----

----

|                                 |                     |
|--------------------------------------|--------------------------|
| British      Columbia, Canada        | Not      applicable      |
| (State      or other jurisdiction of | (I.R.S.      Employer    |
| incorporation      or organization)  | Identification      No.) |

----

----

| TABLE      OF CONTENTS                                                                                                                    |   |
|-------------------------------------------------------------------------------------------------------------------------------------------|--------|
|                                                                                                                                      |   |
| PART      I                                                                                                                               | 2      |
|    ITEM      1. DESCRIPTION OF BUSINESS                                                                                    | 2      |
|    ITEM      1A. RISK FACTORS                                                                                              | 9      |
|    ITEM      2. DESCRIPTION OF PROPERTY[                                                                                   | 14     |
|    ITEM      3. LEGAL PROCEEDINGS                                                                                          | 14     |
|    ITEM      4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS                                                        | 14     |
|                                                                                                                                      |   |
| PART      II                                                                                                                              | 15     |
|    ITEM      5. MARKET FOR COMMON EQUITY AND RELATED STOCKHOLDERMATTERS                                                    | 15     |
|    ITEM      6. MANAGEMENT'S DISCUSSION AND ANALYSIS OR PLAN OF    OPERATION                                               | 20     |
|    ITEM      7. FINANCIAL STATEMENTS                                                                                       | 27     |
|    ITEM      8. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND      FINANCIAL DISCLOSURE                  | 27     |
|    ITEM      8A. CONTROLS AND PROCEDURES                                                                                   | 27     |
|    ITEM      8B. OTHER INFORMATION                                                                                         | 28     |
|                                                                                                                                      |   |
| PART      III                                                                                                                             | 29     |
|    ITEM      9. DIRECTORS, EXECUTIVE OFFICERS AND CONTROL PERSONS                                                          | 29     |
|    ITEM      10. EXECUTIVE COMPENSATION                                                                                    | 36     |
| ITEM      11. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND      RELATED     STOCKHOLDER MATTERS | 40     |
|    ITEM      12. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS                                                            | 45     |
|                                                                                                                                      |   |
| PART      IV                                                                                                                              | 46     |
|    ITEM      13. EXHIBITS                                                                                                  | 46     |
|    ITEM      14. PRINCIPAL ACCOUNTING FEES AND SERVICES                                                                    | 55     |

----

----

| ·   | acknowledged      our debt to the lenders in the aggregate amount of approximately      $44,150,000 |
|--------------------|-----------------------------------------------------------------------------------------------------|

| ·   | assured      the lenders that we had no offsets, claims or counterclaims against any of      them |
|--------------------|---------------------------------------------------------------------------------------------------|

| ·   | ratified      all of the loan documents pursuant to which we had borrowed the money owed      and acknowledged that they, and the documents granting security for      repayment of the loans, were in full force and effect;  and |
|--------------------|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| ·   | we      agreed to adhere to a projected budget during the period ending December      31, 2009. |
|--------------------|-------------------------------------------------------------------------------------------------|

----

| ·   | Dana      Corporation. Seven year Marketing and Distribution agreement      with Dana Corporation dated October 12, 2005 pursuant to which Dana      markets and sells tire monitoring systems to OEM customers throughout      North America, Mexico, Australia and New  Zealand. |
|--------------------|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| ·   | Vansco      Electronics      LP. Development and supply agreement with Vansco Ltd. dated      September 12, 2003 to manufacture a high sensitivity, weatherproof, J1939      controller area network, chassis-mounted  receiver. |
|--------------------|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| ·   | GE Nova      Sensor.  A three-year supply agreement with GE Sensing      Inc. dated July 23, 2007 pursuant to which GE Sensing supplies its NPX      pressure sensors, an important component in the tire pressure monitoring      systems. |
|--------------------|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| ·   | Alligator      Ventilfabrik GmbH.  Based in Giengen, Germany, Alligator      currently supplies valve stems that allow the attachment of tire      monitoring sensors inside the tire. |
|--------------------|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

----

----

| Patent      # | Issue      Date | Title                                                                                             | Jurisdiction |
|---------------|-----------------|---------------------------------------------------------------------------------------------------|--------------|
| 5,231,872     | 3-Aug-1993      | TIRE      MONITORING APPARATUS AND METHOD                                                         | US           |
| 5,335,540     | 9-Aug-1994      | TIRE      MONITORING APPARATUS AND METHOD                                                         | US           |
| 7,421,902     | 9-Sep-2008      | FLUID      PRESSURE SENSING METHOD AND APPARATUS                                                  | US           |
| 6,805,000     | 25-Oct-2004     | APPARATUS      AND METHOD FOR MOUNTING A TIRE CONDITION SENSOR CAPSULE TO A WHEEL      RIM        | US           |
| 6,357,833     | 19-Mar-2002     | WHEEL      COMPONENT WITH CAVITY FOR MOUNTING A HOUSING FOR MEASUREMENT      APPARATUS            | US           |
| 5,945,908     | 7-Aug-1996      | DATA      LOGGING TIRE MONITOR WITH CONDITION PREDICTIVE CAPABILITIES AND INTEGRITY      CHECKING | US           |
| 5,559,484     | 4-Sep-1996      | DATA      LOGGING TIRE MONITOR WITH CONDITION PREDICTIVE CAPABILITIES AND INTEGRITY      CHECKING | US           |
| 5,285,189     | 8-Feb-1994      | ABNORMAL      TIRE CONDITION WARNING SYSTEM                                                       | US           |

----

----

----

----

| ·   | The      markets in which we operated before the Asset Sale, and in which the Buyer      operates after the Asset Sale, are subject to technological change,      evolving industry standards and changes in customer demands. The      introduction of products embodying new technologies and the emergence of      new industry standards could render our products obsolete and      unmarketable. |
|--------------------|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| ·   | During      fiscal 2008 we earned 63% of our revenue from our two largest customers.      Accordingly, the loss by the Buyer of any one of our two major customers      may materially and adversely affect future income from the TPMS business.      The loss of any major customer, or significant reductions by any of them      in buying TPMS products, or any inability on the Buyer’s part to collect      accounts receivable from them, would materially and adversely affect      results of operations from this business, and accordingly, amounts paid to      us under the Earn-Out. |
|--------------------|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

----

| ·   | The      TPMS products, and the products that may be provide in the future, embody      new technologies. Certain of the components and raw materials used in the      TPMS products are difficult to obtain and/or require purchase commitments      to be made far in advance of the manufacturing date. The inability to      obtain sufficient quantities of components or raw materials, or the      inability to forecast purchase requirements accurately, could adversely      affect TPMS business and results of operations. Similarly, commitments to      purchase components and raw materials in excess of customer demand for our      products could materially and adversely affect our results of operations,      and accordingly, amounts paid to us under the Earn-Out. See "Description      of Business - Raw Materials and Principal Suppliers"  above. |
|--------------------|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| ·   | We      historically contracted the manufacture of our products to third parties.      In certain cases, we did not have an alternative source of manufacturing,      and a suitable replacement would be time-consuming and expensive to      obtain. If, for any reason, one of these third party manufacturers is      unable or refuses to produce the TPMS products, the business, financial      condition and results of operations would be materially and adversely      affected, and accordingly, amounts paid to us under the Earn-Out. See      “Description of Business - Raw Materials and Principal Suppliers"      above. |
|--------------------|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

----

| ·   | that a      broker or dealer approve a person's account for transactions in penny      stocks; and |
|--------------------|--------------------------------------------------------------------------------------------------------------|

| ·   | the      broker or dealer receive from the investor a written agreement to the      transaction, setting forth the identity and quantity of the penny stock to      be purchased. |
|--------------------|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| ·   | In      order to approve a person's account for transaction, setting forth the      identity and quantity of the penny stock to    be purchased. |
|--------------------|-------------------------------------------------------------------------------------------------------------------------------------------------------|

| ·   | Obtain financial      information and investment experience objectives of the person;      and |
|--------------------|----------------------------------------------------------------------------------------------------------|

| ·   | make      a reasonable determination that the transactions in penny stocks are      suitable for that person and the person has sufficient knowledge and      experience in financial matters to be capable of evaluating the risks of      transactions in penny stocks. |
|--------------------|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

----

| ·   | sets      forth the basis on which the broker or dealer made the suitability      determination; and |
|--------------------|------------------------------------------------------------------------------------------------------|

| ·   | States      that the broker or dealer received a signed, written agreement from the      investor prior to the transaction. |
|--------------------|-----------------------------------------------------------------------------------------------------------------------------|

| ·   | Brokers      may be less willing to execute transactions in securities subject to the      "penny stock" rules. This may make it more difficult for investors to      dispose of our common stock and cause a decline in the market value of our      stock. |
|--------------------|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

----

----

| QUARTER      ENDED    | HIGH    | LOW     |
|-----------------------|---------|---------|
|                  |    |    |
| July      31, 2008    | $0.0002 | $0.0001 |
|                  |    |    |
| April      30, 2008   | $0.0007 | $0.0002 |
|                  |    |    |
| January      31, 2008 | $0.0059 | $0.0007 |
|                  |    |    |
| October      31, 2007 | $0.01   | $0.0046 |
|                  |    |    |
| July      31, 2007    | $0.019  | $0.006  |
|                  |    |    |
| April      30, 2007   | $0.039  | $0.015  |
|                  |    |    |
| January      31, 2007 | $0.050  | $0.032  |
|                  |    |    |
| October      31, 2006 | $0.065  | $0.034  |
|                  |    |    |

----

| ·   | By      conversion notice dated May 1, 2008, TAIB Securities, Inc. elected to      convert $12,000 of its 10% convertible debenture into common shares of the      Company.  In response we issued 150,000,000 shares of our common      stock pursuant to Rule 506 of Regulation D under the Securities      Act. |
|--------------------|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| ·   | By      conversion notice dated May 1, 2008, Certain Wealth Limited, Inc. elected      to convert $4,000 of its 10% convertible debenture into common shares of      the Company.  In response we issued 50,000,000 shares of our      common stock pursuant to Rule 506 of Regulation D under the Securities      Act. |
|--------------------|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| ·   | By      conversion notice dated May 5, 2008, TAIB Securities, Inc. elected to      convert $12,000 of its 10% convertible debenture into common shares of the      Company.  In response we issued 150,000,000 shares of our common      stock pursuant to Rule 506 of Regulation D under the Securities      Act. |
|--------------------|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| ·   | By      conversion notice dated May 5, 2008, Certain Wealth Limited, Inc. elected      to convert $4,000 of its 10% convertible debenture into common shares of      the Company.  In response we issued 50,000,000 shares of our      common stock pursuant to Rule 506 of Regulation D under the Securities      Act. |
|--------------------|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| ·   | By      conversion notice dated May 6, 2008, Starome Investments Limited elected      to convert $6,000 of its 10% convertible debenture into common shares of      the Company.  In response we issued 60,000,000 shares of our      common stock pursuant to Rule 506 of Regulation D under the Securities      Act. |
|--------------------|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| ·   | By      conversion notice dated May 6, 2008, TAIB Securities, Inc. elected to      convert $9,000 of its 10% convertible debenture into common shares of the      Company.  In response we issued 112,500,000 shares of our common      stock pursuant to Rule 506 of Regulation D under the Securities      Act. |
|--------------------|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| ·   | By      conversion notice dated May 6, 2008, Certain Wealth Limited, Inc. elected      to convert $3,000 of its 10% convertible debenture into common shares of      the Company.  In response we issued 37,500,000 shares of our      common stock pursuant to Rule 506 of Regulation D under the Securities      Act. |
|--------------------|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| ·   | By      conversion notice dated May 7, 2008, TAIB Securities, Inc. elected to      convert $14,000 of its 10% convertible debenture into common shares of the      Company.  In response we issued 175,000,000 shares of our common      stock pursuant to Rule 506 of Regulation D under the Securities      Act. |
|--------------------|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| ·   | By      conversion notice dated May 7, 2008, Certain Wealth Limited, Inc. elected      to convert $6,000 of its 10% convertible debenture into common shares of      the Company.  In response we issued 75,000,000 shares of our      common stock pursuant to Rule 506 of Regulation D under the Securities      Act. |
|--------------------|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| ·   | By      conversion notice dated May 8, 2008, TAIB Securities, Inc. elected to      convert $10,000 of its 10% convertible debenture into common shares of the      Company.  In response we issued 125,000,000 shares of our common      stock pursuant to Rule 506 of Regulation D under the Securities      Act. |
|--------------------|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| ·   | By      conversion notice dated May 8, 2008, Certain Wealth Limited, Inc. elected      to convert $6,000 of its 10% convertible debenture into common shares of      the Company.  In response we issued 75,000,000 shares of our      common stock pursuant to Rule 506 of Regulation D under the Securities      Act. |
|--------------------|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

----

| ·   | By      conversion notice dated May 9, 2008, TAIB Securities, Inc. elected to      convert $10,000 of its 10% convertible debenture into common shares of the      Company.  In response we issued 125,000,000 shares of our common      stock pursuant to Rule 506 of Regulation D under the Securities      Act. |
|--------------------|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| ·   | By      conversion notice dated May 9, 2008, Certain Wealth Limited, Inc. elected      to convert $4,000 of its 10% convertible debenture into common shares of      the Company.  In response we issued 50,000,000 shares of our      common stock pursuant to Rule 506 of Regulation D under the Securities      Act. |
|--------------------|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| ·   | By      conversion notice dated May 14, 2008, TAIB Securities, Inc. elected to      convert $11,000 of its 10% convertible debenture into common shares of the      Company.  In response we issued 137,500,000 shares of our common      stock pursuant to Rule 506 of Regulation D under the Securities      Act. |
|--------------------|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| ·   | By      conversion notice dated May 14, 2008, Certain Wealth Limited, Inc. elected      to convert $3,000 of its 10% convertible debenture into common shares of      the Company.  In response we issued 37,500,000 shares of our      common stock pursuant to Rule 506 of Regulation D under the Securities      Act. |
|--------------------|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| ·   | By      conversion notice dated May 15, 2008, Starome Investments Limited elected      to convert $6,000 of its 10% convertible debenture into common shares of      the Company.  In response we issued 60,000,000 shares of our      common stock pursuant to Rule 506 of Regulation D under the Securities      Act. |
|--------------------|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| ·   | By      conversion notice dated May 15, 2008, TAIB Securities, Inc. elected to      convert $11,400 of its 10% convertible debenture into common shares of the      Company.  In response we issued 142,500,000 shares of our common      stock pursuant to Rule 506 of Regulation D under the Securities      Act. |
|--------------------|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| ·   | By      conversion notice dated May 15, 2008, Certain Wealth Limited, Inc. elected      to convert $3,800 of its 10% convertible debenture into common shares of      the Company.  In response we issued 47,500,000 shares of our      common stock pursuant to Rule 506 of Regulation D under the Securities      Act. |
|--------------------|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| ·   | By      conversion notice dated May 20, 2008, TAIB Securities, Inc. elected to      convert $5,100 of its 10% convertible debenture into common shares of the      Company.  In response we issued 63,750,000 shares of our common      stock pursuant to Rule 506 of Regulation D under the Securities      Act. |
|--------------------|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| ·   | By      conversion notice dated May 20, 2008, Certain Wealth Limited, Inc. elected      to convert $1,700 of its 10% convertible debenture into common shares of      the Company.  In response we issued 21,250,000 shares of our      common stock pursuant to Rule 506 of Regulation D under the Securities      Act. |
|--------------------|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| ·   | By      conversion notice dated May 20, 2008, Starome Investments Limited elected      to convert $6,000 of its 10% convertible debenture into common shares of      the Company.  In response we issued 60,000,000 shares of our      common stock pursuant to Rule 506 of Regulation D under the Securities      Act. |
|--------------------|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| ·   | By      conversion notice dated May 27, 2008, TAIB Securities, Inc. elected to      convert $6,200 of its 10% convertible debenture into common shares of the      Company.  In response we issued 77,500,000 shares of our common      stock pursuant to Rule 506 of Regulation D under the Securities      Act. |
|--------------------|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| ·   | By      conversion notice dated May 27, 2008, Certain Wealth Limited, Inc. elected      to convert $2,100 of its 10% convertible debenture into common shares of      the Company.  In response we issued 26,250,000 shares of our      common stock pursuant to Rule 506 of Regulation D under the Securities      Act. |
|--------------------|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| ·   | By      conversion notice dated May 30, 2008, Xentenial Holdings Limited elected      to convert $9,400 of its 10% convertible debenture into common shares of      the Company.  In response we issued 117,500,000 shares of our      common stock pursuant to Rule 506 of Regulation D under the Securities      Act. |
|--------------------|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| ·   | By      conversion notice dated June 5, 2008, TAIB Securities, Inc. elected to      convert $7,300 of its 10% convertible debenture into common shares of the      Company.  In response we issued 91,250,000 shares of our common      stock pursuant to Rule 506 of Regulation D under the Securities      Act. |
|--------------------|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

----

| ·   | By      conversion notice dated June 5, 2008, Certain Wealth Limited, Inc. elected      to convert $2,400 of its 10% convertible debenture into common shares of      the Company.  In response we issued 30,000,000 shares of our      common stock pursuant to Rule 506 of Regulation D under the Securities      Act. |
|--------------------|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| ·   | By      conversion notice dated June 17, 2008, TAIB Securities, Inc. elected to      convert $6,000 of its 10% convertible debenture into common shares of the      Company.  In response we issued 75,000,000 shares of our common      stock pursuant to Rule 506 of Regulation D under the Securities      Act. |
|--------------------|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| ·   | By      conversion notice dated June 17, 2008, Certain Wealth Limited, Inc.      elected to convert $2,000 of its 10% convertible debenture into common      shares of the Company.  In response we issued 25,000,000 shares      of our common stock pursuant to Rule 506 of Regulation D under the      Securities Act. |
|--------------------|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| ·   | By      conversion notice dated June 20, 2008, TAIB Securities, Inc. elected to      convert $1,900 of its 10% convertible debenture into common shares of the      Company.  In response we issued 23,750,000 shares of our common      stock pursuant to Rule 506 of Regulation D under the Securities      Act. |
|--------------------|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| ·   | By      conversion notice dated June 20, 2008, Certain Wealth Limited, Inc.      elected to convert $600 of its 10% convertible debenture into common      shares of the Company.  In response we issued 7,500,000 shares      of our common stock pursuant to Rule 506 of Regulation D under the      Securities Act. |
|--------------------|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| ·   | By      conversion notice dated June 25, 2008, TAIB Securities, Inc. elected to      convert $2,000 of its 10% convertible debenture into common shares of the      Company.  In response we issued 25,000,000 shares of our common      stock pursuant to Rule 506 of Regulation D under the Securities      Act. |
|--------------------|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| ·   | By      conversion notice dated June 25, 2008, Certain Wealth Limited, Inc.      elected to convert $1,000 of its 10% convertible debenture into common      shares of the Company.  In response we issued 12,500,000 shares      of our common stock pursuant to Rule 506 of Regulation D under the      Securities Act. |
|--------------------|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| ·   | By      conversion notice dated July 8, 2008, Starome Investments Limited elected      to convert $3,000 of its 10% convertible debenture into common shares of      the Company.  In response we issued 30,000,000 shares of our      common stock pursuant to Rule 506 of Regulation D under the Securities      Act. |
|--------------------|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| ·   | By      conversion notice dated July 21, 2008, TAIB Securities, Inc. elected to      convert $1,800 of its 10% convertible debenture into common shares of the      Company.  In response we issued 51,428,571 shares of our common      stock pursuant to Rule 506 of Regulation D under the Securities      Act. |
|--------------------|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| ·   | By      conversion notice dated July 21, 2008, Certain Wealth Limited, Inc.      elected to convert $1,200 of its 10% convertible debenture into common      shares of the Company.  In response we issued 34,285,714 shares      of our common stock pursuant to Rule 506 of Regulation D under the      Securities Act. |
|--------------------|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| ·   | By      conversion notice dated July 22, 2008, TAIB Securities, Inc. elected to      convert $4,350 of its 10% convertible debenture into common shares of the      Company.  In response we issued 124,285,714 shares of our common      stock pursuant to Rule 506 of Regulation D under the Securities      Act. |
|--------------------|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| ·   | By      conversion notice dated July 22, 2008, Certain Wealth Limited, Inc.      elected to convert $4,350 of its 10% convertible debenture into common      shares of the Company.  In response we issued 124,285,714 shares      of our common stock pursuant to Rule 506 of Regulation D under the      Securities Act. |
|--------------------|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

