UNITED
                STATES SECURITIES AND EXCHANGE COMMISSION
              **WASHINGTON,
                D.C. 20549****FORM
                20-F**oREGISTRATION
                STATEMENT PURSUANT TO SECTION 12(b) OR (g) OF THE SECURITIES EXCHANGE
                ACT
                OF 1934
              
              ORxANNUAL
                REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
                ACT OF
                1934 FOR THE FISCAL YEAR ENDED DECEMBER 31, 2004
              
              ORoTRANSITION
                REPORT PURSUANT TO SECTION 13 OR 15 (d) OF THE SECURITIES EXCHANGE
                ACT OF
                1934For
                the transition period from __________ to __________.Commission
                File No.**001-14835****ADB
                SYSTEMS INTERNATIONAL LTD****.**
              (Exact
                name of Registrant as specified in its charter)**Not
                Applicable**
              (Translation
                of Registrant’s name into English)**ONTARIO,
                CANADA**
              (Jurisdiction
                of incorporation or organization)**302
                The East Mall, Suite 300 Toronto, Ontario M9B 6C7**
              (Address
                of principal executive offices)Securities
                registered or to be registered pursuant to Section 12(b) of the
                Act.
              
              **None**Securities
                registered or to be registered pursuant to Section 12(g) of the
                Act.
              
              **Common
                Shares**Securities
                for which there is a reporting obligation pursuant to Section 15(d)
                of the
                Act.
              
              **None**Indicate
                the number of outstanding shares of each of the issuer’s classes of
                capital or common stock as of the close of the period covered by
                the
                Annual Report.**69,870,131
                Common Shares as of December 31, 2004**Indicate
                by check mark whether the registrant (1) has filed all reports required
                to
                be filed by Section 13 or 15(d) of the Securities Exchange Act of
                1934
                during the preceding 12 months (or for such shorter period that the
                registrant was required to file such reports), and (2) has been subject
                to
                such filing requirements for the past 90 days.Yes xNo
                oIndicate
                by check mark which financial statement item the registrant has elected
                to
                follow.Item
                17 oItem
                18x






















**ADB
      SYSTEMS INTERNATIONAL LTD.**




**A****nnual
      Report on Form 20-F for the Fiscal Year**


**Ended
      December 31, 2004**




FORWARD
      LOOKING STATEMENTS




From
      time to time, we make oral and written statements that may be considered
      "forward looking statements" (rather than historical facts). We are taking
      advantage of the "safe-harbour" provisions of the Private Securities Litigation
      Reform Act of 1995 for any forward-looking statements we may make from time
      to
      time, including the forward-looking statements in this Annual
      Report.




You
      can identify these statements when you see words such as "may", "expect",
      "anticipate", "estimate", "believe", "intend", and other similar expressions.
      These forward-looking statements relate, among other items to:




•
            our
                future capital needs;•
            future
                expectations as to profitability and operating results;•
            our
                ability to further develop business relationships and
                revenues;•
            our
                expectations about the markets for our products and
                services;•
            acceptance
                of our products and services;•
            competitive
                factors;•
            our
                ability to repay debt;•
            our
                ability to attract and retain employees;•
            new
                products and technological changes;•
            our
                ability to develop appropriate strategic alliances;•
            protection
                of our proprietary technology;•
            our
                ability to acquire complementary products or businesses and integrate
                them
                into our business; and•
            geographic
                expansion of our business.





We
      have based these forward-looking statements largely on our current plans and
      expectations. Forward-looking statements are subject to risks and uncertainties,
      some of which are beyond our control. Our actual results could differ materially
      from those described in our forward-looking statements as a result of the
      factors described in the “Risk Factors” included elsewhere in this Annual
      Report, including, among others:




•
            the
                timing of our future capital needs and our ability to raise additional
                capital when needed;•
            our
                limited operating history in our current business as a combined
                entity;•
            increasingly
                longer sales cycles;•
            increasingly
                longer collection cycles;•
            potential
                fluctuations in our financial results and our difficulties in
                forecasting;•
            volatility
                of the stock markets and fluctuations in the market price of our
                stock;•
            your
                ability to buy and sell our shares on the Over the Counter Bulletin
                Board;•
            our
                ability to compete with other companies in our
                industry;•
            our
                ability to repay our debt to lenders;•
            our
                ability to retain and attract key
                personnel;


•
              risk
                  of significant delays in product development;











•
            failure
                to timely develop or license new technologies;•
            risks
                relating to any requirement to correct or delay the release of products
                due to software bugs or errors;•
            risk
                of system failure or interruption;•
            problems
                which may arise in connection with the acquisition or integration
                of new
                businesses, products, services, technologies or other strategic
                relationships;•
            risks
                associated with international operations;•
            risks
                associated with protecting our intellectual property, and potentially
                infringing the intellectual property rights of others;•
            uncertainty
                about the continued acceptance of the Internet as a viable commercial
                medium; and•
            sensitivity
                to the overall economic
                environment.





We
      do not have, and do not undertake, any obligation to publicly update or revise
      any forward-looking statements contained in this Annual Report, whether as
      a
      result of new information, future events or otherwise. Because of these risks
      and uncertainties, the forward-looking statements and circumstances discussed
      in
      this Annual Report might not transpire.




Trademarks
      or trade names which we own and are used in this Annual Report include: ADBTM;
      PROCUREMATETM; WORKMATETM; BID BUDDYTM; SEARCH BUDDYTM; DYNAMIC BUYERTM and DYNAMIC
      SELLERTM. Each trademark, trade name, or service mark of any other company
      appearing in this Annual Report belongs to its holder.













**TABLE
      OF CONTENTS**








PagePART
                    I
                  6ITEM
                    1 -
                  IDENTITY
                      OF DIRECTORS, SENIOR MANAGEMENT AND
                      ADVISORS
                  6ITEM 2
                    -
                  OFFER
                      STATISTICS AND EXPECTED TIMETABLE
                  6ITEM
                    3 -
                  KEY
                      INFORMATION
                  6A.
                  Selected
                      Financial Data
                  6B.
                  Capitalization
                      and
                      Indebtedness
                  8C.
                  Reasons
                      For The Offer And Use Of
                      Proceeds
                  8D.
                  Risk
                      Factors
                  8ITEM
                    4 -
                  INFORMATION
                      ON THE COMPANY
                  16A.
                  Company
                      Background
                  16B.
                  Business
                      Overview
                  18C.
                  Organizational
                      Structure
                  28D.
                  Property,
                      Plants and Equipment
                  28ITEM
                    5 -
                  OPERATING
                      AND FINANCIAL REVIEW AND PROSPECTS
                      - MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
                      OF OPERATIONS
                  29ITEM
                    6 -
                  DIRECTORS,
                      SENIOR MANAGEMENT AND
                      EMPLOYEES
                  37A.
                  Directors
                      And Senior
                      Management
                  37B.
                  Compensation
                  39C.
                  Board
                      Practices
                  40D.
                  Employees
                  41E.
                  Share
                      Ownership
                  42ITEM
                    7 -
                  MAJOR
                      SHAREHOLDERS AND RELATED PARTY
                      TRANSACTIONS
                  43A.
                  Major
                      Shareholders
                  43B.
                  Related
                      Party Transactions
                  43ITEM
                    8 -
                  FINANCIAL
                      INFORMATION
                  44ITEM
                    9 -
                  THE
                      OFFER AND LISTING
                  44ITEM
                    10 -
                  ADDITIONAL
                      INFORMATION
                  47A.
                  Share
                      Capital
                  47B.
                  Memorandum
                      and Articles of
                      Association
                  47C.
                  Material
                      Contracts
                  50D.
                  Exchange
                      Controls
                  52E.
                  Taxation
                  52F.
                  Dividends
                      and Paying Agents
                  58G.
                  Statements
                      by Experts
                  58H.
                  Documents
                      on Display
                  58I.
                  Subsidiary
                      Information
                  58



















PageITEM
                11 - QUANTITATIVE
                AND QUALITATIVE DISCLOSURE ABOUT MARKET
                RISK
            58ITEM
                12 - DESCRIPTION
                OF SECURITIES OTHER THAN DEBT
                SECURITIES
            59PART
                II
            59ITEM
                13 - DEFAULT,
                DIVIDEND ARREARAGES AND
                DELINQUENCIES
            59ITEM
                14 - MATERIAL
                MODIFICATIONS TO THE RIGHTS OF
                SECURITY HOLDERS AND USE OF PROCEEDS
            59ITEM
                15 - CONTROLS
                AND PROCEDURES
            59PART
                III
            60ITEM
                17- FINANCIAL
                STATEMENTS
            60ITEM
                18 - FINANCIAL
                STATEMENTS
            60TEM
                19 -  EXHIBITS
            60











Unless
        otherwise indicated, all references in this Annual Report to “dollars” or “$”
        are references to Canadian dollars. Our financial statements are expressed
        in
        Canadian dollars. Except as otherwise noted, certain financial information
        presented in this Annual Report has been translated from Canadian dollars
        to
        U.S. dollars at an exchange rate of Cdn$1.2034 to US$1.00 (or US$ 0.8310
        to Cdn
        1.00), the noon buying rate in New York City on December 31, 2004
        for cable
        transfers in Canadian dollars as certified for customs purposes by the Federal
        Reserve Bank of New York. These translations are not intended to suggest
        that
        Canadian dollars have been or could be converted into U.S. dollars at that
        or
        any other rate.
  *On
        October 11, 2001, our shareholders approved a two-for-one share consolidation.
        Unless otherwise indicated, all share and option figures in this Annual Report
        that relate to the period prior to October 11, 2001 have been adjusted
        retroactively to reflect the share consolidation.*
  *References
        to the “Company” and “ADB” refer to ADB Systems International Ltd., as successor
        to ADB Systems International Inc. as a result of the implementation of the
        plan
        of arrangement described on page 17 under the heading “Major
        Developments.”*


**PART
        I**
  **ITEM
        1 - IDENTITY OF DIRECTORS, SENIOR MANAGEMENT AND
        ADVISORS**
  Not
        applicable.
  **ITEM
        2 - OFFER STATISTICS AND EXPECTED
        TIMETABLE**
  Not
        applicable.
  **ITEM
        3 - KEY INFORMATION**




**A.**
              **SELECTED
                  FINANCIAL
                  DATA**




The
      selected financial data set forth below should be read in conjunction with,
      and
      is qualified by reference to, our consolidated financial statements and the
      related notes, and the section "Operating and Financial Review and Prospects"
      included elsewhere in this Annual Report. The consolidated statement of
      operations data for the years ended December 31, 2004, 2003 and 2002 and
      consolidated balance sheet data as of December 31, 2004 and 2003, as
      set
      forth below, are derived from our consolidated audited financial statements
      and
      the related notes included elsewhere in this Annual Report. The consolidated
      statement of operations data for the years ended December 31, 2001 and 2000
      and
      the consolidated balance sheet data as at December 31, 2002, 2001 and
      2000
      have been derived from our consolidated audited financial statements for those
      years, which are not included in this Annual Report.




We
      have prepared our audited financial statements in accordance with accounting
      principles generally accepted in Canada, which differ in certain respects from
      accounting principles generally accepted in the United States. However, as
      applied to us, for all fiscal periods for which financial data is presented
      in
      this Annual Report, Canadian GAAP and U.S. GAAP were substantially identical
      in
      all material respects, except as disclosed in Note 24 of our consolidated
      financial statements.




Historical
      results are not necessarily indicative of results to be expected for any future
      period.














**Statement
      of Operations Data:**




**Year
                  Ended December 31******
              ****
              **2004**
                **(Cdn$)**
              ****
              **2004**
                **(U.S.$)**
              ****
              **2003**
                **(Cdn$)**
              ****
              **2002**
                **(Cdn$)**
              ****
              **2001**
                **(Cdn$)**
              ****
              **2000**
                **(Cdn$)****(Audited)****(in
                  thousands except for per share data)**Revenue
              
              
              4,930
              
              
              4,097
              
              
              5,853
              
              
              5,780
              
              
              4,455
              
              
              12,497Less:
                  Customer acquisition costs
              
              
              -
              
              
              -
              
              
              -
              
              
              -
              
              
              (60
              )
              
              (157
              )Net
                  Revenue
              
              
              4,930
              
              
              4,097
              
              
              5,853
              
              
              5,780
              
              
              4,395
              
              
              12,340ExpensesDirect
                  expenses
              
              
              -
              
              
              -
              
              
              -
              
              
              -
              
              
              -
              
              
              11,460Advertising
                  and promotion
              
              
              -
              
              
              -
              
              
              -
              
              
              -
              
              
              -
              
              
              5,040General
                  and administrative
              
              
              4,365
              
              
              3,627
              
              
              4,648
              
              
              6,288
              
              
              7,622
              
              
              16,236Sales
                  and marketing
              
              
              749
              
              
              622
              
              
              1,098
              
              
              1,875
              
              
              4,040
              
              
              3,161Software
                  development and technology
              
              
              3,257
              
              
              2,706
              
              
              2,817
              
              
              4,101
              
              
              3,691
              
              
              1,802Employee
                  stock options
              
              
              39
              
              
              32
              
              
              193
              
              
              -
              
              
              -
              
              
              -Depreciation
                  and amortization
              
              
              1,190
              
              
              989
              
              
              1,901
              
              
              2,602
              
              
              1,572
              
              
              1,130Interest
                  expense
              
              
              433
              
              
              360
              
              
              280
              
              
              155
              
              
              (345
              )
              
              (467
              )Total
                  expenses
              
              
              10,033
              
              
              8,336
              
              
              10,937
              
              
              15,021
              
              
              16,580
              
              
              38,362Loss
                  from operations
              
              
              (5,103
              )
              
              (4,239
              )
              
              (5,084
              )
              
              (9,241
              )
              
              (12,185
              )
              
              (26,022
              )**Loss
                  from continuing operations**Net
                  Loss
              
              
              (5,104
              )
              
              (4,240
              )
              
              (2,815
              )
              
              (9,364
              )
              
              (18,714
              )
              
              (20,366
              )Loss
                  per common share(1)
              
              
              (0.08
              )
              
              (0.07
              )
              
              (0.05
              )
              
              (0.22
              )
              
              (0.64
              )
              
              (0.76
              )**Net
                  loss from continuing operations per common share**(2)Weighted
                  average number of common shares(1)
              
              
              61,938
              
              
              61,938
              
              
              54,324
              
              
              41,968
              
              
              29,130
              
              
              26,844
  **Balance
          Sheet Data:** **(3)**
  **As
                    at December 31******
                ****
                **2004**
                  **(Cdn$)**
                ****
                **2004**
                  **(U.S.$)**
                ****
                **2003**
                  **(Cdn$)**
                ****
                **2002**
                  **(Cdn$)**
                ****
                **2001**
                  **(Cdn$)**
                ****
                **2000**
                  **(Cdn$)****(Audited)****(in
                    thousands)**Working
                    capital
                
                
                381
                
                
                317
                
                
                486
                
                
                (1,757
                )
                
                3,115
                
                
                13,671Total
                    assets
                
                
                2,493
                
                
                2,072
                
                
                3,211
                
                
                6,355
                
                
                10,592
                
                
                20,801**Net****assets**Long-term
                    deferred revenue
                
                
                -
                
                
                -
                
                
                -
                
                
                -
                
                
                33
                
                
                1,195Shareholders’
                    (deficiency) equity
                
                
                (1,009
                )
                
                (838
                )
                
                1,026
                
                
                1,198
                
                
                8,014
                
                
                15,860


(1)
              In
                  October 2001, our shareholders approved a 2 for 1 share consolidation.
                  All
                  per share amounts have been adjusted retroactively to reflect the
                  consolidation. See Note 8(d) of our consolidated financial statements
                  for
                  a discussion regarding the calculation of common shares outstanding
                  and
                  loss per common share.(2)
              For
                  each fiscal year, the Company excluded the effect of all convertible
                  debt,
                  stock options and share-purchase warrants, as their impact would
                  have been
                  anti-dilutive.(3)
              We
                  have not paid dividends since our
                  formation.
















EXCHANGE
      RATES




The
      following tables set forth, for the periods indicated, certain exchange rates
      based on the noon buying rate in New York City for cable transfers in Canadian
      dollars, as certified for customs purposes by the Federal Reserve Bank of New
      York. Such rates are the number of U.S. dollars per one Canadian dollar and
      are
      the inverse of the rates quoted by the Federal Reserve Board of New York for
      Canadian Dollars per U.S. $1.00. On May 31, 2005, the exchange rate was US$1.00
      = Cdn$0.7992 **.**




Year
                Ended December 31,Rate
            
            2004
            
            2003
            
            2002
            
            2001
            
            2000Average
                (1) during year
            
            
            0.7702
            
            
            0.7205
            
            
            0.6344
            
            
            0.6449
            
            
            0.6725





(1)
            The
                average rate is the average of the exchange rates on the last day
                of each
                month during the year.





Month
              
              High
                  during month
              
              Low
                  during monthNovember
                  2004
              
              
              0.8493
              
              
              0.8155December
                  2004
              
              
              0.8435
              
              
              0.8064January
                  2005
              
              
              0.8346
              
              
              0.8050February
                  2005
              
              
              0.8134
              
              
              0.7961March
                  2005
              
              
              0.8315
              
              
              0.8024April
                  2005
              
              
              0.8233
              
              
              0.7957May
                  2005
              
              
              0.8082
              
              
              0.7872
 
 **B.**
              **CAPITALIZATION
                  AND
                  INDEBTEDNESS**
 Not
        applicable.
  **C.**
              **REASONS
                  FOR THE OFFER AND USE OF
                  PROCEEDS.**
 Not
        applicable.
  **D.**
              **RISK
                  FACTORS**
 The
        following is a summary of certain risks and uncertainties which we face in
        our
        business. This summary is not meant to be exhaustive. These Risk Factors
        should
        be read in conjunction with other cautionary statements which we make in
        this
        Annual Report and in our other public reports, registration statements and
        public announcements.




WE
      WILL NEED ADDITIONAL CAPITAL AND IF WE ARE UNABLE TO SECURE ADDITIONAL FINANCING
      WHEN WE NEED IT, WE MAY BE REQUIRED TO SIGNIFICANTLY CURTAIL OR CEASE OUR
      OPERATIONS.




We
      have not yet realized profitable operations and have relied on non-operational
      sources of financing to fund our operations. Since we began our operations,
      we
      have been funded primarily through the sale of securities to investors in a
      series of private placements, convertible debt instruments, sales of equity
      to,
      and investments from, strategic partners, gains from investments, option
      exercises and, to a limited extent, through cash flow from operations. Our
      ability to continue as a going concern will be dependent on management’s ability
      to successfully execute its business plan including a substantial increase
      in
      revenue as well as maintaining operating expenses at or near the same level
      as
      2004. Management cannot provide assurance that it will be able to execute on
      its
      business plan or assure that efforts to raise additional financings would be
      successful.




Management
      believes that continued existence beyond 2005 is dependent on its ability to
      increase revenue from existing products, and to expand the scope of its product
      offering which entails a combination of internally developed software and
      partnerships with third parties. As of May 31, 2005, we had cash on hand
      and













marketable
      securities of approximately $610,000. Management believes that it has the
      ability to raise additional financing if required.




We
      do not have any committed sources of additional financing at this time and
      we
      are uncertain whether additional funding will be available when we need it
      on
      terms that will be acceptable to us or at all. If we are not able to obtain
      financing when we need it, we would be unable to carry out our business plan
      and
      would have to significantly curtail or cease our operations. We have included
      in
      Note 2 to our financial statements a discussion about the ability of our company
      to continue as a going concern. Potential sources of financing include strategic
      relationships, public or private sales of our shares, debt, convertible
      securities or other arrangements. If we raise funds by selling additional
      shares, including common shares or other securities convertible into common
      shares, the ownership interests of our existing shareholders will be diluted.
      If
      we raise funds by selling preference shares, such shares may carry more voting
      rights, higher dividend payments or more favorable rights upon distribution
      than
      those for the common shares. If we incur debt, the holders of such debt may
      be
      granted security interests in our assets. Because of our potential long-term
      capital requirements, we may seek to access the public or private equity or
      debt
      markets whenever conditions are favorable, even if we do not have an immediate
      need for additional capital at that time.




WE
      ARE NOT PROFITABLE AND WE MAY NEVER BECOME PROFITABLE.




We
      have accumulated net losses of approximately $104.9 million as of December
      31,
      2004. For the year ended December 31, 2004 our net loss was $5.104 million.
      We have never been profitable and expect to continue to incur losses for the
      foreseeable future. We cannot assure you that we will earn profits or generate
      positive cash flows from operations in the future.




OUR
      LIMITED OPERATING HISTORY IN OUR CURRENT BUSINESS AS A COMBINED ENTITY AND
      OUR
      JOINT VENTURE WITH GE COMMERCIAL FINANCE MAKES EVALUATING OUR BUSINESS
      DIFFICULT.




Since
      we were founded in September 1995 and until 1999 we operated solely as an online
      retailer of computer and other goods. In 2000, we shifted our focus to providing
      dynamic pricing solutions. In October 2001, we acquired ADB Systemer ASA of
      Norway, a provider of enterprise asset management and electronic procurement
      software and services. While ADB Systemer has operated since 1988, we have
      only
      a limited operating history as a combined entity on which you can base your
      evaluation of our business and prospects.




In
      December 2003 we formed the joint venture, GE Asset Manager LLC, with GE
      Commercial Equipment Financing. Growing this business venture has required
      us to
      shift focus from a broad spectrum of customers to focusing on a small number
      of
      large clients. By further investing in our relationship with GE Commercial
      Equipment Financing we are increasing our business risk by becoming
      substantially dependent on the business generated by the joint venture.




Our
      business and prospects must be considered in light of the risks, uncertainties
      and expenses frequently encountered by companies in their early stages of
      development, particularly companies in new and rapidly evolving markets. Our
      business strategy may not be successful and we may not successfully address
      those risks.




WE
      MAY EXPERIENCE INCREASINGLY LONGER SALES CYCLES.




A
      significant portion of our revenue in any quarter is derived from a relatively
      small number of contracts. We often experience sales cycles of six (6) to
      eighteen (18) months. If the length of our sales cycles increases, our revenues
      may decrease and our quarterly results would be adversely affected. In addition,
      our current and future expense levels are based largely on our investment plans
      and estimates of future revenues and are, to a large extent, fixed. We may
      be
      unable to adjust spending in a timely manner to compensate for any unexpected
      revenue shortfall. Any significant shortfall in revenues relative to our planned
      expenditures would have a material adverse effect on our business, financial
      condition, cash flows and results of operations.




POTENTIAL
      FLUCTUATIONS IN OUR FINANCIAL RESULTS MAKE FINANCIAL FORECASTING
      DIFFICULT.




Our
      operating results have varied on a quarterly basis in the past and may fluctuate
      significantly as a result of a variety of factors, many of which are outside
      our
      control. Factors that may affect our quarterly operating results include:




•
            general
                economic conditions as well as economic conditions specific to our
                industry;














•
            long
                sales cycles, which characterize our industry;•
            implementation
                delays, which can affect payment and recognition of
                revenue;•
            any
                decision by us to reduce prices for our solutions in response to
                price
                reductions by competitors;•
            the
                amount and timing of operating costs and capital expenditures relating
                to
                monitoring or expanding our business, operations and infrastructure;
                and•
            the
                timing of, and our ability to integrate, any future acquisition,
                technologies or products or any strategic investments or relationships
                into which we may enter.




Due
      to these factors, our quarterly revenues and operating results are difficult
      to
      forecast. We believe that period-to-period comparisons of our operating results
      may not be meaningful and should not be relied upon as an indication of future
      performance. In addition, it is likely that in one or more future quarters,
      our
      operating results will fall below the expectations of securities analysts and
      investors. In such event, the trading price of our common shares would almost
      certainly be materially adversely affected.




OUR
      SHARE PRICE HAS FLUCTUATED SUBSTANTIALLY AND MAY CONTINUE TO DO SO.




The
      trading price of our common shares on The Toronto Stock Exchange and on the
      NASDAQ Over the Counter Bulletin Board (“OTCBB”) has fluctuated significantly in
      the past and could be subject to wide fluctuations in the future. The market
      prices for securities of technology companies have been highly volatile. These
      companies have experienced extreme price and volume fluctuations that have
      often
      been unrelated or disproportionate to their operating performance. Broad market
      and industry factors may materially and adversely affect the market price of
      our
      common shares, regardless of our operating performance. In addition,
      fluctuations in our operating results, and concerns regarding our competitive
      position can have an adverse and unpredictable effect on the market price of
      our
      shares.




In
      the past, following periods of volatility in the market price of a company’s
      securities, securities class-action litigation has often been instituted against
      that company. Such litigation, if instituted against us, could result in
      substantial costs and a diversion of management’s attention and resources, which
      could have a material adverse effect on our business, results of operations,
      cash flow, financial condition and prospects.




YOUR
      ABILITY TO BUY OR SELL OUR COMMON SHARES ON THE OTCBB MAY BE LIMITED.




On
      June 3, 2002, we transferred the listing of our common shares from the Nasdaq
      National Market to the Nasdaq SmallCap Market. On August 22, 2002, our common
      shares were delisted from the Nasdaq SmallCap Market because we did not satisfy
      the minimum bid price per share requirement for continued listing on that
      market. Our common shares immediately became eligible for and began trading
      on
      the OTCBB. The OTCBB is generally considered to be a less efficient market
      than
      the Nasdaq National Market or the Nasdaq SmallCap Market on which our shares
      previously traded. As a result, your ability to buy or sell our common shares
      on
      the OTCBB may be limited. In addition, since our shares are no longer listed
      on
      the Nasdaq National Market or Nasdaq SmallCap Market, our shares may be subject
      to the “penny stock” regulations described below. De-listing from the Nasdaq
      National Market and the Nasdaq SmallCap Market will not affect the listing
      of
      the common shares on The Toronto Stock Exchange.





OUR
      COMMON SHARES ARE SUBJECT TO “PENNY STOCK” REGULATIONS WHICH MAY AFFECT YOUR
      ABILITY TO BUY OR SELL OUR COMMON SHARES.




Our
      common shares have traded on the Nasdaq National and Small Cap Markets and
      on
      the OTCBB at prices below US$5.00 since April 2000 (on a pre-consolidation
      basis). As a result, our shares are characterized as “penny stocks” which may
      severely affect market liquidity. The Securities Enforcement and Penny Stock
      Reform Act of 1990 requires additional disclosure relating to the market for
      penny stocks in connection with trades in any stock defined as a penny
      stock.




Securities
      and Exchange Commission regulations generally define a penny stock to be an
      equity security that has a market price of less than US$5.00 per share, subject
      to certain exceptions. The regulations require, prior to any transaction
      involving a penny stock, delivery of a disclosure schedule explaining the penny
      stock market and the risks associated therewith. The penny stock regulations
      may
      adversely affect the market liquidity of our common shares by limiting the
      ability of broker/dealers to trade the shares and the ability of purchasers
      of
      our common shares to sell in the secondary market. Certain institutions and
      investors will not invest in penny stocks.






THE
        MARKETS IN WHICH WE OPERATE ARE HIGHLY COMPETITIVE.




The
      market for asset lifecycle management solutions is rapidly evolving and
      intensely competitive. We face significant competition in each segment of our
      business (sourcing, procurement, enterprise asset management and asset
      disposition). We expect that competition will further intensify as new companies
      enter the different segments of our market and larger existing companies expand
      their product lines. If the global economy continues to lag, we could face
      increased competition, particularly in the form of lower prices.




Many
      of our competitors have longer operating histories, larger customer bases,
      greater brand recognition and significantly greater financial, marketing and
      other resources than we. We cannot assure you that we will be able to compete
      with them effectively. If we fail to do so, it would have a material adverse
      effect on our business, financial condition, cash flows and results of
      operations.




WE
      MAY NOT BE ABLE TO RETAIN OR ATTRACT THE HIGHLY SKILLED PERSONNEL WE NEED,
      IN
      PARTICULAR AS A RESULT OF OUR RECENT WORKFORCE REDUCTIONS.




Our
      success is substantially dependent on the ability and experience of our senior
      management and other key personnel. We do not have long-term employment
      agreements with any of our key personnel and maintain no “key person” life
      insurance policies.




In
      2002, we implemented a workforce reduction. We experienced some attrition during
      2003 and 2004 as a result of the reduction. The number of our employees as
      of
      March 15, 2005 represents a 5% decrease in our workforce as compared with the
      number of our employees as of May 12, 2004. We may need to hire new or
      additional personnel to respond to attrition or future growth of our business.
      However, there is significant competition for qualified personnel. We cannot
      be
      certain we will be able to retain existing personnel or hire additional,
      qualified personnel when needed.




SIGNIFICANT
      DELAYS IN PRODUCT DEVELOPMENT WOULD HARM OUR REPUTATION AND RESULT IN LOSS
      OF
      REVENUE.




If
      we experience significant product development delays, our position in the market
      would be harmed, and our revenues could be substantially reduced, which would
      adversely affect our operating results. As a result of the complexities inherent
      in our software, major new product enhancements and new products often require
      long development and test periods before they are released. On occasion, we
      have
      experienced delays in the scheduled release date of new or enhanced products,
      and we may experience delays in the future. Delays may occur for many reasons,
      including an inability to hire a sufficient number of developers, discovery
      of
      bugs and errors or a failure of our current or future products to conform to
      industry requirements. Any such delay, or the failure of new products or
      enhancements in achieving market acceptance, could materially impact our
      business and reputation and result in a decrease in our revenues.




WE
      MAY HAVE TO EXPEND SIGNIFICANT RESOURCES TO KEEP PACE WITH RAPID TECHNOLOGICAL
      CHANGE.




Our
      industry is characterized by rapid technological change, changes in user and
      customer requirements, frequent new service or product introductions embodying
      new technologies and the emergence of new industry standards and practices.
      Any
      of these could hamper our ability to compete or render our proprietary
      technology obsolete. Our future success will depend, in part, on our ability
      to:




•
            develop
                new proprietary technology that addresses the increasingly sophisticated
                and varied needs of our existing and prospective
                customers;•
            anticipate
                and respond to technological advances and emerging industry standards
                and
                practices on a timely and cost-effective basis;•
            continually
                improve the performance, features and reliability of our products
                in
                response to evolving market demands; and•
            license
                leading technologies.




We
      may be required to make substantial expenditures to accomplish the foregoing
      or
      to modify or adapt our services or infrastructure.













OUR
      BUSINESS COULD BE SUBSTANTIALLY HARMED IF WE HAVE TO CORRECT OR DELAY THE
      RELEASE OF PRODUCTS DUE TO SOFTWARE BUGS OR ERRORS.




We
      sell complex software products. Our software products may contain undetected
      errors or bugs when first introduced or as new versions are released. Our
      software products may also contain undetected viruses. Further, software we
      license from third parties and incorporate into our products may contain errors,
      bugs or viruses. Errors, bugs and viruses may result in any of the
      following:




•
            adverse
                customer reactions;•
            negative
                publicity regarding our business and our products;•
            harm
                to our reputation;•
            loss
                of or delay in market acceptance;•
            loss
                of revenue or required product changes;•
            diversion
                of development resources and increased development expenses;•
            increased
                service and warranty costs;•
            legal
                action by our customers; and•
            increased
                insurance costs.





SYSTEMS
      DEFECTS, FAILURES OR BREACHES OF SECURITY COULD CAUSE A SIGNIFICANT DISRUPTION
      TO OUR BUSINESS, DAMAGE OUR REPUTATION AND EXPOSE US TO LIABILITY.




We
      host certain websites and sub-sites for our customers. Our systems are
      vulnerable to a number of factors that may cause interruptions in our ability
      to
      enable or host solutions for third parties, including, among
      others:




•
            damage
                from human error, tampering and vandalism;•
            breaches
                of security;•
            fire
                and power losses;•
            telecommunications
                failures and capacity limitations; and•
            software
                or hardware defects.




Despite
      the precautions we have taken and plan to take, the occurrence of any of these
      events or other unanticipated problems could result in service interruptions,
      which could damage our reputation, and subject us to loss of business and
      significant repair costs. Certain of our contracts require that we pay penalties
      or permit a customer to terminate the contract if we are unable to maintain
      minimum performance levels. Although we continue to take steps to enhance the
      security of our systems and ensure that appropriate back-up systems are in
      place, our systems are not now, nor will they ever be, fully
      secure.




OUR
      BUSINESS HAS UNDERGONE DRAMATIC EXPANSION AND RETRACTION PHASES SINCE OUR
      FORMATION. WE MAY NOT BE ABLE TO MANAGE FURTHER DRAMATIC EXPANSIONS AND
      RETRACTIONS IN THE FUTURE.




Our
      business has undergone dramatic expansion and retraction since our formation,
      which has placed significant strain on our management resources. If we should
      grow or retract dramatically in the future, there may be further significant
      demands on our management, administrative, operating and financial resources.
      In
      order to manage these demands effectively, we will need to expand and improve
      our operational, financial and management information systems and motivate,
      manage and retain employees. We cannot assure you that we will be able to do
      so,
      that our management, personnel or systems will be adequate, or that we will
      be
      able to achieve levels of revenue commensurate with the resulting levels of
      operating expenses.













INTERNATIONAL
      SALES ACCOUNT FOR A SIGNIFICANT PORTION OF OUR REVENUE, WHICH EXPOSES US TO
      CERTAIN RISKS.




We
      currently operate in Canada, Norway, Ireland, the United States and England.
      In
      the 2004 fiscal year, sales to customers outside North America represented
      approximately 84% of our revenues. There are risks inherent in doing business
      on
      a global level, including:




•
            difficulties
                in managing and staffing an organization spread across several
                continents;•
            differing
                laws and regulatory requirements;•
            political
                and economic risks;•
            currency
                and foreign exchange fluctuations and controls;•
            tariffs,
                customs, duties and other trade barriers;•
            longer
                payment cycles and problems in collecting accounts receivable in
                certain
                countries;•
            export
                and import restrictions;•
            the
                need for product compliance with local language and business
                customs;•
            seasonal
                reductions in business activity during the summer months in Europe
                and
                elsewhere; and•
            potentially
                adverse tax consequences.




Any
      of these risks could adversely affect the success of our global
      operations.




ACQUISITIONS
        OF COMPANIES OR TECHNOLOGIES MAY RESULT IN DISRUPTIONS TO OUR BUSINESS AND/OR
        DISTRACTIONS FOR OUR MANAGEMENT.




We
      acquired ADB Systemer ASA of Norway in October 2001. In the future, we may
      seek
      to acquire other businesses or make investments in complementary businesses
      or
      technologies. We may not be able to acquire or manage additional businesses
      profitably or successfully integrate any acquired businesses with our business.
      Businesses that we acquire may have liabilities that we underestimate or do
      not
      discover during our pre-acquisition investigations. Certain liabilities, even
      if
      we do not expressly assume them, may be imposed on us as the successor to the
      business. Further, each acquisition may involve other special risks that could
      cause the acquired businesses to fail to meet our expectations. For
      example:




•
            the
                acquired businesses may not achieve expected results;•
            we
                may not be able to retain key personnel of the acquired
                businesses;•
            we
                may incur substantial, unanticipated costs, delays or other operational
                or
                financial problems when we try to integrate businesses we acquire
                with our
                own;•
            our
                management’s attention may be diverted; or•
            our
                management may not be able to manage the combined entity effectively
                or to
                make acquisitions and grow our business internally at the same
                time.




The
      occurrence of one or more of these factors could have a material adverse effect
      on our business, financial condition, cash flows and results of operations.
      In
      addition, we may incur debt or issue equity securities to pay for any future
      acquisitions or investments, which could dilute the ownership interest of our
      existing shareholders.




IF
      WE ARE UNABLE TO SUCCESSFULLY PROTECT OUR INTELLECTUAL PROPERTY OR OBTAIN
      CERTAIN LICENSES, OUR COMPETITIVE POSITION MAY BE WEAKENED.




Our
      performance and ability to compete are dependent in part on our technology.
      We
      rely on a combination of patent, copyright, trademark and trade secret laws
      as
      well as confidentiality agreements and technical measures, to establish and
      protect our rights in the technology we develop. We cannot guarantee that any
      patents issued to us will afford meaningful protection for our technology.
      Competitors may develop similar technologies which do not conflict with our
      patents. Others may challenge our patents and, as a result, our patents could
      be
      narrowed or invalidated.




Our
      software is protected by common law copyright laws, as opposed to registration
      under copyright statutes. Common law protection may be narrower than that which
      we could obtain under registered copyrights. As a result, we may experience
      difficulty in enforcing our copyrights against certain third parties. The source
      code for our proprietary software is protected as a trade secret. As part of
      our
      confidentiality protection













procedures,
      we generally enter into agreements with our employees and consultants and limit
      access to, and distribution of, our software, documentation and other
      proprietary information. We cannot assure you that the steps we take will
      prevent misappropriation of our technology or that agreements entered into
      for
      that purpose will be enforceable. In order to protect our intellectual property,
      it may be necessary for us to sue one or more third parties. While this has
      not
      been necessary to date, there can be no guarantee that we will not be required
      to do so in future to protect our rights. The laws of other countries may afford
      us little or no protection for our intellectual property.




We
      also rely on a variety of technology that we license from third parties,
      including our database and Internet server software, which is used to perform
      key functions. These third-party technology licenses may not continue to be
      available to us on commercially reasonable terms, or at all. If we are unable
      to
      maintain these licenses or obtain upgrades to these licenses, we could be
      delayed in completing or prevented from offering some products or
      services.




OTHERS
      COULD CLAIM THAT WE INFRINGE ON THEIR INTELLECTUAL PROPERTY RIGHTS, WHICH MAY
      RESULT IN COSTLY AND TIME-CONSUMING LITIGATION.




Our
      success will also depend partly on our ability to operate without infringing
      upon the proprietary rights of others, as well as our ability to prevent others
      from infringing on our proprietary rights. We may be required at times to take
      legal action in order to protect our proprietary rights. Also, from time to
      time, we may receive notice from third parties claiming that we infringe their
      patent or other proprietary rights. In the past, a certain third party claimed
      that certain of our technology infringed their intellectual property rights.
      The
      Company does not believe it does or ever has infringed the intellectual property
      rights of any third party. The claim with the particular third party has been
      resolved through a licensing arrangement. There can be no assurances that other
      third parties will not make similar claims in the future.




We
      believe that infringement claims will increase in the technology sector as
      competition intensifies. Despite our best efforts, we may be sued for infringing
      on the patent or other proprietary rights of others. Such litigation is costly,
      and even if we prevail, the cost of such litigation could harm us. If we do
      not
      prevail or cannot fund a complete defense, in addition to any damages we might
      have to pay, we could be required to stop the infringing activity or obtain
      a
      license. We cannot be certain that any required license would be available
      to us
      on acceptable terms, or at all. If we fail to obtain a license, or if the terms
      of a license are burdensome to us, this could have a material adverse effect
      on
      our business, financial condition, cash flows and results of
      operations.




OUR
      PRODUCT STRATEGY IS PARTIALLY DEPENDENT UPON THE CONTINUED ACCEPTANCE AND USE
      OF
      THE INTERNET AS A MEDIUM OF COMMERCE.




Our
      success depends in part on the continued growth of the Internet and reliance
      on
      and use of the Internet by businesses. Because use of the Internet as a source
      of information, products and services is a relatively recent phenomenon, it
      is
      difficult to predict whether the number of users drawn to the Internet will
      continue to increase and whether the market for commercial use of the Internet
      will continue to develop and expand.




The
      Internet may not be commercially viable for a number of reasons, including
      potentially inadequate development of the necessary network infrastructure,
      delayed development of enabling technologies and inadequate performance
      improvements. In addition, the Internet’s viability as a commercial marketplace
      could be adversely affected by delays in the development of services or due
      to
      increased government regulation. Moreover, concern about the security of
      transactions conducted on the Internet and the privacy of users may also inhibit
      the growth of commerce on the Internet. If the use of the Internet does not
      continue to grow or grows more slowly than expected, or if the infrastructure
      for the Internet does not effectively support growth that may occur, our
      business would be materially and adversely affected.




