September 30, 2007				December 31, 2006
ASSETS
Current
Cash (Note 3)		$	217,571			$	54,624
Accounts receivable			-				24,417
Inventory (Note 4)			245,036				310,039
Prepaid expenses and deposits			323,059				84,736
			785,666				473,816
Equipment			169,724				213,897
Investment in Invisa, Inc. (Note 5)			-				16,875
		$	955,390			$	704,588
LIABILITIES AND CAPITAL DEFICIT
Current
Accounts payable and accrued liabilities		$	282,889			$	331,772
Customer deposits			261,126				147,191
Payable to related parties (Note 6)			796,461				1,229,388
Advances payable (Note 7)			759,459				607,475
Bridge loans, shareholders			5,036				4,287
Current portion of long-term debt (Note 8)			2,642,387				1,910,418
			4,747,358				4,230,531
Long-term debt (Note 8)			-				214,190
			4,747,358				4,444,721
Capital deficit
Capital stock (Note 9)
Authorized
100,000,000 common shares, each with par value of $0.001
10,000,000 preferred shares, each with a par value of $0.001
Issued
12,719,533 (December 31, 2006 – 319,533) common shares(a)			12,720				320
Additional paid-in capital(a)			59,281,821				15,145,996
Shares to be issued (Note 9)			1,493,750				862,500
Accumulated other comprehensive loss			(334,507)				(3,780)
Accumulated deficit			(64,245,752)				(19,745,169)
			(3,791,968)				(3,740,133)
		$	955,390			$	704,588

 

(a) Prior periods have been restated to reflect the 1 for 100 reverse stock split on May 21, 2007.

 

The accompanying notes are an integral part of these consolidated interim financial statements.

 

CONSOLIDATED INTERIM STATEMENTS OF OPERATIONS

(Unaudited – Expressed in US dollars)

 

 

				Three-Month Period Ended  September 30,  2007			Three-Month Period Ended September 30, 2006	Nine-Month Period Ended September 30, 2007		Nine-Month Period Ended September 30, 2006
REVENUE				$  4,414			$  11,452	$  252,068		$      160,517
OPERATING COSTS AND EXPENSES
Cost of sales				3,208			18,975	211,268		148,426
General and administrative (Note 10)				11,483,920			933,607	15,341,354		3,530,110
Depreciation				33,698			297,383	66,960		882,803
Product development				40,124			222,038	342,973		697,999
Selling				68,026			73,915	232,789		133,087
				11,628,976			1,545,918	16,195,344		5,392,425
Loss from operations				(11,624,562)			(1,534,466)	(15,943,276)		(5,231,908)
OTHER ITEMS
Write-down of Investment in Invisa, Inc.				-			(6,750)	-		(6,750)
Loss on sale of Investment in Invisa, Inc. (Note 5)				-			-	(2,329)		-
Gain on sale of Investment in Maps a la Carte, Inc. (Note 5)				-			-	564,366		-
Foreign exchange loss				(3,191)			(437)	(15,057)		(6,129)
Interest income/(expense), net				1,349			(1,486)	(3,887)		(3,479)
Loss on settlement of debt with issuance of shares (Note 9)				-			-	(29,100,400)		-
				(1,842)			(8,673)	(28,557,307)		(16,358)
Net loss for the period				$ (11,626,404)			$ (1,543,139)	$(44,500,583)		$ (5,248,266)
Loss per share – basic and diluted (a)				$            (0.91)			$          (4.93)	$          (6.91)		$         (16.98)
Weighted average shares outstanding – basic and diluted (a)				12,719,533			312,868	6,442,327		309,034

 

(a) Prior periods have been restated to reflect the 1 for 100 reverse stock split on May 21, 2007.

