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**UNITED STATESSECURITIES AND EXCHANGE COMMISSION**Washington, D.C.
20549

**FORM 10-KSB**

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

For the fiscal year ended **December 31,
2006**

**or**

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

For the transition period from: ____ to ____

Commission File Number**0-23687**

**STOCKGROUP INFORMATION SYSTEMS
INC.**(Exact name of registrant as specified in its
charter)



|**Colorado**                                     | **84-1379282**                      
|------------------------------------------------ | ------------------------------------
|(State or other jurisdiction of incorporation or | (I.R.S. Employer Identification No.)
|organization)                                    | ****                                

**Suite 500  750 West Pender St., Vancouver, B.C. V6C
2T7**(Address of principal executive offices)

**(604) 331-0995**(Registrants
telephone number, including area code)

**Securities Registered pursuant to Section 12(b) of the
Act: None**

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

|Title of Each Class:        | Name of Each Exchange on Which
      Registered:
|--------------------------- | ------------------------------------------------
|Common shares, no par value | Nasdaq Stock Market, Inc. OTCBB                 
|                            | TSX-Venture                                     

Check whether the issuer (1) filed all reports required to be filed
  by Section 13 or 15(d) of Exchange Act during the past 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
  [   ]

Check if there is no disclosure of delinquent filers in response
  to Item 405 of Regulation S-B is not contained in this form, and no disclosure
  will be contained, to the best of registrant's knowledge, in definitive proxy
  or information statements incorporated by reference in Part III of this Form
  10-KSB or any amendment to this Form 10-KSB. [   ]

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Indicate by check mark whether the registrant is a shell company
  (as defined in Rule 12b-2 of the Exchange Act). Yes [   ] No [X]

State issuer's revenues for its most recent fiscal year: $7,766,128

The aggregate market value of common equity held by non-affiliates
  of the registrant as of February 28, 2007 was approximately $25,141,000. The
  number of shares outstanding of the registrants common equity as of February
  28, 2007 was 36,971,788.

Documents incorporated by reference:

None

Transitional Small Business Disclosure Format (Check one): Yes
[   ] No [X]

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STOCKGROUP INFORMATION SYSTEMS INC. TABLE OF
CONTENTS

|           |                                                                                                                                                      | Page
|---------- | ---------------------------------------------------------------------------------------------------------------------------------------------------- | ----
|           |                                                                                                                                                      |     
|PART I     |                                                                                                                                                     
|           |                                                                                                                                                      |     
|Item 1.    | Description of Business                                                                                                                              | 4   
|           |                                                                                                                                                      |     
|Item 2.    | Description of Property                                                                                                                              | 12  
|           |                                                                                                                                                      |     
|Item 3.    | Legal Proceedings                                                                                                                                    | 12  
|           |                                                                                                                                                      |     
|Item 4.    | Submission of Matters to a Vote of Security Holders                                                                                                  | 12  
|           |                                                                                                                                                      |     
|PART II    |                                                                                                                                                     
|           |                                                                                                                                                      |     
|Item 5.    | Market for Common Equity and Related Stockholder Matters                                                                                             | 13  
|           |                                                                                                                                                      |     
|Item 6.    | Managements Discussion and Analysis or Plan of Operation                                                                                            | 15  
|           |                                                                                                                                                      |     
|Item 7.    | Financial Statements                                                                                                                                 | 33  
|           |                                                                                                                                                      |     
|Item 8.    | Changes In and Disagreements With Accountants on Accounting
      and Financial Disclosure                                                           | 54  
|           |                                                                                                                                                      |     
|Item 8A.   | Controls and Procedures                                                                                                                              | 54  
|           |                                                                                                                                                      |     
|Item 8B.   | Other Information                                                                                                                                    | 54  
|           |                                                                                                                                                      |     
|PART III   |                                                                                                                                                     
|           |                                                                                                                                                      |     
|Item 9.    | Directors, Executive Officers, Promoters and Control Persons
      and Corporate Governance; Compliance With Section 16(a) of the Exchange
      Act | 55  
|           |                                                                                                                                                      |     
|Item 10.   | Executive Compensation                                                                                                                               | 59  
|           |                                                                                                                                                      |     
|Item 11.   | Security Ownership of Certain Beneficial Owners and Management
      and Related Stockholder Matters                                                 | 61  
|           |                                                                                                                                                      |     
|Item 12.   | Certain Relationships and Related Transactions, and Director
      Independence                                                                      | 63  
|           |                                                                                                                                                      |     
|Item 13.   | Exhibits                                                                                                                                             | 64  
|           |                                                                                                                                                      |     
|Item 14.   | Principal Accountant Fees and Services                                                                                                               | 65  
|           |                                                                                                                                                      |     
|SIGNATURES | 66                                                                                                                                                  

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References in this Form 10-KSB to the Company,
Stockgroup, we, our, and us refer to Stockgroup Information Systems Inc.
and our consolidated subsidiaries, unless otherwise indicated. Stockgroup,
StockHouse, StockStream, and related logos are trademarks or registered
trademarks of the Company in the U.S., Canada or other countries.

PART I

FORWARD-LOOKING STATEMENTS

Certain statements contained
herein constitute "forward-looking statements" within the meaning of Section 27A
of the Securities Act of 1933, as amended (the "Securities Act") and Section 21E
of the Securities Exchange Act of 1934, as amended (the "Exchange Act"). These
forward-looking statements can be identified by the use of predictive,
future-tense or forward-looking terminology, such as "believes," "anticipates,"
"expects," "estimates," "plans," "may," "intends," or similar terms. These
statements appear in a number of places in this report and include statements
regarding the intent, belief or current expectations of the Company, its
directors or its officers with respect to, among other things: (i) trends
affecting the Company's financial condition or results of operations, (ii) the
Company's business and growth strategies, (iii) the Internet and Internet
commerce and (iv) the Company's financing plans. Investors are cautioned that
any such forward-looking statements are not guarantees of future performance and
involve significant risks and uncertainties, and that actual results may differ
materially from those projected in the forward-looking statements as a result of
various factors set forth under "Risk Factors Affecting Our Business" and
elsewhere in this report. The Company disclaims any obligation to update any
such factors or to publicly announce the result of any revisions to any of the
forward-looking statements contained herein to reflect future events or
developments. The managements discussion and analysis of the Company contained
in this Annual Report on Form 10-KSB should be read in conjunction with the
consolidated audited financial statements and notes related thereto included
elsewhere in this report.

Item 1. Description of Business

Our Company

Stockgroup is a leading financial
media company focused on user-generated content and collaborative technologies.
Our web-based platform consists of web-based financial analytics, aggregated
third party financial content, user-generated content from our StockHouse
community and collaborative technologies. This platform is licensed to top North
American brokerage firms, media companies and other intermediaries to help
individual investors create and manage wealth. This platform is also extended
through our StockHouse websites, StockHouse.com and StockHouse.ca, leading
online financial portals owned and operated by Stockgroup. Our StockHouse
websites are home to BullBoardsmessage boards - Canada's largest
community of active investors.

We are a United States reporting
public company incorporated in 1994 and registered in Colorado. Our shares are
quoted on the OTCBB under the symbol SWEB and are listed on the TSX Venture
Exchange under the symbol SWB. Our head office is in Vancouver, Canada, with
regional offices in New York, NY and Toronto, Canada. Our corporate website is
www.stockgroup.com.

On January 25, 2007, we announced
that we had entered into a formal purchase agreement to acquire the Mobile
Finance Division of TeleCommunication Systems Inc., which we refer to hereafter
as the Mobile Finance Division or MFD. A description of the business we acquired
is included at the end of this section under the heading Business
Acquisition  TeleCommunication Systems, Inc. Mobile Finance Division.The
business combination will be accounted for as a purchase of a business and the
results of operations of the acquired business will be included in our
consolidated financial statements from January 31, 2007. We

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issued 1,500,000 restricted common shares for this purchase.
The purchase price may be increased by up to $500,000 in cash depending on the
attainment of certain performance targets.

Products and Services

We have a web-based technology
platform which is the foundation for our two product categories, which are (1)
advertising from agencies and client direct on our online community StockHouse
websites, and (2) licensing our platform to intermediaries who serve retail
investors as their customers. The platform is architected based on integrated
technologies, analytics, and financial content aimed at the retail investor. The
platform uniquely delivers collaborative technologies and customer intelligence
to help investors communicate with their trusted advisors and social networks.
The revenue streams are attractive in that the majority of the revenue is
recurring in nature.

Advertising Services

We provide online disclosure and
advertising services, mainly through our StockHouse website and related sites,
to a wide range of companies. Our target advertising clients are advertising
agencies, publicly traded companies and media buyers who need a cost-effective
method of creating awareness of their company in the investment community.
Client relationships are developed through outbound sales campaigns and inside
inquiries. In addition, we sell subscriptions on our websites for our product
StockStream and provide customers the ability to receive market data via this
portal.

The StockHouse media property
offers content aggregation from hundreds of sources, a comprehensive equities
database, and key syndicated message forums and blogs such as BullBoards,
introduced in 2005, and StockHouse Blogs, introduced in 2006. StockHouse and
BullBoards offer advertising agencies and media buyers access to a high traffic
site with targeted user demographics. We believe there will be ongoing growth in
the advertising market and an increasing shift in advertisers use of the
internet versus traditional media.

Our client direct advertising
solutions focus on high-impact press release dissemination, generating qualified
investor leads, and maximizing the exposure that our customers have to the
market. Some of the key solutions in this product suite include the
following:

Investor Marketplace
(IMP), a web page which is actively marketed through advertising to draw
readers, where companies can be featured online to prospective investors. Being
featured on the IMP enables customers to advertise their name, profile and
Internet link to a large investor audience that they may not otherwise be able
to reach.

E-mail Services sold under
the names StockHouse NewsBlastsand NewsHotlines, which are
purchased by our clients to help them disseminate their news releases and other
information to a select list of investors. Our e-mail lists consist of
subscribers who have opted to receive our mailings and confirmed their
subscription on a subsequent e-mail follow-up, a process known as double
opt-in. We take great care to ensure that recipients actually want the e-mails
we send them.

Sector Supplements, which
are a spotlight feature on a certain industry sector, such as energy, mining,
biotech or technology, are an effective exposure tool for companies. In a Sector
Supplement investors are drawn to a website that features a select number of
companies and contains industry-specific news and information. Investors who
visit this website can view each of the featured companies profiles, request
information or link directly to the clients own website.

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StockStream

Our StockStream product is a
real-time, streaming portfolio manager designed for retail investors. Our most
recent version of StockStream was released and launched in November 2006 and
introduced increased functionality, including improved navigation, new layout
format, research and screening abilities and portfolio performance including
access to more real-time data. Our original version of StockStream was released
in October 2005 and formally introduced in March 2006. StockStream is available
through subscription on our websites or as a licensed product for financial
institutions or finance-related media sites, under the name StockStream
Platinum.

The product gives investors the
ability to track stocks, manage their portfolio, read news, blog and access
other subscribed content. It uses RSS (Really Simple Syndication) technology to
incorporate additional subscribed content feeds. It is the only portfolio
management application that displays user-generated content from the StockHouse
BullBoards.

Offered by the investment firm to
its clients, a white-labeled version of StockStream supports the advisor's
strategies to increase client retention and enhance client communications. In
addition to providing quotes, market depth, charts, alerts, news and portfolio
analysis, the product utilizes Stockgroup's collaboration technology to enable
advisors and clients to simultaneously view the online portfolio as well as set
alerts by the advisor for the client. Together they are able to discuss
investment strategies and portfolio performance in a new way that deepens the
advisor-client relationship. By encouraging clients to consolidate their
investments in StockStream, financial institutions can gain valuable customer
intelligence, including client assets and portfolio activity under management at
other financial institutions.

Licensing Financial Software and Content
Systems

We have developed a proprietary
financial platform consisting of financial analytics, aggregated third party
financial content, user-generated content from our StockHouse community and
collaborative technologies, which is licensed as a system to our clients. The
clients for Financial Software and Content Systems come from many different
industries, such as media, banking, stock brokerages, insurance and others.
Potential clients are identified through lead generation activities including
telemarketing, tradeshows and speaking events. Relationships are further
established through our North American sales force. We provide the systems on a
private-labeled basis.

The financial applications
present stock market data, news and other content that is served from
Stockgroups web-based platform. Stockgroup receives raw feeds from various
content vendors. Proprietary filters and analytics are applied in an effort to
serve meaningful groupings of information to the various application products
used by our licensed customers. Customers gain advantage in a number of
ways:

- There is a reduction of cost and information technology complexity in
  having us transform raw feeds of market data into informative and actionable
  information;
- Our proprietary analytics and filters, along with a customized
  presentation layer, enable our customers to provide a unique online experience
  that is consistent with their brand and market differentiation; and
- StockStream and our portfolio management products include unique
  collaboration technologies that help financial institutions enhance
  advisor-client communications and increase customer retention.

We are able to use economies of
scale to provide a service that is efficiently delivered and customized at
substantial cost savings over having the customer build and manage these systems
internally. From a competitive standpoint, we provide premium quality data
products, with proprietary filters, analytics and features that are aimed at
helping financial institutions demonstrate competitive advantage and improve
customer retention.

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We sell financial software and
content systems through channel partners such as The Associated Press and The
Canadian Press, and through our own direct sales team. These financial tools,
applications and content systems cover the entire North American market
including mutual funds, commodities and equities.

We have built and maintain our
proprietary data processing solution that aggregates the multiple feeds,
translates and builds a common database infrastructure. Our system then cleans,
filters and maintains the data for use by our various data-driven services. We
have a sophisticated server and security system which runs this content/data
management system. The data is streamed continuously in real time to our
proprietary software applications and to our client websites, intranets, and
desktops.

The following are just a few of our services delivered from our
platform:

- StockStream Platinum  streaming real-time portfolio management
- Real-time or delayed stock quotes on major U.S. and Canadian exchanges;
- Company Snapshot  fundamentals, chart, news and regulatory filings;
- Market Summary  daily major indices, stock market gainers, decliners,
  most actives;
- Mutual Funds Center  daily prices, performance and charts;
- Portfolio Management System  updating values, transaction handling, alert
  capabilities.

Competition

Our competition includes direct
competitors in online portfolio management and financial content products, as
well as financial media sites that cater to active investors. Our key
differentiators against competitors are the collaborative technologies that we
serve through our platform, our product design strategy that adds functionality
to meet the strategic needs of our intermediaries, and the user-generated
content created by the investor community.

The financial portal competitive
landscape can be categorized into Major Financial Portals (Yahoo! Finance, MSN
Money, CNN Money), News Sites (MarketWatch, Wall Street Journal Online),
Financial Portals (MarketWatch, TheStreet) and Financial Portals with
User-Generated Content (Motley Fool, Raging Bull, Investor Hub). Our competitors
for our streaming data include IDC eSignal, Prophet.Net, and Globe Investor.

We believe the landscape for
financial sites is well established with very strong barriers to entry for new
participants. In the user-generated content area, it is very difficult for new
entrants as initial critical mass is a key driver of building more mass. We
believe these factors have helped us be successful in Canada and give us a good
base on which to expand our market share into the U.S.

Intellectual Property, Proprietary Rights and Domain
Names

We own the domain names
www.stockhouse.com, www.stockhouse.ca, www.stockhhouse.au, www.stockgroup.com,
www.smallcapcenter.com, and www.investormarketplace.com. We believe our
ownership of these domain names gives us adequate protection over them and we
intend to continue to keep them in our possession.

We own trademarks for
StockHouse and its related logos in the United States, Canada, the United
Kingdom, Australia and Hong Kong. We own trademarks for @ The Bell in the
United States, Australia and Hong Kong. BullBoards is trademarked in Canada
and Australia and Investors Click Here is trademarked in the United States. We
may pursue or acquire other trademarks in the future.

We protect our other intellectual
property through a combination of trademark laws, trade secret laws and
confidentiality agreements with our employees, customers, independent
contractors, agents and vendors.

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We pursue the registration of our domain names, trademarks and
service marks in the United States and internationally. Effective trademark,
service mark, copyright and trade secret protection may not be available in
every country in which our services and products are made available online. We
create some of our own content and obtain the balance of our content from third
parties. It is possible that we could become subject to infringement actions
based upon the content obtained from these third parties. In addition, others
may use this content and we may be subject to claims from our licensors.

We currently have no patents or
patents pending and do not anticipate that patents will become a significant
part of our intellectual property in the future. We enter into confidentiality
agreements with our employees and independent consultants and have instituted
procedures to control access to and distribution of our technology,
documentation and other proprietary information and the proprietary information
of others from whom we license content. The steps we take to protect our
proprietary rights may not be adequate and third parties may infringe or
misappropriate our trademarks, service marks and similar proprietary rights. In
addition, other parties may assert claims of infringement of intellectual
property or alter proprietary rights against us. The legal status of
intellectual property on the Internet is currently subject to various
uncertainties as legal precedents have not been set and are still to be
determined in many areas of Internet law.

Regulatory Issues

We are not subject to
governmental regulation in our Internet publishing efforts, nor do we know of
any pending legislation or regulation which may impose regulatory requirements
on our Internet activities, or any other principal product or service we offer,
other than privacy laws. We believe that we are in compliance in all material
respects with all laws, rule, regulations and requirements that affect our
business, and that compliance with such laws, rule, regulations and requirements
does not impose a material impediment on our ability to conduct our
business.

Product Development

We believe that each new product
in our pipeline is developed to meet the needs to our growing client base and
remains centered upon helping investors create and manage their wealth. During
the past two years, we have launched versions of our StockStream product for
both our StockHouse and our licensing customers. Development conducted in 2006
was focused on the back-end architecture and customer facing design for
StockStream. Our product development group, which is located in Vancouver, is
responsible for the design, development and release or product enhancements,
upgrades and new products. Research and development expenses were $683,776 in
2006 and $324,646 in 2005.

Equipment

We have made an investment in
servers and computer equipment required for our websites, streaming of data and
hosting services. During the year we leased additional servers to support our
increased business requirements and to build-out a back-up hosting site. We have
dedicated staff assigned to maintenance and support of this equipment.

Employees

In 2006, we added and filled key
positions within our management and development teams to support the Companys
strategic growth initiatives. As of December 31, 2006, we employed 58 people on
a full-time basis. None of our employees are subject to collective bargaining
agreements. We have management agreements with our executive officers as further
described in Item 10. Executive Compensation, under the heading
Employment Contracts and Termination of Employment and Change-in-Control
Arrangements.

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Corporate Background of Stockgroup

From 1995 to 1999 we operated a
financial market publishing business and website aimed at public company
clients. We used the funds from a public offering in the spring of 1999 to
provide the foundation for the development and mass marketing of our services.
In October 1999 we launched the website SmallCapCenter.com. At that time we
believed that a subscription/ advertising model centering around small cap
content was viable. While parts of this business model did not prove to be
profitable, the exercise of building SmallCapCenter and its related investment
tools gave us certain experience and skills, and a suite of service products to
sell commercially. SmallCapCenter.com exists to this day.

We entered the Financial Software
and Content Systems market late in 2000 by licensing our proprietary financial
tools, content and applications to customers who need to offer financial
information to their customers or improve their content offering. We had access
to an array of customers through our internal sales team as well as our channel
partners. Our licensed content model is attractive to customers because it is a
comprehensive and cost effective alternative to in-house development.

From 2001 to 2002 we expanded our
product suite to include Sector Supplements and automated investor relations Web
page tools such as the IntegrateIR. We already had a public company customer
base, so the transition into this area was a natural extension of our core
competencies. We started to purchase the website and certain related assets to
run the StockHouse brand in 2002 and completed this acquisition in 2004. This
acquisition provided several key benefits to us including the addition of the
StockHouse brand to our service offering and the integration of those assets
into our business. For 2005 and 2006, we have continued to grow our financial
media business and in January 2007 we made a significant purchase of a provider
of wireless solutions as described below.

Business Acquisition  Mobile Finance Division of
TeleCommunication Systems, Inc.

On January 31, 2007, we closed a
purchase transaction, for the purchase of the Mobile Finance Division of
TeleCommunication Systems, Inc. Following is a description of the acquired
business, known as MFD. We believe that the wireless platform we have obtained
with this acquisition is of strategic value that can be both grown organically
and leveraged within our existing operations. Having a wireless platform for
content delivery, including our StockStream product, is an important part of our
strategy for the growth of enterprise and retail customers. We believe that
adding this wireless capability should also provide us with additional
scalability in distributing our content.

Operations, Products and Services

MFD is a vendor who specializes
in the sale of a wireless service delivering financial market data, news, and
limited analytics like charting and portfolio functionality. The financial data
delivered is acquired from global information companies and is distributed
through mobile devices, including pagers, Blackberry® and other mobile devices
in its device delivery portfolio. This financial information has been delivered
to non pager devices over the past two years under the name MarketStream. Over
the past few years, pager subscriptions have been declining as the demand for
newer more current models of mobile devices have been made available and as a
result the MFD has been working to convert pager customers to the newer
MarketStream product. The current customer base is located in North America and
Europe and its customers are serviced primarily out of offices in Owings Mills,
Maryland and London, UK.

