FMX Ventures Inc. formerly Footmaxx Holdings Inc.
TSX VENTURE : FMX

FMX Ventures Inc. formerly Footmaxx Holdings Inc.

November 30, 2007 15:17 ET

FMX Ventures Inc.: Financial Statements and MD&A for Q3 2007

TORONTO, ONTARIO--(Marketwire - Nov. 30, 2007) - FMX Ventures Inc. formerly operating as Footmaxx Holdings Inc. (TSX VENTURE:FMX) ("Footmaxx"), a leading orthorpaedic and diagnostic company announces that:

Sale of the Company

Footmaxx Holdings Inc. has completed the previously announced sale by the Company and its subsidiaries of substantially all of the assets utilized in carrying on its orthotics business for aggregate cash consideration of $16,300,000 and the assumption of obligations related to the Company's business. The proceeds from the asset sale have been applied primarily to retire the Company's outstanding debentures and to satisfy costs associated with the transaction.

As a result of the sale transaction, the Company no longer has any substantive assets or active business operations and will be changing its name to "FMX Ventures Inc.". Consequently, trading of the Company's shares has been halted on the TSX Venture Exchange ("Exchange"), and subject to the final approval of the Exchange, is expected to resume on the NEX trading board of the Exchange upon completion of the proposed name change.

The Company intends to explore potential alternatives to maximize the value of its listing and its accumulated tax losses. However, there can be no assurance that any viable alternatives will be identified or that a transaction will be completed, whether in the foreseeable future or at all.

Footmaxx Achieves Q3 EBITDA of $278,000, Year-to-date $1,148,000

Overall Performance

During the third quarter of 2007 the Company continued to be impacted by fluctuations in exchange rates due to a strengthening Canadian dollar. As a result, revenue decreased from $3,248,870 in the third quarter of 2006 to $2,997,056 in the third quarter of 2007. EBITDA for the third quarter decreased from $333,583 in 2006 to $277,764 in 2007. The company experienced a net loss of $220,606 for the third quarter of 2007 as compared to a net loss of $164,774 in 2006. Year to date revenue decreased $256,107 from $10,041,741 in 2006 to $9,785,634 in 2007. Year to date EBITDA decreased $108,980 from $1,257,323 in 2006 to $1,148,343 in 2007. Net loss increased from $226,899 in 2006 to $310,655 in 2007.

Non-GAAP Measures

In the Management Discussion and Analysis, and elsewhere, measures such as earnings before interest, taxes, depreciation and amortization (EBITDA) and other terms that are used are not defined by generally accepted accounting principles ("GAAP"). The use of these terms may not be consistent with the way these terms are used by others. Where possible, in particular for EBITDA, tables and other information are provided that enables readers to reconcile between such non-GAAP measures and standard GAAP measures. While these measures are not defined by or required by GAAP, this information is provided to readers to help them better understand significant measures.

Forward-looking Statements

This release may contain projections and other forward-looking statements regarding future events. Such statements are predications involving known and unknown risks, uncertainties and other factors that may cause the actual events or results to be materially different. Although the Company believes that the forward-looking statements contained herein are reasonable, it can give no assurance that the Company's expectations are correct. For information concerning factors affecting the Company's business, the reader is referred to the documents that the Company files from time to time with applicable Canadian securities and regulatory authorities.

Footmaxx produces and globally markets high quality, state-of-the-art orthopaedic devices and products. Footmaxx's diagnostic system and proprietary software provides detailed information which enable clinicians to further evaluate patients for certain for knee, hip, lower back and bio-mechanical problems. For more information on Footmaxx visit: www.footmaxx.com.



