Common Stock

9 Months Ended

Jan. 31, 2015

Common Stock [Text Block]

Note 5 Common Stock

Stock Options

The Company has a stock option plan (the “2010 Stock Option Plan”) under which options to purchase shares of the Company’s common stock may be granted to employees, directors and consultants. Stock options entitle the holder to purchase shares of the Company’s common stock at an exercise price determined by the board of directors (the “Board”) of the Company at the time of the grant. The options generally vest in the amount of 12.5% on the date which is six months from the date of grant and then beginning in the seventh month at 1/42 per month for 42 months, at which time the options are fully vested.

On September 9, 2014, the maximum number of shares of common stock authorized by the stock holders and reserved for issuance by the Board under the 2010 Stock Option Plan was increased from 6,860,000 to 7,860,000.

The Company uses the Black-Scholes option pricing model to determine the fair value of stock options granted. The Company applied an estimated forfeiture rate of 15% for the nine months ended January 31, 2015 and 2014 in determining the expense recorded in the accompanying consolidated statement of operations.

For the majority of the stock options granted, the number of shares issued on the date the stock options are exercised is net of the minimum statutory withholding requirements that the Company pays in cash to the appropriate taxing authorities on behalf of its employees. Although these withheld shares are not issued or considered common stock repurchases under our authorized plan they are treated as common stock repurchases in our consolidated financial statements, as they reduce the number of shares that would have been issued upon vesting.

The weighted-average fair value of options granted during the three and nine months ended January 31, 2015 and 2014 was $0.78 and $1.12, respectively, and $0.63 and $0.79, respectively. The weighted-average assumptions utilized to determine such values are presented in the following table:

	Three Months Ended		Nine Months Ended
	January 31,		January 31,
	2015	2014	2015	2014
Risk-free interest rate	1.53%	1.58%	1.67%	1.61%
Expected volatility	54.50%	70.32%	57.50%	68.09%
Expected term	3.7 years	3.7 years	3.7 years	3.7 years
Dividend yield	0%	0%	0%	0%

The following is a summary of the status of the Company’s stock options as of January 31, 2015 and the stock option activity during the nine months ended January 31, 2015:

	Weighted Average
	Number of			Exercise Price
	Options			per Share
Outstanding at April 30, 2014	3,705,539		$	1.62
Granted	871,000		$	1.12
Exercised (1)	(334,731	)	$	0.60
Forfeited/Cancelled	(481,225	)	$	1.40
Outstanding at January 31, 2015	3,760,583		$	1.62
Exercisable at January 31, 2015	1,916,875		$	1.79
Exercisable at April 30, 2014	1,767,621		$	1.60

(1) 332,356 were cashlessly exercised upon which 67,892 shares of common stock were issued.

The following table summarizes stock options outstanding as of January 31, 2015:

	Number of		Aggregate		Number of		Aggregate
	Options		Intrinsic		Options		Intrinsic
Exercise Price	Outstanding		Value	Expiry Date	Exercisable		Value
				August 21, 2015 to
$0.47	122,750	$	31,719	September 26, 2016	122,750	$	31,719
$0.78	34,000		–	December 12, 2019	–		–
$1.05	137,000		–	September 12, 2019	–		–
$1.15	700,000		–	July 11, 2019	87,500		–
$1.23	20,833		–	January 13, 2019	20,833		–
$1.31	600,000		–	December 12, 2018	162,500		–
$1.41	100,000		–	October 1, 2018	31,250		–
$1.70	650,000		–	December 14, 2016	501,042		–
				December 14, 2015 to
$1.90	845,000		–	July 25, 2018	554,375		–
$2.00	6,000		–	February 28, 2015	6,000		–
$2.15	240,000		–	September 7, 2016	240,000		–
$2.90	305,000		–	July 19, 2017	190,625		–
January 31, 2015	3,760,583	$	31,719		1,916,875	$	31,719
April 30, 2014	3,705,539	$	353,637		1,767,621	$	332,137

The aggregate intrinsic value in the preceding table represents the total intrinsic value, based on the Company’s closing stock price of $0.73 per share as of January 31, 2015 (April 30, 2014 – $1.25), which would have been received by the option holders had all option holders exercised their options as of that date. The total number of in-the-money options vested and exercisable as of January 31, 2015 was 122,750 (April 30, 2014 – 485,726). The total intrinsic value of options exercised during the nine months ended January 31, 2015 was $66,525 (2014 – $355,254). The grant date fair value of options vested during the three and nine months ended January 31, 2015 was $189,156 (January 31, 2014 - $168,160) and $542,569 (January 31, 2014 - $448,234).

