9. FAIR VALUE MEASUREMENTS

3 Months Ended

Jun. 30, 2012

Note 9. Fair Value Measurements

Fair Value Disclosures

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 June 30, 2012 reporting date are classified based on the valuation technique level noted in the table below:

Description	June 30, 2012		Quoted Prices in Active Markets for (Level 1)		Significant Other Observable (Level 2)		Significant Unobservable (Level 3)
Derivative Liabilities	$	2,874,472	$	--	$	--	$	2,874,472
Total Assets	$	2,874,472	$	--	$	--	$	2,874,472

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:

	Three Months Ended June 30, 2012
Risk free interest rate	0.09% - 0.60%
Average expected life	0.02 – 4.2 years
Expected volatility	76.0% - 102.0%
Expected dividends	None

The table below sets forth a summary of changes in the fair value of our Level 3 financial instruments for the three months ended June 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			June 30, 2012
Derivative liabilities	$	3,588,615	$	–	$	(687,600	)	$	(26,543	)	$	2,874,472

The table below sets forth a summary of changes in the fair value of our Level 3 financial instruments for the three months ended June 30, 2011:

	April 1, 2011		Recorded New Derivative Liabilities		Change in estimated fair value recognized in results of operations			Reclassification of Derivative Liability to Paid in capital			June 30, 2011
Derivative liabilities		2,002,896	$	939,136	$	(491,827	)		(228,981	)	$	2,221,224

The fair value of derivative liabilities that we recorded in the three months ended June 2010 was related to the restructuring of the Amended and Restated Convertible Notes (see Note 5) and was based upon an independent valuation report.