|
Derivative Financial Instruments (Tables)
|
12 Months Ended |
|
Dec. 31, 2014
|
| Components of Derivative Liabilities |
The following tables summarize the components of our derivative
liabilities and linked common shares as of December 31, 2014
and December 31, 2013 and the amounts that were reflected in
our income related to our derivatives for the periods then
ended:
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| |
|
December 31,
2014 |
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|
December 31,
2013 |
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Derivative liabilities:
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|
|
|
|
|
|
|
|
Embedded derivatives derived from:
|
|
|
|
|
|
|
|
|
|
Senior Convertible Notes
|
|
$ |
— |
|
|
$ |
47,243 |
|
|
2014 Convertible Promissory Notes
|
|
|
2,115,318 |
|
|
|
— |
|
|
|
|
|
|
|
|
|
|
|
|
|
2,115,318 |
|
|
|
47,243 |
|
|
Warrant derivatives
|
|
|
|
|
|
|
|
|
|
Senior Convertible Notes
|
|
|
111,127 |
|
|
|
840,000 |
|
|
Series G Convertible Preferred Stock
|
|
|
— |
|
|
|
83,580 |
|
|
|
|
|
|
|
|
|
|
|
Warrant derivatives
|
|
|
111,127 |
|
|
|
923,580 |
|
|
|
|
|
|
|
|
|
|
|
Total derivative liabilities
|
|
$ |
2,226,445 |
|
|
$ |
970,823 |
|
|
|
|
|
|
|
|
|
|
|
|
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| |
|
December 31,
2014 |
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|
December 31,
2013 |
|
|
Common shares linked to derivative liabilities:
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|
|
|
|
|
|
|
|
Embedded derivatives:
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|
|
|
|
|
|
|
|
|
Senior Convertible Notes
|
|
|
— |
|
|
|
1,729,647 |
|
|
2014 Convertible Promissory Notes*
|
|
|
3,174,604 |
|
|
|
— |
|
|
|
|
|
|
|
|
|
|
|
|
|
3,174,604 |
|
|
|
1,729,647 |
|
|
|
|
|
|
|
|
|
|
|
Warrant derivatives
|
|
|
|
|
|
|
|
|
|
Senior Convertible Notes
|
|
|
1,562,500 |
|
|
|
1,562,500 |
|
|
Series G Convertible Preferred Stock
|
|
|
— |
|
|
|
525,000 |
|
|
|
|
|
|
|
|
|
|
|
|
|
1,562,500 |
|
|
|
2,087,500 |
|
|
|
|
|
|
|
|
|
|
|
Total common shares linked to derivative liabilities
|
|
|
4,737,104 |
|
|
|
3,817,147 |
|
|
|
|
|
|
|
|
|
|
| * |
The common shares indexed to the 2014
Convertible Promissory Notes are shares indexed to Oceanica. |
|
| Changes in Fair Values of Derivative Liabilities |
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Years ended
December 31, |
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| |
|
2014 |
|
|
2013 |
|
|
Derivative income (expense):
|
|
|
|
|
|
|
|
|
|
Unrealized gains (losses) from fair value changes:
|
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|
|
|
|
|
|
|
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Senior Convertible Notes
|
|
$ |
47,243 |
|
|
$ |
593,001 |
|
|
2014 Convertible Promissory Notes
|
|
|
141,983 |
|
|
|
— |
|
|
Warrant derivatives
|
|
|
812,453 |
|
|
|
1,980,164 |
|
|
|
|
|
|
|
|
|
|
|
|
|
1,001,679 |
|
|
|
2,573,165 |
|
|
Exercise of Warrants
|
|
|
|
|
|
|
922,875 |
|
|
Redemptions of Senior Convertible Notes
|
|
|
— |
|
|
|
889,340 |
|
|
|
|
|
|
|
|
|
|
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Total derivative income (expense)
|
|
$ |
1,001,679 |
|
|
$ |
4,385,380 |
|
|
|
|
|
|
|
|
|
|
|
| Compound Embedded Derivative [Member] |
|
| Changes in Fair Value Inputs and Assumptions |
The following table reflects the issuances of compound embedded
derivatives, redemptions and changes in fair value inputs and
assumptions related to the compound embedded derivatives during the
years ended December 31, 2014 and 2013.
