On July 23, 2018, the Company filed a prospectus and prospectus supplement (the “2018 Prospectus”) under which the Company may offer and sell, from time to time, pursuant to an equity distribution agreement with Piper Jaffray & Co., up to $9.8 million in shares of its common stock. As of December 31, 2019 and June 30, 2020, 25,218 shares have been sold under the 2018 Prospectus for gross proceeds of approximately $110,000.

On April 30, 2019, the Company entered into a securities purchase agreement with certain investors pursuant to which the Company agreed to sell, in a registered direct offering, an aggregate 3,449,112 shares of its common stock for gross proceeds of approximately $10.7 million under its effective shelf registration statement on Form S-3 (File No. 333-226286), which became effective on July 31, 2018. In a concurrent private placement, the Company also agreed, pursuant to the securities purchase agreement, to issue to such investors Series A warrants to purchase up to 3,449,112 shares of its common stock at an exercise price of $4.00 with a term of eighteen months (the “Series A Warrants”) and Series B warrants to purchase up 3,449,112 shares of its common stock at an exercise price of $4.00 with a term of five years (the “Series B Warrants”). The Series B Warrants become exercisable only upon the exercise of the Series A Warrants. In addition, the Company agreed to issue to the placement agent warrants to purchase up to 172,456 shares of common stock representing 5.0% of the aggregate number of shares of common stock sold in this offering. The placement agent warrants have substantially the same terms as the Series A Warrants issued to the investors in the concurrent private placement, except that the placement agent warrants have an exercise price equal to $3.87 or 125% of the offering price per share and will expire on April 30, 2024. The registered direct offering and the concurrent private placement are referred to collectively herein as the “2019 Equity Offering.”

All the warrants issued in connection with the 2019 Equity Offering contained put options that allow the holders of the warrants the right to receive, for each warrant share that would have been issuable upon an exercise immediately prior to the occurrence of an effective change in control event defined as a fundamental transaction, the number of shares of common stock of the successor or acquiring corporation or of the Company, if it is the surviving corporation, and any additional consideration receivable as a result of such fundamental transaction by a holder of the number of shares of common stock for which this warrant is exercisable immediately prior to such fundamental transaction. The Company evaluated the embedded put option contained in the warrants under the guidance of Accounting Standards Codification (“ASC”) 815, Derivatives and Hedging, and concluded that the requirements for contingent exercise provisions as well as the settlement provision for scope exception in ASC 815-10-15-74 has been met. Accordingly, the put options contained in the warrants were not bi-furcated and accounted for as freestanding derivative instruments.

On January 10, 2020 and January 15, 2020, the Company entered into warrant exercise agreements (the “Exercise Agreements”) with the holders (the “Holders”) of its Series A Warrants and Series B Warrants (collectively, the “Warrants”), issued in the 2019 Equity Offering, pursuant to which the Holders agreed to exercise in cash their Warrants to purchase an aggregate of 6,898,224 shares of the Company’s common stock at a reduced exercise price of $0.715 per share, plus an additional $0.125 per share for the issuance of the private placement warrants for gross proceeds (before placement agent fees and expenses) to the Company of approximately $5.8 million (the “Exercise Transaction”).

Under the Exercise Agreements, the Company also agreed to issue to the Holders new warrants to purchase up to 6,898,224 shares of the Company’s common stock at an exercise price of $0.72 per share, with an exercise period of five and a half years (the “Private Placement Warrants”). The Private Placement Warrants transaction subsequently closed and the Private Placement Warrants were issued on January 14, 2020 with respect to the Warrants exercised on January 10, 2020 and on or about January 17, 2020, with respect to the Warrants exercised on January 15, 2020. In addition, the Company agreed to issue to the placement agent warrants to purchase up to 344,911 shares of common stock, representing 5.0% of the aggregate number of shares of common stock issued in the Exercise Transaction. The placement agent warrants have substantially the same terms as the Private Placement Warrants issued to the Holders, except that the placement agent warrants have an exercise price equal to $1.05. A warrant inducement expense of $4.8 million was recorded which was determined using the Black-Scholes option pricing model and was calculated as the difference between the fair value of the Warrants prior to, and immediately after, the reduction in the exercise price on the date of repricing in addition to the fair value of the Private Placement Warrants issued.

As of June 30, 2020, a total of 7,415,591 warrants were available for exercise. The shares of common stock underlying the registered direct placement agent warrants are registered for offer and sale under the Securities Act of 1933, as amended (the “Securities Act”), pursuant to the Company’s effective registration statement on Form S-1 (File No. 333-232011). The shares of common stock underlying the Private Placement Warrants and related placement agent warrants are registered for offer and sale under the Securities Act pursuant to the Company’s effective registration statement on Form S-1 (File No. 333-237379).

