##### Table of Contents



UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
 Washington, D.C. 20549
 FORM 20-F
  o
    
    REGISTRATION STATEMENT PURSUANT TO SECTION 12(b) OR (g) OF THE
SECURITIES EXCHANGE ACT OF 1934
 OR
 þ
    
    ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
 For the fiscal year ended November 30, 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
 For the transition period from  to
 Commission File Number [000-49944]
 OSI Geospatial Inc.
  British Columbia, Canada
 300-340 March Road
Ottawa, Ontario, Canada K2K 2E4
 John Sentjens, Chief Financial Officer
300-340 March Road
Ottawa, Ontario, Canada K2K 2E4
Telephone: 613-287-8004, Facsimile: 613-287-0466
Email: john.sentjens@osigeospatial.com
  None
  Common Stock, no par value
  None
  
    
    46,956,439 shares of Common Stock, no par value,
    
    30,262 shares of Class A Preference Shares Series A Convertible, no par value
    
    178,530 shares of Class B Series 2 Preference Shares, par value of CAD$50.00
  o þ
  o þ
   þ o
  o o þ
  þ o
  o  o  þ
  þ o
  o þ




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##### 



TABLE OF CONTENTS
 Page #PART IItem 1.
    
    IDENTITY OF DIRECTORS, SENIOR MANAGEMENT AND ADVISERS
    
    1Item 2.
    
    OFFER STATISTICS AND EXPECTED TIMETABLE
    
    1Item 3.
    
    KEY INFORMATION
    
    1Item 4.
    
    INFORMATION ON THE COMPANY
    
    15Item 5.
    
    OPERATING AND FINANCIAL REVIEW AND PROSPECTS
    
    27Item 6.
    
    DIRECTORS, SENIOR MANAGEMENT AND EMPLOYEES
    
    51Item 7.
    
    MAJOR SHAREHOLDERS AND RELATED PARTY TRANSACTIONS
    
    62Item 8.
    
    FINANCIAL INFORMATION
    
    65Item 9.
    
    THE OFFER AND LISTING
    
    66Item 10.
    
    ADDITIONAL INFORMATION
    
    67Item 11.
    
    QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
    
    81Item 12.
    
    DESCRIPTION OF SECURITIES OTHER THAN EQUITY SECURITIES
    
    82PART IIItem 13.
    
    DEFAULTS, DIVIDEND ARREARAGES AND DELINQUENCIES
    
    82Item 14.
    
    MATERIAL MODIFICATIONS TO THE RIGHTS OF SECURITY HOLDERS AND USE OF PROCEEDS
    
    82Item 15.
    
    CONTROLS AND PROCEDURES
    
    83Item 16.
    
    [RESERVED]
    
    83Item 16A.
    
    AUDIT COMMITTEE FINANCIAL EXPERT
    
    84Item 16B.
    
    CODE OF ETHICS
    
    84Item 16C.
    
    PRINCIPAL ACCOUNTANT FEES AND SERVICES
    
    84Item 16D.
    
    EXEMPTIONS FROM LISTING STANDARDS FOR AUDIT COMMITTEES
    
    85Item 16E.
    
    PURCHASES OF EQUITY SECURITIES BY ISSUER AND AFFILIATED PURCHASERS
    
    85PART IIIItem 17.
    
    FINANCIAL STATEMENTS
    
    86Item 18.
    
    FINANCIAL STATEMENTS
    
    86Item 19.
    
    EXHIBITS
    
    87Contract between Mr. Kenneth Kirkpatrick and OSI Geospatial Inc.Contract between Mr. John Sentjens and OSI Geospatial Inc.Contract between Mr. Wayne Hoyle and OSI Geospatial Inc.Contract between Mr. Marco Riano and OSI Geospatial Inc.Contract between Mr. Wayne Zachary and OSI GeospatialContract between Mr. James Liddy and OSI Geospatial Inc.List of Subsidiaries and JurisdictionsCertification of CEO and CFO (S.302 - SOX)Certification of CEO and CEO (S.906 - SOX)




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PART I
      
 Item 1. Identity of Directors, Senior Management and Advisers
  
 Item 2. Offer Statistics and Expected Timetable
  
 Item 3. Key Information
 A. Selected financial data.
  Page 1




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OSI Geospatial Inc.  Selected Consolidated Financial Information  Consolidated Statement of Earnings (Loss) and  Deficit Data
 In thousands of U.S. dollars, except share related data
    
    For the years ended November 30,2007
    
    
    2006
    
    
    2005
    
    
    2004
    
    
    2003(restated)*
    
    
    (restated)*Revenue
    
    
    25,326
    
    
    
    24,137
    
    
    
    11,126
    
    
    
    10,411
    
    
    
    8,102Direct costs
    
    
    15,560
    
    
    
    13,484
    
    
    
    5,696
    
    
    
    4,393
    
    
    
    3,633Gross profit
    
    
    9,766
    
    
    
    10,653
    
    
    
    5,430
    
    
    
    6,018
    
    
    
    4,469Expenses
    
    
    12,580
    
    
    
    10,018
    
    
    
    7,999
    
    
    
    5,825
    
    
    
    4,249Earnings (loss) before income taxes
    
    
    (2,814
    )
    
    
    635
    
    
    
    (2,569
    )
    
    
    193
    
    
    
    220Income tax expense (recovery)
    
    
    60
    
    
    
    (297
    )
    
    
    930
    
    
    
    43
    
    
    
    (106
    )Net earnings (loss) for the period
    
    
    (2,874
    )
    
    
    932
    
    
    
    (3,499
    )
    
    
    150
    
    
    
    326Net earnings (loss) attributable to common shareholders
    
    
    (3,588
    )
    
    
    (82
    )
    
    
    (4,252
    )
    
    
    (50
    )
    
    
    (320
    )Basic earnings (loss) per share
    
    
    (0.09
    )
    
    
    0.00
    
    
    
    (0.15
    )
    
    
    0.00
    
    
    
    (0.01
    )Diluted earnings (loss) per share
    
    
    (0.09
    )
    
    
    0.00
    
    
    
    (0.15
    )
    
    
    0.00
    
    
    
    (0.01
    )Weighted average number of Common Shares outstanding 
basic
    
    
    41,096,261
    
    
    
    32,381,992
    
    
    
    27,989,832
    
    
    
    27,230,561
    
    
    
    25,977,123Weighted average number of Common Shares outstanding
 diluted
    
    
    41,096,261
    
    
    
    48,843,168
    
    
    
    27,989,832
    
    
    
    27,230,561
    
    
    
    27,142,492
 
 *
    
    As a result of certain adjustments identified on conversion of the consolidated financial
statements to Canadian GAAP. See notes 1 and 23 to the consolidated financial statements which are
filed under Item 17  Financial Statements.
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OSI Geospatial Inc.  Selected Consolidated Financial  Information
 In thousands of U.S. dollars, except share related data
    
    As at November 30,2007
    
    
    2006
    
    
    2005
    
    
    2004
    
    
    2003(restated)*
    
    
    (restated)*Working capital
    
    
    7,818
    
    
    
    7,877
    
    
    
    15,245
    
    
    
    6.331
    
    
    
    6,213Total assets
    
    
    26,348
    
    
    
    24,450
    
    
    
    21,202
    
    
    
    10,377
    
    
    
    9,028Total liabilities
    
    
    7,734
    
    
    
    6,669
    
    
    
    4,257
    
    
    
    2,256
    
    
    
    1,775Net assets
    
    
    18,614
    
    
    
    17,781
    
    
    
    16,945
    
    
    
    8,121
    
    
    
    7,253Capital stock
    
    
    25,854
    
    
    
    23,021
    
    
    
    22,203
    
    
    
    13,549
    
    
    
    13,268Outstanding Common Shares
    
    
    46,956,439
    
    
    
    35,137,046
    
    
    
    30,367,309
    
    
    
    27,488,074
    
    
    
    26,807,475Outstanding Class A Preference Shares Series A Convertible
    
    
    30,262
    
    
    
    30,262
    
    
    
    30,262
    
    
    
    30,262
    
    
    
    30,262Outstanding Class B Preference Shares Series 1 Convertible
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    57,711
    
    
    
    61,244Outstanding Class B Preference Shares Series 2 Convertible
    
    
    178,530
    
    
    
    279,840
    
    
    
    341,240
    
    
    
    
    
    
    
    
 
 *
    
    As a result of certain adjustments identified on conversion of the consolidated financial
statements to Canadian GAAP. See notes 1 and 23 to the consolidated financial statements which are
filed under Item 17  Financial Statements.
     Page 3




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Goodwill and Intangible Assets Research and Development Costs)
 Page 4




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In thousands of U.S. dollars except earnings (loss) per share
    
    For the year ended November 30,2007
    
    
    2006
    
    
    2005(restated)*
    
    
    (restated)*Earnings (loss), Canadian GAAP
    
    $
    (2,874
    )
    
    $
    932
    
    
    $
    (3,499
    )Adjustment for stock based compensation (a),(b)
    
    
    
    
    
    
    
    
    
    
    855Future income tax on preferred share issue costs (c)
    
    
    (133
    )
    
    
    (99
    )
    
    
    (19
    )Development costs not eligible for deferral (h)
    
    
    (97
    )
    
    
    
    
    
    
    Part VI.1 tax on dividends paid (d)
    
    
    (12
    )
    
    
    (140
    )
    
    
    (86
    )Earnings (loss), U.S. GAAP
    
    $
    (3,116
    )
    
    $
    693
    
    
    $
    (2,749
    )Loss attributable to common shareholders, U.S.GAAP
    
    $
    (4,381
    )
    
    $
    (825
    )
    
    $
    (9,400
    )Basic loss per common share, U.S. GAAP
    
    $
    (0.11
    )
    
    $
    (0.03
    )
    
    $
    (0.34
    )Diluted loss per common share, U.S. GAAP
    
    $
    (0.11
    )
    
    $
    (0.02
    )
    
    $
    (0.34
    )Weighted average number of common shares  basic,
U.S. GAAP
    
    
    41,096,261
    
    
    
    32,381,992
    
    
    
    27,989,832Weighted average number of common shares 
diluted, U.S. GAAP
    
    
    41,096,261
    
    
    
    48,843,168
    
    
    
    27,989,832
  In thousands of U.S. dollars
    
    At November 30,2007
    
    2006(restated)*Deferred development costs
    
    $
    
    
    
    $
    Common shares (f)
    
    
    24,934
    
    
    
    18,222Class B Series 2 preference shares (e), (f)
    
    
    6,552
    
    
    
    8,695Additional paid in capital (f)
    
    
    2,639
    
    
    
    3,357Accumulated deficit (c), (e), (f)
    
    
    (23,175
    )
    
    
    (19,225
    )
 
 *
    
    As a result of certain adjustments identified on conversion of the consolidated financial
statements to Canadian GAAP. See notes 1 and 23 to the consolidated financial statements which are
filed under Item 17  Financial Statements.
 Dividends declared per share:
    
    During Year ended November 302007
    
    2006
    
    2005
    
    2004
    
    2003In U.S. dollars
    
    $
    
    $
    
    $
    
    $
    
    $Common shares
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Class A preference shares
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Class B preference shares  series 1
    
    
    
    
    
    
    
    
    
    
    2.36
    
    
    
    3.48
    
    
    
    0.67Class B preference shares  series 2
    
    
    1.64
    
    
    
    3.13
    
    
    
    3.52
    
    
    
    
    
    
    
    
  Page 5




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Currency and Exchange Rates
  B . Capitalization and indebtedness .
  C. Reasons for the offer and use of proceeds .
  D. Risk factors.
    The Company depends heavily on government contracts, which are only partially funded, subject to
termination, heavily regulated, and audited. The termination of one or more of these contracts
could have a negative impact on its operations. The contract termination clauses are generally in
favour of the government agencies. Typically the termination clause for convenience is 30 days or
less with the condition that all costs to that date are paid by the government agencies.
   
    
    changes in procurement policies;
 
    
    changes in the structure and management of government departments;
 
    
    budget considerations;
 
    
    changing concepts of national defence;
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
    
    political developments domestically and abroad; and
 
    
    increased protectionism.
  The Company derives a significant amount of revenue from only a few customers. It depends on
national and international governments for a significant portion of sales and the loss of any of
these relationships or a shift in any of these governments funding could have severe consequences
on its financial condition.
  The Companys product lines are not broadly diversified.
  The Company derives a significant portion of its revenues from international sales and are subject
to the risks of doing business in foreign countries.
  
    
    changes in regulatory requirements;
 
    
    domestic and foreign government policies, including requirements to expend a portion of
program funds locally and governmental industrial co-operation requirements;
 
    
    fluctuations in foreign currency exchange rates;
 
    
    the complexity and necessity of dealing with foreign representatives and consultants;
 
    
    imposition of tariffs or embargoes, export controls, and other trade restrictions; and
 
    
    compliance with a variety of foreign laws.
  The Company derives significant revenue from contracts awarded through a competitive bidding
process, which can impose substantial costs upon it. The Company will fail to maintain its
current and projected revenue if it fails to compete effectively.
  Page 7




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
    
    the need to bid on engagements in advance of the completion of their design, which may
result in unforeseen difficulties in executing the engagement and cost overruns;
 
    
    the substantial cost and managerial time and effort that the Company spends to prepare bids
and proposals for contracts that may not be awarded to the Company;
 
    
    the need to accurately estimate the resources and costs that will be required to service
any contract the Company is awarded;
 
    
    the expense and delay that may arise if the Companys competitors protest or challenge
contract awards made to them pursuant to competitive bidding, and the risk that any such
protest or challenge could result in the resubmission of bids on modified specifications, or
in termination, reduction, or modification of the awarded contract; and
 
    
    the opportunity cost of not bidding on and winning other contracts the Company might
otherwise pursue.
  The Companys revenues and costs are affected by fluctuations in the rate of exchange between the
Canadian dollar, which is the functional currency for the Companys Canadian subsidiaries, and the
U.S. dollar, the British pound, the Australian dollar and the Euro.
  The Company has established teaming relationships and strategic partnerships with international
corporations to pursue major international government procurements, and the Companys reputation
and results of operations could be adversely affected by its inability to control their operations.
  
    
    remain in business;
 
    
    maintain the financial stability required to fulfill the requirements of these
international procurements; and
 
    
    continue to consider our products in their business priorities.
  Page 8




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Competition within its markets may reduce the Companys ability to procure future contracts and
sales.
  The Companys ability to procure contracts and gain sales in foreign markets may be negatively
impacted by increasing protectionism of foreign governments.
  The Companys future success will depend on its ability to develop new technologies that achieve
market acceptance.
  
    
    identify emerging technological trends in its market;
 
    
    develop and maintain competitive products;
 
    
    enhance its products by adding innovative features that differentiate its products from
those of its competitors; and
 
    
    manufacture and bring products to market quickly at cost-effective prices.
  Page 9




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The Company depends on the recruitment and retention of qualified personnel, and failure to attract
and retain such personnel could seriously harm its business.
  The loss of any officer or key employee could seriously harm the Companys business.
  The Company depends on foreign sub-contract labour in our mapping operations to maintain a
competitive position in the mapping marketplace.
  
    
    the geopolitical uncertainties specific to the home country of each sub-contractor;
 
    
    the cultural compatibility between Canada and the home country of each sub-contractor;
 
    
    the English language proficiency of the labour resources made available to the Company;
 
    
    labour pool characteristics such as work ethic, education, skill level, and attrition; and
 
    
    the infrastructure of both the sub-contractors home country and the sub-contractor.
  The Company may be unable to adequately protect its intellectual property rights, which could
affect its ability to compete.
  The Companys operations depend on component availability and its key suppliers to manufacture and
deliver the Companys products and services.
  Page 10




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The Company may not be able to meet the delivery terms or budgeted costs of its firm fixed price
contracts.
  The unpredictability of the Companys results may harm or contribute to the volatility of the
trading price of its common stock.
  
    
    the volume and timing of product orders received and delivered;
 
    
    levels of product demand;
 
    
    government and corporate spending patterns;
 
    
    the timing of contract receipt and funding, and the resulting impact on its working capital
position;
 
    
    its ability, and the ability of our key suppliers, to respond to changes in customer
orders;
 
    
    the timing of its new product introductions and its competitors new product introductions;
 
    
    the cost and availability of components and subsystems;
 
    
    price erosion;
 
    
    the adoption of new technologies and industry standards;
 
    
    competitive factors, including pricing, availability, and demand for competing products;
 
    
    fluctuations in foreign currency exchange rates; and
 
    
    regulatory developments.
 Sales of a significant number of shares of the Companys common stock by existing shareholders
could cause the market price of its common stock to decline.
  U.S. investors may not be able to enforce their civil liabilities against the Company or its
Directors and officers.
  Page 11




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The Company may pursue strategic relationships, investment, and acquisitions. The Company may not
be able to successfully manage its operations if it fails to successfully integrate the acquired
technologies and/or businesses.
  
    
    difficulty in integrating the third-party product with the Companys products;
 
    
    undiscovered software errors in the third-party product;
 
    
    difficulties in selling the third-party product;
 
    
    difficulties in providing satisfactory support for the third-party product;
 
    
    potential infringement claims from the use of the third-party product; and
 
    
    discontinuation of third-party product lines.
  
    
    issues related to product transition (such as development, distribution and customer
support);
 
    
    the substantial management time devoted to such activities;
 
    
    the potential disruption of the Companys ongoing business;
 
    
    undisclosed liabilities;
 
    
    failure to realize anticipated benefits (such as synergies and cost savings);
 
    
    the difficulty of integrating previously distinct businesses into one business unit; and
 
    
    technological uncertainty regarding the current and future functionality of the product.
 The Company may require additional capital, in which case it may need to raise additional funds
from lenders and equity markets in the future.
  The Companys business could be adversely affected if it fails to manage our growth effectively.
  
    
    improve its financial and management controls, reporting systems, and procedures;
 
    
    add and integrate new senior management personnel;
 
    
    improve its licensing models and procedures;
 
    
    hire, train, and retain qualified employees;
 
    
    maintain sufficient working capital;
 Page 12




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
    
    control expenses;
 
    
    diversify channel sales strategies; and
 
    
    invest in its internal networking infrastructure and facilities.
  Third parties may claim that the Company has infringed their proprietary rights.
   The Company may not be able to protect our proprietary information.
  The Companys products may contain significant defects, which may result in liability and/or
decreased sales.
  The Companys products depend on third-party software products and the Companys reputation and
results of operations could be adversely affected by its inability to control their operations.
 Page 13




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
    
    remain in business;
 
    
    support the Companys product lines;
 
    
    maintain viable and functional product lines; and
 
    
    make their product lines available to the Company on commercially acceptable terms.
    The Company is subject to various government audits, which may result in unfavourable assessments
or penalties to the Company.
  Page 14




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Item 4. Information on the Company
 A. History and development of the Company.
 The Company
 Company Act Company Act Business Corporations Act
 a)
    
    by increasing the number of authorized Common Shares from 100,000,000
to an unlimited number;b)
    
    to create a new series of 10,000,000 shares designated as Class B
Series 2 Preference Shares;c)
    
    to create a new class of unlimited number of shares of Class C
Preference Shares which may be issued in series; andd)
    
    to replace the Companys Articles with new Articles.
   History
     Page 15




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Page 16




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Business Development
     Recent Financing and Acquisitions
    Page 17




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B. Business overview
 Business Units
    Page 18




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Principal Products and Services
  Electronic Chart Precise Integrated Navigation System (ECPINS®)
     Projects
  Page 19




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Common Operational Picture (COP) Products
   
    
    COP- TDS: a tactical display server that provides track, target and tactical
information such as mission and operational data; and
    
    COP-WDS: an open GIS WMS compliant web map server.
  Warship Automatic Identification Systems (W-AIS)
  Asset Control and Tracking (ACT)
  C3Core
  iGEN
  Page 20




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Small Unit Situational Awareness System (SUSA)
  Mapping
  Seasonality
  Major Customers
  Geographic Markets
   In thousands of U.S. dollars
    
    2007
    
    2006
    
    2005Europe
    
    $
    5,899
    
    
    $
    6,816
    
    
    $
    4,093Australia/New Zealand
    
    
    910
    
    
    
    1,200
    
    
    
    2,149United States
    
    
    15,678
    
    
    
    13,717
    
    
    
    2,410Canada
    
    
    2,839
    
    
    
    2,404
    
    
    
    2,415Other
    
    
    
    
    
    
    
    
    
    
    59Total
    
    $
    25,326
    
    
    $
    24,137
    
    
    $
    11,126
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In thousands of U.S. dollars
    
    2007
    
    2006
    
    2005International Systems Operations
    
    $
    8,214
    
    
    $
    9,518
    
    
    $
    8,181U.S. Systems Operations
    
    
    12,708
    
    
    
    10,517
    
    
    
    Mapping Operations
    
    
    4,404
    
    
    
    4,102
    
    
    
    2,945Total
    
    $
    25,326
    
    
    $
    24,137
    
    
    $
    11,126
 Sources and Availability of Components
  Sales, Marketing and Distribution
    
    
    Surface Navy Show in January, 2007 in Arlington, VA
    
    Surface Navy League from January 10 to 12 in Washington, DC
    
    London Boat Show from January 6 to 14 in London, England
    
    DGI 2007 from January 23 to 24 in London, England
    
    Directorate Equipment Capability Workshop on February 1 in London, England
    
    Sea-Air-Space Expo from April 3 to 4 in Washington, DC
    
    CanSec from April 5 to 6 in Ottawa, ON
    
    IMDEX from May 15 to 18 in Singapore
    
    Future Naval Plans and Requirements 2007 from May 23 to 25 in London, England
    
    UDT from June 5 to 7 in Naples, Italy
    
    MACC from June 5 to 7 in Norfolk, VA
    
    Norshipping from June 12 to 15 in Oslo, Norway
    
    DSEi from September 15 to 18 in London, England
 Competition
 Electronic Chart Precise Integrated Navigation System (ECPINS®)
  Page 22




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Common Operational Picture (COP) Products
  Warship Automatic Identification Systems (W-AIS)
  iGEN
  C3Core
 st
 Page 23




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Mapping
    Trademarks and Intellectual Property Rights
   Government Regulations
  Research and Product Development
  Page 24




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Plan of Operation
  C. Organizational structure.
  
 
  D. Property, plants and equipment.
 Human Resources and Facilities
  Page 25




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##### Table of Contents



Size ofPropertyLocation
    
    (Square Feet)
    
    Major UseBurnaby, British Columbia, Canada
    
    
    12,766
    
    
    Headquarters for OSL Systems Ltd.Ottawa, Ontario, Canada
    
    
    2,506
    
    
    Corporate headquarters for the CompanySalt Lake City, Utah, USA
    
    
    2,983
    
    
    Professional office work for Mapcon Mapping Inc.Fort Washington, Pennsylvania, USA
    
    
    11,800
    
    
    Headquarters for CHI Systems, Inc.San Diego, California, USA
    
    
    7,950
    
    
    Professional office work for CHI Systems, Inc.Orlando, Florida, USA
    
    
    2,787
    
    
    Professional office work for CHI Systems, Inc.Norfolk, Virginia, USA
    
    
    4,972
    
    
    Office space for Layered Security Solutions
    In thousands of U.S. dollars
    
    November 30, 2007Canada
    
    U.S.
    
