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 (2017- 50,000,000 common shares with par value $0.01 per common share).

During the year-ended June 30, 2018, the Company issued 5,295,000 shares of its common stock. The issuance was a result of a public offering of 3,520,000 shares of common stock for gross proceeds of $4.9 million and of a private placement of 1,775,000 shares of common stock for gross proceeds of $2.5 million. Share issuance costs were $0.79 million for net proceeds of $6.6 million.

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.

At June 30, 2018 there were 23,074,954 common shares issued and outstanding (June 30, 2017 - 17,779,954 common shares).

Warrants

A summary of warrant activity as of June 30, 2018, and changes during year ended is presented below:

	Warrants		Weighted Average Exercise Price		Weighted- Average Remaining Contractual Term (Years)		Aggregate Intrinsic Value ($)
Outstanding at July 1, 2017		1,045,000	$	2.13		1.67		—
Issued		—		—		—		—
Outstanding at June 30, 2018		1,045,000	$	2.13		.67		—

Stock Options and Stock Based Compensation

Paramount’s 2015 and 2016 Stock Incentive and Compensation Plan, which is 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:

	2018			2017
Weighted average risk-free interest rate		0.00	%		1.26	%
Weighted-average volatility		0.00	%		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.

	2018			2017
Weighted average risk-free interest rate		2.54	%		1.26	%
Weighted-average volatility		67.16	%		70.26	%
Expected dividends		0.00			0.00
Weighted average expected term (years)		5			5
Weighted average fair value	$	0.78		$	1.23

A summary of option activity under the Stock Incentive and Compensation Plan as of June 30, 2018, and changes during the year then ended is presented below.

Options	Shares		Weighted Average Exercise Price		Weighted-Average Remaining Contractual Term		Aggregate Intrinsic Value ($)
Outstanding at July 1, 2017		1,045,000	$	1.54		3.02
Granted		523,995		1.37
Exercised		—		—
Forfeited or expired		—		—
Outstanding at June 30, 2018		1,568,995	$	1.50		2.86	$	—
Exercisable at June 30, 2018		1,011,666	$	1.54		1.95	$	—

A summary of the status of Paramount’s non-vested shares as of June 30, 2018 and changes during the year ended June 30, 2018 is presented below.

Nonvested Options	Shares		Weighted- Average Grant-Date Fair Value
Nonvested at July 1, 2017		33,334	$	1.23
Granted		523,995		0.78
Vested		—		—
Forfeited		—		—
Nonvested at June 30, 2018		557,329	$	0.79

As of June 30, 2018, there was $330,071 of total unrecognized compensation cost related to nonvested share-based compensation arrangements granted under the employee share option plan. That cost is expected to be recognized over a weighted-average period of 1.7 years. The total fair value of shares vested during the years ended June 30, 2018 and 2017, was $nil and $6,800, respectively.