Note 8 - Share Capital and Additional Paid-in Capital | 9 Months Ended |
Sep. 30, 2013 |
Stockholders' Equity Note [Abstract] | ' |
Stockholders' Equity Note Disclosure [Text Block] | ' |
8. SHARE CAPITAL AND ADDITIONAL PAID-IN CAPITAL |
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[a] Authorized - Unlimited common shares without par value. |
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[b] Issued |
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The Company’s issued and outstanding common shares were consolidated on the basis of every twenty (20) common shares being consolidated into one (1) common share during 2012. Refer to note 2 for discussion of the effect of this stock consolidation. |
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The Company closed a shareholder rights offering on December 29, 2011 consisting of 4,506,395 units, with each unit consisting of one common share and one common share purchase unit at a price of $1.492 per share for total gross proceeds of $6,723,542. |
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Each warrant entitles the holder thereof to purchase one-twentieth common share of the Company at a price of $1.492 per whole common share for a period of five years after the closing date. Each warrant may only be exercised on a net cashless exercise basis, and no warrant may be exercised at a time when the exercise price equals or exceeds the current market price. Subject to certain exceptions, the holders of the warrants will be entitled to full ratchet anti-dilution price protection for a period of two years after the closing of the offering and volume weighted anti-dilution price protection thereafter. The Company accounts for warrants under the authoritative guidance on accounting for derivative financial instruments. As a result of these price protection features, the Company has classified these warrants on the accompanying balance sheet as a liability that is revalued at each balance sheet date subsequent to the initial issuance in accordance with ASC 815. On the date of issuance, the Company used the Black-Scholes pricing model to value these warrants based on an assumed risk-free interest rate of 1.18%, estimated stock price volatility of 110%, and a contractual term to expiry of five years. Subsequent changes in the fair value of the warrants between the date of issuance and the balance sheet date are reflected in the consolidated statements of loss and comprehensive loss as unrealized gain (loss) on revaluation of warrant liability. |
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The net proceeds of the rights offering were $6,037,803 after deducting issue costs of $685,739. Of these net proceeds, $2,330,921 was allocated to common shares and $3,706,882 was allocated to the warrants. Further, of this amount allocated to the warrants, $4,127,888 was recorded as warrant liability and $421,008 of issue costs allocated to the warrants was expensed to warrant issue costs on the consolidated statements of loss and comprehensive loss. |
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[c] Stock option plan |
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At the Annual General Meeting held September 3, 2008, the Company’s shareholders approved a new stock option plan (“2008 Plan”). Under the plan, the Company may grant options to purchase common shares in the Company to employees, directors, officers and consultants of the Company. The exercise price of the options is determined by the Board but is equal to the fair market value of the common shares at the grant date. The Company estimates the fair value of options on the date of the grant. The options vest over the requisite service period in accordance with terms as determined by the Board, typically over four years. Stock options expire no later than ten years from the date of grant. |
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At the Annual General and Special Meeting held on June 18, 2013, the Company’s shareholders’ approved a change to the maximum number of the Company’s authorized shares under its 2008 stock option plan permitting a maximum of 20% of the issued and outstanding common shares outstanding at any point in time. |
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Of the 1,315,532 stock options authorized for grant under the 2008 Plan as at September 30, 2013, 172,763 stock options are available for grant. |
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Stock option transactions and the number of stock options outstanding are summarized below: |
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| | Number of optioned | | | Weighted average | | | | | | | | | | | | | | | | | | |
common shares | exercise price | | | | | | | | | | | | | | | | | |
| | # | | | | $ | | | | | | | | | | | | | | | | | | |