----

| ·   | On      June 20, 2008, we issued to Xentenial Holdings Limited, pursuant to Rule      506 of Regulation D under the Securities Act, for an aggregate purchase      price of $269,000 a 12% convertible debenture due on or before June 20,      2011. The debenture is convertible at the lesser of $0.0573 or 80% of the      lowest volume weighted average price of the Company’s common stock during      the thirty trading days preceding the conversion date as quoted by      Bloomberg, LP.  We have paid Yorkville Advisors, LLC, a related      party of Xentenial, a cash fee of $31,000 in connection with the      convertible debenture out of the aggregate purchase  price. |
|--------------------|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| ·   | On      August 1, 2008, we issued to Xentenial Holdings Limited, pursuant to Rule      506 of Regulation D under the Securities Act, for an aggregate purchase      price of $152,500, a 12% convertible debenture due on or before August 1,      2011. The debenture is convertible at the lesser of $0.0573 or 80% of the      lowest volume weighted average price of the Company’s common stock during      the thirty trading days preceding the conversion date as quoted by      Bloomberg, LP.  We have paid Yorkville Advisors, LLC, a related      party of Xentenial, a cash fee of $26,500 in connection with the      convertible debenture out of the aggregate purchase  price. |
|--------------------|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| ·   | On      August 15, 2008, we issued to Xentenial Holdings Limited, pursuant to Rule      506 of Regulation D under the Securities Act, for an aggregate purchase      price of $100,000 a 12% convertible debenture due on or before August 15,      2011. The debenture is convertible at the lesser of $0.0573 or 80% of the      lowest volume weighted average price of the Company’s common stock during      the thirty trading days preceding the conversion date as quoted by      Bloomberg, LP.  We did not pay any fees associated with this      debenture. |
|--------------------|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| ·   | By      conversion notice dated September 22, 2008, Starome Investments Limited      elected to convert $6,000 of its 10% convertible debenture into common      shares of the Company.  In response we issued 60,000,000 shares      of our common stock pursuant to Rule 506 of Regulation D under the      Securities Act. |
|--------------------|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| ·   | By      conversion notice dated September 26, 2008, Starome Investments Limited      elected to convert $6,000 of its 10% convertible debenture into common      shares of the Company.  In response we issued 60,000,000 shares      of our common stock pursuant to Rule 506 of Regulation D under the      Securities Act. |
|--------------------|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| ·   | By      conversion notice dated December 19, 2008, Xentenial Holdings Limited      elected to convert $987,500 face value and $77,736 accrued interest,      relating to five separate convertible debentures held by Xentenial      Holdings Limited, into common shares of the Company.  In      response we issued 13,315,450,000 shares of our common stock pursuant to      Rule 506 of Regulation D under the Securities Act.  After the      conversion, the Company had 19,342,461,198 common shares outstanding, of      which Xentenial was the holder of 13,315,450,000, or 68.8%, of the      Company’s total outstanding common shares.  Upon completion of      the conversion, a change in control of the Company      occurred.  The conversion was executed pursuant to the terms of      a Voting Arrangement Agreement dated December 4, 2008 completed in      connection with the sale of the Company’s tire pressure monitoring system      business and related assets to Bendix CVS Canada, Inc., under which YA      Global Investments LP or its affiliated companies were required to convert      into a number of shares sufficient to guarantee approval by the Company’s      shareholders of the sale of the Company’s tire pressure monitoring system      business and related assets.  Xentenial Holdings Limited is a      wholly owned subsidiary of YA Global Investments  LP. |
|--------------------|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

----

| ·   | Sales      of tire pressure monitoring systems to original equipment manufacturers      for installation on new and existing buses decreased slightly to $980,934      in fiscal year 2008 from $1,062,174 in fiscal year  2007. |
|--------------------|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| ·   | Sales      of tire pressure monitoring systems to original equipment manufacturers      for new passenger cars decreased to $1,494,480 in fiscal year 2008 from      $1,502,597 in fiscal year 2007. The immaterial decrease was due to normal      fluctuations in our sales to Aston Martin, which comprise this product      line. |
|--------------------|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| ·   | Sales      of tire pressure monitoring systems to original equipment manufacturers      for new recreational vehicle tire pressure monitoring systems decreased to      $213,204 in fiscal year 2008 from $274,191 in fiscal year      2007. |
|--------------------|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| ·   | Sales      of tire pressure monitoring systems to the RV aftermarket decreased to      $147,832 in fiscal year 2008 from $385,934 in fiscal year      2007. |
|--------------------|-------------------------------------------------------------------------------------------------------------------------------------------------------------|

| ·   | Sales      of tire pressure monitoring systems to the truck market decreased to      $67,513 in fiscal year 2008 from $161,509 in fiscal year    2007. |
|--------------------|--------------------------------------------------------------------------------------------------------------------------------------------------------|

| ·   | Sales      of tire pressure monitoring systems to the off-road industrial aftermarket      increased to $37,487 in fiscal year 2008 from $30,999 for the year ended      July 31, 2007. |
|--------------------|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| ·   | Sales      of tire pressure monitoring systems to the aftermarket passenger car      market decreased to $34,644 in fiscal year 2008 from $83,570 in fiscal      year 2007. |
|--------------------|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| ·   | Sales      of aftermarket motorcycle tire pressure monitoring systems increased to      $44,628 in fiscal year 2008 from $34,227 in fiscal year    2007. |
|--------------------|----------------------------------------------------------------------------------------------------------------------------------------------------------|

| ·   | Service      revenue for assistance in installing tire pressure monitoring systems and      training customers and making customer specific software changes decreased      to $68,085 in fiscal 2008 from $87,114 in fiscal year  2007. |
|--------------------|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| ·   | Sales      of miscellaneous products and services increased to $51,606 in fiscal year      2008 from $39,506 in fiscal year2007. |
|--------------------|----------------------------------------------------------------------------------------------------------------------------------|

----

----

----

|                             | Estimated      Range                                                                                                                                                  |
|----------------------------------|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
| Debt      repayment (1)          |  $                           - |  $         50,800,000 |
| General      Working Capital (2) |                1,300,000                                                                        |               3,500,000 |
|                             |                                                                                                                                                                       |   |
| TOTAL                            |  $            1,300,000                                                                                   |  $         54,300,000 |

| (1)   | Due      to the Company’s default status, principal payments on all of our      outstanding convertible debentures and preferred stock, and interest      payable due within the next twelve months on these instruments, is      callable in cash, or in shares at the option of the      holders.  Any repayment of debt is limited by the amount of cash      generated by the Company after the AssetSale. |
|-----------------|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| (2)   | Represents      (i) amounts budgeted for operations of the Company after closing and      through July 31, 2009, and (ii) estimate of required payments for      operating liabilities retained by the Company after the asset sale,      exclusive of debt. |
|-----------------|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

----

|               | Gross                                                              | Financing                                                                                 | Net                                                                |
|--------------------|--------------------------------------------------------------------|-------------------------------------------------------------------------------------------|--------------------------------------------------------------------|
| Date               | Proceeds                                                           | Costs                                                                                     | Proceeds                                                           |
| August      2007   |         350,000            |             35,000            |         315,000            |
| November      2007 |           96,500 |             11,500            |           85,000 |
| November      2007 |         422,000            |             72,000            |         350,000            |
| January      2008  |         392,000            |             42,000            |         350,000            |
| February      2008 |           74,000 |               9,000 |           65,000 |
| June      2008     |         269,000            |             31,000            |         238,000            |
|               |                                                               |                                                                                      |                                                               |
|               |      1,603,500                            |           200,500                       |      1,403,000                            |

----

|                 |   |                     |                                                                                                             |                                                                                                             |   |        |                                                                                                             |
|----------------------|--------|--------------------------|------------------------------------------------------------------------------------------------------------------|------------------------------------------------------------------------------------------------------------------|--------|-------------|------------------------------------------------------------------------------------------------------------------|
|                 |   | Options      outstanding |                                                                                                             | Options      exercisable                                                                                         |
|                 |   |                     |                                                                                                             |                                                                                                             |   |        |                                                                                                             |
|                 |   |                     | Weighted                                                                                                    |                                                                                                             |   |        |                                                                                                             |
|                 |   |                     | average                                                                                                          | Weighted                                                                                                         |   |        | Weighted                                                                                                         |
|                 |   |                     | remaining                                                                                                        | average                                                                                                          |   |        | average                                                                                                          |
| Range      of        |   | Number                   | contractual                                                                                                      | exercise                                                                                                         |   | Number      | exercise                                                                                                         |
| exercise      prices |   | of      shares           | life                                                                                                             | price                                                                                                            |   | exercisable | price                                                                                                            |
|                 |   |                     |                                                                                                             |                                                                                                             |   |        |                                                                                                             |
| $0.03      - 0.035   |   | 15,830,002               |                   1.87 |  $               0.03            |   | 15,630,002  |  $               0.03            |
| $0.07      - 0.10    |   | 6,100,000                |                   2.48 | 0.08                                                                                                             |   | 5,800,000   | 0.10                                                                                                             |
| $0.20                |   | 2,119,600                |                   0.04 |                   0.20 |   | 2,119,600   |                   0.20 |
|                 |   |                     |                                                                                                             |                                                                                                             |   |        |                                                                                                             |
| $0.03      - 0.20    |   | 24,049,602               |                   1.87 |  $               0.06            |   | 23,549,602  |  $               0.06            |

|                 |   | Warrants      outstanding |
|----------------------|--------|---------------------------|
|                 |   |                      |   |   |
|                 |   |                      | Weighted  |   |
|                 |   |                      | average | Weighted |
|                 |   |                      | remaining | average |
| Range      of        |   | Number                    | contractual | exercise |
| exercise      prices |   | of      warrants          | life | price |
|                 |   |                      |   |   |
| $0.03                |   | 555,625,000               | 4.17 |  $               0.03 |
| $0.06      - 0.20    |   | 1,750,000                 |                   0.69 | 0.16 |
|                 |   |                      |   |   |
| $0.03      - 0.20    |   | 557,375,000               | 4.16 |  $               0.03 |

----

| ·   | an      obligation under a guaranteecontract; |
|--------------------|-----------------------------------------------|

| ·   | a      retained or contingent interest in assets transferred to the      unconsolidated entity or similar arrangement that serves as credit,      liquidity or market risk support to such entity for such      assets; |
|--------------------|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| ·   | an      obligation, including a contingent obligation, under a contract that would      be accounted for as a derivative instrument; or an obligation, including a      contingent obligation, arising out of a variable interest in an      unconsolidated entity that is held by, and material to, us where such      entity provides financing, liquidity, market risk or credit risk support      to, or engages in leasing, hedging, or research and development services      with us. |
|--------------------|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

----

| ·   | Our      company does not have in-house personnel with the technical knowledge to      identify and address some of the reporting issues surrounding certain      complex or non-routine transactions.  Going forward, with      material, complex and non-routine transactions, management will gain a      thorough understanding of the transaction and seek guidance from      third-party experts or consultants.  Management corrected any      errors prior to the release of our company’s July 31, 2008 consolidated      financial statements. |
|--------------------|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

----

| ·   | Our      company’s administration is composed of a small number of administrative      individuals resulting in a situation where limitations on segregation of      duties exist. In order to remedy this situation we would need to hire      additional staff to provide greater segregation of duties. Currently, it      is not feasible to hire additional staff to obtain optimal segregation of      duties.  Management will reassess this matter in the following      year to determine whether improvement in segregation of duty is      feasible. |
|--------------------|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

----

| Name                         | Age    |   | Position                     |
|------------------------------|--------|--------|------------------------------|
|                         |   |   |                         |
| David      Dodge             | 33     |   | Chief      Financial Officer |
| Dave      Warkentin          | 50     |   | Director                     |
| William      Cronin(1)(2)(3) | 61     |   | Director                     |
| Martin Gannon(1)(2)(3)  | 56     |   | Director                     |
| George      O'Leary (1)(2)   | 45     |   | Director                     |

----

----

| ·   | any      bankruptcy petition filed by or against any business of which such person      was a general partner or executive officer either at the time of the      bankruptcy or within two years prior to that  time; |
|--------------------|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| ·   | any      conviction in a criminal proceeding or being subject to a pending criminal      proceeding (excluding traffic violations and other minor      offences); |
|--------------------|-------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| ·   | been      subject to any order, judgment, or decree, not subsequently reversed,      suspended or vacated, of any court of competent jurisdiction, permanently      or temporarily enjoining, barring, suspending or otherwise limiting his      involvement in any type of business, securities or banking activities;      or |
|--------------------|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| ·   | been      found by a court of competent jurisdiction (in a civil action), the      Commission or the Commodity Futures Trading Commission to have violated a      federal or state securities or commodities law, and the judgment has not      been reversed, suspended, orvacated. |
|--------------------|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| Name             | Number      of Late Reports | Number      of Transactions  Not      Reported on  a      Timely Basis | Failure      to File  Required      Forms |
|------------------|-----------------------------|------------------------------------------------------------------------|-------------------------------------------|
| David      Dodge | 1                           | 1                                                                      | 1      (1)                                |

-  This  individual was appointed as the Company’s Chief Financial Officer on April 9,  2008.  A Form 3 has not been filed.  The individual does  not hold any shares, stock options, stock warrants, or other stock  rights. 

----

| Name      of Director of the Company | Names      of Other Reporting Issuers                                                                            |
|--------------------------------------|------------------------------------------------------------------------------------------------------------------|
| George      O’Leary            | NS8      Corp.NeoMedia      Technologies, Inc.NeoGenomics,      Inc.Isonics      CorporationFuturemedia      PLC |

----

----

| ·   | Review      and recommend to the directors the independent auditors to be selected to      audit the financial statements of the Company and its divisions and      subsidiaries as required. |
|--------------------|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| ·   | Meet      with the independent auditors and financial management of the Company to      review the scope of the proposed audit for the current year and the audit      procedures to be utilized, and at the conclusion thereof review such      audit, including any comments or recommendations of the independent      auditors. |
|--------------------|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| ·   | Review      with the independent auditors, and the Company's financial and accounting      personnel, the adequacy and effectiveness of the accounting and financial      controls of the Company, and elicit any recommendations for the      improvement of such internal control procedures or particular areas where      new or more detailed controls or procedures are desirable. Particular      emphasis should be given to the adequacy of such internal controls to      expose any payments, transactions, or procedures that might be deemed      illegal or otherwise improper. Further, the Committee periodically should      review Company policy statements to determine their adherence to the code      of conduct. |
|--------------------|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| ·   | Review      the financial statements contained in the annual report to shareholders      with management and the independent auditors to determine that the      independent auditors are satisfied with the disclosure and content of the      financial statements to be presented to the shareholders. Any changes in      accounting principles should bereviewed. |
|--------------------|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| ·   | Provide      sufficient opportunity for the independent auditors to meet with the      members of the Audit Committee without members of management present.      Among the items to be discussed in these meetings are the independent      auditors' evaluation of the Company's financial, accounting, and auditing      personnel, and the cooperation that the independent auditors received      during the course of the audit. |
|--------------------|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

----

| ·   | Review      accounting and financial human resources and succession planning within      the Company. |
|--------------------|-------------------------------------------------------------------------------------------------------|

| ·   | Submit      the minutes of all meetings of the Audit Committee to, or discuss the      matters discussed at each committee meeting with, the Board of      Directors. |
|--------------------|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| ·   | Investigate      any matter brought to its attention within the scope of its duties, with      the power to retain outside counsel for this purpose if, in its judgment,      that is appropriate. |
|--------------------|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| ·   | Review      accounting practices and policies and any changes or proposed changes to      such practices and policies to determine appropriateness, conformity to      GAAP and compliance with the laws and  regulations. |
|--------------------|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| ·   | Review      drafts of all financial statements and management discussion and analysis      section of all regulatory filings before submission to the      Board. |
|--------------------|-------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| ·   | Review      compliance with applicable laws, regulations and guidelines related to      financial reporting. |
|--------------------|--------------------------------------------------------------------------------------------------------------|

| ·   | Pre-approve      all services provided by the Company's independent    auditor.” |
|--------------------|----------------------------------------------------------------------------------------|

----

| Summary      Compensation (1)                                  |
|----------------------------------------------------------------|
| Name      and PrincipalPosition                                | Year | Salary | Bonus | Option      awards (2) | Non-Equity      Incentive Plan Compensation | Nonqualified      Deferred Compensation Earnings | All      OtherCompen-sation      (3) | Total      ($) |
|                                                           |   |   |   |   |   |   |   |   |
| Dave      WarkentinPrincipal      Executive Officer            | 2008 | $211,382 | -   | $16,058 | -   | -   |                  - | $227,440 |
| Shawn      LammersVice-President,      Engineering             | 2008 | $157,812 | -   | $7,877 | -   | -   |                  - | $165,689 |
| Greg      TookeVice      President, Product & Supply Chain | 2008 | $117,443 | -   | $13,602 | -   | -   |                  - | $131,045 |

| (1)   | The      average of the closing foreign exchange rates for the years ended July 31,      2008 and 2007, as calculated by using the reported daily rates posted by      the Federal Reserve Bank of New York, was CDN$1.007 to every US$1.00, and      CDN$1.1258 to every US$1.00, respectively. For the purposes of this table,      executive compensation paid in Canadian currency to the Named Executive      Officers has been converted into United States currency at these      rates. |
|-----------------|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| (2)   | Represents      stock based compensation expense recognized in the financial statements in      accordance with FAS 123(R) |
|-----------------|----------------------------------------------------------------------------------------------------------------------------|

| (3)   | The      value of perquisites and other personal benefits, securities and property      for the Named Executive Officers that do not exceed the lesser of $10,000      or 10% of the total of the annual salary and bonus is not reported      herein.   Amounts paid to Dave Warkentin in 2007 represent      sales commissions of $20,125 and $13,424 earned during fiscal 2006 and      2007, respectively, while Mr. Warkentin was in the position of      Vice-President of Sales andMarketing. |
|-----------------|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| (4)   | On      December 11, 2008, in connection with the Asset Sale, David Warkentin      resigned as Chief Executive Officer of the Company.  He retains      his position on the Company’s board of  directors. |
|-----------------|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

----

----

| Name                | Fees      earned or Paid in Cash ($)                                                        | Stock      awards ($)                                         | Option      Awards ($)                                                    | Non-Equity      Incentive Plan Compensation ($)                                             | Nonqualified      Deferred Compensation Earnings ($)                                                                | All      Other Compensation ($)                                                                               | Total      ($)                                                                                    |   |
|---------------------|---------------------------------------------------------------------------------------------|---------------------------------------------------------------|---------------------------------------------------------------------------|---------------------------------------------------------------------------------------------|---------------------------------------------------------------------------------------------------------------------|---------------------------------------------------------------------------------------------------------------|---------------------------------------------------------------------------------------------------|--------|
|                |                                                                                        |                                                          |                                                                      |                                                                                        |                                                                                                                |                                                                                                          |                                                                                              |   |
| Bill      Cronin    |  $     48,900                                                 |           - |             - |                - |                    - |                   - |  $     48,900                                                       | (1)    |
| Martin      Gannon  |         48,900                                      |           - |             - |                - |                    - |                   - |         48,900                                            | (2)    |
| George      O'Leary |         48,900                                      |           - |             - |                - |                    - |           45,059                                            |         93,959                                            | (3)    |
| Dave      Warkentin |                - |           - |             - |                - |                    - |                   - |                 - |   |
|                |                                                                                        |                                                          |                                                                      |                                                                                        |                                                                                                                |                                                                                                          |                                                                                              |   |
|                |  $   146,700                                                            |  $       -            |  $         -            |  $            -            |  $                -            |  $       45,059                                                       |  $   191,759                                                                  |   |

| (1)   | $17,700 paid in fiscal 2008; $134,542 owed at July      31, 2008.  At July 31, 2008, Mr. Cronin held 87,246 shares of      the Company’s common stock and options to purchase 2,773,750 shares of the      Company’s common stock. |
|-----------------|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| (2)   | $7,700      paid in fiscal 2008; $115,833 owed at July 31, 2008. At July 31, 2008, Mr.      Gannon held 9,900 shares of the Company’s common stock and options to      purchase 2,650,050 shares of the Company’s common  stock. |
|-----------------|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| (3)   | $7,400      paid in fiscal 2008; $55,000 owed at July 31, 2008 related to board      service.  Other compensation includes amounts paid to SKS      Consulting of South Florida, Inc., of which Mr. O'Leary is President, for      consulting services rendered.  During the year ended July 31,      2008 SKS Consulting of South Florida, Inc. earned the following fees for      services: (i) $68,673 cash fees, of which $40,442 was paid during the      fiscal year; (ii) 600,000 common shares valued at $2,710; and (iii)      500,000 warrants with an exercise price of $0.03 per share with an      aggregate value of $1,907.  Shares and warrants are accounted      for under the provisions of SFAS 123(R), which requires recognition of the      fair value of equity-based compensation. The fair value of warrants was      estimated using a Black-Scholes option valuation model. This methodology      requires the use of subjective assumptions in implementing SFAS 123(R),      including expected stock price volatility and the estimated life of each      award. At July 31, 2008, Mr. O’Leary and SKS Consulting of South Florida      Corp. held 1,400,000 shares of the Company’s common stock and warrants to      purchase 2,773,750 shares of the Company’s common  stock. |
|-----------------|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

