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Derivative Liabilities
 12 Months Ended
Jun. 30, 2013
Notes to Financial Statements  
Derivative Liabilities

6. Derivative Liabilities

 

During the fiscal year ended June 30, 2013, the Company issued a total of $525,000 14% convertible notes to twelve accredited investors. In connection with the issuance, each note holder received a two-year warrant to purchase up to a total of 131,250 shares of common stock at $0.01 per share and a two-year warrant to purchase up to a total of 78,750 shares of common stock at $0.50 per share. The Company recognized the conversion feature, the $0.01 warrant to purchase common stock and $0.50 warrant to purchase common stock were derivative liabilities. The derivative liabilities were valued using the weighted-average Black-Scholes-Merton option pricing model using the assumptions detailed below. The results of initial valuation were summarized as follows:

 

Grant Date   Derivative Liabilities   Dividend Yield    Expected Volatility    Risk Free Rate   Expected Term   Fair Value as of  Grant Date
8/17/2012   Conversion Feature   0%   280%   0.14%                0.50   $             10,500
    $0.01 Warrant   0%   230%   0.29%                2.00                   2,063
    $0.50 Warrant   0%   230%   0.29%                2.00                   1,088
8/24/2012   Conversion Feature   0%   293%   0.13%                0.50                   9,500
    $0.01 Warrant   0%   236%   0.28%                2.00                   1,875
    $0.50 Warrant   0%   236%   0.28%                2.00                      975
9/9/2012   Conversion Feature   0%   310%   0.14%                0.50                 37,600
    $0.01 Warrant   0%   243%   0.25%                2.00                   6,200
    $0.50 Warrant   0%   243%   0.25%                2.00                   3,420
9/13/2012   Conversion Feature   0%   300%   0.13%                0.50                 35,000
    $0.01 Warrant   0%   242%   0.24%                2.00                   6,250
    $0.50 Warrant   0%   242%   0.24%                2.00                   3,450
9/18/2012   Conversion Feature   0%   303%   0.13%                0.50                 13,500
    $0.01 Warrant   0%   244%   0.25%                2.00                   2,500
    $0.50 Warrant   0%   244%   0.25%                2.00                   1,350
9/18/2012   Conversion Feature   0%   303%   0.13%                0.50                 13,500
    $0.01 Warrant   0%   244%   0.25%                2.00                   2,500
    $0.50 Warrant   0%   244%   0.25%                2.00                   1,350
9/18/2012   Conversion Feature   0%   303%   0.13%                0.50                 13,500
    $0.01 Warrant   0%   244%   0.25%                2.00                   2,500
    $0.50 Warrant   0%   244%   0.25%                2.00                   1,350
9/27/2012   Conversion Feature   0%   307%   0.14%                0.50                 23,000
    $0.01 Warrant   0%   245%   0.25%                2.00                   3,875
    $0.50 Warrant   0%   245%   0.25%                2.00                   2,138
10/5/2012   Conversion Feature   0%   307%   0.15%                0.50                   7,400
    $0.01 Warrant   0%   243%   0.27%                2.00                   1,275
    $0.50 Warrant   0%   243%   0.27%                2.00                      705
10/25/2012   Conversion Feature   0%   331%   0.16%                0.50                 25,500
    $0.01 Warrant   0%   252%   0.31%                2.00                   4,000
    $0.50 Warrant   0%   252%   0.31%                2.00                   2,250
10/31/2012   Conversion Feature   0%   336%   0.16%                0.50                 37,000
    $0.01 Warrant   0%   253%   0.30%                2.00                   5,625
    $0.50 Warrant   0%   253%   0.30%                2.00                   3,188
11/27/2012   Conversion Feature   0%   308%   0.15%                0.50                 42,000
    $0.01 Warrant   0%   253%   0.27%                2.00                   8,000
    $0.50 Warrant   0%   253%   0.27%                2.00                   4,350
12/21/2012   Conversion Feature   0%   290%   0.12%                0.50               112,000
    $0.01 Warrant   0%   251%   0.26%                2.00                 18,750
    $0.50 Warrant   0%   251%   0.26%                2.00                 10,500
1/31/2013   Conversion Feature   0%   273%   0.12%                0.50                 21,000
    $0.01 Warrant   0%   266%   0.27%                2.00                   3,750
    $0.50 Warrant   0%   266%   0.27%                2.00                   2,138
                    Total fair value   $            508,413

