UNITED STATES SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. 20549  FORM 10-QSB  xQUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES EXCHANGE ACT OF 1934  For the quarterly period endedSeptember 30, 2005  OR  o TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES EXCHANGE ACT OF 1934  For the Transition Period from ___________ to ___________  Commission File Number: 0-31040  ADSERO CORPORATION (Exact name of Registrant as specified in its charter)  Delaware(State or other jurisdiction ofincorporation or organization)
        65-0602729(I.R.S. Employer Identification No.)  2101 Nobel Street Sainte Julie, Quebec J3E 1Z8 (Address of principal executive offices, including zip code)  (450) 922-5689 (Registrants telephone number, including area code)  Check whether the Registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months, and (2) has been subject to such filing requirements for the past 90 days. YesxNo o  The number of shares of the
Registrants common stock outstanding at November 15, 2005, was 17,241,975.  Transitional Small Business Disclosure Format:
        Yes o
        Nox 
  ADSERO CORPORATION

SEPTEMBER 30, 2005 QUARTERLY REPORT ON FORM 10-QSB



TABLE OF CONTENTS






PAGESpecial Note Regarding Forward Looking Statements
        3PART I FINANCIAL INFORMATIONItem 1.
        Financial Statements
        4Item 2.
        Plan of Operation
        35Item 3
        Controls and Procedures
        36PART II OTHER INFORMATIONItem 1.
        Legal Proceedings
        37Item 2.
        Changes in Securities and Use of Proceeds
        37Item 3.
        Defaults Upon Senior Securities
        39Item 5.
        Other Information
        39Item 6.
        Exhibits
        45

2
SPECIAL NOTE REGARDING FORWARD-LOOKING STATEMENTS



To the extent that the information presented in this Quarterly Report on Form 10-QSB for the quarter ended September 30, 2005, discusses financial projections, information or expectations about our products or markets, proposed financing and acquisition activities, or otherwise makes statements about future events, such statements are forward-looking. We are making these forward-looking statements in reliance on the safe harbor provisions of the Private Securities Litigation Reform Act of 1995. Although we believe that the expectations reflected in these forward-looking statements are based on reasonable assumptions, there are a number of risks and uncertainties that could cause actual results to differ materially from such forward-looking statements. These risks and uncertainties are described, among other places in this Quarterly Report, in Plan of Operation.



In addition, we disclaim any obligations to update any forward-looking statements to reflect events or circumstances after the date of this Quarterly Report. When considering such forward-looking statements, you should keep in mind the risks referenced above and the other cautionary statements in this Quarterly Report.



3
PART I - FINANCIAL INFORMATION






ITEM 1.
        FINANCIAL STATEMENTS
        PAGECondensed Consolidated Balance Sheet as of September 30, 2005 (unaudited)
        5Condensed Consolidated
Statements of Operations for the three and nine months ended September 30, 2005 and 2004 (unaudited)
        6Condensed Consolidated Statements of Cash Flows for the nine months ended September 30, 2005 and 2004 (unaudited)
        7Notes to Condensed Consolidated Financial Statements (unaudited)
        8

4
ADSERO CORP. AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEET
September 30, 2005
(unaudited)

ASSETSCURRENT ASSETSCash
  
  $
  86,998Accounts
receivable, net
  
  
  3,465,890Inventories
  
  
  5,105,107Income
taxes receivable
  
  
  273,259Prepaid
expenses and other assets
  
  
  265,342Deferred
income taxes
  
  
  160,207TOTAL
CURRENT ASSETS
  
  
  9,356,803Property,
plant and equipment, net
  
  
  2,125,037Trademarks
  
  
  483,333Investment
in prospective acquire
  
  
  1,001,000Goodwill
  
  
  6,946,875Other
assets
  
  
  644,153Total
Assets
  
  $
  20,557,201LIABILITIES AND STOCKHOLDERS EQUITYCURRENT LIABILITIESLine of
credit obligation
  
  $
  2,162,204Installment
loans
  
  
  382,716Accounts
payable
  
  
  5,339,293Salaries
and Benefits
  
  
  723,398Warranties
and related accruals
  
  
  351,022Accrued
expenses
  
  
  1,136,647Liabilities
of discontinued operation
  
  
  2,125,341Notes
payable - Related Parties (including
  accrued interest of $66,495)
  
  
  172,988Redeemable
preferred stock of subsidiary
  
  
  1,570,732Current
portion of long-term debt
  
  
  41,485TOTAL
CURRENT LIABILITIES
  
  
  14,005,826Long-term
debt, less current portion
  
  
  57,175Convertible
promissory note
  
  
  1,639,320Deferred
income taxes
  
  
  373,014Total
Liabilities
  
  
  16,075,335Commitments and ContingenciesSTOCKHOLDERS EQUITYCommon
stock, $.001 par value, 100,000,000
  shares authorized,17,241,975 shares issued and outstanding
  
  
  17,243Series I
exchangeable shares of subsidiary,
  6,500,000 shares outstanding, exchangeable one for one into common shares of
  the company
  
  
  3,250,000Preferred
Stock, $.0001 par value,
  20,000,000 shares authorized, 6,500,000 issued and outstanding
  
  
  650Additional
paid-In-capital
  
  
  11,297,497Common
stock to be issued
  
  
  2,308,779Deferred
compensation
  
  
  (27,998
  )Accumulated
other comprehensive income -
  Foreign currency translation adjustment
  
  
  123,289Accumulated
deficit
  
  
  (12,487,594
  )TOTAL
STOCKHOLDERS EQUITY
  
  
  4,481,866Total
Liabilities and Stockholders Equity
  
  $
  20,557,201See notes to condensed consolidated financial
statements

5

ADSERO CORP. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(unaudited)

Three
  Months Ended
  
  

  Nine
  Months EndedSeptember
  30, 2005
  
  September
  30, 2004
  
  

  September
  30, 2005
  
  September
  30, 2004REVENUES
  
  
  6,503,215
  
  $
  -
  
  

  $
  20,249,635COST OF
  GOODS SOLD
  
  
  5,169,535
  
  
  -
  
  

  
  15,065,687GROSS PROFIT
  
  
  1,333,680
  
  
  -
  
  

  
  5,183,948
  
  
  -OPERATING
  EXPENSESSalaries and Compensation expenses
  
  
  709,604
  
  
  
  
  

  
  2,286,851Sales and Administrative expenses
  
  
  766,765
  
  
  335,605
  
  

  
  2,121,192
  
  
  621,719Restructuring charge
  
  
  52,505
  
  
  -
  
  

  
  52,505
  
  
  -Conversion of debt expense
  
  
  -
  
  
  -
  
  

  
  -
  
  
  627,340Depreciation and amortization
  
  
  226,527
  
  
  -
  
  

  
  363,153
  
  
  -TOTAL OPERATING EXPENSES
  
  
  1,755,401
  
  
  335,605
  
  

  
  4,823,701
  
  
  1,249,059INCOME
  (LOSS) FROM OPERATIONS
  
  
  (421,721
  )
  
  (335,605
  )
  

  
  360,247
  
  
  (1,249,059
  )INTEREST EXPENSE
  
  
  332,386
  
  
  13,596
  
  

  
  721,492
  
  
  41,456LOSS BEFORE
  INCOME TAXES
  
  
  (754,107
  )
  
  (349,201
  )
  

  
  (361,245
  )
  $
  (1,290,515
  )INCOME TAXES
  
  
  68,583
  
  
  -
  
  

  
  137,377
  
  
  -NET LOSS
  
  
  (822,690
  )
  $
  (349,201
  )
  

  $
  (498,622
  )
  $
  (1,290,515
  )LOSS PER
  SHARENET LOSS PER SHARE, BASIC AND DILUTED
  
  $
  (0.05
  )
  $
  (0.03
  )
  

  $
  (0.03
  )
  $
  (0.15
  )WEIGHTED AVERAGE NUMBER OF SHARES USED IN
  COMPUTATION
  
  
  17,241,975
  
  
  10,925,755
  
  

  
  16,658,197
  
  
  8,774,865See notes to condensed consolidated financial
statements


6
ADSERO CORP. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(unaudited)

Nine months endedSeptember 30, 2005
  
  September 30, 2004CASH FLOWS FROM OPERATING
ACTIVITIES:Net Loss
  
  $
  (498,622
  )
  $
  (1,290,515
  )Adjustments to reconcile net
loss to net
  cashprovided by (used in)
operating activities:Depreciation and
amortization
  
  
  363,153Bad debt reserve
  
  
  34,957Inventory reserve
  
  
  189,492Non-cash interest
expense
  
  
  191,934Deferred income
taxes
  
  
  285,555Stock based
compensation
  
  
  83,995Conversion of debt
expense
  
  
  
  
  
  627,340Changes in operating assets
and
  liabilities:Accounts
receivable
  
  
  320,385Inventories
  
  
  (1,965,684
  )Prepaid expenses and other
assets
  
  
  (757,679
  )Accounts payable and
accrued expenses
  
  
  1,361,260
  
  
  116,222Income taxes
receivable
  
  
  512,238Total Adjustments
  
  
  619,606
  
  
  743,562NET CASH PROVIDED BY
(USED IN) OPERATING
  ACTIVITIES
  
  
  120,986
  
  
  (546,953
  )CASH FLOWS USED IN
INVESTING ACTIVITIESInvestment in
Turbon
  
  
  (1,001,000
  )Acquisition of business,
net of cash
  received
  
  
  (3,100,359
  )Puchase of fixed
assets
  
  
  (96,477
  )Proceeds received from sale
of building
  
  
  2,777,460NET CASH USED IN
INVESTING ACTIVITIES
  
  
  (1,420,376
  )
  
  CASH FLOWS FROM FINANCING
ACTIVITIESRepayment on notes payable
to related
  parties
  
  
  (76,079
  )Repayment of mortgage
  
  
  (2,338,375
  )Principal payments on long
term debt
  
  
  (686,853
  )Bank loan
  
  
  (506,069
  )Proceeds from issuances of
common stock
  
  
  2,511,250
  
  
  519,588Proceeds from sale of
special warrants
  
  
  
  
  
  205,000Proceeds from issuances of
convertible
  notes
  
  
  2,666,666
  
  
  70,075Proceeds (repayments) of
loan payable
  
  
  (275,000
  )
  
  52,500NET CASH PROVIDED BY
FINANCING ACTIVITIES
  
  
  1,295,540
  
  
  847,163EFFECT OF EXCHANGE RATE
ON CASH
  
  
  (70,852
  )NET INCREASE (DECREASE)
IN CASH
  
  
  (74,702
  )
  
  300,210CASH AT BEGINNING OF
PERIOD
  
  
  161,700
  
  
  444CASH AT END OF
PERIOD
  
  $
  86,998
  
  $
  300,654SUPPLEMENTAL DISCLOSURE OF NONCASHINVESTING AND FINANCING
ACTIVITIESACQUISITION OF
BUSINESSAssets acquired
  
  $
  13,292,123costs in excess of net
assets acquired
  
  
  7,446,875Liabilities
assumed
  
  
  (12,364,345
  )Stock based purchase
consideration
  
  
  (3,250,000
  )Redeemable preferred stock
issued as
  purchase consideration
  
  
  (1,570,732
  )Non cash expenses
  
  
  (376,865
  )cash received at
closing
  
  
  (38,348
  )Net cash paid for
acquisition of business
  
  $
  3,138,707See notes to condensed consolidated financial
statements

7
ADSERO CORP. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
SEPTEMBER 30, 2005
(unaudited)

1. BASIS OF
INTERIM FINANCIAL STATEMENT PRESENTATION

The accompanying unaudited
  condensed consolidated financial statements have been prepared by the Company
  in conformity with accounting principles generally accepted in the United
  States of America and the instructions to Form 10-QSB. It is managements
  opinion that these statements include all adjustments, consisting of only
  normal recurring adjustments considered necessary to make the financial
  position, results of operations, and cash flows not misleading as of
  September 30, 2005 and for all periods presented.Certain information and
  footnote disclosures normally included in the annual financial statements
  prepared in accordance with accounting principles generally accepted in the
  United States of America have been condensed or omitted. These condensed
  consolidated financial statements should be read in conjunction with the
  consolidated financial statements and notes thereto as of December 31, 2004
  and for the year ended December 31, 2004, which are included in the Companys
  Annual Report on Form 10KSB for the year ended December 31, 2004 filed with
  the Securities and Exchange Commission.2.
ORGANIZATION

Adsero Corp. (Adsero),
  formerly known as Reink Corp., was incorporated in Delaware on March 6, 1999.
  Adsero Corp, is the parent of wholly owned subsidiaries Teckn-O-Laser Global
  Company, Teckn-O-Laser Inc. and Tecknolaser USA inc. (collectively the
  Tecknolaser Group) which acquisitions were completed effective January 2,
  2005 as described in Note 14.Adsero and the Tecknolaser
  Group (collectively the Company) manufactures and distributes
  remanufactured toner cartridges and inkjet cartridges. These products are
  sold through a variety of channels such as distributors and retail office
  supply stores, both domestically and internationally.Development Stage OperationsEffective January 2, 2005, the Company no longer considers itself to be a
  development stage company.8