 

 

 

CONSOLIDATED INTERIM STATEMENT OF CHANGES IN CAPITAL DEFICIT

(Unaudited – Expressed in US dollars)

 

 

	Common Stock
	Number of       Shares(a)	Amount(a)	Additional Paid-in Capital(a)	Shares to be issued	Accumulated Deficit	Accumulated Other Comprehensive Loss	Total

 

 

Balance, January 1, 2007	319,533	$    320	$ 15,145,996	$   862,500	$    (19,745,169)	$        (3,780)	$     (3,740,133)
Shares issued for debt (Note 9)	12,350,000	12,350	30,437,650	-	-	-	30,450,000
Shares issued for consulting services  (Note 9)	50,000	50	119,950	-	-	-	120,000
Stock-based compensation (Note 9)	-	-	13,578,225	-	-	-	13,578,225
Shares to be issued (Note 9)	-	-	-	631,250	-	-	631,250
Net loss for the period	-	-	-	-	(44,500,583)	-	(44,500,583)
Foreign exchange translation	-	-	-	-	-	(330,727)	(330,727)
Balance, September 30,  2007	12,719,533	$    12,720	$     59,281,821	$     1,493,750	$    (64,245,752)	$      (334,507)	$   (3,791,968)

 

 

(a) The above schedule has been adjusted on a retroactive basis to reflect the 1 for 100 reverse stock split on May 21, 2007.

 

 

 

 

The accompanying notes are an integral part of these consolidated interim financial statements.

 

 

 

CONSOLIDATED INTERIM STATEMENTS OF CASH FLOWS

(Unaudited – Expressed in US dollars)

 

 

	Nine-month Period Ended September 30, 2007	Nine-month Period Ended September 30,                  2006
CASH FLOWS FROM OPERATING ACTIVITIES
Net loss for the period	$    (44,500,583)	$     (5,248,266)
Adjustments to reconcile net loss for the period to cash       used in operating activities
Accrued interest on advances (Note 7)	1,984	2,992
Write-down of investment	-	6,750
Write-down of inventory	60,088	-
Gain on sale of investment (Note 5)	(562,037)	-
Loss on settlement of debt with issuance of shares	29,100,400	-
Shares issued to consultant for services	120,000	-
Depreciation and amortizatio	66,960	882,803
Stock-based compensation	13,578,225	1,767,332
Shares to be issued for services	431,250	593,750
Increase in prepaid expenses and deposits	(238,323)	(1,523)
(Increase) decrease in accounts receivable	24,417	(12,554)
(Increase) decrease in inventory	4,915	(170,943)
Decrease in accounts payable and accrued liabilities	(48,883)	(93,844)
Decrease in customer deposits	113,935	-
Cash used in operating activities	(1,847,652)	(2,273,503)
CASH FLOWS FROM FINANCING ACTIVITIES
Repayment of long-term debt	(34,659)	(50,029)
Repayment of advances payable	(145,000)	-
Proceeds from advances payable	295,000	210,000
Proceeds from long-term debt	166,193	358,364
Proceeds from related party advances	916,673	686,655
Proceeds from shares issued and to be issued	200,000	648,000
Cash provided by financing activities	1,398,207	1,852,990
CASH FLOWS FROM INVESTING ACTIVITIES
Purchase of equipment	(707)	(66,445)
Proceeds on sale of investments	578,912	-
Cash provided by (used in) investing activities	578,205	(66,445)
Net increase (decrease) in cash	128,760	(486,958)
Cash, beginning of period	54,624	521,987
Effect of foreign exchange on cash	34,187	30,384
Cash, end of the period	$         217,571	$         65,413

 

 

 

 

 

Interest paid	$            5,790	$           1,145
Non-cash investing and financing activities
Shares issued for settlement of debt	$     1,349,600	$                   -

 

 

The accompanying notes are an integral part of these consolidated interim financial statements.

 

 

NOTES TO THE CONSOLIDATED INTERIM FINANCIAL STATEMENTS

SEPTEMBER 30, 2007

(Unaudited – Expressed in US dollars)

 

 

 

The Company (formerly Navitrak International Corporation) was incorporated in 1998 under the laws of the State of Nevada to engage in any lawful business or activity for which operations may be organized under the laws of the state of Nevada. Through a series of events and agreements, on November 12, 2004, the Company acquired the net assets of Navitrak International Corporation through the issuance of cash, notes payable and common shares. On May 21, 2007, the Company changed its name to VECTr Systems, Inc.  Also on May 21, 2007, the Company had effected a one (1) for one hundred (100) reverse stock split of its authorized as well as issued and outstanding common stock to all of the holders of its common shares who were holders on record on May 21, 2007. The effect of the reverse split has been applied on a retroactive basis to all related disclosures and calculations in these consolidated financial statements.

