UNITED STATES
                       SECURITIES AND EXCHANGE COMMISSION
                             WASHINGTON, D.C. 20549
                                    FORM 20-F

[X]  ANNUAL REPORT  PURSUANT TO SECTION 13 OR 15(d) OF THE  SECURITIES  EXCHANGE
     ACT OF 1934

                    For the fiscal year ended March 31, 2005

Commission file number 0-30366

               ANTHONY CLARK INTERNATIONAL INSURANCE BROKERS LTD.
             (Exact name of Registrant as specified in its charter)

                                 Alberta, Canada
                 (Jurisdiction of incorporation or organization)

     Suite 355, 10333 Southport Road S.W., Calgary, Alberta, Canada T2W 3X6
                    (Address of principal executive offices)

Securities registered or to be registered pursuant to Section 12(b) of the Act:

  Title of each Class                 Name of each exchange on which registered
  -------------------                 -----------------------------------------
        None

Securities registered or to be registered pursuant to Section 12(g) of the Act:

                        Common Shares, Without Par Value
                        --------------------------------
                                (Title of Class)

Securities for which there is a reporting obligation pursuant to Section 15(d)
of the Act:

                                 Not Applicable
                                 --------------
                                (Title of Class)

Indicate the number of outstanding shares of each of the issuer's classes of
capital of Common stock as of the close of the period covered by this report.

         March 31, 2005                           7,955,153 Common Shares

Indicate by check mark 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 (or for such shorter period that the registrant was
required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days.

                   Yes   X              No  ______

Indicate by check mark which financial statement item the registrant has elected
to follow.

           Item 17     X               Item 18  _____

If this is an annual report, indicate by check mark whether the registrant is a
shell company (as defined in Rule 12b-2 of the Exchange Act).

                   Yes   _____           No  X


<PAGE>


<TABLE>

                                      TABLE OF CONTENTS

<S>                                                                                            <C>
SPECIAL NOTE REGARDING FORWARD LOOKING STATEMENTS...............................................1

DEFINITIONS.....................................................................................1

PART I..........................................................................................1
   Item 1.     Identity of Directors, Senior Management and Advisors............................1
   Item 2.     Offer Statistics and Expected Timetable..........................................2
   Item 3.     Key Information..................................................................2
   Item 4.     Information on the Company.......................................................9
   Item 5.     Operating And Financial Review And Prospects....................................14
   Item 6.     Directors, Senior Management and Employees......................................24
   Item 7.     Major Shareholders and Related Party Transactions...............................34
   Item 8.     Financial Information...........................................................37
   Item 9.     The Offer and Listing...........................................................38
   Item 10.    Additional Information..........................................................40
   Item 11.    Quantitative and Qualitative Disclosures About Market Risk......................54
   Item 12.    Description of Securities Other than Equity Securities..........................54

PART II........................................................................................54
   Item 13.    Defaults, Dividend Arrearages And Delinquencies.................................54
   Item 14.    Material Modifications to the Rights of Securities Holders and Use of Proceeds..54
   Item 15.    Controls and Procedures.........................................................54
   Item 16A.   Audit Committee Financial Expert................................................55
   Item 16B.   Code of Ethics..................................................................55
   Item 16C.   Principal Accountant Fees and Services..........................................55

PART III.......................................................................................56
   Item 17.    Financial Statements............................................................56
   Item 18.    Financial Statements............................................................57
   Item 19.    Exhibits........................................................................81
</TABLE>


                                     - i -
<PAGE>


                SPECIAL NOTE REGARDING FORWARD LOOKING STATEMENTS

Certain statements in this document constitute "forward-looking statements" that
involve known and unknown risks, uncertainties and other factors which may cause
the actual  results,  performance or  achievements  of the Company,  or industry
results,  to be materially  different from any future results,  performance,  or
achievements  expressed  or implied  by such  forward-looking  statements.  Such
factors include,  among others,  the following:  the Company's limited operating
history;  under-capitalization;  risks  involving  integration of  acquisitions;
unpredictability  of future  revenues;  management  of growth  and  integration;
potential  technological  changes;  the Company's  dependence on key  personnel;
marketing relationships;  reliance on third-party insurance companies; potential
new businesses,  competition and low barriers to entry;  government regulations;
security  risks;  and the other  risks and  uncertainties  described  under Risk
Factors  in  this  Annual  Report.  Should  one  or  more  of  these  risks  and
uncertainties  materialize,  or should  underlying  assumptions prove incorrect,
actual results may vary materially  from those described in the  forward-looking
statements.  See "Risk  Factors."  Forward-looking  statements are made based on
management's beliefs, estimates and opinions on the date the statements are made
and  management  assumes no obligation to update  forward-looking  statements if
these beliefs,  estimates and opinions or other circumstances should change. You
are cautioned against placing reliance on forward-looking statements.

                                   DEFINITIONS

Certain terms used in this Annual Report are defined below:

"Addison York"      a wholly owned Delaware subsidiary of the Company.

"Company"           means Anthony  Clark  International  Insurance  Brokers Ltd.
                    and, except where otherwise indicated, its subsidiaries.

"Common Shares"     means common  shares  without par value in the capital stock
                    of the Company.

"General Insurance" means insurance  coverage  comprising  property and casualty
                    insurance.

"General            Insurance Brokerage" means an entity which employs Insurance
                    Brokers  to act on behalf of its  customers  in  seeking  to
                    place  General   Insurance  with  any  number  of  Insurance
                    Companies.

"Insurance          Agent"  means a person who is an  employee  of a  particular
                    Insurance Company and represents only that Insurance Company
                    in the sale of insurance policies.

"Insurance          Broker"  means  an  individual   who  works  for  a  General
                    Insurance Brokerage and who is responsible for assessing the
                    needs of his clients, suggesting levels of General Insurance
                    coverage,  if appropriate,  canvassing a number of Insurance
                    Companies which the General Insurance  Brokerage  represents
                    for the coverage requested, obtaining price quotes or policy
                    premium and placing General Insurance coverage.

"Insurance          means  those  entities  which  provide  insurance  coverage,
 Companies" or      assess and provide  the payment of any insurance  claims and
"Insurance          pay  commissions to Insurance  Brokers and Insurance  Agents
 Company"           for  providing   customer  services  and  placing  insurance
                    coverage with the Insurance Company.

"OTCBB"             means the Nasdaq OTC Bulletin Board.

"TSX"               means The Toronto Stock Exchange.


                                     PART I

Item 1.  Identity of Directors, Senior Management and Advisors

Not Applicable.


                                      -1-

<PAGE>


Item 2.   Offer Statistics and Expected Timetable

Not Applicable.

Item 3.  Key Information

     A.   Selected Financial Data

The following  table sets forth selected  financial data regarding the Company's
consolidated  operating results and financial position in Canadian dollars.  See
"Currency   Translations".   The  data  has  been  derived  from  the  Company's
consolidated  financial statements,  which have been prepared in accordance with
Canadian  generally  accepted  accounting  principles  ("Canadian  GAAP"). For a
reconciliation to accounting  principles generally accepted in the United States
("U.S.  GAAP") for the years ended March 31, 2005, 2004 and 2003, see note 25 to
the  consolidated  financial  statements  included  in this Annual  Report.  The
following selected financial data is qualified in its entirety by, and should be
read in  conjunction  with,  the  consolidated  financial  statements  and notes
thereto  included  elsewhere in this Annual  Report.  The  comparability  of the
financial   data   presented  is  affected  by  factors   such  as   significant
acquisitions,  financings,  changes of business and property  dispositions.  See
"Item 5 - Operating and Financial Review and Prospects".

<TABLE>
(Canadian Dollars)
----------------------------------------------------------------------------------------------------------------------
                                            March 31,      March 31,      March 31,       March 31,     March 31,
                                               2005           2004           2003            2002         2001
----------------------------------------------------------------------------------------------------------------------
                                                                                          (restated)    (restated)
<S>                                        <C>             <C>             <C>            <C>            <C>
Working Capital - Canadian GAAP            $(16,785,495)   $  1,848,775    $  3,910,863   $  4,263,466   $  4,391,594
Working Capital- US GAAP                   $(15,356,831)   $  1,848,775    $  3,910,863   $  4,263,466   $  4,391,594

Total Assets - Canadian GAAP               $ 21,862,339    $ 16,864,359    $  8,662,278   $  8,959,873   $  8,890,747
Total Assets - U.S. GAAP                   $ 22,973,372    $ 16,864,359    $  8,662,278   $  8,959,873   $  8,896,993

Total Liabilities - Canadian GAAP          $ 19,453,370    $ 10,366,262    $  1,425,844   $  1,367,732   $    921,074
Total Liabilities - U.S. GAAP              $ 18,024,706    $ 10,366,262    $  1,425,844   $  1,367,732   $    921,074

Long Term Obligations - Canadian GAAP      $    336,141    $  8,243,651    $    363,786   $    571,658   $    169,350
Long Term Obligations - U.S. GAAP          $    336,141    $  8,243,651    $    363,786   $    571,658   $    169,350

Shareholders' Equity - Canadian GAAP       $  2,408,969    $  6,498,097    $  7,236,434   $  7,592,141   $  7,969,673
Shareholders' Equity - U.S. GAAP           $  4,908,666    $  6,458,097    $  7,196,434   $  7,592,141   $  7,975,919

Number of Shares Outstanding                  7,955,153       7,955,153       7,692,055      7,692,055      7,725,455
----------------------------------------------------------------------------------------------------------------------
</TABLE>


<TABLE>
(Canadian Dollars)
                                             -------------------------------------------------------------------------
                 Years ended                    March 31,       March 31,       March 31,     March 31,      March 31,
                                                   2005            2004           2003           2002           2001
                                             -------------------------------------------------------------------------
                                                                                             (restated)      (restated)
<S>                                           <C>            <C>              <C>            <C>             <C>
Revenue - U.S. and Canadian GAAP              $ 13,060,344   $  7,469,559     $ 5,175,072    $ 4,449,628     $ 3,894,115

Earnings (loss) before interest, taxes,       $  1,524,161   $    258,502     $   552,778    $   445,029     $   251,034
depreciation and amortization - Canadian
GAAP (1)
</TABLE>


                                      -2-

<PAGE>

<TABLE>
                                             -------------------------------------------------------------------------
                 Years ended                    March 31,       March 31,       March 31,     March 31,      March 31,
                                                   2005            2004           2003           2002           2001
                                             -------------------------------------------------------------------------
                                                                                             (restated)      (restated)
<S>                                           <C>            <C>              <C>            <C>             <C>

Earnings (loss) before interest, taxes,       $   1,499,207  $     250,789    $  545,065     $   360,618     $   (30,772)
depreciation and amortization - US GAAP (1)

Dividends per Share (2)                       $           0  $           0    $        0     $         0     $         0


Net earnings (loss) - Canadian GAAP           $  (4,470,154) $  (1,051,498)   $ (355,801)    $  (131,742)    $     9,944
Net earnings (loss) - U.S. GAAP               $  (1,955,411) $  (1,059,211)   $ (363,514)    $  (222,399)    $  (294,919)

Earnings (loss) per Common Share, basic and
  diluted:
    Canadian GAAP                             $       (0.56) $       (0.14)   $    (0.05)    $     (0.02)    $      0.00
    U.S. GAAP                                 $       (0.25) $       (0.14)   $    (0.05)    $     (0.03)    $     (0.05)

     (1)  Earnings (loss) before interest,  taxes, depreciation and amortization
          (EBITDA) is discussed and presented here as a  non-Generally  Accepted
          Accounting   Principles  measure  because  it  is  management's  major
          performance indicator.  EBITDA is reconciled to Net Earnings (loss) in
          Item 5.A under the heading  "Earnings (loss) before  interest,  taxes,
          depreciation and amortization (EBITDA)".

     (2)  The Company has paid no dividends  on its shares  since  incorporation
          and  does not  anticipate  doing so for the  foreseeable  future.  The
          declaration of dividends on the Common Shares of the Company is within
          the  discretion  of the  Company's  board of directors and will depend
          upon, among other factors,  earnings,  capital  requirements,  and the
          operating and financial condition of the Company.
</TABLE>

Currency Translations

The following table sets forth the average  exchange rates for Canadian  dollars
("Cdn$") expressed in terms of one United States dollar ("US$") in effect at the
end of the following  periods (based on the average of the exchange rates on the
last day of each month in such periods).

                        Canadian Dollars Per U.S. Dollar
                           Fiscal Year Ended March 31,
                          ------------------------------------------------
                             2005      2004      2003      2002      2001
                          ------------------------------------------------
Average for the period      1.2791    1.3353    1.5447    1.5671    1.5041

The  following  table sets forth the high and low  exchange  rates for  Canadian
dollars  expressed in terms of one United  States  dollar for each of the last 6
months.

                     ------------------------------------------------------
                      August    July     June      May     April     March
                       2005     2005     2005     2005     2005      2005
                     ------------------------------------------------------
High for the month    1.2185   1.2437   1.2578   1.2703   1.2568    1.2463
Low for the month     1.1888   1.2048   1.2256   1.2373   1.2146    1.2017

Exchange  rates are based upon the noon  buying  rate in New York City for cable
transfers in foreign currencies as certified for customs purposes by the Federal
Reserve  Bank of New York.  The noon rate of  exchange  on  August  31,  2005 as
reported  by the  United  States  Federal  Reserve  Bank  of New  York  for  the
conversion  of one  Canadian  dollar into United  States  dollars was  US$0.8408
(US$1.00 = Cdn$1.1893).  In this Annual Report on Form 20-F (the "Annual Report"
or "20-F"),  unless otherwise  specified,  all monetary amounts are expressed in
Canadian dollars.


                                      -3-

<PAGE>


     B.   Capitalization and Indebtedness

Not Applicable.

     C.   Reasons for the Offer and Use of Proceeds

Not Applicable.

     D.   Risk Factors

The securities of the Company are highly speculative.  A prospective investor or
other person reviewing the Company should not consider an investment  unless the
investor is capable of  sustaining  an economic  loss of the entire  investment.
Certain  risks  are  associated  with  the  Company's   business  including  the
following:

FUTURE  GROWTH AND  EXPANSION IS DEPENDENT  ON ONGOING  ACQUISITIONS  OF GENERAL
INSURANCE BROKERAGES

To a large  extent,  the Company's  growth and  expansion  plans depend upon the
ongoing  acquisition of independent  General Insurance  Brokerages at reasonable
prices.  There  can be no  assurance  that an  adequate  number  of  acquisition
candidates  will be available to the Company to meet its expansion  plans, or in
the event that such independent  General Insurance  Brokerages are available for
acquisition that they will be available at a price which would allow the Company
to operate on a  profitable  basis.  The Company  competes for  acquisition  and
expansion  opportunities with entities that have substantially greater resources
than the  Company  and these  entities  may be able to outbid  the  Company  for
acquisition  targets. If the Company fails to execute its acquisition  strategy,
the Company's  revenue  growth is likely to suffer and the Company may be unable
to remain competitive.


THE  COMPANY  MAY BE  UNABLE  TO  SUCCESSFULLY  INTEGRATE  ITS  RECENT OR FUTURE
ACQUISITIONS

There can be no assurance that the Company's recently acquired brokerages or any
brokerages acquired by the Company in the future will achieve acceptable levels
of revenue and profitability or otherwise perform as expected. The Company has
limited experience in acquiring and integrating brokerages in other markets. The
Company may be unable to successfully integrate its recently-acquired brokerages
in the United States, or other brokerages that the Company may acquire in the
future, due to diversion of management attention, strains on the Company's
infrastructure, difficulties in integrating operations and personnel, entry into
unfamiliar markets, or unanticipated legal liabilities or tax, accounting or
other issues. A failure to integrate acquired brokerages may be disruptive to
the Company's operations and negatively impact the Company's revenue or increase
the Company's expenses.


THE COMPANY HAS ACQUIRED AND MAY CONTINUE TO ACQUIRE BROKERAGES PRIOR TO RECEIPT
OF ALL REGULATORY LICENSES AND CARRIER  APPOINTMENTS,  AND IN SUCH CIRCUMSTANCES
THE COMPANY IS DEPENDENT  UPON THE VENDOR TO CONTINUE TO HOLD AND TO COMPLY WITH
THE REQUIREMENTS OF SUCH LICENSES AND APPOINTMENTS

The  Company  has in the past,  and may in the  future,  purchase  the assets of
General Insurance  Brokerages located in jurisdictions where the Company has not
yet obtained the necessary licenses to operate as a General Insurance Brokerage.
Without possessing such licenses, the Company cannot obtain carrier appointments
from  Insurance  Companies  which  would  enable it to market  and sell  General
Insurance products in those jurisdictions. As such, the Company has in the past,
and may in the future,  enter into agency  agreements  with the vendors of these
General  Insurance  Brokerages  whereby the vendors of those agencies agree, for
the sole and  exclusive  benefit of the Company,  to market,  sell,  distribute,
place and write General Insurance  products to the clients of the Company and to
any and all other potential customers who may wish to purchase General Insurance
products  from the  Company.  If the  Company is unable to secure  the  required
licenses in the various  different states in which it operates or if the Company
cannot obtain Insurance  Company  representation  then this will have a negative
impact  on  its  ability  to  service  its  customers  and  provide  alternative
competitive  insurance products.  In addition,  these agency agreements create a
reliance by the Company on third  parties in that the Company must rely upon the
respective  vendors to comply  with  applicable  laws,  to perform on the agency
agreements and to process the Company's General Insurance business in the United
States.  If the vendors fail to properly  perform on the agency  agreements then
this will have a  negative  impact  on the  Company's  ability  to  service  its
customers.



                                      -4-
<PAGE>


THE COMPANY ANTICIPATES THE NEED FOR ADDITIONAL  FINANCING,  WHICH IT MAY NOT BE
SUCCESSFUL IN ARRANGING

The  Company  has  relied  principally  on debt  financing  to fund  its  recent
acquisitions in the United States.  The Company will require additional funds to
make  future  acquisitions  of  General  Insurance  Brokerages  and may  require
additional  funds to market  and sell its  products  into the  marketplace.  The
Company has a history of losses and does not, therefore, anticipate that it will
generate  sufficient  cash flow from  operations  in order to meet its financing
needs.  The ability of the Company to arrange such financing in the future,  and
to repay its  existing  debt,  will depend in part upon the  prevailing  capital
market  conditions  as well  as the  business  performance  of the  Company.  In
addition,  the Company is subject to certain financial and other covenants under
its financing arrangements.  If the Company is unable to or does not comply with
these covenants, the Company's financing needs may be accelerated.  There can be
no  assurance  that the  Company  will be  successful  in its efforts to arrange
additional  financing,  when needed,  on terms  satisfactory to the Company.  If
additional  financing  is raised by the  issuance of shares from the treasury of
the  Company,  control of the  Company  may change and  shareholders  may suffer
additional dilution. If additional financing is not available on terms favorable
to the Company, the Company may be unable to grow or may be required to limit or
halt its expansion plans. In addition, the Company's existing creditors, some of
whom have security  interests in the Company's assets, may exercise their rights
to acquire or dispose of the Company's assets.


PLANNED  FUTURE GROWTH IS LIKELY TO PLACE  SIGNIFICANT  STRAINS ON THE COMPANY'S
MANAGEMENT, ADMINISTRATIVE, OPERATIONAL AND FINANCIAL RESOURCES

Since its  inception,  the Company  has  experienced  steady  growth in revenue,
number and complexity of products,  personnel,  and customer base. The Company's
planned  future growth is likely to place  significant  strains on the Company's
management,  administrative,  operational  and  financial  resources.  Increased
growth  will  require  the  Company to  continue  to add  additional  management
personnel,  improve its financial and management controls, reporting systems and
procedures on a timely basis, to implement new systems as necessary,  to expand,
train,  motivate  and manage its sales and other  personnel  and to service  the
Company's customers effectively. There can be no assurance that the Company will
be able to attract  qualified  personnel or improve its financial and management
controls  or  implement  new systems as  necessary  and the failure to do so may
result in increased costs or a decline in revenue or both.


THE COMPANY'S PERFORMANCE AND FUTURE OPERATING RESULTS AND SUCCESS ARE DEPENDENT
ON THE EFFECTIVENESS OF THE COMPANY'S MANAGEMENT TEAM AND KEY PERSONNEL

The  Company's   performance  and  future  operating  results  and  success  are
substantially  dependent on how effective the management  team and key personnel
are at organizing and implementing the Company's growth strategy and integrating
acquired General Insurance  Brokerages into the Company's overall  organization.
Shareholders  will be relying on the judgment and expertise of the management of
the Company.

The senior  management  and some key  personnel  are employed  under  employment
contracts,  while other key  personnel of the Company are employed on a month to
month basis and are not under an employment contract with the Company.  Although
the Company is in an industry in which there is not high employee turnover,  the
unexpected  loss or departure of any of the Company's key management  personnel,
Mr. Podorieszach, the Chief Executive Officer, Mr. Consalvo, the Chief Operating
Officer,  Mr. Bhatia, the Chief Financial Officer and the Corporate  Controller,
Ms. Shelley Samec could be detrimental to the future operations of the Company.

There can be no  assurance  that the  Company can retain its key  personnel  and
managerial  employees  or that it will be  able  to  attract  or  retain  highly
qualified personnel in the future. The Company believes that the compensation to
its key management  personnel is competitive  with what other  companies pay its
key  management  personnel in the  insurance  brokerage  industry.  Although the
Company plans to  compensate  its senior  management  and other key personnel at
compensation  levels  that are  competitive  within  the  industry,  there is no
assurance  that it will  continue to be able to do so in the future and this may
result in a departure of some if its senior management or other personnel.

The Company  maintains  keyman life  insurance  policies of $100,000 each on Mr.
Podorieszach and Mr. Consalvo and $175,000 on Mr. Bhatia and has no other keyman
life insurance on any other senior management or other


                                      -5-


<PAGE>

personnel. The loss of the services of any of the Company's senior management or
other key  personnel  or the  inability  to attract  and  retain  the  necessary
technical,  sales and managerial  personnel could have a material adverse effect
upon the Company's business, operating results and financial condition.


THE COMPANY FACES INTENSE COMPETITION IN THE INSURANCE INDUSTRY

The Company is in an industry in which intense  competition  exists. The Company
competes with other General Insurance Brokerages, as well as Insurance Companies
that sell insurance  directly to consumers and do not pay  commissions to agents
and brokers.  Some competitors have substantially  more financial  resources and
other  assets  available  than  the  Company  does  and are  larger  and  better
established  than the  Company.  Such  competitors  have  existing  distribution
facilities  and channels,  customer  recognition,  customer  lists,  and greater
research and  development  capabilities  and sales marketing staff than does the
Company.  There can be no  assurance  that the  Company  will be able to compete
successfully  against  current  and  future  competitors,  or  that  competitive
pressure  faced by the Company  will not have a material  adverse  effect on its
business, financial condition and results of operation.


INCURSION OF GOVERNMENT, BANKS OR OTHER FINANCIAL INSTITUTIONS

The Company is susceptible to an incursion in the general insurance  industry by
government or banks or other financial  institutions.  A government  takeover of
the general insurance business (or parts thereof) could affect the profitability
of the Company. In addition, banks with greater financial resources and a larger
customer base than the Company may enter (or are currently entering) the general
insurance business.  While management believes that the Company's representation
of a large and diverse  number of  Insurance  Companies  will allow it to remain
competitive against any such incursion by the banks, there is a possibility that
their entrance into this market could affect the profitability of the Company.


THE COMPANY CANNOT ACCURATELY  FORECAST  COMMISSION REVENUE BECAUSE  COMMISSIONS
DEPEND ON PREMIUM RATES CHARGED BY INSURANCE COMPANIES,  WHICH HISTORICALLY HAVE
VARIED AND ARE  DIFFICULT TO PREDICT.  ANY  DECLINES IN PREMIUMS  MAY  ADVERSELY
IMPACT PROFITABILITY

Revenue from  commissions  fluctuates  with  premiums  charged by  insurers,  as
commissions typically are determined as a percentage of premiums.  When premiums
decline,  the Company  experiences  downward  pressure on revenue and  earnings.
Historically,  property and casualty  premiums  have been cyclical in nature and
have varied widely based on market  conditions.  Because we cannot determine the
timing and extent of premium pricing changes,  we cannot accurately forecast our
commission revenue, including whether it will significantly decline. If premiums
decline or  commission  rates are reduced,  our revenue,  earnings and cash flow
could  decline.  In  addition,  our  budgets  for future  acquisitions,  capital
expenditures, dividend payments, loan repayments and other expenditures may have
to be adjusted to account for unexpected changes in revenue.


INSURANCE  COMPANY   CONTINGENT   COMMISSIONS  AND  VOLUME  OVERRIDES  ARE  LESS
PREDICTABLE  THAN NORMAL  COMMISSIONS,  WHICH IMPAIRS THE  COMPANY'S  ABILITY TO
FORECAST THE AMOUNT OF SUCH  REVENUE  THAT WILL BE RECEIVED  AND MAY  NEGATIVELY
IMPACT OUR OPERATING RESULTS

A portion of the Company's  revenue is derived from  contingent  commissions and
volume  overrides.  The  aggregate  of these  sources of revenue  generally  has
accounted for approximately 6% of our total revenue.  Contingent commissions may
be paid by an  Insurance  Company  based on the  profit it makes on the  overall
volume of  business  that we place  with it.  Volume  overrides  and  contingent
commissions  are  typically  calculated  in the first or second  quarter  of the
following calendar year by the Insurance Companies and are paid once calculated.
Further,  we have no  control  over the  process  by which  Insurance  Companies
estimate  their  own loss  reserves,  which  affects  our  ability  to  forecast
contingent commissions. Because these contingent commissions affect our revenue,
any  decrease  in their  payment to us could  adversely  affect  our  results of
operations.  Recently,  legal  proceedings  challenging the  appropriateness  of
revenue  sharing   arrangements  between  Insurance  Companies  and  brokerages,
including  contingent  profit  and  volume  override  arrangements,   have  been
commenced against certain insurance  brokerages.  These proceedings  allege that
such revenue sharing arrangements  conflict with a broker's duty to its clients.
While we have not been named as a defendant in any such proceeding, and disagree
with the underlying  premise that these revenue  sharing  arrangements  create a
conflict of interest, we could be the subject of a similar action in the future.
A finding that such  arrangements  conflict  with a broker's duty to its clients
could have a material adverse affect on our revenue and profitability.



                                      -6-
<PAGE>


PROPOSED  TORT  REFORM  LEGISLATION  ON THE UNITED  STATES,  IF  ENACTED,  COULD
DECREASE DEMAND FOR LIABILITY INSURANCE, THEREBY REDUCING COMMISSION REVENUE

Legislation  concerning tort reform is currently being  considered in the United
States Congress and in several states. Among the provisions being considered for
inclusion  on such  legislation  are  limitations  on damage  awards,  including
punitive damages, and various restrictions  applicable to class action lawsuits,
including  lawsuits  asserting  professional  liability  of the  kind  of  which
insurance  is offered  under  certain  policies we sell.  Enactment  of these or
similar  provision  by  Congress,  or by  states or  countries  in which we sell
insurance,  could  result in  reduction  in the demand for  liability  insurance
policies or a decrease in policy limits of such policies sold,  thereby reducing
our commission revenue.


PRIVACY  LEGISLATION  MAY IMPEDE THE  COMPANY'S  ABILITY TO UTILIZE THE CUSTOMER
DATABASE AS A MEANS TO GENERATE NEW SALES

The Company  intends to utilize its extensive  customer  databases for marketing
and sales  purposes,  which it believes  would enhance the Company's  ability to
meet its organic growth targets.  However, new privacy legislation,  such as the
Gramm-Leach-Bailey  Act and the Health Insurance  Portability and Accountability
Act of 1996 in the United  States and the Personal  Information  Protection  and
Electronic  Documents Act (PIPEDA) in Canada, as well other regulatory  changes,
may restrict the Company's ability to utilize personal  information that we have
collected  in the normal  course of  operations  to generate  new sales.  If the
Company becomes subject to new restrictions,  or other regulatory  restrictions,
which we are not aware of, the  Company's  ability to grow the  business  may be
adversely affected.


IF THE  COMPANY  FAILS TO COMPLY  WITH  REGULATORY  REQUIREMENTS  FOR  INSURANCE
BROKERAGES, THE COMPANY MAY NOT BE ABLE TO CONDUCT BUSINESS

The  Company  is  subject  to legal  requirements  and  governmental  regulatory
supervision in the  jurisdictions in which it operates.  These  requirements are
designed to protect our clients by  establishing  minimum  standards  of conduct
particularly  regarding the provision of advice and product  information as well
as financial criteria.

Our  activities in the United  States and Canada are subject to  regulation  and
supervision  by  state  and  provincial  authorities.   Although  the  scope  of
regulation and form of supervision by state and provincial  authorities may vary
from  jurisdiction  to  jurisdiction,  insurance  laws in the United  States and
Canada are often complex and  generally  grant broad  discretion to  supervisory
authorities in adopting regulations and supervising regulated  activities.  This
supervision generally includes the licensing of insurance brokers and agents and
the  regulation of the handling and investment of client funds held in fiduciary
capacity.  Our ability to conduct our business in the  jurisdictions in which we
currently  operate  depends  on our  compliance  with the rules and  regulations
promulgated  from time to time by the  regulatory  authorities  in each of these
jurisdictions.

Our clients  have the right to file  complaints  with the  regulators  about our
services,  and the  regulators may  investigate  and require us to address these
complaints.  Our failure to satisfy the  regulators  that we are in  compliances
with their requirements or the legal  requirements  governing our activities can
result in a disciplinary action, fines, reputation damage and financial harm.

In addition,  changes in  legislation  or regulation  and actions by regulators,
including changes in administration and enforcement policies, could from time to
time require  operational  improvements or  modifications  at various  locations
which  could  result in higher  costs or  hinder  our  ability  to  operate  our
business.


THE COMPANY'S SUCCESS IS DEPENDENT ON ITS ABILITY TO REPRESENT QUALITY INSURANCE
COMPANIES

The Company's success is dependent upon its continued  representation of quality
Insurance  Companies  in order to sell  insurance  policies  to  customers.  The
Company's existing brokerage  contracts with certain Insurance  Companies do not
have a set term or expiry  date but may be  terminated  by either the Company or
the  Insurance  Company on between  90-120 days' written  notice of  termination
depending on the terms of the specific contract.  In the event of termination on
any of its contracts  with  Insurance  Companies,  there are no penalties to the
Company but  following  termination,  the Company is no longer able to represent
the applicable Insurance Company as agent on the future



                                      -7-
<PAGE>


placement  or renewal of  insurance  policies.  If the Company  loses  Insurance
Company  representation  then this will have a negative impact on its ability to
service its customers and provide alternative competitive insurance products.


DILUTION AND SALES OF  ADDITIONAL  COMMON SHARES AND THE EXERCISE OF OPTIONS AND
WARRANTS

The  number  of  outstanding  Common  Shares  held by  shareholders  who are not
affiliates of the Company and the number of Common Shares underlying outstanding
stock  options  and  warrants is large  relative  to the  trading  volume of the
Company's Common Shares.  Any substantial  sale of the Common Shares,  including
Common Shares underlying stock options and warrants,  or even the possibility of
such  sales  occurring  may have an adverse  effect on the  market  price of the
Common Shares.


BROKER-DEALERS  MAY BE  DISCOURAGED  FROM EFFECTING  TRANSACTIONS  IN THE COMMON
SHARES BECAUSE THEY ARE CONSIDERED PENNY STOCKS AND SUBJECT TO PENNY STOCK RULES

Rules 15g-1 through 15g-9 promulgated under the Securities  Exchange Act of 1934
(the "Exchange  Act") impose sales practice and disclosure  requirements on NASD
brokers-dealers  who make a market in "a penny  stock." A penny stock  generally
includes any  non-Nasdaq  equity  security  that has a market price of less than
US$5.00  per share.  The Common  Shares of the Company are posted for trading on
the TSX and the closing  price of its Common  Shares on August 31, 2005 was $.60
per share. The Common Shares of the Company are also quoted on the OTCBB and the
quoted  price of its Common  Shares on August 31, 2005 was US$.46 per share.  As
such,  the  Common  Shares of the  Company  will be deemed  penny  stock for the
purposes of the Exchange Act. The  additional  sales  practices  and  disclosure
requirements  imposed upon  broker-dealers  may discourage  broker-dealers  from
effecting transactions in the Common Shares of the Company, which could severely
limit the  market  liquidity  of the  Common  Shares  and impede the sale of the
Common Shares in the secondary market.

Under the penny stock regulations, a broker-dealer selling penny stock to anyone
other than an established customer or "accredited investor",  which is generally
an  individual  with a net worth in excess of  US$1,000,000  or an annual income
exceeding US$200,000, or US$300,000 together with his or her spouse, must make a
special  suitability  determination  for the  purchaser  and  must  receive  the
purchaser's  written  consent  to the  transaction  prior  to sale,  unless  the
broker-dealer  or the transaction is otherwise  exempt.  In addition,  the penny
stock regulations require the broker-dealer to deliver, prior to any transaction
involving a penny  stock,  a  disclosure  schedule  prepared  by the  Commission
relating to the penny stock market,  unless the broker-dealer or the transaction
is otherwise  exempt. A broker-dealer  is also required to disclose  commissions
payable to the  broker-dealer  and the  registered  representative  and  current
quotations for the  securities.  Finally,  a  broker-dealer  is required to send
monthly statements disclosing recent price information with respect to the penny
stock held in a customer's  account and information  with respect to the limited
market in penny stocks.


THE  COMPANY  HAS  SIGNIFICANT  COSTS AND  LOWER  PRODUCTIVITY  COULD  RESULT IN
OPERATING LOSSES

Fixed costs  including  costs  associated  with salaries and employee  benefits,
depreciation and amortization,  rent, and interest and financing costs, and loan
principal  repayments  account for a significant  portion of the Company's costs
and  expenses.  As a  result,  downtime  or  low  productivity  from  its  sales
representatives,  lower demand for  insurance  products,  loss of the  Company's
customers,  any significant decrease in the premium rates, volume and commission
paid in the  different  segments of the  general  insurance  industry,  or other
factors could result in operating losses and adversely impact on the Company.


NO INTENTION TO DECLARE DIVIDENDS

The Company has a recent history of losses and has not declared or paid any cash
dividends  on its Common  Shares.  The Company  currently  intends to retain any
future  earnings  to fund  growth and  operations  and it is unlikely to pay any
dividends in the immediate or foreseeable  future. Any decision to pay dividends
on its Common Shares in the future will be made by the board of directors on the
basis of the Company's earnings,  financial requirements and other conditions at
such time.



                                      -8-
<PAGE>


CONFLICTS  OF  DIRECTORS  AND OFFICERS WHO SERVE AS DIRECTORS OR OFFICERS OR ARE
SIGNIFICANT SHAREHOLDERS OF OTHER COMPANIES

Directors  and officers of the Company may serve as directors or officers of, or
have significant  shareholdings  in other companies,  or be or become engaged in
business and  activities in other fields,  on their own behalf and on the behalf
of other  companies  and  entities.  To the extent that such other  companies or
entities  may  participate  in  industries  or ventures in which the Company may
participate,  the  directors  and officers of the Company may have a conflict of
interest.  Conflicts,  if any,  will be subject to the  procedures  and remedies
under the Business  Companies Act  (Alberta).  None of the  Company's  directors
serve as directors or officers of any competitors of the Company.


INVESTORS MAY NOT BE ABLE TO SECURE  FOREIGN  ENFORCEMENT  OF CIVIL  LIABILITIES
AGAINST THE COMPANY'S MANAGEMENT

The enforcement by investors of civil liabilities  under the federal  securities
laws of the United States may be adversely affected by the fact that the Company
is amalgamated under the laws of Canada,  that all of its officers and directors
are residents of a foreign country and that all or a substantial  portion of its
assets and such person's assets are located  outside of the United States.  As a
result,  it may be difficult for holders of the Common Shares to effect  service
of process on such persons  within the United States or to realize in the United
States upon judgments rendered against them.

