<PAGE> 1
U.S. SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, DC 20549
FORM 10-QSB
[X] Quarterly report under Section 13 or 15(d) of the Securities Exchange Act of
1934 for the quarterly period ended April 30, 1999.
[ ] Transition report under section 13 or 15(d) of the Exchange Act For the
transition period from _______ to _______
Commission file number 0-29248
SmarTire Systems Inc.
(Exact Name of Small Business Issuer as Specified in Its Charter)
British Columbia, Canada Not Applicable
(State or Other Jurisdiction of (I.R.S. Employer
Incorporation or Organization) Identification No.)
150-13151 Vanier Place, Richmond, British Columbia, V6V 2J1
(Address of Principal Executive Offices)
(604) 276-9884
(Issuer's Telephone Number, Including Area Code)
Not Applicable
(Former Name, Former Address and Former Fiscal Year, if Changed Since Last
Report)
Check whether the issuer: (1) filed all reports required to be filed by Section
13 or 15(d) of the Exchange Act during the past 12 months (or for such shorter
period that the registrant was required to file such report(s), and has been
subject to such filing requirements for the past 90 days.
Yes [X] No [ ]
As of May 31, 1999, the Company had 11,113,698 shares of common stock issued and
outstanding*.
* This amount includes 181,250 escrow shares which are in the process of being
cancelled as of May 23, 1999 pursuant to certain escrow agreements between the
Company and the holders of the escrow shares.
Transitional Small Business Disclosure Format (check one):
Yes [ ] No [X]
<PAGE> 2
SMARTIRE SYSTEMS INC.
INDEX
<TABLE>
<S> <C> <C>
PART I. FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
CONSOLIDATED BALANCE SHEETS (UNAUDITED) -
APRIL 30, 1999 AND JULY 31, 1998
CONSOLIDATED STATEMENTS OF LOSS AND DEFICIT
(UNAUDITED) - THREE MONTHS AND NINE MONTHS ENDED
APRIL 30, 1999 AND APRIL 30, 1998.
CONSOLIDATED STATEMENTS OF CASH FLOW (UNAUDITED) -
NINE MONTHS ENDED APRIL 30, 1999 AND APRIL 30, 1998.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED) - NINE MONTHS ENDED APRIL 30, 1999 AND
APRIL 30, 1998.
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OR PLAN
OF OPERATION.
PART II. OTHER INFORMATION
ITEM 5. OTHER INFORMATION
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
</TABLE>
<PAGE> 3
ITEM 1. FINANCIAL STATEMENTS
The unaudited consolidated financial statements of SmarTire Systems Inc. and its
subsidiaries (the "Company" or "SmarTire") as of April 30, 1999 and for the
three months and nine month periods ended April 30, 1999 and April 30, 1998 are
attached hereto.
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<PAGE> 4
SMARTIRE SYSTEMS INC.
Consolidated Balance Sheets
(Expressed in Canadian Dollars)
(Unaudited)
<TABLE>
<CAPTION>
April 30, July 31,
1999 1998
------------ ------------
<S> <C> <C>
Assets
Current assets
Cash $ 5,749,434 $ 8,718,258
Receivables 824,310 802,193
Inventory 1,005,990 1,684,686
Prepaids 430,060 106,957
Supplier prepayments 19,632 1,466,791
------------ ------------
8,029,426 12,778,885
Capital assets 533,950 614,612
Other assets -- 792,612
------------ ------------
$ 8,563,376 $ 14,186,109
============ ============
Liabilities and Shareholders' Equity
Current liabilities
Payables and accruals $ 1,975,186 $ 801,832
Provision for special charges 1,740,000 --
------------ ------------
3,715,186 801,832
------------ ------------
Shareholders' equity
Share capital 38,296,702 30,669,253
Equity component of warrants 2,420,677 4,015,000
Deficit (35,869,189) (21,299,976)
------------ ------------
4,848,190 13,384,277
------------ ------------
$ 8,563,376 $ 14,186,109
============ ============
</TABLE>
See accompanying notes to consolidated financial statements.
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<PAGE> 5
SMARTIRE SYSTEMS INC.