 

               

 

            The Company is actively engaged in the business of developing, marketing and distributing advanced GPS-based navigation, mapping and tracking solutions for use by airborne and ground personnel in law enforcement, military, police, fire-fighting, search and rescue and other applications.  These navigation systems provide real time positioning information through proprietary software, moving map display technology and location-based information.

 

 

 

            Until recently, all of the Company's operational activities were conducted from its facilities in Halifax, Canada.  The Company now has an office in Falls Church, Virginia, from which it conducts its U.S. operations. 

 

 

 

 

 

                Principles of Consolidation and Ability to Continue as a Going Concern

 

 

 

            The consolidated financial statements are prepared in accordance with accounting principles generally accepted in the United States of America, and include the accounts of the Company and its wholly owned subsidiaries, VECTrEngineering (Canada) Inc., VECTr Technologies Inc. and 0705951 BC Ltd.  All significant inter-company transactions have been eliminated on consolidation.  Except for VECTr Engineering (Canada) Inc., the Company’s other subsidiaries are inactive.

 

 

 

These accompanying consolidated financial statements have been prepared on a going concern basis, which contemplates the realization of assets and the satisfaction of liabilities and commitments in the normal course of business. As at September 30, 2007, the Company has a working capital deficit of $3,961,692 (December 31, 2006 - $3,756,715), incurred a loss during the nine months ended September 30, 2007 of $44,500,583 and has an accumulated deficit of $64,245,752 at September 30, 2007. The continuation of the Company is dependent upon the successful marketing and distribution of navigation systems and related products, the continuing support of creditors and stockholders as well as achieving and maintaining a profitable level of operations.  These conditions raise substantial doubt about the Company’s ability to continue as a going concern.  The Company had cash on hand of $217,571 at September 30, 2007. Management anticipates that it requires approximately $3 million over the next twelve months ended September 30, 2008 to continue operations. To the extent that cash needs are not achieved from operating cash flow and existing cash on hand, the Company will raise necessary cash through equity issuances and/or debt financing.  Amounts raised will be used to continue the development of the Company's products, roll out the Company's products to market and for other working capital purposes.

 

NOTES TO THE CONSOLIDATED INTERIM FINANCIAL STATEMENTS

SEPTEMBER 30, 2007

 (Unaudited – Expressed in US dollars)

 

 

 

 

Management cannot provide any assurances that the Company will be successful in any of its plans. However, management believes that the Company will be able to continue operations in the future.  The financial statements do not include any adjustments relating to the recoverability and classification of recorded assets or the amounts of and classification of liabilities that might be necessary in the event the Company cannot continue in existence.

 

 

 

 

 

 

The interim financial statements included herein have been prepared by the Company, without audit, pursuant to the rules and regulations of the Securities and Exchange Commission.  Certain information and footnote disclosures normally included in financial statements prepared in accordance with generally accepted accounting principles have been condensed or omitted pursuant to such rules and regulations, although the Company believes that the disclosures are adequate to make the information presented not misleading.

 

 

 

These statements reflect all adjustments, consisting of normal recurring adjustments, which in the opinion of management are necessary for fair presentation of the information contained therein.  It is suggested that these interim financial statements be read in conjunction with the audited financial statements of the Company for the years ended December 31, 2006 and December 31, 2005 included in its annual report on Form 10-KSB.  The Company follows the same accounting policies in the preparation of interim reports.

 

 

 

Results of operations for the interim periods are not indicative of annual results.

