Derivative Liabilities

12 Months Ended

Dec. 31, 2016

Derivative Instruments and Hedging Activities Disclosure [Abstract]

Derivative Liabilities

NOTE 8. DERIVATIVE LIABILITIES

The Company applies the provisions of ASC Topic 815-40, Contracts in Entity’s Own Equity (“ASC Topic 815-40”), under which convertible instruments, which contain terms that protect holders from declines in the stock price (reset provisions), may not be exempt from derivative accounting treatment. As a result, embedded conversion options in convertible debt are recorded as a liability and are revalued at fair value at each reporting date. If the fair value of the note exceeds the face value of the related debt, the excess is recorded as change in fair value in operations on the issuance date.

The Company identified embedded derivatives related to the Convertible Promissory Note issued in November 2016. These embedded derivatives included certain conversion features. The accounting treatment of derivative financial instruments requires that the Company record the fair value of the derivatives as of the inception date of the Convertible Promissory Note and to adjust the fair value as of each subsequent balance sheet date. At the inception of the Convertible Promissory Note, the Company determined a fair value of $331,973 for the embedded derivative. The fair value of the embedded derivative was determined using the Black Scholes Model based on the following assumptions:

Dividend yield:	0.00	%
Volatility	31.91	%
Risk free rate:	1.81	%

The initial fair values of the embedded debt derivative $100,000 was allocated as a debt discount up to the proceeds of the note with the remainder $231,973 charged to current year operations as interest expense.

The following table provides a summary of changes in fair value of the Company’s Level 3 derivative liabilities for the year ended December 31, 2016:

	December 31, 2016
Balance, beginning of the year :	$	-
Additions		331,973
Mark-to-market at modification date		276
Reclassified to additional paid in capital upon modification of term		-
Balance, December 31, 2016	$	332,249
Net loss due to change in fair value for the year included in statement of operation	$	(276	)