Quarterly report pursuant to Section 13 or 15(d)

5. Derivative Liabilities

v3.3.1.900
5. Derivative Liabilities
 9 Months Ended
Dec. 31, 2015
Derivative Instruments and Hedging Activities Disclosure [Abstract]  
Derivative Liabilities

The Company deems financial instruments, which require net-cash settlement, as either an asset or a liability. The common stock purchase warrants issued in conjunction with the Company’s December 9, 2013 and February 26, 2014 registered direct offerings contain net-cash settlement features, which give the warrant holder the right to a net-cash settlement in the event certain transactions occur. Pursuant to the terms of the warrants, if such a transaction occurs, the warrant holder will be entitled to a net-cash settlement value calculated using the Black-Scholes valuation model using an expected volatility equal to the greater of 100% and the 30 day volatility obtained from the HVT function on Bloomberg, a historical volatility calculator, an expected term equal to the remaining term of the warrants, and applicable risk-free interest rate corresponding to the U.S. Treasury.

 

The derivative liabilities relating to the warrants with net-cash settlement provisions were valued using the Black-Scholes option valuation model and the following assumptions on the following dates:

 

    Measurement
Date 		  Warrants     Remaining
Contract
Term in
Years 		    Exercise
Price 		    Volatility     Risk-free
Interest
Rate 		    Fair
Value 		 
Warrant                                                    
Placement Agent Warrants   March 31, 2015     16,500       1.09       5.00       100%       0.26%     $ 1,000  
Investor - Series A Warrants   March 31, 2015     1,000       0.41       3.00       100%       0.14%       –  
Investor - Series B Warrants   March 31, 2015     1,400,000       0.41       3.63       100%       0.14%       5,000  
Placement Agent Warrants   March 31, 2015     69,037       1.09       3.00       100%       0.26%       5,000  
                                                $ 11,000  
                                                     
Warrant                                                    
Placement Agent Warrants   June 30, 2015     16,500       0.84       5.00       143%       0.28%     $ 5,000  
Investor - Series A Warrants   June 30, 2015     1,000       0.16       3.00       143%       0.01%       –  
Investor - Series B Warrants   June 30, 2015     1,400,000       0.16       3.63       143%       0.01%       35,000  
Placement Agent Warrants   June 30, 2015     69,037       0.84       3.00       143%       0.28%       30,000  
                                                $ 70,000  
Warrant                                                    
Placement Agent Warrants   September 30, 2015     16,500       0.59       5.00       100%       0.08%     $ –  
Placement Agent Warrants   September 30, 2015     69,037       0.59       3.00       100%       0.08%       5,000  
                                                $ 5,000  
Warrant                                                    
Placement Agent Warrants   December 31, 2015     16,500       0.34       5.00       100%       0.16%     $ –  
Placement Agent Warrants   December 31, 2015     69,037       0.34       3.00       100%       0.16%       1,000  
                                                $ 1,000  

 

The following table sets forth a summary of the changes in the fair value of our Level 3 financial liabilities that are measured at fair value on a recurring basis:

 

   

Three Months Ended

December 31,

    

Nine Months Ended

December 31,

  
    2015     2014     2015     2014  
Beginning balance   $ 5,000     $ 856,000     $ 11,000     $ 3,175,000  
Mark to market net unrealized gain     (4,000 )   $ (679,000 )   $ (10,000 )   $ (2,998,000 )
Ending balance   $ 1,000     $ 177,000     $ 1,000     $ 177,000