Quarterly report pursuant to Section 13 or 15(d)

Derivative Financial Instruments and Fair Value Measurements

v3.20.4
Derivative Financial Instruments and Fair Value Measurements
6 Months Ended
Dec. 31, 2020
Derivative Instruments and Hedging Activities Disclosure [Abstract]  
Derivative Financial Instruments and Fair Value Measurements

NOTE 11 - DERIVATIVE FINANCIAL INSTRUMENTS AND FAIR VALUE MEASUREMENTS

 

Derivative Financial Instruments:

 

The Company applies the provisions of ASC 815-40, Contracts in Entity’s Own Equity, under which convertible instruments and warrants that contain terms and provisions which cause the embedded conversion options to be accounted for as derivative liabilities. As a result, warrants and embedded conversion options in convertible debt are recorded as a liability and are revalued at fair value at each reporting date. If the fair value of the warrants exceeds the face value of the related debt, the excess is recorded as derivative expense in operations on the issuance date. The Company had $8,500 (1 note) and $126,500 (3 notes) of convertible debt, which have embedded conversion options bifurcated and is treated as derivative instruments outstanding at December 31, 2020 and June 30, 2020, respectively.

 

The Company calculates the estimated fair values of the liabilities for derivative instruments using the Binomial Trees Method. The closing price of the Company’s common stock at December 31, 2020, the last trading day of the period ended December 31, 2020, was $0.28. Volatility, expected remaining term and risk-free interest rates used to estimate the fair value of derivative liabilities at December 31, 2020 are indicated in the table that follows. The expected term is equal to the remaining term of the warrants or convertible instruments and the risk-free rate is based upon rates for treasury securities with the same term.

 

Convertible Debt

 

   

Initial Valuations
(on new derivative
instruments entered

into during the three
months ended
December 31, 2020)

    December 31, 2020  
Volatility     -       279.38 %
Expected Remaining Term (in years)     -       0.01  
Risk Free Interest Rate     -       0.08 %
Expected dividend yield     None       None  

 

Fair Value Measurements:

 

The Company measures and reports at fair value the liability for derivative instruments. The fair value liabilities for price adjustable warrants and embedded conversion options have been recorded as determined utilizing the Binomial Trees model. The following tables summarize the Company’s financial assets and liabilities measured at fair value on a recurring basis as of December 31, 2020 and June 30, 2020:

 

    Balance at
December 31, 2020
   

Quoted Prices

in Active

Markets for

Identical
Assets

   

Significant

Other

Observable
Inputs

   

Significant

Unobservable Inputs

 
              (Level 1)       (Level 2)       (Level 3)  
Embedded conversion option liabilities   $ 22,867     $     $     $ 22,867  
Total   $ 22,867     $     $     $ 22,867  

 

    Balance at
June 30, 2020
   

Quoted Prices

in Active

Markets for

Identical
Assets

   

Significant

Other

Observable
Inputs

   

Significant

Unobservable Inputs

 
              (Level 1)       (Level 2)       (Level 3)  
Embedded conversion option liabilities   $ 177,009     $     $     $ 177,009  
Total   $ 177,009     $     $     $ 177,009  

 

The following is a roll forward for the six months ended December 31, 2020 of the fair value liability of price adjustable derivative instruments:

 

    Fair Value of  
    Liability for  
    Derivative  
    Instruments  
Balance at June 30, 2020   $ 177,009  
Initial fair value of embedded conversion option derivative liability recorded as debt discount     -  
Initial fair value of embedded conversion option derivative liability recorded as expense     -  
Gain on debt extinguishment     (106,140 )
Change in fair value included in statements of operations     (48,002 )
Balance at December 31, 2020   $ 22,867