##### Table of Contents





UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, DC 20549





FORM 10-K/A

Amendment No. 1

to Form 10-K

(Mark One)

|x | ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
|- | ------------------------------------------------------------------------------------

For the fiscal year ended December 31, 2012

OR



| ̈ | TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
|- | ----------------------------------------------------------------------------------------

For the transition period from              to

Commission file number 0-22245





APRICUS BIOSCIENCES, INC.

(Exact Name of Registrant as Specified in Its Charter)



|                                                               |  |                                     
|-------------------------------------------------------------- |  | ------------------------------------
|Nevada                                                         |  | 87-0449967                          
|(State or Other Jurisdiction of
Incorporation or Organization) |  | (I.R.S. Employer Identification No.)

11975 El Camino Real, Suite 300, San Diego, CA 92130

(Address of Principal Executive Offices) (Zip Code)

(858) 222-8041

(Registrants telephone number, including area code)

Securities registered pursuant to Section 12(b) of the Act:

|                              |  |                                     
|----------------------------- |  | ------------------------------------
|Title of Each Class           |  | Name of Exchange on Which Registered
|Common Stock, par value $.001 |  | The NASDAQ Capital Market           

Securities registered pursuant to Section 12(g) of the Act:

Preferred Share Purchase Rights Pursuant to Rights Agreement





Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities
Act.    Yes   ̈    No  x

Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the
Act.    Yes   ̈    No  x

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the
Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90
days.    Yes  x    No   ̈

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive
Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§ 232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post
such files).    Yes  x    No   ̈

Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K(§229.405 of this chapter) is
not contained herein, and will not be contained, to the best of registrants knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K.    ̈

Indicate by check mark whether the registrant is a large accelerated filer, an
accelerated filer, a non-accelerated filer, or a smaller reporting company. See definitions of large accelerated filer, accelerated filer and smaller reporting company in Rule 12b-2 of the Exchange Act (check
one):



|                        |  |                                                  |  |                           |  |  
|----------------------- |  | ------------------------------------------------ |  | ------------------------- |  | -
|Large accelerated filer |  |  ̈                                                |  | Accelerated filer         |  | x
|                        |  |                                                  | 
|Non-accelerated filer   |  |  ̈  (do not check if a smaller reporting company) |  | Smaller Reporting Company |  |  ̈

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the
Act).    Yes   ̈    No  x

As of March 11, 2013, 30,342,513 shares of the common stock, par value $.001, of the registrant were outstanding. The aggregate
market value of the common stock held by non-affiliates, based upon the last sale price of the registrants common stock on June 30, 2012, was approximately $83.0 million. Shares of common stock held by each officer and director and by
each person who is known to own 10% or more of the outstanding common stock have been excluded in that such persons may be deemed to be affiliates of the Company. This determination of affiliate status is not necessarily a conclusive
determination for other purposes.





DOCUMENTS INCORPORATED BY REFERENCE

Certain information required to be disclosed in Part III of this report is incorporated by reference from the registrants Proxy Statement for the 2013 Annual Meeting of Stockholders, which Proxy
Statement will be filed no later than 120 days after the end of the fiscal year covered by this report.









---

##### Table of Contents

TABLE OF CONTENTS



|                 |  |                                              |   |      |    | 
|---------------- |  | -------------------------------------------- | - | ---- | -- | 
|                 |  |                                              |   | Page |   
|                 | 
|EXPLANATORY NOTE |  |                                              | 3 |     
|                 |  |                                             
|PART II.         |  |                                              |   |      |    | 
|                 |  |                                             
|ITEM 8.          |  | FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA. |   |      | 4  | 
|                 |  |                                             
|ITEM 9A.         |  | CONTROLS AND PROCEDURES                      |   |      | 44 | 
|                 |  |                                             
|PART IV.         |  |                                              |   |      |    | 
|                 |  |                                             
|ITEM 15.         |  | EXHIBITS AND FINANCIAL STATEMENT SCHEDULES   |   |      | 46 | 



2



---

##### Table of Contents

Explanatory Note

We are filing this Amendment No. 1 on Form 10-K/A (the Amended Filing or Form 10-K/A) to our previously filed
Annual Report on Form 10-K for the year ended December 31, 2012 (the Original Filing) to amend and restate our Item 9A. Controls and Procedures disclosures related to effectiveness of our disclosure controls and procedures and internal
control over financial reporting. The Original Filing was filed with the Securities and Exchange Commission (the SEC) on March 18, 2013.

Restatement of Disclosure Controls Procedures Conclusion

On August
6, 2013, PricewaterhouseCoopers LLP (PwC), our independent registered public accounting firm, informed us that it believes that one or more material weaknesses in our internal control over financial reporting may have existed as of
December 31, 2012. As a result, under the supervision and with the participation of our management, including the chief executive officer (CEO) (principal executive officer) and the chief financial officer (CFO) (principal
financial officer), we carried out an evaluation of the effectiveness of our disclosure controls and procedures, as defined in Rules 13a-15(e) and 15d-15(e) under the Exchange Act, as of December 31, 2012. At the time that our Annual Report on Form
10-K for the year ended December 31, 2012 was filed on March 18, 2013, our acting Interim CEO (Interim CEO) who was previously and continued to serve as the CFO concluded that our disclosure controls and procedures were effective as of
December 31, 2012. Subsequent to this evaluation, our CEO and CFO concluded that our disclosure controls and procedures were not effective as of December 31, 2012 because of a material weakness in our internal control over financial reporting as
further described In Item 9A included in this Annual Report on Form 10-K. As a result we have restated our Item 9A Controls and Procedures disclosures related to effectiveness of our disclosure controls and procedures and internal control over
financial reporting to include the material weakness.

In light of the material weakness described in Item 9A, the Company
performed additional analyses and other post-closing procedures to ensure our consolidated financial statements were prepared in accordance with generally accepted accounting principles. Accordingly, management concluded that no changes were
required to the financial statements previously filed and the financial statements included in this Annual Report on Form 10-K present fairly, in all material respects, our financial condition, results of operations and cash flows for the periods
presented.



3



---

##### Table of Contents

|ITEM 8. | FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA.
|------- | --------------------------------------------

INDEX TO FINANCIAL STATEMENTS



|                                                                                                                   |  |      |    | 
|------------------------------------------------------------------------------------------------------------------ |  | ---- | -- | 
|                                                                                                                   |  | PAGE |   
|Reports of Independent Registered Public Accounting Firms                                                          |  |      | 5  | 
|                                                                                                                   | 
|Financial Statements:                                                                                              |  |      |    | 
|                                                                                                                   | 
|Consolidated Balance Sheets as of December 31, 2012 and 2011                                                       |  |      | 7  | 
|                                                                                                                   | 
|Consolidated Statements of Operations and Comprehensive Loss for the years ended December 
31, 2012, 2011 and 2010 |  |      | 8  | 
|                                                                                                                   | 
|Consolidated Statements of Changes in Stockholders Equity for years ended December 
31, 2012, 2011 and 2010       |  |      | 9  | 
|                                                                                                                   | 
|Consolidated Statements of Cash Flows for the years ended December 31, 2012, 2011 and
2010                         |  |      | 10 | 
|                                                                                                                   | 
|Notes to the Consolidated Financial Statements                                                                     |  |      | 12 | 



4



---

##### Table of Contents

Report of Independent Registered Public Accounting Firm

To the Board of Directors and Stockholders of

Apricus Biosciences, Inc.

In our opinion, the
accompanying consolidated balance sheet as of December 31, 2012 and the related consolidated statements of operations and comprehensive loss, of changes in stockholders equity and of cash flows for the year then ended present fairly, in all
material respects, the financial position of Apricus Biosciences, Inc. and its subsidiaries at December 31, 2012, and the results of their operations and their cash flows for the year then ended in conformity with accounting principles generally
accepted in the United States of America. Management and we previously concluded that the Company maintained effective internal control over financial reporting as of December 31, 2012. However, management has subsequently determined that a material
weakness in internal control over financial reporting existed as of that date related to the accounting for and disclosure of technical accounting matters in the consolidated financial statements as management did not maintain a sufficient
complement of resources with an appropriate level of accounting knowledge, experience and training commensurate with their structure and financial reporting requirements. Accordingly, managements report has been restated and our opinion on
internal control over financial reporting, as presented herein, is different from that expressed in our previous report. Also in our opinion, the Company did not maintain, in all material respects, effective internal control over financial reporting
as of December 31, 2012, based on criteria established in Internal Control - Integrated Frameworkissued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO) because a material weakness in internal control over
financial reporting related to the accounting for and disclosures of technical accounting matters in the consolidated financial statements existed as of that date as management did not maintain a sufficient complement of resources with an
appropriate level of accounting knowledge, experience and training commensurate with their structure and financial reporting requirements. A material weakness is a deficiency, or a combination of deficiencies, in internal control over financial
reporting, such that there is a reasonable possibility that a material misstatement of the annual or interim financial statements will not be prevented or detected on a timely basis. The material weakness referred to above is described in
Managements Report on Internal Control over Financial Reporting appearing under Item 9A. We considered this material weakness in determining the nature, timing, and extent of audit tests applied in our audit of the 2012consolidatedfinancial statements, and our opinion regarding the effectiveness of the Companys internal control over financial reporting does not affect our opinion on those consolidatedfinancial statements. The Companys management is
responsible for these financial statements, for maintaining effective internal control over financial reporting and for its assessment of the effectiveness of internal control over financial reporting, included in managements report referred
to above. Our responsibility is to express opinions on these financial statements and on the Companys internal control over financial reporting based on our integrated audit. We conducted our audit in accordance with the standards of the
Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement and whether effective
internal control over financial reporting was maintained in all material respects. Our audit of the financial statements included examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements, assessing the
accounting principles used and significant estimates made by management, and evaluating the overall financial statement presentation. Our audit of internal control over financial reporting included obtaining an understanding of internal control over
financial reporting, assessing the risk that a material weakness exists, and testing and evaluating the design and operating effectiveness of internal control based on the assessed risk. Our audit also included performing such other procedures as we
considered necessary in the circumstances. We believe that our audit provide a reasonable basis for our opinions.

A companys internal
control over financial reporting is a process designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted
accounting principles. A companys internal control over financial reporting includes those policies and procedures that (i) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and
dispositions of the assets of the company; (ii) provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles, and that receipts and
expenditures of the company are being made only in accordance with authorizations of management and directors of the company; and (iii) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use, or
disposition of the companys assets that could have a material effect on the financial statements.

Because of its inherent limitations,
internal control over financial reporting may not prevent or detect misstatements. Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions,
or that the degree of compliance with the policies or procedures may deteriorate.

As described in Managements Report on Internal
Control Over Financial Reporting, management has excluded Finesco SAS, Scomedica SAS and NexMed Pharma SAS from its assessment of internal control over financial reporting as of December 31, 2012, because they were acquired by the Company in
separate purchase business combinations during 2012. We have also excluded Finesco SAS, Scomedica SAS and NexMed Pharma SAS from our audit of internal control over financial reporting. Finesco SAS, Scomedica SAS and NexMed Pharma SAS are
wholly-owned subsidiaries whose total assets and total revenues represent 9% and 34%, respectively, of the related consolidated financial statement amounts as of and for the year ended December 31, 2012.

/s/ PricewaterhouseCoopers LLP

San Diego,
California

March 18, 2013, except for the matter described in the penultimate paragraph of Managements Report on Internal Control over
Financial Reporting, as to which the date is September 30, 2013



5



---

##### Table of Contents

Report of Independent Registered Public Accounting Firm

To the Board of Directors and Stockholders

Apricus Biosciences, Inc. and Subsidiaries

We
have audited the accompanying consolidated balance sheets of Apricus Biosciences, Inc. and Subsidiaries (the Company) as of December 31, 2011 and 2010, and the related consolidated statements of operations and comprehensive loss,
changes in stockholders equity and cash flows for each of the years in the two-year period ended December 31, 2011. We have also audited Apricus Biosciences, Inc. and Subsidiaries internal control over financial reporting as of
December 31, 2011, based on criteria established in Internal ControlIntegrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO). The Companys management is
responsible for these consolidated financial statements, for maintaining effective internal control over financial reporting and for its assessment of the effectiveness of internal control over financial reporting. Our responsibility is to express
an opinion on these consolidated financial statements and an opinion on the Companys internal control over financial reporting as of December 31, 2011 based on our audits.

We conducted our audits in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audits to obtain reasonable
assurance about whether the financial statements are free of material misstatement and whether effective internal control over financial reporting was maintained in all material respects. Our audits of the consolidated financial statements included
examining, on a test basis, evidence supporting the amounts and disclosures in the consolidated financial statements, assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial
statement presentation. Our audit of internal control over financial reporting included obtaining an understanding of internal control over financial reporting, assessing the risk that a material weakness exists, and testing and evaluating the
design and operating effectiveness of internal control based on the assessed risk. Our audit of internal control over financial reporting also included performing such other procedures as we considered necessary in the circumstances. We believe that
our audits provide a reasonable basis for our opinions.

A companys internal control over financial reporting is a process designed to
provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with accounting principles generally accepted in the United States of America. A
companys internal control over financial reporting includes those policies and procedures that (i) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the
assets of the company; (ii) provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with accounting principles generally accepted in the United States of America, and
that receipts and expenditures of the company are being made only in accordance with authorizations of management and directors of the company; and (iii) provide reasonable assurance regarding prevention or timely detection of unauthorized
acquisition, use, or disposition of the companys assets that could have a material effect on the financial statements.

Because of its
inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of
changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.

In our opinion, the consolidated
financial statements referred to above present fairly, in all material respects, the consolidated financial position of Apricus Biosciences, Inc. and Subsidiaries as of December 31, 2011 and 2010, and the consolidated results of their
operations and their cash flows for each of the years in the two-year period ended December 31, 2011, in conformity with accounting principles generally accepted in the United States of America. Also in our opinion, Apricus Biosciences, Inc.
and Subsidiaries maintained, in all material respects, effective internal control over financial reporting as of December 31, 2011, based on criteria established in Internal ControlIntegrated Framework issued by COSO.

We also have audited the adjustments described in Note 5 that were applied to restate the 2011 consolidated financial statements for the presentation of
discontinued operations. In our opinion, such adjustments are appropriate and have been properly applied.

/s/ EisnerAmper LLP

Edison, New Jersey

March 17, 2013



6



---

##### Table of Contents

Apricus Biosciences, Inc. and Subsidiaries

Consolidated Balance Sheets

(In thousands, except share data)



|                                                                                                                                                          |  |             |          |   |      |   |          |  
|--------------------------------------------------------------------------------------------------------------------------------------------------------- |  | ----------- | -------- | - | ---- | - | -------- | -
|                                                                                                                                                          |  | DECEMBER 31 |         
|                                                                                                                                                          |  | 2012        |          |   | 2011 |  
|Assets                                                                                                                                                    |  |             |          |   |      |   |          |  
|Current assets                                                                                                                                            |  |             |          |   |      |   |          |  
|Cash and cash equivalents                                                                                                                                 |  | $           | 15,130   |   |      | $ | 7,435    |  
|Accounts receivable                                                                                                                                       |  |             | 678      |   |      |   | 21       |  
|Restricted cash                                                                                                                                           |  |             | 52       |   |      |   | 52       |  
|Prepaid expenses and other current assets                                                                                                                 |  |             | 590      |   |      |   | 218      |  
|Property held for sale                                                                                                                                    |  |             | 3,654    |   |      |   |         |  
|Current assets of discontinued operations                                                                                                                 |  |             | 791      |   |      |   | 466      |  
|                                                                                                                                                          |  |             |          |   |      |   |          |  
|Total current assets                                                                                                                                      |  |             | 20,895   |   |      |   | 8,192    |  
|Property and equipment, net                                                                                                                               |  |             | 601      |   |      |   | 4,384    |  
|Other long term assets                                                                                                                                    |  |             | 100      |   |      |   | 241      |  
|Restricted cash long term                                                                                                                                 |  |             | 343      |   |      |   |         |  
|Noncurrent assets of discontinued operations                                                                                                              |  |             | 1,940    |   |      |   | 3,799    |  
|                                                                                                                                                          |  |             |          |   |      |   |          |  
|Total assets                                                                                                                                              |  | $           | 23,879   |   |      | $ | 16,616   |  
|                                                                                                                                                          |  |             |          |   |      |   |          |  
|Liabilities and stockholders equity                                                                                                                      |  |             |          |   |      |   |          |  
|Current liabilities                                                                                                                                       |  |             |          |   |      |   |          |  
|Convertible notes payablecurrent portion                                                                                                                 |  | $           |         |   |      | $ | 4,000    |  
|Trade accounts payable                                                                                                                                    |  |             | 2,284    |   |      |   | 1,052    |  
|Accrued expenses                                                                                                                                          |  |             | 1,841    |   |      |   | 1,780    |  
|Accrued compensation                                                                                                                                      |  |             | 1,905    |   |      |   | 861      |  
|Deferred revenue                                                                                                                                          |  |             | 536      |   |      |   | 10       |  
|Deferred compensation                                                                                                                                     |  |             | 616      |   |      |   | 170      |  
|Other current liabilities                                                                                                                                 |  |             | 57       |   |      |   | 4        |  
|Current liabilities of discontinued operations                                                                                                            |  |             | 3,527    |   |      |   | 2,144    |  
|                                                                                                                                                          |  |             |          |   |      |   |          |  
|Total current liabilities                                                                                                                                 |  |             | 10,766   |   |      |   | 10,021   |  
|Long term liabilities                                                                                                                                     |  |             |          |   |      |   |          |  
|Convertible notes payable                                                                                                                                 |  |             | 3,413    |   |      |   |         |  
|Derivative liability                                                                                                                                      |  |             | 906      |   |      |   |         |  
|Deferred revenue                                                                                                                                          |  |             |         |   |      |   | 395      |  
|Deferred compensation                                                                                                                                     |  |             | 1,529    |   |      |   | 834      |  
|Other long term liabilities                                                                                                                               |  |             | 196      |   |      |   | 20       |  
|Noncurrent liabilities of discontinued operations                                                                                                         |  |             | 448      |   |      |   | 528      |  
|                                                                                                                                                          |  |             |          |   |      |   |          |  
|Total liabilities                                                                                                                                         |  |             | 17,258   |   |      |   | 11,798   |  
|                                                                                                                                                          |  |             |          |   |      |   |          |  
|Commitments and contingencies                                                                                                                             |  |             |          |   |      |   |          |  
|Stockholders equity:                                                                                                                                     |  |             |          |   |      |   |          |  
|Preferred stock, $.001 par value, 10,000,000 shares authorized                                                                                            |  |             |         |   |      |   |         |  
|Common stock, $.001 par value, 75,000,000 shares authorized, 29,937,669 and 21,347,986 issued and outstanding at December 31,
2012 and 2011, respectively |  |             | 30       |   |      |   | 21       |  
|Additional paid-in-capital                                                                                                                                |  |             | 257,078  |   |      |   | 224,154  |  
|Accumulated other comprehensive income                                                                                                                    |  |             | 641      |   |      |   |         |  
|Accumulated deficit                                                                                                                                       |  |             | (251,128 | ) |      |   | (219,357 | )
|                                                                                                                                                          |  |             |          |   |      |   |          |  
|Total stockholders equity                                                                                                                                |  |             | 6,621    |   |      |   | 4,818    |  
|                                                                                                                                                          |  |             |          |   |      |   |          |  
|Total liabilities and stockholders equity                                                                                                                |  | $           | 23,879   |   |      | $ | 16,616   |  
|                                                                                                                                                          |  |             |          |   |      |   |          |  

The accompanying notes are an integral part of these consolidated financial statements.



7



---

##### Table of Contents

Apricus Biosciences, Inc. and Subsidiaries

Consolidated Statements of Operations and Comprehensive Loss

(In thousands, except share data)



|                                                                                     |  |                     |            |   |      |   |            |      |  |   |            |  
|------------------------------------------------------------------------------------ |  | ------------------- | ---------- | - | ---- | - | ---------- | ---- |  | - | ---------- | -
|                                                                                     |  | FOR THE YEARS ENDED |           
|                                                                                     |  | DECEMBER 31,        |           
|                                                                                     |  | 2012                |            |   | 2011 |   |            | 2010 | 
|License fee revenue                                                                  |  | $                   | 4,276      |   |      | $ | 877        |      |  | $ | 40         |  
|Grant revenue                                                                        |  |                     |           |   |      |   | 483        |      |  |   |           |  
|Product sales                                                                        |  |                     | 494        |   |      |   | 498        |      |  |   | 527        |  
|Contract service revenue                                                             |  |                     | 3,646      |   |      |   | 2,243      |      |  |   | 4,406      |  
|                                                                                     |  |                     |            |   |      |   |            |      |  |   |            |  
|Total revenue                                                                        |  |                     | 8,416      |   |      |   | 4,101      |      |  |   | 4,973      |  
|Cost of product sales                                                                |  |                     | 324        |   |      |   | 379        |      |  |   | 386        |  
|Cost of services revenue                                                             |  |                     | 4,230      |   |      |   | 1,858      |      |  |   | 3,557      |  
|                                                                                     |  |                     |            |   |      |   |            |      |  |   |            |  
|Gross profit                                                                         |  |                     | 3,862      |   |      |   | 1,864      |      |  |   | 1,030      |  
|Costs and expenses                                                                   |  |                     |            |   |      |   |            |      |  |   |            |  
|Research and development                                                             |  |                     | 5,375      |   |      |   | 5,821      |      |  |   | 2,110      |  
|General and administrative                                                           |  |                     | 15,377     |   |      |   | 11,463     |      |  |   | 10,153     |  
|Loss (recovery) on sale of Bio-Quant subsidiary                                      |  |                     | (250       | ) |      |   | 2,760      |      |  |   |           |  
|Impairment of goodwill and intangible assets                                         |  |                     | 8,254      |   |      |   |           |      |  |   | 10,168     |  
|                                                                                     |  |                     |            |   |      |   |            |      |  |   |            |  
|Total costs and expenses                                                             |  |                     | 28,756     |   |      |   | 20,044     |      |  |   | 22,431     |  
|                                                                                     |  |                     |            |   |      |   |            |      |  |   |            |  
|Loss from continuing operations before other income (expense)                        |  |                     | (24,894    | ) |      |   | (18,180    | )    |  |   | (21,401    | )
|Other income (expense)                                                               |  |                     |            |   |      |   |            |      |  |   |            |  
|Interest expense, net                                                                |  |                     | (325       | ) |      |   | (363       | )    |  |   | (8,822     | )
|Rental income                                                                        |  |                     | 461        |   |      |   | 453        |      |  |   | 415        |  
|Other income (expense), net                                                          |  |                     | (286       | ) |      |   | (27        | )    |  |   | 300        |  
|                                                                                     |  |                     |            |   |      |   |            |      |  |   |            |  
|Total other income (expense)                                                         |  |                     | (150       | ) |      |   | 63         |      |  |   | (8,107     | )
|                                                                                     |  |                     |            |   |      |   |            |      |  |   |            |  
|Loss from continuing operations before income taxes                                  |  | $                   | (25,044    | ) |      | $ | (18,117    | )    |  | $ | (29,508    | )
|                                                                                     |  |                     |            |   |      |   |            |      |  |   |            |  
|Income tax expense                                                                   |  |                     | (516       | ) |      |   |           |      |  |   |           |  
|                                                                                     |  |                     |            |   |      |   |            |      |  |   |            |  
|Loss from continuing operations                                                      |  |                     | (25,560    | ) |      |   | (18,117    | )    |  |   | (29,508    | )
|                                                                                     |  |                     |            |   |      |   |            |      |  |   |            |  
|Loss from discontinued operations                                                    |  |                     | (6,211     | ) |      |   |           |      |  |   |           |  
|                                                                                     |  |                     |            |   |      |   |            |      |  |   |            |  
|Net loss                                                                             |  | $                   | (31,771    | ) |      | $ | (18,117    | )    |  | $ | (29,508    | )
|                                                                                     |  |                     |            |   |      |   |            |      |  |   |            |  
|Basic and diluted loss per common share                                              |  |                     |            |   |      |   |            |      |  |   |            |  
|Loss from continuing operations                                                      |  | $                   | (0.93      | ) |      | $ | (0.90      | )    |  | $ | (2.49      | )
|                                                                                     |  |                     |            |   |      |   |            |      |  |   |            |  
|Loss from discontinued operations                                                    |  | $                   | (0.23      | ) |      | $ |           |      |  | $ |           |  
|                                                                                     |  |                     |            |   |      |   |            |      |  |   |            |  
|Net loss                                                                             |  | $                   | (1.16      | ) |      | $ | (0.90      | )    |  | $ | (2.49      | )
|                                                                                     |  |                     |            |   |      |   |            |      |  |   |            |  
|Weighted average common shares outstanding used for basic and diluted loss per share |  |                     | 27,458,184 |   |      |   | 20,023,456 |      |  |   | 11,847,703 |  
|                                                                                     |  |                     |            |   |      |   |            |      |  |   |            |  
|Comprehensive income (loss)                                                          |  |                     |            |   |      |   |            |      |  |   |            |  
|Net loss                                                                             |  | $                   | (31,771    | ) |      | $ | (18,117    | )    |  | $ | (29,508    | )
|Foreign currency translation adjustments                                             |  |                     | 641        |   |      |   |           |      |  |   |           |  
|                                                                                     |  |                     |            |   |      |   |            |      |  |   |            |  
|Comprehensive loss                                                                   |  | $                   | (31,130    | ) |      | $ | (18,117    | )    |  | $ | (29,508    | )
|                                                                                     |  |                     |            |   |      |   |            |      |  |   |            |  

The accompanying notes are an integral part of these consolidated financial statements.



8



---

##### Table of Contents

Apricus Biosciences, Inc. and Subsidiaries

Consolidated Statement of Changes in Stockholders Equity

(In thousands, except share data)



|                                                                                              |  |                     |            |  |                     |   |    |                          |  |   |                                     |  |  |                    |     |  |                          |   |          |   |  |   |         |  
|--------------------------------------------------------------------------------------------- |  | ------------------- | ---------- |  | ------------------- | - | -- | ------------------------ |  | - | ----------------------------------- |  |  | ------------------ | --- |  | ------------------------ | - | -------- | - |  | - | ------- | -
|                                                                                              |  | CommonStock(Shares) |            |  | CommonStock(Amount) |   |    | AdditionalPaid-InCapital |  |   | AccumulatedOtherComprehensiveIncome |  |  | AccumulatedDeficit |     |  | TotalStockholdersEquity |  
|Balance at January 1, 2010                                                                    |  |                     | 6,988,105  |  |                     | $ | 7  |                          |  | $ | 174,430                             |  |  | $                  |    |  |                          | $ | (171,732 | ) |  | $ | 2,705   |  
|Issuance of compensatory stock to employees, consultants and Board of Director members        |  |                     | 291,096    |  |                     |   |   |                          |  |   | 2,340                               |  |  |                    |     |  |                          |   |          |   |  |   | 2,340   |  
|Issuance of common stock, net of offering costs                                               |  |                     | 5,704,910  |  |                     |   | 6  |                          |  |   | 11,632                              |  |  |                    |     |  |                          |   |          |   |  |   | 11,638  |  
|Issuance of common stock in payment of notes payable to the former Bio-Quant
shareholders     |  |                     | 4,642,620  |  |                     |   | 5  |                          |  |   | 18,841                              |  |  |                    |     |  |                          |   |          |   |  |   | 18,846  |  
|Issuance of common stock in payment of convertible notes payable                              |  |                     | 468,837    |  |                     |   |   |                          |  |   | 4,578                               |  |  |                    |     |  |                          |   |          |   |  |   | 4,578   |  
|Issuance of common stock upon exercise of warrants                                            |  |                     | 426,383    |  |                     |   |   |                          |  |   | 967                                 |  |  |                    |     |  |                          |   |          |   |  |   | 967     |  
|Net loss                                                                                      |  |                     |            |  |                     |   |    |                          |  |   |                                     |  |  |                    |     |  |                          |   | (29,508  | ) |  |   | (29,508 | )
|                                                                                              |  |                     |            |  |                     |   |    |                          |  |   |                                     |  |  |                    |     |  |                          |   |          |   |  |   |         |  
|Balance at December 31, 2010                                                                  |  |                     | 18,521,951 |  |                     |   | 18 |                          |  |   | 212,788                             |  |  |                    |    |  |                          |   | (201,240 | ) |  |   | 11,566  |  
|Issuance of common stock upon exercise of stock options                                       |  |                     | 7,500      |  |                     |   |   |                          |  |   | 13                                  |  |  |                    |     |  |                          |   |          |   |  |   | 13      |  
|Issuance of compensatory stock to employees, consultants and Board of Director members        |  |                     | 307,039    |  |                     |   |   |                          |  |   |                                    |  |  |                    |     |  |                          |   |          |   |  |   |        |  
|Stock-based compensation expense                                                              |  |                     |            |  |                     |   |   |                          |  |   | 2,135                               |  |  |                    |     |  |                          |   |          |   |  |   | 2,135   |  
|Issuance of common stock, net of offering costs                                               |  |                     | 1,527,249  |  |                     |   | 2  |                          |  |   | 6,155                               |  |  |                    |     |  |                          |   |          |   |  |   | 6,157   |  
|Issuance of common stock to the Topo Target shareholders as consideration for the acquisition |  |                     | 334,382    |  |                     |   |   |                          |  |   | 1,700                               |  |  |                    |     |  |                          |   |          |   |  |   | 1,700   |  
|Issuance of common stock upon exercise of warrants                                            |  |                     | 649,865    |  |                     |   | 1  |                          |  |   | 1,363                               |  |  |                    |     |  |                          |   |          |   |  |   | 1,364   |  
|Net loss                                                                                      |  |                     |            |  |                     |   |    |                          |  |   |                                     |  |  |                    |     |  |                          |   | (18,117  | ) |  |   | (18,117 | )
|                                                                                              |  |                     |            |  |                     |   |    |                          |  |   |                                     |  |  |                    |     |  |                          |   |          |   |  |   |         |  
|Balance at December 31, 2011                                                                  |  |                     | 21,347,986 |  |                     |   | 21 |                          |  |   | 224,154                             |  |  |                    |    |  |                          |   | (219,357 | ) |  |   | 4,818   |  
|Issuance of common stock upon exercise of stock options                                       |  |                     | 5,000      |  |                     |   |   |                          |  |   | 10                                  |  |  |                    |     |  |                          |   |          |   |  |   | 10      |  
|Issuance of compensatory stock to employees, consultants and Board of Director members        |  |                     | 147,761    |  |                     |   |   |                          |  |   |                                    |  |  |                    |     |  |                          |   |          |   |  |   |        |  
|Stock-based compensation expense                                                              |  |                     |            |  |                     |   |    |                          |  |   | 2,917                               |  |  |                    |     |  |                          |   |          |   |  |   | 2,917   |  
|Issuance of common stock for co-promote agreement                                             |  |                     | 373,134    |  |                     |   |   |                          |  |   | 1,000                               |  |  |                    |     |  |                          |   |          |   |  |   | 1,000   |  
|Issuance of common stock for Finesco transaction                                              |  |                     | 2,592,592  |  |                     |   | 3  |                          |  |   | 8,553                               |  |  |                    |     |  |                          |   |          |   |  |   | 8,556   |  
|Issuance of common stock and warrants, net of offering costs                                  |  |                     | 5,453,601  |  |                     |   | 6  |                          |  |   | 20,404                              |  |  |                    |     |  |                          |   |          |   |  |   | 20,410  |  
|Issuance of common stock upon exercise of warrants                                            |  |                     | 17,595     |  |                     |   |   |                          |  |   | 40                                  |  |  |                    |     |  |                          |   |          |   |  |   | 40      |  
|Foreign currency translation adjustment                                                       |  |                     |            |  |                     |   |    |                          |  |   |                                     |  |  |                    | 641 |  |                          |   |          |   |  |   | 641     |  
|Net loss                                                                                      |  |                     |            |  |                     |   |    |                          |  |   |                                     |  |  |                    |     |  |                          |   | (31,771  | ) |  |   | (31,771 | )
|                                                                                              |  |                     |            |  |                     |   |    |                          |  |   |                                     |  |  |                    |     |  |                          |   |          |   |  |   |         |  
|Balance at December 31, 2012                                                                  |  |                     | 29,937,669 |  |                     | $ | 30 |                          |  | $ | 257,078                             |  |  | $                  | 641 |  |                          | $ | (251,128 | ) |  | $ | 6,621   |  
|                                                                                              |  |                     |            |  |                     |   |    |                          |  |   |                                     |  |  |                    |     |  |                          |   |          |   |  |   |         |  

The accompanying notes are an integral part of these consolidated financial statements.



9



---

##### Table of Contents

Apricus Biosciences, Inc. and Subsidiaries

Consolidated Statements of Cash Flows

(In thousands)



|                                                                                                                                                                   |  |                                 |         |   |      |   |         |      |  |   |         |  
|------------------------------------------------------------------------------------------------------------------------------------------------------------------ |  | ------------------------------- | ------- | - | ---- | - | ------- | ---- |  | - | ------- | -
|                                                                                                                                                                   |  | FOR THE YEARENDED 
DECEMBER 31, |        
|                                                                                                                                                                   |  | 2012                            |         |   | 2011 |   |         | 2010 | 
|Cash flows from operating activities of continuing operations:                                                                                                     |  |                                 |         |   |      |   |         |      |  |   |         |  
|Net loss                                                                                                                                                           |  | $                               | (31,771 | ) |      | $ | (18,117 | )    |  | $ | (29,508 | )
|Loss from discontinued operations                                                                                                                                  |  |                                 | (6,211  | ) |      |   |        |      |  |   |        |  
|Net loss from continuing operations                                                                                                                                |  |                                 | (25,560 | ) |      |   | (18,117 | )    |  |   | (29,508 | )
|Adjustments to reconcile net loss from continuing operations to net cash used in operating activities of continuing
operations:                                    |  |                                 |         |   |      |   |         |      |  |   |         |  
|Depreciation and amortization                                                                                                                                      |  |                                 | 203     |   |      |   | 602     |      |  |   | 989     |  
|Deferred tax provision                                                                                                                                             |  |                                 | 1,261   |   |      |   |        |      |  |   |        |  
|Impairment charges property held for sale                                                                                                                          |  |                                 | 656     |   |      |   |        |      |  |   |        |  
|Impairment charges goodwill and intangible assets                                                                                                                  |  |                                 | 8,254   |   |      |   |        |      |  |   | 10,168  |  
|Non-cash interest, amortization of beneficial conversion feature and deferred financing costs                                                                      |  |                                 | 37      |   |      |   | 38      |      |  |   | 8,728   |  
|Non-cash write off of deferred revenue                                                                                                                             |  |                                 |        |   |      |   | 134     |      |  |   |        |  
|Non-cash compensation expense                                                                                                                                      |  |                                 | 2,917   |   |      |   | 2,135   |      |  |   | 2,340   |  
|Non-cash deferred compensation                                                                                                                                     |  |                                 | 640     |   |      |   | 199     |      |  |   |        |  
|Research and development expense from the receipt of intellectual property in payment of due from related party                                                    |  |                                 |        |   |      |   |        |      |  |   | 205     |  
|Loss (recovery) on sale of Bio-Quant subsidiary                                                                                                                    |  |                                 | (250    | ) |      |   | 2,760   |      |  |   |        |  
|Provision for related party receivable                                                                                                                             |  |                                 |        |   |      |   | 276     |      |  |   |        |  
|Changes in operating assets and liabilities of continuing operations, net of assets and liabilities acquired and divested in
business acquisition and divestiture: |  |                                 |         |   |      |   |         |      |  |   |         |  
|Decrease (increase) in accounts receivable                                                                                                                         |  |                                 | 657     |   |      |   | 69      |      |  |   | 420     |  
|Decrease (increase) in other receivable                                                                                                                            |  |                                 |        |   |      |   | 250     |      |  |   | 188     |  
|Decrease (increase) in prepaid expenses and other current assets                                                                                                   |  |                                 | (936    | ) |      |   | (325    | )    |  |   | (237    | )
|Increase (decrease) in accounts payable                                                                                                                            |  |                                 | 690     |   |      |   | 1,019   |      |  |   | (639    | )
|Increase (decrease) in accrued expenses                                                                                                                            |  |                                 | (381    | ) |      |   | 1,314   |      |  |   | 537     |  
|Increase (decrease) in deferred revenue                                                                                                                            |  |                                 | (490    | ) |      |   | (10     | )    |  |   | 81      |  
|Increase (decrease) in due to related party                                                                                                                        |  |                                 |        |   |      |   |        |      |  |   | (100    | )
|Increase (decrease) in deferred compensation                                                                                                                       |  |                                 | (230    | ) |      |   | (69     | )    |  |   | (61     | )
|Increase (decrease) in other liabilities                                                                                                                           |  |                                 | 213     |   |      |   |        |      |  |   |        |  
|                                                                                                                                                                   |  |                                 |         |   |      |   |         |      |  |   |         |  
|Net cash used in operating activities from continuing operations                                                                                                   |  |                                 | (12,319 | ) |      |   | (9,725  | )    |  |   | (6,889  | )
|                                                                                                                                                                   |  |                                 |         |   |      |   |         |      |  |   |         |  
|Cash flows from investing activities of continuing operations:                                                                                                     |  |                                 |         |   |      |   |         |      |  |   |         |  
|Purchase of fixed assets                                                                                                                                           |  |                                 | (436    | ) |      |   | (262    | )    |  |   | (436    | )
|Proceeds from sale of Bio-Quant subsidiary                                                                                                                         |  |                                 | 250     |   |      |   | 500     |      |  |   |        |  
|Cash paid for acquisitions                                                                                                                                         |  |                                 | (513    | ) |      |   |        |      |  |   |        |  
|Cash acquired in acquisitions                                                                                                                                      |  |                                 | 2,067   |   |      |   | 107     |      |  |   |        |  
|                                                                                                                                                                   |  |                                 |         |   |      |   |         |      |  |   |         |  
|Net cash provided by (used in) investing activities from continuing operations                                                                                     |  |                                 | 1,368   |   |      |   | 345     |      |  |   | (436    | )
|                                                                                                                                                                   |  |                                 |         |   |      |   |         |      |  |   |         |  
|Cash flows from financing activities of continuing operations:                                                                                                     |  |                                 |         |   |      |   |         |      |  |   |         |  
|Proceeds from issuance of convertible notes payable                                                                                                                |  |                                 |        |   |      |   |        |      |  |   | 6,187   |  
|Extinguishment of convertible notes payable                                                                                                                        |  |                                 | (4,000  | ) |      |   |        |      |  |   |        |  



10



---

##### Table of Contents

Apricus Biosciences, Inc. and Subsidiaries

Consolidated Statements of Cash FlowsSupplemental Information

(In thousands) (continued)



|                                                                                                                                                  |  |                                 |        |   |      |   |        |      |  |   |        |  
|------------------------------------------------------------------------------------------------------------------------------------------------- |  | ------------------------------- | ------ | - | ---- | - | ------ | ---- |  | - | ------ | -
|                                                                                                                                                  |  | FOR THE YEARENDED 
DECEMBER 31, |       
|                                                                                                                                                  |  | 2012                            |        |   | 2011 |   |        | 2010 | 
|Reissuance of convertible notes payable                                                                                                           |  |                                 | 3,413  |   |      |   |       |      |  |   |       |  
|Changes in derivative liability                                                                                                                   |  |                                 | 906    |   |      |   |       |      |  |   |       |  
|Proceeds from exercise of warrants                                                                                                                |  |                                 | 40     |   |      |   | 1,364  |      |  |   | 967    |  
|Proceeds from the exercise of stock options                                                                                                       |  |                                 | 10     |   |      |   | 13     |      |  |   |       |  
|Issuance of common stock, net of offering costs                                                                                                   |  |                                 | 20,410 |   |      |   | 6,157  |      |  |   | 11,638 |  
|Release (deposit) of restricted cash                                                                                                              |  |                                 |       |   |      |   | 553    |      |  |   | (604   | )
|Proceeds from (repayments on) short-term borrowing                                                                                                |  |                                 |       |   |      |   | (401   | )    |  |   | 401    |  
|Repayment of notes payable                                                                                                                        |  |                                 |       |   |      |   |       |      |  |   | (2,592 | )
|Repayment of capital lease obligations                                                                                                            |  |                                 |       |   |      |   | (17    | )    |  |   | (6     | )
|                                                                                                                                                  |  |                                 |        |   |      |   |        |      |  |   |        |  
|Net cash provided by financing activities from continuing operations                                                                              |  |                                 | 20,779 |   |      |   | 7,669  |      |  |   | 15,991 |  
|                                                                                                                                                  |  |                                 |        |   |      |   |        |      |  |   |        |  
|Cash flows from discontinued operations:                                                                                                          |  |                                 |        |   |      |   |        |      |  |   |        |  
|Net cash used in operating activities of discontinued operations                                                                                  |  |                                 | (2,076 | ) |      |   |       |      |  |   |       |  
|Net cash used in investing activities of discontinued operations                                                                                  |  |                                 | (300   | ) |      |   |       |      |  |   |       |  
|                                                                                                                                                  |  |                                 |        |   |      |   |        |      |  |   |        |  
|Net cash used in discontinued operations                                                                                                          |  |                                 | (2,376 | ) |      |   |       |      |  |   |       |  
|Effect of foreign currency exchange rates changes on cash                                                                                         |  |                                 | 243    |   |      |   |       |      |  |   |       |  
|                                                                                                                                                  |  |                                 |        |   |      |   |        |      |  |   |        |  
|Net increase (decrease) in cash and cash equivalents                                                                                              |  |                                 | 7,695  |   |      |   | (1,711 | )    |  |   | 8,666  |  
|Cash and cash equivalents, beginning of period                                                                                                    |  |                                 | 7,435  |   |      |   | 9,146  |      |  |   | 480    |  
|                                                                                                                                                  |  |                                 |        |   |      |   |        |      |  |   |        |  
|Cash and cash equivalents, end of period                                                                                                          |  | $                               | 15,130 |   |      | $ | 7,435  |      |  | $ | 9,146  |  
|                                                                                                                                                  |  |                                 |        |   |      |   |        |      |  |   |        |  
|Cash paid for interest                                                                                                                            |  | $                               | 318    |   |      | $ | 333    |      |  | $ | 228    |  
|                                                                                                                                                  |  |                                 |        |   |      |   |        |      |  |   |        |  
|Supplemental Information:                                                                                                                         |  |                                 |        |   |      |   |        |      |  |   |        |  
|Issuance of 373,134 shares of common stock to PediatRx Inc. for co-promote agreement                                                              |  | $                               | 1,000  |   |      | $ |       |      |  | $ |       |  
|Issuance of 2,592,592 shares of common stock to former Finesco shareholders upon acquisition                                                      |  | $                               | 8,556  |   |      | $ |       |      |  | $ |       |  
|Issuance of 468,837 shares of common stock in payment of convertible notes payable, net of beneficial conversion feature of
$1,861                |  | $                               |       |   |      | $ |       |      |  | $ | 2,698  |  
|Receipt of intellectual property in payment of due from related party                                                                             |  | $                               |       |   |      | $ |       |      |  | $ | 205    |  
|Issuance of 4,642,620 shares of common stock in payment of notes to former Bio-Quant shareholders, net of beneficial conversion
feature of $6,140 |  | $                               |       |   |      | $ |       |      |  | $ | 12,129 |  
|Issuance of 334,382 shares of common stock to former TopoTarget shareholders upon acquisition.                                                    |  | $                               |       |   |      | $ | 1,700  |      |  | $ |       |  
|Payment of interest in common stock                                                                                                               |  | $                               |       |   |      | $ |       |      |  | $ | 597    |  
|Sale of investment in consolidated subsidiary:                                                                                                    |  |                                 |        |   |      |   |        |      |  |   |        |  
|Accounts receivable                                                                                                                               |  | $                               |       |   |      | $ | 199    |      |  | $ |       |  
|Prepaid expenses and other current assets                                                                                                         |  | $                               |       |   |      | $ | 5      |      |  | $ |       |  
|Equipment and leasehold improvements, net                                                                                                         |  | $                               |       |   |      | $ | 781    |      |  | $ |       |  
|Intangible assets, net                                                                                                                            |  | $                               |       |   |      | $ | 2,642  |      |  | $ |       |  
|Accounts payable                                                                                                                                  |  | $                               |       |   |      | $ | (205   | )    |  | $ |       |  
|Payroll related liabilities                                                                                                                       |  | $                               |       |   |      | $ | (41    | )    |  | $ |       |  
|Capital lease payable                                                                                                                             |  | $                               |       |   |      | $ | (118   | )    |  | $ |       |  



The accompanying notes are an integral part of these consolidated financial statements.



11



---

##### Table of Contents

APRICUS BIOSCIENCES, INC. AND SUBSIDIARIES

Notes to Consolidated Financial Statements

1. ORGANIZATION, BASIS OF PRESENTATION AND LIQUIDITY

Apricus Biosciences, Inc. (formerly NexMed, Inc.) and Subsidiaries (the Company) was incorporated in
Nevada in 1987. On September 10, 2010, the Company changed its name from NexMed, Inc. to Apricus Biosciences, Inc. The Company has operated in the pharmaceutical industry since 1995, initially focusing on research and development in the
area of drug delivery and is now primarily focusing on product development and commercialization in the area of sexual health. The Companys proprietary drug delivery technology is called NexACT®and the Company has one approved drug using the NexACT® delivery system, Vitaros®, which is approved in Canada for the treatment of
erectile dysfunction (ED).

During 2012, the Company expanded its growth strategy internationally and began operations in France.
On July 12, 2012, the Company accepted, by way of a share contribution, one hundred percent of all outstanding common stock of Finesco SAS, a holding company incorporated in France (Finesco SAS) and Scomedica SAS, a company
incorporated in France and a wholly owned subsidiary of Finesco SAS (Scomedica) (collectively, Finesco and Scomedica shall be herein referred to as Finesco). This transaction is a business acquisition under U.S. GAAP. (see
Note 4 in the Notes to the consolidated financial statements).

In December 2012, the Company initiated strategic changes
to its business by seeking a buyer for its U.S. Oncology supportive care business and in March 2013, the Company ceased funding it French subsidiaries. These actions are expected to enable an increased focus on the Companys primary products,
Vitaros® for male erectile dysfunction (ED) and Femprox® for female sexual arousal disorder (FSAD).

