DERIVATIVE LIABILITY

12 Months Ended

Dec. 31, 2015

Derivative Instruments and Hedging Activities Disclosure [Abstract]

DERIVATIVE LIABILITY

NOTE 10 – DERIVATIVE LIABILITY

Due to the potential adjustment in the conversion price associated with certain of the convertible debentures and the potential adjustment in the exercise price of certain of the warrants (see Notes 8 and 9), the Company has determined that certain conversion features and warrants are derivative liabilities.

Derivative liabilities at December 31, 2015 consist of the following:

Common stock warrants	$	11,043,126
Debt conversion features		14,402,519
	$	25,445,645

As discussed in Notes 8 and 9, the fair value of the derivative liabilities are measured based upon the Black-Scholes and Monte Carlo Simulation Models. These models involve the use of significant inputs that are both observable and unobservable in the market and therefore is considered a Level 3 fair value measurement. Observable inputs include market quotes, current interest rates, benchmark yield curves. The Company has a relatively short history since inception, lack of comparable companies of the same size in the same industry and its history of losses. Accordingly, the significant unobservable inputs used in the fair value measurement relate to volatility, quoted prices of securities with similar characteristics and historical dividends.

The ranges of assumptions utilized in estimating the fair value of the derivative liabilities related to the conversion features and warrants on the dates of issuance, settlement, and at December 31, 2015, are as follows:

Expected Volatility	58% to 83%
Expected Term	0.0 to 5.0 Years
Risk Free Rate	0.02% to 1.8%
Dividend Rate	0.00%
Triggering capital raise probabilities	25% to 75%

A summary of derivative activity for the year ended December 31, 2015 is as follows:

Balance as of January 1, 2015	$	-
Warrants in connection with promissory notes payable (see Note 8)		556,892
Warrants and conversion features in connection with convertible notes payable, including day one derivative loss of $3,832,920 (see Note 9)		4,780,819
Note conversions		(2,706,167	)
Change in fair value, net of day one derivative loss of $3,832,920		22,814,101
Balance as of December 31, 2015	$	25,445,645