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<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in"><font style="font-size: 8pt"></font></p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in"><font style="font-size: 8pt">Atomera
Incorporated (“Atomera” or the “Company”) was incorporated in the state of Delaware in March 2007 under
the name MEARS Technologies, Inc. and is engaged in the development, commercialization and licensing of proprietary processes
and technologies for the semiconductor industry. On January 12, 2016, the Company changed its name to Atomera Incorporated.</font></p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in"><font style="font-size: 8pt"> </font></p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in"><font style="font-size: 8pt">The
Company has not yet generated revenue from planned principal operations, and is devoting substantially all of its efforts toward
technology research and development and to securing customers for its technology. The Company has primarily financed operations
through private placements of equity and debt securities and the Company’s Initial Public Offering (the “IPO”)
which was consummated on August 10, 2016.</font></p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in"><font style="font-size: 8pt"></font></p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in"><font style="font-size: 8pt">At
September 30, 2017, the Company had cash and cash equivalents of approximately $19.6 million and working capital of approximately
$18.9 million. For the nine months ended September 30, 2017, the Company had a net loss of approximately $10.5 million with approximately
$7.1 million of cash used in operations. The Company has not generated revenues since inception and has incurred recurring operating
losses. At September 30, 2017, the Company had an accumulated deficit of approximately $106.5 million.</font></p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in"><font style="font-size: 8pt"> </font></p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in"><font style="font-size: 8pt">The
Company’s operating plans for the next 12 months include increased headcount in research and development and increased spending
on outsourced fabrication and testing. Based on the funds it has available as of the date of the filing of this report, the Company
believes that it has sufficient capital to fund its current business plans and obligations over, at least, 12 months from the
date that these financial statements have been issued. The Company also believes that it has sufficient capital to enable one
or more customers to license and qualify its technology and to subsequently start full-scale industrial production of devices
that incorporate the Company’s technology. However, as the Company has not yet generated revenue from planned principal
operations, it is subject to all the risks inherent in the initial organization, financing, expenditures, complications and delays
in a new business. Accordingly, the Company may require additional capital, the receipt of which cannot be assured. In the event
the Company requires additional capital, there can be no guarantee that funds will be available on commercially reasonable terms,
if at all.</font></p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><font style="font-size: 8pt"><i></i></font></p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><font style="font-size: 8pt"><i>Significant
accounting policies</i></font></p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><font style="font-size: 8pt"><i> </i></font></p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in"><font style="font-size: 8pt">There
have been no material changes in the Company’s significant accounting policies to those previously disclosed in the Company’s
Annual Report on Form 10-K filed with the Securities and Exchange Commission (“SEC”) on March 31, 2017.</font></p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in"><font style="font-size: 8pt"> </font></p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><font style="font-size: 8pt"><i>Basis of presentation of unaudited
condensed financial information</i></font></p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><font style="font-size: 8pt"><i> </i></font></p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in"><font style="font-size: 8pt">The
unaudited condensed financial statements of the Company for the three and nine months ended September 30, 2017 and 2016 have been
prepared in accordance with accounting principles generally accepted in the United States of America (“GAAP”) for
interim financial information and pursuant to the requirements for reporting on Form 10-Q and Article 8 of Regulation S-X. Accordingly,
they do not include all the information and footnotes required by GAAP for complete financial statements. However, such information
reflects all adjustments (consisting solely of normal recurring adjustments), which are, in the opinion of management, necessary
for the fair presentation of the financial position and the results of operations. Results shown for interim periods are not necessarily
indicative of the results to be obtained for a full fiscal year. The balance sheet information as of December 31, 2016 was derived
from the audited financial statements included in the Company's financial statements as of and for the year ended December 31,
2016 included in the Company’s Annual Report on Form 10-K filed with the SEC on March 31, 2017. These financial statements
should be read in conjunction with that report.</font></p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 27.5pt"><font style="font-size: 8pt"> </font> </p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><font style="font-size: 8pt"><i>Adoption of recent accounting
standards</i></font></p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><font style="font-size: 8pt"><i> </i></font></p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"></p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in"><font style="font-size: 8pt">In
March 2016, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”)
No. 2016-06, <i>Derivatives and Hedging (Topic 815): Contingent Put and Call Options in Debt Instruments</i>. This new standard
simplifies the embedded derivative analysis for debt instruments containing contingent call or put options by removing the requirement
to assess whether a contingent event is related to interest rates or credit risks. The Company has adopted ASU 2016-06 as of January
1, 2017. The ASU did not have an impact on the Company’s financial condition or results of operations.</font></p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><font style="font-size: 8pt"> </font></p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"></p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><font style="font-size: 8pt"><i>Recent
accounting standards</i></font></p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><font style="font-size: 8pt"><i> </i></font></p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in"><font style="font-size: 8pt">In
May 2017, the FASB issued ASU No. 2017-09, C<i>ompensation–Stock Compensation (Topic 718): Scope of Modification Accounting</i>,
clarifying when a change to the terms or conditions of a share-based payment award must be accounted for as a modification. The
new guidance requires modification accounting if the fair value, vesting condition or the classification of the award is not the
same immediately before and after a change to the terms and conditions of the award. The new guidance is effective for the Company
on a prospective basis beginning on January 1, 2018, with early adoption permitted. The Company has not yet adopted this update
and does not expect this standard to have a material impact on its financial position, results of operations or financial statement
disclosure.</font></p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><font style="font-size: 8pt"><i></i></font></p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><font style="font-size: 8pt"><i>Significant
accounting policies</i></font></p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><font style="font-size: 8pt"><i> </i></font></p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in"><font style="font-size: 8pt">There
have been no material changes in the Company’s significant accounting policies to those previously disclosed in the Company’s
Annual Report on Form 10-K filed with the Securities and Exchange Commission (“SEC”) on March 31, 2017.</font></p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in"><font style="font-size: 8pt"></font></p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><font style="font-size: 8pt"><i>Basis of presentation of unaudited
condensed financial information</i></font></p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><font style="font-size: 8pt"><i> </i></font></p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in"><font style="font-size: 8pt">The
unaudited condensed financial statements of the Company for the three and nine months ended September 30, 2017 and 2016 have been
prepared in accordance with accounting principles generally accepted in the United States of America (“GAAP”) for
interim financial information and pursuant to the requirements for reporting on Form 10-Q and Article 8 of Regulation S-X. Accordingly,
they do not include all the information and footnotes required by GAAP for complete financial statements. However, such information
reflects all adjustments (consisting solely of normal recurring adjustments), which are, in the opinion of management, necessary
for the fair presentation of the financial position and the results of operations. Results shown for interim periods are not necessarily
indicative of the results to be obtained for a full fiscal year. The balance sheet information as of December 31, 2016 was derived
from the audited financial statements included in the Company's financial statements as of and for the year ended December 31,
2016 included in the Company’s Annual Report on Form 10-K filed with the SEC on March 31, 2017. These financial statements
should be read in conjunction with that report.</font></p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 27.5pt"></p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><font style="font-size: 8pt"><i>Adoption of recent accounting
standards</i></font></p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><font style="font-size: 8pt"><i> </i></font></p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"></p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in"><font style="font-size: 8pt">In
March 2016, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”)
No. 2016-06, <i>Derivatives and Hedging (Topic 815): Contingent Put and Call Options in Debt Instruments</i>. This new standard
simplifies the embedded derivative analysis for debt instruments containing contingent call or put options by removing the requirement
to assess whether a contingent event is related to interest rates or credit risks. The Company has adopted ASU 2016-06 as of January
1, 2017. The ASU did not have an impact on the Company’s financial condition or results of operations.</font></p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><font style="font-size: 8pt"> </font></p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><font style="font-size: 8pt"></font></p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"></p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><font style="font-size: 8pt"><i>Recent
accounting standards</i></font></p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><font style="font-size: 8pt"><i> </i></font></p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in"><font style="font-size: 8pt">In
May 2017, the FASB issued ASU No. 2017-09, C<i>ompensation–Stock Compensation (Topic 718): Scope of Modification Accounting</i>,
clarifying when a change to the terms or conditions of a share-based payment award must be accounted for as a modification. The
new guidance requires modification accounting if the fair value, vesting condition or the classification of the award is not the
same immediately before and after a change to the terms and conditions of the award. The new guidance is effective for the Company
on a prospective basis beginning on January 1, 2018, with early adoption permitted. The Company has not yet adopted this update
and does not expect this standard to have a material impact on its financial position, results of operations or financial statement
disclosure.</font></p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in"><font style="font-size: 8pt"></font></p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in"><font style="font-size: 8pt">Basic
net loss per share is calculated by dividing the net loss by the weighted-average number of shares outstanding for the period.
Diluted net loss per share is computed by dividing the net loss by the weighted-average number of shares and dilutive share equivalents
