MONSTER MERGER AND FINANCING As noted above, on January 29, 2018, Private Innovate and Monster completed the Monster Merger in accordance with the terms of the Monster Merger Agreement. Pursuant to the Monster Merger Agreement, Monster Merger Sub merged with and into IB Pharmaceuticals, with IB Pharmaceuticals surviving as the wholly owned subsidiary of Monster. Immediately following the Monster Merger, Monster changed its name to Innovate Biopharmaceuticals, Inc. On March 29, 2018, IB Pharmaceuticals was merged into Innovate and ceased to exist. Immediately prior to the closing of the Monster Merger, accredited investors purchased shares of common stock of Private Innovate in a private placement for gross proceeds of approximately $18.1 million , or $16.5 million , net of approximately $1.6 million in placement agent fees and expenses (the Equity Issuance). Additionally, Private Innovate issued five -year warrants to each cash purchaser of common stock, or an aggregate of approximately 1.4 million warrants, with an exercise price of $ 3.18 per share after giving effect to the Exchange Ratio. The Company calculated the fair value of the warrants issued utilizing the Black-Scholes option pricing model with the following assumptions: expected dividend yield of 0.0% , expected stock price volatility of 84.8% , risk free rate of 2.5% and term of 5.0 years . The proceeds were allocated between common stock and warrants utilizing the relative fair value method with the allocated warrant value of approximately $2.0 million recorded as additional paid-in capital. Private Innovate also issued 349,555 five -year warrants with an exercise price of $ 2.54 per share and 279,862 five -year warrants with an exercise price of $ 3.18 per share (after giving effect to the Exchange Ratio) to the respective placement agents and their affiliates. The Company calculated the fair value of the warrants issued utilizing the Black-Scholes option pricing model with the following assumptions: expected dividend yield of 0.0% , expected stock price volatility of 84.8% , risk free rate of 2.5% and term of 5.0 years . The total value for these warrants approximated $913,000 and was recorded as stock issuance costs and additional paid-in capital. Concurrently with the Equity Issuance, convertible promissory notes issued by Private Innovate in the aggregate principal amount of approximately $8.6 million plus accrued interest of $582,000 were converted into shares of Private Innovate common stock at a price per share of $ 0.72 , prior to the Exchange Ratio (the Conversion), which reflected a 25% discount relative to the shares issued pursuant to the Equity Issuance (the Conversion Discount). The Conversion Discount represented a beneficial conversion feature of approximately $3.1 million which was recorded as a charge to interest expense and a credit to additional paid-in capital.