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CAPITAL STOCK
9 Months Ended
Sep. 30, 2011
CAPITAL STOCK
NOTE 9: CAPITAL STOCK
 
Share Capital
 
Effective February 21, 2010, the Company increased its authorized shares of common stock from 50,000,000 shares to 150,000,000 common shares. The Company maintained its authorized shares of preferred stock at 5,000,000.
 
2011 Share Transactions
 
On March 21, 2011, the Company issued 641,023 shares of its restricted common stock pursuant to debt settlement and warrant extinguishment agreement to settle $83,333 of the 2010 Notes and partial extinguishment of the Series A, Series B and Series C Warrants. At the time of issuance, the fair value of the shares was determined to be $115,384, based on the quoted market price of $0.18 per share, which has been recorded against the carrying value of the debt. The Company recognized a loss of $87,734 on partial settlement of 2010 Notes and partial extinguishment of the Series A, Series B and Series C Warrants.
 
On March 23, 2011, the Company issued 1,180,000 shares of its restricted common stock pursuant to various consulting agreements. At the time of issuance the fair value of the shares was determined to be $227,432 based on the quoted market price of $0.18 per share.
 
On March 23, 2011, the Company issued 885,295 shares of its restricted common stock  pursuant to debt settlement agreements to settle $150,500 of outstanding trade payables. At the time of issuance the fair value of the shares was determined to be $172,633 based on the quoted market price of $0.195 per share. The Company recorded $22,133 as loss on settlement of debt.
 
On March 23, 2011, the Company issued 441,177 shares of its restricted common stock to related parties, pursuant to debt settlement agreements to settle $75,000 of its outstanding trade payables. At the time of issuance the fair value of the shares was determined to be $86,030 based on the quoted market price of $0.195 per share. The Company recorded the calculated loss on settlement of $11,030 to the statement of operations.
 
On March 30, 2011, the Company issued 2,048,578 shares of its restricted common stock pursuant to an exchange agreement to settle $233,333 of the 2010 Notes. At the time of issuance the fair value of the shares was determined to be $450,687 based on the quoted market price of $0.22 per share. The discounted carrying amount of the 2010 Note as of March 30, 2011 was $77,421. The Company recorded the difference between the fair value and accreted amount of $373,266 as loss on settlement of debt.
 
On April 5, 2011, the Company issued 500,000 shares of its restricted common stock pursuant to a consulting agreement. At the time of issuance the fair value of the shares was determined to be $125,000 based on the quoted market price of $0.25 per share.
 
On April 25, 2011, the Company issued 350,000 shares of its restricted common stock pursuant to a consulting agreement. At the time of issuance the fair value of the shares was determined to be $87,500 based on the quoted market price of $0.25 per share.
 
On April 25, 2011, the Company issued 366,783 shares of its restricted common stock pursuant to debt settlement agreements to settle $84,315 of outstanding trade payables. At the time of issuance the fair value of the shares was determined to be $91,696 based on the quoted market price of $0.25 per share. The Company recorded $7,381 as loss on settlement of debt.
 
On April 25, 2011, the Company issued 20,000 shares of its restricted common stock pursuant to a debt settlement agreement to settle $4,575 of outstanding trade payables. At the time of agreement the fair value of the shares was determined to be $6,800 based on the quoted market price of $0.34 per share. The Company recorded $2,225 as loss on settlement of debt.

 
 
On April 25, 2011, the Company issued 108,696 shares of its restricted common stock to related parties, pursuant to a debt settlement agreement to settle $25,000 of its outstanding accounts payables. At the time of issuance the fair value of the shares was determined to be $27,174 based on the quoted market price of $0.25 per share. The Company recorded the calculated loss on settlement of $2,174 to the statement of operations.
 
In April 2011, the Company received subscription proceeds of $90,000 and issued 600,001 shares of common stock in a private placement. The subscribers purchased one unit for each $3.00 of subscription proceeds. Each unit consists of 20 shares of Company’s common stock and 6 warrants each exercisable at $0.25, which expire in two years.
 
