Note 2 -basis of Presentation and Summary of Significant Accounting Policies: Fair Value of Financial Instruments (Policies)

9 Months Ended

Sep. 30, 2013

Policies

Fair Value of Financial Instruments

Fair value of financial instruments

The Company adopted the guidance of the Financial Accounting standards Boards (“FASB”) Accounting Standards Codification (“ASC”) Topic 820 for fair value measurements which clarifies the definition of fair value, prescribes methods for measuring fair value, and establishes a fair value hierarchy to classify the inputs used in measuring fair value as follows:

Level 1-Inputs are unadjusted quoted prices in active markets for identical assets or liabilities available at the measurement date.

Level 2-Inputs are unadjusted quoted prices for similar assets and liabilities in active markets, quoted prices for identical or similar assets and liabilities in markets that are not active, inputs other than quoted prices that are observable, and inputs derived from or corroborated by observable market data.

Level 3-Inputs are unobservable inputs which reflect the reporting entity’s own assumptions on what assumptions the market participants would use in pricing the asset or liability based on the best available information.

The carrying amounts reported in the condensed consolidated balance sheets for cash, note receivable, accounts receivable, other receivables, due from related party, advance to vendors and other current assets, convertible notes payable, accounts payable, advance from customers, due to related parties, accrued expense – related parties and accrued expense and other current liabilities approximate their fair market value based on the short-term maturity of these instruments.

ASC Topic 825-10 “Financial Instruments” allows entities to voluntarily choose to measure certain financial assets and liabilities at fair value (fair value option). The fair value option may be elected on an instrument-by-instrument basis and is irrevocable, unless a new election date occurs. If the fair value option is elected for an instrument, unrealized gains and losses for that instrument should be reported in earnings at each subsequent reporting date. The Company did not elect to apply the fair value option to any outstanding instruments.

The following table reflects changes for the nine months ended September 30, 2013 for all financial assets and liabilities categorized as Level 3 as of September 30, 2013.

Liabilities:
Balance of derivative liabilities as of January 1, 2013	$                  0
Initial fair value of derivative liabilities attributable to conversion features of convertible notes	196,253
Reclassification of additional paid-in capital upon conversion	(80,287)
Loss from change in the fair value of derivative liabilities	(60,642)
Balance of derivative liabilities as of September 30, 2013	$ 55,324