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<p style="font: 10pt Times New Roman, Times, Serif; margin: 0"><i>Description of Business</i></p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify; text-indent: 0.5in"> </p>
<p style="font: 12pt Times New Roman, Times, Serif; margin: 0; text-align: justify; text-indent: 0.5in"><font style="font-size: 10pt; letter-spacing: 11pt">   </font><font style="font-size: 10pt">  
SPY Inc. (the “<i>Company</i>”) happily designs, markets and distributes premium sunglasses, goggles and prescription
frame eyewear, as well as apparel and other accessories.  In 1994, the Company began as a grassroots brand in Southern
California with the goal of creating innovative and aesthetically progressive eyewear, and, in doing so, the Company believes it
has captured the imagination of the action sports market with authentic, distinctive, performance-driven products under the SPY</font><font style="font-size: 7pt">®</font><font style="font-size: 10pt"> brand.  Today,
the Company believes the SPY</font><font style="font-size: 7pt">®</font><font style="font-size: 10pt"> brand, symbolized
by the distinct “cross” logo, is a well recognized eyewear brand in its segment of the action sports industry, with
a reputation for its high quality products, style and innovation, most notably showcased in its Happy Lens™ technology.</font></p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify; text-indent: 0.5in"> </p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify; text-indent: 0.5in"><font style="letter-spacing: 11pt">   </font> 
The Company was incorporated as Sports Colors, Inc. in California in August 1992, but had no operations until April 1994, when
the Company changed its name to Spy Optic, Inc.  In November 2004, the Company reincorporated in Delaware and changed
its name to Orange 21 Inc.  In February 2012, the Company changed its name from Orange 21 Inc. to SPY Inc. to better
reflect the focus of its business going forward.</p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify; text-indent: 0.5in"> </p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify; text-indent: 0.5in"><font style="letter-spacing: 11pt">   </font> 
The Company operates through its subsidiaries and currently has one wholly-owned subsidiary incorporated in California, Spy Optic
Inc. (“<i>SPY North America</i>”) and one wholly owned subsidiary incorporated in Italy, Spy Optics Europe S.r.l. S.U.
(“<i>SPY EUROPE</i>”).</p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify; text-indent: 0.5in">  </p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify"><i>Capital Resources</i></p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify"> </p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify; text-indent: 33pt"><font style="background-color: white"> During
the six months ended June 30, 2015, the Company had positive cash flow from operations principally due to timing of working capital
purchases and higher collections on accounts receivable. Although the Company had income from operations during the six months
ended June 30, 2015 and 2014, the Company has a history of incurring significant negative cash flow from operations, net losses,
and has significant working capital requirements. The Company anticipates that it will continue to have ongoing cash requirements
to finance its seasonal and ongoing working capital needs and net losses.</font></p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify; text-indent: 33pt"> </p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify; text-indent: 33pt">In order to finance the
Company's working capital requirements, the Company has relied and anticipates that it will continue to rely on SPY North America’s
credit line with BFI Business Finance (“<i>BFI</i>”) (“<i>BFI Line of Credit</i>”) and its credit facilities
with Costa Brava Partnership III, L.P. (“<i>Costa Brava</i>”).  In addition, SPY North America has relied
on debt and equity financing from Harlingwood (Alpha), LLC (“<i>Harlingwood</i>”).  Costa Brava and Harlingwood
are related parties.  The total outstanding indebtedness of the Company was $27.5 million and $28.5 million at June 30,
2015 and December 31, 2014 respectively.  (See Note 7 “<i>Short-Term Debt</i> ”, Note 8<i> “Long-Term
Debt”</i>, and Note 11<i> “Related Party Transactions”</i>).</p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify; text-indent: 33pt"> </p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify; text-indent: 33pt">The Company believes it
will have sufficient cash on hand and cash available under existing credit facilities to meet its operating requirements for at
least the next twelve months, if the Company is able to achieve some or a combination of the following factors: (i) achieve its
sales growth, (ii) continue the improvements in the management of working capital, and (iii) continue to manage and operate the
Company at appropriate levels of sales, marketing, general and administrative, and other operating expenses in relation to overall
sales.  However, the Company will need to continue to access its existing credit facilities during the next twelve months
to support its planned operations and working capital requirements, and intends to (i) continue to borrow, to the extent available,
from the BFI Line of Credit, (ii) if necessary, continue discretionary deferral of interest payments otherwise payable to Harlingwood,
and (iii) if necessary, raise additional capital through debt or equity financings, or borrow up to the extent available on the
Company’s Costa Brava Line of Credit.</p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-indent: 0.5in"> </p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify; text-indent: 0.5in"><font style="letter-spacing: 11pt">   </font>  
The Company does not anticipate that it can generate sufficient cash from operations to repay the amounts due under the BFI Line
of Credit, which is scheduled to renew in February 2016, and the borrowings from Costa Brava and Harlingwood due, as amended, on
December 31, 2016, consisting of $19.8 million in borrowings from Costa Brava and $1.7 million in borrowings from Harlingwood as
of June 30, 2015.  The Company will therefore need to renew the BFI Line of Credit at its annual renewal in February
2016 and continue to extend the future maturity dates of the Costa Brava and Harlingwood indebtedness. If the Company is unable
to renew the BFI Line of Credit and extend future maturity dates of the Costa Brava and Harlingwood indebtedness, it will need
to raise substantial additional capital through debt or equity financing to continue its operations. No assurances can be given
that any such financing will be available to the Company on favorable terms, if at all. The inability to obtain debt or equity
financing in a timely manner and in amounts sufficient to fund the Company’s operations, or the inability to renew the BFI
Line of Credit or to extend future maturity dates of the Costa Brava and Harlingwood indebtedness, if necessary, would have an
immediate and substantial adverse impact on the Company’s business, financial condition and results of operations.</p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-indent: 0.5in"><i> Basis of Presentation</i></p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-indent: 0.5in"> </p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-indent: 33pt"> The accompanying Consolidated Financial
Statements of SPY Inc. and its wholly owned subsidiaries have been prepared in accordance with generally accepted accounting principles
(“<i>GAAP</i>”) in the United States.  In the opinion of management, the Consolidated Financial Statements
contain all adjustments, consisting of normal recurring items, considered necessary for a fair presentation of the Company’s
financial position, results of operations and cash flows.  The Consolidated Financial Statements contained in this Form
10-Q should be read in conjunction with the Consolidated Financial Statements contained in the Company's Annual Report on Form
10-K for the year ended December 31, 2014.</p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-indent: 0.5in"> </p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-indent: 0.5in"><i> Recently Issued Accounting Principles</i></p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-indent: 0.5in"> </p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-indent: 33pt"> In 2014, the Financial Accounting Standards
Board (“<i>FASB</i>”) issued Accounting Standard Update (“<i>ASU</i>”) No. 2014-09 supersedes the revenue
recognition requirements in Topic 605, Revenue Recognition, as well as most industry-specific guidance, and significantly enhances
comparability of revenue recognition practices across entities and industries by providing a principles-based, comprehensive framework
for addressing revenue recognition issues. In order for a provider of promised goods or services to recognize as revenue the consideration
that it expects to receive in exchange for the promised goods or services, the provider should apply the following five steps:
(1) identify the contract with a customer(s); (2) identify the performance obligations in the contract; (3) determine the transaction
price; (4) allocate the transaction price to the performance obligations in the contract; and (5) recognize revenue when (or as)
the entity satisfies a performance obligation. ASU No. 2014-09 also specifies the accounting for some costs to obtain or fulfill
a contract with a customer and provides enhanced disclosure requirements. In 2015, FASB deferred ASU No. 2014-09 for one year,
and with that deferral, ASU No. 2014-09 will be effective for annual reporting periods beginning after December 15, 2017, including
interim periods within that reporting period, which for us will be our 2018 first quarter. The Company is permitted to use either
the retrospective or the modified retrospective method when adopting ASU No. 2014-09. The Company is still assessing the potential
impact that ASU No. 2014-09 will have on our financial statements and method of adoption.</p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0"> </p>
<p style="font: 8pt Times New Roman, Times, Serif; margin: 0; text-align: center; text-indent: 0.5in"> </p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-indent: 33pt"> The accompanying Consolidated Financial
Statements of SPY Inc. and its wholly owned subsidiaries have been prepared in accordance with generally accepted accounting principles
(“<i>GAAP</i>”) in the United States.  In the opinion of management, the Consolidated Financial Statements
contain all adjustments, consisting of normal recurring items, considered necessary for a fair presentation of the Company’s
financial position, results of operations and cash flows.  The Consolidated Financial Statements contained in this Form
10-Q should be read in conjunction with the Consolidated Financial Statements contained in the Company's Annual Report on Form
10-K for the year ended December 31, 2014.</p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-indent: 33pt"> In 2014, the Financial Accounting Standards
Board (“<i>FASB</i>”) issued Accounting Standard Update (“<i>ASU</i>”) No. 2014-09 supersedes the revenue
recognition requirements in Topic 605, Revenue Recognition, as well as most industry-specific guidance, and significantly enhances
comparability of revenue recognition practices across entities and industries by providing a principles-based, comprehensive framework
for addressing revenue recognition issues. In order for a provider of promised goods or services to recognize as revenue the consideration
that it expects to receive in exchange for the promised goods or services, the provider should apply the following five steps:
(1) identify the contract with a customer(s); (2) identify the performance obligations in the contract; (3) determine the transaction
price; (4) allocate the transaction price to the performance obligations in the contract; and (5) recognize revenue when (or as)
the entity satisfies a performance obligation. ASU No. 2014-09 also specifies the accounting for some costs to obtain or fulfill
a contract with a customer and provides enhanced disclosure requirements. In 2015, FASB deferred ASU No. 2014-09 for one year,
and with that deferral, ASU No. 2014-09 will be effective for annual reporting periods beginning after December 15, 2017, including
interim periods within that reporting period, which for us will be our 2018 first quarter. The Company is permitted to use either
the retrospective or the modified retrospective method when adopting ASU No. 2014-09. The Company is still assessing the potential
impact that ASU No. 2014-09 will have on our financial statements and method of adoption.</p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify; text-indent: 0.5in">Basic loss per share is
computed by dividing net income or loss by the weighted-average number of common shares outstanding during the period. Diluted
loss per share is calculated by including the additional shares of common stock issuable upon exercise of outstanding options and
warrants, vesting of restricted stock and the conversion of convertible debt, using the treasury stock method. The following table
lists the potentially dilutive equity instruments, each convertible into one share of common stock, used in the calculation of
diluted earnings per share for the periods presented:</p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-indent: 0.5in"> </p>
<table cellspacing="0" cellpadding="0" style="font: 10pt Times New Roman, Times, Serif; width: 100%">
<tr style="vertical-align: bottom">
<td> </td>
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<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: center"><b>Three Months Ended </b></p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: center"><b>June 30,</b></p></td>
<td> </td>
<td> </td>
<td colspan="3">
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: center"><b>Six Months Ended </b></p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: center"><b>June 30,</b></p></td></tr>
<tr style="vertical-align: bottom">
<td style="width: 55%"> </td>
<td style="width: 11%; border-bottom: black 1.5pt solid; text-align: center"><font style="font-size: 10pt"><b>2015</b></font></td>
<td style="width: 1%; border-bottom: black 1.5pt solid"> </td>
<td style="width: 11%; border-bottom: black 1.5pt solid; text-align: center"><font style="font-size: 10pt"><b>2014</b></font></td>
<td style="width: 1%"> </td>
<td style="width: 1%; border-bottom: black 1.5pt solid"> </td>
<td style="width: 8%; border-bottom: black 1.5pt solid; text-align: center"><font style="font-size: 10pt"><b>2015</b></font></td>
<td style="width: 1%"> </td>
<td style="width: 11%; border-bottom: black 1.5pt solid; text-align: center"><font style="font-size: 10pt"><b>2014</b></font></td></tr>
<tr style="vertical-align: bottom">
<td> </td>
<td colspan="3" style="text-align: center"><font style="font-size: 10pt"><b>(Thousands)</b></font></td>
<td> </td>
<td> </td>
<td colspan="3" style="text-align: center"><font style="font-size: 10pt"><b>(Thousands)</b></font></td></tr>
<tr style="background-color: #CCEEFF">
<td style="vertical-align: bottom"><font style="font-size: 10pt">Weighted average common shares outstanding – basic</font></td>
<td style="vertical-align: bottom; text-align: right"><font style="font-size: 10pt">13,431</font></td>
<td style="vertical-align: bottom"> </td>
<td style="vertical-align: bottom; text-align: right"><font style="font-size: 10pt">13,358</font></td>
<td style="vertical-align: bottom"> </td>
<td style="vertical-align: bottom"> </td>
<td style="vertical-align: bottom; text-align: right"><font style="font-size: 10pt">13,420</font></td>
<td style="vertical-align: top"> </td>
<td style="vertical-align: bottom; text-align: right"><font style="font-size: 10pt">13,292</font></td></tr>
<tr style="vertical-align: bottom; background-color: white">
<td><font style="font-size: 10pt">Assumed conversion of dilutive stock options, warrants and convertible debt</font></td>
<td style="border-bottom: black 1.5pt solid; text-align: right"><font style="font-size: 10pt">—</font></td>
<td> </td>
<td style="border-bottom: black 1.5pt solid; text-align: right"><font style="font-size: 10pt">—</font></td>
<td> </td>
<td style="border-bottom: black 1.5pt solid"> </td>
<td style="border-bottom: black 1.5pt solid; text-align: right"><font style="font-size: 10pt">—</font></td>
<td style="text-align: right"> </td>
<td style="border-bottom: black 1.5pt solid; text-align: right"><font style="font-size: 10pt">—</font></td></tr>
<tr style="background-color: #CCEEFF">
<td style="vertical-align: bottom"><font style="font-size: 10pt">Weighted average common shares outstanding – dilutive</font></td>
<td style="vertical-align: bottom; border-bottom: black 2.25pt double; text-align: right"><font style="font-size: 10pt"> 13,431</font></td>
<td style="vertical-align: bottom"> </td>
<td style="vertical-align: bottom; border-bottom: black 2.25pt double; text-align: right"><font style="font-size: 10pt">13,358</font></td>
<td style="vertical-align: bottom"> </td>
<td style="vertical-align: bottom; border-bottom: black 2.25pt double"> </td>
<td style="vertical-align: bottom; border-bottom: black 2.25pt double; text-align: right"><font style="font-size: 10pt">13,420</font></td>
<td style="vertical-align: top; text-align: right"> </td>
<td style="vertical-align: bottom; border-bottom: black 2.25pt double; text-align: right"><font style="font-size: 10pt">13,292</font></td></tr>
</table>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-indent: 0.5in"> </p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify; text-indent: 0.5in"><font style="letter-spacing: 11pt">   </font>  
The following potentially dilutive instruments were not included in the diluted per share calculation for periods presented as
their inclusion would have been antidilutive:</p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-indent: 0.5in"><b> </b></p>
<table cellspacing="0" cellpadding="0" style="font: 10pt Times New Roman, Times, Serif; width: 100%">
<tr style="vertical-align: bottom">
<td style="padding-bottom: 1.5pt">
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-indent: 0.5in"> </p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-indent: 0.5in">  </p></td>
<td colspan="7" style="border-bottom: black 1.5pt solid">
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: center"><b>Three Months Ended</b></p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: center"><b>June 30,</b></p></td>
<td nowrap="nowrap"> </td>
<td> </td>
<td colspan="6" style="border-bottom: black 1.5pt solid">
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: center"><b>Six Months Ended</b></p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: center"><b>June 30,</b></p></td>
<td nowrap="nowrap"> </td></tr>
<tr style="vertical-align: bottom">
<td><font style="font-size: 10pt"><b>Shares Issuable through Exercise or Conversion of:</b></font></td>
<td colspan="3" style="border-bottom: black 1.5pt solid; text-align: center"><font style="font-size: 10pt"><b>2015</b></font></td>
<td nowrap="nowrap"> </td>
<td> </td>
<td colspan="2" style="border-bottom: black 1.5pt solid; text-align: center"><font style="font-size: 10pt"><b>2014</b></font></td>
<td nowrap="nowrap"> </td>
<td> </td>
<td colspan="2" style="border-bottom: black 1.5pt solid; text-align: center"><font style="font-size: 10pt"><b>2015</b></font></td>
<td nowrap="nowrap"> </td>
<td> </td>
<td colspan="2" style="border-bottom: black 1.5pt solid; text-align: center"><font style="font-size: 10pt"><b>2014</b></font></td>
<td nowrap="nowrap"> </td></tr>
<tr style="vertical-align: bottom">
<td> </td>