Consolidated Statements of Loss and Deficit
(Expressed in Canadian Dollars)
(Unaudited)
<TABLE>
<CAPTION>
Three Months Ended Nine Months Ended
---------------------------- ----------------------------
April 30, April 30, April 30, April 30,
1999 1998 1999 1998
------------ ------------ ------------ ------------
<S> <C> <C> <C> <C>
Revenue $ 696,840 $ 359,729 $ 1,920,821 $ 1,364,079
Cost of goods sold 577,169 274,979 1,583,863 1,048,327
------------ ------------ ------------ ------------
119,671 84,750 336,958 315,752
------------ ------------ ------------ ------------
Expenses
Marketing 1,288,400 701,698 2,861,463 1,372,030
General and administration 1,085,818 885,751 3,125,255 1,701,743
Research and product development 7,649,323 313,814 8,321,426 950,954
Depreciation and amortization 164,834 165,146 571,553 489,006
------------ ------------ ------------ ------------
10,188,375 2,066,409 14,879,697 4,513,733
------------ ------------ ------------ ------------
Loss from operations 10,068,704 1,981,659 14,542,739 4,197,981
Other expense (income)
Interest and finance charges (49,522) 56,164 (240,943) 1,177,990
Foreign exchange 82,932 10,678 267,417 65,880
------------ ------------ ------------ ------------
33,410 66,842 26,474 1,243,870
------------ ------------ ------------ ------------
Net loss 10,102,114 2,048,501 14,569,213 5,441,851
Deficit, beginning of period 25,767,075 18,000,561 21,299,976 14,607,211
------------ ------------ ------------ ------------
Deficit, end of period $ 35,869,189 $ 20,049,062 $ 35,869,189 $ 20,049,062
------------ ------------ ------------ ------------
Loss per share $ 1.02 $ 0.32 $ 1.49 $ 0.86
------------ ------------ ------------ ------------
</TABLE>
See accompanying notes to consolidated financial statements.
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<PAGE> 6
SMARTIRE SYSTEMS INC.
Consolidated Statements of Cash Flow
(Expressed in Canadian Dollars)
(Unaudited)
<TABLE>
<CAPTION>
Nine Months Ended
-----------------------------
April 30, April 30,
1999 1998
------------ ------------
<S> <C> <C>
Cash flows from operating activities
Net loss $(14,569,213) $ (5,441,851)
Items not affecting cash:
Special charges in research and product development 7,280,299 --
Depreciation and amortization 571,553 489,006
Changes in non-cash working capital (1,996,650) (2,348,933)
------------ ------------
(8,714,011) (7,301,778)
------------ ------------
Cash flows from financing activities
Repayment of long-term debt -- (977,861)
Convertible debentures -- 2,162,652
Share capital issued 6,033,126 20,846,191
Conversion of debentures to share capital -- (4,237,994)
Subscription receivable -- (5,148,000)
------------ ------------
6,033,126 12,644,988
------------ ------------
Cash flows from investing activities
Capital assets (287,939) (167,539)
Other assets -- (14,000)
------------ ------------
(287,939) (181,539)
------------ ------------
Net increase (decrease) in cash (2,968,824) 5,161,671
Cash, beginning of period 8,718,258 69,761
------------ ------------
Cash, end of period $ 5,749,434 $ 5,231,432
------------ ------------
</TABLE>
See accompanying notes to consolidated financial statements.
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<PAGE> 7
SMARTIRE SYSTEMS INC.
Notes to Consolidated Financial Statements
(Expressed in Canadian Dollars)
(Unaudited)
Nine Months ended April 30, 1999 and 1998
- --------------------------------------------------------------------------------
1. UNITED STATES ACCOUNTING PRINCIPLES
The Company's financial statements have been prepared in accordance with
Canadian generally accepted accounting principles. A reconciliation of
financial statement amounts from Canadian generally accepted accounting
principles to United States generally accepted accounting principles is as
follows:
(a) Research and development costs
Under Canadian generally accepted accounting principles development
costs that are expected to provide future benefits with reasonable
certainty may be deferred and amortized to expense in a rational and
systematic manner. United States generally accepted accounting
principles require that all development costs be charged to expense
when incurred.
