Nevada
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20-3626387
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(State or
other jurisdiction of incorporation or organization)
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(I.R.S.
Employer Identification No.)
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2
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3
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7
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7
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7
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8
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8
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8
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8
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8
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Balance Sheets |
F–1
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Statements of Operations |
F–2
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Statements of Cash
Flows
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F–3
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Notes to the Financial Statements |
F–4
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March
31, 2009
$
(Unaudited)
|
December
31, 2008
$
|
|||||||
ASSET
|
||||||||
Current
Assets
|
||||||||
Cash
|
29,826 | 125,251 | ||||||
Prepaid
expenses
|
– | 1,125 | ||||||
Total Current
Assets
|
29,826 | 126,376 | ||||||
Property and
equipment (Note 3)
|
13,939 | 14,922 | ||||||
Total
Assets
|
43,765 | 141,298 | ||||||
LIABILITIES
AND STOCKHOLDERS’ DEFICIT
|
||||||||
Current
Liabilities
|
||||||||
Accounts
payable
|
44,834 | 50,420 | ||||||
Accrued
liabilities
|
1,999 | 2,363 | ||||||
Accrued
convertible interest payable (Note 5)
|
5,880 | 3,154 | ||||||
Advances from
related parties (Note 6(b))
|
26,906 | 26,906 | ||||||
Total Current
Liabilities
|
79,619 | 82,843 | ||||||
Convertible
debentures issued to related parties (Note 5)
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83,481 | 81,094 | ||||||
Advances from
related parties (Note 6(a))
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31,240 | 30,615 | ||||||
Total
Liabilities
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194,340 | 194,552 | ||||||
Contingencies
and Commitments (Notes 1 and 9)
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||||||||
Stockholders’
Deficit
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||||||||
Common stock,
75,000,000 shares authorized, US$0.001 par value;
45,369,068
shares issued and outstanding (December 31, 2008 –
43,729,722)
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52,578 | 50,676 | ||||||
Additional
paid-in capital
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1,490,073 | 1,391,975 | ||||||
Common stock
to be issued (Note 9(a))
|
7,673 | 107,673 | ||||||
Deficit
accumulated during the development stage
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(1,700,899 | ) | (1,603,578 | ) | ||||
Total
Stockholders’ Deficit
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(150,575 | ) | (53,254 | ) | ||||
Total
Liabilities and Stockholders’ Deficit
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43,765 | 141,298 | ||||||
Accumulated
from March 6, 1999
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For
the Three Months
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For
the Three Months
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|||
(Date
of Inception)
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Ended
March 31, 2009
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Ended March
31, 2008
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|||
to
March 31, 2009
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$
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$
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|||
$
|
|
|
|||
Revenue
|
–
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–
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–
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||
Expenses
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|||||
Depreciation
|
12,428
|
983
|
1,355
|
||
Foreign
exchange loss (gain)
|
21,704
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4,198
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(668)
|
||
General and
administrative (Note 4)
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1,234,951
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86,828
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105,305
|
||
Research and
development
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62,855
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1,933
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–
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||
|
|
||||
Total
Operating Expenses
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1,331,938
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93,942
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105,992
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||
|
|
||||
Loss From
Operations
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(1,331,938)
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(93,942)
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(105,992)
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||
Other
Expenses
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|||||
Accretion of
discounts on convertible debentures
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(320,568)
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(2,648)
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(39,509)
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||
Interest
expense
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(48,393)
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(731)
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(7,913)
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||
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|||||
Total Other
Expenses
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(368,961)
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(3,379)
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(47,422)
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Net Loss for
the Period
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(1,700,899)
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(97,321)
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(153,414)
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||
Net Loss Per
Share – Basic and Diluted
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–
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–
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|||
Weighted
Average Shares Outstanding
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44,713,000
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39,524,000
|
|||
For
the Three
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For
the Three
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|||||||
Months
Ended
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Months
Ended
|
|||||||
March
31, 2009
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March
31, 2008
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|||||||
$
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$
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|||||||
Operating
Activities
|
||||||||
Net loss for
the period
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(97,321 | ) | (153,414 | ) | ||||
Adjustments
to reconcile net loss to net cash used in operating
activities:
|
||||||||
Accretion of
discounts on convertible debentures
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731 | 39,509 | ||||||
Depreciation
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983 | 1,355 | ||||||
Foreign
exchange translation loss
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4,115 | – | ||||||
Changes in
operating assets and liabilities:
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||||||||
Amounts
receivable
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– | (26 | ) | |||||
Prepaid
expenses
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1,125 | (4,226 | ) | |||||
Accounts
payable and accrued liabilities
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(7,706 | ) | 31,962 | |||||
Accrued
convertible interest payable
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2,648 | 7,912 | ||||||
Due to
related parties
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– | 44 | ||||||
Net Cash Used
In Operating Activities
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(95,425 | ) | (76,884 | ) | ||||
Financing
Activities
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||||||||
Proceeds from
issuance of shares
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– | 165,000 | ||||||
Net Cash
Provided by Financing Activities
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– | 165,000 | ||||||
(Decrease)
increase in Cash
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(95,425 | ) | 88,116 | |||||
Cash -
Beginning of Period
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125,251 | 46,192 | ||||||
Cash - End of
Period
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29,826 | 134,308 | ||||||
Supplemental
Disclosures
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||||||||
Interest
paid
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– | – | ||||||
Income taxes
paid
|
– | – |
1.