The business primarily serves
leading wealth management, capital markets and advisory companies. These
institutions and/or their employees purchase subscriptions to receive their
products. The subscriptions, typically one year in length, consists of software
downloaded to the users phone or mobile device and access to live streaming
content. The prices for these subscriptions vary by number of end users
subscribed and the type of streaming data selected. Sales have typically been
obtained by targeting large financial institutions

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that have large numbers of traders and investment professionals
who have a mission critical need for real-time financial market data and news.
Sales are driven primarily by interest in the financial markets.

In the operation of our recently
acquired business, we will receive financial information from suppliers over the
internet and deliver it to subscribers through our wireless platform and
directly to clients Blackberry® Enterprise Servers, which send financial
information to corporate wireless devices. Adoption of mobile and smart phones
continue to grow at a significant pace as investors and investment professionals
use mobile devices to stay connected to the market when they are away from their
desktops. Increasing numbers of people are using the Internet as a source of
stock market information. As a result, financial content is becoming an expected
standard offering for media and financial services companies. Customers,
including brokerages, banks, large news websites and other media, are
encountering competitive pressures to improve their financial content offerings.
We believe that this market expansion continues to drive demand for the services
provided by this mobile finance business.

® BlackBerry is the exclusive property and trademark of
Research In Motion Limited. BlackBerry is registered with the U.S. Patent and
Trademark Office and may be pending or registered in other countries.

MarketStream

The MarketStream service
provides global real-time streaming access to security prices and volume,
foreign exchange rates, futures, commodities, fixed income prices as well as
news and charts. MarketStream provides users with a high degree of flexibility
for content purchased in both detail and display. Customers purchase different
data feeds of financial information depending on their individual needs.
MarketStream subscriptions can be purchased on an individual or multi-seat
basis. We believe that the MarketStream product has a competitive advantage in
that it is a true streaming or real time product vs. other polling
applications which update every one to three seconds. This functionality makes
MarketStream an institutional grade product.

Customers of Mobile Finance Division

The customers of our new division
are large Tier I financial institutions which have key personnel which require
real-time mobile access to financial market data. Prospects are contacted
directly by the sales force from internally generated leads many of which come
in through the products website. In many cases new prospects are given a two
week free trial to the services. After the initial trial new customers can
decide what data they wish to receive and sign up for a subscription which can
be on a monthly or annual basis. Customers are located primarily in North
America and Europe and include leading global investment banking, securities and
investment management firms.

The business also private labels
the service to an institutional global information channel partner such as
Reuters®. Reuters® has announced the launch of a wireless product offering for
subscribers named Reuters® Connect for customers of Reuters® Station, Reuters®
Trader, or Reuters® Channel, in the first quarter of 2007 to allow their
customers to have the Reuters® offering on their mobile device.

We also provide Hutchison
Telecoms, a company focused on delivering leading communications and multimedia
services, a private labeled version of MarketStream for their customers in
Australia. Reuters is a registered trademark of the Reuters Group of
companies around the world.

Employees of MFD

As of January 31, 2007, our newly
acquired business employed a total of 12 employees and 2 independent sales
representatives. The main offices are in Owings Mills, Maryland and London,
United Kingdom with one-person offices in Madrid, Spain and Amsterdam,
Netherlands. None of the acquired personnel were or will be considered senior
management though the Owings Mills and London offices have general managers.

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Business Strategy

The strategy for MFD, while it
was owned by TeleCommunication Systems, Inc., was to deliver the MarketStream
product to institutional and professional customers. The target market has been
high-end customers interested primarily in content flexibility and performance.
We intend to expand our customer base by adding the acquired mobile
functionality to our platform and extending our overall platform capabilities.
We will be bringing our entire platform to existing customers of the MFD and
bringing our new functionality to our existing and prospective customers. Our
strategy will be to provide our platform to financial services, media, and
channel partners on a bulk or private labeled basis. In addition, our intention
is to offer a consumer product by the end of 2007. We further expect that
wireless delivery of new products we develop including the user-generated
content generated in our StockHouse community should increase demand from both
the institutional and retail investment communities.

Sales and Marketing Strategy

We plan to sell MarketStream
directly to financial services organizations, media companies and indirectly
through reseller channels. We intend to offer third parties the ability to
private label the products delivered from MarketStream under their own name
while they use our platform capabilities and content. The business currently has
distribution agreements with several global information companies. The addition
of new global information companies increases our potential market for both
wireless and internet customers. We expect a significant number of new customers
located in the Far East.

Supply Strategy

We outsource the management of
the wireless functionality to Imperial Software Technologies or IST®. We also
license the Delta Stream® software engine through IST®. Delta Stream® acts as
the wireless content manager which sits underneath our MarketStream software
which provides the user interface and functionality. We pay a royalty to IST®
for each unit of MarketStream and we have a non-compete agreement for the
financial services marketplace. Delta Stream®, MarketStream and all the
services reside on the servers located in Maryland. The server facility / data
center receives direct market feeds from suppliers which work within the Delta
Stream® and MarketStream systems. We pay IST® a maintenance fee with additional
fees for any additional customization for maintaining our servers and systems
including application support. In the event of business failure by IST® the
source code will be transferred to us. We currently have a copy of the source
code in escrow.® IST and Delta Stream are the exclusive property and
registered trademarks of IST.

Available Information

Our website is located at
http://www.stockgroup.com. We are subject to
the information and periodic reporting requirements of the Securities Act of
1934, as amended, (the Exchange Act) and, as such, we file reports, proxy
statements and other information with the U.S. Securities and Exchange
Commission (SEC). We are an electronic filer. We make available, free of
charge, on our investor relations website under Regulatory Filings our Annual
Reports on Form 10-KSB, Quarterly Reports on Form 10-QSB, Current Reports on
Form 8-K and any amendments to those reports as soon as reasonably practicable
after we electronically file or furnish such materials to the SEC.
Alternatively, you may contact our Investor Relations department in writing for
a copy of our Form 10-KSB.

The public may read and copy any
  materials filed by us with the SEC at the SECs Public Reference Room at
  100 F Street N.E., Washington DC 20459. The public may obtain information on
  the operation of the Public Reference Room by calling the SEC at 1-800-732-0330.
  The SEC maintains an internet site that contains reports, proxy and information
  statements, and other information regarding issuers that file electronically
  with the SEC. The internet address of the site is http://www.sec.gov.

11

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In addition, as we are listed on
the TSX Venture Exchange (TSX-V), we are subject to periodic reporting
requirements set forth by the Ontario Securities Commission, which are
substantially similar to those of the SEC. Such filings are available on our
website and are also available on the Canadian Securities Administrators
website, www.sedar.com.

We are not required to deliver an
annual report to our stockholders but will voluntarily send an annual report
which includes our annual audited financial statements.

Item 2. Description of Property

Our corporate offices are
composed of one floor of leased space located in the center of Vancouvers
business community. We also lease premises for a sales office in each of Toronto
and New York, NY. In addition, as the result of our January 2007 acquisition, we
assumed leases in Owings Mills, Maryland and London, United Kingdom.

Item 3. Legal Proceedings

We are the defendant in a lawsuit
filed in the Saskatchewan Court of Queens Bench by plaintiffs Black Strap
Hospitality Corporation, Harold Lane and Derek Neis. The plaintiffs sought
damages for alleged defamation in the amount of C$100,000 plus pre-judgment
interest. The plaintiffs claimed that they were defamed by certain members of
our Bull Boards investment discussion forum on www.stockhouse.com/ca. We
responded to the action by providing, under court order, information on the Bull
Boards members specified in the court order. On December 7, 2006, we were
advised by the plaintiff that they were prepared to provide discontinuance and a
waiver on costs if we agreed to certain conditions, including the removal of
Black Strap Hospitality Corporation postings from the StockHouse.com and
StockHouse.ca websites. We received a formal discontinuance on January 16,
2007.

We are the plaintiff in a lawsuit
filed in the Ontario Supreme Court of Justice against Hollinger Inc. and
Hollinger Canadian Publishing Holdings Co. in which we seek to recover
approximately C$471,000 from the defendant. The defendant was our vendor and the
amount we seek consists of unused advertising credits which we prepaid in 1999.
The case is currently pending final resolution and there is considerable
uncertainty as to what value, if any, will be derived if we win the lawsuit. No
provision has been made for recovery of these credits in the financial
statements in any year.

In addition to the above, we are
involved in various other legal matters which arise from time-to-time in the
ordinary course of business, none of which we believe is material to our results
of operations, liquidity or financial condition at this time. Unless otherwise
noted, we cannot reasonably estimate at this time whether a monetary settlement
will be reached or predict the ultimate resolution of these legal matters.

Item 4. Submission of Matters to a Vote of Security
Holders

There were no matters submitted
to a vote of security holders during the fourth quarter of 2006.

12

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PART II

Item 5. Market for Common Equity and Related Shareholders
Matters

Market Information

Our common stock has been quoted
for trading on the Over-the-Counter Bulletin Board quotation service operated by
Nasdaq Stock Market, Inc. (Nasdaq OTCBB) since March 17, 1999 under the symbol
SWEB, and on the TSX Venture Exchange (TSX-V) since December 17, 2002 under
the symbol SWB.

The following table sets forth
the range of high and low sales prices in U.S. dollars for our common shares on
the Nasdaq OTCBB and in Canadian dollars for our common shares on the TSX-V for
each quarter within the last two fiscal years. Prices on the Nasdaq OTCBB
represent quotations between dealers without adjustment for retail markup,
markdown or commission and may not represent actual transactions.

Price per Common Share on
      Price per Common ShareNasdaq
        OTCBB
      on
        TSX-VHigh
      Low
      High
      Low2006:Fourth Quarter
      $ 0.47
      $ 0.31
      C$ 0.58
      C$ 0.35Third Quarter
      $ 0.45
      $ 0.30
      C$ 0.50
      C$ 0.34Second Quarter
      $ 0.49
      $ 0.34
      C$ 0.56
      C$ 0.39First Quarter
      $ 0.37
      $ 0.27
      C$ 0.42
      C$ 0.312005:Fourth Quarter
      $ 0.35
      $ 0.29
      C$ 0.42
      C$ 0.34Third Quarter
      $ 0.37
      $ 0.30
      C$ 0.45
      C$ 0.35Second Quarter
      $ 0.36
      $ 0.29
      C$ 0.45
      C$ 0.33First Quarter
      $ 0.40
      $ 0.33
      C$
        0.47
      C$
        0.38


Holders

As of December 31, 2006, there
were 35,350,413 common shares of no par value issued. As of December 31, 2006,
there were 110 holders of record, which does not include beneficial owners of
our common stock whose shares are held in the names of various dealers, clearing
agencies, banks, brokers and other fiduciaries.

Dividends

We have not declared nor
distributed any cash dividends on our common shares. We do not anticipate paying
any cash dividends on our commons shares in the foreseeable future.

Issuer Purchases of Equity Securities

Our stock repurchase program
expired in May 2006. Before this time, during 2006, we repurchased 100,000
common shares of our stock, at prices ranging from $0.26 to $0.27 per share, for
an aggregate cost of $27,333. During 2005, we repurchased 690,000 common shares
of our stock, at prices ranging from $0.34 to $0.40 per share, for an aggregate
cost of $214,490.

Recent Sales of Unregistered Securities

On January 26, 2007, we issued
  1,500,000 of our common shares to TeleCommunication Systems, Inc. at a deemed
  price of $0.38 per share. These common shares are restricted from resale. The
  issuance of the shares was exempt from registration requirements under Section
  4(2) of the Securities Act, or Regulation D of the

13

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Securities Act, as a transaction by an issuer not involving a
public offering. The shares are offered with piggyback registration rights. If
at any time, we decide to file a registration statement under the Securities
Act, other than a registration on Form S-8, we will provide the opportunity for
the holder of these shares to register them for resale.

We entered into a non-brokered
private placement for a total of 1,166,667 purchased units, consisting of one
common share and one share purchase warrant. On September 26, 2006, we issued
1,166,667 restricted common shares. Depending on the holder, the common shares
and the purchase warrants are exempt from registration under Regulation S and/or
Section 4(2) of the Securities Act and under Regulation D Rule 506.

On June 2, 2004, under a
Regulation S exemption, we issued 1,020,000 common shares valued at $290,700 to
Stockhouse Media Corporation related to the purchase of the StockHouse website
assets.

Securities Authorized for Issuance under Equity
Compensation Plans

The following table provides
information as of December 31, 2006 with respect to our common shares that may
be issued under our 2003 Stock Option Plan upon the exercise of stock options by
our employees, consultants and members of our Board of Directors under all of
our existing equity compensation plans, all of which have been approved by our
shareholders.

|                                                       |                            | Weighted-average     |                          
|------------------------------------------------------ | -------------------------- | -------------------- | -------------------------
|                                                       | Number of securities to be | exercise price of    |                          
|                                                       | issued upon exercise of    | outstanding options, | Number of securities     
|                                                       | outstanding options,       | warrants and rights  | remaining available      
|                                                       | warrants and rights        | (USD)                | for future
      issuance
|Equity compensation plans approved by security holders | 3,884,250                  | $ 0.29               | 391,325                  

14

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Item 6. Managements Discussion and Analysis or Plan of
Operation

The following discussion and
analysis should be read together with our Consolidated Financial Statements and
the Notes to those statements included elsewhere in this Annual Report on Form
10-KSB. This discussion contains forward-looking statements based on our current
expectations, assumptions, estimates and projections about Stockgroup and our
industry. These forward-looking statements relate to future events or our future
financial performance. In some cases, you can identify forward-looking
statements by terminology such as may, should, expects, plans,
anticipates, believes, estimates, predicts, potential or continue or
the negative of these terms or other comparable terminology. These statements
are only predictions and involve known and unknown risks, uncertainties and
other factors, including the risks in the section entitled Risk Factors
Affecting Our Business that may cause our or our industrys actual results,
levels of activity, performance or achievements to be materially different from
any future results, levels of activity, performance or achievements expressed or
implied by these forward-looking statements. We undertake no obligation to
update publicly any forward-looking statements for any reason, even if new
information becomes available or other events occur.

Our consolidated financial
statements are stated in United States dollars and are prepared in accordance
with United States generally accepted accounting principles. In this discussion,
unless otherwise specified, all references to common shares refer to the
common shares in our capital stock and the terms we, us and our mean
Stockgroup Information Systems Inc., a Colorado corporation.

Overview

Our Business

Our services can be separated
into two categories: (i) Advertising Services; and (ii) Licensing of Financial
Software and Content Systems. The basic commonalities between the two categories
are that all of our services relate to the financial markets and all are
currently delivered over the Internet.

Much of our sales are driven by
popular interest in the stock markets. Advertising services are in greater
demand when there is greater overall demand for online advertising across all
industries. Our financial software and content systems services are driven by
our clients customers demand for market information. Our audience levels on
our StockHouse websites are closely correlated with the popularity of the stock
market. We believe that greater audience levels on our StockHouse websites will
translate into larger revenues over the long term.

The Internet is the delivery
vehicle for all of our products. The Internet has not yet reached maturity and
continues to reach new levels of sophistication. Increasing numbers of people
are using the Internet as a source of stock market information. As a result,
financial content is becoming an expected standard offering for media and
financial services companies. Financial software and content systems clients,
including large news websites, brokerages, banks, and other media are
encountering competitive pressures to improve their financial content offerings.
This market expansion has driven demand for our services and has resulted in
continued sales growth.

Our Recently Acquired Business

On January 31, 2007, we closed a
transaction to purchase of a division of TeleCommunication Systems, Inc., known
as the Mobile Finance Division. The acquired business specializes in the sale of
a wireless service delivering financial market data, news, and limited analytics
like charting and portfolio functionality. The acquired business is described in
Item 1. Business, under the heading Business Acquisition  Mobile
Finance Division of TeleCommunication Systems, Inc. The following
discussion does not include any financial results of our recently acquired
business and does not provide forward-looking statements as to the revenues or
expenses, and/or trends related to these flows, that may occur in 2007 related
to this business.

15

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Results of Operations

|                                             | Years Ended
      December 31,
|-------------------------------------------- | ------------------------------
|                                             | 2006                          
|REVENUES                                     |                               
|Advertising Services                         | 55%                           
|Financial Software and Content Systems       | 45%                           
|Revenues                                     | 100%                          
|                                             |                               
|OPERATING COSTS AND EXPENSES (1)             |                               
|Cost of revenues (exclusive of amortization) | 29%                           
|Sales and marketing                          | 39%                           
|Research and development                     | 9%                            
|General and administrative                   | 34%                           
|                                             |                               
|Total operating costs and expenses           | 111%                          
|                                             |                               
|Loss from operations                         | (11%)                         
|                                             |                               
|Interest income (expense)                    | 1%                            
|Other income
      (expense)                 |  %                           
|                                             |                               
|Loss before provision for income taxes       | (10%)                         
|Provision for income taxes                   |  %                           
|                                             |                               
|Net loss and comprehensive loss              | (10%)                         

|(1) | Total operating costs and expenses for the year ended December
        31, 2006 includes stock-based compensation calculated in accordance with
        FAS 123R, of $120,957 or 2% of total revenues. We recorded $41,977 of
        stock-based compensation for the year ended December 31, 2005.
|--- | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

16

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Results of Operations

|Revenues                               |   | Years Ended  |  |   |           |  |   |           | 
|-------------------------------------- | - | ------------ |  | - | --------- |  | - | --------- | 
|                                       |   | December 31, |  |   |           |  |   |           | 
|                                       |   | 2006         |  |   | 2005      |  |   | Change $  | 
|Advertising Services                   | $ | 4,233,702    |  | $ | 3,117,501 |  | $ | 1,116,201 | 
|Financial Software and Content Systems |   | 3,532,426    |  |   | 2,982,027 |  |   | 550,399   | 
|Total revenues                         | $ | 7,766,128    |  | $ | 6,099,528 |  | $ | 1,666,600 | 

Our revenues are derived from
customers located in North America.

Advertising Services

Advertising Services revenues
include advertising on our StockHouse websites and our online disclosure and
advertising specialty services. The Advertising Services product category also
includes fees charged on subscription for our StockStream product. The
StockHouse brand name and the functionality of StockHouse.com and StockHouse.ca
websites, including our StockHouse Blogs, provide us with a link to the
investment community. The StockHouse website allows us to provide a range of
advertising services for our clients where they gain exposure to an affluent
group of consumers. We believe that there continues to be an increased market
size for online advertising in general and that there is a greater demand among
companies for highly targeted advertising to the investment community, which has
enabled us to extract greater returns for our advertising inventory over
time.

Advertising revenues increased
by 36% in 2006 from 2005, and represented 55% of total revenues in 2006 compared
to 51% in 2005. Advertising services revenues have increased as the result of
the mix of additional customers purchasing advertising, and the amount of
advertising purchased by customers. We have continued to target new advertising
markets throughout the year and have signed strategic deals with certain
customers for the delivery of our ad inventory. We provide online advertising
services to a wide range of companies. The revenues are dependent on the stock
market and can fluctuate from period to period dependent on the nature of
services sold. We anticipate that overall our client base will continue to grow
in future periods.

Financial Software and Content Systems

Financial Software and Content
Systems revenues increased by 18% in 2006 from 2005, and represented 45% of
total revenues in 2006 compared to 49% in 2005. The absolute dollar growth is
attributable to additional revenues for new monthly agreements signed in the
period, the renewal of existing agreements and the expansion of both new and
existing services to current clients.

Seasonality

We traditionally see a slow down
in our third quarter of each year and a rebound in our fourth quarter in our
advertising revenues. This is due to activity in the financial markets during
these periods. While we reported more total revenues in the three months ended
September 30, 2006 than in each of the prior two quarters of 2006, we believe
that there is seasonality in our business. We believe that our revenues in the
third quarter of 2006 were higher despite the seasonality as a result of the
continued growth of several of our revenue streams on a quarter-over-quarter
basis resulting from the investment in our business in the first half of fiscal
2006. Our revenues for the fourth quarter of 2006 were higher than any other
quarter in the history of the Company.

17

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Operating Costs and Expenses

|                                   |   | Years Ended  |  |   |           |  |   |           | 
|---------------------------------- | - | ------------ |  | - | --------- |  | - | --------- | 
|                                   |   | December 31, |  |   |           |  |   |           | 
|                                   |   | 2006         |  |   | 2005      |  |   | Change $  | 
|Cost of revenues                   |   |              |  |   |           |  |   |           | 
|(exclusive of amortization)        | $ | 2,258,970    |  | $ | 1,459,319 |  | $ | 799,651   | 
|Sales and marketing                |   | 3,041,307    |  |   | 2,111,451 |  |   | 929,856   | 
|Research and development           |   | 683,776      |  |   | 324,646   |  |   | 359,130   | 
|General and administrative         |   | 2,620,869    |  |   | 2,263,025 |  |   | 357,844   | 
|Total operating costs and expenses | $ | 8,604,922    |  | $ | 6,158,441 |  | $ | 2,446,481 | 

Total operating costs and
expenses increased by 40% in 2006 from 2005, and increased to 111% of total
revenues in 2006 from 101% in 2005. The decrease in operating margin was driven
by the growth of and investment in all departments within our business, many of
which do not generate revenues directly such as research and development and
general and administrative. We expect that total operating expenses will
continue to increase as we expand our business, including our product line,
sales, marketing team and infrastructure.