The effects of the above difference between Canadian and United States
generally accepted accounting principles are as follows:
<TABLE>
<CAPTION>
1999 1998
------------ ------------
<S> <C> <C>
Total assets in accordance with Canadian generally
accepted accounting principles $ 8,563,376 $ 13,578,666
Deferred development costs - (109,656)
------------ ------------
Total assets in accordance with United States generally
accepted accounting principles $ 8,563,376 $ 13,469,010
============ ============
</TABLE>
<TABLE>
<CAPTION>
1999 1998
------------ ------------
<S> <C> <C>
Shareholders' equity in accordance with Canadian generally
accepted accounting principles $ 4,848,190 $ 12,546,549
Deferred development costs - (109,656)
------------ ------------
Shareholders' equity in accordance with United States
generally accepted accounting principles $ 4,848,190 $ 12,436,893
============ ============
</TABLE>
<TABLE>
<CAPTION>
1999 1998
------------ ------------
<S> <C> <C>
Net loss in accordance with Canadian generally
accepted accounting principles $(14,569,213) $ (5,441,851)
Deferred development costs 34,236 113,130
------------ ------------
Net loss in accordance with United States generally
accepted accounting principles $(14,534,977) $ (5,328,721)
============ ============
</TABLE>
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<PAGE> 8
SMARTIRE SYSTEMS INC.
Notes to Consolidated Financial Statements
(Expressed in Canadian Dollars)
(Unaudited)
Nine months ended April 30, 1999 and 1998
- --------------------------------------------------------------------------------
2. COMPARATIVE FIGURES
Certain comparative figures have been reclassified to conform with the
financial statement presentation adopted for the current year.
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<PAGE> 9
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OR PLAN OF OPERATION.
FORWARD LOOKING STATEMENTS
Statements contained in this Report that are not based on historical facts are
forward-looking statements subject to uncertainties and risks including, but not
limited to, product demand and acceptance, economic conditions, the impact of
competition and pricing, results of financing efforts, and other risks.
OVERVIEW
The following discussion of the financial condition, changes in financial
condition and results of operations of the Company for the three months and nine
months ended April 30, 1999 and 1998 should be read in conjunction with the
consolidated financial statements of the Company.
The Company's consolidated financial statements are stated in Canadian Dollars
(CDN$) and are prepared in accordance with Canadian Generally Accepted
Accounting Principles (GAAP), the application of which, in the case of the
Company, conforms in all material respects for the periods presented with United
States GAAP except as indicated in the notes to the financial statements. All
per share amounts reflect an 8 to 1 reverse split effected on December 24, 1997.
Herein all references to the "$" and "CDN$" refer to Canadian Dollars; and all
references to "US$" refer to United States Dollars.
In this Report, unless otherwise specified, all dollar amounts are expressed in
Canadian Dollars. The Government of Canada permits a floating exchange rate to
determine the value of the Canadian Dollar against the U.S. Dollar.
Set forth below is the rate of exchange for the Canadian Dollar at the end of
the most recent fiscal year ended July 31, 1998 and the nine months ended April
30, 1999 and 1998, average rates for the periods, and the range of high and low
rates for the periods. For purposes of this table, the rate of exchange means
the noon buying rate in New York City for the cable transfers in foreign
currencies as certified for customs purposes by the Federal Reserve Bank of New
York. The
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<PAGE> 10
table sets forth the number of Canadian Dollars required under that formula to
buy one U.S. dollar. The average rate means the average of the exchange rates on
the last day of each month during the period.
U.S. Dollar/Canadian Dollar
<TABLE>
<CAPTION>
Average Close High Low
------- ----- ---- ---
<S> <C> <C> <C> <C>
Nine Months Ended 04/30/99 1.51 1.46 1.58 1.46
Nine Months Ended 04/30/98 1.42 1.43 1.46 1.37
Fiscal Year Ended 7/31/98 1.43 1.51 1.51 1.37
</TABLE>
Since its inception, the Company has reported net losses arising from general
expenses and research/development expenditures. The Company has sustained itself
through the sale of securities, including common shares and convertible
debentures, and the exercise of share purchase warrants and share purchase
options.
SmarTire is engaged in the development and marketing of a line of Tire
Monitoring Systems (TMS) incorporating proprietary patented technology designed
to improve the tire life, fuel efficiency, vehicle productivity and safety.
During the nine months ended April 30, 1999, the Company earned revenues from
the sale of TMS for passenger cars, racing applications and industrial
applications.
The passenger car TMS are sold to two distinct and separate markets: the
Replacement Tire Market (Aftermarket) and the Original Equipment Manufacturer
(OEM) Market. The Company currently sells OEM passenger car systems to Ford
Motor Company, where they are packaged as an optional accessory with run-flat
tires and other safety features on the Lincoln Continental. In April 1998 the
Company entered into a series of agreements with TRW, Inc. under which TRW was
granted a worldwide exclusive license to market and distribute tire sensing
products into the OEM market. Aftermarket systems may be added to existing
vehicles as an accessory and are distributed primarily through independent tire
dealers and distributors, and automotive service centers. One segment of the
aftermarket involves extended mobility or run-flat tires. Run-flat tires allow
drivers to drive up to 50 miles on a tire that has lost all its air pressure.