Item 4.  Information on the Company

     A.   History and Development of the Company

Anthony  Clark  International  Insurance  Brokers  Ltd.  (the  "Company")  is  a
corporation  amalgamated pursuant to the laws of Alberta,  Canada. The Company's
head  office and  principal  business  office is  located  at Suite  355,  10333
Southport Road, S.W., Calgary,  Alberta, Canada T2W 3X6 and its telephone number
is (403)  278-8811.  The  Company's  registered  office in Alberta is located at
1200, 1015 - 4th Street S.W.,  Calgary,  Alberta,  Canada T2R 1J4. The Company's
agent for the service in Alberta,  Canada,  is Thomas  Milley at the law firm of
Demiantschuk,  Milley,  Burke &  Hoffinger  at 1200,  1015 - 4th  Street,  S.W.,
Calgary, Alberta, Canada, T2R 1J4.

On April 1, 1996, the Company was amalgamated with six other companies under the
Business Corporations Act (Alberta).  The companies involved in the amalgamation
were 393675  Alberta Inc.,  487220  Alberta Inc.,  537169  Alberta Inc.,  582939
Alberta Inc., 537168 Alberta Inc.,  Global FGI Inc. (all Alberta  companies) and
Anthony Clark International  Insurance Brokers Ltd. (which was a federal company
incorporated on June 23, 1993,  extra-provincially registered in the Province of
Alberta on October 6, 1993, and continued into the  jurisdiction of the Province
of Alberta on March 18, 1996, for the purposes of the amalgamation). On February
28, 1999,  the Company  amalgamated  with Mayfair  Insurance  Brokers Ltd.,  its
wholly-owned subsidiary, to form the resulting corporation.

On July 31,  2002,  the Company  completed a  U.S.$5,000,000  revolving  line of
credit (the "Textron Facility") pursuant to a loan agreement dated July 31, 2002
between the Company and Textron Financial Company ("Textron"),  as amended by an
agreement dated April 3, 2003. The Textron  Facility had an interest rate of the
greater of (a) the Wall Street  Journal  prime rate plus 2.5% per annum,  or (b)
U.S.$10,000 per month. A commitment fee of $100,000 was paid on the closing date
and is also  required to be paid on the  anniversary  of the  closing  date each
year. As collateral for the Textron  Facility,  Textron  obtained a first charge
over all of the assets of the Company.

On October 17, 2003,  the Company  acquired  the net assets of DKWS  Enterprises
Inc.  and the  Kabaker  Family  Trust  of July  1998,  doing  business  as Vista
International  Insurance Brokers ("Vista"), a California based General Insurance
Brokerage for purchase  consideration  of $6,117,633.  The purchase was financed
using cash and seller financing.  The Vista acquisition is subject to contingent
adjustment based on commission  revenue earned in the second year after closing.
A further adjustment of 20% of the purchase  consideration will be made based on
a price calculation  relating to the commission  revenue in the fifth year after
closing.  This additional  consideration cannot be reasonably estimated and will
therefore be accounted for when the contingency is resolved.


                                      -9-

<PAGE>


On October 20, 2003,  a  termination  and release  agreement  was executed  with
Textron Financial Corporation,  which terminated the loan agreement and released
all security documents.

On November 6, 2003, the Company  executed a loan agreement (the "Paragon Loan")
with  Paragon  Capital  Corporation  Ltd.  ("Paragon")  with  loan  proceeds  of
$2,100,000.  The loan had a one-year  term,  with interest only  payments,  with
interest  at 2% per month.  A  commitment  fee of $63,000 was paid to Paragon in
connection  with the Paragon Loan.  The Paragon Loan was secured  against all of
the assets of the Company.

On November  6, 2003,  the Company  acquired  the net assets of Johns  Insurance
Agency,  Inc.  ("Johns"),  a California  based General  Insurance  Brokerage for
purchase  consideration of $2,483,009.  The purchase was financed using cash and
seller financing.

On February 26, 2004, the Company  completed the private  placement and issuance
of 263,098 Units (4,000 of these Units were issued as  commission) at a price of
$1.28 per Unit.  The  proceeds of the private  placement  amounted to  $336,765,
which was added to the  Company's  working  capital.  Each Unit  consists of one
common share and one common share purchase warrant (the "Warrant"). Each Warrant
is exercisable to purchase an additional  common share of the Company at a price
of $1.60  per  share for a period  of 24  months  from the  closing  date of the
private placement, which may result in an additional $420,957 of proceeds to the
Company.

On  March  22,  2004,  the  Company  completed  a  US$5,000,000  debt  financing
arrangement  with Oak Street Funding ("Oak Street") whereby Oak Street agreed to
provide  a  US$5,000,000  reducing  revolving  line of credit  (the "Oak  Street
Facility")  subject to a borrowing base formula.  The Oak Street Facility had an
interest  rate of prime  plus 8% per annum with  interest  only  payments  for a
period  of two  years.  The  Oak  Street  Facility  was  required  to be used to
refinance the Paragon Loan,  acquisitions  of General  Insurance  Brokerages and
related working  capital and equipment needs and other purposes  approved by Oak
Street.  The Oak Street  Facility  was secured  against all of the assets of the
Company, other than the collateral subject to future financing.

On March 22, 2004,  the Paragon Loan was repaid with the proceeds  received from
the Oak Street Facility.

On May 31, 2004, the Company settled a previously  outstanding  legal proceeding
for a cash payment of $450,000  (including legal costs). The judgment related to
the Company's alleged failure to honor a stock option agreement dated October 1,
1998.

On June 14, 2004,  the Company  completed a  U.S.$7,500,000  ($10,090,725)  debt
financing  arrangement with First Capital Company,  LLC ("FCC") whereby FCC will
provide up to a U.S.$7,500,000  ($10,090,725)  reducing revolving line of credit
(the "FCC Facility") subject to a borrowing base formula. The FCC Facility had a
maturity 5 years from the close of the transaction,  with interest only payments
during the first two years.  The FCC Facility had a Wall Street Journal interest
rate of prime plus 2% per annum.  As collateral for the FCC Facility,  FCC had a
security  interest in the assets of the Company acquired after June 14, 2004, in
connection  with  any  acquisition  financed  by FCC and a  subsequent  security
interest  in  the  assets  of  the   Company,   subject  to  certain   permitted
encumbrances.  The FCC Facility was to be used to fund  acquisitions  of General
Insurance  Brokerages  within the United States and provide  working capital for
the related acquisitions.

On August 31, 2004, the Company  obtained  U.S.$3,250,000  ($4,192,500)  in debt
financing from Emmett Lescroart  ("Emmett"),  pursuant to an arrangement whereby
Emmett  agreed to provide a loan of up to US  $3,250,000  ($4,192,500  CDN) (the
"Emmett  Facility")  to  purchase  substantially  all of the  net  assets  of Al
Vinciguerra  Ltd.,  ("Vinciguerra")  a  Norfolk,  Virginia  area  based  General
Insurance  Brokerage.  The Emmett  Facility  was fully  drawn down on August 31,
2004,  bears  interest at a rate of 14% per annum,  and  requires the Company to
make monthly  interest only  payments  until 2008.  The principal  amount is due
September  1, 2008.  The  Emmett  Facility  is secured by certain  assets of the
Company.

On  September  8,  2004,   the  Company   acquired   Vinciguerra   for  purchase
consideration  of $8,978,354.  The purchase was financed using the FCC Facility,
the Emmett  Facility  and seller  financing.  On January 12,  2005,  the Company
acquired  the net assets of Schuneman  Insurance  Agency Inc.  ("Schuneman"),  a
Sterling, Illinois based General Insurance Brokerage, for purchase consideration
of $1,122,477.  The purchase was financed using an existing FCC Credit  Facility
and seller financing.



                                      -10-
<PAGE>

On June 15, 2005, the Company completed a U.S.$25,000,000  ($30,750,000) secured
debt financing  arrangement (the "Bridge  Facility") with United States lenders,
Bridge Healthcare Finance, LLC and Bridge Opportunity Finance LLC (collectively,
the  "Lenders").  The Bridge  Facility  was used to repay the FCC and Oak Street
Facilities and certain other  obligations  amounting to  approximately  U.S.$7.5
Million and the balance of the Bridge  Facility will be used for working capital
and to fund  future  acquisitions  of General  Insurance  Brokerages  within the
United  States.  The Bridge  Facility  will mature in five years and interest is
payable  monthly  during the term of the loan.  Principal is payable  during the
term of the loan based upon an excess cash flow availability formula. The Bridge
Facility has an interest  rate of prime plus 6.25% per annum,  with an effective
rate  reduction of 1.5% and 2.5% for new equity  raised of U.S.$3.0  Million and
U.S.$5.0 Million  respectively.  As additional  consideration  for providing the
Bridge  Facility,  the  Company  has  issued  the  Lenders a total of  1,439,128
warrants  exercisable  to purchase  1,439,128  common shares of the Company at a
price of $0.80 per share for a  five-year  period  following  the closing of the
Bridge   Financing.   The  Bridge   Facility  has  been  fully   guaranteed  and
collateralized by the Company.

     B.   Business Overview

The  Company  is  engaged  in the  insurance  business  as a  General  Insurance
Brokerage which employs  Insurance  Brokers to act on behalf of its customers in
seeking to place general  insurance  coverage  comprising  property and casualty
insurance with any number of Insurance Companies. The General Insurance industry
insures  against many  different  types of risk including  automobile,  personal
property,  commercial property and liability. Compared with other sectors of the
financial   services   industry,   the  General  Insurance  industry  is  highly
fragmented.  The large  number of  competitors  results  in no single  Insurance
Company  having a dominant  market share in any line of business.  Industry-wide
financial  conditions are putting pressure upon General  Insurance  Companies to
become more efficient and profitable.  One way in which Insurance  Companies are
becoming  more  efficient  is  by  reducing  the  number  of  General  Insurance
Brokerages with which they do business.  Larger General Insurance Brokerages are
expected to benefit from this trend.

General Insurance Industry

Insurance  Brokers  are  required  to be  licensed  in each  state,  province or
territory that they conduct business.  In addition,  most jurisdictions  require
individuals  who  engage in  Insurance  Brokerage  activities  to be  personally
licensed.  Licensing  laws for  Insurance  Brokers  vary  from  jurisdiction  to
jurisdiction and are subject to amendment by applicable regulatory  authorities.
Regulatory  authorities have the right to grant,  review and revoke licences and
approvals to sell insurance.

There are two types of  distribution  systems  which account for the majority of
sales of General Insurance to the general public:  firstly,  direct placement by
the Insurance  Company through an in-house  employee sales force and,  secondly,
placement through  independent  General Insurance  Brokerages that place General
Insurance for its  customers  with one of a number of Insurance  Companies.  New
sources of competition  continue to emerge as banks and other financial services
companies  expand the  products  and  services  they offer to include  insurance
products and brokerage services. In addition,  independent Insurance Brokers are
faced with  competition  from Insurance  Companies who utilize  aggressive media
campaigns and  telemarketing  distribution  methods to place  General  Insurance
directly with its customers.

The Insurance  Companies  have put pressure on General  Insurance  Brokerages to
consolidate  the  distribution  component of the insurance  industry,  requiring
ever-increasing  premium volume to justify the  continuance  of their  brokerage
contracts  (i.e.,  contracts  pursuant  to which a General  Insurance  Brokerage
receives  product  access and  support  from the  Insurance  Company).  A larger
General Insurance  Brokerage  generally seeks to have brokerage contracts with a
number of Insurance  Companies  so that the  cancellation  of any one  brokerage
contract would not reduce its ability to offer alternative  competitive products
to its  customers.  Smaller  General  Insurance  Brokerages  that generally have
contracts  with  only a few  Insurance  Companies  are  more  vulnerable  to the
cancellation of any one brokerage  account and the potential  inability to offer
alternative competitive General Insurance products to their customers.

Profile

The Company is a General  Insurance  Brokerage  and has been in  business  since
1989.  The Company  carries on operations  in Alberta,  Canada and the States of
California, Virginia, and Illinois, U.S.A. The Company operates out



                                      -11-
<PAGE>


of nineteen locations:  six in Alberta,  two in California,  ten in Virginia and
one in Illinois. The Company generated revenue of $13,060,344 in the fiscal year
ended March 31, 2005,  $7,469,559  in the fiscal year ended March 31, 2004,  and
$5,175,072 in the fiscal year ended March 31, 2003.  The  Company's  business is
generally not affected by seasonality  and experiences  recurring  revenues that
are principally  derived from commissions  earned from placing General Insurance
with insurance carriers on behalf of the Company's customers.

The  Company's  operations  are highly  automated  and it strives to maintain an
excellent  reputation with its customers and the insurance  carriers.  Since its
inception,  the Company has pursued an aggressive  growth  strategy of acquiring
other  General  Insurance  Brokerages  and  integrating  them into the Company's
overall business  structure.  As of March 31, 2005, the Company had purchased 19
General Insurance  Brokerages in the Province of Alberta,  Canada, two insurance
brokerages in the State of California,  one insurance  brokerage in the State of
Virginia and one insurance brokerage in the State of Illinois.

Growth Strategy

The Company has a growth  strategy of acquiring  strategically  located  General
Insurance  Brokerages  ("Flagship   Brokerages").   Upon  acquiring  a  Flagship
Brokerage,  the Company plans to take advantage of the consolidation pressure in
the  General  Insurance  industry by further  acquiring  and  integrating  other
General Insurance Brokerages located close to the Flagship Brokerage in order to
take advantage of the economies of scale of a larger operation.  Moreover, it is
the  Company's  goal to generate  more  revenue by providing  increased  General
Insurance  coverage to existing  and newly  acquired  customers by virtue of the
Company's  representation of various Insurance Companies and their products. The
revenue  growth  during the past three years has been  primarily  attributed  to
business  acquisitions  and  internally  generated  business.  There  can  be no
assurance that the Company will have earnings  growth and benefit from economies
of scale being  achieved from increased  revenue volume and commission  from its
operations and growth strategy.

The Company plans to continue a growth strategy of acquiring  General  Insurance
Brokerages in other parts of Canada and the U.S.

The Company requires licences and insurance carrier appointments to operate as a
General  Insurance  Brokerage in each state,  province or territory  which would
enable it to market and sell  General  Insurance  products.  The Company may not
have the required licenses or carrier  appointments at the time of completion of
each  acquisition of a General  Insurance  Brokerage.  Accordingly,  the Company
enters into separate agency agreements with the vendors of such acquired General
Insurance  Brokerages  whereby the vendors of such agencies agree,  for the sole
and exclusive benefit of the Company,  to market,  sell,  distribute,  place and
write  General  Insurance  products to the clients of the Company and to any and
all  other  potential  customers  who may  wish to  purchase  General  Insurance
products  from the Company.  To date,  the Company has obtained  licences in the
States of California, and Virginia and currently requires a license in Illinois.
The  Company  is  actively  filing  all  necessary  licensing  applications  and
obtaining carrier appointments with the Insurance Companies.

All of the agency agreements entered into with the vendors of the Vista,  Johns,
Vinciguerra  and  Schuneman  assets  are  similar  in  respect to the duties and
obligations of the parties thereto and can be summarized as follows. Pursuant to
the terms of the agency agreements the vendors agreed, for the exclusive benefit
of the Company,  to staff,  manage and operate the Insurance  Brokerages and the
purchased assets within an established  budget and in a professional and prudent
manner.  The agreements  further specify that all clients and revenues  stemming
from the operation of the Insurance Brokerage shall belong solely to the Company
and that the Company is responsible for the payment of all of the reasonable and
provable  expenses of the vendors with respect to the staffing,  management  and
operation of the Insurance Brokerages in accordance with the established budget.

By their  respective  terms,  the  agency  agreements  will  terminate  upon the
occurrence of the earliest of the following  events:  a) the date upon which the
Company obtains: i) all of the necessary  regulatory  approvals to operate as an
Insurance  Brokerage  or agent in the  State  where  the  purchased  assets  are
located;  and ii) all of the carrier  appointments from the Insurance  Companies
(or such number of carrier appointments as the Company deems  satisfactory);  or
b)  December  31,  2018 in respect of Johns,  September  30,  2018 in respect of
Vista,  December  31, 2024 in respect of  Vinciguerra  and  December 31, 2024 in
respect of Schuneman; or c) the date that the Company delivers written notice to
the vendor  (as the case may be) that it is  terminating  the agency  agreement.
Upon the


                                      -12-
<PAGE>

termination  of an agency  agreement all of the vendors right title and interest
in and to any and all  employment  agreements,  non-competition  agreements  and
confidentiality  agreements  which  it may  have  with  its  employees  shall be
assigned to the Company and any and all amounts which are or will become due and
owing  to the  Company  pursuant  to the  terms  of the  agency  agreement  will
immediately become due and payable.

As  security  for the  performance  of the terms and  conditions  of the  agency
agreement the shareholders of the different  vendors pledged all of their issued
and outstanding capital stock in the vendors to the Company and further provided
the Company with a directors  resolution of the respective  vendors  authorizing
the officers of the Company to become the proper signing officers of the vendors
with respect to the control of the bank accounts of the vendors.  The respective
pledge of shares  agreements and the directors  resolutions  are currently being
held in escrow by the firm of  Demiantschuk  Milley Burke & Hoffinger and are to
be released to the  Company in the event of a default of the  respective  agency
agreements  or to the  respective  vendors  upon the  termination  of an  agency
agreement in accordance with its terms.

The Company plans to acquire  additional  General Insurance  Brokerages over the
next 12-month period  depending upon its cash resources and its ability to raise
additional  capital to  acquire  Insurance  Brokerages.  Depending  upon  market
conditions, the availability of other General Insurance Brokerages and the price
that they are available, the Company's acquisition plans may change. Any further
growth may require the Company to obtain  additional  equity or debt  financing,
which may not be available on attractive terms, or at all, or may be dilutive to
current or future shareholders.

For a  breakdown  of  revenues by  geographic  market for the last three  fiscal
years,  see  Note  22,  Segment   Disclosures  in  the  Consolidated   Financial
Statements.

     C.   Organizational Structure

The  Company is a General  Insurance  Brokerage  which  conducts  its  insurance
business in Alberta,  Canada,  and in the States of  California,  Virginia,  and
Illinois,  U.S.A.  In Canada,  it conducts its business  through  Anthony  Clark
International  Insurance  Brokers  Ltd.  and  Heritage  Hill  Insurance  Ltd., a
wholly-owned  Alberta  subsidiary  of the Company.  In the U.S., it conducts its
business  through Addison York Insurance  Brokers Ltd., a wholly-owned  Delaware
subsidiary of the Company.

             -----------------------------------------------------
               Anthony Clark International Insurance Brokers Ltd.
                              (Alberta Corporation)
              -----------------------------------------------------
                                       |
----------------------------------------------------------------------------
               |                                        |
  Addison York Insurance Brokers            Heritage Hill Insurance Ltd.
          Ltd.(Delaware                         (Alberta Corporation)
        Corporation) 100%                               100%
------------------------------------     ------------------------------------

     D.   Property, Plant and Equipment

The Company does not own any real  property  but leases  office space to conduct
its business  operations  as a General  Insurance  Brokerage.  The Company has a
conditional  operating  sublease  commitment  for office  premises  in  Calgary,
Alberta  for a term  expiring  July 30, 2006 at a base rent of $11,096 per month
plus  operating  costs  estimated at $10,040 per month.  Heritage Hill Insurance
Ltd., a  wholly-owned  subsidiary,  also has an operating  lease  commitment for
office premises in Calgary, Alberta for a term expiring March 31, 2006 at a base
rent of $1,738 per month plus operating costs estimated at $1,836 per month. The
remaining four offices operate on a  month-to-month  office sharing  arrangement
basis without formal leases. The total amount of additional month-to-month lease
costs is approximately $1,122 per month in the aggregate.

In California,  the Company's  subsidiary Addison York has two operating leases,
one in the San  Francisco  area for a term expiring on August 31, 2006 at a rent
of US$11,126 plus operating  costs  estimated at $1,000 per month and one in the
Los Angeles area for a term expiring September 30, 2006 at a rent of $2,048 plus
operating costs estimated at $500 per month.


                                      -13-

<PAGE>

In Virginia,  the Company's  subsidiary Addison York has twelve operating leases
with varying  terms of expiry up to August 31, 2007 for a total  monthly rent of
US$21,709 per month plus operating costs estimated at US$3,296 per month.

In Illinois,  the Company's  subsidiary  Addison York has one operating lease in
Sterling,  Illinois for a term expiring  December 31, 2006 at a rent of US$2,100
plus  operating  costs  estimated  at US$750 per month.

Item 5.  Operating And Financial Review And Prospects

The following discussion and analysis explains trends in the Company's financial
condition and results of  operations  for the three fiscal years ended March 31,
2005,  2004 and 2003.  This discussion and analysis of the results of operations
and financial  condition of the Company should be read in  conjunction  with the
audited  consolidated  financial  statements and the related  notes,  as well as
statements made elsewhere in this Form 20-F. See "Special Note Regarding Forward
Looking  Statements".  The audited  consolidated  financial statements have been
prepared in accordance with Canadian  generally accepted  accounting  principles
which conform to accounting  principles generally accepted in the United States,
except as described in the notes to the Consolidated  Financial Statements dated
March 31, 2005, 2004 and 2003. Unless expressly stated otherwise, all references
to dollar amounts in this section are in Canadian  dollars (in  accordance  with
Canadian GAAP). For a reconciliation to accounting principles generally accepted
in the United  States  ("U.S.  GAAP"),  see note 25 to the audited  consolidated
financial  statements and supplemental  information  entitled  Reconciliation to
United States GAAP for years ended March 31, 2005, 2004 and 2003.

Overview

The Company's operations are primarily directed to acting as a General Insurance
Brokerage and acquiring  Flagship  Brokerages which the Company  integrates into
its existing  operations in order to take advantage of the economies of scale of
a larger  Insurance  Brokerage  operation.  It is the Company's goal to generate
more revenue by providing  increased General Insurance  coverage to existing and
newly acquired  customers by virtue of the Company's  representation  of various
Insurance Companies and their products.

Critical Accounting Policies

On December 12, 2001 the  Securities  and  Exchange  Commission  ("SEC")  issued
Financial  Reporting  Release  ("FRR")  No.  60,  "Cautionary  Advice  Regarding
Disclosure  About  Critical  Accounting  Policies"  which,  among other  things,
encourages  discussion  concerning the most critical accounting policies used in
the  preparation  of the Company's  financial  statements.  Critical  accounting
policies are defined as those that are both very  important to the  portrayal of
the Company's  financial  condition and results,  and require  management's most
difficult,  subjective  or complex  judgments.  We are  required to make certain
estimates,  judgments and assumptions  that we believe are reasonable based upon
available information, historical information and/or forecasts. These estimates,
judgments and assumptions  affect the reported amounts of assets and liabilities
at the date of the financial  statements and the reported  revenues and expenses
during the reporting periods.  Actual results could differ from these estimates.
The accounting  policies which management  believes are the most critical to aid
in fully  understanding  and evaluating our reported  financial  results include
those  relating to  business  acquisitions,  and  accounting  for the  resulting
customer  accounts,   goodwill  and  non-competition   agreements,   stock-based
compensation and income taxes.

Impairment of long-lived assets

Long-lived  assets are assessed  for  impairment  when events and  circumstances
warrant.  The carrying value of a long-lived asset is impaired when the carrying
amount exceeds the estimated undiscounted net cash flow from use and fair value.
In that event, the amount by which the carrying value of an impaired  long-lived
asset exceeds its fair value is charged to earnings.

Business combinations

Business  acquisitions  are accounted for using the purchase  method whereby the
fair value of consideration  given is allocated to identifiable  assets acquired
and liabilities assumed. The results of operations and cash flows of an acquired
business are included in the  Company's  financial  statements  from the date of
acquisition. Where the



                                      -14-
<PAGE>

consideration given is subject to contingent adjustment based on future periods'
operating  results,  such adjustment is recognized in the period the contingency
is resolved.

Customer accounts

Acquired  customer  accounts are carried at cost less accumulated  amortization.
Amortization is provided on a straight-line basis over estimated useful lives of
between two and  seventeen  years.  The carrying  value of customer  accounts is
periodically assessed for impairment in accordance with the Company's accounting
policy for impairment of long-lived assets.

Goodwill

Goodwill  results from business  combinations  and  represents the excess of the
consideration  given over the fair value of  identifiable  net assets  acquired.
Goodwill is not subject to  amortization  but is subject to an  impairment  test
that is performed at least annually.

Non-competition agreements

Non-competition  agreements are secured at the time of business combinations and
are  recognized  at their  estimated  fair  value  at the  date of  acquisition.
Amortization  is provided on a straight-line  basis over their estimated  useful
lives of between  six and ten years.  Impairment  is  periodically  assessed  in
accordance with the Company's policy for impairment of long-lived assets.

Stock-based compensation

Stock-based  compensation  is accounted  for at fair value as  determined by the
Black-Scholes   option   pricing  model  using  amounts  that  are  believed  to
approximate  the  volatility of the trading price of the  Company's  stock,  the
expected  lives of awards of  stock-based  compensation,  the fair  value of the
Company's  stock and the risk-free  interest  rate.  The estimated fair value of
awards of stock-based  compensation  are charged to expense as awards vest, with
offsetting amounts recognized as contributed surplus.

Income taxes

Income taxes are recorded using the liability method. Under this method, current
income taxes are recognized for the estimated income taxes payable for the year.
Future income tax assets and liabilities are recognized for the estimated income
tax  consequences  attributable to differences  between the financial  statement
carrying  amounts  of assets and  liabilities  and their  respective  income tax
bases.  Future income tax assets and liabilities are recognized using enacted or
substantively  enacted income tax rates. Future income tax assets are recognized
with respect to deductible temporary  differences and loss carryforwards only to
the extent their  realization  is considered  more likely than not.

     A.   Operating Results

US Acquisitions

Year ended March 31, 2005

During the year the Company acquired the net assets of the Vinciguerra insurance
brokerage,  located in Virginia, and the Schuneman insurance brokerage,  located
in Illinois.  Aggregate  purchase  consideration of $ 10,100,831 (US$ 8,228,463)
was given to  effect  these  acquisitions.  Both  acquisitions  are  subject  to
contingent  adjustment  based  on  future  commission  revenue,  though  in both
acquisitions the purchase consideration may only be reduced. Goodwill attributed
to both acquisitions is expected to be deductible for income tax purposes.

The results of operations and cash flows of the acquired businesses are included
in these financial statements from the closing dates of the acquisitions,  which
are  September 8, 2004 for  Vinciguerra  and January 12, 2005 for  Schuneman and
thus  reflect  results for only part of the year.  The  Company's  revenues  and
expenses are expected to be  significantly  different in the next fiscal year as
results  of the  full  year of  operations  will be  included  in the  financial
statements.



                                      -15-
<PAGE>

The consideration  given has been allocated to acquired  identifiable assets and
liabilities  as follows  based on the  foreign  exchange  rates in effect on the
dates of closing.

<TABLE>
                                               Vinciguerra         Schuneman           Total
                                              --------------------------------------------------
<S>                                           <C>                 <C>              <C>
      Customer accounts                       $  1,855,983        $   227,906      $  2,083,889

      Computer systems and equipment                64,390             36,759           101,149
      Non-competition agreements                   160,975             34,308           195,283
      Goodwill                                   6,978,094            823,504         7,801,598
      Other                                          6,439                  -             6,439
      Liabilities assumed                          (87,527)                 -           (87,527)
                                              --------------------------------------------------
                                              $  8,978,354        $ 1,122,477      $ 10,100,831
                                              --------------------------------------------------
</TABLE>

Consideration paid

<TABLE>

<S>                                           <C>                 <C>              <C>
      Cash                                    $  7,857,638        $   299,588      $  8,157,226

      Fair values of notes payable               1,120,716            822,889         1,943,605
                                              --------------------------------------------------
                                              $  8,978,354        $ 1,122,477      $ 10,100,831
                                              --------------------------------------------------
</TABLE>

The notes issued in connection with the  Vinciguerra and Schuneman  acquisitions
are at rates of interest that were  determined to be below the estimated  market
rate of interest for indebtedness  with similar terms and credit quality.  These
notes have therefore been accounted for at their discounted fair values.

The acquired customer accounts will be amortized on a straight-line basis over
two years and ten years, respectively for the Vinciguerra and Schuneman
agencies, their estimated useful lives.

During the year ended March 31, 2005 the contingent adjustment related to John's
was  resolved,  and the  purchase  consideration  was reduced by $ 9,083  (U.S.$
7,509).

Revenues

The Company's  revenue has increased to $13,060,344 for the year ended March 31,
2005 from  $7,469,559 for the year ended March 31, 2004 primarily due to revenue
generated from US acquisitions (approximately  $5,891,000).  Revenue from the US
acquisitions has been recorded from the closing date of acquisition.

The Company's  revenue increased to $7,469,559 for the year ended March 31, 2004
from  $5,175,072  for the year ended  March 31,  2003  primarily  due to revenue
generated  from  US  acquisitions  (approximately   $1,980,000),   new  business
commissions generated and premium increases (approximately  $231,000), and a net
increase in combined  other  revenue  (approximately  $83,000,  primarily due to
increase in contingent  commissions of $261,000,  a decrease in interest revenue
of  approximately  $10,000 and  non-recurrence  of one-time  revenue of $151,000
booked in the prior year).  Revenue from the US  acquisitions  has been recorded
from the closing date of acquisition.

Contingent  commissions  are  commissions  paid  to  the  Company  by  Insurance
Companies based upon volume, growth and/or profitability of business placed with
such Insurance Companies by the Company.



                                      -16-
<PAGE>

Expenses

Salaries and wages have  increased to $7,925,260 for the period ending March 31,
2005 from $4,818,880 for the period ending March 31, 2004 mainly due to salaries
and wages of US  acquisitions.  Salaries  and wages were  streamlined  in one US
office during the year resulting in an expected  annual saving of  approximately
$767,000.

Salaries  and wages  increased to  $4,818,880  for the twelve month period ended
March 31, 2004 from  $3,165,924 for the twelve month period ended March 31, 2003
mainly due to salaries and wages of US acquisitions  (approximately $1,500,000),
salaries  and  wages  related  to  the  new  business  generated  (approximately
$111,000) and administrative salary adjustments (approximately $42,000).

Rent  increased to $805,937 for the year ending March 31, 2005 from $422,672 for
the year  ending  March 31,  2004  primarily  due to rent  related to the new US
acquisitions.

Rent  increased to $422,672 for the year ended March 31, 2004 from  $283,242 for
the  year  ended  March  31,  2003  primarily  due  to  rent  related  to the US
acquisitions.

General and administrative  expenses increased to $2,393,711 for the year ending
March 31, 2005 from  $1,446,886 for the year ending March 31, 2004 primarily due
to the US acquisitions.

General and  administrative  expenses increased to $1,446,886 for the year ended
March 31, 2004 from  $1,173,128  for the year ended March 31, 2003 mainly due to
the  inclusion  of  general  and  administrative  expenses  of  US  acquisitions
(approximately  $350,000),  increase  in  legal  fees  (approximately  $33,000),
increase in insurance costs (approximately $42,000), increase in accounting fees
(approximately $24,000), decrease in operating costs of the website and computer
maintenance  costs  (approximately  $36,000),  and  decrease  in other  expenses
primarily related to acquisition identification (approximately $102,000).

During the year ended March 31, 2005, the Company  awarded 520,000 stock options
which were  accounted  for in  accordance  with the new  guidance  Section  3870
"Stock-Based  Compensation and Other Stock-Based  Payments" of the CICA Handbook
which requires the expensing of the fair value of the options ($411,275).

During the year ended March 31,  2004,  legal  judgment  expense of $522,619 was
recorded.  This  judgment  was  made  against  the  Company  with  respect  to a
previously  outstanding legal proceeding.  The judgment related to the Company's
alleged failure to honor a stock option agreement dated October 1, 1998.  During
the year  ended  March 31,  2005,  the  Company  settled  for a cash  payment of
$450,000 (including legal costs). The difference between the judgment amount and
settlement  of $72,619 was  recovered  and reflected in the first quarter of the
2005 fiscal year.

Revenues  and  expenses for US  acquisitions  have been  included in the current
fiscal year from the closing date of the  acquisitions  and thus reflect results
for only  part of the  year.  The  revenues  and  expenses  are  expected  to be
significantly  different  in the next fiscal year as results of the full year of
operations will be included in the financial statements.

Earnings Before Interest, Taxes, Depreciation and Amortization (EBITDA)

EBITDA is a non-Generally  Accepted Accounting Principles measure and represents
earnings  before  interest,  income  taxes  and  depreciation  and  amortization
(non-cash  expenses).  The Company's EBITDA increased to $1,524,161 for the year
ended March 31, 2005 from  $258,502 for the year ended March 31, 2004  primarily
due to US acquisitions,  two of which were included for the full year and two of
which occurred during the year.  EBITDA as a percentage of revenue has increased
from 3.5% for the year ended  March 31,  2004 to 11.7% for the year ended  March
31, 2005. Management has taken steps to streamline the costs associated with its
US operations and expects further EBITDA  improvements in upcoming quarters from
these adjustments together with the effect of new acquisitions

The Company's  EBITDA  decreased from $552,778 for the year ended March 31, 2003
to  $258,502  for the year  ended  March  31,  2004  primarily  due to the legal
judgement ($522,619). EBITDA as a percentage of revenue has decreased from 10.7%
for the year ended March 31, 2003 to 3.5% for the year ended March 31, 2004.


                                      -17-

<PAGE>


EBITDA is discussed and presented here as a  non-Generally  Accepted  Accounting
Principles  measure  because it is  management's  major  performance  indicator.
EBITDA is reconciled to Net Earnings (loss) below.

<TABLE>
    Years ended March 31,                             2005              2004           2003          2002          2001
                                                                                                  (restated)    (restated)
   <S>                                            <C>             <C>             <C>           <C>           <C>
    OPERATIONS
    Revenue                                       $ 13,060,344    $   7,469,559   $  5,175,072   $ 4,449,628   $ 3,894,115
    Earnings before the following (EBITDA)           1,524,161          258,502        552,778       445,029       251,034
    Interest and Financing Costs                    (4,539,268)        (941,153)      (285,720)       (9,540)       (9,614)
    Depreciation and amortization                   (1,303,867)        (481,025)      (609,546)     (634,886)      438,133)
    Income Taxes (expense) recovery                   (151,180)         112,178        (13,313)       67,561       206,657
    Net (Loss) Earnings                           $ (4,470,154)    $ (1,051,498)   $  (355,801)   $ (131,836)   $    9,944
</TABLE>

During the year ended March 31, 2005,  non-cash expenses included in arriving at
net loss  amounted to  $4,651,527  which  related to  stock-based  compensation,
depreciation and amortization, amortization of deferred financing costs and loan
discounts,  and the impairment of deferred  financing costs and unamortized loan
discounts on reclassified long-term debt.

During the year ended March 31, 2004,  non-cash expenses included in arriving at
net loss amounted to $956,537 which related to depreciation and amortization and
amortization of deferred financing costs and loan discounts.

Interest and Financing Costs

<TABLE>
                                                                                  2005            2004
     <S>                                                                     <C>              <C>
      Canadian operations:
      Interest and financing costs on Paragon term loan repaid (note
      10(b))                                                                $        --        $ 274,866
      Interest and financing costs on long-term debt                                 --               --
      Interest on obligations under capital lease                                 1,410            1,701
      ---------------------------------------------------------------------------------------------------
                                                                                  1,410          276,567
      US operations:
      Amortization of discount on reclassified long-term debt                   166,489           62,625
      Amortization of financing costs                                           230,199          412,887
      Impairment of discount on reclassified long-term debt                   1,428,664                -
      Impairment of deferred financing costs on reclassified
      long-term debt                                                          1,111,033                -
      Interest and loan fees on long-term debt                                1,596,851          186,520
      Interest on obligations under capital lease                                 4,622            2,554
      ---------------------------------------------------------------------------------------------------
                                                                              4,537,858          664,586

      Total interest and financing costs                                    $ 4,539,268        $ 941,153
</TABLE>

Depreciation and Amortization

Depreciation and  amortization  increased to $1,303,867 for the year ended March
31, 2005 from  $481,025 for the year ended March 31, 2004.  The increase was due
mainly to the amortization of increased  customer accounts resulting from the US
acquisitions, one of which has a two year amortization period.



