APLS 2017 Annual Report

82 expiration of the warrant, Silicon Valley Bank may require us to repurchase the warrant for a total aggregate purchase price of $250,000. On October 19, 2017, we issued and sold an unsecured promissory note in the principal amount of $7.0 million to an affiliate of one of our stockholders. The note bears interest at a rate per annum of 8.0% and is due and payable quarterly in arrears on the 19th day of each April, July, October and January beginning on January 19, 2018. The note has a maturity date of October 19, 2022. The promissory note is contractually subordinated to the term loan facility with Silicon Valley Bank. We would be required to obtain the consent of the holder of our promissory note to increase or extend the maturity of the term loan facility with Silicon Valley Bank. In connection with the issuance and sale of the $7.0 million promissory note, we issued to the affiliate of one of our stockholders a warrant to purchase 93,764 shares of our common stock at a price per share of $5.484, which was exercised in October 2017 prior to the IPO. The warrant was exercisable at any time but would have expired if unexercised by the closing date of our IPO. We recorded the fair value of the warrant in the aggregate amount of $430,160 as a discount to the promissory note. This amount is being accreted as additional interest expense over the term of the promissory note. Cash Flows The following table provides information regarding our cash flows for the years ended December 31, 2015, 2016 and 2017: Year Ended December 31, 2015 2016 2017 Net cash used in operating activities $(18,855,947) $(26,003,078) $ (46,595,073) Net cash used in investing activities — — — Net cash provided by financing activities 41,236,498 14,863,020 197,375,114 Net increase (decrease) in cash and cash equivalents $ 22,380,551 $(11,140,058) $150,780,041 Net Cash Used in Operating Activities Net cash used in operating activities was $46.6 million for the year ended December 31, 2017 and consisted primarily of a net loss of $51.0 million adjusted for non-cash items of $6.1 million, including share-based compensation expense of $5.4 million, and a net increase in operating assets of $1.7 million, which resulted primarily from an increase in prepaid expenses of $3.9 million, offset by an increase in accrued expenses of $1.3 million and an increase in accounts payable of $0.9 million. Net cash used in operating activities was $26.0 million for the year ended December 31, 2016 and consisted primarily of a net loss of $27.1 million adjusted for non-cash items, including share-based compensation expense of $1.1 million, and a net increase in operating assets of $0.1 million, which resulted primarily from an increase in accounts payable and accrued expenses of $0.4 million partially offset by a decrease in refundable research and development credit of $0.4 million and a net increase in prepaid expenses and other assets of $0.8 million. Net cash used in operating activities was $18.9 million for the year ended December 31, 2015, and consisted primarily of a net loss of $46.5 million adjusted for non-cash items, including the cost of acquired in process research and development of $26.5 million, share-based compensation expense of $0.5 million, and a net increase in operating assets of $0.6 million, which resulted primarily from an increase in accounts payable and accrued expenses of $2.1 million partially offset by an increase in refundable research and development credit of $1.3 million and an increase in prepaid expenses and other assets of $0.2 million. Net Cash Used in Investing Activities There was no cash used in investing activities during the years ended December 31, 2015, 2016 and 2017. Net Cash Provided by Financing Activities Net cash provided by financing activities was $197.4 million during the year ended December 31, 2017, compared to $14.9 million during the year ended December 31, 2016. The net cash provided by financing activities during the year ended December 31, 2017 consisted primarily of the net proceeds of $137.2 million from the issuance and sale of 10,714,000 shares of our common stock in November 2017 in our IPO as well as net proceeds of approximately $12.8 million from the issuance and sale of an additional 981,107 shares of our common stock pursuant to the underwriter’s partial exercise of their option to purchase additional shares of common stock after the IPO, and net proceeds of $19.7 million from the issuance and sale of 7,792,035 shares of series E convertible preferred stock in August 2017. In October 2017, we borrowed $20.0 million under the term loan facility with Silicon Valley Bank