Annual report pursuant to Section 13 and 15(d)

DERIVATIVE FINANCIAL LIABILITY

v2.4.0.6
DERIVATIVE FINANCIAL LIABILITY
 12 Months Ended
Jun. 30, 2012
Derivative Instruments and Hedging Activities Disclosure [Text Block]

NOTE G – DERIVATIVE FINANCIAL LIABILITY


The Company was required to account for the August 2008 Warrants (“August 2008 Warrants”) as derivative liabilities in accordance with ASC 815-40. The Company is required to mark to market in each reporting quarter the value of the embedded derivative and the August 2008 Warrants. The Company revalues these derivative liabilities at the end of each reporting period. The periodic change in value of the derivative liabilities is recorded as either non-cash derivative gain (if the value of the embedded derivative and the August Warrants decrease) or as non-cash derivative loss (if the value of the embedded derivative and the August 2008 Warrants increase). If the stock price increases, the derivative liability will generally increase and if the stock price decreases, the derivative financial liability will generally decrease. For the years ended June 30, 2012 and 2011, the Company recorded non-cash income and non-cash expense of approximately $3,668,000 and ($2,474,000), respectively.


The assumptions made in computing the estimated fair value for the derivative financial liability using the Black-Scholes option pricing model were as follows:


 

 

 

 

 

 

 

 

 

 

As of June 30,

 

 

 

 

 

 

2012

 

2011

 

 

 

 

 

 

 

 

 

 

 

 

 

Common stock price

 

$

0.76

 

$

2.86

 

Risk free interest rate

 

 

0.2

%

 

0.4

%

Dividend yield

 

 

0

%

 

0

%

Volatility

 

 

100.0

%

 

96.7

%

Remaining contract term (in years)

 

 

1.2

 

 

2.2