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United States

SECURITIES AND EXCHANGE COMMISSION

Washington,
D.C.  20549



FORM 10-KSB/A

Amendment No. 1

ANNUAL REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934



For the Year Ended December 31, 2004

Commission File Number:  0-26777



InteliSys Aviation Systems of America Inc.

(Name of small business issuer in its charter)



|Delaware
      (State
      or other jurisdiction of incorporation or organization)                       | 22-3662292
      (I.R.S. Employer Identification No.)
|--------------------------------------------------------------------------------------------------------- | -----------------------------------------------------
|815
Bombardier Street
Shediac,
New Brunswick, Canada
      (Address
      of principal executive offices) | E4P1H9
      (Zip
      Code)                        



Issuer's telephone number, including area code:  (506) 532-8515



Securities registered under Section 12(b) of the Exchange Act:



None



Securities registered under Section 12(g) of the Exchange Act:



Common Stock, par value $.001 per share

(Title of Class)



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

Yes

[ X ]

No

[   ]



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



The issuers revenues for its most recent fiscal year were $1,619,601.



Based on the closing sales price of the Common Stock on April 29, 2005, the aggregate



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market value of the voting stock of registrant held by non-affiliates was $1,378,201.



The registrant has 50,966,498 shares outstanding as of April 29, 2005 and 21,788,333 issued and outstanding Special Class B Exchangeable Shares in the registrants wholly-owned subsidiary InteliSys Acquisition Inc. As outlined in Note 2 (a) to the Financial Statements, the exchangeable shares have equal voting rights and equal economic value as the common shares of the registrant as they may be exchanged by the holder thereof at any time on a one-for-one basis for common stock of the registrant, and if not exchanged prior to December 31, 2012, they will be exchanged for common shares of the registrant on that date.



Documents Incorporated By Reference:  None



Transitional Small Business Issuer Disclosure Format (check one):  Yes [ ]  No [X].





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TABLE OF CONTENTS



Explanatory Note



We are filing this Amendment No. 1 to our annual report on Form 10-KSB for the period ended December 31, 2004 to modify Part II Item 8A, Controls and Procedures and Part III Item 13, Exhibits and Reports on Form 8-K, in response to comments we received from the Staff of the Securities Exchange Commission in connection with our May 16, 2005 10-KSB filing.



Changes to our Controls and Procedures; (1) description of material weaknesses and significant deficiencies in the Companys internal controls and (2) actions by Management to address the material weaknesses and significant deficiencies.



Changes to Exhibits and Reports on Form 8-K (1) revision of certifications filed as Exhibits 31.1 and 31.2 to reflect the language exactly as set forth in Item 601(b) (31) of Regulation S-K.





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|TABLE OF CONTENTS | PAGE
|----------------- | ----
|PART I            |     
|Item              | 1.  
|Item              | 2.  
|Item              | 3.  
|Item              | 4.  
|PART II           |     
|Item              | 5.  
|Item              | 6.  
|Item              | 7.  
|Item              | 8.  
|                  |     
|Item              | 8A. 
|PART III          |     
|Item              | 9.  
|                  |     
|Item              | 10. 
|Item              | 11. 
|                  |     
|Item              | 12. 
|Item              | 13. 
|Item              | 14. 



SIGNATURES



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CAUTIONARY STATEMENTS FOR FORWARD-LOOKING INFORMATION



InteliSys Aviation Systems of America Inc. (the "Company" or "we" or "our") has made forward-looking statements (within the meaning of the Private Securities Litigation Reform Act of 1995) in this report that are subject to risks and uncertainties, such as statements about our plans, objectives, projections, expectations, assumptions, strategies, or future events. Other written or oral statements, which constitute forward-looking statements, also may be made from time to time by or on behalf of the Company. Words such as "may," "expects," "anticipates," "intends," "plans," "believes," "seeks," "estimates," "will," "should," "could," variations of such words, and similar expressions are intended to identify such forward-looking statements. Similarly, statements that describe the Company's future plans, objectives, or goals also are forward-looking statements. These statements are not guarantees of future performance and are subject to a number of risks, uncertainties, and other factors, including those discussed below and elsewhere in this report, that could cause actual results to differ materially from future results, performances, or achievements expressed or implied by such forward-looking statements. Consequently, undue reliance should not be placed on these forward-looking statements. The Company undertakes no obligation to update publicly any forward-looking statements, whether as a result of new information, future events or otherwise.



The Company believes that the following  factors, including but not limited to the risk factors contained herein, could affect its future performance and cause actual  results of the Company to differ materially from those expressed in or implied  by forward-looking statements made by or on behalf of the Company:  (a) general economic conditions; (b) regulatory changes or interpretations of such regulations; (c) uninsurable risks, including acts of terrorism; (d) unexpected losses, (e) risks related to competition from established and emerging competitors; (f) risks that our revenues are highly dependent on the travel industry which is experiencing a prolonged decrease in business; (g) risks related to our financial leverage; (h) risks that rapid technological changes may render our technology obsolete; (i) risks to our customers; (j) disruptions in capital markets; and (k) risks related to the fact that we are not yet profitable and need additional capital to fund our operations.



Subsequent written and oral forward-looking statements attributable to us or persons acting on our behalf are expressly qualified in their entirety by the cautionary statements set forth above and contained elsewhere in this Annual Report on Form 10-KSB/A.



PART I





Item 1.  Description of Business.



InteliSys Aviation Systems of America Inc. is a provider of integrated software solutions for regional, mid-sized airlines and fleet operators. Our software enables air carriers to improve their operations by providing solutions that are integrated, adaptable and can be deployed in a cost effective manner. In addition, our software assists airline operators in key areas such as reservation sales and distribution, passenger services, employee record keeping, regulatory



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compliance, capacity planning and resource allocation while managing maintenance requirements to seamlessly optimize operations.



Corporate History



In August of 2003, the Company changed its name from Apta Holdings, Inc. to InteliSys Aviation Systems of America Inc. (IASA) pursuant to a consent of the Companys shareholders, to better reflect its new business activities.



The Company was incorporated on June 4, 1999. We were engaged in two lines of business, owning and operating income producing real estate, and a finance business which originated and serviced loans to individuals and to businesses. The real estate business was spun off in 2000. The finance business was sold on December 31, 2002.



On December 31, 2002, we acquired Convergix, Inc., a Canadian corporation, pursuant to a share exchange agreement dated November 20, 2002.  Pursuant to the agreement, IASA issued 3,295,000 shares of its common stock plus 21,788,333 "exchangeable shares"  in InteliSys Acquisition, Inc. a subsidiary of IASA.  The exchangeable shares have equal voting rights and equal economic value as IASA common shares.  These shares may be exchanged by the holder at any time on a one-for-one basis for IASA common shares, and if not exchanged prior to December 31, 2012, will be exchanged for IASA common shares on that date.  Throughout this document, the exchangeable shares are treated as common stock equivalents.  All references to IASA common stock include the exchangeable shares unless otherwise noted.



The address and telephone number of our main office is 815 Bombardier Street, Shediac, New Brunswick, Canada, E4P 1H9, (506) 532-8515 or 1-877-532-8515



Cynaptec Information Systems Inc. ("Cynaptec"), also a New Brunswick corporation, is a wholly-owned subsidiary of Convergix.  Convergix also owns 53% of the issued and outstanding shares of InteliSys Aviation Systems Inc. ("InteliSys"), a Canadian corporation, with the remaining 47% being owned by Cynaptec.



All dollar amounts reported herein are in United States dollars unless otherwise noted.  The approximate conversion rate as of December 31, 2004 was CAD $1.00 for USD $.83.



Development of the Business



InteliSys is an emerging leader in airline information technology solutions and solutions delivery.  A history of business-focused software development and computer systems engineering, coupled with proven airline management skills, have made InteliSys a solid choice for discerning aviation professionals.



Our mission is to be a leading provider of comprehensive and integrated software solutions for low fare, regional and mid-sized airlines and aviation-related organizations.





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The Company started as a sole proprietorship in the mid 1980s and early operations involved identifying requirements and providing IT solutions for small and mid-sized airlines.  As the Companies experience grew, it became apparent that there was a viable market for customizable, packaged airline management software geared specifically for the small to mid-sized airline market. Research revealed that small and mid-sized airlines operate using a significantly different type of business model than that used by large carriers, and that this model was under-served from an automation standpoint.



In April of 1999, we relocated to Shediac, New Brunswick in order to join forces with Cynaptec, an Information Technology integrator.



In January 2001, Convergix Inc. was incorporated and Cynaptec became a wholly owned subsidiary of Convergix.  Convergix also owned 53% of the issued and outstanding common shares of InteliSys.  Cynaptec owns the remaining 47% of InteliSys.



We then embarked on a project to complete the development of an integrated suite of comprehensive airline management software. The resulting suite was branded as "Amelia".



In June 2001, under a new management team, our research and development was curtailed, and focus was applied towards sales and marketing of our existing, developed modules. Cynaptec's operations were wound down and its personnel laid off. Presently, our principle business is providing our software to our customer base using the Application Service Provider (ASP) model.  This model allows us to deliver our software solutions using the internet, thereby reducing the infrastructure investment requirements of our customers, making our solution a cost effective alternative of running this area of our customers operations.  We currently provide services to 19 clients.  Client contracts are generally for terms of thirty-six to sixty months, with fixed and volume-based charge components.



Products and Services



Software



Amelia is a fully integrated enterprise suite of airline management software that optimizes business processes to modernize the way airlines are managed.  It is the refined aviation business process that combines data manipulation, communications, computer networks and real-time functionality. The value of accurate and timely information has been apparent by the spectacular successes of businesses that use it effectively.



Amelia is delivered to our customers, using a combination of secure internet connection, high speed Client software and basic web browsers.  Using a thin-Client and browser-based delivery methodology, our system provides excellent response time with minimum bandwidth requirements.



The Amelia software is comprised of the following modules:





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·

Passenger Reservation and Booking Engine

·

Online Web Booking for Passengers, Travel Agencies and Corporations

·

Flight, Crew and Aircraft Scheduling

·

Aviation Regulatory Compliance Tools

·

Flight Operations and Flight Watch

·

Maintenance and Inventory

·

Integration with the Global Distribution System

·

Low Cost Freight Management





The Amelia solution can be rapidly activated.  Airlines can be brought online in a matter of days or weeks.  Our ASP model allows our customers to avoid investment in expensive computer hardware infrastructure.



The Amelia system has been developed to target the mid-sized and low cost carriers (LCCs). Recent implementations in Africa, Asia-Pacific and the Middle East have demonstrated the systems suitability for use in these emerging markets. The regional and LCC segments of the airline industry are well developed in the Western world. However, in the secondary centers, and non-Western world, the low cost travel phenomenon has just only begun. The business and distribution model for carriers operating in these regions is significantly different to that of Western carriers. Therefore, there is a need for their IT systems to accommodate for this difference. For example, Western carriers can predicate their distribution model on the assumption the majority of their travelers will have a credit card and will use the internet. This is not the case among the emerging markets. However, we have been successful in configuring and deploying the Amelia suite for use in these regions and for their specific demographic needs.



We feel that this positions the Company very well to continue its penetration into this emerging market as well as in the classic carrier markets. Of note is the rapidly expanding traveler market drawn from among large population bases in the Middle East, India, Asia-Pacific and Africa.



Hosting Services



We provide the Amelia solution to our customers on a hosted basis.  The databases, applications, web services, e-commerce and communication servers are maintained at our on-site data center.  This allows our customers to fully utilize the latest version of our software with minimal additional investment in hardware.   The advantage to us is that it provides us with a recurring revenue stream.



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Custom Programming



We derive significant revenues from custom programming work whereby our developers customize existing applications for a specific client's configuration, or develop completely new functionality.



Implementation Services



We provide implementation support to our clients in order to provide a smooth transition from the client's existing systems to the Amelia solution.  This requires significant time in assessing the client's ability and capacity to adopt a new solution and to determine the solutions scope and fit within the client's organization.  Follow up is provided to ensure training was received in a timely manner and that the client is using all aspects of the solution effectively.  Implementation also includes assisting the clients with their own infrastructure and technical set-up.



Support



We provide 24x7x365 technical and application support to our clients.  Primary method of contact is e-mail or MSN Messenger.  Telephone access is provided through our phone system and forwarded to assigned technicians' mobile phones and pagers for off-hours support.  We are the first response support facility for all technical areas, including client side infrastructure and communications issues.



Education and Training



Training is provided by an IASA-provided trainer.  Typically, this training is carried out at the client's site.  Training is also available through remote sessions during which the trainer "shadows" the client side user, employing the shadow functionality in the operating software.  This permits the user and the trainer to collaborate and work together in a single session.  Implementation and Training is available in English, French, Spanish and German.



The Market



Since the tragedy of September 11th, 2001, the low-fare/low-cost airline market has enjoyed tremendous growth and has redefined how consumers now travel by offering a multitude of choices among carriers. Air travel is becoming increasingly price driven. The traveling public has demonstrated a willingness to forgo many of the perks offered by the larger carriers in order to reduce their cost of travel. This has created a very competitive environment where the small to mid-sized carriers are aggressively seeking ways to cut their operating costs in order to pass even further savings onto their passengers. Cost-effective deployment of IT systems used to manage costs is one of their main areas of focus.





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Competition



We compete in a marketplace with a large number of vendors. These vendors range from small owner-managed operations to large, well-financed international organizations. Aside from the Upper Tier, there is no dominant vendor or organization. We believe that the majority of competitors and customers are using older technology than that which we provide.



We estimate that there are currently approximately 74 companies that provide one or more of the services which we provide.  We believe that most of these competitors do not provide as comprehensive a set of services as we do. We consider the following companies to be our principal competitors:



OpenSkies

Air Kiosk

Sabre (U.S.) AIMS



The marketplace is highly competitive.  Technology and its applications within the aviation industry are in a rapid and continual state of change.  To be effective, we must continue to develop and market offerings that meet changing user needs and respond to technological  changes on a timely and cost effective basis.



Operations



We operate a fully redundant data center built and maintained to standards imposed by clients such as Amex Canada and Transport Canada.  The redundant power, communication and environment systems allow us to host complex, sensitive and high-availability applications.



