Derivative Liabilities

9 Months Ended

Mar. 31, 2018

Derivative Instruments and Hedging Activities Disclosure [Abstract]

Derivative Liabilities

NOTE 4 - DERIVATIVE LIABILITIES

From time to time, the Company issues convertible notes payable with embedded conversion features and options to purchase common stock. Pursuant to the FASB authoritative guidance on determining whether an instrument (or embedded feature) is indexed to an entity’s own stock, when there are insufficient authorized shares, the obligation for the exercise of the convertible instrument should be classified as a liability and measured at fair value. During 2017, the Company determined that there were not sufficient authorized shares of common stock available for issuance upon conversion of certain of its convertible notes and recorded a charge for the fair value of the derivative liabilities, and at June 30, 2017, the total derivative liabilities were $728,000. During the three and nine months ended March 31, 2018, the Company recorded change in the fair value of the derivative liabilities of $(186,829) and $519,582, respectively. At March 31, 2018, total derivative liabilities were $208,418. The conversion feature of the notes is re-measured at the end of every reporting period with the change in value reported in the Condensed Consolidated Statements of Operations.

The conversion feature derivative liability was valued at the following dates using a Black-Scholes-Merton model with the following assumptions:

	March 31, 2018			June 30, 2017
Conversion feature:
Risk-free interest rate		2.09	%		1.50	%
Expected volatility		132	%		179	%
Expected life (in years)		1 year			1 year
Expected dividend yield		—			—
Fair Value:
Conversion feature	$	208,418		$	728,000

The risk-free interest rate was based on rates established by the Federal Reserve Bank. The Company used its own historical stock’s volatility as the estimated volatility. The expected life of the conversion feature of the notes or options was based on the estimated remaining terms of the notes or options, or expected settlement date for notes due on demand or that have matured. The expected dividend yield was based on the fact that the Company has not customarily paid dividends to its holders of common stock in the past and does not expect to pay dividends to holders of its common stock in the future.