6-K

UNITED STATES
SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

Form 6-K

REPORT OF FOREIGN PRIVATE ISSUER PURSUANT TO
RULE 13a-16 OR 15d-16 UNDER THE SECURITIES EXCHANGE ACT OF 1934

Filing No. 1 for the Month of April, 2005

ADB Systems International Ltd.

(Exact name of Registrant)

302 The East Mall, Suite 300, Toronto, ON Canada M9B 6C7

(Address of principal executive office)

Indicate by check mark whether the registrant files or will file annual reports under cover of Form 20-F or Form 40-F:

Form 20-F  ý     Form 40-F o

Indicate by check mark if the registrant is submitting the Form 6-K in paper as permitted by Regulation S-T Rule 101(b)(1):       

Indicate by check mark if the registrant is submitting the Form 6-K in paper as permitted by Regulation S-T Rule 101(b)(7):       

Indicate by check mark whether the registrant by furnishing the information contained in this Form is also thereby furnishing the information to the Commission pursuant to Rule 12g3-2(b) under the Securities Exchange Act of 1934.

Yes o    No ý

If “Yes” is marked, indicate below the file number assigned to the registrant in connection with Rule 12g3-2(b): 82-.              

ADB SYSTEMS INTERNATIONAL LTD.

On March 31, 2005, ADB Systems International Ltd. (“ADB” or the “Company”) filed its Annual Information Form 51-102F2 and its Annual Report for the year ended December 31, 2004 with the applicable Canadian securities commissions and exchanges pursuant to Canadian law.  The Company’s 2004 Annual Information Form is attached to this Form 6-K as Exhibit 1.  The Company’s 2004 Annual Report (which includes the Company’s 2004 financial statements and management’s discussion and analysis) is attached to this Form 6-K as Exhibit 2.

This Form 6-K may include comments that do not refer strictly to historical results or actions and may be deemed to be forward-looking within the meaning of the Safe Harbor provisions of the U.S. federal securities laws. These include, among others, statements about expectations of future revenues, profitability, cash flows, and cash requirements. Forward-looking statements are subject to risks and uncertainties that may cause ADB’s results to differ materially from expectations. These risks include ADB’s future capital needs, expectations as to profitability and operating results, ability to further develop business relationships and revenues, expectations about the markets for its products and services, acceptance of its products and services, competitive factors, ability to repay debt, ability to attract and retain employees, new products and technological changes, ability to develop appropriate strategic alliances, protection of its proprietary technology, ability to acquire complementary products or businesses and integrate them into its business, geographic expansion of its business and other such risks as ADB may identify and discuss from time to time, including those risks disclosed in ADB’s most recent Form 20-F filed with the Securities and Exchange Commission.  Accordingly, there is no certainty that ADB’s plans will be achieved.

Exhibits

Exhibit 1 – 2004 Annual Information Form

Exhibit 2 – 2004 Annual Report (includes Financial Statements and Management’s Discussion and Analysis)

2

SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.

	ADB SYSTEMS INTERNATIONAL LTD.
Date: April 1, 2005	By:	/s/ JEFFREY LYMBURNER
		Name: Jeffrey Lymburner
		Title: Chief Executive Officer

3

EX-1

Exhibit 1

	ADB Systems International Ltd 302 The East Mall, Suite 300. Etobicoke, Ontario	Tel: 416.640.0400 Fax: 416-640-0412
	M9B 6C7  Canada	www.adbsys.com

ADB SYSTEMS INTERNATIONAL LTD.

2004 ANNUAL INFORMATION FORM 51-102F2

(Year Ended December 31, 2004)

March 31, 2005

Table of Contents

Table of Contents
1.0	FORWARD LOOKING STATEMENTS
2.0	CORPORATE STRUCTURE
2.1	The Company
2.2	Intercorporate Relationships
3.0	GENERAL DEVELOPMENT OF THE BUSINESS
3.1	Three Year History
4.0	DESCRIPTION OF THE BUSINESS
4.1	Overview
4.2	History and General Development
4.3	Industry Background and Overview
4.4	Products and Services
4.5	Business Cycles
4.6	Strategy
4.7	Customers
4.8	Sales and Marketing
4.9	Technology Platform
4.10	Software Development & Technology
4.11	Intellectual Property
4.12	Competition
4.13	Customer Concentration
4.14	Employees
4.15	Foreign Operations
5.0	RISK FACTORS
6.0	DESCRIPTION OF CAPITAL STRUCTURE
6.1	Share Capital
6.2	Constraints
7.0	MANAGEMENT’S DISCUSSION AND ANALYSIS
8.0	MARKET FOR SECURITIES
8.1	Trading Price and Volume
8.2	Prior Sales
9.0	DIRECTORS AND OFFICERS
9.1	Bankruptcies
10.0	PROMOTERS
11.0	LEGAL PROCEEDINGS
12.0	RELATED PARTY TRANSACTIONS
13.0	TRANSFER AGENTS AND REGISTRARS
14.0	MATERIAL CONTRACTS
15.0	AUDITORS, LEGAL COUNSEL AND INTERESTS OF EXPERTS
16.0	ADDITIONAL INFORMATION

2

ANNUAL INFORMATION FORM

Unless the context otherwise requires, any reference to the “Company”, “ADB” or “ADB Systems” means ADB Systems International Ltd. and its predecessors.

The Trademarks or trade names owned by the Company and used in this Annual Information Form include:  ADB™; PROCUREMATE™; WORKMATE™; BID BUDDY™; SEARCH BUDDY™; DYNAMIC BUYER™ and DYN@MIC SELLER™. Each trademark, trade name, or service mark of any other company appearing in this Annual Information Form belongs to its holder. 

1.0FORWARD LOOKING STATEMENTS

This Annual Information Form 51-102F2 (“AIF”) contains and incorporates by reference statements that may be considered “forward looking statements” (rather than historical facts).

You can identify these statements when you see words such as “may,” “expect,” “anticipate,” “estimate,” “believe,” “intend,” and other similar expressions.  These forward-looking statements relate, among other items to:

•our future capital needs;

•future expectations as to profitability and operating results;

•our ability to further develop business relationships and revenues;

•our expectations about the markets for our products and services;

•acceptance of our products and services;

•competitive factors;

•our ability to repay debt;

•our ability to attract and retain employees;

•new products and technological changes;

•our ability to develop appropriate strategic alliances;

•protection of our proprietary technology;

•our ability to acquire complementary products or businesses and integrate them into our business; and

•geographic expansion of our business.

We have based these forward-looking statements largely on our current plans and expectations.  Forward-looking statements are subject to risks and uncertainties, some of which are beyond our control.  Our actual results could differ materially from those described in our forward-looking statements as a result of the factors described in the “Risk Factors” included elsewhere in this AIF, including, among others: 

•the timing of our future capital needs and our ability to raise additional capital when needed;

•our limited operating history in our current business as a combined entity;

•increasingly longer sales cycles;

•increasingly longer collection cycles;

•potential fluctuations in our financial results and our difficulties in forecasting;

•volatility of the stock markets and fluctuations in the market price of our stock;

•our ability to compete with other companies in our industry;

•our ability to repay our debt to lenders;

•our ability to retain and attract key personnel;

3

•risk of significant delays in product development;

•failure to timely develop or license new technologies;

•risks relating to any requirement to correct or delay the release of products due to software bugs or errors;

•risk of system failure or interruption;

•problems which may arise in connection with the acquisition or integration of new businesses, products, services, technologies or other strategic relationships;

•risks associated with international operations;

•risks associated with protecting our intellectual property, and potentially infringing the intellectual property rights of others;

•uncertainty about the continued acceptance of the Internet as a viable commercial medium; and

•sensitivity to the overall economic environment.

Because of these risks and uncertainties, the forward-looking statements and circumstances discussed in this AIF might not transpire.

2.0CORPORATE STRUCTURE

2.1The Company

The name of the company is ADB Systems International Ltd (“ADB,” “ADB Systems” or the “Company”). The Company was formed pursuant to the Business Corporations Act (Ontario). The business began as Internet Liquidators Inc. (“IL Inc.”), a business corporation formed under the laws of Ontario, Canada, in September 1995 and after a series of corporate reorganizations, as described below developed into the present Company.  In May 1996, Internet Liquidators International Inc. (“ILI Inc.”), also an Ontario company, acquired all of the shares of IL Inc. These two companies were amalgamated on January 9, 1997.  By articles of amendment dated June 25 1998, ILI Inc. changed its name to Bid.Com International Inc. 

Prior to October 24, 2000, we operated two national business-to-consumer auction sites at www.bid.com, one in the United States and one in Canada. Following an extensive strategic review by ADB’s Board of Directors and management, ADB decided late in 2000 to focus on its software business.

On October 11, 2001, Bid.Com acquired substantially all of the shares of ADB Systemer ASA, a public limited liability company organized under the laws of the Kingdom of Norway. As part of the acquisition of ADB Systemer, Bid.Com completed a two for one share consolidation and changed its name to ADB Systems International Inc. (“ADB Inc.”) by articles of amendment dated October 11, 2001.

During 2002, ADB Systems International Inc. (“ADB Inc.”), entered into a series of agreements with the Brick Warehouse Corporation (“The Brick”), which are described below under the heading “The Brick Transaction” and subsequently ADB Inc. changed its name to Bid.com International Ltd.

On August 20, 2002, ADB Systems International Ltd., was incorporated by certificate and Articles of Incorporation. On October 31, 2002, the shareholders of ADB Inc. exchanged their shares of ADB Inc. for shares of the Company on a one-for-one basis.  This exchange was implemented pursuant to a plan of arrangement approved by the shareholders of ADB Inc. on October 22, 2002 and by the Ontario Superior Court of Justice on October 24, 2002 (which we refer to in this form as the “Arrangement”).  As a result of the Arrangement, the business of ADB Inc., including all assets and liabilities of ADB Inc. (other than those related to retail activities), was transferred to the Company in the form of a return of capital.  ADB Inc. subsequently changed its name to Bid.Com International Ltd.

The principal and registered office of the Company is located at 302 The East Mall, Suite 300 Etobicoke, Ontario, Canada, M9B 6C7 and our telephone number is (416) 640-0400.  

4

2.2Intercorporate Relationships

The Company has the following organizational structure, which include the subsidiaries set out below:

(*) The denoted subsidiaries are currently dormant and the Company anticipates dissolving these companies in due course.

3.0GENERAL DEVELOPMENT OF THE BUSINESS

3.1Three Year History

ADB Systems develops and sells software products and services that allow our customers to source, buy, track, manage and sell assets, primarily in asset intensive industries.  We refer to our product and services suite as asset lifecycle management solutions.  Our solutions can reduce sourcing, procurement and tracking costs, improve tracking and monitoring of asset performance and reduce operational downtime.

We acquired ADB Systemer ASA (“ADB Systemer”), in October 2001.  For more than ten years, ADB Systemer provided enterprise asset management solutions (EAM) to customers in Norway and Europe.  For the past three years, we have provided EAM solutions to customers in North America and Europe and during the past two years we have introduced sourcing and procurement solutions to customers in North America and Europe. 

Our customer list includes a number of leading organizations, such as BP p.l.c. (“BP”), GE Commercial Equipment Financing (“GE CEF”), National Health Services (UK) , permanent TSB (the retail banking division of Irish Life Permanent p.l.c.) (“permanent TSB”), Talisman Energy Inc. (“Talisman Energy”) and Vesta Insurance Group, Inc. (“Vesta Insurance”). 

Through our wholly-owned subsidiary, ADB Systems USA Inc., ADB owns a 50 percent interest in GE Commercial Finance Asset Manager(1), a joint business venture launched with the General Electric Capital Corporation, through its business division GE Commercial Finance, Commercial Equipment Financing (referred to in this AIF as “GE” or “GE Commercial Finance”).

Designed to help our customers get full value from their capital assets, the Company’s integrated asset management solutions:

•Streamline sourcing/procurement activities while reducing purchasing costs;

•Schedule preventative and corrective maintenance activities, eliminating unnecessary operational downtimes and reducing maintenance costs;

(1) The legal corporate name of the joint venture is GE Asset Manager LLC which operates under the name GE Commercial Finance Asset Manager (referred to in this AIF as “GE’s Asset Manager” or “Asset Manager”). Additional information on this joint venture is provided in Section 4.2 of this AIF under the heading Joint Venture with GE Commercial Finance, Commercial Equipment Financing.

5

•Manage inventory of materials more effectively, resulting in reduced purchase costs, improved access to supplies, and easier tracking of assets regardless of their location; and

•Generate higher yield for surplus assets that are disposed or sold on-line.

Significant product and business developments over the last three fiscal years have been as follows:

Fiscal 2004

•ADB was engaged in a number of activities aimed at expanding our relationships with existing customers and developing relationships with new customer organizations. Through these efforts, which included the introduction of new technology enhancements to our suite of product offerings, the cross selling of ancillary applications, and the increase in the number of users of our technology, ADB was able to expand our working relationships with BP the National Health Services (UK), and GE CEF, among others.

•In North America, the primary thrust of our activities in 2004 concentrated on the rollout of Asset Manager from GE, our joint venture with GE Commercial Finance. This joint venture is designed to combine GE’s equipment financing and asset management expertise together with our experience in providing mission-critical technology solutions for asset lifecycle management. Together, we have developed web-based solutions to help our customers:

•Track and re-deploy assets more effectively;

•Automate equipment appraisals;

•Efficiently market and sell surplus equipment; and

•Automate sourcing and tendering processes.

•Through the joint venture, we signed a customer agreement with Kraft Foods Global, Inc. (“Kraft”) and continued to service our customer agreement with the General Electric Company, acting through its GE Aircraft Engines division (“GE Aircraft Engines”).

•ADB made a number of enhancements to our suite of technology product offerings in 2004.   These enhancements, which centered on re-architecting the under-lying platform of our Dyn@mic Buyer solution and expanding the functionality of our WorkMate and Material Transfer applications, allow us to stay current with the latest technology trends while maintaining a competitive advantage.

•A key cornerstone of our technology activities focused on the development of Asset Tracker, a new, web-based asset-tracking offering that is delivered through our joint venture with GE.

•Effective November 15, 2004 our stock symbol on the Over The Counter Bulletin Board (the “OTCBB”) was changed to ADBYF. The addition of the F to the symbol was a requirement of the OTCBB to signify that we are a foreign issuer.

Fiscal 2003

•Completed second year of operations as ADB Systems International Ltd.

•Met revenue and operating forecasts for each quarter of 2003.

•Reduced operating expenses by 27 percent over 2002.

•Improved net loss performance by 70 percent over 2002.

•Secured approximately $2.5 million of gross proceeds through a series of financial agreements and private placements.

6

•Signed agreements with a number of organizations representing the oil and gas, public, healthcare, and financial services sectors including: FluorAmec (Korea), OREDA (North Sea), Vinmonopolet (Norway), Talisman Energy (North Sea), RC Consulting (Russia), and the National Health Services (U.K.).

•Expanded relations with existing customers, including BP, Vesta Insurance (Norway), Calpine (Canada), Paramount Resources (Canada) and the School Board of Broward County (US).

•Launched GE Asset Manager LLC, a joint business venture with GE designed to jointly develop and market new asset management technology solutions to customer in a broad range of industries across North America.

•Through its joint venture with GE, ADB signed a customer agreement with GE Aircraft Engines.

Fiscal 2002

•Completed first year of operations as ADB Systems International Ltd.

•Increased gross revenues by 30 percent over 2001.

•Reduced operating expenses by 20 percent over 2001.

•Improved net loss performance by 50 percent over 2001.

•Signed agreements with a number of organizations representing the oil and gas, public healthcare, and financial services sectors including, City of Narvik, Haliburton Productos, Kongsberg, and Vesta Insurance.

•Signed letter of intent with GE Commercial Equipment Finance to launch a joint venture.

•ADB was selected as the Preferred Bidder by the National Health Services (U.K.) to deliver an on-line procurement initiative.

•Began trading on the OTC Bulletin Board under the symbol ADBY.

•Formed a strategic alliance with RBT Consulting, healthcare sector experts.

•Secured approximately $3 million gross proceeds through a series of financial agreements with The Brick, Stonestreet LP, and a group of private investors.

•Following shareholder approval, ADB implemented a new plan of arrangement, including the launch of an on-line initiative with The Brick.

4.0DESCRIPTION OF THE BUSINESS

4.1Overview

The Company develops and sells software solutions and services that allow our customers to source, manage, and sell their assets and capital equipment.  We refer to our product and services suite as asset lifecycle management solutions.  Our solutions help our customers reduce sourcing, procurement and maintenance costs, improve asset utilization, reduce operational downtime, and generate higher yields for surplus equipment.

The Company operates in three reportable geographic segments: North America, Ireland and the United Kingdom, and Norway. The Company has also in the past earned revenue from both retail and non-retail customers.

Net Revenue by Geographic Segment	2004		2003
(in thousands)
North America	$	796	$	1,211
Ireland and U.K.	$	681	$	1,239
Norway	$	3,453	$	3,403
	$	4,930	$	5,853

7

4.2History and General Development

The Brick Transaction

On August 30, 2002, we entered into a series of agreements with The Brick Warehouse Corporation (“The Brick”) which contemplated a series of transactions among The Brick, ADB Systems International Inc. (“Old ADB”) and ADB. We refer to those transactions in this AIF as “The Brick Transaction”.

Pursuant to The Brick Transaction:

•The Brick made a $2.0 million secured loan to Old ADB and ADB at an interest rate of 12% per annum;

•ADB and Old ADB agreed to enter into the Arrangement (as defined above); and

•The Brick and Old ADB agreed to utilize the online retail technology, experience and expertise of ADB developed and operated under the name “Bid.Com International Inc.” for the online sale of consumer products to be supplied by The Brick (which we refer to in this report as the “Retail Business”). 

The $2.0 million secured loan made by The Brick matured on June 30, 2003. At maturity, ADB had the right, at its option, to: (i) repay the loan in cash or (ii) transfer to The Brick all of the issued shares of Old ADB owned by ADB in satisfaction of the outstanding principal amount and accrued interest then owing to The Brick.  The obligations of Old ADB and ADB were secured by a general security agreement delivered by ADB to The Brick covering all the property and assets of ADB. On June 30, 2003, ADB exercised its option to transfer to The Brick all of the issued shares of Old ADB in satisfaction of the outstanding principal amount and accrued interest then owing to The Brick.

The principal consequences of the Arrangement, which was effective as of October 31, 2002, are as follows:

1.Shareholders of Old ADB received from ADB one common share of ADB in exchange for each of their common shares of Old ADB.  As a result (i) Old ADB became a wholly owned subsidiary of ADB and (ii) each former shareholder of Old ADB owns the same number of shares in ADB that it owned in Old ADB prior to the exchange.

2.Old ADB transferred all of its assets to ADB and ADB assumed all of the liabilities and obligations of Old ADB, except that Old ADB retained specific assets and liabilities of the Retail Business.

3.The registered office, articles of incorporation, by-laws, directors and executive officers of Old ADB immediately prior to the Arrangement became the registered office, articles, by-laws, directors and executive officers of ADB upon consummation of the Arrangement.

4.ADB adopted the Stock Option Plan of Old ADB.  Upon consummation of the Arrangement, all options, warrants or debt that was exercisable or convertible into shares of Old ADB became convertible into the same number of shares of ADB.

5.The articles of amalgamation of Old ADB were amended to: (i) change the name of Old ADB to Bid.Com International Ltd. and (ii) delete the authorized Preference Shares (as defined in such articles) and the rights, preferences and restrictions on the transfer of such Preference Shares.

Upon completion of the Arrangement, the Toronto Stock Exchange approved the listing of the ADB common shares issued in exchange for Old ADB common shares or issuable upon the exercise of options or warrants or conversion of debt.  ADB common shares are listed on the Toronto Stock Exchange for trading under the symbol “ADY”.  The shares of Old ADB ceased trading on the Toronto Stock Exchange on November 5, 2002.  On April 2, 2003 an order was issued by the Ontario Securities Commission pursuant to which Old ADB has ceased to be a reporting issuer in all jurisdictions in Canada in which it was a reporting issuer.

8

Joint Venture with GE Commercial Finance, Commercial Equipment Financing

On December 31, 2003 ADB Systems USA, Inc. (“ADB USA”), a wholly owned subsidiary of ADB, entered into an Amended and Restated Operating Agreement (the “Operating Agreement”) with General Electric Capital Corporation through is business division GE Commercial Finance, Commercial Equipment Financing (“GE Commercial Finance”).  This agreement was entered into in connection with the establishment of GE Asset Manager, LLC a joint business venture in which both GE Commercial Finance and ADB USA hold a 50% interest.  Pursuant to this business venture, GE Commercial Finance and ADB USA also entered into the following agreements that are included as exhibits to the Operating Agreement:  ADB License Agreement, ADB Services Agreement, GE License Agreement and GE Service Agreement. GE Asset Manager LLC, which carries on business under the name GE Commercial Finance Asset Manager (“Asset Manager”), is an integrated, web-based business enabling mid- and large-size organizations to reduce operating costs by simplifying and consolidating their asset management programs. Asset Manager features all-in-one capabilities designed for sourcing of new equipment, tracking and reallocation of existing assets, automated appraisal management and disposition of surplus equipment.

4.3Industry Background and Overview

Asset management software has existed for more than thirty years, initially through computerized maintenance management systems (CMMS), and more recently including more comprehensive and robust enterprise asset management (EAM) and enterprise resource planning (ERP) solutions.  The early CMMS systems automated daily management of assets, while ERP solutions consolidate basic asset information with financial information at the corporate level. EAM solutions encompass elements of both, serving as the next evolution of CMMS solutions by bridging the gap between asset management and corporate-level planning and tracking requirements.

The key value proposition for EAM solutions is that they can provide a quick and quantifiable return on investment (ROI) and return on assets (ROA).  Cost and productivity improvements can immediately and measurably benefit organizations, and thus are highly desirable to potential customers, particularly in difficult economic times where the focus is increasingly bottom line oriented.

In addition to EAM solutions, we offer sourcing and procurement solutions as well as sales solutions.    These are natural extensions to EAM solutions, as organizations seek to extend asset management and corporate-level planning and tracking onto other elements of the asset lifecycle.

4.4Products and Services

GE’s Asset Manager

GE’s Asset Manager is a joint venture between GE Commercial Finance, Commercial Equipment Financing and ADB Systems International Ltd. that combines GE’s equipment financing and asset management expertise together with ADB’s experience in providing mission critical technology solutions for asset lifecycle management.

With organizations needing to generate improved bottom-line results and comply with new financial regulatory requirements, GE’s Asset Manager has introduced a new suite of integrated, web-based solutions that are designed to help organizations gain greater control of their capital assets and implement new process efficiencies to their operational activities.

Our industry-proven solutions enable our customers to:

•Track and re-deploy assets more effectively

•Automate equipment appraisals

•Efficiently market and sell surplus equipment

•Automate sourcing and tendering processes

9

There are four key components to Asset Manager’s offerings:

Asset Tracker

Designed to allow organizations to more effectively utilize their assets, Asset Manager is a web-based solution for keeping track of the location, details and status of capital equipment – regardless of where the equipment is being deployed.

Using a dedicated tracking site that is password protected, Asset Manager provides users the ability to search and locate capital assets throughout their organization.   Users can search for equipment in a number of ways.  Assets can be searched by business unit, function, or by specific piece of equipment category.

Once an asset is located, users can determine its status and take appropriate action.  Idle or under-utilized assets, for example, can be re-deployed, helping to increase their value to the organization and reducing capital spending on new equipment.

Assets no longer required or deemed surplus can be earmarked for disposition through traditional or on-line sales methods, such as Asset Seller.

With Asset Tracker, users can:

•Search and request for capital equipment within their organization, across multiple locations or facilities

•Review asset details, such as equipment description, image, financial information, and contact information

•Add new asset details by uploading data from spreadsheet applications

•Extract asset details and generate asset management reports

•Instantly determine the status of capital equipment

•Transfer and re-deploy idle assets

•Dispose of unnecessary or surplus equipment

Asset Appraiser

Asset Appraiser is a web-based solution that allows organizations to more effectively manage the capital equipment appraisal process. With Asset Appraiser organizations can create an appraisal scope, source collateral specific appraisers, confirm appraisal data, distribute documents and data collection tools, compile appraisal results and access stored appraisals on-line in a protected environment.

Asset Appraiser generates and receives complete narrative appraisal reports on-line in an easy to use, password-protected website. Capabilities provided by Asset Appraiser include:

•Create the full scope of appraisals on-line

•Source collateral-specific appraisal companies on-line

•Receive competitive bids on appraisal services needed

•Create complete appraisal requirements

•Source appraisal services electronically and receive competitive bids on appraisal services needed

•Confirm appraisal details via electronic drafts

•Access appraisals in a 24 x 7 environment - for users and suppliers

•Capture all relevant data through drop down text boxes

•Store and review appraisals in a secure environment

•Download spreadsheet templates into reports

•Add attachments, such as image, text or movie files, to reports

•Ability to add an addendum to a completed appraisal report

•An aid to Sarbanes-Oxley compliance

Asset Seller

Asset Seller facilitates instant and global access to a buying community by presenting your surplus equipment or inventory on geasset.com, GE’s off-lease equipment re-marketing website. Asset Seller is a proven take-to-market solution that will connect your company’s equipment to a global community of qualified organizational buyers using multiple sales platforms, all developed to help maximize asset recovery value and improve cycle time.

Asset Seller brings together multiple sales platforms into one integrated on-line environment, providing flexibility, while maximizing the yield for your surplus equipment.

10

Asset Seller’s direct sale platform features equipment showcases that are designed to promote private treaty sales. Other sales platforms available through Asset Seller include ranked sealed bid and top bid sale events that enable you to market equipment in an auction-like environment.

Utilizing GE’s patent pending ranked sealed bid method, Asset Seller encourages multiple bids and retains buyer anonymity, creating competitive sales environments that generate a higher recovery for asset investment.

Asset Seller also enables organizations to feature equipment specifications, photos, videos and contact information, and allows them to coordinate off-line sales activities such as equipment inspections.

Asset Buyer

Asset Buyer is a web-based solution designed for automating sourcing activities and improving purchasing decisions.   Using Asset Buyer, purchasers can determine the factors that are the most important to their procurement decisions and identify suppliers that deliver the greatest value – from the lowest price to the ability to match exact specification requirements.

Asset Buyer also streamlines the procurement process, making it easier to create and distribute tenders, select vendors and negotiate with suppliers.

With Asset Buyer, organizations can:

•generate cost savings on sourcing activities

•reduce purchasing cycle times

•take advantage of multiple sourcing formats including request for proposals, reverse auction, and sealed bid

•rank suppliers based on their ability to match buying criteria

•improve relations with suppliers through on-line collaborations.

We offer solutions to manage all aspects of the asset lifecycle – sourcing/procurement, maintenance, materials management and disposition.  Below is a detailed description of our offerings:

Dyn@mic Buyer (TM) An on-line sourcing solution, Dyn@mic Buyer automates the tendering process, and can be used to improve the decision-making process involved in sourcing goods by providing automated analysis and selection among competing bids, based on a variety of pre-determined factors. The current release of Dyn@mic Buyer can be delivered on a hosted or client-server (licensed) basis.

Key features of the product include:

•The ability for buyers to create tenders using automated tools that accelerate the purchasing process and reduce procurement costs.

•Capabilities for buyers to post and distribute their tenders on-line to qualified suppliers.

•The ability for buyers to assign values to criteria involved in the purchase decision, such as price, product availability, post-sales support and certification standards.  Suppliers’ responses to tender questions are then weighed for evaluation by buyers.

•Functionality that allows for the posting of detailed technical information, question and answer forums, and automatic e-mail notification of amended or new buyer-posted documents.

•Capabilities to allow for the use of sealed bid sourcing formats enabling users to post their product or service requirements to selected vendors.  The sealed bid system differs from the request for quotation in that the vendors only have one opportunity to supply a bid.  Only after the close of the auction is the user able to view the vendor bids.

Dyn@mic Buyer is licensed to our customers. Fees for Dyn@mic Buyer are determined on an annual basis, depending on the number of sourcing events identified by customers. Service fees are charged separately for implementation, systems integration, training and other consulting activities. Dyn@mic Buyer can be bundled with our procurement solutions or used separately depending on customer requirements.  Current customers using Dyn@mic Buyer include the National Health Services (UK) and Vesta Insurance.

