Derivative Financial Instruments (Tables)

9 Months Ended

Sep. 30, 2013

The following tables summarize the components of our derivative liabilities and linked common shares as of September 30, 2013 and December 31, 2012.


	September 30, 2013		December 31, 2012
Derivative liabilities:
Embedded derivatives derived from:
Senior Convertible Notes	$	421,629	$	1,529,583

Warrant derivatives
Senior Convertible Notes		1,463,281		1,921,094
Series G Convertible Preferred Stock		1,264,651		1,905,526

		2,727,932		3,826,620

Total derivative liabilities	$	3,149,561	$	5,356,203


	September 30, 2013		December 31, 2012
Common shares linked to derivative liabilities:
Embedded derivatives:
Senior Convertible Notes		1,980,938		4,247,343

Warrant derivatives
Senior Convertible Notes		1,562,500		1,562,500
Series G Convertible Preferred Stock		2,250,000		2,250,000

		3,812,500		3,812,500

Total common shares linked to derivative liabilities		5,793,438		8,059,843

Changes in Fair Values of Derivative Liabilities

The amounts that were reflected in our income related to our derivatives for the nine-month periods ended September 30, 2013 and 2012:


	Three months ended September 30,				Nine months ended September 30,
	2013		2012		2013		2012
Derivative income (expense):
Unrealized gains (losses) from fair value changes:
Senior Convertible Notes	$	202,034	$	2,274,033	$	244,303	$	1,174,205
Series G Convertible Preferred Stock		—		286,335		—		158,711
Warrant derivatives		438,119		2,241,494		1,098,688		379,114

		640,153		4,801,862		1,342,991		1,712,030
Redemptions of Senior Convertible Notes		230,300		—		863,651		—

Total derivative income (expense)	$	870,453	$	4,801,862	$	2,206,642	$	1,712,030

Senior Convertible Note [Member]

Significant Assumptions Utilized in Valuation Technique

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 Notes and classified in liabilities:


	September 30, 2013	December 31, 2012
Quoted market price on valuation date	$3.00	$2.97
Contractual conversion rate	$3.17	$3.74
Contractual term to maturity	0.58 Years	1.33 Years
Implied expected term to maturity	0.57 Years	1.24 Years
Market volatility:
Range of volatilities	24.0% - 46.2%	31.3% - 64.03%
Range of equivalent volatilities	32.2% - 37.8%	38.6% - 45.0%
Contractual interest rate	8.0% - 9.0%	8.0% - 9.0%
Range of equivalent market risk adjusted interest rates	8.02% - 9.08%	9.0% - 9.1%
Range of equivalent credit risk adjusted yields	0.58%	0.94% - 1.03%
Risk-free rates	0.03% - 0.04%	0.02% - 0.16%

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 periods ended September 30, 2013 and 2012.


	Nine Months ended September 30,
	2013			2012
Balances at January 1	$	1,529,583		$	2,680,133
Issuances		—			1,291,298
Expirations from redemptions of host contracts reflected in income		(863,652	)		(650,627	)
Changes in fair value inputs and assumptions reflected in income		(244,302	)		(682,289	)

Balances at September 30	$	421,629		$	2,638,515

Warrant Derivatives [Member]

Significant Assumptions Utilized in Valuation Technique

Significant assumptions and utilized in the Binomial Lattice process are as follows for both the issuance dates of the warrants and September 30, 2013 and 2012 and December 31, 2012:


	September 30,		December 31, 2012
	2013	2012	December 31, 2012
Linked common shares	1,725,000	1,800,000	1,725,000
Quoted market price on valuation date	$3.00	$3.15	$2.97
Contractual exercise rate	$2.4648	$2.50	$2.4648
Term (years)	0.03	1.03	0.78
Range of market volatilities	24.0% - 31.5%	38.9% - 68.1%	33.1% - 49.17%
Risk free rates using zero coupon US Treasury Security rates	0.03%	0.06% - 0.17%	0.02% - 0.11%


	September 30,		December 31, 2012
	2013	2012	December 31, 2012
Linked common shares	525,000	525,000	525,000
Quoted market price on valuation date	$3.00	$3.15	$2.97
Contractual exercise rate	$2.4648	$2.75	$2.4648
Term (years)	0.54	1.54	1.28
Range of market volatilities	26.3% - 46.1%	38.7% - 69.2%	33.8% - 63.6%
Risk free rates using zero coupon US Treasury Security rates	0.02% - 0.04%	0.06% - 0.20%	0.02% - 0.16%


	September 30,		December 31, 2012
	2013	2012	December 31, 2012
Linked common shares	1,562,500	1,562,500	1,562,500
Quoted market price on valuation date	$3.00	$3.15	$2.97
Contractual exercise rate	$3.60	$3.60	$3.60
Term (years)	3.61	4.60	4.35
Range of market volatilities	38.2% - 60.5%	54.2% - 71.0%	39.2% - 70.2%
Risk free rates using zero coupon US Treasury Security rates	0.02% - 0.63%	0.10% - 0.47%	0.05% - 0.54%

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 nine months ended September 30, 2013 and 2012.


	Nine months ended September 30,
	2013			2012
Balances at January 1	$	3,826,619		$	4,653,160
Issuances		—			363,542
Changes in fair value inputs and assumptions reflected in income		(1,098,688	)		(379,114	)

Balances at September 30	$	2,727,931		$	4,637,588

- Definition

Tabular disclosure of the fair value measurement of liabilities using significant unobservable inputs (Level 3), a reconciliation of the beginning and ending balances, separately presenting changes attributable to the following: (1) total gains or losses for the period (realized and unrealized), segregating those gains or losses included in earnings (or changes in net assets), and gains or losses recognized in other comprehensive income (loss) and a description of where those gains or losses included in earnings (or changes in net assets) are reported in the statement of income (or activities); (2) purchases, sales, issues, and settlements (each type disclosed separately); and (3) transfers in and transfers out of Level 3 (for example, transfers due to changes in the observability of significant inputs) by class of liability.

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