|9 Months Ended|
Sep. 30, 2017
NOTE 11 — STOCKHOLDERS’ EQUITY
On August 1, 2017, the Company entered into the a securities purchase agreement with Longitude Venture Partners III, L.P. and certain other accredited investors (the Longitude Securities Purchase Agreement”), pursuant to which the Company sold an aggregate of 5,793,063 units (the “Units”) accredited investors (the Longitude Securities Purchase Agreement”), pursuant to which the Company sold an aggregate of 5,793,063 units (the “Units”) having an aggregate purchase price of $40.0 million, each such Unit consisting of (i) one (1) share (the “Shares”) of our common stock and (ii) a warrant (the “Warrants”) to purchase 2,896,532 shares of our common stock (the “Private Placement”). The Private Placement was pursuant to equity commitment letter agreements entered into by and between the Company and investors in March and June 2017. The purchase price per Unit was $6.9048. The Warrants will be exercisable for a period of seven years from the date of their issuance at a per-share exercise price of $6.8423 (which exercise price shall be payable in cash or through a cashless exercise mechanic), subject to certain adjustments as specified in the Warrants. At September 30, 2017, there were warrants outstanding under this agreement to purchase 2,896,532 share of common stock. The value of these warrants is included in additional paid-in capital on the balance sheet.
In connection with the execution of the Takeda Multi-Target Agreement, Threshold and Private Molecular entered into the Takeda Stock Purchase Agreement. Pursuant to the Takeda Stock Purchase Agreement, following the consummation of the Merger and Private Placement, Takeda purchased 2,922,993 shares of the Company common stock, at a price per share of $6.84, for an aggregate purchase price of $20 million.
Common Stock Warrant Valuation
The Company accounts for certain of its common stock warrants under guidance in ASC 480 that clarifies the determination of whether an instrument is classified as a liability or equity. Due to change in control provisions outside of the Company’s control in the warrant agreement, the guidance requires the Company’s outstanding warrants to be classified as liabilities and to be fair valued at each reporting period, with the changes in fair value recognized as other income (expense) in the Company’s consolidated statements of operations.
The following table is a reconciliation of the warrant liability measured at fair value using level 3 inputs (in thousands):
At September 30, 2017, the Company had warrants outstanding (“2017 Warrants”) to purchase 377,273 shares of common stock, having an exercise price of $39.82 per share, that were previously issued by Threshold, and which were recorded by Molecular as a liability as part of the Merger transaction.
At December 31, 2016, the Company had warrants outstanding (“2014 Warrants”) to purchase 48,874 shares of preferred stock, having an exercise price of $3.07 per share, which were issued by Molecular as part of the loan and security agreement with Silicon Valley Bank (“SVB”). These warrants were converted into common stock at the closing of the Merger. Refer to Note 8, Borrowing Arrangements, for further details about the SVB loan and security agreement.
The fair value of these warrants on September 30, 2017 and December 31, 2016 was determined using a Black-Scholes model with the following key level 3 inputs:
During the three months ended September 30, 2017 the change in fair value of $272,000 of noncash expense related to the warrants was recorded as Change in fair value of warrant liabilities in the Company’s consolidated statement of operations.
The following table sets forth the Company’s financial liabilities subject to fair value measurements as of September 30, 2017 and December 31, 2016 (in thousands):
The entire disclosure for shareholders' equity comprised of portions attributable to the parent entity and noncontrolling interest, including other comprehensive income. Includes, but is not limited to, balances of common stock, preferred stock, additional paid-in capital, other capital and retained earnings, accumulated balance for each classification of other comprehensive income and amount of comprehensive income.
Reference 1: http://www.xbrl.org/2003/role/presentationRef