XML 37 R17.htm IDEA: XBRL DOCUMENT v3.3.1.900
Warrants and Derivative Liabilities
 9 Months Ended
Dec. 31, 2015
Derivative Instruments And Hedging Activities Disclosure [Abstract]  
Warrants and Derivative Liabilities

11. Warrants and Derivative Liabilities

Senior Convertible Note Warrant

On April 4, 2012, the Company entered into the Purchase Agreement with CVI. The Purchase Agreement included a warrant (the “Original Warrant”) to purchase 309,406 shares of the Company’s common stock. The Original Warrant is exercisable at any time on or after the date that is six months after the issuance of the Original Warrant and entitles CVI to purchase shares of the Company’s common stock for a period of five years from the initial date the original warrant becomes exercisable at an initial exercise price equal to $54.50 per share, subject to certain price-based and other anti-dilution adjustments. On October 9, 2013, the Company amended the Purchase Agreement with CVI (the “Amendment”). Pursuant to the Amendment, the Company exchanged the Original Warrant for a new warrant (the “Exchanged Warrant”), with a reduced exercise price of $26.10 per share of common stock. Other than the reduced exercise price, the Exchanged Warrant has the same terms and conditions as the Original Warrant.  As a result of the sales of common stock under an At Market Sales Arrangement (“ATM”) and the 909,090 units, each consisting of one share of common stock and 0.90 of a warrant to purchase one share of common stock, sold to Hudson Bay Capital during the three months ended December 31, 2014, the exercise price of the Exchanged Warrant was further reduced to $22.10 per share.  As a result of the April 2015 equity offering (See Note 12, “Stockholders Equity”), the exercise price of the Exchanged Warrant was further reduced to $15.94 per share.  The Exchanged 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 Exchanged Warrant, (See Note 4, “Fair Value Measurements” for further discussion), 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 Exchanged Warrant as a liability due to certain adjustment provisions within the warrant, which requires that it be recorded at fair value. The Exchanged Warrant is subject to revaluation at each balance sheet date and any change in fair value is recorded as a change in fair value of derivatives and warrants until the earlier of its 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 Exchanged Warrant:

 

December 31,

 

 

September 30,

 

 

June 30,

 

 

 

 

 

 

 

 

 

Fiscal Year 15

2015

 

 

2015

 

 

2015

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Risk-free interest rate

 

0.96

%

 

 

0.64

%

 

 

0.74

%

 

 

 

 

 

 

 

 

Expected annual dividend yield

 

—

%

 

 

—

%

 

 

—

%

 

 

 

 

 

 

 

 

Expected volatility

 

76.68

%

 

 

73.39

%

 

 

71.61

%

 

 

 

 

 

 

 

 

Term  (years)

1.76

 

 

2.01

 

 

2.26

 

 

 

 

 

 

 

 

 

Fair value

$0.3 million

 

 

$0.1 million

 

 

$0.2 million

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

March 31,

 

 

December 31,

 

 

September 30,

 

 

June 30,

 

 

March 31,

 

Fiscal Year 14

2015

 

 

2014

 

 

2014

 

 

2014

 

 

2014

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Risk-free interest rate

 

0.73

%

 

 

1.00

%

 

 

1.07

%

 

 

0.98

%

 

 

1.11

%

Expected annual dividend yield

 

—

%

 

 

—

%

 

 

—

%

 

 

—

%

 

 

—

%

Expected volatility

 

70.42

%

 

 

72.38

%

 

 

76.20

%

 

 

83.50

%

 

 

80.99

%

Term  (years)

2.51

 

 

2.76

 

 

3.01

 

 

3.26

 

 

3.51

 

Fair value

$0.3 million

 

 

$0.5 million

 

 

$1.5 million

 

 

$2.3 million

 

 

$2.2 million

 

 

 

The Company recorded a net loss, resulting from an increase in the fair value of the Exchanged Warrant, of $0.2 million during the three months ended December 31, 2015, and a net gain, resulting from a decrease in the fair value of the Exchanged Warrant, of less than $0.1 million to change in fair value of derivatives and warrants during the nine months ended December 31, 2015.  The Company recorded net gains resulting from decreases in the fair value of the Exchanged Warrant of $1.0 million and $1.7 million to the change in fair value of derivatives and warrants during the three and nine months ended December 31, 2014, respectively.

 

 

Senior Secured Term Loan - New Warrant

On December 19, 2014, the Company entered into the Hercules Second Amendment and entered into the New Term Loan C. (See Note 10, “Debt” for additional information regarding the New Term Loan C).  In conjunction with the agreement, the Company issued the Warrant to purchase 58,823 shares of the Company’s common stock.  The Warrant is exercisable at any time after its issuance at an initial exercise price of $11.00 per share, subject to certain price-based and other anti-dilution adjustments, and expires on June 30, 2020.  As a result of the equity offering on April 29, 2015, (See Note 12, “Stockholders Equity”) the exercise price of the Warrant was reduced to $9.41 per share.   