3. LIQUIDITY AND FINANCIAL CONDITIONThe accompanying financial
  statements have been prepared assuming that the Company will continue as a
  going concern, which contemplates the realization of assets and satisfaction
  of liabilities in the normal course of business.At September 30, 2005, the
  Company had a working capital deficiency of $4,649,023 and was not in
  compliance with certain covenants under its line of credit obligation
   and certain of its term loans described in Note 10. The lender under these
  obligations has the right to demand immediate repayment of these loans due to
  the event of default. The exercise of these rights and the requirement to
  immediately repay the outstanding balances, which amounts to an aggregate of
  $2,517,636 at September 30, 2005, would have a material adverse effect on the
  business. There can be no assurance that the lender under these obligations
  will provide the Company with a waiver of this breach of covenant.During the nine months ended September 30, 2005 the Company raised  $2,511,250 through sales of its equity securities and $2,666,666
through issuance of convertible notes.  Subsequent to September 30, 2005 the Company raised an additional $3,200,000 through sales of
its equity securities and $3,400,000 in debt financing. (Note 20)The Companys ability to
  recover its assets and continue its operations is dependent upon its ability
  to raise additional capital and generate revenue and operating cash flow
  through the execution of its business plan. There can be no assurance that
  the Company will be successful in its efforts to operate the Tecknolaser
  Group or any other prospective acquiree businesses profitably. The Company
  can also not provide any assurance that it will obtain the financing it needs
  to sustain the business until such time that it is able to generate
  sufficient revenue and operating cash flow through the operations of the
  Tecknolaser Group or other prospective acquiree businesses. These matters
  raise substantial doubt about the Companys ability to continue as a going
  concern. The financial statements do not include any adjustments relating to
  the recovery of the recorded assets or the classification of liabilities that
  might be necessary should the Company be unable to continue as a going
  concern.4. SUMMARY OF
SIGNIFICANT ACCOUNTING POLICIES

Principles of ConsolidationThe consolidated financial
  statements include the accounts of the Company and its wholly-owned
  subsidiaries. All significant inter-company transactions have been
  eliminated.9

Revenue RecognitionThe Company applies the
  revenue recognition principles set forth in Securities and Exchange
  Commission Staff Accounting Bulletin (SAB) 104 Revenue Recognition with
  respect to all of its revenue. Accordingly, the Company records revenue when
  (i) persuasive evidence of an arrangement exists, (ii) delivery has occurred,
  (iii) the vendors fee is fixed or determinable, and (iv) collectability is
  probable. The Company requires all of its product sales to be supported by
  evidence of a sale transaction that clearly indicates the selling price to
  the customer, shipping terms, payment terms (generally 30 days) and refund
  policy, if any. Selling prices of the products are fixed at the time the sale
  is consummated. The Company recognizes revenue at the time in which it
  receives a confirmation that the goods were either tendered at their
  destination when shipped FOB destination, or transferred to a shipping
  agent when FOB shipping point.Cash and Cash EquivalentsThe Company considers all
  highly liquid securities purchased with original maturities of three months
  or less to be cash equivalents.Accounts ReceivableThe Company has a policy of
  reserving for uncollectible accounts based on its best estimate of the amount
  of probable credit losses in its existing accounts receivable. The Company
  periodically reviews its accounts receivable to determine whether an
  allowance is necessary based on an analysis of past due accounts and other
  factors that may indicate that the realization of an account may be in doubt.
  Account balances deemed to be uncollectible are charged to the allowance
  after all means of collection have been exhausted and the potential for
  recovery is considered remote. As of September 30, 2005, the Company has had
  a low occurrence of credit losses and based on a review of balances
  outstanding has determined that an allowance for doubtful accounts of $34,957
  is necessary.InventoriesThe Companys inventories,
  which consists of raw material and finished goods are stated at the lower of
  cost (first in first out method) or market.Property and EquipmentProperty and Equipment are
  stated at cost less accumulated depreciation and amortization, Depreciation
  and amortization are calculated using the straight line methods over the
  estimated useful lives, which generally range from 3 to 10 years.10


GoodwillGoodwill represents the excess
  of purchase considerations and related transaction expenses that are incurred
  in connection with completing acquisitions of businesses accounted for in
  accordance with SFAS 141 Business Combinations. SFAS 142, Goodwill and
  Other Intangible Assets, requires that goodwill be tested for impairment at
  the reporting unit level (operating segment or one level below an operating
  segment) on an annual basis and between annual tests in certain
  circumstances. Application of the goodwill impairment test requires judgment,
  including the identification of reporting units, assigning assets and
  liabilities to reporting units, assigning goodwill to reporting units, and
  determining the fair value. Significant judgments required to estimate the
  fair value of reporting units include estimating future cash flows,
  determining appropriate discount rates and other assumptions.The Company did not experience
  any events or changes in circumstances during the nine-month period ended
  September 30, 2005 that would indicate that the recoverability of its goodwill
  is in doubt.Long Lived AssetsThe Company periodically
  reviews the carrying values of its long lived assets in accordance with SFAS
  144 Long Lived Assets when events or changes in circumstances would
  indicate that it is more likely than not that their carrying values may
  exceed their realizable values and records impairment charges when considered
  necessary. The Company has determined that no impairment charges are
  necessary during the quarter ended September 30, 2005.Use of EstimatesThe preparation of financial
  statements in conformity with accounting principles generally accepted in the
  United States of America requires management to make estimates and
  assumptions that affect the reported amounts of assets and liabilities and
  disclosures of contingent assets and liabilities at the date of the financial
  statements and the reported amounts of revenues and expenses during the
  reporting period. Actual results could differ from those estimates.Fair Value of Financial
  InstrumentsThe carrying amounts reported
  in the balance sheet for cash, accounts receivable, accounts payable and
  accrued expenses and preferred stock redeemable during the next year
  approximate fair value based on the short-term maturity of these instruments.
  The carrying amounts of the Companys line of credit obligation, and other
  long term obligations approximate fair value as such instruments feature
  contractual interest rates that are consistent with current market rates of
  interest or have effective yields that are consistent with instruments of
  similar risk, when taken together with equity instruments issued to the
  holder.Common Stock Purchase Warrants
  Issued in Private Placement TransactionsThe Company accounts for the
  issuance of common stock purchase warrants issued in connection with sales of
  its common stock in accordance with the provisions of EITF 00-19 Accounting
  for Derivative Financial Instruments Indexed to, and Potentially Settled in,
  a Companys Own Stock.11


Based on the provisions of
  EITF 00-19, the Company classifies as equity any contracts that (i) require
  physical settlement or net-share settlement or (ii) gives the Company a
  choice of net-cash settlement or settlement in its own shares (physical settlement
  or net-share settlement). The Company classifies as assets or liabilities any
  contracts that (i) require net-cash settlement (including a requirement to
  net cash settle the contract if an event occurs and if that event is outside
  the control of the Company) (ii) give the counterparty a choice of net-cash
  settlement or settlement in shares (physical settlement or net-share
  settlement).Stock Based CompensationAs permitted under SFAS No.
  148, Accounting for Stock-Based Compensation--Transition and Disclosure,
  which amended SFAS No. 123 (SFAS 123), Accounting for Stock-Based
  Compensation, the Company has elected to continue to follow the intrinsic
  value method in accounting for its stock-based employee compensation
  arrangements as defined by Accounting Principles Board Opinion (APB) No.
  25, Accounting for Stock Issued to Employees, and related interpretations
  including Financial Accounting Standards Board Interpretation No. 44,
  Accounting for Certain Transactions Involving Stock Compensation, an
  interpretation of APB No. 25. No stock-based employee compensation cost is
  reflected in net income, as all options that the Company granted had exercise
  prices equal to the fair market value of the underlying common stock, on
  their dates of grant.As described in Note 13, the
  Company granted 244,500 stock options, to certain employees of Tecknolaser
  Group and 110,000 to the three independent members of its board of directors
  during the quarter ended March 31, 2005.The following table
  illustrates what the Companys net income and earnings per share would have
  been if the Company had used the fair value based method of accounting for
  its employee stock option plans, as prescribed by SFAS No. 123:For the Three Months Ended
  September 30,
  
  For the Nine Months Ended
  September 30,2005
  
  2004
  
  2005
  
  2004Net loss, as reported
  
  $
  (822,690
  )
  $
  (349,201
  )
  $
  (498,622
  )
  $
  (1,290,515
  )Incremental
amount of stock based
  compensation expense determined under the fair value method
  
  
  (51,080
  )
  
  (3,125
  )
  
  (132,861
  )
  
  (3,125
  )Net loss, pro-forma
  
  
  (873,770
  )
  
  (352,326
  )
  
  (631,483
  )
  
  (1,293,640
  )Income loss per share:Basic and
diluted, as reported
  
  
  (0.05
  )
  
  (0.03
  )
  
  (0.03
  )
  
  (0.15
  )Basic and
Diluted, pro-forma
  
  
  (0.05
  )
  
  (0.03
  )
  
  (0.03
  )
  
  (0.15
  )12

Non-Employee Stock Based
  CompensationThe Company accounts for the
  cost of stock based compensation awards issued to non-employees for services
  at either the fair value of the services rendered or the instruments issued
  in exchange for such services, whichever is more readily determinable, using
  the measurement date guidelines enumerated in Emerging Issues Task Force
  Issue (EITF) 96-18, Accounting for Equity Instruments That Are Issued to
  Other Than Employees for Acquiring, or in Conjunction with Selling, Goods or
  Services.Income TaxesThe Company accounts for
  income taxes under Statement of Financial Accounting Standards No. 109,
  Accounting for Income Taxes (SFAS No. 109). SFAS No. 109 requires the
  recognition of deferred tax assets and liabilities for both the expected
  impact of differences between the financial statements and tax basis of
  assets and liabilities and for the expected future tax benefit to be derived
  from tax loss and tax credit carry forwards. SFAS No. 109 additionally
  requires the establishment of a valuation allowance to reflect the likelihood
  of realization of deferred tax assets.Net Income (Loss) Per ShareThe Company presents net
  income (loss) per share (EPS) in accordance with SFAS No. 128, Earnings
  per Share. Accordingly, the Company computes basic EPS based upon the
  weighted average number of common shares outstanding. Diluted EPS , when
  presented is computing using the weighted average number of common and
  potential common shares outstanding. Potential common shares would include
  stock options using the treasury stock method, and convertible notes and
  exchangeable shares using the if converted method. Potential common shares
  are excluded from the calculation of diluted EPS in loss periods, as the
  impact is anti-dilutive.The following table provides a
  summary of all potentially dilutive securities for the quarters ended
  September 30, 2005 and 2004, of which the amounts presented for the quarter
  ended September 30, 2005 have been excluded from the computation of the loss
  per share as their effect would be anti-dilutive:September 30,2005
  
  2004Stock options
  
  
  784,500
  
  
  337,500Common stock purchase warrants
  
  
  8,458,978
  
  
  281,430Series I exchangeable shares
  
  
  6,500,000Convertible debentures
  
  
  1,639,320
  
  
  70,000Total
  
  
  17,382,798
  
  
  688,93013

Foreign currency translationThe consolidated financial
  statements are presented in United States dollars in accordance with SFAS No.
  52, Foreign Currency Translation. The functional currency of the
  Tecknolaser Group is the Canadian dollar. Foreign denominated monetary assets
  are translated to United States dollars using foreign exchange rates in
  effect at the balance sheet date. Revenues and expenses are translated at the
  average rate of exchange during the period. Gain or losses arising on foreign
  currency transactions are included in the determination of operating results
  for the period.Recently Issued Accounting
  PronouncementsIn January 2003, Financial
  Accounting Standards Board (FASB) issued FASB Interpretation No. 46,
  Consolidation of Variable Interest Entities (FIN 46). This interpretation
  of Accounting Research Bulletin No. 51, Consolidated Financial Statements,
  provides guidance for identifying a controlling interest in a variable
  interest entity (VIE) established by means other than voting interest. FIN
  46 also required consolidation of a VIE by an enterprise that holds such
  controlling interest. In December 2003, the FASB completed its deliberations
  regarding the proposed modifications to FIN No., 46 and issued Interpretation
  Number 46R, Consolidation of Variable Interest Entities  an Interpretation
  of ARB 51 (FIN No. 46 R). The decisions reached included a deferral of the
  effective date and provisions for additional scope exceptions for certain
  types of variable interests. Application of FIN No. 46R is required in
  financial statements of public entities that have interests in VIEs or
  potential VIEs commonly referred to as special-purpose entities for periods
  ending after December 15, 2003. Application by public issuers entities is
  required in all interim and annual financial statements for periods ending
  after December 15, 2004. The adoption of this pronouncement did not have a
  material effect on the Companys financial statements.In December 2004, the FASB
  issued SFAS No. 123R Share Based Payment. This statement is a revision of
  SFAS Statement No. 123, Accounting for Stock-Based Compensation and
  supersedes APB Opinion No. 25, Accounting for Stock Issued to Employees, and
  its related implementation guidance. SFAS 123R addresses all forms of share
  based payment (SBP) awards including shares issued under employee stock
  purchase plans, stock options, restricted stock and stock appreciation
  rights. Under SFAS 123R, SBP awards result in a cost that will be measured at
  fair value on the awards grant date, based on the estimated number of awards
  that are expected to vest and will result in a charge to operations for
  stock-based compensation expense. SFAS 123R is effective for public entities
  that file as small business issuers--as of the beginning of the first annual
  reporting period of the fiscal year that begins after December 15, 2005.The Company is currently in
  the process of evaluating the effect that the adoption of this pronouncement
  will have on its financial statements.In December 2004, the FASB
  issued SFAS No. 153, Exchanges of Nonmonetary Assets. SFAS 153 amends APB
  Opinion No. 29 to eliminate the exception for nonmonetary exchanges of
  similar productive assets and replaces it with a general exception for
  exchanges of nonmonetary assets that do not have commercial substance. A
  nonmonetary exchange has commercial substance if the future cash flows of the
  entity are expected to change significantly as a result of the exchange. The
  provisions of SFAS 153 are effective for nonmonetary asset exchanges
  occurring in fiscal periods beginning after June 15, 2005. Earlier
  application is permitted for nonmonetary asset exchanges occurring in fiscal
  periods beginning after December 16, 2004. The provisions of this Statement are
  intended be applied prospectively. The adoption of this pronouncement did not
  have material effect on the Companys financial statements.14

EITF Issue No. 04-8, The
  Effect of Contingently Convertible Instruments on Diluted Earnings per
  Share. The EITF reached a consensus that contingently convertible
  instruments, such as contingently convertible debt, contingently convertible
  preferred stock, and other such securities should be included in diluted
  earnings per share (if dilutive) regardless of whether the market price
  trigger has been met. The consensus became effective for reporting periods
  ending after December 15, 2004. The adoption of this pronouncement did not
  have material effect on the Companys financial statements.In September 2005, the
FASB ratified the Emerging Issues
Task Forces (EITF) Issue No. 05-7, Accounting for
Modifications to Conversion Options Embedded in Debt
Instruments and Related Issues, which addresses whether a
modification to a conversion option that changes its fair
value affects the recognition of interest expense for the
associated debt instrument after the modification and
whether a borrower should recognize a beneficial conversion
feature, not a debt extinguishment if a debt modification
increases the intrinsic value of the debt (for example, the
modification reduces the conversion price of the debt).