----

| Name                     | Option      Awards                                                          | Stock      Awards                                                                                                                                             |
|--------------------------|-----------------------------------------------------------------------------|---------------------------------------------------------------------------------------------------------------------------------------------------------------|
|                     | Number      of Securities Underlying Unexercised Options (#)    Exercisable | Number      of Securities Underlying Unexercised Options (#)    Unexercisable                                                                                 | Equity      Incentive Plan Awards: Number of Securities Underlying Unexercised      Unearned options (#) | Option      Exercise Price ($) | Option      Expiration Date | Number      of Shares or Units of Stock that have not Vested (#) | Market      Value of Shares or Units of Stock that have not Vested (#) | Equity      Incentive Plan Awards: Number of Unearned Shares, Units or Other Rights      that have not Vested (#) | Equity      Incentive Plan Awards: Market or Payout Value of Unearned Shares, Units or      Other Rights that have not Vested ($) |
| Dave      Warkentin      | 2,000,000                                                                   |                           - |                       - | $0.035 | 8/10/2010 |           - |          - |            - |              - |
| Principal      Executive | 550,000                                                                     |                           - |                       - | $0.035 | 12/29/2010 |           - |          - |            - |              - |
| Officer                  | 550,000                                                                     |                           - |                       - | $0.070 | 12/29/2010 |           - |          - |            - |              - |
|                     | 500,000                                                                     |                           - |                       - | $0.035 | 5/29/2011 |           - |          - |            - |              - |
|                     |                                                                        |                                                                                                                                                          |   |   |   |   |   |   |   |
| Shawn      Lammers       | 332,600                                                                     |                           - |                       - | $0.200 | 8/12/2008 |           - |          - |            - |              - |
| Vice      President,     | 3,000,000                                                                   |                           - |                       - | $0.030 | 12/19/2009 |           - |          - |            - |              - |
| Engineering              | 550,000                                                                     |                                                                                                                                                          |   | $0.035 | 12/29/2010 |   |   |   |   |
|                     | 550,000                                                                     |                           - |                       - | $0.070 | 12/29/2010 |           - |          - |            - |              - |
|                     |                                                                        |                                                                                                                                                          |   |   |   |   |   |   |   |
| Greg      Tooke          | 118,800                                                                     |                           - |                       - | $0.200 | 8/12/2008 |           - |          - |            - |              - |
| Vice      President,     | 740,000                                                                     |                           - |                       - | $0.030 | 1/18/2010 |           - |          - |            - |              - |
| Product      and         | 150,000                                                                     |                           - |                       - | $0.035 | 12/29/2010 |           - |          - |            - |              - |
| Supply      Chain        | 150,000                                                                     |                           - |                       - | $0.070 | 12/29/2010 |           - |          - |            - |              - |
|                     | 400,000                                                                     |                           - |                       - | $0.035 | 5/29/2011 |           - |          - |            - |              - |
|                     | 300,000                                                                     |                           - |                       - | $0.070 | 5/29/2011 |           - |          - |            - |              - |

----

|                                                                            | Amount      and    |             |
|---------------------------------------------------------------------------------|--------------------|------------------|
|                                                                            | Nature      of     |             |
|                                                                            | Beneficial         | Percentage       |
| Name      and Address of Beneficial Owner                                       | Ownership      (1) | of      Class(1) |
|                                                                            |               |             |
| William      Cronin (2)                                                         | 2,362,246          | *                |
| Martin      Gannon (3)                                                          | 2,284,900          | *                |
| George      O'Leary (4)                                                         | 2,600,000          | *                |
| David      Warkentin (5)                                                        | 3,600,000          | *                |
| David      Dodge (6)                                                            | 0                  | *                |
|                                                                            |               |             |
| Directors      and Executive Officers as a Group  (7)                 | 10,847,146         | *                |
|                                                                            |               |             |
| YA      Global Investments LP (formerly Cornell Capital Partners, L.P)      (8) | 233,585,316,517    | 92.35%           |
|                                                                            |               |             |
| Staraim      Enterprises Limited (9)                                            | 25,983,992,637     | 57.33%           |
|                                                                            |               |             |
| Xentenial      Holdings Limited (10)                                            | 207,232,825,942    | 91.46%           |
|                                                                            |               |             |
| Starome      Investments Limited (11)                                           | 317,955,845,750    | 94.27%           |
|                                                                            |               |             |
| TAIB      Bank B.S.C. (12)                                                      | 7,352,712,842      | 27.54%           |
|                                                                            |               |             |
| Certain      Wealth, Ltd. (13)                                                  | 482,522,945        | 2.43%            |

|   | (1)      Based on 19,342,461,198 shares of our common stock issued and outstanding      as of February 24, 2009. Beneficial ownership is determined in accordance      with the rules of the Securities and Exchange Commission and generally      includes voting or investment power with respect to securities. Except as      otherwise indicated, we believe that the beneficial owners of shares of      our common stock listed above, based on information furnished by such      owners, have sole investment and voting power with respect to such shares,      subject to community property laws where  applicable. |
|--------|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | (2)      Beneficial ownership includes 87,246 shares and options to acquire up to      2,275,000 shares of our common stock that are exercisable within sixty      days.  Address of the referenced individual is 180 Concord      Drive, Madison, CT, USA, 06443. |
|--------|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | (3)      Beneficial ownership includes 9,900 shares and options to acquire up to      2,275,000 shares of our common stock that are exercisable within sixty      days.  Address of the referenced individual is 1275 Post Road,      Fairfield, CT, USA, 06824. |
|--------|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | (4)      Beneficial ownership includes 1,200,000 shares and warrants to acquire up      to 1,400,000 shares of our common stock that are exercisable within sixty      days.  Address of the referenced individual is c/o SKS      Consulting, 950 Peninsula Corporate Circle, Suite 2018, Boca Raton, FL,      USA, 33487. |
|--------|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

----

|   | (5)      Beneficial ownership includes options to acquire up to 3,600,000 shares of      our common stock that are exercisable within sixty      days.  Address of the referenced individual is 20580Powell      Avenue, Maple Ridge, BC, Canada, V2X3G1. |
|--------|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | (6)      Address of the referenced individual is 9027 Prosperity Way, Ft. Myers,      FL, USA, 33913. |
|--------|-------------------------------------------------------------------------------------------------------|

|   | (7)      Includes 1,297,146 shares, and options and warrants to acquire up to      9,550,000 shares of our common stock that are exercisable within 60      days. |
|--------|-------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | (8)      The total number of shares of our common stock owned by YA Global      Investments LP (formerly Cornell Capital Partners, LP) includes      13,315,450,000 shares owned directly, plus: (i) 308,544,000 shares of our      common stock that could be issued upon the conversion of $3,085,440 5%      series A convertible preferred shares, (ii) 59,953,938 shares of our      common stock that could be issued upon the conversion of a 5% convertible      debenture issued by our company with a principal balance remaining of      $1,420,000 and interest of $258,710 owed as at February 24, 2009 that      matured unpaid on June 30, 2008, (iii) 25,979,830,137 shares of our common      stock that could be issued upon the conversion of a 10% convertible      debenture issued by our company with a principal balance remaining of      $1,415,400 and interest of $662,986 owed as at February 24, 2009, (iv)      136,670,855,137 shares of our common stock that could be issued upon the      conversion of a 10% convertible debenture issued by our company with a      principal balance remaining of $8,000,000 and interest of $2,933,668 owed      as at February 24, 2009 that matured unpaid on June 23 2008, (v)      27,011,591,781 shares of our common stock that could be issued upon the      conversion of a 10% convertible debenture issued by our company with a      principal balance remaining of $1,800,000 and interest of $360,927 owed as      at February 24, 2009, (vi) 22,059,055,651 shares of our common stock that      could be issued upon the conversion of a 10% convertible debenture issued      by our company with a principal balance remaining of $1,500,000 and      interest of $264,724 owed as at February 24, 2009, (vii) 1,359,914,726      shares of our common stock that could be issued upon the conversion of a      10% convertible debenture issued by our company with a principal balance      remaining of $96,500 and interest of $12,293 owed as at February 24, 2009,      (viii) 6,307,364,897 shares of our common stock that could be issued upon      the conversion of a 12% convertible debenture issued by our company with a      principal balance remaining of $422,000 and interest of $82,589 owed as at      February 24, 2009, (ix) 4,162,500 shares of our common stock that could be      issued upon the exercise of common share purchase warrants issued to      Staraim Enterprises Limited expiring June 22, 2010 at an exercise price of      $0.0298 per share, (x) 16,668,750 shares of our common stock that could be      issued upon the exercise of common share purchase warrants issued to      Xentenial Holdings Limited expiring June 22, 2010 at an exercise price of      $0.0298 per share, (xi) 225,000,000 shares of our common stock that could      be issued upon the exercise of common share purchase warrants issued to      Xentenial Holdings Limited expiring November 30, 2012 at an exercise price      of $0.0298 per share, (xii) 225,000,000 shares of our common stock that      could be issued upon the exercise of common share purchase warrants issued      to Xentenial Holdings Limited expiring January 18, 2013 at an exercise      price of $0.0298 per share, and (xiii) 41,925,000 shares of our common      stock that could be issued upon the exercise of common share purchase      warrants issued to Xentenial Holdings Limited expiring August 20, 2013 at      an exercise price of $0.0298 per share. The convertible debentures and the      share purchase warrants each contain a contractual restriction on      beneficial share ownership that limits YA Global Investments LP and its      affiliates, in the aggregate to beneficial ownership at any one time of      4.9% of our outstanding shares if each instrument is not in default. All      instruments held by YA Global Investments and its affiliates are currently      in default, and as a result such limitation may be waived by YA Global      Investments and its affiliates without notice to the      Company.  Because Staraim Enterprises Limited and Xentenial      Holdings Limited are wholly owned by YA Global Investments LP, YA Global      Investments LP is deemed to beneficially own all shares of our common      stock held by them. Yorkville Advisors, the general partner of YA Global      Investments LP, may also be deemed to beneficially own the securities of      our company that are owned by YA Global Investments LP. Mark A. Angelo,      the founder and President of YA Global Investments LP, has sole voting and      dispositive power over the securities of our company that are beneficially      owned by each of YA Global Investments LP, Xentenial Holdings Limited and      Staraim Enterprises Limited.  The address of YA Global      Investments LP is 101 Hudson Street, Suite 3606, Jersey City, NJ, USA,      07302. |
|--------|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

----

|   | (9)      The total number of shares of our common stock beneficially owned by      Staraim Enterprises Limited includes (i) 25,979,830,137 shares of our      common stock that could be issued upon the conversion of a 10% convertible      debenture issued by our company with a principal balance remaining of      $1,415,400 and interest of $662,9862 owed as at February 24, 2009 that      matured unpaid on June 23 2008, and (ii) 4,162,500 shares of our common      stock that could be issued upon the exercise of common share purchase      warrants issued to Staraim Enterprises Limited expiring June 22, 2010 at      an exercise price of $0.0298 per share.  The convertible      debenture and the share purchase warrants each contain a contractual      restriction on beneficial share ownership that limits Staraim Enterprises      Limited to beneficial ownership, at any one time, of 4.9% of our      outstanding shares if each instrument is not in default.  All      instruments held by Staraim Enterprises Limited are currently in default,      and as a result such limitation may be waived by Staraim Enterprises      Limited without notice to the Company.  These shares of our      common stock are held by either Staraim Enterprises Limited, a Cyprus      company, or its wholly-owned subsidiary, Staraim Enterprises Limited, a      New Brunswick corporation.  YA Global Investments owns all of      the issued and outstanding securities of Staraim Enterprises Limited, and      has voting and dispositive authority over all of the shares of common      stock of our company that are owned by Staraim Enterprises Limited. Mark      A. Angelo, the founder and President of YA Global Investments LP, is      deemed to control YA Global Investments LP and therefore is deemed to be      the beneficial owner of the securities of our company that are held by      Staraim Enterprises Limited.  Mark Angelo disclaims beneficial      ownership of these shares.  The address of Staraim Enterprises      Limited is Athalassas 47, 2nd Floor, Office 202, Strovlos, PC 2012,      Nicosia, Cyprus. |
|--------|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | (10)      The total number of shares of our common stock beneficially owned by      Xentenial Holdings Limited includes 13,315,450,000 shares owned directly,      plus: (i) 136,670,855,137 shares of our common stock that could be issued      upon the conversion of a 10% convertible debenture issued by our company      with a principal balance remaining of $8,000,000 and interest of      $2,933,668 owed as at February 24, 2009 that matured unpaid on June 23      2008, (ii) 27,011,591,781 shares of our common stock that could be issued      upon the conversion of a 10% convertible debenture issued by our company      with a principal balance remaining of $1,800,000 and interest of $360,927      owed as at February 24, 2009, (iii) 22,059,055,651 shares of our common      stock that could be issued upon the conversion of a 10% convertible      debenture issued by our company with a principal balance remaining of      $1,500,000 and interest of $264,724 owed as at February 24, 2009, (iv)      1,359,914,726 shares of our common stock that could be issued upon the      conversion of a 10% convertible debenture issued by our company with a      principal balance remaining of $96,500 and interest of $12,293 owed as at      February 24, 2009, (v) 6,307,364,897 shares of our common stock that could      be issued upon the conversion of a 12% convertible debenture issued by our      company with a principal balance remaining of $422,000 and interest of      $82,589 owed as at February 24, 2009, (vi) 16,668,750 shares of our common      stock that could be issued upon the exercise of common share purchase      warrants issued to Xentenial Holdings Limited expiring June 22, 2010 at an      exercise price of $0.0298 per share, (vii) 225,000,000 shares of our      common stock that could be issued upon the exercise of common share      purchase warrants issued to Xentenial Holdings Limited expiring November      30, 2012 at an exercise price of $0.0298 per share, (vii) 225,000,000      shares of our common stock that could be issued upon the exercise of      common share purchase warrants issued to Xentenial Holdings Limited      expiring January 18, 2013 at an exercise price of $0.0298 per share, and      (ix) 41,925,000 shares of our common stock that could be issued upon the      exercise of common share purchase warrants issued to Xentenial Holdings      Limited expiring August 20, 2013 at an exercise price of $0.0298 per      share.  The convertible debentures and the stock purchase      warrants contain contractual restrictions on beneficial share ownership      limiting Xentenial Holdings Limited's beneficial ownership to 4.9% of our      outstanding shares of common stock except upon providing us with not less      than 65 days prior notice if each instrument is not in      default.  All instruments held by Xentenial Holdings Limited are      currently in default, and as a result such limitation may be waived by      Xentenial Holdings Limited without notice to the Company. The shares shown      and the shares proposed to be sold are held directly by either Xentenial      Holdings Limited, a Cyprus company, and/or its wholly-owned subsidiary,      Xentenial Holdings Limited, a New Brunswick corporation.  All of      the issued and outstanding securities of Xentenial Holdings Limited are      owned by YA Global Investments LP, and YA Global Investments LP is      therefore deemed to have voting and dispositive authority over the shares      of our company owned by Xentenial Holdings Limited.  Mark A.      Angelo, the founder and President of YA Global Investments LP, is deemed      to control YA Global Investments LP and therefore is deemed to be the      beneficial owner of the securities of our company that are held by      Xentenial Holdings Limited.  Mark Angelo disclaims beneficial      ownership of these shares.  The address of Xentenial Holdings      Limited is Athalassas 47, 2nd Floor, Office 202, Strovlos, PC 2012,      Nicosia, Cyprus. |
|--------|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

----

|   | (11)      The total number of shares of our common stock beneficially owned by      Starome Investments Limited includes: (i) 317,914,177,000 shares of our      common stock that could be issued upon the conversion of the 10%      convertible debenture issued by our company with a remaining principal      amount of $19,208,198 and interest of $6,224,936 owed as at February 24,      2009, that matured unpaid on June 23, 2008, and (ii) 41,668,750 shares of      our common stock that could be issued upon the exercise of common share      purchase warrants expiring June 22, 2010 at an exercise price of $0.0298      per share. The convertible debenture and the common share purchase      warrants each contain contractual restrictions on beneficial share      ownership limiting Starome Investments Limited's beneficial ownership to      4.9% unless Starome Investments Limited waives such limitation by      providing us with 65 day notice if each instrument is not in      default.  All instruments held by Starome Investments Limited      are currently in default, and as a result such limitation may be waived by      Starome Investments Limited without notice to the Company.  The      10% convertible debenture and the share purchase warrants are held      directly by either Starome Investments Limited, a Cyprus company, and/or      its wholly-owned subsidiary, Starome Investments Limited, a New Brunswick      corporation.  Prentice Capital Management, L.P. serves as      investment manager to a number of investment funds (including Prentice      Capital Partners, LP, Prentice Capital Partners GP, LP and Prentice      Capital Offshore, Ltd.) and manages investments for certain entities in      managed accounts with respect to which it has voting and dispositive      authority over 100% of the shares of Starome Investments Limited. Michael      Zimmerman is the Managing Member of (a) Prentice Management GP, LLC, the      general partner of Prentice Capital Management and (b) Prentice Capital      GP, LLC, the general partner of certain investment funds.  As      such, he is deemed to control Prentice Capital Management and certain of      the investment funds and therefore may be deemed to be the beneficial      owner of the securities of our company that are held by Starome      Investments Limited. Each of Michael Zimmerman and Prentice Capital      Management disclaims beneficial ownership of these securities of our      company.  The address of Starome Investments Limited is      Athalassas 47, 2nd Floor, Office 202, Strovlos, PC 2012, Nicosia,      Cyprus. |
|--------|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | (12)      The total number of shares of our common stock beneficially owned by TAIB      Bank B.S.C. includes 7,352,712,842 shares of our common stock that could      be issued upon the conversion of the remaining balance of $439,650 of the      10% convertible debenture issued by our Company and interest of $148,567      owed at February 24, 2009 that matured unpaid on October 31, 2008. This      debenture contains contractual restrictions on beneficial share ownership      limiting TAIB Bank B.S.C.’s beneficial ownership to 4.99% unless TAIB Bank      B.S.C. waives such limitation. This debenture is currently in default, and      as a result such limitation may be waived by TAIB Bank B.S.C. without      notice to the Company.  TAIB Bank, B.S.C. has authorized Larry      Chaleff to exercise dispositive powers with respect to the shares offered      by TAIB Bank, B.S.C. Mr. Chaleff disclaims beneficial ownership of the      shares offered by TAIB Bank, B.S.C.  The address of TAIB Bank,      B.S.C. is 450 Park Avenue, Suite 1902, New York, NY, USA,      10022. |
|--------|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | (13)      The total number of shares of our common stock beneficially owned by      Certain Wealth, Ltd. includes 482,522,945 shares of our common stock that      could be issued upon the conversion of the remaining balance of $15,650 of      the 10% convertible debenture issued by our Company and interest of      $22,952 owed at February 24, 2009 that matured unpaid on October 31, 2008.      This debenture contains contractual restrictions on beneficial share      ownership limiting Certain Wealth, Ltd.’s beneficial ownership to 4.99%      unless Certain Wealth, Ltd. waives such limitation. This debenture is      currently in default, and as a result such limitation may be waived by      Certain Wealth, Ltd. without notice to the Company.  Certain      Wealth, Ltd. has authorized Larry Chaleff to exercise dispositive powers      with respect to the shares offered by Certain Wealth ,Ltd. Mr. Chaleff      disclaims beneficial ownership of the shares offered by Certain Wealth,      Ltd.  The address of Certain Wealth, Ltd. is 450 Park Avenue,      Suite 1902, New York, NY, USA,10022. |
|--------|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

----

|                           |                            |                           | Number      of Securities      |
|--------------------------------|---------------------------------|--------------------------------|--------------------------------|
|                           | Number      of Securities to be |                           | Remaining      Available for   |
|                           | Issued      Upon Exercise of    | Weighted-Average      Exercise | Future      Issuance Under     |
|                           | Outstanding      Options,       | Price      of Outstanding      | Equity      Compensation Plans |
|                           | Warrants      and Rights        | Options,      Warrants and     | (Excluding      Securities     |
|                           |                            | Rights                         | Reflected      in Column (a))  |
|                           |                            |                           |                           |
| Plan      Category             | (a)                             | (b)                            | (c)                            |
| Equity      compensation plans | 6,759,800                       | $0.079                         | 14,364,196                     |
| approved      by               |                            |                           |                           |
| securityholders                |                            |                           |                           |
|                           |                            |                           |                           |
| Equity      compensation plans | 574,664,802                     | $0.031                         | 33,136,713                     |
| not      approved by           |                            |                           |                           |
| securityholders                |                            |                           |                           |
|                           |                            |                           |                           |
| Total                          | 581,424,602                     | $0.031                         | 47,500,909                     |