OUR
      BUSINESS IS SENSITIVE TO THE OVERALL ECONOMIC ENVIRONMENT. ANY SLOWDOWN IN
      INFORMATION TECHNOLOGY SPENDING BUDGETS COULD HARM OUR OPERATING
      RESULTS.




Any
      significant downturn in our customers' markets or in general economic conditions
      that results in reduced information technology spending budgets would likely
      result in a decreased demand for our products and services, longer selling
      cycles and lower prices, any of which may harm our business.




WE
      ARE
      SUBJECT TO RISKS ASSOCIATED WITH EXCHANGE RATE FLUCTUATIONS.




Substantially
      all of our revenues are in European currencies or U.S. dollars, while the
      majority of our operating expenses are in Canadian dollars and Norwegian kroner.
      We do not have any hedging programs in













place
      to
      manage the potential exposure to fluctuations in the Canadian dollar and
      Norwegian kroner exchange rates. Fluctuations in the exchange rates of these
      currencies or the exchange rate of other currencies against the Canadian dollar
      or Norwegian kroner could have a material adverse effect on our business,
      financial condition, cash flows and results of operations.




OUR
      PREFERENCE SHARES COULD PREVENT OR DELAY A TAKEOVER THAT SOME OR A MAJORITY
      OF
      SHAREHOLDERS CONSIDER FAVORABLE.




Our
      Board
      of Directors, without any further vote of our shareholders, may issue preference
      shares and determine the price, preferences, rights and restrictions of those
      shares. The rights of the holders of common shares will be subject to, and
      may
      be adversely affected by, the rights of the holders of any series of preference
      shares that may be issued in the future. That means, for example, that we can
      issue preference shares with more voting rights, higher dividend payments or
      more favorable rights upon distribution than those for our common shares. If
      we
      issue certain types of preference shares in the future, it may also be more
      difficult for a third party to acquire a majority of our outstanding voting
      shares and such issuance may, in certain circumstances, deter or delay mergers,
      tender offers or other possible transactions that may be favored by some or
      a
      majority of our shareholders.




IT
      MAY BE
      DIFFICULT FOR YOU TO ENFORCE LEGAL CLAIMS AGAINST US OR OUR OFFICERS OR
      DIRECTORS.




We
      are incorporated under the laws of the Province of Ontario, Canada. Certain
      of
      our directors and officers are residents of Canada and Norway and substantially
      all of our assets and the assets of such persons are located outside the United
      States. As a result, it may be difficult for holders of common shares to effect
      service of legal process within the United States upon those directors and
      officers who are not residents of the United States. It may also be difficult
      to
      realize in the United States upon judgments of courts of the United States
      without enforcing such judgments in our home jurisdiction or the jurisdiction
      of
      residence of the director or officer concerned.




**ITEM
      4 -** **INFORMATION** **ON THE COMPANY**




**A.
      COMPANY BACKGROUND**




The
      name of the company is ADB Systems International Ltd (“ADB,”“ADB Systems” or the
“Company”). The Company was formed pursuant to the *Business
      Corporations Act* (Ontario). The business began as Internet Liquidators Inc. (“IL Inc.”), a
      business corporation formed under the laws of Ontario, Canada, in September
      1995
      and after a series of corporate reorganizations, as described below developed
      into the present Company. In May 1996, Internet Liquidators International Inc.
      (“ILI Inc.”), also an Ontario company, acquired all of the shares of IL Inc.
      These two companies were amalgamated on January 9, 1997. By articles of
      amendment dated June 25 1998, ILI Inc. changed its name to Bid.Com International
      Inc.




Prior
      to October 24, 2000, we operated two national business-to-consumer auction
      sites
      at www.bid.com, one in the United States and one in Canada. Following an
      extensive strategic review by ADB’s Board of Directors and management, ADB
      decided late in 2000 to focus on its software business.




On
      October 11, 2001, Bid.Com acquired substantially all of the shares of ADB
      Systemer ASA, a public limited liability company organized under the laws of
      the
      Kingdom of Norway. As part of the acquisition of ADB Systemer, Bid.Com completed
      a two for one share consolidation and changed its name to ADB Systems
      International Inc. (“ADB Inc.”) by articles of amendment dated October 11,
      2001.




During
      2002, ADB Systems International Inc. (“ADB Inc.”), entered into a series of
      agreements with the Brick Warehouse Corporation (“The Brick”), which are
      described below under the heading “The Brick Transaction” and subsequently ADB
      Inc. changed its name to Bid.com International Ltd.




On
      August 20, 2002, ADB Systems International Ltd., was incorporated by certificate
      and Articles of Incorporation. On October 31, 2002, the shareholders of ADB
      Inc.
      exchanged their shares of ADB Inc. for shares of the Company on a one-for-one
      basis. This exchange was implemented pursuant to a plan of arrangement approved
      by the shareholders of ADB Inc. on October 22, 2002 and by the Ontario Superior
      Court of Justice on October 24, 2002 (which we refer to in this form as the
      “Arrangement”). As a result of the Arrangement, the business of ADB Inc.,
      including all assets and liabilities of ADB Inc. (other than those related
      to
      retail activities),













was
      transferred to the Company in the form of a return of capital. ADB Inc.
      subsequently changed its name to Bid.Com International Ltd.




The
      principal place of business and registered office of the Company is located
      at
      302 The East Mall, Suite 300 Toronto, Ontario, Canada, M9B 6C7 and our telephone
      number is (416) 640-0400. In Norway, our principal business offices are located
      at Vingveien 2, 4050 Sola, Norway and our telephone number is +47 51 64 71
      00.
      In the United States, our principal business office is located at 3001 North
      Rocky Point Drive East, Suite 200, Tampa, Florida 33607 and our telephone number
      is (813) 281-4825.




Our
      shares trade on the Toronto Stock Exchange under the symbol “ADY” and are traded
      on the Over the Counter Bulletin Board (the “OTCBB”) under the symbol “ADBYF”.
      Additional information about our company can be obtained at our web site -
      www.adbsys.com. The information contained on our web site is not deemed to
      be
      part of this Annual Report.





**MAJOR
      DEVELOPMENTS**




***Fiscal
              2004***•
            ADB
                was engaged in a number of activities aimed at expanding our relationships
                with existing customers and developing relationships with new customer
                organizations. Through these efforts, which included the introduction
                of
                new technology enhancements to our suite of product offerings, the
                cross
                selling of ancillary applications, and the increase in the number
                of users
                of our technology, ADB was able to expand our working relationships
                with
                BP the National Health Services (UK), and GE CEF, among others.•
            In
                North America, the primary thrust of our activities in 2004 concentrated
                on the rollout of*Asset
                Manager*from GE, our joint venture with GE Commercial Finance. This joint
                venture
                is designed to combine GE’s equipment financing and asset management
                expertise together with our experience in providing mission-critical
                technology solutions for asset lifecycle management. Together, we
                have
                developed web-based solutions to help our customers:•
            Track
                and re-deploy assets more effectively;•
            Automate
                equipment appraisals;•
            Efficiently
                market and sell surplus equipment; and•
            Automate
                sourcing and tendering processes.•
            Through
                the joint venture, we signed a customer agreement with Kraft Foods
                Global,
                Inc. (“Kraft”) and continued to service our customer agreement with the
                General Electric Company, acting through its GE Aircraft Engines
                division
                (“GE Aircraft Engines”).•
            ADB
                made a number of enhancements to our suite of technology product
                offerings
                in 2004. These enhancements, which centered on re-architecting the
                under-lying platform of our Dyn@mic Buyer solution and expanding
                the
                functionality of our WorkMate and Material Transfer applications,
                allow us
                to stay current with the latest technology trends while maintaining
                a
                competitive advantage.•
            A
                key cornerstone of our technology activities focused on the development
                of
                Asset Tracker, a new, web-based asset-tracking offering that is delivered
                through our joint venture with GE.•
            Effective
                November 15, 2004 our stock symbol on the Over The Counter Bulletin
                Board
                (the “OTCBB”) was changed to ADBYF. The addition of the F to the symbol
                was a requirement of the OTCBB to signify that we are a foreign
                issuer.




***The
      Brick Transaction***




On
      August 30, 2002, we entered into a series of agreements with The Brick Warehouse
      Corporation (“The Brick”) which contemplated a series of transactions among The
      Brick, ADB Systems International Inc. (“Old ADB”) and ADB. We refer to those
      transactions in this AIF as “The Brick Transaction”.




Pursuant
      to The Brick Transaction:




•
            The
                Brick made a $2.0 million secured loan to Old ADB and ADB at an interest
                rate of 12% per year;
















•
            ADB
                and Old ADB agreed to enter into the Arrangement (as defined above);
                and•
            The
                Brick and Old ADB agreed to utilize the online retail technology,
                experience and expertise of ADB developed and operated under the
                name
                “Bid.Com International Inc.” for the online sale of consumer products to
                be supplied by The Brick (which we refer to in this report as the
“Retail
                Business”).




The
      $2.0 million secured loan made by The Brick matured on June 30, 2003. At
      maturity, ADB had the right, at its option, to: (i) repay the loan in cash
      or
      (ii) transfer to The Brick all of the issued shares of Old ADB owned by ADB
      in
      satisfaction of the outstanding principal amount and accrued interest then
      owing
      to The Brick. The obligations of Old ADB and ADB were secured by a general
      security agreement delivered by ADB to The Brick covering all the property
      and
      assets of ADB. On June 30, 2003, ADB exercised its option to transfer to The
      Brick all of the issued shares of Old ADB in satisfaction of the outstanding
      principal amount and accrued interest then owing to The Brick.




The
      principal consequences of the Arrangement, which was effective as of October
      31,
      2002, are as follows:




1.
            Shareholders
                of Old ADB received from ADB one common share of ADB in exchange
                for each
                of their common shares of Old ADB. As a result (i) Old ADB became
                a wholly
                owned subsidiary of ADB and (ii) each former shareholder of Old ADB
                owns
                the same number of shares in ADB that it owned in Old ADB prior to
                the
                exchange.2.
            Old
                ADB transferred all of its assets to ADB and ADB assumed all of the
                liabilities and obligations of Old ADB, except that Old ADB retained
                specific assets and liabilities of the Retail Business.3.
            The
                registered office, articles of incorporation, by-laws, directors
                and
                executive officers of Old ADB immediately prior to the Arrangement
                became
                the registered office, articles, by-laws, directors and executive
                officers
                of ADB upon consummation of the Arrangement.4.
            ADB
                adopted the Stock Option Plan of Old ADB. Upon consummation of the
                Arrangement, all options, warrants or debt that was exercisable or
                convertible into shares of Old ADB became convertible into the same
                number
                of shares of ADB.5.
            The
                articles of amalgamation of Old ADB were amended to: (i) change the
                name
                of Old ADB to Bid.Com International Ltd. and (ii) delete the authorized
                Preference Shares (as defined in such articles) and the rights,
                preferences and restrictions on the transfer of such Preference
                Shares.




Upon
      completion of the Arrangement, the Toronto Stock Exchange approved the listing
      of the ADB common shares issued in exchange for Old ADB common shares or
      issuable upon the exercise of options or warrants or conversion of debt. ADB
      common shares are listed on the Toronto Stock Exchange for trading under the
      symbol “ADY”. The shares of Old ADB ceased trading on the Toronto Stock Exchange
      on November 5, 2002. On April 2, 2003 an order was issued by the Ontario
      Securities Commission pursuant to which Old ADB has ceased to be a reporting
      issuer in all jurisdictions in Canada in which it was a reporting
      issuer.




***Joint
      Venture with*****GE Commercial Finance, Commercial Equipment
      Financing**




On
      December 31, 2003 ADB Systems USA, Inc. (“ADB USA”), a wholly owned subsidiary
      of ADB, entered into an Amended and Restated Operating Agreement (the “Operating
      Agreement”) with General Electric Capital Corporation through is business
      division GE Commercial Finance, Commercial Equipment Financing (“GE Commercial
      Finance”). This agreement was entered into in connection with the establishment
      of GE Asset Manager, LLC a joint business venture in which both GE Commercial
      Finance and ADB USA hold a 50% interest. Pursuant to this business venture,
      GE
      Commercial Finance and ADB USA also entered into the following agreements that
      are included as exhibits to the Operating Agreement: ADB License Agreement,
      ADB
      Services Agreement, GE License Agreement and GE Service Agreement. GE Asset
      Manager LLC, which carries on business under the name GE Commercial Finance
      Asset Manager (“ *Asset
      Manager* ”),
      is an integrated, web-based business enabling mid- and large-size organizations
      to reduce operating costs by simplifying and consolidating their asset
      management programs. *Asset
      Manager* features all-in-one capabilities designed for sourcing of new equipment,
      tracking and reallocation of existing assets, automated appraisal management
      and
      disposition of surplus equipment.
















**PRINCIPAL
      CAPITAL EXPENDITURES AND DIVESTITURES**




For
      a description of principal capital expenditures and divestitures, see Item
      5 - OPERATING
      AND FINANCIAL REVIEW AND PROSPECTS - REALIZED GAINS AND LOSSES ON MARKETABLE
      SECURITIES AND STRATEGIC INVESTMENTS and CAPITAL
      ASSETS .
      As of May 31, 2005 we do not have any significant current capital divestitures
      or any current capital expenditures so far in 2005.




**B.
      BUSINESS OVERVIEW**




ADB
      Systems develops and sells software products and services that allow our
      customers to source, buy, track, manage and sell assets, primarily in asset
      intensive industries. We refer to our product and services suite as asset
      lifecycle management solutions. Our solutions can reduce sourcing, procurement
      and tracking costs, improve tracking and monitoring of asset performance and
      reduce operational downtime.




We
      acquired ADB Systemer ASA (“ADB Systemer”), in October 2001. For more than ten
      years, ADB Systemer provided enterprise asset management solutions (EAM) to
      customers in Norway and Europe. For the past three years, we have provided
      EAM
      solutions to customers in North America and Europe and during the past two
      years
      we have introduced sourcing and procurement solutions to customers in North
      America and Europe.




Our
      customer list includes a number of leading organizations, such as BP p.l.c.
      (“BP”), GE Commercial Equipment Financing (“GE CEF”) **,** National Health Services (NHS) , permanent TSB (the retail banking division
      of
      Irish Life Permanent p.l.c.) (“permanent TSB”), Talisman Energy Inc. (“Talisman
      Energy”) and Vesta Insurance Group, Inc. (“Vesta Insurance”). Through our
      wholly-owned subsidiary, ADB Systems USA Inc., ADB owns a 50 percent interest
      in *GE
      Commercial Finance Asset Manager* ,
      a joint business venture launched with the General Electric Capital Corporation,
      through its business division GE Commercial Finance, Commercial Equipment
      Financing (referred to in this report as “GE” or “GE Commercial
      Finance”).




**INDUSTRY
      BACKGROUND AND OVERVIEW**




Asset
      management software has existed for more than thirty years, initially through
      computerized maintenance management systems (CMMS), and more recently including
      more comprehensive and robust enterprise asset management (EAM) and enterprise
      resource planning (ERP) solutions. The early CMMS systems automated daily
      management of assets, while ERP solutions consolidate basic asset information
      with financial information at the corporate level. EAM solutions encompass
      elements of both, serving as the next evolution of CMMS solutions by bridging
      the gap between asset management and corporate-level planning and tracking
      requirements.




The
      key value proposition for EAM solutions is that they can provide a quick and
      quantifiable return on investment (ROI) and return on assets (ROA). Cost and
      productivity improvements can immediately and measurably benefit organizations,
      and thus are highly desirable to potential customers, particularly in difficult
      economic times where the focus is increasingly bottom line
      oriented.




In
      addition to EAM solutions, we offer sourcing and procurement solutions as well
      as sales solutions. These are natural extensions to EAM solutions, as
      organizations seek to extend asset management and corporate-level planning
      and
      tracking onto other elements of the asset lifecycle.




**PRODUCTS
      AND SERVICES**





**GE’s
      Asset Manager**




GE's
      Asset Manager is a joint venture between GE Commercial Finance, Commercial
      Equipment Financing and ADB Systems International Ltd. that combines GE's
      equipment financing and asset management expertise together with ADB's
      experience in providing mission critical technology solutions for asset
      lifecycle management.




With
      organizations needing to generate improved bottom-line results and comply with
      new financial regulatory requirements, GE's Asset Manager has introduced a
      new
      suite of integrated, web-based solutions that are designed to help organizations
      gain greater control of their capital assets and implement new process efficiencies
      to their operational activities. We have offered the Asset Manager suite of
      solutions to our customers since 2004.















Our
      industry-proven solutions enable our customers to:




•
            Track
                and re-deploy assets more effectively•
            Automate
                equipment appraisals•
            Efficiently
                market and sell surplus equipment•
            Automate
                sourcing and tendering processes




There
      are four key components to Asset Manager’s offerings:




***Asset
      Tracker***




Designed
      to allow organizations to more effectively utilize their assets, Asset Tracker
      is a web-based solution for keeping track of the location, details and status
      of
      capital equipment - regardless of where the equipment is being deployed.




Using
      a dedicated tracking site that is password protected, Asset Tracker provides
      users the ability to search and locate capital assets throughout their
      organization. Users can search for equipment in a number of ways. Assets can
      be
      searched by business unit, function, or by specific piece of equipment
      category.




Once
      an asset is located, users can determine its status and take appropriate action.
      Idle or under-utilized assets, for example, can be re-deployed, helping to
      increase their value to the organization and reducing capital spending on new
      equipment.




Assets
      no longer required or deemed surplus can be earmarked for disposition through
      traditional or on-line sales methods, such as Asset Seller.




With
      Asset Tracker, users can:




•
            Search
                and request for capital equipment within their organization, across
                multiple locations or facilities•
            Review
                asset details, such as equipment description, image, financial
                information, and contact information•
            Add
                new asset details by uploading data from spreadsheet
                applications•
            Extract
                asset details and generate asset management reports•
            Instantly
                determine the status of capital equipment•
            Transfer
                and re-deploy idle assets•
            Dispose
                of unnecessary or surplus equipment





***Asset
      Appraiser***




Asset
      Appraiser is a web-based solution that allows organizations to more effectively
      manage the capital equipment appraisal process. With Asset Appraiser
      organizations can create an appraisal scope, source collateral specific
      appraisers, confirm appraisal data, distribute documents and data collection
      tools, compile appraisal results and access stored appraisals on-line in a
      protected environment.




Asset
      Appraiser generates and receives complete narrative appraisal reports on-line
      in
      an easy to use, password-protected website. Capabilities provided by Asset
      Appraiser include:




•
            Create
                the full scope of appraisals on-line•
            Source
                collateral-specific appraisal companies on-line•
            Receive
                competitive bids on appraisal services needed•
            Create
                complete appraisal requirements•
            Source
                appraisal services electronically and receive competitive bids on
                appraisal services needed•
            Confirm
                appraisal details via electronic drafts•
            Access
                appraisals in a 24 x 7 environment - for users and suppliers•
            Capture
                all relevant data through drop down text boxes•
            Store
                and review appraisals in a secure environment•
            Download
                spreadsheet templates into reports•
            Add
                attachments, such as image, text or movie files, to reports•
            Ability
                to add an addendum to a completed appraisal report•
            An
                aid to Sarbanes-Oxley compliance














***Asset
      Seller***




Asset
      Seller facilitates instant and global access to a buying community by presenting
      surplus equipment or inventory on geasset.com, GE's off-lease equipment
      re-marketing website. Asset Seller is a proven take-to-market solution that
      will
      connect a customer’s equipment to a global community of qualified organizational
      buyers using multiple sales platforms, all developed to help maximize asset
      recovery value and improve cycle time. We have offered Asset Seller since
      2004.




Asset
      Seller brings together multiple sales platforms into one integrated on-line
      environment, providing flexibility, while maximizing the yield for a customer’s
      surplus equipment.




Asset
      Seller's direct sale platform features equipment showcases that are designed
      to
      promote private treaty sales. Other sales platforms available through Asset
      Seller include ranked sealed bid and top bid sale events that enable a customer
      to market equipment in an auction-like environment.




Utilizing
      GE's patent pending ranked sealed bid method, Asset Seller encourages multiple
      bids and retains buyer anonymity, creating competitive sales environments that
      generate a higher recovery for asset investment.




Asset
      Seller also enables organizations to feature equipment specifications, photos,
      videos and contact information, and allows them to coordinate off-line sales
      activities such as equipment inspections.




***Asset
      Buyer***




Asset
      Buyer is a web-based solution designed for automating sourcing activities and
      improving purchasing decisions. Using Asset Buyer, purchasers can determine
      the
      factors that are the most important to their procurement decisions and identify
      suppliers that deliver the greatest value - from the lowest price to the ability
      to match exact specification requirements.




Asset
      Buyer also streamlines the procurement process, making it easier to create
      and
      distribute tenders, select vendors and negotiate with suppliers.




With
      Asset Buyer, organizations can:




•
            generate
                cost savings on sourcing activities•
            reduce
                purchasing cycle times•
            take
                advantage of multiple sourcing formats including request for proposals,
                reverse auction, and sealed bid•
            rank
                suppliers based on their ability to match buying
                criteria•
            improve
                relations with suppliers through on-line
                collaborations.





**Company
      Products**





We
      offer solutions to manage all aspects of the asset lifecycle -
      sourcing/procurement, maintenance, materials management and disposition. Below
      is a detailed description of our offerings:




***Dyn@mic
      Buyer*** **(TM)**




An
      on-line sourcing solution, Dyn@mic Buyer automates the tendering process, and
      can be used to improve the decision-making process involved in sourcing goods
      and services by providing automated analysis and selection among competing
      bids,
      based on a variety of pre-determined factors. We have offered Dyn@mic Buyer
      to
      our customers since 2002. The current release of Dyn@mic Buyer can be delivered
      on a hosted or client-server (licensed) basis.




Key
      features of the product include:




•
            The
                ability for buyers to create tenders using automated tools that accelerate
                the purchasing process and reduce procurement costs.•
            Capabilities
                for buyers to post and distribute their tenders on-line to qualified
                suppliers.

















•
            The
                ability for buyers to assign values to criteria involved in the purchase
                decision, such as price, product availability, post-sales support
                and
                certification standards. Suppliers’ responses to tender questions are then
                weighed for evaluation by buyers.•
            Functionality
                that allows for the posting of detailed technical information, question
                and answer forums, and automatic e-mail notification of amended or
                new
                buyer-posted documents.•
            Capabilities
                to allow for the use of sealed bid sourcing formats enabling users
                to post
                their product or service requirements to selected vendors. The sealed
                bid
                system differs from the request for quotation in that the vendors
                only
                have one opportunity to supply a bid. Only after the close of the
                auction
                is the user able to view the vendor bids.**





Dyn@mic
      Buyer is licensed to our customers. Fees for Dyn@mic Buyer are determined on
      an
      annual basis, depending on the number of sourcing events identified by
      customers. Service fees are charged separately for implementation, systems
      integration, training and other consulting activities. Dyn@mic Buyer can be
      bundled with our procurement solutions or used separately depending on customer
      requirements. Current customers using Dyn@mic Buyer include the National Health
      Services (UK) and Vesta Insurance.




***ProcureMate*** **(TM)**




ProcureMate
      is our web-based business-to-business e-Procurement solution designed to reduce
      purchase costs, improve purchasing efficiencies and reduce maverick buying.
      ProcureMate allows users to select goods for purchase from a web-based catalog
      and automatically issue purchase orders to their suppliers. We have offered
      ProcureMate to our customers since 2000.




Key
      features of ProcureMate include:




•
            The
                ability to notify suppliers automatically of purchase orders requiring
                processing.•
            Functionality
                for allowing on-line dialogue to take place between buyers and
                suppliers.•
            The
                ability to integrate to enterprise resource planning and financial
                systems, reducing manual efforts for processing and consolidating
                purchase
                orders, goods receipt and payment activities.•
            Functionality
                for facilitating direct payment and electronic funds
                transfer.•
            The
                ability to integrate user workflow and approvals into the procurement
                process.





ProcureMate
      is licensed to customers and license fees for ProcureMate are based on the
      number of users named by the customer. Service fees are charged separately
      for
      implementation, systems integration, training and other consulting activities.
      ProcureMate can be bundled with our other on-line purchasing solutions or used
      separately depending on customer requirements. Existing ProcureMate customers
      include BP (Norway), National Health Services (UK), Vesta Insurance, and
      Hordaland HFK County, a large local government entity in Norway.




***WorkMate*** **(TM)**




Our
      Company’s flagship solution, WorkMate provides integrated capabilities for
      enterprise asset management. WorkMate is a client-server solution that operates
      as an extension of (and can be fully integrated with) a customer’s existing ERP
      system. We have offered WorkMate to our customers since 1997. The most advanced
      version of WorkMate incorporates asset maintenance, asset tracking, materials
      management and procurement functionality.




WorkMate
      is designed for use by customers in asset intensive industries - typically
      those
      where maintenance, repair and operations purchases outnumber raw material
      purchases by more than ten to one on a transaction volume basis. Examples of
      asset intensive industries are oil and gas, process industries (such as mining)
      and the utilities sector.




The
      three main modules (procurement, materials management and maintenance
      functionality) may be licensed independently or together as a fully integrated
      system:




•
            Procurement
                Module - for sophisticated domestic and international purchasing
                operations. Key capabilities include: order requisitioning, quotations,
                purchase orders, contracts, cost controls and vendor catalogues.
                The
                procurement module also monitors supplier performance in terms of
                accuracy, punctuality and cost.•
            Materials
                Management Module - for managing inventory and logistics operations.
                Key
                features include: inventory status, goods receipt, stock issue,
                reordering, packing/unpacking, transportation, goods return and














equipment
                rentals. This Module will log all movements of an item and generates
                the
                necessary financial transactions.•
            Maintenance
                Module - for all types of maintenance, including corrective, preventive
                or
                condition-based activities. Customers can automate manual routines
                and
                track maintenance costs and equipment history.




Each
      WorkMate module also includes workflow and reporting tools.




WorkMate
      is a licensed client-server application and pricing is based on the number
      of
      users named by the customer. Service fees are charged separately for
      implementation, systems integration, training and other consulting activities.
      Our WorkMate customers include some of the largest global players in the oil
      and
      gas sector, such as: BP (Norway), Mesta AS (Norway), Halliburton Productus,
      Prosafe, and Talisman Energy (Canada).




***Dyn@mic
      Seller*** **(TM)**




Dyn@mic
      Seller is an on-line sales solution designed to help our customers with the
      disposition of surplus assets and equipment. Dyn@mic Seller integrates multiple
      pricing methods, such as fixed priced, top bid (auction), dutch (declining
      price) and hybrids, through private-labeled websites. Dyn@mic Seller is
      delivered through an application service provider model (remotely through the
      internet). We have offered and sold Dyn@mic Seller to our customers since 2000.




Key
      capabilities of the product include:




•
            Traditional
                rising price auctions, where the highest bids win the items being
                sold.
                The rising price auction allows participants to competitively bid
                on
                available products by incrementally adjusting their bid amounts.
                Our user
                interface allows users to easily identify current leading bidders,
                minimum
                new bids and initial bid pricing. Participants are informed of their
                bid
                status, stating whether they have won, been outbid, approved or declined
                via electronic mail.•
            A
                patented Dutch (declining) auction format, in which a starting price
                is
                set and a limited time period is allocated for a fixed quantity of
                the
                product to be sold. As time advances, the price drops in small increments
                until the asset is sold. The declining bid auction allows participants
                to
                bid in a real-time format utilizing on-screen data which provides
                the time
                and quantity remaining as well as the falling price of the items
                for sale.•
            Hybrid
                auction formats that blend multiple pricing formats to meet a customer’s
                particular needs.•
            Fixed
                price sales where assets are sold in a catalogue or directory format.
                The
                purchaser cannot bid on the price, but merely elects whether or not
                to
                purchase the good or service.




Our
      customers pay monthly hosting fees for use of Dyn@mic Seller and typically
      also
      enter into a revenue sharing arrangement with us. Service fees for
      implementation, systems integration, training and other consulting activities
      are charged separately. Current customers of Dyn@mic Seller include GE
      Commercial Equipment Financing (USA), and permanent TSB (Ireland).




**Related
      Services**




In
      connection with our software offerings, we provide the following services to
      our
      customers:




*Consulting* .
      A significant number of our customers request our advice regarding their
      business and technical processes, often in conjunction with a scoping exercise
      conducted both before and after the execution of a contract. This advice can
      relate to development or streamline of assorted business processes, such as
      sourcing or procurement activities, assisting in the development of technical
      specifications, and recommendations regarding internal workflow activities.




*Customization
      and Implementation* .
      Based generally upon the up-front scoping activities, we are able to customize
      our solutions as required to meet the customer's particular needs. This process
      can vary in length depending on the degree of customization, the resources
      applied by the customer and the customer's business requirements. We work
      closely with our customers to ensure that features and functionality meet their
      expectations. We also provide the professional services work required for the
      implementation of our customer solutions, including loading of data,
      identification of business processes, and integration to other systems
      applications.




*Training* .
      Upon completion of implementation (and often during implementation), we train
      customer personnel to utilize our Solutions through our administrative tools.
      Training can be conducted in one-on-one or group situations. We also conduct
      “train the trainer” sessions.













*Maintenance
      and Support* .
      We provide regular software upgrades and ongoing support to our
      customers.




We
      have been providing consulting, customization and implementation, training,
      maintenance and support services to our customers since 1988.




**Third
      Party Offerings**




In
      addition to the sale of our core solutions and services, we have entered into
      marketing or co-marketing agreements with a number of companies that offer
      services that are complementary to our offerings. We market these complementary
      services to our customers and prospects and can earn a referral fee if these
      services are purchased. In some cases our marketing partner has agreed to market
      our solutions to its customers and prospects and can earn a referral fee. Our
      marketing partners include:




Partner
            
            Service
                or OfferingAMEC
                Services Limited
            
            Engineering
                ServicesRBT
                Consulting
            
            Healthcare
                Consulting ServicesProduction
                Access, Inc.
            
            Oil
                and Gas Data Management Solutions




**Business
      Cycles**




We
      experience some seasonality as a result of lower activity in European markets
      during the summer months. In addition since many of our customers and our joint
      venture *Asset
      Manager* are large organizations or quasi-governmental entities, we may experience
      increasingly longer sales and collection cycles.




For
      additional information regarding business cycles, see Part I - Item 5 under
      the
      heading “OPERATING AND FINANCIAL REVIEW AND PROSPECTS - MANAGEMENT’S DISCUSSION
      AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS”.




**STRATEGY**




Our
      business strategy is to expand our customer base, particularly in the oil and
      gas, healthcare, public authorities, and financial services sectors, through
      superior software functionality and through the industry expertise of our
      employees. In particular, our strategy is comprised of the following key
      components:




***Expand
      joint venture with GE and increase our customer base***




Since
      the launch of GE’s Asset Manager, we have focused our efforts on increasing the
      number of joint venture customers and enhancing our portfolio of asset
      management technology. This focus will be a cornerstone of our efforts in
      2005.




***Strengthen
      our position as an EAM vendor and improve our visibility among target
      sectors.***




ADB
      has been ranked by a respected industry analyst as an emerging provider of
      enterprise asset management solutions. While we have expanded our customer
      base
      and increased the number of users of our technology, ADB is committed to
      solidifying our position as an EAM, particularly among oil and gas, healthcare,
      public authorities, and financial services sectors.




***Maintain
      and Enhance Our Technology.***




Based
      on the relative pricing and functionality of our products as compared with
      those
      of our competitors, we consider our proprietary software offerings to be
      competitive, however it is critical that we continue to maintain and enhance
      our
      technology.




***Enter
      into and Maximize Alliances.***




We
      have marketing and other relationships with AMEC Services Limited, GE Capital,
      RBT Consulting, Production Access, Inc. and a number of other leading companies
      in a broad range of industries. We believe that these and future relationships
      will help provide us with access to important industry participants and will
      help increase our brand awareness.













***Seeking
      Acquisitions and Strategic Investments*** **.**




We
      plan to expand by seeking technologies, products, and services that complement
      our existing business. If appropriate opportunities are available, we may
      acquire businesses, technologies or products or enter into strategic
      relationships that may further diversify revenue sources and product offerings,
      expand our customer base or enhance our technology platform.




**CUSTOMERS**





We
      provide our solutions to customers in a variety of industries, including: oil
      and gas, healthcare, public authorities, and financial services
      sectors.




The
      revenue structures and particular services provided vary depending upon the
      needs of the customer and the solution concerned. For licensed offerings we
      generally collect a license fee based on number of users, service fees for
      implementation and training, and support and maintenance fees. For hosted
      offerings, we generally collect an up-front implementation fee, monthly hosting
      fee, and a share of revenue or transaction volumes.




The
      following is a representative list of some of the customers for whom we have
      implemented or are implementing our solutions:




Customer
            
            Solution(s)
            
            Industry
                Segment
            
            Geographic
                LocationBP
                Norway AS
            
            ProcureMate;
                WorkMate
            
            Oil
                and Gas
            
            NorwayProsafe
                Drilling Company (Prosafe)
            
            WorkMate
            
            Oil
                and Gas
            
            NorwayHalliburton
                Productos (Halliburton)
            
            WorkMate
            
            Oil
                and Gas
            
            BrazilAmecFluor
            
            WorkMate
            
            Oil
                and Gas
            
            KoreaTalisman
                Energy Inc.
            
            WorkMate
            
            Oil
                and Gas
            
            Canada,
                UKHordaland
                fylkeskommune (HFK)
            
            ProcureMate
            
            Public
                Authority
            
            NorwayGE
                Commercial Equipment Financing (GE)
            
            Dyn@mic
                Seller
            
            Financial
                Services
            
            USNational
                Health Services (UK)
            
            ProcureMate
            
            Health
            
            UKpermanent
                TSB
            
            Dyn@mic
                Seller
            
            Financial
                Services
            
            IrelandParamount
                Resources
            
            WorkMate
            
            Oil
                and Gas
            
            CanadaKraft
                Foods Global, Inc.
            
            Serviced
                by our joint venture,*Asset
                Manager,*providing
                Asset Tracker





The
      Company operates in three reportable geographic segments (North America,
      Ireland/United Kingdom, and Norway). The Company has in the past earned revenue
      from both retail and non-retail customers. Currently all our revenue is derived
      from our current business of software licensing, and computer system support
      and
      implementation as described in Item 4.(b) of this Report, and no revenue is
      derived from retail activity.




Net
                Revenue by Geographic Segment
            
            2004
            
            2003(in
                thousands Cdn$)North
                America
            
            $
            796
            
            $
            1,211Ireland
                and U.K.
            
            
            681
            
            
            1,239Norway
            
            
            3,453
            
            
            3,403$
            4,930
            
            $
            5,853





**SALES
      AND MARKETING**





We
      market our solutions primarily through our direct sales force. Our sales
      organization is regional with personnel located in our principal offices in
      Toronto (Canada), Dublin (Ireland), London (UK) and Stavanger (Norway).













Our
      marketing efforts are focused on targeted marketing campaigns, rather than
      broad-based "awareness" campaigns. Potential customers are identified through
      direct contact, responses to requests for information, attendance at trade
      shows
      and through industry contacts. We principally focus on trade show participation,
      seminar series for specific industries or professionals and ongoing lead
      generation through our sales force.




The
      GE sales force takes the lead in the sales and marketing efforts of the *Asset
      Manager* joint venture .




We
      use reference customers to assist us in our marketing efforts, both through
      direct contact with potential customers and through site branding and case
      studies. We also rely on our co-marketing partners to assist in our marketing
      efforts.





**TECHNOLOGY
      PLATFORM**




ADB
      has devoted significant resources to developing its proprietary software
      technology. The technology platform is constructed using distributed software
      technologies which allow rapid redevelopment and deployment of new software
      technology in order to take advantage of emerging business opportunities.




Our
      company's technology platform is based on Microsoft core applications, including
      the Windows NT operating system and a SQL server relational database, all
      residing on scaleable hardware. The software is constructed using an advanced
      proprietary XML framework and resides on an N-tier architecture. The support
      of
      open systems allows integration with a large variety of existing commercial,
      proprietary and legacy applications.




**RESEARCH
      AND DEVELOPMENT**




Based
      on the relative pricing and functionality of our products ****** as
      compared with those of competitors, we believe that our proprietary software
      provides a competitive advantage, and that our future success depends, in part,
      on our ability to continue developing and enhancing that software. Therefore,
      we
      have focused our software development and technology efforts on the continued
      development of our proprietary software offerings. Presently, 14 of our staff
      members are dedicated to product development and maintenance.




Our
      ongoing software development and technology efforts are aimed at the continued
      “productization” of specific elements of our software, enhancing the features
      and functionality of our existing software components, the development of new
      software components, and the integration of superior third party technology
      into
      our environment. Productization involves the development of reusable
      applications to reduce programming time and costs for customer
      implementations.




Our
      software development and technology expenditures were approximately $3.257
      million for the year ended December 31, 2004, $2.817 million for the year ended
      December 31, 2003 and $4.101 million for the year ended December 31,
      2002,
      including salaries and related expenses of our personnel engaged in research
      and
      development. Research and development activities in 2004 included the
      development of version 2.0 of our DYN@MIC BUYER Solution and the development
      of
      a new materials tracking module within our WorkMate application.




Our
      software development and technology activities in 2004 included the ongoing
      development of a new applications framework implemented in Microsoft .Net.
      The
      new framework will be used as the foundation all future Web based products.
      There was also a substantial amount of time devoted to the extension of our
      integration tool set, which allows us to connect our core product suite to
      pre-existing customer owned third party applications. In addition, version
      1.0
      of new asset tracking and document management products were
      released.




**INTELLECTUAL
      PROPERTY**




We
      rely on a combination of patent, copyright, trademark and trade secret laws,
      as
      well as confidentiality agreements and technical measures, to establish and
      protect our proprietary rights.




In
      March 1999 and July 2001, we received patents from the U.S. Patent and Trademark
      Office covering the process whereby we conduct Dutch auctions over electronic
      distribution channels. We have patent applications pending in Canada covering
      the same technology. We also continue to explore other patent opportunities,
      and
      may have other applications pending from time to time. We do not believe,
      however, that our ability to obtain patents is material to our success or
      results.













Our
      proprietary software is subject to common law copyright protection, but we
      do
      not have, and do not intend to pursue, any registered copyrights. Common law
      protection may be narrower than that which we could obtain under registered
      copyrights. As a result, we may experience difficulty in enforcing our
      copyrights against certain third party infringements. The source code for our
      proprietary software is protected as a trade secret.




Our
      major trademarks or tradenames include: ADB; POWERED BY ADB; PROCUREMATE,
      WORKMATE, DYNAMIC SELLER and DYNAMIC BUYER. Except for DYNAMIC SELLER and
      DYNAMIC BUYER, which are unregistered, all of these trademarks and tradenames
      are the subject of pending applications for registration in one or all of the
      United States, Canada and Norway. We also claim rights in other unregistered
      trademarks.




Our
      competitive position is also dependent upon our unpatented trade secrets. In
      an
      effort to protect our trade secrets, and as part of our confidentiality
      procedures, we generally enter into confidentiality and non-disclosure
      agreements with our employees and consultants and generally limit access to
      and
      distribution of our software, documentation and other proprietary information.
      Additionally, we limit physical access to our premises, software and hardware
      and employ security measures to protect against damage or theft.




The
      Company entered into a Patent License Agreement with NCR Corporation on April
      29th, 2002. The agreement provides the Company with access to specific
      technology patents over a seven-year period for US$100,000
      annually.




**COMPETITION**




The
      market for each solution comprising our asset lifecycle management suite is
      intensely competitive. Many of the companies we compete with have much greater
      financial, technical, research and development resources than us.




To
      remain and become more competitive, we will need to make continued investments
      in product development and improve our market visibility and financial
      situation.




