Healthcare: BiotechnologyViralytics Limited (OTCQX: VRACY)€¦ · VIRALYTICS LIMITED (OTCQX:...

Joseph Pantginis, Ph.D., (646) [email protected]

Sales (800) 933-6830, Trading (800) 933-6820

COMPANY NOTE | EQUITY RESEARCH | November 13, 2016

Healthcare: Biotechnology

Viralytics Limited (OTCQX: VRACY) | VLA.AX - AUD1.20 - ASX | BuyCompany Update

Stock Data

52-Week Low - High AUD0.62 - AUD1.35Shares Out. (mil) 240.29Mkt. Cap.(mil) AUD288.43-Mo. Avg. Vol. 304,99112-Mo.Price Target AUD4.50Cash (mil) AUD21.6Tot. Debt (mil) AUD0.012-Mo.Price Target: Our price target is based on a US$3.40 price targetand an exchange rate of 1.31754 as of 10/9/16

EPS $AUD

Yr Jun —2014— —2015— —2016E—Curr Curr

1Q - - -2Q (0.05)A (0.01)A -3Q - - -4Q 0.00A (0.01)A -

YEAR (0.05)A (0.02)A (0.04)E

Viralytics announces financial results on a half-yearly basis. Results maynot add to full year based on increases in share count and rounding

Revenue ($AUD millions)

Yr Jun —2014— —2015— —2016E—Curr Curr

1Q - - -2Q 0.0A 0.0A -3Q - - -4Q 2.5A 2.5A -

YEAR 2.5A 2.5A 4.0E

1.601.401.201.000.800.600.40

Dec

-15

Jan-

16

Feb-

16

Mar

-16

Apr

-16

May

-16

Jun-

16

Jul-1

6

Aug

-16

Sep

-16

Oct

-16

Nov

-16

3.53.02.52.01.51.00.50.0

PriceVol (m)

VLA.AX One-Year Price and Volume History

VLA.AX; CAPRA and the Double WhammyAgainst MelanomaPreliminary data from the CAPRA study combining CAVATAK and Keytruda inadvanced melanoma. A major takeaway, in our belief, is that the data representan impressive translation from preclinical models to the clinical setting. Whilepatient numbers are small, the response rates point to synergy of the twoagents and the combination was safe and well tolerated. Reiterate Buy / A$4.50 target.

Event

At SITC, Viralytics announced preliminary data from the CAPRA studycombining CAVATAK (CVA21) and Keytruda (pembrolizumab) in advancedmetastatic melanoma. There are three major takeaways, in our belief, eventhough the patient numbers are small; 1) Best Overall Response Rate (BORR)of 70.0% (7/10) and a Disease Control Rate of 100%, showing strong synergyof the two agents. Additionally objective responses of 86% (6/7) and DiseaseControl Rate of 100% (7/7) in individual non-injected visceral and non-viscerallesions, 2) safety and tolerability of the combination and importantly, 3)translation of strong preclinical data into the clinical setting. The "one-twopunch" that the study design looks to achieve is that CAVATAK is administeredwith its own efficacy, which has shown upregulation of PD-L1 on tumors.Enter Keytruda then to be able to hit the tumors which express PD-L1 andthe subsequent synergy between the agents seen in this study. Keytrudamonotherapy (ipi-naive) response rates are in the range of 30-35% and 28.1%in the CAVATAK CALM study.

Impact

We are impressed by the first CAPRA look and believe both it and the recentMITCI update (CAVATAK + Yervoy) continue to strengthen the company'sposition. These two data sets offer flexibility to the company as to defining nextpotential clinical steps for the melanoma setting, checkpoint naïve or refractory,or both. Additionally, we believe CAVATAK and combinations continue todifferentiate against Imlygic (talimogene laherparepvec). As the companycontinues to accumulate data and show the potential differentiation comparedto Imlygic, we believe the company is moving closer to a potential acquisitionor partnership.

