Derivative Liability

12 Months Ended

Dec. 31, 2016

Notes to Financial Statements

NOTE 9 - Derivative Liability

The Company adopted ASC 815 which defines the determination of whether an instrument (or embedded feature) is solely indexed to an entity's own stock. During the period ended December 31, 2016, the Company issued two convertible promissory notes payable, as described in note 7, which contain features that entitles the holder to convert any outstanding amounts payable under the convertible promissory note into a shares of the common stock of the Company, the number of which is dependent on several factors. As such, ASC 815 determines the convertible promissory note to be a hybrid financial instrument that includes an embedded derivative that requires separation from the main financial instrument and recognition at fair value.

At origination, the Company valued the conversion feature of the convertible promissory note described in note 7(a) using the Black-Scholes option pricing model with the following assumptions:

Expected life		0.75 years
Expected volatility		226	%
Share price	$	0.15
Risk-free interest rate		0.48	%
Expected dividend yield		Nil

The Company determined that at origination, the fair value of the derivative liability related to the conversion feature was $136,479 which was expensed at the time of origination.

At December 31, 2016, the Company revalued the conversion feature of the convertible promissory note using the following assumptions:

Expected life		0.22 years
Expected volatility		246	%
Share price	$	0.035
Risk-free interest rate		0.51	%
Expected dividend yield		Nil

The Company determined that, from the time of inception to December 31, 2016, the value of the derivative liability increased to $389,204. The corresponding loss of $252,725 has been recognized during the year ended December 31, 2016, and has the effect of increasing the original loss recorded at the time of origination.

At origination, the Company valued the conversion feature of the convertible promissory note described in note 7(b) using the following assumptions:

Expected life		0.97 years
Expected volatility		197	%
Share price	$	0.15
Risk-free interest rate		0.48	%
Expected dividend yield		Nil

The Company determined that at origination, the fair value of the derivative liability related to the conversion feature was $76,076 which was expensed at the time of origination.

At December 31, 2016, the Company revalued the conversion feature of the convertible promissory note using the following assumptions:

Expected life		0.49 years
Expected volatility		166	%
Share price	$	0.035
Risk-free interest rate		0.62	%
Expected dividend yield		Nil

The Company determined that, from the time of inception to December 31, 2016, the value of the derivative liability increased to $315,663. The corresponding loss of $239,587 has been recognized during the year ended December 31, 2016, and has the effect of increasing the original loss recorded at the time of origination.