Correction of 2016 Diluted Net Loss Per Share

The diluted net loss per share for the period ended March 31, 2016 has been corrected. In accordance with U.S. generally accepted accounting principles, when calculating diluted earnings or loss per share, if the effects are dilutive, companies are required to add back to net income or loss the effects of the change in derivative liabilities related to warrants. Additionally, if the effects of the change in derivative liabilities are added back to net income or loss, companies are required to include the warrants outstanding related to the derivative liability in the calculation of the weighted average dilutive shares.

For the period ended March 31, 2016, as originally reported, we did not add back the effects of the change in the derivative liability in computing dilutive income or loss per share. The dilutive loss per share for the period ended March 31, 2016 in the table above has been corrected to correct this error.

The table below reflects the diluted net income per share as originally reported and net loss per share as corrected.

Additionally, the diluted loss per share for the periods ended June 30, 2016 and September 30, 2016 will be reflected as corrected in the Form 10-Q for the quarters ending June 30, 2017 and September 30, 2017, respectively. The corrected diluted loss per share for the six months ended June 30, 2016 was $(0.06). The corrected diluted loss per share for the three and nine months ended September 30, 2016 was $(0.01) and $(0.07), respectively.

The errors were corrected as of December 31, 2016, but since the adjustments were not material to any of the quarters previously reported the Form 10-Qs for those periods were not amended. Management has determined the effects to be neither quantitatively or qualitatively material to the financial statements included in any of the Form 10-Qs filed during 2016.

Significant Concentration of Credit Risk

Sales to the Company’sour top three customers aggregated to 25%approximately 33% and 37%24% of total sales for the three months ended September 30,March 31, 2017 and 2016, and 2015, respectively, and 26% and 33% of total sales for the nine months ended September 30, 2016 and 2015, respectively. Sales to one of those customers were 11%approximately 16% and 18%12% of total sales for the three months ended September 30,March 31, 2017 and 2016, and 2015, respectively, and 11% and 23% of total sales for the nine months ended September 30, 2016 and 2015, respectively. Accounts receivable from these customers were 39%approximately 54% and 30%29% of total accounts receivable as of September 30, 2016March 31, 2017 and December 31, 2015,2016, respectively.

Reclassifications

Certain amounts in the 2015 consolidated financial statements have been reclassified to conform with the current year presentation.

Recent Accounting Pronouncements

In February 2016, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”) No. 2016-02, “Leases (Topic 842)”. The amendments in this ASU revise the accounting related to lessee accounting. Under the new guidance, lessees will be required to recognize a lease liability and a right-of-use asset for all leases. The new lease guidance also simplifies the accounting for sale and leaseback transactions primarily because lessees must recognize lease assets and lease liabilities. The amendments in this ASU are effective for public companies for fiscal years beginning after December 15, 2018 and are to be applied through a modified retrospective transition approach for leases existing at, or entered into after, the beginning of the earliest comparative period presented in the financial statements. Early adoption is permitted. We have not yet determined the impact on our consolidated financial statements of the adoption of this new accounting pronouncement.

In March 2016,January 2017, the FASB issued ASU No. 2016-09, “Stock Compensation2017-04, “Simplifying the Test for Goodwill Impairment (Topic 718)350)”, which is intended to simplify several aspectsremoves Step 2 of the accounting for share-based payment award transactions, includinggoodwill impairment test that requires a hypothetical purchase price allocation.  A goodwill impairment will now be the income tax impacts,amount by which a reporting unit’s carrying value exceeds its fair value, not to exceed the classification on the statementcarrying amount of cash flows, and forfeitures.goodwill.  The amendments in this ASU are effective for fiscal years beginning after December 15, 2016, including interim periods. We have not yet determined the impact on our consolidated financial statements of the2019.  Early adoption of this new accounting pronouncement.

In August 2016, the FASB issued ASU No. 2016-15, “Statement of Cash Flows (Topic 230)”, which clarifies the classification of certain cash receipts and payments in the statement of cash flows. The amendments in this ASU are effective for public business entities for fiscal years beginningis permitted after December 15, 2017, including interim periods.January 1, 2017.  We do not expect the new guidance to have a significant impact on our condensed consolidated financial statements or related disclosures.

Although there are several other new accounting pronouncements issued or proposed by the FASB, which the Company haswe have adopted or will adopt, as applicable, we do not believe any of these accounting pronouncements has had or will have a material impact on our condensed consolidated financial position or results of operations.

NOTE 2 – GOING CONCERN

The accompanying condensed consolidated financial statements have been prepared on a going concern basis, which assumes continuity of operations and realization of assets and liabilities in the ordinary course of business. Since itsIn most periods since our formation, the Company haswe have generated losses from operations. At September 30, 2016, the CompanyMarch 31, 2017, we had an accumulated deficit of $215,203. These losses were associated with start-up activities and brand infrastructure development. Recently,$227,428. Historical losses are primarily attributable to lower than planned sales resulting from low fill rates on demand due to limitations of our working capital, limitations, delayed product introductions and postponed marketing activities, as well asmerger-related and other restructuring costs, and interest.interest and refinancing charges associated with our debt refinancing. Losses have been funded primarily through issuance of common stock borrowings from our stockholders and third-party or related party debt.

Because of thisour history of operating losses, significant interest expense on the Company’sour debt, and the recording of significant derivative liabilities, the Company haswe have a working capital deficiency of $1,719$4,343 at September 30, 2016. The CompanyMarch 31, 2017. We also has $8,874have $14,505 of debt, net of discount, due within the next 12 months. These continuing conditions, among others, raise substantial doubt about the Company'sour ability to continue as a going concern.

Management has addressed operating issues through the following actions: focusing on growing the core business and brands; continuing emphasis on major customers and key products; reducing manufacturing and operating costs and continuing to negotiate lower prices from major suppliers. During the nine months ended September 30, 2016, the Company obtained debt funding totaling $24,678 to fund current operations. Additionally, in connection with the July 2016 promissory note agreements with two of the Company’s related party lenders, the Company may make draw requests and the lenders may loan the Company up to an additional principal amount of $4,362. However, the Company believesWe believe that itwe may need additional capital to execute itsour business plan. If additional funding is required, there can be no assurance that sources of funding will be available when needed on acceptable terms or at all.

NOTE 3 – INVENTORIES

Inventories consisted of the following at:

NOTE 4 – PROPERTY AND EQUIPMENT

Property and equipment consisted of the following at:

Assets held under capital leases are included in machinery and equipment and amounted to $1,390$1,117 and $1,737$1,142 as of September 30, 2016March 31, 2017 and December 31, 2015,2016, respectively.

Depreciation and amortization expense totaled $221$227 and $122$184 for the three months ended September 30,March 31, 2017 and 2016, and 2015, respectively, and totaled $567 and $366 for the nine months ended September 30, 2016 and 2015, respectively.

NOTE 5 – INTANGIBLE ASSETS

Intangible assets consisted of the following at:

Trademarks are amortized over periods ranging from 3 to 30 years, customer relationships are amortized over periods ranging from 15 to 16 years, and other intangible assets are amortized over 3 years. Amortization expense was $557$583 and $204$506 for the three months ended September 30,March 31, 2017 and 2016, and 2015, respectively, and was $1,645 and $584 for the nine months ended September 30, 2016 and 2015, respectively.

NOTE 6 – DEBT

Debt consisted of the following at:

Related-Party Debt

July 2014 Note Payable to Little Harbor, LLC

Pursuant to a July 2014 Debt Repayment Agreement with Little Harbor, LLC (“Little Harbor”), an entity owned by certain stockholders of the Company, the Company iswe are obligated to pay such party $4,900 per year in structured monthly payments for 3 years provided that such payment obligations will terminate at such earlier time as the trailing ninety day volume weighted average closing sales price of the Company’s common stock on all domestic securities exchanges on which such stock is listed equals or exceeds $5.06 per share. This note is unsecured and matures on July 25, 2017. This note is non-interest bearing, accordingly, using an imputed interest rate of 16.2%, the Companywe recorded a note discount in July 2014, which is being amortized into interest expense based on the effective interest rate method over the term of the note.

July 2016 Note Payable to Little Harbor, LLC

On July 21, 2016, the Companywe issued an Unsecured Delayed Draw Promissory Note in favor of Little Harbor, pursuant to which Little Harbor may, in its sole discretion and pursuant to draw requests made by the Company, loan the Companyus up to the maximum principal amount of $4,770. This note is unsecured and matures on January 28, 2019. This note bears interest at an annual rate of 8.5%, with the principal payable at maturity. If Little Harbor, in its discretion, accepts a draw request made by the Company under this note, Little Harbor shall not transfer cash to the Company, but rather Little Harbor shall irrevocably agree to accept the principal amount of any monthly delayed draw under this note in lieu and in complete satisfaction of the obligation of THI to make an equivalent dollar amount of periodic cash payments otherwise due to Little Harbor under the July 2014 note payable. During the three monthsyear ended September 30,December 31, 2016, the Companywe requested and Little Harbor LLC approved, draws totaling $2,589. The Company$4,770. We issued a warrant into escrow in connection with this loan (see Little Harbor Escrow Warrants in Note 7).

