2.	Restatement of Consolidated Financial Statements

Background

March 2014,

pursuant to a registered public offering and note conversion agreement with certain note holders of the Company, the Company issued warrants (“Warrants”) to purchase common stock of the Company. These Warrants were initially classified as equity. The Warrants included a cash settlement feature that could arise in certain very limited events, therefore, the Company is now of the view that the Warrants should have been accounted for as a liability, recorded at fair value at the date of issuance, and marked to market at each reporting period. All changes in fair value should have been recorded in earnings. The company has evaluated the financial statement impact of changing the warrant classification from equity to liability for previously reported periods and concluded that this impact is material.

As a result, the amounts previously reported for the periods ended

March 31,

June 30,

September 30

and

December 31, 2018

and

March 31,

June 30,

and

September 30 2019

are restated in these financial statements, collectively known as the “Affected Periods.” See Note

16:

“

Quarterly Financial Information (Unaudited)

” for more information on further restatements affecting quarterly periods.

Impact of the Restatement

The cumulative effect of these adjustments on the Company’s previously-reported accumulated deficit and total shareholders’ equity was an increase of

$27.4

million and a decrease of

$28.5

million, respectively, as of the beginning of the fiscal year ended

December 31, 2018.

These adjustments do

not

impact the amounts previously reported for the Company’s cash and cash equivalents, net cash used for operating activities, revenue or operating expenses in any of the Affected Periods.

All of the following adjustments relate to marking the Warrants to fair value at period end. The effects of the restatement on the following financial statement line items as of and for the periods indicated are summarized in the following tables:

	Balance Sheet
(In thousands )	As Previously Reported			Adjustments			As Restated
As of December 31, 2018
Warrant liability	$	—		$	28,516		$	28,516
Total liabilities	$	2,319		$	28,516		$	30,835
Additional paid in capital	$	114,160		$	(1,152	)	$	113,008
Accumulated deficit	$	(71,031	)	$	(27,364	)	$	(98,395	)
Total shareholders’ equity	$	43,148		$	(28,516	)	$	14,632

	Statement of Operations
(In thousands, except per share data)	As Previously Reported			Adjustments			As Restated
For the year ended December 31, 2018
Change in fair value of warrants	$	—		$	(28,271	)	$	(28,271	)
Total other expense	$	(396	)	$	(28,271	)	$	(28,667	)
Net income (loss) before provision for income taxes	$	3,266		$	(28,271	)	$	(25,005	)
Net income (loss)	$	3,266		$	(28,271	)	$	(25,005	)
Net income (loss) attributable to common stockholders	$	2,927		$	(28,271	)	$	(25,344	)
Basic net income (loss) per common share	$	0.18		$	(1.74	)	$	(1.56	)
Diluted net income (loss) per common share	$	0.14		$	(1.70	)	$	(1.56	)

	Statement of Shareholders’ Equity / Deficit
(In thousands)	As Previously Reported			Adjustments			As Restated
From March 31, 2014 to January 1, 2018
Additional paid-in capital	$	84,036		$	(20,531	)	$	63,505
Accumulated deficit	$	(73,958	)	$	907		$	(73,051	)
Total shareholders’ equity / (deficit)	$	10,092		$	(19,624	)	$	(9,532	)

	Statement of Cash Flows
(In thousands )	As Previously Reported		Adjustments			As Restated
For the year ended December 31, 2018
Net income (loss)	$	3,266	$	(28,271	)	$	(25,005	)
Change in fair value of warrant liability	$	—	$	28,271		$	28,271