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6. Fair Value Measurements
 9 Months Ended
Sep. 30, 2012
Fair Value Disclosures [Text Block]
6. Fair Value Measurements

The Company measures fair value in accordance with a fair value hierarchy that prioritizes the inputs to valuation techniques used to measure fair value. The hierarchy gives the highest priority to unadjusted quoted prices in active markets for identical assets or liabilities (Level 1 measurements) and the lowest priority to unobservable inputs (Level 3 measurements). The three levels of the fair value hierarchy are described below:

Level 1 Unadjusted quoted prices in active markets that are accessible at the measurement date for identical, unrestricted assets or liabilities;

Level 2 Quoted prices in markets that are not active, or inputs that are observable, either directly or indirectly, for substantially the full term of the asset or liability; and

Level 3 Prices or valuation techniques that require inputs that are both significant to the fair value measurement and unobservable (supported by little or no market activity).

The Company’s conversion option liabilities are valued using pricing models and the Company generally uses similar models to value similar instruments. Where possible, the Company verifies the values produced by its pricing models to market prices. Valuation models require a variety of inputs, including contractual terms, market prices, measures of volatility and risk free rates and correlations of such inputs. These consolidated financial liabilities do not trade in liquid markets, and as such, model inputs cannot generally be verified and do involve significant management judgment. Such instruments are typically classified within Level 3 of the fair value hierarchy.

The following is a reconciliation of the derivative liabilities for which level 3 inputs were used in determining fair value:

Derivative Liabilities

1/1/2012                     Beginning Balance     -  
8/26/2012                   Initial recognition of debt derivative when February 2012 note payable became convertible   $ 77,471  
9/7/2012                     Settlement of derivative liabilities from $12,000 note conversion     (32,729 )
9/18/2012                   Initial recognition of debt derivative when March 2012 note payable became convertible     84,495  
9/30/2012                   Mark to market of debt derivatives     (1,016 )
9/30/2012                   Ending Balance   $ 128,221  

During the period ended September 30, 2012, the loss on embedded derivatives of in the statement of operations consisted of a gain on the change in fair value of $1,016 noted above and a loss of $71,966 which was the amount by which the embedded derivative liabilities exceeded the principal of the related notes payable on the date the notes were issued.