Fair Value of Financial Instruments – The valuation techniques used to measure fair value maximize the use of observable inputs and minimize the use of unobservable inputs. The Company utilizes a fair value hierarchy based on three levels of inputs, of which the first two are considered observable and the last unobservable.

· Level 1 – Quoted prices in active markets for identical assets or liabilities. These are typically obtained from real time quotes for transactions in active exchange markets involving identical assets.

· Level 2 – Quoted prices for similar assets and liabilities in active markets, quoted prices included for identical or similar assets and liabilities that are not active, and model-derived valuations in which all significant inputs and significant value drivers are observable in active markets. These are typically obtained from readily-available pricing sources for comparable instruments.

· Level 3 – Unobservable inputs, where there is little or no market activity for the asset or liability. These inputs reflect the reporting entity’s own beliefs about the assumptions that market participants would use in pricing the asset or liability, based on the best information available in the circumstances.

The following table presents the embedded conversion derivative liabilities, the Company’s only financial liabilities measured and recorded at fair value on the Company’s balance sheet on a recurring basis and their level within the fair value hierarchy as of June 30, 2015:

		Level 1		Level 2		Level 3
Embedded conversion derivative liability:
June 30, 2015	$	-	$	-	$	276,377

The following table reconciles for the years ended June 30, 2015, and June 30, 2014, the beginning and ending balances for financial instruments that are recognized at fair value in the financial statements:

Fair value of embedded conversion derivative liability at issuance	$	55,790
Reductions in fair value due to conversion of convertible debentures into common stock
(Gain) Loss on fair value adjustments		12,508
Balance at June 30, 2014		68,298
Fair value of embedded conversion derivative liability at issuance		571,853
Reductions in fair value due to conversion of convertible debentures into common stock		(436,395)
(Gain) Loss on fair value adjustments		72,621
Balance at June 30, 2015	$	276,377

The fair value of the conversion features are calculated at the time of issuance and the Company records a derivative liability for the calculated value using a Black-Scholes option-pricing model. Changes in the fair value of the derivative liability are recorded in other income (expense) in the statement of operations. Upon conversion of the convertible debt to stock, the Company reclassifies the related embedded conversion derivative liability to paid-in capital. The Company recognizes expense for accretion of the convertible debentures discount over the term of the note. The Company has considered the provision of ASC 480, Distinguishing Liabilities from Equity, as the conversion feature embedded in each debenture could result in the note principal converted to a variable number of the Company’s common shares.

The derivatives were valued using the Black-Scholes option pricing model with the following assumptions:

		June 30, 2015			June 30, 2014
Market value of stock on measurement date	$	0.029		$	0.04
Risk-free interest rate		0.26	%		0.10	%
Dividend yield		0	%		0	%
Volatility factor		213	%		119	%
Term		1 year			9 months