SECURITIES
PURCHASE AGREEMENT


 


This Securities Purchase
Agreement (this “Agreement”) is dated as of January 22, 2014, between Protalex, Inc., a Delaware corporation
(the “Company”), and each purchaser identified on the signature pages hereto (each, including its successors
and assigns, a “Purchaser” and collectively, the “Purchasers”).


 


WHEREAS, subject to
the terms and conditions set forth in this Agreement and pursuant to Section 4(2) of the Securities Act of 1933, as amended (the
“Securities Act”), and Rule 506 promulgated thereunder, the Company desires to issue and sell to each Purchaser,
and each Purchaser, severally and not jointly, desires to purchase from the Company, securities of the Company as more fully described
in this Agreement.


 


NOW, THEREFORE, IN
CONSIDERATION of the mutual covenants contained in this Agreement, and for other good and valuable consideration, the receipt and
adequacy of which are hereby acknowledged, the Company and each Purchaser agree as follows:


 


ARTICLE I.

DEFINITIONS


 


1.1           Definitions.
In addition to the terms defined elsewhere in this Agreement, for all purposes of this Agreement, the following terms have
the meanings set forth in this Section 1.1:


 


“Action”
shall have the meaning ascribed to such term in Section 3.1(j).


 


“Affiliate”
means any Person that, directly or indirectly through one or more intermediaries, controls or is controlled by or is under common
control with a Person, as such terms are used in and construed under Rule 405 under the Securities Act.


 


“Board
of Directors” means the board of directors of the Company.


 


“Business
Day” means any day except any Saturday, any Sunday, any day which is a federal legal holiday in the United States or
any day on which banking institutions in the State of New York are authorized or required by law or other governmental action to
close.


 


“Closing”
means the closing of the purchase and sale of the Shares pursuant to Section 2.1.


 


“Closing
Date” means the Trading Day on which all of the Transaction Documents have been executed and delivered by the applicable
parties thereto, and all conditions precedent to (i) each Purchaser’s obligations to pay its Subscription Amount and (ii)
the Company’s obligations to deliver the Shares, in each case, have been satisfied or waived, but in no event later than
the third Trading Day following the date hereof.


 


“Commission”
means the United States Securities and Exchange Commission.


 




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“Common
Stock” means the common stock of the Company, par value $0.00001 per share, and any other class of securities into which
such securities shall have been reclassified or changed.


 


“Common
Stock Equivalents” means any securities of the Company which would entitle the holder thereof to acquire at any time
Common Stock, including, without limitation, any debt, preferred stock, right, option, warrant or other instrument that is at any
time convertible into or exercisable or exchangeable for, or otherwise entitles the holder thereof to receive, Common Stock.


 


“Company
Counsel” means Morse Zelnick Rose & Lander, LLP, with offices located at 825 Third Avenue, New York, NY 10022.


 


“Effective
Date” means the earliest of the date that (a) the initial Registration Statement has been declared effective by the Commission,
(b) all of the Shares have been sold pursuant to Rule 144 or may be sold pursuant to Rule 144 without the requirement for the Company
to be in compliance with the current public information required under Rule 144 and without volume or manner-of-sale restrictions
or (c) following the six-month anniversary of the Closing Date provided that a holder of the Shares is not an Affiliate of the
Company, all of the Shares may be sold pursuant to an exemption from registration under Section 4(1) of the Securities Act without
volume or manner-of-sale restrictions and Company Counsel has delivered to such holders a standing written unqualified opinion
that resales may then be made by such holders of the Shares pursuant to such exemption which opinion shall be in form and substance
reasonably acceptable to such holders.


 


“Escrow
Agent” shall have the meaning ascribed to such term in Section 2.4(a).


 


“Evaluation
Date” shall have the meaning ascribed to such term in Section 3.1(q).


 


“Exchange
Act” means the Securities Exchange Act of 1934, as amended, and the rules and regulations promulgated thereunder.


 


“FCPA”
means the Foreign Corrupt Practices Act of 1977, as amended.


 


“GAAP”
shall have the meaning ascribed to such term in Section 3.1(h).


 


“Gross
Proceeds” shall have the meaning ascribed to such term in Section 4.4(e)(ii).


 


“Intellectual
Property Rights” shall have the meaning ascribed to such term in Section 3.1(n).


 


“IOLA
Account” shall have the meaning ascribed to such term in Section 2.4(b).


 


“Legend
Removal Date” shall have the meaning ascribed to such term in Section 4.1(c).


 




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“Liens”
means a lien, charge pledge, security interest, encumbrance, right of first refusal, preemptive right or other restriction.


 


“Mandatory
Registration Termination Date” means the earliest to occur of (i) the first anniversary of the Closing Date, and (ii)
such time as all the Shares held by Selling Purchasers can be sold pursuant to Rule 144.


 


“Material
Adverse Effect” shall have the meaning assigned to such term in Section 3.1(b).


 


“Material
Permits” shall have the meaning ascribed to such term in Section 3.1(l).


 


“Person”
means an individual or corporation, partnership, trust, incorporated or unincorporated association, joint venture, limited liability
company, joint stock company, government (or an agency or subdivision thereof) or other entity of any kind.


 


“Proceeding”
means an action, claim, suit, investigation or proceeding (including, without limitation, an informal investigation or partial
proceeding, such as a deposition), whether commenced or threatened.


 


“Public
Announcement” shall have the meaning ascribed to such term in Section 4.8.


 


“Purchaser
Party” shall have the meaning ascribed to such term in Section 4.7.


 


“Registration
Statement” means a registration statement described in and meeting the requirements set forth in Section 4.4 and covering
the resale by the Selling Purchasers of their Shares.


 


“Required
Approvals” shall have the meaning ascribed to such term in Section 3.1(e).


 


“Rule
144” means Rule 144 promulgated by the Commission pursuant to the Securities Act, as such Rule may be amended or interpreted
from time to time, or any similar rule or regulation hereafter adopted by the Commission having substantially the same purpose
and effect as such Rule.


 


“Rule
424” means Rule 424 promulgated by the Commission pursuant to the Securities Act, as such Rule may be amended or interpreted
from time to time, or any similar rule or regulation hereafter adopted by the Commission having substantially the same purpose
and effect as such Rule.


 


“SEC
Reports” shall have the meaning ascribed to such term in Section 3.1(h).


 


“Securities
Act” means the Securities Act of 1933, as amended, and the rules and regulations promulgated thereunder.


 




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“Selling
Purchasers” means the Purchasers who elect to have their Shares registered pursuant to Section 4.4.


 


“Shares”
means the shares of Common Stock sold pursuant to this Agreement.


 


“Short
Sales” means all “short sales” as defined in Rule 200 of Regulation SHO under the Exchange Act.


 


“Subscription
Amount” means, as to each Purchaser, the aggregate amount to be paid for the Shares purchased hereunder as specified
below such Purchaser’s name on the signature page of this Agreement and next to the heading “Subscription Amount,”
in United States dollars and in immediately available funds.


 


“Suspension”
shall have the meaning ascribed to such term in Section 4.4(g)(ii).


 


“Trading
Day” means a day on which the principal Trading Market is open for trading.


 


“Trading
Market” means any of the following markets or exchanges on which the Common Stock is listed or quoted for trading on
the date in question: the NYSE AMEX, the Nasdaq Capital Market, the Nasdaq Global Market, the Nasdaq Global Select Market, the
New York Stock Exchange or the OTC Bulletin Board (or any successors to any of the foregoing).


 


“Transaction
Documents” means this Agreement, including all schedules, exhibits and attachments hereto, including the Risk Factors
included in Annex I hereto, and any other documents or agreements executed in connection with the transactions contemplated hereunder.


 


“Transfer
Agent” means American Stock Transfer & Trust Company, the current transfer agent of the Company, and any successor
transfer agent of the Company.


 


ARTICLE II.

PURCHASE AND SALE


 


2.1           Closing.
On the Closing Date, upon the terms and subject to the conditions set forth herein, substantially concurrent with the execution
and delivery of this Agreement by the parties hereto, the Company agrees to sell, and the Purchasers, severally and not jointly,
agree to purchase, up to an aggregate minimum of $1,000,000 of Shares; provided, however, that the amount of the offering may be
increased in the sole discretion of the Company. The purchase price per share shall be $6.00. Each Purchaser shall deliver to the
Company, via wire transfer or a certified check, immediately available funds equal to such Purchaser’s Subscription Amount
as set forth on the signature page hereto executed by such Purchaser, and the Company shall deliver to each Purchaser its certificates
evidencing the Shares purchased by such Purchaser, and the Company and each Purchaser shall deliver the other items set forth in
Section 2.2 deliverable at the Closing. Upon satisfaction of the covenants and conditions set forth in Sections 2.2 and 2.3, the
Closing shall occur at the offices of Company Counsel or such other location as the parties shall mutually agree.


 




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2.2          Deliveries.


 


(a)          On
or prior to the Closing Date, the Company shall deliver or cause to be delivered to each Purchaser the following:


 


(i)          this
Agreement duly executed by the Company; and


 


(ii)         a
certificate evidencing the Shares purchased by Purchaser or a statement or advice from the Transfer Agent evidencing the book entry
issuance of the Shares.


 


(b)          On
or prior to the Closing Date, each Purchaser shall deliver or cause to be delivered to the Company the following:


 


(i)          this
Agreement duly executed by such Purchaser; and


 


(ii)         such
Purchaser’s Subscription Amount by wire transfer to the account specified in writing by the Company.


 


2.3          Closing
Conditions.


 


(a)          The
obligations of the Company hereunder in connection with the Closing are subject to the following conditions being met:


 


(i)          the
accuracy in all respects on the Closing Date of the representations and warranties of the Purchasers contained herein (unless as
of a specific date therein in which case they shall be accurate as of such date);


 


(ii)         all
obligations, covenants and agreements of each Purchaser required to be performed at or prior to the Closing Date shall have been
performed;


 


(iii)        the
Company shall have received, and shall close on, minimum Subscription Amounts of not less than $1,000,000 in the aggregate; and


 


(iv)        the
delivery by each Purchaser of the items set forth in Section 2.2(b) of this Agreement.


 


(b)          The
respective obligations of the Purchasers hereunder in connection with the Closing are subject to the following conditions being
met:


 


(i)          the
accuracy in all respects when made and on the Closing Date of the representations and warranties of the Company contained herein
(unless as of a specific date therein in which case they shall be accurate as of such date);


 




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(ii)         all
obligations, covenants and agreements of the Company required to be performed at or prior to the Closing Date shall have been performed;


 


(iii)        the
delivery by the Company of the items set forth in Section 2.2(a) of this Agreement;


 


(iv)        the
Company shall have received, and shall close on, minimum Subscription Amounts of not less than $1,000,000 in the aggregate;


 


(v)         there
shall have been no Material Adverse Effect with respect to the Company since the date hereof; and


 


(vi)        from
the date hereof to the Closing Date, trading in the Common Stock shall not have been suspended by the Commission or the Company’s
principal Trading Market, and, at any time prior to the Closing Date, trading in securities generally as reported by Bloomberg
L.P. shall not have been suspended or limited, or minimum prices shall not have been established on securities whose trades are
reported by such service, or on any Trading Market, nor shall a banking moratorium have been declared either by the United States
or New York State authorities nor shall there have occurred any material outbreak or escalation of hostilities or other national
or international calamity of such magnitude in its effect on, or any material adverse change in, any financial market which, in
each case, in the reasonable judgment of such Purchaser, makes it impracticable or inadvisable to purchase the Shares at the Closing.


 


2.4           Deposit
and Escrow.


 


(a)          The
Company and each Purchaser hereby appoint Morse, Zelnick, Rose & Lander, LLP to act as escrow agent (“Escrow Agent”)
in connection with the transactions contemplated hereby upon the following terms and conditions:


 


(b)          Simultaneously
with the execution and delivery of this Agreement, Purchaser shall wire transfer such Purchaser’s Subscription Amount to
the Escrow Agent’s Attorney Trust IOLA Account (the “IOLA Account”), a non-interest bearing account maintained
at J.P. Morgan Chase Bank, in accordance with the following instructions:


 


JP Morgan Chase


500 Stanton Christiana Road


Newark, DE 19713


For credit to the account of:


Morse Zelnick Rose & Lander,
LLP


Attorney Trust IOLA Account


Reference: Protalex, Inc. Private
Placement


ABA#021000021


Account #967086639


 


(c)          Escrow
Agent shall hold such Subscription Amount in escrow in accordance with the terms hereof.


 




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(d)          At
the Closing in accordance with the terms of this Agreement, Escrow Agent shall deliver the Subscription Amount to the Company.


 


(e)          If
the Closing does not take place on or before January 31, 2014 (unless extended by the Company in its sole discretion for up to
15 days upon notice to the Purchasers and the Escrow Agent), Escrow Agent shall return the Subscription Amount to Purchaser as
soon as reasonably practicable thereafter but no later than February 10, 2014.


 


(f)          It
is agreed that:


 


(i)          The
duties of Escrow Agent are only as herein specifically provided, and, except for the provisions of Section 2.4(g) are purely ministerial
in nature, and Escrow Agent shall incur no liability whatever, except for its own willful misconduct or gross negligence;


 


(ii)         Escrow
Agent shall not be liable or responsible for the collection of the proceeds of any checks used to pay the Subscription Amount;


 


(iii)        In
the performance of its duties hereunder, Escrow Agent shall be entitled to rely upon any document, instrument or signature believed
by it to be genuine and signed by either of the other parties hereto or their successors;


 


(iv)        Escrow
Agent may assume that any person purporting to give any notice of instructions in accordance with the provisions hereof has been
duly authorized to do so;


 


(v)         Escrow
Agent shall not be bound by any modification, cancellation or rescission of this Agreement unless in writing and signed by Escrow
Agent, the Company and Purchaser;


 


(vi)        Except
as otherwise provided in Section 2.4(g), the Company shall reimburse and indemnify Escrow Agent for, and hold it harmless against,
any and all loss, liability, costs or expenses in connection herewith, including reasonable attorneys' fees and disbursements,
incurred without fraud, willful misconduct or gross negligence on the part of Escrow Agent, arising out of or in connection with
its acceptance of, or the performance of its duties and obligations under, this Agreement, as well as the costs and expenses of
defending against any claim or liability arising out of or relating to this Agreement (other than any claim or liability arising
out of Escrow Agent's fraud, willful misconduct, gross negligence or breach of this Agreement);


 


(vii)       Each
of the Company and Purchaser hereby releases Escrow Agent from any act done or omitted to be done by Escrow Agent in good faith
in the performance of its duties hereunder (other than any fraud, willful misconduct, gross negligence or breach of this Agreement
by Escrow Agent); and


 




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(viii)      Escrow
Agent may resign upon not less than ten (10) days written notice to the Company and Purchaser, provided that a successor Escrow
Agent has then been appointed. If a successor Escrow Agent is not appointed by the Company and Purchasers within such ten (10)
day period, Escrow Agent may petition a court of competent jurisdiction to name a successor.


 


(g)          Escrow
Agent is acting solely as a stakeholder with respect to the Subscription Amount. Escrow Agent, except as provided in paragraphs
(d) and (e) of Section 2.4, shall not deliver the Subscription Amount to the Company or Purchaser, except on ten (10) days' prior
written notice to the Company and Purchaser and only if neither such party shall object within such ten (10) day period. If there
is any dispute as to whether Escrow Agent is obligated to deliver all or any portion of a Subscription Amount or as to whom Subscription
Amount is to be delivered, Escrow Agent shall not make any delivery, but in such event Escrow Agent shall hold such Subscription
Amount until receipt by Escrow Agent of an authorization in writing, signed by the Company and Purchaser, directing the disposition
of the such Subscription Amount (together with all interest thereon, if any), or, in the absence of such authorization, Escrow
Agent shall hold the Subscription Amount (together with all interest thereon, if any), until the final determination of the rights
of the parties in an appropriate proceeding. If such written authorization is not given or proceedings for such determination are
not begun within thirty (30) days after the date Escrow Agent shall have received written notice of such dispute, and thereafter
diligently continued, Escrow Agent may, but is not required to, bring an appropriate action or proceeding for leave to deposit
the Subscription Amount (together with all interest thereon, if any), in court pending such determination. Escrow Agent shall be
reimbursed for all costs and expenses of such action or proceeding, including, without limitation, reasonable attorneys' fees and
disbursements, by the party determined not to be entitled to the Subscription Amount, or if the Subscription Amount is split between
the Company and Purchaser, such costs of Escrow Agent shall be split, pro rata, between the Company and Purchaser, in inverse proportion
to the amount.


 


(h)          Escrow
Agent has executed this Agreement solely to confirm that the Subscription Amount has been deposited into the IOLA Account.


 


ARTICLE III.

REPRESENTATIONS AND WARRANTIES


 


3.1           Representations
and Warranties of the Company. Except as set forth in the SEC Reports or the schedules attached hereto, which SEC Reports and
schedules shall be deemed a part hereof and shall qualify any representation or otherwise made herein to the extent of the disclosure
contained in the SEC Reports or the corresponding section of the schedules, the Company hereby makes the following representations
and warranties to each Purchaser:


 


(a)          Subsidiaries.
The Company has no subsidiaries.


 




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(b)          Organization
and Qualification. The Company is duly incorporated or otherwise organized, validly existing and in good standing under the
laws of the jurisdiction of its incorporation, with the requisite power and authority to own and use its properties and assets
and to carry on its business as currently conducted. The Company is not in violation nor default of any of the provisions of its
certificate of incorporation or bylaws. The Company is duly qualified to conduct business and is in good standing as a foreign
corporation or other entity in each jurisdiction in which the nature of the business conducted or property owned by it makes such
qualification necessary, except where the failure to be so qualified or in good standing, as the case may be, could not have or
reasonably be expected to result in: (i) a material adverse effect on the legality, validity or enforceability of any Transaction
Document, (ii) a material adverse effect on the results of operations, assets, business, prospects or condition (financial or otherwise)
of the Company, or (iii) a material adverse effect on the Company’s ability to perform in any material respect on a timely
basis its obligations under any Transaction Document (any of (i), (ii) or (iii), a “Material Adverse Effect”)
and no Proceeding has been instituted in any such jurisdiction revoking, limiting or curtailing or seeking to revoke, limit or
curtail such power and authority or qualification.


 


(c)          Authorization;
Enforcement. The Company has the requisite corporate power and authority to enter into and to consummate the transactions contemplated
by this Agreement and each of the other Transaction Documents and otherwise to carry out its obligations hereunder and thereunder.
The execution and delivery of each of this Agreement and the other Transaction Documents by the Company and the consummation by
it of the transactions contemplated hereby and thereby have been duly authorized by all necessary action on the part of the Company
and no further action is required by the Company, the Board of Directors or the Company’s stockholders in connection herewith
or therewith other than in connection with the Required Approvals. This Agreement and each other Transaction Document to which
it is a party has been (or upon delivery will have been) duly executed by the Company and, when delivered in accordance with the
terms hereof and thereof, will constitute the valid and binding obligation of the Company enforceable against the Company in accordance
with its terms, except: (i) as limited by general equitable principles and applicable bankruptcy, insolvency, reorganization, moratorium
and other laws of general application affecting enforcement of creditors’ rights generally, (ii) as limited by laws relating
to the availability of specific performance, injunctive relief or other equitable remedies and (iii) insofar as indemnification
and contribution provisions may be limited by applicable law.


 


(d)          No
Conflicts. The execution, delivery and performance by the Company of this Agreement and the other Transaction Documents to
which it is a party, the issuance and sale of the Shares and the consummation by it of the transactions contemplated hereby and
thereby do not and will not: (i) conflict with or violate any provision of the Company’s certificate of incorporation or
bylaws, (ii) conflict with, or constitute a default (or an event that with notice or lapse of time or both would become a default)
under, result in the creation of any Lien upon any of the properties or assets of the Company, or give to others any rights of
termination, amendment, acceleration or cancellation (with or without notice, lapse of time or both) of, any agreement, credit
facility, debt or other instrument (evidencing a Company debt or otherwise) or other understanding to which the Company is a party
or by which any property or asset of the Company is bound or affected, or (iii) subject to the Required Approvals, conflict with
or result in a violation of any law, rule, regulation, order, judgment, injunction, decree or other restriction of any court or
governmental authority to which the Company is subject (including federal and state securities laws and regulations), or by which
any property or asset of the Company is bound or affected; except in the case of each of clauses (ii) and (iii), such as could
not have or reasonably be expected to result in a Material Adverse Effect.


 




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(e)          Filings,
Consents and Approvals. The Company is not required to obtain any consent, waiver, authorization or order of, give any notice
to, or make any filing or registration with, any court or other federal, state, local or other governmental authority or other
Person in connection with the execution, delivery and performance by the Company of the Transaction Documents, other than: (i)
the filings required pursuant to Section 4.2 of this Agreement, (ii) the notice and/or application(s) to each applicable Trading
Market for the issuance and sale and listing of the Shares for trading thereon in the time and manner required thereby, and (iv)
the filing of Form D with the Commission and such filings as are required to be made under applicable state securities laws (collectively,
the “Required Approvals”).


 


(f)          Issuance
of the Shares. The Shares are duly authorized and, when issued and paid for in accordance with the applicable Transaction Documents,
will be duly and validly issued, fully paid and nonassessable, free and clear of all Liens imposed by the Company other than restrictions
on transfer provided for in the Transaction Documents.


 


(g)          Capitalization.
The capitalization of the Company is as set forth in the SEC Reports. The Company has not issued any capital stock since its most
recently filed periodic report under the Exchange Act. No Person has any right of first refusal, preemptive right, right of participation,
or any similar right to participate in the transactions contemplated by the Transaction Documents. There are no outstanding options,
warrants, scrip rights to subscribe to, calls or commitments of any character whatsoever relating to, or securities, rights or
obligations convertible into or exercisable or exchangeable for, or giving any Person any right to subscribe for or acquire any
shares of Common Stock, or contracts, commitments, understandings or arrangements by which the Company is or may become bound to
issue additional shares of Common Stock or Common Stock Equivalents. The issuance and sale of the Shares will not obligate the
Company to issue shares of Common Stock or other securities to any Person (other than the Purchasers) and will not result in a
right of any holder of Company securities to adjust the exercise, conversion, exchange or reset price under any of such securities.
All of the outstanding shares of capital stock of the Company are duly authorized, validly issued, fully paid and nonassessable,
have been issued in compliance with all federal and state securities laws, and none of such outstanding shares was issued in violation
of any preemptive rights or similar rights to subscribe for or purchase securities. No further approval or authorization of any
stockholder, the Board of Directors or others is required for the issuance and sale of the Shares. Except as set forth in the SEC
Reports, there are no stockholders agreements, voting agreements or other similar agreements with respect to the Company’s
capital stock to which the Company is a party or, to the knowledge of the Company, between or among any of the Company’s
stockholders.


 




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(h)          SEC
Reports; Financial Statements. The Company has filed all reports, schedules, forms, statements and other documents required
to be filed by the Company under the Securities Act and the Exchange Act, including pursuant to Section 13(a) or 15(d) thereof,
for the two years preceding the date hereof (or such shorter period as the Company was required by law or regulation to file such
material) (the foregoing materials, including the exhibits thereto and documents incorporated by reference therein, being collectively
referred to herein as the “SEC Reports”) on a timely basis or has received a valid extension of such time of
filing and has filed any such SEC Reports prior to the expiration of any such extension. As of their respective dates, the SEC
Reports complied in all material respects with the requirements of the Securities Act and the Exchange Act, as applicable, and
none of the SEC Reports, when filed, contained any untrue statement of a material fact or omitted to state a material fact required
to be stated therein or necessary in order to make the statements therein, in the light of the circumstances under which they were
made, not misleading. The financial statements of the Company included in the SEC Reports comply in all material respects with
applicable accounting requirements and the rules and regulations of the Commission with respect thereto as in effect at the time
of filing. Such financial statements have been prepared in accordance with United States generally accepted accounting principles
applied on a consistent basis during the periods involved (“GAAP”), except as may be otherwise specified in
such financial statements or the notes thereto and except that unaudited financial statements may not contain all footnotes required
by GAAP, and fairly present in all material respects the financial position of the Company as of and for the dates thereof and
the results of operations and cash flows for the periods then ended, subject, in the case of unaudited statements, to normal, immaterial,
year-end audit adjustments.


 


(i)          Material
Changes; Undisclosed Events, Liabilities or Developments. Since the date of the latest audited financial statements included
within the SEC Reports, except as specifically disclosed in a subsequent SEC Report filed prior to the date hereof: (i) there has
been no event, occurrence or development unrelated to general economic or market conditions that has had or that could reasonably
be expected to result in a Material Adverse Effect, (ii) the Company has not incurred any liabilities (contingent or otherwise)
other than (A) trade payables and accrued expenses incurred in the ordinary course of business consistent with past practice and
(B) liabilities not required to be reflected in the Company’s financial statements pursuant to GAAP or disclosed in filings
made with the Commission, (iii) the Company has not altered its method of accounting, (iv) the Company has not declared or made
any dividend or distribution of cash or other property to its stockholders or purchased, redeemed or made any agreements to purchase
or redeem any shares of its capital stock and (v) the Company has not issued any equity securities to any officer, director or
Affiliate, except pursuant to existing Company stock option plans. The Company does not have pending before the Commission any
request for confidential treatment of information. Except for the issuance of the Shares contemplated by this Agreement, no event,
liability, fact, circumstance, occurrence or development has occurred or exists, or is reasonably expected to occur or exist, with
respect to the Company or its businesses, properties, operations, assets or financial condition, that would be required to be disclosed
by the Company under applicable securities laws at the time this representation is made or deemed made that has not been publicly
disclosed at least 1 Trading Day prior to the date that this representation is made.


 




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(j)          Litigation.
There is no action, suit, inquiry, notice of violation, proceeding or investigation pending or, to the knowledge of the Company,
threatened against or affecting the Company, or any of its properties before or by any court, arbitrator, governmental or administrative
agency or regulatory authority (federal, state, county, local or foreign) (collectively, an “Action”) which
(i) adversely affects or challenges the legality, validity or enforceability of any of the Transaction Documents or the Shares
or (ii) could, if there were an unfavorable decision, have or reasonably be expected to result in a Material Adverse Effect. Neither
the Company, nor any director or officer thereof, is or has been the subject of any Action involving a claim of violation of or
liability under federal or state securities laws or a claim of breach of fiduciary duty. There has not been, and to the knowledge
of the Company, there is not pending or contemplated, any investigation by the Commission involving the Company or any current
or former director or officer of the Company. The Commission has not issued any stop order or other order suspending the effectiveness
of any registration statement filed by the Company under the Exchange Act or the Securities Act.


 


(k)          Compliance.
The Company: (i) is not in default under or in violation of (and no event has occurred that has not been waived that, with notice
or lapse of time or both, would result in a default by the Company under), nor has the Company received notice of a claim that
it is in default under or that it is in violation of, any indenture, loan or credit agreement or any other agreement or instrument
to which it is a party or by which it or any of its properties is bound (whether or not such default or violation has been waived),
(ii) is in violation of any judgment, decree, or order of any court, arbitrator or other governmental authority or (iii) is or
has been in violation of any statute, rule, ordinance or regulation of any governmental authority, including without limitation
all foreign, federal, state and local laws relating to taxes, environmental protection, occupational health and safety, product
quality and safety and employment and labor matters, except in each case as could not have or reasonably be expected to result
in a Material Adverse Effect.


 


(l)          Regulatory
Permits. The Company possess all certificates, authorizations and permits issued by the appropriate federal, state, local or
foreign regulatory authorities necessary to conduct their respective businesses as described in the SEC Reports, except where the
failure to possess such permits could not reasonably be expected to result in a Material Adverse Effect (“Material Permits”),
and the Company has not received any notice of proceedings relating to the revocation or modification of any Material Permit.


 


(m)          Title
to Assets. The Company has good and marketable title in all personal property owned by them that is material to the business
of the Company, in each case free and clear of all Liens, except for (i) Liens as do not materially affect the value of such property
and do not materially interfere with the use made and proposed to be made of such property by the Company and (ii) Liens for the
payment of federal, state or other taxes, for which appropriate reserves have been made therefor in accordance with GAAP and the
payment of which is neither delinquent nor subject to penalties. Any real property and facilities held under lease by the Company
are held by it under valid, subsisting and enforceable leases with which the Company is in compliance.


 




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(n)          Intellectual
Property. The Company has, or has rights to use, all patents, patent applications, trademarks, trademark applications, service
marks, trade names, trade secrets, inventions, copyrights, licenses and other intellectual property rights and similar rights as
described in the SEC Reports as necessary, required or material for use in connection with their respective businesses and which
the failure to so have could have a Material Adverse Effect (collectively, the “Intellectual Property Rights”).
The Company has not received a notice (written or otherwise) that any of, the Intellectual Property Rights has expired, terminated
or been abandoned, or is expected to expire or terminate or be abandoned, within two (2) years from the date of this Agreement.
The Company has not received, since the date of the latest audited financial statements included within the SEC Reports, a written
notice of a claim or otherwise has any knowledge that the Intellectual Property Rights violate or infringe upon the rights of any
Person, except as could not have or reasonably be expected to not have a Material Adverse Effect. To the knowledge of the Company,
all such Intellectual Property Rights are enforceable and there is no existing infringement by another Person of any of the Intellectual
Property Rights. The Company has taken reasonable security measures to protect the secrecy, confidentiality and value of all of
their intellectual properties, except where failure to do so could not, individually or in the aggregate, reasonably be expected
to have a Material Adverse Effect.


 


(o)          Insurance.
The Company is insured by insurers of recognized financial responsibility against such losses and risks and in such amounts as
are prudent and customary in the businesses in which the Company is engaged, including, but not limited to, directors and officers
insurance coverage. The Company has no reason to believe that it will not be able to renew its existing insurance coverage as and
when such coverage expires or to obtain similar coverage from similar insurers as may be necessary to continue its business without
a significant increase in cost.


 


(p)          Transactions
With Affiliates and Employees. None of the officers or directors of the Company and, to the knowledge of the Company, none
of the employees of the Company is presently a party to any transaction with the Company (other than for services as employees,
officers and directors), including any contract, agreement or other arrangement providing for the furnishing of services to or
by, providing for rental of real or personal property to or from, providing for the borrowing of money from or lending of money
to or otherwise requiring payments to or from any officer, director or such employee or, to the knowledge of the Company, any entity
in which any officer, director, or any such employee has a substantial interest or is an officer, director, trustee, stockholder,
member or partner, in each case in excess of $120,000 other than for: (i) payment of salary or consulting fees for services rendered,
(ii) reimbursement for expenses incurred on behalf of the Company and (iii) other employee benefits, including stock option agreements
under any stock option plan of the Company.


 




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(q)          Sarbanes-Oxley;
Internal Accounting Controls. The Company is in compliance with any and all applicable requirements of the Sarbanes-Oxley Act
of 2002 that are effective as of the date hereof, and any and all applicable rules and regulations promulgated by the Commission
thereunder that are effective as of the date hereof and as of the Closing Date. The Company maintains a system of internal accounting
controls sufficient to provide reasonable assurance that: (i) transactions are executed in accordance with management’s general
or specific authorizations, (ii) transactions are recorded as necessary to permit preparation of financial statements in conformity
with GAAP and to maintain asset accountability, (iii) access to assets is permitted only in accordance with management’s
general or specific authorization, and (iv) the recorded accountability for assets is compared with the existing assets at reasonable
intervals and appropriate action is taken with respect to any differences. The Company has established disclosure controls and
procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) for the Company and designed such disclosure controls and
procedures to ensure that information required to be disclosed by the Company in the reports it files or submits under the Exchange
Act is recorded, processed, summarized and reported, within the time periods specified in the Commission’s rules and forms.
The Company’s certifying officers have evaluated the effectiveness of the disclosure controls and procedures of the Company
as of the end of the period covered by the most recently filed periodic report under the Exchange Act (such date, the “Evaluation
Date”). The Company presented in its most recently filed periodic report under the Exchange Act the conclusions of the
certifying officers about the effectiveness of the disclosure controls and procedures based on their evaluations as of the Evaluation
Date. Since the Evaluation Date, there have been no changes in the internal control over financial reporting (as such term is defined
in the Exchange Act) of the Company that have materially affected, or is reasonably likely to materially affect, the internal control
over financial reporting of the Company.


 


(r)          Certain
Fees. No brokerage or finder’s fees or commissions are or will be payable by the Company to any broker, financial advisor
or consultant, finder, placement agent, investment banker, bank or other Person with respect to the transactions contemplated by
the Transaction Documents. The Purchasers shall have no obligation with respect to any fees or with respect to any claims made
by or on behalf of other Persons for fees of a type contemplated in this Section that may be due in connection with the transactions
contemplated by the Transaction Documents.


 


(s)          Private
Placement. Assuming the accuracy of the Purchasers’ representations and warranties set forth in Section 3.2, no registration
under the Securities Act is required for the offer and sale of the Shares by the Company to the Purchasers as contemplated hereby.
The issuance and sale of the Shares hereunder does not contravene the rules and regulations of the Trading Market.


 


(t)          Investment
Company. The Company is not, and is not an Affiliate of, and immediately after receipt of payment for the Shares, will not
be or be an Affiliate of, an “investment company” within the meaning of the Investment Company Act of 1940, as amended.
The Company shall conduct its business in a manner so that it will not become an “investment company” subject to registration
under the Investment Company Act of 1940, as amended.


 


(u)          
Registration Rights. Except as otherwise provided in the Agreement, no Person has any right to cause the Company to effect
the registration under the Securities Act of any securities of the Company.


 




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(v)         Listing
and Maintenance Requirements. The Common Stock is registered pursuant to Section 12(b) of the Exchange Act, and the Company
has taken no action designed to, or which to its knowledge is likely to have the effect of, terminating the registration of the
Common Stock under the Exchange Act nor has the Company received any notification that the Commission is contemplating terminating
such registration.


 


(w)          Disclosure.
Except with respect to the material terms and conditions of the transactions contemplated by the Transaction Documents (as defined
below), the Company confirms that neither it nor any other Person acting on its behalf has provided any of the Purchasers or their
agents or counsel with any information that it believes constitutes or might constitute material, non-public information. The Company
understands and confirms that the Purchasers will rely on the foregoing representation in effecting transactions in securities
of the Company. All of the disclosure furnished by or on behalf of the Company to the Purchasers regarding the Company, their respective
businesses and the transactions contemplated hereby, including the schedules to this Agreement, is true and correct and does not
contain any untrue statement of a material fact or omit to state any material fact necessary in order to make the statements made
therein, in light of the circumstances under which they were made, not misleading. The Company acknowledges and agrees that no
Purchaser makes or has made any representations or warranties with respect to the transactions contemplated hereby other than those
specifically set forth in Section 3.2 hereof.


 


(x)          No
Integrated Offering. Assuming the accuracy of the Purchasers’ representations and warranties set forth in Section 3.2,
neither the Company, nor any of its Affiliates, nor any Person acting on its or their behalf has, directly or indirectly, made
any offers or sales of any security or solicited any offers to buy any security, under circumstances that would cause this offering
of the Shares to be integrated with prior offerings by the Company for purposes of (i) the Securities Act which would require the
registration of any such securities under the Securities Act, or (ii) any applicable shareholder approval provisions of any Trading
Market on which any of the securities of the Company are listed or designated. 


