RE: RE: RE: News ... - extract from Annual Report12. Shareholders’ Equity SERIES II PREFERRED SHARES
On November 3, 2004 the Company issued 12,000,000 shares of Series II convertible preferred stock for gross consideration of
$12,000,000. The Series II Preferred Shares are convertible at the option of the holder into Common Shares for five years plus
one day at a conversion ratio which is obtained by dividing the fully-accreted value by the applicable conversion price as follows:
25% at $1.45; 50% at $2.50; and 25% at $3.75. The fully accreted value is calculated as the aggregate subscription price of the
preferred shares plus 6% per annum until the earlier of conversion or five years from the date of issuance. Issue costs for this
private placement totaling $268,284 were netted against the share capital of the Series II Preferred Shares
On June 4, 2007, the holder converted 3,000,000 shares or 25% of their Series II convertible preferred stock at its accreted
value for conversion purposes of $3,463,068 to Common Shares at a conversion price of $1.45. As a result, 2,388,323 Common
Shares were issued.
After the initial five-year plus one-day term, any Series II Preferred Shares outstanding are convertible, at the option of the
holder, into Common Shares at the fully accreted value divided by the average market price of the Common Shares less the
greater of 5% or the maximum discount permitted by the TSX [subject to the issuance of a maximum of 6,521,677 [2008
– 6,521,677] Common Shares in the aggregate on conversion of all Series II Preferred Shares].
If the trading price of the Common Shares exceeds $13.50 for 60 consecutive days, the Company may require the holders to
convert the Preferred Shares into Common Shares at the conversion ratio applicable on the date of conversion.
The Preferred Shares have voting rights on the basis of the number of Common Shares that the holder would have if the Preferred
Shares were converted into Common Shares on the date of the applicable shareholders’ meeting