The following table summarizes non-vested stock purchase options outstanding as of January 31, 2015.

				Weighted
	Number of			Average Grant
	Options			Date Fair Value
Non-vested options at April 30, 2014	1,937,918		$	0.87
Granted	871,000		$	0.49
Vested	(622,293	)	$	0.87
Cancelled/Forfeited	(342,917	)	$	0.68
Non-vested options at January 31, 2015	1,843,708		$	0.72

As of January 31, 2015, there was $1,105,444 of total unrecognized compensation cost related to unvested share-based compensation awards. This unrecognized compensation cost is expected to be recognized over a weighted average period of 2.5 years.

Employee and non-employee stock-based compensation amounts classified in the Company’s consolidated statements of operations for the three and nine months ended January 31, 2015 and 2014 are as follows:

		Three Months Ended				Nine Months Ended
		January 31,				January 31,
		2015		2014		2015		2014
Cost of sales	$	22,617	$	18,189	$	58,704	$	45,027
Sales and marketing		86,265		72,517		212,699		269,790
Research and development		21,014		15,339		51,026		39,876
General and administrative		59,390		50,682		180,411		121,252
Total stock-option based compensation		189,286	$	156,727	$	502,840	$	475,945

Warrants

On June 14, 2011, the Company issued an aggregate of 3,145,800 units under a brokered private placement for aggregate gross proceeds of $5,636,170 (CDN$5,505,150) at a price of $1.79 (CDN$1.75) per unit, with each unit consisting of one share of the Company’s common stock and one-half of one common share purchase warrant, with each whole warrant entitling the holder to purchase one additional share of the Company’s common stock at an exercise price of CDN$2.25 per share until June 14, 2013. In connection with the offering, the Company issued an aggregate of 220,206 broker warrants, with each broker warrant entitling the holder thereof to purchase one share of the Company’s common stock at an exercise price of CDN$1.75 per share until December 14, 2012.

On June 19, 2012, the Company issued an aggregate of 1,465,000 units under a non-brokered private placement for aggregate gross proceeds of CDN$3,662,500 ($3,579,335) at a price of CDN$2.50 ($2.44) per unit, with each unit consisting of one share of the Company’s common stock and one-half of one common share purchase warrant, with each whole warrant entitling the holder to purchase one additional share of the Company’s common stock at an exercise price of $3.25 per share until June 19, 2014. The 732,500 warrants issued expired unexercised on June 20, 2014.

Following the guidance in ASC 815-40-15, the Company recorded the warrants issued on June 19, 2012 as derivative instruments due to their exercise price being denominated in a currency other than the Company’s U.S. dollar functional currency. The fair value of the derivative instruments was revalued at the end of each reporting period, and the change in fair value of the derivative instruments was recorded as a gain or loss in the Company’s consolidated statements of operations.

The warrant liability was accounted for at its fair value as follows:

		January 31,		April 30,
		2015		2014
Opening balance at the beginning of the period/year	$	–	$	93,057
Fair value of warrant liability, at issuance		–		–
Change in fair value of warrant liability		–		(93,057	)
Fair value of warrants exercised during the period/year		–		–
Fair value of warrant liability at end of period/year	$	–	$	–

The Company used the Binomial Method to estimate the fair value of the warrants with the following assumptions:

			As at the date of
	As at	As at	issuance
	January 31, 2015	April 30, 2014	June 14, 2011
Risk-free interest rate	–	–	1.60%
Expected volatility	–	–	70%
Expected term	–	–	1.5 years to 2 years
Dividend yield	–	–	0%

The fair value of the warrants were classified as a derivative liability until such time as they were exercised or expired. The balance of unexercised warrants expired on June 14, 2013, and the balance in the liability account of $93,057 has been recorded as a gain in the Company’s consolidated statement of operations for the year ended April 30, 2014.

