NOTE 10 – DERIVATIVE FINANCIAL INSTRUMENTS

Derivative financial instruments are comprised of the fair value of conversion features embedded in convertible promissory notes for which the conversion rate is not fixed, but instead is adjusted based on a discount to the market price of the Company’s common stock. The fair market value of the derivative liabilities was calculated at inception of each convertible promissory notes for which the conversion rate is not fixed and allocated to the respective convertible notes, with any excess recorded as a charge to “Financing cost.” The derivative financial instruments are then revalued at the end of each period, with the change in value recorded to “Change in fair value of on derivative financial instruments.”

Derivative financial instruments and changes thereto recorded in the three months ended March 31, 2018 include the following:

					Change in
	Fair Value		Inception of		Fair Value			Write off			Fair Value
	as of		Derivative		of Derivative			Derivative			as of
	December 31,		Financial		Financial			Financial			March 31,
	2017		Instruments		Instruments			Instruments			2018
	(audited)
$53k Note - July 2017	$	48,876	$	---	$	5,017		$	(53,893	)	$	---
$35k Note - September 2017		36,161		---		1,108			(37,269	)		---
$55k Note - September 2017		64,656		---		5,032			(69,688	)		---
$53k Note #2 - October 2017		58,216		---		617			---			58,833
$171.5k Note - October 2017		190,580		---		11,979			---			202,559
$57.8k Note - January 2018		---		82,653		(2,905	)		---			79,748
$112.8k Note - February 2018		---		161,527		(2,371	)		---			159,156
$83k Note - February 2018		---		119,512		(1,525	)		---			117,987
$105k Note - March 2018		---		153,371		(2,331	)		---			151,040

	$	398,489	$	517,063	$	14,621		$	(160,850	)	$	769,323

During the three months ended March 31, 2018, the $53k Note, the $35k Note and the $55k Note were each repaid in full. Accordingly, the derivative financial instruments associated with the ECFs of these convertible notes were written off in connection with the extinguishment of each convertible note.

Fair market value of the derivative financial instruments is measured using the Black-Scholes pricing model with the following assumptions: risk-free interest rate of 1.21-2.09%, expected life of 0.27-1.00 years, volatility of 172.67-283.66%, and expected dividend yield of zero. The entire amount of derivative instrument liabilities is classified as current due to the fact that settlement of the derivative instruments could be required within twelve months of the balance sheet date. The Company had no derivative financial instruments in the three months ended March 31, 2017.