5. Derivative Liabilities

6 Months Ended

Jun. 30, 2016

Notes

5. Derivative Liabilities

5. Derivative Liabilities

Embedded Conversion Feature

To properly account for the convertible notes payable discussed in Note 4, the Company performed a detailed analysis to obtain a thorough understanding of the transaction. The Company reviewed FASB ASC 815, to identify whether any equity-linked features in the notes are freestanding or embedded. The notes were then analyzed in accordance with FASB ASC 815 to determine if the anti-dilution feature should be bifurcated and accounted for at fair value and remeasured at fair value in income. The Company determined that the anti-dilution feature met the requirements for bifurcation pursuant to FASB ASC 815 due to the variable conversion price and therefore accounted for the anti-dilution features of the notes as a derivative liability. Changes in fair value of the derivative financial instruments are recognized in the Company's statement of operations as a derivative valuation gain or loss.

The adjustment to market of $53,572 at June 30, 2016 resulted in a charge of $11,598 for the six months then ended and a gain of $16,647 for the three months then ended.

The Company values its simple conversion option derivatives using the a lattice model. Assumptions used include:

- life through the note maturity date - expected volatility-152%, - expected dividends-none - exercise prices as set forth in the agreements, - common stock price of the underlying share on the valuation date, and - number of shares to be issued if the instrument is converted