Commitments and Contingencies

6 Months Ended

Jun. 30, 2012

Commitment and Contingencies

Commitments and Contingencies

Note 17. Commitments and Contingencies 

Liabilities for loss contingencies arising from claims, assessments, litigation, fines and penalties and other sources are recorded when it is possible that a liability has been incurred and the amount of the assessment can be reasonably estimated. As at June 30, 2012, there are no material litigations pending or threatened against the Company.

The Company’s commitments are as follows: 

(a) On January 7, 2011, the Company issued 3,334 common shares valued at $nil per common share in error. On July 14, 2011, the Company cancelled these 3,334 common shares. As at June 30, 2012, the Company is still in the process of obtaining the 3,334 common shares to be returned to treasury for cancellation (Note 15).

(b) On February 11, 2010, the Company entered into a Convertible Promissory Note Agreement with Samyang for $2,000,000 (Note 9 and 14). The principal balance bears interest at a rate of 6% per annum. All principal, together with all accrued and unpaid interest, is convertible into common shares of the Company at a price of $1.10 per share.

At present the parties are determining a new mutually agreeable maturity date for the note. 

As at June 30, 2012, should Samyang exercise its option under the Convertible Promissory Note Agreement, the Company would be required to issue 2,078,207 common shares in settlement of its obligation to Samyang. 

(c) On March 5, 2012, the Company entered into a Convertible Promissory Note Agreement with Asher for $37,500 (Note 14). The principal balance bears interest at a rate of 8% per annum. All principal, together with all accrued and unpaid interest, is convertible into common shares of the Company at a variable conversion price per share. The variable conversion price is to be calculated as 58% multiplied by the market price, which is the average of the lowest three closing bid prices on the Over the Counter Bulletin Board (“OTCBB”) during the ten trading day period ending on the latest complete trading day prior to the conversion date.

As at June 30, 2012, should Asher exercise its option under the Asher Agreement, the Company would be required to issue 510,101 common shares in settlement of its obligation.

(d) The Company appointed a new Chief Executive Office (“CEO”) on 20 January 2012 with an employment agreement term effective for twelve months. The employment agreement stipulates an annual salary of $125,000, issuance of 1,000,000 shares of the Company’s common stock, share purchase warrants to purchase up to an additional 1,000,000 shares of the Company’s common stock at a price of $0.25 per share and Employee Common Stock Awards of 500,000 shares of common stock based on targeted increases in the Company’s market capital valuation. Of the 1,000,000 shares of the Company’s common stock, 416,665 have been issued as at June 30, 2012, of which the value of 83,333 shares has been recorded as a prepaid expense. The value of a further 83,333 shares has been recorded in accounts payable and accrued liabilities as shares approved for issue to the CEO in April have not yet been issued.