Derivative Financial Instruments (Tables)

12 Months Ended

Dec. 31, 2015

The following tables summarize the components of our derivative liabilities and linked common shares as of December 31, 2015 and December 31, 2014 and the amounts that were reflected in our income related to our derivatives for the periods then ended:


	December 31, 2015		December 31, 2014
Derivative liabilities:
Embedded derivatives derived from:
2014 Convertible Promissory Notes	$	3,396,191	$	2,115,318

		3,396,191		2,115,318
Warrant derivatives
Senior Convertible Notes		6,225		111,127

Warrant derivatives		6,225		111,127

Total derivative liabilities	$	3,402,416	$	2,226,445


	December 31, 2015		December 31, 2014
Common shares linked to derivative liabilities:
Embedded derivatives:
2014 Convertible Promissory Notes*		3,174,604		3,174,604

		3,174,604		3,174,604

Warrant derivatives
Senior Convertible Notes		130,208		130,208

		130,208		130,208

Total common shares linked to derivative liabilities		3,304,812		3,304,812

*	The common shares indexed to the 2014 Convertible Promissory Notes are shares indexed to Oceanica.

Changes in Fair Values of Derivative Liabilities


	Years ended December 31,
	2015			2014
Derivative income (expense):
Unrealized gains (losses) from fair value changes:
Senior Convertible Notes	$	—		$	47,243
2014 Convertible Promissory Notes		(1,280,873	)		141,983
Warrant derivatives		104,902			812,453

Total derivative income (expense)	$	(1,175,971	)	$	1,001,679

Senior Convertible Notes [Member]

Significant Assumptions Utilized in Valuation Technique

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, 2015, December 31, 2014 and the inception dates (Tranche 1 – August 14, 2014, Tranche 2 – October 1, 2014, Tranche 3 – December 1, 2014):


Tranche 1 – August 14, 2014:	December 31, 2015	December 31, 2014	August 14, 2014
Underlying price on valuation date*	$2.50	$2.50	$2.50
Contractual conversion rate	$3.15	$3.15	$3.15
Contractual term to maturity**	2.00 Years	1.62 Years	2.00 Years
Implied expected term to maturity	1.82 Years	1.51 Years	1.85 Years
Market volatility:
Range of volatilities	85.2% - 109.8%	58.5% - 78.1%	37.0% - 62.2%
Equivalent volatilities	98.1%	69.7%	51.2%
Contractual interest rate	11.00%	8.0% - 11.0%	8.0% - 11.0%
Equivalent market risk adjusted interest rates	11.00%	9.50%	9.50%
Range of credit risk adjusted yields	3.29% - 4.22%	4.66% - 5.27%	3.94% - 4.45%
Equivalent credit risk adjusted yield	3.76%	4.86%	4.15%

Tranche 2 – October 1, 2014:	December 31, 2015	December 31, 2014	October 1, 2014
Underlying price on valuation date*	$2.50	$2.50	$2.50
Contractual conversion rate	$3.15	$3.15	$3.15
Contractual term to maturity**	2.00 Years	1.75 Years	2.00 Years
Implied expected term to maturity	1.82 Years	1.60 Years	1.79 Years
Market volatility:
Range of volatilities	85.2% - 109.8%	60.1% - 80.5%	58.6% - 75.3%
Equivalent volatilities	98.1%	70.4%	68.00%
Contractual interest rate	11.00%	8.0% - 11.0%	8.0% - 11.0%
Equivalent market risk adjusted interest rates	11.00%	9.50%	9.25%
Range of credit risk adjusted yields	3.29% - 4.22%	4.66% - 5.27%	3.97% - 4.61%
Equivalent credit risk adjusted yield	3.76%	4.91%	4.24%

Tranche 3 – December 1, 2014:	December 31, 2015	December 31, 2014	December 1, 2014
Underlying price on valuation date*	$2.50	$2.50	$2.50
Contractual conversion rate	$3.15	$3.15	$3.15
Contractual term to maturity**	2.00 Years	1.92 Years	2.00 Years
Implied expected term to maturity	1.82 Years	1.72 Years	1.76 Years
Market volatility:
Range of volatilities	85.2% - 109.8%	59.8% - 78.1%	61.8% - 79.8%
Equivalent volatilities	98.1%	69.5%	72.2%
Contractual interest rate	11.00%	8.0% - 11.0%	8.0% - 11.0%
Equivalent market risk adjusted interest rates	11.00%	9.25%	9.25%
Range of credit risk adjusted yields	3.29% - 4.22%	4.66% - 5.27%	4.29% - 4.84%
Equivalent credit risk adjusted yield	3.76%	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 years ended December 31, 2015 and 2014 was $2.50.

**	On December 10, 2015 the term was extended to December 31, 2017.

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 years ended December 31, 2015 and 2014.


	For the years ended December 31,
	2015		2014
Balances at January 1	$	2,115,318	$	—
Issuances		—		1,985,079
Changes in fair value inputs and assumptions reflected in income		1,280,873		130,239

Balances at December 31	$	3,396,191	$	2,115,318

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, 2015 and 2014.


	For the years ended December 31,
	2015		2014
Balances at January 1	$	—	$	47,243
Issuances		—		—
Expirations from redemptions of host contracts reflected in income		—		(47,243	)
Changes in fair value inputs and assumptions reflected in income		—		—

Balances at December 31	$	—	$	—

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 130,208 shares of common stock as of December 31, 2015 and December 31, 2014:


	December 31
	2015	2014
Linked common shares	130,208	130,208
Quoted market price on valuation date	$3.24	$11.16
Contractual exercise rate	$43.20	$43.20
Term (years)	1.35	2.40
Range of market volatilities	92.9% - 113.2%	59.9% - 73.9%
Risk free rates using zero coupon US Treasury Security rates	0.16% - 0.65%	0.04% - 0.67%

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, 2015 and 2014.


	Years ended December 31,
	2015			2014
Balances at January 1	$	111,127		$	923,580
Changes in fair value inputs and assumptions reflected in income		(104,902	)		(812,453	)

Balances at December 31	$	6,225		$	111,127