Note 6. Capital Stock

Authorized Capital

Authorized capital stock consists of 50,000,000 common shares with par value of $0.01 per common share (June 30, 2016 – 50,000,000 common shares with par value $0.01 per common share).

On February 14, 2017, the Company issued 2,090,000 units at $1.75 per unit for aggregate gross proceeds of $3,657,500 in a non-brokered private placement funding with accredited investors. Each unit consists of one share of common stock and one warrant to purchase one-half of a share of common stock. Each warrant will have a two-year term and is exercisable at the following exercise prices: in the first year at $2.00 per share or in the second year at $2.25 per share. As a result of the issuance of units, the Company recorded an increase in the additional paid in capital of $3,532,256 which included a fair value for the warrants of $473,658 at the time of the transaction. The fair value of warrants issued during the nine months ended March 31, 2017 was estimated at the grant date using the Black-Scholes option pricing model using the following assumptions:

	2017			2016
Weighted average risk-free interest rate		0.83	%		—
Weighted-average volatility		55.21	%		—
Expected dividends	$	0.00			—
Weighted average expected term (years)		1.00			—
Weighted average fair value	$	0.45			—

At March 31, 2017 there were 17,779,954 common shares issued and outstanding (June 30, 2016 - 8,518,791 common shares).

Warrants

A summary of warrant activity as of March 31, 2017, and changes during the nine month period ended is presented below:

	Warrants		Weighted Average Exercise Price		Weighted- Average Remaining Contractual Term (Years)		Aggregate Intrinsic Value ($)
Outstanding at July 1, 2016		—	$	-		—		—
Issued		1,045,000		2.13		1.92		—
Outstanding at March 31, 2017		1,045,000	$	2.13		1.92		—

Stock Options and Stock Based Compensation

Paramount’s 2015 and 2016 Stock Incentive and Compensation Plans, which are stockholder-approved, permits the grant of stock options and stock to its employees for up to 1.569 million shares of common stock. Option awards are generally granted with an exercise price equal to the market price of Paramount’s stock at the date of grant and have contractual lives of 5 years. To better align the interests of its key executives and employees with those of its stockholders, a significant portion of those stock option awards will vest contingent upon meeting certain stock price appreciation performance goals. Option and stock awards provide for accelerated vesting if there is a change in control (as defined in the employee stock option plan).

The fair value of option awards that have market conditions are estimated on the date of grant using a Monte-Carlo Simulation valuation model. The award’s grant date fair value is determined by taking the average of the grant date fair values under each of many Monte Carlo trials. The key assumptions used in the simulations were as follows:

	2017			2016
Weighted average risk-free interest rate		1.26	%		—
Weighted average volatility		70.26	%		—
Weighted average fair value	$	1.22			—

The fair value of option awards that do not have market conditions are estimated on the date of grant using a Black-Scholes option valuation model that uses the assumptions noted in the following table. Because Black-Scholes option valuation models incorporate ranges of assumptions for inputs, those ranges are disclosed. Given Paramount’s short history as a public company, expected volatilities are based on, historical volatilities from five proxy companies’ stock. Paramount uses historical data to estimate option exercise and employee termination within the valuation model; separate groups of employees that have similar historical exercise behavior are considered separately for valuation purposes. The expected term of options granted is derived from the output of the option valuation model and represents the period of time that options granted are expected to be outstanding; the range given below results from certain groups of employees exhibiting different behavior. The risk-free rate for periods within the contractual life of the option is based on the U.S. Treasury yield curve in effect at the time of grant.

	2017			2016
Weighted average risk-free interest rate		1.26	%		—
Weighted-average volatility		70.26	%		—
Expected dividends	$	0.00			—
Weighted average expected term (years)		5.00			—
Weighted average fair value	$	1.23			—

A summary of option activity under the Stock Incentive and Compensation Plan as of March 31, 2017, and changes during the nine month period ended is presented below.

Options	Options		Weighted Average Exercise Price		Weighted- Average Remaining Contractual Term (Years)		Aggregate Intrinsic Value
Outstanding at July 1, 2016		995,000	$	1.53		—	$	-
Granted		50,000		2.12		—		—
Exercised		—		—		—		—
Forfeited or expired		—		—		—		—
Outstanding at March 31, 2017		1,045,000	$	1.56		3.31	$	139,300
Exercisable at March 31, 2017		680,005	$	1.58		3.36	$	92,868

A summary of the status of Paramount’s non-vested options as of July 1, 2016 and changes during the nine month period ended March 31, 2017 is presented below.

Non-vested Options	Options		Weighted- Average Grant- Date Fair Value
Non-vested at July 1, 2016		663,330	$	1.13
Granted		50,000		1.23
Vested		348,335		1.14
Forfeited		—		—
Non-vested at March 31, 2017		364,995	$	1.14

As of March 31, 2017, there was $60,089 of total unrecognized compensation cost related to non-vested share-based compensation arrangements granted under the employee share option plan. That cost is expected to be recognized over a weighted-average period of 0.51 years. The total fair value of share based compensation arrangements vested during the nine month period ended March 31, 2017 and 2016, was $351,236 and $nil, respectively.