**SECURITIES
      AND EXCHANGE COMMISSION**


**Washington,
      DC 20549**





**FORM
      20-F**




o
            REGISTRATION
                STATEMENT PURSUANT TO SECTION 12(b) or (g) OF THE SECURITIES EXCHANGE
                ACT
                OF 1934




OR




x
            ANNUAL
                REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
                ACT OF
                1934 FOR THE FISCAL YEAR ENDED DECEMBER 31, 2007




OR




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




OR





o
            SHELL
                COMPANY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
                EXCHANGE
                ACT OF 1934


Date
                of event requiring this shell company report
                ____________________





**0-17164**


(Commission
      file number)




**COPERNIC
      INC.**


(Exact
      name of registrant as specified in its charter)




(FORMERLY
      MAMMA.COM INC.)




**PROVINCE
      OF ONTARIO (CANADA)**


(Jurisdiction
      of incorporation or organization)




**388
      St. Jacques Street West, 9th Floor**


**Montreal,
      Quebec**


**Canada,
      H2Y 1S1**


(Address
      of principal executive offices)





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





None





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





Common
      Shares, no par value


(Title
      of
      Class)





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





None







**Indicate
      the number of outstanding shares of each of the issuer’s classes of capital or
      Common Shares, as of March 19, 2008:**





14,637,531
      Common Shares




**Indicate
      by check mark if the registrant is a well-know seasoned issuer, as defined
      in
      Rule 405 of the Act.**





**Yes**
            **No**
            **x**





**If
      this report is an annual or transition report, indicate by check mark if the
      registrant is not required to file reports pursuant to Section 13 or 15(d)
      of
      the Securities Exchange Act of 1934.**





**Yes**
            **No**
            **x**





**Indicate
      by a check mark whether the registrant (1) has filed all reports required to
      be
      filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
      the
      preceding 12 months (or for such shorter period that the registrant was required
      to file such reports), and (2) has been subject to such filing requirements
      for
      the past 90 days.**





**Yes**
            **x**
            **No**





**Indicate
      by check mark whether the registrant is a large accelerated filer, an
      accelerated filer, or a non-accelerated filer. See definition of “accelerated
      filer and large accelerated filer” in Rule 12b of the Exchange Act (Check
      one):**





**Large
                Accelerated Filer**
            **Accelerated
                Filer**
            **Non-Accelerated
                Filer**
            **x**








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





**Item
                17**
            **x**
            **Item
                18**





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





**Yes**
            **No**
            ****x****





**Indicate
      by check mark whether the registrant has filed all documents and reports
      required to be filed by Sections 12, 13 or 15(d) of the Securities Exchange
      Act
      of 1934 subsequent to the distribution of securities under a plan confirmed
      by a
      court.**





**NOT
      APPLICABLE.**





**EXPLANATORY
        NOTES**


On
      June
      14, 2007, the Company changed its name from Mamma.com Inc. to Copernic Inc.





In
      this
      Annual Report on Form 20-F, unless otherwise indicated or the context otherwise
      requires, all monetary amounts are expressed in United States
      dollars.


2


**TABLE
      OF CONTENTS**




**SPECIAL
                NOTE ON FORWARD-LOOKING STATEMENTS**
            
            
            **4****PART
                I**
            
            
            **5****IDENTITY
                OF DIRECTORS, SENIOR MANAGEMENT AND ADVISERS**
            
            
            **5****OFFER
                STATISTICS AND EXPECTED TIMETABLE**
            
            
            **5****KEY
                INFORMATION**
            
            
            **5****INFORMATION
                ON THE COMPANY**
            
            
            **16****OPERATING
                AND FINANCIAL REVIEW AND PROSPECTS**
            
            
            **24****DIRECTORS,
                SENIOR MANAGEMENT AND EMPLOYEES**
            
            
            **50****MAJOR
                SHAREHOLDERS AND RELATED PARTY TRANSACTIONS**
            
            
            **62****FINANCIAL
                INFORMATION**
            
            
            **63****THE
                OFFER AND LISTING**
            
            
            **65****ADDITIONAL
                INFORMATION**
            
            
            **69****QUANTITATIVE
                AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK**
            
            
            **73****DESCRIPTION
                OF SECURITIES OTHER THAN EQUITY SECURITIES**
            
            
            **73****PART
                II**
            
            
            **73****DEFAULTS,
                DIVIDEND ARREARAGES AND DELINQUENCIES**
            
            
            **73****MATERIAL
                MODIFICATIONS TO THE RIGHTS OF SECURITY HOLDERS AND USE OF
                PROCEEDS**
            
            
            **73****CONTROLS
                AND PROCEDURES**
            
            
            **74****AUDIT
                COMMITTEE FINANCIAL EXPERT**
            
            
            **76****CODE
                OF ETHICS**
            
            
            **76****PRINCIPAL
                ACCOUNTANT FEES AND SERVICES**
            
            
            **76****EXEMPTIONS
                FROM THE LISTING STANDARDS FOR AUDIT COMMITTEES**
            
            
            **81****PURCHASES
                OF EQUITY SECURITIES BY THE ISSUER AND AFFILIATED
                PURCHASERS**
            
            
            **82****FINANCIAL
                STATEMENTS**
            
            
            **82****EXHIBITS**
            
            
            **114****SIGNATURES**
            
            
            **116**




3




**SPECIAL
          NOTE ON FORWARD-LOOKING STATEMENTS**


INFORMATION
      CONTAINED IN THIS ANNUAL REPORT ON FORM 20-F INCLUDES FORWARD-LOOKING
      STATEMENTS, WHICH CAN BE IDENTIFIED BY THE USE OF FORWARD-LOOKING TERMINOLOGY
      SUCH AS “BELIEVES,” “EXPECTS,” “MAY,” “DESIRES,” “WILL,” “SHOULD,” “PROJECTS,”
“ESTIMATES,” “CONTEMPLATES,” “ANTICIPATES,” “INTENDS,” OR ANY NEGATIVE SUCH AS
“DOES NOT BELIEVE” OR OTHER VARIATIONS THEREOF OR COMPARABLE TERMINOLOGY. NO
      ASSURANCE CAN BE GIVEN THAT POTENTIAL FUTURE RESULTS OR CIRCUMSTANCES DESCRIBED
      IN THE FORWARD-LOOKING STATEMENTS WILL BE ACHIEVED OR OCCUR. SUCH INFORMATION
      MAY ALSO INCLUDE CAUTIONARY STATEMENTS IDENTIFYING IMPORTANT FACTORS WITH
      RESPECT TO SUCH FORWARD-LOOKING STATEMENTS, INCLUDING CERTAIN RISKS AND
      UNCERTAINTIES THAT COULD CAUSE ACTUAL RESULTS TO VARY MATERIALLY FROM THE
      PROJECTIONS AND OTHER EXPECTATIONS DESCRIBED IN SUCH FORWARD-LOOKING STATEMENTS.
      PROSPECTIVE INVESTORS, CUSTOMERS, VENDORS AND ALL OTHER PERSONS ARE CAUTIONED
      THAT FORWARD-LOOKING STATEMENTS ARE NOT ASSURANCES, FORECASTS OR GUARANTEES
      OF
      FUTURE PERFORMANCE DUE TO RELATED RISKS AND UNCERTAINTIES, AND THAT ACTUAL
      RESULTS MAY DIFFER MATERIALLY FROM THOSE PROJECTED. FACTORS WHICH COULD CAUSE
      RESULTS OR EVENTS TO DIFFER FROM CURRENT EXPECTATIONS INCLUDE, AMONG OTHER
      THINGS: THE SEVERITY AND DURATION OF THE ADJUSTMENTS IN OUR BUSINESS SEGMENTS;
      THE EFFECTIVENESS OF OUR RESTRUCTURING ACTIVITIES, INCLUDING THE VALIDITY OF
      THE
      ASSUMPTIONS UNDERLYING OUR RESTRUCTURING EFFORTS; FLUCTUATIONS IN OPERATING
      RESULTS; THE IMPACT OF GENERAL ECONOMIC, INDUSTRY AND MARKET CONDITIONS; THE
      ABILITY TO RECRUIT AND RETAIN QUALIFIED EMPLOYEES; FLUCTUATIONS IN CASH FLOW;
      INCREASED LEVELS OF OUTSTANDING DEBT; EXPECTATIONS REGARDING MARKET DEMAND
      FOR
      PARTICULAR PRODUCTS AND SERVICES AND THE DEPENDENCE ON NEW PRODUCT/SERVICE
      DEVELOPMENT; DELAYS IN MARKET ACCEPTANCE OF NEW PRODUCTS; THE ABILITY TO MAKE
      ACQUISITIONS AND/OR INTEGRATE THE OPERATIONS AND TECHNOLOGIES OF ACQUIRED
      BUSINESSES IN AN EFFECTIVE MANNER; THE IMPACT OF RAPID TECHNOLOGICAL AND MARKET
      CHANGE; THE IMPACT OF PRICE AND PRODUCT COMPETITION; THE UNCERTAINTIES IN THE
      MARKET FOR INTERNET-BASED PRODUCTS AND SERVICES; STOCK MARKET VOLATILITY; THE
      TRADING VOLUME OF OUR STOCK; THE POSSIBILITY THAT OUR STOCK MAY NOT SATISFY
      OUR
      REQUIREMENTS FOR CONTINUED LISTING ON THE NASDAQ CAPITAL MARKET INCLUDING
      WHETHER THE MINIMUM BID PRICE FOR THE STOCK FALLS BELOW $1; AND THE ADVERSE
      RESOLUTION OF LITIGATION OR RELATED EVENTS COULD HAVE A NEGATIVE IMPACT ON
      THE
      COMPANY, INCREASE COMPANY EXPENSES OR CAUSE EVENTS OR RESULTS TO DIFFER FROM
      CURRENT EXPECTATIONS. FOR ADDITIONAL INFORMATION WITH RESPECT TO THESE AND
      CERTAIN OTHER FACTORS THAT MAY AFFECT ACTUAL RESULTS, SEE THE REPORTS AND OTHER
      INFORMATION FILED OR FURNISHED BY THE COMPANY WITH THE UNITED STATES SECURITIES
      AND EXCHANGE COMMISSION (“SEC”) AND/OR THE ONTARIO SECURITIES COMMISSION (“OSC”)
      RESPECTIVELY ACCESSIBLE ON THE INTERNET AT WWW.SEC.GOV AND WWW.SEDAR.COM, OR
      THE
      COMPANY’S WEB SITE AT WWW.COPERNIC-INC.COM. ALL INFORMATION CONTAINED IN THIS
      ANNUAL REPORT ON FORM 20-F IS QUALIFIED IN ITS ENTIRETY BY THE FOREGOING AND
      REFERENCE TO THE OTHER INFORMATION THE COMPANY FILES WITH THE OSC AND SEC.
      UNLESS OTHERWISE REQUIRED BY APPLICABLE SECURITIES LAWS, THE COMPANY DISCLAIMS
      ANY INTENTION OR OBLIGATION TO UPDATE OR REVISE ANY FORWARD-LOOKING STATEMENTS,
      WHETHER AS A RESULT OF NEW INFORMATION, FUTURE EVENTS OR OTHERWISE.




**PERIOD-TO-PERIOD
          COMPARISONS**


A
      VARIETY
      OF FACTORS MAY CAUSE PERIOD-TO-PERIOD FLUCTUATIONS IN THE COMPANY’S OPERATING
      RESULTS, INCLUDING BUSINESS ACQUISITIONS, REVENUES AND EXPENSES RELATED TO
      THE
      INTRODUCTION OF NEW PRODUCTS AND SERVICES OR NEW VERSIONS OF EXISTING PRODUCTS,
      NEW OR STRONGER COMPETITORS IN THE MARKETPLACE AS WELL AS CURRENCY FLUCTUATIONS,
      ECONOMIC RECESSIONS AND RECOVERIES. HISTORICAL OPERATING RESULTS ARE NOT
      INDICATIVE OF FUTURE RESULTS AND PERFORMANCE.




4


PART
      I





**ITEM
                1.**
            **IDENTITY
                OF DIRECTORS, SENIOR MANAGEMENT AND ADVISERS****Not
                Applicable****ITEM
                2.**
            **OFFER
                STATISTICS AND EXPECTED TIMETABLE****Not
                Applicable****ITEM
                3.**
            **KEY
                INFORMATION**





***SELECTED
      FINANCIAL DATA***





The
      following consolidated statements of operations data for the years ended
      December 31, 2007, 2006 and 2005, and consolidated balance sheets data as at
      December 31, 2007 and 2006 is derived from the audited consolidated financial
      statements included in Item 17. All other financial information below is
      unaudited and derived from sources not included in Item 17. The selected
      consolidated financial data in the following tables should be read in
      conjunction with our audited consolidated financial statements, including the
      notes thereto, and “Item 5 - Operating and Financial Review and Prospects”,
      included elsewhere in this Form 20-F.




5





**CANADIAN
      GAAP**


**YEAR
      ENDED DECEMBER 31** **st**




**2007**
            
            **2006**
            
            **2005**
            
            **2004**
            
            **2003**$
            
            $
            
            $
            
            $
            
            **$****Consolidated
                  Statements of Operations
                  Data****Revenues**
            
            
            8,116,408
            
            
            9,596,402
            
            
            9,443,975
            
            
            14,636,318
            
            
            8,938,863**Earnings
                  (loss) from
                  continuing operations**
            
            
            (14,430,826
            )
            
            (4,358,708
            )
            
            (3,342,983
            )
            
            370,753
            
            
            88,990**Results
                  of discontinued operations, net of income
                  taxes**
            
            
            -
            
            
            89,328
            
            
            (2,315,335
            )
            
            733,654
            
            
            (300,053
            )**Net
                earnings (loss) for the year**
            
            
            (14,430,826
            )
            
            (4,269,380
            )
            
            (5,658,318
            )
            
            1,104,407
            
            
            (211,063
            )**Basic
                  and diluted earnings (loss) per share from
                  continuing** **operations**
            
            
            (0.99
            )
            
            (0.31
            )
            
            (0.27
            )
            
            0.03
            
            
            0.01**Basic
                  and diluted earnings (loss) per share from
                  discontinued** **operations**
            
            
            -
            
            
            0.01
            
            
            (0.19
            )
            
            0.07
            
            
            (0.04
            )**Basic
                  and diluted net earnings (loss) per
                  share**
            
            
            (0.99
            )
            
            (0.30
            )
            
            (0.46
            )
            
            0.10
            
            
            (0.03
            )**Weighted
                  average number of shares –
                  basic**
            
            
            14,564,894
            
            
            14,340,864
            
            
            12,168,117
            
            
            10,758,604
            
            
            6,207,360**Weighted
                  average number of shares –
                  diluted**
            
            
            14,564,894
            
            
            14,340,864
            
            
            12,168,117
            
            
            11,209,906
            
            
            8,041,236**2007**
            
            
            **2006**
            
            
            **2005**
            
            
            **2004**
            
            
            **2003**$
            
            
            $
            
            
            $
            
            
            $
            
            
            $**Consolidated
                Balance Sheets****Data****Total
                assets**
            
            
            18,357,856
            
            
            33,339,488
            
            
            38,327,198
            
            
            35,166,098
            
            
            11,736,414**Total
                liabilities**
            
            
            2,557,462
            
            
            4,444,838
            
            
            5,810,217
            
            
            3,130,526
            
            
            3,716,276**Net
                assets**
            
            
            15,800,394
            
            
            28,894,650
            
            
            32,516,981
            
            
            32,035,572
            
            
            8,020,138**Working
                capital**
            
            
            6,413,044
            
            
            8,533,546
            
            
            8,944,985
            
            
            27,528,003
            
            
            4,351,746**Capital
                stock**
            
            
            96,556,485
            
            
            95,298,234
            
            
            95,298,234
            
            
            90,496,088
            
            
            70,522,179**Additional
                paid-in capital**
            
            
            5,784,502
            
            
            5,706,183
            
            
            5,249,902
            
            
            3,921,806
            
            
            904,008**Accumulated
                  other comprehensive gain**
            
            
            561,137
            
            
            561,137
            
            
            370,369
            
            
            360,884
            
            
            441,564**Accumulated
                deficit**
            
            
            (87,101,730
            )
            
            (72,670,904
            )
            
            (68,401,524
            )
            
            (62,743,206
            )
            
            (63,847,613
            )**Shareholders’
                equity**
            
            
            15,800,394
            
            
            28,894,650
            
            
            32,516,981
            
            
            32,035,572
            
            
            8,020,138**Other****Cash
                dividends**
            
            
            None
            
            
            None
            
            
            None
            
            
            None
            
            
            None




6





**U.S.
      GAAP**


**YEAR
      ENDED DECEMBER 31** **st**




**2007**
            
            **2006**
            
            **2005**
            
            **2004**
            
            **2003**$
            
            $
            
            $
            
            $
            
            **$****Consolidated
                  Statements of Operations
                  Data****Revenues**
            
            
            8,116,408
            
            
            9,596,402
            
            
            9,443,975
            
            
            14,636,318
            
            
            8,938,863**Earnings
                  (loss) from
                  continuing operations**
            
            
            (14,430,826
            )
            
            (4,358,708
            )
            
            (3,342,983
            )
            
            370,753
            
            
            88,990**Results
                  of discontinued operations, net of income
                  taxes**
            
            
            -
            
            
            89,328
            
            
            (2,315,335
            )
            
            733,654
            
            
            (300,053
            )**Net
                earnings (loss) for the year**
            
            
            (14,430,826
            )
            
            (4,269,380
            )
            
            (5,658,318
            )
            
            1,104,407
            
            
            (211,063
            )**Basic
                and diluted earnings (loss) per share from
                continuing** **operations**
            
            
            (0.99
            )
            
            (0.31
            )
            
            (0.27
            )
            
            0.03
            
            
            0.01**Basic
                  and diluted earnings (loss) per share from
                  discontinued** **operations**
            
            
            -
            
            
            0.01
            
            
            (0.19
            )
            
            0.07
            
            
            (0.04
            )**Basic
                  and diluted net earnings (loss) per
                  share**
            
            
            (0.99
            )
            
            (0.30
            )
            
            (0.46
            )
            
            0.10
            
            
            (0.03
            )**Weighted
                  average number of shares –
                  basic**
            
            
            14,564,894
            
            
            14,340,864
            
            
            12,168,117
            
            
            10,758,604
            
            
            6,207,360**Weighted
                  average number of shares –
                  diluted**
            
            
            14,564,894
            
            
            14,340,864
            
            
            12,168,117
            
            
            11,209,906
            
            
            8,041,236**2007**
            
            
            **2006**
            
            
            **2005**
            
            
            **2004**
            
            
            **2003**$
            
            
            $
            
            
            $
            
            
            $
            
            
            $**Consolidated
                Balance Sheets****Data****Total
                assets**
            
            
            18,357,856
            
            
            33,339,488
            
            
            38,327,198
            
            
            35,166,098
            
            
            11,736,414**Total
                liabilities**
            
            
            2,557,462
            
            
            4,444,838
            
            
            5,810,217
            
            
            3,130,526
            
            
            3,716,276**Net
                assets**
            
            
            15,800,394
            
            
            28,894,650
            
            
            32,516,981
            
            
            32,035,572
            
            
            8,020,138**Working
                capital**
            
            
            6,413,044
            
            
            8,533,546
            
            
            8,944,985
            
            
            27,528,003
            
            
            4,351,746**Capital
                stock**
            
            
            113,326,055
            
            
            112,067,804
            
            
            112,067,804
            
            
            107,265,658
            
            
            87,291,749**Additional
                paid-in capital**
            
            
            6,822,192
            
            
            6,743,873
            
            
            6,287,592
            
            
            4,959,496
            
            
            1,941,698**Accumulated
                  other comprehensive gain**
            
            
            561,137
            
            
            561,137
            
            
            370,369
            
            
            360,884
            
            
            441,564**Accumulated
                deficit**
            
            
            (104,908,990
            )
            
            (90,478,164
            )
            
            (86,208,784
            )
            
            (80,550,466
            )
            
            (81,654,873
            )**Shareholders’
                equity**
            
            
            15,800,394
            
            
            28,894,650
            
            
            32,516,981
            
            
            32,035,572
            
            
            8,020,138**Other****Cash
                dividends**
            
            
            None
            
            
            None
            
            
            None
            
            
            None
            
            
            None




7





***CAPITALIZATION
      AND INDEBTEDNESS***





The
      following tables set forth the consolidated cash and consolidated capitalization
      of the Company as at December 31, 2007 prepared in accordance with Canadian
      GAAP
      and United States GAAP, respectively.





(Prepared
                in accordance with Canadian GAAP)
            
            **As at December 31,**
              **2007**
              **$**Cash,
                cash equivalents and restricted cash
            
            
            2,907,028Temporary
                investments
            
            
            3,965,384Indebtnesscurrent
                liabilities
            
            
            1,807,261Obligations
                under capital leases
            
            
            99,788Future
                income taxes
            
            
            650,413Shareholders’
                EquityCapital
                stock
            
            
            96,556,485Additional
                paid-in capital
            
            
            5,784,502Cumulative
                translation adjustment
            
            
            561,137Accumulated
                deficit
            
            
            (87,101,730
            )Total
                shareholders’ equity
            
            
            15,800,394Total
                capitalization
            
            
            18,357,856(Prepared
                in accordance with US GAAP)
            
            
            **As at December 31,**
              **2007**
              **$**Cash and
                cash equivalentsand restricted cash
            
            
            2,907,028Temporary
                investments
            
            
            3,965,384Indebtnesscurrent
                liabilities
            
            
            1,807,261Obligations
                under capital leases
            
            
            99,788Future
                income taxes
            
            
            650,413Shareholders’
                EquityCapital
                stock
            
            
            113,326,055Additional
                paid-in capital
            
            
            6,822,192Cumulative
                translation adjustment
            
            
            561,137Accumulated
                deficit
            
            
            (104,908,990
            )Total
                shareholders’ equity
            
            
            15,800,394Total
                capitalization
            
            
            18,357,856***Reasons
                for the Offer and Use of Proceeds*****Not
                Applicable.**




8





***RISK
      FACTORS***





*Our
      revenues depend to a high degree on our relationship with two customers, the
      loss of which would adversely affect our business and results of
      operations.*





For
      the
      year ended December 31, 2007, approximately 20% and 14% respectively of our
      revenues were derived from agreements with our two largest customers. Revenues
      from these customers represented 22% and 11% of our revenues in 2006
      and  16
      % and
      11% of our revenues in 2005. Although we monitor our accounts receivable for
      credit risk deterioration and these customers have been paying their payables
      to
      Copernic Inc. in accordance with the terms of their agreements with the Company,
      there can be no assurance that they will continue to do so or that they will
      continue to do so at the volume of business they have done historically. Our
      loss of these customers’ business would adversely affect our business and
      results of operations.





*Our
      operating results may fluctuate, which makes our results difficult to predict
      and could cause our results to fall short of expectations.*





Our
      operating results may fluctuate as a result of a number of factors, many of
      which are outside of our control. For these reasons, comparing our operating
      results on a period-to-period basis may not be meaningful, and you should not
      rely on our past results as an indication of our future performance. Our
      operating results may fluctuate as a result of many factors related to our
      business, including the competitive conditions in the industry, loss of
      significant customers, delays in the development of new services and usage
      of
      the Internet, as described in more detail below, and general factors such as
      size and timing of orders and general economic conditions. Our quarterly and
      annual expenses as a percentage of our revenues may be significantly different
      from our historical or projected rates. Our operating results in future quarters
      may fall below expectations. Any of these events could cause our stock price
      to
      fall. Each of the risk factors listed in this “Risk Factors” section, and the
      following factors, may affect our operating results:





·
            Our
                ability to continue to attract users to our Web sites.


·
            Our
                ability to monetize (or generate revenue from) traffic on our Web
                sites
                and our network of advertisers’ Web sites.


·
            Our
                ability to attract advertisers.


·
            The
                amount and timing of operating costs and capital expenditures related
                to
                the maintenance and expansion of our businesses, operations and
                infrastructure.


·
            Our
                focus on long term goals over short term results.


·
            The
                results of any investments in risky projects.


·
            Payments
                that may be made in connection with the resolution of litigation
                matters.


·
            General
                economic conditions and those economic conditions specific to the
                Internet
                and Internet advertising.


·
            Our
                ability to keep our Web sites operational at a reasonable cost and
                without
                service interruptions.


·
            Geopolitical
                events such as war, threat of war or terrorist actions.


·
            Our
                ability to generate Copernic Desktop Search (“CDS”) revenues through
                licensing and revenue share.





Because
      our business is changing and evolving, our historical operating results may
      not
      be useful to you in predicting our future operating results. In addition,
      advertising spending has historically been cyclical in nature, reflecting
      overall economic conditions as well as budgeting and buying patterns. Also,
      user
      traffic tends to be seasonal.





*We
      rely on our Web site partners for a significant portion of our net revenues,
      and
      otherwise benefit from our association with them. The loss of these Web site
      partners could prevent us from receiving the benefits we receive from our
      association with them, which could adversely affect our
      business.*





We
      provide advertising, Web search and other services to members of our partner
      Web
      sites. We expect the percentage of our revenues generated from this network
      to
      increase in the future. We consider this network to be critical in the future
      growth of our revenues. However, some of the participants in this network may
      compete with us in one or more areas. Therefore, they may decide in the future
      to terminate their agreements with us. If our Web site partners decide to use
      a
      competitor’s or their own Web search or advertising services, our revenues would
      decline.




9


*We
      face significant competition from Microsoft, Yahoo, Google and Ask.com.*





We
      face
      formidable competition in every aspect of our business, and particularly from
      other companies that seek to connect people with information on the Web and
      provide them with relevant advertising. Currently, we consider our primary
      competitors to be Microsoft, Yahoo, Google and Ask.com. Microsoft, Yahoo, Google
      and Ask.com have a variety of Internet products, services and content that
      directly competes with our products, services, content and advertising
      solutions. We expect that Microsoft will increasingly use its financial and
      engineering resources to compete with us.





Microsoft,
      Yahoo, Google and Ask.com have more employees and cash resources than we do.
      These companies also have longer histories operating search engines and more
      established relationships with customers. They can use their experience and
      resources against us in a variety of competitive ways, including by making
      acquisitions, investing more aggressively in research and development and
      competing more aggressively for advertisers and Web sites. Microsoft and Yahoo
      also may have a greater ability to attract and retain users than we do because
      they operate Internet portals with a broad range of products and services.
      If
      Microsoft, Yahoo, Google or Ask.com are successful in providing similar or
      better Web search results compared to ours or leverage their platforms to make
      their Web search services easier to access than ours, we could experience a
      significant decline in user traffic. Any such decline in user traffic could
      negatively affect our net revenues.





*We
      face competition from other Internet companies, including Web search providers,
      Internet advertising companies and destination Web sites that may also bundle
      their services with Internet access.*





In
      addition to Microsoft, Yahoo, Google and Ask.com, we face competition from
      other
      Web search providers, including companies that are not yet known to us. We
      compete with Internet advertising companies, particularly in the areas of
      pay-for-performance and keyword-targeted Internet advertising. Also, we may
      compete with companies that sell products and services online because these
      companies, like us, are trying to attract users to their Web sites to search
      for
      information about products and services. Barriers to entry in our business
      are
      generally low and products, once developed, can be distributed quickly and
      to a
      wide range of customers at a reasonably low cost.





We
      also
      compete with destination Web sites that seek to increase their search-related
      traffic. These destination Web sites may include those operated by Internet
      access providers, such as cable and DSL service providers. Because our users
      need to access our services through Internet access providers, they have direct
      relationships with these providers. If an access provider or a computer or
      computing device manufacturer offers online services that compete with ours,
      the
      user may find it more convenient to use the services of the access provider
      or
      manufacturer. In addition, the access provider or manufacturer may make it
      hard
      to access our services by not listing them in the access provider’s or
      manufacturer’s own menu of offerings. Also, because the access provider gathers
      information from the user in connection with the establishment of a billing
      relationship, the access provider may be more effective than we are in tailoring
      services and advertisements to the specific tastes of the user.





There
      has
      been a trend toward industry consolidation among our competitors, and so smaller
      competitors today may become larger competitors in the future. If our
      competitors are more successful than we are at generating traffic and
      advertising, our revenues may decline.





*We
      face competition from traditional media companies, and we may not be included
      in
      the advertising budgets of large advertisers, which could harm our operating
      results.*





In
      addition to Internet companies, we face competition from companies that offer
      traditional media advertising opportunities. Most large advertisers have set
      advertising budgets, a very small portion of which is allocated to Internet
      advertising. We expect that large advertisers will continue to focus most of
      their advertising efforts on traditional media. If we fail to convince these
      companies to spend a portion of their advertising budgets with us, or if our
      existing advertisers reduce the amount they spend on our programs, our operating
      results would be harmed.





*Our
      revenues declined in 2007 and we are experiencing downward pressure on our
      operating margin, which we expect will intensify in the
      future.*





We
      believe our operating margin may decline as a result of increasing competition
      and increased expenditures for all aspects of our business as a percentage
      of
      our revenues, including product development and sales and marketing expenses.
      Also, our operating margin has declined as a result of increases in the
      proportion of our revenues generated from our partner Web sites. The margin
      on
      revenues we generate from our partner Web sites is generally significantly
      less
      than the margin on revenues we generate from advertising on our Web sites.
      Additionally, the  margin
      we
      earn on revenues generated from our partner Web sites could decrease in the
      future if our partners require a greater portion of the advertising fees.




10




*If
        we
        do not continue to innovate and provide products and services that are useful
        to
        users, we may not remain competitive, and our revenues and operating results
        could suffer.*


Our
      success depends on providing products and services that people use for a high
      quality Internet experience. Our competitors are constantly developing
      innovations in Web search, online advertising and providing information to
      people. As a result, we must continue to invest significant resources in
      research and development in order to enhance our Web search technology and our
      existing products and services and introduce new high-quality products and
      services that people will use. If we are unable to predict user preferences
      or
      industry changes, or if we are unable to modify our products and services on
      a
      timely basis, we may lose users, advertisers and Web site partners. Our
      operating results would also suffer if our innovations were not responsive
      to
      the needs of our users, advertisers and Web site partners are not appropriately
      timed with market opportunity, effectively brought to market or well received
      in
      the market place. As search technology continues to develop, our competitors
      may
      be able to offer search results that are, or that are perceived to be,
      substantially similar or better than those generated by our search services.
      This may force us to compete on bases in addition to quality of search results
      and to expend significant resources in order to remain competitive.





*Our
      business depends on a strong brand, and if we are not able to maintain and
      enhance our brands, our ability to expand our base of users and advertisers
      will
      be impaired and our business and operating results will be harmed.*





We
      believe that the brand identity that we have developed has significantly
      contributed to the success of our business. We also believe that maintaining
      and
      enhancing the Company’s brands are critical to expanding our base of users and
      advertisers. Maintaining and enhancing our brands may require us to make
      substantial investments and these investments may not be successful. If we
      fail
      to promote and maintain the Mamma® and Copernic® brands, or if we incur
      excessive expenses in this effort, our business, operating results and financial
      condition will be materially and adversely affected. We anticipate that, as
      our
      market becomes increasingly competitive, maintaining and enhancing our brands
      may become increasingly difficult and expensive. Maintaining and enhancing
      our
      brands will depend largely on our ability to continue to provide high quality
      products and services, which we may not do successfully.





We
      generated a significant portion of our revenues in 2007 from our advertisers.
      Our advertisers can generally terminate their contracts with us at any time.
      Advertisers will not continue to do business with us if their investment in
      advertising with us does not generate sales leads, and ultimately customers,
      or
      if we do not deliver their advertisements in an appropriate and effective
      manner.





*New
      technologies could block our ads, which would harm our
      business.*





Technologies
      are being developed that can block the display of our ads. Most of our revenues
      are derived from fees paid to us by advertisers in connection with the display
      of ads on Web pages. As a result, ad-blocking technology could, in the future,
      adversely affect our operating results.





*We
      generate all of our revenue from advertising and software licensing, and the
      reduction of spending by or loss of customers could seriously harm our
      business.*





If
      we are
      unable to remain competitive and provide value to our advertisers, they may
      stop
      placing ads with us, which could negatively affect our net revenues and
      business. Copernic has on-going efforts to maintain a high quality network
      of
      publishers in order to offer advertisers high quality users that will provide
      for a satisfactory ROI. Therefore, from time to time we cease sending
      advertisements to what we determine are low quality publishers. This can reduce
      our revenues in the short term in order to create advertiser retention in the
      long term.





*We
      make investments in new products and services that may not be
      profitable.*





We
      have
      made and will continue to make investments in research, development and
      marketing for new products, services and technologies. Our success in this
      area
      depends on many factors including our innovativeness, development support,
      marketing and distribution. We may not achieve significant revenue from a new
      product for a number of years, if at all. For the years 2006 and 2007, we did
      not generate significant revenues from licensing Copernic® software and we
      cannot assure you that we will generate significant revenue from licensing
      of
      Copernic® software going forward. In addition, our competitors are constantly
      improving their competing software, and if we fail to innovate and remain
      competitive our revenues from software licensing will decline.





*Volatility
      of stock price and trading volume could adversely affect the market price and
      liquidity of the market for our Common Shares.*




Our
      Common Shares are subject to significant price and volume fluctuations, some
      of
      which result from various factors including (a) changes in our business,
      operations, and future prospects, (b) general market and economic conditions,
      and (c) other factors affecting the perceived value of our Common Shares.
      Significant price and volume fluctuations have particularly impacted the market
      prices of equity securities of many technology companies including without
      limitation those providing communications software or Internet-related products
      and services. Some of these fluctuations appear to be unrelated or
      disproportionate to the operating performance of such companies. The market
      price and trading volume of our Common Shares have been, and may likely continue
      to be, volatile, experiencing wide fluctuations. In addition, the stock market
      in general, and market prices for Internet-related companies in particular,
      have
      experienced volatility that often has been unrelated to the operating
      performance of such companies. These broad market and industry fluctuations
      may
      adversely affect the price of our stock, regardless of our operating
      performance.




11


Furthermore,
      should the market price of our Common Shares drop below the $1.00 per share
      minimum bid price requirement, our Common Shares risk being delisted from The
      NASDAQ Stock Market®, which would have an adverse effect on our business and
      liquidity of our Common Shares. Through the month of December 2007 our stock
      price had steadily declined and as of December 31, 2007 our stock price was
      $1.41 per share. Brokerage firms may not provide a market for low-priced stock,
      may not recommend low-priced stock to their clients and may charge a greater
      percentage commission on low-priced stock than that which they would charge
      on a
      transaction of a similar dollar amount but fewer shares. These circumstances
      may
      adversely impact trading in our Common Shares and may also adversely affect
      our
      ability to access capital.





*Infringement
      and liability claims could damage our business.*





Companies
      in the Internet, technology and media industries own large numbers of patents,
      copyrights, trademarks and trade secrets and frequently enter into litigation
      based on allegations of infringement or other violations of intellectual
      property rights. As we face increasing competition and become increasingly
      high
      profile, the possibility of intellectual property rights claims against us
      grows. Our technologies may not be able to withstand any third-party claims
      or
      rights against their use. Any intellectual property claims, with or without
      merit, could be time-consuming, expensive to litigate or settle and could divert
      resources and attention. In addition, many of our agreements with our
      advertisers require us to indemnify certain third-party intellectual property
      infringement claims, which would increase our costs as a result of defending
      such claims and may require that we pay damages if there were an adverse ruling
      in any such claims. An adverse determination also could prevent us from offering
      our services to others and may require that we procure substitute services
      for
      these members.





With
      respect to any intellectual property rights claim, to resolve these claims,
      we
      may enter into royalty and licensing agreements on less favorable terms, pay
      damages or stop using technology or content found to be in violation of a third
      party’s rights. We may have to seek a license for the technology or content,
      which may not be available on reasonable terms and may significantly increase
      our operating expenses. The technology or content also may not be available
      for
      license to us at all. As a result, we may also be required to develop
      alternative non-infringing technology, which could require significant effort
      and expense, or stop using the content. If we cannot license or develop
      technology or content for the infringing aspects of our business, we may be
      forced to limit our product and service offerings and may be unable to compete
      effectively. Any of these results could harm our brand and operating results.





In
      addition, we may be liable to third-parties for content in the advertising
      we
      deliver if the artwork, text or other content involved violates copyright,
      trademark, or other intellectual property rights of third-parties or if the
      content is defamatory. Any claims or counterclaims could be time-consuming,
      could result in costly litigation and could divert management’s
      attention.





Additionally,
      we may be subject to legal actions alleging patent infringement, unfair
      competition or similar claims. Others may apply for or be awarded patents or
      have other intellectual property rights covering aspects of our technology
      or
      business. For example we understand that Overture Services, Inc. (acquired
      by
      Yahoo) purports to be the owner of U.S. Patent No. 6,269,361, which was issued
      on July 31, 2001 and is entitled “System and method for influencing a position
      on a search result list generated by a computer network search engine.” Overture
      has aggressively pursued its alleged patent rights by filing lawsuits against
      other pay-per-click search engine companies such as MIVA (formerly known as
      FindWhat.com) and Google. MIVA and Google have asserted counter-claims against
      Overture including, but not limited to, invalidity, unenforceability and
      non-infringement. While it is our understanding that the lawsuits against MIVA
      and Google have been settled, there is no guarantee Overture will not pursue
      its
      alleged patent rights against other companies.





*An
      inability to protect our intellectual property rights could damage our business.*





We
      rely
      upon a combination of trade secret, copyright, trademark, patents and other
      laws
      to protect our intellectual property assets. We have entered into
      confidentiality agreements with our management and key employees with respect
      to
      such assets and limit access to, and distribution of, these and other
      proprietary information. However, the steps we take to protect our intellectual
      property assets may not be adequate to deter or prevent misappropriation. We
      may
      be unable to detect unauthorized uses of and take appropriate steps to enforce
      and protect our intellectual property rights. Additionally, the absence of
      harmonized patent laws between the United States and Canada makes it more
      difficult to ensure consistent respect for patent rights. Although senior
      management believes that our services and products do not infringe on the
      intellectual property rights of others, we nevertheless are subject to the
      risk
      that such a claim may be asserted in the future. Any such claims could damage
      our business.





*Historical
      net results include net losses for the years ended December 31, 1999 to December
      31, 2003 and for the years ended December 31, 2005 to December 31, 2007. Working
      capital may be inadequate.*





For
      the
      years ended December 31, 1999 through the year ended December 31, 2003 and
      for
      the years ended December 31, 2005 to December 31, 2007, we have reported net
      losses and net losses per share. We have been financing operations mainly from
      funds obtained in several private placements, and from exercised warrants and
      options. Management considers that liquidities as at December 31, 2007 will
      be
      sufficient to meet normal operating requirements throughout 2008. In the long
      term, we may require additional liquidity to fund growth, which could include
      additional equity offerings or debt finance. No assurance can be given that
      we
      will be successful in getting required financing in the future.




12


*Goodwill
      may be written-down in the future.*





Goodwill
      is evaluated for impairment annually, or when events or changed circumstances
      indicate impairment may have occurred. Management monitors goodwill for
      impairment by considering estimates including discount rate, future growth
      rates, amounts and timing of estimated future cash flows, general economic,
      industry conditions and competition. Future adverse changes in these factors
      could result in losses or inability to recover the carrying value of the
      goodwill. Consequently, our goodwill, which amounts to approximately $7.4M
      as at
      December 31, 2007, may be written-down in the future which could adversely
      effect our financial position.





*Long-lived
      assets may be written-down in the future.*





The
      Company assesses the carrying value of its long-lived assets, which include
      property and equipment and intangible assets, for future recoverability when
      events or changed circumstances indicate that the carrying value may not be
      recoverable. Management monitors long-lived assets for impairment by considering
      estimates including discount rate, future growth rates, general economic,
      industry conditions and competition. Future adverse changes in these factors
      could result in losses or inability to recover the carrying value of the
      long-lived assets. Consequently, our long-lived assets, which amounts to
      approximately $2.8M as at December 31, 2007, may be written-down in the
      future.





*Reduced
      Internet use may adversely affect our results.*





Our
      business is based on Internet driven products and services including direct
      online Internet marketing. The emerging nature of the commercial uses of the
      Internet makes predictions concerning a significant portion of our future
      revenues difficult. As the industry is subject to rapid changes, we believe
      that
      period-to-period comparisons of its results of operations will not necessarily
      be meaningful and should not be relied upon as indicative of our future
      performance. It is also possible that in some fiscal quarters, our operating
      results will be below the expectations of securities analysts and investors.
      In
      such circumstances, the price of our Common Shares may decline. The success
      of a
      significant portion of our operations depends greatly on increased use of the
      Internet by businesses and individuals as well as increased use of the Internet
      for sales, advertising and marketing. It is not clear how effective Internet
      related advertising is or will be, or how successful Internet-based sales will
      be. Our results will suffer if commercial use of the Internet, including the
      areas of sales, advertising and marketing, fails to grow in the
      future.





*Our
      business depends on the continued growth and maintenance of the Internet
      infrastructure.*





The
      success and availability of our internet based products and services depend
      on
      the continued growth, maintenance and use of the Internet. Spam, viruses, worms,
      spyware, denial of service attacks, phishing and other acts of malice may affect
      not only the Internet’s speed and reliability but also its desirability for use
      by customers. If the Internet is unable to meet these threats placed upon it,
      our business, advertiser relationships, and revenues could be adversely
      affected.





*Our
      long-term success may be materially adversely affected if the market for
      E-commerce does not grow or grows slower than expected.*





Because
      many of our customers’ advertisements encourage online purchasing and/or
      Internet use, our long-term success may depend in part on the growth and market
      acceptance of e-commerce. Our business will be adversely affected if the market
      for e-commerce does not continue to grow or grows slower than expected. A number
      of factors outside of our control could hinder the future growth of e-commerce,
      including the following:





·
            the
                network infrastructure necessary for substantial growth in Internet
                usage
                may not develop adequately or our performance and reliability may
                decline;


·
            insufficient
                availability of telecommunication services or changes in telecommunication
                services could result in inconsistent quality of service or slower
                response times on the Internet;


·
            negative
                publicity and consumer concern surrounding the security of e-commerce
                could impede our growth; and


·
            financial
                instability of e-commerce customers.





*Security
      breaches and privacy concerns may negatively impact our
      business.*





Consumer
      concerns about the security of transmissions of confidential information over
      public telecommunications facilities is a significant barrier to increased
      electronic commerce and communications on the Internet that are necessary for
      growth of the Company’s business. Many factors may cause compromises or breaches
      of the security systems we use or other Internet sites use to protect
      proprietary information, including advances in computer and software
      functionality or new discoveries in the fields of cryptography and processor
      design. A compromise of security on the Internet would have a negative effect
      on
      the use of the Internet for commerce and communications and negatively impact
      our business. Security breaches of their activities or the activities of their
      customers and sponsors involving the storage and transmission of proprietary
      information, such as credit card numbers, may expose our operating business
      to a
      risk of loss or litigation and possible liability. We cannot assure you that
      the
      measures in place are adequate to prevent security breaches.


13


*If
      we
      fail to detect click fraud* *or
      other malicious applications or activity of others* *,
      we
      could lose the confidence of our advertisers* *as
      well as face potential litigation, government regulation or
      legislation* *,
      thereby causing our business to suffer.*





We
      are
      exposed to the risk of fraudulent clicks on our ads and other clicks that
      advertisers may perceive as undesirable. Click fraud occurs when a person clicks
      on an ad displayed on a Web site for a reason other than to view the underlying
      content. These types of fraudulent activities could hurt our brands. If
      fraudulent clicks are not detected, the affected advertisers may experience
      a
      reduced return on their investment in our advertising programs because the
      fraudulent clicks will not lead to potential revenue for the advertisers.
      Advertiser dissatisfaction with click fraud and other traffic quality related
      claims has lead to litigation and possible governmental regulation of
      advertising. Any increase in costs due to any such litigation, government
      regulation, or refund could negatively impact our profitability.





*Index
      spammers could harm the integrity of our Web search results, which could damage
      our reputation and cause our users to be dissatisfied with our products and
      services.*





There
      is
      an ongoing and increasing effort by “index spammers” to develop ways to
      manipulate our Web search results. Although they cannot manipulate our results
      directly, “index spammers” can manipulate our suppliers like Ask.com,
      Gigablast.com or Wisenut.com, which can result in our search engine pages
      producing poor results. We take this problem very seriously because providing
      relevant information to users is critical to our success. If our efforts to
      combat these and other types of manipulation are unsuccessful, our reputation
      for delivering relevant information could be diminished. This could result
      in a
      decline in user traffic, which would damage our business.





*Our
      business is subject to a variety of U.S. and foreign laws that could subject
      us
      to claims or other remedies based on the nature and content of the information
      searched or displayed by our products and services, and could limit our ability
      to provide information regarding regulated industries and products.*





The
      laws
      relating to the liability of providers of online services for activities of
      their users are currently unsettled both within the U.S. and abroad. Claims
      have
      been threatened and filed under both U.S. and foreign law for defamation, libel,
      invasion of privacy and other data protection claims, tort, unlawful activity,
      copyright or trademark infringement, or other theories based on the nature
      and
      content of the materials searched and the ads posted or the content generated
      by
      our users. Increased attention focused on these issues and legislative proposals
      could harm our reputation or otherwise affect the growth of our business.





The
      application to us of existing laws regulating or requiring licenses for certain
      businesses of our advertisers, including, for example, distribution of
      pharmaceuticals, adult content, financial services, alcohol or firearms and
      online gambling, can be unclear. Existing or new legislation could expose us
      to
      substantial liability, restrict our ability to deliver services to our users,
      limit our ability to grow and cause us to incur significant expenses in order
      to
      comply with such laws and regulations.





Several
      other federal laws could have an impact on our business. Compliance with these
      laws and regulations is complex and may impose significant additional costs
      on
      us. For example, the Digital Millennium Copyright Act has provisions that limit,
      but do not eliminate, our liability for listing or linking to third-party Web
      sites that include materials that infringe copyrights or other rights, so long
      as we comply with the statutory requirements of this act. The Children’s Online
      Protection Act and the Children’s Online Privacy Protection Act restrict the
      distribution of materials considered harmful to children and impose additional
      restrictions on the ability of online services to collect information from
      minors. In addition, the Protection of Children from Sexual Predators Act of
      1998 requires online service providers to report evidence of violations of
      federal child pornography laws under certain circumstances. Any failure on
      our
      part to comply with these regulations may subject us to additional liabilities.