Liquidity

The accompanying consolidated financial statements have
been prepared on a basis, which contemplates the realization of assets and the satisfaction of liabilities and commitments in the normal course of business. We have experienced net losses and negative cash flows from operations since our
inception. At December 31, 2012, we had an accumulated deficit of $251.1 million and our operations have principally been financed through public offerings of our common stock and other equity instruments, private placements
of equity securities, debt financing and up-front license fees received from commercial partners. Funds raised during the year ended December 31, 2012 from common stock transactions include approximately $18.4 million in net proceeds from
our February 2012 follow-on public offering, approximately $2.0 million from the sale of common stock through our at-the-market stock sales facility and approximately $0.04 million from the exercise of warrants outstanding. The
receipt of this cash during 2012 was offset by our cash used in operations. Our net cash outflow from operations during the year was approximately $12.3 million, which resulted from the increase in expenditures for research and development
activities while we commercialize our Vitaros®product for sale in the Canadian market and obtain market approval in other regions. In November 2012, we extended
the term of our $4.0 million long-term debt obligation with a private investor and the obligation is now due in December 2014. These recent transactions should not be considered an indication of our ability to raise additional funds in any future
periods. We operate in a rapidly changing and highly regulated marketplace and we expect to adjust our capital needs and financing plans as market conditions dictate.

Our cash and cash equivalents at December 31, 2012 were $15.1 million. We expect to require external financing to fund our long-term operations. In March of 2013, we closed the sale of our New Jersey
facility resulting in net proceeds of approximately $3.6 million. As a result, we believe we have sufficient cash reserves to fund our on-going operations for the next twelve months, however, we expect to continue to have net cash outflows from
operations in 2013 as we execute our market approval and commercialization plan for Vitaros®, develop and implement a regulatory and clinical trial program for
Femprox® for FSAD and further develop our pipeline products. We announced in March 2013 that we would cease
funding Finesco.



12



---

##### Table of Contents

Based on our recurring losses, negative cash flows from operations and working capital levels, we will need
to raise substantial additional funds to finance our operations. If we are unable to obtain sufficient financial resources, including by raising additional funds when needed, our business, financial condition and results of operations will be
materially and adversely affected. There can be no assurance that we will be able to obtain the needed financing on reasonable terms or at all. Additionally, equity financing will have a dilutive effect on the holdings of our existing stockholders,
and may result in downward pressure on the price of our common stock.

We have two effective shelf registration statements on Form S-3 filed
with the SEC under which we may offer from time to time any combination of debt securities, common and preferred stock and warrants. One of the registration statements relates to our at-the-market common stock selling facility through
Ascendiant Capital. This facility allows us ready access to cash through the sale of newly issued shares of our common stock. As of March 13, 2013, we have available $17.2 million under this at-the-market common stock selling facility. The
Companys at-the-market common stock selling facility may be terminated by either party by giving proper written notice. The rules and regulations of the SEC or any other regulatory agencies may restrict our ability to conduct certain types of
financing activities, or may affect the timing of and amounts we can raise by undertaking such activities.

Even if we are successful in
obtaining additional cash resources to support further development of our products, we may still encounter additional obstacles such as our development activities may not be successful, our products may not prove to be safe and effective, clinical
development work may not be completed in a timely manner or at all, and the anticipated products may not be commercially viable or successfully marketed. Additionally, our business could require additional financing if we choose to accelerate
product development expenditures in advance of receiving up-front payments from development and commercial partners. If our efforts to raise additional equity or debt funds when needed are unsuccessful, we may be required to delay or scale-back our
development plans, reduce costs and personnel and cease to operate as a going concern. These financial statements do not include any adjustments that might result from the outcome of this uncertainty.

2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

The preparation of financial statements in accordance with accounting principles generally accepted in the United States of America
(GAAP) requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities, the disclosure of contingent liabilities at the date of the financial statements and the reported amounts of revenue
and expenses during the reporting period. The Company bases its estimates on historical experience and on various other assumptions that are believed to be reasonable under the circumstances. On a regular basis, as new information becomes available,
the Company reviews its estimates to ensure the estimates appropriately reflect changes in facts and circumstances. Management believes that these estimates are reasonable; however, actual results could materially differ from these estimates.

Principles of consolidation

The accompanying consolidated financial statements include the accounts of the Company and its wholly owned subsidiaries. All significant intercompany
accounts and transactions have been eliminated in consolidation.

During the fourth quarter of 2012, the Company determined that the $500,000
of proceeds received from the sale of Bio-Quant would be presented as a cash inflow from investing activities instead of a cash inflow from financing activities as previously presented. As a result, the Company modified the prior year presentation
on the consolidated statement of cash flows for the year ended December 31, 2011 to adjust the classification. There was no impact to the prior year consolidated balance sheet, statement of operations and comprehensive loss or statement of changes
in stockholders equity as a result of this adjustment. The adjustment was not considered material to the previously issued statement of cash flows.

Certain prior year items have been reclassified to conform to current year presentation.

Cash
and cash equivalents

Cash equivalents represent all highly liquid investments with an original maturity date of three months or less and
were insignificant at December 31, 2012 and 2011.



13



---

##### Table of Contents

Restricted cash

Short term restricted cash is held as security on the credit limit on our Company credit card and long-term restricted cash is held as security for our automobile leases in France.

Concentration of credit risk

From time
to time, the Company maintains cash in bank accounts that exceed the FDIC insured limits. The Company has not experienced any losses on its cash accounts. We perform credit evaluations of our customers, but generally do not require collateral
to support accounts receivable. Three global pharmaceutical companies accounted for 44%, 30% and 11% of total revenues during the year ended December 31, 2012. In addition, one of these companies comprised 84% of our accounts receivable at
December 31, 2012.

Accounts receivable

Our policy is that an allowance is recorded for estimated losses resulting from the inability of our customers to make required payments. Such allowances are computed based upon a specific customer
account review of larger customers and balances in excess of ninety days old. Our assessment of our customers ability to pay generally includes direct contact with the customer, investigation into our customers financial status, as well
as consideration of our customers payment history with us. If the financial condition of our customers were to deteriorate, resulting in an impairment of their ability to make payments, additional allowances may be required. If we determine,
based on our assessment, that it is probable that our customers will be unable to pay, we will write-off the accounts receivable. At December 31, 2012 and 2011 we determined that no allowances were necessary.

Fair value of financial instruments

The
fair value of a financial instrument represents the amount at which the instrument could be exchanged in a current transaction between willing parties, other than in a forced sale or liquidation. Significant differences can arise between the fair
value and carrying amounts of financial instruments that are recognized at historical cost amounts.

For financial instruments, consisting of
cash, cash equivalents, restricted cash, accounts receivable, accounts payable and accrued expenses including in the Companys financial statements, the carrying amounts are reasonable estimates of fair value due to the short maturities of
these instruments.

Assets held for sale

Assets are classified as held for sale when the Company has determined that the criteria set forth in the property, plant and equipment guidance has been met. Primarily, when their carrying amount will be
recovered principally through a sale transaction rather than continuing use and a sale is highly probable. Assets designated as held for sale are held at the lower of the net book value or fair value less costs to sell, and reported separately on
the balance sheet. Depreciation is not charged against property, plant and equipment classified as held for sale.

In August of 2012 the
Company decided to sell its facility in East Windsor, New Jersey, and as a result, in the third quarter of 2012, the land, building and machinery associated with the facility were reclassified to property held for sale. The monthly depreciation and
amortization previously attributed to the assets were ceased. (See Note 6 in the Notes to the consolidated financial statements).

In December
of 2012 the Company decided to sell its Apricus Pharmaceutical business, and as a result, in the fourth quarter of 2012, assets and liabilities were reclassified to discontinued operations. (See Note 5 in the Notes to the consolidated financial
statements).

Property and equipment

Property and equipment are stated at cost less accumulated depreciation. Depreciation of equipment and furniture and fixtures is provided on a straight-line basis over the estimated useful lives of
the assets, generally three to ten



14



---

##### Table of Contents

years. Depreciation of our building in East Windsor, New Jersey, prior to being reclassified as an asset held for sale, was provided on a straight-line basis over the estimated useful life
of 39 years. Amortization of leasehold improvements is provided on a straight-line basis over the shorter of their estimated useful life or the lease term. The costs of additions and betterments are capitalized, and repairs and maintenance
costs are charged to operations in the periods incurred. (See Note 6 in the Notes to the consolidated financial statements)

Valuation of
long-lived and intangible assets

The Company reviews for impairment of long-lived and intangible assets whenever events or circumstances
indicate that the carrying amount of an asset may not be recoverable. An impairment loss would be recognized when estimated undiscounted future cash flows expected to result from the use of the asset and its eventual disposition is less than
its carrying amount. If such assets are considered impaired, the amount of the impairment loss recognized is measured as the amount by which the carrying value of the asset exceeds the fair value of the asset, fair value being determined based
upon future cash flows or appraised values, depending on the nature of the asset.

Intangible assets

Intangible assets purchased in a business combination or received in a non-monetary exchange are recorded at their estimated fair values, or, for
non-monetary exchanges, the estimated fair values of the assets transferred if more clearly evident. The estimated fair values are generally determined utilizing a market approach or an income approach which utilizes discounted cash flow analyses
that incorporate the estimated future cash flows from the asset during its estimated useful life. Acquired intangible assets are amortized over their estimated useful lives unless the lives are determined to be indefinite.

Amortization expense related to our continuing operations totaled $37,000, $0.1 million and $0.4 million for the years ended December 31, 2012, 2011
and 2010, respectively.

Goodwill

Goodwill consists of the excess purchase price over the fair value of net tangible and identifiable intangible assets of businesses acquired.

The Company follows the applicable guidance for impairment of goodwill and intangible assets, which requires an annual impairment test for goodwill and intangible assets with indefinite lives. Step
1 of the impairment test requires that the Company determine the fair value of each operating unit and compare the fair value to the operating units carrying amount. To the extent a reporting units carrying amount exceeds its fair value,
an indication exists that the reporting units goodwill may be impaired and the Company must perform Step 2 of the impairment assessment. Step 2 of the impairment assessment involves comparing the implied fair value of the reporting units
goodwill to the carrying amount of goodwill to quantify an impairment charge as of the assessment date.

Application of the goodwill
impairment test requires significant judgments including estimation of future cash flows, which is dependent on internal forecasts, estimation of the long-term rate of growth for the businesses, the useful life over which cash flows will occur, and
determination of the Companys weighted average cost of capital. Changes in these estimates and assumptions could materially affect the determination of fair value and/or conclusions on goodwill impairment for each reporting unit. The Company
performs its annual impairment test on December 31 each year, unless triggering events occur that would cause the Company to test for impairment at interim periods. (See Notes 4, 5 and 6 in the Notes to the consolidated financial
statements)

Debt issuance costs

Amounts paid related to debt financing activities are capitalized and amortized over the term of the loan.



15



---

##### Table of Contents

Derivative liability

The Companys embedded conversion feature on its convertible note payable has a conversion price reset feature, which is treated as a derivative for accounting purposes. The Company estimates
the fair value of the embedded conversion features using a Black-Scholes valuation model each reporting period and any resulting increases or decreases in the estimated fair value will be recorded as an adjustment to operating earnings.

Deferred compensation

The Company is
paying compensation on a deferred basis to a former executive based on the estimated present value of the obligation valued on the date of separation. Additionally, Finesco SAS, through its Scomedica subsidiary, has an accrued retirement benefit
liability mandated by the French Works Council which consists of one lump-sum paid on the last working day when the employee retires and has been included within the Deferred Compensation line item within the accompanying Balance Sheets. The amount
of the payment is based on the length of service and earnings of the retiree. The Scomedica liability is estimated using the present value of the obligation at the end of the reporting period. Actuarial estimates for this retirement liability is
performed annually. The discount rate applied in the computation of the present value of the retirement liability corresponds to the yield on high quality corporate bonds denominated in the currency in which the benefits will be paid, and that have
terms to maturity approximating the terms of the related retirement liability. (See Note 7 in the Notes to the consolidated financial statements)

Contingent consideration

The Company records the fair value of future consideration
payments related to its acquisitions as liabilities based on the timing and probability of each event occurring and the present value of each consideration payment as of the estimated event date. The estimated consideration due is updated as changes
in assumptions occur and circumstances change related to those assumptions.

Foreign currency translation

The functional currency of our wholly-owned subsidiaries in France is the Euro. Accordingly, all assets and liabilities of these subsidiaries are
translated into U.S. dollars at exchange rates in effect as of the balance sheet date. Revenue and expense components are translated to U.S. dollars at weighted-average exchange rates in effect during the period. Gains and losses resulting from
foreign currency translation are reported as a separate component of other comprehensive loss in the statement of operations and other comprehensive income and in the stockholders equity section of our consolidated balance sheets. Foreign
currency transaction gains and losses are included in our results of operations and, to date, have not been significant.

Revenue
recognition

We have historically generated revenues from licensing of technology rights, product sales, performance of pre-clinical
testing services, and contract sales services. Payments received under commercial arrangements such as the licensing of technology rights, may include non-refundable fees at the inception of the arrangements, milestone payments for specific
achievements designated in the agreements, royalties on sales of products.

We recognize revenue when all of the following criteria are met:
(1) persuasive evidence of an arrangement exists; (2) delivery has occurred or services have been rendered; (3) our price to the buyer is fixed or determinable; and (4) collectability is reasonably assured.

License Arrangements. License arrangements may consist of non-refundable upfront license fees, various performance or sales milestones,
royalties upon sales of product, and the delivery of product and/or research services to the licensor. We consider a variety of factors in determining the appropriate method of accounting under our license agreements, including whether the various
elements can be separated and accounted for



16



---

##### Table of Contents

individually as separate units of accounting. We account for revenue arrangements with multiple elements entered into or materially modified after January 1, 2011, by separating and
allocating consideration in a multiple-element arrangement according to the relative selling price of each deliverable. If an element can be separated, we allocate amounts based upon the relative selling price of each element. We determine the
relative selling price of a separate deliverable using the price we charge other customers when we sell that product or service separately; however, if we do not sell the product or service separately, we use a best estimate of selling price if
third party evidence is not available, if it is probable that the price, once established, will not change before the separate introduction of the deliverable in the market place. Deliverables under the arrangement will be separate units of
accounting, provided (i) a delivered item has value to the customer on a standalone basis; and (ii) if the arrangement includes a general right of return relative to the delivered item and delivery or performance of the undelivered item is
considered probable and substantially in our control. We defer recognition of non-refundable upfront fees if we have continuing performance obligations without which the technology, right, product or service conveyed in conjunction with the
non-refundable fee has no utility to the licensee that is separate and independent of our performance under the other elements of the arrangement. Non-refundable, up-front fees that are not contingent on any
future performance by us and require no consequential continuing involvement on our part, are recognized as revenue when the license term commences and the licensed data, technology and/or compound is delivered. The specific methodology for the
recognition of the revenue is determined on a case-by-case basis according to the facts and circumstances of the applicable agreement.

There
have been no royalties or milestones received during the years ended December 31, 2012, 2011 or 2010.

Product SalesDiagnostic
Products. Revenues from sales of diagnostic products are recognized upon delivery of products to customers, less allowance for returns and discounts, which, to date, have been insignificant.

Contract Service Revenue.Revenue from contract sales services is based on the number of medical visits plus an incentive based on the sales
growth of the targeted pharmaceutical products. Revenue associated with medical visits is recognized in the accounting period in which services are rendered. Revenue associated with incentives is recognized when the amount of revenue is fixed and
determinable. Revenues from Bio-Quants performance of pre-clinical services through the June 30, 2011 sale date were recognized according to the proportional performance method whereby revenue is recognized as performance has occurred,
based on the relative outputs of the performance that has occurred up to that point in time under the respective agreement, typically the delivery of report data to our clients which documents the results of our pre-clinical testing services. For
research services, we determine the period over which the performance obligation occurs. We recognize revenue using the proportional performance method when the level of effort to complete our performance obligations under an arrangement can be
reasonably estimated. Direct costs are typically used as the measurement of performance.

Rental income

Rental income is recognized on a straight-line basis over the lease term.

Research and development

Research and development costs are expensed as incurred and
include the cost of salaries, building costs, utilities, allocation of indirect costs, and expenses to third parties who conduct research and development, pursuant to development and consulting agreements, on behalf of the Company.

Income taxes

Income taxes are accounted
for under the asset and liability method. Deferred income taxes are recorded for temporary differences between financial statement carrying amounts and the tax basis of assets and liabilities. Deferred tax assets and liabilities reflect
the tax rates expected to be in effect for the years in which the differences are expected to reverse. A valuation allowance is provided if it is more likely than not that some or all of the deferred tax assets will not be realized.



17



---

##### Table of Contents

The Company also follows the provisions of accounting for uncertainty in income taxes which prescribes a
model for the recognition and measurement of a tax position taken or expected to be taken in a tax return, and provides guidance on de-recognition, classification, interest and penalties, disclosure and transition. At December 31, 2012 and 2011
the Company did not have any significant unrecognized tax benefits.

Loss per common share

Basic and diluted net loss per common share is computed by dividing net loss by the weighted-average number of common shares outstanding for the
respective period, without consideration of common stock equivalents as they would have an antidilutive effect on per share amounts.

The
following securities that could potentially decrease net loss per share in the future are not included in the determination of diluted loss per share as they are antidilutive and are as follows:



|                            |  |                                |           |  |      |  |         |      |  |  |           | 
|--------------------------- |  | ------------------------------ | --------- |  | ---- |  | ------- | ---- |  |  | --------- | 
|                            |  | FOR THE YEAR ENDEDDECEMBER
31, |          
|                            |  | 2012                           |           |  | 2011 |  |         | 2010 | 
|Outstanding stock options   |  |                                | 2,213,916 |  |      |  | 840,833 |      |  |  | 107,604   | 
|Outstanding warrants        |  |                                | 3,205,492 |  |      |  | 777,284 |      |  |  | 1,675,658 | 
|Unvested compensatory stock |  |                                | 112,705   |  |      |  | 257,063 |      |  |  | 287,674   | 
|Convertible notes payable   |  |                                | 1,544,402 |  |      |  | 658,979 |      |  |  | 640,000   | 

Accounting for stock based compensation

The value of compensatory stock grants are calculated based upon the closing stock price of the Companys common stock on the date of the grant and recognized over the expected service
period. For stock options granted to employees and directors, we recognize compensation expense based on the grant-date fair value estimated in accordance with the appropriate accounting guidance, and recognized over the expected service
period. We estimate the fair value of each option award on the date of grant using the Black-Scholes option pricing model. Stock options and warrants issued to consultants are accounted for in accordance with ASC 718. Compensation expense is
calculated each quarter for consultants using the Black-Scholes option pricing model until the option is fully vested and is included in research and development or general and administrative expenses, based upon the services performed by the
recipient.

Comprehensive income

Comprehensive income and accumulated other comprehensive income includes unrealized foreign currency translation adjustments that are excluded from the consolidated statements of operations and are
reported as a separate component in stockholders equity.

Recent accounting pronouncement

Effective January 1, 2012, the Company adopted authoritative guidance related to the presentation of comprehensive income (loss) for all periods
presented.

In February 2013, the Financial Accounting Standards Board (FASB) issued an amendment to the accounting guidance on
reporting amounts reclassified out of accumulated comprehensive income. The guidance requires an entity to report the effect of significant reclassifications out of accumulated other comprehensive income on the respective line items in net income if
the amount being reclassified is required under United States GAAP to be reclassified in its entirety to net income. For other amounts that are not required under United States GAAP to be reclassified in their entirety to net income, an entity is
required to cross-reference to other disclosures required under United States GAAP that provide additional detail about those amounts. The guidance is effective prospectively for fiscal years, and interim periods within those years, beginning after
December 15, 2012. The Company will provide the information required by this guidance in 2013.



18



---

##### Table of Contents

3. LICENSING AND RESEARCH AND DEVELOPMENT AGREEMENTS

Vitaros®

On January 9, 2012, the Company entered into an exclusive licensing agreement with Abbott Laboratories Limited
(Abbott), granting Abbott the exclusive rights to commercialize Vitaros® for ED in Canada. The
product was approved by Health Canada in late 2010 and is expected to be launched by Abbott in the first half of 2013. Under the license agreement, the Company received $2.5 million in October 2012 as an up-front payment. Over the term of the
agreement, the Company has the right to receive up to an additional $13.2 million in aggregate milestone payments if all the regulatory and sales thresholds specified in the agreement are achieved, plus tiered royalty payments based on Abbotts
sales of the product in Canada.

The Company determined that the only deliverable was the license element and given no additional obligation
associated with the license, the up-front license fee of $2.5 million from Abbott was recorded as revenue in 2012.

On
February 15, 2012, the Company entered into an exclusive license and collaboration agreement with Sandoz, a division of Novartis (Sandoz), for Sandoz to market Vitaros® for the treatment of ED in Germany. Under the license agreement, the Company has the right to receive up to approximately 22.0 million ($29.1 million at
December 31, 2012) in up-front and aggregate milestone payments if all the regulatory and sales thresholds specified in the agreement are achieved, as well as tiered double digit royalties on net sales by Sandoz in Germany.

Based on the results of the Companys analysis, the Company concluded that the only deliverable was the license element and given no additional
obligation associated with the license, the up-front license fee of $0.8 million from Sandoz was recorded as revenue in 2012.

On February 22, 2012, the Company entered into an Alprostadil Cream and Placebo Clinical Supply Agreement (the Supply Agreement), as amended, with Warner Chilcott UK Limited (Warner
Chilcott UK). Under the Supply Agreement, the Company will receive approximately $0.3 million in exchange for
Vitaros® ordered by Warner Chilcott UK. In addition, we are currently updating the IND for Vitaros® in the U.S. with the new manufacturing data associated with our manufacturing partners facility.

In September and October of 2012, the Company received additional work orders from Warner Chilcott UK under the Supply Agreement,
ordering additional quantities of the Vitaros® product and requesting certain testing procedures be performed by
the Company. The associated aggregate amount of purchase orders received in 2012 from Warner Chilcott UK is approximately $1.2 million and reflects the value of the products to be delivered and certain testing procedures to be performed.

The agreement with Warner Chilcott UK includes two deliverables, certain contract services and product supply. The product supply element of the
agreement will be treated as a single unit of accounting and, accordingly, the supply price of product shipped to Warner Chilcott UK will be recognized as revenue for the supply element when earned. The contract services element of the agreement
will be treated as a separate unit of accounting and revenue will be recognized using the proportional performance method over the period in which the contract services will be performed. Total revenue recognized in 2012 associated with this
agreement amounted to $0.5 million.

On September 12, 2012, the Company entered into an exclusive license and
collaboration agreement with Takeda Pharmaceuticals International GmbH International, (Takeda), to market the Companys Vitaros® drug for the treatment of ED in the United Kingdom. Under the license agreement, the Company has the right to receive license fees of up to 34.65 million
($45.8 million at December 31, 2012) in up-front license fees and aggregate milestone payments if all the regulatory and sales thresholds specified in the agreement are achieved, plus low double-digit royalty payments.



