Annual report pursuant to Section 13 and 15(d)

Warrants

Warrants

12 Months Ended

Dec. 31, 2015

NOTE 10 – WARRANTS

The following is a summary of the Company’s warrant activity:

	Warrants			Weighted average exercise price		Weighted average remaining contractual term in years		Aggregate intrinsic value
Outstanding January 1, 2014		3,395,833		$	0.45		5.28	$	-
Exercisable January 1, 2014		3,395,833		$	0.45		5.28	$	-
Canceled		(3,395,833	)
Granted		28,435,782
Exercised		-
Forfeited		-
Outstanding December 31, 2014		28,435,782		$	0.64		4.07	$	-
Exercisable December 31, 2014		28,435,782		$	0.64		4.07	$	-
Canceled		-
Granted		18,009,430
Exercised		-
Forfeited		-
Outstanding December 31, 2015		46,445,212		$	0.46		3.48	$	2,517,337
Exercisable December 31, 2015		46,445,212		$	0.46		3.48	$	2,517,337

Under ASC No. 718, the Company estimates the fair value of warrants granted on each grant date using the Black-Scholes option valuation model. The fair value of warrants issued with debt is recorded as a debt discount and amortized over the life of the debt. The range of fair value assumptions related to warrants outstanding as of December 31, 2015 and 2014, were as follows:

	December 31, 2015			December 31, 2014
Dividend yield		0.0	%		0.0	%
Risk-free rate		0.12% - 0.86	%		0.12% - 0.66	%
Expected volatility		102% - 159	%		112% - 159	%
Expected term		1.0 - 2.5 years			1.0 - 2.5 years

The expected volatility was calculated based on the historical volatilities of publicly traded peer companies, determined by the Company. The risk free interest rate used was based on the U.S. Treasury constant maturity rate in effect at the time of grant for the expected term of the warrants to be valued. The expected dividend yield was zero, as the Company does not anticipate paying a dividend within the relevant time frame. The expected warrant term is the life of the warrant.

The Company recognized $48,700 and $5,250,540 in stock based compensation expense related to warrants for the years ended December 31, 2015 and 2014, respectively.