• Filing Date: 2012-12-13
  • Form Type: 10-Q
  • Description: Quarterly report
v2.4.0.6
Common Stock
6 Months Ended
Oct. 31, 2012
Common Stock [Text Block]
Note 5 Common Stock

Private Placement

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 common 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 common share of the Company at an exercise price of CDN$1.75 per share until December 14, 2012. In addition, the Company incurred $605,922 in share issue costs.

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 ($2.24) 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 common share of the Company’s common stock at an exercise price of $3.25 per share until June 19, 2014.

Stock Options

The Company has a stock option plan under which options to purchase common shares of the Company may be granted to employees, directors and consultants. Stock options entitle the holder to purchase common stock at a subscription price determined by the Board of Directors 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.

The maximum number of shares of common stock authorized by the stockholders and reserved for issuance by the Board of Directors of the Company under the 2010 Stock Option Plan is 6,860,000.

The Company has elected to use the Black-Scholes option pricing model to determine the fair value of stock options granted. In accordance with ASC 718 for employees, the compensation expense is amortized on a straight-line basis over the requisite service period which approximates the vesting period. Compensation expense for stock options granted to non-employees is amortized over the vesting period or, if none exists, over the service period. Compensation associated with unvested options granted to non-employees is remeasured on each balance sheet date using the Black-Scholes option pricing model.

The expected volatility of options granted has been determined using the method described under ASC 718 using the historical stock price. The expected term of options granted to employees in the current fiscal period has been determined utilizing the “simplified” method as prescribed by ASC 718 Share-Based Payment.

For non-employees, based on the Company’s history, the expected term of the options approximates the full term of the options. The risk-free interest rate is based on a treasury instrument whose term is consistent with the expected term of the stock options. The Company has not paid and does not anticipate paying dividends on its common stock; therefore, the expected dividend yield is assumed to be zero. In addition, ASC 718 requires companies to utilize an estimated forfeiture rate when calculating the expense for the period, whereas prior to the adoption of ASC 718 the Company recorded forfeitures based on actual forfeitures and recorded a compensation expense recovery in the period when the awards were forfeited. As a result, based on the Company’s experience, the Company applied an estimated forfeiture rate of 15% for the six month period ended October 31, 2012 and 2011 in determining the expense recorded in the accompanying consolidated statement of operations.

The weighted-average fair value of options granted during the six months ended October 31, 2012 was $2.90 (2011 - $nil). The weighted-average assumptions utilized to determine such values are presented in the following table:

      Six Months Ended  
      October 31, 2012     October 31, 2011  
  Risk-free interest rate   0.62%     n/a  
  Expected volatility   74.47%     n/a  
  Expected term   3.7 years     n/a  
  Dividend yield   0%     n/a  

The following is a summary of the status of the Company’s stock options as of October 31, 2012 and the stock option activity during the six months ended October 31, 2012:

            Weighted Average  
      Number of     Exercise Price  
      Options     per Share  
  Outstanding at April 30, 2012   3,925,979   $ 1.15  
  Granted   310,000   $ 2.90  
  Exercised   (132,292 ) $ 0.70  
  Expired   (12,000 ) $ 1.24  
  Forfeited/Cancelled   (176,812 ) $ 1.69  
  Outstanding at October 31, 2012   3,914,875   $ 1.28  
               
  Exercisable at October 31, 2012   2,414,785   $ 0.93  
  Exercisable at April 30, 2012   2,087,742   $ 0.85  

The following table summarizes information regarding stock purchase options outstanding as of October 31, 2012:

    Number of     Aggregate           Number of     Aggregate  
Exercise   Options     Intrinsic           Options     Intrinsic  
Price   Outstanding     Value     Expiry Date     Exercisable     Value  
$0.44   373,591   $   769,597     December 15, 2013     356,744   $   734,893  

$0.47
 
356,389
   
723,470
    December 13, 2012 to
September 26, 2016
   
356,389
   
723,470
 
$0.60   424,020     805,638     December 14, 2014     303,549     576,743  
$0.62   850,000     1,598,000     April 17, 2014     743,750     1,398,250  
$1.70   800,000     640,000     December 17, 2016     166,666     133,333  
$1.90   421,875     253,125     December 14, 2015     191,665     114,999  
                December 31, 2014 to              
$2.00   12,000     6,000     February 28, 2015     12,000     6,000  
$2.15   240,000     84,000     September 7, 2016     240,000     84,000  
$2.27   102,000     23,460     March 10, 2016     40,376     9,286  
$2.55   25,000         March 8, 2017     3,646      
$2.68   5,000         September 13, 2017          
$2.90   305,000         July 19, 2017          
October 31, 2012   3,914,875   $   4,903,290           2,414,785   $   3,780,974  
                               
April 30, 2012   3,925,979   $   6,751,493           2,087,742   $   4,213,032  

The aggregate intrinsic value in the preceding table represents the total intrinsic value, based on the Company’s closing stock price of $2.50 per share as of October 31, 2012 (April 30, 2012 – $2.87), 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 October 31, 2012 was 2,411,139 (April 30, 2012 – 2,087,742). The total intrinsic value of options exercised during the six months ended October 31, 2012 was $238,038 (2011 – $61,665). The grant date fair value of options vested during the six months ended October 31, 2012 was $320,694 (2011 – $112,474).

The following table summarizes information regarding the non-vested stock purchase options outstanding as of October 31, 2012.