 


(y)          No
General Solicitation. Neither the Company nor any person acting on behalf of the Company has offered or sold any of the Shares
by any form of general solicitation or general advertising. The Company has offered the Shares for sale only to the Purchasers
and certain other “accredited investors” within the meaning of Rule 501 under the Securities Act.


 


(z)          Foreign
Corrupt Practices. Neither the Company nor, to the knowledge of the Company, any agent or other person acting on behalf of
the Company, has: (i) directly or indirectly, used any funds for unlawful contributions, gifts, entertainment or other unlawful
expenses related to foreign or domestic political activity, (ii) made any unlawful payment to foreign or domestic government officials
or employees or to any foreign or domestic political parties or campaigns from corporate funds, (iii) failed to disclose fully
any contribution made by the Company (or made by any person acting on its behalf of which the Company is aware) which is in violation
of law or (iv) violated in any material respect any provision of FCPA.


 




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(aa)         Acknowledgment
Regarding Purchasers’ Purchase of Securities. The Company acknowledges and agrees that each of the Purchasers is acting
solely in the capacity of an arm’s length purchaser with respect to the Transaction Documents and the transactions contemplated
thereby. The Company further acknowledges that no Purchaser is acting as a financial advisor or fiduciary of the Company (or in
any similar capacity) with respect to the Transaction Documents and the transactions contemplated thereby and any advice given
by any Purchaser or any of their respective representatives or agents in connection with the Transaction Documents and the transactions
contemplated thereby is merely incidental to the Purchasers’ purchase of the Shares. The Company further represents to each
Purchaser that the Company’s decision to enter into this Agreement and the other Transaction Documents has been based solely
on the independent evaluation of the transactions contemplated hereby by the Company and its representatives.


 


(bb)         Acknowledgment
Regarding Purchaser’s Trading Activity. Except as otherwise provided in this Agreement), it is understood and acknowledged
by the Company that: (i) none of the Purchasers have been asked by the Company to agree, nor has any Purchaser agreed, to desist
from purchasing or selling, long and/or short, securities of the Company, or “derivative” securities based on securities
issued by the Company or to hold the Shares for any specified term, (ii) past or future open market or other transactions by any
Purchaser, specifically including, without limitation, Short Sales or “derivative” transactions, before or after the
closing of this or future private placement transactions, may negatively impact the market price of the Company’s publicly-traded
securities, (iii) any Purchaser, and counter-parties in “derivative” transactions to which any such Purchaser is a
party, directly or indirectly, may presently have a “short” position in the Common Stock and (iv) each Purchaser shall
not be deemed to have any affiliation with or control over any arm’s length counter-party in any “derivative”
transaction. The Company further understands and acknowledges that (y) one or more Purchasers may engage in hedging activities
at various times during the period that the Shares are outstanding, and (z) such hedging activities (if any) could reduce the value
of the existing stockholders' equity interests in the Company at and after the time that the hedging activities are being conducted.
The Company acknowledges that such aforementioned hedging activities do not constitute a breach of any of the Transaction Documents.


 


(cc)         Regulation
M Compliance.  The Company has not, and to its knowledge no one acting on its behalf has, (i) taken, directly or indirectly,
any action designed to cause or to result in the stabilization or manipulation of the price of any security of the Company to facilitate
the sale or resale of any of the Shares, (ii) sold, bid for, purchased, or paid any compensation for soliciting purchases of, any
of the Shares, or (iii) paid or agreed to pay to any Person any compensation for soliciting another to purchase any other securities
of the Company, other than, in the case of clauses (ii) and (iii) of this Section 3.1(cc), compensation paid to the Company’s
placement agent in connection with the placement of the Shares.


 


(dd)         Office
of Foreign Assets Control. Neither he Company, nor, to the Company's knowledge, any director, officer, agent, employee or affiliate
of the Company is currently subject to any U.S. sanctions administered by the Office of Foreign Assets Control of the U.S. Treasury
Department (“OFAC”).


 




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(ee)         Money
Laundering. The operations of the Company are and have been conducted at all times in compliance with applicable financial
record-keeping and reporting requirements of the Currency and Foreign Transactions Reporting Act of 1970, as amended, applicable
money laundering statutes and applicable rules and regulations thereunder (collectively, the “Money Laundering Laws”),
and no action, suit or proceeding by or before any court or governmental agency, authority or body or any arbitrator involving
the Company with respect to the Money Laundering Laws is pending or, to the knowledge of the Company, threatened.


 


(ff)         No
Undisclosed Events, Liabilities, Developments or Circumstances. No event, liability, development or circumstance has occurred
or exists, or is reasonably expected to occur or exist with respect to the Company, or it businesses, properties, liabilities,
prospects, operations (including results thereof) or condition (financial or otherwise), that (i) would be required to be disclosed
by the Company under applicable securities laws on a registration statement on Form S-1 filed with the Commission relating to an
issuance and sale by the Company of its Common Stock and which has not been publicly announced or (ii) could have a Material Adverse
Effect.


 


3.2           Representations
and Warranties of the Purchasers. Each Purchaser, for itself and for no other Purchaser, hereby represents and warrants as
of the date hereof and as of the Closing Date to the Company as follows (unless as of a specific date therein):


 


(a)          Organization;
Authority. Such Purchaser is either an individual or an entity duly incorporated or formed, validly existing and in good standing
under the laws of the jurisdiction of its incorporation or formation with full right, corporate, partnership, limited liability
company or similar power and authority to enter into and to consummate the transactions contemplated by the Transaction Documents
and otherwise to carry out its obligations hereunder and thereunder. The execution and delivery of the Transaction Documents and
performance by such Purchaser of the transactions contemplated by the Transaction Documents have been duly authorized by all necessary
corporate, partnership, limited liability company or similar action, as applicable, on the part of such Purchaser. Each Transaction
Document to which it is a party has been duly executed by such Purchaser, and when delivered by such Purchaser in accordance with
the terms hereof, will constitute the valid and legally binding obligation of such Purchaser, enforceable against it in accordance
with its terms, except: (i) as limited by general equitable principles and applicable bankruptcy, insolvency, reorganization, moratorium
and other laws of general application affecting enforcement of creditors’ rights generally, (ii) as limited by laws relating
to the availability of specific performance, injunctive relief or other equitable remedies and (iii) insofar as indemnification
and contribution provisions may be limited by applicable law.


 




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(b)          Own
Account. Such Purchaser understands that the Shares are “restricted securities” and have not been registered under
the Securities Act or any applicable state securities law and is acquiring the Shares as principal for its own account and not
with a view to or for distributing or reselling such Shares or any part thereof in violation of the Securities Act or any applicable
state securities law, has no present intention of distributing any of such Shares in violation of the Securities Act or any applicable
state securities law and has no direct or indirect arrangement or understandings with any other persons to distribute or regarding
the distribution of such Shares in violation of the Securities Act or any applicable state securities law (this representation
and warranty not limiting such Purchaser’s right to sell the Shares otherwise in compliance with applicable federal and state
securities laws). Such Purchaser is acquiring the Shares hereunder in the ordinary course of its business.


 


(c)          Purchaser
Status. At the time such Purchaser was offered the Shares, it was, and as of the date hereof it is, either: (i) an “accredited
investor” as defined in Rule 501(a)(1), (a)(2), (a)(3), (a)(7) or (a)(8) under the Securities Act or (ii) a “qualified
institutional buyer” as defined in Rule 144A(a) under the Securities Act. Such Purchaser is not required to be registered
as a broker-dealer under Section 15 of the Exchange Act.


 


(d)          Experience
of Such Purchaser. Such Purchaser, either alone or together with its representatives, has such knowledge, sophistication and
experience in business and financial matters so as to be capable of evaluating the merits and risks of the prospective investment
in the Shares, and has so evaluated the merits and risks of such investment, including but not limited to the Risk Factors set
forth on Annex I. Such Purchaser is able to bear the economic risk of an investment in the Shares and, at the present time, is
able to afford a complete loss of such investment.


 


(e)          General
Solicitation. Such Purchaser is not purchasing the Shares as a result of any advertisement, article, notice or other communication
regarding the Shares published in any newspaper, magazine or similar media or broadcast over television or radio or presented at
any seminar or any other general solicitation or general advertisement.


 


(f)          Certain
Transactions and Confidentiality. Other than consummating the transactions contemplated hereunder, such Purchaser has not directly
or indirectly, nor has any Person acting on behalf of or pursuant to any understanding with such Purchaser, executed any purchases
or sales, including Short Sales, of any securities of the Company during the period commencing as of the time that such Purchaser
first received a term sheet (written or oral) from the Company or any other Person representing the Company setting forth the material
terms of the transactions contemplated hereunder and ending immediately prior to the execution hereof (it being understood and
agreed that for all purposes of this Agreement, and without implication that the contrary would otherwise be true, neither transactions
nor purchases nor sales shall include the location and/or reservation of borrowable shares of Common Stock). Notwithstanding the
foregoing, in the case of a Purchaser that is a multi-managed investment vehicle whereby separate portfolio managers manage separate
portions of such Purchaser’s assets and the portfolio managers have no direct knowledge of the investment decisions made
by the portfolio managers managing other portions of such Purchaser’s assets, the representation set forth above shall only
apply with respect to the portion of assets managed by the portfolio manager that made the investment decision to purchase the
Shares covered by this Agreement. Other than to other Persons party to this Agreement (and such Purchaser’s representatives
and advisors), such Purchaser has maintained the confidentiality of all disclosures made to it in connection with this transaction
(including the existence and terms of this transaction). Notwithstanding the foregoing, for avoidance of doubt, nothing contained
herein shall constitute a representation or warranty, or preclude any actions, with respect to the identification of the availability
of, or securing of, available shares to borrow in order to affect Short Sales or similar transactions in the future.


 




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ARTICLE IV.

OTHER AGREEMENTS OF THE PARTIES


 


4.1          Transfer
Restrictions.


 


(a)          The
Shares may only be disposed of in compliance with state and federal securities laws. In connection with any transfer of Shares
other than pursuant to an effective registration statement or Rule 144, to the Company or to an Affiliate of a Purchaser or in
connection with a pledge as contemplated in Section 4.1(b), the Company may require the transferor thereof to provide to the Company
an opinion of counsel selected by the transferor and reasonably acceptable to the Company, the form and substance of which opinion
shall be reasonably satisfactory to the Company, to the effect that such transfer does not require registration of such transferred
Shares under the Securities Act. As a condition of transfer, any such transferee shall agree in writing to be bound by the terms
of this Agreement and shall have the rights and obligations of a Purchaser under this Agreement.


 


(b)          The
Purchasers agree to the imprinting, so long as is required by this Section 4.1, of a legend on any certificate evidencing the Shares
in the following form:


 


THE SHARES REPRESENTED BY THIS
CERTIFICATE HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED OR APPLICABLE STATE SECURITIES LAWS. THE SHARES
MAY NOT BE OFFERED FOR SALE, SOLD, TRANSFERRED OR ASSIGNED (I) IN THE ABSENCE OF (A) AN EFFECTIVE REGISTRATION STATEMENT FOR THE
SHARES UNDER THE SECURITIES ACT OF 1933, AS AMENDED, OR (B) AN OPINION OF COUNSEL TO THE HOLDER (IF REQUESTED BY THE COMPANY),
IN A FORM REASONABLY ACCEPTABLE TO THE COMPANY, THAT REGISTRATION IS NOT REQUIRED UNDER SAID ACT OR (II) UNLESS SOLD OR ELIGIBLE
TO BE SOLD PURSUANT TO RULE 144 OR RULE 144A UNDER SAID ACT. NOTWITHSTANDING THE FOREGOING, THE SHARES MAY BE PLEDGED IN CONNECTION
WITH A BONA FIDE MARGIN ACCOUNT OR OTHER LOAN OR FINANCING ARRANGEMENT SECURED BY THE SHARES.


 




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The Company
acknowledges and agrees that a Purchaser may from time to time pledge pursuant to a bona fide margin agreement with a registered
broker-dealer or grant a security interest in some or all of the Shares to a financial institution that is an “accredited
investor” as defined in Rule 501(a) under the Securities Act and who agrees to be bound by the provisions of this Agreement
and, if required under the terms of such arrangement, such Purchaser may transfer pledged or secured Shares to the pledgees or
secured parties. Such a pledge or transfer would not be subject to approval of the Company and no legal opinion of legal counsel
of the pledgee, secured party or pledgor shall be required in connection therewith. Further, no notice shall be required of such
pledge. At the appropriate Purchaser’s expense, the Company will execute and deliver such reasonable documentation as a pledgee
or secured party of Shares may reasonably request in connection with a pledge or transfer of the Shares, including, if the Shares
are subject to registration pursuant to this Agreement, the preparation and filing of any required prospectus supplement under
Rule 424(b)(3) under the Securities Act or other applicable provision of the Securities Act to appropriately amend the list of
selling stockholders thereunder.


 


(c)          Certificates
evidencing the Shares shall not contain any legend (including the legend set forth in Section 4.1(b) hereof), (i) while a registration
statement (including the Registration Statement) covering the resale of such security is effective under the Securities Act, (ii)
following any sale of such Shares pursuant to Rule 144, (iii) if such Shares are eligible for sale under Rule 144, without the
requirement for the Company to be in compliance with the current public information required under Rule 144 as to such Shares and
without volume or manner-of-sale restrictions, or (iv) if such legend is not required under applicable requirements of the Securities
Act (including judicial interpretations and pronouncements issued by the staff of the Commission). The Company shall cause its
counsel to issue a legal opinion to the Transfer Agent promptly after the Effective Date if required by the Transfer Agent to effect
the removal of the legend hereunder. The Company agrees that following the Effective Date or at such time as such legend is no
longer required under this Section 4.1(c), it will, no later than three Trading Days following the delivery by a Purchaser to the
Company or the Transfer Agent of a certificate representing Shares issued with a restrictive legend (such third Trading Day, the
“Legend Removal Date”), deliver or cause to be delivered to such Purchaser a certificate representing such Shares
that is free from all restrictive and other legends. The Company may not make any notation on its records or give instructions
to the Transfer Agent that enlarge the restrictions on transfer set forth in this Section 4.


 


(d)          Each
Purchaser, severally and not jointly with the other Purchasers, agrees with the Company that such Purchaser will sell any Shares
pursuant to either the registration requirements of the Securities Act, including any applicable prospectus delivery requirements,
or an exemption therefrom, and that if Shares are sold pursuant to a Registration Statement, they will be sold in compliance with
the plan of distribution set forth therein, and acknowledges that the removal of the restrictive legend from certificates representing
Shares as set forth in this Section 4.1 is predicated upon the Company’s reliance upon this understanding.


 




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4.2           Furnishing
of Information; Public Information. Until the earlier of one year from the Closing Date or no Purchaser owns any Shares, the
Company covenants to maintain the registration of the Common Stock under Section 12(b) or 12(g) of the Exchange Act and to timely
file (or obtain extensions in respect thereof and file within the applicable grace period) all reports required to be filed by
the Company after the date hereof pursuant to the Exchange Act even if the Company is not then subject to the reporting requirements
of the Exchange Act. As long as any Purchaser owns Shares, if the Company is not required to file reports pursuant to the Exchange
Act, it will prepare and furnish to each of the Purchasers and make publicly available in accordance with Rule 144(c) such information
as is required for each of the Purchasers to sell the Shares, including without limitation, under Rule 144. The Company further
covenants that it will take such further action as any holder of Shares may reasonably request, to the extent required from time
to time to enable such Person to sell such Shares without registration under the Securities Act, including without limitation,
within the requirements of the exemption provided by Rule 144.


 


4.3           Integration.
The Company shall not sell, offer for sale or solicit offers to buy or otherwise negotiate in respect of any security (as defined
in Section 2 of the Securities Act) that would be integrated with the offer or sale of the Shares in a manner that would require
the registration under the Securities Act of the sale of the Shares or that would be integrated with the offer or sale of the Shares
for purposes of the rules and regulations of any Trading Market such that it would require shareholder approval prior to the closing
of such other transaction unless shareholder approval is obtained before the closing of such subsequent transaction. 


 


4.4          Registration
Rights.


 


(a)          Right
to Include Shares. If at any time the Company proposes to register any of its equity securities under the Securities Act (other
than (A) a registration statement on Form S-4 or Form S-8 or any similar or successor forms, (B) a registration of securities in
a Rule 145 transaction, (C) with respect to a public offering by the Company of Common Stock or (D) with respect to an employee
benefit plan), it will promptly give written notice to the Purchasers of its intention to do so. Upon the written request of any
Purchaser made within ten (10) days after the receipt of any such notice (which request shall specify the Shares intended to be
disposed of by such Purchaser and the intended method of disposition thereof), the Company will use its commercially reasonable
efforts to effect the registration under the Securities Act of all Shares that the Company has been so requested to register by
the Purchasers thereof, to the extent necessary to permit the disposition (in accordance with such intended methods thereof) of
the Shares so to be registered; provided that if, at any time after giving written notice of its intention to register any securities
pursuant to this Section 4.4 and prior to the effective date of the registration statement filed in connection with such registration,
the Company shall determine for any reason not to register any securities the Company may, at its election, give written notice
of such determination to each Purchaser and thereupon shall be relieved of its obligation to register any Shares in connection
with such registration.