Demonstration and evaluation implementations are not hosted from the production environment.  For security, the data center has card access and video surveillance as well as motion alarms connected to the facility's monitored alarm system.  Fire protection is provided by an FM-2000 inert gas (halon-like) system.  Backup power is provided via three banks of hard-wired UPS's and an automatically engaged diesel generator.  Primary communication is provided via a primary 10MB fiber optic link to the Internet; secondary communication is provided by a 512KB frame relay connection.



Marketing



We intend to expand existing customer relationships by introducing upgrade programs for customers, and strategically positioning the "integrated suite" concept (i.e. selling other parts of the Amelia suite to existing customers).



Marketing Strategies



Direct Marketing:  We currently market our products and services via a direct sales force, utilizing telemarketing and direct mail.



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Alliance Partner Strategy:  We are developing a program to attract alliance partners who will market our products outside of North America.



Advertising:    Given that the market and prospects are readily identifiable and industry players are very well documented, we focus our advertising plan on Airline Industry publications and journals highlighting specific major events and trade shows.



Product Development



Our product development platform is based on an Internet architecture comprised of interconnected database servers, application servers and client computers or devices running thin-client software or web browsers.  Internet computing allows business information and applications to be managed from centralized locations.  End users can access their data and applications through thin-client software or standard web browsers.  Database servers manage the underlying business information, while application servers run the business applications.  Professional information technology managers typically manage these servers.  In contrast, traditional client/server computing architectures require that each client computer run and manage its own applications and also be updated every time an application changes.  We believe that the network-centric design of our software for Internet computing improves network performance and data quality and helps our customers better control installation, maintenance and training costs associated with information technology infrastructure.  We will continue to enhance our existing products and develop new products to meet the changing needs of our customers.



Intellectual Property and Other Proprietary Rights



We rely primarily on a combination of copyright and trademark laws, trade secrets, confidentiality procedures and contractual provisions to protect our proprietary technology. For example, we license our software pursuant to signed license agreements which impose certain restrictions on the licensees' ability to utilize the software. In addition, we seek to avoid disclosure of our trade secrets, including requiring those persons with access to our proprietary information to execute confidentiality agreements with us and restricting access to our source code. We seek to protect our software, documentation and other written materials under trade secret and copyright laws, which afford only limited protection.



We have applied to register five trademarks to protect the Amelia software system, one in Canada (application no. 1032998) and four in the United States (applications nos. 76135724, 76135723, 76135722 and 76135721).  Of these, the Canadian application and one U.S. application (no. 76135724, for business management consulting services) have been allowed (but not yet registered); the other applications have been granted a first extension of time to file a statement of use.



Despite our efforts to protect our proprietary rights, unauthorized parties may attempt to copy aspects of our products or to obtain and use information that we regard as proprietary. Policing



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unauthorized use of our products is difficult, and, while we are unable to determine the extent to which piracy of its software products exists, software piracy can be expected to be a persistent problem. In addition, the laws of many countries do not protect our proprietary rights to as great an extent as do the laws of the United States. There can be no assurance that our means of protecting our proprietary rights will be adequate or that our competitors will not independently develop similar technology.



To date, we have not been notified that our products infringe the proprietary rights of third parties, but there can be no assurance that third parties will not claim infringement by us with respect to current or future products. We expect that software product developers will increasingly be subject to infringement claims as the number of products and competitors in our industry segment grows and the functionality of products in different industry segments overlaps. Any such claims, with or without merit, could be time-consuming, result in costly litigation, cause product shipment delays or require us to enter into royalty or licensing agreements. Such royalty or licensing agreements, if required, may not be available on terms acceptable to us or at all, which could have a material adverse effect upon our business, operating results and financial condition.



Employees



As of December 31, 2004, we employed 20 individuals, 16 of whom were engaged in operations and customer service, 2 in sales, marketing and related activities and 2 in finance and administration. Our success is highly dependent on our ability to attract and retain qualified employees. The loss of any of our key personnel could have a material adverse effect on our business, operating results and financial condition.



Factors that May Affect Future Results



Limited Operating History; History of Operating Losses:



Fours years ago, we emerged from our development stage. As of December 31, 2004, we had entered into a number of contracts for the provision of our software products, and only commenced sales in 2001. Accordingly, we have only a modest but growing history upon which an evaluation of our prospects and future performance can be made. Such prospects must be considered in the light of risks and difficulties frequently encountered by emerging businesses facing competition in an evolving and ever-changing industry, where products have yet to obtain widespread commercial acceptance and are characterized by rapid technological obsolescence



From inception through December 31, 2004, we have incurred cumulative losses of $11,356,177.



Future operating results will depend on many factors, including the growth of our targeted market, demand for our products, the level of product and price competition, our success in expanding our direct sales force and distribution channels, and our ability to develop and market new products and control costs, together with general economic conditions and other factors common to all businesses.



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Significant Capital Requirements and a Need for Additional Financing:



We have a need for cash in order to pay obligations currently due in a timely manner, and to finance our business operations. Although we believe that we have sufficient resources to conduct our operations on an ongoing basis, our continued operations thereafter will depend upon the availability of cash flow from our operations, or our ability to raise additional funds through equity or debt financing. There is no assurance that we will be able to obtain additional funding when it is needed, or that such funding, if available, will be obtainable on terms acceptable to us. If our operations do not produce the necessary cash flow, or if we cannot obtain needed funds, we may be forced to reduce or cease our activities with consequent loss to investors. In addition, should we incur significant presently unforeseen expenses or delays, we may not be able to accomplish our goals.



We have no other current arrangements with respect to, or sources of, additional financing and there can be no assurance that additional financing will be available to us on commercially reasonable terms, if at all. Any inability to obtain additional financing could have a material adverse effect on us, including possibly requiring us to significantly curtail or cease our operations.



Development of Markets Required for Successful Performance by IASA:



Our financial performance will depend, in part, on market acceptance of Amelia and our hosting services, and on whether we can meet and adapt to the requirements of our customers, both in terms of performance and price. Achieving market acceptance for our products will require substantial marketing efforts and the expenditure of significant funds.



Competition:



New trends and development of new technologies could have an adverse effect on our current technology. The market is subject to rapid change. Competitors vary in size and in the range of products and services they offer. We expect to experience additional competition from other established and emerging companies. Increased competition could result in price reductions fewer customer orders, reduced gross margins and loss of market share, any of which could have a material adverse effect on our business, operating results and financial condition.



Rapid Technological Change and Dependence on New Products:



The market for our software is characterized by rapid technological change, frequent new product introductions and evolving industry standards. The introduction of products incorporating new technologies and the emergence of new industry standards could render existing products obsolete and unmarketable. The life cycles of our products are difficult to estimate. Our future success will depend largely upon our ability to enhance our current products and to develop and introduce, on a timely basis, new products that keep pace with technological developments and emerging industry standards, and address the increasingly sophisticated needs



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of our customers. There can be no assurance that we will be successful in developing and marketing product enhancements or new products that respond to technological change or evolving industry standards, that we will not experience difficulties that could delay or prevent the successful development, introduction and marketing of these products, or that our new products and product enhancements will adequately meet the requirements of the marketplace and achieve market acceptance. We have previously experienced delays in the development and introduction of new products and product enhancements. The length of these delays has varied depending upon the size and scope of the project and the nature of the problems encountered. If we are unable to develop and introduce new products or enhancements of existing products in a timely manner or if we experiences delays in the commencement of commercial shipments of new products and enhancements, our business, operating results and financial condition would be materially adversely affected.



Risks Associated with International Operations:



We plan to expand our operation into Europe, the Middle East and Asia, which will require significant management attention and financial resources. We have committed and continue to commit significant resources to developing international sales and support channels. There can be no assurance that our efforts to develop international sales and support channels will be successful, and the failure of such efforts could have a material adverse effect on our business, operating results and financial condition.



Management of Growth and Dependence on Key Personnel:



The success of IASA will be largely dependent on the efforts of our management. We have no employment agreements with individuals in various managerial positions, and there can be no assurance that such persons will continue their employment with us. The loss of the services of one or more of such key personnel could have a material adverse effect on our ability to maximize our use of our products and technologies or to develop related products and technologies. Our future success will depend largely upon our ability to attract, retain and motivate highly skilled employees. Qualified employees are in great demand and are likely to remain a limited resource for the foreseeable future. There can be no assurance that we will be able to continue to attract and retain sufficient numbers of highly skilled employees. If we are unable to hire, train and retain qualified engineers and our management is unable to manage growth effectively, our business, operating results and financial condition could be adversely affected.





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RISK OF NON-COMPLIANCE WITH THE SECTION 404 OF THE SARBANES-OXLEY ACT OF 2002.



Beginning in Fiscal 2006, Section 404 of the Sarbanes-Oxley Act of 2002 ("the Act") will require the Company to include an internal control report of management in its Annual Report on Form 10-KSB/A. The internal control report must contain (i) a statement of management's responsibility for establishing and maintaining adequate internal control over financial reporting, (ii) a statement identifying the framework used by management to conduct the required evaluation of the effectiveness of our internal control over financial reporting, (iii) management's assessment of the effectiveness of our internal control over financial reporting as of the end of our most recent fiscal year, including a statement as to whether or not internal control over financial reporting is effective, and (iv) a statement that the Company's independent auditors have issued an attestation report on management's assessment of internal control over financial reporting.



Management acknowledges its responsibility for internal controls over financial reporting and seeks to continually improve those controls. In addition, in order to achieve compliance with Section 404 of the Act within the prescribed period, beginning in Fiscal 2005, the Company will engage in a process to document and evaluate its internal controls over financial reporting. In this regard, management will dedicate internal resources, engage outside consultants and adopt a detailed work plan to (i) assess and document the adequacy of internal control over financial reporting, (ii) take steps to improve control processes where appropriate, (iii) validate through testing that controls are functioning as documented and (iv) implement a continuous reporting and improvement process for internal control over financial reporting. The Company believes the process commencing in Fiscal 2005 for documenting, evaluating and monitoring its internal control over financial reporting will be consistent with the objectives of Section 404 of the Act and will ensure that the material weaknesses identified by the auditor during the Fiscal 2004 year end audit will be remediated.



In addition, the Company will have to improve its financial controls as they relate to the material weaknesses as discussed. The Company can provide no assurance as to its, or its independent auditors, conclusions at December 31, 2006 with respect to the effectiveness of its internal control over financial reporting under Section 404 of the Act. The existence of the above factors and circumstances create a risk that the Company, or its independent auditors, will not be able to conclude at December 31, 2006 that the Company's internal controls over financial reporting are effective as required by Section 404 of the Act.



Risk of Software Defects:



Software products are complex and may contain errors or defects, especially when first introduced or when new versions or enhancements are released. Despite product testing by us and by our potential customers, there can be no assurance that defects and errors will not be found in new products or in new versions or enhancements of existing products after commencement of commercial shipment. Such discovery could result in failure to achieve market acceptance, which could have a material adverse effect upon our business, operating



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results and financial condition.



Product Liability:



Our license agreements with our customers typically contain provisions designed to limit our exposure to potential product liability claims. It is possible, however, that  the limitation of liability provisions contained in our license agreements may not be effective as a result of federal, state or local laws or ordinances or unfavorable judicial decisions. Although we have not experienced any product liability claims to date, the license and support of our software may entail the risk of such claims.  A successful product liability claim brought against us would have a material adverse effect upon our business, operating results and financial condition.



Business Interruptions:



Our operations are vulnerable to interruption by fire, power loss, telecommunications failures, terrorist attacks and other events beyond our control.  We do not have adequate insurance against business interruptions. If a business interruption occurs, it could seriously harm us or our customers.



Patent Infringement:



It could be alleged that we have infringed on certain patents or other intellectual property rights of others. Responding to such claims, regardless of their merit, can be time consuming, costly and a diversion of management's attention and resources, and could cause us to incur significant expenses.



Control by Current Shareholders:



Our Officers and Principle Shareholders own approximately 37% of the shares outstanding. Accordingly, such persons may be able to significantly influence  the election of all our directors, increase the authorized capital, dissolve, merge, sell our assets, and generally direct our affairs.  See "Management,"  "Principal  Shareholders"   and   "Certain Transactions."



No Assurance of Public Market:



As of May 16, 2005, there has been minimal trading of our common stock.  There can be no assurance that a regular trading market for our securities will develop or that, if developed, it will be sustained.  The trading price of our securities could be subject to wide fluctuations, in response to quarterly variations in our operating results, announcements by us or others, developments affecting us, and other events or factors.  In addition, the stock market has experienced extreme price and volume fluctuations in recent years.  These fluctuations have had a substantial effect on the market prices for many companies, often unrelated to the operating performance of such companies, and may adversely affect the market prices of the securities.





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No Dividends:



Neither Convergix nor IASA has paid any cash or other dividends on our Common Stock and neither expects to declare or pay any cash dividends in the foreseeable future.



Penny Stock Regulation:



The  regulations of the Securities and Exchange Commission promulgated under the Securities Exchange Act of 1934 (the "Exchange Act") require additional disclosure relating to the market for penny stocks in connection with trades in any stock defined as a penny stock. Commission regulations define a penny stocks to be an equity security that has a market price of less than $5.00 per share, subject to certain exceptions. Unless an exception is available, those regulations require the delivery, prior to any transaction involving a penny stock, of a disclosure schedule explaining the penny stock market and the  risks associated  therewith,  and impose various  sales  practice requirements on broker-dealers who sell penny stocks to persons other  than established customers and accredited  investors (generally institutions). In addition, the broker-dealer must provide the customer with current bid and offer quotations for the penny stock, the compensation of the broker-dealer and its salesperson in the transaction, and monthly account statements showing the market value of each penny stock held in the customer's account. Moreover, broker-dealers who recommend such securities to persons other than established customers and accredited investors must make a special written suitability determination for the purchaser and receive the purchaser's written agreement to a transaction prior to a sale.  If our  securities become subject  to  the  regulations applicable to penny stocks, the market liquidity for our securities could be severely affected. In such an event, the regulations  on penny stocks could limit the  ability  of broker-dealers to sell our securities and thus the ability of purchasers of our securities to sell their securities in the secondary market.



Item 2.  Description of Property.



We do not own any real property. Our principal administrative, sales, marketing, support and product development facility occupies 6,600 square feet in Shediac, New Brunswick, Canada. The lease expires on December 31, 2007.  The annual rent on such lease is $119,520. We believe that existing facilities are adequate to support our activities for the foreseeable future.