Cost of revenues

Our cost of revenues includes
costs associated with bandwidth, data feeds and exchange fees and other direct
product costs. Total costs of revenues increased by 55% in 2006 from 2005, and
increased to 29% of total revenues in 2006 from 24% in 2005. Bandwidth costs
increased 19% and data feeds and exchange fees increased by 60% in 2006 over
2005.

Generally, bandwidth costs are
correlated with changes in our traffic levels of StockHouse and the number of
customers to which we license our platform. Increased traffic, as we experienced
in 2006 over 2005, results in additional costs and expanded bandwidth
requirements. Although late in 2006 we achieved some cost savings as the result
of negotiation with suppliers to reduce these costs, the overall costs for 2006
increased as the result of our co-location agreement with a data provider. This
agreement provides for the hosting of a back-up site for our servers. We
anticipate that bandwidth costs will increase in 2007 as we require additional
bandwidth to support our customers growing needs. In addition, the costs
associated with maintaining a back-up site which was built in late 2006, will
also increase.

Costs associated with providing
data feeds and exchange fees to our customers have increased year over year as
data feed providers, including vendors and stock exchanges, have required
purchasers of data to remit new user fees and older data contracts have more
expensive fees. The number of clients to which we provide data has increased in
2006 resulting in additional costs. In 2006, we entered into an agreement with a
data provider for the delivery of market data. We have incurred costs associated
with this agreement in addition to costs from our previous primary provider. We
expect that data feed and exchange fees will increase as our customer base and
their data requirements increase.

Sales and Marketing

Sales and marketing expenses
increased by 44% in 2006 from 2005, and increased to 39% of total revenues in
2006 from 35% in 2005. During 2006, we hired a Vice President of Sales to
oversee our sales organization and began to ramp up our licensing sales team in
New York and our Advertising sales team in Toronto. Administrative costs,
including rent, associated with employees in other jurisdictions have increased
in 2006 as we expand our sales force in North America. In addition, we increased
our spending on marketing activities such as our thought leadership events and
our launch of our latest version of StockStream. Over 80% of the increase in
costs relates to costs associated with payroll and commissions as our headcount
increases and our revenues grow. Stock-based compensation attributable to sales
and marketing employees was $41,547 in 2006 (2005 - $nil).

18

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Research and Development

Research and development expenses
increased by 111% in 2006 from 2005, and increased to 9% of total revenues in
2006 from 5% in 2005. In 2006, the majority of our development efforts related
to the next generation of our portfolio management solution, StockStream, which
we launched at the end of 2006. In addition, we commenced development work
related to the configuration of our new primary data feed, which we anticipate
will improve the quality of our data while reducing costs. In 2005, the majority
of our development efforts related to the first version of StockStream. For both
2006 and 2005, our activities also included adding functionality to our suite of
products. Approximately 80% of research and development costs relate to payroll
related expenses and overhead costs in the support of our development team. We
doubled the size of this team during 2006. Stock-based compensation attributable
to research and development employees was $9,276 in 2006 (2005 - $nil). We
believe that research and development costs will continue to increase in 2007 as
we continue to invest in developing our platform, including the next generation
of our StockHouse websites.

General and Administrative

General and administrative
expenses increased by 16% in 2006 from 2005, and decreased to 34% of total
revenues in 2006 from 37% in 2005. During 2005, the amortization of StockHouse
assets represented 3% of revenue compared with 0% for 2006.

The primary changes in general and administrative expense are
as follows:

- Costs associated with payroll and the payment of consultants range between
  55% and 65% in any given period dependent on the number of employees and the
  use of consultants for special projects. We continued to add headcount during
  2006, many of which were at a higher costs base, which resulted in additional
  costs.
- We believe that costs will continue to increase as we prepare to comply
  with the internal control reporting requirements provided by Section 404 of
  the Sarbanes-Oxley Act.
- Stock-based compensation expense was $70,134 for 2006 and $41,977 for 2005.

Offsetting these expenses were $23,902 of foreign exchange
gains in 2006 compared with $14,601 of foreign exchange gains in 2005.

Interest and other income (expense)

|                                          |   | Years Ended  |   |   |        |   |   |          |  
|----------------------------------------- | - | ------------ | - | - | ------ | - | - | -------- | -
|                                          |   | December 31, |   |   |        |   |   |          |  
|                                          |   | 2006         |   |   | 2005   |   |   | Change $ |  
|Interest income                           | $ | 65,584       |   | $ | 36,347 |   | $ | 29,237   |  
|Interest expense                          |   | (22,452      | ) |   | (7,366 | ) |   | (15,086  | )
|Other income (expense)                    |   | 8,455        |   |   | (1,192 | ) |   | 9,647    |  
|Total interest and other income (expense) | $ | 51,587       |   | $ | 27,789 |   | $ | 23,798   |  

We earn interest income on cash
we hold in term deposits, which are held in major banks. Both the average amount
deposited in term instruments and the average interest rate increased in 2006
over 2005, resulting in the increase in interest income. The majority of
interest expense for both 2006 and 2005 represents interest charged on capital
lease obligations. The increase is the result of the additional capital lease
obligations we entered into during 2006. Other income is non-recurring.

19

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Liquidity and Capital Resources

Cash and cash equivalents totaled
$2,013,075 at December 31, 2006, a decrease of $43,686 from December 31,
2005.

|                                                           |   | Years Ended |  
|---------------------------------------------------------- | - | ----------- | -
|                                                           |   | December 31 |  
|                                                           |   | 2006        |  
|Cash (used in) provided by operating activities            | $ | (289,572    | )
|Cash used in investing activities                          |   | (155,734    | )
|Cash provided by (used in) financing activities            |   | 401,620     |  
|Net (decrease) increase
      in cash and cash equivalents | $ | (43,686     | )

Historically, our principal
source of liquidity has been our operating cash flow, revenues collected in
advance and the extension in timing of the payment of our liabilities. While not
historically large, we received proceeds on the exercise of stock options of
$189,594 in 2006. In 2006, we closed a restricted non-brokered private placement
which contributed $342,602 to our cash and cash equivalents balance.

Operating Activities.During 2006, we used
more cash than we generated from operations primarily resulting from: deferred
revenues of $129,291 resulting from increased deposits received on new sales
activities; accounts payable of $15,845 due to payment timing of invoices;
accrued compensation of $17,989 related to amounts accrued but not yet paid; and
accrued liabilities of $105,730 associated with additional estimated costs in
operating our business. The most significant reason for the swing from 2005 is
the result of our increased net loss position in 2006.

The net increase in accounts
receivable during 2006 was primarily due to higher revenue during the fourth
quarter of 2006 which had not been collected at year end. Days sales outstanding
for December 31, 2006 and 2005 remained constant at 41 days. Our advertising
services revenues generally take over 60 days to collect as our channel partners
remit payment only after they receive payment.

Investing Activities.Net cash of $155,734 used
in 2006, was the result of capital asset purchases in the period, primarily
related to computer software and hardware. In addition, we entered into four
capital lease agreements in 2006 for computer equipment, primarily network
servers for approximately $192,000. The cash impact of the repayment of these
leases is recorded as a financing activity.

Net cash of $166,241 used in
2005, was the result of capital asset purchases in the period, related to
computer equipment, computer software and leasehold improvements for our
Vancouver office. In addition, we started to enter into capital lease agreements
in 2005 for computer equipment, primarily network servers for approximately
$160,000. All of our capital leases have terms which range from two to five
years.

Financing Activities.Net cash provided by
financing activities of $401,620 in 2006, was the result of: net cash of
$342,602 from a restricted non-brokered private placement of 1,166,667 shares
which closed on September 26, 2006, cash received of $189,594 on the exercise of
761,400 stock options, offset by cash paid to repurchase common stock of $27,333
and cash paid on the repayment of capital lease obligations of $103,243.

Net cash used in financing
activities of $169,124 in 2005, was attributable to: the repurchase of our
common stock for cash of $214,490; the issuance of common shares under our stock
option plans for cash of $24,538; and cash received on the exercise of warrants
of $41,920. During 2006, there were no warrants outstanding prior to the
September 2006 private placement, and no warrants were exercised in 2006. We do
not currently have an approved stock repurchase plan. We expect the monies
received from the exercise of stock options will vary as we cannot predict when
our employees will exercise their stock options.

20

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Future Liquidity Requirements

Changes in the demand for our
products and services, and those of our recently acquired business, could impact
our operating cash flow. We believe that our existing cash and cash equivalents
will be sufficient to meet our consolidated cash requirements of the next 12
months of our growth, including but not limited to working capital, capital
expenditures, contractual cash commitments, and the costs associated with the
integration into our business and the related acquisition costs of our recently
acquired business. There is a risk that our current cash and cash equivalents
may not be adequate for our long term needs, in which case we would need to
raise additional financing through equity or debt issues. If required, there is
no assurance that we could raise sufficient additional capital, either
internally or externally, at all, or at viable terms. We do not expect to
declare or pay any cash dividends in the foreseeable future.

In accordance with the purchase
of our recently acquired business, we may be obligated to pay up to $500,000 in
cash. The payment is based on the attainment of certain performance criteria
and, if payable, we would be required to pay the calculated amount on or before
April 1, 2008.

Contractual Obligations

Our cash flow from operations is
dependent on a number of factors, including fluctuations in operating results,
accounts receivable collections and the timing of other payments. The impact of
contractual obligations on our liquidity and capital resources should be
analyzed in conjunction with such factors. The following table summarizes our
contractual obligations as of December 31, 2006. The following excludes any
commitments we have assumed related to our recent business acquisition.

Payments Due by PeriodMoreWithin 1
      
      
      2  3
      
      
      4  5
      
      
      Than 5Total
      
      
      Year
      
      
      Years
      
      
      Years
      
      
      YearsOperating leases
      $
      1,925,200
      
      $
      320,000
      
      $
      600,500
      
      $
      611,200
      
      $
      393,500Capital leases
      
      208,500
      
      
      121,100
      
      
      87,400
      
      
      -
      
      
      -Data provider commitment
      
      1,219,400
      
      
      372,300
      
      
      781,900
      
      
      65,200
      
      
      -Total contractual cash obligations
      $
      3,353,100
      
      $
      813,400
      
      $
      1,469,800
      
      $
      676,400
      
      $
      393,500


During 2006, we entered into two
new office space lease agreements, the most material of which related to the
renewal of our Vancouver lease, which was renewed for an additional 6 years
commencing on April 1, 2007. Our operating leases expire at various times to
March 2013. We also lease certain computer equipment, mainly servers, under
capital leases. Of the total amount of capital lease payments above,
approximately $21,000 relates to interest payments due in future years.

In 2006, we entered into an
agreement with a data provider for delivery of market data used for our
services. The agreement expires in March 2010, with an option to renew for an
additional 12 months at then applicable rates. In addition, we entered into a
hosting and connectivity agreement for our back-up hosting site at an
approximate cost of $13,000 per month.

Accounting For and Disclosure of Guarantees

From time-to-time we enter into
certain types of contracts that require us to indemnify the other parties to the
contract against claims against them by third parties. These contracts primarily
relate to: (i) service agreements, under which we may be required to indemnify
clients for liabilities relating to data transmission and dissemination; (ii)
certain agreements with our officers, directors, employees and third parties,
under which the we may be required to indemnify such persons for liabilities
arising out of their relationship with us or the performance of their duties for
us.

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We regularly enter into service
level agreements with clients, under which we guarantee consistent streaming of
data within certain pre-defined tolerances. The terms of these obligations vary
and are not generally limited in amount, so it is not possible to express the
amount at risk in dollars. Historically, we have not been required to make
significant payments on account of these obligations and accordingly, we have
not recorded any liability for obligations of this nature on our balance sheet
as of December 31, 2006 and December 31, 2005. The Company carries coverage
under certain insurance policies to protect itself in the case of any unexpected
liability; however, this coverage may not be sufficient.

Off-Balance Sheet Arrangements

We did not have any off-balance sheet arrangements as of
December 31, 2006 or December 31, 2005.

Critical Accounting Policies

Our discussion and analysis of
financial position is based on our consolidated financial statements, which are
prepared in accordance with accounting principles generally accepted in the
United States. The preparation of these financial statements requires us to make
certain estimates, judgments and assumptions that affect the reported amounts of
assets, liabilities, revenues and expenses, and related disclosure of contingent
assets and liabilities. We base our estimates on historical experience and
various other assumptions that are believed to be reasonable based on the
information available to us at the time, the results of which form the basis for
making judgments about the carrying values of assets and liabilities that are
not readily identifiable from other sources. Actual results may vary from these
estimates.

An accounting policy is
considered to be critical if it requires an accounting estimate to be made based
on assumptions about matters that are highly uncertain at the time the estimates
are made, and if different estimates that reasonably could have been used, or
changes in the accounting estimates that are reasonably likely to occur, could
materially impact the financial statements. We believe the following critical
accounting policies reflect the more significant estimates and assumptions used
in the preparation of the consolidated financial statements.

- Revenue Recognition
- Allowance for Doubtful Accounts
- Contingencies and Litigation
- Stock-based Compensation
- Business Combinations
- Accounting for Income Taxes

Revenue
Recognition. Our revenues are generated from our Advertising Services
and our Financial Software and Content Systems product lines. Advertising
Services consists of web page tools, client advertising on our
investment-oriented websites, e-mail services, sponsorships, subscriber fees for
the StockStream and MarketStream products and other internet advertising
services. Financial Software and Content Systems services consist of managing,
licensing, and delivering financial market information and are generally sold
under service agreements, which are typically for 24-month terms. These services
are recognized as services are delivered or pro-rata over the term of the
contract. These services are sold either individually or bundled together into
comprehensive programs.

While the majority of our revenue
transactions contain standard business terms and conditions, there are certain
transactions that contain non-standard business terms and conditions. In
addition, we have certain sales transactions that involve multiple element
arrangements (arrangements with more than one deliverable) that may include set
up fees, implementation and content integration. These non-standard contracts
may require additional interpretation or judgment. In order to determine the
appropriate accounting for the recognition of revenues we interpret: (i) if an
arrangement exists; (ii) how the arrangement consideration

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should be allocated among potential multiple elements; (iii)
when to recognize revenue on the deliverables based on when delivery has
occurred; (iv) if the fee is fixed or determinable; and (v) whether we believe
collectibility is reasonably assured at the time of recognition based on our
evaluation of creditworthiness of our customers.

We recognize certain of our
advertising revenues based on the number of page views delivered to a customer.
We obtain these page view reports from our Ad servers, and recognize revenue
based on delivery of these page views in accordance with the pricing set forth
in each agreement. In the event that our customers indicate that a different
page view count has been delivered, it may impact our revenues. Revenue from
subscriber service fees is recognized in the period earned.

Many of our Financial Software
tools revenue contracts contain service level agreements which specify minimum
service standards and remedies, such as billing reductions, for deficiency of
service. In the case of an interruption of service, we make estimates as the
amount of revenue which will require reversal, if any, based specifically on
requests from our customers to compensate them for the service level
deficiency.

Changes in judgments on these
assumptions and estimates could materially impact the timing or amount of
revenue recognition. Payments received in advance of services provided,
including deposits, are recorded as deferred revenue.

Allowance for Doubtful
Accounts.We make judgments as to our ability to collect outstanding
receivables and provide allowances for a portion of accounts receivable when we
have estimated that collection is doubtful. We make provisions based upon a
specific review of all outstanding invoices over 90 days. Provisions are
generally made for all accounts over 90 days, with certain exceptions based on
the nature of the client or where special arrangements are agreed to with the
customer. In some cases an allowance is made before 90 days if we have
reasonable belief that the collection of the account is doubtful.

Contingencies and
Litigation.We evaluate contingent liabilities, including threatened or
pending litigation; costs associated the purchase of trade-marked and
copy-written data; and other matters in accordance with FAS No. 5,
Accounting for Contingencies. We assess the likelihood of any adverse
judgments or outcomes to these contingencies as well as potential ranges of
probable losses. We record reserves accordingly based on the information we have
available at the time of assessment. We currently have a reserve for potential
costs attributable to data feed costs. The advancement in technologies and
increased sophistication of systems is resulting in increased scrutiny of data
and costs. While we attempt to stay current with all vendors, a change in this
estimate may impact cost of revenues. The amounts of the estimated reserve, if
any, may change in future periods due to new developments in each matter or
changes in approach to a matter such as a change in settlement strategy.

Stock-Based Compensation.During the first quarter of 2006, we implemented the following new
critical accounting policy related to our stock-based compensation. We began
accounting for stock options under the provisions of FAS No. 123R
Share-Based Payment (FAS 123R), which requires the recognition of the
fair value of stock-based compensation. Under the fair value recognition
provisions for FAS 123R, stock-based compensation cost is estimated at the grant
date based on the fair value of the awards expected to vest and recognized as
expense ratably over the requisite service period of the award. We have used the
Black-Scholes valuation model to estimate fair value of our stock-based awards
which requires various judgmental assumptions including estimating share price
volatility and expected life. In addition, we consider many factors when
estimating expected life, including types of awards and historical experience.
If any of the assumptions used in the Black-Scholes valuation model change
significantly, stock-based compensation expense may differ materially in the
future from that recorded in the current period.

We adopted FAS 123R using the
modified-prospective method which requires the application of the accounting
standard as of January 1, 2006. In accordance with the modified-prospective
method, the

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consolidated financial statements for the year ended 2005 have
not been restated to reflect, and do not include, the impact of FAS 123R.

Business
Combinations.Business combinations are accounted for in
accordance with FAS No. 141, Business Combinations (FAS 141), which
requires the purchase method of accounting for business combinations be
followed. In accordance with FAS 141, we allocate the purchase price of our
business combination to the tangible assets, liabilities and intangible assets
acquired, including in-process research and development, based on their
estimated fair values. FAS 141 requires that we determine the recognition of
intangible assets based on specified criteria. The excess purchase price over
those fair values, if any, is recorded as goodwill.

We must make valuations that
require significant estimates and assumptions, especially related to intangible
assets. Our estimates of fair value are based upon assumptions we believe to be
reasonable, but which are inherently uncertain and unpredictable, and as a
result, actual results may differ from estimates.

Accounting for Income
Taxes.We account for our income taxes in accordance with FAS No.
109, Accounting for Income Taxes and related interpretations. Even
though we are in a consolidated loss position, determining the provision of
income tax expense, income tax liabilities, and deferred tax assets, including
the valuation allowance related to deferred tax assets, involves judgment. In
addition, tax interpretations, regulations and legislations are continually
changing. Tax exposures can involve complex issues and may require an extended
period to resolve.

Recent pronouncements

In June 2006, the Financial
Accounting Standards Board (FASB) issued FIN No. 48, Accounting for
Uncertainty in Income Taxes  an Interpretation of FASB Statement No. 109
(FIN 48). FIN 48 clarifies the accounting for uncertainty in income taxes
recognized in a Companys financial statements recognized in the financial
statements. This interpretation prescribes a recognition threshold and
measurement attribute for the financial statement recognition and measurement of
a tax position taken or expected to be taken in a tax return. FIN 48 also
provides guidance on de-recognition, measurement, classification, interest and
penalties, accounting in interim periods, disclosure and transition. This
interpretation is effective for us beginning in the first quarter of 2007. We
are currently evaluating the impact of FIN 48 on our financial statements.

In September 2006, the FASB
issued FAS No. 157 Fair Value Measurements, which defines fair value,
establishes a framework for measuring fair value and expands disclosures about
fair value measurements. FAS 157 is effective for financial statements issued
for fiscal years beginning after November 15, 2007, and interim periods within
those fiscal years, and is applicable to us beginning in the first quarter of
2008. We are currently evaluating the impact of FAS 157 on our financial
statements.

In February 2007, the FASB issued
FAS No. 159, The Fair Value Option for Financial Assets and Financial
Liabilities  Including an amendment of FASB Statement No. 115, (FAS 159)
which permits entities to choose to measure many financial instruments and
certain other items at fair value at specified election dates. A business entity
is required to report unrealized gains and losses on items for which the fair
value option has been elected in earnings at each subsequent reporting date.
This statement is expected to expand the use of fair value measurement. FAS 159
is effective for financial statements issued for fiscal years beginning after
November 15, 2007, and interim periods within those fiscal years, and is
applicable to us beginning in the first quarter of 2008. We are currently
evaluating the impact of FAS 159 on our financial statements.

In September 2006, the SEC issued
Staff Accounting Bulletin No. 108, Section N to Topic 1, Considering the
Effects of Prior Year Misstatements when Quantifying Misstatements in Current
Year Financial Statements (SAB 108). SAB 108 requires the evaluation of
prior-year misstatements using both the balance sheet approach and the income
statement approach. In the initial year of adoption, should

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either approach result in quantifying an error that is material
in light of quantitative and qualitative factors, SAB 108 guidance allows for a
one-time cumulative-effect adjustment to beginning retained earnings. In years
subsequent to adoption, previously undetected misstatements deemed material
shall result in the restatement of previously issued financial statements in
accordance with FAS No. 154, Accounting Changes and Error Corrections,a replacement of APB Opinion No. 20,Accounting Changes,and
Statement No. 3,Reporting Accounting Changes in Interim Financial
Statements. SAB 108 is effective for us for the year ended December 31,
2006. The implementation of SAB 108 did not have any impact on our financial
statements.