----

----

| (a)   | The      following documents are filed as part of this  report: |
|-----------------|-----------------------------------------------------------------|

| Exhibit |   |                                                                                                                  |
|---------|--------|-----------------------------------------------------------------------------------------------------------------------|
| Number  |   | Description                                                                                                           |
|    |   |                                                                                                                  |
| 3.1     |   | Certificate      of Incorporation of TTC/Truck Tech Corp. dated September 8, 1987      (1)                            |
|    |   |                                                                                                                  |
| 3.2     |   | Memorandum      and Articles of TTC/Truck Tech Corp (1)                                                               |
|    |   |                                                                                                                  |
| 3.3     |   | Memorandum      of TTC/Truck Tech Corp. dated September 2, 1987 (1)                                                   |
|    |   |                                                                                                                  |
| 3.4     |   | Altered      Memorandum of TTC/Truck Tech Corp. dated October 25, 1991    (1)                                         |
|    |   |                                                                                                                  |
| 3.5     |   | Certificate      of Change of Name from TTC/Truck Tech Corp. to UniComm Signal Inc. dated      May 15, 1994 (1)       |
|    |   |                                                                                                                  |
| 3.6     |   | Certificate      of Change of Name from UniComm Signal Inc. to SmarTire Systems Inc. dated      December 24, 1997 (1) |
|    |   |                                                                                                                  |
| 3.7     |   | Special      Resolution and Altered Memorandum of UniComm Signal Inc. dated October 28,      1994 (1)                 |
|    |   |                                                                                                                  |
| 3.8     |   | Special      Resolution and Altered Memorandum of SmarTire Systems Inc. dated November      17, 1995 (1)              |
|    |   |                                                                                                                  |
| 3.9     |   | Special      Resolution and Altered Memorandum of UniComm Signal Inc. dated January 17,      1997 (1)                 |
|    |   |                                                                                                                  |
| 3.10    |   | Special      Resolution and Altered Memorandum of SmarTire Systems Inc. dated January      16, 1998 (1)               |

----

| Exhibit |   |                                                                                                                                                                                                                                                                           |
|---------|--------|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
| Number  |   | Description                                                                                                                                                                                                                                                                    |
|    |   |                                                                                                                                                                                                                                                                           |
| 3.11    |   | Special      Resolution and Altered Memorandum of SmarTire Systems Inc. dated December      5, 2000 (2)                                                                                                                                                                        |
|    |   |                                                                                                                                                                                                                                                                           |
| 3.12    |   | Substituted      Articles of SmarTire Systems Inc. adopted December 5, 2000    (2)                                                                                                                                                                                             |
|    |   |                                                                                                                                                                                                                                                                           |
| 3.13    |   | Articles      of Continuance, dated January 29, 2003 and effective February 6, 2003      (3)                                                                                                                                                                                   |
|    |   |                                                                                                                                                                                                                                                                           |
| 3.14    |   | Certificate      of Amendment issued to SmarTire Systems Inc. by the Yukon Registrar of      Corporations effective December 15, 2003 and attached Articles of      Amendment of SmarTire Systems Inc. dated December 11,      2003  (3)                             |
|    |   |                                                                                                                                                                                                                                                                           |
| 3.15    |   | Certificate      of Registration of Restated Articles issued to SmarTire Systems Inc. by      the Yukon Registrar of Corporations effective December 15, 2003, and      attached Restated Articles of Incorporation of SmarTire Systems Inc. dated      December 11, 2003 (12) |
|    |   |                                                                                                                                                                                                                                                                           |
| 3.16    |   | By-Law      No. 1, dated February 6, 2003 (3)                                                                                                                                                                                                                                  |
|    |   |                                                                                                                                                                                                                                                                           |
| 3.17    |   | Articles      of Continuation to British Columbia (17)                                                                                                                                                                                                                         |
|    |   |                                                                                                                                                                                                                                                                           |
| 3.18    |   | Articles      of SmarTire Systems Inc. (17)                                                                                                                                                                                                                                    |
|    |   |                                                                                                                                                                                                                                                                           |
| 10.1    |   | Registration      Rights Agreement dated as of March 22, 2005 by and between SmarTire      Systems, Inc. and Cornell Capital Partners, L.P. (4)                                                                                                                                |
|    |   |                                                                                                                                                                                                                                                                           |
| 10.2    |   | Investment      Agreement dated as of March 22, 2005 by and between SmarTire Systems Inc.      and Cornell Capital Partners, L.P. (4)(5)                                                                                                                                       |
|    |   |                                                                                                                                                                                                                                                                           |
| 10.3    |   | Termination      Agreement dated as of March 22, 2005 by and between SmarTire Systems Inc.      and Cornell Capital Partners, L.P. (4)                                                                                                                                         |
|    |   |                                                                                                                                                                                                                                                                           |
| 10.4    |   | Registration      Rights Agreement dated as of May 22, 2005 by and between SmarTire Systems      Inc. and Cornell Capital Partners, L.P. (3)                                                                                                                                   |
|    |   |                                                                                                                                                                                                                                                                           |
| 10.5    |   | Standby      Equity Distribution Agreement dated as of May 22, 2005 by and between      SmarTire Systems Inc. and Cornell Capital Partners, L.P.    (3)                                                                                                                        |
|    |   |                                                                                                                                                                                                                                                                           |
| 10.6    |   | Investor      Registration Rights Agreement dated as of May 22, 2005 by and between      SmarTire Systems Inc. and Cornell Capital Partners, L.P.    (3)                                                                                                                       |
|    |   |                                                                                                                                                                                                                                                                           |
| 10.7    |   | Amended      and Restated Convertible Debenture dated as of June 10, 2005 by and      between SmarTire Systems Inc. and Cornell Capital Partners, L.P.      (3)                                                                                                                |
|    |   |                                                                                                                                                                                                                                                                           |
| 10.8    |   | Securities      Purchase Agreement dated as of May 22, 2005 by and between SmarTire      Systems Inc. and Cornell Capital Partners, LP (3)                                                                                                                                     |
|    |   |                                                                                                                                                                                                                                                                           |
| 10.9    |   | Waiver      Letter from Cornell Capital Partners to SmarTire Systems Inc. dated      October 7, 2005 (8)                                                                                                                                                                       |

----

| Exhibit |   |                                                                                                                                                                                                                                                                                                             |
|---------|--------|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
| Number  |   | Description                                                                                                                                                                                                                                                                                                      |
|    |   |                                                                                                                                                                                                                                                                                                             |
| 10.10   |   | Waiver      Letter from Crescent International Ltd. to SmarTire Systems Inc. dated      October 20, 2005 (8)                                                                                                                                                                                                     |
|    |   |                                                                                                                                                                                                                                                                                                             |
| 10.11   |   | Waiver      Letter from Cornell Capital Partners to SmarTire Systems Inc. dated      October 31, 2005 (8)                                                                                                                                                                                                        |
|    |   |                                                                                                                                                                                                                                                                                                             |
| 10.12   |   | Marketing      and distribution agreement with DANA Corporation dated as of October 12,      2005 (6)                                                                                                                                                                                                            |
|    |   |                                                                                                                                                                                                                                                                                                             |
| 10.13   |   | Agreement      for Electronic Manufacturing Services, dated November 16, 2005 by      and  between Vansco Electronics L.P. and SmarTire Systems      Inc.(6)                                                                                                                                           |
|    |   |                                                                                                                                                                                                                                                                                                             |
| 10.14   |   | Amendment      No. 1 to Securities Purchase Agreement, dated as of December 30, 2005,      among SmarTire Systems Inc., Cornell Capital Partners, L.P., Highgate      House Funds, Ltd., LCC Global Limited, Starome Investments Limited,      Xentenial Holdings Limited and Staraim Investments Limited    (7) |
|    |   |                                                                                                                                                                                                                                                                                                             |
| 10.15   |   | Amended      and Restated Investor Registration Rights Agreement, dated as of December      30, 2005 among SmarTire Systems, Starome Investment Limited, Xentenial      Holdings Limited and Staraim Investments Limited (7)                                                                                     |
|    |   |                                                                                                                                                                                                                                                                                                             |
| 10.16   |   | Amended      and Restated Convertible Debenture, dated as of December 30, 2005, with a      principal balance of $20 million, issued by SmarTire Systems Inc. to      Starome Investments Limited (7)                                                                                                            |
|    |   |                                                                                                                                                                                                                                                                                                             |
| 10.17   |   | Amended      and Restated Convertible Debenture, dated as of December 30, 2005, with a      principal balance of $8 million, issued by SmarTire Systems Inc. to      Xentenial Holdings Limited (7)                                                                                                              |
|    |   |                                                                                                                                                                                                                                                                                                             |
| 10.18   |   | Amended      and Restated Convertible Debenture, dated as of December 30, 2005, with a      principal balance of $2 million, issued by SmarTire Systems Inc. to      Staraim Investments Limited (7)                                                                                                             |
|    |   |                                                                                                                                                                                                                                                                                                             |
| 10.19   |   | Amended      and Restated Warrant to purchase 41,668,750 shares of common stock, dated      as of December 30, 2005 issued by SmarTire Systems Inc. to Starome      Investments Limited (7)                                                                                                                      |
|    |   |                                                                                                                                                                                                                                                                                                             |
| 10.20   |   | Amended      and Restated Warrant to purchase 16,668,750 shares of common stock, dated      as of December 30, 2005 issued by SmarTire Systems Inc. to Xentenial      Holdings Limited (7)                                                                                                                       |
|    |   |                                                                                                                                                                                                                                                                                                             |
| 10.21   |   | Amended      and Restated Warrant to purchase 4,162,500 shares of common stock, dated      as of December 30, 2005 issued by SmarTire Systems Inc. to Staraim      Investments Limited (7)                                                                                                                       |
|    |   |                                                                                                                                                                                                                                                                                                             |
| 10.22   |   | Agreement      for Electronic Manufacturing Services dated November 16, 2005 between      SmarTire Systems and Vansco Electronics L.P. (8)                                                                                                                                                                       |
|    |   |                                                                                                                                                                                                                                                                                                             |
| 10.23   |   | Placement      Agent Agreement dated December 30, 2005 amongst SmarTire Systems Inc.,      Newbridge Securities Corporation, SmarTire Systems Inc., Newbridge      Securities Corporation and Cornell Capital Partners, LP  (8)                                                                                  |
|    |   |                                                                                                                                                                                                                                                                                                             |
| 10.24   |   | Amended      and Restated Convertible Debenture, with a principal balance of $2      million, issued by SmarTire Systems Inc. to Staraim Investments Limited      dated April 4, 2006 (9)                                                                                                                        |
|    |   |                                                                                                                                                                                                                                                                                                             |
| 10.25   |   | Amended      and Restated Convertible Debenture, with a principal balance of $8      million, issued by SmarTire Systems Inc. to Xentenial Holdings Limited      dated April 4, 2006 (9)                                                                                                                         |
|    |   |                                                                                                                                                                                                                                                                                                             |
| 10.26   |   | Extension      letter regarding Amended and Restated Convertible Debenture dated as of      June 10, 2005 by and between SmarTire Systems Inc. and Cornell Capital      Partners, L.P. (9)                                                                                                                       |
|    |   |                                                                                                                                                                                                                                                                                                             |
| 10.27   |   | Settlement      Agreement and Mutual Release dated January 5, 2006 between SmarTire      Systems Inc. and Bristol Investment Fund Ltd. (7)                                                                                                                                                                       |
|    |   |                                                                                                                                                                                                                                                                                                             |
| 10.28   |   | Waiver      Letter from Starome Investments Limited to SmarTire Systems Inc. dated      April 6, 2006 (9)                                                                                                                                                                                                        |
|    |   |                                                                                                                                                                                                                                                                                                             |
| 10.29   |   | Waiver      Letter from Xentenial Holdings Limited to SmarTire Systems Inc. dated      April 6, 2006 (9)                                                                                                                                                                                                         |
|    |   |                                                                                                                                                                                                                                                                                                             |
| 10.30   |   | Waiver      Letter from Staraim Investments Limited to SmarTire Systems Inc. dated      April 6, 2006 (9)                                                                                                                                                                                                        |
|    |   |                                                                                                                                                                                                                                                                                                             |
| 10.31   |   | Waiver      Letter from Starome Investments Limited to SmarTire Systems Inc. dated      April 6, 2006 (9)                                                                                                                                                                                                        |
|    |   |                                                                                                                                                                                                                                                                                                             |
| 10.32   |   | Waiver      Letter from Xentenial Holdings Limited to SmarTire Systems Inc. dated      April 6, 2006 (9)                                                                                                                                                                                                         |
|    |   |                                                                                                                                                                                                                                                                                                             |
| 10.33   |   | Waiver      Letter from Staraim Investments Limited to SmarTire Systems Inc. dated      April 6, 2006 (9)                                                                                                                                                                                                        |
|    |   |                                                                                                                                                                                                                                                                                                             |
| 10.34   |   | Extension      letter regarding Amended and Restated Convertible Debenture dated as of      July 31, 2005 by and between SmarTire Systems Inc. and Cornell Capital      Partners, LP (10)                                                                                                                        |
|    |   |                                                                                                                                                                                                                                                                                                             |
| 10.35   |   | Waiver      Letter from Cornell Capital Partners, Starome Investments Limited,      Xentenial Holdings Limited and Staraim Investments Limited to SmarTire      Systems Inc. dated July 31, 2006 (10)                                                                                                            |
|    |   |                                                                                                                                                                                                                                                                                                             |
| 10.36   |   | Consulting      Agreement by and between Robert Rudman and SmarTire Systems dated June 30,      2005 (10)                                                                                                                                                                                                        |
|    |   |                                                                                                                                                                                                                                                                                                             |
| 10.37   |   | Renewal      and Amendment Agreement by and between Robert Rudman and SmarTire Systems      dated August 9, 2006 (10)                                                                                                                                                                                            |
|    |   |                                                                                                                                                                                                                                                                                                             |
| 10.38   |   | Management      Agreement by and between SmarTire Systems and David Warkentin dated      October 20, 2006 (11)                                                                                                                                                                                                   |

----

| Exhibit |   |                                                                                                                                                                                                                                                                    |
|---------|--------|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
| Number  |   | Description                                                                                                                                                                                                                                                             |
|    |   |                                                                                                                                                                                                                                                                    |
| 10.39   |   | Securities      Purchase Agreement dated as of October 31, 2006 by and between SmarTire      Systems Inc., TAIB Bank, B.S.C. and Certain Wealth, Ltd.    (13)                                                                                                           |
|    |   |                                                                                                                                                                                                                                                                    |
| 10.40   |   | Investor      Registration Rights Agreement dated as of October 31, 2006 by and between      SmarTire Systems Inc., TAIB Bank, B.S.C. and Certain Wealth, Ltd.      (13)                                                                                                |
|    |   |                                                                                                                                                                                                                                                                    |
| 10.41   |   | Convertible      debenture dated as of October 31, 2006 by and between SmarTire Systems      Inc. and TAIB Bank, B.S.C. (13)                                                                                                                                            |
|    |   |                                                                                                                                                                                                                                                                    |
| 10.42   |   | Convertible      debenture dated as of October 31, 2006 by and between SmarTire Systems      Inc. and Certain Wealth, Ltd. (13)                                                                                                                                         |
|    |   |                                                                                                                                                                                                                                                                    |
| 10.43   |   | Waiver      Letter (Event of default) from Cornell Capital, Starome Investments      Limited, Xentenial Holdings Limited and Staraim Investments Limited to      SmarTire Systems Inc. dated December 15, 2006 (14)                                                     |
|    |   |                                                                                                                                                                                                                                                                    |
| 10.44   |   | Waiver      Letter (Anti-dilution) from Cornell Capital, Starome Investments Limited,      Xentenial Holdings Limited and Staraim Investments Limited to SmarTire      Systems Inc. dated December 15, 2006 (14)                                                        |
|    |   |                                                                                                                                                                                                                                                                    |
| 10.45   |   | Securities      Purchase Agreement dated January 23, 2007 by and between SmarTire Systems      Inc. and Xentenial Holdings Limited (15)                                                                                                                                 |
|    |   |                                                                                                                                                                                                                                                                    |
| 10.46   |   | Investor      Registration Rights Agreement dated January 23, 2007 by and between      SmarTire Systems Inc. and Xentenial Holdings Limited  (15)                                                                                                                       |
|    |   |                                                                                                                                                                                                                                                                    |
| 10.47   |   | Security      Agreement dated as of January 23, 2007 by and between SmarTire Systems      Inc. and Xentenial Holdings Limited (15)                                                                                                                                      |
|    |   |                                                                                                                                                                                                                                                                    |
| 10.48   |   | Convertible      debenture dated as of January 23, 2007 issued by SmarTire Systems Inc. to      Xentenial Holdings Ltd. (15)                                                                                                                                            |
|    |   |                                                                                                                                                                                                                                                                    |
| 10.49   |   | Consent      letter from Cornell Capital Partners, L.P., Starome Investments Limited,      Xentenial Holdings Limited, Staraim Investments Limited, TAIB Bank, B.S.C.      and Certain Wealth Ltd.  to SmarTire Systems Inc. dated January      19, 2007 (19) |
|    |   |                                                                                                                                                                                                                                                                    |
| 10.5    |   | Consulting      Agreement between SKS Consulting of South Florida Corp. and us      (16)                                                                                                                                                                                |
|    |   |                                                                                                                                                                                                                                                                    |
| 10.51   |   | Amendment      to Securities Purchase Agreement dated February 9, 2007 by and between      SmarTire Systems Inc. and Xentenial Holdings Limited  (18)                                                                                                                   |
|    |   |                                                                                                                                                                                                                                                                    |
| 10.52   |   | Convertible      debenture dated as of January 9, 2007 issued by SmarTire Systems Inc. to      Xentenial Holdings Limited (18)                                                                                                                                          |
|    |   |                                                                                                                                                                                                                                                                    |
| 10.53   |   | Waiver      Letter (Event of default) from TAIB Bank, B.S.C. and Certain Wealth Ltd.      to SmarTire Systems Inc. dated February 13, 2007  (19)                                                                                                                        |

----

| Exhibit |   |                                                                                                                                                                                                                                             |
|---------|--------|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
| Number  |   | Description                                                                                                                                                                                                                                      |
|    |   |                                                                                                                                                                                                                                             |
| 10.54   |   | Waiver      Letter (Event of default) from Cornell Capital Partners, L.P., dated      February 15, 2007 (19)                                                                                                                                     |
|    |   |                                                                                                                                                                                                                                             |
| 10.55   |   | Extension      Letter from Cornell Capital Partners, L.P., dated March 31 , 2007      (20)                                                                                                                                                       |
|    |   |                                                                                                                                                                                                                                             |
| 10.56   |   | Waiver      Letter (Event of default) from Cornell Capital Partners, L.P., Staraim      Investments Limited, Xentenial Holdings Limited and Starome Investments      Limited dated March 31, 2007 (20)                                           |
|    |   |                                                                                                                                                                                                                                             |
| 10.57   |   | Waiver      Letter (Event of default) from Cornell Capital Partners, L.P., dated March      31, 2007 (20)                                                                                                                                        |
|    |   |                                                                                                                                                                                                                                             |
| 10.58   |   | Waiver      Letter (Event of default) from TAIB Bank, B.S.C. and Certain Wealth Ltd.      Dated March 31, 2007 (20)                                                                                                                              |
|    |   |                                                                                                                                                                                                                                             |
| 10.59   |   | Amendment      No. 1 to Investor Registration Rights Agreement dated April 27, 2007 by      and between SmarTire Systems Inc., and Xentenial Holdings Limited      (21)                                                                          |
|    |   |                                                                                                                                                                                                                                             |
| 10.60   |   | Amendment      No. 1 to Security Agreement dated April 27, 2007 by and between SmarTire      Systems Inc. Cornell Capital Partners, L.P., Staraim Investments Limited,      Xentenial Holdings Limited and Starome Investments Limited      (21) |
|    |   |                                                                                                                                                                                                                                             |
| 10.61   |   | Convertible      debenture dated as of April 27, 2007 issued by SmarTire Systems Inc. to      Xentenial Holding Limited (21)                                                                                                                     |
|    |   |                                                                                                                                                                                                                                             |
| 10.62   |   | Security      Agreement (Patent) dated April 27, 2007 by and between SmarTire Systems      Inc. Cornell Capital Partners, L.P., Staraim Investments Limited,      Xentenial Holdings Limited and Starome Investments Limited      (21)           |
|    |   |                                                                                                                                                                                                                                             |
| 10.63   |   | Securities      Purchase Agreement dated April 27, 2007 by and between SmarTire Systems      Inc. and Xentenial Holdings Limited (21)                                                                                                            |
|    |   |                                                                                                                                                                                                                                             |
| 10.64   |   | Lease      between Alpha Equities LTD and SmarTire Systems Inc. dated April 30, 2007      (21)                                                                                                                                                   |
|    |   |                                                                                                                                                                                                                                             |
| 10.65   |   | Resignation      agreement and termination of consulting contract between Robert Rudman and      SmarTire Systems Inc. dated May 7, 2007 (21)                                                                                                    |
|    |   |                                                                                                                                                                                                                                             |
| 10.66   |   | Resignation      agreement between Johnny Christiansen and SmarTire Systems Inc. dated May      7, 2007 (21)                                                                                                                                     |
|    |   |                                                                                                                                                                                                                                             |
| 10.67   |   | Settlement      Letter issued by SmarTire Systems Inc. to Erwin Bartz dated February 8,      2007 (21)                                                                                                                                           |
|    |   |                                                                                                                                                                                                                                             |
| 10.68   |   | Release      by Erwin Bartz to SmarTire Systems Inc. dated February 7, 2008      (21)                                                                                                                                                            |
|    |   |                                                                                                                                                                                                                                             |
| 10.69   |   | Settlement      letter issued by SmarTire Systems Inc. to Al Kozak dated February 28, 2007      (21)                                                                                                                                             |
|    |   |                                                                                                                                                                                                                                             |
| 10.70   |   | Release      by Al Kozak to SmarTire Systems Inc. dated February 28, 2008      (21)                                                                                                                                                              |

