Inorout must be thinking that the accounting treatment for all derivatives is the same ie equity derivatives vs liability derivatives vs asset derivatives. The bottom of page 10 of the financial statement footnotes describes how the SLTD’s derivatives are treated which is exactly as we have said. I quoted the text below:
...The Company elected to initially and subsequently measure the note in its entirety at fair value, with changes in fair value recognized in earnings. The derivative liability is adjusted periodically according to the stock price fluctuations. At the time of conversion, any remaining derivative liability will be charged to additional paid-in capital.
For purpose of determining the fair market value of the derivative liability, the Company used Black Scholes option valuation model. The significant assumptions used in the Black Scholes valuation of the derivative are as follows:
Stock price on the valuation dates $0.064 - $0.10
Conversion price for the debt $0.013 - $0.05
Dividend yield 0.00 %
Years to Maturity 6 months - 2 years
Risk free rate 0.03% - 0.13 %
Expected volatility 54.43% - 256.72 %
The derivative liability recognized in the financial statements as of September 30, 2014 was $12,879,105.
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