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Commitments

9 Months Ended

Jun. 30, 2014

Note 10

Commitments

	a)	Share Purchase Warrants

		A summary of the Company’s share purchase warrants outstanding is presented below:

				Weighted
				Average
				Exercise
	Number of Shares			Price

Balance, September 30, 2012	4,250,141		$	1.16
Expired	(1,549,628	)	$	2.56
Issued	6,448,966		$	0.75
Balance, September 30, 2013	9,149,479		$	0.75
Expired	(2,700,513	)	$	0.75
Issued	68,286,666		$	0.36
Balance, June 30, 2014	74,735,632		$	0.40


	a)	Share Purchase Warrants

		At June 30, 2014, the Company had 74,735,632 share purchase warrants outstanding as follows:

Number		Exercise Price	Expiry Date
6,448,966	$	0.75	July 5, 2018
500,000	$	0.75	February 14, 2019
120,000	$	1.00	February 24, 2019
33,833,333	$	0.30	March 13, 2019
33,833,333	$	0.42	March 13, 2019
74,735,632

		All of the 6,448,966 warrants expiring on July 5, 2018 and the 500,000 warrants expiring February 14, 2019 contain a contingent call provision whereby the Company may have the option to call for cancellation of all or any portion of the warrants for consideration equal to $0.001 per share, provided the quoted market price of the Company’s common stock exceeds $1.50 for a period of twenty consecutive trading days, subject to certain minimum volume restrictions and other restrictions as provided in the warrant agreements.

	b)	Stock–based Compensation Plan

		In April, 2007, the Company adopted a stock option plan which provides for the granting of stock options to selected directors, officers, employees or consultants in an aggregate amount of up to 3,000,000 common shares of the Company and, in any case, the number of shares to be issued to any one individual pursuant to the exercise of options shall not exceed 10% of the issued and outstanding share capital. The granting of stock options, exercise prices and terms are determined by the Company's Board of Directors. If no vesting schedule is specified by the Board of Directors on the grant of options, then the options shall vest over a 4 -year period with 25% of the options granted vesting each year commencing 1 year from the grant date. For stockholders who have greater than 10% of the outstanding common shares of the Company and who have granted options, the exercise price of their options shall not be less than 110% of the fair of the stock on grant date. Otherwise, options granted shall have an exercise price equal to their fair value on grant date.

		On February 2, 2011, the Company amended and restated the 2007 stock option plan to increase the number of options authorized to 4,000,000.

A summary of the status of Company’s outstanding stock purchase options for the year ended June 30, 2014 is presented below:

				Weighted
				Average		Weighted
	Number of			Exercise		Average Grant
	Shares			Price		Date fair value
Outstanding at September 30, 2012	1,775,000		$	2.94
Expired	(550,000	)	$	3.86
Forfeited	(150,000	)	$	3.72
Granted	2,000,000		$	0.40	$	0.50
Outstanding at September 30, 2013	3,075,000		$	1.26
Expired	(705,000	)	$	2.70
Granted	800,000		$	0.32	$	0.25
Outstanding at June 30, 2014	3,170,000		$	0.70
Exercisable at June 30, 2014	2,100,000		$	0.56
Exercisable at September 30, 2013	2,305,000		$	0.79

At June 30, 2014, the following stock options were outstanding:

Number of Shares						Aggregate	Remaining
		Number		Exercise		Intrinsic	Contractual
Total		Vested		Price	Expiry Date	Value	Life (yrs)
100,000	⁽¹⁾	100,000	$	3.67	March 30, 2016	-	1.75
270,000	⁽²⁾	-	$	3.00	February 8, 2017	-	2.61
2,000,000	⁽³⁾	2,000,000	$	0.40	July 5, 2023	-	9.02
300,000	⁽⁴⁾	-	$	0.30	May 7, 2024	15,000	9.86
500,000	⁽⁵⁾	-	$	0.33	May 8, 2024	10,000	9.86
3,170,000		2,100,000				25,000


		The aggregate intrinsic value is calculated as the difference between the exercise price of the underlying awards and the quoted market price of the Company’s stock for the options that were in-the-money at June 30, 2014.

		⁽¹⁾	As of June 30, 2014 and September 30, 2013, these options had fully vested. The fair value of these options at issuance was calculated to be $267,000. The Company did not recognize any stock-based compensation during the three and nine months ended June 30, 2014 (2013: $Nil and $Nil, respectively).

		⁽²⁾	As of June 30, 2014 and September 30, 2013, none of these options had vested. The options vest upon one or more compounds: entering Phase II trial – 90,000 options; entering Phase III trial – 90,000 options; and receiving FDA approval – 90,000 options. No stock-based compensation has been recorded in the financial statements as none of the performance conditions have yet been met.

		⁽³⁾	As of June 30, 2014 and September 30, 2013 these options had fully vested. These options were granted during the year ended September 30, 2013 and vested immediately upon granting. The Company recognized stock based compensation expense of $Nil and $Nil, respectively, during the three and nine months ended June 30, 2014 (2013: $Nil and $Nil, respectively) in connection with these options. These amounts have been included in general and administrative expenses on the Company’s statement of operations.

		⁽⁴⁾	As of June 30, 2014 none of these options had vested. These options were issued during the nine months ended June 30, 2014 and vest annually over a three year period commencing on the first anniversary of the date of the grant. The Company recognized stock based compensation expense of $3,422 and $3,422 during the three and nine months ended June 30, 2014, respectively (2013: $Nil and $Nil, respectively) in connection with these options. These amounts have been included in general and administrative expenses on the Company’s statement of operations.

		⁽⁵⁾	As of June 30, 2014 none of these options had vested. These options were issued during the nine months ended June 30, 2014 and vest annually over a four year period commencing on the first anniversary of the date of the grant. The Company recognized stock based compensation expense of $6,167 and $6,167 during the three and nine months ended June 30, 2014, respectively (2013: $Nil and $Nil, respectively) in connection with these options.

During the nine months ended June 30, 2014, 705,000 options expired for which the Company had recognized stock-based compensation of $Nil and $Nil, respectively (2013: $Nil and $Nil, respectively) during the three and nine months ended June 30, 2014.


		The fair value of stock options granted has been determined using the Black- Scholes option pricing model using the following weighted average assumptions applied to stock options granted during the periods:

	2014	2013
Risk-free interest rate	2.17%	-
Expected life of options (years)	6.50	-
Annualized volatility	91.21%	-
Dividend rate	0.00%	-

There has been no stock-based compensation recognized in the financial statements for the three and nine months ended June 30, 2014 (2013: $nil and $nil, respectively) for options that will vest upon the achievement of performance milestones because the Company has determined that satisfaction of the performance milestones was not probable. Compensation relating to stock options exercisable upon achieving performance milestones will be recognized in the period the milestones are achieved.

- Definition

The entire disclosure for significant arrangements with third parties, which includes operating lease arrangements and arrangements in which the entity has agreed to expend funds to procure goods or services, or has agreed to commit resources to supply goods or services, and operating lease arrangements. Descriptions may include identification of the specific goods and services, period of time covered, minimum quantities and amounts, and cancellation rights.

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