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<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.25in"><font style="font-size: 8pt"></font></p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.25in"><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: 0.25in"><font style="font-size: 8pt"> </font></p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.25in"><font style="font-size: 8pt">The
Company is in the development stage, having not yet started planned principal operations, and is devoting substantially all of
its efforts toward technology research and development. 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 (see Note 9).</font></p>
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<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.25in"><font style="font-size: 8pt">At
December 31, 2017, the Company had cash and cash equivalents of approximately $17.4 million and working capital of approximately
$16.8 million. The Company has only generated limited revenues since inception and has incurred recurring operating losses. At
December 31, 2017, the Company had an accumulated deficit of approximately $109.1 million.</font></p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.25in"><font style="font-size: 8pt"> </font></p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.25in"><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 its technology. However, as the Company has not yet generated recurring 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>
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<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><font style="font-size: 8pt"><i>Fair Value
of Financial Instruments</i></font></p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.25in"><font style="font-size: 8pt"> </font></p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.25in"><font style="font-size: 8pt">Authoritative
guidance requires disclosure of the fair value of financial instruments. The Company’s financial instruments consist of
cash and cash equivalents, accounts receivable and accounts payable, the carrying amounts of which approximate their estimated
fair values primarily due to the short-term nature of the instruments or based on information obtained from market sources and
management estimates. The Company measures the fair value of certain of its financial assets and liabilities on a recurring basis.
A fair value hierarchy is used to rank the quality and reliability of the information used to determine fair values. Financial
assets and liabilities carried at fair value which is not equivalent to cost will be classified and disclosed in one of the following
three categories:</font></p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 1in; text-align: justify; text-indent: -45pt"><font style="font-size: 8pt"> </font></p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 1in; text-align: justify; text-indent: -45pt"><font style="font-size: 8pt">Level
1 — Quoted prices (unadjusted) in active markets for identical assets and liabilities.</font></p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 1in; text-align: justify; text-indent: -45pt"><font style="font-size: 8pt"> </font></p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 1in; text-align: justify; text-indent: -45pt"><font style="font-size: 8pt">Level
2 — Inputs other than Level 1 that are observable, either directly or indirectly, such as unadjusted quoted prices for similar
assets and liabilities, unadjusted quoted prices in the markets that are not active, or other inputs that are observable or can
be corroborated by observable market data for substantially the full term of the assets or liabilities.</font></p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 1in; text-align: justify; text-indent: -45pt"><font style="font-size: 8pt"> </font></p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 1in; text-align: justify; text-indent: -45pt"><font style="font-size: 8pt">Level
3 — Unobservable inputs that are supported by little or no market activity and that are significant to the fair value of
the assets or liabilities.</font></p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"></p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><font style="font-size: 8pt"><i>Cash and
cash equivalents</i></font></p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.25in"><font style="font-size: 8pt"> </font></p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.25in"><font style="font-size: 8pt">The
Company maintains its operating accounts in a single reputable financial institution. The balances are insured by the U.S. Federal
Deposit Insurance Corporation (“FDIC”) up to specified limits. The Company’s cash is maintained in checking
accounts and money market funds with maturities of less than three months when purchased, which are readily convertible to known
amounts of cash, and which in the opinion of management are subject to insignificant risk of loss in value.</font></p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><font style="font-size: 8pt"></font></p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><font style="font-size: 8pt"><i>Accounts
Receivable</i></font></p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.25in"><font style="font-size: 8pt"> </font></p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.25in"><font style="font-size: 8pt">Trade
accounts receivable are recorded net of allowances for cash discounts for prompt payment, doubtful accounts, and sales returns.
Estimates for cash discounts and sales returns are based on analysis of contractual terms.</font></p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.25in"><font style="font-size: 8pt"> </font></p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.25in"><font style="font-size: 8pt">The
Company’s policy is to reserve for uncollectible accounts based on its best estimate of the amount of probable credit
losses in its existing accounts receivable. The Company periodically reviews its accounts receivable to determine whether an
allowance for doubtful accounts is necessary based on an analysis of past due accounts and other factors that may indicate
that the realization of an account may be in doubt. Other factors that the Company considers include its existing contractual
obligations, historical payment patterns of its customers and individual customer circumstances, and an analysis of days
sales outstanding by customer. Account balances deemed to be uncollectible are charged to the allowance after all means of
collection have been exhausted and the potential for recovery is considered remote. At December 31, 2017, there were no
allowance for doubtful accounts since the balance was subsequently collected. Any allowances recorded are included in
Accounts Receivable, net in the accompanying balance sheets.</font></p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><font style="font-size: 8pt"></font></p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><font style="font-size: 8pt"><i>Revenue</i></font></p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.25in"><font style="font-size: 8pt">      </font></p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.25in"><font style="font-size: 8pt">The
Company generates revenue from sales of its products and delivery of services to its customer base.</font></p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.25in"><font style="font-size: 8pt"> </font></p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.25in"><font style="font-size: 8pt">The
Company records revenue when (i) persuasive evidence of an arrangement exists, (ii) delivery of the goods or performance of the
services has occurred, (iii) the fee is fixed or determinable, and (iv) collectability of the sale is reasonably assured.</font></p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.25in"><font style="font-size: 8pt"> </font></p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.25in"><font style="font-size: 8pt">The
Company requires all product sales to be supported by evidence of a sale transaction that clearly indicates the selling price
to the customer, shipping terms and payment terms. Evidence of an arrangement generally consists of a contract or purchase order
approved by the customer. The Company has ongoing relationships with certain customers from which it customarily accepts orders
by telephone in lieu of purchase orders.</font></p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.25in"><font style="font-size: 8pt"> </font></p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.25in"><font style="font-size: 8pt">The Company
recognizes revenue at the time it receives confirmation that the goods were either tendered at their destination, when shipped
“FOB destination,” or transferred to a shipping agent, when shipped “FOB shipping point.” Delivery to
the customer is deemed to have occurred when the customer takes title to the product. Generally, title passes to the customer
upon shipment, but could occur when the customer receives the product based on the terms of the agreement with the customer.</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"><i>Income Taxes</i></font></p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.25in"><font style="font-size: 8pt"> </font></p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.25in"><font style="font-size: 8pt">In
accordance with authoritative guidance, deferred tax assets and liabilities are recorded for temporary differences between the
financial reporting and tax bases of assets and liabilities using the current enacted tax rate expected to be in effect when the
differences are expected to reverse. A valuation allowance is recorded on deferred tax assets unless realization is considered
more likely than not.</font></p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.25in"><font style="font-size: 8pt"> </font></p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.25in"><font style="font-size: 8pt">The
Company evaluates its tax positions taken or expected to be taken in the course of preparing the Company’s tax returns to
determine whether the tax positions are “more-likely-than-not” of being sustained by the applicable tax authority.
Tax positions not deemed to meet the “more-likely-than-not” threshold are not recorded as a tax benefit or expense
in the current year. The Company recognizes interest and penalties, if any, related to uncertain tax positions in interest expense.
No interest and penalties related to uncertain tax positions were accrued at either December 31, 2017 or 2016.</font></p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.25in"><font style="font-size: 8pt"> </font></p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.25in"><font style="font-size: 8pt">The
Company follows authoritative guidance which requires the evaluation of existing tax positions. Management has analyzed all open
tax years, as defined by the statute of limitations, for all major jurisdictions, which includes both federal and states where
the Company has operations. Open tax years are those that are open for examination by taxing authorities.</font></p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.25in"><font style="font-size: 8pt"></font></p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><font style="font-size: 8pt"><i>Property
and equipment</i></font></p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.25in"><font style="font-size: 8pt"> </font></p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.25in"><font style="font-size: 8pt">Items
capitalized as property and equipment are stated at cost. Maintenance and routine repairs are charged to operations when incurred,
while betterments and renewals are capitalized. Depreciation and amortization are computed using the straight-line method over
the estimated useful lives of the respective assets starting when the asset is placed in service.</font></p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><font style="font-size: 8pt"></font></p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><font style="font-size: 8pt"><i>Debt Discounts</i></font></p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.25in"><font style="font-size: 8pt"> </font></p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.25in"><font style="font-size: 8pt">Debt
discounts are amortized to interest expense using the straight-line method, which approximates the interest rate method, over
the earlier of the term of the related debt or their earliest date of redemption.</font></p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><font style="font-size: 8pt"></font></p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><font style="font-size: 8pt"><i>Research
and development expenses</i></font></p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.25in"><font style="font-size: 8pt"> </font></p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.25in"><font style="font-size: 8pt">In
accordance with authoritative guidance, the Company charges research and development costs to operations as incurred. Research
and development expenses consist of personnel costs for the design, development, testing and enhancement of the Company’s
technology, and certain other allocated costs, such as depreciation and other facilities related expenditures.</font></p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><font style="font-size: 8pt"></font></p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><font style="font-size: 8pt"><i>Common
stock warrants</i></font></p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.25in"><font style="font-size: 8pt"> </font></p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.25in"><font style="font-size: 8pt">The
Company classifies as equity any warrants that (i) require physical settlement or net-share settlement or (ii) provide the Company
with a choice of net-cash settlement or settlement in its own shares (physical settlement or net-share settlement). The Company
classifies as assets or liabilities any contracts that (i) require net-cash settlement (including a requirement to net cash settle
the contract if an event occurs and if that event is outside the Company’s control), (ii) gives the counterparty a choice
of net-cash settlement or settlement in shares (physical settlement or net-share settlement) or (iii) that contain reset provisions
that do not qualify for the scope exception. The Company assesses classification of its common stock warrants and other freestanding
derivatives at each reporting date to determine whether a change in classification between assets and liabilities is required.
The Company’s freestanding derivatives consist of warrants to purchase common stock that were issued in connection with
its notes payable. The Company evaluated these warrants to assess their proper classification and determined that the common stock
warrants meet the criteria for equity classification in the balance sheet. Such warrants are measured at fair value, which the
Company determines using the Black-Scholes-Merton option-pricing model.</font></p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><font style="font-size: 8pt"></font></p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><font style="font-size: 8pt"><i>Use of
estimates</i></font></p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.25in"><font style="font-size: 8pt"> </font></p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.25in"><font style="font-size: 8pt">The
preparation of financial statements in conformity with GAAP requires the Company’s management to make estimates and assumptions
that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of
the financial statements and the reported amounts of expenses during the reporting period. Significant estimates include the fair
value of stock-based compensation and warrants, valuation allowance against deferred tax assets and related disclosures. Actual
results could differ from those estimates.</font></p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.25in"><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; text-align: justify; text-indent: 0.25in"><font style="font-size: 8pt"> </font></p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.25in"><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; text-align: justify; text-indent: 0.25in"><font style="font-size: 8pt"></font></p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.25in"><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: 0.25in"><font style="font-size: 8pt"> </font></p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.25in"><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: 0.25in"><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">Year
Ended December 31,</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">2,141</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">1,515</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">2,906</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">2,280</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"><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">Year
Ended December 31,</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">2,141</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">1,515</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">2,906</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">2,280</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: 0.25in"><font style="font-size: 8pt"></font></p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.25in"><font style="font-size: 8pt">Property
and equipment consisted of the following (in thousands):</font></p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.25in"><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">December
31,</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">Computer equipment</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">77</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">60</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">Laboratory equipment</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">76</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">55</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><font style="font-size: 8pt">Software</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</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">5</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="text-align: left"><font style="font-size: 8pt">Office equipment</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">1</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</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">Furniture and fixtures</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">1</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></tr>
<tr style="vertical-align: bottom; background-color: White">
<td><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">161</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">122</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">Less: Accumulated depreciation and amortization</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">(94</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">(94</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">67</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">28</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: 0.25in"><font style="font-size: 8pt"> </font></p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.25in"><font style="font-size: 8pt">Depreciation
and amortization expense relating to property and equipment was approximately $19,000 and $15,000 for the years ended December
31, 2017 and 2016, respectively. The Company depreciates computer equipment, laboratory equipment and office equipment on straight-line
basis over three years. Furniture and fixtures are depreciated on a straight-line basis over five years. The Company amortizes
software on straight-line basis over three years.</font></p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.25in"><font style="font-size: 8pt"> </font></p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.25in"><font style="font-size: 8pt">During
the year ended December 31, 2017, the Company disposed of property and equipment with a cost of approximately $21,000, the net
book value of the assets at the time of the disposal was approximately $2,000.</font></p>
<table cellpadding="0" cellspacing="0" style="border-collapse: collapse; width: 100%; font: 10pt Times New Roman, Times, Serif">
<tr style="vertical-align: bottom">
<td><font style="font-size: 8pt"> </font></td><td style="font-weight: bold; padding-bottom: 1pt"><font style="font-size: 8pt"> </font></td>
<td colspan="6" style="font-weight: bold; text-align: center; border-bottom: Black 1pt solid"><font style="font-size: 8pt">December
31,</font></td><td style="padding-bottom: 1pt; font-weight: bold"><font style="font-size: 8pt"> </font></td></tr>
<tr style="vertical-align: bottom">
<td><font style="font-size: 8pt"> </font></td><td style="font-weight: bold; padding-bottom: 1pt"><font style="font-size: 8pt"> </font></td>
<td colspan="2" style="font-weight: bold; text-align: center; border-bottom: Black 1pt solid"><font style="font-size: 8pt">2017</font></td><td style="padding-bottom: 1pt; font-weight: bold"><font style="font-size: 8pt"> </font></td><td style="font-weight: bold; padding-bottom: 1pt"><font style="font-size: 8pt"> </font></td>
<td colspan="2" style="font-weight: bold; text-align: center; border-bottom: Black 1pt solid"><font style="font-size: 8pt">2016</font></td><td style="padding-bottom: 1pt; font-weight: bold"><font style="font-size: 8pt"> </font></td></tr>
<tr style="vertical-align: bottom; background-color: rgb(238,238,238)">
<td style="width: 66%; text-align: left"><font style="font-size: 8pt">Computer equipment</font></td><td style="width: 2%"><font style="font-size: 8pt"> </font></td>
<td style="width: 1%; text-align: left"><font style="font-size: 8pt">$</font></td><td style="width: 13%; text-align: right"><font style="font-size: 8pt">77</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">60</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">Laboratory equipment</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">76</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">55</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><font style="font-size: 8pt">Software</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</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">5</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="text-align: left"><font style="font-size: 8pt">Office equipment</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">1</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</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">Furniture and fixtures</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">1</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></tr>
<tr style="vertical-align: bottom; background-color: White">
<td><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">161</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">122</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">Less: Accumulated depreciation and amortization</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">(94</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">(94</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">67</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">28</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"></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: 0.25in"> </p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.25in"><font style="font-size: 8pt">In
October 2016, the Company entered into lease agreement for approximately 200 square feet of office space in Cambridge, Massachusetts.
