New financial updates yesterdayShares outstanding as of yesterday 43,593,258 shares. Cheers.
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Capital Stock
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(a) Common stock |
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A summary of changes in common stock during the nine months ended September 30, 2010 is as follows:
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Number of |
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Shares |
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Amount |
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| Balance, December 31, 2009 and March 31, 2010 |
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32,945,000 |
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$ |
5,636,536 |
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| Common shares issued for cash |
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10,000,000 |
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2,930,260 |
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| Issue costs - cash |
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- |
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(282,180 |
) |
| Issue of warrants |
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- |
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(688,600 |
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| Issue of compensation warrants |
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- |
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(161,645 |
) |
| Balance, September 30, 2010 |
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42,945,000 |
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$ |
7,434,371 |
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On June 18, 2010, the Company completed a brokered private placement financing of 10,000,000 units (the “Units”) at a price of Cdn
.30 (
.29) per Unit, for aggregate gross proceeds of Cdn$3,000,000 ($2,930,260). Each Unit is comprised of one common share of the Company (a “Common Share”) and one-half of one Common Share purchase warrant (a “Warrant”). Each full Warrant entitles the holder thereof to purchase one Common Share for a period of two years at an exercise price of Cdn
.50 per Common Share. In connection with the sale of the Units, the Company paid a cash commission equal to 8% of the gross proceeds and issued 983,333 compensation warrants to purchase Units at a price of Cdn
.30 per Unit for a period of two years from the closing of the private placement. Net proceeds of the private placement were allocated on a pro-rata basis between Common Shares and Warrants based on the relative fair values.
The grant date fair value of the 5,000,000 Warrants and 983,333 broker warrants was estimated using the Black-Scholes option pricing model to be $688,600 and $211,300 respectively. The assumptions used were: expected dividend yield of 0%; expected volatility of 155%; risk free interest rate of 1.52%; and expected term of 2 years.
(b) Stock options
The Company’s stock option plan (the “Plan”) was amended in June 2010 to provide for the grant of incentive and non-qualified stock options for up to 6,500,000 common shares to employees, consultants, officers and directors of the Company. All terms and conditions of the options are potentially the same for consultants as well as internal employees and directors. Options are granted for a term of up to five years from the date of grant. The vesting conditions were also amended in June 2010. There are 140,000 stock options available for grant as at September 30, 2010.
- 9 -
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BE Resources Inc.
(A Continuation of the Operations of Great Western Exploration, LLC)
(An Exploration Stage Entity)
Notes to Financial Statements - Presented in US Dollars
September 30, 2010
(unaudited) |
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| 5. |
Capital Stock (continued)
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(b) Stock options (continued) |
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A summary of changes in stock options during the nine months ended September 30, 2010 is as follows:
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Weighted average |
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Weighted average |
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Number of |
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Exercise Price |
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Exercise Price |
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Stock Options |
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US |
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CDN |
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| Balance, December 31, 2009 |
3,960,000 |
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$ |
0.25 |
|
$ |
0.26 |
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| Granted |
2,900,000 |
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$ |
0.31 |
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$ |
0.32 |
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| Expired |
(125,000 |
) |
$ |
0.30 |
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$ |
0.31 |
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| Forfeited |
(375,000 |
) |
$ |
0.30 |
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$ |
0.31 |
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| Balance, September 30, 2010 |
6,360,000 |
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$ |
0.28 |
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$ |
0.28 |
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| As at September 30, 2010, the following stock options were outstanding: |
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Options |
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Options |
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Exercise |
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Expiration |
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| Date of Grant |
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Granted |
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Exercisable |
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Price |
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Date |
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| December 7, 2007 |
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3,560,000 |
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3,560,000 |
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CDN
.25 (US
.24) |
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December 7, 2012 |
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| November 12, 2009 |
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400,000 |
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200,000 |
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US
.35 |
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November 12, 2014 |
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| January 5, 2010 |
|
400,000 |
|
|
200,000 |
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US
.30 |
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|
January 5, 2015 |
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| April 21, 2010 |
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500,000 |
|
|
125,000 |
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US
.20 |
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April 21, 2012 |
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| May 11, 2010 |
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500,000 |
|
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125,000 |
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US
.30 |
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May 11, 2012 |
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| June 7, 2010 |
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200,000 |
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200,000 |
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US
.30 |
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June 7, 2015 |
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| July 2, 2010 |
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300,000 |
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- |
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US
.31 |
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July 2, 2012 |
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| July 2, 2010 |
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300,000 |
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300,000 |
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US
.31 |
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July 2, 2015 |
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| August 5, 2010 |
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100,000 |
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100,000 |
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US
.30 |
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August 5, 2012 |
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| September 27, 2010 |
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100,000 |
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100,000 |
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US $1.05 |
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September 27, 2012 |
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6,360,000 |
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4,910,000 |
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As at September 30, 2010, the weighted average exercise price is
.28. As at September 30, 2010, the weighted average remaining contractual life is 2.52 years.
