NOTE 6 - DERIVATIVES

3 Months Ended

Mar. 31, 2015

Note 6 - Derivatives

NOTE 6 - DERIVATIVES

NOTE 6 – DERIVATIVES

The Company determined that the embedded conversion feature included in the November 2014 Peak Debenture required liability treatment because it is convertible into a fixed dollar amount based on a variable conversion rate. Because of the uncertainty regarding the number of shares of Common Stock that may be issuable upon the conversion of the convertible debt, the embedded conversion option is required to be accounted for separately and presented as a derivative liability on the Company’s balance sheet, with subsequent changes in fair value reported in the Company’s statement of operations. On the date of issuance, the Company recorded an initial derivative liability of $66,423 with an offsetting discount against the convertible debt to be amortized into interest expense through the maturity of the convertible debt. The Company adjusted the derivative liability of its fair value on March 31, 2015, of $637 resulting in derivative income of $637 for the quarter ended March 31, 2015. The fair value of the embedded conversion option was determined using Monte Carlo simulations and the following assumptions:

	Issuance Date			December 31, 2014			March 31, 2015
Expected Volatility		41.50	%		44.10	%		41.40	%
Expected Term	3.00 Years			2.85 Years			2.60 Years
Risk-Free Interest Rate		0.51	%		1.02	%		0.89	%
Dividend Rate		—	%		—	%		—	%

The following table presents changes in Level 3 liabilities measured at fair value for the three month period ended March 31, 2015. Both observable and unobservable inputs were used to determine the fair value of positions that the Company has classified within the Level 3 category. Unrealized gains and losses associated with liabilities within the Level 3 category include changes in fair value that were attributable to both observable (e.g., changes in market interest rates) and unobservable (e.g., changes in unobservable long-dated volatilities) inputs.

	Derivative
	Liability
Balance at December 31, 2014	$	65,422
Change in fair value		637
Balance at March 31, 2015	$	66,059