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SmarTire Brings Tire Pressure Monitoring System to John Deere Product Line RICHMOND, British Columbia, June 14 /PRNewswire-FirstCall/ -- SmarTire Systems Inc. (OTC Bulletin Board: SMTR) today announced that it has signed an agreement to supply its SmartWave tire pressure monitoring system (TPMS) to Deere & Company, maker of the well-known John Deere vehicles.
'We're very pleased to be working with Deere & Company, a leading global manufacturer of vehicles in the construction, mining and forestry sectors,' SmarTire CEO Dave Warkentin said. 'The off-road (OTR) market is a key part of our business strategy and we believe that our agreement to supply Deere & Company is a major step forward in our effort to penetrate the OEM segment of that market. We are excited that the engineering phase has been successfully completed and expect production to begin soon.'
SmartWave TPMS is a real-time electronic system that actively and accurately measures the air pressure and temperature for each tire on a vehicle. The system transmits data wirelessly to a receiver mounted on the vehicle, and displays the information in the cab. SmartWave TPMS simplifies the tire maintenance process resulting in an overall reduction of fleet operating costs. Whether it's alerting the driver to a specific under- inflated tire or providing fleet maintenance staff with the capability to quickly and accurately measure tire pressure, SmartWave TPMS is an invaluable tool for fleets. Suitable for all wheel and tire types, SmartWave TPMS can be installed at any point in the vehicle's life.
About SmarTire Systems Inc.
SmarTire develops and markets proprietary advanced wireless sensing and control systems worldwide under the SmartWave(TM) trademark. SmarTire has developed numerous patent-protected wireless technologies and advanced tire monitoring solutions since it was founded in 1987. Its proprietary SmartWave(TM) platform provides a foundation for the addition of multiple wireless sensing and control applications. The initial product release on the SmartWave platform is SmartWave(TM) TPMS, which leverages on SmarTire's background and knowledge in tire monitoring solutions. SmarTire has offices in North America and Europe.
Except for historical information, this news release contains forward- looking statements that involve substantial risks and uncertainties. When used in this news release, the words 'expects,' 'may,' 'intends,' 'plans', anticipates, 'likely', 'believes' and similar expressions can be used to identify forward-looking statements. Forward-looking statements are based on current facts and analysis and on forecasts of future results, estimates of amounts not yet determined and assumptions of management. Actual results, performance, or achievements could differ materially from those contemplated, expressed or implied by the forward-looking statements contained herein. Forward-looking statements in this press release include SmarTire's belief that its agreement to supply Deere & Company is a major step forward in SmarTire's effort to penetrate the OEM market and its expectation that production for Deere & Company should begin soon. This forward-looking statement is based largely on the expectations of SmarTire and is subject to a number of risks and uncertainties that are beyond SmarTire's control. These include, but are not limited to, risks and uncertainties associated with, SmarTire's ability to obtain additional financing and to continue as a going concern, SmarTire's dependence on key personnel, the effects of competitive pricing, SmarTire's dependence on the ability of third-party manufacturers to produce components on a basis that is cost-effective to SmarTire, market acceptance of SmarTire's products, acceptance of SmarTire's products by prominent customers, SmarTire's ability to keep up with technological advances in the industry, the effect of competitive products and the effects of governmental regulations. SmarTire cautions that the foregoing factors are not exhaustive. For a detailed discussion of these and other risk factors, please refer to SmarTire's filings with the Securities and Exchange Commission, including its annual report on Form 10-KSB and subsequent quarterly reports on Form 10-QSB. SmarTire expressly disclaims any intent or obligation to update any forward-looking statements.
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OVERVIEW
The following discussion of our financial condition, changes in financial condition and results of operations for the three and nine months ended April 30, 2007 and 2006 should be read in conjunction with our most recent audited annual financial statements for the financial year ended July 31, 2006, the unaudited interim financial statements included herein, and, in each case, the related notes.
We have three wholly owned subsidiaries: SmarTire Technologies Inc., SmarTire USA Inc. and SmarTire Europe Limited. SmarTire Technologies Inc. was incorporated on June 3, 1988 under the laws of the Province of British Columbia, and was the original developer of our patented technology. SmarTire USA Inc., a Delaware corporation incorporated on May 16, 1997, is our exclusive marketing agency for SmarTire in North America. SmarTire Europe Limited, a United Kingdom corporation incorporated on February 25, 1998, was our exclusive sales and distribution operation for Europe until we began shipping products directly from SmarTire Systems Inc. in February 2007.
