Annual report pursuant to Section 13 and 15(d)

12. DERIVATIVE FINANCIAL INSTRUMENTS (Tables)

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12. DERIVATIVE FINANCIAL INSTRUMENTS (Tables)
 12 Months Ended
Jun. 30, 2014
Derivative Instruments and Hedging Activities Disclosure [Abstract]  
Fair Value of Derivative Warrants
    Warrant Liability  
Balance, June 30, 2012     -  
Initial fair value of derivative warrants     8,228,882  
Change in fair value of derivatives     (2,229,447 )
Balance June 30, 2013     5,999,435  
Issuance of warrants to investors and consultants     245,423  
Change in fair value of derivatives     (5,350,627 )
Reclassification of Zolla share-based compensation liability     558,446  
Balance June 30, 2014     1,452,677  
Warrant Fair Value Assumptions

Certain of the Company’s warrants were valued using the Black-Scholes option pricing model with the following assumptions:

 

Warrant Valuation Assumptions   June 30, 2014   June 30, 2013
Expected term   0.11 to 2.00 years   0.07 to 3.25 years
Weighted average volatility   85.05% to 323.90%   70.65% to 299.63%
Weighted average risk free interest rate   0.30%- 0.49%   0.02% - 0.66%
Expected dividends   -   -

 

Warrants that have a sliding scale exercise price were valued using a binomial lattice option valuation technique using the following assumptions:

 

Warrant Valuation Assumptions   June 30, 2014
Expected term   0.25 -1.79 years
Weighted average volatility   149% - 184%
Weighted average risk free interest rate   0.04% - 0.27%%
Expected dividends   -
Exercise price   $0.05 - $1.00

 
Fair Value of Compound Embedded Derivatives
Balance, June 30, 2012   $ 928,374  
Change in fair value of derivative     (878,702 )
Loss recognized from debt redemption     (49,672 )
Balance, June 30, 2013     -0-  
Change in fair value of derivative     304,699  
Balance, June 30, 2014   $ 304,699