<td colspan="7" style="text-align: center"><font style="font-size: 10pt"><b>(Thousands)</b></font></td>
<td nowrap="nowrap"> </td>
<td> </td>
<td colspan="6" style="text-align: center"><font style="font-size: 10pt"><b>(Thousands)</b></font></td>
<td nowrap="nowrap"> </td></tr>
<tr style="vertical-align: bottom; background-color: #CCEEFF">
<td style="width: 52%"><font style="font-size: 10pt">Stock options</font></td>
<td style="width: 1%"> </td>
<td style="width: 1%"> </td>
<td style="width: 9%; text-align: right"><font style="font-size: 10pt">3,248</font></td>
<td nowrap="nowrap" style="width: 1%"> </td>
<td style="width: 1%"> </td>
<td style="width: 1%"> </td>
<td style="width: 9%; text-align: right"><font style="font-size: 10pt">3,062</font></td>
<td nowrap="nowrap" style="width: 1%"> </td>
<td style="width: 1%"> </td>
<td style="width: 1%"> </td>
<td style="width: 9%; text-align: right"><font style="font-size: 10pt">3,248</font></td>
<td nowrap="nowrap" style="width: 1%"> </td>
<td style="width: 1%"> </td>
<td style="width: 1%"> </td>
<td style="width: 9%; text-align: right"><font style="font-size: 10pt">3,062</font></td>
<td nowrap="nowrap" style="width: 1%"> </td></tr>
<tr style="vertical-align: bottom; background-color: white">
<td><font style="font-size: 10pt">Warrants</font></td>
<td> </td>
<td> </td>
<td style="text-align: right"><font style="font-size: 10pt">244</font></td>
<td nowrap="nowrap"> </td>
<td> </td>
<td> </td>
<td style="text-align: right"><font style="font-size: 10pt">244</font></td>
<td nowrap="nowrap"> </td>
<td> </td>
<td> </td>
<td style="text-align: right"><font style="font-size: 10pt">244</font></td>
<td nowrap="nowrap"> </td>
<td> </td>
<td> </td>
<td style="text-align: right"><font style="font-size: 10pt">244</font></td>
<td nowrap="nowrap"> </td></tr>
<tr style="vertical-align: bottom; background-color: #CCEEFF">
<td><font style="font-size: 10pt">Convertible debt</font></td>
<td> </td>
<td style="border-bottom: black 1.5pt solid"> </td>
<td style="border-bottom: black 1.5pt solid; text-align: right"><font style="font-size: 10pt">4,239</font></td>
<td nowrap="nowrap"> </td>
<td> </td>
<td style="border-bottom: black 1.5pt solid"> </td>
<td style="border-bottom: black 1.5pt solid; text-align: right"><font style="font-size: 10pt">4,240</font></td>
<td nowrap="nowrap"> </td>
<td> </td>
<td style="border-bottom: black 1.5pt solid"> </td>
<td style="border-bottom: black 1.5pt solid; text-align: right"><font style="font-size: 10pt">4,239</font></td>
<td nowrap="nowrap"> </td>
<td> </td>
<td style="border-bottom: black 1.5pt solid"> </td>
<td style="border-bottom: black 1.5pt solid; text-align: right"><font style="font-size: 10pt">4,240</font></td>
<td nowrap="nowrap"> </td></tr>
<tr style="vertical-align: bottom; background-color: white">
<td> </td>
<td> </td>
<td> </td>
<td style="text-align: right"> </td>
<td nowrap="nowrap"> </td>
<td> </td>
<td> </td>
<td style="text-align: right"> </td>
<td nowrap="nowrap"> </td>
<td> </td>
<td> </td>
<td style="text-align: right"> </td>
<td nowrap="nowrap"> </td>
<td> </td>
<td> </td>
<td style="text-align: right"> </td>
<td nowrap="nowrap"> </td></tr>
<tr style="vertical-align: bottom; background-color: #CCEEFF">
<td><font style="font-size: 10pt">Total</font></td>
<td> </td>
<td style="border-bottom: black 2.25pt double"> </td>
<td style="border-bottom: black 2.25pt double; text-align: right"><font style="font-size: 10pt">7,731</font></td>
<td nowrap="nowrap"> </td>
<td> </td>
<td style="border-bottom: black 2.25pt double"> </td>
<td style="border-bottom: black 2.25pt double; text-align: right"><font style="font-size: 10pt">7,546</font></td>
<td nowrap="nowrap"> </td>
<td> </td>
<td style="border-bottom: black 2.25pt double"> </td>
<td style="border-bottom: black 2.25pt double; text-align: right"><font style="font-size: 10pt">7,731</font></td>
<td nowrap="nowrap"> </td>
<td> </td>
<td style="border-bottom: black 2.25pt double"> </td>
<td style="border-bottom: black 2.25pt double; text-align: right"><font style="font-size: 10pt">7,546</font></td>
<td nowrap="nowrap"> </td></tr>
</table>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0 0.1pt"> </p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0"> </p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-indent: 33pt"> Accumulated other comprehensive income
represents the results of operations adjusted to reflect all items recognized under accounting standards as components of comprehensive
income.</p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-indent: 0.5in"> </p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-indent: 33pt">  The components of accumulated other
comprehensive income, net of tax, are as follows:</p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-indent: 0.5in"> </p>
<table cellspacing="0" cellpadding="0" style="font: 10pt Times New Roman, Times, Serif; width: 100%">
<tr style="vertical-align: bottom">
<td> </td>
<td colspan="2" style="border-bottom: black 1.5pt solid">
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: center"><b>June 30,</b></p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: center"><b>2015</b></p></td>
<td> </td>
<td> </td>
<td colspan="2" style="border-bottom: black 1.5pt solid">
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: center"><b>December 31,</b></p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: center"><b>2014</b></p></td>
<td> </td></tr>
<tr style="vertical-align: bottom">
<td> </td>
<td colspan="6" style="text-align: center"><font style="font-size: 10pt"><b>(Thousands)</b></font></td>
<td> </td></tr>
<tr style="vertical-align: bottom; background-color: #CCEEFF">
<td style="width: 79%"><font style="font-size: 10pt">Equity adjustment from foreign currency translation</font></td>
<td style="width: 1%"><font style="font-size: 10pt">$</font></td>
<td style="width: 8%; text-align: right"><font style="font-size: 10pt">1,445</font></td>
<td style="width: 1%"> </td>
<td style="width: 1%"> </td>
<td style="width: 1%"><font style="font-size: 10pt">$</font></td>
<td style="width: 8%; text-align: right"><font style="font-size: 10pt">977</font></td>
<td style="width: 1%"> </td></tr>
<tr style="vertical-align: bottom; background-color: white">
<td><font style="font-size: 10pt">Unrealized loss on foreign currency exposure of net investment in foreign operations</font></td>
<td style="border-bottom: black 1.5pt solid"> </td>
<td style="border-bottom: black 1.5pt solid; text-align: right"><font style="font-size: 10pt">(1,036</font></td>
<td><font style="font-size: 10pt">)</font></td>
<td> </td>
<td style="border-bottom: black 1.5pt solid"> </td>
<td style="border-bottom: black 1.5pt solid; text-align: right"><font style="font-size: 10pt">(527</font></td>
<td><font style="font-size: 10pt">)</font></td></tr>
<tr style="vertical-align: bottom; background-color: #CCEEFF">
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td></tr>
<tr style="vertical-align: bottom; background-color: white">
<td><font style="font-size: 10pt">Accumulated other comprehensive income</font></td>
<td style="border-bottom: black 2.25pt double"><font style="font-size: 10pt">$</font></td>
<td style="border-bottom: black 2.25pt double; text-align: right"><font style="font-size: 10pt">409</font></td>
<td> </td>
<td> </td>
<td style="border-bottom: black 2.25pt double"><font style="font-size: 10pt">$</font></td>
<td style="border-bottom: black 2.25pt double; text-align: right"><font style="font-size: 10pt">450</font></td>
<td> </td></tr>
</table>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-indent: 0.5in"><b> </b></p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0"> </p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-indent: 33pt"> Accounts receivable consisted of the following:</p>
<table cellspacing="0" cellpadding="0" style="font: 10pt Times New Roman, Times, Serif; width: 100%">
<tr style="vertical-align: bottom">
<td> </td>
<td> </td>
<td colspan="2" style="border-bottom: black 1.5pt solid">
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: center"><b>June 30,</b></p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: center"><b>2015</b></p></td>
<td> </td>
<td> </td>
<td colspan="2" style="border-bottom: black 1.5pt solid">
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: center"><b>December 31,</b></p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: center"><b>2014</b></p></td>
<td> </td></tr>
<tr style="vertical-align: bottom">
<td> </td>
<td> </td>
<td colspan="6" style="text-align: center"><font style="font-size: 10pt"><b>(Thousands)</b></font></td>
<td> </td></tr>
<tr style="vertical-align: bottom; background-color: #CCEEFF">
<td style="width: 78%"><font style="font-size: 10pt">Trade receivables</font></td>
<td style="width: 1%"> </td>
<td style="width: 1%"><font style="font-size: 10pt">$</font></td>
<td style="width: 8%; text-align: right"><font style="font-size: 10pt">7,624</font></td>
<td style="width: 1%"> </td>
<td style="width: 1%"> </td>
<td style="width: 1%"><font style="font-size: 10pt">$</font></td>
<td style="width: 8%; text-align: right"><font style="font-size: 10pt">9,477</font></td>
<td style="width: 1%"> </td></tr>
<tr style="vertical-align: bottom; background-color: white">
<td><font style="font-size: 10pt">Less allowance for doubtful accounts</font></td>
<td> </td>
<td> </td>
<td style="text-align: right"><font style="font-size: 10pt">(268</font></td>
<td><font style="font-size: 10pt">)</font></td>
<td> </td>
<td> </td>
<td style="text-align: right"><font style="font-size: 10pt">(290</font></td>
<td><font style="font-size: 10pt">)</font></td></tr>
<tr style="vertical-align: bottom; background-color: #CCEEFF">
<td><font style="font-size: 10pt">Less allowance for returns</font></td>
<td> </td>
<td style="border-bottom: black 1.5pt solid"> </td>
<td style="border-bottom: black 1.5pt solid; text-align: right"><font style="font-size: 10pt">(2,003</font></td>
<td><font style="font-size: 10pt">)</font></td>
<td> </td>
<td style="border-bottom: black 1.5pt solid"> </td>
<td style="border-bottom: black 1.5pt solid; text-align: right"><font style="font-size: 10pt">(2,016</font></td>
<td><font style="font-size: 10pt">)</font></td></tr>
<tr style="vertical-align: bottom; background-color: white">
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td></tr>
<tr style="vertical-align: bottom; background-color: #CCEEFF">
<td><font style="font-size: 10pt">Accounts receivable, net</font></td>
<td> </td>
<td style="border-bottom: black 2.25pt double"><font style="font-size: 10pt">$</font></td>
<td style="border-bottom: black 2.25pt double; text-align: right"><font style="font-size: 10pt">5,353</font></td>
<td> </td>
<td> </td>
<td style="border-bottom: black 2.25pt double"><font style="font-size: 10pt">$</font></td>
<td style="border-bottom: black 2.25pt double; text-align: right"><font style="font-size: 10pt">7,171</font></td>
<td> </td></tr>
</table>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-indent: 0.5in">  <b> </b></p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0"><b></b></p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-indent: 33pt"> Inventories consisted of the following:</p>
<table cellspacing="0" cellpadding="0" style="font: 10pt Times New Roman, Times, Serif; width: 100%">
<tr style="vertical-align: bottom">
<td> </td>
<td> </td>
<td colspan="2" style="border-bottom: black 1.5pt solid">
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: center"><b>June 30,</b></p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: center"><b>2015</b></p></td>
<td> </td>
<td> </td>
<td colspan="2" style="border-bottom: black 1.5pt solid">
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: center"><b>December 31,</b></p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: center"><b>2014</b></p></td>
<td> </td></tr>
<tr style="vertical-align: bottom">
<td> </td>
<td> </td>
<td colspan="6" style="text-align: center"><font style="font-size: 10pt"><b>(Thousands)</b></font></td>
<td> </td></tr>
<tr style="vertical-align: bottom; background-color: #CCEEFF">
<td style="width: 78%"><font style="font-size: 10pt">Raw materials</font></td>
<td style="width: 1%"> </td>
<td style="width: 1%"><font style="font-size: 10pt">$</font></td>
<td style="width: 8%; text-align: right"><font style="font-size: 10pt">61</font></td>
<td style="width: 1%"> </td>
<td style="width: 1%"> </td>
<td style="width: 1%"><font style="font-size: 10pt">$</font></td>
<td style="width: 8%; text-align: right"><font style="font-size: 10pt">114</font></td>
<td style="width: 1%"> </td></tr>
<tr style="vertical-align: bottom; background-color: white">
<td><font style="font-size: 10pt">Finished goods</font></td>
<td> </td>
<td> </td>
<td style="text-align: right"><font style="font-size: 10pt">8,032</font></td>
<td> </td>
<td> </td>
<td> </td>
<td style="text-align: right"><font style="font-size: 10pt">7,796</font></td>
<td> </td></tr>
<tr style="vertical-align: bottom; background-color: #CCEEFF">
<td><font style="font-size: 10pt">Less allowance for excess and obsolete inventory</font></td>
<td> </td>
<td style="border-bottom: black 1.5pt solid"> </td>
<td style="border-bottom: black 1.5pt solid; text-align: right"><font style="font-size: 10pt">(143</font></td>
<td><font style="font-size: 10pt">)</font></td>
<td> </td>
<td style="border-bottom: black 1.5pt solid"> </td>
<td style="border-bottom: black 1.5pt solid; text-align: right"><font style="font-size: 10pt">(213</font></td>
<td><font style="font-size: 10pt">)</font></td></tr>
<tr style="vertical-align: bottom; background-color: white">
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td></tr>
<tr style="vertical-align: bottom; background-color: #CCEEFF">
<td><font style="font-size: 10pt">Inventories, net</font></td>
<td> </td>
<td style="border-bottom: black 2.25pt double"><font style="font-size: 10pt">$</font></td>
<td style="border-bottom: black 2.25pt double; text-align: right"><font style="font-size: 10pt">7,950</font></td>
<td> </td>
<td> </td>
<td style="border-bottom: black 2.25pt double"><font style="font-size: 10pt">$</font></td>
<td style="border-bottom: black 2.25pt double; text-align: right"><font style="font-size: 10pt">7,697</font></td>
<td> </td></tr>
</table>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0 0.1pt; text-indent: 0.5in"> </p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0"> </p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-indent: 33pt"> SPY North America has a Loan and Security
Agreement with BFI, originally dated February 26, 2007 and most recently modified on February 19, 2015 (the “<i>BFI Line
of Credit</i>”). The BFI Line of Credit has a maximum borrowing limit of $9.0 million, based on eligible accounts receivable
and inventory. As of June 30, 2015 and December 31, 2014, SPY North America had a maximum borrowing limit of $7.6 million and $8.0
million, respectively, of which $5.9 million and $6.8 million was borrowed, respectively, as of those dates. The BFI Line
of Credit renews annually in February for one additional year unless otherwise terminated by either SPY North America or BFI. The
Company had $1.7 million and $1.2 million in unused availability as of June 30, 2015 and December 31, 2014, respectively.</p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-indent: 0.5in"> </p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-indent: 33pt">Actual borrowing availability under the BFI Line
of Credit is based on eligible trade receivable and inventory levels of SPY North America. Actual borrowings are subject to the
following limitations at June 30, 2015: (i) up to 100% of United States and Canadian eligible accounts receivable or 65% of eligible
United States inventory, provided, however, such amount does not exceed the maximum inventory borrowing amount of $3.5 million,
(ii) advances against eligible foreign accounts receivable (excluding Canadian accounts receivable) up to $0.4 million, and (iii)
up to 80% of eligible dating programs.</p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0"> </p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-indent: 33pt">Borrowings under the BFI Line of Credit accrue
interest at a rate per annum equal to the prime rate, as reported in the Western Edition of The Wall Street Journal, plus 1.75%,
with a minimum monthly interest charge of $2,000. The interest rate was 5.0% per annum at June 30, 2015. The Company and SPY
North America granted BFI a security interest in substantially all of SPY North America’s assets, and substantially all of
the Company’s accounts receivable and inventories to secure BFI’s position under the BFI Line of Credit.  Additionally,
the obligations under the BFI Line of Credit are guaranteed by SPY Inc.</p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0"> </p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-indent: 33pt"> The BFI Line of Credit imposes certain
covenants on SPY North America, including, but not limited to, covenants requiring SPY North America to provide certain periodic
reports to BFI, to inform BFI of certain changes in the business, to refrain from incurring additional debt in excess of $100,000
and to refrain from paying dividends.  The BFI Line of Credit also contains cross default provisions. BFI may declare
SPY North America in default if SPY North America experiences a material adverse change in its business, financial condition, or
in its ability to perform the obligations owed under the BFI Line of Credit.  BFI’s prior consent, which BFI will
not unreasonably withhold, is required in the event that SPY North America seeks additional debt financing, including debt financing
subordinate to BFI.  SPY North America has also established bank accounts in BFI’s name in the United States and
Canada into which collections on accounts receivable and other collateral are deposited (the “<i>Collateral Accounts</i>”).  Pursuant
to the deposit control account agreements between BFI and SPY North America, BFI is entitled to sweep all amounts deposited into
the Collateral Accounts and apply the funds to outstanding obligations under the BFI Line of Credit; provided that BFI is required
to distribute to SPY North America any amounts remaining after payment of all amounts due under the BFI Line of Credit.  SPY
North America was in compliance with all covenants under the BFI Line of Credit at June 30, 2015.</p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-indent: 0.5in"> </p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0"><i>Costa Brava Term Note</i></p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-indent: 0.5in"> </p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-indent: 33pt">SPY North America issued a promissory note to
Costa Brava in the principal amount of $7.0 million (“<i>Costa Brava Term Note</i>”), which amount was outstanding
at each of June 30, 2015 and December 31, 2014 (excluding unpaid interest related to Costa Brava Term Note during the respective
periods, which was added to the principal balance rather than paid in cash (“<i>Accrued PIK Interest</i>”) of $2.1
million and unamortized debt premium of $0.1 million). During the six months ended June 30, 2015, approximately $0.3 million
of accrued interest was paid in cash.  In April 2014, the Costa Brava Term Note was amended to: (i) extend the maturity date
from April 1, 2015 to December 31, 2016, (ii) increase the amount Costa Brava may convert from $2,250,000 to $6,000,000 and reduce
the conversion price from $2.25 to $2.00, (iii) reduce the interest rate from 12% to 7%, and (iv) eliminate the facility fee, effective
July 1, 2014. Effective with this amendment, the Company no longer adds Accrued PIK Interest to the outstanding principal balance,
and is now required to make quarterly cash interest payments (See Note 11<i> “Related Party Transactions”</i>).
