F.	Common Stock and Warrants

Authorized,

Issued, and Outstanding Common Shares

As of

September 30, 2020

and

December 31, 2019

, the Company had authorized shares of common stock of

250,000,000

shares. Of the authorized shares,

72,514,304

and

36,350,785

shares of common stock were issued and outstanding as of

September 30, 2020

and

December 31, 2019

, respectively.

As of

September 30, 2020

and

December 31, 2019

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

	September 30, 2020		December 31, 2019
Conversion of Deerfield Convertible Note		1,275,971		1,213,606
Conversion of 2021 Notes		—		175,336
Conversion of January 2020 Note		544,599		—
Conversion of December 2019 Notes not subject to the Deerfield Optional Conversion Feature		9,844,933		3,186,770
Outstanding awards under equity incentive plans		5,670,659		5,192,222
Outstanding common stock warrants		2,423,077		2,423,077
In exchange for the Deerfield Optional Conversion Feature*		—		26,439,015
Possible future issuances under the equity line of credit		—		9,553,046
Possible future issuances under equity incentive plans		803,698		84,616
Total common shares reserved for future issuance		20,562,937		48,267,688

* Common Stock issuable (i) in exchange of the Deerfield Optional Conversion Feature, or (ii) upon conversion of the Series B-2 Preferred Stock issuable in exchange of the Deerfield Optional Conversion Feature

Common Stock Activity

The following table summarizes common stock activity for the

nine

months ended

September 30, 2020

	Shares of Common Stock
Balance as of December 31, 2019		36,350,785
Common stock issued under equity line of credit		4,308,637
Restricted stock vested during the period		60,922
Common stock issued as compensation to third-parties		39,767
Common stock issued as a result of Deerfield Optional Conversion Feature conversion		16,000,000
Balance as of March 31, 2020		56,760,111
Common stock issued under equity line of credit		4,959,545
Restricted stock vested during the period		64,277
Common stock issued as compensation to third-parties		189,980
Common stock issued as a result of Deerfield Optional Conversion Feature conversion		5,250,000
Balance as of June 30, 2020		67,223,913
Restricted stock vested during the period		22,180
Common stock issued as compensation to third-parties		74,726
Common stock issued as a result of Deerfield Optional Conversion Feature conversion		5,189,015
Common stock issued as a result of stock option exercise		4,470
Balance as of September 30, 2020		72,514,304

Warrants

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 E). 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 Company's initial public offering (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 unaudited condensed statements of operations.

The Company determined that the 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 Deerfield Warrant automatically converted into warrants to purchase the Company's common stock. 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 unaudited condensed statements of operations as a fair value adjustment (Note H).

In connection with a Collaboration and License Agreement (the “APADAZ 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 reflected the closing price of the Company's common stock on the Nasdaq Global Market on the execution date of the APADAZ 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 APADAZ 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 statements 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 sheets.