19



---

##### Table of Contents

The agreement with Takeda includes two deliverables, the granting of a license and manufacturing with
related product supply. In accordance with the accounting guidance on revenue recognition for multiple-element agreements, the product supply element of the agreement meets the criteria for separation. Therefore, it will be treated as a single unit
of accounting and, accordingly, the supply price of product shipped to Takeda will be recognized as revenue for the supply element when earned. Given no additional obligation associated with the license element, the up-front license fee of $1.0
million from Takeda was recognized as revenue in 2012.

On January 3, 2011, the Company entered into a license
agreement with Elis Pharmaceuticals Ltd. (Elis), granting Elis the exclusive rights to
commercialize Vitaros® for ED in the United Arab Emirates, Oman, Bahrain, Qatar, Saudi Arabia, Kuwait,
Lebanon, Syria, Jordan, Iraq and Yemen (the Elis Territory). Under the license agreement, the Company is entitled to receive upfront license fees and milestone payments of up to $2.1 million over the term of the license
agreement. The future milestones are tied to regulatory approval and the achievement of certain levels of aggregate net sales of Vitaros®. Additionally, the Company is entitled to receive escalating tiered double-digit royalties on Elis sales of Vitaros® in the Elis Territory.

On February, 14, 2011, the Company entered into a license agreement with the Neopharm Scientific Limited (Neopharm), granting Neopharm the exclusive rights to commercialize Vitaros® in Israel and the Palestinian territories (the Neopharm Territory) for ED. Under the license
agreement, the Company is entitled to receive upfront license fees and milestone payments of up to $4.35 million over the term of the Neopharm Agreement. The future milestones are tied to regulatory approval and the achievement of certain
levels of aggregate net sales of Vitaros®. Additionally, the Company is entitled to receive escalating
tiered double-digit royalties on Neopharms sales of Vitaros® in the Neopharm Territory.

The only deliverable was the license element and given no additional obligation was associated with the license element, the aggregate of $0.2 million in
up-front payments pursuant to the Elis and Neopharm licensing agreements was earned upon the delivery of the license and related know-how, which occurred by March 31, 2011, and therefore recognized in 2011 revenue.

On December 22, 2010, the Company entered into an exclusive license agreement with BRACCO SpA (Bracco) for its
Vitaros® product for ED. Under the terms of the license agreement, Bracco has been granted exclusive rights
in Italy to commercialize and market Vitaros® under the Bracco trademark, and the Company received $1.0 million,
net of tax withholdings, as an up-front payment during the year ended December 31, 2011, and is entitled to receive up to 4.75 million ($6.3 million at December 31, 2012) in regulatory and sales milestone payments. Further,
over the term of the agreement, the Company is entitled to receive tiered double-digit royalties based on Braccos sales of the product.

The Company concluded the only deliverable was the license element. However, as $0.3 million of the $1.0 million up-front payment was contingent upon the
Company receiving regulatory marketing approval for the product in Europe, $0.7 million, net of withholding taxes, was recognized as license revenue during the year ended December 31, 2011 and the remaining $0.3 million was deferred and will be
recognized at the time that the Company receives regulatory marketing approval for the product in Europe, which has yet to occur as of December 31, 2012.

MycoVa

On
January 10, 2012, the Company entered into an exclusive licensing agreement granting Elis the exclusive rights to market and commercialize MycoVa, the Companys drug candidate for the treatment for onychomycosis (nail fungal
infection) in the Middle East.

Under the terms of the license agreement, Elis has exclusive rights in part of the Middle East, including
Saudi Arabia, Kuwait, Lebanon, Syria, Jordan, Iraq and Yemen, and in the Gulf Countries (United Arab Emirates,



20



---

##### Table of Contents

Oman, Bahrain, Qatar), if it is approved for commercialization . The Company has the right to receive up to $2.1 million in license fees and aggregate milestone payments if all the regulatory and
sales thresholds specified in the agreement are achieved, plus tiered double digit royalties based on Elis sales of the product.

On
December 30, 2011, the Company entered into an exclusive license agreement with Stellar Pharmaceuticals Inc. (Stellar), granting Stellar the exclusive rights to market MycoVa in Canada. Under the terms of the license
agreement, Stellar will assist the Company in the filing of a New Drug Submission in Canada for MycoVa for the treatment of onychomycosis. If the application is approved, Stellar will have the exclusive rights to commercialize
MycoVa in Canada. Over the term of the agreement, the Company has the right to receive up to CAD $8.0 million (USD $8.0 million at December 31, 2012) in license fees and aggregate milestone payments if all the regulatory and sales
thresholds specified in the agreement are achieved, plus tiered royalty payments based on Stellars sales of the product in Canada, after approval for commercialization.

No milestones have been achieved during 2012 under the license agreements with Stellar and Elis for MycoVa and accordingly, no revenues have been recognized.

4. BUSINESS ACQUISITIONS AND DISPOSITIONS

Ownership of Finesco and Scomedica

On July 12, 2012, the Company entered into an agreement under which it accepted, by way of a share contribution, one hundred percent of all outstanding common stock of Finesco (the Contribution
Agreement), which became a wholly-owned subsidiary of the Company in a transaction accounted for under the acquisition method of accounting for business combinations under the business combination guidance. Accordingly, the assets acquired and
liabilities assumed of Finesco were recorded as of the transaction date at their respective fair values and are included in the consolidated balance sheet at December 31, 2012.

The Company agreed to provide the value of 7.0 million to the shareholders of Finesco and based on the share exchange ratio in place at the acquisition date issued 2,592,592 shares of Apricus
common stock which had a fair market value of $8.6 million at that date. In addition, the Company paid certain selling costs totaling $0.2 million on behalf of the sellers. Contingent consideration for additional shares of common stock valued at
1.8 million would be owed if certain net revenues were achieved during the year ended December 31, 2012. The Company did not assign any value to the potential contingent consideration as it was determined it was unlikely the
milestone would be met. The net revenue target was not met in 2012. The aggregate purchase consideration was as follows (in thousands):



|                                                                     |  |   |        |  
|-------------------------------------------------------------------- |  | - | ------ | -
|Fair value of common stock issued to Finesco shareholders            |  | $ | 8,556  |  
|Cash paid for certain transaction costs paid on behalf of the seller |  |   | 212    |  
|Cash and cash equivalents acquired                                   |  |   | (2,067 | )
|                                                                     |  |   |        |  
|Net purchase price                                                   |  | $ | 6,701  |  
|                                                                     |  |   |        |  



21



---

##### Table of Contents

The assets acquired and liabilities assumed at the transaction date are based upon their respective fair
values and are summarized below (in thousands):



|                                          |  |   |        |  
|----------------------------------------- |  | - | ------ | -
|Accounts receivable                       |  | $ | 1,256  |  
|Prepaid expenses and other current assets |  |   | 218    |  
|Property and equipment                    |  |   | 64     |  
|Other long term assets                    |  |   | 774    |  
|Goodwill                                  |  |   | 7,461  |  
|Trade accounts payable                    |  |   | (491   | )
|Accrued expenses                          |  |   | (1,927 | )
|Deferred compensation                     |  |   | (600   | )
|Other long term liabilities               |  |   | (54    | )
|                                          |  |   |        |  
|Total net assets acquired                 |  | $ | 6,701  |  
|                                          |  |   |        |  

Scomedica is a contract sales organization. The goodwill resulted primarily from the management team and employees
established relationships with pharmaceutical companies and medical practices. These business relationships are not contractual in nature and do not meet the separability criterion and, as a result, they are not considered identifiable intangible
assets recognized separately from goodwill. We do not expect any portion of the goodwill to be deductible for tax purposes. All of the goodwill was assigned to the Contract Sales segment.

The pharmaceuticals landscape has shifted dramatically in France in recent months with changes in reimbursement policy now heavily favoring generic drugs. This has resulted in decreased sales for
pharmaceutical companies and contract sales organizations. Scomedica experienced a loss of certain key contract agreements related to this policy change. These combined developments have resulted in a meaningful decrease in the subsidiarys
value potential to where the Company has determined to cease funding Finesco. In March 2013, the Company announced that it would cease funding Finesco and its other French subsidiaries.

As a result of the changes in circumstances affecting the French commercial market, the Company reassessed the fair value of this reporting unit. The Company performed a Step 1 goodwill impairment
analysis using significant judgments including estimation of future cash flows, which is dependent on internal forecasts, estimation of the long-term rate of growth for the businesses, the useful life over which cash flows will occur, and
determination of the Companys weighted average cost of capital. These significant, unobservable inputs represent a Level 3 measurement within the fair value hierarchy. The fair value of the reporting unit was less than the carrying value
indicating that the goodwill may be impaired. The Company then performed a Step 2 analysis determining that the implied value of the goodwill was significantly less than the carrying value of the goodwill for the reporting unit. In the fourth
quarter the Company recorded a charge in the amount of $8.3 million to record an impairment of the goodwill. In addition, the Company recorded a valuation allowance of $1.3 million against the deferred tax asset as it is now more likely than not
that the deferred tax asset will not be realized. This allowance was partially offset by the additional tax benefits recorded during 2012 in the amount of $0.8 million, resulting in a net tax expense of $0.5 million.

Cash paid for an immaterial acquisition during the year ended December 31, 2012 was $0.3 million.



22



---

##### Table of Contents

Supplemental Pro Forma Information for 2012 and 2011 Acquisitions (unaudited)

The following unaudited supplemental pro forma information for the years ended December 31, 2012 and 2011 assumes the contribution of Finesco had
occurred as of January 1, 2011, giving effect to purchase accounting adjustments. The pro forma data is for informational purposes only and may not necessarily reflect the actual results of operations had Finesco been operated as part of the
Company since January 1, 2011( in thousands except share data):



|                                                   |  |                                  |            |   |                      |   |            |             |  |   |                      |   |  |   |            |  
|-------------------------------------------------- |  | -------------------------------- | ---------- | - | -------------------- | - | ---------- | ----------- |  | - | -------------------- | - |  | - | ---------- | -
|                                                   |  | FOR THE YEARS ENDED DECEMBER 31, |           
|                                                   |  | 2012                             |            |   | 2011                 |  
|                                                   |  | As Reported                      |            |   | Pro Forma(unaudited) |   |            | As Reported |  |   | Pro Forma(unaudited) |  
|Total revenue                                      |  | $                                | 8,416      |   |                      | $ | 13,564     |             |  | $ | 4,101                |   |  | $ | 15,430     |  
|Loss from continuing operations                    |  |                                  | (25,560    | ) |                      |   | (24,764    | )           |  |   | (18,117              | ) |  |   | (16,710    | )
|Net loss                                           |  |                                  | (31,771    | ) |                      |   | (30,975    | )           |  |   | (18,117              | ) |  |   | (16,710    | )
|Loss per common sharebasic and diluted:           |  |                                  |            |   |                      |   |            |             |  |   |                      |   |  |   |            |  
|Loss from continuing operations                    |  | $                                | (0.93      | ) |                      | $ | (0.86      | )           |  | $ | (0.90                | ) |  | $ | (0.74      | )
|Net loss per common share(1)                       |  | $                                | (1.16      | ) |                      | $ | (1.08      | )           |  | $ | (0.90                | ) |  | $ | (0.74      | )
|Shares used in computing net loss per common share |  |                                  | 27,458,184 |   |                      |   | 28,724,898 |             |  |   | 20,023,456           |   |  |   | 22,511,885 |  



|(1) | The pro forma net loss during the year ended December 31, 2012 includes an adjustment for transaction expenses related to the contribution of Finesco of $0.9
million. The pro forma net loss during the year ended December 31, 2011 includes a negative adjustment of $0.3 million for Finesco related to general and administrative expenses.
|--- | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

Total revenue and net loss included in the consolidated statement of operations during the year ended December 31, 2012 for Finesco since the date
of acquisition, is $3.0 million and $2.4 million, respectively.

Sale of Bio-Quant

In 2009, the Company acquired Bio-Quant, Inc. (Bio-Quant), a specialty biotech contract research organization
(CRO) based in San Diego. The Company used the Bio-Quant development capabilities to discover product candidates and identify potential new uses and routes of administration of its NexACT® platform.

In December 2010, the Company determined that the value of the Bio-Quant goodwill and Know-How intangible asset were impaired and charges of $9.1
million and $1.1 million, respectively, were recorded to write off the entire value of goodwill and write down the Know-How asset to its estimated fair value of $1.6 million. The impairments were based on an assessment of the fair value of the
Bio-Quant pre-clinical CRO business segment. Such impairment was derived mainly from the fact that Bio-Quant significantly changed its strategic focus in the fourth quarter of 2010. Rather than serve the greater CRO market, Bio-Quant was
primarily performing CRO services for the Companys own pharmaceutical product development segment. As such, the ongoing revenue, profits and cash flows for Bio-Quant were significantly reduced from the initial projections for Bio-Quant
when it was acquired by the Company in December 2009.

During 2011, the Company considered the significance of its enhanced product candidate
pipeline, the resources needed to further develop each of those product opportunities and the value being derived from the CRO business with diminished cash flows towards operations. Based on the change in strategic focus, on June 30,
2011, the Company sold all of the outstanding capital stock of Bio-Quant, to BioTox Sciences (BioTox). The Company received $0.5 million at closing as an initial payment.



23



---

##### Table of Contents

The Company is entitled to receive earn-out payments calculated as a percentage of the future gross revenue
of BioToxs CRO services business. Over the ten-year term of the earn-out, beginning September 2012, the Company will be entitled to receive minimum payments of $4.5 million, $0.5 million per year, with the right to receive additional amounts
depending on the gross revenue of BioTox over this ten-year period. The earn-out obligations are secured with a first priority lien on all the assets of Bio-Quant as well as the assets of BioTox for a certain period of time. After the sale, the
Company does not beneficially own any equity shares in Bio-Quant or BioTox. The Company does not expect to recognize continuing direct cash flows from Bio-Quant after the sale. However, the transaction was structured with a low down payment and a
payment stream over ten years that is contingent on the operational success of BioTox. This payment structure was negotiated as a means to improve the likely cash available for investment in the growth of the business, which was expected to have the
effect of encouraging higher revenues for BioTox and potentially greater earn-out payments to the Company over the ten year earn-out period.

The Company does not have any vote or direct influence on the execution of the operations but retains a significant amount of collection risk depending
on the operational success of the disposed CRO business. This continued exposure to the operating risk of BioTox and the extended post sale earn-out period indicates future influence in the continuing operations of the CRO. As such, the Company
determined that it would not be appropriate to classify the sale of Bio-Quant as a discontinued operation in the consolidated financial statements.

The collectability associated with the minimum payments due under the earn-out contract is not reasonably assured due to the length of time over which the payments will be due and the fact the entity
could potentially lack sufficient funds to support its operational activities, accordingly, the earn-out payments were recorded at $0.

In
2012, the Company received the initial minimum payments owed under the terms of the agreement of $0.3 million due from BioTox. The amount is reflected as a recovery on the sale of Bio-Quant subsidiary within the accompanying consolidated statements
of operation and comprehensive loss.

5. DISCONTINUED OPERATIONS

TopoTarget

On
December 29, 2011, the Company acquired all of the outstanding stock of TopoTarget USA, Inc., which became a wholly-owned subsidiary of the Company and was subsequently renamed Apricus Pharmaceuticals USA, Inc. (TopoTarget or
Apricus Pharmaceuticals), in a transaction accounted for under the acquisition method of accounting for business combinations. Accordingly, the assets acquired and liabilities assumed of TopoTarget were recorded as of the acquisition
date at their respective fair values.

Apricus Pharmaceuticals owns all existing rights to Totect® in North America and South America and their respective territories and possessions. The acquired entity had a
pre-existing sales infrastructure, sales team, and a revenue-generating product that was acquired to allow the Company to move into the commercialization and sales of oncology and oncology supportive care pharmaceuticals.

The Company made an initial payment of 334,382 shares of common stock valued at $1.7 million, based on the closing market price of the Companys
common stock on the closing date. The Company may be required to make additional milestone payments, based on the achievement of various regulatory and product cost reductions milestones, in shares of common stock based on the fair value at the date
the milestone is achieved. Managements estimate of the range of milestone stock payments varies from approximately $0.3 million if no regulatory or commercial milestones are achieved to a stock payment of approximately $2.3 million if all
milestones are achieved. The Companys estimate of those future milestone payments had a fair value of approximately $1.7 million at December 31, 2012. The decrease in estimated fair value of $0.2 million to $1.7 million at
December 31, 2012 from $1.9 million at December 31, 2011 is due to the accretion of $0.2 million of interest based on an effective interest rate of 23.6% applied to the milestones completely offset by a $0.4 million adjustment to the
milestones that was primarily driven by changes in timing of the anticipated dates to reach certain milestones.



24



---

##### Table of Contents

The Company continually reassesses the contingent consideration fair value each reporting period with any
future changes in fair value recognized in discontinued operations. Changes in fair values reflect new information about the probability and timing of meeting the conditions of the milestone payments. In the absence of new information, changes in
fair value will only reflect the passage of time as commercial and regulatory work progresses towards the achievement of the milestones. A reconciliation of upfront payments in accordance with the purchase agreement to the total purchase price is
presented below (in thousands):



|                                                                 |  |   |       |  
|---------------------------------------------------------------- |  | - | ----- | -
|Fair value of common stock issued to TopoTarget A/S shareholders |  | $ | 1,700 |  
|Fair value of contingent consideration                           |  |   | 1,917 |  
|Cash & cash equivalents acquired                                 |  |   | (107  | )
|                                                                 |  |   |       |  
|Net purchase price                                               |  | $ | 3,510 |  
|                                                                 |  |   |       |  

The assets acquired and liabilities assumed at December 29, 2011 based upon their respective fair values and are
summarized below (in thousands):



|                                            |  |   |       |  
|------------------------------------------- |  | - | ----- | -
|Accounts receivable                         |  | $ | 306   |  
|Inventory                                   |  |   | 133   |  
|Prepaid expenses and other current assets   |  |   | 27    |  
|Other long term assets                      |  |   | 39    |  
|Intangible assets                           |  |   | 2,630 |  
|Goodwill                                    |  |   | 1,130 |  
|Trade accounts payable and accrued expenses |  |   | (755  | )
|                                            |  |   |       |  
|Total net assets acquired                   |  | $ | 3,510 |  
|                                            |  |   |       |  

Asset categories acquired in the TopoTarget acquisition included working capital, license to the
trade name and Totect® product intellectual property assigned to the technology license. The estimated fair
value of the technology license was determined using a discounted cash flow analysis incorporating the estimated future cash flows from the technology during the assumed remaining life. The resulting debt-free net cash flows were then discounted
back to present value at the Companys cost of capital. After accounting for the tax benefit of amortization, it was estimated that the value of the technology license of TopoTarget was $2.2 million. Our estimated useful life of the technology
license was fifteen years.

The valuation of the TopoTarget trade name was based on a derivative of the discounted cash
flow method that estimates the present value of a hypothetical royalty stream derived via licensing the trade name. Alternatively, it could be considered to be the cost savings the Company achieved by not having to pay such royalty licensing fees to
a hypothetical third party owner. It was estimated that the value of the trade name of Totect® was $0.4 million.
Our estimated useful life of the trade name was fifteen years.

The purchase price was allocated based on the estimated fair value of the
tangible and identifiable intangible assets acquired and liabilities assumed. An allocation of the purchase price was made to major categories of assets and liabilities in the accompanying consolidated balance sheet as of December 31, 2011 and
is based on managements best estimates. The excess of purchase price over the fair value amounts assigned to the assets acquired and liabilities assumed represents the goodwill amount resulting from the acquisition. We do not expect any
portion of the intangible assets or goodwill to be deductible for tax purposes. The goodwill of $1.1 million arising from the acquisition results largely from the existing workforce and distribution network in place. All of the goodwill was assigned
to the Pharmaceuticals segment.

The Company did not record net deferred tax assets related to the stock acquired of TopoTarget. The entity
has significant accumulated net operating losses which are offset by a deferred tax liability associated with the acquired intangible assets. The net deferred tax assets are offset by a full valuation allowance related to the uncertainty of
realization of those net deferred tax assets.



25



---

##### Table of Contents

Granisol® and Aquoral

On February 21, 2012, the Company
entered into the following agreements with PediatRx Inc. (PediatRx): (1) a Co-Promotion Agreement in the U.S. for Granisol®, an oral liquid
granisetron based anti-emetic product (the Co-Promotion Agreement), (2) an assignment of PediatRxs rights under its Co-Promotion Agreement with Bi-Coastal Pharmaceuticals, Inc. for Aquoral for dry mouth or
Xerostomia in the U.S. and (3) an Asset Purchase Agreement for Granisol® outside of the U.S. (the
Sale Agreement). As consideration for entering into the agreements, the Company paid PediatRx $0.3 million up-front and will pay PediatRx a percentage royalty on the Companys net operating income related to sales of Granisol® in the U.S. The Company recorded most of $0.3 million related to the Co-Promotion Agreement as an intangible asset
in the Pharmaceuticals segment with an estimated useful life of ten years, which is the life of the agreement. The capitalized portion was recorded as research and development expense as the payment is for intellectual property related to a
particular research and development project that has not reached technological feasibility in the territories covered by the license and that has no alternative future use.

On June 27, 2012, the Company entered into a Termination Agreement with PediatRx, Inc. to terminate discussions regarding the
potential merger transaction whereby the Company would have acquired PediatRx (the Merger). Earlier in the year, on January 26, 2012, the Company had entered into a non-binding term sheet for the acquisition of PediatRx in a
proposed merger transaction. The term sheet included an additional payment by the Company to PediatRx of $1.0 million payable in Company common stock, if the Company elected not to pursue the Merger, subject to certain conditions. On June 27,
2012, the Company issued and delivered to PediatRx 373,134 shares of common stock, which were valued at a price of $2.68 per share in settlement of the $1.0 million payable. The $1.0 million dollar payment is considered part of the cost of the
Co-Promotion Agreement and was recorded as an intangible asset in the Pharmaceuticals segment, with an estimated useful life of ten years, which is the life of the agreement. In addition, the Company retained the ex-U.S. worldwide right to Granisol®.

Discontinued Operations

In December 2012, the Company made the strategic decision to divest Apricus Pharmaceuticals, which is comprised of its U.S. oncology care products, and is currently seeking buyers for this business or the
individual assets related to Totect® and Granisol®. The assets and liabilities and results of the Apricus Pharmaceuticals operations are classified as discontinued operations in the Companys consolidated
financial statements for all periods presented.



