4.	*Share Capital*

The Company’s common shares outstanding are no par value, voting shares with no preferences or rights attached to them.

Common shares – 2016

In July 2016, the Company completed a financing for gross proceeds of $12,193,298 (C$16,124,000) consisting of 11,120,000 units at a price of $1.10 (C$1.45) per unit. Each unit consisted of one common share of the Company and one-half of one common share purchase warrant. Each whole warrant entitles the holder to acquire one additional common share of the Company at a price of C$2.00 per common share until July 25, 2019. The aggregate fair value of the common share purchase warrants at the time of issuance was $2,377,315 (C$3,144,180), which was recorded as a derivative liability and the Company allocated the remaining proceeds of $9,815,983 (C$12,979,820) to the common shares.

In connection with the financing, the Company also issued 757,700 common share purchase warrants to brokers with the same terms as the common share purchase warrants issued with the financing units. The aggregate fair value of the common share purchase warrants issued to the brokers at the time of issuance was $323,973 (C$428,479) which was recorded as a derivative liability.

The fair value of the warrants was determined using the Black-Scholes option pricing model with the following assumptions:

		2016
Expected life years		3.00
Interest rate		0.58%
Volatility		87.29%
Dividend yield		Nil

In addition, the Company incurred cash share issue costs totalling $1,285,458 (C$985,303), which consisted of legal fees, commission and other direct financing costs.

In connection with the guidance of ASC 815-40-15, as the options and warrants are exercisable in a currency other than the functional currency of the Company they do not meet the “fixed-for-fixed” criteria of the guidance. As a result, the Company was required to separately account for the common share purchase warrants issued in connection with the financing noted above as a derivative instrument liability. (See note 9 – Derivative liability)

Common shares – 2015

In March 2015, the Company issued 150,000 common shares to the former President of the Company for achieving two of the three milestones outlined in his management agreement (See Note 6 – Commitments and Contingencies). The common shares had a total fair value of $155,428 (Note 7(i)). The fair value was based on the market price on the date of issuance.

Stock options

The Company has elected to use the Black-Scholes option pricing model to determine the fair value of stock options granted. In accordance with the accounting standard for employees, the compensation expense is amortized on a straight-line basis over the requisite service period, which approximates the vesting period. Compensation expense for stock options granted to non-employees is amortized over the contract services period or, if none exists, from the date of grant until the options vest. Compensation associated with unvested options granted to non-employees is re-measured on each balance sheet date using the Black-Scholes option pricing model.

The following is a summary of stock option activity during the nine months ended September 30, 2016 and the year ended December 31, 2015:

No stock options expired during the three or nine months ended September 30, 2016.

During the three and nine months ended September 30, 2016, the Company recognized $3,799 and $11,396 (three and nine months ended September 30, 2015 - $155,203) in stock-based compensation relating to employee stock options that were issued and/or had vesting terms.

As at September 30, 2016, the aggregate intrinsic value of the outstanding exercisable options was $171,000 (December 31, 2015 - $Nil).

	Shares		Weighted Average Exercise Price per Share
Options outstanding and exercisable, December 31, 2014		750,000	$	1.29
Options granted		570,000	$	0.58
Options forfeited		(250,000)	$	1.18
Options outstanding, December 31, 2015		1,070,000	$	0.94
Options exercisable, December 31, 2015		976,667	$	0.97

Options outstanding, September 30, 2016		1,070,000	$	0.94
Options exercisable, September 30, 2016		1,023,334	$	0.96

The following table summarizes information about stock options outstanding and exercisable at September 30, 2016:

Expiry Date	Number Outstanding		Number Exercisable		Remaining Contractual Life (Years)		Exercise Price
June 3, 2018		50,000		50,000		1.67	$	1.16
September 3, 2018		150,000		150,000		1.93	$	1.59
September 18, 2018		300,000		300,000		1.97	$	1.26
September 8, 2020		570,000		523,334		3.94	$	0.58
Balance, September 30, 2016		1,070,000		1,023,334		3.00

Warrants

During the nine months ended September 30, 2016, the Company issued 6,317,700 (nine months ended September 30, 2015 – 10,000,000) share purchase warrants in connection with a financing. See Note 7(v) and 9, for accounting treatment. The following is a summary of common share purchase warrants activity:

	September 30,2016		December 31,2015
Balance, beginning of period		10,000,000		-
Issued		6,317,700		10,000,000
Balance, end of period		16,317,700		10,000,000

*Included in the warrants issued are 757,700 non-tradable share purchase warrants issued to brokers.

The following table summarizes information about share purchase warrants outstanding and exercisable at September 30, 2016:

Expiry Date	Number Outstanding		Remaining Contractual Life (Years)	Exercise Price
June 8, 2020		10,000,000	3.69	$	0.95
July 25, 2019		6,317,700	2.82	C$	2.00