The Company paid a final facility fee of approximately $35,000, in June 2014, which was a pro-rata portion of the annual facility
fee. This amendment was accounted for as an extinguishment of debt, in accordance with authoritative guidance. In accordance with
the accounting treatment of extinguishment of debt, the Company recorded expense of approximately $155,000, which represents an
increase in the fair value of the Costa Brava Term Note compared to the carrying value of the Costa Brava Term Note prior
to the modification. The expense associated with the modification is reported in other income and expense and the debt premium
will be amortized to interest expense over the revised term of the Costa Brava Term Note. The Company also expensed approximately
$16,000 in capitalized debt fees related to the previous debt agreement during 2014. The Costa Brava Term Note is subordinate to
the BFI Line of Credit, pursuant to the terms of a debt subordination agreement between Costa Brava and BFI.</p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0"> </p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0"><i>Costa Brava Line of Credit</i></p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-indent: 0.5in"> </p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-indent: 33pt"> SPY North America has an additional $9.0
million line of credit from Costa Brava (“<i>Costa Brava Line of Credit</i>”) of which $8.5 million was outstanding
at June 30, 2015 and December 31, 2014 (excluding Accrued PIK Interest of $2.1 million). During the six months ended June
30, 2015, approximately $0.4 million of accrued interest was paid in cash.  In April 2014, the Costa Brava Line
of Credit was amended in to: (i) extend the maturity date from April 1, 2015 to December 31, 2016, (ii) reduce the interest rate
from 12% to 7%, and (iii) eliminate the facility fee, effective July 1, 2014. Effective with this amendment, the Company no longer
adds Accrued PIK Interest to the outstanding principal, and is now required to make quarterly cash interest payments.  This
amendment was accounted for as a modification of debt in accordance with authoritative guidance. The Costa Brava Line of Credit
is subordinate to BFI Line of Credit, pursuant to the terms of a debt subordination agreement between Costa Brava and BFI.</p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify; text-indent: 0.5in"> </p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify; text-indent: 0.5in"><font style="letter-spacing: 11pt">   </font>  
In addition, the Costa Brava Line of Credit, as amended, required SPY North America to pay a final facility fee in June, 2014 calculated
as the lesser of: (i) 1% of the average daily outstanding principal amount owed under the note (excluding Accrued PIK Interest)
for the 365 day period ending on such payment date or (ii) $90,000. The Company has no accrued expenses and other liabilities
related to facility fee as of June 30, 2015 and paid $85,000 for the required facility fee in June 2014.</p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-indent: 0.5in"><i> </i></p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0"><i>Costa Brava Loans</i></p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-indent: 0.5in"> </p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify; text-indent: 0.5in"><font style="letter-spacing: 11pt">   </font>  
As of June 30, 2015 and December 31, 2014, the Company had outstanding borrowings of $19.8 million (including $4.2 million Accrued
PIK Interest and $0.1 million unamortized debt premium) with Costa Brava.  The Costa Brava Term Note and Costa Brava
Line of Credit are pari passu with respect to the rights and preferences of the Harlingwood Notes (defined below).</p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0"> </p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0"><i>Harlingwood Convertible Debt</i></p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-indent: 0.5in"> </p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify; text-indent: 0.5in"><i>  </i><font style="letter-spacing: 11pt">   </font> In
2012, SPY North America entered into convertible note purchase agreements with Harlingwood under which SPY North America issued
two promissory notes to Harlingwood in the principal amounts of $1.0 million and $0.5 million (“<i>Harlingwood Notes</i>”).  Total
outstanding borrowings under the Harlingwood Notes at June 30, 2015 and December 31, 2014 were $1.5 million (excluding Accrued
PIK Interest of $0.2 million during the respective periods). During the six months ended June 30, 2015, approximately $0.1
million of accrued interest was paid in cash. The Harlingwood Notes were amended in April 2014 to extend the maturity date
from April 1, 2015 to December 31, 2016.  This amendment was accounted for as a modification of debt in accordance with
authoritative guidance.  The Harlingwood Notes are subordinate to the amounts owed by SPY North America under the BFI
Line of Credit, pursuant to the terms of a debt subordination agreement between Harlingwood and BFI. The Harlingwood Notes accrue
interest at the rate of 12% per annum.  </p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-indent: 0.5in"> </p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-indent: 33pt"> The $1.0 million promissory note requires
a facility fee equal to the lesser of $10,000 or 1% of the average daily outstanding principal amount due under the Harlingwood
Notes (without giving effect to the Accrued PIK Interest).   Facility fees are due in advance on the respective
anniversary date of the $1.0 million promissory note until maturity.  The $0.5 million promissory note has a facility
fee of $10,000. The Company paid $10,000 to Harlingwood in September 2014 and December 2014, respectively, related to facility
fees on the Harlingwood Notes.</p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-indent: 0.5in"> </p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-indent: 33pt"> The principal amount due under the Harlingwood
Notes (including Accrued PIK Interest) is convertible into shares of the Company’s common stock at $1.40 per share, subject
to adjustment for stock splits or stock dividends.  The Harlingwood Notes contain standard representations, warranties
and reporting requirements that are customary for financings of this type, and cross default provisions with respect to the Costa
Brava indebtedness.  SPY North America was in compliance with all covenants under the Harlingwood Notes at June 30, 2015. The
Harlingwood Notes are pari passu with the respect to the rights and preferences of the Costa Brava Term Note and Costa Brava Line
of Credit.  (See Note 11<i> “Related Party Transactions”</i>).</p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0"> </p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0"><i>Long-Term Debt</i></p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-indent: 0.5in"> </p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-indent: 33pt"> Notes payable at June 30, 2015 consist
of the following:</p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0"> </p>
<table cellspacing="0" cellpadding="0" style="font: 10pt Times New Roman, Times, Serif; width: 100%">
<tr style="vertical-align: bottom; background-color: white">
<td> </td>
<td> </td>
<td colspan="2" style="text-align: center"><font style="font-size: 10pt"><b>(Thousands)</b></font></td>
<td> </td></tr>
<tr style="vertical-align: bottom; background-color: #CCEEFF">
<td style="width: 89%"><font style="font-size: 10pt">Costa Brava Term Loan (subordinated debt), 7% interest rate with mandatory quarterly interest payments.</font></td>
<td style="width: 1%"> </td>
<td style="width: 1%"><font style="font-size: 10pt">$</font></td>
<td style="width: 8%; text-align: right"><font style="font-size: 10pt">9,224</font></td>
<td style="width: 1%"> </td></tr>
<tr style="vertical-align: bottom; background-color: white">
<td><font style="font-size: 10pt">Costa Brava Line of Credit, as amended (subordinated debt, of which up to $6.0 million is convertible into shares of common stock at a conversion price of $2.00 per share and includes $87,053 in unamortized debt premium), 7% interest rate with mandatory quarterly interest payments.</font></td>
<td> </td>
<td> </td>
<td style="text-align: right"><font style="font-size: 10pt">10,579</font></td>
<td> </td></tr>
<tr style="vertical-align: bottom; background-color: #CCEEFF">
<td><font style="font-size: 10pt">Harlingwood Notes (subordinated convertible debt, all of which is convertible into shares of common stock at a conversion price of $1.40 per share) 12% interest rate with discretionary Accrued PIK Interest.</font></td>
<td> </td>
<td> </td>
<td style="text-align: right"><font style="font-size: 10pt">1,736</font></td>
<td> </td></tr>
<tr style="vertical-align: bottom; background-color: white">
<td><font style="font-size: 10pt">Secured note payable for vehicle purchases, 4.69% interest rate with monthly payments of $1,402 due through December 2015, secured by vehicles.</font></td>
<td> </td>
<td> </td>
<td style="text-align: right"><font style="font-size: 10pt">8</font></td>
<td> </td></tr>
<tr style="vertical-align: bottom; background-color: #CCEEFF">
<td><font style="font-size: 10pt">Secured note payable for a vehicle purchase, 11.33% interest rate with monthly payments of $1,769 due through March 2020, secured by vehicle.</font></td>
<td> </td>
<td style="border-bottom: black 1.5pt solid"> </td>
<td style="border-bottom: black 1.5pt solid; text-align: right"><font style="font-size: 10pt">78</font></td>
<td> </td></tr>
<tr style="vertical-align: bottom; background-color: white">
<td><font style="font-size: 10pt">Subtotal</font></td>
<td> </td>
<td style="border-bottom: black 1.5pt solid"> </td>
<td style="border-bottom: black 1.5pt solid; text-align: right"><font style="font-size: 10pt">21,625</font></td>
<td> </td></tr>
<tr style="vertical-align: bottom; background-color: #CCEEFF">
<td><font style="font-size: 10pt">Less current portion</font></td>
<td> </td>
<td style="border-bottom: black 1.5pt solid"> </td>
<td style="border-bottom: black 1.5pt solid; text-align: right"><font style="font-size: 10pt">(28</font></td>
<td><font style="font-size: 10pt">)</font></td></tr>
<tr style="vertical-align: bottom; background-color: white">
<td><font style="font-size: 10pt">Notes payable, less current portion</font></td>
<td> </td>
<td style="border-bottom: black 2.25pt double"><font style="font-size: 10pt">$</font></td>
<td style="border-bottom: black 2.25pt double; text-align: right"><font style="font-size: 10pt">21,597</font></td>
<td> </td></tr>
</table>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0 0.1pt; text-indent: 0.5in"> </p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-indent: 33pt"> The current Financial Accounting Standards
Board guidance provides a fair value hierarchy that prioritizes the inputs to valuation techniques used to measure fair value.
The hierarchy gives the highest priority to unadjusted quoted prices in active markets for identical instruments (Level 1) and
the lowest priority to unobservable inputs (Level 3). The three levels of the fair value hierarchy are described below:</p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-indent: 0.5in"> </p>
<table cellspacing="0" cellpadding="0" style="width: 100%">
<tr style="vertical-align: top">
<td style="width: 6%; font: 10pt Times New Roman, Times, Serif; text-align: center"><font style="font-size: 10pt">●</font></td>
<td style="width: 94%; font: 10pt Times New Roman, Times, Serif"><font style="font-size: 10pt">Level 1 inputs use quoted prices in active markets for identical instruments.</font></td></tr>
</table>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0"> </p>
<table cellspacing="0" cellpadding="0" style="width: 100%">
<tr style="vertical-align: top">
<td style="width: 6%; font: 10pt Times New Roman, Times, Serif; text-align: center"><font style="font-size: 10pt">●</font></td>
<td style="width: 94%; font: 10pt Times New Roman, Times, Serif"><font style="font-size: 10pt">Level 2 inputs use other inputs that are observable, either directly or indirectly. These Level 2 inputs include quoted prices for similar instruments in active markets, and other inputs such as interest rates and yield curves that are observable at commonly quoted intervals.</font></td></tr>
</table>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-indent: 0.5in"> </p>
<table cellspacing="0" cellpadding="0" style="width: 100%">
<tr style="vertical-align: top">
<td style="width: 6%; font: 10pt Times New Roman, Times, Serif; text-align: center"><font style="font-size: 10pt">●</font></td>
<td style="width: 94%; font: 10pt Times New Roman, Times, Serif"><font style="font-size: 10pt">Level 3 inputs are unobservable inputs, including inputs that are available in situations where there is little, if any, market activity for the related instrument.</font></td></tr>
</table>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-indent: 0.5in"> </p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-indent: 33pt">The Company’s financial instruments include
cash, accounts receivable and payable, short-term borrowings, accrued liabilities, other short-term liabilities, capital leases,
notes payable, and related party notes payable.  The carrying amount of these instruments approximates fair value because
of their short-term nature. The carrying value of the Company’s long term related party notes payable approximates fair value
as of June 30, 2015.</p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-indent: 0.5in"> </p>
<table cellspacing="0" cellpadding="0" style="font: 10pt Times New Roman, Times, Serif; width: 100%">
<tr style="vertical-align: bottom">
<td><font style="font-size: 10pt"><i>Stock Option Activity</i></font></td>
<td style="border-bottom: black 1.5pt solid; text-align: center"><font style="font-size: 10pt"><b>Shares</b></font></td>
<td> </td>
<td colspan="2" style="border-bottom: black 1.5pt solid">
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: center"><b>Weighted-</b></p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: center"><b>Average</b></p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: center"><b>Exercise </b></p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: center"><b>Price</b></p></td>
<td> </td>
<td colspan="2" style="border-bottom: black 1.5pt solid">
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: center"><b>Weighted-</b></p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: center"><b>Average</b></p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: center"><b>Remaining</b></p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: center"><b>Contractual</b></p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: center"><b>Term</b></p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: center"><b>(years)</b></p></td>
<td> </td>
<td colspan="2" style="border-bottom: black 1.5pt solid">
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: center"><b>Aggregate</b></p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: center"><b>Intrinsic </b></p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: center"><b>Value</b></p></td>
<td> </td></tr>
<tr style="vertical-align: bottom">
<td> </td>
<td> </td>
<td> </td>
<td colspan="2"> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td colspan="2" style="text-align: center"><font style="font-size: 10pt"><b>(Thousands)</b></font></td>
<td> </td></tr>
<tr style="vertical-align: bottom; background-color: #CCEEFF">
<td style="width: 59%"><font style="font-size: 10pt">Options outstanding at December 31, 2014</font></td>
<td style="width: 10%; text-align: right"><font style="font-size: 10pt">3,139,168</font></td>
<td style="width: 1%"> </td>
<td style="width: 1%"><font style="font-size: 10pt">$</font></td>
<td style="width: 8%; text-align: right"><font style="font-size: 10pt">1.56</font></td>
<td style="width: 1%"> </td>
<td style="width: 1%"> </td>
<td style="width: 8%; text-align: right"><font style="font-size: 10pt"> 7.13</font></td>
<td style="width: 1%"> </td>
<td style="width: 1%"><font style="font-size: 10pt">$</font></td>
<td style="width: 8%; text-align: right"><font style="font-size: 10pt">  3</font></td>
<td style="width: 1%"> </td></tr>
<tr style="vertical-align: bottom; background-color: white">
<td><font style="font-size: 10pt">Granted</font></td>
<td style="text-align: right"><font style="font-size: 10pt">190,000</font></td>
<td> </td>
<td> </td>
<td style="text-align: right"><font style="font-size: 10pt">0.78</font></td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td></tr>
<tr style="vertical-align: bottom; background-color: #CCEEFF">
<td><font style="font-size: 10pt">Exercised</font></td>
<td style="text-align: right"><font style="font-size: 10pt">—</font></td>
<td> </td>
<td> </td>
<td style="text-align: right"><font style="font-size: 10pt">—</font></td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td></tr>
<tr style="vertical-align: bottom; background-color: white">
<td><font style="font-size: 10pt">Expired</font></td>
<td style="text-align: right"><font style="font-size: 10pt">(65,002</font></td>
<td><font style="font-size: 10pt">)</font></td>
<td> </td>
<td style="text-align: right"><font style="font-size: 10pt">2.56</font></td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td></tr>
<tr style="vertical-align: bottom; background-color: #CCEEFF">
<td><font style="font-size: 10pt">Forfeited</font></td>
<td style="border-bottom: black 1.5pt solid; text-align: right"><font style="font-size: 10pt">(16,666</font></td>
<td><font style="font-size: 10pt">)</font></td>
