Derivative Liabilities

3 Months Ended

Mar. 31, 2015

Derivative Liabilities [Abstract]

DERIVATIVE LIABILITIES

5. DERIVATIVE LIABILITIES

We evaluated the financing transactions in accordance with ASC Topic 815, Derivatives and Hedging, and determined that the conversion feature of the convertible promissory note was not afforded the exemption for conventional convertible instruments due to its variable conversion rate. The note has no explicit limit on the number of shares issuable so they did not meet the conditions set forth in current accounting standards for equity classification. The Company elected to recognize the note under paragraph 815-15-25-4, whereby, there would be a separation into a host contract and derivative instrument. The Company elected to initially and subsequently measure the note in its entirety at fair value, with changes in fair value recognized in earnings. The derivative liability is adjusted periodically according to the stock price fluctuations.

For purpose of determining the fair market value of the derivative liability for the embedded conversion, the Company used Black Scholes option valuation model. The significant assumptions used in the Black Scholes valuation of the derivative are as follows:

Risk free interest rate	.03% - .26%
Stock volatility factor	55.59% - 102.69%
Weighted average expected option life	6 - 9 months
Expected dividend yield	None

The derivative liability recognized in the financial statements as of March 31, 2015 was $4,211,960.