Stockholders' Equity

9 Months Ended

Sep. 30, 2021

Equity [Abstract]

Stockholders' Equity

NOTE 17. STOCKHOLDERS’ EQUITY

At-The-Market Equity Sales Agreement

On May 28, 2021, the Company entered into an Equity Sales Agreement (the “ATM Sales Agreement”) with William Blair & Company, L.L.C. (“William Blair”) pursuant to which the Company may sell shares of its common stock having an aggregate offering price of up to $50 million, from time to time, through an “at-the-market” equity offering program under which William Blair will act as sales agent. Subject to the terms and conditions of the ATM Sales Agreement, William Blair may sell shares by any method deemed to be an “at-the-market” offering as defined in Rule 415 under the U.S. Securities Act of 1933, as amended (the “Securities Act"). The Company is not obligated to sell any shares under the ATM Sales Agreement. The Board has authorized management to sell up to a specified number of shares under the Sales Agreement within certain share price levels. The Board may choose to change such share number and share price authorizations at any time. William Blair is entitled to a commission of 3% of the aggregate gross proceeds from each sale of shares occurring pursuant to the Sales Agreement. There were no sales during the three months ended September 30, 2021, but there were 92,497 shares of common stock sold during the nine months ended September 30, 2021 under the ATM Sales Agreement at a price per share of $8.80 resulting in aggregate gross proceeds of $0.8 million, which was recorded to contributed capital.

December 2020 Securities Purchase Agreement

On December 24, 2020, the Company entered into a securities purchase agreement (the “December 2020 Securities Purchase Agreement”) with Jack W. Schuler, John Patience, Matthew Strobeck, Mark C. Miller, Thomas D. Brown and Jack Phillips, or entities affiliated with such persons (collectively, the “Original Purchasers”), for the issuance and sale by the Company of an aggregate of 4,166,663 shares of the Company’s common stock (the “Shares”), to the Original Purchasers in an offering exempt from registration pursuant to Section 4(a)(2) of the Securities Act, and Rule 506 promulgated thereunder. Each of Jack W. Schuler, John Patience, Matthew Strobeck, Mark C. Miller, Thomas D. Brown and Jack Phillips is a member of the Board. Mr. Phillips also serves as the Company’s President and Chief Executive Officer. Additionally, on December 24, 2020, the Company entered into a registration rights agreement (the “Registration Rights Agreement”) with the Original Purchasers pursuant to which the Company agreed to register the resale of the Shares pursuant to the terms set forth therein.

The Jack W. Schuler Living Trust (the “Schuler Trust”), which was the entity affiliated with Jack W. Schuler that originally entered into the December 2020 Securities Purchase Agreement for the purchase of 3,964,843 Shares for an aggregate purchase price of approximately $30.5 million, subsequently entered into an assignment and assumption agreement whereby it assigned all of its rights and obligations as an Original Purchaser to three other entities under the December 2020 Securities Purchase Agreement (collectively, the “Schuler Purchasers”). These three entities are related to Jack W. Schuler but are not affiliates of his.

Pursuant to the December 2020 Securities Purchase Agreement, the Original Purchasers agreed to purchase the Shares at a purchase price (determined in accordance with Nasdaq rules relating to the “market value” of the Company’s common stock) of $7.68 per share, which was equal to the consolidated closing bid price reported by Nasdaq immediately preceding the time the Company entered into the December 2020 Securities Purchase Agreement, for an aggregate purchase price of approximately $32 million.

The December 2020 Securities Purchase Agreement contemplated that the closing of the purchase and sale of the Shares would occur in three approximately equal tranches on the dates specified in the agreement or such other dates as the parties may agree, with the first and second tranches having closed on February 19, 2021 and April 9, 2021, respectively, whereby the Company received total proceeds of approximately $21.3 million which were recorded to contributed capital.

On September 17, 2021, the Company entered into a rescission agreement (the “Rescission Agreement”) with the Schuler Purchasers and the Schuler Trust pursuant to which, effective as of January 29, 2021, the

Company and the Schuler Purchasers agreed to rescind and unwind the December 2020 Securities Purchase Agreement and the Registration Rights Agreement for all legal, tax and financial purposes ab initio as if the related transactions, including the issuance and sale of an aggregate of 2,643,228 Shares in the first two tranche closings and the third tranche (as discussed below) under the December 2020 Purchase Agreement, had never occurred with respect to the Schuler Purchasers and the Company. The Rescission Agreement was entered into due to the unanticipated legal, tax and/or financial consequences that may have otherwise resulted from the December 2020 Purchase Agreement and the Registration Rights Agreement. The 2,643,228 Shares re-acquired by the Company from the Schuler Purchasers as a result of the Rescission Agreement are treated as a reduction to contributed capital and are not outstanding for purposes of the calculation of basic and diluted earnings per share.

