Stockholders' Deficiency

12 Months Ended

Aug. 31, 2013

Notes

Stockholders' Deficiency

Note 10  Stockholders’ Deficiency

The Company is authorized to issue 300,000,000 shares of common stock with a par value of $0.001 and 10,000,000 shares of preferred stock with a par value of $0.001.  Our Board of Directors has the authority to set the terms of any class of preferred shares through an issuance of a certificate of designation without receiving further shareholder approval.  We have reserved 280,000 common shares for issuance under our 2010 Stock Option Plan.  In the period ended August 31, 2007, the Company sold 800,000 shares of common stock for cash of $500. In the year ended August 31, 2008, the Company sold 179,336 shares of its common stock for cash of $112,085. There are no equity transactions in the years ended August 31, 2010 and 2009. Effective November 1, 2010, the Company enacted a four-for-one (4:1) forward stock split. Effective October 10, 2013, the Company enacted a one-for-twenty-five (1:25) reverse stock split. All share and per share data in these financial statements have been adjusted retroactively to reflect the stock splits.

Pursuant to a compensation agreement with a former Director, effective October 4, 2011 and 2010, the Company granted a stock award in the amount of 6,000 shares of Company common stock, an aggregate of 12,000 shares.  The Company recorded share-based compensation of $-0- and $151,500 (the fair value at date of grant) in the years ended August 31, 2013 and 2012.

Pursuant to the acquisition agreement with Axiom Mexico on January 13, 2011, the Company issued eighty thousand (80,000) of its common shares to the shareholders of Axiom Mexico. The shares were valued at $500,000 ($6.25 per share) which represents the fair value on that date.

Pursuant to a compensation agreement with our former Vice President - Exploration, effective January 13, 2011, the Company granted a stock option award for the purchase of 24,000 shares of Company common stock at an exercise price of $6.25 per share.  The fair value of our common stock at date of grant was $16.75.  The fair value of the option, $386,632, was calculated using the Black-Scholes pricing model. The option vested over a two year period as follows: 6,000 shares immediately and 6,000 shares semi-annually through July 13, 2012; and was exercisable for ten years from the date of issuance. The option was forfeited upon the officer’s resignation effective May 18, 2012. The fair value of the option was charged to operations as share-based expense over the vesting period. The expense recorded in the year ended August 31, 2012 was $81,870.

Pursuant to a compensation agreement with our Director - Business Development (current CEO), effective January 20, 2011, the Company granted a stock option award for the purchase of 12,000 shares of Company common stock at an exercise price of $6.25 per share (see Note 12). The fair value of our common stock at date of grant was $17.50.  The fair value of the option, $186,197, was calculated using the Black-Scholes pricing model. The option vested as follows: 6,000 shares immediately and 6,000 shares on January 20, 2012; and is exercisable for five years from the date of issuance. The fair value of the option is charged to operations as share-based expense over the vesting period. The expense recorded in the year ended August 31, 2012 was $36,219.

Pursuant to a compensation agreement with our former CEO, effective January 24, 2011, the Company (i) issued 4,000 shares of common stock valued at $75,000 ($18.75 per share) and (ii) granted a stock option award for the purchase of 220,000 shares of Company common stock at an exercise price of $6.25 per share. The fair value of our common stock at date of grant was $18.75.  The fair value of the option, $3,977,771, was calculated using the Black-Scholes pricing model. The option vested over a three year period as follows: 88,000 shares immediately, 56,000 shares, 52,000 shares and 24,000 shares on January 24, 2012, 2013 and 2014, respectively; and was exercisable for ten years from the date of issuance. The option was forfeited upon the officer’s resignation effective May 18, 2012.  The fair value of the option was charged to operations as share-based expense over the vesting period. The expense recorded in the year ended August 31, 2012 $844,044.