----

| Exhibit |   |                                                                                                                                                                                                                                                     |
|---------|--------|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
| Number  |   | Description                                                                                                                                                                                                                                              |
|    |   |                                                                                                                                                                                                                                                     |
| 10.71   |   | Extension      Letter from Cornell Capital Partners, L.P., dated May 24 , 2007      (21)                                                                                                                                                                 |
|    |   |                                                                                                                                                                                                                                                     |
| 10.72   |   | Waiver      Letter (Event of default) from Cornell Capital Partners, L.P., Staraim      Investments Limited, Xentenial Holdings Limited and Starome Investments      Limited dated May 24, 2007 (21)                                                     |
|    |   |                                                                                                                                                                                                                                                     |
| 10.73   |   | Waiver      Letter (Event of default) from Cornell Capital Partners, L.P., dated May      24, 2007 (21)                                                                                                                                                  |
|    |   |                                                                                                                                                                                                                                                     |
| 10.74   |   | Waiver      Letter (Event of default) from TAIB Bank, B.S.C. and Certain Wealth Ltd.      dated May 25, 2007 (21)                                                                                                                                        |
|    |   |                                                                                                                                                                                                                                                     |
| 10.75   |   | Consent      letter from Cornell Capital Partners, L.P., Starome Investments Limited,      Xentenial Holdings Limited, Staraim Investments Limited, TAIB Bank, B.S.C.      and Certain Wealth Ltd. to SmarTire Systems Inc. dated May 10, 2007      (21) |
|    |   |                                                                                                                                                                                                                                                     |
| 10.76   |   | Agreement      between GE Sensing Inc. and SmarTire Systems Inc. dated August 3, 2007      (22)                                                                                                                                                          |
|    |   |                                                                                                                                                                                                                                                     |
| 10.77   |   | Convertible      debenture dated as of August 20, 2007 issued by SmarTire Systems Inc. to      Xentenial Holding Limited (22)                                                                                                                            |
|    |   |                                                                                                                                                                                                                                                     |
| 10.78   |   | Waiver      letter between us and YA Global Investments, L.P. dated November 7, 2007      (22)                                                                                                                                                           |
|    |   |                                                                                                                                                                                                                                                     |
| 10.79   |   | Waiver      letter from Starome Investements Limited dated November 7, 2007      (22)                                                                                                                                                                    |
|    |   |                                                                                                                                                                                                                                                     |
| 10.80   |   | Securities      Purchase Agreement dated November 19, 2007 by and between SmarTire Systems      Inc. and Xentenial Holdings Limited. (23)                                                                                                                |
|    |   |                                                                                                                                                                                                                                                     |
| 10.81   |   | Securities      Purchase Agreement dated November 19, 2007 by and between SmarTire Systems      Inc. and Xentenial Holdings Limited. (23)                                                                                                                |
|    |   |                                                                                                                                                                                                                                                     |
| 10.82   |   | Convertible      Debenture November 19, 2007 issued by SmarTire Systems Inc. to Xentenial      Holdings Limited. (23)                                                                                                                                    |
|    |   |                                                                                                                                                                                                                                                     |
| 10.83   |   | Amendment      No. 2 to investor registration rights agreement by and between SmarTire      Systems Inc. and Xentenial Holdings Limited dated November 19, 2007.      (23)                                                                               |
|    |   |                                                                                                                                                                                                                                                     |
| 10.84   |   | Form      of Share Purchase Warrant issued by SmarTire Systems Inc. to Xentenial      Holdings Limited on November 30, 2007. (23)                                                                                                                        |
|    |   |                                                                                                                                                                                                                                                     |
| 10.85   |   | Securities      Purchase Agreement dated November 30, 2007 by and between SmarTire Systems      Inc. and Xentenial Holdings Limited. (23)                                                                                                                |
|    |   |                                                                                                                                                                                                                                                     |
| 10.86   |   | Form      of Convertible Debenture dated November 30, 2007 issued by SmarTire      Systems Inc. to Xentenial Holdings Limited.(23)                                                                                                                       |

----

| Exhibit           |   |                                                                                                                                                                                                                                                                          |
|-------------------|--------|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
| Number            |   | Description                                                                                                                                                                                                                                                                   |
|              |   |                                                                                                                                                                                                                                                                          |
| 10.87             |   | Amendment      No. 3 to investor registration rights agreement by and between SmarTire      Systems Inc. and Xentenial Holdings Limited dated November 30, 2007.      (23)                                                                                                    |
|              |   |                                                                                                                                                                                                                                                                          |
| 10.88             |   | November      30, 2007 Assignment agreement by and between Xentenial Holdings Limited,      Staraim Enterprises Ltd. and SmarTire Systems Inc. (23)                                                                                                                           |
|              |   |                                                                                                                                                                                                                                                                          |
| 10.89             |   | Convertible      debenture dated as of January 18, 2007 issued by SmarTire Systems Inc. to      Xentenial Holdings Limited. (24)                                                                                                                                              |
|              |   |                                                                                                                                                                                                                                                                          |
| 10.90             |   | Letter      dated as of January 17, 2008 by SmarTire Systems Inc. to Xentenial      Holdings Limited to fix interest rate on November 30, 2007 debenture.      (24)                                                                                                           |
|              |   |                                                                                                                                                                                                                                                                          |
| 10.91             |   | Waiver      letter between us and YA Global Investments, L.P. dated March 11, 2008.      (25)                                                                                                                                                                                 |
|              |   |                                                                                                                                                                                                                                                                          |
| 10.92             |   | Convertible      Debenture dated June 20, 2008 issued by SmarTire Systems Inc. to Xentenial      Holdings Limited. (26)                                                                                                                                                       |
|              |   |                                                                                                                                                                                                                                                                          |
| 10.93             |   | Convertible      Debenture dated August 1, 2008 issued by SmarTire Systems Inc. to      Xentenial Holdings Limited. (27)                                                                                                                                                      |
|              |   |                                                                                                                                                                                                                                                                          |
| 10.94             |   | Convertible      Debenture dated August 15, 2008 issued by SmarTire Systems Inc. to      Xentenial Holdings Limited. (28)                                                                                                                                                     |
|              |   |                                                                                                                                                                                                                                                                          |
| 10.95             |   | Asset      Purchase Agreement dated December 4, 2008 amongst Bendix CVS Canada, Inc.,      Bendix Commercial Vehicle Systems LLC, SmarTire Systems, Inc., SmarTire      Technologies, Inc., and SmarTire USA, Inc. (29)                                                       |
|              |   |                                                                                                                                                                                                                                                                          |
|        10.96 |   | Liquidation      Agreement dated December 4, 2008 amongst YAA Global Investments LP,      Xentenial Holdings Ltd., Staraim Enterprises Ltd., Starome Investments      Ltd., SmarTire Systems, Inc., SmarTire Technologies, Inc., And SmarTire      USA, Inc. (filed herewith) |
|              |   |                                                                                                                                                                                                                                                                          |
|        10.97 |   | Voting      Arrangement Agreement dated December 4, 2008 amongst Bendix CVS Canada      Inc., SmarTire Systems Inc., YA Global Investments, L.P., Xentenial      Holdings Limited, and Staraim Enterprises Limited (filed      herewith)                                      |
|              |   |                                                                                                                                                                                                                                                                          |
|        10.98 |   | Bridge      Noted dated December11, 2008 (filed herewith)                                                                                                                                                                                                                     |
|              |   |                                                                                                                                                                                                                                                                          |
| 14.1              |   | Code      of Business Conduct and Ethics Compliance Program (10)                                                                                                                                                                                                              |
|              |   |                                                                                                                                                                                                                                                                          |
| 21.1              |   | Subsidiaries      of Small Business Entity (filed herewith)                                                                                                                                                                                                                   |
|              |   |                                                                                                                                                                                                                                                                          |
| 23.1              |   | Consent      of BDO Dunwoody LLP (filed herewith)                                                                                                                                                                                                                             |
|              |   |                                                                                                                                                                                                                                                                          |
| 31.1              |   | Certification      pursuant to Section 302 of the Sarbanes Oxley-Act of 2002 (filed      herewith)                                                                                                                                                                            |
|              |   |                                                                                                                                                                                                                                                                          |
| 32.1              |   | Certification      pursuant to 18 U.S.C. section 1350 as adopted pursuant to section 906 of      the Sarbanes Oxley-Act of 2002 (filed herewith)                                                                                                                              |
|              |   |                                                                                                                                                                                                                                                                          |

----

| Footnotes      to Exhibit Table |
|---------------------------------|
| (1)                             |   | Incorporated      by reference to SmarTire Systems Inc.'s Form 10-KSB filed with the      Securities and Exchange Commission on August 18, 1998 |
|                            |   |   |
| (2)                             |   | Incorporated      by reference to SmarTire Systems Inc.'s 8-K filed with the Securities      Exchange Commission on December 23, 2003. |
|                            |   |   |
| (3)                             |   | Incorporated      by reference to SmarTire Systems Inc.'s 8-K filed with the Securities      Exchange Commission on December 21, 2004. |
|                            |   |   |
| (4)                             |   | Incorporated      by reference to SmarTire Systems Inc.'s 8-K filed with the Securities      Exchange Commission on March 29, 2005. |
|                            |   |   |
| (5)                             |   | Incorporated      by reference to SmarTire Systems Inc.'s 8-K filed with the Securities      Exchange Commission on April 1, 2005, as amended. |
|                            |   |   |
| (6)                             |   | Incorporated      by reference to SmarTire Systems Inc.'s Form 10-QSB filed with the      Securities Exchange Commission on December 15, 2005. |
|                            |   |   |
| (7)                             |   | (7)    Incorporated      by reference to SmarTire Systems Inc.'s Form SB-2 filed with the      Securities Exchange Commission on January 11, 2006. |
|                            |   |   |
| (8)                             |   | Incorporated      by reference to SmarTire Systems Inc.'s Form SB-2/A filed with the      Securities Exchange Commission on February 27, 2006. |
|                            |   |   |
| (9)                             |   | Incorporated      by reference to SmarTire Systems Inc.'s Form SB-2/A filed with the      Securities Exchange Commission on April 12, 2006. |
|                            |   |   |
| (10)                            |   | Incorporated      by reference to SmarTire System Inc.’s Form 10-KSB filed with the      Securities Exchange Commission on October 30, 2006. |
|                            |   |   |
| (11)                            |   | Incorporated      by reference to SmarTire System Inc.’s 8-K filed with the Securities      Exchange Commission on October 26, 2006. |
|                            |   |   |
| (12)                            |   | Incorporated      by reference to SmarTire System Inc.’s 8-K filed with the Securities      Exchange Commission on November 8, 2006. |
|                            |   |   |
| (13)                            |   | Incorporated      by reference to SmarTire Systems Inc.'s Form 10-QSB filed with the      Securities Exchange Commission on December 15, 2006. |
|                            |   |   |
| (14)                            |   | Incorporated      by reference to SmarTire Systems Inc.'s Form SB-2 filed with the      Securities Exchange Commission on January 10, 2007. |
|                            |   |   |
| (15)                            |   | Incorporated      by reference to SmarTire System Inc.’s 8-K filed with the Securities      Exchange Commission on January 26, 2007. |
|                            |   |   |
| (16)                            |   | Incorporated      by reference to SmarTire System Inc.’s 8-K filed with the Securities      Exchange Commission on January 29,2007. |

----

| Footnotes      to Exhibit Table |
|---------------------------------|
|                            |   |   |
| (17)                            |   | Incorporated      by reference to SmarTire System Inc.’s 8-K filed with the Securities      Exchange Commission on February 5, 2007. |
|                            |   |   |
| (18)                            |   | Incorporated      by reference to SmarTire System Inc.’s 8-K filed with the Securities      Exchange Commission on February 15, 2007. |
|                            |   |   |
| (19)                            |   | Incorporated      by reference to SmarTire Systems Inc.'s Form SB-2/A filed with the      Securities Exchange Commission on February 20, 2007. |
|                            |   |   |
| (20)                            |   | Incorporated      by reference to SmarTire Systems Inc.'s Form SB-2/A filed with the      Securities Exchange Commission on April 24, 2007. |
|                            |   |   |
| (21)                            |   | Incorporated      by reference to SmarTire Systems Inc.'s Form SB-2/A filed with the      Securities Exchange Commission on May 25, 2007. |
|                            |   |   |
| (22)                            |   |  Incorporated      by reference to SmarTire System Inc.’s Form 10-KSB filed with the      Securities Exchange Commission on November 9, 2007. |
|                            |   |   |
| (23)                            |   | Incorporated      by reference to SmarTire Systems Inc.'s Form 10-QSB filed with the      Securities Exchange Commission on December 14, 2007. |
|                            |   |   |
| (24)                            |   | Incorporated      by reference to SmarTire System Inc.’s 8-K filed with the Securities      Exchange Commission on January 24, 2008. |
|                            |   |   |
| (25)                            |   | Incorporated      by reference to SmarTire Systems Inc.'s Form 10-QSB filed with the      Securities Exchange Commission on March 17, 2008. |
|                            |   |   |
| (26)                            |   | Incorporated      by reference to SmarTire System Inc.’s 8-K filed with the Securities      Exchange Commission on June 24, 2008. |
|                            |   |   |
| (27)                            |   | Incorporated      by reference to SmarTire System Inc.’s 8-K filed with the Securities      Exchange Commission on August 7, 2008. |
|                            |   |   |
| (28)                            |   | Incorporated      by reference to SmarTire System Inc.’s 8-K filed with the Securities      Exchange Commission on August 21, 2008. |
|                            |   |   |
| (29)                            |   | Incorporated      by reference to SmarTire System Inc.’s 8-K filed with the Securities      Exchange Commission on December 12,2008. |

----

| Nature      of service  |   | Fiscal      year                                                                                                          | Fiscal      year                                                                                                          |
|-------------------------|--------|---------------------------------------------------------------------------------------------------------------------------|---------------------------------------------------------------------------------------------------------------------------|
|                    |   | 2008                                                                                                                      | 2007                                                                                                                      |
|                    |   |                                                                                                                      |                                                                                                                      |
| Audit      fees (1)     |   |  $       205,504                                                                  |  $       223,131                                                                  |
| Audit      related fees |   |                     - |                     - |
| Tax      fees           |   |                     - |                     - |
| All      other fees     |   |                     - |                     - |

| (1)   | These      are fees for professional services performed by BDO LLP for the audit of      our annual financial statements and the review of our quarterly financial      statements and for services that are normally provided in connection with      statutory and regulatory filings orengagements. |
|-----------------|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| ·   | approved      by the Company's audit committee;or |
|--------------------|---------------------------------------------------|

| ·   | entered      into pursuant to pre-approval policies and procedures established by the      audit committee, provided the policies and procedures are detailed as to      the particular service, the audit committee is informed of each service,      and such policies and procedures do not include delegation of the audit      committee's responsibilities tomanagement. |
|--------------------|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| (1)   | Annually      the auditor provides the audit committee with a list of the audit-related      and non-audit services that are anticipated to be provided during the year      for pre-approval. The audit committee reviews the services with the      auditor and management considering whether the provision of the services      is compatible with maintaining the auditor's  independence. |
|-----------------|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| (2)   | Upon      pre-approval of the services on the initial list, management may engage      the auditor for specific engagements that are within the definition of the      pre-approved services. |
|-----------------|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| (3)   | The      audit committee delegates approval authority to the Chair of the audit      committee for requests for services not previously presented to the audit      committee for pre-approval. Any services approved by the Chair are      reported to the full audit committee at the next  meeting. |
|-----------------|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| (4)   | A      final detailed review of all public accounting services and fee amounts is      performed by the audit committee prior to the audit opinion being issued      at year end. At that time, the auditor provides the audit committee with      the annual independence letter and the form and content of fees disclosure      for the Company's annual report. |
|-----------------|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

----

----

----

----

----

| SMARTIRE      SYSTEMS INC.                                                                                                            |   |                          |         |   |          |   |
|---------------------------------------------------------------------------------------------------------------------------------------|--------|-------------------------------|--------------|--------|---------------|--------|
| Consolidated      Balance Sheets                                                                                                      |   |                          |         |   |          |   |
| (Expressed      in United States dollars)                                                                                             |   |                          |         |   |          |   |
| (Prepared      in accordance with U.S. generally accepted accounting      principles)                                                 |   |                          |         |   |          |   |
|                                                                                                                                  |   |                          |         |   |          |   |
| July      31, 2008 and 2007                                                                                                           |   |                          |         |   |          |   |
|                                                                                                                                  |   |                          |         |   |          |   |
|                                                                                                                                  |   | July      31,                 |         |   | July      31, |   |
|                                                                                                                                  |   | 2008                          |         |   | 2007          |   |
|                                                                                                                                  |   |                          |         |   |          |   |
| ASSETS                                                                                                                                |   |                          |         |   |          |   |
|                                                                                                                                  |   |                          |         |   |          |   |
| Current      assets:                                                                                                                  |   |                          |         |   |          |   |
| Cash      and cash equivalents                                                                                                        |   | $                             | 27,057       |   |          | $      | 350,018 |   |
| Receivables,      net of allowance for doubtful accounts                                                                              |   |                          |         |   |          |   |   |   |
| of      $10,000 (July 31, 2007 - $18,657)                                                                                             |   |                          | 406,334      |   |          |   | 505,581 |   |
| Inventory      (note 5)                                                                                                               |   |                          | 1,561,147    |   |          |   | 1,591,230 |   |
| Prepaid      expenses                                                                                                                 |   |                          | 102,547      |   |          |   | 138,890 |   |
|                                                                                                                                  |   |                          | 2,097,085    |   |          |   | 2,585,719 |   |
|                                                                                                                                  |   |                          |         |   |          |   |   |   |
| Property      and equipment (note 6)                                                                                                  |   |                          | 591,225      |   |          |   | 799,540 |   |
|                                                                                                                                  |   |                          |         |   |          |   |   |   |
| Deferred      financing costs (note 13)                                                                                               |   |                          | -            |   |          |   | 947,945 |   |
|                                                                                                                                  |   |                          |         |   |          |   |   |   |
|                                                                                                                                  |   | $                             | 2,688,310    |   |          | $      | 4,333,204 |   |
|                                                                                                                                  |   |                          |         |   |          |   |   |   |
| LIABILITIES      AND CAPITAL DEFICIT                                                                                                  |   |                          |         |   |          |   |   |   |
|                                                                                                                                  |   |                          |         |   |          |   |   |   |
| Current      liabilities:                                                                                                             |   |                          |         |   |          |   |   |   |
| Accounts      payable and accrued liabilities (note 8)                                                                                |   | $                             | 2,970,809    |   |          | $      | 1,748,855 |   |
| Current      portion of convertible debentures (note 9)                                                                               |   |                          | 35,068,398   |   |          |   | 11,134,533 |   |
| Current      portion of preferred shares, subject to mandatory redemption (note      11)                                              |   |                          | 3,604,470    |   |          |   | - |   |
|     Current      portion of accrued interest on convertible debentures, payable in shares      (note 9(c) to (i)) |   |                          | 8,347,538    |   |          |   | 4,741,414 |   |
|                                                                                                                                  |   |                          | 49,991,215   |   |          |   | 17,624,802 |   |
|                                                                                                                                  |   |                          |         |   |          |   |   |   |
| Convertible      debentures (note 9)                                                                                                  |   |                          | -            |   |          |   | 1,828,575 |   |
| Accrued      interest on convertible debentures, payable in shares (note    9)                                                        |   |                          | -            |   |          |   | 194,588 |   |
|                                                                                                                                  |   |                          |         |   |          |   |   |   |
| Preferred      shares, subject to mandatory redemption (note 11)                                                                      |   |                          | -            |   |          |   | 3,449,776 |   |
|                                                                                                                                  |   |                          |         |   |          |   |   |   |
| Capital      deficit:                                                                                                                 |   |                          |         |   |          |   |   |   |
| Share      capital (note 12)                                                                                                          |   |                          |         |   |          |   |   |   |
| Common      shares, without par value:                                                                                                |   |                          |         |   |          |   |   |   |
| Unlimited      shares authorized                                                                                                      |   |                          |         |   |          |   |   |   |
| 5,907,011,198      shares issued and outstanding (July 31, 2007 -463,336,271)                                                         |   |                          | 73,632,963   |   |          |   | 71,033,916 |   |
| Additional      paid-in capital                                                                                                       |   |                          | 34,210,776   |   |          |   | 34,081,226 |   |
| Accumulated      deficit                                                                                                              |   |                          | (156,048,743 | )      |          |   | (124,796,374 | ) |
| Accumulated      other comprehensive income                                                                                           |   |                          | 902,099      |   |          |   | 916,695 |   |
|                                                                                                                                  |   |                          | (47,302,905  | )      |          |   | (18,764,537 | ) |
|                                                                                                                                  |   |                          |         |   |          |   |   |   |
|                                                                                                                                  |   | $                             | 2,688,310    |   |          | $      | 4,333,204 |   |
| Going      concern (note 2)                                                                                                           |   |                          |         |   |          |   |   |   |
| Commitments      and contingencies (note 19)                                                                                          |   |                          |         |   |          |   |   |   |
| Subsequent      events (note 21)                                                                                                      |   |                          |         |   |          |   |   |   |
| See      accompanying notes to consolidated financial statements.                                                                     |   |                          |         |   |          |   |   |   |
|                                                                                                                                  |   |                          |         |   |          |   |   |   |
| Approved      on behalf of Board:                                                                                                     |   |                          |         |   |          |   |   |   |
| /s/ Martin Gannon                                                                                                                     |   | /s/ William Cronin            |         |
| Martin      Gannon, Director                                                                                                          |   | William      Cronin, Director |         |

