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Commitments

3 Months Ended

15 Months Ended

Dec. 31, 2013

Note 9	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,September30,2012	4,250,141		$	1.16
Expired	(1,549,628	)	$	2.56
Issued	6,448,966		$	0.75
Balance,September30,2013	9,149,479		$	0.75
Expired	(2,700,513	)	$	0.75
Balance,December31,2013	6,448,966		$	0.75

	At December 31, 2013, the Company had 6,448,966 share purchase warrants outstanding exercisable at $0.75 per share until July 5, 2018.

	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 December 31, 2013 is presented below:

				Weighted		Weighted
				Average Exercise		Average Grant
	Number of Shares			Price		Date fair value
OutstandingatSeptember30,2012	1,775,000		$	2.94
Expired	(550,000	)	$	3.86
Forfeited	(150,000	)	$	3.72
Granted	2,000,000		$	0.40	$	0.50
OutstandingatSeptember30,2013	3,075,000		$	1.26
Expired	(500,000	)	$	2.50
OutstandingatDecember31,2013	2,575,000		$	1.02
ExercisableatDecember31,2013	2,305,000		$	0.79
ExercisableatSeptember30,2013	2,305,000		$	0.79

At December 31, 2013, the following stock options were outstanding:

Number of Shares						Aggregate	Remaining
	Number			Exercise		Intrinsic	Contractual
Total	Vested			Price	ExpiryDate	Value	Life(yrs)
150,000	150,000	(1)	$	3.10	June 30, 2014	-	0.50
5,000	5,000	(2)	$	2.50	March 2, 2014	-	0.17
50,000	50,000	(3)	$	3.50	June 30, 2014	-	0.50
100,000	100,000	(4)	$	3.67	March 30, 2016	-	2.25
270,000	-	(5)	$	3.00	February 8, 2017	-	3.11
2,000,000	2,000,000	(6)	$	0.40	July 5, 2023	-	9.52
2,575,000	2,305,000					-

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 December 31, 2013.

	⁽¹⁾	As of December 31, 2013 and 2012, these options had fully vested. During the year ended September 30, 2012, the expiration date of these options were extended from June 3, 2013 to June 30, 2014. The fair value of this modification was determined to be $18,600 and was determined using the Black Scholes option pricing model using the following weighted average assumptions: risk-free interest rate: 0.31%, expected life: 2.0 years, annualized volatility: 84.74%, dividend rate: 0%. The Company did not recognize any stock-based compensation for these options during the three months ended December 31, 2013 (2012: $Nil).

	⁽²⁾	As of December 31, 2013 and 2012, these options had fully vested. The Company did not recognize any stock-based compensation for these options during the three months ended December 31, 2013 (2012: $nil).

	⁽³⁾	As of December 31, 2013 and 2012, these options had fully vested. The Company did not recognize any stock-based compensation during the three months ended December 31, 2013 (2012: $nil).

	⁽⁴⁾	As of December 31, 2013 and 2012, 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 months ended December 31, 2013 (2012: $Nil).

	⁽⁵⁾	As of December 31, 2013 and 2012, these options had not 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.

	⁽⁶⁾	As of December 31, 2013 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 during the three months ended December 31, 2013 (2012: $Nil) in connection with these options.

	During the three months ended December 31, 2013, 500,000 options expired for which the Company had recognized stock-based compensation of $Nil (2012: $Nil) during the three months ended December 31, 2013.


	At December 31, 2013, the following summarizes the unvested stock options:

				Weighted		Weighted
				Average		Average
	Number of			Exercise		Grant-Date
	Shares			Price		Fair Value
Unvested options at September 30, 2012	870,000		$	2.81	$	1.82
Granted	2,000,000		$	0.40	$	0.50
Expired	(100,000	)	$	3.86	$	2.49
Vested	(2,000,000	)	$	0.40	$	0.50
Unvested options at September 30, 2013	770,000		$	2.68	$	1.74
Expired	(500,000	)	$	2.50	$	1.48
Unvested options at December 31 ,2013	270,000		$	3.00	$	2.21

As of December 31, 2013, there was no unrecognized compensation cost associated with unvested share-based compensation awards that will become vested exclusive of achieving any performance milestones that is expected to be recognized in the current fiscal year.

There has been no stock-based compensation recognized in the financial statements for the three months ended December 31, 2013 (2012: $nil) 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.

Note 9

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, 2011	2,655,479		$	3.16
Expired	(1,552,651	)	$	3.16
Issued	3,147,313		$	0.93
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

At September 30, 2013, the Company has 9,149,479 currently exercisable share purchase warrants outstanding as follows:

Number		Exercise Price	Expiry Date
2,700,513	$	0.75	November 30, 2013
6,448,966	$	0.75	July 5, 2018
9,149,479

During the year ended September 30, 2012, the exercise price and expiry of 200,000 warrants exercisable at $3.50 and expiring January 5, 2012 were modified and extended such that these warrants were exercisable at $1.50 until January 5, 2013. The fair value of this modification was determined to be $80,200 and was determined using the Black-Scholes option pricing model using the following weighted average assumptions: risk-free interest rate: 0.11%, expected life: 1.0 year, annualized volatility: 79.46%, dividend rate: 0%.