The lease with monthly payments of $2,074 per month commenced on October 24, 2016. The lease rate will increase to $2,330 on January
1, 2018. The lease is a month to month and can be cancelled with a 30 day notice.</font></p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.25in"><font style="font-size: 8pt"> </font></p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.25in"><font style="font-size: 8pt">In
January 2016, the Company entered into a 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. In December 2017, the company
extended the lease terms for three years through January 31, 2021. The lease rate is $13,074 per month, which will decrease to
$12,735 per month commencing February 1, 2018 with annual increases of 3% in each subsequent year.</font></p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.25in"><font style="font-size: 8pt"> </font></p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.25in"><font style="font-size: 8pt">Approximate
future minimum lease payments required under the operating leases are as follows (in thousands):</font></p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.25in"><font style="font-size: 8pt"> </font></p>
<table cellspacing="0" cellpadding="0" style="font: 10pt Times New Roman, Times, Serif; width: 100%; border-collapse: collapse">
<tr style="vertical-align: bottom">
<td colspan="2" style="border-bottom: black 1pt solid"><font style="font-size: 8pt"><b>Years ending December 31,</b></font></td>
<td><font style="font-size: 8pt"> </font></td>
<td><font style="font-size: 8pt"> </font></td>
<td colspan="2" style="border-bottom: black 1pt solid; text-align: center"><font style="font-size: 8pt"><b>Amount</b></font></td>
<td><font style="font-size: 8pt"> </font></td></tr>
<tr style="vertical-align: bottom; background-color: rgb(238,238,238)">
<td style="width: 1%"><font style="font-size: 8pt"> </font></td>
<td style="width: 82%"><font style="font-size: 8pt">2018</font></td>
<td style="width: 1%"><font style="font-size: 8pt"> </font></td>
<td style="width: 1%"><font style="font-size: 8pt"> </font></td>
<td style="width: 1%"><font style="font-size: 8pt">$</font></td>
<td style="width: 13%; text-align: right"><font style="font-size: 8pt">153</font></td>
<td style="width: 1%"><font style="font-size: 8pt"> </font></td></tr>
<tr style="vertical-align: bottom; background-color: White">
<td><font style="font-size: 8pt"> </font></td>
<td><font style="font-size: 8pt">2019</font></td>
<td><font style="font-size: 8pt"> </font></td>
<td><font style="font-size: 8pt"> </font></td>
<td><font style="font-size: 8pt"> </font></td>
<td style="text-align: right"><font style="font-size: 8pt">157</font></td>
<td><font style="font-size: 8pt"> </font></td></tr>
<tr style="vertical-align: bottom; background-color: rgb(238,238,238)">
<td><font style="font-size: 8pt"> </font></td>
<td><font style="font-size: 8pt">2020</font></td>
<td><font style="font-size: 8pt"> </font></td>
<td><font style="font-size: 8pt"> </font></td>
<td><font style="font-size: 8pt"> </font></td>
<td style="text-align: right"><font style="font-size: 8pt">162</font></td>
<td><font style="font-size: 8pt"> </font></td></tr>
<tr style="vertical-align: bottom; background-color: White">
<td><font style="font-size: 8pt"> </font></td>
<td><font style="font-size: 8pt">2021</font></td>
<td><font style="font-size: 8pt"> </font></td>
<td><font style="font-size: 8pt"> </font></td>
<td style="border-bottom: black 1pt solid"><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><font style="font-size: 8pt"> </font></td></tr>
<tr style="vertical-align: bottom; background-color: rgb(238,238,238)">
<td><font style="font-size: 8pt"> </font></td>
<td><font style="font-size: 8pt">Total</font></td>
<td><font style="font-size: 8pt"> </font></td>
<td><font style="font-size: 8pt"> </font></td>
<td style="border-bottom: black 2.25pt double"><font style="font-size: 8pt">$</font></td>
<td style="border-bottom: black 2.25pt double; text-align: right"><font style="font-size: 8pt">485</font></td>
<td><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; text-indent: 0.25in"><font style="font-size: 8pt"> </font></p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.25in"><font style="font-size: 8pt">In
December 2006, the Company entered into licensing agreement with ASM International, NV, a semiconductor OEM 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 EPI 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 incurred approximately $3,000 in royalty expense under this agreement for the year ended December 31, 2017 which is
included in cost of revenue in the statement of operations. There was no royalty expense for the year ended December 31, 2016.</font></p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><font style="font-size: 8pt"> </font></p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><font style="font-size: 8pt"><i>Legal</i></font></p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.25in"><font style="font-size: 8pt"> </font></p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.25in"><font style="font-size: 8pt">The
Company may be involved, from time to time, in legal proceedings and claims arising in the ordinary course of its business. Such
matters are subject to many uncertainties and outcomes and are not predictable with assurance. While management believes that
such matters are currently insignificant, matters arising in the ordinary course of business for which the Company is or could
become involved in litigation may have a material adverse effect on its business and financial condition. To the Company’s
knowledge, neither the Company nor any of its properties are subject to any pending legal proceedings.</font></p>
<table cellspacing="0" cellpadding="0" style="font: 10pt Times New Roman, Times, Serif; width: 100%; border-collapse: collapse">
<tr style="vertical-align: bottom">
<td colspan="2" style="border-bottom: black 1pt solid"><font style="font-size: 8pt"><b>Years ending December 31,</b></font></td>
<td><font style="font-size: 8pt"> </font></td>
<td><font style="font-size: 8pt"> </font></td>
<td colspan="2" style="border-bottom: black 1pt solid; text-align: center"><font style="font-size: 8pt"><b>Amount</b></font></td>
<td><font style="font-size: 8pt"> </font></td></tr>
<tr style="vertical-align: bottom; background-color: rgb(238,238,238)">
<td style="width: 1%"><font style="font-size: 8pt"> </font></td>
<td style="width: 82%"><font style="font-size: 8pt">2018</font></td>
<td style="width: 1%"><font style="font-size: 8pt"> </font></td>
<td style="width: 1%"><font style="font-size: 8pt"> </font></td>
<td style="width: 1%"><font style="font-size: 8pt">$</font></td>
<td style="width: 13%; text-align: right"><font style="font-size: 8pt">153</font></td>
<td style="width: 1%"><font style="font-size: 8pt"> </font></td></tr>
<tr style="vertical-align: bottom; background-color: White">
<td><font style="font-size: 8pt"> </font></td>
<td><font style="font-size: 8pt">2019</font></td>
<td><font style="font-size: 8pt"> </font></td>
<td><font style="font-size: 8pt"> </font></td>
<td><font style="font-size: 8pt"> </font></td>
<td style="text-align: right"><font style="font-size: 8pt">157</font></td>
<td><font style="font-size: 8pt"> </font></td></tr>
<tr style="vertical-align: bottom; background-color: rgb(238,238,238)">
<td><font style="font-size: 8pt"> </font></td>
<td><font style="font-size: 8pt">2020</font></td>
<td><font style="font-size: 8pt"> </font></td>
<td><font style="font-size: 8pt"> </font></td>
<td><font style="font-size: 8pt"> </font></td>
<td style="text-align: right"><font style="font-size: 8pt">162</font></td>
<td><font style="font-size: 8pt"> </font></td></tr>
<tr style="vertical-align: bottom; background-color: White">
<td><font style="font-size: 8pt"> </font></td>
<td><font style="font-size: 8pt">2021</font></td>
<td><font style="font-size: 8pt"> </font></td>
<td><font style="font-size: 8pt"> </font></td>
<td style="border-bottom: black 1pt solid"><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><font style="font-size: 8pt"> </font></td></tr>
<tr style="vertical-align: bottom; background-color: rgb(238,238,238)">
<td><font style="font-size: 8pt"> </font></td>
<td><font style="font-size: 8pt">Total</font></td>
<td><font style="font-size: 8pt"> </font></td>
<td><font style="font-size: 8pt"> </font></td>
<td style="border-bottom: black 2.25pt double"><font style="font-size: 8pt">$</font></td>
<td style="border-bottom: black 2.25pt double; text-align: right"><font style="font-size: 8pt">485</font></td>
<td><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: 0.25in"><font style="font-size: 8pt"></font></p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.25in"><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. National Securities Corporation (“NSC”) acted as placement agent and the Company paid a brokerage
commission to NSC and also issued a warrant (the “2015 NSC Warrant”) to purchase 10% of the common stock issuable
upon conversion of Secured Notes in the principal amount of approximately $7.4 million at an exercise price of $7.362 per share,
subject to adjustment of the exercise price to the conversion price of the Secured Notes when such conversion price became determinable.
The number of shares issuable upon exercise of the 2015 NSC Warrant was initially set at 100,144 shares of the Company’s
common stock, subject to later adjustment to a number of shares equal to 10% of the shares issuable upon conversion of the Secured
Notes. 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 and in April 2016 the Company sold an additional $5.96 million of Secured
Notes</font></p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.25in"><font style="font-size: 8pt"> </font></p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.25in"><font style="font-size: 8pt">During
the year ended December 31, 2016, the interest expense on the Secured Notes was approximately $2.6 million. On August 10, 2016,
upon consummation of the IPO, and in accordance with the terms of the Secured Notes, all principal and accrued interest due under
the Secured Notes, totaling approximately $23.5 million converted into 6,264,659 shares of common stock of the Company, based
on a conversion price equal to 50% of the price of shares sold in to the public in the IPO, or $3.75 per share. There is no interest
expense for the year ended December 31, 2017. The determination of the conversion price and number of shares issuable upon conversion
of the Secured Notes triggered an adjustment to the 2015 NSC Warrant, increasing the number of shares issuable by 96,458 (to a
total of 196,502 shares) and setting the exercise price at $3.75 per share. The modification of the number of shares issuable
and exercise price of the 2015 NSC Warrant increased its fair value resulting in addition interest expense recognized in August,
2016 (See Note 10).</font></p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.25in"><font style="font-size: 8pt"></font></p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.25in"><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 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 year ended December 31, 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: 0.25in"><font style="font-size: 8pt"> </font></p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.25in"><font style="font-size: 8pt">During
the year ended December 31, 2016, a director, who is also a shareholder of the Company, was paid $3,000 for his work as a consultant
for the Company. There were no payments for the year ended December 31, 2017.</font></p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.25in"><font style="font-size: 8pt"></font></p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.25in"><font style="font-size: 8pt">The
Company is authorized to issue to up 2,500,000 shares of preferred stock, $.001 par value. As of December 31, 2017, no
shares have been designated and no shares are issued and outstanding. Preferred stock may rank prior to common stock with
respect to dividends rights, liquidation preferences, or both, and may have full or limited voting rights.</font></p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.25in"><font style="font-size: 8pt"> </font></p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.25in"><font style="font-size: 8pt">In
August 2016, the Company closed its IPO of 3,680,000 shares of common stock at a public offering price of $7.50 per share. In
accordance with the terms of the Secured Notes, all principal plus accrued interest (totaling approximately $23.5 million) converted
automatically upon consummation of the IPO into 6,264,659 shares (see Note 7).</font></p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.25in"><font style="font-size: 8pt">  </font></p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.25in"><font style="font-size: 8pt">As
of December 31, 2017, the Company has reserved approximately 2.9 million shares of common stock for issuance pursuant to outstanding
stock options and warrants.</font></p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.25in"><font style="font-size: 8pt"> </font></p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.25in"><font style="font-size: 8pt">In
May 2017, the Company issued 10,000 shares of common stock to a consultant for services rendered. The shares were valued at fair
value on the date issued and the Company recorded an expense of approximately $60,000 in general and administrative expenses on
the statement of operations for the year ended December 31, 2017.</font></p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.25in"><font style="font-size: 8pt"></font></p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.25in"><font style="font-size: 8pt">As
a result of the conversion of the Secured Notes to common stock on August 10, 2016, the 2015 NSC Warrant was adjusted in accordance
with its terms (See Note 7). This adjustment consisted of (i) an increase in the number of shares issuable upon exercise of the
warrant to 10% of the common shares issued upon conversion of the Secured Notes, or an increase of 96,458 shares to a total of
196,602 shares and (ii) modified the per-share exercise price of the original warrant issued to $3.75. The adjustment increased
the fair value of the warrant by approximately $710,000 and was recorded as additional interest expense in the year ended December
31, 2016 in the statement of operations. The modified warrant expires at the same time as the original warrant, March 17, 2020.</font></p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.25in"><font style="font-size: 8pt"> </font></p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.25in"><font style="font-size: 8pt">On
August 4, 2016, the Company issued a five-year warrant to purchase 368,000 shares of common stock at $9.375 per share to NSC in
consideration for underwriting the Company’s IPO in August 2016. The fair value of these warrants was determined to be approximately
$539,000 and is included as a charge to additional paid-in capital as of December 31, 2016 as a deferred offering cost.</font></p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.25in"><font style="font-size: 8pt"> </font></p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.25in"><font style="font-size: 8pt">The
Company estimated the fair value of warrants using the Black-Scholes option pricing model. There were no warrants issued in the
year ending December 31, 2017. The fair value of warrants was estimated using the following weighted-average assumptions for the
year ended December 31, 2016 is as follows:</font></p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.25in"><font style="font-size: 8pt"> </font></p>
<table cellspacing="0" cellpadding="0" style="font: 10pt Times New Roman, Times, Serif; width: 100%; border-collapse: collapse">
<tr>
<td style="vertical-align: bottom"><font style="font-size: 8pt"> </font></td>
<td style="vertical-align: bottom"><font style="font-size: 8pt"> </font></td>
<td style="vertical-align: bottom"><font style="font-size: 8pt"> </font></td>
<td colspan="5"><font style="font-size: 8pt"> </font></td></tr>
<tr style="vertical-align: bottom; background-color: rgb(238,238,238)">
<td style="width: 78%"><font style="font-size: 8pt">Weighted average exercise price:</font></td>
<td style="width: 2%"><font style="font-size: 8pt"> </font></td>
<td style="width: 2%"><font style="font-size: 8pt"> </font></td>
<td style="width: 1%"><font style="font-size: 8pt"> </font></td>
<td style="width: 2%"><font style="font-size: 8pt"> </font></td>
<td style="width: 1%"><font style="font-size: 8pt">$</font></td>
<td style="width: 13%; text-align: right"><font style="font-size: 8pt">7.42</font></td>
<td style="width: 1%"><font style="font-size: 8pt"> </font></td></tr>
<tr style="vertical-align: bottom; background-color: White">
<td><font style="font-size: 8pt">Weighted average grant date fair value:</font></td>
<td><font style="font-size: 8pt"> </font></td>
<td><font style="font-size: 8pt"> </font></td>
<td><font style="font-size: 8pt"> </font></td>
<td><font style="font-size: 8pt"> </font></td>
<td><font style="font-size: 8pt">$</font></td>
<td style="text-align: right"><font style="font-size: 8pt">2.49</font></td>
<td><font style="font-size: 8pt"> </font></td></tr>
<tr style="vertical-align: bottom; background-color: rgb(238,238,238)">
<td><font style="font-size: 8pt">Assumptions: </font></td>
<td><font style="font-size: 8pt"> </font></td>
<td><font style="font-size: 8pt"> </font></td>
<td><font style="font-size: 8pt"> </font></td>
<td><font style="font-size: 8pt"> </font></td>
<td><font style="font-size: 8pt"> </font></td>
<td style="text-align: right"><font style="font-size: 8pt"> </font></td>
<td><font style="font-size: 8pt"> </font></td></tr>
<tr style="vertical-align: bottom; background-color: White">
<td><font style="font-size: 8pt">Expected volatility</font></td>
<td><font style="font-size: 8pt"> </font></td>
<td><font style="font-size: 8pt"> </font></td>
<td><font style="font-size: 8pt"> </font></td>
<td><font style="font-size: 8pt"> </font></td>
<td><font style="font-size: 8pt"> </font></td>
<td style="text-align: right"><font style="font-size: 8pt">43.1%</font></td>
<td><font style="font-size: 8pt"> </font></td></tr>
<tr style="vertical-align: bottom; background-color: rgb(238,238,238)">
<td><font style="font-size: 8pt">Weighted average expected term (in years)</font></td>
<td><font style="font-size: 8pt"> </font></td>
<td><font style="font-size: 8pt"> </font></td>
<td><font style="font-size: 8pt"> </font></td>
<td><font style="font-size: 8pt"> </font></td>
<td><font style="font-size: 8pt"> </font></td>
<td style="text-align: right"><font style="font-size: 8pt">2.2</font></td>
<td><font style="font-size: 8pt"> </font></td></tr>
<tr style="vertical-align: bottom; background-color: White">
<td><font style="font-size: 8pt">Risk-free interest rate</font></td>
<td><font style="font-size: 8pt"> </font></td>
<td><font style="font-size: 8pt"> </font></td>
<td><font style="font-size: 8pt"> </font></td>
<td><font style="font-size: 8pt"> </font></td>
<td><font style="font-size: 8pt"> </font></td>
<td style="text-align: right"><font style="font-size: 8pt">0.6% </font></td>
<td><font style="font-size: 8pt"> </font></td></tr>
<tr style="vertical-align: bottom; background-color: rgb(238,238,238)">
<td><font style="font-size: 8pt">Expected dividend yield</font></td>
<td><font style="font-size: 8pt"> </font></td>
<td><font style="font-size: 8pt"> </font></td>
<td><font style="font-size: 8pt"> </font></td>
<td><font style="font-size: 8pt"> </font></td>
<td><font style="font-size: 8pt"> </font></td>
<td style="text-align: right"><font style="font-size: 8pt">0.0%</font></td>