Action

With positive Phase II data in hand, and several ongoing clinical studieswith near-term data readouts, we believe VRACY represents an attractiveopportunity for U.S. investors. We reiterate our Buy rating and A$4.50 pricetarget.

Important Disclosures & Regulation AC Certification(s) are located on page 12 to 13 of this report.Roth Capital Partners, LLC | 888 San Clemente Drive | Newport Beach CA 92660 | 949 720 5700 | Member FINRA/SIPC

Page 2 of 13

VIRALYTICS LIMITED (OTCQX: VRACY) Company Note - November 13, 2016

CAPRA; Nice First Look and Validation of Preclinical Data

CAPRA was designed to test the safety, efficacy and potential synergy of the combination of CAVATAK (CVA21) and

Keytruda (pembrolizumab). The study was also based on a broad set of preclinical data (details further below)

showing synergy of the agents and what has been observed in the preliminary CAPRA data set is that the preclinical

data have been validated in the clinical setting. A “one two punch” which appears to be occurring is that when

CAVATAK is given first, increased expression of PD-L1 is observed and then Keytruda is brought in which is likely

responsible for the higher response rates. A schematic of the study design is found below.

CAPRA Study Design

Kaufman et al., SITC 2016

The table below contains the individual patient characteristics, all of which were late stage patients. The majority of

patients, except for two (one prior ipilimumab, one prior T-Vec) were naïve to prior immunotherapy. The combination

therapy was safe and well tolerated.

Patient Characteristics


The table and chart below contain the best overall response rates as well as the waterfall chart showing the extent of

the responses. Note that two of the patients were very close to being complete responses using the irRC response

criteria as well as being Stage IV patients.

Page 3 of 13


Tumor Responses (and Waterfall Chart)


As the data continue to evolve and enrollment moves toward the target of ~30 patients, a key metric will be the

duration of responses. The chart below shows not only the ongoing responses, but also the onset of response and

when it was confirmed. All patients evaluable have ongoing responses and the top two patients have durability

beyond six months. When looking at the timing of response onset, we attribute this to the “delay” in immune

activation.

Duration of Response irRC Criteria (prelim. data, investigator assessed)


The chart below shows the changes/kinetics of response in tumor burden by disease stage. One observation we

have is the two patients (one green, one red) who saw their tumor burden “increase” before dropping off (reductions

in tumor volume). We attribute this early spike in both patients to what is referred to pseudo-progression, an

immunotherapy theme, where an increase in the size of a lesion is likely attributable to the lesion being infiltrated by a

significant number of immune cells.

Page 4 of 13


Change in Tumor Burden By Disease Stage


Distant Tumor Responses Continue to Talk to CAVATAK Dual Mechanism

Recall monotherapy studies with CAVATAK have talked to the dual mechanism of the virus, 1) causing direct killing

of tumor cells and 2) causing a subsequent immune response, which has been evidenced by seeing tumor reductions

in non-injected metastatic lesions at distant sites. The figure below shows data from the CAPRA study from two

patients. The top scan shows three different tumor reductions, 1) top scan injected lesion and non-injected lesion in a

subcarinal lymph node and 2) tumor reductions in the bottom scan for two metastatic lesions in the lung. The bottom

scan shows tumor reduction of a non-injected liver lesion.

Page 5 of 13


Individual Patient Scans – Injected and Non-Injected Lesions


CAPRA Interim Study Conclusions

• From the first 12 patients enrolled, one patient has left the study with progressive disease (PD) and one

patient due to a non treatment-related adverse event.

• At present no DLTs have been observed in patients receiving the combination treatment

• Overall the adverse events have generally been low-grade constitutional symptoms related to CVA21 and

standard pembrolizumab-related side effects. No grade 3 or higher treatment-related adverse events have

been observed.

• CVA21-pembrolizumab combination therapy was associated with clinical benefit in treated patients

• Preliminary Best Overall Response Rate (BORR) of 70% (7/10) and 3/10 patients with stable disease (SD).

• In patients with stave IV M1b/c disease, a BORR of 100% (6/6).

• Preliminary observations have revealed reductions in a number of injected and non-injected visceral/non-

visceral lesions, with a number of patients displaying evidence of post-injection systemic exposure to CVA21

Preclinical Data Set Laid the Foundation As stated above, these preliminary CAPRA data show the translation of a broad set of preclinical data into the clinical setting helping to “prove” the potential synergies between CAVATAK and checkpoint inhibition (MITCI data and now CAPRA).

Page 6 of 13


The model used B16-ICAM-1 cells, which are murine melanoma B16 cells stably transfected to express human ICAM-1 to allow CVA21 binding and cell infection. The study schematic if found below, highlighting the treatment schedule with CAVATAK as well as the checkpoint inhibitor. It also shows the schedule with re-challenge with tumor in the mouse model tested.

Preclincial Checkpoint Combo Study Design

Source: Shafren et al. ESMO 2014

The following two charts contain the “spider plots” measuring the kinetics of tumor growth/volume over time. Looking left to right in these charts, the takeaway is that when CAVATAK is combined with either an anti-PD-1 or anti-CTLA-4 tumor volumes are significantly reduced. When comparing anti-PD-1 or anti-CTLA-4, it appears combination with the latter has the more profound impact in preventing tumor progression.

Spider Plots of Individual Primary Tumor Growth (anti-PD-1)


Page 7 of 13


Spider Plots of Individual Primary Tumor Growth (anti-CTLA-4)


The following two charts look at the incidence of palpable secondary tumors following re-challenge with tumor cells. Here the takeaway is that combination of CAVATAK with either of the checkpoint inhibitors significantly slows the kinetics of growth of the secondary tumor.

Preliminary Incidence of Palpable Secondary B16 tumor (anti-PD-1)


Preliminary Incidence of Palpable Secondary B16 tumor (anti-CTLA-4)


The last two charts are the Kaplan-Meier survival curves from the experiment showing that combination with either of the checkpoint inhibitors dramatically improve the survival of the mice used in the model as well as showing the potential for the characteristic “tail” associated with immunotherapy related therapies.

Page 8 of 13


Impacts on Survival (anti-PD-1)


Impacts on Survival (anti-CTLA-4)


Preclinical Data Study conclusions:

• Intravenous delivered CAVATAK induced “immune agitation” within the tumor microenvironment

• Significant single agent antitumor activities against the primary B16-ICAM-1 tumor were observed in mice treated with either CAVATAK or anti-PD-1/CTLA-4 mAbs relative to saline controls

• Furthermore, combination of CAVATAK and anti-PD-1 or anti-CTLA-4 mAbs mediated significantly greater antitumor activity and offered greater survival benefit when compared to use of either agent alone

• Of particular interest was the finding that combinations of CAVATAK and anti-PD-1 or anti-CTLA-4 mAbs were able to noticeably delay the onset of palpable tumor development following B16 cell challenge when compared to all other single agent treatment regimens

Page 9 of 13


VALUATION

We reiterate our Buy rating and A$4.50 price target. Our valuation of Viralytics is based on our probability-weighted clinical net present value (NPV) valuation model. We believe this method is appropriate in capturingthe value of the clinical stage pipeline. It allows for the flexing of assumptions based on key factors such aschance of success, peak sales estimates, and year of commercial launch. Factors which could impede sharesof VRACY from reaching our price target include negative results from ongoing clinical trials and financing risk.

RISKS

■ Clinical risk – (including technology risk) – As with all drug development stories, clinical studies have aninherent risk of negative data readouts. Should negative news flow come from ongoing clinical studies, thestock could be negatively impacted in a significant manner. Additionally, we believe there is added layer ofrisk to the Viralytics story based on the novelty of the technology approach. Oncolytic viruses are still “early”in their overall acceptance with investors and the medical community alike. Data are positive to date, in ourbelief, though we believe more data may be needed to solidify the therapeutic approach as well as its fit intothe competitive landscape of oncology drugs.

■ Single product risk – While Viralytics is developing earlier stage oncolytic virus approaches, we believethe entirety of the company’s valuation rests on CAVATAK. Melanoma is currently the lead indication indevelopment and the company has also started development in other tumor types as well. Should there benegative data from the melanoma indication, for example, there could be a significant negative impact onthe shares based on a potential increased negative perception on the drug. However, as has been shownwith other drugs approved in multiple indications, such as Avastin, failure in one indication does not precludesuccess in others

■ Regulatory Risk – Should Viralytics’ products successfully complete pivotal registrational studies, there isno guarantee that regulatory agencies would approve these products. Unforeseen issues may arise duringclinical development which could impact the approvability of a therapeutic candidate.

■ Financing risk – As with all non-profitable biotechnology companies, funding is continuously necessaryto fund operations and ongoing clinical studies. Should Viralytics encounter problems in raising sufficientfunds to continue its operations, this could significantly impact the stock’s valuation.

COMPANY DESCRIPTION

Viralytics Limited, a biotechnology company, develops oncolytic immunotherapy treatments for a range ofcancers in Australia. It offers CAVATAK, a lead product that is in phase II clinical trial for the treatment oflate stage melanoma, prostate, lung, and bladder cancer, as well as in phase I/II multi-dose intravenousclinical trial for late-stage melanoma, non-small cell lung, metastatic bladder, and castrate-resistant prostatecancer. The company is also conducting various preclinical studies on CAVATAK for the treatment of breast,multiple myeloma, pancreatic, and malignant glioma cancer, as well as for acute myeloid leukemia and chroniclymphocytic leukemia. In addition, it is developing EVATAK, which is in pre-clinical studies for treating ovarian,prostate, and gastric cancer. The company was formerly known as Psiron Ltd. and changed its name toViralytics Limited in December 2006. Viralytics Limited is headquartered in Sydney, Australia.

Page 10 of 13


(AUD$ in millions except per share data)

Profit & Loss - June fiscalProfit & Loss - June fiscalProfit & Loss - June fiscalProfit & Loss - June fiscal 2011A2011A2011A2011A 2012A2012A2012A2012A 2013A2013A2013A2013A 2014A2014A2014A2014A 2015A2015A2015A2015A 2016E2016E2016E2016E

Licensing 0.0 0.0 0.0 0.0 0.0 0.0

R&D collaborations 1.4 0.9 2.5 2.5 2.5 4.0

Product and Royalties 0.0 0.0 0.0 0.0 0.0 0.0

Other revenues 0.0 0.0 0.0 0.0 0.0 0.0

RevenuesRevenuesRevenuesRevenues 1.41.41.41.4 0.90.90.90.9 2.52.52.52.5 2.52.52.52.5 2.52.52.52.5 4.04.04.04.0

CoGS 0.0 0.0 0.0 0.0 0.0 0.0

Gross ProfitGross ProfitGross ProfitGross Profit 1.41.41.41.4 0.90.90.90.9 2.52.52.52.5 2.52.52.52.5 2.52.52.52.5 4.04.04.04.0

Gross margin 100% 100% 100% 100% 100% 100%

SG&A 1.8 2.1 2.5 2.3 2.4 3.0

R&D 1.9 3.4 3.9 5.2 6.1 8.2

Other op ex 0.4 0.4 0.4 0.4 0.4 0.4

EBITEBITEBITEBIT (2.7)(2.7)(2.7)(2.7) (5.0)(5.0)(5.0)(5.0) (4.3)(4.3)(4.3)(4.3) (5.3)(5.3)(5.3)(5.3) (6.5)(6.5)(6.5)(6.5) (7.6)(7.6)(7.6)(7.6)

