CAPITAL STOCK

12 Months Ended

Jul. 31, 2015

CAPITAL STOCK [Text Block]

NOTE 10: CAPITAL STOCK

Capital Stock

At July 31, 2015, the Company’s capital stock was 750,000,000 authorized common shares with a par value of $0.001 per share.

Equity Financing

During Fiscal 2014, the Company filed a Form S-3 “Shelf” Registration Statement effective January 10, 2014 (the “2014 Shelf”) providing for the public offer and sale of certain securities of the Company from time to time, at its discretion, up to an aggregate offering of $100 million.

On June 25, 2015, the Company completed a public offering of 5,000,000 units at a price of $2.00 per unit for gross proceeds of $10,000,000 pursuant to a prospectus supplement to the 2014 Shelf. Each unit was comprised of one share of common stock of the Company and one-half of one share purchase warrant, each whole warrant exercisable at a price of $2.35 for a three year period to purchase one share of common stock of the Company totaling 2,500,000 shares. The Company issued share purchase warrants to agents as part of share issuance costs to purchase 350,000 shares of common stock of the Company exercisable at a price of $2.35 per share for a three year period.

The shares were valued at the Company’s closing price of $1.60 at June 25, 2015. The share purchase warrants were valued using the Black-Scholes option pricing model with the following assumptions:

Expected Risk Free Interest Rate	1.06%
Expected Annual Volatility	71.23%
Expected Contractual Life in Years	3.00
Expected Annual Dividend Yield	0%

The net proceeds from the equity financing were allocated to the fair values of the shares and share purchase warrants as presented below:

Fair Value of Shares	$	8,000,000
Fair Value of Share Purchase Warrants		1,475,235
Total Fair Value Before Allocation to Net Proceeds	$	9,475,235
Gross Proceeds	$	10,000,000
Share Issuance Costs - Cash		(891,635	)
Net Cash Proceeds Received	$	9,108,365
Relative Fair Value Allocation to:
Shares	$	7,690,249
Share Purchase Warrants		1,418,116
	$	9,108,365

At July 31, 2015, a total of $16.7 million of the 2014 Shelf was utilized through public offers and sales of units ($10.0 million in gross proceeds through an offering of units consisting of the Company’s shares and share purchase warrants on June 25, 2015 and $6.7 million representing the aggregate exercise price of those share purchase warrants and agents’ share purchase warrants should they be exercised in full), for a remaining available balance of $83.3 million under the 2014 Shelf.

During Fiscal 2012, the Company filed a Form S-3 “Shelf” Registration Statement effective September 2, 2011 (the “2011 Shelf”) providing for the public offer and sale of certain securities of the Company from time to time, at its discretion, up to an aggregate amount of $50 million.

On October 23, 2013, the Company completed a public offering of 3,380,954 units at a price of $2.10 per unit for gross proceeds of $7,100,003 pursuant to a prospectus supplement to the 2011 Shelf. Each unit was comprised of one share of common stock of the Company and 0.55 of one share purchase warrant, each whole warrant exercisable at a price of $2.60 for a three year period to purchase one share of common stock of the Company totaling 1,859,524 shares.

The shares were valued at the Company’s closing price of $1.89 at October 23, 2013. The share purchase warrants were valued using the Black-Scholes option pricing model with the following assumptions:

Expected Risk Free Interest Rate	0.60%
Expected Annual Volatility	66.34%
Expected Contractual Life in Years	3.00
Expected Annual Dividend Yield	0%

The net proceeds from the equity financing were allocated to the fair values of the shares and share purchase warrants as presented below:

Fair Value of Shares	$	6,390,003
Fair Value of Share Purchase Warrants		627,775
Total Fair Value Before Allocation to Net Proceeds		7,017,778
Gross Proceeds		7,100,003
Share Issuance Costs		(567,880	)
Net Proceeds Received		6,532,123
Relative Fair Value Allocation to:
Shares		5,947,792
Share Purchase Warrants		584,331
	$	6,532,123

A total of $34.4 million of the 2011 Shelf was utilized through public offers and sales of shares and units ($22.5 million in gross proceeds through an offering of the Company’s shares on April 10, 2012, $7.1 million in gross proceeds through an offering of units consisting of the Company’s shares and share purchase warrants on October 23, 2013 and $4.8 million representing the aggregate exercise price of those share purchase warrants should they be exercised in full). The Company filed a further registration statement effective December 31, 2013 providing for the public offer and sale of certain securities of the Company representing an additional 20%, or $3.1 million, of the then remaining $15.6 million available under the 2011 Shelf, which increased the remaining amount available under the 2011 Shelf to $18.7 million.