Item 3. Legal Proceedings.



In February 2004, the Company received notice that a shareholder is contemplating litigation against the Company for the alleged breach of a memorandum of understanding, related to share subscriptions and other compensation, which was entered into on April 17, 2002 and amended on November 22, 2002.



The Companys position was that it fully satisfied its obligation under the memorandum of understanding in 2002 and that no further liability existed to the shareholder at December 31, 2002 and December 31, 2003.  However, the shareholders interpretation of the agreement was different from that of the Company.



17

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To settle this dispute, the Company has issued 1,821,429 shares of its common stock to the shareholder, which have been recorded in 2004 at their fair value on the date of issuance ($692,143).  The Company and shareholder are currently in negotiations to settle the outstanding balance owed to the shareholder.  The outstanding balance of $296,490 (2003 - $ 221,757) has been recorded in accrued liabilities.



Subsequent to the December 31, 2004 year end, the Company received notice that a former employee is taking legal action against the Company for wrongful dismissal.  No provision has been made in the financial statements for this contingent loss because the outcome of the claim is not currently determinable.  This claim has not been resolved and the outcome and amount of this claim is not determinable



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



No matters were submitted to a vote of security holders during the quarter ended December 31, 2004.





PART II



Item 5.  Market for Common Equity and Related Stockholder Matters.



In 1999 our common stock began trading on the Over-the-Counter Bulletin Board sponsored by the National Association of Securities Dealers, Inc. under the symbol "IYSA.OB". The following table sets forth the range of high and low bid prices of the Company's Common Stock for the quarters indicated through the fourth quarter of 2004 and 2003, respectively:



|Calendar Year  | High Bid |     | Low Bid
|-------------- | -------- | --- | -------
|2004:          |          |     |        
|First quarter  | $        | .65 | $      
|Second quarter | $        | .30 | $      
|Third quarter  | $        | .10 | $      
|Fourth quarter | $        | .03 | $      
|2003:          |          |     |        
|First quarter  | $        | .25 | $      
|Second quarter | $        | .08 | $      
|Third quarter  | $        | .10 | $      
|Fourth quarter | $        | .32 | $      



The quotations reflect inter-dealer prices, without retail markups, markdowns, or commissions



18

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and do not necessarily represent actual transactions.  The quotations were derived from the National Quotation Bureau OTC Market Report.



The Company estimates that as of April 29, 2005 there were approximately 425 holders of record of the Common Stock and 45 holders of record of the Class B Exchangeable Shares.



Dividend Policy



As of April 29, 2005, there had been no dividends declared on the Companys Common Stock.

We have never declared or paid any cash dividends on our common stock nor do we anticipate paying any in the foreseeable future. Furthermore, we expect to retain any future earnings to finance our operations and expansion. The payment of cash dividends in the future will be at the discretion of our Board of Directors and will depend upon our earnings levels, capital requirements, any restrictive loan covenants and other factors the Board considers relevant.



Securities Authorized for Issuance under Equity Compensation Plans



Under the 2004 Stock Option Plan, the Company has authorized the issuance of up to 10,000,000 shares of its common stock.  As of April 29, 2005, the Company has issued 4,937,670 options to purchase shares of common stock to its employees and executive management.



Recent Sales of Unregistered Securities



None.



19

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



The following discussion of our financial condition and results of operations should be read in conjunction with the financial statements and the related notes thereto included elsewhere in this Form 10-KSB/A. The matters discussed herein contain forward-looking statements within the meaning of Section 21E of the Securities Exchange Act of 1934, as amended, and Section 27A of the Securities Act of 1933, as amended, which involve risks and uncertainties. All statements other than statements of historical information provided herein may be deemed to be forward-looking statements. Without limiting the foregoing, the words believes, anticipates, plans, expects and similar expressions are intended to identify forward-looking statements. Factors that could cause actual results to differ materially from those reflected in the forward-looking statements include, but are not limited to, those discussed under the heading Factors that May Affect Future Results and elsewhere in this report and the risks discussed in our other filings with the SEC. Readers are cautioned not to place undue reliance on these forward-looking statements, which reflect managements analysis, judgment, belief or expectation only as of the date hereof. We undertake no obligation to publicly revise these forward-looking statements to reflect events or circumstances that arise after the date hereof.



CRITICAL ACCOUNTING POLICIES



We prepare our consolidated financial statements in accordance with accounting principles generally accepted in the United States, and make estimates and assumptions that affect our reported amounts of assets, liabilities, revenue and expenses.  We base our estimates on historical experience and other assumptions that we believe are reasonable in the circumstances.  Actual results may differ from these estimates.



The following critical accounting policies affect our more significant estimates and assumptions used in preparing our consolidated financial statements.



The consolidated financial statements have been prepared on the going concern basis, which assumes the realization of assets and liquidation of liabilities in the normal course of operations.  If we were not to continue as a going concern, we would likely not be able to realize on our assets at values comparable to the carrying value or the fair value estimates reflected in the balances set out in the preparation of the consolidated financial statements.  There can be no assurances that we will be successful in generating additional cash from equity or other sources to be used for operations.  The consolidated financial statements do not include any adjustments to the recoverability of assets and classification of assets and liabilities that might be necessary should the Company be unable to continue as a going concern



The Company accounts for software sales in accordance with Statement of Position (SOP) No. 97-2, Software Revenue Recognition.  SOP 97-2 generally requires revenues earned on software arrangements involving multiple elements to be allocated to each element based on the relative fair value of the element.



Revenue from license fees is recognized when persuasive evidence of an agreement exists, delivery of the product has occurred, the fee is fixed or determinable, and collectability is probable.  The Company maintains certain provisions for product returns and rebates in accordance with SFAS No. 48 Revenue Recognition when Right of Return Exists.  The Company considers arrangements regarding certain customers with payment terms extending



20

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beyond customary payment terms not to be fixed or determinable.  If the fee is not fixed or determinable, revenue is deferred and recognized when payments become due from the customer providing that all other revenue recognition criteria have been met.



Software subscription, support, consulting service, and training program revenue included in multiple-element arrangements is deferred and recognized on a straight-line basis over the term of the software subscription and support agreement.  The fair value of the undelivered elements (software subscription, specified upgrades, support, consulting services and training) is generally determined based on the price charged for the undelivered element when sold separately.



OVERVIEW



Plan of Operation



Our goal is to be a leading provider of software solutions and hosting services to small and mid-sized airlines and aircraft fleet operators. To meet that goal, we invested heavily to develop an integrated software solution called Amelia. The development cycle and computer hardware integration took longer that anticipated, causing a delay in our commercialization efforts.  As a result, the Company has an accumulated deficit of $11,356,177.  Our balance sheet remains highly leveraged.  Our liabilities exceed our assets by $4,234,030.  The Company has not been able to meet its obligations as they come due.  However, now that the software and hardware development is substantially complete and as our ability to offer additional modules of our software to existing and prospective clients, we have been able to concentrate our efforts on our sales and marketing activities to further commercialize our product on a worldwide basis.  We believe as our product and our marketing activities continue their maturing process, our financial results will improve.  We also believe that our financial results will improve for the following reasons:



1.

Through our marketing efforts, product enhancements and additional modules that are now available, we feel our competitive edge is growing and our presence in our target market is becoming stronger, thereby increasing our ability to continually sign on new customers in the near future.



2.

We have taken an aggressive approach at controlling our costs and making necessary cost saving decisions to provide the Company with cash savings beginning in the 2nd quarter of 2005. These cash savings will further increase by the end of the 3rd quarter when all of the cost saving measures become effective.



3.

We have informal agreements with many of our creditors, some of which we have already been able to settle, that will allow us to continue to function as a going concern.  As more of the cash savings mentioned above become available for debt settlements, we feel we will be in a better position to continue servicing some of the old outstanding debts in a reasonable manner, providing the company with a stronger financial position.



4.

We anticipate that the results of the activities mentioned above will allow the Company to better position itself to secure debt or equity financing in the future.  This additional financing would be used to pay down some of our debt as well as improve our working capital situation.  There can be no assurance that the Company will be able to secure any other additional financing on commercially reasonable terms, if at all.



21

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The Company plans to continue aggressively seeking new customers and emerging markets while continuing to remain customer-focused and provide new product enhancements.  We believe that the focus of our entire team will allow the Company to continue its pattern of strong revenue growth as evidenced by the 56% increase for the period ended December 31, 2004 as compared to the same period ended in 2003.  This impressive growth follows a 117% increase in revenues for the year ended December 31, 2003 as compared to the same period ended in 2002 as evidenced in our 10-KSB filed for the year ended December 31, 2003.  We believe that these figures support our opinion that our sales and marketing strategy has been successfully implemented.



The Company also plans to continue to aggressively seek new sources of financing in order to continue with its growth strategy.  There is no assurance that the Company will be able to secure additional financing on commercially reasonable terms, if at all.



Results of Operations



The following discussion and analysis should be read in conjunction with the Consolidated Financial Statements and Notes thereto appearing elsewhere in this Form 10 KSB.



InteliSys Aviation Systems of America Inc. had revenues of $1,619,601 for the year ended December 31, 2004 as compared to $1,039,429 for the year ended December 31, 2003, an increase of $580,172 or 56%.  This increase was primarily due to an increase in client base.  The increase in clients was the direct result of the Companys continued success in their marketing activities since emerging from its development stage in 2001.  The Companys revenue stream is made up of monthly fixed and variable recurring revenues from its customers whose contracts vary from 12 to 120 months in length.  In addition to the monthly recurring revenue stream, the Company provides consulting and customization services to customers.



Of particular note is that the Company signed contracts with new customers in two new and emerging regions: Asia-Pacific and Africa. These are emerging markets for the Companys target industry segment, and further validate the suitability and quality of its products for this market. It also validates the Companys ability to deliver hosted solutions to these key geographic areas.



Cost of service delivery increased to $1,058,051 during the year ended December 31, 2004 as compared to cost of delivery charges of $816,904 during the same period ended December 31, 2003.  The increase in expense is directly related to higher sales revenues in 2004 as compared to sales revenues for 2003.



Consequently, due to the substantial increase in revenues partially offset by a slight increase in the Companys cost of service delivery, the gross profit for the year ended December 31, 2004 increased to $561,550 from $222,525 during the same period ended December 31, 2003.  This represents an increase of 152% in gross profit for the year ended December 31, 2004.



Selling, general and administrative expenses increased to $2,717,757 in 2004 from $1,736,362 for the year ended on December 31, 2003, an increase of $981,395.  The increase is the result of the Company engaging certain consultants to help with the execution of the Companys business plan as well as the Company



22

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incurring a bridge loan fee.  In the aggregate, these charges represent approximately $1,406,753 in expenses for the year ended December 31, 2004.  Furthermore, the Company incurred approximately $104,682 in expenses for the conversion of a promissory note due to a shareholder into common shares and $149,270 in expense to record the issue of stock options to its employees during the year ended December 31, 2004. During the year ended December 31, 2003, the Company recorded an expense of $698,955 to recognize the cost of inducing a shareholder to forgo a redemption option on exchangeable shares that were issued in 2002.  This was a one-time charge for the year ended in December 31, 2003.



The increase of selling, general and administrative expenses has outweighed the increase of revenues resulting in an increase in the operating loss for the year ended December 31, 2004 as compared to the same period ended December 31, 2003.  The net operating loss for the year ended December 31, 2004 was $3,170,160 as compared to a net operating loss of $1,441,926 for the year ended December 31, 2003, an increase of $1,728,234.



The Companys interest expense was $208,152 for the year ended December 31, 2004 as compared to $97,371 for the same period ended December 31, 2003, an increase of $110,781.



During the year ended December 31, 2004, the Company reached settlement with certain creditors, resulting in the Company recognizing a gain of $13,743.



During the course of the year ended December 31, 2003, the Company reached a settlement with its former bank by using the proceeds from promissory notes provided by two shareholders to settle its outstanding debt.  The settlement resulted in the Company recognizing a gain from debt settlement of $65,586.



Furthermore, during the year ended December 31, 2003, the Company also reached a settlement with certain creditors that resulted in the Company recording a gain on debt settlement of $252,153.



During the year ended December 31, 2004, the Company recorded a charge of $692,143 in connection with a shareholder dispute settlement (refer to Part I, Item 3. legal proceedings).



Net losses have increased from $743,525 in 2003 to $3,170,160 for the year ended December 31, 2004.



Basic net loss per share was $0.06 in 2004 as compared to $0.03 in 2003.



Liquidity and Capital Resources



On January 1, 2004, the Company had a cash and cash equivalents deficiency of $28,076.



Net cash used in operating activities was $694,701 for the year ended December 31, 2004.  Net cash used in operating activities for the year ended December 31, 2004 resulted primarily from the net loss for the period, increases in receivables, decreases in prepaid expenses,  payables, deferred revenues and scientific research and experimental development tax credits partially offset by non-cash expenses.



Net cash used in investing activities for the year ended December 31, 2004 was $106,339.  Net cash used in



23

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investing activities related to investment in capital assets.



Net cash used in financing activities was $762,695 for the year ended December 31, 2004.  During the year, the Company received proceeds from the issuance of capital stock for cash consideration of $902,945, net proceeds from long term debt of $55,000 offset by repayments of $195,250 in long-term debt.



Changes in exchange rates affected  cash balances by $55,384 in 2004.



The Company had a cash and cash equivalents deficiency of $11,037 on December 31, 2004.



The Company had net working capital deficiencies of $2,874,707 and $2,396,270 for the years ended December 31, 2004 and 2003 respectively.



On January 1, 2003, the Company had $39,633 in cash and cash equivalents.



Net cash used in operating activities was $229,449 for the year ended December 31, 2003.  Net cash used in operating activities for the year ended December 31, 2003 resulted primarily from the net loss for the period, increases in receivables and prepaid expenses, offset by increase in payables and non-cash expenses.



Net cash provided by investing activities for the year ended December 31, 2003 was $Nil.



Net cash provided by financing activities was $148,950 for the year ended December 31, 2003.  During the year, the Company received net proceeds from long term debt of $120,999 as well as proceeds of $31,008 from bank indebtedness.  The Company also received proceeds from convertible debt of $62,017 for the year ended December 31, 2003.  These proceeds were offset by the repayment of an operating loan of $65,074.