                                      -18-
<PAGE>

Depreciation and amortization decreased to $481,025 for the year ended March 31,
2004 from  $609,546  for the year ended March 31,  2003.  The  Depreciation  and
Amortization  expense was higher during the year ended March 31, 2003  primarily
due to the final  amortization of the website  development  costs, the change in
accounting  policy  related  to  business   combinations,   goodwill  and  other
intangible  assets and  purchase  price  adjustments  part way through the year.
During the year ended March 31, 2004, the Depreciation and Amortization  expense
included an amount of $196,814(2003 - $0) relating to US acquisitions.

Net loss and loss per Common share

                                                2005          2004       2003

 Net loss                                    (4,470,154)  (1,051,498)  (355,801)

 Loss per Common Share, basic and diluted:        (0.56)       (0.14)     (0.05)

Net loss for the year ended March 31, 2005 was $4,470,154 compared to a net loss
of  $1,051,498  for the year ended March 31, 2004 due to an increase in non-cash
expenses  related  to  stock-based  compensation  ($411,275),  depreciation  and
amortization  ($1,303,867),  amortization  of deferred  financing costs and loan
discounts  ($396,688)  , and the  impairment  of  deferred  financing  costs and
unamortized loan discounts on reclassified long-term debt $2,539,697).

Net loss for the year ended March 31, 2004 increased by $695,697 mainly due to a
legal  judgment of $522,619 and an increase in interest and  financing  costs of
$655,433,  offset by a decrease in depreciation and amortization of $128,521 and
a decrease in future  income tax expenses of $125,491.  Net loss as a percentage
of revenue has  increased  from 6.89% for the year ended March 31, 2003 to 14.1%
for the year ended March 31, 2004.

CHANGE IN ACCOUNTING POLICY

Stock-based Compensation

Effective  on April 1, 2004 the  Company  adopted the  guidance in Section  3870
"Stock-Based  Compensation and Other Stock-Based Payments" of the CICA Handbook.
As permitted,  the Company adopted  Section 3870 on a retroactive  basis but has
adjusted opening retained earnings of the current year for the cumulative effect
of adoption on prior years.  The  comparative  figures for the fiscal year ended
March 31,  2004 have  therefore  not been  restated  to reflect  this  change in
accounting policy.  This change in accounting policy had no effect on the fiscal
year ended March 31, 2003.

     B.   Liquidity and Capital Resources

At March 31, 2005, the Company had a working capital deficiency of $(16,785,495)
and obligations under capital leases of $19,231.  The working capital deficiency
is due to the  reclassification of the long-term debt to demand loans in current
liabilities in accordance with Canadian  accounting  standards (EIC-59 Long-term
debt with covenant  violations).  Subsequent to the March 31, 2005 year end, new
financing was obtained  which  resulted in the repayment of the existing  senior
debt and the reclassification of the senior and seller's debt to long-term debt.

The  Company's  balance sheet as at March 31, 2005 as compared to March 31, 2004
reflects a net decrease in working  capital of $18,634,270  primarily due to the
reclassification  of all senior and  seller's  debt to  current  liabilities  as
demand loans in accordance with Canadian accounting  standards (EIC-59 Long-term
debt with covenant  violations).  Subsequent to the March 31, 2005 year end, new
financing was obtained  which  resulted in the repayment of the existing  senior
debt and the  reclassification  of the seller's  debt to long-term  debt.  Other
major changes include a net increase in customer accounts  ($651,098),  increase
in goodwill ($7,066,149), financing costs paid ($832,998) and net change in debt
($9,065,539)  related to  financing  US  acquisitions  of customer  accounts and
goodwill. Shareholders' equity has decreased by $4,089,128, primarily due to the
current year operating loss of



                                      -19-
<PAGE>

$4,470,154,  partially  offset by an increase in the contributed  surplus due to
the accounting for stock-based compensation.

At March 31, 2004,  the Company had working  capital of $1,848,775 and long-term
debt outstanding of $8,014,044.

The  Company's  balance sheet as at March 31, 2004 as compared to March 31, 2003
reflects a net decrease in working  capital of  $2,062,088  due to cash used for
the US  acquisitions.  Other major  changes  include an increase in net customer
accounts  ($3,465,334) and goodwill  ($3,884,353),  long-term debt  ($8,477,142)
related to  financing  acquisitions  of customer  accounts  and  goodwill  and a
decrease in shareholder's equity of $738,337, primarily due to an operating loss
of $1,051,498 less net proceeds from a share issue of $314,006.

Shareholders'  equity has  decreased  from  $6,498,097  as at March 31,  2004 to
$2,408,969  as at March 31, 2005 due  primarily  to the  operating  loss for the
twelve month period ended March 31, 2005 of $4,470,154 primarily due to non-cash
based items of stock-based compensation  ($411,275),  the impairment of discount
on reclassified  long-term debt  ($1,428,664),  impairment of deferred financing
costs  on  reclassified   long-term  debt   ($1,111,033)  and  depreciation  and
amortization  ($1,303,867),  partially  offset by an increase in the contributed
surplus due to the accounting for stock-based compensation.

Shareholders'  equity has  decreased  from  $7,236,434  as at March 31,  2003 to
$6,498,097  as at March 31,  2004 due to the loss for the  twelve  month  period
ended March 31, 2004  primarily  related to the legal  judgement  ($522,619) and
expensing  of the  financing  costs  related  to new  and  terminated  financing
($495,763)  and  depreciation  and  amortization  ($481,025).  The  decrease was
partially offset by the net proceeds of $314,006 from the private placement.

Cash and cash equivalents decreased $1,587,719 in the year ending March 31, 2005
due to  negative  cash  flow  from  investing  activities,  partially  offset by
positive  cash flow from  financing  and  operating  activities.  Cash flow from
investing  activities was negative,  due to cash being used primarily to acquire
new  brokerages  ($8.1  million)  and  computer  systems  and  office  equipment
($66,256).  Cash flow was provided by financing  activities primarily due to the
FCC debt  financing  ($3.5  million) and Emmett debt  financing  ($3.9  million)
partially offset by deferred  financing costs paid ($832,998),  and repayment of
debt ($417,340).

Cash and cash equivalents decreased $1,729,745 in the year ending March 31, 2004
due to negative cash flow from  operating and  investing  activities,  partially
offset by positive cash flow from  financing  activities.  Operating  activities
generated  negative  cash flow due to legal  judgement  of  $522,619  and higher
interest and financing costs. Cash flow from investing  activities was negative,
as cash was used primarily to acquire new brokerages ($4.6 million) and computer
systems and office  equipment  ($66,230).  Cash flow from  financing  activities
provided positive cash flow of $3.5 million mainly due to a private placement of
$314,006  and Oak Street debt  financing  ($4.4  million),  partially  offset by
$655,274, deposited as collateral to the Oak Street debt financing, and $557,324
paid for deferred financing costs.

As at March 31, 2005, the Company had contractual  and long-term  obligations as
set forth in Item 5.F.

The Company does not currently enter into any financial  instruments for hedging
purposes.

Financing Arrangements and Acquisitions

On July 31,  2002,  the Company  completed a  U.S.$5,000,000  revolving  line of
credit (the "Textron Facility") pursuant to a loan agreement dated July 31, 2002
between the Company and Textron Financial Company ("Textron"),  as amended by an
agreement dated April 3, 2003. The Textron  Facility had an interest rate of the
greater of (a) the Wall Street  Journal  prime rate plus 2.5% per annum,  or (b)
U.S.$10,000 per month. A commitment fee of $100,000 was paid on the closing date
and is also  required to be paid on the  anniversary  of the  closing  date each
year. As collateral for the Textron  Facility  Textron,  obtained a first charge
over all of the assets of the Company.

On October 17, 2003,  the Company  acquired  the net assets of DKWS  Enterprises
Inc.  and the  Kabaker  Family  Trust  of July  1998,  doing  business  as Vista
International  Insurance Brokers ("Vista"), a California based General Insurance
Brokerage for purchase  consideration  of $6,117,633.  The purchase was financed
using cash and seller



                                      -20-
<PAGE>

financing.  The seller  financing is by way of a US$3,515,000  note payable with
interest at 7% per annum and repayable in monthly payments of $49,366  including
principal and interest,  due on September  30, 2013 and is  collateralized  by a
pledge of certain assets of the Company. No payments have been made since August
2004 as the lending  agreement  provides  for  secession  of  payments  based on
available  working  capital.  The Vista  acquisition  is subject  to  contingent
adjustment  based on  commission  revenue  earned in the second  year. A further
adjustment  of 20% of the purchase  consideration  will be made based on a price
calculation  relating to the commission revenue in the fifth year after closing.
This additional  consideration cannot be reasonably estimated and will therefore
be accounted for when the contingency is resolved.

On October 20, 2003,  a  termination  and release  agreement  was executed  with
Textron Financial Corporation,  which terminated the loan agreement and released
all security documents.

On November 6, 2003, the Company  executed a loan agreement (the "Paragon Loan")
with  Paragon  Capital  Corporation  Ltd.  ("Paragon")  with  loan  proceeds  of
$2,100,000.  The loan had a one-year  term,  with interest only  payments,  with
interest  at 2% per month.  A  commitment  fee of $63,000 was paid to Paragon in
connection  with the Paragon Loan.  The Paragon Loan was secured  against all of
the assets of the Company.

On November  6, 2003,  the Company  acquired  the net assets of Johns  Insurance
Agency,  Inc.  ("Johns"),  a California  based General  Insurance  Brokerage for
purchase  consideration of $2,483,009.  The purchase was financed using cash and
seller financing.  The seller financing was by way of a US$174,719 note payable,
bearing no interest, was unsecured and was paid on December 31, 2004.

On  March  22,  2004,  the  Company  completed  a  US$5,000,000  debt  financing
arrangement  with Oak Street Funding ("Oak Street") whereby Oak Street agreed to
provide  a  US$5,000,000  reducing  revolving  line of credit  (the "Oak  Street
Facility")  subject to a borrowing base formula.  The Oak Street Facility had an
interest  rate of prime  plus 8% per annum with  interest  only  payments  for a
period  of two  years.  The  Oak  Street  Facility  was  required  to be used to
refinance the Paragon Loan,  acquisitions  of General  Insurance  Brokerages and
related working  capital and equipment needs and other purposes  approved by Oak
Street.  The Oak Street  Facility  was secured  against all of the assets of the
Company, other than the collateral subject to future financing.

On March 22, 2004,  the Paragon Loan was repaid with the proceeds  received from
the Oak Street Facility.

On June 14, 2004,  the Company  completed a  U.S.$7,500,000  ($10,090,725)  debt
financing  arrangement with First Capital Company,  LLC ("FCC") whereby FCC will
provide up to a U.S.$7,500,000  ($10,090,725)  reducing revolving line of credit
(the "FCC Facility") subject to a borrowing base formula. The FCC Facility had a
maturity 5 years from the close of the transaction,  with interest only payments
during the first two years.  The FCC Facility had a Wall Street Journal interest
rate of prime plus 2% per annum.  As collateral for the FCC Facility,  FCC had a
security  interest in the assets of the Company acquired after June 14, 2004, in
connection  with  any  acquisition  financed  by FCC and a  subsequent  security
interest  in  the  assets  of  the   Company,   subject  to  certain   permitted
encumbrances.  The FCC Facility was to be used to fund  acquisitions  of General
Insurance  Brokerages  within the United States and provide  working capital for
the related acquisitions.

On August 31, 2004, the Company obtained US $3,250,000  ($4,192,500 CDN) in debt
financing from Emmett Lescroart  ("Emmett"),  pursuant to an arrangement whereby
Emmett  agreed to provide a loan of up to US  $3,250,000  ($4,192,500  CDN) (the
"Emmett  Facility")  to  purchase  substantially  all of the  net  assets  of Al
Vinciguerra  Ltd.,  ("Vinciguerra")  a  Norfolk,  Virginia  area  based  General
Insurance  Brokerage  . The Emmett  Facility  was fully drawn down on August 31,
2004,  bears  interest at a rate of 14% per annum,  and  requires the Company to
make monthly  interest only  payments  until 2008.  The principal  amount is due
September  1, 2008.  The  Emmett  Facility  is secured by certain  assets of the
Company.

On  September  8,  2004,   the  Company   acquired   Vinciguerra   for  purchase
consideration  of $8,978,354.  The purchase was financed using the FCC Facility,
the Emmett Facility and seller  financing.  The seller financing was by way of a
US$1,000,000 note payable with interest at 7% per annum and repayable in monthly
payments of $23,951 including principal and interest, due on August 31, 2009 and
collateralized by a pledge of certain assets of the Company.



                                      -21-
<PAGE>

On January 12, 2005, the Company acquired the net assets of Schuneman  Insurance
Agency  Inc.  ("Schuneman"),   a  Sterling,  Illinois  based  General  Insurance
Brokerage,  for purchase consideration of $1,122,477.  The purchase was financed
using an existing FCC Credit Facility and seller financing. The seller financing
was by way of a  US$1,155,000  note  payable  with  interest at 8% per annum and
repayable in monthly payments of $28,328 including principal and interest,  that
do not begin until January 1, 2008, due on December 31, 2012 and  collateralized
by a pledge of certain assets of the Company.

On June 15, 2005, the Company completed a U.S.$25,000,000  ($30,750,000) secured
debt financing  arrangement (the "Bridge  Facility") with United States lenders,
Bridge Healthcare Finance, LLC and Bridge Opportunity Finance LLC (collectively,
the  "Lenders").  The Bridge  Facility  was used to repay the FCC and Oak Street
Facilities and certain other  obligations  amounting to  approximately  U.S.$7.5
Million and the balance of the Bridge  Facility will be used for working capital
and to fund  future  acquisitions  of General  Insurance  Brokerages  within the
United  States.  The Bridge  Facility  will mature in five years and interest is
payable  monthly  during the term of the loan.  Principal is payable  during the
term of the loan based upon an excess cash flow availability formula. The Bridge
Facility has an interest  rate of prime plus 6.25% per annum,  with an effective
rate  reduction of 1.5% and 2.5% for new equity  raised of U.S.$3.0  Million and
U.S.$5.0 Million  respectively.  As additional  consideration  for providing the
Bridge  Facility,  the  Company  has  issued  the  Lenders a total of  1,439,128
warrants  exercisable  to purchase  1,439,128  common shares of the Company at a
price of $0.80 per share for a  five-year  period  following  the closing of the
Bridge   Financing.   The  Bridge   Facility  has  been  fully   guaranteed  and
collateralized by the Company.

Subsequent Events

On June 15, 2005, the Company closed a U.S.$  25,000,000 ($ 30,750,000)  secured
debt  financing  arrangement  with  United  States  lenders,  Bridge  Healthcare
Finance, LLC and Bridge Opportunity  Finance, LLC (collectively,  the "Lenders")
whereby the Lenders  have agreed to provide a U.S.$  25,000,000  ($  30,750,000)
five year term loan facility (the "Facility") to the Company.

The  Company  can  borrow  an  aggregate  amount,  not to  exceed  at  any  time
outstanding,  three times the trailing  twelve month  adjusted  Earnings  Before
Interest,  Income Taxes,  Depreciation and Amortization  (EBITDA).  The Facility
will mature on June 15, 2010. Principal repayments are based upon an excess cash
flow availability formula. Interest is payable monthly calculated at the rate of
prime  plus 6.25% per  annum,  but at no time less than 12% per  annum,  with an
effective  rate  reduction  of 1.5% and 2.5% for new equity  raised of U.S.$ 3.0
million and U.S.$ 5.0 million  respectively.  As  additional  consideration  for
providing the Facility,  the Company has issued the Lenders a total of 1,439,128
warrants  exercisable to purchase  1,439,128  common shares at a price of $ 0.80
per share until June 15, 2010.

The Facility has been fully guaranteed and collateralized by the Company.

The initial term loan proceeds of U.S.$  7,527,105 were used to repay the credit
facilities  that were in  default  as of March 31,  2005 in the  amount of U.S.$
6,458,460,  and pay the costs of U.S.$  1,515,000  incurred  in  relation to the
Facility.  Additional  costs have been incurred for which the amounts  cannot be
determined at this point in time.

The  balance of the  Facility  may only be used to fund  permitted  acquisitions
within the United States.

On or about June 17, 2005, DKWS  Enterprises,  Inc. (DKWS") filed an action (the
"Initial Action") against Addison York alleging that approximately  U.S.$583,500
is due and owing by Addison  York to DKWS.  On or about July 14,  2005,  Addison
York filed legal proceedings  against John Kabaker,  DKWS and the Kabaker Family
Trust of July 1998 (collectively,  the "DKWS Group") for,  interalia,  breach of
contract  and  misrepresentation  concerning  the  purchase of the net assets of
Vista and is claiming damages in the amount of approximately  U.S.$3,136,000  or
in the alternative,  rescission of the purchase and sale agreement in respect of
the purchase of the net assets of Vista.

On or about July 29, 2005,  DKWS filed an amendment to the Initial  Action filed
on June 17, 2005 and have added the Company as a defendant,  and DKWS Group,  as
plaintiffs,  alleging,  interalia,  $583,500  is due and owing by the Company to
DKWS, breach of certain contracts,  including wrongful dismissal of John Kabaker
and is claiming damages  according to proof and costs. On the advice of counsel,
the  Company  is of the view that the legal  proceedings  and claims by the DKWS
Group are without merit.  The Company  intends to vigorously  defend against the
actions  by the DKWS  Group and at the same  time  vigorously  pursue  its claim
against the DKWS Group.  Pursuant to the above noted alleged  breach of contract
by John  Kabaker,  DKWS and the Kabaker  Family Trust of July 1998,  the Company
exercised its rights under the Agency Agreement and Share Pledge Agreement (both
dated October 1,2003), and on or about June 22, 2005, seized the shares and bank
accounts of DKWS.

On September 15, 2005,  John Kabaker filed a complaint with the U.S.  Department
of Labor, for unlawful retaliation pursuant to section 806 of the Sarbanes-Oxley
Act. It is the intent of the Company to  vigorously  defend the Company  against
the claim.




                                      -22-
<PAGE>


Additional Financing

Provided  that the  Company's  lenders do not  accelerate  any of the  Company's
outstanding debt and the Company does not complete any additional  acquisitions,
the  Company  believes  that its  existing  working  capital and cash flows from
operations will be sufficient to meet the Company's working capital needs for at
least the next 12 months,  after which the Company will require  additional debt
or equity financing.  Additional financing may be required prior to such time if
the Company  identifies  additional  acquisition  targets,  or if the  Company's
revenues  are less  than,  or its  expenses  are  greater  than,  expected.  The
Company's  working  capital  and cash flows from  operations  are not  currently
sufficient to pay its  obligations  under its existing  long-term debt when such
debt becomes due.  Accordingly,  the Company  anticipates  it will in the future
need  additional  financing in order to refinance or repay such debt The Company
may seek additional  financing by issuing debt, Common Shares, or other types of
securities in private placements or public offerings.  There can be no assurance
that  additional  financing  will be available  to the Company when  required on
favorable terms, if at all.

     C.   Research and Development, Patents and Licenses, etc.

The Company does not generally engage in research and development activities but
has a growth  strategy of  acquiring  strategically  located  General  Insurance
Brokerages  and  integrating  them  into  its  operation  to take  advantage  of
economies of scale of a larger  operation.  The Company evaluates the market for
potential   acquisitions  in  various   jurisdictions   but  has  to  date  made
acquisitions  in Alberta,  Canada,  and in California,  Virginia,  and Illinois,
U.S.A.

     D.   Trend Information

There  are  not  any  unusual  or  infrequent  events  or  transactions  or  any
significant economic changes which are expected to materially affect income from
continuing operations. Management does not expect that inflation will materially
adversely affect income from continuing operations as proportional increases can
be expected from commission revenue generated from insurance policies.

     E.   Off-Balance Sheet Arrangements

None.

     F.   Tabular Disclosure of Contractual Obligations

The following  table sets forth the Company's  future  contractual and long-term
obligations as at March 31, 2005:

<TABLE>
                                                             Less than         1 - 3           3 - 5       More than
Contractual Obligations                         Total          1 Year          Years           Years         5 years
---------------------------------------------------------------------------------------------------------------------

<S>                                            <C>             <C>            <C>              <C>         <C>
Capital Lease Obligations                      39,966          20,735         14,435           4,796               -
Operating Lease Obligations                   989,698         712,203        277,495              -                -

Demand Loans
Kabaker Family Trust                        3,973,513         524,567        751,106         863,627       1,834,213
Schuneman Insurance Agency Inc.             1,397,088               -         57,423         503,021         836,644
</TABLE>



                                      -23-
<PAGE>


<TABLE>
                                                             Less than         1 - 3           3 - 5       More than
Contractual Obligations                         Total          1 Year          Years           Years         5 years
---------------------------------------------------------------------------------------------------------------------
<S>                                            <C>             <C>            <C>              <C>         <C>

Oak Street Funding (1)                      3,624,294               -      1,374,706       1,780,408         469,180
First Capital Corporation                   3,509,728               -      1,757,420       1,752,308               -
Emmett Lescroart                            3,931,200               -              -       3,931,200               -
Al Vinciguerra Ltd.                         1,089,241         218,082        484,591         386,568               -
Total                                      18,554,728       1,475,587      4,717,176       9,221,928       3,140,037
---------------------------------------------------------------------------------------------------------------------
     (1) Net  of cash held in collateral account $609,306 (US$500,000).

</TABLE>

During the year ended March 31, 2005,  the Company  reclassified  the  long-term
debt (except capital lease  obligations) to current  liabilities as demand loans
in accordance with EIC-59 (Long-Term Debt with Covenant Violations).  Subsequent
to the March 31, 2005 year end,  new  financing  was  obtained  which repaid the
existing  senior  debt.  The result will be the  reclassification  of the demand
loans to  long-term  debt as they are no longer  demand  loans.  The above table
reflects the contractual obligations taking into account the reclassification of
the demand loans to long-term debt, subsequent to the year end.

Item 6.  Directors, Senior Management and Employees

     A.   Directors and Senior Management

The names, municipality of residence, position(s) with the Company and principal
occupation(s)  of each  director  and  executive  officer of the  Company are as
follows:

<TABLE>
-----------------------------------------------------------------------------------------------------------------------
                                                                                                     Date First
Name, Municipality of                                                                                Elected or
Residence and Office or                                                                              Appointed as a
Position Currently Held         Age   Principal Occupation For The Past Five Years                   Director
-----------------------------------------------------------------------------------------------------------------------
<S>                             <C>   <C>                                                            <C>
Primo Podorieszach              49    April 1996 to Present: President of the Company                April 1, 1996
Kamloops, British Columbia
President, Chief Executive
Officer and Director
-----------------------------------------------------------------------------------------------------------------------
Tony Consalvo                   45    April 1996 to Present: General Manager and Chief Operating     April 1, 1996
Calgary, Alberta                      Officer of the Company
Chief Operating Officer and
Director
-----------------------------------------------------------------------------------------------------------------------
Douglas Farmer(1)(2)(3)         47    Since February 1, 2000, Branch Manager, First National         September 24,
Calgary, Alberta                      Financial Corp.                                                1998
Director
-----------------------------------------------------------------------------------------------------------------------
Thomas Milley(1)(2)(3)          45    Barrister & Solicitor; Partner, Demiantschuk, Milley, Burke    June 30, 1999
Calgary, Alberta                      & Hoffinger since 1993
Director
-----------------------------------------------------------------------------------------------------------------------
Joseph P. Giuffre(3)            48    Barrister & Solicitor, Shareholder - Axium Law Corporation     February 9, 2000
Vancouver, British Columbia           since January 1, 2004; Barrister & Solicitor; Partner,
Director and Secretary                Gowling Lafleur Henderson LLP April 1, 2000 - December 2003.
-----------------------------------------------------------------------------------------------------------------------
Normand Cournoyer(1)(2)         56    Independent Insurance Consultant from July 2003 to July        August 16, 2004
Calgary, Alberta                      2004; Assistant Vice-President, Business Development Western
Director                              Canada of Allianz Canada, from 1998 to April 2003.
-----------------------------------------------------------------------------------------------------------------------
</TABLE>



                                      -24-
<PAGE>


<TABLE>
-----------------------------------------------------------------------------------------------------------------------
                                                                                                     Date First
Name, Municipality of                                                                                Elected or
Residence and Office or                                                                              Appointed as a
Position Currently Held         Age   Principal Occupation For The Past Five Years                   Director
-----------------------------------------------------------------------------------------------------------------------
<S>                             <C>   <C>                                                            <C>
Mahesh Bhatia(4)                46    Chief Financial Officer - June 2005 to present; Interim              N/A
Calgary, Alberta                      Chief Financial Officer, August 2004 to February 2005;
Chief Financial Officer               Independent consultant from February 2003 - June 2005; Nov
                                      2000 - January 2003, Corporate Controller, Proprietary
                                      Industries Inc., public company listed on Toronto Stock
                                      Exchange; Oct 1998 - Oct 2000, Sr. Coordinator, Financial
                                      Reporting, ICG Propane Inc.
-----------------------------------------------------------------------------------------------------------------------
(1)      Messrs. Farmer, Milley and Cournoyer are the members of the Company's
         Audit Committee.

(2)      Messrs. Farmer, Cournoyer and Milley are members of the Compensation
         Committee.

(3)      Messrs. Milley, Giuffre, and Farmer are members of the Corporate
         Governance Committee.

(4)      Mahesh Bhatia joined the Company as a consultant on January 15, 2004,
         served as interim Chief Financial Officer from August 16, 2004 to
         February 28, 2005, and was appointed as Chief Financial Officer on June
         15, 2005.
</TABLE>

Primo  Podorieszach  - President,  Chief  Executive  Officer and  Director;  Mr.
Podorieszach  is a Chartered  Accountant  and has been  President of the Company
since  its  inception,  and has  extensive  accounting  and  insurance  industry
experience. He obtained a Chartered Accountant designation in 1982.

Tony Consalvo - Chief  Operating  Officer,  General  Manager and  Director;  Mr.
Consalvo has been involved as Vice-President  and Chief Operating Officer of the
Company since its inception, and has extensive insurance industry experience.

Douglas Owen Farmer - Director;  Mr.  Farmer is employed as a manager with First
National Financial  Corporation and has over 20 years' experience in the banking
and trust industry.

Joseph P.  Giuffre -  Director  and  Secretary;  Mr.  Giuffre  is a founder  and
principal  shareholder of the British  Columbia law firm Axium Law  Corporation,
carries on a diverse  commercial  and business law practice with emphasis in the
area of securities law, acquisitions and mergers,  corporate reorganizations and
public and private securities offerings.

Thomas Milley - Director;  Mr. Milley is a Partner of the law firm Demiantschuk,
Milley,  Burke &  Hoffinger.  He has  served on a number of boards of public and
private  companies  focussed  principally in the high tech sector.  He is also a
director of ILI Technologies Corp.

Normand  Cournoyer  -  Director;  Mr.  Cournoyer  is  an  independent  insurance
consultant and has over 20 years of experience in the insurance industry.

Mahesh  Bhatia - Chief  Financial  Officer;  Mr.  Bhatia joined the Company as a
consultant  in January  2004,  served as interim  Chief  Financial  Officer from
August 16, 2004 to February 28, 2005 and was appointed Chief  Financial  Officer
on June 15, 2005. Mr. Bhatia is a CPA and Chartered  Accountant  (India) and has
extensive  accounting and public company  experience.  He had been working as an
independent consultant since February 2003 to June 2005 and prior to that worked
as a Corporate  Controller  of  Proprietary  Industries  Inc., a public  company
involved in real estate, hospitality, golf and mining. From Oct 1998 - Oct 2000,
he worked as a Sr.  Coordinator,  Financial  Reporting  in ICG Propane  Inc.,  a
propane gas distribution company.

     B.   Compensation

The aggregate  amount of compensation  paid by the Company and its  subsidiaries
during the fiscal  year ended March 31, 2005 to  officers  and  directors,  as a
group,  for services in all  capacities  was $272,333 as compared to $283,772 at
March 31, 2004,  excluding fees billed for legal services by laws firms in which
certain of the Company's  directors  are partners (see Item 7 (B)).  The Company
does not set aside or accrue  funds to provide  pension,  retirement  or similar
benefits for officers and directors of the Company.



                                      -25-
<PAGE>

"Named  Executive  Officer" means the Chief  Executive  Officer  ("CEO") and the
Chief  Financial  Officer  ("CFO"),  regardless of the amount of compensation of
that  individual,  and the  Company's  three most highly  compensated  executive
officers, other than the CEO and CFO, who were serving as such at the end of the
most recently  completed fiscal period,  whose total salary and bonus during the
most  recent  fiscal  year end was  $150,000  or more,  whether or not they were
executive officers at the end of the fiscal year

The  Company  had three Named  Executive  Officers  during the fiscal year ended
March 31, 2005,  Primo  Podorieszach,  Shelley  Samec,  and Mahesh  Bhatia.  The
following table sets forth the  compensation  awarded,  paid to or earned by the
Company's  Named  Executive  Officers during the financial years ended March 31,
2003, 2004 and 2005.

<TABLE>
         Summary Compensation Table
---------------------------------------------------------------------------------------------------------------
                            Annual Compensation                         Long Term Compensation
---------------------------------------------------------------------------------------------------------------
                                                                    Awards                Pay-outs
                                                              ---------------------------------------

Name and           Year      Salary     Bonus      Other      Securities    Restricted      LTIP      All
Principal            (1)      ($)        ($)       Annual       Under        Shares or      Pay-     Other
Position                                           Compen-     Options/     Restricted      outs     Compen-
                                                   sation        SARs          Share        ($)      sation
                                                    ($)        granted         Units                   ($)
                                                                 (#)            ($)
---------------------------------------------------------------------------------------------------------------
<S>                <C>      <C>         <C>        <C>        <C>              <C>        <C>       <C>
Primo              2005     $100,000     Nil         Nil       358,837/0        N/A         N/A       Nil
Podorieszach       2004     $100,000     Nil         Nil       143,837/0        N/A         N/A       Nil
President          2003     $100,000     Nil         Nil          Nil           N/A         N/A       Nil
& Chief Executive
Officer
---------------------------------------------------------------------------------------------------------------
Shelley Samec      2005     $  7,083     Nil         Nil       20,000/0         N/A         N/A       Nil
Chief Financial    2004     $ 77,917     Nil       $5,855(3)   13,017/0         N/A         N/A       Nil
Officer (2)        2003     $ 85,000   $12,500         --         Nil           N/A         N/A       Nil
---------------------------------------------------------------------------------------------------------------
Mahesh Bhatia      2005     $ 48,750   $ 7,500       Nil          Nil           N/A         N/A       Nil
Interim Chief
Financial
Officer (4)
---------------------------------------------------------------------------------------------------------------
(1)  Fiscal years ended March 31, 2005, 2004 and 2003.

(2)  Ms.  Samec was on  maternity  leave from March 1, 2004 to March 1, 2005 and
     ceased to be the Chief Financial Officer on June 15, 2005.

(3)  Paid in lieu of vacation time

(4)  Mr. Bhatia was appointed  Interim Chief  Financial  Officer from August 12,
     2004 to February 28, 2005. Mr. Bhatia was appointed Chief Financial Officer
     on June 15, 2005.
</TABLE>



                                      -26-
<PAGE>

Long Term Incentive Plan Awards

Long term incentive  plan award ("LTIP") means "any plan providing  compensation
intended to serve as an incentive for  performance to occur over a period longer
than one  financial  year  whether  performance  is  measured  by  reference  to
financial  performance  of the  Company  or an  affiliate,  or the  price of the
Company's shares but does not include option or stock appreciation  rights plans
or plans for compensation  through  restricted shares or units". The Company has
not granted any LTIP's during the fiscal year ended March 31, 2005.

Stock Appreciation Rights

Stock appreciation  right ("SAR") means a right,  granted by an issuer or any of
its  subsidiaries  as compensation  for services  rendered or in connection with
office or  employment,  to receive a payment of cash or an issue or  transfer of
securities  based  wholly  or in part on  changes  in the  trading  price of the
Company's  shares.  No SAR's were granted to or exercised by the Named Executive
Officers or directors during the fiscal year ended March 31, 2005.

Option Grants in Last Fiscal Year

The following tables sets forth  information  concerning grants of stock options
during the financial year ended March 31, 2005 to the Named  Executive  Officers
of the Company:

<TABLE>
-------------------------------------------------------------------------------------------------------------------
                                                                               Market Value of
                                                                                 Securities
                             Securities        % of Total                        Underlying
                                Under       Options Granted   Exercise or     Options/SAR's on
                            Options/SAR's   to Employees in    Base Price       Date of Grant          Expiration
Name                         Granted (#)    Fiscal Year (1)   ($/Security)       ($/Security              Date
-------------------------------------------------------------------------------------------------------------------
<S>                            <C>                <C>            <C>               <C>             <C>
Primo Podorieszach             358,837            69%            $1.10             $1.10            August 5, 2009
-------------------------------------------------------------------------------------------------------------------
Shelley Samec                   20,000           3.8%            $1.10             $1.10            August 5, 2009
-------------------------------------------------------------------------------------------------------------------
Mahesh Bhatia                    Nil             N/A              N/A               N/A                  N/A
-------------------------------------------------------------------------------------------------------------------
(1)  Percentage of all of the Company's  options  granted during the fiscal year
     ended March 31, 2005.
</TABLE>


Aggregated  Option  Exercises  in Last  Fiscal Year and Fiscal  Year-End  Option
Values

As no stock options were exercised by the Named  Executive  Officers  during the
fiscal year ended March 31, 2005, the following  table sets forth details of the
fiscal year-end value of unexercised options on an aggregated basis:

<TABLE>
--------------------------------------------------------------------------------------------------------------------
                                                                                              Value of Unexercised
                                                                       Unexercised Options    In-the-Money Options
                                                                        at Fiscal Year-End     at Fiscal Year-End
                                Securities            Aggregate               (#)(1)              ($)(1)(2)(3)
                                Acquired on             Value
                                 Exercise             Realized             Exercisable/           Exercisable/
                                    (#)                  ($)              Unexercisable          Unexercisable
Name
--------------------------------------------------------------------------------------------------------------------
<S>                             <C>                  <C>                  <C>                    <C>
Primo Podorieszach                 Nil                   Nil               527,674/Nil                Nil/Nil
--------------------------------------------------------------------------------------------------------------------
Shelley Samec                      Nil                   Nil                88,017/Nil                Nil/Nil
--------------------------------------------------------------------------------------------------------------------
</TABLE>



                                      -27-
<PAGE>


<TABLE>
--------------------------------------------------------------------------------------------------------------------
                                                                                              Value of Unexercised
                                                                       Unexercised Options    In-the-Money Options
                                                                        at Fiscal Year-End     at Fiscal Year-End
                                Securities            Aggregate               (#)(1)              ($)(1)(2)(3)
                                Acquired on             Value
                                 Exercise             Realized             Exercisable/           Exercisable/
                                    (#)                  ($)              Unexercisable          Unexercisable
Name
--------------------------------------------------------------------------------------------------------------------
<S>                             <C>                  <C>                  <C>                    <C>
Mahesh Bhatia                      Nil                   Nil                   N/A                      N/A
--------------------------------------------------------------------------------------------------------------------
(1)  As  freestanding  SARs have not been  granted,  the number of shares relate
     solely to stock options.

(2)  Based on the closing price of $0.80 for the common shares of the Company on
     The Toronto Stock Exchange on March 31, 2005, no options were in-the-money.

(3)  On April 12, 2004, an aggregate of 335,000 of the options held by the Named
     Executive Officers expired.
</TABLE>


Pension Plans

The Company  does not provide  retirement  benefits  for  directors or executive
officers.

Termination of Employment,  Change in Responsibilities  and Employment Contracts

Other than as  described  below,  the Company has not entered  into any plans or
arrangements in respect of remuneration  received or that may be received by the
Named Executive Officers in the Company's most recently completed financial year
or current  financial year in respect of compensating such officers or directors
in  the  event  of  termination  of  employment  (as a  result  of  resignation,
retirement, change of control, etc.) or a change in responsibilities following a
change of control,  where the value of such  compensation  exceeds  $100,000 per
executive officer or director.

