Quarterly report pursuant to Section 13 or 15(d)

Derivative Liability (Tables)

Derivative Liability (Tables)
6 Months Ended
Nov. 30, 2014
Summary of Fair Value Derivative Liability and Linked Common Shares

The following tables summarize the fair value of the derivative liability and linked common shares as of the derivative liability inception date (September 26, 2014) and November 30, 2014:


     September 26,
     November 30,

Total derivative liability

   $ 767,038       $ 1,572,613   







Shares indexed to derivative liability

     2,000,000         2,000,000   







Significant Inputs and Assumptions Used in Binomial Lattice Model for Derivative Liability

Significant inputs and assumptions used in the Binomial Lattice Model for the derivative liability are as follows:


     September 26,
   November 30,

Quoted market price on valuation date

   $0.79    $1.24

Contractual conversion rate

   $1.00    $1.00

Adjusted conversion price (a)

   $0.9759    $1.00

Contractual term to maturity (years)

     2.00      1.82

Expected volatility

   123%    120%

Contractual interest rate

   5%    5%

Risk-free rate

   0.59%    0.29%

Risk adjusted rate

   2.69%    3.05%

Probability of event of default

   5.00%    5.00%


(a) The adjusted conversion price input used in the Binomial Lattice Model considers the potential for an adjustment to the stated conversion price due to a future dilutive issuance. This input was calculated using a probability-weighted approach which considered the likelihood of various scenarios occurring including (i) potential success or failure of various phases for PRO 140, (ii) the probability the Company will enter into a future financing and (iii) and the potential price of a future financing.