    TotalEquipment
    
    $
    880
    
    
    $
    189
    
    
    $
    1,069Furniture and fixtures
    
    
    62
    
    
    
    112
    
    
    
    174Leasehold improvements
    
    
    646
    
    
    
    25
    
    
    
    671Total
    
    $
    1,588
    
    
    $
    326
    
    
    $
    1,914
  Page 26




---



##### Table of Contents



In thousands of U.S. dollars
    
    As at November 30, 2007AccumulatedCost
    
    
    depreciation
    
    
    NetEquipment
    
    $
    5,468
    
    
    $
    4,399
    
    
    $
    1,069Furniture and fixtures
    
    
    728
    
    
    
    554
    
    
    
    174Leasehold improvements
    
    
    751
    
    
    
    80
    
    
    
    671$
    6,947
    
    
    $
    5,033
    
    
    $
    1,914
 In thousands of U.S. dollars
    
    As at November 30, 2006AccumulatedCost
    
    
    depreciation
    
    
    NetEquipment
    
    $
    4,638
    
    
    $
    3,713
    
    
    $
    925Furniture and fixtures
    
    
    599
    
    
    
    482
    
    
    
    117Leasehold improvements
    
    
    300
    
    
    
    253
    
    
    
    47$
    5,537
    
    
    $
    4,448
    
    
    $
    1,089
 Environmental Protection Requirements
  Item 4A. Unresolved Staff Comments
  
 Item 5. Operating and Financial Review and Prospects
 Forward-Looking Statements
   Page 27




---



##### Table of Contents



A. Operating results
   Overview
   Critical Accounting Policies
   Financial Instruments  Recognition and Measurement Financial Instruments  Presentation and Disclosure Hedges Comprehensive Income
 Page 28




---



##### Table of Contents



(i) Financial Instruments  Recognition and Measurement
     (ii) Hedges
  (iii) Comprehensive Income
   Page 29




---



##### Table of Contents



Revenue recognition
 International Systems Operations and US Systems Operations
       Page 30




---



##### Table of Contents



Mapping Operations
   Unbilled revenue
  Unearned revenue
  Accounts Receivable
  Inventory
  Page 31




---



##### Table of Contents



Income Taxes
  Stock-Based Compensation and Other Stock-Based Payments
   Goodwill
  Impact of Recent Accounting Pronouncements
  Financial Instruments  Disclosure Financial Instruments  Presentation
 Capital Disclosures
 Page 32




---



##### Table of Contents



Inventories Inventories
 Goodwill and Intangible Assets Goodwill and Other Intangibles Research and Development Costs.
  RESULTS OF OPERATIONS  November 30, 2007 compared to November 30, 2006
 Overall Performance
 In thousands of U.S. dollars
    
    2007
    
    
    2006
    
    
    2007 to 2006(restated)*Net earnings (loss) before
income taxes
    
    $
    (2,814
    )
    
    $
    635
    
    
    $
    (3,449
    )Net earnings (loss)
    
    $
    (2,874
    )
    
    $
    932
    
    
    $
    (3,806
    )Net loss attributable to
common shareholders
    
    $
    (3,588
    )
    
    $
    (82
    )
    
    $
    (3,506
    )Loss per share  basic
    
    $
    (0.09
    )
    
    $
    (0.00
    )
    
    $
    (0.09
    )Loss per share  diluted
    
    $
    (0.09
    )
    
    $
    (0.00
    )
    
    $
    (0.09
    )
 
 *
    
    As a result of certain adjustments identified on conversion of the consolidated financial
statements to Canadian GAAP. See notes 1 and 23 to the consolidated financial statements which are
filed under Item 17  Financial Statements.
  Revenue
 % of
    
    
    
    
    
    
    % oftotal
    
    
    
    
    
    
    totalIn thousands of U.S. dollars
    
    2007
    
    
    revenue
    
    
    2006
    
    
    revenue
    
    
    2007 to 2006Marine systems
    
    $
    10,219
    
    
    
    40
    %
    
    $
    11,274
    
    
    
    47
    %
    
    $
    (1,055
    )Land and air systems
    
    
    10,703
    
    
    
    42
    %
    
    
    8,761
    
    
    
    36
    %
    
    
    1,942Mapping
    
    
    4,404
    
    
    
    18
    %
    
    
    4,102
    
    
    
    17
    %
    
    
    302$
    25,326
    
    
    
    100
    %
    
    $
    24,137
    
    
    
    100
    %
    
    $
    1,189
 ® ®
 Page 33




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##### Table of Contents



Revenue by Segment
 % of
    
    
    
    
    
    
    % oftotal
    
    
    
    
    
    
    totalIn thousands of U.S. dollars
    
    2007
    
    
    revenue
    
    
    2006
    
    
    revenue
    
    
    2007 to 2006International Systems
operations
    
    $
    8,214
    
    
    
    33
    %
    
    $
    9,518
    
    
    
    39
    %
    
    $
    (1,304
    )U.S. Systems operations
    
    
    12,708
    
    
    
    50
    %
    
    
    10,517
    
    
    
    44
    %
    
    
    2,191Mapping operations
    
    
    4,404
    
    
    
    17
    %
    
    
    4,102
    
    
    
    17
    %
    
    
    302$
    25,326
    
    
    
    100
    %
    
    $
    24,137
    
    
    
    100
    %
    
    $
    1,189
     Gross Profit
 In thousands of U.S. dollars
    
    2007
    
    
    2006
    
    
    2007 to 2006Gross profit
    
    $
    9,766
    
    
    $
    10,653
    
    
    $
    (887
    )Gross profit percentage
    
    
    39
    %
    
    
    44
    %
    
    
    (5
    )%
  Page 34




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##### Table of Contents



Gross Profit by Segment
 In thousands of U.S. dollars
    
    2007
    
    
    2006
    
    
    2007 to 2006Gross profit:International Systems operations
    
    $
    4,070
    
    
    $
    5,963
    
    
    $
    (1,893
    )U.S. Systems operations
    
    
    4,204
    
    
    
    3,350
    
    
    
    854Mapping operations
    
    
    1,492
    
    
    
    1,340
    
    
    
    152Consolidated operations
    
    $
    9,766
    
    
    $
    10,653
    
    
    $
    (887
    )
 Gross profit percentage:
 2007
    
    
    2006
    
    
    2007 to 2006International Systems operations
    
    
    50
    %
    
    
    63
    %
    
    
    (13
    )%U.S. Systems operations
    
    
    33
    %
    
    
    32
    %
    
    
    1
    %Mapping operations
    
    
    34
    %
    
    
    33
    %
    
    
    1
    %Consolidated operations
    
    
    39
    %
    
    
    44
    %
    
    
    (5
    )%
    1.
    
    the proportion of production services that are performed in-house versus subcontracted
to either specialized production service companies in North America or offshore production
companies in India or China, and2.
    
    the customers primary driver, being either price or quality.
  Page 35




---



##### Table of Contents



Operating Expenses
 % of
    
    
    
    
    
    
    % oftotal
    
    
    
    
    
    
    totalIn thousands of U.S. dollars
    
    2007
    
    
    revenue
    
    
    2006
    
    
    revenue
    
    
    2007 to 2006General and
administrative
    
    $
    6,175
    
    
    
    24
    %
    
    $
    5,712
    
    
    
    24
    %
    
    $
    463Engineering
    
    
    1,361
    
    
    
    5
    %
    
    
    1,783
    
    
    
    7
    %
    
    
    (422
    )Sales and marketing
    
    
    3,859
    
    
    
    15
    %
    
    
    2,527
    
    
    
    10
    %
    
    
    1,332
 General and administrative
  Engineering
  Sales and marketing
  Amortization
 In thousands of U.S. dollars
    
    2007
    
    
    2006
    
    
    2007 to 2006Amortization
    
    $
    554
    
    
    $
    773
    
    
    $
    (219
    )
  Page 36




---



##### Table of Contents



Interest expense
 In thousands of U.S. dollars
    
    2007
    
    
    2006
    
    
    2007 to 2006Interest expense
    
    $
    70
    
    
    $
    21
    
    
    $
    49
  Interest income
 In thousands of U.S. dollars
    
    2007
    
    
    2006
    
    
    2007 to 2006Interest income
    
    $
    7
    
    
    $
    37
    
    
    $
    (30
    )
  Foreign Exchange
 In thousands of U.S. dollars
    
    2007
    
    
    2006
    
    
    2007 to 2006Foreign exchange loss (gain)
    
    $
    316
    
    
    $
    (233
    )
    
    $
    (549
    )
  Technology Partnerships Canada
 In thousands of U.S. dollars
    
    2007
    
    
    2006
    
    
    2007 to 2006Royalty
    
    $
    471
    
    
    $
    493
    
    
    $
    (22
    )Contribution
    
    
    
    
    
    
    (760
    )
    
    
    (760
    )
    Page 37




---



##### Table of Contents



Income Taxes
 In thousands of U.S. dollars
    
    2007
    
    
    2006
    
    
    2007 to 2006(restated)*Future income tax expense (recovery)
    
    $
    (298
    )
    
    $
    (364
    )
    
    $
    66Current income tax expense
    
    
    358
    
    
    
    67
    
    
    
    291$
    60
    
    
    $
    (297
    )
    
    $
    357
 
 *
    
    As a result of certain adjustments identified on conversion of the consolidated financial
statements to Canadian GAAP. See notes 1 and 23 to the consolidated financial statements which are
filed under Item 17  Financial Statements.
   Backlog
       Page 38




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##### Table of Contents



RESULTS OF OPERATIONS  November 30 2006 compared to November 30, 2005
 Overall Performance
 In thousands of U.S. dollars
    
    2006
    
    
    2005
    
    
    2006 to 2005(restated)*
    
    
    (restated)*Net earnings (loss) before
income taxes
    
    $
    635
    
    
    $
    (2,569
    )
    
    $
    3,204Net earnings (loss)
    
    $
    932
    
    
    $
    (3,499
    )
    
    $
    4,431Net loss attributable to
common shareholders
    
    $
    (82
    )
    
    $
    (4,252
    )
    
    $
    (4,170
    )Loss per share  basic
    
    
    (0.00
    )
    
    
    (0.15
    )
    
    
    0.15Loss per share  diluted
    
    $
    (0.00
    )
    
    $
    (0.15
    )
    
    $
    0.15
 
 *
    
    As a result of certain adjustments identified on conversion of the consolidated financial
statements to Canadian GAAP. See notes 1 and 23 to the consolidated financial statements which are
filed under Item 17  Financial Statements.
  Revenue
 % of
    
    
    
    
    
    
    % oftotal
    
    
    
    
    
    
    totalIn thousands of U.S. dollars
    
    2006
    
    
    revenue
    
    
    2005
    
    
    revenue
    
    
    2006 to 2005Marine systems
    
    $
    11,274
    
    
    
    47
    %
    
    $
    8,181
    
    
    
    74
    %
    
    $
    3,093Land and air systems
    
    
    8,761
    
    
    
    36
    %
    
    
    
    
    
    
    
    
    
    
    8,761Mapping
    
    
    4,102
    
    
    
    17
    %
    
    
    2,945
    
    
    
    26
    %
    
    
    1,157$
    24,137
    
    
    
    100
    %
    
    $
    11,126
    
    
    
    100
    %
    
    $
    13,011
 ® ®
   Page 39




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##### Table of Contents



Revenue by Segment
 % of
    
    
    
    
    
    
    
    % oftotal
    
    
    
    
    
    
    
    totalIn thousands of U.S. dollars
    
    2006
    
    
    revenue
    
    
    2005
    
    
    revenue
    
    
    2006 to 2005International Systems
operations
    
    $
    9,518
    
    
    
    39
    %
    
    $
    8,181
    
    
    
    74
    %
    
    $
    1,337U.S. Systems operations
    
    
    10,517
    
    
    
    44
    %
    
    
    
    
    
    
    
    
    
    
    10,517Mapping operations
    
    
    4,102
    
    
    
    17
    %
    
    
    2,945
    
    
    
    26
    %
    
    
    1,157$
    24,137
    
    
    
    100
    %
    
    $
    11,126
    
    
    
    100
    %
    
    $
    13,011
     Gross Profit
 In thousands of U.S. dollars
    
    2006
    
    
    2005
    
    
    2006 to 2005Gross profit
    
    $
    10,653
    
    
    $
    5,430
    
    
    $
    5,223Gross profit percentage
    
    
    44
    %
    
    
    49
    %
    
    
    (5
    )%
  Gross Profit by Segment
 In thousands of U.S. dollars
    
    2006
    
    
    2005
    
    
    2006 to 2005Gross profit:International Systems operations
    
    $
    5,963
    
    
    $
    4,381
    
    
    $
    1,582U.S. Systems operations
    
    
    3,350
    
    
    
    
    
    
    
    3.350Mapping operations
    
    
    1,340
    
    
    
    1,049
    
    
    
    291Consolidated operations
    
    $
    10,653
    
    
    $
    5,430
    
    
    $
    5,223
 Page 40




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##### Table of Contents



Gross profit percentage:
 2006
    
    2005
    
    2006 to 2005International Systems operations
    
    
    63
    %
    
    
    54
    %
    
    
    9
    %U.S. Systems operations
    
    
    32
    %
    
    
    
    
    
    
    32
    %Mapping operations
    
    
    33
    %
    
    
    36
    %
    
    
    (3
    )%Consolidated operations
    
    
    44
    %
    
    
    49
    %
    
    
    (5
    )%
    Operating Expenses
 % of
    
    
    
    
    
    
    % oftotal
    
    
    
    
    
    
    totalIn thousands of U.S. dollars
    
    2006
    
    
    revenue
    
    
    2005
    
    
    revenue
    
    
    2006 to 2005General and administrative
    
    $
    5,712
    
    
    
    24
    %
    
    $
    4,759
    
    
    
    43
    %
    
    $
    953Engineering
    
    
    1,783
    
    
    
    7
    %
    
    
    1,527
    
    
    
    14
    %
    
    
    256Sales and marketing
    
    
    2,527
    
    
    
    10
    %
    
    
    2,354
    
    
    
    21
    %
    
    
    173
 General and administrative
  Engineering
  Sales and marketing
 Page 41




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##### Table of Contents



Amortization
 In thousands of U.S. dollars
    
    2006
    
    
    2005
    
    
    2006 to 2005Amortization
    
    $
    773
    
    
    $
    404
    
    
    $
    369
  Interest expense
 In thousands of U.S. dollars
    
    2006
    
    
    2005
    
    
    2006 to 2005Interest expense
    
    $
    21
    
    
    $
    23
    
    
    $
    (2
    )
  Interest income
 In thousands of U.S. dollars
    
    2006
    
    
    2005
    
    
    2006 to 2005Interest income
    
    $
    37
    
    
    $
    156
    
    
    $
    (119
    )
  Foreign Exchange
 In thousands of U.S. dollars
    
    2006
    
    
    2005
    
    
    2006 to 2005Foreign exchange (gain) loss
    
    $
    (233
    )
    
    $
    90
    
    
    $
    (323
    )
  Page 42




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##### Table of Contents



Technology Partnerships Canada
 In thousands of U.S. dollars
    
    2006
    
    
    2005
    
    
    2006 to 2005Royalty
    
    $
    493
    
    
    $
    243
    
    
    $
    250Contribution
    
    
    (760
    )
    
    
    (1,090
    )
    
    
    330
    Income Taxes
 In thousands of U.S. dollars
    
    2006
    
    2005
    
    2006 to 2005(restated)*
    
    (restated)*Future income tax expense (recovery)
    
    $
    (364
    )
    
    $
    726
    
    
    $
    (1,090
    )Current income tax expense
    
    
    67
    
    
    
    204
    
    
    
    (137
    )$
    (297
    )
    
    $
    930
    
    
    $
    (1,227
    )
 
 *
    
    As a result of certain adjustments identified on conversion of the consolidated financial
statements to Canadian GAAP. See notes 1 and 23 to the consolidated financial statements which are
filed under Item 17  Financial Statements.  Page 43




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##### Table of Contents



Backlog
       B. Liquidity and capital resources
 November 30, 2007 compared to November 30, 2006
 In thousands of U.S. dollars
    
    2007
    
    
    2006
    
    
    2007 to 2006Cash and cash equivalents
    
    $
    
    
    
    $
    
    
    
    $
    Current assets
    
    
    14,905
    
    
    
    14,436
    
    
    
    469Current liabilities
    
    
    7,087
    
    
    
    6,559
    
    
    
    528Working capital(1)
    
    
    7,818
    
    
    
    7,877
    
    
    
    (59
    )
 
 (1)
    
    Working capital is defined as current assets less current liabilities. Working
capital does not have a standardized meaning or comparable measure under Canadian generally
accepted accounting principles and may not be comparable to similar measures presented by other
companies.  Page 44




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##### Table of Contents



Cash Flows
 In thousands of U.S. dollars
    
    2007
    
    
    2006
    
    
    2007 to 2006Cash flows provided by (used in):Operating activities
    
    $
    (1,456
    )
    
    $
    157
    
    
    $
    (1,613
    )Investing activities
    
    
    (1,432
    )
    
    
    (8,484
    )
    
    
    7,052Financing activities
    
    
    2,905
    
    
    
    (44
    )
    
    
    2,949Effect of foreign exchange on cash
    
    
    (17
    )
    
    
    149
    
    
    
    (166
    )
   Page 45




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##### Table of Contents



November 30 2006 compared to November 30, 2005
 In thousands of U.S. dollars
    
    2006
    
    
    2005
    
    
    2006 to 2005Cash and cash equivalents
    
    $
    
    
    
    $
    8,222
    
    
    $
    (8,222
    )Current assets
    
    
    14,436
    
    
    
    19,301
    
    
    
    (4,865
    )Current liabilities
    
    
    6,559
    
    
    
    4,056
    
    
    
    2,503Working capital(1)
    
    
    7,877
    
    
    
    15,245
    
    
    
    (7,368
    )
 
 (1)
    
    Working capital is defined as current assets less current liabilities. Working
capital does not have a standardized meaning or comparable measure under Canadian generally
accepted accounting principles and may not be comparable to similar measures presented by other
companies.   Page 46




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##### Table of Contents



Cash Flows
 In thousands of U.S. dollars
    
    2006
    
    
    2005
    
    
    2006 to 2005Cash flows provided by (used in):Operating activities
    
    $
    157
    
    
    $
    (1,717
    )
    
    $
    1,874Investing activities
    
    
    (8,484
    )
    
    
    (1,448
    )
    
    
    (7,036
    )Financing activities
    
    
    (44
    )
    
    
    10,729
    
    
    
    (10,773
    )Translation adjustment
    
    
    149
    
    
    
    446
    
    
    
    (297
    )
      C. Research and development, patents and licenses, etc.
 Research and Development
  Patents and Licenses, etc.
  Page 47




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##### Table of Contents



® ®
  D. Trend information.
   November 30
    
    
    August 31
    
    
    May 31
    
    
    February 28For the three months ended
    
    2007
    
    
    2007
    
    
    2007
    
    
    2007Revenue
    
    $
    8,276
    
    
    $
    7,342
    
    
    $
    6,138
    
    
    $
    3,570Gross profit
    
    
    3,593
    
    
    
    3,048
    
    
    
    2,455
    
    
    
    670Gross profit percentage
    
    
    43
    %
    
    
    42
    %
    
    
    40
    %
    
    
    19
    %Net earnings (loss)
    
    
    (798
    )
    
    
    279
    
    
    
    (366
    )
    
    
    (1,989
    )Net earnings (loss) attributable to
common shareholders
    
    
    (960
    )
    
    
    109
    
    
    
    (748
    )
    
    
    (2,180
    )Loss per share  basic and diluted
    
    
    (0.02
    )
    
    
    0.00
    
    
    
    (0.02
    )
    
    
    (0.06
    )
  November 30
    
    
    August 31
    
    
    May 31
    
    
    February 28For the three months ended
    
    2006
    
    
    2006
    
    
    2006
    
    
    2006(restated)*
    
    
    (restated)*
    
    
    (restated)*
    
    
    (restated)*Revenue
    
    $
    10,018
    
    
    $
    4,714
    
    
    $
    5,742
    
    
    $
    3,663Gross profit
    
    
    5,461
    
    
    
    1,801
    
    
    
    2,197
    
    
    
    1,194Gross profit percentage
    
    
    55
    %
    
    
    38
    %
    
    
    38
    %
    
    
    33
    %Net earnings (loss)
    
    
    2,785
    
    
    
    (311
    )
    
    
    (311
    )
    
    
    (1,231
    )Net earnings (loss) attributable to
common shareholders
    
    
    2,560
    
    
    
    (574
    )
    
    
    (837
    )
    
    
    (1,231
    )Loss per share  basic
    
    
    0.08
    
    
    
    0.02
    
    
    
    (0.03
    )
    
    
    (0.04
    )Loss per share  diluted
    
    
    0.05
    
    
    
    0.02
    
    
    
    (0.03
    )
    
    
    (0.04
    )
 
 *
    
    As a result of certain adjustments identified on conversion of the consolidated financial
statements to Canadian GAAP. See notes 1 and 23 to the consolidated financial statements for more
information. In addition, a restatement occurred as a result of a correction in the application of
revenue recognition and $398,000 of revenue was moved from the quarter ended May 31, 2006 to the
quarter ended August 31, 2006. Prior to these restatements, revenue and net earnings (loss) for the
quarter ended May 31, 2006 was $6.1 million and ($439,000) respectively, and revenue and net
earnings (loss) for the quarter ended August 31, 2006 was $4.3 million and ($972,000) respectively. Page 48




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##### Table of Contents



Sales Contracts 
 Product mix  ®
 Strategic acquisitions
 Customers 
 Foreign Exchange
 Accounting Pronouncement
 E. Off-balance sheet arrangements
 Derivatives
   Page 49




---



##### Table of Contents



Sell
    
    Exchange rate in relation to CAD
    
    Value dateGBP 1,330,000
    
    1.9533 to 2.0509
    
    February 6, 2008 to
September 19, 2008USD 2,200,000
    
    0.9493 to 0.9994
    
    January 14, 2008 to
March 20, 2008
 Guarantees
   F. Tabular disclosure of contractual obligations.
  In thousands of U.S. dollars
    
    Payments due by periodLess than
    
    
    1 to 3
    
    
    3 to 5
    
    
    More than 5Total
    
    
    1 year
    
    
    years
    
    
    years
    
    
    yearsLong-term debt obligations
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Capital lease obligations
    
    $
    312
    
    
    $
    89
    
    
    $
    163
    
    
    $
    60
    
    
    $
    Operating lease obligations
    
    $
    4,386
    
    
    $
    884
    
    
    $
    1,440
    
    
    $
    946
    
    
    $
    1,116Purchase obligations
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Other long-term liabilities
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Total
    
    $
    4,698
    
    
    $
    973
    
    
    $
    1,603
    
    
    $
    1,006
    
    
    $
    1,116
  Page 50




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##### Table of Contents



G. Safe Harbor
   
 Item 6. Directors, Senior Management and Employees
 A. Directors and Senior Management.
  Number andPercentage ofVoting SharesBeneficially Ownedor Controlled byDirectors andName and
    
    Principal Occupation
    
    
    
    Officers on AprilOffice Held
    
    For Past Five Years
    
    Director Since
    
    25, 2008(a)RAYMOND JOHNSTON
Director,
Chair of the Board,
Québec, Canada
    
    1999 to present:
President of Chamber of
Marine Commerce, an
entity which promotes
the interests of the
commercial marine
industry in Canada.
    
