The maximum number of shares required to be delivered during the period under which substantially all of the Company’s outstanding warrants and convertible notes exceed the amount of authorized shares through September 30, 2011.

The Company accounts for the embedded conversion features included in its convertible promissory notes and outstanding warrants.

The aggregate fair value of derivative liabilities at March 31, 2012 and December 31, 2011 amounted to approximately $0.

During the first three quarters of 2011, the warrants and convertible promissory notes issued by the Company were recognized as liability contracts because, at issuance, the Company did not have sufficient amount of authorized of shares of common stock to satisfy its obligations under such contracts.

During December 2011, the Company’s shareholders approved an increase in the Company’s authorized number of its shares of common stock to 450,000,000. Accordingly, the Company reclassified its previously-recorded liability contracts to equity contracts in December 2011.

At each measurement date, the fair value of the embedded conversion features and warrants were based on the binomial and the Black Scholes method, respectively.

During the three-month period ended March 31, 2011, the Company issued warrants in connection with the sale of the Company’s common stock, conversion of convertible promissory notes, and short-term note payable, as well a convertible promissory note. The maximum number of shares required to be delivered during the period under which the warrants issued pursuant to common stock, conversion of promissory notes and short-term note payables, as well as the issuance of convertible promissory note, together with all the outstanding convertible debt, stock options, warrants and common stock, exceeds the amount of authorized common stock shares at March 31, 2011. As a result, the Company recorded a derivative liability aggregating $2,313,564, and was offset against the additional-paid in capital.

The fair value of the derivative instruments were based on the following assumptions:

Exercise price:		$0.05 - $0.20
Market price at date of grant:		$0.08 - $0.225
Expected volatility:		50.83% - 89.35%
Term:	>1 year – 5 year
Risk-free interest rate:		0.17% - 2.14%