Stockholders deficit

6 Months Ended

Jul. 31, 2014

Stockholders deficit [Text Block]

NOTE 8 – Stockholders’ deficit

Our common shares are all of the same class, are voting and entitle stockholders to receive dividends as defined. Upon liquidation or wind-up, stockholders are entitled to participate equally with respect to any distribution of net assets or any dividends that may be declared.

In August 2013, the company entered into an agreement with an investor relations firm to issue 5,023,256 common shares in exchange for investor relations services, with 50% (2,511,628) of the shares to be held by the Company until the Company chose to continue with additional services.  These additional services were accepted by the Company during the six months ended July 31, 2014, and the 2,511,628 common shares held by the Company were released and classified as issued and outstanding effective July 31, 2014, at a nominal fair value.

In March 2014, the Company issued 1,000,000 units of common stock to a designee of MBGS, LLC, pursuant to a settlement agreement with Northern Dynasty which discharged the $3,730,174 principal balance and $1,592,769 of accrued interest for the 2010 Convertible Note (See Note 7). Each unit consists of one share of the Company’s common stock and a warrant to purchase one-half share of the Company’s common stock. The fair value of the common stock issued was $17,500, which was recorded as an expense upon issuance of the units. The 500,000 warrants, which have an exercise price of $0.028 and have a three year term (See Note 5), had a fair value of $6,440. The fair value was expensed and a derivative liability was recorded for the fair value of the warrant on the date of issuance of the units. The change in the fair value of the derivative liability between the date of issuance and the balance sheet date of July 31, 2014 was recorded in other income and expense.

Between February 2014 and July 2014, pursuant to the investment agreement with KVM, KVM purchased 34,214,226 shares for $456,923, of which $55,673 is still owed to the Company and is reflected as a stock subscription receivable as of July 31, 2014.

During the six months ending July 31, 2014, $242,918 of the August 2013 Note were converted into 23,937,915 shares of the Company’s common stock. The conversions happened on multiple dates with conversion prices ranging from $0.008 to $0.012.

During the six months ended July 31, 2014, the Company issued 6,424,979 units to three investors for total proceeds of $73,000. Each unit consists of one share of the Company’s common stock and a warrant to purchase one share of the Company’s common stock. The warrants have exercise prices ranging from $0.015 to $0.021 and have a three year term.

At July 31, 2014 there were 903,500 non-qualified stock options outstanding with a weighted average exercise price of $0.376 per option; of those options 903,500 are exercisable. At July 31, 2014 there were 85,476,124 incentive stock options outstanding with a weighted average exercise price of $0.046 per option; of those options 83,595,473 are exercisable with a weighted average exercise price of $0.047.

During the six months ended July 31, 2014 we recognized $5,616 of compensation expense related to incentive and non-qualified stock options previously granted to officers, employees and consultants.