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6. DERIVATIVE LIABILITIES
 3 Months Ended
Mar. 31, 2017
Derivative Instruments and Hedging Activities Disclosure [Abstract]  
DERIVATIVE LIABILITIES

As of December 31, 2013, the Company did not have a sufficient number of common shares authorized to fulfill the possible exercise of all outstanding warrants and the conversion of all convertible notes payable. As a result, the Company determined that the warrants and the embedded conversion features of the outstanding debt instruments did not qualify for equity classification. Accordingly, the warrants and conversion features were treated as derivative liabilities and were carried at fair value. During the year ended December 31, 2015, all of the outstanding convertible notes that qualified as derivative liabilities were paid in full or converted to common stock. As of March 31, 2017, only 10,000 warrants remained as derivative liabilities due to the existence of reset provisions that qualify the instruments as derivative liabilities under FASB ASC 815.

 

The following table sets forth the fair value hierarchy within our financial assets and liabilities by level that they were accounted for at fair value on a recurring basis as of March 31, 2017 and December 31, 2016.

 

          Fair Value Measurement at March 31, 2017  
Liabilities:  

Carrying Value

at

March 31, 2017

     Level 1     Level 2      Level 3  
  Warrant derivative liabilities   $ 178     $ -     $ -     $ 178  
Total   $ 178     $ -     $ -     $ 178  

 

          Fair Value Measurement at December 31, 2016  
Liabilities:  

Carrying Value

at

December 31, 2016

     Level 1     Level 2      Level 3  
  Warrant derivative liabilities   $ 44     $ -     $ -     $ 44  
Total   $ 44     $ -     $ -     $ 44  

 

The Company estimates the fair value of the derivative warrant liabilities by using the Black-Scholes Option Pricing Model and the derivative liabilities related to the conversion features in the outstanding convertible notes using the lack-Scholes Option Pricing Model assuming maximum value, Level 3 inputs, with the following assumptions used:

 

 

Dividend yield:  0%  
Expected volatility 159.98 % to 90.19%  
Risk free interest rate  0.00% to 1.07%  
Expected life (years)   0.00 to 0.32  

 

The following table sets forth the changes in the fair value of derivative liabilities for the three months ended     March 31, 2017:
Balance, December 31, 2016     $ (44 )
Loss on change in fair value of derivative liabilities       (134 )
Balance, March 31, 2017     $ (178 )

 

The aggregate loss on derivative liabilities for the three months ended March 31, 2017 was $134.