<td> </td>
<td style="text-align: right"><font style="font-size: 10pt">0.87</font></td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td></tr>
<tr style="vertical-align: bottom; background-color: white">
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td></tr>
<tr style="vertical-align: bottom; background-color: #CCEEFF">
<td><font style="font-size: 10pt">Options outstanding at June 30, 2015</font></td>
<td style="border-bottom: black 2.25pt double; text-align: right"><font style="font-size: 10pt">3,247,500</font></td>
<td> </td>
<td style="border-bottom: black 2.25pt double"> </td>
<td style="border-bottom: black 2.25pt double; text-align: right"><font style="font-size: 10pt">1.50</font></td>
<td> </td>
<td style="border-bottom: black 2.25pt double"> </td>
<td style="border-bottom: black 2.25pt double; text-align: right"><font style="font-size: 10pt">6.90</font></td>
<td> </td>
<td style="border-bottom: black 2.25pt double"> </td>
<td style="border-bottom: black 2.25pt double; text-align: right"><font style="font-size: 10pt">10</font></td>
<td> </td></tr>
<tr style="vertical-align: bottom; background-color: white">
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td></tr>
<tr style="vertical-align: bottom; background-color: #CCEEFF">
<td><font style="font-size: 10pt">Options exercisable at June 30, 2015</font></td>
<td style="border-bottom: black 2.25pt double; text-align: right"><font style="font-size: 10pt">2,345,845</font></td>
<td> </td>
<td style="border-bottom: black 2.25pt double"> </td>
<td style="border-bottom: black 2.25pt double; text-align: right"><font style="font-size: 10pt">1.66</font></td>
<td> </td>
<td style="border-bottom: black 2.25pt double"> </td>
<td style="border-bottom: black 2.25pt double; text-align: right"><font style="font-size: 10pt">6.18</font></td>
<td> </td>
<td style="border-bottom: black 2.25pt double"> </td>
<td style="border-bottom: black 2.25pt double; text-align: right"><font style="font-size: 10pt">2</font></td>
<td> </td></tr>
</table>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-indent: 0.5in"> </p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-indent: 33pt"> Intrinsic value is defined as the difference
between the relevant current market value of the Company’s common stock and the grant price for options with exercise prices
less than the market values on such dates.  During the three and six months ended June 30, 2015, there were no stock
options exercised. During the three and six months ended June 30, 2014, there were 13,128 and 133,128 stock options exercised
respectively, resulting in cash proceeds to the Company of $11,815 and $109,415 respectively.</p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-indent: 0.5in">  </p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-indent: 33pt"> The weighted-average estimated fair value
of employee stock options granted during the six months ended June 30, 2015 and 2014 was $0.49 and $0.74, respectively.</p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-indent: 0.5in"><i> </i></p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0"><i>Restricted Stock Award Activity</i></p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-indent: 0.5in"> </p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-indent: 33pt"> The Company periodically issues restricted
stock awards to certain directors and key employees, subject to certain vesting requirements based on future service.  Fair
value is calculated using the Black-Scholes option-pricing valuation model (single option approach).  There were no restricted
stock awards issued during the six months ended June 30, 2015. However, the Company awarded 38,751 fully vested, non-restricted
shares at a $0.77 weighted-average grant date fair value during the six months ended June 30, 2015.  These shares were
issued to certain members of the Company’s board of directors in lieu of cash payment for quarterly board fees.  The
expense related to these shares was $30,000 during the six months ended June 30, 2015, and was recorded in general and administrative
expense.</p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0"> </p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-indent: 33pt"> The Company recognized the following share-based
compensation expense during the three and six months ended June 30, 2015 and 2014:</p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-indent: 33pt"> </p>
<table cellspacing="0" cellpadding="0" style="font: 10pt Times New Roman, Times, Serif; width: 100%">
<tr style="vertical-align: bottom">
<td> </td>
<td> </td>
<td colspan="6" style="border-bottom: black 1.5pt solid">
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: center"><b>Three Months Ended</b></p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: center"><b>June 30,</b></p></td>
<td> </td>
<td> </td>
<td colspan="6" style="border-bottom: black 1.5pt solid">
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: center"><b>Six Months Ended</b></p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: center"><b>June 30,</b></p></td>
<td> </td></tr>
<tr style="vertical-align: bottom">
<td> </td>
<td> </td>
<td colspan="2" style="border-bottom: black 1.5pt solid; text-align: center"><font style="font-size: 10pt"><b>2015</b></font></td>
<td> </td>
<td> </td>
<td colspan="2" style="border-bottom: black 1.5pt solid; text-align: center"><font style="font-size: 10pt"><b>2014</b></font></td>
<td> </td>
<td> </td>
<td colspan="2" style="border-bottom: black 1.5pt solid; text-align: center"><font style="font-size: 10pt"><b>2015</b></font></td>
<td> </td>
<td> </td>
<td colspan="2" style="border-bottom: black 1.5pt solid; text-align: center"><font style="font-size: 10pt"><b>2014</b></font></td>
<td> </td></tr>
<tr style="vertical-align: bottom">
<td> </td>
<td> </td>
<td colspan="6" style="text-align: center"><font style="font-size: 10pt"><b>(Thousands)</b></font></td>
<td> </td>
<td> </td>
<td colspan="6" style="text-align: center"><font style="font-size: 10pt"><b>(Thousands)</b></font></td>
<td> </td></tr>
<tr style="vertical-align: bottom">
<td style="width: 52%"><font style="font-size: 10pt"><b>Stock options</b></font></td>
<td style="width: 1%"> </td>
<td style="width: 1%"> </td>
<td style="width: 9%"> </td>
<td style="width: 1%"> </td>
<td style="width: 1%"> </td>
<td style="width: 1%"> </td>
<td style="width: 9%"> </td>
<td style="width: 1%"> </td>
<td style="width: 1%"> </td>
<td style="width: 1%"> </td>
<td style="width: 9%"> </td>
<td style="width: 1%"> </td>
<td style="width: 1%"> </td>
<td style="width: 1%"> </td>
<td style="width: 9%"> </td>
<td style="width: 1%"> </td></tr>
<tr style="vertical-align: bottom; background-color: #CCEEFF">
<td><font style="font-size: 10pt">General and administrative expense</font></td>
<td> </td>
<td><font style="font-size: 10pt">$</font></td>
<td style="text-align: right"><font style="font-size: 10pt">57</font></td>
<td> </td>
<td> </td>
<td><font style="font-size: 10pt">$</font></td>
<td style="text-align: right"><font style="font-size: 10pt">118</font></td>
<td> </td>
<td> </td>
<td><font style="font-size: 10pt">$</font></td>
<td style="text-align: right"><font style="font-size: 10pt">117</font></td>
<td> </td>
<td> </td>
<td><font style="font-size: 10pt">$</font></td>
<td style="text-align: right"><font style="font-size: 10pt">217</font></td>
<td> </td></tr>
<tr style="vertical-align: bottom; background-color: white">
<td><font style="font-size: 10pt">Cost of sales</font></td>
<td> </td>
<td> </td>
<td style="text-align: right"><font style="font-size: 10pt">1</font></td>
<td> </td>
<td> </td>
<td> </td>
<td style="text-align: right"><font style="font-size: 10pt">3</font></td>
<td> </td>
<td> </td>
<td> </td>
<td style="text-align: right"><font style="font-size: 10pt">1</font></td>
<td> </td>
<td> </td>
<td> </td>
<td style="text-align: right"><font style="font-size: 10pt">8</font></td>
<td> </td></tr>
<tr style="vertical-align: bottom; background-color: #CCEEFF">
<td><font style="font-size: 10pt">Selling and marketing</font></td>
<td> </td>
<td> </td>
<td style="text-align: right"><font style="font-size: 10pt">24</font></td>
<td> </td>
<td> </td>
<td> </td>
<td style="text-align: right"><font style="font-size: 10pt">29</font></td>
<td> </td>
<td> </td>
<td> </td>
<td style="text-align: right"><font style="font-size: 10pt">51</font></td>
<td> </td>
<td> </td>
<td> </td>
<td style="text-align: right"><font style="font-size: 10pt">62</font></td>
<td> </td></tr>
<tr style="vertical-align: bottom; background-color: white">
<td><font style="font-size: 10pt">Shipping and warehouse</font></td>
<td> </td>
<td> </td>
<td style="text-align: right"><font style="font-size: 10pt">—</font></td>
<td> </td>
<td> </td>
<td> </td>
<td style="text-align: right"><font style="font-size: 10pt">—</font></td>
<td> </td>
<td> </td>
<td> </td>
<td style="text-align: right"><font style="font-size: 10pt">—</font></td>
<td> </td>
<td> </td>
<td> </td>
<td style="text-align: right"><font style="font-size: 10pt">1</font></td>
<td> </td></tr>
<tr style="vertical-align: bottom; background-color: #CCEEFF">
<td><font style="font-size: 10pt">Research and development</font></td>
<td> </td>
<td style="border-bottom: black 1.5pt solid"> </td>
<td style="border-bottom: black 1.5pt solid; text-align: right"><font style="font-size: 10pt">2</font></td>
<td> </td>
<td> </td>
<td style="border-bottom: black 1.5pt solid"> </td>
<td style="border-bottom: black 1.5pt solid; text-align: right"><font style="font-size: 10pt">3</font></td>
<td> </td>
<td> </td>
<td style="border-bottom: black 1.5pt solid"> </td>
<td style="border-bottom: black 1.5pt solid; text-align: right"><font style="font-size: 10pt">3</font></td>
<td> </td>
<td> </td>
<td style="border-bottom: black 1.5pt solid"> </td>
<td style="border-bottom: black 1.5pt solid; text-align: right"><font style="font-size: 10pt">6</font></td>
<td> </td></tr>
<tr style="vertical-align: bottom; background-color: white">
<td><font style="font-size: 10pt">Total share-based compensation for stock options</font></td>
<td> </td>
<td> </td>
<td style="text-align: right"><font style="font-size: 10pt">84</font></td>
<td> </td>
<td> </td>
<td> </td>
<td style="text-align: right"><font style="font-size: 10pt">153</font></td>
<td> </td>
<td> </td>
<td> </td>
<td style="text-align: right"><font style="font-size: 10pt">172</font></td>
<td> </td>
<td> </td>
<td> </td>
<td style="text-align: right"><font style="font-size: 10pt">294</font></td>
<td> </td></tr>
<tr style="vertical-align: bottom; background-color: #CCEEFF">
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td></tr>
<tr style="vertical-align: bottom; background-color: white">
<td><font style="font-size: 10pt"><b>Restricted stock</b></font></td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td></tr>
<tr style="vertical-align: bottom; background-color: #CCEEFF">
<td><font style="font-size: 10pt">General and administrative expense (Board of Directors fees in lieu of cash payments)</font></td>
<td> </td>
<td style="border-bottom: black 1.5pt solid"> </td>
<td style="border-bottom: black 1.5pt solid; text-align: right"><font style="font-size: 10pt">15</font></td>
<td> </td>
<td> </td>
<td style="border-bottom: black 1.5pt solid"> </td>
<td style="border-bottom: black 1.5pt solid; text-align: right"><font style="font-size: 10pt">18</font></td>
<td> </td>
<td> </td>
<td style="border-bottom: black 1.5pt solid"> </td>
<td style="border-bottom: black 1.5pt solid">
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-indent: 0.5in"> </p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: right">30</p></td>
<td> </td>
<td> </td>
<td style="border-bottom: black 1.5pt solid"> </td>
<td style="border-bottom: black 1.5pt solid; text-align: right"><font style="font-size: 10pt">44</font></td>
<td> </td></tr>
<tr style="vertical-align: bottom; background-color: white">
<td><font style="font-size: 10pt">Total share-based compensation for restricted stock</font></td>
<td> </td>
<td style="border-bottom: black 1.5pt solid"> </td>
<td style="border-bottom: black 1.5pt solid; text-align: right"><font style="font-size: 10pt">15</font></td>
<td> </td>
<td> </td>
<td style="border-bottom: black 1.5pt solid"> </td>
<td style="border-bottom: black 1.5pt solid; text-align: right"><font style="font-size: 10pt">18</font></td>
<td> </td>
<td> </td>
<td style="border-bottom: black 1.5pt solid"> </td>
<td style="border-bottom: black 1.5pt solid; text-align: right"><font style="font-size: 10pt">30</font></td>
<td> </td>
<td> </td>
<td style="border-bottom: black 1.5pt solid"> </td>
<td style="border-bottom: black 1.5pt solid; text-align: right"><font style="font-size: 10pt">44</font></td>
<td> </td></tr>
<tr style="vertical-align: bottom; background-color: #CCEEFF">
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td></tr>
<tr style="vertical-align: bottom; background-color: white">
<td><font style="font-size: 10pt">Total Share-based compensation expense</font></td>
<td> </td>
<td style="border-bottom: black 2.25pt double"><font style="font-size: 10pt">$</font></td>
<td style="border-bottom: black 2.25pt double; text-align: right"><font style="font-size: 10pt">99</font></td>
<td> </td>
<td> </td>
<td style="border-bottom: black 2.25pt double"><font style="font-size: 10pt">$</font></td>
<td style="border-bottom: black 2.25pt double; text-align: right"><font style="font-size: 10pt">171</font></td>
<td> </td>
<td> </td>
<td style="border-bottom: black 2.25pt double"><font style="font-size: 10pt">$</font></td>
<td style="border-bottom: black 2.25pt double; text-align: right"><font style="font-size: 10pt">202</font></td>
<td> </td>
<td> </td>
<td style="border-bottom: black 2.25pt double"><font style="font-size: 10pt">$</font></td>
<td style="border-bottom: black 2.25pt double; text-align: right"><font style="font-size: 10pt">338</font></td>
<td> </td></tr>
</table>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-indent: 0.5in"> </p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-indent: 33pt"> Total unrecognized share-based compensation
expense for outstanding stock option awards at June 30, 2015 is approximately $0.4 million, which will be recognized over a weighted
average remaining life of 1.51 years.<b>  </b></p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-indent: 0.5in"></p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0"><i>Promissory Notes with Shareholder, Costa Brava</i></p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0"> </p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-indent: 33pt"> See Note 8 “<i>Long-Term Debt</i>”
to the Consolidated Financial Statements regarding promissory notes held by Costa Brava, an entity that owned, at June 30, 2015,
approximately 47.2%, or 56.9% on an as converted basis, of the Company’s common stock.  The Chairman of the Company’s
Board of Directors, Mr. Seth Hamot, is the President and sole member of Roark, Rearden & Hamot, LLC, which is the sole
general partner of Costa Brava. As of June 30, 2015, Mr. Hamot owns approximately 49.2% or 58.4% on a converted basis, of the Company’s
common stock.</p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-indent: 0.5in"> </p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-indent: 33pt"> As of June 30, 2015 and December 31, 2014,
the Company has outstanding borrowings of $19.8 million (including $4.2 million Accrued PIK Interest and $0.1 unamortized debt
premium), with Costa Brava.</p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0"> </p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0"><i>Convertible Notes with Shareholder, Harlingwood</i></p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0"> </p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-indent: 33pt"> See Note 8, “<i>Long-Term Debt</i>”
to the Consolidated Financial Statements regarding $1.5 million in total promissory notes held by Harlingwood, an entity that owned,
at June 30, 2015, approximately 5.3%, or 13.3% on an as converted basis, of the Company’s common stock.  Mr. Fir
Geenen, a member of the Company’s Board of Directors, manages Harlingwood.</p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-indent: 0.5in"> </p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-indent: 33pt"> The total outstanding borrowings under
all promissory notes issued by the Company to Harlingwood at June 30, 2015 and December 31, 2014 was $1.7 million (including $0.2
million Accrued PIK Interest), respectively.</p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0"> </p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0"></p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0"><i>Operating Leases</i></p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-indent: 0.5in"> </p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-indent: 33pt"> The Company’s corporate headquarters
totals 32,551 square feet and is located in Carlsbad, California.  Effective November 2010, the Company entered into
an amended lease for this facility with average monthly rent payments of approximately $29,000 per month.  In April 2013,
the Company amended this lease to (i) extend the expiration date to December 31, 2019, and (ii) give the Company the right to terminate
the lease commencing on April 1, 2015 with nine months notice.   </p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0"> </p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-indent: 33pt"> In April 2015, the Company delivered notice
of its intent to terminate the lease of its current corporate headquarters, and in May 2015, the Company entered into a five-year
