F.	Common Stock and Warrants

Authorized,

Issued, and Outstanding Common Shares

As of

March 31, 2019

and

December 31, 2018,

the Company had authorized shares of common stock of

250,000,000

shares. Of the authorized shares,

27,976,823

and

26,455,352

shares of common stock were issued and outstanding as of

March 31, 2019

and

December 31, 2018,

respectively.

As of

March 31, 2019

and

December 31,

2018,

the Company had reserved authorized shares of common stock for future issuance as follows:

	March 31, 2019		December 31, 2018
Conversion of Deerfield Convertible Note		1,166,998		1,167,607
Conversion of 2021 Notes		4,481,182		4,481,182
Outstanding awards under equity incentive plans		5,117,655		3,704,755
Outstanding common stock warrants		2,527,763		2,527,763
Conversion of Series A Convertible Preferred Stock		1,112,334		1,112,334
Possible future issuances under equity incentive plans		293,586		648,272
Total common shares reserved for future issuance		14,699,518		13,641,913

Common Stock Activity

The following table summarizes common stock activity for the

three

months ended

March 31, 2019:

	Shares of Common Stock
Balance as of December 31, 2018		26,455,352
Common stock issued under Purchase Agreement		1,521,471
Balance as of March 31, 2019		27,976,823

September 2018,

the Company terminated the First ATM Agreement with Cowen. Prior to termination of the First ATM Agreement, the Company sold an aggregate of

762,338

shares of common stock under the First ATM Agreement resulting in gross proceeds to the Company of

$4.9

million. As of

March 31, 2019,

the Company has

not

sold any shares of common stock under the Second ATM Agreement. Refer to Note A for a further discussion of the First and Second ATM Agreements.

October

2018,

the Company entered into an underwriting agreement with RBCCM pursuant to which the Company issued and sold

8,333,334

shares of common stock of the Company in an underwritten public offering pursuant to the Company's registration statement on Form S-

Refer to Note A for a further discussion of the underwritten public offering.

Also in

October

2018,

the Company entered into the Exchange Agreement pursuant to which the Company issued to the Holders

9,577

shares of Series A Preferred Stock. As of

March 31, 2019,

6,240

shares of Series A Preferred Stock have been converted into

2,080,000

shares of common stock. Refer to Note C for a further discussion of the Exchange Agreement.

Warrants

During

2013,

the Company issued

$3.8

million of convertible notes and the warrants (the

“2013

Warrants”) to purchase

1,079,453

shares of equity securities in a future financing meeting specified requirements (a “Qualified Financing”). The

2013

Warrants allow the holders to purchase shares of the same class and series of equity securities issued in the Qualified Financing for an exercise price equal to the per share price paid by the purchasers of such equity securities in the Qualified Financing. When the Company entered into the Deerfield Facility Agreement, the

2013

Warrants became warrants to purchase

1,079,453

shares of Series D Preferred. Upon completion of the IPO, the

2013

Warrants automatically converted into warrants to purchase

143,466

shares of the Company’s common stock at an exercise price of

$5.85

per share. The

2013

Warrants, if unexercised, expire on the earlier of

June 2, 2019,

or upon a liquidation event.

June 2, 2014,

pursuant to the terms of the Deerfield Facility Agreement, the Company issued the Deerfield Warrant to purchase

14,423,076

shares of Series D Preferred (Note C). The Company recorded the fair value of the Deerfield Warrant as a debt discount and a warrant liability. The Deerfield Warrant, if unexercised, expires on the earlier of

June 2, 2024,

or upon a liquidation event. Upon completion of the IPO, the Deerfield Warrant automatically converted into a warrant to purchase

1,923,077

shares of the Company’s common stock at an exercise price of

$5.85

per share. The Company is amortizing the debt discount over the term of the Deerfield Convertible Note and the expense is recorded as interest expense related to amortization of debt issuance costs and discount in the condensed statements of operations.

The Company determined that the

2013

Warrants and Deerfield Warrant should be recorded as a liability and stated at fair value at each reporting period upon inception. As stated above, upon completion of the IPO, the

2013

Warrants and the Deerfield Warrant automatically converted into warrants to purchase the Company’s common stock. The Company marked the

2013

Warrants to fair value and reclassified them to equity upon closing of the IPO. The Deerfield Warrant remains classified as a liability and is recorded at fair value at each reporting period since it can be settled in cash. Changes to the fair value of the warrant liability are recorded through the condensed statements of operations as a fair value adjustment (Note H).

In connection with a Collaboration and License Agreement (the “License Agreement”) with KVK Tech, Inc. (“KVK”), in

October 2018,

the Company issued to KVK a warrant to purchase up to

500,000

shares of common stock of the Company at an exercise price of

$2.30

per share, which reflects the closing price of the Company’s common stock on the Nasdaq Global Market on execution date of the License Agreement (the “KVK Warrant”). The KVK Warrant is initially

not

exercisable for any shares of common stock. Upon the achievement of each of

four

specified milestones under the KVK Warrant, the KVK Warrant will become exercisable for an additional

125,000

shares, up to an aggregate of

500,000

shares of the Company’s common stock. The exercise price and the number and type of shares underlying the KVK Warrant are subject to adjustment in the event of specified events, including a reclassification of the Company’s common stock, a subdivision or combination of the Company’s common stock, or in the event of specified dividend payments. The KVK Warrant is exercisable until

October 24, 2023.

Upon exercise, the aggregate exercise price

may

be paid, at KVK’s election, in cash or on a net issuance basis, based upon the fair market value of the Company’s common stock at the time of exercise.

The Company determined that, since KVK qualifies as a customer under ASC

606,

the KVK Warrant should be recorded as a contract asset and recognized as contra-revenue as the Company recognizes revenue from the License Agreement. In addition, the Company determined that the KVK Warrant qualifies as a derivative under ASC

815

and should be recorded as a liability and stated at fair value each reporting period. The Company calculates the fair value of the KVK Warrant using a probability-weighted Black-Scholes option pricing model. Changes in fair value resulting from changes in the inputs to the Black Scholes model are accounted for as changes in the fair value of the derivative under ASC

815

and are recorded as fair value adjustment related to derivative and warrant liability in the statement of operations. Changes in the number of shares that are expected to be issued are treated as changes in variable consideration under ASC

606

and are recorded as a change in contract asset in the balance sheet.