NOTE 6 - DERIVATIVE LIABILITIES

3 Months Ended

Mar. 31, 2016

Derivative Instruments and Hedging Activities Disclosure [Abstract]

NOTE 6 - DERIVATIVE LIABILITIES

NOTE 6 - DERIVATIVE LIABILITIES

(A) Convertible Notes Issued in May 8, 2015

The Company identified conversion features embedded within convertible debt issued in May 8, 2015. The Company has determined that the features associated with the embedded conversion option, in the form a ratchet provision, should be accounted for at fair value, as a derivative liability, as the Company cannot determine if a sufficient number of shares would be available to settle all potential future conversion transactions. 

As a result of the application of ASC No. 815, the fair value of the ratchet feature related to convertible debt is summarized as follow: 

	Derivative Liabilities
Balances as of December 31, 2015	$	224,951
Changes in derivative liabilities		(22,080	)
Reclassified to Additional paid in capital due to conversion		(156,517	)
Balances as of March 31, 2016		46,354

The fair value at the commitment and re-measurement dates for the Company’s derivative liabilities were based upon the following management assumptions as of March 31, 2016:

	Remeasurement Date
Expected dividends		0	%
Expected volatility		191	%
Expected term		0.167	years
Risk free interest rate		0.38	%

	Derivative Liabilities
Fair value at the commitment date-November 8, 2015	$	446,282
Fair value mark to market adjustment		(18,698	)
Reclassified to Additional paid in capital due to conversion		(202,633	)
Balances as of December 31, 2015		224,951

The fair value at the commitment and re-measurement dates for the Company’s derivative liabilities were based upon the following management assumptions as of December 31, 2015:

	Commitment Date			Remeasurement Date
Expected dividends		0	%		0	%
Expected volatility		183	%		183	%
Expected term		0.5	years		0.45	years
Risk free interest rate		0.34	%		0.49	%

(B) Settlement of Derivative Liabilities

During the three month ended March 31, 2015 the Company settled a lawsuit brought forth by the note holders, effectively terminating and canceling all remaining agreements, warrants and notes. As a result of the settlement, the company recorded a loss on settlement of convertible notes of $2,336,035 during the year ended December 31, 2015.

As of the date of the settlement with the noteholders, the Company revalued the embedded derivative liability and recorded a loss on change in fair value of derivative liability of $143,383. 

(C) Options identified as derivative liability

The Company identified options issued to directors and officers are a derivative liability due to a lack of number of authorized shares to cover all the options issued by the Company if they are all exercised as of March 31, 2016 and December 31, 2015.

Therefore, the fair value of the options have been recorded as liabilities on the balance sheet. The change in the fair value of the derivative liabilities will be recorded in other income or expenses in the statement of operations at the end of each period, with the offset to the derivative liabilities on the balance sheet. The fair value of the embedded derivative liabilities was determined using the Black-Scholes valuation model on the issuance dates with the assumptions in the table below.

As a result of the application of ASC No. 815, the fair value of the options is summarized as follow:  

	Derivative Liabilities
Balances as of December 31, 2015	$	190,755
Fair value mark to market adjustment		(89,234	)
Balances as of March 31, 2016		101,521

The fair value at the re-measurement date for the Company’s derivative liabilities were based upon the following management assumptions as of March 31, 2016:

	Remeasurement Date
Expected dividends		0	%
Expected volatility		200	%
Expected term		1.50 - 4.25	years
Risk free interest rate		0.38	%

The fair value at the commitment and re-measurement dates for the Company’s derivative liabilities as of December 31, 2015 were:

	Derivative Liabilities
Fair value at the commitment date - November 8, 2015	$	468,814
Fair value mark to market adjustment		(278,059	)
Balances as of December 31, 2015		190,755

The fair value at the commitment and re-measurement dates for the Company’s derivative liabilities were based upon the following management assumptions as of December 31, 2015:

	Commitment Date			Remeasurement Date
Expected dividends		0	%		0	%
Expected volatility		183	%		208	%
Expected term		1.89 - 4.64	years		1.75 - 4.5	years
Risk free interest rate		0.89 – 1.75	%		1.06% - 1.76	%