DERIVATIVE LIABILITY

6 Months Ended

Jun. 30, 2015

Derivative Instruments and Hedging Activities Disclosure [Abstract]

DERIVATIVE LIABILITY

NOTE 8 – DERIVATIVE LIABILITY

In April 2008, the FASB issued a pronouncement that provides guidance on determining what types of instruments or embedded features in an instrument held by a reporting entity can be considered indexed to its own stock for the purpose of evaluating the first criteria of the scope exception in the pronouncement on accounting for derivatives. This pronouncement was effective for financial statements issued for fiscal years beginning after December 15, 2008. The adoption of these requirements can affect the accounting for warrants and many convertible instruments with provisions that protect holders from a decline in the stock price (or “down-round” provisions). For example, warrants or conversion features with such provisions are no longer recorded in equity. Down-round provisions reduce the exercise price of a warrant or convertible instrument if a company either issues equity shares for a price that is lower than the exercise price of those instruments or issues new warrants or convertible instruments that have a lower exercise price.

As of June 30, 2015, the Company had outstanding convertible notes for $850,000 and warrants of 19,490,909 that the Company determined were a derivative liability due to the “reset” clause associated with the note and warrant’s conversion price. The Company had valued the derivative liability of these notes at $4,530,375 as of June 30, 2015 using the Black-Scholes-Merton option pricing model.

The Company uses a weighted average Black-Scholes-Merton option pricing model with the following assumptions to measure the fair value of derivative liability at June 30, 2015:

Stock price	$0.10
Risk free rate	0.28% - 1.63%
Volatility	325%
Conversion/ Exercise price	$0.03 - $0.05
Dividend rate	0%
Term (years)	0.42 to 5.0

The following table represents the Company’s derivative liability activity for the period ended June 30, 2015:

	Amount
Derivative liability balance, December 31, 2014	$	—
Issuance of derivative liability during the period ended June 30, 2015		4,030,124
Change in derivative liability during the nine months ended June 30, 2015		500,251
Derivative liability balance, June 30, 2015	$	4,530,375