EBIT margin nm nm nm nm nm nm

Depreciation 0.0 0.0 0.0 0.0 0.0 0.0

Amortisation Intangibles 0.0 0.0 0.0 0.0 0.0 0.0

EBITDAEBITDAEBITDAEBITDA (2.7)(2.7)(2.7)(2.7) (5.0)(5.0)(5.0)(5.0) (4.3)(4.3)(4.3)(4.3) (5.3)(5.3)(5.3)(5.3) (6.5)(6.5)(6.5)(6.5) (7.6)(7.6)(7.6)(7.6)

EBITDA margin nm nm nm nm nm nm

Non operating expenses 0.0 0.0 0.0 0.0 0.0 0.0

Net Interest Income/Other 0.2 0.3 0.2 (0.2) 2.2 0.1

Interest expense 0.2 0.0 0.0 0.0 0.0 0.0

EBTEBTEBTEBT (2.7)(2.7)(2.7)(2.7) (4.8)(4.8)(4.8)(4.8) (4.1)(4.1)(4.1)(4.1) (5.5)(5.5)(5.5)(5.5) (4.3)(4.3)(4.3)(4.3) (7.5)(7.5)(7.5)(7.5)

EBT margin nm nm nm nm nm nm

Provision for taxes 0.0 0.0 0.0 0.0 0.0 0.0

Net IncomeNet IncomeNet IncomeNet Income (2.7)(2.7)(2.7)(2.7) (4.8)(4.8)(4.8)(4.8) (4.1)(4.1)(4.1)(4.1) (5.5)(5.5)(5.5)(5.5) (4.3)(4.3)(4.3)(4.3) (7.5)(7.5)(7.5)(7.5)

Participation of preferred stock 0.0 0.0 0.0 0.0 0.0 0.0

Net Income to commonNet Income to commonNet Income to commonNet Income to common (2.7)(2.7)(2.7)(2.7) (4.8)(4.8)(4.8)(4.8) (4.1)(4.1)(4.1)(4.1) (5.5)(5.5)(5.5)(5.5) (4.3)(4.3)(4.3)(4.3) (7.5)(7.5)(7.5)(7.5)

net margin nm nm nm nm nm nm

NoSH 55.3 67.5 81.5 119.2 184.5 185.0

EPS - basicEPS - basicEPS - basicEPS - basic (0.05)(0.05)(0.05)(0.05) (0.07)(0.07)(0.07)(0.07) (0.05)(0.05)(0.05)(0.05) (0.05)(0.05)(0.05)(0.05) (0.02)(0.02)(0.02)(0.02) (0.04)(0.04)(0.04)(0.04)

EPS - dilutedEPS - dilutedEPS - dilutedEPS - diluted (0.05)(0.05)(0.05)(0.05) (0.07)(0.07)(0.07)(0.07) (0.05)(0.05)(0.05)(0.05) (0.05)(0.05)(0.05)(0.05) (0.02)(0.02)(0.02)(0.02) (0.04)(0.04)(0.04)(0.04)

Source: http://www.viralytics.com/investor-centre/financial-reports/ and ROTH Capital Partners estimates

Joseph Pantginis, Ph.D. [email protected]

Page 11 of 13


Half-yearly P&L - June fiscal Half-yearly P&L - June fiscal Half-yearly P&L - June fiscal Half-yearly P&L - June fiscal Dec June June Dec June June Dec June June

AUD$ in millions FH1'13AFH1'13AFH1'13AFH1'13A FH2'13AFH2'13AFH2'13AFH2'13A FY'13AFY'13AFY'13AFY'13A FH1'14AFH1'14AFH1'14AFH1'14A FH2'14AFH2'14AFH2'14AFH2'14A FY'14AFY'14AFY'14AFY'14A FH1'15AFH1'15AFH1'15AFH1'15A FH2'15AFH2'15AFH2'15AFH2'15A FY'15AFY'15AFY'15AFY'15A