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| |
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For the years ended
December 31,
|
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| |
|
2014 |
|
|
2013 |
|
|
Balances at January 1
|
|
$ |
47,243 |
|
|
$ |
1,529,583 |
|
|
Issuances
|
|
|
— |
|
|
|
— |
|
|
Expirations from redemptions of host contracts reflected in
income
|
|
|
(47,243 |
) |
|
|
(889,339 |
) |
|
Changes in fair value inputs and assumptions reflected in
income
|
|
|
— |
|
|
|
(593,001 |
) |
|
|
|
|
|
|
|
|
|
|
Balances at December 31
|
|
$ |
— |
|
|
$ |
47,243 |
|
|
|
|
|
|
|
|
|
|
|
| Warrant Derivatives [Member] |
|
| Significant Assumptions Utilized in Valuation Technique |
Significant assumptions and utilized in the Binomial Lattice
process are as follows for the warrants linked to 525,000 shares of
common stock as of December 31, 2013:
|
|
|
| |
|
December 31,
2013 |
|
Linked common shares
|
|
525,000 |
|
Quoted market price on valuation date
|
|
$2.02 |
|
Contractual exercise rate
|
|
$2.3793 |
|
Term (years)
|
|
0.28 |
|
Range of market volatilities
|
|
50.1% - 88.3% |
|
Risk free rates using zero coupon US Treasury Security rates
|
|
0.01% - 0.07% |
Significant assumptions and utilized in the Binomial Lattice
process are as follows for the warrants linked to 1,562,500 shares
of common stock as of December 31, 2014 and December 31,
2013:
|
|
|
|
|
| |
|
December, 31 |
| |
|
2014 |
|
2013 |
|
Linked common shares
|
|
1,562,500 |
|
1,562,500 |
|
Quoted market price on valuation date
|
|
$0.93 |
|
$2.02 |
|
Contractual exercise rate
|
|
$3.60 |
|
$3.60 |
|
Term (years)
|
|
2.40 |
|
3.35 |
|
Range of market volatilities
|
|
59.9% - 73.9% |
|
51.1% - 78.2% |
|
Risk free rates using zero coupon US Treasury Security rates
|
|
0.04% - 0.67% |
|
0.07% - 0.78% |
|
Custom lattice variable: Probability of exercisability (434,027
linked common shares)
|
|
— |
|
— |
|
| Changes in Fair Value Inputs and Assumptions |
The following table reflects the issuances of derivative warrants
and changes in fair value inputs and assumptions related to the
derivative warrants during the years ended December 31, 2014
and 2013.
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|
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Years ended
December 31, |
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| |
|
2014 |
|
|
2013 |
|
|
Balances at January 1
|
|
$ |
923,580 |
|
|
$ |
3,826,619 |
|
|
Issuances:
|
|
|
|
|
|
|
|
|
|
Series G Convertible Preferred Stock Financing
|
|
|
— |
|
|
|
— |
|
|
Senior Convertible Note Financing
|
|
|
— |
|
|
|
— |
|
|
Exercises:
|
|
|
|
|
|
|
|
|
|
Series G Convertible Preferred Stock Financing
|
|
|
— |
|
|
|
(922,875 |
) |
|
Changes in fair value inputs and assumptions reflected in
income
|
|
|
(812,453 |
) |
|
|
(1,980,164 |
) |
|
|
|
|
|
|
|
|
|
|
Balances at December 31
|
|
$ |
111,127 |
|
|
$ |
923,580 |
|
|
|
|
|
|
|
|
|
|
|
| Senior Convertible Note [Member] |
|
| Significant Assumptions Utilized in Valuation Technique |
During the year ended December 31, 2014, the compound embedded
derivatives related to the Senior Convertible Notes were converted.