On June 1, 2011, 586,858 shares of the Company’s restricted common stock was returned to treasury due to an adjustment to the final settlement of the $233,333 2010 Notes. The return of the shares resulted in a $134,977 reduction to the previously calculated loss on debt settlement.
 
On July 7, 2011, the Company received subscription proceeds of $65,000 and issued 325,000 shares of common stock in a private placement. The subscribers purchased one unit for each $2.00 of subscription proceeds. Each unit consists of 10 shares of Company’s common stock and 6 warrants each exercisable at $0.25, which expire in two years. The fair value of these warrants was determined to be $33,600.
 
On August 19, 2011, the Company received subscription proceeds of $45,000 and issued 225,000 shares of common stock in a private placement. The subscribers purchased one unit for each $2.00 of subscription proceeds. Each unit consists of 10 shares of Company’s common stock and 6 warrants each exercisable at $0.25, which expire in two years. The fair value of these warrants was determined to be $23,400.
 
Stock Compensation Plan
 
On June 8, 2007, the Board of Directors of the Company approved the adoption of a stock option plan (the “2007 Plan”) allowing for the granting of up to 640,000 options to directors, officers, employees and consultants of the Company and its subsidiaries. On October 14, 2009, the Company adopted the 2009 Stock Incentive Plan (the “2009 Plan”) which supersedes and replaces the 2007 Stock Plan. The 2009 Plan allows for the issuance of up to 10,000,000 common shares. Options granted under the Plan shall be at prices and for terms as determined by the Board of Directors.
 
On February 16, 2011, the Company granted a total of 850,000 stock options at an exercise price of $0.17 per share to consultants and management, which vest monthly over a twenty-four month period. The term of the options is ten years.
 
Additionally, on February 16, 2011, the Company approved the repricing of 2,928,000 stock options issued to consultants and management. Options with an exercise price of $0.97 were repriced to $0.17 per share and the Company recognized aggregate incremental fair value of the repriced options of $40,260. The incremental fair value was determined using the Black-scholes option pricing model with weighted average assumptions as follows: Expected life of 3.48 years, an expected volatility of 199%, dividend yield of 0% and risk-free rate of 1.4%.
 
On March 16, 2011, the Company granted 2,000,000 stock options to management at an exercise price of $0.19 per share, of which, 1,000,000 vested immediately and the remaining vest monthly over twenty four month period. The aggregate fair value of the new grants was estimated at $522,500, or $0.18 per option, using the Black-Scholes option pricing model with weighted average assumptions as follows: a risk free interest rate of 2.4%, a dividend yield of 0%, an expected volatility of 248%, and an expected life of 6.43 years.
 
On June 8, 2011, the Company granted 250,000 stock options to a consultant at an exercise price of $0.17 per share, of which, 125,000 vested immediately and the remaining vest monthly over twenty four month period. The aggregate fair value of the grant was estimated at $42,500, or $0.17 per option, using the Black-Scholes option pricing model with weighted average assumptions as follows: a risk free interest rate of 2.98%, a dividend yield of 0%, an expected volatility of 238.4%, and an expected life of 10 years.
 
The expensed portion of the value of the granted and vested options during the nine months ended September 30, 2011 was $412,597(2010 - $1,979) which was recorded as stock based consulting and management fees.
 
A summary of the Company’s stock options as of September 30, 2011 and changes during the period is presented below:
 

 
 
   
Number of
Options
    
Weighted Average
Exercise Price
    
Weighted Average
Remaining Life
  
                     
Balance, December 31, 2010
     3,272,000     $ 0.21          
  Issued
     3,100,000       0.18          
  Cancelled
     (94,000 )     0.97          
                         
Balance, September 30, 2011 (Unaudited)
     6,278,000     $ 0.18       7.16  
 
At September 30, 2011, the intrinsic value of the vested options was equal to $nil (2010 - $Nil).
 
