The Offering

On July 17, 2019, the Company entered into an underwriting agreement (the "Underwriting Agreement") with Maxim Group LLC (the “Underwriter”), relating to the Company’s Offering of 1,730,000 shares (the “Shares”) of the Company’s common stock, par value $0.001 (the “Common Stock”), Prefunded Warrants to purchase 570,000 shares of Common Stock (the “Prefunded Warrants”), and warrants to purchase 2,300,000 shares of the Common Stock (the “Purchase Warrants,” and together with the Shares and the Prefunded Warrants, the "Firm Securities"). Each Share was sold together with one Purchase Warrant at a combined public offering price of $6.50 per Share and Purchase Warrant. Each Pre-funded Warrant purchased was sold together with one Purchase Warrant at a combined public offering price of $6.49 per Prefunded Warrant and Purchase Warrant. The Prefunded Warrants were exercisable beginning on July 17, 2019 at an exercise price of $0.01 per share. The holders of the Prefunded Warrants will not have the right to exercise any portion of the Prefunded Warrant if the holder (together with its affiliates) would beneficially own in excess of 4.99% of the number of shares of our Common Stock outstanding immediately after giving effect to the exercise, as such percentage ownership is determined in accordance with the terms of the Prefunded Warrants. The Prefunded Warrants had an intrinsic value of approximately $3.1 million. Pursuant to the Underwriting Agreement, the Company also granted the Underwriter a 45-day option to purchase up to an additional 345,000 shares of Common Stock and/or Purchase Warrants to purchase up to 345,000 shares of Common Stock (the "Additional Securities," and together with the Firm Securities, the "Securities"), at the public offering price less discounts and commissions.

The Securities were offered, issued, and sold pursuant to an effective Registration Statement on Form S-1 (Reg. No. 333-231508) and accompanying prospectus filed with the SEC under the Securities Act of 1933, as amended.

On the Closing Date, the Company completed the Offering resulting in gross proceeds to the Company of approximately $15.0 million before deducting the underwriting discount and offering fees and expenses payable by the Company. In addition, on the Closing Date, the Underwriter exercised its overallotment option with respect to 160,000 Purchase Warrants, resulting in additional gross proceeds of $1,600. The Company intends to use the net proceeds from the Offering of approximately $13.4 million to fund its research, development and clinical programs, including the development of the XCART technology acquired in the Transaction, and for other general corporate purposes. Prefunded Warrants to purchase 450,000 shares of Common Stock were exercised during the three and nine months ended September 30, 2019 resulting in $4,500 of net proceeds to the Company.

The Purchase Warrants are immediately exercisable at a price of $13.00 per share of Common Stock and expire five years from the date of issuance. The warrants began trading on NASDAQ on July 23, 2019 under the symbol “XBIOW.” The Purchase Warrants also provide that if the weighted-average price of Common Stock on any trading day on or after 30 days after issuance is lower than the then-applicable exercise price per share, each Purchase Warrant may be exercised, at the option of the holder, on a cashless basis for one share of Common Stock. The Company evaluated the terms of the warrants issued and determined that they should be classified as equity instruments. The grant date fair value of these warrants was estimated to be $4.61 per share, for a total of approximately $11.3 million. The fair value of these warrants was estimated using a Black-Scholes model utilizing the following key valuation assumptions: the Company’s stock price, a risk free rate of 1.83%, an expected life of 5 years and an expected volatility of 141.89%. Purchase Warrants to purchase approximately 1.9 million shares of Common Stock were exercised on a cashless one-for-one basis during the three and nine months ended September 30, 2019.

Common Stock

On July 16, 2019, the Company, in connection with the Offering, entered into a consent agreement with certain holders of warrants to purchase shares of the Company’s Common Stock whose consent was sought in connection with the Offering. In consideration of the holders’ consent, the Company agreed to (i) issue such holders an aggregate of 16,666 shares of the Company’s Common Stock (“Consent Shares”) and (ii) adjust the exercise price of those certain warrants issued to each holder in connection with the Company’s Reverse Stock Split on June 25, 2019. The Consent Shares and incremental cost associated with the warrant modification were determined to be direct costs of the Offering and, as a result, have been included within net proceeds from the Offering.

On June 21, 2019, the Company filed a Certificate of Change to the Company’s Articles of Incorporation with the Secretary of State of Nevada to effect the Reverse Stock Split. The Reverse Stock Split was effective at 12:01 a.m., eastern Time, on June 25, 2019. No fractional shares were issued as a result of the Reverse Stock Split and any remaining share fractions were rounded up to the nearest whole share, resulting in 1,442 new shares of Common Stock being issued to existing holders of the Company’s common stock.

