NOTE 5 - STOCKHOLDERS’ DEFICIT

Common stock

During the year ended June 30, 2015, the Company completed the following private placements:

(i)

Completed a private placement amounting to $108,620 for the issuance of 638,940 units. Each unit consisted of one common share at $0.17 per share and one share purchase warrant at $0.001 per warrant to purchase 638,940 common shares on or before February 16, 2016 at an exercise price of $0.30 per share.

(ii)

Completed a private placement amounting to $305,478 for the issuance of 1,796,927 units. Each unit consisted of one common share at $0.17 per share and one share purchase warrant issued at $0.001 per warrant to purchase 1,796,927 common shares on or before February 16, 2016 at an exercise price of $0.30 per share.

(iii)

Completed a private placement amounting to $160,622 for the issuance of 642,087 shares consisting of common stock at $0.25 per share.

(iv)

Completed a private placement amounting to $247,875 for the issuance of 701,447 shares consisting of common stock at $0.35 per share.

(v)

Completed a private placement amounting to $263,720 for the issuance of 694,377 shares consisting of common stock at $0.38 per share.

(vi)

Completed a private placement amounting to $25,000 for the issuance of 100,000 shares consisting of common stock at $0.25 per share.

(vii)

Completed a private placement amounting to $48,500 for the issuance of 127,631 shares consisting of common stock at $0.38 per share.

(viii)

Completed a private placement amounting to $35,000 for the issuance of 100,000 shares consisting of common stock at $0.35 per share.

(ix)

Completed a private placement amounting to $239,000 for the issuance of 796,667 shares consisting of common stock at $0.30 per share.

(x)

Completed a private placement amounting to $1,002,190 for the issuance of 3,340,633 shares consisting of common stock at $0.30 per share.

(xi)

Completed a private placement amounting to $70,000 for the issuance of 230,000 shares consisting of common stock at $0.30 per share.

(xii)

Completed a private placement amounting to $400,000 for the issuance of 800,000 common shares issued at $0.50 per share.

The Company determined that warrants issued did not contain any provisions that would preclude equity treatment.

During the year ended June 30, 2015, the Company issued shares of common stock pursuant to consulting agreements as follows:

(i)

50,000 shares measured at a fair value of $0.31 per share resulting in a total value of $15,250 which was previously recorded as selling, general, and administrative expenses during the year ended June 30, 2014.

(ii)

850,000 shares measured at a fair value of $0.33 per share resulting in a total value of $280,500 which was recorded as selling, general, and administrative expenses.

(iii)

150,000 shares measured at a fair value of $0.48 per share resulting in a total value of $72,250 which was recorded as selling, general, and administrative expenses.

(iv)

15,000 shares measured at a fair value of $0.45 per share resulting in a total value of $6,750 which was recorded as selling, general, and administrative expenses.

(v)

50,000 shares measured at a fair value of $0.68 per share resulting in a total value of $33,750 which was recorded as selling, general, and administrative expenses.

(vi)

400,000 shares measured at a fair value of $0.52 per share resulting in a total value of $206,000 which was recorded as selling, general, and administrative expenses.

During the fiscal year ended June 30, 2015, the Company issued 675,000 shares of common stock pursuant to agreements with employees. The shares issued were measured at a weighted average fair value of $0.38 per share. During the year ended June 30, 2015, stock-based compensation recorded on restricted shares totaled $184,622 (June 30, 2014 - $219,930) was recognized and included as selling, general, and administrative expenses.

During the year ended June 30, 2014, the Company completed the following private placements:

(i)

Completed a private placement amounting to $13,400 for the issuance of 44,000 units. Each unit consisted of one common share and two share purchase warrants. 20,000 units were issued at $0.25 per unit and 24,000 units were issued at $0.35 per unit. Warrants were issued at $0.001 per warrant to purchase 88,000 shares of common stock on or before July 31, 2015 at an exercise price of $0.50 per share.

(ii)

Completed a private placement amounting to $28,951 for the issuance of 144,757 units consisting of one common share at $0.20 per share and one share purchase warrant at $0.001 per warrant to purchase 144,757 shares of common stock on or before September 13, 2015 at an exercise price of $0.60 per share.

(iii)

Completed a private placement amounting to $1,147,024 for the issuance of 6,744,257 units. Each unit consisted of one common share at $0.17 per share and one share purchase warrants at $0.001 per warrant to purchase 6,744,251 shares of common stock on or before eighteen months after the closing date at an exercise price of $0.30 per share.

(iv)

Completed a private placement amounting to $210,000 for the issuance of 1,238,236 units. Each unit consisted of one common share at $0.17 per share and one share purchase warrant at $0.001 per warrant to purchase 1,238,236 shares of common stock on or before December 1, 2015 at an exercise price of $0.30 per share.

