Annual report pursuant to Section 13 and 15(d)

FAIR VALUE MEASUREMENTS

v2.4.0.8
FAIR VALUE MEASUREMENTS
 12 Months Ended
Jun. 30, 2013
Fair Value Disclosures [Abstract]  
FAIR VALUE MEASUREMENTS
NOTE 10 – FAIR VALUE MEASUREMENTS
 
We follow FASB ASC Topic No. 820, Fair Value Measurements and Disclosures (“ASC 820”) in connection with financial assets and liabilities measured at fair value on a recurring basis subsequent to initial recognition.
 
ASC 820 requires that assets and liabilities carried at fair value will be classified and disclosed in one of the following categories:
 
Level 1: Quoted market prices in active markets for identical assets and liabilities.
Level 2: Observable market based inputs or unobservable inputs that are corroborated by market data.
Level 3: Unobservable inputs that are not corroborated by market data
 
The hierarchy noted above requires us to minimize the use of unobservable inputs and to use observable market data, if available, when determining fair value.
 
The fair value of our recorded derivative liabilities is determined based on unobservable inputs that are not corroborated by market data, which is a level 3 classification. We record derivative liabilities on our balance sheet at fair value with changes in fair value recorded in our consolidated statements of operations.
 
Following is a summary as of the reporting date of the fair values and applicable level within the fair value hierarchy of assets and liabilities measured at fair value on a recurring basis:
 
At June 30, 2013:
 
 
 
Quoted Prices in
Active Markets
for Identical
Assets
 
Significant Other
Observable Inputs
 
Significant
Unobservable
Inputs
 
 
 
(Level 1)
 
(Level 2)
 
(Level 3)
 
Description:
 
 
 
 
 
 
 
 
 
 
Warrant derivative liabilities
 
$
-
 
$
-
 
$
143,000
 
  
 
At June 30, 2012:
 
 
 
Quoted Prices in
Active Markets
for Identical
Assets
 
Significant Other
Observable Inputs
 
Significant 
Unobservable
Inputs
 
 
 
(Level 1)
 
(Level 2)
 
(Level 3)
 
Description:
 
 
 
 
 
 
 
 
 
 
Warrant derivative liabilities
 
$
-
 
$
-
 
$
4,943,000
 
 
The table below sets forth a summary of changes in the fair value of our Level 3 financial instruments for the twelve months ended June 30, 2013:
 
 
 
Balance at
June 30,
2012
 
Estimated fair
 value of new
derivative
liabilities
 
Change in estimated
fair value 
recognized in results
of operations
 
Balance at
June 30, 
2013
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Warrant derivative liabilities
 
$
4,943,000
 
$
931,000
 
$
(5,731,000)
 
$
143,000
 
 
The fair value of new warrant derivative liabilities and the change in the estimated fair value of derivative liabilities that we recorded during the twelve months ended June 30, 2013, related to warrants issued in connection with our private placement transactions and Baytree Advisory Agreement (see Note 6).
 
Quantitative Information about Significant Unobservable Inputs used in Level 3 Fair Value Measurements
 
The following table represents the Plan’s level 3 financial instruments at June 30, 2013, the valuation techniques used to measure the fair value of those financial instruments, and the significant unobservable inputs and the ranges of values for those inputs:
 
Instrument
 
Fair Value
 
Principal Valuation
Technique
 
Significant
Unobservable Inputs
 
Range of Significant
Input Values
 
 
 
 
 
 
 
 
 
 
 
 
Warrant derivative liabilities
 
$
143,000
 
Monte Carlo simulation
 
Volatility
 
100%
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Risk free rates
 
1.02% - 1.16%
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Probability of subsequent financing
 
100%