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Nature of
Business and Continuance of
Operations
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2.
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Summary of
Significant Accounting Policies
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a)
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Basis of
Presentation
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b)
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Interim
Financial Statements
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2.
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Summary of
Significant Accounting Policies
(continued)
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c)
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Use of
Estimates
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d)
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Cash and Cash
Equivalents
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e)
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Financial
Instruments and Fair Value Measures
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2.
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Summary of
Significant Accounting Policies
(continued)
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f)
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Earnings
(Loss) Per Share
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g)
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Comprehensive
Loss
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h)
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Foreign
Currency Translation
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i)
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Stock-based
Compensation
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j)
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Property and
Equipment
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k)
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Long-lived
Assets
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2.
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Summary of
Significant Accounting Policies
(continued)
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l)
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Research and
Development Costs
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m)
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Income
Taxes
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n)
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Recent
Accounting Pronouncements
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2.
|
Summary of
Significant Accounting Policies
(continued)
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n)
|
Recent
Accounting Pronouncements
(continued)
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3.
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Property and
Equipment
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Accumulated |
March
31, 2009
|
December
31, 2008
|
||
Cost
|
Amortization
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Net
Carrying Value
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Net
Carrying Value
|
|
$
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$
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$
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$
|
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Equipment
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13,617
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6,123
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7,494
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8,102
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Computer
equipment
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3,283
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2,018
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1,265
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1,367
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Office
furniture
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9,467
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4,287
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5,180
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5,453
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26,367
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12,428
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13,939
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14,922
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4.
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Related Party
Transaction
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5.
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Convertible
Debentures Issued to Related
Parties
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a)
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On July 30,
2008, the Company entered into a convertible debenture agreement with a
company controlled by the President of the Company. The Company received
US$36,376 ($36,960) which bears interest at 10% per annum and is due five
years from the advancement date. No interest shall be payable for the
first year from the advancement date but shall accrue from the advancement
date and all accrued interest shall be payable annually, on the subsequent
anniversaries of the advancement date. Proceeds of the loan are to be used
to acquire certain patents and intellectual property rights and the loan
amount is secured against such intellectual property. The loan and any
unpaid interest are convertible into shares of common stock at a
conversion price of US$0.17 per share. In accordance with EITF 98-5 “Accounting for Convertible
Securities with Beneficial Conversion Features or Contingently Adjustable
Conversion Ratios”, the Company recognized the intrinsic value of
the embedded beneficial conversion feature of US$6,419 ($6,523) as
additional paid-in capital and reduced the carrying value of the
convertible debenture to US$29,957 ($30,437). The carrying value will be
accreted over the term of the convertible debenture up to its face value
of US$36,376. As at March 31, 2009, the carrying values of the convertible
debenture and accrued convertible interest payable thereon were $38,040
and $3,039, respectively, after translation into Canadian
dollars.
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b)
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On October
16, 2008, the Company entered into a convertible debenture agreement with
the President of the Company. The Company received US$50,000 ($59,110)
which bears interest at 10% per annum and is due five years from the
advancement date. No interest shall be payable for the first year from the
advancement date but shall accrue from the advancement date and all
accrued interest shall be payable annually, on the subsequent
anniversaries of the advancement date. Proceeds of the loan are to be used
to repay an outstanding loan and to further business development and
research and development activities. The loan and any unpaid interest at
the conversion date are convertible into shares of common stock at a
conversion price of US$0.07 per share. In accordance with EITF 98-5 “Accounting for Convertible
Securities with Beneficial Conversion Features or Contingently Adjustable
Conversion Ratios”, the Company recognized the intrinsic value of
the embedded beneficial conversion feature of US$14,286 ($16,889) as
additional paid-in capital and reduced the carrying value of the
convertible debenture to US$35,714 ($42,221). The carrying value will be
accreted over the term of the convertible debenture up to its face value
of US$50,000. As at March 31, 2009, the carrying values of the convertible
debenture and accrued convertible interest thereon were $45,441 and
$2,841, respectively, after translation into Canadian
dollars.