In September 2005, the FASB also ratified the EITFs Issue
No. 05-8, Income Tax Consequences of Issuing Convertible
Debt with a Beneficial Conversion Feature, which discusses
whether the issuance of convertible debt with a beneficial
conversion feature results in a basis difference arising
from the intrinsic value of the beneficial conversion
feature on the commitment date (which is treated recorded
in the shareholders equity for book purposes, but as a
liability for income tax purposes), and, if so, whether
that basis difference is a temporary difference under FASB
Statement No. 109, Accounting for Income Taxes.  The
Company is currently in the process of evaluating the
effect that the adoption of this pronouncement may have on
its financial statements.5. INVENTORIES

Inventories consists of the
  following at September 30, 2005:Raw materials
  
  $
  2,193,842Finished goods
  
  
  3,100,7575,294,599Less reserves
  
  
  (189,492
  )$
  5,105,1076. PREPAID
EXPENSES

Prepaid
expenses consist of the following:

Insurance
  
  
  81,878Rent
  
  
  115,932Other
  
  
  67,532$
  265,34215

7. PROPERTY
AND EQUIPMENT

Property and Equipment
  consists of the following at September 30, 2005:Leasehold improvements
  
  $
  150,077Machinery and Equipment
  
  
  825,442Furniture and Fixtures
  
  
  143,911Computer Equipment
  
  
  1,308,3832,427,813Less Accumulated Depreciation
  
  
  (302,776
  )$
  2,125,037Depreciation expense for the nine months ended September 30,
2005 was $ 346,486.  As described in Note 9, the
  Company consummated a sale of its main production plant in Sainte
  Julie, Quebec for proceeds of $2,777,460 (CDN$3,400,000).
The net carrying value of the land and building amounted to $ 2,281,397 at the time of the sale.8. LONG TERM
DEBT

Obligation
  
  BalanceEquipment
financing, with interest ranging
  from 6.52% and 10%, payable monthly, maturing at various dates until April
  2009
  
  $
  70,311Term loans,
payable in monthly instalments
  of $1,600(CDN$1,921) without interest, maturing at various dates through
  August 2008
  
  
  28,34998,660Less current portion
  
  
  (41,485
  )Total long term debt
  
  $
  57,1759. SALE
LEASEBACK OF PRODUCTION PLANT

On August
  15, 2005, Teckn-O-Laser Global Company, a wholly-owned subsidiary of the
  Company, sold its land and building for a gross purchase price of
  approximately $2,900,000 (CDN$3,400,000). The same property was leased back
  to Teckn-O-Laser, Inc., a wholly-owned subsidiary of the Company, for a
  period of approximately ten years, effective September 30, 2005.The triple
  net lease is being accounted for as an operating lease, which calls for equal
  monthly installments. The base rent is $297,885 (CDN$345,775) per annum for
  the first five years, and $327,673 (CDN$380,352) per annum for the next five
  years of the term of the lease. The lease provides for two renewal options to
  extend the term of the lease each by a period of five years.16

Future
  minimum lease payment for the year ending December 31 are as follows:October 1 to December 31, 2005
  
  $
  74,472For years ending 2006
  
  
  297,8852007
  
  
  297,8852008
  
  
  297,8852009
  
  
  297,885thereafter
  
  
  1,861,780Total
minimum payments required
  
  $
  3,127,792There was no gain recognized
  in the financial statements since the adjustment related to the building has
  been reflected in the Goodwill recognized on the acquisition of the
  Teckn-O-Laser Group in January, 2005.10. BANK LINE
OF CREDIT AND TERM LOANS DUE ON DEMAND

Bank Line of CreditThat Company has a credit
  facility with a Canadian bank that provides for aggregate borrowings of up to
  approximately $3.0 million (CDN$3.5 million), including an exchange line of
  credit for an amount of US$250,000. The loan is secured by a first ranking
  lien for an amount of approximately $4.3 million (CDN$5 million) on all
  accounts receivable and inventories. Interest is at the Banks Canadian prime
  rate plus 1% (5.25% as at September 30, 2005) and is renewable annually.The Company is required to
  comply with certain financial ratios under the terms of the bank loan. As of
  September 30, 2005, and subsequent thereto, the Company is not in compliance
  with one of these financial ratios. The Company anticipates being able to cure the
  aforementioned default, however; the Company cannot provide any assurance
  that the lender will waive the violation. The lender has requested that the
  Company seek alternative methods of financing in order to replace this
  operating facility. The lender currently has the ability to demand immediate
  repayment of the loan which demand would have a material adverse affect on
  the Companys financial position.Term LoansThe Company has the following
  outstanding term loans, under which it is required to comply with certain
  financial ratios. As of September 30, 2005, and subsequent thereto, the
  Company is not in compliance with these financial ratios. For this reason, a
  12.5% penalty is charged by the bank. The contractual terms of the loans,
  notwithstanding the Companys event of default are as follows:Obligation
  
  BalanceTerm loan,
Secured by automotive equipment,
  6.65%, payable in monthly instalments of 1,250(CDN$1,500), maturing in
  November 2006 (1)
  
  $
  95,607Term loan,
secured by a lien on all present
  and future furniture, fixtures and equipment, Canadian bank prime rate plus
  1% (5.25% as at September 30, 2005), payable in monthly instalments of
  $17,360(CDN$20,833), maturing January 2007 (1)
  
  
  287,109$
  382,71617

The Company is continuing
  making the instalment payments in accordance with the terms of these obligations.
The lender has not, as pf this time, exercised its right to
  demand immediate payment. However, the lender under these obligations has not provided
  the Company with a written waiver of the violation and therefore has the ability
  to exercise its right to demand payment at anytime. The Company
  cannot provide any assurance that the lender will not demand immediate payment. Accordingly, the Company
  has classified the outstanding balance of these loans as a current liability
  in the accompanying balance sheet.11. NOTES
PAYABLE

Westminster Capital Inc.
  Convertible Promissory NoteOn January 7, 2005 the Company
  issued a $1,000,000 convertible promissory note (the Note) paying interest
  at the rate of 3.9% per annum to Westminster Capital Inc. (Westminster) in
  consideration of $1,000,000. Interest and principal in the Note are due
  January 1, 2008 subject to prepayment or conversion commencing on or after
  July 1, 2005. Interest and principal due on the Note are convertible into
  shares of common stock at a price of $.50 per share. For each share acquired
  upon conversion, the holder will also receive one common stock purchase
  warrant to purchase one share of common stock at a price of $1.50 per share
  at any time prior to July 1, 2008.On September 30, 2005 the
  $1,000,000 note plus $28,529 of accrued interest were converted into
  2,057,058 common shares and 2,057,058 warrants.Barrington Bank International
  LimitedEffective January 26, 2005 the
  Company entered into a 5 year $1,639,320 (approximately Cdn$2,000,000)
  convertible loan agreement (the Loan Agreement) with Barrington Bank
  International Limited (Barrington Bank) with interest payable quarterly at
  12% per annum during the first 12 months and 20% per annum thereafter. This
  obligation is subordinated to the Bank of Line of Credit and is secured by
  substantially all the Companys assets.The Loan Agreement provides
  for a prepayment penalty which specifies that in the event the Company
  prepays the obligation prior to its one year anniversary date, it will be
  obligated to pay a fee equal to the amount of additional interest that it
  would have paid had the obligation remained outstanding through the 1 year
  anniversary date. Commencing on the 6 month anniversary of the loan,
  Barrington Bank has the right to convert the remaining principal balance into
  shares of the Companys common stock at a conversion price of US$1.00 per
  share.  The Company also issued
  200,000 shares of common stock to the Lender and has agreed to register these
  shares within the next registration statement filed by the Company. The
  Company accounted for the issuance of the shares as a debt discount, which is
  being amortized over the term of the loan.18

Loewen, Ondaatje, McCutcheon
  LimitedEffective June 22, 2005 the
  Company entered into an agreement with Loewen, Ondaatje, McCutcheon Limited
  (LOM), an investment banking firm. Pursuant to the Agreement, LOM loaned
  the Company $1,001,000 on June 22, 2005 for the specific purpose of allowing
  the Company to purchase issued and outstanding shares of Turbon AG. The term
  of the loan is for a one year period that commenced on June 22, 2005.
  Interest accrued on the outstanding amount of the loan at the rate of 10%
  compounded semi-annually, and is payable quarterly commencing September 1,
  2005. As partial consideration for entering into the Agreement, the Company
  issued 100,000 common stock purchase warrants to LOM, each exercisable for
  the purchase of one share of the Companys common stock at a price of $1.50
  per share during the 30 month period following issuance.On July 21, 2005 pursuant to
  the Agency Agreement with LOM the Company offered and sold through LOM, as
  placement agent, 1,707,000 subscription receipts at a price of $.75 per
  Subscription Receipt or $1,280,250 in the aggregate. Each Subscription
  Receipt will be automatically exercised, without payment of any additional
  consideration, at the Automatic Exercise Date into, subject to adjustment, a
  unit consisting of one share of the Companys common stock and one common
  stock purchase warrant. Each Unit Warrant entitles the holder to purchase an
  additional share of the Companys common stock at a price of $1.25 per share
  during the 30 month period that commenced on July 21, 2005. The
  offer of the Subscription Receipts was made subject to satisfaction of
  certain conditions (the Qualification Conditions).  Failure to meet the Qualification
  Conditions by the Qualification Date, as defined below, results in each
  Subscription Receipt being exercised into 1.5 Units.  The Qualification Date is defined as the
  earlier of (i) December 31, 2005; or (ii) the date ten business days
  following the date by which both (a) a receipt (the Receipt) for the final
  prospectus of ours that qualifies the Units and Agents Warrants, as such term
  is defined below, for issuance in Canada has been obtained by us from the
  securities commissions or securities regulatory authorities in those Canadian
  provinces where purchasers of the Subscription Receipts reside and (b) a
  registration statement under the Securities Act of 1933, as amended, (the
  Registration Statement) has become effective for registering the resale of
  the Unit Shares, Unit Warrants (including those underlying the Agents
  Warrants, as defined below), and the Warrant Shares issuable upon exercise of
  the Unit Warrants.  The Qualification
  Conditions are defined in the Agency Agreement as (i) our having obtained a
  Receipt for the Prospectus, and the Registration Statement having become
  effective for registering the resale of the Unit Shares, Unit Warrants
  (including those underlying the Agents Warrants, as defined below) and the
  Warrant Shares issuable upon exercise of the Unit Warrants; and (ii) the
  shares of our common stock having been listed for trading on the Toronto
  Stock Exchange.Pursuant to the Agency
  Agreement, the Company paid the Agent a commission of $89,618 which is equal
  to 7% of the gross aggregate offering proceeds and issued to the Agent
  119,490 warrants which is equal to 7% of the number of Subscription Receipts
  sold. Each warrant provides
  for the purchase of a Unit at a price of $.75 per Unit during the 30 month
  period that commenced July 21, 2005. If the Qualification
  Conditions have not been satisfied by the Automatic Exercise Date, as defined
  below, then each Broker Warrant will be automatically exercised at the
  Automatic Exercise Date into 1.5 Agents Warrants.This loan was repaid in full,
  including interest of $7,679, from the proceeds of the equity securities sold
  on July 21, 2005 pursuant to the Agency Agreement between LOM and the
  Company.19

12. REDEEMABLE
PREFERRED STOCK OF SUBSIDIARY

As described in Note 14, the
  Company issued 1,932,000 shares of preferred stock in a wholly owned
  subsidiary as partial purchase consideration to the sellers of the
  Tecknolaser Group. The aforementioned shares are mandatorily redeemable at
  CDN$1.00 per share (US$0.83) at certain times through March 31, 2006 and
  contains certain provisions that would enable the holders to obtain up to 2.5
  Series II Exchangeable Shares in the event of the Companys failure to make
  the cash payment. Each Series II Exchangeable shares would be convertible
  into the Companys common stock at the option of the holder, which could
  result in a substantial dilution of stockholders equity in the event of a
  default in addition to one share of the Company Series A Special Preferred
  Voting Stock.As described in Note 20 these shares were
 cancelled in connection with an
amendment to the Companys commitment (under the Share Purchase Agreement) to make
certain payments of contingent consideration to the sellers of the Tecknolaser Group.13.
COMMITMENTS AND CONTINGENCIES

Litigation with Former
  OfficersThe Company is involved in
  ongoing litigation as both a plaintiff and as a defendant against three
  former officers of Reink that arose in connection with the involuntary
  bankruptcy and loss of control of that former business unit. In this action
  the Company is seeking damages and other relief in the amount of $1,000,000.
  The prior officers filed a counter-suit against the Company for back wages and
  other costs. The Company considers the former officers claims to be without
  merit and is vigorously contesting their claim, however; the Company is
  presently unable to determine the outcome or possible range of loss, if any,
  with respect to this matter at the current time.Other LitigationOn June 25, 2004 the Company
  entered into a non-binding letter agreement with Dancap Private Equity Inc.
  (Dancap) respecting the proposed sale of $2,000,000 of a 5 year, 12%
  secured subordinated debenture to Dancap. The proposed transaction involved
  the sale to Dancap of 800,000 shares of redeemable, convertible preferred
  stock for nominal consideration. The agreement was conditioned on the
  execution of a formal agreement between the parties and several other
  conditions. Dancap has instituted an action against the Company in Ontario
  Superior Court related to a break-up fee which was within the agreement. As
  described in Note 16, this claim was settled on November 10, 2005.Bankruptcy of Reink USA and
  Liabilities of Discontinued OperationsIn January, 2003 the three
  largest creditors (the Petitioners) of Reink USA (Reink) filed a petition
  to force Reink into Chapter 7 under the US Federal Bankruptcy Act. The
  Company believes that certain of the Petitioners and officers of this former
  business unit formed a new business that became a direct competitor of the
  Company.In March 2003, Reink filed a
  motion to convert its case to a voluntary Chapter 11, which motion was
  accepted by the District of New Jersey, Federal Bankruptcy Court. However, as
  the case was subsequently converted from Chapter 11 Reorganization into
  Chapter 7 Liquidation on July 10, 2003, and a Bankruptcy Trustee was
  appointed to administer the estate. As a result, the Company lost control of
  Reink.20

