WARRANTS

12 Months Ended

Dec. 31, 2016

Notes to Financial Statements

WARRANTS

Note 12 – Warrants

In March 2014, the Company closed on a $500,000 180-day bridge loan with two investors. The loans bear interest of 10%. Additionally, the investors were granted a total of 500,000 stock warrants to purchase stock at $1.00 per share for a period of two years valued at $147,102. The total fair value of these warrant at the date of grant was determined using the Black-Scholes option pricing model with an expected life of 2 years, a risk free interest rate of 0.45%, a dividend yield of 0% and expected volatility of 333%. In September of 2014, the maturity date of this bridge loan was extended by 30 days; in return the exercise price of the warrant was reduced to $0.34 per share, with the original two year term remaining. Due to the change in the terms of the warrants, the Company recalculated the value of the warrants to be $85,325. Accordingly, the Company recognized a gain on the extinguishment of $73,573. In December of 2015, the maturity date of this bridge loan was extended until September 30, 2016, in return the exercise price of the warrant was reduced to $0.20 and the term of the warrants also extended to until September 30, 2016. At September 30, 2016, the maturity date was further extended to March 31, 2017. The exercise price of the warrant did not change during the extension to March 31, 2016.

The following is a summary of the status of all of the Company’s stock warrants as of December 31, 2016 and changes during the period ended on that date:

	Number of Warrants		Weighted-Average Exercise Price		Weighted-Average Remaining Life (Years)
Outstanding at January 1, 2015		500,000	$	0.34		1.33
Granted		—	$	0.00		—
Exercised		—	$	0.00		—
Cancelled		—	$	0.00		—
Outstanding at December 31, 2015		500,000	$	0.20		0.75
Exercisable at December 31, 2015		500,000	$	0.20		0.75
Granted		—	$	0.00		—
Exercised		—	$	0.00		—
Cancelled		—	$	0.00		—
Outstanding at December 31, 2016		500,000	$	0.20		0.25
Exercisable at December 31, 2016		500,000	$	0.20		0.25