Organization and Description of Business: Fair Value (Policies)

9 Months Ended

Sep. 30, 2016

Policies

Fair Value

e. Fair Value

All cash, accounts receivable, accounts payable and accrued liabilities are carried at cost, which approximates fair value due to the short-term nature of these financial instruments.  Additionally, we measure certain financial instruments at fair value on a recurring basis.  

Fair value is defined as the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date.  FASB Accounting Standards Codification (“ASC”) Topic 820 establishes a three-tier fair value hierarchy that prioritizes the inputs used in measuring fair value.  The hierarchy gives the highest priority to unadjusted quoted prices in active markets for identical assets or liabilities (level 1 measurements) and the lowest priority to unobservable inputs (level 3 measurements). These tiers include:

Level 1 - Quoted market prices in active markets for identical assets or liabilities;

Level 2 - Inputs other than level one inputs that are either directly or indirectly observable; and

Level 3 - Unobservable inputs developed using estimates and assumptions, which are developed by the reporting entity and reflect those assumptions that a market participant would use.

Financial assets are considered Level 3 when their fair values are determined using pricing models, discounted cash flow methodologies or similar techniques and at least one significant model assumption or input is observable.

In applying the Black-Scholes option model at September 30, 2016, the Company again revalued the conversion features using the following assumptions:  stock price of $0.40, annualized volatility of 170%, and interest rate of 0.59% and determined that, during the three and nine month periods ended September 30, 2016, the Company’s derivative liability increased by $8,558 and decreased by $133,874, respectively to $63,019.  The Company recognized a corresponding gain on derivative liability in conjunction with this revaluation during the three and nine month periods ended September 30, 2016.

Liabilities measured at fair value on a recurring basis are as follows at September 30, 2016 and 2015:

	Level 3 Carrying Value at
	September 30, 2016	September 30, 2015
Derivative liabilities:
Derivative Liability	$63,019	$0
Total Liabilities Measured at Fair Value	$63,019	$0

The following table shows the classifications of the Company’s liability at September 30, 2016 that are subject to fair value measurement and the roll-forward of these liabilities from December 31, 2015:

	For the Nine Months Ended September 30, 2016	For the Nine Months Ended  30, 2015
Balance at beginning of year	$196,893	$0
Derivative liability added	$0	$0
Net change in fair value included in net income (loss)	$ (133,874)	$ 0
Total Liabilities Measured at Fair Value	$63,019	$ 0