5. Derivative Liabilities

3 Months Ended

Mar. 31, 2015

Derivative Instruments and Hedging Activities Disclosure [Abstract]

Derivative Instruments and Hedging Activities Disclosure [Text Block]

5.Derivative Liabilities

The Company records the fair value of the of the conversion price of the convertible debentures disclosed in Note 4 in accordance with ASC 815, Derivatives and Hedging. The fair value of the derivative was calculated using a multi-nominal lattice model performed by an independent qualified business valuator. The fair value of the derivative liability is revalued on each balance sheet date with corresponding gains and losses recorded in the consolidated statement of operations. During the period ended March 31, 2015, the Company recorded a gain on the change in fair value of derivative liability of $107,289 (2014 - $672,095). As at March 31, 2015, the Company recorded a derivative liability of $221,003 (December 31, 2014 - $347,672).

The following inputs and assumptions were used to value the convertible debenture outstanding during the period ended March 31, 2015:

· The range of stock prices for the valuation of the derivative instruments at March 31, 2015 ranged from $0.022 to $0.03 per share of common stock.

· The debtholder would redeem (with penalties of 0% to 50% depending on the date and full-partial redemption) based on availability of alternative financing, at a rate of 0% increasing 1.0% monthly to a maximum of 10%.

· The debtholder would automatically convert the note at maturity if the registration was effective and the Company is not in default.

· The projected annual volatility for each valuation period based on the historic volatility of the Company 230% - 243%

· Capital raising events of $100,000 would occur in each quarter for a total of $100,000 in 2014 at 75% of market generating dilutive reset events at prices below $0.002 (rounded) for the convertible debentures.

A summary of the activity of the derivative liability is shown below:

	$
Balance, December 31, 2013	653,253
Day one loss on date notes become convertible	9,542
Debt discount	401,888
Reclass of derivative to APIC	(35,374	)
Gain in change in fair value of the derivative	(28,384	)
Gain on write-off of derivative due to debt forgiven	(653,253	)
Balance, December 31, 2014	347,672
Reclass of derivative to APIC	(19,380	)
Gain in change in fair value of the derivative	(107,289	)
Balance, March 31, 2015	221,003