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8. Derivative Liabilities

3 Months Ended

Mar. 31, 2016

Note 8 Derivative Liabilities

The Company identified conversion features embedded within convertible debt and warrants issued in 2013 and 2014. The Company has determined that the features associated with the embedded conversion option, in the form a ratchet provision, should be accounted for at fair value, as a derivative liability, as the Company cannot determine if a sufficient number of shares would be available to settle all potential future conversion transactions.

As a result of the application of ASC No. 815, the fair value of the ratchet feature related to convertible debt and warrants is summarized as follow:

The fair value at the commitment and re-measurement dates for the Company’s derivative liabilities were based upon the following management assumptions as March 31, 2016:

	March 31, 2016 Unaudited			December 31, 2015 (Audited)
Fair value at the commitment date - convertible debt	$	4,892,234		$	4,892,234
Fair value at the commitment date - warrants		677,214			677,214
Reclassification of derivative liabilities to additional paid in capital related to warrants exercised that ceased being a derivative liability		(404,382	)		(404,382	)
Extinguishment of Derivative Liability - Conversion of Interest to Shares		(209,604	)		(209,604	)
Fair value mark to market adjustment - stock options		105,624			108,548
Fair value mark to market adjustment - convertible debt		16,676,856			18,661,058
Fair value mark to market adjustment - warrants		423,032			432,770
Totals	$	22,160,974		$	24,157,838

	Commitment Date			Re-measurement Date
Expected dividends		0	%		0	%
Expected volatility		150	%		150	%
Expected term		2 5 years			0.00 – 3.24 years
Risk free interest rate		0.29% 1.68	%		0.21% 1.21%	%