Estimated Fair Value of Financial Instruments

3 Months Ended

Sep. 30, 2017

Estimated Fair Value of Financial Instruments

Estimated Fair Value of Financial Instruments

6.Estimated Fair Value of Financial Instruments

The Company’s financial instruments consist of cash and cash equivalents, marketable securities, accounts receivable, accounts payable and accrued expenses, warrant liability and Convertible Senior Notes. The carrying amount of accounts receivable, accounts payable and accrued expenses are generally considered to be representative of their respective fair values because of the short-term nature of those instruments as of September 30, 2017 and June 30, 2017.

The Company has categorized its other financial instruments, based on the priority of the inputs to the valuation technique, into a three-level fair value hierarchy as set forth below. If the inputs used to measure the financial instruments fall within different levels of the hierarchy, the categorization is based on the lowest level input that is significant to the fair value measurement of the instrument.

Financial instruments recorded on the condensed consolidated balance sheets as of September 30, 2017 and June 30, 2017 are categorized based on the inputs to the valuation techniques as follows (in thousands):

· Level 1 – Financial instruments whose values are based on unadjusted quoted prices for identical assets or liabilities in an active market which the company has the ability to access at the measurement date (examples include active exchange-traded equity securities and most U.S. Government and agency securities).

· Level 2 – Financial instruments whose value are based on quoted market prices in markets where trading occurs infrequently or whose values are based on quoted prices of instruments with similar attributes in active markets.

· Level 3 – Financial instruments whose values are based on prices or valuation techniques that require inputs that are both unobservable and significant to the overall fair value measurement. These inputs reflect management’s own assumptions about the assumptions a market participant would use in pricing the asset.

Cash equivalents and marketable securities:

	($ in thousands)
September 30, 2017	Level 1		Level 2		Level 3		Total
Money Market Funds Note (a)	$	39,166	$	—	$	—	$	39,166
Marketable Securities:
U.S. Treasury Bonds		32,091		—		—		32,091
Certificate of Deposits		13,026		—		—		13,026
U.S. Government Sponsored Agencies		12,870		—		—		12,870
Corporate Debt Securities		28,503		—		—		28,503
Commercial Paper		10,185		—		—		10,185
Total	$	135,841	$	—	$	—	$	135,841

	($ in thousands)
June 30, 2017	Level 1		Level 2		Level 3		Total
Money Market Funds Note (a)	$	36,776	$	—	$	—	$	36,776
Marketable Securities:
U.S. Treasury Bonds		35,062		—		—		35,062
Certificate of Deposits		15,298		—		—		15,298
U.S. Government Sponsored Agencies		18,344		—		—		18,344
Corporate Debt Securities		32,659		—		—		32,659
Commercial Paper		10,145		—		—		10,145
Total	$	148,284	$	—	$	—	$	148,284

(a) The money market funds noted above are included in cash and cash equivalents. 

Convertible Senior Notes

The carrying amounts and estimated fair values (Level 2) of debt instruments are as follows (in thousands):

	As of September 30, 2017				As of June 30, 2017
	Carrying		Estimated		Carrying		Estimated
	Amount		Fair Value		Amount		Fair Value
Convertible Senior Notes	$	19,653	$	54,374	$	98,084	$	180,950

The fair value of the Convertible Senior Notes, which differs from their carrying values, is influenced by interest rates, the Company’s stock price and stock price volatility and is determined by prices for the Convertible Senior Notes observed in market trading which are Level 2 inputs.

Warrant Liabilities

The Company has determined its warrant liabilities to be a Level 2 fair value measurement and used the Black Scholes valuation model to calculate the fair value as of September 30, 2017 and June 30, 2017:

At the measurement dates, the Company estimated the fair value for the warrants based on Black-Scholes valuation model and using the following assumptions:

	September 30,	September 30,	June 30,	June 30,
	2017 (1)	2017 (2)	2017 (1)	2017 (2)
Risk-free interest rate	1.06%	1.31%	1.14%	1.38%
Expected remaining term	0.26 years	1.03 years	0.51 years	1.28 years
Expected volatility	63.73%	70.69%	69.34%	73.85%
Dividend yield	0%	0%	0%	0%

₍₁₎ Represents the fair value assumptions for the warrants issued in connection with February 10, 2017 stock purchase agreement.

₍₂₎ Represents the fair value assumptions for the warrants issued in connection with October 11, 2016 on public offering.

The following table sets forth the changes in the fair value for the warrant liability during the three-month period ended September 30, 2017 ($ in thousands):

	Warrants	Level 2
Fair value – June 30, 2017	18,655,804	$	90,706
Reclass of warrant liability to capital contributed in excess of par due to exercise	(1,575,000)		(11,241)
Change in fair value	—		86,378
Fair value – September 30, 2017	17,080,804	$	165,843