The Company determined that the warrants did not contain any provisions that would preclude equity treatment.

Share issue costs to complete private placements totaled $168,010 for the year ended June 30, 2014.

During the fiscal year ended June 30, 2014, the Company issued shares of common stock pursuant to consulting agreements as follows:

(i)

550,000 shares measured at a fair value of $0.50 per share resulting in a total value of $275,000 which was recorded as selling, general, and administrative expenses.

(ii)

250,000 shares measured at a fair value of $0.36 per share resulting in a total value of $90,000 which was recorded as selling, general, and administrative expenses.

(iii)

100,000 shares measured at a fair value of $0.30 per share resulting in a total value of $30,000 which was recorded as selling, general, and administrative expenses.

(iv)

500,000 shares measured at a fair value of $0.29 per share resulting in a total value of $145,000 which was recorded as selling, general, and administrative expenses.

(v)

185,000 shares measured at a fair value of $0.27 per share resulting in a total value of $49,950 which was recorded as selling, general, and administrative expenses.

During the fiscal year ended June 30, 2014, the Company issued 541,666 shares of common stock for options vesting prior to the termination agreement (note 14).The shares issued were measured at a fair value of $0.44 per share and recorded as shares issued for services in the statement of stockholders' deficit.

During the fiscal year ended June 30, 2014, the Company issued 3,379,734 shares of common stock in settlement of convertible debentures. The value of this stock was $1,122,933 ($0.33 per share) measured at fair market value on the date the shares were issued.

Preferred stock

On November 8, 2012, a director of the Company resigned from his position as director and CEO of the Company. The Company agreed to redeem 70,588 shares of preferred stock held by the director at $4.25 per share for a total of $300,000 (note 14).

On May 1, 2014, the Company entered into an amended agreement whereby the above mentioned liability, remaining preferred stock and stock options were exchanged for 750,000 shares of common stock valued at the share price of $0.26 per share in settlement of the remaining debt (Note 14). On June 13, 2014 the remaining 103,567 preferred shares were converted into 382,151 shares of common stock. As of June 30, 2015 and 2014 there are no outstanding preferred shares of stock.

Stock-based compensation

During the fiscal year ended June 30, 2015, the Company recorded stock-based compensation expense with respect to vesting stock options, restricted stock and warrants and modified stock options of $184,622 (2014- $266,243) included in selling, general, and administrative expenses.

Stock-based compensation not yet recognized at June 30, 2015 relating to non-vested stock options was $376,159 (June 30, 2014 - $555,883), which will be recognized over a period of 2 years (2014 – 3 years).

Stock options and restricted shares

The Company is reviewing several alternatives to replace its 2001, 2003, and 2009 Stock Option Plans with a new omnibus stock option plan (the “New Plan”). In certain cases, we have made contractual commitments to provide shares or stock option grants in anticipation of putting in place the New Plan. The New Plan will allow us to attract and retain key employees or service providers as we continue to develop our business. We will obtain the necessary approvals based on the attributes of the plan. We anticipate that this New Plan will be implemented prior to December 31, 2015.

In January 2001, the Company adopted the Integral Technologies, Inc. 2001 Stock Plan (the "2001 Plan"), a non-qualified stock option plan under which the Company may issue up to 2,500,000 stock options and bonuses of common stock of the Company to provide incentives to officers, directors, key employees and other persons who contribute to the success of the Company. This plan was amended during December 2001 to increase the number of common stock options that may be granted from 2,500,000 to 3,500,000 stock options. As of June 30, 2015, there were no (June 30, 2014 - 764,500) common stock options available under this plan.

In April 2003, the Company adopted the Integral Technologies, Inc. 2003 Stock Plan (the "2003 Plan"), a non-qualified stock option plan under which the Company may issue up to 1,500,000 stock options. As of June 30, 2015, there were no (June 30, 2014 - 1,375,000) common stock options available under this plan.

During the fiscal year ended June 30, 2010, the Company adopted the Integral Technologies, Inc. 2009 Stock Plan (the "2009 Plan"), a non-qualified stock option plan under which the Company may issue up to 4,000,000 common stock options. As of June 30, 2015, there were no (June 30, 2014 - 500,000) common stock options available under this plan.