*If
      the technology that we currently use to target the delivery of online
      advertisements and to prevent fraud on our networks is restricted or becomes
      subject to regulation, our expenses could increase and we could lose customers
      or advertising inventory.*





Web
      sites
      typically place small files of non-personalized (or “anonymous”) information,
      commonly known as cookies, on an Internet user’s hard drive, generally without
      the user’s knowledge or consent. Cookies generally collect information about
      users on a non-personalized basis to enable Web sites to provide users with
      a
      more customized experience. Cookie information is passed to the Web site through
      an Internet user’s browser software. We currently use cookies to track an
      Internet user’s movement through the advertiser’s Web site and to monitor and
      prevent potentially fraudulent activity on our network. Most currently available
      Internet browsers allow Internet users to modify their browser settings to
      prevent cookies from being stored on their hard drive, and some users currently
      do so. Internet users can also delete cookies from their hard drives at any
      time. Some Internet commentators and privacy advocates have suggested limiting
      or eliminating the use of cookies, and legislation (including, but not limited
      to, Spyware legislation such as U.S. House of Representatives Bill HR 29 the
      “Spy Act”) has been introduced in some jurisdictions to regulate the use of
      cookie technology. The effectiveness of our technology could be limited by
      any
      reduction or limitation in the use of cookies. If the use or effectiveness
      of
      cookies were limited, we would have to switch to other technologies to gather
      demographic and behavioural information. While such technologies currently
      exist, they are substantially less effective than cookies. We would also have
      to
      develop or acquire other technology to prevent fraud. Replacement of cookies
      could require significant reengineering time and resources, might not be
      completed in time to avoid losing customers or advertising inventory, and might
      not be commercially feasible. Our use of cookie technology or any other
      technologies designed to collect Internet usage information may subject us
      to
      litigation or investigations in the future. Any litigation or government action
      against us could be costly and time-consuming, could require us to change our
      business practices and could divert management’s attention.


14


*Increased
      regulation of the Internet may adversely affect our business.*





If
      the
      Internet becomes more strongly regulated, a significant portion of our operating
      business may be adversely affected. For example, there is increased pressure
      to
      adopt and where adopted, strengthen laws and regulations relating to Internet
      unsolicited advertisements, privacy, pricing, taxation and content. The
      enactment of any additional laws or regulations in Canada, Europe, Asia or
      the
      United States, or any state or province of the United States or Canada may
      impede the growth of the Internet and our Internet-related business, and could
      place additional financial burdens on us and our Internet-related
      business.





*Changes
      in key personnel, labour availability and employee relations could disrupt
      our
      business.*





Our
      success is dependent upon the experience and abilities of our senior management
      and our ability to attract, train, retain and motivate other high-quality
      personnel, in particular for our technical and sales teams. There is significant
      competition in our industries for qualified personnel. Labour market conditions
      generally and additional companies entering industries which require similar
      labour pools could significantly affect the availability and cost of qualified
      personnel required to meet our business objectives and plans. There can be
      no
      assurance that we will be able to retain our existing personnel or that we
      will
      be able to recruit new personnel to support our business objectives and plans.
      We believe our employee relations are good. Currently, none of our employees
      are
      unionized. There can be no assurance, however, that a collective bargaining
      unit
      will not be organized and certified in the future. If certified in the future,
      a
      work stoppage by a collective bargaining unit could be disruptive and have
      a
      material adverse effect on us until normal operations resume.





*Possible
      future exercise of warrants and options could dilute existing and future
      shareholders.*





As
      at
      March 19, 2008, we had 646,392 warrants at a weighted average exercise price
      of
      $15.60 and 860,801 stock options at a weighted average exercise price of $2.69
      outstanding. As at March 19, 2008, the exercise prices of all outstanding
      warrants and options were higher than the market price of our Common Shares.
      When the market value of the Common Shares is above the respective exercise
      prices of all options and warrants, their exercise could result in the issuance
      of up to an additional 1,507,193 Common Shares. To the extent such shares are
      issued, the percentage of our Common Shares held by our existing stockholders
      will be reduced. Under certain circumstances the conversion or exercise of
      any
      or all of the warrants or stock options might result in dilution of the net
      tangible book value of the shares held by existing Company stockholders. For
      the
      life of the warrants and stock options, the holders are given, at prices that
      may be less than fair market value, the opportunity to profit from a rise in
      the
      market price of the shares of Common Shares, if any. The holders of the warrants
      and stock options may be expected to exercise them at a time when the Company
      may be able to obtain needed capital on more favourable terms. In addition,
      we
      reserve the right to issue additional shares of Common Shares or securities
      convertible into or exercisable for shares of Common Shares, at prices, or
      subject to conversion and exercise terms, resulting in reduction of the
      percentage of outstanding Common Shares held by existing stockholders and,
      under
      certain circumstances, a reduction in the net tangible book value of existing
      stockholders’ Common Shares.





*Strategic
      acquisitions and market expansion present special risks.*





A
      future
      decision to expand our business through acquisitions of other businesses and
      technologies presents special risks. Acquisitions entail a number of particular
      problems, including (i) difficulty integrating acquired technologies,
      operations, and personnel with the existing businesses, (ii) diversion of
      management’s attention in connection with both negotiating the acquisitions and
      integrating the assets as well as the strain on managerial and operational
      resources as management tries to oversee larger operations, (iii) exposure
      to
      unforeseen liabilities relating to acquired assets, and (iv) potential issuance
      of debt instruments or securities in connection with an acquisition possessing
      rights that are superior to the rights of holders of the our currently
      outstanding securities, any one of which would reduce the benefits expected
      from
      such acquisition and/or might negatively affect our results of operations.
      We
      may not be able to successfully address these problems.  We
      also
      face competition from other acquirers, which may prevent us from realizing
      certain desirable strategic opportunities.





*We
      do
      not plan to pay dividends on the Common Shares.*





The
      Company has never declared or paid dividends on its shares of Common Shares.
      The
      Company currently intends to retain any earnings to support its working capital
      requirements and growth strategy and does not anticipate paying dividends in
      the
      foreseeable future. Payment of future dividends, if any, will be at the
      discretion of the Company’s Board of Directors after taking into account various
      factors, including the Company’s financial condition, operating results, current
      and anticipated cash needs and plans for expansion.


15


*Rapidly
      evolving marketplace and competition may adversely impact our
      business.*





The
      markets for our products and services are characterized by (i) rapidly changing
      technology, (ii) evolving industry standards, (iii) frequent new product and
      service introductions, (iv) shifting distribution channels, and (v) changing
      customer demands. The success of the Company will depend on its ability to
      adapt
      to its rapidly evolving marketplaces. There can be no assurance that the
      introduction of new products and services by others will not render our products
      and services less competitive or obsolete. We expect to continue spending funds
      in an effort to enhance already technologically complex products and services
      and develop or acquire new products and services. Failure to develop and
      introduce new or enhanced products and services on a timely basis might have
      an
      adverse impact on our results of operations, financial condition and cash flows.
      Unexpected costs and delays are often associated with the process of designing,
      developing and marketing enhanced versions of existing products and services
      and
      new products and services. The market for our products and services is highly
      competitive, particularly the market for Internet products and services which
      lacks significant barriers to entry, enabling new businesses to enter this
      market relatively easily. Competition in our markets may intensify in the
      future. Numerous well-established companies and smaller entrepreneurial
      companies are focusing significant resources on developing and marketing
      products and services that will compete with the Company’s products and
      services. Many of our current and potential competitors have greater financial,
      technical, operational and marketing resources. We may not be able to compete
      successfully against these competitors. Competitive pressures may also force
      prices for products and services down and such price reductions may reduce
      our
      revenues.





*To
      the extent that some of our revenues and expenses are paid in foreign
      currencies, and currency exchange rates become unfavourable, we may lose some
      of
      the economic value in U.S. dollar terms.*





Although
      we currently transact a majority of our business in U.S. dollars, as we expand
      our operations more of our customers may pay us in foreign currencies.
      Conducting business in currencies other than U.S. dollars subjects us to
      fluctuations in currency exchange rates. This could have a negative impact
      on
      our reported operating results. We do not currently engage in hedging
      strategies, such as forward contracts, options and foreign exchange swaps
      related to transaction exposures to mitigate this risk. If we determine to
      initiate such hedging activities in the future, there is no assurance these
      activities will effectively mitigate or eliminate our exposure to foreign
      exchange fluctuations. Additionally, such hedging programs would expose us
      to
      risks that could adversely affect our operating results, because we have limited
      experience in implementing or operating hedging programs. Hedging programs
      are
      inherently risky and we could lose money as a result of poor trades. In 2007,
      revenues were increased by approximately $128,000 and total expenses were also
      increased by $348,000 resulting in a net loss $220,000 due to the fluctuation
      of
      foreign currencies.





*Higher
      inflation could adversely affect our results of operations and financial
      condition.*





We
      do not
      believe that the relatively moderate rates of inflation experienced in the
      United States and Canada in recent years have had a significant effect on our
      revenues or profitability. Although higher rates of inflation have been
      experienced in a number of foreign countries in which we might transact
      business, we do not believe that such rates have had a material effect on our
      results of operations, financial condition and cash flows. Nevertheless, in
      the
      future, high inflation could have a material, adverse effect on the Company’s
      results of operations, financial condition and cash flows.





*Our
      future growth significantly depends to a high degree on our ability to
      successfully commercialize the Copernic Desktop Search* ® *product, and any failure or delays in that commercialization would adversely
      affect our business and results of operations.*





On
      December 22, 2005, we completed our acquisition of Copernic, which we believe
      positioned the Company as a leader in search technologies and applications
      and
      as a multi-channel online marketing services provider. Although we have high
      expectations for the Copernic Desktop Search® (CDS) award-winning product, to
      date our program to commercialize that product through licensing to large ISP’s
      and Internet Portals has not generated significant revenue and we cannot
      guarantee we will obtain such significant licensing revenue in the future.
      Any
      failure or continued significant delay in successfully commercializing the
      CDS
      product could adversely affect our business and results of
      operations.





**ITEM
      4. INFORMATION ON THE COMPANY**





***GENERAL
      INFORMATION***





The
      legal
      name of the Company is Copernic Inc. and the Company operates under the
      commercial names Mamma.com and Copernic. The Company was incorporated on July
      5,
      1985, pursuant to the *Business
      Corporations Act* (Ontario),
      promulgated under the laws of the Province of Ontario, Canada. The Company’s
      principal executive officers are located at 388 St. Jacques Street West, 9th
      Floor, Montreal, Quebec, Canada H2Y 1S1.





The
      Company maintains its registered office c/o Fasken Martineau DuMoulin LLP,
      Toronto Dominion Bank Tower, P.O. Box 20, Suite 4200, 66 Wellington Street
      West,
      Toronto-Dominion Centre, Toronto, Ontario, M5K 1N6, Canada.


16


***RECENT
      EVENTS***





**Resignation
      and departure of two officers**





On
      February 11, 2008 the Company announced the departure of Patrick Hopf, Executive
      Vice President of Business Development. 117,134 options held by Mr. Hopf were
      cancelled, resulting in a reversal of employee stock-based compensation expense
      of $48,542 which will be recorded in Q1 2008.





On
      February 8, 2008 the Company announced that its President and Chief Executive
      Officer, Martin Bouchard, tendered his resignation, effective March 3, 2008,
      citing personal reasons. Mr. Bouchard will continue as a member of the board
      of
      directors and has agreed to be available to the Company on a consulting basis.
      155,000 options held by Mr. Bouchard were cancelled, resulting in a reversal
      of
      employee stock-based compensation expense of $49,320 which will be recorded
      in
      Q1 2008. Mr. Marc Ferland, a director of the Company, is appointed President
      and
      CEO commencing on March 3, 2008.





**Write-down
      of intangible assets and goodwill**





In
      Q4
      2007, the Company concluded that its software unit was facing delays in
      execution and changes of market conditions of its commercial deployment
      solutions. Based on the Company’s assessment of the fair value of its assets
      related to the software unit, the Company concluded that these assets had
      suffered a loss in value and the fair values of intangible assets and goodwill
      were significantly less than their carrying value. Therefore, write-downs of
      $1,333,415 for trade names, $652,055 for customer relationships and goodwill
      of
      $7,214,531 were recorded in 2007.





Also
      in
      Q4 2007, the Company reported decreased revenues due to industry pressures
      on
      advertising rates, slow down in sponsored clicks, pop-up campaigns and general
      demand for all graphic ads. Based on the Company assessment of the fair value
      of
      its assets related to search / media unit, the Company concluded that the
      goodwill related to this unit had suffered a loss in value and the fair value
      of
      the related goodwill was significantly less then its carrying value. Therefore,
      a write-down of goodwill of $846,310 for search / media unit was recorded in
      2007 to bring it to nil.





**Write-down
      of investment**





In
      Q4
      2007, based on its assessment of the fair value of the Company’s investment in
      LTRIM, the Company concluded that its investment had suffered a loss in value
      other than a temporary decline due to LTRIM’s significant corporate
      restructuring and therefore recorded a write-down of $150,000 to bring it to
      nil.





**Closure
      of SEC investigation**





On
      September 19, 2007, the United States Securities and Exchange Commission (“SEC”)
      informed the Company by letter that it had closed its investigation of the
      Company, commenced in 2004, concerning certain trading in the shares of the
      Company and other matters, and that the SEC did not intend to recommend
      enforcement action against the Company.





**Settlement
      of class action lawsuit**





On
      July
      16, 2007, the Company announced that the United States District Court, Southern
      District of New York (the “Court”) had approved the settlement of the class
      action following a hearing on July 9, 2007, at which time the Court heard from
      all parties before concluding that the settlement was fair and all
      procedural requisites were met. As a result, all claims asserted in the class
      actions against the Company and the individual officer defendants have been
      resolved, with the exception of three shareholders who have indicated they
      will
      exclude themselves from the settlement so as to preserve rights to maintain
      separate actions should they elect to do so.  The amount paid into escrow,
      along with any interest earned, was distributed as provided under the settlement
      to pay class members, plaintiffs' attorney fee, and the costs of claims
      administration. Subsequently, one of the three shareholders has declined its
      right to the class action lawsuit.





**Name
      change of Mamma.com Inc. to Copernic Inc.**





On
      June
      8, 2007, the Company’s shareholders approved changing the Company’s name from
      Mamma.com Inc. to Copernic Inc. at its Annual General and Special Meeting of
      the
      Shareholders. On June 14, 2007, articles of amendment were filed at the Ministry
      of Consumer and Business Services of Ontario effecting the name change. On
      June
      21, 2007, the Company’s stock ticker symbol was changed to “CNIC”.





**Agreement
      for financial advisory services**





On
      June
      7, 2007, the Company retained ThomasLloyd Capital LLC (“ThomasLloyd Capital”) as
      its financial and investment banking advisor.  In consideration for these
      services, the Company has committed to pay ThomasLloyd Capital a monthly fee
      of
      $5,000 for seven months beginning June 1, 2007, plus a success fee of the
      greater of $1,000,000 (but in no event shall such amount exceed 3% of the
      transaction value) or 2% of the transaction value but in no event to exceed
      $2,000,000 (less any amounts previously paid as monthly fees) plus an additional
      fee of $200,000, credited against the above fees payable upon delivery of a
      fairness opinion.


17


**Resignation
      of two officers**





In
      January 2007, two officers resigned from their positions. In connection with
      their resignations, the Company paid and recorded termination costs of
      CDN$510,000 in Q1 2007, changed the duration of their option agreements and
      allowed accelerated vesting options for one of the officers. These changes
      represented an additional non-cash item expense of $253,236 which was recorded
      in Q1 2007.





**Granting,
      exercising and cancellation of stock options**





On
      January 23, 2007, the Company granted to officers and employees 70,500 and
      21,803 stock options, respectively, at an exercise price of $5.15 expiring
      in
      five years.





On
      February 26, 2007, 10,000 stock options were granted to a new employee, at
      an
      exercise price of $4.99 expiring in five years.





On
      March
      29, 2007, the Company granted 2,632 stock options to an employee at an exercise
      price of $4.75 expiring in five years.





On
      April
      30, 2007, the Company granted 40,000 stock options to a new employee at an
      exercise price of $4.90 expiring in five years.





On
      June
      8, 2007, the Company granted 60,000 stock options to directors at an exercise
      price of $4.24 expiring in five years.





On
      September 18, 2007, the Company granted 652,000 stock options to officers and
      employees at an exercise price of $1.74 expiring in five years.





On
      September 21, 2007, the Company granted 50,000 stock options to two new board
      members at an exercise price of $1.67 expiring in five years.





As
      at
      September 30, 2007, 296,667 stock options were exercised with exercising prices
      ranging between $1.53 to $2.57 and 59,037 stock options were
      cancelled.





As
      at
      November 8, 2007, the Company granted 4,000 stock options to an employee at
      an
      exercise price of $2.23 expiring in five years.





As
      at
      December 31, 2007, 296,667 stock options were exercised with exercising prices
      ranging between $1.53 to $2.57 and 83,065 were cancelled or had
      expired.





***RECENT
      FINANCINGS***





On
      June
      30, 2004, the Company sold under a securities purchase agreement an aggregate
      of
      1,515,980 common shares and 606,392 warrants to certain accredited investors
      for
      an aggregate price of $16,599,981. Net proceeds from the offering amounted
      to
      $15,541,162, net of issue cost of $1,058,819, $996,000 of which was paid to
      Merriman Curhan Ford & Co. (“MCF”). For this specific transaction, MCF
      waived their entitlement to a warrant component of the financing completion
      fee.
      Each warrant entitles the accredited investors to purchase one additional common
      share at an exercise price equal to $15.82 per share. The warrants will be
      exercisable beginning six months after the closing date, and will have a term
      of
      five years from the closing date.





On
      December 12, 2002, the Company entered into subscription agreements to sell
      1,893,939 Units, for a purchase price of $1.32 per Unit or total proceeds of
      $2.5 million. Each Unit consisted of one share of Common Shares plus one
      nontransferable “A Warrant” that entitled the holder to purchase one additional
      Common Share at a price of $1.40 on or before November 30, 2004. Only in the
      event and upon the exercise of each respective A Warrant, the holder thereof
      was
      entitled to be issued one “B Warrant” that would entitle such holder to purchase
      one additional Common Share at a price of $1.50 on or before November 30, 2006.
      A placement fee of 142,045 Units was paid to a placement agent for arranging
      this financing and the A and B warrants attached were exercised in September
      2004 and November 2004, respectively. A sum of $5,904,354 accrued to the
      treasury of the Company and a further 4,071,968 common shares of the Company
      were issued.




***RECENT
      AGREEMENT***





***ThomasLloyd
      Capital LLC***





On
      June
      7, 2007, the Company retained ThomasLloyd Capital LLC (“ThomasLloyd Capital”) as
      its financial and investment banking advisor.  In consideration for these
      services, the Company committed to pay ThomasLloyd Capital a monthly fee of
      $5,000 for seven months beginning June 1, 2007, plus a success fee of the
      greater of $1,000,000 (but in no event shall such amount exceed 3% of the
      transaction value) or 2% of the transaction value but in no event to exceed
      $2,000,000 (less any amounts previously paid as monthly fees) plus an additional
      fee of $200,000, credited against the above fees payable upon delivery of a
      fairness opinion.


18


***OTHER
      AGREEMENTS***





***Merriman
      Curhan Ford & Co.***





On
      March
      16, 2004, the Company retained Merriman Curhan Ford & Co. (“MCF”) as a
      financial advisor and as an investment banking advisor. The Company then signed
      two separate agreements. In consideration for financial services, the Company
      had committed to pay MCF a monthly fee of $5,000 for a minimum obligation of
      $30,000 and 10,000 warrants per month with a minimum issuance of 60,000
      warrants, each warrant gives the rights to purchase one common share of the
      Company. Warrants are issuable at an exercise price equal to the average closing
      bid for the last five trading days at the end of the month of issue, for the
      duration of the agreement upon the same terms and conditions. The warrants
      have
      a life of five years from the issuance date. For the investment banking
      services, the Company had committed to pay a cash financing completion fee
      equal
      to 6% of the total amount of capital received by the Company from the sale
      of
      its equity securities and warrants to purchase common shares of the Company
      in
      an amount equal to 6% of the number of common shares purchased by investors
      in
      capital raising transactions. The warrants are immediately exercisable at the
      higher of the price per share at which the investor can acquire common shares
      or
      the closing price of the Company’s common shares at the date of the capital
      raising transaction. For mergers and acquisitions, the Company had committed
      to
      pay a success fee upon closing equal to the sum of 4% of up to $10,000,000
      transaction value, 3% of $10,000,000 to $15,000,000 transaction value and 2%
      of
      greater than $15,000,000 transaction value, provided that MCF either introduces
      and/or performs specific services for the transaction. The minimum success
      fee
      for a transaction is $200,000. For a sale transaction, the Company had committed
      to pay a success fee with the same parameters of an acquisition except for
      the
      minimum fee which is $500,000.





For
      the
      period ended December 31, 2004, 40,000 warrants were issued to MCF at an average
      price of $12.31, the fair value of which was $260,301 estimated as of grant
      date
      using the Black-Sholes pricing model, and charged to expense with a
      corresponding credit to additional paid-in capital. The following weighted
      average assumptions were used:





Expected
                option life
            3.5
                yearsVolatility
            86%Risk-free
                interest rate
            3.99%Dividend
                yield
            nil





On
      July
      16, 2004, the agreement for financial services, dated March 16, 2004 was
      amended. The Company committed to pay MCF a monthly fee of $5,000 for eight
      months from July 16, 2004. The agreement for investment banking services was
      amended on July 16, 2004, on September 8, 2004 and subsequently on October
      12,
      2005. The Company then is committed to pay a success fee upon closing equal
      to
      the sum of 3% of up to $20,000,000 transaction value, 1.5% of the excess of
      $20,000,000. If an acquisition transaction is less than 50% interest in the
      Company or the Target, a fee shall be payable in cash for 7% of the transaction
      value. If transaction is not consummated and the Company is entitled to receive
      break-up fee and other form of compensation, the Company then will pay to MCF
      30% of Company’s entire entitlement. In the event that the Board deems it
      necessary or appropriate for a fairness opinion to be rendered in connection
      with an acquisition transaction, MCF will receive a Fairness Opinion Fee of
      $200,000 for rendering its opinion, payable upon delivery of the Fairness
      Opinion and will be credited against the M&A Completion Fee due to MCF.





At
      the
      completion of the Copernic Technologies Inc. acquisition, total fees paid to
      MCF
      were $618,468 including the fairness opinion fee of $200,000.





***Maxim
      Group, LLC***





On
      January 29, 2003, the Company retained Maxim Group LLC (“Maxim”), on a
      non-exclusive basis, as its investment banker, strategic advisor and financial
      advisor. In consideration for these services, the Company paid a retainer of
      $25,000 for the first month and a monthly fee of $5,000 for the duration of the
      agreement. Upon execution of the agreement, the Company issued a warrant to
      purchase 25,000 of the Company’s Common Shares at an exercise price of $2.15
      expiring on June 30, 2006. Under the agreement, on a monthly basis, commencing
      30 days after execution of the agreement, the Company was obligated to issue
      additional warrants, each to purchase 8,000 Common Shares, at an exercise price
      equal to the market price, for the duration of the agreement upon the same
      terms
      and conditions. For any Transaction completed by the Company with Maxim Group
      LLC, the Company agreed to pay a success fee upon closing equal to the sum
      of
      21⁄2% of the aggregate transaction value, provided that Maxim either introduced
      and/or performed specific services for the Transaction. The minimum success
      fee
      for any transaction was $200,000. On May 5, 2003, an amendment was made to
      the
      agreement to increase the success fee for a specific Transaction from 21⁄2% to
      31⁄2%.





The
      term
      of this agreement was indefinite. However, the Company or Maxim could terminate
      it upon 30 days written notice. If such a notice was sent by the Company, the
      monetary consideration was payable by the Company for the ensuing five months;
      however, the warrant consideration would cease after the 30 days written notice.
      If Maxim sent such a notice, both the  monetary
      and warrant consideration will cease immediately. The preceding statements
      notwithstanding, the agreement could also be terminated upon 30 days written
      notice by either party any time after the 6 th month
      anniversary of the agreement. On October 30, 2003 the Company advised Maxim
      of
      termination of this agreement effective November 30, 2003. In 2003, the Company
      granted a total of 105,000 warrants at an average price of $2.50 to Maxim Group
      LLC for financial advisory fees.


19


Maxim
      Group was paid a $200,000 success fee related to the acquisition of Digital
      Arrow in June 2004.





As
      at
      March 30, 2005, Maxim Group, LLC had exercised all its warrants.





***ACQUISITIONS,
      DIVESTITURES AND DISCONTINUED OPERATIONS***





***Acquisition
      of Copernic Technologies Inc.***





On
      December 22, 2005, the Company acquired 100% of the issued and outstanding
      securities of Copernic Technologies Inc. including an amount to settle Copernic
      Technologies Inc.’s outstanding stock appreciation right
      obligations.





The
      consideration for the acquisition, including costs directly related to the
      acquisition, consisted of $15,851,922 in cash including $3,297,007 paid to
      settle Copernic Technologies Inc.’s stock appreciation right and severance
      obligations net of cash acquired. The Company also issued 2,380,000 common
      shares as part of the consideration paid. The fair value of the Company’s common
      shares issued to owners of Copernic Technologies Inc. has been determined to
      be
      $2.958 per share. This value has been determined using the average closing
      price
      of the Company’s common shares for the two days before and after August 17,
      2005, the date the significant terms and conditions of the transaction were
      agreed to and publicly announced.





This
      acquisition has been accounted for using the purchase method and the results
      of
      operations have been included in the Company’s statement of operations from the
      date of acquisition. The purchase price allocation was finalized upon receipt
      of
      a valuation report.





On
      May
      31, 2006, Copernic Technologies Inc. was wound up into the Company. The wind-up
      allows the Company to use carry forward tax losses where needed.





In
      2006,
      the purchase price allocation was adjusted to reflect additional assets and
      liabilities assumed by the Company. These adjustments resulted by
      increasing accounts receivable by $480,091, liabilities by $22,286 and
      consequently decreasing original goodwill by $457,805. The increase in accounts
      receivable, which was not accounted for in the audited closing balance sheet
      of
      Copernic Technologies Inc. at the date of acquisition, was due to revenue
      recognition adjustment related to a specific contract that existed prior to
      the
      date of the transaction.





In
      2006,
      $379,382 was received by the Company from the sellers of Copernic Technologies
      Inc. to compensate for a reduction of research and development tax credits
      prior
      to the acquisition date, the purchase price and goodwill were then reduced
      accordingly.





***Discontinued
      Digital Arrow LLC and High Performance Broadcasting Inc. (“Digital Arrow”)
      Operations***





In
      September 2005, following the poor performance of Digital Arrow LLC and High
      Performance Broadcasting, Inc. (“Digital Arrow”) located in Florida, management
      decided to discontinue its subsidiary’s operations. The Company has therefore
      not renewed the lease in Florida and recorded closing costs.





Consequently,
      the results of the operations of Digital Arrow were recorded as discontinued
      operations and the results of the Company for the years ended December 31,
      2005
      and 2004 were reclassified to account for the closure of the subsidiary’s
      operations.





Digital
      Arrow, which the Company acquired on June 10, 2004, was a privately held
      marketing company that was engaged in the distribution of online, opt-in e-mail
      marketing solutions via the Internet. In that acquisition, the Company’s
      wholly-owned subsidiary, Mamma.com USA, Inc., entered into a Securities Purchase
      Agreement with Digital Arrow and their equity holders, pursuant to which
      Mamma.com USA, Inc. acquired all equity interests in Digital Arrow. The
      consideration for the acquisition, including costs directly related to the
      acquisition, consisted of $1,264,210 in cash, net of cash acquired, and 90,000
      of the Company’s common shares. The fair value of the Company shares issued to
      owners of Digital Arrow was determined to be $8.23 per share. The operations
      of
      the business have been included in the Company’s consolidated financial
      statements since June 1, 2004.





This
      acquisition has been accounted for using the purchase method. The fair value
      of
      the net assets acquired was $1,535,744, which with goodwill of $556,196,
      resulted in a total purchase price of $2,091,940. From this purchase price,
      $740,782 was paid by issuance of the Company’s common shares, $86,948 for cash
      acquired at the transaction for a cash paid net of cash acquired of $1,264,210.





***INCUBATOR
      ACTIVITIES***





Prior
      to
      February 2001, when the Company announced a moratorium on new incubator
      activities, the Company had engaged in incubator management services and held
      positions in companies in the analog circuit, new media and telecommunications
      sectors. These companies included LTRIM Technologies Inc., (“LTRIM”), interWAVE
      communications International, Ltd. Tri-Link Technologies Inc., TEC Technology
      Evaluation.com Corporation, uPath.com Inc. and ESP Media Inc. The Company had
      written down completely or disposed of its interest in all of these companies,
      except for LTRIM.


20


LTRIM
      is
      engaged in the design and development of high-performance analog integrated
      circuit products. LTRIM’s proprietary core technology consists of a laser-based
      fine-tuning system designed to set the electrical characteristics of
      high-performance analog integrated circuits by precisely adjusting the
      resistance of silicon-embedded resistive elements that are fabricated through
      standard semiconductor manufacturing processes. It is expected that this
      technology will have advantages over conventional circuit fine-tuning
      techniques, in terms of manufacturing cost, integration, and time-to-market,
      when applied to the production of high-performance analog semiconductor
      products.





On
      May 4,
      2000, the Company initiated a series of transactions pursuant to which it
      subscribed to a CA$850,000 secured debenture convertible into 12.75% of the
      equity of LTRIM. On February 23, 2001, the Company started acquiring preferred
      shares by step purchase and by May 2001, a total of 207,323 preferred shares
      were subscribed to and entirely paid. These shares were subsequently split
      10
      for 1, resulting in 2,073,230 shares.





On
      December 13, 2002, LTRIM closed the first round of an intended two-round
      financing transaction with new investors. As part of the transaction, the
      Company converted all preference shares and the secured debenture into 4,891,686
      Class A Common Shares. Accrued interest on the debenture in the amount of
      CA$137,014 (US$80,038) was converted into 359,281 Class A preference shares.
      On
      February 11, 2004, LTRIM closed the second round of financing.





In
      2006,
      based on its assessment of the fair value of the Company’s investment in LTRIM,
      the Company concluded that its investment had suffered a loss in value other
      than a temporary decline and therefore recorded a write-down of $570,000.





As
      at
      December 31, 2006, the investment in LTRIM was carried at a value of $150,000
      for approximately 4% of LTRIM.





In
      2007,
      based on its assessment of the fair value of the Company’s investment in LTRIM,
      the Company concluded that its investment had suffered a loss in value other
      than a temporary decline due to significant corporate restructuring and
      therefore recorded a write-down of $150,000 to bring its investment value to
      nil.





***BUSINESS
      OVERVIEW***





Copernic
      Inc. is a leading provider of award winning search technology for both the
      web
      and desktop space delivered through its online properties, including
      www.mamma.com and www.copernic.com.





Through
      its award winning Copernic Desktop Search® software search engine product, the
      Company develops cutting edge search solutions bringing the power of a
      sophisticated, yet easy-to-use search engine to the user’s PC. It allows for
      instant searching of files, e-mails and e-mail attachments stored anywhere
      on a
      PC hard drive. The desktop search application won the CNET Editors' Choice
      Award, as well as the PC World World Class award in 2005.  In 2007, PC Pro,
      the UK’s most respected IT magazine for professionals, and Micro Hebdo, one of
      France’s most read IT magazines, each selected Copernic Desktop Search® 2.0
      software search engine as the top desktop search tool.





Through
      its well established media placement channels, Copernic Inc. provides both
      online advertising as well as pure content to its partnerships worldwide.
      Copernic handles over 1 billion search requests per month and has media
      placement partnerships established not only in North America, but in Europe
      and
      Australia as well.





The
      revenue models of the Company are based on:





Pay-Per-Click
      search listing placement - advertisers bid or pay a fixed price for position
      on
      search listing advertisements on www.mamma.com and within the Copernic Media
      SolutionsTM Publisher Network.





Graphic
      Ad Units - priced on a CPM (Cost-Per-Thousand) basis and are distributed through
      the Copernic Media SolutionsTM Publisher Network.





Copernic
      Media SolutionsTM Publisher Network has over 221 active publishers (combined
      search and graphic ad publishers).





Copernic
      Agent® and Copernic Desktop Search® users generate Web searches and clicks from
      pay-per-click advertising listings.





Copernic
      Desktop Search® licensing to ISPs, portals and e-commerce site generates
      license, maintenance and customization revenues.





Copernic
      Agent® Personal Pro, Copernic Summarizer® and Copernic Tracker® software are
      sold from our e-commerce store.


21


Copernic
      Desktop Search Corporate Edition® software is sold from our e-commerce store or
      direct from corporate sales on a per license basis to businesses, academic
      institutions, non-profit organizations and government environments.





***PRINCIPAL
      MARKETS***





Although
      we operate in the global on-line market, and now engage in the development
      and
      sale of information management and search solution products, the majority of
      our
      users and customers are concentrated in the U.S., Europe and Canada. Our total
      revenues in 2007 can be divided into several categories: search advertising,
      graphic advertising, software licensing, customized development and maintenance
      support revenues. The following table gives a breakdown of the total revenues
      by
      category for the last five financial years. The operations of Copernic
      Technologies Inc. have been included since December 23, 2005.





**CUSTOMIZED****SEARCH**
            
            **GRAPHIC**
            
            **SOFTWARE**
            
            **DEVELOPMENT
                  AND****YEAR**
            
            **ADVERTISING**
            
            **ADVERTISING**
            
            **LICENSING**
            
            **MAINTENANCE SUPPORT**US$
            
            US$
            
            US$
            
            US$2007
            
            7,246,838
            
            107,871
            
            415,263
            
            346,4362006
            
            7,197,868
            
            827,104
            
            957,488
            
            613,9422005
            
            4,970,373
            
            4,456,399
            
            6,671
            
            10,5322004
            
            9,659,024
            
            4,965,198
            
            -
            
            12,0962003
            
            5,787,980
            
            3,150,883
            
            -
            
            -





***SEASONALITY
      AND FLUCTUATION IN REVENUES***





The
      Company is subject to seasonal fluctuations affecting its operations and
      results. Historically, the first and third quarters have shown significant
      decreases in search and graphic revenues, which the Company believes are
      respectively attributable to decreased advertising and Internet use during
      the
      post-Christmas lull and the Summer holiday season.





Although
      not seasonal, our software licensing revenues fluctuate from quarter to quarter
      based upon the quarters in which we obtain new agreements or existing agreements
      terminate.





***MARKETING
      CHANNELS AND SALES METHODS***





The
      Company maintains its own sales and marketing staff and has its own experienced
      direct sales force to address the new and evolving requirements of its target
      markets. Although the Company itself does not expend significant resources
      on
      public relations, the Company markets itself through on-line advertising, press
      releases, internally sponsored events and trade shows.





The
      Company solicits revenues by direct sales force, e-mail directly to the end
      client, or through specialized search engines through advertising agencies
      or
      network distribution business associates who mainly specialize in the online
      advertising market. Search listings are solicited either directly or through
      on-line marketing campaigns from the end client.


22


***DEPENDENCE
      ON INTELLECTUAL PROPERTY AND OTHER MATTERS MATERIAL TO
      PROFITABILITY***





We
      rely
      upon a combination of trade secret, copyright, trademark, patent and other
      laws
      to protect our intellectual property assets. We have entered into
      confidentiality agreements with our management and key employees with respect
      to
      such assets and limit access to, and distribution of, these assets and other
      proprietary information. However, the steps we take to protect our intellectual
      property assets may not be adequate to deter or prevent misappropriation. We
      may
      be unable to detect unauthorized uses of and take appropriate steps to enforce
      and protect our intellectual property rights. Although senior management
      believes that our services and products do not infringe on the intellectual
      property rights of others, we nevertheless are subject to the risk that such
      a
      claim may be asserted in the future. Any such claims could damage our
      business.





***GOVERNMENT
      REGULATION***





The
      laws
      relating to the liability of providers of online services for activities of
      their users are currently unsettled both within the U.S. and abroad. Claims
      have
      been threatened and filed under both U.S. and foreign law for defamation, libel,
      invasion of privacy and other data protection claims, tort, unlawful activity,
      copyright or trademark infringement, or other theories based on the nature
      and
      content of the materials searched and the ads posted or the content generated
      by
      users of other services similar to ours. Increased attention focused on these
      issues and legislative proposals could harm our reputation or otherwise affect
      the growth of our business.





The
      application to us of existing laws regulating or requiring licenses for certain
      businesses of our advertisers, including, for example, distribution of
      pharmaceuticals, adult content, financial services, online gambling, alcohol
      or
      firearms, can be unclear. Existing or new legislation could expose us to
      substantial liability, restrict our ability to deliver services to our users,
      limit our ability to grow and cause us to incur significant expenses in order
      to
      comply with such laws and regulations.





Several
      other federal laws could have an impact on our business. Compliance with these
      laws and regulations is complex and may impose significant additional costs
      on
      us. For example, the Digital Millennium Copyright Act has provisions that limit,
      but do not eliminate, our liability for listing or linking to third-party web
      sites that include materials that infringe copyrights or other rights, so long
      as we comply with the statutory requirements of this act. The Children’s Online
      Protection Act and the Children’s Online Privacy Protection Act restrict the
      distribution of materials considered harmful to children and impose additional
      restrictions on the ability of online services to collect information from
      minors. In addition, the Protection of Children from Sexual Predators Act of
      1998 requires online service providers to report evidence of violations of
      federal child pornography laws under certain circumstances. Any failure on
      our
      part to comply with these and similar regulations in other jurisdictions may
      subject us to additional liabilities.





***COMPETITION***





The
      Company primarily competes in the areas of on-line advertising and software
      licensing which includes sales of licenses, customization and maintenance
      support. **** The
      market for these services are in a constant state of flux and competition is
      intense.





The
      Company faces intense competition expects this competition will continue to
      intensify. The Company’s markets are subject to rapid changes in technology and
      marketing strategies and the Company is significantly affected by new product
      introductions and other market activities of its existing and potential
      competitors. The Company believes the principal competitive factors in this
      market are name recognition, product performance and functionality, ease of
      use,
      size of the Web index, user traffic, the speed with which search results return
      and the relevance of results, pricing and quality of customer support. Many
      of
      the Company’s current and potential competitors in on-line advertising and
      software licensing, includes Google, Ask.com, Miva, Looksmart, Findwhat,
      Microsoft, Yahoo!, Value Click, FastClick, Burst Media, Tribal Fusion and X1
      have significant operating histories, larger customer bases, greater brand
      name
      recognition, greater access to proprietary content and significantly greater
      financial, marketing and other resources which give them a competitive
      advantage.





The
      markets for our products and services are characterized by (i) rapidly changing
      technology, (ii) evolving industry standards, (iii) frequent new product and
      service introductions, (iv) shifting distribution channels, and (v) changing
      customer demands. The success of the Company will depend on its ability to
      adapt
      to its rapidly evolving marketplaces. There can be no assurance that the
      introduction of new products and services by others will not render our products
      and services less competitive or obsolete. We expect to continue spending funds
      in an effort to enhance already technologically complex products and services
      and develop or acquire new products and services. Failure to develop and
      introduce new or enhanced products and services on a timely basis might have
      an
      adverse impact on our results of operations, financial condition and cash flows.
      Unexpected costs and delays are often associated with the process of designing,
      developing and marketing enhanced versions of existing products and services
      and
      new products and services. The market for our products and services is highly
      competitive, particularly the market for Internet products and services which
      lacks significant barriers to entry, enabling new businesses to enter this
      market relatively easily. Competition in our markets may intensify in the
      future. Numerous well-established companies and smaller entrepreneurial
      companies are focusing significant resources on developing and marketing
      products and services that will compete with the Company’s products and
      services. Many of our current and potential competitors have greater financial,
      technical, operational and marketing resources. We may not be able to compete
      successfully against these competitors. Competitive pressures may also force
      prices for products and services down and such price reductions may reduce
      our
      revenues.


23





***ORGANIZATIONAL
      STRUCTURE***





On
      May
      31, 2004, the wholly owned subsidiary, Mamma.com Enterprises Inc. was wound
      up
      into the Company. The transaction has allowed the Company to use carry forward
      tax losses. On May 31, 2006, the wholly owned subsidiary, Copernic Technologies
      Inc. which was acquired on December 22, 2005, was wound up into the Company.
      During 2007 and 2008, a few non-active companies were wound up into the Company.
      As at March 27, 2008 the Company had an active wholly-owned subsidiary,
      Mamma.com USA, Inc. and non-operating, wholly-owned subsidiaries which are
      dormant corporations that the Company will be winding up.





The
      Company leases two office locations. They are in Quebec City, Canada with 13,000
      square feet and Montreal, Canada with 3,400 square feet.





**ITEM
      5. OPERATING AND FINANCIAL REVIEW AND PROSPECTS**





***MANAGEMENT’S
      DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF
      OPERATIONS***





The
      following discussion and analysis of the consolidated financial condition and
      results of operations of Copernic Inc. for the three years ended December 31,
      2007, 2006 and 2005 should be read in conjunction with its consolidated
      financial statements and the related notes. All statements in the following
      discussion, which are not reports of historical information or descriptions
      of
      current accounting policy, are forward-looking statements. Please consider
      our
      forward-looking statements in light of the risks referred to in this
      Management’s Discussion and Analysis of Financial Condition and Results of
      Operations cautionary note. The Company’s consolidated financial statements are
      reported in US dollars and have been prepared in accordance with generally
      accepted accounting principles as applied in Canada (“Canadian GAAP”). As a
      registrant with the Securities and Exchange Commission in the United States,
      the
      Company is required to reconcile its financial results for significant
      measurement differences between Canadian GAAP and generally accepted accounting
      principles as applied in the United States (“U.S. GAAP”) as they specifically
      relate to the Company as described in note 27 to its consolidated financial
      statements. This Management’s Discussion and Analysis of Financial Condition and
      Results of Operations is dated March 27, 2008.





**Business
      overview**




Copernic
      Inc. is a leading provider of award winning search technology for both the
      web
      and desktop space delivered through its online properties, including
      www.mamma.com and www.copernic.com.




Through
      its award winning Copernic Desktop Search® software search engine product, the
      Company develops cutting edge search solutions bringing the power of a
      sophisticated, yet easy-to-use search engine to the user’s PC. It allows for
      instant searching of files, e-mails and e-mail attachments stored anywhere
      on a
      PC hard drive. The desktop search application won the CNET Editors' Choice
      Award, as well as the PC World World Class award in 2005.  In 2007, PC Pro,
      the UK’s most respected IT magazine for professionals, and Micro Hebdo, one of
      France’s most read IT magazines, each selected Copernic Desktop Search® 2.0
      software search engine as the top desktop search tool.




Through
      its well established media placement channels, Copernic Inc. provides both
      online advertising as well as pure content to its partnerships worldwide.
      Copernic handles over 1 billion search requests per month and has media
      placement partnerships established not only in North America, but in Europe
      and
      Australia as well.




The
      revenue models of the Company are based on:





Pay-Per-Click
      search listing placement – advertisers bid or pay a fixed price for
      position on search listing advertisements on www.mamma.com
      and within the Copernic Media SolutionsTM Publisher Network.





Graphic
      Ad Units – priced on a CPM (Cost-Per-Thousand) basis and are distributed
      through the Copernic Media SolutionsTM Publisher Network.





Copernic
      Media SolutionsTM Publisher Network has over 221 active publishers (combined
      search and graphic ad publishers).





Copernic
      Agent ® and
      Copernic Desktop Search ® users
      generate Web searches and clicks from pay-per-click advertising listings.





Copernic
      Desktop Search ® licensing to ISPs, portals and e-commerce site generates license, maintenance
      and customization revenues.





Copernic
      Agent ® Personal
      / Pro, Copernic Summarizer ® and
      Copernic Tracker ® software
      are sold from our e-commerce store.





Copernic
      Desktop Search Corporate Edition® software is sold from our e-commerce store or
      direct from corporate sales on a per license basis to businesses, academic
      institutions, non-profit organizations and government
      environments.


24


**Search
      advertising**





Approximately
      89% of our revenues come from our search based business. The revenue model
      in
      this sector is simply a pay-per-click fee that is charged to the advertiser
      when
      a user clicks on a sponsored link. The business model consists of advertisers
      buying keywords. When these keywords are searched by a user, the advertiser’s
      Web site will be listed in a premium position in the search results, identified
      as a sponsored result. The Company aggregates advertisers from other
      search-based businesses and from its own direct sales efforts (through
      direct sales and automated online marketing initiatives). The Company then
      distributes these search advertisements onto its search publisher network which
      consists of its own search properties (Mamma.com "The Mother of All Search
      Engines" and Copernic Agent®) and third party search properties of approximately
      117 partners. Advertising revenues generated through third party search
      properties have associated payout costs; these payout costs represent a
      percentage of the revenues generated from the distribution of search
      advertisements onto third party search property. Higher margins are obtained
      through our own properties as there are no payout costs associated with these
      revenues.





**Graphic
      advertising**





Approximately
      1% of our revenues were generated from our ad network business. The revenue
      model in this sector is CPM based (cost per one thousand impressions
      published). The business model is based on advertisers buying impressions for
      ad
      campaigns (these are creative based campaigns: different size banners, pop-ups,
      rich media advertising) and targeting them through our network of publishers.
      Campaigns can be targeted in several ways: geo-targeting (by region), or by
      site
      category (ex: travel, entertainment, finance). The publisher network consists
      of
      about 104 active small to medium sized Web sites that subscribe to our service
      through an online or direct representation contract and give us access to their
      advertising inventory. The Company recruits publishers through a direct sales
      force and through online initiatives. Publishers receive payouts of a percentage
      of revenues generated from campaigns published on their Web sites.





**Software
      licensing**





Approximately
      5% of our revenues came from software licensing. The business model is based
      on
      selling licenses of Copernic Desktop Search to ISPs and portals as well as
      Copernic Agent Personal/Pro, Copernic Summarizer and Copernic Tracker through
      our e-commerce store.





**Customized
      development and maintenance support**





Approximately
      5% of our revenues were as a result of customized development and maintenance
      support. The business model is based on billing our technical team for software
      customization and maintenance support.





**Industry
      Trends and Facts released in publications:**





1.
      According to eMarketer, online advertising is expected to grow by 28.5% in
      2008
      up from 26.8% in 2007.  Additionally, spending on paid search advertising
      is expected to grow by 27.5% in 2008 up from 26.8% in 2007. (January
      7 th ,
      2008)


*Source:
      http://www.brandcurve.com/online-advertising-to-grow-285-in-2008/*





2.  By
      2011,
      75% of the US workforce will be mobile. Pressure on companies to provide
      work/life balance programs for employees combined with advances in mobile
      technologies is increasing the number of mobile workers in the U.S. and around
      the world. By year-end 2011, IDC expects nearly 75% of the US workforce will
      be
      mobile (February 10, 2008)


*Source:
      http://www.itfacts.biz/category/wireless-data*





3.
      The
      time spent looking for and not finding information costs an organization $6
      million a year. Including the cost of reworking information because it hasn’t
      been found costs that organization an additional $12 million a year.