 


(b) Obligations
of the Company. In connection with the Company’s obligations under Section 4.4(a) above to file the Registration Statement
with the Commission and to use its commercially reasonable efforts to cause the Registration Statement to become effective as soon
as practicable after filing, the Company shall, as expeditiously and as reasonably as possible, subject to Section 4.4(g) hereof:


 




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(i)          Prepare
and file with the Commission such amendments and supplements to the Registration Statement and the prospectus used in connection
therewith as may be necessary to keep the Registration Statement effective until the Mandatory Registration Termination Date;


 


(ii)         Furnish
to the Selling Purchasers such reasonable number of copies of the Registration Statement, prospectus and preliminary prospectus,
in conformity with the requirements of the Securities Act, and such other documents (including, without limitation, prospectus
amendments and supplements as are prepared by the Company in accordance with Section 4.4(a) above) as the Selling Purchasers may
reasonably request, in order to facilitate the disposition of such Selling Purchasers’ Shares pursuant to the Registration
Statement;


 


(iii)        use
its commercially reasonable efforts to register or qualify or cooperate with the Selling Purchasers in connection with the registration
or qualification (or exemption from the registration or qualification) of such Shares for the resale by the Selling Purchaser under
the securities or Blue Sky laws of such jurisdictions within the United States as any Selling Purchaser reasonably requests in
writing, to keep each registration or qualification (or exemption therefrom) effective until the Mandatory Registration Termination
Date and to do any and all other acts or things reasonably necessary to enable the disposition in such jurisdictions of the Shares
covered by the Registration Statement; provided, that the Company shall not be required to qualify generally to do business in
any jurisdiction where it is not then so qualified, subject the Company to any material tax in any such jurisdiction where it is
not then so subject or file a general consent to service of process in any such jurisdiction; and


 


(iv)        use
commercially reasonable efforts to cause all the Shares registered hereunder to be listed on each trading venue on which securities
of the same class issued by the Company are then listed.


 


(c)          Furnish
Information.


 


(i)          It
shall be a condition precedent to the obligations of the Company to take any action pursuant to this Section 4.4 that the Selling
Purchasers shall furnish to the Company such information regarding them and the Shares held by them as the Company shall reasonably
request and as shall be required in order to effect any registration by the Company pursuant to this Section 4.4.


 


(ii)         The
Registration Statement will provide, at the request of the Selling Purchasers, for a plan of distribution with respect to the Shares
covered thereby substantially as follows:


 




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“The
Shares may be sold from time to time by the Selling Purchasers. Such sales may be made on one or more exchanges or in the over-the-counter
market, or otherwise at prices and at terms then prevailing or at prices related to the then-current market price, or in negotiated
transactions. The Shares may be sold by the Selling Purchasers in one or more of the following types of transactions: (i) a block
trade in which the broker or dealer so engaged will attempt to sell the shares as agent but may position and resell a portion of
the block as principal to facilitate the transaction; (ii) purchases by a broker or dealer as principal and resale by such broker
or dealer for its account pursuant to the resale registration statement; (iii) an exchange distribution in accordance with the
rules of such exchange; (iv) ordinary brokerage transactions and transactions in which the broker solicits purchasers; and (v)
transactions between sellers and purchasers without a broker/dealer. In addition, any securities covered by the Registration Statement
which qualify for sale pursuant to Rule 144 may be sold under Rule 144 rather than pursuant to the Registration Statement. From
time to time the Selling Purchasers may engage in short sales, short sales versus the box, puts and calls and other transactions
in securities of the issuer or derivatives thereof, and may sell and deliver the shares in connection therewith. In effecting sales,
brokers or dealers engaged by the selling Investors may arrange for other brokers or dealers to participate. Brokers or dealers
will receive commissions or discounts from selling Investors in amounts to be negotiated immediately prior to the sale.”


 


(d)          Expenses
of Registration. All expenses incurred by the Company in connection with the registration of the Shares pursuant to this Section
4.4 (excluding underwriting, brokerage and other selling commissions and discounts) shall be borne by the Company. Such fees and
expenses shall include, without limitation, all registration and qualification and filing fees, printing expenses, fees and disbursements
of counsel for the Company.


 




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(e)          Indemnification.


 


(i)          To
the extent permitted by law, the Company will indemnify and hold harmless each Selling Purchaser (including the partners or officers,
directors and stockholders of such Selling Purchaser), and each person, if any, who controls such Selling Purchaser within the
meaning of the Securities Act, against any losses, claims, damages or liabilities, joint or several, to which they may become subject
under the Securities Act, the Exchange Act, and other federal or state securities laws, or otherwise, insofar as such losses, claims,
damages or liabilities (or actions in respect thereof) (A) arise out of or are based upon any untrue or alleged untrue statement
of any material fact contained in the Registration Statement, in any preliminary prospectus or final prospectus relating thereto
or in any amendments or supplements to the Registration Statement or any such preliminary prospectus or final prospectus, (B) arise
out of or are based upon the omission or alleged omission to state therein a material fact required to be stated therein, or necessary
to make the statements therein not misleading or (C) arise out of any violation or alleged violation by the Company of the Securities
Act, the Exchange Act, any other federal or state securities law or any rule or regulation promulgated under the Securities Act,
the Exchange Act or any other federal or state securities law; and the Company will reimburse such Selling Purchaser (including
the partners, officers, directors and stockholders of such Selling Purchaser) or such controlling person for any legal or other
expenses (but in no event for more than one law firm) reasonably incurred by them in connection with investigating or defending
any such loss, claim, damage, liability or action; provided, however, that the indemnity agreement contained in this
Section 4.4(e)(i) shall not apply to amounts paid in settlement of any such loss, claim, damage, liability or action if such settlement
is effected without the consent of the Company, nor shall the Company be liable in any such case for any such loss, damage, liability
or action to the extent that it arises out of or is based upon an untrue statement or alleged untrue statement or omission or alleged
omission made in connection with the Registration Statement, any preliminary prospectus or final prospectus relating thereto or
any amendments or supplements to the Registration Statement or any such preliminary prospectus or final prospectus, (x) in reliance
upon and in conformity with written information furnished expressly for use in connection with the Registration Statement or any
such preliminary prospectus or final prospectus or any amendments or supplements to the Registration Statement, preliminary prospectus
or final prospectus by the Selling Purchaser, any broker/dealer acting on their behalf or controlling person with respect to them
or (y) the plan of distribution described in Section 4.4(c)(ii).


 


(ii)         To
the extent permitted by law, each Selling Purchaser will severally and not jointly indemnify and hold harmless the Company, its
Affiliates, each of their respective directors, officers, partners, members and stockholders, each person, if any, who controls
the Company within the meaning of the Securities Act, any broker/dealer, any underwriter and all other Selling Purchaser, against
any losses, claims, damages or liabilities to which the Company or any such Affiliate, director, officer, partner, member, stockholder,
controlling person, broker/dealer, underwriter or such other Selling Purchaser may become subject to, under the Securities Act,
the Exchange Act, any other Federal securities laws, Blue Sky Laws, or otherwise, insofar as such losses, claims, damages or liabilities
(or actions in respect thereof) (A) arise out of or are based upon any untrue or alleged untrue statement of any material fact
contained in the Registration Statement or any preliminary prospectus or final prospectus relating thereto or in any amendments
or supplements to the Registration Statement or any such preliminary prospectus or final prospectus, (B) arise out of or are based
upon the omission or alleged omission to state therein a material fact required to be stated therein or necessary to make the statements
therein not misleading, or (C) arise out of any violation or alleged violation by the Company of the Securities Act, the Exchange
Act, any other federal or state securities law or any rule or regulation promulgated under the Securities Act, the Exchange Act
or any other federal or state securities law, in each case to the extent and only to the extent (x) that such untrue statement
or alleged untrue statement or omission or alleged omission was made in the Registration Statement, in any preliminary prospectus
or final prospectus relating thereto or in any amendments or supplements to the Registration Statement or any such preliminary
prospectus or final prospectus, in reliance upon and in conformity with (I) written information furnished by the Selling Purchaser
expressly for use in connection with the Registration Statement, or any preliminary prospectus or final prospectus or any such
amendment or supplement, or (II) the plan of distribution described in Section 4.4(c)(ii), or (y) such Selling purchaser fails
to comply with the prospectus delivery requirements of the Securities Act as applicable to it in connection with sales of Shares
pursuant to the Registration Statement; and such Selling Purchaser will reimburse any legal or other expenses reasonably incurred
by the Company or any such Affiliate, director, officer, partner, member, stockholder, controlling person, broker/dealer, underwriter
or other Selling Purchaser in connection with investigating or defending any such loss, claim, damage, liability or action, provided,
however, that the liability of each Selling Purchaser hereunder (when aggregated with amounts contributed, if any, pursuant
to Section 4.4(e)(iv)) shall be limited to the proceeds received by such Selling Purchaser from the sale of the Shares pursuant
to the Registration Statement (the “Gross Proceeds”), and provided further, however, that
the indemnity agreement contained in this Section 4.4(e)(ii) shall not apply to amounts paid in settlement of any such loss, claim,
damage, liability or action if such settlement is effected without the consent of those Selling Purchaser(s) against which the
request for indemnity is being made (which consent shall not be unreasonably withheld or delayed).


 




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(iii)        Promptly
after receipt by an indemnified party under this Section 4.4(e) of notice of the commencement of any action, such indemnified party
will, if a claim in respect thereof is to be made against any indemnifying party under this Section 4.4(e), notify the indemnifying
party in writing of the commencement thereof and the indemnifying party shall have the right to participate in and, to the extent
the indemnifying party desires, jointly with any other indemnifying party similarly noticed, to assume at its expense the defense
thereof with counsel mutually satisfactory to the indemnifying parties with the consent of the indemnified party which consent
will not be unreasonably withheld, conditioned or delayed. In the event that the indemnifying party assumes any such defense, the
indemnified party may participate in such defense with its own counsel and at its own expense; provided, however,
that the counsel for the indemnifying party shall act as lead counsel in all matters pertaining to such defense or settlement of
such claim and the indemnifying party shall only pay for such indemnified party's reasonable legal fees and expenses for the period
prior to the date of its participation in such defense; provided further, however, that the indemnified party
(together with all indemnified parties which may be represented without conflict by one counsel) shall have the right to retain
one separate counsel, with the fees and expenses to be paid by the indemnifying party, if the representation of the indemnified
party by the counsel retained by the indemnifying party would be inappropriate due to actual differing interests between the indemnified
party and any other party represented by such counsel in such proceeding. Notwithstanding the foregoing, the indemnifying party
shall not be obligated to pay the fees of more than one separate counsel. The failure to notify an indemnifying party of the commencement
of any such action will not relieve such indemnifying party of any liability to the indemnified party under this Section 4.4 (except
to the extent that such failure materially prejudiced the indemnifying party’s ability to defend such action), nor shall
the omission so to notify an indemnifying party relieve such indemnifying party of any liability which it may have to any indemnified
party otherwise other than under this Section 4.4(e). No indemnifying party shall, without the consent of the indemnified party,
consent to entry of any judgment or enter into any settlement which does not include as an unconditional term thereof the giving
by the claimant or plaintiff to such indemnified party of a general release from all liability in respect to such claim or litigation
and otherwise in form and substance reasonably satisfactory to the indemnified party.


 




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(iv)        If
the indemnification provided in this Section 4.4(e) is held by a court of competent jurisdiction to be unavailable to an indemnified
party with respect to any loss, liability, claim, damage or expense referred to herein, then the indemnifying party, in lieu of
indemnifying such indemnified party hereunder, shall contribute to the amount paid or payable by such indemnified party as a result
of such loss, liability, claim, damage or expense in such proportion as is appropriate to reflect the relative fault of the indemnifying
party on the one hand and of the indemnified party on the other in connection with the statements or omissions that shall have
resulted in such loss, liability, claim, damage or expense, as well as any other relevant equitable considerations; provided that
in no event shall any contribution by Selling Purchaser under this Section 4.4(e)(iv), when aggregated with amounts paid, if any,
pursuant to Section 4.4(e)(ii), exceed the Gross Proceeds. The relative fault of the indemnifying party and of the indemnified
party shall be determined by reference to, among other things, whether the untrue or alleged untrue statement of a material fact
or the omission to state a material fact relates to information supplied by the indemnifying party or by the indemnified party
and the parties’ relative intent, knowledge, access to information, and opportunity to correct or prevent such statement
or omission.


 


(vi) The obligations
of the Company and Purchasers under this Section 4.4(e) shall survive the completion of any offering of Shares pursuant to the
Registration Statement.


 


(g)          Selling
Procedures. Any sale of Shares pursuant to the Registration Statement filed in accordance with Section 4.4(a) hereof shall
be subject to the following conditions and procedures:


 


(i)            Updating
the Prospectus.


 


(A)         If
the Company informs the Selling Purchaser that the Registration Statement or final prospectus then on file with the Commission
is not current or otherwise does not comply with the 1933 Act, the Company shall use commercially reasonable efforts to provide
to the Selling Purchaser a current prospectus that complies with the 1933 Act as soon as practicable, but in no event later than
ten (10) business days after delivery of such notice.


 


(B)         If
the Company requires more than ten (10) business days to update the prospectus under Section 4.4(g)(i)(A) above, the Company shall
have the right to delay the preparation of a current prospectus that complies with the Securities Act without explanation to such
Purchaser, subject to the limitations set forth in Section 4.4(g)(ii) below, for a period of not more than sixty (60) days (or
two periods which total not more than ninety (90) days in the aggregate) during any twelve-month period.


 




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(ii)         General.
Notwithstanding anything in this Agreement that may be to the contrary, upon (A) any request by the Commission or any other
federal or state governmental authority during the period of effectiveness of the Registration Statement for amendments or supplements
to the Registration Statement or related prospectus or for additional information relating to the Registration Statement, (B) the
issuance by the Commission or any other federal or state governmental authority of any stop order suspending the effectiveness
of the Registration Statement or the initiation of any proceedings for that purpose, (C) the receipt by the Company of any notification
with respect to the suspension of the qualification or exemption from qualification of any of the Shares for sale in any jurisdiction
or the initiation or threatening of any proceeding for such purpose, (D) the happening of any event which makes any statement made
in the Registration Statement or related prospectus or any document incorporated or deemed to be incorporated therein by reference
untrue in any material respect or which requires the making of any changes in the Registration Statement or prospectus so that,
in the case of the Registration Statement, it will not contain an untrue statement of a material fact or omit to state a material
fact required to be stated therein or necessary to make the statements therein not misleading, and that in the case of the prospectus,
it will not contain an untrue statement of a material fact or omit to state a material fact necessary in order to make the statements
therein, in the light of the circumstances under which they were made, not misleading or (E) the determination of the Company’s
Board of Directors that it is advisable to suspend use of the prospectus for a discrete period of time due to pending corporate
developments, public filings with the Commission or that there exists material nonpublic information about the Company that the
Board of Directors, acting in good faith, determines not to disclose in a registration statement, the Company, in each such case,
may suspend use of the related prospectus (each a “Suspension”), in which case the Company shall promptly so
notify each Purchaser and each Purchaser shall not dispose of Shares covered by the Registration Statement or prospectus until
copies of a supplemented or amended prospectus are distributed to the Selling Purchasers or until the Selling Purchasers are advised
in writing by the Company that the use of the applicable prospectus may be resumed; provided, however, that, notwithstanding
the foregoing, the Company may suspend use of the prospectus pursuant to Sections 4.4(f)(i)(B), 4(f)(ii)(D) and 4(f)(ii)(E), and
a Selling Purchaser may be prohibited from selling or otherwise disposing of the Shares covered by the Registration Statement or
prospectus, on not more than two occasions in total during any twelve-month period and for no more than ninety (90) days in the
aggregate during any such twelve-month period. The Company shall use commercially reasonable efforts to ensure the use of the prospectus
may be resumed as soon as practicable. The Company shall use commercially reasonable efforts to obtain the withdrawal of any order
suspending the effectiveness of the Registration Statement, or the lifting of any suspension of the qualification (or exemption
from qualification) of any of the securities for sale in any jurisdiction, at the earliest practicable moment. The Company shall,
upon the occurrence of any event contemplated by clause (D), prepare a supplement or post-effective amendment to the Registration
Statement or a supplement to the related prospectus or any document incorporated therein by reference or file any other required
document so that, as thereafter delivered to the purchasers of the Shares being sold thereunder, such prospectus will not contain
an untrue statement of a material fact or omit to state a material fact necessary to make the statements therein, in light of the
circumstances under which they were made, not misleading.


 




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(iii)        Each
Selling Purchaser agrees that it will comply with the prospectus delivery requirements of the Securities Act as applicable to it
in connection with sales of Shares pursuant to the Registration Statement. Each Selling Purchaser further agrees that, upon receipt
of a notice from the Company of the occurrence of any event of the kind described in Section 4.4(g)(i) or 4.4(g)(ii), such Purchaser
will discontinue disposition of such Shares under the Registration Statement until such Purchaser's receipt of the copies of the
supplemented prospectus or amended Registration Statement, or until it is advised in writing by the Company that the use of the
applicable prospectus may be resumed, and, in either case, has received copies of any additional or supplemental filings that are
incorporated or deemed to be incorporated by reference in such prospectus or Registration Statement. The Company may provide appropriate
stop orders to enforce the provisions of this Section 4.4(g).


 


4.5           Non-Public
Information. Except with respect to the material terms and conditions of the transactions contemplated by the Transaction Documents,
the Company covenants and agrees that neither it, nor any other Person acting on its behalf, will provide any Purchaser or its
agents or counsel with any information that the Company believes constitutes material non-public information, unless prior thereto
such Purchaser shall have entered into a written agreement with the Company regarding the confidentiality and use of such information.
The Company understands and confirms that each Purchaser shall be relying on the foregoing covenant in effecting transactions in
securities of the Company.