Stock option activity

The following summarizes information about the Company’s options outstanding:

	Number of Options			Price Per Option		Weighted Average Exercise Price
Outstanding, June 30, 2014		5,900,000		$	0.25 to $ 1.00	$	0.42
Granted		-			-		-
Cancelled		(100,000	)	$	0.50	$	0.50
Expired		(2,300,000	)	$	0.25 to $ 1.00	$	0.54
		-
Outstanding, June 30, 2015		3,500,000		$	0.25 to $ 0.85	$	0.34
Exercisable, June 30, 2015		3,400,000		$	0.25 to $ 0.85	$	0.34

A summary of the status of non-vested options as of June 30, 2015 is as follows;

	Number of Options			Weighted Average Grant Date Fair Value

Non-vested at June 30, 2014		650,000		$	0.30
Options granted		-			-
Options forfeited		-			-
Options vested		(550,000	)		0.30

Non-vested at June 30, 2015		100,000		$	0.25

The weighted average remaining contractual lives for options outstanding and exercisable at June 30, 2015 are 1.34 years and 1.20 years (June 30, 2014 - 1.55 and 1.30 years), respectively.

The following summarizes the options outstanding and exercisable:

			Number of Options
Expiry Date	Exercise Price		June 30, 2015		June 30, 2014
March 9, 2015	$	0.25		-		125,000
April 15, 2015	$	0.50		-		100,000
June 1, 2015	$	0.50		-		75,000
June 1, 2015	$	0.85		-		200,000
July 31, 2015	$	1.00		-		415,000
October 15, 2015	$	0.50		-		100,000
November 15, 2015	$	1.00		-		100,000
December 1, 2015	$	0.50		75,000		150,000
December 1, 2015	$	0.85		100,000		200,000
December 31, 2015	$	1.00		-		110,000
December 31, 2015	$	0.25		-		1,000,000
June 1, 2016	$	0.50		75,000		75,000
June 1, 2016	$	0.85		100,000		100,000
June 30, 2016	$	0.25		2,000,000		2,000,000
December 1, 2016	$	0.50		75,000		75,000
December 1, 2016	$	0.85		100,000		100,000
February 19, 2017	$	0.31		750,000		750,000
June 1, 2017	$	0.50		75,000		75,000
January 13, 2019	$	0.25		50,000		50,000
January 13, 2020	$	0.25		50,000		50,000
January 13, 2021	$	0.25		50,000		50,000
Total outstanding				3,500,000		5,900,000
Total exercisable				3,400,000		5,250,000

The aggregate intrinsic value of options outstanding and exercisable as of June 30, 2015 was $1,128,000 and $1,089,000 (June 30, 2014 - $163,750 and $156,250), respectively. The aggregate intrinsic values exclude options having a negative aggregate intrinsic value due to awards with exercise prices greater than market value. The intrinsic value is the difference between the market value of the shares and the exercise price of the award.

During the year ended June 30, 2014, the Company entered into employment agreements, whereby the employees would be granted restricted shares. The holder of a restricted share award is generally entitled at all times on and after the date of the agreement to exercise the rights of a shareholder of the Company, including the right to vote and the right to receive dividends on the shares. These shareholders do not have the ability to sell, transfer or otherwise encumber the restricted shares awards until they fully vest. The restricted shares granted vest over three or four-year periods and the grant date fair value of the awards is recognized as expense over the vesting period. During the year ended June 30, 2015, total compensation expense of $184,622 (June 30, 2014 - $111,167) was recognized as stock-based compensation and included in selling, general and administration expense.

During the year ended June 30, 2015, the Company issued 675,000 and is obligated to issue an additional 400,000 shares pursuant to the employment agreements.

As of June 30, 2015, unrecognized stock-based compensation expense totaled $371,212 (June 30, 2014 - $555,833), which will be recognized over a period of 2 years (2014 – 3 years).

A summary of the status of non-vested restricted shares as of June 30, 2015 is as follows:

	Number of Restricted Stock Awards			Weighted Average Grant Date Fair Value

Non-vested at June 30, 2014		1,412,500		$	0.35
Awards granted		-			-
Awards forfeited		-			-
Awards vested		(537,500	)	$	0.33

Non-vested at June 30, 2015		875,000		$	0.35

Stock purchase warrants

The following summarizes information about the Company’s stock purchase warrants outstanding:

	Number of Warrants			Price Per Share		Weighted Average Exercise Price

Balance, June 30, 2014		39,749,999		$	0.17 - $1.00	$	0.37
Issued		4,001,256		$	0.25 - $0.30	$	0.30
Expired		(13,475,923	)	$	0.17 - $0.50	$	0.47
Cancelled		(2,725,002	)	$	0.50 - $0.70	$	0.52
Exercised		(2,508,262	)	$	0.17 - $0.50	$	0.34