----

| SMARTIRE      SYSTEMS INC.                                                            |   |   |          |   |   |   |
|---------------------------------------------------------------------------------------|--------|--------|---------------|--------|--------|--------|
| Consolidated      Statements of Operations                                            |   |   |          |   |   |   |
| (Expressed      in United States dollars)                                             |   |   |          |   |   |   |
| (Prepared      in accordance with U.S. generally accepted accounting      principles) |   |   |          |   |   |   |
|                                                                                  |   |   |          |   |   |   |
| Years      ended July 31, 2008 and 2007                                               |   |   |          |   |   |   |
|                                                                                  |   |   |          |   |   |   |
|                                                                                  |   | 2008   |          |   | 2007   |   |
|                                                                                  |   |   |          |   |   |   |
|                                                                                  |   |   |          |   |   |   |
| Revenue      (note 20)                                                                |   | $      | 3,140,413     |   |   | $      | 3,661,821 |   |
|                                                                                  |   |   |          |   |   |   |   |   |
| Cost      of goods sold                                                               |   |   | 2,723,431     |   |   |   | 2,675,465 |   |
|                                                                                  |   |   | 416,982       |   |   |   | 986,356 |   |
|                                                                                  |   |   |          |   |   |   |   |   |
| Expenses:                                                                             |   |   |          |   |   |   |   |   |
| Depreciation      and amortization                                                    |   |   | 254,805       |   |   |   | 445,700 |   |
| Engineering,      research and development                                            |   |   | 1,730,013     |   |   |   | 2,734,148 |   |
| General      and administrative                                                       |   |   | 2,648,429     |   |   |   | 2,922,461 |   |
| Marketing                                                                             |   |   | 765,655       |   |   |   | 1,642,384 |   |
|                                                                                  |   |   | 5,398,902     |   |   |   | 7,744,693 |   |
|                                                                                  |   |   |          |   |   |   |   |   |
| Loss      from operations                                                             |   |   | (4,981,920    | )      |   |   | (6,758,337 | ) |
|                                                                                  |   |   |          |   |   |   |   |   |
| Other      earnings (expenses):                                                       |   |   |          |   |   |   |   |   |
| Other      income - settlement from lawsuit (note 19)                                 |   |   | 1,500,000     |   |   |   | - |   |
| Interest      income                                                                  |   |   | 9,524         |   |   |   | 31,286 |   |
| Interest      and financing expense (note 14)                                         |   |   | (27,902,197   | )      |   |   | (12,115,066 | ) |
| Unrealized      loss on derivative instruments (note 10)                         |   |   | -             |   |   |   | (1,030,415 | ) |
| Foreign      exchange gain loss                                                       |   |   | 122,224       |   |   |   | 250,724 |   |
|                                                                                  |   |   | (26,270,449   | )      |   |   | (12,863,471 | ) |
|                                                                                  |   |   |          |   |   |   |   |   |
| Loss      for the year                                                                |   |   | (31,252,369   | )      |   |   | (19,621,808 | ) |
|                                                                                  |   |   |          |   |   |   |   |   |
| Accrued      dividends and accretion on preferred shares (note 11)                    |   |   | (154,694      | )      |   |   | (3,737,888 | ) |
|                                                                                  |   |   |          |   |   |   |   |   |
| Loss      available to common stockholders                                            |   | $      | (31,407,063   | )      |   | $      | (23,359,696 | ) |
|                                                                                  |   |   |          |   |   |   |   |   |
| Basic      and diluted loss per share                                                 |   | $      | (0.01         | )      |   | $      | (0.07 | ) |
|                                                                                  |   |   |          |   |   |   |   |   |
| Weighted      average number of common shares used in                                 |   |   |          |   |   |   |   |   |
| the      computation of basic and diluted loss per share (note 18)                    |   |   | 2,188,573,411 |   |   |   | 344,399,602 |   |
|                                                                                  |   |   |          |   |   |   |   |   |
| See      accompanying notes to consolidated financial statements.                     |   |   |          |   |   |   |   |   |
|                                                                                  |   |   |          |   |   |   |   |   |
| SMARTIRE      SYSTEMS INC.                                                            |   |   |          |   |   |   |   |   |
| Consolidated      Statements of Comprehensive Loss                                    |   |   |          |   |   |   |   |   |
| (Expressed      in United States dollars)                                             |   |   |          |   |   |   |   |   |
| (Prepared      in accordance with U.S. generally accepted accounting      principles) |   |   |          |   |   |   |   |   |
|                                                                                  |   |   |          |   |   |   |   |   |
| Years      ended July 31, 2008 and 2007                                               |   |   |          |   |   |   |   |   |
|                                                                                  |   |   |          |   |   |   |   |   |
|                                                                                  |   | 2008   |          |   | 2007   |   |
|                                                                                  |   |   |          |   |   |   |   |   |
|                                                                                  |   |   |          |   |   |   |   |   |
| Loss      for the year                                                                |   | $      | (31,252,369   | )      |   | $      | (19,621,808 | ) |
| Translation      adjustment                                                           |   |   | (14,596       | )      |   |   | (45,836 | ) |
|                                                                                  |   |   |          |   |   |   |   |   |
|  Comprehensive      loss for the year                                            |   | $      | (31,266,965   | )      |   | $      | (19,667,644 | ) |
|                                                                                  |   |   |          |   |   |   |   |   |
| See      accompanying notes to consolidated financial statements.                     |   |   |          |   |   |   |   |   |

----

| SMARTIRE      SYSTEMS INC.                                                            |   |               |          |   |       |   |       |        |   |   |        |   |   |          |         |   |    |   |
|---------------------------------------------------------------------------------------|--------|--------------------|---------------|--------|------------|--------|------------|-------------|--------|--------|-------------|--------|--------|---------------|--------------|--------|---------|--------|
| Consolidated      Statement of Capital Deficit                                        |   |               |          |   |       |   |       |        |   |   |        |   |   |          |         |   |    |   |
| (Expressed      in United States dollars)                                             |   |               |          |   |       |   |       |        |   |   |        |   |   |          |         |   |    |   |
| (Prepared      in accordance with U.S. generally accepted accounting      principles) |   |               |          |   |       |   |       |        |   |   |        |   |   |          |         |   |    |   |
|                                                                                  |   |               |          |   |       |   |       |        |   |   |        |   |   |          |         |   |    |   |
| Years      ended July 31, 2008 and 2007                                               |   |               |          |   |       |   |       |        |   |   |        |   |   |          |         |   |    |   |
|                                                                                  |   |               |          |   |       |   |       |        |   |   |        |   |   |          |         |   |    |   |
|                                                                                  |   |               |          |   |       |   |       |        |   |   |        |   |   |          |         |   |    |   |
|                                                                                  |   | Common      Shares |          |   | Additional |   |       | Accumulated |   |   | Accumulated |   |   |          |         |
|                                                                                  |   | Shares             |          |   | Amount     |   |       | paid-in     |   |   | deficit     |   |   | other         |         |   |    |   |
|                                                                                  |   |               |          |   |       |   |       | capital     |   |   |        |   |   | comprehensive |         |   | Capital |   |
|                                                                                  |   |               |          |   |       |   |       |        |   |   |        |   |   | income        |         |   | deficit |   |
|                                                                                  |   |               |          |   | $          |   |       |        | $      |   |        |   | $      |          |         |   | $       |   |   |   | $ |   |   |
|                                                                                  |   |               |          |   |       |   |       |        |   |   |        |   |   |          |         |   |    |   |   |   |   |   |   |
|                                                                                  |   |               |          |   |       |   |       |        |   |   |        |   |   |          |         |   |    |   |   |   |   |   |   |
| Balance      as at July 31, 2006                                                      |   |               | 311,610,656   |   |       |   | 68,049,577 |        |   |   | 6,929,818   |   |   |          | (103,967,579 | )      |    |   | 962,531 |   |   |   | (28,025,653 | ) |
|                                                                                  |   |               |          |   |       |   |       |        |   |   |        |   |   |          |         |   |    |   |   |   |   |   |   |   |
| Exercise      of stock options for cash (note 12 (d))                                 |   |               | 4,050,000     |   |       |   | 182,250    |        |   |   | (60,750     | )      |   |          | -            |   |    |   | - |   |   |   | 121,500 |   |
| Conversion      of preferred shares into common shares (note 11)                      |   |               | 77,024,000    |   |       |   | 1,540,480  |        |   |   | (770,240    | )      |   |          | -            |   |    |   | - |   |   |   | 770,240 |   |
| Conversion      of convertible debentures into common shares (note 9)                 |   |               | 53,341,141    |   |       |   | 906,196    |        |   |   | (312,544    | )      |   |          | -            |   |    |   | - |   |   |   | 593,652 |   |
| Stock-based      compensation and warrant repricing (notes 9 (c), 12    (d)-(e))      |   |               | -             |   |       |   | -          |        |   |   | 1,157,589   |   |   |          | -            |   |    |   | - |   |   |   | 1,157,589 |   |
| Intrinsic      value of beneficial conversion feature (note 9)                        |   |               | -             |   |       |   | -          |        |   |   | 2,084,574   |   |   |          | -            |   |    |   | - |   |   |   | 2,084,574 |   |
| Change      in accounting policy (note 4)                                             |   |               | -             |   |       |   | -          |        |   |   | 28,494,782  |   |   |          | (1,206,987   | )      |    |   | - |   |   |   | 27,287,795 |   |
| Accrued      dividends and accretion on preferred shares (note 11)                    |   |               | -             |   |       |   | -          |        |   |   | (3,737,888  | )      |   |          | -            |   |    |   | - |   |   |   | (3,737,888 | ) |
| Incremental      beneficial conversion feature adjustment (note 9)                    |   |               | -             |   |       |   | -          |        |   |   | 295,885     |   |   |          | -            |   |    |   | - |   |   |   | 295,885 |   |
| Shares      issued for services and settlement of debt (notes 12    (f)-(g))          |   |               | 17,310,474    |   |       |   | 355,413    |        |   |   | -           |   |   |          | -            |   |    |   | - |   |   |   | 355,413 |   |
| Loss      for the period                                                              |   |               | -             |   |       |   | -          |        |   |   | -           |   |   |          | (19,621,808  | )      |    |   | - |   |   |   | (19,621,808 | ) |
| Translation      adjustment                                                           |   |               | -             |   |       |   | -          |        |   |   | -           |   |   |          | -            |   |    |   | (45,836 | ) |   |   | (45,836 | ) |
| Balance      as at July 31, 2007                                                      |   |               | 463,336,271   |   |       |   | 71,033,916 |        |   |   | 34,081,226  |   |   |          | (124,796,374 | )      |    |   | 916,695 |   |   |   | (18,764,537 | ) |
|                                                                                  |   |               |          |   |       |   |       |        |   |   |        |   |   |          |         |   |    |   |   |   |   |   |   |   |
| Conversion      of convertible debentures into common shares (note 9)                 |   |               | 5,440,970,115 |   |       |   | 2,581,617  |        |   |   | (875,167    | )      |   |          | -            |   |    |   | - |   |   |   | 1,706,450 |   |
| Stock-based      compensation (note 12 (c))                                           |   |               | -             |   |       |   | -          |        |   |   | 159,380     |   |   |          | -            |   |    |   | - |   |   |   | 159,380 |   |
| Issuance      of warrants for services (note 12(e))                                   |   |               | -             |   |       |   | -          |        |   |   | 1,907       |   |   |          | -            |   |    |   | - |   |   |   | 1,907 |   |
| Intrinsic      value of beneficial conversion feature (note 9)                        |   |               | -             |   |       |   | -          |        |   |   | 790,935     |   |   |          | -            |   |    |   | - |   |   |   | 790,935 |   |
| Issuance      of warrants in conjunction with convertible debentures (note      9)    |   |               | -             |   |       |   | -          |        |   |   | 207,189     |   |   |          | -            |   |    |   | - |   |   |   | 207,189 |   |
| Accrued      dividends and accretion on preferred shares (note 11)                    |   |               | -             |   |       |   | -          |        |   |   | (154,694    | )      |   |          | -            |   |    |   | - |   |   |   | (154,694 | ) |
| Shares      issued for services and settlement of debt (notes 12    (f)-(g))          |   |               | 2,704,812     |   |       |   | 17,430     |        |   |   | -           |   |   |          | -            |   |    |   | - |   |   |   | 17,430 |   |
| Loss      for the period                                                              |   |               | -             |   |       |   | -          |        |   |   | -           |   |   |          | (31,252,369  | )      |    |   | - |   |   |   | (31,252,369 | ) |
| Translation      adjustment                                                           |   |               | -             |   |       |   | -          |        |   |   | -           |   |   |          | -            |   |    |   | (14,596 | ) |   |   | (14,596 | ) |
| Balance      as at July 31, 2008                                                      |   |               | 5,907,011,198 |   |       |   | 73,632,963 |        |   |   | 34,210,776  |   |   |          | (156,048,743 | )      |    |   | 902,099 |   |   |   | (47,302,905 | ) |
|                                                                                  |   |               |          |   |       |   |       |        |   |   |        |   |   |          |         |   |    |   |   |   |   |   |   |   |
| See      accompanying notes to consolidated financial statements.                     |   |               |          |   |       |   |       |        |   |   |        |   |   |          |         |   |    |   |   |   |   |   |   |   |

----

| SMARTIRE      SYSTEMS INC.                                                                |   |   |        |   |   |   |
|-------------------------------------------------------------------------------------------|--------|--------|-------------|--------|--------|--------|
| Consolidated      Statements of Cash Flows                                                |   |   |        |   |   |   |
| (Expressed      in United States dollars)                                                 |   |   |        |   |   |   |
| (Prepared      in accordance with U.S. generally accepted accounting      principles)     |   |   |        |   |   |   |
| Years      ended July 31, 2008 and 2007                                                   |   |   |        |   |   |   |
|                                                                                      |   |   |        |   |   |   |
|                                                                                      |   |   |        |   |   |   |
|                                                                                      |   |   |        |   |   |   |
|                                                                                      |   |   |        |   |   |   |
|                                                                                      |   | 2008   |        |   | 2007   |   |
| Cash      provided (used for):                                                            |   |   |        |   |   |   |
| Operating      activities:                                                                |   |   |        |   |   |   |
| Loss      for the year                                                                    |   | $      | (31,252,369 | )      |   | $      | (19,621,808 | ) |
| Items      not affecting cash:                                                            |   |   |        |   |   |   |   |   |
| Depreciation      and amortization                                                        |   |   | 254,805     |   |   |   | 445,700 |   |
| Unrealized      loss on derivative instruments                                            |   |   | -           |   |   |   | 1,030,415 |   |
| Non-cash      interest and finance charges                                                |   |   | 27,775,103  |   |   |   | 12,028,029 |   |
| Stock-compensation      expense                                                           |   |   | 159,380     |   |   |   | 681,879 |   |
| Reprice      of stock options                                                             |   |   | -           |   |   |   | 22,658 |   |
| Issuance      of common shares and warrants for services received                         |   |   | 4,617       |   |   |   | 16,677 |   |
| Issuance      of common shares as partial consideration of debt                           |   |   | 14,720      |   |   |   | 341,788 |   |
| Changes      in non-cash working capital:                                                 |   |   |        |   |   |   |   |   |
| Receivables                                                                               |   |   | 116,391     |   |   |   | 103,669 |   |
| Inventory                                                                                 |   |   | 91,661      |   |   |   | 621,349 |   |
| Prepaid      expenses                                                                     |   |   | 41,073      |   |   |   | 57,778 |   |
| Accounts      payable and accrued liabilities                                             |   |   | 1,044,607   |   |   |   | (508,194 | ) |
|                                                                                      |   |   |        |   |   |   |   |   |
| Net      cash used in operating activities                                                |   |   | (1,750,012  | )      |   |   | (4,780,060 | ) |
|                                                                                      |   |   |        |   |   |   |   |   |
| Investing      activities:                                                                |   |   |        |   |   |   |   |   |
| Purchase      of property and equipment                                                   |   |   | (11,192     | )      |   |   | (346,579 | ) |
|                                                                                      |   |   |        |   |   |   |   |   |
| Net      cash used in investing activities                                                |   |   | (11,192     | )      |   |   | (346,579 | ) |
|                                                                                      |   |   |        |   |   |   |   |   |
| Financing      activities:                                                                |   |   |        |   |   |   |   |   |
| Cash      received on exercise of stock options                                           |   |   | -           |   |   |   | 121,500 |   |
| Proceeds      from convertible debentures (note 9)                                        |   |   | 1,603,500   |   |   |   | 4,150,000 |   |
| Financing      costs (note 9)                                                             |   |   | (200,500    | )      |   |   | (681,398 | ) |
|                                                                                      |   |   |        |   |   |   |   |   |
| Net      cash provided by financing activities                                            |   |   | 1,403,000   |   |   |   | 3,590,102 |   |
|                                                                                      |   |   |        |   |   |   |   |   |
|                                                                                      |   |   |        |   |   |   |   |   |
| Effect      of exchange rate difference on cash and cash equivalents                      |   |   | 35,243      |   |   |   | (101,865 | ) |
|                                                                                      |   |   |        |   |   |   |   |   |
| Net      decrease in cash and cash equivalents                                            |   |   | (322,961    | )      |   |   | (1,638,402 | ) |
|                                                                                      |   |   |        |   |   |   |   |   |
| Cash      and cash equivalents, beginning of year                                         |   |   | 350,018     |   |   |   | 1,988,420 |   |
|                                                                                      |   |   |        |   |   |   |   |   |
| Cash      and cash equivalents, end of year                                               |   | $      | 27,057      |   |   | $      | 350,018 |   |
|                                                                                      |   |   |        |   |   |   |   |   |
| Supplementary      information:                                                           |   |   |        |   |   |   |   |   |
| Interest      and finance charges paid                                                    |   | $      | 42,785      |   |   | $      | 43,497 |   |
| Non-cash      investing and financing activities:                                         |   |   |        |   |   |   |   |   |
| Conversion      of preferred shares to common shares                                      |   |   | -           |   |   |   | 770,240 |   |
| Conversion      of convertible debentures to common shares (note 9)                       |   |   | 1,706,450   |   |   |   | 593,652 |   |
| Issuance      of warrants for services rendered                                           |   |   | 1,907       |   |   |   | - |   |
| Issuance      of common shares for services and partial consideration to settle      debt |   |   | 17,430      |   |   |   | 355,413 |   |
| Proceeds      of convertible debentures allocated to warrants                             |   |   | 207,189     |   |   |   | - |   |
|                                                                                      |   |   |        |   |   |   |   |   |
|                                                                                      |   |   |        |   |   |   |   |   |
| See      accompanying notes to consolidated financial statements.                         |   |   |        |   |   |   |   |   |

----

| (a)   | Basis      of presentation: |
|-----------------|-----------------------------|

| (b)   | Research      and development costs: |
|-----------------|--------------------------------------|

----

| (c)   | Cash      and cash equivalents: |
|-----------------|---------------------------------|

| (d)   | Inventory: |
|-----------------|------------|

| (e)   | Property      and equipment: |
|-----------------|------------------------------|

| (f)   | Deferred      financing costs: |
|-----------------|--------------------------------|

| (g)   | Other      assets: |
|-----------------|--------------------|

| (h)   | Impairment      of long-lived assets: |
|-----------------|---------------------------------------|

----

| (i)   | Revenue      recognition: |
|-----------------|---------------------------|

| (j)   | Loss      per share: |
|-----------------|----------------------|

| (k)   | Income      taxes: |
|-----------------|--------------------|

| (l)   | Warranty      costs: |
|-----------------|----------------------|

| (m)   | Foreign      currency translation: |
|-----------------|------------------------------------|

