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FAIR VALUE MEASUREMENTS

12 Months Ended

Jun. 30, 2017

12.	Fair Value Measurements

The Company measures the fair value of financial assets and liabilities based on US GAAP guidance which defines fair value, establishes a framework for measuring fair value, and expands disclosures about fair value measurements.

The Company classifies financial assets and liabilities as held-for-trading, available-for-sale, held-to-maturity, loans and receivables or other financial liabilities depending on their nature. Financial assets and financial liabilities are recognized at fair value on their initial recognition.

Financial assets and liabilities classified as held-for-trading are measured at fair value, with gains and losses recognized in net income. Financial assets classified as held-to-maturity, loans and receivables, and financial liabilities other than those classified as held-for-trading are measured at amortized cost, using the effective interest method of amortization. Financial assets classified as available-for-sale are measured at fair value, with unrealized gains and losses being recognized in income.

Financial instruments, including receivables, accounts payable and accrued liabilities, and related party loans are carried at amortized cost, which management believes approximates fair value due to the short-term nature of these instruments.

The following table presents information about the assets and liabilities that are measured at fair value on a recurring basis as at June 30, 2017 and 2016, and indicates the fair value hierarchy of the valuation techniques the Company utilized to determine such fair value. In general, fair values determined by Level 1 inputs utilize quoted prices (unadjusted) in active markets for identical instruments. Fair values determined by Level 2 inputs utilize data points that are observable such as quoted prices, interest rates, and yield curves. Fair values determined by Level 3 inputs are unobservable data points for the financial instrument, and included situations where there is little, if any, market activity for the instrument:

	As of June 30, 2017
	Total		Level 1		Level 2		Level 3
Assets:
Cash and cash equivalents	$	238	$	238	$	—	$	—
Restricted cash	$	265		265		—		—
Available for sale securities		23		23		—		—
Total	$	526	$	526	$	—	$	—
Liabilities:
Convertible debt	$	3,465	$	—	$	—	$	3,465
Derivative liability, convertible debt		82		—		—		82
	$	3,547	$	—	$	—	$	3,547

	As of June 30, 2016
	Total		Level 1		Level 2		Level 3
Assets:
Cash and cash equivalents	$	4,412	$	4,412	$	—	$	—
Available for sale securities		32		32		—		—
Total	$	4,444	$	4,444	$	—	$	—
Liabilities:
Convertible debt	$	5,991	$	—	$	—	$	5,991
Derivative liability, convertible debt		330		—		—		330
	$	6,321	$	—	$	—	$	6,321

The Company measures the fair market value of the Level 3 components using the Black-Scholes model and discounted cash flows, as appropriate. These models were initially prepared by a third party and take into account management’s best estimate of the conversion price of the stock, an estimate of the expected time to conversion, an estimate of the stock’s volatility, and the risk-free rate of return expected for an instrument with a term equal to the duration of the convertible debt.

The significant unobservable valuation inputs for the Convertible Debt includes an expected return of 51.06%. A 15% decrease (increase) in the expected return would result in an increase (decrease) to fair value of $94, or approximately 2%.

The derivative liability was valued using a Black-Scholes pricing model with the following inputs:

	2017			2016
Risk-free interest rate		1.25	%		1.25	%
Expected dividend yield		0	%		0	%
Expected stock price volatility		51.14	%		88.63	%
Expected option life in years		1.25			2.25

The following table sets forth a reconciliation of changes in the fair value of the Company’s convertible debt components classified as Level 3 in the fair value hierarchy:

	As of June 30,
	2017			2016
Beginning balance	$	6,321		$	—
Convertible securities closings		1,000			4,860
Conversions to equity		(4,103	)		(638	)
Realized and unrealized losses		329			2,099
Ending balance	$	3,547		$	6,321