FMX Ventures Inc
Formerly operating as Footmaxx holdings Inc
Consolidated Balance Sheet
As at September 30, 2007
Unaudited

September 30, 2007 December 31, 2006
---------------------------------------
Current assets

Cash $ 81,515 322,613
Accounts receivable 1,333,615 1,368,931
Inventory
Systems 163,540 47,229
Materials 426,993 387,304
Other assets 63,757 69,372

---------------------------------------
Total current assets 2,069,420 2,195,449

Capital assets 465,118 533,513
Deferred financing costs - 38,745

---------------------------------------
Total assets $ 2,534,538 2,767,707
---------------------------------------
---------------------------------------

Current liabilities

Accounts payable and accruals $ 839,058 1,147,358
Bank Indebtedness 40,000 -
Current portion of Penfund loan
(Note 6) - 864,932
Current Portion Convertible
debentures 16,871,775 15,661,057

---------------------------------------
Total liabilities 17,750,833 17,673,347
---------------------------------------

Shareholders' deficiency

Capital stock 20,248,082 20,248,082

Deficit (35,464,377) (35,153,722)

---------------------------------------
Total shareholders' deficiency (15,216,295) (14,905,640)
---------------------------------------

---------------------------------------
Total liabilities and shareholders'
deficiency $ 2,534,538 2,767,707
---------------------------------------
---------------------------------------

The interim Consolidated Financial Statements for the three months ended
September 30, 2007 have not been reviewed by an auditor.

See accompany notes to the Consolidated Financial Statements.


FMX Ventures Inc
Formerly operating as Footmaxx holdings Inc
Consolidated Statement of Operations and Deficit
For Quarterly Periods ended September 30, 2007 & 2006
Unaudited

Year-to-Date Year-to-Date
September September
Q3 2007 Q3 2006 30, 2007 30, 2006

Sales $ 2,997,056 $ 3,248,870 $ 9,785,634 $ 10,041,741
Cost of sales 1,476,878 1,605,030 4,742,228 4,861,983
-----------------------------------------------------------
Gross profit 1,520,178 1,643,840 5,043,406 5,179,758
-----------------------------------------------------------

Expenses
Selling and
administration
(note 3) 1,036,468 1,125,781 3,253,773 3,350,608
Information
technology 200,882 211,406 638,541 645,841
Accrued
interest
on convertible
debentures 423,671 347,938 1,210,718 994,906
Interest on
Penfund loan - 42,959 21,480 166,108
Other interest 1,863 2,398 3,764 3,668
Foreign
exchange loss
(gain) 5,064 (26,930) 2,749 (74,014)
Amortization of
capital assets 72,836 81,815 184,292 249,800
Amortization of
deferred
financing
expenses - 23,247 38,744 69,740
-----------------------------------------------------------
Total expenses 1,740,784 1,808,614 5,354,061 5,406,657
-----------------------------------------------------------

Loss before
income taxes (220,606) (164,774) (310,655) (226,899)

Income taxes - - - -

-----------------------------------------------------------
Net loss for
the period (220,606) (164,774) (310,655) (226,899)
-----------------------------------------------------------

Deficit,
beginning of
period (35,243,771) (34,831,776) (35,153,722) (34,769,651)

-----------------------------------------------------------

Deficit, end of
period $ (35,464,377) $ (34,996,550) $ (35,464,377) $ (34,996,550)
-----------------------------------------------------------
-----------------------------------------------------------

Outstanding
shares 41,131,205 41,131,205 41,131,205 41,131,205

Basic and
diluted loss
per common
share (note 5) $ -0.01 $ 0.00 $ -0.01 $ -0.01
-----------------------------------------------------------
-----------------------------------------------------------


The interim Consolidated Financial Statements for the three months ended
September 30, 2007 have not been reviewed by an auditor.

See accompany notes to the Consolidated Financial Statements.


FMX Ventures Inc
Formerly operating as Footmaxx holdings Inc
Consolidated Statement of Cash Flows
For Quarterly Periods ended September 30, 2007 & 2006
Unaudited


Year-to-Date Year-to-Date
September September
Q3 2007 Q3 2006 30, 2007 30, 2006
--------------------------------------------------
Cash flows from
(used in)
operating
activities:

Loss for the period: $(220,606) $(164,774) $(310,655) $(226,899)

Items not involving
cash:
Amortization of
capital assets 72,836 81,815 184,292 249,800
Amortization of
deferred
financing costs - 23,247 38,744 69,740
Interest on
convertible
debentures 423,671 347,938 1,210,718 994,906
Imputed interest on
Penfund loan - 24,463 (420,488) (226,931)
--------------------------------------------------
275,901 312,689 702,611 860,616
--------------------------------------------------