11

ProcureMate (TM) ProcureMate is our web-based business-to-business e-Procurement solution designed to reduce purchase costs, improve purchasing efficiencies and reduce maverick buying.  ProcureMate allows users to select goods for purchase from a web-based catalog and automatically issue purchase orders to their suppliers.

Key features of ProcureMate include:

•The ability to notify suppliers automatically of purchase orders requiring processing.

•Functionality for allowing on-line dialogue to take place between buyers and suppliers.

•The ability to integrate to enterprise resource planning and financial systems, reducing manual efforts for processing and consolidating purchase orders, goods receipt and payment activities.

•Functionality for facilitating direct payment and electronic funds transfer.

•The ability to integrate user workflow and approvals into the procurement process.

ProcureMate is licensed to customers and license fees for ProcureMate are based on the number of users named by the customer.  Service fees are charged separately for implementation, systems integration, training and other consulting activities.  ProcureMate can be bundled with our other on-line purchasing solutions or used separately depending on customer requirements.  Existing ProcureMate customers include BP (Norway), National Health Services (UK), Vesta Insurance, and Hordaland HFK County, a large local government entity in Norway.

WorkMate (TM) Our Company’s flagship solution, WorkMate provides integrated capabilities for enterprise asset management.  WorkMate is a client-server solution that operates as an extension of (and can be fully integrated with) a customer’s existing ERP system.  The most advanced version of WorkMate incorporates asset maintenance, asset tracking, materials management and procurement functionality.

WorkMate is designed for use by customers in asset intensive industries – typically those where maintenance, repair and operations purchases outnumber raw material purchases by more than ten to one on a transaction volume basis.  Examples of asset intensive industries are oil and gas, process industries (such as mining) and the utilities sector. 

The three main modules (procurement, materials management and maintenance functionality) may be licensed independently or together as a fully integrated system:

•Procurement Module – for sophisticated domestic and international purchasing operations.  Key capabilities include: order requisitioning, quotations, purchase orders, contracts, cost controls and vendor catalogues.  The procurement module also monitors supplier performance in terms of accuracy, punctuality and cost.

•Materials Management Module – for managing inventory and logistics operations.  Key features include: inventory status, goods receipt, stock issue, reordering, packing/unpacking, transportation, goods return and equipment rentals.  This Module will log all movements of an item and generates the necessary financial transactions.

•Maintenance Module – for all types of maintenance, including corrective, preventive or condition-based activities. Customers can automate manual routines and track maintenance costs and equipment history.

Each WorkMate module also includes workflow and reporting tools.

WorkMate is a licensed client-server application and pricing is based on the number of users named by the customer.  Service fees are charged separately for implementation, systems integration, training and other consulting activities.  Our WorkMate customers include some of the largest global players in the oil and gas sector, such as: BP (Norway), Halliburton Productus, Prosafe, and Talisman Energy (Canada).

Dyn@mic Seller (TM) Dyn@mic Seller is an on-line sales solution designed to help our customers with the disposition of surplus assets and equipment.  Dyn@mic Seller integrates multiple pricing methods, such as fixed priced, top bid (auction), dutch (declining price) and hybrids, through private-labeled websites. Dyn@mic Seller is delivered through an application service provider model (remotely through the internet).

Key capabilities of the product include:

•Traditional rising price auctions, where the highest bids win the items being sold. The rising price auction allows participants to competitively bid on available products by incrementally adjusting their bid amounts.  Our user interface allows users to easily identify current leading bidders, minimum new bids and initial bid pricing.

12

Participants are informed of their bid status, stating whether they have won, been outbid, approved or declined via electronic mail. 

•A patented Dutch (declining) auction format, in which a starting price is set and a limited time period is allocated for a fixed quantity of the product to be sold.  As time advances, the price drops in small increments until the asset is sold.  The declining bid auction allows participants to bid in a real-time format utilizing on-screen data which provides the time and quantity remaining as well as the falling price of the items for sale.

•Hybrid auction formats that blend multiple pricing formats to meet a customer’s particular needs. 

•Fixed price sales where assets are sold in a catalogue or directory format.  The purchaser cannot bid on the price, but merely elects whether or not to purchase the good or service.

Our customers pay monthly hosting fees for use of Dyn@mic Seller and typically also enter into a revenue sharing arrangement with us.  Service fees for implementation, systems integration, training and other consulting activities are charged separately.  Current customers of Dyn@mic Seller include GE Commercial Equipment Financing (USA), and permanent TSB (Ireland).

Related Services

In connection with our software offerings, we provide the following services to our customers:

Consulting.  A significant number of our customers request our advice regarding their business and technical processes, often in conjunction with a scoping exercise conducted both before and after the execution of a contract.  This advice can relate to development or streamline of assorted business processes, such as sourcing or procurement activities, assisting in the development of technical specifications, and recommendations regarding internal workflow activities.

Customization and Implementation.  Based generally upon the up-front scoping activities, we are able to customize our solutions as required to meet the customer’s particular needs.  This process can vary in length depending on the degree of customization, the resources applied by the customer and the customer’s business requirements.  We work closely with our customers to ensure that features and functionality meet their expectations.  We also provide the professional services work required for the implementation of our customer solutions, including loading of data, identification of business processes, and integration to other systems applications.

Training.  Upon completion of implementation (and often during implementation), we train customer personnel to utilize our Solutions through our administrative tools.   Training can be conducted in one-on-one or group situations. We also conduct “train the trainer” sessions. 

Maintenance and Support.  We provide regular software upgrades and ongoing support to our customers.

Third Party Offerings

In addition to the sale of our core solutions and services, we have entered into marketing or co-marketing agreements with a number of companies that offer services that are complementary to our offerings.  We market these complementary services to our customers and prospects and can earn a referral fee if these services are purchased.  In some cases our marketing partner has agreed to market our solutions to its customers and prospects and can earn a referral fee.  Our marketing partners include:

Partner	Service or Offering
AMEC Services Limited	Engineering Services
RBT Consulting	Healthcare Consulting Services
Production Access, Inc.	Oil and Gas Data Management Solutions

4.5Business Cycles

We experience some seasonality as a result of lower activity in European markets during the summer months. Additional information on seasonality and trends is set out under the heading Seasonality and Trends in the MD&A section of the company’s Annual Report for the year ending December 31, 2004 which is hereby incorporated by reference.

In addition since many of the customers of the Company and our joint venture Asset Manager are large

13

organizations or quasi-governmental entities, we may experience increasingly longer sales and collection cycles. Additional information on business cycle risks are set out in Section 5.0 of this AIF under the heading Risk Factors.

4.6Strategy

Our business strategy is to expand our customer base, particularly in the oil and gas, health, public authorities, and financial services sectors, through superior software functionality and through the industry expertise of our employees.  In particular, our strategy is comprised of the following key components: 

Expand joint venture with GE and increase our customer base

Since the launch of GE’s Asset Manager, we have focused our efforts on increasing the number of joint venture customers and enhancing our portfolio of asset management technology. This focus will be a cornerstone of our efforts in 2005.

Strengthen our position as an EAM vendor and improve our visibility among target sectors.

ADB has been ranked by a respected industry analyst as an emerging provider of enterprise asset management solutions.  While we have expanded our customer base and increased the number of users of our technology, ADB is committed to solidifying our position as an EAM, particularly among the oil and gas, government, healthcare and financial services sectors.

Maintain and Enhance Our Technology. 

Based on the relative pricing and functionality of our products as compared with those of our competitors, we consider our proprietary software offerings to be competitive, however it is critical that we continue to maintain and enhance our technology. 

Enter into and Maximize Alliances. 

We have marketing and other relationships with AMEC Services Limited, GE Capital, Production Access, RBT Consulting, Production Access, Inc.  and a number of other leading companies in a broad range of industries.  We believe that these and future relationships will help provide us with access to important industry participants and will help increase our brand awareness.

Seeking Acquisitions and Strategic Investments.  

We plan to seek to expand by seeking technologies, products, and services that complement our existing business.  If appropriate opportunities are available, we may acquire businesses, technologies or products or enter into strategic relationships that may further diversify revenue sources and product offerings, expand our customer base or enhance our technology platform.

4.7Customers

We provide our solutions to customers in a variety of industries, including: oil and gas, health, public authorities, and financial services. 

The revenue structures and particular services provided vary depending upon the needs of the customer and the solution concerned.  For licensed offerings we generally collect a license fee based on number of users, service fees for implementation and training, and support and maintenance fees.  For hosted offerings, we generally collect an up-front implementation fee, monthly hosting fee, and a share of revenue or transaction volumes.

14

The following is a representative list of some of the customers for whom we have implemented or are implementing our solutions:

Customer	Solution(s)	Industry Segment	Geographic Location
BP Norway AS	ProcureMate; WorkMate	Oil and Gas	Norway
Prosafe Drilling Company (Prosafe)	WorkMate	Oil and Gas	Norway
Halliburton Productos (Halliburton)	WorkMate	Oil and Gas	Brazil
AmecFluor	WorkMate	Oil and Gas	Korea
Talisman Energy Inc.	WorkMate	Oil and Gas	Canada, UK
Hordaland fylkeskommune (HFK)	ProcureMate	Public Authority	Norway
GE Commercial Equipment Financing (GE)	Dyn@mic Seller	Financial Services	US
National Health Services (UK)	ProcureMate	Health	UK
permanent TSB	Dyn@mic Seller	Financial Services	Ireland
Paramount Resources	WorkMate	Oil and Gas	Canada
Kraft Foods Global, Inc.	Serviced by our joint venture, Asset Manager, providing Asset Tracker

For information regarding the regional market segments in which the Company competes, see Note 25 to the Financial Statements in the Company’s Annual Report for the year ended December 31, 2004 which is hereby incorporated by reference.

4.8Sales and Marketing

We market our solutions primarily through our direct sales force. Our sales organization is regional with personnel located in our principal offices in Toronto (Canada), Dublin (Ireland), London (UK), Tampa (Florida, USA) and Stavanger (Norway). 

Our marketing efforts are focused on targeted marketing campaigns, rather than broad-based “awareness” campaigns. Potential customers are identified through direct contact, responses to requests for information, attendance at trade shows and through industry contacts.    We principally focus on trade show participation, seminar series for specific industries or professionals and ongoing lead generation through our sales force.

The GE sales force takes the lead in the sales and marketing efforts of the Asset Manager joint venture .

We use reference customers to assist us in our marketing efforts, both through direct contact with potential customers and through site branding and case studies.  We also rely on our co-marketing partners to assist in our marketing efforts.   

4.9Technology Platform

ADB has devoted significant resources to developing its proprietary software technology. The technology platform is constructed using distributed software technologies which allow rapid redevelopment and deployment of new software technology in order to take advantage of emerging business opportunities. 

Our company’s technology platform is based on Microsoft core applications, including the Windows NT operating system and a SQL server relational database, all residing on scaleable hardware.  The software is constructed using an

15

advanced proprietary XML framework and resides on an N-tier architecture.  The support of open systems allows integration with a large variety of existing commercial, proprietary and legacy applications.

4.10Software Development & Technology

Based on the relative pricing and functionality of our productsas compared with those of competitors, we believe that our proprietary software provides a competitive advantage, and that our future success depends, in part, on our ability to continue developing and enhancing that software.  Therefore, we have focused our software development and technology efforts on the continued development of our proprietary software offerings.  Presently, 14 of our staff members are dedicated to product development and maintenance. 

Our ongoing software development and technology efforts are aimed at the continued “productization” of specific elements of our software, enhancing the features and functionality of our existing software components, the development of new software components, and the integration of superior third party technology into our environment.  Productization involves the development of reusable applications to reduce programming time and costs for customer implementations.

Our software development and technology expenditures were approximately $3.257 million for the year ended December 31, 2004,  $2.817 million for the year ended December 31, 2003 and $4.101 million for the year ended December 31, 2002, including salaries and related expenses of our personnel engaged in research and development. Research and development activities in 2004 included the development of version 2.0 of our DYN@MIC BUYER Solution and the development of a new materials tracking module within our WorkMate application.

Our software development and technology activities in 2004 included the ongoing development of a new applications framework implemented in Microsoft .Net. The new framework will be used as the foundation all future Web based products. There was also a substantial amount of time devoted to the extension of our integration tool set, which allows us to connect our core product suite to pre-existing customer owned third party applications. In addition, version 1.0 of new asset tracking and document management products were released.

4.11Intellectual Property

We rely on a combination of patent, copyright, trademark and trade secret laws, as well as confidentiality agreements and technical measures, to establish and protect our proprietary rights.

In March 1999 and July 2001, we received patents from the U.S. Patent and Trademark Office covering the process whereby we conduct Dutch auctions over electronic distribution channels. We have patent applications pending in Canada covering the same technology.  We also continue to explore other patent opportunities, and may have other applications pending from time to time.  We do not believe, however, that our ability to obtain patents is material to our success or results.

Our proprietary software is subject to common law copyright protection, but we do not have, and do not intend to pursue, any registered copyrights.  Common law protection may be narrower than that which we could obtain under registered copyrights.  As a result, we may experience difficulty in enforcing our copyrights against certain third party infringements.  The source code for our proprietary software is protected as a trade secret.

Our major trademarks or tradenames include: ADB; POWERED BY ADB; PROCUREMATE, WORKMATE, DYNAMIC SELLER and DYNAMIC BUYER. Except for DYNAMIC SELLER and DYNAMIC BUYER, which are unregistered, all of these trademarks and tradenames are the subject of pending applications for registration in one or all of the United States, Canada and Norway. We also claim rights in other unregistered trademarks.

16

Our competitive position is also dependent upon our unpatented trade secrets.  In an effort to protect our trade secrets, and as part of our confidentiality procedures, we generally enter into confidentiality and non-disclosure agreements with our employees and consultants and generally limit access to and distribution of our software, documentation and other proprietary information.  Additionally, we limit physical access to our premises, software and hardware and employ security measures to protect against damage or theft. 

The Company entered into a Patent License Agreement with NCR Corporation on April 29th, 2002.  The agreement provides the Company with access to specific technology patents over a seven-year period for US$100,000 annually.

4.12Competition

The market for each solution comprising our asset lifecycle management suite is intensely competitive.  Many of the companies we compete with have much greater financial, technical, research and development resources than us.

To remain and become more competitive, we will need to make continued investments in product development and improve our market visibility and financial situation.

 Although we offer a broad range of asset lifecycle management solutions, we face significant competition in each of the component product areas from the following companies:

•Sourcing – Procuri, Inc., B2E Markets, Inc., Emptoris, Inc., Moai Technologies, Inc.

•Procurement – MRO Software, Inc., Ariba, Inc., and broader ERP solution providers such as SAP AG, and Oracle Corporation

•EAM – related solutions – Datastream Ltd., MRO Software, Inc., Indus International Inc., Mincom Ltd.,  (and broader ERP solution providers such as SAP AG, and Oracle Corporation)

•Sales solutions – eBay Inc.

In addition, many organizations use in-house developers to develop solutions for certain elements of the asset lifecycle.

4.13Customer Concentration

ADB maintains excellent working relationships with a number of key organizations such as BP, GE CEF and the National Health Services (UK). If our business or contractual relationships with any these customers is severed or meaningfully altered, we would experience a significant decline in our performance, particularly through reduced revenues. For additional information on the business risks involved with our joint venture see section 5.0 Risk Factors of this AIF under the heading, “Our limited operating history in our current business as a combined entity and our joint venture with GE Commercial Finance makes evaluating our business difficult”.

4.14Employees

As of March 15, 2005 we employed a total of 46 full-time employees and one part-time employee as follows:

	North America	Ireland and UK	Norway
Sales and Marketing	4	1	2
Technical Services	4	1	9
Product Group	4	0	10
Finance and Admin	4	1	2
Executive	3	0	1
TOTAL	19	3	24

The number of our employees as of March 15, 2005 represents a 5% decrease in our workforce as compared with the number of our employees as of May 12, 2004. None of our employees are represented by a labor union, and we consider our employee relations to be good.

17

4.15Foreign Operations

ADB is structured into three business units:  North America, Ireland and the U.K. and Norway.  Each of these business units serves a local customer base.  Customers from other parts of the world, including Asia and South America are also served by these business units.

While an increase in sales from our North America business unit is expected, we rely heavily on the performance of our Norway and Ireland and U.K. business units.

Operating as an organization with an international presence and an international base of customers exposes ADB to a number of risks and uncertainties that may impact our operational performance.  These risks and uncertainties are discussed in the Management’s Discussion and Analysis of Financial Condition and Results of Operations (“MD&A”) included in our Annual Report for the financial year ended December 31, 2004, which is incorporated herein by reference.

5.0RISK FACTORS

The following is a summary of certain risks and uncertainties which we face in our business.  This summary is not meant to be exhaustive.  These risk factors should be read in conjunction with other cautionary statements, which we make in this AIF and in our other public reports, registration statements and public announcements.

We will need additional capital and if we are unable to secure additional financing when we need it, we may be required to significantly curtail or cease our operations.

The Company has not yet realized profitable operations and has relied on non-operational sources of financing to fund operations.  Since we began our operations, we have been funded primarily through the sale of securities to investors in a series of private placements, sales of equity to, and investments from, strategic partners, gains from investments, option exercises and, to a limited extent, through cash flow from operations. While the Company’s consolidated financial statements for the year-ended December 31, 2004 have been prepared on the basis of accounting principles applicable to a going concern, certain adverse conditions and events cast substantial doubt upon the validity of this assumption. The Company has not yet realized profitable operations and has relied on non-operational sources of financing to fund operations.  The Company’s ability to continue as a going concern will be dependent on management’s ability to successfully execute its business plan including a substantial increase in revenue as well as maintaining operating expenses at or near the same level as 2004. Management’s 2005 business plan includes a significant increase in revenue and operating cash flow primarily from major new contracts in Norway, UK and North America.  In addition, management believes that it has the ability to raise additional financing if required. The Company cannot provide assurance that it will be able to execute on its business plan or assure that efforts to raise additional financings would be successful.

These financial statements do not include adjustments or disclosures that may result from the Company’s inability to continue as a going concern.  If the going concern assumption were not appropriate for these financial statements, then adjustments would be necessary in the carrying values of assets and liabilities, the reported net losses and the balance sheet classifications used.

Management believes that continued existence beyond 2005 is dependent on its ability to increase revenue from existing products, and to expand the scope of its product offering which entails a combination of internally developed software and partnerships with third parties.

As of December 31, 2004, we had cash on hand and marketable securities of approximately $453,000.

We do not have any committed sources of additional financing at this time and we are uncertain whether additional funding will be available when we need it on terms that will be acceptable to us or at all. If we are not able to obtain financing when we need it, we would be unable to carry out our business plan and would have to significantly curtail or cease our operations. We have included in Note 2  to our financial statements in our Annual Report for the year ended December 31, 2004, incorporated by reference herein, a discussion about the ability of our company to continue as a going concern. Potential sources of financing include strategic relationships, public or private sales of our shares, debt, convertible securities or other arrangements. If we raise funds by selling additional shares, including common shares or other securities convertible into common shares, the ownership interests of our existing shareholders will be diluted.  If we raise funds by selling preference shares, such shares may carry more voting rights, higher

18

dividend payments or more favorable rights upon distribution than those for the common shares.  If we incur debt, the holders of such debt may be granted security interests in our assets.  Because of our potential long-term capital requirements, we may seek to access the public or private equity or debt markets whenever conditions are favorable, even if we do not have an immediate need for additional capital at that time.

We are not profitable and we may never become profitable.

We have accumulated net losses of approximately $104.9 million as of December 31, 2004.  For the year ended December 31, 2004 our net loss was $5.104 million.  We have never been profitable and expect to continue to incur losses for the foreseeable future.  We cannot assure you that we will earn profits or generate positive cash flows from operations in the future.

Our limited operating history in our current business as a combined entity and our joint venture with GE Commercial Finance makes evaluating our business difficult.

Since we were founded in September 1995, and until 1999 we operated solely as an online retailer of computer and other goods.  In 2000, we shifted our focus to providing dynamic pricing solutions.  In October 2001, we acquired ADB Systemer ASA of Norway, a provider of enterprise asset management and electronic procurement software and services.   While ADB Systemer has operated since 1988, we have only a limited operating history as a combined entity on which you can base your evaluation of our business and prospects. 

In December 2003 we formed the joint venture, GE Asset Manager LLC with GE Commercial Finance. Growing this business venture has required the Company to shift focus from a broad spectrum of customers to focusing on a small number of large clients.  By further investing in our relationship with GE Commercial Finance we are increasing our business risk by becoming substantially dependent on the business generated by the joint venture. Much of this risk is mitigated by the maturing nature of our joint venture relationship with GE Commercial Finance and over the past year Asset Manager completed two successful pilots. Our business risks are additionally mitigated by our access to GE Commercial Finance’s sales force, which operate as an outsourced sales force for Asset Manager.

Our business and prospects must be considered in light of the risks, uncertainties and expenses frequently encountered by companies in their early stages of development, particularly companies in new and rapidly evolving markets.  Our business strategy may not be successful and we may not successfully address those risks. 

We may experience increasingly longer sales cycles.

A significant portion of our revenue in any quarter is derived from a relatively small number of contracts.  We often experience sales cycles of six (6) to eighteen (18) months.  If the length of our sales cycles increases, our revenues may decrease and our quarterly results would be adversely affected.  In addition, our current and future expense levels are based largely on our investment plans and estimates of future revenues and are, to a large extent, fixed.  We may be unable to adjust spending in a timely manner to compensate for any unexpected revenue shortfall.   Any significant shortfall in revenues relative to our planned expenditures would have a material adverse effect on our business, financial condition, cash flows and results of operations.

Potential fluctuations in our financial results make financial forecasting difficult.

Our operating results have varied on a quarterly basis in the past and may fluctuate significantly as a result of a variety of factors, many of which are outside our control. Factors that may affect our quarterly operating results include:

•general economic conditions as well as economic conditions specific to our industry;

•long sales cycles, which characterize our industry;

•implementation delays, which can affect payment and recognition of revenue;

•any decision by us to reduce prices for our solutions in response to price reductions by competitors;

•the amount and timing of operating costs and capital expenditures relating to monitoring or expanding our business, operations and infrastructure; and

•the timing of, and our ability to integrate, any future acquisition, technologies or products or any strategic investments or relationships into which we may enter.

19

Due to these factors, our quarterly revenues and operating results are difficult to forecast.  We believe that period-to-period comparisons of our operating results may not be meaningful and should not be relied upon as an indication of future performance. In addition, it is likely that in one or more future quarters, our operating results will fall below the expectations of securities analysts and investors.  In such event, the trading price of our common shares would almost certainly be materially adversely affected.

Our share price has fluctuated substantially and may continue to do so.

The trading price of our common shares on The Toronto Stock Exchange and on the NASDAQ Over the Counter Bulletin Board (“OTCBB”) has fluctuated significantly in the past and could be subject to wide fluctuations in the future. The market prices for securities of technology companies have been highly volatile.   These companies have experienced extreme price and volume fluctuations that have often been unrelated or disproportionate to their operating performance.  Broad market and industry factors may materially and adversely affect the market price of our common shares, regardless of our operating performance. In addition, fluctuations in our operating results, and concerns regarding our competitive position can have an adverse and unpredictable effect on the market price of our shares.

In the past, following periods of volatility in the market price of a company’s securities, securities class-action litigation has often been instituted against that company. Such litigation, if instituted against us, could result in substantial costs and a diversion of management’s attention and resources, which could have a material adverse effect on our business, results of operations, cash flow, financial condition and prospects.

Your ability to buy or sell our common shares on the OTCBB may be limited.

On June 3, 2002, we transferred the listing of our common shares from the Nasdaq National Market to the Nasdaq SmallCap Market.  On August 22, 2002, our common shares were delisted from the Nasdaq SmallCap Market because we did not satisfy the minimum bid price per share requirement for continued listing on that market.  Our common shares immediately became eligible for and began trading on the OTCBB.  The OTCBB is generally considered to be a less efficient market than the Nasdaq National Market or the Nasdaq SmallCap Market on which our shares previously traded.  As a result, your ability to buy or sell our common shares on the OTCBB may be limited.  In addition, since our shares are no longer listed on the Nasdaq National Market or Nasdaq SmallCap Market, our shares may be subject to the “penny stock” regulations described below.  De-listing from the Nasdaq National Market and the Nasdaq SmallCap Market will not affect the listing of the common shares on The Toronto Stock Exchange.

Our common shares may become subject to “Penny Stock” regulations which may affect your ability to buy or sell our common shares.

Our common shares have traded on the Nasdaq National and Small Cap Markets and on the OTCBB at prices below US$5.00 since April 2000 (on a pre-consolidation basis).  As a result, our shares may become characterized as “penny stocks” which could severely affect market liquidity.  The Securities Enforcement and Penny Stock Reform Act of 1990 requires additional disclosure relating to the market for penny stocks in connection with trades in any stock defined as a penny stock. 

Securities and Exchange Commission regulations generally define a penny stock to be an equity security that has a market price of less than US$5.00 per share, subject to certain exceptions.  Such exceptions include any equity security listed on Nasdaq or a national securities exchange and any equity security issued by an issuer that has:

•net tangible assets of at least US$2,000,000, if such issuer has been in continuous operation for three years;

•net tangible assets of at least US$5,000,000, if such issuer has been in continuous operation for less than three years; or

•average annual revenue of at least US$6,000,000, if such issuer has been in continuous operation for less than three years.

Unless an exception is available, the regulations require, prior to any transaction involving a penny stock, delivery of a disclosure schedule explaining the penny stock market and the risks associated therewith.  The penny stock regulations would adversely affect the market liquidity of our common shares by limiting the ability of broker/dealers to

20

trade the shares and the ability of purchasers of our common shares to sell in the secondary market.  Certain institutions and investors will not invest in penny stocks.

The markets in which we operate are highly competitive.

The market for asset lifecycle management solutions is rapidly evolving and intensely competitive.  We face significant competition in each segment of our business (sourcing, procurement, enterprise asset management and asset disposition).  We expect that competition will further intensify as new companies enter the different segments of our market and larger existing companies expand their product lines.  If the global economy continues to lag, we could face increased competition, particularly in the form of lower prices.

Many of our competitors have longer operating histories, larger customer bases, greater brand recognition and significantly greater financial, marketing and other resources than we.   We cannot assure you that we will be able to compete with them effectively. If we fail to do so, it would have a material adverse effect on our business, financial condition, cash flows and results of operations.

We may not be able to retain or attract the highly skilled personnel we need, in particular as a result of our recent workforce reductions.

Our success is substantially dependent on the ability and experience of our senior management and other key personnel.  We do not have long-term employment agreements with any of our key personnel and maintain no “key person” life insurance policies. 

In 2002, we implemented a workforce reduction.  We experienced some attrition during 2003 as a result of the reduction. The number of our employees as of March 15, 2005 represents a 5% decrease in our workforce as compared with the number of our employees as of May 12, 2004.  We may need to hire new or additional personnel to respond to attrition or future growth of our business.  However, there is significant competition for qualified personnel. We cannot be certain we will be able to retain existing personnel or hire additional, qualified personnel when needed.

Significant delays in product development would harm our reputation and result in loss of revenue.

If we experience significant product development delays, our position in the market would be harmed, and our revenues could be substantially reduced, which would adversely affect our operating results.  As a result of the complexities inherent in our software, major new product enhancements and new products often require long development and test periods before they are released.  On occasion, we have experienced delays in the scheduled release date of new or enhanced products, and we may experience delays in the future.  Delays may occur for many reasons, including an inability to hire a sufficient number of developers, discovery of bugs and errors or a failure of our current or future products to conform to industry requirements.  Any such delay, or the failure of new products or enhancements in achieving market acceptance, could materially impact our business and reputation and result in a decrease in our revenues.

We may have to expend significant resources to keep pace with rapid technological change.

Our industry is characterized by rapid technological change, changes in user and customer requirements, frequent new service or product introductions embodying new technologies and the emergence of new industry standards and practices.  Any of these could hamper our ability to compete or render our proprietary technology obsolete.  Our future success will depend, in part, on our ability to: 

•develop new proprietary technology that addresses the increasingly sophisticated and varied needs of our existing and prospective customers;

•anticipate and respond to technological advances and emerging industry standards and practices on a timely and cost-effective basis;

•continually improve the performance, features and reliability of our products in response to evolving market demands; and

•license leading technologies.

We may be required to make substantial expenditures to accomplish the foregoing or to modify or adapt our services or infrastructure.