Run-flat tires perform so well without any air pressure that an approved tire
pressure monitoring system is required with the purchase of each set of tires.
Otherwise, the operator may unknowingly drive on the tire until it fails or is
no longer repairable. The Company's advanced tire monitoring system is approved
for sale with run-flat tires by Goodyear, Michelin, and Bridgestone/Firestone.
In addition, the Company's system is the only tire monitoring system approved by
Goodyear in Europe.
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<PAGE> 11
RESULTS OF OPERATIONS
THREE MONTHS ENDED APRIL 30, 1999 AND APRIL 30, 1998
Gross revenue for the three months ended April 30, 1999 was $696,840 compared to
$359,729 for the three months ended April 30, 1998. Sales of aftermarket
passenger car systems were $433,041 for the quarter ended April 30, 1999
compared to $189,838 sales for the three months ended April 30, 1998. The
increase in revenue was due to sales in Europe in the current year. Despite the
increased sales, revenue was less than expected. Sales into the run-flat market
have not met the expectations shared with the Company by the tire manufacturers.
In the Company's direct marketing campaigns, consumers have been slower to adopt
tire monitoring than had been anticipated primarily due to the fact that tire
monitoring is still in its infancy.
Sales of the OEM passenger car system decreased to $80,710 for the quarter ended
April 30, 1999 compared to $115,909 for the comparable period of the previous
year. Sales of the Racing TMS product increased significantly to $178,659 for
the three months ended April 30, 1999 from $14,280 in the three months ended
April 30, 1998. Sales of Industrial TMS systems decreased to $4,430 during the
three months ended April 30, 1999 from $39,702 in the comparable period of the
previous year due to a decreased emphasis on this segment.
Gross margin decreased from 23.5% for the three months ended April 30, 1998 to
17.2% for the three months ended April 30, 1999 due to a lower profit margin on
the sale of aftermarket passenger car systems. Sales revenues were also more
heavily weighted to the aftermarket segment in the current year.
Expenses increased to $10,188,375 for the three months ended April 30, 1999 from
$2,066,409 for the comparable period of the previous fiscal year due to
increases in expenses for all areas of the business. Included in research and
product development expenses are special charges of $7,280,299. These special
charges are discussed in more detail below.
Marketing expenses increased from $701,698 for the three month period ended
April 30, 1998 to $1,288,400 for the comparable period of 1999. Most of the
increase in expenses was due to higher advertising and promotion costs in the
current year. In North America, the higher costs were due to the SmarTire Direct
campaign. These costs include advertising development, support materials for the
certified dealer installation network and placement costs for advertising. The
North American marketing expenses are expected to remain high in the fourth
quarter as most of the SmarTire Direct advertisements will appear in
publications in the months of May through July. In Europe, the higher costs were
related to advertising and promotion for the caravan direct campaign including
participation
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<PAGE> 12
at the National Boat Caravan and Leisure Show in Birmingham, England. As
SmarTire (Europe) Limited commenced operations later in the 1998 fiscal year,
there were no marketing expenses for European operations for the three months
ended April 30, 1998.
General and administrative expenses increased to $1,085,818 for the three months
ended April 30, 1999 as compared to $885,751 for the three month period ended
April 30, 1998. The increase was attributed to increases in investor relations,
compensation, professional fees, insurance and travel expenses. As SmarTire
(Europe) Limited commenced operations late in the 1998 fiscal year, there were
minimal general and administrative expenses for European operations for the
three months ended April 30, 1998.
Research and product development expenses (before special charges) increased to
$369,024 for the three months ended April 30, 1999 from $313,814 for the three
months ended April 30, 1998 due to increased staff and related costs for the
development of the Company's next generation of products.
The Company has assessed the future business prospects for its tire pressure
monitoring products. Management feels that the longer-term outlook for these
products is favourable as evidenced by the Company's commitment to develop and
market second generation products, including systems for the commercial trucking
market. Based on the Company's assessment, the forecasted business levels in the
near term, through to the introduction of the Company's next generation of tire
pressure monitoring products, would not support the carrying value of certain
assets, including inventories, production equipment and deferred development
costs associated with the current generation of tire pressure monitoring
systems. As a result, at April 30, 1999 the company recorded special charges of
$7,280,299 primarily to reduce the recorded value of these assets to their net
realizable values. Of the special charges, $1,740,000 has been accrued at April
30, 1999 for purchase commitments and other potential charges for the current
tire pressure monitoring products.
