UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
 WASHINGTON, D.C. 20549
 FORM 10-Q
 þ
    
    QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
 FOR THE QUARTERLY PERIOD ENDED OCTOBER 31, 2008.
 o
    
    TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
 COMMISSION FILE NUMBER: 000-32089
 PURERAY CORPORATION
 (Exact name of registrant as specified in its charter)
 Washington
(State or other jurisdiction of 
incorporation or organization)
    
    91-2023071
(I.R.S. Employer
Identification No.)
 3490 PIEDMONT ROAD, SUITE 1120
ATLANTA, GA 30305
(Address of principal executive office)
(404) 869-6242
(Registrants telephone number, including area code)
 þ o
  Large accelerated filer o
    
    Accelerated filer o
    
    Non-accelerated filer o
(Do not check if a smaller reporting company)
    
    Smaller reporting company þ
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TABLE OF CONTENTS
 PagePART I  FINANCIAL INFORMATIONItem 1. Consolidated Financial Statements
    
    
    1Consolidated Balance Sheets as of October 31, 2008 (unaudited), and April 30, 2008
    
    
    F-1Consolidated Statements of Operations (unaudited) for the three and six month
periods ended October 31, 2008 and for the period from September 19, 2007
(inception of PureCanada) through October 31, 2008
    
    
    F-2Consolidated Statements of Cash Flows (unaudited) for the three and six month
periods ended October 31, 2008 and for the period from September 19, 2007
(inception of PureCanada) through October 31, 2008
    
    
    F-3Consolidated Statements of Stockholders Equity (unaudited) for the period from
May 1, 2008 through October 31, 2008
    
    
    F-4Notes to Consolidated Financial Statements (unaudited)
    
    
    F-5Item 2. Managements Discussion and Analysis of Financial Condition and Results
of Operations
    
    
    1Item 3. Quantitative and Qualitative Disclosures about Market Risk
    
    
    10Item 4T. Controls and Procedures
    
    
    10PART II  OTHER INFORMATIONItem 1. Legal Proceedings
    
    
    10Item 1A. Risk Factors
    
    
    10Item 2. Unregistered Sales of Equity Securities and Use of Proceeds
    
    
    10Item 3. Defaults upon Senior Securities
    
    
    11Item 4. Submission of Matters to a Vote of Security Holders
    
    
    11Item 5. Other Information
    
    
    11Item 6. Exhibits
    
    
    11SIGNATURES
    
    
    13
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PART I  FINANCIAL INFORMATION
 Item 1. Financial Statements
  Item 2. Managements Discussion and Analysis of Financial Condition and Results of Operations.
 FORWARD-LOOKING STATEMENTS
    MANAGEMENTS DISCUSSION AND ANALYSIS
OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
 Overview
    1




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1.
    
    PureCanada issued 35,855,000 shares to founders and investors, of which
15,185,000 shares were issued for $0.00001 per share in cash and 20,670,000 shares were
issued as consideration for the transfer to PureCanada of certain intangible assets by
the founders of PureCanada. The Exchangeable Shares include 4,355,000 shares (the
Escrowed Shares) issued to Kairos Partners, LLC (Kairos) pursuant to an Escrow and
Share Purchase Agreement (as defined below), under which the Escrowed Shares will be
held in escrow and incrementally released upon the occurrence of certain
performance-based milestone events. A further discussion of the accounting treatment
for the Escrowed Shares is included in Note 4 to the Consolidated Financial Statements
beginning on page F-1 hereunder.2.
    
    We declared a 1.76 forward split of our Common Stock on May 23 2008, after
which there were 34,870,000 shares of our Common Stock outstanding.3.
    
    Jim Glavas, our former President and a former director of the Company,
contributed 21,370,000 post-split restricted shares of our Common Stock to us as a
capital contribution for no consideration, after which there were 13,500,000 shares of
our Common Stock outstanding.4.
    
    Through an indirect wholly-owned subsidiary, we acquired all of the PureCanada
Shares by issuing one Exchangeable Share for each PureCanada Share. The Exchangeable
Shares are non-voting but have other rights and privileges on a basis pari passu with
our Common Stock.5.
    
    Under an Exchange Agreement (as defined below), we issued 8,963,750 shares of
our Special Voting Stock (as defined below) to a trustee to be held for and on behalf
of the registered holders of the Exchangeable Shares.6.
    
