13. Derivative liability

3 Months Ended

Mar. 31, 2017

Notes to Financial Statements

13. Derivative liability

13. Derivative liability

The short-term convertible note issued to Labrys Fund LP, disclosed in note 12 above, have variable priced conversion rights with no fixed floor price and will reprice dependent on the share price performance over varying periods of time. This gives rise to a derivative financial liability, which was initially valued at inception of the convertible note at $110,000, the maximum amount permissible, using a BlackScholes valuation model. The value of this derivative financial liability was reassessed at March 31, 2017 and $73,048 was charged to the statement of operations and comprehensive loss. The value of the derivative liability will be re assessed at each financial reporting period, with any movement thereon recorded in the statement of operations in the period in which it is incurred. The amortization charge of debt discount for the three months ended March 31, 2017 was $34,641.

The following assumptions were used in the Black-Scholes valuation model:

	Three months ended March 31, 2017
Calculated stock price		$0.03 to $0.06
Risk free interest rate		0.64% to 0.91%
Expected life of convertible notes		3 to 6 months
expected volatility of underlying stock		134.9% to 180.5%
Expected dividend rate		0	%

The movement in derivative liability is as follows:

	Three months ended March 31, 2017
Derivative liability arising from convertible notes	$	110,000
Fair value adjustment to derivative liability		73,048
	$	183,048