Derivative Financial Instruments - Warrants

12 Months Ended

Dec. 31, 2016

Derivative Instruments and Hedging Activities Disclosure [Abstract]

Derivative Financial Instruments - Warrants

Derivative Financial Instruments — Warrants

Based upon the Company’s analysis of the criteria contained in ASC Topic 815-40, Contracts in Entity’s Own Equity (“ASC 815-40”), Trovagene has determined that certain warrants issued in connection with its private placements must be recorded as derivative liabilities with a charge to additional paid-in capital as they were issued with other equity instruments. In accordance with ASC 815-40, the warrants are also being re-measured at each balance sheet date based on estimated fair value, and any resultant change in fair value is being recorded in the Company’s statement of operations. The Company estimates the fair value of these warrants using the Black-Scholes option pricing model.

The range of assumptions used to determine the fair value of the warrants valued using the Black-Scholes option pricing model during the periods indicated was:

	Year ended December 31
	2016	2015	2014
Estimated fair value of Trovagene common stock	$2.10 - $4.65	$5.40 - $10.15	$3.00 - $6.74
Expected warrant term	2.0 - 2.8 years	3.0 - 3.8 years	4.0 years
Risk-free interest rate	0.71% - 1.20%	0.89% - 1.31%	1.38%
Expected volatility	82% - 94%	73% - 77%	86%
Dividend yield	—%	—%	—%

Expected volatility is based on the historical volatility of Trovagene’s common stock. The warrants have a transferability provision and based on guidance provided in SAB No. 107 for instruments issued with such a provision, Trovagene used the full contractual term as the expected term of the warrants. The risk-free interest rate is based on the U.S. Treasury security rates consistent with the expected remaining term of the warrants at each balance sheet date.

The following table sets forth the components of changes in the Company’s derivative financial instruments—warrants liability balance, valued using the Black-Scholes option pricing method, for the periods indicated.

Date	Description	Number of Warrants		Derivative Instrument Liability
December 31, 2014	Balance of derivative financial instruments—warrants liability	1,013,961		$	3,006,021
	Exercised warrants	(46,666	)	(435,365		)
	Change in fair value of warrants during the year recognized as a loss in the statement of operations	—		726,421
December 31, 2015	Balance of derivative financial instruments—warrants liability	967,295		3,297,077
	Change in fair value of warrants during the year recognized as a gain in the statement of operations	—		(2,462,137		)
December 31, 2016	Balance of derivative financial instruments—warrants liability	967,295		$	834,940

The remaining contractual term of these warrants outstanding at December 31, 2016 and 2015 was approximately 2.0 and 3.0 years, respectively.

At December 31, 2016 and 2015, the total fair value of the above warrants accounted for as derivative financial instruments—warrants, valued using the Black-Scholes option pricing model, was $834,940 and $3,297,077, respectively, and is classified as derivative financial instruments—warrants liability on the balance sheet.