Derivative Liabilities

12 Months Ended

Jun. 30, 2018

Derivative Instruments and Hedging Activities Disclosure [Abstract]

Derivative Liabilities

NOTE 5 - DERIVATIVE LIABILITIES

During fiscal 2017, the Company determined there were insufficient authorized shares of common stock available for conversion of certain of its convertible notes issued in the second quarter of fiscal 2017 (See Note 4) and therefore the conversion feature of the notes did not meet equity classification. Based on this, the Company recorded derivative liabilities of $182,000 upon the issuance of these convertible notes. Subsequent to this recording and through June 30, 2017, the Company recorded a change in the fair value of the derivative liabilities of $546,000. At June 30, 2017, total derivative liabilities were $728,000. On April 18, 2018, the Company increased its authorized shares from 50,000,000 to 150,000,000 shares and therefore, the Company determined it had sufficient authorized shares available to meet equity classification for the conversion features of its convertible notes. Accordingly, on April 14, 2018, the Company remeasured the derivative liabilities to their fair value of $125,000, and recorded a gain in fair value of the derivative of $603,000. The balance of the derivative of $125,000 was then reclassified to equity and recorded as a credit to additional paid-in capital in accordance with ASC 815-15-35-4.

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

	April 18, 2018 (date reclassified to equity)			June 30, 2017			July 11, 2016 to December 31, 2016 (dates of inception)
Conversion feature:
Risk-free interest rate		1.24	%		1.50	%		0.07	%
Expected volatility		130	%		179	%		99% to 124%
Expected life (in years)		1 year			1-2.5 years			1-1.5 years
Expected dividend yield		—						—
Fair Value:
Conversion feature	$	125,000		$	728,000		$	182,000

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.