21

Our business could be substantially harmed if we have to correct or delay the release of products due to software bugs or errors.

We sell complex software products.  Our software products may contain undetected errors or bugs when first introduced or as new versions are released.  Our software products may also contain undetected viruses.  Further, software we license from third parties and incorporate into our products may contain errors, bugs or viruses.  Errors, bugs and viruses may result in any of the following:

•adverse customer reactions;

•negative publicity regarding our business and our products;

•harm to our reputation;

•loss of or delay in market acceptance;

•loss of revenue or required product changes;

•diversion of development resources and increased development expenses;

•increased service and warranty costs;

•legal action by our customers; and

•increased insurance costs.

Systems defects, failures or breaches of security could cause a significant disruption to our business, damage our reputation and expose us to liability.

We host certain websites and sub-sites for our customers.  Our systems are vulnerable to a number of factors that may cause interruptions in our ability to enable or host solutions for third parties, including, among others:

•damage from human error, tampering and vandalism;

•breaches of security;

•fire and power losses;

•telecommunications failures and capacity limitations; and

•software or hardware defects.

Despite the precautions we have taken and plan to take, the occurrence of any of these events or other unanticipated problems could result in service interruptions, which could damage our reputation, and subject us to loss of business and significant repair costs.  Certain of our contracts require that we pay penalties or permit a customer to terminate the contract if we are unable to maintain minimum performance levels.   Although we continue to take steps to enhance the security of our systems and ensure that appropriate back-up systems are in place, our systems are not now, nor will they ever be, fully secure.

Our business has undergone dramatic expansion and retraction phases since our formation.  We may not be able to manage further dramatic expansions and retractions in future.

Our business has undergone dramatic expansion and retraction since our formation, which has placed significant strain on our management resources.  If we should grow or retract dramatically in future, there may be further significant demands on our management, administrative, operating and financial resources.  In order to manage these demands effectively, we will need to expand and improve our operational, financial and management information systems and motivate, manage and retain employees.  We cannot assure you that we will be able to do so, that our management, personnel or systems will be adequate, or that we will be able to achieve levels of revenue commensurate with the resulting levels of operating expenses. 

22

International sales account for a significant portion of our revenue, which exposes us to certain risks.

We currently operate in Canada, Norway, Ireland, the United States and England.  In the 2004 fiscal year, sales to customers outside North America represented approximately 84% of our revenues. There are risks inherent in doing business on a global level, including: 

•difficulties in managing and staffing an organization spread across several continents;

•differing laws and regulatory requirements;

•political and economic risks;

•currency and foreign exchange fluctuations and controls;

•tariffs, customs, duties and other trade barriers;

•longer payment cycles and problems in collecting accounts receivable in certain countries;

•export and import restrictions;

•the need for product compliance with local language and business customs;

•seasonal reductions in business activity during the summer months in Europe and elsewhere; and

•potentially adverse tax consequences.

Any of these risks could adversely affect the success of our global operations.

Acquisitions of companies or technologies may result in disruptions to our business and/or distractions for our management.

We acquired ADB Systemer ASA of Norway in October 2001.  In the future, we may seek to acquire other businesses or make investments in complementary businesses or technologies. We may not be able to acquire or manage additional businesses profitably or successfully integrate any acquired businesses with our business.  Businesses that we acquire may have liabilities that we underestimate or do not discover during our pre-acquisition investigations.  Certain liabilities, even if we do not expressly assume them, may be imposed on us as the successor to the business.  Further, each acquisition may involve other special risks that could cause the acquired businesses to fail to meet our expectations.  For example:

•the acquired businesses may not achieve expected results;

•we may not be able to retain key personnel of the acquired businesses;

•we may incur substantial, unanticipated costs, delays or other operational or financial problems when we try to integrate businesses we acquire with our own;

•our management’s attention may be diverted; or

•our management may not be able to manage the combined entity effectively or to make acquisitions and grow our business internally at the same time.

The occurrence of one or more of these factors could have a material adverse effect on our business, financial condition, cash flows and results of operations.

In addition, we may incur debt or issue equity securities to pay for any future acquisitions or investments, which could dilute the ownership interest of our existing shareholders.

If we are unable to successfully protect our intellectual property or obtain certain licenses, our competitive position may be weakened.

Our performance and ability to compete are dependent in part on our technology.  We rely on a combination of patent, copyright, trademark and trade secret laws as well as confidentiality agreements and technical measures, to establish and protect our rights in the technology we develop. We cannot guarantee that any patents issued to us will afford meaningful protection for our technology.  Competitors may develop similar technologies which do not conflict with our patents.  Others may challenge our patents and, as a result, our patents could be narrowed or invalidated.

23

Our software is protected by common law copyright laws, as opposed to registration under copyright statutes.  Common law protection may be narrower than that which we could obtain under registered copyrights.  As a result, we may experience difficulty in enforcing our copyrights against certain third parties.  The source code for our proprietary software is protected as a trade secret.  As part of our confidentiality protection procedures, we generally enter into agreements with our employees and consultants and limit access to, and distribution of, our software, documentation and other proprietary information.  We cannot assure you that the steps we take will prevent misappropriation of our technology or that agreements entered into for that purpose will be enforceable. In order to protect our intellectual property, it may be necessary for us to sue one or more third parties.  While this has not been necessary to date, there can be no guarantee that we will not be required to do so in future to protect our rights. The laws of other countries may afford us little or no protection for our intellectual property.

We also rely on a variety of technology that we license from third parties, including our database and Internet server software, which is used to perform key functions.  These third-party technology licenses may not continue to be available to us on commercially reasonable terms, or at all. If we are unable to maintain these licenses or obtain upgrades to these licenses, we could be delayed in completing or prevented from offering some products or services.

Others could claim that we infringe on their intellectual property rights, which may result in costly and time-consuming litigation. 

Our success will also depend partly on our ability to operate without infringing upon the proprietary rights of others, as well as our ability to prevent others from infringing on our proprietary rights.  We may be required at times to take legal action in order to protect our proprietary rights.  Also, from time to time, we may receive notice from third parties claiming that we infringe their patent or other proprietary rights. In the past, a certain third party claimed that certain of our technology infringed their intellectual property rights.  The Company does not believe it does or ever has infringed the intellectual property rights of any third party.  The claim with the particular third party has been resolved through licensing arrangements.  There can be no assurances that other third parties will not make similar claims in the future.

We believe that infringement claims will increase in the technology sector as competition intensifies.  Despite our best efforts, we may be sued for infringing on the patent or other proprietary rights of others.  Such litigation is costly, and even if we prevail, the cost of such litigation could harm us.  If we do not prevail or cannot fund a complete defense, in addition to any damages we might have to pay, we could be required to stop the infringing activity or obtain a license.  We cannot be certain that any required license would be available to us on acceptable terms, or at all.  If we fail to obtain a license, or if the terms of a license are burdensome to us, this could have a material adverse effect on our business, financial condition, cash flows and results of operations.

Our product strategy is partially dependent upon the continued acceptance and use of the Internet as a medium of commerce.

Our success depends in part on the continued growth of the Internet and reliance on and use of the Internet by businesses.  Because use of the Internet as a source of information, products and services is a relatively recent phenomenon, it is difficult to predict whether the number of users drawn to the Internet will continue to increase and whether the market for commercial use of the Internet will continue to develop and expand. 

The Internet may not be commercially viable for a number of reasons, including potentially inadequate development of the necessary network infrastructure, delayed development of enabling technologies and inadequate performance improvements.  In addition, the Internet’s viability as a commercial marketplace could be adversely affected by delays in the development of services or due to increased government regulation.    Moreover, concern about the security of transactions conducted on the Internet and the privacy of users may also inhibit the growth of commerce on the Internet. If the use of the Internet does not continue to grow or grows more slowly than expected, or if the infrastructure for the Internet does not effectively support growth that may occur, our business would be materially and adversely affected.

24

Our business is sensitive to the overall economic environment. Any slowdown in information technology spending budgets could harm our operating results.

Any significant downturn in our customers’ markets or in general economic conditions that results in reduced information technology spending budgets would likely result in a decreased demand for our products and services, longer selling cycles and lower prices, any of which may harm our business.

We are subject to risks associated with exchange rate fluctuations.

Substantially all of our revenues are in European currencies or U.S. dollars, while the majority of our operating expenses are in Canadian dollars and Norwegian kroner.  We do not have any hedging programs in place to manage the potential exposure to fluctuations in the Canadian dollar or Norwegian kroner exchange rates.  Fluctuations in the exchange rates of these currencies or the exchange rate of other currencies against the Canadian dollar or Norwegian kroner could have a material adverse effect on our business, financial condition, cash flows and results of operations.

Our preference shares could prevent or delay a takeover that some or a majority of shareholders consider favorable. 

Our Board of Directors, without any further vote of our shareholders, may issue preference shares and determine the price, preferences, rights and restrictions of those shares.  The rights of the holders of common shares will be subject to, and may be adversely affected by, the rights of the holders of any series of preference shares that may be issued in the future.  That means, for example, that we can issue preference shares with more voting rights, higher dividend payments or more favorable rights upon distribution than those for our common shares.  If we issue certain types of preference shares in the future, it may also be more difficult for a third party to acquire a majority of our outstanding voting shares and such issuance may, in certain circumstances, deter or delay mergers, tender offers or other possible transactions that may be favored by some or a majority of our shareholders.

6.0DESCRIPTION OF CAPITAL STRUCTURE

6.1Share Capital

Common Shares

The Company is authorized to issuean unlimited number of common shares. The holders of the common shares of our Company are entitled to receive notice of and to attend all meetings of the shareholders of our Company and have one vote for each common share held at all meetings of the shareholders of our Company, except for meetings at which only holders of another specified class or series of shares of the Company are entitled to vote separately as a class or series. Subject to the prior rights of the holders of preference shares of our Company and to any other shares ranking senior to the common shares with respect to priority in the payment of dividends, the holders of common shares are entitled to receive dividends and our Company will pay dividends, as and when declared by our Board of Directors, out of moneys properly applicable to the payment of dividends, in such amount and in such form as our Board of Directors may from time to time determine, and all dividends which our Board of Directors may declare on the common shares shall be declared and paid in equal amounts per share on all common shares at the time outstanding. In the event of the dissolution, liquidation or winding-up of the Company, whether voluntary or involuntary, or any other distribution of assets of the Company among its shareholders for the purpose of winding up its affairs, subject to the prior rights of the holders of preference shares and to any other shares ranking senior to the common shares with respect to priority in the distribution of assets upon dissolution, liquidation or winding-up, the holders of the common shares will be entitled to receive the remaining property and assets of the Company.   There are no redemption or sinking-fund provisions that attach to the common shares, nor are there any provisions that discriminate against existing or prospective holders of common shares as a result of owning a substantial number of shares.  The holders of our common shares are not liable to further capital calls by the Company.

Dividends

The Company does not anticipate paying dividends on its common shares in the foreseeable future and intends to retain future earnings for reinvestment in its business.

25

Preference Shares

Our articles of incorporation authorize the issuance of an unlimited number of preference shares, in one or more series. The Business Corporations Act (Ontario) does not impose restrictions upon our Board of Directors issuing preference shares of the type authorized by our articles of incorporation. Our Board of Directors may fix, before issuing, the number of preference shares of each series, the designation, rights, privileges, restrictions and conditions attaching to the preference shares of each series, including any voting rights, any right to receive dividends (which may be cumulative or non-cumulative and variable or fixed) or the means of determining the dividends, the dates of payment, any terms and conditions of redemption or purchase, any conversion rights, and any rights on the liquidation, dissolution or winding-up of the Company, any sinking fund or other provisions, the whole to be subject to the issue of a Certificate of Amendment setting forth the designation, rights, privileges, restrictions and conditions attaching to the preference shares of the series. Our articles of incorporation require that preference shares of each series must, with respect to the payment of dividends and the distribution of assets or the return of capital in the event of the liquidation, dissolution or winding-up of the Company, whether voluntary or involuntary, rank on a parity with the preference shares of every other series and be entitled to preference over the common shares and over any other shares ranking junior to the preference shares. The preference shares of one series shall participate ratably with the preference shares of every other series in respect of all dividends and similar amounts.  The holders of our preference shares are not liable to further capital calls by the Company.  None of our preference shares are currently issued or outstanding. 

Common Share Purchase Warrants and Convertible Notes

As at December 31, 2004, the Company has issued additional securities, which are convertible into common shares of the Company, the details of which are disclosed in Note 8 and Note 10 of the Company’s Annual Financial Statements for the fiscal year ended December 31, 2004 which is included in the Company’s 2004 Annual Report which is hereby incorporated by reference.

6.2Constraints

Limitations on Rights to Own Securities

There is no limitation imposed by Canadian law or by the articles or other charter documents on the right of a non-resident to hold or vote common shares or preference shares with voting rights, other than as provided in the Investment Canada Act, as amended by the World Trade Organization Agreement Implementation Act.  The Investment Canada Act generally prohibits implementation of a reviewable investment by an individual, government or agency thereof, corporation, partnership, trust or joint venture that is not a “Canadian,” as defined in the Investment Canada Act (a “non-Canadian”), unless, after review, the minister responsible for the Investment Act is satisfied that the investment is likely to be a net benefit to Canada.

An investment in our voting shares by a non-Canadian (other than a “World Trade Organization Investor,” as defined below) would be reviewable under the Investment Canada Act if it were an investment to acquire direct control of our Company, and the value of our assets were $5.0 million or more.  An investment in our voting shares by a World Trade Organization Investor would be reviewable under the Investment Canada Act if it were an investment to acquire direct control of our Company, and the value of our assets equaled or exceeded $250 million.  A non-Canadian, whether a World Trade Organization Investor or otherwise, would acquire control of us for purposes of the Investment Canada Act if he or she acquired a majority of our voting shares.  The acquisition of less than a majority, but at least one-third of our voting shares, would be presumed to be an acquisition of control of our Company, unless it could be established that we were not controlled in fact by the acquirer through the ownership of voting shares.  In general, an individual is a World Trade Organization Investor if he or she is a “national” of a country (other than Canada) that is a member of the World Trade Organization (“World Trade Organization Member”) or has a right of permanent residence in a World Trade Organization Member.  A corporation or other entity will be a World Trade Organization investor if it is a “World Trade Organization investor-controlled entity” pursuant to detailed rules set out in the Investment Canada Act.  The United States is a World Trade Organization Member.

Certain transactions involving our voting shares would be exempt from the Investment Canada Act, including:  (a) an acquisition of our voting shares if the acquisition were made in connection with the person’s business as a trader or dealer in securities; (b) an acquisition of control of our Company in connection with the realization of a security interest granted for a loan or other financial assistance and not for any purpose related to the provisions of the Investment Canada Act; and (c) an acquisition of control of our Company by reason of an amalgamation, merger,

26

consolidation or corporate reorganization, following which the ultimate direct or indirect control in fact of our Company, through the ownership of voting interests, remains unchanged.

Change of Control

Our authorized capital includes an unlimited number of preference shares. The Board of Directors, without any further vote by the common shareholders, has the authority to issue preference shares and to determine the price, preferences, rights and restrictions, including voting and dividend rights, of these shares. The rights of the holders of common shares are subject to the rights of holders of any preference shares that the Board of Directors may issue in the future. That means, for example, that we can issue preference shares with more voting rights, higher dividend payments or more favorable rights upon dissolution, than the common shares. If we issued certain types of preference shares in the future, it may also be more difficult for a third-party to acquire a majority of our outstanding voting shares. 

Our articles do not contain any provisions that govern the ownership threshold above which shareholder ownership must be disclosed.

7.0MANAGEMENT’S DISCUSSION AND ANALYSIS

The information contained under “Management’s Discussion and Analysis” in the Company’s Annual Report for the year ended December 31, 2004, made available to all shareholders of the Company and filed with various regulatory authorities is incorporated herein by reference. This information is available on the SEDAR website at www.sedar.com.

8.0MARKET FOR SECURITIES

8.1Trading Price and Volume

The Company’s Common Shares are listed and posted for trading on the Toronto Stock Exchange under the trading symbol ADY and on the Over The Counter Bulletin Board (“OTCBB”) under the symbol ADBYF.

Toronto Stock Exchange 2004 - ADY (C$)

Month	Open	High	Low	Close	Volume
December	0.20	0.28	0.19	0.21	152,433
November	0.19	0.22	0.16	0.19	115,690
October	0.21	0.23	0.18	0.19	84,205
September	0.27	0.31	0.19	0.20	101,600
August	0.29	0.34	0.27	0.27	33,428
July	0.34	0.36	0.28	0.30	35,752
June	0.26	0.38	0.26	0.33	59,431
May	0.35	0.38	0.25	0.25	36,715
April	0.35	0.38	0.32	0.36	34,571
March	0.40	0.42	0.34	0.36	129,517
February	0.40	0.52	0.39	0.40	172,055
January	0.39	0.45	0.39	0.40	118,723

OTCBB 2004 - ADBYF (US$)

Month	Open	High	Low	Close	Volume
December	0.16	0.22	0.15	0.15	63,441
November	0.13	0.18	0.12	0.16	73,461
October	0.15	0.17	0.14	0.15	48,678
September	0.20	0.24	0.15	0.15	19,154
August	0.22	0.25	0.19	0.20	12,176
July	0.24	0.27	0.21	0.22	15,113
June	0.20	0.29	0.18	0.24	36,868
May	0.26	0.28	0.20	0.24	20,449
April	0.27	0.29	0.23	0.29	28,119
March	0.30	0.32	0.26	0.26	82,457
February	0.30	0.41	0.30	0.30	68,002
January	0.29	0.36	0.28	0.31	55,316

8.2Prior Sales

During the financial year ending December 31, 2004, the Company entered into the following agreements for the issuance of securities. The material terms and conditions attaching to each of these private placements are as follows:

27

a.SERIES F NOTES: On May 19, 2004, the Company issued Series F secured subordinated notes with a face value of $500,000 for net proceeds of $474,000.  The Series F notes have an annual rate of interest of 7 percent paid quarterly in arrears, mature May 19, 2007 and are convertible into equity units at a price of $0.31 per unit.  Each equity unit consists of one common share and one half of a common share purchase warrant with an exercise price of $0.50.  The warrants expire on May 19, 2007.  The Series F secured subordinated notes will automatically convert into units when the share price of the Company closes above $0.70 for five consecutive trading days during the term.  Holders may convert the notes into units at anytime following a four-month hold period.  If the holder does not convert and no automatic conversion takes place, the Company must repay the principal amount in cash.  The Series F notes are secured by a general security agreement on the assets of the Company, subordinated to the security claims provided to the holders of previously issued notes. The material change report, discussing this transaction, filed on SEDAR (www.sedar.com) on May 27, 2004 is hereby incorporated by reference.

b.SERIES G NOTES:  On June 15, 2004, the Company issued Series G secured subordinated notes with a face value of $1,710,000 for net proceeds of $1,624,000.  The Series G notes mature June 15, 2007, have an annual rate of interest of 11 percent (as amended October 21, 2004) payable upon the earlier of maturity and conversion and are convertible into equity units at a price of $0.31 per unit.  Each equity unit consists of one common share and one half of a common share purchase warrant with an exercise price of $0.50.  The warrants expire on June 15, 2008.  The Series G secured subordinated notes will automatically convert into units when the volume-weighted average share price of the Company closes above $0.70 for 20 consecutive trading days during the term.  Holders may convert the notes into units at anytime following a four-month hold period.  If the holder does not convert and no automatic conversion takes place, the Company must repay the principal amount in cash. The Series G notes are secured by a general security agreement on the assets of the Company, subordinated to the security claims provided to the holders of previously issued notes. The material change report disclosing this transaction filed on SEDAR (www.sedar.com) on June 25, 2004 is hereby incorporated by reference.

c.SERIES H NOTES: On October 21, 2004, the Company issued Series H secured subordinated notes with a face value of $520,000 for net proceeds of $500,000.  The Series H notes mature October 21, 2007, have an annual rate of interest of 11 percent payable upon the earlier of maturity and conversion and are convertible into equity units at a price of $0.20 per unit.  Each equity unit consists of one common share and one half of a common share purchase warrant with an exercise price of $0.40.  The warrants expire on October 21, 2008.  The Series H secured subordinated notes will automatically convert into units when the share price of the Company closes at or above $0.45 for 10 consecutive trading days during the term.  Holders may convert the notes into units at anytime following a four-month hold period.  If the holder does not convert and no automatic conversion takes place, the Company must repay the principal amount in cash.  In order to obtain the required approvals to issue the Series H notes, the Company retroactively increased the interest rate on the Series G notes from an annual rate of 7 percent to an annual rate of 11 percent. The Series H notes are secured by a general security agreement on the assets of the Company, subordinated to the security claims provided to the holders of previously issued notes. The material change report discussing this transaction filed on SEDAR (www.sedar.com) on October 28, 2004 is hereby incorporated by reference.

d.EQUITY PRIVATE PLACEMENT:  On November 25 and December 6, 2004, the Company completed a transaction resulting in the issuance of 5,000,000 shares at a price of $0.20 per share and 5,000,000 common share-purchase warrants exercisable into one common share at a price of $0.35 for gross proceeds of $1,000,000.  The warrants expire on December 6, 2008.  Gross proceeds were comprised of $800,000 in cash and $200,000 in past services.  Issuance costs in the amount of $61,000 were incurred, including $19,000 representing the fair value of 150,000 compensation options issued to First Associates Investments Inc.  The compensation options are exercisable into 150,000 equity units at a price of $0.20 per unit.  Each equity unit consists of one common share and one common share-purchase warrant with an exercise price of $0.35 and an expiry date of December 6, 2008.  The compensation options expire on December 6, 2006.  Included in this private placement were 100,000 shares issued to a director of the Company for net proceeds of $20,000. The material change report discussing this transaction filed on SEDAR (www.sedar.com) on December 6, 2004 is hereby incorporated by reference.

28

9.0DIRECTORS AND OFFICERS

The names, location of residence, positions with the Company and the principal occupations of the directors and senior officers of the Company are set out below. Each director is elected at the annual meeting of shareholders or appointed pursuant to the provisions of the Company’s bylaws and applicable laws to serve until the next annual meeting or until a successor is elected or appointed, subject to earlier resignation by the director. As at March 17, 2005 the number of common shares beneficially owned by the current directors and officers as a group is 4,590,086 representing approximately 6.3% of the issued shares of the Company.  These figures do not include the shares denoted by a (*) in the following table which are held by a former director and former officer who ceased to hold positions with the Company as at March 17, 2005.

Name and Municipality of Residence	Principal Occupation for the Preceding Five Years	Director /Officer Since	Position with the Company	Approximate number of shares of the Company beneficially owned directly or indirectly
JEFFREY LYMBURNER, 48, Oldsmar, Florida	Chief Executive Officer since August 1, 1999 and a founding shareholder of the Company. President of the Company from its founding in 1995 to October 11, 2001. Prior to the founding of the Company, Mr. Lymburner was President of Completely Mobile Inc., a cellular and wireless data business, from 1990 to 1995.	May 28, 1996	Chief Executive Officer, Director & Acting Chairman	3,211,975
T. CHRISTOPHER BULGER, (1)(2)(3) 48, Toronto, Ontario	Chairman and CEO of Megawheels Technologies Inc., a web-based classified advertising platform provider in the automotive newspaper and real estate sectors, with enterprise systems for auto dealerships. Executive Vice President of the Company from September 1998 to December 1999 and Chief Financial Officer of the Company from April 1996 to September 1998.	May 28, 1996	Director	265,000
PAUL GODIN, (1)(2)52, Kleinburg, Ontario	Mr. Godin is a private investor. From 1999 to March 2001 he was Chairman of The Art Vault International Limited. Aside from being one of the founding shareholders of the Company in 1995, Mr. Godinwas Chief Executive Officer of the Company from its founding in 1995 to August 1, 1999, and Chairman of the Board of Directors from June 17, 1996 to June 14, 2000.	May 28, 1996	Director	232,667
JIM MOSKOS, 42, Toronto, Ontario	President of the ADB Technology Group since October 19, 1999. Vice President - Technology of the Company from September 1997 to October 19, 1999. Senior Technology Manager for the Canadian Department of Indian Affairs and Northern Development responsible for setting the technical direction for all aspects of application development from September 1994 to August 1997.	June 7, 1999	President, ADB Technology Group & Director	21,375
JAN PEDERSEN, 47, Sola, Norway	President of our Norwegian Operations since October 11, 2001 and currently responsible for ADB System International’s European operations. Prior to that, Mr. Pedersen founded and acted as CEO of ADB Systemer ASA since 1988.	June 12, 2002	President, ADB Systemer AS & Director	767,019
DARROCH ROBERTSON, 53, London, Ontario	Associate Professor of Business at the Richard Ivey School of Business, The University of Western Ontario, for the past five years. He was the Director of the undergraduate HBA program at the Ivey School. Mr. Robertson was also a director and chair of the audit committee of Stackpole Limited, a TSX listed company. Mr. Robertson is also an elected member of council for the Institute of Chartered Accountants of Ontario, where he currently serves on the audit committee and by-laws committee.	June 25, 2003	Director	5,000
GLEN WHYTE ,(1)(2)(3)48, Toronto, Ontario	Associate Dean, Curriculum, Rotman School of Management, University of Toronto - a position he was appointed to in 2001. In 2000, Mr. Whyte was the Conway Chair in Business Ethics, Rotman School of Management. From 1998 to 1999, Mr. Whyte was the Simon Reisman Chair at the Treasury Board of Canada Secretariat. In 1998, Mr. Whyte was Full Professor, Organizational Behaviour and Human Resource Management, Rotman School of Management.	April 16, 2003 - Resigned June 23, 2004	Director	208,333 (*)

29

DUNCAN G. COPELAND, 47 North Potomac, MD, USA	Mr. Copeland is President of Copeland and Company, a consultancy based in Potomac, Maryland. He has been a Director of the corporation since its inception, except for the period from 2001-2004. Mr. Copeland has been a member of the faculties of the Richard Ivey School of Business, The University of Western Ontario and Georgetown University. He is a trustee of the Charles Babbage Foundation. Mr. Copeland holds a doctorate from the Harvard Business School.	June 23, 2004	Director	87,050
AIDAN ROWSOME, 44, Leixlip, Country Kildare, Ireland	Vice-President, Global Sales, has been with the Company since August 1999 when he joined as Managing Director, Europe. From June 1998 to July 1999. Mr. Rowesome was Chief Operations Officer for Nua Internet Consultancy responsible for all project operations. Prior to that Mr. Rowsome spent 8 years as General Manager. European Operations for Quarterdeck Corporation, no part of Symantec Group.	November 31, 2002 – Ceased as an officer February 25, 2005	Vice-President Global Sales	62,500 (*)
MICHAEL ROBB, 42 Ajax, Ontario	Mike Robb is Chief Financial Officer for ADB Systems, responsible for all of the Company’s financial and administrative activities. He brings more than 15 years of finance experience, including venture capital activities, private equity transactions and mergers and acquisitions. Most recently, Mr. Robb served as Vice President of Finance for Westaim Partners, a Toronto venture capital firm. Previously, he served as Director of Finance for Classwave Wireless Inc. and Director of Finance for Bid.Com. Mr. Robb is a Certified Management Accountant and a member of the Society of Management Accountants of Ontario.	August 12, 2003	Chief Financial Officer	Nil

(1)Member of the Management Resources and Compensation Committee,

(2)Member of the Corporate Governance Committee.

(3)Member of the Audit Committee.

9.1Bankruptcies

Paul Godin, a director of our company, was the founding shareholder, an executive officer and a director of The Art Vault. In March 2001, The Art Vault made an assignment in bankruptcy under the laws of the Province of Ontario, due to economic conditions and a lack of available funding. 

10.0PROMOTERS

In connection with our recent financings ADB has employed the assistance of Tim Richardson, of Pinnacle Consulting as a promoter of the Company. Mr. Richardson currently holds 275,000 common shares in the Company which he purchased at $0.23 per unit. Each unit consisted of one common share and one whole common share purchase warrant that can be converted into one share at $0.40, and which expire on December 6, 2008. For his services as a promoter of the Company Mr. Richardson receives remuneration of US$12,000.00 per month.

11.0LEGAL PROCEEDINGS

Neither the Company nor any of its subsidiaries is a party to, or the subject of, any material legal proceedings.

