10. SHARE CAPITAL A. AUTHORIZED B. ISSUED – CLASS A COMMON SHARES C. CONTRIBUTED SURPLUS D. STOCK OPTIONS AND SHARE-BASED PAYMENTS CEAPRO Annual Report 2012 45 The Company has granted stock options to eligible employees, directors, officers, and consultants under stock option plans that vest over periods ranging from two years to ten years and have a maximum term of ten years. The Company accounts for options granted under these plans in accordance with the fair value based method of accounting for share-based payments. In the current year, the Company granted 300,000 (2011 – 400,000) stock options. The application of the fair value based method requires the use of certain assumptions regarding the risk-free market interest rate, expected volatility of the underlying stock, life of the options, and forfeiture rate. The weighted average risk-free rate used in 2012 was 1.51% (2011 – 2.10%), the weighted average expected volatility was 111% (2011 – 127%) which was based on prior trading activity of the Company’s shares, the weighted average expected life of the options was 10 years (2011 – 5 years), forfeiture rate was 0% (2011-0%), the weighted average share price was $0.08 (2011 – $0.10), the weighted average exercise price was $0.10 (2011 – $0.15), and the expected dividends were nil (2011 – nil). The weighted average grant date fair value of options granted during the year were $0.09 (2011 – $0.11) per option. The share-based payments expense recorded during the current year relating to options granted in 2012, 2011, and 2010 was $34,161 (during 2011 relating to options granted in 2011, 2010, 2009, and 2007 – $50,186). The following table summarizes the changes in contributed surplus: These non-cash transactions have been excluded from the consolidated statement of cash flows. During the year ended December 31, 2011, the Company issued 3,700,000 common shares totaling $370,000 for the settlement of convertible debentures and 1,590,909 common shares totaling $175,000 for the settlement of debt owing to the Company’s directors. i. Unlimited number of Class A voting common shares. Class A common shares have no par value. ii. Unlimited number of Class B non-voting common shares. There are no issued Class B shares. NOTES  TO CONSOLIDATED FINANCIAL STATEMENTS Year Ended Year Ended December 31, 2012 December 31, 2011 Number of Amount Number of Amount Shares $ Shares $ Balance at beginning of the year 60,278,948 6,315,858 54,988,039 5,770,858 Changes during the year Shares issued for debt – – 5,290,909 545,000 Balance at end of the year 60,278,948 6,315,858 60,278,948 6,315,858 2012 2011 $ $ Balance at beginning of year 397,631 347,445 Share-based payments (note 10 (d)) 34,161 50,186 Balance at end of year 431,792 397,631