On September 30, 2021, the Company closed the final third tranche in connection with the December 2020 Securities Purchase Agreement and received total proceeds of approximately $0.5 million. In accordance with the Rescission Agreement, the Schuler Purchasers did not participate in the third tranche. During the nine months ended September 30, 2021, the Company issued 201,820 Shares and received total proceeds of approximately $1.5 million under the December 2020 Securities Purchase Agreement, which were recorded to contributed capital, after giving effect to the Rescission Agreement.

September 2021 Securities Purchase Agreement

On September 22, 2021, the Company entered into a new securities purchase agreement (the “September 2021 Securities Purchase Agreement”) with the Schuler Purchasers for the issuance and sale by the Company of an aggregate of 3,954,546 shares of the Company’s newly designated Series A Preferred Stock, par value $0.001 per share (the “Series A Preferred Shares”), to the Schuler Purchasers in an offering exempt from registration pursuant to Section 4(a)(2) of the Securities Act and Rule 506 promulgated thereunder.

Pursuant to the September 2021 Securities Purchase Agreement, the Schuler Purchasers agreed to purchase the Series A Preferred Shares at a purchase price of $7.70 per share for an aggregate purchase price of approximately $30.5 million.

The September 2021 Securities Purchase Agreement contemplated that the closing of the purchase and sale of the Series A Preferred Shares would occur in two tranches. The first tranche closed on the date of the execution of the September 2021 Securities Purchase Agreement whereby an aggregate of 2,636,364 Series A Preferred Shares were issued and sold to the Schuler Purchasers. The Company received total proceeds of approximately $20.3 million, which was recorded to contributed capital during the three months ended September 30, 2021.

On October 29, 2021, the Company closed the final second tranche in connection with the September 2021 Securities Purchase Agreement and received total proceeds of approximately $10.2 million. See Note 20, Subsequent Events for additional information.

The Company’s Series A Preferred Stock ranks, with respect to the payment of dividends, senior to the Company’s common stock and to any other class of securities it may issue in the future that is specifically designated as junior to the Series A Preferred Stock. The holders of Series A Preferred Stock are entitled to receive dividends, out of any assets at the time legally available therefor, prior in preference to any declaration or payment of any dividend on the Company’s common stock at the rate of $0.25 per share per annum on each outstanding share of Series A Preferred Stock (as appropriately adjusted for any subsequent stock splits, stock dividends, combinations, reclassifications and the like), when, as and if declared by the Board.

In the event of a voluntary or involuntary liquidation, dissolution or winding up of the Company, the holders of Series A Preferred Stock then outstanding are entitled to participate with the holders of the Company’s common stock or any other junior securities then outstanding, pro rata on an as-converted basis, in the distribution of all the remaining assets and funds of the Company available for distribution to its stockholders.

The holders of Series A Preferred Stock generally have no voting rights with respect to their shares of Series A Preferred Stock, except as provided by law or to amend, modify or waive any provision of the certificate of designation of the Series A Preferred Stock.

Each share of Series A Preferred Stock is convertible, at the option of the holder, at any time into one share of the Company’s common stock. Additionally, each share of Series A Preferred Stock will automatically be converted into one share of the Company’s common stock immediately upon a sale of all outstanding stock of the Company or a merger of the Company into another corporation where the pre-merger Company’s stockholders cease to be the controlling stockholders of the post-merger corporation.

Convertible Notes Exchange Agreements

During the three months ended September 30, 2021, certain holders of the Notes exchanged $46.0 million in aggregate principal amount of Notes held by them for 5,945,718 shares of the Company's common stock pursuant to their respective exchange agreement. Using the closing stock price on September 22, 2021 of $5.81, the 5,945,718 shares of the Company's common stock were determined to have a value of $34.5 million, which was recorded to contributed capital during the three months ended September 30, 2021. See Note 10, Convertible Notes, for additional information.

On October 15, 2021, a holder of the Notes exchanged $5.0 million in aggregate principal amount of Notes held by it for 657,256 shares of the Company's common stock pursuant to its respective exchange agreement. See Note 20, Subsequent Events for additional information.