Revision of Prior Period Amounts

12 Months Ended

Jul. 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 year ended July 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 year ended July 31, 2013 of $2,181,461 and $1,744,009 applicable to years prior to fiscal year 2013.

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 year ended July 31, 2013, the Company recognized an expense related to these warrants of $920,463, respectively. Therefore, there was a net understatement in stock-based compensation expense of $2,340,537 for the year ended July 31, 2013.

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 year ended July 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 results during the year ended July 31, 2013.

The above errors resulted to an increase in accumulated deficit and additional paid capital reported in the balance sheet as of July 31, 2013 by $6,266,007.

The impact of the above errors to the statement of operations for the year ended July 31, 2013 is as follows:

	As previously reported			Adjustments			As revised
Operating expenses
General and administrative		4,001,904			4,521,998			8,523,902
Research and development		282,670			-			282,670
Total operating expenses		4,284,574			4,521,998			8,806,572
Other income (expense)
Interest expense		(553,045	)		-			(553,045	)
Change in derivative		182,126			-			182,126
Total other income (expense)		(370,919	)		-			(370,919	)
Loss before provision for income taxes		(4,655,493	)		(4,521,998	)		(9,177,491	)
Provision for income taxes		-			-			-
Net loss		(4,655,493	)		(4,521,998	)		(9,177,491	)
Loss per common share:
Basic and diluted	$	(0.03	)		-		$	(0.06	)
Weighted average common shares outstanding
Basic and diluted		143,243,245			-			143,243,425

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 year ended July 31, 2013.