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5. Capital Stock
 3 Months Ended
Mar. 31, 2011
Schedule of Stock by Class [Table Text Block]
5.         Capital Stock

a)         Authorized share capital

350,000,000 shares of common stock with a par value of $0.001 per share

b)         Issued capital stock

On March 6, 2011, 450,000 stock options, with an exercise price of $0.10 per share, were exercised for a reduction in advances payable totalling $45,000.

On July 1, 2010 the Company entered into an agreement with an Officer to issue 2,000,000 common shares as compensation for the initial three months of services provided by the Officer to the Company. The common shares were valued at $0.025 per share for a total value of $50,000. The amount was determined to be the fair market value since the individual became an Officer upon entering into this agreement and immediately prior to that was an arm’s length individual.

c)         Stock options

During the six months ended June 30, 2011:

On January 3, 2011, the Company granted a creditor, who is a relative of a Director and Officer of the Company, 20,000,000 stock options of the Company exercisable at $0.05 per share expiring November 29, 2015. The stock options were granted in exchange for providing an increase in the borrowing limit on its line of credit from $1,000,000 to $2,000,000.

Also as consideration for providing this additional financing, the Company has modified the terms of 10,000,000 stock options granted to the Creditor on March 7, 2010 and previously modified August 8, 2010. The terms have been modified as follows:

-    
Increased the number of stock options granted from 10,000,000 to 20,000,000

-    
Reduced the exercise price of the 20,000,000 stock options granted from $0.10 per share to $0.05 per share.

The Company valued the stock-based compensation resulting from these transactions at $1,493,702.

On March 6, 2011, the Chairman of the Company established a line of credit of up to $2.5 million with the Company for the exclusive purpose of funding the costs of a comprehensive marketing campaign. Under a related agreement, also dated as of March 6, 2011, the Chairman was granted 20,000,000 stock options of the Company exercisable at $0.125 per share, expiring March 5, 2016. Such options will vest on the basis of eight (8) options for each one ($1.00) dollar of principal borrowed to meet the costs of the sales and marketing program. The Company valued the stock-based compensation resulting from this grant at $2,400,000. During the three months ended June 30, 2011, 4,000,000 stock options have vested for which the Company had recognized expense of $479,765, representing the fair value as calculated using the Black-Scholes model. To date, including those that vested above, 4,000,000 stock options have vested.

Also on March 6, 2011, the Company granted 250,000 stock options to a consultant. The stock options were exercisable at $0.10 per share for five years from the date of grant. Furthermore, 200,000 stock options granted to a consultant on July 1, 2010, were modified as follows:

-  All 200,000 stock options are to vest immediately

-  The exercise price of the option was reduced from $0.25 per share to $0.10 per share.

All 450,000 of these stock options were exercised immediately after the Board of Directors approved the above described transaction. The Company valued the stock-based compensation resulting from these transactions at $44,455.

On May 4, 2011, the Company granted 1,000,000 stock options to an officer of the Company for services provided in getting the Company’s FDA submission completed. The options are exercisable at $0.20 per share for five years from the date of grant. The Company valued the stock-based compensation resulting from this grant at $210,000 and allocated this to selling, general and administration expenses.

c)         Stock options (continued)

On May 24, 2011, the Company granted 100,000 stock options to a consultant of the Company for services rendered. The options are exercisable at $0.20 per share for five years from the date of grant. The Company valued the stock-based compensation resulting from this grant at $21,000.

During the year ended December 31, 2010:

The Company granted 11,400,000 stock options as follows:

 
-
On March 7, 2010, 10,000,000 stock options to a relative of a director for advancing funds on the line of credit under negotiation. The options are exercisable at $0.10 per share and expire on December 31, 2011. These options vested immediately and the fair value totaling $409,512 was allocated to interest expense. On August 8, 2010 the expiry date of all 10,000,000 stock options was extended to March 7, 2015. Additional stock-based compensation expense of $87,255 reflecting the increased fair value of these modified stock options was allocated to interest expense at that time.

 
-
On July 1, 2010, 1,200,000 stock options to creditors of the Company exercisable at $0.25 per share for a term of five years expiring June 30, 2015. These options with a fair value of $49,022 vested immediately and were allocated to interest expense.