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Risk Factors Affecting Our Business

We operate in a rapidly
changing environment that involves numerous uncertainties and risks. The
following section describes some, but not all, of these risks and uncertainties
that may adversely affect our business, financial condition or results of
options. This section should be read in conjunction with the audited
consolidated financial statements and the accompanying notes thereto, and other
parts of Managements Discussion and Analysis included in this Annual Report.
Additional factors and uncertainties not currently known to us or that we
currently consider immaterial could also harm our business, operating results
and financial condition.

Risks Related to Our Business

We have a history of operating losses and we cannot
predict if or when we will be profitable.

We have a history of operating
losses in the past years. We currently cannot estimate if we will be profitable
in fiscal 2007 or future fiscal periods. Our acquisition of the Mobile Finance
Division of TeleCommunication Systems, Inc. may increase losses in the short and
medium term as integration costs and possible loss of revenue may occur. In
addition, we have limited operating history upon which an evaluation of our
current business and prospects can be based.

Computer equipment problems and failures could adversely
affect business.

Problems or failures in
Internet-related equipment, including file servers, computers and software,
could result in interruptions or slower response times for our web-based
services, which could reduce the attractiveness of our website and financial
tools to our customers and users. In addition, our customers rely on us for
time-sensitive, up-to-date data that is reliably delivered. Our business is
dependent on our ability to rapidly and efficiently process substantial
quantities of data on our computer-based networks and systems. Should
interruptions continue for an extended period we could lose significant business
and our reputation could be damaged. Equipment problems and failures could
result from a number of causes, including an increase in the number of users of
our website, computer viruses, outside programmers penetrating and disrupting
software systems, human error, fires, floods, power and telecommunications
failures and internal breakdowns. In addition, any disruption in Internet access
and data feeds provided by third parties could have a material and adverse
effect on our business. If we experience a major disaster such as a fire, theft,
or intentional destruction of our computer equipment, we cannot be certain of
the extent of the disruption to our business.

We may have difficulty scaling and adapting our existing
architecture to accommodate increased traffic and technology advances or
changing business requirements, which could lead to the loss of customers and
advertisers, and cause us to incur expenses to make architectural
changes.

To be successful, our network
infrastructure has to perform well and be reliable. The greater the user traffic
and the greater the complexity of our products and services, the more computing
power we will need. We have spent and expect to incur costs related to the
purchase of computer equipment, the upgrade of our technology and network
infrastructure to handle increased traffic on our web sites and our servers, and
to roll out new products and services. This expansion is expensive and complex
and could result in inefficiencies or operational failures. If we do not expand
successfully, or if we experience inefficiencies and operational failures, the
quality of our products and services and our users and customers experience
could decline. This could damage our reputation and lead us to lose current and
potential users, customers and advertisers. Cost increases, loss of traffic or
failure to accommodate new technologies or changing business requirements could
materially harm our operating results and financial condition.

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We may not be able to compete successfully against
current and future competitors.

We currently compete with several
other companies offering similar services. Many of these companies have
significantly greater financial resources, name recognition, and technical and
marketing resources, and virtually all of them are seeking to improve their
technology, products and services. We cannot assure that we will have the
financial resources or the technological expertise to meet this competition
successfully.

We are dependent on activity levels in the securities
market.

Our business is dependent upon
the health of the financial markets as well as the financial health of the
participants in those markets. Some of the financial data and information market
demand is dependent on activity levels in the securities markets while other
demand is static and is not dependent on activity levels. In the event that the
U.S. or international financial markets suffer a prolonged downturn that results
in a significant decline in investor activity, our revenue levels could be
materially adversely affected.

We depend on the ability for wireless devices to access
the Internet.

Historically, wireless carriers
have been relatively slow to implement complex new services such as
Internet-based services. Our future success depends upon a continued increase in
the use of wireless devices to access the Internet and upon the continued
development of wireless devices as a medium for the delivery of network-based
content and services. We have no control over the pace at which wireless
carriers implement these new services. The failure of wireless carriers to
introduce and support services utilizing our products in a timely and effective
manner could reduce sales of our products and services and seriously harm our
business. In addition, mobile handsets change very frequently requiring
continued product design changes and development which may financially impact
our business negatively.

We may be unable to protect the intellectual property
rights upon which our business relies.

We have or may pursue certain
trademarks, and we have brand names, Internet domain names, website designs,
programs and certain subscriber lists which make up the intellectual property we
view as important to our business. It may be possible for a third party to copy
or otherwise obtain or use our intellectual property without authorization or to
develop similar technology independently. There can also be no assurance that
our business activities will not infringe upon the proprietary rights of others,
or that other parties will not assert infringement claims against us, including
claims that by, directly or indirectly, providing hyperlink text links to
websites operated by third parties, we have infringed upon the proprietary
rights of other third parties. Due to the global nature of the Internet, there
can be no assurance that obtaining trademark protection in the United States
will prevent infringements on our trademarks by parties in other countries. We
have not sought or obtained any patents on our proprietary software and data
processing applications.

Litigation may be necessary in
the future to enforce our intellectual property rights, to protect trade secrets
or patents that we may obtain, or to determine the validity and scope of the
proprietary rights of others. Such litigation could result in substantial costs
and diversion of resources and could have a material adverse effect on our
future operating results.

An interruption in the supply of products and services
that we obtain from third parties could cause a decline in sales of the services
from our company, and products we purchase to avoid shortages may become
obsolete before we can use them.

In designing, developing and
supporting the data services of our company, we have relied on wireless
carriers, wireless handheld device manufacturers, content providers, software
providers and companies that manage some of our other services such as our
internal IT operations and customer care services. These suppliers may
experience difficulty in supplying us products or services sufficient to meet
our needs or they

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may terminate or fail to renew contracts for supplying us these
products or services on terms we find acceptable. Any significant interruption
in the supply of any of these products or services could cause a decline in
sales of our services unless and until we are able to replace the functionality
provided by these products and services. We also depend on third parties to
deliver and support reliable products, enhance our current products, develop new
products on a timely and cost-effective basis and respond to emerging industry
standards and other technological changes. In addition, we rely on the ability
of our content providers to continue to provide us with uninterrupted access to
the news and financial information we provide to our customers. The failure of
third parties to meet these criteria, or their refusal or failure to deliver the
information for whatever reason could materially harm our business and would
also affect our ability to sell our products.

Our industry is a rapidly evolving market therefore our
product and service offerings could become obsolete unless we respond
effectively and on a timely basis to rapid technological changes.

The successful execution of our
business strategy is contingent upon wireless network operators launching and
maintaining mobile location services, our ability to create new software and
adapt our existing software products and website to rapidly changing
technologies, industry standards and customer needs. As a result of the
complexities inherent in our product offerings, new technologies may require
long development and testing periods. Additionally, new products may not achieve
market acceptance or our competitors could develop alternative technologies that
gain broader market acceptance than our products. If we are unable to develop
and introduce technologically advanced products that respond to evolving
industry standards and customer needs, or if we are unable to complete the
development and introduction of these products on a timely and cost effective
basis, we will have incurred substantial resources without realizing the
anticipated revenues, which would have an adverse effect on our results of
operations and financial condition.

The applicability to the Internet
of existing laws governing issues such as intellectual property ownership and
infringement, copyright, trademark, trade secret, taxation, obscenity, libel,
employment and personal privacy is uncertain and developing. Any new legislation
or regulation, or the application or interpretation of existing laws, may have a
material adverse effect on our business, results of operations and financial
condition. Additionally, modifications to our business plans or operations to
comply with changing regulations or certain actions taken by regulatory
authorities may increase our costs of providing our product and service
offerings and materially adversely affect our financial condition.

If mobile equipment manufacturers do not overcome
capacity, technology and equipment limitations, we may not be able to sell our
products and services.

The wireless technology currently
in use by most wireless carriers has limited bandwidth, which restricts network
capacity to deliver bandwidth-intensive applications like data services to a
large number of users. Because of capacity limitations, wireless users may not
be able to connect to their network when they wish to, and the connection is
likely to be slow, especially when receiving data transmissions. Data services
also may be more expensive than users are willing to pay. To overcome these
obstacles, wireless equipment manufacturers will need to develop new technology,
standards, equipment and devices that are capable of providing higher bandwidth
services at lower cost. We cannot be sure that manufacturers will be able to
develop technology and equipment that reliably delivers large quantities of data
at a reasonable price. If more capacity is not added, a sufficient market for
our products and services is not likely to develop or be sustained and sales of
our products and services would decline and our business would suffer.

Some mobile operators charge fees for data
usage.

Our wireless service is a live
streaming service which uses continued bandwidth and wireless usage charges. In
the event that some wireless providers do not provide unlimited data at a flat
rate, this may limit our market acceptance of our product due to the cost of
data service when used on a sustained basis. Some

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wireless providers who do offer flat rates do not allow the
continuous data stream functionality on Blackberrys® to be activated which may
limit our sales.

We depend on key personnel and expect to hire additional
personnel.

We depend on the continued
contributions of our executive officers, sales, technical and other critical
personnel to execute our business plan. Our future success will also depend in a
large part upon our ability to attract and retain highly skilled management,
technical engineers, sales and marketing personnel, and finance personnel.
Competition for such personnel is intense and there can be no assurance that we
will be able to attract and retain such personnel. The loss of the services of
any key personnel, the inability to attract or retain qualified personnel in the
future, or any delays in hiring required personnel, particularly technical
engineers and sales personnel, could have a material adverse affect on our
business, results of operations and financial condition.

We are also dependent upon the
personnel acquired through our acquisition of Mobile Finance especially in the
short term to transfer business knowledge. In the event that we lose any or all
of these employees there may be a significant impact on our business in sales,
cost, and customer service.

We may fail to support our anticipated growth in
operations which could reduce demand for our services and materially adversely
affect our revenue.

Our business strategy is based on
the assumption that the number of customers, the amount of information they want
to receive and the number of services we offer will all increase. We must
continue to develop and expand our systems and operations to accommodate this
growth. In addition, information technology has dropped dramatically in price
over the past years and is expected to continue to drop, such that more
customers will be required to maintain the same levels of revenue. The expansion
and adaptation of our systems operations requires substantial financial,
operational and management resources. Due to the limited deployment of our
services to date, the ability of our systems and operations to connect and
manage a substantially larger number of customers while maintaining superior
performance is unknown. Any failure on our part to develop and maintain our
wireless data services as we experience rapid growth could significantly reduce
demand for our services and materially adversely affect our revenue.

We may be held liable for online information or services
provided by third parties or us.

Because materials may be
downloaded by the public on Internet services offered by us or the Internet
access providers with whom we have relationships, and because third party
information may be posted by third parties on our website through discussion
forums and otherwise, there is the potential that claims will be made against us
for defamation, negligence, copyright or trademark infringement or other
theories. Such claims have been brought against providers of online services in
the past. To date we have been named in at lease one lawsuit in which defamation
is alleged to have occurred on our Internet discussion forum called Bull Boards.
The imposition of liability based on such claims could materially and adversely
affect us.

Even to the extent such claims do
not result in liability, we could incur significant costs in investigating and
defending against such claims. The imposition on us of potential liability for
information or services carried on or disseminated through our website could
require implementation of measures to reduce exposure to such liability, which
may require the expenditure of substantial resources and limit the
attractiveness of services to members and users.

We post news clippings from other
news websites on the StockHouse and SmallCapCenter websites with links to the
source site. Most publishers currently encourage this practice, although certain
publishers have requested that we cease posting their stories. We have complied
with their request in each case. To the extent that a large majority of news
publishers prohibit posting of their stories on our websites or begin

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charging royalty fees for such stories, our website traffic
could decrease or our costs could increase, thereby adversely impacting our
profitability.

We generally purchase data
including trademarked and copy-written data that may or may not be under
contract. The advancement in technologies and increased sophistication of
systems is resulting in increased scrutiny of data and costs. We attempt to stay
current with all vendors however the timing of identifying the vendors and costs
of data may cause significant increase in cost of rates.

Our general liability insurance
will not cover all potential claims to which we are exposed or may not be
adequate to indemnify us for all liability that may be imposed. Any imposition
of liability that is not covered by insurance or is in excess of insurance
coverage could have a material adverse effect on our business, results of
operations and financial condition.

We may pursue strategic acquisitions and investments that
could have an adverse effect on our business if they are
unsuccessful.

As part of our business strategy,
we have acquired companies and may continue to acquire companies, technologies
and product lines to complement our internally developed products. In January
2007, we acquired the Mobile Finance Division of TeleCommunication Systems Inc.
It is possible that the contemplated benefits of this acquisition or any future
acquisitions may not materialize within the time periods or to the extent
anticipated. Critical to the success of this strategy in the future and,
ultimately our business as a whole, is the orderly, effective integration of
acquired businesses, technologies, product lines and employees into our
organization. If this integration is unsuccessful, our business will suffer.
There is also the risk that our valuation assumptions and models for the
acquired product or business may be overly optimistic or inaccurate if customers
do not demand the acquired companys products to the extent we expect, the
technology does not function as we expect or the technology we acquire is the
subject of infringement or trade secret claims by third parties.

Because our product and service offerings are sold
internationally, we are subject to risks of conducting business in foreign
countries.

In 2006, customers, primarily in
North America, purchased our products and in 2007 customers in North America,
Europe and Australia will purchase our products. In addition, a portion of the
revenue historically generated by our company has typically been generated
outside the United States. We believe our revenue will be increasingly dependent
on business in foreign countries, and we will be subject to the social,
political and economic risks of conducting business in foreign countries,
including:

- inability to adapt our products and services to local business practices,
  language, customs and mobile user preferences;
- costs of adapting our product and service offerings for foreign markets;
- inability to locate qualified local employees, partners and suppliers;
- reduced protection of intellectual property rights;
- the potential burdens of complying with a variety of U.S. and foreign
  laws, trade standards and regulatory requirements, including the regulation of
  wireless communications and the Internet and uncertainty regarding liability
  for information retrieved and replicated in foreign countries;
- general geopolitical risks, such as political and economic instability and
  changes in diplomatic and trade relations; and
- unpredictable fluctuations in currency exchange rates.

Any of the foregoing risks could
have a material adverse effect on our business by diverting resources toward
addressing them or by reducing or eliminating sales in such foreign countries.

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Our legacy pager business is deteriorating
rapidly.

Through the purchase of MFD, as
described in Item 1. Business, we acquired their legacy business of
providing financial information wirelessly to pager devices and represents the
majority of the revenue of the acquired company. Most customers have been with
the company for years but are changing technology from pagers to other types of
wireless devices. The company has seen a rapid loss of subscribers for its pager
service and there can be no assurance that the company can convert the
subscribers to its wireless offering for Blackberry® or other mobile platforms
and devices. In addition, telecommunication companies are shutting down their
pager networks and rendering the service inoperatable. We are at risk that if
the countries we operate in shut down their page network we would be unable to
service our pager customers.

Involvement in Certain Legal Proceedings.

We are involved in various legal
matters which arise from time-to-time in the ordinary course of business, none
of which we believe is material to our results of operations, liquidity or
financial condition at this time. We cannot reasonably estimate at this time
whether a monetary settlement will be reached or predict the ultimate resolution
of these legal matters.

Risks Related to Ownership of Our Common Stock

We are significantly influenced by our officers,
directors and entities affiliated with them.

In the aggregate, beneficial
ownership of our shares by our officers, directors and management represents
approximately 20% of issued and outstanding shares of our common stock at
February 28, 2007. These shareholders, if acting together, will be able to
influence significantly all matters requiring approval by shareholders,
including the election of directors and the approval of mergers or other
business combinations transactions.

Trading of our stock may be restricted by the SECs penny
stock regulations, which may limit a shareholders ability to buy and sell our
stock.

The Securities and Exchange
Commission (the SEC) has adopted regulations which generally define penny
stock to be any equity security that has a market price (as defined) less than
$5.00 per share or an exercise price of less than $5.00 per share, subject to
certain exceptions. Our securities are covered by the penny stock rules, which
impose additional sales practice requirements on broker-dealers who sell to
persons other than established customers and accredited investors. The term
accredited investor refers generally to institutions with assets in excess of
$5,000,000 or individuals with a net worth in excess of $1,000,000 or annual
income exceeding $200,000 or $300,000 jointly with their spouse. The penny stock
rules require a broker-dealer, prior to a transaction in a penny stock not
otherwise exempt from the rules, to deliver a standardized risk disclosure
document in a form prepared by the SEC which provides information about penny
stocks and the nature and level of risks in the penny stock market. The
broker-dealer also must provide the customer with current bid and offer
quotations for the penny stock, the compensation of the broker-dealer and its
salesperson in the transaction and monthly account statements showing the market
value of each penny stock held in the customers account. The bid and offer
quotations, and the broker-dealer and salesperson compensation information, must
be given to the customer orally or in writing prior to effecting the transaction
and must be given to the customer in writing before or with the customers
confirmation. In addition, the penny stock rules require that prior to a
transaction in a penny stock not otherwise exempt from these rules; the
broker-dealer must make a special written determination that the penny stock is
a suitable investment for the purchaser and receive the purchasers written
agreement to the transaction. These disclosure requirements may have the effect
of reducing the level of trading activity in the secondary market for the stock
that is subject to these penny stock rules. Consequently, these penny stock

31

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rules may affect the ability of broker-dealers to trade our
securities. We believe that the penny stock rules discourage investor interest
in and limit the marketability of our common stock.

Future issuances of shares may adversely impact the value
of our stock.

We may attempt to raise
additional capital through the sale of common stock in the future. Future
issuances of common stock may dilute your position in us.

Our stock price is vulnerable to buying and selling
pressures.

As there is a limited market for
our common stock, there may be considerable volatility in our stock price due to
selling and buying pressures. Future sales of shares by our existing or future
shareholders could cause the market price of our common stock to decline. At
February 28, 2007, there were 36,971,788 issued and outstanding shares of our
common stock; however, a portion of these shares are subject to trading
restrictions in the United States.

Our Board of Directors may authorize and issue preferred
shares.

Our Board of Directors has the
authority to issue preferred shares with rights, preferences and/or privileges
senior to or on parity with the rights of the holders of common stock. The
potential consequences to our investors include a loss of perceived value of the
stock in the market and a loss of future earnings and dividends, if and when
dividends are declared. Because some of our officers and directors are located
in non-U.S. jurisdictions, you may have no effective recourse against the
management for misconduct and may not be able to enforce judgment and civil
liabilities against our officers, directors, experts and agents.

Some of our directors and
officers are nationals and/or residents of countries other than the United
States, and all or a substantial portion of their assets are located outside the
United States. As a result, it may be difficult for investors to enforce within
the United States any judgments obtained against our officers or directors,
including judgments predicated upon the civil liability provisions of the
securities laws of the United States or any U.S. state.

32

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Item 7. Financial Statements

|Report
      of Deloitte & Touche LLP, Independent Registered Chartered Accountants                        | 34
|---------------------------------------------------------------------------------------------------------- | --
|Report
      of Ernst & Young LLP, Independent Registered Public Accounting Firm                           | 35
|Consolidated
      Balance Sheets as of December 31, 2006 and 2005                                         | 36
|Consolidated
      Statements of Operations for the Years Ended December 31, 2006 and 2005                 | 37
|Consolidated
      Statements of Shareholders Equity for the Years Ended December 31, 2006
      and 2005 | 38
|Consolidated
      Statements of Cash Flows for the Years Ended December 31, 2006 and 2005                 | 39
|Notes
      to Consolidated Financial Statements                                                           | 40

33

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REPORT OF INDEPENDENT REGISTERED CHARTERED
ACCOUNTANTS

To the Board of Directors and Shareholders of Stockgroup
Information Systems Inc.

We have audited the accompanying
  consolidated balance sheet of Stockgroup Information Systems Inc. and subsidiaries
  (the Company) as of December 31, 2006, and the related consolidated
  statements of operations, shareholders' equity, and cash flows 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 the standards of the Public Company Accounting Oversight Board
(United States). Those standards require that we plan and perform the audit to
obtain reasonable assurance about whether the financial statements are free of
material misstatement. The Company is not required to have, nor were we engaged
to perform, an audit of its internal control over financial reporting. Our audit
included consideration of internal control over financial reporting as a basis
for designing audit procedures that are appropriate in the circumstances, but
not for the purpose of expressing an opinion on the effectiveness of the
Companys internal control over financial reporting. Accordingly, we express no
such opinion. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements, assessing the
accounting principles used and significant estimates made by management, as well
as evaluating the overall financial statement presentation. We believe that our
audit provides a reasonable basis for our opinion.

In our opinion, such consolidated
financial statements present fairly, in all material respects, the financial
position of the Company as of December 31, 2006, and the results of its
operations and its cash flows for the year then ended in conformity with
accounting principles generally accepted in the United States of America.

