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Stock Purchase Warrants

12 Months Ended

Dec. 31, 2015

Common Stock Warrants

During the year ended December 31, 2015, the Company issued 3,971,436 common stock warrants to investors and 406,859 common stock warrants to the placement agents in connection with issuance of the Convertible Notes (see Note 5). These warrants are recorded as a derivative liability.

In addition, during the year ended December 31, 2015, the Company issued 607,229 common stock warrants at an exercise price of $0.50 per share with a five-year term. These warrants were issued in consideration of the warrant holder waiving its rights with respect to indebtedness incurred by the Company in excess of the amount permitted pursuant to the Certificate of Designation of Relative Rights and Preferences of the Company’s Series A Preferred Stock. The warrants had a fair value of $80,472 and are included in interest and other expense in the consolidated statement of operations.

During the year ended December 31, 2015, 3,558,395 stock purchase warrants expired with a weighted average exercise price of $1.29.

As a result of the issuance of the Convertible Notes, the exercise price of the 8,676,408 common stock warrants, which were issued in connection with the Company's Series B Preferred Stock in 2013 and 2014, was reduced to $0.35 per share.

During the year ended December 31, 2014, the Company issued 470,000 common stock warrants to investors and 45,000 common stock warrants to the placement agents in connection with the sale of common stock.

In addition, during the year ended December 31, 2014, the Company exchanged 546,470 common stock warrants for an equal number of warrants with the same terms as the warrants issued in connection with the sale of the Company’s Series B Preferred Stock. As a result of this exchange and because such new warrants are derivative instruments, the Company increased its derivative warrant liability by approximately $115,000, the fair value of the warrants on the date of the modification. In addition, in conjunction with the exchange, the Company recognized a one-time expense of approximately $82,000 representing the incremental fair value resulting from the modification, which is included in the accompanying statements of operations.

During the year ended December 31, 2014, various warrant holders exercised their rights to purchase 180,750 shares of the Company’s common stock, with an average exercise price of $0.50 per share, pursuant to a cash exercise whereby the Company received cash proceeds of $90,375.

The following is a summary of all common stock warrant activity during the year ended December 31, 2015:

	Number of Shares Under Warrants			Exercise Price Per Share		Weighted Average Exercise Price
Warrants issued and exercisable at December 31, 2014		14,854,035		$	0.50 - 1.33	$	0.76
Warrants Issued/Exchanged		4,985,524		$	0.50	$	0.50
Warrants Expired/Forfeited		(3,558,395	)	$	1.29	$	1.29
Warrants Exercised		-		$	-	$	-
Warrants issued and exercisable at December 31, 2015		16,281,164		$	0.35 - 1.33	$	0.48

The following represents additional information related to common stock warrants outstanding and exercisable at December 31, 2015:

Exercise Price		Number of Shares Under Warrants		Weighted Average Remaining Contract Life in Years		Weighted Average Exercise Price
$	0.35		8,676,408		2.75	$	0.35
$	0.50		4,378,295		4.75	$	0.50
Total warrants accounted for as derivative liability			13,054,703		3.42	$	0.40


$	0.50	607,229	4.79	$	0.50
$	0.83	2,108,500	2.80	$	0.83
$	0.84	20,000	0.59	$	0.84
$	0.85	281,912	1.56	$	0.85
$	0.95	20,000	0.75	$	0.95
$	1.00	165,417	3.13	$	1.00
$	1.33	23,403	0.07	$	1.33
Total warrants accounted for as equity		3,226,461	3.04	$	0.78
Total for all warrants outstanding		16,281,164	3.35	$	0.48

The Company used the Black-Scholes option price calculation to value the warrants granted in 2015 using the following assumptions: risk-free rate of 1.76%, volatility of 49.42%, actual term and exercise price of warrants granted. For warrants granted that are accounted for as a derivative liability, the Company used a Binomial Options Pricing model. The primary assumptions used to determine the grant date fair value of these warrants were: a risk free interest rate with the range from 1.37% - 1.76%, volatility of 49.42%, actual term and exercise price of the warrants granted. There were no material changes to the primary assumptions, as noted above, used to determine the fair value of the warrants as of December 31, 2015.

The Company used the Black-Scholes option price calculation to value the warrants granted in 2014 using the following assumptions: risk-free rate of 1.62%, volatility of 60.13%, actual term and exercise price of warrants granted. For warrants granted that are accounted for as a derivative liability, the Company used a Binomial Options Pricing model. The primary assumptions used to determine the grant date fair value of these warrants were: a risk free interest rate with the range from 1.59% - 3.40%, volatility of 60.13%, actual term and exercise price of the warrants granted. There were no material changes to the primary assumptions, as noted above, used to determine the fair value of the warrants as of December 31, 2014.