*Source:
      IDC and KMWorld*





4.
      More
      than 100 million handsets with touch screens will be ** shipped
      in 2008.


*Source:
      ABI Research, October 2007*





5.
      Business mobile data application to generate $100 billion by 2012.


*Source:
      ABI Research, September 2007*


25


**Recent
      events**





**Resignation
      and departure of two officers**





On
      February 11, 2008 the Company announced the departure of Patrick Hopf, Executive
      Vice President of Business Development. 117,134 options held by Mr. Hopf were
      cancelled, resulting in a reversal of employee stock-based compensation expense
      of $48,542 which will be recorded in Q1 2008.





On
      February 8, 2008 the Company announced that its President and Chief Executive
      Officer, Martin Bouchard, tendered his resignation, effective March 3, 2008,
      citing personal reasons. Mr. Bouchard will continue as a member of the board
      of
      directors and has agreed to be available to the Company on a consulting basis.
      155,000 options held by Mr. Bouchard were cancelled, resulting in a reversal
      of
      employee stock-based compensation expense of $49,320 which will be recorded
      in
      Q1 2008. Mr. Marc Ferland, a director of the Company, is appointed President
      and
      CEO commencing on March 3, 2008.





**Write-down
      of intangible assets and goodwill**





In
      Q4
      2007, the Company concluded that its software unit was facing delays in
      execution and changes of market conditions of its commercial deployment
      solutions. Based on the Company’s assessment of the fair value of its assets
      related to the software unit, the Company concluded that these assets had
      suffered a loss in value and the fair values of intangible assets and goodwill
      were significantly less than their carrying value. Therefore, write-downs of
      $1,333,415 for trade names, $652,055 for customer relationships and goodwill
      of
      $7,214,531 were recorded in 2007.





Also
      in
      Q4 2007, the Company reported decreased revenues due to industry pressures
      on
      advertising rates, slow down in sponsored clicks, pop-up campaigns and general
      demand for all graphic ads. Based on the Company assessment of the fair value
      of
      its assets related to search / media unit, the Company concluded that the
      goodwill related to this unit had suffered a loss in value and the fair value
      of
      the related goodwill was significantly less then its carrying value. Therefore,
      a write-down of goodwill of $846,310 for search / media unit was recorded in
      2007 to bring it to nil.





**Write-down
      of investment**





In
      Q4
      2007, based on its assessment of the fair value of the Company’s investment in
      LTRIM, the Company concluded that its investment had suffered a loss in value
      other than a temporary decline due to LTRIM’s significant corporate
      restructuring and therefore recorded a write-down of $150,000 to bring it to
      nil.





**Closure
      of SEC investigation**





On
      September 19, 2007, the United States Securities and Exchange Commission (“SEC”)
      informed the Company by letter that it had closed its investigation of the
      Company, commenced in 2004, concerning certain trading in the shares of the
      Company and other matters, and that the SEC did not intend to recommend
      enforcement action against the Company.





**Settlement
      of class action lawsuit**





On
      July
      16, 2007, the Company announced that the United States District Court, Southern
      District of New York (the “Court”) had approved the settlement of the class
      action following a hearing on July 9, 2007, at which time the Court heard from
      all parties before concluding that the settlement was fair and all
      procedural requisites were met. As a result, all claims asserted in the class
      actions against the Company and the individual officer defendants have been
      resolved, with the exception of three shareholders who have indicated they
      will
      exclude themselves from the settlement so as to preserve rights to maintain
      separate actions should they elect to do so.  The amount paid into escrow,
      along with any interest earned, was distributed as provided under the settlement
      to pay class members, plaintiffs' attorney fee, and the costs of claims
      administration. Subsequently, one of the three shareholders has declined its
      right to the class action lawsuit.





**Name
      change of Mamma.com inc. to Copernic Inc.**





On
      June
      8, 2007, the Company’s shareholders approved changing the Company’s name from
      Mamma.com Inc. to Copernic Inc. at its Annual General and Special Meeting of
      the
      Shareholders. On June 14, 2007, articles of amendment were filed at the Ministry
      of Consumer and Business Services of Ontario effecting the name change. On
      June
      21, 2007, the Company’s stock ticker symbol was changed to “CNIC”.





**Agreement
      for financial advisory services**





On
      June
      7, 2007, the Company retained ThomasLloyd Capital LLC (“ThomasLloyd Capital”) as
      its financial and investment banking advisor.  In consideration for these
      services, the Company has committed to pay ThomasLloyd Capital a monthly fee
      of
      $5,000 for seven months beginning June 1, 2007, plus a success fee of the
      greater of $1,000,000 (but in no event shall such amount exceed 3% of the
      transaction value) or 2% of the transaction value but in no event to exceed
      $2,000,000 (less any amounts previously paid as monthly fees) plus an additional
      fee of $200,000, credited against the above fees payable upon delivery of a
      fairness opinion.


26


**Resignation
      of two officers**





In
      January 2007, two officers resigned from their positions. In connection with
      their resignations, the Company paid and recorded termination costs of
      CDN$510,000 in Q1 2007, changed the duration of their option agreements and
      allowed accelerated vesting options for one of the officers. These changes
      represented an additional non-cash item expense of $253,236 which was recorded
      in Q1 2007.





**Granting,
      exercising and cancellation of stock options**





On
      January 23, 2007, the Company granted to officers and employees 70,500 and
      21,803 stock options, respectively, at an exercise price of $5.15 expiring
      in
      five years.





On
      February 26, 2007, 10,000 stock options were granted to a new employee, at
      an
      exercise price of $4.99 expiring in five years.





On
      March
      29, 2007, the Company granted 2,632 stock options to an employee at an exercise
      price of $4.75 expiring in five years.





On
      April
      30, 2007, the Company granted 40,000 stock options to a new employee at an
      exercise price of $4.90 expiring in five years.





On
      June
      8, 2007, the Company granted 60,000 stock options to directors at an exercise
      price of $4.24 expiring in five years.





On
      September 18, 2007, the Company granted 652,000 stock options to officers and
      employees at an exercise price of $1.74 expiring in five years.





On
      September 21, 2007, the Company granted 50,000 stock options to two new board
      members at an exercise price of $1.67 expiring in five years.





As
      at
      September 30, 2007, 296,667 stock options were exercised with exercising prices
      ranging between $1.53 to $2.57 and 59,037 stock options were
      cancelled.





As
      at
      November 8, 2007, the Company granted 4,000 stock options to an employee at
      an
      exercise price of $2.23 expiring in five years.





As
      at
      December 31, 2007, 296,667 stock options were exercised with exercising prices
      ranging between $1.53 to $2.57 and 83,065 were cancelled or had
      expired.





**Critical
      Accounting Policies and Estimates**





The
      Company prepares its consolidated financial statements in accordance with
      accounting principles generally accepted in Canada. In doing so, management
      has
      to make estimates and assumptions that affect reported amounts of assets,
      liabilities, revenues and expenses, as well as related disclosure of contingent
      assets and liabilities. In many cases, management reasonably has used different
      accounting policies and estimates. In some cases, changes in the accounting
      estimates are reasonably likely to occur from period to period. Accordingly,
      actual results could differ materially from our estimates. To the extent that
      there are material differences between these estimates and actual results,
      our
      financial condition or results of operations will be affected. Management bases
      its estimates on past experience and other assumptions that it believes are
      reasonable under the circumstances, and it evaluates these estimates on an
      ongoing basis. Management refers to accounting estimates of this type as
      critical accounting policies and estimates, which are discussed further below.
      Management has reviewed its critical accounting policies and estimates with
      its
      Board of Directors.





Use
      of
      estimates




Significant
      estimates in these financial statements include the allowance for doubtful
      accounts, recovery of future income taxes, goodwill and annual goodwill
      impairment test, useful lives and impairment of long-lived assets, stock-based
      compensation costs, valuation of investments and determination of the fair
      value
      of the intangible assets on recent acquisitions. Each of these critical
      accounting policies is described in more detail below.





*Allowance
      for doubtful accounts*





We
      make
      judgments as to our ability to collect outstanding receivables and provide
      allowances for the portion of receivables when collection becomes doubtful.
      Provisions are made based upon a specific review of all significant outstanding
      invoices. The allowance provided for doubtful accounts does not reflect the
      future ability to collect outstanding receivables, additional provisions for
      doubtful accounts may be needed and our future results of operations could
      be
      adversely impacted.




27




We
      also
      record a provision for revenue adjustments in the same period as the related
      revenues are recorded. These estimates are based on historical analysis of
      credit memo data and other factors. If the historical data we use to calculate
      these estimates does not properly reflect future uncollectible revenues, then
      a
      change in the allowances would be made in the period in which such a
      determination is made and revenues in that period could be impacted.




For
      this
      item, actual results could differ from those estimates.





*Recovery
      of future income taxes*





We
      use
      significant judgment in determining our consolidated recovery of future income
      taxes. Uncertainties may arise with respect to the tax treatment of certain
      transactions. Although we believe our estimates are reasonable, we cannot be
      certain that the final tax outcome of these matters will not be different than
      that which is reflected in our financial statements. Such differences could
      have
      a material effect on our future income taxes in the period in which such
      determination is made.


For
      this
      item, actual results could differ from those estimates.





*Goodwill
      and annual goodwill impairment test*





Goodwill
      is evaluated for impairment annually in the fourth quarter of the year, or
      when
      events or changed circumstances indicate impairment may have occurred. In
      connection with the goodwill impairment test, if the carrying value of the
      Company's reporting unit to which goodwill relates exceeds its estimated fair
      value, the goodwill related to that reporting unit is tested for impairment.
      If
      the carrying value of such goodwill is determined to be in excess of its fair
      value, an impairment loss is recognized in the amount of the excess of the
      carrying value over the fair value. Management assesses goodwill for impairment
      using estimates including discount rate, future growth rates, amounts and timing
      of estimated future cash flows, general economic, industry conditions and
      competition. Future adverse changes in these factors could result in losses
      or
      inability to recover the carrying value of the goodwill, thereby possibly
      requiring an impairment charge in the future.




For
      this
      item, actual results could differ from those estimates.





*Useful
      lives and impairment of long-lived assets*





The
      Company assesses the carrying value of its long-lived assets which include
      property and equipment and intangible assets, for future recoverability when
      events or changed circumstances indicate that the carrying value may not be
      recoverable. Useful lives of long-lived assets are regularly reviewed for their
      appropriateness. An impairment loss is recognized if the carrying value of
      a
      long-lived asset exceeds the sum of its estimated undiscounted future cash
      flows
      expected from its use. The amount of impairment loss, if any, is determined
      as
      the excess of the carrying value of the assets over their fair value. Management
      assesses long-lived assets for impairment using estimates including discount
      rate, future growth rates, general economic, industry conditions and
      competition. Future adverse changes in these factors could result in losses
      or
      inability to recover the carrying value of the long-lived assets, thereby
      possibly requiring an impairment charge in the future.





For
      this
      item, actual results could differ from those estimates.





*Stock-based
      compensation costs*





In
      determining the fair value of stock options and warrants issued to employees
      and
      service providers, using the Black-Scholes option pricing model, the Company
      must make estimates of the forfeiture rate, the period in which the holders
      of
      the options and warrants will exercise the options and warrants and the
      volatility of the Company’s stock over that same period. Different estimates
      would result in different amounts of compensation being recorded in the
      financial statements.





*Valuation
      of investments*





The
      Company holds interests in various companies. Management records an investment
      impairment charge when it believes an investment has experienced a decline
      in
      value that is judged to be other than temporary. Management monitors its
      investments for impairment by considering current factors including economic
      environment, market conditions and operational performance and other specific
      factors relating to the business underlying the investment, and records
      reductions in carrying values when necessary. The fair value for privately
      held
      securities is estimated using the best available information as of the valuation
      date, including the quoted market prices of comparable public companies, recent
      financing rounds of the investee and other investee specific information.





For
      this
      item, actual results could differ from those estimates.


28


*Determination
      of the fair value of the intangible assets on Copernic
      acquisition*





The
      acquisition of Copernic made on December 22, 2005 resulted in the recognition
      of
      intangible assets totalling $7,900,000 and goodwill of $15,408,721. In 2006,
      as
      described in note 11, two items reduced the goodwill to $14,571,534. The
      determination of the fair value of the acquired intangible assets and goodwill
      requires management to estimate the discount rate to be used in the
      calculations, the amounts and timing of estimated future net cash flows, royalty
      rate, tax rate, weighted average cost of capital, residual growth rate, general
      economic and industry conditions. If different estimates had been used, the
      purchase price allocation might have been materially different and could cause
      the amortization expense for the current and future years to be significantly
      different.





Revenue
      recognition




Search
      advertising, graphic advertising, software licensing, customized development
      and
      maintenance support revenues are recognized when services are rendered, provided
      there is persuasive evidence of an arrangement, the fee is fixed or
      determinable, collection is considered probable, and fees are not subject to
      forfeiture, refund or other concessions.





With
      respect to search advertising and graphic advertising revenues, insertion orders
      or signed contracts are generally used as evidence of an arrangement. Revenues
      are recognized in accordance with EIC-123, *Reporting
      Revenue Gross as a Principal Versus Net as an Agent.*





Software
      licensing agreements are recognized upon delivery of software if persuasive
      evidence of an arrangement exists, collection is probable, the fee is fixed
      or
      determinable and vendor-specific evidence of an arrangement exists to allocate
      the total fee to the different elements of an arrangement. Vendor-specific
      objective evidence is typically based on the price charged when an element
      is
      sold separately, or, in the case of an element not yet sold separately, the
      price established by management, if it is probable that the price, once
      established, will not change before market introduction.





Revenues
      from maintenance support for licenses previously sold and implemented are
      recognized ratably over the term of the contract.





Revenues
      from customized development, not considered as part of the implementation of
      software licenses, are recognized as the services are provided.





Amounts
      received in advance of the delivery of products or performance of services
      are
      classified as deferred revenue.





Estimates
      of collection likelihood are based on a number of factors, including past
      transaction history with the customer and the credit-worthiness of the customer.
      If it is determined that collection of a fee is not probable, management defers
      the fee and recognizes revenues at the time collection becomes probable, which
      is generally upon receipt of cash.




**Recent
      accounting changes**





**a)
      For changes affecting 2005**





**Consolidation
      of variable interest entities**





The
      Canadian Institute of Chartered Accountants (“CICA”) Accounting Guideline 15,
“Consolidation of Variable Interest Entities”, provides clarification on the
      consolidation of those entities defined as “variable interest entities”, when
      equity investors are not considered to have a controlling financial interest
      or
      they have not invested enough equity to allow the entity to finance its
      activities without additional subordinated financial support from other parties.
      Variable interest entities are commonly referred to as special purpose entities.
      The guideline came into effect for interim periods beginning on or after
      November 1, 2004. The adoption of this section did not have a significant impact
      on the financial statements.





**b)
      For changes affecting 2007**




**Initial
      application of primary source of GAAP**





On
      January 1, 2007, in accordance with the applicable transitional provisions,
      the
      Company applied the recommendations of new Section 1506, “Accounting Changes”,
      of the CICA’s Handbook. This new section, effective for the years beginning on
      or after January 1, 2007, prescribes the criteria for changing accounting
      policies, together with the accounting treatment and disclosure of changes
      in
      accounting policies, changes in accounting estimates and corrections of errors.
      Furthermore, the new standard requires the communication of the new primary
      sources of GAAP that are issued but not yet effective or not yet adopted by
      the
      Company. The new standard had a negligible effect on the Company’s financial
      statements.


29


Effective
      in January 2007, the Company adopted three new accounting standards issued
      by
      the CICA: Section 1530, Comprehensive Income; Section 3855, Financial
      Instruments - Recognition and Measurement; and Section 3865, Hedges. These
      new
      accounting standards establish standards for recognizing and measuring financial
      instruments, namely financial assets, financial liabilities and derivatives.
      Certain changes in the value of these financial instruments are presented under
      Comprehensive Income in the Consolidated Statements of Shareholders’ Equity. The
      application of these new standards had a negligible effect on the Company’s
      financial statements and financial position.





*Accounting
      policy choice for transaction costs (“EIC-166”)*





Issued
      in
      June 2007, EIC-166 addresses whether the entity must make one accounting policy
      choice that applies to all financial assets and financial liabilities classified
      other than held for trading. This Abstract mentions that the same accounting
      policy choice should be made for all similar financial instruments classified
      as
      other than held for trading but that a different accounting policy choice might
      be made for financial instruments that are not similar. This accounting
      treatment should be applied retrospectively to transaction costs accounted
      for
      in accordance with Section 3855 in financial statements issued for interim
      and
      annual periods ending on or after September 30, 2007. The adoption of this
      Abstract had no impact of the Company’s financial statements.





**c)
      Recently published accounting changes**





Convertible
      and other debt instruments with embedded derivatives (“EIC-164”)





EIC-164
      addresses the situation where a company issues a debt instrument that is
      convertible at any time at the holder’s option into a fixed number of common
      shares. Upon conversion, the issuer is either required or has the option to
      satisfy all or part of the obligation in cash. The instrument may also permit
      the issuer to redeem the instrument prior to maturity, and/or permit the holder
      to force the issuer to redeem the instrument prior to maturity. This Abstract
      provides guidance on various issues related to such debt
      instruments.





The
      accounting treatment in this Abstract should be applied retrospectively to
      financial instruments accounted for in accordance with Section 3855 in financial
      statements issued for interim and annual periods ending on or after June 30,
      2007. The adoption of this Abstract had no impact on the financial
      statements.





Accounting
      by an investor upon a loss of significant influence (“EIC-165”)





Issued
      in
      April 2007, EIC-165 addresses the situation of how an investor that loses
      significant influence in an investee should account for the amount the investor
      has in its accumulated other comprehensive income (OCI) for its proportionate
      share of the investee’s equity adjustment for OCI. The amount recorded by the
      investor in accumulated OCI for the investor’s proportionate share of an
      investee’s equity adjustments for OCI should be deducted from or added to the
      carrying value of the investment at the time significant influence is lost.
      To
      the extent that the adjustment results in a carrying value of the investment
      that is less than zero, an investor should reduce the carrying value of the
      investment to zero and record the remaining balance in net income.





The
      accounting treatment in this Abstract should be applied retrospectively, with
      restatement of prior periods, to all financial statements for interim and annual
      reporting periods ending June 30, 2007. The adoption of this Abstract had no
      impact of the Company’s financial statements.





**d)
      Future accounting changes**





*CICA
      Section 1535 - Capital Disclosures*





In
      December 2006, the CICA issued Handbook Section 1535 - Capital Disclosures.
      The
      new accounting standard requires disclosure of information about an entity’s
      objectives, policies, and processes for managing capital, as well as
      quantitative data about capital and whether the entity has complied with any
      capital requirements. This Handbook Section is effective for interim and annual
      periods beginning on or after October 1, 2007. The Company is currently
      evaluating the impact of adopting this new Section.





*CICA
      Section 3862 – Financial Instruments – Disclosures*


*CICA
      Section 3863 – Financial Instruments – Presentation*





In
      December 2006, the CICA issued Handbook Section 3862 and 3863 that provide
      additional guidance regarding disclosure of the risks associated with both
      recognized and unrecognized financial instruments and how those risks are
      managed. These Handbook Sections are also effective for interim and annual
      periods beginning on or after October 1, 2007. The Company is currently
      evaluating the impact of adopting these new Sections.





EIC-169,
      Determining Whether a Contract is Routinely Denominated in a Single
      Currency





Issued
      January 8th, 2008, EIC-169 provides guidance on how to define or apply the
      term
“routinely denominated in commercial transactions around the world” as discussed
      in Section 3855 when assessing contracts for embedded foreign currency
      derivatives. It also determines the factors that can be used to determine
      whether a contract for the purchase or sale of a non-financial item such as
      a
      commodity is routinely denominated in a particular currency in commercial
      transactions around the world. The accounting treatment of this Abstract should
      be applied retrospectively to embedded foreign currency derivatives in host
      contracts that are not financial instruments accounted for in accordance with
      Section 3855 in financial statements issued for interim and annual periods
      ending on or after March 15, 2008. The adoption of this Abstract will not have
      any impact on the Company’s financial statements.




30


Goodwill
      and Intangible Assets - Section 3064





In
      January 2008, the CICA issued Section 3064, Goodwill and Intangible Assets,
      which replaces Section 3062, Goodwill and Other Intangible Assets.  The
      objectives of Section 3064 are to reinforce the principle-based approach to
      the
      recognition of assets only in accordance with the definition of an asset and
      the
      criteria for asset recognition; and clarify the application of the concept
      of
      matching revenues and expenses such that the current practice of recognizing
      asset items that do not meet the definition and recognition criteria is
      eliminated. This standard also provides guidance for the recognition of
      internally developed intangible assets (including research and development
      activities), ensuring consistent treatment of all intangible assets, whether
      separately acquired or internally developed. This Section applies to interim
      and
      annual periods beginning on or after October 1, 2008, with early adoption
      encouraged. The Company is currently evaluating the impact of adopting this
      new
      Section.





Transition
      to International Financial Reporting Standards (“IFRS”)





The
      CICA
      has announced the final date for the required conversion of publicly accountable
      enterprises from Canadian GAAP to IFRS. The official changeover date is for
      interim and annual financial statements relating to fiscal years beginning
      on or
      after January 1, 2011.





**Results
      of Operations**





***Revenues***





**2007
      as compared to 2006**





In
      2007,
      the Company generated revenues of $8,116,408 compared to $9,596,402 for the
      previous year, a decrease of 15%.





During
      2007, search advertising revenues increased to $7,246,838 from $7,197,868 in
      2006, an increase of $48,970 or 0.7%. In the first half of 2007, revenues were
      higher than the same period in 2006 but were lower during the second half of
      2007.





In
      2007,
      graphic advertising totalled $107,871 compared to $827,104 for the same period
      last year, a decrease of $719,233 or 87%. The decrease is due to the decline
      in
      pop-up campaigns and a decrease in demand for all other graphic ad units.





Software
      licensing stood at $415,263 in 2007 compared to $957,488 in 2006, a decrease
      of
      $542,225 or 57%. The decrease is explained by the sale of one major CDS license
      in 2006 compared to two smaller CDS licenses in 2007.





Customized
      development and maintenance support revenues generated $346,436 in 2007 compared
      to $613,942 for the same period last year, a decrease of $267,506 or 44%. The
      decrease is explained by maintenance support contracts that were not renewed
      in
      2007.





**2006
      as compared to 2005**





Revenues
      for 2006 were $9,596,402 compared to $9,443,975 in 2005, an increase of
      2%.





In
      2006
      search advertising revenues increased by $2,227,495 or 45% to $7,197,868 from
      $4,970,373 in 2005. The increased is explained mainly by an expanded
      distribution network and new clients and additional revenues generated by the
      acquisition of Copernic Technologies Inc. at the end of 2005.





Graphic
      advertising revenues totalled $827,104 in 2006 compared to $4,456,399 for the
      same period in 2005, a decrease of $3,629,295 or 81%. The variance is explained
      by the decline of pop-up campaigns, a decrease in demand for all other graphic
      ad units and significant delays in re-orientating our sales team’s focus on
      quality top-tier agencies as opposed to low-tier broker business.





Software
      licensing went from $6,671 in 2005 to $957,488 in 2006 an increase of $950,817.
      The 2005 results represents only 7 days of operations of Copernic Technologies
      Inc. as compared to a full year in 2006 and by a sale of one major CDS license
      during 2006.





In
      2006,
      customized development and maintenance support amounted $613,942 compared to
      $10,532 in 2005 an increase of $603,410. The 2005 results represents only 7
      days
      of operations of Copernic Technologies Inc. as compared to a full year of
      operation in 2006.


31


**Expenses**





***Cost
      of revenues***





Cost
      of
      revenues is comprised of partners’ payouts and bandwidth costs to deliver our
      services.





**2007
      as compared to 2006**





In
      2007,
      cost of revenues represented $2,636,410 or 36% over search and graphic
      advertising revenues, compared to $2,704,101 or 34% over search and graphic
      advertising revenues for the same period in 2006.





Search
      payouts totalled $2,244,715 in 2007 compared to $2,022,516 for the same period
      last year and represented respectively 31% and 28% over search revenues. The
      increase in percentage in 2007 is explained by higher payouts to partners which
      deliver better quality traffic.





In
      2007,
      graphic payouts amounted to $17,641 compared to $286,919 for the same period
      in
      2006 and represented respectively 16% and 35% over graphic advertising revenues.
      The decrease in percentage is explained by reversal of old graphic payable
      payouts that totalled respectively $42,037 in 2007 compared to $144,671 in
      2006.
      Excluding the cumulative reversals of both years, the percentage of payouts
      over
      graphic revenues would both have been respectively 55% and 52%. The increase
      in
      percentage in 2007 is also explained by higher payouts to partners which deliver
      better quality traffic.





In
      2007,
      bandwidth costs decreased by $20,612 or 5% to $374,054 from $394,666 for the
      same period last year. These reductions were due to lower traffic.





**2006
      as compared to 2005**





For
      the
      fiscal year ended December 31, 2006, cost of revenues represented $2,704,101
      or
      34% over search and graphic advertising revenues, compared to $4,183,445 or
      44%
      over search and graphic revenues for the same period in 2005.





In
      2006,
      search payouts totalled $2,022,516 compared to $1,638,780 for the same period
      last year and represented respectively 28% and 33% over search revenues. The
      decrease in percentage in 2006 is explained by new search revenues through
      Copernic Agent® and Copernic Desktop Search® that have no payout associated to
      them.





For
      the
      twelve-month period ended December 31, 2006, graphic payouts stood at $286,919
      or 35% over graphic revenue compared to $2,264,700 or 51% over related revenue
      for the same period in 2005. The decrease in percentage over revenue in 2006
      is
      explained by the reversal of old accruals amounting to $144,671. If we exclude
      this adjustment, the payouts for 2006 would have stood at $431,590, representing
      52% over graphic revenues compared to 51% for the same period last
      year.





The
      bandwidth costs were $394,666 for the twelve-month period ended December 31,
      2006, compared to $279,965 for the same period in 2005.





***Marketing,
      sales and services***





Marketing,
      sales and services consist primarily of salaries, commissions and related
      personnel expenses for our sales force, advertising and promotional expenses,
      as
      well as the provision for doubtful accounts.





**2007
      as compared to 2006**





For
      the
      fiscal year ended December 31, 2007, marketing, sales and services increased
      by
      $47,646 or 3% from $1,850,176 in 2006 to $1,897,822. The variance for the
      twelve-month period reflected an increase in salaries due to reorganization
      of
      the department, professional services due to new sales consultants for CDS
      and
      stock-based compensation of respectively $127,000, $93,000 and $67,000. The
      increases were offset by a decrease in purchase of algorithmic contents and
      publicity and promotion of respectively of $137,000 and $117,000 due to reduced
      revenue.





**2006
      as compared to 2005**





For
      the
      year ended December 31, 2006, marketing, sales and services expenses stood
      at
      $1,850,176 compared to $2,023,925 in 2005, representing a decrease of $173,749
      or 9%.


32


The
      variance for the year is explained by the decrease of charges paid for
      algorithmic content of $162,000, decrease of publicity, bad debt expense and
      salaries and related costs of respectively $69,000, $62,000 and $38,000. The
      decrease was offset by an increase in recruiting fees and professional services
      of respectively $97,000 and $65,000.





**General
      and administration**





General
      and administrative expenses include in the salaries and associated costs of
      employment of executive management and finance personnel, including stock-based
      compensation. These costs also include facility charges, investor relations,
      as
      well as legal, tax and accounting, consulting and professional service fees
      associated with operating our business and corporate compliance
      requirements.





**2007
      as compared to 2006**





For
      the
      year ended December 31, 2007, general and administrative expenses increased
      by
      $695,245 to $4,691,572 from $3,996,327 in 2006. The increase is mainly explained
      by the termination costs of approximately $695,000, which included a non-cash
      item for accelerated vesting options of $253,236, related to the departure
      of
      the former President and CEO of the Company in January 2007.





**2006
      as compared to 2005**





In
      2006,
      general and administrative expenses amounted to $3,996,327 compared to
      $5,692,092 in 2005, a decrease of $1,695,765.


The
      decrease is mainly explained by the reduction of $2,278,000 of professional
      fees, which included a reimbursement of $460,000 by our insurance company in
      relation with the SEC investigation. This reduction was mainly offset by two
      items: an increase of $306,000 in stock-based compensation explained by a
      combination of a reversal of expenses due to cancellation of options in 2005
      and
      new options granted and an increase of $245,000 of salaries and related costs
      mainly related to the acquisition of Copernic Technologies Inc.





**Product
      development and technical support**





Product
      development and technical support costs include the salaries and associated
      costs of employment of our team software developers and maintenance of our
      metasearch engine and other IT systems. These charges also include the costs
      of
      technical support and license maintenance. Research and development (R&D)
      tax credits are also recorded against product development and technical support
      expenses.





**2007
      as compared to 2006**





For
      the
      fiscal year ended December 31, 2007, product development and technical support
      decreased to $2,416,410 from $2,538,867 in 2006, representing a decrease of
      $122,457. The decrease is explained by a reduction in salaries due to a
      reorganization of our R&D team.





**2006
      as compared to 2005**





In
      2006,
      product development and technical support expenses amounted to $2,538,867
      compared to $1,286,345 in 2005, an increase of $1,252,522 and mainly explained
      by additional expenses of $1,460,970 related to the acquisition of Copernic
      Technologies Inc. in December 2005 and offset by a reduction in salaries
      expenses of $207,000 due to the reorganization of the R&D department in
      Montreal.





**Amortization
      of property and equipment**





**2007
      as compared to 2006**





Amortization
      of property and equipment totalled $302,509 for the year ended December 31,
      2007, compared to $178,192 for the same period last year. The increase is
      explained by acquisitions of equipment during the year of approximately $150,000
      and the change in the amortization rates, from 30% in 2006 to 50% in 2007 and
      from 20% to 33% for computer equipment and for furniture
      respectively.


33


**2006
      as compared to 2005**





In
      2006,
      amortization of property and equipment stood at $178,192 compared to $106,788
      in
      2005. The increase was related to acquisition of Copernic Technologies Inc.
      at
      the end of December 2005 and acquisitions of equipment during 2006 for
      approximately $76,000.





**Amortization
      of intangible assets**





**2007
      as compared to 2006**





For
      the
      fiscal year ended December 31, 2007, amortization of intangible assets decrease
      to $1,991,286 from $2,067,009 in 2006. The decrease is explained by the
      write-down of intangible assets recorded in Q3 2006 of $413,238.





**2006
      as compared to 2005**





Amortization
      of intangible assets stood at $2,067,009 in 2006 compared to $242,031 in 2005.
      The increase is explained by the amortization of intangible assets resulting
      from the acquisition of Copernic Technologies Inc. on December 22,
      2005.





***Write-downs
      and settlement costs***





**2007
      as compared to 2006**





In
      2007,
      write-downs and settlement costs amounted to $10,146,311 compared to $1,683,238
      for the same period last year.





In
      Q4
      2007, the Company recorded write-downs of goodwill and intangible assets related
      to Copernic Technologies Inc. acquisition of respectively $7,214,531 and
      $1,985,470. The Company’s software unit was facing delays in execution and
      changes of market conditions of its commercial deployment solutions. Based
      on
      the assessment of the fair value of the Company’s assets related to the software
      unit, the Company concluded that these assets had suffered a loss in value
      and
      the fair values of goodwill and intangible assets were significantly less than
      the carrying value for these assets.





In
      Q4
      2007, the Company reported decreased revenues due to industry pressures on
      advertising rates, slow down in sponsored clicks and general decrease for all
      graphic ads. Based on the Company assessment of the fair value of its assets
      related to search / media unit, the Company concluded that the goodwill had
      suffered a loss in value and the fair value of the related goodwill was
      significantly less then its carrying value. Therefore, a write-down of goodwill
      of $846,310 for search / media unit was recorded in 2007 to bring it to
      nil.





Also
      in
      Q4 2007, based on its assessment of the fair value of the Company’s investment
      in LTRIM, the Company concluded that its investment had suffered a loss in
      value
      other than a temporary decline due to LTRIM’s significant corporate
      restructuring and therefore recorded a write-down of $150,000 to bring it to
      nil.





These
      expenses were offset by the reversal of $50,000 of class action settlement
      costs.





In
      2006,
      the Company recorded class action settlement and closure costs of $700,000,
      write-downs of property and equipment and intangible assets related to graphic
      advertising for a total of $413,238 and a write-down of LTRIM investment of
      $570,000.





**2006
      as compared to 2005**





In
      2006,
      the Company recorded class action settlement and closure costs of $700,000,
      write-downs of property and equipment and intangible assets related to graphic
      advertising for a total of $413,238 and a write-down of LTRIM investment of
      $570,000, none in 2005.





**Interest
      and other income**





**2007
      as compared to 2006**





Interest
      and other income stood at $401,183 in 2007 compared to $415,950 in
      2006.





**2006
      as compared to 2005**





Interest
      income and other income decreased to $415,950 in 2006 from $768,738 in 2005.
      The
      decrease reflected lower liquidities following the acquisition of Copernic
      Technologies Inc. at the end of 2005.





**Loss
      on foreign exchange**





Loss
      on
      foreign exchange totalled $115,071 for the year ended December 31, 2007 compared
      to $82,203 in 2006 and $47,080 in 2005.





The
      increased loss is mainly due to the appraisal of the Canadian dollar in
      2007.


34


**Recovery
        of income taxes**
 
 For
        the
        fiscal year 2007, the recovery for current and future income taxes amounted
        to
        $1,248,974 compared to $729,053 in 2006 and $26,010 in 2005.
 
 In
        2007,
        the recovery of income taxes is explained by current income tax paid of $1,479
        and the reversal of $1,250,453 of future income tax liability due to the
        current
        amortization and write-downs of Copernic Technologies Inc.’s intangible
        assets.
  In
      2006,
      the recovery of future income taxes is explained by a recovery of previous
      year’s income tax for $4,876 and the reversal of $724,177 of future income tax
      liability related to the amortization of Copernic Technologies Inc.’s intangible
      assets.





In
      2005,
      the recovery of income taxes is explained by the reassessment of previous year’s
      income tax returns for $12,046 and the reversal of future income tax liability
      related to the amortization of Copernic Technologies Inc.’s intangible assets
      for $13,964.





**Loss
      from continuing operations and loss per share from continuing
      operations**





The
      Company reported a loss from continuing operations of $14,430,826 ($0.99 per
      share) in 2007, compared to a loss of $4,358,708 ($0.31 per share) in 2006
      and a
      loss of $3,342,983 ($0.27 per share) in 2005.





**Results
      of discontinued operations and loss per share from discontinued
      operations**





Results
      from discontinued operations for Digital Arrow are nil in 2007 compared to
      contribution to earnings of $89,328 ($0.01 per share) in 2006 and a loss of
      $2,315,335 ($0.19 per share) in 2005.





In
      2006,
      the contribution of Digital Arrow was due to a reversal of a reserve for salary
      expenses after a settlement with two former employees and a reversal of the
      provision for remaining restructuring costs.





In
      2005,
      the loss from discontinued operations of Digital Arrow amounting to $2,315,335
      included a write-down of $1,625,898 for property and equipment, intangible
      assets and goodwill.




**Loss
      for the year**





The
      loss
      for the year totalled $14,430,826 ($0.99 per share) in 2007 compared to a loss
      of $4,269,380 ($0.30 per share) in 2006 and a loss of $5,658,318 ($0.46 per
      share in 2005). For 2007, 2006 and 2005, there is no difference between net
      loss
      under US GAAP as compared to Canadian GAAP.





**Liquidity
      and capital resources**





As
      at
      December 31, 2007, the Company had liquidities of $6,872,412 which were composed
      of $2,099,560 in cash and cash equivalents, restricted cash of $807,468 and
      $3,965,384 in temporary investments compared to $7,971,459 in 2006 which
      consisted of $2,379,617 in cash and cash equivalents and $5,591,842 in temporary
      investments. For the year ended December 31, 2007, working capital was
      $6,413,044 compared to $8,533,546 for the previous year.





Operating
      activities





In
      2007,
      the cash used for operating activities of $1,527,890 is mainly due to the loss
      from continuing operations net of non-cash items of $2,518,048 offset by net
      change in non-cash working capital items of $990,158. The cash used for
      discontinued operations in 2007 totalled $6,253.





In
      2006,
      the cash used is explained by the loss from continuing operations net of
      non-cash items of $1,343,253 offset by net change in non-cash working capital
      items of $515,619. The cash used for discontinued operations in 2006 stood
      at
      $83,948.





In
      2005,
      the cash used is mainly due to the loss from continuing operations net of
      non-cash items of $2,871,195 offset by the net change in non-cash working
      capital of $1,420,013. The cash used from discontinued operations amounted
      to
      $630,288 in 2005.





Investing
      activities





In
      2007,
      investing activities provided cash of $1,408,367 mainly explained by the
      decrease of temporary investments of $1,626,458 offset by the purchases of
      property and equipment and intangible assets of $218,091.





In
      2006,
      investing activities used cash of $1,326,652 mainly explained by the purchase
      of
      temporary investments of $1,578,530 offset by a reimbursement related to
      Copernic Technologies Inc. business acquisition of $379,382 and purchases of
      intangible assets and property and equipment of $127,504.





In
      2005,
      investing activities used cash of $13,131,709 of which $15,851,922 was used
      for
      the acquisition of Copernic Technologies Inc., $140,630 used for purchases
      of
      property and equipment an intangible assets and the decrease in temporary
      investments provided cash of $2,860,843.


35


Financing
      activities





In
      2007,
      financing activities provided cash totalling $676,258 from issuance of capital
      stock upon exercise of options offset by repayment of obligations under capital
      leases of $23,071. In 2006, no cash was provided by, nor used in the financing
      activities of the Company. In 2005, financing activities used cash of $1,046,731
      mainly explained by the redemption of common shares of the Company.





Liquidity
      and capital resources





The
      Company considers that its liquidities will be sufficient to meet normal
      operating requirements until the end of 2008. In the long term, the Company
      may
      require additional liquidity to fund growth, which could include additional
      equity offerings or debt financing.





The
      Company retained ThomasLloyd Capital LLC (“ThomasLloyd Capital”) as its
      financial and investment banking advisor.





**Concentration
      of credit risk with customers**





As
      at
      December 31, 2007, four customers represented 54% of our accounts receivable
      compared to 54% from three customers for the previous year resulting in a
      significant concentration of credit risk. Management monitors the evolution
      of
      these customers closely in order to rapidly identify any potential problems.
      These customers, which represented more than 10% of the Company’s net accounts
      receivable, have paid accounts receivable as per their commercial agreements.
      The Company also monitors the other accounts receivable and there is no
      indication of credit risk deterioration. Nevertheless we cannot assure that
      we
      can retain the business of these customers or that their business will not
      decline generally in the future.





**Q4
      2007 Results**





**Revenues**





Revenues
      for the three-month period ended December 31, 2007 (“Q4”) totalled $1,654,352
      compared to $3,566,421 for the same period in 2006, a decrease of $1,912,069
      or
      54%. In Q4 2007, each revenue type was lower than the same period in
      2006.





Search
      advertising revenues went from $2,503,771 in Q4 2006 to $1,431,583 in Q4 2007,
      a
      decrease of $1,072,188 or 43%. The decrease is explained by a change of our
      client mix.





Graphic
      advertising totalled $14,584 for the three-month period ended December 31,
      2007
      compared to $131,634 for the same period last year, a decrease of $117,050
      or
      89%. The decrease is due to the decline in pop-up campaigns and a general
      decrease in demand for all other graphic ad units.





Software
      licensing stood at $85,751 in Q4 2007 compared to $701,181 in Q4 2006, a
      decrease of $615,430 or 88%. The decrease is explained by the sale of one
      significant CDS license in Q4 2006 of approximately $570,000 compared to no
      significant one in 2007.





Customized
      development and maintenance support revenues generated $122,434 in Q4 2007
      compared to $229,834 for the same period last year, a decrease of $107,400
      or
      47%. The decrease is explained by two contracts that were not renewed in 2007
      for a total amount of $192,000 offset by various new small
      contracts.





**Expenses**





**Cost
      of revenues**





In
      Q4
      2007, cost of revenues represented $543,763 or 38% over search and graphic
      advertising revenues, compared to $918,920 or 35% over search and graphic
      advertising revenues for the same period in 2006.





In
      Q4
      2007, search payouts totalled $428,193 compared to $754,628 for the same period
      last year, represented 35% and 34% over search revenues respectively.





In
      Q4
      2007, graphic payouts stood at $5,321 compared to $77,044 for the same period
      in
      2006, represented respectively 36% and 59% over graphic advertising revenue.
      In
      2007, the payouts were reduced by the reversal of old graphic payable of $3,019.
      Excluding the adjustment, the percentage of payout over revenue would have
      been
      57%. The higher percentage in Q4 2006 is explained by a fixed payout of $10,000
      for a specific partner who got cancelled.


36


The
      bandwidth costs were $110,249 in Q4 2007 compared to $87,248 for the same period
      in 2006. The bandwidth costs were higher in Q4 2007 due to the transition period
      of shifting data centers.





**Marketing,
      sales and services**





In
      Q4
      2007, marketing, sales and services expenses decreased to $480,531 from $502,415
      in Q4 2006, a decrease of $21,884. The variance is mainly explained by the
      decrease in training and recruiting fees of $96,000 for our US team incurred
      in
      Q4 2006 offset by the increase in stock based compensation costs and sales
      consulting fees of respectively $46,000 and $29,000.





**General
      and administration**





General
      and administrative expenses in Q4 2007 totalled $1,020,709 as compared to
      $1,029,243 for the same period last year, a decrease of $8,534 or 1%. The
      variance is explained by a decrease of insurance expense and salaries offset
      by
      an increase in legal fees and stock-based compensation.





**Product
      development and technical support**





Product
      development and technical support expenses amounted to $651,830 in Q4 2007,
      compared to $614,340 for the same period last year, an increase of $37,490
      or
      6%. The increase is explained by the increase in stock based compensation costs
      of $43,000 offset by the increase of tax credit of $62,000 and the reversal
      in
      Q4 2006 of a provision for litigation of $27,000.





**Amortization
      of property and equipment**





Amortization
      of property and equipment totalled $119,220 in Q4 2007, compared to $48,968
      for
      the same period last year. The increase is explained by acquisitions of
      equipment and the change in the amortization rates, from 30% in 2006 to 50%
      in
      2007 and from 20% to 33% for computer equipment and for furniture
      respectively.





**Amortization
      of intangible assets**





Amortization
      of intangible assets increased to $511,384 in Q4 2007, compared to $487,914
      for
      the same period last year. The increase is explained by acquisitions of software
      and the change in the amortization rates, from 30% in 2006 to 50% in 2007 for
      software.





**Write-downs,
      settlement and other costs**





In
      Q4
      2007, write-downs and settlement costs amounted to $10,146,311.





In
      Q4
      2007, the Company recorded write-downs of goodwill and intangible assets related
      to Copernic Technologies Inc. acquisition of respectively $7,214,531 and
      $1,985,470. The Company’s software unit was facing delays in execution and
      changes of market conditions of its commercial deployment solutions. Based
      on
      the Company’s assessment of the fair value of the assets related to the software
      unit, the Company concluded that its assets had suffered a loss in value and
      the
      fair value of intangible assets was significantly less than the carrying value
      for these assets. A write-down of goodwill of $846,310 due to industry pressures
      on advertising rates, slow down in sponsored clicks and general decrease for
      all
      graphic ads related to search / media and a write-down of LTRIM investment
      of
      $150,000 were also recorded. These expenses were offset by the reversal of
      $50,000 for class action settlement costs.





**Interest
      and other income**





Interest
      income and other income decreased to $74,078 in Q4 2007 from $102,978 in Q4
      2006. The decrease is explained by lower liquidities during Q4 2007 compared
      to
      the same period last year.





**Loss
      on foreign exchan** **ge**





Loss
      on
      foreign exchange totalled $41,164 for Q4 2007, compared to a gain of $51,392
      for
      the same period last year mainly due to the appraisal of the Canadian dollar
      in
      Q4 2007.





**Income
      taxes**





The
      recovery of future income taxes relates to the amortization of intangible assets
      which does not have the same asset base for accounting and tax purposes.
      Recovery of future income taxes totalled $796,401 in Q4 2007, compared to
      $246,356 for the same period last year. The increase of recovery for income
      taxes is explained by the reversal of future income taxes liability in relation
      with the write-downs of intangible assets in Q4 2007.


37


**Loss
      (earnings) from continuing operations and loss (earnings) per share from
      continuing operations**





The
      Company reported a loss from continuing operations of $10,990,081 ($0.75 per
      share) in Q4 2007, compared to earnings of $365,347 ($0.03 per share) for the
      same period last year.





**Results
      of discontinued operations and loss per share from discontinued
      operations**





Results
      from discontinued operations for Digital Arrow in Q4 2007 are $nil compared
      to
      contribution to earnings of $54,828 ($0.00 per share) in Q4 2006.





**Net
      loss (earnings) and net loss (earnings) per share**





Net
      loss
      for the three-month period ended December 31, 2007, totalled $10,990,081 ($0.75
      per share), compared to net earnings of $420,175 ($0.03) per share for the
      same
      period last year.





**Off-balance
      sheet arrangements**





As
      at
      December 31, 2007 and 2006, the Company has no off-balance sheet
      arrangements.





**Contractual
      obligations, contingent liabilities and commitments**





The
      following table summarizes our contractual obligations as at December 31, 2007,
      and the effect such obligations are expected to have on our liquidity and cash
      flows in future periods:





**Operating leases****Years:**
            
            **$**2008
            
            
            524,0002009
            
            
            174,0002010
            
            
            56,0002011
            
            
            33,0002012
            
            
            22,000Thereafter
            
            
            -





The
      Company maintains director and officer insurance, which may cover certain
      liabilities arising from its obligation to indemnify its directors, and officers
      and former directors, officers and employees of acquired companies, in certain
      circumstances. It is not possible to determine the maximum potential amount
      under these indemnification agreements due to the limited history of prior
      indemnification claims and the unique facts and circumstances involved in each
      particular agreement. Such indemnification agreements may not be subject to
      maximum loss clauses. Historically, the Company has not incurred material costs
      as a result of obligations under these agreements and it has not accrued any
      liabilities related to such indemnification obligations in its financial
      statements.