January 2016 Note Payable to GREAT HARBOR CAPITAL, Great Harbor Capital, LLC

Pursuant to a January 28, 2016 Unsecured Promissory Note with GREAT HARBOR CAPITAL,Great Harbor Capital, LLC (“GH”), an affiliate of a member of the Company’sour Board of Directors, GH lent the Companyus $2,500. The note matures on January 28, 2019, bears interest at an annual rate of 8.5%, with the principal payable in 24 monthly installments of $104 commencing on February 28, 2017. The CompanyWe issued a warrant into escrow in connection with this loan (see GH Escrow Warrants in Note 7).

March 2016 Note Payable to GREAT HARBOR CAPITAL, Great Harbor Capital, LLC

Pursuant to a March 21, 2016 Unsecured Promissory Note, GH lent the Companyus $7,000. The note matures on March 21, 2019, bears interest at an annual rate of 8.5%, with the principal payable in 24 monthly installments of $292 commencing on April 21, 2017. We issued a warrant into escrow in connection with this loan (see GH Escrow Warrants in Note 7). 

December 2016 Note Payable to Great Harbor Capital, LLC

Pursuant to a December 31, 2016 Unsecured Promissory Note, GH lent us $2,500. The Companynote matures on December 30, 2019, bears interest at an annual rate of 8.5%, with the principal payable at maturity. We issued a warrant into escrow in connection with this loan (see GH Escrow Warrants in Note 7).

November 2014 Note Payable to Golisano Holdings LLC (formerly payable toPenta Mezzanine SBIC Fund I, L.P.)

On November 13, 2014, we raised proceeds of $8,000, less certain fees and expenses, from the issuance of a secured note to Penta Mezzanine SBIC Fund I, L.P. (“Penta”). The Managing Director of Penta, an institutional investor, is also a Director of our Company. We granted Penta a security interest in our assets and pledged the shares of our subsidiaries as security for the note. This note matures on November 13, 2019 with payments of principal due on a quarterly basis commencing on November 13, 2017 in installments of (i) $360 per quarter for the first four quarters, (ii) $440 per quarter for the next four quarters and (iii) $520 per quarter for each quarter thereafter. This note bears interest of 12% per annum, payable monthly. We issued a warrant to Penta to purchase 4,960,740 shares of the Company’s common stock in connection with this loan (see Penta Warrants in Note 7). The estimated fair value of the warrant at the date of issuance was $3,770, which was recorded as a note discount and is being amortized into interest expense over the term of this loan. Additionally, we had incurred loan fees of $273, which is also being amortized into interest expense over the term of this loan. On March 8, 2017, Golisano Holdings LLC (“Golisano LLC”) acquired this note payable from Penta. Our terms of this note payable remain the same with the only change for us being the holder of the promissory note.

January 2015 Note Payable to Golisano Holdings LLC (formerly payable to JL-Mezz Utah, LLC-f/k/a JL-BBNC Mezz Utah, LLC)

On January 22, 2015, we raised proceeds of $5,000, less certain fees and expenses, from the sale of a note to JL-Mezz Utah, LLC (f/k/a JL-BBNC Mezz Utah, LLC) (“JL”). The proceeds were restricted to pay a portion of the Nutricap Labs, LLC (“Nutricap”) asset acquisition. We granted JL a security interest in the Company’s assets, including real estate and pledged the shares of our subsidiaries as security for the note. The note matures on February 13, 2020 with payments of principal due on a quarterly basis commencing March 1, 2017 in installments starting at $250 per quarter and increasing to $350 per quarter. This note bears interest of 12% per annum, payable monthly. We issued a warrant to JL to purchase 2,329,400 shares of the Company’s common stock on January 22, 2015 and 434,809 shares of the Company’s common stock on February 4, 2015 (see JL Warrants in Note 7). The estimated fair value of these warrants at the date of issuances was $4,389, which was recorded as a note discount and is being amortized into interest expense over the term of these loans. Additionally, we had incurred loan fees of $152 relating to this loan, which is also being amortized into interest expense over the term of these loans. On March 8, 2017, Golisano LLC acquired this note payable from JL. Our terms of this note payable remain the same with the only change for us being the holder of the promissory note.

February 2015 Note Payable to Golisano Holdings LLC (formerly payable toPenta Mezzanine SBIC Fund I, L.P.)

On February 6, 2015, we raised proceeds of $2,000, less certain fees and expenses, from the issuance of a secured note payable to Penta. The proceeds were restricted to pay a portion of the acquisition of the customer relationships of Nutricap. This note matures on November 13, 2019 with payments of principal due on a quarterly basis commencing November 13, 2017 in installments of (i) $90 per quarter for the first four quarters, (ii) $110 per quarter for the next four quarters and (iii) $130 per quarter for each quarter thereafter. This note bears interest of 12% per annum, payable monthly. We issued a warrant to Penta to purchase 869,618 shares of the Company’s common stock in connection with this loan (see Penta Warrants in Note 7). The estimated fair value of these warrants at the date of issuances totaled $250, which was recorded as a note discount and is being amortized into interest expense over the term of this loan. Additionally, we had incurred loan fees of $90, which is also being amortized into interest expense over the term of these loans. On March 8, 2017, Golisano LLC acquired this note payable from Penta. Our terms of this note payable remain the same with the only change for us being the holder of the promissory note.

January 2016 Note Payable to Golisano Holdings LLC

Pursuant to a January 28, 2016 Unsecured Promissory Note with Golisano Holdings LLC, (“Golisano LLC”), an affiliate of a member of the Company’sour Board of Directors, Golisano LLC lent the Companyus $2,500. The note matures on January 28, 2019, bears interest at an annual rate of 8.5%, with the principal payable in 24 monthly installments of $104 commencing on February 28, 2017. The CompanyWe issued a warrant into escrow in connection with this loan (see Golisano Escrow Warrants in Note 7).

March 2016 Note Payable to Golisano Holdings LLC

Pursuant to a March 21, 2016 Unsecured Promissory Note, Golisano LLC lent the Companyus $7,000. The note matures on March 21, 2019, bears interest at an annual rate of 8.5%, with the principal payable in 24 monthly installments of $292 commencing on April 21, 2017. The CompanyWe issued a warrant into escrow in connection with this loan (see Golisano Escrow Warrants in Note 7).

July 2016 Note Payable to Golisano Holdings LLC

On July 21, 2016, the Companywe issued an Unsecured Delayed Draw Promissory Note in favor of Golisano LLC pursuant to which Golisano LLC may, in its sole discretion and pursuant to draw requests made by the Company, loan the Company up to the maximum principal amount of $4,770 (the “Golisano LLC July 2016 Note”). The Golisano LLC July 2016 Note matures on January 28, 2019. Interest on the outstanding principal accrues at a rate of 8.5% per year. The principal of the Golisano LLC July 2016 Note is payable at maturity. The CompanyWe issued a warrant into escrow in connection with this loan (see Golisano Escrow Warrants in Note 7). During the three monthsyear ended September 30,December 31, 2016, the Companywe requested and Golisano LLC approved, draws totaling $2,589.$4,770. 

November 2014December 2016 Note Payable to Penta Mezzanine SBIC Fund I, L.P.Golisano Holdings LLC

On November 13, 2014, the Company raised proceeds of $8,000, less certain fees and expenses, from the issuance ofPursuant to a note to Penta Mezzanine SBIC Fund I, L.P. (“Penta”), an institutional investor.December 31, 2016 Unsecured Promissory Note, Golisano LLC lent us $2,500. The Company (i) granted Penta a security interest in the Company’s assets and (ii) pledged the shares of its subsidiaries as security for the note. This note matures on November 13,December 30, 2019, with payments of principal due on a quarterly basis commencing on November 13, 2017 in installments of (i) $360 per quarter for the first four quarters, (ii) $440 per quarter for the next four quarters and (iii) $520 per quarter for each quarter thereafter. This note bears interest at an annual rate of 12% per annum,8.5%, with the principal payable monthly. The Companyat maturity. We issued a warrant to Penta to purchase 4,960,740 shares of the Company’s common stockinto escrow in connection with this loan (see PentaGolisano Escrow Warrants in Note 7). The estimated fair value of the warrant at the date of issuance was $3,770, which was recorded as a note discount and is being amortized into interest expense over the term of this loan. Additionally, the Company had incurred loan fees of $273, which is also being amortized into interest expense over the term of this loan.

February 2015March 2017 Note Payable to Penta Mezzanine SBIC Fund I, L.P.Golisano Holdings LLC

On February 6, 2015, the Company raised proceeds of $2,000, less certain fees and expenses, from the issuance ofPursuant to a note Penta.March 14, 2017 Unsecured Promissory Note, Golisano LLC lent us $3,267. The proceeds were restricted to pay a portion of the acquisition of the customer relationships of Nutricap Labs, LLC (“Nutricap”). This note matures on November 13,December 30, 2019, with payments of principal due on a quarterly basis commencing November 13, 2017 in installments starting of (i) $90 per quarter for the first four quarters, (ii) $110 per quarter for the next four quarters and (iii) $130 per quarter for each quarter thereafter. This note bears interest at an annual rate of 12% per annum,8.5%, with the principal payable monthly. The Companyat maturity. We issued a warrant to Penta to purchase 869,618 shares of the Company’s common stockinto escrow in connection with this loan (see PentaGolisano Escrow Warrants in Note 7). The estimated fair value of these warrants at the date of issuances totaled $250, which was recorded as a note discount and is being amortized into interest expense over the term of this loan. Additionally, the Company had incurred loan fees of $90, which is also being amortized into interest expense over the term of these loans.