On December 31, 2013, the Company filed a prospectus supplement to the 2011 Shelf, providing for the public offer and sale of the Company’s shares having an aggregate offering price of up to $18.7 million through one or more “at-the-market” offerings (the “ATM Offering”) pursuant to a Controlled Equity Offering^SM Sales Agreement effective December 31, 2013 between Cantor Fitzgerald & Co., as sales agent, and the Company. At July 31, 2014, no public offer and sale of the Company's shares was completed under the ATM Offering and transaction costs totaling $291,697 were recorded and included in the prepaid expenses and deposits on the Company’s consolidated balance sheets. During Fiscal 2015, a public offer and sale of 280,045 shares of the Company at a price of $1.70 per share for gross proceeds of $474,788 was completed under the ATM Offering.

The 2011 Shelf expired on September 2, 2014. As a result, no further public offer and sale of the Company’s shares may be completed through the ATM Offering under the 2011 Shelf.

Share Transactions

Period / Description	Common		Value per Share				Issuance
	Shares Issued		Low		High		Value
Balance, July 31, 2012	84,975,155
Debt Financing	407,239	$	2.35	$	2.35	$	1,065,400
Options Exercised (1)	459,891		0.33		0.45		46,464
Consulting Services	60,000		2.00		2.00		120,000
Everest Settlement Agreement	55,000		3.54		3.54		194,700
Yuty Settlement Agreement	75,000		2.54		2.54		190,500
Balance, July 31, 2013	86,032,285
Equity Financing	3,380,954		1.76		1.76		5,947,792
Extension Fees for Debt Amendment	100,000		1.74		1.74		174,347
Annual Fee Shares for Debt Facility	99,755		1.71		1.71		170,581
Bonus Adjustment Shares for Debt Facility	187,079		1.77		1.77		331,130
Consulting Services	635,303		1.06		2.41		1,101,932
Options Exercised (2)	470,492		0.33		0.45		27,401
Share Bonus	30,386		1.81		1.81		55,000
Advance Royalty for Workman Creek	30,304		1.15		1.15		34,850
Balance, July 31, 2014	90,966,558
Equity Financing	5,280,045		1.70		2.00		7,659,139
Consulting Services	1,108,390		1.07		2.90		1,851,074
Options Exercised (3)	304,657		0.33		1.32		24,550
Share Bonuses	174,437		1.35		1.35		235,490
Balance, July 31, 2015	97,834,087

(1)	406,615 options were exercised on a cashless basis resulting in 346,598 net shares issued.
(2)	631,250 options were exercised on a cashless basis resulting in 387,842 net shares issued.
(3)	535,000 options were exercised on a cashless basis resulting in 230,267 net shares issued.

Subsequent to July 31, 2015, the Company paid annual bonus shares through the issuance of 752,320 restricted shares of common stock with a fair value of $900,000, representing 4.5% of the $20,000,000 principal balance outstanding at July 31, 2015 under the Amended Credit Facility.

Share Purchase Warrants

A continuity schedule of exercisable and outstanding share purchase warrants for the underlying common shares at July 31, 2015, and the changes during the year, is presented below:

					Weighted Average
	Number of			Weighted Average	Remaining Contractual
	Warrants			Exercise Price	Term (Years)
Balance, July 31, 2012	1,558,812		$	4.95	1.45
Issued	2,600,000			2.50	5.00
Expired	(1,008,812	)		7.06	-
Balance, July 31, 2013	3,150,000			2.25	4.55
Issued	1,859,524			2.60	3.00
Balance, July 31, 2014	5,009,524			2.38	3.08
Issued	2,850,000			2.35	2.90
Balance, July 31, 2015	7,859,524		$	2.37	2.38

On March 13, 2014, as part of the terms of the Amended Credit Facility, the expiry date of the bonus warrants originally issued under the Credit Facility was extended by two years. These bonus warrants are comprised of share purchase warrants to purchase 2,600,000 shares of common stock of the Company exercisable at a price of $2.50 per share until expiry originally on July 30, 2016, extended to July 30, 2018. Refer to Note 8.

Stock Options

At July 31, 2015, the Company had one stock option plan, the 2015 Stock Incentive Plan (the “2015 Plan”). The 2015 Plan provides for 9,600,250 shares of the Company that may be issued pursuant to awards that may be granted and an additional 10,569,301 shares of the Company that may be issued pursuant to stock options previously granted under the Company’s prior 2014 Stock Incentive Plan (the “2014 Plan”). The 2015 Plan supersedes and replaces the Company’s prior 2014 Plan, which superseded and replaced the Company’s prior 2013, 2009 and 2006 Stock Option Plans, such that no further shares are issuable under these prior plans.