The fair value of the stock options granted was estimated using the Black-Scholes option pricing model. The stock options vest based on continuous service and compensation expense is recorded over the service period from date of grant. This model requires management to make estimates of the expected volatility of its common shares, the expected term of the option, the expected future forfeiture rate, and future interest rates. The risk free interest rate is based on the U.S. Treasury Bond rate. The Company has not paid dividends and does not expect to pay dividends in the foreseeable future. As historical volatility of the Company’s common shares is not available, expected volatility is based on the historical performance of the common shares of other corporations with similar operations. The expected term of the stock options was estimated to be the contractual term of the options.
- 10 -
BE Resources Inc.
(A Continuation of the Operations of Great Western Exploration, LLC)
(An Exploration Stage Entity)
Notes to Financial Statements - Presented in US Dollars
September 30, 2010
(unaudited)
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| 5. |
Capital Stock (continued)
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(b) |
Stock options (continued)
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During the nine months ended September 30, 2010, the Company granted the following:
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(i) |
900,000 options for consulting services at an exercise price of
.30 that expire on January 5, 2015. The options vest 25% on the date of grant and 25% every six months thereafter over a period of eighteen months as long as the consultant continues to provide services to the Company. The weighted average grant date fair value of these options was
.29 per share. The assumptions used to estimate the fair value are as follows: expected dividend yield of 0%; expected volatility of 127%; risk free interest rate of 2.56%; and expected term of 5 years. 500,000 of these options were either expired or failed to vest during the nine months ended September 30, 2010.
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(ii) |
500,000 options for consulting services at an exercise price of
.20 that expire on April 21, 2012. The options vest 25% on the date of grant and 25% every six months thereafter over a period of eighteen months as long as the consultant continues to provide services to the Company. The weighted average grant date fair value of these options was
.17 per share. The assumptions used to estimate the fair value are as follows: expected dividend yield of 0%; expected volatility of 151%; risk free interest rate of 1.03%; and expected term of 2 years.
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(iii) |
500,000 options for consulting services at an exercise price of
.30 that expire on May 11, 2012. The options vest 25% on the date of grant and 25% every six months thereafter over a period of eighteen months as long as the consultant continues to provide services to the Company. The weighted average grant date fair value of these options was
.21 per share. The assumptions used to estimate the fair value are as follows: expected dividend yield of 0%; expected volatility of 151%; risk free interest rate of 0.85%; and expected term of 2 years.
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(iv) |
200,000 options for consulting services at an exercise price of
.30 that expire on June 7, 2015. The options vested immediately. The weighted average grant date fair value of these options was
.24 per share. The assumptions used to estimate the fair value are as follows: expected dividend yield of 0%; expected volatility of 127%; risk free interest rate of 1.95%; and expected term of 5 years.
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(v) |
300,000 options for consulting services at an exercise price of
.31 that expire on July 2, 2012. The options vest 25% every three months from the date of grant over a period of twelve months as long as the consultant continues to provide services to the Company. The weighted average grant date fair value of these options was
.21 per share. The assumptions used to estimate the fair value are as follows: expected dividend yield of 0%; expected volatility of 152%; risk free interest rate of 0.63%; and expected term of 2 years.