 


4.6           Use
of Proceeds. The Company shall use the net proceeds from the sale of the Shares hereunder for working capital and general corporate
purposes.


 




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4.7           Indemnification
of Purchasers. Subject to the provisions of this Section 4.7, the Company will indemnify and hold each Purchaser and its directors,
officers, shareholders, members, partners, employees and agents (and any other Persons with a functionally equivalent role of a
Person holding such titles notwithstanding a lack of such title or any other title), each Person who controls such Purchaser (within
the meaning of Section 15 of the Securities Act and Section 20 of the Exchange Act), and the directors, officers, shareholders,
agents, members, partners or employees (and any other Persons with a functionally equivalent role of a Person holding such titles
notwithstanding a lack of such title or any other title) of such controlling persons (each, a “Purchaser Party”)
harmless from any and all losses, liabilities, obligations, claims, contingencies, damages, costs and expenses, including all judgments,
amounts paid in settlements, court costs and reasonable attorneys’ fees and costs of investigation that any such Purchaser
Party may suffer or incur as a result of or relating to (a) any breach of any of the representations, warranties, covenants or
agreements made by the Company in this Agreement or in the other Transaction Documents or (b) any action instituted against any
Purchaser Party in any capacity, or any of them or their respective Affiliates, by any stockholder of the Company who is not an
Affiliate of such Purchaser Party, with respect to any of the transactions contemplated by the Transaction Documents (unless such
action is based upon a breach of such Purchaser Party’s representations, warranties or covenants under the Transaction Documents
or any agreements or understandings such Purchaser Party may have with any such stockholder or any violations by such Purchaser
Party of state or federal securities laws or any conduct by such Purchaser Party which constitutes fraud, gross negligence, willful
misconduct or malfeasance). If any action shall be brought against any Purchaser Party in respect of which indemnity may be sought
pursuant to this Agreement, such Purchaser Party shall promptly notify the Company in writing, and the Company shall have the right
to assume the defense thereof with counsel of its own choosing reasonably acceptable to the Purchaser Party. Any Purchaser Party
shall have the right to employ separate counsel in any such action and participate in the defense thereof, but the fees and expenses
of such counsel shall be at the expense of such Purchaser Party except to the extent that (i) the employment thereof has been specifically
authorized by the Company in writing, (ii) the Company has failed after a reasonable period of time to assume such defense and
to employ counsel or (iii) in such action there is, in the reasonable opinion of counsel, a material conflict on any material issue
between the position of the Company and the position of such Purchaser Party, in which case the Company shall be responsible for
the reasonable fees and expenses of no more than one such separate counsel. The Company will not be liable to any Purchaser Party
under this Agreement (y) for any settlement by a Purchaser Party effected without the Company’s prior written consent, which
shall not be unreasonably withheld or delayed; or (z) to the extent, but only to the extent that a loss, claim, damage or liability
is attributable to any Purchaser Party’s breach of any of the representations, warranties, covenants or agreements made by
such Purchaser Party in this Agreement or in the other Transaction Documents. The indemnification required by this Section 4.7
shall be made by periodic payments of the amount thereof during the course of the investigation or defense, as and when bills are
received or are incurred. The indemnity agreements contained herein shall be in addition to any cause of action or similar right
of any Purchaser Party against the Company or others and any liabilities the Company may be subject to pursuant to law.


 


4.8           Certain
Transactions and Confidentiality. Each Purchaser, severally and not jointly with the other Purchasers, covenants that neither
it, nor any Affiliate acting on its behalf or pursuant to any understanding with it will execute any purchases or sales, including
Short Sales, of any of the Company’s securities during the period commencing with the execution of this Agreement and ending
at such time that the transactions contemplated by this Agreement are first publicly announced (the “Public Announcement”).
Each Purchaser, severally and not jointly with the other Purchasers, covenants that until such time as the Public Announcement,
such Purchaser will maintain the confidentiality of the existence and terms of this transaction and the information included in
the Transaction Documents and the schedules hereto. Notwithstanding the foregoing, and notwithstanding anything contained in this
Agreement to the contrary, the Company expressly acknowledges and agrees that (i) no Purchaser makes any representation, warranty
or covenant hereby that it will not engage in effecting transactions in any securities of the Company after the time of the Public
Announcement, (ii) no Purchaser shall be restricted or prohibited from effecting any transactions in any securities of the Company
in accordance with applicable securities laws and regulations from and after the time of the Public Announcement, and (iii) no
Purchaser shall have any duty of confidentiality to the Company after the Public Announcement. Notwithstanding the foregoing,
in the case of a Purchaser that is a multi-managed investment vehicle whereby separate portfolio managers manage separate portions
of such Purchaser’s assets and the portfolio managers have no knowledge of the investment decisions made by the portfolio
managers managing other portions of such Purchaser’s assets, the covenant set forth above shall only apply with respect
to the portion of assets managed by the portfolio manager that made the investment decision to purchase the Shares covered by
this Agreement. 





 




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4.9           Form
D; Blue Sky Filings. The Company agrees to timely file a Form D with respect to the Shares as required under Regulation D and
to provide a copy thereof, promptly upon request of any Purchaser. The Company shall take such action as the Company shall reasonably
determine is necessary in order to obtain an exemption for, or to qualify the Shares for, sale to the Purchasers at the Closing
under applicable securities or “Blue Sky” laws of the states of the United States, and shall provide evidence of such
actions promptly upon request of any Purchaser.


 


ARTICLE V.

MISCELLANEOUS


 


5.1           Termination.
This Agreement may be terminated by any Purchaser, as to such Purchaser’s obligations hereunder only and without any effect
whatsoever on the obligations between the Company and the other Purchasers, by written notice to the other parties, if the Closing
has not been consummated on or before January 31, 2014 (unless extended by the Company in its sole discretion for up to 15 days
upon notice to the Purchasers and the Escrow Agent); provided, however, that such termination will not affect the
right of any party to sue for any breach by any other party (or parties).


 


5.2           Fees
and Expenses. Each party shall pay the fees and expenses of its advisers, counsel, accountants and other experts, if any, and
all other expenses incurred by such party incident to the negotiation, preparation, execution, delivery and performance of this
Agreement. The Company shall pay all Transfer Agent fees (including, without limitation, any fees required for same-day processing
of any instruction letter delivered by the Company and any exercise notice delivered by a Purchaser), stamp taxes and other taxes
and duties levied in connection with the delivery of any Shares to the Purchasers.


 


5.3           Entire
Agreement. The Transaction Documents, together with the exhibits and schedules thereto, contain the entire understanding of
the parties with respect to the subject matter hereof and thereof and supersede all prior agreements and understandings, oral or
written, with respect to such matters, which the parties acknowledge have been merged into such documents, exhibits and schedules.


 


5.4           Notices.
Any and all notices or other communications or deliveries required or permitted to be provided hereunder shall be in writing and
shall be deemed given and effective on the earliest of: (a) the date of transmission, if such notice or communication is delivered
via facsimile at the facsimile number set forth on the signature pages attached hereto at or prior to 5:30 p.m. (New York City
time) on a Trading Day, (b) the next Trading Day after the date of transmission, if such notice or communication is delivered via
facsimile at the facsimile number set forth on the signature pages attached hereto on a day that is not a Trading Day or later
than 5:30 p.m. (New York City time) on any Trading Day, (c) the second (2nd) Trading Day following the date of mailing,
if sent by U.S. nationally recognized overnight courier service or (d) upon actual receipt by the party to whom such notice is
required to be given. The address for such notices and communications shall be as set forth on the signature pages attached hereto.


 




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5.5           Amendments;
Waivers. No provision of this Agreement may be waived, modified, supplemented or amended except in a written instrument signed,
in the case of an amendment, by the Company and the Purchasers holding at least 67% of the Shares or, in the case of a waiver,
by the party against whom enforcement of any such waived provision is sought. No waiver of any default with respect to any provision,
condition or requirement of this Agreement shall be deemed to be a continuing waiver in the future or a waiver of any subsequent
default or a waiver of any other provision, condition or requirement hereof, nor shall any delay or omission of any party to exercise
any right hereunder in any manner impair the exercise of any such right.


 


5.6           Headings.
The headings herein are for convenience only, do not constitute a part of this Agreement and shall not be deemed to limit or affect
any of the provisions hereof.


 


5.7           Successors
and Assigns. This Agreement shall be binding upon and inure to the benefit of the parties and their successors and permitted
assigns. The Company may not assign this Agreement or any rights or obligations hereunder without the prior written consent of
each Purchaser (other than by merger or acquisition). Any Purchaser may assign any or all of its rights under this Agreement to
any Person to whom such Purchaser assigns or transfers any Shares, provided that such transferee agrees in writing to be bound,
with respect to the transferred Shares, by the provisions of the Transaction Documents that apply to the “Purchasers.”


 


5.8           No
Third-Party Beneficiaries. This Agreement is intended for the benefit of the parties hereto and their respective successors
and permitted assigns and is not for the benefit of, nor may any provision hereof be enforced by, any other Person, except as otherwise
set forth in Section 4.9.


 


5.9           Governing
Law. All questions concerning the construction, validity, enforcement and interpretation of the Transaction Documents shall
be governed by and construed and enforced in accordance with the internal laws of the State of New York, without regard to the
principles of conflicts of law thereof. Each party agrees that all legal proceedings concerning the interpretations, enforcement
and defense of the transactions contemplated by this Agreement and any other Transaction Documents (whether brought against a party
hereto or its respective affiliates, directors, officers, shareholders, partners, members, employees or agents) shall be commenced
exclusively in the state and federal courts sitting in the City of New York. Each party hereby irrevocably submits to the exclusive
jurisdiction of the state and federal courts sitting in the City of New York, Borough of Manhattan for the adjudication of any
dispute hereunder or in connection herewith or with any transaction contemplated hereby or discussed herein (including with respect
to the enforcement of any of the Transaction Documents), and hereby irrevocably waives, and agrees not to assert in any suit, action
or proceeding, any claim that it is not personally subject to the jurisdiction of any such court, that such suit, action or proceeding
is improper or is an inconvenient venue for such proceeding. Each party hereby irrevocably waives personal service of process and
consents to process being served in any such suit, action or proceeding by mailing a copy thereof via registered or certified mail
or overnight delivery (with evidence of delivery) to such party at the address in effect for notices to it under this Agreement
and agrees that such service shall constitute good and sufficient service of process and notice thereof. Nothing contained herein
shall be deemed to limit in any way any right to serve process in any other manner permitted by law.


 




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5.10         Survival.
The representations, warranties and covenants contained herein shall survive the Closing and the delivery of the Shares.


 


5.11         Execution.
This Agreement may be executed in two or more counterparts, all of which when taken together shall be considered one and the same
agreement and shall become effective when counterparts have been signed by each party and delivered to each other party, it being
understood that the parties need not sign the same counterpart. In the event that any signature is delivered by facsimile transmission
or by e-mail delivery of a “.pdf” format data file, such signature shall create a valid and binding obligation of the
party executing (or on whose behalf such signature is executed) with the same force and effect as if such facsimile or “.pdf”
signature page were an original thereof.


 


5.12         Severability.
If any term, provision, covenant or restriction of this Agreement is held by a court of competent jurisdiction to be invalid, illegal,
void or unenforceable, the remainder of the terms, provisions, covenants and restrictions set forth herein shall remain in full
force and effect and shall in no way be affected, impaired or invalidated, and the parties hereto shall use their commercially
reasonable efforts to find and employ an alternative means to achieve the same or substantially the same result as that contemplated
by such term, provision, covenant or restriction. It is hereby stipulated and declared to be the intention of the parties that
they would have executed the remaining terms, provisions, covenants and restrictions without including any of such that may be
hereafter declared invalid, illegal, void or unenforceable.


 


5.13         Replacement
of Shares. If any certificate or instrument evidencing any Shares is mutilated, lost, stolen or destroyed, the Company shall
issue or cause to be issued in exchange and substitution for and upon cancellation thereof (in the case of mutilation), or in lieu
of and substitution therefor, a new certificate or instrument, but only upon receipt of evidence reasonably satisfactory to the
Company of such loss, theft or destruction. The applicant for a new certificate or instrument under such circumstances shall also
pay any reasonable third-party costs (including customary indemnity) associated with the issuance of such replacement Shares.


 


5.14         Remedies.
In addition to being entitled to exercise all rights provided herein or granted by law, including recovery of damages, each of
the Purchasers and the Company will be entitled to specific performance under the Transaction Documents. The parties agree that
monetary damages may not be adequate compensation for any loss incurred by reason of any breach of obligations contained in the
Transaction Documents and hereby agree to waive and not to assert in any action for specific performance of any such obligation
the defense that a remedy at law would be adequate.


 




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5.15         
Independent Nature of Purchasers’ Obligations and Rights. The obligations of each Purchaser under any Transaction Document
are several and not joint with the obligations of any other Purchaser, and no Purchaser shall be responsible in any way for the
performance or non-performance of the obligations of any other Purchaser under any Transaction Document. Nothing contained herein
or in any other Transaction Document, and no action taken by any Purchaser pursuant hereof or thereto, shall be deemed to constitute
the Purchasers as a partnership, an association, a joint venture or any other kind of entity, or create a presumption that the
Purchasers are in any way acting in concert or as a group with respect to such obligations or the transactions contemplated by
the Transaction Documents. Each Purchaser shall be entitled to independently protect and enforce its rights, including, without
limitation, the rights arising out of this Agreement or out of the other Transaction Documents, and it shall not be necessary for
any other Purchaser to be joined as an additional party in any proceeding for such purpose. Each Purchaser has been represented
by its own separate legal counsel in its review and negotiation of the Transaction Documents. For reasons of administrative convenience
only, each Purchaser and its respective counsel have chosen to communicate with the Company through Company Counsel. Company Counsel
does not represent any of the Purchasers and only represents the Company. The Company has elected to provide all Purchasers with
the same terms and Transaction Documents for the convenience of the Company and not because it was required or requested to do
so by any of the Purchasers. It is expressly understood and agreed that each provision contained in this Agreement and in each
other Transaction Document is between the Company and a Purchaser, solely, and not between the Company and the Purchasers collectively
and not between and among the Purchasers.


 


5.16         Saturdays,
Sundays, Holidays, etc. If the last or appointed day for the taking of any action or the expiration of any right required or
granted herein shall not be a Business Day, then such action may be taken or such right may be exercised on the next succeeding
Business Day.


 


5.17         Construction.
The parties agree that each of them and/or their respective counsel have reviewed and had an opportunity to revise the Transaction
Documents and, therefore, the normal rule of construction to the effect that any ambiguities are to be resolved against the drafting
party shall not be employed in the interpretation of the Transaction Documents or any amendments thereto. In addition, each and
every reference to share prices and shares of Common Stock in any Transaction Document shall be subject to adjustment for reverse
and forward stock splits, stock dividends, stock combinations and other similar transactions of the Common Stock that occur after
the date of this Agreement.


 


5.18         WAIVER
OF JURY TRIAL. IN ANY ACTION, SUIT, OR PROCEEDING IN ANY JURISDICTION BROUGHT BY ANY PARTY AGAINST ANY OTHER PARTY, THE PARTIES
EACH KNOWINGLY AND INTENTIONALLY, TO THE GREATEST EXTENT PERMITTED BY APPLICABLE LAW, HEREBY ABSOLUTELY, UNCONDITIONALLY, IRREVOCABLY
AND EXPRESSLY WAIVES FOREVER TRIAL BY JURY.


 


5.19         Rescission
and Withdrawal Right. Notwithstanding anything to the contrary contained in (and without limiting any similar provisions of)
any of the other Transaction Documents, whenever any Purchaser exercises a right, election, demand or option under a Transaction
Document and the Company does not timely perform its related obligations within the periods therein provided, then such Purchaser
may rescind or withdraw, in its sole discretion from time to time upon written notice to the Company, any relevant notice, demand
or election in whole or in part without prejudice to its future actions and rights.


 


(Signature Pages Follow)


 




    	33



    	 



    

 


IN WITNESS WHEREOF,
the parties hereto have caused this Securities Purchase Agreement to be duly executed by their respective authorized signatories
as of the date first indicated above.


 


	PROTALEX, inc.	Address for Notice:
	 	 
	 	131 Columbia Turnpike, Suite 1, Florham Park, NJ 07932
	 	Attn: Kirk Warshaw, CFO
	
        By:__________________________________________

        Name: Arnold P. Kling

        Title: President
	Fax: (212) 713-1818


 


	With a copy to (which shall not constitute notice):	 
	Morse Zelnick Rose & Lander, LLP	 
	825 Third Avenue 	 
	New York, NY 10022	 
	Attn:  Kenneth S. Rose, Esq.	 
	Fax: (212) 208-6809	 


 


ESCROW AGENT (solely with respect to Section 2.4):


 


Morse, Zelnick, Rose & Lander, LLP


 


By:_________________________________________


Name: Kenneth S. Rose


Title: Partner


 


[REMAINDER OF PAGE INTENTIONALLY LEFT BLANK


SIGNATURE PAGE FOR PURCHASER FOLLOWS]


 




    	34



    	 



    

 


[PURCHASER SIGNATURE PAGES TO PROTALEX,
INC. SECURITIES PURCHASE AGREEMENT]


 


IN WITNESS WHEREOF,
the undersigned have caused this Securities Purchase Agreement to be duly executed by their respective authorized signatories as
of the date first indicated above.


