Note

– Preferred Stock and

Common Stock Warrants

Preferred Stock

August 2018,

we sold an aggregate of

50,000

shares of Series A Convertible Preferred Stock, par value

$0.0001

per share (the “Series A Preferred Stock), at

$1,000

per share for an aggregate purchase price of

$50

million and we issued an additional

1,000

shares of Series A Preferred Stock in aggregate as origination fees to the purchasers of the Series A Preferred Stock. In

September 2018,

we sold an aggregate of

29,055

shares of Series B Convertible Preferred Stock, par value

$0.0001

per share (the “Series B Preferred Stock” and, together with the Series A Preferred Stock, the “Convertible Preferred Stock”), at

$1,000

per share for an aggregate purchase price of

$29.055

million and we issued an additional

581

shares of Series B Preferred Stock in aggregate as origination fees to the purchasers of the Series B Preferred Stock. Warrants were issued together with the shares of Series A Preferred Stock and the Series B Preferred Stock (collectively, “Common Stock Warrants”).

May 2019,

we sold an aggregate of

20,945

shares of Series B Preferred Stock, at

$1,000

per share for an aggregate purchase price of

$20.945

million and we issued an additional

418

shares of Series B Preferred Stock in aggregate as origination fees to the purchase of such “Series B Preferred Stock. Warrants were issued together with such shares of Series B Preferred Stock.

The shares of Convertible Preferred Stock bear dividends at a rate of

12%

per annum, which are cumulative and accrue daily from the date of issuance on the

$1,000

stated value. Such dividends are payable quarterly and

may

be paid in cash or in-kind. During the

three

months ended

March 31, 2020

and

2019

, the Company paid-in-kind

$3.4

million and

$11.2

million of dividends, respectively, to the holders of the Convertible Preferred Stock. On

January 9, 2020,

the Company declared dividends to the holders of the Convertible Preferred Stock as of the close of business on

December 15, 2019.

January 15, 2020,

the Company paid-in-kind

$3.4

million of dividends to the holders of the Convertible Preferred Stock.

Common Stock Warrants

The Company revalues the Common Stock Warrants at each balance sheet date and recognized a gain of

$8.3

million and a loss of

$0.2

million as of

March 31, 2020

and

2019

, respectively. The Common Stock Warrant liabilities are included in Level

of the fair value hierarchy.

The Company used the Monte Carlo simulation model to estimate the fair value of the Common Stock Warrants using the following assumptions:

	March 31,			December 31,
	2020			2019
Stock price	$	1.88		$	6.14
Exercise price	$	0.01		$	0.01
Risk-free rate		0.2	%		1.6	%
Volatility		48.8	%		27.6	%
Term (years)		1.6			1.8

Beneficial Conversion Feature

ASC

470

– Debt – Debt with conversion and Other Options (“ASC

470

20”

) defines a beneficial conversion feature (“BCF”) as a nondetachable conversion feature that is in the money at the issuance date. The Company was required by ASC

470

to allocate a portion of the proceeds from the Series A Preferred Stock equal to the intrinsic value of the BCF to additional paid-in capital. We are recording the accretion of the

$2.5

million Series A Preferred Stock discount attributable to the BCF as a deemed dividend using the effective yield method over the period prior to the expected conversion date. Deemed dividends on the Series A Preferred Stock for each of the

three

months ended

March 31, 2020

and

March 31, 2019

was

$0.1

million and

$0.6

million, respectively.