XML 16 R9.htm IDEA: XBRL DOCUMENT v2.4.0.8
Derivative Instruments
 3 Months Ended
Mar. 31, 2014
Derivative Instruments [Abstract]  
Derivative Instruments
3.
Derivative Instruments
 
Effective January 1, 2009, the Company adopted ASC Topic 815-40, "Derivatives and Hedging" (ASC 815-40). One of the conclusions reached under ASC 815-40 was that an equity-linked financial instrument would not be considered indexed to the entity's own stock if the strike price is denominated in a currency other than the issuer's functional currency. The conclusion reached under ASC 815-40 clarified the accounting treatment for these and certain other financial instruments. ASC 815-40 specifies that a contract would not be treated as a derivative if it met the following conditions: (a) it is indexed to the Company's own stock; and (b) it is classified in stockholders' equity in the Company's statement of financial position. The Company's outstanding warrants denominated in Canadian dollars are not considered to be indexed to its own stock because the exercise price is denominated in Canadian dollars and the Company's functional currency is United States dollars. Therefore, these warrants have been treated as derivative financial instruments and recorded at their fair value as a liability. All other outstanding convertible instruments are considered to be indexed to the Company's stock, because their exercise price is denominated in the same currency as the Company's functional currency, and are included in stockholders' deficiency.
 
The Company's derivative instruments include warrants to purchase 18,035 shares, the exercise prices for which are denominated in a currency other than the Company's functional currency, as follows:
·
Warrants to purchase 13,337 shares at CAD$1.44 per whole share that expire on April 30, 2015; and
·
Warrants to purchase 4,698 shares exercisable at CAD$1.44 per whole share that expire on March 29, 2016.
 
These warrants have been recorded at their fair value as a liability at issuance and will continue to be re-measured at fair value as a liability at each subsequent balance sheet date. Any change in value between reporting periods will be recorded as unrealized gain/(loss) in the Statement of Operations. These warrants will continue to be reported as a liability until such time as they are exercised or expire. The fair value of these warrants is estimated using the Black-Scholes option-pricing model.
 
As of March 31, 2014, the fair value of the warrants expiring April 30, 2015 and March 29, 2016 was determined to be $3,428 and $1,974, respectively (December 31, 2013 – warrants expiring April 30, 2015, fair value of $2,015 and $794 respectively), and the loss on these warrants for the three months ended March 31, 2014 was $1,414 and $1,179, respectively (For the three months ending March 31, 2013 - warrants expiring April 30, 2015 and March 29, 2016, loss of $2,317 and $1,198). There is no cash flow impact for these derivatives until the warrants are exercised. If these warrants are exercised, the Company will receive the proceeds from the exercise at the current exchange rate at the time of exercise.
  
Gain/(Loss) on Derivative Instruments
 
Three months ended March 31, 2014
 
Three months ended March 31, 2013
 
Warrant expiring April 30, 2015
 
 
(1,414)
 
 
(2,317)
 
Warrant expiring March 29, 2016
 
 
(1,179)
 
 
(1,198)
 
Options to contractors
 
 
(62)
 
 
(58)
 
Total
 
 
(2,655)
 
 
(3,573)
 
 
During the fiscal years ended December 31, 2011 and 2010, the Company issued 108  and 86 (respectively) options to contractors with a Canadian dollar denominated strike price. Consequently, the Company now has derivatives relating to these options since the strike price is denominated in a currency other than the US dollar functional currency of the Company. While there is an exception to this rule for employees in ASU 2010-13 "Compensation-Stock Compensation (Topic 718): Effect of Denominating the exercise price of a share based payment award in the currency of the market in which the underlying equity security trades", no such exception exists for contractors. These options will be marked to market until the earlier of their expiry or exercise. The fair value of these options at March 31, 2014 and December 31, 2013 was $116 and $54 respectively. The loss for the three months ended March 31, 2014 and March 31, 2013 was $62 and $58 respectively.