DERIVATIVES

3 Months Ended

Mar. 31, 2013

Notes to Financial Statements

NOTE 5 - DERIVATIVES

Embedded Conversion Option Derivatives

Due to the conversion terms of certain promissory notes, the embedded conversion options met the criteria to be bifurcated and presented as derivative liabilities. The Company calculated the estimated fair values of the liabilities for embedded conversion option derivative instruments at the original note inception date and as of March 31, 2013 using the Black-Scholes option pricing model using the share prices of the Company’s stock on the dates of valuation and using the following ranges for volatility, expected term and the risk free interest rate at each respective valuation date, no dividend has been assumed for any of the periods:

	Note Inception Date			March 31, 2013			December 31, 2012
Volatility		251% - 257	%		307	%		251	%
Expected Term	0.17 - 0.5 years			0.17 - 0.67 years			0.08 – 0.46 years
Risk Free Interest Rate		0.33	%		0.27	%		0.32	%

The following reflects the initial fair value on the note inception date and changes in fair value through March 31, 2013:

Note inception date fair value allocated to debt discount	$	483,317
Note inception date fair value allocated to other expense		23,132
Change in fair value in 2011- (gain) loss		(73,402	)
Embedded conversion option derivative liability fair value on December 31, 2012		433,047
Change in fair value in 2012-(gain) loss		(362,343	)
Embedded conversion option derivative liability fair value on December 31, 2012		70,704
Change in fair value for the three months ended March 31, 2013 – (gain) loss		(12,848	)
Embedded conversion option derivative liability fair value on March 31, 2013	$	57,856