DERIVATIVE LIABILITY

12 Months Ended

Jun. 30, 2014

Derivative Instruments and Hedging Activities Disclosure [Abstract]

NOTE 8. DERIVATIVE LIABILITY

On April 1, 2014, we issued a convertible promissory note in the amount of $47,500 containing an embedded derivative (see Note 6).

We analyzed the derivative liability in accordance with EITF 07-05 and ASC 820. EITF 07-5 is effective for fiscal years beginning after December 15, 2009, and interim periods within those fiscal years.

We valued the derivative at issuance (April 1, 2014), and again at the end of our fiscal year (June 30, 2014). The following assumptions were used in valuing the derivative liability using the Lattice model associated with the Convertible Promissory Note at April 1, 2014 and June 30, 2014:

•

The underlying stock price $0.07 and $0.061 was used as the fair value of the common stock;

•

The promissory note face amount issued April 1, 2014 is $47,500 and effectively converts at a discount of 52% at the issuance and 42% at the quarter’s end.

•

Capital raising events are not a factor for this Note;

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The Holder would redeem based on availability of alternative financing, 0% of the time increasing 1.0% monthly to a maximum of 10%;

•

The Holder would automatically convert the note at maturity if the registration (after 120 days) was effective and the company was not in default;

•

The projected annual volatility for each valuation period was based on the historic volatility of the company - 1 year volatility at April 1, 2014: 361%; at June 30, 2014: 402%.

•

An event of default would occur 0% of the time, increasing 1.00% per month to a maximum of 5% – to-date the Notes are not in default nor converted by the holder.

The following shows the changes in the level three derivative liability measured on a recurring basis at inception (April 1, 2014) for the year ended June 30, 2014:

Balance at inception, April 1, 2014	$	47,787
Change in fair value of derivative		(21,246	)
Balance at June 30, 2014	$	26,541

- Definition

The entire disclosure for derivative instruments and hedging activities including, but not limited to, risk management strategies, non-hedging derivative instruments, assets, liabilities, revenue and expenses, and methodologies and assumptions used in determining the amounts.

+ References

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+ Details

ENERGY HOLDINGS INTERNATIONAL, INC. 10-K