CAPITAL STOCK | 9 Months Ended |
Sep. 30, 2013 |
CAPITAL STOCK [Text Block] | ' |
6 | CAPITAL STOCK | | | | | | | | | | | | |
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| (a) | Authorized stock | | | | | | | | | | | |
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| | On July 2, 2013, the Board of Directors, through unanimous written consent, adopted a proposal to amend the Articles of Incorporation to increase the number of authorized shares of Common Stock to 500,000,000 shares and the number of authorized shares of Preferred Stock to 100,000,000 shares. The proposal was approved by the stockholders at the Annual General Meeting held on September 5, 2013. | | | | | | | | | | | |
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| (b) | Preferred stock | | | | | | | | | | | |
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| | During the year ended December 31, 2005, the Company designated shares of Series A preferred stock with a par value of $0.001 per share. Each share of preferred stock was convertible into one common share at any time at the holder’s option, subject to the adjustments to the conversion ratio. The adjustment to the conversion price of these preferred shares is based on the lowest of the share price of any common shares issued, the exercise price of any options granted or reprised, or any preferred shares issued after the issuance of these preferred shares. The preferred stock was unlisted, non-retractable and non-redeemable. The preferred stockholders were entitled to the number of votes equal to the number of whole shares of common stock into which the preferred stock are convertible. The preferred stockholders were further entitled to the same dividends and distributions as the common stockholders. | | | | | | | | | | | |
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| | On February 4, 2013, the Company filed with the Nevada Secretary of State a Certificate of Withdrawal of Certificate of Designations, Preferences and Rights of the Series A convertible preferred stock. The Company has no shares of Series A convertible preferred stock outstanding or authorized to be issued. | | | | | | | | | | | |
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| (c) | Common stock | | | | | | | | | | | |
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| | During the nine months ended September 30, 2013, the Company: | | | | | | | | | | | |
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| • | Issued 4,304,418 units for gross proceeds of $3,013,100 by way of a private placement priced at $0.70 per unit. Each unit consisted of one share of common stock and one-half warrant, each whole warrant exercisable at $0.90 per share until July 25, 2014. The Company paid commissions, finders and legal fees of $250,349. In addition, 215,221 compensation warrants were issued to agents. The terms and conditions of the agent warrants are essentially identical to the terms and conditions of the warrants sold to investors as part of the units, except that the agent warrants had an original expiration date of March 12, 2015. | | | | | | | | | | | |
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During the year ended December 31, 2012, the Company: |
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| • | Issued 584,500 shares of common stock to management, employees and consultants for past services at a weighted average fair value of $2.19 per share based on the market value at the time of the director’s approval. Total value of this share issuance was $1,280,055, and has been expensed to management fees, consulting fees, office expenses and consulting fees – directors and officers (Note 6(e)). The shares were granted under the 2010 Management Compensation Plan; | | | | | | | | | | | |
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| • | Issued 235,000 shares on the exercise of warrants at $0.50 per share and a further 790,000 shares of common stock on the exercise of stock options at $0.50 per share; | | | | | | | | | | | |
| • | Issued 1,536,248 units for gross proceeds of $2,611,622 by way of a private placement priced at $1.70 per unit. Each unit consisted of one share of common stock and one-half warrant, each whole warrant exercisable at $1.70 per share until March 31, 2014. The Company paid commissions of $216,067. In addition, 142,409 compensation warrants were issued to agents. The terms and conditions of the selling agent warrants are essentially identical to the terms and conditions of the warrants sold to investors as part of the Units; | | | | | | | | | | | |
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| • | Issued 1,000,000 shares of common stock at $1.50 per share for gross proceeds of $1,500,000 and paid a finder’s fee of $60,000 ; and | | | | | | | | | | | |
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| • | Issued 1,200,000 shares of common stock at $1.25 per share for gross proceeds of $1,500,000 and paid a finder’s fee of $60,000. | | | | | | | | | | | |
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| (d) | Stock options | | | | | | | | | | | |