Senior Credit Facility

On January 22, 2015, the Companywe entered into a new three-year $15,000 revolving credit facility (the “Senior Credit Facility”) based on the Company’sour accounts receivable and inventory, increasable to up to $20,000, with MidCap Financial Trust, which subsequently assigned the agreement to an affiliate, Midcap Funding X Trust (“MidCap”). On September 2, 2016, the Company and MidCapwe entered into an amendment with Midcap to increase the Senior Credit Facility to increase it to $17,000. The Company (i)We granted MidCap a first priority security interest in certain of itsour assets and (ii) pledged the shares of itsour subsidiaries as security for amounts owed under the credit facility. The Company isWe are required to pay Midcap an unused line fee of 0.50% per annum, a collateral management fee of 1.20% per annummonth and interest of LIBOR plus 5% per annum, which was 6.0% per annum as of September 30, 2016. The CompanyMarch 31, 2017. We issued a warrant to Midcap to purchase 500,000 shares of the Company’s common stock (see Midcap Warrant in Note 7). The estimated fair value of these warrants at the date of issuance was $130, which was recorded as a note discount and is being amortized into interest expense over the term of the Senior Credit Facility. Additionally, the Company hadwe have incurred loan fees totaling $540 relating to the Senior Credit Facility and any subsequent amendments, which is also being amortized into interest expense over the term of the Senior Credit Facility.

Other Debt

January 2015 Note Payable to JL-Mezz Utah, LLC (f/k/a JL-BBNC Mezz Utah, LLC)

On January 22, 2015, the Company raised proceeds of $5,000, less certain fees and expenses, from the sale of a note to JL-Mezz Utah, LLC (f/k/a JL-BBNC Mezz Utah, LLC) (“JL”). The proceeds were restricted to pay a portion of the Nutricap asset acquisition. The Company (i) granted JL a security interest in the Company’s assets, including real estate and (ii) pledged the shares of its subsidiaries as security for the note. The note matures on February 13, 2020 with payments of principal due on a quarterly basis commencing March 1, 2017 in installments starting at $250 per quarter and increasing to $350 per quarter. This note bears interest of 12% per annum, payable monthly. The Company issued a warrant to JL to purchase 2,329,400 shares of the Company’s common stock on January 22, 2015 and 434,809 shares of the Company’s common stock on February 4, 2015 (see JL Warrants in Note 7). The estimated fair value of these warrants at the date of issuances was $4,389, which was recorded as a note discount and being amortized into interest expense over the term of these loans. Additionally, the Company had incurred loan fees of $152 relating to this loan, which is also being amortized into interest expense over the term of these loans.

April 2016 Note Payable toJL-Utah Sub, LLC

OnPursuant to an April 5, 2016 Unsecured Promissory Note, JL-Utah Sub, LLC (“JL-US”) lent the Company $500 pursuant to an unsecured promissory note (the “JL-US Note”). Thisus $500. The note matures on March 21, 2019, bears interest at an annual rate of 8.5%, with payments ofthe principal due overpayable in 24 monthly installments of $21 commencing on April 21, 2017. This note bears interest of 8.5% per annum, payable monthly.

Nutricap Asset Acquisition Notes

The short-term notes payable issued in the Nutricap asset acquisition included a promissory note of $2,500 bearing interest at a rate of 6% per annum and maturing 60 days after the closing of the acquisition and a promissory note of $1,478 bearing interest at a rate of 3% per annum, payable in 12 equal monthly installments of principal and interest commencing in February 2015. On June 30, 2015, NutraScience and Nutricap entered into an Amended and Restated Promissory Note in the original principal amount of $2,750, representing the original principal amount of the first promissory note of $2,500 plus a late fee of $250. This note was repaid in January 2016 and the second promissory note was repaid in February 2016.

Capital Lease Obligations

The Company’sOur capital lease obligations pertain to various leasing agreements with Essex Capital Corporation (“Essex”), a related party to the Company as Essex’s principal owner is a director of the Company.

Financial Covenants

Certain of the foregoing debt agreements, as amended, require the Companyus to meet certain affirmative and negative covenants, including maintenance of specified ratios. The CompanyWe amended itsour debt agreements with MidCap, Penta and JL, effective July 29, 2016, to, among other things, reset the financial covenants of each debt agreement. As of September 30, 2016,March 31, 2017, management believes the Company iswe are in compliance with itsour financial covenants for each debt agreement.

NOTE 7 – WARRANTS AND REGISTRATION RIGHTS AGREEMENTS

AThe following table presents a summary of the status of theour issued warrants issued by the Company as of September 30, 2016,March 31, 2017, and changes during the ninethree months then ended, is presented below:ended:

Warrants Issued

Midcap Warrant

In connection with the line of credit agreement with MidCap described in Note 6, the Companywe issued MidCap a warrant, exercisable through January 22, 2018, for an aggregate of 500,000 shares of the Company’s common stock at an exercise price of $0.76 per share (the “MidCap Warrant”). The Company and MidCap haveWe entered into a Registration Rights Agreement with Midcap, dated as of January 22, 2015, granting MidCap certain registration rights, commencing October 1, 2015, for the shares of common stock issuable on exercise of the MidCap Warrant.

Penta Warrants

In connection with the November 13, 2014 note for $8,000 (see Note 6), Penta was issued a warrant to acquire 4,960,740 shares of the Company’s common stock at an aggregate exercise price of $0.01, through November 13, 2019. In connection with Penta’s consent to the terms of additional debt obtained by the Company, the Company also granted Penta a warrant to acquire a total of 869,618 shares of common stock at a purchase price of $1.00 per share, through November 13, 2019. Both warrant agreements grant Penta certain registration rights, commencing October 1, 2015, for the shares of common stock issuable on exercise of the warrants. Penta has the right, under certain circumstances, to require the Company to purchase all or any portion of the equity interest in the Company issued or represented by the warrant to acquire 4,960,740 shares at a price based on the greater of (i) the product of (x) ten times the Company’s adjusted EBITDA with respect to the twelve months preceding the exercise of the put right times (y) the investor’s percentage ownership in the Company assuming full exercise of the warrant; or (ii) the fair market value of the investor’s equity interest underlying the warrant. In the event (i) the Company does not have the funds available to repurchase the equity interest under the warrant or (ii) such repurchase is not lawful, adjustments to the principal of the note purchased by Penta will be made or, under certain circumstances, interest will be charged on the amount otherwise due for such repurchase. The Company has the right, under certain circumstances, to require Penta to sell to the Company all or any portion of the equity interest issued or represented by the warrant to acquire 4,960,740 shares. The price for such repurchase will be the greater of (i) the product of (x) eleven times the Company’s adjusted EBITDA with respect to the twelve months preceding the exercise of the call right times (y) the investor’s percentage ownership in the Company assuming full exercise of the warrant; or (ii) the fair market value of the equity interests underlying the warrant; or (iii) $3,750.

Pursuant to a Stock Purchase Agreement dated June 30, 2015, a warrant was issued to Penta to purchase an aggregate 807,018 shares of the Company’sour common stock at a price of $0.01 per share at any time prior to the close of business on June 30, 2020. The CompanyWe granted Penta certain registration rights, commencing October 1, 2015, for the shares of common stock issuable upon exercise of the warrant.

JL Warrants

In connection with the January 22, 2015 note payable to JL, the Company issued JL warrants to purchase an aggregate of 2,329,400 shares of the Company’s common stock, at an aggregate exercise price of $0.01, through February 13, 2020. On February 4, 2015, the Company also granted to JL a warrant to acquire a total of 434,809 shares of common stock at a purchase price of $1.00 per share, through February 13, 2020. Both warrant agreements grant JL certain registration rights, commencing October 1, 2015, for the shares of common stock issuable upon exercise of the warrants. These warrants were subsequently assigned to two individuals. During the nine months ended September 30, 2016, these individuals exercised warrants for a total of 1,187,995 shares of the Company’s common stock for total proceeds to the Company of $0.

Pursuant to a June 30, 2015 Stock Purchase Agreement, a warrant was issued to JL to purchase an aggregate 403,509 shares of the Company’s common stock at a price of $0.01 per share at any time prior to the close of business on June 30, 2020, subject to certain adjustments. The CompanyWe granted JL certain registration rights, commencing October 1, 2015, for the shares of common stock issuable upon exercise of the warrant. The warrant was subsequently assigned by JL to two individuals.

Essex Warrants

In connection with the guarantee of a note payable issued in the Nutricap asset acquisition and equipment financing by Essex discussed in Note 6, Essex was issued a warrant exercisable for an aggregate 1,428,571 shares of the Company’s common stock at a purchase price of $0.77 per share, at any time prior to the close of business on June 30, 2020. The number of shares issuable upon the exercise of the warrant is subject to adjustment on terms and conditions customary for a transaction of this nature in the event of (i) reorganization, recapitalization, stock split-up, combination of shares, mergers, consolidations and (ii) sale of all or substantially all of the Company’sour assets or property. Essex subsequently assigned warrants for 350,649 shares to another company.

