4. Derivative Liabilities

9 Months Ended

Sep. 30, 2016

Derivative Instruments and Hedging Activities Disclosure [Abstract]

Derivative Instruments and Hedging Activities Disclosure [Text Block]

4.     Derivative Liabilities

The Company records the fair value of the of the conversion price of the convertible debentures disclosed in Note 3 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 September 30, 2016, the Company recorded a gain on the change in fair value of derivative liability of $418,878 (December 31, 2015 – loss of $341,192). As at September 30, 2016, the Company recorded a derivative liability of $72,371 (December 31, 2015 - $491,249).

The following inputs and assumptions were used to value the convertible debentures outstanding during the period ended September 30, 2016:

· The range of stock prices for the valuation of the derivative instruments at September 30, 2016 ranged from $0.034 to $0.030 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 of 70%, 80%, and 90%.

· The debtholder would automatically convert 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 351% - 306%

· Capital raising events of $100,000 would occur in each quarter at 75% of market generating dilutive reset events at prices below $0.015 (rounded) for the convertible debentures.

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

	$
Balance, December 31, 2015	491,249
Gain in change in fair value of the derivative	(418,878	)
Balance, September 30, 2016	72,371