Changes in exchange rates affected cash balances by $12,590 in 2003.



Cash decreased by $39,633 in 2003.



The Company had no cash and cash equivalents at December 31, 2003.



With respect to years beyond the year ended 2004, we may be required to raise additional capital to meet our long term operating requirements.  Although our revenues have increased since the commercialization of our products, our expenses are and may continue to exceed our revenues in the foreseeable future.  Accordingly, the company may not be able to fund its operations from internally generated funds for the foreseeable future.  Our cash requirements depend on several factors, including marketing activities, personnel expenses, legal costs, accounting costs and investor relations expenses.   However, we believe that the Company will be able to continue as a going concern through at least January 1, 2006.



We have no other commitments for any additional financing, and there can be no assurance that any such commitments can be obtained on favorable terms, if at all.





24

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Item 7.

Financial Statements.









































InteliSys Aviation Systems of America Inc.

Consolidated

Financial Statements

December 31, 2004 and 2003

(in US dollars)





25

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Contents



|                                                    | Page
|--------------------------------------------------- | ----
|Independent Auditors' Report                        |     
|Consolidated Balance Sheets                         |     
|Consolidated Statements of Operations               |     
|Consolidated Statements of Shareholders' Deficiency |     
|Consolidated Statements of Cash Flows               |     
|Notes to the Consolidated Financial Statements      | 32 -













































26

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Report of Independent Registered Public Accounting Firm



To the Stockholders of

InteliSys Aviation Systems of America Inc.



We have audited the accompanying consolidated balance sheets of InteliSys Aviation Systems of America Inc. as of December 31, 2004 and 2003 and the related consolidated statements of operations, shareholders deficiency and cash flows for the years then ended.  These consolidated financial statements are the responsibility of the Companys management.  Our responsibility is to express an opinion on these consolidated financial statements based on our audits.



We conducted our audits in accordance with standards of the Public Company Accounting Oversight Board (United States).  Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the consolidated financial statements are free of material misstatement.  The Company is not required to have, nor were we engaged to perform an audit of its internal control over financial reporting.  Our audits included consideration of internal control over financial reporting as a basis for designing audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the Companys internal control over financial reporting.  Accordingly, we express no such opinion.  An audit also includes examining, on a test basis, evidence supporting the amounts of disclosures in the consolidated financial statements, assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall consolidated financial statement presentation.  We believe that our audits provide a reasonable basis for our opinion.



In our opinion, the consolidated financial statements referred to above present fairly, in all material respects, the consolidated financial position of InteliSys Aviation Systems of America Inc. as of December 31, 2004 and 2003 and the consolidated results of its operations and its cash flows for the years then ended in conformity with accounting principles generally accepted in the United States of America.



The accompanying consolidated financial statements have been prepared assuming that the Company will continue as a going concern.  As discussed in Note 1 to the financial statements, the Company has incurred recurring losses from operations and has a working capital deficiency that raise substantial doubt about its ability to continue as a going concern.  Managements plans in regard to these matters are also described in Note 1.  The financial statements do not include any adjustments that might result from the outcome of this uncertainty.







|                                            | [intelisys10ksba030606001.jpg]
|------------------------------------------- | ------------------------------
|Moncton, New
Brunswick, Canada
May 10, 2005 | Chartered Accountant          





27

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InteliSys Aviation Systems of America Inc.

Consolidated Balance Sheets

As at December 31, 2004 and 2003

|(in US dollars)                                  |   | 2004         |   | 2003       
|------------------------------------------------ | - | ------------ | - | -----------
|Assets                                           |   |              |   |            
|Current assets                                   |   |              |   |            
|Receivables (Notes 2(c)(m), 4)                   | $ | 239,536      | $ | 132,150    
|Scientific Research and Experimental Development |   |              |   |            
|tax credit receivable                            |   | -            |   | 155,039    
|Prepaid expenses                                 |   | 44,349       |   | 66,183     
|Total current assets                             |   | 283,885      |   | 353,372    
|Property and equipment (Notes 2(d), 5)           |   | 571,744      |   | 578,175    
|Other intangibles                                |   | 14           |   | 13         
|                                                 | $ | 855,643      | $ | 931,560    
|Liabilities                                      |   |              |   |            
|Current liabilities                              |   |              |   |            
|Bank indebtedness (Note 6)                       | $ | 44,237       | $ | 59,284     
|Accounts payable (Note 2(m))                     |   | 1,257,530    |   | 1,332,176  
|Accrued liabilities (Note 2 (m))                 |   | 541,363      |   | 452,859    
|Deferred revenue (Note 2(i))                     |   | 25,748       |   | 57,020     
|Current portion of long-term debt (Notes 2(m),8) |   | 1,082,014    |   | 848,303    
|Current portion minority interest (Note 10)      |   | 207,700      |   | -          
|Total current liabilities                        |   | 3,158,592    |   | 2,749,642  
|Convertible debt (Notes 2(m), 9)                 |   | 76,562       |   | 71,434     
|Long-term debt (Notes 2(m), 8)                   |   | 192,827      |   | 674,222    
|                                                 |   | 3,427,981    |   | 3,495,298  
|Minority interest (Note 10)                      |   | 1,661,692    |   | 1,731,646  
|Comittment and contingencies (Notes 13, 19)      |   |              |   |            
|Shareholders Deficiency                         |   |              |   |            
|Capital stock (Notes 2(a), 11)                   |   | 70,394       |   | 36,430     
|Additional paid in capital (Notes 2(a), 11)      |   | 7,921,066    |   | 4,510,902  
|Common stock issuable (Note 11)                  |   | 20,509       |   | -          
|Accumulated other comprehensive loss (Note 2(j)) |   | (889,822)    |   | (656,699)  
|Deficit                                          |   | (11,356,177) |   | (8,186,017)
|                                                 |   | (4,234,030)  |   | (4,295,384)
|                                                 | $ | 855,643      | $ | 931,560    
|                                                 |   |              |   |            

Continuance
of operations (Note 1)



See accompanying notes to the consolidated financial statements.



28

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InteliSys Aviation Systems of America Inc.

Consolidated Statements of Operations

For the years ended December 31, 2004 and 2003

|(in US dollars)                                        |   | 2004        |   | 2003       
|------------------------------------------------------ | - | ----------- | - | -----------
|Revenue (Note 2 (i))                                   | $ | 1,619,601   | $ | 1,039,429  
|Cost of service delivery                               |   | 1,058,051   |   | 816,904    
|Gross profit                                           |   | 561,550     |   | 222,525    
|Costs and expenses:                                    |   |             |   |            
|Selling, general and administrative expenses (Note 18) |   | 2,717,757   |   | 1,736,362  
|Loss before undernoted                                 |   | (2,156,207) |   | (1,513,837)
|Other income (expenses)                                |   |             |   |            
|Interest expense                                       |   | (208,152)   |   | (97,371)   
|Depreciation and amortization                          |   | (142,670)   |   | (148,457)  
|Gain on debt settlement (Note 12)                      |   | 13,743      |   | 317,739    
|Shareholder settlement (Note 17)                       |   | (692,143)   |   | -          
|Interest income                                        |   | 15,269      |   | -          
|                                                       |   | (1,013,953) |   | 71,911     
|Net loss before income taxes                           |   | (3,170,160) |   | (1,441,926)
|Income taxes (recovery) (Note 14)                      |   | -           |   | (698,401)  
|Net loss                                               | $ | (3,170,160) | $ | (743,525)  
|Net loss per share-basic and diluted (Notes 2(p), 15)  | $ | (0.06)      | $ | (0.03)     
|                                                       |   |             |   |            

See accompanying notes to the consolidated financial statements.



29

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InteliSys Aviation Systems of America Inc.

Consolidated Statements of Shareholders Deficiency

For the years ended December 31, 2004 and 2003

(in US dollars)

|                                |            |          |                 |           |          |         |              | Accumulated other |          
|------------------------------- | ---------- | -------- | --------------- | --------- | -------- | ------- | ------------ | ----------------- | ---------
|                                | Common     |          | Additional      |           | Shares   |         | Accumulated  | Comprehensive     |          
|                                | Shares     | Amount   | Paid in Capital | Issuable  |          | Deficit | loss         | Total            
|Balance  December 31, 2002     | 28,083,333 | $ 28,033 | $               | 3,132,319 | $        | -       | $            | (7,442,492)       | $        
|Stock granted for               |            |          |                 |           |          |         |              |                   |          
|consulting and other            |            |          |                 |           |          |         |              |                   |          
|services                        | 2,100,000  | 2,100    |                 | 127,900   |          | -       |              | -                 |          
|Shares issued as for cash       |            |          |                 |           |          |         |              |                   |          
|consideration                   | 6,296,297  | 6,297    |                 | 623,333   |          | -       |              | -                 |          
|Beneficial conversion on        |            |          |                 |           |          |         |              |                   |          
|issuance of convertible debt    | -          | -        |                 | 20,000    |          | -       |              | -                 |          
|Stock options issued for        |            |          |                 |           |          |         |              |                   |          
|consulting and other services   | -          | -        |                 | 103,350   |          | -       |              | -                 |          
|Re-classification of redeemable |            |          |                 |           |          |         |              |                   |          
|shares                          | -          | -        |                 | 504,000   |          | -       |              | -                 |          
|Comprehensive income:           |            |          |                 |           |          |         |              |                   |          
|Net loss (page 3)               | -          | -        |                 | -         |          | -       |              | (743,525)         |          
|Currency translation adjustment | -          | -        |                 | -         |          | -       |              | -                 |          
|Total comprehensive loss        | -          | -        |                 | -         |          | -       |              | -                 |          
|Balance  December 31, 2003     | 36,479,630 | $ 36,430 | $               | 4,510,902 | $        | -       | $            | (8,186,017)       | $        
|Stock issued for financing      |            |          |                 |           |          |         |              |                   |          
|fees (Note 11)                  | 1,530,612  | 1,531    |                 | 471,878   |          | -       |              | -                 |          
|Stock issued for cash           |            |          |                 |           |          |         |              |                   |          
|consideration (Note 11)         | 20,813,611 | 20,813   |                 | 882,132   |          | -       |              | -                 |          
|Stock issued for consulting     |            |          |                 |           |          |         |              |                   |          
|and other services (Note 11)    | 8,165,000  | 8,165    |                 | 925,179   |          | -       |              | -                 |          
|Stock issued as part of a       |            |          |                 |           |          |         |              |                   |          
|shareholder                     |            |          |                 |           |          |         |              |                   |          
|settlement (Note 17)            | 1,821,429  | 1,821    |                 | 690,322   |          | -       |              | -                 |          
|Stock issued for debt           |            |          |                 |           |          |         |              |                   |          
|settlement (Note 11)            | 1,633,619  | 1,634    |                 | 291,383   |          | -       |              | -                 |          
|Common stock issuable for       |            |          |                 |           |          |         |              |                   |          
|settlement of employee          |            |          |                 |           |          |         |              |                   |          
|debt (Note 11)                  | -          | -        |                 | -         |          | 20,509  |              | -                 |          
|Stock options issued to         |            |          |                 |           |          |         |              |                   |          
|employees (Note 11)             | -          | -        |                 | 149,270   |          | -       |              | -                 |          
|Comprehensive income:           |            |          |                 |           |          |         |              |                   |          
|Net loss (Page 3)               | -          | -        |                 | -         |          | -       |              | (3,170,160)       |          
|Currency translation adjustment | -          | -        |                 | -         |          | -       |              | -                 |          
|Total comprehensive loss        | -          | -        |                 | -         |          | -       |              | -                 |          
|Balance  December 31, 2004     | 70,443,901 | $ 70,394 | $               | 7,921,066 | $ 20,509 | $       | (11,356,177) | $                 | (889,822)

---



See accompanying notes to the consolidated financial statements.

30

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InteliSys Aviation Systems of America Inc.

Consolidated Statements of Cash Flows

For the Year Ended December 31, 2004 and 2003

(in US dollars)
	
	2004
	
	2003Increase (decrease) in cash and cash equivalentsOperating activitiesNet loss from operations
	$
	(3,170,160)
	$
	(743,525)Adjustments to reconcile net loss to net cash usedin continuing operationsItems not affecting cashDepreciation and amortization
	
	142,670
	
	148,457Gain on debt settlement
	
	(13,743)
	
	(317,739)Shares issued for consideration other than cash
	
	1,453,336
	
	923,923Stock based compensation expense (Note 11)
	
	149,270
	
	103,350Stock issued as part of shareholdersettlement (Note 17)
	
	692,143Interest on redeemable shares
	
	-
	
	(76,191)Changes in non-cash working capital itemsAccounts receivable
	
	(97,900)
	
	(58,035)Scientific Research and Experimental Developmenttax credit
	
	166,168
	
	(155,039)Prepaid expenses
	
	88,020
	
	(49,744)Accounts payable and accrued liabilities
	
	(69,140)
	
	10,015Deferred revenue
	
	(35,365)
	
	(15,013)Net cash used in continuing operating activities
	
	(694,701)
	
	(229,449)Financing activitiesNet proceeds from the issuance of capital stock
	
	902,945Net proceeds from long-term debt
	
	55,000
	
	120,999Net proceeds from convertible debt
	
	-
	
	62,017(Repayment) net proceeds from bank indebtedness
	
	-
	
	31,008Repayment of long-term debt
	
	(195,250)Repayment of operating loan
	
	-
	
	(65,074)Net cash provided by financing activities
	
	762,695
	
	148,950Investing activitiesAcquisition of property and equipment (net)
	
	(106,339)Net cash (used in) provided by investing activities
	
	(106,339)Effects of exchange rates on cash
	
	55,384
	
	12,590Net increase (decrease) in cash and cash equivalents
	
	17,039
	
	(39,633)Cash and cash equivalents, beginning of year
	
	(28,076)
	
	39,633Cash and cash equivalents, end of year
	$
	(11,037)
	$
	(28,276)Supplemental cash flow informationInterest paid
	$
	63,990
	$
	30,996Non-cash operating, investing and financing activitiesStock issued as part of shareholder settlement
	
	692,143Stock issued for settlement of employee debt
	
	20,509Stock issued to settle debt
	
	104,682
	
	779,082Stock based compensation
	
	149,270
	
	103,350Payable to minority interest
	
	13,440




See accompanying notes to the consolidated financial statements

31

---



InteliSys Aviation Systems of America Inc.