lease agreement for its new corporate headquarters, which will occupy 47,056 square feet in Carlsbad, California. Monthly base
rent for the Company’s new corporate headquarter will be $48,334, which amount is subject to annual increases based on the
Company’s annual operating expenses. The Company anticipates taking occupancy of its new corporate headquarters in December
2015.</p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0"> </p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-indent: 33pt"> Effective August 2014, the Company entered
into a five-year lease agreement to rent approximately 1,200 square feet of office and retail space in Encinitas, California. Monthly
base rent is $5,700, subject to annual 3% increases.</p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-indent: 0.5in"> </p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-indent: 33pt"> The Company also leases an office space
totaling approximately 400 square feet in Vancouver, Canada at a monthly rate of CAD $1,230 (approximately $995 at June 30, 2015).  The
Company also leases certain computer equipment and vehicles.</p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0"> </p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-indent: 33pt"> Total rent expense was approximately $233,000
and $200,000 for the six months ended June 30, 2015 and 2014, respectively.</p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-indent: 0.5in"> </p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-indent: 33pt"> Future minimum rental payments required
under operating leases that have initial or remaining non-cancelable lease terms in excess of one year are as follows:</p>
<table cellspacing="0" cellpadding="0" style="font: 10pt Times New Roman, Times, Serif; width: 100%">
<tr style="vertical-align: bottom">
<td> </td>
<td> </td>
<td colspan="2" style="text-align: center"><font style="font-size: 10pt"><b>(Thousands)</b></font></td>
<td> </td></tr>
<tr style="vertical-align: bottom">
<td><font style="font-size: 10pt">Year Ending December 31,</font></td>
<td> </td>
<td colspan="2"> </td>
<td> </td></tr>
<tr style="vertical-align: bottom; background-color: #CCEEFF">
<td style="width: 89%"><font style="font-size: 10pt">2015</font></td>
<td style="width: 1%"> </td>
<td style="width: 1%"><font style="font-size: 10pt">$</font></td>
<td style="width: 8%; text-align: right"><font style="font-size: 10pt">257</font></td>
<td style="width: 1%"> </td></tr>
<tr style="vertical-align: bottom; background-color: white">
<td><font style="font-size: 10pt">2016</font></td>
<td> </td>
<td> </td>
<td style="text-align: right"><font style="font-size: 10pt">705</font></td>
<td> </td></tr>
<tr style="vertical-align: bottom; background-color: #CCEEFF">
<td><font style="font-size: 10pt">2017</font></td>
<td> </td>
<td> </td>
<td style="text-align: right"><font style="font-size: 10pt">703</font></td>
<td> </td></tr>
<tr style="vertical-align: bottom; background-color: white">
<td><font style="font-size: 10pt">2018</font></td>
<td> </td>
<td> </td>
<td style="text-align: right"><font style="font-size: 10pt">703</font></td>
<td> </td></tr>
<tr style="vertical-align: bottom; background-color: #CCEEFF">
<td><font style="font-size: 10pt">2019</font></td>
<td> </td>
<td> </td>
<td style="text-align: right"><font style="font-size: 10pt">674</font></td>
<td> </td></tr>
<tr style="vertical-align: bottom; background-color: white">
<td><font style="font-size: 10pt">Thereafter</font></td>
<td> </td>
<td style="border-bottom: black 1.5pt solid"> </td>
<td style="border-bottom: black 1.5pt solid; text-align: right"><font style="font-size: 10pt">588</font></td>
<td> </td></tr>
<tr style="vertical-align: bottom; background-color: #CCEEFF">
<td><font style="font-size: 10pt">Total</font></td>
<td> </td>
<td style="border-bottom: black 2.25pt double"><font style="font-size: 10pt">$</font></td>
<td style="border-bottom: black 2.25pt double; text-align: right"><font style="font-size: 10pt">3,630</font></td>
<td> </td></tr>
</table>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-indent: 0.5in"><i> </i></p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0"><i>Capital Leases</i></p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-indent: 0.5in"> </p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-indent: 33pt">  Future minimum lease payments under
capital leases at June 30, 2015 are as follows:<b>  </b></p>
<table cellspacing="0" cellpadding="0" style="font: 10pt Times New Roman, Times, Serif; width: 100%">
<tr style="vertical-align: bottom">
<td> </td>
<td> </td>
<td colspan="2" style="text-align: center"><font style="font-size: 10pt"><b>(Thousands)</b></font></td>
<td> </td></tr>
<tr style="vertical-align: bottom">
<td><font style="font-size: 10pt">Year Ending December 31,</font></td>
<td> </td>
<td colspan="2"> </td>
<td> </td></tr>
<tr style="vertical-align: bottom; background-color: #CCEEFF">
<td style="width: 89%"><font style="font-size: 10pt">2015</font></td>
<td style="width: 1%"> </td>
<td style="width: 1%"><font style="font-size: 10pt">$</font></td>
<td style="width: 8%; text-align: right"><font style="font-size: 10pt">19</font></td>
<td style="width: 1%"> </td></tr>
<tr style="vertical-align: bottom; background-color: white">
<td><font style="font-size: 10pt">2016</font></td>
<td> </td>
<td style="border-bottom: black 1.5pt solid"> </td>
<td style="border-bottom: black 1.5pt solid; text-align: right"><font style="font-size: 10pt">7</font></td>
<td> </td></tr>
<tr style="vertical-align: bottom; background-color: #CCEEFF">
<td><font style="font-size: 10pt">Total minimum lease payments</font></td>
<td> </td>
<td> </td>
<td style="text-align: right"><font style="font-size: 10pt">26</font></td>
<td> </td></tr>
<tr style="vertical-align: bottom; background-color: white">
<td><font style="font-size: 10pt">Amount representing interest</font></td>
<td> </td>
<td style="border-bottom: black 1.5pt solid"> </td>
<td style="border-bottom: black 1.5pt solid; text-align: right"><font style="font-size: 10pt">(1</font></td>
<td><font style="font-size: 10pt">)</font></td></tr>
<tr style="vertical-align: bottom; background-color: #CCEEFF">
<td><font style="font-size: 10pt">Present value of minimum lease payments</font></td>
<td> </td>
<td> </td>
<td style="text-align: right"><font style="font-size: 10pt">25</font></td>
<td> </td></tr>
<tr style="vertical-align: bottom; background-color: white">
<td><font style="font-size: 10pt">Less current portion</font></td>
<td> </td>
<td style="border-bottom: black 1.5pt solid"> </td>
<td style="border-bottom: black 1.5pt solid; text-align: right"><font style="font-size: 10pt">(25</font></td>
<td><font style="font-size: 10pt">)</font></td></tr>
<tr style="vertical-align: bottom; background-color: #CCEEFF">
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td></tr>
<tr style="vertical-align: bottom; background-color: white">
<td><font style="font-size: 10pt">Long-term portion</font></td>
<td> </td>
<td style="border-bottom: black 2.25pt double"><font style="font-size: 10pt">$</font></td>
<td style="border-bottom: black 2.25pt double; text-align: right"><font style="font-size: 10pt">—</font></td>
<td> </td></tr>
</table>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0"> </p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0"><i>Athlete Contracts</i></p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-indent: 0.5in"> </p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify; text-indent: 0.5in"><i>  </i><font style="letter-spacing: 11pt">   </font> At
June 30, 2015, the Company has entered into endorsement contracts with athletes to actively wear and endorse the Company’s
products.  These contracts are based on minimum annual payments totaling approximately $322,000, $374,000 and $19,000
in 2015, 2016, and 2017 respectively, and may include additional performance-based incentives and/or product-specific sales incentives.  At
June 30, 2015, the Company also had in process endorsement contracts with athletes to actively wear and endorse the Company’s
products, with minimum annual payments totaling approximately $14,000.</p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-indent: 0.5in"><i> </i></p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0"><i>Litigation</i></p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-indent: 0.5in"> </p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-indent: 33pt"> From time to time the Company may be party
to lawsuits in the ordinary course of business.  The Company is not currently a party to any material legal proceedings
that could have a material adverse impact on its financial position.</p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-indent: 33pt"> Operating segments are defined as components
of an enterprise about which separate financial information is available that is evaluated regularly by the Company’s management
in deciding how to allocate resources and in assessing performance.  The Company designs, produces and distributes sunglasses,
snow and motocross goggles, prescription frames, along with branded apparel and accessories for the action sports, snow sports
and lifestyle markets.</p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-indent: 0.5in"> </p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-indent: 33pt"> The Company markets its products in North
America and internationally.  Revenue is attributed to the location to which the product is shipped. Identifiable
assets are based on location of domicile:</p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0"> </p>
<table cellspacing="0" cellpadding="0" style="font: 10pt Times New Roman, Times, Serif; width: 100%">
<tr style="vertical-align: bottom">
<td> </td>
<td> </td>
<td colspan="2" style="border-bottom: black 1.5pt solid">
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: center"><b>U.S. and</b></p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: center"><b>Canada</b></p></td>
<td> </td>
<td> </td>
<td colspan="2" style="border-bottom: black 1.5pt solid">
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: center"><b>Europe,</b></p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: center"><b>Asia Pacific</b></p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: center"><b>and Latin</b></p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: center"><b>America</b></p></td>
<td> </td>
<td> </td>
<td colspan="2" style="border-bottom: black 1.5pt solid; text-align: center"><font style="font-size: 10pt"><b>Consolidated</b></font></td>
<td> </td></tr>
<tr style="vertical-align: bottom">
<td> </td>
<td> </td>
<td colspan="2" style="text-align: center"><font style="font-size: 10pt"><b>(Thousands)</b></font></td>
<td> </td>
<td> </td>
<td colspan="2" style="text-align: center"><font style="font-size: 10pt"><b>(Thousands)</b></font></td>
<td> </td>
<td> </td>
<td colspan="2" style="text-align: center"><font style="font-size: 10pt"><b>(Thousands)</b></font></td>
<td> </td></tr>
<tr style="vertical-align: bottom">
<td> </td>
<td colspan="11"> </td>
<td> </td></tr>
<tr style="vertical-align: bottom; background-color: #CCEEFF">
<td style="width: 67%"><font style="font-size: 10pt">Three Months Ended June 30, 2015 — Net sales</font></td>
<td style="width: 1%"> </td>
<td style="width: 1%"><font style="font-size: 10pt">$</font></td>
<td style="width: 8%; text-align: right"><font style="font-size: 10pt">6,912</font></td>
<td style="width: 1%"> </td>
<td style="width: 1%"> </td>
<td style="width: 1%"><font style="font-size: 10pt">$</font></td>
<td style="width: 8%; text-align: right"><font style="font-size: 10pt">1,210</font></td>
<td style="width: 1%"> </td>
<td style="width: 1%"> </td>
<td style="width: 1%"><font style="font-size: 10pt">$</font></td>
<td style="width: 8%; text-align: right"><font style="font-size: 10pt">8,122</font></td>
<td style="width: 1%"> </td></tr>
<tr style="vertical-align: bottom; background-color: white">
<td><font style="font-size: 10pt">Three Months Ended June 30, 2014 — Net sales</font></td>
<td> </td>
<td><font style="font-size: 10pt">$</font></td>
<td style="text-align: right"><font style="font-size: 10pt">7,027</font></td>
<td> </td>
<td> </td>
<td><font style="font-size: 10pt">$</font></td>
<td style="text-align: right"><font style="font-size: 10pt">1,156</font></td>
<td> </td>
<td> </td>
<td><font style="font-size: 10pt">$</font></td>
<td style="text-align: right"><font style="font-size: 10pt">8,183</font></td>
<td> </td></tr>
</table>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-indent: 0.5in"> </p>
<table cellspacing="0" cellpadding="0" style="font: 10pt Times New Roman, Times, Serif; width: 100%">
<tr style="vertical-align: bottom">
<td> </td>
<td> </td>
<td colspan="2" style="border-bottom: black 1.5pt solid">
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: center"><b>U.S. and</b></p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: center"><b>Canada</b></p></td>
<td> </td>
<td> </td>
<td colspan="2" style="border-bottom: black 1.5pt solid">
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: center"><b>Europe,</b></p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: center"><b>Asia Pacific</b></p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: center"><b>and Latin</b></p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: center"><b>America</b></p></td>
<td> </td>
<td> </td>
<td colspan="2" style="border-bottom: black 1.5pt solid; text-align: center"><font style="font-size: 10pt"><b>Consolidated</b></font></td>
<td> </td></tr>
<tr style="vertical-align: bottom">
<td> </td>
<td> </td>
<td colspan="2" style="text-align: center"><font style="font-size: 10pt"><b>(Thousands)</b></font></td>
<td> </td>
<td> </td>
<td colspan="2" style="text-align: center"><font style="font-size: 10pt"><b>(Thousands)</b></font></td>
<td> </td>
<td> </td>
<td colspan="2" style="text-align: center"><font style="font-size: 10pt"><b>(Thousands)</b></font></td>
<td> </td></tr>
<tr style="vertical-align: bottom">
<td> </td>
<td colspan="11"> </td>
<td> </td></tr>
<tr style="vertical-align: bottom; background-color: #CCEEFF">
<td style="width: 67%"><font style="font-size: 10pt">Six Months Ended June 30, 2015 — Net sales</font></td>
<td style="width: 1%"> </td>
<td style="width: 1%"><font style="font-size: 10pt">$</font></td>
<td style="width: 8%; text-align: right"><font style="font-size: 10pt">14,814</font></td>
<td style="width: 1%"> </td>
<td style="width: 1%"> </td>
<td style="width: 1%"><font style="font-size: 10pt">$</font></td>
<td style="width: 8%; text-align: right"><font style="font-size: 10pt">2,438</font></td>
<td style="width: 1%"> </td>
<td style="width: 1%"> </td>
<td style="width: 1%"><font style="font-size: 10pt">$</font></td>
<td style="width: 8%; text-align: right"><font style="font-size: 10pt">17,252</font></td>
<td style="width: 1%"> </td></tr>
<tr style="vertical-align: bottom; background-color: white">
<td><font style="font-size: 10pt">Six Months Ended June 30, 2014 — Net sales</font></td>
<td> </td>
<td><font style="font-size: 10pt">$</font></td>
<td style="text-align: right"><font style="font-size: 10pt">15,010</font></td>
<td> </td>
<td> </td>
<td><font style="font-size: 10pt">$</font></td>
<td style="text-align: right"><font style="font-size: 10pt">2,366</font></td>
<td> </td>
<td> </td>
<td><font style="font-size: 10pt">$</font></td>
<td style="text-align: right"><font style="font-size: 10pt">17,376</font></td>
<td> </td></tr>
</table>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0"> </p>
<table cellspacing="0" cellpadding="0" style="font: 10pt Times New Roman, Times, Serif; width: 100%">
<tr style="vertical-align: bottom">
<td> </td>
<td> </td>
<td colspan="2" style="border-bottom: black 1.5pt solid">
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: center"><b>June 30,</b></p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: center"><b>2015</b></p></td>
<td> </td>
<td> </td>
<td colspan="2" style="border-bottom: black 1.5pt solid">
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: center"><b>December 31,</b></p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: center"><b>2014</b></p></td>
<td> </td></tr>
<tr style="vertical-align: bottom">
<td> </td>
<td> </td>
<td colspan="6" style="text-align: center"><font style="font-size: 10pt"><b>(Thousands)</b></font></td>
<td> </td></tr>
<tr style="vertical-align: bottom">
<td><font style="font-size: 10pt">Tangible long-lived assets:</font></td>
<td> </td>
<td colspan="2"> </td>
<td> </td>
<td> </td>
<td colspan="2"> </td>
<td> </td></tr>
<tr style="vertical-align: bottom; background-color: #CCEEFF">
<td style="width: 78%"><font style="font-size: 10pt">U.S. and Canada</font></td>
<td style="width: 1%"> </td>
<td style="width: 1%"><font style="font-size: 10pt">$</font></td>
<td style="width: 8%; text-align: right"><font style="font-size: 10pt">676</font></td>
<td style="width: 1%"> </td>
<td style="width: 1%"> </td>
<td style="width: 1%"><font style="font-size: 10pt">$</font></td>
<td style="width: 8%; text-align: right"><font style="font-size: 10pt">509</font></td>
<td style="width: 1%"> </td></tr>
<tr style="vertical-align: bottom; background-color: white">
<td><font style="font-size: 10pt">Europe and Asia Pacific</font></td>
<td> </td>
<td style="border-bottom: black 1.5pt solid"> </td>
<td style="border-bottom: black 1.5pt solid; text-align: right"><font style="font-size: 10pt">—</font></td>
<td> </td>
<td> </td>
<td style="border-bottom: black 1.5pt solid"> </td>
<td style="border-bottom: black 1.5pt solid; text-align: right"><font style="font-size: 10pt">—</font></td>
<td> </td></tr>
<tr style="vertical-align: bottom; background-color: #CCEEFF">
