12. FAIR VALUE MEASUREMENTS

12 Months Ended

Sep. 30, 2014

Fair Value Disclosures [Abstract]

12. FAIR VALUE MEASUREMENTS

12. FAIR VALUE MEASUREMENTS

In accordance with the provisions of ASC 820, “Fair Value Measurements,” the Company determines fair value as the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. The Company generally applies the income approach to determine fair value. This method uses valuation techniques to convert future amounts to a single present amount. The measurement is based on the value indicated by current market expectations about those future amounts.

ASC 820 establishes a fair value hierarchy that prioritizes the inputs used to measure fair value. The hierarchy gives the highest priority to active markets for identical assets and liabilities (Level 1 measurement) and the lowest priority to unobservable inputs (Level 3 measurement). The Company classifies fair value balances based on the observability of those inputs. The three levels of the fair value hierarchy are as follows:

o Level 1 – Observable inputs such as quoted prices in active markets for identical assets or liabilities

o Level 2 – Inputs other than quoted prices that are observable for the asset or liability, either directly or indirectly. These include quoted prices for similar assets or liabilities in active markets, quoted prices for identical or similar assets or liabilities in markets that are not active and amounts derived from valuation models where all significant inputs are observable in active markets

o Level 3 – Unobservable inputs that reflect management’s assumptions

For disclosure purposes, assets and liabilities are classified in their entirety in the fair value hierarchy level based on the lowest level of input that is significant to the overall fair value measurement. The Company’s assessment of the significance of a particular input to the fair value measurement requires judgment and may affect the placement within the fair value hierarchy levels.

The table below sets forth the assets and liabilities measured at fair value on a recurring basis, by input level, in the balance sheet at September 30, 2014:

	Quoted Prices in		Significant
	Active Markets for		Other		Significant
	Identical Assets or		Observable		Unobservable
	Liabilities (Level 1)		Inputs (Level 2)		Inputs (Level 3)		Total
Derivative Instruments	$	5,197,352	$	-	$	307,894	$	5,505,246

The table below sets forth the assets and liabilities measured at fair value on a recurring basis, by input level, in the balance sheet at September 30, 2013:

	Quoted Prices in		Significant
	Active Markets for		Other		Significant
	Identical Assets or		Observable		Unobservable
	Liabilities (Level 1)		Inputs (Level 2)		Inputs (Level 3)		Total
Derivative Instruments	$	-	$	-	$	433,024	$	433,024

The following sets forth the reconciliation of beginning and ending balances related to fair value measurements using significant unobservable inputs (Level 3), as of September 30:

	2014			2013
Beginning balance	$	433,024		$	6,983,690
Issuances		7,791,448			4,200,000
Settlements		(1,445,528	)		-
Transfers to Level 1		(7,321,071	)		-
Realized and unrealized losses/(gains) recorded in earnings		850,021			(10,750,066	)
Ending balance	$	307,894		$	433,024

The fair values of the Company’s derivative instruments disclosed above under Level 3 are primarily derived from valuation models where significant inputs such as historical price and volatility of the Company’s stock as well as U.S. Treasury Bill rates are observable in active markets.