nd Price Target $1.43








Symbol (TSX):
SSC.V
Recent Price: (Apr 05, 2007)
CDN$1.28
Avg. Daily Vol. (3-Mo.):
49,022.6
Industry:
Energy Conservation, System Design,
Installation and Maintenance
Market Capitalization ($mil):
30.8
Shares O/S: (12/31/2006)
24,063,000
Cash & Equiv: (12/31/06)
1,761,672

Net Working Capital: (12/31/06)
850,687
Long-term Debt: (12/31/06)
179,147
Shareholders Equity (12/31/06):
3,552,236

Insider Ownership:

Investrend Rating:
Speculative Buy/4
E/S (ttm): NM
P/E (ttm): NM
REVS (ttm): 347,825
P/S (ttm): 63
All $ amount mentioned above are in CDN $

Data above is extracted from the Dec 3106 un-audited balance sheet provided by management
exhibited in a later section of the report. This data is used to reflect most recent performance.


































ANALYSTS SUMMARY
We are initiating coverage of Smartcool Systems Inc. (SSC.V) Inc. with a Speculative
Buy/4 Rating. The company is a high risk investment with potential for moderate to
high price appreciation and hence the speculative nature of our rating.

Smartcool Systems Inc. is an energy conservation company focused on acquiring,
commercializing, and marketing energy saving technology. On July 20, 2004 the
Company changed its name from Citotech Systems Inc. to Smartcool Systems Inc.



INVESTMENT POSITIVES

The company is expected to turn the corner in 2007 per conversations with
management and projected EBITDA and appears moderately undervalued on a
valuation basis.

Smartcools advanced ESM technology is a remarkable energy saving
technology that has no direct competitors and compares favorably to other
energy saving technologies.
1 Smartcool Systems, Inc. (TSX: SSC.V) Research - Initiation of Coverage
Piyali Chakravarty / Investrend Research / April 16, 2007


The companys ESM product has global acceptance among major clients like
Tesco, Safeway,Coca Cola bottlers, its distribution base is vast and growing
monthly.

Smartcool Systems should benefit from a highly experienced management
team. Investors should read the management bios that are detailed in a later
section of the report.

The company has shown good improvement in cash and working capital
positions. To continue funding of its activities, the company has consistently
raised funds through private placements. Further details follow in the financial
analysis section of the report.

Future increases in global electricity consumption accompanied by cash and
tax rebates on energy savings technologies and the growing importance of Asia
as a major consumer of electricity could result in substantial future revenue
growth for Smartcool Systems and higher valuations.



KEY INVESTMENT RISKS
As discussed in the companys Management Discussion and Analysis report, the
business of the Company is subject to a number of risks and uncertainties associated
with its business for the marketing and distribution of the ESM.

Lack of Marketing Network
At the current time the Company has developed a marketing network throughout some
of its territory. A primary objective of the Companys business plan includes the
building up of this network however there can be no assurances that the Company can
establish such a network in all of its territories and as such revenues from the sale of
the ESM could be delayed.

Reliance on Key Personnel
The Company is dependent on certain key members of its management team, and in
particular Mr. George Burnes, President, to complete the market development of the
ESM. If any of these individuals are unavailable for any reason, the ability of the
Company to implement its business plan in the short term would be materially and
adversely affected.

Default in License Agreements
If the company is unable to make the payments to the previous owners under the terms
of the sale agreement then the IT and worldwide rights will reverse back to the
previous owners.

Additional risks include:


An SSC investment exhibits all of the risks associated with any early stage
business, and investors must be aware of the possibility of losing their entire
investment. To date, the company has not generated earnings and remains a
high risk investment. The shareholders deficit is also negative.
2 Smartcool Systems, Inc. (TSX: SSC.V) Research - Initiation of Coverage
Piyali Chakravarty / Investrend Research / April 16, 2007


To date, Smartcool Systems has been successful at raising capital. However,
there can be no assurance that this will continue and shareholders should
monitor the companys capital structure for signs of dilution as Smartcool
Systems may be forced to sell equity at a significant discount.