<td><font style="font-size: 10pt">Total</font></td>
<td> </td>
<td style="border-bottom: black 2.25pt double"><font style="font-size: 10pt">$</font></td>
<td style="border-bottom: black 2.25pt double; text-align: right"><font style="font-size: 10pt">676</font></td>
<td> </td>
<td> </td>
<td style="border-bottom: black 2.25pt double"><font style="font-size: 10pt">$</font></td>
<td style="border-bottom: black 2.25pt double; text-align: right"><font style="font-size: 10pt">509</font></td>
<td> </td></tr>
</table>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-indent: 0.5in"> </p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0"> </p>
<table cellspacing="0" cellpadding="0" style="font: 10pt Times New Roman, Times, Serif; width: 100%">
<tr style="vertical-align: bottom">
<td> </td>
<td> </td>
<td colspan="2" style="border-bottom: black 1.5pt solid">
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: center"><b>U.S. and</b></p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: center"><b>Canada</b></p></td>
<td> </td>
<td> </td>
<td colspan="2" style="border-bottom: black 1.5pt solid">
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: center"><b>Europe,</b></p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: center"><b>Asia Pacific</b></p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: center"><b>and Latin</b></p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: center"><b>America</b></p></td>
<td> </td>
<td> </td>
<td colspan="2" style="border-bottom: black 1.5pt solid; text-align: center"><font style="font-size: 10pt"><b>Consolidated</b></font></td>
<td> </td></tr>
<tr style="vertical-align: bottom">
<td> </td>
<td> </td>
<td colspan="2" style="text-align: center"><font style="font-size: 10pt"><b>(Thousands)</b></font></td>
<td> </td>
<td> </td>
<td colspan="2" style="text-align: center"><font style="font-size: 10pt"><b>(Thousands)</b></font></td>
<td> </td>
<td> </td>
<td colspan="2" style="text-align: center"><font style="font-size: 10pt"><b>(Thousands)</b></font></td>
<td> </td></tr>
<tr style="vertical-align: bottom">
<td> </td>
<td colspan="11"> </td>
<td> </td></tr>
<tr style="vertical-align: bottom; background-color: #CCEEFF">
<td style="width: 67%"><font style="font-size: 10pt">Three Months Ended June 30, 2015 — Net sales</font></td>
<td style="width: 1%"> </td>
<td style="width: 1%"><font style="font-size: 10pt">$</font></td>
<td style="width: 8%; text-align: right"><font style="font-size: 10pt">6,912</font></td>
<td style="width: 1%"> </td>
<td style="width: 1%"> </td>
<td style="width: 1%"><font style="font-size: 10pt">$</font></td>
<td style="width: 8%; text-align: right"><font style="font-size: 10pt">1,210</font></td>
<td style="width: 1%"> </td>
<td style="width: 1%"> </td>
<td style="width: 1%"><font style="font-size: 10pt">$</font></td>
<td style="width: 8%; text-align: right"><font style="font-size: 10pt">8,122</font></td>
<td style="width: 1%"> </td></tr>
<tr style="vertical-align: bottom; background-color: white">
<td><font style="font-size: 10pt">Three Months Ended June 30, 2014 — Net sales</font></td>
<td> </td>
<td><font style="font-size: 10pt">$</font></td>
<td style="text-align: right"><font style="font-size: 10pt">7,027</font></td>
<td> </td>
<td> </td>
<td><font style="font-size: 10pt">$</font></td>
<td style="text-align: right"><font style="font-size: 10pt">1,156</font></td>
<td> </td>
<td> </td>
<td><font style="font-size: 10pt">$</font></td>
<td style="text-align: right"><font style="font-size: 10pt">8,183</font></td>
<td> </td></tr>
</table>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-indent: 0.5in"> </p>
<table cellspacing="0" cellpadding="0" style="font: 10pt Times New Roman, Times, Serif; width: 100%">
<tr style="vertical-align: bottom">
<td> </td>
<td> </td>
<td colspan="2" style="border-bottom: black 1.5pt solid">
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: center"><b>U.S. and</b></p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: center"><b>Canada</b></p></td>
<td> </td>
<td> </td>
<td colspan="2" style="border-bottom: black 1.5pt solid">
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: center"><b>Europe,</b></p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: center"><b>Asia Pacific</b></p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: center"><b>and Latin</b></p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: center"><b>America</b></p></td>
<td> </td>
<td> </td>
<td colspan="2" style="border-bottom: black 1.5pt solid; text-align: center"><font style="font-size: 10pt"><b>Consolidated</b></font></td>
<td> </td></tr>
<tr style="vertical-align: bottom">
<td> </td>
<td> </td>
<td colspan="2" style="text-align: center"><font style="font-size: 10pt"><b>(Thousands)</b></font></td>
<td> </td>
<td> </td>
<td colspan="2" style="text-align: center"><font style="font-size: 10pt"><b>(Thousands)</b></font></td>
<td> </td>
<td> </td>
<td colspan="2" style="text-align: center"><font style="font-size: 10pt"><b>(Thousands)</b></font></td>
<td> </td></tr>
<tr style="vertical-align: bottom">
<td> </td>
<td colspan="11"> </td>
<td> </td></tr>
<tr style="vertical-align: bottom; background-color: #CCEEFF">
<td style="width: 67%"><font style="font-size: 10pt">Six Months Ended June 30, 2015 — Net sales</font></td>
<td style="width: 1%"> </td>
<td style="width: 1%"><font style="font-size: 10pt">$</font></td>
<td style="width: 8%; text-align: right"><font style="font-size: 10pt">14,814</font></td>
<td style="width: 1%"> </td>
<td style="width: 1%"> </td>
<td style="width: 1%"><font style="font-size: 10pt">$</font></td>
<td style="width: 8%; text-align: right"><font style="font-size: 10pt">2,438</font></td>
<td style="width: 1%"> </td>
<td style="width: 1%"> </td>
<td style="width: 1%"><font style="font-size: 10pt">$</font></td>
<td style="width: 8%; text-align: right"><font style="font-size: 10pt">17,252</font></td>
<td style="width: 1%"> </td></tr>
<tr style="vertical-align: bottom; background-color: white">
<td><font style="font-size: 10pt">Six Months Ended June 30, 2014 — Net sales</font></td>
<td> </td>
<td><font style="font-size: 10pt">$</font></td>
<td style="text-align: right"><font style="font-size: 10pt">15,010</font></td>
<td> </td>
<td> </td>
<td><font style="font-size: 10pt">$</font></td>
<td style="text-align: right"><font style="font-size: 10pt">2,366</font></td>
<td> </td>
<td> </td>
<td><font style="font-size: 10pt">$</font></td>
<td style="text-align: right"><font style="font-size: 10pt">17,376</font></td>
<td> </td></tr>
</table>
<table cellspacing="0" cellpadding="0" style="font: 10pt Times New Roman, Times, Serif; width: 100%">
<tr style="vertical-align: bottom">
<td> </td>
<td> </td>
<td colspan="2" style="border-bottom: black 1.5pt solid">
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: center"><b>June 30,</b></p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: center"><b>2015</b></p></td>
<td> </td>
<td> </td>
<td colspan="2" style="border-bottom: black 1.5pt solid">
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: center"><b>December 31,</b></p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: center"><b>2014</b></p></td>
<td> </td></tr>
<tr style="vertical-align: bottom">
<td> </td>
<td> </td>
<td colspan="6" style="text-align: center"><font style="font-size: 10pt"><b>(Thousands)</b></font></td>
<td> </td></tr>
<tr style="vertical-align: bottom">
<td><font style="font-size: 10pt">Tangible long-lived assets:</font></td>
<td> </td>
<td colspan="2"> </td>
<td> </td>
<td> </td>
<td colspan="2"> </td>
<td> </td></tr>
<tr style="vertical-align: bottom; background-color: #CCEEFF">
<td style="width: 78%"><font style="font-size: 10pt">U.S. and Canada</font></td>
<td style="width: 1%"> </td>
<td style="width: 1%"><font style="font-size: 10pt">$</font></td>
<td style="width: 8%; text-align: right"><font style="font-size: 10pt">676</font></td>
<td style="width: 1%"> </td>
<td style="width: 1%"> </td>
<td style="width: 1%"><font style="font-size: 10pt">$</font></td>
<td style="width: 8%; text-align: right"><font style="font-size: 10pt">509</font></td>
<td style="width: 1%"> </td></tr>
<tr style="vertical-align: bottom; background-color: white">
<td><font style="font-size: 10pt">Europe and Asia Pacific</font></td>
<td> </td>
<td style="border-bottom: black 1.5pt solid"> </td>
<td style="border-bottom: black 1.5pt solid; text-align: right"><font style="font-size: 10pt">—</font></td>
<td> </td>
<td> </td>
<td style="border-bottom: black 1.5pt solid"> </td>
<td style="border-bottom: black 1.5pt solid; text-align: right"><font style="font-size: 10pt">—</font></td>
<td> </td></tr>
<tr style="vertical-align: bottom; background-color: #CCEEFF">
<td><font style="font-size: 10pt">Total</font></td>
<td> </td>
<td style="border-bottom: black 2.25pt double"><font style="font-size: 10pt">$</font></td>
<td style="border-bottom: black 2.25pt double; text-align: right"><font style="font-size: 10pt">676</font></td>
<td> </td>
<td> </td>
<td style="border-bottom: black 2.25pt double"><font style="font-size: 10pt">$</font></td>
<td style="border-bottom: black 2.25pt double; text-align: right"><font style="font-size: 10pt">509</font></td>
<td> </td></tr>
</table>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-indent: 33pt">  Future minimum lease payments under
capital leases at June 30, 2015 are as follows:<b>  </b></p>
<table cellspacing="0" cellpadding="0" style="font: 10pt Times New Roman, Times, Serif; width: 100%">
<tr style="vertical-align: bottom">
<td> </td>
<td> </td>
<td colspan="2" style="text-align: center"><font style="font-size: 10pt"><b>(Thousands)</b></font></td>
<td> </td></tr>
<tr style="vertical-align: bottom">
<td><font style="font-size: 10pt">Year Ending December 31,</font></td>
<td> </td>
<td colspan="2"> </td>
<td> </td></tr>
<tr style="vertical-align: bottom; background-color: #CCEEFF">
<td style="width: 89%"><font style="font-size: 10pt">2015</font></td>
<td style="width: 1%"> </td>
<td style="width: 1%"><font style="font-size: 10pt">$</font></td>
<td style="width: 8%; text-align: right"><font style="font-size: 10pt">19</font></td>
<td style="width: 1%"> </td></tr>
<tr style="vertical-align: bottom; background-color: white">
<td><font style="font-size: 10pt">2016</font></td>
<td> </td>
<td style="border-bottom: black 1.5pt solid"> </td>
<td style="border-bottom: black 1.5pt solid; text-align: right"><font style="font-size: 10pt">7</font></td>
<td> </td></tr>
<tr style="vertical-align: bottom; background-color: #CCEEFF">
<td><font style="font-size: 10pt">Total minimum lease payments</font></td>
<td> </td>
<td> </td>
<td style="text-align: right"><font style="font-size: 10pt">26</font></td>
<td> </td></tr>
<tr style="vertical-align: bottom; background-color: white">
<td><font style="font-size: 10pt">Amount representing interest</font></td>
<td> </td>
<td style="border-bottom: black 1.5pt solid"> </td>
<td style="border-bottom: black 1.5pt solid; text-align: right"><font style="font-size: 10pt">(1</font></td>
<td><font style="font-size: 10pt">)</font></td></tr>
<tr style="vertical-align: bottom; background-color: #CCEEFF">
<td><font style="font-size: 10pt">Present value of minimum lease payments</font></td>
<td> </td>
<td> </td>
<td style="text-align: right"><font style="font-size: 10pt">25</font></td>
<td> </td></tr>
<tr style="vertical-align: bottom; background-color: white">
<td><font style="font-size: 10pt">Less current portion</font></td>
<td> </td>
<td style="border-bottom: black 1.5pt solid"> </td>
<td style="border-bottom: black 1.5pt solid; text-align: right"><font style="font-size: 10pt">(25</font></td>
<td><font style="font-size: 10pt">)</font></td></tr>
<tr style="vertical-align: bottom; background-color: #CCEEFF">
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td></tr>
<tr style="vertical-align: bottom; background-color: white">
<td><font style="font-size: 10pt">Long-term portion</font></td>
<td> </td>
<td style="border-bottom: black 2.25pt double"><font style="font-size: 10pt">$</font></td>
<td style="border-bottom: black 2.25pt double; text-align: right"><font style="font-size: 10pt">—</font></td>
<td> </td></tr>
</table>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-indent: 33pt"> Future minimum rental payments required
under operating leases that have initial or remaining non-cancelable lease terms in excess of one year are as follows:</p>
<table cellspacing="0" cellpadding="0" style="font: 10pt Times New Roman, Times, Serif; width: 100%">
<tr style="vertical-align: bottom">
<td> </td>
<td> </td>
<td colspan="2" style="text-align: center"><font style="font-size: 10pt"><b>(Thousands)</b></font></td>
<td> </td></tr>
<tr style="vertical-align: bottom">
<td><font style="font-size: 10pt">Year Ending December 31,</font></td>
<td> </td>
<td colspan="2"> </td>
<td> </td></tr>
<tr style="vertical-align: bottom; background-color: #CCEEFF">
<td style="width: 89%"><font style="font-size: 10pt">2015</font></td>
<td style="width: 1%"> </td>
<td style="width: 1%"><font style="font-size: 10pt">$</font></td>
<td style="width: 8%; text-align: right"><font style="font-size: 10pt">257</font></td>
<td style="width: 1%"> </td></tr>
<tr style="vertical-align: bottom; background-color: white">
<td><font style="font-size: 10pt">2016</font></td>
<td> </td>
<td> </td>
<td style="text-align: right"><font style="font-size: 10pt">705</font></td>
<td> </td></tr>
<tr style="vertical-align: bottom; background-color: #CCEEFF">
<td><font style="font-size: 10pt">2017</font></td>
<td> </td>
<td> </td>
<td style="text-align: right"><font style="font-size: 10pt">703</font></td>
<td> </td></tr>
<tr style="vertical-align: bottom; background-color: white">
<td><font style="font-size: 10pt">2018</font></td>
<td> </td>
<td> </td>
<td style="text-align: right"><font style="font-size: 10pt">703</font></td>
<td> </td></tr>
<tr style="vertical-align: bottom; background-color: #CCEEFF">
<td><font style="font-size: 10pt">2019</font></td>
<td> </td>
<td> </td>
<td style="text-align: right"><font style="font-size: 10pt">674</font></td>
<td> </td></tr>
<tr style="vertical-align: bottom; background-color: white">
<td><font style="font-size: 10pt">Thereafter</font></td>
<td> </td>
<td style="border-bottom: black 1.5pt solid"> </td>
<td style="border-bottom: black 1.5pt solid; text-align: right"><font style="font-size: 10pt">588</font></td>
<td> </td></tr>
<tr style="vertical-align: bottom; background-color: #CCEEFF">
<td><font style="font-size: 10pt">Total</font></td>
<td> </td>
<td style="border-bottom: black 2.25pt double"><font style="font-size: 10pt">$</font></td>
<td style="border-bottom: black 2.25pt double; text-align: right"><font style="font-size: 10pt">3,630</font></td>
<td> </td></tr>
</table>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-indent: 0.5in"><i> </i></p>
<table cellspacing="0" cellpadding="0" style="font: 10pt Times New Roman, Times, Serif; width: 100%">
<tr style="vertical-align: bottom">
<td> </td>
<td> </td>
<td colspan="6" style="border-bottom: black 1.5pt solid">
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: center"><b>Three Months Ended</b></p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: center"><b>June 30,</b></p></td>
<td> </td>
<td> </td>
<td colspan="6" style="border-bottom: black 1.5pt solid">
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: center"><b>Six Months Ended</b></p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: center"><b>June 30,</b></p></td>
<td> </td></tr>
<tr style="vertical-align: bottom">
<td> </td>
<td> </td>
<td colspan="2" style="border-bottom: black 1.5pt solid; text-align: center"><font style="font-size: 10pt"><b>2015</b></font></td>
<td> </td>
<td> </td>
<td colspan="2" style="border-bottom: black 1.5pt solid; text-align: center"><font style="font-size: 10pt"><b>2014</b></font></td>
<td> </td>
<td> </td>
<td colspan="2" style="border-bottom: black 1.5pt solid; text-align: center"><font style="font-size: 10pt"><b>2015</b></font></td>
<td> </td>
<td> </td>
<td colspan="2" style="border-bottom: black 1.5pt solid; text-align: center"><font style="font-size: 10pt"><b>2014</b></font></td>
<td> </td></tr>
<tr style="vertical-align: bottom">
<td> </td>
<td> </td>
<td colspan="6" style="text-align: center"><font style="font-size: 10pt"><b>(Thousands)</b></font></td>
<td> </td>
<td> </td>
<td colspan="6" style="text-align: center"><font style="font-size: 10pt"><b>(Thousands)</b></font></td>
<td> </td></tr>
<tr style="vertical-align: bottom">
<td style="width: 52%"><font style="font-size: 10pt"><b>Stock options</b></font></td>
<td style="width: 1%"> </td>
<td style="width: 1%"> </td>
<td style="width: 9%"> </td>
<td style="width: 1%"> </td>
<td style="width: 1%"> </td>
<td style="width: 1%"> </td>
<td style="width: 9%"> </td>
<td style="width: 1%"> </td>
<td style="width: 1%"> </td>
<td style="width: 1%"> </td>
<td style="width: 9%"> </td>
<td style="width: 1%"> </td>
<td style="width: 1%"> </td>
<td style="width: 1%"> </td>
<td style="width: 9%"> </td>
<td style="width: 1%"> </td></tr>
<tr style="vertical-align: bottom; background-color: #CCEEFF">
<td><font style="font-size: 10pt">General and administrative expense</font></td>
<td> </td>
<td><font style="font-size: 10pt">$</font></td>
<td style="text-align: right"><font style="font-size: 10pt">57</font></td>
<td> </td>
<td> </td>
<td><font style="font-size: 10pt">$</font></td>
<td style="text-align: right"><font style="font-size: 10pt">118</font></td>
<td> </td>
<td> </td>
<td><font style="font-size: 10pt">$</font></td>
<td style="text-align: right"><font style="font-size: 10pt">117</font></td>
<td> </td>
<td> </td>
<td><font style="font-size: 10pt">$</font></td>
