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Note 8. Emedded Derivative Liability
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3 Months Ended | ||
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Jun. 30, 2011
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| Derivative Instruments and Hedging Activities Disclosure [Text Block] |
As
described in Note 4, the Company issued convertible notes
in October 2009 and March 2010. On June 24,
2011 the Company amended the notes to extend the maturity
date from October 15, 2011 to October 15, 2013 for the
October 2009 Notes and from March 31, 2012 to September
30, 2013 for the March 2010 Notes. As a result
of these changes to the maturity dates, the Company
compared the fair values of the embedded derivative
liabilities using the maturity dates immediately prior to
and after the modification date to determine if the
amendments should be accounted for as a debt
extinguishment.
October
2009 notes:
On
the date of the amendment (June 24, 2011), we first
calculated the fair market value of the derivative
liability prior to the amendment modification and
determined the fair market value of the derivative
liability was $820,800 and as a result recorded a net
loss on this adjustment of $115,378. This was
calculated using the Black Scholes Option Pricing Model
based upon the following assumptions: dividend yield of
-0-%, volatility of 95.01%, risk free rate of 0.8%, an
expected term of approximately four months and a current
stock price of $0.55.
We
then calculated the fair value of the derivative
liability after the amendment modification and determined
the fair market value was $2,870,987, which was
calculated using the Black Scholes Option Pricing Model
based upon the following assumptions: dividend yield of
-0-%, volatility of 195.2%, risk free rate of 0.8%, an
expected term of approximately twenty-eight months and a
current stock price of $0.55.
At
the end of this reporting period (on June 30, 2011), the
fair value of the derivative liability was $2,601,092,
which resulted in a non-cash gain of
$269,895. The fair value was calculated using
the Black Scholes Option Pricing Model based upon the
following assumptions: dividend yield of -0-%, volatility
of 188.74%, risk free rate of 0.7%, an expected term of
approximately twenty-eight months and a current stock
price of $0.51.
March
2010 notes:
On
the date of the amendment (June 24, 2011), we first
calculated the fair market value of the derivative
liability prior to the amendment modification and
determined the fair market value of the derivative
liability was $770,860 and as a result recorded a net
loss on this adjustment of $78,371. This was
calculated using the Black Scholes Option Pricing Model
based upon the following assumptions: dividend yield of
-0-%, volatility of 109.41%, risk free rate of 0.8%, an
expected term of approximately nine months and a current
stock price of $0.55.
We
then calculated the fair value of the derivative
liability after the amendment modification and determined
the fair market value was $1,645,253, which was
calculated using the Black Scholes Option Pricing Model
based upon the following assumptions: dividend yield of
-0-%, volatility of 189.35%, risk free rate of 0.8%, an
expected term of approximately twenty-seven months and a
current stock price of $0.55.
At
the end of this reporting period (on June 30, 2011), the
fair value of the derivative liability was $1,496,424,
which resulted in a non-cash gain of
$148,829. The fair value was calculated using
the Black Scholes Option Pricing Model based upon the
following assumptions: dividend yield of -0-%, volatility
of 185.23%, risk free rate of 0.7%, an expected term of
approximately twenty-seven months and a current stock
price of $0.51.
The
Company recorded an aggregate gain of $224,975 as a
result of these transactions.
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