On
      June
      7, 2007, the Company retained ThomasLloyd Capital LLC (“ThomasLloyd Capital”) as
      its financial and investment banking advisor.  In consideration for these
      services, the Company has committed to pay ThomasLloyd Capital a monthly fee
      of
      $5,000 for seven months beginning June 1, 2007, plus a success fee of the
      greater of $1,000,000 (but in no event shall such amount exceed 3% of the
      transaction value) or 2% of the transaction value but in no event to exceed
      $2,000,000 (less any amounts previously paid as monthly fees) plus an additional
      fee of $200,000, credited against the above fees payable upon delivery of a
      fairness opinion.





As
      at
      December 31, 2007, the Company has change of control agreements with certain
      executive officers. If there is a change of control of the Company and their
      employments are not required, the Company will have to pay lump sums up to
      a
      maximum of $1,018,000 for these specific officers.




**Risks
      and uncertainties**





Copernic
      Inc.’s Management considers that these following factors, among others, should
      be considered in evaluating its future results of operations.





*Our
      revenues depend to a high degree on our relationship with two customers, the
      loss of which would adversely affect our business and results of
      operations.*





For
      the
      year ended December 31, 2007, approximately 20% and 14% respectively of our
      revenues were derived from agreements with our two largest customers. Revenues
      from these customers represented 22%
      and
      11% of our revenues in 2006
      and  16
      % and
      11% of our revenues in 2005. Although we monitor our accounts receivable for
      credit risk deterioration and these customers have been paying their payables
      to
      Copernic Inc. in accordance with the terms of their agreements with the Company,
      there can be no assurance that they will continue to do so or that they will
      continue to do so at the volume of business they have done historically. Our
      loss of these customers’ business would adversely affect our business and
      results of operations.


38


*Our
      operating results may fluctuate, which makes our results difficult to predict
      and could cause our results to fall short of expectations.*





Our
      operating results may fluctuate as a result of a number of factors, many of
      which are outside of our control. For these reasons, comparing our operating
      results on a period-to-period basis may not be meaningful, and you should not
      rely on our past results as an indication of our future performance. Our
      operating results may fluctuate as a result of many factors related to our
      business, including the competitive conditions in the industry, loss of
      significant customers, delays in the development of new services and usage
      of
      the Internet, as described in more detail below, and general factors such as
      size and timing of orders and general economic conditions. Our quarterly and
      annual expenses as a percentage of our revenues may be significantly different
      from our historical or projected rates. Our operating results in future quarters
      may fall below expectations. Any of these events could cause our stock price
      to
      fall. Each of the risk factors listed in this “Risk Factors” section, and the
      following factors, may affect our operating results:





·
            Our
                ability to continue to attract users to our Web sites.


·
            Our
                ability to monetize (or generate revenue from) traffic on our Web
                sites
                and our network of advertisers’ Web sites.


·
            Our
                ability to attract advertisers.


·
            The
                amount and timing of operating costs and capital expenditures related
                to
                the maintenance and expansion of our businesses, operations and
                infrastructure.


·
            Our
                focus on long term goals over short term results.


·
            The
                results of any investments in risky projects.


·
            Payments
                that may be made in connection with the resolution of litigation
                matters.


·
            General
                economic conditions and those economic conditions specific to the
                Internet
                and Internet advertising.


·
            Our
                ability to keep our Web sites operational at a reasonable cost and
                without
                service interruptions.


·
            Geopolitical
                events such as war, threat of war or terrorist actions.


·
            Our
                ability to generate CDS revenues through licensing and revenue
                share.





Because
      our business is changing and evolving, our historical operating results may
      not
      be useful to you in predicting our future operating results. In addition,
      advertising spending has historically been cyclical in nature, reflecting
      overall economic conditions as well as budgeting and buying patterns. Also,
      user
      traffic tends to be seasonal.





*We
      rely on our Web site partners for a significant portion of our net revenues,
      and
      otherwise benefit from our association with them. The loss of these Web site
      partners could prevent us from receiving the benefits we receive from our
      association with them, which could adversely affect our
      business.*





We
      provide advertising, Web search and other services to members of our partner
      Web
      sites. We expect the percentage of our revenues generated from this network
      to
      increase in the future. We consider this network to be critical in the future
      growth of our revenues. However, some of the participants in this network may
      compete with us in one or more areas. Therefore, they may decide in the future
      to terminate their agreements with us. If our Web site partners decide to use
      a
      competitor’s or their own Web search or advertising services, our revenues would
      decline.





*We
      face significant competition from Microsoft, Yahoo, Google and Ask.com.*




We
      face
      formidable competition in every aspect of our business, and particularly from
      other companies that seek to connect people with information on the Web and
      provide them with relevant advertising. Currently, we consider our primary
      competitors to be Microsoft, Yahoo, Google and Ask.com. Microsoft,
      Yahoo, Google and Ask.com have a variety of Internet products, services and
      content that directly competes with our products, services, content and
      advertising solutions. We
      expect
      that Microsoft will increasingly use its financial and engineering resources
      to
      compete with us.




Microsoft,
      Yahoo, Google and Ask.com have more employees and cash resources than we do.
      These companies also have longer histories operating search engines and more
      established relationships with customers. They can use their experience and
      resources against us in a variety of competitive ways, including by making
      acquisitions, investing more aggressively in research and development and
      competing more aggressively for advertisers and Web sites. Microsoft and Yahoo
      also may have a greater ability to attract and retain users than we do because
      they operate Internet portals with a broad range of products and services.
      If
      Microsoft, Yahoo, Google or Ask.com are successful in providing similar or
      better Web search results compared to ours or leverage their platforms to make
      their Web search services easier to access than ours, we could experience a
      significant decline in user traffic. Any such decline in user traffic could
      negatively affect our net revenues.


39


*We
      face competition from other Internet companies, including Web search providers,
      Internet advertising companies and destination Web sites that may also bundle
      their services with Internet access.*





In
      addition to Microsoft, Yahoo, Google and Ask.com, we face competition from
      other
      Web search providers, including companies that are not yet known to us. We
      compete with Internet advertising companies, particularly in the areas of
      pay-for-performance and keyword-targeted Internet advertising. Also, we may
      compete with companies that sell products and services online because these
      companies, like us, are trying to attract users to their Web sites to search
      for
      information about products and services. Barriers to entry in our business
      are
      generally low and products, once developed, can be distributed quickly and
      to a
      wide range of customers at a reasonably low cost.





We
      also
      compete with destination Web sites that seek to increase their search-related
      traffic. These destination Web sites may include those operated by Internet
      access providers, such as cable and DSL service providers. Because our users
      need to access our services through Internet access providers, they have direct
      relationships with these providers. If an access provider or a computer or
      computing device manufacturer offers online services that compete with ours,
      the
      user may find it more convenient to use the services of the access provider
      or
      manufacturer. In addition, the access provider or manufacturer may make it
      hard
      to access our services by not listing them in the access provider’s or
      manufacturer’s own menu of offerings. Also, because the access provider gathers
      information from the user in connection with the establishment of a billing
      relationship, the access provider may be more effective than we are in tailoring
      services and advertisements to the specific tastes of the user.





There
      has
      been a trend toward industry consolidation among our competitors, and so smaller
      competitors today may become larger competitors in the future. If our
      competitors are more successful than we are at generating traffic and
      advertising, our revenues may decline.





*We
      face competition from traditional media companies, and we may not be included
      in
      the advertising budgets of large advertisers, which could harm our operating
      results.*





In
      addition to Internet companies, we face competition from companies that offer
      traditional media advertising opportunities. Most large advertisers have set
      advertising budgets, a very small portion of which is allocated to Internet
      advertising. We expect that large advertisers will continue to focus most of
      their advertising efforts on traditional media. If we fail to convince these
      companies to spend a portion of their advertising budgets with us, or if our
      existing advertisers reduce the amount they spend on our programs, our operating
      results would be harmed.





*Our
      revenues declined in 2007 and we are experiencing downward pressure on our
      operating margin, which we expect will intensify in the
      future.*





We
      believe our operating margin may decline as a result of increasing competition
      and increased expenditures for all aspects of our business as a percentage
      of
      our revenues, including product development and sales and marketing expenses.
      Also, our operating margin has declined as a result of increases in the
      proportion of our revenues generated from our partner Web sites. The margin
      on
      revenues we generate from our partner Web sites is generally significantly
      less
      than the margin on revenues we generate from advertising on our Web sites.
      Additionally, the  margin
      we
      earn on revenues generated from our partner Web sites could decrease in the
      future if our partners require a greater portion of the advertising fees.





*If
      we
      do not continue to innovate and provide products and services that are useful
      to
      users, we may not remain competitive, and our revenues and operating results
      could suffer.*





Our
      success depends on providing products and services that people use for a high
      quality Internet experience. Our competitors are constantly developing
      innovations in Web search, online advertising and providing information to
      people. As a result, we must continue to invest significant resources in
      research and development in order to enhance our Web search technology and
      our
      existing products and services and introduce new high-quality products and
      services that people will use. If we are unable to predict user preferences
      or
      industry changes, or if we are unable to modify our products and services on
      a
      timely basis, we may lose users, advertisers and Web site partners. Our
      operating results would also suffer if our innovations were not responsive
      to
      the needs of our users, advertisers and Web site partners are not appropriately
      timed with market opportunity, effectively brought to market or well received
      in
      the market place. As search technology continues to develop, our competitors
      may
      be able to offer search results that are, or that are perceived to be,
      substantially similar or better than those generated by our search services.
      This may force us to compete on bases in addition to quality of search results
      and to expend significant resources in order to remain competitive.





*Our
      business depends on a strong brand, and if we are not able to maintain and
      enhance our brands, our ability to expand our base of users and advertisers
      will
      be impaired and our business and operating results will be harmed.*





We
      believe that the brand identity that we have developed has significantly
      contributed to the success of our business. We also believe that maintaining
      and
      enhancing the Company’s brands are critical to expanding our base of users and
      advertisers. Maintaining and enhancing our brands may require us to make
      substantial investments and these investments may not be successful. If we
      fail
      to promote and maintain the Mamma® and Copernic® brands, or if we incur
      excessive expenses in this effort, our business, operating results and financial
      condition will be materially and adversely affected. We anticipate that, as
      our
      market becomes increasingly competitive, maintaining and enhancing our brands
      may become increasingly difficult and expensive. Maintaining and enhancing
      our
      brands will depend largely on our ability to continue to provide high quality
      products and services, which we may not do successfully.


40


We
      generated a significant portion of our revenues in 2007 from our
      advertisers. Our advertisers can generally terminate their contracts with us
      at
      any time. Advertisers will not continue to do business with us if their
      investment in advertising with us does not generate sales leads, and ultimately
      customers, or if we do not deliver their advertisements in an appropriate and
      effective manner.





*New
      technologies could block our ads, which would harm our
      business.*





Technologies
      are being developed that can block the display of our ads. Most of our revenues
      are derived from fees paid to us by advertisers in connection with the display
      of ads on Web pages. As a result, ad-blocking technology could, in the future,
      adversely affect our operating results.





*We
      generate all of our revenue from advertising and software licensing, and the
      reduction of spending by or loss of customers could seriously harm our
      business.*





If
      we are
      unable to remain competitive and provide value to our advertisers, they may
      stop
      placing ads with us, which could negatively affect our net revenues and
      business. Copernic has on-going efforts to maintain a high quality network
      of
      publishers in order to offer advertisers high quality users that will provide
      for a satisfactory ROI. Therefore, from time to time we cease sending
      advertisements to what we determine are low quality publishers. This can reduce
      our revenues in the short term in order to create advertiser retention in the
      long term.





*We
      make investments in new products and services that may not be
      profitable.*





We
      have
      made and will continue to make investments in research, development and
      marketing for new products, services and technologies. Our success in this
      area
      depends on many factors including our innovativeness, development support,
      marketing and distribution. We may not achieve significant revenue from a new
      product for a number of years, if at all. For the years 2006 and 2007, we did
      not generate significant revenues
      from licensing Copernic® software and we cannot assure you that we will generate significant
      revenue from licensing of Copernic ® software going forward. In addition,
      our competitors are constantly improving their competing software, and if we fail
      to
      innovate and remain competitive our revenues from software licensing will
      decline.





*Volatility
      of stock price and trading volume could adversely affect the market price and
      liquidity of the market for our Common Shares.*




Our
      Common Shares are subject to significant price and volume fluctuations, some
      of
      which result from various factors including (a) changes in our business,
      operations, and future prospects, (b) general market and economic conditions,
      and (c) other factors affecting the perceived value of our Common Shares.
      Significant price and volume fluctuations have particularly impacted the market
      prices of equity securities of many technology companies including without
      limitation those providing communications software or Internet-related products
      and services. Some of these fluctuations appear to be unrelated or
      disproportionate to the operating performance of such companies. The market
      price and trading volume of our Common Shares have been, and may likely continue
      to be, volatile, experiencing wide fluctuations. In addition, the stock market
      in general, and market prices for Internet-related companies in particular,
      have
      experienced volatility that often has been unrelated to the operating
      performance of such companies. These broad market and industry
      fluctuations may
      adversely affect the price
      of
      our stock, regardless of our operating performance.




Furthermore,
      should the market price of our Common Shares drop below the $1.00 per share
      minimum bid price requirement, our Common Shares risk being delisted from The
      NASDAQ Stock Market®, which would have an adverse effect on our business and
      liquidity of our Common Shares. Through
      the month of December 2007 our stock price had steadily declined and as of
      December 31, 2007 our stock price was $1.41 per share. Brokerage
      firms may not provide a market for low-priced stock, may not recommend
      low-priced stock to their clients and may charge a greater percentage commission
      on low-priced stock than that which they would charge on a transaction of a
      similar dollar amount but fewer shares. These circumstances may adversely impact
      trading in our Common Shares and may also adversely affect our ability to access
      capital.





*Infringement
      and liability claims could damage our business.*





Companies
      in the Internet, technology and media industries own large numbers of patents,
      copyrights, trademarks and trade secrets and frequently enter into litigation
      based on allegations of infringement or other violations of intellectual
      property rights. As we face increasing competition and become increasingly
      high
      profile, the possibility of intellectual property rights claims against us
      grows. Our technologies may not be able to withstand any third-party claims
      or
      rights against their use. Any intellectual property claims, with or without
      merit, could be time-consuming, expensive to litigate or settle and could divert
      resources and attention. In addition, many of our agreements with our
      advertisers require us to indemnify certain third-party intellectual property
      infringement claims, which would increase our costs as a result of defending
      such claims and may require that we pay damages if there were an adverse ruling
      in any such claims. An adverse determination also could prevent us from offering
      our services to others and may require that we procure substitute services
      for
      these members.


41


With
      respect to any intellectual property rights claim, to
      resolve these claims, we may enter into royalty and licensing agreements on
      less
      favorable terms, pay
      damages or stop using technology or content found to be in violation of a third
      party’s rights. We may have to seek a license for the technology or content,
      which may not be available on reasonable terms and may significantly increase
      our operating expenses. The technology or content also may not be available
      for
      license to us at all. As a result, we may also be required to develop
      alternative non-infringing technology, which could require significant effort
      and expense, or stop using the content. If we cannot license or develop
      technology or content for the infringing aspects of our business, we may be
      forced to limit our product and service offerings and may be unable to compete
      effectively. Any of these results could harm our brand and operating results.





In
      addition, we may be liable to third-parties for content in the advertising
      we
      deliver if the artwork, text or other content involved violates copyright,
      trademark, or other intellectual property rights of third-parties or if the
      content is defamatory. Any claims or counterclaims could be time-consuming,
      could result in costly litigation and could divert management’s
      attention.





Additionally,
      we may be subject to legal actions alleging patent infringement, unfair
      competition or similar claims. Others may apply for or be awarded patents or
      have other intellectual property rights covering aspects of our technology
      or
      business. For example we understand that Overture Services, Inc. (acquired
      by
      Yahoo) purports to be the owner of U.S. Patent No. 6,269,361, which was issued
      on July 31, 2001 and is entitled “System and method for influencing a position
      on a search result list generated by a computer network search engine.” Overture
      has aggressively pursued its alleged patent rights by filing lawsuits against
      other pay-per-click search engine companies such as MIVA (formerly known as
      FindWhat.com) and Google. MIVA and Google have asserted counter-claims against
      Overture including, but not limited to, invalidity, unenforceability and
      non-infringement. While it is our understanding that the lawsuits against MIVA
      and Google have been settled, there is no guarantee Overture will not pursue
      its
      alleged patent rights against other companies.




*An
      inability to protect our intellectual property rights could damage our business.*




We
      rely
      upon a combination of trade secret, copyright, trademark, patents and other
      laws
      to protect our intellectual property assets. We have entered into
      confidentiality agreements with our management and key employees with respect
      to
      such assets and limit access to, and distribution of, these and other
      proprietary information. However, the steps we take to protect our intellectual
      property assets may not be adequate to deter or prevent misappropriation. We
      may
      be unable to detect unauthorized uses of and take appropriate steps to enforce
      and protect our intellectual property rights. Additionally, the absence of harmonized patent laws between the United States
      and Canada makes it more difficult to ensure consistent respect for patent
      rights. Although
      senior management believes that our services and products do not infringe on
      the
      intellectual property rights of others, we nevertheless are subject to the
      risk
      that such a claim may be asserted in the future. Any such claims could damage
      our business.





*Historical
      net results include net losses for the years ended December 31, 1999 to December
      31, 2003 and for the years ended December 31, 2005 to December 31, 2007. Working
      capital may be inadequate.*





For
      the
      years ended December 31, 1999 through the year ended December 31, 2003 and
      for
      the years ended December 31, 2005 to December
      31, 2007, we have
      reported net losses and net losses per share. We have been financing operations
      mainly from funds obtained in several private placements, and from exercised
      warrants and options. Management considers that liquidities as at December
      31, 2007 will
      be
      sufficient to meet normal operating requirements throughout 2008. In the
      long term, we may require additional liquidity to fund growth, which could
      include additional equity offerings or debt finance. No assurance can be given
      that we will be successful in getting required financing in the
      future.





*Goodwill
      may be written-down in the future.*





Goodwill
      is evaluated for impairment annually, or when events or changed circumstances
      indicate impairment may have occurred. Management monitors goodwill for
      impairment by considering estimates including discount rate, future growth
      rates, amounts and timing of estimated future cash flows, general economic,
      industry conditions and competition. Future adverse changes in these factors
      could result in losses or inability to recover the carrying value of the
      goodwill. Consequently, our goodwill, which amounts to approximately $7.4M
      as at
      December 31, 2007, may be written-down in the future which could adversely
      effect our financial position.





*Long-lived
      assets may be written-down in the future.*





The
      Company assesses the carrying value of its long-lived assets, which include
      property and equipment and intangible assets, for future recoverability when
      events or changed circumstances indicate that the carrying value may not be
      recoverable. Management monitors long-lived assets for impairment by considering
      estimates including discount rate, future growth rates, general economic,
      industry conditions and competition. Future adverse changes in these factors
      could result in losses or inability to recover the carrying value of the
      long-lived assets. Consequently, our long-lived assets, which amounts to
      approximately $2.8M as at December 31, 2007, may be written-down in the
      future.


42


*Reduced
      Internet use may adversely affect our results.*





Our
      business is based on Internet driven products and services including direct
      online Internet marketing. The emerging nature of the commercial uses of the
      Internet makes predictions concerning a significant portion of our future
      revenues difficult. As the industry is subject to rapid changes, we believe
      that
      period-to-period comparisons of its results of operations will not necessarily
      be meaningful and should not be relied upon as indicative of our future
      performance. It is also possible that in some fiscal quarters, our operating
      results will be below the expectations of securities analysts and investors.
      In
      such circumstances, the price of our Common Shares may decline. The success
      of a
      significant portion of our operations depends greatly on increased use of the
      Internet by businesses and individuals as well as increased use of the Internet
      for sales, advertising and marketing. It is not clear how effective Internet
      related advertising is or will be, or how successful Internet-based sales will
      be. Our results will suffer if commercial use of the Internet, including the
      areas of sales, advertising and marketing, fails to grow in the
      future.





*Our
      business depends on the continued growth and maintenance of the Internet
      infrastructure* *.*





The
      success and availability of our internet based products and services depend
      on
      the continued growth, maintenance and use of the Internet. Spam, viruses, worms,
      spyware, denial of service attacks, phishing and other acts of malice may affect
      not only the Internet’s speed and reliability but also its desirability for use
      by customers. If the Internet is unable to meet these threats placed upon it,
      our business, advertiser relationships, and revenues could be adversely
      affected.





*Our
      long-term success may be materially adversely affected if the market for
      e-commerce does not grow or grows slower than expected.*





Because
      many of our customers’ advertisements encourage online purchasing and/or
      Internet use, our long-term success may depend in part on the growth and market
      acceptance of e-commerce. Our business will be adversely affected if the market
      for e-commerce does not continue to grow or grows slower than expected. A number
      of factors outside of our control could hinder the future growth of e-commerce,
      including the following:





·
            the
                network infrastructure necessary for substantial growth in Internet
                usage
                may not develop adequately or our performance and reliability may
                decline;


·
            insufficient
                availability of telecommunication services or changes in telecommunication
                services could result in inconsistent quality of service or slower
                response times on the Internet;


·
            negative
                publicity and consumer concern surrounding the security of e-commerce
                could impede our growth; and


·
            financial
                instability of e-commerce customers.





*Security
      breaches and privacy concerns may negatively impact our
      business.*





Consumer
      concerns about the security of transmissions of confidential information over
      public telecommunications facilities is a significant barrier to increased
      electronic commerce and communications on the Internet that are necessary for
      growth of the Company’s business. Many factors may cause compromises or breaches
      of the security systems we use or other Internet sites use to protect
      proprietary information, including advances in computer and software
      functionality or new discoveries in the fields of cryptography and processor
      design. A compromise of security on the Internet would have a negative effect
      on
      the use of the Internet for commerce and communications and negatively impact
      our business. Security breaches of their activities or the activities of their
      customers and sponsors involving the storage and transmission of proprietary
      information, such as credit card numbers, may expose our operating business
      to a
      risk of loss or litigation and possible liability. We cannot assure you that
      the
      measures in place are adequate to prevent security breaches.





*If
      we
      fail to detect click fraud* *or
      other malicious applications or activity of others* *,
      we
      could lose the confidence of our advertisers* *as
      well as face potential litigation, government regulation or
      legislation* *,
      thereby causing our business to suffer.*





We
      are
      exposed to the risk of fraudulent clicks on our ads and
      other
      clicks that advertisers may perceive as undesirable .
      Click
      fraud occurs when a person clicks on an ad displayed on a Web site for a reason
      other than to view the underlying content. These types of fraudulent activities
      could hurt our brands. If fraudulent clicks are not detected, the affected
      advertisers may experience a reduced return on their investment in our
      advertising programs because the fraudulent clicks will not lead to potential
      revenue for the advertisers. Advertiser
      dissatisfaction with click fraud and other traffic quality related claims has
      lead to litigation and possible governmental regulation of advertising. Any
      increase in costs due to any such litigation, government regulation, or refund
      could negatively impact our profitability .





*Index
      spammers could harm the integrity of our Web search results, which could damage
      our reputation and cause our users to be dissatisfied with our products and
      services.*





There
      is
      an ongoing and increasing effort by “index spammers” to develop ways to
      manipulate our Web search results. Although they cannot manipulate our results
      directly, “index spammers” can manipulate our suppliers like Ask.com,
      Gigablast.com or Wisenut.com, which can result in our search engine pages
      producing poor results. We take this problem very seriously because providing
      relevant information to users is critical to our success. If our efforts to
      combat these and other types of manipulation are unsuccessful, our reputation
      for delivering relevant information could be diminished. This could result
      in a
      decline in user traffic, which would damage our business.


43


*Our
      business is subject to a variety of U.S. and foreign laws that could subject
      us
      to claims or other remedies based on the nature and content of the information
      searched or displayed by our products and services, and could limit our ability
      to provide information regarding regulated industries and products.*





The
      laws
      relating to the liability of providers of online services for activities of
      their users are currently unsettled both within the U.S. and abroad. Claims
      have
      been threatened and filed under both U.S. and foreign law for defamation, libel,
      invasion of privacy and other data protection claims, tort, unlawful activity,
      copyright or trademark infringement, or other theories based on the nature
      and
      content of the materials searched and the ads posted or the content generated
      by
      our users. Increased attention focused on these issues and legislative proposals
      could harm our reputation or otherwise affect the growth of our business.





The
      application to us of existing laws regulating or requiring licenses for certain
      businesses of our advertisers, including, for example, distribution of
      pharmaceuticals, adult content, financial services, alcohol or firearms and
      online gambling, can be unclear. Existing or new legislation could expose us
      to
      substantial liability, restrict our ability to deliver services to our users,
      limit our ability to grow and cause us to incur significant expenses in order
      to
      comply with such laws and regulations.





Several
      other federal laws could have an impact on our business. Compliance with these
      laws and regulations is complex and may impose significant additional costs
      on
      us. For example, the Digital Millennium Copyright Act has provisions that limit,
      but do not eliminate, our liability for listing or linking to third-party Web
      sites that include materials that infringe copyrights or other rights, so long
      as we comply with the statutory requirements of this act. The Children’s Online
      Protection Act and the Children’s Online Privacy Protection Act restrict the
      distribution of materials considered harmful to children and impose additional
      restrictions on the ability of online services to collect information from
      minors. In addition, the Protection of Children from Sexual Predators Act of
      1998 requires online service providers to report evidence of violations of
      federal child pornography laws under certain circumstances. Any failure on
      our
      part to comply with these regulations may subject us to additional liabilities.





*If
      the technology that we currently use to target the delivery of online
      advertisements and to prevent fraud on our networks is restricted or becomes
      subject to regulation, our expenses could increase and we could lose customers
      or advertising inventory.*





Web
      sites
      typically place small files of non-personalized (or “anonymous”) information,
      commonly known as cookies, on an Internet user’s hard drive, generally without
      the user’s knowledge or consent. Cookies generally collect information about
      users on a non-personalized basis to enable Web sites to provide users with
      a
      more customized experience. Cookie information is passed to the Web site through
      an Internet user’s browser software. We currently use cookies to track an
      Internet user’s movement through the advertiser’s Web site and to monitor and
      prevent potentially fraudulent activity on our network. Most currently available
      Internet browsers allow Internet users to modify their browser settings to
      prevent cookies from being stored on their hard drive, and some users currently
      do so. Internet users can also delete cookies from their hard drives at any
      time. Some Internet commentators and privacy advocates have suggested limiting
      or eliminating the use of cookies, and legislation (including, but not limited
      to, Spyware legislation such as U.S. House of Representatives Bill HR 29 the
      “Spy Act”) has been introduced in some jurisdictions to regulate the use of
      cookie technology. The effectiveness of our technology could be limited by
      any
      reduction or limitation in the use of cookies. If the use or effectiveness
      of
      cookies were limited, we would have to switch to other technologies to gather
      demographic and behavioural information. While such technologies currently
      exist, they are substantially less effective than cookies. We would also have
      to
      develop or acquire other technology to prevent fraud. Replacement of cookies
      could require significant reengineering time and resources, might not be
      completed in time to avoid losing customers or advertising inventory, and might
      not be commercially feasible. Our use of cookie technology or any other
      technologies designed to collect Internet usage information may subject us
      to
      litigation or investigations in the future. Any litigation or government action
      against us could be costly and time-consuming, could require us to change our
      business practices and could divert management’s attention.





*Increased
      regulation of the Internet may adversely affect our business.*





If
      the
      Internet becomes more strongly regulated, a significant portion of our operating
      business may be adversely affected. For example, there is increased pressure
      to
      adopt and where adopted, strengthen laws and regulations relating to Internet
      unsolicited advertisements, privacy, pricing, taxation and content. The
      enactment of any additional laws or regulations in Canada, Europe, Asia or
      the
      United States, or any state or province of the United States or Canada may
      impede the growth of the Internet and our Internet-related business, and could
      place additional financial burdens on us and our Internet-related
      business.





*Changes
      in key personnel, labour availability and employee relations could disrupt
      our
      business.*





Our
      success is dependent upon the experience and abilities of our senior management
      and our ability to attract, train, retain and motivate other high-quality
      personnel, in particular for our technical and sales teams. There is significant
      competition in our industries for qualified personnel. Labour market conditions
      generally and additional companies entering industries which require similar
      labour pools could significantly affect the availability and cost of qualified
      personnel required to meet our business objectives and plans. There can be
      no
      assurance that we will be able to retain our existing personnel or that we
      will
      be able to recruit new personnel to support our business objectives and plans.
      We believe our employee relations are good. Currently, none of our employees
      are
      unionized. There can be no assurance, however, that a collective bargaining
      unit
      will not be organized and certified in the future. If certified in the future,
      a
      work stoppage by a collective bargaining unit could be disruptive and have
      a
      material adverse effect on us until normal operations resume.


44


*Possible
      future exercise of warrants and options could dilute existing and future
      shareholders.*





As
      at
      March 19, 2008, we had 646,392 warrants at a weighted average exercise price
      of
      $15.60 and 860,801 stock options at a weighted average exercise price of $2.69
      outstanding. As at March 19, 2008, the exercise prices of all outstanding
      warrants and options, were higher than the market price of our Common Shares.
      When the market value of the Common Shares is above the respective exercise
      prices of all options and warrants, their exercise could result in the issuance
      of up to an additional 1,507,193 Common Shares. To the extent such shares are
      issued, the percentage of our Common Shares held by our existing stockholders
      will be reduced. Under certain circumstances the conversion or exercise of
      any
      or all of the warrants or stock options might result in dilution of the net
      tangible book value of the shares held by existing Company stockholders. For
      the
      life of the warrants and stock options, the holders are given, at prices that
      may be less than fair market value, the opportunity to profit from a rise in
      the
      market price of the shares of Common Shares, if any. The holders of the warrants
      and stock options may be expected to exercise them at a time when the Company
      may be able to obtain needed capital on more favourable terms. In addition,
      we
      reserve the right to issue additional shares of Common Shares or securities
      convertible into or exercisable for shares of Common Shares, at prices, or
      subject to conversion and exercise terms, resulting in reduction of the
      percentage of outstanding Common Shares held by existing stockholders and,
      under
      certain circumstances, a reduction in the net tangible book value of existing
      stockholders’ Common Shares.





*Strategic
      acquisitions and market expansion present special risks.*





A
      future
      decision to expand our business through acquisitions of other businesses and
      technologies presents special risks. Acquisitions entail a number of particular
      problems, including (i) difficulty integrating acquired technologies,
      operations, and personnel with the existing businesses, (ii) diversion of
      management’s attention in connection with both negotiating the acquisitions and
      integrating the assets as well as the strain on managerial and operational
      resources as management tries to oversee larger operations, (iii) exposure
      to
      unforeseen liabilities relating to acquired assets, and (iv) potential issuance
      of debt instruments or securities in connection with an acquisition possessing
      rights that are superior to the rights of holders of the our currently
      outstanding securities, any one of which would reduce the benefits expected
      from
      such acquisition and/or might negatively affect our results of operations.
      We
      may not be able to successfully address these problems.  We
      also
      face competition from other acquirers, which may prevent us from realizing
      certain desirable strategic opportunities.





*We
      do
      not plan to pay dividends on the Common Shares.*





The
      Company has never declared or paid dividends on its shares of Common Shares.
      The
      Company currently intends to retain any earnings to support its working capital
      requirements and growth strategy and does not anticipate paying dividends in
      the
      foreseeable future. Payment of future dividends, if any, will be at the
      discretion of the Company’s Board of Directors after taking into account various
      factors, including the Company’s financial condition, operating results, current
      and anticipated cash needs and plans for expansion.





*Rapidly
      evolving marketplace and competition may adversely impact our
      business.*





The
      markets for our products and services are characterized by (i) rapidly changing
      technology, (ii) evolving industry standards, (iii) frequent new product and
      service introductions, (iv) shifting distribution channels, and (v) changing
      customer demands. The success of the Company will depend on its ability to
      adapt
      to its rapidly evolving marketplaces. There can be no assurance that the
      introduction of new products and services by others will not render our products
      and services less competitive or obsolete. We expect to continue spending funds
      in an effort to enhance already technologically complex products and services
      and develop or acquire new products and services. Failure to develop and
      introduce new or enhanced products and services on a timely basis might have
      an
      adverse impact on our results of operations, financial condition and cash flows.
      Unexpected costs and delays are often associated with the process of designing,
      developing and marketing enhanced versions of existing products and services
      and
      new products and services. The market for our products and services is highly
      competitive, particularly the market for Internet products and services which
      lacks significant barriers to entry, enabling new businesses to enter this
      market relatively easily. Competition in our markets may intensify in the
      future. Numerous well-established companies and smaller entrepreneurial
      companies are focusing significant resources on developing and marketing
      products and services that will compete with the Company’s products and
      services. Many of our current and potential competitors have greater financial,
      technical, operational and marketing resources. We may not be able to compete
      successfully against these competitors. Competitive pressures may also force
      prices for products and services down and such price reductions may reduce
      our
      revenues.


45


*To
      the extent that some of our revenues and expenses are paid in foreign
      currencies, and currency exchange rates become unfavourable, we may lose some
      of
      the economic value in U.S. dollar terms.*





Although
      we currently transact a majority of our business in U.S. dollars, as we expand
      our operations more of our customers may pay us in foreign currencies.
      Conducting business in currencies other than U.S. dollars subjects us to
      fluctuations in currency exchange rates. This could have a negative impact
      on
      our reported operating results. We do not currently engage in hedging
      strategies, such as forward contracts, options and foreign exchange swaps
      related to transaction exposures to mitigate this risk. If we determine to
      initiate such hedging activities in the future, there is no assurance these
      activities will effectively mitigate or eliminate our exposure to foreign
      exchange fluctuations. Additionally, such hedging programs would expose us
      to
      risks that could adversely affect our operating results, because we have limited
      experience in implementing or operating hedging programs. Hedging programs
      are
      inherently risky and we could lose money as a result of poor trades. In 2007,
      revenues were increased by approximately $128,000 and total expenses were also
      increased by $348,000 resulting in a net loss $220,000 due to the fluctuation
      of
      foreign currencies.





*Higher
      inflation could adversely affect our results of operations and financial
      condition.*





We
      do not
      believe that the relatively moderate rates of inflation experienced in the
      United States and Canada in recent years have had a significant effect on our
      revenues or profitability. Although higher rates of inflation have been
      experienced in a number of foreign countries in which we might transact
      business, we do not believe that such rates have had a material effect on our
      results of operations, financial condition and cash flows. Nevertheless, in
      the
      future, high inflation could have a material, adverse effect on the Company’s
      results of operations, financial condition and cash flows.





*Our
      future growth significantly depends to a high degree on our ability to
      successfully commercialize the Copernic Desktop Search* ® *product, and any failure or delays in that commercialization would adversely
      affect our business and results of operations.*





On
      December 22, 2005, we completed our acquisition of Copernic, which we believe
      positioned the Company as a leader in search technologies and applications
      and
      as a multi-channel online marketing services provider. Although
      w e
      have
      high expectations for the Copernic Desktop Search® (CDS) award-winning
      product ,
      to date
      our program to commercialize that product through licensing to large ISP’s and
      Internet Portals has not generated significant revenue and we cannot guarantee
      we will obtain such significant licensing revenue in the future. Any failure
      or
      continued significant delay in successfully commercializing the CDS product could
      adversely affect our business and results of operations.





Disclosure
      Controls and Procedures





We
      are
      responsible for establishing and maintaining a system of disclosure controls
      and
      procedures, as defined in Rule 13a-15 (e) under the Securities Exchange Act
      of
      1934, (the “Exchange Act”) designed to ensure that information we are required
      to disclose in the reports that we file or submit under the Exchange Act is
      recorded, processed, summarized and reported within the time periods specified
      in the Securities and Exchange Commission’s rules and forms. Disclosure controls
      and procedures include, without limitation, controls and procedures designed
      to
      ensure that information required to be disclosed by an issuer in the reports
      that it files or submits under the Exchange Act is accumulated and communicated
      to the issuer’s management, including its principal executive officer or
      officers and principal financial officer or officers, or persons performing
      similar functions, as appropriate to allow timely decisions regarding required
      disclosure.





We
      carried out an evaluation, under the supervision of and with the participation
      of our management, including our Chief Executive Officer and Chief Financial
      Officer, as to the effectiveness of our disclosure controls and procedures
      as of
      December 31, 2007.





Based
      upon that evaluation, our Chief Executive Officer and Chief Financial Officer
      concluded that our disclosure controls and procedures were effective as of
      December 31, 2007.





Management’s
      Report on Internal Control over Financial Reporting





Our
      management is responsible for establishing and maintaining adequate internal
      control over financial reporting. Internal control over financial reporting
      is
      defined in Rule 13a-15(f) of the Exchange Act as a process designed to provide
      reasonable assurance regarding the reliability of financial reporting and the
      preparation of financial statements for external purposes in accordance with
      generally accepted accounting principles and includes those policies and
      procedures that (1) pertain to the maintenance of records that in reasonable
      detail accurately and fairly reflect the transactions and dispositions of the
      assets of the company; (2) provide reasonable assurance that transactions are
      recorded as necessary to permit preparation of financial statements in
      accordance with generally accepted accounting principles, and that receipts
      and
      expenditures of the company are being made only in accordance with
      authorizations of management and directors of the company; and (3) provide
      reasonable assurance regarding prevention or timely detection of unauthorized
      acquisition, use or disposition of the company's assets that could have a
      material effect on the financial statements.





Because
      of its inherent limitations, internal control over financial reporting may
      not
      prevent or detect all misstatements. Projections of any assessment of
      effectiveness to future periods are subject to the risks that controls may
      become inadequate because of changes in conditions, or that the degree of
      compliance with the policies or procedures may deteriorate. Our management
      evaluated the effectiveness of our internal control over financial reporting
      as
      of December 31, 2007. In making this evaluation, management used the criteria
      set forth by the Committee of Sponsoring Organizations of the Treadway
      Commission (COSO) in “Internal Control — Integrated Framework.” Management’s
      evaluation of the effectiveness of our internal control over financial reporting
      as of December 31, 2007 identified the following material weaknesses in our
      internal control over financial reporting:


46


**Area**
              
              **Deficiencies**
              
              **Remediation
                  actions**
              
              **Scheduled**
                **date**
                **for**
                **remediation**Security
              
              No
                  user session time out in place
              
              An
                  automatic lock has been implemented for all workstations and servers
              
              Done
                  on March
                3rd
                  2008Security
              
              No
                  efficient log of activities for US servers is available for appropriate
                  monitoring of activity by IT management
              
              The
                  US datacenters will be closed by end of March 31, 2008 and replaced
                  by
                  Canadian datacenters already in operations. All processes are in
                  place and
                  well documented for new data centers.
              
              Done
                  on February
                18th
                  2008Entity
                  level
              
              Conflict
                  of segregation of duties: Search application programmer and Database
                  Administrator
              
              More
                  control will be put in place and a design accommodation Implementation
                  of
                  internal controls have been done by end of February 2008 to mitigate
                  situation.
              
              Done
                  on February
                28th
                  2008Security
              
              No
                  monitoring of access granted to temporary users
              
              A
                  procedure will be put in place in order to ensure that all 3rd
                  party
                  consultants will sign the following forms: NDA, Security Policy.
                  Also a
                  timeframe for the user access will also be documented. This will
                  be
                  reviewed by the security committee in its first quarter
                  meeting.
              
              To
                  be done on
                March
                31st
                  2008Security
              
              Access
                  rights review does not include shared folders and database
              
              New
                  policies will be implemented as per target date.
              
              To
                  be done on April 15th 2008Entity
                  level
              
              Privileged
                  access to financial application to be improved
              
              A
                  solution will be designed to have a super user password for accounting
                  software that will not be known by anyone. Two people will have
                  a portion
                  of the password in order to improve the control.
              
              To
                  be done on
                March
                31st
                  2008





It
      should
      be noted that while management believes that current disclosure and internal
      controls and procedures provide a reasonable level of assurance, it cannot
      be
      expected that existing disclosure controls and procedures or internal financial
      controls will prevent all human error and circumvention or overriding of the
      controls and procedures. A control system, no matter how well conceived or
      operated, can provide only reasonable, not absolute, assurance that the
      objectives of the control system are met.





Capital
      Stock Information





The
      following table discloses the Company’s outstanding share data:





Number
                of issued and outstanding common shares as at March 19,
                2008
            
            Book
                value as at December 31, 2007
              under
                Canadian GAAP
            
            Book
                value as at December 31, 2007
              under
                US GAAP14,637,531
            
            $96,556,485
            
            $113,326,055




As
      at
      March 19, 2008, the Company also had 646,392 warrants and 860,801 stock options
      outstanding.


47




**Forward-Looking
      Statements**




Information
      contained in this Management’s Discussion and Analysis of Financial Condition
      and Results of Operations includes forward-looking statements, which can be
      identified by the use of forward-looking terminology such as “believes,”
“expects,” “may,” “desires,” “will,” “should,” “projects,” "estimates,”
“contemplates,” “anticipates,” “intends,” or any negative such as “does not
      believe” or other variations thereof or comparable terminology. No assurance can
      be given that potential future results or circumstances described in the
      forward-looking statements will be achieved or occur. Such information may
      also
      include cautionary statements identifying important factors with respect to
      such
      forward-looking statements, including certain risks and uncertainties that
      could
      cause actual results to vary materially from the projections and other
      expectations described in such forward-looking statements. Prospective
      investors, customers, vendors and all other persons are cautioned that
      forward-looking statements are not assurances, forecasts or guarantees of future
      performance due to related risks and uncertainties, and that actual results
      may
      differ materially from those projected. Factors which could cause results or
      events to differ from current expectations include, among other things: the
      severity and duration of the adjustments in our business segments; the
      effectiveness of our restructuring activities, including the validity of the
      assumptions underlying our restructuring efforts; fluctuations in operating
      results; the impact of general economic, industry and market conditions; the
      ability to recruit and retain qualified employees; fluctuations in cash flow;
      increased levels of outstanding debt; expectations regarding market demand
      for
      particular products and services and the dependence on new product/service
      development; the ability to make acquisitions and/or integrate the operations
      and technologies of acquired businesses in an effective manner; the impact
      of
      rapid technological and market change; the impact of price and product
      competition; the uncertainties in the market for Internet-based products and
      services; stock market volatility; the trading volume of our stock; the
      possibility that our stock may not satisfy our requirements for continued
      listing on the NASDAQ Capital Market including whether the minimum bid price
      for
      the stock falls below $1; and the adverse resolution of litigation. Developments
      in the SEC inquiry, purported class action litigation or related events could
      have a negative impact on the Company, increase Company expenses or cause events
      or results to differ from current expectations .  For
      additional information with respect to these and certain other factors that
      may
      affect actual results, see the reports and other information filed or furnished
      by the Company with the United States Securities and Exchange Commission (“SEC”)
      and/or the Ontario Securities Commission (“OSC”) respectively accessible on the
      internet at www.sec.gov and www.sedar.com ,
      or the
      Company’s Web site at www.copernic-inc.com. All information contained in these
      audited financial statements and Management’s Discussion and Analysis of
      Financial Condition and Results of Operations is qualified in its entirety
      by
      the foregoing and reference to the other information the Company files with
      the
      OSC and SEC. Unless otherwise required by applicable securities laws, the
      Company disclaims any intention or obligation to update or revise any
      forward-looking statements, whether as a result of new information, future
      events or otherwise.





**Period-to-Period
      Comparisons**





A
      variety
      of factors may cause period-to-period fluctuations in the Company’s operating
      results, including business acquisitions, revenues and expenses related to
      the
      introduction of new products and services or new versions of existing products,
      new or stronger competitors in the marketplace as well as currency fluctuations.
      Historical operating results are not indicative of future results and
      performance.





48


Selected
      Annual Information





(In
      thousand of US dollars, except per share data and in accordance with generally
      accepted accounting principles in Canada)





For
                the years ended December 31,
            
            2007
              $
            
            2006
              $
            
            2005
              $
            
            2004
              $
            
            2003
              $Revenues
            
            
            8,116
            
            
            9,596
            
            
            9,444
            
            
            14,636
            
            
            8,939Earnings
                (loss) from continuing operations
            
            
            (14,431
            )
            
            (4,358
            )
            
            (3,343
            )
            
            371
            
            
            89Results
                of discontinued operations, net of income taxes
            
            
            -
            
            
            89
            
            
            (2,315
            )
            
            734
            
            
            (300
            )Earnings
                (loss) for the year
            
            
            (14,431
            )
            
            (4,269
            )
            
            (5,658
            )
            
            1,104
            
            
            (211
            )Earnings
                (loss) per share from continuing operationsBasic
                and diluted
            
            
            (0.99
            )
            
            (0.31
            )
            
            (0.27
            )
            
            0.03
            
            
            0.01Net
                earnings (loss) per shareBasic
                and diluted
            
            
            (0.99
            )
            
            (0.30
            )
            
            (0.46
            )
            
            0.10
            
            
            (0.03
            )Total
                assets
            
            
            18,358
            
            
            33,339
            
            
            38,327
            
            
            35,166
            
            
            11,736








Quarterly
      Financial Highlights





(in
      thousand of US dollars, except per share data and in accordance with generally
      accepted accounting principles in Canada)


(unaudited)






2007
            
            2006Q4
              $
            
            Q3
              $
            
            Q2
              $
            
            Q1
              $
            
            Q4
              $
            
            Q3
              $
            
            Q2
              $
            
            Q1
              $Revenues
            
            
            1,654
            
            
            1,867
            
            
            1,953
            
            
            2,642
            
            
            3,566
            
            
            1,891
            
            
            1,929
            
            
            2,210Earnings
                (loss) from continuing operations
            
            
            (10,990
            )
            
            (975
            )
            
            (1,085
            )
            
            (1,381
            )
            
            365
            
            
            (2,553
            )
            
            (1,270
            )
            
            (900
            )Results
                of discontinued operations, net of income taxes
            
            
            -
            
            
            -
            
            
            -
            
            
            -
            
            
            55
            
            
            5
            
            
            4
            
            
            25Net
                earnings (loss) for the period
            
            
            (10,990
            )
            
            (975
            )
            
            (1,085
            )
            
            (1,381
            )
            
            420
            
            
            (2,548
            )
            
            (1,266
            )
            
            (875
            )Earnings
                (loss) per share from continuing operationsBasic
            
            
            (0.75
            )
            
            (0.07
            )
            
            (0.07
            )
            
            (0.10
            )
            
            0.03
            
            
            (0.18
            )
            
            (0.09
            )
            
            (0.06
            )Diluted
            
            
            (0.75
            )
            
            (0.07
            )
            
            (0.07
            )
            
            (0.10
            )
            
            0.03
            
            
            (0.18
            )
            
            (0.09
            )
            
            (0.06
            )Net
                earnings (loss) per shareBasic
            
            
            (0.75
            )
            
            (0.07
            )
            
            (0.07
            )
            
            (0.10
            )
            
            0.03
            
            
            (0.18
            )
            
            (0.09
            )
            
            (0.06
            )Diluted
            
            
            (0.75
            )
            
            (0.07
            )
            
            (0.07
            )
            
            (0.10
            )
            
            0.03
            
            
            (0.18
            )
            
            (0.09
            )
            
            (0.06
            )


49


**ITEM
      6. DIRECTORS, SENIOR MANAGEMENT AND EMPLOYEES**





***DIRECTORS
      AND SENIOR MANAGEMENT***




Following
      is a table, which discloses the names, functions, areas of expertise within
      the
      Company and present principal occupation(s) of the Company’s directors and
      senior management.





