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Loans Payable (Tables)
 9 Months Ended
Sep. 30, 2017
Schedule of Consolidated Debt

The Company’s consolidated debt consisted of the following at:

 

     September 30,
2017		      December 31,
2016		  

Note 1 – Monaco 2014

    $ 2,800,000        2,800,000  

Note 2 – Monaco 2016

      1,098,230        1,535,501  

Note 3 – MINOSA 1

      14,750,001        14,750,001  

Note 4 – Epsilon

      1,000,000        5,981,806  

Note 5 – SMOM

      3,000,000        —    

Note 6 – MINOSA 2

      3,502,293        —    
  

 

 

     

 

 

  
     $26,150,524      $25,067,308  
  

 

 

     

 

 

  
Summary of Fair Value of Debt

The fair value of the new debt is as follows:

 

Monaco loans

    Loan one  

Forward cash flows:

   

Principal

    $ 2,800,000  

Interest

      559,463  
  

 

 

  

Total forward cash flows

    $ 3,359,463  
  

 

 

  

Present value of forward cash flows

    $ 2,554,371  

Fair value of equity conversion option

      1,063,487  
  

 

 

  

Fair value of debt

    $ 3,617,858  
  

 

 

  
Summary of Debt Premium

Monaco loans

    Loan one  

Forward cash flows:

   

Face value

    $ 2,800,000  

Fair value

      3,617,858  
  

 

 

  

Difference (premium)*

    $ 817,858  
  

 

 

  

 

* ASC 470-20-25-13 provides that if a convertible debt instrument is issued at a substantial premium, there is a presumption that such premium represents paid in capital. Since the total face amount of the new loans is $2,800,000, we conclude that the $817,858 was substantial and recorded that premium to additional paid-in capital.
Summary of Gain or Loss Upon Extinguishment Allocation

The allocation is as follows:

 

     Allocation  

Derivative liabilities (share purchase options)

    $ 1,456,825  

Monaco Loan (Old Debt)

      3,372,844  

Monaco Loan (New Debt)

      (2,800,000 ) 

APIC (Premium)

      (817,858 ) 
  

 

 

  

Difference to APIC*

    $ 1,211,811  
  

 

 

  

 

* The difference between the fair value of the new debt and the sum of the pre-modification carrying amount of the old debt and the share purchase option’s fair value represented a gain on extinguishment. ASC 470-50-40-2 indicates that debt restructuring with a related party may be in essence a capital transaction and as a result the gain upon extinguishment was recognized in additional paid in capital.
Schedule of Allocation of Cash Proceeds to Derivative Components at their Fair Values

The allocations of the three additional tranches were as follows.

 

     Tranche 3      Tranche 4      Tranche 5  

Promissory Note

    $ 981,796      $ 939,935      $ 1,000,000  

Beneficial Conversion Feature (“BCF”)*

      18,204        60,065        —    
  

 

 

     

 

 

     

 

 

  

Proceeds

    $ 1,000,000      $ 1,000,000      $ 1,000,000  
  

 

 

     

 

 

     

 

 

  
Oceanica Resources S. de. R.L [Member]  
Schedule of Allocation of Cash Proceeds to Derivative Components at their Fair Values

Based on the previous conclusions, we allocated the cash proceeds first to the debt at its present value using a market rate of 15%, which is management’s estimate of a market rate loan for the Company, with the residual allocated to the Oceanica Call Option, as follows:

 

     Tranche 1      Tranche 2      Tranche 3      Tranche 4      Tranche 5      Total  

Promissory Note

    $ 1,932,759      $ 5,826,341      $ 2,924,172      $ 1,960,089      $ 1,723,492      $ 14,366,853  

Deferred Income (Oceanica Call Option)

      67,241        173,659        75,828        39,911        26,509        383,148  
  

 

 

     

 

 

     

 

 

     

 

 

     

 

 

     

 

 

  

Proceeds

    $ 2,000,000      $ 6,000,000      $ 3,000,000      $ 2,000,000      $ 1,750,0001      $ 14,750,001  
  

 

 

     

 

 

     

 

 

     

 

 

     

 

 

     

 

 

  
Monaco Notes [Member] | Note 2 [Member]  
Summary of Significant Conversion Option Valuation Inputs and Results

Significant inputs and results arising from the Binomial Lattice process are as follows for the conversion option that is classified in equity after the modification in March 2016:

 

Underlying price on valuation date

      $1.25  

Contractual conversion rate

      $1.00  

Contractual term to maturity

      1.82 Years  

Implied expected term to maturity

      1.82 Years  

Market volatility:

   

Range of volatilities

      96.0% - 154.0%  

Equivalent volatilities

      120.1%  

Risk free rates using zero coupon US Treasury Security rates

      0.29% - 0.68%  

Equivalent market risk adjusted interest rates

      0.52%