Stockholders' Equity |
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Stockholders' Equity |
NOTE 12—STOCKHOLDERS’ EQUITY Equity Financings and Related Warrants Concurrent Financing On August 1, 2017, the Company entered into the a securities purchase agreement with Longitude 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”) having an aggregate purchase price of $40.0 million (“PIPE Financing”), each such Unit consisting of (i) one (1) share (the “Shares”) of our common stock and (ii) a warrant (the “Warrants”) to purchase 0.5 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 December 31, 2017, there were warrants outstanding under this agreement to purchase 2,896,532 share of common stock. The warrants met the requirements for equity classification under ASC 815: Derivatives and Hedging, and the value of these warrants is included in additional paid-in capital on the balance sheet. The warrants are exercisable upon issuance and expire August 1, 2024. The Company will continue to evaluate equity classification on a quarterly basis. In December 2015, the Company entered into an agreement with Wedbush (“Wedbush Agreement”), which was subsequently amended in December of 2017, related to investment banking services. As part of the Wedbush Agreement, the Company issued warrants to purchase 57,930 shares of our common stock. 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. The warrants met the requirements for equity classification under ASC 815: Derivatives and Hedging, and the value of these warrants is included in additional paid-in capital on the balance sheet. The warrants are exercisable upon issuance and expire December 1, 2024. The Company will continue to evaluate equity classification on a quarterly basis. Subsequent Financing In connection with the execution of the Takeda Multi-Target Agreement, Threshold and Private Molecular entered into the Takeda Stock Purchase Agreement (“Concurrent Financing”). 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 $6.8423, for an aggregate purchase price of $20 million. Common Stock Warrant Liability Valuation The Company accounts for certain of its common stock warrants as liabilities under guidance in ASC 480 that clarifies the determination of whether an instrument is classified as a liability or equity. In 2014, 2015 and 2016, the Company issued to SVB warrants to purchase 14,254, 17,310, and 17,310 shares of our common stock, respectively, as part of the SVB loan and securities agreement, with an exercise price of $3.07 per share. Refer to Note 9: Borrowing Arrangements, for further detail about the SVP loan. The SVB warrants were converted into common stock as part of the Merger. Refer to Note 3: Merger with Private Molecular, for further detail about the Merger. On August 1, 2017, as part of the Merger, the Company assumed the warrant liability of the predecessor Threshold, related to issued warrants to purchase 377,273 shares of our common stock, with an exercise price of $39.82 per share. Refer to Note 3: Merger with Private Molecular, for further detail about the Merger. Due to change in control provisions outside of the Company’s control in these warrant agreements, 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 December 31, 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. Refer to Note 3 – Merger with Private Molecular. The fair value of these warrants on December 31, 2017 and 2016 was determined using a Black-Scholes model with the following key level 3 inputs:
During the year ended December 31, 2017 the change in fair value of $128,000 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 and comprehensive loss. The following table sets forth the Company’s financial liabilities subject to fair value measurements as of December 31, 2017 and 2016 (in thousands):
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