Change in other
non-cash
working capital:

Decrease (increase)
in accounts
receivable 174,279 (8,882) 35,316 (185,016)
Decrease (increase)
in inventory (46,414) 113,424 (156,000) 22,579
Decrease (increase)
in other assets 35,379 10,405 5,615 1,541
(Decrease) increase
in accounts payable
and accruals (74,655) 20,457 (308,300) 149,370
--------------------------------------------------
88,589 135,404 (423,369) (11,526)
--------------------------------------------------

364,490 448,093 279,242 849,090
--------------------------------------------------

Cash flows from
(used in)
financing activities

Increase (decrease)
in bank
indebtedness (200,000) (180,000) 40,000 (200,000)
Repayment of
Penfund loan - (148,149) (444,444) (592,593)
--------------------------------------------------
(200,000) (328,149) (404,444) (792,593)
--------------------------------------------------

Cash flows used in
investing
activities:

Purchase of
capital assets (92,159) (96,587) (115,896) (100,039)
--------------------------------------------------

Increase (decrease)
in cash 72,331 23,357 (241,098) (43,542)

Cash, beginning of
period 9,184 47,091 322,613 113,990
--------------------------------------------------

Cash, end of period $ 81,515 $ 70,448 $ 81,515 $ 70,448
--------------------------------------------------
--------------------------------------------------

The interim Consolidated Financial Statements for the three months ended
September 30, 2007 have not been reviewed by an auditor.

See accompany notes to the Consolidated Financial Statements.


FMX Ventures Inc
Formerly operating as Footmaxx holdings Inc
Notes to Consolidated Financial
Statements As at September 30, 2007


1. Basis of Presentation

The unaudited interim period consolidated financial statements have been prepared by the Company in accordance with Canadian generally accepted accounting principles. The preparation of financial data is based on accounting policies and practices consistent with those used in the preparation of the audited annual consolidated statements. These unaudited interim period financial statements do not include all the disclosures required by generally accepted accounting principles and accordingly should be read together with the audited annual consolidated financial statements and the accompanying notes included in the Company's 2006 Annual Report.

These statements have been prepared on the basis of accounting principles applicable to a going concern. Footmaxx has incurred losses over the past three consecutive years and as at September 30,2007 had a shareholders equity deficiency of $15,216,295. The Company's convertible debentures matured on June 30, 2007.

Footmaxx Holdings Inc. has completed the previously announced sale by the Company and its subsidiaries of substantially all of the assets utilized in carrying on its orthotics business for aggregate cash consideration of $16,300,000 and the assumption of obligations related to the Company's business. The proceeds from the asset sale have been applied primarily to retire the Company's outstanding debentures and to satisfy costs associated with the transaction.

As a result of the sale transaction, the Company no longer has any substantive assets or active business operations and will be changing its name to "FMX Ventures Inc." Consequently, trading of the Company's shares has been halted on the TSX Venture Exchange ("Exchange"), and subject to the final approval of the Exchange, is expected to resume on the NEX trading board of the Exchange upon completion of the proposed name change.

The Company intends to explore potential alternatives to maximize the value of its listing and its accumulated tax losses. However, there can be no assurance that any viable alternatives will be identified or that a transaction will be completed, whether in the foreseeable future or at all.

2. Revenue Recognition

The Company recognizes revenue from the sales of orthotics, proprietary computer systems, footwear and other accessories for orthopedic products when shipment occurs, title is transferred and collection is reasonably assured. Revenue is recorded at the invoice price for each product net of estimated returns and incentives provided to customers.



3. Analysis of Fixed Expenses
Year-to-date Year-to-date
September September
Q3 2007 Q3 2006 30, 2007 30, 2006
--------------------------------------------------------
Selling and
administration
Field sales force $ 513,652 $ 600,505 $ 1,681,144 $ 1,818,363
Marketing expense 63,404 59,831 170,262 172,220
Finance and
administration 459,412 465,445 $ 1,402,367 1,360,025
--------------------------------------------------------
$ 1,036,468 $ 1,125,781 $ 3,253,773 $ 3,350,608
--------------------------------------------------------
--------------------------------------------------------

4. Summary of Stock Options

There were no stock options outstanding during the period January 1 to
September 30, 2007.

