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Derivative Liability
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3 Months Ended |
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Mar. 31, 2015
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| Derivative Instruments and Hedging Activities Disclosure [Abstract] | |
| Derivative Liability |
NOTE 9 – DERIVATIVE LIABILITY
Effective July 31, 2009, the Company adopted ASC 815 which defines determining whether an instrument (or embedded feature) is solely indexed to an entity’s own stock. The conversion price of our outstanding convertible notes 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 ASC 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 convertible notes payable.
At origination, the Company valued the conversion features using the following assumptions: dividend yield of zero, years to maturity of between 1.00 and 2.02 years, risk free rates of between 0.18 and 0.27 percent, and annualized volatility of between 149% and 172%. At March 31, 2015, the Company revalued the conversion features using the following assumptions: dividend yield of zero, years to maturity of between 0.75 and 1.93 years, risk free rates of 0.26 to 0.56 percent, and annualized volatility of between 303 and 396 percent and determined that, during the three months ended March 31, 2015, the Company’s derivative liability increased by $2,821,725 to $1,037,052. The Company recognized a corresponding gain on derivative liability in conjunction with this revaluation. |