FMNL Warrants - There are no warrants outstanding.
Other Dilutive Elements
All convertible debentures totaling $40,486 issued prior to 2003 are fully matured as of December 31, 2002. The debentures during their term carried a rate of interest of eight percent per annum payable semi-annually. The conversion feature of the debenture allowed for the debenture holders to convert his capital at a rate of $6.00 US to $12.50 US per share. The Company would have 4,622 shares issued if 100% of the debentures were to be converted. For the year ending September 30, 2011, $Nil, (December 31, 2006 $Nil, December 31, 2005 $Nil) of convertible debentures was repaid. There were no conversions during the year ended September 30, 2011, 2010, or 2009.
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During the year, the Company offered a secured convertible debenture with a face value of up to $9,000,000 USD, secured by a 100% interest in two US Irrevocable Life Insurance Trusts (ILIT) with death benefits totaling $9,000,000 USD, and are subject to an escrow agreement. The Company issued seven units for a total face value of $3,150,000 USD, for cash proceeds of $253,541 plus common shares of the company valued at $134,101.
The debenture holders have the right to convert at any time in whole or in part, any outstanding amount paid to date on the debenture, into Common Shares of the Company at a 20% discount to the market trading price immediately prior to conversion. The fair value of these conversion rights was calculated using the Black-Scholes method. At issuance assumptions included the stock price of $0.17 with a maturity date of 9.3 years and an interest rate of 1.76%. At September 30, 2011 assumptions included a stock price of $0.48 with a maturity date of 8.7 years and an interest rate of 1.76%.
The fair value of the $3,150,000 convertible debentures was estimated by discounting the payments due at the time of maturity of the two underlying ILIT’s. This debt discount will be amortized as interest expense over the life of the debt. During the year ended September 30, 2011, the company recognized $188,572 of accretion interest expense on the debt.
Ten years from the date of subscription, the debenture is redeemable and/or callable by the holder or the Company, at 75% of the total face value of the debenture. The Company, or debenture holder, can force the Company to convert the debt and take the option of either receiving payment in cash or a conversion to common shares of the Company, at the stated conversion rate. The option of receiving either common shares or cash is at the sole discretion of the debenture holder.