Although
      we offer a broad range of asset lifecycle management solutions, we face
      significant competition in each of the component product areas from the
      following companies:




•
            Sourcing
                - Procuri, Inc., B2E Markets, Inc., Emptoris, Inc., Moai Technologies,
                Inc.•
            Procurement
                - MRO Software, Inc., Ariba, Inc., and broader ERP solution providers
                such
                as SAP AG, and Oracle Corporation•
            EAM
                - related solutions - Datastream Ltd., MRO Software, Inc., Indus
                International Inc., Mincom Ltd., (and broader ERP solution providers
                such
                as SAP AG, and Oracle Corporation)•
            Sales
                solutions - eBay Inc.




In
      addition, we face competition from organizations that use in-house developers
      to
      develop solutions for certain elements of the asset lifecycle.













**C.
      ORGANIZATIONAL
      STRUCTURE**





The
      Company has the following organizational structure, which include the
      subsidiaries set out below:









**D.
      PROPERTY, PLANTAND EQUIPMENT**





The
      table below lists the locations of our facilities, all of which are held by
      us
      pursuant to lease agreements, and summarizes certain information about each
      location.





Location
            
            Use
            
            Square
                Feet
              (Approximate)
            
            Term
                of Lease302
                The East Mall,
              Suite
                300
              Toronto,
                Ontario
            
            Executive,
                Administrative, Engineering and Marketing
            
            5,435
            
            Expires
                Oct. 2009Vingveien
                2,
              4050,
                Sola
              Norway
            
            Executive,
                Administrative, Engineering and Marketing
            
            8,234
            
            Expires
                July 2008AS
                Kontorsenter 2
              Tonsberg,
                Norway
            
            Not
                in Use
            
            2,851
            
            Expires
                October 200552
                Broomhill Rd.,
              Suite
                112 & 113
              Broomhill
                Industrial Estate
              Tallaght,
                Dublin 24
              Ireland
            
            Administrative,
                Engineering and Marketing
            
            500
            
            Expires
                December 20053000
                Cathedral Hill
              Guildford,
                Surrey, England
            
            Marketing
            
            no
                dedicated space
            
            Month-by-Month3001
                North Rocky Point Drive East,
              Tampa,
                Florida
            
            Executive
            
            143
            
            Month-by-Month




We
      believe that we have adequate space for our current needs. As we expand, we
      expect that suitable additional space will be available on commercially
      reasonable terms. We do not own any real estate nor do we currently own or
      lease
      warehouse space.




**ITEM
                    5**-
                **OPERATING
                    AND FINANCIALREVIEW AND
                    PROSPECTS****MANAGEMENT’S
                    DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF
                    OPERATIONS**
 
 YOU
        SHOULD READ THE FOLLOWING DISCUSSION AND ANALYSIS IN CONJUNCTION WITH "ITEM
        3.A
        - SELECTED FINANCIAL DATA" AND OUR CONSOLIDATED FINANCIAL STATEMENTS AND
        THE
        RELATED NOTES INCLUDED ELSEWHERE IN THIS ANNUAL REPORT. IN ADDITION TO
  
  HISTORICAL
        INFORMATION, THE FOLLOWING DISCUSSION CONTAINS CERTAIN FORWARD-LOOKING
        STATEMENTS THAT INVOLVE KNOWN AND UNKNOWN RISKS AND UNCERTAINTIES, SUCH AS
        STATEMENTS OF OUR PLANS, OBJECTIVES, EXPECTATIONS AND INTENTIONS. SEE
        "FORWARD-LOOKING STATEMENTS".




Overview





We
      develop and sell software solutions and services that allow our customers to
      source, manage, and sell their assets and capital equipment. We refer to our
      product and services suite as asset lifecycle management solutions. Our
      solutions help our customers reduce sourcing, procurement and maintenance costs,
      improve asset utilization, reduce operational downtime, and generate higher
      yields for surplus equipment.




We
      operate in three reportable geographic segments: North America, Ireland and
      the
      United Kingdom, and Norway. We have also in the past earned revenue from both
      retail and non-retail customers.




Our
      company is headquartered in Toronto (Canada), and maintains offices in Tampa
      (U.S.), Dublin (Ireland), London (U.K.), and Stavanger (Norway).





Our
      shares trade on both the Toronto Stock Exchange (TSX: ADY) and the OTC Bulletin
      Board (OTCBB: ADBYF).





**A.
      OPERATING RESULTS**





*Comparison
      of Years Ended December 31, 2004 and December 31, 2003*





**Net
      Loss.** Our net loss for the year ended December 31, 2004 was $5.104 million, an
      increase of 81.3 percent over the net loss of $2.815 million reported for the
      year ended December 31, 2003. The net loss for 2003, however, included a gain
      of
      $2.195 million from the settlement of a demand loan and revenue from historic
      retail activities. Excluding these items outside of the normal course of
      operations (although not considered extraordinary items), our 2004 loss of
      $5.104 million represents a 0.5 percent increase over the 2003 loss of $5.077
      million.





The
      loss before employee stock options, depreciation and amortization, interest
      expense and interest income (“EBITDA”) was $3.441 million for 2004 as compared
      to $2.710 million for 2003, an increase of 27.0 percent. The Company considers
      EBITDA to be a meaningful performance measure as it provides an approximation
      of
      operating cash flows. This increase was the result of a $923,000 decrease in
      revenue from $5.853 million in 2003 to $4.930 million in 2004, partially offset
      by a $192,000 improvement in the associated expenses of $8.563 million in 2003
      to $8.371 million in 2004. The reduction in expenses of 2.2 percent in 2004
      when
      compared to 2003 was achieved in the areas of general and administrative
      expenses by $283,000 and sales and marketing expenses by $349,000, partially
      offset by an increase in software development and technology expenses of
      $440,000.





**Revenue.** Revenue is comprised of software license sales, service fees for consulting,
      implementation, application hosting, training, maintenance and support
      activities and transaction fees from on-line activities performed for customers.





Revenue
      decreased to $4.930 million for the year ended December 31, 2004 from $5.853
      million for the year ended December 31, 2003, representing a decline of 15.8
      percent. This decline was attributable to reduced revenue in North America
      of
      $415,000 and reduced revenue in Ireland/U.K. of $557,000. Revenue from Norway
      increased by $50,000 in 2004 as compared to 2003.





In
      North America, re-targeting of resources towards the GE CEF joint venture
      efforts in 2004 resulted in a decline in development, hosting and transactional
      revenue of approximately $408,000.




In
      the Ireland/UK region we did not experience an increase in customer acquisitions
      and activity in 2004 as we did 2003. The year-over-year revenue decline was
      primarily the result of reduced sales by the amount of $532,000 to customers
      in
      non-healthcare industry sectors.





**General
      and Administrative.** General and administrative expenses include, primarily: all salaries and related
      expenses (including benefits and payroll taxes) other than technology staff
      compensation (which is included in software development and technology
      expenses), and sales and marketing staff compensation (which is included











in
      sales and marketing expenses), occupancy costs, foreign exchange gains or
      losses, professional fees, insurance, investor relations, regulatory filing
      fees, and travel and related costs.





General
      and administrative expenses decreased by $283,000 to $4.365 million for the
      year
      ended December 31, 2004, as compared to $4.648 million for the year ended
      December 31, 2003, representing a decline of 6.1 percent.





Year-over-year
      savings in the amount of $183,000 resulted from salary expense reductions
      arising from a smaller administrative workforce and favourable Canadian dollar
      exchange rates pertaining to US dollar-denominated salaries. Continued cost
      containment efforts resulted in $67,000 savings in travel expenses and the
      reduction of occupancy and connectivity costs in the amount of $65,000
      associated with the change of North American office locations and decreased
      utility costs as the result of Norway office leases renegotiations. Reductions
      in foreign exchange losses of $59,000 and in insurance costs of $41,000 also
      added to the savings. Expense reductions were partially offset by increased
      investor relation costs in the areas of consulting ($68,000) and increased
      professional services expenses associated with regulatory filings ($29,000).
      The
      salary expense savings were also partially offset by increased professional
      services employed in Norway ($34,000).





**Sales
      and Marketing.** Sales and marketing costs include all salaries and related expenses of sales
      and
      marketing personnel as well as business development expenses such as
      advertising, sales support materials, and trade show costs.





Sales
      and marketing costs for the year ended December 31, 2004 amounted to $749,000,
      as compared to $1.098 million for 2003, a decrease of 31.8 percent. This
      decrease is attributable to lower staffing levels in the sales department
      combined with decreased advertising and tradeshow activities and related travel
      expenses throughout 2004.





**Software
      Development and Technology.** Software development and technology expenses consist of costs associated with
      acquired and internally developed software, and research and development
      expenses, including fees to independent contractors and salaries and related
      expenses of personnel engaged in these activities.





Software
      development and technology expenses increased to $3.257 million for the year
      ended December 31, 2004 from $2.817 million for the year ended December 31,
      2003, an increase of 15.6 percent. This increase is attributable to increased
      salary expenses resulting largely from increases in the number of technology
      personnel in Ireland/UK and Norway.





**Employee
      Stock Options.** Effective January 1, 2003, the Company adopted the accounting recommendations
      contained in the CICA handbook Section 3870 - “Stock-based Compensation and
      Other Stock-based Compensation Payments”. As a result, the Company recorded an
      employee stock option expense of $39,000 for the year ended December 31, 2004
      and $193,000 for the year ended December 31, 2003. No employee stock options
      were granted in 2004. The 2004 expense arises from the vesting of stock options
      that were granted in 2003. Prior to 2003, no accounting recognition was required
      for stock-based compensation expense however; the Company was required to
      disclose the impact of stock option related expenses for previous years on
      a
      pro-forma basis.





**Depreciation
      and Amortization.** Depreciation and amortization expense was $1.190 million for the year ended
      December 31, 2004 as compared to $1.901 million for the year ended December
      31,
      2003, a decrease of 37.4 percent. This decrease reflects a $499,000 reduction
      in
      the amortization of deferred charges as deferred financing charges relating
      to a
      demand loan were fully amortized in 2003. Additionally, software acquired in
      the
      acquisition of ADB Systemer was fully amortized by the end of the third quarter
      of 2004, resulting in an amortization expense for the year that was $282,000
      lower than that for fiscal 2003.





**Interest
      Expense.** Interest expense reflects interest incurred from debt instruments and loans.
      Interest expense for the year ended December 31, 2004 was $439,000 compared
      to
      $289,000 for December 31, 2003. During 2004, cash interest expense of $173,000
      and non-cash interest expense of $266,000 was incurred related to secured
      subordinated notes. Comparatively, cash interest expense of $50,000 and non-cash
      interest expense of $112,000 was recorded in 2003. The interest expense for
      fiscal 2003 also included interest related to a demand loan of
      $126,000.





**Interest
      Income.** Interest income reflects interest from investments in cash and marketable
      securities. Interest income was negligible for both years ended December 31,
      2004 and 2003.














**Realized
      Gain on Settlement of Demand Loan.** On
      June 30, 2003, the Company settled an outstanding demand loan through the
      transfer of its investment in an associated company. The investment had a
      nominal carrying value and the transfer resulted in a gain on settlement of
      the
      demand loan in the amount of $2.195 million.





**Retail
      Activities.** During 2003, the Company received a $67,000 refund from a U.S.-based credit
      card
      institution formally engaged by the Company when it operated its on-line retail
      activities in the U.S. No similar refunds were received in 2004.





*Comparison
      of Years Ended December 31, 2003 and December 31, 2002*





**Net
      Income (Loss).** Our net loss for the year ended December 31, 2003 was $2.815 million, an
      improvement of 69.9 percent over the net loss of $9.364 million reported for
      the
      year ended December 31, 2002. Excluding items outside of the normal course
      of
      operations, our loss was $5.084 million, as compared to $9.241 million in 2002,
      an improvement of 45.0 percent. The improvement in expenses of more than $4.0
      million was achieved in 2003 when compared to 2002 in the areas of general
      and
      administrative of $1.6 million, sales and marketing of $777,000, software
      development and technology of $1.3 million and $700,000 in depreciation and
      amortization. In addition, during 2003 the Company recorded a realized gain
      on
      the settlement of a demand loan of $2.2 million.





**Revenue.** Revenue is derived from software licensing and related services from consulting,
      implementation, application hosting, training, maintenance and support
      activities.




Revenue
      increased to $5.853 million for the year ended December 31, 2003 from $5.780
      million for the year ended December 31, 2002, representing an increase of 1.3
      percent.




Revenue
      outside North America was $4.642 million for the year ended December 31, 2003,
      compared to $3.598 million for the year ended December 31, 2002. The increase
      in
      revenue outside North America is primarily attributable to an increase in
      customer acquisitions and activity in our Ireland/UK region that resulted in
      year-over-year revenue improvement of almost $800,000.





**General
      and Administrative.** General and administrative expenses include, primarily: all salaries and related
      expenses (including benefits and payroll taxes) other than technology staff
      compensation (which is included in software development and technology
      expenses), and sales and marketing staff compensation (which is included in
      sales and marketing expenses); occupancy costs; foreign exchange gains or
      losses; professional fees; insurance; investor relations; regulatory filing
      fees; and travel and related costs.





General
      and administrative expenses decreased to $4.648 million for the year ended
      December 31, 2003, as compared to $6.288 million for the year ended December
      31,
      2002, representing a decline of 26.1 percent.





Year-over-year
      savings resulting from salary reductions and a smaller workforce totaled
      $401,000. Continued cost containment efforts and greater reliance on internal
      staff resulted in $503,000 savings in professional fees and $271,000 in investor
      relations costs. In addition, savings were achieved in rent and occupancy costs
      of $325,000 as office space was reduced in Norway as well as the closing of
      a
      U.K. office in 2002.





**Sales
      and Marketing.** Sales and marketing costs include all salaries and related expenses of sales
      and
      marketing personnel as well as business development expenses such as
      advertising, sales support materials, and trade show costs.





Sales
      and marketing costs for the year ended December 31, 2003 amounted to $1.098
      million, as compared to $1.875 million for 2002, a decrease of 41.4 percent.
      This decrease is attributable to lower staffing levels in the sales department
      combined with decreased advertising and tradeshow activities throughout
      2003.





**Software
      Development and Technology.** Software development and technology expenses consist of costs associated with
      acquired and internally developed software, and research and development
      expenses, including fees to independent contractors and salaries and related
      expenses of personnel engaged in these activities.





Software
      development and technology expenses decreased to $2.817 million for the year
      ended December 31, 2003 from $4.101 million for the year ended December 31,
      2002, a decrease of 31.3 percent. This decrease is attributable to government
      research and development claims made by the Company and a decrease in technology
      personnel.














**Employee
      Stock Options.** Effective January 1, 2003, the Company adopted the accounting recommendations
      contained in the CICA handbook Section 3870 - “Stock-based Compensation and
      Other Stock-based Compensation Payments”. As a result, the Company recorded an
      employee stock option expense of $193,000 for the year ended December 31, 2003.
      Prior to 2003, no accounting recognition was required for stock-based
      compensation expense however; the Company was required to disclose the impact
      of
      stock option related expenses for previous years on a pro-forma basis. In 2002,
      a pro-forma impact of $244,000 and $141,000 in 2003 related to options granted
      prior to January 1, 2003 is disclosed (Note 9(j)).




**Depreciation
      and Amortization.** Depreciation and amortization expense was $1.901 million for the year ended
      December 31, 2003 as compared to $2.602 million for the year ended December
      31,
      2002, a decrease of 26.9 percent. This decrease reflects a maturing asset
      pool.





**Interest
      Expense.** Interest expense reflects interest incurred from debt instruments and
      loans.





Interest
      expense for the year ended December 31, 2003 was $289,000 compared to $200,000
      for December 31, 2002. During 2003, cash interest expense of $50,000 and
      non-cash interest expense of $112,000 was incurred related to secured
      subordinated notes. Comparatively, cash interest expense of $23,000 and non-cash
      interest expense of $108,000 was recorded in 2002. Interest related to the
      demand loan was $126,000 in 2003 compared to $68,000 in 2002.





**Interest
      Income.** Interest income reflects interest from investments in cash and marketable
      securities.





Interest
      income was $9,000 for the year ended December 31, 2003, as compared to $45,000
      for the year ended December 31, 2002, a decline of 80.0 percent. This decline
      was largely attributable to lower cash deposits and money market funds on hand
      throughout 2003.





**Realized
      Gains and Losses on Disposal of Marketable Securities, Strategic Investments
      and
      Capital Assets, and Recovery of Assets.** Realized gains on disposal of marketable securities and strategic investments
      amounted to $20,000 for the year ended December 31, 2003, compared to a loss
      of
      $108,000 for the year ended December 31, 2002. The gain recorded in 2003
      resulted from the sale of shares of MegaWheels Technology Inc. These gains
      and
      losses are outside of the normal course of operations but are not considered
      extraordinary items.





During
      2002, the Company disposed of its remaining shares in America Online Inc.
      (“AOL”) resulting in a realized loss of $143,000. Realized gains in 2002
      included $41,000 from the sale of strategic investments in SCS Solars and
      MegaWheels. In 2003, the Company realized a loss from the disposal of surplus
      capital assets in the amount of $13,000 compared to a gain of $23,000 in 2002.




**Unrealized
      Gains and Losses on Revaluation of Strategic Investments, and Provision for
      Impairment of Assets.** Unrealized gains and losses on strategic investments, and provisions for
      impairment of assets are the result of an assessment by management as to the
      recoverability of the value of certain assets and are not realized losses.
      Unrealized gains and losses are outside the normal course of operations but
      are
      not considered extraordinary.





Unrealized
      losses for the year ended December 31, 2002 were $24,000. We conduct an
      assessment of our strategic investment portfolio at the end of each fiscal
      period by analyzing the financial performance of the companies we invested
      in as
      well as general market conditions. In 2002, we recorded impairment provisions
      totaling approximately $24,000. As our investments were all in companies in
      the
      technology sector, the market performance of these holdings had been
      dramatically affected by economic conditions. In 2003, the Company did not
      record an impairment provision as a result of the assessment.




**Goodwill
      Impairment** .
      There was no goodwill impairment recorded in 2003 as compared to $14,000 at
      December 31, 2002. The goodwill impairment recorded in 2002 relates to a change
      in goodwill arising on purchase of shares from minority interests during the
      year.





**Retail
      Activities.** During 2003, the Company received a $67,000 refund from a U.S.-based credit
      card
      institution formally engaged by the Company when it operated its on-line retail
      activities in the U.S. No similar refunds were received in 2002.





**Critical
      Accounting Policies.**We prepare the consolidated financial statements
      of ADB in conformity with accounting principles generally accepted in Canada.
      As
      such, we are required to make certain estimates, judgments and assumptions
      that
      we believe are reasonable based upon the information available. These estimates











and
      assumptions affect the reported amounts of assets, liabilities and shareholders’
      equity at the date of the financial statements and the reported amounts of
      revenue and expenses during the periods presented. The significant accounting
      policies employed by ADB are described in our 2004 Annual Report within Notes
      2
      and 3 of the Notes to the Consolidated Financial Statements. The significant
      accounting policies which we believe are the most critical to aid in fully
      understanding and evaluating our reported financial results include the
      following:





**Continuation
      of the Business**


The
      Company’s ability to continue as a going concern will be dependent on
      management’s ability to successfully execute its business plan including a
      substantial increase in revenue as well as maintaining operating expenses at
      or
      near the same level as 2004. Our 2005 business plan includes a significant
      increase in revenue and operating cash flow primarily from major new contracts
      in Norway, the UK and North America. We cannot provide assurance that the actual
      operating results for 2005 will meet the estimates included in our 2005 business
      plan. A shortfall in revenue and/or increased in expenses will result in the
      necessity for non-operational funding. We believe that we have the ability
      to
      raise additional financing if required, but we cannot provide assurance that
      such efforts would be successful.





**Revenue
      Recognition**


The
      Company’s revenues are derived from software license fees, implementation,
      training and consulting services, product maintenance and customer support,
      and
      software development, and hosting fees. Fees for services are billed separately
      from licenses of the Company’s product. The Company recognizes revenue in
      accordance with Canadian GAAP, which in the Company’s circumstances, are not
      materially different from the amounts that would be determined under provisions
      of the American Institute of Certified Public Accountants Statements of Position
      (SOP) No. 97-2, “ Software Revenue Recognition”, and as amended by Statement of
      Position 98-9, “Modification of SOP 97-2, Software revenue Recognition, With
      Respect to Certain Transactions”. The Company also considers the provisions of
      CICA EIC 141, which is analogous to Staff Accounting Bulletin (SAB) 104,
“Revenue Recognition in Financial Statements”, and CICA EIC 142, which is
      analogous to the Emerging Issues Task Force consensus on EITF 00-21, “Accounting
      for Revenue Arrangements with Multiple Elements,” in determining the appropriate
      revenue recognition methodology.





**Software
      License Revenue**


The
      Company recognizes software license revenue in accordance with the terms of
      the
      license agreement and when the following criteria as set out in SOP No. 97-2
      are
      met:




•
            persuasive
                evidence of an arrangement exists,•
            delivery
                has occurred,•
            the
                fee is fixed or determinable, and•
            collectibility
                is probable.




Software
      license revenue consists of fixed license fee agreements involving perpetual
      licenses.





Software
      license agreements may be part of multiple element arrangements that include
      consulting and implementation services. When these services are considered
      essential to the functionality of the license, the associated revenue is
      recognized on the basis of the percentage of completion method as specified
      by
      contract accounting principles. When these services are not considered essential
      to the functionality of the license, the entire arrangement fee is allocated
      to
      each element in the arrangement based on the respective vendor specific
      objective evidence (“VSOE”) of the fair value of each element. VSOE used in
      determining the fair value of license revenues is based on the price charged
      by
      the Company when the same element is sold in similar quantities to a customer
      of
      a similar size and nature. VSOE used in determining fair value for installation,
      implementation and training based on the standard daily rates for the type
      of
      service being provided multiplied by the estimated time to complete each task.
      VSOE used in determining the fair value of maintenance and support is based
      on
      the annual renewal rates. The revenue allocable to the software license is
      recognized when the revenue criteria are met. The revenue allocable to the
      consulting services is recognized as the services are performed.





**Implementation,
      Training & Consulting Service Fees**


The
      Company receives revenue from implementation of its product offerings,
      consulting services and training services. Customers are charged a fee based
      on
      time and expenses. Revenue from implementation, consulting service and training
      fees is recognized as the services are performed or deferred until contractually
      defined milestones are achieved or until customer acceptance has occurred,
      as
      the case may be, for such contracts.





**Product
      Maintenance & Customer Support Fees**


The
      Company receives revenue from maintaining its products and the provision of
      on-going support services to customers. The maintenance and support fees are
      typically equal to a specified percentage of the customers’











license
      fee. If associated with the fixed fee license model, the maintenance revenues
      received are recorded as deferred revenue and recognized on a straight-line
      basis over the contract period.





Services
      revenue from maintenance and support is recognized when the services are
      performed. Maintenance and support revenues paid in advance are non-refundable
      and are recognized on a straight-line basis over the term of the agreement,
      which typically is 12 months.





**Software
      Development Fees**


Typically,
      development of software for our customers is provided based on a predetermined
      fixed rate basis. Revenue is recognized as time is incurred throughout the
      development process.





**Hosting
      Fees**


The
      Company earns revenue from the hosting of customer websites. Under our existing
      hosting contracts, we charge customers a recurring periodic flat fee. The fees
      are recognized as the hosting services are provided.





**Secured
      Subordinated Notes**


Under
      Canadian GAAP, financial instruments that contain both a liability and an equity
      element are required to have the instrument’s component parts classified
      separately. On the issuance date, the Company values the debt component of
      the
      instrument by calculating the present value of the associated cash flows and
      uses the Cox-Rubinstein binomial valuation model to determine the fair value
      of
      the conversion feature of convertible secured subordinated notes. The calculated
      values of the liability and of equity components are disclosed separately in
      Consolidated Balance Sheets. The liability component is accreted to the face
      value of the subordinated notes over the term to maturity, or until the
      underlying notes are converted into common shares, through the recording of
      a
      non-cash interest expense. These valuation methods incorporate estimates
      regarding the appropriate discount rate to be used in the debt component
      valuation and the appropriate share-price volatility to be employed in the
      equity component valuation. The discount rates used were based upon our estimate
      of expected market yield rates on similarly secured debt instruments. Volatility
      rate estimates were based upon historical share-price volatility for the year
      proceeding the issuance of the notes. Changes in the assumptions underlying
      the
      discount rate and volatility estimates could result in a change in the
      proportions of the notes that are allocated to the debt and equity components
      and a change in the amount of non-cash interest expense resulting from the
      accretion of the liability component to its face value.





U.S.
      GAAP does not permit separate disclosure of different elements of a financial
      instrument in the financial statements. Under U.S. GAAP, upon issuance, the
      secured subordinated notes would have been recorded as a liability and
      reclassified to equity only upon conversion. Further, under U.S. GAAP, the
      beneficial conversion feature represented by the excess of the fair value of
      the
      shares issuable on conversion of the subordinated notes, measured on the
      commitment date, over the amount of the loan proceeds to be allocated to the
      common shares upon conversion would be allocated to contributed surplus. This
      results in a discount on the subordinated notes that is recognized as additional
      interest expense over the term of the subordinated notes and any unamortized
      balance is expensed immediately upon conversion of the subordinated notes.





**B.
      LIQUIDITY AND CAPITAL RESOURCES**





**LIQUIDITY**


The
      Company has been funded to date primarily through a series of private placements
      of equity and convertible debentures, sales of equity to and investments from
      strategic partners, gains from investments and option exercises. Since
      inception, the Company has received aggregate net proceeds of $87.7 million
      from
      debt and equity financing and has realized $23.7 million in gains on investment
      disposals. The Company has not earned profits to date and, at December 31,
      2004,
      has an accumulated deficit of $104.866 million. The Company expects to incur
      losses into 2005 and there can be no assurance that it will ever achieve
      profitability. Operating results have varied on a quarterly basis in the past
      and may fluctuate significantly in the future as a result of a variety of
      factors, many of which are outside of the Company’s control.





The
      Company has incurred negative annual cash flows from operations since inception
      and expects to continue to expend substantial funds to continue to develop
      technology, build an infrastructure to support business development efforts
      and
      expand other areas of the business including the acquisition of, or strategic
      investments in, complementary products, businesses or technologies. The Company
      has historically relied on non-operational sources of financing to fund its
      operations. The Company’s ability to continue as a going concern will be
      dependent on management’s ability to successfully execute its business plan
      including a substantial increase in revenue as well as maintaining operating
      expenses at or near the same level as 2004. Management’s 2005 business plan
      includes a significant increase in revenue and operating cash flow primarily
      from major new











contracts
      in Norway, the UK and North America. Management believes that it has the ability
      to raise additional financing if required. The Company cannot provide assurance
      that it will be able to execute on its business plan or assure that efforts
      to
      raise additional financings would be successful.


Cash
      and cash equivalents increased slightly by $8,000 to $453,000 as at December
      31,
      2004 from $445,000 as at December 31, 2003.





Current
      assets of $2.196 million exceeded current liabilities (excluding deferred
      revenue) of $1.680 million in the current fiscal year by $516,000. Current
      assets of $1.947 million exceeded current liabilities (excluding deferred
      revenue) of $1.370 million by $577,000 in the prior year. Deferred revenue
      has
      been excluded from current liabilities as it is expected to be settled by
      resources other than cash.


As
      of May 31, 2005, we had cash on hand and marketable securities of approximately
      $610,000. Management believes that it has the ability to raise additional
      financing if required.




**Cash
      Flows**




*Operating:*




Cash
      outflows from operating activities remained relatively unchanged at $3.3 million
      in the current fiscal year compared to cash outflows from operating activities
      of $3.4 million in the prior year. Non-cash working capital resulted in inflows
      of $322,000 in fiscal 2004 as compared to outflows of $728,000 in fiscal 2003,
      an increase of $1.05 million, as summarized in the following table:





**2004**
            
            **2003**
            
            **Difference****(in
                thousands)**Accounts
                receivable
            
            $
            (151
            )
            $
            444
            
            $
            (595
            )Deposits
                and prepaid expenses
            
            
            (8
            )
            
            60
            
            
            (68
            )Accounts
                payable
            
            
            288
            
            
            (87
            )
            
            375Accrued
                liabilities
            
            
            139
            
            
            (491
            )
            
            630Deferred
                revenue
            
            
            44
            
            
            (741
            )
            
            785Effect
                of currency translation
            
            
            10
            
            
            87
            
            
            (77
            )$
            322
            
            $
            (728
            )
            $
            1,050





*Investing:*


No
      significant cash flows resulted from investing activities in fiscal 2004. In
      2004, $40,000 was spent on capital asset acquisitions as compared to $45,000
      in
      expenditures for 2003. In 2003, proceeds in the amount of $62,000 were earned
      from the disposal of capital assets, strategic investments and marketable
      securities. No such proceeds were earned in 2004.





*Financing:*


Cash
      flows generated as the result of financing activities totaled $3.3 million
      in
      fiscal 2004. The sources of cash included an equity private placement and the
      issuance of convertible debt, which was slightly offset by deferred financing
      costs related to the convertible debt issuance. Cash flows generated in
      financing activities were $2.5 million for 2003, including an equity private
      placement and a convertible debt private placement.





**CAPITAL
      RESOURCES**


There
      were minor additions to capital assets during the years ended December 31,
      2004
      and 2003. In 2003, the liquidation of redundant capital assets resulted in
      net
      proceeds of $34,000.




During
      2004, the Company incurred $167,000 of costs associated with the issuance of
      secured subordinated notes, which were recorded as deferred financing charges.
      The deferred financing charges are being amortized on a straight-line basis
      over
      the term of the underlying notes. No deferred charges were incurred in
      2003.





**F****unding**


**Overview.** The Company has been funded to date primarily through a series of private
      placements of equity and convertible debentures, sales of equity to and
      investments from strategic partners, gains from investments and option
      exercises. Since inception, the Company has received aggregate net proceeds
      of
      $87.7 million from debt and equity financing and has realized $23.7 million
      in
      gains on investment disposals.














**Funding
      - 2005**


On
      February 23, 2005, the Company completed a transaction resulting in the issuance
      of 2.5 million equity units at a price of $0.23 per unit for gross proceeds
      of
      $575,000. Each equity unit consists of one common share and one common
      share-purchase warrant with an exercise price of $0.40 each. The warrants expire
      on February 22, 2009.





**Funding
      - 2004**


On
      May 19, 2004, the Company issued Series F secured subordinated notes with a
      face
      value of $500,000 for net proceeds of $474,000. The Series F notes have an
      annual rate of interest of 7 percent paid quarterly in arrears, mature May
      19,
      2007 and are convertible into equity units at a price of $0.31 per unit. Each
      equity unit consists of one common share and one half of a share-purchase
      warrant with an exercise price of $0.50. The share-purchase warrants expire
      on
      May 19, 2007. The Series F secured subordinated notes will automatically convert
      into units when the share price of the Company closes above $0.70 for five
      consecutive trading days during the term. Holders may convert the notes into
      units at anytime following a four-month hold period. If the holder does not
      convert and no automatic conversion takes place, the Company must repay the
      principal amount in cash. The
      Series F notes are secured by a general security agreement on the assets of
      the
      Company, subordinated to the security claims provided to the holders of
      previously issued notes.




On
      June 15, 2004, the Company issued Series G secured subordinated notes with
      a
      face value of $1,710,000 for net proceeds of $1,624,000. The Series G notes
      mature June 15, 2007, have an annual rate of interest of 7 percent payable
      upon
      the earlier of maturity and conversion and are convertible into equity units
      at
      a price of $0.31 per unit. Each equity unit consists of one common share and
      one
      half of a share-purchase warrant with an exercise price of $0.50. The
      share-purchase warrants expire on June 15, 2008. The Series G secured
      subordinated notes will automatically convert into units when the
      volume-weighted average share price of the Company closes above $0.70 for 20
      consecutive trading days during the term. Holders may convert the notes into
      units at anytime following a four-month hold period. If the holder does not
      convert and no automatic conversion takes place, the Company must repay the
      principal amount in cash. The Series G notes are secured by a general security
      agreement on the assets of the Company, subordinated to the security claims
      provided to the holders of previously issued notes.





On
      October 21, 2004, the Company issued Series H secured subordinated notes with
      a
      face value of $520,000 for net proceeds of $500,000. The Series H notes mature
      October 21, 2007, have an annual rate of interest of 11 percent payable upon
      the
      earlier of maturity and conversion and are convertible into equity units at
      a
      price of $0.20 per unit. Each equity unit consists of one common share and
      one
      half of a share-purchase warrant with an exercise price of $0.40. The
      share-purchase warrants expire on October 21, 2008. The Series H secured
      subordinated notes will automatically convert into units when the share price
      of
      the Company closes at or above $0.45 for 10 consecutive trading days during
      the
      term. Holders may convert the notes into units at anytime following a four-month
      hold period. If the holder does not convert and no automatic conversion takes
      place, the Company must repay the principal amount in cash. In order to obtain
      the required approvals to issue the Series H notes, the Company retroactively
      increased the interest rate on the Series G notes from an annual rate of 7
      percent to an annual rate of 11 percent. The Series H notes are secured by
      a
      general security agreement on the assets of the Company, subordinated to the
      security claims provided to the holders of previously issued notes.





On
      December 6, 2004, the Company completed a transaction resulting in the issuance
      of 5,000,000 shares at a price of $0.20 per share and 5,000,000 common
      share-purchase warrants exercisable into one common share at a price of $0.35
      for gross proceeds of $1,000,000. The warrants expire on December 6, 2008.
      Gross
      proceeds were comprised of $800,000 in cash and $200,000 in services. Issuance
      costs in the amount of $61,000 were incurred, including $19,000 representing
      the
      fair value of 150,000 compensation options issued to First Associates. The
      compensation options are exercisable into 150,000 equity units at a price of
      $0.20 per unit. Each equity unit consists of one common share and one common
      share-purchase warrant with an exercise price of $0.35 and an expiry date of
      December 6, 2008. The compensation options expire on December 6, 2006. Included
      in this private placement were 100,000 shares issued to a director of the
      Company for net proceeds of $20,000.




**C.
      RESEARCH AND DEVELOPMENT**





For
      a discussion of the Company’s research and development policies for the last
      three years, see Item 4 - B. BUSINESS OVERVIEW under the heading “RESEARCH AND
      DEVELOPMENT”.





**D.
      TREND INFORMATION**





For
      trend information, see the section above entitled “LIQUIDITY AND CAPITAL
      RESOURCES”.














**Foreign
      Currency Rate Fluctuations.**


The
      Company’s revenue from software licensing and related services and e-commerce
      enabling agreements is transacted in various currencies including the Canadian
      dollar, U.S. dollar, UK pound, EURO, and Norwegian krone. Correspondingly,
      operating expenses related to these activities are transacted in the
      above-denoted currencies. The Company may suffer losses due to fluctuations
      in
      exchange rates between the Canadian dollar or Norwegian krone and currencies
      of
      other countries. The Company does not use derivative instruments to manage
      exposure to foreign exchange fluctuations.





**Interest
      Rate and Investment Risk.**


The
      Company has limited exposure to fluctuations in interest rates. The Company
      does
      not use derivative instruments to reduce its exposure to interest rate risk.





**Credit
      Risk****.**


Credit
      risk arises from the potential that a customer will fail to meet its contractual
      obligations under a software licensing and related services agreement or an
      e-commerce enabling agreement.





At
      December 31, 2004, there were three customers that accounted for 18 percent,
      13
      percent and 11 percent, respectively, of total accounts receivable. At December
      31, 2003, three customers accounted for 25 percent, 19 percent and 14 percent,
      respectively, of total accounts receivable.





**Net
      Operating Losses for Tax
      Purposes****.**


We
      have available an aggregate of approximately $20.9 million of net operating
      losses for tax purposes that may be used to reduce taxable income in future
      years, of which $1.659 million expires in 2009, 8.418 million expires in 2010,
      $981,000 expires in 2011, and $3.569 million expires in 2014. In addition,
      there
      is $6.242 million that do not expire related to tax losses in Ireland. Our
      net
      operating losses are subject to assessment of our tax returns by taxation
      authorities.





**E.
      OFF-BALANCE SHEET ARRANGEMENTS**





The
      Company does not have any off-balance sheet special purpose entities or other
      off-balance sheet arrangements.





**F.
      TABULAR DISCLOSURE OF CONTRACTUAL OBLIGATIONS**





As
      at December 31, 2004 the Company's contractual obligations, including payments
      due by periods over the next five years, are as follows:





(C$000’s)
            
            Total
            
            **2005**
            
            **2006**
            
            **2007**
            
            **2008**
            
            **2009**
            
            **2010**
              **and**
              **thereafter**Operating
                leases
            
            $
            1,867
            
            $
            416
            
            $
            369
            
            $
            339
            
            $
            310
            
            $
            279
            
            $
            154License
                agreements
            
            
            510
            
            
            120
            
            
            120
            
            
            120
            
            
            120
            
            
            30
            
            
            -Secured
                subordinated notes -principal repayment(a)
            
            
            2,605
            
            
            -
            
            
            375
            
            
            2,230
            
            
            -
            
            
            -
            
            
            -Secured
                subordinated notes - interest payment(a)
            
            
            800
            
            
            41
            
            
            26
            
            
            733
            
            
            -
            
            
            -
            
            
            -$
            5,782
            
            $
            577
            
            $
            890
            
            $
            3,422
            
            $
            430
            
            $
            309
            
            $
            154





(a)
      Assumes secured subordinated notes are held to maturity and not converted.
      Conversion may take place at the option of the holder or as a result of
      automatic conversion provisions contained within the term of the notes. No
      principal repayment is required for converted notes. In the case of Series
      G and
      H notes, conversion will result in the earlier payment of interest. Conversion
      will also result in the reduction of the aggregate dollar amount of interest
      payments.




The
      Company does not have any material commitments for capital
      expenditures.
















**ITEM
      6 - DIRECTORS, SENIORMANAGEMENT AND
      EMPLOYEES**





**A.**
            **DIRECTORS
                AND SENIORMANAGEMENT**




The
      following table sets forth the name, age and position of each of our directors
      and executive officers. This information is supplied based on our records and
      information furnished by our executive officers and directors.




Name
            
            Age
            
            Position*Directors*Jeffrey
                Lymburner(1)
            
            48
            
            Director
                and Chief Executive OfficerT.
                Christopher Bulger(2),(3),(4)
            
            48
            
            DirectorPaul
                Godin,(2),(3)
            
            52
            
            DirectorJim
                Moskos
            
            42
            
            Director
                and President, ADB Technology GroupDarroch
                (Rick) Robertson(4)
            
            53
            
            DirectorJan
                Pedersen
            
            47
            
            Director
                and President, Norwegian OperationsDuncan
                G. Copeland(2),(3),(4)
            
            47
            
            DirectorGlen
                Whyte(5)
            
            48
            
            Former
                Director*Executive
                Officers*
              *(other
                than Messrs. Lymburner, Pedersen and Moskos)*Michael
                Robb
            
            42
            
            Chief
                Financial Officer and Corporate SecretaryAidan
                Rowsome(6)
            
            44
            
            Former
                Vice-President, Global Sales


_______________________




(1)
            Mr.
                Lymburner is acting Chairman of the Board of Directors.(2)
            Member
                of the Management Resources and Compensation Committee.(3)
            Member
                of the Corporate Governance Committee.(4)
            Member
                of Audit Committee.(5)
            Resigned
                on June 23, 2004(6)
            Resigned
                on February 25, 2005




The
      business experience of each of our directors and executive officers for at
      least
      the last five years is as follows:




*Directors*




**Jeffrey
      Lymburner** ,
      Oldsmar, Florida


Director
      since May 28, 1996


*Acting
      Chairman*




Mr.
      Lymburner **** has
      been our Chief Executive Officer since August 1, 1999 and was a founding
      shareholder of our company. He was President of our company from its founding
      in
      1995 to October 11, 2001. Prior to the founding of our company, Mr. Lymburner
      was President of Completely Mobile Inc., a cellular and wireless data company,
      from 1990 to 1995.





