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Warrants liability
 6 Months Ended
Dec. 31, 2013
Derivative Instruments and Hedging Activities Disclosure [Abstract]  
Derivative Instruments and Hedging Activities Disclosure [Text Block]
Note 13 –Warrants liability
 
In connection with the stock offering in November 2013, the Company issued warrants to certain institutional investors and placement agent to purchase 218,600 ordinary shares (see details in Note 14).
 
According to ASC 815-40, if the strike price of the warrants is denominated in a currency other than the Company’s functional currency, the warrants are not considered indexed to the entity’s own stock. The Company’s functional currency is RMB and the strike price of the warrants is denominated in USD, as a result, the warrants are classified as liabilities with all future changes in the fair value of these warrants recognized in earnings until such time as the warrants are exercised or expired.
 
These common stock purchase warrants do not trade in an active securities market, and as such, their fair value is estimated by using the Cox-Ross-Rubinstein (CRR) Binomial Model using the following assumptions:
 
 
 
December 31,
 
 
November 29,
 
 
 
2013
 
 
2013
 
 
 
 
 
 
 
 
Annual dividend yield
 
-
 
 
-
 
 
 
 
 
 
 
 
Exercised price
 
5.38
 
 
5.38
 
 
 
 
 
 
 
 
Underlying price at grant date
 
3.86
 
 
3.86
 
 
 
 
 
 
 
 
Expected life (years)
 
3
 
 
3
 
 
 
 
 
 
 
 
Risk-free interest rate
 
0.78
%
 
0.56
%
 
 
 
 
 
 
 
Expected volatility
 
272
%
 
272
%
 
Expected volatility is based on the historical volatility of the Company’s common stock. The Company has no reason to believe future volatility over the expected remaining life of these warrants is likely to differ materially from historical volatility. The expected life is based on the remaining term of the warrants. The risk-free interest rate is based on U.S. Treasury securities according to the remaining term of the warrants. The expected dividend yield was based on the Company’s current and expected dividend policy.
 
The following table sets forth by level within the fair value hierarchy the warrants liability that was accounted at fair value on a recurring basis.
 
 
 
 
Carrying Value at
 
Carrying Value at
 
 
Fair Value Measurement at
December 31, 2013
 
December 31, 
2013
 
December 31, 
2013
 
 
Level 1
 
Level 2
 
Level 3
 
RMB
 
USD
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Warrants liability
¥
-
 
¥
5,044,722
 
¥
-
 
¥
5,044,722
 
$
825,596
 
 
The following is a reconciliation of the beginning and ending balance of the assets and liabilities measured at fair value on a recurring basis for six months ended December 31, 2013:
 
For the six months ended December 31, 2013:
 
 
Changes in warrants liability
 
 
RMB
 
USD
 
 
 
 
 
 
 
 
Beginning balance - June 30, 2013
¥
-
 
$
-
 
 
 
 
 
 
 
 
Initial measurement of warrants liability on November 29, 2013
 
5,045,278
 
 
825,687
 
Change in warrants liability from November 29, 2013 to December 31, 2013
 
(556)
 
 
(91)
 
Ending balance - December 31, 2013
¥
5,044,722
 
$
825,596