At our annual and special meeting of shareholders held December 8, 2006, our shareholders approved the continuation of our company from the Yukon Territory to the Province of British Columbia, Canada. Accordingly, we filed a continuation application with the Registrar of Companies for the Province of British Columbia on December 20, 2006 and received a Certificate of Continuation from the Registrar of Companies on December 20, 2006.
We are a "foreign private issuer," as such term is defined in Rule 3b-4 under the Securities Exchange Act of 1934, and a "small business issuer," as such term is defined in Rule 12b-2 under the Securities Exchange Act of 1934. We voluntarily file annual Reports on Form 10-KSB, Quarterly Reports on Form 10-QSB and Current Reports on Form 8-K with the SEC.
We develop, subcontract our manufacturing, and market technically advanced tire pressure monitoring systems ("TPMSs"), which monitor tire pressure and tire temperature in a wide range of vehicles. Our TPMSs are designed to improve vehicle safety, performance, reliability and fuel efficiency. We currently sell TPMSs for trucks, buses, recreational vehicles, passenger cars and motorcycles. Our primary sales and marketing efforts are focused on the commercial or truck, bus, recreational and off-road industrial vehicle markets.
Our goal is to become the global leader in providing wireless sensing and control solutions for commercial, industrial and off-road industrial vehicles. We are selling our products under the brand "SmartWave" and "SmarTire." We anticipate that the increasing penetration of the wireless technology and the ability of the Smartwave products to provide applications in addition to TPMS will provide us with multiple benefits, including the following:
· increase the overall value of our technology and the competitiveness of our products; · create opportunities for revenue growth beyond tire pressure monitoring ("TPM"); and · increase the barrier for other companies to enter the market for TPM.
We plan to develop at least one additional application that can be integrated into our receiver module.
During January 2007, we took significant actions to reduce our costs. Since September, our overall staff level has been reduced by approximately 45%. As part of this streamlining of operations, we closed our United Kingdom facility at the end of February 2007. We do not anticipate that this closure will affect our European sales efforts. In addition, we were able to reduce our engineering and product development team as we have now completed the development of our tire pressure monitoring system which meets the requirements of our major commercial vehicle customers.
Government Regulations
Our products are subject to regulation by the government agencies responsible for radio frequencies in each country that our TPMSs will be sold. For example, in the United States approval must be received from the Federal Communications Commission for each product. Some countries require additional governmental approvals in certain circumstances. For example, in the United Kingdom, all electronic equipment to be installed in emergency and police vehicles must be approved by the Vehicle Installation Development Group, a governmental body. Also, as a practical matter, certain nongovernmental approvals may be necessary for market acceptance of our products in certain countries. For example, the approval of TUV (an independent testing company) is considered necessary to market our TPMSs in Germany.
We believe that we have all of the necessary governmental approvals for our current TPMSs in our intended market countries. As each new TPMS is introduced to the market, we intend to apply for the necessary approvals.
Our direct measurement TPMSs generally exceed the standard for tire pressure monitoring established by the National Highway Transportation Safety Administration ("NHTSA"). Although the Transportation Recall Enhancement, Accountability, and Documentation Act of 2000 ("TREAD Act") only applies to passenger automobiles, we believe that other motor vehicles, including medium and heavy trucks, buses and recreational vehicles will be impacted by this legislation in subsequent years. We also believe that the TREAD Act is positively influencing commercial vehicle manufacturers' adoption of tire pressure monitoring.
It is difficult to predict the magnitude of the expected sales increase or the exact timing of the increase since our products will continue to face competition from other TPMSs manufactured by our competitors, and the timing of additional legislative initiatives on tire safety, if any, in the United States and abroad remains uncertain.
RESULTS OF OPERATIONS
Three months ended April 30, 2007 and April 30, 2006
Revenue
Gross revenue for the three months ended April 30, 2007 decreased to $933,113 from $1,195,136 for the three months ended April 30, 2006. The breakdown of the sources of our gross revenue is as follows:
· Sales of TPMSs to OEMs for installation on new and existing buses increased to $273,990 for the three months ended April 30, 2007 from $170,261 for the three months ended April 30, 2006. Although we anticipate sales of this product to the OEM bus market to increase significantly as our customer base has increased, it is difficult for us to predict what the volume of sales will be as this is dependent on how quickly our new customers retrofit their fleets and integrate TPMSs into their production lines.