**T.
      Christopher Bulger** , Toronto, Ontario


Director
      since May 28, 1996


*Chairman
      of the Management Resources and Compensation, Corporate Governance and Audit
      Committees* ******





Mr.
      Bulger is the Chairman and CEO of Megawheels Technologies Inc., a web-based
      classified advertising platform provider for the newspaper and real estate
      sectors, with enterprise systems for auto dealerships. Mr. Bulger served as
      Executive Vice President of our company from September 1998 to December 1999
      and
      Chief Financial Officer of our company from April 1996 to September
      1998.














**Paul
      Godin** ,
      Kleinburg, Ontario


Director
      since May 28, 1996


*Member
      of the Management Resources and Compensation and Corporate Governance
      Committees*




Mr.
      Godin is a private investor. Aside from being one of the founding shareholders
      of our company in 1995, Mr. Godin **** was
      Chief Executive Officer of our company from its founding in 1995 to August
      1,
      1999, and Chairman of the Board of Directors from June 17, 1996 to June 14,
      2000. From September 1999 to March 2001, Mr. Godin was Chairman of The Art
      Vault
      International Limited. In March 2001, The Art Vault made an assignment in
      bankruptcy under the laws of the Province of Ontario, due to economic conditions
      and a lack of available funding.





**Jim
      Moskos** ,
      Toronto, Ontario


Director
      since June 7, 1999





Mr.
      Moskos **** has
      been President of the ADB Technology Group since October 19, 1999. Mr. Moskos
      served as Vice President - Technology of our company from September 1997 to
      October 19, 1999. From September 1994 to August 1997, Mr. Moskos was Senior
      Technology Manager for the Canadian Department of Indian Affairs and Northern
      Development responsible for setting the technical direction for all aspects
      of
      application development.





**Jan
      Pedersen** ,
      Stavanger, Norway


Director
      since June 12, 2002




Mr.
      Pedersen has been President of our Norwegian Operations since October 11, 2001.
      Prior to that, Mr. Pedersen founded and acted as CEO of ADB Systemer ASA since
      1988. Mr. Pedersen has broad software experience with clients such as Saga
      Petroleum, Statoil, BP Norway, Elf Petroleum and the Norwegian Petroleum
      Directorate. He holds a Master Science degree in Civil Engineering, the
      technical university in Trondheim, Norway.




**Darroch
      (Rick) Robertson** ,
      London, Ontario


Director
      since June 25, 2003


*Chairman
      of the Audit Committee*




Mr.
      Robertson has been an Associate Professor of Business at the Richard Ivey School
      of Business, The University of Western Ontario, for the past five years. He
      was
      the Director of the undergraduate HBA program at the Ivey School. Mr. Robertson
      was also a director and chair of the audit committee of Stackpole Limited,
      a TSX
      listed company. Mr. Robertson is also an elected member of council for the
      Institute of Chartered Accountants of Ontario, where he currently serves on
      the
      audit committee and by-laws committee.





**Duncan
      Copeland**


*Member
      of the Audit Committee, Corporate Governance Committee, Management Resources
      and
      Compensation Committee*





Mr.
      Copeland is President of Copeland and Company, a consultancy based in Potomac,
      Maryland. He has been a Director of the Corporation since its inception, except
      for the period from 2001-2004. Mr. Copeland has been a member of the faculties
      of the Richard Ivey School of Business, The University of Western Ontario and
      Georgetown University. He is a trustee of the Charles Babbage Foundation. Mr.
      Copeland holds a doctorate from the Harvard Business School.




***Executive
      Officer***


***(other
      than Messrs. Lymburner, Moskos, and Pedersen)***




***Michael
      Robb*** , **** is
      Chief Financial Officer for ADB Systems, responsible for all of the Company's
      financial and administrative activities. He brings more than 15 years of finance
      experience, including venture capital activities, private equity transactions
      and mergers and acquisitions. Most recently, Mr. Robb served as Vice President
      of Finance for Westaim Partners, a Toronto venture capital firm. Previously,
      he
      served as Director of Finance for Classwave Wireless Inc. and Director of
      Finance for Bid.Com. Mr. Robb is a Certified Management Accountant and a member
      of the Society of Management Accountants of Ontario.













For
      a discussion of certain transactions involving directors and executive officers,
      see Item 7 - MAJOR SHAREHOLDERS and RELATED PARTY TRANSACTIONS and Note 23
      to
      Consolidated Financial Statements.




**B.**
            **C****OMPENSATION**





**Summary
      Compensation Table**




The
      following table provides a summary of compensation earned during the most
      recently completed fiscal year by our Chief Executive Officer and our four
      highest paid executives, other than the Chief Executive Officer, who earned
      in
      excess of $100,000.





**Awards**
            **Payouts****Annual
                Compensation**
            
            **Restricted****Options/**
            **Shares
                or****Other****Annual**
            **SARs**
            **Restricted**
            **LTIP**
            **All
                Other****Salary**
            **Bonus**
            **Compensation**
            **Granted**
            **Share
                Units**
            **Payout**
            **Compensation****Name
                And Principal Position**
            **Year**
            **($)**
            **($)**
            ($)(1)
            **(#)****(2)**
            **($)**
            **($)**
            **($)**Jeffrey
                Lymburner
            2004
            130,130
            Nil
            15,616
            Nil
            Nil
            Nil
            NilCEO(3)
            2003
            140,150
            $3,503
            16,818
            Nil
            Nil
            Nil
            Nil2002
            157,760
            Nil
            25,242
            110,000
            Nil
            Nil
            NilMike
                Robb
            2004
            144,583
            Nil
            6,600
            Nil
            Nil
            Nil
            NilCFO(4)
            2003
            76,250
            Nil
            5,362
            Nil
            Nil
            Nil
            NilJames
                Moskos
            2004
            190,000
            Nil
            12,000
            Nil
            Nil
            Nil
            NilPresident,
                Technology Group
            2003
            193,333
            15,000
            12,000
            220,202
            Nil
            Nil
            Nil2002
            200,000
            Nil
            12,000
            214,167
            Nil
            Nil
            NilJan
                Pedersen
            2004
            201,657
            Nil
            Nil
            Nil
            Nil
            Nil
            NilPresident,
                Norwegian Operations
            2003
            181,843
            40,358
            Nil
            22,378
            Nil
            Nil
            Nil2002
            165,500
            47,000
            Nil
            214,167
            Nil
            Nil
            NilAidan
                Rowsome
            2004
            205,166
            1,020
            16,955
            Nil
            Nil
            Nil
            NilVice-President,
                Global Sales
            2003
            173,430
            10,033
            17,747
            122,580
            Nil
            Nil
            Nil2002
            168,000
            5,500
            16,500
            163,125
            Nil
            Nil
            Nil




(1)
            Other
                compensation reflects our company’s provision of automotive related
                expenses and options.(2)
            All
                numbers have been adjusted to reflect the two for one consolidation
                of our
                shares in October, 2001.(3)
            Mr.
                Lymburner’s salary is U.S. $100,000.(4)
            Mike
                Robb joined our company on February 26, 2003 as Director of Finance
                and
                was appointed as CFO and Corporate Secretary on August 12,
                2003.




Messrs.
      Lymburner, Moskos, Pedersen and Rowsome have volunteered salary reductions
      in
      the 2002, 2003, and 2004 calendar years, ranging from fifteen percent to fifty
      percent. In exchange for the foregone salary, the executives were granted stock
      options, vesting quarterly in arrears, in an amount equal to the amount of
      foregone salary divided by the exercise price of the options (being the market
      price of our company’s shares on the day prior to the date of the grant). These
      salary reductions took effect January 1, 2002. The salary reductions will not
      affect any severance entitlement for the individuals concerned.




Our
        company has a stock option plan which provides for the issuance of stock
        options
        to employees, which may expire as much as 10 years from the date of grant,
        at
        prices not less than the fair market value of the common shares on the date
        of
        grant. The Management Resources and Compensation Committee of the Board of
        Directors reserves the right to attach vesting periods to stock options granted.
        No options or stock appreciation rights were granted to employees, officers
        or
        directors of our company during the fiscal year ended December 31, 2004.
 
 During
        2004, we did not provide any pension, retirement or similar benefits to our
        directors and officers as a group. Our employees based in Ireland and the
        United
        Kingdom participate in a retirement savings arrangement where employee
        contributions to personal retirement savings accounts are matched by the
        Company











to
      a maximum of six percent of salary. This arrangement does not represent a future
      pension obligation to the Company. Mr. Rowsome participates in this
      plan.




Jeff
      Lymburner has entered into a non-competition and salary protection agreement
      with our company, dated February 21, 1997, which provides, among other
      things, that he (i) will not compete with our company for a period of
      12
      months, which may be extended by us to 24 months, following the termination
      of
      his employment with our company, in consideration of which we will pay his
      full
      annual salary during such period; and (ii) if his employment with us
      is
      terminated other than by reason of death, disability or cause (as such terms
      are
      defined in such agreements), we will continue to pay his full annual salary
      for
      12 months (or 24 months if we exercise our option to extend the non-competition
      restrictions for 24 months) following the date of termination.




Jan
      Pedersen entered into a new employment agreement with our company in 2003 which
      sets out his salary and benefits as the Company’s President of Norwegian
      operations, as described in Item 6. The new agreement does not provide for
      termination payments or retention bonuses.




**Compensation
      of Directors**





Our
      directors receive no fees for meetings of the Board or committees of the Board
      which they attend, and no fee for the signing of any resolution of directors
      or
      documents on behalf of our company.





All
      directors are reimbursed for reasonable out-of-pocket travel and other expenses
      incurred by them in attending Board meetings or Committee meetings.





**C.**
            **BOARD
                PRACTICES**




Our
      articles of incorporation currently provide for a Board of Directors consisting
      of not less than 3 and not more than 15 directors, to be elected annually.
      The *Business
      Corporations Act* (Ontario) provides that, where a minimum and maximum number of directors is
      provided for in the articles of a company, the directors of that company may,
      if
      empowered by special resolution of the shareholders, by a resolution determine
      the number of directors to be elected at each annual meeting of the
      shareholders. Our Board of Directors has the authority to fix the number of
      directors to a number within the minimum and maximum number of directors as
      set
      forth in the articles, and has determined by resolution that the size of the
      Board is 7 directors.





Our
      Board of Directors presently consists of 7 directors. Under Canadian law, a
      majority of our Board of directors and of each of our Board Committees must
      be
      residents of Canada, subject to certain exceptions. Each of our directors holds
      office until the next annual meeting of shareholders, until his successor has
      been elected and qualified, or his earlier resignation or removal. Our executive
      officers are appointed by our Board of directors and serve at the discretion
      of
      our Board of Directors.





Except
      for Jeffrey Lymburner's salary protection agreements, no director has any
      contract or arrangement with us entitling them to benefits upon termination
      of
      their directorship.





The
      three committees of the Board are the Audit Committee, Management Resources
      and
      Compensation Committee, and the Corporate Governance Committee.





The
      Audit Committee, all of whose members are unrelated as defined by the TSX
      Corporate Governance Guidelines, meets with our management and our auditors
      on a
      periodic basis, before the release of quarterly results and before submission
      of
      our annual financial statements to the Board. The committee is responsible
      for
      the review and assessment of our audit practices, financial reporting and
      internal controls, inquiry of the auditors as to cooperation in access and
      disclosure by our management and the ultimate approval of our annual financial
      statements for submission to the Board and to the shareholders. The committee
      is
      also responsible for the appointment, compensation and oversight of the work
      of
      our auditors (including resolution of disagreements between management and
      our
      auditors regarding financial reporting). Our Audit Committee consists of Darrock
      Robertson (Chairman), Chris Bulger and Duncan Copeland. The composition of
      the
      committee changed during fiscal 2004 due to the resignation of Glen Whyte from
      the board of directors effective June 30, 2004. Mr. Copeland was appointed
      in
      Mr. Whyte’s place.





The
      Management Resources and Compensation Committee, all of whose members are
      unrelated as defined by the TSX Corporate Governance Guidelines, is responsible
      for recommendations to the Board regarding the appointment or removal of
      executive officers, reviewing the performance of the executive officers and
      fixing their compensation. The committee is also responsible for administering
      our stock option plan and ensuring that











salary
      and benefit programs are continuously suitable for attracting, retaining and
      encouraging the development of knowledgeable, experienced and capable management
      and employees. The Management Resources and Compensation Committee of our
      company consists of Christopher Bulger (Chairman), Paul Godin and Duncan
      Copeland, all of whom are directors of our company. The composition of the
      committee changed during fiscal 2004 due to the resignation of Glen Whyte from
      the board of directors effective June 30, 2004. Mr. Copeland was appointed
      in
      Mr. Whyte’s place.





The
      Corporate Governance Committee, all of whose members are unrelated as defined
      by
      the TSX Corporate Governance Guidelines, oversees the implementation of our
      governance practices. The committee also oversees the process for nominations
      to
      the Board and assesses the overall effectiveness of the Board. The Corporate
      Governance Committee consists of Paul Godin (Chairman), Chris Bulger, and Duncan
      Copeland, all of whom are directors of our company. The composition of the
      committee changed during fiscal 2004 due to the resignation of Glen Whyte from
      the board of directors effective June 30, 2004. Mr. Copeland was appointed
      in
      Mr. Whyte’s place.





**D.**
            **EMPLOYEES**




As
      of
      December 31, 2004 we employed a total of 46 full-time employees and one
      part-time employee as follows:




North
                America
            
            Ireland
                and UK
            
            NorwaySales
                and Marketing
            
            
            4
            
            
            1
            
            
            2Technical
                Services
            
            
            4
            
            
            2
            
            
            9Product
                Group
            
            
            4
            
            
            0
            
            
            10Finance
                and Admin
            
            
            3
            
            
            1
            
            
            2Executive
            
            
            3
            
            
            1
            
            
            1TOTAL
            
            
            18
            
            
            5
            
            
            24




None
      of our employees are represented by a labor union, and we consider our employee
      relations to be good **.**




As
      of December 31, 2003 we employed a total of 50 full-time employees and no
      part-time employees as follows:




North
                America
            
            Ireland
                and UK
            
            NorwaySales
                and Marketing
            
            
            5
            
            
            1
            
            
            1Technical
                Services
            
            
            5
            
            
            2
            
            
            12Product
                Group
            
            
            2
            
            
            0
            
            
            10Finance
                and Admin
            
            
            4
            
            
            1
            
            
            2Executive
            
            
            3
            
            
            1
            
            
            1TOTAL
            
            
            19
            
            
            5
            
            
            26




As
      of December 31, 2002 we employed a total of 49 full-time employees and no
      part-time employees as follows:




North
                America
            
            Ireland
                and UK
            
            NorwaySales
                and Marketing
            
            
            5
            
            
            1
            
            
            2Technical
                Services
            
            
            5
            
            
            1
            
            
            9Product
                Group
            
            
            3
            
            
            Nil
            
            
            10Finance
                and Admin
            
            
            5
            
            
            1
            
            
            2Executive
            
            
            3
            
            
            1
            
            
            1TOTAL
            
            
            21
            
            
            4
            
            
            24




The
      number of our employees as of December 31, 2004 represents a decrease in our
      workforce of approximately 6% as compared with the number of our employees
      as of
      December 31, 2003.


















**E.**
            **SHARE
                OWNERSHIP**




The
      following table sets forth information concerning share and option ownership
      of
      each of our current directors and officers as of June 1, 2005:







**Name**
              
              Number
                  of
                Common
                Shares
                Owned
                  (1)(2)
              
              Number
                  of
                Common
                  Shares
                Underlying
                Options
                  (3)
              
              Range
                  of
                Exercise
                Prices
                  of
                Options
              
              Range
                  of
                Expiration
                Dates
                  of
                Options
              
              Percentage
                  of
                Common
                Shares
                Beneficially
                Owned (4)T.
                  Christopher Bulger
              
              265,000
              
              75,000
              
              $0.22-$0.37
              
              07/03/06-01/25/10
              
              *Paul
                  Godin
              
              332,667
              
              70,000
              
              $0.22
              
              01/25/10
              
              *Jeffrey
                  Lymburner
              
              3,211,975
              
              153,300
              
              $0.22
              
              01/25/10
              
              4.44%Jim
                  Moskos
              
              21,375
              
              370,202
              
              $0.22-$0.35
              
              07/03/06
                  - 01/25/10
              
              *Darroch
                  Robertson
              
              5,000
              
              110,000
              
              $0.22-$0.37
              
              07/03/06-01/25/10
              
              *Michael
                  Robb
              
              Nil
              
              138,750
              
              $0.22-$0.35
              
              02/26/06-01/25/10
              
              *Jan
                  Pedersen
              
              767,019
              
              442,292
              
              $0.22-$
                  0.33
              
              07/03/06-01/25/10
              
              1.06%Duncan
                  Copeland
              
              87,050
              
              70,000
              
              $0.22
              
              01/25/10
              
              *Aidan
                  Rowsome
              
              62,500
              
              122,580
              
              $0.33-$0.35
              
              07/03/06-08/15/06
              
              *





*
            Represents
                less than 1%.(1)
            All
                numbers adjusted to reflect the two for one consolidation of our
                shares in
                October 2001.(2)
            Represents
                shares owned beneficially by the named individual other than those
                shares
                which may be acquired under our Corporation's option plans. Unless
                otherwise noted, all persons referred to above have sole voting and
                sole
                investment power.(3)
            Includes
                all shares which the named individual has the right to acquire under
                all
                vested and unvested options and warrants granted to such individual
                under
                our company's option plan.(4)
            This
                information is based on 72,370,131 common shares outstanding as of
                May 31,
                2005. Common shares subject to options exercisable within 60 days
                are
                deemed outstanding for computing the percentage ownership of the
                person
                holding the options but are not deemed outstanding for computing
                the
                percentage ownership of any other
                person.





**ITEM
      7 - MAJOR SHAREHOLDERSAND RELATED PARTY
      TRANSACTIONS**





**A.**
            **MAJOR
                SHAREHOLDERS**





To
      our knowledge, no person beneficially owns, directly or indirectly, or exercises
      control or direction over more than 5.0% of our issued and outstanding common
      shares.




This
      information is based on our records, information provided to us by directors
      and
      executive officers and a review of any Schedules 13D and 13G filed by our
      shareholders with the Securities and Exchange Commission prior to June 1, 2005,
      and insider reports filed with the Ontario Securities Commission. The Company’s
      major shareholders do not have any voting rights that differ from the rights
      of
      our other shareholders.




As
      at April 18, 2005, the shareholders of record held 72,370,131 common shares,
      of
      which 793 shareholders had an address of record in the United States. Common
      shares held by CEDE & Co. in the United States on such date amounted to
      4,289,060 or 5.9% of our issued common shares, which shares are held for
      participants’ accounts.













We
      are not aware of any other corporation, foreign government, or other person
      or
      entity that directly or indirectly owns or controls our company, severally
      or
      jointly. We are not aware of any arrangements which may at a later date result
      in a change in control of our company.





**B.**
            **RELATED
                PARTY TRANSACTIONS**




On
      August 30, 2002, the Company entered into a private placement agreement of
      secured subordinated notes (Series A, B and D notes) with a group of private
      investors for total gross proceeds of $1.12 million. The following officers
      and
      directors purchased the Series D notes: Chris Bulger, a director of the Company,
      purchased $20,000 of Series D notes that have not yet been converted. Paul
      Godin, a director of the Company, purchased $25,000 of Series D notes that
      were
      converted on December 13, 2002 to 208,333 common shares and 104,167 share
      purchase warrants. Jeff Lymburner, CEO and a director of the Company, purchased
      $75,000 of Series D notes of which $54,750 were converted on April 1, 2004
      to
      456,250 shares and 228,125 share purchase warrants The 228,125 common share
      purchase warrants were exercised into an equal number of common shares by April
      19, 2004. The remaining $20,250 of Series D notes have yet to be converted
      as of
      June 18, 2004. Aidan Rowsome, who was then Vice President - Global Sales of
      the
      Company, purchased $15,000 of Series D notes that were converted on February
      3,
      2003 to 125,000 common shares and 62,500 share purchase warrants.




On
      May 9, 2003, the Company issued 666,666 common shares to Jeff Lymburner, CEO
      of
      the Company, in consideration of gross proceeds of $200,000 as part of a private
      placement financing.




On
      August 19, 2003, the Company entered into a private placement agreement of
      secured subordinated notes (Series E notes) with a group of private investors
      for total gross proceeds of $1.0 million. The following officers and directors
      purchased the Series E notes: Paul Godin, a director of the Company, purchased
      $50,000 of Series E notes that have not yet been converted. Jim Moskos,
      President Technology Group and a director of the Company, purchased $35,000
      of
      Series E notes that have not yet been converted. Michael Robb, CFO and Corporate
      Secretary of the Company, purchased $15,000 of Series E notes that have not
      yet
      been converted.




On
      June 15, 2004 the Company issued to private investors Series G secured
      subordinated notes in the aggregate principal amount of $1.71 million for net
      proceeds of $1.48 million. The following officers and directors purchased Series
      G notes: Jeff Lymburner, CEO of the Company, purchased $100,000 of Series G
      notes that have not yet been converted; Jan Pedersen, President,
      Norwegian **** Operations
      and a director of the Company, purchased $60,000 of Series G notes that have
      not
      yet been converted; and Jim Moskos, President Technology Group and a director
      of
      the Company, purchased $10,000 of Series G notes that have not yet been
      converted.




On
      October 21, 2004 the Company issued to private investors Series H secured
      subordinated notes in the aggregate principal amount of $520,000 for net
      proceeds of $477,000. A total of $270,000 of the principal amount of Series
      H
      notes was issued to the following directors and/or senior officers of the
      Company: Jeffrey Lymburner, an officer and director of the Company, purchased
      Series H notes in the principal amount of $200,000; Paul Godin, a director
      of
      the Company purchased Series H notes in the principal amount of $50,000; and
      James Moskos, an officer and director of the Company purchased Series G notes
      in
      the principal amount of $20,000.




On
      December 6, 2004, the Company completed a private placement resulting in the
      issuance of 5,000,000 shares at a price of $0.20 per share and 5,000,000 common
      share-purchase warrants exercisable into one common share at a price of $0.35
      for gross proceeds of $1.0 million. Included in this private placement were
      100,000 shares issued to Paul Godin, a director of the Company for gross
      proceeds of $20,000. The warrants were issued for a four year term and will
      expire on December 6, 2008.




For
      additional information regarding related party transactions, see Part I - Item
      5
      under the heading “OPERATING AND FINANCIAL REVIEW AND PROSPECTS - MANAGEMENT’S
      DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS” and
      see Note 6(d) to Notes Consolidated Financial Statements.




**ITEM
      8 - FINANCIAL INFORMATION**





See
      the Consolidated Financial Statements and notes thereto accompanying this Annual
      Report beginning on page F-1. All contingencies and commitments set out in
      the
      Financial Statements have been reviewed and updated as at the date of filing
      this Annual Report.













**LEGAL
      PROCEEDINGS**




Neither
      we, nor any of our subsidiaries, is a party to, or the subject of, any material
      legal proceedings.




**DIVIDEND
      POLICY**




We
      have not declared or paid any cash dividends on our common shares. We currently
      intend to retain any future earnings for use in the operation and expansion
      of
      our business. We do not anticipate paying any cash dividends on our common
      shares in the foreseeable future.




We
      have not issued any preference shares. The dividend entitlement of any
      preference shares issued will be determined by our Board of
      Directors.




**SIGNIFICANT
      CHANGES**




None.




**ITEM
      9 - THE OFFERAND LISTING**




Our
      common shares are listed on The Toronto Stock Exchange and are quoted for
      trading on the OTCBB. Our common shares were quoted on the Nasdaq National
      Market from April 20, 1999 until June 3, 2002 and were quoted on the Nasdaq
      SmallCap Market from June 3, 2002 until August 21, 2002 at which time they
      were
      delisted because we did not satisfy the minimum bid price per share requirement
      for continued listing on that market. The shares were listed on the Nasdaq
      exchanges from April 20, 1999 until October 17, 2001 under the symbol “BIDS” and
      from October 18, 2001 until August 21, 2002 under the symbol “ADBI”. Our common
      shares have been quoted for trading on the OTCBB since August 22, 2002 under
      the
      symbol “ADBY”. Effective November 15, 2004 our stock symbol on the Over the
      OTCBB was changed to “ADBYF”. The addition of the F to the symbol was a
      requirement of the OTCBB to signify that we are a foreign issuer.




From
      June 6, 1996 to February 8, 1998, our common shares were quoted for trading
      on
      the Canadian Dealing Network under the symbol “ILII.” Our common shares were
      traded on The Toronto Stock Exchange from February 9, 1998 to July 17, 1998
      under the symbol “ILI” and from July 18, 1998 to October 17, 2001 under the
      symbol “BII”. Since October 18, 2001, our common shares have been traded on the
      Toronto Stock Exchange under the symbol “ADY”.




For
      additional information about the trading of our common shares, see Item 3-D
      -
      Risk Factors - YOUR
      ABILITY TO BUY OR SELL OUR COMMON SHARES ON THE OTCBB MAY BE LIMITED .




The
      following tables set forth the range of high and low sales prices (rounded
      to
      the nearest hundredth) as reported by The Toronto Stock Exchange, the OTCBB
      (beginning June 4, 2002) and Nasdaq (until June 3, 2002) during the calendar
      years and quarters indicated. Note that all numbers have been adjusted to
      reflect the two-for-one share consolidation completed in October
      2001.













THE
      TORONTO STOCK EXCHANGE




High
            
            Low(Cdn
                $)
            
            (Cdn
                $)ANNUAL
                MARKET PRICES2000
                Calendar Year
            
            
            26.20
            
            
            1.942001
                Calendar Year
            
            
            3.40
            
            
            0.292002
                Calendar Year
            
            
            0.93
            
            
            0.072003
                Calendar Year
            
            
            0.85
            
            
            0.172004
                Calendar Year
            
            
            0.52
            
            
            0.16QUARTERLY
                MARKET PRICES2003
                CALENDAR YEARFirst
                Quarter
            
            
            0.85
            
            
            0.17Second
                Quarter
            
            
            0.41
            
            
            0.19Third
                Quarter
            
            
            0.55
            
            
            0.31Fourth
                Quarter
            
            
            0.54
            
            
            0.372004
                CALENDAR YEARFirst
                Quarter
            
            
            0.52
            
            
            0.34Second
                Quarter
            
            
            0.38
            
            
            0.25Third
                Quarter
            
            
            0.36
            
            
            0.19Fourth
                Quarter
            
            
            0.28
            
            
            0.162005
                CALENDAR YEARFirst
                Quarter
            
            
            0.36
            
            
            0.19MONTHLY
                MARKET PRICESNovember
                2004
            
            
            0.22
            
            
            0.16December
                2004
            
            
            0.28
            
            
            0.19January
                2005
            
            
            0.25
            
            
            0.19February
                2005
            
            
            0.36
            
            
            0.23March
                2005
            
            
            0.34
            
            
            0.26April
                2005
            
            
            0.29
            
            
            0.25May
                2005
            
            
            0.28
            
            
            0.15
















NASDAQ
      AND OTCBB




High
            
            Low
            
            High
            
            Low(Cdn
                $)
            
            (Cdn
                $)
            
            (U.S.
                $)
            
            (U.S.
                $)ANNUAL
                MARKET PRICES2000
                Calendar Year
            
            
            26.60
            
            
            1.60
            
            
            19.26
            
            
            1.062001
                Calendar Year
            
            
            3.30
            
            
            0.30
            
            
            2.18
            
            
            0.192002
                Calendar Year
            
            
            0.93
            
            
            0.06
            
            
            0.59
            
            
            0.042003
                Calendar Year
            
            
            0.79
            
            
            0.16
            
            
            0.54
            
            
            0.112004
                Calendar Year
            
            
            0.54
            
            
            0.14
            
            
            0.41
            
            
            0.12QUARTERLY
                MARKET PRICES2003
                CALENDAR YEARFirst
                Quarter
            
            
            0.79
            
            
            0.16
            
            
            0.54
            
            
            0.11Second
                Quarter
            
            
            0.39
            
            
            0.16
            
            
            0.29
            
            
            0.12Third
                Quarter
            
            
            0.57
            
            
            0.27
            
            
            0.42
            
            
            0.20Fourth
                Quarter
            
            
            0.58
            
            
            0.34
            
            
            0.45
            
            
            0.262004
                CALENDAR YEARFirst
                Quarter
            
            
            0.54
            
            
            0.34
            
            
            0.41
            
            
            0.26Second
                Quarter
            
            
            0.39
            
            
            0.24
            
            
            0.29
            
            
            0.18Third
                Quarter
            
            
            0.35
            
            
            0.19
            
            
            0.27
            
            
            0.15Fourth
                Quarter
            
            
            0.27
            
            
            0.14
            
            
            0.22
            
            
            0.122005
                CALENDAR YEARFirst
                Quarter
            
            
            0.36
            
            
            0.18
            
            
            0.29
            
            
            0.15MONTHLY
                MARKET PRICESNovember
                2004
            
            
            0.21
            
            
            0.14
            
            
            0.18
            
            
            0.12December
                2004
            
            
            0.27
            
            
            0.19
            
            
            0.22
            
            
            0.15January
                2005
            
            
            0.25
            
            
            0.18
            
            
            0.20
            
            
            0.15February
                2005
            
            
            0.36
            
            
            0.22
            
            
            0.29
            
            
            0.18March
                2005
            
            
            0.33
            
            
            0.24
            
            
            0.27
            
            
            0.20April
                2005
            
            
            0.28
            
            
            0.24
            
            
            0.23
            
            
            0.19May
                2005
            
            
            0.32
            
            
            0.23
            
            
            0.25
            
            
            0.18




United
      States dollar amounts are converted to Canadian dollars at the noon buying
      rate
      in New York City for cable transfers in Canadian dollars as certified for
      customs purposes by the Federal Reserve Bank of New York for the date of such
      sales prices.




**ITEM
      10 - ADDITIONAL
      INFORMATION**




**A.**
            **Share
                Capital**




Not
      applicable.




**B.**
            **Memorandum
                and Articles of Association**




The
      Articles of Arrangement for ADB are on file with the Ministry of Consumer and
      Commercial Relations for the Province of Ontario under Ontario Corporation
      Number 1539169. Our articles do not include a stated purpose.




*Directors*




Directors
      of our company need not be shareholders. In accordance with our by-laws and
      the *Business
      Corporations Act* (Ontario), a majority of our directors must be residents of Canada, subject
      to
      certain exceptions. In addition, directors must be at least 18 years of age,
      of
      sound mind, and not bankrupt. Neither our articles or by-laws, nor the *Business
      Corporations Act* (Ontario), impose any mandatory retirement age for directors.













A
      director who is a party to, or who is a director or officer of or has a material
      interest in any person who is a party to, a material contract or transaction
      or
      proposed material contract or transaction with our company shall disclose to
      our
      company the nature and extent of his interest at the time and in the manner
      provided by the *Business
      Corporations Act* (Ontario). The *Business
      Corporations Act* (Ontario) prohibits such a director from voting on any resolution to approve
      the
      contract or transaction unless the contract or transaction:





•
            is
                an arrangement by way of security for money lent to or obligations
                undertaken by the director for the benefit of our company or an
                affiliate;•
            relates
                primarily to his or her remuneration as a director, officer, employee
                or
                agent of our company or an affiliate;•
            is
                for indemnity or insurance; or•
            is
                with an affiliate.





Our
      Board of Directors may, on behalf of our company and without authorization
      of
      our shareholders:





•
            borrow
                money upon the credit of our company;•
            issue,
                reissue, sell or pledge bonds, debentures, notes or other evidences
                or
                indebtedness or guarantees of our company, either secured or
                unsecured;•
            subject
                to certain disclosure requirements of the*Business
                Corporations Act*(Ontario), give, directly or indirectly, financial assistance to
                any
                person by means of a loan, a guarantee or otherwise on behalf of
                our
                company to secure performance or any present or future indebtedness,
                liability or obligation of any person; and•
            mortgage,
                hypothecate, pledge or otherwise create a security interest in all
                or any
                currently owned or subsequently acquired real or personal property
                of our
                company, movable or immovable, including without limitation book
                debts,
                rights, powers, franchises and undertakings, to secure any bonds,
                debentures, notes or other evidences of indebtedness or guarantee
                or any
                other obligation of our company.





*Common
      Shares*





Our
      articles authorize the issuance of an unlimited number of common shares. The
      holders of the common shares of our company are entitled to receive notice
      of
      and to attend all meetings of the shareholders of our company and have one
      vote
      for each common share held at all meetings of the shareholders of our company,
      except for meetings at which only holders of another specified class or series
      of shares of our company are entitled to vote separately as a class or series.
      Subject to the prior rights of the holders of preference shares of our company
      and to any other shares ranking senior to the common shares with respect to
      priority in the payment of dividends, the holders of common shares are entitled
      to receive dividends and our company will pay dividends, as and when declared
      by
      our Board of Directors, out of moneys properly applicable to the payment of
      dividends, in such amount and in such form as our Board of Directors may from
      time to time determine, and all dividends which our Board of Directors may
      declare on the common shares shall be declared and paid in equal amounts per
      share on all common shares at the time outstanding. In the event of the
      dissolution, liquidation or winding-up of our company, whether voluntary or
      involuntary, or any other distribution of assets of our company among its
      shareholders for the purpose of winding up its affairs, subject to the prior
      rights of the holders of preference shares and to any other shares ranking
      senior to the common shares with respect to priority in the distribution of
      assets upon dissolution, liquidation or winding-up, the holders of the common
      shares will be entitled to receive the remaining property and assets of our
      company. There are no redemption or sinking-fund provisions that attach to
      the
      common shares, nor are there any provisions that discriminate against existing
      or prospective holders of common shares as a result of owning a substantial
      number of shares. The holders of our common shares are not liable to further
      capital calls by our company.





*Preference
      Shares*





Our
      articles of incorporation authorize the issuance of an unlimited number of
      preference shares, in one or more series. The Ontario Business Corporations
      Act
      does not impose restrictions upon our Board of Directors issuing preference
      shares of the type authorized by our articles of incorporation. Our Board of
      Directors may fix, before











issuing,
      the number of preference shares of each series, the designation, rights,
      privileges, restrictions and conditions attaching to the preference shares
      of
      each series, including any voting rights, any right to receive dividends (which
      may be cumulative or non-cumulative and variable or fixed) or the means of
      determining the dividends, the dates of payment, any terms and conditions of
      redemption or purchase, any conversion rights, and any rights on the
      liquidation, dissolution or winding-up of our company, any sinking fund or
      other
      provisions, the whole to be subject to the issue of a Certificate of Amendment
      setting forth the designation, rights, privileges, restrictions and conditions
      attaching to the preference shares of the series. Our articles of incorporation
      require that preference shares of each series must, with respect to the payment
      of dividends and the distribution of assets or the return of capital in the
      event of the liquidation, dissolution or winding-up of our company, whether
      voluntary or involuntary, rank on a parity with the preference shares of every
      other series and be entitled to preference over the common shares and over
      any
      other shares ranking junior to the preference shares. The preference shares
      of
      one series shall participate ratably with the preference shares of every other
      series in respect of all dividends and similar amounts. The holders of our
      preference shares are not liable to further capital calls by our company. None
      of our preference shares are currently issued or outstanding.





*Action
      Necessary to Change the Rights of Shareholders*





In
      order to change the rights of our shareholders, we would need to amend our
      articles of incorporation to effect the change. Such an amendment would require
      the approval of holders of two-thirds of the shares cast at a duly called
      special meeting. If we wish to amend the rights of holders of a specific class
      of shares, such approval would also be required from the holders of that class.
      A shareholder is entitled to dissent in respect of such a resolution and, if
      the
      resolution is adopted and our company implements such changes, demand payment
      of
      the fair value of its shares.





*Meetings
      of Shareholders*





An
      annual meeting of shareholders is held each year for the purpose of considering
      the financial statements and reports, electing directors, appointing auditors
      and for the transaction of other business as may be brought before the meeting.
      The President, the Chairman of the Board or the Board of Directors has the
      power
      to call a special meeting of shareholders at any time. Notice of the time and
      place of each meeting of shareholders must be given not less than 21 days,
      nor
      more than 50 days, before the date of each meeting to each director, to the
      auditor and to each shareholder who at the close of business on the record
      date
      for notice is entered in the securities register as the holder of one or more
      shares carrying the right to vote at the meeting. Notice of a meeting of
      shareholders called for any other purpose other than consideration of financial
      statements and auditors’ report, election of directors and reappointment of the
      incumbent auditor, must state the nature of the business in sufficient detail
      to
      permit the shareholder to form a reasoned judgment on, and must state the text
      of, any special resolution or by-law to be submitted to the meeting. The only
      persons entitled to be present at a meeting of shareholders are those entitled
      to vote thereat, the directors of our company, the auditor of our company and
      others who although not entitled to vote are entitled or required to be present
      at the meeting. Any other person may be admitted only on the invitation of
      the
      chairman of the meeting or with the consent of the meeting. If a corporation
      is
      winding-up, the *Business
      Corporations Act* (Ontario) permits a liquidator appointed by the shareholders, during the
      continuance of a voluntary winding-up, to call and attend meetings of the
      shareholders. In circumstances where a court orders a meeting of shareholders,
      the court may direct how the meeting may be held, including the parties
      entitled, or required, to attend the meeting.





*Limitations
      on Rights to Own Securities*





There
      is no limitation imposed by Canadian law or by the articles or other charter
      documents on the right of a non-resident to hold or vote common shares or
      preference shares with voting rights, other than as provided in the Investment
      Canada Act, as amended by the World Trade Organization Agreement Implementation
      Act. The Investment Canada Act generally prohibits implementation of a
      reviewable investment by an individual, government or agency thereof,
      corporation, partnership, trust or joint venture that is not a “Canadian,” as
      defined in the Investment Canada Act (a “non-Canadian”), unless, after review,
      the minister responsible for the Investment Act is satisfied that the investment
      is likely to be a net benefit to Canada.




An
      investment in our voting shares by a non-Canadian (other than a “World Trade
      Organization Investor,” as defined below) would be reviewable under the
      Investment Canada Act if it were an investment to acquire direct control of
      our
      company, and the value of our assets were $5.0 million or more. An investment
      in
      our voting shares by a World Trade Organization Investor would be reviewable
      under the Investment Canada Act if it were an investment to acquire direct
      control of our company, and the value of our assets equaled or exceeded $209
      million. A non-Canadian, whether a World Trade Organization Investor or
      otherwise, would acquire control of us













for
      purposes of the Investment Canada Act if he or she acquired a majority of our
      voting shares. The acquisition of less than a majority, but at least one-third
      of our voting shares, would be presumed to be an acquisition of control of
      our
      company, unless it could be established that we were not controlled in fact
      by
      the acquirer through the ownership of voting shares. In general, an individual
      is a World Trade Organization Investor if he or she is a “national” of a country
      (other than Canada) that is a member of the World Trade Organization (“World
      Trade Organization Member”) or has a right of permanent residence in a World
      Trade Organization Member. A corporation or other entity will be a World Trade
      Organization investor if it is a “World Trade Organization investor-controlled
      entity” pursuant to detailed rules set out in the Investment Canada Act. The
      United States is a World Trade Organization Member.




Certain
      transactions involving our voting shares would be exempt from the Investment
      Canada Act, including: (a) an acquisition of our voting shares if the
      acquisition were made in connection with the person’s business as a trader or
      dealer in securities; (b) an acquisition of control of our company in connection
      with the realization of a security interest granted for a loan or other
      financial assistance and not for any purpose related to the provisions of the
      Investment Canada Act; and (c) an acquisition of control of our company by
      reason of an amalgamation, merger, consolidation or corporate reorganization,
      following which the ultimate direct or indirect control in fact of our company,
      through the ownership of voting interests, remains unchanged.