Capstone Warrants

In May 2015, the Company and Capstone Financial Group, Inc. (“Capstone”) entered into an amendment to a previously issued Series B Warrant, with the following warrants outstanding as of September 30, 2016: Tranche 4 consisting of 6,000,000 shares exercisable at $0.76 per share through November 30, 2016. Tranche 2 warrants for 4,000,000 shares expired March 31, 2016 and Tranche 3 warrants for 6,000,000 shares expired on July 31, 2016. The Company and Capstone previously entered into a Registration Rights Agreement pursuant to which Capstone can require the Company to register the shares of common stock acquired upon exercise of the Series B Warrant at such time as the Company is eligible to register securities on a Registration Statement on Form S-3 and thereafter file additional registration statements if requested by Capstone on a quarterly basis. The Registration Agreement contains terms and conditions customary for the grant of registration rights.

JL Properties, Inc. Warrants

In April 2015, the Companywe entered into an office lease agreement which requires a $1,000 security deposit, subject to reduction if the Company achieveswe achieve certain market capitalization metrics at certain dates. On April 30, 2015, the Company andwe entered into a Reimbursement Agreement with JL Properties, Inc. (“JL Properties”) entered into a Reimbursement Agreement pursuant to which JL Properties agreed to arrange for and provide an unconditional, irrevocable, transferable, and negotiable commercial letter of credit to serve as the security deposit. As partial consideration for the entry by JL Properties into the Reimbursement Agreement and the provision of the letter of credit, the Companywe issued JL Properties two warrants to purchase shares of the Company’s common stock.

The first warrant is exercisable for an aggregate of 465,880 shares of common stock, subject to certain adjustments, at an aggregate purchase price of $0.01, at any time prior to April 30, 2020. In addition to adjustments on terms and conditions customary for a transaction of this nature in the event of (i) reorganization, recapitalization, stock split-up, combination of shares, mergers, consolidations and (ii) sale of all or substantially all of the Company’sour assets or property, the number of shares of common stock issuable pursuant to the warrant will be increased in the event the Company’sour consolidated audited adjusted EBITDA (as defined in the warrant agreement) for the fiscal year ending December 31, 2018 does not equal or exceed $19,250. JL Properties subsequently assigned the warrant to two individuals.

The second warrant is exercisable for an aggregate of 86,962 shares of common stock, at a per share purchase price of $1.00, at any time prior to April 30, 2020. The number of shares issuable upon exercise of the second warrant is subject to adjustment on terms and conditions customary for a transaction of this nature in the event of (i) reorganization, recapitalization, stock split-up, combination of shares, mergers, consolidations and (ii) sale of all or substantially all of the Company’sour assets or property.

The Company hasWe have granted JL Properties certain registration rights, commencing October 1, 2015, for the shares of common stock issuable on exercise of the two warrants.

Golisano LLC Warrants (formerlyPenta Warrants)

In connection with the November 13, 2014 note for $8,000 (see Note 6), Penta was issued a warrant to acquire 4,960,740 shares of the Company’s common stock at an aggregate exercise price of $0.01, through November 13, 2019. In connection with Penta’s consent to the terms of additional debt obtained by us, we also granted Penta a warrant to acquire a total of 869,618 shares of common stock at a purchase price of $1.00 per share, through November 13, 2019. Both warrant agreements grant Penta certain registration rights, commencing October 1, 2015, for the shares of common stock issuable on exercise of the warrants. Penta has the right, under certain circumstances, to require us to purchase all or any portion of the equity interest in the Company issued or represented by the warrant to acquire 4,960,740 shares at a price based on the greater of (i) the product of (x) ten times our adjusted EBITDA with respect to the twelve months preceding the exercise of the put right times (y) the investor’s percentage ownership in the Company assuming full exercise of the warrant; or (ii) the fair market value of the investor’s equity interest underlying the warrant. In the event (i) we do not have the funds available to repurchase the equity interest under the warrant or (ii) such repurchase is not lawful, adjustments to the principal of the note purchased by Penta will be made or, under certain circumstances, interest will be charged on the amount otherwise due for such repurchase. We have the right, under certain circumstances, to require Penta to sell to us all or any portion of the equity interest issued or represented by the warrant to acquire 4,960,740 shares. The price for such repurchase will be the greater of (i) the product of (x) eleven times our adjusted EBITDA with respect to the twelve months preceding the exercise of the call right times (y) the investor’s percentage ownership in the company assuming full exercise of the warrant; or (ii) the fair market value of the equity interests underlying the warrant; or (iii) $3,750. In connection with Golisano LLC’s acquisition of the note payable from Penta on March 8, 2017 (see Note 6 above for additional information), these warrants were assigned to Golisano LLC.

Golisano LLC Warrants (formerlyJL Warrants)

In connection with the January 22, 2015 note payable to JL, we issued JL warrants to purchase an aggregate of 2,329,400 shares of the Company’s common stock, at an aggregate exercise price of $0.01, through February 13, 2020. On February 4, 2015, we also granted to JL a warrant to acquire a total of 434,809 shares of common stock at a purchase price of $1.00 per share, through February 13, 2020. Both warrant agreements grant JL certain registration rights, commencing October 1, 2015, for the shares of common stock issuable upon exercise of the warrants. These warrants were subsequently assigned to two individuals. During the year ended December 31, 2016, these individuals exercised warrants for a total of 1,187,995 shares of the Company’s common stock for total proceeds to the Company of less than $1. In connection with Golisano LLC’s acquisition of the note payable from JL on March 8, 2017 (see Note 6 above for additional information), these warrants were assigned to Golisano LLC.

Golisano LLCWarrants

Pursuant to an October 2015 Securities Purchase Agreement with Golisano LLC, the Companywe issued Golisano LLC a warrant (the “Golisano Warrant”), which Golisano Warrant is intended to maintain, following each future issuance of shares of common stock pursuant to the conversion, exercise or exchange of certain currently outstanding warrants to purchase shares of common stock held by third-parties (the “Outstanding Warrants”), Golisano LLC’s proportional ownership of the Company’sour issued and outstanding common stock so that it is the same thereafter as on October 5, 2015. The Company hasWe have reserved 12,697,977 shares of its common stock for issuance under the Golisano Warrant. The purchase price for any shares of common stock issuable upon exercise of the Golisano Warrant is $.001 per share. The Golisano Warrant is exercisable immediately and up to and including the date which is sixty days after the later to occur of the termination, expiration, conversion, exercise or exchange of all of the Outstanding Warrants and the Company’sour delivery of notice thereof to Golisano LLC. The Golisano Warrant is also subject to customary adjustments upon any recapitalization, capital reorganization or reclassification, consolidation, merger or transfer of all or substantially all of the assets of the Company.our assets. In addition, if any payments are made to a holder of an Outstanding Warrant in consideration for the termination of or agreement not to exercise such Outstanding Warrant, Golisano LLC will be entitled to equal treatment. The Company and Golisano LLCWe have entered into a Registration Rights Agreement with Golisano LLC, dated as of October 5, 2015, granting Golisano LLC certain registration rights for the shares of common stock issuable on exercise of the Golisano Warrant. On February 6, 2016, Golisano LLC exercised the Golisano Warrant in part for 509,141 shares of the Company’s common stock for an aggregate purchase price of $1. During the nine monthsyear ended September 30,December 31, 2016, the Golisano Warrant was cancelled in part for 4,285,7146,857,143 shares pursuant to the cancellation of a portion of the Outstanding Warrants. As of September 30, 2016, the Company hasMarch 31, 2017, we have reserved 7,327,9344,756,505 shares of its common stock for issuance under the Golisano Warrant.

Warrants Issued Intointo Escrow

GolisanoEscrowWarrants

In connection with a January 28, 2016 Unsecured Promissory Note, the Companywe issued into escrow in the name of Golisano LLC a warrant to purchase an aggregate of 1,136,363 shares of the Company’s common stock at an exercise price of $0.01 per share (the “January 2016 Golisano Warrant”). The January 2016 Golisano Warrant will not be released from escrow or be exercisable unless and until the Company failswe fail to pay Golisano LLC the entire unamortized principal amount of the related promissory note and any accrued and unpaid interest thereon as of January 28, 2019 or such earlier date as is required pursuant to an Acceleration Notice (as defined in the related note agreement). The Company hasWe have reserved 1,136,363 shares of itsthe Company’s common stock for issuance under the January 2016 Golisano Warrant. The January 2016 Golisano Warrant, if exercisable, expires on February 28, 2022. The January 2016 Golisano Warrant is also subject to customary adjustments upon any recapitalization, capital reorganization or reclassification, consolidation, merger or transfer of all or substantially all of the assets of the Company.our assets.

In connection with a March 21, 2016 Unsecured Promissory Note, the Companywe issued into escrow in the name of Golisano LLC a warrant to purchase an aggregate of 3,181,816 shares of the Company’s common stock at an exercise price of $0.01 per share (the “March 2016 Golisano Warrant”). The March 2016 Golisano Warrant will not be released from escrow or be exercisable unless and until the Company failswe fail to pay Golisano LLC the entire unamortized principal amount of the related promissory note and any accrued and unpaid interest thereon as of March 21, 2019 or such earlier date as is required pursuant to an Acceleration Notice (as defined in the related note agreement). The Company hasWe have reserved 3,181,816 shares of itsthe Company’s common stock for issuance under the March 2016 Golisano Warrant. The March 2016 Golisano Warrant, if exercisable, expires on March 21, 2022. The March 2016 Golisano Warrant is also subject to customary adjustments upon any recapitalization, capital reorganization or reclassification, consolidation, merger or transfer of all or substantially all of the assets of the Company.our assets.