On June 19, 2019, shareholders of the Company voted to approve an amendment to the Company’s Articles of Incorporation to increase the authorized shares of Common Stock to 150,000,000 shares on a pre-Reverse Stock Split basis (the “Authorized Share Increase”). On June 24, 2019, the Company filed a Certificate of Amendment to the Company’s Articles of Incorporation with the Secretary of the State of Nevada to effect the Authorized Share Increase as of June 25, 2019. As a result of the Authorized Share Increase and after giving effect to the Reverse Stock Split, the Company had 12,500,000 authorized shares of Common Stock.

As a result of the Reverse Stock Split, the number of outstanding shares of our Common Stock held by non-affiliates was approximately 475,000. On June 28, 2019, the Company received a notice from the Nasdaq Capital Market ("NASDAQ") that it no longer met the minimum 500,000 publicly held shares requirement for continued listing. On July 19, 2019, the Company received a notice from NASDAQ that the Company had regained compliance with the publicly held shares requirement as a result of the Offering.

On March 5, 2019, the Company entered into a Securities Purchase Agreement with certain purchasers pursuant to which the Company offered to the purchasers, in a registered direct offering, an aggregate of (i) 86,667 shares of Common Stock, par value $0.001 per share and (ii) prefunded warrants to purchase 42,417 shares of Common Stock. The prefunded warrants were exercisable beginning on March 7, 2019 at an exercise price of $0.012 per share. The shares were sold at a price of $24.00 per share and the prefunded warrants were sold at a price of $23.988 per prefunded warrant, which represents the per share purchase price for the shares less the $0.012 per share exercise price for each such prefunded warrant. The holders of the prefunded warrants will not have the right to exercise any portion of the prefunded warrant if the holder (together with its affiliates) would beneficially own in excess of 9.99% of the number of shares of our Common Stock outstanding immediately after giving effect to the exercise, as such percentage ownership is determined in accordance with the terms of the prefunded warrants. The net proceeds to the Company from this offering were approximately $2.7 million, after deducting expenses related to the offering, including dealer-manager fees and expenses. In a concurrent private placement, the Company issued to the purchasers a warrant to purchase one share of the Company’s Common Stock for each share and prefunded warrant purchased in the offering. These warrants have an exercise price of $27.00 per share, were exercisable beginning on September 8, 2019 and expire seven years from such date. The Company evaluated the terms of the warrants issued and determined that they should be classified as equity instruments. The grant date fair value of these warrants was estimated to be $22.74 per share, for a total of approximately $2.9 million. The fair value of the warrants was estimated using a Black-Scholes model utilizing the following key valuation assumptions: the Company’s stock price, a risk free rate of 2.56%, an expected life of 7.5 years and an expected volatility of 111.3%. The prefunded warrants had an intrinsic value of approximately $1.1 million. In June 2019, the prefunded warrants were exercised in full resulting in $509 of net proceeds to the Company.

Series B Preferred Stock

As of September 30, 2019 and December 31, 2018 there were approximately 1.8 million shares of Series B Preferred Stock issued and outstanding which were convertible on a 1.625 preferred shares to one share of common stock basis. The number of shares of Common Stock that, when aggregated with any shares of Common Stock that may be issued in connection with any conversion of Series B Preferred Stock and the exercise of warrants issued in connection with the Series B Preferred Stock, is subject to an Issuable Maximum, subject to adjustment, as set forth in the Second Amended and Restated Certificate of Designation of the Company’s Series B Preferred Stock. As of September 30, 2019, the Issuable Maximum is 0.6 million shares of Common Stock that can be issued upon the conversion of the currently outstanding Series B Preferred Stock and the exercise of warrants, issued in connection with the Series B Preferred Stock, that are currently outstanding.

The March 2019 registered direct offering triggered the down-round provision in the Company’s Series B Preferred Stock resulting in an adjustment to the conversion ratio and the recording of a deemed dividend of $3.9 million increasing the net loss attributable to common shareholders for the nine months ended September 30, 2019. In addition, the Offering triggered the down-round provision in the Company’s Series B Preferred Stock, resulting in a further adjustment to the conversion ratio and the recording of a deemed dividend of $1.4 million during the third quarter increasing the net loss attributable to common shareholders for the three and nine months ended September 30, 2019. There were no Series B Preferred Stock conversions during the nine months ended September 30, 2019. During the nine months ended September 30, 2018, the holders of Series B Preferred Stock converted approximately 316,000 shares into approximately 26,000 shares of common stock.

