NOTE 6. STOCKHOLDERS' EQUITY

Preferred Stock

We are authorized to issue 1.0 million shares of preferred stock with a par value of $0.0001 per share with such designations, rights and preferences as may be determined by our Board of Directors.

Series A

In January 2018, we issued 0.03 million shares of Series A preferred stock as an element of the Exchange (see Note 4). The Series A preferred stock had an 8.0% dividend payable quarterly in arrears and accumulated whether or not earned or declared beginning April 1, 2018. In the three months and nine months ended September 30, 2018, we issued dividends in kind valued at $0.5 million and $1.6 million, respectively. Each outstanding share of Series A preferred stock was convertible into 163.573 shares of common stock or, if an election was made by an eligible holder, into warrants representing the right to receive 163.573 shares of common stock. The Series A preferred stock was recorded at $62.0 million, less stock issuance costs of $3.6 million, based on an allocation of the Exchange consideration to the various share classes and securities based on their relative fair values.

We evaluated the nondetachable conversion option embedded in the Series A preferred stock and determined that a beneficial conversion feature (“BCF”) existed as of the closing date of the Exchange. As the intrinsic value of the BCF exceeded the value allotted to the Series A preferred stock, we separately recognized a discount of $62.0 million as a reduction to the value of the Series A preferred stock.

In September 2018, all the shares of the Series A preferred stock were converted into 0.7 million shares of common stock and 94.8 million Series E warrants with an exercise price of $0.0001. Upon conversion, the Series A preferred stock was derecognized, and we recorded a deemed dividend of $5.3 million to recognize the remainder of the value of the BCF. As of September 30, 2018, there were no issued or outstanding shares of Series A preferred stock.

Series B

In January 2018, we issued 0.9 million shares of Series B preferred stock as an element of the Exchange (see Note 4). The Series B preferred stock had no stated dividend and dividends were at the discretion of our Board of Directors. Each outstanding share of Series B preferred stock was convertible into 1.08689 shares of common stock or, if an election was made by an eligible holder, into warrants representing the right to receive 1.08689 shares of common stock. The Series B preferred stock was senior to our common stock and junior to the Series A preferred stock in the event of our liquidation. The Series B preferred stock was recorded at $10.8 million based on an allocation of the Exchange consideration to the various share classes and securities based on their relative fair values. Similar to the Series A preferred stock, we determined that a BCF existed for the Series B preferred stock. As the intrinsic value of the BCF exceeded the value allotted to the Series B preferred stock, we separately recognized a discount of $10.8 million as a reduction in the value of the Series B preferred stock.

In March 2018, all the shares of the Series B preferred stock were converted into 0.2 million shares of common stock and 14.1 million Series D warrants with an exercise price of $0.0001. Upon conversion, the Series B preferred stock was derecognized, and we fully recognized the value of the BCF as a deemed dividend. As of September 30, 2018, there were no issued or outstanding shares of Series B preferred stock.

Common Stock

As of September 30, 2018, we are authorized to issue 20.0 million shares of common stock with a par value of $0.0001 per share.

The following table presents the changes in the number of shares outstanding:

	2018
Shares issued:
Balance as of January 1		473
Issue of shares upon vesting of restricted stock units		268
Issue of shares on exercises of stock options		16
Issue of shares in the Exchange		41
Issue of shares on the conversion of the Series A preferred stock		704
Issue of shares on the conversion of the Series B preferred stock		225
Issue of shares on exercises of Series C warrants		15
Issue of shares on exercises of Series D warrants		117
Balance as of September 30		1,859

Shares held as treasury stock:
Balance as of January 1		2
Purchase of treasury stock		109
Balance as of September 30		111

Shares outstanding as of September 30		1,748

Warrants

Series A and Series B

As of September 30, 2018, we have 0.2 million Series A warrants and 0.2 million Series B warrants outstanding, both with an expiration date of July 27, 2021. The Series A warrants and Series B warrants entitle the holders to purchase 0.05 shares of our common stock, have exercise prices of $10.30 and $12.88, respectively, and become exercisable 30 days in advance of their expiration date.

Series C

In January 2018, we issued 8.3 million Series C warrants as an element of the Exchange (see Note 4). Each Series C warrant entitles the holder to purchase 0.05 shares of our common stock, has an exercise price of $0.0001 and has no expiration date. The Series C warrants are immediately exercisable by the holder and are exercisable by us in connection with a full redemption of the Series A preferred stock and Series B preferred stock provided that it does not result in a holder owning 10% or more of our outstanding shares of common stock, or upon a change in control. The Series C warrants were recorded at $4.8 million based on an allocation of the Exchange consideration to the various share classes and securities based on their relative fair values.

As of September 30, 2018, 0.3 million of the Series C warrants have been exercised, and there are 8.0 million Series C warrants outstanding.

Series D

In March 2018, we issued 14.1 million Series D warrants in connection with the conversion of the Series B preferred stock. Each warrant entitles the holder to purchase 0.05 shares of our common stock, has an exercise price of $0.0001 and has no expiration date. The Series D warrants are immediately exercisable by the holders and are exercisable us in connection with a full redemption of the Series A preferred stock and Series B preferred stock, provided that it does not result in a holder owning 10% or more of our outstanding shares of common stock, or upon a change in control. The Series D warrants were recorded at their fair value of $23.0 million, which was based on the price of our common stock as of the date of the conversion as the Series D warrants have a nominal strike price, no expiration date and no other relevant restrictions.

As of September 30, 2018, 2.4 million of the Series D warrants have been exercised, and there are 11.7 million Series D warrants outstanding.

Series E

In September 2018, we issued 94.8 million Series E warrants in connection with the conversion of the Series A preferred stock. Each warrant entitles the holder to purchase 0.05 shares of our common stock, has an exercise price of $0.0001 and has no expiration date. The Series E warrants are immediately exercisable by the holders and are exercisable by us in connection with a full redemption of the Series A preferred stock, provided that it does not result in a holder owning 10% or more of our outstanding shares of common stock, or upon a change in control. The Series E warrants were recorded at their fair value of $54.0 million, which was based on the price of our common stock as of the date of the conversion as the Series E warrants have a nominal strike price, no expiration date and no other relevant restrictions.