PRODUCT AND TECHNOLOGY OVERVIEW
Smartcool Systems Inc. is an advanced energy conservation solutions company that
specializes in energy and cost reduction technologies for commercial and retail
businesses. The company's wholly owned subsidiary, Smartcool International Inc., is
the owner, developer, manufacturer and worldwide distributor of the Energy Saving
Module (ESM). This green technology reduces the electricity consumption (Kwh)
and maximum demand (KW) of air conditioning and refrigeration compressors. Rather
than replacing existing equipment, the ESM works in conjunction with existing
controls in order to ensure that compressors work at maximum efficiency, while
maintaining preset temperature levels and without causing over-cycling. This process,
known as "Compressor Optimization" can reduce compressor runtime by more than
30% and electricity consumption and demand by up to 20%. Smartcool thus provides
a rare solution in the marketplace that generates immediate, dramatic and measurable
energy efficiencies that go straight to the customers bottom line. The product is a
proven solution in the reduction of green house gas emissions and provides its clients
with economic and ethical solutions.

Rising global energy demand is resulting in significant increases in energy prices.
Environmental concerns are causing both government and industry to re-examine the
way they do business. With licensed distributors in nine countries and exports to many
more, Smartcool provides organizations around the world with solutions to address the
growing pressure to reduce energy costs, increase profits and decrease greenhouse gas
emissions. Over 25,000 ESM units have been installed throughout the world since
1986 and the ESM is utilized by some of the worlds leading corporations such as
Tesco Supermarkets, Telstra Corporation, and the Luxor Hotel & Casino, to name
only a few.
ESM vs. Conventional Building & Refrigeration Control Systems
Overview of ESM System 4000
The ESM optimizes the performance of air conditioning/refrigeration compressors and
reduce electricity consumption while operating within the control parameters of the
primary controller. The ESM is designed to reduce electricity consumption in the
range of 15% to 50% and maintain the required temperature. Evaluations have shown
savings in most cases range from 15% to 25%. The ESM System 4000 utilizes
exclusive copyrighted software developed by Abbotly in Australia over a period of 20
years.
3 Smartcool Systems, Inc. (TSX: SSC.V) Research - Initiation of Coverage
Piyali Chakravarty / Investrend Research / April 16, 2007

Overview of Conventional Controls
Control systems are software programs designed to improve the efficiency of
compressor run cycles or interaction between compressors. Most modern control
systems use Direct Digital Control. Direct Digital Control is commonly referred to as:
Controls, BMS or building management system, DDC or Direct Digital Control. The
major function of a control system is to provide the primary control and information
system for the air conditioning or refrigeration equipment.

Conventional controls, including the most sophisticated Building Management
Systems (BMS) and state-of-the-art refrigeration controls, operate only on reaching
pre-programmed fixed (static) absolute values to switch compressors off and on or
adjust capacity. When the measured medium is within the dead band the BMS and
controllers remain idle until a specific set value is reached.
They do nothing to
measure the heat load and adjust the control differential in proportion to the cooling
demand, do not dynamically control the cycle rate of the compressors and in most
cases they do not perform predictive analyses.
ESM Augments Building & Refrigeration Control Systems

Using BMS (used here to mean Building Management Systems or refrigeration
controls) and ESM (System 4000 Energy Saving Module) together will achieve two
distinctly different but compatible approaches to savings:


The major function of a BMS is to provide the primary control and information
system for the air conditioning or refrigeration equipment.


The major function of the ESM is to reduce the cost of running the air
conditioning system/refrigeration compressors while operating within the
control parameters set by the BMS. The ESM is not a primary controller it
complements the air conditioning systems/refrigeration compressor existing
controller and does not replace it. The ESM is designed to interface with all
types of controls.
How Are Savings Achieved?
Conventional