Balance at December 31, 2012 | | | 989,064 | | | | 1.98 | | | | | | | | | | | | | | | | | | |
Options granted | | | 207,670 | | | | 3.09 | | | | | | | | | | | | | | | | | | |
Options forfeited | | | (53,402 | ) | | | 2.24 | | | | | | | | | | | | | | | | | | |
Options expired | | | (563 | ) | | | 133.49 | | | | | | | | | | | | | | | | | | |
Balance, September 30, 2013 | | | 1,142,769 | | | | 2.11 | | | | | | | | | | | | | | | | | | |
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At September 30, 2013, the following stock options were outstanding: |
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| Range of | | | Number of | | | Weighted average | | | Weighted average | | | Number of options | | | Weighted average | |
exercise price | shares under | remaining | exercise price | currently | exercise price |
| option | contractual life | | exercisable | |
| | $ | | | # | | | (years) | | | | $ | | | # | | | | $ | |
| | 1.02 | - | 1.6 | | | | 509,316 | | | | 8.9 | | | | 1.53 | | | | 143,557 | | | | 1.57 | |
| | | | 2.2 | | | | 430,878 | | | | 8.51 | | | | 2.2 | | | | 343,138 | | | | 2.2 | |
| | 3 | - | 3.10 | | | | 198,270 | | | | 9.47 | | | | 3.09 | | | | - | | | | - | |
| | 6.8 | - | 8.2 | | | | 2,036 | | | | 2.35 | | | | 7.75 | | | | 666 | | | | 7.86 | |
| | 23 | - | 24 | | | | 2,269 | | | | 0.81 | | | | 23.38 | | | | 1,782 | | | | 23.48 | |
| | 1.02 | - | 24 | | | | 1,142,769 | | | | 8.82 | | | | 2.11 | | | | 489,143 | | | | 2.1 | |
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The fair value of each stock award is estimated on the grant date using the Black-Scholes option-pricing model based on the assumptions noted in the following table: |
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Nine Months Ended September 30, | | 2013 | | | 2012 | | | | | | | | | | | | | | | | | | |
Risk-free interest rates | | | 1.66 | % | | | 1.69 | % | | | | | | | | | | | | | | | | | |
Expected dividend yield | | | 0 | % | | | 0 | % | | | | | | | | | | | | | | | | | |
Expected life (in years) | | | 5.74 | | | | 5.95 | | | | | | | | | | | | | | | | | | |
Expected volatility | | | 123 | % | | | 113 | % | | | | | | | | | | | | | | | | | |
Fair value per stock option | | | $2.68 | | | | $1.59 | | | | | | | | | | | | | | | | | | |
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[d] Restricted share unit plan |
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At the Annual General and Special Meeting held on June 18, 2013, the Company’s shareholders approved a new restricted share unit plan (“RSU Plan”). Under the plan, the Company may grant Restricted Share Units (“RSUs”) to employees, directors, and eligible consultants which entitle each participant to either one common share of the Company on a time vested basis or a cash payout equal to the number of vested RSUs multiplied by the then current market value of the RSUs. The fair market value of the RSUs is determined based upon the number of RSUs granted and the quoted closing price of the Company’s stock on the trading day immediately preceding the date of determination. The duration of the vesting period and other vesting terms applicable to the grant of the RSUs shall be determined by the Board. |
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| | Number | | | Weighted average | | | | | | | | | | | | | | | | | | |
of RSUs | grant price | | | | | | | | | | | | | | | | | |
| | # | | | | | | | | | | | | | | | | | | | | | | |
Balance at December 31, 2012 | | | - | | | | - | | | | | | | | | | | | | | | | | | |
RSUs granted | | | 53,258 | | | | 2.54 | | | | | | | | | | | | | | | | | | |
Balance, September 30, 2013 | | | 53,258 | | | | 2.54 | | | | | | | | | | | | | | | | | | |
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The restricted share units that were granted during the nine month period ended September 30, 2013 were to settle a director compensation liability that was recorded in Accounts payable and accrued liabilities. The $135,000 liability has been excluded from the change in accounts payable and accrued liabilities on the statement of cash flows. |
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Of the 164,441 RSUs authorized for grant under the RSU Plan as at September 30, 2013, 111,183 RSUs are available for grant. |
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[e] Deferred share unit plan |
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At the Annual General and Special Meeting held on June 18, 2013, the Company’s shareholders approved a new non-employee director deferred share unit plan (“DSU Plan”). A Deferred Share Unit (“DSU”) is a right granted to non-employee directors which entitle each participant to either one common share of the Company on a time vested basis or a cash payout equal to the number of DSUs multiplied by the then current market value of the DSUs. The fair market value of the DSU’s is determined based upon the number of DSUs granted and the quoted price of the Company’s stock on the trading day immediately preceding the determination date. The duration of the vesting period and other vesting terms applicable to the grant of the DSU’s shall be determined by the Board. |