Reinks remaining liabilities,
  which consist of $2,125,341 of accounts payable and accrued expenses, are
  presented in the accompanying balance sheet as liabilities of discontinued
  operations until such time that the bankruptcy is adjudicated. The Company is
  unaware of any changes in the status of the Bankruptcy proceedings.Employment AgreementsConcurrent with the
  acquisition of the Tecknolaser Group, the Companys President and Chief Executive
  Officer resigned from his position. The vacancy in this position was
  immediately filled by Yvon Leveille, a former shareholder of the acquiree.The Company entered into
  renewable 3 year employment agreements with each of Yvon Leveille and Alain Lachambre.
  The initial base annual salaries payable to Messrs.
  Leveille and Lachambre under their employment agreements are CDN$175,000
  (approximately US$146,000) and CDN$166,000 (approximately US$139,000),
  respectively. The employment agreements further provide for the payment of
  performance based bonuses of up to 100% of salary at the discretion of the
  compensation committee of the board of directors.Consulting AgreementsThe Company entered into a
  series of consulting agreements with certain related and unrelated parties
  that are more fully described in Note 15.Strategic Supply AgreementEffective June 22, 2005, the
  Company entered into a Strategic Supply Agreement with Turbon AG, (Turbon)
  a leading global imaging supply company specializing in the remanufacture of
  laser cartridges. Pursuant to the Agreement, Turbon will become a strategic
  supplier of remanufactured laser toner cartridges for the Company at prices
  that will be competitive in the market place for such products and that will
  be lower than prices offered by Turbon to other third party customers for
  similar products under similar conditions. In consideration thereof, the
  Company will give preferred vendor status to Turbon and will give preference
  to ordering products from Turbon over competitive products of third parties
  as long as Turbons product quality meets our specifications.As described in Note 16, the
  Company made a tender offer to acquire all of the outstanding capital stock
  of Turbon in a proposed purchase business combination, which is still subject
  to completion.14.
STOCKHOLDERS EQUITY

Private Placement of Equity
  SecuritiesIn January 2005 the Company
  sold an aggregate of 2,530,000 units to 11 accredited investors (as defined
  under Securities Act Rule 144) at $.50 per unit or net proceeds of $1,121,000
  ($1,265,000 less cash fees charged as reduction of the offering proceeds).
  Each unit consists of one share of common stock (the Unit Shares) and one
  common stock purchase warrant. Each warrant entitles the holder to purchase
  one share of common stock at a price of $1.50 per share at any time during
  the three year period commencing on January 31, 2005.21

The Company issued 68,000
  shares of its common stock and 68,000 common stock purchase warrants. Each
  warrant entitles the holder to purchase one share of common stock at a price
  of $1.50 per share at any time during the three year period commencing on
  January 31, 2005. In addition, the Company paid $44,000 in cash to DGM Bank
  & Trust Inc., the placement agent, as fees for representing the Company
  in the aforementioned financing transaction.Issuance of Common Stock in
  Connection with Debt FinancingAs described in Note 10, the
  Company issued 200,000 shares of common stock with registration rights to
  Barrington Bank in accordance with the Loan Agreement.Issuance of Common Stock as a
  Fee to Related Party Transaction AdvisorIn March 2005, the Company
  issued an aggregate of 698,500 shares of common stock to Manchester
  Consolidated Corp. (Manchester) and its designees as part of the financing
  fee payable to Manchester for its role in arranging the acquisition of the
  Tecknolaser Group.Issuance of Unit Shares in
  Settlement of Fees to Placement AgentIn March 2005, the Company
  issued 50,000 shares of common stock and 150,000 common stock purchase
  warrants to DGM Bank and Trust Inc. (DGM) in satisfaction and settlement of
  all sums due to DGM under the June 22, 2004 Agency Agreement with DGM with
  respect to equity sales made by the Company during the term of the Agency
  Agreement that were not generated by or through DGM.Issuance of Shares Committed
  in 2004In March 2005, the Company
  issued an aggregate of 500,000 shares of its common stock pursuant to a
  commitment to issue such shares to certain consultants who rendered services
  to the Company in 2004. The Company also issued 205,000 Units Shares to
  certain investors who funded their purchases during 2004. The Company
  accounted for the issuance of these shares as a reduction of Common Stock to
  be Issued.Common Stock Purchase WarrantsThe Company issued all
  warrants under the Unit Shares with registration rights agreements which
  stipulate that the Company will file a registration statement to register the
  underlying shares. The Company is not precluded from delivering restricted
  stock to the holders of these warrants in the event such holder elect to
  exercise their warrants prior to the Company causing a registration statement
  to be declared effective under the Securities Act. In addition, there are no
  provision under which the Company would be required to net cash settle any of
  the aforementioned instruments. Accordingly, the Company has classified the
  warrants as equity securities in accordance with EITF 00-19.Adjustment to Previously
  Issued Unit SharesThe Company, following the
  sale of Unit Shares that it consummated in January 2005, agreed to issue an
  additional 852,500 units to certain investors, or their designees, at no
  additional cost, to bring their unit cost down to $.50 per unit.22

The Company has agreed to
  register for resale on behalf of the subscribers in this offering and DGM,
  the Unit Shares and Warrant Shares, including the additional Unit Shares and
  the Warrant Shares underlying the additional warrants issued in March 2005,
  and the Work Fee Shares.Issuance of Series A Preferred
  Special Voting StockAs described in Note 14, the
  Company issued 6,500,000 shares of Series A Special Voting Preferred Stock as
  partial purchase consideration to the former shareholders of the Tecknolaser
  Group. The Series A Special Voting Preferred Stock is non-participating and
  the holders rights allow them only to vote.
  Each Series A Special Preferred Voting share is cancellable on a
  one-for-one basis upon the exercise of certain cinversion privledges embedded
  in the Series I Exchangeable Shares described below.Issuance of Exchangeable
  SharesAs described in Note 14, the
  Company issued 6,500,000 Series I Exchangeable Shares of 3091503 Nova Scotia
  Company, an indirect subsidiary, as partial purchase consideration to the
  former shareholders of the Tecknolaser Group. Each Series I Exchangeable
  Share is convertible into one share of the Companys common stock at the
  option of the holder at any time. Upon issuance of any common shares of the
  Company, the corresponding number of Series A Preferred Special Voting will
  be cancelled.Non-Employee Stock Based
  CompensationIn February 2005, the Company
  issued 100,000 stock options with an exercise price of $1.55 per share to
  Agora Investor Relations Corp. (Agora) pursuant to its February 1, 2005
  Investor Relations Agreement with Agora. The options are exercisable, upon
  vesting, during the two year period commencing February 1, 2006. The Company
  is recording a charge of $111,993 equally over the 4 quarters ($27,998 each
  quarter) to amortize the cost of the options under the contract.Grants of Stock Options to
  Employees and DirectorsPursuant to the Share Purchase
  Agreement described in Note 14, the Company agreed to issue an aggregate of
  300,000 non-statutory stock options under its 2000 Stock Option Plan to
  certain employees of the Tecknolaser Group. The options granted to each
  employee have a maximum term of 10 years and vest in equal amounts, each
  equal to 1/3 of the total number of options granted to the employee, on each
  of the first, second and third anniversaries of the date of grant.The Company granted 244,500
  and 110,000 stock options, exercisable at $1.57 and $1.06 per share,
  respectively (the quoted market prices) during the quarter ended March 31,
  2005. Such grants include 244,500 options to certain employees of Tecknolaser
  Group, and 110,000 to the three independent members of the board of
  directors. The options vest over a period of three years.23

Equity Purchase CommitmentOn January 6, 2005 the Company
  obtained an equity purchase commitment from Trisan Equitable Corporation
  (Trisan) pursuant to which Trisan has committed to purchase an aggregate of
  $1,600,000 of the Companys common shares valued at $.50 per share in stated
  amounts at stated times. Pursuant thereto, Trisan had agreed to purchase
  1,250,000 shares for $625,000 on September 1, 2005; 740,000 shares for
  $370,000 on September 30, 2005; 740,000 shares for $370,000 on December 31,
  2005; and 470,000 shares for $235,000 on March 31, 2006. On each share
  purchase date, for each share purchased by Trisan, the Company has also
  agreed to issue one common stock purchase warrant, each to purchase one share
  of the Companys common stock at $1.50 per share at any time during the 3
  year period commencing on issuance.
  The warrants will contain anti-dilution and cashless exercise
  provisions. The Company has agreed to register the shares to be purchased by
  Trisan under the commitment on behalf of Trisan.As described in Note 20,
  effective November 4, 2005 the equity purchase commitment was cancelled with
  a full release from both the Company and Trisan related to any past or
  ongoing future commitments.15. RESTRUCTURING CHARGEAs a result of the changes
  within the existing business of the Company, and its main operating
  subsidiary, certain changes have been undertaken due to the outsourcing of
  production to the Turbon group.  As a
  result the Company has eliminated certain positions and recorded a charge for one-time termination benefits payable to such employees in the amount of $52,505.16. ACQUISITION OF THE
  TECKNOLASER GROUPDescription of TransactionEffective January 2, 2005, the
  Company entered into a Share Purchase Agreement (the Share Purchase
  Agreement) among Adsero Corp, YAC Corp. (YAC), Teckn-O-Laser Company (TOL
  Canada), 3091503 Nova Scotia Company (Acquiror), and Teckn-O-Laser Global
  Company (Acquiree), 3091732 Nova Scotia Company (Callco), and the
  shareholders of Acquiree (the Acquiree Shareholders). TOL Canada is a
  wholly owned subsidiary of Acquiree. YAC is a wholly owned subsidiary of the
  Company. Callco is a wholly owned subsidiary of YAC. Acquiror is a wholly
  owned subsidiary of Callco.Pursuant to the Share Purchase
  Agreement, The Company acquired through its subsidiary Acquiror, all of the
  issued and outstanding capital stock of Acquiree, effectively the Tecknolaser
  Group. The Tecknolaaser Group manufacturers and distributes imaging products,
  including remanufactured toner cartridges and remanufactured inkjet
  cartridges.The Company acquired the
  Tecknolaser Group to establish a platform that would enable it to penetrate
  the imaging consumables market and to position itself to acquire other high
  potential businesses in the same market segment. The accompanying statement
  of operations for the period ended September 30, 2005 includes the results of
  the Technolaser Group.24

The aggregate purchase price
  that the Company paid for its acquisition of theTecknolaser Group amounted to
  $8,374,652, including cash of $1,894,598, 6,500,000 Acquiror Series I
  Exchangeable Shares in the Acquiror Subsidiary with a fair value of $3,250,000,
  1,932,000 shares of preferred stock in the Acquiror Subsidiary which are
  mandatorily redeemable for $1,570,732 (Note 11) and transaction fees
  amounting to $1,659,322.The cash component of the
  purchase consideration includes a $1,265,656 (contractual amount of
  CDN$1,500,000) advance that the Company made to the Acquiree shareholders for
  them to acquire certain shares of stock from a third party so that at
  closing, the Acquiree Shareholders would own all the capital stock of
  Acquiree. The advance, which was not required to be repaid upon closing,
  became part of the purchase consideration that the Company paid to the
  Acquiree shareholders.Pursuant to a Lock-Up
  Agreement dated as of January 2, 2005, 6,000,000 of the Series I Exchangeable
  Shares are subject to provisions that restrict the subsequent sale, transfer,
  or disposal of a corresponding number of the Companys common shares that
  will be issued to the holders of the Acquiror Series I Exchangeable Shares
  upon exchange thereof.In addition, the Company
  issued 6,500,000 shares of its newly created Series A Preferred Special
  Voting Stock (the Series A Preferred Stock) for each Acquiror Series I
  Exchangeable Share owned. Shares of the Companys Series A Preferred Stock
  have the right to vote on all matters submitted to the vote of the Companys
  common shareholders on the basis of one vote for each share held.Transaction fees include an
  aggregate of $640,800 in cash and common stock paid to Manchester
  Consolidated Corp., a related party pursuant to a consulting services
  agreement. The cash portion of the fee amounted to $291,550 and the stock
  portion includes 698,500 shares with an aggregate fair value amounting to
  $349,250.A summary of the allocation of
  the purchase price to the fair value of assets acquired and liabilities
  assumed, in accordance with SFAS 141 Business Combinations, is as follows:Cash
  
  $
  38,348Other current assets
  
  
  8,194,656Property, plant and equipment
  
  
  4,824,329Other assets
  
  
  234,790Fair value of assets acquired
  
  
  13,292,123Accounts payable and accrued
  expenses
  
  
  6,189,468Secured obligations and long
  term debt
  
  
  6,174,877Fair value of liabilities
  assumed
  
  
  12,364,345Fair value of identifiable net
  tangible assets acquired
  
  
  927,777Trademarks (estimated life of
  15 years, straight line basis)
  
  
  500,000Goodwill
  
  
  6,946,875Total Purchase Price
  
  $
  8,374,65225
The allocation of the purchase
  price is preliminary and was prepared by management using estimates and
  assumptions that management believes are reasonable in the circumstances. The
  Company intends to commission a formal valuation study, which study could
  result in changes to the allocation of the purchase price and the
  determination of the fair value of the assets acquired and liabilities
  assumed and the amount of any excess that could be assigned to amortizable
  intangibles. During the quarter ended September 30, 2005, the Company modified its allocation of the purchase price to increase
 the fair market value of the plant and reduce goodwill be approximately $196,000. The modification was made to more appropriately reflect
the fair value of the building based on information that became available to the Company as a result of the sale transaction
described in Note 9.The Share Purchase Agreement
  also provides for the Company to pay the following additional consideration
  (the Contingent Consideration) to the Acquiree shareholder at future dates,
  contingent upon the attainment of certain performance targets described
  below.Date
  