*Change
      of Control*





Our
      authorized capital consists of an unlimited number of common shares and an
      unlimited number of preference shares. The Board of Directors, without any
      further vote by the common shareholders, has the authority to issue preference
      shares and to determine the price, preferences, rights and restrictions,
      including voting and dividend rights, of these shares. The rights of the holders
      of common shares are subject to the rights of holders of any preference shares
      that the Board of Directors may issue in the future. That means, for example,
      that we can issue preference shares with more voting rights, higher dividend
      payments or more favorable rights upon dissolution, than the common shares.
      If
      we issued certain types of preference shares in the future, it may also be
      more
      difficult for a third-party to acquire a majority of our outstanding voting
      shares.





Our
      articles do not contain any provisions that govern the ownership threshold
      above
      which shareholder ownership must be disclosed.





**C.**
            **Material
                Contracts**The
                following is a summary of our company’s material contracts entered into
                since January 1, 2003.




1.
            SERIES
                E NOTES: During the year ended December 31, 2003, the Company issued
                Series E secured subordinated notes with a face value of $1.0 million
                for
                net proceeds of $994,000. The Series E notes have an annual rate
                of
                interest of 11 percent that is paid quarterly in arrears, mature
                August
                19, 2006 and are convertible into equity units at a price of $0.35
                per
                unit. Each equity unit consists of one common share and one half
                of a
                share-purchase warrant with an exercise price of $0.50. The Series
                E
                secured subordinated notes will automatically convert into units
                when the
                share price of the Company closes above $0.70 for five consecutive
                trading
                days during the term. Note holders may convert into units at anytime
                following a four-month hold period. If the holder does not convert
                and no
                automatic conversion takes place, the Company must repay the principal
                amount to the holders of the Series E secured subordinated notes
                in cash.
                As part of this private placement, the Company issued 30,000 common
                share-purchase warrants to an associate of Stonestreet Limited Partnership
                (“Stonestreet”) in consideration for professional fees. Each such warrant
                entitles the holder to purchase one common share of the Company for
                $0.50
                at any time up to and including August 18, 2006. The Series E notes
                are
                secured by a general security agreement on the assets of the Company,
                subordinated to the security claims provided to the holders of previously
                issued notes.The
                Series E notes were issued to private investors including an amount
                totaling $100,000 issued to directors and/or senior officers of the
                Company. Costs in the amount of $6,000 associated with the issuance
                of the
                Series E secured subordinated notes were recorded as a reduction
                of the
                equity component of these notes.2.
            On
                June 26, 2003, the Company completed a transaction resulting in the
                issuance of 4,879,000 common shares at a price of $0.24 and 2,733,000
                common share-purchase warrants exercisable into one common share
                at $0.40
                for net proceeds of $1.148 million. The warrants expire on June 26,
                2005.
                This private placement included the issuance of 693,000 common shares
                and
                347,000 common share-purchase warrants in settlement of an account
                payable
                in the amount of $166,000. Included in this private placement were
                2,146,000 shares issued to a director and officer of the Company
                for total
                net proceeds of $505,000.
















3.
            SERIES
                F NOTES: On May 19, 2004, the Company issued Series F secured subordinated
                notes with a face value of $500,000 for net proceeds of $474,000.
                The
                Series F notes have an annual rate of interest of 7 percent paid
                quarterly
                in arrears, mature May 19, 2007 and are convertible into equity units
                at a
                price of $0.31 per unit. Each equity unit consists of one common
                share and
                one half of a common share purchase warrant with an exercise price
                of
                $0.50. The warrants expire on May 19, 2007. The Series F secured
                subordinated notes will automatically convert into units when the
                share
                price of the Company closes above $0.70 for five consecutive trading
                days
                during the term. Holders may convert the notes into units at anytime
                following a four-month hold period. If the holder does not convert
                and no
                automatic conversion takes place, the Company must repay the principal
                amount in cash. The Series F notes are secured by a general security
                agreement on the assets of the Company, subordinated to the security
                claims provided to the holders of previously issued
                notes.4.
            SERIES
                G NOTES: On June 15, 2004, the Company issued Series G secured
                subordinated notes with a face value of $1,710,000 for net proceeds
                of
                $1,624,000. The Series G notes mature June 15, 2007, have an annual
                rate
                of interest of 11 percent (as amended October 21, 2004) payable upon
                the
                earlier of maturity and conversion and are convertible into equity
                units
                at a price of $0.31 per unit. Each equity unit consists of one common
                share and one half of a common share purchase warrant with an exercise
                price of $0.50. The warrants expire on June 15, 2008. The Series
                G secured
                subordinated notes will automatically convert into units when the
                volume-weighted average share price of the Company closes above $0.70
                for
                20 consecutive trading days during the term. Holders may convert
                the notes
                into units at anytime following a four-month hold period. If the
                holder
                does not convert and no automatic conversion takes place, the Company
                must
                repay the principal amount in cash. The Series G notes are secured
                by a
                general security agreement on the assets of the Company, subordinated
                to
                the security claims provided to the holders of previously issued
                notes.**5.**
            SERIES
                H NOTES: On October 21, 2004, the Company issued Series H secured
                subordinated notes with a face value of $520,000 for net proceeds
                of
                $500,000. The Series H notes mature October 21, 2007, have an annual
                rate
                of interest of 11 percent payable upon the earlier of maturity and
                conversion and are convertible into equity units at a price of $0.20
                per
                unit. Each equity unit consists of one common share and one half
                of a
                common share purchase warrant with an exercise price of $0.40. The
                warrants expire on October 21, 2008. The Series H secured subordinated
                notes will automatically convert into units when the share price
                of the
                Company closes at or above $0.45 for 10 consecutive trading days
                during
                the term. Holders may convert the notes into units at anytime following
                a
                four-month hold period. If the holder does not convert and no automatic
                conversion takes place, the Company must repay the principal amount
                in
                cash. In order to obtain the required approvals to issue the Series
                H
                notes, the Company retroactively increased the interest rate on the
                Series
                G notes from an annual rate of 7 percent to an annual rate of 11
                percent.
                The Series H notes are secured by a general security agreement on
                the
                assets of the Company, subordinated to the security claims provided
                to the
                holders of previously issued notes.6.
            EQUITY
                PRIVATE PLACEMENT: On November 25 and December 6, 2004, the Company
                completed a transaction resulting in the issuance of 5,000,000 shares
                at a
                price of $0.20 per share and 5,000,000 common share-purchase warrants
                exercisable into one common share at a price of $0.35 for gross proceeds
                of $1,000,000. The warrants expire on December 6, 2008. Gross proceeds
                were comprised of $800,000 in cash and $200,000 in past services.
                Issuance
                costs in the amount of $61,000 were incurred, including $19,000
                representing the fair value of 150,000 compensation options issued
                to
                First Associates Investments Inc. The compensation options are exercisable
                into 150,000 equity units at a price of $0.20 per unit. Each equity
                unit
                consists of one common share and one common share-purchase warrant
                with an
                exercise price of $0.35 and an expiry date of December 6, 2008. The
                compensation options expire on December 6, 2006. Included in this
                private
                placement were 100,000 shares issued to a director of the Company
                for net
                proceeds of $20,000.7.
            EQUITY
                PRIVATE PLACEMENT: On February 23, 2005, the Company competed a
                transaction resulting in the issuance of 2,500,000 units (“Units”) of the
                Company, each Unit consisting of one common share of the Company
                and one
                half of one non-transferable Common Share purchase Warrant, at a
                price of
                $0.23 per Unit, each whole Warrant entitling the holder to acquire
                one
                Common Share at an exercise price of $0.40. The Warrants comprising
                part
                of the Units were issued for a term of 4 years and will expire on
                February
                23, 2009. The aggregate consideration in money received by our company
                from the subscribers for Units was
                $575,000.



















**D.**
            **Exchange
                Controls**




There
      is no law, government decree or regulation in Canada restricting the export
      or
      import of capital or affecting the remittance of dividends, interest or other
      payments to a non-resident holder of common shares, other than withholding
      tax
      requirements.




**E.**
            **Taxation**




The
      following summary describes material Canadian federal income tax consequences
      generally applicable to a holder of our common shares who is not a resident
      of
      Canada, and who, for purposes of the Income Tax Act (Canada), (i) holds such
      shares as capital property and (ii) deals at arm’s length with us. Generally,
      common shares will be considered capital property to a holder provided that
      such
      holder does not hold such securities in the course of carrying on a business
      and
      has not acquired such securities in a transaction or transactions considered
      to
      be an adventure or concern in the nature of trade which includes a transaction
      or transactions of the same kind and carried on in the same manner as a
      transaction or transactions of an ordinary trader or dealer in property of
      the
      same kind.




This
      summary is based upon the current provisions of the Income Tax Act and the
      regulations thereunder and on an understanding of the published administrative
      practices of the Canadian Customs and Revenue Agency. This summary does not
      take
      into account or anticipate any possible changes in law, or the administration
      thereof, whether by legislative, governmental or judicial action, except
      proposals for specific amendment thereto which have been publicly announced
      by
      the Canadian Minister of Finance prior to the date hereof.




This
      summary does not address all aspects of Canadian federal income tax law that
      may
      be relevant to shareholders based upon their particular circumstances, and
      does
      not deal with provincial, territorial or foreign income tax consequences, which
      might differ significantly from the consequences under Canadian federal income
      tax law.




Shareholders
      are advised to consult their tax advisors regarding the application of the
      Canadian federal income tax law to their particular circumstances, as well
      as
      any Canadian provincial, territorial or other tax consequences or any U.S.
      federal, state or local tax consequences or other foreign income tax
      consequences of the acquisition, ownership and disposition of our common
      shares.




***Taxation
      of Dividends.***




A
      holder of a common share who is not resident in Canada for purposes of the
      Income Tax Act will be subject to Canadian withholding tax on dividends paid
      or
      credited, or deemed under the Income Tax Act to be paid or credited, to the
      holder of the common share. The rate of withholding tax under the Income Tax
      Act
      on dividends is 25% of the amount of the dividend. Such rate may be reduced
      under the provisions of an applicable international tax treaty to which Canada
      is a party. Under the tax treaty that Canada has entered into with the United
      States, the rate of Canadian withholding tax applicable in respect of dividends
      paid or credited by a Canadian corporation to a shareholder resident in the
      United States, is generally reduced to 15%, or 5% in the case of a corporate
      holder which owns 10% or more of the voting shares. A foreign tax credit for
      the
      tax withheld may be available under applicable US tax law to a US holder against
      U.S. federal income tax liability. Moreover, pursuant to Article XXI of the
      Canada-U.S. Treaty, an exemption from Canadian withholding tax generally is
      available in respect of dividends received by certain trusts, companies and
      other organizations whose income is exempt from tax under the laws of the United
      States.




***Disposition
      of common shares.***




A
      non-resident holder of a common share will not be subject to tax under the
      Income Tax Act in respect of a capital gain realized on the disposition of
      a
      common share unless the common share constitutes or is deemed to constitute
      “taxable Canadian property” as defined in the Income Tax Act. Shares of a
      corporation that are listed on a prescribed stock exchange (which includes
      shares traded on certain U.S. stock exchanges, including the Nasdaq National
      Market), are generally not considered to be taxable Canadian property. However,
      such shares are considered taxable Canadian property in the hands of a
      non-resident holder if, at any time during the 60-month period immediately
      preceding disposition by the holder, 25% or more of our issued shares of any
      class were owned by the non-resident holder together with persons with whom
      the
      non-resident did not deal at arm’s length.













An
      interest in or option in respect of common shares or other securities
      convertible into or exchangeable for common shares could constitute taxable
      Canadian property if the common shares that could be acquired upon the exercise
      of the option, the conversion or exchange rights or in which there is such
      interest are themselves taxable Canadian property. Taxable Canadian property
      also includes any common share held by a non-resident if the non-resident used
      the common share in carrying on a business (other than an insurance business)
      in
      Canada, or, if the non-resident is a non-resident insurer, any common share
      that
      is its “designated insurance property” for the year. A non-resident whose common
      shares constitute or are deemed to constitute taxable Canadian property will
      realize upon the disposition or deemed disposition of a common share, a capital
      gain (or a capital loss) to the extent that the proceeds of disposition are
      greater than (or less than) the aggregate of the adjusted cost base to the
      holder of a common share and any reasonable costs of disposition.




One-half
      of any capital gain realized by a holder (a taxable capital gain) will be
      included in computing the holder’s income. One-half of any capital loss realized
      by a holder may, subject to certain restrictions applicable to holders that
      are
      corporations, normally be deducted from the holder’s taxable capital gains
      realized in the year of disposition, the three preceding taxation years or
      any
      subsequent taxation years, subject to detailed rules contained in the Income
      Tax
      Act.




A
      purchase by us of our common shares (other than a purchase of our common shares
      on the open market in a manner in which shares would normally be purchased
      by
      any member of the public in the open market) will give rise to a deemed dividend
      under the Income Tax Act equal to the difference between the amount we paid
      on
      the purchase and the paid-up capital of such shares determined in accordance
      with the Income Tax Act. The paid-up capital of such shares may be less than
      the
      cost of such shares to the holder. Any such dividend deemed to have been
      received by a non-resident holder will be subject to non-resident withholding
      tax as described above. The amount of any such deemed dividend will reduce
      the
      proceeds of disposition of the common share to the non-resident holder for
      the
      purpose of computing the amount of the non-resident holder’s capital gain or
      loss under the Income Tax Act.




Even
      if the common shares constitute taxable Canadian property to a non-resident
      holder and their disposition would give rise to a capital gain, an exemption
      from tax under the Income Tax Act may be available under the terms of an
      applicable international tax treaty to which Canada is a party. A holder
      resident in the United States for purposes of the Canada-U.S. Treaty will
      generally be exempt from Canadian tax in respect of a gain on the disposition
      of
      common shares provided that the value of the common shares is not derived
      principally from real property situated in Canada. Our common shares would
      qualify for this exemption, however Article XIII paragraph 5 of the Canada-U.S.
      Treaty provides that the treaty exemption does not apply where the U.S. resident
      holder was an individual who was a Canadian resident for 120 months during
      any
      period of 20 consecutive years preceding the time of the sale and was resident
      in Canada at any time during the ten years immediately preceding the sale and
      owned the shares at the time he/she ceased to be resident in Canada. If the
      exemption from such Canadian tax in respect of such gain is not available under
      the Canada-U.S. Treaty, a foreign tax credit may be available under applicable
      US tax law for U.S. federal income tax purposes. Non-residents are advised
      to
      consult their tax advisers with regard to the availability of a treaty
      exemption.





**U.S.
      Federal Income Tax Considerations**





The
      following summary describes material United States federal income tax
      consequences arising from the purchase, ownership and sale of common shares.
      This summary is based on the provisions of the Internal Revenue Code of 1986,
      as
      amended, final, temporary and proposed United States Treasury Regulations and
      revenue rulings and administrative pronouncements of the Internal Revenue
      Service and court decisions, all as in effect as of the date of this Annual
      Report and all of which are subject to change, possibly on a retroactive basis.
      The consequences to any particular shareholder may differ from those described
      below by reason of that shareholder's particular circumstances. This summary
      does not address the considerations that may be applicable to any particular
      shareholder based on such shareholder's particular circumstances (including
      potential application of the alternative minimum tax), to particular classes
      of
      shareholders (including financial institutions, broker-dealers, insurance
      companies, shareholders who have elected mark-to-market accounting, tax-exempt
      organizations, shareholders who hold ordinary shares as part of a straddle,
      "hedge" or "conversion transaction" with other investments, shareholders who
      own
      (directly, indirectly or through attribution) 10% or more of our company's
      outstanding voting shares, shareholders whose functional currency is not the
      U.S. dollar, persons who are not citizens or residents of the United States,
      or
      persons which are foreign corporations, foreign partnerships or foreign estates
      or trusts as to the United States, or any aspect of state, local or non-United
      States tax laws and shareholders who acquired their common shares pursuant
      to
      the exercise of employee stock options or rights or otherwise as compensation.
      Additionally, the discussion does not consider the tax treatment of persons
      who
      hold common shares through a partnership or other pass-through entity or the
      possible application of United States











federal
      gift or estate tax. This summary is addressed only to a holder of common shares
      who is (i) a citizen or resident of the United States who owns less than 10%
      of
      our company's outstanding voting shares, (ii) a corporation organized in the
      United States or under the laws of the United States or any state thereof,
      (iii)
      an estate, the income of which is includable in gross income for United States
      federal income tax purposes regardless of source, or (iv) a trust, if
      (1) a
      court within the United States is able to exercise primary supervision over
      the
      administration of the trust and one or more U.S. persons have the authority
      to
      control all substantial decisions of the trust or (2) has a valid election
      in
      effect under applicable United States Treasury Regulations to be treated as
      a
      U.S. person (each, a "U.S. Holder"). This summary is for general information
      purposes only and does not purport to be a comprehensive description of all
      of
      the tax considerations that may be relevant to a decision to purchase common
      shares. This summary generally considers only U.S. Holders that will own their
      common shares as capital assets.





Each
      shareholder should consult with such shareholder's own tax advisor as to the
      particular tax consequences to such shareholder of the purchase, ownership
      and
      sale of their common shares including the effects of applicable state, local,
      foreign or other tax laws and possible changes in the tax laws.





**Treatment
      of Dividend Distributions**





Subject
      to the discussion below under "Tax Status Of The Company - *Passive
      Foreign Investment Companies* ,"
      a distribution by our company to a U.S. Holder in respect of the common shares
      (including the amount of any Canadian taxes withheld thereon) will generally
      be
      treated for United States federal income tax purposes as a dividend to the
      extent of our company's current and accumulated earnings and profits, as
      determined under United States federal income tax principles. To the extent,
      if
      any, that the amount of any such distribution exceeds our company's current
      and
      accumulated earnings and profits, as so computed, it will first reduce the
      U.S.
      Holder's tax basis in the common shares owned by him, and to the extent it
      exceeds such tax basis, it will be treated as capital gain from the sale of
      common shares.





While
      it is not anticipated that our company will pay dividends in the foreseeable
      future, the gross amount of any distribution from our company received by a
      U.S.
      Holder which is treated as a dividend for United States federal income tax
      purposes (before reduction for any Canadian tax withheld at source) will be
      included in such U.S. Holder's gross income as ordinary income and generally
      will not qualify for the dividends received deduction applicable in certain
      cases to United States corporations. If you are an individual, dividends that
      we
      pay you through 2008 will be subject to tax at long-term capital gain rates,
      provided certain holding period and other requirements are satisfied and
      provided that in the year such dividends are paid, or the preceding taxable
      year, we are not a foreign personal holding company, a foreign investment
      company or a passive foreign investment company. For United States federal
      income tax purposes, the amount of any dividend paid in Canadian dollars by
      our
      company to a U.S. Holder will equal the U.S. dollar value of the amount of
      the
      dividend paid in Canadian dollars, at the exchange rate in effect on the date
      of
      the distribution, regardless of whether the Canadian dollars are actually
      converted into United States dollars at that time. Canadian dollars received
      by
      a U.S. Holder will have a tax basis equal to the U.S. dollar value thereof
      determined at the exchange rate on the date of the distribution. Currency
      exchange gain or loss, if any, recognized by a U.S. Holder on the conversion
      of
      Canadian dollars into U.S. dollars will generally be treated as U.S. source
      ordinary income or loss to such holder. U.S. Holders should consult their own
      tax advisors concerning the treatment of foreign currency gain or loss, if
      any,
      on any Canadian dollars received which are converted into dollars subsequent
      to
      distribution.





A
      U.S. Holder generally will be entitled to deduct any Canadian taxes withheld
      from dividends in computing United States taxable income, or to credit such
      withheld taxes against the United States federal income tax imposed on such
      U.S.
      Holder's dividend income. No deduction for Canadian taxes may be claimed,
      however, by an individual (noncorporate) U.S. Holder that does not itemize
      deductions. The amount of foreign taxes for which a U.S. Holder may claim a
      credit in any year is subject to complex limitations and restrictions, which
      must be determined on an individual basis by each shareholder. Distributions
      with respect to common shares that are taxable as dividends will generally
      constitute foreign source income for purposes of the foreign tax credit
      limitation. The limitation on foreign taxes eligible for credit is calculated
      separately with respect to specific classes of income. For this purpose,
      dividends distributed by our company with respect to the common shares will
      generally constitute "passive income." Foreign income taxes exceeding a
      shareholder's credit limitation for the year of payment or accrual of such
      tax
      can be carried back for two taxable years and forward for five taxable years,
      subject to the credit limitation applicable in each of such years. Additionally,
      the foreign tax credit in any taxable year may not offset more than 90% of
      a
      shareholder's liability for United States individual or corporate alternative
      minimum tax. The total amount of allowable foreign tax credits in any year
      generally cannot exceed regular U.S. tax liability for the year attributable
      to
      foreign source taxable income. A U.S. Holder will be denied a foreign tax credit
      with respect to Canadian income tax withheld from dividends received on the
      common shares to











the
      extent such U.S. Holder has not held the ordinary shares for at least 16 days
      of
      the 30-day period beginning on the date which is 15 days before the ex-dividend
      date or to the extent such U.S. Holder is under an obligation to make certain
      related payments with respect to substantially similar or related property.
      Any
      days during which a U.S. Holder has substantially diminished its risk of loss
      on
      the common shares are not counted toward meeting the 16 day holding period
      required by the statute.





**Sale
      or Exchange of a Common Share**





Subject
      to the discussion below under "Tax Status Of The Company - *Passive
      Foreign Investment Companies* ,"
      the sale or exchange by a U.S. Holder of a common share generally will result
      in
      the recognition of gain or loss by the U.S. Holder in an amount equal to the
      difference between the amount realized and the U.S. Holder's basis in the common
      share sold. Such gain or loss will be capital gain or loss provided that the
      common share is a capital asset in the hands of the holder. The gain or loss
      realized by an individual (noncorporate) U.S. Holder on the sale or exchange
      of
      a common share will be long-term capital gain or loss subject to a reduced
      rate
      of tax if the common share had been held for more than one year. If the common
      share had been held by such individual U.S. Holder for not more than one year,
      such gain will be short-term capital gain. Gains recognized by a U.S. Holder
      on
      a sale, exchange or other disposition of common shares generally will be treated
      as United States source income for United States foreign tax credit purposes.
      A
      loss recognized by a U.S. Holder on the sale, exchange or other disposition
      of
      common shares generally is allocated to U.S. source income. However, such loss
      must be allocated to foreign source income to the extent certain dividends
      were
      received by the U.S. Holder within the 24-month period preceding the date on
      which the U.S. Holder recognized the loss. The deductibility of a capital loss
      recognized on the sale, exchange or other disposition of common shares is
      subject to limitations. A U.S. Holder that receives foreign currency upon
      disposition of common shares and subsequently converts the foreign currency
      into
      U.S. dollars generally will have foreign exchange gain or loss based on any
      appreciation or depreciation in the value of the foreign currency against the
      U.S. dollar. U.S. Holders should consult their own tax advisors regarding
      treatment of any foreign currency gain or loss on any Canadian dollars received
      in respect of the sale, exchange or other disposition of common shares.





**Tax
      Status of the Company**





*Personal
      Holding Companies.* A
      non-U.S. corporation may be classified as a personal holding company for United
      States federal income tax purposes if both of the following two tests are
      satisfied: (i) if at any time during the last half of the company's taxable
      year, five or fewer individuals (without regard to their citizenship or
      residency) own or are deemed to own (under certain attribution rules) more
      than
      50% of the stock of the corporation by value and (ii) 60% or more of such
      non-U.S. corporation's gross income derived from U.S. sources or effectively
      connected with a U.S. trade or business, as specifically adjusted, is from
      certain passive sources such as dividends and royalty payments. Such a
      corporation generally is taxed on the amounts of such passive source income,
      after making adjustments such as deducting dividends paid and income taxes,
      that
      are not distributed to shareholders. We believe that our company was not a
      personal holding company in 2004 and is not currently a personal holding
      company. However, no assurance can be given that either test will not be
      satisfied in the future.





*Foreign
      Personal Holding Companies.* A
      non-U.S. corporation will be classified as a foreign personal holding company
      for United States federal income tax purposes if both of the two following
      tests
      are satisfied: (i) five or fewer individuals who are United States citizens
      or
      residents own or are deemed to own (under certain attribution rules) more than
      50% of all classes of the corporation's stock measured by voting power or value
      and (ii) the corporation receives at least 60% (50% if previously a foreign
      personal holding company) of its gross income (regardless of source), as
      specifically adjusted, from certain passive sources. If such a corporation
      is
      classified as a foreign personal holding company, a portion of its
      "undistributed foreign personal holding company income" (as defined for United
      States federal income tax purposes) would be imputed to all of its shareholders
      who are U.S. Holders on the last taxable day of the corporation's taxable year,
      or, if earlier, the last day on which it is classifiable as a foreign personal
      holding company. Such income would be taxable as a dividend, even if no cash
      dividend is actually paid. U.S. Holders who dispose of their shares prior to
      such date would not be subject to tax under these rules. We believe that our
      company was not a foreign personal holding company in 2004 and is not currently
      a foreign personal holding company. However, no assurance can be given that
      our
      company will not qualify as a foreign personal holding company in the future.





*Passive
      Foreign Investment Companies.* A
      company will be a passive foreign investment company if 75% or more of its
      gross
      income (including the pro rata share of the gross income of any company (United
      States or foreign) in which the company is considered to own 25% or more of
      the
      shares (determined by market value)) in a taxable year is passive income.
      Alternatively, the company will be considered to be a passive foreign











investment
      company if at least 50% of the value of the company's assets (averaged over
      the
      year) (including the pro rata share of the value of the assets of any company
      in
      which the company is considered to own 25% or more of the shares (determined
      by
      market value)) in a taxable year are held for the production of, or produce,
      passive income. For these purposes, the value of our assets is calculated based
      on our market capitalization. Passive income generally includes, among others,
      interest, dividends, royalties, rents and annuities.





If
      our company is a passive foreign investment company for any taxable year, a
      U.S.
      Holder, in the absence of an election by such U.S. Holder to treat our company
      as a "qualified electing fund" (a "QEF election"), as discussed below, would,
      upon certain distributions by our company and upon disposition of the common
      shares at a gain, be liable to pay tax at the highest tax rate on ordinary
      income in effect for each period to which the income is allocated, plus interest
      on the tax, as if the distribution or gain had been recognized ratably over
      the
      days in the U.S. Holder's holding period for the common shares during which
      our
      company was a passive foreign investment company. Additionally, if our company
      is a passive foreign investment company, U.S. Holders who acquire ordinary
      shares from decedents would be denied the normally available step-up of the
      income tax basis for such common shares to fair market value at the date of
      death and instead would have a tax basis equal to the decedent's basis, if
      lower.





If
      our company is treated as a passive foreign investment company for any taxable
      year, U.S. Holders should consider whether to make a QEF election for United
      States federal income tax purposes. If a U.S. Holder has a QEF election in
      effect for all taxable years that such U.S. Holder has held the common shares
      and our company was a passive foreign investment company, distributions and
      gain
      will not be recognized ratably over the U.S. Holder's holding period or subject
      to an interest charge, gain on the sale of common shares will be characterized
      as capital gain and the denial of basis step-up at death described above would
      not apply. Instead, each such U.S. Holder is required for each taxable year
      that
      our company is a qualified electing fund to include in income a pro rata share
      of the ordinary earnings of our company as ordinary income and a pro rata share
      of the net capital gain of our company as long-term capital gain, subject to
      a
      separate election to defer payment of taxes, which deferral is subject to an
      interest charge. Consequently, in order to comply with the requirements of
      a QEF
      election, a U.S. Holder must receive from our company certain information.
      We
      intend to supply U.S. Holders with the information needed to report income
      and
      gain pursuant to a QEF election in the event our company is classified as a
      passive foreign investment company. The QEF election is made on a
      shareholder-by-shareholder basis and can be revoked only with the consent of
      the
      Internal Revenue Service. A shareholder makes a QEF election by attaching a
      completed IRS Form 8621 (including the passive foreign investment company annual
      information statement) to a timely filed United States federal income tax return
      and by filing such form with the IRS Service Center in Philadelphia,
      Pennsylvania. Even if a QEF election is not made, a shareholder in a passive
      foreign investment company who is a U.S. Holder must file a completed IRS Form
      8621 every year.





As
      an alternative to making a QEF election, a U.S. Holder may elect to make a
      mark-to-market election with respect to the common shares owned by him if such
      stock qualifies as “marketable stock.” To qualify as “marketable stock,” the
      stock must be regularly traded on a qualified exchange. Under applicable
      Treasury regulations, a “qualified exchange” includes a national securities
      exchange that is registered with the SEC or the national market system
      established under the Securities Exchange Act of 1934 and certain foreign
      securities exchanges. Under applicable Treasury Regulations, PFIC stock traded
      on a qualified exchange is regularly traded on such exchange for any calendar
      year during which such stock is traded, other than in *de*  *minimis* quantities, on at least 15 days during each calendar quarter. We cannot assure
      U.S. Holders that our common shares will be treated as regularly traded stock
      on
      a qualified exchange. If the mark-to-market election were made, then the rules
      set forth above would not apply for periods covered by the election. Under
      such
      election, a U.S. Holder includes in income each year an amount equal to fair
      market value of the common shares owned by such U.S. Holder as of the close
      of
      the taxable year over the U.S. Holder's adjusted basis in such shares. The
      U.S.
      Holder would be entitled to a deduction for the excess, if any, of such U.S.
      Holder's adjusted basis in his common shares over the fair market value of
      such
      shares as of the close of the taxable year; provided however, that such
      deduction would be limited to the extent of any net mark-to-market gains with
      respect to the common shares included by the U.S. Holder under the election
      for
      prior taxable years. The U.S. Holder's basis in his common shares is adjusted
      to
      reflect the amounts included or deducted pursuant to this election. Amounts
      included in income pursuant to the mark-to-market election, as well as gain
      on
      the sale or exchange of the common shares, will be treated as ordinary income.
      Ordinary loss treatment applies to the deductible portion of any mark-to-market
      loss, as well as to any loss realized on the actual sale or exchange of the
      common shares to the extent that the amount of such loss does not exceed the
      net
      mark-to-market gains previously included with respect to such common shares.





The
      mark-to-market election applies to the tax year for which the election is made
      and all later tax years, unless the common shares cease to be marketable or
      the
      IRS consents to the revocation of the election.














We
      do not believe our company was a passive foreign investment company during
      2004.
      However, there can be no assurance that our company will not be classified
      as a
      passive foreign investment company in 2005 or thereafter because the tests
      for
      determining passive foreign investment company status are applied annually
      and
      it is difficult to make accurate predictions of future income and assets, which
      are relevant to this determination. U.S. Holders who hold common shares during
      a
      period when our company is a passive foreign investment company will be subject
      to the foregoing rules, even if our company ceases to be a passive foreign
      investment company, subject to certain exceptions for U.S. Holders who made
      a
      QEF election. U.S. Holders are urged to consult with their own tax advisors
      about making a QEF election or mark-to-market election and other aspects of
      the
      passive foreign investment company rules.





**Back-Up
      Withholding and Information Reporting**





U.S.
      Holders generally are subject to information reporting requirements and back-up
      withholding with respect to dividends paid in the United States on common
      shares, or proceeds paid from the disposition of common shares, unless the
      U.S.
      Holder provides an IRS Form W-9 or otherwise establishes an
      exemption.





The
      amount of any back-up withholding will be allowed as a credit against a U.S.
      Holder’s federal income tax liability and may entitle such holder to a refund,
      provided that certain required information is furnished to the IRS.





**F.**
            **Dividends
                and PayingAgents**




Not
      applicable.




**G.**
            **Statements
                by
                Experts**




Not
      applicable.




**H.**
            **Documents
                on
                Display.**




We
      have filed this Annual Report on Form 20-F with the Securities and Exchange
      Commission under the Securities Exchange Act of 1934. Statements made in this
      Annual Report as to the contents of any contract, agreement or other document
      referred to are not necessarily complete. With respect to each such contract,
      agreement or other document filed as an exhibit to this Annual Report, reference
      is made to the exhibit for a more complete description of the matter involved,
      and each such statement shall be deemed qualified in its entirety by such
      reference.




We
      are subject to the informational requirements of the Exchange Act and file
      reports and other information with the Securities and Exchange Commission.
      Reports and other information which we file with the Securities and Exchange
      Commission, including this Annual Report on Form 20-F, may be inspected
      and
      copied at the public reference facilities of the Securities and Exchange
      Commission at:




450
                Fifth Street N.W.
            500
                West Madison StreetRoom
                1024
            Suite
                1400Washington
                D.C. 20549
            Chicago,
                Illinois 60661




You
      can also obtain copies of this material by mail from the Public Reference
      Section of the Securities and Exchange Commission, 450 Fifth Street, N.W.,
      Washington, D.C. 20549, at prescribed rates. Additionally, copies of this
      material may also be obtained from the Securities and Exchange Commission’s
      Internet site at http://www.sec.gov. The Commission’s telephone number is
      1-800-SEC-0330.




**I.**
            **Subsidiary
                Information.**





Not
      applicable.




**ITEM
      11 - QUANTITATIVE AND QUALITATIVE DISCLOSURE ABOUT
      MARKET RISK**




(a)
            Quantitative
                Information about Market Risk





See
      Item 5 -
      Operating and Financial Review and Prospects - Liquidity and Capital Resources
      -
      Foreign Currency Rate Fluctuations; Interest Rate and Investment
      Risk.















(b)
            Qualitative
                Information about Market Risk





See
      Item 5 -
      Operating and Financial Review and Prospects - Liquidity and Capital Resources
      -
      Foreign Currency Rate Fluctuations; Interest Rate and Investment
      Risk.




**ITEM
      12 - DESCRIPTION OF SECURITIES OTHER THAN DEBT
      SECURITIES**





Not
      applicable.





**PART
      II**





**ITEM
      13 - DEFAULT, DIVIDENDARREARAGES AND
      DELINQUENCIES**





None.





**ITEM
      14 - MATERIAL MODIFICATIONSTO THE RIGHTS
      OF
      SECURITY HOLDERS AND USE OF PROCEEDS**





There
      were no material modifications to the rights of our security holders during
      the
      fiscal year ended December 31, 2004.





**ITEM
      15 - CONTROLS AND
      PROCEDURES**





The
      Company’s management, with the participation of the Company’s Chief Executive
      Officer and its Chief Financial Officer has evaluated the effectiveness of
      the
      Company’s disclosure controls and procedures as of March 22, 2005. Based on that
      evaluation, the Company’s management, including the Chief Executive Officer and
      the Chief Financial Officer, concluded that the Company’s disclosure controls
      and procedures were effective.




The
      Company's management did not identify any change in the Company's internal
      control over financial reporting that occurred during the Company's last fiscal
      year that has materially affected, or is reasonably likely to materially affect,
      the Company's internal control over financial reporting.





**ITEM
      16A - AUDIT COMMITTEE FINANCIAL EXPERT**





The
      Company’s Board of Directors has determined that it has at least one audit
      committee financial expert serving on its audit committee. The Board of
      Directors has determined that Darroch Robertson is an audit committee financial
      expert. The Board of directors has determined that Mr. Robertson is independent,
      as that term is defined under Rule 4200-1(a)(14) of the Nasdaq Stock Market
      Rules. **** Mr.
      Robertson has been an Associate Professor of Business at the Richard Ivey School
      of Business, The University of Western Ontario, for the past five years. He
      was
      the Director of the undergraduate HBA program at the Ivey School. Mr. Robertson
      was also a director and chair of the audit committee of Stackpole Ltd., a
      TSX-listed company. Mr. Robertson is also an elected member of council for
      the
      Institute of Chartered Accountants of Ontario, where he currently serves on
      the
      audit committee and by-laws committee.





**ITEM
      16B - CODE OF ETHICS**





The
      Company has adopted a Code of Ethics that applies to its principal executive
      officer, principal financial officer, principal accounting officer, controller
      and persons performing similar functions. The Code of Ethics is attached as
      an
      exhibit to this report. We did not amend, modify or grant any waiver from any
      provision of our Code of Ethics during the last fiscal year.





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





The
      following table sets forth the aggregate fees billed for each of the last two
      fiscal years for professional services rendered by our auditors for the audit
      of
      our annual financial statements and other services.













**FEES
        OF AUDITORS**
 
 **Year**
              
              Audit
                  Fees(1)
              
              Audit-Related
                  Fees(2)
              
              Tax
                  Fees(3)
              
              Other
                  Fees(4)2003
              
              $
              160,000
              
              $
              66,000
              
              $
              71,450(5
              )
              $
              18,7502004
              
              $
              243,000
              
              $
              60,000
              
              $
              36,000
              
              $
              9,000


(1)
            Audit
                Fees represent costs associated with the audit of our company’s financial
                statements including U.S. GAAP and U.S. GAAS.(2)
            Audit-Related
                Fees represent costs associated with reviews of our company’s quarterly
                financial press releases and shareholders reports.(3)
            Tax
                Fees represent costs associated with the preparation of our company’s
                annual tax filings, tax planning & advice.(4)
            Other
                fees represent costs associated with the review and recommended accounting
                treatment related to complicated contracts or
                arrangements.(5)
            $28,500
                of this amount represents a fee that was recovered by the
                company.





Before
      the Company’s auditor is engaged by the Company to render audit or non-audit
      services, the engagement is approved by the Audit Committee. All of the audit
      and non-audit services provided by the Company’s auditor were approved by the
      Audit Committee pursuant to the Audit Committee’s pre-approval
      policy.





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





Not
      applicable. ****





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





During
      the last fiscal year, there were no purchases by or on behalf of the Company
      or
      any affiliated purchaser of any class of the Company’s equity securities
      registered under Section 12 of the Exchange Act.




**PART
      III**





**ITEM
      17- FINANCIAL STATEMENTS**





Not
      applicable.





**ITEM
      18 - FINANCIAL STATEMENTS**





See
      the Index to Consolidated Financial Statements accompanying this report on
      page
      F-1.





**ITEM
      19- EXHIBITS**





Exhibits
      filed as part of this Annual Report.





1.1
            Articles
                of Arrangement of the Company filed with the Ontario Ministry of
                Consumer
                and Business Services on October 31, 2002.(1)1.2
            By-laws
                of the Company.(2)2.1
            Form
                of Convertible Secured Note.(6)2.2
            Registration
                Rights Agreement, dated as of June 16, 2000, between Bid.Com International
                and Acqua Wellington Value Fund Ltd.(4)2.3
            Form
                of Warrant issued or issuable upon exercise of Convertible Secured
                Notes.(6)4.1
            Salary
                Protection Letter, dated February 12, 1997, between the Company and
                Jeffrey Lymburner.(3)4.2
            Option
                Agreement dated February 19, 2001 between Bid.Com International Inc.
                and
                Wendell Willick.(5)4.3
            Amendment
                to Option Agreement dated May 2, 2001 between Bid.Com International
                Inc.
                and Wendell Willick.(5)4.4
            Board
                Support Agreement, dated as of September 7, 2001 between Bid.Com
                International Inc. and ADB Systemer ASA.(5)
















4.5
            Board
                Representation Agreement, dated as of September 7, 2001 between Bid.Com
                International Inc. and LimeRock Partners LLC, Jan Pedersen, Sandnes
                Investering, Rogaland Investering, AIG Private Bank Ltd. and Karstein
                Gjersvik.(5)4.6
            Employment
                Agreement, dated as of September 18, 2001 between Bid.Com International
                Inc. and Jan Pedersen.(5)4.7
            Subscription
                Agreement, dated as of April 25, 2002, between ADB Systems International
                Inc. and Stonestreet Limited Partnership.(5)4.8
            Arrangement
                Agreement, dated as of August 23, 2002, between ADB Systems International
                Inc. and ADB Systems International Ltd.(1)4.9
            General
                Conveyance and Assumption Agreement, dated August 23, 2002, between
                ADB
                Systems International Inc. and ADB Systems International Ltd.(2)4.10
            Loan
                Agreement, dated August 23, 2002, and Loan Agreement Amending Agreement
                entered into as of August 30, 2002 among The Brick Warehouse Corporation,
                ADB Systems International Inc. and ADB Systems International
                Ltd.(6)4.11
            Form
                of Supply Services and Licensing Agreement, dated August 23, 2002,
                among
                The Brick Warehouse Corporation, ADB Systems International Inc.,
                and ADB
                Systems International Ltd.(6)4.12
            Form
                of General Security Agreement, dated as of April 30, 2002, between
                ADB
                Systems International Inc. and each of Stonestreet Limited Partnership
                and
                Greenwich Growth Fund Ltd.(6)4.13
            Form
                of Subscription Agreement, dated August 30, 2002, between ADB Systems
                International Inc. and Stonestreet Limited Partnership.(6)4.14
            Form
                of Subscription Agreement, dated August 30, 2002, between ADB Systems
                International Inc. and Greenwich Growth Fund Ltd.(6)4.15
            Co-operation
                Agreement made as of August 23, 2002 between ADB Systems International
                Inc., ADB Systems International Ltd. and The Brick Warehouse
                Corporation.(6)4.16
            Agency
                Agreement dated June 15, 2004 between ADB Systems International Ltd.
                and
                First Associates Investments Inc.(7)4.17
            General
                Security Agreement dated as of May 19, 2004 between ADB Systems
                International Ltd. and Stonestreet Limited Partnership.(7)4.18
            Form
                of Subscription Agreement between ADB Systems International Ltd.
                and First
                Associates Investments Inc.(7)4.19
            Subscription
                Agreement dated May 19, 2004 between ADB Systems International Ltd.
                and
                Stonestreet Limited Partnership.(7)4.20
            Formof
                Subscription Agreement for Equity Private
                Placements.*8.1
            List
                of Subsidiaries.*10.1
            Certification
                pursuant to 18 U.S.C. Section
                1350.*11.1
            Code
                of Ethics of ADB Systems International Ltd.(7)









*
            Filed
                herewith(1)
            Incorporated
                by reference from Exhibit 1 to the Company’s Current Report on Form 6-K,
                Filing No. 1 for the Month of November 2002, filed with the Securities
                and
                Exchange Commission on November 5, 2002.(2)
            Incorporated
                by reference from Exhibit 1.2 of Amendment No. 1 to the Company’s
                Registration Statement on Form 20-F, File No. 001-14835, filed with
                the
                Securities and Exchange Commission on March 30,
                1999.
















