Quarterly report pursuant to Section 13 or 15(d)

Note 7 - Warrant Derivative Liability

v3.5.0.2
Note 7 - Warrant Derivative Liability
 3 Months Ended
Sep. 30, 2016
Notes to Financial Statements  
Derivative Instruments and Hedging Activities Disclosure [Text Block]
NOTE
7
–
WARRANT DERIVATIVE LIABILITY
 
The 2012 Warrants
discussed in Note 6 include exercise price re-set provisions should future equity offerings be offered at a price lower than the warrant exercise price.  In accordance with ASC No. 815, the re-set provisions are recorded as derivative liabilities in the accompanying condensed consolidated financial statements.
 
Warrants classified as derivative liabilities are recorded at their fair values at the issuance date and are revalued at each subsequent reporting date.
  These warrants were determined to have an average fair value per warrant and aggregate value as of September 30, 2016 of $0.01 and $6,000, respectively and an average fair value per warrant and aggregate value as of June 30, 2016 of $0.01 and $24,000, respectively.
 
Significant assumptions used to estimate the fair value of the warrants classified as derivative liabilities are summarized below:
 
   
As of
September
30, 2016
  
 
As of
June 30,
2016
  
Risk-free interest rate
     0.47%     0.44% - 0.49%  
Expected life (average) (years)
   0.70 – 1.08   0.96 - 1.33  
Stock price (based on prices on valuation date)
     $0.05       $0.05    
Exercise price
     $0.14       $0.15    
Expected volatility
     110%       110%    
 
As discussed in
Note 6, in conjunction with the Offering, we sold shares of our common stock at a price of $0.04 per share, thereby triggering an anti-dilution provision in the 2012 Warrants. As a result, the exercise price of such warrants has been reduced to $0.14 per share as of September 30, 2016. The remaining terms, including expiration dates, of all effected warrants remain unchanged.
 
The change in the estimated fair value of warrants classified as derivative liabilities during the
three months ended September 30, 2016 and 2015 was $10,000 and $0, respectively, and is included as a component of other income (expense) in the accompanying condensed consolidated statements of operations.