(7)	Secured Convertible Notes Payable and Common Stock Purchase Warrants

On June 4, 2018, the Company entered into a Securities Purchase Agreement (the “SPA”) with an institutional investor pursuant to which the Company issued $3.3 million in principal face amount of senior secured convertible notes of the Company (the “Notes”) and related Series D Warrants (the “Series D Warrants”) to purchase additional shares of the Company’s common stock (“Common Stock”). Notes in the amount of $3.3 million were issued for cash proceeds of $2.4 million with an original issue discount in the amount of $1.1 million. The Notes are secured pursuant to a Security Agreement which creates a first priority security interest in all of the personal property (other than Excluded Collateral (as defined in the Security Agreement) of the Company of every kind and description, tangible or intangible, whether currently owned and existing or created or acquired in the future. The Notes bear 8% interest payable quarterly in cash. Of the $3.3 million in issued Notes, $2.5 million matures in six months; the balance of $0.8 million is payable in twelve installments beginning seven (7) months after the original issuance date. Each payment shall be paid in cash or, provided that the Market Price (as defined in the SPA) is at least the conversion price of $3.00, at the option of the Company, upon ten (10) Trading Days’ written notice to the Holder, in free trading Common Stock at the conversion price.

In connection with the issuance of the Notes under the SPA, the Company also issued Series D Warrants. Warrant D-1 is exercisable to acquire 1.1 million shares of Common Stock at an initial exercise price of $4.00. Warrants D-2 101-113 are exercisable to acquire 13.0 million shares of Common Stock at a pre-funded exercise price of $0.01. The Company may buy back each D-2 Warrant on its date of initial exercisability so long as the Company is not in default and the applicable installment payment for each month commencing on January 4, 2019 through December 4, 2019 has been paid when due. In the event that Delcath’s Market Price (as defined in the Note Agreement) is less than $3.00, the Company can only purchase back these warrants if the Notes payable are settled for cash. The provisions in the Series D Warrants required the Company to account for the warrants as derivative liabilities. The Company valued the Series D Warrants using the following inputs:

	Warrant D-1		Warrant D-2
Expected life (in years)		5.0	5.5 - 6.5
Expected volatility	194.10%		215.0% - 389.0%
Risk-free interest rates	2.78%		2.13% - 2.30%

The Company recognized a discount to debt of $2.3 million and additional expense of $2.8 million was recognized as a Loss on issuance of a financial instrument related to the initial fair value of the Series D Warrants. The D-1 Warrants have a five-year term; the D-2 Warrants have a five-year term from initial exercisability which begins on the fifth day of each month commencing December 5, 2018, through December 5, 2019, for each of Warrant D-2-101 through 113 respectively.