As discussed in Note 1 to the consolidated
  financial statements, the Company adopted Statement of Financial Accounting
  Standards No. 123(R), Share-Based Payments, effective January 1, 2006.

/s/ Deloitte & Touche LLP

Independent Registered Chartered Accountants

Vancouver, Canada 
  March 12, 2007

34

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REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING
FIRM

To the Board of Directors and Shareholders ofStockgroup
Information Systems Inc.

We have audited the accompanying
consolidated balance sheet of Stockgroup Information Systems Inc.(and
subsidiaries) as of December 31, 2005, and the related consolidated statements
of operations, stockholders' equity, and cash flows 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 the standards of the Public Company Accounting Oversight Board
(United States). Those standards require that we plan and perform the audit to
obtain reasonable assurance about whether the financial statements are free of
material misstatement. We were not engaged to perform an audit on the Companys
internal control over financial reporting. Our audit included consideration of
internal control over financial reporting as a basis for designing audit
procedures that are appropriate in the circumstances, but not for the purpose of
expressing an opinion on the effectiveness of the Companys internal control
over financial reporting. Accordingly, we express no such opinion. An audit also
includes examining, on a test basis, evidence supporting the amounts and
disclosures in the financial statements, assessing the accounting principles
used and significant estimates made by management, as well as evaluating the
overall financial statement presentation. We believe that our audit provides a
reasonable basis for our opinion.

In our opinion, the financial
statements referred to above present fairly, in all material respects, the
consolidated financial position of Stockgroup Information Systems Inc.(and subsidiaries) as of December 31, 2005, and the results of its
operations and its cash flows for the year then ended in conformity with U.S.
generally accepted accounting principles.

|Vancouver, Canada | /s/ Ernst & Young LLP
|----------------- | ---------------------
|February 27, 2006 | Chartered Accountants

35

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Stockgroup Information Systems Inc. CONSOLIDATED BALANCE
SHEETS(Expressed in U.S. Dollars, except number of common
shares)

|                                                                    |   | December 31, |  
|------------------------------------------------------------------- | - | ------------ | -
|                                                                    |   | 2006         |  
|ASSETS                                                              |   |              |  
|Current Assets:                                                     |   |              |  
|Cash and cash
      equivalents                                     | $ | 2,013,075    |  
|Accounts receivable, net (note 1)                                   |   | 814,047      |  
|Prepaid and other
      current assets                              |   | 185,719      |  
|TOTAL CURRENT ASSETS                                                |   | 3,012,841    |  
|                                                                    |   |              |  
|Property and equipment, net (note 2)                                |   | 447,411      |  
|TOTAL ASSETS                                                        | $ | 3,460,252    |  
|                                                                    |   |              |  
|                                                                    |   |              |  
|LIABILITIES AND SHAREHOLDERS EQUITY                                |   |              |  
|                                                                    |   |              |  
|Current Liabilities:                                                |   |              |  
|Accounts payable                                                    | $ | 425,816      |  
|Accrued liabilities                                                 |   | 472,522      |  
|Accrued compensation                                                |   | 175,559      |  
|Deferred revenues                                                   |   | 810,273      |  
|Capital lease
      obligations (note 7)                            |   | 130,380      |  
|TOTAL CURRENT LIABILITIES                                           |   | 2,014,550    |  
|                                                                    |   |              |  
|Long-term capital lease obligations (note 7)                        |   | 97,205       |  
|Long-term deferred revenues                                         |   | 64,936       |  
|TOTAL LIABILITIES                                                   |   | 2,176,691    |  
|                                                                    |   |              |  
|Commitments and contingencies (note 7)                              |   |              |  
|Shareholders Equity(note 3):                                       |   |              |  
|Common stock, no par value: authorized 75,000,000; issued
      and |   |              |  
|outstanding 35,350,413 and
      33,522,346                         |   | 13,793,188   |  
|Additional paid-in capital                                          |   | 3,394,390    |  
|Accumulated deficit                                                 |   | (15,904,017  | )
|TOTAL SHAREHOLDERS EQUITY                                          |   | 1,283,561    |  
|TOTAL LIABILITIES AND SHAREHOLDERS EQUITY                          | $ | 3,460,252    |  

See accompanying notes to Consolidated Financial Statements

36

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Stockgroup Information Systems Inc. CONSOLIDATED
STATEMENTS OF OPERATIONS(Expressed in U.S. Dollars, except number of
common shares)

|                                                                           |   | December 31, |  
|-------------------------------------------------------------------------- | - | ------------ | -
|                                                                           |   | 2006         |  
|                                                                           |   |              |  
|REVENUES                                                                   |   |              |  
|Advertising Services                                                       | $ | 4,233,702    |  
|Financial Software and Content
      Systems                               |   | 3,532,426    |  
|TOTAL REVENUES                                                             |   | 7,766,128    |  
|OPERATING COSTS AND EXPENSES                                               |   |              |  
|Cost of revenues (exclusive of amortization)                               |   | 2,258,970    |  
|Sales and marketing                                                        |   | 3,041,307    |  
|Research and development                                                   |   | 683,776      |  
|General and administrative                                                 |   | 2,620,869    |  
|TOTAL OPERATING EXPENSES                                                   |   | 8,604,922    |  
|                                                                           |   |              |  
|Loss from operations                                                       |   | (838,794     | )
|Interest and other income (expense), net                                   |   | 51,587       |  
|Loss before provision for income taxes                                     |   | (787,207     | )
|Provision for income taxes (note 6)                                        |   | 3,990        |  
|Net loss and comprehensive loss                                            | $ | (791,197     | )
|                                                                           |   |              |  
|Net loss per common share:                                                 |   |              |  
|Basic and diluted                                                          | $ | (0.02        | )
|                                                                           |   |              |  
|Common shares used in computing basic and
      diluted net loss per share |   | 33,910,350   |  

See accompanying notes to Consolidated Financial Statements

37

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Stockgroup Information Systems Inc. CONSOLIDATED
STATEMENTS OF SHAREHOLDERS EQUITY(Expressed in U.S. Dollars, except
number of common shares)

TotalCommon
    
    
    Common
    
    
    Additional
    
    
    Accumulated
    
    
    Shareholdersstock
    
    
    stock
    
    
    paid-in capital
    
    
    deficit
    
    
    Equity# of
      shares
    
    
    $
    
    
    $
    
    
    $
    
    
    $Balance at December 31,
      2004
    
    33,931,221
    
    
    13,568,499
    
    
    3,099,314
    
    
    (15,054,230
    )
    
    1,613,583Issuance of common stockpursuant to
      exercise ofemployee stock options
    
    136,125
    
    
    24,538
    
    
    
    
    
    
    
    
    24,538Warrants exercised
    
    145,000
    
    
    41,920
    
    
    
    
    
    
    
    
    41,920Repurchase of common shares
    
    (690,000
    )
    
    (275,616
    )
    
    61,126
    
    
    
    
    
    (214,490
    )Stock based compensationexpense
    
    
    
    
    
    
    
    41,977
    
    
    
    
    
    41,977Net loss and comprehensive loss
    
    
    
    
    
    
    
    
    
    
    (58,590
    )
    
    (58,590
    )Balance at December 31, 2005
    
    33,522,346
    
    
    13,359,341
    
    
    3,202,417
    
    
    (15,112,820
    )
    
    1,448,938Issuance of common stockpursuant to
      exercise ofemployee stock options
    
    761,400
    
    
    199,751
    
    
    (10,157
    )
    
    
    
    
    189,594Repurchase of common shares
    
    (100,000
    )
    
    (39,904
    )
    
    12,571
    
    
    
    
    
    (27,333
    )Private placement transaction common shares
      and warrants
    
    1,166,667
    
    
    274,000
    
    
    68,602
    
    
    
    
    
    342,602Stock based compensationexpense
    
    
    
    
    
    
    
    120,957
    
    
    
    
    
    120,957Net
      loss and comprehensive loss
    
    
    
    
    
    
    
    
    
    
    (791,197
    )
    
    (791,197
    )Balance at December 31, 2006
    
    35,350,413
    
    
    13,793,188
    
    
    3,394,390
    
    
    (15,904,017
    )
    
    1,283,561


See accompanying notes to Consolidated Financial Statements

38

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Stockgroup Information Systems Inc. 
  CONSOLIDATED STATEMENTS OF CASH FLOWS(Expressed in U.S. Dollars)

|                                                                             |   | December 31, |  
|---------------------------------------------------------------------------- | - | ------------ | -
|                                                                             |   | 2006         |  
|                                                                             |   |              |  
|Operating activities:                                                        |   |              |  
|Net loss                                                                     | $ | (791,197     | )
|Adjustments to reconcile net loss to net
      cash (used in) provided by    |   |              |  
|operating activities:                                                        |   |              |  
|Amortization of property and equipment                                       |   | 217,102      |  
|Stock-based
      compensation expense                                       |   | 120,957      |  
|Changes in operating assets and
      liabilities:                           |   |              |  
|Accounts receivable, net                                                     |   | (53,753      | )
|Prepaid and other
      current assets                                       |   | (51,536      | )
|Accounts payable                                                             |   | 15,845       |  
|Accrued liabilities                                                          |   | 105,730      |  
|Accrued compensation                                                         |   | 17,989       |  
|Deferred revenues                                                            |   | 129,291      |  
|NET CASH (USED IN) PROVIDED BY OPERATING ACTIVITIES                          |   | (289,572     | )
|                                                                             |   |              |  
|Investing activities:                                                        |   |              |  
|Purchases of property
      and equipment                                    |   | (155,734     | )
|NET CASH USED IN INVESTING ACTIVITIES                                        |   | (155,734     | )
|                                                                             |   |              |  
|Financing activities:                                                        |   |              |  
|Repurchase of common
      stock                                             |   | (27,333      | )
|Proceeds on exercise of warrants                                             |   |             |  
|Proceeds on exercise of
      stock options                                  |   | 189,594      |  
|Proceeds on private placement, net of
      costs                            |   | 342,602      |  
|Repayment of capital
      lease obligation                                  |   | (103,243     | )
|NET CASH PROVIDED BY (USED IN) FINANCING ACTIVITIES                          |   | 401,620      |  
|                                                                             |   |              |  
|Net (decrease) increase in cash and cash equivalents                         |   | (43,686      | )
|Cash and cash equivalents, beginning of the
      period                     |   | 2,056,761    |  
|Cash and cash equivalents, end of the period                                 | $ | 2,013,075    |  
|                                                                             |   |              |  
|Supplemental Cash Flow Information                                           |   |              |  
|Interest paid                                                                |   | 23,755       |  
|Taxes paid                                                                   |   | 13,987       |  
|Assets acquired through capital lease
      transactions                     |   | 191,947      |  
|Value of warrants issued in connection with private
      placement (note 3) |   | 93,474       |  

See accompanying notes to Consolidated Financial Statements

39

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|Stockgroup Information Systems Inc.       
|------------------------------------------
|Notes to Consolidated Financial Statements
|December 31, 2006                         
|                                          

1. Organization and Summary of Significant Accounting
Policies

Organization and Basis of Presentation

Stockgroup Information Systems
Inc. (the Company or Stockgroup) is a financial media company that provides
various financial Internet solutions, tools, content and services to financial
institutions, media publishers, public companies, and advertisers. The Company
also helps the retail investor create and manage their personal wealth by
delivering a consolidated source of financial data streams, news, portfolio
management, analysis tools and a forum for capturing user-generated content. The
Company also operates its StockHouse.com and StockHouse.ca websites, where it
provides its advertising services.

The consolidated financial
statements have been prepared in accordance with United States (U.S.)
generally accepted accounting principles (GAAP). The accompanying financial
statements include the accounts of the Company and its subsidiaries. All
intercompany accounts and transactions have been eliminated. All information is
stated in U.S. dollars unless otherwise noted.

The Company was incorporated
under the laws of Colorado on December 6, 1994.

Use of estimates

The preparation of financial
statements in conformity with U.S. GAAP requires the Company to make estimates
and assumptions that affect the amounts reported in the financial statements and
accompanying notes. Estimates are used for, but are not limited to, revenue
recognition, accrued liabilities, contingencies and litigation, allowances for
doubtful accounts, stock-based compensation and income and other taxes. Actual
results could differ from those estimates.

Foreign Currency

The reporting and functional
currency of the Company and its subsidiaries is the U.S. dollar. Foreign
currency monetary assets and liabilities are translated into U.S. dollars at the
exchange rate prevailing at the balance sheet date; non monetary assets
denominated in foreign currencies are translated using the rate of exchange at
the transaction date; and foreign exchange gains and losses are included in the
determination of earnings.

Revenue Recognition

The Company generates its
revenues from two primary sources: Advertising Services and Financial Software
and Content Systems. The Company records its revenues in accordance with the
Securities and Exchange Commission (SEC) Staff Accounting Bulletin No. 104,
Revenue Recognition (SAB 104) and the Financial Accounting Standards
Board (FASB) Emerging Issues Task Force (EITF) Issue No. 00-21, Revenue
Arrangements with Multiple Deliverables. In all cases, revenue is
recognized only when the price is fixed or determinable, persuasive evidence of
an arrangement exists, the service is performed, and collectibility of the
resulting receivable is reasonably assured.

Advertising Services consist of
advertising on the Companys investment-orientated websites, the Companys
client direct advertising solutions portfolio, e-mail services, and
subscriptions to the Companys online streaming products. Internet advertising
services are sold either individually or bundled together into comprehensive
programs.

40

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A portion of advertising revenues
on the Companys investment-oriented websites consists of continuous or rotating
advertisements on various specialized web pages hosted by StockHouse.com,
StockHouse.ca, SmallCapCenter.com and InvestorMarketPlace.com. Delivery of these
profiles is based either on a certain number of days the advertising appears on
the web pages or a certain quantity of impressions, profile views or
click-throughs, depending on the agreement. An impression is a single instance
of an Internet user viewing the page that contains the clients name and/or
logo. A profile view is a single instance of an Internet user clicking on the
clients profile link. A click-through is a single instance of an Internet user
clicking on the clients profile and being redirected to the clients website.
Revenue is recognized on such advertising programs based on delivery, and
delivery organized and measured to equal the agreed monthly fee in each month
the customer is profiled on the web pages.

E-mail services are mailings to a
targeted list of e-mail addresses, with delivery consisting solely of
transmitting the mailing to the e-mail targets. Each transmittal is called a
flight. E-mail services may be bought on a per-flight basis, for which revenue
is recorded when the flight occurs, or on a fixed-fee monthly basis in which the
client receives access to a fixed number of flights per month. The Company
records the revenue on the fixed fee monthly e-mail services on a pro-rata basis
over the term of the agreement.

Internet advertising on the
Companys websites is delivered, and revenue is earned, on a page-view basis, as
this term is defined above. Advertising insertion orders are obtained from
customers and advertisements are delivered in a set rotation on the Companys
Stockhouse websites. At the end of certain specified period, usually monthly,
the customer is given a page-view delivery report and billed according to the
number of page-views delivered.

Subscriptions to StockStream and
MarketStream and its real-time streaming data information are sold online via
our websites. Subscriptions are one month in duration and auto-renew unless
cancelled by the subscriber. Revenue from subscriber services is recognized in
the period earned.

Financial Software and Content
Systems services consist of managing, licensing, and delivering financial market
information. Examples of financial market information are real time stock
quotes, stock charts, public company profiles, investment information and
technical stock analysis. Under these revenue contracts, the Company normally
charges customers for set up fees, periodic maintenance fees, and the
contractual monthly licensing fees for ongoing use of financial tools and
content. These revenues are recognized ratably over the contract term, which is
typically 24 months, beginning when the product is activated. Revenue from
activation fees is recognized ratably over the determinable portion of the
customer contract.

All Financial Software and
Content Systems services are delivered via the Internet from the Companys Web
servers to the clients websites on a continuous real time basis. Revenue begins
to be earned on the day the data feed is activated and begins to deliver content
to the client site. Revenue is earned on a fixed monthly fee, with some clients
paying a page-view overage fee over a certain number of page-views. The
page-view overages, if any, are billed to the client and recorded on a monthly
basis as they occur and usually represent a small portion of the overall monthly
fee from each customer. Usage usually refers to website page views and real-time
quotes.

This revenue category also
includes Investor relations webpage services, sold under the name IntegrateIR,
which are delivered to the clients investor relations page of their website via
an Internet data feed, in real time and on a continuous basis for an agreed
period of time, normally 12 months. Revenue is recognized ratably, according to
the agreed fixed rate, on a monthly basis once the IntegrateIR data feed has
been activated. Setup fees, if any, are recognized ratably over the initial term
of the agreement, on a monthly basis.

Deferred revenues represent
amounts for which the Company has received deposits which are to be applied to
the end of the contract. The earnings process has not yet been completed for
those payments. Deferred revenues primarily related to our license agreements,
which are amortized ratably over the period of the contract and certain internet
services for which the Company holds deposits.

41

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Cost of Revenues

Cost of revenues is recorded if
the cost relates directly to the services the Company sells or to its
revenue-generating websites, namely StockHouse.com, StockHouse.ca,
SmallCapCenter.com, and InvestorMarketPlace.com. Cost of revenues consist of
subscription fees for access to data feeds of financial and business databases,
Internet bandwidth, and direct advertising purchases. Data feeds are a key
component of many of the Companys Financial Software and Content Systems
services, as well as a key input into its revenue-generating websites. Bandwidth
is consumed by the Companys revenue-generating websites, by its Financial
Software and Content Systems services, by its IntegrateIR service, and by its
e-mail mailing services. Direct advertising purchases relate to Internet
advertising purchases for the purpose of promoting a client or clients feature
on one of the Companys websites.

Fair value of financial instruments

The Companys financial
instruments consist of cash and cash equivalents, accounts receivable, accounts
payable and capital lease obligations. Unless otherwise stated the fair value of
the financial instruments approximates their carrying value.

Cash and Cash Equivalents

Cash and cash equivalents, which
consist of cash and short-term deposits with original maturities of ninety days
or less, are recorded at fair value. The Company places its cash equivalents
with high quality financial institutions. Cash equivalents at December 31, 2006
and 2005, respectively, are U.S. denominated term deposits of $1,400,000 and
$1,600,000.

Accounts Receivable

Accounts receivable are stated
net of allowance for doubtful accounts of $97,710 at December 31, 2006 and
$79,982 at December 31, 2005. The Company makes judgments as to its ability to
collect outstanding receivables and provides allowances for a portion of
accounts receivable when collection becomes doubtful. Provisions are made based
upon a specific review of all outstanding invoices over 90 days. Provisions are
generally made for all accounts over 90 days, with certain exceptions based on
the nature of the client or where special arrangements are agreed to with the
customer. In some cases an allowance is made before 90 days if the Company has a
reasonable belief that the collection of the account is doubtful. Invoices which
are over 120 days are generally sent to collections.

The Company is subject to credit
risk related to its account receivables. The Company does not have extensive
credit evaluations and for some of its smaller customers, the Company requires
two months of deposit as collateral. During 2006, one customer accounted for 10%
of outstanding trade receivables, and during 2005, a different customer
accounted for 14% of outstanding trade receivables.

Property and Equipment

Property and equipment are
carried at cost less accumulated amortization. Office equipment, computer
software and equipment are amortized using the straight-line method over the
assets estimated useful lives with range from 1 to 5 years. Capital leases of
computer hardware are amortized over the term of the lease on a straight-line
basis. Leasehold improvements are amortized over the shorter of the asset life
or the remaining lease term on a straight-line basis.

Leases

Leases are classified as either
capital or operating leases. Leases which transfer substantially all the
benefits and risks of ownership of the property to the Company are accounted for
as capital leases. Capital lease obligations reflect the present value of future
minimum lease payments, discounted at the appropriate

42

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interest rate. All other leases are accounted for as operating
leases and rental payments are expensed as incurred.

Software development costs

The Company applies FAS No. 86,
Accounting for the Costs of Computer Software to Be Sold, Leased, or
Otherwise Marketed (FAS 86) to software developed internally, acquired in
business acquisitions or purchased. FAS 86 requires companies to capitalize
eligible software development costs upon achievement of technological
feasibility, subject to net realizable value considerations. Research and
development costs prior to technological feasibility are expensed as incurred.
Because the period between achievement of technological feasibility and the
general release of the Companys products have been a relatively short duration,
costs qualifying for capitalization were insignificant during 2006 and 2005.
There were no capitalized software development costs at December 31, 2006 and
2005.

Income Taxes

The Company accounts for its
income taxes in accordance with FAS No. 109, Accounting for Income
Taxes (FAS 109) and related interpretations. This Interpretation requires
that the impact of a tax position be recognized if it is more likely than not of
being sustained in an audit, based on the technical merits of the position. Even
though the Company is in a consolidated loss position, determining the provision
for income tax expense, income tax liabilities, and deferred tax assets and
liabilities involves judgment. In addition, tax interpretations, regulations and
legislations are continually changing. Tax exposures can involve complex issues
and may require an extended period to resolve.