Notes to the Consolidated Financial Statements

December 31, 2004

(in US dollars)

---





1.

Ability to continue operations



The accompanying consolidated financial statements have been prepared on a going-concern basis, which contemplates the realization of assets and the satisfaction of liabilities in the normal course of business.  As indicated in the consolidated financial statements, the Company has incurred significant operating losses and negative cash flows from operations over the past two years and has not been able to meet its obligations as they come due.  At December 31, 2004 and December 31, 2003, the Company has working capital deficiencies of $2,874,707 and $2,396,270 respectively and net shareholders deficiencies of $4,234,030 as at December 31, 2004 and $4,295,384 at December 31, 2003.  These factors, among others, strongly indicate that the Company might not be able to continue as a going concern.  The consolidated financial statements do not include any adjustments relating to the recoverability and classification of recorded asset amounts, or the amount of and classification of liabilities that might be necessary should the Company be unable to continue as a going concern.  The Companys continuation as a going concern is dependent upon its ability to achieve profitable operations, generate sufficient cash flow to meet its obligations, and obtain additional financing.



Managements plans



As indicated in the consolidated financial statements, the Company has incurred losses from continuing operations of $3,170,160 and $1,441,927 for the years ended December 31, 2004 and 2003 respectively.  The Company also has a severe working capital deficiency, and a net shareholders deficiency at year-end.  Since its inception, the Company has devoted substantially all of its efforts to developing its products, obtaining financing, assessing market demand, and obtaining customers.  The success of the Companys operations and, ultimately, the attainment of profitable operations are dependant on achieving a level of sales adequate to support the Companys cost structure.



Management continues to focus on seeking new customers and seeking new sources of financing.



---





2.

Summary of significant accounting policies



a)

Nature of operations and basis of financial statement presentation



In August of 2003, the Company changed its name from Apta Holdings, Inc. to InteliSys Aviation Systems of America Inc (IASA), pursuant to a consent of the Companys shareholders, to better reflect its new business activities.



IASA was incorporated on June 4, 1999 in the State of Delaware.  IASA was formerly engaged in two lines of business: owning and operating income producing real estate, and a finance business which originated and serviced loans to individuals and to businesses.
The real estate business was spun off in 2000.  The finance business was sold prior to December 31, 2002.



32

---





InteliSys Aviation Systems of America Inc.

Notes to the Consolidated Financial Statements

December 31, 2004

(in US dollars)

---



2.

Summary of significant accounting policies(continued)



On December 31, 2002, IASA acquired 100% of the issued and outstanding common stock of CONVERGix, Inc. (CONVERGix), a Canadian corporation, pursuant to a share exchange agreement dated November 22, 2002. Under the share exchange agreement, IASA issued 3,295,000 shares of its common stock plus 21,788,333 of Class B Special exchangeable shares of Intelisys Acquisition, Inc., a 100% owned subsidiary of IASA.  The exchangeable shares have equal voting rights and equal economic value as IASA common stock.  These exchangeable shares may be exchanged by the holder at any time on a one-for-one basis for IASA common stock, and if not exchanged prior to December 31, 2012, will be exchanged for IASA common stock on that date. As a result of the merger, the shareholders of CONVERGix are now shareholders of IASA.  In conjunction with the merger, all of the directors and officers of IASA resigned and the shareholders have appointed a new board of directors and officers, which consists of the directors and officers of CONVERGix.



The merger was accounted for as a reverse acquisition and resulted in CONVERGix becoming the accounting acquirer, whereby the historical financial statements of IASA have become those of CONVERGix.



In conjunction with the merger and recapitalization of CONVERGix, CONVERGixs 25,083,333 issued and outstanding common stock were reclassified into common stock of IASA or exchangeable shares of Intelisys Acquistion Inc., which represent IASA common stock equivalents.  Because IASA was inactive at December 31, 2002, net assets acquired were Nil.



CONVERGix is incorporated under the New Brunswick Business Corporations Act in Canada and is a holding company, which holds investments in two subsidiary companies whose business activities include developing, marketing, installation and support of a suite of aviation enterprise software for the global market.



CONVERGix was incorporated on January 18, 2001 in connection with a corporate reorganization of its two subsidiary companies, Cynaptec Information Systems Inc. and InteliSys Aviation Systems Inc.  Following this reorganization, CONVERGix owns 100% of the issued and outstanding common shares of Cynaptec Information Systems Inc. and 53% of the issued and outstanding common shares of InteliSys Aviation Systems Inc.  On March 31, 2001, the Company abandoned its operations in Cynaptec Information Systems Inc. in order to concentrate on the development and marketing of the Amelia software product developed by Intelisys Aviation Systems Inc.



Cynaptec Information Systems Inc. owns 47% of the issued and outstanding common shares of InteliSys Aviation Systems Inc.



The reorganization on January 18, 2001 did not result in a change of control of Cynaptec Information Systems Inc. and InteliSys Aviation Systems Inc.



The consolidated financial statements have been prepared in accordance with accounting principles generally accepted in the United States of America and include the following significant accounting policies:

33

---



InteliSys Aviation Systems of America Inc.

Notes to the Consolidated Financial Statements

December 31, 2004

(in US dollars)

---



b)

Principles of consolidation



The consolidated financial statements include the accounts of InteliSys Aviation Systems of America Inc., and its wholly-owned subsidiaries:



·

InteliSys Acquisition, Inc.

·

InteliSys (Nova Scotia) Co.

·

CONVERGix, Inc.

·

InteliSys Aviation Systems Inc.

·

Cynaptec Information Systems Inc.



Significant inter-company transactions have been eliminated on consolidation.



c)

Accounts Receivable



The majority of the Companys accounts receivable are due from companies in the aviation industry that operate regional, low-fare/low cost airlines.  Credit is extended based on evaluation of a customers financial condition and collateral is not required.  Accounts receivable are due within 15-30 days and are stated at amounts due from customers net of an allowance for doubtful accounts.  Accounts outstanding longer than the contractual payment terms are considered past due.  The Company determines its allowance by considering a number of factors, including the length of time trade accounts receivable are past due, the Companys previous loss history, the customers current ability to pay its obligation to the Company, and the condition of the general economy and the industry as a whole.  The Company writes-off accounts receivable when they become uncollectible, and payments subsequently received on such receivables are credited to the bad debt recovery account.



d)

Property and equipment and depreciation



Property and equipment is recorded at cost less accumulated depreciation.  Depreciation is provided using the declining balance method over their useful lives at the following annual rates:



| | Office furniture and equipment: | 20%
| | ------------------------------- | ---
| | Computer equipment and software | 30%
| | Library                         | 50%
| | Leasehold improvements          | 7% 



e)

Software development costs



Software development costs are accounted for in accordance with Statement of Financial Accounting Standards No. 86, Accounting for the Costs of Computer Software to be Sold, Leased or Otherwise Marketed.  Under the standard, capitalization of software development costs begins upon the establishment of technological feasibility, subject to net realizable value considerations.  To date, the period between achieving technological feasibility and the general availability of such software has been short; therefore, software development costs qualifying for capitalization have been immaterial.  Accordingly, the Company has not capitalized any software developments costs and has charged all such costs to research and development expense.  Research and development costs are expensed as incurred, net of any investment tax credits.



34

---







InteliSys Aviation Systems of America Inc.

Notes to the Consolidated Financial Statements

December 31, 2004

(in US dollars)

---



f)

Income taxes



The Company accounts for income taxes on the liability method, as outlined by Statement of Financial Accounting Standards 109, Accounting for Income Taxes.  Income taxes are provided for current taxes payable or refundable, and temporary differences arising from the future tax consequences of events that have been recognized in the Companys financial statements or income tax returns.  The effect of income taxes is measured based on currently enacted tax laws and rate.  A valuation allowance is provided for deferred tax assets when it is more likely than not that some or all of such assets will not be realized.



g)

Cash and cash equivalents



The Company considers cash on hand and balances with banks, net of overdrafts, and checks in excess of funds on deposit and investments in highly liquid temporary money market investment instruments with original maturities of 90 days or less at the date of purchase to be cash and cash equivalents.



h)

Use of estimates



The preparation of financial statements in conformity with accounting principles generally accepted in the United States of America require management to make estimates and assumptions that affect the reported amounts of assets, liabilities, revenues and expenses, and disclosure of contingent liabilities in these financial statements.  Actual results could differ from those estimates.



i)

Revenue recognition



The Company accounts for software sales in accordance with Statement of Position (SOP) No. 97-2, Software Revenue Recognition.  SOP 97-2 generally requires revenues earned on software arrangements involving multiple elements to be allocated to each element based on the relative fair value of the element.



Revenue from license fees is recognized when persuasive evidence of an agreement exists, delivery of the product has occurred, the fee is fixed or determinable, and collectability is probable.  The Company maintains certain provisions for product returns and rebates in accordance with SFAS No. 48 Revenue Recognition when Right of Return Exists.  The Company considers arrangements regarding certain customers with payment terms extending beyond customary payment terms not to be fixed or determinable.  If the fee is not fixed or determinable, revenue is deferred and recognized when payments become due from the customer providing that all other revenue recognition criteria have been met.



Software subscription, support, consulting service, and training program revenue included in multiple-element arrangements is deferred and recognized on a straight-line basis over the term of the software subscription and support agreement.  The fair value of the undelivered elements (software subscription, specified upgrades, support, consulting services and training) is generally determined based on the price charged for the undelivered element when sold separately.



35

---







InteliSys Aviation Systems of America Inc.

Notes to the Consolidated Financial Statements

December 31, 2004

(in US dollars)

---





j)

Comprehensive (loss) income



Comprehensive income or loss encompasses net income or loss and other comprehensive income or loss, which includes all other non-owner transactions and events that change shareholders (deficiency).  The Companys other comprehensive income (loss) reflects the effect of foreign currency translation adjustments on the translation of the financial statements from the functional currency of Canadian dollars into the reporting currency of U.S. dollars



k)

Reporting currency and foreign currency translation



The Companys functional currency is the Canadian dollar since it is the currency of the primary economic environment in which the Company operates.  Assets and liabilities are translated into United States dollars using the current rate of exchange at the balance sheet date.  Revenues, expenses, gains and losses are translated into United States dollars using the weighted-average exchange rate prevailing during the period.



l)

Stock-based compensation



In accordance with the accounting requirements of SFAS 123, Share-Based Payments the Company uses the fair value  based method of accounting for stock based employee compensation and stock based compensation to suppliers other than employees.



The fair value of each option granted is estimated on the grant date using the Black-Scholes option pricing model with the following assumptions:



| |                                 | 2004     | 2003   
| | ------------------------------- | -------- | -------
| | Expected dividend yield         | -        | -      
| | Risk-free interest rate         | 4.13%    | 2%     
| | Volatility                      | 199%     | 128%   
| | Expected lives                  | 10 years | 2 years
| | Per share weighted average fair |          |        
| | value of stock options granted  | $ .03    | $ .16  



m)

Financial instruments



The Companys primary financial instruments consist of receivables, current liabilities, convertible debt and long-term debt.  The difference between the carrying values and the fair market values of the primary financial instruments are not material due to the short-term maturities and/or the credit terms of those instruments.



The fair value of shareholder advances cannot be determined, as they do not include any terms of payment (Note 8).



36

---







InteliSys Aviation Systems of America Inc.

Notes to the Consolidated Financial Statements

December 31, 2004

(in US dollars)

---





n)

Recovery of long-lived assets



The Company adopted FASB Statement 144, Accounting for the Impairment and Disposal of Long-Lived Assets (SFAS 144).  SFAS 144 requires recognition of impairment losses on long-lived assets when indicators of impairment are present and the undiscounted cash flows estimated to be generated by those assets are less than the assets carrying amounts.



o)

Government assistance



Government assistance relating to the purchase of capital assets and other assets is recorded as a reduction of the cost of such assets.  Government assistance relating to current expenses is netted against the related expense.



p)

Loss per share



The Company computes net earnings (loss) per common share in accordance with SFAS No. 128, Earnings Per Share (SFAS 128) and SAB No. 98 (SAB 98).  Under the provisions of SFAS 128 and SAB 98, basic net earnings (loss) per common share is computed by dividing the net earnings (loss) available to common stockholders for the period by the weighted average number of shares of common stock outstanding during the period.  Net earnings (loss) per share on a diluted basis is computed by dividing the net earnings (loss) for the period by the weighted average number of common and dilutive common stock equivalent shares outstanding during the period.



At December 31, 2004 and 2003, the effect of outstanding convertible debt has not been included in the diluted loss per share as such amounts would be anti-dilutive.



q)

Recent accounting pronouncements



On December 16, 2004, the Financial Accounting Standards Board (FASB) issued SFAS No. 123(R), Share-Based Payment, which is a revision of SFAS No. 123 and supersedes APB Opinion 25. SFAS No. 123(R) requires all share-based payments to employees, including grants of employee stock options, to be valued at fair value on the date of grant, and to be expensed over the applicable vesting period. Pro forma disclosure of the income statement effects of share-based payments is no longer an alternative. SFAS No. 123(R) is effective for all stock-based awards granted on or after January 1, 2006. In addition, companies must also recognize compensation expense related to any awards that are not fully vested as of the effective date. Compensation expense for the unvested awards will be measured based on the fair value of the awards previously calculated in developing the pro forma disclosures in accordance with the provisions of SFAS No. 123.



The Company has adopted SFAS No. 123 (R) during 2004.  The implementation of which did not have a significant effect on the Companys consolidated financial statement presentation and disclosure.   We have not completed the calculation of this impact.



37

---







InteliSys Aviation Systems of America Inc.

Notes to the Consolidated Financial Statements

December 31, 2004

(in US dollars)

---





q)

Recent accounting pronouncements(continued)



On December 16, 2004, the FASB issued SFAS No. 153, Exchanges of Non-monetary Assets, which is an amendment to APB Opinion No. 29. It states that the exchanges on non-monetary assets should be measured based on the fair value of the assets exchanged. Further, FSAS No. 153 eliminates the narrow exception for non-monetary exchanges of similar productive assets and replaces it with a broader exception for exchanges of non-monetary assets that do not have commercial substance. FSAS No. 153 is effective for financial statements for fiscal years beginning after June 15, 2005. Earlier application is permitted for non-monetary asset exchanges incurred during fiscal years beginning after the date that this statement is issued. Management believes the adoption of this Statement will not have an effect on the consolidated financial statements.