The following table summarizes warrants outstanding as of January 31, 2015:

	Number of			Weighted Average
	Warrants			Exercise Price	Expiry Dates
Warrants at April 30, 2014	732,500		$	3.25	June 19, 2014
Granted	–			–	–
Exercised	–			–	–
Expired	(732,500	)	$	3.25	–
Warrants at January 31, 2015	–			–	–

Employee Stock Purchase Plan

Under the terms of the Employee Stock Purchase Plan (the “ESPP”) all regular salaried (non-probationary) employees can purchase up to 6% of their base salary in shares of the Company’s common stock at market price. The Company will match 50% of the shares purchased by issuing or purchasing in the market up to 3% of the respective employee’s base salary in shares. During the nine months ended January 31, 2015, the Company matched $43,516 (2014 - $38,333) in shares purchased by employees under the ESPP. During the nine months ended January 31, 2015, 136,749 shares (2014 – 75,438) were purchased on the open market under the ESPP.

A total of 700,000 shares have been reserved for issuance under the ESPP. As of January 31, 2015, a total of 556,401 shares were available for issuance under the ESPP.

Normal Course Issuer Bid Plan

Pursuant to a normal course issuer bid (“NCIB”) commencing on March 19, 2013 (expiring March 18, 2014), the Company was authorized to purchase 2,462,365 of its shares of common stock through the facilities of the Toronto Stock Exchange (the “TSX”) and other Canadian or US marketplaces. The NCIB was renewed on March 19, 2014 (expiring March 18, 2015) and the Company was authorized to purchase 2,458,153 of shares of common stock. During the period from March 19, 2013 to March 18, 2014, the Company repurchased 180,870 shares at an average price of $1.53 (CDN$1.61) for a total of $276,731 and during the period from March 19, 2014 to January 31, 2015, the Company repurchased 346,326 shares at an average price of $0.95 (CDN$1.06) for a total of $327,525. As of January 31, 2015, a total of 552,240 shares have been cancelled and the remaining 77,044 repurchased shares are in the process of being cancelled since the NCIB was initiated.

Deferred Share Unit Plan

Under the terms of the Deferred Share Unit Plan (the “DSUP”), each DSU is equivalent to one common share. The maximum number of common shares that may be reserved for issuance to any one participant pursuant to DSUs granted under the DSUP and any share compensation arrangement is 5% of the number of shares outstanding at the time of reservation. A DSU granted to a participant who is a director of the Company shall vest immediately on the award date. A DSU granted to a participant other than a director will generally vest as to one-third (1/3) of the number of DSUs granted on the first, second and third anniversaries of the award date. Fair value of the DSUs, which is based on the closing price of the shares of the Company’s common stock on the date of grant, is recorded as compensation expense over the vesting period.

On September 9, 2014, the shares reserved for issuance under the DSUP plan was increased from 2,500,000 to 3,000,000. During the nine months ended January 31, 2015, 326,613 (2014 - 191,066) DSUs were issued under the DSUP, of which 145,161 were granted to officers or employees and 181,452 were granted to non-employee directors. As of January 31, 2015, a total of 760,814 shares were available for issuance under the DSUP.

The following table summarizes the Company’s outstanding DSU awards as of January 31, 2015, and changes during the period then ended:

			Weighted
			Average Grant
			Date Fair
	Number of DSUs		Value Per Unit
DSUs outstanding at April 30, 2014	1,672,434	$	1.09
Granted	326,613	$	1.17
Conversions	–		–
DSUs outstanding at January 31, 2015	1,999,047	$	1.10

The following table summarizes information regarding the non-vested DSUs outstanding as of January 31, 2015:

				Weighted
				Average Grant
				Date Fair
	Number of DSUs			Value Per Unit
Non-vested DSUs at April 30, 2014	156,778		$	2.16
Granted	326,613		$	1.17
Vested	(231,701	)	$	1.52
Non-vested DSUs at January 31, 2015	251,690		$	1.47

As of January 31, 2015, there was $271,380 (2014 – $242,905) of total unrecognized compensation cost related to unvested DSU awards. This unrecognized compensation cost is expected to be recognized over a weighted average period of 1.46 years (2014 – 1.81 years).

Employee and non-employee DSU based compensation amounts classified in the Company’s consolidated statements of operations for the three and nine months ended January 31, 2015 and 2014 are as follows:

		Three Months Ended				Nine Months Ended
		January 31,				January 31,
		2015		2014		2015		2014
Sales and marketing	$	–	$	6,667	$	1,667	$	20,001
Research and development		2,082		2,082		6,246		6,246
General and administrative		41,974		45,507		292,709		345,834
Total DSU-based compensation	$	44,056	$	54,256	$	300,622	$	372,081