26



---

##### Table of Contents

The carrying amounts of the assets and liabilities of our discontinued operations are as follows (in
thousands):



|                                                  |  |              |       |  |      |   |       | 
|------------------------------------------------- |  | ------------ | ----- |  | ---- | - | ----- | 
|                                                  |  | DECEMBER 31, |      
|                                                  |  | 2012         |       |  | 2011 |  
|Accounts receivable                               |  | $            |      |  |      | $ | 306   | 
|Inventories                                       |  |              | 285   |  |      |   | 133   | 
|Prepaid expenses and other current assets         |  |              | 506   |  |      |   | 27    | 
|                                                  |  |              |       |  |      |   |       | 
|Current assets of discontinued operations         |  |              | 791   |  |      |   | 466   | 
|Property and equipment                            |  |              | 40    |  |      |   |      | 
|Intangible assets, net                            |  |              | 1,877 |  |      |   | 2,630 | 
|Goodwill                                          |  |              |      |  |      |   | 1,130 | 
|Other long-term assets                            |  |              | 23    |  |      |   | 39    | 
|                                                  |  |              |       |  |      |   |       | 
|Noncurrent assets of discontinued operations      |  |              | 1,940 |  |      |   | 3,799 | 
|                                                  |  |              |       |  |      |   |       | 
|Total assets of discontinued operations           |  | $            | 2,731 |  |      | $ | 4,265 | 
|                                                  |  |              |       |  |      |   |       | 
|                                                  |  |             
|Trade accounts payable                            |  | $            | 699   |  |      | $ | 87    | 
|Accrued expenses                                  |  |              | 1,087 |  |      |   | 381   | 
|Deferred revenue                                  |  |              | 243   |  |      |   |      | 
|Contingent consideration                          |  |              | 1,328 |  |      |   | 1,418 | 
|Provision for replacement inventory               |  |              | 170   |  |      |   | 258   | 
|                                                  |  |              |       |  |      |   |       | 
|Current liabilities of discontinued operations    |  |              | 3,527 |  |      |   | 2,144 | 
|Contingent consideration                          |  |              | 420   |  |      |   | 500   | 
|Provision for replacement inventory               |  |              | 28    |  |      |   | 28    | 
|                                                  |  |              |       |  |      |   |       | 
|Noncurrent liabilities of discontinued operations |  |              | 448   |  |      |   | 528   | 
|                                                  |  |              |       |  |      |   |       | 
|Total liabilities of discontinued operations      |  | $            | 3,975 |  |      | $ | 2,672 | 
|                                                  |  |              |       |  |      |   |       | 

The operating results of the Companys discontinued operations are as follows during the year ended
December 31, 2012 (in thousands):



|                                  |  |                   |        |  
|--------------------------------- |  | ----------------- | ------ | -
|                                  |  | DECEMBER 31, 2012 |       
|Product sales                     |  | $                 | 314    |  
|Cost of goods sold                |  |                   | 270    |  
|Operating expenses                |  |                   | 3,369  |  
|Impairment of intangible assets   |  |                   | 2,886  |  
|                                  |  |                   |        |  
|Loss before income tax provision  |  |                   | (6,211 | )
|                                  |  |                   |        |  
|Income tax provision              |  |                   |       |  
|                                  |  |                   |        |  
|Loss from discontinued operations |  | $                 | (6,211 | )
|                                  |  |                   |        |  

In December 2012, the Company made the strategic decision to divest the oncology supportive care
business and is currently seeking buyers for the business or the individual assets. Revenues, profits and cash flows for 2012 were significantly lower than the initial projections of the Totect® product when the business was acquired by the Company. As part of the Companys annual impairment test at December 31, 2012 and as a result of the decision
in December 2012 to sell the business, the Company analyzed the fair value using discounted cash flow models and comparing the results to offers made on the assets of the business. The Company performed a Step 1 goodwill impairment analysis which
uses significant judgments including estimation of future cash flows, which is dependent on internal forecasts, estimation of the long-term rate of growth for the businesses, the useful life over which cash flows will occur, and determination of the
Companys weighted average cost of capital. These significant, unobservable inputs represent a Level 3 measurement within the fair value hierarchy. The fair value



27



---

##### Table of Contents

of the reporting unit was significantly less than the carrying value indicating that the goodwill may be impaired. The Company then compared the fair value estimated in Step 1 to the fair value
of the net assets less goodwill to calculate the implied value of goodwill. The fair value of the net assets less goodwill was approximately the same as the fair value of the business. Thus the implied goodwill was determined to be $0 and the
goodwill associated with the oncology supportive care business was fully impaired. The Company recorded a charge of $1.1 million in the fourth quarter to record an impairment of the goodwill.

In connection with the expected sale of the U.S. oncology products, Totect® and Granisol®, as a result of
the Companys decision to focus its resources on Vitaros® and Femprox®, the Company considered the fair value for the assets and liabilities and compared the amount to the carrying amount
of intangible assets associated with the assets. The estimated fair values of the Companys co-promotion rights, technology licenses and trade names were determined using discounted cash flows model. The discounted cash flow model requires
certain assumptions and judgments including but not limited to estimation of future cash flows, which is dependent on internal forecasts, estimation of the long-term rate of growth for the businesses, the useful life over which cash flows will
occur, and determination of the Companys weighted average cost of capital. These significant, unobservable inputs represent a Level 3 measurement within the fair value hierarchy. Based on the analysis performed, the Company recorded impairment
charges of $0.6 million associated with Totect® intangible assets and $1.2 million related to Granisol® intangible assets which is included in the loss from discontinued operations for the year ended December 31,
2012. Any gain or loss on the eventual sale of the business or assets will be calculated from the carrying value of the assets and the final selling price. The fair value measurement was considered in relation offers received by the Company, which
is an observable input and represents a Level 2 measurement within the fair value hierarchy.

6. OTHER FINANCIAL INFORMATION

Property and Equipment

Property and equipment are comprised of the following (in thousands):



|                                                |  |              |     |   |      |   |        |  
|----------------------------------------------- |  | ------------ | --- | - | ---- | - | ------ | -
|                                                |  | December 31, |    
|                                                |  | 2012         |     |   | 2011 |  
|Land                                            |  | $            |    |   |      | $ | 364    |  
|Building                                        |  |              |    |   |      |   | 6,043  |  
|Leasehold improvements                          |  |              | 130 |   |      |   | 17     |  
|Machinery and equipment                         |  |              | 126 |   |      |   | 1,443  |  
|Capital lease equipment                         |  |              | 76  |   |      |   | 26     |  
|Computer software                               |  |              | 17  |   |      |   | 17     |  
|Furniture and fixtures                          |  |              | 31  |   |      |   | 26     |  
|Equipment in process                            |  |              | 318 |   |      |   |       |  
|                                                |  |              |     |   |      |   |        |  
|Total property and equipment                    |  |              | 698 |   |      |   | 7,936  |  
|                                                |  |              |     |   |      |   |        |  
|Less: accumulated depreciation and amortization |  |              | (97 | ) |      |   | (3,552 | )
|                                                |  |              |     |   |      |   |        |  
|Property and equipment, net                     |  | $            | 601 |   |      | $ | 4,384  |  
|                                                |  |              |     |   |      |   |        |  

Depreciation expense totaled $0.2 million, $0.5 million and $0.6 million for the years ended December 31, 2012, 2011
and 2010, respectively.

Property Held for Sale

In August of 2012, the Company decided to sell its facility in East Windsor, New Jersey and as a result, during the year ended December 31, 2012, the land, building and machinery associated with the
facility were reclassified to property held for sale. The monthly depreciation and amortization previously attributed to the assets were ceased. Any gain or loss on the eventual sale of the facility will be calculated from the net book value of the
assets. On December 28, 2012, we signed an agreement to sell the facility for a total of $4.1 million. We



28



---

##### Table of Contents

have performed a review for impairment of our facility based on this offer price less the estimated selling costs of $0.5 million and recorded an impairment of approximately $0.5 million in
general and administrative expenses. The fair value measurement is based on a recent offer received by the Company, which is an observable input and represents a Level 2 measurement within the fair value hierarchy. The property is currently leased
to a tenant under a long term lease. The building was sold in March 2013.

In December 2009, the Company entered into an agreement to lease
its facility in East Windsor, New Jersey for a period of 10 years, commencing in February 2010, at $34,450 per month with annual 2.5% escalations. The Company records this rental income on a straight-line basis with the difference between rental
income and payments received recorded as a deferred rental income asset. The Company determined that the deferred rental income will not be recognized due to the expected sale of the building and as a result, wrote off the $0.2 million underlying
asset as of December 31, 2012. Deferred rental income of $0 and $0.2 million is included in other long-term assets in the consolidated balance sheets at December 31, 2012 and 2011, respectively.

Goodwill

Changes in our goodwill
are as follows (in thousands):



|                                        |  |                             |       |  |                           |   |       |                                    |  |   |                |  |  |                       |        |   |  |   |       | 
|--------------------------------------- |  | --------------------------- | ----- |  | ------------------------- | - | ----- | ---------------------------------- |  | - | -------------- |  |  | --------------------- | ------ | - |  | - | ----- | 
|                                        |  | Balance atBeginning 
ofYear |       |  | Current 
YearAcquisitions |   |       | Foreign 
CurrencyTranslationEffect |  |   | Adjustments(1) |  |  | Balance at Endof Year |       
|Year Ended December 31, 2012            |  |                             |       |  |                           |   |       |                                    |  |   |                |  |  |                       |        |   |  |   |       | 
|Continuing operationsContract Sales    |  | $                           |      |  |                           | $ | 7,652 |                                    |  | $ | 602            |  |  | $                     | (8,254 | ) |  | $ |      | 
|Discontinued OperationsPharmaceuticals |  |                             | 1,130 |  |                           |   |      |                                    |  |   |               |  |  |                       | (1,130 | ) |  |   |      | 
|                                        |  |                             |       |  |                           |   |       |                                    |  |   |                |  |  |                       |        |   |  |   |       | 
|Total                                   |  |                             | 1,130 |  |                           |   | 7,652 |                                    |  |   | 602            |  |  |                       | (9,384 | ) |  |   |      | 
|                                        |  |                             |       |  |                           |   |       |                                    |  |   |                |  |  |                       |        |   |  |   |       | 
|Year Ended December 31, 2011            |  |                             |       |  |                           |   |       |                                    |  |   |                |  |  |                       |        |   |  |   |       | 
|Discontinued OperationsPharmaceuticals |  | $                           |      |  |                           | $ | 1,130 |                                    |  | $ |               |  |  | $                     |       |   |  | $ | 1,130 | 
|                                        |  |                             |       |  |                           |   |       |                                    |  |   |                |  |  |                       |        |   |  |   |       | 



|(1) | See Notes 4 and 5 to the Consolidated Financial Statements for discussion on the adjustments recorded in 2012.
|--- | --------------------------------------------------------------------------------------------------------------

Accrued Liabilities

Accrued
liabilities are comprised of the following (in thousands):



|                             |  |              |       |  |      |   |       | 
|---------------------------- |  | ------------ | ----- |  | ---- | - | ----- | 
|                             |  | December 31, |      
|                             |  | 2012         |       |  | 2011 |  
|Accrued professional fees    |  | $            | 286   |  |      | $ | 417   | 
|Accrued social and VAT taxes |  |              | 359   |  |      |   |      | 
|Accrued consulting           |  |              | 702   |  |      |   | 831   | 
|Accrued other                |  |              | 494   |  |      |   | 532   | 
|                             |  |              |       |  |      |   |       | 
|                             |  | $            | 1,841 |  |      | $ | 1,780 | 
|                             |  |              |       |  |      |   |       | 

7. DEFERRED COMPENSATION

On December 28, 2012, the Company entered into a Separation Agreement and Mutual Release (the Separation Agreement)
with Bassam Damaj, Ph.D. (Damaj). Damaj served as the Companys President and Chief Executive Officer until November 2012, at which time he tendered his resignation as an officer and director of the Company. Pursuant to the
Separation Agreement, the Company has agreed to pay Damaj a total of $0.5 million in cash, of which $0.1 million was paid in 2012 and $0.4 million will be payable in 2013 and is included in accrued compensation in the accompany balance sheet. The
consolidated financial statements in 2012 also include a non-cash charge in the amount of $0.7 million related to the accelerated vesting of 46,667 shares of common stock underlying compensatory stock and the accelerated vesting of options to
purchase up to



29



---

##### Table of Contents

300,000 shares of common stock. Subsequent to the execution of the Separation Agreement, the 46,667 shares were issued in the first quarter of 2013 and the 300,000 of stock options expired as
they were not exercised within the ninety day exercise period.

Finesco SAS, through its Scomedica subsidiary, has an accrued retirement
benefit liability of $0.9 million, which is mandated by the French Works Council that consists of one lump-sum paid on the last working day when the employee retires and is reported as deferred compensation in the accompanying consolidated balance
sheets. The amount of the payment is based on the length of service and earnings of the retiree. The cost of the obligation is estimated using the present value at the end of the reporting period. Actuarial estimates for the obligation are performed
annually. The discount rate applied in the computation of the present value of the retirement liability corresponds to the yield on high quality corporate bonds denominated in the currency in which the benefits will be paid and that have terms to
maturity approximating the terms of the related retirement liability.

In 2002, the Company entered into an employment agreement with Y.
Joseph Mo, Ph.D., that had a constant term of five years, and pursuant to which, Dr. Mo served as the Companys Chief Executive Officer and President. Under the employment agreement, Dr. Mo is entitled to a severance in the form
of an annual amount equal to one sixth of the sum of his base salary and bonus for the 36 calendar months preceding the date on which the deferred compensation payments commence subject to certain limitations, including a vesting requirement through
the date of termination, as set forth in the employment agreement. The deferred compensation is payable monthly for 180 months upon termination of his employment. Dr. Mos employment was terminated in December 2005. At such date, the
Company accrued deferred severance compensation of $1.2 million based upon the estimated present value of the obligation.

Effective
December 20, 2011, pursuant to a Consulting Agreement entered into by the Company and Dr. Mo on August 8, 2011, the agreement was renegotiated and the payment terms were changed from the remaining 108 payments of $9,158 to 69 payments
of $15,000. There was no change in the remaining principal amount due as of that date. The Company incurred a non-cash charge to general and administrative expense in the amount of $0.2 million based upon the revised estimated present value of the
obligation.

At December 31, 2012 and 2011, respectively, the Company had a deferred compensation balance of $2.1 million and $1.0
million, respectively.

8. CONVERTIBLE NOTES PAYABLE

On March 15, 2010, the Company issued convertible notes (the 2010 Convertible Notes) in an aggregate principal amount
of $4.0 million to the holders of convertible notes issued in 2008. The 2010 Convertible Notes were secured by the Companys facility in East Windsor, New Jersey and were due on December 31, 2012. The proceeds were used to repay
the convertible notes then outstanding.

On December 7, 2012, the 2010 Convertible Notes were amended (the 2012 Convertible
Notes) and restated to 1) extend the due date to December 31, 2014, subject to an aggregate of $1.5 million of the aggregate original principal amount of notes being subject to redemption by the holders at their election on April 1,
2014; 2) the conversion price was reduced to equal 125% of the market price of the common stock as of December 7, 2012 (subject to further adjustment upon certain dilutive issuances of common stock); and 3) the 2012 Convertible Notes shall no
longer be collateralized by the East Windsor, New Jersey property upon the sale of the property which occurred in March 2013. The amended conversion price has been reduced to $2.59 per share for the 2012 Convertible Notes.

The 2012 Convertible Notes are, at the holders option, redeemable in cash upon maturity at December 31, 2014 or convertible into shares
of common stock at a current conversion price of $2.59 per share, which price is subject to adjustment upon certain dilutive issuances of common stock. The 2012 Convertible Notes bear interest at 7% per annum, which is payable quarterly at
the Companys option in cash or, if the Companys net cash balance is less than $3.0 million at the time of payment, in shares of common stock. If paid in shares of common



30



---

##### Table of Contents

stock, then the price of the stock issued is determined as 95% of the five-day weighted average of the market price of the common stock prior to the time of payment. At December 31,
2012, the conversion price was above the current market price of our common stock. The 2012 Convertible Notes contain a beneficial conversion feature specific to the payment of interest in shares and will be recognized when that contingency is
resolved.

The 2012 Convertible Notes were considered to be an extinguishment of debt as the terms of the debt instruments immediately before
and after the amendment were considered to be substantially different as defined in the accounting guidance. In accordance with debt extinguishment accounting requirements, the new debt instrument was recorded at its fair value as determined on the
amendment date. The fair value of the note payable was determined based on a discounted cash flow model using a risk adjusted annual interest rate of 16%, which represent a Level 3 measurement within the fair value hierarchy given this is an
unobservable input. The estimated fair value of the note payable was $3.4 million which has been recorded in the consolidated balance sheet. In addition, the 2012 Convertible Notes have an anti-dilution provision that results in an embedded
conversion feature that has been accounted for as a derivative. The Company valued the derivative using a Black-Scholes valuation model and the following inputs, stock price on the day of issuance $1.93, 70% volatility, the term of the notes payable
(2 years) and the risk-free interest rate 0.25%. These unobservable inputs represent a Level 3 measurement within the fair value hierarchy. The estimated fair value of the conversion feature as of December 31, 2012 was $0.9 million which has been
recorded as a derivative liability in the consolidated balance sheet. The estimated fair value of the conversion feature will be revalued on a quarterly basis and any resulting increases or decreases in the estimated fair value will be recorded as
an adjustment to operating earnings.

The net difference of $0.3 million has been recorded as an extinguishment loss and is recorded in the
other income (expense), net line item of the consolidated statements of operations and other comprehensive loss.

9. STOCKHOLDERS EQUITY

Preferred Stock

The Company is authorized to issue 10.0 million shares of preferred stock, par value $0.001, of which 1.0 million shares are designated as
Series A Junior Participating Preferred Stock, 800 are designated as Series B 8% Cumulative Convertible Preferred Stock, 600 are designated as Series C 6% Cumulative Convertible Preferred Stock and 50,000 have been designated as Series D Junior
Participating Cumulative Preferred Stock. No shares of preferred stock were outstanding at December 31, 2012 or 2011.

Stockholders Rights Plan

On March 24, 2011, pursuant to the Companys shareholders rights plan (the Plan), the Company declared a dividend distribution of
one preferred share purchase right for each outstanding share of the Companys Common Stock to shareholders of record at the close of business on April 1, 2011. Initially, these rights will not be exercisable and will trade with
the shares of the Companys common stock.

Under the Plan, the rights generally will become exercisable if a person or group acquires
beneficial ownership of 15% or more of the Companys common stock in a transaction not approved by the Companys Board. In that situation, each holder of a right (other than the acquiring person) will be entitled to purchase, at the
then-current exercise price, i.e., a purchase price of $20.00 per one ten-thousandth of a share (the Exercise Price), additional shares of common stock having a value of twice the exercise price of the right. In addition, if the Company
is acquired in a merger or other business combination after an unapproved party acquires more than 15% of the Companys common stock, each holder of the right would then be entitled to purchase at the then-current Exercise Price, shares of the
acquiring companys stock, having a value of twice the exercise price of the right.

The Board may redeem the rights for a nominal amount
at any time before an event that causes the rights to become exercisable. The rights will expire on April 1, 2021.

Common Stock
Offerings

On February 14, 2012, the Company offered and sold 4,938,272 units (Units) in a follow-on public offering
of securities with each Unit consisting of one share of common stock, $0.001 par value per share of the Company



31



---

##### Table of Contents

and one warrant to purchase 0.50 shares of Common Stock at a price of $5.25 per full warrant share. The Units were offered at a public offering price of $4.05 per Unit. The Underwriters purchased
the Units from the Company at a price of $3.807 per Unit, which represented a 6.0% discount to the public offering price. The warrants were exercisable immediately upon issuance and will expire five years from the date of issuance. The net proceeds
to the Company from this offering were approximately $18.4 million after deducting underwriting discounts and commissions and other offering expenses payable by the Company. In accordance with the derivative guidance, the warrants fair value
of $3.7 million was determined on the date of grant using the Black-Scholes model with the following assumptions: risk free interest rate of 1.0%, volatility of 70.0%, a 5.0 year term and no dividend yield. These warrants were recorded as a
component of stockholders equity with an equal offsetting amount to stockholders equity because the value of the warrants was considered a financing cost given the warrants did not meet the liability classification criteria. No
warrants that were issued as part of the Unit offering have been exercised in 2012.

On December 30, 2011, the Company entered into a
Controlled Equity Offering Agreement (the Offering Agreement) with Ascendiant Capital Markets, LLC (the Manager). Pursuant to the Offering Agreement, the Company may offer and sell shares of its common stock having an
aggregate offering price of up to $20.0 million, from time to time through the Manager. The sales of the common stock under the Offering Agreement will be made in at the market offerings as defined in Rule 415 of the Securities
Act of 1933 (the Securities Act), including sales made directly on the NASDAQ Capital Market, on any other existing trading market for the Shares or to or through a market maker. Our at-the-market common stock selling facility may be
terminated by either party by giving proper written notice.

The Shares to be sold in the offering will be issued pursuant to the
Companys effective shelf registration statement on Form S-3 (Registration No. 333-165960) previously filed with the Securities and Exchange Commission (the SEC), in accordance with the provisions of the Securities Act, as
supplemented by a prospectus supplement dated December 30, 2011, which the Company filed with the SEC pursuant to Rule 424(b) (5) under the Securities Act. No common stock sales were made pursuant to this Offering Agreement in 2011.
For the year ended December 31, 2012, the Company sold an aggregate of 515,329 shares of common stock under the Sales Agreement at a weighted average sales price of approximately $3.87 per share, resulting in offering proceeds of approximately
$2.0 million, net of sales commissions.

On April 21, 2010, the Company entered into a Sales Agreement with Brinson Patrick Securities
Corporation (the Sales Manager) to issue and sell through the Sales Manager, as agent, up to $10.0 million of common stock from time to time pursuant to the Companys effective shelf registration statement on Form S-3 (File
No. 333-165960). For the year ended December 31, 2011, the Company sold an aggregate of 1,527,249 shares of common stock under the Sales Agreement at a weighted average sales price of approximately $4.26 per share, resulting in
offering proceeds of approximately $6.2 million, net of sales commissions. There were no sales under this Sales Agreement in 2012. During 2010, the Company had sold an aggregate of 518,264 shares of common stock under the Sales Agreement at a
weighted average sales price of approximately $6.73 per share, resulting in offering proceeds of approximately $3.3 million, net of sales commission.

On October 4, 2010, the Company completed a best-efforts offering (the Offering) for the sale of 1,728,882 units (the Units), with each Unit consisting of three shares of
common stock, par value $0.001 per share, and a warrant to purchase one additional share of common stock. The Units were offered to the public at a price of $5.40 and the warrants, which are exercisable starting at the closing and remaining
exercisable thereafter for a period of five years, have an exercise price of $2.268 per share. Accordingly, the Company issued 5,186,646 shares of common stock and warrants to purchase 1,728,882 shares of common stock and received Offering
proceeds, net of discounts, commissions and expenses, of approximately $8.5 million. Additionally, warrants to purchase 155,599 shares of common stock were issued to the placement agent as commission.

Warrants

During the years ended
December 31, 2012, 2011 and 2010, the Company received proceeds of $40,000, $1.4 million and $1.0 million from the exercise of 17,595, 649,865 and 426,383 warrants, respectively, from the Offering.