Balance, June 30, 2015		25,042,068		$	0.25 - $0.50	$	0.33

			Number of Warrants
Expiry Date	Exercise Price		June 30, 2015		June 30, 2014

July 15, 2014	$	0.31		-		300,000
August 31, 2014	$	0.17		-		549,020
August 31, 2014	$	0.60		-		1,123,333
August 31, 2014	$	0.70		-		756,854
September 30, 2014	$	0.50		-		1,954,604
November 30, 2014	$	0.50		-		100,000
January 31, 2015	$	0.50		-		2,550,000
February 28, 2015	$	0.50		-		1,300,000
February 28, 2015	$	0.17		-		301,500
May 25, 2015	$	0.50		-		533,333
June 30, 2015	$	0.50		125,000		4,850,000
July 15, 2015	$	0.50		88,000		88,000
September 13, 2015	$	0.60		44,757		44,757
September 13, 2015	$	0.30		-		1,263,569
October 1, 2015	$	0.30		11,191,410		11,153,721
October 1, 2015	$	0.50		375,000		650,000
December 1, 2015	$	0.30		848,530		1,351,093
December 1, 2015	$	0.50		1,000,000		1,000,000
December 31, 2015	$	0.30		157,000		157,000
January 1, 2016	$	0.30		249,235		-
February 16, 2016	$	0.25		302,117		-
February 16, 2016	$	0.30		1,737,804		-
November 25, 2016	$	0.30		6,168,692		6,668,692
November 25, 2016	$	0.50		2,754,523		2,754,523
November 29, 2016	$	0.70		-		300,000
Total outstanding and exercisable				25,042,068		39,749,999

The following summarizes changes to share purchase warrants outstanding during the year ended June 30, 2015:

117,647 investor warrants exercisable at $0.60 were re-priced to $0.17 and were exercised for proceeds of $20,000.

301,500 investor warrants exercisable at $0.50 were re-priced to $0.17 and exercised for proceeds of $51,255.

400,000 investor warrants exercisable at $0.50 were re-priced to $0.17 and exercised for proceeds of $68,000.

446,470 investor warrants exercisable at $0.30 were exercised for proceeds of $133,941.

64,706 investor warrants exercisable at $0.70 were re-priced to $0.30 and exercised for proceeds of $19,411.

50,000 investor warrants exercisable at $0.30 were exercised for proceeds of $15,000.

1,250,000 investor warrants expiring January 31, 2015 and exercisable at $0.50 were extended to October 1, 2015 and re-priced to $0.30.

1,000,000 investor warrants expiring February 28, 2015 were extended to December 1, 2015.

50,000 investor warrants expiring February 28, 2015 and exercisable at $0.50 were extended to December 1, 2015 and re-priced to $0.30.

25,000 investor warrants expiring February 28, 2015 and exercisable at $0.70 were extended to October 1, 2015 and re-priced to $0.50.

1,000,000 investor warrants expiring February 28, 2015 and exercisable at $0.50 were extended to October 1, 2015 and re-priced to $0.30.

350,000 investor warrants expiring February 28, 2015 and exercisable at $0.50 were extended to October 1, 2015.

6,248,215 investor warrants expiring May 25, 2015 and exercisable at $0.50 were extended to November 25, 2016 and re-priced to $0.30.

1,209,470 investor warrants expiring February 28, 2015 and exercisable at $0.30 were extended to October 1, 2015.

2,000,000 investor warrants exercisable at $0.50 expiring February 28, 2015 were extended to November 25, 2016 and re-priced to $0.30.

157,000 investor warrants exercisable at $0.70 were re-priced to $0.30.

2,425,000 investor warrants exercisable at $0.50 were re-priced to $0.30.

The modifications of warrants resulted in no additional expense.

Share obligations

Pursuant to a consulting agreement with the CFO dated August 19, 2013, the Company is obligated to pay $5,000 to $12,500 per month based on the number of hours worked and to issue 6,000 shares of common stock per month beginning September 1, 2013.

As of June 30, 2015, no shares have been issued. As such, a total of 132,000 shares of common stock are issuable. The obligation to issue shares of common stock was measured at a weighted average fair value of $0.46 per share on the date each series of shares became issuable. During the year ended June 30, 2015, $45,720 (June 30, 2014 - $14,760) was recorded as an obligation to issue shares within equity and as selling, general and administration in the consolidated statements of operations during. As of June 30, 2015, a total balance of $60,480 remains as an obligation to issue the shares.

Pursuant to an agreement dated September 25, 2014, the Company is obligated to issue 400,000 shares of common stock to settle accounts payable of $223,994. The obligation to issue shares was measured at a weighted average fair value of $0.56 per share on the date each series of shares became issuable. A total of $223,994 was recorded as an obligation to issue shares within equity.

During the year ended June 30, 2014, there was $20,000 received in subscriptions for 52,361 shares of common stock measured at a weighted average fair value of $0.38 per share. As a result, $20,000 was recorded as an obligation to issue shares within equity as of December 31, 2014. During the year ended June 30, 2015, the funds were refunded, and the related shares of common stock were cancelled.

Subscriptions

During the year ended June 30, 2015, $107,500 was received for 331,667 share purchase warrants exercised. A total of 331,667 shares were issued July 21, 2015.