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Warrants and Derivative Liabilities | 3 Months Ended
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Jun. 30, 2013
Derivative Instruments And Hedging Activities Disclosure [Abstract] |
Warrants and Derivative Liabilities |
11. | Warrants and Derivative Liabilities
On April 4, 2012, the Company entered into a Purchase Agreement for the Initial Note and on December 20, 2012, the Company entered into the Amendment pursuant to which it exchanged the Initial Note for the Exchanged Note, as described in Note 10. The Initial Note included a warrant to purchase 3,094,060 million shares of the Company’s common stock. The warrant is exercisable at any time on or after the date that is six months after the issuance of the warrant and entitles CVI to purchase shares of the Company’s common stock for a period of five years from the initial date the warrant becomes exercisable at a price equal to $5.45 per share, subject to certain price-based and other anti-dilution adjustments. The warrant may not be exercised if, after giving effect to the conversion, CVI together with its affiliates would beneficially own in excess of 4.99% of the Company’s common stock. This percentage may be raised to any other percentage not in excess of 9.99% at the option of CVI, upon at least 61-days prior notice to the Company, or lowered to any other percentage, at the option of CVI, at any time. The Company calculated the fair value of the derivative liabilities and warrants utilizing an integrated lattice model. The lattice model is an option pricing model that involves the construction of a binomial tree to show the different paths that the underlying asset may take over the option’s life. A lattice model can take into account expected changes in various parameters such as volatility over the life of the options, providing more accurate estimates of option prices than the Black-Scholes model. The Company accounts for the warrant as a liability due to certain adjustment provisions within the warrant, which requires that it be recorded at fair value. The warrant is subject to revaluation at each balance sheet date and any change in fair value will be recorded as a change in fair value in other income (expense) until the earlier of expiration or its exercise at which time the warrant liability will be reclassified to equity. Following is a summary of the key assumptions used to calculate the fair value of the warrant:
|  | June 30, 2013 |
Fiscal Year 2013 |  |  |  |
Risk-free interest rate |  |  | 1.13 | %
Expected annual dividend yield |  |  | 0.0 | %
Expected volatility |  |  | 71.9 | %
Term (years) |  |  | 4.27 |
Fair Value |  | $ | 3.0 million |
|  | March 31, |  |  | December 31, |  |  | September 30, |  |  | June 30, |  |  | April 4, |
|  | 2013 |  |  | 2012 |  |  | 2012 |  |  | 2012 |  |  | 2012 |
Fiscal Year 2012 |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Risk-free interest rate |  |  | 0.67 | % |  |  | 0.75 | % |  |  | 0.63 | % |  |  | 0.77 | % |  |  | 1.19 | %
Expected annual dividend yield |  |  | 0.0 | % |  |  | 0.0 | % |  |  | 0.0 | % |  |  | 0.0 | % |  |  | 0.0 | %
Expected volatility |  |  | 71.7 | % |  |  | 80.6 | % |  |  | 80.9 | % |  |  | 80.8 | % |  |  | 80.0 | %
Term (years) |  |  | 4.51 |  |  |  | 4.76 |  |  |  | 5.01 |  |  |  | 5.28 |  |  |  | 5.5 |
Fair Value |  | $ | 3.4 million |  |  | $ | 4.4 million |  |  | $ | 7.1 million |  |  | $ | 8.6 million |  |  | $ | 7.0 million |