· Sales of TPMSs to OEMs for new passenger cars increased to $409,958 for the three months ended April 30, 2007 from $349,620 for the three months ended April 30, 2006. The increase was primarily due to an increase in sales to Aston Martin, Ford's flagship division. As Aston Martin now supplies our TPMSs on all three of their platforms, we do not anticipate sales of this product to the OEMs to increase unless Aston Martin increases their production of vehicles as our sales and marketing efforts are focused on the commercial or truck, bus, recreational and off-road industrial vehicle markets.
· Sales of TPMSs to the aftermarket passenger car market decreased to $10,833 for the three months ended April 30, 2007 from $74,063 for the three months ended April 30, 2006. As our sales and marketing efforts are not focused on this market, we do not anticipate future sales of this product to be material.
· Sales of TPMSs to OEMs for new recreational vehicles ("RVs") decreased to $76,334 for the three months ended April 30, 2007 from $80,646 for the three months ended April 30, 2006. Although we anticipate sales of this product to the OEM RV market to increase, it is difficult for us to predict what the volume of sales of this product will be as this will depend primarily on market acceptance.
· Sales of TPMSs to the RV aftermarket decreased to $102,235 for the three months ended April 30, 2007 from $452,757 for the three months ended April 30, 2006. Sales of this product were significantly higher during the three months ended April 30, 2006 as we received initial stocking orders from our major distributor of this product during this period. We anticipate sales of this product to the RV aftermarket to increase. However it is difficult for us to predict what the volume of sales will be as this will depend primarily on market acceptance.
· Sales of TPMSs to the truck market decreased to $23,033 for the three months ended April 30, 2007 from $29,655 for the three months ended April 30, 2006. Sales to this market will increase significantly in the near future as we will ship product in our fourth quarter to fulfill orders from new OEM customers that we have been working with for the last twelve to eighteen months. Although interest in this product is very high, it is difficult for us to predict what the volume of sales will be, as this will depend primarily on market acceptance.
· Sales of TPMSs to the off-road industrial market decreased to $6,458 for the three months ended April 30, 2007 from $8,265 for the three months ended April 30, 2006. While we anticipate sales to this market to increase significantly in the near term, it is difficult for us to predict what the volume of sales will be, as this will depend primarily on market acceptance.
· Service revenue for assistance in installing TPMSs and training customers increased to $8,000 for the three months ended April 30, 2007 from $0 for the three months ended April 30, 2006.
· Sales of aftermarket motorcycle TPMSs decreased to $4,917 for the three months ended April 30, 2007 from $16,929 for the three months ended April 30, 2006. As discussed above, as our sales and marketing efforts are not focused on this market, we do not anticipate future sales of this product to be material.
· Sales of miscellaneous products were $16,355 for the three months ended April 30, 2007 compared to $12,940 for the three months ended April 30, 2006.
Gross Margin
Overall gross margin increased to 24% for the three months ended April 30, 2007 from negative 28% for the three months ended April 30, 2006. The negative gross margin for the three months ended April 30, 2006 was due to an inventory write-down of $700,000 for slow moving aftermarket passenger car TPMSs and motorcycle TPMSs. Without the inventory write-down, the gross margin would have increased to 31% for the three months ended April 30, 2006. Gross margin for the three months ended April 30, 2007 was lower than the three months ended April 30, 2006 mainly due to a reduction in the margins on the sale of our OEM passenger car TPMSs.
Expenses
Expenses decreased to $1,409,488 for the three months ended April 30, 2007 from $2,294,596 for the three months ended April 30, 2006. Excluding a stock-based compensation expense of $214,852 for the three months ended April 30, 2007 and a stock-based compensation recovery of $601,200 for the three months ended April 30, 2006, expenses decreased to $1,194,636 for the three months ended April 30, 2007 from $2,895,756 for the three months ended April 30, 2006.
Engineering, research and development expenses for the three months ended April 30, 2007 decreased to $457,372 from $677,496 for the three months ended April 30, 2006. Excluding a stock-based compensation expense of $111,019 incurred during the three months ended April 30, 2007 and a stock-based compensation recovery of $230,492 for the three months ended April 30, 2006, engineering, research and development expenses decreased to $346,353 from $907,988 for the three months ended April 30, 2006. The decrease, excluding the stock-based compensation expense/recovery, was mainly due to a decrease in product testing and wage expenses. The decrease was partially offset by costs to streamline operations of approximately $225,000 and an increase in prototype development expenses. We anticipate a slight increase in our engineering, research and development expenses during our fourth quarter from our engineering, research and development expenses incurred during our third quarter as our third quarter expenses also includes a partial recovery of termination wages previously accrued, which were settled in shares and adjustment to terms on existing stock options, at a discount to book value of approximately $12,000.