Pursuant to a compensation agreement with a former Director, effective January 26, 2011, the Company granted a stock option award for the purchase of 12,000 shares of Company common stock at an exercise price of $6.25 per share. The fair value of our common stock at date of grant was $16.75.  The fair value of the option, $193,350, was calculated using the Black-Scholes pricing model. The option vested over a three year period as follows: 2,000 shares immediately,2,000 shares, 4,000 shares and 4,000 shares on January 26, 2012, 2013 and 2014, respectively; and was exercisable for ten years from the date of issuance. The option was forfeited upon the director’s resignation effective May 18, 2012. The fair value of the option was charged to operations as share-based expense over the vesting period. The expense recorded in the year ended August 31, 2012 $67,373.

In January and February 2011, the Company sold 13,200 shares of common stock at $6.25 per share for gross proceeds of $82,500 to five non-US accredited investors pursuant to Regulation S.  The Company incurred offering costs of $2,500 pursuant to an escrow agreement.

In April and May 2011, the Company sold 64,000 shares of common stock at $6.25 per share for gross proceeds of $400,000 to three non-US accredited investors pursuant to Regulations S and one US accredited investor pursuant to Regulation D.

In June and July 2011, we sold 95,760 shares of common stock at $6.25 per share for gross proceeds of $598,500 to six non-US accredited investors pursuant to Regulations S and three US accredited investors pursuant to Regulation D. In addition, we incurred offering costs of $94,350 (10% of gross proceeds) on all sales pursuant to Regulation S.

In July 2011, we issued 10,000 shares of common stock for investor relations services.  The shares were valued at $487,500, the fair value at date of grant, and such amount was charged to operations as share-based expense at that date.

Pursuant to the compensation agreement with a former director, effective June 17, 2011, we granted a stock option award for the purchase of 4,000 shares of our common stock exercisable at $6.25 per share, the agreed upon fair value at date of grant. The option was fully vested and expired 10 years from date of grant. The option was forfeited upon the director’s resignation effective May 18, 2012.  The fair value of the option, $114,464, was calculated using the Black-Scholes pricing model. The fair value of the option was charged to operations as share-based expense on the date of the grant.

Effective June 17, 2011, we granted our former CFO an option to purchase 4,000 shares of common stock exercisable at $6.25 per share, the agreed upon fair value at date of grant.  The option vested over a two year period and expired 10 years from date of grant. The option was forfeited upon the officer’s resignation effective May 18, 2012.  The fair value of the option, $114,464, was calculated using the Black-Scholes pricing model. The fair value of the option was charged to operations as share-based expense over the vesting period. The expense recorded in the year ended August 31, 2012 was $40,831.

In December 2011, we received gross proceeds of $285,904 from the sale of 45,745 shares of common stock at $6.25 per share to one non-U.S. investor pursuant to Regulation S.

Effective August 16, 2012, our current CEO converted $212,218 of accrued and unpaid compensation and reimbursable expenses owed him into 8,488,720 shares of common stock at $0.025 per share. The fair value of the stock on that date was $0.75 per share and we incurred a charge for share based finance costs of $6,154,322 in the year ended August 31, 2012.

In August 2012, we initiated an offering of up to a total of 480,000 shares of common stock and 48,000 warrants to purchase shares of common stock (collectively the “Units”).  The Units are being offered at US $0.625 per Unit for an aggregate purchase price of US $300,000.  The warrants are exercisable for a two year period at US $0.875 per share. Offering costs are 10% of the gross proceeds received plus warrants equal to 10% of the warrant equity for sales to non-US investors pursuant to Regulation S. There are no offering costs for sales to US investors pursuant to Regulation D. 

In August 2012, we received gross proceeds of $10,000 from the sale of 16,000 Units at $0.625 per Unit which included 16,000 shares of common stock and warrants to purchase 1,600 shares of common stock at $0.875 per share to a non-US accredited investor pursuant to Regulation S.  We incurred offering costs of $1,000 (10% of gross proceeds) plus warrants to purchase 1,143 shares of common stock at $0.875 per share.

