COMMON SHARES

12 Months Ended

Dec. 31, 2019

WARRANTS

On July 23, 2019, 1,666,667 warrants were issued to certain entities affiliated with B. Riley in connection with the Equitization Transactions described in Note 19. Each warrant can be converted to one share of our common stock at an exercise price of $0.01 per share. As of December 31, 2019, all 1,666,667 warrants remain unexercised.

The warrants were contemplated in the April 5, 2019 Letter Agreement (defined in Note 19) and on June 14, 2019, the issuance of the warrants was approved by stockholders in the Company's annual stockholder meeting, which established the grant date for accounting purposes. The grant date fair value of the warrants was estimated to be $6.1 million using the Black-Scholes option pricing model. The warrants may not be put back to the Company for cash, and they qualify for equity classification. The grant date value of the warrants was included as part of the original-issue discount based on the relative fair value method for Tranche A-3 of the Last Out Term Loans described in Note 15 because the value was part of the consideration required by the Tranche A-3 lender in order to extend the Tranche A-3 loans.

The Black-Scholes option pricing model key assumptions are as follows:



Stock price ⁽¹⁾	$	0.385
Exercise price	$	0.010
Time to expiration	3 years
Annualized volatility	121.00		%
Annual rate of quarterly dividends	—		%
Discount rate - bond equivalent rate	2.30		%
Expiration of option	April 5, 2022
Warrant value	$	0.380

⁽¹⁾The stock price is the April 5, 2019 closing price, the date the Black-Scholes option pricing model was performed. The stock price used in the model was not adjusted for the one-for-ten reverse stock split.

COMMON SHARES

On June 14, 2019, after approval of the stockholders at the Company's annual meeting of stockholders, the Company amended its Restated Certificate of Incorporation to increase the authorized number of shares of the Company's common stock from 200,000,000 shares to 500,000,000 shares to allow for the Equitization Transactions described in Note 19. The reverse stock split on July 24, 2019, described in Note 1 did not affect the number of authorized shares.