On January 2, 2014, Biozone sold substantially all its operating assets to MusclePharm, a public company trading on the OTCBB, in exchange for 1,200,000 shares of MusclePharm common stock. 600,000 shares were placed into escrow for a period of 9 months (the “Escrow Period”) to cover indemnification obligations. Additionally, MusclePharm had the option to purchase the shares held in escrow at a purchase price of $10.00 per share during the Escrow Period, which ended on October 2, 2014 (the “Call Option”). The remaining 600,000 non-escrowed shares were issued to Biozone upon closing. This transaction occurred immediately prior to the Merger described in Note 1 above. These 600,000 non-escrowed shares were sold for $9.00 per share in June 2014 in a private sale. The unrealized holding gain of $480,000 on these shares was reclassified to realizede gain from accumulated other comprehensive income in June 2014. On September 29, 2014, the Company signed a Memo of Understanding in which it agreed to release 90,000 shares of MusclePharm stock in exchange for a release from all claims which MusclePharm had made concerning assets which it acquired in its purchase of assets from the Company in January 2014. This agreement resulted in recording a net loss of $584,000 in Other income (expense) based on the original basis of the shares received in January 2014 being released for no consideration. The net loss of $584,000 is presented based on teh fair value of these shares of $1,188,000 as of September 30, 2014 offest by the unrelaized gain of $604,000 which was reclassified from accumulated other comprehensive income to realized gain as of September 30, 2014. As of September 30, 2014, therefore, 510,000 shares remained in escrow. MusclePharm did not withdraw the portion of its claim of $3,037,000 that relates to the pending eviction proceedings described in Note 11 below and will continue to hold in escrow 260,000 shares of its stock pending such time as MusclePharm and the Company can reach a mutually agreeable arrangement. In October 2014, MusclePharm exercised its right to repurchase 250,000 shares of MusclePharm shares at $10.00 per share. As of September 30, 2014, these shares are recorded at $2,500,000. As of October 2, 2014, the right of MusclePharm to repurchase additional shares terminated.

The estimated fair value of the MusclePharm escrowed securities is determined at each balance sheet date. Any decrease or increase in the estimated fair value of the securities since the most recent balance sheet date is recorded as a component of other comprehensive income (loss). Since the shares held in escrow are subject to restrictions on the Company’s ability to sell them freely in the open market, the fair value of such shares is estimated by applying a discount for lack of marketability to the quoted market price of unrestricted shares of MusclePharm. The discount was estimated to be approximately $363,491 as of September 30, 2014. As a result, the 260,000 MusclePharm shares which will remain in escrow are recorded on the consolidated balance sheet at their estimated fair value of $3,042,509 as of September 30, 2014 and are recorded as long-term assets based on uncertainty regarding when the Company will be able to sell these shares. The market price of those shares was $3,406,000 as of September 30, 2014. The 250,000 MusclePharm shares which were repurchased by MusclePharm at $10.00 per share in October 2014 are recorded on the consolidated balance sheet at their estimated fair value of $2,500,000.