NOTE 8: WARRANTS

Below is a table summarizing the Company’s outstanding warrants as of September 30, 2016 and December 31, 2015:

										Intrinsic
						Wtd Avg.				Value
	Number of			Wtd Avg.		Remaining				of Exercisable
	Warrants			Exercise Price		Term		Exercisable		Warrants
Outstanding at December 31, 2015		42,526,609		$	0.22		4.15		41,297,920	$	1,167

Exercised		-
Granted		21,961,513			0.02		4.66				-
Expired		(393,081	)		0.42

Outstanding at September 30, 2016		64,095,041			0.15		3.73		63,907,541	$	4,059,950

The warrant grants during the nine months ended September 30, 2016 were valued using the Black-Scholes pricing model. Significant assumptions used in the valuation include expected term of 1.5 to 2.5 years, expected volatility of 166.74% to 178.98%, risk free interest rate of 0.71% to 1.08%, and expected dividend yield of 0%.

During the nine months ended September 30, 2016, the Company issued an aggregate of 1,575,954 warrants to purchase shares of the Company’s common stock with an exercise prices of $0.038 to $0.179 per share vested immediately for services. The fair value on the grant date of the warrants was $150,500.

In April 2016, the Company issued an aggregate of 18,353,310 warrants to acquire its common stock in settlement of $1,541,678 convertible notes and accrued interest. The warrants issued to Anthion are exercisable at $0.001 per share for five years from the date of issuance.

The Company determined that the estimated fair value of the 18,353,311 warrants of $3,205,959 exceeded the settlement of $1,541,678 of convertible notes and accrued interest and accordingly recorded a loss of settlement of debt of $1,664,281 for the nine months ended September 30, 2016. The Company used the Black-Scholes Option Pricing model to estimate the fair value of the warrants at settlement with the following assumptions: the price of the Company stock of $0.175, volatility was estimated to be 178%, the risk free rate of 1.24% and the remaining term was 5 years.

In May 2016, the Company issued 1,312,000 warrants with an exercise price of $0.25 in connection with the sale of Common Stock. The five year warrants also contain a provision that the warrant exercise price will automatically be adjusted for any common stock equity issuances at less than $0.25 per share.

For the three and nine months ended September 30, 2016 and 2015, the Company has incurred warrant-based expense of $58,599 and $206,772 and $20,962 and $491,148, respectively.