DERIVATIVE LIABILITY	9 Months Ended
Sep. 30, 2012
Notes to Financial Statements
NOTE 10 – DERIVATIVE LIABILITY	Effective July 31, 2009, the Company adopted ASC Topic No. 815-40 which defines determining whether an instrument (or embedded feature) is solely indexed to an entity’s own stock. These debts are convertible at the holder’s option at 59% of the average of the lowest three trading prices during the 10 days prior to conversion according to different note agreements. The number of shares issuable upon conversion of these debts are limited so that the Holder’s total beneficial ownership of our common stock may not exceed 4.99% of the total issued and outstanding shares. The exercise price of these warrants are subject to “reset” provisions in the event the Company subsequently issues common stock, stock warrants, stock options or convertible debt with a stock price, exercise price or conversion price lower than conversion price of these notes. If these provisions are triggered, the conversion price of the note will be reduced. As a result, the Company has determined that the conversion feature is not considered to be solely indexed to the Company’s own stock and is therefore not afforded equity treatment. In accordance with AC 815, the Company has bifurcated the conversion feature of the note and recorded a derivative liability. ASC 815 requires Company management to assess the fair market value of certain derivatives at each reporting period and recognize any change in the fair market value as another income or expense item. The Company’s only asset or liability measured at fair value on a recurring basis is its derivative liability associated with the above convertible debts. At September 30, 2012, the Company revalued the conversion features using the following assumptions: stock price of $0.15, exercise price of $0.07, dividend yield of zero, years to maturity of 0.93 years, risk free rate of 0.17 percent, and annualized volatility of 162 percent and determined that, during the nine months ended September 30, 2012, the Company’s derivative liability decreased by $185,118 to $277,460. The Company recognized a corresponding loss on derivative liability in conjunction with this revaluation.

DERIVATIVE LIABILITY

9 Months Ended

Sep. 30, 2012

Effective July 31, 2009, the Company adopted ASC Topic No. 815-40 which defines determining whether an instrument (or embedded feature) is solely indexed to an entity’s own stock. These debts are convertible at the holder’s option at 59% of the average of the lowest three trading prices during the 10 days prior to conversion according to different note agreements. The number of shares issuable upon conversion of these debts are limited so that the Holder’s total beneficial ownership of our common stock may not exceed 4.99% of the total issued and outstanding shares.

The exercise price of these warrants are subject to “reset” provisions in the event the Company subsequently issues common stock, stock warrants, stock options or convertible debt with a stock price, exercise price or conversion price lower than conversion price of these notes. If these provisions are triggered, the conversion price of the note will be reduced. As a result, the Company has determined that the conversion feature is not considered to be solely indexed to the Company’s own stock and is therefore not afforded equity treatment. In accordance with AC 815, the Company has bifurcated the conversion feature of the note and recorded a derivative liability.

ASC 815 requires Company management to assess the fair market value of certain derivatives at each reporting period and recognize any change in the fair market value as another income or expense item. The Company’s only asset or liability measured at fair value on a recurring basis is its derivative liability associated with the above convertible debts. At September 30, 2012, the Company revalued the conversion features using the following assumptions: stock price of $0.15, exercise price of $0.07, dividend yield of zero, years to maturity of 0.93 years, risk free rate of 0.17 percent, and annualized volatility of 162 percent and determined that, during the nine months ended September 30, 2012, the Company’s derivative liability decreased by $185,118 to $277,460. The Company recognized a corresponding loss on derivative liability in conjunction with this revaluation.