The  Company  entered  into  employment  agreement  dated  April  1,  2003  (the
"Agreements") with Primo  Podorieszach (the "CEO") whereby,  among other things,
should the Company  terminate  the CEO without just cause,  the CEO will receive
payment equal to 300% of his then current annual base salary.

In addition, should any of the following events occur:

     (a)  an  adverse  change  in any of the  current  duties,  powers,  rights,
          discretion, salary or benefits of the CEO;

     (b)  a diminution of the current title of the CEO;

     (c)  a change  in the  person  or body to whom the CEO  currently  reports,
          except if such person or body is of equivalent rank or stature or such
          change is a result of the  resignation  or removal  of such  person or
          persons  comprising  such body, as the case may be, provided that this
          does not include a change  resulting  from a  promotion  in the normal
          course of business;

     (d)  a change in the  municipality  at which the CEO currently  carries out
          his terms of employment  with the Company,  without the CEO's consent,
          unless the CEO's terms of employment include the obligation to receive
          geographic  transfers  from  time  to  time in the  normal  course  of
          business; or

     (e)  the CEO is not  nominated  as a  management  nominee  of the  Board of
          Directors of the Company at a general  meeting of the  shareholders of
          the Company,

     (f)  the CEO will be entitled to terminate his employment  with the Company
          and receive a payment  equal to 300% of his then  current  annual base
          salary.

Composition of Compensation Committee

The Company's executive  compensation  program is administered by a compensation
committee made up of three directors from the board of directors, Thomas Milley,
Normand Cournoyer and Douglas Farmer. The Compensation Committee has, as part of
its mandate,  primary  responsibility  for the appointment  and  remuneration of
executive  officers of the Company.  The Board of Directors  also  evaluates the
performance of the Company's  senior  executive  officers and reviews the design
and competitiveness of the Company's compensation plans.



                                      -28-
<PAGE>

Report on Executive Compensation

Executive Compensation Program

The Company's executive  compensation  program is based on a pay for performance
philosophy. It is designed to encourage,  compensate and reward employees on the
basis of individual  and corporate  performance,  both in the short and the long
term.  The  Compensation  Committee  reviews  and  recommends  to the  Board  of
Directors  base  salaries  based on a number of factors  enabling the Company to
compete for and retain  executives  critical to the Company's long term success.
Incentive compensation is directly tied to corporate and individual performance.
Share ownership  opportunities  are provided to align the interests of executive
officers with the longer term interests of shareholders. Independent consultants
may be  retained on an as needed  basis by the  Company to assess the  executive
compensation program.

Compensation for the Named Executive Officers, as well as for executive officers
as a whole, consists of a base salary, along with annual incentive  compensation
in the form of a discretionary  annual bonus, and a longer term incentive in the
form of stock options granted. As an executive officer's level of responsibility
increases,  a greater  percentage of total  compensation is based on performance
(as opposed to base salary and standard employee  benefits) and the mix of total
compensation  shifts towards stock options,  thereby increasing the mutuality of
interest between executive officers and shareholders.

Base Salary

The Chief Executive  Officer and Chief  Operating  Officer approve base salaries
for  employees  at all  levels of the  Company  based on  performance  and other
reviews of market data  available.  The level of base  salary for each  employee
within a specified range is determined by the level of past performance, as well
as by the level of  responsibility  and the  importance  of the  position to the
Company.

Annual Bonus

The Board of Directors determines on a discretionary basis,  incentive awards or
bonuses to be paid by the  Company  to all  eligible  employees  in respect of a
fiscal year. Corporate performance is measured by reviewing personal performance
and other significant factors, such as level of responsibility and importance of
the  position to the  Company.  The  individual  performance  factor  allows the
Company to recognize  and reward those  individuals  whose efforts have assisted
the Company to attain its corporate performance objective.

Stock Options

The Board has sole discretion to determine the key employees to whom grants will
be made and to determine the terms and conditions of the options forming part of
such grants.  The Board approves stock option grants for each level of executive
officer or employee.  Individual  grants are  determined  by an assessment of an
individual's current and expected future performance,  level of responsibilities
and the importance of the position to the Company.

The number of stock  options  which may be issued under the Stock Option Plan in
the  aggregate  and in respect of any fiscal year is limited  under the terms of
the Stock  Option Plan and cannot be  increased  without  shareholder  approval.
Stock  options may be granted  with or without  SARs  attached.  Existing  stock
options/SARs have up to a five year term and are exercisable at the market price
(as defined in the Stock Option Plan) of the Company's common shares on the date
of grant.  Generally,  a holder of stock  options/SARs  must be a  director,  an
employee or consultant of the Company,  a subsidiary or an affiliate in order to
exercise stock options/SARs.

2005 Compensation of Senior Executive Officers

The  Compensation  Committee  has not yet  presented  its report to the Board of
Directors  concerning an incentive  award or bonus to be paid to senior officers
of the  Company  in respect  of 2005  fiscal  year.  In  considering  whether an
incentive  award or bonus  should be paid,  the Board of  Directors  takes  into
account revenues of the Company and other relevant factors  including the senior
officers  personal  commitment and ongoing  contributions in the ongoing success
and development of the Company.



                                      -29-
<PAGE>


Shareholder Return Performance Graph

The chart below compares the yearly  percentage  change in the cumulative  total
shareholder  return on the Company's  common shares against the cumulative total
shareholder  return of The TSX Composite Index for the fiscal period  commencing
March 31, 2000, and ending March 31, 2005.


                     [GRAPHIC OMITTED - Performance Graph]


<TABLE>
       ----------------------------------------------------------------------------------------
                                2000        2001        2002       2003       2004     2005
       March 31
       ----------------------------------------------------------------------------------------
       <S>                    <C>          <C>         <C>         <C>       <C>       <C>
       Company                $100.00      $47.20      $9.68       $7.60     $10.80    $6.40
       ----------------------------------------------------------------------------------------
       TSX Composite Index    $100.00      $81.39     $85.36      $70.33     $96.87   $110.37
       ----------------------------------------------------------------------------------------
</TABLE>

Compensation of Directors

Remuneration is not presently paid to the directors of the Company for acting in
their capacity as such; however, directors are entitled to reimbursement for
reasonable travel and other out-of-pocket expenses incurred in connection with
attendance at meetings of the Board of Directors. In the past, the Company had
Fgranted options to acquire Common Shares to directors.

The following stock options were granted to the Company's  directors who are not
Named Executive Officers during the fiscal year ended March 31, 2005:




                                      -30-
<PAGE>

<TABLE>
----------------------------------------------------------------------------------------------------------------------
                                                                                 Market Value of
                                            % of Total                             Securities
                                           Options/SARs                            Underlying
                      Securities Under      Granted to       Exercise or Base    Options/SARs on
                        Options/SARs       Employees in           Price        the Date of Grant
Name                     Granted (1)       Fiscal Year(2)      ($/Security)       ($/Security)(3)    Expiration Date
----------------------------------------------------------------------------------------------------------------------
<S>                        <C>                  <C>                <C>                <C>           <C>
Directors who are          126,163              24%                $1.10              $1.10         August 5, 2009
not Named Executive
Officers                    15,000              2.9%               $1.25              $1.25         August 16, 2009
----------------------------------------------------------------------------------------------------------------------
1)   As  freestanding  SARs have not been  granted,  the number of shares relate
     solely to stock options.
2)   Percentage of all of the Company's  options  granted during the fiscal year
     ended March 31, 2005.
3)   Market value of the Company's shares on August 5. 2004 and August 16, 2004,
     being the dates of grant.
</TABLE>


     C.   Board Practices

The  current  Board of  Directors  was elected at an annual  general  meeting of
shareholders  of the Company held on August 15, 2005. They shall serve until the
next annual general meeting or until their successors are appointed.

The Company has no director's  service contracts with any director providing for
benefits upon termination of employment.

The standing  committees  of the Board of Directors of the Company are the Audit
Committee,  the Compensation  Committee and the Corporate Governance  Committee.
The Audit  Committee of the Company's Board of Directors  currently  consists of
Messrs.  Cournoyer,  Milley and Farmer. This committee is directed to review the
scope,  cost and results of the  independent  audit of the  Company's  books and
records, the results of the annual audit with management and the adequacy of the
Company's accounting, financial and operating controls; to recommend annually to
the Board of Directors the selection of the  independent  auditors;  to consider
proposals made by the Company's independent auditors for consulting work; and to
report  to the Board of  Directors,  when so  requested,  on any  accounting  or
financial  matters.  Directors have  historically  received no remuneration  for
acting as members of the Audit  Committee,  nor are their  appointments  for any
fixed term or subject to any specific terms of reference.  However, as at August
16,  2004,  audit  committee  members are to be paid $1,500 per audit  committee
meeting.

The Company's executive  compensation  program is administered by a Compensation
Committee  made up of three  directors  from the  Board  of  Directors,  Messrs.
Farmer,  Cournoyer and Milley.  The  Compensation  Committee has, as part of its
mandate,   primary  responsibility  for  the  appointment  and  remuneration  of
executive  officers of the Company.  The Board of Directors  also  evaluates the
performance of the Company's senior executive officers and review the design and
competitiveness  of the  Company's  compensation  plans.  Directors  receive  no
remuneration for acting as members of the Compensation Committee,  nor are their
appointments for any fixed term or subject to any specific terms of reference.

The Compensation Committee reviews and recommends to the Board of Directors base
salaries  based on a number of factors  enabling  the Company to compete for and
retain  executives  critical  to the  Company's  long  term  success.  Incentive
compensation  is directly tied to corporate and  individual  performance.  Share
ownership  opportunities  are  provided  to align  the  interests  of  executive
officers with the longer term interests of shareholders. Independent consultants
may be  retained on an as needed  basis by the  Company to assess the  executive
compensation program.

The Corporate Governance Committee of the Company's Board of Directors currently
consists of Messrs.  Milley,  Farmer,  and Giuffre.  The overall  purpose of the
Corporate Governance Committee (the "Committee") is to implement and oversee the
structure used to direct and manage the business affairs of the company with the
objective  of  enhancing  long-term  value for  shareholders  and the  financial
viability  of the  business.  It  also  has the  responsibility  to  assess  the
effectiveness of the board as a whole, as well as the contribution of individual
members and to develop the  Company's  approach to Corporate  Governance  issues
including  developing a set of corporate  governance  principles  and guidelines
that are specifically applicable to the Company.



                                      -31-
<PAGE>

No director or executive officer of the Company has any family relationship with
any other officer or director of the Company.

     D.   Employees

As of March 31,  2005,  the Company  had 144  employees,  which were  located in
Alberta, Canada (53) and in California, Virginia and Illinois, U.S.A (91). There
is no relationship  between  management and any labour unions and the management
structure is typical of other General Insurance Brokerages.

     E.   Share Ownership

The following table sets forth, as of July 31, 2005, the number of the Company's
Common Shares  beneficially  owned by (a) directors and Named Executive Officers
of the Company,  individually,  and as a group, and (b) the percentage ownership
of the  outstanding  Common  Shares  represented  by such  shares.  The security
holders  listed below are deemed to be the  beneficial  owners of Common  Shares
underlying options which are exercisable within 60 days from the above date.

Unless  otherwise  indicated,  the  shareholders  listed possess sole voting and
investment  power  with  respect to the shares  shown.  All of our  shareholders
possess the same voting rights.

<TABLE>
-------------------------------------------------------------------------------------------------------------------
Title of Class        Name and Municipality                      Position              Amount       Percentage of
                                                                                                       Class(1)
-------------------------------------------------------------------------------------------------------------------
<S>                   <C>                                <C>                         <C>                <C>
Common                Primo Podorieszach,                Chief Executive Officer &    996,304(2)         11.7%
                      Kamloops, British Columbia                 Director
-------------------------------------------------------------------------------------------------------------------
Common                Tony Consalvo,                     Chief Operating Officer &    539,179(3)          6.6%
                      Calgary, Alberta                           Director
-------------------------------------------------------------------------------------------------------------------
Common                Mahesh Bhatia,                      Chief Financial Officer        Nil              N/A
                      Calgary, Alberta
-------------------------------------------------------------------------------------------------------------------
Common                Thomas Milley,                             Director             107,940(4)          1.3%
                      Calgary, Alberta
-------------------------------------------------------------------------------------------------------------------
Common                Douglas Farmer,                            Director             153,740(5)          1.9%
                      Calgary, Alberta
-------------------------------------------------------------------------------------------------------------------
Common                Joseph P. Giuffre,                   Secretary & Director       131,240(6)          1.6%
                      Vancouver, British Columbia
-------------------------------------------------------------------------------------------------------------------
Common                Patti Runnalls,                     Director (term expired       15,000(7)             *
                      Calgary, Alberta                       August 15, 2005)
-------------------------------------------------------------------------------------------------------------------
Common                Normand Cournoyer                          Director              15,000(8)             *
                      Calgary, Alberta
-------------------------------------------------------------------------------------------------------------------
Common                Directors and Officers as a                                    1,958,403(9)        21.7%
                      group (8 persons)
-------------------------------------------------------------------------------------------------------------------
*    Less than 1%

(1)  As of July 31,  2005  there were  7,955,153  common  shares of the  Company
     issued  and  outstanding.  Percentage  of class is based on the  number  of
     shares  beneficially  owned by the  individual (or group,  if  applicable),
     divided by the sum of 7,955,153  plus any shares  subject to stock  options
     exercisable by such individual (or group) within 60 days of July 31, 2005.

(2)  Includes 527,674 shares subject to stock options exercisable within 60 days
     of July 31, 2005.

(3)  Includes 200,000 shares subject to stock options exercisable within 60 days
     of July 31, 2005.

(4)  Includes 106,240 shares subject to stock options exercisable within 60 days
     of July 31, 2005.

(5)  Includes 106,240 shares subject to stock options exercisable within 60 days
     of July 31, 2005.

(6)  Includes 106,240 shares subject to stock options exercisable within 60 days
     of July 31, 2005.
</TABLE>



                                      -32-
<PAGE>


(7)  Includes 15,000 shares subject to stock options  exercisable within 60 days
     of July 31, 2005.

(8)  Includes 15,000 shares subject to stock options  exercisable within 60 days
     of July 31, 2005.

(9)  Includes  1,076,394 shares subject to stock options  exercisable  within 60
     days of July 31, 2005.

Director and Employee Stock Option Grants

Stock  options  to  purchase  Common  Shares  from the  Company  are  granted to
directors,  officers,  employees and consultants of the Company on the terms and
conditions  acceptable to the applicable  securities  regulatory  authorities in
Canada.  The Company has adopted a formal written stock option plan (the "Plan")
which authorizes 1,309,811 shares available for the grant of stock options under
the Plan.  Under the plan,  options  expired or cancelled  will be available for
future issuances.

Under the Plan,  the Board of  Directors  of the  Company  may from time to time
grant to the directors,  officers,  employees or consultants of the Company (the
"Eligible  Persons") and its associated,  affiliated,  controlled and subsidiary
companies,  as the Board of Directors  shall  designate,  the option to purchase
from the Company such number of its Common  Shares as the Board of Directors may
designate. Options may be granted on authorized but unissued Common Shares up to
but not exceeding  the number  reserved for issuance  under the Plan.  The total
number of Common Shares to be optioned to the insiders under the Plan may exceed
10% of the  outstanding  issue  (determined on the basis of the number of Common
Shares that are outstanding immediately prior to the share issuance in question,
excluding Common Shares issued pursuant to share compensation  arrangements over
the preceding one year period). In addition, within a one year period, directors
and  senior  officers  may  receive  Common  Shares  issued  pursuant  to  share
compensation  arrangements  that  exceed  10% of the  outstanding  issue and the
issuance to any one insider or such  insider's  associates  may exceed 5% of the
outstanding  issue.  The purchase  price per Common Share for any option granted
under the Plan shall not be less than the closing price of the Company's  shares
on the TSX on the trading day immediately  preceding the date of grant.  Options
shall be granted under the Plan  pursuant to an option  agreement in a form that
complies with the rules and policies of the TSX, which provide as follows:

     o    all options granted shall be non-assignable;

     o    an option must be exercisable  during a period not extending beyond 10
          years from the time of grant; and

     o    no financial  assistance will be provided with respect to the exercise
          of stock options.

As of July 31, 2005, 1,290,411 options were outstanding under the Plan.

Director and Employee Stock Option Grants

The names and  titles of the  directors  and  Named  Executive  Officers  of the
Company to whom  outstanding  stock  options have been granted and the number of
Common  Shares  subject to such stock options are set forth below as at July 31,
2005.


                                      -33-


<PAGE>


<TABLE>
-----------------------------------------------------------------------------------------------------------------
                                                                                                Total Outstanding
                                                                                                   Options at
                                                                                                 31-July-2005 to
                                          Total                                                   Directors and
                                         Options          Exercise                               Officers of the
Name and titles of Optionees             Granted           Price        Expiration Date              Company
-----------------------------------------------------------------------------------------------------------------
<S>                                       <C>              <C>          <C>                      <C>
Primo Podorieszach, President,            25,000           $1.00         Oct. 26, 2006                25,000
Chief Executive Officer & Director       143,837           $0.81        August 29, 2008              143,837
                                         358,837           $1.10         August 5, 2009              358,837
-----------------------------------------------------------------------------------------------------------------
Tony Consalvo, Chief Operating           100,000           $1.00         Oct. 26, 2006               100,000
Officer & Director                        68,837           $0.81        August 29, 2008               68,837
                                          31,163           $1.10        August 5, 2009                31,163
-----------------------------------------------------------------------------------------------------------------
Thomas Milley, Director                   25,000           $1.00         Oct. 26, 2006                25,000
                                          31,240           $0.81        August 29, 2008               31,240
                                          50,000           $1.10        August 5, 2009                50,000
-----------------------------------------------------------------------------------------------------------------
Douglas Farmer, Director                  55,000           $1.00         Oct. 26, 2006                55,000
                                          31,240           $0.81        August 29, 2004               31,240
                                          20,000           $1.10        August 5, 2009                20,000
-----------------------------------------------------------------------------------------------------------------
Joseph P. Giuffre, Secretary &            65,000           $1.00         Oct. 26, 2006                65,000
Director                                  31,240           $0.81        August 29, 2008               31,240
                                          10,000           $1.10        August 5, 2009                10,000
-----------------------------------------------------------------------------------------------------------------
Patti Runnalls, Director (term            15,000           $1.10        August 5, 2009                15,000
expired August 15, 2005)
-----------------------------------------------------------------------------------------------------------------
Normand Cournoyer, Director               15,000           $1.25        August 16, 2009               15,000
-----------------------------------------------------------------------------------------------------------------
Mahesh Bhatia, Chief Financial              Nil             Nil              Nil                       Nil
Officer
-----------------------------------------------------------------------------------------------------------------
Total                                  1,076,394                                                   1,076,394
-----------------------------------------------------------------------------------------------------------------
</TABLE>


Item 7.  Major Shareholders and Related Party Transactions

     A.   Major Shareholders

The Company is a publicly owned  Corporation.  As at July 18, 2005, 99.5% of the
Company's  outstanding  common  shares were owned of record by persons  resident
outside of the United  States  and the  remaining  .5% were owned of record by a
total of 6 persons  resident in the United States.  To the best of the Company's
knowledge,   the  Company  is  not  directly  owned  or  controlled  by  another
corporation or by any foreign government.


                                      -34-


<PAGE>


To the best of the Company's knowledge, there are no beneficial owners of record
of over 5% of the  Company's  outstanding  Common Shares other than as described
below. To the best of the Company's knowledge,  there are no voting arrangements
in existence between the shareholders of the Company.

As at July 31, 2005,  to the best of the  Company's  knowledge,  the  registered
shareholders of more than 5% of the issued shares of the Company were:

-------------------------------------------------------------------
                        Number of Shares as        Percentage of
  Shareholder Name        of July 31, 2005           Class(3)
-------------------------------------------------------------------
Primo Podorieszach           996,304(1)                11.7%
-------------------------------------------------------------------
Tony Consalvo                539,179(2)                 6.6%
-------------------------------------------------------------------
Bridge    Opportunity      1,439,128(4)                15.3%
Finance, LLC
-------------------------------------------------------------------
(1)  Includes 527,674 shares subject to stock options exercisable within 60 days
     of July 31, 2005.

(2)  Includes 200,000 shares subject to stock options exercisable within 60 days
     of July 31, 2005.

(3)  As of July 31,  2005  there were  7,955,153  common  shares of the  Company
     issued  and  outstanding.  Percentage  of class is based on the  number  of
     shares  beneficially  owned by the  individual (or group,  if  applicable),
     divided by the sum of 7,955,153 plus any shares subject to stock options or
     warrants  exercisable by such  individual (or group) within 60 days of July
     31, 2005.

(4)  Represented by warrants  exercisable to purchase 1,439,128 common shares at
     a price of $0.80 per share until June 15, 2010.


                                      -35-

<PAGE>


To the best of the Company's  knowledge,  there have been no significant changes
in the percentage  ownership held by the Company's major shareholders during the
past three years,  except that on February 11, 2005,  each of John  Podorieszach
and Pietro Podorieszach filed an amendment to his Schedule 13G beneficial report
stating  that he had  ceased to be the  beneficial  owner of more than 5% of the
Company's common shares. All of the Company's common shares have the same voting
rights.  The Company's major  shareholders do not have different  voting rights.
There are no known  arrangements that would result in a change in control of the
Company.

     B.   Related Party Transactions

Other than as  disclosed in Item 6, the  following is a list which  includes all
transactions  and  loans  since  April  1,  2004  and  all  presently   proposed
transactions and loans to which the Company or any subsidiary was, is or will be
a party and that are required to be disclosed under this Item 7.C.

The Company enters into  transactions  with related parties from time to time in
the normal course of business.  Related party  transactions  are measured at the
exchange  amount,  being the amount of  consideration  established and agreed to
between the related parties, unless otherwise noted.

1.   On June 27, 2001,  the Company  approved and advanced a loan of $200,000 to
     Mr. Tony Consalvo,  a director of the Company to satisfy  certain  personal
     financial  obligations  at an interest rate equal to the variable,  nominal
     rate per annum for Canadian dollar loans in Canada as declared by the Royal
     Bank of Canada,  under the terms of a demand promissory note dated June 28,
     2001 which  provides that repayment is required upon demand by the Company.
     The loan was secured by a general  security  agreement  that  provides  the
     Company with a security interest in all present and after-acquired property
     of Mr.  Consalvo to secure the  repayment of the $200,000  loan. As of July
     31, 2005, the outstanding  indebtedness  has been reduced to $40,000 (As of
     March 31, 2004 - $40,000).

2.   During the  fiscal  year  ended  March 31,  2005,  the  Company  was billed
     $188,364  for legal  fees,  disbursements  and taxes by a law firm in which
     Thomas Milley, a director of the Company, is a partner,  for legal services
     rendered.  The Company expects that it will continue to engage the law firm
     from time to time.



                                      -36-
<PAGE>


3.   During the fiscal year ended March 31, 2005, the Company was billed $43,237
     for  legal  fees,  disbursements  and  taxes by a law firm in which  Joseph
     Giuffre,  a director of the Company,  is a shareholder,  for legal services
     rendered. The Company expects that it will continue to engage the law firms
     from time to time.

4.   Subsequent to the Company's  acquisition  of the Vista  brokerage from DKWS
     Enterprises,  Inc.  and Kabaker  Family  Trust of July 1998,  Addison  York
     appointed  an  owner  and  trustee  of  DKWS  and  Kabaker   Family  Trust,
     respectively,  as an officer of Addison York. Although such person is not a
     member of key  management  of the  Company  and is not  otherwise a related
     party within the scope of Item 7.B, the Company is providing  the following
     disclosure relating to certain transactions among Addison, DKWS and Kabaker
     are described below:

     a)  Pursuant  to an asset  management  agreement  with DKWS,  Addison  York
     processes its clients  insurance  policies  through DKWS,  whereby  Addison
     shall  receive  all the  revenues  therefrom  and shall pay all  associated
     operating  costs.  During the fiscal year ended March 31, 2005, the Company
     processed  $  2,377,971  (2004  - $  1,307,446)  of  revenue  through  this
     arrangement, incurred payroll costs, rent and overhead of $ 3,053,440 (2004
     - $ 1,462,369)  and paid for the  purchase of office  equipment of $ 40,984
     (2004 - $ 46,103).  The Company's accounts  receivable as at March 31, 2005
     include $ 60,408 (2004 - accounts  payable of $ 60,832) in connection  with
     this arrangement.

     b) The Company holds a US$150,000  promissory note issued by Kabaker Family
     Trust on October 10, 2003.  This note is due on demand and is  non-interest
     bearing. It is secured by a general security agreement.

     c) The Company has issued a $4,444,479  promissory  note to Kabaker  Family
     Trust.  The note bears  interest at 7% per annum and is  repayable  over 10
     years in equal monthly instalments of US$40,812 including interest, secured
     by  a  general  security  agreement.  That  note  has  been  discounted  to
     $3,760,015  (US$2,844,617) to reflect the fair value of the note based upon
     the market value rate for a similar note of 12%.  The  difference  has been
     deducted from  goodwill.  The  outstanding  balance as at March 31, 2005 is
     US$3,284,982.  Included  in the  Company's  accounts  payable  and  accrued
     liabilities  as at March 31,  2005 is $ 159,014  (2004 - $ Nil) of  accrued
     interest due to Kabaker  Family Trust on the  promissory  note.  During the
     fiscal year ended March 31,  2005,  the  Company  paid $ 246,831  (2004 - $
     322,146) to Kabaker Family Trust, comprised of $ 118,154 (2004 - $ 222,255)
     representing  interest on a note payable and $ 128,677 (2004 - $ 99,696) of
     principal.

Item 8. Financial Information

     A.   Consolidated Statements and Other Financial Information

Financial Statements

Included in this Annual Report are consolidated  financial statements audited by
independent  auditors  and  accompanied  by an audit  report  consisting  of the
following:

     o    Balance Sheets as of March 31, 2005 and 2004

     o    Statements of Operations  and Deficit for the fiscal years ended March
          31, 2005, 2004 and 2003;

     o    Statements  of Cash Flow for the fiscal  years ended  March 31,  2005,
          2004 and 2003; and

     o    Notes to the Consolidated Financial Statements.

Legal Proceedings

The  Company  is  aware  of  no  pending  or  threatened  legal  or  arbitration
proceedings which may have or have had in the recent past significant effects on
the Company's financial position or profitability (except as discussed below).


                                      -37-
<PAGE>


The Company is aware of no material proceeding in which any director,  member of
senior management or affiliate of the Company is an adverse party to the Company
or its  subsidiaries  or has a material  interest  adverse to the Company or its
subsidiaries.

On or about June 17, 2005, DKWS  Enterprises,  Inc. (DKWS") filed an action (the
"Initial Action") against Addison York alleging that approximately  U.S.$583,500
is due and owing by Addison  York to DKWS.  On or about July 14,  2005,  Addison
York filed legal proceedings  against John Kabaker,  DKWS and the Kabaker Family
Trust of July 1998 (collectively,  the "DKWS Group") for,  interalia,  breach of
contract  and  misrepresentation  concerning  the  purchase of the net assets of
Vista and is claiming damages in the amount of approximately  U.S.$3,136,000  or
in the alternative,  rescission of the purchase and sale agreement in respect of
the purchase of the net assets of Vista.

On or about July 29, 2005,  DKWS filed an amendment to the Initial  Action filed
on June 17, 2005 and have added the Company as a defendant,  and DKWS Group,  as
plaintiffs,  alleging,  interalia,  $583,500  is due and owing by the Company to
DKWS, breach of certain contracts,  including wrongful dismissal of John Kabaker
and is claiming damages  according to proof and costs. On the advice of counsel,
the  Company  is of the view that the legal  proceedings  and claims by the DKWS
Group are without merit.  The Company  intends to vigorously  defend against the
actions  by the DKWS  Group and at the same  time  vigorously  pursue  its claim
against the DKWS Group.  Pursuant to the above noted alleged  breach of contract
by John  Kabaker,  DKWS and the Kabaker  Family Trust of July 1998,  the Company
exercised its rights under the Agency Agreement and Share Pledge Agreement (both
dated October 1,2003), and on or about June 22, 2005, seized the shares and bank
accounts of DKWS.

On September 15, 2005,  John Kabaker filed a complaint with the U.S.  Department
of Labor, for unlawful retaliation pursuant to section 806 of the Sarbanes-Oxley
Act. It is the intent of the Company to  vigorously  defend the Company  against
the claim.


Dividend Policy

No dividends have been declared or paid on the Common Shares since incorporation
and it is not  anticipated  that any  dividends  will be declared or paid on the
Common  Shares in the  immediate  or  foreseeable  future.  Any  decision to pay
dividends  on the Common  Shares will be made by the board of  directors  on the
basis of the Company's  earnings,  financial  requirements  and other conditions
existing at such future time.

     B.   Significant Changes

None, except as disclosed elsewhere in this Annual Report.

Item 9.  The Offer and Listing

     A.   Offer and Listing Details

The Company's Common Shares without par value are issued in registered form. The
transfer  agent  for the  Common  Shares is CIBC  Mellon  Trust  Company  at its
principal office at Suite 600, 333, 7th Avenue S.W, Calgary, Alberta T2P 2Z1. No
significant  trading  suspensions have occurred in the Common Shares in the last
three  years.  Below  is a table of the high  and low  prices,  for the  periods
indicated,  of trading or quotations  on various  stock  exchanges or markets in
which the Company's Common Shares are or have been traded or quoted.

----------------------------------------------------------------------------
                         Exchange        High          Low
----------------------------------------------------------------------------
(a)      Year Ended
----------------------------------------------------------------------------
March 31, 2001             TSX          $15.00         $5.60
----------------------------------------------------------------------------
March 31, 2002             TSX          $6.45          $0.58
                          OTCBB         US$4.50        US$0.38
----------------------------------------------------------------------------



                                      -38-
<PAGE>


----------------------------------------------------------------------------
                         Exchange        High          Low
----------------------------------------------------------------------------
(a)      Year Ended
----------------------------------------------------------------------------
March 31, 2003             TSX          $1.69          $0.75
                          OTCBB         US$1.20        US$0.25
----------------------------------------------------------------------------
March 31, 2004             TSX          $1.60          $0.80
                          OTCBB         US$1.30        US$0.51
----------------------------------------------------------------------------
March 31, 2005             TSX          $1.48          $0.80
                          OTCBB         US$1.10        US$0.65
----------------------------------------------------------------------------
(b)      Quarter Ended
----------------------------------------------------------------------------
June 30, 2003              TSX          $1.02          $0.80
                          OTCBB         US$0.70        US$0.65
----------------------------------------------------------------------------
September 30, 2003         TSX          $0.98          $0.80
                          OTCBB         US$0.78        US$0.51
----------------------------------------------------------------------------
December 31, 2003          TSX          $1.60          $1.35
                          OTCBB         US$1.30        US$1.01
----------------------------------------------------------------------------
March 31, 2004             TSX          $1.45          $1.34
                          OTCBB         US$1.10        US$1.03
----------------------------------------------------------------------------
June 30, 2004              TSX          $1.20          $0.93
                          OTCBB         US$0.81        US$0.65
----------------------------------------------------------------------------
September 30, 2004         TSX          $1.40          $0.98
                          OTCBB         US$1.10        US$0.65
----------------------------------------------------------------------------
December 31, 2004          TSX          $1.48          $0.94
                          OTCBB         US$1.10        US$0.70
----------------------------------------------------------------------------
March 31, 2005             TSX          $1.20          $0.80
                          OTCBB         US$1.01        US$0.70
----------------------------------------------------------------------------
June 30, 2005              TSX          $0.85          $0.75
                          OTCBB         US$0.72        US$0.54
----------------------------------------------------------------------------
(c)      Month Ended
----------------------------------------------------------------------------
March 31, 2005             TSX          $1.04          $0.80
                          OTCBB         US$0.86        US$0.72
----------------------------------------------------------------------------
April 30, 2005             TSX          $0.80          $0.78
                          OTCBB         US$0.72        US$0.54
----------------------------------------------------------------------------
May 31, 2005               TSX          $0.80          $0.79
                          OTCBB         US$0.54        US$0.54
----------------------------------------------------------------------------
June 30, 2005              TSX          $0.85          $0.75
                          OTCBB         US$0.63        US$0.54
----------------------------------------------------------------------------
July 31, 2005              TSX          $0.75          $0.65
                          OTCBB         US$0.63        US$0.54
----------------------------------------------------------------------------
August 31, 2005            TSX          $0.75          $0.55
                          OTCBB         US$0.62        US$0.46
----------------------------------------------------------------------------


     B.   Plan of Distribution

Not applicable.


                                      -39-
<PAGE>

     C.   Markets

The Company's Common Shares are listed on the TSX under the trading symbol "ACL"
and on the OTCBB under the trading symbol "ACKBF".

     D.   Selling Shareholders

Not applicable.

     E.   Dilution

Not applicable.

     F.   Expenses of the Issue

Not applicable.

Item 10.  Additional Information

     A.   Share Capital

Not applicable.

     B.   Memorandum and Articles of Association

Objects and Purposes of the Company

The Articles and Bylaws of the Company places no restrictions upon the Company's
objects and purposes and the Corporate Access Number of the Company is 208204016
with the Registrar of Corporations (Alberta).

Directors' Powers

There are no provisions  in the Company's  Articles with respect to a director's
power to vote on a proposal,  arrangement  or contract in which the  director is
materially interested.

Section  5.06  of  the  Bylaws  provides  that  the  quorum  necessary  for  the
transaction  of the  business  of the  directors  at any meeting of the board of
directors  shall consist of a majority of the directors  holding  office or such
greater  number of  directors  as the board of  directors  may from time to time
determine.

Section 4.08 of the Bylaws  provides that the  remuneration of the directors may
be determined  from time to time by the directors.  There are no restrictions in
the Bylaws upon the directors'  power, in the absence of an independent  quorum,
to vote compensation to themselves or any members of their body.

Section 2.01 of the Bylaws gives  directors a broad  discretion  to borrow money
upon  the  credit  of the  Company,  issue,  re-issue,  sell  or  pledge  bonds,
debentures,  notes  or other  evidences  of  indebtedness  or  guarantee  of the
Company,   whether  secured  or  unsecured;  to  the  extent  permitted  by  the
Corporations Act (Alberta),  give a guarantee on behalf of the Company to secure
performance  of any present or future  indebtedness,  liability or obligation of
any person;  and mortgage,  hypothecate,  pledge or otherwise  create a security
interest  in all  or any  currently  owned  or  subsequently  acquired  real  or
personal, moveable or immoveable,  property of the Company including book debts,
rights, powers,  franchises and undertakings,  to secure any bonds,  debentures,
notes or other  evidences of  indebtedness  or guarantee or any other present or
future indebtedness, liability or obligation of the Company.

Qualifications of Directors

There is no  provision  in the  Articles or Bylaws  imposing a  requirement  for
retirement or non-retirement of directors under an age limit requirement.


                                      -40-
<PAGE>


Section  4.04 of the Bylaws  provides  that a director  shall not be required to
hold a share in the capital of the Company as  qualification  for his office but
no person  shall be  qualified  for election as a director if he is less than 18
years  of age,  if he is of  unsound  mind  and has  been so found by a court in
Canada or elsewhere;  if he is not an  individual;  or if he has the status of a
bankrupt.

Share Rights

All of the  authorized  Common  Shares of the Company are of the same class and,
once issued,  rank equally as to dividends,  voting powers, and participation in
assets and in all other respects,  on liquidation,  dissolution or winding up of
the Company, whether voluntary or involuntary,  or any other distribution of the
assets of the Company among its  shareholders  for the purpose of winding up its
affairs.  The issued Common Shares are not subject to call or assessment  rights
or any  pre-emptive  or  conversion  rights.  The  holders of Common  Shares are
entitled to one vote for each Common  Share on all matters to be voted on by the
shareholders. There are no provisions for redemption, purchase for cancellation,
surrender or purchase funds.

To change the rights of shareholders of stock, where such rights are attached to
an issued class or series of shares, section 173(1) of the Business Corporations
Act requires the consent by a separate  resolution  of the  shareholders  of the
class or series of shares,  as the case may be,  requiring  a majority of 2/3 of
the votes cast by all the shareholders entitled to vote on that resolution.