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6.
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Advances From
Related Parties
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a)
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On September
5, 2008, the Company entered into a loan agreement with a company
controlled by the President of the Company. The Company received US$25,000
($26,388) which is non-interest bearing and is due five years from the
advancement date. As at March 31, 2009, the loan payable was $31,240
(December 31, 2008 - $30,615) after translation into Canadian
dollars.
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b)
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On December
9, 2008, the Company received $25,000 from a company controlled by the
President of the Company. The amount owing is unsecured, non-interest
bearing, and has no specified repayment terms. As at March 31, 2009, the
Company owed this company $1,906 (December 31, 2008 - $1,906) for payment
of expenses on behalf of the
Company.
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7.
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Common
Stock
|
8.
|
Share
Purchase Warrants
|
Number
of
Warrants
|
Weighted
Average
Exercise
Price
|
|
Balance –
December 31, 2008
|
1,345,585
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US$0.39
|
Issued
|
3,278,692
|
US$0.11
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Balance –
March 31, 2009
|
4,624,277
|
US$0.19
|
Number
of Warrants
|
Exercise
Price
|
Expiry
Date
|
|
||
187,500
|
US$1.04
|
July 28,
2009
|
970,585
|
US$0.30
|
February 12,
2010
|
187,500
|
US$0.23
|
July 28,
2010
|
3,278,692
|
US$0.11
|
February 5,
2011
|
|
||
4,624,277
|
9.
|
Commitments
|
a)
|
On July 28,
2006, the Company’s board of directors resolved to issue certain
share-based payments to an employee of the Company over a three year
period. Under the arrangement, the employee was to be issued 62,500 shares
of common stock and 187,500 share purchase warrants, each on July 28, 2006
(issued), 2007 (issued), 2008, and 2009. On September 12, 2008, the
employee resigned and became a consultant to the Company (refer to Note
9(b)). It was mutually agreed that the former employee remains entitled to
the shares and warrants to be issued under the arrangement. As at March
31, 2009, the Company had yet to issue the 62,500 shares due on July 28,
2008. The fair value of these shares on the measurement date of $7,673 has
been recorded as common stock to be issued as at March 31,
2009.
|
b)
|
On September
15, 2008, the Company entered into a consulting agreement with the former
employee in Note 9(a), for administrative services. Pursuant to the
agreement, the Company agreed to pay the former employee $6,800 per
month.
|
9.
|
Commitments
(continued)
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c)
|
On November
20, 2008, the Company entered into an investor relations agreement with a
company that will perform investor relations services for a period of six
months commencing effective September 1, 2008. Pursuant to the terms of
this agreement, the Company agreed to pay the company $1,000 per month and
to issue 75,000 shares of common stock
(issued).
|
d)
|
On December
4, 2008, the Company entered into a contribution agreement with National
Research Council Canada (“NRC”) to bring the Company’s catalytic muffler
technology to commercialization through a two phase research and
development project. This agreement becomes effective on April 1, 2009 and
terminates on November 30, 2010. Under the agreement, the NRC will
reimburse 80% of supported internal salaries up to a maximum of $115,832
and 50% of supported contractor fees up to a maximum of $119,645 incurred
on the project. The NRC will contribute a maximum of $125,717 and $109,760
during the fiscal years of the Canadian government ending March 31, 2010
and 2011, respectively.
|
10.
|
Subsequent
Event
|
Area
|
Filing
Number
|
United
States
|
6,622,482
|
7,108,590
|
|
Canada
|
2,448,742
|
2,448,648
|
|
Europe
|
02742591.7
|
Three
Months Ended
March
31, 2009
($)
|
Three
Months Ended
March
31, 2008
($)
|
Period
from
March
6, 1999
(Date
of Inception) to
March
31, 2009
($)
|
|
Revenue
|
-
|
-
|
-
|
Operating
Expenses
|
93,942
|
105,992
|
1,331,938
|
Net
Loss
|
97,321
|
153,414
|
1,700,899
|
Exhibit
Number
|
Exhibit
Description
|
Environmental Control
Corp.
|
|
(Registrant)
|
|
Date:
May 15, 2009
|
/s/
Albert E. Hickman
|
Albert E.
Hickman
|
|
President,
Chief Executive Officer and Director
|
|
Date:
May 15, 2009
|
/s/
Gary Bishop
|
Gary
Bishop
|
|
Chief
Financial Officer and Director
|
|
(Principal
Accounting Officer)
|