----

| 3.   | Significant      accounting policies (continued): |
|----------------|---------------------------------------------------|

| (n)   | Use      of estimates: |
|-----------------|------------------------|

| (o)   | Advertising      and Marketing costs: |
|-----------------|---------------------------------------|

| (p)   | Fair      value of financial assets andliabilities: |
|-----------------|-----------------------------------------------------|

| (q)   | Comprehensive      income: |
|-----------------|----------------------------|

----

| (r)   | Accounting      for uncertainty in income taxes: |
|-----------------|--------------------------------------------------|

| (s)   | Stock      based compensation: |
|-----------------|--------------------------------|

----

----

| (t)   | Recent      accounting pronouncements(continued): |
|-----------------|---------------------------------------------------|

----

----

|                  | 2008                                                                                                                            | 2007                                                                                                                      |
|-----------------------|---------------------------------------------------------------------------------------------------------------------------------|---------------------------------------------------------------------------------------------------------------------------|
|                  |                                                                                                                            |                                                                                                                      |
| Raw      materials    |  $                 308,870            |  $                746,849            |
| Work      in progress |                     265,847 |                    247,971 |
| Finished      goods   |                     986,430 |                    596,410 |
|                  |                                                                                                                            |                                                                                                                      |
|                  |  $              1,561,147                            |  $             1,591,230                            |

|                                |                                                                                                                                        | Accumulated                                                                                                                     | Net      book                                                                                                                                                                     |
|-------------------------------------|---------------------------------------------------------------------------------------------------------------------------------------------|---------------------------------------------------------------------------------------------------------------------------------|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
| 2008                                | Cost                                                                                                                                        | depreciation                                                                                                                    | Value                                                                                                                                                                             |
|                                |                                                                                                                                        |                                                                                                                            |                                                                                                                                                                              |
| Computer      hardware and software |  $                   860,273            |  $                 738,224            |  $                   122,049                                                  |
| Office      and shop equipment      |                    2,254,699                 |                  1,786,024                 |                       468,675                                       |
| Leasehold      improvements         |                       122,894 |                     122,393 |                              501 |
|                                |                                                                                                                                        |                                                                                                                            |                                                                                                                                                                              |
|                                |  $                3,237,866                            |  $              2,646,641                            |  $                   591,225                                                  |
|                                |                                                                                                                                        |                                                                                                                            |                                                                                                                                                                              |
|                                |                                                                                                                                        | Accumulated                                                                                                                     | Net      book                                                                                                                                                                     |
| 2007                                | Cost                                                                                                                                        | depreciation                                                                                                                    | Value                                                                                                                                                                             |
|                                |                                                                                                                                        |                                                                                                                            |                                                                                                                                                                              |
| Computer      hardware and software |  $                   815,431            |  $                 650,849            |  $                   164,582                                                  |
| Office      and shop equipment      |                    2,152,657                 |                  1,518,303                 |                       634,354                                       |
| Leasehold      improvements         |                       118,339 |                     117,735 |                              604 |
|                                |                                                                                                                                        |                                                                                                                            |                                                                                                                                                                              |
|                                |  $                3,086,427                            |  $              2,286,887                            |  $                   799,540                                                  |

|                                            | 2008                                                                                  | 2007                                                                                  |
|-------------------------------------------------|---------------------------------------------------------------------------------------|---------------------------------------------------------------------------------------|
|                                            |                                                                                  |                                                                                  |
| Accounts      payable                           |  $       1,230,175                            |  $          374,788            |
| Accrued      liabilities                        |              715,237 |              534,071 |
| Due      to directors                           |              305,376 |              191,475 |
| Interest      payable on convertible debentures |              720,021 |              648,521 |
|                                            |                                                                                  |                                                                                  |
|                                            |  $       2,970,809                            |  $       1,748,855                            |

----

|                                                                                                                                                                                                                                                                              |   | Note      9 (a) |     |   | Note      9 (b) |   |       | Note      9 (c) |   |   | Note      9 (d) |   |   | Note      9 (e) |      |   | Note      9 (f) |   |       | Note      9 (g) |   |   | Note      9 (h) |   |   | Note      9 (i) |    |   |   |   |
|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|--------|-----------------|----------|--------|-----------------|--------|------------|-----------------|--------|--------|-----------------|--------|--------|-----------------|-----------|--------|-----------------|--------|------------|-----------------|--------|--------|-----------------|--------|--------|-----------------|---------|--------|--------|--------|
|                                                                                                                                                                                                                                                                              |   |            | 5        | %      |            |   | 5          | %               |   |   | 10              | %      |   |            | 10        | %      |            |   | 10         | %               |   |   | 10              | %      |   |            | 10      | %      |   |   | 12 | % |   |   | 12 | % |   | Total |   |
| Original      face value of convertible debenture                                                                                                                                                                                                                                 |   | $               | 195,000  |   |            | $      | 1,500,000  |            |   | $      | 30,000,000      |   |   | $               | 1,200,000 |   |            | $      | 1,800,000  |            |   | $      | 1,500,000       |   |   | $               | 96,500  |   |   | $      | 888,000 |   |   | $ | 269,000 |   |   | $ | 37,448,500 |   |
|                                                                                                                                                                                                                                                                              |   |            |     |   |            |   |       |            |   |   |            |   |   |            |      |   |            |   |       |            |   |   |            |   |   |            |    |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Debt      component, as at July 31, 2006:                                                                                                                                                                                                                                         |   |            | 195,000  |   |            |   | 1,420,000  |            |   |   | 21,432,576      |   |   |            | -         |   |            |   | -          |            |   |   | -               |   |   |            | -       |   |   |   | - |   |   |   | - |   |   |   | 23,047,576 |   |
| Issued                                                                                                                                                                                                                                                                            |   |            | -        |   |            |   | -          |            |   |   | -               |   |   |            | 1,200,000 |   |            |   | 1,800,000  |            |   |   | 1,150,000       |   |   |            | -       |   |   |   | - |   |   |   | - |   |   |   | 4,150,000 |   |
| Finance      fees paid to debenture holder/related company of debenture      holder                                                                                                                                                                                               |   |            | -        |   |            |   | -          |            |   |   | -               |   |   |            | (130,000  | )      |            |   | (195,000   | )               |   |   | (135,000        | )      |   |            | -       |   |   |   | - |   |   |   | - |   |   |   | (460,000 | ) |
| Intrinsic      value of beneficial conversion feature of convertible      debentures                                                                                                                                                                                              |   |            | -        |   |            |   | -          |            |   |   | -               |   |   |            | (663,871  | )      |            |   | (886,302   | )               |   |   | (534,401        | )      |   |            | -       |   |   |   | - |   |   |   | - |   |   |   | (2,084,574 | ) |
| Interest      accretion                                                                                                                                                                                                                                                           |   |            | -        |   |            |   | -          |            |   |   | 6,927,439       |   |   |            | 272,701   |   |            |   | 177,414    |            |   |   | 36,244          |   |   |            | -       |   |   |   | - |   |   |   | - |   |   |   | 7,413,798 |   |
| Change      in accounting policy (note 4 (a))                                                                                                                                                                                                                                     |   |            | -        |   |            |   | -          |            |   |   | (18,214,155     | )      |   |            | -         |   |            |   | -          |            |   |   | -               |   |   |            | -       |   |   |   | - |   |   |   | - |   |   |   | (18,214,155 | ) |
| Incremental      beneficial conversion feature adjustment                                                                                                                                                                                                                         |   |            | -        |   |            |   | -          |            |   |   | (295,885        | )      |   |            | -         |   |            |   | -          |            |   |   | -               |   |   |            | -       |   |   |   | - |   |   |   | - |   |   |   | (295,885 | ) |
| Conversion      of debt to common shares                                                                                                                                                                                                                                          |   |            | (185,000 | )      |            |   | -          |            |   |   | (145,442        | )      |   |            | (263,210  | )      |            |   | -          |            |   |   | -               |   |   |            | -       |   |   |   | - |   |   |   | - |   |   |   | (593,652 | ) |
|                                                                                                                                                                                                                                                                              |   |            |     |   |            |   |       |            |   |   |            |   |   |            |      |   |            |   |       |            |   |   |            |   |   |            |    |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Debt      component, as at July 31, 2007                                                                                                                                                                                                                                          |   |            | 10,000   |   |            |   | 1,420,000  |            |   |   | 9,704,533       |   |   |            | 415,620   |   |            |   | 896,112    |            |   |   | 516,843         |   |   |            | -       |   |   |   | - |   |   |   | - |   |   |   | 12,963,108 |   |
| Less      current portion, as at July 31, 2007                                                                                                                                                                                                                                    |   |            | (10,000  | )      |            |   | (1,420,000 | )               |   |   | (9,704,533      | )      |   |            | -         |   |            |   | -          |            |   |   | -               |   |   |            | -       |   |   |   | - |   |   |   | - |   |   |   | (11,134,533 | ) |
|                                                                                                                                                                                                                                                                              |   |            |     |   |            |   |       |            |   |   |            |   |   |            |      |   |            |   |       |            |   |   |            |   |   |            |    |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Long      term portion of debt      component,                                as      at July 31,  2007 |   | $               | -        |   |            | $      | -          |            |   | $      | -               |   |   | $               | 415,620   |   |            | $      | 896,112    |            |   | $      | 516,843         |   |   | $               | -       |   |   | $      | - |   |   | $ | - |   |   | $ | 1,828,575 |   |
|                                                                                                                                                                                                                                                                              |   |            |     |   |            |   |       |            |   |   |            |   |   |            |      |   |            |   |       |            |   |   |            |   |   |            |    |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Remaining      face value of convertible debenture as at July      31,  2007                                                                                                                                                                                            |   | $               | 10,000   |   |            | $      | 1,420,000  |            |   | $      | 29,854,558      |   |   | $               | 936,790   |   |            | $      | 1,800,000  |            |   | $      | 1,150,000       |   |   | $               | -       |   |   | $      | - |   |   | $ | - |   |   | $ | 35,171,348 |   |
|                                                                                                                                                                                                                                                                              |   |            |     |   |            |   |       |            |   |   |            |   |   |            |      |   |            |   |       |            |   |   |            |   |   |            |    |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Debt      component, as at July 31, 2007:                                                                                                                                                                                                                                         |   |            | 10,000   |   |            |   | 1,420,000  |            |   |   | 9,704,533       |   |   |            | 415,620   |   |            |   | 896,112    |            |   |   | 516,843         |   |   |            | -       |   |   |   | - |   |   |   |   |   |   |   | 12,963,108 |   |
| Issued                                                                                                                                                                                                                                                                            |   |            | -        |   |            |   | -          |            |   |   | -               |   |   |            | -         |   |            |   | -          |            |   |   | 350,000         |   |   |            | 96,500  |   |   |   | 888,000 |   |   |   | 269,000 |   |   |   | 1,603,500 |   |
| Finance      fees paid to debenture holder/related company of debenture      holder                                                                                                                                                                                               |   |            | -        |   |            |   | -          |            |   |   | -               |   |   |            | -         |   |            |   | -          |            |   |   | (35,000         | )      |   |            | (11,500 | )      |   |   | (123,000 | ) |   |   | (31,000 | ) |   |   | (200,500 | ) |
| Intrinsic      value of beneficial conversion feature of convertible      debentures                                                                                                                                                                                              |   |            | -        |   |            |   | -          |            |   |   | -               |   |   |            | -         |   |            |   | -          |            |   |   | (200,121        | )      |   |            | (35,625 | )      |   |   | (456,939 | ) |   |   | (98,250 | ) |   |   | (790,935 | ) |
| Fair      value of warrants issued                                                                                                                                                                                                                                                |   |            | -        |   |            |   | -          |            |   |   | -               |   |   |            | -         |   |            |   | -          |            |   |   | -               |   |   |            | -       |   |   |   | (207,189 | ) |   |   | - |   |   |   | (207,189 | ) |
| Interest      accretion                                                                                                                                                                                                                                                           |   |            | -        |   |            |   | -          |            |   |   | 20,150,025      |   |   |            | 521,170   |   |            |   | 903,888    |            |   |   | 868,278         |   |   |            | 47,125  |   |   |   | 787,128 |   |   |   | 129,250 |   |   |   | 23,406,864 |   |
| Conversion      of debt to common shares                                                                                                                                                                                                                                          |   |            |     |   |            |   | -          |            |   |   | (1,224,960      | )      |   |            | (481,490  | )      |            |   | -          |            |   |   | -               |   |   |            | -       |   |   |   | - |   |   |   | - |   |   |   | (1,706,450 | ) |
|                                                                                                                                                                                                                                                                              |   |            |     |   |            |   |       |            |   |   |            |   |   |            |      |   |            |   |       |            |   |   |            |   |   |            |    |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Debt      component, as at July 31, 2008                                                                                                                                                                                                                                          |   |            | 10,000   |   |            |   | 1,420,000  |            |   |   | 28,629,598      |   |   |            | 455,300   |   |            |   | 1,800,000  |            |   |   | 1,500,000       |   |   |            | 96,500  |   |   |   | 888,000 |   |   |   | 269,000 |   |   |   | 35,068,398 |   |
| Less      current portion, as at July 31, 2008                                                                                                                                                                                                                                    |   |            | (10,000  | )      |            |   | (1,420,000 | )               |   |   | (28,629,598     | )      |   |            | (455,300  | )      |            |   | (1,800,000 | )               |   |   | (1,500,000      | )      |   |            | (96,500 | )      |   |   | (888,000 | ) |   |   | (269,000 | ) |   |   | (35,068,398 | ) |
|                                                                                                                                                                                                                                                                              |   |            |     |   |            |   |       |            |   |   |            |   |   |            |      |   |            |   |       |            |   |   |            |   |   |            |    |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Long      term portion of debt component, as at July 31, 2008                                                                                                                                                                                                                     |   | $               | -        |   |            | $      | -          |            |   | $      | -               |   |   | $               | -         |   |            | $      | -          |            |   | $      | -               |   |   | $               | -       |   |   | $      | - |   |   | $ | - |   |   | $ | - |   |
|                                                                                                                                                                                                                                                                              |   |            |     |   |            |   |       |            |   |   |            |   |   |            |      |   |            |   |       |            |   |   |            |   |   |            |    |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Remaining      face value of convertible debenture as at July 31, 2008                                                                                                                                                                                                            |   | $               | 10,000   |   |            | $      | 1,420,000  |            |   | $      | 28,629,598      |   |   | $               | 455,300   |   |            | $      | 1,800,000  |            |   | $      | 1,500,000       |   |   | $               | 96,500  |   |   | $      | 888,000 |   |   | $ | 269,000 |   |   | $ | 35,068,398 |   |
|                                                                                                                                                                                                                                                                              |   |            |     |   |            |   |       |            |   |   |            |   |   |            |      |   |            |   |       |            |   |   |            |   |   |            |    |   |   |   |   |   |   |   |   |   |   |   |   |   |

----

| (a)   | $195,000 –      5% convertible debenture issued on December 15,      2004                  |
|-----------------|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| (i)   | $0.036      and; |
|-----------------|------------------|

| (ii)   | an      amount equal to 80% of the lowest closing bid price of our common stock,      as quoted on Bloomberg, L.P., for the five trading days immediately      preceding the conversion date, subject to adjustment as provided for in      the debentures. |
|------------------|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| (b)   | $1,500,000      – 5% convertible debenture issued on May 20,  2005 |
|-----------------|--------------------------------------------------------------------------|

----

| (c)   | $30,000,000      - 10% convertible debentures issued on June 23,  2005 |
|-----------------|------------------------------------------------------------------------|

| (i)   | $0.0573      and; |
|-----------------|-------------------|

| (ii)   | 80%      of the lowest volume weighted average price of the Company’s common stock      during the thirty trading days preceding the conversion date as quoted by      Bloomberg, LP.   As a result of this reset, the Company      recorded an incremental beneficial conversion feature of $295,885 against      the carrying value of the debentures at the time the reset occurred on      November 7, 2006.  The additional discount is being amortized to      interest over the life of thedebentures. |
|------------------|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

----

| (d)   | $1,200,000      - 10% convertible debentures issued on November 7,  2006 |
|-----------------|--------------------------------------------------------------------------|

| i)   | $0.0573      and; |
|----------------|-------------------|

| ii)   | 80%      of the lowest volume weighted average price of the Company’s common stock      during the thirty (30) trading days immediately preceding the      conversion date as quoted by Bloomberg,LP |
|-----------------|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| (e)   | $1,800,000      - 10% convertible debentures issued January 23, 2007, February 9, 2007 and      March 2, 2007 |
|-----------------|---------------------------------------------------------------------------------------------------------------|

| i)   | $0.0573      and, |
|----------------|-------------------|

| ii)   | 80%      of the lowest volume weighted average price of our common stock      during the thirty (30) trading days immediately preceding the conversion      date as quoted by Bloomberg, LP. |
|-----------------|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

----

| (f)   | $1,500,000      – 10% convertible debentures issued April 27, 2007 and August 20,      2007 |
|-----------------|---------------------------------------------------------------------------------------------------|

| i)   | $0.0573      and; |
|----------------|-------------------|

| ii)   | 80%      of the lowest volume weighted average price of our common stock      during the thirty (30) trading days immediately preceding the conversion      date as quoted by Bloomberg, LP. |
|-----------------|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

----

| (g)   | $96,500      – 10% convertible debenture issued November 19,  2007 |
|-----------------|--------------------------------------------------------------------------|

| i)   | $0.0573      and; |
|----------------|-------------------|

| ii)   | 80%      of the lowest volume weighted average price of our common stock      during the thirty (30) trading days immediately preceding the conversion      date as quoted by Bloomberg, LP. |
|-----------------|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

----

| (h)   | $888,000      – 12% convertible debentures issued November 30, 2007, January 18, 2008,      and February 20, 2008 |
|-----------------|-------------------------------------------------------------------------------------------------------------------------|

| i)   | $0.0573      and; |
|----------------|-------------------|

| ii)   | 80%      of the lowest volume weighted average price of our common stock      during the thirty (30) trading days immediately preceding the conversion      date as quoted by Bloomberg, LP. |
|-----------------|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

----

| (i)   | $269,000      – 12% convertible debenture issued June 20,2008 |
|-----------------|---------------------------------------------------------------------|

| iii)   | $0.0573      and; |
|------------------|-------------------|

| iv)   | 80%      of the lowest volume weighted average price of our common stock      during the thirty (30) trading days immediately preceding the conversion      date as quoted by Bloomberg, LP. |
|-----------------|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

----

| (j)   | Registration      rights agreements and beneficial ownership  limitations |
|-----------------|---------------------------------------------------------------------------|

----

| (k)   | Security      granted |
|-----------------|-----------------------|

----

----

----

| (a)   | Authorized: |
|-----------------|-------------|

| (b)   | Standby      equity distribution agreement: |
|-----------------|---------------------------------------------|

----

| (c)   | Stock-based      compensation |
|-----------------|-------------------------------|