  
  AmountMarch 26, 2006
  
  $
  2,182,000
  (approximately US $1,817,606)March 31, 2007
  
  $
  1,000,000
  (approximately US$833,333)March 31, 2008
  
  $
  1,000,000
  (approximately US$833,333)Notwithstanding the forgoing,
  the 2006 Payment is not due and payable in the event that Acquirees Earnings
  Before Interest Taxes Depreciation and Amortization (EBITDA) for the year
  ending December 31, 2005, is less than CDN$1,000,000. The 2007 Payment is not
  due and payable in the event that Acquirees EBITDA for the year ending
  December 31, 2006 is less than CDN$1,500,000. The 2008 Payment is not due and
  payable in the event that Acquirees EBITDA for the year ending December 31,
  2007 is less than CDN$2,000,000.The following table provides
  unaudited pro-forma results of operations and loss per share data for the 3
  and 9 months ended September 30, 2004 as if the Tecknolaser Group had been
  acquired on January 1, 2004.For the Three Months Ended September
30, 2004
  
  For the Nine Months 
  Ended 
  September 30, 2004Revenues
  
  
  7,229,237
  
  $
  22,069,383Cost of good sold
  
  
  5,601,665
  
  
  17,297,314Gross profit
  
  
  1,627,572
  
  
  4,772,069Operating expensesSelling
General & Administration
  
  
  1,789,804
  
  
  4,824,152Conversion
of debt expense
  
  
  
  
  
  627,340Depreciation and amortization
  
  
  161,372
  
  
  555,146Total
operating expenses
  
  
  1,951,176
  
  
  6,006,638Loss from
operations
  
  
  (323,604
  )
  
  (1,234,569
  )Interest
expense
  
  
  163,564
  
  
  533,544Loss before income taxes
  
  
  (487,168
  )
  
  (1,768,113
  )Income taxes (benefit)
  
  
  (42,074
  )
  
  (135,607
  )Net Loss
  
  $
  (445,094
  )
  $
  (1,632,506
  )Net Loss per share basic
  
  $
  (0.04
  )
  $
  (0.19
  )26

Share Voting, Support and
  Exchange AgreementsSeries I Exchangeable Share
  Voting, Support and Exchange AgreementSubject to the terms of a
  Series I Exchangeable Share Voting, Support and Exchange Agreement, dated as
  of January 2, 2005 (the Series I Support Agreement), among us, YAC, Callco,
  Acquiror and the Acquiree Shareholders holding Series I Exchangeable Shares
  of Acquiror (the Holders), the holders of Acquiror Series I Exchangeable
  Shares have the option of converting any Post Closing Payments due to them
  into Acquiror Series I Exchangeable Shares at a conversion rate calculated by
  dividing the dollar amount of any converted payments by an amount
  representing the greater of:US$1.00 converted to CDN
  dollars; or 80% of the average closing price of the Companys common stock
  converted to CDN dollars for the twenty trading days immediately preceding
  the date on which an Acquiree Shareholder provides a notice of conversion to
  Acquiree.All Holders of Acquiror Series
  I Exchangeable Shares were issued one share of the Companys newly created
  Series A Preferred Special Voting Stock (the Series A Preferred Stock) for
  each Acquiror Series I Exchangeable Share owned. Shares of the Companys
  Series A Preferred Stock have the right to vote on all matters submitted to
  the vote of the Companys common shareholders on the basis of one vote for
  each share held. The Series A Preferred Stock is non-transferable, other than
  upon sale or exchange on disposition of the corresponding Acquiror Series I
  Exchangeable Shares, which triggers a requirement for the holder to deliver a
  like number of shares of Series A Preferred Stock to us for cancellation. The
  Series I Support Agreement also contains provisions that grant Callco the
  right, exercisable upon the occurrence of certain events, including the
  proposed dissolution or liquidation of Acquiror or a prior retraction request
  by the Holder, to require the Holders to sell their Series I Exchangeable
  Shares to Callco. Similarly, the Series I Support Agreement grants the Holder
  the right to require Callco to purchase from the Holder all or any part of
  the holders Acquiror Series I Exchangeable Shares upon certain events
  including the institution by Acquiror of any proceeding to be adjudicated a
  bankrupt or insolvent or to be dissolved or wound up. The Series I Support
  Agreement further provides for automatic exchange upon the sale of all or
  substantially all of the Companys assets, or upon the Companys liquidation
  or dissolution. The Series I Support Agreement further provides that so long
  as any Acquiror Series I Exchangeable Shares are issued and outstanding, that
  the Company and its subsidiaries cannot declare or pay a dividend on the
  Companys respective common stocks unless an equivalent dividends is declared
  or paid, as the case may be, on the Series I Exchangeable Shares.27


Preferred Share Purchase and
  Support AgreementSubject to the terms of a
  Preferred Share Purchase and Support Agreement, dated as of January 2, 2005
  (the Preferred Share Support Agreement), among us, YAC, Callco, Acquiror
  and the Acquiree Shareholders holding Acquiror Preferred Shares, and subject
  to Callcos right (the Retraction Call Right), exercisable upon the
  occurrence of certain events to require the Holders of Acquiror Preferred
  Shares to sell such shares to Callco, the Acquiree Shareholders, as Holders
  of Acquiror Preferred Shares, have the rights set forth in Schedule A of the
  Preferred Share Support Agreement. Dividends are not payable on the Acquiror
  Preferred Shares but as long as they are outstanding, Acquiror cannot,
  without the approval of the holders of the Acquiror Preferred Shares, pay any
  dividends on Acquirors common shares or redeem or purchase or make any
  capital distributions in respect of any Acquiror common shares. Holders of
  Acquiror Preferred Shares are entitled to a specially designated right,
  subject to the exercise of the Retraction Call Right by Callco and compliance
  with other terms of the Preferred Share Support Agreement, to require
  Acquiror to redeem their Acquiror Preferred Shares at a price of CDN$1.00 per
  share at specified times. The times at which holders of Acquiror Preferred
  Shares may make such requests are as follows:Number of AcquirorDates
  
  
  Preferred SharesSeptember 1, 2005
  
  
  
  750,000September 30, 2005
  
  
  
  443,250December 31, 2005
  
  
  
  443,250March 31, 2006
  
  
  
  295,500The September 1, and September
  30, 2005 obligations for redemption were delayed at the request of the
  Company. On November 4, 2005 all of the Acquiror Preferred Shares along with
  all future payments under the earn-out obligation were cancelled in exchange for $600,000
  cash payment on or before November 24, 2005, 3,272,397 common shares and
  $2,290,678 in payments to be paid equally over 6 quarters commencing March,
  2005.Series II Exchangeable Share
  Voting, Support and Exchange AgreementSubject to the terms of a
  Series II Exchangeable Share Voting, Support and Exchange Agreement, dated as
  of January 2, 2005 (the Series II Support Agreement) among the Company,
  YAC, Callco, Acquiror and the Acquiree stockholders holding Series II
  Exchangeable Shares of Acquiror (the Acquiror Series II Exchangeable
  Shares), the Holders of the Acquiror Series II Exchangeable Shares have the
  option (subject to the right of Callco (the Retraction Call Right)
  exercisable upon the occurrence of certain events to require the Holders to
  sell their Acquiror Series II Exchangeable Shares to Callco) to require
  Acquiror to redeem any or all of the Holderss Acquiror Series II
  Exchangeable Shares at a price equal to:the then current market price
  for one share of the Companys common stock which is payable by the delivery
  of one (1) share of the Companys common stock; plus the amount of all cash
  dividends declared and unpaid by us on the Companys common stock at the
  effective time of such action; plus the amount of all declared and unpaid
  non-cash dividends or other distributions by us on the Companys common stock
  at the effective time of such action.28


Notwithstanding the forgoing,
  during the first ninety days following the issuance of any Series II
  Exchangeable Shares, the Holders can only require the Acquiror to redeem half
  of their Series II Exchangeable Shares.All Holders of Acquiror Series
  II Exchangeable Shares receive one share of the Companys Series A Preferred
  Stock for each of their Acquiror Series II Exchangeable Shares.
  Contemporaneously with the completion of any transaction pursuant to which
  any Acquiror Series II Exchangeable Shares held by a Holder is retracted,
  redeemed, purchased or exchanged, such Holder(s) shall surrender to us a like
  number of shares of Series A Preferred Stock for cancellation. Holders of
  Acquiror Series II Exchangeable Shares are entitled to receive dividends on
  such shares at the times and in the amounts of any dividends declared by us
  on the Companys common stock. The Series II Support Agreement also places
  limitations on Acquirors ability to pay dividends on its common stock while
  shares of Acquiror Series II Exchangeable Shares are issued and outstanding.
  The Series II Support Agreement grants the Holders the right to require
  Callco to purchase from the Holders all or any part of the Holders Acquiror
  Series II Exchangeable Shares upon certain events including the institution
  by Acquiror of any proceeding to be adjudicated a bankrupt or insolvent or to
  be dissolved or wound up. The Series II Support Agreement further provides
  for automatic exchange upon the Companys liquidation or dissolution or upon
  the sale of all or substantially all of the Companys assets.As described in Note 20,
  effective November 4, 2005, the Company and the Aquiree Shareholders agreed
  to modify certain provisions of the original Share Purchase Agreement
  relating ot the payment of contingent consideration and to cancel 1,932,000
  Redeemable Preferred Shares in exchange for $2,890,678 in cash and 600,000
  shares of the Company common stock.17. CONSULTING
AGREEMENTS

Westminster Capital Corp.In January 2005, the Company
  entered into a 3 year consulting agreement with Westminster Capital Inc., a
  shareholder, to provide various services to the Company. The Company issued
  300,000 shares in exchange for the services.Gregory BelzbergIn January 2005, the Company
  entered into a 3 year consulting agreement with Gregory Belzberg, a
  shareholder, to provide various services to the Company. The Company issued
  50,000 shares in exchange for the services.6327214 Canada Inc. (A Related
  Party)In January 2005, the Company
  executed a consulting agreement with 6327214 Canada Inc., a company owned by
  William Smith, the Companys CFO, to provide consulting services to the
  Company. 6327214 Canada Inc. is paid approximately $11,500 per month based on
  invoicing to the Company. In addition, the Company covers all business
  related expenses incurred by 6327214 Canada Inc. while delivering the
  consulting services. This agreement continues until terminated and can be
  terminated by the Company upon 10 months written notice. At the same time the
  existing agreement with Manchester Administrative Services providing
  consulting services was terminated.29


Agora Investor Relations Corp.Effective February 1, 2005 the
  Company entered into a 1 year Investor Relations Agreement with Agora
  Investor Relations Corp., an Ontario, Canada corporation (Agora) pursuant
  to which Agora provides shareholder relation services and, subject to
  compliance with applicable laws, rules and regulation, other services
  intended to raise public awareness of the Companys business. Compensation
  under this arrangement includes monthly cash payments amounting to CDN$2,750
  (approximately US$2,300) and 100,000 stock options with an exercise price of
  $1.55 per share issued at the inception of the agreement (Note 13).The options are exercisable,
  upon vesting, during the period February 1, 2006 through February 1, 2008.
  25,000 of the options vest on each of May 1, 2005; August 1, 2005; November
  1, 2005; and February 1, 2006. The agreement is renewable at the Companys
  option, for an additional 1 year term on similar terms.Stockgroup Media Inc.Effective February 1, 2005 the
  Company entered into a 1 year Investor Relations Agreement with Stockgroup
  Media Inc., a Canadian corporation (Stockgroup) pursuant to which
  Stockgroup provides shareholder relation services and, subject to compliance
  with applicable laws, rules and regulations, other services intended to raise
  public awareness of the Companys business. In consideration of such
  services, the Company is paying Stockgroup monthly compensation of CDN$2,250
  (approximately US$1,920).18. PROPOSED
ACQUISITION OF TURBON AG

In April 2005, the Company made
  a tentative offer to the management of Turbon to acquire all the outstanding
  shares of Turbon, a leading global imaging supply company publicly traded on
  the Frankfurt stock exchange. The aggregate offering price pursuant to the
  offer, as amended, amounts to approximately US$56.8 million in cash. The
  Turbon Executive Board has agreed to meet with us to discuss the details of
  our offer as well as the planned role and significance of Turbon within the
  combined entity in the event the acquisition is accomplished. If amenable to
  our offer, Turbons Executive Board will provide its recommendation to
  Turbons shareholders. The completion and closing of this transaction is
  subject to certain conditions, including but not limited to, completing due
  diligence, raising the necessary funds to close the transaction, and obtaining the approval of
  Turbons shareholders. The Company cannot provide any assurance that it will
  complete this proposed acquisition or that the terms of the transaction if
  completed will not be materially different from the terms that are currently
  proposed.On June 21, 2005 and June 22,
  2005 the Company entered into stock purchase agreements with each of NCR
  Corporation, Holger Brueckmann - Turbon and Gothaer Lebensversicherung AG (the Selling
  Shareholders). Pursuant to the Agreements, the Selling Shareholders
  have agreed to sell to the Company an aggregate of 2,509,000 shares of Turbon
  capital stock owned by them in the event the Company submits a public offer
  for the acquisition of the such shares in accordance with the terms of the
  Securities Acquisition and Takeover Act, to which Turbon is subject, by
  September 30, 2005. Prior to the end of the quarter all the above
  shareholders extended the agreements to December 31, 2005. The purchase price
  for the Vendor Shares, which is payable in cash or a combination of cash and
  stock, will be made for at least $14 per share. Under the Agreements, the
  Company is not required to submit an offer to purchase the Vendor Shares or
  any other Turbon shares.30