    We completed a private placement (the Offering) of 2,000,000 Units at a price
of $1.00 per Unit, whereby each Unit is comprised of one share of our Common Stock and
one share purchase warrant at an exercise price of $1.00 per share for a period of six
months.7.
    
    Jim Glavas, our former sole director, appointed Jefrey M. Wallace, Derek
Blackburn, Mickael Joasil and Frank ODea to our Board of Directors, and subsequently
resigned from the Board of Directors.
  2




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Business Operations
     Results of Operations
  3




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From Inception of PureCanada on September 19, 2007 to October 31, 2008
       Liquidity and Capital Resources
 From Inception of PureCanada on September 19, 2007 to October 31, 2008
  4




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Entry Into Share Purchase Agreement
      5




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6




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
    
    545,000 Escrowed Shares, within 120 days after the end of the
financial year of PureCanada in which the sales of PureCanada and its
affiliates are at least US$8,000,000;
    
    545,000 Escrowed Shares, within 120 days after the end of the
financial year of PureCanada in which the minimum EBITDA of PureCanada
and its affiliates for such financial year, on a consolidated basis,
is at least US$1,000,000;
    
    545,000 Escrowed Shares, within 120 days after the end of the
financial year of PureCanada in which the minimum EBITDA of PureCanada
and its affiliates for such financial year, on a consolidated basis,
is at least US$2,500,000;
    
    545,000 Escrowed Shares, within 120 days after the end of the
financial year of PureCanada in which the minimum EBITDA of PureCanada
and its affiliates for such financial year, on a consolidated basis,
is at least US$5,000,000; and
    
    2,175,000 Escrowed Shares, within five days after the day on which the shares of Common Stock of the Company are listed and posted for
trading on the Nasdaq Stock Market.
 7




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
    
    paying any dividends on common stock or any other shares which by their designation rank
junior to the Exchangeable Shares, other than stock dividends payable in common stock or
any such other shares ranking junior to the Exchangeable Shares;
    
    redeeming or purchasing or making any capital distribution in respect of common stock or
any other shares which by their designation rank junior to the Exchangeable Shares with
respect to the payment of dividends or on any liquidation distribution;
    
    redeeming or purchasing any other shares which by their designation rank equally with
the Exchangeable Shares with respect to the payment of dividends or on any liquidation
distribution.
  8




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Critical Accounting Policies and Estimates
          9




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Related Party Transactions
     Item 3. Quantitative and Qualitative Disclosures about Market Risk
  Item 4T. Controls and Procedures.
   PART II  OTHER INFORMATION
 Item 1. Legal Proceedings.
  Item 1A. Risk Factors.
  Item 2. Unregistered Sales of Equity Securities and Use of Proceeds.  Recent Sales of Unregistered Securities
  10




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Item 3. Defaults upon Senior Securities.
  Item 4. Submission of Matters to a Vote of Security Holders.
  Item 5. Other Information.
   Item 6. Exhibits.
 Number
    
    Description3.1
    
    Articles of Incorporation (incorporated by reference to Exhibit 3.1 to PureRay Corporations Registration Statement No. 333-38534 filed on June 2, 2000).3.2
    
    Articles of Amendment to Articles of Incorporation (incorporated by reference to Exhibit 3.1 to PureRay
Corporations Current Report on Form 8-K filed on March 25, 2003).3.3
    
    Articles of Amendment to Articles of Incorporation (incorporated by reference to Exhibit 3.1 to PureRay
Corporations Current Report on Form 8-K/A filed on October 9, 2008).3.4
    
    Bylaws (incorporated by reference to Exhibit 3.3 to PureRay Corporations Registration Statement No.
333-38534 filed on June 2, 2000).4.1
    
    Certificate of Designation of Special Voting Stock (incorporated by reference to Exhibit 4.1 to PureRay
Corporations Current Report on Form 8-K/A filed on October 9, 2008).10.1
    
    Share Purchase Agreement dated July 24, 2008 among the Company, PureRay Acquisition Inc., PureRay
Corporation, Mickael Joasil, Derek Blackburn, F.W.F. Robinson, Frank ODea, Kairos Partners, LLC, Thomas
J. Broeski, Raj Kurichh, Megs Padiachy , Ramlia Padiachy, Patrick Pierre and Matthew Sicoli (incorporated
by reference to Exhibit 10.1 to PureRay Corporations Current Report on Form 8-K/A filed on October 9,
2008).
 11