 

 

 

 

 

 

In June 2006, the Financial Accounting Standards Board (“FASB”) issued interpretation No. 48, “Accounting for Uncertainty in Income Taxes-an interpretation of FASB Statement No. 109 (FAS No. 109)” (“FIN 48”). This interpretation prescribes a recognition threshold and measurement attribute for tax positions taken or expected to be taken in a tax return. This interpretation also provides guidance on de-recognition, classification, interest and penalties, accounting in interim periods, disclosure and transition. The evaluation of a tax position in accordance with this interpretation is a two-step process. In the first step, recognition, the Company determines whether it is more-likely-than-not that a tax position will be sustained upon examination, including resolution of any related appeals or litigation processes, based on the technical merits of the position. The second step addresses measurement of a tax position that meets the more-likely-than-not criteria. The tax position is measured at the largest amount of benefit that is greater than 50 percent likely of being realized upon ultimate settlement. Differences between tax positions taken in a tax return and amounts recognized in the financial statements will generally result in a) an increase in a liability for income taxes payable or a reduction of an income tax refund receivable, b) a reduction in a deferred tax asset or an increase in a deferred tax liability or c) both a and b. Tax positions that previously failed to meet the more-likely-than-not recognition threshold should be recognized in the first subsequent financial reporting period in which that threshold is met. Previously recognized tax positions that no longer meet the more-likely-than-not recognition threshold should be de-recognized in the first subsequent financial reporting period in which that threshold is no longer met. Use of a valuation allowance as described in FAS No. 109 is not an appropriate substitute for the de-recognition of a tax position. The requirement to assess the need for a valuation allowance for deferred tax assets based on sufficiency of future taxable income is unchanged by this interpretation. This Interpretation is effective for fiscal years beginning after December 15, 2006.

 

 

 

 

NOTES TO THE CONSOLIDATED INTERIM FINANCIAL STATEMENTS

SEPTEMBER 30, 2007

(Unaudited – Expressed in US dollars)

 

 

 

 

 

 

 

On January 1, 2007, the Company adopted FIN 48, regarding accounting for uncertainty in tax positions. The Company remains subject to examination of income tax filings in the United States and various state jurisdictions for periods since its inception in 1998.  The Company has also determined that it is subject to examination in Canada for all prior periods due to the Company’s continued loss position in such jurisdictions. Material tax positions were examined under the more-likely-than-not guidance provided by FIN 48. If interest and penalties were to be assessed, the Company would charge interest to interest expense, and penalties to general and administrative expense.

 

As a result of the FIN 48 assessment, the Company concluded that it has not taken any uncertain tax positions on any of its open tax returns that would materially distort the Company’s financial statements. There was no material cumulative effect of adopting FIN 48 on the Company’s financial statements as of January 1, 2007.

 

 

In September 2006, FASB issued Statement of Financial Accounting Standard (“SFAS”) No. 157, “Fair Value Measurements” (“FAS 157”). FAS 157 defines fair value, establishes a framework for measuring fair value in accordance with generally accepted accounting principles, and expands disclosures about fair value measurements. The provisions of FAS 157 are effective for fiscal years beginning after November 15, 2007. The Company is currently evaluating the impact of the provisions of FAS 157.

 

 

 

 

Included in cash is $41,950 (December 31, 2006 - $52,918) denominated in Canadian dollars.

 

 

 

 

The following inventory was on hand at September 30, 2007 and December 31, 2006:

 

	September 30, 2007	December 31,  2006
Finished goods	$    102,377	$   147,191
Raw Materials	122,752	154,424
Work-in-process	19,907	8,424
	$   245,036	$  310,039

 

NOTES TO THE CONSOLIDATED INTERIM FINANCIAL STATEMENTS

SEPTEMBER 30, 2007

 (Unaudited – Expressed in US dollars)

 

 

 

 

 

The Company sold Invisa, Inc. shares for $14,546 in the first quarter of 2007 at a value of approximately $0.04 per share, resulting in a loss of $2,329 (2006 - $Nil). The Company sold its shares of Maps a la Carte, Inc., a private company, for $564,366 in the second quarter of 2007 at a value of approximately $2.38 per share. The shares were being carried at $Nil and thus resulted in a gain of $564,366 (2006 - $Nil).