As of December 31, 2014, no compound embedded derivatives were
present. Significant inputs and results arising from the Monte
Carlo Simulations process are as follows for the compound embedded
derivative that has been bifurcated from our Senior Convertible
Note and classified in liabilities as of December 31,
2013:
|
|
|
| |
|
December 31,
2013 |
|
Quoted market price on valuation date
|
|
$2.02 |
|
Contractual conversion rate
|
|
$3.17 |
|
Range of effective contractual conversion rates
|
|
— |
|
Contractual term to maturity
|
|
0.33 Years |
|
Implied expected term to maturity
|
|
0.33 Years |
|
Market volatility:
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|
|
|
Range of volatilities
|
|
47.4% - 91.2% |
|
Range of equivalent volatilities
|
|
59.9% - 69.9% |
|
Contractual interest rate
|
|
8.0 - 9.0% |
|
Range of equivalent market risk adjusted interest rates
|
|
8.08% - 9.08% |
|
Range of equivalent credit risk adjusted yields
|
|
0.67% |
|
Risk-free rates
|
|
0.01% - 0.07% |
Significant inputs and results arising from the Monte Carlo
Simulations process are as follows for the share purchase options
that have been bifurcated from our Monaco Notes and classified in
liabilities as of December 31, 2014 and the inception dates
(Tranche 1 – August 14, 2014, Tranche 2 –
October 1, 2014, Tranche 3 – December 1, 2014):
|
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|
|
|
|
Tranche 1 – August 14, 2014:
|
|
December 31, 2014 |
|
August 14, 2014 |
|
Underlying price on valuation date*
|
|
$2.50 |
|
$2.50 |
|
Contractual conversion rate
|
|
$3.15 |
|
$3.15 |
|
Contractual term to maturity
|
|
1.62 Years |
|
2.00 Years |
|
Implied expected term to maturity
|
|
1.51 Years |
|
1.85 Years |
|
Market volatility:
|
|
|
|
|
|
Range of volatilities
|
|
58.5% - 78.1% |
|
37.0% - 62.2% |
|
Equivalent volatilities
|
|
69.7% |
|
51.2% |
|
Contractual interest rate
|
|
8.0% - 11.0% |
|
8.0% - 11.0% |
|
Equivalent market risk adjusted interest rates
|
|
9.50% |
|
9.50% |
|
Range of credit risk adjusted yields
|
|
4.66% - 5.27% |
|
3.94% -
4.45% |
|
Equivalent credit risk adjusted yield
|
|
4.86% |
|
4.15% |
|
|
|
|
|
|
Tranche 2 – October 1, 2014:
|
|
December 31, 2014 |
|
October 1, 2014 |
|
Underlying price on valuation date*
|
|
$2.50 |
|
$2.50 |
|
Contractual conversion rate
|
|
$3.15 |
|
$3.15 |
|
Contractual term to maturity
|
|
1.75 Years |
|
2.00 Years |
|
Implied expected term to maturity
|
|
1.60 Years |
|
1.79 Years |
|
Market volatility:
|
|
|
|
|
|
Range of volatilities
|
|
60.1% - 80.5% |
|
58.6% - 75.3% |
|
Equivalent volatilities
|
|
70.4% |
|
68.00% |
|
Contractual interest rate
|
|
8.0% - 11.0% |
|
8.0% - 11.0% |
|
Equivalent market risk adjusted interest rates
|
|
9.50% |
|
9.25% |
|
Range of credit risk adjusted yields
|
|
4.66% - 5.27% |
|
3.97% - 4.61% |
|
Equivalent credit risk adjusted yield
|
|
4.91% |
|
4.24% |
|
|
|
|
|
|
Tranche 3 – December 1, 2014:
|
|
December 31, 2014 |
|
December 1, 2014 |
|
Underlying price on valuation date*
|
|
$2.50 |
|
$2.50 |
|
Contractual conversion rate
|
|
$3.15 |
|
$3.15 |
|
Contractual term to maturity
|
|
1.92 Years |
|
2.00 Years |
|
Implied expected term to maturity
|
|
1.72 Years |
|
1.76 Years |
|
Market volatility:
|
|
|
|
|
|
Range of volatilities
|
|
59.8% - 78.1% |
|
61.8% - 79.8% |
|
Equivalent volatilities
|
|
69.5% |
|
72.2% |
|
Contractual interest rate
|
|
8.0% - 11.0% |
|
8.0% - 11.0% |
|
Equivalent market risk adjusted interest rates
|
|
9.25% |
|
9.25% |
|
Range of credit risk adjusted yields
|
|
4.66% - 5.27% |
|
4.29% - 4.84% |
|
Equivalent credit risk adjusted yield
|
|
4.91% |
|
4.52% |
| * |
The instrument is convertible into
shares of the Company’s subsidiary, Oceanica, which is not a
publicly-traded entity. Therefore its shares do not trade on a
public exchange. As a result, the underlying value must be based on
private sales of the subsidiary’s shares because that is the
best indicator of the value of the shares. There has been a sale of
Oceanica’s shares in which a private investor accumulated 24%
of the shares of which their last purchase price was for $2.50 per
share in December 2013. Accordingly the underlying price used in
the MCS calculations for the inception dates and quarter ended
December 31, 2014 was $2.50. |
|
| 2014 Share Purchase Option [Member] |
|
| Changes in Fair Value Inputs and Assumptions |
The following table reflects the issuances of the Share Purchase
Option derivatives and changes in fair value inputs and assumptions
for these derivatives during the year ended December 31,
2014.
|
|
|
|
|
| |
|
December 31, 2014 |
|
|
Balances at January 1
|
|
$ |
— |
|
|
Issuances
|
|
|
1,985,079 |
|
|
Changes in fair value inputs and assumptions reflected in
income
|
|
|
130,239 |
|
|
|
|
|
|
|
Balances at December 31
|
|
$ |
2,115,318 |
|
|
|
|
|
|
|