Common Stock

During the six months ended June 30, 2017, 185,000 shares of Series B preferred stock were converted into 185,000 shares of common stock.

In connection with the Company’s underwritten public offering in November 2016 and pursuant to the terms of the APA, a $500,000 10% convertible promissory note issued to our controlling stockholder, Pharmsynthez, in July 2016 automatically converted into shares of common stock in March 2017. The associated 125,397 shares issued to Pharmsynthez represent both owed principal and accrued interest.

On April 29, 2016, the Company closed the APA with an effective date of April 27, 2016, acquiring in-process research and development (“IPR&D”) related to certain intellectual property rights with respect to the immunomodulator product XBIO-101 (formerly known as Virexxa) held by Kevelt, which included the 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 3,378,788 shares of its common stock to Pharmsynthez. As there was no alternative use for the IPR&D, the Company recognized $39.5 million of expense based on the fair value of intellectual property received, which was determined to be more reliably measured than the related equity consideration.

Warrants

In connection with the Company’s issuance of the Initial APA Note in March 2016, the Company issued a warrant to purchase 353,540 shares of common stock at the Exercise Price (the “Initial APA Warrant”). The Initial APA Warrant has a five-year term and is exercisable commencing March 31, 2016. The fair value of the warrant was calculated using the Black-Scholes option pricing model. The key valuation assumptions used consist of the Company’s stock price, a risk-free rate of 1.42% and an expected volatility of 135%.

As of June 30, 2017 and December 31, 2016, there were warrants to purchase an aggregate of 3,522,225 shares of common stock at a weighted average exercise price of $4.30 outstanding, which had been issued in connection with debt and equity financing arrangements.