Marketing expenses for the three months ended April 30, 2007 decreased to $270,895 from $451,351 for the three months ended April 30, 2006. Excluding a stock-based compensation expense of $57,851 for the three months ended April 30, 2007 and a stock-based compensation recovery of $22,276 for the three months ended April 30, 2006, marketing expenses decreased to $213,044 from $473,627 for the three months ended April 30, 2006. The decrease, excluding the stock-based compensation expense/recovery was mainly a result of lower wage expenses and lower advertising and promotion expenses. The decrease in wage expense is primarily due to the termination of our SmarTire Europe Managing Director at the end of October 31, 2006 and the allocation of wages of our current President and CEO was formerly our VP Sales and Marketing to general and administration expenses since his appointment in October 2006. We anticipate a slight increase in our marketing expenses during our fourth quarter from our marketing expenses incurred during our third quarter as our third quarter expenses also includes a partial recovery of costs associated with the termination of our former SmarTire Europe Managing Director previously accrued, which were settled in shares at a discount to book value of approximately $49,000.
General and administrative expenses for the three months ended April 30, 2007 decreased to $615,081 from $877,826 for the three months ended April 30, 2006. Excluding a stock-based compensation expense of $45,982 for the three months ended April 30, 2006 and a stock-based compensation recovery of $348,432 for the three months ended April 30, 2006, general and administration expenses decreased to $569,099 from $1,226,258 for the three months ended April 30, 2006. The decrease, excluding the stock-based compensation expense/recovery, was primarily attributed to a decrease in professional fees, insurance costs, public relations expenses, directors' fees and wage expense. Wage expense decreased as wage expense for the three months ended April 30, 2006 included the cost of terminating our former President and Chief Executive Officer and also included certain wages former administrative employees at our European subsidiary who were terminated in our last quarter.
Depreciation and amortization expense decreased to $66,140 for the three months ended April 30, 2007 from $287,923 for the three months ended April 30, 2006 as our other assets were fully amortized as at October 31, 2006.
Interest and finance charges
Interest and finance charges increased to $3,113,992 for the three months ended April 30, 2007 from $2,502,181 for the three months ended April 30, 2006. Interest and finance charges for the three months ended April 30, 2007 includes non-cash interest of $3,088,103 compared to non-cash interest charges of $2,162,214 for the three months ended October 31, 2006. The majority of interest and finance charges relate to accrued and accreted interest on our convertible debentures and amortization of deferred charges on our convertible debentures.
Interest income earned during the three months ended April 30, 2007 decreased to $5,694 from $50,284 for the three months ended April 30, 2006. The decrease was a result of lower average cash balances during the three months ended April 30, 2007.
Foreign exchange gain
A foreign exchange gain of $271,703 was recorded during the three months ended April 30, 2007 as compared to a foreign exchange gain of $63,423 for the three months ended April 30, 2006. Foreign exchange gains or losses are due to fluctuations in currency exchange rates and are impossible to predict.
Nine months ended April 30, 2007 and April 30, 2006
Revenue
Gross revenue for the nine months ended April 30, 2007 increased to $2,731,557 from $2,627,617 for the nine months ended April 30, 2006. The breakdown of the sources of our gross revenue is as follows:
· Sales of TPMSs to OEMs for installation on new and existing buses increased to $777,662 for the nine months ended April 30, 2007 from $730,496 for the nine months ended April 30, 2006. Although we anticipate sales of this product to the OEM bus market to increase significantly as our customer base has increased, it is difficult for us to predict what the volume of sales will be as this is dependent on how quickly our new customers retrofit their fleets and integrate TPMSs into their production lines.
· Sales of TPMSs to OEMs for new passenger cars increased to $1,203,528 for the nine months ended April 30, 2007 from $831,309 for the nine months ended April 30, 2006. The increase was primarily due to an increase in sales to Aston Martin, Ford's flagship division. As Aston Martin now supplies our TPMSs on all three of their platforms, we do not anticipate sales of this product to the OEMs to increase unless Aston Martin increases their production of vehicles as our sales and marketing efforts are focused on the commercial or truck, bus, recreational and off-road industrial vehicle markets.
