Derivative Financial Instruments (Tables)

9 Months Ended

Sep. 30, 2017

Derivative Instruments and Hedging Activities Disclosure [Abstract]

Fair Values of Derivative Instruments to be classified as Derivative Liabilities on Balance Sheet

Fair values of derivative instruments to be classified as derivative liabilities on the balance sheet consist of the following:

($ in thousands)
Liability derivates:	Balance Sheet Location		Fair Value
September 30, 2017:
Derivative liabilities		Liabilities	$	2,350

Change in Derivative Liability

The change in the derivative liability for the three months ended September 30, 2017 consisted of the following:

($ in thousands)
	Fair Value
Balance, June 30, 2017	$	2,480
Dividends		72
Change in fair value of derivative liabilities		(202	)
Balance, September 30, 2017	$	2,350

Fair Value Assumptions Used in Probability Weighted Approach and Monte Carlo Simulation Model

The fair value of the Series 1 preferred stock dividends were estimated using a probability-weighted approach and a Monte Carlo simulation model. The fair value of the embedded derivatives was estimated using the “with” and “without” method where the preferred stock was first valued with all of its features (“with” scenario) and then without derivatives subject to the valuation analysis (“without” scenario). The fair value of the derivatives was then estimated as the difference between the fair value of the preferred stock in the “with” scenario and the preferred stock in the “without” scenario. The model also takes into account, management estimates of clinical success/failure based upon market studies and probability of potential conversion and liquidation events.    If these estimates were different, the valuations would change and that change could be material. Inputs to the models included the following:

	September 30, 2017			December 31, 2016
Risk-free interest rate		1.72	%		1.69	%
Expected dividend rate		0			0
Expected volatility		70.20	%		72.70	%
Preferred stock conversion limit - percentage of outstanding common stock		19.90	%		19.90	%
Preferred conversion floor price	$	1.00		$	1.00