In connection with the Golisano LLC July 2016 Note provides that the Company issuewe issued into escrow in the name of Golisano LLC a warrant to purchase an aggregate of 2,168,178 shares of the Company’s common stock, at an exercise price of $0.01 per share (the “Golisano LLC July 2016 Warrant”). The Golisano LLC July 2016 Warrant will not be released from escrow or be exercisable unless and until the Company failswe fail to pay Golisano LLC the entire unamortized principal amount of the Golisano LLC July 2016 Note and any accrued and unpaid interest thereon as of January 28, 2019 or such earlier date as is required pursuant to an Acceleration Notice (as defined in the Golisano LLC July 2016 Note). The Company hasWe have reserved 2,168,178 shares of the Company’s common stock for issuance under the Golisano LLC July 2016 Warrant. The Golisano LLC July 2016 Warrant, if exercisable, expires on July 21, 2022. The Golisano LLC July 2016 Warrant is also subject to customary adjustments upon any recapitalization, capital reorganization or reclassification, consolidation, merger or transfer of all or substantially all of our assets.

In connection with the assetsGolisano LLC December 2016 Note we issued into escrow in the name of Golisano LLC a warrant to purchase an aggregate of 1,136,363 shares of the Company.Company’s common stock, at an exercise price of $0.01 per share (the “Golisano December 2016 Warrant”). The Golisano December 2016 Warrant will not be released from escrow or be exercisable unless and until we fail to pay Golisano LLC the entire unamortized principal amount of the Golisano December 2016 Note and any accrued and unpaid interest thereon as of December 30, 2019 or such earlier date as is required pursuant to an Acceleration Notice (as defined in the Golisano LLC December 2016 Note). We have reserved 1,136,363 shares of the Company’s common stock for issuance under the Golisano December 2016 Warrant. The Golisano December 2016 Warrant, if exercisable, expires on December 30, 2022. The Golisano December 2016 Warrant is also subject to customary adjustments upon any recapitalization, capital reorganization or reclassification, consolidation, merger or transfer of all or substantially all of our assets.

The Company andIn connection with the Golisano LLC March 2017 Note we issued into escrow in the name of Golisano LLC a warrant to purchase an aggregate of 1,484,847 shares of the Company’s common stock, at an exercise price of $0.01 per share (the “Golisano March 2017 Warrant”). The Golisano March 2017 Warrant will not be released from escrow or be exercisable unless and until we fail to pay Golisano LLC the entire unamortized principal amount of the Golisano March 2017 Note and any accrued and unpaid interest thereon as of December 30, 2019 or such earlier date as is required pursuant to an Acceleration Notice (as defined in the Golisano LLC March 2017 Note). We have reserved 1,484,847 shares of the Company’s common stock for issuance under the Golisano March 2017 Warrant. The Golisano March 2017 Warrant, if exercisable, expires on March 14, 2023. The Golisano March 2017 Warrant is also subject to customary adjustments upon any recapitalization, capital reorganization or reclassification, consolidation, merger or transfer of all or substantially all of our assets.

We previously entered into a Registration Rights Agreement with Golisano LLC, dated as of October 5, 2015 (the “Registration Rights Agreement”), granting Golisano LLC certain registration rights for certain shares of the Company’s common stock. The shares of common stock issuable pursuant to the above warrants are also entitled to the benefits of the Registration Rights Agreement.

GH Escrow Warrants

In connection with a January 28, 2016 Unsecured Promissory Note, the Companywe issued into escrow in the name of GH a warrant to purchase an aggregate of 1,136,363 shares of the Company’s common stock at an exercise price of $0.01 per share (the “January 2016 GH Warrant”). The January 2016 GH Warrant will not be released from escrow or be exercisable unless and until the Company failswe fail to pay GH the entire unamortized principal amount of the related promissory note and any accrued and unpaid interest thereon as of January 28, 2019 or such earlier date as is required pursuant to an Acceleration Notice (as defined in the related note agreement). The Company hasWe have reserved 1,136,363 shares of itsthe Company’s common stock for issuance under the January 2016 GH warrant. The January 2016 GH Warrant, if exercisable, expires on February 28, 2022. The January 2016 GH Warrant is also subject to customary adjustments upon any recapitalization, capital reorganization or reclassification, consolidation, merger or transfer of all or substantially all of the assets of the Company.our assets.

In connection with a March 21, 2016 Unsecured Promissory Note, the Companywe issued into escrow in the name of GH a warrant to purchase an aggregate of 3,181,816 shares of the Company’s common stock at an exercise price of $0.01 per share (the “March 2016 GH Warrant”). The March 2016 GH Warrant will not be released from escrow or be exercisable unless and until the Company failswe fail to pay GH the entire unamortized principal amount of the related promissory note and any accrued and unpaid interest thereon as of March 21, 2019 or such earlier date as is required pursuant to an Acceleration Notice (as defined in the related note agreement). The Company hasWe have reserved 3,181,816 shares of itsthe Company’s common stock for issuance under the March 2016 GH Warrant. The March 2016 GH Warrant, if exercisable, expires on March 21, 2022. The March 2016 GH Warrant is also subject to customary adjustments upon any recapitalization, capital reorganization or reclassification, consolidation, merger or transfer of all or substantially all of our assets.

In connection with the assetsGH December 2016 Note provides that we issue into escrow in the name of GH a warrant to purchase an aggregate of 1,136,363 shares of the Company.Company’s common stock, at an exercise price of $0.01 per share (the “December 2016 GH Warrant”). The December 2016 GH Warrant will not be released from escrow or be exercisable unless and until we fail to pay GH the entire unamortized principal amount of the December 2016 GF Warrant and any accrued and unpaid interest thereon as of December 30, 2019 or such earlier date as is required pursuant to an Acceleration Notice (as defined in the December 2016 GH Warrant). We have reserved 1,136,363 shares of common stock for issuance under the December 2016 GH Warrant. The December 2016 GH Warrant, if exercisable, expires on December 30, 2022. The December 2016 GH Warrant is also subject to customary adjustments upon any recapitalization, capital reorganization or reclassification, consolidation, merger or transfer of all or substantially all of our assets.

JL-US Escrow Warrant

In connection with an April 5, 2016 Unsecured Promissory Note, the Companywe issued into escrow in the name of JL-US a warrant to purchase an aggregate of 227,273 shares of the Company’s common stock at an exercise price of $0.01 per share (the “JL-US Warrant”). The JL-US Warrant will not be released from escrow or be exercisable unless and until the Company failswe fail to pay JL-US the entire unamortized principal amount of the JL-US Note and any accrued and unpaid interest thereon as of March 21, 2019 or such earlier date as is required pursuant to an Acceleration Notice (as defined in the JL-US Note). The Company hasWe have reserved 227,273 shares of itsthe Company’s common stock for issuance under the JL-US Warrant. The JL-US Warrant, if exercisable, expires on March 21, 2022. The JL-US Warrant is also subject to customary adjustments upon any recapitalization, capital reorganization or reclassification, consolidation, merger or transfer of all or substantially all of the assets of the Company.our assets.

Little Harbor Escrow Warrant

The Little Harbor July 2016 Note provides that the Companywe issue into escrow in the name of Little Harbor a warrant to purchase an aggregate of 2,168,178 shares of Common Stockcommon stock at an exercise price of $.01$0.01 per share (the “Little Harbor July 2016 Warrant”). The Little Harbor July 2016 Warrant will not be released from escrow or be exercisable unless and until the Company failswe fail to pay Little Harbor the entire unamortized principal amount of the Little Harbor July 2016 Note and any accrued and unpaid interest thereon as of January 28, 2019 or such earlier date as is required pursuant to an Acceleration Notice (as defined in the Little Harbor July 2016 Note). The Company hasWe have reserved 2,168,178 shares of Common Stockthe Company’s common stock for issuance under the Little Harbor July 2016 Warrant. The Little Harbor July 2016 Warrant, if exercisable, expires on July 21, 2022. The Little Harbor July 2016 Warrant is also subject to customary adjustments upon any recapitalization, capital reorganization or reclassification, consolidation, merger or transfer of all or substantially all of the assets of the Company.our assets. The Little Harbor July 2016 Warrant grants Little Harbor certain registration rights for the shares of Common Stockthe Company’s common stock issuable upon exercise of the Little Harbor July 2016 Warrant.

NOTE 8 – DERIVATIVE LIABILITIES

The number of shares of common stock issuable pursuant to certain warrants issued in 2015 will be increased if the Company’sour adjusted EBITDA or the market price of the Company’s common stock do not meet certain defined amounts. The Company hasWe have recorded the estimated fair value of the warrants as of the date of issuance. Due to the variable terms of the warrant agreements, the warrants are recorded as derivative liabilities with a corresponding charge to our consolidated statements of comprehensive income (loss) for changes in the estimated fair value of the warrants from the date of issuance to each balance sheet reporting date are recorded as derivative liabilities with a corresponding charge to our condensed consolidated statements of comprehensive income (loss).date. As of September 30, 2016, the Company hasMarch 31, 2017, we have estimated the total fair value of the derivative liabilities to be $2,988$7,453 as compared to $33,091$6,455 as of December 31, 2015. Accordingly, the Company recorded a gain on change in derivative liabilities of $14,065 and $28,128 for the three and nine months ended September 30, 2016, respectively.The Company2016. We had the following activity in itsour derivative liabilities account since December 31, 2015:2016:

The value of the derivative liabilities is generally estimated using an options lattice model with multiple inputs and assumptions, including the market price of the Company’s common stock, stock price volatility and other assumptions to project EBITDA and other reset events. These inputs and assumptions are subject to management’s judgment and can vary materially from period to period.

