DERIVATIVE FINANCIAL INSTRUMENTS and FAIR VALUE MEASUREMENTS
|3 Months Ended|
Sep. 30, 2016
|Derivative Instruments and Hedging Activities Disclosure [Abstract]|
|Derivative Instruments and Hedging Activities Disclosure [Text Block]||
NOTE 10 - DERIVATIVE FINANCIAL INSTRUMENTS and FAIR VALUE MEASUREMENTS
Derivative Financial Instruments:
The Company applies the provisions of ASC Topic 815-40, Contracts in Entity’s Own Equity (“ASC Topic 815-40”), under which convertible instruments and warrants, which contain terms that protect holders from declines in the stock price (reset provisions), may not be exempt from derivative accounting treatment. 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 change in fair value in operations on the issuance date. The Company has 3,000,000 warrants and $1,679,194 of convertible debt with repricing options outstanding at September 30, 2016.
The Company calculates the estimated fair values of the liabilities for derivative instruments using the Black Scholes (“BSM”) option pricing model. Along with the below BSM value, the Company also computed the fair value using the Monte-Carlo model noting no material difference between the valuations. The closing price of the Company’s common stock at September 30, 2016 was $0.0138. Volatility, expected remaining term and risk free interest rates used to estimate the fair value of derivative liabilities at September 30, 2016, are indicated in the table that follows. The volatility was based on historical volatility at September 30, 2016, the expected term is equal to the remaining term of the warrants and the risk free rate is based upon rates for treasury securities with the same term.
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 BSM option pricing model. The following tables summarize the Company’s financial assets and liabilities measured at fair value on a recurring basis as of September 30, 2016:
The following is a roll forward for the three months ended September 30, 2016 of the fair value liability of price adjustable derivative instruments:
The entire disclosure for derivative instruments and hedging activities including, but not limited to, risk management strategies, non-hedging derivative instruments, assets, liabilities, revenue and expenses, and methodologies and assumptions used in determining the amounts.
Reference 1: http://www.xbrl.org/2003/role/presentationRef