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9. FAIR VALUE MEASUREMENTS
 6 Months Ended
Sep. 30, 2013
Fair Value Disclosures [Abstract]  
FAIR VALUE MEASUREMENTS

We follow FASB ASC 820, "FAIR VALUE MEASUREMENTS AND DISCLOSURES" (“ASC 820”) in connection with assets and liabilities measured at fair value on a recurring basis subsequent to initial recognition. The guidance applies to our derivative liabilities. We had no assets or liabilities measured at fair value on a non-recurring basis for any period reported.

 

ASC 820 requires that assets and liabilities carried at fair value will be classified and disclosed in one of the following three categories: We measure the fair value of applicable financial and non-financial assets based on the following fair value hierarchy:

 

Level 1: Quoted market prices in active markets for identical assets or liabilities.

 

Level 2: Observable market based inputs or unobservable inputs that are corroborated by market data.

 

Level 3: Unobservable inputs that are not corroborated by market data.

 

The hierarchy noted above requires us to minimize the use of unobservable inputs and to use observable market data, if available, when determining fair value.

 

The fair value of our recorded derivative liabilities is determined based on unobservable inputs that are not corroborated by market data, which is a Level 3 classification. We record derivative liabilities on our balance sheet at fair value with changes in fair value recorded in our consolidated statements of operations. 

 

Our fair value measurements at the September 30, 2013 reporting date are classified based on the valuation technique level noted in the table below (there were no transfers in or out of level 3 for all periods presented):

 

          Quoted Prices     Significant        
          in Active     Other     Significant  
          Markets for     Observable     Unobservable  
    September 30,     Identical Assets     Inputs     Inputs  
Description   2013     (Level 1)     (Level 2)     (Level 3)  
Derivative Liabilities   $ 5,864,615     $ –     $ –     $ 5,864,615  
Total Assets   $ 5,864,615     $ –     $ –     $ 5,864,615  

 

The following outlines the significant weighted average assumptions used to estimate the fair value information presented, in connection with our warrant and embedded conversion option derivative instruments utilizing the Binomial Lattice option pricing model:

 

      Six Months Ended September 30, 2013  
Risk free interest rate     0.02% - 0.62%  
Average expected life     0.25 – 3 years  
Expected volatility     78.9% - 104.5%  
Expected dividends     None  

 

The table below sets forth a summary of changes in the fair value of our Level 3 financial instruments for the six months ended September 30, 2013:

 

    April 1, 2013     Recorded New Derivative Liabilities     Change in estimated fair value recognized in results of operations     Reclassification of Derivative Liability to Paid in capital     September 30, 2013  
                                         
Derivative liabilities   $ 3,588,239     $ –     $ 2,382,877     $ (106,501 )   $ 5,864,615  

 

 

The table below sets forth a summary of changes in the fair value of our Level 3 financial instruments for the six months ended September 30, 2012:

 

    April 1, 2012     Recorded New Derivative Liabilities     Change in estimated fair value recognized in results of operations     Reclassification of Derivative Liability to Paid in capital     September 30, 2012  
                                         
Derivative liabilities   $ 3,588,615     $ –     $ (361,462 )   $ (32,759 )   $ 3,194,394  

 

 

The fair value of derivative liabilities that we recorded in the six months ended September 30, 2012 was related to our April 2011 convertible note, July & August 2011 10% convertible notes and the September 2011 convertible note offerings (see Note 5) and was based upon an independent valuation report.