Warrants to Acquire Shares of Common Stock

The following is a summary of the Company's warrants to acquire shares of common stock activity for the three months ended March 31, 2018 (in thousands):



Warrant Issuance	Outstanding, December 31, 2017	Granted	Canceled		Outstanding, March 31, 2018	Expiration
Series A Convertible Preferred	—	774	—		774	September 2023
2017 Equilibria	316	—	—		316	December 2022
Galena February 2017	567	—	(501	)	66	February 2022
Galena Other	80	—	—		80	January 2022
	963	774	(501	)	1,236

Warrants to acquire shares of common stock consist of warrants that may be settled in cash, which are liability-classified warrants, and equity-classified warrants. During the three months ended March 31, 2018, a total of 501,000 of the Galena February 2017 liability-classified warrants to purchase shares of common stock were canceled under various warrant exchange agreements. The Company issued 54,613 shares of its common stock in exchange for the surrender and cancellation of warrants to acquire 121,667 shares of its common stock and $0.9 million in convertible promissory notes in exchange for the surrender and cancellation of warrants to acquire 379,333 shares of its common stock, as described in Note 7. The fair value of the common stock and promissory notes exchanged totaled $1.2 million, which exceeded the fair value of the warrant liability of the warrants canceled by $0.7 million and is recorded as loss on settlement of liability-classified warrants in the condensed consolidated statement of operations for the three months ended March 31, 2018.

Warrants Classified as Liabilities

Liability-classified warrants consist of warrants to acquire common stock issued in connection with previous equity financings for the Series A Convertible Preferred, Galena's February 2017 financing, and various other Galena equity financings that were assumed by the Company at the consummation of the Merger. These warrants may be settled in cash and were determined to not be indexed to the Company’s common stock.

The initial exercise price of the warrants to acquire shares of common stock in connection with the Series A Convertible Preferred is $5.80 per share of common stock, subject to standard adjustments for certain transactions affecting the Company’s securities (such as stock dividends, stock splits, and the like). From the original issue date until the one year anniversary of a Qualified Offering, the initial exercise price and number of warrants to acquire shares of common stock are subject to anti-dilution protection in the event of non-exempt equity issuances at a price per share lower than the initial exercise price ("Base Share Price"). simultaneously with the consummation of each non-exempt equity issuance the exercise price shall be reduced to equal the Base Share Price and the number of warrants to acquire shares of common stock issuable shall be increased such that the aggregate exercise price payable, after taking into account the decrease in the exercise price, shall be equal to the aggregate exercise price prior to such adjustment, provided that no adjustment to the number of warrant to purchase shares of common stock issuable shall be made, as a result of (i) a Qualified Offering or (ii) any Dilutive Issuance that occurs after the consummation of a Qualified Offering. Such adjustment shall be made whenever such common stock or common stock equivalents are issued.

The estimated fair value of outstanding warrants accounted for as liabilities is determined at each balance sheet date. Any decrease or increase in the estimated fair value of the warrant liability since the most recent balance sheet date is recorded in the condensed consolidated statement of operations as change in fair value of warrant liability. The fair value of the warrants is estimated using a Black-Scholes pricing model with the following inputs:



As of March 31, 2018

Warrant Issuance	Outstanding (in thousands)	Strike price (per share)		Expected term (years)	Volatility %		Risk-free rate %
Series A Convertible Preferred	774	$	6.59	5.45	80.78	%	2.59	%
Galena February 2017	66	$	33.00	3.88	74.00	%	2.25	%
Galena Other	80	$	888.22	2.94	74.08	%	2.27	%

As of December 31, 2017
Warrant Issuance	Outstanding (in thousands)	Strike price (per share)		Expected term (years)	Volatility %		Risk-free rate %
Galena February 2017	567	$	13.00	4.12	79.29	%	2.09	%
Galena Other	80	$	28.40	3.19	74.05	%	2.09	%

The expected volatility assumptions are based on the Company's implied volatility in combination with the implied volatilities of similar publicly traded entities. The expected life assumption is based on the remaining contractual terms of the warrants. The risk-free rate is based on the zero coupon rates in effect at the time of valuation. The dividend yield used in the pricing model is zero, because the Company has no present intention to pay cash dividends.

The changes in fair value of the warrant liability for the three months ended March 31, 2018 were as follows (in thousands):



Warrant Issuance	Warrant liability, December 31, 2017		Fair value of warrants granted		Fair value of warrants canceled			Change in fair value of warrants			Warrant liability, March 31, 2018
Series A Convertible Preferred	$	—	$	2,587	$	—		$	(1,083	)	$	1,504
Galena February 2017	1,305		—		(487		)	(794		)	24
Galena Other	4		—		—			(4		)	—
	$	1,309	$	2,587	$	(487	)	$	(1,881	)	$	1,528

Warrants Classified as Equity

The Company issued warrants to acquire 316,163 shares of the its common stock at an exercise price of $7.42, maturing five years from issuance, to EQC Private Markets SAC Fund Ltd-EQC Biotech Sely I Fund on December 29, 2017. These warrants are recorded in equity at fair value upon issuance, and not as liabilities, and are not subject to adjustment to fair value in subsequent reporting periods. The fair value of the warrants granted was $5.60 per share using the Black-Scholes pricing model with the fair value assumptions for the grant including a volatility of 90.10%, expected term of five years, risk free rate of 2.20%, and a dividend rate of 0.00.