Stockholders' Equity

9 Months Ended

Sep. 30, 2019

Stockholders' Equity Note [Abstract]

Stockholders’ equity:

Public Offering

On April 15, 2019 the Company completed an underwritten public offering by the Company and a selling stockholder of 12,000,000 shares of common stock at a public offering price of $5.00 per share. The gross proceeds from the Company’s portion of the offering (10,000,000 shares), before deducting the underwriter discounts and commission and other offering expenses, was $50.0 million. The net proceeds were $47.6 million. The gross proceeds to the selling stockholder were approximately $19.0 million, which includes shares sold pursuant to the underwriters’ exercise of their option to purchase an additional 1,800,000 shares of common stock at the public offering price.

Common Stock

On July 25, 2019, in connection with the Company’s 2019 Annual Meeting of Stockholders (“the Annual Meeting”), the Company’s stockholders approved, among other matters, an amendment to the Company’s Certificate of Incorporation to increase the number of authorized shares of Common Stock from 125,000,000 to 175,000,000. Shareholders also approved the Company’s 2019 Stock Option and Incentive Plan (the “2019 Plan”), which reserves 14,000,000 shares of stock for issuance under the 2019 Plan.

Stock-based compensation

During the nine months ended September 30, 2019, a total of 2,267,904 options to purchase Common Stock, with an aggregate fair market value of approximately $9.5 million, were granted to employees, officers and directors of the Company. Options have a term of 10 years from the grant date. Options granted to employees vest ratably over a three-year period and options

granted to members of the Board of Directors vest ratably through 2022. The fair value of each option is amortized as compensation expense evenly through the vesting period.

The fair value of each option award is estimated on the grant date using the Black-Scholes valuation model that uses assumptions for expected volatility, expected dividends, expected term, and the risk-free interest rate. Expected volatilities are based on implied volatilities from historical volatility of the Common Stock, and other factors estimated over the expected term of the options.

Expected term of options granted is derived using the “simplified method” which computes expected term as the average of the sum of the vesting term plus contract term. The risk-free rate is based on the U.S. Treasury yield curve in effect at the time of grant for the period of the expected term.

The key assumptions used in determining the fair value of options granted during the nine months ended September 30, 2019 follows:


Expected price volatility			61.80%-64.10%
Risk-free interest rate			1.36%-2.66%
Weighted average expected life in years			6 years
Dividend yield			—

Option activity during the nine months ended September 30, 2019 was as follows:


	Number of shares	Weighted average exercise price per share		Aggregate intrinsic value
Outstanding at January 1, 2019	4,406,004	$	3.19	$	4,172
Granted in 2019:
Officers and Directors	1,132,109	3.93
Employees	1,135,795	4.46
Exercised	(412,500)	4.60
Forfeitures	(490,342)	3.97
Outstanding at September 30, 2019	5,771,066	$	3.53	$	5,627

As of September 30, 2019, options exercisable totaled 1,903,370. There are approximately $5.6 million of unrecognized compensation cost related to non-vested share-based compensation awards, including options and restricted stock units (“RSUs”) granted. These costs will be expensed through 2022.

Restricted stock units

During the nine months ended September 30, 2019, a cumulative total of 360,250 RSUs were granted to the Company’s executive officers, members of senior management, a former officer and directors with a fair market value of approximately $1.6 million. The fair value of restricted units is determined using quoted market prices of the Common Stock and the number of shares expected to vest.

RSU grants are time-based, all of which generally vest from a one to three-year period. The RSU grant to the former officer vested on his retirement date April 30, 2019.

Restricted stock activity during the nine months ended September 30, 2019 was as follows:


	Number of restricted shares	Weighted average fair market value per RSU
Outstanding at January 1, 2019	2,166,102	$	2.59
Granted:
Executive officers	223,250	4.44
Directors	90,000	4.85
Employees	47,000	4.67
Vested	(801,661)	4.80
Forfeitures	(87,132)	2.30
Outstanding at September 30, 2019	1,637,559	$	3.23

Preferred Stock

During the nine months ended September 30, 2019, 1,402 shares of Series B Preferred Stock (“Series B”) were converted into 7,788,888 shares of Common Stock. As of September 30, 2019, 1,698 shares of Series B are outstanding. As of September 30, 2019, 2,093,155 shares of Series A Preferred Stock (“Series A”) are outstanding. There were no conversions of Series A during the nine months ended September 30, 2019.

Earnings Per Share


	Three months ended September 30,						Nine months ended September 30,
	2019		2018		2019		2018
Basic:
Net income (loss)	$	354	$	(6,380)	$	(14,609)	$	(26,859)
Less deemed dividend related to beneficial conversion feature on Series B Preferred Stock	—		(12,500)		—		(12,500)
Net earnings (loss) attributable to common stockholders	$	354	$	(18,880)	$	(14,609)	$	(39,359)
Weighted average common shares outstanding	89,649,922		64,900,007		81,612,112		60,599,456
Basic earnings (loss) per common share	$	—	$	(0.29)	$	(0.18)	$	(0.65)
Diluted:
Effect of dilutive securities:
Net income (loss) attributable to common stockholders, diluted	$	354	$	(18,880)	$	(14,609)	$	(39,359)
Weighted average common shares outstanding	89,649,922		64,900,007		81,612,112		60,599,456
Effect of dilutive options and warrants	15,488,972		—		—		—
Dilutive weighted average common shares outstanding	105,138,894		64,900,007		81,612,112		60,599,456
Diluted earnings (loss) per common share	$—		$(0.29)		$(0.18)		$(0.65)

During the three months ended September 30, 2019, outstanding stock options, RSUs, warrants and preferred shares of 15,488,972 were included in the computation of diluted earnings per common share. During the three months ended September 30, 2018, outstanding stock options, RSUs, warrants and preferred shares of 25,745,108 were not included in the computation

of diluted earnings per common share, because to do so would have had an antidilutive effect. During the nine months ended September 30, 2019 and 2018, outstanding stock options, RSUs, warrants and preferred shares of 15,260,949 and 18,917,774, respectively, were not included in the computation of diluted earnings per common share, because to do so would have had an antidilutive effect. Included in the three and nine months ended September 30, 2019 and 2018 are the Series B shares as converted to common stock.