12.0RELATED PARTY TRANSACTIONS

For additional information regarding related party transactions, see the information contained under “Management’s Discussion and Analysis – Transactions with Related Parties” in the Company’s Annual Report for the year ended December 31, 2004, which is herein incorporated by reference. See also the description of “The Brick Transaction” that is described earlier in this AIF under the heading “History and Development”.

On August 30, 2002, the Company entered into a private placement agreement of secured subordinated notes (Series A, B and D notes) with a group of private investors for total gross proceeds of $1.12 million.   The notes are secured by a general security agreement on the property and assets of ADB. 

The following officers and directors purchased the Series D notes: Chris Bulger, a director of the Company, purchased $20,000 of Series D notes that have not yet been converted.  Paul Godin, a director of the Company,

30

purchased $25,000 of Series D notes that were converted on December 13, 2002 to 208,333 common shares and 104,167 share purchase warrants. Jeff Lymburner, CEO and a director of the Company, purchased $75,000 of Series D notes of which $54,750 were converted on April 1, 2004  to 456,250 shares and 228,125 share purchase warrants The 228,125 common share purchase warrants were exercised into an equal number of common shares by April 19, 2004. The remaining $20,250 of Series D notes have yet to be converted as of June 18, 2004. Aidan Rowsome, VP Global Sales of the Company, purchased $15,000 of Series D notes that were converted on February 3, 2003 to 125,000 common shares and 62,500 share purchase warrants.

On May 9, 2003, the Company issued 666,666 common shares to Jeff Lymburner, CEO of the Company, in consideration of gross proceeds of $200,000 as part of a private placement financing.

On June 26, 2003, the Company issued 4,879,000 common shares at a price of $0.24 per share and 2,733,000 common share-purchase warrants exercisable into one common share at $0.40 per share for net proceeds of $1.148 million.  Included in this private placement were 2,146,000 shares issued to Jeffrey Lymburner, CEO and director of the Company for total net proceeds of $505,000. 

On August 19, 2003 the Company issued to private investors Series E secured subordinated notes in the aggregate principal amount of $1.0 million for net proceeds of $987,000.  The notes are secured by a general security agreement on the property and assets of ADB.  A total of $100,000 of the principal amount of Series E notes was issued to the following directors and/or senior officers of the Company: Paul Godin a director of the Company, purchased Series E notes in the principal amount of $50,000;  James Moskos, an officer and director of the Company purchased Series E notes in the principal amount of $35,000; and Mike Robb, an officer of the Company purchased Series E notes in the principal amount of $15,000.

On June 15, 2004 the Company issued to private investors Series G secured subordinated notes in the aggregate principal amount of $1.71 million for net proceeds of $1.48 million.  A total of $170,000 of the principal amount of Series G notes was issued to the following directors and/or senior officers of the Company: Jeffrey Lymburner, an officer and director of the Company, purchased Series G notes in the principal amount of $100,000;  Jan Pedersen, an officer and director of the Company purchased Series G notes in the principal amount of $60,000; and James Moskos, an officer and director of the Company purchased Series G notes in the principal amount of $10,000.

On October 21, 2004 the Company issued to private investors Series H secured subordinated notes in the aggregate principal amount of $520,000 for net proceeds of $477,000.  A total of $270,000 of the principal amount of Series H notes was issued to the following directors and/or senior officers of the Company: Jeffrey Lymburner, an officer and director of the Company, purchased Series H notes in the principal amount of $200,000;  Paul Godin, a director of the Company purchased Series H notes in the principal amount of $50,000; and James Moskos, an officer and director of the Company purchased Series G notes in the principal amount of $20,000.

On December 6, 2004, the Company completed a private placement resulting in the issuance of 5,000,000 shares at a price of $0.20 per share and 5,000,000 common share-purchase warrants exercisable into one common share at a price of $0.35 for gross proceeds of $1.0 million.  Included in this private placement were 100,000 shares issued to Paul Godin, a director of the Company for gross proceeds of $20,000. The warrants were issued for a four year term and will expire on December 6, 2008. 

13.0TRANSFER AGENTS AND REGISTRARS

The Company’s Transfer Agent and Registrar is Equity Transfer Services and are located in the municipality of Toronto at 120 Adelaide Street West Suite 420, Toronto, ON M5W 4C3, Tel: 416-361-0152.

14.0MATERIAL CONTRACTS

The following is the only material contract entered into by the Company within the last year (or before the most recently completed financial year but that is still in effect) other than in the ordinary course of business.

On June 15, 2004, ADB entered into an Agency Agreement with First Associates Investments Inc. (“FAI”) (the “Agency Agreement”) as sole agent and exclusive financial advisor for an offering of securities of ADB of up to C$5 million on a best efforts basis. Under the Agency Agreement, the Company has made certain covenants which survive until June 15, 2005. Under certain amendments to the Agency Agreement FAI’s right of first refusal has been terminated in exchange for certain rights to receive commissions on placement to certain “introduced purchasers” until

31

June 15, 2005.  A copy of the Agency Agreement was filed on SEDAR (www.sedar.com) on June 25, 2004 and is hereby incorporated by reference.

15.0AUDITORS, LEGAL COUNSEL AND INTERESTS OF EXPERTS

Deloitte & Touche LLP are our auditors. As such they have provided the audit report forming part of our audited financial statements for the year ended December 31, 2004, which are filed on SEDAR at www.sedar.com.

The partners, associates and employees of this firm own less than one percent of the outstanding securities of ADB Systems.

16.0ADDITIONAL INFORMATION

Additional information with respect to the Company, including directors’ and officers’ remuneration and indebtedness, principal holders of our securities and options to purchase securities and interests of insiders in material transactions is contained, where applicable, in our Management Information Circular filed on SEDAR at www.sedar.com on May 27, 2004  (the “2004 Circular”).  Additional financial information is provided in the annual financial statements for the fiscal year ended December 31, 2004, the notes appended thereto and in the Management’s Discussion and Analysis for the fiscal year ended December 31, 2004 which are included in the Company’s 2004 annual report.  Additional copies of this Annual Information Form and any documents incorporated by reference in this Annual Information Form, including the materials listed in the preceding paragraphs of this section can be obtained upon request to the Company or by going to SEDAR at www.sedar.com.  The Company may require payment of a reasonable charge if the request is made by a person or company who is not a shareholder of the Company.

32

EX-2

Exhibit 2

	ADB Systems International Ltd. 302 The East Mall, Suite 300 Etobicoke, Ontario		Tel: 416.640.0400 Fax: 416-640-0412
	M9B 6C7	Canada	www.adbsys.com

ADB SYSTEMS INTERNATIONAL LTD.

2004 ANNUAL REPORT

(Year Ended December 31, 2004)

Message to Shareholders

Over the past 18 months, ADB has undergone a significant evolution as evidenced by our expanded suite of technology offerings, growing base of customers, and the launch of a joint venture with GE Commercial Finance, Commercial Equipment Financing.

While the impact of these efforts is not significantly reflected in our financial results for 2004, I believe ADB’s position is, in many ways, much more solid than ever before.

Focus of 2004

A cornerstone of our efforts in 2004 centred on GE’s Asset Manager, our joint venture with GE.  Through the joint venture, we deliver web-based technology that helps organizations gain greater control of and greater value from their capital equipment and assets.

Throughout the year, we spent considerable effort formalizing the operations of GE’s Asset Manager.  Chief among these activities included the introduction of new technology, development of sales and marketing materials, training of qualified sales representatives, identification of potential markets, and the deployment of technology within existing customers, such as Kraft Foods Global, Inc.

Although we have taken a methodical approach to becoming operational, the progress we have made has, in fact, been considerable.  As evidenced by the positive the feedback we have received from customers and target organizations, we are very encouraged by results thus far.  We are buoyed by the belief that we will achieve greater progress and significant milestones in 2005 and beyond.

Customer Activities

Related to our joint-venture activities have been our efforts with customers around the world.  Over the past two years, we have targeted our sales and customer activities to organizations active in the oil and gas, healthcare, financial services, and government sectors.   Customers in these sectors, such as BP, and GE Commercial Equipment Financing, each respective leaders in their areas, have large-scale asset management requirements that our technology offerings can support.   Based on our expanded relationships with these organizations, it is clear that our technology offerings deliver value and a return on investment that is unmatched by any of our competitors.

A clear example of one of our successful customer relationships is the National Health Service (NHS), Europe’s largest healthcare provider.  Since we began discussions with the NHS in 2003 to explore how we could streamline their purchasing activities and reduce buying costs, we have entered into a number of agreements that resulted in a significant increase in the use of our technology.  By addressing our customers’ needs and enhancing our suite of technology, we have been able to forge a strategic relationship whose potential is now starting to be filled.

Outlook

While 2004 was, in many ways, a year of transition for ADB, we were able to recapture our momentum in the fourth quarter.  Given recent our customer activities, improved cash flow position, and healthy sales pipeline, I believe we are well positioned for 2005 and beyond.   Already, we have entered into a customer agreement with Mesta AS, Norway’s road construction and maintenance company.  This customer win is among the most significant ever for our Norwegian business unit, and enables us to enter a new industry sector while growing our procurement expertise.

On behalf of our directors, senior management and all ADB Systems employees, I would like to thank all of our shareholders for their ongoing support.

Jeff Lymburner

CEO

1

Management’s Discussion and Analysis

Management’s Discussion & Analysis is dated March 6, 2005.

OVERVIEW

ADB Systems provides asset lifecycle management solutions that help organizations source, maintain and sell assets for maximum value. Through our technology offerings and services, we enable organizations across a variety of sectors to generate improved efficiencies and reduced operating costs.

Our integrated solutions are designed to help our customers get full value from their capital assets by helping to:

•Streamline sourcing/procurement activities while reducing purchasing costs

•Schedule preventative and corrective maintenance activities, eliminating unnecessary operational downtimes and reducing maintenance costs

•Manage inventory of materials more effectively, resulting in reduced purchase costs, improved access to supplies, and easier tracking of assets regardless of their location

•Generate higher yield for surplus assets that are disposed or sold on-line

We work with a growing number of customers and partners in a variety of industry verticals including oil and gas, government, healthcare, manufacturing and financial services.

Our current customers and partners include BP, GE Commercial Finance, Commercial Equipment Financing (“GE CEF”), National Health Service (UK), permanent TSB (Ireland), Talisman Energy and Vesta Insurance.

Through our wholly owned subsidiary, ADB Systems USA Inc., ADB owns a 50 percent interest in GE Asset Manager LLC (also referred to as “GE’s Asset Manager”), a joint business venture launched with GE CEF.

ADB has offices in Toronto (Canada), Stavanger (Norway), Tampa (U.S.), Dublin (Ireland), and London (U.K.).

Our shares trade on both the Toronto Stock Exchange (TSX: ADY) and the OTC Bulletin Board (OTCBB: ADBYF).

DEVELOPMENTS OF 2004

CUSTOMER ACTIVITIES

Throughout 2004, ADB was engaged in a number of activities aimed at expanding our relationships with existing customers and developing relationships with new customer organizations. Through these efforts, which included the introduction of new technology enhancements to our suite of product offerings, the cross selling of ancillary applications, and the increase in the number of users our technology, ADB was able to expand its working relationships with BP, the National Health Service (UK), and GE CEF, among others.

JOINT VENTURE WITH GE CEF

In North America, the primary thrust of our activities in 2004 concentrated on the rollout of GE’s Asset Manager, our joint venture with GE CEF.  This joint venture is designed to combine GE CEF’s equipment financing and asset management expertise together with our experience in providing mission-critical technology solutions for asset lifecycle management. Together, we have developed web-based solutions to help our customers:

•Track and re-deploy assets more effectively;

•Automate equipment appraisals;

•Efficiently market and sell surplus equipment; and

•Automate sourcing and tendering processes.

Through the joint venture, we signed a customer agreement with Kraft Foods Global, Inc. and continued to service our customer agreement with GE Aircraft Engines.

2

Sofware Development and Technology

ADB made a number of enhancements to our suite of technology product offerings in 2004.   These enhancements, which centered on redesigning the underlying platform of our Dyn@mic Buyer solution and expanding the functionality of our WorkMate and Material Transfer applications, allow us to stay current with the latest technology trends while maintaining a competitive advantage.

A key cornerstone of our technology activities focused on the development of Asset Tracker, a new, web-based asset-tracking offering that is delivered through our joint venture with GE CEF.

Information Regarding Forward-looking Statements

Statements contained in this report may include comments that do not refer strictly to historical results or actions and may be deemed to be forward-looking within the meaning of the Safe Harbor provisions of the U.S. federal securities laws.  These risks include, among others, statements about expectations of future revenues, cash flows, and cash requirements.  Forward-looking statements are subject to risks and uncertainties that may cause our results to differ materially from expectations.

These risks include:

•our ability to raise additional funding when needed;

•our ability to repay our debt to lenders;

•volatility of the stock markets and fluctuations in the market price of our stock;

•risks associated with international operations;

•our ability to develop appropriate strategic alliances and successfully develop and implement technology;

•our ability to gain acceptance of our products and services;

•our ability to respond to competitive factors and technological changes;

•our ability to introduce new technology offerings and services;

Other such risks as we may identify and discuss from time to time, including those risks disclosed in the Company’s Form 20-F filed with the Securities and Exchange Commission, Annual Information Form, and Management Information Circular, may also cause our results to differ materially from expectations.

We encourage you to carefully review these risks, as outlined below, to evaluate your existing or potential investment in our securities.

General Industry, Economic and Market Conditions

ADB’s future revenues and operating results are largely dependent on a number of industry, economic and market conditions.   If any of these conditions were subject to adverse developments, our operational performance would be affected.  For example, if consolidation occurs within the target industries we operate in, adverse economic conditions impact our existing base of customers, or if the demand for asset management solutions decreases, our ability to increase our customer base, improve our revenues and generate a profit may be impacted.

ASSET MANAGEMENT FOCUS

Since our acquisition of ADB Systemer in October 2001, we have focused all of our efforts on delivering asset management technology solutions to customers in the oil and gas, healthcare, financial services and government sectors.

Our future success, including revenue performance and ability to generate a profit,

may be impacted if:

•the significance of asset management requirements, including sourcing, procurement, maintenance management, materials management and asset disposition activities, diminishes within our target markets and existing customer base;

•we are unable to expand our suite of asset management technology to meet new market requirements;

•we are unable to leverage new technology advancements into our core suite of offerings; or

•our existing partners shift focus away from current asset management activities to other areas.

3

COMPETITIVE LANDSCAPE

ADB operates in a very competitive marketplace against organizations that, in some cases, are larger, have more resources, or more sophisticated technology.   These competitive organizations include Datastream, MRO, Indus, Ariba, SAP and Oracle, among others.

Our future success is dependent on our ability to gain market share from these competitors while ensuring that our existing customer base is free of any competitive encroachment.

CUSTOMER CONCENTRATION

ADB maintains excellent working relationships with a number of key organizations such as BP, GE CEF and the National Health Service.

In 2004, one customer accounted for 31 percent (2003 – two customers accounted for 26 percent and 15 percent) of total revenues.  If our relationships with any of these customers is severed or meaningfully altered, we would experience a significant decline in our performance, particularly through reduced revenues.

INTERNATIONAL MARKETS

ADB is structured into three business units:  North America, Ireland and the U.K. and Norway.  Each of these business units serves a local customer base.  These business units also serve customers from other parts of the world, including Asia and South America.

While an increase in sales from our North America business unit is expected, we rely heavily on the performance of our Norway and Ireland/U.K. business units.

Operating as an organization with an international presence and an international base of customers exposes ADB to a number of risks and uncertainties that may impact our operational performance.  These risks and uncertainties include:

•fluctuations in currency exchanges

•unexpected changes to foreign laws and regulations, and foreign tax laws

•local residency requirements for our sales and professional service personnel

•fluctuations to local demand for asset management technology and services

FOREIGN EXCHANGE RISK

The Company’s revenue from software licensing and related services and e-commerce enabling agreements is transacted in various currencies including the Canadian dollar, U.S. dollar, UK pound, EURO, and Norwegian krone.  Correspondingly, operating expenses related to these activities are transacted in the above-denoted currencies.  The Company does not use derivative instruments to manage exposure to foreign exchange fluctuations.

INTEREST RATE RISK

The Company has limited exposure to fluctuations in interest rates.  The Company does not use derivative instruments to reduce its exposure to interest rate risk.

CREDIT RISK

Credit risk arises from the potential that a customer will fail to meet its contractual obligations under a software licensing and related services agreement or an e-commerce enabling agreement.

At December 31, 2004, there were three customers that accounted for 18 percent, 13 percent and 11 percent, respectively, of total accounts receivable.  At December 31, 2003, three customers accounted for 25 percent, 19 percent and 14 percent, respectively, of total accounts receivable.

4

CRITICAL ACCOUNTING ESTIMATES

The Company has incurred negative annual cash flows from operations since inception and expects to continue to expend substantial funds to continue to develop technology, build an infrastructure to support business development efforts and expand other areas of business including the acquisition of, or strategic investments in, complementary products, businesses or technologies.  The Company’s ability to continue as a going concern will be dependent on management’s ability to successfully execute its business plan including a substantial increase in revenue as well as maintaining operating expenses at or near the same level as 2004.  Management’s 2005 business plan includes a significant increase in revenue and operating cash flow primarily from major new contracts in Norway, the UK and North America.  The revenue contained in management’s business plan is based on detailed estimates of revenue on a customer-by-customer basis.  Management does not anticipate a material increase in 2005 expenses over those incurred in 2004, in order to attain the 2005 revenue goals.  Additionally, management believes that it has the ability to raise additional financing if required.  The Company cannot provide assurance that it will be able to execute on its business plan or assure that efforts to raise additional financings would be successful.

CRITICAL ACCOUNTING POLICIES

We periodically review our financial reporting and disclosure practices and accounting policies to ensure that they provide accurate and transparent information relative to the current economic and business environment. As part of this process, we have reviewed our selection, application and communication of critical accounting policies and financial disclosures. We have determined that the critical accounting policies related to our core ongoing business activities are primarily those that relate to revenue recognition. Other important accounting policies are described in Note 3 to our audited annual consolidated financial statements for the year ended December 31, 2004.

REVENUE RECOGNITION

The Company’s revenues are derived from software license fees, implementation, training and consulting services, product maintenance and customer support, and software development, and hosting fees. Fees for services are billed separately from licenses of the Company’s product.  The Company recognizes revenue in accordance with Canadian GAAP, which in the Company’s circumstances, are not materially different from the amounts that would be determined under provisions of the American Institute of Certified Public Accountants Statements of Position (SOP) No. 97-2, “ Software Revenue Recognition”, and as amended by Statement of Position 98-9, “Modification of SOP 97-2, Software revenue Recognition, With Respect to Certain Transactions”. The Company also considers the provisions of CICA EIC 141, which is analogous to Staff Accounting Bulletin (SAB) 104, “Revenue Recognition in Financial Statements”, and CICA EIC 142, which is analogous to the Emerging Issues Task Force consensus on EITF 00-21, “Accounting for Revenue Arrangements with Multiple Elements,” in determining the appropriate revenue recognition methodology.

SOFTWARE LICENSE REVENUE

The Company recognizes software license revenue in accordance with the terms of the license agreement and when the following criteria as set out in SOP No. 97-2 are met:

•persuasive evidence of an arrangement exists,

•delivery has occurred,

•the fee is fixed or determinable, and

•collectibility is probable.

Software license revenue consists of fixed license fee agreements involving perpetual licenses.

5

Software license agreements may be part of multiple element arrangements that include consulting and implementation services.  When these services are considered essential to the functionality of the license, the associated revenue is recognized on the basis of the percentage of completion method as specified by contract accounting principles.  When these services are not considered essential to the functionality of the license, the entire arrangement fee is allocated to each element in the arrangement based on the respective vendor specific objective evidence (“VSOE”) of the fair value of each element.  VSOE used in determining the fair value of license revenues is based on the price charged by the Company when the same element is sold in similar quantities to a customer of a similar size and nature.  VSOE used in determining fair value for installation, implementation and training based on the standard daily rates for the type of service being provided multiplied by the estimated time to complete each task.  VSOE used in determining the fair value of maintenance and support is based on the annual renewal rates.  The revenue allocable to the software license is recognized when the revenue criteria are met.  The revenue allocable to the consulting services is recognized as the services are performed.

IMPLEMENTATION, TRAINING & CONSULTING SERVICE FEES

The Company receives revenue from implementation of its product offerings, consulting services and training services. Customers are charged a fee based on time and expenses. Revenue from implementation, consulting service and training fees is recognized as the services are performed or deferred until contractually defined milestones are achieved or until customer acceptance has occurred, as the case may be, for such contracts.

PRODUCT MAINTENANCE & CUSTOMER SUPPORT FEES

The Company receives revenue from maintaining its products and the provision of on-going support services to customers. The maintenance and support fees are typically equal to a specified percentage of the customers’ license fee. If associated with the fixed fee license model, the maintenance revenues received are recorded as deferred revenue and recognized on a straight-line basis over the contract period.

Services revenue from maintenance and support is recognized when the services are performed.  Maintenance and support revenues paid in advance are non-refundable and are recognized on a straight-line basis over the term of the agreement, which typically is 12 months.

SOFTWARE DEVELOPMENT FEES

Typically, development of software for our customers is provided based on a predetermined fixed rate basis.  Revenue is recognized as time is incurred throughout the development process.

HOSTING FEES

The Company earns revenue from the hosting of customer websites.  Under our existing hosting contracts, we charge customers a recurring periodic flat fee.  The fees are recognized as the hosting services are provided.

6

SELECTED ANNUAL INFORMATION

	2004			2003			2002
Revenue	$	4,930		$	5,853		$	5,780
General and administrative	4,365			4,648			6,288
Sales and marketing	749			1,098			1,875
Software development and technology	3,257			2,817			4,101
	8,371			8,563			12,264
Loss before employee stock options, depreciation and amortization, interest expense and interest income	(3,441		)	(2,710		)	(6,484		)
Employee stock options	39			193			—
Depreciation and amortization	1,190			1,901			2,602
Interest expense	439			289			200
Interest income	(6		)	(9		)	(45		)
	1,662			2,374			2,757
Loss before the undernoted	(5,103		)	(5,084		)	(9,241		)
Realized gain on settlement of demand loan	—			2,195			—
Realized gains and losses on disposal of marketable securities, strategic investments and capital assets	(1		)	7			(85		)
Unrealized gains and losses on revaluation of Strategic investments	—			—			(24		)
Goodwill impairment	—			—			(14		)
Retail activities	—			67			—
	(1		)	2,269			(123		)
NET LOSS FOR THE YEAR	$	(5,104	)	$	(2,815	)	$	(9,364	)
LOSS PER SHARE	$	(0.08	)	$	(0.05	)	$	(0.22	)

Year ended (In thousand of Canadian dollars)	Dec. 31, 2004		Dec. 31, 2003		Dec. 31, 2002
Total Assets	$	2,493	$	3,211	$	6,355
Total Long-term liabilities	$	1,684	$	721	$	34

7

RESULTS OF OPERATIONS

Comparison of Years Ended December 31, 2004 and December 31, 2003

Net Loss.  Our net loss for the year ended December 31, 2004 was $5.104 million, an increase of 81.3 percent over the net loss of $2.815 million reported for the year ended December 31, 2003.  The net loss for 2003, however, included a gain of $2.195 million from the settlement of a demand loan and revenue from historic retail activities.  Excluding these items outside of the normal course of operations (although not considered extraordinary items), our 2004 loss of $5.104 million represents a 0.5 percent increase over the 2003 loss of $5.077 million.

The loss before employee stock options, depreciation and amortization, interest expense and interest income (“EBITDA”) was $3.441 million for 2004 as compared to $2.710 million for 2003, an increase of 27.0 percent.  The Company considers EBITDA to be a meaningful performance measure as it provides an approximation of operating cash flows. This increase was the result of a $923,000 decrease in revenue from $5.853 million in 2003 to $4.930 million in 2004, partially offset by a $192,000 improvement in the associated expenses of $8.563 million in 2003 to $8.371 million in 2004.  The reduction in expenses of 2.2 percent in 2004 when compared to 2003 was achieved in the areas of general and administrative expenses by $283,000 and sales and marketing expenses by $349,000, partially offset by an increase in software development and technology expenses of $440,000.

Revenue.  Revenue is comprised of software license sales, service fees for consulting, implementation, application hosting, training, maintenance and support activities and transaction fees from on-line activities performed for customers.

Revenue decreased to $4.930 million for the year ended December 31, 2004 from $5.853 million for the year ended December 31, 2003, representing a decline of 15.8 percent.  This decline was attributable to reduced revenue in North America of $415,000 and reduced revenue in Ireland/U.K. of $557,000.  Revenue from Norway increased by $50,000 in 2004 as compared to 2003.

In North America, re-targeting of resources towards the GE CEF joint venture efforts in 2004 resulted in a decline in development, hosting and transactional revenue of approximately $408,000.

In the Ireland/UK region we did not experience an increase in customer acquisitions and activity in 2004 as we did 2003.  The year-over-year revenue decline was primarily the result of reduced sales by the amount of $532,000 to customers in non-healthcare industry sectors.

General and Administrative.  General and administrative expenses include, primarily: all salaries and related expenses (including benefits and payroll taxes) other than technology staff compensation (which is included in software development and technology expenses), and sales and marketing staff compensation (which is included in sales and marketing expenses), occupancy costs, foreign exchange gains or losses, professional fees, insurance, investor relations, regulatory filing fees, and travel and related costs.

General and administrative expenses decreased by $283,000 to $4.365 million for the year ended December 31, 2004, as compared to $4.648 million for the year ended December 31, 2003, representing a decline of 6.1 percent.

Year-over-year savings in the amount of $183,000 resulted from salary expense reductions arising from a smaller administrative workforce and favourable Canadian dollar exchange rates pertaining to US dollar-denominated salaries.  Continued cost containment efforts resulted in $67,000 savings in travel expenses and the reduction of occupancy and connectivity costs in the amount of $65,000 associated with the change of North American office locations and decreased utility costs as the result of Norway office leases renegotiations.  Reductions in foreign exchange losses of $59,000 and in insurance costs of $41,000 also added to the savings.  Expense reductions were partially offset by increased investor relation costs in the areas of consulting ($68,000) and increased professional services expenses associated with regulatory filings ($29,000).  The salary expense savings were also partially offset by increased professional services employed in Norway ($34,000).

8

Sales and Marketing.  Sales and marketing costs include all salaries and related expenses of sales and marketing personnel as well as business development expenses such as advertising, sales support materials, and trade show costs.

Sales and marketing costs for the year ended December 31, 2004 amounted to $749,000, as compared to $1.098 million for 2003, a decrease of 31.8 percent.  This decrease is attributable to lower staffing levels in the sales department combined with decreased advertising and tradeshow activities and related travel expenses throughout 2004.

Software Development and Technology.  Software development and technology expenses consist of costs associated with acquired and internally developed software, and research and development expenses, including fees to independent contractors and salaries and related expenses of personnel engaged in these activities.

Software development and technology expenses increased to $3.257 million for the year ended December 31, 2004 from $2.817 million for the year ended December 31, 2003, an increase of 15.6 percent.  This increase is attributable to increased salary expenses resulting largely from increases in the number of technology personnel in Ireland/UK and Norway.

Employee Stock Options.  Effective January 1, 2003, the Company adopted the accounting recommendations contained in the CICA handbook Section 3870 – “Stock-based Compensation and Other Stock-based Compensation Payments”.  As a result, the Company recorded an employee stock option expense of $39,000 for the year ended December 31, 2004 and $193,000 for the year ended December 31, 2003.  No employee stock options were granted in 2004.  The 2004 expense arises from the vesting of stock options that were granted in 2003.  Prior to 2003, no accounting recognition was required for stock-based compensation expense however; the Company was required to disclose the impact of stock option related expenses for previous years on a pro-forma basis.

Depreciation and Amortization.  Depreciation and amortization expense was $1.190 million for the year ended December 31, 2004 as compared to $1.901 million for the year ended December 31, 2003, a decrease of 37.4 percent.  This decrease reflects a $499,000 reduction in the amortization of deferred charges as deferred financing charges relating to a demand loan were fully amortized in 2003.  Additionally, software acquired in the acquisition of ADB Systemer was fully amortized by the end of the third quarter of 2004, resulting in an amortization expense for the year that was $282,000 lower than that for fiscal 2003.

