DERIVATIVE LIABILITIES

12 Months Ended

Dec. 31, 2015

DERIVATIVE LIABILITIES [Abstract]

DERIVATIVE LIABILITIES

NOTE 12 – DERIVATIVE LIABILITIES

Certain of the Company’s convertible preferred stock and warrants have reset provisions to the exercise price if the Company issues equity or other derivatives at a price less than the exercise price set forth in such warrants. This ratchet provision results in a derivative liability in our financial statements.

Our derivative liabilities increased to $742,833 at December 31, 2015 from $20,166 at December 31, 2014. The loss recognized during the twelve months ended December 31, 2015 was $1,265,611 as compared to a gain of $74,883 for the twelve months ended December 31, 2014.

The assumptions used to value the derivative liabilities in the lattice model for the year ended December 31, 2015 included the closing stock price of $0.42 per share, and the projected volatility based on a historical value used of 165% and assuming the probability for an event of default occurring 5% of the time and increasing by 0.10% per month. For the year ended December 31, 2014, the assumptions included the closing stock price of $0.38 per share, and the projected volatility based on a historical value used of 119% and assuming the probability for an event of default occurring 5% of the time and increasing by 0.10% per month.

The following tabular presentation reflects the components of derivative financial instruments on the Company’s balance sheet at December 31, 2015 and 2014:

	12/31/2015			12/31/2014
Common stock warrants	$	130,028		$	20,166
Embedded conversion features for convertible debt or preferred shares		612,805			-
Total	$	742,833		$	20,166
Beginning balance	$	20,166		$	95,049
Change in derivative liability valuation		1,265,611			(74,883	)
Change in derivative liability - settlements		(542,944	)
Total	$	742,833		$	20,166