    11/14/00
(and from 12/94 to 9/98)
    
    274,000 common
shares (includes
220,000 options to
purchase common
shares)May 1992 to June 1999:
CEO of Canada Steamship
Lines
    
    
    
    0.6% of common sharesHELMUT F. LOBMEIER
Director
    
    2001 to present: Retired
    
    4/26/90
    
    951,695 common
shares (includes
220,000 options toBritish Columbia, Canada
    
    1979 to 2001: Co-owner
PSL Steel Ltd., and
Independent Businessman
    
    
    
    purchase common shares)2.0% of common shares
 Page 51




---



##### Table of Contents



Number andPercentage ofVoting SharesBeneficially Ownedor Controlled byDirectors andName and
    
    Principal Occupation
    
    
    
    Officers on AprilOffice Held
    
    For Past Five Years
    
    Director Since
    
    25, 2008(a)WALTER P. PURIO
Director
Western Australia, Australia
    
    2007 to present:
Principal, Fremantle
Maritime Simulation
Centre, Pty
    
    1/14/99
    
    225,000 common
shares (includes
220,000 options to
purchase common
shares)2006 to present:Shipmaster, APL
Maritime, Ltd1993 to 2000:
President, P and H
Marine Associates, Inc.
    
    
    
    0.5% of common shares1985 to 2006:Shipmaster , General
Dynamics, AMSEAGERALD J. SHIELDS
Director
British Columbia, Canada
    
    2006 to present:
Principal, Providia
Investment Group
    
    4/08/05
    
    270,000 common
shares (includes
220,000 options to
purchase common
shares)2005 to 2006: Lawyer
engaged in private
practice with the firm
of Clark Wilson LLP1998 to 2005: Lawyer
engaged in private
practice with the firm
of Godinho Sinclair
Shields
    
    
    
    0.6% of common sharesKENNETH H. KIRKPATRICK
Director
President and Chief Executive Officer 
Ontario, Canada
    
    2005 to present:
President and Chief
Executive Officer, OSI
Geospatial Inc.
    
    11/07/05
    
    363,833 common
shares (includes
308,333 options to
purchase common
shares)2005: Chief Operating
Officer, OSI Geospatial
Inc.
    
    
    
    0.8% of common shares2001 to 2005: Vice
President, Operations,
OSI Geospatial Inc.1997 to 2001: Vice
President and Chief
Operating Officer,
Triathlon Ltd.
subsidiary of MacDonald
Dettwiler & AssociatesJOSEPH A. STROUD
Director 
Virginia, United States
    
    2005 to April 9, 2008:
Partner at General
Management Partners,
LLC
    
    03/15/06
    
    198,750 common
shares (includes
98,750 options to
purchase common
shares)1997 to 2007:
Partner/Consultant at
J.F. Lehman Equity
Investors I, LLP
    
    
    
    0.4% of common sharesDONALD W. YOUNG
Director 
British Columbia, Canada
    
    February 2007 to
present: Independent
Business Advisor
    
    03/15/06
    
    150,750 common
shares (includes
98,750 options to
purchase common
shares)Oct 2005 to January
2007: Retired1979 to September 2005:
Partner at KPMG LLP
    
    
    
    0.3% of common shares
 Page 52




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##### Table of Contents



Number andPercentage ofVoting SharesBeneficially Ownedor Controlled byDirectors andName and
    
    Principal Occupation
    
    
    
    Officers on AprilOffice Held
    
    For Past Five Years
    
    Director Since
    
    25, 2008(a)JOHN T. SENTJENS
Chief Financial Officer and Corporate
Secretary 
Ontario, Canada
    
    Sept. 2007 to present:
Chief Financial Officer
and Corporate
Secretary, OSI
Geospatial Inc.
    
    N/A
    
    277,000 common
shares (includes
247,000 options to
purchase common
shares)2005 to Sept. 2007:
Vice President, Finance
and Corporate
Secretary, OSI
Geospatial Inc.
    
    
    
    0.6% of common shares2001 to 2005: CorporateController,
OSI Geospatial Inc.1999 to 2001: Controller,Triathlon
Ltd. subsidiary of
MacDonald Dettwiler &
Associates Ltd.WAYNE HOYLE
Vice President and General Manager,
Offshore Systems Ltd. British Columbia, Canada
    
    July 2006 to present:
Vice President and
General Manager,
Offshore Systems Ltd.
    
    N/A
    
    272,198 common
shares (includes
225,000 options to
purchase common
shares)Feb 2004 to July 2006:Director of Sales,
Offshore Systems Ltd.June 2001 to Feb 2004:
Area Sales Manager,
Offshore Systems Ltd.
    
    
    
    0.6% of common sharesMarch 2000 to June
2001: Program Manager,
Offshore Systems Ltd.MARCOS RIANO
Vice President and General Manager,
Mapcon Mapping Ltd.
British Columbia, Canada
    
    Nov. 2007 to present:
Vice President and
General Manager, Mapcon
Mapping
    
    N/A
    
    109,888 common
shares (includes
100,000 options to
purchase common
shares)Dec 2002 to Nov 2007:
Director of Operations,
Mapcon Mapping Ltd.
    
    
    
    0.2% of common sharesMarch 2002 to Dec 2002:Manager of Operations,
Mapcon Mapping Ltd.WAYNE ZACHARY
President, CHI
Systems, Inc.
Pennsylvania, USA
    
    Nov 1985 to present:
President, CHI Systems,
Inc.
    
    N/A
    
    715,036 common
shares (includes
125,000 options to
purchase common
shares)1.5% of common shares
 Page 53




---



##### Table of Contents



Number andPercentage ofVoting SharesBeneficially Ownedor Controlled byDirectors andName and
    
    Principal Occupation
    
    
    
    Officers on AprilOffice Held
    
    For Past Five Years
    
    Director Since
    
    25, 2008(a)JAMES LIDDY
Vice President,
Layered Security 
Solutions 
Virginia, USA
    
    March 6, 2007 to
present: Vice
President, Layered
Security Solutions, CHI
Systems, Inc.
    
    N/A
    
    500,000 common
shares (includes
200,000 options to
purchase common
shares)April 2005 to Feb 2007:
CEO, Red Cell
Associates
    
    
    
    1.1% of common shares2004 to 2005: Counter
Terrorism Chief of
Policy and Plans,
Special Operations,
Pentagon
 
 (a)
    
    As used in the table above, beneficial ownership means the sole or shared power to vote or
direct the voting or to dispose or direct the disposition of any security. For purposes of
this table, a person is deemed to have beneficial ownership of any securities that such person
has a right to acquire within 60 days of April 25, 2008 through the exercise of any option or
warrant. Any security that any person named above has the right to acquire within 60 days is
deemed outstanding for the purpose of calculating the ownership of such person, but is not
deemed to be outstanding for the purpose of calculating the ownership percentage of any other
person.  B. Compensation.
 (1)
 (1) (1)
 Page 54




---



##### Table of Contents



(1)
 Listing of Directors Geographically
 Canadian Directors
    
    Raymond W. Johnston (Chair)Kenneth H. KirkpatrickHelmut F. LobmeierGerald J. ShieldsDonald W. YoungU.S. Directors
    
    Joseph A. StroudAustralian Director
    
    Walter P. Purio(1)
  
 (1)
    
    Walter Purio is a U.S. citizen.  Annual CompensationOther AnnualIn thousands of U.S. dollars
    
    
    
    
    
    Salary
    
    
    Bonus
    
    
    CompensationName
    
    Year
    
    
    ($)
    
    
    ($)
    
    
    ($)Kenneth H. Kirkpatrick
    
    
    2007
    
    
    
    226
    
    
    
    
    
    
    
    29President and CEO
    
    
    2006
    
    
    
    220
    
    
    
    69
    
    
    
    8OSIGeospatial Inc.
    
    
    2005
    
    
    
    129
    
    
    
    18
    
    
    
    5John T. Sentjens(1)
    
    
    2007
    
    
    
    135
    
    
    
    
    
    
    
    7Chief Financial Officer and
Secretary
    
    
    2006
    
    
    
    116
    
    
    
    34
    
    
    NilOSI Geospatial Inc.
    
    
    2005
    
    
    
    89
    
    
    
    12
    
    
    NilAndrew Carniel(2)
    
    
    2007
    
    
    
    152
    
    
    
    
    
    
    
    25Vice President, Business
Development
    
    
    2006
    
    
    
    146
    
    
    
    29
    
    
    
    5OSI Geospatial Inc.
    
    
    2005
    
    
    
    115
    
    
    
    6
    
    
    NilWayne Zachary
    
    
    2007
    
    
    
    200
    
    
    
    38
    
    
    
    9Vice President and General
Manager
    
    
    2006
    
    
    
    143
    
    
    
    30
    
    
    
    7CHI Systems Inc.
    
    
    2005
    
    
    
    
    
    
    
    
    
    
    
    James Liddy(3)
    
    
    2007
    
    
    
    120
    
    
    
    75
    
    
    
    Vice President, Layered
Security Solutions
    
    
    2006
    
    
    
    
    
    
    
    
    
    
    
    CHI Systems Inc.
    
    
    2005
    
    
    
    
    
    
    
    
    
    
    
    
  
 (1)
    
    Mr. Sentjens, formerly VP, Finance, was appointed Chief Financial Officer on
September 25, 2007.(2)
    
    On October 23, 2007, Mr. Carniels employment as VP, Business Development was
terminated without cause. $16,000 severance paid to Mr. Carniel is included in the amount
shown under Other Annual Compensation.(3)
    
    Mr. Liddy was appointed VP, Layered Security Solutions on March 6,
2007.  Page 55




---



##### Table of Contents



Kenneth Kirkpatrick
 John Sentjens
 Andrew Carniel
 Wayne Zachary
 James Liddy
 Page 56




---



##### Table of Contents



ExercisePriceName and
    
    Common Shares Under
    
    (CAD$ per
    
    Vesting
    
    ExpiryOffice Held
    
    Options Granted
    
    Common Share)
    
    Date
    
    DateRaymond W. Johnston  Chair and Director
    
    
    50,000
    
    
    
    0.60
    
    
    April 19, 2007
    
    April 19, 2012Kenneth H. Kirkpatrick   Director,
President and Chief Executive Officer
    
    
    20,000
    
    
    
    0.71
    
    
    February 5, 2007
    
    February 5, 2012Helmut F. Lobmeier  Director
    
    
    50,000
    
    
    
    0.60
    
    
    April 19 2007
    
    April 19, 2012Walter P. Purio  Director
    
    
    50,000
    
    
    
    0.60
    
    
    April 19, 2007
    
    April 19, 2012Gerald J. Shields  Director
    
    
    50,000
    
    
    
    0.60
    
    
    April 19, 2007
    
    April 19, 2012Joseph A. Stroud  Director
    
    
    50,000
    
    
    
    0.60
    
    
    April 19, 2007
    
    April 19, 2012Donald W. Young  Director
    
    
    50,000
    
    
    
    0.60
    
    
    April 19, 2007
    
    April 19, 2012John T. Sentjens
    
    
    25,000
    
    
    
    0.71
    
    
    February 5, 2007
    
    February 5, 2012Wayne Hoyle
    
    
    25,000
    
    
    
    0.71
    
    
    February 5, 2007
    
    February 5, 2012155,000
    
    
    
    0.60
    
    
    April 19, 2007
    
    April 19.2012Marcos Riano
    
    
    75,000
    
    
    
    0.46
    
    
    November 28, 2007
    
    November 28, 2012Wayne Zachary
    
    
    25,000
    
    
    
    0.71
    
    
    February 5, 2007
    
    February 5, 2012James Liddy
    
    
    200,000
    
    
    
    0.46
    
    
    November 28, 2007
    
    November 28, 2012
 Page 57




---



##### Table of Contents



C. Board practices
  Name
    
    Period ServedRaymond W. Johnston (Chair)
    
    since November 2000Kenneth H. Kirkpatrick
    
    since November 2005Helmut F. Lobmeier
    
    since April 1990Walter P. Purio
    
    since January 1999Gerald J. Shields
    
    since April 2005Joseph A. Stroud
    
    since March 2006Donald W. Young
    
    since March 2006
   Duties and Obligations of the Board of Directors
   (a)
    
    adopting a strategic planning process for the Company which establishes the Companys
long-term goals and strategies, and monitoring the success of the Companys management in
achieving those goals and implementing the strategy;(b)
    
    identifying the principal risks with respect to all aspects of the Companys business,
ensuring that there are systems in place to effectively monitor and manage such risks with a
view to the long-term viability of the Company, and achieving a proper balance between the
risks incurred and the potential return to the Companys members;(c)
    
    engaging in succession planning, including appointing, training and monitoring Senior
Management (which includes ensuring that objectives are in place against which managements
performance can be
 Page 58




---



##### Table of Contents



measured), establishing and maintaining programs to train and develop management, providing for
the orderly succession of management, and assessing the performance and contribution of the
Chief Executive Officer of the Company against mutually established objectives; and(d)
    
    ensuring that the Company has a policy in place to enable it to communicate effectively with
its shareholders, other stakeholders and the general public, effectively interpreting the
operations of the Company to shareholders, accommodating feedback from shareholders, and
ensuring that there are effective controls and information systems in place for the Board of
Directors to discharge its responsibilities.
 Committees of the Board of Directors
  Audit Committee
   (a)
    
    reviewing and monitoring the audit functions, risk-management systems, management information
systems, and accounting policies;(b)
    
    reviewing the Companys financial statements prepared by management and meeting with the
Companys external auditors to discuss the results of annual audits and quarterly reviews;(c)
    
    recommending for approval to the Board all public disclosure information such as financial
statements, quarterly reports, financial news releases, annual information forms, management
discussions and analyses, and prospectuses;(d)
    
    directly appointing, compensating, retaining and overseeing the work of the Companys
external auditors, who report directly to the Audit Committee;(e)
    
    establishing procedures for (i) the receipt, retention and treatment of complaints received
by the Company regarding accounting, internal accounting controls or auditing matters and (ii)
the confidential, anonymous submission by employees of the Company of concerns regarding
questionable accounting and auditing matters; and(f)
    
    engaging independent counsel and other advisors, as it deems necessary to carry out its
duties.
 Human Resource and Compensation Committee
   Executive Committee
   Page 59




---



##### Table of Contents



(a)
    
    recommending to the Board corporate procedures in order to address the issues of corporate
governance within the organization;(b)
    
    defining the limits of managements responsibilities;(c)
    
    assisting the board in identifying new Directors for nomination to the Board and assessing
existing Directors on an ongoing basis;(d)
    
    overseeing the implementation of the business plan for the Companys subsidiaries in terms of
operating capital and related expenditures as approved by the Board as a whole;(e)
    
    approving the engagement of individual Directors and outside advisors at the Companys
expense at appropriate circumstances; and(f)
    
    overseeing the Companys activities in the area of investor relations and relations with the
capital markets.
 D. Employees
   Canada
    
    U.S.
    
    U.K.
    
    Australia
    
    TotalNovember 30, 2007
    
    
    73
    
    
    
    73
    
    
    
    1
    
    
    
    
    
    
    
    147November 30, 2006
    
    
    73
    
    
    
    61
    
    
    
    1
    
    
    
    
    
    
    
    135November 30, 2005
    
    
    76
    
    
    
    12
    
    
    
    
    
    
    
    1
    
    
    
    89
  E. Share ownership
  CommonShares
    
    ExerciseUnder
    
    Price (CAD$Name and
    
    Options
    
    per Common
    
    Vesting
    
    ExpiryOffice Held
    
    Granted
    
    Share)
    
    Date
    
    DateRaymond W. Johnston  Chair
    
    
    45,000
    
    
    
    0.88
    
    
    April 12, 2005
    
    April 12, 2010and Director
    
    
    100,000
    
    
    
    0.99
    
    
    July 28, 2005
    
    July 28, 201025,000
    
    
    
    0.73
    
    
    April 12, 2006
    
    April 12, 201150,000
    
    
    
    0.60
    
    
    April 19, 2007
    
    April 19, 2012Kenneth H. Kirkpatrick 
    
    
    45,000
    
    
    
    0.88
    
    
    April 12, 2005
    
    April 12, 2010Director, President and Chief
    
    
    10,000
    
    
    
    0.99
    
    
    July 28, 2005
    
    July 28, 2010Executive Officer
    
    
    100,000
    
    
    
    0.99
    
    
    October 25, 2005
    
    October 25, 2010133,333
    
    
    
    0.87
    
    
    November 23, 2005
    
    November 23, 201020,000
    
    
    
    0.71
    
    
    February 5, 2007
    
    February 5, 2012
 Page 60




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##### Table of Contents



CommonShares
    
    ExerciseUnder
    
    Price (CAD$Name and
    
    Options
    
    per Common
    
    Vesting
    
    ExpiryOffice Held
    
    Granted
    
    Share)
    
    Date
    
    DateHelmut F. Lobmeier  Director
    
    
    45,000
    
    
    
    0.88
    
    
    April 12, 2005
    
    April 12, 2010100,000
    
    
    
    0.99
    
    
    July 28, 2005
    
    July 28, 201025,000
    
    
    
    0.73
    
    
    April 12, 2006
    
    April 12, 201150,000
    
    
    
    0.60
    
    
    April 19 2007
    
    April 19, 2012Walter P. Purio  Director
    
    
    45,000
    
    
    
    0.88
    
    
    April 12, 2005
    
    April 12, 2010100,000
    
    
    
    0.99
    
    
    July 28, 2005
    
    July 28, 201025,000
    
    
    
    0.73
    
    
    April 12, 2006
    
    April 12, 201150,000
    
    
    
    0.60
    
    
    April 19, 2007
    
    April 19, 2012Gerald J. Shields  Director
    
    
    45,000
    
    
    
    0.88
    
    
    April 12, 2005
    
    April 12, 2010100,000
    
    
    
    0.99
    
    
    July 28, 2005
    
    July 28, 201025,000
    
    
    
    0.73
    
    
    April 12, 2006
    
    April 12, 201150,000
    
    
    
    0.60
    
    
    April 19, 2007
    
    April 19, 2012Joseph A. Stroud  Director
    
    
    3,750
    
    
    
    0.73
    
    
    March 15, 2006
    
    March 15, 201145,000
    
    
    
    0.73
    
    
    April 12, 2006
    
    April 12, 201150,000
    
    
    
    0.60
    
    
    April 19, 2007
    
    April 19, 2012Donald W. Young  Director
    
    
    3,750
    
    
    
    0.73
    
    
    March 15, 2006
    
    March 15, 201145,000
    
    
    
    0.73
    
    
    April 12, 2006
    
    April 12, 201150,000
    
    
    
    0.60
    
    
    April 19, 2007
    
    April 19, 2012John T. Sentjens
    
    
    30,000
    
    
    
    0.88
    
    
    April 12, 2005
    
    April 12, 20105,000
    
    
    
    0.99
    
    
    July 28, 2005
    
    July 28, 201050,000
    
    
    
    0.99
    
    
    October 25, 2005
    
    October 25, 201050,000
    
    
    
    0.91
    
    
    November 14, 2005
    
    November 14, 201087,000
    
    
    
    0.87
    
    
    November 23, 2005
    
    November 23, 201025,000
    
    
    
    0.71
    
    
    February 5, 2007
    
    February 5, 2012Wayne Hoyle
    
    
    5,000
    
    
    
    0.88
    
    
    April 12, 2005
    
    April 12, 201015,000
    
    
    
    0.99
    
    
    July 28, 2005
    
    July 28, 201025,000
    
    
    
    0.91
    
    
    November 14, 2005
    
    November 14, 201025,000
    
    
    
    0.71
    
    
    February 5, 2007
    
    February 5, 2012155,000
    
    
    
    0.60
    
    
    April 19, 2007
    
    April 19, 2012Marcos Riano
    
    
    5,000
    
    
    
    0.88
    
    
    April 12, 2005
    
    April 12, 20105,000
    
    
    
    0.99
    
    
    July 28, 2005
    
    July 28, 201015,000
    
    
    
    0.91
    
    
    November 14, 2005
    
    November 14, 201075,000
    
    
    
    0.46
    
    
    November 28, 2007
    
    November 28, 2012Wayne Zachary
    
    
    100,000
    
    
    
    0.91
    
    
    November 14, 2005
    
    November 14, 201025,000
    
    
    
    0.71
    
    
    February 5, 2007
    
    February 5, 2012James Liddy
    
    
    200,000
    
    
    
    0.46
    
    
    November 28, 2007
    
    November 28, 2012
  Page 61




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##### Table of Contents



Item 7. Major Shareholders and Related Party Transactions
 A. Major shareholders.
  Page 62




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Common Shares BeneficiallyClass B Series 2
    
    Owned (upon conversion of ClassName of Shareholders
    
    Preference Shares
    
    B Series 2 Preference Shares#
    
    %
    
    #
    
    %SF Capital Partners Ltd.
    
    
    48,600
    (1)
    
    
    27.2
    %
    
    
    4,287,664
    (1)
    
    
    8.4
    %Basso Multi-Strategy Holding Fund Ltd.
    
    
    24,300
    (2)
    
    
    13.6
    %
    
    
    2,143,832
    (2)
    
    
    4.4
    %Basso Private Opportunity Holding Fund Ltd.Millennium Partners, LP
    
    
    24,300
    (3)
    
    
    13.6
    %
    
    
    2,143,832
    (3)
    
    
    4.4
    %Shannon River Partners II, LP
    
    
    24,300
    (4)
    
    
    13.6
    %
    
    
    2,143,832
    (4)
    
    
    4.4
    %Shannon River Partners, LPSDS Capital Group SPC, Ltd.
    
    
    18,500
    (5)
    
    
    10.4
    %
    
    
    1,953,183
    (5)
    
    
    4.0
    %DKR SoundsShore Oasis Holding Fund Ltd.
    
    
    10,840
    (6)
    
    
    6.1
    %
    
    
    994,563
    (6)
    
    
    2.1
    %Pender Growth Fund (VCC) Inc.
    
