Quarterly report pursuant to Section 13 or 15(d)

Derivative Liability (Tables)

v3.3.0.814
Derivative Liability (Tables)
 3 Months Ended
Aug. 31, 2015
Summary of Fair Value Derivative Liability and Linked Common Shares

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

 

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

Total derivative liability

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

 

 

     

 

 

     

 

 

     

 

 

  

Shares indexed to derivative liability

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

 

 

     

 

 

     

 

 

     

 

 

  
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 are as follows:

 

     September 26,
2014		     February 6,
2015		     May 31,
2015		     June 24,
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      $ 1.0000      $ 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 the short-term convertible notes 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.