<td><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: 0.25in"><font style="font-size: 8pt"> </font></p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.25in"><font style="font-size: 8pt">The
risk-free interest rate was obtained from U.S. Treasury rates for the applicable periods. The Company’s expected volatility
was based upon the historical volatility for industry peers and used an average of those volatilities. The expected life of the
Company’s options was determined using the simplified method as a result of limited historical data regarding the Company’s
activity. The dividend yield considers that the Company has not historically paid dividends and does not expect to pay dividends
in the foreseeable future.</font></p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.25in"><font style="font-size: 8pt">  </font></p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.25in"><font style="font-size: 8pt">A
summary of warrant activity for the years ended December 31, 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: 0.25in"><font style="font-size: 8pt"> </font></p>
<table cellspacing="0" cellpadding="0" style="font: 10pt Times New Roman, Times, Serif; width: 100%; border-collapse: collapse">
<tr style="vertical-align: bottom">
<td><font style="font-size: 8pt"> </font></td>
<td><font style="font-size: 8pt"> </font></td>
<td colspan="2"><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><font style="font-size: 8pt"> </font></td>
<td><font style="font-size: 8pt"> </font></td>
<td colspan="2" style="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><font style="font-size: 8pt"> </font></td>
<td><font style="font-size: 8pt"> </font></td>
<td colspan="2" style="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-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><font style="font-size: 8pt"> </font></td></tr>
<tr style="vertical-align: bottom; background-color: rgb(238,238,238)">
<td style="width: 58%"><font style="font-size: 8pt">Outstanding at January 1, 2017</font></td>
<td style="width: 1%"><font style="font-size: 8pt"> </font></td>
<td style="width: 1%; border-bottom: Black 1pt solid"><font style="font-size: 8pt"> </font></td>
<td style="width: 11%; border-bottom: Black 1pt solid; text-align: right"><font style="font-size: 8pt">765</font></td>
<td style="width: 1%"><font style="font-size: 8pt"> </font></td>
<td style="width: 1%"><font style="font-size: 8pt"> </font></td>
<td style="width: 1%"><font style="font-size: 8pt">$</font></td>
<td style="width: 11%; text-align: right"><font style="font-size: 8pt">5.75</font></td>
<td style="width: 1%"><font style="font-size: 8pt"> </font></td>
<td style="width: 1%"><font style="font-size: 8pt"> </font></td>
<td style="width: 1%"><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%"><font style="font-size: 8pt"> </font></td></tr>
<tr style="vertical-align: bottom; background-color: White">
<td><font style="font-size: 8pt">Outstanding and exercisable at December 31, 2017</font></td>
<td><font style="font-size: 8pt"> </font></td>
<td style="border-bottom: black 2.25pt double"><font style="font-size: 8pt"> </font></td>
<td style="border-bottom: black 2.25pt double; text-align: right"><font style="font-size: 8pt">765</font></td>
<td><font style="font-size: 8pt"> </font></td>
<td><font style="font-size: 8pt"> </font></td>
<td style="border-bottom: black 2.25pt double"><font style="font-size: 8pt">$</font></td>
<td style="border-bottom: black 2.25pt double; text-align: right"><font style="font-size: 8pt">5.75</font></td>
<td><font style="font-size: 8pt"> </font></td>
<td><font style="font-size: 8pt"> </font></td>
<td style="border-bottom: black 2.25pt double"><font style="font-size: 8pt"> </font></td>
<td style="border-bottom: black 2.25pt double; text-align: right"><font style="font-size: 8pt">2.9</font></td>
<td><font style="font-size: 8pt"> </font></td></tr>
</table>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.25in"><font style="font-size: 8pt"> </font></p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.25in"><font style="font-size: 8pt">The warrants
outstanding at December 31, 2017 had an intrinsic value of approximately $809,000 based on a per-share stock price of $4.33 as
of December 31, 2017.</font></p>
<table cellspacing="0" cellpadding="0" style="font: 10pt Times New Roman, Times, Serif; width: 100%; border-collapse: collapse">
<tr>
<td style="vertical-align: bottom"><font style="font-size: 8pt"> </font></td>
<td style="vertical-align: bottom"><font style="font-size: 8pt"> </font></td>
<td style="vertical-align: bottom"><font style="font-size: 8pt"> </font></td>
<td colspan="5"><font style="font-size: 8pt"> </font></td></tr>
<tr style="vertical-align: bottom; background-color: rgb(238,238,238)">
<td style="width: 78%"><font style="font-size: 8pt">Weighted average exercise price:</font></td>
<td style="width: 2%"><font style="font-size: 8pt"> </font></td>
<td style="width: 2%"><font style="font-size: 8pt"> </font></td>
<td style="width: 1%"><font style="font-size: 8pt"> </font></td>
<td style="width: 2%"><font style="font-size: 8pt"> </font></td>
<td style="width: 1%"><font style="font-size: 8pt">$</font></td>
<td style="width: 13%; text-align: right"><font style="font-size: 8pt">7.42</font></td>
<td style="width: 1%"><font style="font-size: 8pt"> </font></td></tr>
<tr style="vertical-align: bottom; background-color: White">
<td><font style="font-size: 8pt">Weighted average grant date fair value:</font></td>
<td><font style="font-size: 8pt"> </font></td>
<td><font style="font-size: 8pt"> </font></td>
<td><font style="font-size: 8pt"> </font></td>
<td><font style="font-size: 8pt"> </font></td>
<td><font style="font-size: 8pt">$</font></td>
<td style="text-align: right"><font style="font-size: 8pt">2.49</font></td>
<td><font style="font-size: 8pt"> </font></td></tr>
<tr style="vertical-align: bottom; background-color: rgb(238,238,238)">
<td><font style="font-size: 8pt">Assumptions: </font></td>
<td><font style="font-size: 8pt"> </font></td>
<td><font style="font-size: 8pt"> </font></td>
<td><font style="font-size: 8pt"> </font></td>
<td><font style="font-size: 8pt"> </font></td>
<td><font style="font-size: 8pt"> </font></td>
<td style="text-align: right"><font style="font-size: 8pt"> </font></td>
<td><font style="font-size: 8pt"> </font></td></tr>
<tr style="vertical-align: bottom; background-color: White">
<td><font style="font-size: 8pt">Expected volatility</font></td>
<td><font style="font-size: 8pt"> </font></td>
<td><font style="font-size: 8pt"> </font></td>
<td><font style="font-size: 8pt"> </font></td>
<td><font style="font-size: 8pt"> </font></td>
<td><font style="font-size: 8pt"> </font></td>
<td style="text-align: right"><font style="font-size: 8pt">43.1%</font></td>
<td><font style="font-size: 8pt"> </font></td></tr>
<tr style="vertical-align: bottom; background-color: rgb(238,238,238)">
<td><font style="font-size: 8pt">Weighted average expected term (in years)</font></td>
<td><font style="font-size: 8pt"> </font></td>
<td><font style="font-size: 8pt"> </font></td>
<td><font style="font-size: 8pt"> </font></td>
<td><font style="font-size: 8pt"> </font></td>
<td><font style="font-size: 8pt"> </font></td>
<td style="text-align: right"><font style="font-size: 8pt">2.2</font></td>
<td><font style="font-size: 8pt"> </font></td></tr>
<tr style="vertical-align: bottom; background-color: White">
<td><font style="font-size: 8pt">Risk-free interest rate</font></td>
<td><font style="font-size: 8pt"> </font></td>
<td><font style="font-size: 8pt"> </font></td>
<td><font style="font-size: 8pt"> </font></td>
<td><font style="font-size: 8pt"> </font></td>
<td><font style="font-size: 8pt"> </font></td>
<td style="text-align: right"><font style="font-size: 8pt">0.6% </font></td>
<td><font style="font-size: 8pt"> </font></td></tr>
<tr style="vertical-align: bottom; background-color: rgb(238,238,238)">
<td><font style="font-size: 8pt">Expected dividend yield</font></td>
<td><font style="font-size: 8pt"> </font></td>
<td><font style="font-size: 8pt"> </font></td>
<td><font style="font-size: 8pt"> </font></td>
<td><font style="font-size: 8pt"> </font></td>
<td><font style="font-size: 8pt"> </font></td>
<td style="text-align: right"><font style="font-size: 8pt">0.0%</font></td>
<td><font style="font-size: 8pt"> </font></td></tr>
</table>
<table cellspacing="0" cellpadding="0" style="font: 10pt Times New Roman, Times, Serif; width: 100%; border-collapse: collapse">
<tr style="vertical-align: bottom">
<td><font style="font-size: 8pt"> </font></td>
<td><font style="font-size: 8pt"> </font></td>
<td colspan="2"><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><font style="font-size: 8pt"> </font></td>
<td><font style="font-size: 8pt"> </font></td>
<td colspan="2" style="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><font style="font-size: 8pt"> </font></td>
<td><font style="font-size: 8pt"> </font></td>
<td colspan="2" style="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-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><font style="font-size: 8pt"> </font></td></tr>
<tr style="vertical-align: bottom; background-color: rgb(238,238,238)">
<td style="width: 58%"><font style="font-size: 8pt">Outstanding at January 1, 2017</font></td>
<td style="width: 1%"><font style="font-size: 8pt"> </font></td>
<td style="width: 1%; border-bottom: Black 1pt solid"><font style="font-size: 8pt"> </font></td>
<td style="width: 11%; border-bottom: Black 1pt solid; text-align: right"><font style="font-size: 8pt">765</font></td>
<td style="width: 1%"><font style="font-size: 8pt"> </font></td>
<td style="width: 1%"><font style="font-size: 8pt"> </font></td>
<td style="width: 1%"><font style="font-size: 8pt">$</font></td>
<td style="width: 11%; text-align: right"><font style="font-size: 8pt">5.75</font></td>
<td style="width: 1%"><font style="font-size: 8pt"> </font></td>
<td style="width: 1%"><font style="font-size: 8pt"> </font></td>
<td style="width: 1%"><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%"><font style="font-size: 8pt"> </font></td></tr>
<tr style="vertical-align: bottom; background-color: White">
<td><font style="font-size: 8pt">Outstanding and exercisable at December 31, 2017</font></td>
<td><font style="font-size: 8pt"> </font></td>
<td style="border-bottom: black 2.25pt double"><font style="font-size: 8pt"> </font></td>
<td style="border-bottom: black 2.25pt double; text-align: right"><font style="font-size: 8pt">765</font></td>
<td><font style="font-size: 8pt"> </font></td>
<td><font style="font-size: 8pt"> </font></td>
<td style="border-bottom: black 2.25pt double"><font style="font-size: 8pt">$</font></td>
<td style="border-bottom: black 2.25pt double; text-align: right"><font style="font-size: 8pt">5.75</font></td>
<td><font style="font-size: 8pt"> </font></td>
<td><font style="font-size: 8pt"> </font></td>
<td style="border-bottom: black 2.25pt double"><font style="font-size: 8pt"> </font></td>
<td style="border-bottom: black 2.25pt double; text-align: right"><font style="font-size: 8pt">2.9</font></td>
<td><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: 0.25in"><font style="font-size: 8pt"></font></p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.25in"><font style="font-size: 8pt">On
March 14, 2007, the Company’s stockholders approved the 2007 Equity Incentive Plan (the “2007 Plan”). The 2007
Plan expired in March 2017, however all options and warrants outstanding at the time of the expiration remained outstanding and
exercisable by their term. At the time of the expiration of the 2007 plan, options to purchase 2,106,637 shares of common stock
were outstanding.</font></p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.25in"><font style="font-size: 8pt"> </font></p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.25in"><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 Company has reserved a total of 3,750,000 shares of common
stock for issuance under the 2017 Plan. All employees, officers, directors, consultants, advisors and other persons who provide
services to the Company or any subsidiaries of the Company are eligible to receive incentive awards under the 2017 Plan. As of
December 31, 2017, awards aggregate of 90,900 shares of common stock had been granted under the 2017 Plan and total of 3,569,100
shares of common stock are reserved for reissuance.</font></p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.25in"><font style="font-size: 8pt"> </font></p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.25in"><font style="font-size: 8pt">The
following table summarizes the stock-based compensation expense recorded in the Company’s results of operations during the
years ended December 31, 2017 and 2016 for stock options and restricted stock (in thousands):</font></p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.25in"><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">Year
Ended December 31,</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">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: 13%; text-align: right"><font style="font-size: 8pt">435</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">158</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">2,822</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">1,892</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">761</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">418</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">4,018</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">2,468</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: 0.25in"><font style="font-size: 8pt"> </font></p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.25in"><font style="font-size: 8pt">As
of December 31, 2017, there was approximately $4.2 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
2.4 years.</font></p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.25in"><font style="font-size: 8pt"> </font></p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.25in"><font style="font-size: 8pt">The
Company records compensation expense for employee awards with graded vesting using the straight-line method. The Company records
compensation expense for nonemployee awards with graded vesting using the accelerated expense attribution method. The Company
recognizes compensation expense over the requisite service period applicable to each individual award, which generally equals
the vesting term. The Company estimates the fair value of each option award using the Black-Scholes-Merton option pricing model.
Forfeitures are recognized when realized.</font></p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.25in"><font style="font-size: 8pt">  </font></p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.25in"><font style="font-size: 8pt">The
Company estimated the fair value of employee and non-employee stock options using the Black-Scholes option pricing model. The
fair value of employee stock options is being amortized on a straight-line basis over the requisite service periods of the respective
awards. The Company recognizes forfeitures as they occur rather than estimate their forfeiture rate. The fair value of employee
stock options issued was estimated using the following weighted-average assumptions:</font></p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.25in"><font style="font-size: 8pt"> </font></p>
<table cellspacing="0" cellpadding="0" style="font: 10pt Times New Roman, Times, Serif; width: 100%; border-collapse: collapse">
<tr style="vertical-align: bottom">
<td><font style="font-size: 8pt"> </font></td>
<td><font style="font-size: 8pt"> </font></td>
<td colspan="6" style="border-bottom: black 1pt solid; text-align: center"><font style="font-size: 8pt"><b>Year Ended December
31,</b></font></td>
<td><font style="font-size: 8pt"> </font></td></tr>
<tr style="vertical-align: bottom">
<td style="text-align: justify"><font style="font-size: 8pt"> </font></td>
<td><font style="font-size: 8pt"> </font></td>
<td colspan="2" style="border-bottom: black 1pt solid; text-align: center"><font style="font-size: 8pt"><b>2017</b></font></td>
<td><font style="font-size: 8pt"> </font></td>
<td><font style="font-size: 8pt"> </font></td>
<td colspan="2" style="border-bottom: black 1pt solid; text-align: center"><font style="font-size: 8pt"><b>2016</b></font></td>
<td><font style="font-size: 8pt"> </font></td></tr>
<tr style="vertical-align: bottom; background-color: rgb(238,238,238)">
<td style="width: 68%"><font style="font-size: 8pt">Weighted average exercise price:</font></td>
<td style="width: 1%"><font style="font-size: 8pt"> </font></td>
<td style="width: 1%"><font style="font-size: 8pt">$</font></td>
<td style="width: 13%; text-align: right"><font style="font-size: 8pt">6.73</font></td>
<td style="width: 1%"><font style="font-size: 8pt"> </font></td>
<td style="width: 1%"><font style="font-size: 8pt"> </font></td>
<td style="width: 1%"><font style="font-size: 8pt">$</font></td>
<td style="width: 13%; text-align: right"><font style="font-size: 8pt">7.47</font></td>
<td style="width: 1%"><font style="font-size: 8pt"> </font></td></tr>
<tr style="vertical-align: bottom; background-color: White">
<td><font style="font-size: 8pt">Weighted average grant date fair value:</font></td>
<td><font style="font-size: 8pt"> </font></td>
<td><font style="font-size: 8pt">$</font></td>
<td style="text-align: right"><font style="font-size: 8pt">2.94</font></td>
<td><font style="font-size: 8pt"> </font></td>
<td><font style="font-size: 8pt"> </font></td>
<td><font style="font-size: 8pt">$</font></td>
<td style="text-align: right"><font style="font-size: 8pt">3.50</font></td>
<td><font style="font-size: 8pt"> </font></td></tr>
<tr style="vertical-align: bottom; background-color: rgb(238,238,238)">
<td><font style="font-size: 8pt">Assumptions:</font></td>
<td><font style="font-size: 8pt"> </font></td>
<td><font style="font-size: 8pt"> </font></td>
<td style="text-align: right"><font style="font-size: 8pt"> </font></td>
<td><font style="font-size: 8pt"> </font></td>
<td><font style="font-size: 8pt"> </font></td>
<td><font style="font-size: 8pt"> </font></td>
<td style="text-align: right"><font style="font-size: 8pt"> </font></td>
<td><font style="font-size: 8pt"> </font></td></tr>
<tr style="vertical-align: bottom; background-color: White">
<td><font style="font-size: 8pt">Expected volatility</font></td>
<td><font style="font-size: 8pt"> </font></td>
<td><font style="font-size: 8pt"> </font></td>
<td style="text-align: right"><font style="font-size: 8pt">42.7%</font></td>
<td><font style="font-size: 8pt"> </font></td>
<td><font style="font-size: 8pt"> </font></td>
<td><font style="font-size: 8pt"> </font></td>
<td style="text-align: right"><font style="font-size: 8pt">44.1%</font></td>
<td><font style="font-size: 8pt"> </font></td></tr>
<tr style="vertical-align: bottom; background-color: rgb(238,238,238)">
<td><font style="font-size: 8pt">Weighted average expected term (in years)</font></td>
<td><font style="font-size: 8pt"> </font></td>
<td><font style="font-size: 8pt"> </font></td>
<td style="text-align: right"><font style="font-size: 8pt">6.0</font></td>
<td><font style="font-size: 8pt"> </font></td>
<td><font style="font-size: 8pt"> </font></td>
<td><font style="font-size: 8pt"> </font></td>
<td style="text-align: right"><font style="font-size: 8pt">5.8</font></td>
<td><font style="font-size: 8pt"> </font></td></tr>
<tr style="vertical-align: bottom; background-color: White">
<td><font style="font-size: 8pt">Risk-free interest rate</font></td>
<td><font style="font-size: 8pt"> </font></td>
<td><font style="font-size: 8pt"> </font></td>
<td style="text-align: right"><font style="font-size: 8pt">2.16%</font></td>
<td><font style="font-size: 8pt"> </font></td>
<td><font style="font-size: 8pt"> </font></td>
<td><font style="font-size: 8pt"> </font></td>
<td style="text-align: right"><font style="font-size: 8pt">1.46%</font></td>
