$ 46The instalments on the long-term debt for the next years are as follows:
Year ending December 31:
2007 $ 2,678
2008 5,068
2009 3,825
2010 6
(a) 5,000,855 warrants with an exercise price of $0.3133 per share were issued to the lender as compensation for making
the loan commitment. If in September 2007, the fair market value of the Company’s subordinate voting shares are less than
four (4) times the value of the exercise price, the Company shall be required to compensate the lender with a payment of
US$ 1,400,000 which will be offset by the obligation by the lender to exercise its 5,000,855 warrants, at the agreed-to
exercise price.
Furthermore, 1,786,187 warrants with an exercise price of $0.324 were issued as compensation warrants to the
Company’s agent.
The fair value of the warrants was determined using the Black-Scholes options-pricing model with the following assumptions:
Expected dividend yield of 0%, expected volatility of 70%-80% and 82%, risk-free interest rates of 3.96% and 4.12% and
expected life of three and five years. The estimated fair values of the warrants at the date of grant were respectively $0.298
and $0.24. The total value of the warrants of $1,919 is accounted as deferred financing expenses. Considering the
warrants and other expenses incurred for the long-term debt, the effective interest rate is 32.75%.