**Name**
            
            **Functions and areas**
              **of experience within**
              **the Company**
            
            **Present Principal Occupation(s)**
            
            **Date first elected**
              **Director or**
              **appointed Senior**
              **Officer of the**
              **Company**Marc
                Ferland
            
            Director
                and Officer
            
            President,
                and Chief Executive Officer
              Copernic
                Inc.
            
            September
                21, 2007Daniel
                Bertrand
            
            Officer
            
            Executive
                Vice President and
              Chief
                Financial Officer
              Copernic
                Inc.
            
            July
                8, 1999Éric
                Bouchard
            
            Officer
            
            Vice
                President - Products
              Copernic
                Inc.
            
            December
                22, 2005David
                Goldman
            
            Director
                and Officer
            
            Executive
                Chairman,
              Copernic
                Inc.
              Director,
                SNC-Lavalin Group Inc. (an engineering and construction company listed
                on
                the Toronto Stock Exchange)
            
            May
                24, 2001Martin
                Bouchard
            
            Director
            
            Consultant
            
            December
                22, 2005Claude
                E. Forget
            
            Director
            
            Consultant
            
            October
                11, 1999Irwin
                Kramer
            
            Director
            
            President,
                iCongo, Inc.
              (an
                e-commerce and service company)
            
            May
                24, 2001Dr.
                David Schwartz
            
            Director
            
            Associate
                Professor, Bar Ilan
              University
              School
                of Business Administration
            
            May
                23, 2002Lawrence
                Yelin
            
            Director
            
            Attorney,
                Fasken Martineau DuMoulin LLP
            
            September
                21, 2007





Each
      Director’s term of office expires at the earliest of the next annual meeting of
      shareholders or his resignation as Director.





With
      the
      exception of Martin Bouchard and Éric Bouchard who are brothers, to the
      knowledge of the Company, there is no family relationship among any of the
      persons named in this Item 6, nor were any such persons selected as directors
      or
      members of senior management pursuant to any arrangement or understanding with
      major shareholders, customers, suppliers or others.





***STATEMENT
      OF CORPORATE GOVERNANCE PRACTICES***





The
      directors of the Company strongly believe that sound corporate governance is
      essential to produce maximum value to shareholders. The following is a summary
      of the governance practices of the Company.





The
      Board
      of Directors has approved and adopted a document entitled “Responsibilities of
      the Board of Directors and its three Committees” which sets forth the
      responsibilities for the Board and these three committees. That document is
      available on SEDAR at www.sedar.com. That document includes the Board’s
      mandate, the Charters of the Board’s three committees and the Company’s insider
      trading policy and code of ethics. The Company’s code of ethics is available on
      SEDAR at www.sedar.com. In accordance with the policies and guidelines
      outlined in that document, the Board of Directors constantly strives to promote
      a culture of ethical conduct in an effort to meet the highest industry
      standards. All decisions are carefully considered from this point of view and
      the Board of Directors does not act until all factors have been adequately
      considered. This approach is expected of management and, to a relevant degree,
      all employees of the Company.


50


1.
            Composition
                of the Board of Directors





More
      than
      fifty percent of the directors of the Company are “independent” directors. An
      independent director is independent of management and free of any business
      or
      other relationship which could, or could reasonably be perceived to, materially
      interfere with the director’s ability to act in the best interest of the
      Company, as required by the standards of the NASDAQ Stock Exchange® and the
      Ontario Securities Commission.





The
      Chair
      of the Board of Directors is David Goldman, who is not an independent director.
      Mr. Goldman also sits on the board of directors of SNC-Lavalin Group Inc. The
      Board feels strongly that Mr. Goldman’s abilities, extensive experience as a
      director of listed companies and role in the Company make him best suited for
      this position. The Board will continue to consider whether or not the position
      of Chairman should be occupied by an independent director and, if circumstances
      change, will take action to adjust the composition of the Board accordingly
      or
      appoint a lead director who is independent. Independent directors meet, when
      they deem it advisable, through in camera sessions conducted after or during
      each meeting of the Board. ****** The
      independent directors, when they deem it advisable, make recommendations to
      the
      Board on various matters. The Board will continue to encourage regular meetings
      of the independent directors through in camera sessions as it feels that it
      is a
      good way to facilitate Board operations independently of management and to
      maintain and improve the quality of governance.





The
      directors consider the following nominees to be independent to the Company:
      Claude E. Forget, Irwin Kramer, Dr. David Schwartz, and Lawrence Yelin. Through
      October 2, 2001, Claude E. Forget was Chief Executive Officer of Intasys Billing
      Technologies, a subsidiary of the Company, whose business was subsequently
      sold.
      The Board of Directors has determined that Marc Ferland and David Goldman are
      not independent because they are officers of the Company. Martin Bouchard is
      not
      independent because he was President and Chief Executive Officer of the Company
      until March 3, 2008.





During
      the 2007 fiscal year,
      the Board of Directors met 8 times and all of the Directors attended all of
      the
      meetings. Brian Edwards attended 4 of the meetings since he resigned on June
      2007. Marc Ferland and Lawrence Yelin attended the last 3 meetings since they
      joined the Company as Directors on September 21, 2007. During the 2007 fiscal
      year, there were no meetings of the independent directors.





The
      Board
      of Directors’ mandate is set forth in the document entitled “Responsibilities of
      the Board of Directors and its Three Committees,” which provides in pertinent part:





It
      is the
      explicit responsibility of the Board of Directors to assume the global
      stewardship of the Company and to ensure itself of the
      pertinence and efficiency of the key functions and of the following
      matters:





·
            Strategic
                planning.


·
            Financial
                management.


·
            Identification
                of the principal risks associated with the activities of the Company
                and
                the establishment of an appropriate system to manage these
                risks.


·
            Succession
                planning, including appointing, training and monitoring
                officers.


·
            The
                communications policy of the Company with its
                shareholders.


·
            The
                integrity of the Company’s internal control and management information
                systems.





The
      Board
      has drawn up a written position description for the Chairman of the Board and
      CEO. The Chairman of a Board committee is
      mainly responsible for overseeing how the committee is managed and that it
      effectively performs its duties and to guide the committee in the performance
      of
      its charter mandate and any other matter which the Board delegates to the
      committee.





The
      Board
      ensures that each new
      director has the necessary abilities, expertise, availability and knowledge
      to
      properly perform his duties and provides him with the corporate information
      and
      documentation required to do so. Additional education of directors and
      information about our activities is available upon request.





All
      directors, officers and
      employees who have information giving them reasonable grounds to believe that
      certain accounting practices or the auditing of the Company are illegal or
      irregular, or that other violations of our Code of Ethics have or are occurring,
      can and are encouraged to utilize the Company’s Whistleblower
      Policy.





No
      material change report that
      pertains to any conduct of a director or officer that constitutes a departure
      from the Code of Ethics was filed during financial year 2007.


51


Our
      Code
      of Ethics clearly states that the directors and executive officers must avoid
      any transaction or event which could give rise to a conflict of interest. If
      an
      event or transaction occurs in which a director has a material interest, he
      must
      disclose his interest to the Board and refrain from voting with respect to
      any
      matter related thereto.





The
      role
      of the Nominating and Governance Committee is, among other things, to assess
      the
      effectiveness of the Board, its committees and its directors.





2.
            Committees
                of the Board of Directors





The Company maintains three standing committees: the Audit and Finance Committee, the
      Nominating and Governance Committee and the Compensation Committee.





As
      part
      of its ongoing
      review of corporate governance matters, on March 29, 2006 the Company’s Board of
      Directors approved Charters constituting a Compensation Committee and a
      Nominating and Governance Committee to segregate the nominating and executive
      compensation functions into separate Charters as required by the standards
      of
      the NASDAQ Stock Exchange ® .





***Composition
      of the Audit and Finance Committee***





The
      current members of the Audit and Finance Committee are Irwin Kramer,
      Dr. David Schwartz, Claude E. Forget and Lawrence Yelin all of whom are
      independent. On March 29, 2006, the Board approved a new Charter of the Audit
      and Finance Committee of the Company. The Charter provides that the Audit and
      Finance Committee shall assist the Board in fulfilling its responsibilities
      relating to corporate accounting and reporting practices of the Company and
      in
      the quality and integrity of financial reports of the Company. The Audit and
      Finance Committee meets with the financial officers of the Company, including
      the Chief Financial Officer, and the independent auditors to review financial
      reporting matters, the system of internal accounting controls and the overall
      audit plan and examines the quarterly and year-end financial statements before
      their presentation to the Board. In addition, the Audit Committee fixes the
      compensation and other terms of engagement of the Company’s independent
      auditors. In 2007, the Audit and Finance Committee met 8 times and the Company’s
      independent auditors were present at 6 of these meetings.





***Composition
      of the Nominating and Governance Committee***





The
      current members of the Nominating and Governance Committee are Irwin Kramer,
      Dr. David Schwartz, Claude E. Forget and Lawrence Yelin.





The Nominating and
      Governance Committee is responsible for, among other things, overseeing and
      making recommendations to the Board on the following matters:





(i)
            the
                search for and compensation of all senior executives and management
                of the
                Company and its subsidiaries, including periodic review of
                same;


(ii)
            the
                Company’s management structure and succession
                plans;


(iii)
            the
                recommendation of new candidates as potential directors of the Company
                and
                the assessment of the performance of current directors and committees;
                and


(iv)
            the
                review and recommendation of procedures to be followed with respect
                to
                corporate governance guidelines.





***Composition
      of the Compensation Committee***





The
      current members of the Compensation Committee are Irwin Kramer, Dr. David
      Schwartz, Claude E. Forget and Lawrence Yelin.





The Compensation Committee is responsible for, among other things, overseeing and making
      recommendations to the Board on the following matters:





(i)
            the
                compensation of all senior executives and management of the Company
                and
                its subsidiaries, including periodic review of
                same;


(ii)
            the
                incentive plans for employees of the Company and its subsidiaries;
                and


(iii)
            the
                Company’s Stock Option Plan and the granting of stock options
                thereunder.




***Report
      on Executive Compensation***





As
      part
      of its ongoing
      dedication to creating shareholder value and promoting corporate success, the
      Compensation Committee establishes executive compensation in order to attract,
      retain and motivate key executives in the increasing competitive Internet and
      information technology sectors and to reward significant performance
      achievements.


52


Consistent
      with the Company’s objectives, and in order to further align shareholder and
      executive interests, the Compensation Committee places emphasis on base salary,
      incentive compensation, discretionary bonus and long-term incentive compensation
      by granting of stock options in establishing executive compensation.
      Consequently, the standard executive compensation package of the Company is
      composed of four major components: (i) base salary and benefits, (ii) short-term
      incentive and (iii) long-term incentive compensation.





In
      making
      compensation decisions with respect to each of these components, the
      Compensation Committee considers external market data for executives. Towers
      Perrin was retained by the Chair of the Compensation Committee in 2007, 2006
      and 2005 to
      assist with preparing information and providing advice on officer and Board
      of
      Director compensation arrangements. Materials prepared by Towers Perrin have
      been presented by the Chair to the Compensation Committee for review and
      decisions. Towers Perrin’s scope of services in the most recent fiscal year
      included providing advice and market data related to Board of Director and
      officer compensation arrangements, assisting with the design of special
      compensation programs, and other general executive compensation assistance.
      Towers Perrin does not provide any other services to the Company. The
      Compensation Committee uses the compensation data from Towers Perrin as one
      of
      several factors in determining the appropriate levels of base salary, short-term
      and long-term incentives that fairly compensate the Company’s executive
      officers.





In
      setting the compensation package for executives, the Compensation Committee
      balances consideration of base salary with short-term incentive compensation
      so
      that a significant proportion of executive officers’ compensation is linked to
      objectives aligned with the interests of the Company’s shareholders. The
      compensation packages include:





i)
            Salary
                and Benefits





Salary
      and benefits policies of the Company are determined by bench marking similar
      businesses in the Internet sector and are targeted at the mid range in the
      sectors, taking into account the economic trends, the Company’s competitive
      position and performance and extraordinary contributions to the Company.





ii)
            Short-Term
                Incentive Compensation




The
      Company provides short -term
      cash incentive compensation to those individuals of its senior management and
      its subsidiaries whose responsibilities and attainment of personal and Company
      objectives exceed established expectations, based on individual contributions,
      operating results, and financial performance. The amount of these payments
      are
      approved by the Compensation Committee and are based on specific goals in these
      areas. Incentive compensation targets for each individual are set during the
      first quarter of each year.





In
      the
      case of Named Executive Officers, as defined hereinafter under the heading
      “Statement of Executive Compensation”, targeted incentive compensation varies in proportion to base
      salary, depending primarily on the level of responsibility of the individual.
      Generally, when operating results and financial performance objectives are
      exceeded bonuses are higher, when the objectives are not met the incentive
      bonuses are lower or nil depending on the circumstances and the individual’s
      contribution to the Company.





The
      Board
      of Directors, upon recommendation of the Compensation Committee, also may award
      bonuses as deemed necessary to compensate management for circumstances where
      warranted to reward extraordinary contributions to the Company not reflected
      in
      our results of
      operations if and when deemed in the Company’s best interest.





For
      the
      year ended December 31, 2007, for all of the officers, no incentive compensation
      was earned related to Company objectives as minimal financial targets were
      not
      met; however, some executive officers were paid bonuses based upon their
      contributions to the Company.





iii)
            Long-Term
                Incentive Compensation





The
      long-term incentive component of the Company’s compensation program consists of the stock option
      plan of the Company which provides for the issuance of options to executive
      officers and other employees, directors or consultants to purchase common shares
      of the Company. The stock option plan of the Company is described below under
      the heading “ *Stock
      Option Plan* ”.





The
      Compensation Committee determines the executives, employees and directors
      eligible for the granting of options pursuant to the stock option plan. It
      also
      determines the size of each grant and the date on which each grant is to become
      effective. The exercise price of options granted may not be less than the market
      price of the Company’s common shares as traded on the NASDAQ Stock
      Exchange ® in U.S.
      dollars determined as of the date the options are granted. The number of options
      granted annually to recipients is determined by the Compensation Committee
      on a
      discretionary basis.





The
      Compensation Committee may, in
      its discretion, determine when the options granted under the stock option plan
      may be exercised or vested, provided that the term of such options can not
      exceed ten (10) years.


53


Unless
      otherwise stipulated by the terms of a stock option grant, which terms are
      approved by the Compensation Committee, options granted
      pursuant to the stock option plan will lapse thirty (30) days after the holder
      ceases to be employed by the Company. In the event of death, any vested option
      of a holder lapses three (3) months after his or her death. In the event that
      the holder’s employment terminates due to disability, the holder may exercise
      the vested options for one (1) year after the date of termination of employment.
      If the holder is terminated for cause, vested options terminate
      immediately.





In
      July
      2007, the Company reviewed its stock option plan to assess its retention
      potential for key employees. The review was initiated following the resignation
      of a number of key employees due to a competitive labor market in the high
      tech
      industry in the Quebec City region. PCI Perrault Consulting Inc. was retained
      by
      the Chair of the Compensation Committee to assist with preparing information
      and
      providing advice.





In
      light
      of the above and consistent with the Company’s objectives to retain key
      employees, the Board of Directors has, on September 18, 2007, reviewed and
      accepted stock option grants to key employees that would vest on equal
      increments over a three-year period.





At
      the
      time that the Stock Option Plan was reviewed in July 2007, 1,400,000 Common
      Shares were reserved for issuance under this plan. Taking into account options
      that have been cancelled of forfeited, options to acquire a net total of 652,000
      Common Shares have been granted on September 18, 2007 under the Stock Option
      Plan. As of January 1, 2008, 186,565 Common Shares remain available for future
      grants.





***Conclusion***





The
      Company’s executive compensation policy links executive compensation to
      corporate results and individual contribution ,
      as well
      as stock performance and long-term results. The Compensation Committee regularly
      reviews the various executive compensation components to ensure that they
      maintain their competitiveness in the industry and continue to focus on the
      Company’s objectives, values and business strategies.





Depending
      on specific circumstances, the Compensation Committee may also recommend
      employment terms and conditions that deviate from the above described policies.





***Statement
      of Executive Compensation***





The
      following summary table,
      presented in accordance with applicable securities legislation, sets forth
      all
      compensation provided by the Company and its affiliates for the fiscal years
      ended December 31, 2005, 2006 and 2007 to:





(i)
            the
                Chief Executive Officer;


(ii)
            the
                Chief Financial Officer;


(iii)
            each
                of the Company’s three most highly compensated executive officers, other
                than the Chief Executive Officer and the Chief Financial Officer,
                who were
                serving as executive officers at the end of December 31, 2007 and
                whose
                total salary and bonus exceeded CA$150,000,
                and


(iv)
            such
                other individuals for whom the foregoing disclosure would have been
                made
                but for the fact that such individual was not an officer of the Company
                at
                the end of December 31, 2007 (collectively, the “Named Executive
                Officers”).





***Summary
      Compensation Table***





Compensation
      is payable in Canadian dollars and converted by using the yearly average U.S.
      exchange rate. Exchange rate conversions were .82622 in 2005, .88206 in 2006
      and
      0.93565 in 2007.


54





**Annual
                Compensation****Name
                and Principal Occupation**
            
            **Year**
            
            **Salary**
              **U.S. $**
            
            **Bonus**
              **U.S. $**
            
            **Other Annual**
              **Compensation**
              **U.S. $**
              **(Taxable Benefits Related**
              **to Exercised Options and**
              **Other)****Guy
                Fauré**1
              President
                and Chief Executive Officer
            
            
            2007
              2006
              2005
            
            
            46,403
              224,705
              199,520
            
            
            -
              179,940
              49,573
            2
            
            502,977
              3,718
              3,980**David
                Goldman**3
              Executive
                Chairman
            
            
            2007
              2006
              2005
            
            
            Nil
              Nil
              Nil
            
            
            Nil
              Nil
              Nil
            
            
            78,430
              Nil
              Nil**Martin
                Bouchard**4
              President
                and Chief Executive Officer
            
            
            2007
              2006
              2005
            
            
            220,526
              176,158
              -
            
            
            22,456
              13,231
              -
            
            
            3,813
              2,382
              -**Daniel
                Bertrand**
              Executive
                Vice President and
              Chief
                Financial Officer
            
            
            2007
              2006
              2005
            
            
            172,897
              153,326
              136,040
            
            
            12,982
              116,644
              57,835
            5
            
            117,534
              3,722
              3,990**Éric
                Bouchard**
              Vice
                President - Products
            
            
            2007
              2006
              2005
            
            
            169,155
              149,798
              -
            
            
            10,161
              23,992
              -
            
            
            3,813
              2,372
              -**Patrick
                Hopf**6
              Vice
                President - Business Development
            
            
            2007
              2006
              2005
            
            
            154,145
              125,816
              107,016
            
            
            -
              88,488
              53,503
            7
            
            47,817
              2,869
              1,660







1Mr.
      Fauré resigned from his positions as the President, Chief Executive Officer and
      a member of the Board of Directors of the Company effective as of January 31,
      2007. In connection with his resignation, the Company paid Mr. Fauré termination
      compensation and recorded the termination costs of CDN$510,000 in Q1 2007,
      changed the duration of option agreements and allowed accelerated vesting of
      options. These changes represented an additional non-cash item expense of
      approximately US$267,000 which was recorded in Q1 2007.


2 Performance bonus of $22,492 and retention compensation of
      $157,448.


3  The
      Company and Dave Goldman Advisors Ltd., a company controlled by Mr. Goldman,
      entered into a consulting agreement pursuant to which David Goldman provides
      his
      services to the Company. In addition, as part of the compensation paid to David
      Goldman, the Company agreed to grant him options under the Company’s stock
      option plan.


4 Martin
      Bouchard resigned from his
      position as the President and Chief Executive Officer effective as of March
      3,
      2008 for personal reasons. He was replaced by Marc Ferland.


5  Performance
      bonus of $9,209 and retention bonus of $107,435 .


6 On
      February 11, 2008, the Company announced the departure of Patrick Hopf,
      effective February 11, 2008.


7 Performance bonus of $6,986 and retention bonus of $81,502.


55


***Option
        Grants During the Most Recently Completed Financial
        Year***


**Long
                Term Compensation**
            
            **All
                Other Compensation****Awards**
            
            **Payouts**
            
            **U.S.
                $****Name
                and Principal Occupation**
            
            **Year**
            
            **Securities**
              **Under
                Options**
              **#**
            
            **Shares
                or Units Subject to Resale Restrictions**
              **($)**
            
            **LTIP Payouts**
              **$****Guy
                Fauré**1
              President
                and Chief Executive Officer
            
            
            2007
              2006
              2005
            
            
            Nil
              Nil
              176,500
            
            
            Nil
              Nil
              Nil
            
            
            Nil
              Nil
              Nil
            
            
            477,182
              Nil
              Nil**David
                Goldman**2
              Executive
                Chairman
            
            
            2007
              2006
            
            
            20,000
              Nil
            
            
            Nil
              Nil
            
            
            Nil
              Nil
            
            
            108,291
              125,004
            22005
            
            
            75,000
            
            
            Nil
            
            
            Nil
            
            
            173,859
            2**Martin
                Bouchard**3
              President
                and Chief Executive Officer
            
            
            2007
              2006
              2005
            
            
            155,000
              Nil
              N/A
            
            
            Nil
              Nil
              N/A
            
            
            Nil
              Nil
              N/A
            
            
            Nil
              Nil
              N/A**Daniel
                Bertrand**
              Executive
                Vice President and Chief Financial Officer
            
            
            2007
              2006
              2005
            
            
            98,000
              Nil
              87,500
            
            
            Nil
              Nil
              Nil
            
            
            Nil
              Nil
              Nil
            
            
            Nil
              Nil
              Nil**Éric
                Bouchard**
              Vice
                President – Products
            
            
            2007
              2006
              2005
            
            
            78,000
              Nil
              N/A
            
            
            Nil
              Nil
              N/A
            
            
            Nil
              Nil
              N/A
            
            
            Nil
              Nil
              N/A**Patrick
                Hopf**4
              Vice
                President–Business
                Development
            
            
            2007
              2006
              2005
            
            
            73,000
              Nil
              46,800
            
            
            Nil
              Nil
              Nil
            
            
            Nil
              Nil
              Nil
            
            
            Nil
              Nil
              Nil





1.
            Mr.
                Fauré resigned from his positions as the President, Chief Executive
                Officer and a member of the Board of Directors of the Company effective
                as
                of January 31, 2007. In connection with his resignation, the Company
                paid
                Mr. Fauré termination compensation and recorded the termination costs of
                CDN$510,000 in Q1 2007, changed the duration of option agreements
                and
                allowed accelerated vesting of options. These changes represented
                an
                additional non-cash item expense of approximately US$267,000 which
                was
                recorded in Q1 2007.


2.
            The
                Company and Dave Goldman Advisors Ltd., a company controlled by Mr.
                Goldman, entered into a consulting agreement pursuant to which David
                Goldman provides his services to the Company. In addition, as part
                of the
                compensation paid to David Goldman, the Company agreed to grant him
                options under the Company’s stock option
                plan.


3.
            Martin
                Bouchardresignedfrom his position as the President and Chief Executive Officer effective
                as of March 3, 2008 for personal reasons. He was replaced by Marc
                Ferland.


4.
              On
                  February 11, 2008, the Company announced the departure of Patrick
                  Hopf,
                  effective February 11,
                  2008.


56


***Employment
      Agreements and Change of Control Provisions***





During
      2007, the Company had employment arrangements and agreements with the following
      Named Executive Officers. All sums mentioned herein are in Canadian
      Dollars.





On
      July
      8, 1999, Daniel Bertrand ,
      Executive Vice President and Chief Financial Officer of the Company entered
      into
      an employment agreement with the Company. Pursuant to the terms and conditions
      of his employment agreement, Mr. Bertrand is paid an annual salary of
      CA$192,400. Mr. Bertrand is also entitled to a bonus for meeting financial
      and
      individual performance levels, to a maximum of 60% of his base salary for far
      exceeding expected performance levels. Mr. Bertrand is also entitled to
      receive stock options under the Company’s stock option plan.





On
      August
      12, 2004, the Company amended
      the employment arrangement of the Executive Vice President and Chief Financial
      Officer. As a result, if there is a change of control of the Company,
      Mr. Bertrand will receive a lump sum payment equal to the greater of the
      past 18 months salary payments, or CA$225,000 if he:





(i)
            is
                terminated;





(ii)
            does
                not accept a relocation outside of the greater Montreal
                area;





(iii)
            does
                not accept an offer of employment at reduced levels of responsibility;
                or





(iv)
            does
                not accept an offer of compensation (including performance/incentive
                plan
                targets and long-term compensation) which is less than his current
                level.





David
      Goldman was Chairman and Chief Executive Officer of the Company until January
      12, 2004 when he became the Executive Chairman of the Company. During the year
      ended 2003, Mr. Goldman was not paid any salary or benefits by the Company
      but rather was rewarded solely through the granting of stock options which
      are
      awarded at the discretion of the Nominating, Human Resource and Governance
      Committee. This position was not considered as a full time position and
      therefore the level of this award was based solely on the overall achievements
      and performance of the Company.





On
      May 1,
      2002, the Company entered into a consulting agreement with David Goldman through
      Dave Goldman Advisors Ltd. These consulting arrangements may be terminated
      on
      sixty (60) days’ notice by either party. On August 12, 2004, the Company amended
      the consulting agreement with Dave Goldman Advisors Ltd. As a result, if there
      is change of control of the Company, Dave Goldman Advisors Ltd. will receive
      a
      lump sum payment equal to the greater of the past 24 months consulting payments
      or CA$300,000 if:





(i)
            the
                consultant agreement is terminated;





(ii)
            Mr.
                Goldman does not accept a relocation or to perform a substantial
                part of
                his services outside of the greater Montreal
                area;





(iii)
            Mr.
                Goldman’s responsibilities are greatly reduced for which reason he
                terminates the agreement; or





(iv)
            the
                total compensation offered to the consultant is
                reduced.





On
      May
      23, 2005, the consulting agreement was further amended to increase the hourly
      rate of Dave Goldman Advisors Ltd. for services rendered from CA$200 to
      CA$250. Total
      fees for 2007 were $108,291 (2006: $141,971; 2005: $202,404). The transactions
      are in the normal course of operations and are measured at the exchange amount
      which is the amount of the consideration established and agreed to by the
      related parties





Martin
      Bouchard signed an employment agreement with the Company on December 22, 2005.
      In 2007, Martin Bouchard’s annual salary was established at CA$240,000 with an
      entitlement to short term annual incentive compensation for meeting targeted
      financial performance, to a maximum of 75% of his base salary for far exceeding
      targeted performance levels.





Martin
      Bouchard’s employment agreement provides that in the event of a change of
      control or sale of the Company, Martin Bouchard may terminate his employment
      agreement and will be entitled to one year’s base salary. The employment
      agreement also provides that the Company may at any time with or without cause
      terminate the agreement. In such event, the Company must pay Martin Bouchard
      the
      lesser of (i) the base salary of Martin Bouchard from the date of termination
      until December 31, 2008, and (ii) one year’s base salary. Martin Bouchard’s
      resignation on March 3, 2008 did not trigger the termination provision of the
      employment agreement and therefore, no termination payment was paid by the
      Company to Martin Bouchard under the employment agreement.


57


On
      March
      3, 2008, the Company entered into a consulting agreement with Martin Bouchard
      through 4332903 Canada Inc. This company is remunerated for services rendered
      on
      an hourly rate of CA$250. These consulting arrangements may be terminated on
      sixty (60) days’ notice by either party.





Éric
      Bouchard has been Vice President - Products since the acquisition of Copernic
      Technologies Inc. by the Company. Eric Bouchard signed an employment agreement
      with the Company on December 22, 2005. Éric Bouchard’s annual salary is
      CA$188,200 with an entitlement to short term annual incentive compensation
      for
      meeting targeted financial performance, to a maximum of 60% of his base salary
      for far exceeding targeted performance levels. This compensation package was
      contractually negotiated at the time of the acquisition of Copernic Technologies
      Inc. and was approved by the Compensation Committee as it was consistent with
      the compensation and bonus arrangements with other officers.





Eric
      Bouchard’s employment agreement provides that in the event of a change of
      control or sale of the Company, Eric Bouchard may terminate his employment
      agreement and will be entitled to one year’s base salary. The employment
      agreement also provides that the Company may at any time with or without cause
      terminate the agreement. In such event, the Company must pay Eric Bouchard
      the
      lesser of (i) the base salary of Eric Bouchard from the date of termination
      until December 31, 2008, and (ii) one year’s base salary.





On
      October 11, 2007, the Company entered into a consulting agreement with Marc
      Ferland through Gen24 Marketing, a division of 6556027 Canada Inc. The agreement
      provided for a USD$5,000 per month retainer and 5% commissions on recognized
      revenue of customers and investment proceeds for a 3-year period received from
      certain specified customers brought in by Gen24 Marketing to the Company. The
      consulting agreement is cancellable on thirty (30) days’ notice by either party. Total
      fees for 2007 were $15,454.





The
      monthly retainer of Gen24 Marketing was increased to $10,000 for the month
      of
      February, 2008 and the consulting agreement was terminated as of February 29,
      2008.





On
      March
      3, 2008, Marc Ferland entered into an employment agreement with the Company
      regarding his appointment as President and Chief Executive Officer. Pursuant
      to
      the terms and conditions of his employment agreement, Mr. Ferland is paid an
      annual salary of CA$250,000. Mr. Ferland is also entitled to a bonus for meeting
      certain financial performance levels, to a maximum of 50% of his base salary.
      Under his employment agreement, Mr. Ferland is also entitled to receive,
      before April 27, 2008, 100,000 stock options under the Company’s stock option
      plan. If there is a change of control of the Company, Mr. Ferland will
      receive a lump sum payment equal to one and a half times his annual base salary
      if he:





(i)
            is
                terminated;





(ii)
            does
                not accept a relocation outside of the greater Montreal
                area;





(iii)
            does
                not accept an offer of employment at reduced levels of responsibility;
                or





(iv)
            does
                not accept an offer of compensation (including performance/incentive
                plan
                targets and long-term compensation) which is less than his current
                level.





***Stock
      Option Plan***





In
      1999,
      the Company adopted a new stock option plan (the “Plan”), replacing all previous
      stock option plans of the Company, to provide eligible officers, directors,
      employees and consultants of the Company and its subsidiaries compensation
      opportunities that will encourage share ownership and enhance the Company’s
      ability to attract, retain and motivate such persons and reward significant
      performance achievements. Options under the Plan may not be granted with a
      term
      exceeding ten years. The exercise price of the options may not be less than
      the
      market price of the Company’s common shares determined as of the date the
      options were granted. Unless the Board determines otherwise, options granted
      under the Plan are exercisable within 30 days after an optionee ceases to be
      employed or retained by the Company (other than for reason of cause in which
      event they terminate immediately, death in which event they are exercisable
      within three months and disability in which event they are exercisable within
      one year). The Plan, which was approved by shareholders on June 30, 1999, and
      subsequently amended as approved by shareholders on June 20, 2000, May 23,
      2002
      and June 7, 2006 provides that the aggregate number of common shares reserved
      for issuance under the Plan shall not exceed 1,400,000 common shares. The
      granting of options is subject to the further conditions that: (i) the number
      of
      outstanding common shares of the Company reserved for options to optionees
      or
      issued to optionees within any one year period shall not exceed fifteen percent
      (15%) of the outstanding common shares of the Company, and (ii) at no time
      may
      any optionee hold more than five percent (5%) of the outstanding common shares
      of the Company under option.





The
      following table discloses individual grants of options to the Named Executive
      Officers to purchase or acquire common shares of the Company pursuant to the
      Plan for the financial year ended December 31, 2007.


58


***Aggregate
      Options Exercised During the Most Recently Completed Financial Year and
      Financial Year-end Option Values***





**Name**
            
            **Securities**
              **Acquired on
                Exercise**
              **(#)**
            
            **Aggregate Value**
              **Realized**
              **(U.S.
                $)**
            
            **Unexercised**
              **Options at FY-End
                (#)**
              **Exercisable/**
              **Unexercisable**
            
            **Value of
                Unexercised**
              **in-the-Money
                Options at FY-End (U.S. $)**
              **Exercisable/**
              **Unexercisable****David
                Goldman**
            
            
            40,000
            
            
            78,430
            
            
            54,000 / 45,000
            
            
            Nil
                / Nil**Daniel
                Bertrand**
            
            
            40,000
            
            
            103,370
            
            
            45,250 / 129,250
            
            
            Nil
                / Nil**Patrick
                Hopf**
            
            
            15,000
            
            
            40,061
            
            
            27,401 / 89,733
            
            
            Nil
                / Nil**Martin
                Bouchard**
            
            
            Nil
            
            
            Nil
            
            
            Nil / 155,000
            
            
            Nil
                / Nil**Éric
                Bouchard**
            
            
            Nil
            
            
            Nil
            
            
            Nil / 78,000
            
            
            Nil
                / Nil**Claude
                E. Forget**
            
            
            Nil
            
            
            Nil
            
            
            16,667 / 18,333
            
            
            Nil
                / Nil**Dr.
                David Schwartz**
            
            
            8,333
            
            
            26,416
            
            
            8,334 / 18,333
            
            
            Nil
                / Nil**Irwin
                Kramer**
            
            
            Nil
            
            
            Nil
            
            
            Nil
                / Nil
            
            
            Nil
                / Nil**W.
                Brian Edwards**
            
            
            8,334
            
            
            18,543
            
            
            Nil
                / Nil
            
            
            Nil
                / Nil**Marc
                Ferland**
            
            
            Nil
            
            
            Nil
            
            
            Nil
                / 25,000
            
            
            Nil
                / Nil**Lawrence
                Yelin**
            
            
            Nil
            
            
            Nil
            
            
            Nil
                / 25,000
            
            
            Nil
                / Nil**Guy
                Fauré**
            
            
            177,500
            
            
            458,746
            
            
            60,500
                / Nil
            
            
            Nil
                / Nil





***Option
      and SAR Repricing***





No
      options were repriced during the year ended December 31 , 2006
      and
      2007.




**Remainder
      of page intentionally left blank.**


59




***Securities
      Under Option to Directors and Named Executive Officers as at December 31,*** **200** **7**




**Names**
            
            **Securities**
              **Under**
              **Options**
              **Granted**
              **(#)**
            
            **Exercise
                or Base**
              **Price**
              **(US$/Security)**
            
            **Market
                Value of**
              **Securities
                Underlying**
              **Options
                on the Date**
              **of
                Grant**
              **(US$/Security)**
            
            **Expiration**
              **Date****Daniel
                Bertrand**
            
            
            85,000
            
            
            1.74
            
            
            1.74
            
            
            09/18/2012**Daniel
                Bertrand**
            
            
            50,000
            
            
            2.28
            
            
            2.28
            
            
            11/08/2010**Daniel
                Bertrand**
            
            
            14,000
            
            
            3.58
            
            
            3.58
            
            
            11/05/2010**Daniel
                Bertrand**
            
            
            13,000
            
            
            5.15
            
            
            5.15
            
            
            01/23/2012**Daniel
                Bertrand**
            
            
            12,500
            
            
            6.28
            
            
            6.28
            
            
            02/15/2012**Claude
                E. Forget**
            
            
            25,000
            
            
            2.28
            
            
            2.28
            
            
            11/08/2010**Claude
                E. Forget**
            
            
            10,000
            
            
            4.24
            
            
            4.24
            
            
            06/08/2012**David
                Goldman**
            
            
            50,000
            
            
            2.28
            
            
            2.28
            
            
            11/08/2010**David
                Goldman**
            
            
            29,000
            
            
            3.58
            
            
            3.58
            
            
            11/05/2010**David
                Goldman**
            
            
            20,000
            
            
            4.24
            
            
            4.24
            
            
            06/08/2012**Irwin
                Kramer**
            
            
            25,000
            
            
            2.28
            
            
            2.28
            
            
            11/08/2010**Irwin
                Kramer**
            
            
            10,000
            
            
            4.24
            
            
            4.24
            
            
            06/08/2012**Dr. David
                Schwartz**
            
            
            16,667
            
            
            2.28
            
            
            2.28
            
            
            11/08/2010**Dr. David
                Schwartz**
            
            
            10,000
            
            
            4.24
            
            
            4.24
            
            
            06/08/2012**Patrick
                Hopf**
            
            
            60,000
            
            
            1.74
            
            
            1.74
            
            
            09/18/2012**Patrick
                Hopf**
            
            
            30,834
            
            
            2.28
            
            
            2.28
            
            
            11/08/2010**Patrick
                Hopf**
            
            
            6,500
            
            
            3.58
            
            
            3.58
            
            
            11/05/2010**Patrick
                Hopf**
            
            
            13,000
            
            
            5.15
            
            
            5.15
            
            
            01/23/2012**Patrick
                Hopf**
            
            
            6,800
            
            
            6.28
            
            
            6.28
            
            
            02/15/2012**Éric
                Bouchard**
            
            
            65,000
            
            
            1.74
            
            
            1.74
            
            
            09/18/2012**Éric
                Bouchard**
            
            
            13,000
            
            
            5.15
            
            
            5.15
            
            
            01/23/2012**Martin
                Bouchard**
            
            
            130,000
            
            
            1.74
            
            
            1.74
            
            
            09/18/2012**Martin
                Bouchard**
            
            
            25,000
            
            
            5.15
            
            
            5.15
            
            
            01/23/2012**Guy
                Fauré**
            
            
            5,000
            
            
            2.57
            
            
            2.57
            
            
            01/31/2009**Guy
                Fauré**
            
            
            29,000
            
            
            3.58
            
            
            3.58
            
            
            01/31/2009**Guy
                Fauré**
            
            
            26,500
            
            
            6.28
            
            
            6.28
            
            
            01/31/2009**Marc
                Ferland**
            
            
            25,000
            
            
            1.67
            
            
            1.67
            
            
            09/21/2012**Lawrence
                Yelin**
            
            
            25,000
            
            
            1.67
            
            
            1.67
            
            
            09/21/2012


60





***Share
                Ownership***




The
      information with respect to shares beneficially owned, controlled or directed
      by
      directors of the Company or Named Executive Officers is in each instance based
      upon information furnished by the person concerned. The Company’s articles of
      incorporation provide for Common Shares as the only authorized class of shares,
      all of which have the same rights. Options to acquire shares held by directors
      or Named Executive Officers, are listed in the above table entitled *Securities
      Under Option to Directors and Named Executive Officers* and not
      included in the information below. To the knowledge of the Company, the
      following directors and Named Executive Officers hold the following shares
      of
      the Company as at March 19, 2008.





**Director/
                Named Executive Officer**
            
            **Number
                of Company**
              **Shares
                Held**1
            
            **%
                of Total Number of**
              **shares
                Is Issued and**
              **Outstanding**Marc
                Ferland, President and Chief Executive Officer, Director
            
            
            0
            
            
            0
            %Martin
                Bouchard, Director
            
            
            50,000
            
            
            0.3
            %Claude
                E. Forget, Director
            
            
            65,000
            
            
            0.4
            %David
                Goldman, Executive Chairman,Director
            
            
            75,000
            
            
            0.5
            %Irwin
                Kramer, Director
            
            
            2,000
            
            
            0
            %Dr.
                David Schwartz, Director
            
            
            3,533
            
            
            0
            %Daniel
                Bertrand, Executive Vice President and Chief Financial Officer
            
            
            100
            
            
            0
            %Éric
                Bouchard, Vice President - Products
            
            
            25,000
            
            
            0.2
            %Lawrence
                Yelin, Director
            
            
            0
            
            
            0
            %





On
      May
      10, 2007, the Company adopted minimum shareholding requirements for directors
      and officers. Minimum shareholding requirements are 100,000 shares for the
      CEO,
      40,000 shares for the Chair, 20,000 shares for Executive and Senior Vice
      Presidents, 10,000 shares for Vice Presidents, and 10,000 shares for directors
      with current officers and directors having five years from this date to achieve
      these levels or, for new officers and directors, five years from the effective
      date of their appointment.







1. 
      Does not include shares subject to receipt upon exercise of
      options.


61





***Employees***




The
      following table provides a breakdown of persons employed by main category of
      activity for each of the past three financial years.





**N****UMBER OF****E****MPLOYEES BY****C****ATEGORY OF****A****CTIVITY****Y****EAR**
            
            **SEARCH / MEDIA**
            
            **SOFTWARE**2007
            
            
            16
            
            
            362006
            
            
            23
            
            
            362005
            
            
            39
            
            
            36





***Pension
      and Retirement Benefits***





The
      Company does not set aside nor accrue any amounts to provide pension, retirement
      or similar benefits.





**ITEM
      7. MAJOR SHAREHOLDERS AND RELATED PARTY TRANSACTIONS**





***MAJOR
      SHAREHOLDERS***





To
      the
      knowledge of the Company, no shareholder currently owns, directly or indirectly,
      or exercises control or direction over voting securities carrying more than
      5%
      of the voting rights attaching to any class of voting securities of the
      Company.





The
      Company’s Common Shares are widely held in the United States, Canada and
      Europe.





To
      the
      knowledge of the Company, the Company is not directly or indirectly owned or
      controlled by another corporation(s), by any foreign government or by any other
      natural or legal person(s), whether severally or jointly acting as a “group”
within the meaning of the United States Securities Exchange Act of 1934, as
      amended. To the knowledge of the Company, there are no arrangements, which
      may
      at a subsequent date result in a change in control of the Company.





***RELATED
      PARTY TRANSACTIONS***





The
      Company and Dave Goldman Advisors Ltd., a company controlled by Mr. Goldman,
      entered into a consulting agreement pursuant to which David Goldman provides
      services as an Executive Chairman at an hourly fee of CA$250. Total fees for
      2007 were $108,291, (2006 -$125,003; 2005 - $202,685). The payment of these
      sums
      has been approved by the Compensation Committee. The transactions are in the
      normal course of operations and are measured at the exchange amount which is
      the
      amount of the consideration established and agreed to by the related parties.





The
      Company and Marc Ferland, a member of the board of directors of the Company,
      entered into an agreement pursuant to which Marc Ferland performs various sales
      and marketing projects. He is remunerated $5,000 per month retainer and 5%
      commissions on recognized revenue (as per Canadian GAAP) of customers and
      investment proceeds for a 3 year period brought in by his corporation, Gen24
      Marketing, to the Company. Total fees for 2007 were $15,454. On March 3, 2008
      Mr. Ferland was appointed President and CEO. The consulting agreement was
      therefore terminated when Mr. Ferland was appointed President and CEO of the
      Company.





***INTEREST
      OF EXPERTS AND COUNSEL***





**Not
      Applicable.**


62


**ITEM
      8. FINANCIAL INFORMATION**




***CONSOLIDATED
      FINANCIAL STATEMENTS AND OTHER FINANCIAL INFORMATION***





The
      audited consolidated financial statements of the Company and certain other
      financial information of the Company are included under Item 17 of this Annual
      Report on Form 20-F.





***LEGAL
      OR ARBITRATION PROCEEDINGS***





None.





***POLICY
      ON DIVIDEND DISTRIBUTIONS***





The
      Company has never declared or paid dividends on its Common Shares. The Company
      currently intends to retain any earnings to support its working capital
      requirements and growth strategy and does not anticipate paying dividends in
      the
      foreseeable future. Payment of future dividends, if any, will be at the
      discretion of the Company’s Board of Directors after taking into account various
      factors, including the Company’s financial condition, operating results, current
      and anticipated cash needs and plans for expansion.





***SIGNIFICANT
      CHANGES***





There
      have been no significant changes since the date of the audited, consolidated
      financial statements of the Company included in this Annual Report on Form
      20-F.





**Resignation
      and departure of two officers**





On
      February 11, 2008 the Company announced the departure of Patrick Hopf, Executive
      Vice President of Business Development. 117,134 options held by Mr. Hopf were
      cancelled, resulting in a reversal of employee stock-based compensation expense
      of $48,542 which will be recorded in Q1 2008.





On
      February 8, 2008 the Company announced that its President and Chief Executive
      Officer, Martin Bouchard, tendered his resignation, effective March 3, 2008,
      citing personal reasons. Mr. Bouchard will continue as a member of the board
      of
      directors and has agreed to be available to the Company on a consulting basis.
      155,000 options held by Mr. Bouchard were cancelled, resulting in a reversal
      of
      employee stock-based compensation expense of $49,320 which will be recorded
      in
      Q1 2008. Mr. Marc Ferland, a director of the Company, is appointed President
      and
      CEO commencing on March 3, 2008.





**Write-down
      of intangible assets and goodwill**





In
      Q4
      2007, the Company concluded that its software unit was facing delays in
      execution and changes of market conditions of its commercial deployment
      solutions. Based on the Company’s assessment of the fair value of its assets
      related to the software unit, the Company concluded that these assets had
      suffered a loss in value and the fair values of intangible assets and goodwill
      were significantly less than their carrying value. Therefore, write-downs of
      $1,333,415 for trade names, $652,055 for customer relationships and goodwill
      of
      $7,214,531 were recorded in 2007.





Also
      in
      Q4 2007, the Company reported decreased revenues due to industry pressures
      on
      advertising rates, slow down in sponsored clicks, pop-up campaigns and general
      demand for all graphic ads. Based on the Company assessment of the fair value
      of
      its assets related to search / media unit, the Company concluded that the
      goodwill related to this unit had suffered a loss in value and the fair value
      of
      the related goodwill was significantly less then its carrying value. Therefore,
      a write-down of goodwill of $846,310 for search / media unit was recorded in
      2007 to bring it to nil.





