Quarterly report pursuant to Section 13 or 15(d)

Derivative Liability (Tables)

v3.7.0.1
Derivative Liability (Tables)
 9 Months Ended
Feb. 28, 2017
Summary of Fair Value Warrant Derivative Liability and Related Common Shares

The following tables summarize the fair value of the warrant derivative liability and related common shares as of inception date (September 15, 2016), November 30, 2016 and February 28, 2017:

 

     September 15, 2016      November 30, 2016      February 28, 2017  

Total warrant derivative liability

    $ 5,179,200      $ 3,955,734      $ 3,982,400  
  

 

 

     

 

 

     

 

 

  

Shares indexed to derivative liability

      7,733,334        7,733,334        7,733,334  
  

 

 

     

 

 

     

 

 

  

 
Assumptions used in Estimating Fair Value of Warrant Derivative Liability

The Company estimated the fair value of the warrant derivative liability as of inception, November 30, 2016 and February 28, 2017, using the following assumptions:

 

     September 15,
2016		     November 30,
2016		     February 28,
2017		  

Fair value of underlying stock

    $ 0.78     $ 0.67     $ 0.71  

Risk free rate

      1.20 %      1.81 %      1.85 % 

Expected term (in years)

      5       4.79       4.54  

Stock price volatility

      106 %      103 %      101 % 

Expected dividend yield

      —         —         —    

Probability of Fundamental Transaction

      50 %      50 %      50 % 

Probability of holder requesting cash payment

      50 %      50 %      50 % 

 
Significant Inputs and Assumptions Used in Binomial Lattice Model for Derivative Liability

Significant inputs and assumptions used in the Binomial Lattice Model for the derivative liability were as follows:

 

     September 26,
2014		     February 6,
2015		     May 31,
2015		   June 23,
2015		  

Quoted market price on valuation date

    $ 0.79     $ 0.96     $0.99   $ 0.90  

Contractual conversion rate

    $ 1.00     $ 1.00     $1.00   $ 1.00  

Adjusted conversion price (a)

    $ 0.9759     $ 1.00     $0.675   $ 0.675  

Contractual term to maturity (years)

      2.00       0.49     0.18 – 1.33     0.12  

Expected volatility

      123 %      124 %    90% – 114%     48 % 

Contractual interest rate

      5 %      2 %    1.5% – 5.0%     1.2 % 

Risk-free rate

      0.59 %      0.045 %    0.041% – 0.48%     0.001 % 

Risk adjusted rate

      2.69 %      2.78 %    2.80%     2.80 % 

Probability of event of default

      5.00 %      5.00 %    5.00%     5.00 % 

 

(a) The adjusted conversion price input used in the Binomial Lattice Model considers both (i) the reduction of the conversion price to $0.675 on April 30, 2015, as result of a private placement offering in which Common Stock was sold for a weighted average price of $0.75 and (ii) potential adjustment to the stated conversion price due to a future dilutive issuance. This input was calculated using a probability-weighted approach which considered the likelihood of various scenarios occurring including (i) potential success or failure of various phases for PRO 140, (ii) the probability the Company will enter into a future financing and (iii) and the potential price of a future financing.
AVCP Convertible Notes  
Summary of Fair Value Warrant Derivative Liability and Related Common Shares

The following tables summarize the fair value of the derivative liability and linked common shares of the AVCP Notes, as of the derivative liability inception dates (September 26, 2014 and February 6, 2015) and fiscal year end May 31, 2015:

 

     September 26,
2014		      February 6,
2015		      May 31,
2015		  

Total AVCP Notes derivative liability

    $ 767,038      $ 403,266      $ 2,008,907  
  

 

 

     

 

 

     

 

 

  

Shares indexed to derivative liability

      2,000,000        1,500,000        5,185,185