Interest Expense.  Interest expense reflects interest incurred from debt instruments and loans.  Interest expense for the year ended December 31, 2004 was $439,000 compared to $289,000 for December 31, 2003.  During 2004, cash interest expense of $173,000 and non-cash interest expense of $266,000 was incurred related to secured subordinated notes.  Comparatively, cash interest expense of $50,000 and non-cash interest expense of $112,000 was recorded in 2003.  The interest expense for fiscal 2003 also included interest related to a demand loan of $126,000.

Interest Income.  Interest income reflects interest from investments in cash and marketable securities.  Interest income was negligible for both years ended December 31, 2004 and 2003.

Realized Gain on Settlement of Demand Loan.  On June 30, 2003, the Company settled an outstanding demand loan through the transfer of its investment in an associated company.  The investment had a nominal carrying value and the transfer resulted in a gain on settlement of the demand loan in the amount of $2.195 million.

Retail Activities.  During 2003, the Company received a $67,000 refund from a U.S.-based credit card institution formally engaged by the Company when it operated its on-line retail activities in the U.S.  No similar refunds were received in 2004.

9

Comparison of Years Ended December 31, 2003 and December 31, 2002

Net Loss.  Our net loss for the year ended December 31, 2003 was $2.815 million, an improvement of 69.9 percent over the net loss of $9.364 million reported for the year ended December 31, 2002.  Excluding items outside of the normal course of operations, our loss was $5.084 million, as compared to $9.241 million in 2002, an improvement of 45.0 percent.  The improvement in expenses of more than $4.0 million was achieved in 2003 when compared to 2002 in the areas of general and administrative of $1.6 million, sales and marketing of $777,000, software development and technology of $1.3 million and $700,000 in depreciation and amortization.  In addition, during 2003 the Company recorded a realized gain on the settlement of a demand loan of $2.2 million.

Revenue.  Revenue is derived from software licensing and related services from consulting, implementation, application hosting, training, maintenance and support activities.

Revenue increased to $5.853 million for the year ended December 31, 2003 from $5.780 million for the year ended December 31, 2002, representing an increase of 1.3 percent.

Revenue outside North America was $4.642 million for the year ended December 31, 2003, compared to $3.598 million for the year ended December 31, 2002.  The increase in revenue outside North America is primarily attributable to an increase in customer acquisitions and activity in our Ireland/UK region that resulted in year-over-year revenue improvement of almost $800,000.

General and Administrative.  General and administrative expenses include, primarily: all salaries and related expenses (including benefits and payroll taxes) other than technology staff compensation (which is included in software development and technology expenses), and sales and marketing staff compensation (which is included in sales and marketing expenses); occupancy costs; foreign exchange gains or losses; professional fees; insurance; investor relations; regulatory filing fees; and travel and related costs.

General and administrative expenses decreased to $4.648 million for the year ended December 31, 2003, as compared to $6.288 million for the year ended December 31, 2002, representing a decline of 26.1 percent.

Year-over-year savings resulting from salary reductions and a smaller workforce totaled $401,000.  Continued cost containment efforts and greater reliance on internal staff resulted in $503,000 savings in professional fees and $271,000 in investor relations costs.  In addition, savings were achieved in rent and occupancy costs of $325,000 as office space was reduced in Norway as well as the closing of a U.K. office in 2002.

Sales and Marketing.  Sales and marketing costs include all salaries and related expenses of sales and marketing personnel as well as business development expenses such as advertising, sales support materials, and trade show costs.

Sales and marketing costs for the year ended December 31, 2003 amounted to $1.098 million, as compared to $1.875 million for 2002, a decrease of 41.4 percent.  This decrease is attributable to lower staffing levels in the sales department combined with decreased advertising and tradeshow activities throughout 2003.

Software Development and Technology.  Software development and technology expenses consist of costs associated with acquired and internally developed software, and research and development expenses, including fees to independent contractors and salaries and related expenses of personnel engaged in these activities.

Software development and technology expenses decreased to $2.817 million for the year ended December 31, 2003 from $4.101 million for the year ended December 31, 2002, a decrease of 31.3 percent.  This decrease is attributable to government research and development claims made by the Company and a decrease in technology personnel.

10

Employee Stock Options.  Effective January 1, 2003, the Company adopted the accounting recommendations contained in the CICA handbook Section 3870 – “Stock-based Compensation and Other Stock-based Compensation Payments”.  As a result, the Company recorded an employee stock option expense of $193,000 for the year ended December 31, 2003.  Prior to 2003, no accounting recognition was required for stock-based compensation expense however; the Company was required to disclose the impact of stock option related expenses for previous years on a pro-forma basis.  In 2002, a pro-forma impact of $244,000 and $141,000 in 2003 related to options granted prior to January 1, 2003 is disclosed (Note 11(b)).

Depreciation and Amortization.  Depreciation and amortization expense was $1.901 million for the year ended December 31, 2003 as compared to $2.602 million for the year ended December 31, 2002, a decrease of 26.9 percent.  This decrease reflects a maturing asset pool.

Interest Expense.  Interest expense reflects interest incurred from debt instruments and loans.  Interest expense for the year ended December 31, 2003 was $289,000 compared to $200,000 for December 31, 2002.  During 2003, cash interest expense of $50,000 and non-cash interest expense of $112,000 was incurred related to secured subordinated notes.  Comparatively, cash interest expense of $23,000 and non-cash interest expense of $108,000 was recorded in 2002.  Interest related to the demand loan was $126,000 in 2003 compared to $68,000 in 2002.

Interest Income.  Interest income reflects interest from investments in cash and marketable securities.  Interest income was $9,000 for the year ended December 31, 2003, as compared to $45,000 for the year ended December 31, 2002, a decline of 80.0 percent.  This decline was largely attributable to lower cash deposits and money market funds on hand throughout 2003.

Realized Gain on Settlement of Demand Loan.  On June 30, 2003, the Company settled an outstanding demand loan through the transfer of its investment in an associated company.  The investment had a nominal carrying value and the transfer resulted in a gain on settlement of the demand loan in the amount of $2.195 million.

Realized Gains and Losses on Disposal of Marketable Securities, Strategic Investments and Capital Assets, and Recovery of Assets.  Realized gains on disposal of marketable securities and strategic investments amounted to $20,000 for the year ended December 31, 2003, compared to a loss of $108,000 for the year ended December 31, 2002.  The gain recorded in 2003 resulted from the sale of shares of MegaWheels Technology Inc.  These gains and losses are outside of the normal course of operations but are not considered extraordinary items.

During 2002, the Company disposed of its remaining shares in America Online Inc. (“AOL”) resulting in a realized loss of $143,000.  Realized gains in 2002 included $41,000 from the sale of strategic investments in SCS Solars and MegaWheels.  In 2003, the Company realized a loss from the disposal of surplus capital assets in the amount of $13,000 compared to a gain of $23,000 in 2002.

Unrealized Gains and Losses on Revaluation of Strategic Investments, and Provision for Impairment of Assets.  Unrealized gains and losses on strategic investments, and provisions for impairment of assets are the result of an assessment by management as to the recoverability of the value of certain assets and are not realized losses.  Unrealized gains and losses are outside the normal course of operations but are not considered extraordinary.

Unrealized losses for the year ended December 31, 2002 were $24,000.  We conduct an assessment of our strategic investment portfolio at the end of each fiscal period by analyzing the financial performance of the companies we invested in as well as general market conditions.  In 2002, we recorded impairment provisions totaling approximately $24,000.  As our investments were all in companies in the technology sector, the market performance of these holdings had been dramatically affected by economic conditions.  In 2003, the Company did not record an impairment provision as a result of the assessment.

Goodwill Impairment.  There was no goodwill impairment recorded in 2003 as compared to $14,000 at December 31, 2002.  The goodwill impairment recorded in 2002 relates to a change in goodwill arising on purchase of shares from minority interests during the year.

11

Retail Activities.  During 2003, the Company received a $67,000 refund from a U.S.-based credit card institution formally engaged by the Company when it operated its on-line retail activities in the U.S.  No similar refunds were received in 2002.

SUMMARY OF QUARTERLY RESULTS

The following table sets forth certain unaudited consolidated statements of operations data for each of the eight most recent quarters that, in management’s opinion, have been prepared on a basis consistent with audited consolidated financial statements contained elsewhere in this annual report and include all adjustments, consisting of normal recurring adjustments, necessary for a fair presentation of the information presented. These operating results are not necessarily indicative of results for any future period. You should not rely on them to predict future performance.

Quarter ended (In thousand of Canadian dollars, except per share amounts)	Dec. 31, 2004			Sep. 30, 2004			Jun. 30, 2004			Mar. 31, 2004			Dec. 31, 2003			Sep. 30, 2003			Jun. 30, 2003			Mar. 31, 2003
Revenue	$	1,529		$	886		$	1,331		$	1,184		$	1,493		$	1,701		$	1,398		$	1, 261
Expenses:
General and administrative	1,020			1,061			1,242			1,042			1,083			1,010			1,433			1,122
Sales and marketing	149			149			168			283			192			259			328			319
Software development and technology	880			678			904			795			727			497			730			863
	2,049			1,888			2,314			2,120			2,002			1,766			2,491			2,304
Loss before employee stock options, depreciation and amortization, interest expense and interest income	(520		)	(1,002		)	(983		)	(936		)	(509		)	(65		)	(1,093		)	(1,043		)
Employee stock options	—			—			11			28			60			130			1			2
Depreciation and amortization	94			374			366			356			376			333			591			601
Interest expense	162			145			65			67			51			63			75			100
Interest income	(3		)	—			(2		)	(1		)	(2		)	(1		)	(1		)	(5		)
	253			519			440			450			485			525			666			698
Loss before the undernoted	(773		)	(1,521		)	(1,423		)	(1,386		)	(994		)	(590		)	(1,759		)	(1,741		)
Gains (losses) on disposal of capital assets and strategic investments	—			—			—			(1		)	—			—			23			(16		)
Gain on settlement of demand loan	—			—			—			—			—			—			2,195			—
Retail activities	—			—			—			—			—			—			67			—
	—			—			—			(1		)	—			—			2,285			(16		)
Net (Loss) Income for the Period	$	(773	)	$	(1,521	)	$	(1,423	)	$	(1,387	)	$	(994	)	$	(590	)	$	526		$	(1,757	)
Basic and Diluted (Loss) Income Per Share	$	(0.01	)	$	(0.02	)	$	(0.02	)	$	(0.02	)	$	(0.02	)	$	(0.01	)	$	0.01		$	(0.03	)

12

SEASONALITY AND TRENDS

Historically, revenues have remained relatively consistent when compared with the same quarter of the prior year; however; there was a significant decline in third quarter 2004 revenues when compared to the same quarter of 2003. Overall revenue decreased to $886,000 for the quarter ended September 30, 2004 from $1.7 million for the quarter ended September 30, 2003.

The decrease was primarily attributable to reduced revenue in North America of $241,000 and reduced revenue from Ireland/U.K. of $312,000. The Company decided to re-target North American resources to focus primarily on the efforts of the GE joint venture which resulted in the decline of revenues.  In addition, the Company experienced reduced revenue from existing customers over 2003 coupled with slower than planned service implementation relating to the NHS. Additionally, revenue from Norway in 2004 was lower than 2003 levels primarily due to a decline in development contracts and 2003 revenue generated from the partial forgoing of the traditional Norwegian vacation shutdown in the period.

Traditionally, the Company incurs higher expenses in the first and second quarters of each year due to seasonal expenses related to regulatory, filing and Annual Meeting costs.

LIQUIDITY

The Company has been funded to date primarily through a series of private placements of equity and convertible debentures, sales of equity to and investments from strategic partners, gains from investments and option exercises.  Since inception, the Company has received aggregate net proceeds of $87.7 million from debt and equity financing and has realized $23.7 million in gains on investment disposals. The Company has not earned profits to date and, at December 31, 2004, has an accumulated deficit of $104.866 million.  The Company expects to incur losses into 2005 and there can be no assurance that it will ever achieve profitability.  Operating results have varied on a quarterly basis in the past and may fluctuate significantly in the future as a result of a variety of factors, many of which are outside of the Company’s control.

The Company has incurred negative annual cash flows from operations since inception and expects to continue to expend substantial funds to continue to develop technology, build an infrastructure to support business development efforts and expand other areas of business including the acquisition of, or strategic investments in, complementary products, businesses or technologies.  The Company has historically relied on non-operational sources of financing to fund its operations.  The Company’s ability to continue as a going concern will be dependent on management’s ability to successfully execute its business plan including a substantial increase in revenue as well as maintaining operating expenses at or near the same level as 2004.  Management’s 2005 business plan includes a significant increase in revenue and operating cash flow primarily from major new contracts in Norway, the UK and North America.  Management believes that it has the ability to raise additional financing if required.  The Company cannot provide assurance that it will be able to execute on its business plan or assure that efforts to raise additional financings would be successful.

Cash and cash equivalents increased slightly by $8,000 to $453,000 as at December 31, 2004 from $445,000 as at December 31, 2003.

Current assets of $2.196 million exceeded current liabilities (excluding deferred revenue) of $1.680 million in the current fiscal year by $516,000.  Current assets of $1.947 million exceeded current liabilities (excluding deferred revenue) of $1.370 million by $577,000 in the prior year.  Deferred revenue has been excluded from current liabilities as it is expected to be settled by resources other than cash.

13

i) Operating:

Cash outflows from operating activities remained relatively unchanged at $3.3 million in the current fiscal year compared to cash outflows from operating activities of $3.4 million in the prior year.

Non-cash working capital resulted in inflows of $322,000 in fiscal 2004 as compared to outflows of $728,000 in fiscal 2003, an increase of $1.05 million, as summarized in the following table:

	2004			2003			Difference
	(in thousands)
Accounts receivable	$	(151	)	$	444		$	(595	)
Deposits and prepaid expenses	(8		)	60			(68		)
Accounts payable	288			(87		)	375
Accrued liabilities	139			(491		)	630
Deferred revenue	44			(741		)	785
Effect of currency translation	10			87			(77		)
	$	322		$	(728	)	$	1,050

ii) Investing:

No significant cash flows resulted from investing activities in fiscal 2004.  In 2004, $40,000 was spent on capital asset acquisitions as compared to $45,000 in expenditures for 2003.  In 2003, proceeds in the amount of $62,000 were earned from the disposal of capital assets, strategic investments and marketable securities.  No such proceeds were earned in 2004.

iii) Financing:

Cash flows generated as the result of financing activities totaled $3.3 million in fiscal 2004.  The sources of cash included an equity private placement and the issuance of convertible debt, which was slightly offset by deferred financing costs related to the convertible debt issuance.  Cash flows generated in financing activities were $2.5 million for 2003, including an equity private placement and a convertible debt private placement.

iv) Contractual Obligations:

As at December 31, 2004 the Company’s contractual obligations, including payments due by periods over the next five years, are as follows:

(C$000’s)	Total		2005		2006		2007		2008		2009		2010 and thereafter
Operating leases	$	1,867	$	416	$	369	$	339	$	310	$	279	$	154
License agreements	510		120		120		120		120		30		—
Secured subordinated notes - principal repayment(a)	2,605		—		375		2,230		—		—		—
Secured subordinated notes - interest payment (a)	800		41		26		733		—		—		—
	$	5,782	$	577	$	890	$	3,422	$	430	$	309	$	154

(a)  Assumes secured subordinated notes are held to maturity.

14

CAPITAL RESOURCES

There were minor additions to capital assets during the years ended December 31, 2004 and 2003.  In 2003, the liquidation of redundant capital assets resulted in net proceeds of $34,000.

During 2004, the Company incurred $167,000 of costs associated with the issuance of secured subordinated notes, which were recorded as deferred financing charges.  The deferred financing charges are being amortized on a straight-line basis over the term of the underlying notes.  No deferred charges were incurred in 2003.

FUNDING

Overview.  The Company has been funded to date primarily through a series of private placements of equity and convertible debentures, sales of equity to and investments from strategic partners, gains from investments and option exercises.  Since inception, the Company has received aggregate net proceeds of $87.7 million from debt and equity financing and has realized $23.7 million in gains on investment disposals.

Funding – 2005

On February 23, 2005, the Company completed a transaction resulting in the issuance of 2.5 million equity units at a price of $0.23 per unit for gross proceeds of $575,000.  Each equity unit consists of one common share and one common share-purchase warrant with an exercise price of $0.40 each.  The warrants expire on February 22, 2009.

Funding – 2004

On May 19, 2004, the Company issued Series F secured subordinated notes with a face value of $500,000 for net proceeds of $474,000.  The Series F notes have an annual rate of interest of 7 percent paid quarterly in arrears, mature May 19, 2007 and are convertible into equity units at a price of $0.31 per unit.  Each equity unit consists of one common share and one half of a share-purchase warrant with an exercise price of $0.50.  The share-purchase warrants expire on May 19, 2007.  The Series F secured subordinated notes will automatically convert into units when the share price of the Company closes above $0.70 for five consecutive trading days during the term.  Holders may convert the notes into units at anytime following a four-month hold period.  If the holder does not convert and no automatic conversion takes place, the Company must repay the principal amount in cash. The Series F notes are secured by a general security agreement on the assets of the Company, subordinated to the security claims provided to the holders of previously issued notes.

On June 15, 2004, the Company issued Series G secured subordinated notes with a face value of $1,710,000 for net proceeds of $1,624,000.  The Series G notes mature June 15, 2007, have an annual rate of interest of 7 percent payable upon the earlier of maturity and conversion and are convertible into equity units at a price of $0.31 per unit.  Each equity unit consists of one common share and one half of a share-purchase warrant with an exercise price of $0.50.  The share-purchase warrants expire on June 15, 2008.  The Series G secured subordinated notes will automatically convert into units when the volume-weighted average share price of the Company closes above $0.70 for 20 consecutive trading days during the term.  Holders may convert the notes into units at anytime following a four-month hold period.  If the holder does not convert and no automatic conversion takes place, the Company must repay the principal amount in cash.  The Series G notes are secured by a general security agreement on the assets of the Company, subordinated to the security claims provided to the holders of previously issued notes.

On October 21, 2004, the Company issued Series H secured subordinated notes with a face value of $520,000 for net proceeds of $500,000.  The Series H notes mature October 21, 2007, have an annual rate of interest of 11 percent payable upon the earlier of maturity and conversion and are convertible into equity units at a price of $0.20 per unit.  Each equity unit consists of one common share and one half of a share-purchase warrant with an exercise price of $0.40.  The share-purchase warrants expire on October 21, 2008.  The Series H secured subordinated notes will automatically convert into units when the share price of the Company closes at or above $0.45 for 10 consecutive trading days during the term.  Holders may convert the notes into units at anytime following a four-month hold period.  If the holder does not convert and no automatic conversion takes place, the Company must repay the principal amount in cash.  In order to obtain the required approvals to issue the Series H notes, the Company retroactively increased the interest rate on the Series G notes from an annual rate of 7 percent to an annual rate of 11 percent.  The Series H notes are secured by a general security agreement on the assets of the Company, subordinated to the security claims provided to the holders of previously issued notes.

15

On December 6, 2004, the Company completed a transaction resulting in the issuance of 5,000,000 shares at a price of $0.20 per share and 5,000,000 common share-purchase warrants exercisable into one common share at a price of $0.35 for gross proceeds of $1,000,000.  The warrants expire on December 6, 2008.  Gross proceeds were comprised of $800,000 in cash and $200,000 in services.  Issuance costs in the amount of $61,000 were incurred, including $19,000 representing the fair value of 150,000 compensation options issued to First Associates.  The compensation options are exercisable into 150,000 equity units at a price of $0.20 per unit.  Each equity unit consists of one common share and one common share-purchase warrant with an exercise price of $0.35 and an expiry date of December 6, 2008.  The compensation options expire on December 6, 2006.  Included in this private placement were 100,000 shares issued to a director of the Corporation for net proceeds of $20,000.

FUNDING - 2003

During the period from January 1 to June 26, 2003, the Company issued 4,879,000 common shares at a price of $0.24 per share and 2,733,000 common share-purchase warrants exercisable into one common share at $0.40 for net proceeds of $1.148 million.  The warrants expire on June 26, 2005.  Included in this private placement were 2,146,000 shares issued to a director and officer of the Company for total net proceeds of $505,000.  None of the 2,733,000 warrants had been converted into common shares at December 31, 2003.

On August 19, 2003 the Company issued Series E secured subordinated notes with a face value of $1.0 million for net proceeds of $994,000.  The Series E notes have an annual rate of interest of 11 percent that is paid quarterly in arrears, mature in August 2006 and are convertible into equity units at a price of $0.35 per unit.  Each equity unit consists of one common share and one half of a share-purchase warrant with an exercise price of $0.50.  The Series E secured subordinated notes will automatically convert into units when the share price of the Company closes above $0.70 for five consecutive trading days during the term.  The holders of this Series E may convert at anytime following a four-month hold period.  If the holder does not convert and no automatic conversion takes place, the Company must repay the principle amount to the holders of the Series E secured subordinated notes in cash.  As part of this private placement, the Company issued 30,000 common share-purchase warrants to an associate of Stonestreet Limited Partnership (“Stonestreet”) in consideration for professional fees.  Each such warrant entitles the holder to purchase one common share of the Company for $0.50 at any time up to and including August 18, 2006.  The Series E notes were issued to private investors including an amount totaling $100,000 issued to directors and/or senior officers of the Company.  The Series E notes are secured by a general security agreement on the assets of the Company, subordinated to the security claims provided to the holders of previously issued notes.

FUNDING – 2002

On April 25, 2002, the Company entered into an agreement with Stonestreet for a $1.1 million private placement.  The Company issued 3.3 million common shares at US $0.21 per share and warrants exercisable into 1 million common shares at US $0.35 per share.  The warrants were exercised on December 17, 2002, providing an additional $550,000 in gross proceeds to the Company.

On August 30, 2002, the Company entered into a private placement agreement of secured subordinated notes (Series A, B and D notes) with Stonestreet and a group of private investors for total gross proceeds of  $1 million.  The Series A, B and D notes are secured by a general security agreement on the assets of the Company.

Pursuant to the agreement with Stonestreet dated April 25, 2002, on August 30, 2002, the Company also issued a $120,000 secured subordinated note (Series C note) in exchange for the waiver of certain US registration rights granted to Stonestreet.

On August 30, 2002, ADB entered into a series of agreements with a lender, an unrelated party, whereby the lender granted to ADB and ADB Systems International Inc. (“Old ADB”) a secured loan in the aggregate principal amount of $2,000,000 and bearing interest at the rate of 12 percent per annum.  As part of this transaction, ADB and Old ADB implemented the Arrangement  (as defined below).

16

ADB Systems International Ltd. was created on August 30, 2002.  Upon implementation of a plan of arrangement approved by the shareholders of ADB on October 22, 2002 and approved by the Ontario Superior Court of Justice effective October 31, 2002 (the Arrangement), the shareholders of ADB exchanged their shares for shares of the Company on a one-for-one basis.  All assets and liabilities of ADB, other than those related to its retail activities, were transferred to the Company as of that date in the form of a return of capital.  Old ADB subsequently changed its name to Bid.com International Ltd. (“Bid.Com Ltd.”)

The Company and the lender entered into an arrangement whereby online retail operations utilizing the online retail technology, experience and expertise of ADB developed and operated under the name “Bid.Com International Inc.” in the on-line selling of consumer products to be supplied by the lender would be conducted by Bid.Com Ltd.  The loan matured on June 30, 2003 or upon earlier demand and the Company had the right after the earlier of June 1, 2003 and demand for payment to repay the loan in cash or to transfer to the lender 100 percent of the issued shared of Bid.Com Ltd. acquired by the Company as a consequence of the Arrangement for proceeds equal to the outstanding principal amount and accrued interest then owing to the lender.  The obligations of the Company and Bid.Com Ltd. were secured by a general security agreement delivered by the Company to the lender and a pledge of the shares of the Company’s Norwegian subsidiary.

On December 31, 2002 the Company owned 100 percent of the issued and outstanding shares of Bid.Com Ltd., but had determined that, for accounting purposes, consolidation of Bid.Com Ltd. is not appropriate.  This determination was based upon the Company’s evaluation of its continuing ability to determine the strategic operating policies of Bid.Com Ltd. without the cooperation of others, its ability to obtain future economic benefits from the resources of Bid.Com Ltd., and its exposure to the related risks of ownership.  Therefore, the Company accounted for its investment in Bid.Com Ltd. on the equity basis.  On October 22, 2002, after obtaining shareholder approval, the above-noted debt instruments became convertible into units at $0.12 per unit at the option of the holder.  Each Series A, B, and D unit consists of one common share and one-half common share purchase warrant.  Series C notes also became convertible into common shares at a conversion price of $0.12 per share at the option of the holder or at the option of the Company.  Upon conversion, the Company will issue 9.333 million common shares for no additional consideration and 4.167 million warrants exercisable into an equal number of common shares at $0.14 per share.

On June 30, 2003, the Company exercised its put option to transfer 100 percent of the issued shares of Bid.Com Ltd. in full settlement of the outstanding principal and accrued interest owed to the lender.

FUNDING – 2001

During 2001, the Company continued to liquidate its AOL position to fund operations.  In addition, the Company disposed of its equity position in Point2 for $2.6 million and recovered an $811,000 receivable from Point2 that had been provided for in 2000.

In October 2001, with the acquisition of ADB Systemer, the Company paid $2.293 million in cash to the shareholders of ADB Systemer in connection with the acquisition.  As a result of that acquisition, cash of  $814,000 held by ADB Systemer was acquired.

TRANSACTIONS WITH RELATED PARTIES

On August 30, 2002, the Company entered into a series of agreements with a lender, an unrelated party, whereby the lender granted to the Company a secured loan in the aggregate principal amount of $2 million (Note 19).  The Company and the same unrelated party also entered into an agreement whereby on-line retail operations were to be conducted by Bid.Com Ltd.  These operations utilized the on-line retail technology, experience and expertise of the Company developed and operated under the name “Bid.Com International Inc.” in the on-line selling of consumer products supplied by the lender.

On June 30, 2003, the Company exercised its option to transfer 100 percent of the issued shares of Bid.Com Ltd. in full settlement of the outstanding principal and accrued interest owed to the lender.

17

The Company owned 100 percent of the issued and outstanding shares of Bid.Com Ltd., but determined that, for accounting purposes, consolidation of Bid.Com Ltd. was not appropriate.  This determination was based upon the Company’s evaluation of its continuing ability to determine the strategic operating policies of Bid.Com without the cooperation of others, its ability to obtain the future economic benefits from the resources of Bid.Com Ltd., and its exposure to the related risk of ownership.  Therefore, the Company accounted for its investment in Bid.Com Ltd. on the equity basis.  The Company was not exposed to losses incurred by Bid.Com Ltd., and accordingly this investment was carried at a nominal amount.  U.S. GAAP required consolidation of the investment in Bid.Com Ltd. in the Company’s financial statements.  The impact of this U.S. GAAP difference from Canadian GAAP is disclosed in note 24 to the financial statements.

Condensed income statement and cash flow information for Bid.Com Ltd. for the six-month period ended June 30, 2003 is as follows:

	2003
	(in thousands)
Revenue	$	3,614
Net income (loss)	208
Change in cash resources	(358		)

Revenue of $35,000 related to web-site development, support and maintenance services provided to Bid.com Ltd. has been included in the consolidated results of the Company for the six months ended June 30, 2003.  In addition, the Company charged overhead-related costs of $76,000 for rent, connectivity and management fees to Bid.com Ltd. for the six-month period ended June 30, 2003.  These overhead charges have been recorded as a reduction of expenses in the consolidated financial statements for the year ended December 31, 2003.

On August 30, 2002, the Company entered into a private placement agreement of secured subordinated notes (Series A, B and D notes) with a group of private investors for total gross proceeds of  $1.12 million.   The notes are secured by a general security agreement on the property and assets of ADB.

The following officers and directors purchased the Series D notes: Chris Bulger, a director of the Company, purchased $20,000 of Series D, which were converted on December 22, 2004 into 166,667 common shares and 83,333 common share-purchase warrants.  These warrants were also exercised on December 22, 2004.  Paul Godin, a director of the Company, purchased $25,000 of Series D notes that were converted on December 13, 2002 to 208,333 common shares and 104,167 share-purchase warrants. These warrants were exercised on October 21, 2003.  Jeff Lymburner, CEO and a director of the Company, purchased $75,000 of Series D notes of which $54,750 were converted on April 1, 2004 into 456,250 shares and 228,125 common share-purchase warrants and the remaining $20,250 were converted on August 5, 2004 into 168,750 common shares and 84,375 common share-purchase warrants.  The 228,125 common share purchase warrants were exercised into an equal number of common shares by April 19, 2004. The remaining 84,375 warrants expired, unexercised on December 31, 2004. Aidan Rowsome, VP Global Sales, purchased $15,000 of Series D notes that were converted on February 3, 2003 to 125,000 common shares and 62,500 common share-purchase warrants.  These warrants were exercised on December 21, 2004.

