WARRANTS

3 Months Ended

Mar. 31, 2023

Equity Classified Common Stock Warrants

In connection with a March 2018 direct registered offering (the “March 2018 Direct Registered Offering”), the Company issued (i) 4,090,000 shares of its common stock; (ii) 3,000,581 shares of its Series A convertible preferred stock and (iii) warrants to purchase 1,418,116 shares of common stock at an exercise price of $8.31 per share (the “2018 Offering Warrants”). The 2018 Offering Warrants became exercisable upon issuance and expire in March 2025. None of the 2018 Offering Warrants have been exercised to date and they all remained outstanding at March 31, 2023.

As separate classes of securities were issued in a bundled transaction, the gross proceeds from the March 2018 Direct Registered Offering of $59.1 million were allocated to common stock, Series A convertible preferred stock and the 2018 Offering Warrants based on their respective relative fair value upon issuance. The aggregate fair value of the 2018 Offering Warrants of $7.4 million was estimated using the Black-Scholes option-pricing model with the following assumptions:


			Upon Issuance
Common Stock Warrants:
Expected term (in years)			7.0
Expected volatility (%)			62.5%
Risk-free interest rate (%)			2.8%
Expected dividend yield (%)			0%

The allocated proceeds from the 2018 Offering Warrants of $6.6 million were recorded in additional paid-in-capital.

Liability Classified Common Stock Warrants

In connection with private placement offerings in 2016 and 2017 (the “2016 and 2017 Private Placements”), the Company issued warrants that provide the warrant holder the right to purchase 1,720,512 and 1,380,745 shares of common stock (the “2017 and 2016 Placement Warrants”, respectively). The 2017 and 2016 Placement Warrants contain protection whereby the warrant holders will have the right to receive cash in the amount equal to the Black-Scholes value of the warrants upon the occurrence of a change of control, as defined in the warrant agreement. The 2017 and 2016 Placement Warrants were accounted for as a liability at the date of issuance and are adjusted to fair value at each balance sheet date, with the change in fair value recorded as a component of other (expense) income, net in the condensed consolidated statements of operations and comprehensive loss.

The key terms of the 2017 and 2016 Placement Warrants are as follows:


	Issuance Date	Term	Exercise Price Per Share		Warrants Exercised during the three months ended March 31, 2023	Warrants Outstanding at March 31, 2023
2017 Placement Warrants	January 2017	7 years	$	3.17	—	1,500,022
2016 Placement Warrants	August and September 2016	7 years	$	2.95	—	536,711
Total					—	2,036,733

During the three months ended March 31, 2023 and 2022, the Company recorded a gain of $1.9 million and $2.8 million, respectively, related to the change in fair value of the 2017 and 2016 Placement Warrants. The fair value of the 2017 and

2016 Placement Warrants at March 31, 2023 and December 31, 2022, respectively, was estimated using the Black-Scholes option-pricing model and the following weighted-average assumptions:


	2017 Placement Warrants				2016 Placement Warrants
	March 31, 2023		December 31, 2022		March 31, 2023		December 31, 2022
Expected term (in years)	0.8		1.0		0.4		0.6
Expected volatility	81.7	%	82.9	%	81.6	%	82.7	%
Risk-free interest rate	4.7	%	4.7	%	4.9	%	4.8	%
Expected dividend yield	—	%	—	%	—	%	—	%