Securities Purchase Agreement

3 Months Ended

Sep. 30, 2014

Securities Purchase Agreement [Abstract]

NOTE 6 – SECURITIES PURCHASE AGREEMENT

On March 14, 2014, the Company closed a financing with three subscribers, whom had previously completed a financing with the Company. Under this Securities Purchase Agreement (SPA) the Company raised a total $300,000 with three accredited investors introduced by Palladium to the Company. Under the terms of the SPA, the purchasers subscribed for a total of 3,750,000 shares of the common stock of the Company at $0.08 per share and an equal number of warrants exercisable at $0.15 per share for a period of five years. Under the SPA the purchasers have the option to purchase up to an equal number of shares and warrants as those purchased on the initial closing for a period of nine months from the initial closing date. Each purchaser shall be entitled to one closing on the exercise of the subsequent closing and option warrants have piggy back registration rights. Subject to no effective registration statement registering the warrants within 180 days after the initial exercise date of the warrants, then the warrants shall have a cashless exercise provision. The warrants further have exercise limitations of 9.99% as a beneficial ownership limitation which the holder may increase or decrease upon 61 days prior notice to the Company, however, the beneficial ownership limitation shall not exceed 9.99% of the number of shares held by the holder.

Under the terms of the SPA, the purchasers that hold outstanding stock or warrants at the time of any subsequent funding have the right to participate in any subsequent financing up to 100% of the subsequent financing on the terms negotiated with any funders for a period of eighteen months from the date of the SPA, Further, the shares of common stock issued under the SPA have a purchase price reset until the sooner of (i) the purchaser no longer holds and securities, and (ii) five years after the initial closing date whereby should the Company issue or sell any shares of common stock or any common stock equivalent at a price less than the per share purchase price (the Dilutive Financing”), then the Company shall issue additional shares of common stock to the purchasers who hold outstanding shares on the date of such Dilutive Financing for no additional consideration. The warrants also have a warrant dilution adjustment which requires the issuance of additional warrant shares to reflect any dilutive financing undertaken by the Company whereby the holders of any outstanding warrants shall receive additional warrants based on the price of the Dilutive Financing.

The following table summarizes the number of common shares indexed to the derivative financial instruments as of September 30, 2014 and June 30, 2014:

		June 30, 2014				September 30, 2014
3,7500,000 common stock purchase agreement dated March 14, 2014			3,750,000				3,750,000

Information and significant assumptions embodied in our valuations (including ranges for certain assumptions during the subject periods that instruments were outstanding) as of September 30, 2014 and June 30, 2014 are illustrated in the following tables:

	Warrant Derivative
	Revaluation Date (June 30, 2014)				Revaluation Date (September 30, 2014)
Warrants to purchase common stock:
Strike price		$	0.15		$	0.15
Volatility			121.01	%		135.78	%
Term (years)			4.70			4.45
Risk-free rate			1.62	%		1.78	%
Dividends			-			-

On September 30, 2014 as a result of the revaluation of the warrant derivatives the Company recorded a loss of $3,062 in respect of the change in the fair value of the warrant liability.