 


Name of Purchaser: ________________________________________________________


 


Signature of Authorized Signatory of
Purchaser: __________________________________


 


Name of Authorized Signatory: ____________________________________________________


 


Title of Authorized Signatory: _____________________________________________________


 


Email Address of Authorized Signatory:
______________________________________________


 


Facsimile Number of Authorized Signatory: _____________________________________________


 


Address for Notice to Purchaser:


 


Address for Delivery of Securities to Purchaser (if not same
as address for notice):


 


Shares: _________________


 


Subscription Amount: $_________________ ($6.00 per Share)


 


TIN/EIN Number: _______________________


 


 


 




    	35



    	 



    

 


ANNEX I


 


RISK FACTORS


 


You should carefully
consider the risks, uncertainties and other factors described below, in addition to the other information set forth in this Annex
I, because they could materially and adversely affect our business, operating results, financial condition, cash flows and prospects,
as well as adversely affect the value of an investment in our Common Stock. Also, you should be aware that the risks and uncertainties
described below are not the only ones facing us. Additional risks and uncertainties that we do not yet know of, or that we currently
think are immaterial, may also impair our business operations. You should also refer to the other information contained in and
incorporated by reference into the Securities Purchase Agreement of which this Annex I is a part and the various registration statements,
current and periodic reports and other documents we file with the Commission, including our consolidated financial statements and
the related notes.


 


Capitalized terms
used in this Annex I have the same meaning as ascribed to them in Securities Purchase Agreement of which this Annex I is a part.


 


Risks relating to our Business


 


If we are unable to enroll enough patients
to complete our clinical trials, regulatory agencies may delay their review of, or reject our applications, which may result in
increased costs and harm our ability to develop products.


 


If we are not able
to enroll enough patients to complete the RA or other planned clinical trials for PRTX-100, regulatory agencies may delay reviewing
our applications for approval, or may reject them, based on our inability to enroll enough patients to complete our clinical trials.
Patient enrollment depends on many factors, including the size of the patient population, the nature of the protocol, the proximity
of patients to clinical sites and the eligibility criteria for the study. Delays in planned patient enrollment may result in increased
costs and delays, which could have a harmful effect on our ability to develop products. We may also encounter delays or rejections
based on changes in regulatory agency policies during the period in which we develop a drug or the period required for review of
any application for regulatory agency approval of a particular compound. We also may encounter delays if we are unable to produce
clinical trial material in sufficient quantities and of sufficient quality to meet the schedule for our planned clinical trials.
In addition, we rely on a number of third-parties, such as clinical research organizations, to help support the clinical trials
by performing independent clinical monitoring, data acquisition and data evaluations. Any failure on the part of these third-parties
could delay the regulatory approval process.


 


Clinical trials are expensive, time
consuming and difficult to design and implement. If clinical trials for PRTX-100 don’t provide positive results, we may be
required to abandon or repeat such clinical trials.


 


Human clinical trials
are expensive and difficult to design and implement, in part because they are subject to rigorous requirements. The clinical trial
process is also time-consuming. Even with adequate financing, we estimate that our clinical trials for PRTX-100 will take several
years to complete. Furthermore, poor results or failure can occur at any stage of the trials, and we can encounter problems that
cause us to abandon or repeat clinical trials. The commencement and completion of clinical trials may be delayed by several factors,
including:


 




    	I-1



    	 



    

 


		·	slow enrollment of qualified patients;



 


		·	unforeseen safety issues;



 


		·	determination of dosing issues;



 


		·	lack of effectiveness during clinical trials



 


		·	slower than expected rates of patient recruitment



 


		·	inability to monitor patients adequately or after treatment; and



 


		·	inability or unwillingness of medical investigators to follow our clinical protocols.



 


In addition, we or
the FDA and/or foreign regulatory agencies may suspend our clinical trials at any time if it appears that we are exposing participants
to unacceptable health risks or if the FDA and/or foreign regulatory agencies find deficiencies in our IND and/or country specific
regulatory submissions or in the conduct of these trials. Therefore, we cannot predict with any certainty the schedule for future
clinical trials.


 


If we fail to obtain regulatory approvals
for PRTX-100 or any other drug we develop, we will not be able to generate revenues from the commercialization or sale of those
drugs. 


 


We must receive regulatory
approval of each of our drugs before we can commercialize or sell that product. The pre-clinical laboratory testing, formulation
development, manufacturing and clinical trials of any product we develop, as well as the distribution and marketing of these products,
are regulated by numerous federal, state and local governmental authorities in the United States, principally the U.S. Food and
Drug Administration (“FDA”), and by similar agencies in other countries. The development and regulatory approval process
takes many years, requires the expenditure of substantial resources, is uncertain and subject to delays, and will thus delay our
receipt of revenues, if any, from PRTX-100 or any other drug we develop. We cannot assure you that our clinical trials will demonstrate
the safety and efficacy of PRTX-100 or any other drug we develop or will result in a marketable product.


 


No product can receive
FDA approval unless human clinical trials show both safety and efficacy for each target indication in accordance with FDA and foreign
country standards. A number of companies in the pharmaceutical and biotechnology industries have suffered significant setbacks
in late stage clinical trials even after achieving promising results in early stage development. We therefore cannot assure you
that the results from our clinical trials will be successful or that the results from our pre-clinical trials for PRTX-100 or any
other drug we develop will be predictive of results obtained in future clinical trials.


 


Further, data obtained
from pre-clinical and clinical trial activities are subject to varying interpretations that could delay, limit or prevent regulatory
agency approval. We cannot assure you that our clinical trials will establish the safety and efficacy of PRTX-100 or any other
drug we develop sufficiently for us to obtain regulatory approval.


 




    	I-2



    	 



    

 


Our products, if approved, may fail
to achieve market acceptance.


 


There can be no assurance
that any products we successfully develop, if approved for marketing, will achieve market acceptance or generate significant revenues.
We intend for our products, including PRTX-100, to replace or alter existing therapies or procedures, and hospitals, physicians
or patients may conclude that these products are less safe or effective or otherwise less attractive than existing therapies or
procedures. If our products do not receive market acceptance for any reason, it would adversely affect our business, financial
condition and results of operations.


 


Further, our competitors
may develop new technologies or products that are more effective or less costly, or that seem more cost-effective, than our products.
We can give no assurance that hospitals, physicians, patients or the medical community in general will accept and use any products
that we may develop.


 


We may never obtain orphan drug status
and market exclusivity for any disease indication, and if approved, we could lose orphan market exclusivity if another drug is
approved first using the same method of action or demonstrates clinical superiority.


 


There is no assurance
that we will file for an Orphan Drug Designation for any indication, nor if such application is made, that the FDA, the European
Medicines Agency (“EMA”) or any other regulatory body will ever approve it. In addition, if an application is approved,
Orphan drug exclusive marketing rights may be lost if the FDA, EMA or other regulatory body later determines that the request for
designation was materially defective or if the manufacturer is unable to assure sufficient quantity of the drug. Although obtaining
approval to market a product with Orphan drug exclusivity may be advantageous, we cannot be certain that:


 


		·	we will be the first to obtain approval
for any drug for which we obtain Orphan Drug Designation;



 


		·	Orphan
Drug Designation will result in any commercial advantage or reduce competition; or



 


		·	limited
exceptions to this exclusivity will not be invoked by the relevant regulatory authority.



 


If we are unable to obtain, protect,
and maintain our proprietary rights in intellectual property, we may not be able to compete effectively or operate profitably.


 


Our commercial success
also depends, in large part, on our ability to obtain and maintain intellectual property protection for our technology covering
our product candidates and avoiding infringement of the proprietary technology of others. Our ability to do so will depend on,
among other things, complex legal and factual questions, and it should be noted that the standards regarding intellectual property
rights in our industry are still evolving. However, we will be able to protect our proprietary rights from unauthorized use by
third-parties only to the extent that our proprietary rights are covered by valid and enforceable patents or are effectively maintained
as trade secrets.


 




    	I-3



    	 



    

 


We have tried to protect
our proprietary position by filing U.S. and international patent applications related to PRTX-100. We filed an initial therapeutic
use patent application with the U.S. Patent and Trademark Office, or PTO, which issued the 258 Patent in May 2007. The 258 Patent
has claims relating to the treatment of acute inflammation as well as rheumatoid arthritis (RA) and systemic lupus erythematosis
(SLE) using protein A. A second patent claiming the use of protein A to treat idiopathic thrombocytopenia or autoimmune thrombocytic
purpura issued as U.S. 7,425,331 in September, 2008. A further patent for the use of protein A the 170 Patent was issued in October,
2010. The 170 Patent claims the use of protein A to reduce an acute inflammatory response or inflammation, including when these
symptoms are associated with myasthenia gravis, ulcerative colitis, Crohn’s disease, psoriatic arthritis or pemphigus vulgaris.
A further patent claiming the use of protein A to treat psoriasis and scleroderma issued as U.S. 8,168,189 in May, 2012. In December
2013, a patent with claims to the use of protein A to treat multiple sclerosis issued as U.S. 8,603,486. We have also filed for
foreign patent protection in Canada, Japan and the European Union. Japanese patent JP 4598404 issued in October, 2010 with claims
relating to use of protein A to treat rheumatoid arthritis, systemic lupus erythematosis (SLE), idiopathic thrombocytopenia, and
autoimmune thrombocytopenia purpura. Because the patent position of pharmaceutical companies involves complex legal and factual
questions, the issuance, scope and enforceability of patents cannot be predicted with certainty. Patents, if issued, may be challenged,
invalidated or circumvented. Thus, any patents that we own may not provide any protection against competitors. Patents that we
may file in the future or those we may license from third parties, may not result in patents being issued. If issued, they may
not provide us with proprietary protection or competitive advantages against competitors with similar technology. Furthermore,
others may independently develop similar technologies or duplicate any technology that we have developed, or designed around any
patents we may have issued to us. Moreover, the laws of foreign countries do not protect intellectual property rights to the same
extent as the laws of the United States.


 


We also rely on trade
secrets, know-how and technology, which are not protected by patents, to maintain our competitive position. We protect this information
by entering into confidentiality agreements with parties that have access to it, such as potential investors, advisors, employees
and consultants. Any of these parties may breach the agreements and disclose our confidential information, or our competitors might
learn of the information in some other way. If any trade secret, know-how or other technology not protected by a patent was to
be disclosed to or independently developed by a competitor, our business and financial condition could be adversely affected.


 


If other companies claim that we infringe
their proprietary technology, we may incur liability for damages or be forced to stop our development and commercialization efforts.


 


Competitors and other
third-parties may initiate patent litigation against us in the U.S. or in foreign countries based on existing patents or patents
that may be granted in the future. These lawsuits can be expensive and would consume time and other resources even if unsuccessful
or brought without merit. Our competitors may have sought or may seek patents that cover aspects of our technology. We are aware
that a third-party has a pending patent application for technologies generally related to ours, and more patents for similar technologies
may be filed in the future. In the United States, patent applications may remain confidential after filing or published 18 months
after filing.


 


Owners or licensees
of patents may file one or more infringement actions against us. Any such infringement action could cause us to incur substantial
costs defending the lawsuit and could distract our management from our business, even if the allegations of infringement or misappropriation
are unwarranted. The defense of multiple claims could have a disproportionately greater impact. Furthermore, an adverse outcome
from this type of claim could subject us to a judgment that requires us to pay substantial damages. A judgment could also include
an injunction or other court order that could prevent us from making, using, selling, offering for sale or importing our products
or prevent our customers from using our products.


 




    	I-4



    	 



    

 


Alternatively, we could
be required to license disputed rights from the third party. If a court determines, or if we independently discover, that any of
our products or manufacturing processes violates third-party proprietary rights, we might not be able to reengineer the product
or processes to avoid those rights, or obtain a license under those rights on commercially reasonable terms, if at all.


 


We may become involved in lawsuits to
protect or enforce our patents that would be expensive and time consuming.


 


In order to protect
or enforce our patent rights, we may initiate patent litigation against third-parties. In addition, we may become subject to interference
or opposition proceedings conducted in patent and trademark offices to determine the priority of inventions. The defense of intellectual
property rights, including patent rights through lawsuits, interference or opposition proceedings, and other legal and administrative
proceedings, would be costly and divert our technical and management personnel from their normal responsibilities. An adverse determination
of any litigation or defense proceedings could put our patent application at risk of not issuing.


 


Furthermore, 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. For example, during the course
of this kind of litigation, confidential information may be inadvertently disclosed in the form of documents or testimony in connection
with discovery requests, depositions or trial testimony. This disclosure could negatively affect our business and financial results.


 


If third-party manufacturers of our
products fail to devote sufficient time and resources to our concerns, or if their performance is substandard, our clinical trials
and product introductions may be delayed and our costs may rise. 


 


We have relied on,
and intend to rely in the future, on third-party contract manufacturers to supply, store and distribute PRTX-100 and other potential
products. Any products we develop may be in competition with other product candidates and products for access to these facilities.
Thus, we may not be successful in contracting with third-party manufacturers, or they may not be able to manufacture these candidates
and products in a cost-effective or timely manner. Additionally, our reliance on third-party manufacturers exposes us to the following
risks, any of which could delay or prevent the completion of (x) our clinical trials, (y) the approval of our products by the FDA
or (z) the commercialization of our products, resulting in higher costs or depriving us of potential product revenues:


 


		·	Contract manufacturers are obliged to operate in accordance with FDA-mandated cGMPs. Their failure
to establish and follow cGMPs and to document their adherence to such practices may lead to significant delays in the availability
of material for clinical study and may delay or prevent filing or approval of marketing applications for our products. Additionally,
failure to achieve and maintain high manufacturing standards, including the incidence of manufacturing errors, could result in
patient injury or death, product recalls or withdrawals, delays or failures in product testing or delivery, cost overruns or other
problems that could seriously hurt our business.



 




    	I-5



    	 



    

 


		·	It may be difficult or impossible for us to find replacement manufacturers quickly on acceptable
terms, or at all. For example, we have initially relied on a single contract drug substance manufacturer, Eurogentec S.A., to produce
PRTX-100. Changing this manufacturer, or changing the manufacturer for any other products we develop, may be difficult, time consuming
and expensive. The number of potential manufacturers is limited, and changing manufacturers may require confirmation of the analytical
methods of the manufacturing processes and procedures in accordance with FDA-mandated cGMPs. Such confirmation of the analytical
methods may be costly and time-consuming.



 


		·	Our contract manufacturers may not perform as agreed or may not remain in the contract manufacturing
business for the time required to produce, store and distribute our products successfully.



 


Drug manufacturers
are subject to ongoing periodic unannounced inspection by the FDA, the U.S. Drug Enforcement Agency, and corresponding state and
foreign agencies to ensure strict compliance with cGMPs, other government regulations and corresponding foreign standards. While
we are obligated to audit the performance of third-party contractors, we do not have control over our third-party manufacturers’
compliance with these regulations and standards. Failure by our third-party manufacturers or us to comply with applicable regulations
could result in sanctions being imposed on us, including fines, injunctions, civil penalties, failure of the government to grant
market approval of drugs, delays, suspension or withdrawal of approvals, seizures or recalls of product, operating restrictions
and criminal prosecutions, any of which could significantly and adversely affect our business.


 


We believe Eurogentec
S.A. has the capacity to produce a sufficient inventory of PRTX-100 to conduct our current planned clinical trials. If these inventories
are lost or damaged, or if Eurogentec S.A. cannot or will not produce additional inventory to complete the remaining phases of
clinical trials, the clinical development of our product candidate or its submission for regulatory approval could be significantly
delayed and our ability to commercialize this product could be impaired.


 


If we do not have adequate
clinical trial material available to complete our clinical trials, which could also lead to a significant delay in continuing and
/or commencing our clinical trial programs, we may be unable to obtain FDA approval and our ability to commercialize this product
could be impaired or precluded.


 


We may not be able to manufacture our
products in commercial quantities, which would prevent us from marketing our products.


 


If any of our potential
products were approved by the FDA or foreign regulatory agencies for commercial sale, we would need to manufacture them in larger
quantities. We have no manufacturing facilities at this time, and we have no experience in the commercial manufacturing of drugs.
Thus, we would need to either develop the capability of manufacturing on a commercial scale or engage third-party manufacturers
with this capability. Significant scale-up of manufacturing may require certain additional validation studies, which the FDA must
review and approve. Moreover, contract manufacturers often encounter difficulties in achieving volume production, quality control
and quality assurance, as well as shortages of qualified personnel. For these reasons, a third-party manufacturer might not be
able to manufacture sufficient quantities of PRTX-100 to allow us to commercialize it. If we are unable to increase the manufacturing
capacity for PRTX-100, or any other product we may develop, we may experience delays in or shortages in supply when launching them
commercially.


 




    	I-6



    	 



    

 


We have no experience selling, marketing
or distributing our products and no internal capability to do so. 


 


If we receive regulatory
approval to commence commercial sales of PRTX-100, we will face competition with respect to commercial sales, marketing and distribution.
These are areas in which we currently have no experience due to a lack of management. To market our product directly, we must develop
a direct marketing and sales force with technical expertise and supporting distribution capability. Alternatively, we may engage
a pharmaceutical or other healthcare company with an existing distribution system and direct sales force to assist us. There can
be no assurance that we will successfully establish sales and distribution capabilities either on our own or in collaboration with
third-parties or gain market acceptance for our product. To the extent we enter co-promotion or other licensing arrangements, any
revenues we receive will depend on the efforts of third-parties. Those efforts may not succeed.


 


Competition in the pharmaceutical industry
is intense; if we fail to compete effectively, our financial results will suffer.


 


We engage in a business
characterized by extensive research efforts, rapid developments and intense competition. We cannot assure you that our products
will compete successfully or that research and development by others will not render our products obsolete or uneconomical. Our
failure to compete effectively would negatively affect our business, financial condition and results of operations. We expect that
successful competition will depend, among other things, on product efficacy, safety, reliability, availability, timing and scope
of regulatory approval and price. Specifically, other factors we expect will impact our ability to compete include the relative
speed with which we can develop products, complete the clinical, development and laboratory testing and regulatory approval processes
and supply commercial quantities of the product to the market.