outstanding for the period, determined using the treasury-stock and if-converted methods. Since the Company has had net losses
for all periods presented, all potentially dilutive securities are anti-dilutive. Accordingly, basic and diluted net loss per
share are equal.</font></p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in"><font style="font-size: 8pt"> </font></p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in"><font style="font-size: 8pt">The
following potential common stock equivalents were not included in the calculation of diluted net loss per common share because
the inclusion thereof would be anti-dilutive (in thousands):</font></p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in"><font style="font-size: 8pt"> </font></p>
<table cellpadding="0" cellspacing="0" style="border-collapse: collapse; width: 100%; font: 10pt Times New Roman, Times, Serif">
<tr style="vertical-align: bottom">
<td><font style="font-size: 8pt"> </font></td><td style="font-weight: bold; padding-bottom: 1pt"><font style="font-size: 8pt"> </font></td>
<td colspan="6" style="font-weight: bold; text-align: center; border-bottom: Black 1pt solid"><font style="font-size: 8pt">September
30,</font></td><td style="padding-bottom: 1pt; font-weight: bold"><font style="font-size: 8pt"> </font></td></tr>
<tr style="vertical-align: bottom">
<td><font style="font-size: 8pt"> </font></td><td style="font-weight: bold; padding-bottom: 1pt"><font style="font-size: 8pt"> </font></td>
<td colspan="2" style="font-weight: bold; text-align: center; border-bottom: Black 1pt solid"><font style="font-size: 8pt">2017</font></td><td style="padding-bottom: 1pt; font-weight: bold"><font style="font-size: 8pt"> </font></td><td style="font-weight: bold; padding-bottom: 1pt"><font style="font-size: 8pt"> </font></td>
<td colspan="2" style="font-weight: bold; text-align: center; border-bottom: Black 1pt solid"><font style="font-size: 8pt">2016</font></td><td style="padding-bottom: 1pt; font-weight: bold"><font style="font-size: 8pt"> </font></td></tr>
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<td style="width: 66%; text-align: left"><font style="font-size: 8pt">Stock Options</font></td><td style="width: 2%"><font style="font-size: 8pt"> </font></td>
<td style="width: 1%; text-align: left"><font style="font-size: 8pt"> </font></td><td style="width: 13%; text-align: right"><font style="font-size: 8pt">2,111</font></td><td style="width: 1%; text-align: left"><font style="font-size: 8pt"> </font></td><td style="width: 2%"><font style="font-size: 8pt"> </font></td>
<td style="width: 1%; text-align: left"><font style="font-size: 8pt"> </font></td><td style="width: 13%; text-align: right"><font style="font-size: 8pt">1,363</font></td><td style="width: 1%; text-align: left"><font style="font-size: 8pt"> </font></td></tr>
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<td style="padding-bottom: 1pt"><font style="font-size: 8pt">Warrants</font></td><td style="padding-bottom: 1pt"><font style="font-size: 8pt"> </font></td>
<td style="border-bottom: Black 1pt solid; text-align: left"><font style="font-size: 8pt"> </font></td><td style="border-bottom: Black 1pt solid; text-align: right"><font style="font-size: 8pt">765</font></td><td style="padding-bottom: 1pt; text-align: left"><font style="font-size: 8pt"> </font></td><td style="padding-bottom: 1pt"><font style="font-size: 8pt"> </font></td>
<td style="border-bottom: Black 1pt solid; text-align: left"><font style="font-size: 8pt"> </font></td><td style="border-bottom: Black 1pt solid; text-align: right"><font style="font-size: 8pt">765</font></td><td style="padding-bottom: 1pt; text-align: left"><font style="font-size: 8pt"> </font></td></tr>
<tr style="vertical-align: bottom; background-color: rgb(238,238,238)">
<td style="padding-bottom: 2.5pt"><font style="font-size: 8pt"> </font></td><td style="padding-bottom: 2.5pt"><font style="font-size: 8pt"> </font></td>
<td style="border-bottom: Black 2.5pt double; text-align: left"><font style="font-size: 8pt"> </font></td><td style="border-bottom: Black 2.5pt double; text-align: right"><font style="font-size: 8pt">2,876</font></td><td style="padding-bottom: 2.5pt; text-align: left"><font style="font-size: 8pt"> </font></td><td style="padding-bottom: 2.5pt"><font style="font-size: 8pt"> </font></td>
<td style="border-bottom: Black 2.5pt double; text-align: left"><font style="font-size: 8pt"> </font></td><td style="border-bottom: Black 2.5pt double; text-align: right"><font style="font-size: 8pt">2,128</font></td><td style="padding-bottom: 2.5pt; text-align: left"><font style="font-size: 8pt"> </font></td></tr>
</table>
<p style="margin-top: 0; margin-bottom: 0"><font style="font-size: 8pt"> </font></p>
<table cellpadding="0" cellspacing="0" style="border-collapse: collapse; width: 100%; font: 10pt Times New Roman, Times, Serif">
<tr style="vertical-align: bottom">
<td><font style="font-size: 8pt"> </font></td><td style="font-weight: bold; padding-bottom: 1pt"><font style="font-size: 8pt"> </font></td>
<td colspan="6" style="font-weight: bold; text-align: center; border-bottom: Black 1pt solid"><font style="font-size: 8pt">September
30,</font></td><td style="padding-bottom: 1pt; font-weight: bold"><font style="font-size: 8pt"> </font></td></tr>
<tr style="vertical-align: bottom">
<td><font style="font-size: 8pt"> </font></td><td style="font-weight: bold; padding-bottom: 1pt"><font style="font-size: 8pt"> </font></td>
<td colspan="2" style="font-weight: bold; text-align: center; border-bottom: Black 1pt solid"><font style="font-size: 8pt">2017</font></td><td style="padding-bottom: 1pt; font-weight: bold"><font style="font-size: 8pt"> </font></td><td style="font-weight: bold; padding-bottom: 1pt"><font style="font-size: 8pt"> </font></td>
<td colspan="2" style="font-weight: bold; text-align: center; border-bottom: Black 1pt solid"><font style="font-size: 8pt">2016</font></td><td style="padding-bottom: 1pt; font-weight: bold"><font style="font-size: 8pt"> </font></td></tr>
<tr style="vertical-align: bottom; background-color: rgb(238,238,238)">
<td style="width: 66%; text-align: left"><font style="font-size: 8pt">Stock Options</font></td><td style="width: 2%"><font style="font-size: 8pt"> </font></td>
<td style="width: 1%; text-align: left"><font style="font-size: 8pt"> </font></td><td style="width: 13%; text-align: right"><font style="font-size: 8pt">2,111</font></td><td style="width: 1%; text-align: left"><font style="font-size: 8pt"> </font></td><td style="width: 2%"><font style="font-size: 8pt"> </font></td>
<td style="width: 1%; text-align: left"><font style="font-size: 8pt"> </font></td><td style="width: 13%; text-align: right"><font style="font-size: 8pt">1,363</font></td><td style="width: 1%; text-align: left"><font style="font-size: 8pt"> </font></td></tr>
<tr style="vertical-align: bottom; background-color: White">
<td style="padding-bottom: 1pt"><font style="font-size: 8pt">Warrants</font></td><td style="padding-bottom: 1pt"><font style="font-size: 8pt"> </font></td>
<td style="border-bottom: Black 1pt solid; text-align: left"><font style="font-size: 8pt"> </font></td><td style="border-bottom: Black 1pt solid; text-align: right"><font style="font-size: 8pt">765</font></td><td style="padding-bottom: 1pt; text-align: left"><font style="font-size: 8pt"> </font></td><td style="padding-bottom: 1pt"><font style="font-size: 8pt"> </font></td>
<td style="border-bottom: Black 1pt solid; text-align: left"><font style="font-size: 8pt"> </font></td><td style="border-bottom: Black 1pt solid; text-align: right"><font style="font-size: 8pt">765</font></td><td style="padding-bottom: 1pt; text-align: left"><font style="font-size: 8pt"> </font></td></tr>
<tr style="vertical-align: bottom; background-color: rgb(238,238,238)">
<td style="padding-bottom: 2.5pt"><font style="font-size: 8pt"> </font></td><td style="padding-bottom: 2.5pt"><font style="font-size: 8pt"> </font></td>
<td style="border-bottom: Black 2.5pt double; text-align: left"><font style="font-size: 8pt"> </font></td><td style="border-bottom: Black 2.5pt double; text-align: right"><font style="font-size: 8pt">2,876</font></td><td style="padding-bottom: 2.5pt; text-align: left"><font style="font-size: 8pt"> </font></td><td style="padding-bottom: 2.5pt"><font style="font-size: 8pt"> </font></td>
<td style="border-bottom: Black 2.5pt double; text-align: left"><font style="font-size: 8pt"> </font></td><td style="border-bottom: Black 2.5pt double; text-align: right"><font style="font-size: 8pt">2,128</font></td><td style="padding-bottom: 2.5pt; text-align: left"><font style="font-size: 8pt"> </font></td></tr>
</table>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in"><font style="font-size: 8pt"></font></p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in"><font style="font-size: 8pt">On
March 17, 2015, the Company issued Senior Secured Convertible Notes (the “Secured Notes”) to certain investors under
which the Company borrowed approximately $7.4 million and it exchanged all of its previously outstanding unsecured convertible
promissory notes for Secured Notes with an aggregate principal balance of approximately $7.35 million. The total closing represented
$14.75 million. The Secured Notes were due on May 31, 2016 and accrued interest at a rate of 10% per annum. During March 2016,
the maturity date for the Secured Notes was extended to May 31, 2017.</font></p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in"><font style="font-size: 8pt"> </font></p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in"><font style="font-size: 8pt">During
April 2016, the Company issued additional secured Notes in the aggregate principal amount of approximately $5.96 million. These
notes have the same terms as the previous Secured Notes and mature on May 31, 2017.</font></p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in"><font style="font-size: 8pt"> </font></p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in"><font style="font-size: 8pt">During
the three and nine months ended September 30, 2016, the interest expense on the Secured Notes was approximately $1.3 million
and $2.6 million, respectively. On August 31, 2016, all principal and accrued interest were converted into shares of common
stock. There is no interest expense for the three and nine months ended September 30, 2017.</font></p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in"><font style="font-size: 8pt"></font></p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in"><font style="font-size: 8pt">On
January 14, 2005, the Company executed a Secured Promissory Note (the “Promissory Note”) with an officer of the Company.
Under the Promissory Note, the officer borrowed $187,500 from the Company. The Promissory Note bore interest at a fixed rate of
3.76% per annum, with interest-only payments due annually through the maturity date of January 14, 2014. In December 2015, the
Company agreed to extend the term of the note to January 14, 2019, subject to acceleration in the event of the sale or liquidation
of the Company, bankruptcy or like event. Effective January 2016, the Company cancelled the outstanding principal of the note
in the amount of $187,500. The cancellation of this note was recognized as a bonus to the officer and included in general and
administrative expenses in the accompanying statement of operations for the nine months ended September 30, 2016. As of the date
of the cancellation of the Promissory Note, there was accrued and unpaid interest under the note in the amount of approximately
$7,000, which amount has been repaid by the officer. In return for the cancellation of the note, the officer was required to reimburse
the Company for withholding taxes payable by the Company, in the amount of approximately $14,000.</font></p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in"><font style="font-size: 8pt"> </font> </p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in"><font style="font-size: 8pt">During
the three and nine months ended September 30, 2016, a director, who is also a shareholder of the Company, was paid $0 and $3,000,
respectively, for his work as a consultant for the Company. The director is no longer paid for consulting work.</font></p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in"><font style="font-size: 8pt"></font></p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in"><font style="font-size: 8pt">A
summary of warrant activity for the nine months ended September 30, 2017 is as follows (shares in thousands except per share and
contractual term):</font></p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in"><font style="font-size: 8pt"> </font></p>
<table cellpadding="0" cellspacing="0" style="border-collapse: collapse; width: 100%; font: 10pt Times New Roman, Times, Serif">
<tr style="vertical-align: bottom">
<td colspan="2" style="text-align: left"><font style="font-size: 8pt"> </font></td><td style="padding-bottom: 1pt"><font style="font-size: 8pt"> </font></td><td style="padding-bottom: 1pt"><font style="font-size: 8pt"> </font></td>