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- 11 -
BE Resources Inc.
(A Continuation of the Operations of Great Western Exploration, LLC)
(An Exploration Stage Entity)
Notes to Financial Statements - Presented in US Dollars
September 30, 2010
(unaudited)
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| 5. |
Capital Stock (continued)
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(b) |
Stock options (continued)
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(vi) |
300,000 options for consulting services at an exercise price of
.31 that expire on July 2, 2015. The options vested immediately. The weighted average grant date fair value of these options was
.25 per share. The assumptions used to estimate the fair value are as follows: expected dividend yield of 0%; expected volatility of 127%; risk free interest rate of 1.82%; and expected term of 5 years.
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(vii) |
100,000 options for consulting services at an exercise price of
.30 that expire on August 5, 2012. The options vested immediately. The weighted average grant date fair value of these options was
.24 per share. The assumptions used to estimate the fair value are as follows: expected dividend yield of 0%; expected volatility of 158%; risk free interest rate of 0.53%; and expected term of 2 years.
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(viii) |
100,000 options for consulting services at an exercise price of $1.05 that expire on September 27, 2012. The options vested immediately. The weighted average grant date fair value of these options was
.75 per share. The assumptions used to estimate the fair value are as follows: expected dividend yield of 0%; expected volatility of 149%; risk free interest rate of 0.44%; and expected term of 2 years.
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The Company has determined that 2,200,000 stock options granted during the year ended December 31, 2007 and denominated in Canadian dollars were effectively indexed to the exchange rate between the Canadian dollar and the U.S. dollar, the functional currency of the Company, in addition to the price of its common stock. As a result, these stock options have been classified as liabilities and are remeasured at the end of each reporting period until settlement. As at September 30, 2010, the fair value of the liability of $1,898,500 (December 31, 2009 - $487,700) was estimated based on the following assumptions: expected dividend yield of 0% (2009 - 0%); expected volatility of 148% (2009 - 133%); risk free interest rate of 0.42% (2009 -1.7%); and expected life of 2.19 years (2009 - 2.94 years). The revaluation increased the stock option liability by $1,408,700, increased stock-based compensation by $1,377,700 and resulted in a foreign exchange loss of $31,000 for the nine months ended September 30, 2010.
During the nine months ended September 30, 2010, $2,311,496 was expensed (2009 -$20,776 recovered) as stock based compensation and consisted of expense related to vesting of fair value at grant date, expense related to the revaluation of consultants' options and revaluation of stock options denominated in Canadian dollars.
A summary of changes in warrants during the period ended September 30, 2010 is as follows:
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Weighted average |
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Weighted average |
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Number of |
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Exercise Price |
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Exercise Price |
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Warrants |
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US |
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CDN |
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| Balance, December 31, 2009 |
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575,000 |
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$ |
0.29 |
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$ |
0.30 |
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| Issued (note 5(a)) |
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5,983,333 |
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$ |
0.46 |
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$ |
0.47 |
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| Balance, September 30, 2010 |
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6,558,333 |
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$ |
0.44 |
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$ |
0.45 |
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- 12 -
BE Resources Inc.
(A Continuation of the Operations of Great Western Exploration, LLC)
(An Exploration Stage Entity)
Notes to Financial Statements - Presented in US Dollars
September 30, 2010
(unaudited)
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| 5. |
Capital Stock (continued)
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| As at September 30, 2010, the following warrants were outstanding: |
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| Expiry Date |
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Number of |
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Exercise |
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Fair Value |
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warrants |
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Price |
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on Issue Date |
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| October 26, 2011 |
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500,000 |
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CDN
.30 (US
.29) |
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$ |
94,600 |
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| November 13, 2011 |
|
75,000 |
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CDN
.30 (US
.29) |
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14,200 |
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| June 18, 2012 |
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5,000,000 |
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CDN
.50 (US
.49) |
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|
671,789 |
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| June 18, 2012 |
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983,333 |
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CDN
.30 (US
.29) |
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|
260,587 |
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|
6,558,333 |
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ASC 815 indicates that warrants with exercise prices denominated in a different currency than an entity’s functional currency should not be classified as equity. As a result, these warrants have been treated as derivatives and recorded as liabilities carried at their fair value, with period to period changes in the fair value recorded as a gain or loss in the statement of operations. The Company treated the warrants as a liability upon their issuance.
