Revision of Prior Period Amounts

6 Months Ended

Jan. 31, 2014

Revision of Prior Period Amounts [Abstract]

Revision of Prior Period Amounts

4. Revision of Prior Period Amounts

In preparing the Company's financial statements for the quarter ended October 31, 2013, the Company discovered and corrected errors related to the accounting of stock options issued to officers and a director in prior years which were either fully vested at the date of grant or with a vesting term ranging up to 9 years. The prior period financial statements amortized these costs over the contractual term as opposed to the vesting period. This error resulted in a misstatement in stock based compensation expense for the three and six months ended January 31, 2013 of $2,542,035 and $2,303,376,respectively.

Additionally, 72,500,000 in warrants were issued to officers on December 31, 2012 as part of their employment agreements. These warrants vested on that date and were determined to have a fair value of $3,261,000. During the three and six months ended January 31, 2013, the Company recognized an expense related to these warrants of $80,000 and $80,000, respectively. Therefore, there was a net understatement in stock-based compensation expense of $3,181,000 in both periods.

In accordance with SEC Staff Accounting Bulletin Nos. 99 and 108 ("SAB 99 and SAB 108"), the Company evaluated these errors and, based on an analysis of quantitative and qualitative factors, determined that they were immaterial to each of the reporting periods affected and, therefore, amendment of previously filed reports with the Securities and Exchange Commission was not required. However, if the adjustments to correct the cumulative effect of the aforementioned errors had been recorded in the six months ended January 31, 2014, the Company believes the impact would have been significant to the current quarter and would impact comparisons to prior periods. Therefore, as permitted by SAB 108, the Company revised in the current filing previously reported quarterly results during the three and six months ended January 31, 2013.

The impact of the above errors to the statement of operations for the six months ended January 31, 2013 are as follows:

	As previously reported			Adjustments			As revised
Revenues		-			-			-
Operating expenses
General and administrative		1,370,455			5,484,376			6,824,831
Research and development		149,691			-			149,691
Mineral interests		-			-			-
Total operating expenses		1,520,146			5,484,376			6,974,522
Other income (expense)
Interest expense		(254,754	)		-			(254,754	)
Change in derivative		81,804			-			81,804
Debt forgiveness		-			-			-
Total other income (expense)		(172,950	)		-			(172,950	)
Income (loss) before provision for income taxes		(1,693,095	)		(5,484,376	)		(7,147,472	)
Provision for income taxes		-			-			-
Net income (loss)		(1,693,095	)		(5,484,376	)		(7,147,472	)
Loss per common share:
Basic and diluted	$	(0.01	)		-		$	(0.06	)
Weighted average common shares outstanding
Basic and diluted		129,906,666			-			129,906,666

The impact of the above errors to the statement of operations for the three months ended January 31, 2013 are as follows:

	As previously reported			Adjustments			As revised
Revenues		-			-			-
Operating expenses
General and administrative		443,892			5,723,035			6,166,927
Research and development		74,550			-			74,550
Mineral interests		-			-			-
Total operating expenses		518,442			5,723,035			6,241,477
Other income (expense)
Interest expense		(109,333	)		-			(109,333	)
Change in derivative		60,652			-			60,652
Debt forgiveness		-			-			-
Total other income (expense)		(48,681	)		-			(48,681	)
Income (loss) before provision for income taxes		(567,123	)		(5,723,035	)		(6,290,158	)
Provision for income taxes		-			-			-
Net income (loss)		(567,123	)		(5,723,035	)		(6,290,158	)
Loss per common share:
Basic and diluted	$	(0.01	)		-		$	(0.05	)
Weighted average common shares outstanding
Basic and diluted		131,717,143			-			131,717,143

The above errors did not impact previously reported amounts of net cash used in operating activities, investing activities and financing activities as reported in the statements of cash flows for the six months ended January 31, 2013.