**Write-down
      of investment**





In
      Q4
      2007, based on its assessment of the fair value of the Company’s investment in
      LTRIM, the Company concluded that its investment had suffered a loss in value
      other than a temporary decline due to LTRIM’s significant corporate
      restructuring and therefore recorded a write-down of $150,000 to bring it to
      nil.





**Closure
      of SEC investigation**





On
      September 19, 2007, The United States Securities and Exchange Commission (“SEC”)
      informed the Company by letter that it had closed its investigation of the
      Company, commenced in 2004, concerning certain trading in the shares of the
      Company and other matters, and that the SEC did not intend to recommend
      enforcement action against the Company.


63


**Settlement
      of class action lawsuit**





On
      July
      16, 2007, the Company announced that the United States District Court, Southern
      District of New York (the “Court”) had approved the settlement of the class
      action following a hearing on July 9, 2007, at which time the Court heard from
      all parties before concluding that the settlement was fair and all
      procedural requisites were met. As a result, all claims asserted in the class
      actions against the Company and the individual officer defendants have been
      resolved, with the exception of three shareholders who have indicated they
      will
      exclude themselves from the settlement so as to preserve rights to maintain
      separate actions should they elect to do so.  The amount paid into escrow,
      along with any interest earned, was distributed as provided under the settlement
      to pay class members, plaintiffs' attorney fee, and the costs of claims
      administration. Subsequently, one of the three shareholders has declined its
      right to the class action lawsuit.





**Name
      change of Mamma.com Inc. to Copernic Inc.**





On
      June
      8, 2007, the Company’s shareholders approved changing the Company’s name from
      Mamma.com Inc. to Copernic Inc. at its Annual General and Special Meeting of
      the
      Shareholders. On June 14, 2007, articles of amendment were filed at the Ministry
      of Consumer and Business Services of Ontario effecting the name change. On
      June
      21, 2007, the Company’s stock ticker symbol was changed to “CNIC”.





**Agreement
      for financial advisory services**





On
      June
      7, 2007, the Company retained ThomasLloyd Capital LLC (“ThomasLloyd Capital”) as
      its financial and investment banking advisor.  In consideration for these
      services, the Company has committed to pay ThomasLloyd Capital a monthly fee
      of
      $5,000 for seven months beginning June 1, 2007, plus a success fee of the
      greater of $1,000,000 (but in no event shall such amount exceed 3% of the
      transaction value) or 2% of the transaction value but in no event to exceed
      $2,000,000 (less any amounts previously paid as monthly fees) plus an additional
      fee of $200,000, credited against the above fees payable upon delivery of a
      fairness opinion.





**Resignation
      of two officers**





In
      January 2007, two officers resigned from their positions. In connection with
      their resignations, the Company paid and recorded termination costs of
      CDN$510,000 in Q1 2007, changed the duration of their option agreements and
      allowed accelerated vesting options for one of the officers. These changes
      represented an additional non-cash item expense of $253,236 which was recorded
      in Q1 2007.





**Granting,
      exercising and cancellation of stock options**





On
      January 23, 2007, the Company granted to officers and employees 70,500 and
      21,803 stock options, respectively, at an exercise price of $5.15 expiring
      in
      five years.





On
      February 26, 2007, 10,000 stock options were granted to a new employee, at
      an
      exercise price of $4.99 expiring in five years.





On
      March
      29, 2007, the Company granted 2,632 stock options to an employee at an exercise
      price of $4.75 expiring in five years.





On
      April
      30, 2007, the Company granted 40,000 stock options to a new employee at an
      exercise price of $4.90 expiring in five years.





On
      June
      8, 2007, the Company granted 60,000 stock options to directors at an exercise
      price of $4.24 expiring in five years.





On
      September 18, 2007, the Company granted 652,000 stock options to officers and
      employees at an exercise price of $1.74 expiring in five years.





On
      September 21, 2007, the Company granted 50,000 stock options to two new board
      members at an exercise price of $1.67 expiring in five years.





As
      at
      September 30, 2007, 296,667 stock options were exercised with exercising prices
      ranging between $1.53 to $2.57 and 59,037 stock options were
      cancelled.





As
      at
      November 8, 2007, the Company granted 4,000 stock options to an employee at
      an
      exercise price of $2.23 expiring in five years.





As
      at
      December 31, 2007, 296,667 stock options were exercised with exercising prices
      ranging between $1.53 to $2.57 and 83,065 were cancelled or had
      expired.





As
      at
      March 19, 2008, 352,634 stock options were cancelled or
      expired.


64


**ITEM
      9. THE OFFER AND LISTING**





***U.S.
      and German Trading Markets***





The
      Company’s Common Shares are quoted on the NASDAQ Stock Exchange® - Capital
      Market under the symbol “CNIC” and on the Third Market Segment of the Frankfurt
      and Berlin stock exchanges in Germany under the symbol “IYS1”. On June 21, 2007
      following the change of the Company’s name to Copernic Inc., the Company’s
      shares begin to trade under the symbol CNIC. Prior to June, 2007, the Company’s
      shares were quoted under various other trading symbols. With a corporate name
      change taking effect in August 1996 the Company’s Common Share trading symbol
      was changed to “INTAF” and in April 1999 the symbol was changed to “INTA”. On
      January 12, 2004, following the approval of the change of name of the Company
      to
      Mamma.com Inc. the symbol was changed to “MAMA”. On July 11, 2001, the Company
      filed articles of amendment consolidating its issued and outstanding Common
      Shares on the basis of one post-consolidation Common Share for every ten
      pre-consolidation Common Shares. The Company’s Common Shares started trading on
      the NASDAQ Small Cap Market® on a consolidated basis at the opening of the
      markets on July 13, 2001.





The
      following table sets forth the price history of the Company’s Common Shares
      reported on the NASDAQ Stock Market® and on the Third Market Segment of the
      Frankfurt and Berlin stock exchanges in Germany, which reflect inter-dealer
      prices without retail mark-ups or commissions and may not represent actual
      transactions. As per the Explanatory Notes to this Annual Report on Form 20-F,
      all prices referred to below are adjusted to take into account the July 2001
      consolidation of the Company’s Common Shares on the basis of 1
      post-consolidation common share for every 10 pre-consolidation Common
      Shares.





**NASDAQ
      Stock Exchange Capital Market®** ***Annual
      High and Low Market Prices– 5 Years Ended December 31,*** **2007** ***(based on closing prices)***





**Year**
            
            **High**
            
            **Low**2007
            
            5.90
            
            1.412006
            
            7.95
            
            0.972005
            
            6.28
            
            2.122004
            
            15.90
            
            3.262003
            
            4.51
            
            1.25


65


**NASDAQ
      Stock Exchange Capital Market®** ***Quarterly
      High and Low Market Prices – 2 Years Ended December 31, 2007 (based on
      closing prices)***





**Quarter
                End**
            
            **High**
            
            **Low**12/31/07
            
            3.47
            
            1.419/30/07
            
            3.56
            
            1.456/30/07
            
            5.60
            
            2.623/31/07
            
            5.90
            
            4.0712/31/06
            
            7.95
            
            1.119/30/06
            
            1.34
            
            0.976/30/06
            
            2.07
            
            1.1303/31/06
            
            3.54
            
            2.03


66


***NASDAQ
      Stock Exchange Capital Market® Monthly High and Low Market Prices – 6
      Months Ended February 29, 2008 (based on closing
      prices)***





**Month**
            
            **High**
            
            **Low**Feb
            
            1.41
            
            1.24Jan
            
            1.55
            
            1.03Dec
            
            1.92
            
            1.41Nov
            
            3.07
            
            1.67Oct
            
            3.47
            
            2.83Sep
            
            3.56
            
            1.66





***Frankfurt
      Exchange (based on closing prices) - High and Low Market Prices – 4 Years
      Ended December 31, 2007 (in euros)***





**Year**
            
            **High**
            
            **Low**2007
            
            2.65
            
            0.602006
            
            5.94
            
            0.702005
            
            4.80
            
            1.772004
            
            13.80
            
            2.58


67





***Frankfurt
      Exchange (based on closing prices) Quarterly High and Low Market Prices – 2
      Years Ended December 31, 2007 and Latest Quarter (in
      euros)***





**Quarter**
            
            **High**
            
            **Low**12/31/07
            
            2.59
            
            0.789/30/07
            
            2.65
            
            0.976/30/07
            
            4.12
            
            1.913/31/07
            
            4.59
            
            3.1912/31/06
            
            5.94
            
            0.8909/30/06
            
            1.13
            
            0.7006/30/06
            
            1.73
            
            0.9103/31/06
            
            2.65
            
            1.70


68


***Frankfurt
      Exchange (based on closing prices) Monthly High and Low Market Prices – 6
      Months Ended February 29, 2008 (in euros)***





**Month**
            
            **High**
            
            **Low**February
                2008
            
            0.99
            
            0.82January
                2008
            
            1.07
            
            0.67December
                2007
            
            1.29
            
            0.78November
                2007
            
            2.14
            
            1.14October
                2007
            
            2.59
            
            2.07September
                2007
            
            2.65
            
            1.21





Equity
      Transfer Services, Inc. of Toronto, Ontario, Canada acts as registrar and
      transfer agent for the Company’s common shares.





**ITEM
      10. ADDITIONAL INFORMATION**





***SHARE
      CAPITAL***





**Not
      Applicable.**





***MEMORANDUM
      AND ARTICLES OF ASSOCIATION***





The
      Company was incorporated under the laws of the Province of Ontario on July
      5,
      1985 as ‘Quartet Management Ltd.’, and has an Ontario Corporation Number of
      630609. By articles of amendment filed on March 27, 1987, the Company changed
      its name to ‘Health Care Products Inc. By articles of amendment filed on March
      28, 1994, the Company changed its name to ‘Celltech Media Inc.’. By articles of
      amendment filed on June 21, 1995, the Company changed its name to ‘Smartel
      Communications Corporation’ and by articles of amendment filed on July 29, 1996,
      the Company changed its name to ‘Intasys Corporation’. On July 11, 2001, the
      Company filed articles of amendment consolidating its issued and outstanding
      Common Shares on the basis of one post-consolidation common share for every
      ten
      pre-consolidation Common Shares. By articles of amendment filed on January
      8,
      2004 the Company changed its name to ‘Mamma.com Inc.’ By articles of amendment
      filed on June 14, 2007 the Company changed its name to ‘Copernic
      Inc.’





Section
      5
      of the Company’s articles of incorporation indicates that there are no
      restrictions on the business the Company may carry on or on the powers it may
      exercise. Pursuant to Section 15 of the *Business
      Corporations Act* (Ontario) (“OBCA”), a corporation has the capacity and the rights, powers and
      privileges of a natural person.





With
      respect to a material contract, proposal or arrangement between the Company
      and
      one or more directors thereof or between the Company and another person of
      which
      a director of the Company is a director or in which a director has a material
      interest, such material contract, proposal or arrangement, as the case may
      be,
      is neither void nor voidable by reason only of that relationship or by reason
      only that a director with an interest in the transaction is present at or is
      counted to determine the presence of a quorum at a meeting of directors or
      committee of directors that authorized the transaction, if (i) the director
      disclosed his or her interest in accordance with the OBCA; (ii) the transaction
      was approved by the directors or the shareholders of the Company, as applicable;
      and (iii) it was reasonable and fair to the Company at the time it was approved.
      Generally, the business corporation laws of the United States vary significantly
      on this issue from state to state. Delaware Law accords similar treatment (a)
      if
      conditions (i) and (ii) above are satisfied or (b) if (iii), without regard
      to
      conditions (i) and (ii), is satisfied, except that any ratification by the
      board
      must be by a vote of disinterested members.


69


Neither
      the Company’s articles of incorporation nor its bylaws restrict the directors
      from exercising any power (in the absence of an independent quorum) to approve
      their compensation.





The
      directors of the Company may from time to time, without the authorization of
      the
      shareholders:





(a)
            borrow
                money upon the credit of the Company;(b)
            issue,
                re-issue, sell or pledge debt obligations of the Company, including
                without limitation, bonds, debentures, notes or other similar obligations
                of the Company whether secured or unsecured;(c)
            subject
                to Section 20 of the OBCA, give a guarantee on behalf of the Company
                to
                secure performance of any present or future indebtedness, liability
                or
                obligation of any person; or(d)
            charge,
                mortgage, hypothecate, pledge or otherwise create a security interest
                in
                all or any currently owned or subsequently acquired, real or personal,
                moveable or immovable property of the Company, including without
                limitation, book debts, rights, powers, franchises and undertakings,
                to
                secure any present or future indebtedness, liabilities or other
                obligations of the Company.




Although
      most progressive U.S. state corporate codes grant similar powers to corporate
      boards of directors, some U.S. states still require shareholder approval of
      liens in substantially all of a corporation’s assets.





The
      directors may from time to time, by resolution, delegate any or all of the
      powers referred to above to a director, committee of directors or one or more
      officers of the Company. These powers may be varied by enacting a new by-law
      by
      resolution of the directors, which by-law must then be subsequently approved
      at
      a meeting of shareholders or by shareholder resolution. U.S. state corporate
      laws establish no general rule concerning directors’ ability to delegate such
      duties. More progressive U.S. state corporate laws such as Delaware’s General
      Corporation Law allow a board of directors to establish a committee of one
      or
      more directors and delegate such powers to such committee without a by-law
      or
      stockholder approval.





The
      Company’s articles of incorporation do not contain any provisions for the
      retirement of directors as the result of reaching a certain age limit. The
      Company’s by-laws contain a minimum age requirement of 18 years to be named a
      director.





Directors
      need not be shareholders of the Company.





The
      Company is authorized to only issue, and its share capital consists of only,
      Common Shares. Each common share entitles the holder to receive notice of,
      and
      to vote on the basis of one vote per common share, at all meetings of
      shareholders, to receive any dividend declared by the Company on the Common
      Shares and to receive the remaining property of the Company on its dissolution,
      liquidation or wind-up. The shareholders do not have the rights to share in
      the
      profits of the Company. The laws of most US states vest Common Shares with
      similar powers. The Company has never and does not have plans to declare any
      dividends.





In
      order
      to change the rights of holders of Common Shares, an amendment to the Company’s
      articles is required. Pursuant to Section 168 of the OBCA, such an amendment
      can
      be effected at a meeting of shareholders upon agreement by a majority of the
      shareholders. Pursuant to Section 170, the holders of shares of a class are
      entitled to vote separately as a class upon a proposal to amend the articles
      that would have the effect of altering the rights of that class or altering
      the
      rights of that class relative to the other classes of shares. Progressive U.S.
      state corporate codes generally require similar procedures except that corporate
      laws such as New York’s Business Corporation Law and Delaware’s General
      Corporation Law permit stockholders to authorize such amendments by majority
      consent in writing, without a meeting, subject to certain
      limitations.





The
      annual meeting of shareholders shall be held at such time, day and place as
      the
      Board, Chairman of the Board or the President may from time to time determine,
      provided that an annual meeting must be called not later than 15 months after
      the holding of the immediately preceding annual meeting. The Board, the Chairman
      of the Board, the President, the Managing Director or Vice President shall
      have
      the power to call a special meeting of shareholders at any time.





In
      addition, pursuant to Section 105 of the OBCA, the holders of not less than
      5%
      of the issued shares of a corporation that carry the right to vote at a meeting
      sought to be held, may requisition the directors to call a meeting of
      shareholders for the purposes stated in the requisition. Such requisition shall
      state the business to be transacted at the meeting. Although there is no general
      rule, progressive U.S. state corporation laws provide that the by-laws shall
      determine stockholders’ rights to call stockholder meetings. The directors of a
      corporation shall call a meeting of shareholders upon receiving the requisition
      unless a meeting of shareholders has already been called or a record date has
      been fixed and the appropriate notice has been provided. If the directors do
      not, within twenty-one days after receiving the requisition, call a meeting
      and
      if the above-noted exceptions are not met, any shareholder who signed the
      requisition may call the meeting.


70


Notice
      of
      the time and place of each meeting of shareholders shall be given not less
      than
      21 nor more than 50 days before the date of the meeting to each director and
      the
      auditor of the Company and to each shareholder who, at the close of business
      on
      the record date for notice or, if no record date for notice is fixed, at the
      close of business on the day proceeding the day on which notice is given, is
      entered in the securities register as the holder of one or more shares of the
      Company carrying the right to vote at the meeting. For every meeting of
      shareholders, the Company shall prepare a list of shareholders entitled to
      receive notice of the meeting, arranged in alphabetical order and showing the
      number of shares entitled to vote at the meeting held by each
      shareholder.





The
      only
      persons entitled to be present at a meeting of shareholders shall be those
      entitled to vote thereat, the directors and auditors, if any, of the Company
      and
      others who, although not entitled to vote, are entitled or required under the
      OBCA or the articles or by-laws of the Company to be present at the meeting.
      Any
      other person may be admitted on the invitation of the Chairman of the meeting
      or
      with the consent of the meeting.





There
      are
      no restrictions in the Company’s articles or by-laws, nor under the OBCA or the
      provision of the Securities Act (Ontario) or Securities Act (Quebec) limiting
      the right to own, hold or exercise voting rights on the Company’s securities.
      Most, if not all U.S. states have enacted some form of takeover disclosure
      law
      or business combination act requiring certain disclosures and/or limiting the
      right to own or vote shares acquired in certain situations including hostile
      business combinations.





There
      are
      no provisions in the Company’s articles or by-laws that would have the effect of
      delaying, deferring or preventing a change in control of the Company and that
      would operate only with respect to a merger, acquisition or corporate
      restructuring involving the Company.





Pursuant
      to the Securities Act (Ontario) (the “Securities Act”), any shareholder holding
      or exercising control over more than 10% of the voting rights attached to all
      outstanding voting securities of a Company is considered an insider of that
      company and among other things is required to disclose any trades in shares
      of
      that company. Similarly, Section 16 and Rule 16(a) of the U.S. Securities
      Exchange Act of 1934 (“1934 Act”), under which the Company is registered,
      requires holders of 10% or more of the securities of a 1934 Act registered
      company to file reports disclosing ownership and transactions in that company’s
      securities. The Company, however, currently is deemed a “foreign private issuer”
and is exempt from these provisions. Section 101 of the Securities Act requires
      that any person who acquires beneficial ownership of, or the power to exercise
      control over, a total of 10% or more of a company’s voting or equity securities
      in any class shall issue a news release and file a report containing the
      particulars and purpose behind the acquisition. Further reports must be issued
      every time such person acquires an additional 2% or more of the company’s voting
      or equity securities, or there is a change in any of the material facts
      disclosed in the former report. Similarly, Section 13(d) and Regulation 13D
      of
      the 1934 Act requires any person who acquires beneficial ownership or more
      than
      5% of an equity security of any company registered under the 1934 Act to file
      a
      report disclosing the particulars and purpose behind the acquisition. Amendments
      must be filed to this report every time such person acquires or disposes of
      1%
      or more of the equity security or there is some other material change in the
      report on file. In addition, Section 14(d) and Regulation 14D of the 1934 Act
      imposes certain filing and disclosure requirements on persons making “tender
      offers” for equity securities of a 1934 Act registered company.





The
      articles of incorporation and by-laws of the Company do not contain any
      conditions governing changes in the Company’s capital that are more stringent
      than the applicable law.





***MATERIAL
      CONTRACTS***





The
      Company has not entered into any material contracts during the last two fiscal
      years other than in the ordinary course of business and other than those
      described in “Item 4 - Information on the Company” or elsewhere in this Annual
      Report on Form 20-F.





***EXCHANGE
      CONTROLS***





There
      is
      no Canadian law, government decree or regulation that restricts the export
      or
      import of capital or that affects the remittance of dividends, interest or
      other
      payments to a non-resident holder of Common Shares other than withholding tax
      requirements.


71


There
      is
      no limitation imposed by Canadian law or by the articles or other charter
      documents of the Company on the right of a non-resident to hold or vote Common
      Shares, other than as provided in the Investment Canada Act, as amended (the
      “Investment Act”). The Investment Act generally prohibits implementation of a
      reviewable investment by an individual, government or agency thereof,
      corporation, partnership, trust, joint venture or other entity that is not
      a
“Canadian,” as defined in the Investment Act (a “non-Canadian”), unless, after
      review, the Minister responsible for the Investment Act is satisfied that the
      investment is likely to be of net benefit to Canada based on the criteria set
      out in the Investment Act. Investment in Common Shares of the Company (or other
      voting shares) by a non-Canadian (other than a “WTO investor,” as defined below)
      would be reviewable under the Investment Act if it constitutes an acquisition
      of
      control of the Company, and the value of the assets of the Company were
      $5,000,000 Canadian or more. Such an investment in Common Shares of the Company
      by a WTO investor would be reviewable under the Investment Act if the value
      of
      the assets of the Company equaled or exceeded $295,000,000 Canadian for
      investments made in 2008. The Investment Act contains rules to determine if
      an
      investment constitutes an acquisition of control of a particular entity. For
      example, any non-Canadian, whether a WTO investor or otherwise, would acquire
      control of the Company for purposes of the Investment Act if such non-Canadian
      acquired a majority of the Common Shares of the Company. The acquisition of
      less
      than a majority but at least one-third of the Common shares of the Company
      is
      presumed to be an acquisition of control of the Company, unless it could be
      established that on the acquisition the Company was not controlled in fact
      by
      the acquirer through the ownership of Common Shares. In general, an individual
      is a WTO Investor if such individual is a “national” of a country (other than
      Canada) that is a member of the World Trade Organization (“WTO Member”) or has a
      right of permanent residence in relation to that WTO Member. A corporation
      or
      other entity is a WTO investor if it is a “WTO Investor-controlled entity”
pursuant to detailed rules set out in the Investment Act.





Certain
      transactions involving Common Shares of the Company would be exempt from the
      Investment Act, including, without limitation: (a) an acquisition of Common
      Shares of the Company if the acquisition were made in connection with the
      person’s business as a trader or dealer in securities; (b) an acquisition of
      control of the Company’s business in connection with the realization of a
      security interest granted for a loan or other financial assistance and not
      for
      any purpose related to the provisions of the Investment Act; and (c) an
      acquisition of control of the Company’s business by reason of an amalgamation,
      merger, consolidation or corporate reorganization, following which the ultimate
      direct or indirect control in fact of the Company, through the ownership of
      voting interests (as defined in the Investment Act), remains
      unchanged.





***TAXATION***





The
      following is a summary of certain federal income tax provisions applicable
      to
      United States corporations, citizens and resident alien individuals who purchase
      Common Shares and who will hold such shares as capital property for the purpose
      of the Income Tax Act (Canada) (the “ITA”). This discussion does not purport to
      deal with all relevant aspects of U.S. or Canadian taxation. Shareholders are
      advised to consult their own tax advisors regarding the United States income
      tax
      consequences of holding and disposing of the Common Shares as well as any
      consequences arising under state and local tax laws or the tax laws of
      jurisdictions outside the United States. The summary is based on the assumption
      that, for Canadian tax purposes and at all relevant times, a holder of Common
      Shares (a) is neither resident nor deemed to be resident in Canada for the
      purposes of the ITA, but is resident in the United States for the purposes
      of
      the Canada – United States Income Tax Convention (1980) (the “Treaty”); (b)
      deals at arm’s length with the Company and is not affiliated with the Company;
      (c) holds the Common Shares as capital property and does not use or hold and
      is
      not deemed to use or hold the Common Shares in the course of carrying on a
      business in Canada; and (d) is not an insurer or a financial
      institution.





This
      summary is based on the current provisions of the Treaty and accompanying
      protocols, the ITA, the regulations under the ITA, specific proposals to amend
      the ITA or the regulations thereunder announced by the Canadian Minister of
      Finance prior to the date of this report and our understanding of the current
      administrative and assessing practices of the Canada Revenue Agency (or CRA).
      This summary does not otherwise take into account or anticipate any changes
      in
      law, whether by legislative, governmental or judicial action, nor does it take
      into account tax laws or considerations of any province or territory of
      Canada.





The
      summary is for general information only and does not take into account the
      individual circumstances of any particular investor. Therefore, investors are
      urged to consult their own tax advisors with respect to the tax consequences
      of
      an investment in the Common Shares of the Company based on their specific
      circumstances, including any consequences of an investment in the Common Shares
      arising under state, local or provincial tax laws of other jurisdictions,
      including the United States.





For
      United States federal income tax purposes, a United States corporation, citizen
      or resident alien generally will realize, to the extent of the Company’s current
      or accumulated earnings and profits, taxable ordinary income on the receipt
      of
      cash dividends on the Common Shares equal to the gross amount of such dividends
      without reduction for any Canadian withholding tax. Subject to certain
      limitations, such withholding tax generally may be credited, against the
      holder’s United States federal income tax liability or, alternatively, may be
      deducted in computing the holder’s United States federal taxable income.
      Dividends paid on the Common Shares will not be eligible for the “dividends
      received” deduction, available under certain circumstances to United States
      corporations.





Dividends
      paid to a holder on Common Shares, including deemed dividends and stock
      dividends, will be subject to Canadian non-resident withholding tax, which
      is
      generally applicable to dividends paid by a corporation resident in Canada
      to a
      resident of the United States. Under the terms of the Treaty, non-resident
      withholding tax is generally levied at a rate of 15% of the gross amount of
      the
      dividend. If, however, the beneficial owner of the dividends is a company
      resident in the United States for the purposes of the Treaty that owns at least
      10% of the voting stock of the Company paying the dividends, the rate of
      withholding tax under the Treaty is further reduced to 5%. Under the terms
      of
      the proposed Protocol amending the Treaty between Canada and the United States,
      which was signed on September 21, 2007 but which is not yet in force, a company
      that is resident of the United States will be considered to own the voting
      stock
      owned by an entity that is considered fiscally transparent under the laws of
      the
      United States and that is not a resident of Canada in proportion to the
      company’s ownership interest in the Company. This proposed amendment to the
      Treaty will have effect for amounts paid or credited on or after the first
      day
      of the second month that begins after the date on which the proposed Protocol
      enters into force.


72


A
      holder
      may be subject to Canadian income tax in respect of any capital gains realized
      on a disposition or deemed disposition of Common Shares. However, a holder
      will
      be exempt from Canadian tax on a capital gain realized on an actual or deemed
      disposition of Common Shares unless the Common Shares are “taxable Canadian
      property” (as defined in the ITA) to the holder at the time of the disposition.
      Provided the Common Shares are listed on a designated stock exchange for the
      purposes of the ITA (the National Association of Securities Dealers Automated
      Quotation System is a designated stock exchange under the ITA), the Common
      Shares (as well as any interests in or options for Common Shares) will not
      be
“taxable Canadian property” to a holder, unless the holder, persons with whom
      the holder did not deal at arm’s length for the purposes of the ITA or the
      holder together with such persons owned 25% or more of the shares of any class
      or series of the capital stock of the Company at any time during the 60-month
      period immediately preceding the disposition or deemed disposition of the Common
      Shares. The Common Shares may be deemed to be “taxable Canadian property” where
      the holder acquired them in certain circumstances, including upon the
      disposition of other “taxable Canadian property”. In the event that the Common
      Shares do constitute “taxable Canadian property”, any capital gain realized on
      their disposition by a holder may be exempt from Canadian tax pursuant to the
      provisions of the Treaty. Holders of Common Shares must consult their own tax
      advisers to determine if any such Canadian income tax must be paid.





For
      United States federal income tax purposes, upon a sale or exchange of a Common
      Share, a holder will recognize gain or loss equal to the difference between
      the
      amount realized on such sale or exchange and the holder’s tax basis in such
      common share. For non-corporate taxpayers, the maximum tax rates imposed are
      15%
      on net capital gains and 35% on ordinary income. US capital gains may result
      in
      additional taxes by application of the Alternative Minimum Tax. As a taxpayer’s
      income rises, US federal income tax law phases-out US personal exemptions and
      increasingly limits the availability of itemized deductions which may increase
      the effective tax rates. The deduction of net capital losses against ordinary
      income currently is severely limited under US federal income tax law. Holders
      of
      Common Shares must consult their own tax advisers to determine the effect of
      federal, state and local income taxes upon a sale or exchange of Common
      Shares.





***DOCUMENTS
      ON DISPLAY***





Documents
      concerning the Company which are referred to in the document and otherwise
      available for public inspection may be inspected at the executive offices of
      the
      Company as well as the executive or operating offices of the Company’s operating
      subsidiaries. Any request for inspection must be made in writing addressed
      to
      the Company’s executive offices to the attention of Mr. Daniel Bertrand,
      Executive Vice President and Chief Financial Officer. Such request must
      explicitly identify the person making the request, the documents pertaining
      to
      the request as well as the date and time that the person making such request
      desires to inspect such documents. The Company reserves all rights to refuse
      or
      limit a request.





**ITEM
                11.**
            
            **QUANTITATIVE
                AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK**





***CURRENCY
      RISK***





The
      Company has employees located in Canada and the United States where the local
      currency is used. No forward exchange contracts are used to sell currencies
      at
      fixed forward rates.





***INTEREST
      RATE RISK***





The
      Company has short term investments and temporary investments bearing average
      interest rates between 4.06% and 5.23%. No other financial instruments are
      used.





**ITEM
                12.**
            
            **DESCRIPTION
                OF SECURITIES OTHER THAN EQUITY SECURITIES**





**Not
      applicable.**





**PART
      II**





**ITEM
                13.**
            ****
            **DEFAULTS,
                DIVIDEND ARREARAGES AND DELINQUENCIES**




**Not
      applicable.**





**ITEM
                14.**
            
            **MATERIAL
                MODIFICATIONS TO THE RIGHTS OF SECURITY HOLDERS AND USE OF
                PROCEEDS**




**Not
      applicable.**


73





**ITEM
                15.**
            
            **CONTROLS
                AND PROCEDURES**




Disclosure
      Controls and Procedures





We
      are
      responsible for establishing and maintaining a system of disclosure controls
      and
      procedures, as defined in Rule 13a-15 (e) under the Securities Exchange Act
      of
      1934, (the “Exchange Act”) designed to ensure that information we are required
      to disclose in the reports that we file or submit under the Exchange Act is
      recorded, processed, summarized and reported within the time periods specified
      in the Securities and Exchange Commission’s rules and forms. Disclosure controls
      and procedures include, without limitation, controls and procedures designed
      to
      ensure that information required to be disclosed by an issuer in the reports
      that it files or submits under the Exchange Act is accumulated and communicated
      to the issuer’s management, including its principal executive officer or
      officers and principal financial officer or officers, or persons performing
      similar functions, as appropriate to allow timely decisions regarding required
      disclosure.





We
      carried out an evaluation, under the supervision of and with the participation
      of our management, including our Chief Executive Officer and Chief Financial
      Officer, as to the effectiveness of our disclosure controls and procedures
      as of
      December 31, 2007.





Based
      upon that evaluation, our Chief Executive Officer and Chief Financial Officer
      concluded that our disclosure controls and procedures were effective as of
      December 31, 2007.





Management’s
      Report on Internal Control over Financial Reporting





Our
      management is responsible for establishing and maintaining adequate internal
      control over financial reporting. Internal control over financial reporting
      is
      defined in Rule 13a-15(f) of the Exchange Act as a process designed to provide
      reasonable assurance regarding the reliability of financial reporting and the
      preparation of financial statements for external purposes in accordance with
      generally accepted accounting principles and includes those policies and
      procedures that (1) pertain to the maintenance of records that in reasonable
      detail accurately and fairly reflect the transactions and dispositions of the
      assets of the company; (2) provide reasonable assurance that transactions are
      recorded as necessary to permit preparation of financial statements in
      accordance with generally accepted accounting principles, and that receipts
      and
      expenditures of the company are being made only in accordance with
      authorizations of management and directors of the company; and (3) provide
      reasonable assurance regarding prevention or timely detection of unauthorized
      acquisition, use or disposition of the company's assets that could have a
      material effect on the financial statements.





Because
      of its inherent limitations, internal control over financial reporting may
      not
      prevent or detect all misstatements. Projections of any assessment of
      effectiveness to future periods are subject to the risks that controls may
      become inadequate because of changes in conditions, or that the degree of
      compliance with the policies or procedures may deteriorate. Our management
      evaluated the effectiveness of our internal control over financial reporting
      as
      of December 31, 2007. In making this evaluation, management used the criteria
      set forth by the Committee of Sponsoring Organizations of the Treadway
      Commission (COSO) in “Internal Control — Integrated Framework.” Management’s
      evaluation of the effectiveness of our internal control over financial reporting
      as of December 31, 2007 identified the following material weaknesses in our
      internal control over financial reporting:





**Remainder
      of page intentionally left blank.**


74








**Area**
            
            **Deficiencies**
            
            **Remediation
                actions**
            
            **Scheduled**
              **date**
              **for**
              **remediation**Security
            
            No
                user session time out in place
            
            An
                automatic lock has been implemented for all workstations and servers
            
            Done
                on March
              3rd
                2008Security
            
            No
                efficient log of activities for US servers is available for appropriate
                monitoring of activity by IT management
            
            The
                US datacenters will be closed by end of March 31, 2008 and replaced
                by
                Canadian datacenters already in operations. All processes are in
                place and
                well documented for new data centers.
            
            Done
                on February
              18th
                2008Entity
                level
            
            Conflict
                of segregation of duties: Search application programmer and Database
                Administrator
            
            More
                control will be put in place and a design accommodation Implementation
                of
                internal controls have been done by end of February 2008 to mitigate
                situation.
            
            Done
                on February
              28th
                2008Security
            
            No
                monitoring of access granted to temporary users
            
            A
                procedure will be put in place in order to ensure that all 3rd party
                consultants will sign the following forms: NDA, Security Policy.
                Also a
                timeframe for the user access will also be documented. This will
                be
                reviewed by the security committee in its first quarter
                meeting.
            
            To
                be done on
              March
              31st2008Security
            
            Access
                rights review does not include shared folders and database
            
            New
                policies will be implemented as per target date.
            
            To
                be done on April 15th2008Entity
                level
            
            Privileged
                access to financial application to be improved
            
            A
                solution will be designed to have a super user password for accounting
                software that will not be known by anyone. Two people will have a
                portion
                of the password in order to improve the control.
            
            To
                be done on
              March
              31st2008





It
      should
      be noted that while management believes that current disclosure and internal
      controls and procedures provide a reasonable level of assurance, it cannot
      be
      expected that existing disclosure controls and procedures or internal financial
      controls will prevent all human error and circumvention or overriding of the
      controls and procedures. A control system, no matter how well conceived or
      operated, can provide only reasonable, not absolute, assurance that the
      objectives of the control system are met.





The
      Company’s auditors were not engaged to examine management’s assertion about the
      effectiveness of the Company’s internal control over financial reporting at
      December 31, 2007.


75





**ITEM
                16.**
            
            **[RESERVED]****ITEM
                16A.**
            
            **AUDIT
                COMMITTEE FINANCIAL EXPERT**





The
      Company’s board of directors has determined that a member of its Audit
      Committee, Mr. Irwin Kramer, an independent director (as defined in the Rules
      of
      the National Association of Securities Dealers, Inc.), is an Audit Committee
      financial expert as defined in Item 16A of Form 20-F.





**ITEM
                16B.**
            
            **CODE
                OF ETHICS**





The
      Company’s board of directors has adopted a Code of Ethics that applies to all of
      the Company’s employees, including the Executive Chairman, Chief Executive
      Officer, Chief Financial Officer, principal accounting officer and persons
      performing similar functions.





**ITEM
                16C.**
            
            **PRINCIPAL
                ACCOUNTANT FEES AND SERVICES**





RSM
      Richter LLP has served as the Company’s independent public accountants to audit
      our financial statements for the fiscal years ended December 31, 2007, 2006
      and
      2005.





The
      following table presents the aggregate fees for professional services and other
      services rendered by RSM Richter LLP in 2007.





**2007**
            
            **2006**Audit
                Fees(1)
            
            $
            255,629
            
            $
            175,096Audit
                Related Fees(2)
            
            $
            97,048
            
            $
            115,108Tax
                Fees(3)
            
            $
            3,209
            
            
            -Other
                Fees(4)**TOTAL:**
            
            $
            355,886
            
            $
            290,204





These
                fees are subject to a pre-approval
                policy.





(1)
            Audit
                Fees consist of fees billed for the annual audit services engagement
                and
                other audit services, which are those services that only the external
                auditor reasonably can provide, and include the audit of its financial
                statements; comfort letters and consents; attest services; and services
                associated with the filing of documents with the SEC.(2)
            Audit-Related
                Fees consist of fees billed for assurance and related services that
                are
                reasonably related to the performance of the audit or review of the
                Company’s financial statements or that are traditionally performed by the
                external auditor, and include consultations concerning financial
                accounting and reporting standards; due diligence related to acquisitions.(3)
            Tax
                Fees include fees billed for tax compliance services, advice on original
                and amended tax returns and claims for refund, tax consultations
                (such as
                assistance in connection with tax audits and appeals), tax advice
                related
                to mergers and acquisitions, transfer pricing, tax planning services
                and
                expatriate tax planning and services.(4)
            Related
              to assistance for SOX
              compliance.


76


***PROCEDURES
      FOR APPROVAL OF AUDIT AND NON-AUDIT SERVICES BY THE EXTERNAL
      AUDITORS***





**I.**
            
            **Audit
                Committee Pre-Approval of Services**




In
      accordance with the requirements of securities regulations to which the Company
      is subject and to safeguard the continued independence of its external auditors,
      all audit and non-audit services to be rendered by the Company’s external
      auditors and any related entities (the “Auditors”) to the Company, its
      subsidiaries and any material related companies over which the Company exercises
      significant influence must be the subject of pre-approval by the Audit Committee
      of the Board.





Such
      pre-approval shall be based on the following detailed policies and procedures
      established by the Audit Committee.





**II.**
            
            **Services
                that the Auditors may not
                Provide**





The
      Auditors may not act in any capacity where they could reasonably be seen
      to:





·  function
      in the role of the Company’s management;


·  audit
      their own work; or


·  serve
      in
      an advocacy role on behalf of the Company





Except
      as
      otherwise permitted and pre-approved hereby, the Auditors will not be asked
      to
      provide any services in the following areas (in each case as more fully defined
      in applicable corporate and securities regulations or the regulations and
      guidelines of the appropriate oversight authorities governing the accounting
      and
      auditing profession):





1.
            Bookkeeping
                and related functions;2.
            Financial
                information systems design and implementation;3.
            Appraisal,
                valuation, fairness opinions or contribution-in-kind reports;4.
            Actuarial
                services;5.
            Internal
                audit outsourcing;6.
            Management
                functions and human resources functions;7.
            Broker-dealer,
                investment advisor or investment banking services;8.
            Legal
                services;9.
            Expert
                services; and10.
            Management
                consulting services.


77





**III.**
            
            **Pre-Approval
                of a Range of Services**





The
      engagement for the annual audit of the Company’s consolidated financial
      statements is specifically approved on an annual basis by the execution of
      the
      audit engagement letter with the Auditors. Subject to paragraph IV below,
      engagements of the Auditors involving services for any of the Company’s entities
      that fall into the following service definitions are pre-approved by the Audit
      Committee.


Type
                  of Service
              
              Description**Audit
                  Services**Financial
                  statement audit
              
              Recurring
                  audit of consolidated financial statementsincluding
                  subsidiary company and statutory audits and taxservices
                  and accounting consultations required to performan
                  audit in accordance with Generally Accepted AuditingStandards.Regulatory
                  financial filings
              
              Services
                  relating to 1933 and 1934 filings with the SECincluding
                  issuance of comfort letters.Statutory
                  and regulatory filings including prospectusesand
                  registration statements.404
                  attestation services
              
              Attestation
                  services relating to the report on the entity’s internal controls as
                  specified in Section 404 of the Sarbanes-Oxley
                  Act and any similar requirements thatmay
                  be introduced under Canadianlegislation/regulations.**Audit
                  Related Services**Employee
                  benefit plan audits
              
              Audit
                  of pension and other employee benefit plans andfunds.Financial
                  due diligence in
                connection
                  with acquisitions and
                divestitures
              
              Assistance
                  in financial and tax due diligence, includingreview
                  of financial statements, financial data andrecords,
                  tax returns, tax forms and tax filings, discussionwith
                  target’s finance and accounting personnel.Accounting
                  consultation and audits in connection withacquisitions
                  and divestitures.Other
                  attest services
              
              Attest
                  services that are not required by statute orregulation.
                  Quarterly reviews.




78


Application
                and general
              control
                reviews
            
            Review
                of IT and general controls related to specific applications, including
                overall general computer controls, excluding those that are a part
                of the
                financial statement audit.Consultation
                regarding GAAP
            
            Discussions,
                review and testing of impact of new pronouncements, acquisition
                accounting, and other GAAP topics.**Tax
                Services**Tax
                compliance
            
            Preparation
                and/or review of income, capital, sales, use, property, excise, local,
                value added (VAT) and GST tax returns, filings and forms. Consultation
                regarding handling of items for tax returns, required disclosures,
                elections, and filing positions available.Tax
                consulting
            
            Assistance
                with tax audits, examinations or requests for information. Responding
                to
                requests regarding technical interpretations, applicable laws and
                regulations, and tax accounting. Tax advice on mergers, acquisitions,
                restructurings, financings, inter-company transactions, foreign tax
                credits, foreign income tax, tax accounting, foreign earnings and
                profits,
                capital tax, sales tax, use tax, property tax, the treatment in any
                jurisdiction of foreign subsidiary income, VAT, GST, excise tax or
                equivalent taxes in the jurisdiction. Assistance with tax appeals
                that are
                not in front of a tax court or its equivalent. Advice regarding tax
                legislation or codes including interpretations, procedures and advance
                tax
                rulings or private letter rulings thereof, or their equivalent, in
                applicable jurisdictions in the following areas: income, capital,
                sales,
                use, property, excise, local, value added (VAT) and GST taxes.Transfer
                pricing
            
            Advice
                and assistance with respect to transfer pricing matters, including
                preparation of reports used by the company to comply with taxing
                authority
                documentation requirements regarding royalties, services and inter-
                company pricing and assistance with tax exemptions.Customs
                and duties
            
            Compliance
                reviews and advice on compliance in the areas of tariffs and
                classification, origin, pricing, and documentation. Assistance with
                customs audits or requests for information.




79


Expatriate
                tax services
            
            Preparation
                of individual income tax returns, advice on impact of changes in
                local tax
                laws and consequences of changes in compensation programs or practices.
                Compliance and advice in relation to benefits and compensation, stock
                options, and tax equalization policies.**Other
                Services**Valuation
            
            Valuation
                services for non-financial reporting in connection with tax-only
                valuations and valuation services to review and comment on tax-related
                valuations prepared by the Company or third parties.Other
            
            Fact
                finding services and forensic investigations under the supervision
                of the
                audit committee; environmental audits; non-financial systems design
                and
                implementation.


80





**IV.**
            
            **Limits
                on the Pre-Approval of a Range of
                Services**





In
      the
      case of proposed engagements of the Auditors involving any of the services
      covered under the range of services under paragraph III where the fees for
      a
      particular engagement are expected to exceed a total of CDN $5,000, specific
      pre-approval must be obtained therefore under the provisions of paragraph V
      hereof.





The
      general pre-approval of the range of services covered under paragraph III will
      be brought to the Audit Committee for review and, if thought appropriate,
      renewal on an annual basis.





In
      respect of services under paragraph III where the fees for a particular
      engagement are expected to be less than or equal to a total of CDN $5,000,
      the
      Chairman of the Audit Committee shall be notified expeditiously of any such
      services commenced by the Auditors.





In
      the
      event that services under paragraph III are commenced by the Auditors where
      the
      fees for a particular engagement were expected to be less than or equal to
      a
      total of CDN $5,000, specific pre-approval must be obtained therefore under
      the
      provisions of paragraph V hereof if such fees are later expected to exceed
      a
      total of CDN $5,000.





**V.**
            
            **Pre-Approval
                of Individual Services**





The
      Company’s management and/or the Auditors may seek pre-approval by the Audit
      Committee of the engagement of the Auditors to provide particular services
      in
      certain cases.





Where
      particular pre-approval is required, the Audit Committee has delegated the
      authority to effect such pre-approval to the Chairman of the
      Committee.





Under
      no
      circumstances may the Audit Committee delegate its responsibilities to Company
      management.





For
      greater certainty, if an engagement with the Auditors for a particular service
      is contemplated that is neither forbidden under paragraph II hereof, nor covered
      under the range of services under paragraph III hereof, in order for such
      engagement to proceed it must be the subject of individual pre-approval under
      this paragraph.





It
      is the
      responsibility of management to determine whether a particular service is
      covered by the pre-approved range of services. Management should seek the
      guidance of the audit committee chair where there is any ambiguity about whether
      a particular service is pre-approved.





**VI.**
            
            **Engagement
                Letters**





Pre-approved
      non-audit services shall be provided by the Auditors pursuant to an engagement
      letter with the appropriate Company entity that satisfies each of the following
      requirements:





1.
            the
                engagement letter shall be in writing and signed by the Auditors;
                and2.
            the
                engagement letter shall set out the particular non-audit services
                to be
                provided by the Auditors which, unless individually pre-approved,
                shall be
                within the categories of pre-approved non-audit services described
                in
                paragraph III hereof.





**VII.**
            
            **Reports
                of Services to the Audit
                Committee**





At
      every
      regularly-scheduled meeting of the Audit Committee, management shall report
      on
      all new pre-approved engagements of the Auditors since the last such report.
      The
      Auditors may comment on the report if they wish to do so. All engagement letters
      entered into pursuant hereto shall be made available to the Audit Committee
      upon
      demand.





**ITEM
      16D. EXEMPTIONS FROM THE LISTING STANDARDS FOR AUDIT
      COMMITTEES**





**Not
      applicable.**




81




**ITEM
      16E. PURCHASES OF EQUITY SECURITIES BY THE ISSUER AND AFFILIATED
      PURCHASERS**





None.





**ITEM
      17. FINANCIAL STATEMENTS**





These
      consolidated financial statements have been prepared in accordance with
      accounting principles generally accepted in Canada (“Canadian GAAP”). There are
      certain measurement differences between Canadian GAAP and U.S. GAAP. Differences
      which relate to the Company are summarized in note 27 to our consolidated
      financial statements.





**Independent
      Registered Public Accounting Firm’s Report**





To
      the
      Shareholders and Board of Directors of Copernic Inc.





We
      have
      audited the accompanying consolidated balance sheets of Copernic Inc. as at
      December 31, 2007 and 2006 and the consolidated statements of operations,
      shareholders’ equity and cash flows for each of the years in the three-year
      period ended December 31, 2007. These financial statements are the
      responsibility of the Company’s management. Our responsibility is to express an
      opinion on these financial statements based on our audits.





