Derivative Financial Instruments (Tables)

12 Months Ended

Dec. 31, 2017

The following table summarizes the components of our derivative liabilities and linked common shares as of December 31, 2017 and December 31, 2016 and the amounts that were reflected in our income related to our derivatives for the periods then ended:


	December 31,		December 31,
	2017		2016
Derivative liabilities:
Embedded derivatives derived from:
2014 Convertible Promissory Notes	$	—	$	—

		—		—
Warrant derivatives*
Senior Convertible Notes		—		—

Warrant derivatives		—		—

Total derivative liabilities	$	—	$	—

*	The warrant derivatives expired unexercised on November 11, 2016.


	December 31,		December 31,
	2017		2016
Common shares linked to derivative liabilities:
Embedded derivatives:
2014 Convertible Promissory Notes*		—		—

		—		—

Warrant derivatives
Senior Convertible Notes		—		—

		—		—

Total common shares linked to derivative liabilities		—		—

*	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,
	2017		2016
Derivative income (expense):
Unrealized gains (losses) from fair value changes:
2014 Convertible Promissory Notes	$	—	$	3,944,763
Warrant derivatives		—		(542,347	)

Total derivative income (expense)	$	—	$	3,402,416

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 March 8, 2016 (Modification Date), December 31, 2015, and the inception dates (Tranche 1 – August 14, 2014, Tranche 2 – October 1, 2014, Tranche 3 – December 1, 2014):


	March 8, 2016***		December 31, 2015		August 14, 2014
Tranche 1 – August 14, 2014:
Underlying price on valuation date*		$1.25		$2.50		$2.50
Contractual conversion rate		$3.15		$3.15		$3.15
Contractual term to maturity**		1.82 Years		2.00 Years		2.00 Years
Implied expected term to maturity		1.24 Years		1.82 Years		1.85 Years
Market volatility:
Range of volatilities		96.0% - 154.0%		85.2% - 109.8%		37.0% - 62.2%
Equivalent volatilities		120.1%		98.1%		51.2%
Contractual interest rate		11.00%		11.00%		8.0% -11.0%
Equivalent market risk adjusted interest rates		11.60%		11.00%		9.50%
Range of credit risk adjusted yields		3.49% - 5.02%		3.29% - 4.22%		3.94% - 4.45%
Equivalent credit risk adjusted yield		4.13%		3.76%		4.15%


	March 8, 2016***		December 31, 2015		October 1, 2014
Tranche 2 – October 1, 2014:
Underlying price on valuation date*		$1.25		$2.50		$2.50
Contractual conversion rate		$3.15		$3.15		$3.15
Contractual term to maturity**		1.82 Years		2.00 Years		2.00 Years
Implied expected term to maturity		1.24 Years		1.82 Years		1.79 Years
Market volatility:
Range of volatilities		96.0% - 154.0%		85.2% - 109.8%		58.6% - 75.3%
Equivalent volatilities		120.1%		98.1%		68.00%
Contractual interest rate		11.00%		11.00%		8.0% - 11.0%
Equivalent market risk adjusted interest rates		11.60%		11.00%		9.25%
Range of credit risk adjusted yields		3.49% - 5.02%		3.29% - 4.22%		3.97% - 4.61%
Equivalent credit risk adjusted yield		4.13%		3.76%		4.24%


	March 8, 2016***	December 31, 2015	December 1, 2014
Tranche 3 – December 1, 2014:
Underlying price on valuation date*	$1.25	$2.50	$2.50
Contractual conversion rate	$3.15	$3.15	$3.15
Contractual term to maturity**	1.82 Years	2.00 Years	2.00 Years
Implied expected term to maturity	1.24 Years	1.82 Years	1.76 Years
Market volatility:
Range of volatilities	96.0% - 154.0%	85.2% - 109.8%	61.8% - 79.8%
Equivalent volatilities	120.1%	98.1%	72.2%
Contractual interest rate	11.00%	11.00%	8.0% -11.0%
Equivalent market risk adjusted interest rates	11.60%	11.00%	9.25%
Range of credit risk adjusted yields	3.49% - 5.02%	3.29% - 4.22%	4.29% - 4.84%
Equivalent credit risk adjusted yield	4.13%	3.76%	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 was originally based on private sales of the subsidiary’s shares because that was the best indicator of the value of the shares in the past. The last 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 past in the MCS calculations was the $2.50 for the inception dates and December 31, 2015. Being far removed from December 2013 while considering the modification in March 2016 of the new option price of $1.00 and other market conditions currently prevailing, management determined $1.25 to be fairly representative of the per share fair value.

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

In March 2016 the term was extended to April 1, 2018.

***

In March 2016 the purchase price of the share purchase options was modified to $1.00 per share. As a result of the re-pricing, the share purchase options no longer require measurement as derivative liabilities. The MCS were calculated for the instruments just prior to the modification on March 8, 2016.

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, 2017 and 2016.


	For the years ended December 31,
	2017		2016
Balances at January 1	$	—	$	3,396,191
Issuances		—		—
Modification		—		(1,456,826	)
Changes in fair value inputs and assumptions reflected in income		—		(1,939,365	)

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, 2017 and December 31, 2016:


	December 31,	December 31,
	2017	2016
Linked common shares	—	130,208
Quoted market price on valuation date	—	$3.59
Contractual exercise price	—	$43.20
Term (years)	—	0.60
Range of market volatilities	—	29.9% - 158.8%
Risk free rates using zero coupon US Treasury Security rates	—	0.20% - 0.45%

*	The warrants expired unexercised on November 8, 2016.

Warrant Derivatives [Member]

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, 2017 and 2016.


	Years ended December 31,
	2017		2016
Balances at January 1	$	—	$	6,225
Changes in fair value inputs and assumptions reflected in income				(6,082	)
Expired		—		(143	)

Balances at December 31	$	—	$	—