· Sales of TPMSs to the aftermarket passenger car market decreased to $72,425 for the nine months ended April 30, 2007 from $174,893 for the nine months ended April 30, 2006. As our sales and marketing efforts are not focused on this market, we do not anticipate future sales of this product to be material.
· Sales of TPMSs to OEMs for new recreational vehicles ("RVs") decreased to $176,535 for the nine months ended April 30, 2007 from $206,409 for the nine months ended April 30, 2006. Although we anticipate sales of this product to the OEM RV market to increase, it is difficult for us to predict what the volume of sales of this product will be as this will depend primarily on market acceptance.
· Sales of TPMSs to the RV aftermarket decreased to $307,076 for the nine months ended April 30, 2007 from $549,839 for the nine months ended April 30, 2006. Sales of this product were significantly higher during the nine months ended April 30, 2006 as we received initial stocking orders from our major distributor of this product during this period. We anticipate sales of this product to the RV aftermarket to increase. However it is difficult for us to predict what the volume of sales will be as this will depend primarily on market acceptance.
· Sales of TPMSs to the truck market increased to $93,634 for the nine months ended April 30, 2007 compared to $42,263 for the nine months ended April 30, 2006. Sales to this market will increase significantly in the near future as we will ship product in our fourth quarter to fulfill orders from new OEM customers that we have been working with for the last twelve to eighteen months. Although interest in this product is very high, it is difficult for us to predict what the volume of sales will be, as this will depend primarily on market acceptance.
· Sales of TPMSs to the off-road industrial market increased to $22,013 for the nine months ended April 30, 2007 from $6,097 for the nine months ended April 30, 2006. While we anticipate sales to this market to increase significantly in the near term, it is difficult for us to predict what the volume of sales will be, as this will depend primarily on market acceptance.
· Service revenue for assistance in installing TPMSs and training customers increased to $36,000 for the nine months ended April 30, 2007 from $0 for the nine months ended April 30, 2006.
· Sales of aftermarket motorcycle TPMSs decreased to $11,596 for the nine months ended April 30, 2007 from $28,198 for the nine months ended April 30, 2006. As discussed above, as our sales and marketing efforts are not focused on this market, we do not anticipate future sales of this product to be material.
· Sales of miscellaneous products were $30,727 for the nine months ended April 30, 2007 compared to $26,809 for the nine months ended April 30, 2006.
Gross Margin
Overall gross margin increased to 27% (26% on product sales) for the nine months ended April 30, 2007 from 1% for the nine months ended April 30, 2006. The gross margin for the nine months ended April 30, 2006 included an inventory write-down of $700,000 for slow moving aftermarket passenger car TPMSs and motorcycle TPMSs. Excluding the inventory write-down, our gross margin for the nine months ended April 30, 2006 would have been 28%.
Expenses
Expenses increased to $6,356,106 for the nine months ended April 30, 2007 from $4,835,300 for the nine months ended April 30, 2006. Excluding a stock-based compensation expense of $568,102 for the nine months ended April 30, 2007 and a stock-based compensation recovery of $1,944,175 for the nine months ended April 30, 2006, expenses decreased to $5,788,004 for the nine months ended April 30, 2007 from $6,637,633 for the nine months ended April 30, 2006.
Engineering, research and development expenses for the nine months ended April 30, 2007 increased to $2,277,057 from 1,194,914 for the nine months ended April 30, 2006. Excluding a stock-based compensation expense of $276,287 for the nine months ended April 30, 2007 and a stock-based compensation recovery of $990,614 for the nine months ended April 30, 2006, expenses decreased to $2,000,770 for the nine months ended April 30, 2007 from $2,185,528 for the nine months ended April 30, 2006. The decrease, excluding the stock-based compensation expense/recovery, was mainly due to a decrease in product testing, less travel and lower wage expense. The decrease was partially offset by an increase in prototype development expenses.
Marketing expenses for the nine months ended April 30, 2007 increased to $1,309,354 from $1,232,754 for the nine months ended April 30, 2006. Excluding a stock-based compensation expense of $167,767 for the nine months ended April 30, 2007 and a stock-based compensation recovery of $72,252 for the nine months ended April 30, 2006, marketing expenses decreased to $1,141,587 for the nine months ended April 30, 2007 from $1,305,006 for the nine months ended April 30, 2006. Marketing expenses for the nine months ended April 30, 2007 also included costs to streamline operations of approximately $150,000. The decrease, excluding the stock-based compensation expense/recovery was mainly a result of lower advertising and promotion expenses and lower wage expenses. We anticipate a slight increase in our marketing expenses during our fourth quarter from our marketing expenses incurred during our third quarter as our third quarter expenses also includes a partial recovery of termination wages previously accrued which were settled in shares at a discount to book value of approximately $49,000.