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Number
    
    Description10.2
    
    Voting and Exchange Trust Agreement dated July 24, 2008 among the Company, PureRay Holdings ULC, PureRay
Acquisition Inc. and Derek Blackburn (incorporated by reference to Exhibit 10.2 to PureRay Corporations
Current Report on Form 8-K/A filed on October 9, 2008).10.3
    
    Support Agreement dated July 24, 2008 among the Company, PureRay Holdings ULC and PureRay Acquisition
Inc. (incorporated by reference to Exhibit 10.3 to PureRay Corporations Current Report on Form 8-K/A
filed on October 9, 2008).10.4
    
    Capital Contribution Agreement dated July 24, 2008 between the Company and Jim Glavas (incorporated by
reference to Exhibit 10.4 to PureRay Corporations Current Report on Form 8-K/A filed on October 9,
2008).10.5
    
    Escrow and Share Purchase Agreement dated July 31, 2008 among Kairos Partners, LLC, PureRay Acquisition
Inc. and Wildeboer Dellelce LLP (incorporated by reference to Exhibit 10.5 to PureRay Corporations
Current Report on Form 8-K/A filed on October 9, 2008).10.6
    
    Assignment of Application dated July 2, 2008 between Mickael Joasil and PureRay Corporation (incorporated
by reference to Exhibit 10.6 to PureRay Corporations Current Report on Form 8-K/A filed on October 9,
2008).10.7
    
    Assignment of Application dated July 2, 2008 between Mickael Joasil and PureRay Corporation (incorporated
by reference to Exhibit 10.7 to PureRay Corporations Current Report on Form 8-K/A filed on October 9,
2008).10.8
    
    Trademark Assignment dated July 16, 2008 (incorporated by reference to Exhibit 10.8 to PureRay
Corporations Current Report on Form 8-K/A filed on October 9, 2008).10.9
    
    2008 Stock Option and Incentive Plan (incorporated by reference to Exhibit 10.2 to PureRay Corporations
Current Report on Form 8-K filed on October 17, 2008).31.1
    
    Certification of Chief Executive Officer Pursuant to Rule 13a-14(a) and Rule 15d-14(a).31.2
    
    Certification of Chief Financial Officer Pursuant to Rule 13a-14(a) and Rule 15d-14(a).32.1
    
    Certification of Chief Executive Officer Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.32.2
    
    Certification of Chief Financial Officer Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
 12




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SIGNATURES
  PURERAY CORPORATION
(Registrant)Date: December 22, 2008
    By:
    /s/ Jefrey M. WallaceJefrey M. WallacePrincipal Executive OfficerDate: December 22, 2008
    By:
    /s/ Derek BlackburnDerek BlackburnPrincipal Financial Officer 13




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EXHIBIT INDEX
 Number
    
    Description31.1
    
    Certification of Principal Executive Officer Pursuant to Rule 13a-14(a) and Rule 15d-14(a).31.2
    
    Certification of Principal Financial Officer Pursuant to Rule 13a-14(a) and Rule 15d-14(a).32.1
    
    Certification of Principal Executive Officer Pursuant to Section 906 of the Sarbanes-Oxley
Act of 2002.32.2
    
    Certification of Principal Financial Officer Pursuant to Section 906 of the Sarbanes-Oxley
Act of 2002.
 14




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PURERAY CORPORATION
(a development stage company)
CONSOLIDATED BALANCE SHEETS
(Expressed in U.S. dollars)
  October 31, 2008
    
    
    April 30, 2008$
    
    
    $UnauditedASSETS
    
    
    
    
    
    
    
    

Current AssetsCash
    
    
    496,613
    
    
    
    Prepaid expenses
    
    
    157,289
    
    
    
    11,240Due from related parties
    
    
    
    
    
    
    100,150Total Current Assets
    
    
    653,902
    
    
    
    111,390Other AssetsPatents
    
    
    19,200
    
    
    
    Total Assets
    
    
    673,102
    
    
    
    111,390LIABILITIES AND STOCKHOLDERS DEFICITCurrent LiabilitiesAccounts payable
    
    
    267,982
    
    
    
    59,751Accrued liabilities
    
    
    
    
    
    
    70,092Due to a related party
    
    
    49,500
    
    
    
    11,240Note payable
    
    
    
    
    
    
    100,000Total Liabilities
    
    
    317,482
    
    
    
    241,083Contingencies
and Commitments (Note 4)Stockholders Equity (Deficit)Preferred Stock; Par value $0.0001 per share;
8,963,750 shares issued and outstanding
    