On May 9, 2003, the Company issued 666,666 common shares to Jeff Lymburner, CEO of the Company, in consideration of gross proceeds of $200,000 as part of a private placement financing.

On August 19, 2003, the Company entered into a private placement agreement of secured subordinated notes (Series E notes) with a group of private investors for total gross proceeds of  $1.0 million.   The notes are secured by a general security agreement on the property and assets of ADB.

The following officers and directors purchased the Series E notes: Paul Godin, a director of the Company, purchased $50,000 of Series E notes that have not yet been converted. Jim Moskos, President Technology Group and a director of the Company purchased $35,000 of Series E notes that have not yet been converted. Michael Robb, CFO and Corporate Secretary of the Company, purchased $15,000 of Series E notes that have not yet been converted.

18

The following officers and directors purchased Series G notes: Jeff Lymburner, CEO of the Company, purchased $100,000 of Series G notes that have not yet been converted; Jan Pedersen, President, European Operations and a director of the Company, purchased $60,000 of Series G notes that have not yet been converted; and Jim Moskos, President Technology Group and a director of the Company, purchased $10,000 of Series G notes that have not yet been converted.

The following officers and directors purchased Series H notes: Jeff Lymburner, CEO of the Company, purchased $200,000 of Series H notes that have not yet been converted; Jim Moskos, President, Technology Group and a director of the Company, purchased $20,000 of Series H notes that have not yet been converted; and Paul Godin, a director of the Company, purchased $50,000 of Series G notes that have not yet been converted.

In December 2004, the Company issued 100,000 Units at a price of $0.20 to Paul Godin, a director of the Company, in consideration of gross proceeds of $20,000 as part of a private placement financing. Each Unit consists of one common share and one common share purchase warrant. Each common share purchase warrant may be exercised by Mr. Godin to purchase one common share at a price of $0.35. The warrants were issued for a four-year term and will expire on December 6, 2008.

19

Management’s Report

Preparation of the consolidated financial statements accompanying this annual report and the presentation of all other information in this report is the responsibility of management.  The financial statements have been prepared in accordance with appropriate and generally accepted accounting principles and reflect management’s best estimates and judgments.  All other financial information in the report is consistent with that contained in the financial statements.  The Company maintains appropriate systems of internal control, policies and procedures which provide management with reasonable assurance that assets are safeguarded and that financial records are reliable and form a proper basis for preparation of financial statements.

The Board of Directors ensures that management fulfills its responsibilities for financial reporting and internal control through an Audit Committee which is composed of non-executive directors. The Audit Committee reviewed the consolidated financial statements with management and external auditors and recommended their approval by the Board of Directors.  The consolidated financial statements have been audited by Deloitte & Touche LLP, Chartered Accountants.  Their report stating the scope of their audit and their opinion on the consolidated financial statements is presented below.

Jeff Lymburner	Michael Robb
CEO	Chief Financial Officer

Report of Independent Registered Chartered Accountants
To the Shareholders of ADB Systems International Ltd.

We have audited the consolidated balance sheets of ADB Systems International Ltd. as at December 31, 2004 and 2003, and the consolidated statements of operations, deficit and cash flows for each of the years in the three year period ended December 31, 2004.  These financial statements are the responsibility of the Company’s management.  Our responsibility is to express an opinion on these financial statements based on our audits.

We conducted our audits in accordance with Canadian generally accepted auditing standards and the standards of the Public Company Accounting Oversight Board (United States).  Those standards require that we plan and perform an audit to obtain reasonable assurance whether the financial statements are free of material misstatement.  An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements.  An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation.  We believe that our audits provide a reasonable basis for our opinion.

In our opinion, these consolidated financial statements present fairly, in all material respects, the financial position of the Company as at December 31, 2004 and 2003 and the results of its operations and its cash flows for each of the years in the three year period ended December 31, 2004 in accordance with Canadian generally accepted accounting principles.

Independent Registered Chartered Accountants

Toronto, Ontario, Canada

March 6, 2005

Comments by Independent Registered Chartered Accountants on Canada – United States Reporting Difference

The standards of the Public Company Accounting Oversight Board (United States) require the addition of an explanatory paragraph when the financial statements are affected by conditions and events that cast substantial doubt on the Company’s ability to continue as a going concern, such as those described in Note 2 to the financial statements.  Although we conducted our audits in accordance with Canadian generally accepted auditing standards and the Standards of the Public Company Accounting Oversight Board (United States), our report to the Shareholders dated March 6, 2005 is expressed in accordance with Canadian reporting standards which do not permit a reference to such conditions and events in the auditors’ report when these are adequately disclosed in the financial statements.

Independent Registered Chartered Accountants

Toronto, Ontario, Canada

March 6, 2005

20

Consolidated Balance Sheets
December 31, 2004 and 2003
(in thousands ofCanadian dollars)

	2004			2003
ASSETS
CURRENT
Cash	$	440		$	432
Marketable securities	13			13
Accounts receivable	1,535			1,384
Deposits and prepaid expenses	208			118
	2,196			1,947
CAPITAL ASSETS (Note 4)	142			266
ACQUIRED SOFTWARE (Note 20)	—			846
DEFERRED CHARGES (NET) (Note 5)	155			—
ACQUIRED AGREEMENTS (Note 21)	—			150
TRADEMARKS AND INTELLECTUAL PROPERTY (NET)	—			2
	$	2,493		$	3,211
LIABILITIES
CURRENT
Accounts payable	$	870		$	700
Accrued liabilities	810			670
Deferred revenue	135			91
	1,815			1,461
SECURED SUBORDINATED NOTES (Note 6)	1,684			721
	3,499			2,182
NON-CONTROLLING INTEREST	3			3
COMMITMENTS AND CONTINGENCIES (Notes 2 and 14)
SHAREHOLDERS’ DEFICIENCY
Share capital (Note 8)	100,052			97,674
Contributed surplus (Note 9)	1,282			1,289
Warrants (Note 10)	405			324
Stock options (Note 11)	936			898
Other options (Note 12)	78			—
Conversion feature on secured subordinated notes (Note 6)	992			497
Cumulative translation account	112			106
Deficit	(104,866		)	(99,762		)
	(1,009		)	1,026
	$	2,493		$	3,211

On behalf of the Board:

Director	Director

See notes to consolidated financial statements.

21

Consolidated Statements of Operations
Years ended December 31, 2004, 2003 and 2002
(in thousands ofCanadian dollars, except per share amounts)

	2004			2003			2002
Revenue	$	4,930		$	5,853		$	5,780
General and administrative	4,365			4,648			6,288
Sales and marketing	749			1,098			1,875
Software development and technology	3,257			2,817			4,101
	8,371			8,563			12,264
Loss before employee stock options, depreciation and amortization, interest expense and interest income	(3,441		)	(2,710		)	(6,484		)
Employee stock options (Note 11)	39			193			—
Depreciation and amortization	1,190			1,901			2,602
Interest expense	439			289			200
Interest income	(6		)	(9		)	(45		)
	1,662			2,374			2,757
Loss before the undernoted	(5,103		)	(5,084		)	(9,241		)
Realized gain on settlement of demand loan (Note 19)	—			2,195			—
Realized gains and losses on disposal of marketable securities, strategic investments and capital assets (Note 17)	(1		)	7			(85		)
Unrealized gains and losses on revaluation of strategic investments (Note 18)	—			—			(24		)
Goodwill impairment (Note 22)	—			—			(14		)
Retail activities (Note 16)	—			67			—
	(1		)	2,269			(123		)
NET LOSS FOR THE YEAR	$	(5,104	)	$	(2,815	)	$	(9,364	)
LOSS PER SHARE (Note 8(d))	$	(0.08	)	$	(0.05	)	$	(0.22	)

See notes to consolidated financial statements.

22

Consolidated Statements of Deficit
Years ended December 31, 2004, 2003 and 2002
(in thousands of Canadian dollars)

	2004			2003			2002
DEFICIT, BEGINNING OF YEAR	$	(99,762	)	$	(96,947	)	$	(87,583	)
NET LOSS FOR THE YEAR	(5,104		)	(2,815		)	(9,364		)
DEFICIT, END OF YEAR	$	(104,866	)	$	(99,762	)	$	(96,947	)

See notes to consolidated financial statements.

23

Consolidated Statements of Cash Flows
Years ended December 31, 2004, 2003 and 2002
(in thousands of Canadian Dollars)

	2004			2003			2002
NET INFLOW (OUTFLOW) OF CASH RELATED TO THE FOLLOWING ACTIVITIES
OPERATING
Net loss for the year	$	(5, 104	)	$	(2,815	)	$	(9,364	)
Items not affecting cash
Depreciation and amortization	1,190			1,901			2,602
Non cash customer acquisition costs	—			38			—
Non cash interest expense	266			239			108
Employee stock options	39			193			—
Stock compensation to third parties	—			—			25
Realized gain on settlement of demand loan (Note 19)	—			(2,195		)	—
Realized gains and losses on disposal of marketable securities, strategic investments, and capital assets (Note 17)	1			(7		)	85
Unrealized gains and losses on revaluation of strategic investments (Note 18)	—			—			24
Goodwill impairment (Note 22)	—			—			14
	(3,608		)	(2,646		)	(6,506		)
Changes in non cash operating working capital (Note 15)	322			(728		)	61
	(3,286		)	(3,374		)	(6,445		)
INVESTING
Capital assets	(40		)	(45		)	(43		)
Capitalized software, trademarks and intellectual property	—			—			(7		)
Marketable securities	—			8			1,556
Proceeds from disposal of capital assets	—			34			167
Proceeds from disposal of joint venture and strategic investments (Note 17 (a))	—			20			126
Purchase of non-controlling interest	—			—			(14		)
	(40		)	17			1,785
FINANCING
Issuance of common shares for cash (Note 8 (b))	903			1,458			1,506
Repayment of capital lease	—			—			(42		)
Secured subordinated notes (Note 6)	2,598			994			1,000
Deferred charges (Note 5)	(167		)	—			(1,024		)
Demand loan (Note 19)	—			—			2,000
	3,334			2,452			3,440
NET CASH INFLOW (OUTFLOW) DURING THE YEAR	8			(905		)	(1,220		)
CASH, BEGINNING OF YEAR	432			1,337			2,557
CASH, END OF YEAR	$	440		$	432		$	1,337
SUPPLEMENTAL DISCLOSURE OF CASH PAYMENTS
Interest paid	$	60		$	48		$	24
Income taxes	$	—		$	—		$	—

SUPPLEMENTAL DISCLOSURE OF NON-CASH FINANCING ACTIVITIES – See Note 15

See notes to consolidated financial statements.

24

Notes to the Consolidated Financial Statements
Years ended December 31, 2004, 2003 and 2002
(in Canadian dollars)

1.DESCRIPTION OF BUSINESS

ADB Systems International Ltd. (“ADB” or the “Company”) delivers asset lifecycle management solutions that enable companies to source, manage and sell assets for maximum value.  ADB works with a growing number of customers and partners in a variety of sectors including the asset-intensive oil and gas industry to improve operational efficiencies.  ADB also enables customers in government, manufacturing and financial services sectors to reduce purchasing costs and improve procurement processes.

ADB was created on August 30, 2002.  Upon implementation of a special resolution of the shareholders of the Company and shareholders of ADB Systems International Inc. (“Old ADB”, formerly Bid.Com International Inc. (“Bid.Com”)), pursuant to Section 182 of the Business Corporations Act (Ontario), the shareholders of Old ADB exchanged their shares for shares of the Company on a one-for-one basis on October 22, 2002.  All assets and liabilities of Old ADB, other than those related to retail activities (Note 16) were transferred to the Company on that date in the form of a return of capital.  ADB conducted no activities prior to October 22, 2002.  Old ADB subsequently changed its name to Bid.Com International Ltd. (“Bid.Com Ltd.”).

These consolidated financial statements reflect the financial position of the Company as at December 31, 2004 and 2003, and results of its operations and its cash flows subsequent to October 22, 2002, and results of operations and of cash flows of Old ADB for the 2002 period prior to October 22, 2002 based upon continuity of interests accounting as no substantive change of ownership occurred.

Bid.Com was an on-line auction service provider and e-tailer.  During 2000, the Company refocused its business model to become an on-line enabling service to other businesses seeking to use its on-line retailing technologies.  The Company provides businesses with the use of its software and hardware technology over a specific term in addition to consulting, implementation, and training services.  In October 2001, Bid.Com acquired ADB Systemer ASA (“ADB Systemer”), a Norway-based software vendor of enterprise asset management and electronic procurement applications.  The Company changed its name to ADB Systems International Inc. to reflect its expanded product offering.

2.CONTINUATION OF THE BUSINESS

While the accompanying consolidated financial statements have been prepared on the basis of accounting principles applicable to a going concern, certain adverse conditions and events cast substantial doubt upon the validity of this assumption. The Company has not yet realized profitable operations and has relied on non-operational sources of financing to fund operations.  The Company’s ability to continue as a going concern will be dependent on management’s ability to successfully execute its business plan including a substantial increase in revenue as well as maintaining operating expenses at or near the same level as 2004.  Management’s 2005 business plan includes a significant increase in revenue and operating cash flow primarily from major new contracts in Norway, the UK and North America.  Management believes that it has the ability to raise additional financing if required.  The Company cannot provide assurance that it will be able to execute on its business plan or assure that efforts to raise additional financings would be successful.

These financial statements do not include adjustments or disclosures that may result from the Company’s inability to continue as a going concern.  If the going concern assumption were not appropriate for these financial statements, then adjustments would be necessary in the carrying values of assets and liabilities, the reported net losses and the balance sheet classifications used.

Management believes that continued existence beyond 2004 is dependent on its ability to increase revenue from existing products, and to expand the scope of its product offering which entails a combination of internally developed software and partnerships with third parties.

25

3.SIGNIFICANT ACCOUNTING POLICIES

The accompanying consolidated financial statements are prepared in accordance with accounting principles generally accepted in Canada (Canadian GAAP), which are substantially the same as generally accepted accounting principles in the United States (U.S. GAAP), except as disclosed in Note 24.  The accompanying consolidated financial statements are prepared using accounting principles applicable to a going concern, which assumes that the Company will continue in operation for a reasonable period of time and will be able to realize its assets and discharge its liabilities in the normal course of operations (see Note 2).

PRINCIPLES OF CONSOLIDATION

The accompanying consolidated financial statements include the accounts of the Company and subsidiaries over which it exercises control.  Business acquisitions are accounted for under the purchase method and operating results are included in the consolidated financial statements as of the date of the acquisition of control.  All material inter-company transactions have been eliminated.

INVESTMENT IN ASSOCIATED COMPANY

The investment in Bid.Com Ltd. was accounted for under the equity method (see Note 23).  This method was considered appropriate based upon management’s inability to determine the strategic operating policies of the associated company without the cooperation of others, its inability to obtain future economic benefits from the associated company, and its lack of exposure to the related risks of ownership.  U.S. GAAP required consolidation of the investment in associated company.  The impact of this difference in U.S. GAAP from Canadian GAAP is disclosed in these financial statements in Note 24 — Reconciliation of United States GAAP.

MARKETABLE SECURITIES

Marketable securities are comprised of interest-bearing certificates carried at cost plus accrued interest which approximate market value.

CAPITAL ASSETS AND AMORTIZATION

Capital assets are carried at cost less accumulated amortization.  Amortization is calculated on a straight-line basis in amounts sufficient to amortize the cost of capital assets over their estimated useful lives as follows:

Computer hardware	3 years
Computer software	1 year or life of the license
Furniture and fixtures	5 years
Leasehold improvements	life of the lease

SOFTWARE DEVELOPMENT COSTS

The cost of software internally developed for client applications through e-commerce enabling agreements and software licensing is expensed as incurred.

ACQUIRED SOFTWARE

The cost of core software acquired as a result of the acquisition of ADB Systemer ASA was capitalized and amortized over three years, the estimated useful life of the software.

ACQUIRED AGREEMENTS

Acquired agreements were capitalized based on the estimated fair value of common share purchase warrants issued in exchange for entering into certain agreements and are amortized over the initial term of the agreements.  The fair value of these warrants is calculated based on the Cox-Rubinstein binomial valuation model.

26

TRADEMARKS AND INTELLECTUAL PROPERTY

Trademarks and intellectual property are recorded at cost and amortized on a straight-line basis over two years.  Trademarks and intellectual property acquired as a result of the acquisition of ADB Systemer ASA, and directly attributable to core software products, were capitalized and have been amortized over three years, the estimated useful life of the related software.

GOODWILL

In 2001, the Company adopted the provisions of the Canadian Institute of Chartered Accountants (“CICA”) Handbook sections 1581 and 3062, whereby the purchase price of an acquired business is allocated to all assets and liabilities, including identifiable intangible assets, based on their fair values.  Any purchase price in excess of those fair values is recorded as goodwill.  Goodwill must be tested annually for impairment on a fair value basis, and where the carrying value exceeds fair value, a goodwill impairment loss must be recorded.  This accounting policy became effective January 1, 2002 with a transition provision beginning July 1, 2001.  Management assessed the carrying value of the goodwill arising from the acquisition of ADB Systemer, and determined that a permanent decline had occurred in the fair value of goodwill at December 31, 2002 based on estimated future cash flows from the business acquired.

TRANSLATION OF FOREIGN CURRENCIES

The accompanying consolidated financial statements are prepared in Canadian dollars.  The Company’s foreign subsidiaries in the United States, Ireland and the United Kingdom are classified as fully integrated with the functional currency being the Canadian dollar.  The Company uses the temporal method of foreign currency translation for these operations.  Monetary assets and liabilities are translated at the exchange rates in effect on the balance sheet date.  Non-monetary assets are translated at historic exchange rates.  Revenue and expense amounts are translated using the average exchange rate for the year except amortization of capital assets which is translated at historic exchange rates.  Gains and losses from foreign exchange translations are included in the statement of operations.

The Company’s subsidiary in Norway is classified as a self-sustaining operation whereby the functional currency of the operation is the Norwegian krone.  The Company uses the current rate method of translation for these operations.  Assets and liabilities are translated at the rate of exchange in effect at the balance sheet date.  Revenue and expenses (including depreciation and amortization) are translated using the average exchange rate for the year.  Gains and losses from foreign exchange translations are included as a separate component of shareholders’ equity.

LOSS PER SHARE

The treasury stock method of calculating diluted earnings per share is used.  For the years presented, all stock options, convertible debentures and warrants are anti-dilutive, therefore diluted loss per share is equal to basic loss per share.  The basic loss per share calculation is based on the weighted average number of shares outstanding during the year.

27

REVENUE RECOGNITION

The Company’s revenues are derived from software license fees, implementation, training and consulting services, product maintenance and customer support, and software development, and hosting fees. Fees for services are billed separately from licenses of the Company’s product.  The Company recognizes revenue in accordance with Canadian GAAP, which in the Company’s circumstances, are not materially different from the amounts that would be determined under provisions of the American Institute of Certified Public Accountants Statements of Position (SOP) No. 97-2, “ Software Revenue Recognition”, and as amended by Statement of Position 98-9, “Modification of SOP 97-2, Software revenue Recognition, With Respect to Certain Transactions”. The Company also considers the provisions of CICA EIC 141, which is analogous to Staff Accounting Bulletin (SAB) 104, “Revenue Recognition in Financial Statements”, and CICA EIC 142, which is analogous to the Emerging Issues Task Force consensus on EITF 00-21, “Accounting for Revenue Arrangements with Multiple Elements,” in determining the appropriate revenue recognition methodology.

SOFTWARE LICENSE REVENUE

The Company recognizes software license revenue in accordance with the terms of the license agreement and when the following criteria as set out in SOP No. 97-2 are met:

•persuasive evidence of an arrangement exists,

•delivery has occurred,

•the fee is fixed or determinable, and

•collectibility is probable.

Software license revenue consists of fixed license fee agreements involving perpetual licenses.

Software license agreements may be part of multiple element arrangements that include consulting and implementation services.  When these services are considered essential to the functionality of the license, the associated revenue is recognized on the basis of the percentage of completion method as specified by contract accounting principles.  When these services are not considered essential to the functionality of the license, the entire arrangement fee is allocated to each element in the arrangement based on the respective vendor specific objective evidence (“VSOE”) of the fair value of each element.  VSOE used in determining the fair value of license revenues is based on the price charged by the Company when the same element is sold in similar quantities to a customer of a similar size and nature.  VSOE used in determining fair value for installation, implementation and training based on the standard daily rates for the type of service being provided multiplied by the estimated time to complete each task.  VSOE used in determining the fair value of maintenance and support is based on the annual renewal rates.  The revenue allocable to the software license is recognized when the revenue criteria are met.  The revenue allocable to the consulting services is recognized as the services are performed.

IMPLEMENTATION, TRAINING & CONSULTING SERVICE FEES

The Company receives revenue from implementation of its product offerings, consulting services and training services. Customers are charged a fee based on time and expenses. Revenue from implementation, consulting service and training fees is recognized as the services are performed or deferred until contractually defined milestones are achieved or until customer acceptance has occurred, as the case may be, for such contracts.

PRODUCT MAINTENANCE & CUSTOMER SUPPORT FEES

The Company receives revenue from maintaining its products and the provision of on-going support services to customers. The maintenance and support fees are typically equal to a specified percentage of the customers’ license fee. If associated with the fixed fee license model, the maintenance revenues received are recorded as deferred revenue and recognized on a straight-line basis over the contract period.

Services revenue from maintenance and support is recognized when the services are performed.  Maintenance and support revenues paid in advance are non-refundable and are recognized on a straight-line basis over the term of the agreement, which typically is 12 months.

SOFTWARE DEVELOPMENT FEES

Typically, development of software for our customers is provided based on a predetermined fixed rate basis.  Revenue is recognized as time is incurred throughout the development process.

28

HOSTING FEES

The Company earns revenue from the hosting of customer websites.  Under our existing hosting contracts, we charge customers a recurring periodic flat fee.  The fees are recognized as the hosting services are provided.

DEFERRED REVENUE

Deferred revenue is comprised of the unrecognized portion of consulting and implementation fees received from maintenance and support e-commerce enabling agreements, and the unrecognized portion of license, installation, and consulting revenue on the sale of software licenses and related services.

CUSTOMER ACQUISITION COSTS

Customer acquisition costs are comprised of the calculated fair value of common share purchase warrants issued to customers in return for certain agreements.  These amounts are deducted from gross revenue to the extent that revenue is earned, and are otherwise included in general and administrative expenses.  The fair value of these warrants is calculated based on the Cox-Rubinstein binomial valuation model.

DEFERRED CHARGES

Deferred charges are comprised of expenditures incurred in the issuance of secured subordinated notes.  The deferred charges are amortized over the term of the underlying notes on a straight-line basis.  In accordance with Canadian GAAP, conversion of the underlying notes results in the allocation of the associated unamortized deferred charge to shareholders’ equity.  Under U.S. GAAP, note conversion results in the expensing of the associated unamortized deferred charge.  The impact of this difference in Canadian GAAP from U.S. GAAP is disclosed in these notes to the financial statements under Reconciliation of United States GAAP (Note 24).

The 2003 opening balance of deferred charges consisted of expenditures incurred in obtaining a demand loan.  This balance was completely amortized in 2003.

SECURED SUBORDINATED NOTES

Financial instruments that contain both a liability and an equity element are required to have the instrument’s component parts classified separately under Canadian GAAP.  The Company uses the Cox-Rubinstein binomial valuation model to determine the fair value of the conversion feature at the issue dates of convertible secured subordinated notes and discloses the liability and equity components separately on its balance sheet.  U. S. GAAP does not permit separate disclosure of different elements of a financial instrument in the financial statements.  The impact of this difference in U. S. GAAP from Canadian GAAP is disclosed in the notes to these financial statements under Reconciliation of United States GAAP (Note 24).

STOCK-BASED COMPENSATION

The Canadian Institute of Chartered Accountants issued Handbook section 3870, “Stock-based Compensation and Other Stock-based Payments,” effective January 1, 2002.  During the fourth quarter of fiscal 2003, the Company elected to adopt the fair value method for stock-based compensation on a prospective basis.  As a result, the annual financial statements reflect the cost of stock-based compensation to employees effective January 1, 2003.  The impact of this standard is disclosed in Note 11 to the financial statements.  The impact of Statement of Financial Accounting Standards (SFAS) 123, “Accounting for Stock-Based Compensation,” is disclosed in the notes to these financial statements under Reconciliation of U.S. GAAP (Note 24).

Prior to January 1, 2003, under Canadian GAAP, stock options granted to employees were not required to be recorded in the accounts of the Company.  Stock options to employees under U.S. GAAP are accounted for in accordance with the provisions of Accounting Principles Board (APB) Opinion No. 25, “Accounting for Stock Issued to Employees”.  Because options granted to employees have been fixed options with the exercise price equal to the market price of stock, under US GAAP no accounting recognition was given to stock options granted to employees at fair market value until they are exercised.

Stock-based compensation to third parties is recognized and recorded in the accounts of the Company at the fair market value of the equity instrument as determined by the Cox-Rubinstein binomial valuation model.

29

INCOME TAXES

The Company accounts for income taxes in accordance with the liability method.  The determination of future tax assets and liabilities is based on differences between the financial statement and income tax bases of assets and liabilities, using substantively enacted tax rates in effect for the period in which the differences are expected to reverse.  Future tax assets are recorded to recognize tax benefits only to the extent that, based on available evidence, it is more likely than not that they will be realized.

USE OF SIGNIFICANT ACCOUNTING ESTIMATES

The preparation of financial statements in conformity with generally accepted accounting principles requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenue and expenses during the reporting periods.  Estimates are used when determining items such as the allowance for doubtful accounts, the fair value assigned to the debt and equity components of the secured subordinated notes and the expected requirements for non-operational funding in 2005.  Actual results could differ from those estimates.

4.CAPITAL ASSETS

	2004									2003
	Cost			Accumulated Amortization			Net Book Value			Cost		Accumulated Amortization		Net Book Value
	(in thousands)
Computer hardware	$	2,601		$	2,547		$	54		$	2,588	$	2,428	$	160
Computer software	28			28			—			28		—		28
Furniture and fixtures	405			343			62			411		333		78
Leasehold improvements	27			1			26			151		151		—
	$		3,061	$		2,919	$		142	$	3,178	$	2,912	$	266

During 2004, the Company recorded capital asset amortization in the amount of $160,000 (2003 - $162,000)

5.DEFERRED CHARGES

During 2004, financing costs in the amount of $15,000, $162,000 and $23,000 associated with the liability component of the Series F, Series G and Series H notes, respectively were recorded as deferred charges.  The financing costs for the Series G notes include $33,000 representing the allocation of the fair value of compensation options issued in conjunction with these notes (See Note 6 (b)).  The deferred charges are being amortized on a straight-line basis over the term of the underlying debt.

During the year ended December 31, 2004, conversion of the Series F notes resulted in the allocation of $13,000 in unamortized deferred charges to contributed surplus.  For 2004, amortization of deferred charges in the amount of $32,000 (2003 - $513,000) was recorded and included in depreciation and amortization expense.

The following table summarizes the transactions within deferred charges.

	2004			2003
	(in thousands)
Opening balance	$	—		$	513
Series F financing costs	15			—
Series G financing costs	162			—
Series H financing costs	23			—
Amortization	(32		)	(513		)
Allocation to contributed surplus	(13		)	—
Closing balance	$	155		$	—

30

6.SECURED SUBORDINATED NOTES

a) During the year ended December 31, 2004, the Company issued Series F secured subordinated notes with a face value of $500,000.  The Series F notes have an annual rate of interest of 7 percent paid quarterly in arrears, mature May 19, 2007 and are convertible into equity units at a price of $0.31 per unit.  Each equity unit consists of one common share and one half of a share-purchase warrant with an exercise price of $0.50.  The share-purchase warrants expire on May 19, 2007.  The Series F secured subordinated notes will automatically convert into units when the share price of the Company closes above $0.70 for five consecutive trading days during the term.  Holders may convert the notes into units at anytime following a four-month hold period.  If the holder does not convert and no automatic conversion takes place, the Company must repay the principal amount in cash.  The Series F notes are secured by a general security agreement on the assets of the Company, subordinated to the security claims provided to the holders of previously issued notes.

