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). At December 31, 2016 there were 15,689,954 common shares issued and outstanding (June 30, 2016- 8,518,791 common shares).

Stock Options and Stock Based Compensation

Paramount’s 2015 and 2016 Stock Incentive and Compensation Plans, which are shareholder-approved, permits the grant of share options and shares 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 shareholders, a significant portion of those share option awards will vest contingent upon meeting certain stock price appreciation performance goals. Option and share awards provide for accelerated vesting if there is a change in control (as defined in the employee share 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:

	2016			2015
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.

	2016			2015
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 December 31, 2016, and changes during the six 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 December 31, 2016		1,045,000	$	1.56		3.70	$	477,600
Exercisable at December 31, 2016		680,005	$	1.53		4.25	$	318,404

A summary of the status of Paramount’s non-vested shares as of July 1, 2016 and changes during the six month period ended December 31, 2016 is presented below.

Non-vested Options	Shares		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 December 31, 2016		364,995	$	1.14

As of December 31, 2016, there was $120,928 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 0.67 years. The total fair value of share based compensation arrangements vested during the six month period ended December 31, 2016 and 2015, was $351,236 and $nil, respectively.