32



---

##### Table of Contents

A summary of warrant activity is as follows:



|                                 |  |                                    |           |   |                               |   |       |                                                    |  |  |     | 
|-------------------------------- |  | ---------------------------------- | --------- | - | ----------------------------- | - | ----- | -------------------------------------------------- |  |  | --- | 
|                                 |  | Common SharesIssuable
uponExercise |           |   | WeightedAverageExercise Price |   |       | WeightedAverageRemainingContractualLife (in years) | 
|Outstanding at December 31, 2011 |  |                                    | 777,284   |   |                               | $ | 2.88  |                                                    |  |  | 3.4 | 
|Issued                           |  |                                    | 2,469,136 |   |                               | $ | 5.25  |                                                    |  |  |     | 
|Exercised                        |  |                                    | (17,595   | ) |                               | $ | 2.27  |                                                    |  |  |     | 
|Cancelled                        |  |                                    | (23,333   | ) |                               | $ | 22.80 |                                                    |  |  |     | 
|                                 |  |                                    |           |   |                               |   |       |                                                    |  |  |     | 
|Outstanding at December 31, 2012 |  |                                    | 3,205,492 |   |                               | $ | 4.56  |                                                    |  |  | 3.8 | 
|                                 |  |                                    |           |   |                               |   |       |                                                    |  |  |     | 
|Exercisable at December 31, 2012 |  |                                    | 3,205,492 |   |                               | $ | 4.56  |                                                    |  |  | 3.8 | 
|                                 |  |                                    |           |   |                               |   |       |                                                    |  |  |     | 

10. RELATED PARTY TRANSACTIONS

The Company had the following related party transactions during the years ended December 31, 2012, 2011 and 2010:

Innovus Pharmaceuticals, Inc.

Innovus
Pharmaceuticals, Inc. (Innovus) (formerly FasTrack Pharmaceuticals, Inc.) and Sorrento Pharmaceuticals, Inc. (Sorrento) were formed by Bio-Quant in 2008. In 2009, Bio-Quant spun-off its pharmaceutical assets to
the two companies to enable it to focus on its core business of pre-clinical CRO testing services. Innovus subsequently acquired Sorrentos assets and liabilities in March 2011. Innovus is a development-stage company of which one
former executive officer and one former director of the Company were minority shareholders during 2011 and 2012. Each has left the Company near the end of 2012 and are now directors of Innovus. One current executive officer of the Company has less
than a 2% ownership interest of Innovus.

On April 4, 2011, the Company and Innovus entered into an Asset Purchase
Agreement, pursuant to which Innovus sold to the Company all the rights it had in certain back-up compounds for
PrevOncoTM. PrevOncoTM, a development-stage candidate that we have studied for the
treatment of solid tumors, contains a marketed anti-ulcer compound lansoprazole that we believe has the potential to be used alone or in combination with other chemotherapeutic agents. The Company believes PrevOncoTMcan be optimized further to increase its efficacy in combination
with our NexACT® technology.

In exchange for the PrevOnco back-up compound portfolio, the Company loaned Innovus $0.25 million in the form of a secured convertible note and restructured the then existing outstanding demand
notes and interest payable due to the Company into a second secured convertible note in the amount of $0.2 million. The notes were due on April 4, 2013 and bore interest at the rate of prime plus 1%. The notes would automatically convert
to common stock of Innovus at a 10% discount if, prior to the maturity date, Innovus completed a material round of financing, closes a merger or acquisition transaction (an M&A event), or completed a public offering of its Common
stock. In March 2012, Innovus converted the notes to common stock of Innovus based on an M&A event that occurred in December of 2011, through the merger of Innovus with a publicly-traded company, North Horizon, Inc. Under the agreement, Innovus
became a subsidiary of North Horizon and the entity was renamed, Innovus Pharmaceuticals, Inc. The Company received an insignificant common stock interest in Innovus (less than 1%) in connection with the conversion which was determined to have an
insignificant value.

On October 4, 2012, the Company and Innovus entered into an agreement in which the Company obtained all rights and
interests, free of any future obligations to PrevOnco in exchange for the return of the Innovus common stock received in March of 2012 and $25,000 in cash. The transaction was recorded as a charge to research and development expense of $25,000
during the year ended December 31, 2012 and there will be no



33



---

##### Table of Contents

other impact on the financial position or results of operations of the Company from this transaction. Following the settlement transaction, and the departure of the former CEO of the Company and
one director of the Company, there are no other related party matters between the Company and Innovus.

Other Related Party Transactions

For the year ended December 31, 2012, the Company purchased approximately $36,000 of drug supplies from an entity owned 100% by the
Companys former CEO. In 2011 the Company purchased approximately $123,000 of drug supplies from the same entity. The Company purchased approximately $48,000 of drug supplies from the same entity during 2010.

11. EQUITY COMPENSATION PLANS

At December 31, 2012, we had two share-based compensation plans that provide for awards to acquire shares of our common stock. In
March 2012 our stockholders approved the 2012 Stock Long Term Incentive Plan (the 2012 Plan) that provides for the issuance of incentive and non-incentive stock options, restricted and unrestricted stock awards, stock unit awards and
stock appreciation rights, as well as certain cash awards. A total of 2.0 million common shares have been authorized for issuance under the 2012 Plan. In May 2011, our stockholders approved an increase in the number of common shares authorized
for issuance under the NexMed, Inc. 2006 Stock Incentive Plan (the 2006 Plan) of 2.5 million to 3.8 million.

We currently
grant stock options, stock appreciation rights, and restricted and unrestricted compensatory stock under our 2006 Plan. Options granted generally vest over a period of one to five years and have a maximum term of 10 years from the date of grant. At
December 31, 2012, an aggregate of 4.8 million shares of common stock are authorized under our equity compensation plans, of which 2.5 million common shares are available for future grants.

Stock Options

A summary of stock
option activity during the year ended December 31, 2012 is as follows:



|                                 |  |                 |           |   |                              |   |      |                                                      |  |  |                              |  |  |   |   | 
|-------------------------------- |  | --------------- | --------- | - | ---------------------------- | - | ---- | ---------------------------------------------------- |  |  | ---------------------------- |  |  | - | - | 
|                                 |  | Number ofShares |           |   | WeightedAverageExercisePrice |   |      | WeightedAverage 
RemainingContractualLife (in years) |  |  | TotalAggregateIntrinsicValue | 
|Outstanding at December 31, 2011 |  |                 | 840,833   |   |                              | $ | 4.79 |                                                      |  |  | 9.0                          |  |  |   |   | 
|Granted                          |  |                 | 1,508,083 |   |                              | $ | 3.15 |                                                      |  |  |                              |  |  |   |   | 
|Exercised                        |  |                 | (5,000    | ) |                              | $ | 2.09 |                                                      |  |  |                              |  |  |   |   | 
|Cancelled                        |  |                 | (130,000  | ) |                              | $ | 4.24 |                                                      |  |  |                              |  |  |   |   | 
|                                 |  |                 |           |   |                              |   |      |                                                      |  |  |                              |  |  |   |   | 
|Outstanding at December 31, 2012 |  |                 | 2,213,916 |   |                              | $ | 3.71 |                                                      |  |  | 8.9                          |  |  | $ |  | 
|                                 |  |                 |           |   |                              |   |      |                                                      |  |  |                              |  |  |   |   | 
|Vested or expected to vest at    |  |                 |           |   |                              |   |      |                                                      |  |  |                              |  |  |   |   | 
|December 31, 2012                |  |                 | 2,155,026 |   |                              | $ | 4.24 |                                                      |  |  | 8.9                          |  |  | $ |  | 
|                                 |  |                 |           |   |                              |   |      |                                                      |  |  |                              |  |  |   |   | 
|Exercisable at December 31, 2012 |  |                 | 856,868   |   |                              | $ | 4.45 |                                                      |  |  | 8.3                          |  |  | $ |  | 
|                                 |  |                 |           |   |                              |   |      |                                                      |  |  |                              |  |  |   |   | 

The weighted average fair value of options granted during the years ended December 31, 2012, 2011, and 2010 was
approximately $1.95, $4.40, and $1.76, respectively. At December 31, 2012, 2011, and 2010, there were 856,868, 138,323, and 80,104 options exercisable, respectively. The aggregate intrinsic value of options exercised during the years ended
December 31, 2012, 2011, and 2010 was approximately $15,850, $14,175, and $0.0, respectively, determined as of the date of exercise. The Company received $10,450 in cash from options exercised during the year ended December 31, 2012.



34



---

##### Table of Contents

Compensatory Stock Awards

Shares of common stock for compensatory stock awards are generally not issued until vested. A summary of compensatory stock award activity during the year ended December 31, 2012 is as follows:



|                                      |  |                 |          |   |                                                 |   |      | 
|------------------------------------- |  | --------------- | -------- | - | ----------------------------------------------- | - | ---- | 
|                                      |  | Numberof Shares |          |   | Weighted AverageGrant 
Date Fair ValuePer Share |  
|Nonvested shares at December 31, 2011 |  |                 | 257,063  |   |                                                 | $ | 4.93 | 
|Shares granted                        |  |                 | 23,136   |   |                                                 | $ | 2.79 | 
|Shares vested and issued              |  |                 | (147,761 | ) |                                                 | $ | 4.46 | 
|Shares forfeited                      |  |                 | (19,733  | ) |                                                 | $ | 4.15 | 
|                                      |  |                 |          |   |                                                 |   |      | 
|Nonvested shares at December 31, 2012 |  |                 | 112,705  |   |                                                 | $ | 5.15 | 
|                                      |  |                 |          |   |                                                 |   |      | 

The total fair value of compensatory stock awards that vested during the years ended December 31, 2012, 2011 and
2010 was $0.5 million, $1.0 million and $2.0 million, respectively.

Share-Based Compensation

The value of compensatory stock grants is calculated based upon the closing stock price of the Companys common stock on the date of the
grant. For stock options granted to employees and directors, we recognize compensation expense based on the grant-date fair value over the requisite service period of the awards, which is generally the vesting period. We estimate the fair value
of each option award on the date of grant using the Black-Scholes option pricing model.

The fair value of each stock option grant is
estimated on the grant date using the Black-Scholes option-pricing model with the following assumptions used for the years ended December 31:



|                     |  |      |               |  |      |  |             |      |  |  |                 | 
|-------------------- |  | ---- | ------------- |  | ---- |  | ----------- | ---- |  |  | --------------- | 
|                     |  | 2012 |               |  | 2011 |  |             | 2010 | 
|Dividend yield       |  |      | 0.0%          |  |      |  | 0.0%        |      |  |  | 0.0%            | 
|Risk-free yields     |  |      | 0.6%  1.1%   |  |      |  | 1.2%  1.7% |      |  |  | 1.35%  5.02%   | 
|Expected volatility  |  |      | 70%           |  |      |  | 255%        |      |  |  | 54.38% 103.51% | 
|Expected option life |  |      | 5.25 6 years |  |      |  | 4 years     |      |  |  | 1  6 years     | 
|Forfeiture rate      |  |      | 2.66%         |  |      |  | 2.66%       |      |  |  | 2.66%  8.22%   | 

Expected Volatility. The Company uses analysis of historical volatility to compute the expected
volatility of its stock options. For the consideration of volatility in 2011, the Company had a limited number of reference points and as a result the expected volatility was considered to be significant but did not have a significant impact to the
consolidated financial statements.

Expected Term.The expected life assumptions were based on the simplified method
set forth in Staff Accounting Bulletin 14.

Risk-Free Interest Rate. The interest rate used in valuing awards is based
on the yield at the time of grant of a U.S. Treasury security with an equivalent remaining term.

Dividend Yield. The
Company has never paid cash dividends, and does not currently intend to pay cash dividends, and thus has assumed a 0% dividend yield.

Pre-Vesting Forfeitures. Estimates of pre-vesting option forfeitures are based on Company experience. The Company will adjust its estimate of forfeitures over the requisite service period based on
the extent to which actual forfeitures differ, or are expected to differ, from such estimates. Changes in estimated forfeitures are recognized through a cumulative catch-up adjustment in the period of change and also impact the amount of
compensation expense to be recognized in future periods. Adjustments have not been significant to date.



35



---

##### Table of Contents

As of December 31, 2012, there was $2.5 million in unrecognized compensation cost related to non-vested
stock options expected to be recognized over a weighted average period of 1.2 years.

The value of compensatory stock grants is calculated
based upon the closing stock price of the Companys common stock on the date of the grant and is expensed over the vesting period of the award. As of December 31, 2012 there was $0.3 million in unrecognized compensation cost related
to non-vested restricted compensatory stock, which is expected to be recognized over a weighted average period of one year.

The following
table indicates where the total stock-based compensation expense resulting from share-based awards appears in the Consolidated Statements of Operations (In thousands):



|                                       |  |                                 |       |  |      |   |       |      |  |   |       | 
|-------------------------------------- |  | ------------------------------- | ----- |  | ---- | - | ----- | ---- |  | - | ----- | 
|                                       |  | FOR THE YEARS ENDEDDECEMBER 31, |      
|                                       |  | 2012                            |       |  | 2011 |   |       | 2010 | 
|Research and development               |  | $                               | 299   |  |      | $ | 307   |      |  | $ | 87    | 
|General and administrative             |  |                                 | 2,618 |  |      |   | 1,828 |      |  |   | 2,253 | 
|                                       |  |                                 |       |  |      |   |       |      |  |   |       | 
|Total Stock-based compensation expense |  | $                               | 2,917 |  |      | $ | 2,135 |      |  | $ | 2,340 | 
|                                       |  |                                 |       |  |      |   |       |      |  |   |       | 

12. INCOME TAXES

The Company has incurred losses since inception, which have generated U.S. net operating loss carry forwards (NOLS)
of approximately $145.8 million for federal income tax purposes. These carry forwards are available to offset future taxable income and expire beginning in 2018 through 2031 for federal income tax purposes.

Utilization of the NOLs may be subject to a substantial annual limitation due to ownership change limitations that may have occurred or that could
occur in the future, as required under Internal Revenue Code Section 382 (Section 382), as well as similar state and foreign provisions. These ownership changes may limit the amount of NOLs that can be utilized annually to
offset future taxable income. In general, an ownership change as defined by Section 382 results from a transaction or series of transactions over a three-year period resulting in an ownership change of more than 50 percentage points
of the outstanding stock of a company by certain stockholders or public groups. Since the Companys formation, the Company has raised capital through the issuance of capital stock on several occasions which, combined with the purchasing
stockholders subsequent disposition of those shares, may have resulted in such an ownership change, or could result in an ownership change in the future upon subsequent disposition.

The Company has not completed a study to assess whether an ownership change has occurred or whether there have been multiple ownership changes since the Companys formation due to the complexity and
cost associated with such a study, and the fact that there may be additional such ownership changes in the future. If the Company has experienced an ownership change at any time since its formation, utilization of the NOLs would be subject to
an annual limitation under Section 382, which is determined by first multiplying the value of the Companys stock at the time of the ownership change by the applicable long-term, tax-exempt rate, and then could be subject to additional
adjustments, as required. Any limitation may result in expiration of a portion of the NOL before utilization. Further, until a study is completed and any limitation known, no amounts are being considered as an uncertain tax position or disclosed as
an unrecognized tax benefit under authoritative accounting guidance. Any NOLs that will expire prior to utilization as a result of such limitations will be removed from deferred tax assets with a corresponding reduction of the valuation
allowance with no net effect on income tax expense or the effective tax rate.



36



---

##### Table of Contents

Details of income tax expense (benefit) are as follows (in thousands):



|                    |  |              |     |  |      |   |   | 
|------------------- |  | ------------ | --- |  | ---- | - | - | 
|                    |  | DECEMBER 31, |    
|                    |  | 2012         |     |  | 2011 |  
|Income tax expense: |  |              |     |  |      |   |   | 
|Current:            |  |              |     |  |      |   |   | 
|Federal (U.S.)      |  | $            |    |  |      | $ |  | 
|State (U.S.)        |  |              |    |  |      |   |  | 
|Foreign             |  |              |    |  |      |   |  | 
|                    |  |              |     |  |      |   |   | 
|Total Current       |  |              |    |  |      |   |  | 
|Deferred:           |  |              |     |  |      |   |   | 
|Federal (U.S.)      |  |              |    |  |      |   |  | 
|State (U.S.)        |  |              |    |  |      |   |  | 
|Foreign             |  |              | 516 |  |      |   |  | 
|                    |  |              |     |  |      |   |   | 
|Total Deferred      |  |              | 516 |  |      |   |  | 
|                    |  |              |     |  |      |   |   | 
|Income tax expense  |  | $            | 516 |  |      | $ |  | 
|                    |  |              |     |  |      |   |   | 

The Company assumed $0.5 million of deferred tax assets in France related to Finesco. During 2012 the value of the
deferred tax assets increased to $1.3 million primarily associated with net operating losses from the French operations. In consideration of the uncertainty of its ability to utilize this deferred tax benefit in the future, the Company has
recorded a valuation allowance to fully offset the deferred tax assets in France.

Deferred tax assets of continuing operations consist of the
following:



|                                     |  |              |         |   |      |   |         |  
|------------------------------------ |  | ------------ | ------- | - | ---- | - | ------- | -
|                                     |  | DECEMBER 31, |        
|                                     |  | 2012         |         |   | 2011 |  
|Net operating tax loss carryforwards |  | $            | 54,563  |   |      | $ | 48,200  |  
|Deferred compensation                |  |              | 482     |   |      |   | 382     |  
|Other accruals and reserves          |  |              | 1,199   |   |      |   | 1,257   |  
|Basis of intangible assets           |  |              | 20      |   |      |   | (997    | )
|Capital loss                         |  |              |        |   |      |   | 1,067   |  
|                                     |  |              |         |   |      |   |         |  
|Total deferred tax asset             |  |              | 56,264  |   |      |   | 49,909  |  
|Less valuation allowance             |  |              | (56,264 | ) |      |   | (49,909 | )
|                                     |  |              |         |   |      |   |         |  
|Net deferred tax asset               |  | $            |        |   |      | $ |        |  
|                                     |  |              |         |   |      |   |         |  

The net operating loss carry forwards and tax credit carry forwards resulted in a noncurrent deferred tax asset at
December 31, 2012 and 2011 of approximately $54.6 million and $48.2 million respectively. In consideration of the Companys accumulated losses and the uncertainty of its ability to utilize this deferred tax asset in the
future, the Company has recorded a full valuation allowance as of such date.

The Company follows the provisions of Income Tax guidance
which provides recognition criteria and a related measurement model for uncertain tax positions taken or expected to be taken in income tax returns. The guidance requires that a position taken or expected to be taken in a tax return be recognized in
the financial statements when it is more likely than not that the position would be sustained upon examination by tax authorities. Tax positions that meet the more likely than not threshold are then measured using a probability weighted approach
recognizing the largest amount of tax benefit that is greater than 50% likely of being realized upon ultimate settlement. The Companys Federal income tax returns for 2001 to 2012 are still open and subject to audit. In addition, net
operating losses arising from prior years are also subject to examination at the time they are utilized in future years. Unrecognized tax benefits, if recognized, would have no effect on the Companys effective tax



37



---

##### Table of Contents

rate. The Companys policy is to recognize interest and penalties related to unrecognized tax benefits in income tax expense. As of December 31, 2012, the Company has not recorded any
interest and penalties related to uncertain tax positions. The Company does not foresee any material changes to unrecognized tax benefits within the next twelve months.

A reconciliation of the Companys unrecognized tax benefits from January 1, 2012 through December 31, 2012 is provided in the following table (in thousands):



|                                                |  |      |       | 
|----------------------------------------------- |  | ---- | ----- | 
|                                                |  | 2012 |      
|Balance as of January 1, 2012                   |  | $    |      | 
|Increase/(decrease) in current period positions |  |      | 155   | 
|Increase/(decrease) in prior period positions   |  |      | 2,724 | 
|                                                |  |      |       | 
|Balance as of December 31, 2012                 |  | $    | 2,879 | 
|                                                |  |      |       | 

The reconciliation of income taxes computed using the statutory U.S. income tax rate and the provision (benefit) for
income taxes for continuing operations for the years ended December 31, 2012, 2011 and 2010 are as follows:



|                                    |  |                                  |     |    |      |  |     |      |  |  |     |   
|----------------------------------- |  | -------------------------------- | --- | -- | ---- |  | --- | ---- |  |  | --- | --
|                                    |  | FOR THE YEARS ENDED DECEMBER 31, |    
|                                    |  | 2012                             |     |    | 2011 |  |     | 2010 | 
|Federal statutory tax rate          |  |                                  | (34 | %) |      |  | (34 | %)   |  |  | (35 | %)
|State taxes, net of federal benefit |  |                                  | (3  | %) |      |  | (5  | %)   |  |  | (6  | %)
|Valuation allowance                 |  |                                  | 20  | %  |      |  | 39  | %    |  |  | 41  | % 
|Prior year true-ups                 |  |                                  | 6   | %  |      |  | 0   | %    |  |  | 0   | % 
|Foreign rate difference             |  |                                  | 2   | %  |      |  | 0   | %    |  |  | 0   | % 
|Permanent differences               |  |                                  | 11  | %  |      |  | 0   | %    |  |  | 0   | % 
|                                    |  |                                  |     |    |      |  |     |      |  |  |     |   
|Income tax expense                  |  |                                  | 2   | %  |      |  | 0   | %    |  |  | 0   | % 
|                                    |  |                                  |     |    |      |  |     |      |  |  |     |   

For the years ended December 31, 2012, 2011 and 2010, the Companys effective tax rate differs from the federal
statutory rate principally due to net operating losses and other temporary differences for which no benefit was recorded.

13. COMMITMENTS AND CONTINGENCIES

Operating Leases

In
December 2011, the Company entered into a five year lease agreement for its new headquarters location in San Diego, California expiring December 31, 2016. The Company has an option to extend the lease another five years. The headquarters lease
term contains a base rent of $23,990 per month with 3% annual escalations, plus a supplemental real estate tax and operating expense charge to be determined annually. The Company received a five month base rent abatement with the lease agreement.
This abatement is recoverable by the landlord on a straight line amortized basis over 60 months should the Company terminate the lease early for any reason.

Finesco has two office leases, various equipment leases and automobile leases. The Scomedica office in Montigny-le-Bretonneux, France is on a nine year lease expiring November 30, 2020. The lease
agreement had a base rent of 4,294 ($5,675 at December 31, 2012) per month with an accelerated escalation for years two and three. For years four and on, the escalation is based on the French ICC index, which is recognized on a
straight-line basis over the term of the lease agreement. The agreement includes real estate tax and operating expenses to be determined and charged annually. The Company received a six month base rent abatement with the lease agreement. Finesco
also has a lease for a small office in Paris that is also on a nine year lease expiring April 16,



38



---

##### Table of Contents

2015 with a current monthly payment of 1,011 ($1,336 at December 31, 2012). The escalation is also based on the French ICC index. The agreement includes real estate tax and operating
expenses to be determined and charged annually.

Scomedica has automobile leases for its sales force. The automobile leases have terms ranging
from 24 to 48 months with the last one expiring on June 19, 2015. The monthly payment in December of 2012 is 36,014 ($47,593 at December 31, 2012).

For the years ended December 31, 2012, 2011 and 2010, rent expense for continuing operations totaled $0.7 million, $0.4 million and $0.4 million, respectively.

Future minimum rental payments under all operating leases as of December 31, 2012 are as follows (in thousands):



|                         |  |   |       | 
|------------------------ |  | - | ----- | 
|Years Ended December 31, |  |   |      
|2013                     |  | $ | 1,049 | 
|2014                     |  |   | 737   | 
|2015                     |  |   | 563   | 
|2016                     |  |   | 423   | 
|2017                     |  |   | 104   | 
|Thereafter               |  |   | 447   | 
|                         |  |   |       | 
|Total                    |  | $ | 3,323 | 
|                         |  |   |       | 

Legal matters

In the normal course of business, we may become subject to lawsuits and other claims and legal proceedings. Such matters are subject to uncertainty and outcomes are often not predictable with
assurance.

