NOTE 8 — RELATED PARTY TRANSACTIONS

Convertible Notes

As of December 31, 2017, the Company had received an aggregate of approximately $10.0 million from stockholders under secured convertible promissory notes (the “Notes”). All of the Notes were issued in 2017 and 2016 and had the same terms. The Notes were subordinate to the long-term debt due to Silicon Valley Bank (See Note 9. Borrowing Arrangements) and accrue interest at a rate of 5.0% per annum, which was due with all unpaid principal on the maturity date of September 7, 2017. In connection with the Merger, the holders of the Notes agreed to convert the Notes based on an agreed upon price of $3.36 per share and no Notes remain outstanding at December 31, 2017.  The principal of $10.0 million and accrued interest $486,900 was converted to 3,121,098 shares, which converted to 2,208,716 post-split shares in the merged entity. As a result, the Company recorded a loss on conversion of notes of $4.6 million during the year ended December 31, 2017, since the agreed upon price was below the fair value of the Notes at the time of the Merger.

Takeda Collaboration and Stock Purchase

In connection with the Takeda Stock Purchase Agreement described in Note 4. Research and Development Collaboration Agreements, Takeda became a related party, following the stock purchase. Refer to Note 4. Research and Development Collaboration Agreements for more details about the Takeda Collaboration Agreement, the Takeda Multi-Target Agreement and the Takeda Development and License Agreement. Refer to Note 12. Stockholders’ Equity, for more detail about the Takeda Stock Purchase Agreement. Jonathan Lanfear, a director of the Company, is the Vice President and Global Head of Oncology and Neuroscience Business Development for Takeda.

Private Placement

Immediately following the Private Placement in 2017 described in Note 12 below, Longitude Venture Partner III, L.P. (“Longitude”) and CDK Associates, L.L.C. (“CDK”) became related parties, with Longitude and CDK beneficially owning 15.3% and 5.55% of the Company, respectively, following investments of $20.0 million and $7.0 million, respectively. Scott Morenstein, a director of the Company is a Managing Director of Caxton Alternative Management LP, the investment manager of CDK. David Hirsch, a director of the Company, is a member of Longitude Capital Partners III, LLC, the general partner of Longitude. Furthermore, Kevin Lalande, a director of the Company is affiliated with Sante Health Ventures I, L.P. and Sante Heath Ventures Annex Fund, L.P., which are stockholders of the Company and were investors in the Concurrent Financing.

Threshold Promissory Note

The Company received $4.0 million in the aggregate from Threshold during 2017 in the form on a promissory note that was settled as part of the Merger. Refer to Note 3. “Merger with Private Molecular”, for more details about the Threshold promissory note.

Public Offering

Following the Public Offering described in Note 12, “Stockholders’ Equity” below, BVF Partners L.P. (“BVF”) and Perceptive Advisors LLC (“Perceptive”) owned 7.6% and 5.9% of the Company, following investments of $15.3 million and $11.9 million, respectively.

Neither BVF nor Perceptive is affiliated with any director or executive officer of the Company. Longitude Venture Partners III, L.P. and CDK, current stockholders of the Company, purchased 365,000 and 545,454 shares of common stock, respectively, in the Public Offering at the public offering price.  Following the Public Offering, Longitude and CDK beneficially owned 12.33% and 4.96% of the Company, respectively. Scott Morenstein, a director of the Company is a Managing Director of Caxton Alternative Management LP, the investment manager of CDK. David Hirsch, a director of the Company, is a member of Longitude Capital Partners III, LLC, the general partner of Longitude.