Licensing 0.00 0.00 0.000 0.00 0.00 0.0 0.00 0.00 0.0

R&D collaborations 0.60 1.90 2.5 0.00 2.50 2.5 0.00 2.45 2.5

Product and Royalties 0.00 0.00 0.0 0.00 0.00 0.0 0.00 0.00 0.0

Other revenues 0.00 0.00 0.0 0.00 0.01 0.0 0.00 0.00 0.0

RevenuesRevenuesRevenuesRevenues 0.600.600.600.60 1.901.901.901.90 2.52.52.52.5 0.000.000.000.00 2.502.502.502.50 2.52.52.52.5 0.000.000.000.00 2.452.452.452.45 2.52.52.52.5

CoGS 0.00 0.00 0.0 0.00 0.00 0.0 0.00 0.00 0.0

Gross ProfitGross ProfitGross ProfitGross Profit 0.600.600.600.60 1.901.901.901.90 2.52.52.52.5 0.000.000.000.00 2.502.502.502.50 2.52.52.52.5 0.000.000.000.00 2.452.452.452.45 2.52.52.52.5

Gross margin 100% 100% 100% 100% 100% 100% 100% 100% 100%

SG&A 1.37 1.10 2.5 1.12 1.14 2.3 1.09 1.31 2.4

R&D 1.66 2.28 3.9 2.70 2.47 5.2 2.59 3.50 6.1

Other op ex 0.20 0.21 0.41 0.21 0.21 0.4 0.21 0.21 0.4

EBITDAEBITDAEBITDAEBITDA (2.6)(2.6)(2.6)(2.6) (1.7)(1.7)(1.7)(1.7) (4.3)(4.3)(4.3)(4.3) (4.0)(4.0)(4.0)(4.0) (1.3)(1.3)(1.3)(1.3) (5.3)(5.3)(5.3)(5.3) (3.9)(3.9)(3.9)(3.9) (2.6)(2.6)(2.6)(2.6) (6.5)(6.5)(6.5)(6.5)

EBITDA margin nm nm nm

Non operating expenses 0.00 0.00 0.0 0.00 0.00 0.0 0.00 0.00 0.0

Net Interest Income/Other 0.12 0.07 0.2 0.04 (0.22) (0.2) 1.44 0.77 2.2

Interest expense 0.00 0.00 0.0 0.00 0.00 0.0 0.00 0.00 0.0

EBTEBTEBTEBT (2.5)(2.5)(2.5)(2.5) (1.6)(1.6)(1.6)(1.6) (4.1)(4.1)(4.1)(4.1) (4.0)(4.0)(4.0)(4.0) (1.5)(1.5)(1.5)(1.5) (5.5)(5.5)(5.5)(5.5) (2.4)(2.4)(2.4)(2.4) (1.8)(1.8)(1.8)(1.8) (4.3)(4.3)(4.3)(4.3)

EBT margin nm nm nm

Provision for taxes 0.00 0.00 0.0 0.00 0.00 0.0 0.00 0.00 0.0

Participation of preferred stock

Net Income to commonNet Income to commonNet Income to commonNet Income to common (2.5)(2.5)(2.5)(2.5) (1.6)(1.6)(1.6)(1.6) (4.1)(4.1)(4.1)(4.1) (4.0)(4.0)(4.0)(4.0) (1.5)(1.5)(1.5)(1.5) (5.5)(5.5)(5.5)(5.5) (2.4)(2.4)(2.4)(2.4) (1.8)(1.8)(1.8)(1.8) (4.3)(4.3)(4.3)(4.3)

net margin nm 0% 0%

NoSH 75.75 81.00 81.46 87.27 118.00 119.24 184.50 184.50 184.50

EPS - basicEPS - basicEPS - basicEPS - basic (0.03)(0.03)(0.03)(0.03) (0.02)(0.02)(0.02)(0.02) (0.05)(0.05)(0.05)(0.05) (0.05)(0.05)(0.05)(0.05) (0.00)(0.00)(0.00)(0.00) (0.05)(0.05)(0.05)(0.05) (0.01)(0.01)(0.01)(0.01) (0.01)(0.01)(0.01)(0.01) (0.02)(0.02)(0.02)(0.02)