<td colspan="2" style="text-align: center; border-bottom: Black 1pt solid"><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><font style="font-size: 8pt"><b>Number
of</b></font></p> <p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><font style="font-size: 8pt"><b>Shares</b></font></p></td><td style="padding-bottom: 1pt"><font style="font-size: 8pt"> </font></td><td style="padding-bottom: 1pt"><font style="font-size: 8pt"> </font></td>
<td colspan="2" style="text-align: center; border-bottom: Black 1pt solid"><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><font style="font-size: 8pt"><b>Weighted-</b></font></p> <p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><font style="font-size: 8pt"><b>Average</b></font></p> <p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><font style="font-size: 8pt"><b>Exercise</b></font></p> <p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><font style="font-size: 8pt"><b>Price</b></font></p></td><td style="padding-bottom: 1pt"><font style="font-size: 8pt"> </font></td><td style="padding-bottom: 1pt"><font style="font-size: 8pt"> </font></td>
<td colspan="2" style="text-align: center; border-bottom: Black 1pt solid"><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><font style="font-size: 8pt"><b>Weighted-</b><br />
<b>Average</b></font></p> <p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><font style="font-size: 8pt"><b>Remaining</b></font></p> <p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><font style="font-size: 8pt"><b>Contractual</b></font></p> <p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><font style="font-size: 8pt"><b>Term
(In</b><br /> <b>Years)</b></font></p></td><td style="padding-bottom: 1pt"><font style="font-size: 8pt"> </font></td></tr>
<tr style="vertical-align: bottom; background-color: rgb(238,238,238)">
<td style="width: 1%; padding-bottom: 1pt; text-align: left"><font style="font-size: 8pt"> </font></td><td style="width: 47%; padding-bottom: 1pt; text-align: left"><font style="font-size: 8pt">Outstanding
at January 1, 2017</font></td><td style="width: 1%; padding-bottom: 1pt; text-align: left"><font style="font-size: 8pt"> </font></td><td style="width: 2%; padding-bottom: 1pt"><font style="font-size: 8pt"> </font></td>
<td style="width: 1%; border-bottom: Black 1pt solid; text-align: left"><font style="font-size: 8pt"> </font></td><td style="width: 13%; border-bottom: Black 1pt solid; text-align: right"><font style="font-size: 8pt">765</font></td><td style="width: 1%; padding-bottom: 1pt; text-align: left"><font style="font-size: 8pt"> </font></td><td style="width: 2%; padding-bottom: 1pt"><font style="font-size: 8pt"> </font></td>
<td style="width: 1%; padding-bottom: 1pt; text-align: left"><font style="font-size: 8pt">$</font></td><td style="width: 13%; padding-bottom: 1pt; text-align: right"><font style="font-size: 8pt">5.75</font></td><td style="width: 1%; padding-bottom: 1pt; text-align: left"><font style="font-size: 8pt"> </font></td><td style="width: 2%; padding-bottom: 1pt"><font style="font-size: 8pt"> </font></td>
<td style="width: 1%; padding-bottom: 1pt; text-align: left"><font style="font-size: 8pt"> </font></td><td style="width: 13%; padding-bottom: 1pt; text-align: right"><font style="font-size: 8pt"> </font></td><td style="width: 1%; padding-bottom: 1pt; text-align: left"><font style="font-size: 8pt"> </font></td></tr>
<tr style="vertical-align: bottom; background-color: White">
<td style="padding-bottom: 2.5pt; text-align: left"><font style="font-size: 8pt"> </font></td><td style="padding-bottom: 2.5pt; text-align: left"><font style="font-size: 8pt">Outstanding
at September 30, 2017</font></td><td style="padding-bottom: 2.5pt; text-align: left"><font style="font-size: 8pt"> </font></td><td style="padding-bottom: 2.5pt"><font style="font-size: 8pt"> </font></td>
<td style="border-bottom: Black 2.5pt double; text-align: left"><font style="font-size: 8pt"> </font></td><td style="border-bottom: Black 2.5pt double; text-align: right"><font style="font-size: 8pt">765</font></td><td style="padding-bottom: 2.5pt; text-align: left"><font style="font-size: 8pt"> </font></td><td style="padding-bottom: 2.5pt"><font style="font-size: 8pt"> </font></td>
<td style="border-bottom: Black 2.5pt double; text-align: left"><font style="font-size: 8pt">$</font></td><td style="border-bottom: Black 2.5pt double; text-align: right"><font style="font-size: 8pt">5.75</font></td><td style="padding-bottom: 2.5pt; text-align: left"><font style="font-size: 8pt"> </font></td><td style="padding-bottom: 2.5pt"><font style="font-size: 8pt"> </font></td>
<td style="border-bottom: Black 2.5pt double; text-align: left"><font style="font-size: 8pt"> </font></td><td style="border-bottom: Black 2.5pt double; text-align: right"><font style="font-size: 8pt">3.1</font></td><td style="padding-bottom: 2.5pt; text-align: left"><font style="font-size: 8pt"> </font></td></tr>
</table>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in"><font style="font-size: 8pt"> </font></p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in"><font style="font-size: 8pt">The
warrants outstanding at September 30, 2017 had an intrinsic value of approximately $635,000 based on a per-share stock price of
$3.89 as of September 30, 2017.</font></p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in"><font style="font-size: 8pt"> </font></p>
<table cellpadding="0" cellspacing="0" style="border-collapse: collapse; width: 100%; font: 10pt Times New Roman, Times, Serif">
<tr style="vertical-align: bottom">
<td colspan="2" style="text-align: left"><font style="font-size: 8pt"> </font></td><td style="padding-bottom: 1pt"><font style="font-size: 8pt"> </font></td><td style="padding-bottom: 1pt"><font style="font-size: 8pt"> </font></td>
<td colspan="2" style="text-align: center; border-bottom: Black 1pt solid"><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><font style="font-size: 8pt"><b>Number
of</b></font></p> <p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><font style="font-size: 8pt"><b>Shares</b></font></p></td><td style="padding-bottom: 1pt"><font style="font-size: 8pt"> </font></td><td style="padding-bottom: 1pt"><font style="font-size: 8pt"> </font></td>
<td colspan="2" style="text-align: center; border-bottom: Black 1pt solid"><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><font style="font-size: 8pt"><b>Weighted-</b></font></p> <p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><font style="font-size: 8pt"><b>Average</b></font></p> <p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><font style="font-size: 8pt"><b>Exercise</b></font></p> <p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><font style="font-size: 8pt"><b>Price</b></font></p></td><td style="padding-bottom: 1pt"><font style="font-size: 8pt"> </font></td><td style="padding-bottom: 1pt"><font style="font-size: 8pt"> </font></td>
<td colspan="2" style="text-align: center; border-bottom: Black 1pt solid"><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><font style="font-size: 8pt"><b>Weighted-</b><br />
<b>Average</b></font></p> <p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><font style="font-size: 8pt"><b>Remaining</b></font></p> <p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><font style="font-size: 8pt"><b>Contractual</b></font></p> <p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><font style="font-size: 8pt"><b>Term
(In</b><br /> <b>Years)</b></font></p></td><td style="padding-bottom: 1pt"><font style="font-size: 8pt"> </font></td></tr>
<tr style="vertical-align: bottom; background-color: rgb(238,238,238)">
<td style="width: 1%; padding-bottom: 1pt; text-align: left"><font style="font-size: 8pt"> </font></td><td style="width: 47%; padding-bottom: 1pt; text-align: left"><font style="font-size: 8pt">Outstanding
at January 1, 2017</font></td><td style="width: 1%; padding-bottom: 1pt; text-align: left"><font style="font-size: 8pt"> </font></td><td style="width: 2%; padding-bottom: 1pt"><font style="font-size: 8pt"> </font></td>
<td style="width: 1%; border-bottom: Black 1pt solid; text-align: left"><font style="font-size: 8pt"> </font></td><td style="width: 13%; border-bottom: Black 1pt solid; text-align: right"><font style="font-size: 8pt">765</font></td><td style="width: 1%; padding-bottom: 1pt; text-align: left"><font style="font-size: 8pt"> </font></td><td style="width: 2%; padding-bottom: 1pt"><font style="font-size: 8pt"> </font></td>
<td style="width: 1%; padding-bottom: 1pt; text-align: left"><font style="font-size: 8pt">$</font></td><td style="width: 13%; padding-bottom: 1pt; text-align: right"><font style="font-size: 8pt">5.75</font></td><td style="width: 1%; padding-bottom: 1pt; text-align: left"><font style="font-size: 8pt"> </font></td><td style="width: 2%; padding-bottom: 1pt"><font style="font-size: 8pt"> </font></td>
<td style="width: 1%; padding-bottom: 1pt; text-align: left"><font style="font-size: 8pt"> </font></td><td style="width: 13%; padding-bottom: 1pt; text-align: right"><font style="font-size: 8pt"> </font></td><td style="width: 1%; padding-bottom: 1pt; text-align: left"><font style="font-size: 8pt"> </font></td></tr>
<tr style="vertical-align: bottom; background-color: White">
<td style="padding-bottom: 2.5pt; text-align: left"><font style="font-size: 8pt"> </font></td><td style="padding-bottom: 2.5pt; text-align: left"><font style="font-size: 8pt">Outstanding
at September 30, 2017</font></td><td style="padding-bottom: 2.5pt; text-align: left"><font style="font-size: 8pt"> </font></td><td style="padding-bottom: 2.5pt"><font style="font-size: 8pt"> </font></td>
<td style="border-bottom: Black 2.5pt double; text-align: left"><font style="font-size: 8pt"> </font></td><td style="border-bottom: Black 2.5pt double; text-align: right"><font style="font-size: 8pt">765</font></td><td style="padding-bottom: 2.5pt; text-align: left"><font style="font-size: 8pt"> </font></td><td style="padding-bottom: 2.5pt"><font style="font-size: 8pt"> </font></td>
<td style="border-bottom: Black 2.5pt double; text-align: left"><font style="font-size: 8pt">$</font></td><td style="border-bottom: Black 2.5pt double; text-align: right"><font style="font-size: 8pt">5.75</font></td><td style="padding-bottom: 2.5pt; text-align: left"><font style="font-size: 8pt"> </font></td><td style="padding-bottom: 2.5pt"><font style="font-size: 8pt"> </font></td>
<td style="border-bottom: Black 2.5pt double; text-align: left"><font style="font-size: 8pt"> </font></td><td style="border-bottom: Black 2.5pt double; text-align: right"><font style="font-size: 8pt">3.1</font></td><td style="padding-bottom: 2.5pt; text-align: left"><font style="font-size: 8pt"> </font></td></tr>
</table>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in"><font style="font-size: 8pt"></font></p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in"><font style="font-size: 8pt">In
May 2017, the Company’s shareholders approved its 2017 Stock Incentive Plan (“2017 Plan”). The 2017 Plan provides
for the grant of non-qualified stock options and incentive stock options to purchase shares of the Company’s common stock
and for the grant of restricted and unrestricted share grants. The 2007 Stock Incentive Plan (“2007 Plan”) expired
in March 2017. The 2017 Plan provides for the issuance of 3,750,000 shares of common stock. All of the Company’s employees
and any subsidiary employees (including officers and directors who are also employees), as well as all of the Company’s
nonemployee directors and other consultants, advisors and other persons who provide services to the Company will be eligible to
receive incentive awards under the 2017 Plan. Generally stock options and restricted stock vest over a one to four-year period
from the date of grant under the 2017 Plan.</font></p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in"><font style="font-size: 8pt"> </font></p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in"><font style="font-size: 8pt">The
following table summarizes the stock-based compensation expense recorded in the Company’s results of operations during the
three and nine months ended September 30, 2017 and 2016 for stock options and restricted stock from the 2017 Plan and 2007 Plan
(in thousands):</font></p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in"><font style="font-size: 8pt"> </font></p>
<table cellpadding="0" cellspacing="0" style="border-collapse: collapse; width: 100%; font: 10pt Times New Roman, Times, Serif">
<tr style="vertical-align: bottom">
<td><font style="font-size: 8pt"> </font></td><td style="font-weight: bold; padding-bottom: 1pt"><font style="font-size: 8pt"> </font></td>
<td colspan="6" style="font-weight: bold; text-align: center; border-bottom: Black 1pt solid"><font style="font-size: 8pt">Three
Months Ended<br /> September 30,</font></td><td style="padding-bottom: 1pt; font-weight: bold"><font style="font-size: 8pt"> </font></td><td style="font-weight: bold; padding-bottom: 1pt"><font style="font-size: 8pt"> </font></td>