Effective June 22, 2005 the
  Company entered into a Share Purchase Agreement with Turbon pursuant to which
  it agreed to purchase 400,000 Turbon shares from Turbons treasury at a
  purchase price of $14 per share or an aggregate of $5,600,000 (the Purchase
  Price). On June 23, 2005 the Company paid Turbon $1,001,000 of the Purchase
  Price which represents 71,500 shares. Such funds were obtained under the loan
  facility with LOM described in Note 10. The balance of $4,599,000 (328,500
  shares) was completed November 4, 2005 (see Note 18 below). These funds were
  comprised of $1.2 million from a private placement, a $2.8 million term loan
  from Turbon International, and a $600,000 loan from three shareholders, two
  of which are officers of the Company.The Company classified its
  investment in these securities as investment in prospective acquiree in the
  accompanying balance sheet pending its completion of the transaction.19. MAJOR
CUSTOMERS AND FOREIGN AND DOMESTIC SALES

During the nine months ended
  September 30, 2005, ten customers represented 42% of our total sales and one
  customer represented approximately 16% of our total sales. Sales to
  customers in the United States represented 59% of total sales and sales to
  customers outside the United States represented 41% of total sales.20. SUBSEQUENT
EVENTS

Private Placements and LoansOn November
  4, 2005 the Company sold 2,400,000 subscription receipts at a price of $.50
  per subscription receipt or an aggregate of $1,200,000 to HBT Holdings GmbH,
  each subscription receipt to be automatically exercised, without payment of
  any additional consideration, on January 31, 2006 into, subject to
  adjustment, one unit. Each unit consists of one share of common stock (the
  Unit Shares) and one common stock purchase warrant (the Unit Warrants)
  .Each warrant entitles the holder to purchase, subject to adjustment, an
  additional share of common stock (the Warrant Shares) at a price of $1.25
  per share during the period ending at 5:00 p.m. (Toronto time) on May 3,
  2008. We have agreed to use best efforts to file a registration statement on
  or before March 31, 2006 and to have such registration statement declared
  effective within 90 days of filing, registering the resale of the Unit Shares
  and Unit Warrants and the issuance of the Warrant Shares. The issuance of the
  subscription receipts was made in reliance on Regulation S under the
  Securities Act of 1933, as amended. Proceeds from the sales were utilized to
  purchase certain Turbon AG shares (See below).On November
  4, 2005 the Company received aggregate loans of $600,000 from three related
  persons. In consideration thereof, the Company issued 5% convertible
  promissory notes due December 31, 2006 (the Maturity Date) to Alain Lachambre
  ($136,198), Yvon Leveille ($328,113) and Manchester Consolidated Corp.
  ($135,689). Interest and principal on the notes are due on the Maturity Date.
  The notes can be prepaid at any time. If all principal and interest due on
  the notes are not paid in full on the Maturity Date, the respective holders
  may, at their sole option, convert the total amount of unpaid principal and
  interest into shares of common stock at the rate of $.50 per share. The
  issuance of the notes was made in reliance on Section 4(2) of the Securities
  Act of 1933, as amended. The loan proceeds were utilized to purchase certain
  Turbon shares. (See below).31


On November
  9, 2005 the Company entered into an Agency Agreement with Loewen, Ondaatje,
  McCutcheon Limited (LOM) pursuant to which the Company offered and sold
  through LOM, as placement agent, (the Agent) 4,000,000 subscription
  receipts (the Subscription Receipts) at a price of $.50 per Subscription
  Receipt or $2,000,000 in the aggregate. The offering was made to non-US
  persons in reliance on Regulation S under the Securities Act of 1933 as
  amended. Each Subscription Receipt will be automatically exercised, without
  payment of any additional consideration, at the Automatic Exercise Date, as
  defined below, into, subject to adjustment, a unit (the Units) consisting
  of one share of common stock (the Unit Shares) and one common stock
  purchase warrant (the Unit Warrants). Each Unit Warrant entitles the holder
  to purchase an additional share of common stock (the Warrant Shares) at a
  price of $1.25 per share during the 30 month period that commenced on
  November 9, 2005.Pursuant to
  the Agency Agreement, the Company paid the Agent a commission of $140,000
  which is equal to 7% of the gross aggregate offering proceeds and issued to
  the Agent 280,000 broker warrants (the Broker Warrants) which is equal to
  7% of the number of Subscription Receipts sold. Each Broker Warrant will be
  automatically exercised, without payment of any consideration, at the
  Automatic Exercise Date, as defined below, into, subject to adjustment, one
  agents warrant (the Agents Warrant). Each Agents Warrant entitles the
  holder, subject to adjustment and the terms and condition set forth in the
  Agents Warrant certificate, to purchase one Unit at a price of $.50 per Unit
  during the 30 month period that commenced November 9, 2005.For purposes
  of the Agency Agreement, the Automatic Exercise Date means the earlier of (i)
  December 31, 2005; (ii) the closing date in respect of the Prospectus and the
  Registration Statement, as defined below; and (iii) the Qualification Date,
  as defined below.The
  Qualification Date is defined as the earlier of (i) December 31, 2005; or
  (ii) the date ten business days following the date by which both (a) a
  receipt (the Receipt) for the final prospectus that qualifies the Units and
  Agents Warrants for issuance in Canada (the Prospectus) has been obtained
  from the securities commission or securities regulatory authorities in those
  Canadian provinces where purchasers of the Subscription Receipts reside and
  (b) a registration statement under the Securities Act of 1933, as amended,
  (the Registration Statement) has become effective for registering the
  resale of the Unit Shares, Unit Warrants (including those underlying the
  Agents Warrants, as defined below), and the Warrant Shares issuable upon
  exercise of the Unit Warrants. In all events the Company has agreed to use
  best efforts to have the common shares listed for trading on the Toronto
  Stock Exchange, file and obtain the Receipt for the Prospectus and file and
  have the Registration Statement declared effective by March 31, 2006.Pursuant to
  the Agency Agreement, the Company also granted the Agent the right to act as
  co-lead member of an investment banking syndicate for purposes of marketing
  and selling any brokered equity financing for the Company in Canada for a
  period of one year commencing November 9, 2005. The Company also granted the
  Agent the right to a minimum participation of 15% on any brokered equity
  financing in the United States for a period of one year commencing November
  9, 2005.32


Modifications
  to Share Purchase AgreementOn November
  4, 2005 the Company entered into an agreement with 9144-6773 Quebec Inc. and
  9144-6906 Quebec Inc. (the Modification Agreement), providing for the
  restructuring of certain payment stipulated in the Share Purchase Agreement
  described in Note 14. These obligations were modified to improve the Companys
  liquidity and facilitate its purchase of treasury shares of Turbon AG as
  described below.Pursuant to
  the restructuring, the Company and Acquiree Shareholders agreed to cancel any
  obligation on the part of the Company to (a) ,make any Contingent Consideration
  payments to the Acquiree Shareholders (described in the Share Purchase
  Agreement) and (b) redeem the 1,932,000 shares of Redeemable Preferred Stock
  originally issued as part of the purchase consideration (Notes 11 and 14). In
  exchange, the Company agreed to make an immediate payment of $600,000 to the
  Acquiree Shareholders, issue 3,272,397 shares to the Acquiree Shareholders,
  make an aggregate of $2,290,678 in additional cash payments in six equal
  installments of $381,780 each on March 31, 2007; June 30, 2007; September 30,
  2007; December 31, 2007; March 31, 2008 and June 30, 2008.Share
  Purchase Agreement with Turbon AGEffective
  June 22, 2005 the Company entered into a Share Purchase Agreement (the
  Agreement) with Turbon AG (Turbon) pursuant to which the Company agreed
  to purchase 400,000 Turbon shares from Turbons treasury at a purchase price
  of $14 per share or an aggregate of $5,600,000 (the Purchase Price). On
  June 23, 2005 the Company paid Turbon $1,001,000 of the Purchase Price and
  acquired 71,500 of the 400,000 Turbon shares. On November 4, 2005 the Company
  paid Turbon an additional $4,599,000 and acquired the remaining 328,500 of
  the 400,000 Turbon shares. Manchester Consolidated Corp. is entitled to
  acquisition fees under their agreement of $642,000. The acquisition fees will
  be paid in a combination of cash of $82,000 and the balance in shares of
  common stock. For such purposes, the common stock will be valued at $.50 per
  share.33


Loan Agreement
  with Turbon International Inc.As of
  November 4, 2005 the Company entered into a Loan Agreement (the Loan
  Agreement) with Turbon International Inc., (Turbon International), a
  wholly subsidiary of Turbon AG, and Teckn-O-Laser Global Company, a wholly
  owned subsidiary of the Company (Teckn-O-Laser). Pursuant to the Loan
  Agreement, Turbon International made a $2,800,000 term loan to the Company
  and extended a line of credit for up to an additional $2,800,000. Proceeds
  from the term loan were utilized to purchase certain Turbon AG shares (see
  above). In consideration of the $2,800,000 term loan, the Company issued a 5%
  promissory note to Turbon International. Interest under the term loan note is
  payable quarterly on each of January 31, April 30, July 31 and October 31
  during the term of the loan commencing January 31, 2006. Principal and
  accrued but unpaid interest under the term loan note are due October 31, 2008
  subject to acceleration upon an event of default. The loan can be prepaid at
  any time prior to maturity without penalty. The line of credit may only be
  used for the purpose of purchasing products from Turbon International and
  certain affiliated entities. The Company will pay interest of 5% per annum on
  all sums advanced under the line of credit. Interest will be due and payable
  on the last day of each quarter starting with the quarter ending November 30,
  2005. Principal and accrued but unpaid interest under the line of credit are
  due October 31, 2006 subject to acceleration upon an event of default. All
  advances under the line of credit will be evidenced by promissory notes.
  Amounts borrowed under the line of credit may be repaid at any time prior to
  maturity without penalty and may be re-borrowed.Upon an
  event of default under the term loan or line of credit the interest rate
  payable under the applicable notes will be increased from 5% to 9% until
  cured. The Companys indebtedness to Turbon International under both the term
  loan and line of credit has been guaranteed by Teckn-O-Laser and, subject to
  the receipt of written consent from existing secured lenders, will be secured
  by a first priority loan on the 400,000 shares of common stock of Turbon AG.Litigation
  SettlementThe Company settled its
  litigation with Dancap for approximately $42,500 (Cdn$50,000) on November 10,
  200534

ITEM 2.
        PLAN OF OPERATION

The following discussion and analysis should be read in conjunction with the consolidated financial statements and the notes thereto appearing elsewhere in this Report.



In January 2005 we purchased Teckn-O-Laser Global Company, a remanufacturer of laser toner and inkjet print cartridges. Prior to the acquisition, we had no operations. Accordingly, no comparison of prior period results is contained herein.



As of September 30, 2005, we had a working capital
deficiency of approximately $4,649,023 (including approximately $2,125,037 related to the discontinued operation leaving a net
working capital deficiency of approximately $2,523,986). At September 30, 2005 and subsequent thereto, we are not in compliance with
certain covenants under a line of credit obligation and certain of its term loans. The lender under these obligations has the right
to demand immediate repayment of these loans due to this event of default. See Item 3 hereof. The exercise of this right and the
requirement to immediately repay the outstanding balance, which amounts to an aggregate of $2,517,636 at September 30, 2005, would
have a material adverse effect on our business. We cannot provide any assurance that the lender under these obligations will provide
us with a waiver of this breach of covenant.



Our ability continued existence is dependent upon our ability to raise additional capital and generate revenue and operating cash flow through the execution of our business plan. We can not provide any assurance that we will be able obtain the financing we needs to sustain the business until such time that we generate sufficient revenue and operating cash flow through the operations of the Tecknolaser Group or other prospective acquiree businesses. These matters raise substantial doubt about our ability to continue as a going concern.



Subsequent to September 30, 2005 we  raised approximately $4.4 million in additional equity and entered into a loan agreements for approximately $7.2 million with various parties. These financings allowed us to acquire Teckn-O-Laser Global Company in January 2005 and an aggregate of 400,000 treasury shares of Turbon AG in June 2005 and November 2005. In April 2005 we announced our intention to launch a formal takeover offer for 100% of the shares of Turbon AG, a German public company operating in the same business. As discussed above, we have acquired 400,000 common shares of Turbon AG which equates to approximately 10% of Turbon AGs outstanding common shares.



Except as provided herein, we have no present
commitment that is likely to result in our liquidity increasing or decreasing in any material way. In addition, except as noted
herein, we know of no trend, additional demand, event or uncertainty that will result in, or that are reasonably likely to result
in, our liquidity increasing or decreasing in any material way. We have no material commitments for capital expenditures. As a
result of the Teckn-O-Laser Global Company acquisition we operate a plant in Sainte Julie, Quebec that is equipped to remanufacture
laser toner printer cartridges. We also conduct reverse engineering of products at this location. During its 2003 and 2004 fiscal
years ended April 30, 2003 and April 30, 2004, respectively, Teckn-O-Laser Global Company expended approximately $395,833
(approximately CDN$475,0000) and $280,000 (approximately CDN$336,000) on this reverse engineering process. We anticipate spending
approximately $350,000 on the reverse engineering during 2005. We have 232 employees as a result of the acquisition. We presently
have sufficient cash available together with anticipated cash flow from operations to cover our anticipated cash requirements for
our existing operations for the next 12 months. We anticipate however, that we will need additional financing during the next 12
months with respect to our intended acquisition of the balance of Turbon AG and any other acquisitions that we may decide to engage
in.



35

ITEM 3.
        CONTROLS AND PROCEDURES

Evaluation of Our Disclosure Controls and Internal Controls



As of the end of the period covered by this Quarterly Report, we carried out an evaluation of the effectiveness of the design and operation of our disclosure controls and procedures (as defined in Exchange Act Rule 13-d-15(e) and 15d-15(e)). Based upon that evaluation, our Chief Executive Officer (CEO) and Chief Financial Officer (CFO) concluded that as of the end of the period covered by this Quarterly Report on Form 10-QSB our disclosure controls and procedures were adequate to enable us to record, process, summarize and report information required to be included in our periodic SEC filings within the required time period.



Officers Certifications



Appearing as exhibits to this Quarterly Report are Certifications of the CEO and the CEO. The Certifications are required pursuant to Section 302 of the Sarbanes-Oxley Act of 2002 (the Section 302 Certifications). This section of the Quarterly Report contains information concerning the Controls Evaluation referred to in the Section 302 Certifications and this information should be read in conjunction with the Section 302 Certifications for a more complete understanding of the topics presented.