As required by Canadian GAAP, the Company has separated the liability and equity components of the Series F secured subordinated notes.  The Company has determined the fair value of the liability component of the Series F notes by calculating the present value of the associated cash flows, using a discount rate that reflects the Company’s underlying rate of borrowing.  The Company has determined the fair value of the conversion feature at the issue date of the Series F notes using the Cox-Rubinstein binomial valuation model.  The resulting pro rata fair values of the liability component of the notes and the conversion features of the units, comprised of shares and attached warrants, was $286,000, $159,000 and $55,000, respectively.  The liability component will be accreted to $500,000 over the term of the Series F notes through the recording of a non-cash interest expense until such date at which the underlying notes are converted into common shares.

Financing costs in the amount of $26,000 were incurred in the issuance of the Series F notes.  Financing costs of $15,000 attributed to the liability component of the notes were allocated to deferred charges (See Note 5).  Financing costs of $11,000 attributed to the equity portions of the notes were recorded as a reduction to shareholders’ equity.

During the year, all of the Series F notes were converted into equity units.  (See table below.)

b) During the year ended December 31, 2004, the Company issued Series G secured subordinated notes with a face value of $1,710,000.  The Series G notes were issued to private investors including an amount totaling $170,000 issued to directors of the Company. The Series G notes mature June 15, 2007, have an annual rate of interest of 7 percent payable upon the earlier of maturity and conversion and are convertible into equity units at a price of $0.31 per unit.  Each equity unit consists of one common share and one half of a share-purchase warrant with an exercise price of $0.50.  The share-purchase warrants expire on June 15, 2008.  The Series G secured subordinated notes will automatically convert into units when the volume-weighted average share price of the Company closes above $0.70 for 20 consecutive trading days during the term.  Holders may convert the notes into units at anytime following a four-month hold period.  If the holder does not convert and no automatic conversion takes place, the Company must repay the principal amount in cash. The Series G notes are secured by a general security agreement on the assets of the Company, subordinated to the security claims provided to the holders of previously issued notes.

As required by Canadian GAAP, the Company has separated the liability and equity components of the Series G secured subordinated notes.  The Company has determined the fair value of the liability component of the Series G notes by calculating the present value of the associated cash flows, using a discount rate that reflects the Company’s underlying rate of borrowing.  The Company has determined the fair value of the conversion feature at the issue date of the Series G notes using the Cox-Rubinstein binomial valuation model.  The resulting pro rata fair values of the liability component of the notes and the conversion features of the units, comprised of shares and attached warrants, was $959,000, $539,000 and $212,000, respectively.  The liability component will be accreted to $1,710,000 over the term of the Series G notes through the recording of a non-cash interest expense until such date at which the underlying notes are converted into common shares.

31

Financing costs in the amount of $230,000 were incurred in the issuance of the Series G notes.  Financing costs of $129,000 attributed to the liability component of the notes were allocated to deferred charges (See Note 5).  Financing costs of $101,000 attributed to the equity portions of the notes were recorded as a reduction to shareholders’ equity.

In addition to the financing costs described above, the Company issued to First Associates Investment Inc. (“First Associates”) an option to purchase up to 485,000 equity units at a purchase price of $0.31 per unit.  The option expires on June 15, 2006.  Each equity unit consists of one common share and one half of a share-purchase warrant with an exercise price of $0.50.  The share-purchase warrants expire on June 15, 2008.  Using the Cox-Rubinstein binomial valuation model, the Company has determined the fair value of these equity units to be $59,000.  The portion of the fair value of these options, in the amount of $33,000, attributable to the liability component of the notes was allocated to deferred charges.  The remaining portion, in the amount of $26,000, attributable to the equity components of the notes was recorded as a reduction to shareholders’ equity.

Subsequent to the issuance of the Series G notes, the interest rate payable on the notes was retroactively increased to 11 percent.  The increase in the interest rate was a condition of the issuance of the Series H notes (See c) below).

c) During the year ended December 31, 2004, the Company issued Series H secured subordinated notes with a face value of $520,000.  The Series H notes were issued to private investors including an amount totaling $270,000 issued to directors of the Company.  The Series H notes mature October 21, 2007, have an annual rate of interest of 11 percent payable upon the earlier of maturity and conversion and are convertible into equity units at a price of $0.20 per unit.  Each equity unit consists of one common share and one half of a share-purchase warrant with an exercise price of $0.40.  The share-purchase warrants expire on October 21, 2008.  The Series H secured subordinated notes will automatically convert into units when the share price of the Company closes at or above $0.45 for 10 consecutive trading days during the term.  Holders may convert the notes into units at anytime following a four-month hold period.  If the holder does not convert and no automatic conversion takes place, the Company must repay the principal amount in cash.  In order to obtain the required approvals to issue the Series H notes, the Company retroactively increased the interest rate on the Series G notes from an annual rate of 7 percent to an annual rate of 11 percent. The Series H notes are secured by a general security agreement on the assets of the Company, subordinated to the security claims provided to the holders of previously issued notes.

As required by Canadian GAAP, the Company has separated the liability and equity components of the Series H secured subordinated notes.  The Company has determined the fair value of the liability component of the Series H notes by calculating the present value of the associated cash flows, using a discount rate that reflects the Company’s underlying rate of borrowing.  The Company has determined the fair value of the conversion feature at the issue date of the Series H notes using the Cox-Rubinstein binomial valuation model.  The resulting pro rata fair values of the liability component of the notes and the conversion features of the units, comprised of shares and attached warrants, was $282,000, $184,000 and $54,000, respectively.  The liability component will be accreted to $520,000 over the term of the Series H notes through the recording of a non-cash interest expense until such date at which the underlying notes are converted into common shares.

Financing costs in the amount of $43,000 were incurred in the issuance of the Series H notes.  Included in the financing costs was the incremental interest expense associated with the retroactive increase of the interest rate on the Series G notes.  Financing costs of $23,000 attributed to the liability component of the notes were allocated to deferred charges (See Note 5).  Financing costs of $20,000 attributed to the equity portions of the notes were recorded as a reduction to shareholders’ equity.

32

d) During the year ended December 31, 2003, the Company issued Series E secured subordinated notes with a face value of $1.0 million for net proceeds of $994,000.  The Series E notes have an annual rate of interest of 11percent that is paid quarterly in arrears, mature August 19, 2006 and are convertible into equity units at a price of $0.35 per unit.  Each equity unit consists of one common share and one half of a share-purchase warrant with an exercise price of $0.50.  The Series E secured subordinated notes will automatically convert into units when the share price of the Company closes above $0.70 for five consecutive trading days during the term.  Note holders may convert into units at anytime following a four-month hold period.  If the holder does not convert and no automatic conversion takes place, the Company must repay the principal amount to the holders of the Series E secured subordinated notes in cash.  As part of this private placement, the Company issued 30,000 common share-purchase warrants to an associate of Stonestreet Limited Partnership (“Stonestreet”) in consideration for professional fees.  Each such warrant entitles the holder to purchase one common share of the Company for $0.50 at any time up to and including August 18, 2006. The Series E notes are secured by a general security agreement on the assets of the Company, subordinated to the security claims provided to the holders of previously issued notes.

The Series E notes were issued to private investors including an amount totaling $100,000 issued to directors and/or senior officers of the Company.  Costs in the amount of $6,000 associated with the issuance of the Series E secured subordinated notes were recorded as a reduction of the equity component of these notes.

As required by Canadian GAAP, the Company has separated the liability and equity components of the Series E secured subordinated notes.  The Company has determined the fair value of the debt component of the Series E notes by calculating the present value of the associated cash flows, using a discount rate that reflects the Company’s underlying rate of borrowing.  The Company has determined the fair value of the conversion feature at the issue date of the Series E notes using the Cox-Rubinstein binomial valuation model.  The resulting pro rata fair value of the liability component of the secured subordinated notes and the conversion features of the units, comprised of shares and attached warrants, was $596,000, $292,000 and $106,000, respectively.  The liability component will be accreted to $1 million over the term of the Series E notes through the recording of non-cash interest expense until such date at which the underlying notes are converted into common shares.

33

e) The following summarizes the nominal and fair values of the liability and equity components of the Series A through H secured subordinated notes.

Secured subordinated notes

	2004							2003
	Nominal Value				Fair Value			Nominal  Value			Fair Value
	(in thousands)
Opening balance	$		1,115		$	721		$	205		$	34
Issuance of notes:
Series E	—				—			1,000			596
Series F	500				286			—			—
Series G	1,710				959			—			—
Series H	520				282			—			—
Non-cash interest	—				266			—			112
Conversion of notes
Series D	(115			)	(96		)	(90		)	(21		)
Series E	(625			)	(428		)	—			—
Series F	(500			)	(306		)	—			—
Closing balance	$	2,605			$	1,684		$	1,115		$	721

Conversion features on secured subordinated notes including conversion of attached warrants

	2004					2003
	Common Shares		Fair Value			Common Shares		Fair Value
	(in thousands)
Opening balance	5,723		$	497		2,562		$	175
Issuance of notes
Series E	—		—			4,286		398
Series F	2,419		203			—		—
Series G	8,274		624			—		—
Series H	3,900		218			—		—
Conversion of notes
Series D	(1,437	)	(99		)	(1,125	)	(76		)
Series E	(2,679	)	(248		)
Series F	(2,419	)	(203		)
Closing balance	13,781		$	992		5,723		$	497

34

7.INCOME TAXES

The Company adopted accounting for income taxes under the liability method.  Under the liability method, a future tax asset is recorded based upon tax losses carried forward and differences in tax and accounting values in the Company’s assets and liabilities.  The tax asset is reduced by a valuation allowance to the extent that it is more likely than not that the asset would not be realized.  The valuation allowance will be reviewed and adjusted as appropriate for each reporting period.  At December 31, 2004 and 2003, the Company established the valuation allowance at 100 percent of the future tax asset.

	2004			2003
	(in thousands)
FUTURE TAX ASSET
Tax losses carried forward	$	5,618		$	3,229
Difference in tax and accounting valuations for capital assets and investments	207			55
	5,825			3,284
Valuation allowance	(5,825		)	(3,284		)
Future tax asset	$	—		$	—
PROVISION FOR INCOME TAXES
Income taxes at statutory rate	$	(1,388	)	$	(467	)
Adjustments to loss	2,195			(316		)
Net reduction in tax rates	—			(896		)
(Increase) reduction to valuation allowance on future tax asset	(2,541		)	1,212
Tax losses carried forward	1,412			226
Difference in tax and accounting valuations for capital assets and investments	152			360
Permanent differences for tax and accounting income	170			(119		)
Provision for income taxes	$	—		$	—

The $2.195 million adjustment to loss represents the difference between estimated 2003 loss carry-forwards and actual 2003 loss carry-forwards.  The $316,000 adjustment to loss represents the difference between estimated 2002 loss carry-forwards and actual 2002 loss carry-forwards.

Tax loss carry-forwards at December 31, 2004 expire as follows:

	(in thousands)
2009	$	1,659
2010	8,418
2011	981
2012	—
2013	—
2014	3,569
Tax loss carry-forwards that do not expire (a)	6,242
	$	20,869

(a)Under Irish local tax laws, tax loss carry-forwards do not expire.

35

8.SHARE CAPITAL

a)AUTHORIZED

Unlimited number of common shares

Unlimited number of preference shares – issuable in series

b)COMMON SHARES

	2004			2003
	Number	Amount		Number	Amount
	(in thousands of shares and dollars)
Opening balance	59,423	$	97,674	50,140	$	95,633
Shares issued pursuant to:
Private placement	5,000	930		5,181	1,254
Conversion of debentures	4,357	1,227		750	72
Exercise of warrants	920	195		3,313	703
Exercise of options	72	26		39	12
Re-issuance of treasury shares	98	—		—	—
Closing balance	69,870	$	100,052	59,423	$	97,674

During 2004, the issuance of common shares generated cash proceeds of $903,000 (2003 - $1.458 million) as follows: $749,000 (2003 - $982,000) from private placement issuances, $129,000 (2003 – $464,000) from the exercise of warrants and $25,000 (2003 - $12,000) from the exercise of options.

An unclaimed certificate for 98,000 common shares previously issued from treasury in the 2001 acquisition of ADB Systemer ASA, and not included in the number of shares outstanding, was reissued during 2004.

The conversion of the remaining secured subordinated notes would result in the issuance of Nil (2003 – 958,000) common shares for Series A, B and D notes, 1,071,000 (2003 – 2,857,000) common shares for Series E notes, 5,516,000 common shares for Series G notes and 2,600,000 common shares for Series H notes.

c)PRIVATE COMMON SHARE PLACEMENT

On December 6, 2004, the Company completed a transaction resulting in the issuance of 5,000,000 shares at a price of $0.20 per share and 5,000,000 common share-purchase warrants exercisable into one common share at a price of $0.35 for gross proceeds of $1,000,000.  The warrants expire on December 6, 2008.  Gross proceeds were comprised of $800,000 in cash and $200,000 in legal services.  The $200,000 was applied, in part, to outstanding payables and the remainder was recorded as a prepaid retainer for legal services.  Issuance costs in the amount of $70,000 were incurred, including $19,000 representing the fair value of 150,000 compensation options issued to First Associates.  The compensation options are exercisable into 150,000 equity units at a price of $0.20 per unit.  Each equity unit consists of one common share and one common share-purchase warrant with an exercise price of $0.35 and an expiry date of December 6, 2008.  The compensation options expire on December 6, 2006.  Included in this private placement were 100,000 shares issued to a director of the Corporation for gross proceeds of $20,000.

36

On June 26, 2003, the Company completed a transaction resulting in the issuance of 4,879,000 common shares at a price of $0.24 and 2,733,000 common share-purchase warrants exercisable into one common share at $0.40 for net proceeds of $1.148 million.  The warrants expire on June 26, 2005.  This private placement included the issuance of 693,000 common shares and 347,000 common share-purchase warrants in settlement of an account payable in the amount of $166,000.  Included in this private placement were 2,146,000 shares issued to a director and officer of the Company for total net proceeds of $505,000.

On September 19, 2003 the Company issued 302,250 shares in settlement of an account payable in the amount of $106,000.

On April 25, 2002, the Company entered into an agreement with Stonestreet for a $1.1 million private placement resulting in net proceeds of $945,000 after deducting costs of issue of approximately $155,000.  As a result, the Company issued 3.3 million common shares and 1 million common share-purchase warrants exercisable into common shares at US$0.35 per share.

On December 17, 2002, Stonestreet exercised all of these warrants for proceeds of $550,000.  Pursuant to the April 25, 2002 private placement, the Company issued 50,000 share-purchase warrants to an associate of Stonestreet for partial consideration in securing the funding and due diligence services.  These warrants expire on April 25, 2005 and are exercisable into common shares at US$ 0.35 per common share.

d)The following table sets forth the computation of basic and diluted loss per share.

	2004			2003			2002
	(in thousands, except per share amounts)
Numerator:
Net Loss (numerator for basic loss per share applicable to common shares)	$	(5,104	)	$	(2,815	)	$	(9,364	)
Denominator:
Weighted average shares (denominator for basic loss per share)	61,938			54,324			41,968
Basic loss per share	$	(0.08	)	$	(0.05	)	$	(0.22	)

For each fiscal year, the Company excluded the effect of all convertible debt, stock options and share-purchase warrants, as their impact would have been anti-dilutive.

9.CONTRIBUTED SURPLUS

During the year ended December 31, 2004, recorded value of $6,000 (2003 - $1,289,000) related to expired warrants was allocated from warrants to contributed surplus.

During the year ended December 31, 2004, conversion of the Series F secured subordinated notes resulted in the reduction of contributed surplus by $13,000 due to the allocation of unamortized deferred charges.  (See Note 5.)

37

10.WARRANTS

a)A summary of changes in the warrants issued and vested for the two years ended December 31, 2004 is as follows:

	2004					2003
	Number		Amount			Number		Amount
	(in thousands)
Opening balance	5,338		$	324		6,121		$	1,599
Issued to key customer (Note 10 (c))	—		—			—		226
Issued in private equity placement (Note 8 (c))	5,000		—			2,733		—
Issued upon conversion of debt (Note 10 (b))	2,178		153			375		27
Issued in lieu of fees	—		—			30		—
Cancelled	(84	)	(6		)	(608	)	(1,289		)
Exercised	(920	)	(66		)	(3,313	)	(239		)
Closing balance	11,512		$	405		5,338		$	324

The conversion of the remaining secured subordinated notes would result in the issuance of Nil (2003 – 479,000) common share-purchase warrants for Series A, B and D notes, 536,000 (2003 – 1,429,000) common share-purchase warrants for Series E notes, 2,758,000 common share-purchase warrants for Series G notes and 1,300,000 common share-purchase warrants for Series H notes.

b)CONVERTIBLE SECURED SUBORDINATED DEBENTURES

During the year, the Company issued a total of 2,178,000 share-purchase warrants as follows: 479,000 with an exercise price of $0.14 per share and 1,699,000 with an exercise price of $0.50 per share (2003 – 375,000 with an exercise price of $0.14 per share) as the result of the conversion of secured subordinated notes.

During the year, 84,000 share-purchase warrants, that arose from of the conversion of Series D secured subordinated notes, expired and as a result were cancelled.

c)STRATEGIC MARKETING AGREEMENT

On December 13, 2002, the Company issued 2 million warrants convertible into common shares of the Company to a customer at an exercise price of $0.45 per warrant.  The warrants expired on January 5, 2005.  Warrants that have vested are to be automatically exercised when the share price of the Company closes at or above $1.02 for three consecutive trading days.  The vesting of warrants is based on achieving a number of performance objectives associated with the GE Asset Manager LLC joint venture (See Note 21).

During 2003, a total of 1.25 million of the above warrants vested; 250,000 warrants vested when three initial customers of the joint venture were identified and the remaining 1 million warrants vested upon the legal establishment of the joint venture.  The remaining 750,000 warrants have not vested as at December 31, 2004.  Vesting was contingent upon the achievement of certain performance and business related goals, which are currently undefined, associated with the GE Asset Manager joint venture.

38

d)ACQUISITION OF ADB SYSTEMER ASA

On October 11, 2001, the Company acquired 98.3 percent of the outstanding common shares of ADB Systemer ASA.  As a result of the acquisition, the Company issued 607,600 share-purchase warrants with a strike price of two Norwegian krone, in exchange for 700,000 share purchase warrants in ADB Systemer ASA.  These warrants retained all of the characteristics of the original warrants and had specific exercise dates of March 31, 2002 and March 31, 2003, expiring March 31, 2003 (see Note 20).  All of the 607,600 warrants were cancelled on March 31, 2003.

11. STOCK OPTIONS

a)Stock options are comprised of the following components:

	2004			2003
	Number	Amount		Number	Amount
	(in thousands of options and dollars)
Employees	853	$	820	2,645	$	782
Non-employees	—	116		27	116
Total	853	$	936	2,672	$	898

b)EMPLOYEE STOCK OPTIONS

The Company has a stock option plan which provides for the issuance of stock options to employees, which may expire as much as 10 years from the date of grant, at prices not less than the fair market value of the common shares on the date of grant.  The aggregate exercise price for employee options outstanding at December 31, 2004 was approximately $296,000 (2003 – $1.8 million).  The Management Resources and Compensation Committee of the Board of Directors reserves the right to attach vesting periods to stock options granted.  All of the stock options outstanding at the end of 2004 are exercisable immediately.  The options expire between 2005 and 2006.

A summary of changes in the stock option plan for the two years ended December 31, 2004 is as follows:

	Number of Options				Weighted Average Exercise Price
	2004		2003		2004		2003
	(in thousands)
Opening balance	2,645		2,793		$	0.68	$	1.84
Granted	—		1,095		—		0.37
Exercised	(72	)	(39	)	0.34		0.30
Cancelled	(1,720	)	(1,204	)	0.84		3.38
Closing balance	853		2,645		$	0.35	$	0.68
Exercisable, end of year	853		2,057		$	0.35	$	0.74
Options remaining for issuance under stock option plan	3,191		1,224

39

Range of Exercise Prices	Number Outstanding and Exercisable at December 31, 2004	Weighted Average Remaining Contractual Life	Weighted Average Exercise Price
	(in thousands)
$0.22-$0.33	167	1.1 years	$	0.32
$0.34-$0.37	684	1.6 years	$	0.35
$0.76	2	1.0 years	$	0.76
	853

During the fourth quarter of fiscal 2003, the Company adopted the accounting recommendations contained in the CICA Handbook Section 3870 – “Stock-based Compensation and Other Stock-based Payments” effective January 1, 2003.  This Section establishes standards for the recognition, measurement and disclosure of stock-based compensation and other stock-based payments made in exchange for goods and services, and applies to transactions, including non-reciprocal transactions, in which an enterprise grants shares of common stock, stock options, or other equity instruments, or incurs liabilities based on the price of common stock or other equity instruments.  Commencing in fiscal 2003, the Company recorded a compensation expense for stock options granted to employees on or after January 1, 2003, based on the fair value method of accounting.  For the year ended December 31, 2004, the employee stock option expense was $39,000 (2003 - $193,000).  For the year ended December 31, 2003, expenses in the first, second and third quarters increased by $2,000, $1,000 and $130,000, respectively as the result of the early adoption of these recommendations.  Accordingly, quarterly net income (loss) in 2003 for such quarters previously reported as ($1,755,000), $527,000 and ($460,000), respectively were revised to ($1,757,000), $526,000 and ($590,000), respectively.

For the year ended December 31, 2002, the Company did not record a compensation expense for stock options granted to employees.  Instead, the Company disclosed the pro forma net income (loss) and the pro forma income (loss) per share had the Company adopted the fair value method of accounting for stock-based compensation awarded on or after January 1, 2002.

The Company determined the fair value of employee stock option grants using the Cox-Rubinstein binomial valuation model with the following assumptions on a weighted average basis:

	2004	2003		2002
Dividend yield	N/A	—		—
Risk free interest rate	N/A	3.53	%	3.69	%
Volatility	N/A	137.51	%	131.51	%
Expected term, in years	N/A	2.94		2.00

40

For the years ended December 31, 2004, 2003 and 2002, the amortization of the value of the stock-based compensation granted by the Company to employees in 2002, over the vesting period of the awards as specified under CICA 3870, would have resulted in the following pro forma loss attributable to common shareholders and pro forma basic and diluted loss per share:

	2004				2003			2002
Loss attributable to common shareholders
As reported	$		(5,104	)	$	(2,815	)	$	(9,364	)
Pro forma	$	(5,104		)	$	(2,956	)	$	(9,608	)
Basic and diluted net loss per share:
As reported	$	(0.08		)	$	(0.05	)	$	(0.22	)
Pro forma	$	(0.08		)	$	(0.05	)	$	(0.23	)

c)NON-EMPLOYEE STOCK OPTIONS

The Company had no stock options outstanding to third parties at December 31, 2004.  A summary of changes in the stock options to third parties for the two years ended December 31, 2004 is as follows:

	Number of Options				Weighted Average Exercise Price
	2004		2003		2004		2003
	(in thousands)
Opening balance	27		253		$	2.88	$	2.88
Granted	—		—		—		—
Exercised	—		—		—		—
Cancelled	(27	)	(226	)	2.56		2.91
Closing balance	—		27		$	—	$	2.56
Exercisable, end of year	—		27		$	—	$	2.56

12.OTHER OPTIONS

During the year ended December 31, 2004, the Company issued 485,000 compensation options with a fair value of $59,000 relating to the issuance of Series G secured subordinated notes (See Note 6 (b)).  The options entitle the holder to purchase an equity unit at a purchase price of $0.31 per unit and expire on June 15, 2006.  Each equity unit consists of one common share and one half of a share-purchase warrant with an exercise price of $0.50.  The share-purchase warrants expire on June 15, 2008.

Also during the year ended December 31, 2004, the Company issued 150,000 compensation options with a fair value of $19,000 relating to the December private equity placement (See Note 8 (c)).  The options entitle the holder to purchase an equity unit at a purchase price of $0.20 per unit and expire on December 6, 2006.  Each equity unit consists of one common share and one share-purchase warrant with an exercise price of $0.35.  The share-purchase warrants expire on December 6, 2008.

41

13.FINANCIAL INSTRUMENTS

Foreign exchange risk

The Company’s revenue from software licensing and related services and e-commerce enabling agreements is transacted in various currencies including the Canadian dollar, U.S. dollar, UK pound, EURO, and Norwegian krone.  Correspondingly, operating expenses related to these activities are transacted in the above-denoted currencies.  The Company does not use derivative instruments to manage exposure to foreign exchange fluctuations.  The Company incurred $24,000 in foreign exchange losses in 2004 (2003 - $84,000; 2002 - $29,000).

The Company transacted the majority of its retail product sales and purchases in U.S. dollars.

Interest rate risk

The Company has limited exposure to fluctuations in interest rates.  The Company does not use derivative instruments to reduce its exposure to interest rate risk.

Credit risk

Credit risk arises from the potential that a customer will fail to meet its contractual obligations under a software licensing and related services agreement or an e-commerce enabling agreement.

In 2004, one customer accounted for 31 percent (2003 – two customers accounted for 26 percent and 15 percent) of total revenues.  At December 31, 2004, there were three customers that accounted for 18 percent, 13 percent and 11 percent, respectively, of total accounts receivable.  At December 31, 2003, three customers accounted for 25 percent, 19 percent and 14 percent, respectively, of total accounts receivable.

Fair value

The fair value of monetary assets and liabilities approximates amounts at which they would be exchanged between knowledgeable and unrelated persons.  The amounts recorded in the financial statements approximate fair value.

14.COMMITMENTS AND CONTINGENCIES

(a)Minimum payments under operating leases during the next five years are as follows:

	(in thousands)
2005	$	416
2006	369
2007	339
2008	310
2009	279
2010 and thereafter	154

(b)As a result of a review of statutory reporting obligations regarding employee benefits, the Company has identified a potential for non-compliance.  The employees and regulators concerned have been notified.  The probability and amount of any potential liability relating to this situation is presently not determinable.

(c)The Company has entered into compensation arrangements with certain of its employees.  In the event of involuntary termination, the Company may be liable for potential payments totaling $182,000 to these employees.

(d)The Company entered into a licensing agreement with NCR Corporation on April 29th, 2002.  The agreement provides the Company with access to specific technology patents over a seven-year period for US$100,000 annually.

42

15.CHANGES IN NON-CASH OPERATING WORKING CAPITAL

The following table sets forth the changes in non-cash working capital items resulting from the inflow (outflow) of cash in the period.

	2004				2003			2002
	(in thousands)
Accounts receivable	$		(151	)	$	444		$	(540	)
Deposits and prepaid expenses	(8			)	60			(47		)
Accounts payable	288				(87		)	218
Accrued liabilities	139				(491		)	416
Deferred revenue	44				(741		)	9
Effect of currency translation	10				87			5
	$	322			$	(728	)	$	61

The following table summarizes the non-cash financing activities of the Company

	2004			2003			2002
Issuance of common shares in settlement of accounts payable (Note 8(c))	$	118		$	272		$	—
Issuance of common shares in return for prepaid services (Note 8(c))	82			—			—
Reduction in debt from conversion of secured subordinated notes (Note 6(e))	(830		)	(21		)	(51		)
Reduction in conversion feature from conversion of secured subordinated notes (Note 6(e))	(550		)	(76		)	(761		)
Settlement of demand loan by transfer of Bid.Com Ltd. Shares (Note 19)	—			(2,000		)	—
Settlement of accrued liability by transfer of Bid.Com Ltd. shares	—			(68		)	—

16.RETAIL ACTIVITIES

The Company ceased its on-line retail activities in October 2000; however, during 2003, the Company received a $67,000 refund from a U.S.-based credit card institution formally engaged by the Company when it operated its on-line retail activities in the U.S.

The Company’s non-consolidated investment, Bid.Com, recommenced on-line retail activities in 2002 (Note 23).  The shares of Bid.Com were transferred in settlement of a demand loan on June 30, 2003 (Note 19).

