Stock warrants

12 Months Ended

Jun. 30, 2017

Notes to Financial Statements

Stock warrants

10. Stock warrants

In connection with the issuance of the promissory notes in 2012, the investors in the aggregate received two-year warrants to purchase up to a total of 50,000 shares of common stock at an exercise price of $0.50 per share, and two-year warrants purchasing up to a total of 81,250 shares of common stock at an exercise price of $0.01 per share. For purposes of accounting for the detachable warrants issued in connection with the convertible notes, the fair value of the warrants was estimated using the Black-Scholes-Merton option pricing formula. The value of all warrants granted at the date of issuance totaled $508,413 and was recorded as a discount to the notes payable. The amount was amortized over the nine (9) month term of the respective convertible note as additional interest expense.  

On various dates during June 2014 and December 2014 the Company and holders of certain convertible notes agreed to cancel warrants to purchase common shares in the Company and to extend the due dates on the Notes to July 1, 2016. $0.50 warrants and “Bonus Warrants” priced at $0.01, as defined in the original Convertible Note Purchase Agreements we cancelled pertaining to the Note and warrants acquired on the following dates for the following Convertible Notes and amounts. These warrants were expired on July 1, 2016.

On May 17, 2017, the Company entered a promissory note with an investor for a total amount of $1,375,000 (after $10,000 legal and due diligence fee) with an OID of $125,000; the note will be fulfilled through a series of funding. In connection with the note, the investor will also receive warrants and is calculated based on 15% of the maturity amount. The warrants have a life of four years with an exercise price of $0.15 per share and have cashless exercise option. The fair value of the warrants at grant date was $40,400. As of June 30, 2017 and 2016, the fair value of the warrant liability was $25,250 and $4,000, respectively. The Black-Scholes model with the following assumption inputs:

Warrants issued in May 2017:	June 30, 2017
Annual dividend yield		—
Expected life (years)		3.86
Risk-free interest rate		1.89	%
Expected volatility		440	%

Warrants issued in 2012 with extension to July 1, 2016	June 30, 2016
Annual dividend yield		—
Expected life (years)		0.01
Risk-free interest rate		0.21	%
Expected volatility		449	%

Below is the movement of warrants for the years ending June 30, 2017 and 2016:

	Number of  Shares		Weighted Average  Exercise Price		Weighted Average Remaining contractual life
Outstanding at June 30, 2015		131,250	$	0.20
Granted		—		—
Exercised		—		—
Outstanding at June 30, 2016		131,250		0.20
Expired		131,250		0.20
Granted		505,000	$	0.15		4
Outstanding at June 30, 2017		505,000	$	0.15		3.86