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| | The Company has a stock option plan, adopted in 2005, and a Stock Option/Stock Issuance Plan, adopted in 2010, (individually the “2005 Plan” and the “2010 Plan”, respectively, and, collectively, the “Plans”). Under the Plans, the Company is authorized to grant options to executive officers and directors, employees and consultants of the Company. The 2005 Plan was originally authorized to grant 3,140,000 shares; the 2010 Plan was originally authorized to issue 4,901,740 shares, which amount is increased at the end of each year to represent 10% of the total outstanding shares at year-end, up to a maximum of 3,800,000. The terms of any stock options granted under the 2005 Plan may not exceed five years and the exercise price of any stock option granted may not be discounted below the maximum discount permitted under the policies of the Toronto Stock Exchange. The terms of any stock options granted under the 2010 Plan may not exceed ten years and the exercise price of any stock option plan is fixed by the plan administrator. | | | | | | | | | | | |
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| | The Company has also adopted a Management Compensation Plan for the benefit of officers, directors and employees of the Company. The pool will consist of 1% of the outstanding shares at the end of each year. | | | | | | | | | | | |
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| | During the nine months ended September 30, 2013, no stock options were granted . During the year ended December 31, 2012, options for 790,000 shares were exercised for gross proceeds of $395,000, and the Company granted 150,000 stock options to an officer. The options entitle the officer to purchase a total of 150,000 common shares of the Company at the price of $1.30 per common share exercisable for five years. | | | | | | | | | | | |
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| | The following table represents service-based stock option activity during the nine months ended September 30, 2013 and the year ended December 31, 2012: | | | | | | | | | | | |
| | | 30-Sep-13 | | | 31-Dec-12 | |
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| | | Number of | | | Exercise | | | Number of | | | Exercise | |
| | | Shares | | | Price | | | Shares | | | Price | |
| Outstanding - beginning of period | | 315,000 | | $ | 1.14 | | | 1,080,000 | | $ | 0.58 | |
| Granted | | - | | | - | | | 150,000 | | | 1.3 | |
| Expired | | (165,000 | ) | | 1 | | | (125,000 | ) | | 0.5 | |
| Exercised | | - | | | - | | | (790,000 | ) | | 0.5 | |
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| Outstanding – end of period | | 150,000 | | $ | 1.3 | | | 315,000 | | $ | 1.14 | |
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| Exercisable – end of period | | 150,000 | | $ | 1.3 | | | 315,000 | | $ | 1.14 | |
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As at September 30, 2013 and December 31, 2012, the following stock options were outstanding: |
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| | | | Exercise | | | September 30, | | | December 31, | | | |
| Expiry Date | | | Price | | | 2013 | | | 2012 | | | |
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| 23-Jun-13 | | $ | 1 | | | - | | | 165,000 | | | |
| 1-Oct-17 | | $ | 1.3 | | | 150,000 | | | 150,000 | | | |
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| | | | | | | 150,000 | | | 315,000 | | | |
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The 150,000 shares under option at September 30, 2013 were exercisable at a price of $1.30 per share and had a weighted average remaining contractual life of 4.01 years. |
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The shares under option at December 31, 2012 were in the following exercise price ranges: |
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| | | | | | | | | | | Weighted Average | | |
| | Weighted Average | | | Number of Shares | | | Aggregate Intrinsic | | | Remaining Contractual | | |
| | Exercise Price | | | under Option | | | Value | | | Life in Years | | |
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| $ | 1 | | | 165,000 | | $ | - | | | 0.23 | | |
| | 1.3 | | | 150,000 | | | - | | | 4.51 | | |
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| $ | 1.14 | | | 315,000 | | $ | - | | | 2.27 | | |
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| (e) | Stock-based compensation | | | | | | | | | | | |
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| | During the nine months ended September 30, 2013, $123,684 (2012 - $123,684) was recognized as stock- based compensation for the 2,000,000 management warrants issued to directors and officers in 2010 (Note 6(f)). The maximum stock-based compensation to be recognized is $944,959. The remaining unamortized balance of $347,857 (December 31, 2012 - $471,541) will be amortized through December 2015. These warrants were fair valued using a trinomial barrier pricing model with the following weighted average assumptions: exercise price of $1.50, risk-free interest rate of 1.89%, expected life of 3.4 years, an expected volatility factor of 75.90%, a dividend yield of 0.00% and a probability exercisability of 11%. The Company estimated the exercisability of these warrants using a Monte Carlo probability calculator. | | | | | | | | | | | |
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| | During the year ended December 31, 2012, in recognition of past service in prior years, the Company issued 584,500 shares of common stock at a fair value of $1,280,055 to management, employees and consultants, under the 2010 Management Compensation Plan. No such issuance has since been made. | | | | | | | | | | | |