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





In
      our
      opinion, these consolidated financial statements present fairly, in all material
      respects, the financial position of the Company as at December 31, 2007 and
      2006
      and the results of its operations and its cash flows for each of the years
      in
      the three-year period ended December 31, 2007 in accordance with Canadian
      generally accepted accounting principles.





We
      were
      not engaged to examine management's assertion about the effectiveness of the
      Company's internal control over financial reporting at December 31, 2007
      included in item 15 of Form 20-F for the year ended December 31, 2007 and,
      accordingly, we do not express an opinion thereon.





/s/
                RSM Richter LLPMontreal,
                CanadaMarch
                27, 2008





82


**Copernic
        Inc.**
 Consolidated
        Balance Sheets
 **As
        at December 31, 2007 and 2006**
 
  (expressed
        in U.S. dollars)


**2007**
              **$**
            
            **2006**
              **$****Assets****Current
                assets**Cash
                and cash equivalents
            
            
            2,099,560
            
            
            2,379,617Restricted
                cash (note 5)
            
            
            807,468
            
            
            -Temporary
                investments (note 7)
            
            
            3,965,384
            
            
            5,591,842Accounts
                receivable (note 8)
            
            
            918,033
            
            
            2,734,172Income
                taxes receivable
            
            
            221,205
            
            
            110,002Prepaid
                expenses
            
            
            208,655
            
            
            261,8858,220,305
            
            
            11,077,518**Investments**
                (note 9)
            
            
            -
            
            
            150,000**Property
                and equipment**  (note 10)
            
            
            459,872
            
            
            503,828**Intangible
                assets** (note 11)
            
            
            2,320,676
            
            
            6,190,298**Goodwill**
                (note 11)
            
            
            7,357,003
            
            
            15,417,84418,357,856
            
            
            33,339,488**Liabilities****Current
                liabilities**Accounts
                payable and accrued liabilities (note 12)
            
            
            1,520,619
            
            
            2,289,686Deferred
                revenue
            
            
            211,455
            
            
            227,660Deferred
                rent
            
            
            11,016
            
            
            12,273Income
                taxes payable
            
            
            8,100
            
            
            8,100Liabilities
                of discontinued operations (note 5)
            
            
            -
            
            
            6,253Current
                portion of obligations under capital leases (note 13)
            
            
            56,071
            
            
            -1,807,261
            
            
            2,543,972**Obligations
                under capital leases**(note 13)
            
            
            99,788
            
            
            -**Future
                income taxes**(note 21)
            
            
            650,413
            
            
            1,900,866**Commitments**(note 25)**Shareholders’
                Equity****Capital
                stock** (note 14)AuthorizedUnlimited
                common shares, no par valueIssued
                and outstanding14,637,531
                common shares (14,340,864 in 2006)
            
            
            96,556,485
            
            
            95,298,234**Additional
                paid-in capital**
            
            
            5,784,502
            
            
            5,706,183**Cumulative
                translation adjustment**
            
            
            561,137
            
            
            561,137**Accumulated
                deficit**
            
            
            (87,101,730
            )
            
            (72,670,904
            )15,800,394
            
            
            28,894,65018,357,856
            
            
            33,339,488




See
      accompanying notes.





**Approved
      by the Board of Directors**




/s/
                David Goldman
            /s/
                Irwin KramerDavid
                Goldman, Executive Chairman of the Board
            Irwin
                Kramer, Director and Chair of the Audit
                Committee


83


**Copernic
        Inc.**
 Consolidated
        Statements of Operations
 **For
        the years ended December 31**
 
  (expressed
        in U.S. dollars)





**2007**
              **$**
            
            **2006**
              **$**
            
            **2005**
              **$****Revenues**
                (note 16)
            
            
            8,116,408
            
            
            9,596,402
            
            
            9,443,975**Cost
                of revenues** (note 17)
            
            
            2,636,410
            
            
            2,704,101
            
            
            4,183,445**Gross
                Margin**
            
            
            5,479,998
            
            
            6,892,301
            
            
            5,260,530**Expenses**Marketing,
                sales and services
            
            
            1,897,822
            
            
            1,850,176
            
            
            2,023,925General
                and administration
            
            
            4,691,572
            
            
            3,996,327
            
            
            5,692,092Product
                development and technical support (note 22)
            
            
            2,416,410
            
            
            2,538,867
            
            
            1,286,345Amortization
                of property and equipment
            
            
            302,509
            
            
            178,192
            
            
            106,788Amortization
                of intangible assets
            
            
            1,991,286
            
            
            2,067,009
            
            
            242,031Write-downs
                and settlement costs (note 18)
            
            
            10,146,311
            
            
            1,683,238
            
            
            -Interest
                and other income
            
            
            (401,183
            )
            
            (415,950
            )
            
            (768,738
            )Loss
                on foreign exchange
            
            
            115,071
            
            
            82,203
            
            
            47,08021,159,798
            
            
            11,980,062
            
            
            8,629,523**Loss
                from continuing operations****before
                income taxes and discontinued operations**
            
            
            (15,679,800
            )
            
            (5,087,761
            )
            
            (3,368,993
            )Recovery
                of income taxes****(note 21)
            
            
            (1,248,974
            )
            
            (729,053
            )
            
            (26,010
            )**Loss
                from continuing operations before discontinued
                operations**
            
            
            (14,430,826
            )
            
            (4,358,708
            )
            
            (3,342,983
            )Results
                of discontinued operations,****net of income taxes
                (note 5)
            
            
            -
            
            
            89,328
            
            
            (2,315,335
            )**Loss
                for the year**
            
            
            (14,430,826
            )
            
            (4,269,380
            )
            
            (5,658,318
            )**Basic
                and diluted loss per share from continuing
                operations**
            
            
            (0.99
            )
            
            (0.31
            )
            
            (0.27
            )**Basic
                and diluted earnings (loss) per share from discontinued
                operations**
            
            
            -
            
            
            0.01
            
            
            (0.19
            )**Basic
                and diluted net loss per share**
            
            
            (0.99
            )
            
            (0.30
            )
            
            (0.46
            )





See
      accompanying notes.


84




**Copernic
      Inc.**


Consolidated
      Statements of Shareholders’ Equity


**For
      the years ended December 31**







(expressed
      in U.S. dollars)





**Number
                of common**
              **shares**
            
            **Common**
              **shares**
              **$**
            
            **Additional**
              **paid-in**
              **Capital**
              **$**
            
            **Accumulated**
              **Other**
              **Comprehensive**
              **Income**
              **$**
            
            **Accumulated**
              **deficit**
              **$**
            
            **Total**
              **$****Balance,
                December 31, 2004**
            
            
            12,263,029
            
            
            90,496,088
            
            
            3,921,806
            
            
            360,884
            
            
            (62,743,206
            )
            
            32,035,572Stock-based
                compensation
            
            
            
            
            
            
            
            
            136,933
            
            
            
            
            
            
            
            
            136,933Comprehensive
                income:Net
                loss for the year
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            (5,658,318
            )
            
            (5,658,318
            )Foreign
                currency translation adjustments for the year
            
            
            
            
            
            
            
            
            
            
            
            9,485
            
            
            
            
            
            9,485Comprehensive
                income
            
            
            
            
            
            
            
            
            
            
            
            9,485
            
            
            (5,658,318
            )
            
            (5,648,833
            )Redemption
                of common shares
            
            
            (304,665
            )
            
            (2,248,302
            )
            
            1,195,147
            
            
            
            
            
            
            
            
            (1,053,155
            )Options
                exercised
            
            
            2,500
            
            
            10,408
            
            
            (3,984
            )
            
            
            
            
            
            
            
            6,424Shares
                issued for acquisition of Copernic Technologies Inc.
            
            
            2,380,000
            
            
            7,040,040
            
            
            
            
            
            
            
            
            
            
            
            7,040,040**Balance,
                December 31, 2005**
            
            
            14,340,864
            
            
            95,298,234
            
            
            5,249,902
            
            
            370,369
            
            
            (68,401,524
            )
            
            32,516,981Stock-based
                compensation
            
            
            
            
            
            
            
            
            456,281
            
            
            
            
            
            
            
            
            456,281Comprehensive
                income:Net
                loss for the year
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            (4,269,380
            )
            
            (4,269,380
            )Foreign
                currency translation adjustments for the year
            
            
            
            
            
            
            
            
            
            
            
            190,768
            
            
            
            
            
            190,768Comprehensive
                income
            
            
            
            
            
            
            
            
            
            
            
            190,768
            
            
            (4,269,380
            )
            
            (4,078,612
            )**Balance,
                December 31, 2006**
            
            
            14,340,864
            
            
            95,298,234
            
            
            5,706,183
            
            
            561,137
            
            
            (72,670,904
            )
            
            28,894,650Stock-based
                compensation
            
            
            
            
            
            
            
            
            407,076
            
            
            
            
            
            
            
            
            407,076Comprehensive
                income:Net
                loss for the year
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            (14,430,826
            )
            
            (14,430,826
            )Comprehensive
                income
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            (14,430,826
            )
            
            (14,430,826
            )Options
                exercised
            
            
            296,667
            
            
            1,258,251
            
            
            (581,993
            )
            
            
            
            
            
            
            
            676,258Options
                which conditions have changed (note 14)
            
            
            
            
            
            
            
            
            253,236
            
            
            
            
            
            
            
            
            253,236**Balance,
                December 31, 2007**
            
            
            14,637,531
            
            
            96,556,485
            
            
            5,784,502
            
            
            561,137
            
            
            (87,101,730
            )
            
            15,800,394





See
      accompanying notes.


85


**Copernic
        Inc.**
 Consolidated
        Statements of Cash Flows
 **For
        the years ended December 31**
 
  (expressed
        in U.S. dollars)


**2007**
              **$**
            
            **2006**
              **$**
            
            **2005**
              **$****Cash
                flows from (used for)****Operating
                activities**Loss
                from continuing operations
            
            
            (14,430,826
            )
            
            (4,358,708
            )
            
            (3,342,983
            )Adjustments
                forAmortization
                of property and equipment
            
            
            302,509
            
            
            178,192
            
            
            106,788Amortization
                of intangible assets
            
            
            1,991,286
            
            
            2,067,009
            
            
            242,031Employee
                stock-based compensation
            
            
            660,312
            
            
            456,281
            
            
            136,933Write-down
                of goodwill (note 11)
            
            
            8,060,841
            
            
            -
            
            
            -Write-down
                of intangible assets (note 11)
            
            
            1,985,470
            
            
            403,425
            
            
            -Write-down
                of investment (note 9)
            
            
            150,000
            
            
            570,000
            
            
            -Write-down
                of property and equipment
            
            
            -
            
            
            9,813
            
            
            -Long-term
                income tax credits
            
            
            -
            
            
            54,912
            
            
            -Future
                income taxes
            
            
            (1,250,453
            )
            
            (724,177
            )
            
            (13,964
            )Unrealized
                loss on foreign exchange
            
            
            12,813
            
            
            -
            
            
            -Net
                change in non-cash working capital items (note 20)
            
            
            990,158
            
            
            515,619
            
            
            1,420,013Cash
                used for operating activities from continuing operations
            
            
            (1,527,890
            )
            
            (827,634
            )
            
            (1,451,182
            )Cash
                used for operating activities from discontinued operations
            
            
            (6,253
            )
            
            (83,948
            )
            
            (630,288
            )(1,534,143
            )
            
            (911,582
            )
            
            (2,081,470
            )**Investing
                activities**Business
                acquisition (note 6)
            
            
            -
            
            
            -
            
            
            (15,851,922
            )Reimbursement
                related to Copernic Technologies Inc.’s business acquisition (note
                6)
            
            
            -
            
            
            379,382
            
            
            -Purchase
                of intangible assets
            
            
            (68,433
            )
            
            (51,400
            )
            
            (54,943
            )Purchase
                of property and equipment
            
            
            (149,658
            )
            
            (76,104
            )
            
            (85,687
            )Net
                decrease (increase) in temporary investments
            
            
            1,626,458
            
            
            (1,578,530
            )
            
            2,860,843Cash
                provided from (used for) investing activities
            
            
            1,408,367
            
            
            (1,326,652
            )
            
            (13,131,709
            )**Financing
                activities**Issuance
                of capital stock
            
            
            676,258
            
            
            -
            
            
            6,424Repayment
                of obligations under capital leases
            
            
            (23,071
            )
            
            -
            
            
            -Redemption
                of common shares
            
            
            -
            
            
            -
            
            
            (1,053,155
            )Cash
                provided from (used for) financing activities
            
            
            653,187
            
            
            -
            
            
            (1,046,731
            )**Effect
                of foreign exchange rate changes on cash
                and cash equivalents**
            
            
            -
            
            
            116,650
            
            
            4,022**Net
                change in cash, cash equivalents and restricted cash during the
                year**
            
            
            527,411
            
            
            (2,121,584
            )
            
            (16,255,888
            )**Cash,
                cash equivalents and restricted cash – Beginning of
                year**
            
            
            2,379,617
            
            
            4,501,201
            
            
            20,757,089**Cash,
                cash equivalents and restricted cash – End of
                year**
            
            
            2,907,028
            
            
            2,379,617
            
            
            4,501,201Cash
                and cash equivalents comprise:Cash
            
            
            596,493
            
            
            777,637
            
            
            4,501,201Short-term
                investments
            
            
            1,503,067
            
            
            1,601,980
            
            
            -2,099,560
            
            
            2,379,617
            
            
            4,501,201Restricted
                cash (note 5)
            
            
            807,468
            
            
            -
            
            
            -2,907,028
            
            
            2,379,617
            
            
            4,501,201**Supplemental
                cash flow information**Cash
                paid for interest
            
            
            7,426
            
            
            4,862
            
            
            16,097Cash
                (received) paid for income taxes
            
            
            1,479
            
            
            (64,900
            )
            
            17,189





See
      accompanying notes.


86


**Copernic
      Inc.**


Notes
      to
      Consolidated Financial Statements


**For
      the years ended December 31, 2007, 2006 and 2005**








(expressed
      in U.S. dollars)





**1**
            **Nature
                of business**




Copernic
      Inc. is a leading provider of award winning search technology for both the
      web
      and desktop space delivered through its online properties, including
      www.mamma.com and www.copernic.com.





Through
      its award winning Copernic Desktop Search® software search engine product, the
      Company develops cutting edge search solutions bringing the power of a
      sophisticated, yet easy-to-use search engine to the user’s PC. It allows for
      instant searching of files, e-mails and e-mail attachments stored anywhere
      on a
      PC hard drive. The desktop search application won the CNET Editors' Choice
      Award, as well as the PC World World Class award in 2005.  In 2007, PC Pro,
      the UK’s most respected IT magazine for professionals, and Micro Hebdo, one of
      France’s most read IT magazines, each selected Copernic Desktop Search® 2.0
      software search engine as the top desktop search tool.





Through
      its well established media placement channels, Copernic Inc. provides both
      online advertising as well as pure content to its partnerships worldwide.
      Copernic handles over 1 billion search requests per month and has media
      placement partnerships established not only in North America, but in Europe
      and
      Australia as well.





The
      revenue models of the Company are based on:





Pay-Per-Click
      search listing placement – advertisers bid or pay a fixed price for
      position on search listing advertisements on www.mamma.com and within the
      Copernic Media SolutionsTM Publisher Network.





Graphic
      Ad Units – priced on a CPM (Cost-Per-Thousand) basis and are distributed
      through the Copernic Media SolutionsTM Publisher Network.





Copernic
      Media SolutionsTM Publisher Network has over 221 active publishers (combined
      search and graphic ad publishers).





Copernic
      Agent® and Copernic Desktop Search® users generate Web searches and clicks from
      pay-per-click advertising listings.





Copernic
      Desktop Search® licensing to ISPs, portals and e-commerce site generates
      license, maintenance and customization revenues.





Copernic
      Agent® Personal Pro, Copernic Summarizer® and Copernic Tracker® software are
      sold from our e-commerce store.





Copernic
      Desktop Search Corporate Edition® software is sold from our e-commerce store or
      direct from corporate sales on a per license basis to businesses, academic
      institutions, non-profit organizations and government environments.





Search
      advertising





Approximately
      89% of our revenues come from our search based business. The revenue model
      in
      this sector is simply a pay-per-click fee that is charged to the advertiser
      when
      a user clicks on a sponsored link. The business model consists of advertisers
      buying keywords. When these keywords are searched by a user, the advertiser’s
      Web site will be listed in a premium position in the search results, identified
      as a sponsored result. The Company aggregates advertisers from other
      search-based businesses and from its own direct sales efforts (through
      direct sales and automated online marketing initiatives). The Company then
      distributes these search advertisements onto its search publisher network which
      consists of its own search properties (Mamma.com, "The Mother of All Search
      Engines®," and Copernic Agent®) and third party search properties of
      approximately 117 partners. Advertising revenues generated through third party
      search properties have associated payout costs; these payout costs represent
      a
      percentage of the revenues generated from the distribution of search
      advertisements onto third party search property. Higher margins are obtained
      through our own properties as there are no payout costs associated with these
      revenues.





Graphic
      advertising





Approximately
      1% of our revenues were generated from our ad network business. The revenue
      model in this sector is cost per thousand (CPM) based (cost per one
      thousand impressions published). The business model is based on advertisers
      buying impressions for ad campaigns (these are creative based campaigns:
      different size banners, pop-ups, rich media advertising) and targeting them
      through our network of publishers. Campaigns can be targeted in several ways:
      geo-targeting (by region), or by site category (e.g.: travel, entertainment,
      finance). The publisher network consists of 104 active small to medium sized
      Web
      sites that subscribe to our service through an on-line or direct representation
      contract and give us access to their advertising inventory. The Company recruits
      publishers through a direct sales force and through online initiatives.
      Publishers receive payouts of a percentage of revenues generated from campaigns
      published on their Web sites.




87


Software
      licensing





Approximately
      5% of our revenues came from software licensing. The business model is based
      on
      selling licenses of Copernic Desktop Search® to ISPs and portals as well as
      Copernic Agent® Personal/Pro, Copernic Summarizer® and Copernic Tracker® through
      our e-commerce store.





Customized
      development and maintenance support





Approximately
      5% of our revenues were as a result of customized development and maintenance
      support. The business model is based on billing for our technical team’s
      software customization and maintenance support.





**2**
            **Significant
                accounting policies**




These
      consolidated financial statements have been prepared in accordance with
      accounting principles generally accepted in Canada (“Canadian GAAP”). There are
      certain measurement differences between Canadian GAAP and United States
      generally accepted accounting principles (“U.S. GAAP”). Differences which relate
      to the Company are summarized in note 27.





a)
            Basis
                of presentation




These
      consolidated financial statements include the accounts of the Company and its
      subsidiaries, all of which are wholly owned. All intercompany balances and
      transactions have been eliminated on consolidation.




b)
            Use
                of estimates




The
      preparation of financial statements in accordance with generally accepted
      accounting principles requires management to make estimates and assumptions
      that
      affect the reported amounts of assets and liabilities and disclosures of
      contingent assets and liabilities at the date of the financial statements and
      the reported amounts of revenues and expenses during the reporting period.
      Significant estimates in these financial statements include the allowance for
      doubtful accounts, recovery of future income taxes, goodwill and annual goodwill
      impairment test, useful lives and impairment of long-lived assets, stock-based
      compensation costs, valuation of investments and determination of the fair
      value
      of the intangible assets on recent acquisitions. Actual results could differ
      from those estimates.





c)
            Cash
                and cash equivalents




Cash
      and
      cash equivalents consist of cash on hand, bank balances available, and highly
      liquid investments with an initial term of three months or less that are stated
      at cost, which approximates market value.





d)
            Temporary
                investments




Temporary
      investments are valued at the amortized cost using the effective interest rate
      method.





e)
            Income
                tax credits




Income
      tax credits are accounted for using the cost reduction method. Under this
      method, tax credits relating to eligible expenditures are deducted from the
      cost of the related assets or included in the consolidated statements of
      operations as a reduction of the related expenses. Tax credits are recorded
      in
      the year in which the expenditures are incurred provided there is reasonable
      assurance of realization.





f)
            Investments




The
      Company has investments in equity instruments of privately-held companies.
      These
      investments are generally accounted for under the cost method, as the Company
      does not have the ability to exercise significant influence over operations.
      The
      Company records an investment impairment charge when it believes an investment
      has experienced a decline in value that is judged to be other than temporary.
      The Company monitors its investments for impairment by considering current
      factors including economic environment, market conditions and operational
      performance and other specific factors relating to the business underlying
      the
      investment, and records reductions in carrying values when necessary. The fair
      value for privately held securities is estimated using the best available
      information as of the valuation date, including the quoted market prices of
      comparable public companies, recent financing rounds of the investee and other
      investee specific information.




88


g)
            Property
                and equipment




Property
      and equipment are recorded at cost, less applicable tax credits and accumulated
      amortization. Amortization is calculated using the following methods and annual
      rates or period:





Computer
                equipment
            Declining
                balance
            50%Furniture
                and fixtures
            Declining
                balance
            33%Leasehold
                improvements
            Straight-line
            Duration
                of lease





h)
            Intangible
                assets




Intangible
      assets with finite useful lives are recorded at cost less accumulated
      amortization. The Company provides for the amortization of intangible assets
      over their estimated useful lives using the following methods and annual
      rates:





Trade
                names
            Straight-line
            14%Technology
            Straight-line
            25%Customer
                relationships
            Straight-line
            33%Patents
            Straight-line
            10%Software
            Declining
                balance
            50%





i)
            Goodwill




Goodwill
      represents the excess of the purchase price over the fair value of net assets
      acquired. Goodwill is tested for impairment annually or more often if events
      or
      changes in circumstances indicate that it might be impaired. The impairment
      test
      first consists of a comparison of the fair value of the reporting unit to which
      goodwill is assigned with its carrying amount. When the carrying amount of
      a
      reporting unit exceeds its fair value, the fair value of the reporting unit’s
      goodwill is compared with its carrying amount to measure the amount of the
      impairment loss, if any. Any impairment loss is charged to earnings in the
      period in which the loss is incurred. The Company uses the discounted cash
      flows
      method to determine the fair value of reporting units.





j)
            Impairment
                of long-lived assets




The
      Company assesses the carrying value of its long-lived assets, which include
      property and equipment and intangible assets, for future recoverability when
      events or changed circumstances indicate that the carrying value may not be
      recoverable. An impairment loss is recognized if the carrying value of a
      long-lived asset exceeds the sum of its estimated undiscounted future cash
      flows
      expected from its use. The amount of impairment loss, if any, is determined
      as
      the excess of the carrying value of the assets over their fair
      value.





k)
            Revenue
                recognition




Search
      advertising, graphic advertising, software licensing, customized development
      and
      maintenance support revenues are recognized when services are rendered, provided
      there is persuasive evidence of an arrangement, the fee is fixed or
      determinable, collection is considered probable, and fees are not subject to
      forfeiture or other concessions.





With
      respect to search advertising and graphic advertising revenues, insertion orders
      or signed contracts are generally used as evidence of an arrangement. Revenues
      are recognized in accordance with EIC-123, *Reporting
      Revenue Gross as a Principal Versus Net as an Agent.*





Software
      licensing agreements are recognized upon delivery of software if persuasive
      evidence of an arrangement exists, collection is probable, the fee is fixed
      or
      determinable and vendor-specific evidence of an arrangement exists to allocate
      the total fee to the different elements of an arrangement. Vendor-specific
      objective evidence is typically based on the price charged when an element
      is
      sold separately, or, in the case of an element not yet sold separately, the
      price established by management, if it is probable that the price, once
      established, will not change before market introduction.


89


Revenues
      from maintenance support for licenses previously sold and implemented are
      recognized ratably over the term of the contract.





Revenues
      from customized development, not considered as part of the implementation of
      software licenses, are recognized as the services are provided.





Amounts
      received in advance of the delivery of products or performance of services
      are
      classified as deferred revenue.





Estimates
      of collection likelihood are based on a number of factors, including past
      transaction history with the customer and the credit-worthiness of the customer.
      If it is determined that collection of a fee is not probable, management defers
      the fee and recognizes revenues at the time collection becomes probable, which
      is generally upon receipt of cash.





Deferred
      revenue is recorded when payments are received in advance of the Company’s
      performance in the underlying agreement on the accompanying consolidated balance
      sheets.





l)
            Research
                and development costs




Research
      costs are expensed as incurred. Development costs are also expensed as incurred
      unless such costs meet the criteria under generally accepted accounting
      principles for deferral and amortization. To qualify for deferral, the costs
      must relate to a technically feasible, identifiable product which the Company
      intends to produce and market, there must be a clearly defined market for the
      product, and the Company must have the resources, or access to the resources,
      necessary to complete the development. The Company has not deferred any such
      development costs during the years ended December 31, 2007 and
      2006.





m)
            Income
                taxes




The
      Company provides for income taxes using the liability method of tax allocation.
      Under this method, future income tax assets and liabilities are determined
      based
      on deductible or taxable temporary differences between financial statement
      values and tax values of assets and liabilities using enacted income tax rates
      expected to be in effect for the year in which the differences are expected
      to
      reverse.





The
      Company establishes a valuation allowance against future income tax assets
      if,
      based upon available information, it is more likely than not that some or all
      of
      the future income tax assets will not be realized.





n)
            Foreign
                currency translation




The
      functional and reporting currency of the Company is the U.S. dollar. The
      functional currency of the Company’s subsidiaries is the local currency.
      Accordingly, the financial statements of the Company’s subsidiaries, except for
      Copernic Technologies Inc., have been translated into the reporting currency
      as
      follows: monetary assets and liabilities have been translated at the exchange
      rate in effect at the balance sheet date, non-monetary assets and liabilities
      have been translated at the historical exchange rate. Revenues and expenses
      have
      been translated at the average exchange rate for each year. All gains or losses
      resulting from the application of this translation method are included in net
      earnings (loss) for the year.





Prior
      to
      the wind up of Copernic Technologies Inc. into the Company as of May 31, 2006,
      Copernic Technologies Inc. followed the current rate method of accounting for
      translation of foreign currency amounts into Canadian dollars. Under this
      method, all assets and liabilities denominated in foreign currencies are
      translated at the exchange rate in effect at the balance sheet date. Revenues
      and expenses denominated in foreign currencies are translated at the exchange
      rate in effect at the time of the transaction. Exchange gains or losses
      resulting from translation are included in the cumulative translation
      adjustment.





o)
            Foreign
                currency transactions




Transactions
      concluded in currencies other than the functional currency have been translated
      as follows: monetary assets and liabilities have been translated at the exchange
      rate in effect at the balance sheet date and revenue and expenses have been
      translated at the average exchange rate for each period; non-monetary assets
      and
      liabilities have been translated at the rates prevailing at the dates of the
      respective transactions. Exchange gains and losses arising from such
      transactions are included in net earnings (loss) for the
      year.


90


p)
            Stock-based
                compensation




The
      Company has one share option plan (described in note 14) and accounts for grants
      under this plan in accordance with the fair value-based method of accounting
      for
      stock-based compensation. Compensation expense for stock options awarded under
      the plan is measured at the fair value at the grant date using the Black-Scholes
      valuation model and is recognized using the accelerated expense attribution
      method over the vesting period of the options granted. The Company estimates
      its
      forfeiture rate in order to determine its compensation expense arising from
      stock-based awards. Cash Consideration received from employees when they
      exercise the option is credited to capital stock.





The
      Company uses the Black-Scholes option pricing model which requires the input
      of
      highly subjective assumptions. These assumptions, including estimating the
      length of time employees will retain their stock options before exercising
      them
      (“the expected term”), the expected volatility of our common stock price over
      the expected term and the number of options that will ultimately not complete
      their vesting requirements (“forfeitures”). Changes in subjective assumptions
      can materially affect the estimate of fair value of stock-based compensation
      and, consequently, the related amount recognized on the Consolidated Statements
      of Operations.





q)
            Earnings
                (loss) per share




Basic
      earnings (loss) per share are calculated using the weighted average number
      of
      shares outstanding during each of the years (note 15 ).





Diluted
      earnings (loss) per share, are calculated based on the weighted average number
      of common shares outstanding in each of the years, plus the effects of dilutive
      common share equivalents, such as options and warrants outstanding. This method
      requires that the dilutive effect of outstanding options and warrants be
      calculated using the treasury stock method, as if all dilutive options and
      warrants had been exercised at the later of the beginning of the reporting
      period or date of issuance, and that the funds obtained thereby were used to
      purchase common shares of the Company at the average trading price of the common
      shares during the year.





r)
            Comparative
                figures




Certain
      comparative figures have been reclassified to conform with the current year’s
      presentation.





**3**
            **Change
                in accounting policies**




**a)
      For changes affecting 2005**





**Consolidation
      of variable interest entities**





The
      Canadian Institute of Chartered Accountants (“CICA”) Accounting Guideline 15,
“Consolidation of Variable Interest Entities”, provides clarification on the
      consolidation of those entities defined as “variable interest entities”, when
      equity investors are not considered to have a controlling financial interest
      or
      they have not invested enough equity to allow the entity to finance its
      activities without additional subordinated financial support from other parties.
      Variable interest entities are commonly referred to as special purpose entities.
      The guideline came into effect for interim periods beginning on or after
      November 1, 2004. The adoption of this section did not have a significant impact
      on the financial statements.


91


**b)**
            **For
                changes affecting 2007**





**Initial
      application of primary source of GAAP**





On
      January 1, 2007, in accordance with the applicable transitional provisions,
      the
      Company applied the recommendations of new Section 1506, “Accounting Changes”,
      of the CICA’s Handbook. This new section, effective for the years beginning on
      or after January 1, 2007, prescribes the criteria for changing accounting
      policies, together with the accounting treatment and disclosure of changes
      in
      accounting policies, changes in accounting estimates and corrections of errors.
      Furthermore, the new standard requires the communication of the new primary
      sources of GAAP that are issued but not yet effective or not yet adopted by
      the
      Company. The new standard had a negligible effect on the Company’s financial
      statements.





Effective
      in January 2007, the Company adopted three new accounting standards issued
      by
      the CICA: Section 1530, “Comprehensive Income”; Section 3855, “Financial
      Instruments - Recognition and Measurement”; and Section 3865, “Hedges”. These
      new accounting standards establish standards for recognizing and measuring
      financial instruments, namely financial assets, financial liabilities and
      derivatives. Certain changes in the value of these financial instruments are
      presented under Comprehensive Income in the Consolidated Statements of
      Shareholders’ Equity. The application of these new standards had a negligible
      effect on the Company’s financial statements and financial position.





*Accounting
      policy choice for transaction costs (“EIC-166”)*





Issued
      in
      June 2007, EIC-166 addresses whether the entity must make one accounting policy
      choice that applies to all financial assets and financial liabilities classified
      other than held for trading. This Abstract mentions that the same accounting
      policy choice should be made for all similar financial instruments classified
      as
      other than held for trading but that a different accounting policy choice might
      be made for financial instruments that are not similar. This accounting
      treatment should be applied retrospectively to transaction costs accounted
      for
      in accordance with Section 3855 in financial statements issued for interim
      and
      annual periods ending on or after September 30, 2007. The adoption of this
      Abstract had no impact of the Company’s financial statements.





**c)**
            **Recently
                published accounting
                changes**





*Convertible
      and other debt instruments with embedded derivatives*  *(“EIC-164”)*





EIC-164
      addresses the situation where a company issues a debt instrument that is
      convertible at any time at the holder’s option into a fixed number of common
      shares. Upon conversion, the issuer is either required or has the option to
      satisfy all or part of the obligation in cash. The instrument may also permit
      the issuer to redeem the instrument prior to maturity, and/or permit the holder
      to force the issuer to redeem the instrument prior to maturity. This Abstract
      provides guidance on various issues related to such debt
      instruments.





The
      accounting treatment in this Abstract should be applied retrospectively to
      financial instruments accounted for in accordance with Section 3855 in financial
      statements issued for interim and annual periods ending on or after June 30,
      2007. The adoption of this Abstract had no impact on the financial
      statements.





*Accounting
      by an investor upon a loss of significant influence*  *(“EIC-165”)*





Issued
      in
      April 2007, EIC-165 addresses the situation of how an investor that loses
      significant influence in an investee should account for the amount the investor
      has in its accumulated other comprehensive income (OCI) for its proportionate
      share of the investee’s equity adjustment for OCI. The amount recorded by the
      investor in accumulated OCI for the investor’s proportionate share of an
      investee’s equity adjustments for OCI should be deducted from or added to the
      carrying value of the investment at the time significant influence is lost.
      To
      the extent that the adjustment results in a carrying value of the investment
      that is less than zero, an investor should reduce the carrying value of the
      investment to zero and record the remaining balance in net income.





The
      accounting treatment in this Abstract should be applied retrospectively, with
      restatement of prior periods, to all financial statements for interim and annual
      reporting periods ending June 30, 2007. The adoption of this Abstract had no
      impact of the Company’s financial statements.





**d)**
            **Future
                accounting changes:**





*CICA
      Section 1535 - Capital Disclosures*





In
      December 2006, the CICA issued Handbook Section 1535 - Capital Disclosures.
      The
      new accounting standard requires disclosure of information about an entity’s
      objectives, policies, and processes for managing capital, as well as
      quantitative data about capital and whether the entity has complied with any
      capital requirements. This Handbook Section is effective for interim and annual
      periods beginning on or after October 1, 2007. The Company is currently
      evaluating the impact of adopting this new Section.


92


*CICA
      Section 3862 – Financial Instruments – Disclosures*


*CICA
      Section 3863 – Financial Instruments – Presentation*





In
      December 2006, the CICA issued Handbook Section 3862 and 3863 that provide
      additional guidance regarding disclosure of the risks associated with both
      recognized and unrecognized financial instruments and how those risks are
      managed. These Handbook Sections are also effective for interim and annual
      periods beginning on or after October 1, 2007. The Company is currently
      evaluating the impact of adopting these new Sections.





*EIC-169,
      Determining Whether a Contract is Routinely Denominated in a Single
      Currency*





Issued
      January 8th, 2008, EIC-169 provides guidance on how to define or apply the
      term
“routinely denominated in commercial transactions around the world” as discussed
      in Section 3855 when assessing contracts for embedded foreign currency
      derivatives. It also determines the factors that can be used to determine
      whether a contract for the purchase or sale of a non-financial item such as
      a
      commodity is routinely denominated in a particular currency in commercial
      transactions around the world. The accounting treatment of this Abstract should
      be applied retrospectively to embedded foreign currency derivatives in host
      contracts that are not financial instruments accounted for in accordance with
      Section 3855 in financial statements issued for interim and annual periods
      ending on or after March 15, 2008. The adoption of this Abstract will not have
      any impact on the Company’s financial statements.




*Goodwill
      and Intangible Assets - Section 3064*





In
      January 2008, the CICA issued Section 3064, Goodwill and Intangible Assets,
      which replaces Section 3062, Goodwill and Other Intangible Assets.  The
      objectives of Section 3064 are to reinforce the principle-based approach to
      the
      recognition of assets only in accordance with the definition of an asset and
      the
      criteria for asset recognition; and clarify the application of the concept
      of
      matching revenues and expenses such that the current practice of recognizing
      asset items that do not meet the definition and recognition criteria is
      eliminated. This standard also provides guidance for the recognition of
      internally developed intangible assets (including research and development
      activities), ensuring consistent treatment of all intangible assets, whether
      separately acquired or internally developed. This Section applies to interim
      and
      annual periods beginning on or after October 1, 2008, with early adoption
      encouraged. The Company is currently evaluating the impact of adopting this
      new
      Section.





*Transition
      to International Financial Reporting Standards (“IFRS”)*





The
      CICA
      has announced the final date for the required conversion of publicly accountable
      enterprises from Canadian GAAP to IFRS. The official changeover date is for
      interim and annual financial statements relating to fiscal years beginning
      on or
      after January 1, 2011.





**4**
            **Financial
                Instruments**




Financial
      assets and financial liabilities





Under
      the
      new standards, financial assets and financial liabilities are initially
      recognized at fair value and are subsequently accounted for based on their
      classification as described below. The classification depends on the purpose
      for
      which the financial instruments were acquired and their characteristics. Except
      in very limited circumstances, the classification is not changed subsequent
      to
      initial recognition.





Financial
      assets





Held
      for
      trading





Financial
      assets that are purchased and incurred with the intention of generating profits
      in the near term are classified as held for trading. In addition, any other
      financial assets can be designated by the Company upon initial recognition
      as
      held for trading. These instruments are accounted for at fair value with the
      change in the fair value recognized in net income (loss) during the period.
      Cash
      and cash equivalents are classified as held for trading.


93


Available-for-sale





Available-for-sale
      assets are non-derivative financial assets that are either designated in this
      category or not classified in any of the other categories. Financial assets
      classified as available-for-sale are carried at fair value with the changes
      in
      fair value recorded in other comprehensive income (loss), except for investments
      in equity instruments that do not have a quoted market price in an active market
      which should be measured at cost. Interest on available-for-sale assets is
      calculated using the effective interest rate method and is recognized in the
      net
      income (loss). When a decline in fair value is determined to be
      other-than-temporary, the cumulative loss included in accumulated other
      comprehensive income is removed and recognized in net income (loss). Gains
      and
      losses realized on disposal of available-for-sale securities are recognized
      in
      net income (loss). Investments which are measured at cost, are classified as
      available-for-sale.





Held-to-maturity





Securities
      that have a fixed maturity date and which the Company has positive intention
      and
      the ability to hold to maturity are classified as held-to-maturity and accounted
      for at amortized cost using the effective interest rate method. Temporary
      investments are classified as held-to-maturity.





Loans
      and
      receivables





Loans
      and
      receivables are non-derivative financial assets resulting from the delivery
      of
      cash or other assets in return for a promise to repay on a specified date,
      or on
      demand, usually with interest. Loans and receivables are accounted for at
      amortized cost using the effective interest rate method. Accounts receivable
      are
      classified as loans and receivable.





Financial
      liabilities





Held
      for
      trading





Financial
      liabilities classified as held for trading include derivative liabilities that
      are not accounted for as hedging instruments, obligations to deliver financial
      assets borrowed by a short seller and financial liabilities that are part of
      a
      portfolio of identified financial instruments that are managed together with
      the
      intention of generating profits in the near term. In addition, any other
      financial liabilities can be designated by the Company upon initial recognition
      as held for trading. These instruments are accounted for at fair value with
      the
      change in the fair value recognized in net income (loss) during the period.
      No
      liabilities are classified as held for trading.





Other
      liabilities





Other
      liabilities are accounted for at amortized cost using the effective interest
      rate method. Accounts payable are classified as other liabilities.





Embedded
      derivatives





Derivatives
      may be embedded in other financial and non-financial instruments (the “host
      instrument”). Prior to the adoption of the new standards, embedded derivatives
      were not accounted for separately from the host instrument except in certain
      circumstances. Under the new standards, embedded derivatives are treated as
      separate derivatives when their economic characteristics and risks are not
      closely related to those of the host instrument, the terms of the embedded
      derivative are the same as those of a stand-alone derivative, and the combined
      contract is not held for trading or designated at fair value. These embedded
      derivatives are measured at fair value with subsequent changes recognized in
      the
      statement of earnings (operations) as an element of financial expenses. The
      Company has no embedded derivatives .




Determination
      of fair value





The
      fair
      value of a financial instrument on initial recognition is the transaction price,
      which is the fair value of the consideration given or received. Subsequent
      to
      initial recognition, fair value is determined by using valuation techniques
      which refer to observable market data.





Comprehensive
      income





Comprehensive
      income is composed of the Company’s net income (loss) and other comprehensive
      income (loss). Other comprehensive income includes unrealized gains and losses
      on available-for-sale securities, changes in the fair market value of derivative
      instruments designated as cash flow hedges and foreign currency translation
      adjustments of self-sustaining foreign operations, all net of income taxes.
      The
      components of comprehensive income are presented in the statement of
      shareholders’ equity.




94


**5**
            **Discontinued
                operations**




**Digital
      Arrow LLC and High Performance Broadcasting, Inc.**





In
      September 2005, following the poor performance of Digital Arrow LLC and High
      Performance Broadcasting, Inc. (“Digital Arrow”) located in Florida, management
      decided to discontinue its subsidiary’s operations. The Company had therefore
      not renewed the lease in Florida and recorded closing costs.





Consequently,
      the results of the operations of Digital Arrow have been recorded as
      discontinued operations and the results of the Company for the years ended
      December 31, 2007, 2006 and 2005 have been reclassified to account for the
      closure of the subsidiary’s operations.




**Summary
      of assets and liabilities of discontinued operations**


**As at December 31,****2007**
                  **$**
                
                **2006**
                  **$**LiabilitiesAccounts
                    payable and accrued liabilities
                
                
                -
                
                
                6,253-
                
                
                6,253





**Summary
      of discontinued operations**





**2007**
              **$**
            
            **2006**
              **$**
            
            **2005**
              **$**Revenues
            
            
            -
            
            
            -
            
            
            474,409Earnings
                (loss) before income taxes
            
            
            -
            
            
            89,328
            
            
            (2,315,335
            )Net
                earnings (loss)
            
            
            -
            
            
            89,328
            
            
            (2,315,335
            )





For
      the
      years 2007, 2006 and 2005, earnings (loss) before income taxes are the same
      as
      net earnings (loss).





**Sale
      of Intasys Billing Technologies’ assets**





On
      February 12, 2004, the Company concluded the sale of Intasys Billing
      Technologies (“IBT”) assets which include contracts, customer lists,
      intellectual property, property and equipment and tangible and intangible assets
      relating to the business. In February 2007, the Company started the process
      of
      liquidating the wholly owned IBT subsidiaries which became dormant corporations
      after the sale of the assets. As at December 31, 2007, $807,468 of restricted
      cash was kept in IBT UK until the final liquidation VAT clearance is received.
      On January 14, 2008, $347,373 became available as a pre-liquidation VAT
      clearance was received. The remaining balance of $460,095 should be released
      when the final liquidation VAT clearance is received.





**6**
            **Business
                acquisition**





**Copernic
      Technologies Inc** .





On
      December 22, 2005, the Company acquired 100% of the issued and outstanding
      securities of Copernic Technologies Inc. including an amount to settle Copernic
      Technologies Inc.'s outstanding stock appreciation right
      obligations.




95







This
      acquired company develops cutting-edge search and information management
      solutions that enable home and business PC users to maximize their information
      assets and become more efficient and proactive in their daily activities.
      Copernic Technologies Inc. is dedicated to providing its customers with
      cost-effective Web and desktop search technology that enables better
      decision-making and increased productivity.





The
      consideration for the acquisition, including costs directly related to the
      acquisition, consisted of $15,851,922 in cash including $3,297,007 paid to
      settle Copernic Technologies Inc.’s stock appreciation right and severance
      obligations net of cash acquired. The Company also issued 2,380,000 common
      shares as part of the consideration paid. The fair value of the Company shares
      issued to owners of Copernic Technologies Inc. has been determined to be $2.958
      per share. This value has been determined using the average closing price of
      the
      Company’s common stock for two days before and after August 17, 2005, the date
      the significant terms and conditions of the transaction were agreed to and
      publicly announced.





This
      acquisition has been accounted for using the purchase method and the results
      of
      operations have been included in the statement of operations from the date
      of
      acquisition. The purchase price allocation was finalized upon receipt of a
      valuation report.





The
      fair
      value of the net assets acquired is summarized below:





**$**Cash
            
            
            851,130Accounts
                receivable
            
            
            1,383,228Prepaid
            
            
            65,994Income
                tax receivable
            
            
            496,219Future
                income taxes (current)
            
            
            33,403Future
                income taxes (long-term)
            
            
            13,442Income
                tax credits
            
            
            54,746Property
                and equipment
            
            
            314,284Software
            
            
            65,220Patents
            
            
            69,527Trade
                names
            
            
            2,500,000Customer
                relationships
            
            
            2,000,000Technology
            
            
            3,400,000Total
                assets acquired
            
            
            11,247,193Accounts
                payable and accrued liabilities
            
            
            226,822Future
                income taxes
            
            
            2,686,000Total
                liabilities assumed
            
            
            2,912,822Net
                identifiable assets acquired
            
            
            8,334,371Goodwill
            
            
            15,408,721Purchase
                price
            
            
            23,743,092Less:Common
                shares issued
            
            
            7,040,040Cash
                acquired
            
            
            851,130Consideration
                paid net of cash acquired
            
            
            15,851,922





Goodwill
      is not deductible for income tax purposes.





In
      2006,
      the purchase price allocation was adjusted to reflect additional assets and
      liabilities assumed by the Company. These adjustments resulted by
      increasing accounts receivable by $480,091, liabilities by $22,286 and
      consequently decreasing original goodwill by $457,805. The increase in accounts
      receivable, which was not accounted for in the audited closing balance sheet
      of
      Copernic Technologies Inc. at the date of acquisition, was due to a revenue
      recognition adjustment related to a specific contract that existed prior to
      the
      date of the transaction.





In
      2006,
      $379,382 was received by the Company from the sellers of Copernic Technologies
      Inc. to compensate for a reduction of research and development tax credits
      prior
      to the acquisition date, the purchase price and goodwill were then reduced
      accordingly.




96


**7**
            **Temporary
                Investments**




Temporary
      investments consist of commercial paper, with ratings of A1+ and P1 as per
      Standard & Poor and Moody’s respectively, bearing a weighted average
      interest rate 4.51% per annum (2006 - 5.09%) and maturing on various dates
      up to
      March 2008. The market value of the commercial paper as at December 31, 2007
      and
      2006 approximates its book value.





**8**
            **Accounts
                receivable**




Accounts
      receivable comprise of the following:





**2007**
              **$**
            
            **2006**
              **$**Trade
                accounts receivable
            
            
            842,459
            
            
            2,783,834Allowance
                for doubtful accounts
            
            
            (9,808
            )
            
            (78,104
            )832,651
            
            
            2,705,730Other
            
            
            85,382
            
            
            28,442918,033
            
            
            2,734,172





**9**
            **Investments**





Investments
      comprise of the following:





**2007**
              **$**
            
            **2006**
              **$**LTRIM
                Technologies Inc. (4,891,686 Class “A”common
                shares and 359,281 Class “A” preference shares)
            
            
            -
            
            
            150,000Tri-Link
                Technologies Inc. (4,054,874 Preference shares)
            
            
            -
            
            
            -TECE,
                Inc. (5,000,000 Common shares)
            
            
            -
            
            
            --
            
            
            150,000





In
      2007,
      based on the assessment of the fair value of the Company’s investment in LTRIM
      Technologies Inc. (“LTRIM”), the Company concluded that its investment has
      suffered a loss in value other than a temporary decline due to LTRIM’s
      significant corporate restructuring and therefore recorded a write-down of
      $150,000 to bring it to nil.