The Company records a valuation
allowance to reduce its deferred tax assets to the amount of future tax benefit
that is more likely than not to be realized. The Company believes its tax
positions comply with current applicable tax law and that the Company has
adequately provided for known tax contingencies.

Net Loss per Share

In accordance with FAS No. 128,
Earnings per Share, basic net income (loss) per share is computed based
on the weighted average number of common shares outstanding during the period.
Diluted net income (loss) per share is computed using the weighted average
number of common shares and dilutive equivalent common shares outstanding during
the using the treasury stock method. In a year of income, dilutive equivalent
common shares consist of stock options and warrants where the calculated market
price is in excess of the exercise price of these stock awards In a loss year,
basic and fully diluted net income (loss) per share is equal.

Contingencies and Litigation

The Company evaluates contingent
liabilities including threatened or pending litigation in accordance with FAS
No. 5 Accounting for Contingencies. The Company assesses the likelihood
of an adverse outcomes or judgment to a potential claim or legal proceeding, as
well as potential ranges of probable losses, when the outcome of the claims or
proceedings are probable and reasonably estimable. A determination of the amount
of accrued liabilities required, if any, for these contingencies is made after
analysis of each matter. Because of uncertainties related to these matters, the
Company bases its estimates on the information available at the time. As
additional information becomes available, the Company reassesses the potential
liability and may revise its estimates. Any revision to these estimates could
have a material impact on the Companys results of operations and financial
position.

Business Combinations

The Company accounts for business
combinations in accordance with FAS No. 141, Business Combinations
(FAS 141), which requires the purchase method of accounting for business
combinations be followed. In accordance with FAS 141, the Company allocates the
purchase price of its business

43

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combinations to the tangible assets, liabilities and intangible
assets acquired, including in-process technology, based on their estimated fair
values. The excess purchase price over those fair values, if any, is recorded as
goodwill.

The Company must make valuation
assumptions that require significant estimates, especially with respect to
intangible assets. The Company estimates fair value based upon assumptions the
Company believes are reasonable, but which are inherently uncertain and
unpredictable and, as a result, actual results may differ from estimates.

Accounting for Stock-based Compensation

On January 1, 2006, the Company
adopted the provisions of FAS No. 123R Share-Based Payment (FAS 123R)
which requires recognition of stock-based compensation expense for all
share-based payments based on fair value. Prior to January 1, 2006, the Company
measured compensation expense for all of its share-based compensation using the
intrinsic value method prescribed by Accounting Principles Board (APB) Opinion
No. 25, Accounting for Stock Issued to Employees (APB 25) and related
interpretations. The Company has provided pro forma disclosure amounts in
accordance with FAS No. 148, Accounting for Stock-Based Compensation 
Transition and Disclosure  an amendment of FASB Statement No. 123 (FAS
148), as if the fair value method defined by FAS No. 123, Accounting for
Stock Based Compensation (FAS 123) had been applied to its stock-based
compensation.

The Company has elected to use
the modifiedprospective approach method. Under that transition method, the
calculated expense in 2006 is equivalent to compensation expense for all awards
granted prior to, but not yet vested as of January 1, 2006, based on the
grant-date fair values estimated in accordance with the original provisions of
FAS 123. Stock-based compensation expense for all awards granted after January
1, 2006 is based on the grant-date fair values estimated in accordance with the
provisions of FAS 123R. The Company recognizes these compensation costs, net of
an estimated forfeiture rate, on a pro rata basis over the requisite service
period of each vesting tranche of each award. The Company considers voluntary
termination behavior as well as trends of actual option forfeitures when
estimating the forfeiture rate.

Recent pronouncements

In June 2006, the FASB issued FIN
No. 48, Accounting for Uncertainty in Income Taxes  an Interpretation of
FASB Statement No. 109 (FIN 48). FIN 48 clarifies the accounting for
uncertainty in income taxes recognized in a Companys financial statements
recognized in the financial statements. This interpretation prescribes a
recognition threshold and measurement attribute for the financial statement
recognition and measurement of a tax position taken or expected to be taken in a
tax return. FIN 48 also provides guidance on de-recognition, measurement,
classification, interest and penalties, accounting in interim periods,
disclosure and transition. This interpretation is effective for the Company
beginning in the fiscal quarter of 2007. The Company is currently evaluating the
impact of FIN 48 on its financial statements.

In September 2006, the FASB
issued FAS No. 157 Fair Value Measurements, (FAS 157) which defines
fair value, establishes a framework for measuring fair value and expands
disclosures about fair value measurements. FAS 157 is effective for financial
statements issued for fiscal years beginning after November 15, 2007, and
interim periods within those fiscal years, and is applicable to the Company
beginning in the first quarter of 2008. The Company is currently evaluating the
impact of FAS 157 on its financial statements.

In February 2007, the FASB issued
FAS No. 159, The Fair Value Option for Financial Assets and Financial
Liabilities  Including an amendment of FASB Statement No. 115, (FAS 159)
which permits entities to choose to measure many financial instruments and
certain other items at fair value at specified election dates. A business entity
is required to report unrealized gains and losses on items for which the fair
value option has been elected in earnings at each subsequent reporting date.
This statement is expected to expand the use of fair value measurement. FAS 159
is effective for financial statements issued for fiscal years beginning after
November 15, 2007, and interim periods within those fiscal years, and is
applicable to

44

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the Company beginning in the first quarter of 2008. The Company
is currently evaluating the impact of FAS 159 on its financial statements.

In September 2006, the SEC issued
Staff Accounting Bulletin No. 108, Section N to Topic 1, Considering the
Effects of Prior Year Misstatements when Quantifying Misstatements in Current
Year Financial Statements (SAB 108). SAB 108 requires the evaluation of
prior-year misstatements using both the balance sheet approach and the income
statement approach. In the initial year of adoption, should either approach
result in quantifying an error that is material in light of quantitative and
qualitative factors, SAB 108 guidance allows for a one-time cumulative-effect
adjustment to beginning retained earnings. In years subsequent to adoption,
previously undetected misstatements deemed material shall result in the
restatement of previously issued financial statements in accordance with FAS No.
154, Accounting Changes and Error Corrections,a replacement of APB
Opinion No. 20, Accounting Changes,and Statement No. 3, Reporting
Accounting Changes in Interim Financial Statements. SAB 108 is effective
for the Company for the year ended December 31, 2006. The implementation of SAB
108 did not have any impact on the Companys financial statements.

45

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2. Property and Equipment

|                                       |   | December 31, |  
|-------------------------------------- | - | ------------ | -
|                                       |   | 2006         |  
|                                       |   |              |  
|Computer equipment                     | $ | 764,954      |  
|Computer equipment under capital lease |   | 500,975      |  
|Computer software                      |   | 257,675      |  
|Website software                       |   | 637,822      |  
|Office furniture and equipment         |   | 177,347      |  
|Leasehold
      improvements           |   | 110,020      |  
|Total cost                             |   | 2,448,793    |  
|Less: accumulated
      amortization   |   | (2,001,382   | )
|Property and equipment                 |   | 447,411      |  

Amortization expense related to
property and equipment totaled $217,102 in 2006 and $274,600 in 2005.

3. Shareholders Equity

The Company is authorized to
issue up to 75,000,000 shares of common stock and 5,000,000 shares of preferred
stock. No preferred stock is issued and outstanding. During 2006, the Company
issued shares on the exercise of stock options and also in a private placement
transaction. The Company also repurchased and retired shares of its common stock
during both 2006 and 2005.

Stock Based Compensation Plans

The Company grants stock options
pursuant to shareholder approved stock option plans. The Company's 1999, 2000,
2001, 2002, and 2003 Stock Option Plans (collectively the "Plans") authorize a
total of 5,220,600 common shares for issuance. The Plans entitle employees,
non-employee directors, and consultants to purchase common shares of the Company
on the exercise of stock options. Options immediately become exercisable once
vested. Any options that do not vest as the result of a grantee leaving the
Company are forfeited and the common shares underlying them are returned to the
reserve if they were granted under the 2003 Stock Option Plan.

The Company generally grants
stock options for a fixed number of shares to employees with an exercise price
equal to at least the fair market value of the underlying common shares on the
date of grant. The standard vesting schedule used for stock option grants to
most employees is a two year vesting calendar, with equal vesting occurring at
the end of each quarterly period. Stock option grants to management generally
follow a four year vesting calendar, with vesting occurring at the end of each
quarterly period. All stock options are denominated in U.S. dollars and expire
either five or six years after the date of grant.

46

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The following table provides
information on the Companys outstanding options and options available for grant
at December 31, 2006, and activity since December 31, 2004:

Options OutstandingWeightedNumber of
      
      
      AverageOptions
      
      Price Per
      ExerciseAvailable
      Number of
      Share
      PriceFor
        Grant
      Options
      U.S.
        $
      U.S.
        $Balance at December 31, 2004
      1,622,500
      3,598,100
      $0.12 - $0.59
      $0.24Options granted
      (1,301,800)
      1,301,800
      $0.29 - $0.53
      $0.28Options exercised
      
      (136,125)
      $0.15 - $0.29
      $0.18Options forfeited
      634,375
      (634,375)
      $0.26 - $0.53
      $0.39Balance at December 31, 2005
      955,075
      4,129,400
      $0.12 - $0.59
      $0.26Options granted
      (1,201,250)
      1,201,250
      $0.29 - $0.44
      $0.38Options exercised
      
      (761,400)
      $0.15 - $0.36
      $0.25Options forfeited
      637,500
      (685,000)
      $0.15 - $0.38
      $0.30Balance at December 31, 2006
      391,325
      3,884,250
      $0.12 - $0.59
      $0.29


The Company ceased granting of
stock options under its 1999, 2000, 2001 and 2002 Stock Option Plans in December
2002. Stock options outstanding to purchase common shares under these plans
continue to be exercisable as vested until exercised or forfeited, and if
forfeited, they are no longer available for future grants. For 2006, there were
761,400 options exercised for proceeds of $189,594. For 2005, there were 136,125
options exercised for proceeds of $24,538. Subsequent to December 31, 2006, an
additional 175,000 options were granted.

Stock-based Award Activity

Equity awards activity under the
Companys Plans for 2006 was as follows:

|                                            |  |           |   |   |              |  |  | Weighted-        |  |   |              | 
|------------------------------------------- |  | --------- | - | - | ------------ |  |  | ---------------- |  | - | ------------ | 
|                                            |  |           |   |   | Weighted-    |  |  | Average          |  |   |              | 
|                                            |  |           |   |   | Average      |  |  | Remaining        |  |   | Aggregate    | 
|                                            |  | Number of |   |   | Exercise     |  |  | Contractual      |  |   | Intrinsic    | 
|                                            |  | Stock     |   |   | Price       |  |  | Term             |  |   | Value       | 
|                                            |  | Options   |   |   | U.S.
      $ |  |  | (in
      years) |  |   | U.S.
      $ | 
|                                            |  |           |   |   |              |  |  |                  |  |   |              | 
|Balance at December 31, 2005                |  | 4,129,400 |   | $ | 0.26         |  |  |                  |  |   |              | 
|Granted                                     |  | 1,201,250 |   | $ | 0.38         |  |  |                  |  |   |              | 
|Forfeited                                   |  | (685,000  | ) | $ | 0.30         |  |  |                  |  |   |              | 
|Exercised                                   |  | (761,400  | ) | $ | 0.25         |  |  |                  |  |   |              | 
|Outstanding at December 31, 2006            |  | 3,884,250 |   | $ | 0.29         |  |  | 2.56             |  | $ | 447,617      | 
|                                            |  |           |   |   |              |  |  |                  |  |   |              | 
|Vested and exercisable at December 31, 2006 |  | 2,965,431 |   | $ | 0.26         |  |  | 2.02             |  | $ | 423,856      | 

The aggregate intrinsic value is
equal to the difference between the quoted closing market price of the Companys
common shares at December 31, 2006 and the exercise price of the underlying
awards, where the stock options are in-the-money. At December 31, 2006, there
were 3,158,000 in-the-money options outstanding and 2,799,025 in-the-money
options vested and exercisable.

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The following table summarizes
the Companys unvested equity award activity for the year ended December 31,
2006:

|                              |                  | Weighted-Average
|----------------------------- | ---------------- | ----------------
|                              |                  | Grant Date Fair 
|Unvested Shares               | Number of Awards | Value  U.S. $  
|Unvested at December 31, 2005 | 963,263          | $0.15           
|Granted                       | 918,594          | $0.19           
|Vested                        | (644,288)        | $0.18           
|Forfeited                     | (318,750)        | $0.17           
|Unvested at December 31, 2006 | 918,819          | $0.20           

As of December 31, 2006, total
unrecognized compensation expense related to unvested awards granted under the
Plans was $82,542, which is expected to be recognized over a weighted-average
period of 2.56 years. Forfeiture rates used to determine unrecognized
compensation expense were based on forfeiture rates experienced for the year
ended December 31, 2006.

Stock-Based Compensation Expense

During 2006, the net loss of
$791,197 includes $120,957 of stock-based compensation expense calculated in
accordance with FAS 123R, of which $41,547 was attributable to sales and
marketing employees, $70,134 was attributable to general and administrative
employees and non-employee directors and $9,276 was attributable to research and
development employees.

During 2005, the reported net
loss of $58,590 did not include stock-based compensation expense as determined
under the fair-value based method of FAS 123, as the Company had not adopted
this pronouncement. Reported net loss included $41,977 of stock-based
compensation in general and administrative expense related to stock options
granted to a consultant which was recorded as an expense under APB 25. If the
Company had adopted FAS 123 in 2005, stock-based compensation expense would have
been $157,371, of which $45,231 would have been attributable to sales and
marketing employees, and $112,140 would have been attributable to general and
administrative employees and non-employee directors. Including this pro forma
stock-based compensation expense, pro forma net loss for 2005 was $173,984 and
pro forma basic and diluted net loss per share for 2005 was $(0.01) .

Valuation Assumptions Used in Fair-Value Based
Calculation Method

The fair-value of the Companys
stock-based awards granted to employees, non-employee directors and consultants
for years ended December 31, 2006 and 2005 was estimated using the Black-Scholes
option-pricing model using the following weighted average assumptions:

|                            | Year Ended  
|--------------------------- | ------------
|                            | December 31,
|                            | 2006        
|Expected life (in years)    | 5 years     
|Risk-free interest rate     | 4%          
|Expected volatility         | 52%         
|Dividend yield              | 0%          
|Fair value per stock option | $ 0.19      

The expected life of employee
stock options is based on the average expected life of all outstanding stock
options taking into consideration past employee exercise behavior. The exercise
price of the stock option is equal to the market value of the Companys common
stock on the grant date. The Company uses the zero coupon interest yield rate
comparable to the expected life of the option. Expected volatility is based on
historical computations of the Companys volatility. The estimated fair value of
the stock-based awards is amortized over the vesting period of the underlying
awards, on a graduated basis.

48

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The Black-Scholes option pricing
valuation model was developed for use in estimating the fair value of traded
options that have no vesting restrictions, are fully transferable and do not
have employment or trading restrictions. Employee stock options have
characteristics significantly different from those of traded options.

Private Placement Transaction

On September 26, 2006, the
Company completed a restricted non-brokered private placement for 1,166,667
purchased securities (Unit) at a price of $0.30 per Unit with ten of its
directors and senior management. Each Unit consisted of one common share and one
share purchase warrant (Warrant) for the purchase of one common stock. Each
Warrant entitles the holder to purchase one common share at a price of $0.40 per
share at any time until the close of business on the day which is twenty-four
months from the date of issue of the Unit. All shares issued in connection with
the private placement and any shares issued on exercise of warrants comprised in
those Units will be subject to a one year hold period. At December 31, 2006, all
1,166,667 warrants were outstanding and exercisable.

Legal fees and other costs were
approximately $7,398, resulting in net proceeds of $342,602. Of the net
proceeds, $274,000 were allocated to common stock and $68,602 were allocated to
additional paid in capital (associated with warrants) based on the fair value of
each security at the time of issuance. The Black-Scholes value of each warrant
of $0.08 was determined based on the following assumptions: expected life of 2
years; market price on date of issue of $0.32; exercise price of $0.40 per
warrant; risk-free interest rate of 4% and volatility of 54%.

Repurchase of Common Stock

During 2006, the Company
repurchased 100,000 common shares of its stock, at prices ranging from $0.26 to
$0.27 per share, for an aggregate cost of $27,333. During 2005, the Company
repurchased 690,000 common shares of its stock, at prices ranging from $0.34 to
$0.40 per share, for an aggregate cost of $214,490. The Companys stock
repurchase program expired in May 2006.

4. Segmented Information

The Company operates in one
reportable segment. The Company defines a reportable operating segment as a
component of the Company for which separate financial information is available
and which is evaluated regularly by the Chief Executive Officer in deciding how
to allocate resources and in assessing performance.

During 2006 and 2005, the Company
had no customers whose revenue represented greater than 10% of total revenues.
Substantially all of the Companys property and equipment is located in Canada
and the majority of its current operations are in Canada.

5. Related Party Transaction

In December 2006, in the normal
course of business, the Company sold advertising to a Company who is affiliated
with our 50% owned subsidiary, Stockscores Analytics Corp. The one-time sale
represented approximately $85,000 in revenues, which was the fair value for the
services provided. The full amount was paid subsequent to year end.

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6. Income Taxes

The Company is subject to United
States federal and state income taxes at an approximate rate of 38% (2005 
35%). The reconciliation of the provision for income taxes at the United States
federal statutory rate compared to the Companys income tax expense as reported
is as follows:

|                                                          |   | Year Ended   |  
|--------------------------------------------------------- | - | ------------ | -
|                                                          |   | December 31, |  
|                                                          |   | 2006         |  
|                                                          |   |              |  
|Tax recovery at U.S. statutory rates                      | $ | (299,000     | )
|Increase from lower effective rate of Canadian subsidiary |   | (11,000      | )
|Change in and adjustment to valuation
      allowance     |   | 67,000       |  
|Change in foreign exchange rates                          |   |             |  
|Non-deductible expenses                                   |   | 243,000      |  
|Other                                                     |   | 3,990        |  
|Income tax provision                                      | $ | 3,990        |  

Deferred income taxes reflect the
net tax effects of temporary differences between the carrying amounts of assets
and liabilities for financial reporting purposes and the amounts used for income
tax purposes.

Significant components of the Companys
  deferred tax assets as of December 31 are as follows:

|                                 |   | December 31, |  
|-------------------------------- | - | ------------ | -
|                                 |   | 2006         |  
|                                 |   |              |  
|Net operating loss carryforwards | $ | 1,747,000    |  
|Net capital loss carryforwards   |   | 110,000      |  
|Property and equipment           |   | 658,000      |  
|Other                            |   | 312,000      |  
|Total deferred tax assets        | $ | 2,827,000    |  
|Less: valuation
      allowance  |   | (2,827,000   | )
|Net deferred tax assets          | $ |             |  

The Company has recognized a
valuation allowance for the deferred tax assets for which it is more likely than
not that realization will not occur.

At December 31, 2006, the Company
had U.S. federal net operating loss carryforwards of $2,059,000. These net
operating loss carryforwards will expire at various times from 2019 through 2026
if not utilized. At December 31, 2006, the Company had Canadian federal net
operating loss carryforwards of $2,825,000. These net operating loss
carryforwards will expire in 2007 and 2008. The Company also has net capital
losses of $323,000 available to offset future taxable capital gains in
Canada.

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7. Commitments and Contingencies

Commitments

Payments Due by PeriodMoreWithin 1
      
      
      2  3
      
      
      4  5
      
      
      Than 5Total
      
      
      Year
      
      
      Years
      
      
      Years
      
      
      YearsOperating leases
      $
      1,925,200
      
      $
      320,000
      
      $
      600,500
      
      $
      611,200
      
      $
      393,500Capital leases
      
      208,500
      
      
      121,100
      
      
      87,400
      
      
      -
      
      
      -Data provider commitment
      
      1,219,400
      
      
      372,300
      
      
      781,900
      
      
      65,200
      
      
      -Total contractual cash obligations
      $
      3,353,100
      
      $
      813,400
      
      $
      1,469,800
      
      $
      676,400
      
      $
      393,500


The Company leases its facilities
under operating leases that expire at various times to March 2013. Total rent
expense was $282,284 in 2006 and $320,957 in 2005. The Company leases certain
computer equipment, mainly servers, under capital leases. Of the total amount of
capital lease payments above, approximately $21,000 relates to interest payments
due in future years. Interest expense related to capital lease obligations was
$22,453 for 2006 and $6,298 for 2005.

The Company entered into an
agreement with a data provider for the delivery of market data used in the
Companys products. The agreement expires in March 2010, with an option to renew
for an additional 12 months at the then applicable current rates. In addition,
the Company entered into a hosting and connectivity agreement for the back-up
hosting site at an approximate cost of $13,000 per month, with an end date that
coincides with the data provider agreement.