<td colspan="6" style="font-weight: bold; text-align: center; border-bottom: Black 1pt solid"><font style="font-size: 8pt">Nine
Months Ended<br /> September 30,</font></td><td style="padding-bottom: 1pt; font-weight: bold"><font style="font-size: 8pt"> </font></td></tr>
<tr style="vertical-align: bottom">
<td><font style="font-size: 8pt"> </font></td><td style="font-weight: bold; padding-bottom: 1pt"><font style="font-size: 8pt"> </font></td>
<td colspan="2" style="font-weight: bold; text-align: center; border-bottom: Black 1pt solid"><font style="font-size: 8pt">2017</font></td><td style="padding-bottom: 1pt; font-weight: bold"><font style="font-size: 8pt"> </font></td><td style="font-weight: bold; padding-bottom: 1pt"><font style="font-size: 8pt"> </font></td>
<td colspan="2" style="font-weight: bold; text-align: center; border-bottom: Black 1pt solid"><font style="font-size: 8pt">2016</font></td><td style="padding-bottom: 1pt; font-weight: bold"><font style="font-size: 8pt"> </font></td><td style="font-weight: bold; padding-bottom: 1pt"><font style="font-size: 8pt"> </font></td>
<td colspan="2" style="font-weight: bold; text-align: center; border-bottom: Black 1pt solid"><font style="font-size: 8pt">2017</font></td><td style="padding-bottom: 1pt; font-weight: bold"><font style="font-size: 8pt"> </font></td><td style="font-weight: bold; padding-bottom: 1pt"><font style="font-size: 8pt"> </font></td>
<td colspan="2" style="font-weight: bold; text-align: center; border-bottom: Black 1pt solid"><font style="font-size: 8pt">2016</font></td><td style="padding-bottom: 1pt; font-weight: bold"><font style="font-size: 8pt"> </font></td></tr>
<tr style="vertical-align: bottom; background-color: rgb(238,238,238)">
<td style="width: 40%; text-align: left"><font style="font-size: 8pt">Research and development</font></td><td style="width: 2%"><font style="font-size: 8pt"> </font></td>
<td style="width: 1%; text-align: left"><font style="font-size: 8pt">$</font></td><td style="width: 11%; text-align: right"><font style="font-size: 8pt">115</font></td><td style="width: 1%; text-align: left"><font style="font-size: 8pt"> </font></td><td style="width: 2%"><font style="font-size: 8pt"> </font></td>
<td style="width: 1%; text-align: left"><font style="font-size: 8pt">$</font></td><td style="width: 11%; text-align: right"><font style="font-size: 8pt">50</font></td><td style="width: 1%; text-align: left"><font style="font-size: 8pt"> </font></td><td style="width: 2%"><font style="font-size: 8pt"> </font></td>
<td style="width: 1%; text-align: left"><font style="font-size: 8pt">$</font></td><td style="width: 11%; text-align: right"><font style="font-size: 8pt">338</font></td><td style="width: 1%; text-align: left"><font style="font-size: 8pt"> </font></td><td style="width: 2%"><font style="font-size: 8pt"> </font></td>
<td style="width: 1%; text-align: left"><font style="font-size: 8pt">$</font></td><td style="width: 11%; text-align: right"><font style="font-size: 8pt">63</font></td><td style="width: 1%; text-align: left"><font style="font-size: 8pt"> </font></td></tr>
<tr style="vertical-align: bottom; background-color: White">
<td style="text-align: left"><font style="font-size: 8pt">General and administrative</font></td><td><font style="font-size: 8pt"> </font></td>
<td style="text-align: left"><font style="font-size: 8pt"> </font></td><td style="text-align: right"><font style="font-size: 8pt">647</font></td><td style="text-align: left"><font style="font-size: 8pt"> </font></td><td><font style="font-size: 8pt"> </font></td>
<td style="text-align: left"><font style="font-size: 8pt"> </font></td><td style="text-align: right"><font style="font-size: 8pt">832</font></td><td style="text-align: left"><font style="font-size: 8pt"> </font></td><td><font style="font-size: 8pt"> </font></td>
<td style="text-align: left"><font style="font-size: 8pt"> </font></td><td style="text-align: right"><font style="font-size: 8pt">2,493</font></td><td style="text-align: left"><font style="font-size: 8pt"> </font></td><td><font style="font-size: 8pt"> </font></td>
<td style="text-align: left"><font style="font-size: 8pt"> </font></td><td style="text-align: right"><font style="font-size: 8pt">928</font></td><td style="text-align: left"><font style="font-size: 8pt"> </font></td></tr>
<tr style="vertical-align: bottom; background-color: rgb(238,238,238)">
<td style="text-align: left; padding-bottom: 1pt"><font style="font-size: 8pt">Selling and Marketing</font></td><td style="padding-bottom: 1pt"><font style="font-size: 8pt"> </font></td>
<td style="border-bottom: Black 1pt solid; text-align: left"><font style="font-size: 8pt"> </font></td><td style="border-bottom: Black 1pt solid; text-align: right"><font style="font-size: 8pt">154</font></td><td style="padding-bottom: 1pt; text-align: left"><font style="font-size: 8pt"> </font></td><td style="padding-bottom: 1pt"><font style="font-size: 8pt"> </font></td>
<td style="border-bottom: Black 1pt solid; text-align: left"><font style="font-size: 8pt"> </font></td><td style="border-bottom: Black 1pt solid; text-align: right"><font style="font-size: 8pt">149</font></td><td style="padding-bottom: 1pt; text-align: left"><font style="font-size: 8pt"> </font></td><td style="padding-bottom: 1pt"><font style="font-size: 8pt"> </font></td>
<td style="border-bottom: Black 1pt solid; text-align: left"><font style="font-size: 8pt"> </font></td><td style="border-bottom: Black 1pt solid; text-align: right"><font style="font-size: 8pt">723</font></td><td style="padding-bottom: 1pt; text-align: left"><font style="font-size: 8pt"> </font></td><td style="padding-bottom: 1pt"><font style="font-size: 8pt"> </font></td>
<td style="border-bottom: Black 1pt solid; text-align: left"><font style="font-size: 8pt"> </font></td><td style="border-bottom: Black 1pt solid; text-align: right"><font style="font-size: 8pt">149</font></td><td style="padding-bottom: 1pt; text-align: left"><font style="font-size: 8pt"> </font></td></tr>
<tr style="vertical-align: bottom; background-color: White">
<td style="padding-bottom: 2.5pt"><font style="font-size: 8pt"> </font></td><td style="padding-bottom: 2.5pt"><font style="font-size: 8pt"> </font></td>
<td style="border-bottom: Black 2.5pt double; text-align: left"><font style="font-size: 8pt">$</font></td><td style="border-bottom: Black 2.5pt double; text-align: right"><font style="font-size: 8pt">916</font></td><td style="padding-bottom: 2.5pt; text-align: left"><font style="font-size: 8pt"> </font></td><td style="padding-bottom: 2.5pt"><font style="font-size: 8pt"> </font></td>
<td style="border-bottom: Black 2.5pt double; text-align: left"><font style="font-size: 8pt">$</font></td><td style="border-bottom: Black 2.5pt double; text-align: right"><font style="font-size: 8pt">1,031</font></td><td style="padding-bottom: 2.5pt; text-align: left"><font style="font-size: 8pt"> </font></td><td style="padding-bottom: 2.5pt"><font style="font-size: 8pt"> </font></td>
<td style="border-bottom: Black 2.5pt double; text-align: left"><font style="font-size: 8pt">$</font></td><td style="border-bottom: Black 2.5pt double; text-align: right"><font style="font-size: 8pt">3,554</font></td><td style="padding-bottom: 2.5pt; text-align: left"><font style="font-size: 8pt"> </font></td><td style="padding-bottom: 2.5pt"><font style="font-size: 8pt"> </font></td>
<td style="border-bottom: Black 2.5pt double; text-align: left"><font style="font-size: 8pt">$</font></td><td style="border-bottom: Black 2.5pt double; text-align: right"><font style="font-size: 8pt">1,140</font></td><td style="padding-bottom: 2.5pt; text-align: left"><font style="font-size: 8pt"> </font></td></tr>
</table>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in"><font style="font-size: 8pt"> </font></p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in"><font style="font-size: 8pt">As
of September 30, 2017, there was approximately $4.6 million of total unrecognized compensation expense related to non-vested share-based
compensation arrangements that are expected to vest. This cost is expected to be recognized over a weighted-average period of
2.6 years.</font></p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in"><font style="font-size: 8pt"> </font></p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 27.5pt"><font style="font-size: 8pt">The
weighted average grant date fair value per share of the options granted under the plan was $3.08 and $3.58 for the three months
ended September 30, 2017 and 2016, respectively, and $3.01 and $3.56 for the nine months ended September 30, 2017 and 2016, respectively.</font></p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 27.5pt"><font style="font-size: 8pt"> </font> </p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in"><font style="font-size: 8pt">The
following table summarizes stock option activity during the nine months ended September 30, 2017 (in thousands except exercise
prices and contractual terms):</font></p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in"><font style="font-size: 8pt"> </font></p>
<table cellpadding="0" cellspacing="0" style="border-collapse: collapse; width: 100%; font: 10pt Times New Roman, Times, Serif">
<tr style="vertical-align: bottom">
<td colspan="2" style="text-align: left"><font style="font-size: 8pt"> </font></td><td style="padding-bottom: 1pt"><font style="font-size: 8pt"> </font></td><td style="padding-bottom: 1pt"><font style="font-size: 8pt"> </font></td>
<td colspan="2" style="text-align: center; border-bottom: Black 1pt solid"><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><font style="font-size: 8pt"><b>Number
of</b></font></p> <p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><font style="font-size: 8pt"><b>Shares</b></font></p></td><td style="padding-bottom: 1pt"><font style="font-size: 8pt"> </font></td><td style="padding-bottom: 1pt"><font style="font-size: 8pt"> </font></td>
<td colspan="2" style="text-align: center; border-bottom: Black 1pt solid"><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><font style="font-size: 8pt"><b>Weighted-</b></font></p> <p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><font style="font-size: 8pt"><b>Average</b></font></p> <p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><font style="font-size: 8pt"><b>Exercise</b></font></p> <p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><font style="font-size: 8pt"><b>Prices</b></font></p></td><td style="padding-bottom: 1pt"><font style="font-size: 8pt"> </font></td><td style="padding-bottom: 1pt"><font style="font-size: 8pt"> </font></td>
<td colspan="2" style="text-align: center; border-bottom: Black 1pt solid"><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><font style="font-size: 8pt"><b>Weighted-</b><br />
<b>Average</b></font></p> <p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><font style="font-size: 8pt"><b>Remaining</b></font></p> <p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><font style="font-size: 8pt"><b>Contractual</b></font></p> <p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><font style="font-size: 8pt"><b>Term
(In Years)</b></font></p></td><td style="padding-bottom: 1pt"><font style="font-size: 8pt"> </font></td><td style="font-weight: bold; padding-bottom: 1pt"><font style="font-size: 8pt"> </font></td>
<td colspan="2" style="font-weight: bold; text-align: center; border-bottom: Black 1pt solid"><font style="font-size: 8pt">Intrinsic
<br /> Value</font></td><td style="padding-bottom: 1pt; font-weight: bold"><font style="font-size: 8pt"> </font></td></tr>
<tr style="vertical-align: bottom; background-color: rgb(238,238,238)">
<td style="width: 1%; text-align: left"><font style="font-size: 8pt"> </font></td><td style="width: 38%; text-align: left"><font style="font-size: 8pt">Outstanding
at January 1, 2017</font></td><td style="width: 1%; text-align: left"><font style="font-size: 8pt"> </font></td><td style="width: 2%"><font style="font-size: 8pt"> </font></td>
<td style="width: 1%; text-align: left"><font style="font-size: 8pt"> </font></td><td style="width: 11%; text-align: right"><font style="font-size: 8pt">1,515</font></td><td style="width: 1%; text-align: left"><font style="font-size: 8pt"> </font></td><td style="width: 2%"><font style="font-size: 8pt"> </font></td>
<td style="width: 1%; text-align: left"><font style="font-size: 8pt">$</font></td><td style="width: 11%; text-align: right"><font style="font-size: 8pt">7.21</font></td><td style="width: 1%; text-align: left"><font style="font-size: 8pt"> </font></td><td style="width: 2%"><font style="font-size: 8pt"> </font></td>
<td style="width: 1%; text-align: left"><font style="font-size: 8pt"> </font></td><td style="width: 11%; text-align: right"><font style="font-size: 8pt"> </font></td><td style="width: 1%; text-align: left"><font style="font-size: 8pt"> </font></td><td style="width: 2%"><font style="font-size: 8pt"> </font></td>
<td style="width: 1%; text-align: left"><font style="font-size: 8pt"> </font></td><td style="width: 11%; text-align: right"><font style="font-size: 8pt"> </font></td><td style="width: 1%; text-align: left"><font style="font-size: 8pt"> </font></td></tr>