	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 September 30, 2013 is presented below:

				Weighted		Weighted
	Number of			Average		Average Grant
	Shares			Exercise Price		Date fair value
Outstanding at September 30, 2011	2,375,000		$	3.18
Forfeited	(1,100,000	)	$	2.82
Granted	500,000		$	1.50	$	0.72
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
Exercisable at September 30, 2013	2,305,000		$	0.79
Exercisable at September 30, 2012	905,000		$	2.81


		At September 30, 2013, the following stock options were outstanding:

Number of Shares					Aggregate	Remaining
	Number		Exercise		Intrinsic	Contractual
Total	Vested		Price	Expiry Date	Value	Life (yrs)
150,000 ⁽¹⁾	150,000	$	3.10	June 30, 2014	-	0.75
500,000 ⁽²⁾	-	$	2.50	October 19, 2013	-	0.05
5,000 ⁽³⁾	5,000	$	2.50	March 2, 2014	-	0.42
50,000 ⁽⁴⁾	50,000	$	3.50	June 30, 2014	-	0.75
100,000 ⁽⁵⁾	100,000	$	3.67	March 30, 2016	-	2.50
270,000 ⁽⁶⁾	-	$	3.00	February 8, 2017	-	3.36
2,000,000 ⁽⁷⁾	2,000,000	$	0.40	July 5, 2023	500,000	9.77
3,075,000	2,305,000				500,000

	⁽¹⁾	As at September 30, 2013 and 2012, these options had fully vested. During the year ended September 30, 2012, the expiry of these options was extended from June 3, 2013 to June 30, 2014. The fair value of this modification was determined to be $18,600 and was determined using the Black Scholes option pricing model using the following weighted average assumptions: risk-free interest rate: 0.31%, expected life: 2.0 years, annualized volatility: 84.74%, dividend rate: 0%. The Company did not recognize any stock-based compensation for these options during the year ended September 30, 2013 (2012: $18,600).

	⁽²⁾	As at September 30, 2013 and 2012, none of these options have vested. The options vest as to 100,000 per compound entered into a phase II trial. The fair value of these options was calculated to be $740,000, which the Company has not yet recognized in the financial statements as the performance conditions have not yet been met.

	⁽³⁾	As at September 30, 2013 and 2012, these options had fully vested. The Company did not recognize any stock-based compensation for these options during the year ended September 30, 2013 (2012: $nil).


	⁽⁴⁾	As at September 30, 2013 and 2012, these options had fully vested. The Company did not recognize any stock-based compensation during the year ended September 30, 2013 (2012: $nil). During the year ended September 30, 2012, the expiry of these options was shortened from June 29, 2015 to June 30, 2014. The Company did not recognize any stock based compensation expense in connection with this modification because the fair value of the modified options was less than the fair value of the options under the old terms.

	⁽⁵⁾	As at September 30, 2013 and 2012, 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 year ended September 30, 2013 (2012: $6,500).

	⁽⁶⁾	As at September 30, 2013 and 2012, these options had not 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.

	⁽⁷⁾	As at September 30, 2013 these options had fully vested (2012: None of these options had 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 $1,002,500 (2012: $Nil) during the year ended September 30, 2013 in connection with these options.

During the year ended September 30, 2013, 150,000 options were forfeited for which the Company had recognized stock-based compensation of $Nil (2012: $163,415) during the year ended September 30, 2013.

During the year ended September 30, 2012, 1,100,000 options were forfeited for which the Company had recognized stock-based compensation of $33,493 during the year ended September 30, 2012.

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:

	2013	2012
Risk-free interest rate	2.73%	0.83% - 2.19%
Expected life of options	10.0 years	4.25 - 5.0 years
Annualized volatility	71.39%	57.87% - 95.25%
Dividend rate	0.00%	0.00%


		At September 30, 2013, the following summarizes the unvested stock options:

				Weighted		Weighted
				Average		Average
	Number of			Exercise		Grant-Date
	Shares			Price		Fair Value
Unvested options at September 30, 2011	1,445,000		$	3.33	$	2.17
Granted	500,000		$	1.50	$	0.72
Forfeited	(900,000	)	$	2.74	$	1.60
Vested	(175,000	)	$	3.71	$	2.70
Unvested options at September 30, 2012	870,000		$	2.81	$	1.82
Granted	2,000,000		$	0.40	$	0.50
Expired	(100,000	)	$	3.86	$	2.49
Vested	(2,000,000	)	$	0.40	$	0.50
Unvested options at September 30, 2013	770,000		$	2.68	$	1.74

As at September 30, 2013, there was no unrecognized compensation cost associated with unvested share-based compensation awards that will become vested exclusive of achieving any performance milestones that is expected to be recognized in the current fiscal year. There has been no stock-based compensation recognized in the financial statements for the year ended September 30, 2013 (2012: $nil) 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.

Stock-based compensation amounts, including those relating to shares issued for services during the years ended September 30, 2013 and 2012, are classified in the Company’s Statement of Operations as follows:

		2013		2012
Consulting fees	$	-	$	312,903
Research and development		-		80,200
Salaries and wages		1,002,500		-
	$	1,002,500	$	393,103

- 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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