Contingencies

Litigation

The Company is a defendant in a
lawsuit filed in the Saskatchewan Court of Queens Bench by plaintiffs Black
Strap Hospitality Corporation, Harold Lane and Derek Neis. The plaintiffs seek
damages for alleged defamation in the amount of C$100,000 plus pre-judgment
interest. The plaintiffs claimed that they were defamed by certain members of
the Companys Bull Boards investment discussion forum on the Companys websites
StockHouse.com and StockHouse.ca. The Company responded to the action by
providing, under court order, information on the Bull Boards members specified
in the court order. On December 7, 2006, the Company was advised by the
plaintiff that they were prepared to provide discontinuance and a waiver on
costs if the Company agreed to certain conditions, including the removal of
Black Strap Hospitality Corporation postings from the StockHouse.com and
StockHouse.ca websites. The Company received a formal discontinuance on January
16, 2007.

The Company is the plaintiff in a
lawsuit filed in Ontario Supreme Court of Justice against Hollinger Inc. and
Hollinger Canadian Publishing Holdings Co. in which the Company seeks to recover
approximately C$471,000 from the defendant. The defendant was a vendor to the
Company and the amount sought by the Company consists of unused advertising
credits which were prepaid by the Company in 1999. The case is currently pending
final resolution and there is considerable uncertainty as to what value, if any,
will be derived if the Company wins the lawsuit. No provision has been made for
recovery of these credits in the financial statements in any year.

In addition to the above, the
Company is involved in various other legal matters which arise from time-to-time
in the ordinary course of the Companys business, none of which is believed to
be material to its results of operations, liquidity or financial condition at
this time. Unless otherwise noted, the Company cannot reasonably estimate at
this time whether a monetary settlement will be reached or predict the ultimate
resolution of these legal matters.

51

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8. Accounting for and Disclosure of Guarantees

From time-to-time, the Company
enters into certain types of contracts that require it contingently to indemnify
parties against third party claims. These contracts primarily relate to: (i)
service level agreements with clients, under which the Company may be required
to indemnify clients for liabilities related to data transmission and
dissemination; and (ii) certain agreements with the Companys officers,
directors and employees and third parties, under which the Company may be
required to indemnify such persons for liabilities arising out of their duties
to the Company.

The Company regularly enters into
service level agreements with clients, under which the Company guarantees
consistent streaming of data within certain pre-defined tolerances. The terms of
these obligations vary and generally are not limited in amount, so it is not
possible to express the amount at risk in dollars. Historically, the Company has
not been obligated to make significant payments on account of these obligations,
and accordingly, no liabilities were recorded for these obligations of this
nature on its balance sheets as of December 31, 2006 or 2005. The Company
carries coverage under certain insurance policies to protect itself in the case
of any unexpected liability; however, this coverage may not be sufficient.

9. Subsequent Event

Business Acquisition

On January 25, 2007, the Company
announced that it had entered into a formal Purchase Agreement with
TeleCommunication Systems, Inc. (TCS) pursuant to which the Company agreed to
issue to TCS 1,500,000 common shares in the capital of the Company and to assume
some TCS liabilities in exchange for certain assets of TCS that make up its
Mobile Finance Division (MFD). The transaction closed on January 31, 2007.

MFD delivers financial market
data, news, and limited analytics like charting and portfolio functionality,
distributed through mobile devices such as pagers, Blackberry® and other mobile
devices. The acquisition adds:

- a proven set of wireless financial products for migration onto the
  Companys platform without significant additional development costs and
  go-to-market time
- a high profile customer-base, consisting of leading wealth management,
  capital markets and advisory companies located in North America and Europe,
  that can be introduced to the Companys existing product-line, and
- distribution agreements with one of the world's largest financial
  information providers and a global 3rd generation telecommunications provider.

This business combination will be
accounted for as a purchase of a business, with the Company being identified as
the acquirer and MFD as the acquiree. The results of operations of MFD will be
included in the consolidated financial statements of the Company from January
31, 2007.

52

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A preliminary allocation of the purchase price, which is
subject to adjustment, is as follows:

Preliminary Purchase Price:1,500,000 common shares of Stockgroup
    $
    840,000Acquisition costs
    
    220,000$
    1,060,000Net Assets Acquired:Accounts receivable
    $
    1,578,000Prepaid and other current assets
    
    379,000Property and equipment, net
    
    286,000Accounts payable
    
    (985,000
    )Accrued liabilities
    
    (777,000
    )Accrued compensation
    
    (183,000
    )Customer deposits
    
    (238,000
    )Deferred revenues
    
    (350,000
    )Unallocated
      purchase price
    
    1,350,000$
    1,060,000


The difference between the cost
of acquisition and the values of net assets acquired has been presented as
unallocated purchase price. The fair value of the 1,500,000 common shares
issued was determined based on the Companys common share price of $0.56,
representing the average closing price of the Companys shares for the two days
before, the day of, and two days after the date of announcement. The purchase
price may be increased by up to $500,000, payable in cash, if certain
performance requirements are achieved.

Stockgroup will continue to
review information and perform further analysis, including an independent
valuation, prior to finalizing the allocation of the purchase price.

Pro forma Information (Unaudited)

Pro forma consolidated revenues
for the year ended December 31, 2006 would have been $14,700,000, if the
acquisition of MFD was completed as of January 1, 2006. The pro forma
consolidated revenues are not necessarily indicative of the actual results that
would have occurred had the acquisition been consummated on that date or of the
future revenues of the combined entities.

53

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Item 8. Changes In and Disagreements with Accountants on
Accounting and Financial Disclosure

On May 30, 2006, we dismissed
Ernst & Young LLP and we engaged Deloitte & Touche LLP, independent
registered chartered accountants, as our principal accountant with the approval
of our Companys Board of Directors. The decision to dismiss Ernst & Young
LLP was recommended and approved by the Audit Committee of the Board of
Directors of the Company and was the result of a competitive bidding process
conducted in the ordinary course of business. We filed a Form 8-K/A on July 19,
2006 related to the change in our certifying accountant (File No. 000-23687),
which amended the Form 8-K we filed on July 6, 2006 related to the change.

In connection with the audit of
our financial statements for the year ended December 31, 2005, and in the
subsequent interim period preceding May 30, 2006, there were no disagreements
with Ernst & Young LLP on any matters of accounting principles or practices,
financial statement disclosure, or auditing scope and procedures which
disagreements, if not resolved to the satisfaction of Ernst & Young LLP,
would have caused Ernst & Young LLP to make reference to the matter in their
report on the Companys consolidated financial statements.

Item 8A. Controls and Procedures

As required by Rule 13a-15 under
the Exchange Act, as of the end of the period covered by this report, being
December 31, 2006, we have carried out an evaluation of the effectiveness of the
design and operation of our Company's disclosure controls and procedures. This
evaluation was carried out under the supervision and with the participation of
our management, including our Chief Executive Officer and Chief Financial
Officer. Based upon that evaluation, our Chief Executive Officer and Chief
Financial Officer concluded that our disclosure controls and procedures are
effective as of the end of the period covered by this report.

Disclosure controls and
procedures are controls and other procedures that are designed to ensure that
information required to be disclosed in our reports filed or furnished under the
Exchange Act is recorded, processed, summarized and reported, within the time
periods specified in the Securities and Exchange Commissions rules and forms.
Disclosure controls and procedures include, without limitation, controls and
procedures designed to ensure that information required to be disclosed in our
reports is accumulated and communicated to management, including our President
and Chief Executive Officer as appropriate, to allow timely decisions regarding
required disclosure.

Changes in Internal Control over Financial Reporting

There were no changes in our
internal control over financial reporting during the quarter ended December 31,
2006 that have materially affected, or are reasonably likely to materially
affect, our internal control over financial reporting.

Item 8B. Other Information

None.

54

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PART III

Item 9. Directors, Executive Officers, Promoters, Control
Persons and Corporate Governance; Compliance with Section 16(a) of the Exchange
Act

The following are our directors
and executive officers and certain information about them as of February 28,
2007:

|Name                  | Age | Principal Occupation and
      Business Experience                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                         
|--------------------- | --- | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|Marcus New            | 36  | Founder, President and CEO. Mr. New founded
      Stockgroup in May 1995 and continues to provide the corporate vision and
      direction for the Company. A finalist as Entrepreneur of the Year by Ernst
      & Young Pacific Region in 2005. Mr. New is a recognized leader and
      sought-after speaker in the industry. Prior to founding Stockgroup, Mr.
      New served as VP of Investor Relations for AmCan Public Relations Group
      Inc., a company specializing in investor campaigns for public companies.
      Mr. New received a Bachelor of Arts degree with a Business major from
      Trinity Western University.                                                                                                                                                                                                                                                                                                                                                                                                              
|                      |     |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                            
|Leslie A. Landes      | 62  | Chairman of Liquidation World Inc. Mr. Landes brings
        a breadth of experience running media and media related companies, including
        13 years with the Jim Pattison Group with $4 billion in sales. Mr. Landes
        served as President of the Jim Pattison Sign Group, Outdoor Group, and
        The Communications Group. He ultimately served as President of Jim Pattison
        Industries Ltd. and Senior VP of the Jim Pattison Group. He was formerly
        the President and Chief Operating Officer of Stockgroup Information Systems
        Inc. from August 1998 to December 2004. Mr. Landes is a director and member
        of the compensation committee of Liquidation World, Inc., which is a Toronto
        Stock Exchange listed company and formerly a director of TIR Systems Inc.,
        a Toronto Stock Exchange listed company. Mr. Landes joined our Board of
        Directors in August 1998, and he is also a member of our Audit Committee
        and Nominating and Corporate Governance Committee.
|                      |     |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                            
|David Caddey          | 57  | Retired President of the Space Missions Unit of MDA
      Corporation, responsible for $300 million in revenues and about 900
      employees. Mr. Caddey has extensive experience in all facets of business
      management including mergers and acquisitions, business development,
      program management and engineering. Mr. Caddey has severed on numerous
      Boards of profit and not-for-profit organizations including past Chair and
      now a Director of the Aerospace Industries Association of Canada. Mr.
      Caddey joined our Board of Directors in June 1999, and he is also a member
      of our Audit Committee and Compensation Committee.                                                                                                                                                                                                                                                                                                                                                                                
|                      |     |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                            
|Louis (Lee) deBoer II | 54  | Chairman, Life Balance Media LLC; Managing Partner,
      Propeller Partners LLC. Mr. deBoer has over 20 years experience
      in the strategic development of national media programming, advertising
      sales and content development. Mr. DeBoer spent 17 years at HBO
      culminating in the positions of Executive Vice President of HBO Inc. and
      President of its International division. Mr. deBoer joined our Board of
      Directors in October 1999, and he is also a member of our Compensation
      Committee and Nominating and Corporate Governance Committee.                                                                                                                                                                                                                                                                                                                                                                                                                                                                 
|                      |     |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                            
|Patrick Spain         | 54  | Chairman and CEO of Highbeam Research, LLC, which
      operates an online research service for individuals. He is also the
      co-founder and former Chairman and CEO of Hoover's, Inc. a leading online
      provider of company information headquartered in Austin, Texas. Hoover's
      was bought by Dun & Bradstreet in March 2003. Prior to Hoovers, Mr.
      Spain worked in the telecommunications,                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                        

55

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|Name              | Age | Principal Occupation and Business
      Experience                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                               
|----------------- | --- | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|                  |     | real estate and consulting industries. Mr. Spain holds a
      Bachelor of Arts from the University of Chicago in Ancient History and a
      Juris Doctorate from Boston University. Mr. Spain joined our Board of
      Directors in August 2004, and he is also a member of our Compensation
      Committee and Nominating and Corporate Governance Committee.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                               
|                  |     |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                  
|Elizabeth DeMarse | 53  | Director. Ms. DeMarse is a graduate of Wellesley
      and Harvard Business School, and a member of The Committee of 200. She is
      CEO and President of Creditcards.com, the leading credit card site for
      consumers on the internet. Previously she was President and CEO of
      Bankrate Inc. (RATE:NASDAQ), restructuring it into the #1 financial advice
      site as ranked by Media Metrix. Ms. DeMarse's experience also includes a
      role as the Executive Vice President of Hoover's Inc., an Internet company
      providing sales, marketing and business development information, and as a
      member of the senior management team at Bloomberg L.P. Ms. DeMarse joined
      our Board of Directors in June 2005, and she is also a member of our Audit
      Committee.                                                                        
|                  |     |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                  
|Stephen Zacharias | 57  | Founder and managing director of Transact Capital
      Partners LLC, a Richmond Virginia based investment banking firm
      serving small to middle market privately-owned businesses. He has over 30
      years of financial related experience, including numerous acquisition and
      divestiture transactions, debt financings and capital reorganizations.
      Before founding Transact, he served as corporate treasurer for Media
      General Inc (NYSE: MEG), a Fortune 1000 TV and newspaper media company,
      and as a board director and audit committee chairman for Hoovers Inc., an
      online business information company acquired by Dun & Bradstreet. Mr.
      Zacharias joined our Board of Directors in July 2006, and he is also a
      member of our Audit Committee.                                                                     
|                  |     |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                  
|Thomas Baker      | 52  | Consultant. Mr. Baker has more than 25 years of
      experience in print and online media. He was the founder and general
      manager of The Wall Street Journal Online(wsj.com), a
      publication of Dow Jones & Company, where he led the start-up effort
      and grew the Online Journalinto a $60 million business unit and
      the largest paid news and information site on the web. He oversaw The
      Wall Street Journalsnational radio news network and Dow
      Jones news syndication and licensing business. Mr. Baker has consulted
      for leading publishers and media companies. He holds a degree from
      Princeton University and an MBA from Columbia Business School. Mr. Baker
      joined our Board of Directors in July 2006, and he is also a member of our
      Compensation Committee.                                          
|                  |     |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                  
|                  |     | Executive Officer                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                
|Susan Lovell      | 39  | Chief Financial Officer. Ms. Lovell provides
      direction on financial strategy for Stockgroup. She was recruited in April
      2006 and brings senior management experience in finance, accounting,
      financial planning and analysis with successful high-tech companies.
      Formerly with Crystal Decisions, which was acquired by Business Objects in
      2003, Ms. Lovell contributed to 15 successive quarters of revenue growth
      and a 60 point increase in operating margins. Crystal Decisions had
      revenues over US$300 million prior to being acquired. Ms. Lovell was also
      the Controller of GaleForce Solutions, an award-winning provider of CRM
      software for the financial services industry, and was responsible for
      developing and leading the information systems audit practice for Ernst
      & Young in Vancouver.

Each director who is elected will
serve until the earlier of our next annual meeting, the date his or her
successor has been elected and qualified, or the date of the director's death,
resignation or removal. All terms of office on our Board of Directors will
expire at the close of our 2007 Annual Shareholders meeting.

56

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Indemnification of Directors and Officers

Our by-laws provide for the
indemnification of our, directors, officers, employees, and agents, under
certain circumstances, against attorney's fees and other expenses incurred by
them in any litigation to which they become a party arising from their
association with or activities on behalf of the Company. We will also bear the
expenses of such litigation for any of its directors, officers, employees, or
agents, upon such persons promise to repay us if it is ultimately determined
that any such person should have not been entitled to indemnification. This
indemnification policy could result in substantial expenditures by us, which we
may be unable to recoup.

Section 16(a) Beneficial Ownership Reporting Compliance

Section 16(a) of the Exchange Act
requires our executive officers, directors and persons who own more than 10% of
our registered common stock to file reports of ownership and changes in
ownership with the SEC. Such executive officers, directors and persons who own
more than 10% of our stock are also required by SEC rules to furnish us with
copies of all forms that they file pursuant to Section 16(a) of the Exchange
Act.

Based solely on our review of
copies of Forms 3 and 4 and amendments thereto furnished to us pursuant to Rule
16a-3 and Forms 5 and amendments thereto furnished to us with respect to 2006,
and any written representations referred to in Item 405(b)(1) of Regulation S-B
of the Securities Act stating that no Forms 5 were required, we believe that,
during 2006, all Section 16(a) filing requirements applicable to our officers,
directors and more than 10% shareholders, were compiled with except for the late
filings disclosed following. Corrective filings were made for these incidences
of non-compliance.

During 2006, there were late
filings on Form 4 for the following directors and officers for the number of
transactions listed behind their names: Stephen Zacharias (1); Thomas Baker (1);
Elizabeth DeMarse (2); Susan Lovell (1); Bruce Nunn (1); Michael Donnelly
(1).

Code of Ethics

We have adopted a code of ethics
that applies to each of our Chief Executive Officer, Chief Financial Officer and
other Senior Officers of our Company. The text of our Code of Ethics may be
viewed on our website at www.stockgroup.com
under Investors/Corporate Governance.

Committees

Audit Committee.Our Audit Committee currently consists of David Caddey, Elisabeth
DeMarse, Stephen Zacharias and Leslie Landes. The Audit Committee is governed by
a written charter, which can be viewed at www.stockgroup.com under Investors/Corporate
Governance. Each of the members of our Audit Committee is independent, as that
term is defined by Rule 4200(a) (15) of the National Association of Securities
Dealers' listing standards. Mr. Zacharias is our audit committee financial
expert as defined by the rules of the SEC.

Compensation Committee.Our Compensation Committee currently consists of Lee deBoer, David
Caddey, Patrick Spain and Thomas Baker.

Nominating and Corporate
Governance Committee.Our Nominating and Corporate Governance Committee
currently consists of Patrick Spain, Lee deBoer, and Leslie Landes, and is
governed by a written charter which can be viewed at www.stockgroup.com under Investors/Corporate
Governance. The Committee has formed in 2004. During 2006, the nominating
committee did not receive a recommended nominee for director from a security
holder that beneficially owned more than 5% of our common share under rule
(407)(c)(ix) of Regulation S-B.

57

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Procedure for Submitting Shareholder Proposals

We encourage shareholders to
submit proposals, questions or concerns to us by writing to Mr. Patrick Spain,
the Chairman of our Corporate Governance Committee or any member of our Board of
Directors. All written communications with Board members are treated as
confidential. Instructions and contact information for Mr. Spain and the Board
of Directors can be found by visiting our website at www.stockgroup.com under Investors/Corporate
Governance. Once a proposal, question or concern is received by Mr. Spain or a
Board member, the communication is reviewed and addressed accordingly.

The Board of Directors
established a Corporate Governance Committee to monitor our practice against
generally accepted governance guidelines, and to determine which guidelines are
both practical and beneficial for us. The Corporate Governance Committee has
reviewed our own corporate governance practices, with input and guidance from
the Board of Directors.

Procedure for Submitting Shareholder Proposals Related to
Nominee as Director

See Procedures for Submitting
Shareholder Proposals above.

58

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Item 10. Executive Compensation

Summary Compensation
Table.The following table shows certain information concerning
the compensation of (i) our Chief Executive Officer, (ii) our Chief Financial
Officer; and (iii) our other executive officers as of December 31, 2006
(collectively, the Named Executive Officers) for 2006.

Option
      
      
      All OtherGrants
      
      
      CompensationName
    
      Salary ($)
      
      
      Bonus
        ($)
      
      
      ($)
        (5)
      
      
      ($)
      
      
      Total
        ($)Marcus New (2)
    $
    142,746
    
    $
    28,312
    
    $
    
    
    $
    23,826
    
    $
    194,884Chief Executive OfficerSusan Lovell (3)
    
    76,610
    
    
    8,267
    
    
    24,750
    
    
    6,422
    
    
    116,049Chief Financial
      OfficerBruce Nunn
    
    94,834
    
    
    5,511
    
    
    
    
    
    
    
    
    100,345Vice President, MarketingMichael Donnelly (4)
    
    94,074
    
    
    46,285
    
    
    41,400
    
    
    
    
    
    181,759Vice President, Sales


|(1) | All amounts are stated in U.S. dollars. For payment in
      other currencies other than the U.S. dollar, translation of compensation
      into U.S. dollars is made using the average exchange rate for 2006 except
      for the salary and bonus amounts for Mr. New as described below.   
|--- | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|(2) | Mr. News annual compensation was set by the compensation
        committee in U.S. dollars and has been paid in Canadian dollars at a rate
        of 1.43 per contractual agreement. All other compensation for Mr. New
        includes $16,342 of costs associated with the lease of a car.
|(3) | Ms. Lovell joined our Company as Chief Financial Officer
        on April 3, 2006. All other compensation includes a stock incentive to
        purchase common shares of our Company of $5,592.                                                                                               
|(4) | Mr. Donnelly joined our Company as Vice President, Sales
      on May 31, 2006.                                                                                                                                                                                                                
|(5) | The fair value of option grants is determined as
      described in Item 7. Financial Statements, Note 3 to the
      Consolidated Financial Statements.                                                                                                                                       

Outstanding Equity Awards at Fiscal Year-End

|Number of Securities Underlying | 
|------------------------------- | 
|Unexercised Options             | 
|                                | 
|                                | 
|Name                            | 
|Marcus New                      | 
|                                | 
|                                | 
|                                | 
|                                | 
|Susan Lovell (1)                | 
|                                | 
|Bruce Nunn (2)                  | 
|                                | 
|Michael Donnelly (3)            | 

|    |                                                                                              
|--- | ---------------------------------------------------------------------------------------------
|(1) | Options vest at the rate of 6.25% per quarter in arrears,
      starting on July 3, 2006.    
|(2) | Options vest at the rate of 12.5% per quarter in arrears,
      starting on December 7, 2005.
|(3) | Options vest at the rate of 6.25% per quarter in arrears,
      starting on August 31, 2006. 

