Restatement of Consolidated Financial Statements

Restatement Background and Explanation

On May 14, 2020, the Company concluded that, because of a misapplication of the accounting guidance related to the warrants the Company issued in January 2018, the Company’s previously issued consolidated financial statements for the Affected Periods should no longer be relied upon. As such, the Company is restating its consolidated financial statements for the Affected Periods included in this Annual Report. In addition, although immaterial to the Company’s consolidated financial statements for the year ended December 31, 2019, the Company has also revised these financial statements in connection with the restatement of its consolidated financial statements for the Affected Periods.

The warrants subject to the misapplication of the applicable accounting guidance were issued in connection with a public offering of the Company’s common stock and warrants completed on January 9, 2018 pursuant to the Company’s effective shelf registration statement (the “January 2018 Offering”). In this offering, the Company sold an aggregate of 10,000,000 shares of common stock and issued warrants to purchase up to 10,000,000 shares of common stock at a public offering price of $3.80 per share of common stock and accompanying warrant. Pursuant to the terms of the warrants, the warrant exercise price is $4.66 per share and the warrants will expire four years from the date of issuance. The material terms of the warrants are more fully described in Note 10—Stockholders’ Equity (Deficit).

Upon issuance of the warrants in the first quarter of 2018, and during each quarterly and annual period thereafter through December 31, 2019, the Company conducted an evaluation pursuant to applicable guidance in ASC 480 and ASC 815 to determine the appropriate balance sheet classification for the warrants. The Company concluded during such historical assessments that the warrants should be classified as liabilities in the consolidated balance sheets with subsequent changes in the fair value of the warrants reported in the consolidated statements of operations for the relevant periods. This historical liability classification conclusion was based primarily on a determination that the warrant holder may have the option to receive a cash settlement, equal to the Black-Scholes value of the remaining unexercised portion of the warrant as determined in accordance with the warrant, in the event of a fundamental transaction (as that term is defined in the warrant).

In connection with the initial classification and accounting assessment of the warrants issued during the quarterly period ended March 31, 2020, the Company re-assessed the accounting treatment for the warrants issued in January 2018 as part of its periodic warrant classification and accounting assessment, including consideration of all classification criteria under ASC 480 and ASC 815 pursuant to the accounting policy described in Note 1—Organization and Significant Accounting Policies.

During this re-assessment of the warrants issued in January 2018, the Company further examined the fundamental transaction settlement provisions of the warrants. Pursuant to the terms of the warrants, a warrant holder may only require cash settlement of a warrant in connection with certain fundamental transactions that are within the control of the Company. Upon the occurrence of a fundamental transaction that is not within the control of the Company, the warrant holder would receive the same type or form of consideration offered and paid to common stockholders. The Company recognizes that ASC 480 and ASC 815 do not preclude equity classification when the only events that can trigger a net cash settlement payment to a warrant holder are within the control of the Company. Additionally, ASC 815 does not preclude equity classification when the warrant holder’s settlement, upon the occurrence of an event outside the control of the Company, is in the same type or form of consideration that is provided to common stockholders.

The Company then applied such examinations and observations during its assessment and determined that (i) the warrants do not constitute a liability under ASC 480; (ii) the warrants meet the definition of a derivative under ASC 815; (iii) the warrant holder’s option to receive a net cash settlement payment only becomes exercisable upon the occurrence of certain specified fundamental transactions that are within the control of the Company; (iv) upon the occurrence of a fundamental transaction that is not within the control of the Company, the warrant holder would receive the same type or form of consideration offered and paid to common stockholders; (v) the warrants are indexed to the Company’s common stock; and (vi) the warrants meet all other conditions for equity classification under ASC 480 and ASC 815.

Therefore, based on the results of the Company’s assessment, the Company has now concluded that the warrants issued in January 2018 are freestanding equity-linked derivative instruments that meet the criteria for the own-equity scope exception to derivative accounting under ASC 815. Accordingly, the warrants should have been classified as equity and should have been reported at the time of issuance as a component of additional paid-in capital rather than as a warrant liability on the consolidated balance sheets. Furthermore, the Company should not have reported any subsequent changes in the warrants’ estimated fair value within its consolidated statements of operations.