Meetings

The Business  Corporations  Act provides  that the directors of the Company must
call an annual general  meeting of  shareholders  not later than 15 months after
the last preceding  annual meeting.  The Company must give to its  shareholders,
directors and auditor  entitled to receive notice of a general  meeting not less
than 21 days'  and not more  than 50 days'  notice  before  the  meeting  of the
Company,  but  shareholders and any other person entitled to attend a meeting of
shareholders   may  waive  notice  for  a  particular   meeting.   The  Business
Corporations Act requires management of a corporation,  concurrently with giving
notice of a meeting  of  shareholders,  to send a form of proxy in a  prescribed
form to each  shareholder  who is  entitled  to receive  notice of the  meeting.
However a proxy is not  required to be sent where the  corporation  has not more
than 15  shareholders  entitled to vote at a meeting of  shareholders  with 2 or
more  joint  shareholders  being  counted  as 1  shareholder,  or if  all of the
shareholders entitled to vote at a meeting waive this requirement.

The  directors  are  required to place before the  shareholders  at every annual
meeting  comparative  financial  statements,  the report of the  auditor and any
further information respecting the financial position of the corporation and the
results of its operations required by the articles,  the bylaws or any unanimous
shareholder agreement.  This provision of the Business Corporations Act does not
apply to a corporation  that is subject to and complies  with the  provisions of
the Securities Act (Alberta)  relating to the financial  statements to be placed
before the shareholders at every annual meeting.

The Business  Corporations  Act provides that holders of not less than 5% of the
issued  voting  shares of the Company may  requisition  the  directors to call a
meeting of shareholders for the stated purpose in the requisition.

Limitations on Ownership of Securities

There are no limitations on the right to own securities,  imposed by foreign law
or by the charter or other constituent document of the Company.

Change in Control of Company

No provision of the Company's  articles of association,  charter or bylaws would
have the effect of delaying, deferring, or preventing a change in control of the
Company,  and operate  only with respect to a merger,  acquisition  or corporate
restructuring of the Company or any of its subsidiaries.



                                      -41-
<PAGE>

Ownership Threshold

There are no bylaw  provisions  governing  the ownership  threshold  above which
shareholder ownership must be disclosed.

     C.   Material Contracts

The  following  are the  material  contracts  of the  Company,  other than those
mentioned elsewhere in this Annual Report, to which the Company or any member of
the group is a party, for the two years  immediately  preceding the date of this
Annual Report.

On July 3, 2001,  the Board of Directors of the Company  declared a distribution
of one common  share  purchase  right (a "Right")  for each  outstanding  Common
Share.  Each Right has an exercise price of $60.00,  subject to adjustment  (the
"Exercise  Price").  The  description and terms of the Rights are set forth in a
Shareholder Rights Plan Agreement (the "Rights  Agreement")  between the Company
and CIBC Mellon Trust Company,  as Rights Agent.  Initially,  the Rights will be
attached to all share  certificates  representing  Common Shares and no separate
Rights  certificates will be distributed.  Subject to certain  limitations,  the
Rights will detach from the Common Shares and will become  exercisable after the
close of business on the eighth trading day following the date of the earlier to
occur of the  following,  which date is  referred  to herein as the  "Separation
Time":

     (a)  the  first  date of a  public  announcement  by the  Company  or by an
          Acquiring  Person  (as  defined  in the  Rights  Agreement)  that such
          Acquiring  Person has  acquired,  or  obtained  the right to  acquire,
          beneficial  ownership of 20% or more of the outstanding  voting shares
          of any class  (other  than as a result of  certain  reductions  in the
          number of shares outstanding, a Permitted Bid or a Competing Permitted
          Bid (each as defined below),  certain pro rata  acquisitions,  certain
          inadvertent  acquisitions or certain Take Over Bids (as defined below)
          pursuant to take over bid circulars  that are approved by the Board of
          Directors); or

     (b)  the date on which any person does or first publicly  announces that it
          intends to do any of the following:  (i) commence an offer to purchase
          or a  solicitation  of an offer to sell,  or (ii)  accept  an offer to
          sell,  voting  shares or  securities  convertible  into voting  shares
          (other  than as a result of a Permitted  Bid or a Competing  Permitted
          Bid (each as defined below)) that would in the aggregate, if accepted,
          cause such person to  beneficially  own,  together with any securities
          previously  beneficially  owned  by  such  person,  20% or more of the
          voting shares of any class (a "Take Over Bid").

Until the Separation  Time, (i) the Rights shall not be exercisable and no Right
may be  exercised,  (ii)  the  Rights  will be  evidenced  by the  Common  Share
certificates in the name of the holder and will only be  transferable  with such
certificates,  (ii) Common  Share  certificates  issued  after July 3, 2001 have
contained  and will  contain a notation  incorporating  the Rights  Agreement by
reference and (iii) the surrender  for transfer of any  certificates  for Common
Shares  outstanding  will also constitute the transfer of the Rights  associated
with the Common Shares represented by such certificate.

After the Separation Time and prior to the expiry of the Rights,  the Rights are
exercisable  and the  registration  and transfer of Rights will be separate from
and independent of the Common Shares.

The Rights  Agreement  was  re-confirmed  by the Company's  shareholders  at the
Company's  2005  annual  meeting of  shareholders,  which was held on August 15,
2005.  The  Rights  Agreement  must be  reconfirmed  at the  annual  meeting  of
shareholders  held in 2008 in order for the  Rights to remain  outstanding.  The
required vote for the Rights Agreement to be so reconfirmed is a majority of the
votes  cast  by  holders  of  voting  shares,   excluding  those  voting  shares
beneficially  owned by an  Acquiring  Person,  a person  making a Take  Over Bid
(other than a person who has completed a Permitted Bid or a Competing  Permitted
Bid (each as defined below) or certain exempt  acquisitions),  any affiliates or
associates  of or persons  acting  jointly with such  persons,  and any employee
benefit or similar  plan or trust for the  benefit of the  Company's  employees,
unless  the  beneficiaries  of the plan or trust  direct the manner in which the
voting  shares  are to be voted or  tendered.  If the  Rights  Agreement  is not
reconfirmed  or is not  presented  for  reconfirmation  at either of such annual
meetings,  then the Rights Agreement and all outstanding  Rights shall terminate
on the date of the termination of such annual meeting;  provided,  however, that
the Rights shall not


                                      -42-
<PAGE>

terminate if a Flip-In Event (as defined below) has occurred prior to such date.
Unless terminated earlier in accordance with the foregoing, the Rights Agreement
and all  outstanding  Rights shall terminate at the close of business on July 3,
2011.

Promptly following the Separation Time, Rights certificates and a description of
the  rights  will be mailed  to  holders  of  record of Common  Shares as of the
Separation Time (other than an Acquiring  Person,  any affiliate or associate of
an Acquiring Person, any person acting in concert with any of the foregoing, any
transferee of Rights, directly or indirectly, from any of the foregoing, and any
person  holding  Rights   beneficially   owned  by  an  Acquiring  Person)  and,
thereafter, the separate Rights certificates alone will represent the Rights.

In the event  that a person  acquires  20% or more of the  voting  shares of any
class  of the  Company,  other  than  through  certain  permitted  acquisitions,
including a Permitted  Bid (as defined  below),  certain pro rata  acquisitions,
certain  reductions in the number of  outstanding  shares,  certain  inadvertent
transactions or in certain Take Over Bids involving take over bid circulars that
are  approved by the Board of Directors  (a "Flip-In  Event"),  each holder of a
Right will  thereafter  have the right to receive,  upon payment of the Exercise
Price,  that  number of Common  Shares  (or,  in  certain  circumstances,  cash,
property or other  securities of the Company)  having an aggregate  market price
equal to two (2) times  the  Exercise  Price for an amount in cash  equal to the
Exercise Price.  Notwithstanding any of the foregoing,  following the occurrence
of any of the events set forth in this paragraph, all Rights that are, or (under
certain  circumstances  specified in the Rights  Agreement)  were,  beneficially
owned by any Acquiring Person, any affiliate of associate of an Acquiring Person
or any person acting jointly with any of the foregoing will be null and void.

For example,  at an Exercise Price of $60.00 per Common Share issuable  pursuant
to the exercise of the Rights,  each Right not owned by an Acquiring  Person (or
by certain related  parties)  following a Flip-In Event would entitle its holder
to purchase $120.00 worth of Common Shares for $60.00.  Assuming that the Common
Shares  had a per share  value of $4.00 at such  time,  the holder of each valid
Right would be entitled to purchase thirty (30) Common Shares for $60.00.

A person  will not trigger  the  exercisability  of the Rights if he becomes the
beneficial owner of 20% or more of the voting shares of any class as a result of
a Permitted Bid (as defined below),  certain  reductions in outstanding  shares,
certain pro-rata acquisitions, certain inadvertent transactions and certain Take
Over Bids  involving  take over bid circulars  that are approved by the Board of
Directors  (collectively  the "Permitted  Acquisitions"),  provided that if such
person or group becomes the beneficial owner of 20% or more of the voting shares
of any class by such means and subsequently  acquires  additional  voting shares
constituting more than 1% of the outstanding shares of such class, other than by
a Permitted Acquisition, then, as of the date of such additional acquisition, he
shall become an Acquiring Person.

Any person who was the beneficial owner of 20% or more of the outstanding Common
Shares on July 3, 2001 will be  "grandfathered," so that the dilutive effects of
the Rights will not be triggered unless such person  subsequently  increases his
shareholdings by more than 1%, other than through a Permitted  Acquisition.  The
Company  is not aware of any person or  related  group  that was the  beneficial
owner of 20% or more of the outstanding Common Shares on July 3, 2001.

The Exercise Price payable,  and the number of Common Shares or other securities
or property issuable, upon exercise of the Rights are subject to adjustment from
time to time to prevent dilution, including (i) in the event of a stock dividend
on (other than pursuant to any dividend  reinvestment  plan),  or a subdivision,
combination or  reclassification  of, the Common Shares,  (ii) if holders of the
Common Shares are granted certain  rights,  options or warrants to subscribe for
Common  Shares or  convertible  securities  at less than the market price of the
Common  Shares  on the  record  date  set for  such  grant,  or  (iii)  upon the
distribution  to holders of the Common  Shares of evidences of  indebtedness  or
assets (excluding  annual cash dividends and those dividends  referred to above)
or of  subscription  rights,  options or warrants  (other than those referred to
above).

With certain  exceptions,  no adjustment in the Exercise  Price will be required
until  cumulative  adjustments  amount to at least 1% of the Exercise  Price. No
fractional Common Shares or fractional Rights will be issued and no amounts will
be paid in respect of such fractional amounts.

The Exercise Price is payable by certified check,  banker's draft of money order
payable to the order of the Company.


                                      -43-
<PAGE>

The Board of  Directors  may,  acting in good  faith,  at any time  prior to the
occurrence of a Flip-In Event,  elect to redeem all but not less than all of the
outstanding  Rights at the  redemption  price of $0.0001  per Right,  subject to
adjustment  under  certain  circumstances  (the  "Redemption  Price").  Any such
redemption  prior to the Separation Time shall require the prior approval of the
Company's  shareholders by an affirmative vote of the majority of the votes cast
by holders of voting  shares  (excluding  voting  shares  beneficially  owned by
persons that are not independent shareholders) at a meeting duly called and held
for such purpose (the "Required  Vote of Voting  Shares").  Any such  redemption
after the Separation Time shall require the prior approval of the Rights holders
by an  affirmative  vote of the  majority of the votes cast by holders of Rights
(excluding  those Rights that have been become null and void in accordance  with
the Rights  Agreement)  at a meeting of Rights  holders duly called and held for
such purpose (the "Required Vote of Rights").

The Rights  Agreement  requires  the  Company  to redeem all of the  outstanding
Rights  at  the  Redemption  Price  upon  the  completion  of a  Take  Over  Bid
transaction  if the Board of Directors  has waived the  occurrence  of a Flip-In
Event with respect to such  transaction.  Such waiver and  redemption  shall not
require the approval of the Company's shareholders or Rights holders.

As discussed  above,  a take over bid which fits the criteria of a Permitted Bid
or a  Competing  Permitted  Bid will not  trigger  the  dilutive  effects of the
Rights.  A  Permitted  Bid is a take  over  bid  made by way of a take  over bid
circular and which also complies with the following conditions:

     (i)  the  bid  is  made  for  all  voting  shares  of  the  Company  to all
          shareholders  of  record of such  voting  shares  (wherever  resident)
          registered on the books of the Company other than the offeror;

     (ii) the bid  contains,  and  the  take up and  payment  of the  securities
          tendered or deposited  thereunder shall be subject to, irrevocable and
          unqualified provisions that:

          (a)  voting shares will be taken up and paid for pursuant to the bid:

               (i)  prior to the close of  business  on a date which is not less
                    than 75 days following the date of the bid; and

               (ii) only if at such date more than  fifty  percent  (50%) of the
                    voting  shares held by  independent  shareholders  have been
                    deposited pursuant to the bid and not withdrawn;

          (b)  all voting  shares may be  deposited  pursuant  to the bid at any
               time prior to the close of  business  on the date  referred to in
               (a)(i) above and that all voting shares deposited pursuant to the
               bid may be withdrawn until taken up and paid for; and

          (c)  should the  condition  referred to in (a)(ii)  above be met,  the
               offeror must make a public  announcement of that fact and the bid
               must remain open for  deposits  and tenders of voting  shares for
               not less than ten (10) business days from the date of such public
               announcement.

A  Competing  Permitted  Bid is a take  over  bid  which is made  while  another
Permitted  Bid is in  existence,  and which  satisfies  all the  provisions of a
Permitted Bid except that the time limit set out in (ii)(a)(i) above is the date
which is no earlier  than the later of: (i) 35 days after date of the  Competing
Permitted  Bid, and (ii) the 75th day after the earliest date on which any other
Permitted Bid then in existence was made.

Until a Right is exercised,  the holder thereof, as such, will have no rights as
a shareholder of the Company,  including,  without limitation, the right to vote
or to receive dividends.

The  Company  may from  time to time  amend the  Rights  Agreement  without  the
approval  of the holders of voting  shares or Rights to correct any  clerical or
typographical  errors and to address changes in law. Any amendment adopted prior
to the  Separation  Time to  address  changes  in law must be  submitted  to the
Company's  shareholders  for  approval  at  the  next  annual  meeting.  If  the
shareholders fail to approve the amendment by the Required Vote of Voting Shares
at such meeting, the Rights Agreement shall thereafter terminate.  Any amendment
adopted after the Separation Time to address changes in law must be submitted to
the Rights holders for approval at a meeting to be



                                      -44-
<PAGE>

held not later than the next annual  meeting of the Company's  shareholders.  If
the Rights  holders fail to approve the amendment by the Required Vote of Rights
at the meeting, the Rights Agreement shall thereafter  terminate.  Other changes
to the Rights  Agreement may be made only (i) prior to the Separation Time, with
the  approval  of the  Company's  shareholders  by the  Required  Vote of Voting
Shares,  or (ii) after the Separation  Time,  with the approval of the Company's
Rights  holders  by the  Required  Vote of Voting  Shares.  Notwithstanding  the
foregoing,  the  approval of the Rights  Agent shall always be required to amend
Article 4 of the Rights  Agreement,  which sets forth the terms of engagement of
the Rights Agent.

The Rights have certain anti-takeover  effects. The Rights may cause substantial
dilution to a person or group that attempts to acquire the Company other than by
way of a Permitted  Bid or a Take Over Bid  involving  a take over bid  circular
that is approved by the Board of  Directors.  The Rights  Agreement  permits the
Board of  Directors  to waive the  dilutive  effects  of the  Rights in  certain
limited circumstances.  The Rights may interfere with an offeror that is willing
to negotiate with the Company,  since the approval of the Company's shareholders
or Rights  holders at a meeting called for such purpose is required in order for
the Company to redeem the Rights or to amend or terminate the Rights  Agreement.
The Rights may also interfere with other  transactions  approved by the Board of
Directors,  including  issuances  of  additional  voting  shares  or  securities
convertible into voting shares,  transfers of such  securities,  and mergers and
other business combinations that would not otherwise require the approval of the
Company's  shareholders,  if such transactions would result in a person or group
beneficially  owning  20% or more  of the  voting  shares  of any  class  of the
Company.

          D.   Exchange Controls

Canada has no system of exchange controls. There are no exchange restrictions on
borrowing from foreign  countries nor on the remittance of dividends,  interest,
royalties and similar payments, management fees, loan repayments,  settlement of
trade debts, or the repatriation of capital.  However, any dividends remitted to
U.S.  Holders,  as defined below,  will be subject to withholding tax. See "Item
10E - Taxation".

Except as provided in the Investment  Canada Act (the "Act"),  as amended by the
Canada-United  States Free Trade Agreement  Implementation  Act (Canada) and the
Canada-United States Free Trade Agreement,  there are no limitations specific to
the rights of  non-Canadians  to hold or vote the common  shares of the  Company
under the laws of Canada or the Province of Alberta or in the charter  documents
of the Company.

Management of the Company  considers that the following  general  summary fairly
describes those  provisions of the Act pertinent to an investment in the Company
by a  person  who  is  not a  Canadian  resident  (a  "non-Canadian").  However,
provisions  of the  Act  are  complex  and  any  non-Canadian  contemplating  an
investment  to  acquire  control  of the  Company  should  consult  professional
advisors as to whether and how the Act might apply.

The Act requires a non-Canadian  making an investment  which would result in the
acquisition of control of a Canadian business,  the gross value of the assets of
which  exceed  certain  threshold  levels or the  business  activity of which is
related to Canada's cultural heritage or national identity, to either notify, or
file an  application  for review with,  Investment  Canada,  the federal  agency
created by the Act.

The  notification  procedure  involves a brief  statement  about the  investment
containing  the  prescribed  information  which is  required  to be  filed  with
Investment  Canada  by  the  investor  at  any  time  up  to 30  days  following
implementation of the investment. It is intended that investments requiring only
notification will proceed without government  intervention unless the investment
is in a specific type of business activity related to Canada's cultural heritage
and national identity.

If an  investment  is  reviewable  under  the Act,  an  application  for  review
containing  the  prescribed  information  is normally  required to be filed with
Investment  Canada prior to the  investment  taking place and the investment may
not be  implemented  until  the  review  has  been  completed  and the  Minister
responsible for Investment  Canada is satisfied that the investment is likely to
be of net benefit to Canada.

Factors to be considered include:  (i) the effect of the investment on the level
and nature of economic  activity in Canada,  including  employment,  on resource
processing,  on utilization of parts, components and services produced in Canada
and on exports from Canada; (ii) the degree and significance of participation by
Canadians in the Canadian  business or new Canadian business and in any industry
or industries in Canada of which the Canadian business or



                                      -45-
<PAGE>

new  Canadian  business  forms or would  form a part;  (iii)  the  effect of the
investment on productivity,  industrial efficiency,  technological  development,
product  innovation  and  product  variety  in  Canada;  (iv) the  effect of the
investment on competition  within any industry or industries in Canada;  (v) the
compatibility of the investment with national industrial,  economic and cultural
policies, taking into consideration industrial, economic and cultural objectives
enunciated  by the  government  or  legislature  of any  province  likely  to be
significantly  affected  by the  investment;  and (vi) the  contribution  of the
investment to Canada's ability to compete in world markets.

If the  Minister is not  satisfied  that the  investment  is likely to be of net
benefit to Canada, the non-Canadian must not implement the investment or, if the
investment has been implemented, may be required to divest himself of control of
the business that is the subject of the investment.

The following investments by non-Canadians are subject to notification under the
Act:

(a)  an investment to establish a new Canadian business; and

(b)  an  investment  to  acquire  control  of a  Canadian  business  that is not
     reviewable pursuant to the Act.

The following investments by a non-Canadian are subject to review under the Act:

(a)  direct  acquisitions  of  control of  Canadian  businesses  with  assets of
     $5,000,000 or more,  unless the  acquisition is being made by a World Trade
     Organization  ("WTO")  member  country  investor (the United States being a
     member of the WTO);

(b)  direct  acquisitions  of  control of  Canadian  businesses  with  assets of
     $250,000,000 or more by a WTO investor;

(c)  indirect  acquisitions  of control of  Canadian  businesses  with assets of
     $5,000,000  or more if such  assets  represent  more  than 50% of the total
     value  of the  assets  of the  entities,  the  control  of  which  is being
     acquired,  unless the acquisition is being made by a WTO investor, in which
     case there is no review;

(d)  indirect  acquisitions  of control of  Canadian  businesses  with assets of
     $50,000,000  or more  even if such  assets  represent  less than 50% of the
     total  value of the assets of the  entities,  the control of which is being
     acquired,  unless the acquisition is being made by a WTO investor, in which
     case there is no review;

(e)  indirect  acquisitions  of control of  Canadian  businesses  with assets of
     $250,000,000  or more by a WTO investor if such assets  represent more than
     50% of the total value of the assets of the entities,  the control of which
     is being acquired; and

(f)  an  investment   subject  to  notification  that  would  not  otherwise  be
     reviewable if the Canadian business engages in the activity of publication,
     distribution or sale of books, magazines, periodicals,  newspapers, film or
     video  recordings,  audio or video music  recordings,  or music in print or
     machine-readable form.

Generally  speaking,  an acquisition is direct if it involves the acquisition of
control of the Canadian business or of its Canadian parent or grandparent and an
acquisition  is  indirect  if  it  involves  the  acquisition  of  control  of a
non-Canadian  parent  or  grandparent  of an  entity  carrying  on the  Canadian
business.  Control may be acquired  through the  acquisition of actual or lawful
voting  control  of  a  Canadian  corporation  or  through  the  acquisition  of
substantially  all of the assets of the Canadian  business.  No change of voting
control  will be deemed to have  occurred if less than  one-third  of the voting
control of a Canadian corporation is acquired by an investor.

A WTO investor,  as defined in the Act, includes an individual who is a national
of a member  country  of the World  Trade  Organization  or who has the right of
permanent  residence in relation to that WTO member,  a government or government
agency of a WTO investor-controlled  corporation,  limited partnership, trust or
joint venture and a  corporation,  limited  partnership,  trust or joint venture
that  is  neither  WTO-investor  controlled  or  Canadian  controlled  of  which
two-thirds of its board of directors,  general partners or trustees, as the case
may be, are any  combination  of  Canadians  and WTO  investors.  The WTO review
threshold ($250,000,000) is adjusted annually by a formula relating to increases
in the nominal gross domestic product of Canada.



                                      -46-
<PAGE>

The higher  thresholds  for WTO investors do not apply if the Canadian  business
engages in activities  in certain  sectors such as uranium,  financial  services
(except insurance), transportation services or media activities.

The Act specifically  exempts certain  transactions from either  notification or
review.  Included  among this category of  transactions  is the  acquisition  of
voting shares or other voting  interests by any person in the ordinary course of
that person's business as a trader or dealer in securities.

     E.   Taxation

Certain Canadian Federal Income Tax Consequences

The  following  is a general  summary of  certain  Canadian  federal  income tax
considerations  generally  applicable to a holder of the Company's Common Shares
who is not a resident of Canada for the  purposes of the Income Tax Act (Canada)
(the "Act").  The discussion does not address all potentially  relevant  federal
income tax  matters  and it does not  address  consequences  peculiar to persons
subject to special provisions of federal income tax law.

The summary is based on the current  provisions  of the Act and the  regulations
thereunder  and  the  Company's  understanding  of  the  current  administrative
practices published by, and Press  announcements  released by the Canada Revenue
Agency and the Department of Finance.  This summary takes into account proposals
to amend the Act announced prior to the date hereof  (although no assurances can
be given that such changes will be enacted in the form presented or at all), but
does not  otherwise  take into account or  anticipate  any other changes in law,
whether by judicial,  governmental or legislative action or decision nor does it
take  into   account  any   provincial,   territorial,   local  or  foreign  tax
considerations.  Accordingly,  holders and prospective  holders of the Company's
Common  Shares  should  consult  their  own  tax  advisors  about  the  federal,
provincial,  territorial,  local and foreign  tax  consequences  of  purchasing,
owning and disposing of such shares.

The Act provides in subsection  212(2) that  dividends  and other  distributions
which are deemed to be dividends and which are paid or credited or are deemed to
be paid or credited by a Canadian  resident  Company to a non-resident of Canada
shall be  subject  to  non-resident  withholding  tax equal to 25 percent of the
gross amount of the dividend or deemed dividend.  In subsection  215(1), the Act
imposes an obligation on a corporation  to withhold the  applicable tax from the
dividends paid to a non-resident and remit that amount forthwith to the Receiver
General.

Subsections  2(3),  115(1) and  248(1) of the Act  provide  that a  non-resident
person  is  subject  to tax in  Canada  at the  rates  generally  applicable  to
residents of Canada on any "taxable  capital gain" arising on the disposition of
the shares of a company  resident  in Canada  which are  listed on a  prescribed
stock exchange (i.e.  certain listed Canadian,  U.S.A.  and other  international
stock  exchanges  as defined in  Regulations  3200 and 3201 but does not include
"over-the-counter"  trading ) only if such  non-resident,  together with persons
with  whom he does not deal at arm's  length,  owned 25  percent  or more of the
issued  shares of any class of the  capital  stock of the Company at any time in
the five years immediately preceding the date of disposition of the shares. This
also includes the  disposition of any interest in or option on such shares.  The
Common Shares of the Company are traded on the  Exchange,  which is a prescribed
stock exchange for the purpose of these rules.

Subsections 2(3),  115(1) and 248(1) also provide that a non-resident  person is
subject to tax in Canada on taxable  capital gains arising on the disposition of
shares that constitute capital property used in carrying on a business in Canada
which  also  includes  the  disposition  of any  interest  in or  option in such
property.  Taxable  Canadian  Property  that is "treaty  protected"  property is
exempted from taxation in Canada by subsection 115(1).  However, it is necessary
for a  non-resident  to report the  disposition  of such  property on a Canadian
income tax return and claim an exemption  under a tax treaty.  A capital gain is
the excess of the proceeds of  disposition  of a property over its adjusted cost
base (cost amount plus or minus adjustments under s.53 for certain distribution,
contributions  of capital,  etc.) to the holder,  with the taxable portion being
one-half thereof.  Subsection 116(5) and paragraph  116(6)(b) exempt a purchaser
from being  required to withhold  tax from  proceeds  of  disposition  paid to a
non-resident  of Canada for  purchases of shares  traded on a  prescribed  stock
exchange.

Provisions  in the Act  relating to dividend  and deemed  dividend  payments and
gains realized by non-residents of Canada who are residents of the United States
are subject to the Canada-United States Income Tax Convention (1980), as amended
(the "1980 Convention").


                                      -47-
<PAGE>

Article X of the 1980 Convention  provides that for 1997 and subsequent taxation
years pursuant to the Third Protocol to the 1980 Convention the rate of Canadian
non-resident   withholding  tax  on  dividends  paid  to  a  U.S.  company  that
beneficially  owns at least 10% of the  voting  stock of the  Company  shall not
exceed 5% of the  dividends.  Otherwise,  and  except  in the case of  dividends
received  by a resident  of the United  States who carries on business in Canada
through a Canadian  permanent  establishment  and the shares in respect of which
the  dividends  are  paid  are   effectively   connected   with  that  permanent
establishment,  the rate of non-resident withholding shall not exceed 15 percent
of the dividend.  Where the dividends are received by a  non-resident  of Canada
who is a United States person  carrying on business in Canada through a Canadian
permanent  establishment  and the shares in respect of which the  dividends  are
paid are effectively  connected with that permanent  establishment the dividends
are generally  subject to Canadian tax as business  profits,  generally  without
limitation  under  the 1980  Convention.  Article  XIII of the  1980  Convention
provides that gains realized by a United States  resident on the  disposition of
shares of a Canadian  company may not  generally  be taxed in Canada  unless the
value of those  shares is derived  principally  from real  property  situated in
Canada  or  the  shares  form  part  of the  business  property  of a  permanent
establishment   which  the  non-resident  of  Canada  who  is  a  United  States
shareholder  has or had in Canada within the 12 month period  preceding the date
of disposition.  Based on Canadian domestic law and provisions of the Convention
as set out above, a  non-resident  of Canada who is a US person would be subject
to income tax on a capital gain in Canada on a  disposition  of Common Shares of
the  Company  only where the 25%  ownership  threshold  is met  (under  domestic
Canadian law as described  above) and the value of those common  shares  derives
principally  from real  property  situated  in Canada (as  stipulated  under the
Convention  as described  above).  Canada also retains the right to tax gains on
property  owned at the time of  departure  from Canada if it is sold by a person
who was resident in Canada for 120 months in any 20 consecutive  years preceding
the sale and who was a resident in Canada at any time in the 10 years  preceding
sale.  This  rule  also  applies  to  property  substituted  in  a  tax-deferred
transaction for the property owned on departure.

U.S. Federal Income Tax Consequences

     The following is a summary of the anticipated  material U.S. federal income
tax  consequences  to a U.S. Holder (as defined below) arising from and relating
to the acquisition, ownership, and disposition of Common Shares.

     This summary is for general information  purposes only and does not purport
to be a complete  analysis or listing of all potential  U.S.  federal income tax
consequences  that may apply to a U.S.  Holder  as a result of the  acquisition,
ownership,  and disposition of Common Shares. In addition, this summary does not
take into account the individual facts and  circumstances of any particular U.S.
Holder  that  may  affect  the  U.S.  federal  income  tax  consequences  of the
acquisition,  ownership,  and  disposition of Common Shares.  Accordingly,  this
summary is not  intended to be, and should not be  construed  as,  legal or U.S.
federal  income tax advice with  respect to any U.S.  Holder.  Each U.S.  Holder
should consult its own financial advisor, legal counsel, or accountant regarding
the U.S.  federal,  U.S. state and local,  and foreign tax  consequences  of the
acquisition, ownership, and disposition of Common Shares.

Scope of this Disclosure

Authorities

     This summary is based on the Internal Revenue Code of 1986, as amended (the
"Code"), Treasury Regulations (whether final, temporary, or proposed), published
rulings  of the  Internal  Revenue  Service  ("IRS"),  published  administrative
positions of the IRS, the  Convention  Between  Canada and the United  States of
America with  Respect to Taxes on Income and on Capital,  signed  September  26,
1980, as amended (the "Canada-U.S.  Tax  Convention"),  and U.S. court decisions
that are  applicable  and, in each case, as in effect and  available,  as of the
date of this Annual  Report.  Any of the  authorities  on which this  summary is
based  could be changed in a material  and adverse  manner at any time,  and any
such change  could be applied on a  retroactive  basis.  This  summary  does not
discuss the potential  effects,  whether adverse or beneficial,  of any proposed
legislation that, if enacted, could be applied on a retroactive basis.



                                      -48-
<PAGE>

U.S. Holders

     For purposes of this  summary,  a "U.S.  Holder" is a  beneficial  owner of
Common Shares that, for U.S.  federal income tax purposes,  is (a) an individual
who is a citizen or resident of the U.S., (b) a corporation, or any other entity
classified  as a  corporation  for U.S.  federal  income tax  purposes,  that is
created or  organized in or under the laws of the U.S. or any state in the U.S.,
including  the District of Columbia,  (c) an estate if the income of such estate
is subject to U.S.  federal  income tax regardless of the source of such income,
or (d) a trust if (i) such  trust has  validly  elected  to be treated as a U.S.
person for U.S.  federal  income tax  purposes  or (ii) a U.S.  court is able to
exercise primary  supervision over the  administration  of such trust and one or
more U.S.  persons have the  authority to control all  substantial  decisions of
such trust.

Non-U.S. Holders

     For purposes of this summary, a "non-U.S.  Holder" is a beneficial owner of
Common Shares other than a U.S.  Holder.  This summary does not address the U.S.
federal income tax consequences of the acquisition,  ownership,  and disposition
of Common  Shares to non-U.S.  Holders.  Accordingly,  a non-U.S.  Holder should
consult its own financial advisor,  legal counsel,  or accountant  regarding the
U.S. federal, U.S. state and local, and foreign tax consequences  (including the
potential  application of and operation of any tax treaties) of the acquisition,
ownership, and disposition of Common Shares.

U.S. Holders Subject to Special U.S. Federal Income Tax Rules Not Addressed

     This summary does not address the U.S.  federal income tax  consequences of
the  acquisition,  ownership,  and disposition of Common Shares to U.S.  Holders
that are subject to special  provisions under the Code,  including the following
U.S.  Holders:  (a) U.S.  Holders that are tax-exempt  organizations,  qualified
retirement  plans,   individual   retirement  accounts,  or  other  tax-deferred
accounts; (b) U.S. Holders that are financial institutions, insurance companies,
real estate  investment  trusts,  or regulated  investment  companies;  (c) U.S.
Holders that are dealers in securities  or  currencies or U.S.  Holders that are
traders in securities that elect to apply a  mark-to-market  accounting  method;
(d) U.S.  Holders that have a "functional  currency" other than the U.S. dollar;
(e) U.S. Holders that are liable for the alternative minimum tax under the Code;
(f)  U.S.  Holders  that  own  Common  Shares  as  part of a  straddle,  hedging
transaction,  conversion  transaction,  constructive  sale, or other arrangement
involving more than one position;  (g) U.S.  Holders that acquired Common Shares
in  connection  with the  exercise of employee  stock  options or  otherwise  as
compensation  for services;  (h) U.S. Holders that hold Common Shares other than
as a capital  asset within the meaning of Section 1221 of the Code;  or (i) U.S.
Holders that own, directly or indirectly, 10% or more, by voting power or value,
of the  outstanding  shares of the  Company.  U.S.  Holders  that are subject to
special provisions under the Code, including U.S. Holders described  immediately
above,  should consult their own financial advisor,  legal counsel or accountant
regarding the U.S.  federal,  U.S. state and local, and foreign tax consequences
of the acquisition, ownership, and disposition of Common Shares.

     If an entity that is classified as a partnership (or "pass-through" entity)
for U.S.  federal  income tax purposes  holds Common  Shares,  the U.S.  federal
income tax consequences to such partnership (or  "pass-through"  entity) and the
partners of such partnership (or owners of such "pass-through" entity) generally
will depend on the activities of the partnership (or "pass-through"  entity) and
the  status  of such  partners  (or  owners).  Partners  of  entities  that  are
classified  as  partnerships  (or owners of  "pass-through"  entities)  for U.S.
federal income tax purposes  should consult their own financial  advisor,  legal
counsel or accountant  regarding the U.S. federal income tax consequences of the
acquisition, ownership, and disposition of Common Shares.

Tax Consequences Other than U.S. Federal Income Tax Consequences Not Addressed

     This summary does not address the U.S. state and local, U.S. federal estate
and gift,  or foreign  tax  consequences  to U.S.  Holders  of the  acquisition,
ownership, and disposition of Common Shares. Each U.S. Holder should consult its
own financial advisor, legal counsel, or accountant regarding the U.S. state and
local,  U.S.  federal  estate and gift,  and  foreign  tax  consequences  of the
acquisition,    ownership,    and    disposition   of   Common   Shares.    (See
"Taxation--Canadian Federal Income Tax Consequences" above).



                                      -49-
<PAGE>

U.S.  Federal  Income  Tax  Consequences  of  the  Acquisition,  Ownership,  and
Disposition of Common Shares

Distributions on Common Shares

     General Taxation of Distributions

A  U.S.   Holder  that  receives  a   distribution,   including  a  constructive
distribution,  with respect to the Common Shares will be required to include the
amount of such distribution in gross income as a dividend (without reduction for
any Canadian  income tax withheld from such  distribution)  to the extent of the
current or accumulated "earnings and profits" of the Company. To the extent that
a distribution exceeds the current and accumulated "earnings and profits" of the
Company,  such  distribution  will be treated (a) first, as a tax-free return of
capital to the extent of a U.S. Holder's tax basis in the Common Shares and, (b)
thereafter,  as gain from the sale or exchange of such Common Shares.  (See more
detailed discussion at "Disposition of Common Shares" below).