As at September 30, 2010, the fair value of the warrant liability of $5,028,511 (December 31, 2009 –$108,800) was estimated using the Black-Scholes option pricing model, based on the following assumptions: expected dividend yield of 0%; expected volatility of 122-152%; risk free interest rate of 0.42%-0.27%; and expected term of 1.07-1.72 years. The revaluation increased the warrant liability by $4,069,466, increased change in warrant liability expense by $4,013,146 and resulted in a foreign exchange loss of $56,320 for the nine months ended September 30, 2010.
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(d) |
Additional paid-in capital
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A summary of changes in additional paid-in capital during the nine months ended September 30, 2010 is as follows:
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Amount |
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| Balance, December 31, 2009 |
$ |
232,117 |
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| Stock-based compensation |
|
89,079 |
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| Balance, March 31, 2010 |
|
321,196 |
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| Stock-based compensation |
|
156,799 |
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| Balance, June 30, 2010 |
|
477,995 |
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| Stock-based compensation |
|
765,352 |
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| Balance, September 30, 2010 |
$ |
1,243,347 |
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- 13 -
BE Resources Inc.
(A Continuation of the Operations of Great Western Exploration, LLC)
(An Exploration Stage Entity)
Notes to Financial Statements - Presented in US Dollars
September 30, 2010
(unaudited)
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| 6. |
Related Party Transactions
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(a) |
Pursuant to an employment agreement dated December 1, 2007 which was subsequently amended on September 1, 2009, the Company paid an officer who is also a director of the Company, a salary of $9,000 and $27,000 for the three and nine months ended September 30, 2010, respectively (three and nine months ended September 30, 2009 - $23,000 and $83,000 respectively) and an expense allowance of $45,000 and $191,000 for the three and nine months ended September 30, 2010, respectively (three and nine months ended September 30, 2009 - $15,488 and $60,488 respectively). Included in accounts payable and accrued liabilities as at September 30, 2010 was $2,195 (December 31, 2009 - $9,395) owing to this individual for expense reimbursement. This amount is unsecured, non-interest bearing with no fixed terms of repayment.
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(b) |
During the three and nine months ended September 30, 2010, the Company incurred fees for accounting services rendered of $6,092 and $20,011, respectively (three and nine months ended September 30, 2009 - $2,415 and $6,147 respectively) charged by a corporation controlled by an officer of the Company. In addition, during the three and nine months ended September 30, 2010, the Company incurred fees for corporate secretarial services rendered of $3,656 and $9,231, respectively (three and nine months ended September 30, 2009 - $nil) charged by a corporation in which an officer of the Company is also an officer. Consulting fees of $6,000 and $18,000 for the three and nine months ended September 30, 2010 respectively (three and nine months ended September 30, 2009 - $6,000 and $18,000 respectively) was charged by this officer. Included in accounts payable and accrued liabilities as at September 30, 2010 is $2,556 (December 31, 2009 - $11,396) owing to the corporation controlled by this officer, $1,388 owing to the corporation in which this officer is also an officer and $nil (December 31, 2009 - $45,000) owing to this officer. These amounts are unsecured, non-interest bearing with no fixed terms of repayment.
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The above transactions were in the normal course of operations and were measured at the exchange amount, which is the amount of consideration established and agreed to by the related parties.
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(c) |
An officer of the Company purchased 33,333 units of the private placement financing completed on June 18, 2010 (note 5(a)) at a price of Cdn
.30 for gross proceeds of Cdn$10,000, on the same terms as other investors.
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