Warrants to Acquire Shares of Common Stock

Warrant Exercise Agreement

On July 16, 2018, the Company issued the Existing Warrants to purchase up to an aggregate of 11,520,000 shares of common stock, with an exercise price per share of $2.10. The Existing Warrants were immediately exercisable and expire on July 16, 2023.

On March 6, 2019, the Company entered into the Exercise Agreement with one of the holders of the Existing Warrants. Pursuant to the Exercise Agreement, such warrant holder agreed to exercise for cash up to 3,800,000 of the Existing Warrants into shares of common stock at an adjusted exercise price of $1.10 per share for any Existing Warrants exercised prior to May 31, 2019. In addition to reducing the exercise price of the Existing Warrants held by the warrant holder, the Exercise Agreement also provides for the issuance of the New Warrants to purchase up to an aggregate of approximately 3,800,000 shares of common stock at an exercise price of $1.40 per share to be issued on a share-for-share basis in an amount equal to the number of the Existing Warrants that are cash exercised by the warrant holder prior to May 31, 2019. The New Warrants expire five years from the date of issuance. During the six months ended June 30, 2019, the warrant holder exercised approximately 3.1 million of the Existing Warrants for gross proceeds to the Company of $3.5 million and approximately 3.1 million New Warrants were issued. The reduced exercise price of the 3.1 million Existing Warrants exercised by the warrant holder increased the fair value of these Existing Warrants by approximately $0.1 million and $0.3 million during the three months and six months ended June 30, 2019, respectively, which is recorded as a deemed dividend increasing the net loss attributable to common stockholders and in additional paid-in capital. The Exercise Agreement expired on May 31, 2019.

Pursuant to the terms of certain warrants issued in connection with our previously outstanding Series A Convertible Preferred stock in March 2018 and May 2018, the exercise price of these warrants was automatically adjusted on March 6, 2019 to $1.10 per share from the previous exercise price of $2.10 per share as a result of the Company's entry into the Exercise Agreement. The Company recognized the $0.3 million increase to the fair value of the warrant liability as a result of the adjusted exercise price as a deemed dividend which increased the net loss attributable to common stockholders during the three months ended March 31, 2019.

Additionally, no later than November 8, 2019, the Company has agreed to seek the approval of The Nasdaq Stock Market to reduce the exercise price to $0.15 per share (subject to adjustment for stock splits and the like) of those warrants what were issued to certain holders pursuant to those certain Warrant Exercise Agreements entered into by and among the Company such holders on March 6, 2019.

June 2019 Offering

In connection with the June 2019 Offering, the Company reduced the exercise price of those warrants that were issued on July 16, 2018 (the "July 2018 Offering Warrants") to $0.15 per share from the previous exercise price of $2.10 per share. The reduced exercise price of the July 2018 Offering Warrants increased the value of fair value of the July 2018 Offering Warrants by approximately $0.8 million and is recorded as a deemed dividend increasing net loss attributable to common stockholders and additional paid-in-capital during the three and six months ended June 30, 2019.

Pursuant to the terms of certain liability-classified warrants issued in connection with our previously outstanding Series A Convertible Preferred stock in March 2018 and May 2018, the exercise price of these warrants was automatically adjusted on June 18, 2019 to $0.15 per share from the previous exercise price of $1.10 per share. The Company recognized the $0.1 million increase to the fair value of the warrant liability as a result of the adjusted exercise price as a deemed dividend which increased the net loss attributable to common stockholders during the three and six months ended June 30, 2019.

Warrants Outstanding

The following is a summary of the Company's warrants to acquire shares of common stock activity for the six months ended June 30, 2019 (in thousands):



Warrant Issuance	Outstanding, December 31, 2018	Granted	Exercised		Canceled/Expired	Outstanding, June 30, 2019	Expiration
June 2019 Offering	—	100,000	—		—	100,000	June 2024
Pre-funded June 2019 Offering	—	73,633	(47,967	)	—	25,666	June 2024
March 2019 Exercise Agreement	—	3,150	—		—	3,150	March 2024
July 2018 Offering	15,268	—	(3,150	)	—	12,118	July 2023
Pre-funded July 2018 Offering	625	—	(625	)	—	—	July 2023
Series A Convertible Preferred	1,384	—	—		—	1,384	September 2023
2017 Equilibria	316	—	—		—	316	December 2022
Galena February 2017	33	—	—		—	33	February 2022
Galena Other	72	—	—		—	72	January 2022
	17,698	176,783	(51,742	)	—	142,739

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.

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 stock, 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 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 June 30, 2019

Warrant Issuance	Outstanding (in thousands)	Strike price (per share)		Expected term (years)	Volatility %		Risk-free rate %
Series A Convertible Preferred	1,384	$	0.15	4.26	99.14	%	1.74	%
Galena February 2017	33	$	33.00	2.63	105.00	%	1.71	%
Galena Other	72	$	829.88	1.93	105.00	%	1.71	%

As of December 31, 2018
Warrant Issuance	Outstanding (in thousands)	Strike price (per share)		Expected term (years)	Volatility %		Risk-free rate %
Series A Convertible Preferred	1,384	$	2.10	4.76	88.80	%	2.50	%
Galena February 2017	33	$	33.00	3.12	94.12	%	2.46	%
Galena Other	72	$	829.88	2.43	94.73	%	2.46	%

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 six months ended June 30, 2019 were as follows (in thousands):



Warrant Issuance	Warrant liability, December 31, 2018		Fair value of warrants granted		Fair value of warrants canceled		Adjustment to exercise price of warrants		Change in fair value of warrants			Warrant liability, June 30, 2019
Series A Convertible Preferred	$	1,010	$	—	$	—	$	243	$	(1,153	)	$	100
Galena February 2017	3		—		—		—		—			3
	$	1,013	$	—	$	—	$	243	$	(1,153	)	$	103

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 per share, maturing five years from issuance, to EQC Private Markets SAC Fund Ltd-EQC Biotech Sely I Fund on December 29, 2017.

The pre-funded warrants exercisable for shares of common stock and warrants to acquire shares of common stock issued during the June 2019 Offering and July 2018 Offering were recorded in equity upon issuance. During its evaluation of equity classification for the pre-funded warrants exercisable for shares of common stock and warrants to acquire shares of common stock issued in the June 2019 Offering, the Company considered the conditions as prescribed within ASC 815-40, Derivatives and Hedging, Contracts in an Entity’s own Equity (“ASC 815-40”). The conditions within ASC 815-40 are not subject to a probability assessment. The pre-funded warrants exercisable for shares of common stock and warrants to acquire shares of common stock do not fall under the liability criteria within ASC 480, Distinguishing Liabilities from Equity, as they are not puttable and do not represent an instrument that has a redeemable underlying security. The pre-funded warrants exercisable for shares of common stock and warrants to acquire shares of common stock do meet the definition of a derivative instrument under ASC 815, but are eligible for the scope exception as they are indexed to the Company’s own stock and would be classified in permanent equity if freestanding. In addition, the Company determined that the down round feature in the warrants to acquires shares of common stock issued in the June 2019 Offering did not preclude equity classification. As described in Note 3, the Company adopted ASU No. 2017-11 on January 1, 2019 which changed the classification of certain equity-linked financial instruments (or embedded features) with down round features. A down round feature no longer precludes equity classification, therefore a freestanding equity feature would no longer be accounted for as a derivative liability at fair value as a result of the existence of a down round feature.