Derivative liability

6 Months Ended

Jun. 30, 2017

Notes to Financial Statements

Derivative liability

13. Derivative liability

The short-term convertible notes issued to Labrys Fund LP and Power Up Lending Group, LTD, 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 notes at $223,500, the maximum amount permissible, using a Black-Scholes valuation model.

The Labrys Fund note was repaid in May 2017; therefore, the derivative liability was no longer required, the total derivative liability relating to this note of $183,048 was released to the statement of operations. The value of the Power Up convertible note was re-assessed as of June 30, 2017 and a further charge of $15,468 was made to the statement of operations. 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 following assumptions were used in the Black-Scholes valuation model:

	Six months ended June 30, 2017
Calculated stock price	$0.03 to $0.06
Risk free interest rate	0.64% to 1.24%
Expected life of convertible notes	3 to 9 months
expected volatility of underlying stock	134.9% to 180.5%
The movement in derivative liability is as follows:
	Six months ended June 30, 2017
Opening balance	$	—
Derivative liability arising from convertible notes	$	223,500
Fair value adjustment to derivative liability		(94,532	)
	$	128,968