5. Loss per Common Share
Year-to-date Year-to-date
September September
Q3 2007 Q3 2006 30, 2007 30, 2006
---------------------------------------------------------

Loss for the
quarter $ (220,606) $ (164,774) $ (310,655) $ (226,899)
---------------------------------------------------------
---------------------------------------------------------

Weighted average
common shares 41,131,205 41,131,205 41,131,205 41,131,205
---------------------------------------------------------
---------------------------------------------------------

Basic loss per
common share $ - $ - $ - $ -
---------------------------------------------------------
---------------------------------------------------------

6. Penfund Long Term Loan

The Company made final payment to Pendfund on May 31, 2007 to retire all
indebtedness to Penfund Inc.

7. Segmented Information

The Company operates in Canada and internationally in one dominant segment,
foot orthotics and associated computer systems. Revenue is attributed to
geographic areas based on location of the customer. International sales are
predominantly sales to the United States.

Year-to-date Year-to-date
September September
Q3 2007 Q3 2006 30, 2007 30, 2006
-------------------------------------------------------------
Revenue
Canada $ 1,593,445 $ 1,561,724 $ 5,142,352 $ 5,095,395
International 1,403,611 1,687,146 4,643,282 4,946,346
-------------------------------------------------------------
$ 2,997,056 $ 3,248,870 $ 9,785,634 $ 10,041,741
-------------------------------------------------------------
-------------------------------------------------------------

Year-to-date Year-to-date
September September
Q3 2007 Q3 2006 30, 2007 30, 2006
-------------------------------------------------------------
Gross profit
Canada $ 786,139 $ 800,033 $ 2,695,006 $ 2,734,108
International 734,039 843,807 2,348,400 2,445,650
-------------------------------------------------------------
$ 1,520,178 $ 1,643,840 $ 5,043,406 $ 5,179,758
-------------------------------------------------------------
-------------------------------------------------------------


September September
30, 2007 30, 2006
-------------------------------------------------------------
Capital assets
and deferred
financing costs
Canada $ 278,150 $ 343,068
United States 186,968 217,616
-------------------------------------------------------------
$ 465,118 $ 560,684
-------------------------------------------------------------
-------------------------------------------------------------


FMX Ventures Inc. formerly operating as
FOOTMAXX HOLDINGS INC.
For the Nine Months Ended September 30, 2007
Management Discussion and Analysis


Sale of the Company

Footmaxx Holdings Inc. has completed the previously announced sale by the Company and its subsidiaries of substantially all of the assets utilized in carrying on its orthotics business for aggregate cash consideration of $16,300,000 and the assumption of obligations related to the Company's business. The proceeds from the asset sale have been applied primarily to retire the Company's outstanding debentures and to satisfy costs associated with the transaction.

As a result of the sale transaction, the Company no longer has any substantive assets or active business operations and will be changing its name to "FMX Ventures Inc.". Consequently, trading of the Company's shares has been halted on the TSX Venture Exchange ("Exchange"), and subject to the final approval of the Exchange, is expected to resume on the NEX trading board of the Exchange upon completion of the proposed name change.

The Company intends to explore potential alternatives to maximize the value of its listing and its accumulated tax losses. However, there can be no assurance that any viable alternatives will be identified or that a transaction will be completed, whether in the foreseeable future or at all.

Overall Performance

During the third quarter of 2007 the Company continued to be impacted by fluctuations in exchange rates due to a strengthening Canadian dollar. As a result, revenue decreased from $3,248,870 in the third quarter of 2006 to $2,997,056 in the third quarter of 2007. EBITDA for the third quarter decreased from $333,583 in 2006 to $277,764 in 2007. The company experienced a net loss of $220,606 for the third quarter of 2007 as compared to a net loss of $164,774 in 2006. Year to date revenue decreased $256,107 from $10,041,741 in 2006 to $9,785,634 in 2007. Year to date EBITDA decreased $108,980 from $1,257,323 in 2006 to $1,148,343 in 2007. Net loss increased from $226,899 in 2006 to $310,655 in 2007.