    
    10,000
    (7)
    
    
    5.6
    %
    
    
    999,835
    (7)
    
    
    2.1
    %Pender Financial Group Corporation
  
 (1)
    
    Consist of 48,600 Class B Series 2 Preference Shares convertible into
2,858,824 Common Shares and Warrants to purchase 1,428,840 Common Shares.(2)
    
    Consist of 18,700 Class B Series 2 Preference Shares convertible into 1,100,000
Common Shares and Warrants to purchase 549,780 Common Shares held by Basso Multi-Strategy Holding
Fund Ltd. and 5,600 Class B Series 2 Preference Shares convertible into 329,412 Common Shares and
Warrants to purchase 164,640 Common Shares held by Basso Private Opportunity Holding Fund, a
related group.(3)
    
    Consist of 24,300 Class B Series 2 Preference Shares convertible into 1,429,412
Common Shares and Warrants to purchase 714,420 Common Shares.(4)
    
    Consist of 14,300 Class B Series 2 Preference Shares convertible into 841,176
Common Shares and Warrants to purchase 420,420 Common Shares held by Shannon River Partners II, LP
and 10,000 Class B Series 2 Preference Shares convertible into 588,235 Common Shares and Warrants
to purchase 294,000 Common Shares held by Shannon River Partners, LP, a related group.(5)
    
    Consist of 18,500 Class B Series 2 Preference Shares convertible into
1,088,235 Common Shares and Warrants to purchase 864,948 Common Shares.(6)
    
    Consist of 10,840 Class B Series 2 Preference Shares convertible into 637,647
Common Shares and Warrants to purchase 356,916 Common Shares.(7)
    
    Consist of 10.000 Class B Series 2 Preference Shares convertible into 588,235
Common Shares and Warrants to purchase 294,000 Common Shares held by Pender Growth Fund (VCC) Inc.
and Warrants to purchase 117,600 Common Shares held by Pender Financial Group Corporation, a
related group. Page 63




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##### Table of Contents



Common Shares BeneficiallyClass A Series A
    
    Owned (upon conversion ofPreference Shares
    
    Class A Series A PreferenceName of Shareholders
    
    Convertible
    
    Shares )#
    
    %
    
    #
    
    %John Visnapu
    
    
    16,375
    
    
    
    54.1
    %
    
    
    16,375
    
    
    
    0.0
    %G.A. Lachapelle
    
    
    3,275
    
    
    
    10.8
    %
    
    
    3,275
    
    
    
    0.0
    %Dennis Kong
    
    
    3,275
    
    
    
    10.8
    %
    
    
    3,275
    
    
    
    0.0
    %Daniel Jacobson
    
    
    3,275
    
    
    
    10.8
    %
    
    
    3,275
    
    
    
    0.0
    %
  ,
  B. Related party transactions.
      Page 64




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##### Table of Contents



C. Interests of experts and counsel.
 .
 
 Item 8. Financial Information
 A. Consolidated statements and other financial information.
   In thousands of U.S. dollars
    
    2007
    
    
    2006
    
    
    2005Europe
    
    $
    5,899
    
    
    $
    6,816
    
    
    $
    4,093Australia/New Zealand
    
    
    910
    
    
    
    1,200
    
    
    
    2,149United States
    
    
    15,678
    
    
    
    13,717
    
    
    
    2,410Canada
    
    
    2,839
    
    
    
    2,404
    
    
    
    2,415Other
    
    
    
    
    
    
    
    
    
    
    59Total
    
    $
    25,326
    
    
    $
    24,137
    
    
    $
    11,126
 .
  
    
    The Company and four employees became the objects of a lawsuit by Triathlon Ltd., a
subsidiary of MacDonald, Dettwiler and Associates Ltd., related to the alleged use of
confidential information and breach of fiduciary duty. The Company believes the suit poses
limited financial risk. The Companys current C.E.O. and President and the Chief Financial
Officer were officers of Triathlon Ltd. prior to their employment with the Company. The
Company is currently negotiating a settlement and has accrued an amount that it anticipates
will be paid to settle this matter.
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##### Table of Contents



B. Significant changes.
  
 Item 9. The Offer and Listing
 A. Offer and listing details.
   
    
    the annual high and low market prices for the five most recent full financial years;
    
    the quarterly high and low market prices for the two most recent full financial years and
any subsequent period; and
    
    the high and low monthly market prices for the most recent six months.
 Price per shareTSX (in C$)
    
    OTCBB (in US$)High
    
    Low
    
    High
    
    LowYearFiscal year ended November 30, 2003
    
    $
    1.35
    
    
    $
    0.76
    
    
    $
    0.95
    
    
    $
    0.60Fiscal year ended November 30, 2004
    
    $
    1.50
    
    
    $
    0.76
    
    
    $
    1.30
    
    
    $
    0.62Fiscal year ended November 30, 2005
    
    $
    1.14
    
    
    $
    0.67
    
    
    $
    0.96
    
    
    $
    0.53Fiscal year ended November 30, 2006
    
    $
    1.10
    
    
    $
    0.65
    
    
    $
    0.98
    
    
    $
    0.55Fiscal year ended November 30, 2007
    
    $
    0.91
    
    
    $
    0.40
    
    
    $
    0.79
    
    
    $
    0.42Year Ending November 30, 2006First Quarter
    
    $
    0.94
    
    
    $
    0.65
    
    
    $
    0.85
    
    
    $
    0.61Second Quarter
    
    $
    0.86
    
    
    $
    0.68
    
    
    $
    0.75
    
    
    $
    0.60Third Quarter
    
    $
    1.10
    
    
    $
    0.70
    
    
    $
    0.98
    
    
    $
    0.63Fourth Quarter
    
    $
    0.86
    
    
    $
    0.66
    
    
    $
    0.82
    
    
    $
    0.55Year Ending November 30, 2007First Quarter
    
    $
    0.91
    
    
    $
    0.56
    
    
    $
    0.79
    
    
    $
    0.48Second Quarter
    
    $
    0.85
    
    
    $
    0.57
    
    
    $
    0.69
    
    
    $
    0.51Third Quarter
    
    $
    0.85
    
    
    $
    0.45
    
    
    $
    0.79
    
    
    $
    0.45Fourth Quarter
    
    $
    0.55
    
    
    $
    0.40
    
    
    $
    0.57
    
    
    $
    0.42
 Page 66




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##### Table of Contents



Price per shareTSX (in C$)
    
    OTCBB (in US$)High
    
    Low
    
    High
    
    LowYear Ending November 30, 2008First Quarter
    
    $
    0.51
    
    
    $
    0.38
    
    
    $
    0.51
    
    
    $
    0.38Most Recent Six MonthsNovember 2007
    
    $
    0.53
    
    
    $
    0.44
    
    
    $
    0.57
    
    
    $
    0.42December 2007
    
    $
    0.49
    
    
    $
    0.38
    
    
    $
    0.51
    
    
    $
    0.38January 2008
    
    $
    0.51
    
    
    $
    0.40
    
    
    $
    0.50
    
    
    $
    0.39February 2008
    
    $
    0.48
    
    
    $
    0.39
    
    
    $
    0.49
    
    
    $
    0.40March 2008
    
    $
    0.44
    
    
    $
    0.38
    
    
    $
    0.45
    
    
    $
    0.36April 2008
    
    $
    0.44
    
    
    $
    0.35
    
    
    $
    0.45
    
    
    $
    0.36
 B. Plan of distribution.
  C. Markets.
  D. Selling shareholders.
  E. Dilution.
  F. Expenses of the issue.
  
 Item 10. Additional Information
 A. Share capital.
  B. Memorandum and articles of association.
  Page 67




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Directors Powers and Conflicts of Interest
   Borrowing Powers
 2/3
 Directors
     Page 68




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Rights Attached to Shares
  
    
    An unlimited number of Common Shares without par value;
    
    100,000,000 Class A Preference Shares with no par value, issuable in series, of which
one series has been created, being 10,000,000 shares designated as Class A Preference
Shares Series A Convertible without par value;
    
    100,000,000 Class B Preference Shares with a par value of CAD $50 each, issuable in
series, of which 2 series have been created:
 
    
    10,000,000 shares designated as Class B Series 1 Preference Shares with a par value
of CAD $50 each; and
    
    10,000,000 shares designated as Class B Series 2 Preference Shares with a par value
of CAD $50 each; and
 
    
    An unlimited number of Class C Preference Shares without par value, issuable in series.
  a)
    
    Unlimited number of Common Shares without par value  Each Common Share carries the right to
one vote at any general meeting of shareholders of the Company. Cumulative voting is not
permitted or required. Dividends are payable on the Common Shares at the discretion of the
Board of Directors. The holders of the Common Shares are not liable to further capital calls
on such shares by the Company. In the event of the liquidation, dissolution or winding-up of
the Company or any distribution of its assets for the purpose of winding up its affairs, the
Common Shares rank subordinate to the Class A Preference Shares, the Class B Preference
Shares, and the Class C Preference Shares with respect to the payment of any declared but
unpaid dividends and repayment of the amount of capital paid up with respect of such Class A
Preference Shares, Class B Preference Shares and Class C Preference Shares. Thereafter,
the Class A Preference Shares, Class B Preference Shares and Class C Preference Shares
are not entitled to any further distributions and the holders of the Common Shares shall be
entitled to the distribution of all residual amounts on a pro-rated basis. Except as expressly
provided by any special rights and restrictions which the Directors may create, define or
attach to any series of Class A, Class B or Class C Preference Shares (described below),
the Directors of the Company may, in their discretion, declare dividends with respect to the
Common Shares only or with respect to any other class or series of shares. To date, the Class
A Preference Shares Series A Convertible and the Class B Series 1 Preference Shares and
the Class B Series 2 Preference Shares are the only Preference Shares which have been issued
with a priority for payment of dividends over the Common Shares.
 b)
    
    100,000,000 Class A Preference Shares without par value  These shares may be issued in
one or more series. The Directors have the power to alter the Notice of Articles and Articles
of the Company from time to time to fix the number of shares in, and to determine the rights,
privileges and restrictions attached to each series of Class A Preference Shares, including
voting rights; however, no one series of Class A Preference Shares may be issued with a
right to payment of dividends or a return
 Page 69




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##### Table of Contents



of capital on a winding-up or dissolution of the Company in priority to any other series of
Class A Preference Shares. In addition, if the right to cumulative dividends is attached
to a series of Class A Preference Shares issued by the Company, and such dividends are not
paid in full, the shares of all series of the Class A Preference Shares are entitled to
participate ratably in respect of accumulated dividends in accordance with the amounts that
would be payable on those shares if all the accumulated dividends were paid in full. In the
event of the liquidation, dissolution, or winding-up of the Company or any distribution of
its assets for the purpose of winding up its affairs, after the payment of any dividends
which have been declared but unpaid, the holders of the Class A Preference Shares and the
Class B Preference Shares (described below) shall be entitled pari passu to be paid such
amount as the special rights and restrictions attaching to such shares shall provide and, in
the absence of any express provision with respect to such payments, the amount of paid up
capital on such shares, out of the assets of the Company in preference to and in priority
over any payment or distribution of any capital asset or monies to the holders of the Common
Shares of the Company. After such payment, the holders of the Class A Preference Shares
and Class B Preference Shares shall not be entitled to share in any other distribution of
the property or assets of the Company. Once a series of Class A Preference Shares is
designated by the Board of Directors and shares in such series have been issued, the rights,
privileges and conditions attached to such series of Class A Preference Shares may be
altered or amended only by way of a special resolution passed by a majority of not less than
66 2/3% of the votes cast by holders of voting shares at a meeting of the holders of that
series of Class A Preference Shares.To date, only one series of shares has been created by the Board of Directors out of the
Class A Preference Shares, namely, 10,000,000 shares which have been designated as Class
A Preference Shares Series A Convertible without par value (the Series A Convertible
Shares). Each Series A Convertible Share entitles the holder to one vote either in person
or by proxy at any general meeting of the shareholders of the Company. Each Series A
Convertible Share may be converted at the option of the holder into one Common Share at any
time. In each calendar year, the holders of the Series A Convertible Shares shall be
entitled to receive, in priority to the Common Shares, non-cumulative dividends at a rate
not exceeding CAD $0.01 per Series A Convertible Share, when, as and if so declared by the
Board of Directors, in its discretion, out of the net profits and surplus of the Company
properly applicable to the payment of dividends. The Series A Convertible Shares are not
subject to any right of redemption at the option of the holder or the Company. In the event
of the liquidation, dissolution, or winding-up of the Company or any distribution of its
assets for the purpose of winding up its affairs, after the payment of any dividends which
have been declared or accrued but unpaid, the holders of the Series A Convertible Shares
shall be entitled to be paid the amount of paid up capital on such shares, out of the assets
of the Company in preference to and in priority over any payment or distribution of any
capital asset or monies to the holders of the Common Shares of the Company, but in
subordination to payment of the paid up capital plus any accrued but unpaid dividends on the
Class B Preference Shares. After such payment, the holders of the Series A Convertible
Shares shall not be entitled to share in any other distribution of the property or assets of
the Company. There are no sinking fund provisions for any further capital calls on such
shares. All issued and outstanding Series A Convertible Shares are fully paid.c)
    
    100,000,000 Class B Preference Shares with a par value of CAD $50.00 each  These shares
may be issued in one or more series. The Directors have the power to alter the Notice of
Articles and Articles of the Company from time to time to fix the number of shares in, and to
determine the rights, privileges and restrictions attached to each series of Class B
Preference Shares, including voting rights; however, no one series of Class B Preference
Shares may be issued with rights to payment of dividends or a return of capital on a
winding-up or dissolution of the Company in priority to any other series of Class B
Preference Shares. In addition, if the right to cumulative dividends is attached to a series
of Class B Preference Shares issued by the Company, and such dividends are not paid in full,
the shares of all series of Class B Preference Shares are entitled to participate ratably in
respect of accumulated dividends in accordance with the amounts that would be payable on those
shares if all the accumulated dividends were paid in full. In the event of the liquidation,
dissolution, or winding-up of the Company or any distribution of its assets for the purpose of
winding up its affairs, after the payment of any dividends which have been declared but
unpaid, the holders of the Class A
 Page 70




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Preference Shares described above and the Class B Preference Shares shall be entitled pari
passu to be paid such amount as the special rights and restrictions attached to such shares
shall provide and, in the absence of any express provision with respect to such payments,
the amount of paid up capital on such shares, out of the assets of the Company in preference
to and priority over any payment or distribution of any capital asset or monies to the
holders of the Common Shares of the Company. After such payment, the holders of the Class
A Preference Shares and Class B Preference Shares shall not be entitled to share in any
other distribution of the property or assets of the Company. Once a series of Class B
Preference Shares is designated by the Board of Directors, the rights, privileges and
conditions attached to such series of Class B Preference Shares may be altered or amended
only by a special resolution passed by a majority of not less than 66 2/3% of the votes cast
by holders of voting shares at a meeting of the holders of that series of Class B
Preference Shares.To date, two series of shares has been created and issued by the Board of Directors out of
the Class B Preference Shares, namely:
 
    
    10,000,000 shares which have been designated as Class B Series 1 Preference Shares
with a par value of CAD $50.00 each (the Series 1 Preference Shares). Each Series 1
Preference Share entitles the holder to one vote either in person or by proxy at any
general meeting of the shareholders of the Company. Each Series 1 Preference Share may
be converted at the option of the holder into 45.5 Common Shares at any time. The
Company has the right to require the shareholders of the Series 1 Preference Shares to
convert each such share into 45.5 Common Shares if (i) at any time after 13 months
following the issuance of the Series 1 Preference Share, the closing trade price of the
Companys Common Shares exceeds CAD $2.00 for at least 20 consecutive trading days, or
(ii) at any time, the Company completes a firm public underwritten offering of its
Common Shares for more than $40,000,000 at a price per Common Share greater than CAD
$2.20. The holders of the Series 1 Preference Shares shall be entitled to receive in
each calendar year cumulative dividends at a rate of CAD $3.00 per Series 1 Preference
Share, out of the monies of the Company properly applicable to the payment of
dividends, in priority to the payment of any dividend on the Common Shares or Class A
Preference Shares. The Series 1 Preference Shares are redeemable at the option of the
Company at any time after the fifth anniversary of the issuance date for an amount
equal to the original issuance price plus all accrued but unpaid dividends on such
shares. The Series 1 Preference Shares are not subject to any right of redemption at
the option of the holder. In the event of the liquidation, dissolution, or winding-up
of the Company or any distribution of its assets for the purpose of winding up its
affairs, the holders of the Series 1 Preference Shares shall be entitled to be paid the
amount of paid up capital plus all accrued but unpaid dividends on such shares, out of
the assets of the Company in preference to and in priority over any payment or
distribution of any capital asset or monies to the holders of the Common Shares or
Class A Preference Shares. After such payment, the holders of the Series 1
Preference Shares shall not be entitled to share in any other distribution of the
property or assets of the Company. There are no sinking fund provisions for any further
capital calls on such shares. All issued and outstanding Series 1 Preference Shares
were fully paid. There are currently none outstanding.
    
    10,000,000 million shares which have been designated as Class B Series 2
Preference Shares with a par value of CAD $50.00 each (the Series 2 Preference
Shares). Each Series 2 Preference Share entitles the holder to one vote either in
person or by proxy at any general meeting of the shareholders of the Company. Each
Series 2 Preference Share may be converted at the option of the holder into 58.82353
Common Shares at any time. The Company has the right to require the shareholders of
the Series 2 Preference Shares to convert each such share into 58.82353 Common Shares
if (i) at any time after 12 months following the issuance of the Series 2 Preference
Share, the closing trade price of the Companys Common Shares exceeds CAD $2.13 for at
least 20 consecutive trading days, or (ii) at any time, the Company completes a firm
public underwritten offering of its Common Shares for more than CAD $40,000,000 at a
price per Common Share greater than CAD
 Page 71




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$1.70. The holders of the Series 2 Preference Shares shall be entitled to receive in
each calendar year cumulative dividends at a rate of 7% per annum, out of the monies
of the Company properly applicable to the payment of dividends, in priority to the
payment of any dividend on the Common Shares, Class A Preference Shares and any
other shares ranking junior to the Series 2 Preference Shares. The Series 2
Preference Shares are redeemable at the option of the Company at any time after the
third anniversary of the issuance date for an amount equal to the original issuance
price plus a premium of 20% and payment of all accrued but unpaid dividends on such shares. The Series 2 Preference Shares are not subject to any right of redemption at
the option of the holder. In the event of the liquidation, dissolution, or
winding-up of the Company or any distribution of its assets for the purpose of
winding up its affairs, the holders of the Series 2 Preference Shares shall be
entitled to be paid the amount of paid up capital plus all accrued but unpaid
dividends on such shares, out of the assets of the Company in preference to and in
priority over any payment or distribution of any capital asset or monies to the
holders of the Common Shares or Class A Preference Shares. After such payment, the
holders of the Series 2 Preference Shares shall not be entitled to share in any other
distribution of the property or assets of the Company. There are no sinking fund
provisions for any further capital calls on such shares. All issued and outstanding
Series 2 Preference Shares are fully paid; and
 d)
    
    An unlimited number of C Preference Shares without par value  These shares may be issued
in one or more series. The Directors have the power to alter the Notice of Articles and
Articles of the Company from time to time to fix the number of shares in, and to determine the
rights, privileges and restrictions attached to each series of Class C Preference Shares,
including voting rights; however, no one series of Class C Preference Shares may be issued
with rights to payment of dividends or a return of capital on a winding-up or dissolution of
the Company in priority to any other series of Class C Preference Shares. In addition, if
the right to cumulative dividends is attached to a series of Class C Preference Shares
issued by the Company, and such dividends are not paid in full, the shares of all series of
Class C Preference Shares are entitled to participate ratably in respect of accumulated
dividends in accordance with the amounts that would be payable on those shares if all the
accumulated dividends were paid in full. In the event of the liquidation, dissolution, or
winding-up of the Company or any distribution of its assets for the purpose of winding up its
affairs, after the payment of any dividends which have been declared but unpaid, the holders
of the Class C Preference Shares described above shall be entitled to be paid such amount as
the special rights and restrictions attached to such shares shall provide and, in the absence
of any express provision with respect to such payments, the amount of paid up capital on such
shares, out of the assets of the Company in preference to and priority over any payment or
distribution of any capital asset or monies to the holders of the Common Shares and any other shares ranking junior to the Class C Preference Shares. After such payment, the holders of
the Class C Preference Shares shall not be entitled to share in any other distribution of
the property or assets of the Company except as specifically provided in the special rights
and restrictions attached to any series. Once a series of Class C Preference Shares is
designated by the Board of Directors, the rights, privileges and conditions attached to such
series of Class C Preference Shares may be altered or amended only by a special resolution
passed by a majority of not less than 66 2/3% of the votes cast by holders of Class C
Preference Shares at a meeting of the holders of that series of shares. To date, no series of shares has been designated by the Board of Directors out of the Class C Preference Shares.
  Alteration of the Rights of Shareholders
 2/3
 Page 72




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Shareholders Meetings
             Page 73




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Shareholder rights plan
    C. Material Contracts.
   United Kingdom Ministry of Defence W-AIS Contract Update
  Page 74




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##### Table of Contents




    
    Supply of W-AIS systems  software and hardware components
    
    Installation of W-AIS systems
    
    Four-year support and maintenance program
    
    Twenty-six year long-term support and maintenance program
      Page 75




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D. Exchange controls.
  E. Taxation.
  U.S. Holder of Common Shares
  Page 76




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
    
    for purposes of the Income Tax Act (Canada) (ITA) and the Canada-United States
Income Tax Convention (1980), as amended by the protocol signed on July 29, 1997,
(Treaty) are residents of the U.S., not Limited Liability Corporations (LLC) and have
never been residents of Canada;
    
    for purposes of the U.S. Internal Revenue Code of 1986 (Code) are U.S. persons;
    
    deal at arms length with the Company;
    
    will hold the Common Shares as capital property for purposes of the ITA;
    
    will hold the Common Shares as capital assets for purposes of the Code;
    
    do not and will not hold the Common Shares in carrying on a business in Canada;
    
    will not perform independent personal services from a fixed base situated in Canada;
and
    
    are not or will not be subject to special provisions of Canadian or U.S. federal
income tax law, including, without limiting the generality of the foregoing, financial
institutions, real estate investment trusts, shareholders that have a functional
currency other than the U.S. dollar, shareholders that own shares through a partnership
or other pass-through entity, shareholders that hold shares as part of a straddle,
hedge or conversion transaction, tax-exempt organizations, qualified retirement plans,
insurance companies, shareholders who acquired their shares through the exercise of
employee stock options or otherwise as compensation and mutual fund companies.
  
    
    the ITA and the Income Tax Regulations (Canada) (Regulations);
    
    published proposals to amend the ITA and the Regulations;
    
    published administrative positions and practices of the Canada Revenue Agency (CRA);
    
    the Code, as amended;
    
    Treasury Regulations;
    
    published Internal Revenue Service (IRS) rulings;
    
    published administrative positions of the IRS;
    
    published jurisprudence that is considered applicable; and
    
    the Treaty.
   Canadian Federal Income Tax Consequences
 Disposition of Common Shares
  Page 77




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##### Table of Contents



Dividend Distributions on Shares of the Company
  United States Federal Income Tax Consequences
  Disposition of Common Shares
  Dividend Distributions on Shares of the Company
   Page 78




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##### Table of Contents



Foreign Tax Credit
  Passive Foreign Investment Company Rules
  
    
    75% or more of the Companys gross income for the taxable year is passive income,
which includes interest, dividends and certain rents and royalties; or
    
    the average quarterly percentage, by fair market value of the Companys assets that
produce or are held for the production of passive income is 50% or more of the fair
market value of all of the Companys assets.
   
    
    the excess distributions (generally any distributions received by a shareholder of a
PFIC in any taxable year that are greater than 125% of the average annual distributions
received by such shareholder in the three preceding taxable years or the shareholders
holding period for the shares, if shorter) or gain would be allocated on a pro rata
basis over a U.S. Holder of Common Shares holding period for the shares;
    
    the amount allocated to the current taxable year and any taxable year prior to the
first taxable year in which the Company is a PFIC would be treated as ordinary income
in the current taxable year; and
    
    the amount allocated to each of the other taxable years would be subject to the
highest rate of tax on ordinary income in effect for that year and to an interest
charge based on the value of the tax deferred during the period during which the shares
are owned.
   Page 79




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##### Table of Contents



Controlled Foreign Corporation Rules
  F. Dividends and paying agents.
  G. Statement by experts.
  H. Documents on display.
   I. Subsidiary information.
  Page 80




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##### Table of Contents



Item 11. Quantitative and Qualitative Disclosures about Market Risk
  Foreign Exchange Risk
     Interest rate risk
  Credit Risk
   Page 81




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##### Table of Contents



In thousands of U.S. dollarsNovember
    
    
    November30, 2007
    
    
    30, 2006Trade accounts receivable
    
    $
    7,570
    
    
    $
    5,143Unbilled revenue
    
    
    5,312
    
    
    
    7,257Technology Partnerships Canada contribution
    
    
    
    
    
    
    269Other
    
    
    182
    
    
    
    97Allowance for doubtful accounts
    
    
    (9
    )
    
    
    (59
    )$
    13,055
    
    
    $
    12,707
  In thousands of U.S. dollarsNovember
    
    
    November30, 2007
    
    
    30, 2006Current
    
    $
    5,965
    
    
    $
    3,47861  90 days
    
    
    576
    
    
    
    194Greater than 90 days
    
    
    1,029
    
    
    
    1,471$
    7,570
    
    
    $
    5,143
  
 Item 12. Description of Securities Other than Equity Securities
  
 Part II
 
 Item 13. Defaults, Dividend Arrearages and Delinquencies
  
 Item 14. Material Modifications to the Rights of Security Holders and Use of Proceeds
  Page 82




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##### Table of Contents



Item 15. Controls and Procedures
     1.
    
    pertain to the maintenance of records that, in reasonable detail, accurately and
fairly reflect the transactions and dispositions of its assets and its consolidated
entities;2.
    
    provide reasonable assurance that transactions are recorded as necessary to permit
preparation of the consolidated 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; and3.
    
    provide reasonable assurance regarding prevention or timely detection of
unauthorized acquisition, use, or disposition of its assets that could have a material
effect on the consolidated financial statements.
   
