Derivative Liability

3 Months Ended

Mar. 31, 2016

Notes to Financial Statements

Note 4 - Derivative Liability

Under the terms of the convertible note agreements, we identified derivative instruments arising from embedded conversion features, as well as warrants issued with the December 2015 Convertible Note.

The following summarizes the Black-Scholes assumptions used to estimate the fair value of the derivative liability at the dates of issuance and the revaluation dates:

	January 27, 2016 (1)			February 10, 2016 (2)			February 24, 2016 (3)			March 31, 2016
Volatility		121	%		121	%		118	%	121 – 127		%
Risk-free interest rate		0.5	%		0.4	%		0.7	%	0.3 – 0.8		%
Expected life (years)		1.0			0.5			1.6		0.4 – 2.7
Dividend yield		--			--			--			--

(1)	Additional borrowing under the December 2015 Convertible Note.
(2)	Borrowing under the February 2016 Convertible Note
(3)	Partial conversion of the September 2015 Convertible Note

Changes in the derivative liability were as follows:

	Amount
December 31, 2015	$	356,554
December 2015 Convertible Note – additional borrowing		53,951
February 2016 Convertible Note		252,271
Conversion – September 2015 Convertible Note		(71,122	)
Change in fair value at March 31, 2016		218,000
March 31, 2016	$	809,654

An estimated 4,209,487 number of shares were issuable if the conversion features and warrants had been exercised on March 31, 2016.