     Reduced Tax Rates for Certain Dividends

For taxable years  beginning after December 31, 2002 and before January 1, 2009,
a dividend paid by the Company  generally will be taxed at the  preferential tax
rates  applicable to long-term  capital gains if (a) the Company is a "qualified
foreign  corporation"  (as defined below),  (b) the U.S.  Holder  receiving such
dividend is an individual,  estate,  or trust,  and (c) such dividend is paid on
Common  Shares  that have been  held by such  U.S.  Holder  for at least 61 days
during the 121-day period beginning 60 days before the "ex-dividend date" (i.e.,
the first date that a purchaser  of such  Common  Shares will not be entitled to
receive such dividend).

The Company generally will be a "qualified  foreign  corporation"  under Section
1(h)(11)  of the  Code  (a  "QFC")  if (a)  the  Company  is  incorporated  in a
possession  of the U.S.,  (b) the  Company is eligible  for the  benefits of the
Canada-U.S.  Tax Convention, or (c) the Common Shares are readily tradable on an
established securities market in the U.S. However, even if the Company satisfies
one or more of such  requirements,  the Company  will not be treated as a QFC if
the Company is a "passive foreign investment company" (as defined below) for the
taxable  year  during  which the Company  pays a dividend  or for the  preceding
taxable year. In 2003, the U.S.  Department of the Treasury (the "Treasury") and
the IRS announced  that they intended to issue  Treasury  Regulations  providing
procedures for a foreign corporation to certify that it is a QFC. Although these
Treasury  Regulations  were not issued in 2004,  the  Treasury  and the IRS have
confirmed  their intention to issue these Treasury  Regulations.  It is expected
that  these  Treasury   Regulations  will  obligate  persons  required  to  file
information  returns to report a distribution with respect to a foreign security
issued  by a  foreign  corporation  as a  dividend  from a QFC  if  the  foreign
corporation  has, among other things,  certified under penalties of perjury that
the foreign  corporation was not a "passive foreign investment  company" for the
taxable year during which the foreign  corporation  paid the dividend or for the
preceding taxable year.

As discussed  below, the Company does not believe that it was a "passive foreign
investment  company"  for the taxable  year ended March 31,  2005,  and does not
expect that it will be a "passive  foreign  investment  company" for the taxable
year ending March 31, 2006. (See more detailed  discussion at "Additional  Rules
that May Apply to U.S. Holders" below).  However, there can be no assurance that
the IRS will not challenge the determination  made by the Company concerning its
"passive  foreign  investment  company" status or that the Company will not be a
"passive foreign investment company" for the current or any future taxable year.
Accordingly,  although  the  Company  expects  that it  should  be a QFC for the
taxable year ending March 31, 2005, there can be no assurances that the IRS will
not challenge the determination  made by the Company  concerning its QFC status,
that the Company will be a QFC for the current or any future  taxable  year,  or
that the Company will be able to certify that it is a QFC in accordance with the
certification procedures issued by the Treasury and the IRS.

If the Company is not a QFC, a dividend  paid by the  Company to a U.S.  Holder,
including a U.S. Holder that is an individual,  estate, or trust, generally will
be taxed at  ordinary  income tax rates (and not at the  preferential  tax rates
applicable to long-term capital gains). The dividend rules are complex, and each
U.S.  Holder  should  consult  its own  financial  advisor,  legal  counsel,  or
accountant regarding the dividend rules.

     Distributions Paid in Foreign Currency

The amount of a distribution paid to a U.S. Holder in foreign currency generally
will be  equal  to the  U.S.  dollar  value  of such  distribution  based on the
exchange rate applicable on the date of receipt. A U.S. Holder that does


                                      -50-
<PAGE>

not convert foreign currency received as a distribution into U.S. dollars on the
date of receipt  generally will have a tax basis in such foreign  currency equal
to the U.S. dollar value of such foreign currency on the date of receipt. Such a
U.S. Holder  generally will recognize  ordinary income or loss on the subsequent
sale or  other  taxable  disposition  of such  foreign  currency  (including  an
exchange for U.S. dollars).

     Dividends Received Deduction

Dividends  paid on the Common  Shares  generally  will not be  eligible  for the
"dividends  received  deduction."  The  availability  of the dividends  received
deduction  is subject to complex  limitations  that are beyond the scope of this
discussion,  and a U.S.  Holder  that is a  corporation  should  consult its own
financial advisor, legal counsel, or accountant regarding the dividends received
deduction.

Disposition of Common Shares

A U.S.  Holder  will  recognize  gain  or  loss on the  sale  or  other  taxable
disposition  of  Common  Shares in an amount  equal to the  difference,  if any,
between  (a) the  amount  of cash  plus the fair  market  value of any  property
received  and (b) such U.S.  Holder's  tax basis in the  Common  Shares  sold or
otherwise  disposed of. Any such gain or loss  generally will be capital gain or
loss, which will be long-term capital gain or loss if the Common Shares are held
for more than one year.  Gain or loss recognized by a U.S. Holder on the sale or
other taxable  disposition  of Common Shares  generally will be treated as "U.S.
source" for purposes of applying the U.S.  foreign tax credit  rules.  (See more
detailed discussion at "Foreign Tax Credit" below).

Preferential tax rates apply to long-term capital gains of a U.S. Holder that is
an individual,  estate, or trust.  There are currently no preferential tax rates
for long-term  capital gains of a U.S. Holder that is a corporation.  Deductions
for capital losses are subject to significant limitations under the Code.

Foreign Tax Credit

A U.S. Holder who pays (whether directly or through withholding) Canadian income
tax with  respect to  dividends  paid on the  Common  Shares  generally  will be
entitled,  at the election of such U.S. Holder, to receive either a deduction or
a credit for such Canadian  income tax paid.  Generally,  a credit will reduce a
U.S.  Holder's U.S. federal income tax liability on a  dollar-for-dollar  basis,
whereas a deduction will reduce a U.S.  Holder's income subject to U.S.  federal
income tax.  This  election is made on a  year-by-year  basis and applies to all
foreign taxes paid (whether  directly or through  withholding)  by a U.S. Holder
during a year.

Complex  limitations  apply to the  foreign tax  credit,  including  the general
limitation  that the  credit  cannot  exceed the  proportionate  share of a U.S.
Holder's U.S.  federal  income tax liability  that such U.S.  Holder's  "foreign
source" taxable income bears to such U.S. Holder's  worldwide taxable income. In
applying this limitation,  a U.S. Holder's various items of income and deduction
must be classified,  under complex rules,  as either  "foreign  source" or "U.S.
source." In addition,  this limitation is calculated  separately with respect to
specific categories of income (including "passive income," "high withholding tax
interest,"  "financial  services  income,"  "general  income," and certain other
categories of income).  Dividends paid by the Company  generally will constitute
"foreign  source" income and generally  will be categorized as "passive  income"
or, in the case of certain U.S. Holders,  "financial  services income." However,
for taxable  years  beginning  after  December 31, 2006,  the foreign tax credit
limitation  categories are reduced to "passive income" and "general income" (and
the other  categories  of income,  including  "financial  services  income," are
eliminated).  The foreign tax credit  rules are  complex,  and each U.S.  Holder
should consult its own financial advisor, legal counsel, or accountant regarding
the foreign tax credit rules.

Information Reporting; Backup Withholding Tax

Payments  made  within  the  U.S.,  or by a U.S.  payor  or U.S.  middleman,  of
dividends  on,  and  proceeds  arising  from  certain  sales  or  other  taxable
dispositions  of,  Common  Shares  generally  will  be  subject  to  information
reporting and backup  withholding  tax, at the rate of 28%, if a U.S. Holder (a)
fails to furnish such U.S. Holder's correct U.S. taxpayer  identification number
(generally on Form W-9), (b) furnishes an incorrect U.S. taxpayer identification
number,  (c) is notified by the IRS that such U.S. Holder has previously  failed
to properly  report  items  subject to backup  withholding  tax, or (d) fails to
certify,  under  penalty of perjury,  that such U.S.  Holder has  furnished  its
correct U.S.  taxpayer  identification  number and that the IRS has not notified
such U.S. Holder that it is subject to backup  withholding  tax.  However,  U.S.
Holders that are corporations generally are excluded from these



                                      -51-
<PAGE>


information  reporting and backup  withholding tax rules.  Any amounts  withheld
under the U.S. backup  withholding tax rules will be allowed as a credit against
a U.S. Holder's U.S. federal income tax liability,  if any, or will be refunded,
if such U.S. Holder furnishes required  information to the IRS. Each U.S. Holder
should consult its own financial advisor, legal counsel, or accountant regarding
the information reporting and backup withholding tax rules.

Additional Rules that May Apply to U.S. Holders

If the  Company is a  "controlled  foreign  corporation"  or a "passive  foreign
investment  company"  (each as defined  below),  the preceding  sections of this
summary  may not  describe  the U.S.  federal  income tax  consequences  to U.S.
Holders of the acquisition, ownership, and disposition of Common Shares.

Controlled Foreign Corporation

The Company generally will be a "controlled  foreign  corporation" under Section
957 of the Code (a  "CFC") if more  than 50% of the  total  voting  power or the
total  value of the  outstanding  shares of the  Company is owned,  directly  or
indirectly,  by  citizens  or  residents  of the  U.S.,  domestic  partnerships,
domestic corporations,  domestic estates, or domestic trusts (each as defined in
Section 7701(a)(30) of the Code), each of which own, directly or indirectly, 10%
or more of the total  voting power of the  outstanding  shares of the Company (a
"10% Shareholder").

If the Company is a CFC, a 10% Shareholder  generally will be subject to current
U.S.  federal  income tax with  respect to (a) such 10%  Shareholder's  pro rata
share of the  "subpart F income"  (as defined in Section 952 of the Code) of the
Company  and (b) such 10%  Shareholder's  pro rata share of the  earnings of the
Company  invested in "United States  property" (as defined in Section 956 of the
Code).  In addition,  under Section 1248 of the Code, any gain recognized on the
sale or other taxable  disposition of Common Shares by a U.S.  Holder that was a
10% Shareholder at any time during the five-year period ending with such sale or
other taxable disposition  generally will be treated as a dividend to the extent
of the  "earnings  and  profits" of the Company  that are  attributable  to such
Common Shares.  If the Company is both a CFC and a "passive  foreign  investment
company" (as defined below), the Company generally will be treated as a CFC (and
not  as a  "passive  foreign  investment  company")  with  respect  to  any  10%
Shareholder.

The Company does not believe that it has  previously  been,  or currently  is, a
CFC.  However,  there can be no assurance that the Company will not be a CFC for
the current or any future taxable year.

Passive Foreign Investment Company

The Company  generally  will be a "passive  foreign  investment  company"  under
Section 1297 of the Code (a "PFIC") if, for a taxable  year,  (a) 75% or more of
the gross income of the Company for such  taxable year is passive  income or (b)
50% or more of the assets held by the Company either  produce  passive income or
are held for the production of passive income, based on the fair market value of
such assets (or on the adjusted tax basis of such assets,  if the Company is not
publicly  traded and either is a "controlled  foreign  corporation"  or makes an
election). "Passive income" includes, for example, dividends,  interest, certain
rents and royalties,  certain gains from the sale of stock and  securities,  and
certain gains from commodities transactions.

For  purposes  of the PFIC income test and asset test  described  above,  if the
Company  owns,  directly  or  indirectly,  25% or more of the total value of the
outstanding shares of another foreign  corporation,  the Company will be treated
as if it (a) held a  proportionate  share of the  assets of such  other  foreign
corporation  and (b) received  directly a  proportionate  share of the income of
such other  foreign  corporation.  In addition,  for purposes of the PFIC income
test and asset test  described  above,  "passive  income"  does not  include any
interest,  dividends,  rents,  or royalties  that are received or accrued by the
Company from a "related  person" (as defined in Section  954(d)(3) of the Code),
to the extent such items are  properly  allocable  to the income of such related
person that is not passive income.

If the Company is a PFIC,  the U.S.  federal income tax  consequences  to a U.S.
Holder of the  acquisition,  ownership,  and  disposition  of Common Shares will
depend on whether  such U.S.  Holder makes an election to treat the Company as a
"qualified  electing  fund"  or  "QEF"  under  Section  1295 of the Code (a "QEF
Election")  or a  mark-to-market  election  under  Section  1296 of the  Code (a
"Mark-to-Market Election"). A U.S. Holder that does not



                                      -52-
<PAGE>

make either a QEF Election or a  Mark-to-Market  Election will be referred to in
this summary as a "Non-Electing U.S. Holder."

Under Section 1291 of the Code, any gain recognized on the sale or other taxable
disposition  of Common  Shares,  and any  "excess  distribution"  (as defined in
Section  1291(b)  of the  Code)  paid on the  Common  Shares,  must  be  ratably
allocated to each day in a  Non-Electing  U.S.  Holder's  holding period for the
Common Shares. The amount of any such gain or excess  distribution  allocated to
prior years of such  Non-Electing  U.S.  Holder's  holding period for the Common
Shares  generally will be subject to U.S.  federal income tax at the highest tax
applicable  to ordinary  income in each such prior  year.  A  Non-Electing  U.S.
Holder will be required to pay interest on the  resulting tax liability for each
such prior year,  calculated  as if such tax liability had been due in each such
prior year.

A U.S.  Holder that makes a QEF  Election  generally  will not be subject to the
rules of Section 1291 of the Code discussed above.  However,  a U.S. Holder that
makes a QEF Election  generally  will be subject to U.S.  federal  income tax on
such U.S.  Holder's pro rata share of (a) the "net capital gain" of the Company,
which will be taxed as long-term  capital gain to such U.S. Holder,  and (b) and
the "ordinary  earnings" of the Company,  which will be taxed as ordinary income
to such U.S.  Holder. A U.S. Holder that makes a QEF Election will be subject to
U.S.  federal  income tax on such  amounts  for each  taxable  year in which the
Company is a PFIC,  regardless of whether such amounts are actually  distributed
to such U.S. Holder by the Company.

A U.S. Holder that makes a Mark-to-Market Election generally will not be subject
to the rules of Section 1291 of the Code discussed above. A U.S. Holder may make
a Mark-to-Market  Election only if the Common Shares are "marketable  stock" (as
defined  in  Section   1296(e)  of  the  Code).  A  U.S.  Holder  that  makes  a
Mark-to-Market  Election will include in gross income,  for each taxable year in
which the Company is a PFIC,  an amount equal to the excess,  if any, of (a) the
fair market value of the Common Shares as of the close of such taxable year over
(b) such U.S. Holder's tax basis in such Common Shares. A U.S. Holder that makes
a Mark-to-Market  Election will,  subject to certain  limitations,  be allowed a
deduction  in an amount equal to the excess,  if any, of (a) such U.S.  Holder's
adjusted  tax basis in the Common  Shares over (b) the fair market value of such
Common Shares as of the close of such taxable year.

The Company does not believe that it was a PFIC for the taxable year ended March
31, 2005, and does not expect that it will be a PFIC for the taxable year ending
March 31, 2006.  Whether the Company  will,  in fact,  be a PFIC for the taxable
year ending March 31, 2006, depends on the assets and income of the Company over
the course of the taxable year ending March 31, 2006,  and, as a result,  cannot
be predicted with  certainty as of the date of this Annual Report.  In addition,
there can be no assurance that the IRS will not challenge the determination made
by the Company concerning its PFIC status or that the Company will not be a PFIC
for the current or any future taxable year.

The PFIC  rules  are  complex,  and each  U.S.  Holder  should  consult  its own
financial advisor, legal counsel, or accountant regarding the PFIC rules and how
the PFIC rules may  affect  the U.S.  federal  income  tax  consequences  of the
acquisition, ownership, and disposition of Common Shares.

     F.   Dividends and paying agents.

Not Applicable.

     G.   Statement by experts.

Not applicable.

     H.   Documents on Display.

The  documents  described  herein may be  inspected at the  principal  executive
offices of the Company,  Suite 355, 10333 Southport Road, Calgary,  Alberta, T2W
3X6, during normal business hours.

     I.   Subsidiary Information.

Not Applicable.


                                      -53-
<PAGE>

Item 11.  Quantitative and Qualitative Disclosures About Market Risk

The Company deposits  surplus funds with a Canadian  chartered bank or U.S. bank
earning  daily  interest.  The Company  does not invest in any  instruments  for
trading purposes.

Exchange rate sensitivity

We report our revenue in Canadian dollars.  Our U.S. operations earn revenue and
incur expenses in U.S. dollars.  Given our increasingly  significant U.S. dollar
revenue,  we are sensitive to the  fluctuations  in the value of the U.S. dollar
and are therefore  exposed to foreign currency  exchange risk.  Foreign currency
exchange risk is the potential for loss in revenue and net income as a result of
a decline in the Canadian  dollar value of U.S.  dollar revenue due to a decline
in the value of U.S. dollar compared to Canadian dollar.

The table  below  summarizes  the  effect  that a  hypothetical  10%  decline or
increase in the value of US dollar would have had on our  revenue,  net loss and
cumulative  translation adjustment account for the twelve months ended March 31,
2005.

(in thousands of Canadian dollars)
                                                      2005

Revenue                                              +/- $787
Net loss                                             +/- $440
Cumulative translation adjustment                    +/- $44

We expect that the proportion of revenue earned in U.S. dollars will continue to
increase, further increasing our foreign currency exchange sensitivity.

Interest rate sensitivity

The Company's  Bridge Facility is a variable  interest  bearing debt instrument.
The  Company is  therefore  subject to interest  rate risk with  respect to this
instrument.  Based on the total principal  amount of the Bridge Facility at July
31,  2005,  the  maximum  potential  future  reduction  in  cash  flows  from  a
hypothetical  instantaneous 10% increase in the prevailing  interest rates as at
July 31, 2005 is  approximately  US$100,300 per annum.  The future  reduction in
cash  flows  could vary based on the  amount  actually  drawn and any  principal
repayments.

Item 12. Description of Securities Other than Equity Securities

Not applicable.

                                     PART II

Item 13. Defaults, Dividend Arrearages And Delinquencies

None.

Item 14.  Material Modifications to the Rights of Securities Holders
          and Use of Proceeds

None.

Item 15. Controls and Procedures

In connection with this filing, the Company's management, with the participation
of the Company's Chief Executive Officer and Chief Financial Officer,  evaluated
the effectiveness of the Company's disclosure controls


                                      -54-
<PAGE>


and procedures  (as defined in Rule 13a-15(e)  under the Exchange Act) as of the
end of the period covered by this report (the "Evaluation Date").

Based upon the evaluation described above, the Chief Executive Officer and Chief
Financial  Officer  concluded  that  as of the  Evaluation  Date  the  Company's
disclosure controls and procedures were effective in timely alerting them to the
material information relating to the Company (or its consolidated  subsidiaries)
required to be included in reports that the Company  files or submits  under the
Exchange Act.

No changes were made in the Company's internal control over financial  reporting
during the period covered by this report that have materially  affected,  or are
reasonably  likely to materially  affect,  the Company's  internal  control over
financial reporting.

Item 16A.         Audit Committee Financial Expert

The Company's  Board of Directors has determined  that Doug Farmer,  a member of
the Company's Audit  Committee,  is an audit  committee  financial  expert.  Mr.
Farmer  is  independent,  as  that  term is  defined  in the  listing  standards
applicable to companies listed on the American Stock Exchange

Item 16B.         Code of Ethics

The Company has adopted a code of ethics that applies to the Company's principal
executive officer,  principal financial officer and principal accounting officer
or controller, among other employees.

Item 16C.         Principal Accountant Fees and Services


The following table discloses the aggregate fees billed for each of the last two
fiscal years for professional services rendered by the Company's former external
auditors,  KPMG LLP : No fees were billed by the current external auditors,  D&H
Group LLP in the fiscal year ended March 31, 2005.

Fiscal Year ended March 31, 2005 and 2004      Fiscal Year     Fiscal Year
Principal Accountant Fees and Services             2005           2004
---------------------------------------------------------------------------

Audit Fees                                      $  111,782      $   55,000
                                            -------------------------------
Audit Related Fees (1)                          $   25,000      $   14,975
                                            -------------------------------
Tax Fees (2)                                    $   15,182      $   35,079
                                            -------------------------------
All Other Fees (3)                              $   59,308           Nil
                                            -------------------------------
Total                                           $  211,272      $  105,054
                                            ===============================

(1)  Audit related fees during  fiscal 2005 related to the  following  services:
     limited reviews of interim financial statements.  Audit related fees during
     fiscal  2004  related  to the  following  services:  Due  diligence  of new
     acquisition,   and  review  and  limited   reviews  of  interim   financial
     statements.



                                      -55-
<PAGE>

(2)  Tax fees during  fiscal 2005 related to the following  services:  Advise on
     Canadian and U.S. tax matters; filing of Canadian and U.S. tax returns; and
     tax  planning.  Tax  fees  during  fiscal  2004  related  to the  following
     services:  Advise on Canadian and U.S. tax matters;  filing of Canadian and
     U.S. tax returns; advice on financing, business acquisitions.

(3)  Other fees related to the auditor's involvement in providing audit services
     on acquisitions

All  services  to be  undertaken  by  the  Company's  outside  auditor  must  be
pre-approved by the Audit Committee.

Item 16D.  Exemptions from the Listing Standards for Audit Committees

Not applicable.

Item 16E.  Purchases of Equity Securities by the Issuer and
           Affiliated Purchasers

Neither the Company nor any affiliated  purchaser purchased any of the Company's
Common Shares during the year ended March 31, 2005.

During the year ended March 31, 2005, the Company received  regulatory  approval
from the TSX to make a normal  course  issuer bid. The bid  commenced on May 20,
2004 and ended on May 19, 2005. The Company did not repurchase any of its Common
Shares pursuant to the bid.

                                    PART III

Item 17. Financial Statements

The  Consolidated  Financial  Statements  for the year ended March 31, 2005 were
reported on by D&H Group LLP.  The  Consolidated  Financial  Statements  for the
years  ended  March  31,  2004 and 2003  were  reported  on by KPMG  LLP.  These
Consolidated Financial Statements were prepared in accordance with Canadian GAAP
and are presented in Canadian  dollars.  There are  differences  between  United
States  and  Canadian  GAAP  which are set forth in note 25 to the  Consolidated
Financial Statements.

Item 18. Financial Statements

Not applicable.

Item 19. Financial Statements and Exhibits

(A)  Financial Statements

Auditors'  Report to the  Shareholders  dated May 20,  2005  (except for note 24
which is as at June 15, 2005)

Auditors'  Report to the Directors  dated June 17, 2004 (except for notes 13 and
25 which are as at November 15, 2004)

Consolidated  Balance  Sheet as at March 31, 2005  (audited)  and March 31, 2004
(audited)

Consolidated  Statement of Operations  and Deficit for the years ended March 31,
2005, 2004 and 2003 (audited)

Consolidated  Statements of Cash Flows for the years ended March 31, 2005,  2004
and 2003 (audited)

Notes to Consolidated  Financial  Statements for the years ended March 31, 2005,
2004 and 2003


                                      -56-
<PAGE>




                           Anthony Clark International
                             Insurance Brokers Ltd.
                        CONSOLIDATED FINANCIAL STATEMENTS
                    Years ended March 31, 2005, 2004 and 2003
                         (Expressed in Canadian dollars)




                                      -57-
<PAGE>

                                                                [D&H GROUP LOGO]


AUDITORS' REPORT



To the Shareholders of
Anthony Clark International Insurance Brokers Ltd.


We have audited the  consolidated  balance sheet of Anthony Clark  International
Insurance  Brokers Ltd. as at March 31, 2005 and the consolidated  statements of
operations  and deficit and cash flow for the year then ended.  These  financial
statements   are  the   responsibility   of  the   Company's   management.   Our
responsibility  is to express an opinion on these financial  statements based on
our audit.

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

In our opinion,  these consolidated  financial statements present fairly, in all
material  respects,  the financial  position of the Company as at March 31, 2005
and the  results  of its  operations  and cash flow for the year  then  ended in
accordance with Canadian generally accepted accounting principles.

Canadian generally accepted  accounting  principles vary in certain  significant
respects from  accounting  principles  generally  accepted in the United States.
Application  of accounting  principles  generally  accepted in the United States
would have  affected  assets and  shareholders'  equity as at March 31, 2005 and
2004 and results of operations for the years ended March 31, 2005, 2004 and 2003
to the extent summarized in Note 25 to the consolidated financial statements.

On May 20, 2005,  we reported  separately to the  shareholders  of Anthony Clark
International  Insurance Brokers Ltd. on consolidated financial statements as at
and for the year ended  March 31,  2005  audited  in  accordance  with  Canadian
generally accepted auditing standards.


                                                           /s/ D&H Group LLP

Vancouver, B.C.
May 20, 2005, except as to Note 24,
which is as of June 15, 2005                               Chartered Accountants




                                  D&H Group LLP
        a British Columbia Limited Liability Partnership of Corporations
           A Member of BHD Association with affiliated offices across
                           Canada and Internationally
             10th Floor, 1333 West Broadway, Vancouver B.C. V6H 4C1
              |_| www.dhgroup.ca |_| F 604-731-9923 T 604-731-5881



                                      -58-
<PAGE>

                                                                [D&H GROUP LOGO]





COMMENTS BY AUDITORS FOR U.S. READERS
ON CANADA - U.S. REPORTING DIFFERENCE


In the United States,  reporting  standards for auditors require the addition of
an  explanatory  paragraph  (following  the opinion  paragraph)  when there is a
change in accounting  principles that has a material effect on the comparability
of the Company's consolidated financial statements, such as the change described
in  Note 3 (a) to the  consolidated  financial  statements.  Our  report  to the
shareholders  dated May 20, 2005,  except as to Note 24, which is as of June 15,
2005, is expressed in accordance with Canadian reporting  standards which do not
require a reference to such a change in  accounting  principles in the auditors'
report when the change is properly accounted for and adequately disclosed in the
consolidated financial statements.


                                                           /s/ D&H Group LLP

Vancouver, B.C.
May 20, 2005, except as to Note 24,
which is as of June 15, 2005                               Chartered Accountants



                                  D&H Group LLP
        a British Columbia Limited Liability Partnership of Corporations
           A Member of BHD Association with affiliated offices across
                           Canada and Internationally
             10th Floor, 1333 West Broadway, Vancouver B.C. V6H 4C1
              |_| www.dhgroup.ca |_| F 604-731-9923 T 604-731-5881





                                      -59-
<PAGE>


KPMG
                       KPMG LLP                         Telephone (403) 691-8000
                       Chartered  Accountants           Fax       (403) 691-8008
                       1200 205 - 5th Avenue SW         Internet  www.kpmg.ca
                       Calgary AB T2P 4B9




REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

To the Directors of Anthony Clark International Insurance Brokers Ltd.

We have audited the  accompanying  consolidated  balance sheets of Anthony Clark
International  Insurance  Brokers Ltd. and subsidiaries as of March 31, 2004 and
2003 and the  consolidated  statements of operations  and deficit and cash flows
for  each of the  years in the two year  period  ended  March  31,  2004.  These
consolidated  financial  statements  are  the  responsibility  of the  Company's
management.  Our  responsibility is to express an opinion on these  consolidated
financial statements based on our audits.

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

In our opinion, the consolidated  financial statements referred to above present
fairly,  in all  material  respects,  the  financial  position of Anthony  Clark
International  Insurance  Brokers Ltd. and subsidiaries as of March 31, 2004 and
2003 and the  results of their  operations  and their cash flows for each of the
years in the two-year  period ended March 31, 2004 in  accordance  with Canadian
generally accepted accounting principles.

As discussed in note 3(b), the Company has corrected the application of Canadian
generally accepted  accounting  principles for the amounts allocated to customer
accounts and goodwill,  and the  amortization  periods used in  connection  with
business combinations completed prior to July 1, 2001.

The  accompanying  financial  statements  have been  prepared  assuming that the
Company  will  continue as a going  concern.  As  discussed in note 13(b) to the
financial statements, the Company was in noncompliance with certain covenants in
its long-term  borrowing  agreement  which covenants were waived as at September
30,  2004.  The  Company  expects  that these  covenants  will be in  continuous
noncompliance pending their replacement or revision. The uncertainty relating to
the  Corporation's  ability  to reach a  satisfactory  resolution  with it's the
lenders raises  substantial doubt of the Corporation's  ability to continue as a
going  concern.  The financial  statements do not include any  adjustments  that
might result from the outcome of this uncertainty.


/s/ KPMG LLP
Chartered Accountants


Calgary, Canada
June 17, 2004 (except for notes 13 and 25 which are as at November 15, 2004)


       KPMG LLP, a Canadian limited liability partnership is the Canadian
            member firm of KPMG International, a Swiss cooperative.




                                      -60-

<PAGE>

ANTHONY CLARK INTERNATIONAL INSURANCE BROKERS LTD.
CONSOLIDATED BALANCE SHEETS
March 31, 2005 and 2004
(Expressed in Canadian dollars)

<TABLE>
-----------------------------------------------------------------------------------------------------------
                                                                             2005                 2004
                                                                        --------------       --------------
                                                                                             (Note 23)
<S>                                                                     <C>                  <C>
ASSETS

CURRENT ASSETS
    Cash and cash equivalents                                           $     401,944        $   1,989,663
    Accounts receivable                                                     1,708,085            1,335,775
    Prepaid expenses                                                          221,705              123,329
    Restricted cash (Note 5)                                                        -              522,619
                                                                        --------------       --------------
                                                                            2,331,734            3,971,386

Restricted cash (Note 5)                                                            -              655,274
Note receivable from related party (Note 6)                                   181,440              196,575
Due from director (Note 7)                                                     40,000               40,000
Computer systems and office equipment (Note 8)                                399,442              376,540
Customer accounts (Note 9)                                                  5,678,499            5,027,401
Goodwill                                                                   12,525,334            5,459,185
Deferred financing costs (Notes 10 and 13)                                          -              474,447
Non-competition agreements (Note 11)                                          705,890              663,551
                                                                        --------------       --------------
                                                                        $  21,862,339        $  16,864,359
                                                                        ==============       ==============
LIABILITIES

CURRENT LIABILITIES
    Accounts payable                                                    $     959,964        $     915,066
    Accrued liabilities                                                       547,589              199,479
    Loans payable (Note 13)                                                13,551,551                    -
    Due to related party-current (Note 12)                                  3,973,513              184,787
    Current portion of long-term debt (Note 13)                                     -              277,748
    Current portion of obligations under capital leases (Note 14)              20,735               22,912
    Income taxes payable                                                       63,877                    -
    Litigation liability (Note 5)                                                   -              522,619
                                                                        --------------       --------------
                                                                           19,117,229            2,122,611

Obligations under capital leases (Note 14)                                     19,231               39,966
Due to related party (Note 12)                                                      -            3,436,108
Long-term debt (Note 13)                                                            -            4,537,970
Future income taxes (Note 19)                                                 316,910              229,607
                                                                        --------------       --------------
                                                                           19,453,370           10,366,262
                                                                        --------------       --------------
Commitments (Note 20)

SHAREHOLDERS' EQUITY

Share capital (Note 15)                                                     9,895,142            9,897,116
Contributed surplus                                                           667,585              104,022
Retained earnings (deficit)                                                (8,124,638)          (3,502,196)
Cumulative translation adjustment                                             (29,120)                (845)
                                                                        --------------       --------------
                                                                            2,408,969            6,498,097
                                                                        --------------       --------------
                                                                        $  21,862,339        $  16,864,359
                                                                        ==============       ==============
Subsequent event (Note 24)
</TABLE>


        See accompanying notes to the consolidated financial statements.


Approved by the Board  "Tony Consalvo"  Director  "Thomas Milley"  Director
                       ---------------             ---------------



                                      -61-
<PAGE>


ANTHONY CLARK INTERNATIONAL INSURANCE BROKERS LTD.
CONSOLIDATED STATEMENTS OF OPERATIONS AND DEFICIT
Years ended March 31, 2005, 2004 and 2003
(Expressed in Canadian dollars)


<TABLE>
--------------------------------------------------------------------------------------------------------------------

                                                              2005                 2004                2003
                                                             -------------        -------------        -------------
                                                                                                      (Note 23)
<S>                                                          <C>                  <C>                  <C>
REVENUE                                                      $ 13,060,344         $  7,469,559         $  5,175,072
                                                             -------------        -------------        -------------
EXPENSES
    General and administrative                                  2,393,711            1,446,886            1,173,128
    Legal judgment                                                      -              522,619                    -
    Rent                                                          805,937              422,672              283,242
    Salaries and wages                                          7,925,260            4,818,880            3,165,924
    Stock-based compensation                                      411,275                    -                    -
                                                             -------------        -------------        -------------
                                                               11,536,183            7,211,057            4,622,294
                                                             -------------        -------------        -------------
Earnings before interest, income taxes,
    depreciation and amortization                               1,524,161              258,502              552,778

Interest and financing costs (Note 21)                         (4,539,268)            (941,153)            (285,720)
                                                             -------------        -------------        -------------
Earnings (loss) before income taxes,
    depreciation and amortization                              (3,015,107)            (682,651)             267,058

Depreciation and amortization                                  (1,303,867)            (481,025)            (609,546)
                                                             -------------        -------------        -------------
Earnings (loss) before income taxes                            (4,318,974)          (1,163,676)            (342,488)
                                                             -------------        -------------        -------------
INCOME TAXES (Note 19)
    Current                                                        63,877                    -                    -
    Future (recovery)                                              87,303             (112,178)              13,313
                                                             -------------        -------------        -------------
                                                                  151,180             (112,178)              13,313
                                                             -------------        -------------        -------------
Net earnings (loss) for the year                               (4,470,154)          (1,051,498)            (355,801)
                                                             -------------        -------------        -------------
RETAINED EARNINGS (DEFICIT), beginning of year
    As previously reported                                     (3,502,196)          (2,450,698)          (2,669,781)
    Change in accounting policy (Note 3 (a))                     (152,288)                   -                    -
    Correction of accounting error (Note 3 (b))                         -                    -              574,884
                                                             -------------        -------------        -------------
    As restated                                                (3,654,484)          (2,450,698)          (2,094,897)
                                                             -------------        -------------        -------------
RETAINED EARNINGS (DEFICIT), end of year                     $ (8,124,638)        $ (3,502,196)        $ (2,450,698)
                                                             =============        =============        =============
Earnings (loss) per share - basic and diluted                $      (0.56)        $      (0.14)        $      (0.05)
                                                             =============        =============        =============
</TABLE>


        See accompanying notes to the consolidated financial statements.



                                      -62-
<PAGE>


ANTHONY CLARK INTERNATIONAL INSURANCE BROKERS LTD.
CONSOLIDATED STATEMENTS OF CASH FLOW
Years ended March 31, 2005, 2004 and 2003
(Expressed in Canadian dollars)


<TABLE>

-------------------------------------------------------------------------------------------------------------------
                                                                   2005               2004                  2003
                                                             -------------        -------------        -------------
                                                                                    (Note 23)
<S>                                                          <C>                  <C>                  <C>
CASH FLOW FROM (USED IN) OPERATING ACTIVITIES
    Net earnings (loss) for the year                         $ (4,470,154)        $ (1,051,498)        $   (355,801)
    Adjustments to reconcile net cash provided
    by operating activities
       Depreciation and amortization                            1,303,867              481,025              609,546
       Future income taxes (recovery)                              87,303             (112,178)              13,313
       Amortization of deferred financing costs and
          loan discounts                                          396,688              485,694              102,385
       Impairment of deferred financing costs and
          unamortized loan discounts                            2,539,697                    -                    -
       Stock-based compensation                                   411,275                    -                    -
       Changes in non-cash working capital
       relating to operations
          Accounts receivable                                    (370,786)            (297,054)            (114,185)
          Prepaid expenses                                       (103,420)              47,086              (37,463)
          Note receivable from related party                            -             (196,575)                   -
          Accounts payable                                         44,898              (21,592)             240,887
          Accrued liabilities                                     320,626               78,804               78,410
                                                             -------------        -------------        -------------
                                                                  159,994             (586,288)             537,092
                                                             -------------        -------------        -------------
CASH FLOW FROM (USED IN) FINANCING ACTIVITIES
    Net proceeds on sale of common shares                          (1,974)             314,006                    -
    Proceeds from loans payable                                 7,469,141            6,632,353                    -
    Repayments on loans payable                                  (417,340)          (2,199,696)            (180,754)
    Financing costs paid                                         (832,998)            (557,324)            (442,578)
    Repayment from director                                             -                    -               60,327
    Restricted cash                                                     -             (655,274)                   -
                                                             -------------        -------------        -------------
                                                                6,216,829            3,534,065             (563,005)
                                                             -------------        -------------        -------------
CASH FLOW FROM (USED IN) INVESTING ACTIVITIES
    Additions to computer systems and office equipment            (66,256)             (66,230)             (31,766)
    Business acquisitions (Note 4)                             (8,157,225)          (4,611,292)                   -
                                                             -------------        -------------        -------------
                                                               (8,223,481)          (4,677,522)             (31,766)
                                                             -------------        -------------        -------------
EFFECT OF FOREIGN EXCHANGE                                        258,939                    -                    -
                                                             -------------        -------------        -------------
INCREASE (DECREASE) IN CASH DURING THE YEAR                    (1,587,719)          (1,729,745)             (57,679)

CASH AND CASH EQUIVALENTS, beginning of year                    1,989,663            3,719,408            3,777,087
                                                             -------------        -------------        -------------
CASH AND CASH EQUIVALENTS, end of year                       $    401,944         $  1,989,663         $  3,719,408
                                                             =============        =============        =============
CASH AND CASH EQUIVALENTS is comprised of
    Cash                                                     $    401,944         $    679,006         $  1,719,408
    Term deposits                                                       -            1,310,657            2,000,000
                                                             -------------        -------------        -------------
                                                             $    401,944         $  1,989,663         $  3,719,408
                                                             =============        =============        =============
SUPPLEMENTAL CASH FLOW INFORMATION
    Income taxes paid                                        $          -         $          -         $          -
                                                             =============        =============        =============
    Interest paid                                            $  1,390,222         $    382,766         $     80,156
                                                             =============        =============        =============
</TABLE>


        See accompanying notes to the consolidated financial statements.