 


We expect competition
to increase as technological advances are made and commercial applications broaden. In commercializing PRTX-100 and any additional
products we develop using our technology, we will face substantial competition from large pharmaceutical, biotechnology and other
companies, universities and research institutions.


 


Substantially all of
our competitors have substantially greater capital resources, research and development personnel, facilities and experience in
conducting clinical trials and obtaining regulatory approvals than us. As well, most of our competitors have advantages over us
in manufacturing and marketing pharmaceutical products. We are thus at a competitive disadvantage to those competitors who have
greater capital resources and we may not be able to compete effectively.


 




    	I-7



    	 



    

 


If we are unable to hire additional
qualified scientific, sales and marketing, and other personnel, we will not be able to achieve our goals.


 


We depend on the members
of our management staff, Scientific Advisory Board and a small number of third-party consultants to provide the expertise needed
to carry out our business objectives. The loss of any of these individuals’ services may significantly delay or prevent the
achievement of research, development or business objectives and could negatively affect our business, financial condition and results
of operations if their replacements are not promptly retained. We face intense competition for such personnel and consultants.
Such replacements are predicated, among other conditions, on our ability to raise additional funding. We cannot assure you that
we will attract and retain qualified management and scientific personnel in the future, with or without adequate additional financing.
We do not maintain key person life insurance on any of these individuals.


 


Further, we expect
that our potential expansion into areas and activities requiring additional expertise, such as further clinical trials, governmental
approvals, contract manufacturing and marketing, will place additional requirements on our management, operational and financial
resources. We expect these demands will require an increase in management and scientific personnel and the development of additional
expertise. The failure to attract and retain such personnel or to develop such expertise would impact prospects for our success.


 


Even if we obtain marketing approval,
PRTX-100 will be subject to ongoing regulatory review.


 


If regulatory approval
of PRTX-100 is granted, that approval may be subject to limitations on the indicated uses for which it may be marketed or contain
requirements for costly post-marketing follow-up studies. As to products for which marketing approval is obtained, the manufacturer
of the product and the manufacturing facilities will be subject to continual review and periodic inspections by the FDA and other
regulatory authorities. In addition, the labeling, packaging, adverse event reporting, storage, advertising, promotion and record
keeping related to the product will remain subject to extensive regulatory requirements. The subsequent discovery of previously
unknown problems with the product, manufacturer or facility may result in restrictions on the product or the manufacturer, including
withdrawal of the product from the market. We may be slow to adapt, or we may never adapt, to changes in existing requirements
or adoption of new requirements or policies.


 


If we fail to comply
with applicable regulatory requirements, we may be subject to fines, suspension or withdrawal of regulatory approvals, product
recalls, seizure of products, operating restrictions and criminal prosecution. 


 


Market acceptance of PRTX-100 will be
limited if users are unable to obtain adequate reimbursement from third-party payors.


 


Government health administration
authorities, private health insurers and other organizations generally provide reimbursement for products like PRTX-100, and our
commercial success will depend in part on these third-party payors agreeing to reimburse patients for the costs of our product.
Even if we succeed in bringing our proposed products to market, we cannot assure you that third-party payors will consider it cost-effective
or provide reimbursement in whole or in part for its use.


 


Significant uncertainty
exists as to the reimbursement status of newly approved health care products. PRTX-100 is intended to replace or alter existing
therapies or procedures. These third-party payors may conclude that our product is less safe, effective or cost-effective than
existing therapies or procedures. Therefore, third-party payors may not approve our product for reimbursement.


 






    	I-8



    	 



    

 


If third-party payors
do not approve our product for reimbursement or fail to reimburse them adequately, sales will suffer as some physicians or their
patients will opt for a competing product that is approved for reimbursement or is adequately reimbursed. Even if third-party payors
make reimbursement available, these payors’ reimbursement policies may adversely affect our ability to sell our product on
a profitable basis.


 


Moreover, legislative
proposals to reform healthcare and government insurance programs could significantly influence the purchase of healthcare services
and products, resulting in lower prices and reduced demand for our product, which could adversely affect our business, financial
condition and results of operations.


 


In addition, legislation
and regulations affecting the pricing of pharmaceuticals may change in ways adverse to us before or after the FDA or other regulatory
agencies approve PRTX-100 for marketing. While we cannot predict the likelihood of any of these legislative or regulatory proposals,
if any government or regulatory agencies adopt these proposals they could negatively affect our business, financial condition and
results of operations.


 


We may be required to defend lawsuits
or pay damages in connection with the alleged or actual harm caused by our products.


 


We face an inherent
business risk of exposure to product liability claims in the event that the use of any of our products is alleged to have resulted
in harm to others. This risk exists in clinical trials as well as in commercial distribution. In addition, the pharmaceutical and
biotechnology industries in general have been subject to significant medical malpractice litigation. We may incur significant liability
if product liability or malpractice lawsuits against us are successful. Furthermore, product liabilities claims, regardless of
their merits, could be costly and divert our management’s attention from other business concerns, or adversely affect our
reputation and the demand for our product. We currently maintain a $2,000,000 general liability insurance policy, a global $5,000,000
clinical liability insurance policy and as required, country specific clinical liability insurance will be procured. We intend
to expand our liability insurance coverage for any products for which we obtain marketing approval, however, such insurance may
be unavailable, prohibitively expensive or may not fully cover our potential liabilities. If we are unable to maintain sufficient
insurance coverage on reasonable terms or to otherwise protect against potential product liability claims or field actions, we
may be unable to continue to market our products and develop new markets.


 


Developments by competitors may render
our products or technologies obsolete or non-competitive.


 


The biotechnology and
pharmaceutical industries are intensely competitive and subject to rapid and significant technological change. PRTX-100, should
we obtain regulatory approval, will have to compete with existing therapies. In addition, a significant number of companies are
pursuing the development of products that target the same indications that we are targeting. We face competition from both domestic
and international companies. In addition, companies pursuing different but related fields represent substantial competition. Many
of these organizations competing with us have substantially greater capital resources, larger research and development staffs and
facilities, long drug development history in obtaining regulatory approvals and greater manufacturing and marketing capabilities
than we do. These organizations also compete with us to attract qualified personnel and parties for acquisitions, joint ventures
or other strategic collaborations.


 







    	I-9



    	 



    

 


The loss of one or more key members
of our management team could adversely affect our business.


 


Our performance is
substantially dependent on the continued service and performance of our management team, [who have extensive experience
and specialized expertise] in our business.  In particular, the loss of Arnold P. Kling, our president, could
adversely affect our business and operating results. We do not have “key person” life insurance policies for any members
of our management team or employment agreements with any members of our management team.


 


If we are unable to engage additional
qualified personnel, our ability to grow our business may be harmed.


 


We will need to engage
additional qualified personnel and consultants with expertise in clinical research and testing, government regulation, formulation
and manufacturing and sales and marketing.  We expect that the hiring of such additional personnel may increase our annual
expenditures by approximately $2-$3 million or more.  We will compete for qualified individuals with numerous biopharmaceutical
companies, universities and other research institutions.  Competition for such individuals is intense, and we cannot
assure you that our search for such personnel will be successful.  Attracting and retaining qualified personnel will
be critical to our success and any failure to do so successfully may have a material adverse effect on us.


 


Many of our business practices are subject
to scrutiny by regulatory authorities, as well as to lawsuits brought by private citizens under federal and state laws.  Failure
to comply with applicable law or an adverse decision in lawsuits may result in adverse consequences to us.


 


The laws governing
our conduct in the United States are enforceable by criminal, civil and administrative penalties.  Violations of laws
such as the Federal Food, Drug, and Cosmetic Act, the False Claims Act and the Anti-Kickback Law and the Public Health Service
Act, and any regulations promulgated under their authority, may result in jail sentences, fines or exclusion from federal and state
programs, as may be determined by Medicare, Medicaid and the Department of Health and Human Services and other regulatory authorities
as well as by the courts.  There can be no assurance that our activities will not come under the scrutiny of regulators
and other government authorities or that our practices will not be found to violate applicable laws, rules and regulations or prompt
lawsuits by private citizen “relators” under federal or state false claims laws.


 


For example, under
the Anti-Kickback Law, and similar state laws and regulations, even common business arrangements, such as discounted terms and
volume incentives for customers in a position to recommend or choose products for patients, such as physicians and hospitals, can
result in substantial legal penalties, including, among others, exclusion from the Medicare and Medicaid programs, and arrangements
with referral sources must be structured with care to comply with applicable requirements.  Also, certain business practices,
such as consulting fees to healthcare providers, sponsorship of educational or research grants, charitable donations, interactions
with healthcare providers that prescribe products for uses not approved by the FDA and financial support for continuing medical
education programs, must be conducted within narrowly prescribed and controlled limits to avoid any possibility of wrongfully influencing
healthcare providers to prescribe or purchase particular products or as a reward for past prescribing.  Under the Patient
Protection and Affordable Care Act and the companion Health Care and Education Reconciliation Act, which together are referred
to as the healthcare reform law, such payments by pharmaceutical manufacturers to U.S. healthcare practitioners and academic medical
centers must be publicly disclosed.  A number of states have similar laws in place.  Additional and stricter
prohibitions could be implemented by federal and state authorities.  Where such practices have been found to be improper
incentives to use such products, government investigations and assessments of penalties against manufacturers have resulted in
substantial damages and fines.  Many manufacturers have been required to enter into consent decrees or orders that prescribe
allowable corporate conduct.


 




    	I-10



    	 



    

  


Failure to satisfy
requirements under the Federal Food, Drug, and Cosmetic Act can also result in penalties, as well as requirements to enter into
consent decrees or orders that prescribe allowable corporate conduct.


 


In addition, while
regulatory authorities generally do not regulate physicians’ discretion in their choice of treatments for their patients,
they do restrict communications by manufacturers on unapproved uses of approved products or on the potential safety and efficacy
of unapproved products in development.  Companies in the United States, Canada and the European Union cannot promote
approved products for other indications that are not specifically approved by the competent regulatory authorities (e.g., FDA in
the United States), nor can companies promote unapproved products.  In limited circumstances, companies may disseminate
to physicians information regarding unapproved uses of approved products or results of studies involving investigational products.  If
such activities fail to comply with applicable regulations and guidelines of the various regulatory authorities, we may be subject
to warnings from, or enforcement action by, these authorities.  Furthermore, if such activities are prohibited, it may
harm demand for our products.


 


Promotion of unapproved
drugs or devices or unapproved indications for a drug or device is a violation of the Federal Food, Drug, and Cosmetic Act and
subjects us to civil and criminal sanctions.  Furthermore, sanctions under the Federal False Claims Act have recently
been brought against companies accused of promoting off-label uses of drugs, because such promotion induces the use and subsequent
claims for reimbursement under Medicare and other federal programs.  Similar actions for off-label promotion have been
initiated by several states for Medicaid fraud.  The healthcare reform law significantly strengthened provisions of the
Federal False Claims Act, Medicare and Medicaid Anti-Kickback provisions, and other health care fraud provisions, leading to the
possibility of greatly increased qui tam suits by relators for perceived violations.  Violations or allegations of violations
of the foregoing restrictions could materially and adversely affect our business.


 


We may be required
to report detailed pricing information, net of included discounts, rebates and other concessions, to the Centers for Medicare
& Medicaid Services, or CMS, for the purpose of calculating national reimbursement levels, certain federal prices and certain
federal and state rebate obligations.  We will need to establish systems for collecting and reporting this data accurately
to CMS and institute a compliance program to assure that the information collected is complete in all respects.  If
we report pricing information that is not accurate to the federal government, we could be subject to fines and other sanctions
that could adversely affect our business.


 




    	I-11



    	 



    

  


If we choose to pursue
clinical development and commercialization in the European Union or otherwise market and sell our products outside of the United
States, we must obtain and maintain regulatory approvals and comply with regulatory requirements in such jurisdictions.  The
approval procedures vary among countries in complexity and timing.  We may not obtain approvals from regulatory authorities
outside the United States on a timely basis, if at all, which would preclude us from commercializing products in those markets.  In
addition, some countries, particularly the countries of the European Union, regulate the pricing of prescription pharmaceuticals.  In
these countries, pricing discussions with governmental authorities can take considerable time after the receipt of marketing approval
for a product.  To obtain reimbursement or pricing approval in some countries, we may be required to conduct a clinical
trial that compares the cost-effectiveness of their product candidate to other available therapies.  Such trials may
be time-consuming and expensive, and may not show an advantage in efficacy for our products.  If reimbursement of our
products is unavailable or limited in scope or amount, or if pricing is set at unsatisfactory levels, in either the United States
or the European Union, we could be adversely affected.  Also, under the United States Foreign Corrupt Practices Act,
or FCPA, the United States has increasingly focused on regulating the conduct by U.S. businesses occurring outside of the United
States, generally prohibiting remuneration to foreign officials for the purpose of obtaining or retaining business.


 


To enhance compliance
with applicable health care laws, and mitigate potential liability in the event of noncompliance, regulatory authorities, such
as the United States Health and Human Services Department Office of Inspector General, or OIG, have recommended the adoption and
implementation of a comprehensive health care compliance program that generally contains the elements of an effective compliance
and ethics program described in Section 8B2.1 of the United States Sentencing Commission Guidelines Manual.  Increasing
numbers of U.S.-based pharmaceutical companies have such programs.  In the future, we may need to adopt healthcare compliance
and ethics programs that would incorporate the OIG’s recommendations, and train our applicable employees in such compliance.  Such
a program may be expensive and may not assure that we will avoid compliance issues.


  


Our ability to commercialize our products,
alone or with collaborators, will depend in part on the extent to which reimbursement will be available from government and health
administration authorities, private health maintenance organizations and health insurers and other healthcare payers.


 


Our ability to generate
product revenues will be diminished if our products sell for inadequate prices or patients are unable to obtain adequate levels
of reimbursement. Significant uncertainty exists as to the reimbursement status of newly approved healthcare products.  Healthcare
payers, including Medicare, are challenging the prices charged for medical products and services.  Government and other
healthcare payers increasingly attempt to contain healthcare costs by limiting both coverage and the level of reimbursement for
products.  Even if one of our product candidates is approved by the FDA, insurance coverage may not be available, and
reimbursement levels may be inadequate, to cover such product.  If government and other healthcare payers do not provide
adequate coverage and reimbursement levels for one of our products, once approved, market acceptance of such product could be reduced.


 


Prices in many countries,
including many in Europe, are subject to local regulation and certain pharmaceutical products, such as plasma-derived products,
are subject to price controls in several of the world’s principal markets, including many countries within the European Union.  In
the United States, where pricing levels for our products are substantially established by third-party payors, if payors reduce
the amount of reimbursement for a product, it may cause groups or individuals dispensing the product to discontinue administration
of the product, to administer lower doses, to substitute lower cost products or to seek additional price-related concessions.  These
actions could have a negative effect on financial results, particularly in cases where our products command a premium price in
the marketplace, or where changes in reimbursement induce a shift in the site of treatment.  The existence of direct
and indirect price controls and pressures over our products could materially adversely affect our financial prospects and performance.


 






    	I-12



    	 



    



 


The implementation of the healthcare
reform law in the United States may adversely affect our business.


 


Through the March 2010
adoption of the healthcare reform law in the United States, substantial changes are being made to the current system for paying
for healthcare in the United States, including programs to extend medical benefits to millions of individuals who currently lack
insurance coverage.  The changes contemplated by the healthcare reform law are subject to rule-making and implementation
timelines that extend for several years, and this uncertainty limits our ability to forecast changes that may occur in the future.  However,
implementation has already begun with respect to certain significant cost-saving measures under the healthcare reform law, for
example with respect to several government healthcare programs that may cover the cost of our future products, including Medicaid,
Medicare Parts B and D, and these efforts could have a materially adverse impact on our future financial prospects and performance.


 


For example, with respect
to Medicaid, in order for a manufacturer’s products to be reimbursed by federal funding under Medicaid, the manufacturer
must enter into a Medicaid rebate agreement with the Secretary of the United States Department of Health and Human Services, and
pay certain rebates to the states based on utilization data provided by each state to the manufacturer and to CMS, and pricing
data provided by the manufacturer to the federal government.  The States share this savings with the federal government,
and sometimes implement their own additional supplemental rebate programs.  Under the Medicaid drug rebate program, the
rebate amount for most branded drug products was previously equal to a minimum of 15.1% of the Average Manufacturer Price, or AMP,
or the AMP less Best Price, whichever is greater.  Effective January 1, 2010, the healthcare reform law generally increases
the size of the Medicaid rebates paid by manufacturers for single source and innovator multiple source (brand name) drug product
from a minimum of 15.1% to a minimum of 23.1% of the AMP, subject to certain exceptions, for example, for certain clotting factors,
the increase is limited to a minimum of 17.1% of the AMP.  For non-innovator multiple source (generic) products, the
rebate percentage is increased from a minimum of 11.0% to a minimum of 13.0% of AMP.  In 2010, the healthcare reform
law also newly extended this rebate obligation to prescription drugs covered by Medicaid managed care organizations.  These
increases in required rebates may adversely affect our future financial prospects and performance.