Interest income of $49,522 resulted from the cash balances generated from the
Company's financing activities in 1998 and proceeds from the exercise of
warrants in March, 1999. This compares with interest expense of $56,164 for the
three months ended April 30, 1998.
NINE MONTHS ENDED APRIL 30, 1999 AND APRIL 30, 1998
Gross revenue for the nine months ended April 30, 1999 was $1,920,821 compared
to $1,364,079 for the nine months ended April 30, 1998. Sales of aftermarket
passenger car systems were $1,198,023 for the nine months ended April 30, 1999
compared to $652,339 sales for the nine months ended April 30, 1998. The
increase in revenue was due to sales in Europe in the current year.
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<PAGE> 13
Despite the increased sales, revenue was less than expected. Sales into the
run-flat market have not met the expectations shared with the Company by the
tire manufacturers. In the Company's direct marketing campaigns, consumers have
been slower to adopt tire monitoring than had been anticipated primarily due to
the fact that tire monitoring is still in its infancy.
Sales of the OEM passenger car system decreased to $368,239 for the period ended
April 30, 1999 compared to $462,382 for the comparable period of the previous
year. Sales of the Racing TMS product increased to $329,014 for the nine months
ended April 30, 1999 from $176,598 in the nine months ended April 30, 1998.
Sales of Industrial TMS systems decreased to $25,545 during the nine months
ended April 30, 1999 from $72,760 in the comparable period of the previous year.
Gross margin decreased from 23.1% for the nine months ended April 30, 1998 to
17.5% for the nine months ended April 30, 1999 due to a lower profit margin on
the sale of aftermarket passenger car systems. Sales revenues were also more
heavily weighted to the aftermarket segment in the current year.
Expenses increased to $14,879,697 for the nine months ended April 30, 1999 from
$4,513,733 for the comparable period of the previous fiscal year due to
increases in expenses for all areas of the business. Included in research and
product development expenses are special charges of $7,280,299 which were
charged at April 30, 1999.
Marketing expenses increased from $1,372,030 for the nine month period ended
April 30, 1998 to $2,861,463 for the comparable period of 1999 as a result of
increased expenditures on point of sale materials, technical manuals, trade
shows, and advertising and promotion relating to the aftermarket passenger car
product. Marketing compensation increased as a result of additional employees
for marketing functions. Marketing travel increased as a result of increased
activity relating to the marketing of the aftermarket passenger car product line
and participation in trade shows. The creation of the Company's European
marketing subsidiary, SmarTire (Europe) Limited, late in the 1998 fiscal year
contributed to the increase in the above marketing expenses in the current year.
General and administrative expenses were $3,125,255 for the nine months ended
April 30, 1999 as compared to $1,701,743 for the nine month period ended April
30, 1998. The increase was attributed to increases in public relations,
compensation, legal, insurance and travel expenses. Compensation increased due
to increases in the number of administrative staff and increases in
administrative wage levels. Professional fees increased as a result of the
Company's U.S. securities filings and Nasdaq listing application, recruitment
costs for staff of SmarTire (Europe) and product approval costs in Europe. The
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<PAGE> 14
creation of SmarTire (Europe), late in the 1998 fiscal year also contributed to
the increase in general and administrative expenses in the current year.
Research and product development expenses (before special charges) increased to
$1,041,127 for the nine months ended April 30, 1999 from $950,954 for the nine
months ended April 30, 1998 due to an increase in staff and related costs.
The Company has assessed the future business prospects for its tire pressure
monitoring products. Management feels that the longer-term outlook for these
products is favourable as evidenced by the Company's commitment to develop and
market second generation products, including systems for the commercial trucking
market. Based on the Company's assessment, the forecasted business levels in the
near term, through to the introduction of the Company's next generation of tire
pressure monitoring products, would not support the carrying value of certain
assets, including inventories, production equipment and deferred development
costs associated with the current generation of tire pressure monitoring
systems. As a result, at April 30, 1999 the company recorded special charges of
$7,280,299 primarily to reduce the recorded value of these assets to their net
realizable values. Of the special charges, $1,740,000 has been accrued at April
30, 1999 for purchase commitments and other potential charges for the current
tire pressure monitoring products.
