Derivative Liability

12 Months Ended

Dec. 31, 2015

Notes to Financial Statements

Note 5 - Derivative Liability

Under the terms of the September 2015 Convertible Note and the December 2015 Convertible Note, we identified derivative instruments arising from embedded conversion features, as well as warrants issued with the December 2015 Convertible Note.

The following summarizes the Black-Scholes assumptions used to estimate the fair value of the derivative liability at the dates of issuance and the revaluation date:

	September 15, 2015			November 12, 2015			December 2, 2015			December 31, 2015
Volatility		112	%		111	%		103	%		102	%
Risk-free interest rate		0.8	%		0.8	%		1.2	%	0.5 – 1.2 %
Expected life (years)		2.0			1.8		1.0 – 3.0			0.9 – 2.9
Dividend yield		-			-			-			-

Changes in the derivative liability were as follows:

	Amount		Shares(1)
December 31, 2014	$	-		-
Fair value of derivative upon issuance:
September 2015 Convertible Note – September borrowing		75,750		633,690
September 2015 Convertible Note – November borrowing		45,479		422,460
December 2015 Convertible Note – conversion feature		43,713		500,000
December 2015 Convertible note - warrants		141.475		2,030,765
		306,317		3,586,915
Change in fair value at December 31, 2015		50,237
December 31, 2015	$	356,554

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(1) Estimated number of shares issuable if the conversion feature or warrants were exercised as of December 31, 2015.