<td><font style="font-size: 8pt"> </font></td></tr>
<tr style="vertical-align: bottom; background-color: rgb(238,238,238)">
<td><font style="font-size: 8pt">Expected dividend yield</font></td>
<td><font style="font-size: 8pt"> </font></td>
<td><font style="font-size: 8pt"> </font></td>
<td style="text-align: right"><font style="font-size: 8pt">0.0%</font></td>
<td><font style="font-size: 8pt"> </font></td>
<td><font style="font-size: 8pt"> </font></td>
<td><font style="font-size: 8pt"> </font></td>
<td style="text-align: right"><font style="font-size: 8pt">0.0%</font></td>
<td><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: 0.25in"><font style="font-size: 8pt"> </font></p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.25in"><font style="font-size: 8pt">The
risk-free interest rate was obtained from U.S. Treasury rates for the applicable periods. The Company’s expected volatility
was based upon the historical volatility for industry peers and used an average of those volatilities. The expected life of the
Company’s options was determined using the simplified method as a result of limited historical data regarding the Company’s
activity. The dividend yield considers that the Company has not historically paid dividends and does not expect to pay dividends
in the foreseeable future.</font></p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.25in"><font style="font-size: 8pt"> </font></p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.25in"><font style="font-size: 8pt">Prior
to the Company’s IPO in August 2016, the fair value of the common stock was determined by the board of directors based on
a variety of factors, including valuations prepared by third parties, the Company’s financial position, the status of development
efforts within the Company, the current climate in the marketplace and the prospects of a liquidity event, among others.</font></p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.25in"><font style="font-size: 8pt"> </font></p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.25in"><font style="font-size: 8pt">The following
table summarizes stock option activity during the year ended December 31, 2017 (in thousands except exercise prices and contractual
terms):</font></p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.25in"><font style="font-size: 8pt"> </font></p>
<table cellspacing="0" cellpadding="0" style="font: 10pt Times New Roman, Times, Serif; width: 100%; border-collapse: collapse">
<tr style="vertical-align: bottom">
<td colspan="2"><font style="font-size: 8pt"> </font></td>
<td><font style="font-size: 8pt"> </font></td>
<td><font style="font-size: 8pt"> </font></td>
<td colspan="2" style="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><font style="font-size: 8pt"> </font></td>
<td><font style="font-size: 8pt"> </font></td>
<td colspan="2" style="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><font style="font-size: 8pt"> </font></td>
<td><font style="font-size: 8pt"> </font></td>
<td colspan="2" style="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-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><font style="font-size: 8pt"> </font></td>
<td><font style="font-size: 8pt"> </font></td>
<td colspan="2" style="border-bottom: black 1pt solid; text-align: center"><font style="font-size: 8pt"><b>Intrinsic Value</b></font></td>
<td><font style="font-size: 8pt"> </font></td></tr>
<tr style="vertical-align: bottom; background-color: rgb(238,238,238)">
<td style="width: 1%"><font style="font-size: 8pt"> </font></td>
<td style="width: 34%"><font style="font-size: 8pt">Outstanding at January 1, 2017</font></td>
<td style="width: 1%"><font style="font-size: 8pt"> </font></td>
<td style="width: 1%"><font style="font-size: 8pt"> </font></td>
<td style="width: 1%"><font style="font-size: 8pt"> </font></td>
<td style="width: 13%; text-align: right"><font style="font-size: 8pt">1,515</font></td>
<td style="width: 1%"><font style="font-size: 8pt"> </font></td>
<td style="width: 1%"><font style="font-size: 8pt"> </font></td>
<td style="width: 1%"><font style="font-size: 8pt">$</font></td>
<td style="width: 13%; text-align: right"><font style="font-size: 8pt">7.21</font></td>
<td style="width: 1%"><font style="font-size: 8pt"> </font></td>
<td style="width: 1%"><font style="font-size: 8pt"> </font></td>
<td style="width: 1%"><font style="font-size: 8pt"> </font></td>
<td style="width: 13%; text-align: right"><font style="font-size: 8pt"> </font></td>
<td style="width: 1%"><font style="font-size: 8pt"> </font></td>
<td style="width: 1%"><font style="font-size: 8pt"> </font></td>
<td style="width: 1%"><font style="font-size: 8pt"> </font></td>
<td style="width: 13%; text-align: right"><font style="font-size: 8pt"> </font></td>
<td style="width: 1%"><font style="font-size: 8pt"> </font></td></tr>
<tr style="vertical-align: bottom; background-color: White">
<td><font style="font-size: 8pt"> </font></td>
<td><font style="font-size: 8pt">Granted</font></td>
<td><font style="font-size: 8pt"> </font></td>
<td><font style="font-size: 8pt"> </font></td>
<td><font style="font-size: 8pt"> </font></td>
<td style="text-align: right"><font style="font-size: 8pt">628</font></td>
<td><font style="font-size: 8pt"> </font></td>
<td><font style="font-size: 8pt"> </font></td>
<td><font style="font-size: 8pt">$</font></td>
<td style="text-align: right"><font style="font-size: 8pt">6.73</font></td>
<td><font style="font-size: 8pt"> </font></td>
<td><font style="font-size: 8pt"> </font></td>
<td><font style="font-size: 8pt"> </font></td>
<td style="text-align: right"><font style="font-size: 8pt"> </font></td>
<td><font style="font-size: 8pt"> </font></td>
<td><font style="font-size: 8pt"> </font></td>
<td><font style="font-size: 8pt"> </font></td>
<td style="text-align: right"><font style="font-size: 8pt"> </font></td>
<td><font style="font-size: 8pt"> </font></td></tr>
<tr style="vertical-align: bottom; background-color: rgb(238,238,238)">
<td><font style="font-size: 8pt"> </font></td>
<td><font style="font-size: 8pt">Exercised</font></td>
<td><font style="font-size: 8pt"> </font></td>
<td><font style="font-size: 8pt"> </font></td>
<td><font style="font-size: 8pt"> </font></td>
<td style="text-align: right"><font style="font-size: 8pt">—</font></td>
<td><font style="font-size: 8pt"> </font></td>
<td><font style="font-size: 8pt"> </font></td>
<td><font style="font-size: 8pt">$</font></td>
<td style="text-align: right"><font style="font-size: 8pt">—</font></td>
<td><font style="font-size: 8pt"> </font></td>
<td><font style="font-size: 8pt"> </font></td>
<td><font style="font-size: 8pt"> </font></td>
<td style="text-align: right"><font style="font-size: 8pt"> </font></td>
<td><font style="font-size: 8pt"> </font></td>
<td><font style="font-size: 8pt"> </font></td>
<td><font style="font-size: 8pt"> </font></td>
<td style="text-align: right"><font style="font-size: 8pt"> </font></td>
<td><font style="font-size: 8pt"> </font></td></tr>
<tr style="vertical-align: bottom; background-color: White">
<td><font style="font-size: 8pt"> </font></td>
<td><font style="font-size: 8pt">Expired</font></td>
<td><font style="font-size: 8pt"> </font></td>
<td><font style="font-size: 8pt"> </font></td>
<td style="border-bottom: black 1pt solid"><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><font style="font-size: 8pt">)</font></td>
<td><font style="font-size: 8pt"> </font></td>
<td><font style="font-size: 8pt">$</font></td>
<td style="text-align: right"><font style="font-size: 8pt">43.42</font></td>
<td><font style="font-size: 8pt"> </font></td>
<td><font style="font-size: 8pt"> </font></td>
<td><font style="font-size: 8pt"> </font></td>
<td style="text-align: right"><font style="font-size: 8pt"> </font></td>
<td><font style="font-size: 8pt"> </font></td>
<td><font style="font-size: 8pt"> </font></td>
<td><font style="font-size: 8pt"> </font></td>
<td style="text-align: right"><font style="font-size: 8pt"> </font></td>
<td><font style="font-size: 8pt"> </font></td></tr>
<tr style="vertical-align: bottom; background-color: rgb(238,238,238)">
<td><font style="font-size: 8pt"> </font></td>
<td><font style="font-size: 8pt">Outstanding at December 31, 2017</font></td>
<td><font style="font-size: 8pt"> </font></td>
<td><font style="font-size: 8pt"> </font></td>
<td style="border-bottom: black 2.25pt double"><font style="font-size: 8pt"> </font></td>
<td style="border-bottom: black 2.25pt double; text-align: right"><font style="font-size: 8pt">2,141</font></td>
<td><font style="font-size: 8pt"> </font></td>
<td><font style="font-size: 8pt"> </font></td>
<td style="border-bottom: black 2.25pt double"><font style="font-size: 8pt">$</font></td>
<td style="border-bottom: black 2.25pt double; text-align: right"><font style="font-size: 8pt">7.03</font></td>
<td><font style="font-size: 8pt"> </font></td>
<td><font style="font-size: 8pt"> </font></td>
<td style="border-bottom: black 2.25pt double"><font style="font-size: 8pt"> </font></td>
<td style="border-bottom: black 2.25pt double; text-align: right"><font style="font-size: 8pt">8.3</font></td>
<td><font style="font-size: 8pt"> </font></td>
<td><font style="font-size: 8pt"> </font></td>
<td style="border-bottom: black 2.25pt double"><font style="font-size: 8pt">$</font></td>
<td style="border-bottom: black 2.25pt double; text-align: right"><font style="font-size: 8pt">14</font></td>
<td><font style="font-size: 8pt"> </font></td></tr>
<tr style="vertical-align: bottom; background-color: White">
<td><font style="font-size: 8pt"> </font></td>
<td><font style="font-size: 8pt">Exercisable at December 31, 2017</font></td>
<td><font style="font-size: 8pt"> </font></td>
<td><font style="font-size: 8pt"> </font></td>
<td style="border-bottom: black 2.25pt double"><font style="font-size: 8pt"> </font></td>
<td style="border-bottom: black 2.25pt double; text-align: right"><font style="font-size: 8pt">965</font></td>
<td><font style="font-size: 8pt"> </font></td>
<td><font style="font-size: 8pt"> </font></td>
<td style="border-bottom: black 2.25pt double"><font style="font-size: 8pt">$</font></td>
<td style="border-bottom: black 2.25pt double; text-align: right"><font style="font-size: 8pt">7.19</font></td>
<td><font style="font-size: 8pt"> </font></td>
<td><font style="font-size: 8pt"> </font></td>
<td style="border-bottom: black 2.25pt double"><font style="font-size: 8pt"> </font></td>
<td style="border-bottom: black 2.25pt double; text-align: right"><font style="font-size: 8pt">7.9</font></td>
<td><font style="font-size: 8pt"> </font></td>
<td><font style="font-size: 8pt"> </font></td>
<td style="border-bottom: black 2.25pt double"><font style="font-size: 8pt">$</font></td>
<td style="border-bottom: black 2.25pt double; text-align: right"><font style="font-size: 8pt">—</font></td>
<td><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: 0.25in"><font style="font-size: 8pt"> </font></p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.25in"><font style="font-size: 8pt">During
the year ended December 31, 2017, the Company granted options under its 2007 Plan purchase 593,292 shares of its common stock
to its employees. The fair value of these options was approximately $1.8 million. During the year ended December 31, 2017, the
Company granted options under its 2017 Plan purchase 35,000 shares of its common stock to its employees. The fair value of these
options was approximately $62,000.</font></p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.25in"><font style="font-size: 8pt"> </font></p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.25in"><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 year ended December 31, 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: 0.25in"><font style="font-size: 8pt"> </font></p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.25in"></p>
<table cellspacing="0" cellpadding="0" style="font: 10pt Times New Roman, Times, Serif; width: 100%; border-collapse: collapse">
<tr style="vertical-align: bottom">
<td style="text-align: justify"><font style="font-size: 8pt"> </font></td>
<td><font style="font-size: 8pt"> </font></td>
<td colspan="2" style="border-bottom: black 1pt solid; text-align: center"><font style="font-size: 8pt"><b>Number of Shares</b></font></td>
<td><font style="font-size: 8pt"> </font></td>
<td><font style="font-size: 8pt"> </font></td>
<td colspan="2" style="border-bottom: black 1pt solid; text-align: center"><font style="font-size: 8pt"><b>Weighted-Average
Grant Date Fair Value</b></font></td>
<td><font style="font-size: 8pt"> </font></td></tr>
<tr style="vertical-align: bottom; background-color: rgb(238,238,238)">
<td style="width: 68%"><font style="font-size: 8pt">Outstanding at January 1, 2017</font></td>
<td style="width: 1%"><font style="font-size: 8pt"> </font></td>
<td style="width: 1%"><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%"><font style="font-size: 8pt"> </font></td>
<td style="width: 1%"><font style="font-size: 8pt"> </font></td>
<td style="width: 1%"><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%"><font style="font-size: 8pt"> </font></td></tr>
<tr style="vertical-align: bottom; background-color: White">
<td><font style="font-size: 8pt">Granted</font></td>
<td><font style="font-size: 8pt"> </font></td>
<td><font style="font-size: 8pt"> </font></td>
<td style="text-align: right"><font style="font-size: 8pt">136</font></td>
<td><font style="font-size: 8pt"> </font></td>
<td><font style="font-size: 8pt"> </font></td>
<td><font style="font-size: 8pt">$</font></td>
<td style="text-align: right"><font style="font-size: 8pt">6.60</font></td>
<td><font style="font-size: 8pt"> </font></td></tr>
<tr style="vertical-align: bottom; background-color: rgb(238,238,238)">
<td><font style="font-size: 8pt">Vested</font></td>
<td><font style="font-size: 8pt"> </font></td>
<td><font style="font-size: 8pt"> </font></td>
<td style="text-align: right"><font style="font-size: 8pt">(476</font></td>
<td><font style="font-size: 8pt">)</font></td>
<td><font style="font-size: 8pt"> </font></td>
<td><font style="font-size: 8pt">$</font></td>
<td style="text-align: right"><font style="font-size: 8pt">7.95</font></td>
<td><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">Cancelled</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 style="text-align: right; border-bottom: Black 1pt solid"><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 style="padding-bottom: 1pt"><font style="font-size: 8pt">$</font></td>
<td style="text-align: right; padding-bottom: 1pt"><font style="font-size: 8pt">–</font></td>
<td style="padding-bottom: 1pt"><font style="font-size: 8pt"> </font></td></tr>
<tr style="vertical-align: bottom; background-color: rgb(238,238,238)">
<td style="padding-bottom: 2.5pt"><font style="font-size: 8pt">Outstanding non-vested shares at December 31, 2017</font></td>
<td style="padding-bottom: 2.5pt"><font style="font-size: 8pt"> </font></td>
<td style="padding-bottom: 2.5pt"><font style="font-size: 8pt"> </font></td>
<td style="text-align: right; border-bottom: Black 2.5pt double"><font style="font-size: 8pt">121</font></td>
<td style="padding-bottom: 2.5pt"><font style="font-size: 8pt"> </font></td>
<td style="padding-bottom: 2.5pt"><font style="font-size: 8pt"> </font></td>
<td style="padding-bottom: 2.5pt"><font style="font-size: 8pt">$</font></td>
<td style="text-align: right; padding-bottom: 2.5pt"><font style="font-size: 8pt">6.90</font></td>
<td style="padding-bottom: 2.5pt"><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: 0.25in"></p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.25in"><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">Year
Ended December 31,</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">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">$</font></td><td style="width: 13%; text-align: right"><font style="font-size: 8pt">435</font></td><td style="width: 1%; text-align: left"><font style="font-size: 8pt"> </font></td><td style="width: 2%"><font style="font-size: 8pt"> </font></td>
<td style="width: 1%; text-align: left"><font style="font-size: 8pt">$</font></td><td style="width: 13%; text-align: right"><font style="font-size: 8pt">158</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">2,822</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">1,892</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">761</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">418</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">$</font></td><td style="border-bottom: Black 2.5pt double; text-align: right"><font style="font-size: 8pt">4,018</font></td><td style="padding-bottom: 2.5pt; text-align: left"><font style="font-size: 8pt"> </font></td><td style="padding-bottom: 2.5pt"><font style="font-size: 8pt"> </font></td>
<td style="border-bottom: Black 2.5pt double; text-align: left"><font style="font-size: 8pt">$</font></td><td style="border-bottom: Black 2.5pt double; text-align: right"><font style="font-size: 8pt">2,468</font></td><td style="padding-bottom: 2.5pt; text-align: left"><font style="font-size: 8pt"> </font></td></tr>
</table>
<table cellspacing="0" cellpadding="0" style="font: 10pt Times New Roman, Times, Serif; width: 100%; border-collapse: collapse">
<tr style="vertical-align: bottom">
<td><font style="font-size: 8pt"> </font></td>
<td><font style="font-size: 8pt"> </font></td>
<td colspan="6" style="border-bottom: black 1pt solid; text-align: center"><font style="font-size: 8pt"><b>Year Ended December
31,</b></font></td>
<td><font style="font-size: 8pt"> </font></td></tr>
<tr style="vertical-align: bottom">
<td style="text-align: justify"><font style="font-size: 8pt"> </font></td>
<td><font style="font-size: 8pt"> </font></td>
<td colspan="2" style="border-bottom: black 1pt solid; text-align: center"><font style="font-size: 8pt"><b>2017</b></font></td>
<td><font style="font-size: 8pt"> </font></td>
<td><font style="font-size: 8pt"> </font></td>
<td colspan="2" style="border-bottom: black 1pt solid; text-align: center"><font style="font-size: 8pt"><b>2016</b></font></td>
<td><font style="font-size: 8pt"> </font></td></tr>
<tr style="vertical-align: bottom; background-color: rgb(238,238,238)">
<td style="width: 68%"><font style="font-size: 8pt">Weighted average exercise price:</font></td>
<td style="width: 1%"><font style="font-size: 8pt"> </font></td>
<td style="width: 1%"><font style="font-size: 8pt">$</font></td>
<td style="width: 13%; text-align: right"><font style="font-size: 8pt">6.73</font></td>
<td style="width: 1%"><font style="font-size: 8pt"> </font></td>
<td style="width: 1%"><font style="font-size: 8pt"> </font></td>
<td style="width: 1%"><font style="font-size: 8pt">$</font></td>
<td style="width: 13%; text-align: right"><font style="font-size: 8pt">7.47</font></td>
<td style="width: 1%"><font style="font-size: 8pt"> </font></td></tr>
<tr style="vertical-align: bottom; background-color: White">
<td><font style="font-size: 8pt">Weighted average grant date fair value:</font></td>
<td><font style="font-size: 8pt"> </font></td>
<td><font style="font-size: 8pt">$</font></td>
<td style="text-align: right"><font style="font-size: 8pt">2.94</font></td>
<td><font style="font-size: 8pt"> </font></td>
<td><font style="font-size: 8pt"> </font></td>
<td><font style="font-size: 8pt">$</font></td>
<td style="text-align: right"><font style="font-size: 8pt">3.50</font></td>
<td><font style="font-size: 8pt"> </font></td></tr>
<tr style="vertical-align: bottom; background-color: rgb(238,238,238)">
<td><font style="font-size: 8pt">Assumptions:</font></td>
<td><font style="font-size: 8pt"> </font></td>
<td><font style="font-size: 8pt"> </font></td>
<td style="text-align: right"><font style="font-size: 8pt"> </font></td>
<td><font style="font-size: 8pt"> </font></td>
<td><font style="font-size: 8pt"> </font></td>
<td><font style="font-size: 8pt"> </font></td>