Results of Operations

Non-GAAP Measures

In the Management Discussion and Analysis, and elsewhere, measures such as earnings before interest, taxes, depreciation and amortization (EBITDA) and other terms that are used are not defined by generally accepted accounting principles ("GAAP"). The use of these terms may not be consistent with the way these terms are used by others. Where possible, in particular for EBITDA, tables and other information are provided that enables readers to reconcile between such non-GAAP measures and standard GAAP measures. While these measures are not defined by or required by GAAP, this information is provided to readers to help them better understand significant measures.

Revenue

Revenue for the third quarter of 2007 decreased by $251,814 from $3,248,870 in Q3 2006 to $2,997,056 in Q3 2007, a decrease of 7.8%. Orthotic volumes decreased 6.7% from the level achieved in Q3 2006.

Year to date revenue for the first nine months of 2007 decreased $256,107 or 2.6% from $10,041,741 in 2006 to $9,785,634 in 2007. For the first nine months of 2007 the foreign exchange losses in revenue were $90,402 which occurred mainly in the third quarter. Orthotic volumes decreased 2.9% over the level achieved for the first nine months of 2006.



Third Quarter Revenues by Geographic Area

% Total % Total
CDN $ Q3 2007 Sales Q3 2006 Sales
-----------------------------------------------
-----------------------------------------------

Canada $ 1,593,445 53.2% $ 1,561,724 48.1%
International (mainly USA) 1,403,611 46.8% 1,687,146 51.9%
-----------------------------------------------
Total sales $ 2,997,056 100.0% $ 3,248,870 100.0%
-----------------------------------------------
-----------------------------------------------


The revenue in Canada for Q3 2007 increased $31,721 or 2.0% over the revenue in Canada for the same period of 2006. Increases in footwear and non-prescription orthotics were the main reason for the increase in revenue. The International business decreased by $ 283,535 or 16.8% . Decreased orthotic volume, in addition to the $90,402 unfavorable foreign exchange were the main reasons.



Year-to date Revenue by Geographic Area

% Total % Total
CDN $ YTD Q3 2007 Sales YTD Q3 2006 Sales
----------------------------------------------
----------------------------------------------

Canada $ 5,142,352 52.6% $ 5,095,385 50.7%
International (mainly USA) 4,643,282 47.4% 4,946,346 49.3%
----------------------------------------------
Total sales $ 9,785,634 100.0% $ 10,041,741 100.0%
----------------------------------------------
----------------------------------------------


The year to date revenue in Canada for Q3 2007 increased $ 46,967 or 0.9% over the revenue in Canada for the same period of 2006. Increases in footwear and systems offset the decrease in orthotics. The International business decreased by $303,064 or 6.1% . Decreases in systems revenues and the unfavorable foreign exchange impact of $88,438 were the main reasons.

Gross Profit

Gross profit for the third quarter of 2007 decreased by $123,662 or 7.5% from $1,643,840 in Q3 2006 to $1,520,178 in Q3 2007. The $251,814 decrease in revenue is the main reason.

Year to date gross profit decreased $136,352 or 2.6% from $5,179,758 in 2006 to $5,043,406 for the same period in 2007. The decrease in revenue is the main reason.



Third Quarter Gross Profit by Geographic Area

% Gross % Gross
CDN $ Q3 2007 Profit Q3 2006 Profit
------------------------------------------------
------------------------------------------------

Canada $ 786,139 51.7% $ 800,033 48.7%
International (mainly USA) 734,039 48.3% 843,807 51.3%
------------------------------------------------
Total gross profit $ 1,520,178 100.0% $ 1,643,840 100.0%
------------------------------------------------
------------------------------------------------


Canadian gross profit decreased slightly by $13,894 or 1.7% . Gross profit in the International business decreased $109,768 or 13.0% due to the decrease in revenues for the International business.



Year-to-date Third Quarter Gross Profit by Geographic Area

% Gross % Gross
CDN $ YTD Q3 2007 Profit YTD Q3 2006 Profit
----------------------------------------------
----------------------------------------------

Canada $ 2,695,006 53.4% $ 2,734,108 52.8%
International (mainly USA) 2,348,400 46.6% 2,448,650 47.2%
----------------------------------------------
Total gross profit $ 5,043,406 100.0% $ 5,179,758 100.0%
----------------------------------------------
----------------------------------------------


Canadian gross profit decreased by $39,102 or 1.4% . Gross profit in the International business decreased $100,250 or 4.1% mainly due to decreased revenue.