(3)
            Incorporated
                by reference from Exhibit 3.27 of Amendment No. 1 to the Company’s
                Registration Statement on Form 20-F, File No. 001-14835, filed with
                the
                Securities and Exchange Commission on March 30, 1999.(4)
            Incorporated
                by reference from the Exhibits to the Company’s Annual Report on Form
                20-F, File No. 001-14835, filed with the Securities and Exchange
                Commission on May 23, 2001.(5)
            Incorporated
                by reference from the Exhibits to the Company’s Annual Report on Form
                20-F, File No. 001-14835, filed with the Securities and Exchange
                Commission on May 17, 2002.(6)
            Incorporated
                by reference from Exhibits to the Company’s Annual Report on Form 20-F,
                File No. 001-14835, filed with the Securities and Exchange Commission
                on
                May 20, 2003.(7)
            Incorporated
                by reference from Exhibits to the Company’s Annual Report on Form 20-F,
                File No. 001-14835, filed with the Securities and Exchange Commission
                on
                June 30, 2004.





SIGNATURES





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




ADB
                  SYSTEMS INTERNATIONAL INC.By:
              /s/
                  Jeffrey LymburnerName:
              Jeffrey
                  LymburnerTitle:
              Chief
                  Executive OfficerDated:
                  June 24, 2005
              By:
              /s/
                  Michael RobbName:
              Michael
                  RobbTitle:
              Chief
                  Financial Officer and Corporate
                  Secretary
















**Certification**





I,
      Jeffrey Lymburner, certify that:





1.
      I have reviewed this annual report on Form 20-F of ADB Systems International
      Ltd.;





2.
      Based on my knowledge, this report does not contain any untrue statement of
      a
      material fact or omit to state a material fact necessary to make the statements
      made, in light of the circumstances under which such statements were made,
      not
      misleading with respect to the period covered by this report;





3.
      Based on my knowledge, the financial statements, and other financial information
      included in this report, fairly present in all material respects the financial
      condition, results of operations and cash flows of the company as of, and for,
      the periods presented in this report;





4.
      The company’s other certifying officers and I are responsible for establishing
      and maintaining disclosure controls and procedures (as defined in Exchange
      Act
      Rules 13a-15(e) and 15d-15(e)) for the company and have:





a)
                Designed such disclosure controls and procedures, or caused such
                disclosure controls and procedures to be designed under our supervision,
                to ensure that material information relating to the company, including
                its
                consolidated subsidiaries, is made known to us by others within those
                entities, particularly during the period in which this report is
                being
                prepared;b)
                not applicable;c)
                Evaluated the effectiveness of the company’s disclosure controls and
                procedures and presented in this report our conclusions about the
                effectiveness of the disclosure controls and procedures, as of the
                end of
                the period covered by this report based on such evaluation;
                andd)
                Disclosed in this report any change in the company’s internal control over
                financial reporting that occurred during the period covered by the
                annual
                report that has materially affected, or is reasonably likely to materially
                affect, the company’s internal control over financial reporting;
                and





5.
      The company’s other certifying officers and I have disclosed, based on our most
      recent evaluation of internal control over financial reporting, to the company's
      auditors and the audit committee of the company's board of directors (or persons
      performing the equivalent functions):





a)
                All significant deficiencies and material weaknesses in the design
                or
                operation of internal control over financial reporting which are
                reasonably likely to adversely affect the company's ability to record,
                process, summarize and report financial information;
                andb)
                Any fraud, whether or not material, that involves management or other
                employees who have a significant role in the company's internal control
                over financial reporting.








Dated:
                June 24, 2005
            /s/
                Jeffrey LymburnerJeffrey
                LymburnerChief
                Executive Officer











**Certification**





I,
      Michael Robb, certify that:





1.
      I have reviewed this annual report on Form 20-F of ADB Systems International
      Ltd.;





2.
      Based on my knowledge, this report does not contain any untrue statement of
      a
      material fact or omit to state a material fact necessary to make the statements
      made, in light of the circumstances under which such statements were made,
      not
      misleading with respect to the period covered by this report;





3.
      Based on my knowledge, the financial statements, and other financial information
      included in this report, fairly present in all material respects the financial
      condition, results of operations and cash flows of the company as of, and for,
      the periods presented in this report;





4.
      The company’s other certifying officers and I are responsible for establishing
      and maintaining disclosure controls and procedures (as defined in Exchange
      Act
      Rules 13a-15(e) and 15d-15(e)) for the company and have:





a)
                Designed such disclosure controls and procedures, or caused such
                disclosure controls and procedures to be designed under our supervision,
                to ensure that material information relating to the company, including
                its
                consolidated subsidiaries, is made known to us by others within those
                entities, particularly during the period in which this report is
                being
                prepared;b)
                not applicable;c)
                Evaluated the effectiveness of the company’s disclosure controls and
                procedures and presented in this report our conclusions about the
                effectiveness of the disclosure controls and procedures, as of the
                end of
                the period covered by this report based on such evaluation;
                andd)
                Disclosed in this report any change in the company’s internal control over
                financial reporting that occurred during the period covered by the
                annual
                report that has materially affected, or is reasonably likely to materially
                affect, the company’s internal control over financial reporting;
                and




5.
      The company’s other certifying officers and I have disclosed, based on our most
      recent evaluation of internal control over financial reporting, to the company's
      auditors and the audit committee of the company's board of directors (or persons
      performing the equivalent functions):





a)
                All significant deficiencies and material weaknesses in the design
                or
                operation of internal control over financial reporting which are
                reasonably likely to adversely affect the company's ability to record,
                process, summarize and report financial information;
                andb)
                Any fraud, whether or not material, that involves management or other
                employees who have a significant role in the company's internal control
                over financial reporting.





Dated:
                June 24, 2005
            /s/
                Michael RobbMichael
                RobbChief
                Financial Officer




























**INDEX
      TO CONSOLIDATED FINANCIAL STATEMENTS**




Audited
      Consolidated Financial Statements for the years ended December 31, 2004, 2003,
      2002





Report
                of Independent Registered Chartered Accountants
            
            
            F-1Consolidated
                Balance Sheets as at December 31, 2004 and 2003
            
            
            F-3Consolidated
                Statements of Operations for the years ended December 31, 2004, 2003
                and
                2002
            
            
            F-4Consolidated
                Statements of Deficit for the years ended December 31, 2004, 2003
                and
                2002
            
            
            F-5Consolidated
                Statements of Cash Flows for the years ended December 31, 2004, 2003,
                and
                2002
            
            
            F-6Notes
                to Consolidated Financial Statements
            
            
            F-7





**Management’s
      Report**





Preparation
      of the consolidated financial statements accompanying this annual report and
      the
      presentation of all other information in this report is the responsibility
      of
      management. The financial statements have been prepared in accordance with
      appropriate and generally accepted accounting principles and reflect
      management’s best estimates and judgments. All other financial information in
      the report is consistent with that contained in the financial statements. The
      Company maintains appropriate systems of internal control, policies and
      procedures which provide management with reasonable assurance that assets are
      safeguarded and that financial records are reliable and form a proper basis
      for
      preparation of financial statements.





The
      Board of Directors ensures that management fulfills its responsibilities for
      financial reporting and internal control through an Audit Committee which is
      composed of non-executive directors. The Audit Committee reviewed the
      consolidated financial statements with management and external auditors and
      recommended their approval by the Board of Directors. The consolidated financial
      statements have been audited by Deloitte & Touche LLP, Chartered
      Accountants. Their report stating the scope of their audit and their opinion
      on
      the consolidated financial statements is presented below.




jlsig
            mrsigJeff
                Lymburner
            Michael
                RobbCEO
            Chief
                Financial Officer





**Report
      of Independent Registered Chartered Accountants**


**To
      the Shareholders of ADB Systems International Ltd.**




We
      have audited the consolidated balance sheets of ADB Systems International Ltd.
      as at December 31, 2004 and 2003, and the consolidated statements of operations,
      deficit and cash flows for each of the years in the three year period ended
      December 31, 2004.  These financial statements are the responsibility
      of
      the Company's management.  Our responsibility is to express an opinion
      on
      these financial statements based on our audits.




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




In
      our opinion, these consolidated financial statements present fairly, in all
      material respects, the financial position of the Company as at December 31,
      2004
      and 2003 and the results of its operations and its cash flows for each of the
      years in the three year period ended December 31, 2004 in accordance with
      Canadian generally accepted accounting principles.




The
      Company is not required to have, nor were we engaged to perform, an audit of
      its
      internal control over financial reporting. Our audit included consideration
      of
      internal control over financial reporting as a basis for designing audit
      procedures that are appropriate in the circumstances, but not for the purpose
      of
      expressing an opinion on the effectiveness of the Company’s internal control
      over financial reporting. Accordingly we express no such opinion.









ADB
      Systems International Ltd. F-1











Independent
      Registered Chartered Accountants


Toronto,
      Ontario, Canada


March
      6, 2005




***Comments
      by Independent Registered Chartered Accountants on Canada - United States
      Reporting Difference***




The
      standards of the Public Company Accounting Oversight Board (United States)
      require the addition of an explanatory paragraph when the financial statements
      are affected by conditions and events that cast substantial doubt on the
      Company’s ability to continue as a going concern, such as those described in
      Note 2 to the financial statements.  Although we conducted our audits
      in
      accordance with Canadian generally accepted auditing standards and the Standards
      of the Public Company Accounting Oversight Board (United States), our report
      to
      the Shareholders dated March 6, 2005 is expressed in accordance with Canadian
      reporting standards which do not permit a reference to such conditions and
      events in the auditors’ report when these are adequately disclosed in the
      financial statements.










Independent
      Registered Chartered Accountants


Toronto,
      Ontario, Canada


March
      6, 2005







ADB
        Systems International Ltd. F-2








**Consolidated
      Balance Sheets**


**December
      31, 2004 and 2003**


**(in
      thousands of** **Canadian dollars)**




**2004**
                
                **2003****ASSETS**CURRENTCash
                
                $
                440
                
                $
                432Marketable
                    securities
                
                
                13
                
                
                13Accounts
                    receivable
                
                
                1,535
                
                
                1,384Deposits
                    and prepaid expenses
                
                
                208
                
                
                1182,196
                
                
                1,947CAPITAL
                    ASSETS (Note 4)
                
                
                142
                
                
                266ACQUIRED
                    SOFTWARE (Note 20)
                
                
                -
                
                
                846DEFERRED
                    CHARGES (NET) (Note 5)
                
                
                155
                
                
                -ACQUIRED
                    AGREEMENTS (Note 21)
                
                
                -
                
                
                150TRADEMARKS
                    AND INTELLECTUAL****PROPERTY
                    (NET)
                
                
                -
                
                
                2$
                2,493
                
                $
                3,211**LIABILITIES**CURRENTAccounts
                    payable
                
                $
                870
                
                $
                700Accrued
                    liabilities
                
                
                810
                
                
                670Deferred
                    revenue
                
                
                135
                
                
                911,815
                
                
                1,461SECURED
                    SUBORDINATED NOTES (Note 6)
                
                
                1,684
                
                
                7213,499
                
                
                2,182NON-CONTROLLING
                    INTEREST
                
                
                3
                
                
                3COMMITMENTS
                    AND CONTINGENCIES (Notes 2 and 14)**SHAREHOLDERS’
                    DEFICIENCY**Share
                    capital (Note 8)
                
                
                100,052
                
                
                97,674Contributed
                    surplus (Note 9)
                
                
                1,282
                
                
                1,289Warrants
                    (Note 10)
                
                
                405
                
                
                324Stock
                    options (Note 11)
                
                
                936
                
                
                898Other
                    options (Note 12)
                
                
                78
                
                
                -Conversion
                    feature on secured subordinated notes (Note 6)
                
                
                992
                
                
                497Cumulative
                    translation account
                
                
                112
                
                
                106Deficit
                
                
                (104,866
                )
                
                (99,762
                )(1,009
                )
                
                1,026$
                2,493
                
                $
                3,211




On
        behalf of the Board:
 
 director1sig
              director2sigDirector
              Director
 
 See
        notes to consolidated financial statements.




ADB
        Systems International Ltd. F-3





**Consolidated
          Statements of Operations**Years ended
          December 31, 2004, 2003 and 2002(in thousands ofCanadian
          dollars, except per share
          amounts)  **2004**
                
                **2003**
                
                **2002**Revenue
                
                $
                4,930
                
                $
                5,853
                
                $
                5,780General
                    and
                    administrative
                
                4,365
                
                4,648
                
                6,288Sales
                    and
                    marketing
                
                749
                
                1,098
                
                1,875Software
                    development and technology
                
                3,257
                
                2,817
                
                4,1018,371
                
                8,563
                
                12,264Loss
                    before
                    employee stock options, depreciation and amortization, interest
                    expense
                    and interest income
                
                (3,441
                )
                (2,710
                )
                (6,484
                )Employee
                    stock options (Note 11)
                
                39
                
                193
                
                —Depreciation
                    and amortization
                
                1,190
                
                1,901
                
                2,602Interest
                    expense
                
                439
                
                289
                
                200Interest
                    income
                
                (6
                )
                (9
                )
                (45
                )1,662
                
                2,374
                
                2,757Loss
                    before
                    the undernoted
                
                (5,103
                )
                (5,084
                )
                (9,241
                )Realized
                    gain
                    on settlement of demand loan (Note 19)
                
                —
                
                2,195
                
                —Realized
                    gains and losses on disposal of marketable securities, strategic
                    investments and capital assets (Note 17)
                
                (1
                )
                7
                
                (85
                )Unrealized
                    gains and losses on revaluation of strategic investments(Note
                    18)
                
                —
                
                —
                
                (24
                )Goodwill
                    impairment (Note 22)
                
                —
                
                —
                
                (14
                )Retail
                    activities (Note 16)
                
                —
                
                67
                
                —(1
                )
                2,269
                
                (123
                )NET
                    LOSS FOR
                    THE YEAR
                
                $
                (5,104
                )
                $
                (2,815
                )
                $
                (9,364
                )LOSS
                    PER
                    SHARE (Note 8(d))
                
                $
                (0.08
                )
                $
                (0.05
                )
                $
                (0.22
                )
  See
          notes to
          consolidated financial statements.  ADB
            Systems International Ltd. F-4
 
   **Consolidated
          Statements of Deficit**
 **Years
          ended December 31, 2004, 2003 and 2002**
 **(in
          thousands of Canadian dollars)**




**2004**
              
              **2003**
              
              **2002**DEFICIT,
                  BEGINNING OF YEAR
              
              $
              (99,762
              )
              $
              (96,947
              )
              $
              (87,583
              )NET
                  LOSS FOR
                  THE YEAR
              
              (5,104
              )
              (2,815
              )
              (9,364
              )DEFICIT,
                  END
                  OF YEAR
              
              $
              (104,866
              )
              $
              (99,762
              )
              $
              (96,947
              )
  See
        notes to
        consolidated financial statements.






ADB
        Systems International Ltd. F-5





**Consolidated
          Statements of Cash
          FlowsYears ended December 31, 2004, 2003 and
          2002****(in thousands
          of
          Canadian Dollars)**  **2004**
                
                **2003**
                
                **2002****NET
                    INFLOW (OUTFLOW) OF CASH RELATED TO THE FOLLOWING
                    ACTIVITIES****OPERATING**Net
                    loss for
                    the year
                
                $
                (5,
                    104
                )
                $
                (2,815
                )
                $
                (9,364
                )Items
                    not
                    affecting cashDepreciation
                    and amortization
                
                1,190
                
                1,901
                
                2,602Non
                    cash
                    customer acquisition costs
                
                —
                
                38
                
                —Non
                    cash
                    interest expense
                
                266
                
                239
                
                108Employee
                    stock options
                
                39
                
                193
                
                —Stock
                    compensation to third parties
                
                —
                
                —
                
                25Realized
                    gain
                    on settlement of demand loan (Note 19)
                
                —
                
                (2,195
                )
                —Realized
                    gains and losses on disposal of marketable securities, strategic
                    investments, and capital assets (Note 17)
                
                1
                
                (7
                )
                85Unrealized
                    gains and losses on revaluation of strategic investments(Note
                    18)
                
                —
                
                —
                
                24Goodwill
                    impairment (Note 22)
                
                —
                
                —
                
                14Changes
                    in
                    non cash operating working capital (Note 15)
                
                322
                
                (728
                )
                61(3,286
                )
                (3,374
                )
                (6,445
                )**INVESTING**Capital
                    assets
                
                (40
                )
                (45
                )
                (43
                )Capitalized
                    software, trademarks and intellectual property
                
                —
                
                —
                
                (7
                )Marketable
                    securities
                
                —
                
                8
                
                1,556Proceeds
                    from
                    disposal of capital assets
                
                —
                
                34
                
                167Proceeds
                    from
                    disposal of joint venture and strategic investments(Note 17
                    (a))
                
                —
                
                20
                
                126Purchase
                    of
                    non-controlling interest
                
                —
                
                —
                
                (14
                )(40
                )
                17
                
                1,785**FINANCING**Issuance
                    of
                    common shares for cash (Note 8 (b))
                
                903
                
                1,458
                
                1,506Repayment
                    of
                    capital lease
                
                —
                
                —
                
                (42
                )Secured
                    subordinated notes (Note 6)
                
                2,598
                
                994
                
                1,000Deferred
                    charges (Note 5)
                
                (167
                )
                —
                
                (1,024
                )Demand
                    loan
                    (Note 19)
                
                —
                
                —
                
                2,0003,334
                
                2,452
                
                3,440NET
                    CASH
                    INFLOW (OUTFLOW) DURING THE YEAR
                
                8
                
                (905
                )
                (1,220
                )CASH,
                    BEGINNING OF YEAR
                
                432
                
                1,337
                
                2,557CASH,
                    END OF
                    YEAR
                
                $
                440
                
                $
                432
                
                $
                1,337SUPPLEMENTAL
                    DISCLOSURE OF CASH PAYMENTSInterest
                    paid
                
                $
                60
                
                $
                48
                
                $
                24Income
                    taxes
                
                $
                —
                
                $
                —
                
                $
                —
  SUPPLEMENTAL
          DISCLOSURE OF NON-CASH FINANCING ACTIVITIES – See Note 15  See
          notes to
          consolidated financial statements.
  ADB
          Systems International Ltd. F-6
 
  **Notes
          to the Consolidated Financial
          StatementsYears ended December 31, 2004, 2003 and 2002(in
          Canadian dollars)**  
  **1.********DESCRIPTION OF
          BUSINESS**  ADB
          Systems
          International Ltd. (“ADB” or the “Company”) delivers asset lifecycle management
          solutions that enable companies to source, manage and sell assets for maximum
          value.  ADB works with a growing number of customers and partners
          in a
          variety of sectors including the asset-intensive oil and gas industry to
          improve
          operational efficiencies.  ADB also enables customers in government,
          manufacturing and financial services sectors to reduce purchasing costs
          and
          improve procurement processes.  ADB
          was created on
          August 30, 2002.  Upon implementation of a special resolution
          of the
          shareholders of the Company and shareholders of ADB Systems International
          Inc.
          (“Old ADB”, formerly Bid.Com International Inc. (“Bid.Com”)), pursuant to
          Section 182 of the Business Corporations Act (Ontario), the shareholders
          of
          Old ADB exchanged their shares for shares of the Company on a one-for-one
          basis
          on October 22, 2002.  All assets and liabilities of Old ADB,
          other
          than those related to retail activities (Note 16) were transferred to the
          Company on that date in the form of a return of capital.  ADB conducted
          no
          activities prior to October 22, 2002.  Old ADB subsequently
          changed
          its name to Bid.Com International Ltd. (“Bid.Com Ltd.”).  These
          consolidated
          financial statements reflect the financial position of the Company as at
          December 31, 2004 and 2003, and results of its operations and its
          cash
          flows subsequent to October 22, 2002, and results of operations
          and of cash
          flows of Old ADB for the 2002 period prior to October 22, 2002 based
          upon
          continuity of interests accounting as no substantive change of ownership
          occurred.  Bid.Com
          was an
          on-line auction service provider and e-tailer.  During 2000, the
          Company
          refocused its business model to become an on-line enabling service to other
          businesses seeking to use its on-line retailing technologies.  The
          Company
          provides businesses with the use of its software and hardware technology
          over a
          specific term in addition to consulting, implementation, and training
          services.  In October 2001, Bid.Com acquired ADB Systemer
          ASA (“ADB
          Systemer”), a Norway-based software vendor of enterprise asset management and
          electronic procurement applications.  The Company changed its name
          to ADB
          Systems International Inc. to reflect its expanded product offering.  **2.********CONTINUATION
          OF THE
          BUSINESS**  While
          the
          accompanying consolidated financial statements have been prepared on the
          basis
          of accounting principles applicable to a going concern, certain adverse
          conditions and events cast substantial doubt upon the validity of this
          assumption. The Company has not yet realized profitable operations and
          has
          relied on non-operational sources of financing to fund operations. 
          The
          Company’s ability to continue as a going concern will be dependent on
          management’s ability to successfully execute its business plan including a
          substantial increase in revenue as well as maintaining operating expenses
          at or
          near the same level as 2004.  Management’s 2005 business plan includes a
          significant increase in revenue and operating cash flow primarily from
          major new
          contracts in Norway, the UK and North America.  Management believes
          that it
          has the ability to raise additional financing if required.  The
          Company
          cannot provide assurance that it will be able to execute on its business
          plan or
          assure that efforts to raise additional financings would be
          successful.  These
          financial
          statements do not include adjustments or disclosures that may result from
          the
          Company’s inability to continue as a going concern.  If the going concern
          assumption were not appropriate for these financial statements, then adjustments
          would be necessary in the carrying values of assets and liabilities, the
          reported net losses and the balance sheet classifications used.  Management
          believes
          that continued existence beyond 2004 is dependent on its ability to increase
          revenue from existing products, and to expand the scope of its product
          offering
          which entails a combination of internally developed software and partnerships
          with third parties.
  ADB
          Systems International Ltd. F-7
 
  **Notes
          to the Consolidated Financial
          StatementsYears ended December 31, 2004, 2003 and 2002(in
          Canadian dollars)**
  **3.********SIGNIFICANT ACCOUNTING
          POLICIES**  The
          accompanying
          consolidated financial statements are prepared in accordance with accounting
          principles generally accepted in Canada (Canadian GAAP), which are substantially
          the same as generally accepted accounting principles in the United States
          (U.S.
          GAAP), except as disclosed in Note 24.  The accompanying consolidated
          financial statements are prepared using accounting principles applicable
          to a
          going concern, which assumes that the Company will continue in operation
          for a
          reasonable period of time and will be able to realize its assets and discharge
          its liabilities in the normal course of operations (see Note 2).  PRINCIPLES
          OF
          CONSOLIDATION The
          accompanying
          consolidated financial statements include the accounts of the Company and
          subsidiaries over which it exercises control.  Business acquisitions
          are
          accounted for under the purchase method and operating results are included
          in
          the consolidated financial statements as of the date of the acquisition
          of
          control.  All material inter-company transactions have been
          eliminated.  INVESTMENT
          IN
          ASSOCIATED COMPANY The
          investment in
          Bid.Com Ltd. was accounted for under the equity method (see Note 23). 
          This
          method was considered appropriate based upon management’s inability to determine
          the strategic operating policies of the associated company without the
          cooperation of others, its inability to obtain future economic benefits
          from the
          associated company, and its lack of exposure to the related risks of
          ownership.  U.S. GAAP required consolidation of the investment in
          associated company.  The impact of this difference in U.S. GAAP
          from
          Canadian GAAP is disclosed in these financial statements in Note 24 —
          Reconciliation of United States GAAP.  MARKETABLE
          SECURITIES Marketable
          securities are comprised of interest-bearing certificates carried at cost
          plus
          accrued interest which approximate market value.  CAPITAL
          ASSETS AND
          AMORTIZATION Capital
          assets are
          carried at cost less accumulated amortization.  Amortization is
          calculated
          on a straight-line basis in amounts sufficient to amortize the cost of
          capital
          assets over their estimated useful lives as follows:  Computer
                    hardware
                
                3
                    yearsComputer
                    software
                
                1
                    year or
                    life of the licenseFurniture
                    and
                    fixtures
                
                5
                    yearsLeasehold
                    improvements
                
                life
                    of the
                    lease
  SOFTWARE
          DEVELOPMENT COSTS The
          cost of
          software internally developed for client applications through e-commerce
          enabling agreements and software licensing is expensed as incurred.  ACQUIRED
          SOFTWARE The
          cost of core
          software acquired as a result of the acquisition of ADB Systemer ASA was
          capitalized and amortized over three years, the estimated useful life of
          the
          software.  ACQUIRED
          AGREEMENTS Acquired
          agreements
          were capitalized based on the estimated fair value of common share purchase
          warrants issued in exchange for entering into certain agreements and are
          amortized over the initial term of the agreements.  The fair value
          of these
          warrants is calculated based on the Cox-Rubinstein binomial valuation
          model.
 ADB
        Systems International Ltd. F-8
 
 **Notes
                to the Consolidated Financial
                StatementsYears ended December 31, 2004, 2003 and 2002(in
                Canadian dollars)**
          TRADEMARKS
              AND
              INTELLECTUAL PROPERTY
            Trademarks
              and
              intellectual property are recorded at cost and amortized on a straight-line
              basis over two years.  Trademarks and intellectual property
              acquired as a
              result of the acquisition of ADB Systemer ASA, and directly attributable
              to core
              software products, were capitalized and have been amortized over three
              years,
              the estimated useful life of the related software.
            
            GOODWILL
            In
              2001, the
              Company adopted the provisions of the Canadian Institute of Chartered
              Accountants (“CICA”) Handbook sections 1581 and 3062, whereby the purchase price
              of an acquired business is allocated to all assets and liabilities,
              including
              identifiable intangible assets, based on their fair values. 
              Any purchase
              price in excess of those fair values is recorded as goodwill. 
              Goodwill
              must be tested annually for impairment on a fair value basis, and where
              the
              carrying value exceeds fair value, a goodwill impairment loss must
              be
              recorded.  This accounting policy became effective January 1,
              2002
              with a transition provision beginning July 1, 2001. 
              Management
              assessed the carrying value of the goodwill arising from the acquisition
              of ADB
              Systemer, and determined that a permanent decline had occurred in the
              fair value
              of goodwill at December 31, 2002 based on estimated future cash
              flows from
              the business acquired.
            
            TRANSLATION
              OF
              FOREIGN CURRENCIES
            The
              accompanying
              consolidated financial statements are prepared in Canadian dollars. 
              The
              Company’s foreign subsidiaries in the United States, Ireland and the United
              Kingdom are classified as fully integrated with the functional currency
              being
              the Canadian dollar.  The Company uses the temporal method of
              foreign
              currency translation for these operations.  Monetary assets
              and liabilities
              are translated at the exchange rates in effect on the balance sheet
              date. 
              Non-monetary assets are translated at historic exchange rates. 
              Revenue and
              expense amounts are translated using the average exchange rate for
              the year
              except amortization of capital assets which is translated at historic
              exchange
              rates.  Gains and losses from foreign exchange translations
              are included in
              the statement of operations.
            
            The
              Company’s
              subsidiary in Norway is classified as a self-sustaining operation whereby
              the
              functional currency of the operation is the Norwegian krone. 
              The Company
              uses the current rate method of translation for these operations. 
              Assets
              and liabilities are translated at the rate of exchange in effect at
              the balance
              sheet date.  Revenue and expenses (including depreciation and
              amortization)
              are translated using the average exchange rate for the year. 
              Gains and
              losses from foreign exchange translations are included as a separate
              component
              of shareholders’ equity.
            
            LOSS
              PER
              SHARE
            The
              treasury stock
              method of calculating diluted earnings per share is used.  For
              the years
              presented, all stock options, convertible debentures and warrants are
              anti-dilutive, therefore diluted loss per share is equal to basic loss
              per
              share.  The basic loss per share calculation is based on the
              weighted
              average number of shares outstanding during the year.
          ADB
                Systems International Ltd. F-9
          
          
          **Notes
                to the Consolidated Financial
                StatementsYears ended December 31, 2004, 2003 and 2002(in
                Canadian dollars)**
          REVENUE
              RECOGNITION
            The
              Company’s
              revenues are derived from software license fees, implementation, training
              and
              consulting services, product maintenance and customer support, and
              software
              development, and hosting fees. Fees for services are billed separately
              from
              licenses of the Company’s product.  The Company recognizes revenue in
              accordance with Canadian GAAP, which in the Company’s circumstances, are not
              materially different from the amounts that would be determined under
              provisions
              of the American Institute of Certified Public Accountants Statements
              of Position
              (SOP) No. 97-2, “ Software Revenue Recognition”, and as amended by Statement of
              Position 98-9, “Modification of SOP 97-2, Software revenue Recognition, With
              Respect to Certain Transactions”. The Company also considers the provisions of
              CICA EIC 141, which is analogous to Staff Accounting Bulletin (SAB)
              104,
“Revenue Recognition in Financial Statements”, and CICA EIC 142, which is
              analogous to the Emerging Issues Task Force consensus on EITF 00-21,
“Accounting
              for Revenue Arrangements with Multiple Elements,” in determining the appropriate
              revenue recognition methodology.
            
            SOFTWARE
              LICENSE
              REVENUE
            The
              Company
              recognizes software license revenue in accordance with the terms of
              the license
              agreement and when the following criteria as set out in SOP No. 97-2
              are
              met:
            •persuasive
              evidence of an
              arrangement exists,
            •delivery
              has occurred,
            •the
              fee is fixed or determinable,
              and
            •collectibility
              is probable.
            Software
              license
              revenue consists of fixed license fee agreements involving perpetual
              licenses.
            
            Software
              license agreements may be part of multiple element
              arrangements that include consulting and implementation services. 
              When
              these services are considered essential to the functionality of the
              license, the
              associated revenue is recognized on the basis of the percentage of
              completion
              method as specified by contract accounting principles.  When
              these services
              are not considered essential to the functionality of the license, the
              entire
              arrangement fee is allocated to each element in the arrangement based
              on the
              respective vendor specific objective evidence (“VSOE”) of the fair value of each
              element.  VSOE used in determining the fair value of license
              revenues is
              based on the price charged by the Company when the same element is
              sold in
              similar quantities to a customer of a similar size and nature. 
              VSOE used
              in determining fair value for installation, implementation and training
              based on
              the standard daily rates for the type of service being provided multiplied
              by
              the estimated time to complete each task.  VSOE used in determining
              the
              fair value of maintenance and support is based on the annual renewal
              rates.  The revenue allocable to the software license is recognized
              when
              the revenue criteria are met.  The revenue allocable to the
              consulting
              services is recognized as the services are performed.
            
            IMPLEMENTATION,
              TRAINING & CONSULTING SERVICE
              FEES
            The
              Company receives revenue from implementation of its
              product offerings, consulting services and training services. Customers
              are
              charged a fee based on time and expenses. Revenue from implementation,
              consulting service and training fees is recognized as the services
              are performed
              or deferred until contractually defined milestones are achieved or
              until
              customer acceptance has occurred, as the case may be, for such
              contracts.
            
            PRODUCT
              MAINTENANCE & CUSTOMER SUPPORT FEES
            The
              Company receives revenue from maintaining its products
              and the provision of on-going support services to customers. The maintenance
              and
              support fees are typically equal to a specified percentage of the customers’
              license fee. If associated with the fixed fee license model, the maintenance
              revenues received are recorded as deferred revenue and recognized on
              a
              straight-line basis over the contract period.
            
            Services
              revenue from maintenance and support is recognized
              when the services are performed.  Maintenance and support revenues
              paid in
              advance are non-refundable and are recognized on a straight-line basis
              over the
              term of the agreement, which typically is 12 months.
            
            SOFTWARE
              DEVELOPMENT FEES
            Typically,
              development of software for our customers is
              provided based on a predetermined fixed rate basis.  Revenue
              is recognized
              as time is incurred throughout the development process.
          
          
          ADB
                Systems International Ltd. F-10
          
          **Notes
                to the Consolidated Financial
                StatementsYears ended December 31, 2004, 2003 and 2002(in
                Canadian dollars)**
          
          HOSTING
              FEES
            The
              Company earns revenue from the
              hosting of customer websites.Under our existing hosting contracts,
              we charge customers a recurring periodic flat fee.  The fees
              are recognized
              as the hosting services are provided.
            
            DEFERRED
              REVENUE
            Deferred
              revenue is
              comprised of the unrecognized portion of consulting and implementation
              fees
              received from maintenance and support e-commerce enabling agreements,
              and the
              unrecognized portion of license, installation, and consulting revenue
              on the
              sale of software licenses and related services.
            
            CUSTOMER
              ACQUISITION COSTS
            Customer
              acquisition costs are comprised of the calculated fair value of common
              share
              purchase warrants issued to customers in return for certain agreements. 
              These amounts are deducted from gross revenue to the extent that revenue
              is
              earned, and are otherwise included in general and administrative expenses. 
              The fair value of these warrants is calculated based on the Cox-Rubinstein
              binomial valuation model.
            
            DEFERRED
              CHARGES
            Deferred
              charges
              are comprised of expenditures incurred in the issuance of secured subordinated
              notes.  The deferred charges are amortized over the term of
              the underlying
              notes on a straight-line basis.  In accordance with Canadian
              GAAP,
              conversion of the underlying notes results in the allocation of the
              associated
              unamortized deferred charge to shareholders’ equity.  Under U.S. GAAP, note
              conversion results in the expensing of the associated unamortized deferred
              charge.  The impact of this difference in Canadian GAAP from
              U.S. GAAP is
              disclosed in these notes to the financial statements under Reconciliation
              of
              United States GAAP (Note 24).
            
            The
              2003 opening
              balance of deferred charges consisted of expenditures incurred in obtaining
              a
              demand loan.  This balance was completely amortized in 2003.
            
            SECURED
              SUBORDINATED NOTES
            Financial
              instruments that contain both a liability and an equity element are
              required to
              have the instrument’s component parts classified separately under Canadian
              GAAP.  The Company uses the Cox-Rubinstein binomial valuation
              model to
              determine the fair value of the conversion feature at the issue dates
              of
              convertible secured subordinated notes and discloses the liability
              and equity
              components separately on its balance sheet.  U. S. GAAP does
              not permit
              separate disclosure of different elements of a financial instrument
              in the
              financial statements.  The impact of this difference in U. S.
              GAAP from
              Canadian GAAP is disclosed in the notes to these financial statements
              under
              Reconciliation of United States GAAP (Note 24).
            
            STOCK-BASED
              COMPENSATION
            The
              Canadian
              Institute of Chartered Accountants issued Handbook section 3870, “Stock-based
              Compensation and Other Stock-based Payments,” effective January 1, 2002. 
              During the fourth quarter of fiscal 2003, the Company elected to adopt
              the fair
              value method for stock-based compensation on a prospective basis. 
              As a
              result, the annual financial statements reflect the cost of stock-based
              compensation to employees effective January 1, 2003.  The impact
              of this
              standard is disclosed in Note 11 to the financial statements. 
              The impact
              of Statement of Financial Accounting Standards (SFAS) 123, “Accounting for
              Stock-Based Compensation,” is disclosed in the notes to these financial
              statements under Reconciliation of U.S. GAAP (Note 24).
            
            Prior
              to January 1,
              2003, under Canadian GAAP, stock options granted to employees were
              not required
              to be recorded in the accounts of the Company.  Stock options
              to employees
              under U.S. GAAP are accounted for in accordance with the provisions
              of
              Accounting Principles Board (APB) Opinion No. 25, “Accounting for Stock Issued
              to Employees”.  Because options granted to employees have been fixed
              options with the exercise price equal to the market price of stock,
              under US
              GAAP no accounting recognition was given to stock options granted to
              employees
              at fair market value until they are exercised.
            
            Stock-based
              compensation to third parties is recognized and recorded in the accounts
              of the
              Company at the fair market value of the equity instrument as determined
              by the
              Cox-Rubinstein binomial valuation model.
          
          ADB
                Systems International Ltd. F-11
          
          
          **Notes
                to the Consolidated Financial
                StatementsYears ended December 31, 2004, 2003 and 2002(in
                Canadian dollars)**
          INCOME
              TAXES
            The
              Company
              accounts for income taxes in accordance with the liability method. 
              The
              determination of future tax assets and liabilities is based on differences
              between the financial statement and income tax bases of assets and
              liabilities,
              using substantively enacted tax rates in effect for the period in which
              the
              differences are expected to reverse.  Future tax assets are
              recorded to
              recognize tax benefits only to the extent that, based on available
              evidence, it
              is more likely than not that they will be realized.
            
            USE
              OF SIGNIFICANT
              ACCOUNTING ESTIMATES
            The
              preparation of
              financial statements in conformity with generally accepted accounting
              principles
              requires management to make estimates and assumptions that affect the
              reported
              amounts of assets and liabilities and disclosure of contingent assets
              and
              liabilities at the date of the financial statements and the reported
              amounts of
              revenue and expenses during the reporting periods.  Estimates
              are used when
              determining items such as the allowance for doubtful accounts, the
              fair value
              assigned to the debt and equity components of the secured subordinated
              notes and
              the expected requirements for non-operational funding in 2005. 
              Actual
              results could differ from those estimates.
            
