NOTE 4 – DERIVATIVE LIABILITIES

Because there is not a fixed conversion price, the ability of the Company to remain compliant with the requirement under the United Wireless notes that the Company have sufficient authorized common stock in the event that the notes become convertible is outside of the control of the Company. There is no limit on the number of shares issuable under the note, and absent an increase in the stock price or an increase in authorized shares, it is possible the Company will not have enough authorized shares to satisfy the exercise of outstanding non-employee options and warrants. Thus, the Company determined the options and warrants qualify as derivative liabilities under ASC Topic 815. On January 22, 2016, the Company reclassified all non-employee warrants and options as derivative liabilities and revalued them at their fair values at each balance sheet date. Any change in fair value was recorded as other income (expense) for each reporting period at each balance sheet date.

As of September 30, 2018, and December 31, 2017, the aggregate fair value of the outstanding derivative liability was approximately $115,000 and $90,000, respectively.

The Company estimated the fair value of the derivative liability using the Black-Scholes option pricing model using the following key assumptions during the period ended September 30, 2018:

	Period Ended September 30,
	2018
Volatility		417 % - 460	%
Risk-free interest rate		1.36	%
Expected dividends		-	%
Expected term		2.00 – 2.75 years

The following schedule summarizes the valuation of financial instruments at fair value in the balance sheets as of September 30, 2018 and December 31, 2017:

	Fair Value Measurements as of
	September 30, 2018						December 31, 2017
	Level 1		Level 2		Level 3		Level 1		Level 2		Level 3
Assets
None		-		-		-		-		-		-
Total assets		-		-		-		-		-		-
Liabilities
Option derivative liability		-		-		115,000		-		-		90,000
Total liabilities	$	-	$	-	$	115,000	$	-	$	-	$	90,000

The following table sets forth a reconciliation of changes in the fair value of derivative liabilities classified as Level 3 in the fair value hierarchy:

	Significant Unobservable Inputs (Level 3) as of September 30, 2018
Beginning balance	$	90,000
Change in fair value		25,000
Ending balance	$	115,000