13. WARRANTS

Private Placement, Placement Agent and Subsequent Financing Warrants

The Company issues common stock warrants in connection with debt or equity financing to a lender, a placement agent or an investor. Issued warrants are considered standalone financial instruments and the terms of each warrant are analyzed for equity or liability classification in accordance with US GAAP. Warrants that are classified as liabilities usually have various features that would require net-cash settlement by the Company. Warrants that are not liabilities, derivatives and/or meet exception criteria are classified as equity. Warrants liabilities are re-measured at fair value at each period end with changes in fair value recorded in the condensed statements of operations until expired or exercised. The Company utilizes a Monte Carlo simulation model to estimate the fair value of its warrants. Refer to Note 4 for further details. Warrants that are classified as equity are valued at fair value on the date of issuance, recorded in additional paid in capital and not re-measured.

On January 1, 2018, the Company adopted new accounting guidance (refer to Note 2) and reclassified the warrants to purchase 1,338,326 shares of common stock issued to JGB from liability to equity at the fair value of $6.6 million. The re-measurement income for the three months ended March 31, 2017 of $0.4 million was recorded in change in estimated fair value of common stock warrant liability and derivative liability on the Company’s condensed consolidated statement of operations.

In the three months ended March 31, 2018, warrants to purchase 23,000 shares of common stock were exercised for a cash payment of less than $0.1 million. The warrant liability was re-measured prior to the exercise and a change in fair value of $0.1 million was recorded in the condensed consolidated statement of operations.

As of March 31, 2018, outstanding warrants to purchase common stock were:

	Classified as	Original Term	Exercise Price		Number of Shares Underlying Warrants
Original issue date:
August 2009	Equity	10 years	$	21.78		33,473
July 2010	Equity	9 years	$	21.78		6,694
August 2012	Equity	7 years	$	21.78		167,182
January 2015	Equity	5 years	$	6.96		34,483
April 2016 (a)	Liability	7 years	$	1.12		904,800
April 2016 (b)	Liability	5 years	$	1.12		146,100
June 2016 (c)	Liability	7 years	$	4.00		1,002,507
March 2017 (d)	Equity	5 years	$	4.67		1,338,326
						3,633,565

(a)

Issued on April 14, 2016 in connection with the private placement to certain accredited investors. In accordance with the anti-dilution provisions, the exercise price of the warrants issued in connection with such private placement was adjusted from $4.98 to $4.00, which was the price paid by investors in the Company’s underwritten public offering of common stock, which closed on September 26, 2016. As a result of the issuance of 1,022,544 shares of the Company’s common stock at $1.12 in connection with the amendments to the Conditional Share Purchase Agreement, the exercise price was adjusted from $4.00 to $1.12, effective July 3, 2017.

(b)

Issued on April 14, 2016 in connection with the private placement to placement agents. As a result of the issuance of 1,022,544 shares of the Company’s common stock at $1.12 in connection with the amendments to the Conditional Share Purchase Agreement, the exercise price was adjusted from $3.99 to $1.12, effective July 3, 2017.

(c)

Issued on June 15, 2016 in connection with a subsequent private placement. In accordance with the anti-dilution provisions, the exercise price of the warrants issued in connection with the subsequent private placement was adjusted from $4.98 per share to $4.00 per share, which was the price paid by investors in the Company’s underwritten public offering of common stock, which closed on September 26, 2016. The exercise price remained at $4.00 as the anti-dilution provision was waived for the issuance of shares related to the July 3, 2017 amendment to the Conditional Share Purchase Agreements.

(d)

Issued on March 15, 2017 in connection with the JGB Debt. As a result of the issuance of 1,022,544 shares of the Company’s common stock at $1.12 in connection with the amendments to the Conditional Share Purchase Agreement, the number of shares issuable pursuant to the JGB Warrants increased from 1,250,000 to 1,296,679 and the exercise price of the JGB Warrants was adjusted from $5.00 to $4.82, effective July 3, 2017. As a result of the 2017 Public Offering, effective October 5, 2017, the aggregate number of shares of common stock issuable upon exercise of the JGB Warrants increased from 1,296,679 to 1,338,326 shares and the exercise price of the JGB Warrants decreased from $4.82 to $4.67 per share.