            **4.********CAPITAL
              ASSETS**
            
            **2004**
                    
                    **2003****Cost**
                    
                    **Accumulated
                        Amortization**
                    
                    **Net
                        Book Value**
                    
                    **Cost**
                    
                    **Accumulated
                        Amortization**
                    
                    **Net
                        Book Value****(in
                        thousands)**Computer
                        hardware
                    
                    $
                    2,601
                    
                    $
                    2,547
                    
                    $
                    54
                    
                    $
                    2,588
                    
                    $
                    2,428
                    
                    $
                    160Computer
                        software
                    
                    28
                    
                    28
                    
                    —
                    
                    28
                    
                    —
                    
                    28Furniture
                        and fixtures
                    
                    405
                    
                    343
                    
                    62
                    
                    411
                    
                    333
                    
                    78Leasehold
                        improvements
                    
                    27
                    
                    1
                    
                    26
                    
                    151
                    
                    151
                    
                    —$
                    3,061
                    
                    $
                    2,919
                    
                    $
                    142
                    
                    $
                    3,178
                    
                    $
                    2,912
                    
                    $
                    266
            
            During
              2004, the
              Company recorded capital asset amortization in the amount of $160,000
              (2003 -
              $162,000)
            
            **5.********DEFERRED
              CHARGES**
            
            During
              2004,
              financing costs in the amount of $15,000, $162,000 and $23,000 associated
              with
              the liability component of the Series F, Series G and Series H notes,
              respectively were recorded as deferred charges.  The financing
              costs for
              the Series G notes include $33,000 representing the allocation of the
              fair value
              of compensation options issued in conjunction with these notes (See
              Note 6
              (b)).  The deferred charges are being amortized on a straight-line
              basis
              over the term of the underlying debt.
            
            During
              the year
              ended December 31, 2004, conversion of the Series F notes resulted
              in the
              allocation of $13,000 in unamortized deferred charges to contributed
              surplus.  For 2004, amortization of deferred charges in the
              amount of
              $32,000 (2003 - $513,000) was recorded and included in depreciation
              and
              amortization expense.
            
            The
              following table
              summarizes the transactions within deferred charges.
            
            **2004**
                    
                    **2003****(in
                        thousands)**Opening
                        balance
                    
                    $
                    —
                    
                    $
                    513Series
                        F financing costs
                    
                    15
                    
                    —Series
                        G financing costs
                    
                    162
                    
                    —Series
                        H financing costs
                    
                    23
                    
                    —Amortization
                    
                    (32
                    )
                    (513
                    )Allocation
                        to contributed surplus
                    
                    (13
                    )
                    —Closing
                        balance
                    
                    $
                    155
                    
                    $
                    —
          
          
          ADB
                Systems International Ltd. F-12
          
          **Notes
                to the Consolidated Financial
                StatementsYears ended December 31, 2004, 2003 and 2002(in
                Canadian dollars)**
          **6.********SECURED SUBORDINATED
              NOTES**
            
            a)
              During the year
              ended December 31, 2004, the Company issued Series F secured subordinated
              notes
              with a face value of $500,000.  The Series F notes have an annual
              rate of
              interest of 7 percent paid quarterly in arrears, mature May 19, 2007
              and are
              convertible into equity units at a price of $0.31 per unit. 
              Each equity
              unit consists of one common share and one half of a share-purchase
              warrant with
              an exercise price of $0.50.  The share-purchase warrants expire
              on May 19,
              2007.  The Series F secured subordinated notes will automatically
              convert
              into units when the share price of the Company closes above $0.70 for
              five
              consecutive trading days during the term.  Holders may convert
              the notes
              into units at anytime following a four-month hold period.  If
              the holder
              does not convert and no automatic conversion takes place, the Company
              must repay
              the principal amount in cash.  The Series F notes are secured
              by a general
              security agreement on the assets of the Company, subordinated to the
              security
              claims provided to the holders of previously issued notes.
            
            As
              required by
              Canadian GAAP, the Company has separated the liability and equity components
              of
              the Series F secured subordinated notes.  The Company has determined
              the
              fair value of the liability component of the Series F notes by calculating
              the
              present value of the associated cash flows, using a discount rate that
              reflects
              the Company’s underlying rate of borrowing.  The Company has determined
              the
              fair value of the conversion feature at the issue date of the Series
              F notes
              using the Cox-Rubinstein binomial valuation model.  The resulting
              pro rata
              fair values of the liability component of the notes and the conversion
              features
              of the units, comprised of shares and attached warrants, was $286,000,
              $159,000
              and $55,000, respectively.  The liability component will be
              accreted to
              $500,000 over the term of the Series F notes through the recording
              of a non-cash
              interest expense until such date at which the underlying notes are
              converted
              into common shares.
            
            Financing
              costs in
              the amount of $26,000 were incurred in the issuance of the Series F
              notes. 
              Financing costs of $15,000 attributed to the liability component of
              the notes
              were allocated to deferred charges (See Note 5).  Financing
              costs of
              $11,000 attributed to the equity portions of the notes were recorded
              as a
              reduction to shareholders’ equity.
            
            During
              the year,
              all of the Series F notes were converted into equity units. 
              (See table
              below.)
            
            b)
              During the year
              ended December 31, 2004, the Company issued Series G secured subordinated
              notes
              with a face value of $1,710,000.  The Series G notes were issued
              to private
              investors including an amount totaling $170,000 issued to directors
              of the
              Company. The Series G notes mature June 15, 2007, have an annual rate
              of
              interest of 7 percent payable upon the earlier of maturity and conversion
              and
              are convertible into equity units at a price of $0.31 per unit. 
              Each
              equity unit consists of one common share and one half of a share-purchase
              warrant with an exercise price of $0.50.  The share-purchase
              warrants
              expire on June 15, 2008.  The Series G secured subordinated
              notes will
              automatically convert into units when the volume-weighted average share
              price of
              the Company closes above $0.70 for 20 consecutive trading days during
              the
              term.  Holders may convert the notes into units at anytime following
              a
              four-month hold period.  If the holder does not convert and
              no automatic
              conversion takes place, the Company must repay the principal amount
              in cash. The
              Series G notes are secured by a general security agreement on the assets
              of the
              Company, subordinated to the security claims provided to the holders
              of
              previously issued notes.
            
            As
              required by
              Canadian GAAP, the Company has separated the liability and equity components
              of
              the Series G secured subordinated notes.  The Company has determined
              the
              fair value of the liability component of the Series G notes by calculating
              the
              present value of the associated cash flows, using a discount rate that
              reflects
              the Company’s underlying rate of borrowing.  The Company has determined
              the
              fair value of the conversion feature at the issue date of the Series
              G notes
              using the Cox-Rubinstein binomial valuation model.  The resulting
              pro rata
              fair values of the liability component of the notes and the conversion
              features
              of the units, comprised of shares and attached warrants, was $959,000,
              $539,000
              and $212,000, respectively.  The liability component will be
              accreted to
              $1,710,000 over the term of the Series G notes through the recording
              of a
              non-cash interest expense until such date at which the underlying notes
              are
              converted into common shares.
          
          
          ADB
                Systems International Ltd. F-13
          **Notes
              to the Consolidated Financial
              StatementsYears ended December 31, 2004, 2003 and 2002(in
              Canadian dollars)**
        Financing
              costs in
              the amount of $230,000 were incurred in the issuance of the Series
              G
              notes.  Financing costs of $129,000 attributed to the liability
              component
              of the notes were allocated to deferred charges (See Note 5). 
              Financing
              costs of $101,000 attributed to the equity portions of the notes were
              recorded
              as a reduction to shareholders’ equity.
            
            In
              addition to the
              financing costs described above, the Company issued to First Associates
              Investment Inc. (“First Associates”) an option to purchase up to 485,000 equity
              units at a purchase price of $0.31 per unit.  The option expires
              on June
              15, 2006.  Each equity unit consists of one common share and
              one half of a
              share-purchase warrant with an exercise price of $0.50.  The
              share-purchase
              warrants expire on June 15, 2008.  Using the Cox-Rubinstein
              binomial
              valuation model, the Company has determined the fair value of these
              equity units
              to be $59,000.  The portion of the fair value of these options,
              in the
              amount of $33,000, attributable to the liability component of the notes
              was
              allocated to deferred charges.  The remaining portion, in the
              amount of
              $26,000, attributable to the equity components of the notes was recorded
              as a
              reduction to shareholders’ equity.
            
            Subsequent
              to the
              issuance of the Series G notes, the interest rate payable on the notes
              was
              retroactively increased to 11 percent.  The increase in the
              interest rate
              was a condition of the issuance of the Series H notes (See c) below).
            
            c)
              During the year
              ended December 31, 2004, the Company issued Series H secured subordinated
              notes
              with a face value of $520,000.  The Series H notes were issued
              to private
              investors including an amount totaling $270,000 issued to directors
              of the
              Company.  The Series H notes mature October 21, 2007, have an
              annual rate
              of interest of 11 percent payable upon the earlier of maturity and
              conversion
              and are convertible into equity units at a price of $0.20 per unit. 
              Each
              equity unit consists of one common share and one half of a share-purchase
              warrant with an exercise price of $0.40.  The share-purchase
              warrants
              expire on October 21, 2008.  The Series H secured subordinated
              notes will
              automatically convert into units when the share price of the Company
              closes at
              or above $0.45 for 10 consecutive trading days during the term. 
              Holders
              may convert the notes into units at anytime following a four-month
              hold
              period.  If the holder does not convert and no automatic conversion
              takes
              place, the Company must repay the principal amount in cash. 
              In order to
              obtain the required approvals to issue the Series H notes, the Company
              retroactively increased the interest rate on the Series G notes from
              an annual
              rate of 7 percent to an annual rate of 11 percent. The Series H notes
              are
              secured by a general security agreement on the assets of the Company,
              subordinated to the security claims provided to the holders of previously
              issued
              notes.
            
            As
              required by
              Canadian GAAP, the Company has separated the liability and equity components
              of
              the Series H secured subordinated notes.  The Company has determined
              the
              fair value of the liability component of the Series H notes by calculating
              the
              present value of the associated cash flows, using a discount rate that
              reflects
              the Company’s underlying rate of borrowing.  The Company has determined
              the
              fair value of the conversion feature at the issue date of the Series
              H notes
              using the Cox-Rubinstein binomial valuation model.  The resulting
              pro rata
              fair values of the liability component of the notes and the conversion
              features
              of the units, comprised of shares and attached warrants, was $282,000,
              $184,000
              and $54,000, respectively.  The liability component will be
              accreted to
              $520,000 over the term of the Series H notes through the recording
              of a non-cash
              interest expense until such date at which the underlying notes are
              converted
              into common shares.
            
            Financing
              costs in
              the amount of $43,000 were incurred in the issuance of the Series H
              notes. 
              Included in the financing costs was the incremental interest expense
              associated
              with the retroactive increase of the interest rate on the Series G
              notes. 
              Financing costs of $23,000 attributed to the liability component of
              the notes
              were allocated to deferred charges (See Note 5).  Financing
              costs of
              $20,000 attributed to the equity portions of the notes were recorded
              as a
              reduction to shareholders’ equity.
          ADB
                Systems International Ltd. F-14
          
          
          **Notes
                to the Consolidated Financial
                StatementsYears ended December 31, 2004, 2003 and 2002(in
                Canadian dollars)**
          d)
              During the year
              ended December 31, 2003, the Company issued Series E secured subordinated
              notes
              with a face value of $1.0 million for net proceeds of $994,000. 
              The Series
              E notes have an annual rate of interest of 11percent that is paid quarterly
              in
              arrears, mature August 19, 2006 and are convertible into equity units
              at a price
              of $0.35 per unit.  Each equity unit consists of one common
              share and one
              half of a share-purchase warrant with an exercise price of $0.50. 
              The
              Series E secured subordinated notes will automatically convert into
              units when
              the share price of the Company closes above $0.70 for five consecutive
              trading
              days during the term.  Note holders may convert into units at
              anytime
              following a four-month hold period.  If the holder does not
              convert and no
              automatic conversion takes place, the Company must repay the principal
              amount to
              the holders of the Series E secured subordinated notes in cash. 
              As part of
              this private placement, the Company issued 30,000 common share-purchase
              warrants
              to an associate of Stonestreet Limited Partnership (“Stonestreet”) in
              consideration for professional fees.  Each such warrant entitles
              the holder
              to purchase one common share of the Company for $0.50 at any time up
              to and
              including August 18, 2006. The Series E notes are secured by a general
              security
              agreement on the assets of the Company, subordinated to the security
              claims
              provided to the holders of previously issued notes.
            
            The
              Series E notes
              were issued to private investors including an amount totaling $100,000
              issued to
              directors and/or senior officers of the Company.  Costs in the
              amount of
              $6,000 associated with the issuance of the Series E secured subordinated
              notes
              were recorded as a reduction of the equity component of these notes.
            
            As
              required by
              Canadian GAAP, the Company has separated the liability and equity components
              of
              the Series E secured subordinated notes.  The Company has determined
              the
              fair value of the debt component of the Series E notes by calculating
              the
              present value of the associated cash flows, using a discount rate that
              reflects
              the Company’s underlying rate of borrowing.  The Company has determined
              the
              fair value of the conversion feature at the issue date of the Series
              E notes
              using the Cox-Rubinstein binomial valuation model.  The resulting
              pro rata
              fair value of the liability component of the secured subordinated notes
              and the
              conversion features of the units, comprised of shares and attached
              warrants, was
              $596,000, $292,000 and $106,000, respectively.  The liability
              component
              will be accreted to $1 million over the term of the Series E notes
              through the
              recording of non-cash interest expense until such date at which the
              underlying
              notes are converted into common shares.
            
            
            ADB
                Systems International Ltd. F-15
            
            
            **Notes
                to the Consolidated Financial
                StatementsYears ended December 31, 2004, 2003 and 2002(in
                Canadian dollars)**
            
            e)
                The following summarizes the nominal and fair values of the liability
                and equity
                components of the Series A through H secured subordinated notes.
              
              **Secured
                subordinated notes**
              
              **2004**
                      
                      **2003****Nominal
Value**
                      
                      **Fair
Value**
                      
                      **Nominal Value**
                      
                      **Fair
Value****(in
                          thousands)**Opening
                          balance
                      
                      $
                      1,115
                      
                      $
                      721
                      
                      $
                      205
                      
                      $
                      34Issuance
                          of notes:Series
                          E
                      
                      —
                      
                      —
                      
                      1,000
                      
                      596Series
                          F
                      
                      500
                      
                      286
                      
                      —
                      
                      —Series
                          G
                      
                      1,710
                      
                      959
                      
                      —
                      
                      —Series
                          H
                      
                      520
                      
                      282
                      
                      —
                      
                      —Non-cash
                          interest
                      
                      —
                      
                      266
                      
                      —
                      
                      112Conversion
                          of notesSeries
                          D
                      
                      (115
                      )
                      (96
                      )
                      (90
                      )
                      (21
                      )Series
                          E
                      
                      (625
                      )
                      (428
                      )
                      —
                      
                      —Series
                          F
                      
                      (500
                      )
                      (306
                      )
                      —
                      
                      —Closing
                          balance
                      
                      $
                      2,605
                      
                      $
                      1,684
                      
                      $
                      1,115
                      
                      $
                      721
              
              **Conversion
                features on secured subordinated notes including conversion of
                attached warrants**
              
              **2004**
                      
                      **2003****Common
Shares**
                      
                      **Fair
Value**
                      
                      **Common
Shares**
                      
                      **Fair
Value****(in
                          thousands)**Opening
                          balance
                      
                      5,723
                      
                      $
                      497
                      
                      2,562
                      
                      $
                      175Issuance
                          of notesSeries
                          E
                      
                      —
                      
                      —
                      
                      4,286
                      
                      398Series
                          F
                      
                      2,419
                      
                      203
                      
                      —
                      
                      —Series
                          G
                      
                      8,274
                      
                      624
                      
                      —
                      
                      —Series
                          H
                      
                      3,900
                      
                      218
                      
                      —
                      
                      —Conversion
                          of notesSeries
                          D
                      
                      (1,437
                      )
                      (99
                      )
                      (1,125
                      )
                      (76
                      )Series
                          E
                      
                      (2,679
                      )
                      (248
                      )Series
                          F
                      
                      (2,419
                      )
                      (203
                      )Closing
                          balance
                      
                      13,781
                      
                      $
                      992
                      
                      5,723
                      
                      $
                      497
          
          
          ADB
                Systems International Ltd. F-16
          
          **Notes
                to the Consolidated Financial
                StatementsYears ended December 31, 2004, 2003 and 2002(in
                Canadian dollars)**
          **7.********INCOME
            TAXES**
          
          The
            Company adopted accounting for income taxes under
            the liability method.  Under the liability method, a future tax
            asset is
            recorded based upon tax losses carried forward and differences in tax
            and
            accounting values in the Company’s assets and liabilities.  The tax asset
            is reduced by a valuation allowance to the extent that it is more likely
            than
            not that the asset would not be realized.  The valuation allowance
            will be
            reviewed and adjusted as appropriatefor each reporting period.  At
            December 31, 2004 and 2003, the Company established the valuation allowance
            at
            100 percent of the future tax asset.
          
          **2004**
                  
                  **2003****(in
                      thousands)**FUTURE
                      TAX ASSETTax
                      losses carried forward
                  
                  $
                  5,618
                  
                  $
                  3,229Difference
                      in tax and accounting valuations for capital assets and
                      investments
                  
                  207
                  
                  555,825
                  
                  3,284Valuation
                      allowance
                  
                  (5,825
                  )
                  (3,284
                  )Future
                      tax asset
                  
                  $
                  —
                  
                  $
                  —PROVISION
                      FOR INCOME TAXESIncome
                      taxes at statutory rate
                  
                  $
                  (1,388
                  )
                  $
                  (467
                  )Adjustments
                      to loss
                  
                  2,195
                  
                  (316
                  )Net
                      reduction in tax rates
                  
                  —
                  
                  (896
                  )(Increase)
                      reduction to valuation allowance on future tax
                      asset
                  
                  (2,541
                  )
                  1,212Tax
                      losses carried forward
                  
                  1,412
                  
                  226Difference
                      in tax and accounting valuations for capital assets and
                      investments
                  
                  152
                  
                  360Permanent
                      differences for tax and accounting income
                  
                  170
                  
                  (119
                  )Provision
                      for income taxes
                  
                  $
                  —
                  
                  $
                  —
          
          The
            $2.195 million adjustment to loss represents the difference between
            estimated 2003 loss carry-forwards and actual 2003 loss carry-forwards. 
            The $316,000 adjustment to loss represents the difference between estimated
            2002
            loss carry-forwards and actual 2002 loss carry-forwards.
          
          Tax
            loss carry-forwards at December 31, 2004 expire as
            follows:
          
          **(in
                      thousands)**2009
                  
                  
                  $
                  1,6592010
                  
                  
                  8,4182011
                  
                  
                  9812012
                  
                  
                  —2013
                  
                  
                  —2014
                  
                  
                  3,569Tax
                      loss carry-forwards that do not expire (a)
                  
                  
                  6,242$
                  20,869
          
          
          (a)Under
            Irish local tax laws, tax loss carry-forwards do not expire.
          

          
          ADB
                Systems International Ltd. F-17
            
            **Notes
                to the Consolidated Financial
                StatementsYears ended December 31, 2004, 2003 and 2002(in
                Canadian dollars)**
            
            **8.********SHARE
              CAPITAL**
            
            a)AUTHORIZED
            
            Unlimited
              number of
              common shares
            Unlimited
              number of
              preference shares – issuable in series
            
            b)COMMON SHARES
            
            **2004**
                    
                    **2003****Number**
                    
                    **Amount**
                    
                    **Number**
                    
                    **Amount****(in
                        thousands of shares and dollars)**Opening
                        balance
                    
                    59,423
                    
                    $
                    97,674
                    
                    50,140
                    
                    $
                    95,633Shares
                        issued pursuant to:Private
                        placement
                    
                    5,000
                    
                    930
                    
                    5,181
                    
                    1,254Conversion
                        of debentures
                    
                    4,357
                    
                    1,227
                    
                    750
                    
                    72Exercise
                        of warrants
                    
                    920
                    
                    195
                    
                    3,313
                    
                    703Exercise
                        of options
                    
                    72
                    
                    26
                    
                    39
                    
                    12Re-issuance
                        of treasury shares
                    
                    98
                    
                    —
                    
                    —
                    
                    —Closing
                        balance
                    
                    69,870
                    
                    $
                    100,052
                    
                    59,423
                    
                    $
                    97,674
            
            During
              2004, the
              issuance of common shares generated cash proceeds of $903,000 (2003
              - $1.458
              million) as follows: $749,000 (2003 - $982,000) from private placement
              issuances, $129,000 (2003 – $464,000) from the exercise of warrants and $25,000
              (2003 - $12,000) from the exercise of options.
            
            An
              unclaimed
              certificate for 98,000 common shares previously issued from treasury
              in the 2001
              acquisition of ADB Systemer ASA, and not included in the number of
              shares
              outstanding, was reissued during 2004.
            
            The
              conversion of
              the remaining secured subordinated notes would result in the issuance
              of Nil
              (2003 – 958,000) common shares for Series A, B and D notes, 1,071,000 (2003
–
              2,857,000) common shares for Series E notes, 5,516,000 common shares
              for Series
              G notes and 2,600,000 common shares for Series H notes.
            
            c)PRIVATE COMMON SHARE PLACEMENT
            
            On
              December 6,
              2004, the Company completed a transaction resulting in the issuance
              of 5,000,000
              shares at a price of $0.20 per share and 5,000,000 common share-purchase
              warrants exercisable into one common share at a price of $0.35 for
              gross
              proceeds of $1,000,000.  The warrants expire on December 6,
              2008. 
              Gross proceeds were comprised of $800,000 in cash and $200,000 in legal
              services.  The $200,000 was applied, in part, to outstanding
              payables and
              the remainder was recorded as a prepaid retainer for legal services. 
              Issuance costs in the amount of $70,000 were incurred, including $19,000
              representing the fair value of 150,000 compensation options issued
              to First
              Associates.  The compensation options are exercisable into 150,000
              equity
              units at a price of $0.20 per unit.  Each equity unit consists
              of one
              common share and one common share-purchase warrant with an exercise
              price of
              $0.35 and an expiry date of December 6, 2008.  The compensation
              options
              expire on December 6, 2006.  Included in this private placement
              were
              100,000 shares issued to a director of the Corporation for gross proceeds
              of
              $20,000.
            
            
            ADB
                Systems International Ltd. F-18
          **Notes
                to the Consolidated Financial
                StatementsYears ended December 31, 2004, 2003 and 2002(in
                Canadian dollars)**
          On
              June 26, 2003,
              the Company completed a transaction resulting in the issuance of 4,879,000
              common shares at a price of $0.24 and 2,733,000 common share-purchase
              warrants
              exercisable into one common share at $0.40 for net proceeds of $1.148
              million.  The warrants expire on June 26, 2005.  This
              private
              placement included the issuance of 693,000 common shares and 347,000
              common
              share-purchase warrants in settlement of an account payable in the
              amount of
              $166,000.  Included in this private placement were 2,146,000
              shares issued
              to a director and officer of the Company for total net proceeds of
              $505,000.
            
            On
              September 19,
              2003 the Company issued 302,250 shares in settlement of an account
              payable in
              the amount of $106,000.
            
            On
              April 25, 2002, the Company entered into an agreement with Stonestreet
              for a
              $1.1 million private placement resulting in netproceeds of $945,000
              after deducting costs of issue of approximately $155,000.  As
              a result, the
              Company issued 3.3 million common shares and 1 million common share-purchase
              warrants exercisable into common shares at US$0.35 per share.
            
            OnDecember 17, 2002, Stonestreet exercised all of these warrants
              for
              proceeds of $550,000.  Pursuant to the April 25, 2002 private
              placement,
              the Company issued 50,000 share-purchase warrants to an associate of
              Stonestreet
              for partial consideration in securing the funding and due diligence
              services.  These warrants expire on April 25, 2005 and are exercisable
              into
              common shares at US$ 0.35 per common share.
            
            d)The following table sets forth the computation of basic
              and diluted
              loss per share.
            
            **2004**
                    
                    **2003**
                    
                    **2002****(in
                        thousands, except per share amounts)****Numerator:**Net
                        Loss (numerator for basic loss per share applicable to common
                        shares)
                    
                    $
                    (5,104
                    )
                    $
                    (2,815
                    )
                    $
                    (9,364
                    )**Denominator:**Weighted
                        average shares (denominator for basic loss per
                        share)
                    
                    61,938
                    
                    54,324
                    
                    41,968Basic
                        loss per share
                    
                    $
                    (0.08
                    )
                    $
                    (0.05
                    )
                    $
                    (0.22
                    )
            
            For
              each fiscal year, the Company excluded the effect of
              all convertible debt, stock options and share-purchase warrants, as
              their impactwould have been anti-dilutive.
            
            **9.********CONTRIBUTED
              SURPLUS**
            
            During
              the year
              ended December 31, 2004, recorded value of $6,000 (2003 - $1,289,000)
              related to
              expired warrants was allocated from warrants to contributed surplus.
            
            During
              the year ended December 31, 2004, conversion of the Series F secured
              subordinated notes resulted in the reduction of contributedsurplus by
              $13,000 due to the allocation of unamortized deferred charges. 
              (See Note
              5.)

          
          ADB
                Systems International Ltd. F-19
            
            
            **Notes
                to the Consolidated Financial
                StatementsYears ended December 31, 2004, 2003 and 2002(in
                Canadian dollars)**
            
            **10.********WARRANTS**
            
            a)A
              summary of changes in the warrants issued
              and vested for the two years ended December 31, 2004 is as follows:
            
            **2004**
                    
                    **2003****Number**
                    
                    **Amount**
                    
                    **Number**
                    
                    **Amount****(in
                        thousands)**Opening
                        balance
                    
                    5,338
                    
                    $
                    324
                    
                    6,121
                    
                    $
                    1,599Issued
                        to key customer (Note 10 (c))
                    
                    —
                    
                    —
                    
                    —
                    
                    226Issued
                        in private equity placement (Note 8 (c))
                    
                    5,000
                    
                    —
                    
                    2,733
                    
                    —Issued
                        upon conversion of debt (Note 10 (b))
                    
                    2,178
                    
                    153
                    
                    375
                    
                    27Issued
                        in lieu of fees
                    
                    —
                    
                    —
                    
                    30
                    
                    —Cancelled
                    
                    (84
                    )
                    (6
                    )
                    (608
                    )
                    (1,289
                    )Exercised
                    
                    (920
                    )
                    (66
                    )
                    (3,313
                    )
                    (239
                    )Closing
                        balance
                    
                    11,512
                    
                    $
                    405
                    
                    5,338
                    
                    $
                    324
            
            The
              conversion of
              the remaining secured subordinated notes would result in the issuance
              of Nil
              (2003 – 479,000) common share-purchase warrants for Series A, B and D notes,
              536,000 (2003 – 1,429,000) common share-purchase warrants for Series E notes,
              2,758,000 common share-purchase warrants for Series G notes and 1,300,000
              common
              share-purchase warrants for Series H notes.
            
            b)CONVERTIBLE
              SECURED SUBORDINATED
              DEBENTURES
            
            During
              the year,
              the Company issued a total of 2,178,000 share-purchase warrants as
              follows:
              479,000 with an exercise price of $0.14 per share and 1,699,000 with
              an exercise
              price of $0.50 per share (2003 – 375,000 with an exercise price of $0.14 per
              share) as the result of the conversion of secured subordinated notes.
            
            During
              the year, 84,000 share-purchase warrants, that arose from of the
              conversion of Series D secured subordinated notes, expired and as a
              result were
              cancelled.
            
            c)STRATEGIC
              MARKETING AGREEMENT
            
            On
              December 13,
              2002, the Company issued 2 million warrants convertible into common
              shares of
              the Company to a customer at an exercise price of $0.45 per warrant. 
              The
              warrants expired on January 5, 2005.  Warrants that have vested
              are to be
              automatically exercised when the share price of the Company closes
              at or above
              $1.02 for three consecutive trading days.  The vesting of warrants
              is based
              on achieving a number of performance objectives associated with the
              GE Asset
              Manager LLC joint venture (See Note 21).
            
            During
              2003, a
              total of 1.25 million of the above warrants vested; 250,000 warrants
              vested when
              three initial customers of the joint venture were identified and the
              remaining 1
              million warrants vested upon the legal establishment of the joint venture. 
              The remaining 750,000 warrants have not vested as at December 31, 2004. 
              Vesting was contingent upon the achievement of certain performance
              and business
              related goals, which are currently undefined, associated with the GE
              Asset
              Manager joint venture.
            
            
            ADB
                Systems International Ltd. F-20

          **Notes
                to the Consolidated Financial
                StatementsYears ended December 31, 2004, 2003 and 2002(in
                Canadian dollars)**
          **d)**ACQUISITION
              OF ADB SYSTEMER ASA
            
            On
              October 11,
              2001, the Company acquired 98.3 percent of the outstanding common shares
              of ADB
              Systemer ASA.  As a result of the acquisition, the Company issued
              607,600
              share-purchase warrants with a strike price of two Norwegian krone,
              in exchange
              for 700,000 share purchase warrants in ADB Systemer ASA.  These
              warrants
              retained all of the characteristics of the original warrants and had
              specific
              exercise dates of March 31, 2002 and March 31, 2003, expiring March
              31, 2003
              (see Note 20).  All of the 607,600 warrants were cancelled on
              March 31,
              2003.
            
            **11.********STOCK
              OPTIONS**
            
            a)Stock
              options are comprised of the
              following components:
            
            **2004**
                    
                    **2003****Number**
                    
                    **Amount**
                    
                    **Number**
                    
                    **Amount****(in
                        thousands of options and dollars)**Employees
                    
                    853
                    
                    $
                    820
                    
                    2,645
                    
                    $
                    782Non-employees
                    
                    —
                    
                    116
                    
                    27
                    
                    116Total
                    
                    853
                    
                    $
                    936
                    
                    2,672
                    
                    $
                    898
            
            b)EMPLOYEE
              STOCK OPTIONS
            
            The
              Company has a stock option plan which provides for the issuance of
              stock options
              to employees, which may expire as much as 10 years from the date of
              grant, at
              prices not less than the fair market value of the common shares on
              the date of
              grant.  The aggregate exercise price for employee options outstanding
              at
              December 31, 2004 was approximately $296,000 (2003 – $1.8 million).  The
              Management Resources and Compensation Committee of the Board of Directors
              reserves the right to attach vesting periods to stock options granted. 
              All
              of the stockoptions outstanding at the end of 2004 are exercisable
              immediately.  The options expire between 2005 and 2006.
            
            A
              summary of
              changes in the stock option plan for the two years ended December 31,
              2004 is as
              follows:
            
            **Number
                        of Options**
                    
                    **Weighted
                        Average Exercise Price****2004**
                    
                    **2003**
                    
                    **2004**
                    
                    **2003****(in
                        thousands)**Opening
                        balance
                    
                    2,645
                    
                    2,793
                    
                    $
                    0.68
                    
                    $
                    1.84Granted
                    
                    —
                    
                    1,095
                    
                    —
                    
                    0.37Exercised
                    
                    (72
                    )
                    (39
                    )
                    0.34
                    
                    0.30Cancelled
                    
                    (1,720
                    )
                    (1,204
                    )
                    0.84
                    
                    3.38Closing
                        balance
                    
                    853
                    
                    2,645
                    
                    $
                    0.35
                    
                    $
                    0.68Exercisable,
                        end of year
                    
                    853
                    
                    2,057
                    
                    $
                    0.35
                    
                    $
                    0.74Options
                        remaining for issuance under stock option
                        plan
                    
                    3,191
                    
                    1,224
        
        ADB
                Systems International Ltd. F-21
          
          **Notes
                to the Consolidated Financial
                StatementsYears ended December 31, 2004, 2003 and 2002(in
                Canadian dollars)**
            
            **Range
                        of Exercise Prices**
                    
                    **Number
                        Outstanding and Exercisable at December 31, 2004**
                    
                    **Weighted
Average
Remaining
Contractual
                        Life**
                    
                    **Weighted
Average
Exercise
Price****(in
                        thousands)**$0.22-$0.33
                    
                    167
                    
                    1.1
                        years
                    
                    $
                    0.32$0.34-$0.37
                    
                    684
                    
                    1.6
                        years
                    
                    $
                    0.35$0.76
                    
                    2
                    
                    1.0
                        years
                    
                    $
                    0.76853
            
            During
              the fourth
              quarter of fiscal 2003, the Company adopted the accounting recommendations
              contained in the CICA Handbook Section 3870 –“Stock-based Compensation and Other
              Stock-based Payments” effective January 1, 2003.  This Section establishes
              standards for the recognition, measurement and disclosure of stock-based
              compensation and other stock-based payments made in exchange for goods
              and
              services, and applies to transactions, including non-reciprocal transactions,
              in
              which an enterprise grants shares of common stock, stock options, or
              other
              equity instruments, or incurs liabilities based on the price of common
              stock or
              other equity instruments.  Commencing in fiscal 2003, the Company
              recorded
              a compensation expense for stock options granted to employees on or
              after
              January 1, 2003, based on the fair value method of accounting. 
              For the
              year ended December 31, 2004, the employee stock option expense was
              $39,000
              (2003 - $193,000).  For the year ended December 31, 2003, expenses
              in the
              first, second and third quarters increased by $2,000, $1,000 and $130,000,
              respectively as the result of the early adoption of these recommendations. 
              Accordingly, quarterly net income (loss) in 2003 for such quarters
              previously
              reported as ($1,755,000), $527,000 and ($460,000), respectively were
              revised to
              ($1,757,000), $526,000 and ($590,000), respectively.
            
            For
              the year ended
              December 31, 2002, the Company did not record a compensation expense
              for stock
              options granted to employees.  Instead, the Company disclosed
              the pro forma
              net income (loss) and the pro forma income (loss) per share had the
              Company
              adopted the fair value method of accounting for stock-based compensation
              awarded
              on or after January 1, 2002.
            
            The
              Company
              determined the fair value of employee stock option grants using the
              Cox-Rubinstein binomial valuation model with the following assumptions
              on a
              weighted average basis:
            
            **2004**
                    
                    **2003**
                    
                    **2002**Dividend
                        yield
                    
                    N/A
                    
                    —
                    
                    —Risk
                        free interest rate
                    
                    N/A
                    
                    3.53
                    %
                    3.69
                    %Volatility
                    
                    N/A
                    
                    137.51
                    %
                    131.51
                    %Expected
                        term, in years
                    
                    N/A
                    
                    2.94
                    
                    2.00

          
          ADB
                Systems International Ltd. F-22
          
          **Notes
                to the Consolidated Financial
                StatementsYears ended December 31, 2004, 2003 and 2002(in
                Canadian dollars)**
            
            For
              the years ended
              December 31, 2004, 2003 and 2002, the amortization of the value of
              the
              stock-based compensation granted by the Company to employees in 2002,
              over the
              vesting period of the awards as specified under CICA 3870, would have
              resulted
              in the following pro forma loss attributable to common shareholders
              and pro
              forma basic and diluted loss per share:
            
            **2004**
                    
                    **2003**
                    
                    **2002**Loss
                        attributable to common shareholdersAs
                        reported
                    
                    $
                    (5,104
                    )
                    $
                    (2,815
                    )
                    $
                    (9,364
                    )Pro
                        forma
                    
                    $
                    (5,104
                    )
                    $
                    (2,956
                    )
                    $
                    (9,608
                    )Basic
                        and diluted net loss per share:As
                        reported
                    
                    $
                    (0.08
                    )
                    $
                    (0.05
                    )
                    $
                    (0.22
                    )Pro
                        forma
                    
                    $
                    (0.08
                    )
                    $
                    (0.05
                    )
                    $
                    (0.23
                    )
            
            c)NON-EMPLOYEE
              STOCK OPTIONS
            
            TheCompany
              had no stock options outstanding to third parties at
              December 31, 2004.  A summary of changes in the stock options
              to third
              parties for the two years ended December 31, 2004 is as follows:
            
            **Number
                        of Options**
                    
                    **Weighted
                        Average Exercise Price****2004**
                    
                    **2003**
                    
                    **2004**
                    
                    **2003****(in
                        thousands)**Opening
                        balance
                    
                    27
                    
                    253
                    
                    $
                    2.88
                    
                    $
                    2.88Granted
                    
                    —
                    
                    —
                    
                    —
                    
                    —Exercised
                    
                    —
                    
                    —
                    
                    —
                    
                    —Cancelled
                    
                    (27
                    )
                    (226
                    )
                    2.56
                    
                    2.91Closing
                        balance
                    
                    —
                    
                    27
                    
                    $
                    —
                    
                    $
                    2.56Exercisable,
                        end of year
                    
                    —
                    
                    27
                    
                    $
                    —
                    
                    $
                    2.56
            
            **12.********OTHER
              OPTIONS**
            
            During
              the year ended December 31, 2004, the Company issued 485,000 compensation
              options with a fair value of $59,000 relating to the issuance of Series
              G
              secured subordinated notes (See Note 6 (b)).  The options entitle
              the
              holder to purchase an equity unit at a purchase price of $0.31 per
              unit and
              expire on June 15, 2006.Each equity unit consists of one common
              share and one half of a share-purchase warrant with an exercise price
              of
              $0.50.  The share-purchase warrants expire on June 15, 2008.
            
            Also
              during the year ended December 31, 2004, the Company issued
              150,000 compensation options with a fair value of $19,000 relating
              to the
              December private equity placement (See Note 8 (c)).  The options
              entitle
              the holder to purchase an equity unit at a purchase price of $0.20
              per unit and
              expire on December 6, 2006.  Each equity unit consists of one
              common share
              and one share-purchase warrant with an exercise price of $0.35. 
              The
              share-purchase warrants expire on December 6, 2008.

          
          ADB
                Systems International Ltd. F-23
          
          **Notes
                to the Consolidated Financial
                StatementsYears ended December 31, 2004, 2003 and 2002(in
                Canadian dollars)**
            
            **13.********FINANCIAL
              INSTRUMENTS**
            
            Foreign
              exchange
              risk
            The
              Company’s
              revenue from software licensing and related services and e-commerce
              enabling
              agreements is transacted in various currencies including the Canadian
              dollar,
              U.S. dollar, UK pound, EURO, and Norwegian krone.  Correspondingly,
              operating expenses related to these activities are transacted in the
              above-denoted currencies.  The Company does not use derivative
              instruments
              to manage exposure to foreign exchange fluctuations.  The Company
              incurred
              $24,000 in foreign exchange losses in 2004 (2003 - $84,000; 2002 -
              $29,000).
            
            The
              Company
              transacted the majority of its retail product sales and purchases in
              U.S.
              dollars.
            
            Interest
              rate
              risk
            The
              Company has
              limited exposure to fluctuations in interest rates.  The Company
              does not
              use derivative instruments to reduce its exposure to interest rate
              risk.
            
            Credit
              risk
            Credit
              risk arises
              from the potential that a customer will fail to meet its contractual
              obligations
              under a software licensing and related services agreement or an e-commerce
              enabling agreement.
            
            In
              2004, one
              customer accounted for 31 percent (2003 – two customers accounted for 26 percent
              and 15 percent) of total revenues.  At December 31, 2004, there
              were three
              customers that accounted for 18 percent, 13 percent and 11 percent,
              respectively, of total accounts receivable.  At December 31,
              2003, three
              customers accounted for 25 percent, 19 percent and 14 percent, respectively,
              of
              total accounts receivable.
            
            Fair
              value
            The
              fair value of
              monetary assets and liabilities approximates amounts at which they
              would be
              exchanged between knowledgeable and unrelated persons.  The
              amounts
              recorded in the financial statements approximate fair value.
            
            **14.********COMMITMENTS
              AND
              CONTINGENCIES**
            
            (a)Minimum payments under operating leases during the next five
              years are as
              follows:
            
            **(in
                        thousands)**2005
                    
                    $
                    4162006
                    
                    3692007
                    
                    3392008
                    
                    3102009
                    
                    2792010
                        and thereafter
                    
                    154
            
            (b)As a result of a review of statutory reporting obligations regarding
              employee benefits, the Company has identified a potential for
              non-compliance.  The employees and regulators concerned have
              been
              notified.  The probability and amount of any potential liability
              relating
              to this situation is presently not determinable.
            
            (c)The Company has entered into compensation arrangements with
              certain of
              its employees.  In the event of involuntary termination, the
              Company may be
              liable for potential payments totaling $182,000 to these employees.
            
            (d)The Company entered into a licensing agreement with NCR Corporation
              on
              April 29th, 2002.  The agreement provides the Company with access
              to
              specific technology patents over a seven-year period for US$100,000
              annually.

