11. Stock Options

The Company's 1998 stock incentive plan (1998 Plan)

Under the terms of the 1998 Plan, as amended, 12,000,000 common shares were reserved for issuance on exercise of options granted under the 1998 Plan. The 1998 Plan terminated on December 4, 2008 and as such, there are no further options to be granted under the 1998 Plan. However, as at December 31, 2011, there are 1,800,000 options that were granted prior to December 4, 2008 currently outstanding and able to be exercised.

The Company's 2008 stock incentive plan (2008 Plan)

Under the terms of the 2008 Plan, 12,000,000 common shares have been reserved for issuance on exercise of options granted under the 2008 Plan. As at December 31, 2011, there are 9,210,000 options to issue common stock remaining for grant under the 2008 Plan. The Board of Directors of the Company may amend or modify the 2008 Plan at any time, subject to any required stockholder approval. The 2008 Plan will terminate on the earliest of: (i) May 30, 2018; (ii) the date on which all shares available for issuance under the 2008 Plan have been issued as fully-vested shares; or, (iii) the termination of all outstanding options in connection with certain changes in control or ownership of the Company.

Stock-based compensation

The Company recognizes compensation cost for stock-based compensation arrangements with employees, non-employee consultants and non-employee directors based on their fair value using the Black-Scholes option-pricing model, such cost to be expensed over the respective vesting periods.

The following table summarizes the classification of stock-based compensation:

	Year ended Dec 31, 2011 $			Year ended Dec 31, 2010 $		Year ended Dec 31, 2009 $		Period from Inception, Aug 21, 2002 to Dec 31, 2011 $

Stock-based compensation
Consolidated Statements of Operations
General and administrative		662,232			700,433		778,845		4,794,360
Consulting fees		(2,254	)		17,196		139,840		3,413,834
		659,978			717,629		918,685		8,208,194
Consolidated Balance Sheets
Property and equipment		234,568			252,335		662,420		5,644,572
		894,546			969,964		1,581,105		13,852,766

At December 31, 2011, the total compensation cost related to non-vested awards not yet recognized was $64,723 (December 31, 2010 – $318,647 and December 31, 2009 - $382,483) which will be recognized over a weighted-average period of twenty-one months. During the years ended December 31, 2011, 2010 and 2009, no options were exercised.

No income tax benefit has been recognized relating to stock-based compensation expense and no tax benefits have been realized from the exercise of stock options.

The fair value of each option granted was estimated on the date of grant using the Black-Scholes option-pricing model. Weighted average assumptions used in the valuation are disclosed in the following table:

	Year ended Dec 31, 2011	Year ended Dec 31, 2010	Year ended Dec 31, 2009

Fair value of stock options granted (per option)	$0.54	$0.90	$0.66
Risk-free interest rate	3.1%	2.6%	1.5%
Volatility	119.8%	129.7%	115.0%
Expected life	9.7 years	8.4 years	3.3 years
Dividend yield	0%	0%	0%

Stock option table

Activity with respect to all stock options is presented below for the years ended December 31, 2011, 2010 and 2009:

	2011					2010					2009
	Shares #			Weighted Average Exercise Price $		Shares #			Weighted Average Exercise Price $		Shares #			Weighted Average Exercise Price $

Outstanding at beginning of year		4,550,000			2.72		4,440,000			3.48		5,325,000			3.69
Granted		1,280,000			1.04		1,280,000			1.58		280,000			1.15
Exercised		--			--		--			--		--			--
Expired		(1,240,000	)		1.70		(1,060,000	)		5.03		(1,060,000	)		4.03
Forfeitures and cancellations		--			--		(110,000	)		1.72		(105,000	)		2.67
Outstanding at end of year		4,590,000			2.53		4,550,000			2.72		4,440,000			3.49

Outstanding aggregate intrinsic value	$	--				$	25,000				$	711,700

Exercisable at end of year		3,823,501			2.80		3,252,500			3.04		3,487,500			3.99

Exercisable aggregate intrinsic value	$	--				$	--				$	240,325

The weighted average remaining life by exercise price as of December 31, 2011 is summarized below:

Range of Exercise Prices $	Outstanding Shares #	Weighted Average Remaining Life Months	Exercisable Shares #	Weighted Average Exercise Price $
0.01 - 0.99	774,800	95.4	591,467	0.67
1.00 - 1.99	1,369,000	91.5	785,834	1.34
2.00 - 2.99	323,800	100.9	323,800	2.25
3.00 - 4.99	1,672,400	57.4	1,672,400	3.67
5.00 - 5.99	400,000	25.9	400,000	5.07
6.00 - 6.99	50,000	36.0	50,000	6.81
	4,590,000	74.1	3,823,501	2.53