In September 2012, we received gross proceeds of $33,750 from the sale of 54,000 Units at $0.625 per Unit which included 54,000 shares of common stock and warrants to purchase 5,400 shares of common stock at $0.875 per share to three non-US accredited investors pursuant to Regulation S.  We incurred offering costs of $3,375 plus warrants to purchase 3,857 shares of common stock at $0.875 per share

In December 2012, our former CEO converted $157,500 of accrued and unpaid compensation and reimbursable expenses owed him into 50,000 shares of Company common stock valued at $132,500 and a $25,000 promissory note (see Note 8).

Warrant activity for the year ended August 31, 2013 is as follows:

	August 31, 2013
	Shares	Weighted- Average Exercise Price	Weighted- Average Remaining Contractual Term	Aggregate Intrinsic Value
Outstanding at beginning
of period	2,743	$ 0.875
Granted/Sold	9,257	$ 0.875
Expired/Cancelled	--	--
Forfeited	--	--
Exercised	--	--
Outstanding and exercisable at
August 31, 2013	12,000	$ 0.875	1.04 Years	$ --

	August 31, 2012
	Shares	Weighted- Average Exercise Price	Weighted- Average Remaining Contractual Term	Aggregate Intrinsic Value
Outstanding at beginning
of period	--	--
Granted/Sold	2,743	$ 0.875
Expired/Cancelled	--	--
Forfeited	--	--
Exercised	--	--
Outstanding and exercisable at
August 31, 2012	2,743	$ 0.875	2.0 Years	$ --

The fair value of the warrants, an aggregate $1,848 for the year ended August 31, 2013 and $560 for the year ended August 31, 2012, is estimated on the date of grant using the Black-Scholes pricing model.  The following weighted-average assumptions were made in estimating fair value:

	Years Ended August 31,
	2013	2012
Dividend Yield	--%	--%
Risk-Free Interest Rate	0.27%	0.22%
Expected Life	2.0 Years	2.0 Years
Expected Volatility	57.49%	58.62%

2010 Stock Option Plan

The Plan, adopted by the Board of Directors on January 31, 2011, is intended to provide an incentive to our executive officers, directors, employees, independent contractors or agents who are responsible for or contribute to our management, growth and/or profitability. The purpose of granting options to such persons under the Plan is to attract them to consider employment with, or service to, us, to encourage their continued employment or service, and to give them incentive to provide their best efforts to us for purposes of enhancing shareholder value.

A total of up to 280,000 shares of our common stock have been reserved for the implementation of the Plan, either through the issuance of options to eligible persons in the form of incentive stock options or non-statutory options which are subject to restricted property treatment under Section 83 of the Internal Revenue Code. Whenever practical, the Plan is to be administered by a committee of not less than two members of the Board of Directors appointed by the full Board, and the Plan has a term of ten years, unless sooner terminated by the Board. As of August 31, 2013, 268,000 shares of common stock are available for issuance under the plan.

The following table summarizes options transactions under the 2010 Stock Option Plan for the periods.

	For the Year Ended
	August 31, 2013
	Shares	Weighted- Average Exercise Price	Weighted- Average Remaining Contractual Term	Aggregate Intrinsic Value
Outstanding at beginning
of period	12,000	$ 6.25
Granted/Sold	--	--
Expired/Cancelled	--	--
Forfeited	--	--
Exercised	--	--
Outstanding at August 31, 2013	12,000	$ 6.25	2.39 Years	$ --
Exercisable at August 31, 2013	12,000	$ 6.25	2.39 Years	$ --

	For the Year Ended
	August 31, 2012
	Shares	Weighted- Average Exercise Price	Weighted- Average Remaining Contractual Term	Aggregate Intrinsic Value
Outstanding at beginning
of period	--	$ --
Granted/Sold	278,000	6.25
Expired/Cancelled	--	--
Forfeited	(266,000)	6.25
Exercised	--	--
Outstanding at August 31, 2012	12,000	$ 6.25	3.64 Years	$ --
Exercisable at August 31, 2012	12,000	$ 6.25	3.64 Years	$ --