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| | Total stock-based compensation recognized for shares issued and warrants granted for services for the nine months ended September 30, 2013 and 2012 was as follows: | | | | | | | | | | | |
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| | | 2013 | | | 2012 | | | | | | | |
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| Consulting fees | $ | - | | $ | 153,300 | | | | | | | |
| Consulting fees – directors and officers | | - | | | 607,725 | | | | | | | |
| Management fees | | 123,684 | | | 452,184 | | | | | | | |
| Office | | - | | | 190,530 | | | | | | | |
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| | $ | 123,684 | | $ | 1,403,739 | | | | | | | |
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| (f) | Warrants | | | | | | | | | | |
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| | During the year ended December 31, 2010, the Company issued 2,000,000 warrants to two officers and directors of the Company as compensation, as approved by the Board in January 2010 (Note 6(d)). These warrants are exercisable at $1.50 per share expiring December 31, 2015. These warrants vest only upon occurrence of one of the following events and are exercisable in full upon the first of the following events: | | | | | | | | | | |
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| | (i) | If on or before June 30, 2011 the closing price of the common stock of the Company is at least $2.00 per share for five consecutive trading days (this vesting condition was not met); | | | | | | | | | | |
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| | (ii) | If on or before December 31, 2012 the closing price of the common stock of the Company is at least $2.50 per share for five consecutive trading days (this vesting condition was not met); and | | | | | | | | | | |
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| | (iii) | If on or before December 31, 2015 the closing price of the common stock of the Company is at least $3.00 per share for five consecutive trading days. | | | | | | | | | | |
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| | These prices are subject to reasonable adjustment upon occurrence of certain conditions, as defined in the warrant indenture. | | | | | | | | | | | |
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| | During the nine months ended September 30, 2013, the Company issued warrants to purchase 2,152,216 shares of common stock, as part of a private placement offering (Note 6(c)). Each whole warrant is exercisable at $0.90 per share until July 25, 2014. In addition, 215,221 compensation warrants were issued to agents. The terms and conditions of the agent warrants are identical to the terms and conditions of the warrants sold to investors as part of the Units, except that the agent warrants had an original expiration date of March 12, 2015. | | | | | | | | | | | |
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| | On September 5, 2013, the Board of Directors amended all outstanding warrants (except those held by member of management) to extend the expiration date of the warrants to December 31, 2015. | | | | | | | | | | | |
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| | Details of stock purchase warrant activity is as follows: | | | | | | | | | | | |
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| | | 30-Sep-13 | | | 31-Dec-12 | |
| | | | | | Weighted | | | | | | Weighted | |
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| | | Number | | | Exercise | | | Number | | | Exercise | |
| | | of Warrants | | | Price | | | of Warrants | | | Price | |
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| Outstanding - beginning of period | | 4,716,862 | | $ | 1.22 | | | 4,041,383 | | $ | 1.07 | |
| Correction to opening balance | | - | | | - | | | (55 | ) | | 1.07 | |
| Issued | | 2,367,437 | | | 0.9 | | | 910,534 | | | 1.7 | |
| Exercised | | - | | | - | | | (235,000 | ) | | 0.5 | |
| Expired | | (36,000 | ) | | (1.18 | ) | | - | | | - | |
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| Outstanding - end of period | | 7,048,299 | | $ | 1.11 | | | 4,716,862 | | $ | 1.22 | |
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As at September 30, 2013 and December 31, 2012, the following share purchase warrants were outstanding: |
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| | | | | | | September 30, | | | December 31, | | | |
| Expiry Date | | | Exercise Price | | | 2013 | | | 2012 | | | |
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| 19-Jan-13 | | $ | 1.18 | | | - | | | 36,000 | | | |
| 31-Dec-15 | | $ | 0.65 | | | 1,770,328 | | | 1,770,328 | | | |
| 31-Dec-15 | | $ | 1.70 | * | | 910,534 | | | 910,534 | | | |
| 31-Dec-15 | | $ | 0.9 | * | | 2,152,216 | | | - | | | |
| 31-Dec-15 | | $ | 0.9 | * | | 215,221 | | | - | | | |
| 31-Dec-15 | | $ | 1.5 | | | 2,000,000 | | | 2,000,000 | | | |
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| | | | | | | 7,048,299 | | | 4,716,862 | | | |
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*Subsequent to the period end, these warrants were re-priced to $0.65. |