NOTE 9 – STOCKHOLDERS’ EQUITY (DEFICIT)

Preferred Stock

The Company has authorized 500,000,000 shares of preferred stock with a par value of $0.001 per share. No shares of the preferred stock have been issued.

Twinlab Consolidation Corporation 2013 Stock Incentive Plan

The only equity compensation plan currently in effect is the Twinlab Consolidation Corporation 2013 Stock Incentive Plan (the “TCC Plan”), which was assumed by the Company on September 16, 2014. The TCC Plan originally established a pool of 20,000,000 shares of common stock for issuance as incentive awards to employees for the purposes of attracting and retaining qualified employees who will aid in the success of the Company. From January through December 2015, the Company granted Restricted Stock Units to certain employees of the Company pursuant to the TCC Plan. Each Restricted Stock Unit relates to one share of the Company’s common stock. The Restricted Stock Unit awards vest 25% each annually on various dates through 2019. The Company estimated the grant date fair market value per share of the Restricted Stock Units and is amortizing the total estimated grant date value over the vesting periods. During the ninethree months ended September 30, 2016, a total of 822,890March 31, 2017, there were not any shares of common stock were issued to employees pursuant to the vesting of Restricted Stock Units. AsUnits.As of September 30, 2016, 6,878,520March 31, 2017, 5,544,175 shares remain available for use in the TCC Plan.

Separation and Release Agreement

The employment of Thomas A. Tolworthy as President and Chief Executive Officer of the Company was terminated by the Company on March 16, 2016.

Common Stock Repurchase

On March 23, 2016, the Company and Mr. Tolworthy entered intoJanuary 5, 2017, pursuant to a Separation and ReleaseRepurchase Agreement (the “Separation Agreement”). Pursuant to the Separation Agreement, the Company purchased from Mr. Tolworthy 35,551,724642,366 shares of the Company’s common stock were returned for an aggregate repurchase price of $500.less than $1.

In connection with the Separation Agreement, Mr. Tolworthy also surrendered 9,306,898 shares of the Company’s common stock pursuant to that certain Surrender Agreement between Mr. Tolworthy and the Company, dated September 3, 2014.

Treasury Stock

In March 2016, the Company purchased an aggregate of 38,111,112 shares of its common stock from former employees. These repurchases included (a) the purchase of 2,559,388 unvested restricted shares previously acquired by employees under the TCC Plan for total cash consideration of $1 (equal to the employees’ original purchase price), and (b) the purchase, as referenced immediately above, of 35,551,724 shares from Thomas A. Tolworthy for total cash consideration of $500. In addition, and as referenced immediately above, Mr. Tolworthy surrendered 9,306,898 shares to the Company during the nine months ended September 30, 2016 pursuant to contractual agreements between him and the Company. All such repurchased and surrendered shares, amounting to 47,418,010 shares, have been placed in treasury.

Warrant Exercises

As discussed in Note 7, the Company issued JL warrants to purchase an aggregate of 2,329,400 shares of the Company’s common stock, at an aggregate exercise price of $0.01, through February 13, 2020. These warrants were ultimately assigned to two individuals. On February 4, 2016, one individual exercised warrants to acquire a total of 930,538 shares of the Company’s common stock for an aggregate purchase price of $0. On February 4, 2016, another individual exercised warrants to acquire a total of 257,457 shares of the Company’s common stock for an aggregate purchase price of $0.

As discussed in Note 7, warrants were exercised for a total of 1,697,136 shares of the Company’s common stock for an aggregate purchase price of $1, including the warrant exercises discussed in the paragraph above and warrants exercised by Golisano LLC for a total of 509,141 shares of the Company’s common stock.

Stock Subscription Receivable and Loss on Stock Price Guarantee

At September 30, 2016,March 31, 2017, the stock subscription receivable dated August 1, 2014 for the purchase of 1,528,384 shares of the Company’s common stock had a principal balance of $30 and bears interest at an annual rate of 5%.

On August 6, 2016, the 18-month anniversary of the closing of a share purchase agreement, the Company mustwe were required to pay the purchaser of the common stock the difference between $2.29 per share and either a defined market price or a price per share determined by a valuation firm acceptable to both parties. Based on an outside professional valuation performed on the company’s common stock, the Company estimated the stock price guarantee payment to be $3,210. Accordingly, the Company recorded a loss on the stock purchase price guarantee of $3,210 during the nine months ended September 30, 2016 and a corresponding liability for the same amount as of September 30,in 2016, which is included in accrued expenses and other current liabilities in the accompanying condensed consolidated balance sheets. As of the filing date of this Form 10-Q, the Company haswe have not yet paid the liability to the purchaser and the Company iswe are negotiating with the purchaser on extending the payment date. The CompanyWe cannot provide any assurance that itwe will be successful in negotiating an extension of the payment date. If the Company iswe are not successful, the purchaser may sue the company for breach of contract.

Overview

This Quarterly Report on Form 10-Q contains forward-looking statements. Any statements contained herein that are not statements of historical fact may be deemed to be forward-looking statements within the meaning of Section 21E of the Securities Exchange Act of 1934, as amended (the “Exchange Act”). The words “believes,” “anticipates,” “plans,” “expects,” ‘intends”“intends” and similar expressions identify some of the forward-looking statements. Forward-looking statements are not guarantees of performance or future results and involve risks, uncertainties and assumptions. The factors discussed elsewhere in this Form 10-Q and in subsequent Quarterly Reports on Form 10-Q and Annual Reports on Form 10-K, could also cause actual results to differ materially from those indicated by the Company’sour forward-looking statements. The Company undertakesWe undertake no obligation to publicly update or revise any forward-looking statements.

Our Operations

We are an integrated manufacturer, marketer, distributor and retailer of branded nutritional supplements and other natural products sold to and through domestic health and natural food stores, mass market retailers, specialty stores retailers, on-line retailers and websites. Internationally, we market and distribute branded nutritional supplements and other natural products to and through health and natural product distributors and retailers.

Our products include vitamins, minerals, specialty supplements and sports nutrition products primarily under the Twinlab® brand (including the Twinlab® Fuel familybrand of sports nutrition products), Reserveage™ and Reserveage™ nutrition brand ResVitale® brand name.brands. We also manufacture and sell diet and energy products under the Metabolife® brand name and Re-Body® brand name, a line of products that promote joint health under the Trigosamine® brand name,brands and a full line of herbal teas under the Alvita® brand name.brand. To accommodate consumer preferences, our products come in various formulations and delivery forms, including capsules, tablets, softgels, chewables, liquids, sprays, powders and whole herbs. These products are sold primarily through health and natural food stores and national and regional drug store chains, supermarkets, and mass-market retailers.

We also perform contract manufacturing services for private label products.  Our contract manufacturing business involves the manufacture of custom products to the specifications of a customer who requires finished product under the customer’s own brand name.  We do not market these private label products as our business is to manufacture and sell the products to the customer, who then markets and sells the products to retailers or end consumers.

We manufacture and/or distribute one of the broadest branded product lines in the industry with approximately 550260 stock keeping units, or SKUs, including approximately 250 SKUs sold internationally.SKUs. We believe that as a result of our emphasis on innovation, quality, loyalty, education and customer service, our brands are widely recognized in health and natural food stores and among their customers.

We focused significantly incontinue to focus on integrating our two 2015 on successfully obtaining funding for and completing two acquisitions which form the foundation for our consolidation and growth strategy.acquisitions. The first was the acquisition of the customer relationships of Nutricap, Labs, LLC (“Nutricap”), a provider of dietary supplement contract manufacturing services, into our subsidiary, NutraScience, onin February 6, 2015, and the second was the acquisition of 100% of the equity interests of Organic Holdings, LLC (“Organic Holdings”), a market leader in the healthy aging and beauty from within categories and owner of the award-winning Reserveage™ Nutrition brand. Consequently, the results ofbrand, in October 2015. Progress has been made in consolidating manufacturing operations and we continue to believe that these acquisitions significantly strengthened our operations for the three monthsproduct offerings, contract manufacturing services and nine months ended September 30, 2016 generally will not be comparableour sales and marketing capabilities, providing us with opportunities to the results ofimprove our operations for the three months and nine months ended September 30, 2015.market position in addition to adding to supply chain efficiencies.

Going Concern Uncertainty

The accompanying condensed consolidated financial statements have been prepared on a going concern basis, which assumes continuity of operations and realization of assets and liabilities in the ordinary course of business. SinceIn most periods since our formation, we have generated losses from operations. At September 30, 2016,March 31, 2017, we had an accumulated deficit of $215,203. These losses were associated with start-up activities and brand infrastructure development. Recently,$227,428. Historical losses are primarily attributable to lower than planned sales resulting from low fill rates on demand due to limitations of our working capital, limitations, delayed product introductions and postponed marketing activities, as well asmerger-related and other restructuring costs, and interest.interest and refinancing charges associated with our debt refinancing. Losses have been funded primarily through issuance of common stock borrowings from our stockholders and third-party or related party debt.

