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Derivative liabilities

9 Months Ended

Sep. 30, 2014

7.	Derivative liabilities

Balance, December 31, 2013	$	5,118,454
Fair value change of derivative liabilities		(1,203,575	)
Fair value of preferred shares issued as dividends		101,112
Fair value of warrants issued and extended		1,095,294
Conversion of preferred shares		(315,596	)
Balance, September 30, 2014	$	4,795,689

The derivative liability consists of the fair value of share purchase warrants that were issued in unit private placements that have an exercise price in a currency other than the functional currency of the Company, as well as conversion options and dividends on Series A Shares.

The fair value of the warrants and dividends were determined using the Black-Scholes option pricing model and the conversion options were valued using the Binomial Lattice model using the following current market assumptions:

	September 30, 2014	December 31, 2013
Volatility	92% - 176%	92% - 186%
Risk-free interest rate	0.44% - 1.73%	0.63% - 1.39%
Expected life	1.84 – 5.00 yrs	2.19 – 4.75 yrs

- Definition

Disclosure of accounting policy for derivatives entered into for trading purposes and those entered into for purposes other than trading including where and when derivative financial instruments and derivative commodity instruments and their related gains or losses are reported in the entity's statements of financial position, cash flows, and results of operations.

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