Derivative Liabilities

6 Months Ended

Sep. 30, 2015

Derivative Instruments and Hedging Activities Disclosure [Abstract]

Derivative Liabilities

11. DERIVATIVE LIABILITIES

The Company has determined that the variable conversion price for its convertible notes causes the embedded conversion feature to be a financial derivative. The Company may not have enough authorized common shares to settle its obligation if the note holder elects to convert the note to common shares when the trading price is lower than a certain threshold.

Because the Company may not have enough authorized common shares to settle its obligation for its convertible notes and equity instruments, such as warrants and convertible notes payable-related parties, the Company concluded that the warrants issued with the 31 Group, LLC convertible notes and all of the existing warrants should be treated as financial derivatives. The Company reclassified the fair value of the tainted warrants from equity to liability on the same date it obtained the first convertible note from the 31 Group, LLC.

Changes of derivative liabilities during the six months ended September 30, 2015 were as follows:

	September 30, 2015
Balance, March 31, 2015	$	1,803,965
Initial valuation of derivatives		411,283
Transfer from liabilities classification to equity classification		(87,945)
Change in fair value		(1,165,385)
Balance, September 30, 2015	$	961,918

Fair values of the Company’s financial derivatives are measured at fair value at each reporting period. The fair values of the financial derivative were calculated using a modified binomial valuation model with the following assumptions at March 31, 2015 and September 30, 2015:

	March 31, 2015	September 30, 2015
Market value of common stock on measurement date (1)	$0.01	$0.0023~$0.0010
Adjusted conversion price (2)	$0.008	65% to 80% of the low trade in 10 trading days
Risk free interest rate (3)	0.56%	0.08%~0.42%
Life of the note in years (weighted average)	0~1.35 years	0.17 ~1 years
Expected volatility (4)	270%	303%~311%
Expected dividend yield (5)	-	-

(1) The market value of common stock is based on closing market price as of initial valuation dates and September 30, 2015.

(2) The adjusted conversion price is calculated based on conversion terms described in the note agreement.

(3) The risk-free interest rate was determined by management using the 2-year Treasury Bill as of the respective Offering or measurement date.

(4) The volatility factor was estimated by management using the historical volatilities of the Company’s stock.

(5) Management determined the dividend yield to be 0% based upon its expectation that it will not pay dividends for the foreseeable future.