The Company recorded the change in the fair value of the CVI warrant of $0.4 million gain and $1.6 million loss, to change in fair value of derivatives and warrants in the three months ended June 30, 2013 and 2012, respectively. The Company determined certain embedded derivatives issued with the convertible notes required accounting as a liability, which requires they be accounted for as a standalone liability subject to revaluation at each balance sheet date with changes in fair value recorded as change in fair value of derivatives and warrants until the earlier of exercise or expiration. The terms of the debt modification reduced the conversion price of the Initial Note from $4.85 per share to $3.19 per share in the Exchanged Note. As a result the Company revalued these derivatives pre- and post-modification and recorded the difference of $0.5 million as a debt discount and a derivative liability. (See Note 10, “Debt,” for further discussion). Following is a summary of the key assumptions used to value the convertible notes derivative feature:
|  | June 30, |
|  | 2013 |
Fiscal Year 2013 |  |  |  |
Principal Outstanding (000’s) |  | $ | 14,389 |
Stock Price |  | $ | 2.64 |
Percentage Volume Condition Met |  |  | 87.5 | %
Expected Volatility |  |  | 65.8 | %
Risk Free Rate |  |  | 0.21 | %
Bond Yield |  |  | 16.7 | %
Recovery Rate |  |  | 37.0 | %
Redeemable |  |  | yes |
Total Time (years) |  |  | 1.26 |
Dilution Effect |  |  | yes |
Fair Value |  | $ | 0.5 million |
Fair Value as a Percent of Par |  |  | 3.3 | %
|  |  |  |  |  |  |  | Post- modification |  |  | Pre-modification |  |  |  |  |  |  |  |  |  |
|  | March 31, |  |  | December 31, |  |  | December 20, |  |  | December 20, |  |  | September 30, |  |  | June 30, |  |  | April 4, |
|  | 2013 |  |  | 2012 |  |  | 2012 |  |  | 2012 |  |  | 2012 |  |  | 2012 |  |  | 2012 |
Fiscal Year 2012 |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Principal Outstanding (000’s) |  | $ | 15,380 |  |  | $ | 20,944 |  |  | $ | 20,944 |  |  | $ | 24,617 |  |  | $ | 24,191 |  |  | $ | 25,278 |  |  | $ | 25,000 |
Stock Price |  | $ | 2.67 |  |  | $ | 2.62 |  |  | $ | 2.95 |  |  | $ | 2.95 |  |  | $ | 4.15 |  |  | $ | 4.68 |  |  | $ | 3.97 |
Percentage Volume Condition Met |  |  | 80.5 | % |  |  | 94.5 | % |  |  | 94.9 | % |  |  | 28.6 | % |  |  | 51.0 | % |  |  | 75.2 | % |  |  | 85.9 | %
Expected Volatility |  |  | 66.9 | % |  |  | 73.5 | % |  |  | 72.5 | % |  |  | 72.5 | % |  |  | 70.0 | % |  |  | 71.0 | % |  |  | 75.0 | %
Risk Free Rate |  |  | 0.20 | % |  |  | 0.23 | % |  |  | 0.25 | % |  |  | 0.25 | % |  |  | 0.23 | % |  |  | 0.33 | % |  |  | 0.44 | %
Bond Yield |  |  | 16.5 | % |  |  | 16.5 | % |  |  | 16.5 | % |  |  | 16.5 | % |  |  | 15.0 | % |  |  | 16.0 | % |  |  | 15.0 | %
Recovery Rate |  |  | 30.0 | % |  |  | 30.0 | % |  |  | 30.0 | % |  |  | 30.0 | % |  |  | 30.0 | % |  |  | 30.0 | % |  |  | 30.0 | %
Redeemable |  |  | yes |  |  |  | yes |  |  |  | yes |  |  |  | yes |  |  |  | yes |  |  |  | yes |  |  |  | yes |
Total Time (years) |  |  | 1.51 |  |  |  | 1.76 |  |  |  | 1.79 |  |  |  | 1.79 |  |  |  | 2.01 |  |  |  | 2.28 |  |  |  | 2.5 |
Dilution Effect |  |  | yes |  |  |  | yes |  |  |  | yes |  |  |  | yes |  |  |  | yes |  |  |  | yes |  |  |  | yes |
Fair Value as a Percent of Par |  |  | 3.4 | % |  |  | 4.9 | % |  |  | 7.1 | % |  |  | 3.9 | % |  |  | 11.4 | % |  |  | 17.9 | % |  |  | 15.1 | %
Fair Value |  | $ | 0.5 million |  |  | $ | 1.0 million |  |  | $ | 1.5 million |  |  | $ | 0.9 million |  |  | $ | 2.8 million |  |  | $ | 4.5 million |  |  | $ | 3.8 million |