<td style="text-align: right"><font style="font-size: 8pt"> </font></td>
<td><font style="font-size: 8pt"> </font></td></tr>
<tr style="vertical-align: bottom; background-color: White">
<td><font style="font-size: 8pt">Expected volatility</font></td>
<td><font style="font-size: 8pt"> </font></td>
<td><font style="font-size: 8pt"> </font></td>
<td style="text-align: right"><font style="font-size: 8pt">42.7%</font></td>
<td><font style="font-size: 8pt"> </font></td>
<td><font style="font-size: 8pt"> </font></td>
<td><font style="font-size: 8pt"> </font></td>
<td style="text-align: right"><font style="font-size: 8pt">44.1%</font></td>
<td><font style="font-size: 8pt"> </font></td></tr>
<tr style="vertical-align: bottom; background-color: rgb(238,238,238)">
<td><font style="font-size: 8pt">Weighted average expected term (in years)</font></td>
<td><font style="font-size: 8pt"> </font></td>
<td><font style="font-size: 8pt"> </font></td>
<td style="text-align: right"><font style="font-size: 8pt">6.0</font></td>
<td><font style="font-size: 8pt"> </font></td>
<td><font style="font-size: 8pt"> </font></td>
<td><font style="font-size: 8pt"> </font></td>
<td style="text-align: right"><font style="font-size: 8pt">5.8</font></td>
<td><font style="font-size: 8pt"> </font></td></tr>
<tr style="vertical-align: bottom; background-color: White">
<td><font style="font-size: 8pt">Risk-free interest rate</font></td>
<td><font style="font-size: 8pt"> </font></td>
<td><font style="font-size: 8pt"> </font></td>
<td style="text-align: right"><font style="font-size: 8pt">2.16%</font></td>
<td><font style="font-size: 8pt"> </font></td>
<td><font style="font-size: 8pt"> </font></td>
<td><font style="font-size: 8pt"> </font></td>
<td style="text-align: right"><font style="font-size: 8pt">1.46%</font></td>
<td><font style="font-size: 8pt"> </font></td></tr>
<tr style="vertical-align: bottom; background-color: rgb(238,238,238)">
<td><font style="font-size: 8pt">Expected dividend yield</font></td>
<td><font style="font-size: 8pt"> </font></td>
<td><font style="font-size: 8pt"> </font></td>
<td style="text-align: right"><font style="font-size: 8pt">0.0%</font></td>
<td><font style="font-size: 8pt"> </font></td>
<td><font style="font-size: 8pt"> </font></td>
<td><font style="font-size: 8pt"> </font></td>
<td style="text-align: right"><font style="font-size: 8pt">0.0%</font></td>
<td><font style="font-size: 8pt"> </font></td></tr>
</table>
<table cellspacing="0" cellpadding="0" style="font: 10pt Times New Roman, Times, Serif; width: 100%; border-collapse: collapse">
<tr style="vertical-align: bottom">
<td colspan="2"><font style="font-size: 8pt"> </font></td>
<td><font style="font-size: 8pt"> </font></td>
<td><font style="font-size: 8pt"> </font></td>
<td colspan="2" style="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><font style="font-size: 8pt"> </font></td>
<td><font style="font-size: 8pt"> </font></td>
<td colspan="2" style="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><font style="font-size: 8pt"> </font></td>
<td><font style="font-size: 8pt"> </font></td>
<td colspan="2" style="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-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><font style="font-size: 8pt"> </font></td>
<td><font style="font-size: 8pt"> </font></td>
<td colspan="2" style="border-bottom: black 1pt solid; text-align: center"><font style="font-size: 8pt"><b>Intrinsic Value</b></font></td>
<td><font style="font-size: 8pt"> </font></td></tr>
<tr style="vertical-align: bottom; background-color: rgb(238,238,238)">
<td style="width: 1%"><font style="font-size: 8pt"> </font></td>
<td style="width: 34%"><font style="font-size: 8pt">Outstanding at January 1, 2017</font></td>
<td style="width: 1%"><font style="font-size: 8pt"> </font></td>
<td style="width: 1%"><font style="font-size: 8pt"> </font></td>
<td style="width: 1%"><font style="font-size: 8pt"> </font></td>
<td style="width: 13%; text-align: right"><font style="font-size: 8pt">1,515</font></td>
<td style="width: 1%"><font style="font-size: 8pt"> </font></td>
<td style="width: 1%"><font style="font-size: 8pt"> </font></td>
<td style="width: 1%"><font style="font-size: 8pt">$</font></td>
<td style="width: 13%; text-align: right"><font style="font-size: 8pt">7.21</font></td>
<td style="width: 1%"><font style="font-size: 8pt"> </font></td>
<td style="width: 1%"><font style="font-size: 8pt"> </font></td>
<td style="width: 1%"><font style="font-size: 8pt"> </font></td>
<td style="width: 13%; text-align: right"><font style="font-size: 8pt"> </font></td>
<td style="width: 1%"><font style="font-size: 8pt"> </font></td>
<td style="width: 1%"><font style="font-size: 8pt"> </font></td>
<td style="width: 1%"><font style="font-size: 8pt"> </font></td>
<td style="width: 13%; text-align: right"><font style="font-size: 8pt"> </font></td>
<td style="width: 1%"><font style="font-size: 8pt"> </font></td></tr>
<tr style="vertical-align: bottom; background-color: White">
<td><font style="font-size: 8pt"> </font></td>
<td><font style="font-size: 8pt">Granted</font></td>
<td><font style="font-size: 8pt"> </font></td>
<td><font style="font-size: 8pt"> </font></td>
<td><font style="font-size: 8pt"> </font></td>
<td style="text-align: right"><font style="font-size: 8pt">628</font></td>
<td><font style="font-size: 8pt"> </font></td>
<td><font style="font-size: 8pt"> </font></td>
<td><font style="font-size: 8pt">$</font></td>
<td style="text-align: right"><font style="font-size: 8pt">6.73</font></td>
<td><font style="font-size: 8pt"> </font></td>
<td><font style="font-size: 8pt"> </font></td>
<td><font style="font-size: 8pt"> </font></td>
<td style="text-align: right"><font style="font-size: 8pt"> </font></td>
<td><font style="font-size: 8pt"> </font></td>
<td><font style="font-size: 8pt"> </font></td>
<td><font style="font-size: 8pt"> </font></td>
<td style="text-align: right"><font style="font-size: 8pt"> </font></td>
<td><font style="font-size: 8pt"> </font></td></tr>
<tr style="vertical-align: bottom; background-color: rgb(238,238,238)">
<td><font style="font-size: 8pt"> </font></td>
<td><font style="font-size: 8pt">Exercised</font></td>
<td><font style="font-size: 8pt"> </font></td>
<td><font style="font-size: 8pt"> </font></td>
<td><font style="font-size: 8pt"> </font></td>
<td style="text-align: right"><font style="font-size: 8pt">—</font></td>
<td><font style="font-size: 8pt"> </font></td>
<td><font style="font-size: 8pt"> </font></td>
<td><font style="font-size: 8pt">$</font></td>
<td style="text-align: right"><font style="font-size: 8pt">—</font></td>
<td><font style="font-size: 8pt"> </font></td>
<td><font style="font-size: 8pt"> </font></td>
<td><font style="font-size: 8pt"> </font></td>
<td style="text-align: right"><font style="font-size: 8pt"> </font></td>
<td><font style="font-size: 8pt"> </font></td>
<td><font style="font-size: 8pt"> </font></td>
<td><font style="font-size: 8pt"> </font></td>
<td style="text-align: right"><font style="font-size: 8pt"> </font></td>
<td><font style="font-size: 8pt"> </font></td></tr>
<tr style="vertical-align: bottom; background-color: White">
<td><font style="font-size: 8pt"> </font></td>
<td><font style="font-size: 8pt">Expired</font></td>
<td><font style="font-size: 8pt"> </font></td>
<td><font style="font-size: 8pt"> </font></td>
<td style="border-bottom: black 1pt solid"><font style="font-size: 8pt"> </font></td>
<td style="border-bottom: black 1pt solid; text-align: right"><font style="font-size: 8pt">(2</font></td>
<td><font style="font-size: 8pt">)</font></td>
<td><font style="font-size: 8pt"> </font></td>
<td><font style="font-size: 8pt">$</font></td>
<td style="text-align: right"><font style="font-size: 8pt">43.42</font></td>
<td><font style="font-size: 8pt"> </font></td>
<td><font style="font-size: 8pt"> </font></td>
<td><font style="font-size: 8pt"> </font></td>
<td style="text-align: right"><font style="font-size: 8pt"> </font></td>
<td><font style="font-size: 8pt"> </font></td>
<td><font style="font-size: 8pt"> </font></td>
<td><font style="font-size: 8pt"> </font></td>
<td style="text-align: right"><font style="font-size: 8pt"> </font></td>
<td><font style="font-size: 8pt"> </font></td></tr>
<tr style="vertical-align: bottom; background-color: rgb(238,238,238)">
<td><font style="font-size: 8pt"> </font></td>
<td><font style="font-size: 8pt">Outstanding at December 31, 2017</font></td>
<td><font style="font-size: 8pt"> </font></td>
<td><font style="font-size: 8pt"> </font></td>
<td style="border-bottom: black 2.25pt double"><font style="font-size: 8pt"> </font></td>
<td style="border-bottom: black 2.25pt double; text-align: right"><font style="font-size: 8pt">2,141</font></td>
<td><font style="font-size: 8pt"> </font></td>
<td><font style="font-size: 8pt"> </font></td>
<td style="border-bottom: black 2.25pt double"><font style="font-size: 8pt">$</font></td>
<td style="border-bottom: black 2.25pt double; text-align: right"><font style="font-size: 8pt">7.03</font></td>
<td><font style="font-size: 8pt"> </font></td>
<td><font style="font-size: 8pt"> </font></td>
<td style="border-bottom: black 2.25pt double"><font style="font-size: 8pt"> </font></td>
<td style="border-bottom: black 2.25pt double; text-align: right"><font style="font-size: 8pt">8.3</font></td>
<td><font style="font-size: 8pt"> </font></td>
<td><font style="font-size: 8pt"> </font></td>
<td style="border-bottom: black 2.25pt double"><font style="font-size: 8pt">$</font></td>
<td style="border-bottom: black 2.25pt double; text-align: right"><font style="font-size: 8pt">14</font></td>
<td><font style="font-size: 8pt"> </font></td></tr>
<tr style="vertical-align: bottom; background-color: White">
<td><font style="font-size: 8pt"> </font></td>
<td><font style="font-size: 8pt">Exercisable at December 31, 2017</font></td>
<td><font style="font-size: 8pt"> </font></td>
<td><font style="font-size: 8pt"> </font></td>
<td style="border-bottom: black 2.25pt double"><font style="font-size: 8pt"> </font></td>
<td style="border-bottom: black 2.25pt double; text-align: right"><font style="font-size: 8pt">965</font></td>
<td><font style="font-size: 8pt"> </font></td>
<td><font style="font-size: 8pt"> </font></td>
<td style="border-bottom: black 2.25pt double"><font style="font-size: 8pt">$</font></td>
<td style="border-bottom: black 2.25pt double; text-align: right"><font style="font-size: 8pt">7.19</font></td>
<td><font style="font-size: 8pt"> </font></td>
<td><font style="font-size: 8pt"> </font></td>
<td style="border-bottom: black 2.25pt double"><font style="font-size: 8pt"> </font></td>
<td style="border-bottom: black 2.25pt double; text-align: right"><font style="font-size: 8pt">7.9</font></td>
<td><font style="font-size: 8pt"> </font></td>
<td><font style="font-size: 8pt"> </font></td>
<td style="border-bottom: black 2.25pt double"><font style="font-size: 8pt">$</font></td>
<td style="border-bottom: black 2.25pt double; text-align: right"><font style="font-size: 8pt">—</font></td>
<td><font style="font-size: 8pt"> </font></td></tr>
</table>
<table cellspacing="0" cellpadding="0" style="font: 10pt Times New Roman, Times, Serif; width: 100%; border-collapse: collapse">
<tr style="vertical-align: bottom">
<td style="text-align: justify"><font style="font-size: 8pt"> </font></td>
<td><font style="font-size: 8pt"> </font></td>
<td colspan="2" style="border-bottom: black 1pt solid; text-align: center"><font style="font-size: 8pt"><b>Number of Shares</b></font></td>
<td><font style="font-size: 8pt"> </font></td>
<td><font style="font-size: 8pt"> </font></td>
<td colspan="2" style="border-bottom: black 1pt solid; text-align: center"><font style="font-size: 8pt"><b>Weighted-Average
Grant Date Fair Value</b></font></td>
<td><font style="font-size: 8pt"> </font></td></tr>
<tr style="vertical-align: bottom; background-color: rgb(238,238,238)">
<td style="width: 68%"><font style="font-size: 8pt">Outstanding at January 1, 2017</font></td>
<td style="width: 1%"><font style="font-size: 8pt"> </font></td>
<td style="width: 1%"><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%"><font style="font-size: 8pt"> </font></td>
<td style="width: 1%"><font style="font-size: 8pt"> </font></td>
<td style="width: 1%"><font style="font-size: 8pt">$</font></td>
<td style="width: 13%; text-align: right"><font style="font-size: 8pt">8.07</font></td>
<td style="width: 1%"><font style="font-size: 8pt"> </font></td></tr>
<tr style="vertical-align: bottom; background-color: White">
<td><font style="font-size: 8pt">Granted</font></td>
<td><font style="font-size: 8pt"> </font></td>
<td><font style="font-size: 8pt"> </font></td>
<td style="text-align: right"><font style="font-size: 8pt">136</font></td>
<td><font style="font-size: 8pt"> </font></td>
<td><font style="font-size: 8pt"> </font></td>
<td><font style="font-size: 8pt">$</font></td>
<td style="text-align: right"><font style="font-size: 8pt">6.60</font></td>
<td><font style="font-size: 8pt"> </font></td></tr>
<tr style="vertical-align: bottom; background-color: rgb(238,238,238)">
<td><font style="font-size: 8pt">Vested</font></td>
<td><font style="font-size: 8pt"> </font></td>
<td><font style="font-size: 8pt"> </font></td>
<td style="text-align: right"><font style="font-size: 8pt">(476</font></td>
<td><font style="font-size: 8pt">)</font></td>
<td><font style="font-size: 8pt"> </font></td>
<td><font style="font-size: 8pt">$</font></td>
<td style="text-align: right"><font style="font-size: 8pt">7.95</font></td>
<td><font style="font-size: 8pt"> </font></td></tr>
<tr style="vertical-align: bottom; background-color: White">
<td style="padding-bottom: 1pt"><font style="font-size: 8pt">Cancelled</font></td>
<td style="padding-bottom: 1pt"><font style="font-size: 8pt"> </font></td>
<td style="padding-bottom: 1pt"><font style="font-size: 8pt"> </font></td>
<td style="text-align: right; border-bottom: Black 1pt solid"><font style="font-size: 8pt">–</font></td>
<td style="padding-bottom: 1pt"><font style="font-size: 8pt"> </font></td>
<td style="padding-bottom: 1pt"><font style="font-size: 8pt"> </font></td>
<td style="padding-bottom: 1pt"><font style="font-size: 8pt">$</font></td>
<td style="text-align: right; padding-bottom: 1pt"><font style="font-size: 8pt">–</font></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="padding-bottom: 2.5pt"><font style="font-size: 8pt">Outstanding non-vested shares at December 31, 2017</font></td>
<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="text-align: right; border-bottom: Black 2.5pt double"><font style="font-size: 8pt">121</font></td>
<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="padding-bottom: 2.5pt"><font style="font-size: 8pt">$</font></td>
<td style="text-align: right; padding-bottom: 2.5pt"><font style="font-size: 8pt">6.90</font></td>
<td style="padding-bottom: 2.5pt"><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: 0.25in"><font style="font-size: 8pt"></font></p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.25in"><font style="font-size: 8pt">During
2002, the Company established a plan under Section 401(k) of the Internal Revenue Code (the 401(k) Plan). The 401(k) Plan covers
substantially all of its employees who have attained 18 years of age. Employees may elect to contribute part of their annual compensation
to the 401(k) Plan, up to the maximum deferral allowance for individuals by the Internal Revenue Service under Code Section 401(k),
and the Company may make a matching contribution. During 2017 and 2016, there were no matching contributions made by the Company.</font></p>
<table cellspacing="0" cellpadding="0" style="font: 10pt Times New Roman, Times, Serif; width: 100%; border-collapse: collapse">
<tr style="vertical-align: bottom">
<td colspan="2"><font style="font-size: 8pt"> </font></td>
<td><font style="font-size: 8pt"> </font></td>
<td><font style="font-size: 8pt"> </font></td>
<td colspan="6" style="border-bottom: black 1pt solid; text-align: center"><font style="font-size: 8pt"><b>Year Ended December
31,</b></font></td>
<td><font style="font-size: 8pt"> </font></td></tr>
<tr style="vertical-align: bottom">
<td colspan="2"><font style="font-size: 8pt"> </font></td>
<td><font style="font-size: 8pt"> </font></td>
<td><font style="font-size: 8pt"> </font></td>
<td colspan="2" style="border-bottom: black 1pt solid; text-align: center"><font style="font-size: 8pt"><b>2017</b></font></td>
<td><font style="font-size: 8pt"> </font></td>
<td><font style="font-size: 8pt"> </font></td>
<td colspan="2" style="border-bottom: black 1pt solid; text-align: center"><font style="font-size: 8pt"><b>2016</b></font></td>
<td><font style="font-size: 8pt"> </font></td></tr>
<tr style="vertical-align: bottom; background-color: rgb(238,238,238)">
<td style="width: 1%"><font style="font-size: 8pt"> </font></td>
<td style="width: 66%"><font style="font-size: 8pt">Domestic</font></td>
<td style="width: 1%"><font style="font-size: 8pt"> </font></td>
<td style="width: 1%"><font style="font-size: 8pt"> </font></td>
<td style="width: 1%"><font style="font-size: 8pt">$</font></td>
<td style="width: 13%; text-align: right"><font style="font-size: 8pt">(13,068</font></td>
<td style="width: 1%"><font style="font-size: 8pt">)</font></td>
<td style="width: 1%"><font style="font-size: 8pt"> </font></td>
<td style="width: 1%"><font style="font-size: 8pt">$</font></td>
<td style="width: 13%; text-align: right"><font style="font-size: 8pt">(12,610</font></td>
<td style="width: 1%"><font style="font-size: 8pt">)</font></td></tr>
<tr style="vertical-align: bottom; background-color: White">
<td><font style="font-size: 8pt"> </font></td>
<td><font style="font-size: 8pt">International</font></td>
<td><font style="font-size: 8pt"> </font></td>
<td><font style="font-size: 8pt"> </font></td>
<td style="border-bottom: black 1pt solid"><font style="font-size: 8pt"> </font></td>
<td style="border-bottom: black 1pt solid; text-align: right"><font style="font-size: 8pt">—</font></td>
<td><font style="font-size: 8pt"> </font></td>
<td><font style="font-size: 8pt"> </font></td>
<td style="border-bottom: black 1pt solid"><font style="font-size: 8pt"> </font></td>
<td style="border-bottom: black 1pt solid; text-align: right"><font style="font-size: 8pt">—</font></td>
<td><font style="font-size: 8pt"> </font></td></tr>
<tr style="vertical-align: bottom; background-color: rgb(238,238,238)">
<td><font style="font-size: 8pt"> </font></td>
<td><font style="font-size: 8pt">Total</font></td>
<td><font style="font-size: 8pt"> </font></td>
<td><font style="font-size: 8pt"> </font></td>
<td style="border-bottom: black 2.25pt double"><font style="font-size: 8pt">$</font></td>
<td style="border-bottom: black 2.25pt double; text-align: right"><font style="font-size: 8pt">(13,068</font></td>
<td><font style="font-size: 8pt">)</font></td>
<td><font style="font-size: 8pt"> </font></td>
<td style="border-bottom: black 2.25pt double"><font style="font-size: 8pt">$</font></td>
<td style="border-bottom: black 2.25pt double; text-align: right"><font style="font-size: 8pt">(12,610</font></td>
<td><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 style="text-align: justify"><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">Year
ending December 31,</font></td><td style="padding-bottom: 1pt; font-weight: bold"><font style="font-size: 8pt"> </font></td></tr>
<tr style="vertical-align: bottom">