    
    896
    
    
    
    Common Stock; Par value $0.001 per share;
15,500,000 and 15,185,000 shares issued and
outstanding
    
    
    1,550
    
    
    
    1,519Additional Paid-in Capital
    
    
    1,836,513
    
    
    
    Stock Subscription Receivable
    
    
    
    
    
    
    (1,369
    )Deficit Accumulated During the Development Stage
    
    
    (1,483,339
    )
    
    
    (129,843
    )Total Stockholders Equity (Deficit)
    
    
    355,620
    
    
    
    (129,693
    )Total
Liabilities and Stockholders Equity (Deficit)
    
    
    673,102
    
    
    
    111,390
  F-1




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PURERAY CORPORATION
(a development stage company)
CONSOLIDATED STATEMENTS OF OPERATIONS
(Expressed in U.S. dollars)
(unaudited)
  Accumulated FromThree Months
    
    
    Three Months
    
    
    Six Months
    
    
    Six Months
    
    
    September 19, 2007Ended
    
    
    Ended
    
    
    Ended
    
    
    Ended
    
    
    (Date of Inception)October 31, 2008
    
    
    October 31, 2007
    
    
    October 31, 2008
    
    
    October 31, 2007
    
    
    To October 31, 2008$
    
    
    $
    
    
    $
    
    
    $
    
    
    $Revenue
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    ExpensesProfessional fees
    
    
    211,359
    
    
    
    
    
    
    
    641,854
    
    
    
    
    
    
    
    641,854Management and consulting fees
    
    
    216,160
    
    
    
    
    
    
    
    388,276
    
    
    
    
    
    
    
    438,276Product development
    
    
    138,330
    
    
    
    
    
    
    
    138,330
    
    
    
    
    
    
    
    138,330Marketing
    
    
    78,234
    
    
    
    
    
    
    
    83,734
    
    
    
    
    
    
    
    153,826Other
    
    
    74,843
    
    
    
    
    
    
    
    104,713
    
    
    
    
    
    
    
    114,464Total Expenses
    
    
    718,926
    
    
    
    
    
    
    
    1,356,907
    
    
    
    
    
    
    
    1,486,750Net Loss Before Other Income (Expense)
    
    
    (718,926
    )
    
    
    
    
    
    
    (1,356,907
    )
    
    
    
    
    
    
    (1,486,750
    )Other Income (Expense)Interest income
    
    
    3,411
    
    
    
    
    
    
    
    3,411
    
    
    
    
    
    
    
    3,411Net Loss for the Period
    
    
    (715,515
    )
    
    
    
    
    
    
    (1,353,496
    )
    
    
    
    
    
    
    (1,483,339
    )Net Loss Per Share  Basic and Diluted
    
    
    (0.05
    )
    
    
    
    
    
    
    (0.08
    )
    
    
    
    
    
    
    (0.14
    )Weighted Average Number of Shares Outstanding
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Basic and Diluted
    
    
    15,500,000
    
    
    
    
    
    
    
    17,995,917
    
    
    
    
    
    
    
    10,452,614
  F-2




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PURERAY CORPORATION
(a development stage company)
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Expressed in U.S. dollars)
(unaudited)
  Accumulated FromSix Months
    
    
    Six Months
    
    
    September 19, 2007Ended
    
    
    Ended
    
    
    (Date of Inception)October 31, 2008
    
    
    October 31, 2007
    
    
    To October 31, 2008$
    
    
    $
    
    
    $Operating ActivitiesNet loss
    
    
    (1,353,496
    )
    
    
    
    
    
    
    (1,483,339
    )Adjustments to reconcile net loss to cash used in
operating activitiesChange in operating assets and liabilitiesPrepaid expenses
    
    
    (146,048
    )
    
    
    
    
    
    
    (157,289
    )Accounts payable and accrued liabilities
    
    
    53,667
    
    
    
    
    
    
    
    183,511Net Cash Used in Operating Activities
    
    
    (1,445,877
    )
    
    
    
    
    
    
    (1,457,117
    )Financing ActivitiesProceeds (repayment) of notes payable
    
    
    
    
    
    
    
    
    
    
    Due to (from) related parties
    
    
    (11,240
    )
    
    
    
    
    
    
    Net Cash Provided By Financing Activities
    
    
    (11,240
    )
    
    
    
    
    
    
    Investing ActivitiesPatent costs
    
    
    (19,200
    )
    
    
    