In
      2006,
      based on its assessment of the fair value of the Company’s investment in LTRIM,
      the Company concluded that its investment has suffered a loss in value other
      than a temporary decline due to delays in commercialization of its technology
      and therefore recorded a write-down of $570,000 to bring it to $150,000. The
      fair value of LTRIM has been established by independent appraisal as of
      September 30, 2006. In 2004, the Company also wrote-off $365,286 of this
      investment due to a permanent impairment in value.




97


**10**
            **Property
                and equipment**




**2007****Cost**
              **$**
            
            **Accumulated**
              **amortization**
              **$**
            
            **Net**
              **$**Computer
                equipment
            
            
            1,513,749
            
            
            1,167,247
            
            
            346,502Furniture
                and fixtures
            
            
            176,750
            
            
            115,946
            
            
            60,804Leasehold
                improvements
            
            
            189,230
            
            
            136,664
            
            
            52,5661,879,729
            
            
            1,419,857
            
            
            459,872





**2006****Cost**
              **$**
            
            **Accumulated**
              **amortization**
              **$**
            
            **Net**
              **$**Computer
                equipment
            
            
            1,256,254
            
            
            920,578
            
            
            335,676Furniture
                and fixtures
            
            
            176,750
            
            
            85,543
            
            
            91,207Leasehold
                improvements
            
            
            189,230
            
            
            112,285
            
            
            76,9451,622,234
            
            
            1,118,406
            
            
            503,828





Computer
      and equipment include assets under capital leases with an original cost of
      $108,895 (2006 - nil) and accumulated depreciation of $22,627 (2006 - nil)
      as at
      December 31, 2007. Property and equipment also include computer equipment that
      are not depreciated since they are not yet put in operation with an original
      cost of $99,672 (2006 - nil).





Effective
      January 1, 2007, the Company changed its depreciation estimates for computer
      equipment and furniture and fixtures from 30% to 50%, and from 20% to 33%,
      respectively. This change was made as management believes that technological
      advances in the computer industry have reduced the useful life of computer
      software. Management also believes that the new depreciation rate for furniture
      and fixtures better reflect their useful life. This change of estimate has
      been
      applied prospectively and the effect of this change is to increase the
      amortization for the year by approximately $135,000 and accordingly, decrease
      property and equipment and increase the deficit by the same amount.





Amortization
      of property and equipment includes $22,627 (2006 - nil) of amortization on
      computer equipment under capital leases.





**11**
            **Goodwill
                and other intangible
                assets**





a)
            Intangible
                assets





**2007****Cost**
              **$**
            
            **Accumulated**
              **amortization**
              **$**
            
            **Impairment**
              **provision**
              **$**
            
            **Net**
              **$**Trade
                names
            
            
            2,560,518
            
            
            782,633
            
            
            1,333,415
            
            
            444,470Technology
            
            
            3,400,000
            
            
            1,718,630
            
            
            -
            
            
            1,681,370Customer
                relationships
            
            
            2,000,000
            
            
            1,347,945
            
            
            652,055
            
            
            -Software
            
            
            325,218
            
            
            192,328
            
            
            -
            
            
            132,890Patents
            
            
            77,622
            
            
            15,676
            
            
            -
            
            
            61,9468,363,358
            
            
            4,057,212
            
            
            1,985,470
            
            
            2,320,676





The
      Company’s software unit is facing delays in execution and changes in market
      conditions of its commercial deployment solutions. Based on its assessment
      of
      the fair value of the Company’s assets related to software, the Company
      concluded that the assets related to it had suffered a loss in value and the
      fair value of intangible assets was significantly less than its carrying value
      for these assets. Therefore, write-downs of $1,333,415 for trade names and
      $652,055 for customer relationships were recorded in 2007.





98


Effective
      January 1, 2007, the Company changed its depreciation estimate for software
      from
      30% to 50%. This change was made as management believes that technological
      advances in the computer industry have reduced the useful life of software.
      Management also believes that the new depreciation rate for software better
      reflect their useful life. This change of estimate has been applied
      prospectively and the effect of this change is to increase the amortization
      for
      the year by approximately $55,000, decrease software and increase the deficit
      by
      the same amount.





**2006****Cost**
              **$**
            
            **Accumulated**
              **amortization**
              **$**
            
            **Net**
              **$**Trade
                names
            
            
            2,560,518
            
            
            422,206
            
            
            2,138,312Technology
            
            
            3,400,000
            
            
            868,630
            
            
            2,531,370Customer
                relationships
            
            
            2,000,000
            
            
            681,279
            
            
            1,318,721Software
            
            
            218,085
            
            
            85,878
            
            
            132,207Patents
            
            
            77,622
            
            
            7,934
            
            
            69,6888,256,225
            
            
            2,065,927
            
            
            6,190,298





The
      Company’s graphic advertising revenues have constantly declined from $4,456,399
      in 2005 to $827,104 in 2006. Based on its assessment of the fair value of the
      Company’s assets related to graphic advertising, the Company concluded that its
      assets related to it had suffered a loss in value and the fair values of
      property and equipment and intangible assets were significantly less than their
      carrying values for each of these assets. Therefore, write-downs of $413,238
      were recorded in 2006 to bring them to nil.





Intangible
      assets include assets under capital leases with an original cost of $38,701
      (2006 - nil) and accumulated depreciation of $9,675 (2006 - nil) as at December
      31, 2007. Intangible assets also include software that is not depreciated since
      it is not yet in operation with an original cost of $ 26,439 (2006 -
      nil).





Amortization
      of intangible assets includes $9,675 (2006 - nil) of amortization on software
      under capital leases.




b)
            Goodwill




The
      changes in the carrying amount of goodwill for the years ended December 31,
      2007 and 2006 are as follows:





**Copernic**
              **Technologies**
              **Inc.**
            
            **focusIN**
            
            **Total**$
            
            $
            
            **$**Balance
                - December 31, 2005
            
            
            15,408,721
            
            
            846,310
            
            
            16,255,031Purchase
                price allocation adjustment (note6)
            
            
            (457,805
            )
            
            -
            
            
            (457,805
            )Reimbursement
                related to Copernic acquisition (note6)
            
            
            (379,382
            )
            
            -
            
            
            (379,382
            )Balance
                - December 31, 2006
            
            
            14,571,534
            
            
            846,310
            
            
            15,417,844Write-down
            
            
            (7,214,531
            )
            
            (846,310
            )
            
            (8,060,841
            )Balance
                - December 31, 2007
            
            
            7,357,003
            
            
            -
            
            
            7,357,003





Based
      on
      the Company’s assessment of the fair value of its assets related to the software
      and search / media units, the Company concluded that the related goodwill had
      suffered a loss in value and the fair value of the related goodwill was
      significantly less then its carrying value. Therefore, write-downs of $7,214,531
      for the software unit due to delays in execution and changes in market
      conditions of its commercial deployment solutions and $846,310 for the search
      /
      media unit, explained by decreased revenues due to industry pressures on
      advertising rates, slow down in sponsored clicks and general decrease for all
      graphic ads, were recorded in 2007.





99


**12**
            **Accounts
                payable and accrued
                liabilities**





Accounts
      payable and accrued liabilities comprise of the following:





**2007**
              **$**
            
            **2006**
              **$**Trade
                accounts payable
            
            
            971,474
            
            
            1,814,362OtherAccrued
                employee costs
            
            
            412,759
            
            
            293,834Directors
                and officers payable
            
            
            123,541
            
            
            165,469Companies
                owned by current directors (a) (b)
            
            
            12,845
            
            
            16,0211,520,619
            
            
            2,289,686





(a)
      The
      amount payable to companies owned by current directors relates to consulting
      agreement between the Company and the companies owned by current
      directors.





(b)
      Services provided by two directors for 2007 were $123,746 (2006 - $141,971;
      2005
      - $202,404). The transactions are in the normal course of operations and are
      measured at the exchange amount which is the amount of the consideration
      established and agreed to by the related parties.





**13**
            **Obligations
                under capital leases**





As
      at
      December 31, 2007, future minimum payments for obligations under capital leases
      are as follows:





**2007**
              **$**
            
            **2006**
              **$**2008
            
            
            70,449
            
            
            -2009
            
            
            70,449
            
            
            -2010
            
            
            38,552
            
            
            -179,450
            
            
            -Less:
                Interest (Weighted average rate of 10.99%)
            
            
            23,591
            
            
            -Less:
                Current portion
            
            
            56,071
            
            
            -99,788
            
            
            -





**14**
            **Capital
                stock**




On
      September 7, 2004, the Company filed a Notice of Intention with the Ontario
      Securities Commission to make a Normal Course Issuer Bid (“the Notice”). In the
      Notice, the Company stated its intention to purchase on the open market at
      prevailing market prices, through the facilities of the NASDAQ stock market,
      up
      to a maximum of 600,000 of its common shares, being approximately 5% of the
      outstanding common shares, and common shares comprising the public float, as
      at
      December 31, 2004. At the expiration date, on September 7, 2005, the Company
      did
      not file a new notice.





During
      the year ended December 31, 2005, the Company redeemed 304,665 of its common
      shares at a weighted average purchase price of $3.46, for a total amount of
      $1,053,155. The $1,195,147 excess of stated capital value over the redemption
      amount has been credited to additional paid-in capital.





a)
            Stock
                options




The
      Company’s stock option plan is administered by the Compensation Committee, which
      is a subcommittee of the Board of Directors. The Compensation Committee
      designates eligible participants to be included under the plan, and designates
      the number of options and the share price pursuant to the new options, subject
      to applicable securities laws and stock exchange regulations. The options,
      when
      granted, will have an exercise price of no less than the market price of shares
      at the date of grant and a life not exceeding 10 years. The options vest in
      equal increments over a period of three or four years, commencing one year
      from
      the grant date. The number of options granted in any fiscal year shall not
      exceed 15% of the issued and outstanding common shares at the date of the grant.
      The fair value of granted options are estimated as the date of grant using
      the
      Black-Scholes option pricing model.




100


On
      February 2, 2005, the Officers and Members of the Board of Directors of the
      Company to whom the above-mentioned stock options had been granted, waived
      and
      renounced any and all rights that each had or may have had on the options.
      Consequently, the options were cancelled as of that date. The stock-based
      compensation costs of $138,395 recorded as of December 31, 2004 pertaining
      to
      these options was reversed in the first quarter of 2005.





On
      February 16, 2005, 55,800 and 39,196 stock options at an exercise price of
      $6.28
      expiring in five years were granted to Officers and employees of the Company,
      respectively.





On
      November 8, 2005, the Company granted to Officers and Members of Board of the
      Company, 430,000 stock options at an exercise price of $2.28 expiring in five
      years.





On
      January 25, 2006, the Company granted to employees 9,661 stock options at an
      exercise price of $3.08 expiring in five years.





On
      March
      17, 2006, 25,000 stock options were granted to a new director, at an exercise
      price of $2.13 expiring in five years.





On
      March
      27, 2006, the Company granted 25,000 stock options to an employee at an exercise
      price of $2.11 expiring in five years.





On
      January 23, 2007, the Company granted to Officers and employees 70,500 and
      21,803 stock options, respectively, at an exercise price of $5.15 expiring
      in
      five years.





In
      January 2007, in connection with the resignation of two Officers, the Company
      changed the duration of their option agreements and allowed accelerated vesting
      options for one of the officers. These changes represented an additional
      non-cash item expense of $253,236 which was recorded in Q1 2007.





On
      February 26, 2007, 10,000 stock options were granted to a new employee, at
      an
      exercise price of $4.99 expiring in five years.





On
      March
      29, 2007, the Company granted 2,632 stock options to an employee at an exercise
      price of $4.75 expiring in five years.





On
      April
      30, 2007, the Company granted 40,000 stock options to a new employee at an
      exercise price of $4.90 expiring in five years.





On
      June
      8, 2007, the Company granted 60,000 stock options to directors at an exercise
      price of $4.24 expiring in five years.





On
      September 18, 2007, the Company granted 652,000 stock options to Officers and
      employees at an exercise price of $1.74 expiring in five years.





On
      September 21, 2007, the Company granted 50,000 stock options to two new Members
      of the Board of the Company at an exercise price of $1.67 expiring in five
      years.





As
      at
      November 8, 2007, the Company granted 4,000 stock options to an employee at
      an
      exercise price of $2.23 expiring in five years.





As
      at
      December 31, 2007, 296,667 (2006 - nil) stock options were exercised with
      exercising prices ranging between $1.53 to $2.57 and 83,065 (2006 - 38,512)
      were
      forfeited or expired.




101


Information
      with respect to stock option activity for, 2005, 2006 and 2007 is as
      follows:





**Number
                of options**
            
            **Weighted
                average**
              **exercise
                price**
              **$**Outstanding
                - December 31, 2004
            
            
            461,334
            
            
            5.60Granted
            
            
            524,996
            
            
            3.00Forfeited
            
            
            (322,747
            )
            
            6.94Exercised
            
            
            (2,500
            )
            
            2.57Outstanding
                - December 31, 2005
            
            
            661,083
            
            
            2.90Granted
            
            
            59,661
            
            
            2.28Forfeited
            
            
            (38,512
            )
            
            1.64Outstanding
                - December 31, 2006
            
            
            682,232
            
            
            2.84Granted
            
            
            910,935
            
            
            2.43Forfeited
            
            
            (71,215
            )
            
            4.03Expired
            
            
            (11,850
            )
            
            3.57Exercised
            
            
            (296,667
            )
            
            2.28Outstanding
                - December 31, 2007
            
            
            1,213,435
            
            
            2.59





Details
      of stock options outstanding as at December 31, 2007 are as
      follows:




**Outstanding
                  options**
              
              **Exercisable
                  options****Range
                  of exercise**
                **prices**
                **$**
              
              **Number
                  of options**
              
              **Weighted**
                **average**
                **remaining**
                **contractual**
                **life**
                **(years)**
              
              **Weighted**
                **average**
                **exercise**
                **price**
                **$**
              
              **Number
                  of**
                **options**
              
              **Weighted**
                **average**
                **exercise**
                **price**
                **$**1.50
                  - 1.99
              
              
              699,500
              
              
              4.71
              
              
              1.73
              
              
              2,500
              
              
              1.502.11
                  - 3.58
              
              
              285,001
              
              
              2.67
              
              
              2.64
              
              
              192,669
              
              
              2.826.28
              
              
              228,934
              
              
              3.85
              
              
              5.15
              
              
              38,513
              
              
              6.281,213,435
              
              
              4.07
              
              
              2.59
              
              
              233,682
              
              
              3.37




As
      at
      December 31, 2006 and 2005 there were 298,320 and 100,668 options exercisable
      at
      weighted average prices of $ 2.81 and $2.78, respectively.


102


The
      fair
      values of all options granted during 2007, 2006 and 2005 were estimated as
      of
      the date of grant using the Black-Scholes option pricing model with the
      following weighted average assumptions:





**2007**
            
            **2006**
            
            **2005**Expected
                option life (years)
            
            
            3.03
            
            
            4.00
            
            
            4.21Volatility
            
            
            86.09
            %
            
            75.81
            %
            
            79
            %Risk-free
                interest rate
            
            
            4.28
            %
            
            4.01
            %
            
            3.78
            %Dividend
                yield
            
            
            nil
            
            
            nil
            
            
            nil





The
      weighted average grant-date fair values for stock options granted during 2007,
      2006 and 2005 were $2.43, $1.34 and $1.90 per option, respectively.





Stock-based
      compensation expense recognized in 2007, 2006 and 2005 in regards to the stock
      options was $ 660,312 ,
      $456,281 and $136,933, respectively.





b)
            Pro
                forma stock-based compensation
                disclosures




The
      Company adopted, retroactive to January 1, 2003, the fair value method of
      accounting for stock options granted to employees and has applied this new
      method on a prospective basis. The following is a summary of what the net
      earnings (loss) and related per share figures would have been for 2007, 2006
      and
      2005 if the Company had applied this change retroactively to all prior
      years.





**2007**
              **$**
            
            **2006**
              **$**
            
            **2005**
              **$**Net
                loss for the year
            
            
            (14,430,826
            )
            
            (4,269,380
            )
            
            (5,658,318
            )Compensation
                costs
            
            
            -
            
            
            -
            
            
            17,496Pro
                forma net loss
            
            
            (14,430,826
            )
            
            (4,269,380
            )
            
            (5,675,814
            )Pro
                forma net loss per share:Basic
            
            
            (0.99
            )
            
            (0.30
            )
            
            (0.47
            )Diluted
            
            
            (0.99
            )
            
            (0.30
            )
            
            (0.47
            )




Information
      with respect to warrant activity for 2005, 2006 and 2007 is as
      follows:





**Number
                of**
              **warrants**
            
            **Weighted**
              **average**
              **exercise**
              **price**
              **$**Outstanding
                - December 31, 2005, 2006 and 2007
            
            
            646,392
            
            
            15.60




103


For
      various price ranges, the weighted average characteristics of warrants
      outstanding and exercisable as at December 31, 2007 were as
      follows:





**Range
                of**
              **exercise
                prices**
              **$**
            
            **Number
                of**
              **warrants**
            
            **Weighted
                average**
              **remaining
                contractual**
              **life**
              **(years)**
            
            **Weighted
                average**
              **exercise
                price**
              **$**11.34
                - 13.89
            
            
            40,000
            
            
            2.41
            
            
            12.3115.82
            
            
            606,392
            
            
            2.50
            
            
            15.82646,392
            
            
            2.49
            
            
            15.60





**15**
            **Earnings
                (loss) per share**




**2007**
            
            **2006**
            
            **2005**Weighted
                average number of shares - Basic and Diluted
            
            
            14,564,894
            
            
            14,340,864
            
            
            12,168,117





Options,
      at weighted average exercise price of $3.37 to purchase 233,682 common shares
      (2006 - 298,320; 2005 - 100,668), warrants at weighted average exercise price
      of
      $15.60 to purchase 646,392 common shares


(2006
      -
      646,392; 2005 - 646,392) have been excluded from the above calculations since
      they would all have an anti-dilutive effect.





**16**
            **Revenues**




**2007**
              **$**
            
            **2006**
              **$**
            
            **2005**
              **$**Search
                advertising
            
            
            7,246,838
            
            
            7,197,868
            
            
            4,970,373Graphic
                advertising
            
            
            107,871
            
            
            827,104
            
            
            4,456,399Software
                licensing
            
            
            415,263
            
            
            957,488
            
            
            6,671Customized
                development and maintenance support
            
            
            346,436
            
            
            613,942
            
            
            10,5328,116,408
            
            
            9,596,402
            
            
            9,443,975




104


**17**
            **Cost
                of revenues**




**2007**
              **$**
            
            **2006**
              **$**
            
            **2005**
              **$**Search
                payouts
            
            
            2,244,715
            
            
            2,022,516
            
            
            1,638,780Graphic
                payouts
            
            
            17,641
            
            
            286,919
            
            
            2,264,700ISP
                charges
            
            
            374,054
            
            
            394,666
            
            
            279,9652,636,410
            
            
            2,704,101
            
            
            4,183,445





**18**
            **Write-downs
                and settlement costs**




**2007**
              **$**
            
            **2006**
              **$**
            
            **2005**
              **$**Write-down
                of goodwill (note 11)
            
            
            8,060,841
            
            
            -
            
            
            -Write-downs
                of property and equipment and intangible assets (note 11)
            
            
            1,985,470
            
            
            413,238
            
            
            -Write-down
                of investment (note 9)
            
            
            150,000
            
            
            570,000
            
            
            -Class
                action closure costs
            
            
            (50,000
            )
            
            50,000
            
            
            -Class
                action settlement costs
            
            
            -
            
            
            650,000
            
            
            -10,146,311
            
            
            1,683,238
            
            
            -





**19**
            **Consolidated
                statement of cash flows**




In
      2005,
      the consideration for the acquisition of Copernic Technologies Inc. includes
      2,380,000 of the Company’s common shares at a determined fair value of $2.958
      per share. Therefore, $7,040,040 representing the value of the consideration
      paid by the issuance of capital stock are excluded from business acquisition
      and
      issuance of capital stock.





In
      2007,
      the Company acquired $108,895 of computer equipment and $38,701 of software
      equipment under capital leases.





**20**
            **Net
                change in non-cash working capital
                items**





**2007**
              **$**
            
            **2006**
              **$**
            
            **2005**
              **$**Cash
                flows provided from (used for):Accounts
                receivable
            
            
            1,816,139
            
            
            418,842
            
            
            1,266,077Income
                taxes receivable
            
            
            (111,203
            )
            
            525,447
            
            
            12,100Prepaid
                expenses and other assets
            
            
            71,751
            
            
            36,912
            
            
            (99,707
            )Accounts
                payable and accrued liabilities
            
            
            (769,067
            )
            
            (454,958
            )
            
            227,841Income
                taxes payable
            
            
            -
            
            
            (415
            )
            
            -Deferred
                rent
            
            
            (1,257
            )
            
            12,108
            
            
            -Deferred
                revenue
            
            
            (16,205
            )
            
            (22,317
            )
            
            13,702990,158
            
            
            515,619
            
            
            1,420,013




105


**21**
            **Income
                taxes**




a)
            The
                provision for (recovery of) income taxes is detailed as
                follows:




**2007**
                **$**
              
              **2006**
                **$**
              
              **2005**
                **$**Current
              
              
              1,479
              
              
              (4,876
              )
              
              (12,046
              )Future
                  (recovered)
              
              
              (1,250,453
              )
              
              (724,177
              )
              
              (13,964
              )(1,248,974
              )
              
              (729,053
              )
              
              (26,010
              )





b)
            A
                reconciliation of the combined Canadian Federal and provincial income
                tax
                rate with the Company’s effective income tax rate is as
                follows:





**2007**
              **$**
            
            **2006**
              **$**
            
            **2005**
              **$**Loss
                from continuing operations before income taxes
            
            
            (15,679,799
            )
            
            (5,087,761
            )
            
            (3,368,993
            )Expected
                provision for (recovery of) income taxes at the statutory
                rate
            
            
            (5,020,672
            )
            
            (1,629,101
            )
            
            (1,070,666
            )Impact
                of foreign and provincial rates
            
            
            3,654
            
            
            (3,676
            )
            
            (348
            )Change
                in future income tax balance due to change in rate
            
            
            1,316,637
            
            
            1,475,114
            
            
            (947,104
            )Unrecognized
                benefit of current year tax losses and undeducted research
                and development expenses, and other temporary
                differences
            
            
            (176,111
            )
            
            (571,165
            )
            
            2,067,696Benefit
                of prior years’ tax losses not previously recognized
            
            
            -
            
            
            (27,891
            )
            
            (93,681
            )Permanent
                difference:Impairment
                of goodwill
            
            
            2,367,218
            
            
            -
            
            
            -Non-deductible
                expenses
            
            
            260,300
            
            
            27,666
            
            
            18,093Provision
                for (recovery of) income taxes
            
            
            (1,248,974
            )
            
            (729,053
            )
            
            (26,010
            )




106


c)
            The
                major components of the net future income tax asset classified by
                the
                source of temporary differences are as
                follows:




**2007**
              **$**
            
            **2006**
              **$****Assets**Property
                and equipment
            
            
            2,802,656
            
            
            2,627,190Non-capital
                losses (expiring 2008-2027)
            
            
            6,515,429
            
            
            6,656,115Unrealized
                impairment losses on investments
            
            
            932,368
            
            
            848,548Research
                and development expenses
            
            
            668,801
            
            
            487,753Financing
                expenses
            
            
            89,657
            
            
            156,411Intangible
                assets
            
            
            476,619
            
            
            459,966Goodwill
            
            
            284,206
            
            
            57,001Other
            
            
            62,352
            
            
            171,29511,832,088
            
            
            11,464,279**Liabilities**Intangible
                assets
            
            
            650,413
            
            
            1,900,866Net
                future income tax assets before valuation
            
            
            11,181,675
            
            
            9,563,413Valuation
                allowance
            
            
            (11,832,088
            )
            
            (11,464,279
            )(650,413
            )
            
            (1,900,866
            )Presented
                as:Current
                asset
            
            
            -
            
            
            -Long-term
                asset
            
            
            -
            
            
            -Long-term
                liability
            
            
            (650,413
            )
            
            (1,900,866
            )(650,413
            )
            
            (1,900,866
            )





As
      at
      December 31, 2007, the Company also has temporary differences in United States
      of America consisting mainly of non-capital losses for $2,590,457 (2006 -
      $2,075,622). No future tax assets were recognized in 2007 and in 2006 for these
      temporary differences.




In
      addition, the Company has capital losses amounting to $20,031,365 in 2007 (2006
      - $16,734,752) with no expiration date. No future tax assets were recognized
      in
      2007 and in 2006 for these capital losses.





d)
            As
                at December 31, 2007, the Company has non-capital loss carryforwards
                totalling approximately $24,260,000 for Federal and Provincial income
                tax
                purposes which may be used to reduce taxable income in future years.
                These
                losses may be claimed no later than fiscal years ending
                December 31:




**$**2008
              
              
              4,169,0002009
              
              
              3,040,0002010
              
              
              4,060,0002014
              
              
              1,006,0002015
              
              
              6,548,0002026
              
              
              879,0002027
              
              
              4,558,000
 
 107


**22**
            **Product
                development and technical support
                expenses**




The
      following details the net product development and technical support expenses
      included in the consolidated statements of operations:





**2007**
              **$**
            
            **2006**
              **$**
            
            **2005**
              **$**Product
                development and technical support expenses
            
            
            2,050,266
            
            
            2,268,310
            
            
            1,276,346Research
                and development expenses
            
            
            567,825
            
            
            485,944
            
            
            31,6002,618,091
            
            
            2,754,254
            
            
            1,307,946Less:
                research and development tax credits
            
            
            201,681
            
            
            215,387
            
            
            21,6012,416,410
            
            
            2,538,867
            
            
            1,286,345




As
      of
      December 31, 2007 the Company has non-refundable tax credits of $315,001 (2006
      -
      $140,598) with no expiration date.





**23**
            **Segment
                information**




In
      2007,
      following the corporate name change, the Company launched a new corporate image
      and Web site describing our overall objective of combining our strengths in
      Web
      search, media services and innovative software development.





Management
      decided to follow and measure its operations using two separate
      segments:


·
            Search
                / Media


o
            This
                segment includes the metasearch and vertical search engines such
                as:


§
            **Mamma.com**-
                The Mother of all Search Engines is a search site on the Web that
                simultaneously searches a variety of engines, directories, and deep
                content sites.


§
            **Mamma
                Health**-
                Focuses its search exclusively on relevant health information by
                crawling
                only authoritative, hand picked health
                sources.


§
            **Mamma
                Videos**-
                Find, explore, and view broadband videos from a wide range of topics
                including TV shows, movies, music, and news from providers across
                the
                Web.


§
            **Mamma
                Jobs**-Provides
                job seekers free instant access in one single searchfor job boards, newspapers and associations.


o
            This
                segment also includes our media network consisting of active publishers
                in
                the combined search and graphic ad categories which providesonline
                marketing solutionssuch
                as:


§
            **Pay-per-click
                advertising**-Advertisers bid or pay a fixed price for position on search listing
                advertisements on our own properties as well as within our Publisher
                Network.


§
            **Graphic
                ad network**-Allows advertisers to pay a CPM price for graphic ads to be distributed
                though our Publisher Network.


§
            **XML
                search feeds**-****Our
                property provides third party’s content, whether commercial or
                non-commercial search result
                listings.


·
            Software


o
            This
                segment includes various sophisticated technology such
                as:


§
            **Copernic
                Desktop Search**®-
                Software that allows tofind
                files and e-mails with the power of a search engine right on a desktop.
                With the Company’s new mobile plug-in, PC files can be accessed by mobile
                devices. There are two product types
                available:


·
            Copernic
                Desktop Search®Home Edition: for personal use with basic features and is ad supported
                and


·
            Copernic
                Desktop Search®Corporate
                Edition: enterprise-oriented desktop search solution that is secure,
                scalable and easy to deploy.


§
            **Copernic
                Agent**®-
                An Internet search and tracking toolsoftware.


§
            **Copernic
                Tracker**®-
                A software that keeps users up to date with what is new on the Web.


§
            **Copernic
                Summarizer®**-
                Creates concise document summaries of any file or Web page to save
                users
                time spent reading, without missing any important
                information.


o
            This
                segment includes also software customization and
                maintenance.




108


The
      segmented information is presented for the continuing operations.





**For
                the twelve months ended****December
                31, 2007****Search/Media**
            
            **Software**
            
            **Total****$**
            
            **$**
            
            **$**Revenues
            
            
            7,354,709
            
            
            761,699
            
            
            8,116,408Costs
                of revenues
            
            
            2,636,410
            
            
            -
            
            
            2,636,410Marketing,
                sales and services
            
            
            1,084,777
            
            
            813,045
            
            
            1,897,822Product
                development and technical support
            
            
            980,360
            
            
            1,436,050
            
            
            2,416,410Amortization
                of property and equipment
            
            
            164,783
            
            
            137,726
            
            
            302,509Amortization
                of intangible assets
            
            
            49,515
            
            
            1,941,771
            
            
            1,991,286Write-downs
                and settlement costs
            
            
            846,310
            
            
            9,200,001
            
            
            10,046,311Segmented
                operating income (loss)
            
            
            1,592,554
            
            
            (12,766,894
            )
            
            (11,174,340
            )Unallocated
                expensesGeneral
                and administration expenses, interest and loss on foreign
                exchange
            
            
            
            
            
            
            
            
            4,505,460Loss
                from continuing operations before income taxes and discontinued
                operations
            
            
            
            
            
            
            
            
            (15,679,800
            )





**As
                at****December
                31, 2007****Search/Media**
            
            **Software**
            
            **Total****$**
            
            **$**
            
            **$**Property
                and equipment
            
            
            277,394
            
            
            182,478
            
            
            459,872Intangible
                assets
            
            
            72,671
            
            
            2,248,005
            
            
            2,320,676Goodwill
            
            
            -
            
            
            7,357,003
            
            
            7,357,003350,065
            
            
            9,787,486
            
            
            10,137,551





For
                the twelve months endedDecember
                31, 2006**Search/Media**
            
            **Software**
            
            **Total****$**
            
            **$**
            
            **$**Revenues
            
            
            8,024,972
            
            
            1,571,430
            
            
            9,596,402Costs
                of revenues
            
            
            2,704,101
            
            
            -
            
            
            2,704,101Marketing,
                sales and services
            
            
            1,414,074
            
            
            436,102
            
            
            1,850,176Product
                development and technical support
            
            
            1,049,714
            
            
            1,489,153
            
            
            2,538,867Amortization
                of property and equipment
            
            
            88,466
            
            
            89,726
            
            
            178,192Amortization
                of intangible assets
            
            
            161,809
            
            
            1,905,200
            
            
            2,067,009Write-downs
                and settlement costs
            
            
            1,063,238
            
            
            -
            
            
            1,063,238Segmented
                operating income (loss)
            
            
            1,543,570
            
            
            (2,348,751
            )
            
            (805,181
            )Unallocated
                expensesGeneral
                and administration expenses, interests and loss on foreign
                exchange
            
            
            
            
            
            
            
            
            4,282,580Loss
                from continuing operations before income taxes and discontinued
                operations
            
            
            
            
            
            
            
            
            (5,087,761
            )




109





As
                atDecember
                31, 2006**Search/Media**
            
            **Software**
            
            **Total****$**
            
            **$**Property
                and equipment
            
            
            236,175
            
            
            267,653
            
            
            503,828Intangible
                assets
            
            
            67,681
            
            
            6,121,617
            
            
            6,189,298Goodwill
            
            
            846,310
            
            
            14,571,534
            
            
            15,417,8441,150,166
            
            
            20,960,804
            
            
            22,110,970





Geographic
      segment





**2007**
              **$**
            
            **2006**
              **$**
            
            **2005**
              **$****Revenues:**Canada
            
            
            204,820
            
            
            884,494
            
            
            206,446United
                States
            
            
            3,730,229
            
            
            4,682,376
            
            
            7,435,905Europe
            
            
            3,217,451
            
            
            3,728,775
            
            
            1,644,632Australia
            
            
            542,571
            
            
            241,137
            
            
            -Other
            
            
            421,337
            
            
            59,620
            
            
            156,9928,116,408
            
            
            9,596,402
            
            
            9,443,975





**2007**
              **$**
            
            **2006**
              **$**
            
            **2005**
              **$****Long-lived
                assets and goodwill:**Canada
            
            
            10,137,551
            
            
            22,111,970
            
            
            25,455,63710,137,551
            
            
            22,111,970
            
            
            25,455,637





**24**
            **Major
                Customers**




The
      Company has two major customers, each account for more than 10% of the Company's
      sales. Sales for each of them represented approximately 20% (2006 - 22%; 2005
      -
      16%) and 14% (2006 - 11%; 2005 - 11%), respectively, of the Company's sales.
      The
      outstanding accounts receivable from these customers as at December 31, 2007
      amount to approximately 15% (2006 - 20%) and 18% (2006 - 8%), respectively,
      of
      the total accounts receivable.





**25**
            **Commitments**





The
      Company is committed under operating lease agreements. Future minimum payments
      under these leases as at December 31, 2007 are as follows:




**$**2008
              
              
              524,0002009
              
              
              174,0002010
              
              
              56,0002011
              
              
              33,0002012
              
              
              22,000





Other
      commitments




The
      Company maintains director and officer insurance, which may cover certain
      liabilities arising from its obligation to indemnify its directors, and officers
      and former directors, officers and employees of acquired companies, in certain
      circumstances. It is not possible to determine the maximum potential amount
      under these indemnification agreements due to the limited history of prior
      indemnification claims and the unique facts and circumstances involved in each
      particular agreement. Such indemnification agreements may not be subject to
      maximum loss clauses. Historically, the Company has not incurred material costs
      as a result of obligations under these agreements and it has not accrued any
      liabilities related to such indemnification obligations in its financial
      statements.




110


On
      June
      7, 2007, the Company retained ThomasLloyd Capital LLC (“ThomasLloyd Capital”) as
      its financial and investment banking advisor.  In consideration for these
      services, the Company has committed to pay ThomasLloyd Capital a monthly fee
      of
      $5,000 for seven months beginning June 1, 2007, plus a success fee of the
      greater of $1,000,000 (but in no event shall such amount exceed 3% of the
      transaction value) or 2% of the transaction value but in no event to exceed
      $2,000,000 (less any amounts previously paid as monthly fees) plus an additional
      fee of $200,000, credited against the above fees payable upon delivery of a
      fairness opinion.





As
      at
      December 31, 2007, the  Company
      has change of control agreements with certain executive officers. If there
      is a
      change of control of the Company and their employments are not required, the
      Company will have to pay lump sums up to a maximum of $1,018,000 for these
      specific officers.





**26**
            **Financial
                instruments**




**Currency
      risk**





The
      Company operates internationally and is exposed to market risks principally
      from
      changes in foreign currency rates. The Company does not hold any financial
      instruments that mitigate this risk.





**Credit
      risk**





Financial
      instruments which potentially subject the Company to credit risk consist
      principally of cash, short-term investments, temporary investments and accounts
      receivable. The Company’s cash, short-term investments and temporary investments
      are maintained at major financial institutions; therefore, the Company considers
      the risk of non-performance on these instruments to be remote.





The
      Company is exposed to credit risk on accounts receivable from its customers.
      The
      Company performs ongoing credit evaluations of its customers’ financial
      condition and generally requires no collateral from its customers. As at
      December 31, 2007, approximately 54% of accounts receivable are due from four
      customers, as compared to 54% from three customers in the previous
      year.





**Fair
      value of financial instruments**





The
      carrying amounts reflected in the consolidated balance sheets for cash and
      cash
      equivalents, temporary investments, accounts receivable and accounts payable
      and
      accrued liabilities approximate their respective fair values due to the short
      maturities of those instruments. The fair value of the Company’s investments is
      presented in note 9.





**Interest
      rate risk**





As
      at
      December 31, 2007, the Company’s exposure to interest rate risk is summarized as
      follows:





Cash
                and cash equivalents
            Variable
                interest ratesTemporary
                investments
            From
                4.32% to 4.57%Accounts
                receivable
            Non-interest
                bearingAccounts
                payable and accrued liabilities
            Non-interest
                bearingCapital
                lease
            From
                10.41% to 11.45%





**27**
            **United
                States generally accepted accounting
                principles**




As
      a
      registrant with the Securities and Exchange Commission in the United States,
      the
      Company is required to reconcile its financial results for significant
      measurement differences between Canadian GAAP and U.S. GAAP as they specifically
      relate to the Company.





For
      the
      years ended December 31, 2007, 2006 and 2005, the Company does not have any
      significant adjustments to record in order to reconcile its reported net
      earnings (loss) under Canadian GAAP and U.S. GAAP.


111


The
      effects of these adjustments on the consolidated balance sheets of the Company
      are as follows:





**2007**
              **$**
            
            **2006**
              **$****Capital
                stock**Capital
                stock in accordance with Canadian GAAP
            
            
            96,556,485
            
            
            95,298,234Reduction
                of stated capital (b)
            
            
            16,769,570
            
            
            16,769,570Capital
                stock in accordance with U.S. GAAP
            
            
            113,326,055
            
            
            112,067,804**Additional
                paid-in capital**Additional
                paid-in capital in accordance with Canadian GAAP
            
            
            5,784,502
            
            
            5,706,183Stock-based
                compensation costs (c)Cumulative
                effect of prior years
            
            
            1,037,690
            
            
            1,037,690Additional
                paid-in capital in accordance with U.S. GAAP
            
            
            6,822,192
            
            
            6,743,873**Accumulated
                deficit**In
                accordance with Canadian GAAP
            
            
            (87,101,730
            )
            
            (72,670,904
            )Reduction
                of stated capital to deficit (b)
            
            
            (16,769,570
            )
            
            (16,769,570
            )Stock-based
                compensation costs (c)Cumulative
                effect of prior years
            
            
            (1,037,690
            )
            
            (1,037,690
            )Accumulated
                deficit in accordance with U.S. GAAP
            
            
            (104,908,990
            )
            
            (90,478,164
            )**Shareholders’
                equity in accordance with U.S. GAAP**
            
            
            15,800,394
            
            
            28,894,650





a)
            Consolidated
                statement of cash flows




The
      consolidated statement of cash flows was prepared under Canadian GAAP. There
      are
      no measurement differences between Canadian GAAP and U.S. GAAP as they
      specifically apply to the Company.





b)
            Reduction
                of stated capital




Under
      U.S. GAAP, the reduction of stated capital in the amount of $16,769,570
      undertaken by the Company on June 28, 1995 would not be permitted.





c)
            Stock-based
                compensation costs




The
      Company prospectively adopted the fair value method of accounting for stock
      options granted to employees. As a result of this change, there is no difference
      between the Company’s net earnings (loss) for 2007, 2006 and 2005 under U.S.
      GAAP as compared to Canadian GAAP.





For
      all
      fiscal years prior to 2003, under U.S. GAAP, the Company had elected to measure
      stock-based compensation costs using the intrinsic value method (APB 25). Under
      this method, compensation cost is measured as the difference between the fair
      value of the stock at the date of the grant over the exercise price.
      Compensation cost is amortized to expense over the appropriate vesting period.
      Under Canadian GAAP, no such compensation cost was recognized.





The
      Company has conformed with *Share-Based
      Payment* FAS
      123(R) and therefore certain figures have been reclassified
      accordingly.




112


d)
            Non-refundable
                tax credits




Under
      U.S. GAAP, non-refundable tax credits must be presented as a reduction of the
      provision for income taxes. Under Canadian GAAP, these tax credits are presented
      as a reduction of the related research and development expenses. Under U.S.
      GAAP, there would be no change in earnings (loss) from continuing operations
      and
      net earnings (loss) for the year; however, earnings (loss) from continuing
      operations before income taxes and recovery of income taxes under U.S. GAAP
      would be different. Since the Company has not recorded any non-refundable tax
      credits for 2007, 2006 and 2005, a reconciliation is not required.





**28**
            **Subsequent
                events**





**Resignation
      and departure of two officers**





On
      February 11, 2008 the Company announced the departure of Patrick Hopf, Executive
      Vice President of Business Development. 117,134 options held by Mr. Hopf were
      cancelled, resulting in a reversal of employee stock-based compensation expense
      of $48,542 which will be recorded in Q1 2008.





On
      February 8, 2008 the Company announced that its President and Chief Executive
      Officer, Martin Bouchard, tendered his resignation, effective March 3, 2008,
      citing personal reasons. Mr. Bouchard will continue as a member of the board
      of
      directors and has agreed to be available to the Company on a consulting basis.
      155,000 options held by Mr. Bouchard were cancelled, resulting in a reversal
      of
      employee stock-based compensation expense of $49,320 which will be recorded
      in
      Q1 2008. Mr. Marc Ferland, a director of the Company, is appointed President
      and
      CEO commencing on March 3, 2008.




113





**ITEM
      18. FINANCIAL STATEMENTS**





**Not
      applicable.** See
      Item
      17 above.





**ITEM
      19. EXHIBITS**





The
      following are filed in support of the statements contained herein and are in
      addition to those exhibits previously filed with the Commission:




1.1
                Articles
                    of Incorporation of Mamma.com Inc, as amended. (Filed as Exhibit
                    1.1 to
                    the Company’s Form 20-F filed May 31, 2005)1.2
                Bylaws
                    of Mamma.com Inc., as amended. (Filed as Exhibit 1.2 to the Company’s Form
                    20-F filed May 31, 2005)4.1
                Consulting
                    Agreement between Dave Goldman Advisors Ltd. and Intasys Corporation
                    dated
                    October 30, 2001 and renewed on May 1, 2002. (Filed as Exhibit
                    4.4 to the
                    Company’s Form 20-F filed May 31, 2005)4.2
                Consulting
                    Agreement between Maxim Group LLC and Intasys Corporation dated
                    January
                    29, 2003, the Amended Agreement dated May 5, 2003 and the termination
                    letter regarding the investment banking agreement. (Filed as
                    Exhibit 4.5
                    to the Company’s Report on Form 20-F filed May 31, 2005)4.3
                Consulting
                    Agreement between Sam Luft and Intasys Corporation dated April
                    1, 2002 and
                    expired on March 1, 2003. (Filed as Exhibit 4.6 to the Company’s Form 20-F
                    filed May 31, 2005)4.4
                Asset
                    Purchase Agreement dated January 27, 2004 (without Exhibits and
                    Schedules), the Amendment to Asset Purchase Agreement dated February
                    12,
                    2004, the Escrow Agreement dated February 12, 2004 and the Indemnity
                    Agreement dated February 12, 2004 between Mamma.com Inc. and
                    ACE*COMM.
                    (Filed as Exhibit 4.7 to the Company’s Form 20-F filed May 31, 2005)4.5
                Merriman
                    Curhan Ford & Co. Advisory Agreement and Engagement Letter dated March
                    16, 2004 (Filed as Exhibit 4.8 to the Company’s Form 20-F filed May 31,
                    2005)4.6
                Securities
                    Purchase Agreement among the Company, Chris Tsistinas, Erik Kretschmar,
                    Digital Arrow LLC and High Performance Broadcasting, Inc. dated
                    June 10,
                    2004. (Filed as Exhibit 4.9 to the Company’s Report on Form 20-F filed May
                    31, 2005)4.7
                Securities
                    Purchase Agreement among the Company and the several purchasers
                    thereunder
                    dated June 30, 2004. (Filed as Exhibit 4.10 to the Company’s Form 20-F
                    filed May 31, 2005)4.8
                Revised
                    Merriman Curhan Ford & Co. Advisory Agreement and Engagement Letters
                    dated July 16 and September 8, 2004. (Filed as Exhibit 4.11 to
                    the
                    Company’s Form 20-F filed May 31, 2005).4.9
                Amendment
                    to Consulting Agreement among Mamma.com Inc. and Dave Goldman
                    Advisors
                    Ltd. and David Goldman dated May 23, 2005. (Filed as Exhibit
                    4.12 to the
                    Company’s Form 20-F filed May 31, 2005)4.10
                Share
                    Purchase Agreement among Mamma.com Inc., Martin Bouchard, Éric Bouchard,
                    4332903 Canada, Inc., 4332911 Canada, Inc. and others, (Filed
                    as Exhibit
                    99.2 to the Company’s Form 6-K filed December 29, 2005)4.11
                Share
                    Purchase Agreement among Mamma.com Inc., Copernic Technologies,
                    Inc. and
                    others dated December 22, 2005 (Filed as Exhibit 99.3 to the
                    Company’s
                    Form 6-K filed December 29, 2005).4.12*
                Consulting
                    Agreement between ThomasLloyd Capital LLC and Copernic Inc. dated
                    June 7,
                    2007 and expired on December 31, 2007.8.1*
                List
                    of Subsidiaries of Copernic Inc.11
                Code
                    of Ethics (filed as Exhibit 11 to the Company’s Form 20-F filed March 31,
                    2006).12.1*
                Certification
                    of Marc Ferland under Rule 13a-14(a) or Rule 15d-14(a) of the
                    Securities
                    Exchange Act of 1934.
  114
  12.2*
                Certification
                    of Daniel Bertrand under Rule 13a-14(a) or Rule 15d-14(a) of
                    the
                    Securities Exchange Act of 1934.13.1*
                Certifications
                    under Rule 13a-14(a) or Rule 15d-14(a) of the Securities Exchange
                    Act of
                    1934 and Section 1350 of Chapter 18 of Title 18 of the United
                    States
                    Code.15.1*
                Consent
                    of RSM Richter LLP.15.2
                Audit
                    and Finance Committee Charter (filed as Exhibit 15.3 to the Company’s Form
                    20-F filed March 31, 2006).15.3
                Compensation
                    Committee Charter (filed as Exhibit 15.4 to the Company’s Form 20-F filed
                    March 31, 2006).15.4
                Nominating
                    and Corporate Governance Committee Charter (filed as Exhibit
                    15.5 to the
                    Company’s Form 20-F filed March 31,
                    2006).




*Filed as an Exhibit to this Annual Report on Form
                20-F.


115




**SIGNATURES**





Pursuant
      to the requirements of Section 12 of the Securities Exchange Act of 1934, the
      registrant certifies that it meets all requirements for filing an Annual Report
      on Form 20-F and has duly caused this Annual Report to be signed on its behalf.





**Dated:**March
                27, 2008**COPERNIC
                INC.****By:**
            
            /s/
                David GoldmanName:
            
            David
                GoldmanTitle:
            
            Executive
                Chairman/s/
                Marc FerlandName:
            
            Marc
                FerlandTitle:
            
            President
                and Chief Executive Officer/s/
                Daniel BertrandName:
            
            Daniel
                BertrandTitle:
            
            Executive
                Vice President and Chief Financial Officer




116