Interest income of $240,943 resulted from the cash balances generated from the
Company's financing activities in 1998 and proceeds from the exercise of share
purchase warrants in March 1999. This compares with interest expense of
$1,177,990 for the nine months ended April 30, 1998.
LIQUIDITY AND CAPITAL RESOURCES
The Company has financed its activities through revenue from operations and the
placement of securities. Financing has been accomplished in the form of private
placements of common shares and common share purchase warrants; private
placements of convertible debentures; the exercise of incentive stock options;
the exercise of common share purchase warrants; and issuance of common stock in
exchange for settlement of liabilities.
The Company's cash position at April 30, 1999 was $5,749,434 as compared to
$8,718,258 at July 31, 1998. This decrease was due to funding of the Company's
operating, financing and investing activities described herein. During the three
months ended April 30, 1999, the Company received net cash proceeds of
$5,431,651 from the exercise of share purchase warrants.
The Company used $8,714,011 for operating activities during the nine months
ended April 30, 1999 as compared with $7,301,778 for the nine months ended
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<PAGE> 15
April 30, 1998. For the nine months ended April 30, 1999, the Company received
net cash proceeds of $6,033,126 from the exercise of stock options and warrants.
Investing activities consisted of $287,939 during the nine months ended April
30, 1999 for the purchase of capital assets.
The Year 2000 Issue arises because many computerized systems use two digits
rather than four digits to identify a year. Date-sensitive systems may recognize
the year 2000 as 1900 or some other date, resulting in errors when information
using year 2000 dates is processed. In addition, similar problems may arise in
some systems which use certain dates in 1999 to represent something other than a
date. The effects of the Year 2000 Issue may be experienced before, on or after
January 1, 2000, and, if not addressed, the impact on operations and financial
reporting may range from minor errors to significant systems failure which could
affect an entity's ability to conduct normal business operations. It is not
possible to be certain that all aspects of the Year 2000 Issue affecting the
Company, including those related to the efforts of customers, suppliers, or
other third parties, will be fully resolved.
PART II. OTHER INFORMATION
ITEM 5. OTHER INFORMATION
None.
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) EXHIBITS:
The following exhibits are filed hereunder:
27 Financial Data Schedule (electronic filing only)
(b) Reports of Form 8-K -Nine months ended April 30, 1999:
None.
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<PAGE> 16
SIGNATURES
In accordance with the requirements of the Exchange Act, the registrant caused
this report to be signed on its behalf by the undersigned, thereunto duly
authorized.
SMARTIRE SYSTEMS INC.
----------------------------------
(Registrant)
Date June 14, 1999 /s/ ROBERT V. RUDMAN
------------------------- ----------------------------------
Robert V. Rudman
Chief Executive Officer and
Chairman of the Board
Date June 14, 1999 /s/ KEVIN A. CARLSON
------------------------- ----------------------------------
Kevin A. Carlson
Chief Financial Officer (Principal
Financial Officer)
-14-
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
CONDENSED CONSOLIDATED UNAUDITED FINANCIAL STATEMENTS INCLUDED IN THE COMPANY'S
QUARTERLY REPORT ON FORM 10-QSB FOR THE QUARTERLY PERIOD ENDED APRIL 30, 1999
AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<CURRENCY> CANADIAN DOLLARS
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> JUL-31-1999
<PERIOD-START> AUG-01-1998
<PERIOD-END> APR-30-1999
<EXCHANGE-RATE> 1.46
<CASH> 5,749,434
<SECURITIES> 0
<RECEIVABLES> 824,310
<ALLOWANCES> 0
<INVENTORY> 1,005,990
<CURRENT-ASSETS> 8,029,426
<PP&E> 904,254
<DEPRECIATION> (370,304)
<TOTAL-ASSETS> 8,563,376
<CURRENT-LIABILITIES> 3,715,186
<BONDS> 0
0
0
<COMMON> 40,717,379
<OTHER-SE> (35,869,189)
<TOTAL-LIABILITY-AND-EQUITY> 8,563,376
<SALES> 1,920,821
<TOTAL-REVENUES> 2,161,764
<CGS> 1,583,863
<TOTAL-COSTS> 1,583,863
<OTHER-EXPENSES> 15,147,114
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> (14,569,213)
<INCOME-TAX> 0
<INCOME-CONTINUING> (14,569,213)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (14,569,213)
<EPS-BASIC> (1.49)
<EPS-DILUTED> (1.49)
</TABLE>