General and administrative expenses for the nine months ended April 30, 2007 increased to $2,419,946 from $1,404,629 for the nine months ended April 30, 2006. Excluding a stock-based compensation expense of $123,958 for the nine months ended April 30, 2007 and a stock-based compensation recovery of $1,482,509 recorded in the nine months ended April 30, 2006, general and administrative expenses decreased to $2,295,988 for the nine months ended April 30, 2007 from $2,887,138. General and administrative expenses for the nine months ended April 30, 2007 also included costs to streamline operations of approximately $75,000. The decrease, excluding the stock-based compensation recovery, was primarily attributed to a decrease in insurance costs, public relation expenses, legal fees and wages. The decrease was partially offset by an increase in our rent expense and the settlement with one of our distributors as more fully explained under "Legal Proceedings". Rent increased substantially as we estimated the cost of terminating our UK lease. The decrease in professional fees occurred as legal expenses were higher during the three months ended April 30, 2006 as due to the cost of legal services incurred to defend against a lawsuit from a debenture holder.
Depreciation and amortization expense decreased to $349,749 for the nine months ended April 30, 2007 from $1,003,003 for the nine months ended April 30, 2006 as our other assets have been completely amortized as at October 31, 2006.
Interest and financing expense
Interest and finance charges decreased to $8,077,800 for the nine months ended April 30, 2007 from $21,802,983 for the nine months ended April 30, 2006. Interest and finance charges for the nine months ended April 30, 2007 includes non-cash interest of $8,009,002 compared to non-cash interest charges of $20,798,430 for the nine months ended April 30, 2006. The majority of interest and finance charges relate to accrued and accreted interest on our convertible debentures and amortization of deferred charges related to our convertible debentures. Interest and finance charges for the nine months ended April 30, 2006 included a $16 million fee paid on June 23, 2005 for the $160 million standby equity distribution agreement with Cornell Capital Partners, which was replaced by a $100 million standby equity distribution agreement on December 30, 2005, plus related professional fees and interest accretion on our convertible debentures.
Interest income earned during the nine months ended April 30, 2007 decreased to $21,256 from $185,386 for the nine months ended April 30, 2006. The decrease was a result of lower average cash balances during the three months ended April 30, 2007.
Loss on settlement of debt
A loss on the settlement of debt of $nil was incurred for the nine months ended April 30, 2007 as compared to a loss on the settlement of debt of $214,274 for the nine months ended April 30, 2006. The loss on settlement of debt represents the aggregate consideration provided less the face value of the debt. The loss on settlement of debt occurred as on April 21, 2005, Bristol Investment Fund, Ltd., a holder of our discounted debentures in the amount of $91,726, commenced a lawsuit in the Supreme Court of New York against us, essentially alleging that we wrongfully refused to honor its request to convert the debt into 9,268,875 shares of our common stock. The lawsuit sought an order compelling us to pay $4,393,360 plus interest from April 25, 2005 for damages and attorneys fees.
On January 5, 2006, we entered into a Settlement Agreement and Mutual Release with Bristol Investment Fund, Ltd. In connection with the Agreement and Mutual Release, we issued (i) a bank check in the amount of $228,000 payable to "Bristol Investment Fund, Ltd. representing $250,000, less $22,000 in Canadian withholding taxes"; (ii) 2,000,000 shares of our common stock (the "Bristol Shares") in certificates of 1,000,000 shares each; and (iii) an executed Stipulation of Discontinuance with prejudice. Bristol Investment Fund, Ltd. further agreed that no sale of the Bristol Shares will be made before January 16, 2006 and that no more than 1,000,000 of the Bristol Shares may be sold before February 16, 2006. Bristol Investment Fund, Ltd. further acknowledged that the discounted debenture has been paid in full and no further sums are due thereunder.
Unrealized loss on derivative instruments
A derivative instrument loss of $1,030,415 was incurred for the nine months ended April 30, 2007 as compared to compared to an unrealized gain of $545,153 for the nine months ended April 30, 2006. The derivative instrument loss for the nine months ended April 30, 2007 represents the mark to market adjustment on derivative instruments. There was no derivative instrument unrealized gain or
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