5.          DERIVATIVE LIABILITIES

Starting September 22, 2014, through June 03, 2015, the Company raised $2.27 million in a private placement of secured convertible debt at $0.25 per share of Common Stock. This debt instrument also has a ratchet whereby the conversion price of $0.25 per share can be reduced to a minimum of $0.10 per share (see Note 4). The inclusion of this ratchet requires the determination of the fair market carrying value. At issuance, the note discount and derivative liability using the Black-Scholes model was $179,200. Upon subsequent revaluations, the derivative liability value was $153,100 and $0.00 as at September 30, 2014 and June 30, 2015, respectively, with a resultant gain from derivative liabilities of $85,900 and 185,200 being booked to other income for the three and nine months ended June 30, 2015. For the nine months ended June 30, 2014, we had no derivative liabilities to value.

The Black-Scholes option-pricing model with the following assumption inputs: