Stockholders' Equity | Stockholders' Equity 2019 Issuance and Sale of Common Stock and Warrants On June 23, 2019 , the Company entered into a Securities Purchase Agreement (the "Purchase Agreement") with CVI, pursuant to which CVI agreed to purchase (i) 2,728,513 shares of Common Stock (the "Initial Shares"), at a price of $7.33 per share and (ii) Series A Warrants, Series B-1 Warrants, Series B-2 Warrants and Series C Warrants, for aggregate gross proceeds of $20.0 million (the "Private Placement"). The Private Placement closed on June 26, 2019 (the "Closing Date"). The Series B-1 and Series B-2 Warrants are exercisable by the holders at any time prior to the six- and twelve-month anniversaries of the Closing Date, respectively. The Series B-1 Warrants provide the holders the right to purchase an aggregate of up to 2,347,418 shares of Common Stock at an exercise price equal to $8.52 , and the Series B-2 Warrants provide the holders the right to purchase an aggregate of up to 1,121,076 shares of Common Stock at an exercise price equal to $8.92 . The Series B-1 and B-2 Warrants may be exercised for cash only. If all of the Series B-1 Warrants or Series B-2 Warrants have not been exercised prior to their respective expiration dates, the Company will have the right, subject to prior notice to the holders and certain equity, volume and other conditions, to force the exercise of any unexercised portion of the applicable Series B-1 or B-2 Warrants by such holders. Key conditions that may impact the ability of the Company to force the exercise of these warrants include a $3.96 minimum for the VWAP of the Common Stock leading up to the forced exercise date, a minimum threshold for trading volume, and the maintained effectiveness of a registration statement with the SEC. The forced exercise price for the Series B-1 Warrants, if applicable, will be 85.0% of the VWAP of the Common Stock as of the date immediately preceding the expiration date of the Series B-1 Warrants (the "Series B-1 Forced Exercise Price"). The forced exercise price for the Series B-2 Warrants, if applicable, will be the lesser of (i) 85.0% of the VWAP of the Common Stock on the date immediately preceding the expiration date of the Series B-2 Warrants and (ii) the Series B-1 Forced Exercise Price. The Series A Warrants are exercisable for a period of five years from the Closing Date and are currently exercisable into 5,457,026 shares of Common Stock, which is equal to the Initial Shares plus the number of shares issued pursuant to the exercise of the Series C Warrants (described below). The exercise price for the Series A Warrants is $12.00 . The Series A Warrants may be exercised for cash or through a net settlement feature. The Series C Warrants are partially prepaid warrants (with a nominal remaining exercise price) that were not exercisable before September 21, 2019 and expire 90 days after the first anniversary of the Closing Date. CVI exercised the Series C Warrants on October 10, 2019. Because the VWAP of the Common Stock as of the date of exercise, discounted by 7.5% , was less than CVI's purchase price for the Initial Shares, the Company was required to issue to CVI a number of shares of Common Stock equal to (i) (x) CVI's purchase price for the Initial Shares divided by (y) 92.5% of the VWAP of the Common Stock leading up to September 21, 2019, subject to a floor of 50.0% of the price per Initial Share, less (ii) the number of Initial Shares issued to CVI on the Closing Date. As a result of this exercise, the Company issued 2,728,513 shares of Common Stock to CVI on October 14, 2019. In addition, the number of shares issuable under the Company's Series A Warrants was increased by 2,278,513 . The exercise prices for the Series A, B-1 and B-2 Warrants are subject to anti-dilution adjustment in certain circumstances. If and to the extent the exercise of any warrants would, together with the issuances of the Initial Shares and the shares issued pursuant to the exercise of any other warrants, result in the issuance of 20.0% or more of the outstanding Common Stock of the Company on the Closing Date (the "Exchange Cap"), the Company intends to, in lieu of issuing such shares, settle the obligation to issue such shares in cash. In addition, CVI will not have the right to exercise any warrant that would result in CVI beneficially owning more than 4.99% of the outstanding Common Stock after giving effect to such exercise. CVI has the right, in its discretion, to raise this threshold up to 9.99% with 60 days' notice to the Company. If any forced exercise of a Series B-1 or B-2 Warrant would result in CVI beneficially owning more than 4.99% of the outstanding Common Stock, CVI will pay the applicable forced exercise price and no shares of Common Stock will be issued, but instead the aggregate number of shares of Common Stock issuable upon any exercise of the Series C Warrant will increase by an equal amount. Pursuant to the transactions described above, the Company agreed to a 105 -day lock-up period related to any future offering of equity or equity-linked securities and also agreed to provide CVI with registration rights relating to the Initial Shares and any shares issuable upon the exercise of the warrants. On June 26, 2019, the Company filed a prospectus supplement to its effective registration statement on Form S-3 to permit the resale of such shares. Management determined each warrant to be a freestanding financial