 
-
On July 1, 2010, 200,000 stock options to a consultant of the Company exercisable at $0.25 per share for a term of five years expiring June 30, 2015. The stock options have a fair value of $8,309. Commencing July 1, 2011, 50,000 of the stock options vest each July 1 until all the stock options are fully vested. Stock-based compensation expense of $1,030 was recognized as professional fees during 2010.

A summary of stock option activity is as follows:

   
Six Months Ended
Year Ended
   
June 30, 2011
December 31, 2010
   
Number of
 
Weighted Average
Number of
 
Weighted Average
   
Options
 
Exercise Price
Options
 
Exercise Price
 
Outstanding, beginning of period
13,555,000
$
0.13
3,505,000
$
0.25
 
Granted
51,350,000
 
0.08
11,400,000
 
0.10
 
Exercised
(450,000)
 
(0.10)
-
 
-
 
Expired
(200,000)
$
-
(1,350,000)
 
0.25
               
 
Outstanding, end of period
64,255,000
$
0.08
13,555,000
$
0.13
               
 
Exercisable, end of period
48,255,000
$
0.12
13,355,000
$
0.13

c)         Stock options (continued)

The options outstanding at June 30, 2011 and December 31, 2010 were as follows:

     
June 30, 2011
 
December 31, 2010
 
 
Expiry Date
 
Options
 
Exercise Price
 
Intrinsic Value
 
Options
 
Exercise Price
Intrinsic Value
                         
 
April 7, 2011
 
-
$
0.25
 
-
 
200,000
$
0.25
-
 
December 19, 2011
 
1,455,000
$
0.25
 
-
 
1,455,000
$
0.25
-
 
March 7, 2015
 
20,000,000
$
0.05
 
0.17
 
10,000,000
$
0.10
-
 
June 30, 2015
 
1,200,000
$
0.25
 
-
 
1,400,000
$
0.25
-
 
November 29, 2015
 
20,000,000
$
0.05
 
0.17
 
-
 
-
-
 
March 6, 2016
 
20,000,000
$
0.13
 
0.10
 
-
 
-
-
 
May 4, 2016
 
1,000,000
$
0.20
 
0.02
 
-
 
-
-
 
May 23, 2016
 
100,000
$
0.20
 
0.02
 
-
 
-
-
 
May 31, 2017
 
500,000
$
0.25
 
-
 
500,000
$
0.25
-
 
Total
 
64,255,000
$
0.08
 
0.13
 
13,555,000
$
0.12
-
 
Weighted Average Remaining
Contractual Life
 
4.12
         
3.43
     

The aggregate intrinsic value in the table above represents the total pre-tax intrinsic value for in-the-money options, based on the $0.22 (December 31, 2010: $0.04) closing stock price of the Company’s common stock on the NASDAQ over-the-counter market (OTC) on June 30, 2011. As of June 30, 2011, 60,000,000 (December 31, 2010: none) of the stock options outstanding were in-the-money.

The Company uses the fair value method for determining stock-based compensation for all options granted during the fiscal periods. The fair value was determined using the Black-Scholes option pricing model based on the following weighted average assumptions:

   
June 30, 2011
 
December 31, 2010
         
 
Risk-free interest rate
1.45%
 
1.76%
 
Expected life
5 years
 
5 years
 
Expected dividends
0%
 
0%
 
Expected volatility
308%
 
252%
 
Forfeiture rate
0%
 
0%

The weighted average fair value for the options granted during the six months ended June 30, 2011 was $0.05 (2010: $0.04).

c)         Stock options (continued)

The compensation cost of the stock options granted was allocated as follows:

     
Three months ended
June 30, 2011
 
Three months ended
June 30, 2010
 
Six months ended
June 30, 2011
 
Six months ended
June 30, 2010
 
Interest expense:
               
   
Related parties
$
479,765
$
-
$
1,973,467
$
409,512
 
Professional fees:
               
   
Unrelated parties
$
-
$
-
$
44,455
$
-
 
General and Administrative:
               
   
Related parties
$
209,888
$
-
$
209,888
$
-