XML 36 R11.htm IDEA: XBRL DOCUMENT v2.4.0.6
FAIR VALUE OF FINANCIAL INSTRUMENTS
 6 Months Ended
Dec. 31, 2012
Fair Value Disclosures [Abstract]  
FAIR VALUE OF FINANCIAL INSTRUMENTS
5. 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 December 31, 2012 and June 30, 2012:
 
December 31, 2012 (unaudited)
Level 1
Level 2
Level 3
Total
Cash equivalents
 $ 175,304 $ - $ - $ 175,304
Common stock warrant liability, warrants exercisable at $2.6058 from September 18, 2011 through September 18, 2016
 $ - $ - $ 858,925 $ 858,925
Common stock warrant liability, warrants exercisable at $5.90 through September 14, 2013
 $ - $ - $ 143 $ 143
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
 
As of December 31, 2012 and June 30, 2012, the fair values of the Company’s Level 1 financial instruments were $175,304 and $141,107, respectively. These financial instruments consist of cash equivalents, including money market accounts. As of December 31, 2012 and June 30, 2012, the Company held no Level 2 financial instruments.
 
As of December 31, 2012 and June 30, 2012, the fair values of the Company’s Level 3 financial instruments totaled $859,068 and $918,566, 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 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. As of December 31, 2012, 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 $143 using the Black-Scholes with the following assumptions: dividend yield of 0%, expected stock price volatility of 0.66, risk free interest rate of 0.11%, and an expected life of nine months. There were no transfers of assets or liabilities between level 1, level 2, or level 3 during the periods ended December 31, 2012 and June 30, 2012.
 
 
The following table summarizes the changes in fair value of the Company’s Level 3 financial instruments for the six months ended December 31, 2012 and 2011:
 
Six months ended
December 31,
2012
2011
(unaudited)
(unaudited)
Balance, Beginning of period
 $ 918,566 $ 2,732,253
Purchase, sales, issuance, settlements, or transfers
Gain due to change in fair value of warrant liabilities, net
 (59,498 ) (1,888,368 )
Balance, End of period
 $ 859,068 $ 843,885