DERIVATIVE FINANCIAL INSTRUMENTS (Tables)

6 Months Ended

Jun. 30, 2014

The following tables summarize the components of our derivative liabilities and linked common shares as of June 30, 2014 and December 31, 2013 and the amounts that were reflected in our income related to our derivatives for the years then ended:


	June 30,		December 31,
	2014		2013
Derivative liabilities:
Embedded derivatives derived from:
Senior Convertible Notes	$	—	$	47,243

		—		47,243
Warrant derivatives
Senior Convertible Notes		599,844		840,000
Series G Convertible Preferred Stock		—		83,580

Warrant derivatives		599,844		923,580

Total derivative liabilities	$	599,844	$	970,823


	June 30,		December 31,
	2014		2013
Common shares linked to derivative liabilities:
Embedded derivatives:
Senior Convertible Notes		—		1,729,647

		—		1,729,647

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

		1,562,500		2,087,500

Total common shares linked to derivative liabilities		1,562,500		3,817,147

Changes in Fair Values of Derivative Liabilities


	Three months ended June 30,				Six months ended June 30,
	2014		2013		2014		2013
Derivative income (expense):
Unrealized gains (losses) from fair value changes:
Senior Convertible Notes	$	—	$	682,831	$	47,243	$	42,269
Warrant derivatives		553,693		1,120,306		323,736		660,569

		553,693		1,803,137		370,979		702,838
Redemptions of Senior Convertible Notes		—		195,462		—		633,351

Total derivative income (expense)	$	553,693	$	1,998,599	$	370,979	$	1,336,189

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 six months ended June 30, 2014 and 2013.


	For the six months ended June 30,
	2014			2013
Balances at January 1	$	47,243		$	1,529,583
Issuances
Expirations from redemptions of host contracts reflected in income		—			(633,351	)
Changes in fair value inputs and assumptions reflected in income		(47,243	)		(42,268	)

Balances at June 30	$	—		$	853,964

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 1,725,000 shares of common stock as of June 30, 2013:


		June 30, 2013
Linked common shares		1,725,000
Quoted market price on valuation date		$2.96
Contractual exercise rate		$2.4648
Term (years)		0.28
Range of market volatilities		17.3% - 53.6%
Risk free rates using zero coupon US Treasury Security rates		0.02% - 0.04%


	June 30,	December 31,
	2013	2013
Linked common shares	525,000	525,000
Quoted market price on valuation date	$2.96	$2.02
Contractual exercise rate	$2.4648	$2.3793
Term (years)	0.79	0.28
Range of market volatilities	31.7% - 53.5%	50.1% - 88.3%
Risk free rates using zero coupon US Treasury Security rates	0.02% - 0.10%	0.01% - 0.07%


	June, 30		December 31,
	2014	2013	2013
Linked common shares	1,562,500	1,562,500	1,562,500
Quoted market price on valuation date	$1.68	$2.96	$2.02
Contractual exercise rate	$3.60	$3.60	$3.60
Term (years)	2.86	3.86	3.35
Range of market volatilities	55.0% - 87.2%	44.3% - 62.3%	51.1% - 78.2%
Risk free rates using zero coupon US Treasury Security rates	0.04% - 0.47%	0.04% - 0.66%	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 six months ended June 30, 2014 and 2013.


	For the six months ended June 30,
	2014			2013
Balances at January 1	$	923,580		$	3,826,619
Changes in fair value inputs and assumptions reflected in income		(323,736	)		(660,569	)

Balances at June 30	$	599,844		$	3,166,050

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 as of December 31, 2013:


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

- 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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