STOCK COMPENSATION PROGRAM
6 Months Ended
Aug. 31, 2011
Notes to Financial Statements 
STOCK COMPENSATION PROGRAM

11.      STOCK COMPENSATION PROGRAM

On March 18, 2009, the board of directors approved the granting of stock options according to the 2009 Nonqualified Stock Option Plan (“2009 Option Plan”) whereby the board is authorized to grant to employees and other related persons stock options to purchase an aggregate of up to 6,000,000 shares of the Company's common stock. Subject to the adoption of the 2009 Option Plan, the options were granted and vest, pursuant to the terms of the 2009 Option Plan, in six equal instalments, with the first instalment vesting at the date of grant, and the balance vesting over 2 ½ years, every six months.

In the six months ended August 31, 2011, the Company awarded 1,600,000 options to purchase common shares (August 31, 2010 – nil) and recorded stock-based compensation expense for the vesting options of $220,975 (August 31, 2010 - $228,054). The following weighted average assumptions were used for the Black-Scholes option-pricing model to value stock options granted in 2012 and 2011:

  2012   2011
Expected volatility 110.11%   110.36%
Weighted-average volatility 110.11%   110.36%
Expected dividend rate -   -
Expected life of options in years 10   3 -10
Risk-free rate 3.38%   2.95%

There were no capitalized stock-based compensation costs at August 31, 2011 or August 31, 2010.

The summary of option activity under the 2009 Option Plan as of August 31, 2011, and changes during the period then ended, is presented below:

               
    Weighted   Number of   Weighted- Aggregate
    Average   Shares   Average Intrinsic
    Exercise       Remaining Value
    Price       Contractual  
Options           Term  
               
Balance at March 1, 2011   $0.46   6,735,000       
Options granted   0.29   1,600,000       
Options exercised              
Options cancelled/forfeited   0.61   (2,120,000)      
               
               
Balance at August 31, 2011   $0.34   6,215,000    8.14 $68,350
               
Exercisable at August 31, 2011   $0.38   4,215,001    7.47 $25,750
               

 

The weighted-average grant-date fair value of options granted during the six months ended August 31, 2011 was $0.27 and $nil, respectively.

A summary of the status of the Company’s non-vested options as of August 31, 2011, and changes during the six months ended August 31, 2011, is presented below:

 

        Weighted-average
        Grant-Date
Non-vested options   Shares   Fair Value
         
Non-vested at February 28, 2011   1,376,666    $0.26 
Granted   1,600,000    0.27 
Vested   (881,666)   0.26 
Cancelled/forfeited   (95,001)   0.16 
         
Non-vested at August 31, 2011   1,999,999    0.26 

 

As of August 31, 2011, there was an estimated $444,200 of total unrecognized compensation cost related to non-vested share-based compensation arrangements granted under the 2009 nonqualified stock option plan. That cost is expected to be recognized over a weighted-average period of approximately 2.06 years.

On April 29, 2011, the Company repriced the exercise price of 1,125,000 vested stock options by reducing the exercise prices of $0.36 and $0.44 to $0.28. As a result, the Company recorded incremental stock-based compensation of $6,000 during the six months ended August 31, 2011.