On November 24, 2004, FASB issued SFAS No. 151, Inventory Costs, which is an amendment to ARB No. 43, Chapter 4. It clarifies the accounting for abnormal amounts of idle facility expense, freight, handling costs, and wasted material (spoilage). The FASB states that these costs should be expensed as incurred and not included in overhead. Further, SFAS No. 151 requires that allocation of fixed production overheads to conversion costs should be based on normal capacity of the production facilities. SFAS No. 151 is effective for inventory costs incurred during fiscal years beginning after June 15, 2005. Management believes the adoption of this Statement will not have an effect on the consolidated financial statements.



In December 2003, the FASB issued FASB Interpretation No. 46 (revised December 2003), Consolidation of Variable Interest Entities. (VIEs) (FIN 46R) which addresses how a business enterprise should evaluate whether it has a controlling financial interest in an entity through means other than voting rights and accordingly should consolidate the entity. FIN 46R replaces FASB Interpretation No. 46. Consolidation of Variable Interest Entities, which was issued in January 2003. The Company has adopted FIN 46R as of March 31, 2004 for variable interests in VIEs. For any VIEs that must be consolidated under FIN 46R that were created before January 1, 2004, the assets, liabilities and non-controlling interests of the VIE initially would be measured at their carrying amounts with any difference between the net amount added to the balance sheet and any previously recognized interest being recognized as the cumulative effect of an accounting change. If determining the carrying amounts is not practicable, fair value at the date FIN 46R first applies may be used to measure the assets, liabilities and non-controlling interest of the VIE. The adoption of FIN 46R did not have an effect on the consolidated financial statements inasmuch as the Company has no interests in any VIEs.



r)

Capital stock issued for consideration other than cash.



Capital stock issued for consideration other than cash is recorded at an estimate of the fair value of the stock issued or issuable or at an estimate of the fair value of the goods or services received, whichever is more readily ascertainable.



38

---







InteliSys Aviation Systems of America Inc.

Notes to the Consolidated Financial Statements

December 31, 2004

(in US dollars)

---





3.

Concentrations



Concentrations of Credit Risk



At December 31, 2004, two significant customers accounted for 61% of trade accounts receivable and each of these two customers accounted for more than 10% of trade accounts receivable.  At December 31, 2003, six significant customers accounted for 88% of trade accounts receivable and each of these six customers accounted for more than 10% of trade accounts receivable.





Concentration in Operations



In 2004, two significant customers accounted for 35% of revenue and each of these two customers accounted for more than 10% of revenue.   In 2003, four significant customers accounted for 50% of revenue and each of these four customers accounted for more than 10% of revenue.



---





4.

Accounts receivables

|                                |   | 2004      |   | 2003    
|------------------------------- | - | --------- | - | --------
|Accounts receivable  trade     | $ | 376,930   | $ | 160,511 
|Allowance for doubtful accounts |   | (143,737) |   | (42,489)
|Other                           |   | 6,343     |   | 14,128  
|                                | $ | 239,536   | $ | 132,150 

39

---



InteliSys Aviation Systems of America Inc.

Notes to the Consolidated Financial Statements

December 31, 2004

(in US dollars)

---



5.

Property and
equipment

|                               |          |            |         | 2004         |            |         |                         | 2003       
|------------------------------ | -------- | ---------- | ------- | ------------ | ---------- | ------- | ----------------------- | -----------
|                               |          |            |         | Accumulated  |            | Net     |                         | Accumulated
|                               |          | Cost       |         | Depreciation | Book Value | Cost    | Depreciation Book Value
|Computer equipment and         |          |            |         |              |            |         |                         |            
|                               | software | $ 905,112  | $       | 581,404      | $          | 323,708 | $ 752,871               | $          
|Leasehold improvements         | 213,822  |            | 56,994  |              | 156,828    | 199,501 |                         | 41,600     
|Office furniture and equipment | 195,442  |            | 117,127 |              | 78,315     | 174,755 |                         | 91,964     
|Trade show booth               | 36,662   |            | 23,928  |              | 12,734     | 34,206  |                         | 17,235     
|Library                        | 8,859    |            | 8,700   |              | 159        | 8,265   |                         | 7,969      
|                               |          | $1,359,897 | $       | 788,153      | $          | 571,744 | $1,169,598              | $          





---



6.

Bank indebtedness



The Company has an authorized operating line of credit of $ 33,200 (2003  $31,008) which bears interest of prime plus 3.50%.  As of December 31, 2004, the Company had written checks in excess of the operating line of credit in the amount of $ 11,037 (2003 - $28,276).



---



7.

Bank operating loans



On March 22, 2002, the Companys two wholly owned subsidiaries, Cynaptec Information Systems Inc. and InteliSys Aviation Systems Inc. entered into a forbearance agreement with their Bank, which was further amended August 1, 2002.



At December 31, 2002, the Companys wholly owned subsidiaries were in default of their forbearance agreement due to non-payment.



On May 30, 2003, the Companys two wholly owned subsidiaries, Cynaptec Information Systems Inc., and InteliSys Aviation Systems Inc., reached a settlement with their bank in regards to the outstanding debt.  Under the settlement, the bank has released all security pledged by the Companys two wholly owned subsidiaries and guarantees from certain shareholders.  The debt settlement resulted in the forgiveness of $65,586 of debt, which is recorded as other income on the consolidated statement of operations for the year ended December 31, 2003.



40

---





InteliSys Aviation Systems of America Inc.

Notes to the Consolidated Financial Statements

December 31, 2004

(in US dollars)

---



8.

Long-term
debt

|                                                                   |   |           | 2004      |         | 2003     
|------------------------------------------------------------------ | - | --------- | --------- | ------- | ---------
|Atlantic Canada Opportunities Agency (ACOA)                        |   |           |           |        
|unsecured repayable contribution, non-interest bearing             |   |           |           |        
|payments were to begin Jan. 1, 2003, $315 for first 6 months,      |   |           |          
|1,261 for next 44 payments and a final of $641. The Company        |   |          
|is currently in default of this loan and in negotiations with ACOA |   |          
|to have the payment schedule amended.                              | $ | 74,360    | $         | 69,380 
|Atlantic Canada Opportunities Agency (ACOA)                        |   |           |           |        
|unsecured repayable contribution, non-interest bearing             |   |           |           |        
|repayment is calculated as 3% of the gross annual sales            |   |           |           |        
|where first payment was due January 1, 2003 and                    |   |           |           |        
|subsequent repayments are due monthly until the                    |   |           |           |        
|contribution has been repaid. The Company is currently in          |   |           |          
|default of this loan and in negotiations with ACOA to have         |   |           |          
|the Payment schedule amended.                                      |   | 267,378   |           | 249,470
|Gavella Corp. promissory notes, secured by shareholder             |   |           |           |        
|guarantee and all of the assets of the Company, bearing            |   |           |           |        
|interest at 12%, repayable on December 31, 2003.                   |   | -         |           | 101,407
|Promissory note, unsecured, bearing interest at 6%                 |   |           |           |        
|per month, due on demand.                                          |   | 33,234    |           | 31,008 
|Long-term loan, non-interest bearing, repayable starting           |   |           |           |        
|in 2006.                                                           |   | 55,000    |           | -      
|ACOA, Amelia marketing loan, unsecured repayable                   |   |           |           |        
|contribution, non-interest bearing, repayable in 39                |   |           |           |        
|monthly installments of $5,256. First repayment was                |   |           |           |        
|due February 1, 2004. The Company is currently in default          |   |           |          
|of this loan and in negotiations with ACOA to have the             |   |           |           |        
|payment schedule amended.                                          |   | 365,664   |           | 341,173
|Promissory notes, unsecured, bearing interest at                   |   |           |           |        
|varying rates between 6.7% - 15%, which were repayable             |   |           |           |        
|between August 2001 and January 2003.                              |   | 299,927   |           | 527,789
|BDC leasehold loan, secured by shareholder guarantee               |   |           |           |        
|and general security agreement covering equipment,                 |   |           |           |        
|bearing interest at 10.8%, repayable in 3 consecutive              |   |           |           |        
|monthly payments of $631, beginning November 15, 2002,             |   |           |          
|followed by 43 consecutive payments of $2,113, beginning           |   |           |          
|February 15, 2003 and one final payment of $2,163 on               |   |           |           |        
|September 15, 2006.                                                |   | 44,420    |           | 65,120 
|Former shareholder loan, bearing interest at 26%,                  |   |           |           |        
|repayable in minimum monthly installments of $1,099,               |   |           |           |        
|beginning in December 2002 and continuing until balance            |   |           |           |        
|is paid in full.                                                   |   | 133,375   |           | 124,442
|Shareholder loan, non-interest bearing, no set terms               |   |           |           |        
|of repayment.                                                      |   | 1,483     |           | 12,736 
|                                                                   |   |           | 1,274,841 |         | 1,522,525
|Less current portion of long-term debt                             |   | 1,082,014 |           | 848,303
|                                                                   |   | $         | 192,827   | $       | 674,222  



41

---







InteliSys Aviation Systems of America Inc.

Notes to the Consolidated Financial Statements

December 31, 2004

(in US dollars)

---





8.

Long-term debt(continued)



The aggregate maturities of long-term debt for each of the five years subsequent to December 31, 2004 are approximately as follows:



| | 2005           | $ | 1,082,014
| | -------------- | - | ---------
| | 2006           |   | 57,305   
| | 2007           |   | 47,404   
| | 2008           |   | 15,321   
| | 2009           |   | 15,321   
| | and thereafter |   | 57,476   
| |                | $ | 1,274,841



At December 31, 2004 the Company is in default on principal and interest payments for many of its obligations as follows:



| | Principal payments in default | $1,056,660
| | ----------------------------- | ----------
| | Interest payments in default  | 402,504   
| |                               | $1,459,164

All debt in default has been classified as part of current liabilities at December 31, 2004.  The Company is in the process of refinancing both its long-term and short-term debt obligations.  No waivers have been obtained by the Company.



---





9.

Convertible debt



Convertible debt at December 31, 2004 consists of debt which is convertible into the Companys common stock.

|                                                                |   | 2004   |   | 2003  
|--------------------------------------------------------------- | - | ------ | - | ------
|Shareholder loan, bearing interest at 8%, convertible into      |   |        |   |       
|common shares at the closing price of shares at the date        |   |        |   |       
|of conversion. Management is currently in negotiations with the |   |        |   |       
|holder of the convertible debt to convert the debt into the     |   |        |   |       
|Companys common shares.                                        | $ | 66,400 | $ | 62,015
|Shareholder loan, non-interest bearing convertible into         |   |        |   |       
|Common shares at the market price at the date of conversion.    |   | 10,162 |   | 9,419 
|                                                                | $ | 76,562 | $ | 71,434



At December 31, 2004, the effect of outstanding convertible debt has not been included in the earnings per share calculation for the year then ended; as such amounts would be anti-dilutive.



There is no beneficial conversion associated with the convertible debt.



42

---







InteliSys Aviation Systems of America Inc.

Notes to the Consolidated Financial Statements

December 31, 2004

(in US dollars)

---







10.

Minority interest



At December 31, 2004 and 2003, minority interest consists of preferred shares of CONVERGix Inc. (CONVERGix) and preferred shares of Cynaptec Information Systems, Inc. (Cynaptec).  The minority interest in CONVERGix arose following the merger with IASA on December 31, 2002 as the preferred stock of CONVERGix was not acquired by IASA in the merger (Note 2 (a)).  The minority interest in Cynaptec arose following the Corporate re-organization on January 18, 2001.  The preferred shares of Cynaptec are redeemable by the holder in 2005.  Accordingly, the redemption value of the preferred shares has been classified as a current liability.



---





11.

Capital stock



At December 31, 2004, the Company is authorized to issue:



1)

10,000,000 shares of preferred stock, par value $0.001 per share.



2)

100,000,000 shares of common stock, par value $0.001 per share.



At December 31, 2004, there are 48,655,568 shares of common stock outstanding.  In addition, there are 21,788,333 issued and outstanding Special Class B Exchangeable Shares in IASAs wholly owned subsidiary Intelisys Acquisition Inc.  As outlined in Note 2(a), the exchangeable shares have equal voting rights and equal economic value as IASA common shares as they may be exchanged by the holder at any time on a one-for-one basis for IASA common shares, and if not exchanged prior to December 31, 2012, will be exchanged for IASA common shares on that date.



Accordingly, the Special Class B exchangeable shares have been accounted for as if they are issued and outstanding in the Company at December 31, 2004 and have been included in calculating the basic loss per share.



During the year ended December 31, 2004, the Company issued 1,530,612 shares of common stock valued at $473,409, the market value on the grant date, as compensation for arranging a short term financing arrangement (a bridge loan).



During the year ended December 31, 2004, the Company issued 20,102,500 shares of common stock for cash consideration of $828,445 as part of an offshore placement agreement to investors who are not US persons, relying on an exemption provided under Regulation S of the Securities Act of 1933.



During the year ended December 31, 2004, the Company issued 711,111 shares of common stock for cash consideration of $74,500 as part of an offshore placement to investors who are not US persons, relying on an exemption provided under Regulation S of the Securities Act of 1933.



During the year ended December 31, 2004, the Company issued 8,165,000 shares of common stock valued at $933,344, the market value on the date of the grants, to various individuals for consulting services rendered.



During the year ended December 31, 2004, the Company issued 1,821,429 shares of common stock valued at $692,143, the market value on the grant date, as part of a dispute settlement with a shareholder.



During the year ended December 31, 2004, the Company issued 1,633,619 shares of common stock as part of a debt settlement agreement.  In exchange for the shares, the shareholder has released the Company from a promissory note obligation valued at $188,335.



43

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InteliSys Aviation Systems of America Inc.

Notes to the Consolidated Financial Statements

December 31, 2004

(in US dollars)

---





11.

Capital stock(continued)



During the year ended December 31, 2004, the Company agreed to issue 1,025,430 shares of common stock to an employee in settlement of $20,509 owed to the employee.  The shares were issued in 2005.