 


The healthcare reform
law also creates new rebate obligations for our products under Medicare Part D, a partial, voluntary prescription drug benefit
created by the United States federal government primarily for persons 65 years old and over.  The Part D drug program
is administered through private insurers that contract with CMS.  Beginning in 2011, the healthcare reform law generally
requires that in order for a drug manufacturer’s products to be reimbursed under Medicare Part D, the manufacturer must enter
into a Medicare Coverage Gap Discount Program agreement with the Secretary of the United States Department of Health and Human
Services, and reimburse each Medicare Part D plan sponsor an amount equal to 50% savings for the manufacturer’s brand name
drugs and biologics which the Part D plan sponsor has provided to its Medicare Part D beneficiaries who are in the “donut
hole” (or a gap in Medicare Part D coverage for beneficiaries who have expended certain amounts for drugs). The Part D plan
sponsor is responsible for calculating and providing the discount directly to its beneficiaries and for reporting these amounts
paid to CMS’s contractor, which notifies drug manufacturers of the rebate amounts it must pay to each Part D plan sponsor.  The
rebate requirement could adversely affect our future financial performance, particularly if contracts with Part D plans cannot
be favorably renegotiated or the Part D plan sponsors fail to accurately calculate payments due in a manner that overstates our
rebate obligation.


 




    	I-13



    	 



    

 


The healthcare reform
law also introduced a biosimilar pathway that will permit companies to obtain FDA approval of generic versions of existing biologics
based upon reduced documentation and data requirements deemed sufficient to demonstrate safety and efficacy than are required for
the pioneer biologics.  The new law provides that a biosimilar application may be submitted as soon as 4 years after
the reference product is first licensed, and that the FDA may not make approval of an application effective until 12 years after
the reference product was first licensed.  With the likely introduction of biosimilars in the United States, we expect
in the future to face greater competition from biosimilar products, including a possible increase in patent challenges.  The
FDA has reported meeting with sponsors who are interested in developing biosimilar products, and is developing regulations to implement
the abbreviated regulatory review pathway.


 


Regarding access to
our products, the healthcare reform law established and provided significant funding for a Patient-Centered Outcomes Research Institute
to coordinate and fund Comparative Effectiveness Research, or CER.  While the stated intent of CER is to develop information
to guide providers to the most efficacious therapies, outcomes of CER could influence the reimbursement or coverage for therapies
that are determined to be less cost-effective than others.  Should any of our products be determined to be less cost-effective
than alternative therapies, the levels of reimbursement for these products, or the willingness to reimburse at all, could be impacted,
which could materially impact our future financial prospects and results.


 


Risks Relating to our Finances, Capital
Requirements and Other Financial Matters


 


Auditors have doubt as to our ability
to continue in business.


 


In their report on
our May 31, 2013 financial statements, our auditors expressed substantial doubt as to our ability to continue as a going concern.
A going concern qualification could impair our ability to finance our operations through the sale of debt or equity securities.
Our ability to continue as a going concern will depend, in large part, on our ability to obtain additional financing and generate
positive cash flow from operations, neither of which is certain. If we are unable to achieve these goals, our business would be
jeopardized and we may not be able to continue operations.


 


We are a clinical stage company with
a history of operating losses that are expected to continue and we are unable to predict the extent of future losses, whether we
will generate significant revenues or whether we will achieve or sustain profitability.


 


We are a clinical stage
company and our prospects must be considered in light of the uncertainties, risks, expenses and difficulties frequently encountered
by similarly situated companies.  We have generated net losses in all periods since our inception in September 1999 including
losses of approximately $4.4 million and $6.3 million for the years ended May 31, 2012 and 2013, respectively and approximately$2.8
million for the six months ended November 30, 2013.  At November 30, 2013, we had an accumulated
deficit of approximately $64.7 million.  We expect to make substantial expenditures and incur increasing operating
costs in the future and our accumulated deficit will increase significantly as we expand development and clinical trial activities
for our product candidates.  Our losses have had, and are expected to continue to have, an adverse impact on our working
capital, total assets and stockholders’ equity.  Because of the risks and uncertainties associated with product
development, we are unable to predict the extent of any future losses, whether we will ever generate significant revenues or if
we will ever achieve or sustain profitability.


 







    	I-14



    	 



    

 


We will need substantial additional
funding and may be unable to raise capital when needed, which would force us to delay, curtail or eliminate one or more of our
research and development programs or commercialization efforts.


 


Our operations have
consumed substantial amounts of cash since inception.  During the years ended May 31, 2012 and 2013, we incurred research
and development expenses of approximately $1.9 million and $3.8 million, respectively, and approximately $1.6 million for the six
months ended November 30, 2013.  As of November 30, 2013, we had cash and cash equivalents of approximately $1.1
million and net working capital of approximately $550,000 compared to cash and cash equivalents of approximately $32,000 and negative
net working capital of approximately $2.7 million as of November 30, 2012.  We have suffered recurring losses from operations.


 


We expect to continue
to spend substantial amounts on product development, including conducting clinical trials for our product candidates and purchasing
clinical trial materials from our suppliers.  We anticipate that, based upon our projected expenditures, our current
cash and cash equivalents will be sufficient to fund our operations into the 4th fiscal quarter of 2014. If we complete
this offering, the expected net proceeds from the sale of the shares offered hereby, if added to our current cash and cash
equivalents is anticipated to be sufficient to fund our operations into the 1st fiscal quarter of 2015.  We
have based this estimate, however, on assumptions that may prove to be wrong, and we could spend our available financial resources
much faster than we currently expect.  


 


Until such time, if
ever, as we can generate a sufficient amount of product revenue and achieve profitability, we expect to seek to finance future
cash needs through equity or debt financings or corporate collaboration and licensing arrangements. We currently have no agreements
relating to any of these types of transactions and we cannot be certain that additional funding will be available on acceptable
terms, or at all.  If we are unable to raise additional capital, we will have to delay, curtail or eliminate one or more
of our research and development programs.


 


Raising additional funds by issuing
securities or through licensing or lending arrangements may cause dilution to our existing stockholders, restrict our operations
or require us to relinquish proprietary rights.


 


To the extent that
we raise additional capital by issuing equity securities, the share ownership of existing stockholders will be diluted.  Any
future debt financing may involve covenants that restrict our operations, including limitations on our ability to incur liens or
additional debt, pay dividends, redeem our stock, make certain investments and engage in certain merger, consolidation or asset
sale transactions, among other restrictions. In addition, if we raise additional funds through licensing arrangements, it may be
necessary to relinquish potentially valuable rights to our product candidates, or grant licenses on terms that are not favorable
to us.


 







    	I-15



    	 



    

 


If we fail to maintain proper and effective
internal controls over financial reporting in the future, our ability to produce accurate and timely financial statements could
be impaired, which could harm our operating results, investors’ views of us and, as a result, the value of our common stock.


 


Pursuant to Section
404 of the Sarbanes-Oxley Act of 2002 and related rules, or SOX, beginning with the annual report for the year ended
December 31, 2012, our management is required to report on the effectiveness of our internal control over financial reporting.  The
rules governing the standards that must be met for management to assess our internal control over financial reporting are complex
and require significant documentation, testing and possible remediation.  To comply with the requirements of being a
reporting company under the Exchange Act we may need to further upgrade our systems, including information technology, implement
additional financial and management controls, reporting systems and procedures and hire additional accounting and finance staff.


 


Risks Associated with our Capital Stock


 


The market price of our Common Stock
may be volatile and may fluctuate in a way that is disproportionate to our operating performance.


 


Our stock price may
experience substantial volatility as a result of a number of factors, including:


 


		·	sales or potential sales of substantial amounts of our Common Stock;



 


		·	the actual number of shares of our Common Stock that trade;



 


		·	delay or failure in initiating or completing preclinical or clinical trials or unsatisfactory results of these trials;



 


		·	announcements about us or about our competitors, including clinical trial results, regulatory approvals or new product introductions;



 


		·	developments concerning our licensors or product manufacturers;



 


		·	litigation and other developments relating to our patents or other proprietary rights or those of our competitors;



 


		·	conditions in the pharmaceutical or biotechnology industries;



 


		·	governmental regulation and legislation;



 


		·	variations in our anticipated or actual operating results; and



 


		·	change in securities analysts’ estimates of our performance, or our failure to meet analysts’ expectations.



  




    	I-16



    	 



    

 


Many of these factors
are beyond our control.  The stock markets in general, and the market for pharmaceutical and biotechnological companies
in particular, have historically experienced extreme price and volume fluctuations.  These fluctuations often have been
unrelated or disproportionate to the operating performance of these companies.  These broad market and industry factors
could reduce the market price of our Common Stock, regardless of our actual operating performance.


 


We have never paid and do not intend
to pay cash dividends.  As a result, capital appreciation, if any, will be your sole source of gain.


 


We have never paid
cash dividends on any of our capital stock and we currently intend to retain future earnings, if any, to fund the development and
growth of our business.  In addition, the terms of existing and future debt agreements may preclude us from paying dividends.  As
a result, capital appreciation, if any, of our Common Stock will be your sole source of gain for the foreseeable future.


 


Provisions in our certificate of incorporation,
our by-laws and Delaware law might discourage, delay or prevent a change in control of the Company or changes in our management
and, therefore, depress the trading price of our Common Stock.


 


Provisions of our certificate
of incorporation, our by-laws and Delaware law may have the effect of deterring unsolicited takeovers or delaying or preventing
a change in control of the Company or changes in our management, including transactions in which our stockholders might otherwise
receive a premium for their shares over then current market prices.  In addition, these provisions may limit the ability
of stockholders to approve transactions that they may deem to be in their best interests.  These provisions include:


 


		·	the inability of stockholders to call special meetings; and



 


		·	the ability of our Board of Directors to designate the terms of and issue new series of preferred stock without stockholder
approval, which could include the right to approve an acquisition or other change in our control or could be used to institute
a rights plan, also known as a poison pill, that would work to dilute the stock ownership of a potential hostile acquirer, likely
preventing acquisitions that have not been approved by our Board of Directors.



 


The classification
of our Board of Directors and limitation on filling of vacancies could make it more difficult for a third party to acquire, or
discourage a third party from seeking to acquire, control of the Company.


 


In addition, Section
203 of the Delaware General Corporation Law prohibits a publicly-held Delaware corporation from engaging in a business combination
with an interested stockholder, generally a person which together with its affiliates owns, or within the last three years, has
owned 15% of our voting stock, for a period of three years after the date of the transaction in which the person became an interested
stockholder, unless the business combination is approved in a prescribed manner.


 




    	I-17



    	 



    

 


The existence of the
forgoing provisions and anti-takeover measures could limit the price that investors might be willing to pay in the future for shares
of our Common Stock.  They could also deter potential acquirers of the Company, thereby reducing the likelihood that
you could receive a premium for your Shares in an acquisition.


 


Our affiliates control the majority
of our shares of common stock and one shareholder holds a controlling interest.


 


As of December 31,
2013, our directors and executive officers and their Affiliates beneficially own approximately 82% of the outstanding shares of
our Common Stock, with one such Affiliate, Niobe Ventures LLC, beneficially owns approximately 79% of our outstanding Common Stock. As
a result, this stockholder is able to exercise control over matters requiring stockholder approval, including the election of directors,
and the approval of mergers, consolidations and sales of all or substantially all of our assets.


 


Our Common Stock is quoted on the OTC
Bulletin Board, which may have an unfavorable impact on our stock price and liquidity.


 


Our Common Stock is
not listed on any securities exchange. Rather, it is quoted on the OTC Bulletin Board. The OTC Bulletin Board is a significantly
more limited market than the New York Stock Exchange, NYSE Amex or any of the securities exchanges that are part of the NASDAQ
system. The quotation of our shares on the OTC Bulletin Board may result in a less liquid market available for existing and
potential stockholders to trade shares of our Common Stock, which could have an adverse impact on the trading price of our Common
Stock and could have a long-term adverse impact on our ability to raise capital in the future. In addition, we cannot assure that
our Common Stock will continue to be quoted on the OTC Bulletin Board. For example, the current market makers in our Common Stock
are under no obligations to continue to do so and if they should decide to terminate their market making activities in our Common
Stock, you may not be able to trade your Shares.


 


If our Common Stock becomes subject
to the penny stock rules, this may make it more difficult to sell the Shares.


 


The Commission has
adopted rules that regulate broker-dealer practices in connection with transactions in penny stocks. Penny stocks are generally
equity securities with a price of less than $5.00 (other than securities registered on certain national securities exchanges or
authorized for quotation on certain automated quotation systems, provided that current price and volume information with respect
to transactions in such securities is provided by the exchange or system). The OTC Bulletin Board does not meet such requirements
and if the price of our Common Stock is less than $5.00, our securities will be deemed penny stocks. The penny stock rules require
a broker-dealer, prior to a transaction in a penny stock not otherwise exempt from those rules, to deliver a standardized risk
disclosure document containing specified information. In addition, the penny stock rules require that prior to effecting any transaction
in a penny stock not otherwise exempt from those rules, a broker-dealer must make a special written determination that the penny
stock is a suitable investment for the purchaser and receive (i) the purchaser’s written acknowledgment of the receipt of
a risk disclosure statement; (ii) a written agreement to transactions involving penny stocks; and (iii) a signed and dated copy
of a written suitability statement. These disclosure requirements may have the effect of reducing the trading activity in the secondary
market for our Common Stock and, therefore, you may have difficulty selling the Shares.


 




    	I-18



    	 



    

 


Risks Associated with the Offering


 


The
Shares are “restricted securities” and, as such, may not be sold except in limited circumstances.


 


None of the Shares
have been registered under the Securities Act, or registered or qualified under any state securities laws. Rather, they will be
sold and/or issued pursuant to exemptions contained in and under those laws. Accordingly, the Shares will be “restricted
securities” as defined in Rule 144 and, therefore, may not be sold until they are registered under applicable federal and
state securities laws, or an exemption from the registration requirements of those laws is available. (Rule 144 permits the resale,
subject to various terms and conditions, of limited amounts of restricted securities after they have been held for six months.)
The certificates representing the Shares will contain legends reflecting their restricted status or an appropriate notation will
be made in the Company’s stock register. Subject to the availability of an exemption from the registration requirements of
the Securities Act, you will not be able to sell the Shares until the Registration Statement is filed and declared effective by
the Commission. However, we are only obligated to register the Shares under limited circumstances. Moreover, even if we were to
become obligated to register the Shares, there are many reasons, including some over which we have little or no control, which
could delay the filing of the Registration Statement or which could keep the Registration Statement from being declared effective,
including delays resulting from the regulatory review process and comments raised by the Commission during that process with respect
to the Registration Statement.


 


Filing the Registration Statement could
have an adverse impact on the market price of the Common Stock. Even if the Shares are covered by an effective registration statement
covering their resale, there may be periods when you will be prevented from selling the Shares.


 


We are under no obligation
to register the Shares unless and until we file a resale registration statement. We expect that if we ever file such a registration
statement it will include the Shares as well as shares of Common Stock held by other shareholders. Following the effective date
of the Registration Statement, all such shares would become available for sale in the public market, which could harm the market
price of the Common Stock. Moreover, following the effective date of the Registration Statement, there may be periods when you
still will be unable to publicly resell any the Shares that you hold. In particular, upon the occurrence of material developments,
we may be required to update the information included in the Registration Statement as a result of such development. Examples of
material developments that might require post-effective amendments to the Registration Statement or supplements to the prospectus
included therein include, without limitation, the announcement of quarterly and annual operating results or material corporate
events such as the licensing of a new product or the regulatory approval of one of our product candidates. During these “blackout”
periods when a material development has occurred but the information included in the Registration Statement has not yet been amended
or supplemented, you will be unable to resell any Shares pursuant to the prospectus. Accordingly, you may not always be able to
resell your Shares publicly at times and prices that you feel are appropriate.


 


The purchase price of the Shares
may not be indicative of our value.


 


The purchase price
of the Shares may bear no relationship to our assets, book value, results of operations or any other established criterion of value.
Therefore, we cannot assure you that you will be able to sell your Shares at or above the price you paid for them. Following effectiveness
of the Registration Statement, the market price of the Common Stock may fluctuate significantly in response to factors, some of
which are beyond our control, such as:


 




    	I-19



    	 



    

 


		·	the announcement of new products or product enhancements by us or
our competitors;



 


		·	developments concerning intellectual property rights and regulatory
approvals; 



 


		·	quarterly variations in our and our competitors’ results of
operations; 



 


		·	changes in earnings estimates or recommendations by securities analysts;




 


		·	our ability to license our products to a third-party pharmaceutical
company;



 


		·	developments in the pharmaceutical industry; and 



 


		·	general market conditions and other factors, including factors unrelated
to operating performance.



 


Further, the stock
market in general in recent years has experienced extreme price and volume fluctuations. Continued market fluctuations could result
in extreme volatility in the price of the Common Stock, which could cause a decline in value. You should also be aware that price
volatility might be worse if the trading volume of the Common Stock is low.


 


You will experience immediate and substantial
dilution with respect to the Shares you purchase in the offering.


 


Because we have negative book value and
no tangible assets, you will experience immediate and substantial dilution in the net tangible book value per share of the Common
Stock you purchase in the offering.


 


We have broad discretion in the use
of the net proceeds of this offering and may not use them effectively.


 


We intend to use the
net proceeds from this offering to continue clinical testing and commercialization of PRTX-100 and for working capital and
other general corporate purposes. However, our management will have broad discretion in the application of the net proceeds from
this offering and could spend the proceeds in ways that do not improve our results of operations or enhance the value of our Common
Stock.  The failure by management to apply these funds effectively could result in financial losses that could have a
material adverse effect on our business, cause the price of our Common Stock to decline and delay the development of our product
candidates.  Pending their use, we may invest the net proceeds from this offering in a manner that does not produce income
or that loses value.


 


We have not retained independent
professionals for you.


 


We have not retained
any independent professionals to protect your interests in connection with the offering and sale of the Shares. You must rely on
the advice of your own professional advisors and legal counsel.


 




    	I-20