Note 8. Emedded Derivative Liability | 6 Months Ended | ||
|---|---|---|---|
Sep. 30, 2011 | |||
| Derivative Instruments and Hedging Activities Disclosure [Text Block] |
As
described in Note 4, the Company issued convertible debt
notes in October 2009 and March 2010. The notes
are convertible at $0.50 per share, or $0.40 per share upon
a change in control of the Company. Based on the
alternative conversion options, the Company determined that
the conversion options in the notes should be accounted for
as derivatives. The Company used the Black
Scholes model to determine the fair value of each of the
conversion options as of September 30, 2011, assigning a
probability of occurrence to each conversion
option. The final fair value of each of the
derivative liabilities considered the likelihood of
conversion at the separate conversion prices.
On
June 24, 2011 as per ASC 470 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 the June 30, 2011 reporting period, 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.
At
the end of the September 30, 2011 reporting period, the
fair value of the derivative liability was $2,143,206,
which resulted in a non-cash gain of
$457,886. The fair value was calculated using
the Black Scholes Option Pricing Model based upon the
following assumptions: dividend yield of -0-%, volatility
of 151.67%, risk free rate of 0.27%, an expected term of
approximately twenty-five months and a current stock price
of $0.45.
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 the June 30, 2011 reporting period, 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.
At
the end of the September 30, 2011 reporting period, the
fair value of the derivative liability was $1,243,745,
which resulted in a non-cash gain of
$252,679. The fair value was calculated using
the Black Scholes Option Pricing Model based upon the
following assumptions: dividend yield of -0-%, volatility
of 152.12%, risk free rate of 0.27%, an expected term of
approximately twenty-four months and a current stock price
of $0.45.
For
the six-month period ended September 30, 2011, the Company
recorded an aggregate gain of $935,540 as a result of these
transactions.
|