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 the APA with Pharmsynthez and Kevelt providing for, among other things, the issuance of a minimum of a $3.5 million 10% Senior Secured Collateralized Convertible Promissory Note (the “Initial APA Note”) and the issuance of certain warrants. The warrants covered up to half the amount of the Initial APA Note to purchase shares of common stock at the Exercise Price. During the quarter ended March 31, 2016, the Company issued $3.5 million of convertible debt as well as the associated warrants, both in connection with the Initial APA Note. A $1.6 million loss was recorded upon the issuance of hybrid debt instruments. In addition, a $1.9 million gain was recorded during 2016 reflecting the change in fair value of hybrid instruments during the period.

On April 22, 2016, Pharmsynthez converted all of the then outstanding 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 approximately 1.4 million 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. Both the final mark-to-market gain and the loss on conversion were recorded in other income (expense) in the consolidated statement of comprehensive loss for the year ended December 31, 2016.

On July 1, 2016, the Company issued a convertible promissory note (the “Note”) in the amount of $500,000 to Pharmsynthez. In consideration for the Note, the Company issued Pharmsynthez warrants (the “Warrants”) to purchase 50,506 shares of its common stock at the Exercise Price. The Note was convertible into shares of the Company’s common stock at any time at a conversion price of $4.95 per share (subject to price protection and usual and customary adjustments). The Warrants could be exercised at any time through the five-year anniversary. The maturity date of the Note was one year from issuance and was convertible, in whole or in part, into shares of common stock at the option of the holder, at any time and from time to time in accordance with the terms contained therein. Upon a public offering, as such term was defined in the Note, the holder was required to convert the Note to shares of the Company’s common stock in accordance with the conversion terms contained therein.

On July 1, 2016, the Company issued a convertible promissory note in the amount of $369,958 (the “CEO Note”) and warrants to purchase 37,369 shares of the Company’s common stock at the Exercise Price to Mr. Scott Maguire, the Company’s former CEO, for his deferred salary. Upon a public offering, as defined, and at the option of the holder, the CEO Note could be settled in cash or by means of conversion into shares of common stock in accordance with the conversion terms contained therein. Upon completion of its public offering, the Company settled the CEO Note and the related interest of $13,176 in cash on November 7, 2016.

On August 26 and September 9, 2016, the Company issued convertible promissory notes (the “Further Notes”) in the amount of $178,000 and $322,000, respectively, and warrants to purchase 50,506 shares of its common stock at the Exercise Price to Pharmsynthez. The notes were convertible into shares of the Company’s common stock at any time at a conversion price of $4.00 per share (subject to price protection and usual and customary adjustments) or may be applied toward a public offering, at the option of Pharmsynthez. The maturity date of the Further Notes was one year from issuance and were convertible, in whole or in part, into shares of common stock at the option of the holder, at any time and from time to time in accordance with the terms contained therein. Upon the closing of the Company’s underwritten public offering in November 2016, the balance of the Further Notes automatically converted into units of the Company’s public offering in accordance with the conversion terms contained therein.

The Note, CEO Note and Further Notes (together, the “Period Notes”) shared the same principal terms and features. The Period Notes were convertible debt and included embedded debt-like features and were reflected as a hybrid debt instrument.

The fair value of the compound derivative was bifurcated from the Period Notes and remeasured at each report date until they were settled, with changes in fair value recognized in the consolidated statement of comprehensive loss as a change in fair value of derivative liability. Refer to Note 9, Fair Value Measurements, for a table showing changes in the combined compound derivative during the year ended December 31, 2016.

The key assumptions used to calculate the estimated fair value of the compound derivative liability at each issuance and subsequent report date included the Company’s stock price ($4.50 - $16.83), expected volatility (100% - 115%), and risk-free interest rate (0.28% - 0.68%).

A $0.1 million loss on issuance of hybrid instrument was recorded upon the issuance of the Period Notes. This amount was recorded as a loss in other income (expense) in the consolidated statement of comprehensive loss for the year ended December 31, 2016.

On November 7, 2016, the Company closed an approximate $10.0 million underwritten public offering (see Note 11, Stockholders’ Equity). In connection with the offering and pursuant to the respective terms therein, the balances of the Period Notes were settled as follows:

Following the November 2016 settlement of these instruments, all outstanding convertible debt and embedded debt-like instruments under these financing arrangements were retired. As a result, no hybrid debt instruments were outstanding as of December 31, 2017 and December 31, 2016, respectively. Interest expense (including both debt discount amortization and coupon rate) related to the SPA Note, the Initial APA Note, and the Period Notes of approximately $0.7 million was recognized in the consolidated statement of comprehensive loss for the twelve months ended December 31, 2016.