PREFERRED STOCK AND STOCKHOLDERS’ DEFICIT

Series A Preferred Stock

As of December 31, 2018, the carrying value of Series A Preferred Stock included accrued dividends at 11.5% and discount accretion from the date of issuance. Dividends and discount accretion totaled $0.3 million and $0.1 million, respectively, for each of the years ended December 31, 2018 and 2017 and were recorded as a reduction to additional paid-in capital. The following table sets forth the activity recorded during the years ended December 31, 2018 and 2017 related to the Series A Preferred Stock (in thousands):



Series A Preferred Stock carrying value at December 31, 2016	$	2,462
Dividends and discount accretion through December 31, 2017 ¹	365
Series A Preferred Stock carrying value at December 31, 2017	$	2,827
Dividends and discount accretion through December 31, 2018 ¹	404
Series A Preferred Stock carrying value at December 31, 2018	$	3,231

¹Dividends recorded reflect the increase in the Liquidation Preference associated with unpaid dividends.

Series C Preferred Stock

As of December 31, 2018, the carrying value of Series C Preferred Stock included accrued dividends at 11.5% and discount accretion from the date of issuance. Dividends and discount accretion totaled $10.1 million and $0.7 million, respectively, for the year ended December 31, 2018 and $9.1 million and $0.6 million, respectively, for the year ended December 31, 2017 and were recorded as a reduction to additional paid-in capital. The following table sets forth the activity recorded during the years ended December 31, 2018 and 2017 related to the Series C Preferred Stock (in thousands):



Series C Preferred Stock carrying value at December 31, 2016	$	69,540
Dividends and discount accretion through December 31, 2017 ¹	9,712
Series C Preferred Stock carrying value at December 31, 2017	$	79,252
Dividends and discount accretion through December 31, 2018 ¹	10,806
Series C Preferred Stock carrying value at December 31, 2018	$	90,058

¹Dividends recorded reflect the increase in the Liquidation Preference associated with unpaid dividends.

First Quarter 2017 Private Placement

On March 1, 2017, the Company entered into a Stock Purchase Agreement (the “First Quarter Stock Purchase Agreement”) with Venor Capital Master Fund Ltd., Map 139 Segregated Portfolio of LMA SPC, Venor Special Situations Fund II LP and Trevithick LP (the “First Quarter Stockholders”). Pursuant to the First Quarter Stock Purchase Agreement, the Company sold an aggregate of 3.3 million shares of its common stock (the “First Quarter Shares”) for aggregate gross proceeds of approximately $5.1 million in a private placement transaction (the “First Quarter 2017 Private Placement”). The purchase price for each Share was $1.5366, which was negotiated between the Company and the First Quarter Stockholders based on the volume-weighted average price of the Company's common stock on the Nasdaq Global Market on March 1, 2017.

Second Quarter 2017 Private Placement

On June 29, 2017, the Company entered into a Stock Purchase Agreement (the “Second Quarter Stock Purchase Agreement”) with a fund managed by Ares Management L.P. (“Ares” or the “Second Quarter Stock Purchaser”). Pursuant to the terms of the Second Quarter Stock Purchase Agreement, the Company issued and sold to the Second Quarter Stock Purchaser in a private placement (the “Second Quarter 2017 Private Placement”) 6,359,350 shares of Common Stock (the “Second Quarter Shares”) at a price of $2.50 per share, for proceeds of approximately $15.9 million, net of $0.2 million in associated costs.

Second Quarter Registration Rights Agreement

In connection with the 2017 Warrants and the Second Quarter 2017 Private Placement, the Company entered into a Registration Rights Agreement (the “Second Quarter 2017 Registration Rights Agreement”) with the holders of the 2017 Warrants and the Second Quarter Stock Purchaser. Pursuant to the Second Quarter 2017 Registration Rights Agreement, subject to certain exceptions, the Company is required, upon the request of the Second Quarter Stock Purchaser and holders of the 2017 Warrants, to register the resale of the Second Quarter Shares and the shares of Common Stock issuable upon exercise of the 2017 Warrants. Pursuant to the terms of the Second Quarter 2017 Registration Rights Agreement, these registration rights will not become effective until twelve months after the Closing Date, and the costs incurred in connection with such registrations will be borne by the Company.

2017 Warrants

In connection with the Second Lien Note Facility (as defined above), the Company issued warrants (the “2017 Warrants”) to the purchasers of the Second Lien Notes (as defined below) pursuant to a Warrant Purchase Agreement dated as of June 29, 2017 (the “Warrant Purchase Agreement”). The 2017 Warrants entitle the purchasers of the Warrants to purchase shares of Common Stock, representing at the time of any exercise of the 2017 Warrants an equivalent number of shares equal to 4.99% of the Common Stock of the Company on a fully diluted basis, subject to the terms of the Warrant Agreement governing the 2017 Warrants, dated as of June 29, 2017 (the “Warrant Agreement”); provided, however, the 2017 Warrants may not be converted to the extent that, after giving effect to such conversion, the holders of the 2017 Warrants would beneficially own, in the aggregate, in excess of (i) 19.99% of the shares of Common Stock outstanding as of June 29, 2017 (the “Closing Date”) minus (ii) the shares of Common Stock that were sold pursuant to the Second Quarter 2017 Private Placement (as defined below) (the “Conversion Cap”). The Conversion Cap will not apply to the 2017 Warrants if the Company obtains the approval of its stockholders for the removal of the Conversion Cap, which the Company is required to take certain steps to attempt to obtain, subject to the terms of the Warrant Agreement.

The 2017 Warrants have a 10-year term and an initial exercise price of $2.00 per share, and may be exercised by payment of the exercise price in cash or surrender of shares of Common Stock into which the 2017 Warrants are being converted in an aggregate amount sufficient to pay the exercise price. The exercise price and the number of shares that may be acquired upon exercise of the 2017 Warrants are subject to adjustment in certain situations, including price based anti-dilution protection whereby, subject to certain exceptions, if the Company later issues Common Stock or certain Common Stock Equivalents (as defined in the Warrant Agreement) at a price less than either the then-current market price per share or exercise price of the 2017 Warrants, then the exercise price will be decreased and the percentage of shares of Common Stock issuable upon exercise of the 2017 Warrants will remain the same, giving effect to such issuance. Additionally, the 2017 Warrants have standard anti-dilution protections if the Company effects a stock split, subdivision, reclassification or combination of its Common Stock or fixes a record date for the making of a dividend or distribution to stockholders of cash or certain assets. Upon the occurrence of certain business combinations, the 2017 Warrants will be converted into the right to acquire shares of stock or other securities or property (including cash) of the successor entity.

See 2017 Warrants within Note 2 - Summary of Significant Accounting Policies for additional information related to the estimated fair value of the 2017 Warrants.

Treasury Stock

During the years ended December 31, 2018 and 2017, 51,394 and 5,106 shares, respectively, were surrendered to satisfy tax withholding obligations on the exercise of stock options and the vesting of restricted stock awards. During the year ended December 31, 2018, an additional 257,305 shares were surrendered in net settlement of option exercises. The Company did not hold any shares of treasury stock at December 31, 2016 as the balance was utilized to issue shares, reflected as consideration, in the Home Solutions acquisition.