43

17.REALIZED GAINS AND LOSSES ON DISPOSAL OF MARKETABLE SECURITIES,
STRATEGIC INVESTMENTS AND CAPITAL ASSETS, AND RECOVERY OF ASSETS

	2004				2003			2002
	(in thousands)
Gain on disposal of strategic investment (Note 17(a))	$		—		$	20		$	41
(Loss) gain on disposal of capital assets (Note 17(b))	(1			)	(13		)	23
Loss on disposal of marketable securities (Note 17(c))	—				—			(149		)
	$	(1		)	$	7		$	(85	)

(a)During 2003, the Company sold shares in Megawheels Technologies Inc. for proceeds of $20,000.  During 2002, the Company disposed of its strategic investments, resulting in cash proceeds of $126,000 and a realized gain of $41,000.

(b)During 2004, the Company disposed of capital assets that were no longer required resulting in a loss of $1,000.  Similar disposals in 2003 resulted in a loss of $13,000 and a gain of $23,000 in 2002.

(c)The loss on disposal of marketable securities includes a loss of $143,000 resulting from the January 2002 sale of the Company’s remaining AOL shares for gross proceeds of $1.3 million.

18.UNREALIZED GAINS AND LOSSES ON REVALUATION OF STRATEGIC INVESTMENTS

	2004			2003		2002
	(in thousands)
Revaluation of strategic investments (Note 18(a))	$		—	$	—	$	(24	)
	$	—		$	—	$	(24	)

(a)During 2002, the Company reviewed the carrying value of each of its strategic investments and determined that in light of recent financial performance of each investment and market conditions, the decline in value of these investments was other than temporary, and a revaluation was required.

19.REALIZED GAIN ON SETTLEMENT OF DEMAND LOAN

During the year ended December 31, 2002, the Company completed a series of transactions whereby the Company received a secured demand loan in the aggregate principal amount of $2,000,000.  The loan carried an interest rate of 12 percent compounded monthly, and was secured by a general security agreement on the assets of the Company and a pledge of the shares of the Company’s Norwegian subsidiary.  The loan matured on June 30, 2003.  The Company could, at its discretion, repay the loan in cash or transfer to the lender 100 percent of the issued shares of its investment in an associated company in full settlement of the outstanding principal amount and accrued interest then owing to the lender (Note 23).

On June 30, 2003, the Company exercised its option to transfer its investment in the associated company, which had a nominal carrying value, to the lender in full settlement of the outstanding principal and accrued interest amounts.  This transfer resulted in a gain on settlement of the demand loan in the amount of $2,195,000.

44

20.ACQUISITION OF ADB SYSTEMER ASA

On October 11, 2001, the Company acquired 98.3 per cent of the outstanding shares of ADB Systemer of Sola, Norway.  ADB Systemer was a publicly traded software vendor focused on enterprise asset management and integrated electronic procurement.  ADB Systemer has wholly-owned subsidiaries in the United States and in the United Kingdom.

The purchase price for 12,518,493 of the outstanding ADB Systemer common shares was $13.762 million.  The purchase price was comprised of $2.293 million in cash, $9.844 million of common stock issued from treasury, acquisition costs of $765,000, employee stock options with a fair market value of $576,000 granted to ADB Systemer employees as replacement options and warrants with a fair market value of $284,000 issued to ADB Systemer warrant holders as replacement warrants.  Common stock issued from treasury totaled 10,866,052 shares (21,732,104 pre-consolidation) with a value of $9.844 million based on a five-day trading average before and after September 10, 2001, the date the acquisition was announced to the general public.  The purchase price for ADB Systemer did not include any contingent payments, options, or commitments.  The purchase price of $13.762 million was allocated as follows:

	2001
	(in thousands)
Net monetary assets (including cash of $814)	$	418
Capital assets	308
Contractual agreements	177
Acquired software and related intellectual property	3,383
Goodwill	9,476
Total purchase price	$	13,762

ADB Systemer’s operations were consolidated after the effective date of the acquisition, October 11, 2001.

The amortization periods for contractual agreements and software and related intellectual property are 12 and 36 months respectively.  An amortization expense relating to software in the amount of $846,000 was recorded in 2004 (2003 - $1,128,000).  At the end of fiscal 2004, acquired software had been fully amortized.  At the end of fiscal 2003, accumulated amortization for acquired software amounted to $2,537,000, resulting in a net book value of $846,000.

Goodwill was not amortized, but was subject to an impairment test where the carrying value of goodwill was compared to its fair value.  In the event the carrying value of goodwill exceeded its fair value, a goodwill impairment would be recorded. At December 31, 2001, the carrying value of goodwill was tested for impairment, and it was determined that a goodwill impairment of $9.476 million was required.  Goodwill is not deductible for tax purposes.

45

21.INVESTMENTS IN JOINTLY CONTROLLED COMPANY

On September 25, 2003 the Company established a joint venture with GE Commercial Equipment Financing, a unit of GE Commercial Finance, with each entity holding a 50 percent interest in the joint venture.  The joint venture operates under the name of GE Asset Manager LLC.  The joint business venture develops and markets asset management technology to customers in a broad range of industries.  Upon the establishment of this joint venture, 1 million share-purchase warrants issued by ADB to GE Capital Corporation vested.  The fair value of these warrants of $188,000, calculated at the vesting date, is reflected on the Consolidated Balance Sheets as an Acquired Agreement.  An amortization expense of $150,000 was recorded in 2004 (2003 - $38,000). This acquired agreement has been fully amortized as of December, 2004.

As at December 31, 2004, the joint venture held no assets or liabilities, and earned no revenue.  A nominal amount of incremental expenses has been incurred by the Company in development and marketing activities pertaining to the joint venture.  Such expenses have been included in the financial statements of the Company.

22.GOODWILL IMPAIRMENT

The Company reviewed the carrying value of goodwill acquired in connection with the acquisition of ADB Systemer.  The carrying value of goodwill was tested against its fair value and it was determined that a goodwill impairment of $9.476 million was required at December 31, 2001 (Note 20).  For the year ended December 31, 2002 a goodwill impairment of $14,000 was recorded on goodwill acquired in connection with the purchase of shares of the non-controlling interest shareholders of ADB Systemer.  The permanent decline in the fair value arose on a downturn in economic conditions resulting in lower than previously anticipated cash flows.

23.RELATED PARTY TRANSACTIONS

On August 30, 2002, the Company entered into a series of agreements with a lender, an unrelated party, whereby the lender granted to the Company a secured loan in the aggregate principal amount of $2 million (Note 19).  The Company and the same unrelated party also entered into an agreement whereby on-line retail operations were to be conducted by Bid.Com Ltd.  These operations utilized the on-line retail technology, experience and expertise of the Company developed and operated under the name “Bid.Com International Inc.” in the on-line selling of consumer products supplied by the lender.

On June 30, 2003, the Company exercised its option to transfer 100 percent of the issued shares of Bid.Com Ltd. in full settlement of the outstanding principal and accrued interest owed to the lender.

The Company owned 100 percent of the issued and outstanding shares of Bid.Com Ltd., but determined that, for accounting purposes, consolidation of Bid.Com Ltd. was not appropriate.  This determination was based upon the Company’s inability to determine the strategic operating policies of Bid.Com without the cooperation of others, its inability to obtain the future economic benefits from the resources of Bid.Com Ltd., and its lack of exposure to the related risk of ownership.  Therefore, the Company accounted for its investment in Bid.Com Ltd. on the equity basis.  The Company was not exposed to losses incurred by Bid.Com Ltd., and accordingly this investment was carried at a nominal amount.  U.S. GAAP required consolidation of the investment in Bid.Com Ltd. in the Company’s financial statements.  The impact of this U.S. GAAP difference from Canadian GAAP is disclosed in note 24.

46

Condensed income statement and cash flow information for Bid.Com Ltd. for the six-month period ended June 30, 2003 is as follows:

	2003
	(in thousands)
Revenue	$	3,614
Net income	208
Change in cash resources	(358		)

Revenue of $35,000 related to web-site development, support and maintenance services provided to Bid.com Ltd. was included in the consolidated results of the Company for the six months ended June 30, 2003.  In addition, the Company charged overhead-related costs of $76,000 for rent, connectivity and management fees to Bid.com Ltd. for the six-month period ended June 30, 2003.  These overhead charges were recorded as a reduction of expenses in the consolidated financial statements for the year ended December 31, 2003.

24.RECONCILIATION OF UNITED STATES GAAP

The financial statements of the Company have been prepared in accordance with generally accepted accounting principles as applied in Canada, which conform in all material respects with generally accepted accounting principles in the United States, except as noted below.

(a)STOCK-BASED COMPENSATION TO EMPLOYEES

In fiscal 2003, the Company adopted the accounting recommendations contained in the CICA Handbook Section 3870 — “Stock-based Compensation and Other Stock-based Payments” effective January 1, 2003 regarding expensing of employee stock-based compensation.  Accordingly, commencing in fiscal 2003, the Company records a compensation expense for stock options granted to employees on or after January 1, 2003, based on the fair value method of accounting.  For fiscal 2002, the Company did not recognize compensation expense for employee stock options, however pro-forma disclosure giving recognition to the fair market value of options granted from January 1, 2002 has been provided in Note 11.

Under U.S. GAAP stock-based compensation granted to employees is accounted for in accordance with the provisions of Accounting Principles Board (APB) Opinion No. 25, “Accounting for Stock Issued to Employees,” or in accordance with SFAS 123 “Accounting for Stock-Based Compensation.”  Prior to 2003, under United States GAAP the Company elected to follow APB 25 and no accounting recognition was given to stock options granted at fair market value until they were exercised.  Upon exercise, the proceeds were credited to shareholders’ equity.  In December 2002, the FASB issued SFAS No. 148, “Accounting for Stock-Based Compensation – Transition and Disclosure,” an amendment of FASB Statement No. 123.  This Statement amends FASB Statement No. 123, “Accounting for Stock- Based Compensation,” to provide alternative methods of transition for a voluntary change to fair value method of accounting for stock-based employee compensation.  In fiscal 2003, the Company elected to prospectively adopt the fair value method for stock-based compensation as prescribed in SFAS No. 148.  Under CICA 3870 and SFAS No. 148, the fair value of stock-based awards to employees is calculated through the use of option pricing models, even though such models were developed to estimate the fair value of freely tradable, fully transferable options without vesting restrictions, which significantly differ from the Company’s stock option awards.  The Company’s calculations for employee grants were made using the Cox-Rubinstein binomial model with weighted average assumptions as described in the following table.  As a result, the 2004 annual financial statements under U.S. GAAP reflect a stock-based compensation expense to employees of $39,000 (2003 - $193,000) for options granted on or after January 1, 2003.

47

Prior to fiscal 2003, SFAS No. 123, “Accounting for Stock-Based Compensation,” requires the disclosure of pro forma net income (loss) and earnings (loss) per share had the Company adopted the fair value method from the date the standard was applicable.  The calculations for the pro forma disclosures of stock options granted prior to 2004 are reported below and were made using the Cox-Rubinstein binomial valuation model with the following weighted average assumptions:

	2004	2003		2002
Dividend yield	N/A	—		—
Risk free interest rate	N/A	3.53	%	3.69	%
Volatility	N/A	137.51	%	131.51	%
Expected term, in years	N/A	2.94		2.00

If the estimated fair values of the Company’s stock options granted to employees had been amortized to expense over the vesting period of the awards as specified under SFAS No. 123, the loss attributable to common shareholders and the basic and diluted loss per share on a pro forma basis (as compared to such items as reported) would have been:

	2004			2003			2002
	(in thousands)
Loss attributable to common shareholders under U.S. GAAP
As calculated (Note 24(g))	$	(5,013	)	$	(2,572	)	$	(9,947	)
Stock-based compensation included in net loss	39			193			—
	(4,974		)	(2,379		)	(9,947		)
Stock-based compensation if fair value applied to all awards	(39		)	(337		)	(797		)
Pro forma net loss as if fair value applied to all awards	$	(5,013	)	$	(2,716	)	$	(10,744	)
Basic and diluted net loss per share:
As calculated	$	(0.08	)	$	(0.05	)	$	(0.24	)
Pro forma	$	(0.08	)	$	(0.05	)	$	(0.26	)

(b)COMPREHENSIVE INCOME

Financial Accounting Standards Board Statement of Financial Accounting Standards No. 130, “Reporting Comprehensive Income,” requires disclosure of comprehensive income, which includes reported net earnings adjusted for other comprehensive income.  Comprehensive income is defined as the change in net assets of a business enterprise during a period from transactions and other events and circumstances from non-owner sources.

Under Canadian GAAP, gains and losses from foreign exchange translations of subsidiaries classified as self-sustaining are included in the foreign cumulative translation account component of shareholders’ equity.  Under U.S. GAAP, these gains and losses are included as a component of comprehensive income (loss).

48

(c)MARKETABLE SECURITIES

U.S. GAAP requires that the Company disclose marketable securities into one of three categories: held to maturity; available for sale; or trading. As at December 31, 2004 and 2003, the marketable securities held were classified as follows:

	2004		2003
	(in thousands)
Trading	$	13	$	13

(d)FINANCIAL INSTRUMENTS WITH LIABILITY AND EQUITY ELEMENTS

Under Canadian GAAP, the secured subordinated notes (see Note 6) are recorded based upon the relative fair values of the liability and equity components of the instruments.  The liability component is accreted to the face value of the subordinated notes over the term to maturity until the underlying notes are converted into common shares.  Under U.S. GAAP, upon issuance, the secured subordinated notes would have been recorded as a liability and reclassified to equity only upon conversion.  Accordingly, the interest accretion of $266,000 (2003 - $112,000) that is recorded under Canadian GAAP is reversed under U.S. GAAP.

Additionally, under Canadian GAAP, the financing costs arising from the issuance of the convertible notes are allocated between the liability and equity components of the notes.  The financing costs associated with the liability component of the notes are deferred and amortized over the term of the underlying debt (see Note 5).  The financing costs associated with the equity component of the notes are charged to shareholders’ equity.  Under U.S. GAAP, all of the financing costs are deferred and amortized over the term of the underlying debt.  As a result, the 2004 amortization expense under U.S GAAP is $58,000 compared to an amortization expense of $32,000 under Canadian GAAP.  Furthermore, under Canadian GAAP, conversion of debt results in the allocation of any unamortized deferred financing charges associated with that debt to shareholders’ equity.  Under U.S. GAAP, such unamortized financing charges are expensed upon conversion of the associated debt.  Accordingly, under U.S. GAAP, an additional amount of $23,000, representing the unamortized financing charges associated with the Series F notes, is expensed.  The unamortized financing charges under Canadian GAAP, in the amount of $13,000, were allocated to contributed surplus upon the conversion of the Series F notes.

Further, under U.S. GAAP, the beneficial conversion feature represented by the excess of the fair value of the shares issuable on conversion of the subordinated notes, measured on the commitment date, over the amount of the loan proceeds to be allocated to the common shares upon conversion would be allocated to contributed surplus.  This results in a discount on the subordinated notes that is recognized as additional interest expense over the term of the subordinated notes and any unamortized balance is expensed immediately upon conversion of the subordinated notes.  Accordingly, for U.S. GAAP purposes, the Company has recognized beneficial conversion features in 2004 of $20,000, $90,000 and $49,000 relating to Series F subordinated notes, Series G subordinated notes and Series H subordinated notes, respectively.  In 2003, the Company has recognized a beneficial conversion feature of $96,000 with respect to the Series E subordinated notes.  An interest expense of $126,000 (2003 - $64,000) results from the amortization of the discount over the term to maturity of those subordinated notes as well as the unamortized discount for those subordinated notes converted during the year.  Canadian GAAP does not require the recognition of any beneficial conversion feature.

49

(e)ADDITIONAL DISCLOSURES AS REQUIRED IN ACCORDANCE WITH UNITED STATES GAAP

U.S. GAAP requires the disclosure of the allowance for doubtful accounts.  The accounts receivable balance reported on the consolidated balance sheets at December 31, 2004, includes an allowance for doubtful accounts in the amount of $51,000 (2003 - $65,000).

U.S. GAAP requires the disclosure of accrued liabilities that exceed five percent of current liabilities.  Included in accrued liabilities at December 31, 2004 are accrued audit fees of $193,000 (2003 - $145,000) and accrued compensation expenses (severance and unpaid vacation) of $274,000 (2003 - $228,000).

U.S. GAAP requires the disclosure of non-cash interest components incurred during the year.  In 2004, the Company incurred $126,000 (2003 - - $64,000) in non-cash interest expense associated with secured subordinated notes.  In 2003, the Company incurred $126,000 in non-cash interest expense associated with a demand loan that was settled through the transfer of the investment in an associated company (Note 19).

Under U.S. GAAP, EITF 01-09 requires, in certain circumstances, that the warrants issued to customers be recorded as a reduction of revenue.  There is no similar guidance in Canadian GAAP.  Accordingly, depreciation and amortization and revenue would be reduced by $150,000 (2003 - $38,000) under U.S. GAAP.

(f)INVESTMENT IN ASSOCIATED COMPANY/DISCONTINUED OPERATIONS

U.S. GAAP requires consolidation of the Company’s investment in the associated company described in Note 19.  Furthermore, under FAS 144, the Bid.Com Ltd. component would be classified as an asset held for sale and be subject to the reporting requirements for discontinued operations.  The effect of consolidation of this entity upon the Canadian GAAP balance sheet is reported in Note 24(g).

Consolidation of this associated company results in a decrease in the net loss attributable to common shareholders due to income from discontinued operations in the amount of $195,000 for fiscal 2003.  For fiscal 2002, the net loss attributable to common shareholders is increased due to a loss from discontinued operations of $195,000.  Revenue in the amount of $1.074 million is included in the 2003 income from discontinued operations.  Revenue of $15,000 is included in the 2002 loss from discontinued operations.

For fiscal 2003, the impact of consolidation of the associated company upon cash flows was to decrease cash flows as a result of cash outflows from discontinued operations in the amount of $358,000.  For fiscal 2002, the impact upon cash flows was to increase cash flows as the result of cash inflows from discontinued operations in the amount of $358,000.

50

(g)The effect of the above differences described in Note 24(b), (d) and (f) on the Company’s financial statements is set out below:

Consolidated Balance Sheets

	2004			2003
	(in thousands)
Cash and marketable securities	$	453		$	445
Accounts receivable	1,535			1,384
Deposits and prepaid expense	208			118
Capital assets	142			266
Intangible assets	277			998
Accounts payable and accrued liabilities	1,680			1,370
Deferred revenue	135			91
Secured subordinated notes (Note 24(e))	2,465			1,009
Non-controlling interest	3			3
Shareholders’ equity	$	(1,668	)	$	738

Consolidated Statements of Operations

	2004			2003			2002
	(in thousands)
Net loss for the year as reported under Canadian GAAP	$	(5,104	)	$	(2,815	)	$	(9,364	)
Adjustments:
Accretion of interest on secured subordinated notes (Note 24(d))	266			112			68
Gain on settlement of demand loan (Note 24(f))	—			(2,195		)	—
Amortization of deferred charges relating to secured subordinated notes under Canadian GAAP (Note 24(d))	32			—			—
Amortization of deferred charges relating to secured subordinated notes under U.S. GAAP (Note 24(d))	(81		)	—			—
Amortization of beneficial conversion feature (Note 24(d))	(126		)	(64		)	(316		)
Net loss from continuing operations for the year as reported under U.S. GAAP	(5,013		)	(4,962		)	(9,612		)
Income (loss) from discontinued operations (Note 24(f))	—			2,390			(195		)
Net loss for the year as reported under U.S. GAAP	(5,013		)	(2,572		)	(9,807		)
Preferential distribution to shareholder (Note 24(j))	—			—			(140		)
Net loss attributable to common shareholders under U.S. GAAP	$	(5,013	)	$	(2,572	)	$	(9,947	)
Net loss for the year as reported under U.S. GAAP	$	(5,013	)	$	(2,572	)	$	(9,807	)
Other comprehensive income (loss) (Note 24(b))	6			74			32
Comprehensive income (loss) as reported under U.S. GAAP	$	(5,007	)	$	(2,498	)	$	(9,775	)
Basic and diluted loss per share from continuing operations	$	(0.08	)	$	(0.09	)	$	(0.23	)
Basic and diluted net loss per share	$	(0.08	)	$	(0.05	)	$	(0.24	)

51

(h)IMPACT OF NEW ACCOUNTING PRONOUNCEMENTS

On September 30, 2004, the FASB issued staff position EITF  Issue No. 03-1-1 “Effective Date of 10-20 of EITF Issue No. 03-1 – The Meaning of Other-Than-Temporary Impairment and its Application to Certain Investments”.  The staff position delays the effective date for the measurement and recognition guidance contained in paragraphs 10-20 of Issue 03-1. The adoption of EITF Issue No. 03-1-1 had no effect on the Company’s results of operations and financial position for 2004.

In December 2004, the FASB issued staff position No. SFAS 109-1, “Application of FASB Statement 109, Accounting for Income Taxes, for the Tax Deduction Provided to U.S. Based Manufacturers by the American Jobs Creation Act of 2004”. The staff position addresses the issue as to whether this deduction should be accounted for as a special deduction or a tax rate reduction. This guidance was effective upon issuance on December 21, 2004. The adoption of SFAS No. 109-1 had no effect on the Company’s results of operations and financial position for 2004.

The FASB issued SFAS No. 123 (revised 2004), “Share-Based Payment”.  This Statement is a revision of FASB Statement No. 123, “Accounting for Stock- Based Compensation” and supersedes APB Opinion No. 25, “Accounting for Stock Issued to Employees.”  This Statement establishes standards for the accounting for transactions in which an entity exchanges its equity instruments for goods or services. It also addresses transactions in which an entity incurs liabilities in exchange for goods or services that are based on the fair value of the entity’s equity instruments or that may be settled by the issuance of those equity instruments. This Statement focuses primarily on accounting for transactions in which an entity obtains employee services in share-based payment transactions.  This Statement is effective for annual or interim financial statements commencing after June 15, 2005. The Company currently accounts for its employee stock option plan in accordance with the provisions of SFAS No. 123 (revised 2004), accordingly the adoption of these standards is not expected to have a material impact on the Company’s financial position, results of operations or cash flows.

In January 2003 and December 2003, the FASB issued interpretation No. 46, “Consolidation of Variable Interest Entities” (“FIN 46”), and its revision, FIN 46-R, respectively.  FIN 46 and FIN 46-R address the consolidation of entities whose equity holders have either not provided sufficient equity at risk to allow the entity to finance its own activities or do not possess certain characteristics of a controlling financial interest.  FIN 46 and FIN 46-R require the consolidation of these entities, known as variable interest entities (“VIE”), by the primary beneficiary of the entity.  The primary beneficiary is the entity, if any, that is subject to a majority of the risk of loss from the VIE’s activities, entitled to receive a majority of the VIE’s residual returns, or both.  FIN 46 and FIN 46-R is effective for the Company’s annual financial statements commencing January 1, 2004.  Adoption of both of these standards had no effect on the Company’s financial position, results of operations or cash flows.

The Emerging Issues Task Force provided guidance on Issue 03-1, “The meaning of Other-Than-Temporary Impairment and its Application to Certain Investments. This Task Force guidance for evaluating whether an investment is other-than-temporarily impaired should be applied in other-than-temporary impairment evaluations made in reporting periods beginning after June 15, 2004. The disclosures are effective in annual financial statements for fiscal years ending after December 15, 2003, for investments accounted for under Statements 115 and 124. For all other investments within the scope of this Issue, the disclosures are effective in annual financial statements for fiscal years ending after June 15, 2004. The additional disclosures for cost method investments are effective for fiscal years ending after June 15, 2004. Comparative information for periods prior to initial application is not required.

The Emerging Issues Task Force reached a consensus on Issue 03-10, “Application of EITF Issue No. 02-16 — Accounting by a Customer for Certain Consideration Received from a Vendor by Resellers to Sales Incentives Offered to Consumers by Manufacturers. The Company has determined that EITF Issue No. 02-16 had no effect on the Company’s results of operations and financial position for 2004.

52

(i)OPERATING LOSS

U.S. GAAP requires that the Company disclose operating loss.  Operating loss of the Company for the year was $5.013 million, comprised of net loss of $5.013 million less realized and unrealized gains and losses on marketable securities and strategic investments of $Nil  (2003 - $4.982 million, comprised of net loss from continuing operations of $4.962 million less $20,000; 2002 - $9.480 million, comprised of net loss from continuing operations of $9.612 million plus $132,000).

(j)PREFERENTIAL DISTRIBUTION TO SHAREHOLDERS

In accordance with U.S. GAAP, the $120,000 Series C secured subordinated debentures issued in exchange for the waiver of certain US registration rights granted to Stonestreet pursuant to a subscription agreement dated April 25, 2002 is recorded as preferential distribution to Stonestreet and deducted from the net loss to determine net loss attributable to common shareholders.  The Series C secured subordinated debentures include a beneficial conversion feature; accordingly, a preferential distribution of $140,000 has been recorded.

25.SEGMENTED INFORMATION

The Company operates in the following reportable geographic segments: North America, Ireland and the United Kingdom, and Norway.

Assets by Geographic Region:

	2004				2003
	(in thousands)
	Capital Assets		Intangible and Other Assets		Capital Assets		Intangible and Other Assets
North America	$	39	$	155	$	106	$	152
Ireland and U.K.	6		—		16		—
Norway	97		—		144		846
	$	142	$	155	$	266	$	998

Net Revenue by Geographic Region:

	2004		2003		2002
	(in thousands)
North America	$	796	$	1,211	$	2,182
Ireland and U.K.	681		1,239		472
Norway	3,453		3,403		3,126
	$	4,930	$	5,853	$	5,780

26.SUBSEQUENT EVENT

On February 23, 2005, the Company completed a transaction resulting in the issuance of 2.5 million equity units at a price of $0.23 per unit for gross proceeds of $575,000.  Each equity unit consists of one common share and one common share-purchase warrant with an exercise price of $0.40 each.  The warrants expire on February 22, 2009.

53

Corporate Directory

Directors

Jeffrey Lymburner
CEO

T. Christopher Bulger(1),(2), (3)

CEO, Megawheels

Duncan Copeland(1), (2), (3)
President, Copeland and Company

Paul Godin(2), (3)

Jim Moskos
President,
ADB Technologies Group

Jan Edvin Pedersen
President, ADB Systems, European Operations

Rick Robertson(1)
Associate Professor of Business
Richard Ivey School of Business,
The University of Western
Ontario

Officers
Jeffrey Lymburner
CEO

Mike Robb

Chief Financial Officer

Jim Moskos

President, ADB Technology Group

Jan Pedersen

President ADB Systems, European Operations

Aidan Rowsome

Vice President, Global Sales

(1)Member of the Audit Committee

(2)Member of the Management Resources and Compensation Committee

(3)Member of the Corporate Governance Committee

ADB Systems Offices

North America
Corporate Headquarters
ADB Systems International Ltd.
302 The East Mall, Suite 300
Toronto, Ontario ML4V 1V2
1 888 287 7467

ADB Systems International Ltd.
3001 North Rocky Point Drive East,
Suite 200, Tampa, Florida 33607
1 888 750 7467

Europe
ADB Systemer International ASA
Vingveien 2, N-4050
Sola, Norway
+ 47 51 64 71 00

ADB Systems International Ltd.
3000 Cathedral Hill
Guildford, Surrey GU2 7YB UK
+ 44 (0) 1483 243 577

ADB Systems International Ltd.
52 Broomhill Road, Suite 108
Broomhill Industrial Estate
Tallaght, Dublin 24, Ireland
+ 353 1 431 0513

Additional Shareholder Information
www.adbsys.com
investor-relations@adbsys.com

Registrar and Transfer Agent
Equity Transfer Services
120 Adelaide Street West
Suite 420, Toronto, ON M5W 4C3
(416) 361-0152

Auditors

Deloitte & Touche LLP

Toronto, Ontario, Canada

Lawyers
Brown Raysman Millstein
   Felder & Steiner LLP, New York
Gowling Lafleur Henderson LLP,
Toronto

Stock Exchange Listings
Toronto Stock Exchange
Symbol: ADY

OTC Bulletin Board

Symbol: ADBYF

Shares Outstanding

Issued: 69,870,131

December 31, 2004

ADB Systems, Dyn@mic Buyer, ProcureMate, WorkMate and Dyn@mic Seller are trademarks of ADB Systems International Ltd. and its affiliates.

© 2005 ADB Systems International Ltd.