<td style="text-align: justify"><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">2017</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: justify"><font style="font-size: 8pt">Statutory rate</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">34.00%</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">34.00%</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: justify"><font style="font-size: 8pt">State rate</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">1.13%</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">(9.63</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: justify"><font style="font-size: 8pt">Non-deductible items</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">(1.07</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">(2.72</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="text-align: justify"><font style="font-size: 8pt">Change in valuation allowance</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">(34.77</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">(16.93</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: justify"><font style="font-size: 8pt">Change in tax credits</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">0.71%</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">(2.82</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="text-align: justify"><font style="font-size: 8pt">Non-deductible interest expense</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">(1.90</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: justify"><font style="font-size: 8pt">Changes in deferreds due to tax reform</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">(75.66</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="text-align: justify; padding-bottom: 1pt"><font style="font-size: 8pt">Changes in valuation allowance due to tax
reform</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">75.66%</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></tr>
<tr style="vertical-align: bottom; background-color: rgb(238,238,238)">
<td style="text-align: justify; padding-bottom: 2.5pt"><font style="font-size: 8pt">   Total</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><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 style="text-align: justify"><font style="font-size: 8pt"> </font></td><td><font style="font-size: 8pt"> </font></td>
<td colspan="6" style="text-align: center"><font style="font-size: 8pt"> </font></td><td><font style="font-size: 8pt"> </font></td></tr>
<tr style="vertical-align: bottom">
<td style="text-align: justify"><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: justify"><font style="font-size: 8pt">January 1 – unrecognized tax benefits</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">510</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">–</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: justify"><font style="font-size: 8pt">Increases (decreases) – prior year tax positions</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">(3</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">463</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: justify; padding-bottom: 1pt"><font style="font-size: 8pt">Increases – current year tax positions</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">99</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">47</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="text-align: justify; padding-bottom: 2.5pt"><font style="font-size: 8pt">December 31 - unrecognized tax benefits</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">606</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">510</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><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>Balance at</b></font></p> <p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><font style="font-size: 8pt"><b>Beginning</b></font></p> <p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><font style="font-size: 8pt"><b>of
Year</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">Additions</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">Deductions</font></td><td style="padding-bottom: 1pt; font-weight: bold"><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>Balance</b></font></p> <p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><font style="font-size: 8pt"><b>at
End 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>Year</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="text-align: left"><font style="font-size: 8pt">Deferred tax assets valuation allowance</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="width: 48%"><font style="font-size: 8pt">Year ended December 31, 2017</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: 9%; text-align: right"><font style="font-size: 8pt">24,819</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">$</font></td><td style="width: 9%; text-align: right"><font style="font-size: 8pt">892</font></td><td style="width: 1%; text-align: left"><font style="font-size: 8pt"> </font></td><td style="width: 2%"><font style="font-size: 8pt"> </font></td>
<td style="width: 1%; text-align: left"><font style="font-size: 8pt">$</font></td><td style="width: 9%; text-align: right"><font style="font-size: 8pt">6,214</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">$</font></td><td style="width: 9%; text-align: right"><font style="font-size: 8pt">19,497</font></td><td style="width: 1%; text-align: left"><font style="font-size: 8pt"> </font></td></tr>
<tr style="vertical-align: bottom; background-color: rgb(238,238,238)">
<td><font style="font-size: 8pt">Year ended December 31, 2016</font></td><td><font style="font-size: 8pt"> </font></td>
<td style="text-align: left"><font style="font-size: 8pt">$</font></td><td style="text-align: right"><font style="font-size: 8pt">24,536</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">$</font></td><td style="text-align: right"><font style="font-size: 8pt">11,296</font></td><td style="text-align: left"><font style="font-size: 8pt"> </font></td><td><font style="font-size: 8pt"> </font></td>
<td style="text-align: left"><font style="font-size: 8pt">$</font></td><td style="text-align: right"><font style="font-size: 8pt">11,013</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">24,819</font></td><td style="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: 0.25in"><font style="font-size: 8pt">The
Company has evaluated subsequent events since December 31, 2017, the date of these financial statements. On March 2, 2018 the
Compensation Committee of the Board of Directors of the Company approved the issuance of 200,432 shares of Restricted Stock Awards
and 335,424 Stock Options to its employees.</font></p>
3 -5 years
21000
162000
13000
3000
0
0
2600000
3.75
187000
0
7000
7000
14000
0
3000
2020-03-17
4.33
14000
476000
7.95
3750000
3569100
1800000
62000
-.7566
0.00
.7566
0.00
99000
47000
3000
-9900000
-5300000
283000
90900
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><font style="font-size: 8pt"></font></p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><font style="font-size: 8pt"><i>Basis
of presentation</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"> </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
financial statements are presented in accordance with accounting principles generally accepted in the United States of America
(“GAAP”) and reflect the financial position, results of operations and cash flows for all periods presented.</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"><font style="font-size: 8pt"><i>Fair Value
of Financial Instruments</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"> </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">Authoritative
guidance requires disclosure of the fair value of financial instruments. The Company’s financial instruments consist of
cash and cash equivalents, accounts receivable and accounts payable, the carrying amounts of which approximate their estimated
fair values primarily due to the short-term nature of the instruments or based on information obtained from market sources and
management estimates. The Company measures the fair value of certain of its financial assets and liabilities on a recurring basis.
A fair value hierarchy is used to rank the quality and reliability of the information used to determine fair values. Financial
assets and liabilities carried at fair value which is not equivalent to cost will be classified and disclosed in one of the following
three categories:</font></p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 1in; text-align: justify; text-indent: -45pt"><font style="font-size: 8pt"> </font></p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 1in; text-align: justify; text-indent: -45pt"><font style="font-size: 8pt">Level
1 — Quoted prices (unadjusted) in active markets for identical assets and liabilities.</font></p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 1in; text-align: justify; text-indent: -45pt"><font style="font-size: 8pt"> </font></p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 1in; text-align: justify; text-indent: -45pt"><font style="font-size: 8pt">Level
2 — Inputs other than Level 1 that are observable, either directly or indirectly, such as unadjusted quoted prices for similar
assets and liabilities, unadjusted quoted prices in the markets that are not active, or other inputs that are observable or can
be corroborated by observable market data for substantially the full term of the assets or liabilities.</font></p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 1in; text-align: justify; text-indent: -45pt"><font style="font-size: 8pt"> </font></p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 1in; text-align: justify; text-indent: -45pt"><font style="font-size: 8pt">Level
3 — Unobservable inputs that are supported by little or no market activity and that are significant to the fair value of
the assets or liabilities.</font></p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><font style="font-size: 8pt"> </font></p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><font style="font-size: 8pt"></font></p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><font style="font-size: 8pt"><i>Cash and
cash equivalents</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"> </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 maintains its operating accounts in a single reputable financial institution. The balances are insured by the U.S. Federal
Deposit Insurance Corporation (“FDIC”) up to specified limits. The Company’s cash is maintained in checking
accounts and money market funds with maturities of less than three months when purchased, which are readily convertible to known
amounts of cash, and which in the opinion of management are subject to insignificant risk of loss in value.</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"><i>Concentration of Credit Risk
and Major Customers</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"> </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">Financial
instruments, which potentially subject the Company to concentrations of credit risk, consist principally of cash, cash equivalents
and accounts receivable.</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
times, the amounts on deposit at the financial institution exceed the federally insured limits. Management believes that the financial
institutions which hold the Company’s cash is financially sound and, accordingly, minimal credit risk exists. As of December
31, 2017 and 2016, the Company’s cash balances were in excess of insured limits maintained at the financial institution.</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 grants credit to its business customers. Collateral is generally not required for trade receivables. The Company maintains
allowances for potential credit losses when necessary. During the year ended December 31, 2017, one customer represented 100%
of revenues and 100% of the accounts receivable balance. At December 31, 2016, the Company did not have any revenue generated
from customers.</font></p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><font style="font-size: 8pt"> </font></p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><font style="font-size: 8pt"><i>Accounts
Receivable</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"> </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">Trade
accounts receivable are recorded net of allowances for cash discounts for prompt payment, doubtful accounts, and sales returns.
Estimates for cash discounts and sales returns are based on analysis of 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>
<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 policy is to reserve for uncollectible accounts based on its best estimate of the amount of probable credit losses
in its existing accounts receivable. The Company periodically reviews its accounts receivable to determine whether an allowance
for doubtful accounts is necessary based on an analysis of past due accounts and other factors that may indicate that the realization
of an account may be in doubt. Other factors that the Company considers include its existing contractual obligations, historical
payment patterns of its customers and individual customer circumstances, and an analysis of days sales outstanding by customer.
Account balances deemed to be uncollectible are charged to the allowance after all means of collection have been exhausted and
the potential for recovery is considered remote. At December 31, 2017, there were no allowance for doubtful accounts since the
balance was subsequently collected. Any allowances recorded are included in Accounts Receivable, net in the accompanying balance
sheets.</font></p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><font style="font-size: 8pt"> </font></p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><font style="font-size: 8pt"><i>Revenue</i></font></p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; 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 generates revenue from sales of its products and delivery of services to its customer base.</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 records revenue when (i) persuasive evidence of an arrangement exists, (ii) delivery of the goods or performance of the
services has occurred, (iii) the fee is fixed or determinable, and (iv) collectability of the sale is reasonably assured.</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 requires all product sales to be supported by evidence of a sale transaction that clearly indicates the selling price
to the customer, shipping terms and payment terms. Evidence of an arrangement generally consists of a contract or purchase order
approved by the customer. The Company has ongoing relationships with certain customers from which it customarily accepts orders
by telephone in lieu of purchase orders.</font></p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in"><font style="font-size: 8pt"> </font></p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in"><font style="font-size: 8pt">The Company
recognizes revenue at the time it receives confirmation that the goods were either tendered at their destination, when shipped
“FOB destination,” or transferred to a shipping agent, when shipped “FOB shipping point.” Delivery to
the customer is deemed to have occurred when the customer takes title to the product. Generally, title passes to the customer
upon shipment, but could occur when the customer receives the product based on the terms of the agreement with the customer.</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"><font style="font-size: 8pt"><i>Income Taxes</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"> </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
accordance with authoritative guidance, deferred tax assets and liabilities are recorded for temporary differences between the
financial reporting and tax bases of assets and liabilities using the current enacted tax rate expected to be in effect when the
differences are expected to reverse. A valuation allowance is recorded on deferred tax assets unless realization is considered
more likely than not.</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 evaluates its tax positions taken or expected to be taken in the course of preparing the Company’s tax returns to
determine whether the tax positions are “more-likely-than-not” of being sustained by the applicable tax authority.
Tax positions not deemed to meet the “more-likely-than-not” threshold are not recorded as a tax benefit or expense
in the current year. The Company recognizes interest and penalties, if any, related to uncertain tax positions in interest expense.
No interest and penalties related to uncertain tax positions were accrued at either December 31, 2017 or 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">The
Company follows authoritative guidance which requires the evaluation of existing tax positions. Management has analyzed all open
tax years, as defined by the statute of limitations, for all major jurisdictions, which includes both federal and states where
the Company has operations. Open tax years are those that are open for examination by taxing authorities.</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"><font style="font-size: 8pt"><i>Property
and equipment</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"> </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">Items
capitalized as property and equipment are stated at cost. Maintenance and routine repairs are charged to operations when incurred,
while betterments and renewals are capitalized. Depreciation and amortization are computed using the straight-line method over
the estimated useful lives of the respective assets starting when the asset is placed in service.</font></p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><font style="font-size: 8pt"> </font></p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><font style="font-size: 8pt"><i>Debt Discounts</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"> </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">Debt
discounts are amortized to interest expense using the straight-line method, which approximates the interest rate method, over
the earlier of the term of the related debt or their earliest date of redemption.</font></p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><font style="font-size: 8pt"> </font></p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><font style="font-size: 8pt"><i>Research
and development expenses</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"> </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
accordance with authoritative guidance, the Company charges research and development costs to operations as incurred. Research
and development expenses consist of personnel costs for the design, development, testing and enhancement of the Company’s
technology, and certain other allocated costs, such as depreciation and other facilities related expenditures.</font></p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><font style="font-size: 8pt"> </font></p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><font style="font-size: 8pt"><i>Common
stock warrants</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"> </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 classifies as equity any warrants that (i) require physical settlement or net-share settlement or (ii) provide the Company
with a choice of net-cash settlement or settlement in its own shares (physical settlement or net-share settlement). The Company
classifies as assets or liabilities any contracts that (i) require net-cash settlement (including a requirement to net cash settle
the contract if an event occurs and if that event is outside the Company’s control), (ii) gives the counterparty a choice
of net-cash settlement or settlement in shares (physical settlement or net-share settlement) or (iii) that contain reset provisions
that do not qualify for the scope exception. The Company assesses classification of its common stock warrants and other freestanding
derivatives at each reporting date to determine whether a change in classification between assets and liabilities is required.
