Quarterly report pursuant to Section 13 or 15(d)

Warrants

v3.5.0.2
Warrants
9 Months Ended
Sep. 30, 2016
Warrants  
Warrants

NOTE 9 – 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, 2015     28,435,782     $ 0.64       4.07     $ -  
Exercisable January 1, 2015     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  
Canceled     -                          
Granted     30,000,000                          
Exercised     -                          
Forfeited     (602,563 )                        
Outstanding September 30, 2016     75,842,649     $ 0.33       3.52     $ -  
Exercisable September 30, 2016     75,842,649     $ 0.33       3.52     $ -  

 

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 were as follows:

 

    September 30, 2016     December 31, 2015  
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 timeframe. The expected warrant term is the life of the warrant.

 

The Company recognized no stock based compensation expense related to warrants for the three and nine-months ended September 30, 2016 and 2015.

 

Warrant expiration

 

During the three and nine-months ended September 30, 2016, warrants to purchase an aggregate of 60,866 and 602,563 shares, respectively, of restricted common stock expired.