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Note 6. Emedded Derivative Liability
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Mar. 31, 2012
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| Derivative Instruments and Hedging Activities Disclosure [Text Block] |
6.
EMBEDDED DERIVATIVE LIABILITY
As
described in Note 5, 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 at
the end of each quarter and as of March 31, 2012, 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:
The
table below summarizes the Black-Scholes Option Pricing Model
range of inputs used to calculate the fair market values on
the date of the amendment (June 24, 2011) and then at the end
of each quarter afterwards.
March
2010 notes:
The
table below summarized the Black-Scholes Option Pricing Model
information used to calculate the fair market values on the
date of the amendment (June 24, 2011) and then at the end of
each quarter afterwards.
For
the twelve-month period ended March 31, 2012, the Company
recorded an aggregate gain of $801,995 as a result of these
transactions.
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