 

As of June 30, 2013, The derivative liabilities were valued using the weighted-average Black-Scholes-Merton option pricing model using the assumptions detailed below. The results of year--end valuation were summarized as follows:

 

Grant Date   Derivative Liabilities   Dividend Yield    Expected Volatility    Risk Free Rate   Expected Term   Fair Value as of  June 30, 2013
8/17/2012   Conversion Feature   0%   88%   0.15%           0.88   $            12,500
    $0.01 Warrant   0%   232%   0.15%           1.13                 2,313
    $0.50 Warrant   0%   232%   0.15%           1.13                 1,088
8/24/2012   Conversion Feature   0%   65%   0.15%           0.65                 7,000
    $0.01 Warrant   0%   251%   0.15%           1.15                 2,313
    $0.50 Warrant   0%   251%   0.15%           1.15                 1,125
9/9/2012   Conversion Feature   0%   94%   0.15%           0.94               20,000
    $0.01 Warrant   0%   248%   0.15%           1.19                 3,700
    $0.50 Warrant   0%   248%   0.15%           1.19                 1,800
9/13/2012   Conversion Feature   0%   71%   0.15%           0.71               16,000
    $0.01 Warrant   0%   232%   0.15%           1.13                 4,625
    $0.50 Warrant   0%   232%   0.15%           1.13                 2,175
9/18/2012   Conversion Feature   0%   97%   0.15%           0.97               13,000
    $0.01 Warrant   0%   245%   0.15%           1.22                 2,313
    $0.50 Warrant   0%   245%   0.15%           1.22                 1,125
9/18/2012   Conversion Feature   0%   97%   0.15%           0.97               13,000
    $0.01 Warrant   0%   245%   0.15%           1.22                 2,313
    $0.50 Warrant   0%   245%   0.15%           1.22                 1,125
9/18/2012   Conversion Feature   0%   97%   0.15%           0.97               13,000
    $0.01 Warrant   0%   245%   0.15%           1.22                 2,313
    $0.50 Warrant   0%   245%   0.15%           1.22                 1,125
9/27/2012   Conversion Feature   0%   121%   0.15%           1.21               15,000
    $0.01 Warrant   0%   244%   0.15%           1.24                 2,313
    $0.50 Warrant   0%   244%   0.15%           1.24                 1,125
10/5/2012   Conversion Feature   0%   85%   0.15%           0.85                 4,600
    $0.01 Warrant   0%   243%   0.15%           1.27                    925
    $0.50 Warrant   0%   243%   0.15%           1.27                    465
10/25/2012   Conversion Feature   0%   90%   0.15%           0.90               12,500
    $0.01 Warrant   0%   245%   0.15%           1.32                 2,313
    $0.50 Warrant   0%   245%   0.15%           1.32                 1,163
10/31/2012   Conversion Feature   0%   84%   0.15%           0.84               11,500
    $0.01 Warrant   0%   244%   0.15%           1.34                 2,313
    $0.50 Warrant   0%   244%   0.15%           1.34                 1,163
11/27/2012   Conversion Feature   0%   91%   0.15%           0.91               50,000
    $0.01 Warrant   0%   240%   0.15%           1.41                 9,250
    $0.50 Warrant   0%   240%   0.15%           1.41                 4,650
12/21/2012   Conversion Feature   0%   98%   0.15%           0.98               52,000
    $0.01 Warrant   0%   237%   0.15%           1.48                 9,250
    $0.50 Warrant   0%   237%   0.15%           1.48                 4,650
1/31/2013   Conversion Feature   0%   108%   0.15%           1.08               14,000
    $0.01 Warrant   0%   224%   0.15%           1.08                 2,313
    $0.50 Warrant   0%   224%   0.15%           1.08                 1,013
                    Total fair value   $         326,452