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Warrants

12 Months Ended

Dec. 31, 2015

9.	WARRANTS

For the year ended December 31, 2015

On October 29, 2015 a 1:40 reverse split of the Company stock occurred and the effect has been applied retroactively for disclosure purposes.

For the year 2015, 52,500 common stock purchase warrants were granted to two consultants and a vendor for service provided. One consultant was granted 25,000 warrants with exercise price of $10.00, vesting over two years and the expiration date is June 16, 2018. The other consultant was granted 12,500 warrants with exercise price of $10.00, vesting over one year and the expiration date is June 25, 2018. These same two consultants and the vendor each received 5,000 warrants with exercise price of $5.00, immediately vested and an expiration date of December 10, 2018.

On November 20, 2015, the Company issued 70,000 warrants with exercise price of $5.00, immediately vested and the expiration date of November 20, 2020 to the placement agent in the common stock private placement.

The Company uses the Black-Scholes warrant pricing model to estimate the fair value of warrants as of December 31, 2015.

The following table summarizes the assumptions used to estimate the fair value of warrants granted during 2015:

	2015

Expected dividend yield	0	%
Expected volatility	116% – 121	%
Risk-free interest rate	.87% – 1.70	%
Expected life of warrants	2.4 – 5 years

Under the Black-Scholes warrant price model, fair value of the warrants granted is estimated at $347,201. During 2015, $324,263 compensation expense was recognized.

For the year ended December 31, 2014

On April 30, 2014, the effective date of the Redomestication and effective date of the Merger Exchange Ratio, there were a total of 16,842 warrants, on a post-reverse split basis, carried over to the reverse merger with DAC on June 3, 2014 with strike prices ranging from $101.2 to $662.8. A total of 4,717 of these warrants with strike prices of $202.4 expired between July and September 2014 leaving a total of 12,125 outstanding warrants.

During May 2014, the Company issued a total of 42,500 warrants on a post-reverse split basis for services. The warrants have a term of three years, and exercise price of $0.40. The 42,500 warrants were exercised in July 2014 for a total of $17,000. As further described above in Note 4, on June 3, 2014, the Company issued 67,500 warrants on a post-reverse split basis to purchase one share of common stock at an exercise price of $40.00 per warrant share to investors who purchased Series E Preferred Stock. The exercise price of $40.00 per warrant may be adjusted any time during the first twenty-four months from issuance under the terms of a Favored Nations Provision contained in the warrant. If at any time during that twenty-four month period the Company should issue common stock or convertible securities at a price lower than $40.00 per share, unless the warrant holder consents to such lower price issuance, then the exercise price of the warrant shall be automatically reduced to reflect such other lower price and the number of warrant securities shall be adjusted to reflect such lower price. The warrants expire on June 3, 2017. In August 2014, all seven investors holding the warrants attached to Series E Preferred Stock executed cashless exercises of their warrants resulting in the issuance of 9,310 shares of restricted common stock on a post-reverse split basis.

Because the 42,500 warrants issued on June 3, 2014 have full reset adjustments tied to future issuances of equity securities by the Company, they are subject to derivative liability treatment under ASC 815-40-15 “Determining whether an Instrument (or Embedded feature) is Indexed to an Entity’s Own Stock.” ASC 815-40-15 requires as of the date the warrant is issued, the derivative liability to be measured at fair value and re-evaluated at the end of each reporting period.

As of June 3, 2014, the fair value of the warrants derivative liability was $2,159,824 – see Note #4. On August 26, 2014, when the warrants were exercised, the Company determined the fair value of the derivative liability to be $2,510,793, and upon warrant exercise, the derivative liability was written off to additional paid in capital.

As a result of the warrant exercises, as of December 31, 2014, the fair value of the warrants derivative liability is $0, and the Company recognized a loss on derivative liability of $350,969 for the year ended December 31, 2014. The fair value of the derivative liability was estimated at the date of grant and the date of warrant exercised using a Black-Scholes option pricing model.

The following table represents warrant activity as of and for the period ended December 31, 2015 and 2014:

	Number of Warrants			Weighted Average Exercise Price		Contractual Life in Years		Intrinsic Value
Outstanding – December 31, 2014		12,129		$	206.86		2.04
Exercisable – December 31, 2014		12,129		$	206.86		2.04	$	0.00
Granted		122,500		$	6.53

Forfeited or Expired		(420	)	$	250.35
Outstanding – December 31, 2015		134,209		$	23.87		3.66
Exercisable – December 31, 2015		104,209		$	27.87		4.01	$	0.00