<tr style="vertical-align: bottom; background-color: White">
<td style="text-align: left"><font style="font-size: 8pt"> </font></td><td style="text-align: left; padding-left: 11pt"><font style="font-size: 8pt">Granted</font></td><td style="text-align: left"><font style="font-size: 8pt"> </font></td><td><font style="font-size: 8pt"> </font></td>
<td style="text-align: left"><font style="font-size: 8pt"> </font></td><td style="text-align: right"><font style="font-size: 8pt">598</font></td><td style="text-align: left"><font style="font-size: 8pt"> </font></td><td><font style="font-size: 8pt"> </font></td>
<td style="text-align: left"><font style="font-size: 8pt">$</font></td><td style="text-align: right"><font style="font-size: 8pt">6.87</font></td><td style="text-align: left"><font style="font-size: 8pt"> </font></td><td><font style="font-size: 8pt"> </font></td>
<td style="text-align: left"><font style="font-size: 8pt"> </font></td><td style="text-align: right"><font style="font-size: 8pt"> </font></td><td style="text-align: left"><font style="font-size: 8pt"> </font></td><td><font style="font-size: 8pt"> </font></td>
<td style="text-align: left"><font style="font-size: 8pt"> </font></td><td style="text-align: right"><font style="font-size: 8pt"> </font></td><td style="text-align: left"><font style="font-size: 8pt"> </font></td></tr>
<tr style="vertical-align: bottom; background-color: rgb(238,238,238)">
<td style="text-align: left"><font style="font-size: 8pt"> </font></td><td style="text-align: left; padding-left: 11pt"><font style="font-size: 8pt">Exercised</font></td><td style="text-align: left"><font style="font-size: 8pt"> </font></td><td><font style="font-size: 8pt"> </font></td>
<td style="text-align: left"><font style="font-size: 8pt"> </font></td><td style="text-align: right"><font style="font-size: 8pt">–</font></td><td style="text-align: left"><font style="font-size: 8pt"> </font></td><td><font style="font-size: 8pt"> </font></td>
<td style="text-align: left"><font style="font-size: 8pt">$</font></td><td style="text-align: right"><font style="font-size: 8pt">–</font></td><td style="text-align: left"><font style="font-size: 8pt"> </font></td><td><font style="font-size: 8pt"> </font></td>
<td style="text-align: left"><font style="font-size: 8pt"> </font></td><td style="text-align: right"><font style="font-size: 8pt"> </font></td><td style="text-align: left"><font style="font-size: 8pt"> </font></td><td><font style="font-size: 8pt"> </font></td>
<td style="text-align: left"><font style="font-size: 8pt"> </font></td><td style="text-align: right"><font style="font-size: 8pt"> </font></td><td style="text-align: left"><font style="font-size: 8pt"> </font></td></tr>
<tr style="vertical-align: bottom; background-color: White">
<td style="padding-bottom: 1pt; text-align: left"><font style="font-size: 8pt"> </font></td><td style="padding-bottom: 1pt; text-align: left; padding-left: 11pt"><font style="font-size: 8pt">Expired</font></td><td style="padding-bottom: 1pt; text-align: left"><font style="font-size: 8pt"> </font></td><td style="padding-bottom: 1pt"><font style="font-size: 8pt"> </font></td>
<td style="border-bottom: Black 1pt solid; text-align: left"><font style="font-size: 8pt"> </font></td><td style="border-bottom: Black 1pt solid; text-align: right"><font style="font-size: 8pt">(2</font></td><td style="padding-bottom: 1pt; text-align: left"><font style="font-size: 8pt">)</font></td><td style="padding-bottom: 1pt"><font style="font-size: 8pt"> </font></td>
<td style="padding-bottom: 1pt; text-align: left"><font style="font-size: 8pt">$</font></td><td style="padding-bottom: 1pt; text-align: right"><font style="font-size: 8pt">43.42</font></td><td style="padding-bottom: 1pt; text-align: left"><font style="font-size: 8pt"> </font></td><td style="padding-bottom: 1pt"><font style="font-size: 8pt"> </font></td>
<td style="padding-bottom: 1pt; text-align: left"><font style="font-size: 8pt"> </font></td><td style="padding-bottom: 1pt; text-align: right"><font style="font-size: 8pt"> </font></td><td style="padding-bottom: 1pt; text-align: left"><font style="font-size: 8pt"> </font></td><td style="padding-bottom: 1pt"><font style="font-size: 8pt"> </font></td>
<td style="padding-bottom: 1pt; text-align: left"><font style="font-size: 8pt"> </font></td><td style="padding-bottom: 1pt; text-align: right"><font style="font-size: 8pt"> </font></td><td style="padding-bottom: 1pt; text-align: left"><font style="font-size: 8pt"> </font></td></tr>
<tr style="vertical-align: bottom; background-color: rgb(238,238,238)">
<td style="padding-bottom: 2.5pt; text-align: left"><font style="font-size: 8pt"> </font></td><td style="padding-bottom: 2.5pt; text-align: left"><font style="font-size: 8pt">Outstanding
at September 30, 2017</font></td><td style="padding-bottom: 2.5pt; text-align: left"><font style="font-size: 8pt"> </font></td><td style="padding-bottom: 2.5pt"><font style="font-size: 8pt"> </font></td>
<td style="border-bottom: Black 2.5pt double; text-align: left"><font style="font-size: 8pt"> </font></td><td style="border-bottom: Black 2.5pt double; text-align: right"><font style="font-size: 8pt">2,111</font></td><td style="padding-bottom: 2.5pt; text-align: left"><font style="font-size: 8pt"> </font></td><td style="padding-bottom: 2.5pt"><font style="font-size: 8pt"> </font></td>
<td style="border-bottom: Black 2.5pt double; text-align: left"><font style="font-size: 8pt">$</font></td><td style="border-bottom: Black 2.5pt double; text-align: right"><font style="font-size: 8pt">7.08</font></td><td style="padding-bottom: 2.5pt; text-align: left"><font style="font-size: 8pt"> </font></td><td style="padding-bottom: 2.5pt"><font style="font-size: 8pt"> </font></td>
<td style="border-bottom: Black 2.5pt double; text-align: left"><font style="font-size: 8pt"> </font></td><td style="border-bottom: Black 2.5pt double; text-align: right"><font style="font-size: 8pt">8.5</font></td><td style="padding-bottom: 2.5pt; text-align: left"><font style="font-size: 8pt"> </font></td><td style="padding-bottom: 2.5pt"><font style="font-size: 8pt"> </font></td>
<td style="border-bottom: Black 2.5pt double; text-align: left"><font style="font-size: 8pt">$</font></td><td style="border-bottom: Black 2.5pt double; text-align: right"><font style="font-size: 8pt">–</font></td><td style="padding-bottom: 2.5pt; text-align: left"><font style="font-size: 8pt"> </font></td></tr>
<tr style="vertical-align: bottom; background-color: White">
<td style="padding-bottom: 2.5pt; text-align: left"><font style="font-size: 8pt"> </font></td><td style="padding-bottom: 2.5pt; text-align: left"><font style="font-size: 8pt">Exercisable
at September 30, 2017</font></td><td style="padding-bottom: 2.5pt; text-align: left"><font style="font-size: 8pt"> </font></td><td style="padding-bottom: 2.5pt"><font style="font-size: 8pt"> </font></td>
<td style="border-bottom: Black 2.5pt double; text-align: left"><font style="font-size: 8pt"> </font></td><td style="border-bottom: Black 2.5pt double; text-align: right"><font style="font-size: 8pt">843</font></td><td style="padding-bottom: 2.5pt; text-align: left"><font style="font-size: 8pt"> </font></td><td style="padding-bottom: 2.5pt"><font style="font-size: 8pt"> </font></td>
<td style="border-bottom: Black 2.5pt double; text-align: left"><font style="font-size: 8pt">$</font></td><td style="border-bottom: Black 2.5pt double; text-align: right"><font style="font-size: 8pt">7.21</font></td><td style="padding-bottom: 2.5pt; text-align: left"><font style="font-size: 8pt"> </font></td><td style="padding-bottom: 2.5pt"><font style="font-size: 8pt"> </font></td>
<td style="border-bottom: Black 2.5pt double; text-align: left"><font style="font-size: 8pt"> </font></td><td style="border-bottom: Black 2.5pt double; text-align: right"><font style="font-size: 8pt">8.1</font></td><td style="padding-bottom: 2.5pt; text-align: left"><font style="font-size: 8pt"> </font></td><td style="padding-bottom: 2.5pt"><font style="font-size: 8pt"> </font></td>
<td style="border-bottom: Black 2.5pt double; text-align: left"><font style="font-size: 8pt">$</font></td><td style="border-bottom: Black 2.5pt double; text-align: right"><font style="font-size: 8pt">–</font></td><td style="padding-bottom: 2.5pt; text-align: left"><font style="font-size: 8pt"> </font></td></tr>
</table>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in"><font style="font-size: 8pt"> </font></p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in"><font style="font-size: 8pt">During
the nine months ended September 30, 2017, the Company granted options under its 2007 Stock Incentive Plan to purchase 593,292
shares of its common stock to its employees. The fair value of these options was approximately $1.8 million. During the nine months
ended September 30, 2017, the Company granted options under its 2017 Stock Incentive Plan to purchase 5,000 shares of its common
stock to a consultant. The fair value of these options was approximately $11,000 as of September 30, 2017.</font></p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 27.5pt"><font style="font-size: 8pt">  </font></p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in"><font style="font-size: 8pt">The
Company issues restricted stock to employees, directors and consultants and estimates the fair value based on the closing price
on the day of grant. The following table summarizes all restricted stock activity during the nine months ended September 30, 2017
(in thousands except per share data):</font></p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in"><font style="font-size: 8pt"> </font></p>
<table cellpadding="0" cellspacing="0" style="border-collapse: collapse; width: 100%; font: 10pt Times New Roman, Times, Serif">
<tr style="vertical-align: bottom">
<td colspan="2" style="text-align: left"><font style="font-size: 8pt"> </font></td><td style="padding-bottom: 1pt"><font style="font-size: 8pt"> </font></td><td style="padding-bottom: 1pt"><font style="font-size: 8pt"> </font></td>
<td colspan="2" style="text-align: center; border-bottom: Black 1pt solid"><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><font style="font-size: 8pt"><b>Number
of</b></font></p> <p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><font style="font-size: 8pt"><b>Shares</b></font></p></td><td style="padding-bottom: 1pt"><font style="font-size: 8pt"> </font></td><td style="padding-bottom: 1pt"><font style="font-size: 8pt"> </font></td>
<td colspan="2" style="text-align: center; border-bottom: Black 1pt solid"><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><font style="font-size: 8pt"><b>Weighted-</b></font></p> <p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><font style="font-size: 8pt"><b>Average</b></font></p> <p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><font style="font-size: 8pt"><b>Grant
Date</b><br /> <b>Fair Value</b></font></p></td><td style="padding-bottom: 1pt"><font style="font-size: 8pt"> </font></td></tr>
<tr style="vertical-align: bottom; background-color: rgb(238,238,238)">
<td style="width: 1%; text-align: left"><font style="font-size: 8pt"> </font></td><td style="width: 64%; text-align: left"><font style="font-size: 8pt">Outstanding
at January 1, 2017</font></td><td style="width: 1%; text-align: left"><font style="font-size: 8pt"> </font></td><td style="width: 2%"><font style="font-size: 8pt"> </font></td>
<td style="width: 1%; text-align: left"><font style="font-size: 8pt"> </font></td><td style="width: 13%; text-align: right"><font style="font-size: 8pt">462</font></td><td style="width: 1%; text-align: left"><font style="font-size: 8pt"> </font></td><td style="width: 2%"><font style="font-size: 8pt"> </font></td>
<td style="width: 1%; text-align: left"><font style="font-size: 8pt">$</font></td><td style="width: 13%; text-align: right"><font style="font-size: 8pt">8.07</font></td><td style="width: 1%; text-align: left"><font style="font-size: 8pt"> </font></td></tr>
<tr style="vertical-align: bottom; background-color: White">
<td style="text-align: left"><font style="font-size: 8pt"> </font></td><td style="text-align: left; padding-left: 11pt"><font style="font-size: 8pt">Granted</font></td><td style="text-align: left"><font style="font-size: 8pt"> </font></td><td><font style="font-size: 8pt"> </font></td>
<td style="text-align: left"><font style="font-size: 8pt"> </font></td><td style="text-align: right"><font style="font-size: 8pt">136</font></td><td style="text-align: left"><font style="font-size: 8pt"> </font></td><td><font style="font-size: 8pt"> </font></td>
<td style="text-align: left"><font style="font-size: 8pt">$</font></td><td style="text-align: right"><font style="font-size: 8pt">6.60</font></td><td style="text-align: left"><font style="font-size: 8pt"> </font></td></tr>
<tr style="vertical-align: bottom; background-color: rgb(238,238,238)">