Impact of the Restatement

The impact of the restatement on the consolidated balance sheets, statements of operations and statements of cash flows for the Affected Periods is presented below. The restatement had no impact on net cash flows from operating, investing or financing activities.

Impact of the Restatement and Revision - 2019

($ in thousands except share and per share amounts)

Consolidated Statements of Operations and Comprehensive Loss



	Year Ended December 31, 2019
	As Reported			Adjustments		As Revised
Change in fair value of warrant liability	$	(264	)	$	264	$	—
Total other income (expense), net	47			264		311
Net loss and comprehensive loss	(30,641		)	264		(30,377		)
Net loss per share, basic and diluted	$	(1.17	)	$	0.01	$	(1.16	)
Weighted-average common shares outstanding, basic and diluted	26,254,119			—		26,254,119

Consolidated Balance Sheets



	December 31, 2019
	As Reported			Adjustments			As Revised
Warrant liability	$	1,504		$	(1,504	)	$	—
Total liabilities	52,884			(1,504		)	51,380
Additional paid-in-capital	180,047			17,806			197,853
Accumulated deficit	(203,682		)	(16,302		)	(219,984		)
Total stockholders' (deficit) equity	(23,787		)	1,504			(22,283		)

Consolidated Statements of Cash Flows



	Year Ended December 31, 2019
	As Reported			Adjustments			As Revised
Net loss	$	(30,641	)	$	264		$	(30,377	)
Change in fair value of warrant liability	264			(264		)	—

Condensed Consolidated Statements of Operations and Comprehensive Loss



	Three Months Ended September 30, 2019
	As Reported			Adjustments			As Restated
Change in fair value of warrant liability	$	1,160		$	(1,160	)	$	—
Total other income (expense), net	1,236			(1,160		)	76
Net loss and comprehensive loss	(8,336		)	(1,160		)	(9,496		)
Net loss per share, basic and diluted	$	(0.32	)	$	(0.04	)	$	(0.36	)
Weighted-average common shares outstanding, basic and diluted	26,189,454			—			26,189,454

Condensed Consolidated Statements of Operations and Comprehensive Loss



	Nine Months Ended September 30, 2019
	As Reported			Adjustments		As Restated
Change in fair value of warrant liability	$	(9,030	)	$	9,030	$	—
Total other income (expense), net	(8,767		)	9,030		263
Net loss and comprehensive loss	(33,459		)	9,030		(24,429		)
Net loss per share, basic and diluted	$	(1.28	)	$	0.34	$	(0.94	)
Weighted-average common shares outstanding, basic and diluted	26,108,870			—		26,108,870

Condensed Consolidated Balance Sheets



	September 30, 2019
	As Reported			Adjustments			As Restated
Warrant liability	$	10,270		$	(10,270	)	$	—
Total liabilities	64,322			(10,270		)	54,052
Additional paid-in-capital	179,047			17,806			196,853
Accumulated deficit	(206,500		)	(7,536		)	(214,036		)
Total stockholders' (deficit) equity	(27,605		)	10,270			(17,335		)

Condensed Consolidated Statements of Cash Flows



	Nine Months Ended September 30, 2019
	As Reported			Adjustments			As Restated
Net loss	$	(33,459	)	$	9,030		$	(24,429	)
Change in fair value of warrant liability	9,030			(9,030		)	—

Condensed Consolidated Statements of Operations and Comprehensive Loss



	Three Months Ended June 30, 2019
	As Reported			Adjustments		As Restated
Change in fair value of warrant liability	$	(9,802	)	$	9,802	$	—
Total other income (expense), net	(9,699		)	9,802		103
Net loss and comprehensive loss	(18,098		)	9,802		(8,296		)
Net loss per share, basic and diluted	$	(0.69	)	$	0.37	$	(0.32	)
Weighted-average common shares outstanding, basic and diluted	26,069,734			—		26,069,734

Condensed Consolidated Statements of Operations and Comprehensive Loss



	Six Months Ended June 30, 2019
	As Reported			Adjustments		As Restated
Change in fair value of warrant liability	$	(10,190	)	$	10,190	$	—
Total other income (expense), net	(10,003		)	10,190		187
Net loss and comprehensive loss	(25,123		)	10,190		(14,933		)
Net loss per share, basic and diluted	$	(0.96	)	$	0.39	$	(0.57	)
Weighted-average common shares outstanding, basic and diluted	26,067,909			—		26,067,909