 

 

 

 

 

	September 30, 2007	December 31,  2006
Knight Financial Ltd. (controlled by director)	$        415,785	$      114,316
G.M. Capital Partners Ltd. (major shareholder, Note 9)	357,634	1,095,011
Express Systems Corporation (common director)	3,000	3,000
Advances from other shareholders	20,042	17,061
	$        796,461	$   1,229,388

 

 

                The above advances are unsecured, non-interest bearing and have no specific terms of repayment.

 

 

 

	September 30, 2007	December 31,  2006
1199684 Ontario Inc., advances and accrued interest	$     73,459	$   216,475
Daimler Capital Partners	120,000	-
Tiger Eye Holdings Ltd.	150,000	150,000
Kallur Enterprises Ltd.	416,000	241,000
	$     759,459	$   607,475

 

 

Of the initial advances received from 1199684 Ontario Inc, $50,000 bore interest at 8% per annum  and $125,000 was non-interest bearing.  The advances are unsecured and have no specific terms of repayment.  Accrued interest on the advances for the three and nine months period ended September 30, 2007 totalled $Nil and $1,984 (2006 – $1,007 and $2,992), respectively. The Company has made 3 payments in July and August totalling $145,000 as per the settlement with 1199684 Ontario Inc. (Note 13). 

 

 

The advances received from Daimler Capital Partners bear interest at 6% per annum, are unsecured and have no specific terms of repayment.  The advances received from Tiger Eye Holdings Ltd. and Kallur Enterprises Ltd. are non-interest bearing, unsecured and have no specific terms of repayment.

 

 

NOTES TO THE CONSOLIDATED INTERIM FINANCIAL STATEMENTS

SEPTEMBER 30, 2007

 (Unaudited – Expressed in US dollars)

 

 

 

 

 

	September 30, 2007	December 31, 2006
Atlantic Canada Opportunities Agency (“ACOA”) project funding loan, unsecured.  The loan was non-interest bearing unless payments were past due, at which time interest was charged at the Bank of Canada discount rate plus 3% per annum.  Repayment of principal was deferred to January 1, 2005, since then monthly principal payments were approximately $1,967 (CDN $2,274). The loan was repaid in full in May 2007.	$                -	$        9,757
ACOA project funding loan unsecured.  The loan is non-interest bearing unless payments are past due, at which time interest is charged at the Bank of Canada discount rate plus 3% per annum.  Repayment of principal is due in monthly instalments of approximately $8,372 (CDN$8,313) commencing July 1, 2007.  The amount of funds available under this facility as at September 30, 2007 is approximately $502,300 (CDN$498,750).  The Company is currently in default of certain of the financial covenants and therefore the debt is considered as due on demand.	477,199	270,002
ACOA project funding loan, unsecured and non-interest bearing.  The loan is non-interest bearing unless payments are past due, at which time interest is charged at the Bank of Canada discount rate plus 3% per annum.  The principal amount of the loan is repayable annually commencing September 1, 2008 at a rate equal to 5.0% of gross revenue.  The maximum project funding under this facility is approximately $2,115,000 (CDN $2,100,000). The Company is currently in default of certain of the financial covenants and therefore the debt is considered as due on demand.	1,903,515	1,620,371

 

 

Program for Export Market Development (“PEMD”) project funding loan unsecured and non-interest bearing. The loan is repayable at a rate equal to 4% of sales to the USA. Arrears of $34,800 (CDN$40,021) are repayable in 39 monthly instalments of $892 (CDN$1,000) plus one instalment of $912 (CDN$1,021), which commenced November 15, 2004. The Company started making quarterly payments of $3,021 (CDN$3,000) in late December 2005 to repay the loan.  The Company is currently in default of the repayment terms and therefore the debt is considered in arrears and due on demand.	52,935	45,061
Industrial Regional Assistance Program (“IRAP”) project funding loan, unsecured and non-interest bearing. The loan is repayable quarterly in arrears commencing January 1, 2005 at a rate equal to 1.25% of gross revenue.  The Company paid all payments in the first quarter of 2006 relating to 1.25% of gross revenue for 2004 and 2005.  The Company is currently in default of the repayment terms and therefore the debt is considered in arrears and due on demand.	208,738	179,417
	2,642,387	2,124,608
Less: current portion	2,642,387	1,910,418
	$                -	$     214,190

