Derivative Financial Instruments (Tables)

3 Months Ended

Mar. 31, 2014

The following tables summarize the components of our derivative liabilities and linked common shares as of March 31, 2014 and December 31, 2013 and the amounts that were reflected in our income related to our derivatives for the years then ended:


	March 31,		December 31,
	2014		2013
Derivative liabilities:
Embedded derivatives derived from:
Senior Convertible Notes	$	—	$	47,243

Warrant derivatives		—		47,243
Senior Convertible Notes		858,906		840,000
Series G Convertible Preferred Stock		294,630		83,580

Warrant derivatives		1,153,536		923,580

Total derivative liabilities	$	1,153,536	$	970,823


	March 31,		December 31,
	2014		2013
Common shares linked to derivative liabilities:
Embedded derivatives:
Senior Convertible Notes		743,937		1,729,647

		743,937		1,729,647

Warrant derivatives
Senior Convertible Notes		1,562,500		1,562,500
Series G Convertible Preferred Stock		525,000		525,000

		2,087,500		2,087,500

Total common shares linked to derivative liabilities		2,831,437		3,817,147

Changes in Fair Values of Derivative Liabilities


The amounts that were reflected in our income related to our derivatives for the three-month periods ended March 31, 2014 and 2013	Three months ended March 31,
	2014			2013
Derivative income (expense):
Unrealized gains (losses) from fair value changes:
Senior Convertible Notes	$	47,243		$	(640,562	)
Warrant derivatives		(229,956	)		(459,737	)

		(182,713	)		(1,100,299	)
Redemptions of Senior Convertible Notes		—			437,889

Total derivative income (expense)	$	(182,713	)	$	(662,410	)

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 Note and classified in liabilities:


	March 31, 2014	December 31, 2013
Quoted market price on valuation date	$2.29	$2.02
Contractual conversion rate	$3.17	$3.17
Range of effective contractual conversion rates	—	—
Contractual term to maturity	0.085 Years	0.33 Years
Implied expected term to maturity	0.085 Years	0.33 Years
Market volatility:
Range of volatilities	18.2% - 38.4%	47.4% - 91.2%
Range of equivalent volatilities	27.3%	59.9% - 69.9%
Contractual interest rate	9.0%	8.0 - 9.0%
Range of equivalent market risk adjusted interest rates	9.08%	8.08% - 9.08%
Range of equivalent credit risk adjusted yields	0.64%	0.67%
Risk-free rates	0.03% - 0.05%	0.01% - 0.07%

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 three months ended March 31, 2014 and 2013.


	For the three months ended March 31,
	2014			2013
Balances at January 1	$	47,243		$	1,529,583
Issuances
Expirations from redemptions of host contracts reflected in income		(47,243	)		(437,889	)
Changes in fair value inputs and assumptions reflected in income					640,563

Balances at March 31	$	—		$	1,732,257

Warrant Derivatives [Member]

Significant Assumptions Utilized in Valuation Technique

Significant assumptions and utilized in the Binomial Lattice process are as follows for the warrants as of March 31, 2014 and 2013 and December 31, 2013:


		March 31, 2013
Linked common shares		1,725,000
Quoted market price on valuation date		$3.26
Contractual exercise rate		$2.4648
Term (years)		0.53
Range of market volatilities		33.8% - 44.4%
Risk free rates using zero coupon US Treasury Security rates		0.04% - 0.11%


	March 31,		December 31,
	2014	2013	2013
Linked common shares	525,000	525,000	525,000
Quoted market price on valuation date	$2.29	$3.26	$2.02
Contractual exercise rate	$2.3793	$2.4648	$2.3793
Term (years)	0.04	1.04	0.28
Range of market volatilities	15.2% - 29.2%	34.1% - 45.3%	50.1% - 88.3%
Risk free rates using zero coupon US Treasury Security rates	0.05%	0.04% - 0.14%	0.01% - 0.07%


	March 31,		December 31,
	2014	2013	2013
Linked common shares	1,562,500	1,562,500	1,562,500
Quoted market price on valuation date	$2.29	$3.26	$2.02
Contractual exercise rate	$3.60	$3.60	$3.60
Term (years)	3.11	4.10	3.35
Range of market volatilities	47.9% - 66.1%	34.1% - 67.7%	51.1% - 78.2%
Risk free rates using zero coupon US Treasury Security rates	0.05% - 0.90%	0.07% - 0.57%	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 three months ended March 31, 2014 and 2013.


	For the three months ended March 31,
	2014		2013
Balances at January 1	$	840,000	$	3,826,619
Changes in fair value inputs and assumptions reflected in income		18,906		459,737

Balances at March 31	$	858,906	$	4,286,356

- 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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