    
    
    
    (19,200
    )Net cash from recapitalization
    
    
    1,972,930
    
    
    
    
    
    
    
    1,972,930Net Cash Provided By Investing Activities
    
    
    1,953,730
    
    
    
    
    
    
    
    1,953,730Increase (Decrease) In Cash
    
    
    496,613
    
    
    
    
    
    
    
    496,613Cash  Beginning of Period
    
    
    
    
    
    
    
    
    
    
    Cash  End of Period
    
    
    496,613
    
    
    
    
    
    
    
    496,613Non-cash Investing and Financing ActivitiesAcquistion of net assets of NAGA with issuance of stock
    
    
    1,838,759
    
    
    
    
    
    
    
    1,838,759Supplemental DisclosuresInterest paid
    
    
    
    
    
    
    
    
    
    
    Income taxes paid
    
    
    
    
    
    
    
    
    
    
    
  F-3




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PURERAY CORPORATION
(a development stage company)
CONSOLIDATED STATEMENTS OF STOCKHOLDERS EQUITY
(Expressed in U.S. dollars)
(unaudited)
  DeficitAccumulatedCommon Shares
    
    
    Preferred Shares
    
    
    Additional
    
    
    
    
    
    
    During thePar
    
    
    
    
    
    
    Par
    
    
    Paid -In
    
    
    Shareholder
    
    
    DevelopmentNumber
    
    
    Value
    
    
    Number
    
    
    Value
    
    
    Capital
    
    
    Subscription
    
    
    Stage
    
    
    Total#
    
    
    $
    
    
    #
    
    
    $
    
    
    $
    
    
    $
    
    
    $
    
    
    $Balance  September 19, 2007
(Date of Inception)
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Common shares subscribed
    
    
    15,185,000
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    150
    
    
    
    
    
    
    
    
    
    
    
    150Net loss for the period
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (129,843
    )
    
    
    (129,843
    )Balance  April 30, 2008
    
    
    15,185,000
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    150
    
    
    
    
    
    
    
    (129,843
    )
    
    
    (129,693
    )Shares issued for intangible assets
    
    
    20,670,000
    
    
    
    2,067
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (2,067
    )
    
    
    
    
    
    
    Adjustment for change in Par Value
    
    
    
    
    
    
    1,519
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (1,519
    )
    
    
    
    
    
    
    Recapitalization transactions
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Shares effectively issued to former
NAGA shareholders as part of the
recapitalization
    
    
    34,870,000
    
    
    
    3,487
    
    
    
    
    
    
    
    
    
    
    
    (3,487
    )
    
    
    
    
    
    
    
    
    
    
    Cancellation of founders stock
    
    
    (21,370,000
    )
    
    
    (2,137
    )
    
    
    
    
    
    
    
    
    
    
    2,137
    
    
    
    
    
    
    
    
    
    
    
    Shares of Pure Canada acquired by
legal acquiror
    
    
    (35,855,000
    )
    
    
    (3,586
    )
    
    
    
    
    
    
    
    
    
    
    (150
    )
    
    
    3,586
    
    
    
    
    
    
    
    (150
    )Net liabilities assumed in
recapitalization
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (160,996
    )
    
    
    
    
    
    
    
    
    
    
    (160,996
    )Unit Private Placement
    
    
    2,000,000
    
    
    
    200
    
    
    
    
    
    
    
    
    
    
    
    1,999,755
    
    
    
    
    
    
    
    
    
    
    
    1,999,955Issuance of Preferred Shares
    
    
    
    
    
    
    
    
    
    
    8,963,750
    
    
    
    896
    
    
    
    (896
    )
    
    
    
    
    
    
    
    
    
    
    Net loss for the period
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (1,353,496
    )
    
    
    (1,353,496
    )Balance  October 31, 2008
    
    
    15,500,000
    
    
    
    1,550
    
    
    
    8,963,750
    
    
    
    896
    
    
    
    1,836,513
    
    
    
    
    
    
    
    (1,483,339
    )
    
    
    355,620
  F-4




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##### 



PURERAY CORPORATION
(a development stage company)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
October 31, 2008
(unaudited)
    a.
    
    PureCanada issued 35,855,000 shares to founders and investors, of which 15,185,000
shares (subscribed as of April 30, 2008) were issued for $0.00001 per share in cash, and
20,670,000 shares were issued as consideration for the transfer to PureCanada of certain
intangible assets by the founders of PureCanada.b.
    
