2015 Asset Purchase and Financing Agreement

In November 2015, the Company entered into an Asset Purchase Agreement (the “APA”) with OJSC Pharmsynthez (“Pharmsynthez”) and AS Kevelt (“Kevelt”), a wholly owned subsidiary of Pharmsynthez, providing for up to $10 million in financing proceeds beginning with the issuance of a minimum of a $3.5 million 10% Senior Secured Collateralized Convertible Promissory Note (the “APA Note”) and included the transfer to the Company of certain intellectual property rights with respect to XBIO-101 in exchange for, among other conditions, approximately 3.0 million shares of the Company’s common stock. The APA also provided for the issuance of certain warrants covering up to half the amount of the APA Note. During the year ended December 31, 2016, the Company issued $4.5 million of convertible debt as well as the associated warrants, both in connection with the APA Note. The convertible debt and its embedded debt-like features were recorded in the consolidated balance sheet within current liabilities as a hybrid debt instrument.

On April 29, 2016, the Company closed on the APA with an effective date of April 27, 2016, acquiring certain intellectual property rights with respect to the immunomodulator product XBIO-101 held by Kevelt and grant of the worldwide right to develop, market and license XBIO-101 for certain uses.

In connection with the closing of the APA, the Company issued 3,045,455 shares of its common stock to Pharmsynthez. In addition, Pharmsynthez converted all convertible notes (in the principal amount of $6.5 million, which included $3 million of notes issued in July 2015, plus accrued interest of approximately $300,000), issued by the Company to Pharmsynthez in 2015 and 2016. The conversion rate as set forth in the notes was $4.95 per share. As such, the Company issued to Pharmsynthez 1,373,036 shares of its common stock in connection with conversion of the convertible notes, which amount, together with the 3,045,455 shares of common stock in connection with the closing of the Asset Purchase Agreement, resulted in an aggregate of 4,418,491 new shares of common stock being issued to Pharmsynthez.

Following the note conversion in April 2016 and leading up to our public offering in November 2016, the Company issued an additional $1 million in bridge note financing (see Note 8, Hybrid Debt Instruments), leaving $5.5 million of the original $10 million commitment. On November 7, 2016, Pharmsynthez purchased $5.5 million units in connection with the Company’s public offering thus completing its financing commitment under the APA. See Note 11, Stockholders’ Equity, for discussion of the public offering.