Operating Expenses

Selling and administrative expenses decreased $89,313 or 7.9% during the third quarter of 2007 as compared to the same period in 2006. Field sales force expenses decrease was the main area of improvement. Year-to-date selling and administration expenses decreased $96,835 or 2.8% from $3,350,608 in the first nine months of 2006 to $3,253,773 for the same period in 2007. Once again the field sales force expenses contributed the majority of the decrease.



--------------------------------------------------------------------
Operating expenses Q3 2007 Q3 2006 YTD Q3 2007 YTD Q3 2006
--------------------------------------------------------------------
Field sales force $ 513,652 $ 600,505 $ 1,681,144 $ 1,818,363
--------------------------------------------------------------------
Marketing 63,404 59,831 170,262 172,220
--------------------------------------------------------------------
Finance and
Administration 459,412 465,445 1,402,367 1,360,025
--------------------------------------------------------------------
Total Operating
Expenses $ 1,036,468 $1,125,781 $ 3,253,773 $ 3,350,608
-------------------------------------------------
-------------------------------------------------
--------------------------------------------------------------------


Information technology expenses decreased $10,524 or 5.0%, from $211,406 in Q3 2006, to $200,882 in Q3 2007. Year-to-date Information technology expenses decreased $7,300 or 1.1% from $645,841 in 2006 to $638,541 in 2007.

Net Loss

Net loss for the third quarter of 2007 was $220,601, which is $ 55,827 more than the $164,774 loss for the same period of 2006. The decrease in revenue was the main reason.

Year-to-date net loss for the nine months ended September 30, 2007 was $310,650, which is a $83,751 increase from the $226,899 loss achieved for the same period of 2006. The decrease in revenue was the main reason.

EBITDA

Earnings before interest, taxes, depreciation and amortization for Q3 2007 decreased $55,819 from $333,583 in Q3 2006 to $ 277,764 in the third quarter of 2007. The decrease in revenue was the main contributing factor. Year-to-date EBITDA for the nine months ended September 30, 2007 decreased $108,980 from $ 1,257,323 in 2006 to $ 1,148,343 in 2007. The decrease in revenue was the main contributing factor. EBITDA has been used by the Company historically to measure the cash flow generated by operations.



Q3 2007 Q3 2006 YTD Q3 2007 YTD Q3 2006
----------------------------------------------------
Net Income (Loss) $ (220,606) $ (164,774) $ (310,655) $ (226,899)
Add back:
Accrued interest on
debentures 423,671 347,938 1,210,718 994,906
Interest on long
term debt - 42,959 21,480 166,108
Other interest 1,863 2,398 3,764 3,668
Amortization capital
assets 72,836 81,815 184,292 249,800
Amortization
deferred financing - 23,247 38,744 69,740
Income taxes - - - -
----------------------------------------------------
EBITDA $ 277,764 $ 333,583 $ 1,148,343 $ 1,257,323
----------------------------------------------------
----------------------------------------------------


Liquidity

Cash Flow

Cash flow for the third quarter of 2007 was 72,331. Year-to-date cash flow was negative $241,098. The company reduced the Penfund loan $444,444 and paid all outstanding interest including bonus interest in the amount of $425,000. The company has left in the bank $430,000 to be used to prepare all annual filing requirements and legal and accounting costs associated with retaining the shell company until it is sold.

Capital Expenditures

The Company made investments in capital assets in the amount of $115,896 during the first nine months of 2007 that were related mainly to the equipment pool to meet demand from trial, loaner and rental systems customers. These investments will support increases in the orthotic volumes.

Debt Covenants

On May 31, 2007 the company made the final payments on the Penfund loan and therefore the debt covenant calculations are no longer relevant.

Convertible debentures

As a result of the sale of the company all of the convertible debentures have been retired. From the proceeds of the sale a total of $14,101,219 were paid to the debenture holders to retire total amount of debentures and interest outstanding on November 1, 2007.