Disclosure Controls and Internal Controls



Disclosure Controls are procedures that are designed with the objective of ensuring that information required to be disclosed in our reports filed under the Securities Exchange Act of 1934 (Exchange Act), such as this Quarterly Report, is recorded, processed, summarized and reported within the time periods specified in the SECs rules and forms. Disclosure Controls are also designed with the objective of ensuring that such information is accumulated and communicated to our management, including the CEO and CFO, as appropriate to allow timely decisions regarding required disclosure. Internal Controls are procedures which are designed with the objective of providing reasonable assurance that (1) our transactions are properly authorized, recorded and reported; and (2) our assets are safeguarded against unauthorized or improper use, to permit the preparation of our financial statements in
conformity with generally accepted accounting principles.



Our Company is not an accelerated filer (as defined in the Securities Exchange Act) and is not required to deliver managements report on control over our financial reporting until our fiscal year ended December 31, 2006.



There were no changes in our internal controls over financial reporting that occurred during the quarter ended September 30, 2005 that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.



36

PART II - OTHER INFORMATION




ITEM 1.
        LEGAL PROCEEDINGS

On December 31, 2002, our CEO and VP of Finance resigned. On the same date, one of the production chemists from our R&D facility also resigned. Prior to resigning these three officers dismissed all the employees of Reink USA, which left us with no employees. On May 7, 2003 we commenced legal proceedings against these three former officers in the United States Bankruptcy Court for the District of New Jersey (Case Number 03-11053 (JHW)) for actions we believe to be in violation of non-competition and confidentiality clauses within their employment contracts. In this action we are seeking damages and other relief in the amount of $1,000,000. The prior officers filed a counter-suit against us for back wages and other costs. We consider the counter-claim to be without merit. On September 7, 2003 we filed a defense against the counter-claim. We are presently unable to determine the probable outcome of these matters.



In January, 2003 the three largest creditors of Reink USA filed a petition to force Reink into Chapter 7 under the US Federal Bankruptcy Act. We believe that some of the creditors involved with the petition assisted the new business which competed directly against us and was founded by our former CEO and VP of Finance. Reink USA filed a motion to have the petition thrown out since the third creditor withdrew from the filing and also since the counsel for the petitioners withdrew. Subsequently the remaining two creditors provided a new third creditor and amended the filing. This new third creditor also subsequently withdrew and the two remaining creditors found two other creditors and filed an amendment. During March 2003, Reink USAs motion to convert to a voluntary Chapter 11 was accepted by the District of New Jersey, Federal Bankruptcy Court. As a result of failed negotiations with our largest
suppliers, on July 10, 2003, Reink USA was moved from Chapter 11 Reorganization into Chapter 7 Liquidation and a Bankruptcy Trustee was appointed to administer the estate. As a result, we lost control of Reink USA and Reink USA is presented for all periods as a discontinued operation. The Company is unaware of any changes in the status of the Bankruptcy proceedings.



In June 2005, we were served with a Statement of Claim by Dancap Private Equity Inc. (Dancap). The Statement of Claim alleges that we are in breach of certain obligations under a letter agreement between us and Dancap, dated September 25, 2004, with respect to a possible investment in us by Dancap. The Statement of Claim relates to a break fee provision contained in the letter agreement and seeks CDN$107,000 in damages together with interest and costs. On November 10, 2005 we settled this claim for a total of Cdn $50,000 or approximately US$42,500. We obtained full releases related to this matter.



No other material legal proceedings are pending to which we or any of our property are subject, nor to our knowledge are any such proceedings threatened.


ITEM 2.
        CHANGES IN SECURITIES AND USE OF PROCEEDS

In connection with our July 21, 2005 Agency Agreement with Loewen, Ondaatje, McCutcheon Limited described in Item 5 hereof, and the related offering made thereunder, on July 21, 2005 we issued the following securities.




(i)
        1,707,000 Subscription Receipts(ii)
        119,490 Broker Warrants

37

For a detailed description of the foregoing securities and the securities into which they will be automatically exercised, reference is made to Item 5 hereof.



Effective September 30, 2005 Westminster Capital Inc., the holder of our January 7, 2005 3.9% 1,000,000 convertible promissory note, converted the principal ($1,000,000) and interest ($28,529) then due thereon, at a conversion price of $.50 per unit, into an aggregate of 2,057,058 units. Each unit consists of one share of our common stock and one common stock purchase warrant each of which is exercisable to purchase an additional share of our common stock at a price of $1.50 per share at any time prior to July 1, 2008. We have yet to issue the 2,057,058 shares but expect to do so shortly.



On November 4, 2005 we sold 2,400,000 subscription receipts at a price of $.50 per subscription receipt or an aggregate of $1,200,000 to HBT Holdings GmbH, each subscription receipt to be automatically exercised, without payment of any additional consideration, on January 31, 2006 into, subject to adjustment, one unit. Each unit consists of one share of our common stock (the Unit Shares) and one common stock purchase warrant (the Unit Warrants) .Each warrant entitles the holder to purchase, subject to adjustment, an additional share of our common stock (the Warrant Shares) at a price of $1.25 per share during the period ending at 5:00 p.m. (Toronto time) on May 3, 2008. We have agreed to use our best efforts to file a registration statement on or before March 31, 2006 and to have such registration statement declared effective within 90 days of filing, registering the
resale of the Unit Shares and Unit Warrants and the issuance of the Warrant Shares. Proceeds from the sales were utilized to purchase certain Turbon AG shares (See Item 5  Turbon Share Purchase Agreement).



On November 4, 2005 we received aggregate loans of $600,000 from three related persons. In consideration thereof, we issued 5% convertible promissory notes due December 31, 2006 (the Maturity Date) to Alain Lachambre ($136,198), Yvon Leveille ($328,113) and Manchester Consolidated Corp. ($135,689). Interest and principal on the notes are due on the Maturity Date. The notes can be prepaid by us at any time. If all principal and interest due on the notes are not paid in full on the Maturity Date, the respective holders may, at their sole option, convert the total amount of unpaid principal and interest into shares of our common stock at the rate of $.50 per share. The loan proceeds were utilized to purchase certain Turbon AG shares. (See Item 5  Turbon Share Purchase Agreement).



On November 4, 2005 we entered into a term loan with Turbon International Inc. as more fully described in Item 5 hereof. In connection therewith we issued to Turbon International Inc. a $2,800,000 5% promissory note due October 31, 2008.



In connection with our November 9, 2005 Agency Agreement with Loewen, Ondaatje, McCutcheon Limited described in Item 5 hereof, and the related offering made thereunder, on November 9, 2005 we issued the following securities:




(i)
        4,000,000 Subscription Receipts(ii)
        280,000 Broker Warrants

For a detailed description of the forgoing securities and the securities into which they will be automatically exercised, reference is made to Item 5 hereof.



All of the foregoing issuances were made in reliance on Section 4(2) or Regulation S of the Securities Act of 1933, as amended.



38

ITEM 3.
        DEFAULTS UPON SENIOR SECURITIES

Bank Line of Credit



We currently have a credit facility with a Canadian bank that provides for aggregate borrowings of up to approximately $3.0 million (CDN$3.5 million), including an exchange line of credit for an amount of US$250,000. The loan is secured by a first ranking lien for an amount of approximately $4.3 million (CDN$5 million) on all accounts receivable and inventories. Interest is at the Bank's Canadian prime rate plus 1% (5.25% as at September 30, 2005) and is renewable annually.



We are required to comply with certain financial
ratios under the terms of the bank loan. As of September 30, 2005, and subsequent thereto, we were not in compliance with one of
these financial ratios. We anticipate being able to cure the aforementioned default, however; we cannot provide any assurance that
the lender will waive the violation. The lender has requested that we seek alternative methods of financing in order to replace this
operating facility.  The lender currently has the ability to demand immediate repayment of the loan which demand would have a
material adverse effect on our financial position.




ITEM 5.
        OTHER INFORMATION

Turbon Share Purchase Agreement



Effective June 22, 2005 we entered into a Share Purchase Agreement (the Share Purchase Agreement) with Turbon AG pursuant to which we agreed to purchase 400,000 Turbon AG shares from Turbon AGs treasury at a purchase price of $14 per share or an aggregate of $5,600,000 (the Purchase Price). On June 23, 2005 we paid Turbon $1,001,000 of the Purchase Price and acquired 71,500 of the 400,000 shares. On November 4, 2005 we paid Turbon AG $4,599,000 of the Purchase Price and acquired the remaining 328,500 shares. In furtherance of the Share Purchase Agreement, we have obtained irrevocable agreements from Turbon AGs three largest shareholders, with aggregate holdings of 2,509,000 Turbon AG shares, in which each of the shareholders have agreed to sell all of the Turbon AG shares owned by them or affiliated entities to us, upon a formal takeover offer by us, at a price of
$14 per share in cash or a combination of cash and stock. The 400,000 shares purchased by us represent 9.928% of Turbon AGs outstanding share capital consisting of 4,029,000 shares. The Share Purchase Agreement is part of our larger plan to acquire all or a majority of Turbon AGs outstanding shares. The closing and completion of any such transaction will be subject to certain conditions including but not limited to, raising of necessary funds to close the transaction and obtaining the approval of Turbon AGs shareholders. No assurance can be given that we will be able to close and complete the transaction. Pursuant to the Share Purchase Agreement, Manchester Consolidated Corp. is entitled to acquisition fees of $642,000. The acquisition fee is being paid in a combination of cash ($82,000) and the balance in shares of our common stock. For such purposes, the common stock will be valued at $.50 per share.



Sale Leaseback Of Production Plant



On August 15, 2005 our wholly owned subsidiary, Teckn-O-Laser Global Company, sold its land and building for a gross purchase price of approximately $2,900,000 (CDN$3,400,000). The same property was leased back to our wholly owned subsidiary, Teckn-O-Laser, Inc., for a period of approximately ten years, effective September 30, 2005, under a triple net lease which provides for payments in equal monthly installments. The base rent under the lease is $297,885



39

(CDN$345,775) per annum for the first five years, and $327,673 (CDN$380,352) per annum for the next five years of the term of the lease. The lease provides for two renewal options to extend the term of the lease each by a period of five years.



LOM Loan Agreement



Effective June 22, 2005 we entered into an agreement (the Loan Agreement) with Loewen, Ondaatje, McCutcheon Limited (LOM), an investment banking firm. Pursuant to the Loan Agreement, LOM loaned us $1,001,000 on June 22, 2005 for the specific purpose of allowing us to purchase issued and outstanding shares of Turbon AG. The term of the loan was the one year period that commenced on June 22, 2005. Interest accrued on the outstanding amount of the loan at the rate of 10% compounded semi-annually, and was payable quarterly commencing June 1, 2005. As partial consideration for entering into the Agreement, we issued 100,000 common stock purchase warrants to LOM, each exercisable for the purchase of one share of our common stock at a price of $1.50 per share during the 30 month period following issuance. The LOM loan was repaid in full from the proceeds of our July 21, 2005 private
placement discussed below.



July 21, 2005 Agency Agreement and Private Placement



In connection with the LOM Loan Agreement, on July 21, 2005 we entered into an Agency Agreement with LOM. The proceeds from the July 2005 private placement were used to repay all principal and interest due under our loan from LOM.



On July 21, 2005 pursuant to the Agency Agreement with LOM we offered and sold through LOM, as placement agent, (the Agent) 1,707,000 subscription receipts (the Subscription Receipts) at a price of $.75 per Subscription Receipt or $1,280,250 in the aggregate. The offering was made to non-US persons in reliance on Regulation S under the Securities Act of 1933 as amended. Each Subscription Receipt will be automatically exercised, without payment of any additional consideration, at the Automatic Exercise Date, as defined below, into, subject to adjustment, a unit (the Units) consisting of one share of our common stock (the Unit Shares) and one common stock purchase warrant (the Unit Warrants). Each Unit Warrant entitles the holder to purchase an additional share of our common stock (the Warrant Shares) at a price of $1.25 per share during
the 30 month period that commenced on July 21, 2005.



The offer of the Subscription Receipts was made subject to satisfaction of certain conditions (the Qualification Conditions). Failure to meet the Qualification Conditions by the Qualification Date, as defined below, results in each Subscription Receipt being exercised into 1.5 Units. We do not expect to satisfy the Qualification Conditions by the Qualification Date. The Qualification Date is defined as the earlier of (i) December 31, 2005; or (ii) the date ten business days following the date by which both (a) a receipt (the Receipt) for the final prospectus of ours that qualifies the Units and Agents Warrants, as such term is defined below, for issuance in Canada has been obtained by us from the securities commissions or securities regulatory authorities in those Canadian provinces where purchasers of the Subscription Receipts reside and (b) a registration statement under the
Securities Act of 1933, as amended, (the Registration Statement) has become effective for registering the resale of the Unit Shares, Unit Warrants (including those underlying the Agents Warrants, as defined below), and the Warrant Shares issuable upon exercise of the Unit Warrants. The Qualification Conditions are defined in the Agency Agreement as (i) our having obtained a Receipt for the Prospectus, and the Registration Statement having



40

become effective for registering the resale of the Unit Shares, Unit Warrants (including those underlying the Agents Warrants, as defined below) and the Warrant Shares issuable upon exercise of the Unit Warrants; and (ii) the shares of our common stock having been listed for trading on the Toronto Stock Exchange.



Pursuant to the July 21, 2005 Agency Agreement, we paid the Agent a commission of $89,618 which is equal to 7% of the gross aggregate offering proceeds and issued to the Agent 119,490 broker warrants (the Broker Warrants) which is equal to 7% of the number of Subscription Receipts sold. Each Broker Warrant will be automatically exercised, without payment of any consideration, at the Automatic Exercise Date, as defined below, into, subject to adjustment, one agents warrant (the Agents Warrant). Each Agents Warrant entitles the holder, subject to adjustment and the terms and condition set forth in the Agents Warrant certificate, to purchase from us one Unit at a price of $.75 per Unit during the 30 month period that commenced July 21, 2005. If the Qualification Conditions havent been satisfied by the Automatic Exercise Date, as defined below, then each Broker
Warrant will be automatically exercised at the Automatic Exercise Date into 1.5 Agents Warrants. We do not expect to satisfy the Qualification Conditions by the Qualification Date.



