Quarterly report pursuant to Section 13 or 15(d)

Derivative Liabilities

Derivative Liabilities
6 Months Ended
Dec. 31, 2018
Derivative Instruments and Hedging Activities Disclosure [Abstract]  
Derivative Liabilities

Note 6. Derivative Liabilities


The Company’s 6.5% Convertible Senior Secured Notes due 2023 issued in May 2018 contain certain derivative features, as described in Note 7 - Convertible Notes. The table below provides a summary of the changes in fair value, including net transfers in and/or out, of all financial assets and liabilities measured at fair value on a recurring basis using significant unobservable inputs (Level 3) during the six months ended December 31, 2018:



Fair Value
Using Level 3


Balance, July 1, 2018   $ 1,104,701  
Change in fair value of derivative liabilities     (186,701 )
Balance, December 31, 2018   $ 918,000  


The fair value of the derivative features of the convertible note at the balance sheet dates were calculated using the with-and-without method, a form of the income approach, valued with the following weighted average assumptions:



December 31, 



June 30,


Risk free interest rate     2.50 %     2.73 %
Dividend yield     0.00 %     0.00 %
Expected volatility     46.0 %     42.0 %
Remaining term (years)     4.41       4.92  


Risk-free interest rate: The Company uses the risk-free interest rate of a U.S. Treasury Bill with a similar term on the date of the issuance.


Dividend yield: The Company uses a 0% expected dividend yield as the Company has not paid dividends to date and does not anticipate declaring dividends in the near future.


Volatility: The Company estimated the expected volatility of the stock price based on the corresponding volatility of the Company’s peer group stock price for a period consistent with the convertible notes’ expected term.


Remaining term: The Company’s remaining term is based on the remaining contractual term of the convertible notes.


The Company’s 6.5% Convertible Senior Notes due 2023 issued in October 2018 contain certain derivative features, as described in Note 7 - Convertible Notes; however, as of December 31, 2018 the fair value of these components recorded as a debt discount was $0.