<td style="text-align: left"><font style="font-size: 8pt"> </font></td><td style="text-align: left; padding-left: 11pt"><font style="font-size: 8pt">Vested</font></td><td style="text-align: left"><font style="font-size: 8pt"> </font></td><td><font style="font-size: 8pt"> </font></td>
<td style="text-align: left"><font style="font-size: 8pt"> </font></td><td style="text-align: right"><font style="font-size: 8pt">(471</font></td><td style="text-align: left"><font style="font-size: 8pt">)</font></td><td><font style="font-size: 8pt"> </font></td>
<td style="text-align: left"><font style="font-size: 8pt">$</font></td><td style="text-align: right"><font style="font-size: 8pt">7.96</font></td><td style="text-align: left"><font style="font-size: 8pt"> </font></td></tr>
<tr style="vertical-align: bottom; background-color: White">
<td style="padding-bottom: 1pt; text-align: left"><font style="font-size: 8pt"> </font></td><td style="padding-bottom: 1pt; text-align: left; padding-left: 11pt"><font style="font-size: 8pt">Cancelled</font></td><td style="padding-bottom: 1pt; text-align: left"><font style="font-size: 8pt"> </font></td><td style="padding-bottom: 1pt"><font style="font-size: 8pt"> </font></td>
<td style="border-bottom: Black 1pt solid; text-align: left"><font style="font-size: 8pt"> </font></td><td style="border-bottom: Black 1pt solid; text-align: right"><font style="font-size: 8pt">–</font></td><td style="padding-bottom: 1pt; text-align: left"><font style="font-size: 8pt"> </font></td><td style="padding-bottom: 1pt"><font style="font-size: 8pt"> </font></td>
<td style="padding-bottom: 1pt; text-align: left"><font style="font-size: 8pt">$</font></td><td style="padding-bottom: 1pt; text-align: right"><font style="font-size: 8pt">–</font></td><td style="padding-bottom: 1pt; text-align: left"><font style="font-size: 8pt"> </font></td></tr>
<tr style="vertical-align: bottom; background-color: rgb(238,238,238)">
<td style="padding-bottom: 2.5pt; text-align: left"><font style="font-size: 8pt"> </font></td><td style="padding-bottom: 2.5pt; text-align: left"><p style="margin-top: 0; margin-bottom: 0; text-align: left"></p><p style="margin-top: 0; margin-bottom: 0; text-align: left"></p><p style="margin-top: 0; margin-bottom: 0; text-align: left"><font style="font-size: 8pt">Outstanding
non-vested shares at September 30, 2017</font></p></td><td style="padding-bottom: 2.5pt; text-align: left"><font style="font-size: 8pt"> </font></td><td style="padding-bottom: 2.5pt"><font style="font-size: 8pt"> </font></td>
<td style="border-bottom: Black 2.5pt double; text-align: left"><font style="font-size: 8pt"> </font></td><td style="border-bottom: Black 2.5pt double; text-align: right"><font style="font-size: 8pt">127</font></td><td style="padding-bottom: 2.5pt; text-align: left"><font style="font-size: 8pt"> </font></td><td style="padding-bottom: 2.5pt"><font style="font-size: 8pt"> </font></td>
<td style="border-bottom: Black 2.5pt double; text-align: left"><font style="font-size: 8pt">$</font></td><td style="border-bottom: Black 2.5pt double; text-align: right"><font style="font-size: 8pt">6.90</font></td><td style="padding-bottom: 2.5pt; text-align: left"><font style="font-size: 8pt"> </font></td></tr>
</table>
<p style="margin-top: 0; margin-bottom: 0"><font style="font-size: 8pt"> </font></p>
<table cellpadding="0" cellspacing="0" style="border-collapse: collapse; width: 100%; font: 10pt Times New Roman, Times, Serif">
<tr style="vertical-align: bottom">
<td><font style="font-size: 8pt"> </font></td><td style="font-weight: bold; padding-bottom: 1pt"><font style="font-size: 8pt"> </font></td>
<td colspan="6" style="font-weight: bold; text-align: center; border-bottom: Black 1pt solid"><font style="font-size: 8pt">Three
Months Ended<br /> September 30,</font></td><td style="padding-bottom: 1pt; font-weight: bold"><font style="font-size: 8pt"> </font></td><td style="font-weight: bold; padding-bottom: 1pt"><font style="font-size: 8pt"> </font></td>
<td colspan="6" style="font-weight: bold; text-align: center; border-bottom: Black 1pt solid"><font style="font-size: 8pt">Nine
Months Ended<br /> September 30,</font></td><td style="padding-bottom: 1pt; font-weight: bold"><font style="font-size: 8pt"> </font></td></tr>
<tr style="vertical-align: bottom">
<td><font style="font-size: 8pt"> </font></td><td style="font-weight: bold; padding-bottom: 1pt"><font style="font-size: 8pt"> </font></td>
<td colspan="2" style="font-weight: bold; text-align: center; border-bottom: Black 1pt solid"><font style="font-size: 8pt">2017</font></td><td style="padding-bottom: 1pt; font-weight: bold"><font style="font-size: 8pt"> </font></td><td style="font-weight: bold; padding-bottom: 1pt"><font style="font-size: 8pt"> </font></td>
<td colspan="2" style="font-weight: bold; text-align: center; border-bottom: Black 1pt solid"><font style="font-size: 8pt">2016</font></td><td style="padding-bottom: 1pt; font-weight: bold"><font style="font-size: 8pt"> </font></td><td style="font-weight: bold; padding-bottom: 1pt"><font style="font-size: 8pt"> </font></td>
<td colspan="2" style="font-weight: bold; text-align: center; border-bottom: Black 1pt solid"><font style="font-size: 8pt">2017</font></td><td style="padding-bottom: 1pt; font-weight: bold"><font style="font-size: 8pt"> </font></td><td style="font-weight: bold; padding-bottom: 1pt"><font style="font-size: 8pt"> </font></td>
<td colspan="2" style="font-weight: bold; text-align: center; border-bottom: Black 1pt solid"><font style="font-size: 8pt">2016</font></td><td style="padding-bottom: 1pt; font-weight: bold"><font style="font-size: 8pt"> </font></td></tr>
<tr style="vertical-align: bottom; background-color: rgb(238,238,238)">
<td style="width: 40%; text-align: left"><font style="font-size: 8pt">Research and development</font></td><td style="width: 2%"><font style="font-size: 8pt"> </font></td>
<td style="width: 1%; text-align: left"><font style="font-size: 8pt">$</font></td><td style="width: 11%; text-align: right"><font style="font-size: 8pt">115</font></td><td style="width: 1%; text-align: left"><font style="font-size: 8pt"> </font></td><td style="width: 2%"><font style="font-size: 8pt"> </font></td>
<td style="width: 1%; text-align: left"><font style="font-size: 8pt">$</font></td><td style="width: 11%; text-align: right"><font style="font-size: 8pt">50</font></td><td style="width: 1%; text-align: left"><font style="font-size: 8pt"> </font></td><td style="width: 2%"><font style="font-size: 8pt"> </font></td>
<td style="width: 1%; text-align: left"><font style="font-size: 8pt">$</font></td><td style="width: 11%; text-align: right"><font style="font-size: 8pt">338</font></td><td style="width: 1%; text-align: left"><font style="font-size: 8pt"> </font></td><td style="width: 2%"><font style="font-size: 8pt"> </font></td>
<td style="width: 1%; text-align: left"><font style="font-size: 8pt">$</font></td><td style="width: 11%; text-align: right"><font style="font-size: 8pt">63</font></td><td style="width: 1%; text-align: left"><font style="font-size: 8pt"> </font></td></tr>
<tr style="vertical-align: bottom; background-color: White">
<td style="text-align: left"><font style="font-size: 8pt">General and administrative</font></td><td><font style="font-size: 8pt"> </font></td>
<td style="text-align: left"><font style="font-size: 8pt"> </font></td><td style="text-align: right"><font style="font-size: 8pt">647</font></td><td style="text-align: left"><font style="font-size: 8pt"> </font></td><td><font style="font-size: 8pt"> </font></td>
<td style="text-align: left"><font style="font-size: 8pt"> </font></td><td style="text-align: right"><font style="font-size: 8pt">832</font></td><td style="text-align: left"><font style="font-size: 8pt"> </font></td><td><font style="font-size: 8pt"> </font></td>
<td style="text-align: left"><font style="font-size: 8pt"> </font></td><td style="text-align: right"><font style="font-size: 8pt">2,493</font></td><td style="text-align: left"><font style="font-size: 8pt"> </font></td><td><font style="font-size: 8pt"> </font></td>
<td style="text-align: left"><font style="font-size: 8pt"> </font></td><td style="text-align: right"><font style="font-size: 8pt">928</font></td><td style="text-align: left"><font style="font-size: 8pt"> </font></td></tr>
<tr style="vertical-align: bottom; background-color: rgb(238,238,238)">
<td style="text-align: left; padding-bottom: 1pt"><font style="font-size: 8pt">Selling and Marketing</font></td><td style="padding-bottom: 1pt"><font style="font-size: 8pt"> </font></td>
<td style="border-bottom: Black 1pt solid; text-align: left"><font style="font-size: 8pt"> </font></td><td style="border-bottom: Black 1pt solid; text-align: right"><font style="font-size: 8pt">154</font></td><td style="padding-bottom: 1pt; text-align: left"><font style="font-size: 8pt"> </font></td><td style="padding-bottom: 1pt"><font style="font-size: 8pt"> </font></td>
<td style="border-bottom: Black 1pt solid; text-align: left"><font style="font-size: 8pt"> </font></td><td style="border-bottom: Black 1pt solid; text-align: right"><font style="font-size: 8pt">149</font></td><td style="padding-bottom: 1pt; text-align: left"><font style="font-size: 8pt"> </font></td><td style="padding-bottom: 1pt"><font style="font-size: 8pt"> </font></td>
<td style="border-bottom: Black 1pt solid; text-align: left"><font style="font-size: 8pt"> </font></td><td style="border-bottom: Black 1pt solid; text-align: right"><font style="font-size: 8pt">723</font></td><td style="padding-bottom: 1pt; text-align: left"><font style="font-size: 8pt"> </font></td><td style="padding-bottom: 1pt"><font style="font-size: 8pt"> </font></td>
<td style="border-bottom: Black 1pt solid; text-align: left"><font style="font-size: 8pt"> </font></td><td style="border-bottom: Black 1pt solid; text-align: right"><font style="font-size: 8pt">149</font></td><td style="padding-bottom: 1pt; text-align: left"><font style="font-size: 8pt"> </font></td></tr>
<tr style="vertical-align: bottom; background-color: White">
<td style="padding-bottom: 2.5pt"><font style="font-size: 8pt"> </font></td><td style="padding-bottom: 2.5pt"><font style="font-size: 8pt"> </font></td>
<td style="border-bottom: Black 2.5pt double; text-align: left"><font style="font-size: 8pt">$</font></td><td style="border-bottom: Black 2.5pt double; text-align: right"><font style="font-size: 8pt">916</font></td><td style="padding-bottom: 2.5pt; text-align: left"><font style="font-size: 8pt"> </font></td><td style="padding-bottom: 2.5pt"><font style="font-size: 8pt"> </font></td>
<td style="border-bottom: Black 2.5pt double; text-align: left"><font style="font-size: 8pt">$</font></td><td style="border-bottom: Black 2.5pt double; text-align: right"><font style="font-size: 8pt">1,031</font></td><td style="padding-bottom: 2.5pt; text-align: left"><font style="font-size: 8pt"> </font></td><td style="padding-bottom: 2.5pt"><font style="font-size: 8pt"> </font></td>
<td style="border-bottom: Black 2.5pt double; text-align: left"><font style="font-size: 8pt">$</font></td><td style="border-bottom: Black 2.5pt double; text-align: right"><font style="font-size: 8pt">3,554</font></td><td style="padding-bottom: 2.5pt; text-align: left"><font style="font-size: 8pt"> </font></td><td style="padding-bottom: 2.5pt"><font style="font-size: 8pt"> </font></td>
<td style="border-bottom: Black 2.5pt double; text-align: left"><font style="font-size: 8pt">$</font></td><td style="border-bottom: Black 2.5pt double; text-align: right"><font style="font-size: 8pt">1,140</font></td><td style="padding-bottom: 2.5pt; text-align: left"><font style="font-size: 8pt"> </font></td></tr>
</table>
<table cellpadding="0" cellspacing="0" style="border-collapse: collapse; width: 100%; font: 10pt Times New Roman, Times, Serif">
<tr style="vertical-align: bottom">
<td colspan="2" style="text-align: left"><font style="font-size: 8pt"> </font></td><td style="padding-bottom: 1pt"><font style="font-size: 8pt"> </font></td><td style="padding-bottom: 1pt"><font style="font-size: 8pt"> </font></td>
<td colspan="2" style="text-align: center; border-bottom: Black 1pt solid"><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><font style="font-size: 8pt"><b>Number
of</b></font></p> <p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><font style="font-size: 8pt"><b>Shares</b></font></p></td><td style="padding-bottom: 1pt"><font style="font-size: 8pt"> </font></td><td style="padding-bottom: 1pt"><font style="font-size: 8pt"> </font></td>
<td colspan="2" style="text-align: center; border-bottom: Black 1pt solid"><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><font style="font-size: 8pt"><b>Weighted-</b></font></p> <p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><font style="font-size: 8pt"><b>Average</b></font></p> <p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><font style="font-size: 8pt"><b>Exercise</b></font></p> <p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><font style="font-size: 8pt"><b>Prices</b></font></p></td><td style="padding-bottom: 1pt"><font style="font-size: 8pt"> </font></td><td style="padding-bottom: 1pt"><font style="font-size: 8pt"> </font></td>
