General form of registration statement for all companies including face-amount certificate companies

Derivative Liabilities

v3.5.0.2
Derivative Liabilities
 12 Months Ended
Mar. 31, 2016
Derivative Instruments and Hedging Activities Disclosure [Abstract]  
Derivative Liabilities

Note 8. Derivative Liabilities

 

Upon closing of the private placement transactions on May 22, 2015 and June 9, 2015, the Company issued 298,551 and 26,099 warrants, respectively, to purchase Common Stock with an exercise price of $1.50 and a five-year term to the placement agent. The Company identified certain put features embedded in the warrants that potentially could result in a net cash settlement, requiring the Company to classify the warrants as a derivative liability.

 

Level 3 Financial Liabilities – Derivative warrant liabilities

 

Financial assets and liabilities measured at fair value on a recurring basis are summarized below and disclosed on the consolidated balance sheet as of March 31, 2016:

 

    Carrying     Fair Value Measurement Using  
    Value     Level 1     Level 2     Level 3     Total  
                               
Derivative warrant liabilities   $ 313,709     $ —     $ —     $ 313,709     $ 313,709  

 

The table below provides a summary of the changes in fair value, including net transfers in and/or out, of all financial assets and liabilities measured at fair value on a recurring basis using significant unobservable inputs (Level 3) during the year ended March 31, 2016:

 

    Fair Value
Measurement
Using Level 3
Inputs		  
    Total  
Balance, April 1, 2015   $ —  
Issuance of derivative warrant liabilities     206,715  
Change in fair value of derivative warrant liabilities     106,994  
Balance, March 31, 2016   $ 313,709  

 

The fair value of the derivative feature of the warrants on the issuance dates and at the balance sheet date were calculated using a binomial option model valued with the following weighted average assumptions:

 

    May 22, 2015     June 9, 2015     March 31, 2016  
Risk free interest rate     1.57 %     1.74 %     1.04 %
Dividend yield     0.00 %     0.00 %     0.00 %
Expected volatility     47 %     47 %     41 %
Remaining term (years)     5.0       5.0       4.15 – 4.19  

 

Risk-free interest rate: The Company uses the risk-free interest rate of a U.S. Treasury Note with a similar term on the date of the grant.

 

Dividend yield: The Company uses a 0% expected dividend yield as the Company has not paid dividends to date and does not anticipate declaring dividends in the near future.

 

Volatility: The Company calculates the expected volatility of the stock price based on the corresponding volatility of the Company’s peer group stock price for a period consistent with the warrants’ expected term.

 

Remaining term: The Company’s remaining term is based on the remaining contractual maturity of the warrants.

 

During the year ended March 31, 2016, the Company marked the derivative feature of the warrants to fair value and recorded a loss of $106,994 relating to the change in fair value.