Condensed Consolidated Balance Sheets



	June 30, 2019
	As Reported			Adjustments			As Restated
Warrant liability	$	11,430		$	(11,430	)	$	—
Total liabilities	67,725			(11,430		)	56,295
Additional paid-in-capital	178,100			17,806			195,906
Accumulated deficit	(198,164		)	(6,376		)	(204,540		)
Total stockholders' (deficit) equity	(20,216		)	11,430			(8,786		)

Condensed Consolidated Statements of Cash Flows



	Six Months Ended June 30, 2019
	As Reported			Adjustments			As Restated
Net loss	$	(25,123	)	$	10,190		$	(14,933	)
Change in fair value of warrant liability	10,190			(10,190		)	—

Condensed Consolidated Statements of Operations and Comprehensive Loss



	Three Months Ended March 31, 2019
	As Reported			Adjustments		As Restated
Change in fair value of warrant liability	$	(388	)	$	388	$	—
Total other income (expense), net	(304		)	388		84
Net loss and comprehensive loss	(7,025		)	388		(6,637		)
Net loss per share, basic and diluted	$	(0.27	)	$	0.02	$	(0.25	)
Weighted-average common shares outstanding, basic and diluted	26,066,064			—		26,066,064

Condensed Consolidated Balance Sheets



	March 31, 2019
	As Reported			Adjustments			As Restated
Warrant liability	$	1,628		$	(1,628	)	$	—
Total liabilities	24,156			(1,628		)	22,528
Additional paid-in-capital	177,855			17,806			195,661
Accumulated deficit	(180,066		)	(16,178		)	(196,244		)
Total stockholders' (deficit) equity	(2,363		)	1,628			(735		)

Condensed Consolidated Statements of Cash Flows



	Three Months Ended March 31, 2019
	As Reported			Adjustments			As Restated
Net loss	$	(7,025	)	$	388		$	(6,637	)
Change in fair value of warrant liability	388			(388		)	—

Impact of the Restatement - 2018

($ in thousands except share and per share amounts)

Consolidated Statements of Operations and Comprehensive Loss



	Year Ended December 31, 2018
	As Reported			Adjustments			As Restated
Change in fair value of warrant liability	$	16,566		$	(16,566	)	$	—
Total other income (expense), net	15,888			(16,566		)	(678		)
Net loss and comprehensive loss	(12,673		)	(16,566		)	(29,239		)
Net loss per share, basic and diluted	$	(0.49	)	$	(0.64	)	$	(1.13	)
Weighted-average common shares outstanding, basic and diluted	25,795,721			—			25,795,721

Consolidated Balance Sheets



	December 31, 2018
	As Reported			Adjustments			As Restated
Warrant liability	$	1,240		$	(1,240	)	$	—
Total liabilities	21,164			(1,240		)	19,924
Additional paid-in-capital	177,677			17,806			195,483
Accumulated deficit	(172,327		)	(16,566		)	(188,893		)
Total stockholders' equity	5,198			1,240			6,438

Consolidated Statements of Cash Flows



	Year Ended December 31, 2018
	As Reported			Adjustments			As Restated
Net loss	$	(12,673	)	$	(16,566	)	$	(29,239	)
Change in fair value of warrant liability	(16,566		)	16,566			—

Condensed Consolidated Statements of Operations and Comprehensive Loss



	Three Months Ended September 30, 2018
	As Reported			Adjustments			As Restated
Change in fair value of warrant liability	$	1,464		$	(1,464	)	$	—
Total other income (expense), net	1,313			(1,464		)	(151		)
Net loss and comprehensive loss	(7,031		)	(1,464		)	(8,495		)
Net loss per share, basic and diluted	$	(0.27	)	$	(0.06	)	$	(0.33	)
Weighted-average common shares outstanding, basic and diluted	26,046,666			—			26,046,666