 

 

 

 

Scheduled principal repayments until maturity are due as follows:

 

 

 

Remaining of fiscal year 2007	$      321,293
2008	2,016,070
2009	112,555
2010	112,555
2011	79,914
	$  2,642,387

 

 

 

NOTES TO THE CONSOLIDATED INTERIM FINANCIAL STATEMENTS

SEPTEMBER 30, 2007

 (Unaudited – Expressed in US dollars)

 

 

 

 

Included in the 2007 scheduled principal repayments is the full repayment of the IRAP project-funding loan.  Principal repayments are based on 1.25% of gross revenue commencing January 1, 2005.  Included in the 2008 scheduled principal repayments is the full repayment of the $1,903,515 ACOA project-funding loan.  This loan has undefined principal repayments as the repayments are based on a percentage of sales, with the first payment commencing in the 2008 year.

 

 

 

The current portion of the long-term debt noted above is in excess of the scheduled principal repayments due in the next twelve months because all of the loans are currently in default and have been classified on the Balance Sheet as current.  All of the above project funding is subject to project verification and audit by the lending agency. 

 

 

 

In May 21, 2007, the Company had effected a one (1) for one hundred (100) reverse stock split of its authorized  and issued and outstanding common stock to all of the holders of its common shares who were holders of record on May 21, 2007.

 

 

 

During the period ended September 30, 2007 and the year ended December 31, 2006 the Company completed the following share transactions not disclosed elsewhere in these consolidated financial statements:

 

 

 

The employment agreement of an employee specifies that they are entitled to a bonus of 5,000 shares of common stock on each of June 30, 2006 (not yet issued), June 30, 2007 (not yet issued) and June 30, 2008 for a total of 15,000 shares so long as he continues to be employed by the Company at those dates.  Compensation expense associated with the bonus payments was determined based upon the quoted market price of the underlying common stock on the grant date and was being amortized on a straight-line basis over the requisite service period, which is the period from the date of grant to June 30, 2008.  For the three and nine months ended September 30, 2007, the Company has recognized $143,750 and $431,250 (2006 - $143,750 and $593,750) in respect of shares to be issued related to these bonus payments. As of September 30, 2007, there was $431,250 (December 31, 2006 - $862,500) of total unrecognized compensation cost related to these bonus payments. This unrecognized compensation cost is expected to be recognized over the remaining requisite service period of nine months ending June 30, 2008.

 

 

 

On February 27, 2007, the Company issued 350,000 common shares in settlement of $350,000 debt of the related party payable (Note 6) to G.M. Capital Partners Ltd. The transaction was recorded at the quoted market price of $15 per share that resulted in a loss on settlement of debt of $4,900,000 in 2007.

 

 

 

On May 25, 2007, the Company issued 12,000,000 common shares in settlement of $999,600 debt of the related party payable (Note 6) to G.M. Capital Partners Ltd. The transaction was recorded at the quoted market price of $2.10 per share that resulted in a loss on settlement of debt of $24,200,400 in 2007.

 

               

 

On June 6, 2007, the Company issued 50,000 common shares for consulting services as per agreement with an investment banking firm. The common shares were recorded using the quoted market value of $2.40 per share on the issuance date resulting in an expense of $120,000.

 

 

 

In September 2007, the Company received gross proceeds of $200,000 from signed subscriptions for common shares. Subsequent to September 30, 2007, the Company issued 200,000 common shares at a price of $1.00 per common share.  Net of transaction costs, cash received from the issuance of these common shares was $199,958.