	Rollforward of Warrant Activity
	Registered direct warrants, Series A			Registered direct warrants, Series B			Registered direct warrants, placement agent		Private placement warrants		Private placement warrants, placement agent		Total
Balance as of December 31, 2019		3,449,112			3,449,112			172,456		—		—		7,070,680
Issued		—			—			—		6,898,224		344,911		7,243,135
Exercised		(3,449,112	)		(3,449,112	)		—		—		—		(6,898,224	)
Cancelled/Expired		—			—			—		—		—		—
Balance as of June 30, 2020		—			—			172,456		6,898,224		344,911		7,415,591

On February 13, 2020, the Company entered into an exchange agreement (the “Exchange Agreement”) with Biotechnology Value Fund, L.P., Biotechnology Value Fund II, L.P. and Biotechnology Value Trading Fund OS, L.P. (the “Exchanging Stockholders”), pursuant to which the Exchanging Stockholders exchanged (the “Exchange”) 3,796,000 shares of the Company’s common stock for 3,796 shares of newly designated Series X Convertible Preferred Stock (the “Series X Preferred Stock”). The Company agreed to reimburse the Exchanging Stockholders for their expenses in connection with the Exchange up to a total of $25,000, which was recorded as operating expense in the Company’s condensed consolidated statements of operations and comprehensive loss. The Exchange was completed on February 19, 2020.

On February 13, 2020, in connection with the Exchange, the Company filed a Certificate of Designation setting forth the preferences, rights and limitations of the Series X Preferred Stock with the Secretary of State of the State of Delaware. The number of shares so designated shall be 10,000 and Series X Preferred Stock shall have a par value of $0.001 per share. Each share of Series X Preferred Stock will be convertible into 1,000 shares of common stock at the option of the holder at any time; subject to certain limitations, including, that the holder will be prohibited from converting Series X Preferred Stock into common stock if, as a result of such conversion, the holder, together with its affiliates, would beneficially own a number of shares of common stock above a conversion blocker, which is initially set at 9.99% of the total common stock then issued and outstanding immediately following the conversion of such shares of Series X Preferred Stock. In the event of the Company’s liquidation, dissolution or winding up, holders of Series X Preferred Stock will participate pari passu with any distribution of proceeds to holders of common stock. Holders of Series X Preferred Stock are entitled to receive dividends on shares of Series X Preferred Stock equal (on an as-if-converted-to-common stock basis) to and in the same form as dividends actually paid on the common stock or other junior securities of the Company. Shares of Series X Preferred Stock will generally have no voting rights, except as required by law and except that the consent of a majority of the holders of the outstanding Series X Preferred Stock will be required to amend the terms of the Series X Preferred Stock.

SEC Accounting Series Release No. 268, Presentation in Financial Statements of “Redeemable Preferred Stocks” (“ASR 268”) requires equity instruments with redemption features that are not solely within the control of the issuer to be classified outside of permanent equity, often referred to as classification in “temporary equity”).The Company evaluated Series X Preferred Stock redemption features and concluded that there are no redemption features with the Series X Preferred Stock that are not solely within the control of the Company and permanent equity classification was appropriate.

Series X Preferred Stock has two (2) separate and distinct embedded features. They are: (1) optional conversion by holder and (2) redemption put feature upon fundamental transaction.

Each share of Series X Preferred Stock shall be convertible into 1,000 shares of common stock, at the option of the holder, at any time after the date of issuance. The Company evaluated the embedded optional conversion feature in accordance with the guidance under ASC 815, Derivatives and Hedging, and determined it is exempt from derivative accounting as the embedded feature is deemed to be indexed to the Company’s own stock and classified in stockholder’s equity if freestanding. Further, because the conversion ratio is fixed and equal to the ratio of the original exchange of 1,000 common stock to each share of Series X Preferred Stock, the Company concluded that there is no intrinsic value to the beneficial conversion feature.

Each share of Series X Preferred Stock contains redemption put features that allow the holders of the Series X Preferred Stock the right to receive, in lieu of the right to receive conversion shares, for each conversion share that would have been issuable upon such conversion immediately prior to the occurrence of an effective change in control (“Fundamental Transaction”), the same kind and amount of securities, cash or property as it would have been entitled to receive upon the occurrence of such Fundamental Transaction if it had been, immediately prior to such Fundamental Transaction, the holder of one share of common stock. The Company evaluated the redemption put feature contained in each Series X Preferred Stock under the guidance of ASC 815, Derivatives and Hedging, and concluded that the embedded redemption put feature do not meet the definition of a derivative, if freestanding, under ASC 815 as net settlement could not be achieved. Accordingly, the redemption put features contained in the Series X Preferred Stock were not bi-furcated and accounted for as freestanding derivative instruments.

On June 1, 2020 and June 10, 2020, the Exchanging Stockholders converted a total of 3,285 shares of Series X Preferred Stock into 3,285,000 shares of common stock. As of June 30, 2020, 511 shares of Series X Preferred Stock remain outstanding.

Total stock-based compensation expense was recognized in our condensed consolidated statements of operations and comprehensive loss as follows (in thousands):

	For the Three Months Ended June 30,				For the Six Months Ended June 30,
	2020		2019		2020		2019
Research and development	$	49	$	186	$	203	$	222
General and administrative		148		441		431		616
Total stock-based compensation	$	197	$	627	$	634	$	838

During the six months ended June 30, 2020, PRSUs awarded to employees totaling 55,000 shares vested and resulted in the recognition of $204,765 in stock-based compensation expense.