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5. Capital Stock
 6 Months Ended
Jun. 30, 2012
Stockholders' Equity Note Disclosure [Text Block]
5.         Capital Stock

a)         Authorized share capital

On May 17, 2012, shareholders holding a majority of the outstanding shares of our common stock executed a written consent approving the amendment to the articles of incorporation to: (1) increase the authorized shares of common stock from 350,000,000 to 500,000,000 shares with a par value of $0.001; and, (2) create a class of 500,000,000 preferred shares, $0.001 par value per shares, the terms of which to be determined by the board of directors. On July 5, 2012 the certificate of amendment was issued by the Office of the Secretary of the State of Nevada.

b)         Issued share capital

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.

c)         Stock options

During the six months ended June 30, 2012:

On June 27, 2012, the 20,000,000 stock options granted to the Chairman on March 6, 2011 were modified as follows:

-      
All stock options remaining unvested were immediately vested

-      
The exercise price was reduced from $0.125 per share to $0.07 per share

The compensation expense related to the vesting of the un-vested options was $1,252,386 and the compensation expense related to the modification of the stock options was $1,280.

Furthermore, on June 27, 2012, the Company granted the Chairman 15,750,000 stock options with an exercise price of $0.07 per share and expiry date on March 6, 2016. The compensation expense related to these stock options was $1,130,988.

On June 27, 2012, the 1,000,000 stock options issued to the President of the Company on May 4, 2011 were modified to reduce the exercise price from $0.20 per share to $0.07 per share. The modification of the stock options resulted in no change in compensation expense.

On June 27, 2012, the 100,000 stock options issued to a consultant on May 4, 2011, were modified to reduce the exercise price from $0.20 per share to $0.07 per share. The modification of the stock options resulted in no change in compensation expense.

On June 27, 2012, the Company granted 700,000 stock options to five consultants with exercise prices of $0.07 per share, expiring on June 27, 2017. Of the 700,000 stock options, 500,000 stock options vest on the grant date and 200,000 have the following vesting terms:

-      
100,000 vest on May 28, 2013

-      
100,000 vest on May 29, 2014

As a result of this grant, the Company incurred $36,730 of stock-based compensation expense which was allocated on the Condensed Consolidated Statements of Operations a i) 13,992 to general & administrative ii) 20,989 to market development and iii) $1,749 to development

During the year ended December 31, 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 year ended December 31, 2011, 7,624,488 stock options have vested for which the Company had recognized expense of $914,491, representing the fair value as calculated using the Black-Scholes model. To date, including those that vested in 2012 as described above, 9,171,513 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.

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.

A summary of stock option activity is as follows:

 
Six Months Ended
Year Ended
 
June 30, 2012
December 31, 2011
 
Number of
 
Weighted Average
Number of
 
Weighted Average
 
Options
 
Exercise Price
Options
 
Exercise Price
Outstanding, beginning of period
62,800,000
$
  0.08
13,555,000
$
0.13
Granted
16,450,000
 
0.07
51,350,000
 
0.08
Exercised
-
 
-
(450,00)
 
(0.10)
Expired
-
$
-
(1,655,000)
$
(0.25)
             
Outstanding, end of period
79,250,000
$
0.07
62,800,000
$
0.08
             
Exercisable, end of period
79,050,000
$
0.06
50,424,488
$
0.07

The options outstanding at June 30, 2012 and December 31, 2012 were as follows:

   
June 30, 2012
 
December 31, 2012
   
Expiry Date
 
Options
 
Exercise Price
 
Intrinsic Value
 
Options
 
Exercise Price
 
Intrinsic Value
                         
March 7, 2015
 
20,000,000
$
0.05
 
0.02
 
20,000,000
$
0.05
$
0.03
March 31, 2015
 
1,200,000
$
0.25
 
-
 
1,200,000
 
0.25
 
-
November 29, 2015
 
20,000,000
$
0.05
 
0.02
 
20,000,000
 
0.05
 
0.03
March 6, 2016
 
35,750,000
$
0.07
 
-
 
20,000,000
 
0.13
 
-
May 4, 2016
 
1,000,000
$
0.07
 
-
 
1,000,000
 
0.20
 
-
May 23, 2016
 
100,000
$
0.07
 
-
 
100,000
 
0.20
 
-
May 27. 2017
 
700,000
 
0.07
               
May 31, 2017
 
500,000
$
0.25
 
-
 
500,000
 
0.25
 
-
Total
 
79,250,000
$
0.07
 
-
 
62,800,000
$
0.08
   
Weighted Average Remaining
Contractual Life
 
3.38
         
3.78
       

The aggregate intrinsic value in the table above represents the total pre-tax intrinsic value for in-the-money options, based on the $0.07 (December 31, 2011: $0.08) closing stock price of the Company’s common stock on the NASDAQ over-the-counter market (OTC) on June 30, 2012. As of June 30, 2012, 40,000,000 (December 31, 2011:  40,000,000) 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, 2012
 
December 31, 2011
       
Risk-free interest rate
2.77%
 
2.77%
Expected life
3.69 years
 
5 years
Expected dividends
0%
 
0%
Expected volatility
311%
 
308%
Forfeiture rate
0%
 
0%

The weighted average fair value for the options granted during the 6 months ended June 30, 2012 was $0.07 (2011: $0.07).

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

   
Three months ended
June 30, 2012
 
Three months ended
June 30, 2011
 
Six months ended
June 30, 2012
 
Six months ended
June 30, 2011
Market development
               
Unrelated parties
$
20,989
$
-
$
20,989
$
-
Interest expense:
               
 
Related parties
 
2,384,654
 
479,765
 
2,616,602
 
1,973,467
Product development fees
               
Unrelated parties
 
1,749
 
-
 
1,749
 
-
Professional fees:
               
 
Unrelated parties
 
-
 
-
 
-
 
44,455
General and administrative:
               
 
Unrelated parties
 
13,992
 
-
 
13,992
   
 
Related parties
$
-
$
209,888
$
-
$
209,888