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NOTE 7 - DERIVATIVE LIABILITY

9 Months Ended

Sep. 30, 2017

NOTE 7 – DERIVATIVE LIABILITY

As discussed in Note 1, on a recurring basis, we measure certain financial assets and liabilities based upon the fair value hierarchy. The following table presents information about the Company’s liabilities measured at fair value as of September 30, 2017 and December 31, 2016:

Level 1

Level 2

Level 3

Fair Value at

September 30, 2017

Liabilities

Derivative Liability

156,504

Level 1

Level 2

Level 3

Fair Value at

December 31, 2016

Liabilities

Derivative Liability

As of September 30, 2017, the Company had a $156,504 derivative liability balance on the balance sheet and recorded a loss from derivative liability fair value adjustment of $66,226 during the three and nine months, respectively ended September 30, 2017. The Company assessed its outstanding convertible credit line payable as summarized in Note 6 – Convertible Credit Line Payable- Related Party and determined certain convertible credit lines payable with variable conversion features contain embedded derivatives and are therefore accounted for at fair value under ASC 920, Fair Value Measurements and Disclosures and ASC 825, Financial Instruments.

Utilizing Level 3 Inputs, the Company recorded fair market value adjustments related to convertible notes payable for the three months ended September 30, 2017 of $66,226 and fair value adjustments related to the convertible notes payable for the nine months ended September 30, 2017 of $66,226, respectively. The derivative liability was initially measured at $90,278, resulting in a loss on initial measurement of $2,912, on September 1, 2017 using the following assumptions: exercise price of $1.50, 58,244 common shares the balance can be converted into shares and a stock price at measurement date of $1.55. The fair market value adjustments as of September 30, 2017 were calculated utilizing a max valuation method using the following assumptions: exercise price of $1.50, 56,911 common shares the balance can be converted into and a stock price at measurement date of $2.75.

A summary of the activity of the derivative liability is shown below:

Balance at December 31, 2016	$	-
Derivative liabilities recorded		87,366
Day one loss		2,912
Change due to note conversion		-
Loss on change in derivative fair value adjustment		66,226
Balance at September 30, 2017	$	156,504

- Definition

Tabular disclosure of credit derivatives which includes information by sellers of credit derivatives, about each credit derivative, or each group of similar credit derivatives, including (a) the nature of the credit derivative - its term, how it arose, the events or circumstances that would require the seller to perform under the credit derivative, and the current status of the payment/performance risk of the credit derivative; (b) the maximum potential amount of future payments (undiscounted) the seller could be required to make under the credit derivative; (c) the current fair value of the credit derivative; and (d) the nature of any recourse provisions under the credit derivative, and any assets held either as collateral or by third parties. A credit derivative is a derivative instrument (1) in which one or more of its underlyings are related to the credit risk of a specified entity (or a group of entities) or an index based on the credit risk of a group of entities and (2) that exposes the seller to potential loss from credit-risk-related events specified in the contract. Examples of credit derivatives within the scope of this paragraph include, but are not limited to, credit default swaps, credit spread options, and credit index products; also includes a hybrid instrument that has an embedded credit derivative (for example, but not limited to, a credit-linked note).

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