Because of this history of operating losses, significant interest expense on our debt, and the recording of significant derivative liabilities, we have a working capital deficiency of $1,719$4,343 at September 30, 2016.March 31, 2017. We also have significant$14,505 of debt, net of discount, due within the next 12 months. These continuing conditions, among others, raise substantial doubt about our ability to continue as a going concern.

Management has addressed operating issues through the following actions: focusing on growing the core business and brands; continuing emphasis on major customers and key products; reducing manufacturing and operating costs and continuing to negotiate lower prices from major suppliers. During the ninethree months ended September 30, 2016,March 31, 2017, we obtained debt funding totaling $24,678$3,267 to fund current operations. Additionally, in connection withexecute the July 2016 promissory note agreements with two related-party lenders, pursuant to draw requests we made, the lenders may loan us up to an additional principal amount of $4,362.new supply chain initiatives and increase inventory levels. It is possible that we may need additional capital to execute our business plan. If additional funding is required, there can be no assurance that sources of funding will be available when needed on acceptable terms or at all.

Critical Accounting Policies and Estimates

This discussion and analysis of our financial condition and results of operations is based on our condensed consolidated financial statements, which we have prepared in accordance with the U.S. generally accepted accounting principles. The preparation of our financial statements required us to make estimates and assumptions that affected the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the dates of the financial statements and the reported amounts of net sales and expenses during the reported periods. Significant estimates include values and lives assigned to acquired intangible assets, reserves for customer returns and allowances, uncollectible accounts receivable, valuation adjustments for slow moving, obsolete and/or damaged inventory and valuation, recoverability of long-lived assets, intangibles and goodwill, estimated values of stock options and warrants, share-based compensation, and the identification and valuation of derivatives. Actual results may differ from these estimates.

Our critical accounting policies and estimates include the following:

Revenue Recognition

Revenue from product sales, net of estimated returns and allowances, is recognized when evidence of an arrangement is in place, related prices are fixed and determinable, contractual obligations have been satisfied, title and risk of loss have been transferred to the customer and collection of the resulting receivable is reasonably assured. Shipping terms are generally freight on board shipping point. We sell predominately in the North American and European markets, with international sales transacted in U.S. Dollars.

Accounts Receivable and Allowances

We grant credit to customers and generally do not require collateral or other security. We perform credit evaluations of our customers and provide for expected claims, related to promotional items; customer discounts; shipping shortages and damages; and doubtful accounts based upon historical bad debt and claims experience.

Inventories

Inventories are stated at the lower of cost or market. Costs are determined using the weighted average cost method,net realizable value and are reduced by an estimated reserve for obsolete inventory.

Intangible assets consist primarily of trademarks and customer relationships, which are amortized on a straight-line basis over their estimated useful lives ranging from 3 to 30 years. The valuation and classification of these assets and the assignment of amortizable lives involve significant judgment and the use of estimates.

We believe that our long-term growth strategy supports our fair value conclusions. For intangible assets, the recoverability of these amounts is dependent upon achievement of our projections and the execution of key initiatives related to revenue growth and improved profitability.

Goodwill

Goodwill is not subject to amortization, but is reviewed for impairment annually, or more frequently whenever events or changes in circumstances indicate the carrying value of goodwill may not be recoverable. An impairment charge would be recorded to the extent the carrying value of goodwill exceeds its estimated fair value. The testing of goodwill under established guidelines for impairment requires significant use of judgment and assumptions. Changes in forecasted operations and other assumptions could materially affect the estimated fair values. Changes in business conditions could potentially require adjustments to these asset valuations.

Impairment of Long-Lived Assets

Long-lived assets, including intangible assets subject to amortization, are reviewed for impairment when changes in circumstances indicate that the carrying amount of the asset may not be recoverable. If the carrying amount of the asset exceeds the expected undiscounted cash flows of the asset, an impairment charge is recognized equal to the amount by which the carrying amount exceeds fair value. The testing of these intangibles under established guidelines for impairment requires significant use of judgment and assumptions. Changes in forecasted operations and other assumptions could materially affect the estimated fair values. Changes in business conditions could potentially require adjustments to these asset valuations.

GoodwillIndefinite-Lived Intangible Assets

Goodwill isIndefinite-lived intangible assets relating to the asset acquisition of Organic Holdings are determined to have an indefinite useful economic life and as such are not amortized, butamortized. Indefinite-lived intangible assets are tested for impairment on an annual basis atannually which consists of a comparison of the endfair value of our fiscal year and at an interim date if indicators of impairment exist.the asset with its carrying value.

Income Taxes

We account for income taxes using an asset and liability approach. Deferred income taxes are determined by applying currently enacted tax laws and rates to the cumulative temporary differences between the carrying values of assets and liabilities for financial statement and income tax purposes. Valuation allowances against deferred tax assets are recorded when we are unable to conclude that it is more likely than not that such deferred tax assets will be realized.

Value of Warrants Issued with Debt

We estimate the grant date value of certain warrants issued with debt, using an outside professional valuation firm, which uses the Monte Carlo option lattice model. We record therecordthe amounts as interest expense or debt discount, depending on the terms of the agreement. These estimates involve multiple inputs and assumptions, including the market price of the Company’s common stock, stock price volatility and other assumptions to project earningsprojectearnings before interest, taxes, depreciation and amortization (“EBITDA”) and other reset events. These inputs and assumptions are subject to management’s judgment and can vary materially from period to period.

Derivative Liabilities

We have recorded certain warrants as derivative liabilities at estimated fair value, as determined based on ourthe Company’s use of an outside professional valuation firm, due to the variable terms of the warrant agreements. The value of the derivative liabilities is generally estimated using Monte Carlo option lattice model with multiple inputs and assumptions, including the market price of the Company’s common stock, stock price volatility and other assumptions to project EBITDA and other reset events. These inputs and assumptions are subject to management’s judgment and can vary materially from period to period.

Share-Based Compensation

We record share-based compensation, including grants of restricted stock units, based on their grant date fair values and record compensation expense over the vesting period of the restricted stock awards.

Income Taxes

We account for income taxes using an asset and liability approach. Deferred income taxes are determined by applying currently enacted tax laws and rates to the cumulative temporary differences between the carrying values of assets and liabilities for financial statement and income tax purposes. Valuation allowances against deferred tax assets are recorded when we are unable to conclude that it is more likely than not that such deferred tax assets will be realized.

Results of Operations

Net Sales

Our net sales increased $6,489,$3,482, or 39%17%, to $23,046$24,099 for the three months ended September 30, 2016March 31, 2017 from $16,557$20,617 for the three months ended September 30, 2015. On a year-to-date basis, our net sales increased $5,670, or 9%, to $65,885 for the nine months ended September 30, 2016 from $60,215 for the nine months ended September 30, 2015.March 31, 2016. The increases in our net sales reflect the organic growth in our contract manufacturing as well as the decision to increase our fill rates to ship more product to our customers.

Gross Profit

Our gross profit increased $3,178, or 93%, to $6,600 for the three and nine months ended September 30, 2016March 31, 2017 from the corresponding periods of 2015 reflect the acquisition of Organic Holdings on October 5, 2015 and the acquisition of the Nutricap customer relationships by NutraScience on February 6, 2015. Without the 2015 acquisitions, our net sales would have decreased$3,422 for both the three and nine months ended September 30, 2016 dueMarch 31, 2016. The increases in part to operating cash constraints andour gross profit reflect the decision to exit certain lowlower margin, private label contract manufacturing.

Gross Profit

Our gross profit increased $4,645, or 191%, to $7,083, for the three months ended September 30, 2016 from $2,438 for the three months September 30, 2015. On a year-to-date basis, our gross profit increased $7,081, or 75%, to $16,480 for the nine months ended September 30, 2016 from $9,399 for the nine months ended September 30, 2015. The increases in our gross profit for the three and nine months ended September 30, 2016 from the corresponding periods of 2015 reflect the gross profit contributed by our 2015 acquisitions. Without the 2015 acquisitions, our net gross profit for the three months ended September 30, 2016 as compared to the corresponding period of 2015 would still have increased primarily attributable to improved margins due to a strategic effort to eliminate low margin business in 2016. Without the 2015 acquisitions, our net gross profit for the nine months ended September 30, 2016 as compared to the corresponding period of 2015 would have decreased primarily because of decreased net sales as discussed above.

Selling, General and Administrative Expenses

Our selling, general and administrative expenses increased $1,536,decreased $3,327, or 25%34%, to $7,760$6,595 for the three months ended September 30, 2016March 31, 2017 from $6,224$9,922 for the three months ended September 30, 2015. On a year-to-date basis, our selling, general and administrative expenses increased $5,071, or 24%, to $26,249 for the nine months ended September 30, 2016 from $21,178 for the nine months ended September 30, 2015.March 31, 2016. The increasesdecreases in our selling, general and administrative expenses for the three and nine months ended September 30, 2016 from the corresponding periods of 2015 reflect incremental expenses from our 2015 acquisitions. Without the 2015 acquisitions, our selling, general and administrative expenses would have decreasedare primarily due to the Company’sour reduction in force to right-size the number of employees against the needs of current operations on April 13, 2016.