                                      -63-
<PAGE>


ANTHONY CLARK INTERNATIONAL INSURANCE BROKERS LTD.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
March 31, 2005, 2004 and 2003
(Expressed in Canadian dollars)
--------------------------------------------------------------------------------


1.   NATURE OF OPERATIONS

     Anthony Clark International Insurance Brokers Ltd. (the "Company") operates
     general insurance brokerages in Canada and the United States.

2.   ACCOUNTING POLICIES

     Basis of presentation
     These  consolidated  financial  statements have been prepared in accordance
     with Canadian generally accepted accounting principles ("GAAP") and include
     the  accounts  of  the  Company  and  its  wholly-owned  subsidiaries.  All
     intercompany   transactions   and   balances   have  been   eliminated   on
     consolidation. GAAP differs in certain material respects from United States
     generally  accepted  accounting  principles  ("U.S.  GAAP").  The  material
     differences  between  GAAP  and U.S.  GAAP  that  apply to these  financial
     statements are described in Note 25.

     Use of estimates
     Significant estimates used in the preparation of these financial statements
     include the  collectibility of accounts  receivable,  the allocation of the
     purchase price on business  acquisitions,  the valuation of reporting units
     when testing the  recoverability  of goodwill and  intangible  assets,  the
     estimated useful lives of tangible and intangible assets and the fair value
     of stock-based compensation.

     Revenue recognition
     Commission revenue,  which is earned by the placement of insurance policies
     with  underwriters,  is recognized as of the effective  date of each policy
     provided that collection is believed to be reasonably  assured.  Contingent
     commissions  are  based on the  underwriters'  profitability  on  insurance
     policies placed by the Company and are recognized when received.

     Cash and cash equivalents
     Cash  and  cash  equivalents   consist  of  bank  deposits  and  short-term
     investments with an initial term to maturity of three months or less.

     Computer systems and office equipment
     Computer  systems and office equipment are carried at cost less accumulated
     depreciation.  Depreciation  is  provided  using  the  following  rates and
     methods:

          Computer equipment and software         -  30% declining balance
          Corporate website                       -   3 years straight-line
          Furniture and equipment                 -  20% declining balance

     Impairment of long-lived assets
     Long-lived assets are assessed for impairment when events and circumstances
     warrant.  The  carrying  value of a long-lived  asset is impaired  when the
     carrying amount exceeds the estimated  undiscounted  net cash flow from use
     and fair value. In that event, the amount by which the carrying value of an
     impaired long-lived asset exceeds its fair value is charged to earnings.

     Business combinations
     Business  acquisitions  are accounted for using the purchase method whereby
     the fair value of consideration  given is allocated to identifiable  assets
     acquired and liabilities  assumed. The results of operations and cash flows
     of an acquired business are included in the Company's financial  statements
     from the date of acquisition.  Where the consideration  given is subject to
     contingent  adjustment  based on future periods'  operating  results,  such
     adjustment is recognized in the period the contingency is resolved.

     Customer accounts
     Acquired   customer   accounts   are  carried  at  cost  less   accumulated
     amortization.  Amortization  is  provided  on a  straight-line  basis  over
     estimated  useful lives of between two and  seventeen  years.  The carrying
     value of customer  accounts is  periodically  assessed  for  impairment  in
     accordance  with  the  Company's   accounting   policy  for  impairment  of
     long-lived assets.



                                      -64-
<PAGE>



ANTHONY CLARK INTERNATIONAL INSURANCE BROKERS LTD.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
March 31, 2005, 2004 and 2003
(Expressed in Canadian dollars)
--------------------------------------------------------------------------------


2.   ACCOUNTING POLICIES - continued

     Goodwill
     Goodwill  results from business  combinations  and represents the excess of
     the  consideration  given  over the fair value of  identifiable  net assets
     acquired.  Goodwill  is not  subject to  amortization  but is subject to an
     impairment test that is performed at least annually.

     Non-competition agreements
     Non-competition agreements are secured at the time of business combinations
     and  are  recognized  at  their   estimated  fair  value  at  the  date  of
     acquisition.  Amortization is provided on a straight-line  basis over their
     estimated  useful  lives  of  between  six and  ten  years.  Impairment  is
     periodically   assessed  in  accordance  with  the  Company's   policy  for
     impairment of long-lived assets.

     Deferred financing costs and debt discounts
     Deferred  financing costs and debt discounts are amortized over the term of
     the related  indebtedness  using the effective interest rate method. If the
     related  debt  becomes  due on demand or is settled  earlier,  the  related
     balance of  unamortized  deferred  financing  costs and debt  discounts are
     charged to earnings.

     Foreign currency translation
     The  Company  uses the  current  rate  method  under  which the  assets and
     liabilities of  self-sustaining  foreign  operations  are  translated  into
     Canadian  dollars at the exchange rate in effect at the balance sheet date.
     Revenues and expenses are translated  using weighted average exchange rates
     for the year. Foreign currency  translation gains and losses are shown as a
     separate component of shareholders' equity.

     Earnings (loss) per share
     Earnings (loss) per share is determined  using the weighted  average number
     of common shares  outstanding  during the year, which amounted to 7,955,153
     (2004 - 7,713,980, 2003 - 7,692,055) common shares. Diluted earnings (loss)
     per share is  calculated  using the treasury  stock  method,  which assumes
     proceeds from the exercise of stock  options and warrants  would be used to
     purchase  common shares at the average  market price for the year.  Diluted
     earnings  (loss) per share has not been presented  separately as the effect
     of common  shares  issuable on exercise of issued  stock  options  would be
     anti-dilutive.

     Stock-based compensation
     Stock-based  compensation  is accounted  for at fair value as determined by
     the  Black-Scholes  option pricing model using amounts that are believed to
     approximate the volatility of the trading price of the Company's stock, the
     expected lives of awards of stock-based compensation, the fair value of the
     Company's  stock and the risk-free  interest rate. The estimated fair value
     of awards of  stock-based  compensation  are  charged  to expense as awards
     vest, with offsetting amounts recognized as contributed surplus.

     Income taxes
     Income taxes are recorded  using the liability  method.  Under this method,
     current income taxes are recognized for the estimated  income taxes payable
     for the year.  Future income tax assets and  liabilities are recognized for
     the estimated income tax consequences  attributable to differences  between
     the financial  statement  carrying  amounts of assets and  liabilities  and
     their respective income tax bases. Future income tax assets and liabilities
     are  recognized  using enacted or  substantively  enacted income tax rates.
     Future  income  tax  assets  are  recognized  with  respect  to  deductible
     temporary  differences  and loss  carryforwards  only to the  extent  their
     realization is considered more likely than not.



                                      -65-
<PAGE>

ANTHONY CLARK INTERNATIONAL INSURANCE BROKERS LTD.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
March 31, 2005, 2004 and 2003
(Expressed in Canadian dollars)
--------------------------------------------------------------------------------


3.   ADJUSTMENTS TO RETAINED EARNINGS

     a)   Change in accounting policy

          Stock-based compensation
          Effective on April 1, 2004 the Company adopted the guidance in Section
          3870 "Stock-Based  Compensation and Other Stock-Based Payments" of the
          CICA Handbook.  As permitted,  the Company  adopted  Section 3870 on a
          retroactive  basis but has adjusted opening  retained  earnings of the
          current year for the cumulative effect of adoption on prior years. The
          comparative  figures  for the fiscal  year ended  March 31,  2004 have
          therefore  not been  restated  to reflect  this  change in  accounting
          policy.

     b)   Correction of accounting error

          Business combinations, goodwill and other intangible assets
          On April 1, 2002, the Company implemented the new accounting standards
          for business  combinations and goodwill and other intangible assets as
          set out in CICA Handbook section 1581 and 3062.

          Under section 1581, the purchase  method should be used to account for
          all business  combinations  initiated on or after July 1, 2001.  Under
          Section 1581,  intangible  assets  acquired in a business  combination
          should be  identified  and  recognized  apart from  goodwill when they
          arise from either  contractual  or other  legal  rights or they can be
          separated  from  the  acquired   enterprise  and  sold,   transferred,
          licensed, rented or exchanged,  either individually or with a group of
          related assets or  liabilities.  Any intangible  assets  acquired in a
          business  combination  completed before July 1, 2001, that do not meet
          the  criteria  for  separate  recognition  in  Section  1581,  must be
          subsumed into goodwill.

          Under  Section  3062,  goodwill  is not  amortized  and is tested  for
          impairment  annually,  or more  frequently  if  events or  changes  in
          circumstances indicate that the asset might be impaired.

          The Company adopted Sections 1581 and 3062 effective April 1, 2002. As
          of the date of  adoption,  the  Company  had  previously  reported  an
          intangible  asset  called  customer   accounts  in  the  amount  of  $
          3,085,009,  and no goodwill.  In accordance  with the  requirements of
          Sections  1581 and 3062,  the  adoption  of these two  Sections is not
          applied  retroactively and the amounts presented for prior periods are
          not to be restated for this change.  However,  in accordance  with the
          requirements  of those  Sections,  the  Company  reviewed  each of the
          business combinations  completed prior to July 1, 2001 to determine if
          the carrying amount of acquired  customer accounts met the criteria in
          Section  1581 for  recognition  apart from  goodwill,  and whether the
          amortization  period of acquired  customer  accounts  continued  to be
          appropriate.  In connection with this review,  the Company  determined
          that it has incorrectly  allocated  amounts to customer accounts under
          superseded  CICA  Handbook  Section  1580  for  business  combinations
          consummated   prior  to  July  1,  2001,  and  that  it  had  used  an
          inappropriate amortization period for customer accounts.

          Accordingly,  in  connection  with the  adoption of Sections  1581 and
          3062,  the Company has restated  the carrying  amounts of goodwill and
          customer  accounts at April 1, 2001 in order to correct the allocation
          of the excess  purchase  price over the fair value of tangible  assets
          acquired in business combinations completed prior to July 1, 2001, and
          to adjust the amortization  period used in prior periods. As a result,
          it  was  determined  that,  in  aggregate,  net  carrying  value  of $
          1,593,468  of  customer  accounts  at April 1, 2001  should  have been
          classified as goodwill  under Section 1580. In  conjunction  with this
          correction,  the amortization  period of customer accounts was reduced
          to 12 years  retroactively,  with a net reduction of customer accounts
          of $ 1,008,515.  The future income tax  liability  related to customer
          accounts  was  reduced by $ 203,160  and the  deficit was reduced by $
          788,113.  The statement of  operations  and deficit for the year ended
          March 31, 2002 has been restated to reflect the  resulting  changes in
          depreciation,  amortization  and future  income tax  expense  for that
          year.  Depreciation and amortization has increased from $ 343,172 to $
          634,792 and future  income tax  recovery  has  increased  by $ 78,391,
          resulting  in an  increase of $ 213,229 in net loss for the year ended
          March 31, 2002. This correction conformed the Company's accounting for
          business  combinations  completed  prior  to  July  1,  2001,  and the
          amortization  of goodwill and customer  accounts,  under GAAP with the
          accounting the Company had followed under US GAAP. Accordingly,  there
          have been no changes in the  reported  operating  results or financial
          position of the Company for US GAAP purposes (See note 25).



                                      -66-
<PAGE>

ANTHONY CLARK INTERNATIONAL INSURANCE BROKERS LTD.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
March 31, 2005, 2004 and 2003
(Expressed in Canadian dollars)
--------------------------------------------------------------------------------


4.   BUSINESS ACQUISITIONS

     Year ended March 31, 2005
     During  the year the  Company  acquired  the net  assets  of two  insurance
     brokerages  known as  "Vinciguerra",  located in Virginia,  and "Schuneman"
     located  in  Illinois.   Purchase  consideration  of  $  10,100,831  (U.S.$
     8,228,463) was given to effect these  acquisitions.  Both  acquisitions are
     subject to contingent adjustment based on future commission revenue, though
     in both  acquisitions  the  purchase  consideration  may  only be  reduced.
     Goodwill  attributed to both  acquisitions is expected to be deductible for
     income tax purposes.

     The results of  operations  and cash flows of the acquired  businesses  are
     included  in  these  financial  statements  from the  closing  dates of the
     acquisitions,  which are September 8, 2004 for  Vinciguerra and January 12,
     2005 for Schuneman.

     The consideration given has been allocated to acquired  identifiable assets
     and liabilities as follows based on the foreign exchange rates in effect on
     the dates of closing.

<TABLE>
                                                  Vinciguerra           Schuneman            Total
                                                 -------------        ------------       --------------
     <S>                                         <C>                  <C>                <C>
     Customer accounts                           $  1,855,983         $   227,906        $  2,083,889
     Computer systems and equipment                    64,390              36,759             101,149
     Non-competition agreements                       160,975              34,308             195,283
     Goodwill                                       6,978,094             823,504           7,801,598
     Other                                              6,439                   -               6,439
     Liabilities assumed                              (87,527)                  -             (87,527)
                                                 -------------        ------------       --------------
                                                 $  8,978,354         $ 1,122,477        $ 10,100,831
                                                 =============        ============       ==============
     Consideration paid

     Cash                                        $  7,857,638         $   299,588        $  8,157,226
     Fair values of notes payable                   1,120,716             822,889           1,943,605
                                                 -------------        ------------       --------------
                                                 $  8,978,354         $ 1,122,477        $ 10,100,831
                                                 =============        ============       ==============
</TABLE>


     The  notes  issued  in  connection   with  the  Vinciguerra  and  Schuneman
     acquisitions  are at rates of interest that were determined to be below the
     estimated market rate of interest for  indebtedness  with similar terms and
     credit  quality.  These notes have  therefore  been  accounted for at their
     discounted fair values.

     During the year ended March 31, 2005 the contingent  adjustment  related to
     John's, see below, was resolved, and the purchase consideration was reduced
     by $ 9,083 (U.S.$ 7,509).

     Year ended March 31, 2004
     During  the year the  Company  acquired  the net  assets  of two  insurance
     brokerages  known as "Vista"  and  "John's",  both of which are  located in
     California.  Purchase  consideration of $ 8,600,642  (U.S.$  6,515,638) was
     given to effect these  acquisitions.  The Vista  acquisition  is subject to
     contingent adjustment based on commission revenue earned in the second year
     and the fifth year after closing.  This additional  consideration cannot be
     reasonably   estimated  and  will  therefore  be  accounted  for  when  the
     contingency  is  resolved.  Goodwill  attributed  to both  acquisitions  is
     expected to be deductible for income tax purposes.

     The results of  operations  and cash flows of the acquired  businesses  are
     included  in  the  financial  statements  from  the  closing  dates  of the
     acquisitions, which are October 17, 2003 for Vista and November 6, 2003 for
     John's.



                                      -67-
<PAGE>

ANTHONY CLARK INTERNATIONAL INSURANCE BROKERS LTD.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
March 31, 2005, 2004 and 2003
(Expressed in Canadian dollars)
--------------------------------------------------------------------------------


4.   BUSINESS ACQUISITIONS - continued

     The consideration  given was allocated to acquired  identifiable assets and
     liabilities as follows based on the foreign exchange rates in effect at the
     dates of closing.

<TABLE>
                                                           Vista                John's              Total
                                                       --------------        -------------       --------------

    <S>                                                <C>                   <C>                 <C>
     Customer accounts                                 $   2,481,432         $  1,372,120        $  3,853,552
     Computer systems and office equipment                   136,706               45,941             182,647
     Non-competition agreements                              523,992              179,826             703,818
     Goodwill                                              3,038,638              885,122           3,923,760
     Obligation under capital lease                          (63,135)                   -             (63,135)
                                                       --------------        -------------       --------------
                                                       $   6,117,633         $  2,483,009        $  8,600,642
                                                       ==============        =============       ==============
     Consideration paid

     Cash                                              $   2,357,618         $  2,253,674        $  4,611,292
     Fair values of notes payable                          3,760,015              229,335           3,989,350
                                                       --------------        -------------       --------------
                                                       $   6,117,633         $  2,483,009        $  8,600,642
                                                       ==============        =============       ==============
</TABLE>


     The note issued in connection  with the Vista  acquisition  is at a rate of
     interest  that was  determined  to be below the  estimated  market  rate of
     interest for indebtedness with similar terms and credit quality.  This note
     has therefore been accounted for at its discounted fair value.

5.   RESTRICTED CASH

     During the year ended  March 31, 2005 the  Company  settled an  outstanding
     legal  judgment for a cash  payment of $ 450,000.  As at March 31, 2004 the
     Company had provided for the full amount of the judgment, $ 522,619 and had
     paid that  amount into trust.  During 2005 the  difference  of $ 72,619 was
     recovered.

     As required by the Debt Financing agreement with Oak Street, an amount of $
     655,274 (U.S.$ 500,000) has been deposited into a collateral  account.  The
     Company is required to maintain  this  balance at all times during the term
     of the Debt  Financing.  Due to the related  loan being in default at March
     31, 2005,  the loan is presented net of the  collateral  account.  See also
     Notes 13(a) and 24.

6.   NOTE RECEIVABLE FROM RELATED PARTY

     The  amount  due  from  a  corporation  controlled  by an  officer  of  the
     subsidiary is due on demand,  does not bear interest and is  denominated in
     U.S. dollars (U.S.$ 150,000).  The amount due is collateralized by a pledge
     of assets.

7.   DUE FROM DIRECTOR

     The amount due from an officer  and  director  bears  interest at the Royal
     Bank of Canada's prime rate of interest and is  collateralized  by a pledge
     of marketable  securities and a pledge of other personal assets. The amount
     is repayable on demand but the Company does not anticipate  requesting full
     repayment during the 2006 fiscal year.

8.   COMPUTER SYSTEMS AND OFFICE EQUIPMENT

<TABLE>
                                                                   2005
                                            ---------------------------------------------------
                                                                 Accumulated
                                                Cost             depreciation            Net
                                            -------------       --------------     ------------
     <S>                                    <C>                  <C>                <C>
     Computer equipment and software        $    885,741         $  654,360         $  231,381
     Furniture and equipment                     398,481            230,420            168,061
     Corporate website                             9,245              9,245                  -
                                            -------------       --------------     ------------
                                            $  1,293,467         $  894,025         $  399,442
                                            =============       ==============     ============
</TABLE>


                                      -68-
<PAGE>

ANTHONY CLARK INTERNATIONAL INSURANCE BROKERS LTD.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
March 31, 2005, 2004 and 2003
(Expressed in Canadian dollars)
--------------------------------------------------------------------------------


8.   COMPUTER SYSTEMS AND OFFICE EQUIPMENT - continued

<TABLE>
                                                                   2004
                                            ---------------------------------------------------
                                                                 Accumulated
                                                Cost             depreciation            Net
                                            -------------       --------------     ------------
     <S>                                    <C>                  <C>                <C>
     Computer equipment and software        $    805,876         $  569,390         $  236,486
     Furniture and equipment                     334,434            195,920            138,514
     Corporate website                             9,245              7,705              1,540
                                            -------------       --------------     ------------
                                            $  1,149,555         $  773,015         $  376,540
                                            =============       ==============     ============
</TABLE>


     Included in computer  systems and office equipment are assets under capital
     lease  with a  cost  of $  45,693  (2004  - $  26,518)  net of  accumulated
     depreciation of $ 15,078 (2004 - $ 7,425).

9.   CUSTOMER ACCOUNTS

                                                     2005              2004
                                                -------------      ------------
       Cost                                      $ 8,719,481       $ 7,069,520
       Accumulated amortization                   (3,040,982)       (2,042,119)
                                                -------------      ------------
                                                 $ 5,678,499       $ 5,027,401
                                                =============      ============

10.  DEFERRED FINANCING COSTS

                                                     2005              2004
                                                -------------      ------------
       Cost                                      $         -       $   476,727
       Accumulated amortization                            -            (2,280)
                                                -------------      ------------
                                                 $         -       $   474,447
                                                =============      ============

     During the year ended  March 31,  2005 the  Company  charged  all  deferred
     financing costs to earnings as discussed in Note 13.

11.  NON-COMPETITION AGREEMENTS

                                                     2005              2004
                                                -------------      ------------
       Cost                                      $   830,300       $   703,818
       Accumulated amortization                     (124,410)          (40,267)
                                                -------------      ------------
                                                 $   705,890        $  663,551
                                                =============      ============

12.  DUE TO RELATED PARTY

<TABLE>
                                                                                       2005              2004
                                                                                 ---------------     -------------
     <S>                                                                          <C>                 <C>
      Note payable (U.S.$ 3,284,982) to a trust of which an officer of the
        Company's subsidiary is a trustee, with interest at 7% per annum and
        repayable in monthly payments of $ 49,366 including principal and
        interest, due on September 30, 2013 and collateralized by a pledge of
        certain assets of the Company. No payments have been made since August
        2004 as the lending agreement provides for secession of payments based
        on available working capital.                                             $ 3,973,513         $ 4,444,379

      Unamortized discount provided at 12% market rate
        of interest                                                                         -            (823,484)
                                                                                 ---------------     -------------
                                                                                    3,973,513           3,620,895
       Current portion                                                              3,973,513             184,787
                                                                                 ---------------     -------------
                                                                                  $         -         $ 3,436,108
                                                                                 ===============     =============
       See Note 13 (b)
</TABLE>



                                      -69-
<PAGE>

ANTHONY CLARK INTERNATIONAL INSURANCE BROKERS LTD.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
March 31, 2005, 2004 and 2003
(Expressed in Canadian dollars)
--------------------------------------------------------------------------------


13.  LOANS PAYABLE

<TABLE>
                                                                                       2005              2004
                                                                                 ---------------     -------------
     <S>                                                                          <C>                 <C>
        a)  Note payable (U.S.$ 3,500,000) with interest at the prime rate
              of interest plus 8% per annum, with interest only payments
              until March 24, 2005 and then repayable in monthly payments
              of approximately $ 95,000 including principal and interest,
              due on demand and maturing on March 22, 2011 and collateralized
              by a pledge of all assets of the Company and cash held in
              escrow.                                                             $ 4,233,600         $ 4,586,749

            Cash held in collateral account (U.S.$ 500,000)                          (609,306)                  -
                                                                                 ---------------     -------------
                                                                                    3,624,294           4,586,749
                                                                                 ---------------     -------------
            Note payable (U.S.$ 2,901,558) with interest at the prime rate of
              interest plus 2% per annum, with interest only payments until
              June 14, 2006 and then repayable in monthly payments of $
              103,446 including principal and interest, due on demand and
              maturing on June 14, 2009 and collateralized by a pledge
              of all assets of the Company.                                         3,509,728                   -
                                                                                 ---------------     -------------
            Note payable (U.S.$ 3,250,000) with interest at 14%
              per annum, with interest only payments, due on
              August 31, 2008 and collateralized by a pledge
              of certain assets of the Company.                                     3,931,200                   -
                                                                                 ---------------     -------------
            Note payable without interest, repaid on December 31,
              2004.                                                                         -             228,969
                                                                                 ---------------     -------------
            Note payable (U.S.$ 900,497) with interest at 7% per annum and
              repayable in monthly payments of $ 23,951 including principal
              and interest, due on August 31, 2009 and collateralized by a
              pledge of certain assets of the Company.                              1,089,241                   -
                                                                                 ---------------     -------------

            Note payable (U.S.$ 1,155,000) with interest at 8% per annum and
              repayable in monthly payments of $ 28,328 including principal
              and interest, that do not begin until January 1, 2008, due on
              December 31, 2012 and collateralized by a pledge of certain
              assets of the Company.                                                1,397,088                   -
                                                                                 ---------------     -------------
                                                                                   13,551,551           4,815,718
            Long-term portion                                                               -           4,537,970
                                                                                 ---------------     -------------
                                                                                  $13,551,551         $   277,748
                                                                                 ===============     =============
</TABLE>


                                      -70-

<PAGE>


ANTHONY CLARK INTERNATIONAL INSURANCE BROKERS LTD.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
March 31, 2005, 2004 and 2003
(Expressed in Canadian dollars)



13. LOANS PAYABLE - continued

          During the year the Company and its creditors  entered into agreements
          that define the rights and  priorities  of each creditor in respect of
          the  Company's  collateral in the event of default.  These  agreements
          impose no additional material obligations on the Company.

     b)   Compliance with lending covenants
          The Company was in compliance with the financial covenant requirements
          of the prime plus 8% note payable of $ 4,233,600  (2004 - $ 4,586,739)
          (U.S.$  3,500,000),  (the "Oak Street  Debt") as described  above,  at
          March 31, 2004 and therefore,  the note was classified as long-term at
          that time.

          During  the year  ended  March  31,  2005 the  Company  closed a U.S.$
          7,500,000  ($10,090,725)  debt  financing  arrangement  with a  United
          States  lender,  First Capital  Corporation,  LLC ("FCC")  whereby FCC
          provided up to a U.S.$  7,500,000 ($  10,090,725)  reducing  revolving
          line of credit (the "Facility") subject to a borrowing base formula.

          The Company could borrow an aggregate amount not to exceed at any time
          outstanding the lesser of (a) the maximum principal amount of the Line
          of Credit or (b) the Borrowing  Base. The Borrowing Base is determined
          as a percentage  of  recurring  annual  revenue of eligible  insurance
          commissions  earned with regard to  policies of  acceptable  insurance
          pursuant  to agency  agreements  with the  borrower  by the  insurance
          companies having a rating by AM Best of B and above.

          The Facility has a Wall Street Journal  interest rate of prime plus 2%
          per annum,  with interest  only  payments for two years  following the
          date of closing.  After the initial two year period, the Company shall
          pay the principal and interest in the amount  calculated  based on the
          amortization  schedule  with the total  amount  being repaid over a 36
          month period.

          The  Facility is secured by the general  security  agreement  over the
          Company's  assets.  Pursuant to the Facility,  FCC,  will have:  (i) a
          first  priority  security  interest in the assets of the Company which
          are acquired  after June 14, 2004, in connection  with any purchase or
          other  acquisition  by the  Company  from an  unaffiliated  party  and
          financed  by FCC,  of:  (a) an  insurance  agency;  (b) any  group  of
          insurance  policies;  (c) any  "book  of  business"  with  respect  to
          insurance  policies;   and  (d)  any  "expirations"  with  respect  to
          insurance  policies:  in each case together with all future  insurance
          policies  (including all commissions  paid or payable  thereunder) and
          other  assets  directly  related  to  such  acquired  assets,  and all
          products  and  proceeds  thereof;   and  (ii)  a  subsequent  security
          interest,  subject to certain permitted  encumbrances in the assets of
          the Company.

          The Facility was  required to be used to fund  permitted  acquisitions
          with the United  States and  provide  working  capital for the related
          acquisitions.

          The FCC Debt and the Oak  Street  Debt loan  agreements  each  contain
          subjective  acceleration  clauses  whereby the  lenders may  terminate
          their loan facilities and declare the obligations  immediately due and
          payable,  without presentment,  demand, protest or notice of any kind,
          all of which the Company has expressly  waived.  The defaults that may
          cause the  acceleration  clause to occur  include a "material  adverse
          change"  in  the  Company's   business  or  financial   conditions  as
          determined by the lenders in good faith.



                                      -71-
<PAGE>


ANTHONY CLARK INTERNATIONAL INSURANCE BROKERS LTD.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
March 31, 2005, 2004 and 2003
(Expressed in Canadian dollars)
--------------------------------------------------------------------------------


13.  LOANS PAYABLE - continued

          During  the  year  ended   March  31,   2005,   the   Company  was  in
          non-compliance  with the Oak Street  Debt and the FCC Debt as a result
          of the  Company's  non-compliance  with  certain  financial  covenants
          prescribed  in the  respective  loan  agreements.  Tangible  Net Worth
          ("TNW")  covenants  contained  in each  agreement,  which  require the
          Company to maintain a minimum TNW, as defined in the loan  agreements,
          were  in  non-compliance.   Also,  Minimum  Interest  Coverage  Ratios
          ("MICR")  and the Total  Liabilities  to TNW,  as  defined in the loan
          agreements, were in non-compliance.  The lenders waived non-compliance
          with each of these  covenants  as at September  30, 2004.  The Company
          expected that these  covenants  would be in continuous  non-compliance
          for the  foreseeable  future  and had  been in  discussions  with  the
          lenders to revise or replace the subject covenants by amendment of the
          loan  agreements.  No  agreement  was reached  with the  lenders  with
          respect to amendment of the loan agreements.  The Company  anticipated
          that it would be able to obtain further  waivers and/or  amendments of
          the Company's  covenants  from the lenders.  The Company was unable to
          comply with the  financial  covenants  and they were not waived by the
          lenders,  the lenders could have exercised  their rights to accelerate
          repayment  of  the  Company's   obligations   and  (unless  paid  with
          replacement  financing)  acquire or dispose of the  Company's  assets.
          Subsequent  to year  end,  one  creditor  furnished  formal  notice of
          default effective as of February 28, 2005.

          As is required by Canadian generally accepted  accounting  principles,
          the Company  reclassified its long-term debt as current liabilities as
          a result  of  these  covenant  violations.  All  unamortized  deferred
          financing  costs and  unamortized  debt discounts were also charged to
          earnings (see Note 21).

          See Note 24.


14.    OBLIGATIONS UNDER CAPITAL LEASES

<TABLE>
                                                                                    2005                   2004
                                                                                -------------         -------------
<S>                                                                             <C>                   <C>
       Obligation under capital lease, bearing interest at 9.78%
          per annum and secured by the assets under lease                       $   12,444            $   17,624

       Obligation under capital lease, bearing interest at 15%
          per annum and secured by the assets under lease                           27,522                45,254
                                                                                -------------         -------------
                                                                                    39,966                62,878
       Current portion                                                             (20,735)              (22,912)
                                                                                -------------         -------------
                                                                                $   19,231            $   39,966
                                                                                =============         =============
</TABLE>


15.  SHARE CAPITAL

     Authorized
          Unlimited common shares without par value

<TABLE>
                                              2005                            2004                        2003
                                   ---------------------------    ---------------------------    ---------------------------
                                     Shares          Amount          Shares          Amount         Shares         Amount
                                   ------------   ------------    ------------    ------------   ------------   ------------
<S>                                 <C>           <C>              <C>            <C>             <C>            <C>
       Issued
         Beginning of year          7,955,153     $ 9,897,116      7,692,055      $ 9,687,132     7,692,005      $ 9,687,132
         Common shares issued
            for private placement           -               -        263,098          336,765             -                -

         Fair value of stock
            purchase warrants               -               -              -         (104,022)            -                -

         Share issue costs                  -          (1,974)             -          (22,759)            -                -
                                   ------------   ------------    ------------    ------------   ------------   ------------
                                    7,955,153     $ 9,895,142       7,955,153     $ 9,897,116     7,692,055      $ 9,687,132
                                   ============   ============    ============    ============   ============    ===========
</TABLE>



                                      -72-
<PAGE>


ANTHONY CLARK INTERNATIONAL INSURANCE BROKERS LTD.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
March 31, 2005, 2004 and 2003
(Expressed in Canadian dollars)
--------------------------------------------------------------------------------


15.  SHARE CAPITAL - continued

     During the year ended March 31, 2004 the Company  issued 263,098 units on a
     private  placement  basis for cash of $ 336,765  ($ 1.28 per unit) and paid
     costs of issue of $ 24,733. Each unit was comprised of one common share and
     one share purchase warrant. Each share purchase warrant is exercisable into
     one common  share at $ 1.60 per common share until  February  28, 2006.  No
     share  purchase  warrants  were  exercised  during the year ended March 31,
     2005.

16.  STOCK-BASED COMPENSATION

     The Company has an incentive stock option plan which provides for the award
     of stock  options to directors,  officers,  employees  and  consultants.  A
     maximum of 1,309,811  common shares are reserved  under the plan. The terms
     and  exercise  prices of all stock  option  awards  are  determined  by the
     directors at the time of issue.  All stock  options  awarded prior to March
     31, 2001 vested  immediately.  Stock options  awarded during the year ended
     March 31,  2002 vest over  periods of up to five years.  All stock  options
     awarded during the years ended March 31, 2004 and 2005 vested immediately.

     Changes in stock options during the years ended March 31, 2005 and 2004 are
     as follows:

<TABLE>
                                      2005                            2004                          2003
                           --------------------------     ---------------------------    ----------------------------
                                            Weighted                       Weighted                       Weighted
                                            average                        average                         average
                            Number of       exercise       Number of       exercise       Number of        exercise
                             options         price          options         price          options           price
                           -----------    -----------     -----------     -----------     -----------     -----------
<S>                         <C>             <C>             <C>             <C>            <C>              <C>
Outstanding,
  beginning of year         1,308,811       $ 1.23          984,400         $ 1.37         991,400          $ 1.37
Awarded                       520,000         1.10          334,411           0.82               -               -
Cancelled                      (4,000)       (1.00)         (10,000)         (1.00)         (7,000)          (1.00)
Expired                      (534,400)       (1.69)               -              -               -               -
                           -----------    -----------     -----------     -----------     -----------     -----------
Outstanding,
  end of year               1,290,411       $ 1.00        1,308,811         $ 1.23         984,400          $ 1.37
                           ===========    ===========     ===========     ===========     ===========     ===========
Exercisable,
 end of year                1,277,411       $ 1.00        1,244,611         $ 1.25         859,400          $ 1.43
                           ===========    ===========     ===========     ===========     ===========     ===========
</TABLE>


     The  following  table  sets forth  information  relating  to stock  options
     outstanding as at March 31, 2005:

<TABLE>
                                               Number        Weighted                       Number
                                            outstanding      average        Weighted      exercisable       Weighted
                              Range of          at          remaining        average           at            average
                              exercise       March 31,      contractual      exercise       March 31,        exercise
           Expiry              prices           2005           life           price           2005             price
          -------------     -----------     ------------   -------------   -----------    -------------     -----------
          <S>                 <C>             <C>               <C>         <C>               <C>             <C>
          10/26/06            $   1.00        431,000           1.58        $  1.00           420,500         $ 1.00
          03/18/07                1.15          5,000           1.96           1.15             2,500           1.15
          08/29/08                0.81        319,411           3.42           0.81           319,411           0.81
          08/29/08                1.00         15,000           3.42           1.00            15,000           1.00
          08/05/09                1.10        505,000           4.33           1.10           505,000           1.10
          08/16/09                1.25         15,000           4.33           1.25            15,000           1.25
                            -----------     ------------   -------------   -----------    -------------     -----------
                         $ 0.81 to $ 1.25   1,290,411           3.17        $  1.00         1,277,411         $ 1.00
                            ===========     ============   =============   ===========    =============     ============
</TABLE>



                                      -73-
<PAGE>


ANTHONY CLARK INTERNATIONAL INSURANCE BROKERS LTD.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
March 31, 2005, 2004 and 2003
(Expressed in Canadian dollars)
--------------------------------------------------------------------------------


16.  STOCK-BASED COMPENSATION - continued

     The  fair  value of stock  options  awarded  to  employees,  directors  and
     consultants  was  estimated on the dates of awards using the  Black-Scholes
     option pricing model with the following assumptions:

                                                  2005                 2004
                                                ---------           ---------

       Risk-free interest rate                      2.6%               2.6%
       Estimated volatility                          93%                64%
       Expected lives                            5 years            5 years

     The average fair value of stock  options  awarded  during the 2005 and 2004
     fiscal years, as calculated using the  Black-Scholes  option pricing model,
     was $ 0.79 and $ 0.45 per stock option.