instrument that qualifies for liability treatment as a result of the net cash settlement feature associated with the Exchange Cap provision. Each warrant is initially measured at fair value and classified as a current liability on the Condensed Consolidated Balance Sheet, with subsequent changes in fair value recorded in earnings. To determine the fair value of each warrant, management utilized a Monte Carlo simulation analysis within an option pricing model using the following key assumptions as of the Closing Date: • Stock price : The stock price was measured using the fair value of the Common Stock on the Closing Date, which was $5.57 per share. • Volatility : The Company determined volatility to be 50.0% based on (i) the historical volatility of the Common Stock daily volume weighted average price with a look-back period commensurate with the term of the warrants and (ii) options-based implied volatility. • Risk-free rate : Management assumed the risk-free rate to be between 1.7% and 2.1% , based on the U.S. Treasury bonds on the valuation date with terms commensurate with the terms of each warrant. • Dividend yield : Management assumed the dividend yield to be zero based on the historical payout of the Company. • Term : Management determined the term based on the time period of each warrant's maturity, between six months and five years from the Closing Date. • Cost of debt : Management assumed the cost of debt to be between 16.7% and 18.7% based on a synthetic credit rating analysis. • Change of control probability : The Company utilized a range between 0.0% and 10.0% to estimate the likelihood of occurrence. The above estimates represent Level 3 inputs within the fair value hierarchy. Based on the option pricing valuation model, the Company determined the fair value of the warrants as of the Closing Date to be the following: (in thousands) Warrants Liability Series A Warrant $ 3,862 Series B-1 Warrant 328 Series B-2 Warrant 376 Series C Warrant 6,232 Total $ 10,798 The Company recorded $2.8 million in accrued transaction costs in the second quarter of 2019, of which $1.2 million was allocated to the warrants liability and recorded in general and administrative expenses in the Condensed Consolidated Statements of Operations and Comprehensive Loss. The remaining transaction costs of $1.6 million were recorded in additional paid-in capital in the Condensed Consolidated Balance Sheet. In the third quarter of 2019, the Company recorded a $1.0 million adjustment due to a change in its estimate of transaction costs by decreasing general and administrative expenses by $0.4 million and additional paid-in capital by $0.6 million . The estimated fair value of the warrants as of September 30, 2019 was $5.9 million . Refer to Footnote 7 , Fair Value Measurements , for further information. 2018 Equity and Incentive Compensation Plan The Company's stockholders approved the 2018 Equity and Incentive Compensation Plan (the "2018 Plan") at the Company's 2018 annual meeting of stockholders. Under the 2018 Plan, the Company may grant option rights, appreciation rights, restricted stock awards, restricted stock units, performance shares and performance units up to 10,650,000 shares of Common Stock. The aggregate number of shares of Common Stock available will be reduced by: (i) one share of Common Stock for every one share of Common Stock subject to an award of option rights or appreciation rights granted under the 2018 Plan and (ii) two shares of Common Stock for every one share of Common Stock subject to an award other than option rights or appreciation rights granted under the 2018 Plan. If any award granted under the 2018 Plan (in whole or in part) is cancelled or forfeited, expires, is settled in cash, or is unearned, the shares of Common Stock subject to such award will, to the extent of such cancellation, forfeiture, expiration, cash settlement, or unearned amount, again be available at a rate of one share of Common Stock for every one share of Common Stock subject to awards of option rights or appreciation rights and two shares of Common Stock for every one share of Common Stock subject to awards other than of option rights or appreciation rights. Additionally, if, after December 31, 2017, any shares of Common Stock subject to an award granted under the 2007 Equity Incentive Plan (the "2007 Plan") are forfeited, or an award granted under the 2007 Plan (in whole or in part) is canceled or forfeited, expires, is settled in cash, or is unearned, the shares of Common Stock subject to such award will, to the extent of such cancellation, forfeiture, expiration, cash settlement, or unearned amount, be available for awards under the 2018 Plan at a rate of one share for every one share subject to such award. The Company registered the securities under the 2018 Plan with the SEC effective June 1, 2018. The maximum number of shares available for issuance under the 2018 Plan as of September 30, 2019 is 4,549,287 . Stock Awards During the nine months ended September 30, 2018, the Company's Compensation Committee approved and awarded 2,538,326 time-based RSUs and 149,705 performance-based RSUs under the 2018 Plan to employees, directors and consultants of the Company. The Company recognized $6.3 million and $31.2 million in stock-based compensation expense related to these and prior awards during the three and nine months ended September 30, 2018, respectively. During the nine months ended