 Item 16. [Reserved]
  Page 83




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##### Table of Contents



Item 16A. Audit committee financial expert
  
 Item 16B. Code of ethics
 www.osigeospatial.com
  
 Item 16C. Principal Accountant Fees and Services
 .
  Financial Year ending November 30
    
    2007
    
    2006Audit fees (1)
    
    $
    342,588
    
    
    $
    322,939Audit-related fees (2)
    
    
    
    
    
    
    223,778Tax fees (3)
    
    
    115,355
    
    
    
    108,734All other fees (4)
    
    
    4,545
    
    
    
    2,490
 
 (1)
    
    Audit Fees consist of fees billed by E&Y for assurance and related services
reasonably related to the performance of the audit or review of the Companys financial
statements.(2)
    
    Audit-Related Fees consist of fees billed by E&Y for assurance and related
services that are reasonably related to the performance of the audit or review of the
Companys financial statements and are not reported as Audit Fees. For fiscal year 2006,
these fees of $223,778 were for the financial statement audit of CHI Systems Inc. for the
years ended September 30, 2004 and 2005 that were required as part of the Business Acquisition
Report the Company filed with the SEC on February 27, 2006.(3)
    
    Tax Fees consist of fees billed by E&Y for professional services rendered for tax
compliance, tax advice, and tax planning for the Company and in connection with the Companys
Canadian federal and provincial tax returns and U.S. federal and state income tax returns. Page 84




---



##### Table of Contents



(4)
    
    All Other Fees consist of fees billed by E&Y for products and services other than
Audit Fees, Audit-Related Fees and Tax Fees. For fiscal years 2007 and 2006, these fees were
for an annual subscription to E&Ys on-line accounting research website.   
 Item 16D. Exemptions from the Listing Standards for Audit Committees
  
 Item 16E. Purchases of Equity Securities by the Issuer and Affiliated Purchasers
  Page 85




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##### Table of Contents



Part III
 
 Item 17. Financial Statements
  Financial Statement Schedules
  F1
    
    Independent Auditors Report  November 30, 2007F2
    
    Consolidated Balance Sheets as at November 30, 2007 and 2006F3
    
    Consolidated Statements of Operations for the years ended
November 30, 2007, 2006, and 2005F4
    
    Consolidated Statements of Shareholders Equity for the years
ended November 30, 2007, 2006, and 2005F5
    
    Consolidated Statements of Comprehensive Income (Loss) for the
years ended November 30, 2007, 2006, and 2005F6
    
    Consolidated Statements of Cash Flows for the years ended
November 30, 2007, 2006, and 2005F7
    
    Notes to the Consolidated Financial Statements  November 30, 2007 and 2006
 
 Item 18. Financial Statements
  Page 86




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Item 19. Exhibits
 ExhibitNumber
    
    Description1.1(4)
    
    Articles pursuant to The Business Corporations Act of British Columbia.2.1(6)
    
    Shareholder Rights Plan Agreement dated April 19, 2001 and amended and
restated March 19, 2007.4.2(2)
    
    Contract No. W8472-OICJ 26/001/QC between Public Works and Government Services
Canada and Offshore Systems Ltd. dated November 29, 2001.4.4(3)
    
    Contract No. 265-004-002 between Nautronix Ltd. and Offshore Systems Ltd. dated
March 18, 2004.4.6(4)
    
    Agreement, dated April 26, 2004, between the Company and Technology
Partnerships Canada.4.7(4)
    
    Contract between C.E. Unterberg, Towbin, LLC and Offshore Systems International
Ltd. dated March 8, 2005.4.9(4)
    
    Form of Subscription Agreement.4.10(4)
    
    Letter of Intent to Acquire Mapcon Mapping Consultants Inc dated February 28,
2005.4.11(5)
    
    CHI Systems Inc. Purchase Agreement dated November 2, 2005.4.12
    
    Contract between Mr. Kenneth Kirkpatrick and OSI Geospatial Inc. dated November 7, 2005 and
all amendments.*4.13
    
    Contract between Mr. John Sentjens and OSI Geospatial Inc. dated September 25, 2007 and all
amendments.*4.14
    
    Contract between Mr. Wayne Hoyle and OSI Geospatial Inc. dated July 17, 2006 and all
amendments.*4.15
    
    Contract between Mr. Marcos Riano and OSI Geospatial Inc. dated February 22, 2002 and all
amendments.*4.16
    
    Contract between Mr. Wayne Zachary and CHI Systems Inc. dated December 14, 2005.4.17
    
    Contract between Mr. James Liddy and CHI Systems Inc. dated March 6, 2007.*4.18(1)
    
    1994 Stock option plan4.19(1)
    
    1996 Stock option plan4.20(1)
    
    1998 Stock option plan8.1
    
    List of Subsidiaries and Jurisdictions.
 Page 87




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##### Table of Contents



ExhibitNumber
    
    Description11.1(6)
    
    Code of Ethics.12.1
    
    Certification of Chief Executive Officer and Chief Financial Officer pursuant to Section 302
of the Sarbanes-Oxley Act of 2002.13.1
    
    Certification by Chief Executive Officer and Chief Financial Officer Pursuant to Section 906
of the Sarbanes-Oxley Act of 2002.
 
 (1)
    
    Incorporated by reference to the Companys registration statement on Form 20-F as
filed with the SEC on July 24, 2002.(2)
    
    Incorporated by reference to the Companys annual report on Form 20-F for the fiscal
year ended November 30, 2001.(3)
    
    Incorporated by reference to the Companys annual report on Form 20-F for the fiscal
year ended November 30, 2003.(4)
    
    Incorporated by reference to the Companys annual report on Form 20-F for the fiscal
year ended November 30, 2004.(5)
    
    Incorporated by reference to the Companys annual report on Form 20-F for the fiscal
year ended November 30, 2005.(6)
    
    Incorporated by reference to the Companys annual report on Form 20-F for the fiscal
year ended November 30, 2006.*
    
    Confidential portions of this exhibit have been omitted and filed separately with the Commission
pursuant to an application for Confidential Treatment under rule 24b-2 promulgated under the
Securities Exchange Act of 1934, as amended. Page 88




---



##### Table of Contents



SIGNATURES
  OSI GEOSPATIAL INC.Dated: May 26, 2008
    By:
    /s/ Ken KirkpatrickKenneth H. KirkpatrickPresident & CEO Page 89




---



##### Table of Contents



Exhibits Attached
 ExhibitNumber
    
    Description8.1
    
    List of Subsidiaries and Jurisdictions12.1
    
    Certification of Chief Executive Officer and Chief Financial Officer pursuant to Section 302
of the Sarbanes-Oxley Act of 2002.13.1
    
    Certification by Chief Executive Officer and Chief Financial Officer Pursuant to Section 906
of the Sarbanes-Oxley Act of 2002.
 Page 90




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##### Table of Contents



OSI Geospatial Inc.
 Consolidated Financial Statements
November 30, 2007 and 2006
(expressed in U.S. dollars)




---



##### Table of Contents



AUDITORS REPORT
 OSI Geospatial Inc.
 OSI Geospatial Inc.
      Vancouver, Canada,
February 5, 2008.
    
    Chartered Accountants
 F1




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##### Table of Contents



OSI Geospatial Inc.
   As at November 30, 2007 and 2006
 In thousands of U.S. dollars
    
    2007
    
    
    2006(restated  seeNotes 1 & 23)AssetsCurrent assetsAccounts receivable and unbilled revenue (note 6)
    
    $
    13,055
    
    
    $
    12,707Income taxes recoverable
    
    
    
    
    
    
    28Inventory (note 7)
    
    
    1,216
    
    
    
    1,063Prepaid expenses and deposits
    
    
    502
    
    
    
    534Current portion of future income tax asset (note 17)
    
    
    132
    
    
    
    10414,905
    
    
    
    14,436Deferred development costs
    
    
    97
    
    
    
    Future income tax asset(note 17)
    
    
    271
    
    
    
    1Equipment and furnishings(note 8)
    
    
    1,914
    
    
    
    1,089Intangible and other assets(note 9)
    
    
    861
    
    
    
    794Goodwill(note 5)
    
    
    8,300
    
    
    
    8,130$
    26,348
    
    
    $
    24,450LiabilitiesCurrent liabilitiesBank indebtedness
    
    $
    822
    
    
    $
    904Accounts payable and accrued liabilities (note 10)
    
    
    5,585
    
    
    
    4,887Income taxes payable
    
    
    179
    
    
    
    86Unearned revenue
    
    
    392
    
    
    
    667Current portion of deferred rent
    
    
    38
    
    
    
    Current portion of future income tax liability (note 17)
    
    
    25
    
    
    
    15Current portion of capital lease obligations (note 12)
    
    
    46
    
    
    
    7,087
    
    
    
    6,559Deferred rent
    
    
    347
    
    
    
    Capital lease obligation(note 12)
    
    
    200
    
    
    
    Future income tax liability(note 17)
    
    
    100
    
    
    
    1107,734
    
    
    
    6,669Commitments and contingencies(note 15)Shareholders EquityIssued and outstanding30,262 Class A, Series A preference shares (2006  30,262) (note 13b)
    
    
    19
    
    
    
    19178,530 Class B, Series 2 preference shares (2006  279,840) (note 13c)
    
    
    4,542
    
    
    
    7,11546,956,439 common shares (2006  35,137,046) (note 13d)
    
    
    21,293
    
    
    
    15,88725,854
    
    
    
    23,021Warrants(note 13f)
    
    
    4,618
    
    
    
    4,286Contributed surplus
    
    
    1,679
    
    
    
    1,343Accumulated deficit
    
    
    (16,564
    )
    
    
    (13,296
    )Accumulated other comprehensive income
    
    
    3,027
    
    
    
    2,42718,614
    
    
    
    17,781$
    26,348
    
    
    $
    24,450
 On behalf of the Board
 Raymond Johnston
    
    Director
    
    Donald Young
    
    Director
  F2




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##### Table of Contents



OSI Geospatial Inc.
 For the years ended November 30, 2007, 2006 and 2005
 In thousands of U.S. dollars, except share related data
    
    2007
    
    
    2006
    
    
    2005(restated  see
    
    
    (restated  seeNotes 1 & 23)
    
    
    Notes 1 & 23)RevenueMarine Systems
    
    $
    10,219
    
    
    $
    11,274
    
    
    $
    8,181Land and air systems
    
    
    10,703
    
    
    
    8,761
    
    
    
    Mapping
    
    
    4,404
    
    
    
    4,102
    
    
    
    2,94525,326
    
    
    
    24,137
    
    
    
    11,126Cost of sales
    
    
    15,560
    
    
    
    13,484
    
    
    
    5,696Gross profit
    
    
    9,766
    
    
    
    10,653
    
    
    
    5,430ExpensesGeneral and administrative
    
    
    6,175
    
    
    
    5,712
    
    
    
    4,759Engineering
    
    
    1,361
    
    
    
    1,783
    
    
    
    1,527Sales and marketing
    
    
    3,859
    
    
    
    2,527
    
    
    
    2,354Amortization
    
    
    326
    
    
    
    510
    
    
    
    245Interest expense
    
    
    70
    
    
    
    21
    
    
    
    23Interest income
    
    
    (7
    )
    
    
    (37
    )
    
    
    (156
    )Foreign exchange loss (gain)
    
    
    316
    
    
    
    (233
    )
    
    
    90Loss on disposal of fixed assets
    
    
    9
    
    
    
    2
    
    
    
    4Technology Partnerships Canada royalty (note 14)
    
    
    471
    
    
    
    493
    
    
    
    243Technology Partnerships Canada contribution (note 14)
    
    
    
    
    
    
    (760
    )
    
    
    (1,090
    )12,580
    
    
    
    10,018
    
    
    
    7,999Net earnings (loss) before income taxes
    
    
    (2,814
    )
    
    
    635
    
    
    
    (2,569
    )Future income tax expense (recovery)
    
    
    (298
    )
    
    
    (364
    )
    
    
    726Current income tax expense
    
    
    358
    
    
    
    67
    
    
    
    204Income tax expense (recovery)(note 17)
    
    
    60
    
    
    
    (297
    )
    
    
    930Net earnings (loss)
    
    $
    (2,874
    )
    
    $
    932
    
    
    $
    (3,499
    )Net loss available to common shareholders(note 13g)
    
    $
    (3,588
    )
    
    $
    (82
    )
    
    $
    (4,252
    )Loss per share(note 13g)Basic
    
    $
    (0.09
    )
    
    $
    0.00
    
    
    $
    (0.15
    )Diluted
    
    $
    (0.09
    )
    
    $
    0.00
    
    
    $
    (0.15
    )Weighted average number of common shares outstanding (note 13g)Basic
    
    
    41,096,261
    
    
    
    32,381,992
    
    
    
    27,989,832Diluted
    
    
    41,096,261
    
    
    
    48,843,168
    
    
    
    27,989,832Dividends declared per shareClass B preference shares  Series 1
    
    $
    
    
    
    $
    
    
    
    $
    2.36Class B preference shares  Series 2
    
    $
    1.64
    
    
    $
    3.13
    
    
    $
    3.52
  F3




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##### Table of Contents



OSI Geospatial Inc.   For the years ended November 30, 2007, 2006 and 2005
 In thousands of U.S. dollars except share numbers
    
    2007
    
    
    
    2006
    
    
    
    2005(restated  see
    
    
    
    (restated  seeNotes 1 & 23)
    
    
    
    Notes 1 & 23)Number
    
    
    Amount
    
    
    
    Number
    
    
    Amount
    
    
    
    Number
    
    
    AmountClass A preference sharesBalance at beginning of year
    
    
    30,262
    
    
    $
    19
    
    
    
    
    30,262
    
    
    $
    19
    
    
    
    
    30,262
    
    
    $
    19Balance at end of year
    
    
    30,262
    
    
    $
    19
    
    
    
    
    30,262
    
    
    $
    19
    
    
    
    
    30,262
    
    
    $
    19Class B preference sharesBalance at beginning of year
    
    
    279,840
    
    
    $
    7,115
    
    
    
    
    341,240
    
    
    $
    8,669
    
    
    
    
    57,711
    
    
    $
    1,261Repurchase of Class B Series 1 preference shares
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (57,711
    )
    
    
    (1,261
    )Issue of Class B Series 2 preference shares, net
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    390,000
    
    
    
    9,908Class B preference shares converted to common shares
    
    
    (101,310
    )
    
    
    (2,573
    )
    
    
    
    (61,400
    )
    
    
    (1,560
    )
    
    
    
    (48,760
    )
    
    
    (1,239
    )Share issue costs
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    6
    
    
    
    
    
    
    
    
    Balance at end of year
    
    
    178,530
    
    
    $
    4,542
    
    
    
    
    279,840
    
    
    $
    7,115
    
    
    
    
    341,240
    
    
    $
    8,669Common sharesBalance at beginning of year
    
    
    35,137,046
    
    
    $
    15,887
    
    
    
    
    30,367,309
    
    
    $
    13,515
    
    
    
    
    27,488,074
    
    
    $
    12,269Shares issued to CHI shareholders (note 5)
    
    
    
    
    
    
    
    
    
    
    
    1,067,975
    
    
    
    752
    
    
    
    
    
    
    
    
    Shares issued to Liddy shareholders (note 5)
    
    
    300,000
    
    
    
    129
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Shares issued (note 13d)
    
    
    5,560,000
    
    
    
    3,060
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Share issue costs, net of tax benefit
    
    
    
    
    
    
    (356
    )
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Class B preference shares converted to common shares
    
    
    5,959,393
    
    
    
    2,573
    
    
    
    
    3,611,762
    
    
    
    1,560
    
    
    
    
    2,868,235
    
    
    
    1,239Exercise of stock options
    
    
    
    
    
    
    
    
    
    
    
    90,000
    
    
    
    60
    
    
    
    
    11,000
    
    
    
    7Balance at end of year
    
    
    46,956,439
    
    
    $
    21,293
    
    
    
    
    35,137,046
    
    
    $
    15,887
    
    
    
    
    30,367,309
    
    
    $
    13,515WarrantsBalance at beginning of year
    
    
    13,788,368
    
    
    $
    4,286
    
    
    
    
    13,788,368
    
    
    $
    4,286
    
    
    
    
    1,393,301
    
    
    $
    437Warrants issued  net of issue costs
    
    
    2,780,000
    
    
    
    332
    
    
    
    
    
    
    
    
    
    
    
    
    
    12,395,067
    
    
    
    3,849Balance at end of year
    
    
    16,568,368
    
    
    $
    4,618
    
    
    
    
    13,788,368
    
    
    $
    4,286
    
    
    
    
    13,788,368
    
    
    $
    4,286Contributed surplusBalance at beginning of year
    
    
    
    
    
    $
    1,343
    
    
    
    
    
    
    
    $
    1,239
    
    
    
    
    
    
    
    $
    161Share based broker compensation
    
    
    
    
    
    
    74
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Stock-based compensation
    
    
    
    
    
    
    262
    
    
    
    
    
    
    
    
    104
    
    
    
    
    
    
    
    
    1,078Balance at end of year
    
    
    
    
    
    $
    1,679
    
    
    
    
    
    
    
    $
    1,343
    
    
    
    
    
    
    
    $
    1,239Accumulated deficitBalance at beginning of year
    
    
    
    
    
    $
    (13,296
    )
    
    
    
    
    
    
    $
    (13,059
    )
    
    
    
    
    
    
    $
    (7,701
    )Repurchase of Class B Series 1 preference shares
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (1,020
    )Difference between conversion consideration and
carrying value of Class B Series 2 preference
shares
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (15
    )
    
    
    
    
    
    
    
    Dividends on Class B preference shares
    
    
    
    
    
    
    (382
    )
    
    
    
    
    
    
    
    (1,014
    )
    
    
    
    
    
    
    
    (753
    )Tax expense on dividends
    
    
    
    
    
    
    (12
    )
    
    
    
    
    
    
    
    (140
    )
    
    
    
    
    
    
    
    (86
    )Net earnings (loss) for the year
    
    
    
    
    
    
    (2,874
    )
    
    
    
    
    
    
    
    932
    
    
    
    
    
    
    
    
    (3,499
    )Balance at end of year
    
    
    
    
    
    $
    (16,564
    )
    
    
    
    
    
    
    $
    (13,296
    )
    
    
    
    
    
    
    $
    (13,059
    )Accumulated other comprehensive incomeForeign currency translation adjustmentBalance at beginning of year
    
    
    
    
    
    $
    2,427
    
    
    
    
    
    
    
    $
    2,291
    
    
    
    
    
    
    
    $
    1,691Other comprehensive income
    
    
    
    
    
    
    600
    
    
    
    
    
    
    
    
    136
    
    
    
    
    
    
    
    
    600Balance at end of year
    
    
    
    
    
    $
    3,027
    
    
    
    
    
    
    
    $
    2,427
    
    
    
    
    
    
    
    $
    2,291Total shareholders equity
    
    
    
    
    
    $
    18,614
    
    
    
    
    
    
    
    $
    17,781
    
    
    
    
    
    
    
    $
    16,960
  F4




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OSI Geospatial Inc.   For the years ended November 30, 2007, 2006 and 2005
 In thousands of U.S. dollars
    
    2007
    
    
    2006
    
    
    2005(restated  see
    
    
    (restated  seeNotes 1 & 23)
    
    
    Notes 1 & 23)Net earnings (loss)
    
    $
    (2,874
    )
    
    $
    932
    
    
    $
    (3,499
    )Other comprehensive income (loss), net of taxesUnrealized gains on translation of self-sustaining
foreign operations
    
    
    600
    
    
    
    136
    
    
    
    600Comprehensive (loss) income for year
    
    $
    (2,274
    )
    
    $
    1,068
    
    
    $
    (2,899
    )
  F5




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OSI Geospatial Inc.   For the years ended November 30, 2007, 2006 and 2005
 In thousands of U.S. dollars
    
    2007
    
    
    2006
    
    
    2005(restated  see
    
    
    (restated  seeNote1 & 23)
    
    
    Note1 & 23)Cash flows from (used) in operating activitiesNet earnings (loss) for the year
    
    $
    (2,874
    )
    
    $
    932
    
    
    $
    (3,499
    )Items not affecting cashAmortization
    
    
    554
    
    
    
    763
    
    
    
    404Loss on disposal of equipment
    
    
    9
    
    
    
    2
    
    
    
    3Stock-based compensation
    
    
    262
    
    
    
    104
    
    
    
    1,078Future income taxes
    
    
    (298
    )
    
    
    (558
    )
    
    
    678(2,347
    )
    
    
    1,243
    
    
    
