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FAIR VALUE OF FINANCIAL INSTRUMENTS
 12 Months Ended
Jun. 30, 2012
Fair Value Disclosures [Abstract]  
FAIR VALUE OF FINANCIAL INSTRUMENTS
8. FAIR VALUE OF FINANCIAL INSTRUMENTS
 
In accordance with the fair value hierarchy described in Note 2, the following table shows the fair value of the Company’s financial instruments that are required to be measured at fair value as of June 30, 2012 and 2011:

June 30, 2012
Level 1
Level 2
Level 3
Total
Cash equivalents
 $ 141,107 $ - $ - $ 141,107
Common stock warrant liability, warrants exercisable at $2.6058 from September 18, 2011 through September 18, 2016
 $ - $ - $ 917,440 $ 917,440
Common stock warrant liability, warrants exercisable at $5.90 through September 14, 2013
 $ - $ - $ 1,126 $ 1,126
June 30, 2011
Level 1
Level 2
Level 3
Total
Cash equivalents
 $ 83,267 $ - $ - $ 83,267
Common stock warrant liability, warrants exercisable at $2.6058 from September 18, 2011 through September 18, 2016
 $ - $ - $ 2,638,629 $ 2,638,629
Common stock warrant liability, warrants exercisable at $5.90 through September 14, 2013
 $ - $ - $ 93,624 $ 93,624
 
As of June 30, 2012 and 2011, the fair values of the Company’s Level 1 financial instruments were $141,107 and $83,267, respectively. These financial instruments consist of cash equivalents, including certificates of deposit and money market accounts. As of June 30, 2012 and 2011, the Company held no Level 2 financial instruments.
 
As of June 30, 2012 and 2011, the fair values of the Company’s Level 3 financial instruments totaled $918,566 and $2,732,253, respectively. The Level 3 financial instruments consist of common stock warrants issued by the Company in March 2011 and March 2007, which include features requiring liability treatment of the warrants. The fair value of warrants issued in March 2011 (see Notes 11 and 12) to purchase 3.9 million shares of the Company’s common stock is based on valuations performed by an independent third party valuation firm. The fair value was determined using proprietary valuation models using the quality of the underlying securities of the warrants, restrictions on the warrants and security underlying the warrants, time restrictions and precedent sale transactions completed in the secondary market or in other private transactions. The fair value of warrants issued in March 2007 to purchase 903,955 shares of the Company’s common stock was estimated by the Company to be $1,126 using the Black-Scholes with the following assumptions: dividend yield of 0%, expected stock price volatility of 0.82, risk free interest rate of 0.21, and an expected life of 1.2 years. Prior to March 31, 2011, the fair value of these warrants was determined to be de minimus and was not included on the Company’s consolidated balance sheets. There were no transfers of assets or liabilities between level 1, level 2, or level 3 during the years ended June 30, 2012 and 2011.
 
The following table summarizes the changes in fair value of the Company’s Level 3 financial instruments for the year ended:
 
June 30,
2012
2011
Beginning balance
 $ (2,732,253 ) $ -
Issuance of common stock warrants, exercisable at $2.6058 per share
 - (1,917,122 )
Recognize liability of warrants, exercisable at $5.90 per share; attributed to loss due to change in fair value
 - (151,631 )
Gain/ (Loss) due to change in fair value of warrant liabilities, net
 1,813,687 (663,500 )
Ending balance
 $ (918,566 ) $ (2,732,253 )