Derivative Income

12 Months Ended

Dec. 31, 2016

Derivative Income (Loss)

Derivative Income

18.Derivative Income (Loss)

During the year ended December 31, 2016 the Company recorded approximately $1.7 million of warrant derivative loss related to an increase in the fair value of the liability recorded for warrants to acquire the Company’s common stock (see Note 13).  During the year ended December 31, 2015 the Company recorded approximately $1.3 million of derivative income related to a decrease in the fair value of the liability recorded for the warrants. The warrant liability has been recorded at fair value as of December 31, 2016 and 2015 based primarily on a valuation performed by a third party expert using a Monte Carlo simulation, which falls within Level 3 of the fair value hierarchy.  The valuation model takes into account the probability that the Company could issue additional shares in a future transaction at a lower price than the current exercise price of the warrants.  Significant inputs to the valuation model included prices for the warrants disclosed above, the probability of an additional issuance of the Company’s common stock at a lower price than the current warrant exercise price and the inputs in the table below for the respective periods.

During the year ended December 31, 2016 the Company recorded approximately $0.8 million of derivative loss related to an increase in the fair value of the derivative liability related to the Sentient Loan. During the year ended December 31, 2015 the Company recorded approximately $0.6 million of derivative income related to a decrease in the fair value of the derivative liability related to the Sentient Loan (see Note 10).  The derivative liability was recorded at fair value at June 10, 2016, the date of the conversion of the remaining note (see Note 10), and at December 31, 2015 based primarily on a valuation performed by a third party expert using a Monte Carlo simulation, which falls within Level 3 of the fair value hierarchy (see Note 13).  Significant inputs to the valuation model included: 1) future variations in the Company’s stock price, and 2) the probability of entering into an equity transaction prior to the loan maturity date that would lower the conversion price.   

Additional inputs used in the valuation of derivatives related to both the warrants and the Sentient loan are summarized in the table below.

	At December 31,
The Company's	2016		2015
Closing stock price	$	0.58	$	0.20
Volatility		110.00%		85.00%
Risk-free rate		1.39%		1.48%