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Of the 164,441 DSUs authorized for grant under the DSU Plan as at September 30, 2013, all are available for grant. |
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[f] Share-based compensation |
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The following table shows share-based compensation allocated by type of cost (in thousands): |
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| | Three Months Ended | | | Nine Months Ended | | | | | | | | | | |
September 30, | September 30, | | | | | | | | | |
| | 2013 | | | 2012 | | | 2013 | | | 2012 | | | | | | | | | | |
| | | $ | | | | $ | | | | $ | | | | $ | | | | | | | | | | |
Cost of sales | | | 8 | | | | 3 | | | | 24 | | | | 19 | | | | | | | | | | |
Research and development | | | 12 | | | | 8 | | | | 34 | | | | 38 | | | | | | | | | | |
General and administrative | | | 160 | | | | 75 | | | | 422 | | | | 430 | | | | | | | | | | |
Sales and marketing | | | 10 | | | | 3 | | | | 26 | | | | 5 | | | | | | | | | | |
| | | 190 | | | | 89 | | | | 506 | | | | 492 | | | | | | | | | | |
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As of September 30, 2013, the total compensation expense to be recognized in future periods related to stock options granted amounts to $913,000, which is expected to be recognized over a weighted average service period of 2.26 years. |
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[g] Common share purchase warrants |
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Common share purchase warrant transactions and the number of warrants outstanding are summarized below: |
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| | Number of | | | Weighted average | | | | | | | | | | | | | | | | | | |
warrants | exercise price | | | | | | | | | | | | | | | | | |
| | # | | | | $ | | | | | | | | | | | | | | | | | | |
Balance, December 31, 2012 | | | 89,976,289 | | | | 0.0746 | | | | | | | | | | | | | | | | | | |
Exercise of warrants | | | (3,872,545 | ) | | | 0.0746 | | | | | | | | | | | | | | | | | | |
Balance, September 30, 2013 | | | 86,103,744 | | | | 0.0746 | | | | | | | | | | | | | | | | | | |
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As discussed in note 2, each warrant entitles the holder thereof to purchase 1/20th of a common share of the Company at a price of $1.492 per whole common share. |
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The estimated fair value of warrants issued is reassessed at each balance sheet date using the Black-Scholes option pricing model. The following assumptions were used to value the warrants on the following balance sheet dates: |
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| | 30-Sep-13 | | | 31-Dec-12 | | | | | | | | | | | | | | | | | | |
Risk-free interest rates | | | 1.69 | % | | | 1.33 | % | | | | | | | | | | | | | | | | | |
Expected dividend yield | | | 0 | % | | | 0 | % | | | | | | | | | | | | | | | | | |
Expected life (in years) | | | 3.25 | | | | 4 | | | | | | | | | | | | | | | | | | |
Expected volatility | | | 132 | % | | | 128 | % | | | | | | | | | | | | | | | | | |
Fair value of warrant | | $ | 0.1067 | | | $ | 0.0411 | | | | | | | | | | | | | | | | | | |
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[h] Earnings per common share |
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Basic net income per share is computed by dividing the net income attributable to common shareholders by the weighted average number of common shares outstanding during the period. Diluted net income per share is computed by dividing the net income attributable to common shareholders by the weighted average number of common shares that would have been outstanding during the period assuming the issuance of common shares for all potential dilutive common shares outstanding using the treasury stock method. Dilutive potential common shares outstanding include outstanding warrants, stock options, and restricted share units. |
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86,103,744 warrants, 1,142,769 stock options and 53,258 restricted share units have been excluded from the computation of diluted earnings per share for the three and nine month periods ended September 30, 2013 as the Company has incurred a net loss during the periods and their inclusion would be anti-dilutive to our loss per share (2012 - 89,985,289 warrants and 969,000 stock options were excluded). |