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Derivative Liabilities
 12 Months Ended
Jun. 30, 2016
Derivative Liabilities [Abstract]  
DERIVATIVE LIABILITIES

NOTE 7 - DERIVATIVE LIABILITIES

 

ASC Topic No. 815 - Derivatives and Hedging provides guidance on determining what types of instruments or embedded features in an instrument issued by a reporting entity can be considered indexed to its own stock for the purpose of evaluating the first criteria of the scope exception in the pronouncement on accounting for derivatives. These requirements can affect the accounting for warrants and convertible preferred instruments issued by the Company. At June 30, 2016 and 2015, the Company had warrants resulting from equity offerings in May 2014 and June 2014 that do not have fixed settlement provisions because their conversion and exercise prices may be lowered if the Company issues securities at lower prices in the future, the Company concluded that the instruments are not indexed to the Company’s stock and are to be treated as derivative liabilities. In determining the fair value of the derivative liabilities, the Company used the Black-Scholes option pricing model at June 30, 2016 and 2015.

 

The following is a summary of the assumptions used in the valuation model at June 30, 2016 and 2015:

 

  June 30,  June 30, 
  2016  2015 
Common stock issuable upon exercise of warrants  2,574,570   2,574,570 
Market value of common stock on measurement date (1) $2.28  $10.15 
Exercise price $7.50 and $11.25  $7.50 and $11.25 
Risk free interest rate (2)  0.71%  1.6%
Expected life in years  2.95   3.90 
Expected volatility (3)  75%  70%
Expected dividend yields (4)   None   None 

 

(1)Quoted market value of the common stock, reflects a one-for-five reverse stock split.
(2)The risk-free interest rate was determined by management using the applicable Treasury Bill interest rate as of the measurement date, when applicable.
(3)The historical trading volatility was determined by calculating the volatility of the Company’s peer group.
(4)The Company does not expect to pay a dividend in the foreseeable future.

 

During the year ended June 30, 2015, 2,033,915 A warrants were exercised and 1,398,845 A warrants expired. The following were the summary of the assumptions at the transactions dates for the warrant exercises during the year ended June 30, 2015.

 

  Year Ended
June 30,
2015		 
Common stock issuable upon exercise of warrants  2,033,915 
Market value of common stock on measurement date $15.00 
Exercise price $7.50 
Risk free interest rate  0.02%
Expected life in years  0.0 
Expected volatility  71.2%
Expected dividend yields   None 

 

The following table sets forth, by level within the fair value hierarchy, the Company’s derivative liabilities that were accounted for at fair value on a recurring basis as of June 30, 2016:

 

  Balance at 
June 30,		  Initial valuation of derivative 
liabilities upon issuance of new warrants during 
the		  Decrease in fair value of derivative  Fair value of derivatives 
reclassified to additional		  Balance at 
June 30,		 
  2015  period  liabilities  paid-in-capital  2016 
Series B warrants issued in connection with May and June 2014 offering $8,770,700  $       -  $(8,266,218) $       -  $504,482 
Placement Agent warrants issued in connection with May and June 2014 offering  5,230,669   -   (4,842,648)  -   388,021 
Total $14,001,369  $-  $(13,108,866) $-  $892,503 

 

The following table sets forth, by level within the fair value hierarchy, the Company’s derivative liabilities that were accounted for at fair value on a recurring basis as of June 30, 2015:

 

  Balance at 
June 30,		  Initial valuation of derivative 
liabilities upon issuance of new warrants during 
the		  Increase (decrease) in fair value of derivative  Fair value of derivatives 
reclassified to additional		  Balance at 
June 30,		 
  2014  period  liabilities  paid-in-capital  2015 
Series A warrants issued in May and June 2014 offering $10,040,822  $      -  $5,255,019  $(15,295,841) $- 
Series B warrants issued in connection with May and June 2014 offering  9,894,930   -   (1,124,230)  -   8,770,700 
Placement Agent warrants issued in connection with May and June 2014 offering  5,651,181   -   (420,512)  -   5,230,669 
Total $25,586,933  $-  $3,710,277  $(15,295,841) $14,001,369