In September 2014, the Company granted stock options under the 2014 Plan to the Company’s directors, officers, employees and consultants to purchase a total of 7,540,000 shares of the Company exercisable at a price of $1.32 per share over a five-year term. These stock options are subject to an 18-month vesting provision whereby at the end of each of the first three, six, 12 and 18 months after the grant date, 25% of the total stock option grant becomes exercisable. The five-year contractual term is significantly different from the 10-year contractual term generally applicable to the stock options previously granted by the Company. Since no relevant historical information was available to provide a reasonable basis in estimating the expected life, the Company adopted the simplified method, being the mid-point of the average vesting date and the end of the contractual term, to estimate the expected life for these stock options.

A summary of stock options granted by the Company during Fiscal 2015, including corresponding grant date fair values and assumptions using the Black-Scholes option pricing model, is presented below:

	Options		Exercise	Term		Fair	Expected	Risk-Free	Dividend	Expected
Date	Issued		Price	(Years)		Value	Life (Years)	Interest Rate	Yield	Volatility
September 3, 2014	7,540,000	$	1.32	5	$	3,750,388	2.90	0.94%	0.00%	56.28%
January 19, 2015	50,000		1.20	5		25,430	2.90	0.77%	0.00%	64.54%
February 10, 2015	50,000		1.31	5		28,714	2.90	1.01%	0.00%	66.72%
Total	7,640,000				$	3,804,532

No stock options were granted during Fiscal 2014.

A continuity schedule of outstanding stock options for the underlying common shares at July 31, 2015, and the changes during the period, is presented below:

					Weighted Average
	Number of Stock			Weighted Average	Remaining Contractual
	Options			Exercise Price	Term (Years)
Balance, July 31, 2012	9,559,271		$	1.95	6.52
Issued	155,000			2.27	9.51
Exercised	(519,909	)		0.37	3.53
Expired	(42,673	)		5.37	-
Forfeited	(185,500	)		2.79	7.22
Balance, July 31, 2013	8,966,189			2.02	5.72
Exercised	(713,900	)		0.41	2.75
Expired	(41,575	)		4.85	-
Forfeited	(223,500	)		3.46	5.48
Balance, July 31, 2014	7,987,214			2.10	4.97
Issued	7,640,000			1.32	4.10
Exercised	(609,390	)		1.16	3.87
Expired	(15,599	)		5.13	-
Forfeited	(126,250	)		2.52	6.20
Cancelled	(4,294,000	)		2.59	5.59
Balance, July 31, 2015	10,581,975		$	1.38	3.68

In December 2014, the Company cancelled certain stock options previously granted to the Company’s directors, officers, employees and consultants to purchase a total of 4,294,000 shares of the Company exercisable at prices ranging from $2.25 to $5.65 per share with original contractual terms of 10 years.

At July 31, 2015, the aggregate intrinsic value under the provisions of ASC 718 of all outstanding stock options was estimated at $1,938,812 (vested: $1,859,037 and unvested: $79,775).

At July 31, 2015, unrecognized compensation cost related to non-vested stock options granted under the Company’s Stock Option Plans was $487,752 expected to be recognized over 0.51 years.

A summary of stock options outstanding and exercisable at July 31, 2015 is presented below:

	Options Outstanding			Options Exercisable
Range of Exercise Prices	Outstanding at		Weighted Average	Exercisable at		Weighted Average
	July 31, 2015		Exercise Price	July 31, 2015		Exercise Price
$0.33 to $0.70	1,901,801	$	0.41	1,901,801	$	0.41
$0.71 to $2.45	7,727,500		1.39	3,907,500		1.46
$2.46 to $5.90 (1)	952,674		3.30	952,674		3.30
	10,581,975	$	1.38	6,761,975	$	1.42

⁽¹⁾ Includes stock options to purchase 12,674 shares issued in connection with the acquisition of Cue, which were not issued pursuant to, and are not subject to the terms and conditions of, any of the Company’s stock option plans

Stock-Based Compensation

A summary of stock-based compensation expense for Fiscal 2015, 2014 and 2013 is presented below:

		Year Ended July 31,
		2015		2014			2013
Stock-Based Compensation for Consultants
Common stock issued for consulting services	$	1,851,074	$	1,101,932		$	120,000
Common stock issued for Yuty Settlement Agreement		-		-			190,500
Common stock issued for bonuses		18,000		-			-
Stock options issued to consultants		588,207		74,992			297,400
		2,457,281		1,176,924			607,900
Stock-Based Compensation for Management
Common stock issued for bonuses		105,998		55,000			-
Stock options issued to management		1,617,937		-			-
		1,723,935		55,000			-
Stock-Based Compensation for Employees
Common stock issued for bonuses		111,492		-			-
Stock options issued to employees		1,325,040		82,321			407,887
		1,436,532		82,321			407,887
Stock-based compensation charged to inventory		-		(4,795	)		(53,872	)
	$	5,617,748	$	1,309,450		$	961,915