Oversight Role of the Audit Committee

The Audit Committee reviews, with management, the Company's quarterly MD&A and related consolidated financial statements and approves the release to shareholders. Management also periodically presents to the Audit Committee a report of their assessment of the Company's internal controls and procedures for financial reporting.

Forward-looking statements

The foregoing may contain forward-looking statements. These statements are based on current expectations that are subject to risks and uncertainties, and the Company can give no assurance that these expectations are correct. Various factors could cause actual results to differ materially from those projected in such statements, including financial considerations and those predicting the timing and market acceptance of future products. The Company disclaims any intention or obligation to revise forward-looking statements whether as a result of new information, future developments or otherwise. All forward-looking statements are expressly qualified in their entirety by this Cautionary Statement.

Management's Responsibility for Financial Reporting

Disclosure Controls

The Company's Chief Executive Officer ("CEO") and Chief Financial Officer ("CFO") have reviewed the disclosure controls in place as at September 30, 2007 and have concluded that they provide reasonable assurance that all material information relating to the Company would be made known to them. While the CEO and CFO believe that the Company's disclosure controls and procedures provide reasonable assurance they are also aware that any control system can only provide reasonable, not absolute, assurance of achieving its control objectives.

Internal Controls Over Financial Reporting

Management is also responsible for the design of internal controls over financial reporting ("ICFR") within the Company in order to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with Canadian generally accepted accounting principles ("Canadian GAAP"). Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. In addition, the design of any system of control is based upon certain assumptions about the likelihood of future events, and there can be no assurance that any design will succeed in achieving its stated goals under all future events, no matter how remote, or that the degree of compliance with the policies or procedures may not deteriorate. Accordingly, even effective ICFR can only provide reasonable, not absolute, assurance of achieving the control objectives for financial reporting. Based on an the initial evaluation of the overall control structure and in accordance with criteria established in Multilateral Instrument 52-109 the following disclosable weaknesses existed, as at September 30, 2007 and require internal control improvements.

Limited Resources - Segregation of Duties

Given the Company's size it had limited resources within the finance department to adequately segregate duties and to permit or necessitate the comprehensive documentation of all policies and procedures that form the basis of an effective design of ICFR. As a result, the Company is highly reliant on the knowledge of a limited number of employees and on the performance of mitigating procedures during its financial close process to ensure that the consolidated financial statements are presented fairly in all material respects. As of December 31, 2006 the Company had done an initial documentation of its key accounting policies and procedures to determine where weaknesses existed. The Company has retained an experienced practitioner to assist in completing the process of comprehensively documenting and disseminating all policies and procedures that could have an impact on financial reporting. This will be completed in 2007.

Adoption of the New Accounting Standards

On January 1, 2007, the Company adopted the new recommendations of the Canadian Institute of Chartered Accountants (CICA) Handbook Section 1530, Comprehensive Income; Section 3251, Equity; Section 3855, Financial Instruments - Recognition and Measurement; Section 3861, Financial Instruments - Disclosure and Presentation; and, Section 3865, Hedges, retroactively without restatement. These new Handbook Sections, which apply to fiscal years beginning on or after October 1, 2006, provide requirements for the recognition and measurement of financial instruments and on the use of hedge accounting. Section 1530 establishes standards for reporting and presenting comprehensive income, which is defined as the change in equity from transactions and other events from non-owner sources. Other comprehensive income refers to items recognized in comprehensive income that are excluded from net income calculated in accordance with generally accepted accounting principles.

Under the new standards, policies followed for periods prior to the effective date generally are not reversed and therefore, the comparative figures have not been restated. The adoption of these Handbook Sections had no impact on opening deficit.

Upon adoption of these new standards, the Company has designated its cash and bank indebtedness as held-for-trading, which are measured at fair value. Accounts receivable are classified as loans and receivables, which are measured at amortized cost. Accounts payable, accrued liabilities, long-term debt and convertible debentures, are classified as other liabilities.

The Company had no other comprehensive income or loss transactions during the nine months ended September 30, 2007, and no opening or closing balances for accumulated other comprehensive income or loss."

Number of Common Shares issued to date - 41,131,205

Contact Information