Stock options



During the year ended December 31, 2003 the Company issued 650,000 stock options to a shareholder, who is a non-employee, for consulting and other services, valued at $103,350. The options may be exercised by the Optionee in whole or in multiples of 1,000 shares at any time on or prior to December 31, 2005 for a purchase price of $0.10 per share.  As at December 31, 2004, all 650,000 options remain unexercised.



During the year ended December 31, 2004, the Company issued 4,937,670 stock options to its employees and executive management, under its 2004 Stock Option Plan as filed with the Securities and Exchange Commission in April 2004, valued at $149,270.



The following table outlines the status of all of the Companys outstanding stock options:



|Amount    | Exercise price | Date exercisable  | Expiration       
|--------- | -------------- | ----------------- | -----------------
|650,000   | $0.10          | immediately       | December 31, 2005
|3,571,854 | $0.001         | immediately       | December 31, 2014
|510,544   | $0.03          | immediately       | December 31, 2014
|255,272   | $0.03          | December 31, 2005 | December 31, 2014



Stock option activity is presented below:

|                               |                  | Weighted average
|------------------------------ | ---------------- | ----------------
|                               | Number of shares | exercise price  
|Outstanding, December 31, 2002 | -                | $               
|Granted                        | 650,000          |                 
|Outstanding, December 31, 2003 | 650,000          |                 
|Granted                        | 4,937,670        |                 
|                               | 5,587,670        | $ 0.02          



---



12.

Gain on debt settlement



During the year, the Company reached a settlement with certain unsecured trade creditors that resulted in the Company recording a gain on debt settlement of $13,743 (2003  $252,153).



During the year ended December 31, 2003, the Company reached a settlement with the former bank of its two wholly-owned subsidiaries (Note 7).  The settlement resulted in the Company recognizing a gain from debt settlement of $65,586.



44

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InteliSys Aviation Systems of America Inc.

Notes to the Consolidated Financial Statements

December 31, 2004

(in US dollars)

---





13.

Commitments



The Company is committed to minimum annual lease payments under an operating lease for office space.  The minimum payments required under this lease for each of the three years subsequent to December 31, 2004 are approximately as follows:



| | 2005
      2006
      2007 | $ 119,520
119,520
23,904
| | -------------------------- | ------------------------



---





14.

Income taxes



The Companys provision (benefit) for income taxes consist of the following for the years ended December 31:



| |          |   | 2004 |   | 2003     
| | -------- | - | ---- | - | ---------
| | Current  | $ | -    | $ | (698,401)
| | Deferred |   | -    |   | -        
| |          | $ | -    | $ | (698,401)



The composition of the components of tax provision (benefit) is as stated below for the years ended December 31:



| |                                      |   | 2004      |   | 2003     
| | ------------------------------------ | - | --------- | - | ---------
| | Current                              |   |           |   |          
| | Deferred income tax asset write down | $ | -         | $ | -        
| | Research and Development tax credit  |   | -         |   | (698,401)
| |                                      | $ | -         | $ | (698,401)
| | Deferred                             |   |           |   |          
| | Tax benefit at statutory rates       | $ | (222,000) | $ | (224,000)
| | Increase in valuation allowance      |   | 222,000   |   | 224,000  
| |                                      | $ | -         | $ | -        



The components of the deferred tax assets and liabilities at December 31, 2004 and 2003 are approximately as follows:



| |                                   |   | 2004        |   | 2003       
| | --------------------------------- | - | ----------- | - | -----------
| | Net operating loss carry forwards |   |             |   |            
| | Valuation allowance               | $ | 3,124,000   | $ | 2,902,000  
| |                                   |   | (3,124,000) |   | (2,902,000)
| |                                   | $ | -           | $ | -          









45

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InteliSys Aviation Systems of America Inc.

Notes to the Consolidated Financial Statements

December 31, 2004

(in US dollars)

---





14.

Income taxes(continued)





The reconciliation of income tax attributable to continuing operations computed at the U.S. Federal and Canadian statutory tax rates to income tax expense is:



| |                                                | 2004  | 2003 
| | ---------------------------------------------- | ----- | -----
| | Tax at blended U.S. / Canadian statutory rates | 35%   | 35%  
| | Change in valuation allowance                  | (35%) | (35%)
| | Tax recovery (expense)                         | -     | -    



At December 31, 2004, the Company had operating loss carry-forwards of approximately $6,646,700 available to offset future taxable income, which expire through 2011 and $2,248,000 which expire in 2014.  Utilization of these carry-forwards is dependant on future taxable income.



---





15.

Loss per share



The following table sets forth the computation of loss per share for the years ended December 31, 2004 and 2003:



| | Numerator:                                    | 2004         | 2003      
| | --------------------------------------------- | ------------ | ----------
| | Net loss  basic and diluted                  | $(3,170,160) | $(743,525)
| | Denominator                                   |              |           
| | Weighted average number of shares outstanding |              |           
| | during the period                             | 56,651,535   | 29,549,691
| | Loss per share                                | ($0.06)      | ($0.03)   



---



16.

Related party transactions



(a)

Accounts payable and accruals at December 31, 2004 include amounts owing to shareholders, officers and employees of $600,987 (2003 - $761,543).



(b)

Promissory notes at December 31, 2004 include amounts owing to a related party and to a shareholder of $154,076 (2003 - $155,449).



(c)

During the year, the Company expensed $37,948 (2003 - $32,338) of interest charges on a loan payable to a related party.



(d)

During the year, the Company paid interest of $9,220 (2003 - $8,554) on a shareholders personal debt which is related to personal property of the shareholder that is pledged as security for the Companys debt obligations.



46

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InteliSys Aviation Systems of America Inc.

Notes to the Consolidated Financial Statements

December 31, 2004

(in US dollars)

---





16.

Related party transactions(continued)



(e)

During the year ended December 31, 2004, the Company expensed $65,835 (2003 - $ NIL) for consulting fees performed by a related party.



---





17.

Shareholder settlement



In February 2004, the Company received notice that a shareholder was contemplating litigation against the Company for the alleged breach of a memorandum of understanding, related to share subscriptions and other compensation, which was entered into on April 17, 2002 and amended on November 22, 2002.



The Companys position was that it fully satisfied its obligation under the memorandum of understanding in 2002 and that no further liability existed to the shareholder at December 31, 2002 and December 31, 2003.  However, the shareholders interpretation of the agreement was different from that of the Company.



To settle this dispute, the Company has issued 1,821,429 shares of its common stock to the shareholder, which has been recorded in 2004 at their fair value on the date of issuance ($692,143).  The Company and shareholder are currently in negotiations to settle the outstanding balance owed to the shareholder.  The outstanding balance of $296,490 (2003 - $ 221,757) has been recorded in accrued liabilities.



---



18.

Schedule of selling, general and administrative expenses



|                                               |   | 2004      |   | 2003     
|---------------------------------------------- | - | --------- | - | ---------
|Finance and administrative wages & benefits    | $ | 302,274   | $ | 264,388  
|Bad debts                                      |   | 134,013   |   | 49,452   
|Stock issued for consulting and other services |   | 933,344   |   | 130,000  
|Stock issued for financing fees                |   | 473,409   |   | -        
|Stock based compensation                       |   | 149,270   |   | 103,350  
|Stock issued to settle debt                    |   | 104,682   |   | 779,082  
|Professional and consulting fees               |   | 366,324   |   | 170,077  
|Rent                                           |   | 95,159    |   | 88,093   
|Telecommunications                             |   | 70,464    |   | 68,212   
|Insurance                                      |   | 37,496    |   | 37,887   
|Other general expenses                         |   | 51,322    |   | 45,821   
|                                               | $ | 2,717,757 | $ | 1,736,362





47

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InteliSys Aviation Systems of America Inc.

Notes to the Consolidated Financial Statements

December 31, 2004

(in US dollars)

---





19.

Contingency



There is one outstanding claim against the Company.  No provision has been made in the financial statements for this contingent loss because the outcome of the claim is not currently determinable.  This claim has not been resolved and the outcome and amount of this claim is not determinable



---



20.

Subsequent events



In February 2005, the Company entered into an informal agreement with the holder of an unsecured promissory note that is currently in default.  According to the repayment terms, the Company has agreed to repay the balance in full by making monthly payments of $6,231 until the principal of $41,540 plus accrued interest is paid in full.  The first monthly payment was made on March 15th, 2005.



In February 2005, the Company signed a contract with a new customer to provide its services to an operator in British Columbia, Canada.



In April 2005, the Company accepted the resignation from Mr. Gallant, the Companys chief financial officer.  Mr. Gallant has decided to pursue other business interests but has agreed to provide consulting services to the Company as required.  In the interim, the Company has engaged an independent consultant to help with the day-to-day operations of the Company.



In January, February and April 2005, 1,285,000 stock options were exercised by management.





48

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



None



Item 8A.

Controls and Procedures.



Disclosure Controls and Procedures.    The issuer's principal executive and financial officer is responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the issuer and has:



·

designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under their supervision,  to ensure that material information relating to the issuer, including its consolidated subsidiaries, is made known to them by others within those entities, particularly during the period in which the periodic reports are being prepared;



·

designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under their supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;



·

evaluated the effectiveness of the issuer's disclosure controls and procedures as of the end of the fiscal year December 31, 2004 (the "Evaluation Date").



Based on his evaluation as of the Evaluation Date, his conclusion about the effectiveness of the disclosure controls and procedures were that;



·

the number of internal control deficiencies over corporate governance in aggregate constituted a material weakness. The deficiencies noted herein surrounded the documentation of existing internal controls of our IT security policy, our disaster recovery plan and regulatory reports and the documentation of such processes;



·

the absence of an audit committee and our lack of effective monitoring controls constitute a material weakness. Also identified are deficiencies in monitoring the internal control structure, policies associated with communicating control risks and the effects of such risks on our financial reporting process to our board of directors;



·

the number of internal control deficiencies over financial reporting in aggregate constituted a material weakness. The deficiencies noted herein surrounded the monitoring controls over the preparation of financial statements; and



·

also, there was a significant deficiency due to an inadequate segregation of duties with respect to the revenue and expenditures cycles as incompatible tasks are performed by the same accounting personnel.



The Company believes that any of the abovementioned deficiencies, significant deficiency, or material weaknesses in the Companys internal controls do not materially affect the fairness or

49

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accuracy of the presentation of the Companys financial condition and results of operation in the Companys historical financial statements as set forth in the Companys reports previously filed with the SEC under the Securities Exchange Act of 1934.



The following tasks represent what management believes to be the most significant actions necessary to address existing deficiencies, significant deficiencies and material weaknesses in the Companys controls:

·

Recruit independent board members with required knowledge and expertise to provide oversight as audit committee members;

·

Review of the Companys current policies and procedures to develop processes so that incompatible duties are not performed by one individual or that there are specific compensating controls if incompatible duties cannot be avoided; and

·

Develop, document and implement appropriate controls related to IT security policies and disaster recovery/business continuity plans and develop monitoring controls to ensure compliance with Sarbanes-Oxley Section 404.  External resources will be engaged to assist with ensuring plans, policies and controls that are documented and implemented for the Company are appropriate.



Internal Control Over Financial Reporting.    There have not been any changes in the Companys internal control over financial reporting (as such term is defined in Rules 13a-15(f) under the Exchange Act) during the Companys fourth fiscal quarter for the year ended December 31, 2004 that have materially affected, or are reasonably likely to materially affect, the Companys internal control over financial reporting.





PART III



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



Set forth below is certain information concerning each person who served as an executive officer during the year ended December 31, 2004 or is presently a director of the Company.  All officers and directors hold office until their respective successors are elected and qualified, or until their earlier resignation or removal. There are no family relationships among any of our directors or executive officers.



The following sets forth the names and ages of our directors and executive officers:





Age

Title

Ralph Eisenschmid

38

President, CEO,

and Director



Jock English

54

Vice President, Sales and

Marketing, Secretary

and Director

50

---







Ralph Eisenschmid - Founder/President



Mr. Eisenschmid created the InteliSys / Amelia concept in 1987. Over the past 17 years he has led the sales, implementation and development of a broad range of software for the operation and management of 19 mid-sized airlines. Prior to his career in aviation, he co-founded a software joint venture that developed and implemented innovative solutions for industries that included travel   services,   transportation,  construction,   and pharmaceuticals.   Mr. Eisenschmid was instrumental in designing, organizing, and implementing a new operating division of a domestic airline to manage the operational needs  of  an international tour operator. As well as being a proven systems analyst and programmer, he has had experience as a licensed multi-engine commercial airline pilot. Mr. Eisenschmid speaks three languages, and has extensive real-world business experience implementing and supporting high performance airline technology solutions internationally.



Jock English - Vice President, Sales and Marketing and Chief Operating Officer



Mr. English has over 20 years experience in software development, marketing and sales. His primary experience has been in managing both sales and marketing of mission critical enterprise software systems for both U.S. and Canadian software firms.  During his employment with a U.S. based Fortune 300 software firm Mr. English was responsible for product introduction and initial sales activities for a family of software products to markets in over 50 countries.  Mr. English is a registered professional engineer in Canada and a holds both U.S. and Canadian private pilots licenses.



None of our directors holds any directorships in companies with a class of securities registered pursuant to Section 12 of the Securities Exchange Act or subject to the requirements of Section 15(d) of such Act or any company registered as an investment company under the Investment Company Act of 1940, as amended.



All directors hold office until the next annual meeting of stockholders or the election and qualification of their successors.  Our directors do not receive any compensation for their services as members of the Board of Directors, but are entitled to reimbursement for expenses incurred in connection with their attendance at Board of Directors' meetings.  Officers are appointed by the Board of Directors and serve at the discretion of the Board.



We do not have audit, nominating or compensation committees.  The Company is currently seeking independent board members to join its current board of directors.  The Company has not been successful in retaining independent board members in order to form its audit committee.



Section 16(a) Beneficial Ownership Reporting Compliance



Section 16(a) of the Exchange Act requires the Company's executive officers, directors and persons who beneficially own more than 10% of a registered class of the Company's equity securities to file with the Commission initial reports of ownership and reports of changes in ownership of Common Stock and other equity securities of the Company. Such persons are required by Commission regulations to furnish the Company with copies of all Section 16(a) forms they filed.