    NAGA declared a 1.76 forward split of its common stock on May 23, 2008, after which
there were 34,870,000 shares of its common stock outstanding.c.
    
    Jim Glavas, the former President and a former director of NAGA, contributed
21,370,000 post-split restricted shares of NAGAs Common Stock to NAGA as a capital
contribution for no consideration, after which there were 13,500,000 shares of NAGAs
common stock outstanding.d.
    
    Pursuant to a Share Purchase Agreement, NAGA acquired, through an indirect
wholly-owned subsidiary (Acquisition Sub), all of the outstanding shares of PureCanada
by issuing one (1) exchangeable share (the Exchangeable Shares) of Acquisition Sub for
each share of PureCanada (total Exchangeable Shares issued, 35,855,000). The Exchangeable
Shares are non-voting but have other rights and privileges on a basis pari passu with the
common stock of the Company.e.
    
    Under a Voting and Exchange Trust Agreement (the Exchange Agreement), the Company
issued shares of preferred stock of the Company, par value $0.0001 per share (the Special
Voting Stock), in a ratio of a quarter (1/4) share of Special Voting Stock for each
Exchangeable Share issued in connection with the Acquisition (for a total of 8,963,750
shares of Special Voting Stock) to a trustee to be held for and on behalf of the
registered holders of the Exchangeable Shares.f.
    
    NAGA completed a private placement (the Offering) of 2,000,000 units at a price of
$1.00 per unit, whereby each unit is comprised of one common share and one share purchase
warrant (the Warrants) at an exercise price of $1.00 per share for a period of six
months.g.
    
    The former sole director of NAGA appointed three holders of Exchangeable Shares to
the Companys Board of Directors and subsequently resigned from the Board of Directors.
   F-5




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F-6




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Basis of Accounting
  Year end
  Comparative Financial Statements
  Use of Estimates
  Cash and Cash Equivalents
  Research and Development Costs
  Foreign Currency Translation
  Long-lived Assets
 
 F-7




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Financial Instruments
  Income Taxes
  Comprehensive Income
  Basic and Diluted Net Loss per Share
  Stock-based Compensation
 
 F-8




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Recent Accounting Pronouncements
      F-9




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October 31,
    
    
    April 30,2008
    
    
    2008Preferred Shares
    
    
    8,963,750
    
    
    
    8,963,750Common Shares
    
    
    15,500,000
    
    
    
    15,500,000
  a.
    
    The Exchangeable Shares (Note 1)b.
    
    The Warrants (Note 1)c.
    
    Warrants issued for servicesIn October 2008, the Company granted warrants to a non-employee for the purchase of 750,000
common shares at an exercise price of $0.50 per share, based upon the average trading
price of the Companys common stock for the immediately succeeding five days following
the date of grant. The warrants vest in four quarterly installments beginning November
1, 2009. The fair value of the warrants ($0.14 per share or $105,000 in aggregate) will
be amortized to consulting expense over the vesting period. The $105,000 value ascribed to the warrants was estimated as of October 31, 2008 using the Black-Scholes Pricing Model with the following assumptions: risk-free interest rate of 2.6%; expected life of 5.3 years; expected volatility of 75%; and an expected dividend yield of 0.0%.d.
    
    2008 Stock Option and Incentive Plan (the 2008 Option Plan)The Company adopted
the 2008 Option Plan in October 2008. The 2008 Option Plan authorizes up to 5,500,000
common shares for the grant of options or restricted stock to qualified recipients,
including employees and non-employees. The exercise price of options and the value
established for restricted shares will be the then current fair value per common share.
Vesting schedules and other terms will be determined by the Board of Directors upon each
grant under the plan. No options or restricted shares had been granted as of October 31,
2008.
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Earnings (Loss) per Share.
   
    
    545,000 Escrowed Shares, within 120 days after the end of the
financial year in which the sales are at least US$8,000,000;
    
    545,000 Escrowed Shares, within 120 days after the end of the
financial year in which EBITDA for such financial year is at least
US$1,000,000;
    
    545,000 Escrowed Shares, within 120 days after the end of the
financial year in which EBITDA is at least US$2,500,000;
    
    545,000 Escrowed Shares, within 120 days after the end of the
financial year in which EBITDA is at least US$5,000,000; and
    
    2,175,000 Escrowed Shares, within five days after the day on which the shares of common stock of the Company are listed and posted for
trading on the Nasdaq Stock Market.
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F-12