Derivative Liabilities

12 Months Ended

Dec. 31, 2016

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 decreased to $131,043 at December 31, 2016 from $742,833 at December 31, 2015. The gain recognized during the twelve months ended December 31, 2016 was $567,139 as compared to a loss of $1,265,611 for the twelve months ended December 31, 2015. During the year ended December 31, 2016, a portion of the derivative liability was written off to additional paid in capital due to the purchase of the warrants utilizing common stock.

The assumptions used to value the derivative liabilities in the lattice model for the year ended December 31, 2016 included the closing stock price of $.0101 per share, and the projected volatility based on a historical value used of 275% and assuming the probability for an event of default occurring 0% of the time and increasing by 0.0% per month. 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.

The following tabular presentation reflects the components of derivative financial instruments on the Company’s balance sheet at December 31, 2016 and 2015:

Components of derivative financial instruments

	12/31/2016			12/31/2015
Common stock warrants	$	-		$	130,028
Embedded conversion features for convertible debt or preferred shares		131,043			612,805
Total	$	131,043		$	742,833
Beginning balance	$	742,833		$	20,166
Change in derivative liability valuation		(567,139	)		1,265,611
Change in derivative liability - settlements		(85,877	)		-
Change in derivative liability - warrant issuance		41,226			(542,944	)
Total	$	131,043		$	742,833