Derivative liabilities

6 Months Ended

Sep. 30, 2017

Notes to Financial Statements

NOTE 6 - Derivative liabilities

The Company determined that the conversion features of the convertible notes represented embedded derivatives since the Notes are convertible into a variable number of shares upon conversion. Accordingly, the notes are not considered to be conventional debt under EITF 00-19 and the embedded conversion feature is bifurcated from the debt host and accounted for as a derivative liability. Accordingly, the fair value of these derivative instruments is recorded as liabilities on the consolidated balance sheet with the corresponding amount recorded as a discount to each Note, with any excess of the fair value of the derivative component over the face amount of the note recorded as an expense on the issue date. Such discounts are amortized from the date of issuance to the maturity dates of the Notes. The change in the fair value of the derivative liabilities are recorded in other income or expenses in the condensed consolidated statements of operations at the end of each period, with the offset to the derivative liabilities on the balance sheet. See Note 5.

The Company valued the derivative liabilities at September 30, 2017, and March 31, 2017, at $12,428,028 and $1,645,015, respectively. The Company used the Monte Carlo simulation valuation model with the following assumptions as of September 30, 2017, a risk-free interest rates from 1.06% to 1.28% and volatility of 140% to 260%.

A summary of the activity related to derivative liabilities for the six months ended on September 30, 2017, is as follows:

	September 30, 2017
Beginning Balance	$	1,654,015
Initial Derivative Liability		7,609,087
Reclassification for note conversions		(7,399,158	)
Fair Value Change		10,564,084
Ending Balance	$	12,428,028

Derivative liability expense of $16,357,532 for the six months ended September 30, 2017, consisted of the initial derivative expense of $5,793,448 and the above fair value change of $10,564,084.