Derivative Liability

3 Months Ended

Mar. 31, 2012

Derivative Instruments and Hedging Activities Disclosure [Abstract]

Derivative Liability

NOTE 7 – DERIVATIVE LIABILITY 

On September 28, 2011 the Company executed a convertible note payable in the amount of $100,000 which is convertible at the holder’s option at 90 percent of the average of the lowest three daily closing prices per share for the five business days prior to the date of conversion.

The fair value of the conversion option of the convertible note of $93,976 has been recognized as a derivative liability on the date of issuance with all future changes in the fair value of these conversion options being recognized in earnings in the Company’s statement of operations under the caption “Other income (expense) – Gain (loss) on derivative liability” until such time as the note is converted or the conversion feature expires.

The Company uses the Black-Scholes options pricing model to value the derivative liability and subsequent remeasurement. Included in the models are the following assumptions: risk free rates ranging from 0.10% to 0.12%, and annual volatilities which ranged from 259% to 517%.

ASC 815 requires the Company to assess the fair market value of certain derivatives at each reporting period and recognize any change in the fair market value of the derivatives as gain (loss) on the income statements. At December 31, 2011 the derivative liability was revalued at $103,581, which led to the Company recording a loss on derivative liability in the amount of $9,605.