The Company’s freestanding derivatives consist of warrants to purchase common stock that were issued in connection with
its notes payable. The Company evaluated these warrants to assess their proper classification and determined that the common stock
warrants meet the criteria for equity classification in the balance sheet. Such warrants are measured at fair value, which the
Company determines using the Black-Scholes-Merton option-pricing model.</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"><font style="font-size: 8pt"><i>Stock-based compensation</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"> </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 computes stock-based compensation in accordance with authoritative guidance. The Company uses the Black-Scholes-Merton
option-pricing model to determine the fair value of its stock options. The Black-Scholes-Merton option-pricing model includes
various assumptions, including the fair market value of the common stock of the Company, expected life of stock options, the expected
volatility and the expected risk-free interest rate, among others. These assumptions reflect the Company’s best estimates,
but they involve inherent uncertainties based on market conditions generally outside the control of the Company. Forfeitures are
recorded when they occur.</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">As
a result, if other assumptions had been used, stock-based compensation cost, as determined in accordance with authoritative guidance,
could have been materially impacted. Furthermore, if the Company uses different assumptions on future grants, stock-based compensation
cost could be materially affected in future periods.</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 accounts for the fair value of equity instruments issued to non-employees using either the fair value of the services
received or the fair value of the equity instrument, whichever is considered more reliable<i>.</i> The Company utilizes the Black-Scholes-Merton
option-pricing model to measure the fair value of options issued to non-employees.</font></p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><font style="font-size: 8pt"> </font></p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><font style="font-size: 8pt"><i>Use of
estimates</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"> </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
preparation of financial statements in conformity with GAAP requires the Company’s management to make estimates and assumptions
that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of
the financial statements and the reported amounts of expenses during the reporting period. Significant estimates include the fair
value of stock-based compensation and warrants, valuation allowance against deferred tax assets and related disclosures. Actual
results could differ from those estimates.</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>Adoption of recent accounting
standards</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"> </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
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"><i>Recent accounting standards</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"> </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 2014, the FASB issued ASU No. 2014-09, <i>Revenue from Contracts with Customers</i>, which supersedes the revenue recognition
requirements in Topic 605, <i>Revenue Recognition</i> and requires entities to recognize revenue in a way that depicts the transfer
of promised goods or services to customers in an amount that reflects the consideration to which the entity expects to be entitled
in exchange for those goods or services. In August 2015, the FASB issued ASU 2015-14, which defers by one year the effective date
of ASU 2014-09. Accordingly, this guidance is effective for interim and annual periods beginning after December 15, 2017 with
early adoption permitted for interim and annual periods beginning after December 15, 2016. In March 2016, the FASB issued ASU
2016-08 <i>Principal versus Agent Considerations (Reporting Revenue Gross versus Net)</i>, which finalizes its amendments to the
guidance in the new revenue standard on assessing whether an entity is a principal or an agent in a revenue transaction. This
conclusion impacts whether an entity reports revenue on a gross or net basis. In April 2016, the FASB issued ASU 2016-10 <i>Identifying
Performance Obligations and Licensing</i>, which finalizes its amendments to the guidance in the new revenue standard regarding
the identification of performance obligations and accounting for the license of intellectual property. In May 2016, the FASB issued
ASU 2016-12 <i>Narrow-Scope Improvements and Practical Expedients,</i> which finalizes its amendments to the guidance in the new
revenue standard on collectability, noncash consideration, presentation of sales tax, and transition. In December 2016, the FASB
issued ASU 2016-20, <i>Technical Corrections and Improvements to Topic 606, Revenue from Contracts with Customers,</i> which continues
the FASB's ongoing project to issue technical corrections and improvements to clarify the codification or correct unintended applications
of guidance. The amendments are intended to make the guidance more operable and lead to more consistent application. The amendments
have the same effective date and transition requirements as the new revenue recognition standard. In September 2017, the FASB
Issued ASU 2017-13, <i>Revenue Recognition (Topic 605), Revenue from Contracts with Customers (Topic 606), Leases (Topic 840),
and Leases (Topic 842), which provides additional implementation guidance on the previously issued ASU 2014-09. </i>Overall, ASU
No. 2014-09, as amended, provides for either full retrospective adoption or a modified retrospective adoption by which it is applied
only to the most current period presented. The Company has adopted Topic 606 as of January 1, 2018 and the Company has concluded
that it will utilize the full retrospective method of adoption. The Company has reviewed its 2017 revenue under both Topic 605
and Topic 606 and concluded that there is no difference in the accounting treatment under each Topic. While the Company will provide
expanded disclosures as a result of ASU No. 2014-09, this standard will not have any impact on its results of operations and financial
condition.</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"></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
February 2016, the FASB ASU No. 2016-02, <i>Leases (Topic 842)</i> which supersedes FASB ASC Topic 840, <i>Leases
(Topic 840)</i> and provides principles for the recognition, measurement, presentation and disclosure of leases for both
lessees and lessors. The FASB has continued to clarify this guidance and most recently issued ASU 2017-13 “Amendments to
SEC Paragraphs Pursuant to the Staff Announcement at the July 20, 2017 EITF Meeting and Rescission of Prior SEC Staff Announcements
and Observer Comments.” The new standard requires lessees to apply a dual approach, classifying leases as either finance
or operating leases based on the principle of whether or not the lease is effectively a financed purchase by the lessee. This
classification will determine whether lease expense is recognized based on an effective interest method or on a straight-line
basis over the term of the lease, respectively. A lessee is also required to record a right-of-use asset and a lease liability
for all leases with a term of greater than twelve months regardless of classification. Leases with a term of twelve months or
less will be accounted for similar to existing guidance for operating leases. The standard will be effective for annual and interim
periods beginning after December 15, 2018, with early adoption permitted upon issuance. The Company is currently evaluating the
impact that ASU 2016-02 will have on its financial statements and related disclosures.</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
August 26, 2016, the FASB issued ASU No. 2016-15, <i>Classification of Certain Cash Receipts and Cash Payments (a
consensus of the Emerging Issues Task Force)</i>. The amendments in ASU 2016-15 address eight specific cash flow issues and
apply to all entities, including both business entities and not-for-profit entities that are required to present a statement
of cash flows under FASB Accounting Standards Codification 230, Statement of Cash Flows. The amendments in ASU 2016-15 are
effective for public business entities for fiscal years beginning after December 15, 2017, and interim periods within those
fiscal years. Early adoption is permitted, including adoption in an interim period. The Company has adopted this update as
of January 1, 2018 and the adoption will not have a material impact on its financial condition or results of
operations.</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">In
December 2017, the SEC staff issued Staff Accounting Bulletin No. 118, Income Tax Accounting Implications of the Tax Cuts and
Jobs Act (“SAB 118”) which allows companies to record provisional amounts during a measurement period not to extend
beyond one year of the enactment date. Since the Act was passed late in the fourth quarter of 2017, and ongoing guidance and accounting
interpretation are expected over the next 12 months, the Company considers the accounting of the deferred tax re-measurements
to be incomplete due to the forthcoming guidance and its ongoing analysis of final year-end data and tax positions. The Company
expects to complete its analysis within the measurement period in accordance with SAB 118.</font></p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><font style="font-size: 8pt"><i>Basis
of presentation</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"> </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
financial statements are presented in accordance with accounting principles generally accepted in the United States of America
(“GAAP”) and reflect the financial position, results of operations and cash flows for all periods presented.</font></p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><font style="font-size: 8pt"><i>Concentration of Credit Risk
and Major Customers</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"> </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">Financial
instruments, which potentially subject the Company to concentrations of credit risk, consist principally of cash, cash equivalents
and accounts receivable.</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
times, the amounts on deposit at the financial institution exceed the federally insured limits. Management believes that the financial
institutions which hold the Company’s cash is financially sound and, accordingly, minimal credit risk exists. As of December
31, 2017 and 2016, the Company’s cash balances were in excess of insured limits maintained at the financial institution.</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 grants credit to its business customers. Collateral is generally not required for trade receivables. The Company maintains
allowances for potential credit losses when necessary. During the year ended December 31, 2017, one customer represented 100%
of revenues and 100% of the accounts receivable balance. At December 31, 2016, the Company did not have any revenue generated
from customers.</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"><i>Stock-based compensation</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"> </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 computes stock-based compensation in accordance with authoritative guidance. The Company uses the Black-Scholes-Merton
option-pricing model to determine the fair value of its stock options. The Black-Scholes-Merton option-pricing model includes
various assumptions, including the fair market value of the common stock of the Company, expected life of stock options, the expected
volatility and the expected risk-free interest rate, among others. These assumptions reflect the Company’s best estimates,
but they involve inherent uncertainties based on market conditions generally outside the control of the Company. Forfeitures are
recorded when they occur.</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">As
a result, if other assumptions had been used, stock-based compensation cost, as determined in accordance with authoritative guidance,
could have been materially impacted. Furthermore, if the Company uses different assumptions on future grants, stock-based compensation
cost could be materially affected in future periods.</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 accounts for the fair value of equity instruments issued to non-employees using either the fair value of the services
received or the fair value of the equity instrument, whichever is considered more reliable<i>.</i> The Company utilizes the Black-Scholes-Merton
option-pricing model to measure the fair value of options issued to non-employees.</font></p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><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; 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 2014, the FASB issued ASU No. 2014-09, <i>Revenue from Contracts with Customers</i>, which supersedes the revenue recognition
requirements in Topic 605, <i>Revenue Recognition</i> and requires entities to recognize revenue in a way that depicts the transfer
of promised goods or services to customers in an amount that reflects the consideration to which the entity expects to be entitled
in exchange for those goods or services. In August 2015, the FASB issued ASU 2015-14, which defers by one year the effective date
of ASU 2014-09. Accordingly, this guidance is effective for interim and annual periods beginning after December 15, 2017 with
early adoption permitted for interim and annual periods beginning after December 15, 2016. In March 2016, the FASB issued ASU
2016-08 <i>Principal versus Agent Considerations (Reporting Revenue Gross versus Net)</i>, which finalizes its amendments to the
guidance in the new revenue standard on assessing whether an entity is a principal or an agent in a revenue transaction. This
conclusion impacts whether an entity reports revenue on a gross or net basis. In April 2016, the FASB issued ASU 2016-10 <i>Identifying
Performance Obligations and Licensing</i>, which finalizes its amendments to the guidance in the new revenue standard regarding
the identification of performance obligations and accounting for the license of intellectual property. In May 2016, the FASB issued
ASU 2016-12 <i>Narrow-Scope Improvements and Practical Expedients,</i> which finalizes its amendments to the guidance in the new
revenue standard on collectability, noncash consideration, presentation of sales tax, and transition. In December 2016, the FASB
issued ASU 2016-20, <i>Technical Corrections and Improvements to Topic 606, Revenue from Contracts with Customers,</i> which continues
the FASB's ongoing project to issue technical corrections and improvements to clarify the codification or correct unintended applications
of guidance. The amendments are intended to make the guidance more operable and lead to more consistent application. The amendments
have the same effective date and transition requirements as the new revenue recognition standard. In September 2017, the FASB
Issued ASU 2017-13, <i>Revenue Recognition (Topic 605), Revenue from Contracts with Customers (Topic 606), Leases (Topic 840),
and Leases (Topic 842), which provides additional implementation guidance on the previously issued ASU 2014-09. </i>Overall, ASU
No. 2014-09, as amended, provides for either full retrospective adoption or a modified retrospective adoption by which it is applied
only to the most current period presented. The Company has adopted Topic 606 as of January 1, 2018 and the Company has concluded
that it will utilize the full retrospective method of adoption. The Company has reviewed its 2017 revenue under both Topic 605
and Topic 606 and concluded that there is no difference in the accounting treatment under each Topic. While the Company will provide
expanded disclosures as a result of ASU No. 2014-09, this standard will not have any impact on its results of operations and financial
condition.</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"></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
February 2016, the FASB ASU No. 2016-02, <i>Leases (Topic 842)</i> which supersedes FASB ASC Topic 840, <i>Leases
(Topic 840)</i> and provides principles for the recognition, measurement, presentation and disclosure of leases for both
lessees and lessors. The FASB has continued to clarify this guidance and most recently issued ASU 2017-13 “Amendments to
SEC Paragraphs Pursuant to the Staff Announcement at the July 20, 2017 EITF Meeting and Rescission of Prior SEC Staff Announcements
and Observer Comments.” The new standard requires lessees to apply a dual approach, classifying leases as either finance
or operating leases based on the principle of whether or not the lease is effectively a financed purchase by the lessee. This
classification will determine whether lease expense is recognized based on an effective interest method or on a straight-line
basis over the term of the lease, respectively. A lessee is also required to record a right-of-use asset and a lease liability
for all leases with a term of greater than twelve months regardless of classification. Leases with a term of twelve months or
less will be accounted for similar to existing guidance for operating leases. The standard will be effective for annual and interim
periods beginning after December 15, 2018, with early adoption permitted upon issuance. The Company is currently evaluating the
impact that ASU 2016-02 will have on its financial statements and related disclosures.</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
August 26, 2016, the FASB issued ASU No. 2016-15, <i>Classification of Certain Cash Receipts and Cash Payments (a
consensus of the Emerging Issues Task Force)</i>. The amendments in ASU 2016-15 address eight specific cash flow issues and
apply to all entities, including both business entities and not-for-profit entities that are required to present a statement
of cash flows under FASB Accounting Standards Codification 230, Statement of Cash Flows. The amendments in ASU 2016-15 are
effective for public business entities for fiscal years beginning after December 15, 2017, and interim periods within those
fiscal years. Early adoption is permitted, including adoption in an interim period. The Company has adopted this update as
of January 1, 2018 and the adoption will not have a material impact on its financial condition or results of
operations.</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">In
December 2017, the SEC staff issued Staff Accounting Bulletin No. 118, Income Tax Accounting Implications of the Tax Cuts and
Jobs Act (“SAB 118”) which allows companies to record provisional amounts during a measurement period not to extend
beyond one year of the enactment date. Since the Act was passed late in the fourth quarter of 2017, and ongoing guidance and accounting
interpretation are expected over the next 12 months, the Company considers the accounting of the deferred tax re-measurements
to be incomplete due to the forthcoming guidance and its ongoing analysis of final year-end data and tax positions. The Company
expects to complete its analysis within the measurement period in accordance with SAB 118.</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
December 22, 2017, the 2017 Tax Cut and Jobs Act (“the Act”) was enacted into law and the new legislation contains
several key tax provisions, including a one-time mandatory transition tax on undistributed foreign earnings and a reduction of
the corporate income tax rate to 21% effective January 1, 2018, among others. The Company is required to recognize the effect
of the tax law changes in the period of enactment, such as determining the estimated transition tax, re-measuring its U.S. deferred
tax assets and liabilities at a 21% rate as well as reassessing the net realizability of its deferred tax assets and liabilities.
