Common Stock Warrants

The Company has not issued any new warrants in fiscal 2016. As of July 31, 2016 and July 31, 2015, 3,495 warrants to purchase shares of common stock issued to Silicon Valley Bank in fiscal 2015 with an exercise price of $13.68 remained exercisable.

On February 14, 2013, the Company issued to one of its customers a warrant to purchase 420,901 shares of common stock with an exercise price of $1.52 per share. The warrant was provided as a sales incentive and recorded as an offset to the amount of revenue recognized from the customer. The warrant vested 50% upon achievement of each of two performance milestones. Both performance milestones were based on achieving certain targets and both were met as of July 31, 2013. The warrant agreement had an anti-dilution clause whereby, if a financing event occurred prior to December 31, 2013, the Company was obligated to issue additional warrants to the customer equal to 2% of the Company’s outstanding shares on a fully diluted basis. A financing event was defined as a sale of equity securities for capital raising purposes during the period beginning on the date of the issue of the warrants until December 31, 2013.

Due to the anti-dilution provision of the warrants, the fair value of the outstanding warrants was classified within current liabilities on the consolidated balance sheets, and any changes in fair value were recognized as a reduction of revenue prior to the achievement of the performance milestones and as a component of other expense, net after both milestones were met, in its consolidated statements of comprehensive loss. During fiscal 2014 the Company performed the final remeasurement of the warrants prior to its exercise on December 17, 2013 and recorded an expense of $1.6 million, which was included in other expense, net.

The Company determined the fair value of warrants on the issuance date and subsequent reporting dates using the Black-Scholes pricing model utilizing the assumptions noted below. The expected term of the warrants was based on the remaining contractual expiration period. The expected stock price volatility for the Company’s stock was determined by examining the historical volatilities of a group of its industry peers as it did not have any trading history of its common stock. The risk-free interest rate was calculated using the average of the published interest rates for U.S. Treasury zero-coupon issues with maturities that approximate the expected term. The dividend yield assumption was zero, as the Company does not have any history of, nor plans for, dividend payments.

The following assumptions were used to estimate the fair value of the common stock warrants:



	Year Ended July 31,
		2014
Expected volatility		34.9 – 37.0%
Risk-free rate		0.07 – 0.11%
Dividend yield		—%
Expected term (in years)		0.28 – 0.41
Fair value of common stock		$4.11 – $7.38

No customer common stock warrants were issued or valued during the years ended July 31, 2016 and 2015.