We are not aware of any instances in fiscal year 2004 when an executive officer, director or







51

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owners of more than 10% of the outstanding shares of our common stock failed to comply with the reporting requirements of Section 16(a) of the Securities Exchange Act of 1934, other than the Form 4s which should have been filed by Mohamed Ahmed Juman and Lloyd Poirier.



Code of Ethics



The Company has adopted a code of ethics that applies to its principal executive officer, principal financial officer, principal accounting officer or controller, or persons performing similar functions. For purposes of this Item, the term code of ethics means written standards that are reasonably designed to deter wrongdoing and to promote:



- honest and ethical conduct, including the ethical handling of actual or apparent conflicts of interest between personal and professional relationships;

- full, fair, accurate, timely, and understandable disclosure in reports and documents that the issuer files with, or submits to, the Commission and in other public communications made by the issuer;

- compliance with applicable governmental laws, rules and regulations;

- the prompt internal reporting of violations of the code to the board of directors or another appropriate person or persons; and

- accountability for adherence to the code.



The Company hereby undertakes to provide to any person without charge, upon request, a copy of such code of ethics. Such request may be made in writing to the board of directors at the address of the issuer.



Item 10.  Executive Compensation.



The following table sets forth information with respect to compensation we paid for the years ended December 31, 2004, 2003 and 2002, for services of Ralph Eisenschmid, our President and CEO, Jock English, VP Sales and Marketing and Denis Gallant, former CFO.



Summary of Annual Compensation

|                            |                        |                     |           |                                |                |                               |                             |          
|--------------------------- | ---------------------- | ------------------- | --------- | ------------------------------ | -------------- | ----------------------------- | --------------------------- | ---------
|                            |                        | Annual Compensation | Awards    | Payouts                       
|Name and Principle Position | Year                   | Salary ($)          | Bonus ($) | Other Annual Compen-sation ($) | Securities     | Long-Term Incentive Plans ($) | All other compen-sation ($)
|Restricted Stock Awards ($) | Underlying Options ($)
|Ralph                       | 2004                   | $89,308             | $0        | $0                             | $0             | $49,732(5)                    | $0                          | $0       
|Eisenschmid                 | 2003                   | $56,875             | $0        | $0                             | $0             | $0                            | $0                          | $0       
|President,                  | 2002                   | $78,750             | $0        | $12,087(1)                     | $ 1,007,954(3) | $0                            | $0                          | $0       
|CEO                         |                        |                     |           |                                |                |                               |                             |          
|                            |                        |                     |           |                                |                |                               |                             |          
|Jock                        | 2004                   | $34,193             | $0        | $0                             | $0             | $48,873(6)                    | $0                          | $0       
|English                     | 2003                   | $41,600             | $0        | $0                             | $0             | $0                            | $0                          | $0       
|Vice Pres.,                 | 2002                   | $59,920             | $0        | $26,073(1)                     | $ 290,550(4)   | $0                            | $0                          | $0       
|Sales &                     |                        |                     |           |                                |                |                               |                             |          
|Marketing                   |                        |                     |           |                                |                |                               |                             |          
|                            |                        |                     |           |                                |                |                               |                             |          
|Denis                       | 2004                   | $100,000            | $0        | $13,783(7)                     | $0             | $26,550(8)                    | $0                          | $6,480(9)
|Gallant                     | 2003                   | $33,540             | $0        | $0                             | $0             | $0                            | $0                          | $0       
|Chief                       |                        |                     |           |                                |                |                               |                             |          
|Financial                   |                        |                     |           |                                |                |                               |                             |          
|officer                     |                        |                     |           |                                |                |                               |                             |          

52

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(1)  Other annual compensation represents retroactive pay increases.

(2)  Represents commissions

(3)  Mr. Eisenschmid received 5,039,772 Exchangeable Shares to reflect his minimal pay during the past several years.

(4)  Mr. English received 1,500,000 Exchangeable shares to reflect his working for minimal pay since joining Convergix and in lieu of $9,450 in unpaid commissions.

(5)  Mr. Eisenschmid received 1,657,746 options to purchase common stock

(6)  Mr. English received 1,629,108 options to purchase common stock

(7)  Monies earned in 2003 but only paid in 2004

(8)  Mr. Gallant received 885,000 options to purchase common stock

(9)  Car allowance



We have no employment agreements with any of our executive officers or employees.

53

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Item 11.  Security Ownership of Certain Beneficial Owners and Management.



The following table lists, as of April 2005, the number of shares of common stock beneficially owned by (i) each person or entity known to the Company to be the beneficial owner of more than 5% of the outstanding common stock; (ii) each officer and director of the Company; and (iii) all officers and directors as a group. Information relating to beneficial ownership of common stock by our principal stockholders and management is based upon information furnished by each person using "beneficial ownership" concepts under the rules of the Securities and Exchange Commission. Under these rules, a person is deemed to be a beneficial owner of a security if that person has or shares voting power, which includes the power to vote or direct the voting of the security, or investment power, which includes the power to vote or direct the voting of the security. The person is also deemed to be a beneficial owner of any security of which that person has a right to acquire beneficial ownership within 60 days.  Under the Securities and Exchange Commission rules, more than one person may be deemed to be a beneficial owner of the same securities, and a person may be deemed to be a beneficial owner of securities as to which he or she may not have any pecuniary beneficial interest.



The percentages below are calculated based on 54,668,668 shares of InteliSys Aviation Systems of America Inc. common stock issued and outstanding, 21,788,333 shares of InteliSys Acquisition Co., exchangeable into shares of InteliSys Aviation Systems of America Inc. on a one-for-one basis (Exchangeable Shares) and 3,702,670 outstanding options to purchase shares of the Companys common stock.



|Officers, Directors, |                      |                     
|-------------------- | -------------------- | --------------------
|5% Shareholder       | No. of Shares        | Beneficial Ownership
|                     |                      | %                   
|                     |                      |                     
|Ralph Eisenschmid    | 14,704,851 (1)(2)(3) |                     
|65 Matheieu-Martin   |                      |                     
|Grand Barachois      |                      |                     
|New Brunswick        |                      |                     
|Canada E4P 7V7       |                      |                     
|                     |                      |                     
|Jock English         | 2,429,108 (1)(4)     |                     
|113 Cap Brule Road   |                      |                     
|Boudreau West,       |                      |                     
|New Brunswick        |                      |                     
|Canada E1P 6J1       |                      |                     
|                     |                      |                     
|Mohamed Juman        | 11,217,694 (1)       |                     
|PO Box 743           |                      |                     
|Manama               |                      |                     
|Kingdom of Bahrain   |                      |                     
|                     |                      |                     
|Lloyd Poirier        | 4,116,429            |                     
|Costa Rica           |                      |                     





54

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|Californian Securities S.A.              |            |  |    
|---------------------------------------- | ---------- |  | ---
|Edificio Bilbao Plaza, Suite 418         |            |  |    
|Avenida Bilbao, Panama City              |            |  |    
|Republic de Panama                       | 8,889,395  |  | 12%
|                                         |            |  |    
|Pacific Continental Securities (UK) Ltd. |            |  |    
|80 Cannon Street                         |            |  |    
|London                                   |            |  |    
|EC4N 6HL                                 |            |  |    
|England                                  | 11,213,105 |  | 15%
|                                         |            |  |    
|All directors and                        |            |  |    
|executive officers as                    |            |  |    
|a Group (2 persons)                      | 17,133,959 |  | 22%
|                                         |            |  |    



(1) Includes shares of InteliSys Acquisition Co., exchangeable into shares of InteliSys Aviation Systems of America Inc. on a one-for-one basis (Exchangeable Shares). Said shares are included by the Company in the computation of the number of shares issued and outstanding.



(2) Includes 783,333 shares owned by Charlene Eisenschmid, wife of Ralph Eisenschmid.



(3) Includes 1,357,746 outstanding stock options issued as part of the Companys 2004 Stock Option Plan.



(4) Includes 929,108 outstanding stock options issued as part of the Companys 2004 Stock Option Plan.



The persons or entities named in this table, based upon the information they have provided to us, have sole voting and investment power with respect to all shares of common stock beneficially owned by them.





Item 12.  Certain Relationships and Related Transactions



None of the following persons had any direct or indirect material interest in any transaction to which we were or are a party during the past two years, or in any proposed transaction to which the Company proposes to be a party:



a)

any director or officer;

b)

any person who beneficially owns, directly or indirectly, shares carrying more than 5% of the voting rights attached to our common stock; or

c)

any relative or spouse of any of the foregoing persons, or any relative of such spouse, who has the same house as such person or who is a director or officer of any parent or subsidiary.





55

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Item 13.  Exhibits and Reports on Form 8-K.



(a)   We are filing the exhibits listed below with this Report:



Exhibit No.

Description



23.1

Consent of Grant Thornton, LLP



31.1

Certification of Chief Executive Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.



31.2

Certification of Chief Financial Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.





32.1

Certification of the President and Chief Executive and Financial Officer pursuant to 18 U.S.C. 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.



(b)

Reports on Form 8-K.  The Company has not been filed any Reports on Form 8-K during the last quarter of the fiscal year of December 31, 2004.



56

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EXHIBIT 23.1

CONSENT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

We have issued our reports
 dated May 10, 2005, accompanying the consolidated financial statements included in the Annual Report of InteliSys Aviation Systems of America Inc. on Form 10-K/A
 for the year ended December 31, 2004.  We hereby consent to the incorporation by reference of said reports
 in the Registration Statements of InteliSys Aviation Systems of America Inc. on Forms S-8 (File No. 333-63064, effective June 14, 2001,
File No. 333-114887, effective April 27, 2004 and File No. 333-125852, effective May 16, 2005).

/s/ GRANT THORNTON LLP

Moncton, New Brunswick

February 14, 2006

57

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EXHIBIT 31.1

CERTIFICATION

PURSUANT TO SECTION 302

I, Ralph Eisenschmid, President and Chief Executive Officer of Intelisys Aviation Systems of America Inc., certify that:

1.     I have reviewed this annual report on Form 10-KSB/A of Intelisys Aviation Systems of America Inc;

2.     Based on my knowledge, this annual 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 annual report;

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

4.    I am responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and I have:

(a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under my supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this annual report is being prepared;

(b) Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

(c) Evaluated the effectiveness of the registrants disclosure controls and procedures as of a date within 90 days prior to the filing date of this annual report (the Evaluation Date); and

(d) Disclosed in this report any change in the registrant's internal control over financial reporting that occurred during the registrant's most recent fiscal quarter that has materially affected, or is reasonably likely to materially affect, the registrant's internal control over financial reporting; and

5.     I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrants auditors and the audit committee of registrants board of directors (or persons performing the equivalent function):



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(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 registrants ability to record, process, summarize and report financial information; and

(b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrants internal control over financial reporting.



|                        |                                                                                               
|----------------------- | ----------------------------------------------------------------------------------------------
|Date: February 14, 2006 | By: /s/ Ralph Eisenschmid, President and Chief Executive Officer (principal executive officer)

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EXHIBIT 31.2

CERTIFICATION

PURSUANT TO SECTION 302

I, Ralph Eisenschmid, Chief Financial Officer of Intelisys Aviation Systems of America Inc., certify that:

1.     I have reviewed this annual report on Form 10-KSB/A of Intelisys Aviation Systems of America Inc;

2.     Based on my knowledge, this annual 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 annual report;

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

4.    I am responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and I have:

(a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under my supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this annual report is being prepared;

(b) Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

(c) Evaluated the effectiveness of the registrants disclosure controls and procedures as of a date within 90 days prior to the filing date of this annual report (the Evaluation Date); and

(d) Disclosed in this report any change in the registrant's internal control over financial reporting that occurred during the registrant's most recent fiscal quarter that has materially affected, or is reasonably likely to materially affect, the registrant's internal control over financial reporting; and

5.     I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrants auditors and the audit committee of registrants board of directors (or persons performing the equivalent function):

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(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 registrants ability to record, process, summarize and report financial information; and

(b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrants internal control over financial reporting.



|                        |                                                                                
|----------------------- | -------------------------------------------------------------------------------
|Date: February 14, 2006 | By: /s/ Ralph Eisenschmid
Chief Financial Officer (principal financial officer)

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EXHIBIT 32.1

CERTIFICATION PURSUANT TO

18 U.S.C. SECTION 1350

AS ADOPTED PURSUANT TO

SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002



The undersigned, Ralph Eisenschmid, President, Chief Executive and Financial

Officer, Secretary and Treasurer of InteliSys Aviation Systems of America Inc(the "Company") certifies, under the standards set forth and solely for the purposes of 18 U.S.C. 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that, to his knowledge, the Annual Report on Form 10-KSB/A of the Company for the year ended December 31, 2004 fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934 and information contained in that Form 10-KSB/A fairly presents, in all material respects, the financial condition and results of operations of the Company.





Dated:  February 14, 2006

/s/ Ralph Eisenschmid

Ralph Eisenschmid

President, Chief Executive and Financial Officer



A signed original of this written statement required by Section 906 has been

provided to the Company and will be retained by the Company and furnished to the Securities and Exchange Commission or its staff upon request.



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Item 14.  Principal Accountant Fees and Services.





Grant Thornton LLP has served as the Companys Principal Accountant since February 19, 2003. Their fees billed to the Company are set forth below:



|                   |  |                                      |        |                                      |         |        | 
|------------------ |  | ------------------------------------ | ------ | ------------------------------------ | ------- | ------ | 
|                   |  | Fiscal year ending
December 31, 2004 |        | Fiscal year ending
December 31, 2003 |        
|Audit Fees         |  | $                                    | 84,160 |                                      | $       | 63,875 | 
|Audit Related Fees |  | $   2,491                            |        | $  2,340                             |        
|Tax Fees           |  | $                                    | 14,737 |                                      | $20,780 |       
|All Other Fees     |  | $                                    | -      |                                      | $       | -      | 





SIGNATURES



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





INTELISYS AVIATION SYSTEMS OF AMERICA INC.







|                        |                                                                                               
|----------------------- | ----------------------------------------------------------------------------------------------
|Date: February 14, 2006 | By: /s/ Ralph Eisenschmid, President and Chief Executive Officer (principal executive officer)



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