59

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Compensation of Directors

The following table shows the amount
  of compensation earned by our independent directors in 2006. We compensate our
  independent directors with directors fees and stock options. Options Awards
  represent the fair value of option awards granted in 2006 as determined as described
  in *Item 7. Financial Statements*, Note 3.

|                  |   | Fees Earned    |  |   |            |  |   | All Other    |  |   |           | 
|----------------- | - | -------------- |  | - | ---------- |  | - | ------------ |  | - | --------- | 
|                  |   | or Paid in     |  |   | Option     |  |   | Compensation |  |   |           | 
|Name              |   | Cash
      ($) |  |   | Awards ($) |  |   | ($)          |  |   | Total ($) | 
|Leslie Landes     | $ | 17,583         |  | $ | 5,125      |  | $ |             |  | $ | 22,708    | 
|David Caddey      |   | 18,733         |  |   | 5,125      |  |   |             |  |   | 23,858    | 
|Louis deBoer II   |   | 17,283         |  |   | 5,125      |  |   |             |  |   | 22,408    | 
|Patrick Spain     |   | 7,283          |  |   | 15,375     |  |   |             |  |   | 22,658    | 
|Elizabeth DeMarse |   | 9,033          |  |   | 15,375     |  |   |             |  |   | 24,408    | 
|Stephen Zacharias |   | 6,817          |  |   | 14,175     |  |   |             |  |   | 20,992    | 
|Thomas Baker      |   | 5,442          |  |   | 14,175     |  |   |             |  |   | 19,617    | 
|                  | $ | 82,174         |  | $ | 74,475     |  | $ |             |  | $ | 156,649   | 

Commencing for the compensation
year beginning June 1, 2006, each director receives an annual fee of $8,600
related to service on the Board of Directors, with an additional $3,000 per
annum paid to members of our Audit Committee. Each director is eligible to
receive up to 75,000 stock options to acquire shares of common stock, with the
exercise price being equal to the market price of our common stock on the date
of grant. Directors who are re-elected and continue to serve for more than one
year may receive up to an additional 75,000 stock options after each annual
general meeting in compensation for future service. During the year, we paid
three directors a sum of $10,000 each in lieu of granting stock options, as our
2003 Stock Option Plan has a limited number of registered options remaining for
issuance.

Employment Contracts and Termination of Employment and
Change-in-Control Arrangements

We have an Executive Employment
  Agreement with our CEO, Marcus New, which became effective on February 9, 2004.
  Under the Agreement, for 2006, Mr. New received an annual base salary of C$202,432
  or U$141,561, which was converted at the exchange rate as set out in the 2004
  Management Agreement. The agreement outlines a minimum 5% annual compensation
  increase. All increases are approved by our Compensation Committee. In addition,
  he receives an incentive compensation bonus based on achieving certain profitability
  goals in the calendar year, and on financing, merger, and acquisition transactions.
  Mr. News February 9, 2004 employment agreement awarded him 652,500 stock
  options at $0.27 per share, which are fully vested at December 31, 2006. Mr.
  New will be entitled to 12 months of severance which will include pay in lieu
  of notice plus an additional one month severance for each year of employment
  up to a maximum of 24 months, should we elect to terminate his employment without
  cause. The employment agreement contains a confidentiality clause and a 24-month
  non-competition clause. There is no specified termination date in the Agreement.

We have an employment agreement
with our Chief Financial Officer, Susan Lovell, who is to receive an annual base
salary of C$120,000, subject to normal salary increases, and is entitled to a
C$25,000 annual maximum incentive compensation bonus, based on the achievement
of both Company and departmental goals. On her date of employment, April 3,
2006, she received 150,000 stock options at an exercise price of $0.34 per
share, which will vest over a four year period at 6.25% per quarter in arrears.
In addition, she was eligible for the stock option purchase incentive bonus of
up to $10,000 to assist in the purchase of shares within 60 days from the start
of employment. Ms. Lovell purchased 45,500 shares resulting in $5,592 of
benefit. These shares are required to be held for a minimum of one year. Ms.
Lovell will be entitled to one month of severance, which will include pay in
lieu of notice for each year of employment up to a maximum of four months,
should we elect to terminate her employment without cause after 395 days.

60

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We have an employment agreement
with our Vice President of Marketing, Bruce Nunn, who is to receive an annual
base salary of C$105,000, subject to normal salary increases, and is entitled to
an annual C$25,000 maximum incentive compensation bonus, based on the
achievement of both Company and departmental goals. On his date of employment,
September 7, 2005, he received 75,000 stock options at an exercise price of
$0.315 per share, which will vest over a two year period at 12.5% per quarter in
arrears. Mr. Nunn will be entitled to one month of severance which will include
pay in lieu of notice for each year of employment, should we elect to terminate
Mr. Nunns employment without cause.

We have an employment agreement
  with our Vice President of Sales, Michael Donnelly, who is to receive an annual
  base salary of U$160,000, subject to normal salary increases. In addition, Mr.
  Donnelly receives incentive compensation pay related to recognized revenue as
  outlined in a separate compensation agreement. On his date of employment, May
  31, 2006, he received 200,000 stock options at an exercise price of $0.425 per
  share, which will vest over a four year period at 6.25% per quarter in arrears.
  Mr. Donnelly will be entitled to two months of severance which will include
  pay in lieu of notice should we elect to terminate his employment after one
  year of employment without cause. An additional month of severance will be awarded
  during the third year of employment for a total of three months severance. If
  termination without cause occurs during or after the fourth year of employment,
  he will receive four months of severance. Mr. Donnellys employment agreement
  contains a 12 month non-competition clause.

Item 11. Security Ownership of Certain Beneficial Owners and
Management and Related Stockholder Matters

Security Ownership of Certain Beneficial
Owners

The following table sets forth
the beneficial ownership of our common shares as of February 28, 2007 for each
person or entity (including group) that is known by us to be the beneficial
owner of more than 5% of our outstanding shares. Information related to holders
of more than 5% of our outstanding shares was obtained from filings made with
the SEC pursuant to Sections 13(d) or 13(g) of the Exchange Act. Except as
otherwise noted, the address of the beneficial owners is c/o Stockgroup
Information Systems Inc., Suite 500  750 West Pender Street, Vancouver, B.C.,
V6C 2T7.

|Name and Address of Beneficial Owner | Amount and Nature of Beneficial Owner | PercentageBeneficially Owned
|------------------------------------ | ------------------------------------- | ----------------------------
|Marcus A. New (1)                    | 5,231,254                             | 13.5%                       
|518464 B.C. Ltd (1)                  | 1,945,000                             | 5.3%                        

(1) On March 11, 1999, we entered into a Share Exchange and
Share Purchase Agreement through our wholly owned subsidiary 579818 B.C. Ltd.,
with Stockgroup Media Inc. (formerly Stock Research Group, Inc.) and all of its
shareholders. Under that agreement we acquired all of the issued and outstanding
shares of Stock Research Group and in consideration 579818 B.C. Ltd. issued
3,900,000 Class A Exchangeable Shares to Stock Research Group shareholders. The
exchangeable shares held by Stockgroup Research Group shareholders may be
converted, at the option of the holder, into an equal number of shares of common
shares of our Company held by a trustee. Pending any such conversion, each
holder of the exchangeable shares has the right to vote, or to direct the
trustee to vote on their behalf, an equivalent number of shares of common stock
held of record by them. The trustee has no discretion as to the voting or
disposition of such common stock. At February 28, 2007, there were 2,134,000
shares of exchangeable shares outstanding owned as follows:

Of these exchangeable shares, Mr.
New directly owns 169,500 and his wife, Yvonne New, directly owns 19,500 shares.
They both indirectly own, through 518464 B.C. Ltd., a British Columbia company
owned by Mr. New as to 50% and by Mrs. New as to 50%, 1,945,000 exchangeable
shares.

61

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In addition to the exchangeable
shares beneficially owned as described above, including those owned by Mrs. New,
Mr. New owns 344,700 shares of common stock which were purchased in the open
market, 416,777 shares which were purchased via our September 2006 private
placement, the right to purchase 416,777 additional shares of stock on the
exercise of share purchase warrants and 1,452,500 fully vested stock options to
purchase common stock. He also beneficially owns the 466,500 shares of common
stock that Mrs. New directly owns.

Security Ownership of Management

The following table sets forth
the beneficial ownership of our common shares as of February 28, 2007 for the
following: (i) each of our directors and nominees for director; (ii) our Chief
Executive Officer and each of the Named Executive Officers named in the Summary
Compensation Table in Item 10, Part III; and (iii) all our directors and our
executive officers as a group. Information related to directors and executive
officers is as of February 28, 2007 and options and warrants exercisable within
60 days after February 28, 2007. Except as otherwise noted, the address of the
beneficial owners is c/o Stockgroup Information Systems Inc., Suite 500  750
West Pender Street, Vancouver, B.C., V6C 2T7.

|Name and Address of Beneficial             |                                             | Percentage        
|------------------------------------------ | ------------------------------------------- | ------------------
|Owner                                      | Amount and Nature of Beneficial
      Owner | Beneficially Owned
|Directors and Nominees for
      Director  |                                             |                   
|Marcus A. New (1)                          | 5,231,254                                   | 13.5%             
|Leslie Landes (2)                          | 297,575                                     | *                 
|David Caddey (3)                           | 602,709                                     | 1.6%              
|Louis deBoer II (4)                        | 209,375                                     | *                 
|Patrick Spain (5)                          | 285,875                                     | *                 
|Elizabeth DeMarse (6)                      | 55,725                                      | *                 
|Stephen Zacharias (7)                      | 424,609                                     | 1.1%              
|Thomas Baker (8)                           | 91,275                                      | *                 
|Executive Officers                         |                                             |                   
|Susan Lovell (9)                           | 283,000                                     | *                 
|Bruce Nunn (10)                            | 123,050                                     | *                 
|Michael Donnelly (11)                      | 237,500                                     | *                 
|                                           |                                             |                   
|All directors and officers as a group (12) | 7,841,947                                   | 19.3%             

* less than 1%

|(1) | See description of holdings in section above on
      beneficial owners who own more than 5% of our outstanding common
      shares.                                                                                                                                                                                            
|--- | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|(2) | Includes 292,575 shares issuable on the exercise of stock
      options as of February 28, 2007, or 60 days thereafter.                                                                                                                                                                                                         
|(3) | Includes 209,375 shares issuable on the exercise of stock
        options and 166,667 shares issuable on the exercise of share warrants,
        as of February 28, 2007, or 60 days thereafter. Also includes 40,000 common
        shares which are indirectly owned through his wife.                                        
|(4) | Includes 159,375 shares issuable on the exercise of stock
      options as of February 28, 2007, or 60 days thereafter.                                                                                                                                                                                                         
|(5) | Includes 109,375 shares issuable on the exercise of stock
        options as of February 28, 2007, or 60 days thereafter. Also includes
        70,000 common shares and 70,000 share warrants exercisable as of February
        28, 2007, or 60 days thereafter which are indirectly owned by the Spain
        Family IX LLC.
|(6) | Includes 55,725 shares issuable on the exercise of stock
      options as of February 28, 2007, or 60 days thereafter.                                                                                                                                                                                                          
|(7) | Includes 24,609 shares issuable on the exercise of stock
        options and 200,000 shares issuable on the exercise of share warrants,
        as of February 28, 2007, or 60 days thereafter.                                                                                                                                 
|(8) | Includes 24,609 shares issuable on the exercise of stock
        options and 33,333 shares issuable on the exercise of share warrants,
        as of February 28, 2007, or 60 days thereafter.                                                                                                                                  
|(9) | Includes 37,500 shares issuable on the exercise of stock
        options and 100,000 shares issuable on the exercise of share warrants,
        as of February 28, 2007, or 60 days thereafter.                                                                                                                                 

62

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|(10) | Includes 56,250 shares issuable on the exercise of stock
        options and 33,400 shares issuable on the exercise of share warrants,
        as of February 28, 2007, or 60 days thereafter. 
|---- | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|(11) | Includes 37,500 shares issuable on the exercise of stock
        options and 100,000 shares issuable on the exercise of share warrants,
        as of February 28, 2007, or 60 days thereafter.
|(12) | See notes 1 through 11.                                                                                                                                                                        

Applicable percentage ownership
in the above table is based on 36,971,788 shares outstanding as of February 28,
2007. The number and percentage of shares beneficially owned is determined under
rules of the SEC, and the information is not necessarily indicative of
beneficial ownership for any other purpose. Under such rules, beneficial
ownership includes any shares as to which the individual has sole or shared
voting power or investment power and also any shares which the individual has
the right to acquire within sixty days of February 28, 2007, through the
exercise of any stock option or other right. Unless otherwise indicated in the
footnotes above, we believe each person has sole voting and investment power (or
shares such powers with his or her spouse) with respect to the shares shown as
beneficially owned.

Item 12. Certain Relationships and Related Transactions, and
Director Independence

During the last two years, there
have been no transactions or proposed transactions to which we were or are to be
a party, in which any persons as set out by Item 404(a) of Regulation S-B had or
is to have a direct or indirect material interest.

Transactions with Related Parties

During fiscal 2006, we sold
advertising to a company who is affiliated with our 50% owned subsidiary,
Stockscores Analytics Corp. The one-time sale was approximately $85,000, which
was market value for the services provided. The full amount was paid subsequent
to December 31, 2006.

Director Independence

All of our current directors
except from Marcus New, our Chief Executive Officer, are independent as that
term is defined by Rule 4200(a) (15) of the National Association of Securities
Dealers' listing standards.

63

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Item 13. Exhibits

The following exhibits are filed as part of this Form
10-KSB.

|Exhibit |                                                                                                                                                                                                                                                
|------- | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|No.     | Exhibit Title                                                                                                                                                                                                                                  
|        |                                                                                                                                                                                                                                                
|21.1    | List
        of Subsidiaries of the Company                                                                                                                                                                                                    
|        |                                                                                                                                                                                                                                                
|23.1    | Consent
        of Independent Registered Chartered Accountants                                                                                                                                                                                
|        |                                                                                                                                                                                                                                                
|31.1    | Certification
        of Chief Executive Officer pursuant to Rule 13a-14(a) of the Exchange
        Act                                                                                                                                        
|        |                                                                                                                                                                                                                                                
|31.2    | Certification
        of Chief Financial Officer pursuant to Rule 13a-14(a) of the Exchange
        Act.                                                                                                                                       
|        |                                                                                                                                                                                                                                                
|32.1    | Certification
        of Chief Executive Officer and of Chief Financial Officer furnished pursuant
        to Rule 13a-14(b) of the Exchange Act and Section 1350 of Chapter 63 of
        Title 18 of the United States Code (18 U.S.C. 1350).

The following exhibits are
incorporated by reference.

|Exhibit |                                                                                                                                                                                                                                                                                                                                                                                              
|------- | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|No.     | Exhibit Title                                                                                                                                                                                                                                                                                                                                                                                
|        |                                                                                                                                                                                                                                                                                                                                                                                              
|3.1     | Articles of Incorporation & Bylaws, is incorporated
      by reference to Form 10SB12G filed January 29, 1998. (File No. 000-23687)                                                                                                                                                                                                                                                          
|        |                                                                                                                                                                                                                                                                                                                                                                                              
|10.1    | Stockgroup Information Systems Inc. 2003 Stock Option
      Plan  Amended, is incorporated by reference to Exhibit 10.1 filed on Form
      S-8 POS with the SEC on May 19, 2006. (File No. 333- 114481)                                                                                                                                                                                    
|        |                                                                                                                                                                                                                                                                                                                                                                                              
|10.2    | Private Placement Subscription Agreement is incorporated
      by reference to Form 8-K filed September 28, 2006. (File No. 000-23687)                                                                                                                                                                                                                                                       
|        |                                                                                                                                                                                                                                                                                                                                                                                              
|10.3    | Form of Warrant for Common Stock is incorporated by
      reference to Form 8-K filed September 28, 2006. (File No. 000-23687)                                                                                                                                                                                                                                                               
|        |                                                                                                                                                                                                                                                                                                                                                                                              
|10.4    | Purchase Agreement between Stockgroup Information Systems
        Inc., Stockgroup Systems Ltd., Stockgroup Media, Inc., TeleCommunication
        Systems, Inc., and TeleCommunication Systems (Holdings) Limited. Agreement
        was originally filed on Form 8-K on February 16, 2007 as Exhibit 10.1.
        This agreement is incorporated herein by reference. (File No. 000-23687)
|        |                                                                                                                                                                                                                                                                                                                                                                                              
|10.5    | Audit Committee Charter of the Company is incorporated by
      reference to Form 8-K filed on February 20, 2007. (File No. 000-23687)                                                                                                                                                                                                                                                       
|        |                                                                                                                                                                                                                                                                                                                                                                                              
|16.1    | Letter dated July 12, 2006 from Ernst & Young LLP,
      independent registered public accountants regarding the change in
      independent registered public accounting firms. This letter is
      incorporated herein by reference from Form 8-K/A filed on July 19, 2006.
      (File No. 000-23687)                                                                                    

64

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Item 14. Principal Accountant Fees and Services

On May 30, 2006, we dismissed
Ernst & Young LLP and we engaged Deloitte & Touche LLP, independent
registered chartered accountants, as our principal accountant with the approval
of our Companys Board of Directors. The decision to dismiss Ernst & Young
LLP was recommended and approved by the Audit Committee of the Board of
Directors of the Company and was the result of a competitive bidding process
conducted in the ordinary course of business.

Services performed by our
principal accountant during 2006 consisted of the examination of our financial
statements, services related to filings with the SEC and the TSX, consulting and
regulatory filing reviews in connection with private placements, domestic and
foreign tax compliance work, tax filings and tax consulting services.

Audit Fees

Fees billed for audit services
totaled approximately $64,800 for 2006 and $85,100 for 2005, including fees
associated with the annual audit and the reviews of our quarterly reports on
Form 10-QSB.

Audit-Related Fees

Fees billed for audit related
services totaled approximately $3,200 for 2006 and $2,300 for 2005. Audit
related fees include services related to other regulatory filings and other
accounting matters.

Tax Fees

Fees billed for tax services,
including tax compliance and tax advice, totaled approximately $46,800 for 2006
and $6,754 for 2005.

All Other Fees

We did not incur other types of fees in 2006 or 2005.

Pre-approval Policies and Procedures

In accordance with our Audit
Committee Charter, our Audit Committee is required to review and approve in
advance all audit, audit-related, tax, and other services performed by the
principal accountant. Unless the specific service has been previously
pre-approved with respect to that year, the Audit Committee must approve the
permitted service before the principal accountant is engaged to perform it. The
Audit Committee has delegated to the Chair of the Audit Committee authority to
approve permitted services provided that the Chair reports any decisions to the
Committee at its next scheduled meeting. For 2006, the Audit Committee
pre-approved 100% of the fees incurred.

The Audit Committee has
considered the nature and amount of the fees billed by our principal accountant,
and believes that the provision of the services for non-audit services is
compatible with maintaining our principal accountants independence under U.S.
Regulations.

65

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SIGNATURES

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

STOCKGROUP INFORMATION SYSTEMS
INC.

|Date: March 15, 2007 | By: /s/ Marcus NewMarcus A. New 
      President and Chief Executive Officer
|-------------------- | ----------------------------------------------------------------------------

Pursuant to the requirements of
the Securities Exchange Act of 1934, as amended, this report has been signed
below by the following persons on behalf of the Registrant and in the capacities
and on the dates indicated.

|Signature                   | Title                                                                  | Date          
|--------------------------- | ---------------------------------------------------------------------- | --------------
|                            |                                                                        |               
|/s/
      Marcus New        | President, Chief Executive Officer (Principal
      Executive Officer) | March 15, 2007
|Marcus A. New               | and Director                                                           |               
|                            |                                                                        | March 15, 2007
|/s/
      Susan Lovell      | Chief Financial Officer (Principal Financial
      and Accounting      |               
|Susan Lovell                | Officer)                                                               |               
|                            |                                                                        |               
|/s/
      Leslie Landes     | Chairman of the Board                                                  | March 15, 2007
|Leslie Landes               |                                                                        |               
|                            |                                                                        |               
|/s/
      David Caddey      | Director                                                               | March 15, 2007
|David Caddey                |                                                                        |               
|                            |                                                                        |               
|/s/
      Lee deBoer        | Director                                                               | March 15, 2007
|Lee deBoer                  |                                                                        |               
|                            |                                                                        |               
|/s/
      Patrick Spain     | Director                                                               | March 15, 2007
|Patrick Spain               |                                                                        |               
|                            |                                                                        |               
|/s/
      Elizabeth DeMarse | Director                                                               | March 15, 2007
|Elizabeth DeMarse           |                                                                        |               
|                            |                                                                        |               
|/s/
      Stephen Zacharias | Director                                                               | March 15, 2007
|Stephen Zacharias           |                                                                        |               
|                            |                                                                        |               
|/s/
      Thomas Baker      | Director                                                               | March 15, 2007
|Thomas Baker                |                                                                        |               

66

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