----

| (d)   | Stock-options: |
|-----------------|----------------|

|                                            |                                                                                  |                                                                         |                                                      |                                                             |                                                                                                          |                                                                   |
|-------------------------------------------------|---------------------------------------------------------------------------------------|------------------------------------------------------------------------------|-----------------------------------------------------------|------------------------------------------------------------------|---------------------------------------------------------------------------------------------------------------|------------------------------------------------------------------------|
|                                            |  Unvested      options                                                      |  Vested      options                                                    |  Total                                               |                                                             |
|                                            |                                                                                  | Weighted                                                           |                                                      | Weighted                                                         |                                                                                                          | Weighted                                                               |
|                                            | Unvested                                                                         | average                                                                      | Vested                                                    | average                                                          |                                                                                                          | average                                                                |
|                                            | options                                                                          | exercise                                                                     | options                                                   | exercise                                                         | Options                                                                                                       | exercise                                                               |
|                                            | outstanding                                                                           | price                                                                        | outstanding                                               | price                                                            | outstanding                                                                                                   | price                                                                  |
|                                            |                                                                                  |                                                                         |                                                      |                                                             |                                                                                                          |                                                                   |
| Opening      balance,                           |                                                                                  |                                                                         |                                                      |                                                             |                                                                                                          |                                                                   |
|           July 31, 2007     |           9,600,000                 |  $         0.05            |       39,243,002            |  $       0.09            |     48,843,002                                                                            |  $        0.06            |
|           Options vested    |         (8,300,000)                           |             0.06 |         8,300,000 |           0.06 |                   - |  -                                                                |
|           Options forfeited |            (800,000)           |             0.05 |      (23,993,400)                |           0.06 |   (24,793,400)                                                                                      |            0.06 |
|                                            |                                                                                  |                                                                         |                                                      |                                                             |                                                                                                          |                                                                   |
| Ending      balance,                            |                                                                                  |                                                                         |                                                      |                                                             |                                                                                                          |                                                                   |
|     July      31, 2008      |              500,000 |  $         0.06            |       23,549,602            |  $       0.06            |     24,049,602                                                                            |  $        0.06            |

|                                            |                                                                                                                                  |                                                                         |                                                                                                                                        |                                                             |                                                                                                          |                                                                   |
|-------------------------------------------------|---------------------------------------------------------------------------------------------------------------------------------------|------------------------------------------------------------------------------|---------------------------------------------------------------------------------------------------------------------------------------------|------------------------------------------------------------------|---------------------------------------------------------------------------------------------------------------|------------------------------------------------------------------------|
|                                            |  Unvested      options                                                                                                      |  Vested      options                                                    |  Total                                                                                                                                 |
|                                            |                                                                                                                                  | Weighted                                                           |                                                                                                                                        | Weighted                                                         |                                                                                                          | Weighted                                                               |
|                                            | Unvested                                                                                                                         | average                                                                      | Vested                                                                                                                                      | average                                                          |                                                                                                          | average                                                                |
|                                            | options                                                                                                                          | exercise                                                                     | options                                                                                                                                     | exercise                                                         | Options                                                                                                       | exercise                                                               |
|                                            | outstanding                                                                                                                           | price                                                                        | outstanding                                                                                                                                 | price                                                            | outstanding                                                                                                   | price                                                                  |
|                                            |                                                                                                                                  |                                                                         |                                                                                                                                        |                                                             |                                                                                                          |                                                                   |
| Opening      balance,                           |                                                                                                                                  |                                                                         |                                                                                                                                        |                                                             |                                                                                                          |                                                                   |
|           July 31, 2006     |         21,950,000                                                                            |  $         0.10            |       44,073,402                                                                                              |  $       0.10            |     66,023,402                                                                            |  $        0.10            |
|           Options granted   |           2,500,000                                                                 |             0.05 |                        - |  -                                                          |       2,500,000                                                                 |            0.05 |
|           Options vested    |       (12,625,000)                                                                                      |             0.10 |       12,625,000                                                                                              |           0.10 |                   - |  -                                                                |
|           Options exercised |                       - |  -                                                                      |        (4,050,000)                                                                                       |           0.03 |     (4,050,000)                                                                           |            0.03 |
|           Options forfeited |         (2,225,000)                                                                           |             0.08 |      (13,405,400)                                                                                                  |           0.23 |   (15,630,400)                                                                                      |            0.21 |
|                                            |                                                                                                                                  |                                                                         |                                                                                                                                        |                                                             |                                                                                                          |                                                                   |
| Ending      balance,                            |                                                                                                                                  |                                                                         |                                                                                                                                        |                                                             |                                                                                                          |                                                                   |
|     July      31, 2007      |           9,600,000                                                                 |  $         0.05            |       39,243,002                                                                                              |  $       0.09            |     48,843,002                                                                            |  $        0.06            |

----

|                                 | 2008 | 2007              |
|--------------------------------------|------|-------------------|
| Expected      dividend yield         | ---  | 0%                |
| Expected      stock price volatility | ---  | 140      - 144%   |
| Risk-free      interest rate         | ---  | 3.87      - 4.08% |
| Expected      life of options        | ---  | 5      years      |

|                 |   |                     |                                                                                                             |                                                                                                             |                     |        |                                                                                                             |
|----------------------|--------|--------------------------|------------------------------------------------------------------------------------------------------------------|------------------------------------------------------------------------------------------------------------------|--------------------------|-------------|------------------------------------------------------------------------------------------------------------------|
|                 |   | Options      outstanding |                                                                                                             |                                                                                                             | Options      exercisable |
|                 |   |                     |                                                                                                             |                                                                                                             |                     |        |                                                                                                             |
|                 |   |                     | Weighted                                                                                                    |                                                                                                             |                     |        |                                                                                                             |
|                 |   |                     | average                                                                                                          | Weighted                                                                                                         |                     |        | Weighted                                                                                                         |
|                 |   |                     | remaining                                                                                                        | average                                                                                                          |                     |        | average                                                                                                          |
| Range      of        |   | Number                   | contractual                                                                                                      | exercise                                                                                                         |                     | Number      | exercise                                                                                                         |
| exercise      prices |   | of      shares           | life                                                                                                             | price                                                                                                            |                     | exercisable | price                                                                                                            |
|                 |   |                     |                                                                                                             |                                                                                                             |                     |        |                                                                                                             |
| $0.03      - 0.035   |   | 15,830,002               |                   1.87 |  $               0.03            |                     | 15,630,002  |  $               0.03            |
| $0.07      - 0.10    |   | 6,100,000                |                   2.48 | 0.08                                                                                                             |                     | 5,800,000   | 0.10                                                                                                             |
| $0.20                |   | 2,119,600                |                   0.04 |                   0.20 |                     | 2,119,600   |                   0.20 |
|                 |   |                     |                                                                                                             |                                                                                                             |                     |        |                                                                                                             |
| $0.03      - 0.20    |   | 24,049,602               |                   1.87 |  $               0.06            |                     | 23,549,602  |  $               0.06            |

----

|  (e)   | Warrants: |
|-----------------------|-----------|

|                                |   | 2008                                                                                                                                        |                                                                            |   | 2007                                                                                                                                        |                                                                            |
|-------------------------------------|--------|---------------------------------------------------------------------------------------------------------------------------------------------|---------------------------------------------------------------------------------|--------|---------------------------------------------------------------------------------------------------------------------------------------------|---------------------------------------------------------------------------------|
|                                |   |                                                                                                                                        | Weighted-                                                                       |   |                                                                                                                                        | Weighted-                                                                       |
|                                |   |                                                                                                                                        | average                                                                    |   |                                                                                                                                        | average                                                                    |
|                                |   |                                                                                                                                        | exercise                                                                   |   |                                                                                                                                        | exercise                                                                   |
|                                |   | Warrants                                                                                                                                    | price                                                                           |   | Warrants                                                                                                                                    | price                                                                           |
|                                |   |                                                                                                                                        |                                                                            |   |                                                                                                                                        |                                                                            |
| Outstanding,      beginning of year |   |        65,758,141                                                                                        |  $       0.16                           |   |        64,858,141                                                                                        |  $       0.16                           |
| Issued                              |   |      492,425,000                                                                                                   |           0.03                |   |             900,000                                                             |           0.04                |
| Reprice      of warrants            |   |                        - |              - |   |      (62,500,000)                                                                                                  |           0.16                |
| Reprice      of warrants            |   |                        - |              - |   |        62,500,000                                                                                        |           0.03                |
| Expired                             |   |           (808,141)                                                                       |           0.35                |   |                        - |              - |
|                                |   |                                                                                                                                        |                                                                            |   |                                                                                                                                        |                                                                            |
| Oustanding,      end of year        |   |      557,375,000                                                                                                   |  $       0.04                           |   |        65,758,141                                                                                        |  $       0.16                           |
|                                |   |                                                                                                                                        |                                                                            |   |                                                                                                                                        |                                                                            |

----

| (f)   | Settlement      of liabilities: |
|-----------------|---------------------------------|

----

| (g)   | Consulting      agreement: |
|-----------------|----------------------------|

|                                                |   | 2008                                                                                                                                              | 2007                                                                                        |
|-----------------------------------------------------|--------|---------------------------------------------------------------------------------------------------------------------------------------------------|---------------------------------------------------------------------------------------------|
|                                                |   |                                                                                                                                              |                                                                                        |
| Balance,      beginning of year                     |   |  $           947,945                                                                  |  $        1,692,094                            |
|  Additions      during the year                |   |                         - |               227,910 |
|  Amortization      of deferred financing costs |   |              (947,945)                                                           |              (972,059)     |
|                                                |   |                                                                                                                                              |                                                                                        |
| Balance,      end of year                           |   |  $                     -            |  $           947,945            |

|                                                                    |   | 2008                                                                                                                                  |   |  2007                                              |
|-------------------------------------------------------------------------|--------|---------------------------------------------------------------------------------------------------------------------------------------|--------|---------------------------------------------------------|
|                                                                    |   |                                                                                                                                  |   |                                                    |
| Interest      accreted on convertible debentures                        | $      |      23,406,864                                                                                              | $      |      7,413,798                 |
| Interest      expense and finance charges on convertible debt and other |   |        3,547,388                                                                                   |   |      3,279,209                 |
| Amortization      of deferred financing fees                            |   |           947,945                                                                   |   |         972,059 |
| Repricing      of warrants (notes 9(c) and 12 (e))                      |   |                       - |   |         450,000 |
|                                                                    |   |                                                                                                                                  |   |                                                    |
|                                                                    | $      |      27,902,197                                                                                              | $      |    12,115,066                            |

----

| (a)   | Interest      rate Risk: |
|-----------------|-------------------------------|

| (b)   | Credit      Risk: |
|-----------------|-------------------|

| (c)   | Foreign      Currency Risk: |
|-----------------|-----------------------------|

| (a)   | YA      Global Investments LP, formerly Cornell Capital Partners, is considered a      related party from a financial perspective due to the number and size of      the financial transactions that were entered into with the Company. YA      Global Investments does not have influence over the Company's operating or      investing activities. During the year ended July 31, 2008, the Company      paid $nil (2007 - $nil) in cash interest payments to YA Global Investments      for interest and financing fees due convertible debentures held by YA      Global Investments. The Company had the following financial      instruments outstanding with YA Global Investments and its subsidiaries as      at July 31, 2008: |
|-----------------|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| Financial      Instruments                 |    | Amount                                                                            |
|--------------------------------------------|---------|-----------------------------------------------------------------------------------|
|                                       |    |                                                                              |
| Standby      equity distribution agreement |  $ |         100,000,000                       |
| Preferred      shares                      |    |             3,085,440 |
| Convertible      debentures                |    |           15,388,900            |

| (b)   | During      the year ended July 31, 2008, the Company was charged $146,700 (2007 -      $229,268) in directors fees. As at July 31, 2008 $305,375 (2007 -      $191,475) was included in accounts payable and accrued liabilities as owed      to Directors of the Company.  These amounts were incurred in the      ordinary course of business are non- interest bearing, unsecured and due      on demand. |
|-----------------|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| (c)   |  During      the year ended July 31, 2007, the Company paid $80,000 in consulting fees      to the Company’s former Chairman pursuant to a consulting agreement      entered into on June 30, 2005 and renewed and modified on August 9, 2006.      The consulting agreement was terminated effective February 28, 2007 and      3,679,604 shares of the Company’s common stock were issued as      consideration for $72,525 owed to the former Chairman.  No      payments were made in 2008 pursuant to the  agreement. |
|-----------------|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

----

|                                            |   |                                                                                                                            |                                                                                                                      |
|-------------------------------------------------|--------|---------------------------------------------------------------------------------------------------------------------------------|---------------------------------------------------------------------------------------------------------------------------|
|                                            |   | 2008                                                                                                                            | 2007                                                                                                                      |
|                                            |   |                                                                                                                            |                                                                                                                      |
| Statutory      rate                             |   | 32.51%                                                                                                                          | 34.1%                                                                                                                     |
| Computed      statutory tax expense             |   |     (10,160,000)                                                                                            |       (6,695,000)                                                                           |
| Foreign      losses tax affected at lower rates |   |              (8,000)                                           |              32,000                                      |
| Reduction      of effective tax rates           |   |         6,378,000                                                                       |              14,000                                      |
| Permanent      and other differences            |   |         8,738,000                                                                       |         1,244,000                                                                 |
| Change      in valuation allowance              |   |       (4,948,000)                                                                                 |         5,405,000                                                                 |
|                                            |   |                                                                                                                            |                                                                                                                      |
|                                            |   |                      - |                     - |

|                                                        |   |                                                                      |                                                                      |
|-------------------------------------------------------------|--------|---------------------------------------------------------------------------|---------------------------------------------------------------------------|
|                                                        |   | 2008                                                                      | 2007                                                                      |
|                                                        |   |                                                                      |                                                                      |
| Deferred      tax assets:                                   |   |                                                                      |                                                                      |
| Property      and equipment and other assets, accounting    |   |                                                                      |                                                                      |
|           depreciation in excess of tax |   |  $     4,146,000                            |  $     5,587,000                            |
| Loss      carryforwards                                     |   |       23,201,000                            |       26,368,000                            |
| Scientific      research and development expenses           |   |            360,000 |            455,000 |
| Share      issue costs                                      |   |            398,000 |            552,000 |
| Others                                                      |   |            344,000 |            435,000 |
|                                                        |   |                                                                      |                                                                      |
| Total      gross deferred tax assets                        |   |       28,449,000                            |       33,397,000                            |
| Valuation      allowance                                    |   |     (28,449,000)                                      |     (33,397,000)                                      |

----

|                                                | 2008            | 2007          |
|-----------------------------------------------------|-----------------|---------------|
|                                                |            |          |
| Weighted-average      shares used in computation of | 2,188,573,411   | 344,399,602   |
| basic      loss per share                           |            |          |
|                                                |            |          |
| Potentially      dilutive securities excluded in    |            |          |
| calculation      of loss per share                  | 534,230,437,500 | 7,845,651,174 |

| (a)   | The      Company was committed to the following payments under operating leases,      and service agreements for premises and certain equipment and      consultants: |
|-----------------|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   |                                        |
|--------|---------------------------------------------|
| 2009   |       316,311 |
| 2010   |       323,797 |
| 2011   |       331,284 |
| 2012   |       334,402 |
| 2013   |       194,776 |

| (b)   | Product      warranties: |
|-----------------|--------------------------|

|                        |                                                   |
|-----------------------------|--------------------------------------------------------|
| Balance,      July 31, 2006 |  $     75,230            |
| Provision      decrease     |       (60,005)           |
| Expenditures                |         14,775 |
|                        |                                                   |
| Balance,      July 31, 2007 |         30,000 |
| Provision      increase     |         30,266 |
| Expenditures                |       (34,183)           |
|                        |                                                   |
| Balance,      July 31, 2008 |  $     26,083            |

| (c)   | Contingencies: |
|-----------------|----------------|

| (d)   | On      September 12, 2007, the Company filed a complaint against Siemens VDO      Automotive Corp. and Schrader-Bridgeport International, Inc. (“Schrader”)      in the United States District Court for the Eastern District of Virginia      alleging infringement of our United States Patent No. 5,231,872, entitled      “Tire Monitoring Apparatus and Method.” The case was styled      SmarTire Systems, Inc.      v. Siemens VDO      Automotive Corp.,      Schrader-Bridgeport      International, Inc. and Schrader Electronics      Ltd., Civil Action No. 1:07cv932 (E.D.      Virginia). |
|-----------------|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

----

|                | 2008                                                                                                                                                                                                    | 2007                                                                                                                                                                                                    |
|---------------------|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
|                |                                                                                                                                                                                                    |                                                                                                                                                                                                    |
| United      Kingdom |  $                          1,587,923                            |  $                          1,550,352                            |
| United      States  |                              1,431,560                 |                              1,929,474                 |
| Other               |                                 120,930 |                                 181,995 |
|                |                                                                                                                                                                                                    |                                                                                                                                                                                                    |
|                |  $                          3,140,413                            |  $                          3,661,821                            |

|            | 2008                                                                                                                                                                                                    | 2007                                                                                                                                                                                                    |
|-----------------|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
|            |                                                                                                                                                                                                    |                                                                                                                                                                                                    |
| Customer      A |  $                          1,438,667                            |  $                          1,492,557                            |
| Customer      B |                                 541,312 |                                 628,512 |
|            |                                                                                                                                                                                                    |                                                                                                                                                                                                    |

| (a)   | Subsequent      to July 31, 2008, 120,000,000 shares of the Company’s common stock were      issued pursuant to the conversion of convertible debentures with a      principal balance of $12,000. |
|-----------------|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| (b)   | On      August 1, 2008, the Company sold a secured convertible debenture to      Xentenial Holdings Limited in the principal amount of $152,500. The      Company received net proceeds of $126,000 on August 1, 2008 after paying      $26,500 monitoring and due diligence fees to Yorkville Advisors, LLC.      Under the terms of this secured convertible debenture, the Company is      required to repay principal, together with accrued interest calculated at      an annual rate of twelve percent (12%), on or before August 1,      2011.  Interest may be paid either in cash or in shares of the      Company’s common stock valued at the closing bid price on the trading day      immediately prior to the date paid, at the Company’s option. The secured      convertible debenture is secured by all of the Company’s      assets.  The debenture is convertible at the lesser of $0.0573      or eighty percent (80%) of the lowest volume weighted average price of the      Company’s common stock during the thirty (30) trading days immediately      preceding the conversion date as quoted by Bloomberg,      LP.   The secured convertible debenture also stipulated      that the Company pay the holder fifty percent (50%) of the proceeds (after      commercially reasonable attorney’s fees and taxes related to such      proceeds) up to $900,000, in cash, of any pending or future litigation,      with such payments to be applied to principal and/or interest on this      debenture or other debentures issued by the Company to the holder, at the      sole discretion of the holder (see note 19(c)).  The principal      on this note was repaid in full in September  2008. |
|-----------------|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

----

| (c)   | On      August 15, 2008, the Company sold a secured convertible debenture to      Xentenial Holdings Limited in the principal amount of $100,000. No fees      were withheld from the proceeds, which were received on August 19, 2008.      Under the terms of this secured convertible debenture, the Company is      required to repay principal, together with accrued interest calculated at      an annual rate of twelve percent (12%), on or before August 15,      2011.  Interest may be paid either in cash or in shares of the      Company’s common stock valued at the closing bid price on the trading day      immediately prior to the date paid, at the Company’s option. The secured      convertible debenture is secured by all of the Company’s      assets.  The secured convertible debenture is secured by all of      the Company’s assets.  The debenture is convertible at the      lesser of $0.0573 or eighty percent (80%) of the lowest volume weighted      average price of the Company’s common stock during the thirty (30) trading      days immediately preceding the conversion date as quoted by Bloomberg,      LP.  The secured convertible debenture also stipulated that the      Company pay the holder one hundred percent (100%) of the proceeds (after      commercially reasonable attorney’s fees and taxes related to such      proceeds) up to $900,000, in cash, of any pending or future litigation,      with such payments to be applied to principal and/or interest on this      debenture or other debentures issued by the Company to the holder, at the      sole discretion of the holder (see note 19(c)).  The principal      on this note was repaid in full in September  2008. |
|-----------------|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| (d)   | On      December 11, 2008, the Company sold its tire pressure monitoring      system business, along with substantially all of its assets and certain of      its liabilities, to Bendix CVS Canada, Inc. and Bendix Commercial Vehicle      Systems LLC pursuant to an asset purchase agreement dated December 4,      2008.  The assets sold include the grant of an exclusive,      royalty-free license to the Buyers that permits them to practice the      inventions covered by the claims in our patents in the market for      vehicles, and, with the exception of certain retained rights, the right to      enforce these patents against third parties for      infringement. The sale price was $2,500,000 cash at closing, plus an      earn-out amount in each of the five years after closing based on a      percentage of sales of tire pressure monitoring systems made by the buyers      during that period, with a minimum of US$500,000, of which $250,000 is      payable by March 1, 2009 and $250,000 is payable by March 1,      2010.  The earn-out is based on future revenues generated by the      buyers from the tire pressure monitoring system business, and any amounts      earned by the business above the minimum earn-out are payable on an annual      basis for a period of five years. |
|-----------------|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| (e)   | On      December 11, 2008, in connection with the sale of the Company’s tire      pressure monitoring business, David Warkentin resigned as Chief Executive      Officer of the Company.  He will retain his position on the      Company’s board of directors. |
|-----------------|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

----

| (f)   | On      December 19, 2008, Xentenial Holdings Limited, a wholly owned subsidiary      of YA Global Investments LP, converted face value in the aggregate amount      of $1,065,986 of various secured convertible debentures issued by the      Company into a total of 13,324,825,000 of the Company’s common shares as      follows: |
|-----------------|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|                         | Face                                                                            | Accrued                                                                                    | Total                                                                           | Shares                                |
|------------------------------|---------------------------------------------------------------------------------|--------------------------------------------------------------------------------------------|---------------------------------------------------------------------------------|---------------------------------------|
|                         | Value                                                                           | Interest                                                                                   | Amount                                                                          | Issued      Upon                      |
| Debenture      Issuance Date | Converted                                                                       | Converted                                                                                  | Converted                                                                       | Conversion                            |
| January      17, 2008        |  $         392,000            |  $           43,303            |  $         435,303            |     5,441,287,500 |
| February      20, 2008       |  $           74,000 |  $             7,347 |  $           81,347 |     1,016,837,500 |
| June      20, 2008           |  $         269,000            |  $           16,007            |  $         285,007            |     3,562,587,500 |
| August      1, 2008          |  $         152,500            |  $             6,969 |  $         159,469            |     1,993,362,500 |
| August      15, 2008         |  $         100,000            |  $             4,110 |  $         104,110            |     1,301,375,000 |
|                         |  $         987,500            |  $           77,736            |  $      1,065,236                            |   13,315,450,000            |

----