EPS - dilutedEPS - dilutedEPS - dilutedEPS - diluted

Source: http://www.viralytics.com/investor-centre/financial-reports/ and ROTH Capital Partners estimates

Joseph Pantginis, Ph.D. - [email protected]

Page 12 of 13


Regulation Analyst Certification ("Reg AC"): The research analyst primarily responsible for the content of this report certifiesthe following under Reg AC: I hereby certify that all views expressed in this report accurately reflect my personal viewsabout the subject company or companies and its or their securities. I also certify that no part of my compensation was, isor will be, directly or indirectly, related to the specific recommendations or views expressed in this report.

Disclosures:

Within the last twelve months, ROTH has received compensation for investment banking services from Viralytics Limited(OTCQX: VRACY).

Shares of Viralytics Limited (OTCQX: VRACY) may not be eligible for sale in one or more states.

Shares of Viralytics Limited (OTCQX: VRACY) may be subject to the Securities and Exchange Commission's Penny StockRules, which may set forth sales practice requirements for certain low-priced securities.

Each box on the Rating and Price Target History chart above represents a date on which an analyst made a change to arating or price target, except for the first box, which may only represent the first note written during the past three years.Distribution Ratings/IB Services shows the number of companies in each rating category from which Roth or an affiliatereceived compensation for investment banking services in the past 12 month.

Distribution of IB Services Firmwide

IB Serv./Past 12 Mos.as of 11/13/16

Rating Count Percent Count Percent

Buy [B] 254 75.82 132 51.97Neutral [N] 56 16.72 29 51.79Sell [S] 5 1.49 3 60.00Under Review [UR] 19 5.67 11 57.89

Our rating system attempts to incorporate industry, company and/or overall market risk and volatility. Consequently, at anygiven point in time, our investment rating on a stock and its implied price movement may not correspond to the stated 12-month price target.

Ratings System Definitions - ROTH employs a rating system based on the following:

Buy: A rating, which at the time it is instituted and or reiterated, that indicates an expectation of a total return of at least10% over the next 12 months.

Neutral: A rating, which at the time it is instituted and or reiterated, that indicates an expectation of a total return betweennegative 10% and 10% over the next 12 months.

Sell: A rating, which at the time it is instituted and or reiterated, that indicates an expectation that the price will depreciateby more than 10% over the next 12 months.

Under Review [UR]: A rating, which at the time it is instituted and or reiterated, indicates the temporary removal of theprior rating, price target and estimates for the security. Prior rating, price target and estimates should no longer be reliedupon for UR-rated securities.

Not Covered [NC]: ROTH does not publish research or have an opinion about this security.

Page 13 of 13


ROTH Capital Partners, LLC expects to receive or intends to seek compensation for investment banking or other businessrelationships with the covered companies mentioned in this report in the next three months. The material, information andfacts discussed in this report other than the information regarding ROTH Capital Partners, LLC and its affiliates, are fromsources believed to be reliable, but are in no way guaranteed to be complete or accurate. This report should not be used asa complete analysis of the company, industry or security discussed in the report. Additional information is available uponrequest. This is not, however, an offer or solicitation of the securities discussed. Any opinions or estimates in this report aresubject to change without notice. An investment in the stock may involve risks and uncertainties that could cause actualresults to differ materially from the forward-looking statements. Additionally, an investment in the stock may involve a highdegree of risk and may not be suitable for all investors. No part of this report may be reproduced in any form without theexpress written permission of ROTH. Copyright 2016. Member: FINRA/SIPC.

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