<td colspan="2" style="text-align: center; border-bottom: Black 1pt solid"><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><font style="font-size: 8pt"><b>Weighted-</b><br />
<b>Average</b></font></p> <p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><font style="font-size: 8pt"><b>Remaining</b></font></p> <p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><font style="font-size: 8pt"><b>Contractual</b></font></p> <p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><font style="font-size: 8pt"><b>Term
(In Years)</b></font></p></td><td style="padding-bottom: 1pt"><font style="font-size: 8pt"> </font></td><td style="font-weight: bold; padding-bottom: 1pt"><font style="font-size: 8pt"> </font></td>
<td colspan="2" style="font-weight: bold; text-align: center; border-bottom: Black 1pt solid"><font style="font-size: 8pt">Intrinsic
<br /> Value</font></td><td style="padding-bottom: 1pt; font-weight: bold"><font style="font-size: 8pt"> </font></td></tr>
<tr style="vertical-align: bottom; background-color: rgb(238,238,238)">
<td style="width: 1%; text-align: left"><font style="font-size: 8pt"> </font></td><td style="width: 38%; text-align: left"><font style="font-size: 8pt">Outstanding
at January 1, 2017</font></td><td style="width: 1%; text-align: left"><font style="font-size: 8pt"> </font></td><td style="width: 2%"><font style="font-size: 8pt"> </font></td>
<td style="width: 1%; text-align: left"><font style="font-size: 8pt"> </font></td><td style="width: 11%; text-align: right"><font style="font-size: 8pt">1,515</font></td><td style="width: 1%; text-align: left"><font style="font-size: 8pt"> </font></td><td style="width: 2%"><font style="font-size: 8pt"> </font></td>
<td style="width: 1%; text-align: left"><font style="font-size: 8pt">$</font></td><td style="width: 11%; text-align: right"><font style="font-size: 8pt">7.21</font></td><td style="width: 1%; text-align: left"><font style="font-size: 8pt"> </font></td><td style="width: 2%"><font style="font-size: 8pt"> </font></td>
<td style="width: 1%; text-align: left"><font style="font-size: 8pt"> </font></td><td style="width: 11%; text-align: right"><font style="font-size: 8pt"> </font></td><td style="width: 1%; text-align: left"><font style="font-size: 8pt"> </font></td><td style="width: 2%"><font style="font-size: 8pt"> </font></td>
<td style="width: 1%; text-align: left"><font style="font-size: 8pt"> </font></td><td style="width: 11%; text-align: right"><font style="font-size: 8pt"> </font></td><td style="width: 1%; text-align: left"><font style="font-size: 8pt"> </font></td></tr>
<tr style="vertical-align: bottom; background-color: White">
<td style="text-align: left"><font style="font-size: 8pt"> </font></td><td style="text-align: left; padding-left: 11pt"><font style="font-size: 8pt">Granted</font></td><td style="text-align: left"><font style="font-size: 8pt"> </font></td><td><font style="font-size: 8pt"> </font></td>
<td style="text-align: left"><font style="font-size: 8pt"> </font></td><td style="text-align: right"><font style="font-size: 8pt">598</font></td><td style="text-align: left"><font style="font-size: 8pt"> </font></td><td><font style="font-size: 8pt"> </font></td>
<td style="text-align: left"><font style="font-size: 8pt">$</font></td><td style="text-align: right"><font style="font-size: 8pt">6.87</font></td><td style="text-align: left"><font style="font-size: 8pt"> </font></td><td><font style="font-size: 8pt"> </font></td>
<td style="text-align: left"><font style="font-size: 8pt"> </font></td><td style="text-align: right"><font style="font-size: 8pt"> </font></td><td style="text-align: left"><font style="font-size: 8pt"> </font></td><td><font style="font-size: 8pt"> </font></td>
<td style="text-align: left"><font style="font-size: 8pt"> </font></td><td style="text-align: right"><font style="font-size: 8pt"> </font></td><td style="text-align: left"><font style="font-size: 8pt"> </font></td></tr>
<tr style="vertical-align: bottom; background-color: rgb(238,238,238)">
<td style="text-align: left"><font style="font-size: 8pt"> </font></td><td style="text-align: left; padding-left: 11pt"><font style="font-size: 8pt">Exercised</font></td><td style="text-align: left"><font style="font-size: 8pt"> </font></td><td><font style="font-size: 8pt"> </font></td>
<td style="text-align: left"><font style="font-size: 8pt"> </font></td><td style="text-align: right"><font style="font-size: 8pt">–</font></td><td style="text-align: left"><font style="font-size: 8pt"> </font></td><td><font style="font-size: 8pt"> </font></td>
<td style="text-align: left"><font style="font-size: 8pt">$</font></td><td style="text-align: right"><font style="font-size: 8pt">–</font></td><td style="text-align: left"><font style="font-size: 8pt"> </font></td><td><font style="font-size: 8pt"> </font></td>
<td style="text-align: left"><font style="font-size: 8pt"> </font></td><td style="text-align: right"><font style="font-size: 8pt"> </font></td><td style="text-align: left"><font style="font-size: 8pt"> </font></td><td><font style="font-size: 8pt"> </font></td>
<td style="text-align: left"><font style="font-size: 8pt"> </font></td><td style="text-align: right"><font style="font-size: 8pt"> </font></td><td style="text-align: left"><font style="font-size: 8pt"> </font></td></tr>
<tr style="vertical-align: bottom; background-color: White">
<td style="padding-bottom: 1pt; text-align: left"><font style="font-size: 8pt"> </font></td><td style="padding-bottom: 1pt; text-align: left; padding-left: 11pt"><font style="font-size: 8pt">Expired</font></td><td style="padding-bottom: 1pt; text-align: left"><font style="font-size: 8pt"> </font></td><td style="padding-bottom: 1pt"><font style="font-size: 8pt"> </font></td>
<td style="border-bottom: Black 1pt solid; text-align: left"><font style="font-size: 8pt"> </font></td><td style="border-bottom: Black 1pt solid; text-align: right"><font style="font-size: 8pt">(2</font></td><td style="padding-bottom: 1pt; text-align: left"><font style="font-size: 8pt">)</font></td><td style="padding-bottom: 1pt"><font style="font-size: 8pt"> </font></td>
<td style="padding-bottom: 1pt; text-align: left"><font style="font-size: 8pt">$</font></td><td style="padding-bottom: 1pt; text-align: right"><font style="font-size: 8pt">43.42</font></td><td style="padding-bottom: 1pt; text-align: left"><font style="font-size: 8pt"> </font></td><td style="padding-bottom: 1pt"><font style="font-size: 8pt"> </font></td>
<td style="padding-bottom: 1pt; text-align: left"><font style="font-size: 8pt"> </font></td><td style="padding-bottom: 1pt; text-align: right"><font style="font-size: 8pt"> </font></td><td style="padding-bottom: 1pt; text-align: left"><font style="font-size: 8pt"> </font></td><td style="padding-bottom: 1pt"><font style="font-size: 8pt"> </font></td>
<td style="padding-bottom: 1pt; text-align: left"><font style="font-size: 8pt"> </font></td><td style="padding-bottom: 1pt; text-align: right"><font style="font-size: 8pt"> </font></td><td style="padding-bottom: 1pt; text-align: left"><font style="font-size: 8pt"> </font></td></tr>
<tr style="vertical-align: bottom; background-color: rgb(238,238,238)">
<td style="padding-bottom: 2.5pt; text-align: left"><font style="font-size: 8pt"> </font></td><td style="padding-bottom: 2.5pt; text-align: left"><font style="font-size: 8pt">Outstanding
at September 30, 2017</font></td><td style="padding-bottom: 2.5pt; text-align: left"><font style="font-size: 8pt"> </font></td><td style="padding-bottom: 2.5pt"><font style="font-size: 8pt"> </font></td>
<td style="border-bottom: Black 2.5pt double; text-align: left"><font style="font-size: 8pt"> </font></td><td style="border-bottom: Black 2.5pt double; text-align: right"><font style="font-size: 8pt">2,111</font></td><td style="padding-bottom: 2.5pt; text-align: left"><font style="font-size: 8pt"> </font></td><td style="padding-bottom: 2.5pt"><font style="font-size: 8pt"> </font></td>
<td style="border-bottom: Black 2.5pt double; text-align: left"><font style="font-size: 8pt">$</font></td><td style="border-bottom: Black 2.5pt double; text-align: right"><font style="font-size: 8pt">7.08</font></td><td style="padding-bottom: 2.5pt; text-align: left"><font style="font-size: 8pt"> </font></td><td style="padding-bottom: 2.5pt"><font style="font-size: 8pt"> </font></td>
<td style="border-bottom: Black 2.5pt double; text-align: left"><font style="font-size: 8pt"> </font></td><td style="border-bottom: Black 2.5pt double; text-align: right"><font style="font-size: 8pt">8.5</font></td><td style="padding-bottom: 2.5pt; text-align: left"><font style="font-size: 8pt"> </font></td><td style="padding-bottom: 2.5pt"><font style="font-size: 8pt"> </font></td>
<td style="border-bottom: Black 2.5pt double; text-align: left"><font style="font-size: 8pt">$</font></td><td style="border-bottom: Black 2.5pt double; text-align: right"><font style="font-size: 8pt">–</font></td><td style="padding-bottom: 2.5pt; text-align: left"><font style="font-size: 8pt"> </font></td></tr>
<tr style="vertical-align: bottom; background-color: White">
<td style="padding-bottom: 2.5pt; text-align: left"><font style="font-size: 8pt"> </font></td><td style="padding-bottom: 2.5pt; text-align: left"><font style="font-size: 8pt">Exercisable
at September 30, 2017</font></td><td style="padding-bottom: 2.5pt; text-align: left"><font style="font-size: 8pt"> </font></td><td style="padding-bottom: 2.5pt"><font style="font-size: 8pt"> </font></td>
<td style="border-bottom: Black 2.5pt double; text-align: left"><font style="font-size: 8pt"> </font></td><td style="border-bottom: Black 2.5pt double; text-align: right"><font style="font-size: 8pt">843</font></td><td style="padding-bottom: 2.5pt; text-align: left"><font style="font-size: 8pt"> </font></td><td style="padding-bottom: 2.5pt"><font style="font-size: 8pt"> </font></td>
<td style="border-bottom: Black 2.5pt double; text-align: left"><font style="font-size: 8pt">$</font></td><td style="border-bottom: Black 2.5pt double; text-align: right"><font style="font-size: 8pt">7.21</font></td><td style="padding-bottom: 2.5pt; text-align: left"><font style="font-size: 8pt"> </font></td><td style="padding-bottom: 2.5pt"><font style="font-size: 8pt"> </font></td>
<td style="border-bottom: Black 2.5pt double; text-align: left"><font style="font-size: 8pt"> </font></td><td style="border-bottom: Black 2.5pt double; text-align: right"><font style="font-size: 8pt">8.1</font></td><td style="padding-bottom: 2.5pt; text-align: left"><font style="font-size: 8pt"> </font></td><td style="padding-bottom: 2.5pt"><font style="font-size: 8pt"> </font></td>
<td style="border-bottom: Black 2.5pt double; text-align: left"><font style="font-size: 8pt">$</font></td><td style="border-bottom: Black 2.5pt double; text-align: right"><font style="font-size: 8pt">–</font></td><td style="padding-bottom: 2.5pt; text-align: left"><font style="font-size: 8pt"> </font></td></tr>
</table>
<table cellpadding="0" cellspacing="0" style="border-collapse: collapse; width: 100%; font: 10pt Times New Roman, Times, Serif">
<tr style="vertical-align: bottom">
<td colspan="2" style="text-align: left"><font style="font-size: 8pt"> </font></td><td style="padding-bottom: 1pt"><font style="font-size: 8pt"> </font></td><td style="padding-bottom: 1pt"><font style="font-size: 8pt"> </font></td>
<td colspan="2" style="text-align: center; border-bottom: Black 1pt solid"><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><font style="font-size: 8pt"><b>Number
of</b></font></p> <p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><font style="font-size: 8pt"><b>Shares</b></font></p></td><td style="padding-bottom: 1pt"><font style="font-size: 8pt"> </font></td><td style="padding-bottom: 1pt"><font style="font-size: 8pt"> </font></td>
<td colspan="2" style="text-align: center; border-bottom: Black 1pt solid"><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><font style="font-size: 8pt"><b>Weighted-</b></font></p> <p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><font style="font-size: 8pt"><b>Average</b></font></p> <p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><font style="font-size: 8pt"><b>Grant
Date</b><br /> <b>Fair Value</b></font></p></td><td style="padding-bottom: 1pt"><font style="font-size: 8pt"> </font></td></tr>
<tr style="vertical-align: bottom; background-color: rgb(238,238,238)">
<td style="width: 1%; text-align: left"><font style="font-size: 8pt"> </font></td><td style="width: 64%; text-align: left"><font style="font-size: 8pt">Outstanding
at January 1, 2017</font></td><td style="width: 1%; text-align: left"><font style="font-size: 8pt"> </font></td><td style="width: 2%"><font style="font-size: 8pt"> </font></td>
<td style="width: 1%; text-align: left"><font style="font-size: 8pt"> </font></td><td style="width: 13%; text-align: right"><font style="font-size: 8pt">462</font></td><td style="width: 1%; text-align: left"><font style="font-size: 8pt"> </font></td><td style="width: 2%"><font style="font-size: 8pt"> </font></td>