A summary of the status of the Company’s unvested options as of September 30, 2011 is presented below:
 
   
Number of
Shares
    
Weighted Average
Grant-Date
Fair Value
  
             
Unvested, December 31, 2010
     208,332     $ 0.84  
  Granted
     3,100,000       0.18  
  Vested
     (2,032,499 )     0.18  
  Cancelled
     -       -  
                 
Unvested, September 30, 2011 (Unaudited)
     1,275,833     $ 0.18  
 
Share Purchase Warrants
 
On February 24, 2011, the Company issued 2,369,388 share purchase warrants to acquire an equivalent number of common shares of the Company, at an exercise price of $0.25 per share for an exercise period of up to five years from the issuance date. The warrants were issued pursuant to a securities purchase agreement (Note 5). The fair value of these warrants was determined to be $400,427, using the Black-Scholes option pricing model with an expected life of 5 years, a risk free interest rate of 2.19%, a dividend yield of 0%, and an expected volatility of 251%.
 
On March 21, 2011, the Company issued 250,000 share purchase warrants to acquire an equivalent number of common shares of the Company, at an exercise price of $0.25 per share for an exercise period of up to five years from the issuance date. The warrants were issued pursuant to a debt settlement agreement (Note 5). The fair value of these warrants was determined to be $44,750, using the Black-Scholes option pricing model with an expected life of 5 years, a risk free interest rate of 2.04%, a dividend yield of 0%, and an expected volatility of 251%.
 
On April 4, 2011, the Company issued 430,000 share purchase warrants to acquire an equivalent number of common shares of the Company, at an exercise price of $0.25 per share for an exercise period of up to five years from the issuance date. The warrants were issued pursuant to a securities purchase agreement (Note 5). The fair value of these warrants was determined to be $149,948, using the Black-Scholes option pricing model with an expected life of 5 years, a risk free interest rate of 2.20%, a dividend yield of 0%, and an expected volatility of 253%.
 
On April 4, 2011, the Company issued 1,000,000 share purchase warrants to acquire an equivalent number of common shares of the Company, at an exercise price of $0.25 per share for an exercise period of up to five years from the issuance date. The warrants were issued pursuant to a debt settlement agreement (Note 5). The fair value of these warrants was determined to be $349,000, using the Black-Scholes option pricing model with an expected life of 5 years, a risk free interest rate of 2.20%, a dividend yield of 0%, and an expected volatility of 252%.
 
On April 25, 2011, the Company issued 180,000 share purchase warrants to acquire an equivalent number of common shares of the Company, at an exercise price of $0.25 per share for an exercise period of up to five years from the issuance date. The warrants were issued pursuant to the private placement of $90,000. The fair value of these warrants was determined to be $44,800, using the Black-Scholes option pricing model with an expected life of 5 years, a risk free interest rate of 2.1%, a dividend yield of 0%, and an expected volatility of 257.7%.

 
 
On June 6, 2011, the Company issued 60,000 share purchase warrants to acquire an equivalent number of common shares of the Company, at an exercise price of $0.25 per share for an exercise period of up to five years from the issuance date. The warrants were issued pursuant to a securities purchase agreement (Note 5). The fair value of these warrants was determined to be $10,146, using the Black-Scholes option pricing model with an expected life of 5 years, a risk free interest rate of 1.60%, a dividend yield of 0%, and an expected volatility of 254%.
 
In July, 2011, the Company issued 220,000 share purchase warrants to acquire an equivalent number of common shares of the Company, at an exercise price of $0.25 per share for an exercise period of up to five years from the issuance date. The warrants were issued pursuant to the private placement of $110,000. The fair value of these warrants was determined to be $57,000, using the Black-Scholes option pricing model with an expected life of 5 years, a risk free interest rate of 1.74%, a dividend yield of 0%, and an expected volatility of 256.8%.
 
A summary of the Company’s stock purchase warrants as of September 30, 2011 and changes during the period is presented below:
 
   
Number of
Warrants
    
Weighted Average
Exercise Price
    
Weighted Average
Remaining Life
  
                   
Balance, December 31, 2010
     24,868,300     $ 0.45       3.24  
Issued
     4,509,388       0.25       3.24  
Extinguished or expired
     (19,460,500 )     0.32       -  
                         
Balance, September 30, 2011 (Unaudited)
     9,917,188     $ 0.59       2.80