September 30, 2019, the Company's Compensation Committee approved and awarded 1,064,244 time-based RSUs (of which 206,108 RSUs related to the settlement of an accrued 2018 annual incentive plan liability) and 300,000 market-based RSUs to employees, directors and consultants of the Company. The time-based RSUs generally vest after one to three years contingent on continued service. The market-based RSUs vest annually over ten years based on the achievement of certain stock price goals. A summary of the unvested stock awards for the nine months ended September 30, 2019 and 2018 is presented below: Unvested Stock Awards Restricted Stock Units Number of Shares Underlying Awards Weighted Average Grant-Date Fair Value Unvested as of December 31, 2018 1,466,135 1,466,135 $ 22.62 Granted 1,364,244 1,364,244 12.67 Vested and delivered (653,628 ) (653,628 ) 24.74 Forfeited (466,789 ) (466,789 ) 18.16 Unvested as of September 30, 2019 1,709,962 1,709,962 $ 15.04 Unvested Stock Awards Restricted Stock Awards Restricted Stock Units Number of Shares Underlying Awards Weighted Average Grant-Date Fair Value Unvested as of December 31, 2017 2,125 779,912 782,037 $ 37.22 Granted — 2,688,031 2,688,031 22.92 Vested and delivered (2,125 ) (1,550,272 ) (1,552,397 ) 28.42 Forfeited — (72,490 ) (72,490 ) 30.68 Unvested as of September 30, 2018 — 1,845,181 1,845,181 $ 24.07 The weighted-average remaining vesting period for unvested RSUs as of September 30, 2019 was 3.76 years . As of September 30, 2019 , total unrecognized compensation expense related to unvested RSUs was $14.6 million , of which $2.7 million is expected to be recognized in the fourth quarter of 2019 . As of September 30, 2018 , total unrecognized compensation expense related to unvested RSUs was $24.8 million . Total unrecognized compensation expense may be increased or decreased in future periods for subsequent grants or forfeitures. Stock Options During the nine months ended September 30, 2019 , the Company's Compensation Committee approved and awarded 465,000 stock options under the 2018 Plan to employees and consultants of the Company. The fair value of options at date of grant was estimated using the Black-Scholes method utilizing the following assumptions: Dividend yield 0.0% Expected volatility 44.9 % - 52.9% Risk-free interest rate 1.3 % - 2.7% Expected life of options (in years) 5.21 - 10.00 Dividend yield — The Company has never declared or paid a cash dividend on its Common Stock and has no plans to pay cash dividends in the foreseeable future. Expected volatility — Volatility is a measure of the amount by which a financial variable such as a share price has fluctuated (historical volatility) or is expected to fluctuate (expected volatility) during a period. The Company considered the historical volatility of its stock price over a term similar to the expected life of the options in determining expected volatility. Risk-free interest rate — The Company used rates on the grant date of zero-coupon government bonds with maturities over periods covering the term of the awards, converted to continuously compounded forward rates. Expected life of the options — This is the period of time that the options granted are expected to remain outstanding. Activity related to options outstanding during the nine months ended September 30, 2019 and 2018 is presented below: Number of shares Weighted-Average Exercise Price Options outstanding as of December 31, 2018 1,045,913 $ 17.89 Options granted 465,000 7.30 Options exercised (68,259 ) 17.44 Options forfeited (361,962 ) 15.14 Options outstanding as of September 30, 2019 1,080,692 $ 14.39 Options exercisable as of September 30, 2019 694,442 $ 18.17 Number of shares Weighted-Average Exercise Price Options outstanding as of December 31, 2017 3,444,252 $ 30.65 Options exercised (1) (347,752 ) 15.45 Options expired (1,987,107 ) 40.43 Options outstanding as of September 30, 2018 1,109,393 $ 17.91 Options exercisable as of September 30, 2018 1,109,393 $ 17.91 (1) Includes 125,523 options withheld to pay the exercise price for certain exercises during the three months ended September 30, 2018. The following table summarizes information about options outstanding as of September 30, 2019: Options Outstanding Options Exercisable Range of Exercise Prices Options Outstanding Weighted Weighted Options Exercisable Weighted Average Exercise Price Weighted Average Remaining Contractual Life (Years) $1.88 - $3.00 175,000 $ 2.52 9.95 43,750 $ 2.52 9.95 $10.00 - $19.31 640,110 12.99 5.62 385,110 14.84 2.94 $20.11 - $25.86 259,525 25.22 1.41 259,525 25.22 1.41 $40.80 6,057 40.80 4.87 6,057 40.80 4.87 1,080,692 $ 14.39 5.31 694,442 $ 18.17 2.83 The intrinsic value of exercised stock options is calculated based on the difference between the exercise price and the quoted market price of the Common Stock as of the close of the exercise date. There were 68,259 and 347,752 options exercised during the nine months ended September 30, 2019 and 2018, respectively. The total intrinsic value of the options exercised during the nine months ended September 30, 2019 and 2018 was $0.3 million and $1.5 million , respectively. As of September 30, 2019 , the total unrecognized compensation expense related to outstanding options is $1.2 million , of which $0.3 million is expected to be recognized in the remainder of 2019 . As of September 30, 2018 , there was no unrecognized compensation expense related to outstanding options. |