Condensed Consolidated Statements of Operations and Comprehensive Loss



	Nine Months Ended September 30, 2018
	As Reported			Adjustments			As Restated
Change in fair value of warrant liability	$	5,733		$	(5,733	)	$	—
Total other income (expense), net	5,222			(5,733		)	(511		)
Net loss and comprehensive loss	(19,826		)	(5,733		)	(25,559		)
Net loss per share, basic and diluted	$	(0.77	)	$	(0.22	)	$	(0.99	)
Weighted-average common shares outstanding, basic and diluted	25,707,978			—			25,707,978

Condensed Consolidated Balance Sheets



	September 30, 2018
	As Reported			Adjustments			As Restated
Warrant liability	$	12,073		$	(12,073	)	$	—
Total liabilities	31,991			(12,073		)	19,918
Additional paid-in-capital	177,336			17,806			195,142
Accumulated deficit	(179,480		)	(5,733		)	(185,213		)
Total stockholders' (deficit) equity	(2,296		)	12,073			9,777

Condensed Consolidated Statements of Cash Flows



	Nine Months Ended September 30, 2018
	As Reported			Adjustments			As Restated
Net loss	$	(19,826	)	$	(5,733	)	$	(25,559	)
Change in fair value of warrant liability	(5,733		)	5,733			—

Condensed Consolidated Statements of Operations and Comprehensive Loss



	Three Months Ended June 30, 2018
	As Reported			Adjustments			As Restated
Change in fair value of warrant liability	$	711		$	(711	)	$	—
Total other income (expense), net	569			(711		)	(142		)
Net loss and comprehensive loss	(7,578		)	(711		)	(8,289		)
Net loss per share, basic and diluted	$	(0.29	)	$	(0.03	)	$	(0.32	)
Weighted-average common shares outstanding, basic and diluted	26,039,169			—			26,039,169

Condensed Consolidated Statements of Operations and Comprehensive Loss



	Six Months Ended June 30, 2018
	As Reported			Adjustments			As Restated
Change in fair value of warrant liability	$	4,269		$	(4,269	)	$	—
Total other income (expense), net	3,909			(4,269		)	(360		)
Net loss and comprehensive loss	(12,795		)	(4,269		)	(17,064		)
Net loss per share, basic and diluted	$	(0.50	)	$	(0.17	)	$	(0.67	)
Weighted-average common shares outstanding, basic and diluted	25,535,827			—			25,535,827

Condensed Consolidated Balance Sheets



	June 30, 2018
	As Reported			Adjustments			As Restated
Warrant liability	$	13,537		$	(13,537	)	$	—
Total liabilities	34,359			(13,537		)	20,822
Additional paid-in-capital	176,953			17,806			194,759
Accumulated deficit	(172,449		)	(4,269		)	(176,718		)
Total stockholders' equity	4,352			13,537			17,889

Condensed Consolidated Statements of Cash Flows



	Six Months Ended June 30, 2018
	As Reported			Adjustments			As Restated
Net loss	$	(12,795	)	$	(4,269	)	$	(17,064	)
Change in fair value of warrant liability	(4,269		)	4,269			—

Condensed Consolidated Statements of Operations and Comprehensive Loss



	Three Months Ended March 31, 2018
	As Reported			Adjustments			As Restated
Change in fair value of warrant liability	$	3,558		$	(3,558	)	$	—
Total other income (expense), net	3,340			(3,558		)	(218		)
Net loss and comprehensive loss	(5,217		)	(3,558		)	(8,775		)
Net loss per share, basic and diluted	$	(0.21	)	$	(0.14	)	$	(0.35	)
Weighted-average common shares outstanding, basic and diluted	25,026,890			—			25,026,890

Condensed Consolidated Balance Sheets



	March 31, 2018
	As Reported			Adjustments			As Restated
Warrant liability	$	14,248		$	(14,248	)	$	—
Total liabilities	34,923			(14,248		)	20,675
Additional paid-in-capital	176,402			17,806			194,208
Accumulated deficit	(164,871		)	(3,558		)	(168,429		)
Total stockholders' equity	11,379			14,248			25,627

Condensed Consolidated Statements of Cash Flows



	Three Months Ended March 31, 2018
	As Reported			Adjustments			As Restated
Net loss	$	(5,217	)	$	(3,558	)	$	(8,775	)
Change in fair value of warrant liability	(3,558		)	3,558			—