Warrants and Derivative Liabilities

The Company accounts for its warrants and contingent consideration as liabilities due to certain adjustment provisions within the instruments, which require that they be recorded at fair value. The warrants are subject to revaluation at each balance sheet date and any change in fair value is recorded as a change in fair value of warrants until the earlier of its expiration or its exercise at which time the warrant liability will be reclassified to equity. The Company calculated the fair value of the warrants utilizing an integrated lattice model. The contingent consideration is subject to revaluation at each balance sheet date and any change in fair value is recorded as a change in fair value of contingent consideration until the earlier of its settlement or expiration. The Company determined the fair value of the contingent consideration utilizing a Black-Scholes option pricing method upon acquisition and as of September 30, 2017. The contingent consideration was settled as of March 31, 2018. See Note 4, "Fair Value Measurements", for further discussion.

Senior Convertible Note Warrant

On April 4, 2012, the Company entered into the Purchase Agreement with CVI. The Purchase Agreement included a warrant to purchase 309,406 shares of the Company’s common stock (the “Original Warrant”). Pursuant to an exchange in October 2013, the Original warrant was exchanged for a new warrant (the “Exchanged Warrant”). The Exchanged Warrant expired on October 4, 2017.

Hercules Warrant

On December 19, 2014, the Company entered into the Hercules Second Amendment, (see Note 11, “Debt” for additional information). In conjunction with the agreement, the Company issued the Hercules Warrant to purchase 58,823 shares of the Company’s common stock. The Hercules Warrant is exercisable at any time after its issuance at an exercise price of $7.85 per share, subject to certain price-based and other anti-dilution adjustments, including the equity raise in May 2017, the acquisition of ITC with common stock in September 2017 and sales of common stock under the ATM entered into in January 2017, and expires on June 30, 2020.

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. 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 exercise price equal to $7.81 per share, subject to certain price-based and other anti-dilution adjustments as noted above, and expires on November 13, 2019.

Following is a summary of the key assumptions used to calculate the fair value of the November 2014 Warrant:



	March 31,	December 31,	September 30,	June 30,
Fiscal Year 2017	2018	2017	2017	2017
Risk-free interest rate	2.20%	1.87%	1.49%	1.44%
Expected annual dividend yield	—	—	—	—
Expected volatility	65.86%	65.86%	65.64%	67.21%
Term (years)	1.62	1.87	2.12	2.37
Fair value	$1.1 million	$0.4 million	$0.8 million	$0.9 million

	March 31,	December 31,	September 30,	June 30,
Fiscal Year 2016	2017	2016	2016	2016
Risk-free interest rate	1.41%	1.43%	0.93%	0.77%
Expected annual dividend yield	—	—	—	—
Expected volatility	66.53%	69.31%	68.96%	70.01%
Term (years)	2.62	2.87	3.12	3.37
Fair value	$1.8 million	$2.3 million	$2.3 million	$3.2 million

	March 31,	December 31,	September 30,	June 30,	March 31,
Fiscal Year 2015	2016	2015	2015	2015	2015
Risk-free interest rate	0.98%	1.51%	1.17%	1.44%	1.28%
Expected annual dividend yield	—	—	—	—	—
Expected volatility	69.88%	70.02%	73.02%	74.18%	75.96%
Term (years)	3.62	3.87	4.12	4.37	4.62
Fair value	$2.6 million	$2.1 million	$1.3 million	$1.8 million	$2.5 million

The Company recorded a net gain, resulting from a decrease in the fair value of the November 2014 Warrant, of $0.7 million, a net gain, resulting from a decrease in the fair value of the November 2014 Warrant, of $1.4 million, and a net loss resulting from an increase in the fair value of the November 2014 Warrant, of $0.1 million to change in fair value of derivatives and warrants in the fiscal years ended March 31, 2018, 2017 and 2016, respectively.

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, the repaid term loans, and the November 2014 Warrant utilizing the respective terms of the warrants with similar inputs, as described above.

Contingent Consideration

The Company evaluated the ITC acquisition Make Whole Payment set forth in the SPA, which ultimately required net settlement cash, and determined the contingent consideration qualified for liability classification and derivative treatment under ASC 815. As a result, for each period the fair value of the contingent consideration was remeasured and the resulting gain or loss was recognized in operating expenses.

Following is a summary of the key assumptions used to calculate the fair value of the contingent consideration related to the ITC acquisition:



	September 30,			September 25,
Fiscal Year 2017	2017			2017
Risk-free interest rate	1.09		%	1.09		%
Expected annual dividend yield	—			—
Expected volatility	66.54		%	65.71		%
Term (years)	0.31			0.32
Fair value	$	0.4		$	0.6

All of the stock related to this liability was sold as of December 5, 2017 and the amount of the Make Whole Payment was calculated to be $0.7 million, and subsequently paid on January 5, 2018. As such, no fair value estimate using a Black-Scholes model was needed as the liability was recorded at the known settlement value for the period ending December 31, 2017. The Company recorded a net loss of $0.1 million resulting from an increase in the fair value of the contingent consideration in the year ended March 31, 2018.