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SEC Filings

S-1/A
OREXIGEN THERAPEUTICS, INC. filed this Form S-1/A on 04/09/2007
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Table of Contents

 
OREXIGEN THERAPEUTICS, INC.
(a development stage company)

NOTES TO FINANCIAL STATEMENTS — (Continued)

In addition, at any time after April 22, 2010 and upon the election of the holders of at least two-thirds of the outstanding shares of Preferred Stock, and only after all outstanding shares of the Series B Preferred Stock have been redeemed, the Company will redeem in three annual installments, the outstanding shares of Preferred Stock by a cash payment equal to the original issue price ($1.18 for Series A Preferred Stock and $2.36 for Series B Preferred Stock) plus any declared but unpaid dividends, as adjusted for stock dividends, combinations or splits. The number of shares to be redeemed will be equal to the number of outstanding shares of each series of Preferred Stock divided by the number of remaining redemption installments made on a pro rata basis among all series of Preferred Stock outstanding.
 
At December 31, 2006, redeemable convertible Preferred Stock consisted of the following:
 
                         
    Shares Authorized,
       
    Issued and
  Liquidation Preference
   
Series
  Outstanding   and Redemption Value   Carrying Value
 
Series A
    9,322,035     $ 11,000,000     $ 10,954,497  
Series B
    14,830,509       35,000,000       34,942,437  
                         
      24,152,544     $ 46,000,000     $ 45,896,934  
                         
 
The Company is accreting the carrying value of these securities to the Liquidation Preference and Redemption Value as of April 23, 2010, the earliest date on which the Preferred Holders can require the redemption of the outstanding shares. The difference between the Carrying Value and the Liquidation Preference and Redemption Value of the Preferred Stock represents the amount of issuance costs remaining to be accreted.
 
Convertible Preferred Stock
 
During November 2006, the Company sold 8,771,930 shares of Series C convertible Preferred Stock at $3.42 per share, resulting in net proceeds of approximately $29,900,000. The Series C convertible Preferred Stock was sold at a price per share below the anticipated initial public offering price. Accordingly, pursuant to Emerging Issues Task Force Issue No. 98-5, Accounting for Convertible Securities with Beneficial Conversion Features, the Company recorded a deemed dividend on the Series C convertible Preferred Stock of $13,859,649, which is equal to the number of shares of Series C convertible Preferred Stock sold multiplied by the difference between the estimated fair value of the underlying common stock and the Series C conversion price per share. The deemed dividend increased the net loss applicable to common stockholders in the calculation of basic and diluted net loss per common share for the year ended December 31, 2006 and is reported as a charge to additional paid-in capital.
 
The holders of Series C convertible Preferred Stock are entitled to receive non-cumulative dividends at a rate of 8% per annum. These dividends are payable when and if declared by the Board of Directors. At December 31, 2006, the Board of Directors had not declared any dividends. The preferred dividends are payable in preference and in priority to any dividends on the Company’s common stock.
 
Shares of Series C convertible Preferred Stock are convertible into shares of common stock, at the option of the holder, at a conversion ratio of one-to-two, subject to certain further antidilutive adjustments. Holders of Series C convertible Preferred Stock vote on an equivalent basis with common shareholders on an as-converted basis.
 
Each share of Series C convertible Preferred Stock is automatically converted into common stock upon (i) the affirmative election of the holders of two-thirds of the outstanding shares of Preferred Stock, or (ii) the closing of a firmly underwritten public offering pursuant to an effective registration statement under the Securities Act of 1933, as amended, covering the offer and sale of common stock for the account of the


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