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

	Number   of Options	Weighted Average   Exercise Price ($USD)	Aggregate Intrinsic Value
Balance, December 31, 2005	47,200	$     67.00
Cancelled	(2,300)	46.00
Forfeited	(1,200)	85.00
Balance, December 31, 2006	43,700	67.50
Granted	5,040,000	0.73
Cancelled	(4,200)	62.74
Forfeited	(400)	85.00
Balance September 30, 2007	5,079,100	$       1.25	$      2.75
Options exercisable, as at September 30, 2007	3,759,050	$       1.29	$           2.71
Options exercisable, as at December 31, 2006	34,500	$     71.00

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

	Number   of Options	Weighted Average   Exercise Price ($USD)	Weighted Average   Grant Date Fair Value
Unvested at December 31, 2005	24,650	$     67.00	$      67.00
Vested	(14,250)	72.00	67.00
Forfeited	(1,200)	85.00	77.00
Unvested at December 31, 2006	9,200	56.00	65.00
Granted	5,040,000	0.73	2.40
Vested	(3,737,550)	0.75	2.33
Forfeited	(400)	85.00	77.00
Unvested at September 30, 2007	1,311,250	$             1.03	$           3.02

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

	Number   of Warrants	Weighted   Average   Exercise   Price ($USD)
Balance, December 31, 2005	69,720	$       71.00
Issued	5,800	125.00
Balance, December 31, 2006	75,520	74.00
Issued	3,500,000	2.04
Expired	(29,720)	100.00
Balance, September 30, 2007	3,545,800	$        2.75
Warrants exercisable, as at September 30, 2007	1,035,800	$         4.16
Warrants exercisable, as at December 31, 2006	45,520	$     104.00

 

 

 

 

 

 

 

 

 

 

Number   of Warrants	Exercise   Price	Expiry Date
1,000,000	$     1.00	September 1, 2008
1,000,000	$     2.00	September 1, 2009
750,000	$     2.50	December 31, 2009
750,000	$     3.00	December 31, 2009
20,000	$   25.00	January 22, 2008
10,000	$   50.00	January 22, 2010
10,000	$ 100.00	November 30, 2009
4,800	$ 125.00	August 28, 2008
1,000	$ 125.00	July 24, 2008

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

a)       Management fees were accrued during the three and nine months period ended September 30, 2007 of $15,000 and $45,000 (2006 - $15,000 and $45,000) to two companies controlled by a director. 

 

b)       On September 1, 2007, the Company had extended its Consulting Agreement with G.M. Capital Partners, Ltd. pursuant to the Consulting Agreement, G.M. Capital Partners, Ltd. has agreed to provide corporate counseling and advice.  The term of the agreement is for a period of 24 months, though either party may terminate the agreement with five days’ notice.  The Company agreed to pay G.M. Capital Partners, Ltd. a monthly payment of $10,000.  During the three and nine months period ended September 30, 2007 under the previous agreement, $30,000 and $90,000 (2006 - $30,000 and $90,000) in consulting fees were accrued to G.M. Capital Partners Ltd.  The Company also agreed to issue G.M. Capital Partners, Ltd. warrants as described in Note 9.

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

c)       A director of the Company resigned all of his positions with the Company effective May 18, 2006.  Pursuant to the Agreement and Mutual Release between the Company and this ex-director, which became effective on May 18, 2006, the Company agreed to pay the ex-director the sum of $131,685 (CDN $147,500).  The amount still owing of $47,201 (CDN $50,000) as of September 30, 2007 was accrued in these consolidated interim financial statements (December 31, 2006 - $64,300 (CDN $75,000)).

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

	Three-Months   Ended   September 30,   2007	Three-Months   Ended   September 30,   2006	Nine-Months   Ended   September 30,   2007	Nine-Months   Ended   September 30,   2006
Canada	$      4,414	$              -	$  252,068	$              -
United States	-	11,452	-	160,517
	$      4,414	$    11,452	$  252,068	$  160,517

 

 

 

 

 

 

 

 

 

 

(a)                The Company has two lease agreements for offices in Halifax and Washington.  Minimum lease payments under the leases (excluding operating expenses) over the next five years are as follows:

 

 

 

Twelve months ended   September 30
2008	$	14,028

 

 

 

 

 

(b)               For certain of the Company’s employees, their employment agreement specifies that they are entitled to severance pay upon termination based on a pre-determined number of months salary.  As at September 30, 2007, the obligation for the severance payments should they be terminated was approximately $18,000 (CDN $18,100) and $228,000 denominated in USD (September 30, 2006 - $224,000 (CDN $249,500) and $225,000 denominated in USD).