The Company issued warrants in conjunction with the issuance of convertible debentures.  These warrants contain certain reset provisions. Therefore, in accordance with ASC 815-40, the Company reclassified the fair value of the warrant from equity to a liability at the date of issuance.  Subsequent to the initial issuance date, the Company is required to adjust to fair value the warrant as an adjustment to current period operations.

The Company recorded a gain on change in fair value of warrant liability of $7,817 for the six months ended June 30, 2013.

At June 30, 2013, the fair value of the 425,000 warrants containing certain reset provisions were determined using the Binomial Option Pricing Model based on the following assumptions: (1) dividend yield of 0%, (2) expected volatility of 245.95%, (3) weighted average risk-free interest rate of 0.1.41%, (4) expected life of 4.76 years, and (5) estimated fair value of the Company’s common stock of $0.036 per share.