The Company analyzed the conversion option for derivative accounting consideration under ASC 815, Derivatives and Hedging, and hedging, and determined that the instrument should be classified as a liability since the conversion option becomes effective at issuance resulting in there being no explicit limit to the number of shares to be delivered upon settlement of the above conversion options.

ASC 815 requires we assess the fair market value of derivative liability at the end of each reporting period and recognize any change in the fair market value as other income or expense item.

The Company determined our derivative liabilities to be a Level 3 fair value measurement and used the Black-Scholes pricing model to calculate the fair value as of September 30, 2018. The Black-Scholes model requires six basic data inputs: the exercise or strike price, time to expiration, the risk free interest rate, the current stock price, the estimated volatility of the stock price in the future, and the dividend rate. Changes to these inputs could produce a significantly higher or lower fair value measurement. The fair value of each convertible note is estimated using the Black-Scholes valuation model.

For the three months ended September 30, 2018, the estimated fair values of the liabilities measured on a recurring basis are as follows:

	Three months ended
	September 30, 2018
Expected term	0.62 - 1.00 years
Expected average volatility	450% - 526%
Expected dividend yield	-
Risk-free interest rate	2.24% - 2.45%

The following table summarizes the changes in the derivative liabilities during the three months ended September 30, 2018:


Balance - June 30, 2018	$	-

Addition of new derivatives recognized as debt discounts		72,250
Addition of new derivatives recognized as loss on derivatives		516,568
Gain on change in fair value of the derivative		(68,097)
Balance - September 30, 2018	$	520,721

The aggregate loss on derivatives during the three months ended September 30, 2018 and 2017 was as follows;

		Three months ended
		September 30,
		2018		2017
Addition of new derivatives recognized as loss on derivatives	$	516,568	$	-
Gain on change in fair value of the derivative		(68,097)		-
	$	448,471	$	-