     The Black-Scholes  option pricing model was developed for use in estimating
     the fair value of stock  options  that have no vesting  provisions  and are
     fully  transferable.  Also,  option  pricing  models  require  the  use  of
     estimates and assumptions  including expected volatility.  The Company uses
     expected volatility rates which are based upon historical volatility rates.
     Changes in the  underlying  assumptions  can  materially  affect these fair
     value estimates.

17.  RELATED PARTY TRANSACTIONS

     The Company enters into transactions with related parties from time to time
     in the normal course of business.  Related party  transactions are measured
     at the exchange  amount,  being the amount of  consideration  estimated and
     agreed to between the related parties, unless otherwise noted.

     Included in accounts payable and accrued liabilities is $ 159,014 (2004 - $
     Nil) of accrued  interest due to a corporation  controlled by an officer of
     the subsidiary.

     Two directors are also partners with law partnerships.  During the year the
     Company  incurred $ 231,601  (2004 - $ 298,296,  2003 - $ 162,384) of legal
     fees with these law partnerships.

     During the year the Company paid $ 246,831 (2004 - $ 322,146, 2003 - $ Nil)
     to a trust,  of which an officer of the Company's  subsidiary is a trustee,
     comprised  of $  118,154  (2004  - $  222,255,  2003 - $ Nil)  representing
     interest on a note payable and $ 128,677 (2004 - $ 99,696, 2003 - $ Nil) of
     principal.

     During the year ended March 31, 2004 the Company  acquired the fixed assets
     and customer accounts of a California  insurance  brokerage  ("Vista") from
     the  Kabaker  Family  Trust,  a trust in which an officer of the  Company's
     subsidiary is a trustee,  and DKWS Enterprises Inc. ("DKWS"), a corporation
     controlled by an officer of the Company's subsidiary.  Pursuant to an asset
     management   agreement  with  DKWS,  the  Company  processes  its  clients'
     insurance  policies through DKWS, whereby the Company shall receive all the
     revenues there from and shall pay all associated  operating  costs.  During
     the year ended March 31, 2005, the Company  received $ 2,377,971  (2004 - $
     1,307,446,  2003 $ Nil) in revenues, paid expenses of $ 3,053,440 (2004 - $
     1,462,369,  2003 - $ Nil) for payroll, rent and administrative charges, and
     paid for capital  asset  additions  and  capital  leases in the amount of $
     40,984 (2004 - $ 46,103, 2003 - $ Nil) to DKWS in accordance with the asset
     management  agreement.  Accounts  receivable  at March 31, 2005  includes $
     60,408  (2004 -  accounts  payable  of $ 60,832)  due to DKWS for  expenses
     incurred on behalf of the Company.

     See Notes 6, 7 and 12.



                                      -74-
<PAGE>


ANTHONY CLARK INTERNATIONAL INSURANCE BROKERS LTD.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
March 31, 2005, 2004 and 2003
(Expressed in Canadian dollars)
--------------------------------------------------------------------------------


18.  FINANCIAL INSTRUMENTS

     The Company's  financial  instruments consist of cash and cash equivalents,
     accounts receivable,  an amount due from a director, a note receivable from
     a related party, accounts payable,  accrued liabilities,  loans payable, an
     amount due to a related party and obligations under capital leases.

     Fair value
     The  carrying  values of cash and cash  equivalents,  accounts  receivable,
     accounts payable and accrued liabilities  approximate their fair values due
     to the relatively  short periods to maturity of the  instruments.  The fair
     value of the amount due from a director,  loans payable, an amount due to a
     related party and the obligations  under capital leases are approximated by
     their  carrying  values as these items bear market rates of  interest.  The
     fair value of the note  receivable  from a related party is not practicably
     determinable as the amount is due from a related party.

     Credit risk
     The Company's  financial  instruments that are exposed to concentrations of
     credit risk  consist  primarily of cash and cash  equivalents  and accounts
     receivable.  Cash and cash  equivalents  are in place with major  financial
     institutions.  Concentrations  of credit  risk  with  respect  to  accounts
     receivable  are limited due to the large number of  customers.  The Company
     has evaluation  and  monitoring  processes in place and writes off accounts
     when they are determined to be uncollectible.

     Foreign currency risk
     The Company conducts business  operations in the United States and has U.S.
     dollar denominated indebtedness and is therefore exposed to cash flow risks
     associated with fluctuations in the relative value of the Canadian and U.S.
     dollar.  The Company does not engage in hedging activities or use financial
     instruments to reduce its risk exposure.

     Interest rate risk
     Certain of the Company's  indebtedness  bears interest at floating rates of
     interest, which exposes the Company to interest rate cash flow risk. Should
     the base rate of interest  increase in the future,  the Company's  required
     interest payments will also increase.

19.  INCOME TAXES

     Income tax expense or recovery is the sum of the  Company's  provision  for
     current  income  taxes and the  difference  between  the opening and ending
     balances of its future income tax assets and liabilities.

     The  provision for income tax differs from the result which would have been
     obtained by applying the statutory income tax rate of 33.6% (2004 - 36.62%;
     2003 - 38.62%) to the Company's net income (loss) before income taxes.  The
     difference results from the following items:

<TABLE>
                                                                 2005                 2004                 2003
                                                             ------------         ------------         ------------
       <S>                                                 <C>                    <C>                 <C>
       Expected tax expense (recovery)                     $ (1,501,971)          $ (385,059)         $  (132,269)
       Effect of income tax rate changes on future
          income taxes                                                -               (5,924)                (549)
       Non-deductible impairment of debt discounts              480,031                    -                    -
       Net non-deductible portion of financing costs            417,148                    -                    -
       Net unrecognized benefit of loss carryforwards           999,558              287,449              130,591
       Non-deductible stock-based compensation                  138,188                    -                    -
       Net effect of deductible goodwill and intangibles       (377,163)                   -                    -
       Other                                                     (4,611)              (8,644)              15,540
                                                             ------------         ------------         ------------
                                                           $    151,180           $ (112,178)         $    13,313
                                                             ============         ============         ============
</TABLE>


                                      -75-
<PAGE>


ANTHONY CLARK INTERNATIONAL INSURANCE BROKERS LTD.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
March 31, 2005, 2004 and 2003
(Expressed in Canadian dollars)
--------------------------------------------------------------------------------


19.  INCOME TAXES - continued

     The tax  effects of  temporary  differences  that give rise to  significant
     portions  of the future tax assets and  liabilities  at March 31,  2005 and
     2004 are as follows:

<TABLE>
                                                                    2005                 2004
                                                               -------------         ------------
      <S>                                                      <C>                   <C>
       Future income tax assets
           Customer accounts, with tax basis                   $    199,478          $    38,990
           Share issue costs                                              -               40,690
           Other assets                                              33,067                   55
           Non capital losses                                     1,326,180              502,038
           Computer systems and office equipment                          -                1,633
           Valuation allowance                                   (1,279,658)            (352,141)
                                                               -------------         ------------
                                                                    279,067              231,265
                                                               -------------         ------------
       Future income tax liabilities
           Goodwill                                                (255,038)             (42,519)
           Customer accounts, without tax basis                    (340,939)            (418,353)
                                                               -------------         ------------
                                                                   (595,977)            (460,872)
                                                               -------------         ------------
       Net future income tax liability                         $   (316,910)         $  (229,607)
                                                               ==============        ============
</TABLE>


     As at March 31, 2005, the Company has accumulated U.S. net operating losses
     of  approximately  $  3,132,000,  which can be carried  forward and charged
     against future taxable income. A valuation  allowance has been provided for
     these  future  income tax assets as there is no  reasonable  assurance  the
     potential  benefit of these  losses will be realized.  These losses  expire
     principally in 2024 and 2025.

20.  COMMITMENTS

     The Company leases office  premises under  operating  leases that expire at
     various  dates  during the 2006 through 2008 fiscal  years.  The  Company's
     minimum lease payments under the agreements are as follows:

                2006                                    $    712,203
                2007                                         250,212
                2008                                          27,283
                                                             -------
                                                        $    989,698
                                                             =======


21.    INTEREST AND FINANCING COSTS

<TABLE>
                                                                           2005            2004           2003
                                                                      -------------   -------------   -------------
      <S>                                                             <C>             <C>             <C>
       Canadian operations
          Interest and financing costs on Paragon
              term loan repaid                                        $           -   $     274,866   $           -
          Interest on obligations under capital lease                         1,410           1,701           1,870
          Interest on long-term debt                                              -               -          10,961
                                                                      -------------   -------------   -------------
                                                                              1,410         276,567          12,831
                                                                      -------------   -------------   -------------
       U.S. operations
          Amortization of discount on reclassified long-term debt           166,489          62,625               -
          Interest and loan fees on long-term debt                        1,596,851         186,520         272,889
          Amortization of financing costs                                   230,199         412,887               -
          Impairment of discount on reclassified long-term debt           1,428,664               -               -
          Impairment of deferred financing costs on reclassified
              long-term debt                                              1,111,033               -               -
          Interest on obligations under capital lease                         4,622           2,554               -
                                                                      -------------   -------------   -------------
                                                                          4,537,858         664,586         272,889
                                                                      -------------   -------------   -------------
                                                                      $   4,539,268   $     941,153   $     285,720
                                                                      =============   =============   =============
</TABLE>


                                      -76-

<PAGE>


ANTHONY CLARK INTERNATIONAL INSURANCE BROKERS LTD.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
March 31, 2005, 2004 and 2003
(Expressed in Canadian dollars)
--------------------------------------------------------------------------------


22.  SEGMENT DISCLOSURES

     The  Company  operates  in two  geographic  regions,  Canada and the United
     States.  There were no  inter-segment  transactions  during  the  reporting
     periods:

<TABLE>
                                                 Twelve months ended                          Twelve months ended
                                                   March 31, 2005                                March 31, 2004
                                  ----------------------------------------------   --------------------------------------------
       Operating Segments             Canada         U.S.          Consolidated        Canada          U.S.      Consolidated
                                  -------------  -------------    --------------   --------------  -------------  -------------
      <S>                         <C>            <C>              <C>              <C>             <C>            <C>
       Revenue                    $  5,189,302   $  7,871,042     $  13,060,344    $  5,489,636    $  1,979,923   $  7,469,559
       Net earnings                    (70,047)    (4,400,107)       (4,470,154)       (189,146)       (862,352)    (1,051,498)
       Identifiable assets           4,198,839     17,663,500        21,862,339       5,490,449      11,373,910     16,864,359
       Additions to:
          Computer systems
             and office equipment        7,755         58,501            66,256          21,797          44,433         66,230
          Goodwill (Note 4)                  -      7,801,598         7,801,598               -       3,923,760      3,923,760
       Depreciation and
          amortization                 266,328      1,037,539         1,303,867         284,211         196,814        481,025
       Interest and financing costs      1,410      4,537,858         4,539,268         276,567         664,586        941,153
       Computer systems and
          office equipment and
          goodwill                   1,705,067     11,219,709        12,924,776       1,745,839       4,089,886      5,835,725
</TABLE>

<TABLE>
                                               Twelve months ended
                                                   March 31, 2003
       Operating Segments              Canada           U.S.          Consolidated
                                   -------------   --------------    -------------
      <S>                          <C>             <C>               <C>
       Revenue                     $  5,175,072    $          -      $  5,175,072
       Net earnings                     (17,657)       (338,144)         (355,801)
       Identifiable assets            8,263,053         399,225         8,662,278
       Additions to:
          Computer systems
             and office equipment        31,766               -            31,766
       Depreciation and
          amortization                  609,546               -           609,546
       Interest and financing costs      12,831         272,889           285,720
       Computer systems and
           office equipment and
           Goodwill                   1,787,097               -         1,787,097
</TABLE>


23.  COMPARATIVE FIGURES

     Certain 2004 and 2003 comparative figures have been reclassified to conform
     to the presentation used in the current year.

24.  SUBSEQUENT EVENT

     On June 15, 2005,  the Company  closed a U.S.$  25,000,000  ($  30,750,000)
     secured debt  financing  arrangement  with United  States  lenders,  Bridge
     Healthcare Finance,  LLC and Bridge Opportunity Finance, LLC (collectively,
     the  "Lenders")  whereby  the  Lenders  have  agreed  to  provide  a  U.S.$
     25,000,000 ($ 30,750,000)  five year term loan facility (the "Facility") to
     the Company.

     The  Company  can  borrow an  aggregate  amount,  not to exceed at any time
     outstanding, three times the trailing twelve month adjusted Earnings Before
     Interest,  Income taxes,  Depreciation  and  Amortization  ("EBITDA").  The
     Facility will mature on June 15, 2010.  Principal repayments are based upon
     an excess  cash flow  availability  formula.  Interest  is payable  monthly
     calculated  at the rate of prime plus 6.25% per annum,  but at no time less
     than 12% per annum,  with an effective  rate reduction of 1.5% and 2.5% for
     new equity raised of U.S.$ 3.0 million and U.S.$ 5.0 million  respectively.
     As additional  consideration  for  providing the Facility,  the Company has
     issued the Lenders a total of 1,439,128  warrants  exercisable  to purchase
     1,439,128 common shares at a price of $ 0.80 per share until June 15, 2010.


                                      -77-
<PAGE>


ANTHONY CLARK INTERNATIONAL INSURANCE BROKERS LTD.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
March 31, 2005, 2004 and 2003
(Expressed in Canadian dollars)
--------------------------------------------------------------------------------


24.  SUBSEQUENT EVENT - continued

     The Facility has been fully guaranteed and collateralized by the Company.

     The initial term loan  proceeds of U.S.$  7,527,105  were used to repay the
     credit  facilities  that were in default as of March 31, 2005 in the amount
     of  U.S.$  6,458,460  and pay the  costs  of U.S.$  1,515,000  incurred  in
     relation to the Facility. Additional costs have been incurred for which the
     amounts cannot be determined at this point in time.

     The balance of the Facility may only be used to fund permitted acquisitions
     within the United States.

25.  DIFFERENCES   BETWEEN  CANADIAN  AND  UNITED  STATES   GENERALLY   ACCEPTED
     ACCOUNTING PRINCIPLES

     a)   The  consolidated  financial  statements  of  the  Company  have  been
          prepared in  accordance  with GAAP.  GAAP differs in certain  material
          respects from U.S. GAAP. The material differences between Canadian and
          U.S.  GAAP and their effect on the  Company's  consolidated  financial
          statements are summarized in the tables below.

<TABLE>
            Consolidated Statements of Operations

                                                                            2005              2004              2003
                                                                       --------------    --------------    --------------
           <S>                                                       <C>               <C>               <C>
            Net loss under Canadian GAAP                               $  (4,470,154)    $ (1,051,498)     $   (355,801)
               Deferred financing costs (i)                                1,111,033                -                 -
               Discounts on loans payable (i)                              1,428,664                -                 -
               Stock-based compensation (ii)                                       -           (7,713)           (7,713)
               Fair value of stock-based compensation (ii)                   (24,954)               -                 -
                                                                       --------------    --------------    --------------
            Net loss under U.S. GAAP                                   $  (1,955,411)    $ (1,059,211)     $   (363,514)
                                                                       ==============    ==============    ==============
            Loss per share - U.S. GAAP                                 $       (0.25)    $      (0.14)     $      (0.05)
                                                                       ==============    ==============    ==============
</TABLE>

<TABLE>

            Consolidated Balance Sheets                                               2005               2004
                                                                                 ---------------      ---------------
           <S>                                                                  <C>                  <C>
            Deferred financing costs:

            Balance - Canadian GAAP                                              $            -       $     663,551
               Costs impaired under Canadian GAAP (i)                                 1,111,033                   -
                                                                                 ---------------      ---------------
            Balance - U.S. GAAP                                                  $    1,111,033       $     663,551
                                                                                 ===============      ===============
            Loans payable:

            Balance - Canadian GAAP                                              $   13,551,551       $           -
               Discount impaired under Canadian GAAP (i)                             (1,428,664)                  -
                                                                                 ---------------      ---------------
            Balance - U.S. GAAP                                                  $   12,122,887       $           -
                                                                                 ===============      ===============
            Shareholders' equity:

            Share capital
               Balance - Canadian GAAP                                           $    9,895,142       $   9,897,116
               Compensation expense - Intrinsic value of stock options (ii)           1,420,337           1,420,337
               Compensation expense - Escrowed shares (iii)                           4,442,318           4,442,318
                                                                                 ---------------      ---------------
               Balance - U.S. GAAP                                                   15,757,797          15,759,771
                                                                                 ---------------      ---------------
</TABLE>


                                      -78-
<PAGE>


ANTHONY CLARK INTERNATIONAL INSURANCE BROKERS LTD.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
March 31, 2005, 2004 and 2003
(Expressed in Canadian dollars)
--------------------------------------------------------------------------------


25.  DIFFERENCES   BETWEEN  CANADIAN  AND  UNITED  STATES   GENERALLY   ACCEPTED
     ACCOUNTING PRINCIPLES - continued

<TABLE>

                                                                                       2005               2004
                                                                                 ---------------      ---------------
           <S>                                                                  <C>                  <C>
            Contributed surplus
               Balance - Canadian GAAP                                           $      667,585        $    104,022
               Compensation expense - Fair value of stock options (ii)                   24,954                   -
                                                                                 ---------------      ---------------
               Balance U.S. GAAP                                                        692,539             104,022
                                                                                 ---------------      ---------------
            Retained earnings (deficit)
               Balance - Canadian GAAP                                               (8,124,638)         (3,502,196)
               Deferred financing costs (i)                                           1,111,033                   -
               Discount on loans payable (i)                                          1,428,664                   -
               Compensation expense - Intrinsic value of stock options (ii)          (1,420,337)         (1,420,337)
               Compensation expense - Fair value of stock options (ii)                  (24,954)                  -
               Compensation expense - Escrowed shares (iii)                          (4,442,318)         (4,442,318)
                                                                                 ---------------      ---------------
               Balance - U.S. GAAP                                                  (11,472,550)         (9,364,851)
                                                                                 ---------------      ---------------
            Due from director                                                           (40,000)            (40,000)

            Cumulative translation adjustment                                           (29,120)               (845)
                                                                                 ---------------      ---------------
            Shareholders' equity - U.S. GAAP                                     $    4,908,666        $  6,458,097
                                                                                 ===============      ===============
</TABLE>


            For U.S. GAAP purposes the amount due from a director (see Note 7)
            is presented as a reduction in shareholders' equity.

            Consolidated statements for cash flow.
            There are no differences between Canadian and U.S. GAAP in respect
            of the consolidated statements of cash flow.

            (i)     Deferred financing costs and discounts

                    U.S.  GAAP  requires  that  deferred   financing  costs  and
                    unamortized  discounts  on loans  payable  be  amortized  to
                    earnings  over  the  contractual   period  to  maturity  and
                    requires that a loss on settlement be recognized only in the
                    period of settlement. Canadian GAAP permits these amounts to
                    be charged to earnings at the time the debtor defaults under
                    the provisions of the lending contracts and the loans become
                    repayable on demand.

             (ii)   Stock-based compensation

                    The Company awards stock options which reserve common shares
                    for  issuance  to  employees,   directors  and  consultants.
                    Effective  on  April  1,  2004  the  Company  adopted,  on a
                    retroactive  basis without  restatement as described in Note
                    3(a), the  provisions of Section 3870,  which are similar to
                    the   provisions   of  Statement  of  Financial   Accounting
                    Standards No. 123 "Accounting for Stock-based  Compensation"
                    ("SFAS  123"),  issued  by  the  U.S.  Financial  Accounting
                    Standards  Board ("FASB").  The  calculations of stock-based
                    compensation for 2005 and 2004 are presented in Note 16, and
                    for 2005 the Company's  accounting  treatment of stock-based
                    compensation under GAAP conforms to U.S. GAAP


                                      -79-

<PAGE>


ANTHONY CLARK INTERNATIONAL INSURANCE BROKERS LTD.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
March 31, 2005, 2004 and 2003
(Expressed in Canadian dollars)
--------------------------------------------------------------------------------


25.  DIFFERENCES   BETWEEN  CANADIAN  AND  UNITED  STATES   GENERALLY   ACCEPTED
     ACCOUNTING PRINCIPLES - continued

                    During the years  ended  March 31, 2004 and 2003 the Company
                    awarded  334,111  and  nil  stock  options.  For  U.S.  GAAP
                    purposes  for 2004 and 2003 the  Company has  accounted  for
                    stock-based  compensation in accordance with APB 25. Had the
                    Company adopted SFAS 123 for these years,  the Company would
                    have reported the following pro forma amounts:

<TABLE>
                                                                                2004           2003
                                                                            ------------   ------------
                    <S>                                                    <C>             <C>
                     Net loss under US GAAP                                 $ (1,059,211)   $  (363,514)
                     Intrinsic value of stock-based compensation                   7,713          7,713
                     Fair value of stock-based compensation                     (177,242)       (24,954)
                                                                            ------------   ------------

                     Net loss - pro-forma                                   $ (1,228,740)   $  (380,755)
                                                                            ============   ============
                     Loss per share-pro forma                               $      (0.16)   $     (0.05)
                                                                            ============   ============
</TABLE>


                    The fair value of the 2003  amount was  estimated  using the
                    Black-Scholes  option pricing model with expected volatility
                    of 73%,  a  risk-free  interest  rate  of 5.5%  and a 5 year
                    expected life.

                    For  U.S.  GAAP  purposes  the  Company   adopted  SFAS  123
                    effective on April 1, 2004 and elected to apply the modified
                    prospective  method  of  adoption.  As at April 1,  2004 the
                    Company  had  132,000  stock  options  that  were  partially
                    vested.  In  connection  with the  vesting  of  these  stock
                    options the Company will recognize stock-based  compensation
                    expense of $ 45,821 for U.S. GAAP purposes  through the 2008
                    fiscal year, including $ 24,954 recognized in 2005.

             (iii)  Escrowed shares

                    In accordance with securities  regulations  1,767,960 Common
                    Shares with  respect to the  initial  public  offering  were
                    placed in escrow with a Trustee  under an Escrow  Agreement.
                    Under  the  terms of the  agreement  the  shares  were to be
                    released from escrow on the basis of one escrowed  share for
                    every $ 0.61 of cumulative cash flow if the minimum offering
                    is achieved and on the basis of one escrowed share for every
                    $ 0.41 of  cumulative  cash flow if the maximum  offering is
                    achieved.

                    On July 6, 1999  1,665,581  Common shares were released from
                    escrow and compensation  expense of $ 3,997,061 was recorded
                    for the fair value of the shares which  related to directors
                    and officers (832,721 x $ 4.80).

                    On July 24, 2000 102,379  Common  shares were  released from
                    escrow based on the cumulative  cash flows at March 31, 2000
                    on a $ 0.41 basis as the maximum offering was achieved.  For
                    the  purposes  of  reconciling  to U.S.  GAAP,  compensation
                    expense was  recorded as at July 24, 2000 for the fair value
                    of  the  shares   released  from  escrow  which  related  to
                    directors and officers (51,179 x $ 8.70 = $ 445,257)

     b)   New technical pronouncements

          The Financial Accounting Standards Board ("FASB") has issued Statement
          of Financial  Accounting  Standards  No. 153 Exchange of  non-monetary
          assets  ("SFAS 153") which is effective  for fiscal years ending after
          June  15,  2005.  SFAS  153  refines  the  circumstances  under  which
          non-monetary  transactions  should be accounted for at fair value. The
          adoption  of  SFAS  153 is not  expected  to  have  an  effect  on the
          Company's financial position.

          The FASB has also  issued  SFAS No. 154  Accounting  changes and error
          corrections - A replacement  of APB Opinion No. 20 and FASB  Statement
          No. 3 ("SFAS  154"),  which is effective for fiscal years ending after
          December 15, 2005. SFAS 154 requires that changes in accounting policy
          be accounted for on a retroactive  basis.  The adoption of SFAS 154 is
          not expected to have an effect on the Company's financial position.





                                      -80-


<PAGE>


(B)  Index to Exhibits

Exhibit
Number              Description
--------------------------------------------------------------------------------
1.1(1)              Notarially  certified copies of the Certificate and Articles
                    of Amalgamation dated February 28, 1999

1.2(4)              Notarially certified copies of General By-Law No. 1

1.3(4)              Copy of Shareholder  Rights Plan Agreement  dated as of July
                    3, 2001 between the Company and CIBC Mellon Trust Company as
                    Rights Agent

4.1(1)              Copy of Sublease  Agreement  regarding  property  located at
                    Southport  Atrium,   10333  Southport  Road,  S.W.  Calgary,
                    Alberta  between  Valmet  Automation  (Canada)  Ltd. and the
                    Company

4.2(2)              Copy of Employee Stock Option Plan dated February, 2000

4.3(3)              Copy of  Proposal  to  Provide  Financial  Public  Relations
                    Services to the  Company by Barry  Kaplan  Associates  dated
                    March 17, 2000

4.4(3)              Copy of Content  License  Agreement  between the Company and
                    Screaming Media dated June 20, 2000

4.5(3)              Copy of Service  Agreement and Fee Proposal for  Co-Transfer
                    Agent Services  dated  September 1, 2000 between the Company
                    and Chase Mellon Shareholder Services

4.6(3)              Copy of  Letter  of  Agreement  dated  October  12,  2000 re
                    Maintenance & Support Services between the Company and Axiom
                    Internet Services

4.7(3)              Copy of Employment  Agreement  dated January 1, 2001 between
                    the Company and Kevin Hamilton

4.8(3)              Copy of Employment  Agreement  dated January 1, 2001 between
                    the Company and Tim Ogryzlo

4.9(3)              Extension  of Sublease  dated July 20, 2001  between  Valmet
                    Automation (Canada) Ltd. and the Company

4.10(3)             Promissory  Note  dated  June 28,  2001 from  Tony  Consalvo
                    issued to the Company

4.11(3)             Share  Pledge  Agreement  dated June 28, 2001  between  Tony
                    Consalvo and the Company

4.12(3)             General Security  Agreement dated June 28, 2001 between Tony
                    Consalvo and the Company

4.13(4)             Form of Director Stock Option Agreements

4.14(4)             Form of Employee Stock Option Agreement

4.15(4)             Purchase  Agreement dated August 21, 2001 among the Company,
                    Robert Ryan and 779451 Alberta Ltd.

4.16(4)             Trust  Agreement  dated  July 29,  2002  among  Demiantschuk
                    Milley Burke & Hoffinger, the Company and Robert Ryan

4.17(5)             Employment   Agreement   between   the   Company  and  Primo
                    Podorieszach dated April 1, 2003



                                      -81-
<PAGE>

Exhibit
Number              Description
--------------------------------------------------------------------------------
4.18(5)             Employment  Agreement  between the Company and Tony Consalvo
                    dated April 1, 2003

4.19(5)             Employment  Agreement  between the Company and Shelly  Samec
                    dated September 1, 2002

4.20(6)             Credit Agreement between Addison York Insurance Brokers Ltd.
                    and Oak Street Funding LLC dated March 19, 2004

4.21(6)             $15,000,000  Credit  Note  dated  March 19,  2004  issued by
                    Addison York  Insurance  Brokers Ltd. to Oak Street  Funding
                    LLC (included in Exhibit 4.20)

4.22(6)             General  Security  Agreement  between Addison York Insurance
                    Brokers Ltd. and Oak Street Funding LLC dated March 19, 2004
                    (included in Exhibit 4.20)

4.23(6)             Guaranty  of the  Company  to Oak Street  Funding  LLC dated
                    March 19, 2004 (included in Exhibit 4.20)

4.24(6)             General  Security  Agreement  between  the  Company  and Oak
                    Street Funding LLC dated March 19, 2004 (included in Exhibit
                    4.20)

4.25(6)             Securities  Pledge  Agreement  between  the  Company and Oak
                    Street Funding LLC dated March 19, 2004 (included in Exhibit
                    4.20)

4.26(6)             Waiver and First  Amendment to Loan and  Security  Agreement
                    dated  August  31,  2004  between   Addison  York  Insurance
                    Brokers, Ltd. and Oak Street Funding LLC.

4.27(6)             Purchase  Agreement dated October 1, 2003 among Addison York
                    Insurance Brokers, Ltd., and DKWS Enterprises, Inc., Kabaker
                    Family  Trust of July  1998,  John W.  Kabaker  and  Theolyn
                    Kabaker

4.28(6)             Amendment to Purchase  Agreement  dated March 15, 2004 among
                    Addison York Insurance Brokers,  Ltd., and DKWS Enterprises,
                    Inc., Kabaker Family Trust of July 1998, John W. Kabaker and
                    Theolyn Kabaker

4.29(6)             $3,515,000  Promissory  Note dated October 1, 2003 issued by
                    Addison York Insurance Brokers, Ltd. to Kabaker Family Trust
                    of July 1998 (included in Exhibit 4.27)

4.30(6)             General  Security  Agreement  dated  October 1, 2003 between
                    Addison York Insurance Brokers Ltd. and Kabaker Family Trust
                    of July 1998 (included in Exhibit 4.27)

4.31(6)             Amendment to General Security Agreement dated March 15, 2004
                    between  Addison  York  Insurance  Brokers  Ltd. and Kabaker
                    Family Trust of July 1998

4.32(6)             Agency  Agreement  dated  October 1, 2003 among Addison York
                    Insurance Brokers Ltd., DKWS  Enterprises,  Inc. and Kabaker
                    Family Trust of July 1998 (included in Exhibit 4.27)

4.33(6)             Purchase  Agreement dated October 1, 2003 among Addison York
                    Insurance Brokers Ltd., Johns Insurance Agency,  Inc., Johns
                    Revocable Trust and Frederick G. Johns Jr.

4.34(6)             Agency  Agreement  dated  October 1, 2003 among Addison York
                    Insurance  Brokers Ltd.,  Johns Insurance  Agency,  Inc. and
                    Johns Revocable Trust (included in Exhibit 4.33)

4.35(6)             Extension  of  Sublease  dated  February  21,  2004  between
                    Telvent Canada Limited and the Company

4.36(6)             Loan and  Security  Agreement  dated  June 3,  2004  between
                    Addison York  Insurance  Brokers,  Ltd. and FCC, LLC,  d/b/a
                    First Capital


                                      -82-

<PAGE>

Exhibit
Number              Description
--------------------------------------------------------------------------------
4.37(6)             Waiver and First  Amendment to Loan and  Security  Agreement
                    dated  August  31,  2004  between   Addison  York  Insurance
                    Brokers, Ltd. and FCC, LLC, d/b/a/ First Capital

4.38(6)             Guarantee of the Company to FCC,  LLC,  d/b/a First  Capital
                    dated June 3, 2004

4.39(6)             General  Security  Agreement  dated June 3, 2004 between the
                    Company and FCC, LLC d/b/a First Capital

4.40(6)             Securities Pledge Agreement between the Company and FCC, LLC
                    dated June 3, 2004

4.41(6)             Loan and  Security  Agreement  dated August 31, 2004 between
                    Addison York Insurance Brokers Ltd. and Emmett Lescroart

4.42(6)             $3,250,000  Credit  Note  dated  August 31,  2004  issued by
                    Addison York Insurance Brokers, Ltd. to Emmett Lescroart

4.43(6)             Guarantee  of the Company to Emmett  Lescroart  dated August
                    31, 2004

4.44(6)             General Security Agreement dated August 31, 2004 between the
                    Company and Emmett Lescroart

4.45(6)             Purchase  Agreement dated August 31, 2004 among Addison York
                    Insurance   Brokers,   Ltd.,  Al  Vinciguerra   Ltd.,   Dena
                    Vinciguerra and Renee Woodard

4.46(6)             $1,000,000  Promissory  Note dated August 31, 2004 issued by
                    Addison York Insurance Brokers,  Ltd. to Al Vinciguerra Ltd.
                    (included in Exhibit 4.45)

4.47(6)             Security  Agreement  dated August 31, 2004  between  Addison
                    York  Insurance  Brokers,   Ltd.  and  Al  Vinciguerra  Ltd.
                    (included in Exhibit 4.45)

4.48(6)             Debt Subordination and Intercreditor  Agreement dated August
                    31, 2004 among Addison York Insurance Brokers, Ltd., Anthony
                    Clark   International   Insurance   Brokers   Ltd.,   Emmett
                    Lescroart, Al Vinciguerra Ltd., Kabaker Family Trust of July
                    1998,  FCC,  LLC,  and Oak Street  Funding LLC  (included in
                    Exhibit 4.45)

4.49(6)             Agency  Agreement  dated August 31, 2004 among  Addison York
                    Insurance   Brokers,   Ltd.,  Al  Vinciguerra   Ltd.,   Dena
                    Vinciguerra and Renee Woodard (included in Exhibit 4.45)

4.50(7)             Purchase  Agreement dated January 1, 2005 among Addison York
                    Insurance Brokers,  Ltd.,  Schuneman Insurance Agency, Inc.,
                    Ron Hartz and Bill N. Feather

4.51(7)             Security  Agreement  dated January 1, 2005,  between Addison
                    York  Insurance  Brokers,   Ltd.,  and  Schuneman  Insurance
                    Agency, Inc.

4.52                Agency  Agreement  dated January 1, , 2005,  between Addison
                    York Insurance Brokers, Ltd. and Schuneman Insurance Agency,
                    Inc.

4.53(7)             Amended and Restated Loan and Security  Agreement dated June
                    15,  2005  among  Bridge  Healthcare  Finance,  LLC,  Bridge
                    Opportunity  Finance,   LLC,  and  certain  other  financial
                    institutions  from time to time,  and Addison York Insurance
                    Brokers, Ltd., the Company and Heritage Hill Insurance Ltd.

4.54                Warrant issued to Bridge  Opportunity  Finance,  LLC on June
                    15, 2005

8.1                 List of Subsidiaries (included in Item 4.C.)

11.1                Code of Ethics


                                      -83-

<PAGE>

Exhibit
Number              Description
--------------------------------------------------------------------------------


12.1                Certifications   Required   by   Rule   13a-14(a)   or  Rule
                    15(d)-14(a)

13.1                Certifications Required by Rule 13a-14(b) or Rule 14d-14(b)
--------------------
(1)  Previously  filed as Exhibits to the Company's  Form 20-F filed on November
     2, 1999.

(2)  Previously  filed as Exhibits to the Company's  Form 20-F filed on July 27,
     2000.

(3)  Previously  filed as Exhibits to the Company's Form 20-F filed on September
     27, 2001.

(4)  Previously filed as Exhibits to the Company's Form 20-F filed on August 27,
     2002.

(5)  Previously  filed as Exhibits to the Company's Form 20-F filed on September
     15, 2003.

(6)  Previously  filed as Exhibits to the Company's  Form 20-F filed on November
     18, 2004.

(7)  Incorporated  by reference to the Company's Form 6-K submitted on September
     14, 2005.





                                      -84-

<PAGE>

                                   SIGNATURES

The  registrant  certifies that it meets all of the  requirements  for filing on
Form 20-F and that it has duly caused and  authorized  the  undersigned  to sign
this annual report on its behalf.


Date:   October 17, 2005


                                     ANTHONY CLARK INTERNATIONAL
                                     INSURANCE BROKERS LTD.


                                     Per:  /s/ Primo Podorieszach
                                           -------------------------------------
                                           Primo Podorieszach
                                           President and Chief Executive Officer




                                      -85-