5. Hybrid Debt Instrument
|6 Months Ended|
Jun. 30, 2017
|Derivative Instruments and Hedging Activities Disclosure [Abstract]|
|Hybrid Debt Instrument||
During 2015 and 2016 the Company entered into several financing arrangements which included the issuance of convertible notes and warrants to purchase shares of common stock. On July 1, 2015, the Company entered into a Securities Purchase Agreement (the “SPA”) with Pharmsynthez providing for the issuance of a minimum of a $3.0 million, 10% Senior Secured Collateralized Convertible Promissory Note (the “SPA Note”). The SPA also provided for the issuance of certain warrants up to the amount of the SPA Note to purchase shares of common stock at the lesser of $6.60 per share and 120% of the price per share in the Company’s next capital raise of at least $7 million (the “Exercise Price”).
On November 13, 2015, the Company entered into an Asset Purchase Agreement (the “APA”) with Pharmsynthez and AS Kevelt (“Kevelt”) providing for the issuance of a minimum of a $3.5 million, 10% Senior Secured Collateralized Convertible Promissory Note (the “Initial APA Note”) and the transfer to the Company of certain intellectual property rights with respect to XBIO-101 in exchange for, among other things, 3,378,788 shares of our common stock. The APA also provided for the issuance of certain warrants covering up to half the amount of the Initial APA Note to purchase shares of common stock at the Exercise Price. During the six month period ended June 30, 2016, the Company issued $3.5 million of convertible debt as well as the associated warrants, both in connection with the Initial APA Note. The convertible debt and its embedded debt-like features were recorded within current liabilities as a hybrid debt instruments. A $1.6 million loss was recorded upon the issuance of hybrid debt instruments. In addition, a $1.9 million gain was recorded during the six months ended June 30, 2016, reflecting the change in fair value of the hybrid debt instruments during the period.
On April 22, 2016, Pharmsynthez converted all of the convertible notes issued by the Company to Pharmsynthez in the principal amount of $6.5 million plus accrued interest of approximately $0.2 million, resulting in a $6.2 million loss. The conversion rate was $4.95 per share. As such, the Company issued to Pharmsynthez 1,373,036 shares of common stock in connection with conversion of the convertible notes. The related embedded derivatives, which had been bifurcated from the host debt and accounted for separately, were settled by action of the conversion. Following the settlement of these instruments, no hybrid debt instruments were outstanding as of June 30, 2017 and December 31, 2016, respectively.
The entire disclosure for hybrid instruments and embedded derivatives, including discussion of the process used in evaluating whether a hybrid instrument in the form of a share constitutes a debt or equity security, and on what basis an embedded derivative was deemed to be separable or inseparable from the host instrument.
Reference 1: http://www.xbrl.org/2003/role/presentationRef