Loss on Stock Purchase Price Guarantee

On August 6, 2016, the 18-month anniversary of the closing of a share purchase agreement, we mustwere required to pay the purchaser of the common stock the difference between $2.29 per share and either a defined market price or a price per share determined by a valuation firm acceptable to both parties. Based on an outside professional valuation performed on the company’s common stock, wethe Company estimated the stock price guarantee payment to be $3,210. Accordingly, wethe Company recorded a loss on the stock purchase price guarantee of $3,210 during the nine months ended September 30, 2016 and a corresponding liability for the same amount as of September 30,in 2016, which is included in accrued expenses and other current liabilities in the accompanying condensed consolidated balance sheets. As of the filing date of this Form 10-Q, we have not yet paid the liability to the purchaser and we are negotiating with the purchaser on further extending the payment date. We cannot provide any assurance that we will be successful in negotiating an extension of the payment date. If we are not successful, the purchaser may sue the company for breach of contract.

Interest Expense, Net

Our interest expense increased $857,$4, or 55%less than 1%, to $2,423$1,964 for the three months ended September 30, 2016March 31, 2017 from $1,566$1,960 for the three months ended September 30, 2015. On a year-to-date basis, our interest expense increased $1,250, or 24%, to $6,530 for the nine months ended September 30, 2016 from $5,280 for the nine months ended September 30, 2015. The increase in interest expense is due primarily to interest on new debt incurred in 2015 to complete the Nutricap and Organic Holdings acquisitions and new debt incurred during the first nine months of 2016, including the amortization of related debt discounts.March 31, 2016.

Gain (Loss) on Change in Derivative Liabilities

The number of shares of common stock issuable pursuant to certain warrants issued in 2015 will be increased if our audited adjusted earnings before interest, taxes, depreciation and amortization (“EBITDA”) or the market price of the Company’s common stock do not meet certain defined amounts. We have recorded the estimated fair value of the warrants as of the date of issuance. Due to the variable terms of the warrant agreements, changes in the estimated fair value of the warrants from the date of issuance to each balance sheet reporting date are recorded as derivative liabilities with a corresponding charge to our condensed consolidated statements of comprehensive income (loss). During the three months and nineended March 31, 2017, we recorded a loss on change in derivative liabilities of $998. During the three months ended September 30,March 31, 2016, we reportedrecorded a gain on change in derivative liabilities of $14,065 and $28,128, respectively. During the three and nine months ended September 30, 2015, we reported a loss on change in derivative liabilities of $4,167 and $14,523, respectively.$12,991.

Liquidity and Capital Resources

At September 30, 2016,March 31, 2017, we had an accumulated deficit of $215,203,$227,428, primarily because of our history of operating losses and our recording of derivative liabilities and loss on stock purchase guarantee. We have a working capital deficiency of $1,719$4,343 at September 30, 2016.March 31, 2017. Losses have been funded primarily through issuance of common stock, borrowings from our stockholders and third-party debt and proceeds from the exercise of warrants. As of September 30, 2016,March 31, 2017, we had cash of $3,045.$2,699. On an ongoing basis, we also seek to improve operating cash through trade receivables and payables management as well as inventory stocking levels. We used net cash in operating activities of $20,535$6,512 for the ninethree months ended September 30, 2016.March 31, 2017. During the ninethree months ended September 30, 2016,March 31, 2017, we incurred new debt of $24,678$3,267 and a net increase in borrowings on our senior credit facility of $3,342$2,030 to fund our operations and debt repayment of $5,562.$1,165.

Our total liabilities decreasedincreased by $4,960$6,215 to $97,275 at March 31, 2017 from $86,471$91,060 at December 31, 2015 to $81,511 at September 30, 2016. This decreaseincrease in our total liabilities was primarily due to a decreasean increase in our non-cash derivative liabilities of $30,103 and$998, liabilities related to operations of $3,119, partially offset by an increase of $3,210 in liability on stock purchase guarantee$513 and a net increase of $25,174$4,704 in debt, principally due to new debt financings obtained during the first ninethree months of 2016.2017. For discussion of our debt financings completed to date during 2016,2017, see Notes 6 and 7 in the Notes to Condensed Consolidated Financial Statements included in this Report.

Cash Flows from Operating, Investing and Financing Activities

Net cash used in operating activities was $20,535$6,512 for the ninethree months ended September 30, 2016March 31, 2017 as a result of our net incomeloss of $8,584,$2,956, a non-cash gainloss on change in derivative liabilities of $28,128$998, as well as other non-cash expenses totaling $10,016$1,612 and an increase in net operating assets and liabilities of $11,007.$6,166. By comparison, for the ninethree months ended September 30, 2015,March 31, 2016, net cash used in operating activities was $1,125$4,369 as a result of our net lossincome of $31,155, $1,319,a non-cash lossgain on change in derivative liabilities of $14,523, a non-cash gain on sale of intangible of $750$12,991 as well as other non-cash expenses of $5,694 andtotaling $6,361and a net decrease in net operating assets and liabilities of $10,563.$942. See Condensed Consolidated Statements of Cash Flows included in this Report for additional information.

Net cash used in investing activities for the ninethree months ended September 30,March 31, 2017 and 2016 was $119,$18 and $37, respectively, consisting of the purchase of property and equipment. Net cash used in investing activities for the nine months ended September 30, 2015 was $6,495, consisting of cash paid in the Nutricap acquisition of $6,126 and the purchase of property and equipment of $1,727, partially offset by proceeds from the sale of assets of $988 and cash provided by change in restricted cash of $370.

Net cash provided by financing activities was $22,459$4,132 for the ninethree months ended September 30, 2016,March 31, 2017, primarily consisting of proceeds from the issuance of debt of $22,089,$3,267, net borrowings of $3,342$2,030 under our revolving credit facilities, partially offset by repayment of debt of $2,973.$1,165.   Net cash provided by financing activities was $8,923$16,449 for the ninethree months ended September 30, 2015, primarilyMarch 31, 2016, consisting of proceeds from the exercise of warrants of $6,066, proceeds from the issuance of common stock of $2,500,$1, proceeds from the issuance of debt of $7,000,$19,000 and a decrease in security deposits of $19, partially offset by repayment of debt of $4,007 and net repayments under our revolving credit facilities and payment of debt issuance costs of $666.$2,571.

Ongoing Funding Requirements

As set forth above, we have obtained $24,678 inadditional debt financing to date in 20162017 to support operations. It is possible that we may need additional funding to enable us to fund our operating expenses and capital expenditure requirements.

Until such time, if ever, as we can generate substantial product revenues, we intend to finance our cash needs through a combination of equity offerings, debt financings, collaborations, strategic alliances and licensing arrangements. There can be no assurance that any of those sources of funding will be available when needed on acceptable terms or at all. To the extent that we raise additional capital through the sale of equity or convertible debt securities, the ownership interests of existing stockholders will be diluted, and the terms of these securities may include liquidation or other preferences that adversely affect the rights of existing stockholders. Debt financing, if available, may involve agreements that include covenants limiting or restricting our ability to take specific actions, such as incurring additional debt, making capital expenditures or declaring dividends. If we raise funds through collaborations, strategic alliances or licensing arrangements with third parties, we may have to relinquish valuable rights to our technologies, future revenue streams, research programs or product candidates or to grant licenses on terms that may not be favorable to us. If we are unable to raise additional funds through equity or debt financings or relationships with third parties when needed or on acceptable terms, we may be required to delay, limit, reduce or terminate our product development or future commercialization efforts; abandon our business strategy of growth through acquisitions; or grant rights to develop and market product candidates that we would otherwise prefer to develop and market ourselves.

Recent Accounting Pronouncements

Recent Accounting Pronouncements

In February 2016, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”) No. 2016-02, “Leases (Topic 842)”. The amendments in this ASU revise the accounting related to lessee accounting. Under the new guidance, lessees will be required to recognize a lease liability and a right-of-use asset for all leases. The new lease guidance also simplifies the accounting for sale and leaseback transactions primarily because lessees must recognize lease assets and lease liabilities. The amendments in this ASU are effective for public companies for fiscal years beginning after December 15, 2018 and are to be applied through a modified retrospective transition approach for leases existing at, or entered into after, the beginning of the earliest comparative period presented in the financial statements. Early adoption is permitted. We have not yet determined the impact on our consolidated financial statements of the adoption of this new accounting pronouncement.

In March 2016,January 2017, the FASB issued ASU No. 2016-09, “Stock Compensation2017-04, “Simplifying the Test for Goodwill Impairment (Topic 718)350)”, which is intended to simplify several aspectsremoves Step 2 of the accounting for share-based payment award transactions, includinggoodwill impairment test that requires a hypothetical purchase price allocation.  A goodwill impairment will now be the income tax impacts,amount by which a reporting unit’s carrying value exceeds its fair value, not to exceed the classification on the statementcarrying amount of cash flows, and forfeitures.goodwill.  The amendments in this ASU are effective for fiscal years beginning after December 15, 2016, including interim periods. We have not yet determined the impact on our consolidated financial statements of the2019.  Early adoption of this new accounting pronouncement.