Based on historical volume-weighted average price (“VWAP”) of the Company’s common stock as well as the historic average dollar trading volume of the Company’s common stock, the percentage volume condition is the probability that the Company will convert monthly installment payments into the Company’s common stock. The expected volatility rate was estimated based on an equal weighting of the historical volatility of the Company’s common stock and the implied volatility of the Company’s traded options. To determine the risk-free interest rate, an interpolated rate was used based on the one, two and three-year United States Treasury rates. The bond yield was estimated using comparable corporate debt and yield information. The recovery rate of the Exchanged Note was estimated by reviewing historical corporate debt that went into default. The bond is redeemable by the Company at any point after the one-year anniversary of the grant date provided certain provisions within the note. The total time is based on the actual 30-month contractual terms. It was determined that there is a dilution effect based on the Company’s ability to make payments in shares of common stock. The Company recorded the change in the fair value of the derivative liabilities of $0.1 million gain and $0.7 million loss, to changes in fair value of derivatives and warrants in the three months ended June 30, 2013 and 2012, respectively. On June 5, 2012, the Company entered into a Loan and Security Agreement with Hercules (see Note 10, “Debt,” for additional information regarding the Loan and Security Agreement). In conjunction with this agreement, the Company issued a warrant to purchase 139,276 shares of the Company’s common stock. The warrant is exercisable at any time after the issuance of the warrant and expires on December 5, 2017, at a price equal to $3.59 per share subject to certain price-based and other anti-dilution adjustments. The Company accounts for the warrant as a liability due to certain provisions within the warrant, which requires that it be recorded at fair value. The warrant is subject to revaluation at each balance sheet date and any change in fair value will be recorded as changes in fair value of derivatives and warrants until the earlier of expiration or its exercise at which time the warrant liability will be reclassified to equity. Following is a summary of the key assumptions used to calculate the fair value of the warrant:
|  | June 30, |
|  | 2013 |
Fiscal Year 2013 |  |  |  |
Risk-free interest rate |  |  | 1.20 | %
Expected annual dividend yield |  |  | — | %
Expected volatility |  |  | 72.3 | %
Term (years) |  |  | 4.43 |
Fair Value |  | $ | 0.2 million |
|  | March 31, |  |  | December 31, |  |  | September 30, |  |  | June 30, |  |  | June 5, |
|  | 2013 |  |  | 2012 |  |  | 2012 |  |  | 2012 |  |  | 2012 |
Fiscal Year 2012 |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Risk-free interest rate |  |  | 0.70 | % |  |  | 0.75 | % |  |  | 0.64 | % |  |  | 0.80 | % |  |  | 0.77 | %
Expected annual dividend yield |  |  | — | % |  |  | — | % |  |  | — | % |  |  | — | % |  |  | — | %
Expected volatility |  |  | 72.01 | % |  |  | 80.14 | % |  |  | 81.18 | % |  |  | 80.32 | % |  |  | 79.99 | %
Term (years) |  |  | 4.68 |  |  |  | 4.93 |  |  |  | 5.18 |  |  |  | 5.44 |  |  |  | 5.5 |
Fair Value |  | $ | 0.2 million |  |  | $ | 0.2 million |  |  | $ | 0.4 million |  |  | $ | 0.5 million |  |  | $ | 0.4 million |
The Company prepared its estimates for the assumptions used to determine the fair value of the warrants issued in conjunction with both the Convertible Note and Term Loan utilizing the respective terms of the warrants with similar inputs, as described above. The Company recorded a loss from the change in the fair value of the Hercules warrant of $0.1 million, during the three months ended June 30, 2012.

