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Loans Payable (Tables)
 9 Months Ended
Sep. 30, 2018
Schedule of Consolidated Debt

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

 

     September 30,
2018		      December 31,
2017		  

Note 1 – Monaco 2014

    $ 2,800,000      $ 2,800,000  

Note 2 – Monaco 2016

      1,175,000        1,138,441  

Note 3 – MINOSA 1

      14,750,001        14,750,001  

Note 4 – Epsilon

      1,000,000        1,000,000  

Note 5 – SMOM

      3,500,000        3,000,000  

Note 6 – MINOSA 2

      5,050,000        4,675,000  

Note 7 – Monaco 2018

      1,099,366        —    

Note 8 – Promissory note

      20,403        —    
  

 

 

     

 

 

  
   $ 29,394,770      $ 27,363,442  
  

 

 

     

 

 

  
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
  

 

 

     

 

 

     

 

 

     

 

 

     

 

 

     

 

 

  
Note 2 [Member] | Monaco Notes [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%