Quarterly report pursuant to Section 13 or 15(d)

Note 4 - Fair Value

Note 4 - Fair Value

6 Months Ended

Jun. 30, 2017

4 .	Fair Value

The Company has been informed by PPVA that it is the owner of the balance of the Platinum-Montaur loan. Such balance of approximately

$1.9

million was due upon closing of the Asset Sale but withheld by the Company and

not

paid to anyone as it is subject to competing claims of ownership by both Dr. Michael Goldberg, the Company’s President and Chief Executive Officer, and PPVA.

Platinum or Dr. Goldberg has the right to convert all or any portion of the unpaid principal or unpaid interest accrued on all draws under the Platinum credit facility, under certain circumstances. The Platinum embedded option to convert such debt into common stock is recorded at fair value on the consolidated balance sheets and deemed to be a derivative instrument as the amount of shares to be issued upon conversion is indeterminable. The estimated fair value of the conversion option of the Platinum notes payable is

and

$153,000

June 30, 2017

and

December 31, 2016,

respectively.

MT issued warrants to purchase MT Common Stock with certain characteristics including a net settlement provision that require the warrants to be accounted for as a derivative liability at fair value on the consolidated balance sheets. The estimated fair value of the MT warrants is

$63,000

at both

June 30, 2017

and

December 31, 2016,

and will continue to be measured on a recurring basis. See Note

(b)(

The following tables set forth, by level, financial liabilities measured at fair value on a recurring basis:

Liabilities Measured at Fair Value on a Recurring Basis as of June 30 , 201 7
Description	Quoted Prices in Active Markets for Identical Liabilities (Level 1)		Significant Other Observable Inputs (Level 2)		Significant Unobservable Inputs (Level 3)		Total
Platinum conversion option	$	—	$	—	$	—	$	—
Liability related to MT warrants		—		—		63,000		63,000

Liabilities Measured at Fair Value on a Recurri ng Basis as of December 31, 2016
Description	Quoted Prices in Active Markets for Identical Liabilities (Level 1)		Significant Other Observable Inputs (Level 2)		Significant Unobservable Inputs (Level 3)		Total
Platinum conversion option	$	—	$	—	$	153,000	$	153,000
Liability related to MT warrants		—		—		63,000		63,000

Valuation Processes-Level

Measurements:

The Company utilizes

third

-party valuation services that use complex models such as Monte Carlo simulation to estimate the value of our financial liabilities. Each reporting period, the Company provides significant unobservable inputs to the

third

-party valuation experts based on current internal estimates and forecasts.

The assumptions used in the Monte Carlo simulation as of

June 30, 2017

and

December 31, 2016

are summarized in the following table:

	June 30, 2017			December 31, 2016
Estimated volatility		72	%		76	%
Expected term (in years)		0.18			4.75
Debt rate		8.125	%		8.125	%
Beginning stock price	$	0.51		$	0.64

Sensitivity Analysis-Level

Measurements:

Changes in the Company’s current internal estimates and forecasts are likely to cause material changes in the fair value of certain liabilities. The significant unobservable inputs used in the fair value measurement of the liabilities include the amount and timing of future draws expected to be taken under the Platinum Loan Agreement based on current internal forecasts and management’s estimate of the likelihood of actually making those draws as opposed to obtaining other sources of financing. Significant increases (decreases) in any of the significant unobservable inputs would result in a higher (lower) fair value measurement. A change in

one

of the inputs would

not

necessarily result in a directionally similar change in the others.

There were

Level

or Level

liabilities outstanding at any time during the

three

-month and

six

-month periods ended

June 30, 2017

and

2016.

There were

transfers in or out of our Level

or Level

liabilities during the

three

-month and

six

-month periods ended

June 30, 2017

2016.

Changes in the estimated fair value of our Level

liabilities relating to unrealized gains (losses) are recorded as changes in fair value of financial instruments in the consolidated statements of operations. The change in the estimated fair value of our Level

liabilities during the

three

-month periods ended

June 30, 2017

and

2016

was decreases of

$13,000

and

$1.5

million, respectively. The change in the estimated fair value of our Level

liabilities during the

six

-month periods ended

June 30, 2017

and

2016

was decreases of

$153,000

and

$2.6

million, respectively.

- Definition

The entire disclosure for the fair value of financial instruments (as defined), including financial assets and financial liabilities (collectively, as defined), and the measurements of those instruments as well as disclosures related to the fair value of non-financial assets and liabilities. Such disclosures about the financial instruments, assets, and liabilities would include: (1) the fair value of the required items together with their carrying amounts (as appropriate); (2) for items for which it is not practicable to estimate fair value, disclosure would include: (a) information pertinent to estimating fair value (including, carrying amount, effective interest rate, and maturity, and (b) the reasons why it is not practicable to estimate fair value; (3) significant concentrations of credit risk including: (a) information about the activity, region, or economic characteristics identifying a concentration, (b) the maximum amount of loss the entity is exposed to based on the gross fair value of the related item, (c) policy for requiring collateral or other security and information as to accessing such collateral or security, and (d) the nature and brief description of such collateral or security; (4) quantitative information about market risks and how such risks are managed; (5) for items measured on both a recurring and nonrecurring basis information regarding the inputs used to develop the fair value measurement; and (6) for items presented in the financial statement for which fair value measurement is elected: (a) information necessary to understand the reasons for the election, (b) discussion of the effect of fair value changes on earnings, (c) a description of [similar groups] items for which the election is made and the relation thereof to the balance sheet, the aggregate carrying value of items included in the balance sheet that are not eligible for the election; (7) all other required (as defined) and desired information.

+ References + Details