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- Definition The entire disclosure for derivative instruments and hedging activities including, but not limited to, risk management strategies, non-hedging derivative instruments, assets, liabilities, revenue and expenses, and methodologies and assumptions used in determining the amounts. + References Reference 1: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Accounting Standards Codification -Topic 815 -SubTopic 10 -Section 50 -Paragraph 4K -URI http://asc.fasb.org/extlink&oid=7476318&loc=SL5708775-113959 Reference 2: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Accounting Standards Codification -Topic 815 -SubTopic 10 -Section 50 -Paragraph 4B -URI http://asc.fasb.org/extlink&oid=7476318&loc=SL5624163-113959 Reference 3: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Accounting Standards Codification -Topic 235 -SubTopic 10 -Section S99 -Paragraph 1 -Subparagraph (SX 210.4-08.(n)) -URI http://asc.fasb.org/extlink&oid=26873400&loc=d3e23780-122690 Reference 4: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Accounting Standards Codification -Topic 815 -SubTopic 10 -Section 50 -Paragraph 4J -URI http://asc.fasb.org/extlink&oid=7476318&loc=SL5708773-113959 Reference 5: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Accounting Standards Codification -Topic 815 -SubTopic 25 -Section 50 -Paragraph 1 -URI http://asc.fasb.org/extlink&oid=6886632&loc=d3e76258-113986 Reference 6: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Accounting Standards Codification -Topic 815 -SubTopic 10 -Section 50 -Paragraph 3 -URI http://asc.fasb.org/extlink&oid=7476318&loc=d3e41635-113959 Reference 7: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Accounting Standards Codification -Topic 815 -SubTopic 10 -Section 50 -Paragraph 4H -URI http://asc.fasb.org/extlink&oid=7476318&loc=SL5624258-113959 Reference 8: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Accounting Standards Codification -Topic 815 -SubTopic 10 -Section 50 -Paragraph 4A -URI http://asc.fasb.org/extlink&oid=7476318&loc=SL5618551-113959 Reference 9: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Accounting Standards Codification -Topic 815 -SubTopic 30 -Section 45 -Paragraph 1 -URI http://asc.fasb.org/extlink&oid=6441202&loc=d3e80720-113993 Reference 10: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Accounting Standards Codification -Topic 815 -SubTopic 30 -Section 50 -Paragraph 1 -URI http://asc.fasb.org/extlink&oid=7668309&loc=d3e80748-113994 Reference 11: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Accounting Standards Codification -Topic 815 -SubTopic 10 -Section 50 -Paragraph 4E -URI http://asc.fasb.org/extlink&oid=7476318&loc=SL5624181-113959 Reference 12: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Accounting Standards Codification -Topic 815 -SubTopic 30 -Section 50 -Paragraph 2 -URI http://asc.fasb.org/extlink&oid=7668309&loc=d3e80784-113994 Reference 13: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Accounting Standards Codification -Topic 815 -SubTopic 10 -Section 50 -Paragraph 2 -URI http://asc.fasb.org/extlink&oid=7476318&loc=d3e41620-113959 Reference 14: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Accounting Standards Codification -Topic 815 -SubTopic 10 -Section 50 -Paragraph 4D -URI http://asc.fasb.org/extlink&oid=7476318&loc=SL5624177-113959 Reference 15: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Accounting Standards Codification -Topic 815 -SubTopic 10 -Section 50 -Paragraph 1A -URI http://asc.fasb.org/extlink&oid=7476318&loc=SL5579245-113959 Reference 16: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Accounting Standards Codification -Topic 815 -SubTopic 10 -Section 50 -Paragraph 1B -URI http://asc.fasb.org/extlink&oid=7476318&loc=SL5580258-113959 Reference 17: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Accounting Standards Codification -Topic 815 -SubTopic 10 -Section 50 -Paragraph 1 -URI http://asc.fasb.org/extlink&oid=7476318&loc=SL5579240-113959 Reference 18: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Accounting Standards Codification -Topic 815 -SubTopic 10 -Section 50 -Paragraph 5 -URI http://asc.fasb.org/extlink&oid=7476318&loc=d3e41641-113959 Reference 19: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Accounting Standards Codification -Topic 815 -SubTopic 10 -Section 50 -Paragraph 4 -URI http://asc.fasb.org/extlink&oid=7476318&loc=d3e41638-113959 Reference 20: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Accounting Standards Codification -Topic 815 -SubTopic 10 -Section 50 -Paragraph 4C -URI http://asc.fasb.org/extlink&oid=7476318&loc=SL5624171-113959 + Details
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