Warrants

On July 17, 2019, in connection with the Offering, the Company offered to the purchasers Prefunded Warrants to purchase 570,000 shares of common stock. The Prefunded Warrants were exercisable beginning on July 17, 2019 at an exercise price of $0.01 per share. The Prefunded Warrants were sold at a price of $6.49 per Prefunded Warrant, which represents the per share purchase price for the shares less the $0.01 per share exercise price for each such Prefunded Warrant. The holders of the Prefunded Warrants did not have the right to exercise any portion of the Prefunded Warrant if the holder (together with its affiliates) would beneficially own in excess of 4.99% of the number of shares of our common stock outstanding immediately after giving effect to the exercise, as such percentage ownership is determined in accordance with the terms of the Prefunded Warrants. Prefunded Warrants to purchase 450,000 shares were exercised during the three and nine months ended September 30, 2019 resulting in net proceeds to the Company of $4,500. Also in connection with the Offering, the Company issued to the purchasers the Purchase Warrants. These Purchase Warrants have an exercise price of $13.00 per share, were exercisable beginning on July 17, 2019 and expire five years from such date. The warrants began trading on NASDAQ on July 23, 2019 under the symbol “XBIOW.” The Purchase Warrants also provide that if the weighted-average price of Common Stock on any trading day on or after 30 days after issuance is lower than the then-applicable exercise price per share, each Purchase Warrant may be exercised, at the option of the holder, on a cashless basis for one share of Common Stock. Purchase Warrants to purchase approximately 1.9 million shares of common stock were exercised on a cashless one-for-one basis during the three and nine months ended September 30, 2019. As of September 30, 2019, there were approximately 120,000 Prefunded Warrants and 0.6 million Purchase Warrants outstanding. Subsequent to quarter end, the remaining outstanding Prefunded Warrants were exercised resulting in $1,200 of net proceeds to the Company.

On June 24, 2019, the Company entered into a consent agreement with certain holders of warrants to purchase shares of the Company’s common stock whose consent was required to effect the Reverse Stock Split. In consideration of the holders’ consent, the Company agreed to issue the holders warrants (the “Consent Warrants”) to purchase 8,335 shares of the Company’s common stock, at an exercise price per share based on a volume weighted average price for the five trading days following the effectiveness of the Reverse Stock Split. The Consent Warrants were issued on July 3, 2019 at an exercise price of $10.63. The Company evaluated the terms of the Consent Warrants and determined that they should be classified as equity instruments. The grant date fair value of these warrants was estimated to be $7.62 per share, for a total of approximately $64,000. The fair value of the Consent Warrants was estimated using a Black-Scholes model utilizing the following key valuation assumptions: the Company’s stock price, a risk free rate of 1.83%, an expected life of 7 years and an expected volatility of 114.53%. The Company recorded approximately $64,000 as general and administrative expense during the three and nine months ended September 30, 2019. The Consent Warrants were subsequently modified to reflect an exercise price of $2.91 price per share in connection with the Offering. As a result of this modification, the Company recognized a $2,000 expense that was netted against the proceeds of the Offering.

In March 2019, in connection with its registered direct offering, the Company offered to the purchasers prefunded warrants to purchase 42,417 shares of common stock. The prefunded warrants were exercisable beginning on March 7, 2019 at an exercise price of $0.012 per share. The prefunded warrants were sold at a price of $23.988 per prefunded warrant, which represents the per share purchase price for the shares less the $0.012 per share exercise price for each such prefunded warrant. The holders of the prefunded warrants did not have the right to exercise any portion of the prefunded warrant if the holder (together with its affiliates) would beneficially own in excess of 9.99% of the number of shares of our common stock outstanding immediately after giving effect to the exercise, as such percentage ownership is determined in accordance with the terms of the prefunded warrants. All of these prefunded warrants were exercised in June 2019 resulting in net proceeds to the Company of $509. In a concurrent private placement, the Company issued to the purchasers a warrant to purchase one share of the Company’s common stock for each share and prefunded warrant (129,084 shares) purchased in the offering. These warrants have an exercise price of $27.00 per share, are exercisable beginning on September 8, 2019 and expire seven years from such date. As of September 30, 2019, all of these warrants were outstanding.

In addition to the prefunded and purchase warrants issued in the March 2019 registered direct offering and the Offering, the Company has outstanding warrants to purchase an aggregate of 262,690 shares of common stock in connection with debt and equity financing arrangements as of September 30, 2019 at a weighted average exercise price of $51.97 and expiration dates ranging from July 2020 through November 2021. There were no debt and equity financing warrants granted or exercised during the nine months ended September 30, 2019. During the nine months ended September 30, 2018, debt and equity financing warrants to purchase approximately 31,000 shares of common stock were exercised resulting in approximately $1.5 million of net proceeds to the Company.