            Weighted Average  
      Number of Options     Grant Date Fair Value  
  Non-vested options at April 30, 2012   1,838,237   $ 0.82  
  Granted   310,000   $ 1.54  
  Vested   (471,335 ) $ 0.68  
  Cancelled/Forfeited   (176,812 ) $ 0.90  
  Non-vested options at October 31, 2012   1,500,090   $ 1.00  

As of October 31, 2012 there was $1,295,925 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 2.94 years.

Employee and non-employee stock-based compensation amounts classified in the Company’s consolidated statements of operations for the three and six months ended October 31, 2012 and 2011 are as follows:

      Three Months Ended     Six Months Ended  
      October 31,     October 31,  
      2012     2011     2012     2011  
  Cost of sales $   8,797   $   8,875   $   17,636   $   17,919  
  Sales and marketing   73,072     26,906     127,007     35,872  
  Research and development   10,531     8,021     21,247     18,071  
  General and administrative   55,100     30,521     111,043     61,399  
  Total stock-option based compensation $   147,500   $   74,323   $   276,933   $   133,261  

Warrants

During the three months ended October 31, 2010, the Company entered into a warrant agreement with a customer whereby the Company issued 1,000,000 stock purchase warrants as part of a contract that the Company entered into with the customer. The fair value of 320,000 stock purchase warrants that was charged to revenue during the three months ended October 31, 2011 was $136,934. These warrants expired unexercised on July 30, 2012.

On May 17, 2012 and July 25, 2012, holders of warrants issued under a brokered private placement, exercised 50,000 warrants and 7,000 warrants respectively, at the original exercise price of $2.25 per common share. On October 25, 2012, a holder of warrants issued under a brokered private placement, exercised 110,103 warrants at the original exercise price of $1.75 per common share.

The following table summarizes information regarding the warrants outstanding as of October 31, 2012:

      Number of     Weighted Average        
      Warrants     Exercise Price     Expiry Dates  
  Warrants at April 30, 2012   2,793,105   $ 1.94     July 30, 2012 to June 14, 2013  
  Granted   732,500   $ 3.25     June 19, 2014  
  Exercised   (167,103 ) $ 1.92     June 14, 2013  
  Expired   (1,000,000 ) $ 1.50     July 30, 2012  
  Warrants at October 31, 2012   2,358,502   $ 2.54     December 14, 2012 to June 19, 2014  

Employee Stock Purchase Plan

Under the terms of the Employee Stock Purchase Plan (the “ESPP”), all regular salaried (non-probationary) employees may purchase up to 6% of their base salary in common shares of the Company at market price. The Company matches 50% of the shares purchased by issuing or purchasing in the market up to 3% of the respective employee’s base salary in shares.

A total of 700,000 shares have been reserved for issuance under the ESPP. As of October 31, 2012, a total of 556,401 (April 30, 2012 - 556,401) shares were available for issuance under the ESPP. During the six months ended October 31, 2012, nil shares (April 30, 2012 - 55,571) were sold or issued to employees under the ESPP.

Deferred Share Unit Plan

Under the terms of the Deferred Share Unit Plan (the “DSUP”), each deferred share unit is equivalent to one share of common stock. The maximum number of shares of common stock that may be reserved for issuance to any one participant pursuant to deferred share units granted under the DSUP and any share compensation arrangement is 5% of the number of shares of common stock of the Company outstanding at the time of reservation and, as applicable, any grants of deferred share units to any one participant may not exceed a value of $100,000 per annum on the date of grant. A deferred share unit (DSU) granted to a participant who is a director of the board of the Company shall vest immediately on the award date. A deferred share unit granted to a participant other than a director will generally vest as to one-third (1/3) of the number of deferred share units granted on the first, second and third anniversaries of the award date. Fair value of the DSU’s, which is based on the closing price of the Company’s common stock on the date of grant, is recorded as compensation expense over the vesting period.

A total of 2,500,000 shares have been reserved for issuance under the DSUP. During the six months ended October 31, 2012, 133,443 deferred share units were issued under the DSUP, of which 59,878 were granted to officers or employees and 73,565 were granted to non-employee directors. As of October 31, 2012, a total of 778,493 shares were available for issuance under the DSUP.

The following table summarizes the Company’s outstanding deferred share unit awards as of October 31, 2012, and changes during the period then ended:

            Weighted Average  
            Grant Date Fair  
      Number of DSU’s     Value Per Unit  
  DSU’s outstanding at April 30, 2012   1,588,064   $ 0.83  
  Granted   133,443   $ 2.90  
  Conversions        
  DSU’s outstanding at October 31, 2012   1,721,507   $ 1.01  

The following table summarizes information regarding the non-vested deferred share units outstanding as of October 31, 2012:

            Weighted Average  
            Grant Date Fair  
      Number of DSU’s     Value Per Unit  
  Non-vested DSU’s at April 30, 2012   334,337   $ 1.33  
  Granted   133,443   $ 2.90  
  Vested   (165,007 ) $ 2.06  
  Non-vested DSU’s at October 31, 2012   302,773   $ 1.63  

As of October 31, 2012 there was $361,356 (2011 – $441,035) of total unrecognized compensation cost related to unvested deferred share units awards. This unrecognized compensation cost is expected to be recognized over a weighted average period of 2.02 years (2011 – 2.49 years).

Employee and non-employee deferred share unit based compensation amounts classified in the Company’s consolidated statements of operations for the three and six months ended October 31, 2012 and 2011 are as follows:

      Three Months Ended     Six Months Ended  
      October 31,     October 31,  
      2012     2011     2012     2011  
  Sales and marketing $   4,167   $  –   $   8,334   $  –  
  Research and development   2,082         2,354      
  General and administrative   60,856     55,600     323,754     240,923  
  Total DSU-based compensation $   67,105   $   55,600   $   334,442   $   240,923