14. SEGMENT, GEOGRAPHIC AND MAJOR CUSTOMER INFORMATION

Segment Information

The internal organization used by the Companys Chief Operating Decision Maker (CODM) to assess performance and allocate resources
determines the basis for our reportable operating segments. The Companys CODM is the Chief Executive Officer. The Company currently operates in three segments:



| |  |  | Pharmaceuticalsdesigns and develops pharmaceutical products including those with its NexACT ® platform;
| | - |  | --------------------------------------------------------------------------------------------------------



| |  |  | Diagnostic Salessells diagnostic products and, prior to June 30, 2011, provided pre-clinical CRO services through the Companys
former subsidiary, Bio-Quant; and
| | - |  | ------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | Contract Salesprovides contract sales for third party pharmaceutical companies through the Companys subsidiary, Finesco.
| | - |  | --------------------------------------------------------------------------------------------------------------------------

Segment information for our continuing operations for the years ended December 31, 2012, 2011 and 2010, respectively
is as follows (in thousands):



|                                             |  |                                     |         |   |                 |   |     |               |  |   |                     |   |  |       |   |  |  |   |         |  
|-------------------------------------------- |  | ----------------------------------- | ------- | - | --------------- | - | --- | ------------- |  | - | ------------------- | - |  | ----- | - |  |  | - | ------- | -
|                                             |  | FOR THE YEAR ENDEDDECEMBER 31,
2012 |        
|                                             |  | Pharmaceuticals                     |         |   | DiagnosticSales |   |     | ContractSales |  |   | Other orUnallocated |   |  | Total |  
|Revenues from external customers             |  | $                                   | 4,999   |   |                 | $ | 471 |               |  | $ | 2,946               |   |  | $     |  |  |  | $ | 8,416   |  
|Income (loss) from continuing operations     |  |                                     | (14,000 | ) |                 |   | 115 |               |  |   | (11,675             | ) |  |       |  |  |  |   | (25,560 | )
|Depreciation and amortization expense        |  |                                     | 203     |   |                 |   |    |               |  |   |                    |   |  |       |  |  |  |   | 203     |  
|Other significant noncash items:             |  |                                     |         |   |                 |   |     |               |  |   |                     |   |  |       |   |  |  |   |         |  
|Impairment of goodwill and intangible assets |  |                                     | (210    | ) |                 |   |    |               |  |   | (8,044              | ) |  |       |  |  |  |   | (8,254  | )
|Income tax expense                           |  |                                     |        |   |                 |   |    |               |  |   | 516                 |   |  |       |  |  |  |   | 516     |  
|Total assets                                 |  |                                     | 16,740  |   |                 |   | 475 |               |  |   | 3,933               |   |  |       |  |  |  |   | 21,148  |  
|Expenditures on long lived assets            |  |                                     | 392     |   |                 |   |    |               |  |   | 44                  |   |  |       |  |  |  |   | 436     |  



39



---

##### Table of Contents

|                                         |  |                                     |         |   |                                 |   |       |               |  |   |                     |  |  |       |        |   |  |   |         |  
|---------------------------------------- |  | ----------------------------------- | ------- | - | ------------------------------- | - | ----- | ------------- |  | - | ------------------- |  |  | ----- | ------ | - |  | - | ------- | -
|                                         |  | FOR THE YEAR ENDEDDECEMBER 31,
2011 |        
|                                         |  | Pharmaceuticals                     |         |   | Bio-QuantCRO andDiagnosticSales |   |       | ContractSales |  |   | Other orUnallocated |  |  | Total |       
|Revenues from external customers         |  | $                                   | 1,509   |   |                                 | $ | 2,592 |               |  | $ |                    |  |  | $     |       |   |  | $ | 4,101   |  
|Income (loss) from continuing operations |  |                                     | (15,410 | ) |                                 |   | 53    |               |  |   |                    |  |  |       | (2,760 | ) |  |   | (18,117 | )
|Depreciation and amortization expense    |  |                                     | 351     |   |                                 |   | 251   |               |  |   |                    |  |  |       |       |   |  |   | 602     |  
|Other significant noncash items:         |  |                                     |         |   |                                 |   |       |               |  |   |                     |  |  |       |        |   |  |   |         |  
|Loss on sale of Bio-Quant                |  |                                     |        |   |                                 |   |      |               |  |   |                    |  |  |       | (2,760 | ) |  |   | (2,760  | )
|Total assets                             |  |                                     | 11,940  |   |                                 |   | 304   |               |  |   |                    |  |  |       |       |   |  |   | 12,244  |  
|Expenditures on long lived assets        |  |                                     | 111     |   |                                 |   | 151   |               |  |   |                    |  |  |       |       |   |  |   | 262     |  



|                                             |  |                                     |        |   |                            |   |         |               |  |   |                     |  |  |       |   |  |  |   |         |  
|-------------------------------------------- |  | ----------------------------------- | ------ | - | -------------------------- | - | ------- | ------------- |  | - | ------------------- |  |  | ----- | - |  |  | - | ------- | -
|                                             |  | FOR THE YEAR ENDEDDECEMBER 31,
2010 |       
|                                             |  | Pharmaceuticals                     |        |   | Bio-QuantCRO andDiagnostic |   |         | ContractSales |  |   | Other orUnallocated |  |  | Total |  
|Revenues from external customers             |  | $                                   | 40     |   |                            | $ | 4,933   |               |  | $ |                    |  |  |       |  |  |  | $ | 4,973   |  
|Income (loss) from continuing operations     |  |                                     | (9,820 | ) |                            |   | (19,688 | )             |  |   |                    |  |  |       |  |  |  |   | (29,508 | )
|Depreciation and amortization expense        |  |                                     | 648    |   |                            |   | 341     |               |  |   |                    |  |  |       |  |  |  |   | 989     |  
|Other significant noncash items:             |  |                                     |        |   |                            |   |         |               |  |   |                     |  |  |       |   |  |  |   |         |  
|Impairment of goodwill and intangible assets |  |                                     |       |   |                            |   | (10,168 | )             |  |   |                    |  |  |       |  |  |  |   | (10,168 | )
|Total assets                                 |  |                                     | 15,025 |   |                            |   | 3,839   |               |  |   |                    |  |  |       |  |  |  |   | 18,864  |  
|Expenditures on long lived assets            |  |                                     | 2      |   |                            |   | 434     |               |  |   |                    |  |  |       |  |  |  |   | 436     |  

Geographic Information

Revenues and net long-lived assets by geographic area for our continuing operations are as follows (in thousands):



|                              |  |              |         |  |      |   |       |      |  |   |       | 
|----------------------------- |  | ------------ | ------- |  | ---- | - | ----- | ---- |  | - | ----- | 
|                              |  | December 31, |        
|                              |  | 2012         |         |  | 2011 |   |       | 2010 | 
|United States                 |  | $            | 235     |  |      |   | 2,596 |      |  |   | 4,168 | 
|North AmericaOther           |  |              | 2,511   |  |      |   | 173   |      |  |   | 314   | 
|France                        |  |              | 2,971   |  |      |   |      |      |  |   |      | 
|EuropeOther                  |  |              | 2,558   |  |      |   | 963   |      |  |   | 148   | 
|Rest of the World             |  |              | 141     |  |      |   | 369   |      |  |   | 343   | 
|                              |  |              |         |  |      |   |       |      |  |   |       | 
|                              |  |              | $ 8,416 |  |      | $ | 4,101 |      |  | $ | 4,973 | 
|                              |  |              |         |  |      |   |       |      |  |   |       | 
|Long-lived assets located in: |  |              |         |  |      |   |       |      |  |   |       | 
|United States                 |  |              | 491     |  |      |   | 4,384 |      |  |   | 5,421 | 
|France                        |  |              | 516     |  |      |   |       |      |  |   |       | 

15. FAIR VALUE MEASUREMENTS

Assets and Liabilities Measured at Fair Value on a Recurring Basis

We determine the fair value measurements of applicable assets and liabilities based on a three-tier fair value hierarchy, which prioritizes the inputs used in measuring fair value. These tiers include:
Level 1, defined as observable inputs such as quoted market prices in active markets; Level 2, defined as inputs other than quoted prices in active markets that are either directly or indirectly observable; and Level 3, defined as unobservable
inputs in which little or no market data exists, therefore requiring an entity to develop its own assumptions.



40



---

##### Table of Contents

The following table summarizes our assets and liabilities that require fair value measurements on a
recurring basis and their respective input levels based on the fair value hierarchy contained in accounting guidance for fair value measurements and disclosures (in thousands):



|                                                   |  |            |       |  |                                                   |   |   |                                              |  |   |                                         |  |  |   |       | 
|-------------------------------------------------- |  | ---------- | ----- |  | ------------------------------------------------- | - | - | -------------------------------------------- |  | - | --------------------------------------- |  |  | - | ----- | 
|                                                   |  | Fair Value |       |  | Quoted Market Pricesfor
Identical Assets(Level 1) |   |   | Significant OtherObservable 
Inputs(Level 2) |  |   | SignificantUnobservableInputs (Level 3) | 
|At December 31, 2012                               |  |            |       |  |                                                   |   |   |                                              |  |   |                                         |  |  |   |       | 
|Contingent consideration (discontinued operations) |  | $          | 1,748 |  |                                                   | $ |  |                                              |  | $ |                                        |  |  | $ | 1,748 | 
|Deferred compensation                              |  | $          | 868   |  |                                                   |   |   |                                              |  | $ |                                        |  |  | $ | 868   | 
|At December 31, 2011                               |  |            |       |  |                                                   |   |   |                                              |  |   |                                         |  |  |   |       | 
|Contingent consideration                           |  | $          | 1,917 |  |                                                   | $ |  |                                              |  | $ |                                        |  |  | $ | 1,917 | 
|Deferred compensation                              |  | $          |      |  |                                                   | $ |  |                                              |  | $ |                                        |  |  | $ |      | 

Contingent Consideration.

The $1.7 million and $1.9 million estimated fair value of additional purchase consideration (contingent consideration) at December 31, 2012 and 2011, respectively, based on the projected
achievement of various regulatory and product cost reductions milestones which would be settled in shares of common stock based on the fair value at the date the milestone is achieved. We determined the fair values of the obligation to pay
additional milestone payments using various inputs, including probability of success, discount rates and amount of time until the conditions of the milestone payments are anticipated to be met. This fair value measurement is based on significant
inputs not observable in the market, representing a Level 3 measurement within the fair value hierarchy. The resulting probability-weighted cash flows were discounted using a risk adjusted cost of capital factor of 23.6%, which is representative of
the rate of return a market participant would expect to receive from these assets. Managements estimate of the range of milestone stock payments varies from approximately $0.3 million if no regulatory or commercial milestones are achieved to
approximately $2.3 million if all milestones are achieved.

Deferred Compensation.

Finesco SAS, through its Scomedica subsidiary, has an accrued retirement benefit liability of $0.9 million at December 31, 2012, which is mandated by
the French Works Council that consists of one lump-sum paid on the last working day when the employee retires. The amount of the payment is based on the length of service and earnings of the retiree. The cost of the obligation is estimated using the
present value at the end of the reporting period representing Level 3 inputs. Actuarial estimates for the obligation are performed annually. The discount rate applied in the computation of the present value of the retirement liability corresponds to
the yield on high quality corporate bonds denominated in the currency in which the benefits will be paid and that have terms to maturity approximating the terms of the related retirement liability.



41



---

##### Table of Contents

The following table summarizes the activity in liabilities measured at fair value on a recurring basis using
significant unobservable inputs (Level 3 inputs) (in thousands):



|                                                                                                  |  |                         |        |   |                      |   |     |       |  |   |        |  
|------------------------------------------------------------------------------------------------- |  | ----------------------- | ------ | - | -------------------- | - | --- | ----- |  | - | ------ | -
|                                                                                                  |  | ContingentConsideration |        |   | DeferredCompensation |   |     | Total | 
|Balance at January 1, 2012                                                                        |  | $                       | 1,917  |   |                      | $ |    |       |  | $ | 1,917  |  
|Contingent consideration expense included in discontinued operations                              |  |                         | (1,748 | ) |                      |   |    |       |  |   | (1,748 | )
|Interest income, net                                                                              |  |                         | (169   | ) |                      |   |    |       |  |   | (169   | )
|Deferred compensation expense acquired                                                            |  |                         |       |   |                      |   | 600 |       |  |   | 600    |  
|Deferred compensation expense included in cost of service and general and administrative expenses |  |                         |       |   |                      |   | 268 |       |  |   | 268    |  
|                                                                                                  |  |                         |        |   |                      |   |     |       |  |   |        |  
|Balance at December 31, 2012                                                                      |  | $                       |       |   |                      | $ | 868 |       |  | $ | 868    |  
|                                                                                                  |  |                         |        |   |                      |   |     |       |  |   |        |  

16.SELECTED QUARTERLY FINANCIAL INFORMATION (Unaudited)

The following table presents our unaudited quarterly results of operations for the years ended December 31, 2012 and 2011 (in
thousands, except per share data):



|                                       |  |                |        |   |               |   |        |                    |  |   |                        |   |  |   |         |  
|-------------------------------------- |  | -------------- | ------ | - | ------------- | - | ------ | ------------------ |  | - | ---------------------- | - |  | - | ------- | -
|                                       |  | March 31, 2012 |        |   | June 30, 2012 |   |        | September 30, 2012 |  |   | December 31, 2012 
(1) |  
|Net revenue                            |  | $              | 781    |   |               | $ | 120    |                    |  | $ | 5,011                  |   |  | $ | 2,504   |  
|Gross profit                           |  |                | 705    |   |               |   | 36     |                    |  |   | 3,341                  |   |  |   | (220    | )
|Loss from continuing operations(2),(3) |  |                | (3,667 | ) |               |   | (4,291 | )                  |  |   | (1,886                 | ) |  |   | (15,716 | )
|Loss from discontinued operations(4)   |  |                | (1,046 | ) |               |   | (635   | )                  |  |   | (608                   | ) |  |   | (3,922  | )
|Net loss                               |  |                | (4,713 | ) |               |   | (4,926 | )                  |  |   | (2,494                 | ) |  |   | (19,638 | )
|Basic and diluted loss per share(5)    |  |                |        |   |               |   |        |                    |  |   |                        |   |  |   |         |  
|Loss from continuing operations        |  |                | (0.15  | ) |               |   | (0.16  | )                  |  |   | (0.07                  | ) |  |   | (0.53   | )
|Loss from discontinued operations(4)   |  |                | (0.05  | ) |               |   | (0.03  | )                  |  |   | (0.02                  | ) |  |   | (0.13   | )
|Net loss                               |  |                | (0.20  | ) |               |   | (0.19  | )                  |  |   | (0.09                  | ) |  |   | (0.66   | )
|                                       |  |                |        |  
|                                       |  | March 31, 2011 |        |   | June 30, 2011 |   |        | September 30, 2011 |  |   | December 31, 2011      |  
|Net revenue                            |  | $              | 1,587  |   |               | $ | 1,595  |                    |  | $ | 799                    |   |  | $ | 120     |  
|Gross profit                           |  |                | 582    |   |               |   | 589    |                    |  |   | 665                    |   |  |   | 28      |  
|Loss from continuing operations(6)     |  |                | (3,411 | ) |               |   | (7,794 | )                  |  |   | (2,220                 | ) |  |   | (4,692  | )
|Loss from discontinued operations      |  |                |       |   |               |   |       |                    |  |   |                       |   |  |   |        |  
|Net loss                               |  |                | (3,411 | ) |               |   | (7,794 | )                  |  |   | (2,220                 | ) |  |   | (4,692  | )
|Basic and diluted loss per share       |  |                |        |   |               |   |        |                    |  |   |                        |   |  |   |         |  
|Loss from continuing operations        |  |                | (0.18  | ) |               |   | (0.39  | )                  |  |   | (0.11                  | ) |  |   | (0.22   | )
|Loss from discontinued operations      |  |                |       |   |               |   |       |                    |  |   |                       |   |  |   |        |  
|Net loss                               |  |                | (0.18  | ) |               |   | (0.39  | )                  |  |   | (0.11                  | ) |  |   | (0.22   | )



|(1) | In December 2012, the Company made the strategic decision to divest its operating segment aggregated in the Pharmaceuticals reporting segment, Apricus Pharmaceuticals
(USA), Inc. (Apricus Pharmaceuticals) which is comprised of its U.S. oncology care products, and is currently seeking buyers for this business. The results of the Apricus Pharmaceuticals operations are classified as discontinued
operations in the Companys consolidated financial statements for all periods presented. In 2011, there were no operations.
|--- | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|(2) | Loss from continued operations during the fourth quarter of 2012 includes a one-time charge for $8.3 million to record an impairment of the goodwill associated with the
Finesco transaction.
|--- | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|(3) | Loss from continued operations during the fourth quarter of 2012 includes a one-time charge for $1.3 million to record a valuation allowance on the
deferred tax asset Finesco transaction. This valuation allowance was recorded as a tax expense and is partially offset by deferred tax assets recorded subsequent to
|--- | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



42



---

##### Table of Contents

| | the Finesco transaction. The impact to the loss from continuing operations is a charge of $0.5 million presented as tax expense on the consolidated statement of operations and comprehensive loss.
| | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|(4) | Loss from discontinued operations during the fourth quarter of 2012 includes $2.9 million for the impairment of intangible assets and goodwill related to our
discontinued operations.
|--- | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|(5) | The sum of the quarterly per share amounts may not equal the amounts presented for the full year due to differences in the weighted average number of shares outstanding
as calculated on a quarterly basis compared to an annual basis.
|--- | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|(6) | Loss from continuing operations during the second quarter of 2011 includes a loss of $2.8 million on the sale of our Bio-Quant subsidiary.
|--- | ------------------------------------------------------------------------------------------------------------------------------------------



43



---

##### Table of Contents

|ITEM 9A. | CONTROLS AND PROCEDURES
|-------- | -----------------------

Evaluation
of disclosure controls and procedures

Our disclosure controls and procedures are designed to ensure that information required to be
disclosed by us in reports that we file or submit under the Securities Exchange Act (SEC) of 1934, as amended (the Exchange Act), is recorded, processed, summarized and reported within the time periods specified in the
SECs rules and forms. Disclosure controls and procedures include, without limitation, controls and procedures designed to ensure that information required to be disclosed by us in reports we file or submit under the Exchange Act is accumulated
and communicated to our management, including our principal executive officer and principal financial officer, or persons performing similar functions, as appropriate to allow timely decisions regarding required disclosure.

Under the supervision and with the participation of our management, including the acting Interim CEO (Interim CEO) (principal executive
officer) who was previously and continued to serve as the chief financial officer (CFO) (principal financial officer), we carried out an evaluation of the effectiveness of our disclosure controls and procedures, as defined in
Rules 13a-15(e) and 15d-15(e) under the Exchange Act, as of December 31, 2012. At the time that our Annual Report on Form 10-K for the year ended December 31, 2012 was filed on
March 18, 2013, our acting Interim CEO who was previously and continued to serve as the CFO concluded that our disclosure controls and procedures were effective as of December 31, 2012. Subsequent to this evaluation, our CEO and CFO
concluded that our disclosure controls and procedures were not effective as of December 31, 2012 because of a material weakness in our internal control over financial reporting as described below. In light of the material weakness described
below, the Company performed additional analyses and other post-closing procedures to ensure our consolidated financial statements were prepared in accordance with generally accepted accounting principles. Accordingly, management concluded that no
changes were required to the financial statements previously filed and the financial statements included in this report present fairly, in all material respects, our financial condition, results of operations and cash flows for the periods
presented.

Restated Managements Report on Internal Control Over Financial Reporting

Management is responsible for establishing and maintaining adequate internal control over financial reporting, as such term is defined in Exchange Act
Rule 13a-15(f). Our internal control over financial reporting is a process designed, under the supervision and with the participation of our CEO and CFO, and effected by our Board of Directors, management and other personnel, to provide
reasonable assurance regarding the reliability of our financial reporting and the preparation of our financial statements for external purposes in accordance with generally accepted accounting principles. Our internal control over financial
reporting includes policies and procedures that:



| |  |  | Pertain to the maintenance of records that in reasonable detail accurately and fairly reflect the transactions and dispositions of our assets;
| | - |  | ----------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | Provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally
accepted accounting principles, and that receipts and expenditures are being made only in accordance with authorizations of our management and directors; and
| | - |  | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | Provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use or disposition of our assets that could have a
material effect on our financial statements.
| | - |  | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

Because of its inherent limitations, our internal control over financial
reporting may not prevent or detect misstatements. Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance
with the policies or procedures may deteriorate.

Management performed an assessment of the effectiveness of our internal control over
financial reporting as of December 31, 2012 using criteria established in the Internal ControlIntegrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO). Based on that
criteria, management identified a material weakness in internal control over financial reporting as of December 31, 2012 as further described below. A material weakness is a deficiency, or combination of deficiencies, in internal control over
financial reporting, such that there is a reasonable possibility that a material misstatement of our annual or interim financial statements will not be prevented or detected on a timely basis.

We have excluded Finesco SAS, Scomedica SAS and NexMed Pharma SAS from our assessment of internal control over financial reporting as of
December 31, 2012, because they were acquired by us in separate purchase business combinations during 2012. Finesco SAS, Scomedica SAS and NexMed Pharma SAS are wholly-owned subsidiaries whose total assets and total revenues represent
9 percent and 34 percent, respectively, of the related consolidated financial statement amounts as of and for the year ended December 31, 2012.



44



---

##### Table of Contents

We did not maintain effective internal controls over the accounting for and disclosures of technical
accounting matters in the consolidated financial statements. Specifically, we did not maintain a sufficient complement of resources with an appropriate level of accounting knowledge, experience and training commensurate with our structure and
financial reporting requirements. This control deficiency resulted in audit adjustments with respect to our consolidated financial statements for the year ended December 31, 2012 and the interim periods during fiscal year 2012 related to the
identification of and accounting for an embedded derivative associated with the convertible note, presentation and disclosure related to the sale of the Bio-Quant business and associated cash flows and certain income tax disclosures. Additionally,
this control deficiency could result in misstatements of the consolidated financial statements that would result in a material misstatement of the consolidated financial statements that would not be prevented or detected. Accordingly, management has
determined that this control deficiency constitutes a material weakness.

In Managements Report on Internal Control Over Financial
Reporting included in our original Annual Report on Form 10-K for the year-ended December 31, 2012, our management, including our acting Interim CEO who was previously and continued to serve as the CFO, concluded that we maintained effective
internal control over financial reporting as of December 31, 2012. Management has subsequently concluded that the material weakness described above existed as of December 31, 2012. As a result, we have concluded that we did not maintain
effective internal control over financial reporting as of December 31, 2012, based on the criteria in Internal Control-Integrated Framework issued by the COSO. Accordingly, management has restated its report on internal control over financial
reporting.

The effectiveness of the Companys internal control over financial reporting as of December 31, 2012 has been audited by
PricewaterhouseCoopers LLP, an independent registered public accounting firm, as stated in their report which appears herein.

Plan for
Remediation of Material Weakness

Management is actively engaged in the planning for, and implementation of, remediation efforts to
address the material weakness.