For purposes of the Agency Agreement, the Automatic Exercise Date means the earlier of (i) December 31, 2005; (ii) the closing date in respect of the Prospectus and the Registration Statement; and (iii) the Qualification Date.



Pursuant to the Agency Agreement, our officers and directors entered into 180 day lock up agreements whereby they agreed not to directly or indirectly, offer, sell, contract to sell, pledge, grant any option to purchase, make any short sale or otherwise dispose of any shares of our common stock, or any financial instruments or securities convertible into, exercisable or exchangeable for, or that represent the right to receive shares of our common stock or similar securities now owned directly or indirectly by them or under their control or direction or with respect to which they have beneficial ownership, or enter into any swap, forward or other arrangement that transfers all or a portion of the economic consequences associated with the ownership of their securities or agree to do any of the forgoing or publicly announce any intention to do the foregoing. Pursuant to the Agency Agreement, Manchester
Consolidated Corp., a principal shareholder, entered into a 30 day lock up agreement on similar terms to those discussed above.



Agreement with 9144-6773 Quebec Inc. and 9144-6906 Quebec Inc.



On November 4, 2005 we entered into an agreement with 9144-6773 Quebec Inc. and 9144-6906 Quebec Inc., to restructure certain obligations of ours to these corporations pursuant to the Share Purchase Agreement dated and effective as of January 2, 2005 among us, YAC Corp. (YAC), Teckn-O-Laser Company (TOL Canada), 3091503 Nova Scotia Company (Acquiror), Teckn-O-Laser Global Company (Acquiree), 3091732 Nova Scotia Company (Callco), and 9144-6773 Quebec Inc. and 9144-6906 Quebec Inc., the shareholders of Acquiree (the Acquiree Shareholders).



Pursuant to the Share Purchase Agreement, we acquired through our indirect subsidiary, Acquiror, all of the issued and outstanding capital stock of Acquiree in exchange for certain payments to be made at closing (the Closing Payments) and subsequent to closing (the Post-Closing Payments).



41

The Closing Payments consisted of:





        the issuance to the Acquiree Shareholders of 6,500,000 Acquiror Series I Exchangeable Shares;
        the issuance to the Acquiror Shareholders of 1,932,000 Acquiror Preferred Shares; and
        the payment to the Acquiree Shareholders of CDN$750,000 (approximately US$625,000).

The required Post-Closing Payments consisted of:





        a cash payment to the Acquiree Shareholders of CDN$2,182,000 (approximately US$1,818,333) due March 26, 2006 (the 2006 Payment);
        a cash payment to the Acquiree Shareholders of CDN$1,000,000 (approximately US$833,333) due March 31, 2007 (the 2007 Payment); and
        a cash payment to the Acquiree Shareholders of CDN$1,000,000 (approximately US$833,333) due March 31, 2008 (the 2008 Payment).

The 2006 Payment was not due and payable in the event that Acquirees Earnings Before Interest Taxes Depreciation and Amortization (EBITDA) for the year ending December 31, 2005, was less than CDN$1,000,000. The 2007 Payment was not due and payable in the event that Acquirees EBITDA for the year ending December 31, 2006 was less than CDN$1,500,000. The 2008 Payment was not due and payable in the event that Acquirees EBITDA for the year ending December 29, 2007 was less than CDN$2,000,000.



Subject to the terms of a Series I Exchangeable Share Voting, Support and Exchange Agreement, dated as of January 2, 2005 (the Series I Support Agreement), among us, YAC, Callco, Acquiror and the Acquiree Shareholders holding Series I Exchangeable Shares of Acquiror, the holders had the option of converting any Post Closing Payments due to them into Acquiror Series I Exchangeable Shares at a conversion rate calculated by dividing the dollar amount of any converted payments by an amount representing the greater of:





        US$1.00 converted to CDN dollars; or
        80% of the average closing price of our common stock converted to CDN dollars for the twenty trading days immediately preceding the date on which an Acquiree Shareholder provides a notice of conversion to Acquiree.

Dividends were not payable on the Acquiror Preferred Shares but as long as they were outstanding, Acquiror could not, without the approval of the holders of the Acquiror Preferred Shares, pay any dividends on Acquirors common shares or redeem or purchase or make any capital distributions in respect of any Acquiror common shares. Holders of Acquiror Preferred Shares were entitled, subject to the exercise of the Retraction Call Right by Callco and compliance with other terms of the Preferred Share Support Agreement, to require Acquiror to redeem their Acquiror Preferred Shares at a price of CDN$1.00 per share at specified times. The times at which holders of Acquiror Preferred Shares could make such requests were as follows:





        September 1, 2005 : 750,000 Acquiror Preferred Shares;
        September 30, 2005 ; 443,250 Acquiror Preferred Shares;
        December 31, 2005 : 443,250 Acquiror Preferred Shares; and
        March 31, 2006 : 295,500 Acquiror Preferred Shares.

42

In the event Acquiror failed or neglected to redeem the Acquiror Preferred Shares for CDN$1.00 as required by the Preferred Share Support Agreement, Acquiror was required to redeem such Acquiror Preferred Shares by issuing to the holders thereof 2.5 Series II Exchangeable Shares of Acquiror for each Acquiror Preferred Shares so redeemed.



The restructuring transaction was effected to improve our liquidity and facilitate our purchase of treasury shares of Turbon AG. Pursuant to the restructuring, our obligation to make the 2006 Payment, 2007 Payment and 2008 Payment to the Acquiree Shareholders was terminated, and the 1,932,000 Acquiror Preferred Shares were cancelled as was our obligation to redeem such Preferred Shares. In consideration thereof, we agreed to pay $600,000 to the Acquiree Shareholders, agreed to issue 3,272,397 shares to the Acquiree Shareholders at a valuation of $.70 per share or $2,290,678, and agreed to pay to Acquiree Shareholders additional aggregate cash payments of $2,290,678 payable in six equal installments of $381,780 each on March 31, 2007; June 30, 2007; September 30, 2007; December 31, 2007; March 31, 2008 and June 30, 2008.



Loan Agreement with Turbon International Inc.



As of November 4, 2005 we entered into a Loan Agreement (the Loan Agreement) with Turbon International Inc., (Turbon International), a wholly subsidiary of Turbon AG, and Teckn-O-Laser Global Company, a wholly owned subsidiary of ours (Teckn-O-Laser). Pursuant to the Loan Agreement, Turbon International made a $2,800,000 term loan to us and extended us a line of credit for up to an additional $2,800,000. Proceeds from the term loan were utilized by us to purchase certain Turbon AG shares (See Turbon Share Purchase Agreement). In consideration of the $2,800,000 term loan, we issued a 5% promissory note to Turbon International. Interest under the term loan note is payable quarterly on each of January 31, April 30, July 31 and October 31 during the term of the loan commencing January 31, 2006. Principal and accrued but unpaid interest under the term loan note are due October
31, 2008 subject to acceleration upon an event of default. The loan can be prepaid by us at any time prior to maturity without penalty. The line of credit may only be used by us for the purpose of purchasing products from Turbon International and certain affiliated entities. We will pay interest of 5% per annum on all sums advanced under the line of credit. Interest will be due and payable on the last day of each quarter starting with the quarter ending November 30, 2005. Principal and accrued but unpaid interest under the line of credit are due October 31, 2006 subject to acceleration upon an event of default. All advances under the line of credit will be evidenced by promissory notes. Amounts borrowed under the line of credit may be repaid by us at any time prior to maturity without penalty and may be re-borrowed.



Upon an event of default under the term loan or line
of credit the interest rate payable under the applicable notes will be increased from 5% to 9% until cured. Our indebtedness to
Turbon International under both the term loan and line of credit has been guaranteed by Teckn-O-Laser and, subject to our receipt of
written consent from our existing secured lenders, will be secured by a first priority lien on our 400,000 shares of common stock of
Turbon AG.



November 9, 2005 Agency Agreement and Private Placement



On November 9, 2005 we entered into an Agency Agreement with Loewen, Ondaatje, McCutcheon Limited (LOM) pursuant to which we offered and sold through LOM, as placement agent, (the Agent) 4,000,000 subscription receipts (the Subscription Receipts) at a price of $.50 per Subscription Receipt or $2,000,000 in the aggregate. The offering was made to non-US persons in reliance on Regulation S under the Securities Act of 1933 as amended. Each Subscription Receipt will be automatically exercised, without payment of any additional



43

consideration, at the Automatic Exercise Date, as defined below, into, subject to adjustment, a unit (the Units) consisting of one share of our common stock (the Unit Shares) and one common stock purchase warrant (the Unit Warrants). Each Unit Warrant entitles the holder to purchase an additional share of our common stock (the Warrant Shares) at a price of $1.25 per share during the 30 month period that commenced on November 9, 2005.



Pursuant to the Agency Agreement, we paid the Agent a commission of $140,000 which is equal to 7% of the gross aggregate offering proceeds and issued to the Agent 280,000 broker warrants (the Broker Warrants) which is equal to 7% of the number of Subscription Receipts sold. Each Broker Warrant will be automatically exercised, without payment of any consideration, at the Automatic Exercise Date, as defined below, into, subject to adjustment, one agents warrant (the Agents Warrant). Each Agents Warrant entitles the holder, subject to adjustment and the terms and condition set forth in the Agents Warrant certificate, to purchase from us one Unit at a price of $.50 per Unit during the 30 month period that commenced November 9, 2005.



For purposes of the Agency Agreement, the Automatic Exercise Date means the earlier of (i) December 31, 2005; (ii) the closing date in respect of the Prospectus and the Registration Statement, as defined below; and (iii) the Qualification Date, as defined below.



The Qualification Date is defined as the earlier of (i) December 31, 2005; or (ii) the date ten business days following the date by which both (a) a receipt (the Receipt) for the final prospectus of ours that qualifies the Units and Agents Warrants for issuance in Canada (the Prospectus) has been obtained by us from the securities commission or securities regulatory authorities in those Canadian provinces where purchasers of the Subscription Receipts reside and (b) a registration statement under the Securities Act of 1933, as amended, (the Registration Statement) has become effective for registering the resale of the Unit Shares, Unit Warrants (including those underlying the Agents Warrants, as defined below), and the Warrant Shares issuable upon exercise of the Unit Warrants. In all events we have agreed to use our best efforts to have our common shares
listed for trading on the Toronto Stock Exchange, file and obtain the Receipt for the Prospectus and file and have the Registration Statement declared effective by March 31, 2006.



Pursuant to the Agency Agreement, we also granted the Agent the right to act as co-lead member of an investment banking syndicate for purposes of marketing and selling any brokered equity financing for us in Canada for a period of one year commencing November 9, 2005. We also granted the Agent the right to a minimum participation of 15% on any brokered equity financing for us in the United States for a period of one year commencing November 9, 2005.



Termination of Trisan Agreement



In November 2005 we reached mutual agreement with Trisan Equitable Corporation (Trisan) to terminate Trisans remaining obligations to us under a January 6, 2005 equity purchase commitment. Under the commitment, Trisan had committed to purchase an aggregate of 3,200,000 shares of our common stock at a price of $.50 per share or $1,600,000 on an aggregate basis. The purchases were to have been made in four installments on September 1, 2005; September 30, 2005; December 31, 2005; and March 31, 2006. We had previously agreed with Trisan to terminate the purchase obligations for the September 1, 2005 and September 30, 2005 installments.



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Appointment of New Directors



On November 14, 2005 we increased the size of our board of directors from 5 to 7 members and appointed John Ioannou and Aldo DeLuca to fill the vacancies created thereby. Mr. Ioannou is an experienced senior executive with approximately 27 years of experience in which he has operated and advised  businesses in the technology, services, private equity and manufacturing sectors. He is presently employed as Vice President, New Ventures for The Turbon Group. Mr. DeLuca is also an experienced senior executive with approximately 26 years of experience working for businesses ranging from private sector entities to Fortune 200 companies. He is presently employed as the Managing Director of Finance and Operations for The Turbon Group.




ITEM 6.
        EXHIBITS

Exhibits



The following exhibits are filed as a part of this report on Form 10-QSB:




Exhibit No.
        Description4.1
        Subscription Receipt Certificate for November 4, 2005 Private Placement4.2
        Form of Warrant for November 4, 2005 Private Placement4.3
        Form of Broker Warrant for November 9, 2005 Private Placement10.1
        Loan Agreement with Turbon International Inc. and Teckn-O-Laser Global Company dated November 4, 200510.2
        $2,800,000 Term Loan Promissory Note dated November 4,200510.3
        Form of Credit Line Promissory Note with Turbon International Inc.10.4
        Loan Guarantee of Teckn-O-Laser Global Company dated November 4, 2005.10.5
        Promissory Note dated November 4, 2005 issued to Yvon Leveille10.6
        Promissory Note date November 4, 2005 issued to Alan Lachambre10.7
        Promissory Note date November 4, 2005 issued to Manchester Consolidated Corp.10.8
        Agency Agreement dated November 9, 2005 between Registrant and Loewen Ondaatje McCutcheon Limited10.9
        Agreement of Lease between Sreit (Central No. 3) Ltd and Teckn-O-Laser Company31.1
        Rule 13(a)-14(a)/15(d)-14(a) Certification of Principal Executive Officer31.2
        Rule 13(a)-14(a)/15(d)-14(a) Certification of Principal Financial Officer32.1
        Rule 1350 Certification of Chief Executive Officer32.2
        Rule 1350 Certification of Chief Financial Officer

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SIGNATURES

Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the Registrant has duly caused this Form 10-QSB to be signed on its behalf by the undersigned, thereunto duly authorized.


Dated: November 18, 2005
        Adsero CorporationBy:/s/ William SmithWilliam SmithSecretary, Treasurer, Chief Financial Officer

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