The Company accounts for the Warrant as a liability due to certain provisions within the Warrant.  The Warrant is subject to revaluation at each balance sheet date and any change in fair value is recorded as a change in fair value of derivatives and warrants until the earlier of its 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:

 

December 31,

 

 

September 30,

 

 

June 30,

 

Fiscal Year 15

2015

 

 

2015

 

 

2015

 

 

 

 

 

 

 

 

 

 

 

 

 

Risk-free interest rate

 

1.65

%

 

 

1.31

%

 

 

1.63

%

Expected annual dividend yield

 

—

%

 

 

—

%

 

 

—

%

Expected volatility

 

73.57

%

 

 

75.32

%

 

 

72.57

%

Term  (years)

 

4.50

 

 

 

4.75

 

 

 

5.00

 

Fair value

$0.2 million

 

 

$0.1 million

 

 

$0.2 million

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

New Issuance

 

 

March 31,

 

 

December 31,

 

 

December 19,

 

Fiscal Year 14

2015

 

 

2014

 

 

2014

 

 

 

 

 

 

 

 

 

 

 

 

 

Risk-free interest rate

 

1.41

%

 

 

1.73

%

 

 

1.74

%

Expected annual dividend yield

 

—

%

 

 

—

%

 

 

—

%

Expected volatility

 

74.60

%

 

 

77.43

%

 

 

70.26

%

Term  (years)

 

5.25

 

 

 

5.50

 

 

 

5.53

 

Fair value

$0.2 million

 

 

$0.2 million

 

 

$0.2 million

 

The Company recorded a net loss, resulting from an increase in the fair value of the Warrant, of $0.1 million during the three months ended December 31, 2015 and a net gain, resulting from a decrease in the fair value of the Warrant of less than $0.1 million during the nine months ended December 31, 2015 to change in fair value of derivatives and warrants.  The Company recorded no change in the fair value of the Warrant in the three and nine months ended December 31, 2014.

November 2014 Warrant

On November 13, 2014, the Company completed an offering of approximately 909,090  units of the Company’s common stock with Hudson Bay Capital.  (See Note 12, “Stockholder’s Equity”, for further information).  Each unit consisted of one share of the Company’s common stock and 0.9 of a warrant to purchase one share of common stock, or a warrant to purchase in the aggregate 818,181 shares (the “November 2014 Warrant”).  The November 2014 Warrant is exercisable at any time, at an initial exercise price equal to $11.00 per share, subject to certain price-based and other anti-dilution adjustments, and expires on November 13, 2019.  As a result of the April 2015 equity offering, the exercise price of the November 2014 Warrant was reduced to $9.41 per share. 

The Company accounts for the November 2014 Warrant as a liability due to certain provisions within the warrant.  The November 2014 Warrant is subject to revaluation at each balance sheet date and any change in fair value is recorded as a change in fair value of derivatives and warrants until the earlier of its 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 November 2014 Warrant:

 

December 31,

 

 

September 30,

 

 

June 30,

 

Fiscal Year 15

2015

 

 

2015

 

 

2015

 

 

 

 

 

 

 

 

 

 

 

 

 

Risk-free interest rate

 

1.51

%

 

 

1.17

%

 

 

1.44

%

Expected annual dividend yield

 

—

%

 

 

—

%

 

 

—

%

Expected volatility

 

70.02

%

 

 

73.02

%

 

 

74.18

%

Term  (years)

 

3.87

 

 

 

4.12

 

 

 

4.37

 

Fair value

$2.1 million

 

 

$1.3 million

 

 

$1.8 million

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

New Issuance

 

 

March 31,

 

 

December 31,

 

 

November 13,

 

Fiscal Year 14

2015

 

 

2014

 

 

2014

 

 

 

 

 

 

 

 

 

 

 

 

 

Risk-free interest rate

 

1.28

%

 

 

1.61

%

 

 

1.64

%

Expected annual dividend yield

 

—

%

 

 

—

%

 

 

—

%

Expected volatility

 

75.96

%

 

 

78.00

%

 

 

72.86

%

Term  (years)

 

4.62

 

 

 

4.87

 

 

 

5.00

 

Fair value

$2.5 million

 

 

$3.2 million

 

 

$4.3 million

 

The Company recorded a net loss, resulting from an increase in the fair value of the November 2014 Warrant, of $0.8 million in the three months ended December 31, 2015, and a net gain, resulting from a decrease in the fair value of the November 2014 Warrant, of $0.4 million to change in fair value of derivatives and warrants during the nine months ended December 31, 2015.  The Company recorded a gain, resulting from the decrease in the fair value of the November 2014 Warrant, of $1.1 million in each of the three and nine months ended December 31, 2014. 

The Company prepared its estimates for the assumptions used to determine the fair value of the warrants issued in conjunction with both the Exchanged Note and the Term Loans, as well as the November 2014 Warrant utilizing the respective terms of the warrants with similar inputs, as described above.