Management plans to undertake the following actions to address the material weakness:



| |  |  | the addition of more experienced accounting staff;
| | - |  | --------------------------------------------------



| |  |  | training programs for accounting personnel; and
| | - |  | -----------------------------------------------



| |  |  | a review of the design of the controls associated with the analysis of technical matters over significant transactions to ensure the process is
addressing the relevant financial statement assertions and presentation and disclosure matters.
| | - |  | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

The Audit Committee has
directed management to develop a detailed plan and timetable for the implementation of the foregoing remedial measures and will monitor our implementation. In addition, under the direction of the Audit Committee, management will continue to review
and make necessary changes to the overall design of our internal control environment to improve the overall effectiveness of internal control over financial reporting.

Management believes the measures described above and others that will be implemented will remediate the control deficiencies that we have identified and strengthen our internal control over financial
reporting. As management continues to evaluate and improve internal control over financial reporting, we may decide to take additional measures to address control deficiencies or determine to modify, or in appropriate circumstances not to complete,
certain of the remediation measures described above.

Changes in Internal Control Over Financial Reporting

There were no changes in our internal control over financial reporting during the quarter ended December 31, 2012 that have materially affected or
are reasonably likely to materially affect such controls.



45



---

##### Table of Contents

PART IV.



|ITEM 15. | EXHIBITS AND FINANCIAL STATEMENT SCHEDULES
|-------- | ------------------------------------------

(a) 1. Financial Statements:

The information required by this item is included in Item 8 of Part II of this Form 10-K.

2. Financial Statement Schedules

The information required by this item is
included in Item 8 of Part II of this Form 10-K.

3. Exhibits

The following exhibits are incorporated by reference or filed as part of this report.



|             |  |                                                                                                                                                                                                                                                                                                                                      
|------------ |  | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|EXHIBITS NO. |  | DESCRIPTION                                                                                                                                                                                                                                                                                                                          
|             | 
|1.1          |  | Sales Agreement, dated April 21, 2010, by and between Apricus Biosciences, Inc. and Brinson Patrick Securities Corporation (incorporated by reference to Exhibit 1.1 to the
Companys Current Report on Form 8-K, filed with the Securities and Exchange Commission on April 21, 2010).                                              
|             | 
|1.2          |  | Controlled Equity Offering Agreement, dated December 30, 2011, by and between Apricus Biosciences, Inc. and Ascendiant Capital Markets, LLC (incorporated herein by reference to
Exhibit 1.1 to the Companys Current Report on Form 8-K filed with the Securities and Exchange Commission on December 30, 2011).                    
|             | 
|1.3          |  | Underwriting Agreement, dated February 9, 2012, by and among Apricus Biosciences Inc., Lazard Capital Markets, LLC, JMP Securities, LLC and Roth Capital Partners, LLC (incorporated
by reference to Exhibit 1.1 to the Companys Current Report on Form 8-K filed with the Securities and Exchange Commission on February 13, 2012).
|             | 
|2.1+         |  | Stock Purchase Agreement, dated December 15, 2011, by and among Apricus Biosciences Inc., TopoTarget A/S, and TopoTarget USA, Inc. (incorporated herein by reference to Exhibit 2.1
to the Companys Form 10-K filed with the Securities and Exchange Commission on March 13, 2012).                                                 
|             | 
|2.2          |  | Stock Contribution Agreement, dated June 19, 2012, by and among Apricus Biosciences, Inc., Finesco SAS, Scomedica SA and the shareholders of Finesco named therein (incorporated
herein by reference to Exhibit 2.1 to the Companys Current Report form 8-K, filed with the Securities and Exchange Commission on July 13, 2012).   
|             | 
|3.1          |  | Amended and Restated Articles of Incorporation of Apricus Biosciences, Inc. (incorporated herein by reference to Exhibit 2.1 to the Companys Registration Statement on Form
10-SB filed with the Securities and Exchange Commission on March 14, 1997).                                                                             
|             | 
|3.2          |  | Certificate of Amendment to Articles of Incorporation of Apricus Biosciences, Inc., dated June 22, 2000 (incorporated herein by reference to Exhibit 3.2 to the Companys Form
10-K filed with the Securities and Exchange Commission on March 31, 2003).                                                                            
|             | 
|3.3          |  | Certificate of Amendment to Articles of Incorporation of Apricus Biosciences, Inc., dated June 14, 2005 (incorporated herein by reference to Exhibit 3.4 to the Companys Form
10-K filed with the Securities and Exchange Commission on March 16, 2006).                                                                            
|             | 
|3.4          |  | Certificate of Amendment to Amended and Restated Articles of Incorporation of Apricus Biosciences, Inc., dated March 3, 2010 (incorporated herein by reference to Exhibit 3.6 to the
Companys Annual Report on Form 10-K filed with the Securities and Exchange Commission on March 31, 2010).                                      



46



---

##### Table of Contents

|             |  |                                                                                                                                                                                                                                                                                                                             
|------------ |  | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|EXHIBITS NO. |  | DESCRIPTION                                                                                                                                                                                                                                                                                                                 
|             | 
|3.5          |  | Certificate of Correction to Certificate of Amendment to Amended and Restated Articles of Incorporation of Apricus Biosciences, Inc., dated March 3, 2010 (incorporated herein by
reference to Exhibit 3.7 to the Companys Annual Report on Form 10-K filed with the Securities and Exchange Commission on March 31, 2010).
|             | 
|3.6          |  | Certificate of Designation for Series D Junior-Participating Cumulative Preferred Stock (incorporated herein by reference to Exhibit 3.1 to the Companys Current Report on Form
8-A12GK filed with the Securities and Exchange Commission on March 24, 2011).                                                              
|             | 
|3.7          |  | Certificate of Change filed with the Nevada Secretary of State (incorporated herein by reference to Exhibit 3.1 to the Companys Current Report on Form 8-K filed with the
Securities Exchange Commission on June 17, 2010).                                                                                                
|             | 
|3.8          |  | Certificate of Amendment to Amended and Restated Articles of Incorporation of Apricus Biosciences, Inc., dated September 10, 2010 (incorporated herein by reference to Exhibit 3.1 to
the Companys Current Report on Form 8-K filed with the Securities and Exchange Commission on September 10, 2010).                    
|             | 
|3.9          |  | Fourth Amended and Restated Bylaws, dated December 18, 2012 (incorporated herein by reference to Exhibit 3.9 to the Companys Annual Report on Form 10-K filed with the
Securities and Exchange Commission on March 18, 2013).                                                                                              
|             | 
|4.1          |  | Form of Warrant, dated November 30, 2006 (incorporated herein by reference to Exhibit 4.1 to the Companys Form 8-K filed with the Securities and Exchange Commission on
December 4, 2006).                                                                                                                                 
|             | 
|4.2          |  | Form of Warrant, dated December 20, 2006 (incorporated herein by reference to Exhibit 4.1 to the Companys Form 8-K filed with the Securities and Exchange Commission on
December 21, 2006).                                                                                                                                
|             | 
|4.3          |  | Amendment No. 1 to Rights Agreement, dated January 16, 2007 (incorporated herein by reference to Exhibit 4.1 to the Companys Form 8-K filed with the Securities and Exchange
Commission on January 22, 2007).                                                                                                              
|             | 
|4.4          |  | Form of Warrant, dated October 26, 2007 (incorporated herein by reference to Exhibit 4.1 to the Companys Current Report on Form 8-K filed with the Securities and Exchange
Commission on October 31, 2007).                                                                                                                
|             | 
|4.5          |  | Form of Warrant, dated July 28, 2008 (incorporated herein by reference to Exhibit 4.4 to the Companys Current Report on Form S-3 filed with the Securities and Exchange
Commission on July 29, 2008).                                                                                                                      
|             | 
|4.6          |  | Shareholder Rights Agreement, dated March 22, 2011, by and between Apricus Biosciences, Inc. and Wells Fargo Bank, N.A. (incorporated by reference to Exhibit 4.1 to the
Companys Current Report on Form 8-A12G filed with the Securities and Exchange Commission on March 24, 2011).                                      
|             | 
|4.7          |  | Form of Warrant, dated September 17, 2010 (incorporated by reference to Exhibit 4.6 of Amendment No. 2 to the Companys Registration Statement on Form S-1 (File No. 333-169132)
filed with the Securities and Exchange Commission on September 28, 2010).                                                                  
|             | 
|4.8          |  | Form of Warrant Certificate (incorporated by reference to Exhibit 4.7 of Amendment No. 2 to the Companys Registration Statement on Form S-1 (File No. 333-169132) filed with
the Securities and Exchange Commission on September 28, 2010).                                                                                
|             | 
|4.9          |  | Form of Common Stock Certificate (incorporated by reference to Exhibit 4.1 to the Companys Current Report on Form 8-K filed with the Securities and Exchange Commission on
March 24, 2011).                                                                                                                                
|             | 
|4.10         |  | Form of Warrant (incorporated by reference to Exhibit 4.1 to the Companys Current Report on Form 8-K filed with the Securities and Exchange Commission on February 13,
2012).                                                                                                                                              



47



---

##### Table of Contents

|             |  |                                                                                                                                                                                                                                                                                                                                                             
|------------ |  | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|EXHIBITS NO. |  | DESCRIPTION                                                                                                                                                                                                                                                                                                                                                 
|             | 
|4.11         |  | Form of Common Stock Certificate (incorporated herein by reference to Exhibit 3.1 to the Companys Registration Statement on Form 10-SB filed with the Securities and Exchange
Commission on March 14, 1997).                                                                                                                                               
|             | 
|10.1*        |  | Amended and Restated NexMed, Inc. Stock Option and Long-Term Incentive Compensation Plan (incorporated herein by reference to Exhibit 10.1 to the Companys Form 10-Q filed with
the Securities and Exchange Commission on May 15, 2001).                                                                                                                   
|             | 
|10.2*        |  | The NexMed, Inc. Recognition and Retention Stock Incentive Plan (incorporated herein by reference to Exhibit 99.1 to the Companys Form 8-K filed with the Securities and
Exchange Commission on May 28, 2004).                                                                                                                                             
|             | 
|10.3         |  | License Agreement, dated March 22, 1999, by and between NexMed International Limited and Vergemont International Limited (incorporated herein by reference to Exhibit 10.7 to
the Companys Form 10-KSB filed with the Securities and Exchange Commission on March 16, 2000).                                                                               
|             | 
|10.4*        |  | Employment Agreement, dated February 26, 2002, by and between NexMed, Inc. and Dr. Y. Joseph Mo (incorporated herein by reference to Exhibit 10.7 to the Companys Form
10-K filed with the Securities and Exchange Commission on March 29, 2002).                                                                                                          
|             | 
|10.5*        |  | Amendment, dated September 26, 2003, to Employment Agreement by and between NexMed, Inc. and Dr. Y. Joseph Mo dated February 26, 2002 (incorporated herein by reference to Exhibit
10.4 to the Companys Form 10-Q filed with the Securities and Exchange Commission on November 12, 2003).                                                                 
|             | 
|10.6*        |  | Form of Stock Option Grant Agreement between Apricus Biosciences and its Directors (incorporated herein by reference to Exhibit 10.29 to the Companys Form 10-K filed with the
Securities and Exchange Commission on March 16, 2006).                                                                                                                      
|             | 
|10.7*        |  | NexMed, Inc. 2006 Stock Incentive Plan (incorporated herein by reference to Annex A of the Companys Definitive Proxy Statement filed with the Securities and Exchange
Commission on April 6, 2006).                                                                                                                                                        
|             | 
|10.8+        |  | License Agreement, dated November 1, 2007, by and between NexMed, Inc. and Warner Chilcott Company, Inc. (incorporated herein by reference to Exhibit 10.31 to the Companys
Form 10-K filed with the Securities and Exchange Commission on March 12, 2008).                                                                                                
|             | 
|10.9         |  | Side Letter, effective June 27, 2008, to License Agreement by and among NexMed, Inc, NexMed International Limited and Novartis International Pharmaceutical Ltd., dated
September 13, 2005 (incorporated herein by reference to Exhibit 10.1 to the Companys Current Report on Form 8-K filed with the Securities and Exchange Commission on July 1, 2008).
|             | 
|10.10*       |  | NexMed, Inc. Amendment to 2006 Stock Incentive Plan (incorporated by reference to Appendix A of the Companys Definitive Proxy Statement filed with the Securities and Exchange
Commission on April 18, 2008).                                                                                                                                              
|             | 
|10.11        |  | Asset Purchase Agreement, dated February 3, 2009, by and between Warner Chilcott Company, Inc. and NexMed, Inc. (incorporated herein by reference to Exhibit 10.1 to the
Companys Current Report on Form 8-K filed with the Securities and Exchange Commission on February 5, 2009).                                                                       
|             | 
|10.12        |  | License Agreement, dated February 3, 2009, by and between NexMed, Inc. and Warner Chilcott Company, Inc. (incorporated herein by reference to Exhibit 10.2 to the Companys
Current Report on Form 8-K filed with the Securities and Exchange Commission on February 5, 2009).                                                                              



48



---

##### Table of Contents

|             |  |                                                                                                                                                                                                                                                                                                                                                      
|------------ |  | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|EXHIBITS NO. |  | DESCRIPTION                                                                                                                                                                                                                                                                                                                                          
|             | 
|10.13        |  | Purchase Agreement, dated March 15, 2010, by and between NexMed, Inc. and the Purchasers named therein (incorporated herein by reference to Exhibit 10.44 to the Companys
Annual Report on Form 10-K filed with the Securities and Exchange Commission on March 31, 2010).                                                                          
|             | 
|10.14*       |  | Apricus Biosciences, Inc. 2012 Stock Long Term Incentive Plan (incorporated by reference to Exhibit A of the Registrants Definitive Proxy Statement filed on April 6,
2012).                                                                                                                                                                        
|             | 
|10.15        |  | Registration Rights Agreement, dated March 15, 2010 (incorporated herein by reference to Exhibit 10.45 to the Companys Annual Report on Form 10-K filed with the Securities and
Exchange Commission on March 31, 2010).                                                                                                                             
|             | 
|10.16        |  | Amendment, dated December 7, 2012, by and among Apricus Biosciences, Inc. and The Tail Wind Fund Ltd., Solomon Strategic Holdings, Inc. and Tail Wind Advisory & Management Ltd.
(incorporated herein by reference to Exhibit 10.16 to the Companys Annual Report on Form 10-K filed with the Securities and Exchange Commission on March 18, 2013).
|             | 
|10.17        |  | Amended and Restated 7% Convertible Note Due December 31, 2014 with The Tail Wind Fund Ltd. (incorporated herein by reference to Exhibit 10.17 to the Companys Annual Report on
Form 10-K filed with the Securities and Exchange Commission on March 18, 2013).                                                                                     
|             | 
|10.18        |  | Amended and Restated 7% Convertible Note Due December 31, 2014 with Solomon Strategic Holdings, Inc. (incorporated herein by reference to Exhibit 10.18 to the Companys Annual
Report on Form 10-K filed with the Securities and Exchange Commission on March 18, 2013).                                                                            
|             | 
|10.19        |  | Amended and Restated 7% Convertible Note Due December 31, 2014, with Tail Wind Advisory & Management Ltd. (incorporated herein by reference to Exhibit 10.19 to the
Companys Annual Report on Form 10-K filed with the Securities and Exchange Commission on March 18, 2013).                                                                       
|             | 
|10.20        |  | Real Estate Purchase Agreement, dated November 7, 2012, by and between NexMed, Inc. and Maujer, LLC. (incorporated herein by reference to Exhibit 10.20 to the Companys Annual
Report on Form 10-K filed with the Securities and Exchange Commission on March 18, 2013).                                                                            
|             | 
|10.21        |  | Real Estate Purchase Agreement, dated December 28, 2012, by and between NexMed, Inc. and Jack Breitkopf. (incorporated herein by reference to Exhibit 10.21 to the Companys
Annual Report on Form 10-K filed with the Securities and Exchange Commission on March 18, 2013).                                                                        
|             | 
|10.22        |  | NexMed, Inc. Subscription Agreement and Instructions (incorporated herein by reference to Exhibit 10.47 to the Companys Annual Report on Form 10-K filed with the Securities
and Exchange Commission on March 31, 2010).                                                                                                                            
|             | 
|10.23        |  | Form of Unsecured Promissory Note (incorporated herein by reference to Exhibit 10.48 to the Companys Annual Report on Form 10-K filed with the Securities and Exchange
Commission on March 31, 2010).                                                                                                                                               
|             | 
|10.24        |  | Sales Agreement, dated April 21, 2010, by and between Apricus Biosciences, Inc. and Brinson Patrick Securities Corporation (incorporated herein by reference to Exhibit 1.1 to the
Companys Form 8-K filed with the Securities and Exchange Commission on April 21, 2010).                                                                          
|             | 
|10.25        |  | Warrant Agent Agreement, dated September 17, 2010, by and between Apricus Biosciences, Inc. and Wells Fargo Bank, N.A. (incorporated by reference to Exhibit 10.30 of Amendment No. 2
to the Companys Registration Statement on Form S-1 (File No. 333-169132) filed with the Securities and Exchange Commission on September 28, 2010).            
|             | 
|10.26        |  | Separation Agreement, dated June 1, 2011, by and between the Company and Mark Westgate (incorporated by reference to Exhibit 10.1 to the Companys Current Report on Form
8-K filed with the Securities and Exchange Commission on June 2, 2011).                                                                                                    
|             | 
|10.27*       |  | Amended and Restated Employment Agreement, dated January 31, 2011, by and between Apricus Biosciences, Inc. and Dr. Bassam Damaj (incorporated herein by reference to Exhibit 10.1 to
the Companys Form 10-Q filed with the Securities and Exchange Commission on November 14, 2011).                                                               
|             | 
|10.28*       |  | Employment Agreement by and between Apricus Biosciences, Inc. and Randy Berholtz, dated May 9, 2011 (incorporated by reference to Exhibit 10.3 to the
Companys Current Report on Form 8-K filed with the Securities and Exchange Commission on August 15, 2011).                                                                                    



49



---

##### Table of Contents

|             |  |                                                                                                                                                                                                                                                                                  
|------------ |  | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|EXHIBITS NO. |  | DESCRIPTION                                                                                                                                                                                                                                                                      
|             | 
|10.29*       |  | Employment Agreement by and between Apricus Biosciences, Inc. and Steve Martin, dated June 1, 2011 (incorporated by reference to Exhibit 10.2 to the Companys Current
Report on Form 8-K filed with the Securities and Exchange Commission on June 2, 2011).                    
|             | 
|10.30        |  | Separation Agreement, dated December 28, 2012, by and between Apricus Biosciences, Inc. and Dr. Bassam Damaj (incorporated herein by reference to Exhibit 10.30 to the Companys
Annual Report on Form 10-K filed with the Securities and Exchange Commission on March 18, 2013).
|             | 
|10.31        |  | Consulting Agreement, dated August 5, 2011, by and between Apricus Biosciences, Inc. and Echo Galaxy Limited (incorporated herein by reference to Exhibit 10.31 to the Companys
Form 10-K filed with the Securities and Exchange Commission on March 13, 2012).                 
|             | 
|10.32        |  | Registration Rights and Transfer Restriction Agreement, dated July 12, 2012 (incorporated herein by reference to Exhibit 10.1 to the Companys Current Report Form 8-K filed
with the Securities and Exchange Commission on July 13, 2012).                                      
|             | 
|21           |  | Subsidiaries (incorporated herein by reference to Exhibit 21 to the Companys Annual Report on Form 10-K filed with the Securities and Exchange Commission on March 18,
2013).                                                                                                   
|             | 
|23.1         |  | Consent of PricewaterhouseCoopers LLP, independent registered public accounting firm (incorporated herein by reference to Exhibit 23.1 to the Companys Annual Report on Form
10-K filed with the Securities and Exchange Commission on March 18, 2013).                         
|             | 
|23.2         |  | Consent of EisnerAmper LLP, independent registered public accounting firm (incorporated herein by reference to Exhibit 23.2 to the Companys Annual Report on Form 10-K filed
with the Securities and Exchange Commission on March 18, 2013).                                    
|             | 
|23.3         |  | Consent of PricewaterhouseCoopers LLP, independent registered public accounting firm.                                                                                                                                                                                            
|             | 
|23.4         |  | Consent of EisnerAmper LLP, independent registered public accounting firm.                                                                                                                                                                                                       
|             | 
|31.1         |  | Chief Executive Officers Certificate, pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.                                                                                                                                                                                
|             | 
|31.2         |  | Chief Financial Officers Certificate, pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.                                                                                                                                                                                
|             | 
|32.1         |  | Chief Executive Officers Certificate, pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002. (2)                                                                                                                             
|             | 
|32.2         |  | Chief Financial Officers Certificate, pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002. (2)                                                                                                                             
|             | 
|101.INS      |  | XBRL Instance Document. (1)                                                                                                                                                                                                                                                      
|             | 
|101.SCH      |  | XBRL Taxonomy Extension Schema. (1)                                                                                                                                                                                                                                              
|             | 
|101.CAL      |  | XBRL Taxonomy Extension Calculation Linkbase. (1)                                                                                                                                                                                                                                
|             | 
|101.DEF      |  | XBRL Taxonomy Extension Definition Linkbase. (1)                                                                                                                                                                                                                                 
|             | 
|101.LAB      |  | XBRL Taxonomy Extension Label Linkbase. (1)                                                                                                                                                                                                                                      
|             | 
|101.PRE      |  | XBRL Taxonomy Extension Presentation Linkbase. (1)                                                                                                                                                                                                                               



|(1) | Previously furnished.
|--- | ---------------------

|(2) | Furnished herein.
|--- | -----------------

|* | Management compensatory plan or arrangement required to be filed as an exhibit pursuant to Item 15(c) of Form 10-K.
|- | -------------------------------------------------------------------------------------------------------------------

|+ | Portions of this exhibit have been omitted pursuant to a request for confidential treatment with the Securities and Exchange Commission. Such portions have been filed
separately with the Securities and Exchange Commission.
|- | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



50



---

##### Table of Contents

SIGNATURES

Pursuant to the requirements of the Section 13 or 15(d) of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto
duly authorized.



|                          |  |  |  |     |  |                                                                           
|------------------------- |  |  |  | --- |  | --------------------------------------------------------------------------
|APRICUS BIOSCIENCES, INC. |  |  |  |    
|                          |  |  | 
|Dated: September 30, 2013 |  |  |  | By: |  | /s/    STEVE MARTIN                                                       
|                          |  |  |  |     |  | Steve Martin Senior Vice President, Chief Financial Officer, and Secretary



51



---

##### Table of Contents

EXHIBIT INDEX



|     |  |                                                                                                                                                     
|---- |  | ----------------------------------------------------------------------------------------------------------------------------------------------------
|     | 
|23.3 |  | Consent of PricewaterhouseCoopers LLP, independent registered public accounting firm.                                                               
|     | 
|23.4 |  | Consent of EisnerAmper LLP, independent registered public accounting firm.                                                                          
|     | 
|31.1 |  | Chief Executive Officers Certificate, pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.                                                   
|     | 
|31.2 |  | Chief Financial Officers Certificate, pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.                                                   
|     | 
|32.1 |  | Chief Executive Officers Certificate, pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002. (1)
|     | 
|32.2 |  | Chief Financial Officers Certificate, pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002. (1)



|(1) | Furnished, not filed.
|--- | ---------------------



52