The Company determined that the conversion feature of the convertible notes represented an embedded derivative since the Notes were convertible into a variable number of shares upon conversion. Accordingly, the notes were not considered to be conventional debt under EITF 00-19 and the embedded conversion feature was bifurcated from the debt host and accounted for as a derivative liability. Accordingly, the fair value of these derivative instruments being recorded as a liability on the consolidated balance sheet with the corresponding amount recorded as a discount to each Note. Such discount was being amortized from the date of issuance to the maturity dates of the Notes. The change in the fair value of the liability for derivative contracts were recorded in other income or expenses in the consolidated statements of operations at the end of each period, with the offset to the derivative liability on the balance sheet.

The Company valued the derivative liabilities at March 31, 2016, at $1,955,721. The Company used the Monte Carlo valuation model with a risk-free interest rates from .00% to 1.76%, volatility from 107.95% to 649.04%, trading prices from $.0004 to $.235 per share and conversion prices from $.0002 to $.407 per share.

A summary of the derivative liability balance as of March 31, 2016 and 2015 is as follows: