Derivative Obligations

Series A Warrants

Series A warrants to purchase

404,410

common shares were issued and vested during the year ended

June

30,

2016.

At the time of issuance, the Company determined that as such warrants can be settled for cash at the holders’ option in a future fundamental transaction which constituted a derivative liability. The Company has estimated the fair value of the derivative liability, using a Binomial Lattice Valuation Model and the following assumptions:

	Series A
	December 31, 2016			June 30, 2016
Market price of common stock	$	3.45		$	2.93
Expected volatility		106	%		99	%
Contractual term (years)		4.2			4.7
Discount rate		1.73	%		1.01	%
Dividend rate		0	%		0	%
Exercise price	$	8.00		$	8.00

Expected volatilities are based on the historical volatility of the Company’s common stock. Contractual term is based on remaining term of the respective warrants. The discount rate represents the yield on U.S. Treasury bonds with a maturity equal to the contractual term.

The Company recorded a gain of

$153

and

$2,180

during the

three

months ended

December

31,

2016

and

2015,

respectively and a (loss) gain of

($174)

and

$3,606

during the

six

months ended

December

31,

2016

and

2015,

respectively, representing the net change in the fair value of the derivative liability, which is presented as fair value change of derivative instruments, in the accompanying condensed consolidated statements of operations and comprehensive loss.

The following table represents the Company’s fair value hierarchy for its financial liabilities measured at fair value on a recurring basis as of

December

31,

2016

and

June

30,

2016:

	Balance at December 31, 2016		Level 1		Level 2		Level 3

Derivative obligation	$	844	$	-	$	-	$	844

	Balance at June 30, 2016		Level 1		Level 2		Level 3

Derivative obligation	$	670	$	-	$	-	$	670

The following table reflects the change in fair value of the Company’s derivative liabilities for the

six

months ended

December

31,

2016:

	Amount
Balance – July 1, 2016	$	670
Change in fair value of derivative obligation		174
Balance – December 31, 2016	$	844