DERIVATIVE LIABILITY

3 Months Ended

Dec. 31, 2012

DERIVATIVE LIABILITY [Abstract]

DERIVATIVE LIABILITY

NOTE 12 – DERIVATIVE LIABILITY

Effective June 1, 2010, we adopted the ASC 815 guidance provided for Derivatives and Hedging which applies to any free standing financial instruments or embedded features that have characteristics of a derivative and to any free standing financial instruments that are potentially settled in an entity's own common stock.  As of September 30, 2011, we had 20 shares of Series L Convertible Preferred Stock outstanding for which the underlying common has a reset provision relating to the conversion price.  As a result of the reset provision we recorded a Derivative Liability of $64,524 which accrued on the date of issuance and recorded an increase of $137,631 as a result in changes in the market price of our stock.  The total Derivative Liability for the Series L Convertible Preferred Stock for the fiscal year ended June 30, 2010 was $202,156.  For the quarter ending September 30, 2010, we recorded additional Derivative Expense of $19,355 due to a conversion rate adjustment from $.0211 to $.019933 associated with Series L Convertible Preferred Stock issued to the holder.  For the quarter ending December 31, 2010, we recorded additional Derivative Expense of $81,827 due to a conversion rate adjustment from $.019933 to $.015 associated with Series L Convertible Preferred Stock issued to the holder.  On January 6, 2011, the investor converted 15 shares of the Series L Convertible Preferred Stock into 20,000 shares of common stock.  On May 11, 2011, we obtained a waiver from the private investor where the investor agreed to convert no additional Series L Convertible Preferred Stock into common shares until the approval by our shareholders of an increase in authorized common stock at our next annual meeting to be held on July 12, 2011.  Due to this conversion and the receipt of the waiver, we retired $303,337 of Derivative Liability.  Because of the fixed conversion price established at the time of the waiver, no further Derivative Liability was recorded.  At the annual meeting, our shareholders voted to increase our authorized shares to 2,000,000,000 and the waiver was terminated.

We have notes payable outstanding that can be converted into our common stock at any time at the option of the note holder.  The number of shares to be issued is made pursuant to conversion notices by the note holder and is based on agreed-upon formulas.  The conversions have no floor and thus give rise to a derivative liability in accordance with ASC 815.  The derivative liabilities associated with these conversion notices are valued using the Black Scholes Pricing Model and are marked-to-market at the end of each quarter.  As of December 31, 2012 and June 30, 2012, we had derivative liabilities reported in our balance sheet in connection with these types of options totaling $472,350 and $961,058, respectively and recorded as gain on change in fair value of derivative liabilities in our statement of operations $245,200 and $1,040,218 for the three and six months ended December 31, 2012, respectively.  Gain on change in fair value was $696,129 and $1,085,657 for the three and six months ended December 31, 2011, respectively.