Note 6. Warrants

2015 Unit Offering Warrants

During the three-months ended March 31, 2015 and 2016, pursuant to the terms of our 2015 Unit Offering (see Note 4), we issued warrants to purchase up to an aggregate 1,023,400 and 728,571 shares of our common stock at an exercise price of $0.40 and $0.45 per share, respectively. These warrants were issued to investors and as commissions, and are set to expire June 1, 2020. The intrinsic and relative fair value of these warrants resulted in $233,000 and $255,000 recorded as a discount on our convertible notes on our consolidated balance sheet in the period issued.

Warrants Issued

oncurrently with

December/January Notes

During the three-months ended March 31, 2015 we issued warrants to purchase an aggregate 266,000 shares of our common stock. These warrants are exercisable at $0.30 per share and expire January 2020.

The intrinsic and relative fair value of warrants issued in the three-months ended March 31, 2015 resulted in $133,000 discount on the note payables.

We recorded $72,578 and $298,771 of interest expense related to the amortization of the discount on convertible notes and for the extension of warrants set to expire during the three-months ended March 31, 2015 and 2016, respectively.

We have certain warrants outstanding to purchase our common stock, at various prices, as summarized in the following tables:

Balance, March 31, 2015	Number of
	Shares		Price Range
Outstanding as of December 31, 2014		8,838,122	$0.125	–	1.00
Issued		1,501,900	0.30	–	0.75
Expired		—		—
Outstanding as of March 31, 2015		10,340,022	$0.125	–	1.00

Balance, March 31, 2016	Number of
	Shares		Price Range
Outstanding as of December 31, 2015		13,779,438	$0.125	–	1.00
Issued		728,571		0.45
Expired		—		—
Outstanding as of March 31, 2016		14,508,009	$0.125	–	1.00

The fair value of each award grant is estimated on the date of grant using the Black-Scholes option-pricing model. The determination of expense of warrants issued for services or settlement also uses the option-pricing model. The principal assumptions we used in applying this model were as follows for the three-months ended March 31:

	2015			2016
Risk free interest rate	0.97	–	1.46%		1.36	%
Expected volatility		332%			315	%
Expected dividend yield		—			—
Forfeiture rate		—			—
Expected life in years		5			5

The risk-free interest rate is based on U.S Treasury yields in effect at the time of grant. Expected volatilities are based on historical volatility of our common stock.