<td style="text-align: right"><font style="font-size: 10pt">217</font></td>
<td> </td></tr>
<tr style="vertical-align: bottom; background-color: white">
<td><font style="font-size: 10pt">Cost of sales</font></td>
<td> </td>
<td> </td>
<td style="text-align: right"><font style="font-size: 10pt">1</font></td>
<td> </td>
<td> </td>
<td> </td>
<td style="text-align: right"><font style="font-size: 10pt">3</font></td>
<td> </td>
<td> </td>
<td> </td>
<td style="text-align: right"><font style="font-size: 10pt">1</font></td>
<td> </td>
<td> </td>
<td> </td>
<td style="text-align: right"><font style="font-size: 10pt">8</font></td>
<td> </td></tr>
<tr style="vertical-align: bottom; background-color: #CCEEFF">
<td><font style="font-size: 10pt">Selling and marketing</font></td>
<td> </td>
<td> </td>
<td style="text-align: right"><font style="font-size: 10pt">24</font></td>
<td> </td>
<td> </td>
<td> </td>
<td style="text-align: right"><font style="font-size: 10pt">29</font></td>
<td> </td>
<td> </td>
<td> </td>
<td style="text-align: right"><font style="font-size: 10pt">51</font></td>
<td> </td>
<td> </td>
<td> </td>
<td style="text-align: right"><font style="font-size: 10pt">62</font></td>
<td> </td></tr>
<tr style="vertical-align: bottom; background-color: white">
<td><font style="font-size: 10pt">Shipping and warehouse</font></td>
<td> </td>
<td> </td>
<td style="text-align: right"><font style="font-size: 10pt">—</font></td>
<td> </td>
<td> </td>
<td> </td>
<td style="text-align: right"><font style="font-size: 10pt">—</font></td>
<td> </td>
<td> </td>
<td> </td>
<td style="text-align: right"><font style="font-size: 10pt">—</font></td>
<td> </td>
<td> </td>
<td> </td>
<td style="text-align: right"><font style="font-size: 10pt">1</font></td>
<td> </td></tr>
<tr style="vertical-align: bottom; background-color: #CCEEFF">
<td><font style="font-size: 10pt">Research and development</font></td>
<td> </td>
<td style="border-bottom: black 1.5pt solid"> </td>
<td style="border-bottom: black 1.5pt solid; text-align: right"><font style="font-size: 10pt">2</font></td>
<td> </td>
<td> </td>
<td style="border-bottom: black 1.5pt solid"> </td>
<td style="border-bottom: black 1.5pt solid; text-align: right"><font style="font-size: 10pt">3</font></td>
<td> </td>
<td> </td>
<td style="border-bottom: black 1.5pt solid"> </td>
<td style="border-bottom: black 1.5pt solid; text-align: right"><font style="font-size: 10pt">3</font></td>
<td> </td>
<td> </td>
<td style="border-bottom: black 1.5pt solid"> </td>
<td style="border-bottom: black 1.5pt solid; text-align: right"><font style="font-size: 10pt">6</font></td>
<td> </td></tr>
<tr style="vertical-align: bottom; background-color: white">
<td><font style="font-size: 10pt">Total share-based compensation for stock options</font></td>
<td> </td>
<td> </td>
<td style="text-align: right"><font style="font-size: 10pt">84</font></td>
<td> </td>
<td> </td>
<td> </td>
<td style="text-align: right"><font style="font-size: 10pt">153</font></td>
<td> </td>
<td> </td>
<td> </td>
<td style="text-align: right"><font style="font-size: 10pt">172</font></td>
<td> </td>
<td> </td>
<td> </td>
<td style="text-align: right"><font style="font-size: 10pt">294</font></td>
<td> </td></tr>
<tr style="vertical-align: bottom; background-color: #CCEEFF">
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td></tr>
<tr style="vertical-align: bottom; background-color: white">
<td><font style="font-size: 10pt"><b>Restricted stock</b></font></td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td></tr>
<tr style="vertical-align: bottom; background-color: #CCEEFF">
<td><font style="font-size: 10pt">General and administrative expense (Board of Directors fees in lieu of cash payments)</font></td>
<td> </td>
<td style="border-bottom: black 1.5pt solid"> </td>
<td style="border-bottom: black 1.5pt solid; text-align: right"><font style="font-size: 10pt">15</font></td>
<td> </td>
<td> </td>
<td style="border-bottom: black 1.5pt solid"> </td>
<td style="border-bottom: black 1.5pt solid; text-align: right"><font style="font-size: 10pt">18</font></td>
<td> </td>
<td> </td>
<td style="border-bottom: black 1.5pt solid"> </td>
<td style="border-bottom: black 1.5pt solid">
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-indent: 0.5in"> </p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: right">30</p></td>
<td> </td>
<td> </td>
<td style="border-bottom: black 1.5pt solid"> </td>
<td style="border-bottom: black 1.5pt solid; text-align: right"><font style="font-size: 10pt">44</font></td>
<td> </td></tr>
<tr style="vertical-align: bottom; background-color: white">
<td><font style="font-size: 10pt">Total share-based compensation for restricted stock</font></td>
<td> </td>
<td style="border-bottom: black 1.5pt solid"> </td>
<td style="border-bottom: black 1.5pt solid; text-align: right"><font style="font-size: 10pt">15</font></td>
<td> </td>
<td> </td>
<td style="border-bottom: black 1.5pt solid"> </td>
<td style="border-bottom: black 1.5pt solid; text-align: right"><font style="font-size: 10pt">18</font></td>
<td> </td>
<td> </td>
<td style="border-bottom: black 1.5pt solid"> </td>
<td style="border-bottom: black 1.5pt solid; text-align: right"><font style="font-size: 10pt">30</font></td>
<td> </td>
<td> </td>
<td style="border-bottom: black 1.5pt solid"> </td>
<td style="border-bottom: black 1.5pt solid; text-align: right"><font style="font-size: 10pt">44</font></td>
<td> </td></tr>
<tr style="vertical-align: bottom; background-color: #CCEEFF">
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td></tr>
<tr style="vertical-align: bottom; background-color: white">
<td><font style="font-size: 10pt">Total Share-based compensation expense</font></td>
<td> </td>
<td style="border-bottom: black 2.25pt double"><font style="font-size: 10pt">$</font></td>
<td style="border-bottom: black 2.25pt double; text-align: right"><font style="font-size: 10pt">99</font></td>
<td> </td>
<td> </td>
<td style="border-bottom: black 2.25pt double"><font style="font-size: 10pt">$</font></td>
<td style="border-bottom: black 2.25pt double; text-align: right"><font style="font-size: 10pt">171</font></td>
<td> </td>
<td> </td>
<td style="border-bottom: black 2.25pt double"><font style="font-size: 10pt">$</font></td>
<td style="border-bottom: black 2.25pt double; text-align: right"><font style="font-size: 10pt">202</font></td>
<td> </td>
<td> </td>
<td style="border-bottom: black 2.25pt double"><font style="font-size: 10pt">$</font></td>
<td style="border-bottom: black 2.25pt double; text-align: right"><font style="font-size: 10pt">338</font></td>
<td> </td></tr>
</table>
<table cellspacing="0" cellpadding="0" style="font: 10pt Times New Roman, Times, Serif; width: 100%">
<tr style="vertical-align: bottom">
<td><font style="font-size: 10pt"><i>Stock Option Activity</i></font></td>
<td style="border-bottom: black 1.5pt solid; text-align: center"><font style="font-size: 10pt"><b>Shares</b></font></td>
<td> </td>
<td colspan="2" style="border-bottom: black 1.5pt solid">
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: center"><b>Weighted-</b></p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: center"><b>Average</b></p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: center"><b>Exercise </b></p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: center"><b>Price</b></p></td>
<td> </td>
<td colspan="2" style="border-bottom: black 1.5pt solid">
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: center"><b>Weighted-</b></p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: center"><b>Average</b></p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: center"><b>Remaining</b></p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: center"><b>Contractual</b></p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: center"><b>Term</b></p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: center"><b>(years)</b></p></td>
<td> </td>
<td colspan="2" style="border-bottom: black 1.5pt solid">
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: center"><b>Aggregate</b></p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: center"><b>Intrinsic </b></p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: center"><b>Value</b></p></td>
<td> </td></tr>
<tr style="vertical-align: bottom">
<td> </td>
<td> </td>
<td> </td>
<td colspan="2"> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td colspan="2" style="text-align: center"><font style="font-size: 10pt"><b>(Thousands)</b></font></td>
<td> </td></tr>
<tr style="vertical-align: bottom; background-color: #CCEEFF">
<td style="width: 59%"><font style="font-size: 10pt">Options outstanding at December 31, 2014</font></td>
<td style="width: 10%; text-align: right"><font style="font-size: 10pt">3,139,168</font></td>
<td style="width: 1%"> </td>
<td style="width: 1%"><font style="font-size: 10pt">$</font></td>
<td style="width: 8%; text-align: right"><font style="font-size: 10pt">1.56</font></td>
<td style="width: 1%"> </td>
<td style="width: 1%"> </td>
<td style="width: 8%; text-align: right"><font style="font-size: 10pt"> 7.13</font></td>
<td style="width: 1%"> </td>
<td style="width: 1%"><font style="font-size: 10pt">$</font></td>
<td style="width: 8%; text-align: right"><font style="font-size: 10pt">  3</font></td>
<td style="width: 1%"> </td></tr>
<tr style="vertical-align: bottom; background-color: white">
<td><font style="font-size: 10pt">Granted</font></td>
<td style="text-align: right"><font style="font-size: 10pt">190,000</font></td>
<td> </td>
<td> </td>
<td style="text-align: right"><font style="font-size: 10pt">0.78</font></td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td></tr>
<tr style="vertical-align: bottom; background-color: #CCEEFF">
<td><font style="font-size: 10pt">Exercised</font></td>
<td style="text-align: right"><font style="font-size: 10pt">—</font></td>
<td> </td>
<td> </td>
<td style="text-align: right"><font style="font-size: 10pt">—</font></td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td></tr>
<tr style="vertical-align: bottom; background-color: white">
<td><font style="font-size: 10pt">Expired</font></td>
<td style="text-align: right"><font style="font-size: 10pt">(65,002</font></td>
<td><font style="font-size: 10pt">)</font></td>
<td> </td>
<td style="text-align: right"><font style="font-size: 10pt">2.56</font></td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td></tr>
<tr style="vertical-align: bottom; background-color: #CCEEFF">
<td><font style="font-size: 10pt">Forfeited</font></td>
<td style="border-bottom: black 1.5pt solid; text-align: right"><font style="font-size: 10pt">(16,666</font></td>
<td><font style="font-size: 10pt">)</font></td>
<td> </td>
<td style="text-align: right"><font style="font-size: 10pt">0.87</font></td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td></tr>
<tr style="vertical-align: bottom; background-color: white">
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td></tr>
<tr style="vertical-align: bottom; background-color: #CCEEFF">
<td><font style="font-size: 10pt">Options outstanding at June 30, 2015</font></td>
<td style="border-bottom: black 2.25pt double; text-align: right"><font style="font-size: 10pt">3,247,500</font></td>
<td> </td>
<td style="border-bottom: black 2.25pt double"> </td>
<td style="border-bottom: black 2.25pt double; text-align: right"><font style="font-size: 10pt">1.50</font></td>
<td> </td>
<td style="border-bottom: black 2.25pt double"> </td>
<td style="border-bottom: black 2.25pt double; text-align: right"><font style="font-size: 10pt">6.90</font></td>
<td> </td>
<td style="border-bottom: black 2.25pt double"> </td>
<td style="border-bottom: black 2.25pt double; text-align: right"><font style="font-size: 10pt">10</font></td>
<td> </td></tr>
<tr style="vertical-align: bottom; background-color: white">
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td></tr>
<tr style="vertical-align: bottom; background-color: #CCEEFF">
<td><font style="font-size: 10pt">Options exercisable at June 30, 2015</font></td>
<td style="border-bottom: black 2.25pt double; text-align: right"><font style="font-size: 10pt">2,345,845</font></td>
<td> </td>
<td style="border-bottom: black 2.25pt double"> </td>
<td style="border-bottom: black 2.25pt double; text-align: right"><font style="font-size: 10pt">1.66</font></td>
<td> </td>
<td style="border-bottom: black 2.25pt double"> </td>
<td style="border-bottom: black 2.25pt double; text-align: right"><font style="font-size: 10pt">6.18</font></td>
<td> </td>
<td style="border-bottom: black 2.25pt double"> </td>
<td style="border-bottom: black 2.25pt double; text-align: right"><font style="font-size: 10pt">2</font></td>
<td> </td></tr>
</table>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-indent: 33pt">Notes payable at June 30, 2015 consist of the
following:</p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0"> </p>
<table cellspacing="0" cellpadding="0" style="font: 10pt Times New Roman, Times, Serif; width: 100%">
<tr style="vertical-align: bottom; background-color: white">
<td> </td>
<td> </td>
<td colspan="2" style="text-align: center"><font style="font-size: 10pt"><b>(Thousands)</b></font></td>
<td> </td></tr>
<tr style="vertical-align: bottom; background-color: #CCEEFF">
<td style="width: 89%"><font style="font-size: 10pt">Costa Brava Term Loan (subordinated debt), 7% interest rate with mandatory quarterly interest payments.</font></td>
<td style="width: 1%"> </td>
<td style="width: 1%"><font style="font-size: 10pt">$</font></td>
<td style="width: 8%; text-align: right"><font style="font-size: 10pt">9,224</font></td>
<td style="width: 1%"> </td></tr>
<tr style="vertical-align: bottom; background-color: white">
<td><font style="font-size: 10pt">Costa Brava Line of Credit, as amended (subordinated debt, of which up to $6.0 million is convertible into shares of common stock at a conversion price of $2.00 per share and includes $87,053 in unamortized debt premium), 7% interest rate with mandatory quarterly interest payments.</font></td>
<td> </td>
<td> </td>
<td style="text-align: right"><font style="font-size: 10pt">10,579</font></td>
<td> </td></tr>
<tr style="vertical-align: bottom; background-color: #CCEEFF">
<td><font style="font-size: 10pt">Harlingwood Notes (subordinated convertible debt, all of which is convertible into shares of common stock at a conversion price of $1.40 per share) 12% interest rate with discretionary Accrued PIK Interest.</font></td>
<td> </td>
<td> </td>
<td style="text-align: right"><font style="font-size: 10pt">1,736</font></td>
<td> </td></tr>
<tr style="vertical-align: bottom; background-color: white">
<td><font style="font-size: 10pt">Secured note payable for vehicle purchases, 4.69% interest rate with monthly payments of $1,402 due through December 2015, secured by vehicles.</font></td>
<td> </td>
<td> </td>
<td style="text-align: right"><font style="font-size: 10pt">8</font></td>
<td> </td></tr>
<tr style="vertical-align: bottom; background-color: #CCEEFF">
<td><font style="font-size: 10pt">Secured note payable for a vehicle purchase, 11.33% interest rate with monthly payments of $1,769 due through March 2020, secured by vehicle.</font></td>
<td> </td>
<td style="border-bottom: black 1.5pt solid"> </td>
<td style="border-bottom: black 1.5pt solid; text-align: right"><font style="font-size: 10pt">78</font></td>
<td> </td></tr>
<tr style="vertical-align: bottom; background-color: white">
<td><font style="font-size: 10pt">Subtotal</font></td>
<td> </td>
<td style="border-bottom: black 1.5pt solid"> </td>
<td style="border-bottom: black 1.5pt solid; text-align: right"><font style="font-size: 10pt">21,625</font></td>
<td> </td></tr>
<tr style="vertical-align: bottom; background-color: #CCEEFF">
<td><font style="font-size: 10pt">Less current portion</font></td>
<td> </td>
<td style="border-bottom: black 1.5pt solid"> </td>
<td style="border-bottom: black 1.5pt solid; text-align: right"><font style="font-size: 10pt">(28</font></td>
<td><font style="font-size: 10pt">)</font></td></tr>
<tr style="vertical-align: bottom; background-color: white">
<td><font style="font-size: 10pt">Notes payable, less current portion</font></td>
<td> </td>
<td style="border-bottom: black 2.25pt double"><font style="font-size: 10pt">$</font></td>
<td style="border-bottom: black 2.25pt double; text-align: right"><font style="font-size: 10pt">21,597</font></td>
<td> </td></tr>
</table>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0 0.1pt; text-indent: 0.5in"> </p>
<table cellspacing="0" cellpadding="0" style="font: 10pt Times New Roman, Times, Serif; width: 100%">
<tr style="vertical-align: bottom">
<td> </td>
<td> </td>
<td colspan="2" style="border-bottom: black 1.5pt solid">
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: center"><b>June 30,</b></p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: center"><b>2015</b></p></td>
<td> </td>
<td> </td>
<td colspan="2" style="border-bottom: black 1.5pt solid">
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: center"><b>December 31,</b></p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: center"><b>2014</b></p></td>
<td> </td></tr>
<tr style="vertical-align: bottom">
<td> </td>
<td> </td>
<td colspan="6" style="text-align: center"><font style="font-size: 10pt"><b>(Thousands)</b></font></td>
<td> </td></tr>
<tr style="vertical-align: bottom; background-color: #CCEEFF">
<td style="width: 78%"><font style="font-size: 10pt">Raw materials</font></td>
<td style="width: 1%"> </td>
<td style="width: 1%"><font style="font-size: 10pt">$</font></td>
<td style="width: 8%; text-align: right"><font style="font-size: 10pt">61</font></td>