The one-time transition tax does not apply to the Company as it does not have any undistributed foreign earnings. The provisional
amount related to the re-measurement of its deferred tax balance is a reduction of approximately $9.9 million. Due to the corresponding
valuation allowance fully offsetting deferred taxes, there is no income statement impact. Upon completion of our 2017 U.S. income
tax return in 2018 we may identify additional re-measurement adjustments to our recorded deferred tax assets. We will continue
to assess our provision for income taxes as future guidance is issued, but do not currently anticipate significant revisions will
be necessary. Any such revisions will be treated in accordance with the measurement period guidance outlined in SAB 118.</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
loss before provision for income taxes consisted of the following (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 cellspacing="0" cellpadding="0" style="font: 10pt Times New Roman, Times, Serif; width: 100%; border-collapse: collapse">
<tr style="vertical-align: bottom">
<td colspan="2"><font style="font-size: 8pt"> </font></td>
<td><font style="font-size: 8pt"> </font></td>
<td><font style="font-size: 8pt"> </font></td>
<td colspan="6" style="border-bottom: black 1pt solid; text-align: center"><font style="font-size: 8pt"><b>Year Ended December
31,</b></font></td>
<td><font style="font-size: 8pt"> </font></td></tr>
<tr style="vertical-align: bottom">
<td colspan="2"><font style="font-size: 8pt"> </font></td>
<td><font style="font-size: 8pt"> </font></td>
<td><font style="font-size: 8pt"> </font></td>
<td colspan="2" style="border-bottom: black 1pt solid; text-align: center"><font style="font-size: 8pt"><b>2017</b></font></td>
<td><font style="font-size: 8pt"> </font></td>
<td><font style="font-size: 8pt"> </font></td>
<td colspan="2" style="border-bottom: black 1pt solid; text-align: center"><font style="font-size: 8pt"><b>2016</b></font></td>
<td><font style="font-size: 8pt"> </font></td></tr>
<tr style="vertical-align: bottom; background-color: rgb(238,238,238)">
<td style="width: 1%"><font style="font-size: 8pt"> </font></td>
<td style="width: 66%"><font style="font-size: 8pt">Domestic</font></td>
<td style="width: 1%"><font style="font-size: 8pt"> </font></td>
<td style="width: 1%"><font style="font-size: 8pt"> </font></td>
<td style="width: 1%"><font style="font-size: 8pt">$</font></td>
<td style="width: 13%; text-align: right"><font style="font-size: 8pt">(13,068</font></td>
<td style="width: 1%"><font style="font-size: 8pt">)</font></td>
<td style="width: 1%"><font style="font-size: 8pt"> </font></td>
<td style="width: 1%"><font style="font-size: 8pt">$</font></td>
<td style="width: 13%; text-align: right"><font style="font-size: 8pt">(12,610</font></td>
<td style="width: 1%"><font style="font-size: 8pt">)</font></td></tr>
<tr style="vertical-align: bottom; background-color: White">
<td><font style="font-size: 8pt"> </font></td>
<td><font style="font-size: 8pt">International</font></td>
<td><font style="font-size: 8pt"> </font></td>
<td><font style="font-size: 8pt"> </font></td>
<td style="border-bottom: black 1pt solid"><font style="font-size: 8pt"> </font></td>
<td style="border-bottom: black 1pt solid; text-align: right"><font style="font-size: 8pt">—</font></td>
<td><font style="font-size: 8pt"> </font></td>
<td><font style="font-size: 8pt"> </font></td>
<td style="border-bottom: black 1pt solid"><font style="font-size: 8pt"> </font></td>
<td style="border-bottom: black 1pt solid; text-align: right"><font style="font-size: 8pt">—</font></td>
<td><font style="font-size: 8pt"> </font></td></tr>
<tr style="vertical-align: bottom; background-color: rgb(238,238,238)">
<td><font style="font-size: 8pt"> </font></td>
<td><font style="font-size: 8pt">Total</font></td>
<td><font style="font-size: 8pt"> </font></td>
<td><font style="font-size: 8pt"> </font></td>
<td style="border-bottom: black 2.25pt double"><font style="font-size: 8pt">$</font></td>
<td style="border-bottom: black 2.25pt double; text-align: right"><font style="font-size: 8pt">(13,068</font></td>
<td><font style="font-size: 8pt">)</font></td>
<td><font style="font-size: 8pt"> </font></td>
<td style="border-bottom: black 2.25pt double"><font style="font-size: 8pt">$</font></td>
<td style="border-bottom: black 2.25pt double; text-align: right"><font style="font-size: 8pt">(12,610</font></td>
<td><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
Company had no income tax expense due to operating losses incurred for the years ended December 31, 2017 and 2016. The Company
accounts for income taxes in accordance with ASC 740, which requires that the tax benefit of net operating losses, temporary differences
and credit carryforwards be recorded as an asset to the extent that management assesses that realization is "more likely
than not." Realization of the future tax benefits is dependent on the Company's ability to generate sufficient taxable income
within the carryforward period. Because of the Company's recent history of operating losses, management believes that recognition
of the deferred tax assets arising from the above-mentioned future tax benefits is currently not likely to be realized and, accordingly,
has provided a full valuation allowance. The valuation decreased by approximately $5.3 million during the year ended December
31, 2017 and increased by approximately $283,000 during the year ended December 31, 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">The
Company’s deferred tax assets 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><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">Year
Ended December 31,</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="text-align: left; text-indent: 27pt"><font style="font-size: 8pt">Deferred tax assets:</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="width: 66%; text-align: left; text-indent: 49.5pt"><font style="font-size: 8pt">Net operating loss carryforwards</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">14,907</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">19,431</font></td><td style="width: 1%; 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; text-indent: 49.5pt"><font style="font-size: 8pt">Tax credit</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">1,074</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">695</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="text-align: left; text-indent: 49.5pt"><font style="font-size: 8pt">Fixed assets and intangibles</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">1,784</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">3,239</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; text-indent: 49.5pt"><font style="font-size: 8pt">Stock compensation</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">1,621</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">1,302</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="text-align: left; padding-bottom: 1pt; text-indent: 49.5pt"><font style="font-size: 8pt">Accruals and other</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">111</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">152</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="text-align: left; text-indent: 27pt"><font style="font-size: 8pt">Total deferred tax assets</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">19,497</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">$</font></td><td style="text-align: right"><font style="font-size: 8pt">24,819</font></td><td style="text-align: left"><font style="font-size: 8pt"> </font></td></tr>
<tr style="vertical-align: bottom; background-color: White">
<td style="text-align: left; padding-bottom: 1pt; text-indent: 44.4pt"><font style="font-size: 8pt">Valuation allowance</font></td><td style="padding-bottom: 1pt"><font style="font-size: 8pt"> </font></td>
<td style="border-bottom: Black 1pt solid; text-align: left"><font style="font-size: 8pt"> </font></td><td style="border-bottom: Black 1pt solid; text-align: right"><font style="font-size: 8pt">(19,497</font></td><td style="padding-bottom: 1pt; text-align: left"><font style="font-size: 8pt">)</font></td><td style="padding-bottom: 1pt"><font style="font-size: 8pt"> </font></td>
<td style="border-bottom: Black 1pt solid; text-align: left"><font style="font-size: 8pt"> </font></td><td style="border-bottom: Black 1pt solid; text-align: right"><font style="font-size: 8pt">(24,819</font></td><td style="padding-bottom: 1pt; text-align: left"><font style="font-size: 8pt">)</font></td></tr>
<tr style="vertical-align: bottom; background-color: rgb(238,238,238)">
<td style="text-align: left; padding-bottom: 2.5pt; text-indent: 27pt"><font style="font-size: 8pt">Net deferred tax asset</font></td><td style="padding-bottom: 2.5pt"><font style="font-size: 8pt"> </font></td>
<td style="border-bottom: Black 2.5pt double; text-align: left"><font style="font-size: 8pt">$</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><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"></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">Net
operating losses and tax credit carryforwards as of December 31, 2017, 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 style="text-align: justify"><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><td style="font-weight: bold; padding-bottom: 1pt"><font style="font-size: 8pt"> </font></td>
<td style="font-weight: bold; text-align: center; border-bottom: Black 1pt solid"><font style="font-size: 8pt">Expiration
in years</font></td></tr>
<tr style="vertical-align: bottom; background-color: rgb(238,238,238)">
<td style="width: 68%; text-align: justify"><font style="font-size: 8pt">Net operating losses, federal</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">63,510</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: 13%; text-align: center"><font style="font-size: 8pt">2027-2037</font></td></tr>
<tr style="vertical-align: bottom; background-color: White">
<td style="text-align: justify"><font style="font-size: 8pt">Net operating losses, state</font></td><td><font style="font-size: 8pt"> </font></td>
<td style="text-align: left"><font style="font-size: 8pt">$</font></td><td style="text-align: right"><font style="font-size: 8pt">25,962</font></td><td style="text-align: left"><font style="font-size: 8pt"> </font></td><td><font style="font-size: 8pt"> </font></td>
<td style="text-align: center"><font style="font-size: 8pt">2030-2037</font></td></tr>
<tr style="vertical-align: bottom; background-color: rgb(238,238,238)">
<td style="text-align: justify"><font style="font-size: 8pt">Tax credits, federal</font></td><td><font style="font-size: 8pt"> </font></td>
<td style="text-align: left"><font style="font-size: 8pt">$</font></td><td style="text-align: right"><font style="font-size: 8pt">918</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: center"><font style="font-size: 8pt">2027-2037</font></td></tr>
<tr style="vertical-align: bottom; background-color: White">
<td style="text-align: justify"><font style="font-size: 8pt">Tax credits, state</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">729</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: center"><font style="font-size: 8pt">2022-2032</font></td></tr>
</table>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.25in; text-align: justify"><font style="font-size: 8pt"> </font></p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.25in; text-align: justify"><font style="font-size: 8pt">The
effective tax rate of the Company’s provision (benefit) for income taxes differs from the federal statutory rate as follows:</font></p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.25in; text-align: justify"><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 style="text-align: justify"><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">Year
ending December 31,</font></td><td style="padding-bottom: 1pt; font-weight: bold"><font style="font-size: 8pt"> </font></td></tr>
<tr style="vertical-align: bottom">
<td style="text-align: justify"><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">2017</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: justify"><font style="font-size: 8pt">Statutory rate</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">34.00%</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">34.00%</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: justify"><font style="font-size: 8pt">State rate</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">1.13%</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">(9.63</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: justify"><font style="font-size: 8pt">Non-deductible items</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">(1.07</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">(2.72</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="text-align: justify"><font style="font-size: 8pt">Change in valuation allowance</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">(34.77</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">(16.93</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: justify"><font style="font-size: 8pt">Change in tax credits</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">0.71%</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">(2.82</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="text-align: justify"><font style="font-size: 8pt">Non-deductible interest expense</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">(1.90</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: justify"><font style="font-size: 8pt">Changes in deferreds due to tax reform</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">(75.66</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="text-align: justify; padding-bottom: 1pt"><font style="font-size: 8pt">Changes in valuation allowance due to tax
reform</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">75.66%</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></tr>
<tr style="vertical-align: bottom; background-color: rgb(238,238,238)">
<td style="text-align: justify; padding-bottom: 2.5pt"><font style="font-size: 8pt">   Total</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><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">Utilization
of U.S. net operating losses and tax credit carryforwards may be limited by “ownership change” rules, as defined in
Section 382 of the Internal Revenue Code. Similar rules may apply under state tax laws. The Company has not conducted a study
to-date to assess whether a limitation would apply under Section 382 of the Internal Revenue Code as and when it starts utilizing
its net operating losses and tax credits. The Company will continue to monitor activities in the future. In the event the Company
previously experienced an ownership change, or should experience an ownership change in the future, the amount of net operating
losses and research and development credit carryovers available in any taxable year could be limited and may expire unutilized.</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 establishes reserves for uncertain tax positions based on the largest amount that is more-likely-than-not to be sustained.
An uncertain income tax position will not be recognized if it has less than a 50% likelihood of being sustained. It is the Company’s
policy to recognize interest and penalties related to income tax matters in income tax expense. As of December 31, 2017 and 2016,
respectively, the Company has no accrued interest or penalties related to uncertain tax positions.</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 files income tax returns in the U.S. federal jurisdiction and various state jurisdictions. In the normal course of business,
the Company is subject to examination by their respective taxing authorities. The Company is not currently under audit by the
Internal Revenue Service or other similar state or local authority. <font style="font-family: Times New Roman, Times, Serif">The
statute of limitations remain effectively open for all tax years from inception (2007) through 2017. Tax years outside the normal
statute of limitations remain open to examination by tax authorities due to tax attributes generated in earlier years which have
been carried forward and may be examined and adjusted in subsequent years when utilized.</font></font></p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in"></p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in"><font style="font-size: 8pt"> </font></p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in"><font style="font-size: 8pt"></font></p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in"><font style="font-size: 8pt">The following
table summarizes the activity related to the Company’s gross unrecognized tax benefits for the years ended December 31,
2017 and 2016 (in thousands):</font></p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; 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 style="text-align: justify"><font style="font-size: 8pt"> </font></td><td><font style="font-size: 8pt"> </font></td>
<td colspan="6" style="text-align: center"><font style="font-size: 8pt"> </font></td><td><font style="font-size: 8pt"> </font></td></tr>
<tr style="vertical-align: bottom">
<td style="text-align: justify"><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: justify"><font style="font-size: 8pt">January 1 – unrecognized tax benefits</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">510</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">–</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: justify"><font style="font-size: 8pt">Increases (decreases) – prior year tax positions</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">(3</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">463</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: justify; padding-bottom: 1pt"><font style="font-size: 8pt">Increases – current year tax positions</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">99</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">47</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="text-align: justify; padding-bottom: 2.5pt"><font style="font-size: 8pt">December 31 - unrecognized tax benefits</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">606</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">510</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-indent: 0.5in"><font style="font-size: 8pt"> </font></p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in"><font style="font-size: 8pt">The following
table summarizes the activity in the Company’s Valuation Allowance and Qualifying Accounts for the years ended December
31, 2017 and 2016 (in thousands):</font></p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; 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="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>Balance at</b></font></p> <p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><font style="font-size: 8pt"><b>Beginning</b></font></p> <p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><font style="font-size: 8pt"><b>of
Year</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">Additions</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">Deductions</font></td><td style="padding-bottom: 1pt; font-weight: bold"><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>Balance</b></font></p> <p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><font style="font-size: 8pt"><b>at
End 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>Year</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="text-align: left"><font style="font-size: 8pt">Deferred tax assets valuation allowance</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="width: 48%"><font style="font-size: 8pt">Year ended December 31, 2017</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: 9%; text-align: right"><font style="font-size: 8pt">24,819</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">$</font></td><td style="width: 9%; text-align: right"><font style="font-size: 8pt">892</font></td><td style="width: 1%; text-align: left"><font style="font-size: 8pt"> </font></td><td style="width: 2%"><font style="font-size: 8pt"> </font></td>
<td style="width: 1%; text-align: left"><font style="font-size: 8pt">$</font></td><td style="width: 9%; text-align: right"><font style="font-size: 8pt">6,214</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">$</font></td><td style="width: 9%; text-align: right"><font style="font-size: 8pt">19,497</font></td><td style="width: 1%; text-align: left"><font style="font-size: 8pt"> </font></td></tr>
<tr style="vertical-align: bottom; background-color: rgb(238,238,238)">
<td><font style="font-size: 8pt">Year ended December 31, 2016</font></td><td><font style="font-size: 8pt"> </font></td>
<td style="text-align: left"><font style="font-size: 8pt">$</font></td><td style="text-align: right"><font style="font-size: 8pt">24,536</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">$</font></td><td style="text-align: right"><font style="font-size: 8pt">11,296</font></td><td style="text-align: left"><font style="font-size: 8pt"> </font></td><td><font style="font-size: 8pt"> </font></td>
<td style="text-align: left"><font style="font-size: 8pt">$</font></td><td style="text-align: right"><font style="font-size: 8pt">11,013</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">24,819</font></td><td style="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"></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">Year
Ended December 31,</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="text-align: left; text-indent: 27pt"><font style="font-size: 8pt">Deferred tax assets:</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>
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<td style="width: 66%; text-align: left; text-indent: 49.5pt"><font style="font-size: 8pt">Net operating loss carryforwards</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">14,907</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">19,431</font></td><td style="width: 1%; text-align: left"><font style="font-size: 8pt"> </font></td></tr>
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<td style="text-align: left; text-indent: 49.5pt"><font style="font-size: 8pt">Tax credit</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">1,074</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">695</font></td><td style="text-align: left"><font style="font-size: 8pt"> </font></td></tr>
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<td style="text-align: left; text-indent: 49.5pt"><font style="font-size: 8pt">Fixed assets and intangibles</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">1,784</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">3,239</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; text-indent: 49.5pt"><font style="font-size: 8pt">Stock compensation</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">1,621</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">1,302</font></td><td style="text-align: left"><font style="font-size: 8pt"> </font></td></tr>
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<td style="text-align: left; padding-bottom: 1pt; text-indent: 49.5pt"><font style="font-size: 8pt">Accruals and other</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">111</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">152</font></td><td style="padding-bottom: 1pt; text-align: left"><font style="font-size: 8pt"> </font></td></tr>
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<td style="text-align: left; text-indent: 27pt"><font style="font-size: 8pt">Total deferred tax assets</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">19,497</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">$</font></td><td style="text-align: right"><font style="font-size: 8pt">24,819</font></td><td style="text-align: left"><font style="font-size: 8pt"> </font></td></tr>
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<td style="text-align: left; padding-bottom: 1pt; text-indent: 44.4pt"><font style="font-size: 8pt">Valuation allowance</font></td><td style="padding-bottom: 1pt"><font style="font-size: 8pt"> </font></td>
<td style="border-bottom: Black 1pt solid; text-align: left"><font style="font-size: 8pt"> </font></td><td style="border-bottom: Black 1pt solid; text-align: right"><font style="font-size: 8pt">(19,497</font></td><td style="padding-bottom: 1pt; text-align: left"><font style="font-size: 8pt">)</font></td><td style="padding-bottom: 1pt"><font style="font-size: 8pt"> </font></td>
<td style="border-bottom: Black 1pt solid; text-align: left"><font style="font-size: 8pt"> </font></td><td style="border-bottom: Black 1pt solid; text-align: right"><font style="font-size: 8pt">(24,819</font></td><td style="padding-bottom: 1pt; text-align: left"><font style="font-size: 8pt">)</font></td></tr>
<tr style="vertical-align: bottom; background-color: rgb(238,238,238)">
<td style="text-align: left; padding-bottom: 2.5pt; text-indent: 27pt"><font style="font-size: 8pt">Net deferred tax asset</font></td><td style="padding-bottom: 2.5pt"><font style="font-size: 8pt"> </font></td>
<td style="border-bottom: Black 2.5pt double; text-align: left"><font style="font-size: 8pt">$</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><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">$</font></td><td style="border-bottom: Black 2.5pt double; text-align: right"><font style="font-size: 8pt">–</font></td><td style="padding-bottom: 2.5pt; text-align: left"><font style="font-size: 8pt"> </font></td></tr>
</table>
<table cellpadding="0" cellspacing="0" style="border-collapse: collapse; width: 100%; font: 10pt Times New Roman, Times, Serif">
<tr style="vertical-align: bottom">
<td style="text-align: justify"><font style="font-size: 8pt"> </font></td><td style="font-weight: bold; padding-bottom: 1pt"><font style="font-size: 8pt"> </font></td>
<td colspan="2" style="font-weight: bold; text-align: center; border-bottom: Black 1pt solid"><font style="font-size: 8pt">Amount</font></td><td style="padding-bottom: 1pt; font-weight: bold"><font style="font-size: 8pt"> </font></td><td style="font-weight: bold; padding-bottom: 1pt"><font style="font-size: 8pt"> </font></td>
<td style="font-weight: bold; text-align: center; border-bottom: Black 1pt solid"><font style="font-size: 8pt">Expiration
in years</font></td></tr>
<tr style="vertical-align: bottom; background-color: rgb(238,238,238)">
<td style="width: 68%; text-align: justify"><font style="font-size: 8pt">Net operating losses, federal</font></td><td style="width: 2%"><font style="font-size: 8pt"> </font></td>
<td style="width: 1%; text-align: left"><font style="font-size: 8pt">$</font></td><td style="width: 13%; text-align: right"><font style="font-size: 8pt">63,510</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: 13%; text-align: center"><font style="font-size: 8pt">2027-2037</font></td></tr>
<tr style="vertical-align: bottom; background-color: White">
<td style="text-align: justify"><font style="font-size: 8pt">Net operating losses, state</font></td><td><font style="font-size: 8pt"> </font></td>
<td style="text-align: left"><font style="font-size: 8pt">$</font></td><td style="text-align: right"><font style="font-size: 8pt">25,962</font></td><td style="text-align: left"><font style="font-size: 8pt"> </font></td><td><font style="font-size: 8pt"> </font></td>
<td style="text-align: center"><font style="font-size: 8pt">2030-2037</font></td></tr>
<tr style="vertical-align: bottom; background-color: rgb(238,238,238)">
<td style="text-align: justify"><font style="font-size: 8pt">Tax credits, federal</font></td><td><font style="font-size: 8pt"> </font></td>
<td style="text-align: left"><font style="font-size: 8pt">$</font></td><td style="text-align: right"><font style="font-size: 8pt">918</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: center"><font style="font-size: 8pt">2027-2037</font></td></tr>
<tr style="vertical-align: bottom; background-color: White">
<td style="text-align: justify"><font style="font-size: 8pt">Tax credits, state</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">729</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: center"><font style="font-size: 8pt">2022-2032</font></td></tr>
</table>
12361069