<td style="width: 1%; text-align: left"><font style="font-size: 8pt">$</font></td><td style="width: 13%; text-align: right"><font style="font-size: 8pt">8.07</font></td><td style="width: 1%; text-align: left"><font style="font-size: 8pt"> </font></td></tr>
<tr style="vertical-align: bottom; background-color: White">
<td style="text-align: left"><font style="font-size: 8pt"> </font></td><td style="text-align: left; padding-left: 11pt"><font style="font-size: 8pt">Granted</font></td><td style="text-align: left"><font style="font-size: 8pt"> </font></td><td><font style="font-size: 8pt"> </font></td>
<td style="text-align: left"><font style="font-size: 8pt"> </font></td><td style="text-align: right"><font style="font-size: 8pt">136</font></td><td style="text-align: left"><font style="font-size: 8pt"> </font></td><td><font style="font-size: 8pt"> </font></td>
<td style="text-align: left"><font style="font-size: 8pt">$</font></td><td style="text-align: right"><font style="font-size: 8pt">6.60</font></td><td style="text-align: left"><font style="font-size: 8pt"> </font></td></tr>
<tr style="vertical-align: bottom; background-color: rgb(238,238,238)">
<td style="text-align: left"><font style="font-size: 8pt"> </font></td><td style="text-align: left; padding-left: 11pt"><font style="font-size: 8pt">Vested</font></td><td style="text-align: left"><font style="font-size: 8pt"> </font></td><td><font style="font-size: 8pt"> </font></td>
<td style="text-align: left"><font style="font-size: 8pt"> </font></td><td style="text-align: right"><font style="font-size: 8pt">(471</font></td><td style="text-align: left"><font style="font-size: 8pt">)</font></td><td><font style="font-size: 8pt"> </font></td>
<td style="text-align: left"><font style="font-size: 8pt">$</font></td><td style="text-align: right"><font style="font-size: 8pt">7.96</font></td><td style="text-align: left"><font style="font-size: 8pt"> </font></td></tr>
<tr style="vertical-align: bottom; background-color: White">
<td style="padding-bottom: 1pt; text-align: left"><font style="font-size: 8pt"> </font></td><td style="padding-bottom: 1pt; text-align: left; padding-left: 11pt"><font style="font-size: 8pt">Cancelled</font></td><td style="padding-bottom: 1pt; text-align: left"><font style="font-size: 8pt"> </font></td><td style="padding-bottom: 1pt"><font style="font-size: 8pt"> </font></td>
<td style="border-bottom: Black 1pt solid; text-align: left"><font style="font-size: 8pt"> </font></td><td style="border-bottom: Black 1pt solid; text-align: right"><font style="font-size: 8pt">–</font></td><td style="padding-bottom: 1pt; text-align: left"><font style="font-size: 8pt"> </font></td><td style="padding-bottom: 1pt"><font style="font-size: 8pt"> </font></td>
<td style="padding-bottom: 1pt; text-align: left"><font style="font-size: 8pt">$</font></td><td style="padding-bottom: 1pt; text-align: right"><font style="font-size: 8pt">–</font></td><td style="padding-bottom: 1pt; text-align: left"><font style="font-size: 8pt"> </font></td></tr>
<tr style="vertical-align: bottom; background-color: rgb(238,238,238)">
<td style="padding-bottom: 2.5pt; text-align: left"><font style="font-size: 8pt"> </font></td><td style="padding-bottom: 2.5pt; text-align: left"><p style="margin-top: 0; margin-bottom: 0; text-align: left"></p><p style="margin-top: 0; margin-bottom: 0; text-align: left"></p><p style="margin-top: 0; margin-bottom: 0; text-align: left"><font style="font-size: 8pt">Outstanding
non-vested shares at September 30, 2017</font></p></td><td style="padding-bottom: 2.5pt; text-align: left"><font style="font-size: 8pt"> </font></td><td style="padding-bottom: 2.5pt"><font style="font-size: 8pt"> </font></td>
<td style="border-bottom: Black 2.5pt double; text-align: left"><font style="font-size: 8pt"> </font></td><td style="border-bottom: Black 2.5pt double; text-align: right"><font style="font-size: 8pt">127</font></td><td style="padding-bottom: 2.5pt; text-align: left"><font style="font-size: 8pt"> </font></td><td style="padding-bottom: 2.5pt"><font style="font-size: 8pt"> </font></td>
<td style="border-bottom: Black 2.5pt double; text-align: left"><font style="font-size: 8pt">$</font></td><td style="border-bottom: Black 2.5pt double; text-align: right"><font style="font-size: 8pt">6.90</font></td><td style="padding-bottom: 2.5pt; text-align: left"><font style="font-size: 8pt"> </font></td></tr>
</table>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><font style="font-size: 8pt"><i></i></font></p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><font style="font-size: 8pt"><i>Operating
Leases</i></font></p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in"><font style="font-size: 8pt"><i> </i> </font></p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in"><font style="font-size: 8pt">On
January 19, 2016, the Company entered into a real estate lease agreement for a 3,396 square foot office facility in Los Gatos,
California as its new corporate headquarters. The lease commenced on February 1, 2016 and expires on January 31, 2018. The lease
rate is $13,074 per month.</font></p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><font style="font-size: 8pt">  </font></p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in"><font style="font-size: 8pt">Approximate
future minimum lease payments required under the operating leases are as follows (in thousands):</font></p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in"><font style="font-size: 8pt"> </font></p>
<table cellpadding="0" cellspacing="0" style="border-collapse: collapse; width: 100%; font: 10pt Times New Roman, Times, Serif">
<tr style="vertical-align: bottom">
<td colspan="2" style="font-weight: bold; border-bottom: Black 1pt solid; text-align: left"><font style="font-size: 8pt">Years
ending December 31,</font></td><td style="padding-bottom: 1pt; font-weight: bold"><font style="font-size: 8pt"> </font></td><td style="font-weight: bold; padding-bottom: 1pt"><font style="font-size: 8pt"> </font></td>
<td colspan="2" style="font-weight: bold; text-align: center; border-bottom: Black 1pt solid"><font style="font-size: 8pt">Amount</font></td><td style="padding-bottom: 1pt; font-weight: bold"><font style="font-size: 8pt"> </font></td></tr>
<tr style="vertical-align: bottom; background-color: rgb(238,238,238)">
<td style="width: 1%; text-align: left"><font style="font-size: 8pt"> </font></td><td style="width: 81%; text-align: left"><font style="font-size: 8pt">Remaining
period in 2017</font></td><td style="width: 1%; text-align: left"><font style="font-size: 8pt"> </font></td><td style="width: 2%"><font style="font-size: 8pt"> </font></td>
<td style="width: 1%; text-align: left"><font style="font-size: 8pt">$</font></td><td style="width: 13%; text-align: right"><font style="font-size: 8pt">39</font></td><td style="width: 1%; text-align: left"><font style="font-size: 8pt"> </font></td></tr>
<tr style="vertical-align: bottom; background-color: White">
<td style="padding-bottom: 1pt; text-align: left"><font style="font-size: 8pt"> </font></td><td style="padding-bottom: 1pt; text-align: left"><font style="font-size: 8pt">2018</font></td><td style="padding-bottom: 1pt; text-align: left"><font style="font-size: 8pt"> </font></td><td style="padding-bottom: 1pt"><font style="font-size: 8pt"> </font></td>
<td style="border-bottom: Black 1pt solid; text-align: left"><font style="font-size: 8pt"> </font></td><td style="border-bottom: Black 1pt solid; text-align: right"><font style="font-size: 8pt">13</font></td><td style="padding-bottom: 1pt; text-align: left"><font style="font-size: 8pt"> </font></td></tr>
<tr style="vertical-align: bottom; background-color: rgb(238,238,238)">
<td style="padding-bottom: 2.5pt; text-align: left"><font style="font-size: 8pt"> </font></td><td style="padding-bottom: 2.5pt; text-align: left"><font style="font-size: 8pt">Total</font></td><td style="padding-bottom: 2.5pt; text-align: left"><font style="font-size: 8pt"> </font></td><td style="padding-bottom: 2.5pt"><font style="font-size: 8pt"> </font></td>
<td style="border-bottom: Black 2.5pt double; text-align: left"><font style="font-size: 8pt">$</font></td><td style="border-bottom: Black 2.5pt double; text-align: right"><font style="font-size: 8pt">52</font></td><td style="padding-bottom: 2.5pt; text-align: left"><font style="font-size: 8pt"> </font></td></tr>
</table>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><font style="font-size: 8pt"><i> </i></font></p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><font style="font-size: 8pt"><i>Licensing
agreement</i></font></p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><font style="font-size: 8pt"><i> </i></font></p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in"><font style="font-size: 8pt">In
December 2006, the Company entered into a licensing agreement with ASM International N.V., a vendor or semiconductor manufacturing
equipment located in Almere, The Netherlands, pursuant to which ASM has granted to the Company a non-exclusive, worldwide license
to make, and sublicense others to make, semiconductor devices using certain ASM patents. The ASM license restricts the Company
and its sublicensees from using the ASM licensed rights in the manufacture of epitaxial deposition machines or any other machines
used to manufacture semiconductors. The ASM license is coterminous with patents licensed by ASM, which expires on January 8, 2019,
and requires the Company to pay ASM a royalty of 5% of net royalty revenue, generally defined as gross royalty revenue less certain
customer offsets and credits, from the sale of any product incorporating the ASM licensed patents not manufactured on ASM equipment
and a royalty of 2.5% of net revenue from the sale of any product incorporating ASM licensed patents manufactured on ASM equipment.
All semiconductor devices incorporating the Company’s MST<sup>® </sup>technology manufactured prior to January 8, 2019
will be subject to the ASM license royalty. The Company has not incurred any royalty obligation under this license agreement as
of September 30, 2017.</font></p>
<table cellpadding="0" cellspacing="0" style="border-collapse: collapse; width: 100%; font: 10pt Times New Roman, Times, Serif">
<tr style="vertical-align: bottom">
<td colspan="2" style="font-weight: bold; border-bottom: Black 1pt solid; text-align: left"><font style="font-size: 8pt">Years
ending December 31,</font></td><td style="padding-bottom: 1pt; font-weight: bold"><font style="font-size: 8pt"> </font></td><td style="font-weight: bold; padding-bottom: 1pt"><font style="font-size: 8pt"> </font></td>
<td colspan="2" style="font-weight: bold; text-align: center; border-bottom: Black 1pt solid"><font style="font-size: 8pt">Amount</font></td><td style="padding-bottom: 1pt; font-weight: bold"><font style="font-size: 8pt"> </font></td></tr>
<tr style="vertical-align: bottom; background-color: rgb(238,238,238)">
<td style="width: 1%; text-align: left"><font style="font-size: 8pt"> </font></td><td style="width: 81%; text-align: left"><font style="font-size: 8pt">Remaining
period in 2017</font></td><td style="width: 1%; text-align: left"><font style="font-size: 8pt"> </font></td><td style="width: 2%"><font style="font-size: 8pt"> </font></td>
<td style="width: 1%; text-align: left"><font style="font-size: 8pt">$</font></td><td style="width: 13%; text-align: right"><font style="font-size: 8pt">39</font></td><td style="width: 1%; text-align: left"><font style="font-size: 8pt"> </font></td></tr>
<tr style="vertical-align: bottom; background-color: White">
<td style="padding-bottom: 1pt; text-align: left"><font style="font-size: 8pt"> </font></td><td style="padding-bottom: 1pt; text-align: left"><font style="font-size: 8pt">2018</font></td><td style="padding-bottom: 1pt; text-align: left"><font style="font-size: 8pt"> </font></td><td style="padding-bottom: 1pt"><font style="font-size: 8pt"> </font></td>
<td style="border-bottom: Black 1pt solid; text-align: left"><font style="font-size: 8pt"> </font></td><td style="border-bottom: Black 1pt solid; text-align: right"><font style="font-size: 8pt">13</font></td><td style="padding-bottom: 1pt; text-align: left"><font style="font-size: 8pt"> </font></td></tr>
<tr style="vertical-align: bottom; background-color: rgb(238,238,238)">
<td style="padding-bottom: 2.5pt; text-align: left"><font style="font-size: 8pt"> </font></td><td style="padding-bottom: 2.5pt; text-align: left"><font style="font-size: 8pt">Total</font></td><td style="padding-bottom: 2.5pt; text-align: left"><font style="font-size: 8pt"> </font></td><td style="padding-bottom: 2.5pt"><font style="font-size: 8pt"> </font></td>
<td style="border-bottom: Black 2.5pt double; text-align: left"><font style="font-size: 8pt">$</font></td><td style="border-bottom: Black 2.5pt double; text-align: right"><font style="font-size: 8pt">52</font></td><td style="padding-bottom: 2.5pt; text-align: left"><font style="font-size: 8pt"> </font></td></tr>
</table>
3.01
3.56
3.08
3.58
187500
7000
14000
3000
0