Annual report pursuant to Section 13 and 15(d)

12. Fair Value Measurements

v3.6.0.2
12. Fair Value Measurements
12 Months Ended
Sep. 30, 2016
Notes  
12. Fair Value Measurements

12.                Fair Value Measurements

The Company measures the fair values of its assets and liabilities using the US GAAP hierarchy levels as follows:

 

Level 1

The Company does not have any Level 1 inputs available to measure its assets.

Level 2

Certain of the Company’s embedded derivative liabilities are measured on a recurring basis using Level 2 inputs.

Level 3

Certain of the Company’s embedded derivative liabilities are measured on a recurring basis using Level 3 inputs.

To the extent that the valuation is based on models or inputs that are less observable or unobservable in the market, the determination of fair value requires more judgment. Accordingly, the degree of judgment exercised by the Company in determining fair value is greatest for instruments categorized in Level 3. A financial instrument's level within the fair value hierarchy is based on the lowest level of any input that is significant to the fair value measurement.

Items measured at fair value on a recurring basis include embedded derivatives related to the Company’s warrants and notes payable. During fiscal 2016, the Company has not changed the manner in which it values liabilities that are measured at fair value using Level 3 inputs. The following fair value hierarchy table presents information about the Company's financial liabilities measured at fair value on a recurring basis:

 

 Quoted Prices in Active Markets for Identical Items (Level 1)

 

 Significant Other Observable Inputs (Level 2)

 

 Significant Unobservable Inputs (Level 3)

 

 Total

September 30, 2016

 

 

 

 

Derivatives liability

$

-

$

281,613

$

1,772,458

$

2,054,071

 

 

 

 

 

September 30, 2015

 

 

 

 

Derivatives liability

 

-

 

79,347

 

-

 

79,347

 

The following is a reconciliation of the opening and closing balances for the derivatives liability measured at fair value on a recurring basis using significant unobservable inputs (Level 3) during the fiscal year ended September 30, 2016:

Derivatives Liability

 

Balance, September 30, 2015

$

-           

 

Issuance of warrants recorded as derivatives

5,570,167

 

Issuance of embedded derivatives related to

  notes payable

2,643,569

 

Gain on derivatives liability resulting

  from changes in fair value

(6,441,278

)

Balance, September 30, 2016

$

1,772,458

 

 

The Company’s embedded derivatives liability is re-measured to fair value as of each reporting date.  See Note 13 for more information about the valuation methods of derivatives and the inputs used for calculating fair value.