    (1,336
    )Changes in non-cash working capital itemsAccounts receivable
    
    
    69
    
    
    
    (1,995
    )
    
    
    (1,222
    )Inventory
    
    
    47
    
    
    
    (109
    )
    
    
    (363
    )Prepaid expenses and deposits
    
    
    138
    
    
    
    185
    
    
    
    (362
    )Accounts payable and accrued liabilities
    
    
    459
    
    
    
    809
    
    
    
    1,079Income taxes payable
    
    
    86
    
    
    
    (173
    )
    
    
    131Unearned revenue
    
    
    (275
    )
    
    
    197
    
    
    
    356Deferred rent
    
    
    367
    
    
    
    
    
    
    
    891
    
    
    
    (1,086
    )
    
    
    (381
    )(1,456
    )
    
    
    157
    
    
    
    (1,717
    )Cash flows used in investing activitiesPurchase of Liddy International Inc. (note 5)
    
    
    (25
    )
    
    
    
    
    
    
    Purchase of CHI Systems, Inc., net of cash acquired (note 5)
    
    
    
    
    
    
    (8,146
    )
    
    
    Purchase of Mapcon Mapping Consultants Inc., net of cash acquired
    
    
    
    
    
    
    
    
    
    
    (973
    )Decrease (increase) in restricted cash
    
    
    
    
    
    
    189
    
    
    
    (189
    )Development costs deferred
    
    
    (97
    )
    
    
    
    
    
    
    Additions to equipment and furnishings
    
    
    (400
    )
    
    
    (290
    )
    
    
    (70
    )Additions to leaseholds
    
    
    (663
    )
    
    
    
    
    
    
    Additions to intangibles and other assets
    
    
    (247
    )
    
    
    (237
    )
    
    
    (216
    )(1,432
    )
    
    
    (8,484
    )
    
    
    (1,448
    )Cash flows from (used in) financing activities(Repayments to) advances from operating line of credit
    
    
    (103
    )
    
    
    904
    
    
    
    Capital lease financing
    
    
    246Issue of common shares, net of issue costs
    
    
    2,812
    
    
    
    60
    
    
    
    7Issue of warrants
    
    
    332
    
    
    
    
    
    
    
    Issue of Class B Series 2 preference shares and warrants, net of issue costs
    
    
    
    
    
    
    
    
    
    
    13,756Class B preference share issue costs
    
    
    
    
    
    
    6
    
    
    
    Repurchase of Class B Series 1 preference shares
    
    
    
    
    
    
    
    
    
    
    (2,281
    )Class B preference share dividends declared and paid
    
    
    (382
    )
    
    
    (1,014
    )
    
    
    (753
    )2,905
    
    
    
    (44
    )
    
    
    10,729Effect of foreign exchange on cash balances
    
    
    (17
    )
    
    
    149
    
    
    
    446Increase (decrease) in cash and cash equivalents
    
    
    
    
    
    
    (8,222
    )
    
    
    8,010Cash and cash equivalents  beginning of year
    
    
    
    
    
    
    8,222
    
    
    
    212Cash and cash equivalents  end of year
    
    $
    
    
    
    $
    
    
    
    $
    8,222
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##### Table of Contents



OSI Geospatial Inc.
  November 30, 2007 and 2006
 1
    
    Basis of presentationThese audited consolidated financial statements have been prepared by management and include
the accounts of OSI Geospatial Inc. and its wholly owned subsidiaries, collectively referred to
as OSI Geospatial or the Company. These consolidated financial statements have been prepared in
accordance with generally accepted accounting principles in Canada (Canadian GAAP) and all
amounts herein have been expressed in thousands of U.S. dollars unless otherwise noted. Note 22
to these financial statements presents a comparison to generally accepted acccounting
principles in the United States (U.S. GAAP).The annual and interim consolidated financial statements previously issued in 2005 and 2006
were prepared in accordance with U.S. GAAP. These previously released financial statements
included a reconciliation to Canadian GAAP. The Company has restated all comparative amounts
presented in the financial statements in accordance with Canadian GAAP. In the process of this
restatement to Canadian GAAP, certain GAAP differences that were previously not identified in
prior years GAAP reconciliation notes to the financial statements have now been identified and
corrected. See Note 23 for additional information.On April 12, 2006 at the Companys annual general meeting its shareholders voted in favour of
changing the Companys name from Offshore Systems International Ltd. to OSI Geospatial Inc.
The name change was effective June 5, 2006. For the purposes of this report, the Company is
referred to by its new legal identity.2
    
    Nature of operationsOSI Geospatial Inc. designs, develops, and markets software and systems for enhancing
situational awareness in command, control, and intelligence applications. OSI Geospatials
principal product is the proprietary ECPINS® line of electronic chart navigation systems for
commercial and military customers. OSI Geospatial conducts its operations through three
business units  International Systems Operations, U.S. Systems Operations and Mapping
Operations. The Companys International and U.S. Systems business units develop and produce
geographic information display systems and software for the marine navigation, and command and
control markets, and situational awareness products for land-based and aeronautical command and
control markets. The Companys Mapping business unit (formerly the Geomatics business unit)
provides digital land map and electronic nautical chart production services, and produces and
distributes electronic nautical chart data.3
    
    Accounting changesa) Changes in accounting policies relating to the adoption of Canadian GAAPIn line with the conversion to Canadian GAAP referred to in Note 1 above, the Company has
adopted the provisions of CICA Handbook Section 3855 Financial Instruments  Recognition and
Measurement, CICA Handbook Section 3861 Financial Instruments  Presentation and Disclosure,
CICA Handbook Section 3865 Hedgesand CICA Handbook Section 1530 Comprehensive Income. These
provisions became effective for the fiscal year beginning December 1, 2006, and have been
applied retroactively.
 (i)
    
    Financial Instruments  Recognition and MeasurementThis standard prescribes the recognition and measurement of financial instruments. Section
3855 requires that all financial assets and liabilities (including derivatives) be measured
at fair value on initial recognition except for certain related party transactions.
Measurement in subsequent periods depends on
the classification of the instruments. All financial instruments must be classified as one
of the following categories: held for trading, held to maturity, loans and receivables,
available for sale assets and other financial liabilities.The financial assets categorized as held for trading are measured at fair value with
unrealized gains and losses recognized in net income. Section 3855 permits an entity to
designate any financial instruments as held for trading on initial recognition or adoption
of this standard, even if that instrument would not
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OSI Geospatial Inc.
  November 30, 2007 and 2006
 otherwise meet the definition of held for trading as specified in Section 3855. The
Companys financial instruments classified as held for trading have included forward
contracts and marketable securities, when used. The Company has historically measured these
instruments at fair value and any unrealized gains and losses have been included in income.Available for sale financial assets are measured at fair value with unrealized gains and
losses recognized in other comprehensive income. The Company currently has no assets
classified as available for sale.The financial assets and liabilities classified as loans and receivables, held to maturity
and other liabilities are measured at amortized cost. There is no change in accounting
treatment for these financial instruments as a result of adoption of Section 3855.(ii)
    
    HedgesThis standard sets out the criteria of when hedge accounting is applied and how it is
applied. It provides the option of designating qualifying transactions as hedges for
accounting purposes. The qualifying hedging relationships include fair value hedges, cash
flow hedges, and hedges of foreign currency exposures of net investments in self-sustaining
foreign operations. The changes in the fair value of the hedging derivatives will be
recognized in net earnings or accumulated other comprehensive income depending on the
nature of the hedging relationships. Any gains and losses resulting from any
ineffectiveness in hedging relationships are recognized in net income immediately. The
Company does not currently have any hedges and as a result there is no change on adoption
of Section 3865.(iii)
    
    Comprehensive IncomeThis section establishes standards for the reporting and disclosure of other comprehensive
income [OCI] in a new category, Accumulated Other Comprehensive Income, which will be
included in shareholders equity on the consolidated balance sheet. Comprehensive income
includes all changes in equity of the Company during a period except those resulting from
investments by shareholders and distributions to shareholders. The major components
included in Accumulated Other Comprehensive Income are unrealized gains and losses on
financial assets classified as available for sale, and unrealized foreign exchange gains
and losses arising on translation of the financial statements of self-sustaining foreign
operations.The adoption of Section 1530 alongside with the conversion to Canadian GAAP has not
resulted in any change in disclosure on the Companys balance sheet. The Company has
presented a Statement of Other Comprehensive Income in the consolidated financial
statements.
 b) Change in reporting currencyEffective March 1, 2006, the Company adopted the U.S. dollar as its reporting currency. In
general this change resulted from the acquisition of CHI Systems Inc. which increased the
overall proportion of business activities of the OSI Geospatial Inc. Group of Companies
conducted in U.S. dollars. The change was effected by translating assets and liabilities at the
existing U.S./Canadian dollar foreign exchange spot rate on the last day of the period, while
earnings were translated at the average rate for period. Equity transactions have been
translated at historical rates; with opening equity restated at the rate of exchange on
December 1, 2001. The resulting net translation adjustment has been credited to the foreign
currency translation adjustment.Prior to March 1, 2006, the reporting currency of the Company was Canadian dollars.
 F8




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OSI Geospatial Inc.
  November 30, 2007 and 2006
 c) Recent pronouncementsThe following recent pronouncements issued by the CICA will be monitored by the Company:The CICA has issued two accounting standards related to the disclosure and presentation of
financial instruments. CICA Handbook Section 3862 Financial Instruments  Disclosureand CICA
Handbook Section 3863 Financial Instruments  Presentation, which will replace Section 3861
Financial Instruments  Disclosure and Presentation. These standards apply to interim and
annual financial statements relating to fiscal years beginning on or after October 1, 2007.
The new disclosure standard increases the emphasis on the risks associated with both recognized
and unrecognized financial instruments and how those risks are managed. The new presentation
standard carries forward the former presentation requirements.The CICA has issued CICA Handbook Section 1535 Capital Disclosureswhich will require
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 standard applies to interim and annual financial statements
relating to fiscal years beginning on or after October 1, 2007.The CICA has issued CICA Handbook Section 3031 Inventorieswhich will replace CICA 3030
Inventories. CICA 3031 will create changes from current practice, including the reversal of
impairment write-downs, which is not permitted currently and more extensive disclosure. The
section is effective for interim and annual financial statements relating to fiscal years
beginning on or after January 1, 2008.The CICA has issued CICA Handbook Section 3064 Goodwill and Intangible Assetswhich replaces
Section 3062 Goodwill and Other Intangiblesand Section 3450 Research and Development Costs.
This Section establishes standards for the recognition, measurement, presentation and
disclosure of goodwill and intangible assets, including the development, maintenance or
enhancement of intangible resources such as scientific or technical knowledge, design and
implementation of new processes or systems, licenses, intellectual property, market knowledge
and trademarks. This Section applies to annual and interim financial statements relating to
fiscal years beginning on or after October 1, 2008.The Company is assessing the impact on its consolidated financial statements of the above
recent pronouncements.4
    
    Summary of significant accounting policiesThese consolidated financial statements have been prepared in accordance with Canadian
generally accepted accounting principles. A reconciliation of amounts presented in accordance
with United States generally accepted accounting principles is detailed in note 22. The
following is a summary of significance accounting principles used in the preparation of these
consolidated financial statements.a)
    
    Principles of consolidationThese consolidated financial statements include the accounts of the Company and its
wholly-owned subsidiaries. All material intercompany transactions and balances have been
eliminated on consolidation.b)
    
    Foreign currency translationThe Companys Canadian subsidiaries functional currency is Canadian Dollar. The Companys
United States subsidiaries functional currency is United States Dollars.Monetary assets and liabilities denominated in foreign currencies are recorded at the rate of
exchange prevailing at the balance sheet date. Non-monetary assets and liabilities denominated
in foreign currencies are translated at historical rates. Revenue and expenses are translated
at the average exchange rate
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##### Table of Contents



OSI Geospatial Inc.
  November 30, 2007 and 2006
 prevailing during the period. Foreign currency translation gains and losses are included in
income in the period in which they occur.The cumulative foreign currency translation adjustment included under accumulated other
comprehensive income within shareholders equity on the consolidated balance sheets relates to
the unrealized foreign currency translation gains or losses of Canadian subsidiaries.
Financial statements of Canadian subsidiaries, all of which are self-sustaining, are translated
into U.S. dollars using the current rate method. Under the current rate method, assets and
liabilities are translated at the rate of exchange prevailing at the balance sheet date.
Revenue and expenses are translated at the average exchange rate prevailing during the period.c)
    
    Use of estimatesThe preparation of financial statements in conformity with Canadian GAAP requires management to
make estimates and assumptions which affect the reported amounts of assets and liabilities and
the disclosure of contingent assets and liabilities at the date of the financial statements and
revenues and expenses for the years reported. Actual results could differ from these estimates.d)
    
    Cash and cash equivalentsCash and cash equivalents consist of cash and deposit instruments with an initial maturity of
three months or less.e)
    
    Accounts receivableThe Company maintains an allowance for doubtful accounts against its accounts receivable for
estimated losses that may arise if any of its customers are unable to make required payments.
Management specifically analyzes the age of outstanding customer balances, historical bad
debts, customer credit-worthiness and changes in customer payment terms when making estimates
of the uncollectability of the Companys accounts receivable. If the Company determines that
the financial condition of any of its customers deteriorates, increases in the allowance may be
made.f)
    
    InventoryMaterials and components are stated at the lower of cost and net realizable value as determined
by the first-in first-out method. Work-in-process and manufactured parts are stated at the cost
of materials and direct labour applied to the product and the applicable share of overhead.
Finished goods are stated at the lower of cost and net realizable value. The Company assesses
the need for inventory write-downs based on its assessment of estimated replacement or net
realizable value using assumptions about future demand and market conditions. If market
conditions differ from those originally estimated by the Company, an additional inventory
write-down may be required.g)
    
    Research and development costsThe Company annually incurs costs on activities that relate to the research and development of
new products.Research costs are expensed in the period incurred.Product development costs include investigative and development expenditures incurred on
specific potential products. These costs are expensed in the period incurred unless, in the
opinion of management, the deferral criteria are satisfied in all material respects, in which
case development expenditures are capitalized and amortized over the estimated life of the
related products.
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OSI Geospatial Inc.
  November 30, 2007 and 2006
 h)
    
    Equipment and furnishingsEquipment, furniture and fixtures and leasehold improvements are recorded at cost less
accumulated amortization. Amortization is provided using the methods indicated below and rates
based on the assets estimated useful lives as follows:
 Method
    
    PercentageEquipment
    
    Declining balance
    
    20  25Furniture and fixtures
    
    Declining balance
    
    
    20Leasehold improvements
    
    Straight line
    
    
    10
 An impairment loss is recognized when the undiscounted cash flows expected from use and
eventual disposition of the asset are less than the carrying amount of the asset. An impairment
charge is recorded to reduce the carrying value of the asset to its fair value.i)
    
    Intangible and other assetsIntangible and other assets are recorded at cost less accumulated amortization. Amortization is
provided using the methods indicated below and rates based on the assets estimated useful
lives as follows:
 Method
    
    PercentageComputer software
    
    Declining balance
    
    
    33Customer contracts
    
    Straight line
    
    33  100Customer relationships
    
    Straight line
    
    10  25Security clearance
    
    Straight line
    
    
    17Licenses and patents
    
    Declining balance
    
    
    10
 An impairment loss is recognized when the undiscounted cash flows expected from use and
eventual disposition of the asset are less than the carrying amount of the asset. An impairment
charge is recorded to reduce the carrying value of the asset to its fair value.j)
    
    LeasesLeases are classified as either capital or operating leases. A lease that transfers
substantially all benefits and risks incidental to the ownership of property is classified as a
capital lease. All other leases are accounted for as operating leases wherein rental payments
are expensed as incurred. At the inception of a capital lease, an asset and a lease obligation
are recorded at an amount equal to the lesser of the present value of the minimum lease
payments and the propertys fair value at the beginning of such lease. Assets recorded under
the capital leases are amortized over the estimated useful lives of the respective assets on
commencement of use of the related assets.k)
    
    GoodwillAcquisitions are accounted for using the purchase method whereby acquired assets and
liabilities are recorded at fair value as of the date of acquisition. The excess of the
purchase price over such fair value is recorded as goodwill. The Company evaluates, on at least
an annual basis, the carrying amounts of goodwill for impairment. To accomplish this, the
Company compares the fair value of the reporting unit to the carrying amount. If the carrying
value of the reporting unit were to exceed its fair value, the Company would perform the second
step of the impairment test. In the second step, the Company would compare the fair value of
the
reporting unit goodwill to the carrying amount and any excess would be written off. Any
impairment of goodwill would be recognized as an expense in the period of impairment, and
subsequent reversals of impairment are prohibited. The Company performs its testing for
impairment of goodwill and other intangible assets on an annual basis. Based on testing
performed as of November 30, 2007, there was no impairment.
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##### Table of Contents



OSI Geospatial Inc.
  November 30, 2007 and 2006
 l)
    
    Lease inducementsLease inducements are recorded on the balance sheet as deferred rent and are amortized against
rent expense over 10 years, the economic life of the lease, on a straight line basis.m)
    
    Income taxesThe Company accounts for income taxes using the liability method of tax allocation. Under the
liability method, future income tax assets and liabilities are determined based on differences
between their financial reporting and tax bases and are measured using substantially enacted
tax rates and laws expected to be in effect when the differences are expected to reverse. The
Company provides a valuation allowance against future tax assets to the extent that the Company
does not consider them to be more likely than not of being realized.n)
    
    Revenue recognitionInternational Systems Operations and US Systems OperationsThe Company recognizes revenue from the sale of systems and software licenses upon the transfer
of title and software locks to the customer, so long as persuasive evidence of an arrangement
exists, delivery has occurred, the price is fixed or determinable, collection is reasonably
assured, and there are no ongoing obligations of the Company to provide future services with
the exception of warranties and maintenance. The Company uses the residual method to recognize
revenue on delivered elements when a license agreement includes one or more elements to be
delivered at a future date if evidence of the fair value of all undelivered elements exists. If
an undelivered element for the arrangement exists under the license arrangement, revenue
related to the undelivered element is deferred based on vendor-specific objective evidence
(VSOE) of the fair value of the undelivered element. If VSOE of fair value does not exist for
all undelivered elements, all revenue is deferred until sufficient evidence exists or all
elements are delivered.The Company recognizes revenue from the sales of hardware products upon the transfer of title
of the hardware product to the customer so long as persuasive evidence of an arrangement
exists, delivery has occurred, the price is fixed or determinable, and collection is reasonably
assured.The Company also enters into contracts that are primarily fixed fee arrangements to render
specific consulting and software modification services. The percentage of completion method is
applied to these more complex contracts that involve the provision of services relating to the
design or building of complex systems that require significant modification and that are
essential to the functionality of other elements in the arrangement. Under this method,
revenue is recognized using the percentage of completion basis and is calculated based on
actual labour dollars incurred compared to the estimated total labour dollars for the services
under the arrangement, so long as persuasive evidence of an arrangement exists, the price is
fixed or determinable, and collection is reasonably assured. If the Company does not have a
sufficient basis to measure progress towards completion, revenue is recognized when final
acceptance is received by the Company from the customer.Service revenues consist of revenues from consulting, implementation, training, integration
services and research and development services. These services are set forth separately in the
contractual arrangements such that the total price of the customer arrangement is expected to
vary as a result of the inclusion or exclusion of these services. For those contracts where the
services are not essential to the functionality of any other element of the transaction, the
Company determines VSOE of fair value for these services based upon normal pricing and
discounting practices for these services when sold separately. These services contracts
are primarily time and material based contracts. Revenue from these services is recognized at
the time such services are rendered by the Company so long as persuasive evidence of an
arrangement exists, delivery has occurred, the price is fixed or determinable, and collection
is reasonably assured.The Companys multiple-element sales arrangements include arrangements where software licenses
and the associated post contract customer support (PCS) are sold together. The Company
endeavours to establish
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##### Table of Contents



OSI Geospatial Inc.
  November 30, 2007 and 2006
 VSOE of the fair value of the undelivered PCS element based on the contracted price for
standalone PCS services previously provided. The Companys multiple-element sales arrangements
may include rights for the customer to renew PCS after the bundled term ends. These rights are
irrevocable to the customers benefit, are for specified prices, are consistent with the
initial price in the original multiple-element sales arrangement, and the customer is not
subject to any economic or other penalty for failure to renew. Further, the renewal PCS options
are for services comparable to the bundled PCS.PCS revenue associated with systems and software licenses is recognized rateably over the term
of the PCS period, so long as persuasive evidence of an arrangement exists, the price is fixed
or determinable, and collection is reasonably assured. PCS revenue may include software
license updates, rights to unspecified software product revisions addressing latent defects,
maintenance releases and patches released during the term of the PCS period. PCS revenue may
also include hardware maintenance and upgrades throughout the PCS period including maintaining
the continual performance standards of the hardware, making modifications, alterations and
repairs as required and other hardware related support services.Revenue under bill-and-hold arrangements is recognized when risks of ownership have been passed
on to the customer, there is a signed contract with the customer, the customer has a
substantial business purpose for ordering the goods on a bill-and-hold basis, a fixed delivery
schedule has been established with the customer, and the Company does not retain any specific
performance obligations such that the earnings process is not complete. Goods held under such
arrangements are segregated, ready for shipment and not subject to being used to fill other
orders. The customers are charged additional fees for storage and other associated costs until
shipment occurs.Mapping OperationsRevenue from mapping services are recognized using the proportional performance method of
accounting, whereby revenue in the period are based on the output completed to total units of
work to be completed of the project for each segment of the project. A provision is made for
the entire amount of future estimated losses, if any, on contracts in progress.Revenue from the sale of mapping products is recorded at the time of delivery of the product to
the customer so long as persuasive evidence exists of an agreement with the customer, the price
is fixed or determinable, and collection is reasonably assured.o)
    
    Unbilled revenueUnbilled revenue is revenue that has been recognized using the percentage of completion or the
proportional performance methods of accounting less amounts billed to the customer in
accordance with the milestone terms of the contract. Unbilled revenue is reduced when customers
are invoiced and the respective accounts receivable is recorded.p)
    
    Unearned revenueUnearned revenue is amounts that have been billed to the customer but have not been recognized
in revenue.q)
    
    Government assistanceGovernment assistance is recorded when there is reasonable assurance that the Company has
complied with, and will continue to comply with, all conditions necessary to obtain the
government assistance. Government assistance towards current research expenditures is recorded
as a reduction of expenses in the consolidated statements of operations. The liability to repay
government assistance is recognized as an expense in the period in which conditions arise that
cause the government assistance to be repayable.
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##### Table of Contents



OSI Geospatial Inc.
  November 30, 2007 and 2006
 r)
    
    Stock-based compensationThe Company has stock option plans as described in note 13. The Company uses the fair value
method to account for such plans. Under this method, the Company measures the fair value of
stock-based awards as of the grant date and recognizes the cost as an expense on a
straight-line basis over the applicable vesting period with a corresponding increase in
contributed surplus. When stock-based compensation awards vest, contributed surplus is reduced
by the applicable amount and share capital is increased by the same amount.s)
    