<td style="width: 1%"> </td>
<td style="width: 1%"> </td>
<td style="width: 1%"><font style="font-size: 10pt">$</font></td>
<td style="width: 8%; text-align: right"><font style="font-size: 10pt">114</font></td>
<td style="width: 1%"> </td></tr>
<tr style="vertical-align: bottom; background-color: white">
<td><font style="font-size: 10pt">Finished goods</font></td>
<td> </td>
<td> </td>
<td style="text-align: right"><font style="font-size: 10pt">8,032</font></td>
<td> </td>
<td> </td>
<td> </td>
<td style="text-align: right"><font style="font-size: 10pt">7,796</font></td>
<td> </td></tr>
<tr style="vertical-align: bottom; background-color: #CCEEFF">
<td><font style="font-size: 10pt">Less allowance for excess and obsolete inventory</font></td>
<td> </td>
<td style="border-bottom: black 1.5pt solid"> </td>
<td style="border-bottom: black 1.5pt solid; text-align: right"><font style="font-size: 10pt">(143</font></td>
<td><font style="font-size: 10pt">)</font></td>
<td> </td>
<td style="border-bottom: black 1.5pt solid"> </td>
<td style="border-bottom: black 1.5pt solid; text-align: right"><font style="font-size: 10pt">(213</font></td>
<td><font style="font-size: 10pt">)</font></td></tr>
<tr style="vertical-align: bottom; background-color: white">
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td></tr>
<tr style="vertical-align: bottom; background-color: #CCEEFF">
<td><font style="font-size: 10pt">Inventories, net</font></td>
<td> </td>
<td style="border-bottom: black 2.25pt double"><font style="font-size: 10pt">$</font></td>
<td style="border-bottom: black 2.25pt double; text-align: right"><font style="font-size: 10pt">7,950</font></td>
<td> </td>
<td> </td>
<td style="border-bottom: black 2.25pt double"><font style="font-size: 10pt">$</font></td>
<td style="border-bottom: black 2.25pt double; text-align: right"><font style="font-size: 10pt">7,697</font></td>
<td> </td></tr>
</table>
<table cellspacing="0" cellpadding="0" style="font: 10pt Times New Roman, Times, Serif; width: 100%">
<tr style="vertical-align: bottom">
<td> </td>
<td> </td>
<td colspan="2" style="border-bottom: black 1.5pt solid">
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: center"><b>June 30,</b></p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: center"><b>2015</b></p></td>
<td> </td>
<td> </td>
<td colspan="2" style="border-bottom: black 1.5pt solid">
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: center"><b>December 31,</b></p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: center"><b>2014</b></p></td>
<td> </td></tr>
<tr style="vertical-align: bottom">
<td> </td>
<td> </td>
<td colspan="6" style="text-align: center"><font style="font-size: 10pt"><b>(Thousands)</b></font></td>
<td> </td></tr>
<tr style="vertical-align: bottom; background-color: #CCEEFF">
<td style="width: 78%"><font style="font-size: 10pt">Trade receivables</font></td>
<td style="width: 1%"> </td>
<td style="width: 1%"><font style="font-size: 10pt">$</font></td>
<td style="width: 8%; text-align: right"><font style="font-size: 10pt">7,624</font></td>
<td style="width: 1%"> </td>
<td style="width: 1%"> </td>
<td style="width: 1%"><font style="font-size: 10pt">$</font></td>
<td style="width: 8%; text-align: right"><font style="font-size: 10pt">9,477</font></td>
<td style="width: 1%"> </td></tr>
<tr style="vertical-align: bottom; background-color: white">
<td><font style="font-size: 10pt">Less allowance for doubtful accounts</font></td>
<td> </td>
<td> </td>
<td style="text-align: right"><font style="font-size: 10pt">(268</font></td>
<td><font style="font-size: 10pt">)</font></td>
<td> </td>
<td> </td>
<td style="text-align: right"><font style="font-size: 10pt">(290</font></td>
<td><font style="font-size: 10pt">)</font></td></tr>
<tr style="vertical-align: bottom; background-color: #CCEEFF">
<td><font style="font-size: 10pt">Less allowance for returns</font></td>
<td> </td>
<td style="border-bottom: black 1.5pt solid"> </td>
<td style="border-bottom: black 1.5pt solid; text-align: right"><font style="font-size: 10pt">(2,003</font></td>
<td><font style="font-size: 10pt">)</font></td>
<td> </td>
<td style="border-bottom: black 1.5pt solid"> </td>
<td style="border-bottom: black 1.5pt solid; text-align: right"><font style="font-size: 10pt">(2,016</font></td>
<td><font style="font-size: 10pt">)</font></td></tr>
<tr style="vertical-align: bottom; background-color: white">
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td></tr>
<tr style="vertical-align: bottom; background-color: #CCEEFF">
<td><font style="font-size: 10pt">Accounts receivable, net</font></td>
<td> </td>
<td style="border-bottom: black 2.25pt double"><font style="font-size: 10pt">$</font></td>
<td style="border-bottom: black 2.25pt double; text-align: right"><font style="font-size: 10pt">5,353</font></td>
<td> </td>
<td> </td>
<td style="border-bottom: black 2.25pt double"><font style="font-size: 10pt">$</font></td>
<td style="border-bottom: black 2.25pt double; text-align: right"><font style="font-size: 10pt">7,171</font></td>
<td> </td></tr>
</table>
<table cellspacing="0" cellpadding="0" style="font: 10pt Times New Roman, Times, Serif; width: 100%">
<tr style="vertical-align: bottom">
<td> </td>
<td colspan="2" style="border-bottom: black 1.5pt solid">
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: center"><b>June 30,</b></p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: center"><b>2015</b></p></td>
<td> </td>
<td> </td>
<td colspan="2" style="border-bottom: black 1.5pt solid">
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: center"><b>December 31,</b></p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: center"><b>2014</b></p></td>
<td> </td></tr>
<tr style="vertical-align: bottom">
<td> </td>
<td colspan="6" style="text-align: center"><font style="font-size: 10pt"><b>(Thousands)</b></font></td>
<td> </td></tr>
<tr style="vertical-align: bottom; background-color: #CCEEFF">
<td style="width: 79%"><font style="font-size: 10pt">Equity adjustment from foreign currency translation</font></td>
<td style="width: 1%"><font style="font-size: 10pt">$</font></td>
<td style="width: 8%; text-align: right"><font style="font-size: 10pt">1,445</font></td>
<td style="width: 1%"> </td>
<td style="width: 1%"> </td>
<td style="width: 1%"><font style="font-size: 10pt">$</font></td>
<td style="width: 8%; text-align: right"><font style="font-size: 10pt">977</font></td>
<td style="width: 1%"> </td></tr>
<tr style="vertical-align: bottom; background-color: white">
<td><font style="font-size: 10pt">Unrealized loss on foreign currency exposure of net investment in foreign operations</font></td>
<td style="border-bottom: black 1.5pt solid"> </td>
<td style="border-bottom: black 1.5pt solid; text-align: right"><font style="font-size: 10pt">(1,036</font></td>
<td><font style="font-size: 10pt">)</font></td>
<td> </td>
<td style="border-bottom: black 1.5pt solid"> </td>
<td style="border-bottom: black 1.5pt solid; text-align: right"><font style="font-size: 10pt">(527</font></td>
<td><font style="font-size: 10pt">)</font></td></tr>
<tr style="vertical-align: bottom; background-color: #CCEEFF">
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td></tr>
<tr style="vertical-align: bottom; background-color: white">
<td><font style="font-size: 10pt">Accumulated other comprehensive income</font></td>
<td style="border-bottom: black 2.25pt double"><font style="font-size: 10pt">$</font></td>
<td style="border-bottom: black 2.25pt double; text-align: right"><font style="font-size: 10pt">409</font></td>
<td> </td>
<td> </td>
<td style="border-bottom: black 2.25pt double"><font style="font-size: 10pt">$</font></td>
<td style="border-bottom: black 2.25pt double; text-align: right"><font style="font-size: 10pt">450</font></td>
<td> </td></tr>
</table>
<table cellspacing="0" cellpadding="0" style="font: 10pt Times New Roman, Times, Serif; width: 100%">
<tr style="vertical-align: bottom">
<td style="padding-bottom: 1.5pt">
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-indent: 0.5in"> </p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-indent: 0.5in">  </p></td>
<td colspan="7" style="border-bottom: black 1.5pt solid">
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: center"><b>Three Months Ended</b></p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: center"><b>June 30,</b></p></td>
<td nowrap="nowrap"> </td>
<td> </td>
<td colspan="6" style="border-bottom: black 1.5pt solid">
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: center"><b>Six Months Ended</b></p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: center"><b>June 30,</b></p></td>
<td nowrap="nowrap"> </td></tr>
<tr style="vertical-align: bottom">
<td><font style="font-size: 10pt"><b>Shares Issuable through Exercise or Conversion of:</b></font></td>
<td colspan="3" style="border-bottom: black 1.5pt solid; text-align: center"><font style="font-size: 10pt"><b>2015</b></font></td>
<td nowrap="nowrap"> </td>
<td> </td>
<td colspan="2" style="border-bottom: black 1.5pt solid; text-align: center"><font style="font-size: 10pt"><b>2014</b></font></td>
<td nowrap="nowrap"> </td>
<td> </td>
<td colspan="2" style="border-bottom: black 1.5pt solid; text-align: center"><font style="font-size: 10pt"><b>2015</b></font></td>
<td nowrap="nowrap"> </td>
<td> </td>
<td colspan="2" style="border-bottom: black 1.5pt solid; text-align: center"><font style="font-size: 10pt"><b>2014</b></font></td>
<td nowrap="nowrap"> </td></tr>
<tr style="vertical-align: bottom">
<td> </td>
<td colspan="7" style="text-align: center"><font style="font-size: 10pt"><b>(Thousands)</b></font></td>
<td nowrap="nowrap"> </td>
<td> </td>
<td colspan="6" style="text-align: center"><font style="font-size: 10pt"><b>(Thousands)</b></font></td>
<td nowrap="nowrap"> </td></tr>
<tr style="vertical-align: bottom; background-color: #CCEEFF">
<td style="width: 52%"><font style="font-size: 10pt">Stock options</font></td>
<td style="width: 1%"> </td>
<td style="width: 1%"> </td>
<td style="width: 9%; text-align: right"><font style="font-size: 10pt">3,248</font></td>
<td nowrap="nowrap" style="width: 1%"> </td>
<td style="width: 1%"> </td>
<td style="width: 1%"> </td>
<td style="width: 9%; text-align: right"><font style="font-size: 10pt">3,062</font></td>
<td nowrap="nowrap" style="width: 1%"> </td>
<td style="width: 1%"> </td>
<td style="width: 1%"> </td>
<td style="width: 9%; text-align: right"><font style="font-size: 10pt">3,248</font></td>
<td nowrap="nowrap" style="width: 1%"> </td>
<td style="width: 1%"> </td>
<td style="width: 1%"> </td>
<td style="width: 9%; text-align: right"><font style="font-size: 10pt">3,062</font></td>
<td nowrap="nowrap" style="width: 1%"> </td></tr>
<tr style="vertical-align: bottom; background-color: white">
<td><font style="font-size: 10pt">Warrants</font></td>
<td> </td>
<td> </td>
<td style="text-align: right"><font style="font-size: 10pt">244</font></td>
<td nowrap="nowrap"> </td>
<td> </td>
<td> </td>
<td style="text-align: right"><font style="font-size: 10pt">244</font></td>
<td nowrap="nowrap"> </td>
<td> </td>
<td> </td>
<td style="text-align: right"><font style="font-size: 10pt">244</font></td>
<td nowrap="nowrap"> </td>
<td> </td>
<td> </td>
<td style="text-align: right"><font style="font-size: 10pt">244</font></td>
<td nowrap="nowrap"> </td></tr>
<tr style="vertical-align: bottom; background-color: #CCEEFF">
<td><font style="font-size: 10pt">Convertible debt</font></td>
<td> </td>
<td style="border-bottom: black 1.5pt solid"> </td>
<td style="border-bottom: black 1.5pt solid; text-align: right"><font style="font-size: 10pt">4,239</font></td>
<td nowrap="nowrap"> </td>
<td> </td>
<td style="border-bottom: black 1.5pt solid"> </td>
<td style="border-bottom: black 1.5pt solid; text-align: right"><font style="font-size: 10pt">4,240</font></td>
<td nowrap="nowrap"> </td>
<td> </td>
<td style="border-bottom: black 1.5pt solid"> </td>
<td style="border-bottom: black 1.5pt solid; text-align: right"><font style="font-size: 10pt">4,239</font></td>
<td nowrap="nowrap"> </td>
<td> </td>
<td style="border-bottom: black 1.5pt solid"> </td>
<td style="border-bottom: black 1.5pt solid; text-align: right"><font style="font-size: 10pt">4,240</font></td>
<td nowrap="nowrap"> </td></tr>
<tr style="vertical-align: bottom; background-color: white">
<td> </td>
<td> </td>
<td> </td>
<td style="text-align: right"> </td>
<td nowrap="nowrap"> </td>
<td> </td>
<td> </td>
<td style="text-align: right"> </td>
<td nowrap="nowrap"> </td>
<td> </td>
<td> </td>
<td style="text-align: right"> </td>
<td nowrap="nowrap"> </td>
<td> </td>
<td> </td>
<td style="text-align: right"> </td>
<td nowrap="nowrap"> </td></tr>
<tr style="vertical-align: bottom; background-color: #CCEEFF">
<td><font style="font-size: 10pt">Total</font></td>
<td> </td>
<td style="border-bottom: black 2.25pt double"> </td>
<td style="border-bottom: black 2.25pt double; text-align: right"><font style="font-size: 10pt">7,731</font></td>
<td nowrap="nowrap"> </td>
<td> </td>
<td style="border-bottom: black 2.25pt double"> </td>
<td style="border-bottom: black 2.25pt double; text-align: right"><font style="font-size: 10pt">7,546</font></td>
<td nowrap="nowrap"> </td>
<td> </td>
<td style="border-bottom: black 2.25pt double"> </td>
<td style="border-bottom: black 2.25pt double; text-align: right"><font style="font-size: 10pt">7,731</font></td>
<td nowrap="nowrap"> </td>
<td> </td>
<td style="border-bottom: black 2.25pt double"> </td>
<td style="border-bottom: black 2.25pt double; text-align: right"><font style="font-size: 10pt">7,546</font></td>
<td nowrap="nowrap"> </td></tr>
</table>
<table cellspacing="0" cellpadding="0" style="font: 10pt Times New Roman, Times, Serif; width: 100%">
<tr style="vertical-align: bottom">
<td> </td>
<td colspan="3">
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: center"><b>Three Months Ended </b></p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: center"><b>June 30,</b></p></td>
<td> </td>
<td> </td>
<td colspan="3">
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: center"><b>Six Months Ended </b></p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: center"><b>June 30,</b></p></td></tr>
<tr style="vertical-align: bottom">
<td style="width: 55%"> </td>
<td style="width: 11%; border-bottom: black 1.5pt solid; text-align: center"><font style="font-size: 10pt"><b>2015</b></font></td>
<td style="width: 1%; border-bottom: black 1.5pt solid"> </td>
<td style="width: 11%; border-bottom: black 1.5pt solid; text-align: center"><font style="font-size: 10pt"><b>2014</b></font></td>
<td style="width: 1%"> </td>
<td style="width: 1%; border-bottom: black 1.5pt solid"> </td>
<td style="width: 8%; border-bottom: black 1.5pt solid; text-align: center"><font style="font-size: 10pt"><b>2015</b></font></td>
<td style="width: 1%"> </td>
<td style="width: 11%; border-bottom: black 1.5pt solid; text-align: center"><font style="font-size: 10pt"><b>2014</b></font></td></tr>
<tr style="vertical-align: bottom">
<td> </td>
<td colspan="3" style="text-align: center"><font style="font-size: 10pt"><b>(Thousands)</b></font></td>
<td> </td>
<td> </td>
<td colspan="3" style="text-align: center"><font style="font-size: 10pt"><b>(Thousands)</b></font></td></tr>
<tr style="background-color: #CCEEFF">
<td style="vertical-align: bottom"><font style="font-size: 10pt">Weighted average common shares outstanding – basic</font></td>
<td style="vertical-align: bottom; text-align: right"><font style="font-size: 10pt">13,431</font></td>
<td style="vertical-align: bottom"> </td>
<td style="vertical-align: bottom; text-align: right"><font style="font-size: 10pt">13,358</font></td>
<td style="vertical-align: bottom"> </td>
<td style="vertical-align: bottom"> </td>
<td style="vertical-align: bottom; text-align: right"><font style="font-size: 10pt">13,420</font></td>
<td style="vertical-align: top"> </td>
<td style="vertical-align: bottom; text-align: right"><font style="font-size: 10pt">13,292</font></td></tr>
<tr style="vertical-align: bottom; background-color: white">
<td><font style="font-size: 10pt">Assumed conversion of dilutive stock options, warrants and convertible debt</font></td>
<td style="border-bottom: black 1.5pt solid; text-align: right"><font style="font-size: 10pt">—</font></td>
<td> </td>
<td style="border-bottom: black 1.5pt solid; text-align: right"><font style="font-size: 10pt">—</font></td>
<td> </td>
<td style="border-bottom: black 1.5pt solid"> </td>
<td style="border-bottom: black 1.5pt solid; text-align: right"><font style="font-size: 10pt">—</font></td>
<td style="text-align: right"> </td>
<td style="border-bottom: black 1.5pt solid; text-align: right"><font style="font-size: 10pt">—</font></td></tr>
<tr style="background-color: #CCEEFF">
<td style="vertical-align: bottom"><font style="font-size: 10pt">Weighted average common shares outstanding – dilutive</font></td>
<td style="vertical-align: bottom; border-bottom: black 2.25pt double; text-align: right"><font style="font-size: 10pt"> 13,431</font></td>
<td style="vertical-align: bottom"> </td>
<td style="vertical-align: bottom; border-bottom: black 2.25pt double; text-align: right"><font style="font-size: 10pt">13,358</font></td>
<td style="vertical-align: bottom"> </td>
<td style="vertical-align: bottom; border-bottom: black 2.25pt double"> </td>
<td style="vertical-align: bottom; border-bottom: black 2.25pt double; text-align: right"><font style="font-size: 10pt">13,420</font></td>
<td style="vertical-align: top; text-align: right"> </td>
<td style="vertical-align: bottom; border-bottom: black 2.25pt double; text-align: right"><font style="font-size: 10pt">13,292</font></td></tr>
</table>