          
          ADB
                Systems International Ltd. F-24
          
          **Notes
                to the Consolidated Financial
                StatementsYears ended December 31, 2004, 2003 and 2002(in
                Canadian dollars)**
            
            **15.********CHANGES IN
              NON-CASH
              OPERATING WORKING CAPITAL**
            
            The
              following table
              sets forth the changes in non-cash working capital items resulting
              from the
              inflow (outflow) of cash in the period.
            
            **2004**
                    
                    **2003**
                    
                    **2002****(in
                        thousands)**Accounts
                        receivable
                    
                    $
                    (151
                    )
                    $
                    444
                    
                    $
                    (540
                    )Deposits
                        and prepaid expenses
                    
                    (8
                    )
                    60
                    
                    (47
                    )Accounts
                        payable
                    
                    288
                    
                    (87
                    )
                    218Accrued
                        liabilities
                    
                    139
                    
                    (491
                    )
                    416Deferred
                        revenue
                    
                    44
                    
                    (741
                    )
                    9Effect
                        of currency translation
                    
                    10
                    
                    87
                    
                    5$
                    322
                    
                    $
                    (728
                    )
                    $
                    61
            
            The
              following table
              summarizes the non-cash financing activities of the Company
            
            **2004**
                    
                    **2003**
                    
                    **2002**Issuance
                        of common shares in settlement of accounts payable
                        (Note 8(c))
                    
                    $
                    118
                    
                    $
                    272
                    
                    $
                    —Issuance
                        of common shares in return for prepaid services
                        (Note 8(c))
                    
                    82
                    
                    —
                    
                    —Reduction
                        in debt from conversion of secured subordinated notes
                        (Note 6(e))
                    
                    (830
                    )
                    (21
                    )
                    (51
                    )Reduction
                        in conversion feature from conversion of secured
                        subordinated notes (Note 6(e))
                    
                    (550
                    )
                    (76
                    )
                    (761
                    )Settlement
                        of demand loan by transfer of Bid.Com Ltd. Shares
                        (Note 19)
                    
                    —
                    
                    (2,000
                    )
                    —Settlement
                        of accrued liability by transfer of Bid.Com Ltd.
                        shares
                    
                    —
                    
                    (68
                    )
                    —
            
            **16.********RETAIL
              ACTIVITIES**
            
            The
              Company ceased
              its on-line retail activities in October 2000; however, during 2003,
              the Company
              received a $67,000 refund from a U.S.-based credit card institution
              formally
              engaged by the Company when it operated its on-line retail activities
              in the
              U.S.
            
            The
              Company’s
              non-consolidated investment, Bid.Com, recommenced on-line retail activities
              in
              2002 (Note 23).  The shares of Bid.Com were transferred in settlement
              of a
              demand loan on June 30, 2003 (Note 19).

          
          ADB
                Systems International Ltd. F-25
          
          **Notes
                to the Consolidated Financial
                StatementsYears ended December 31, 2004, 2003 and 2002(in
                Canadian dollars)**
            
            **17.********REALIZED
              GAINS AND
              LOSSES ON DISPOSAL OF MARKETABLE SECURITIES, STRATEGIC INVESTMENTS
              AND
              CAPITAL ASSETS, AND RECOVERY OF ASSETS**
            
            **2004**
                    
                    **2003**
                    
                    **2002****(in
                        thousands)**Gain
                        on disposal of strategic investment (Note 17(a))
                    
                    $
                    —
                    
                    $
                    20
                    
                    $
                    41(Loss)
                        gain on disposal of capital assets (Note
                        17(b))
                    
                    (1
                    )
                    (13
                    )
                    23Loss
                        on disposal of marketable securities (Note
                        17(c))
                    
                    —
                    
                    —
                    
                    (149
                    )$
                    (1
                    )
                    $
                    7
                    
                    $
                    (85
                    )
            
            
            (a)During 2003, the Company sold shares in Megawheels Technologies
              Inc. for
              proceeds of $20,000.  During 2002, the Company disposed of its
              strategic
              investments, resulting in cash proceeds of $126,000 and a realized
              gain of
              $41,000.
            
            (b)During 2004, the Company disposed of capital assets that were
              no longer
              required resulting in a loss of $1,000.  Similar disposals in
              2003 resulted
              in a loss of $13,000 and a gain of $23,000 in 2002.
            
            (c)The loss on disposal of marketable securities includes a loss
              of $143,000
              resulting from the January 2002 sale of the Company’s remaining AOL shares for
              gross proceeds of $1.3 million.
            
            
            **18.********UNREALIZED
              GAINS AND
              LOSSES ON REVALUATION OF STRATEGIC INVESTMENTS**
            
            **2004**
                    
                    **2003**
                    
                    **2002****(in
                        thousands)**Revaluation
                        of strategic investments (Note 18(a))
                    
                    $
                    —
                    
                    $
                    —
                    
                    $
                    (24
                    )$
                    —
                    
                    $
                    —
                    
                    $
                    (24
                    )
            
            
            (a)During 2002, the Company reviewed the carrying value of each
              of its
              strategic investments and determined that in light of recent financial
              performance of each investment and market conditions, the decline in
              value of
              these investments was other than temporary, and a revaluation was required.
            
            
            **19.********REALIZED
              GAIN ON
              SETTLEMENT OF DEMAND LOAN**
            
            During
              the year
              ended December 31, 2002, the Company completed a series of transactions
              whereby
              the Company received a secured demand loan in the aggregate principal
              amount of
              $2,000,000.  The loan carried an interest rate of 12 percent
              compounded
              monthly, and was secured by a general security agreement on the assets
              of the
              Company and a pledge of the shares of the Company’s Norwegian subsidiary. 
              The loan matured on June 30, 2003.  The Company could, at its
              discretion,
              repay the loan in cash or transfer to the lender 100 percent of the
              issued
              shares of its investment in an associated company in full settlement
              of the
              outstanding principal amount and accrued interest then owing to the
              lender (Note
              23).
            
            On
              June 30, 2003,the Company exercised its option to transfer its
              investment in the associated company, which had a nominal carrying
              value, to the
              lender in full settlement of the outstanding principal and accrued
              interest
              amounts.  This transfer resulted in a gain on settlement of
              the demand loan
              in the amount of $2,195,000.
            
            ADB
                Systems International Ltd. F-26

          
          
          **Notes
                to the Consolidated Financial
                StatementsYears ended December 31, 2004, 2003 and 2002(in
                Canadian dollars)**
            
            **20.********ACQUISITION
              OF ADB
              SYSTEMER ASA**
            
            On
              October 11,
              2001, the Company acquired 98.3 per cent of the outstanding shares
              of ADB
              Systemer of Sola, Norway.  ADB Systemer was a publicly traded
              software
              vendor focused on enterprise asset management and integrated electronic
              procurement.  ADB Systemer has wholly-owned subsidiaries in
              the United
              States and in the United Kingdom.
            
            The
              purchase price for 12,518,493 of the outstanding ADB
              Systemer common shares was $13.762 million.  The purchase price
              was
              comprised of $2.293 million in cash, $9.844 million of common stock
              issued from
              treasury, acquisition costs of $765,000, employee stock options with
              a fair
              market value of $576,000 granted to ADB Systemer employees as replacement
              options and warrantswith a fair market value of $284,000 issued to ADB
              Systemer warrant holders as replacement warrants.  Common stock
              issued from
              treasury totaled 10,866,052 shares (21,732,104 pre-consolidation) with
              a value
              of $9.844 million based on a five-day trading averagebefore and after
              September 10, 2001, the date the acquisition was announced to the general
              public.  The purchase price for ADB Systemer did not include
              any contingent
              payments, options, or commitments.  The purchase price of $13.762
              million
              was allocated as follows:
            
            **2001****(in
                        thousands)**Net
                        monetary assets (including cash of $814)
                    
                    $
                    418Capital
                        assets
                    
                    308Contractual
                        agreements
                    
                    177Acquired
                        software and related intellectual property
                    
                    3,383Goodwill
                    
                    9,476Total
                        purchase price
                    
                    $
                    13,762
            
            ADB
              Systemer’s
              operations were consolidated after the effective date of the acquisition,
              October 11, 2001.
            
            The
              amortization
              periods for contractual agreements and software and related intellectual
              property are 12 and 36 months respectively.  An amortization
              expense
              relating to software in the amount of $846,000 was recorded in 2004
              (2003 -
              $1,128,000).  At the end of fiscal 2004, acquired software had
              been fully
              amortized.  At the end of fiscal 2003, accumulated amortization
              for
              acquired software amounted to $2,537,000, resulting in a net book value
              of
              $846,000.
            
            Goodwill
              was not
              amortized, but was subject to an impairment test where the carrying
              value of
              goodwill was compared to its fair value.  In the event the carrying
              value
              of goodwill exceeded its fair value, a goodwill impairment would be
              recorded. At
              December 31, 2001, the carrying value of goodwill was tested for impairment,
              and
              it was determined that a goodwill impairment of $9.476 million was
              required.  Goodwill is not deductible for tax purposes.

          ADB
                Systems International Ltd. F-27
          
          **Notes
                to the Consolidated Financial
                StatementsYears ended December 31, 2004, 2003 and 2002(in
                Canadian dollars)**
            
            **21.********INVESTMENTS
              IN JOINTLY
              CONTROLLED COMPANY**
            
            On
              September 25,
              2003 the Company established a joint venture with GE Commercial Equipment
              Financing, a unit of GE Commercial Finance, with each entity holding
              a 50
              percent interest in the joint venture.  The joint venture operates
              under
              the name of GE Asset Manager LLC.  The joint business venture
              develops and
              markets asset management technology to customers in a broad range of
              industries.  Upon the establishment of this joint venture, 1
              million
              share-purchase warrants issued by ADB to GE Capital Corporation vested. 
              The fair value of these warrants of $188,000, calculated at the vesting
              date, is
              reflected on the Consolidated Balance Sheets as an Acquired Agreement. 
              An
              amortization expense of $150,000 was recorded in 2004 (2003 - $38,000).
              This
              acquired agreement has been fully amortized as of December, 2004.
            
            As
              at December 31,
              2004, the joint venture held no assets or liabilities, and earned no
              revenue.  A nominal amount of incremental expenses has been
              incurred by the
              Company in development and marketing activities pertaining to the joint
              venture.  Such expenses have been included in the financial
              statements of
              the Company.
            
            **22.********GOODWILL
              IMPAIRMENT**
            
            The
              Company
              reviewed the carrying value of goodwill acquired in connection with
              the
              acquisition of ADB Systemer.  The carrying value of goodwill
              was tested
              against its fair value and it was determined that a goodwill impairment
              of
              $9.476 million was required at December 31, 2001 (Note 20). 
              For the year
              ended December 31, 2002 a goodwill impairment of $14,000 was recorded
              on
              goodwill acquired in connection with the purchase of shares of the
              non-controlling interest shareholders of ADB Systemer.  The
              permanent
              decline in the fair value arose on a downturn in economic conditions
              resulting
              in lower than previously anticipated cash flows.
            
            **23.********RELATED PARTY
              TRANSACTIONS**
            
            On
              August 30, 2002,
              the Company entered into a series of agreements with a lender, an unrelated
              party, whereby the lender granted to the Company a secured loan in
              the aggregate
              principal amount of $2 million (Note 19).  The Company and the
              same
              unrelated party also entered into an agreement whereby on-line retail
              operations
              were to be conducted by Bid.Com Ltd.  These operations utilized
              the on-line
              retail technology, experience and expertise of the Company developed
              and
              operated under the name “Bid.Com International Inc.” in the on-line selling of
              consumer products supplied by the lender.
            
            On
              June 30, 2003,
              the Company exercised its option to transfer 100 percent of the issued
              shares of
              Bid.Com Ltd. in full settlement of the outstanding principal and accrued
              interest owed to the lender.
            
            The
              Company owned
              100 percent of the issued and outstanding shares of Bid.Com Ltd., but
              determined
              that, for accounting purposes, consolidation of Bid.Com Ltd. was not
              appropriate.  This determination was based upon the Company’s inability to
              determine the strategic operating policies of Bid.Com without the cooperation
              of
              others, its inability to obtain the future economic benefits from the
              resources
              of Bid.Com Ltd., and its lack of exposure to the related risk of
              ownership.  Therefore, the Company accounted for its investment
              in Bid.Com
              Ltd. on the equity basis.  The Company was not exposed to losses
              incurred
              by Bid.Com Ltd., and accordingly this investment was carried at a nominal
              amount.  U.S. GAAP required consolidation of the investment
              in Bid.Com Ltd.
              in the Company’s financial statements.  The impact of this U.S. GAAP
              difference from Canadian GAAP is disclosed in note 24.

          ADB
                Systems International Ltd. F-28
          
          **Notes
                to the Consolidated Financial
                StatementsYears ended December 31, 2004, 2003 and 2002(in
                Canadian dollars)**
            
            Condensed
              income
              statement and cash flow information for Bid.Com Ltd. for the six-month
              period
              ended June 30, 2003 is as follows:
            
            **2003****(in
                        thousands)**Revenue
                    
                    $
                    3,614Net
                        income
                    
                    208Change
                        in
                        cash resources
                    
                    (358
                    )
            
            Revenue
              of $35,000
              related to web-site development, support and maintenance services provided
              to
              Bid.com Ltd. was included in the consolidated results of the Company
              for the six
              months ended June 30, 2003.  In addition, the Company charged
              overhead-related costs of $76,000 for rent, connectivity and management
              fees to
              Bid.com Ltd. for the six-month period ended June 30, 2003. 
              These overhead
              charges were recorded as a reduction of expenses in the consolidated
              financial
              statements for the year ended December 31, 2003.
            
            **24.****RECONCILIATION
              OF UNITED STATES GAAP**
            
            The
              financial
              statements of the Company have been prepared in accordance with generally
              accepted accounting principles as applied in Canada, which conform
              in all
              material respects with generally accepted accounting principles in
              the United
              States, except as noted below.
            
            (a)STOCK-BASED
              COMPENSATION TO
              EMPLOYEES
            
            In
              fiscal 2003, the
              Company adopted the accounting recommendations contained in the CICA
              Handbook
              Section 3870 —“Stock-based Compensation and Other Stock-based Payments”
              effective January 1, 2003 regarding expensing of employee stock-based
              compensation.  Accordingly, commencing in fiscal 2003, the Company
              records
              a compensation expense for stock options granted to employees on or
              after
              January 1, 2003, based on the fair value method of accounting. 
              For fiscal
              2002, the Company did not recognize compensation expense for employee
              stock
              options, however pro-forma disclosure giving recognition to the fair
              market
              value of options granted from January 1, 2002 has been provided in
              Note
              11.
            
            Under
              U.S. GAAP
              stock-based compensation granted to employees is accounted for in accordance
              with the provisions of Accounting Principles Board (APB) Opinion No.
              25,
“Accounting for Stock Issued to Employees,” or in accordance with SFAS 123
“Accounting for Stock-Based Compensation.”  Prior to 2003, under United
              States GAAP the Company elected to follow APB 25 and no accounting
              recognition
              was given to stock options granted at fair market value until they
              were
              exercised.  Upon exercise, the proceeds were credited to shareholders’
              equity.  In December 2002, the FASB issued SFAS No. 148, “Accounting for
              Stock-Based Compensation – Transition and Disclosure,” an amendment of FASB
              Statement No. 123.  This Statement amends FASB Statement No.
              123,
“Accounting for Stock- Based Compensation,” to provide alternative methods of
              transition for a voluntary change to fair value method of accounting
              for
              stock-based employee compensation.  In fiscal 2003, the Company
              elected to
              prospectively adopt the fair value method for stock-based compensation
              as
              prescribed in SFAS No. 148.  Under CICA 3870 and SFAS No. 148,
              the fair
              value of stock-based awards to employees is calculated through the
              use of option
              pricing models, even though such models were developed to estimate
              the fair
              value of freely tradable, fully transferable options without vesting
              restrictions, which significantly differ from the Company’s stock option
              awards.  The Company’s calculations for employee grants were made using the
              Cox-Rubinstein binomial model with weighted average assumptions as
              described in
              the following table.  As a result, the 2004 annual financial
              statements
              under U.S. GAAP reflect a stock-based compensation expense to employees
              of
              $39,000 (2003 - $193,000) for options granted on or after January 1,
              2003.

          
          ADB
                Systems International Ltd. F-29
          
          Prior
              to fiscal
              2003, SFAS No. 123, “Accounting for Stock-Based Compensation,” requires the
              disclosure of pro forma net income (loss) and earnings (loss) per share
              had the
              Company adopted the fair value method from the date the standard was
              applicable.  The calculations for the pro forma disclosures
              of stock
              options granted prior to 2004 are reported below and were made using
              the
              Cox-Rubinstein binomial valuation model with the following weighted
              average
              assumptions:
            
            **2004**
                    
                    **2003**
                    
                    **2002**Dividend
                        yield
                    
                    N/A
                    
                    —
                    
                    —Risk
                        free
                        interest rate
                    
                    N/A
                    
                    3.53
                    %
                    3.69
                    %Volatility
                    
                    N/A
                    
                    137.51
                    %
                    131.51
                    %Expected
                        term, in years
                    
                    N/A
                    
                    2.94
                    
                    2.00
            
            If
              the estimated
              fair values of the Company’s stock options granted to employees had been
              amortized to expense over the vesting period of the awards as specified
              under
              SFAS No. 123, the loss attributable to common shareholders and the
              basic and
              diluted loss per share on a pro forma basis (as compared to such items
              as
              reported) would have been:
            
            **2004**
                    
                    **2003**
                    
                    **2002****(in
                        thousands)**Loss
                        attributable to common shareholders under U.S. GAAPAs
                        calculated
                        (Note 24(g))
                    
                    $
                    (5,013
                    )
                    $
                    (2,572
                    )
                    $
                    (9,947
                    )Stock-based
                        compensation included in net loss
                    
                    39
                    
                    193
                    
                    —(4,974
                    )
                    (2,379
                    )
                    (9,947
                    )Stock-based
                        compensation if fair value applied to all awards
                    
                    (39
                    )
                    (337
                    )
                    (797
                    )Pro
                        forma net
                        loss as if fair value applied to all awards
                    
                    $
                    (5,013
                    )
                    $
                    (2,716
                    )
                    $
                    (10,744
                    )Basic
                        and
                        diluted net loss per share:As
                        calculated
                    
                    $
                    (0.08
                    )
                    $
                    (0.05
                    )
                    $
                    (0.24
                    )Pro
                        forma
                    
                    $
                    (0.08
                    )
                    $
                    (0.05
                    )
                    $
                    (0.26
                    )
            
            **(b)**COMPREHENSIVE
              INCOME
            
            Financial
              Accounting Standards Board Statement of Financial Accounting Standards
              No. 130,
“Reporting Comprehensive Income,” requires disclosure of comprehensive income,
              which includes reported net earnings adjusted for other comprehensive
              income.  Comprehensive income is defined as the change in net
              assets of a
              business enterprise during a period from transactions and other events
              and
              circumstances from non-owner sources.
            
            Under
              Canadian
              GAAP, gains and losses from foreign exchange translations of subsidiaries
              classified as self-sustaining are included in the foreign cumulative
              translation
              account component of shareholders’ equity.  Under U.S. GAAP, these gains
              and losses are included as a component of comprehensive income
              (loss).

          
          ADB
                Systems International Ltd. F-30
          
          **Notes
                to the Consolidated Financial
                StatementsYears ended December 31, 2004, 2003 and 2002(in
                Canadian dollars)**
            
            (c)MARKETABLE
              SECURITIES
            
            U.S.
              GAAP requires
              that the Company disclose marketable securities into one of three categories:
              held to maturity; available for sale; or trading. As at December 31,
              2004 and
              2003, the marketable securities held were classified as follows:
            
            **2004**
                    
                    **2003****(in
                        thousands)**Trading
                    
                    $
                    13
                    
                    $
                    13
            
            (d)FINANCIAL
              INSTRUMENTS WITH
              LIABILITY AND EQUITY ELEMENTS
            
            Under
              Canadian
              GAAP, the secured subordinated notes (see Note 6) are recorded based
              upon the
              relative fair values of the liability and equity components of the
              instruments.  The liability component is accreted to the face
              value of the
              subordinated notes over the term to maturity until the underlying notes
              are
              converted into common shares.  Under U.S. GAAP, upon issuance,
              the secured
              subordinated notes would have been recorded as a liability and reclassified
              to
              equity only upon conversion.  Accordingly, the interest accretion
              of
              $266,000 (2003 - $112,000) that is recorded under Canadian GAAP is
              reversed
              under U.S. GAAP.
            
            Additionally,
              under
              Canadian GAAP, the financing costs arising from the issuance of the
              convertible
              notes are allocated between the liability and equity components of
              the
              notes.  The financing costs associated with the liability component
              of the
              notes are deferred and amortized over the term of the underlying debt
              (see Note
              5).  The financing costs associated with the equity component
              of the notes
              are charged to shareholders’ equity.  Under U.S. GAAP, all of the financing
              costs are deferred and amortized over the term of the underlying debt. 
              As
              a result, the 2004 amortization expense under U.S GAAP is $58,000 compared
              to an
              amortization expense of $32,000 under Canadian GAAP.  Furthermore,
              under
              Canadian GAAP, conversion of debt results in the allocation of any
              unamortized
              deferred financing charges associated with that debt to shareholders’
              equity.  Under U.S. GAAP, such unamortized financing charges
              are expensed
              upon conversion of the associated debt.  Accordingly, under
              U.S. GAAP, an
              additional amount of $23,000, representing the unamortized financing
              charges
              associated with the Series F notes, is expensed.  The unamortized
              financing
              charges under Canadian GAAP, in the amount of $13,000, were allocated
              to
              contributed surplus upon the conversion of the Series F notes.
            
            Further,
              under U.S.
              GAAP, the beneficial conversion feature represented by the excess of
              the fair
              value of the shares issuable on conversion of the subordinated notes,
              measured
              on the commitment date, over the amount of the loan proceeds to be
              allocated to
              the common shares upon conversion would be allocated to contributed
              surplus.  This results in a discount on the subordinated notes
              that is
              recognized as additional interest expense over the term of the subordinated
              notes and any unamortized balance is expensed immediately upon conversion
              of the
              subordinated notes.  Accordingly, for U.S. GAAP purposes, the
              Company has
              recognized beneficial conversion features in 2004 of $20,000, $90,000
              and
              $49,000 relating to Series F subordinated notes, Series G subordinated
              notes and
              Series H subordinated notes, respectively.  In 2003, the Company
              has
              recognized a beneficial conversion feature of $96,000 with respect
              to the Series
              E subordinated notes.  An interest expense of $126,000 (2003
              - $64,000)
              results from the amortization of the discount over the term to maturity
              of those
              subordinated notes as well as the unamortized discount for those subordinated
              notes converted during the year.  Canadian GAAP does not require
              the
              recognition of any beneficial conversion feature.

          
          ADB
                Systems International Ltd. F-31
          
          **Notes
                to the Consolidated Financial
                StatementsYears ended December 31, 2004, 2003 and 2002(in
                Canadian dollars)**
            
            (e)ADDITIONAL
              DISCLOSURES AS
              REQUIRED IN ACCORDANCE WITH UNITED STATES GAAP
            
            U.S.
              GAAP requires
              the disclosure of the allowance for doubtful accounts.  The
              accounts
              receivable balance reported on the consolidated balance sheets at December
              31,
              2004, includes an allowance for doubtful accounts in the amount of
              $51,000 (2003
              - $65,000).
            
            U.S.
              GAAP requires
              the disclosure of accrued liabilities that exceed five percent of current
              liabilities.  Included in accrued liabilities at December 31,
              2004 are
              accrued audit fees of $193,000 (2003 - $145,000) and accrued compensation
              expenses (severance and unpaid vacation) of $274,000 (2003 -
              $228,000).
            
            U.S.
              GAAP requires
              the disclosure of non-cash interest components incurred during the
              year. 
              In 2004, the Company incurred $126,000 (2003 - $64,000) in non-cash
              interest
              expense associated with secured subordinated notes.  In 2003,
              the Company
              incurred $126,000 in non-cash interest expense associated with a demand
              loan
              that was settled through the transfer of the investment in an associated
              company
              (Note 19).
            
            Under
              U.S. GAAP,
              EITF 01-09 requires, in certain circumstances, that the warrants issued
              to
              customers be recorded as a reduction of revenue.  There is no
              similar
              guidance in Canadian GAAP.  Accordingly, depreciation and amortization
              and
              revenue would be reduced by $150,000 (2003 - $38,000) under U.S.
              GAAP.
            
            (f)INVESTMENT
              IN
              ASSOCIATED COMPANY/DISCONTINUED OPERATIONS
            
            U.S.
              GAAP requires
              consolidation of the Company’s investment in the associated company described in
              Note 19.  Furthermore, under FAS 144, the Bid.Com Ltd. component
              would be
              classified as an asset held for sale and be subject to the reporting
              requirements for discontinued operations.  The effect of consolidation
              of
              this entity upon the Canadian GAAP balance sheet is reported in Note
              24(g).
            
            Consolidation
              of
              this associated company results in a decrease in the net loss attributable
              to
              common shareholders due to income from discontinued operations in the
              amount of
              $195,000 for fiscal 2003.  For fiscal 2002, the net loss attributable
              to
              common shareholders is increased due to a loss from discontinued operations
              of
              $195,000.  Revenue in the amount of $1.074 million is included
              in the 2003
              income from discontinued operations.  Revenue of $15,000 is
              included in the
              2002 loss from discontinued operations.
            
            For
              fiscal 2003,
              the impact of consolidation of the associated company upon cash flows
              was to
              decrease cash flows as a result of cash outflows from discontinued
              operations in
              the amount of $358,000.  For fiscal 2002, the impact upon cash
              flows was to
              increase cash flows as the result of cash inflows from discontinued
              operations
              in the amount of $358,000.

          
          ADB
                Systems International Ltd. F-32
          
          **Notes
                to the Consolidated Financial
                StatementsYears ended December 31, 2004, 2003 and 2002(in
                Canadian dollars)**
            
            (g)The
              effect of the above
              differences described in Note 24(b), (d) and (f) on the Company’s financial
              statements is set out below:
            
            **Consolidated
              Balance Sheets**
            
            **2004**
                    
                    **2003****(in
                        thousands)**Cash
                        and
                        marketable securities
                    
                    $
                    453
                    
                    $
                    445Accounts
                        receivable
                    
                    1,535
                    
                    1,384Deposits
                        and
                        prepaid expense
                    
                    208
                    
                    118Capital
                        assets
                    
                    142
                    
                    266Intangible
                        assets
                    
                    277
                    
                    998Accounts
                        payable and accrued liabilities
                    
                    1,680
                    
                    1,370Deferred
                        revenue
                    
                    135
                    
                    91Secured
                        subordinated notes (Note 24(e))
                    
                    2,465
                    
                    1,009Non-controlling
                        interest
                    
                    3
                    
                    3Shareholders’
                        equity
                    
                    $
                    (1,668
                    )
                    $
                    738
            
            **Consolidated
              Statements of Operations**
            
            **2004**
                    
                    **2003**
                    
                    **2002****(in
                        thousands)**Net
                        loss for
                        the year as reported under Canadian GAAP
                    
                    $
                    (5,104
                    )
                    $
                    (2,815
                    )
                    $
                    (9,364
                    )Adjustments:Accretion
                        of
                        interest on secured subordinated notes (Note 24(d))
                    
                    266
                    
                    112
                    
                    68Gain
                        on
                        settlement of demand loan (Note 24(f))
                    
                    —
                    
                    (2,195
                    )
                    —Amortization
                        of deferred charges relating to secured subordinated notes
                        under Canadian
                        GAAP (Note 24(d))
                    
                    32
                    
                    —
                    
                    —Amortization
                        of deferred charges relating to secured subordinated notes
                        under U.S. GAAP
                        (Note 24(d))
                    
                    (81
                    )
                    —
                    
                    —Amortization
                        of beneficial conversion feature (Note 24(d))
                    
                    (126
                    )
                    (64
                    )
                    (316
                    )Net
                        loss from
                        continuing operations for the year as reported under U.S.
                        GAAP
                    
                    (5,013
                    )
                    (4,962
                    )
                    (9,612
                    )Income
                        (loss)
                        from discontinued operations (Note 24(f))
                    
                    —
                    
                    2,390
                    
                    (195
                    )Net
                        loss for
                        the year as reported under U.S. GAAP
                    
                    (5,013
                    )
                    (2,572
                    )
                    (9,807
                    )Preferential
                        distribution to shareholder (Note 24(j))
                    
                    —
                    
                    —
                    
                    (140
                    )Net
                        loss
                        attributable to common shareholders under U.S. GAAP
                    
                    $
                    (5,013
                    )
                    $
                    (2,572
                    )
                    $
                    (9,947
                    )Net
                        loss for
                        the year as reported under U.S. GAAP
                    
                    $
                    (5,013
                    )
                    $
                    (2,572
                    )
                    $
                    (9,807
                    )Other
                        comprehensive income (loss) (Note 24(b))
                    
                    6
                    
                    74
                    
                    32Comprehensive
                        income (loss) as reported under U.S. GAAP
                    
                    $
                    (5,007
                    )
                    $
                    (2,498
                    )
                    $
                    (9,775
                    )Basic
                        and
                        diluted loss per share from continuing operations
                    
                    $
                    (0.08
                    )
                    $
                    (0.09
                    )
                    $
                    (0.23
                    )Basic
                        and
                        diluted net loss per share
                    
                    $
                    (0.08
                    )
                    $
                    (0.05
                    )
                    $
                    (0.24
                    )

          
          ADB
                Systems International Ltd. F-33
          
          
          **Notes
              to the Consolidated Financial
              StatementsYears ended December 31, 2004, 2003 and 2002(in
              Canadian dollars)**
        (h)IMPACT OF NEW ACCOUNTING PRONOUNCEMENTS
          
          On
            September 30, 2004, the FASB issued staff position EITF  Issue
            No. 03-1-1
“Effective Date of 10-20 of EITF Issue No. 03-1 – The Meaning of
            Other-Than-Temporary Impairment and its Application to Certain
            Investments”.  The staff position delays the effective date for the
            measurement and recognition guidance contained in paragraphs 10-20 of
            Issue
            03-1. The adoption of EITF Issue No. 03-1-1 had no effect on the Company’s
            results of operations and financial position for 2004.
          
          In
            December 2004, the FASB issued staff position No. SFAS 109-1, “Application of
            FASB Statement 109, Accounting for Income Taxes, for the Tax Deduction
            Provided
            to U.S. Based Manufacturers by the American Jobs Creation Act of 2004”. The
            staff position addresses the issue as to whether this deduction should
            be
            accounted for as a special deduction or a tax rate reduction. This guidance
            was
            effective upon issuance on December 21, 2004. The adoption of SFAS No.
            109-1 had
            no effect on the Company’s results of operations and financial position for
            2004.
          
          The
            FASB issued SFAS No. 123 (revised 2004), “Share-Based Payment”. 
            This Statement is a revision of FASB Statement No. 123, “Accounting for Stock-
            Based Compensation” and supersedes APB Opinion No. 25, “Accounting for Stock
            Issued to Employees.”  This Statement establishes standards for the
            accounting for transactions in which an entity exchanges its equity instruments
            for goods or services. It also addresses transactions in which an entity
            incurs
            liabilities in exchange for goods or services that are based on the fair
            value
            of the entity’s equity instruments or that may be settled by the issuance of
            those equity instruments. This Statement focuses primarily on accounting
            for
            transactions in which an entity obtains employee services in share-based
            payment
            transactions.  This Statement is effective for annual or interim
            financial
            statements commencing after June 15, 2005. The Company currently accounts
            for
            its employee stock option plan in accordance with the provisions of SFAS
            No. 123
            (revised 2004), accordingly the adoption of these standards is not expected
            to
            have a material impact on the Company’s financial position, results of
            operations or cash flows.
          
          In
            January 2003 and December 2003, the FASB issued interpretation No. 46,
            “Consolidation of Variable Interest Entities” (“FIN 46”), and its revision, FIN
            46-R, respectively.  FIN 46 and FIN 46-R address the consolidation
            of
            entities whose equity holders have either not provided sufficient equity
            at risk
            to allow the entity to finance its own activities or do not possess certain
            characteristics of a controlling financial interest.  FIN 46 and
            FIN 46-R
            require the consolidation of these entities, known as variable interest
            entities
            (“VIE”), by the primary beneficiary of the entity.  The primary beneficiary
            is the entity, if any, that is subject to a majority of the risk of loss
            from
            the VIE’s activities, entitled to receive a majority of the VIE’s residual
            returns, or both.  FIN 46 and FIN 46-R is effective for the Company’s
            annual financial statements commencing January 1, 2004.  Adoption
            of both
            of these standards had no effect on the Company’s financial position, results of
            operations or cash flows.
          
          The
            Emerging Issues Task Force provided guidance on Issue 03-1, “The
            meaning of Other-Than-Temporary Impairment and its Application to Certain
            Investments. This Task Force guidance for evaluating whether an investment
            is
            other-than-temporarily impaired should be applied in other-than-temporary
            impairment evaluations made in reporting periods beginning after June
            15, 2004.
            The disclosures are effective in annual financial statements for fiscal
            years
            ending after December 15, 2003, for investments accounted for under Statements
            115 and 124. For all other investments within the scope of this Issue,
            the
            disclosures are effective in annual financial statements for fiscal years
            ending
            after June 15, 2004. The additional disclosures for cost method investments
            are
            effective for fiscal years ending after June 15, 2004. Comparative information
            for periods prior to initial application is not required.
          
          The
            Emerging Issues Task Force reached a consensus on Issue 03-10,
“Application of EITF Issue No. 02-16 — Accounting by a Customer for Certain
            Consideration Received from a Vendor by Resellers to Sales Incentives
            Offered to
            Consumers by Manufacturers. The Company has determined that EITF Issue
            No. 02-16
            had no effect on the Company’s results of operations and financial position for
            2004.
          

          
          
          ADB
                Systems International Ltd. F-34
          
          **Notes
                to the Consolidated Financial
                StatementsYears ended December 31, 2004, 2003 and 2002(in
                Canadian dollars)**
            
            (i)OPERATING
              LOSS
            
            U.S.
              GAAP requires
              that the Company disclose operating loss.  Operating loss of
              the Company
              for the year was $5.013 million, comprised of net loss of $5.013 million
              less
              realized and unrealized gains and losses on marketable securities and
              strategic
              investments of $Nil  (2003 - $4.982 million, comprised of net
              loss from
              continuing operations of $4.962 million less $20,000; 2002 - $9.480
              million,
              comprised of net loss from continuing operations of $9.612 million
              plus
              $132,000).
            
            (j)PREFERENTIAL
              DISTRIBUTION TO SHAREHOLDERS
            
            In
              accordance with
              U.S. GAAP, the $120,000 Series C secured subordinated debentures issued
              in
              exchange for the waiver of certain US registration rights granted to
              Stonestreet
              pursuant to a subscription agreement dated April 25, 2002 is recorded
              as
              preferential distribution to Stonestreet and deducted from the net
              loss to
              determine net loss attributable to common shareholders.  The
              Series C
              secured subordinated debentures include a beneficial conversion feature;
              accordingly, a preferential distribution of $140,000 has been
              recorded.
            
            **25.****SEGMENTED
              INFORMATION**
            
            The
              Company
              operates in the following reportable geographic segments: North America,
              Ireland
              and the United Kingdom, and Norway.
            
            Assets
              by
              Geographic Region:
            
            **2004**
                    
                    **2003****(in
                        thousands)****Capital
                        Assets**
                    
                    **Intangible
                        and OtherAssets**
                    
                    **Capital
                        Assets**
                    
                    **Intangible
                        andOther Assets**North
                        America
                    
                    $
                    39
                    
                    $
                    155
                    
                    $
                    106
                    
                    $
                    152Ireland
                        and
                        U.K.
                    
                    6
                    
                    —
                    
                    16
                    
                    —Norway
                    
                    97
                    
                    —
                    
                    144
                    
                    846$
                    142
                    
                    $
                    155
                    
                    $
                    266
                    
                    $
                    998
            
            Net
              Revenue by
              Geographic Region:
            
            **2004**
                    
                    **2003**
                    
                    **2002****(in
                        thousands)**North
                        America
                    
                    $
                    796
                    
                    $
                    1,211
                    
                    $
                    2,182Ireland
                        and
                        U.K.
                    
                    681
                    
                    1,239
                    
                    472Norway
                    
                    3,453
                    
                    3,403
                    
                    3,126$
                    4,930
                    
                    $
                    5,853
                    
                    $
                    5,780
            
            **26.****SUBSEQUENT
              EVENT**
            
            On
              February 23,
              2005, the Company completed a transaction resulting in the issuance
              of 2.5
              million equity units at a price of $0.23 per unit for gross proceeds
              of
              $575,000.  Each equity unit consists of one common share and
              one common
              share-purchase warrant with an exercise price of $0.40 each. 
              The warrants
              expire on February 22, 2009.

          
          ADB
                Systems International Ltd. F-35
          
          **Corporate
              Directory**
            
            **Directors**
            Jeffrey
              LymburnerCEO
            T.
              Christopher
              Bulger(1),(2),(3)
            CEO,
              Megawheels
            
            Duncan
              Copeland(1),(2),(3)President,
              Copeland and Company
            
            Paul
              Godin(2),(3)
            
            Jim
              MoskosPresident, ADB Technologies Group
            
            Jan
              Edvin
              PedersenPresident, ADB Systems, European Operations
            
            Rick
              Robertson(1)Associate Professor of BusinessRichard Ivey School of
              Business, The University of Western Ontario
            
            **Officers**Jeffrey
              LymburnerCEO
            Mike
              Robb
            Chief
              Financial
              Officer
            
            Jim
              Moskos
            President,
              ADB
              Technology Group
            
            Jan
              Pedersen
            President
              ADB
              Systems, European Operations
            
            Aidan
              Rowsome
            Vice
              President,
              Global Sales
            
            
            (1)Member of the Audit Committee
            (2)Member of the Management Resources and Compensation Committee
            (3)Member of the Corporate Governance Committee
          **ADB
              Systems Offices**
            North
              AmericaCorporate HeadquartersADB Systems International Ltd.302 The
              East Mall, Suite 300Toronto, Ontario ML4V 1V21 888 287
              7467
            ADB
              Systems
              International Ltd.3001 North Rocky Point Drive East, Suite 200, Tampa,
              Florida 336071 888 750 7467
            Europe
ADB
              Systemer International ASAVingveien 2, N-4050Sola, Norway+ 47 51 64
              71 00
            
            ADB
              Systems
              International Ltd.3000 Cathedral HillGuildford, Surrey GU2 7YB UK+
              44 (0) 1483 243 577
            
            ADB
              Systems
              International Ltd.52 Broomhill Road, Suite 108Broomhill Industrial
              EstateTallaght, Dublin 24, Ireland + 353 1 431 0513
            
            
            
**Additional
                Shareholder
                Information**www.adbsys.cominvestor-relations@adbsys.com
              
              **Registrar
                and Transfer Agent**Equity Transfer
                Services120 Adelaide Street WestSuite 420, Toronto, ON M5W 4C3(416)
                361-0152
              
              **Auditors**
              Deloitte
&
                Touche LLP
              Toronto,
                Ontario,
                Canada
              
              **Lawyers**Brown
                Raysman MillsteinFelder &
                Steiner LLP, New YorkGowling Lafleur Henderson LLP,Toronto
              
              **Stock
                Exchange Listings**Toronto Stock
                ExchangeSymbol: ADY
              
              OTC
                Bulletin
                Board
              Symbol:
                ADBYF
              
              **Shares
                Outstanding**
              Issued:
                69,870,131
              December
                31,
                2004
              
              
              ADB
                Systems,
                Dyn@mic Buyer, ProcureMate, WorkMate and Dyn@mic Seller are trademarks
                of ADB
                Systems International Ltd. and its affiliates.
              
              ©
                2005 ADB Systems
                International Ltd.