    Earnings per shareBasic earnings per share are computed using the weighted average number of common shares
outstanding during the year. The treasury stock method is used for the calculation of diluted
earnings per share. Under the treasury stock method, the weighted average number of
common shares outstanding for the calculation of diluted earnings per share assumes that the proceeds
to be received on the exercise of dilutive stock options and warrants are applied to repurchase
common shares at the average market price for the period. Stock options and warrants are
dilutive when the average market price of the common shares during the period exceeds the
exercise price of the options and warrants.t)
    
    GuaranteesThe Company guarantees that its software and hardware products will operate substantially in
conformity with product documentation and that the physical media will be free from defect. The
specific terms and conditions of the warranties are generally one year but may vary depending
on the country in which the products are sold. The Company accrues for known warranty issues if
a loss is probable and can be reasonably estimated, and accrues for estimated incurred but
unidentified warranty issues based on historical activity. To date, the Company has had no
material warranty claims.u)
    
    Derivative financial instrumentsDerivative financial instruments are utilized by the Company in the management of its foreign
currency exposure to reduce its exposure to fluctuations in foreign exchange on certain
committed and anticipated transactions. The Company formally documents the relationships
between derivative financial instruments and hedged items, as well as the risk management
objective and strategy. The Company assesses, on an ongoing basis, whether the derivative
financial instruments continue to be effective in offsetting changes in fair values or cash
flows of the hedged transactions.Changes in fair value of foreign currency denominated derivative financial instruments used to
hedge anticipated or committed foreign currency exposures are recognized as an adjustment to
the related operating costs or revenue when the hedged transaction is recorded. Derivatives
that are not subject to hedge accounting are recorded on the consolidated balance sheets with
the changes in fair value being recorded in the consolidated statement of operations each
period.The Company purchases foreign exchange forward contracts to mitigate the exposure to sales and
the related accounts receivable to customers denominated in U.S. dollars, UK pounds, Australian
dollars and Euros.
 F14




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##### Table of Contents



OSI Geospatial Inc.
  November 30, 2007 and 2006
 5
    
    Acquisitions
 a) Liddy International Inc.On April 23, 2007, the Company through its subsidiary CHI Systems, Inc., acquired the assets of
Liddy International Inc. (Liddy), a United States defence contracting company and established
Layered Security Solutions (LSS). LSS provides business continuity solutions against hazards
and has the capability to develop deterrence, response and recovery strategies designed to deal
with global threats to business and government. Under the terms of the agreement, the Company
paid approximately $154,000 for assets and goodwill of Liddy, of which $25,000 was paid in cash
with the balance paid by the issuance of 300,000 common shares of the Company of which 200,000
common shares are held in escrow subject to the satisfaction of certain contractual provisions.The following table summarizes the fair value of the assets acquired by the Company at April
23, 2007, the date of acquisition. The acquisition was accounted for using the purchase method
whereby assets acquired were recorded at their fair values at April 23, 2007. The excess of the
purchase price over the fair market value was recorded as goodwill.
 In thousands of U.S. dollarsAssetsFurniture and Fixtures
    
    $
    8Computer Equipment
    
    
    17Goodwill
    
    
    170Total assets acquired
    
    
    195Net assets acquired (cash and common share consideration)
    
    
    154Direct acquisition costs incurred by the Company
    
    
    41Total acquisition costs
    
    $
    195Less fair value of net identifiable assets acquired
    
    
    25Goodwill
    
    $
    170
 b) Mapcon Mapping Consultants Inc,On April 8, 2005, the Company acquired all of the issued and outstanding shares of Mapcon
Mapping Consultants Inc. (Mapcon Mapping) of Salt Lake City, Utah for cash consideration of
$1.1 million. The acquisition was effective April 1, 2005. Mapcon Mapping was a privately held
land mapping company in the U.S. digital and electronic geomatics data production market. The
results of Mapcon Mappings operations have been included in the consolidated financial
statements commencing April 1, 2005.The acquisition was accounted for using the purchase method whereby assets acquired and
liabilities assumed were recorded at their fair values at April 1, 2005. The excess of the
purchase price over the fair market value of $403,000 was recorded as goodwill.c) CHI Systems Inc.On December 14, 2005, the Company acquired CHI Systems, Inc. (CHI Systems), a United States
defence contracting company. CHI Systems has multiple offices in the United States and is a
supplier of technology and services to the U.S. Department of Defense and key defence prime
contractors. Under the terms of the agreement, the Company paid approximately $9.0 million for
100% of the outstanding shares of CHI Systems, of which $8.1 million was paid in cash with the
balance paid by the issuance of 1,067,975 common shares of
the Company. The results of CHI Systems operations have been included in the consolidated
financial statements commencing December 14, 2005. The acquisition was accounted for using the
purchase method
 F15




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##### Table of Contents



OSI Geospatial Inc.  Notes to Consolidated Financial StatementsNovember 30, 2007 and 2006
  In thousands of U.S. dollarsAssetsCurrent assets
    
    $
    2,058Plant and equipment
    
    
    225Intangible and other assets
    
    
    439Goodwill
    
    
    7,727Total assets acquired
    
    $
    10,449LiabilitiesCurrent liabilities not including future tax liabilities
    
    
    720Future tax liabilities
    
    
    181Total liabilities assumed
    
    $
    901Net assets acquired (cash and common share consideration)
    
    $
    8,849Direct acquisition costs incurred by the Company
    
    
    699Total acquisition costs
    
    
    9,548Less fair value of net identifiable assets acquired
    
    
    1,821Goodwill
    
    $
    7,727Cash of acquired operations
    
    $
    627
   In thousands of U.S. dollarsEstimated useful life
    
    
    AmountPatents
    
    5 years
    
    $
    6Customer contracts
    

    2 to 36 months

    
    
    158Security clearance
    
    6 years
    
    
    275Total intangible assets
    
    
    
    
    
    $
    439
 6
    
    Accounts receivable and unbilled revenue
 In thousands of U.S. dollars
    
    November 30,2007
    
    
    2006Trade
    
    $
    7,570
    
    
    $
    5,143Unbilled revenue
    
    
    5,312
    
    
    
    7,257Technology Partnerships Canada contribution
    
    
    
    
    
    
    269Other
    
    
    182
    
    
    
    97Allowance for doubtful accounts
    
    
    (9
    )
    
    
    (59
    )$
    13,055
    
    
    $
    12,707
  F16




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##### Table of Contents



OSI Geospatial Inc.  Notes to Consolidated Financial StatementsNovember 30, 2007 and 2006
 7
    
    Inventory
 In thousands of U.S. dollars
    
    November 30,2007
    
    
    2006Materials and components
    
    $
    1,012
    
    
    $
    958Finished goods
    
    
    204
    
    
    
    105$
    1,216
    
    
    $
    1,063
 8
    
    Equipment and furnishings
 In thousands of U.S. dollars
    
    November 30, 2007AccumulatedCost
    
    
    Amortization
    
    
    Net AmountEquipment
    
    $
    5,468
    
    
    $
    4,399
    
    
    $
    1,069Furniture and fixtures
    
    
    728
    
    
    
    554
    
    
    
    174Leasehold improvements
    
    
    751
    
    
    
    80
    
    
    
    671$
    6,947
    
    
    $
    5,033
    
    
    $
    1,914
 In thousands of U.S. dollars
    
    November 30, 2006AccumulatedCost
    
    
    Amortization
    
    
    Net AmountEquipment
    
    $
    4,638
    
    
    $
    3,713
    
    
    $
    925Furniture and fixtures
    
    
    599
    
    
    
    482
    
    
    
    117Leasehold improvements
    
    
    300
    
    
    
    253
    
    
    
    47$
    5,537
    
    
    $
    4,448
    
    
    $
    1,089
 9
    
    Intangible and other assets
 In thousands of U.S. dollars
    
    November 30, 2007AccumulatedCost
    
    
    Amortization
    
    
    Net AmountComputer software
    
    $
    1,583
    
    
    $
    1,050
    
    
    $
    533Customer contracts
    
    
    288
    
    
    
    286
    
    
    
    2Customer relationships
    
    
    160
    
    
    
    64
    
    
    
    96Security clearance
    
    
    275
    
    
    
    92
    
    
    
    183Licenses and patents
    
    
    85
    
    
    
    38
    
    
    
    47$
    2,391
    
    
    $
    1,530
    
    
    $
    861
 F17




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##### Table of Contents



OSI Geospatial Inc.  Notes to Consolidated Financial StatementsNovember 30, 2007 and 2006
 In thousands of U.S. dollars
    
    November 30, 2006AccumulatedCost
    
    
    Amortization
    
    
    Net AmountComputer software
    
    $
    1,189
    
    
    $
    791
    
    
    $
    398Customer contracts
    
    
    288
    
    
    
    278
    
    
    
    10Customer relationships
    
    
    160
    
    
    
    42
    
    
    
    118Security clearance
    
    
    275
    
    
    
    46
    
    
    
    229Licenses and patents
    
    
    80
    
    
    
    41
    
    
    
    39$
    1,992
    
    
    $
    1,198
    
    
    $
    794
  10
    
    Accounts payable and accrued liabilities
 In thousands of U.S. dollars
    
    November 30,2007
    
    
    2006Trade
    
    $
    1,798
    
    
    $
    2,016Accrued employee compensation
    
    
    1,542
    
    
    
    1,318Accrued employee benefits and payroll deductions
    
    
    217
    
    
    
    280Accrued royalties (note 14)
    
    
    472
    
    
    
    490Other accrued liabilities
    
    
    1,556
    
    
    
    783$
    5,585
    
    
    $
    4,887
 11
    
    Credit facilities
    F18




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##### Table of Contents



OSI Geospatial Inc.  Notes to Consolidated Financial StatementsNovember 30, 2007 and 2006
 12
    
    Capital lease obligation
   In thousands of U.S. dollars
    
    November 30,2007
    
    
    2006Within one year
    
    $
    89
    
    
    $
    Later than one year but less than five years
    
    
    222
    
    
    
    Minimum lease payments
    
    
    311
    
    
    
    Future financing charges
    
    
    (65
    )
    
    
    Recognized as a liability
    
    
    246
    
    
    
    Less: current portion
    
    
    (46
    )
    
    
    Long term portion of capital lease obligation
    
    $
    200
    
    
    
    
 13
    
    Capital Stock
 a.      Authorized
        b.      Class A preference shares
  c.      Class B Series 2 preference shares
  F19




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##### Table of Contents



OSI Geospatial Inc.  Notes to Consolidated Financial StatementsNovember 30, 2007 and 2006
  d.
    
    Common shares
    e.
    
    Stock option plans
  F20




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##### Table of Contents



OSI Geospatial Inc.  Notes to Consolidated Financial StatementsNovember 30, 2007 and 2006
  In Canadian dollars
    
    2007
    
    2006
    
    2005Weighted
    
    
    
    
    
    Weighted
    
    
    
    
    
    WeightedNumber
    
    average
    
    Number
    
    average
    
    Number
    
    averageof
    
    exercise
    
    of
    
    exercise
    
    of
    
    exerciseshares
    
    price
    
    shares
    
    price
    
    shares
    
    priceOutstanding  beginning
of year
    
    
    3,417,584
    
    
    $
    0.95
    
    
    
    3,674,417
    
    
    $
    0.81
    
    
    
    2,254,047
    
    
    $
    0.94Granted
    
    
    1,150,000
    
    
    
    0.55
    
    
    
    247,500
    
    
    
    0.65
    
    
    
    3,054,666
    
    
    
    0.79Exercised
    
    
    
    
    
    
    
    
    
    
    (90,000
    )
    
    
    0.73
    
    
    
    (11,000
    )
    
    
    0.65Forfeited
    
    
    (273,000
    )
    
    
    0.90
    
    
    
    (196,000
    )
    
    
    0.82
    
    
    
    (18,384
    )
    
    
    0.80Surrendered
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (632,784
    )
    
    
    0.87Expired
    
    
    (698,418
    )
    
    
    1.08
    
    
    
    (218,333
    )
    
    
    0.87
    
    
    
    (972,128
    )
    
    
    0.98Outstanding  end of year
    
    
    3,596,166
    
    
    $
    0.80
    
    
    
    3,417,584
    
    
    $
    0.83
    
    
    
    3,674,417
    
    
    $
    0.82Exercisable  end of year
    
    
    3,531,582
    
    
    $
    0.80
    
    
    
    3,417,584
    
    
    $
    0.83
    
    
    
    3,378,417
    
    
    $
    0.81
  In Canadian dollars
    
    Options outstanding
    
    Options exercisableWeightedaverageNumber
    
    remaining
    
    Weighted
    
    Number
    
    WeightedRange of
    
    outstanding
    
    contractual
    
    average
    
    exercisable
    
    averageExercise
    
    at November
    
    life
    
    exercise
    
    at November
    
    exerciseprices
    
    30, 2007
    
    (years)
    
    price
    
    30, 2007
    
    price$0.46  0.63
    
    
    980,000
    
    
    
    4.72
    
    
    $
    0.53
    
    
    
    915,416
    
    
    $
    0.520.64  0.96
    
    
    1,725,166
    
    
    
    2.94
    
    
    
    0.86
    
    
    
    1,725,166
    
    
    
    0.860.97  1,21
    
    
    891,000
    
    
    
    2.72
    
    
    
    0.99
    
    
    
    891,000
    
    
    
    0.99$0.46  1.21
    
    
    3,596,166
    
    
    
    3.37
    
    
    $
    0.80
    
    
    
    3,531,582
    
    
    $
    0.80
  In Canadian dollars
    
    Options outstanding
    
    Options exercisableWeightedNumber
    
    average
    
    Weighted
    
    Number
    
    Weightedoutstanding at
    
    remaining
    
    average
    
    outstanding at
    
    averageRange of
    
    November 30,
    
    contractual life
    
    exercise
    
    November 30,
    
    exerciseexercise prices
    
    2006
    
    (years)
    
    price
    
    2006
    
    price$0.64  0.96
    
    
    2,902,916
    
    
    
    3.58
    
    
    $
    0.80
    
    
    
    2,902,916
    
    
    $
    0.800.97  1.21
    
    
    514,668
    
    
    
    0.35
    
    
    
    1.00
    
    
    
    514,668
    
    
    
    1.00$0.64  1.21
    
    
    3,417,584
    
    
    
    3.10
    
    
    $
    0.83
    
    
    
    3,417,584
    
    
    $
    0.83
 F21




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##### Table of Contents



OSI Geospatial Inc.  Notes to Consolidated Financial StatementsNovember 30, 2007 and 2006
  In Canadian dollars
    
    Options outstanding
    
    Options exercisableWeightedNumber
    
    average
    
    Weighted
    
    Number
    
    Weightedoutstanding at
    
    remaining
    
    average
    
    outstanding at
    
    averageRange of
    
    November 30,
    
    contractual life
    
    exercise
    
    November 30,
    
    exerciseexercise prices
    
    2005
    
    (years)
    
    price
    
    2005
    
    price$0.64  0.96
    
    
    3,101,416
    
    
    
    4.19
    
    
    $
    0.79
    
    
    
    2,951,416
    
    
    $
    0.790.97  1.21
    
    
    573,001
    
    
    
    1.26
    
    
    
    0.98
    
    
    
    427,001
    
    
    
    0.98$0.64  1.21
    
    
    3,674,417
    
    
    
    3.73
    
    
    $
    0.82
    
    
    
    3,378,417
    
    
    $
    0.81
 Stock-based compensation
   2007
    
    2006
    
    2005Risk-free interest rate
    
    
    3.96
    %
    
    
    4.14
    %
    
    
    2.87
    %Volatility
    
    
    47
    %
    
    
    53
    %
    
    
    49
    %Estimated average option lives
    
    5 years
    
    5 years
    
    3.2 yearsDividend yield
    
    
    0.0
    %
    
    
    0.0
    %
    
    
    0.0
    %
  Shareholder rights plan
    F22




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##### Table of Contents



OSI Geospatial Inc.  Notes to Consolidated Financial Statements  November 30, 2007 and 2006
  f.
    
    Warrants
  Weighed average remainingNumber of Warrants
    
    Exercise Price
    
    contractual life in years1,393,301
    
    $
    1.10
    
    
    
    0.2112,395,067
    
    
    0.85
    
    
    
    2.362,780,000
    
    
    0.80
    
    
    
    1.6716,568,368
    
    $
    0.86
    
    
    
    2.06
 g.
    
    Loss per share
 In thousands of U.S. dollars, except share related data
    
    Years ended November 30,Basic loss per share
    
    2007
    
    2006
    
    2005Net earnings (loss)
    
    $
    (2,874
    )
    
    $
    932
    
    
    $
    (3,499
    )Less:Class B Series 1 preference share dividends
    
    
    
    
    
    
    
    
    
    
    (51
    )Class B Series 2 preference share dividends (*A)
    
    
    (714
    )
    
    
    (1,014
    )
    
    
    (702
    )Loss available to common shareholders
    
    $
    (3,588
    )
    
    $
    (82
    )
    
    $
    (4,252
    )Weighted average number of common shares
outstanding
    
    
    41,096,261
    
    
    
    32,381,992
    
    
    
    27,989,832Basic loss per share
    
    $
    (0.09
    )
    
    $
    (0.00
    )
    
    $
    (0.15
    )
 
 (*A)
    
    Dividends of $332,000 are included which represents the dividends earned by the shareholders
of the Class B Series 2 cumulative preference shares. These dividends were declared and paid in
December 2007 (Note 24)
 F23




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##### Table of Contents



OSI Geospatial Inc.  Notes to Consolidated Financial Statements  November 30, 2007 and 2006
 In thousands of U.S. dollars, except share related data
    
    Years ended November 30,Diluted loss per share
    
    2007
    
    2006
    
    2005Net earnings (loss)
    
    $
    (2,874
    )
    
    $
    932
    
    
    $
    (3,499
    )Class B Series 1 preference share dividends
    
    
    
    
    
    
    
    
    
    
    (51
    )Class B Series 2 preference share dividends (*A)
    
    
    (714
    )
    
    
    (1,014
    )
    
    
    (702
    )Loss available to common shareholders
    
    $
    (3,588
    )
    
    $
    (82
    )
    
    $
    (4,252
    )Weighted average number of common shares outstanding
    
    
    41,096,261
    
    
    
    32,381,992
    
    
    
    27,989,832Dilutive effect of Class A preference shares  Series A (*1)
    
    
    
    
    
    
    
    
    
    
    Dilutive effect of Class B preference shares  Series 1 (*2)
    
    
    
    
    
    
    
    
    
    
    Dilutive effect of Class B preference shares  Series 2 (*1)
    
    
    
    
    
    
    
    
    
    
    Dilutive effect of warrants (*3)
    
    
    
    
    
    
    16,461,176
    
    
    
    Dilutive effect of stock options (*1)
    
    
    
    
    
    
    
    
    
    
    Adjusted weighted average number of common shares outstanding
    
    
    41,096,261
    
    
    
    48,843,168
    
    
    
    27,989,832Diluted loss per share
    
    $
    (0.09
    )
    
    $
    (0.00
    )
    
    $
    (0.15
    )
 
 (*A)
    
    Dividends of $332,000 are included which represents the dividends earned by the
shareholders of the Class B Series 2 cumulative preference shares. These dividends were
declared and paid in December 2007 (Note 24)(*1)
    
    The Class A preference shares  Series A, Class B preference shares Series 2 and stock
options were anti-dilutive for the purposes of calculating diluted earnings per share for the
years ended November 30, 2007, 2006 and 2005.(*2)
    
    The Class B preference shares  Series 1 were anti-dilutive for the purposes of
calculating diluted earnings per share for the years ended November 30, 2005. There were no
Class B preference shares  Series 1 outstanding at November 30, 2007 and 2006.(*3)
    
    The outstanding warrants were anti-dilutive for the purposes of calculating diluted
earnings per share for the years ended November 30, 2007 and 2005.
 14
    
    Technology Partnerships Canada
   F24




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##### Table of Contents



OSI Geospatial Inc.  Notes to Consolidated Financial Statements  November 30, 2007 and 2006
      In thousands of U.S. dollars
    
    Years ended November 30,2007
    
    
    2006
    
    
    2005Royalties paid
    
    $
    476
    
    
    $
    256
    
    
    $
    263Accrued royalties  current
    
    $
    472
    
    
    $
    490
    
    
    $
    256
  15
    
    Commitments and contingencies
    F25




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##### Table of Contents



OSI Geospatial Inc.  Notes to Consolidated Financial Statements  November 30, 2007 and 2006
  Less than
    
    
    1 to 3
    
    
    4 to 5
    
    
    After 5Payments due by period
    
    Total
    
    
    1 year
    
    
    years
    
    
    years
    
    
    yearsIn thousands of U.S. dollarsFacility leases
    
    $
    4,320
    
    
    $
    855
    
    
    $
    1,406
    
    
    $
    942
    
    
    $
    1,116Equipment leases
    
    
    66
    
    
    
    29
    
    
    
    34
    
    
    
    4
    
    
    
    Total contractual obligations
    
    $
    4,386
    
    
    $
    884
    
    
    $
    1,440
    
    
    $
    946
    
    
    $
    1,116
   16
    
    Related party transactions
    F26




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##### Table of Contents



OSI Geospatial Inc.  Notes to Consolidated Financial Statements  November 30, 2007 and 2006
 17
    
    Income taxes
   In thousands of U.S. dollars
    
    2007
    
    
    2006
    
    
    2005Canadian income (loss)
    
    $
    (2,450
    )
    
    $
    1,112
    
    
    $
    (2,868
    )U.S. income (loss)
    
    
    (364
    )
    
    
    (477
    )
    
    
    299$
    (2,814
    )
    
    $
    635
    
    
    $
    (2,569
    )
  In thousands of U.S. dollars
    
    2007
    
    
    2006
    
    
    2005Canadian income tax expense
    
    $
    103
    
    
    $
    1
    
    
    $
    786U.S. income tax expense (recovery)
    
    
    (43
    )
    
    
    (298
    )
    
    
    144$
    60
    
    
    $
    (297
    )
    
    $
    930
  Year ending November 302014
    
    
    222,0002015
    
    
    1,431,0002026
    
    
    949,0002027
    
    
    1,334,000
  Year ending November 302020
    
    $
    188,0002021
    
    
    27,0002026
    
    
    327,0002027
    
    
    387,000
 F27




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OSI Geospatial Inc.  Notes to Consolidated Financial Statements  November 30, 2007 and 2006
  Year ending November 302011
    
    $
    152,0002012
    
    
    192,0002013
    
    
    200,0002014
    
    
    485,0002015
    
    
    601,0002016
    
    
    221,0002017
    
    
    146,0002026
    
    
    397,0002027
    
    
    263,000
    In thousands of U.S. dollars
    
    2007
    
    
    2006Future tax assetsNon-capital loss carry-forwards and net operating losses
    
    $
    1,574
    
    
    $
    585Net capital loss carry-forwards
    
    
    54
    
    
    
    48Interest deduction carry-forwards
    
    
    314
    
    
    
    Scientific research and experimental development costs
    
    
    2,625
    
    
    
    2,110Share issue costs
    
    
    395
    
    
    
    376Investment tax credits
    
    
    2,009
    
    
    
    1,494Equipment and furnishings
    
    
    1,115
    
    
    
    900Accrued operating expenses
    
    
    132
    
    
    
    238Other
    
    
    
    
    
    
    208,218
    
    
    
    5,771Valuation allowance
    
    
    (7,815
    )
    
    
    (5,666
    )Future tax assets
    
    
    403
    
    
    $
    105Less: current portion
    
    
    (132
    )
    
    
    (104
    )Future tax assets  long term
    
    $
    271
    
    
    $
    1
 F28




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##### Table of Contents



OSI Geospatial Inc.  Notes to Consolidated Financial Statements  November 30, 2007 and 2006
 In thousands of U.S. dollars
    
    2007
    
    
    2006Future tax liabilitiesChange in tax accounting method
    
    $
    25
    
    
    $
    36Intangible assets
    
    
    74
    
    
    
    35Equipment and furnishings
    
    
    26
    
    
    
    54Future tax liabilities
    
    
    125
    
    
    
    125Less: current portion
    
    
    (25
    )
    
    
    (15
    )Future tax liabilities  long term
    
    $
    100
    
    
    $
    110Future tax assets
    
    
    403
    
    
    
    105Future tax liabilities
    
    
    (125
    )
    
    
    (125
    )Net future tax
    
    $
    278
    
    
    $
    (20
    )
   In thousands of U.S. dollars
    
    2007
    
    
    2006
    
    
    2005Expected statutory rate
    
    
    34.12
    %
    
    
    34.12
    %
    
    
    35.00
    %Expected provision for income taxes
    
    $
    (961
    )
    
    $
    217
    
    
    $
    (899
    )Change in tax rates applied in valuation allowance
    
    
    138
    
    
    
    372
    
    
    
    128Change in valuation allowance
    
    
    2,399
    
    
    
    338
    
    
    
    1,881Foreign tax differentials
    
    
    (21
    )
    
    
    (27
    )
    
    
    (3
    )Foreign exchange effect on valuation allowance
    
    
    (993
    )
    
    
    (114
    )
    
    
    Investment tax credits and share issue cost adjustments
    
    
    (332
    )
    
    
    (351
    )
    
    
    (439
    )Withholding taxes
    
    
    103
    
    
    
    
    
    
    
    Part VI.1 tax deduction
    
    
    (12
    )
    
    
    (106
    )
    
    
    (68
    )Non-deductible expenses and other
    
    
    (261
    )
    
    
    (626
    )
    
    
    330Income tax expense (recovery)
    
    $
    60
    
    
    $
    (297
    )
    
    $
    930
 18
    
    Segmented information
   F29




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##### Table of Contents



OSI Geospatial Inc.  Notes to Consolidated Financial Statements  November 30, 2007 and 2006
  In thousands of U.S. dollars
    
    2007CorporateInternational
    
    
    U.S.
    
    
    
    
    
    
    and PublicSystems
    
    
    Systems
    
    
    Mapping
    
    
    CompanyOperations
    
    
    Operations
    
    
    Operations
    
    
    Costs
    
    
    TotalRevenue
    
    $
    8,214
    
    
    
    12,708
    
    
    
    4,404
    
    
    
    
    
    
    
    25,326Gross profit
    
    
    4,070
    
    
    
    4,204
    
    
    
    1,492
    
    
    
    
    
    
    
    9,766Technology Partnerships Canada  net
    
    
    471
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    471Interest expense
    
    
    19
    
    
    
    3
    
    
    
    1
    
    
    
    47
    
    
    
    70Income tax expense (recovery)
    
    
    
    
    
    
    87
    
    
    
    (130
    )
    
    
    103
    
    
    
    60Net earnings (loss)
    
    
    (1,206
    )
    
    
    1,959
    
    
    
    63
    
    
    
    (3,690
    )
    
    
    (2,874
    )Equipment and furnishings expenditures
    
    
    594
    
    
    
    193
    
    
    
    219
    
    
    
    57
    
    
    
    1,063Intangible expenditures
    
    
    39
    
    
    
    136
    
    
    
    70
    
    
    
    2
    
    
    
    247Amortization
    
    $
    236
    
    
    
    162
    
    
    
    148
    
    
    
    8
    
    
    
    554
 In thousands of U.S. dollars
    
    2006CorporateInternational
    
    
    U.S.
    
    
    
    
    
    
    and PublicSystems
    
    
    Systems
    
    
    Mapping
    
    
    CompanyOperations
    
    
    Operations
    
    
    Operations
    
    
    Costs
    
    
    TotalRevenue
    
    $
    9,518
    
    
    
    10,517
    
    
    
    4,102
    
    
    
    
    
    
    
    24,137Gross profit
    
    
    5,963
    
    
    
    3,350
    
    
    
    1,340
    
    
    
    
    
    
    
    10,653Technology Partnerships Canada  net
    
    
    267
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    267Interest expense
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    21
    
    
    
    21Income tax expense (recovery)
    
    
    
    
    
    
    (95
    )
    
    
    (202
    )
    
    
    
    
    
    
    (297
    )Net earnings (loss)
    
    
    1,720
    
    
    
    1,853
    
    
    
    205
    
    
    
    (2,846
    )
    
    
    932Equipment and furnishings expenditures
    
    
    182
    
    
    
    66
    
    
    
    40
    
    
    
    2
    
    
    
    290Intangible expenditures
    
    
    114
    
    
    
    88
    
    
    
    35
    
    
    
    
    
    
    
    237Amortization
    
    $
    209
    
    
    
    296
    
    
    
    253
    
    
    
    5
    
    
    
    763
 In thousands of U.S. dollars
    
    2005CorporateInternational
    
    
    U.S.
    
    
    
    
    
    
    and PublicSystems
    
    
    Systems
    
    
    Mapping
    
    
    CompanyOperations
    
    
    Operations
    
    
    Operations
    
    
    Costs
    
    
    TotalRevenue
    
    $
    8,181
    
    
    
    
    
    
    
    2,945
    
    
    
    
    
    
    
    11,126Gross profit
    
    
    4,381
    
    
    
    
    
    
    
    1,049
    
    
    
    
    
    
    
    5,430Technology Partnerships Canada  net
    
    
    847
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    847Interest expense
    
    
    11
    
    
    
    
    
    
    
    2
    
    
    
    10
    
    
    
    23Income tax expense
    
    
    554
    
    
    
    
    
    
    
    225
    
    
    
    151
    
    
    
    930Net earnings (loss)
    
    
    191
    
    
    
    
    
    
    
    (270
    )
    
    
    (3,420
    )
    
    
    (3,499
    )Equipment and furnishings expenditures
    
    
    157
    
    
    
    
    
    
    
    (92
    )
    
    
    5
    
    
    
    70Intangible expenditures
    
    
    21
    
    
    
    
    
    
    
    193
    
    
    
    2
    
    
    
    216Amortization
    
    $
    177
    
    
    
    
    
    
    
    221
    
    
    
    6
    
    
    
    404
 F30




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OSI Geospatial Inc.  Notes to Consolidated Financial Statements  November 30, 2007 and 2006
 In thousands of U.S. dollars
    
    Total assets employedInternational
    
    
    
    
    
    
    
    
    
    
    Corporate andSystems
    
    
    U.S. Systems
    
    
    
    
    
    
    Public CompanyOperations
    
    
    Operations
    
    
    Mapping Operations
    
    
    Costs
    
    
    TotalAs at November 30, 2007
    
    $
    8,704
    
    
    $
    13,859
    
    
    $
    3,648
    
    
    $
    137
    
    
    $
    26,348As at November 30, 2006
    
    $
    10,483
    
    
    $
    10,704
    
    
    $
    3,283
    
    
    $
    (20
    )
    
    $
    24,450
 Geographically, revenues reported are based on the location of the Companys customers as
follows:
 In thousands of U.S. dollars
    
    2007
    
    2006
    
    2005Europe
    
    $
    5,899
    
    
    $
    6,816
    
    
    $
    4,093Australia/New Zealand
    
    
    910
    
    
    
    1,200
    
    
    
    2,149United States
    
    
    15,678
    
    
    
    13,717
    
    
    
    2,410Canada
    
    
    2,839
    
    
    
    2,404
    
    
    
    2,415Other
    
    
    
    
    
    
    
    
    
    
    59Total
    
    $
    25,326
    
    
    $
    24,137
    
    
    $
    11,126
 Approximately 41% of revenue for the year ended November 30, 2007 (2006  47%, 2005  40%) is
derived from the three largest customers at 18%, 13% and 11%, respectively (2006  24%, 15%,
8%, 2005  22%, 10%, 8%).The three largest customers for 2007 were the Royal Navy of the United Kingdom, the U.S. Army
and the U.S. Navy. The three largest customers for 2006 were the Royal Navy of the United
Kingdom, the U.S. Army and the U.S. Navy. The three largest customers for 2005 were the Royal
Navy of the United Kingdom, Royal Australian Navy and the Canadian Navy.Geographically, equipment and furnishings and intangible and other assets are reported based on
location. At November 30, 2007 and 2006, all of the Companys equipment and furnishings and
intangible and other assets were located in Canada and the U.S. as follows:
 In thousands of U.S. dollars
    
    November 30, 2007Canada
    
    U.S.
    
    TotalEquipment and furnishings
    
    $
    1,588
    
    
    $
    326
    
    
    $
    1,914Intangible and other assets
    
    
    300
    
    
    
    561
    
    
    
    861Goodwill
    
    
    
    
    
    
    8,300
    
    
    
    8,300Total
    
    $
    1,888
    
    
    $
    9,187
    
    
    $
    11,075
 In thousands of U.S. dollars
    
    November 30, 2006Canada
    
    U.S.
    
    TotalEquipment and furnishings
    
    $
    859
    
    
    $
    230
    
    
    $
    1,089Intangible and other assets
    
    
    322
    
    
    
    472
    
    
    
    794Goodwill
    
    
    
    
    
    
    8,130
    
    
    
    8,130Total
    
    $
    1,181
    
    
    $
    8,832
    
    
    $
    10,013
 F31




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OSI Geospatial Inc.  Notes to Consolidated Financial Statements  November 30, 2007 and 2006
 19
    
    Financial Instruments and Risk ManagementFair valuesThe Companys financial instruments consist of accounts receivable, bank indebtedness, accounts
payable and accrued liabilities. The carrying values of current assets and current liabilities
approximate their fair values due to their short maturities.Credit and foreign currency riskThe Company is exposed to credit risk on its cash and cash equivalents in the event of
non-performance of other parties. To mitigate this risk, the Company maintains substantially
all of its cash and cash equivalents with major financial institutions. Financial instruments
that potentially subject the Company to credit risk are primarily accounts receivable.
Management is of the opinion that any risk of accounting loss is significantly reduced due to
the financial strength of the Companys major customers.A substantial portion of the Companys revenues are received in foreign currencies including US
dollar, UK pound and Euros. Fluctuations in the exchange rates between these currencies could
have a material effect on the business, financial condition and results of operations. The
Company attempts to mitigate this risk with the use foreign exchange forward contracts to hedge
transactions denominated in U.S. dollars, UK pounds, Australian dollars and Euros. The purpose
of the Companys hedging activities is to reduce the level of exposure to exchange rate
movements.20
    
    Derivative Financial instruments and Foreign Exchange ContractsFluctuations in foreign currency exchange ratesThe Companys Canadian subsidiaries enter into transactions denominated in U.S. dollars, UK
pounds, Australian dollars and Euros and as such their revenue, expenses, monetary assets and
liabilities will be affected by fluctuations in the various currencies relative to the
functional currency, the Canadian dollar.The Companys Canadian subsidiaries use foreign exchange forward contracts to mitigate the
foreign exchange exposure related to transactions denominated in U.S. dollars, UK pounds,
Australian dollars and Euros. At November 30, 2007, the Company had foreign exchange forward
contracts maturing in the following year to sell US $2,200,000 (2006  US $1,262,000),
£1,330,000 (2006  £107,000) and Australian $nil (2006  Australian $500,000).The fair value of derivative instruments generally reflects the estimated amounts that the
Company would receive or pay to settle the contracts at November 30, 2007. The fair value of the
above derivative financial instruments was a recorded liability in accounts payable and accrued
liabilities of $137,000 at November 30, 2007 (2006  $55,000).21
    
    Supplemental cash flow information
 In thousands of U.S. dollars
    
    2007
    
    2006
    
    2005Cash paid during the year for interest
    
    $
    71
    
    
    $
    21
    
    
    $
    23Cash paid during the year for income taxes
    
    $
    
    
    
    $
    263
    
    
    $
    5Cash received during the year for interest
    
    $
    14
    
    
    $
    
    
    
    $
    
 F32




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OSI Geospatial Inc.  Notes to Consolidated Financial Statements  November 30, 2007 and 2006
 22.
    
    Reconciliation of generally accepted accounting principlesThe Company prepares its audited consolidated financial statements in accordance with Canadian
generally accepted accounting principles (Canadian GAAP) which, as applied in these
consolidated financial statements, conform in all material respects to U.S. generally accepted
accounting principles (U.S. GAAP), except for the differences as follows:(a) Under U.S. GAAP prior to December 1, 2005, the Company accounted for stock-based
compensation to employees and directors in accordance with the intrinsic value method of the
Accounting Principles Board Opinion No. 25, Accounting for Stock Issued to Employees.
Effective December 1, 2005, under U.S. GAAP the Company accounts for stock-based compensation
to employees and directors in accordance with the fair value based method of FASB Statement
123(R). Under Canadian GAAP, for stock option awards granted by the Company after December 1,
2003, the Company is required to recognize compensation when stock options are granted to
employees and directors under stock option plans with no cash settlement feature based on the
fair value based method. As permitted by the standard, the Company had applied this change
prospectively for new awards granted on or after December 1, 2003. Under U.S. GAAP, this
resulted in a decrease to stock based compensation of $206,000 in 2005.(b) Under U.S. GAAP, the Company is required to record stock-based compensation for options
granted to non-employees based on the fair value based method as required by SFAS 123(R)
retroactive for all prior periods. Under Canadian GAAP, the Company is not required to record
stock-based compensation for stock options granted to non-employees prior to December 1, 2001.
These stock-based compensation transactions result in differences of $649,000 (November 30,
2006  $649,000, November 30, 2005  $649,000) when compared to the same balances as previously
reported under Canadian GAAP.(c) Under U.S. GAAP, share issue costs are amortized over 5 years and give rise to a future tax
expense. Under Canadian GAAP, share issue costs are deductible in the year incurred. For U.S.
GAAP purposes, there is a deferred tax expense for the year ended November 30, 2007 of $133,000
(for the year ended November 30, 2006, $99,000, for the year ended November 30, 2005, $19,000).(d) Under U.S. GAAP, taxes owing on dividends paid (Part VI.1 tax) are included in tax expense
in the income statement. Under Canadian GAAP, Part VI.1 taxes are included in accumulated
deficit, alongside the cost of the dividends. Under U.S. GAAP, for the year ended November 30,
2007, tax expense related to dividends was $12,000 (for the year ended November 30, 2006,
$140,000, for the year ended November 30, 2005, $86,000).(e) Under Canadian GAAP, there is no requirement to record the beneficial conversion feature
and accretion of discount when preference shares are issued with attached warrants. For U.S.
GAAP purposes, during the
fiscal year 2005 the Company recorded beneficial conversion features of $3.9 million on the
issuance of Class B Series 1 and 2 preference shares, as a reduction to the net earnings
available to common shareholders calculated on the effective conversion price of the preference
shares to common shares based on the proceeds allocated to the preference shares. In both
cases, the conversion feature of the preference shares vested immediately and the Company
recorded the accretion of the full amount of the beneficial conversion feature. For both the
Series 1 and Series 2 Class B preference shares, the discount on these shares that resulted
from the allocation of the gross proceeds to the Class B preference shares and to the attached
warrants is accreted over the five-year life of the warrants. This resulted in an accretion of
$676,000 for the year ended November 30, 2007 ($674,000 for the year ended November 30, 2006,
$431,000 for the year ended November 30, 2005).(f) Additionally, when convertible shares are converted to common shares under U.S. GAAP, the
conversion is recorded by reducing preference shares at the historical share price, increasing
common shares are the current market value, proportionally reducing the beneficial conversion
feature included in additional paid in capital and adjusting accumulated deficit by the
difference. Under Canadian GAAP, both the preference shares and common shares are adjusted by
the historical value. As a result of the above, under U.S. GAAP for the year ended November
30, 2007, preference shares were reduced by $378,000 (for the year ended
 F33




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OSI Geospatial Inc.  Notes to Consolidated Financial Statements  November 30, 2007 and 2006
 November 30, 2006, $148,000), common shares were increased by $1,306,000 (for the year ended
November 30, 2006, $576,000), additional paid in capital was reduced by $598,000, (for the year
ended November 30, 2006, $1,054,000), and accumulated deficit was increased by $125,000 (for
the year ended November 30, 2006, $170,000),(g) Under US GAAP, investment tax credits applied to taxable income are recorded as a tax
recovery. Under Canadian GAAP, investment tax credits are considered a reduction of engineering
expenses on the income statement. For US GAAP purposes for the year ended November 30, 2005,
the current income tax expense would be $143,000 lower and the engineering expenses would be
$143,000 higher.(h) Under Canadian GAAP, development costs are eligible for deferment subject to meeting the
requirements of CICA Section 3064 Goodwill and Intangible Assets(formerly CIC Section 3450
Research and Development Costs), Under U.S. GAAP, development costs are expensed as incurred.
As a result, under U.S. GAAP, deferred development costs would be nil (2006: nil) and
engineering costs would increase by $97,000.(i) If U.S. GAAP were followed:
 i)
    
    the effect on the Consolidated Statements of Earnings would be:
 In thousands of U.S. dollars except earnings (loss) per share
    
    For the year ended November 30,2007
    
    2006
    
    2005(restated  see
    
    (restated  seeNotes 1 & 23)
    
    Notes 1 & 23)Earnings (loss), Canadian GAAP
    
    $
    (2,874
    )
    
    $
    932
    
    
    $
    (3,499
    )Adjustment for stock based compensation (a),(b)
    
    
    
    
    
    
    
    
    
    
    855Future income tax on preferred share issue costs (c)
    
    
    (133
    )
    
    
    (99
    )
    
    
    (19
    )Development costs not eligible for deferral (h)
    
    
    (97
    )
    
    
    
    
    
    
    Part VI.1 tax on dividends paid (d)
    
    
    (12
    )
    
    
    (140
    )
    
    
    (86
    )Earnings (loss), U.S. GAAP
    
    $
    (3,116
    )
    
    $
    693
    
    
    $
    (2,749
    )Loss attributable to common shareholders, U.S.GAAP
    
    $
    (4,381
    )
    
    $
    (825
    )
    
    $
    (9,400
    )Basic loss per common share, U.S. GAAP
    
    $
    (0.11
    )
    
    $
    (0.03
    )
    
    $
    (0.34
    )Diluted loss per common share, U.S. GAAP
    
    $
    (0.11
    )
    
    $
    (0.02
    )
    
    $
    (0.34
    )Weighted average number of common shares  basic,
U.S. GAAP
    
    
    41,096,261
    
    
    
    32,381,992
    
    
    
    27,989,832Weighted average number of common shares 
diluted, U.S. GAAP
    
    
    41,096,261
    
    
    
    48,843,168
    
    
    
    27,989,832
 ii)
    
    Balance Sheet items which would differ under U.S. GAAP are as follows:
 In thousands of U.S. dollars
    
    At November 30,2007
    
    2006(restated  seeNotes 1 & 23)Deferred development costs
    
    $
    
    
    
    $
    Common shares (f)
    
    
    24,934
    
    
    
    18,222Class B Series 2 preference shares (e), (f)
    
    
    6,552
    
    
    
    8,695Additional paid in capital (f)
    
    
    2,639
    
    
    
    3,357Accumulated deficit (c), (e), (f)
    
    
    (23,175
    )
    
    
    (19,225
    )
 F34




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##### Table of Contents



OSI Geospatial Inc.  Notes to Consolidated Financial Statements  November 30, 2007 and 2006
 23
    
    Restatement of prior years U.S. to Canadian GAAP reconciliation notesAs disclosed in Note 1, the Company began preparing its consolidated financial statements in
accordance with Canadian GAAP during the year ended November 30, 2007. Prior period financial
statements were prepared in accordance with U.S. GAAP. During the conversion to Canadian GAAP,
the Company identified certain GAAP differences that were previously not included in the prior
years GAAP reconciliation notes. The GAAP differences have been highlighted below:Statement of operations   prior years Canadian GAAP reconciliations
 In thousands of U.S. dollars
    
    At November 30, 2006As previouslyreported
    
    RestatedNet earnings, Canadian GAAP
    
    $
    688
    
    
    $
    932Loss attributable to common shareholders, Canadian GAAP
    
    
    (326
    )
    
    
    (82
    )Basic and diluted loss per share
    
    
    (0.01
    )
    
    
    0.00
 At November 30, 2005As previouslyreported
    
    RestatedEarnings (loss), Canadian GAAP
    
    $
    (3,604
    )
    
    $
    (3,499
    )Loss attributable to common shareholders, Canadian GAAP
    
    
    (4,357
    )
    
    
    (4,252
    )Basic and diluted loss per share
    
    
    (0.16
    )
    
    
    (0.15
    )
 The differences previously not identified between the reported and restated amounts in the
November 30, 2006 and 2005 Canadian GAAP reconciliations are largely attributable to the
adjustments described in Note 22 paragraphs (c) and (d) above.Balance sheet  prior year Canadian GAAP reconciliations
 In thousands of U.S. dollars
    
    At November 30, 2006As previouslyreported
    
    RestatedClass A Series A preference shares
    
    $
    19
    
    
    $
    19Class B Series 2 preference shares
    
    
    7,148
    
    
    
    7,115Common shares
    
    
    17,573
    
    
    
    15,887Warrants
    
    
    4,286
    
    
    
    4,286Contributed surplus
    
    
    (79
    )
    
    
    1,343Accumulated deficit *
    
    
    (13,593
    )
    
    
    (13,296
    )Accumulated other comprehensive income *
    
    
    2,427
    
    
    
    2,427Total shareholders equity
    
    $
    17,781
    
    
    $
    17,781
 
 *
    
    These amounts were combined in the prior years U.S. to Canadian GAAP reconciliation note The main differences not identified in the equity accounts reconciliation in the prior year
Canadian GAAP reconciliation note are described in Note 22 paragraph (f) above and impacted
Class B Series 2 preference shares, common shares, contributed surplus and accumulated deficit.
These restatements were within the equity accounts and did not impact total shareholders
equity.
 F35




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##### Table of Contents



OSI Geospatial Inc.  Notes to Consolidated Financial Statements  November 30, 2007 and 2006
 24
    
    Subsequent eventsOn December 13, 2007, the Board of Directors declared the semi-annual dividend of $332,000 on
the Class B Preference Share  Series 2.25
    
    Comparative figuresThe comparative consolidated financial statements have been reclassified from financial
statements previously presented prepared in accordance with generally accepted accounting
principles in the United States to conform to the presentation of the 2007 consolidated
financial statements prepared in accordance with generally accepted accounting principles in
Canada.
 F36