UNITED STATES SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

FORM 20-F

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

x ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 FOR THE FISCAL YEAR ENDED DECEMBER 31, 2004

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

For the transition period from __________ to __________.

Commission File No. 001-14835

ADB SYSTEMS INTERNATIONAL LTD.

(Exact name of Registrant as specified in its charter)

Not Applicable

(Translation of Registrant’s name into English)

ONTARIO, CANADA

(Jurisdiction of incorporation or organization)

302 The East Mall, Suite 300 Toronto, Ontario M9B 6C7

(Address of principal executive offices)

Securities registered or to be registered pursuant to Section 12(b) of the Act. None Securities registered or to be registered pursuant to Section 12(g) of the Act. Common Shares Securities for which there is a reporting obligation pursuant to Section 15(d) of the Act. None Indicate the number of outstanding shares of each of the issuer's classes of capital or common stock as of the close of the period covered by the annual report. 54,638,468 Common Shares as of December 31, 2000 Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes X No ______ Indicate by check mark which financial statement item the registrant has elected to follow. Item 17 X Item 18 ______ ~~TABLE OF CONTENTS~~

~~Page~~ PART I........................................................................................ 4 ITEM 1 - IDENTITY OF DIRECTORS, SENIOR MANAGEMENT AND ADVISORS........................... 4 ITEM 2 - OFFER STATISTICS AND EXPECTED TIMETABLE......................................... 4 ITEM 3 - KEY INFORMATION................................................................. 4 A. Selected Financial Data........................................................ 4 B. Capitalization and Indebtedness................................................ 6 C. Reasons For The Offer And Use Of Proceeds...................................... 6 D. Risk Factors................................................................... 6 ITEM 4 - INFORMATION ON THE COMPANY...................................................... 16 A. History and Development of the Company......................................... 16 B. Business Overview.............................................................. 16 C. Organizational Structure....................................................... 24 D. Property, PlantsAct.
**None**
Securities registered or to be registered pursuant to Section 12(g) of the Act. Common Shares
Securities for which there is a reporting obligation pursuant to Section 15(d) of the Act. None
Indicate the number of outstanding shares of each of the issuer’s classes of capital or common stock as of the close of the period covered by the Annual Report.

69,870,131 Common Shares as of December 31, 2004

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and Equipment................................................. 25 ITEM 5 - OPERATING AND FINANCIAL REVIEW AND PROSPECTS MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS........ 25 ITEM 6 - DIRECTORS, SENIOR MANAGEMENT AND EMPLOYEES...................................... 33 A. Directors And Senior Management................................................ 33 B. Compensation................................................................... 36 C. Board Practices................................................................ 38 D. Employees...................................................................... 38 E. Share Ownership................................................................ 39 ITEM 7 - MAJOR SHAREHOLDERS AND RELATED PARTY TRANSACTIONS............................... 39 A. MAJOR SHAREHOLDERS............................................................. 39 B. RELATED PARTY TRANSACTIONS..................................................... 40 ITEM 8 - FINANCIAL INFORMATION........................................................... 40 ITEM 9 - THE OFFER AND LISTING........................................................... 40 ITEM 10 - ADDITIONAL INFORMATION......................................................... 42 A. Share Capital................................................................. 42 B. Memorandum and Articles of Association........................................ 42 C. Material Contracts............................................................ 45 D. Exchange Controls............................................................. 45 E. Taxation...................................................................... 45 F. Dividends and Paying Agents................................................... 51 G. Statements(2) has been subject to such filing requirements for the past 90 days.

Yes x No o

Indicate by Experts......................................................... 51 H. Documents on Display.......................................................... 51 ITEM 11 - QUANTITATIVE AND QUALITATIVE DISCLOSURE ABOUT MARKET RISK...................... 52 ITEM 12 - DESCRIPTION OF SECURITIES OTHER THAN DEBT SECURITIES........................... 52 PART II....................................................................................... 52 ITEM 13 - DEFAULT, DIVIDEND ARREARAGES AND DELINQUENCIES................................. 52 ITEM 14 - MATERIAL MODIFICATIONS TO THE RIGHTS OF SECURITY HOLDERS AND USE OF PROCEEDS... 52 PART III...................................................................................... 52 ITEMcheck mark which financial statement item the registrant has elected to follow.

Item 17 ~~- FINANCIAL STATEMENTS........................................................... 52 ITEM~~o Item 18 ~~- FINANCIAL STATEMENTS........................................................... 52 ITEM 19 - EXHIBITS....................................................................... 52~~ x

1 ~~BID.COM~~

ADB SYSTEMS INTERNATIONAL ~~INC. Annual~~LTD.

Annual Report on Form 20-F for the Fiscal Year

Ended December 31, ~~2000~~ 2004

FORWARD LOOKING STATEMENTS ~~This annual report includes~~

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

You can identify these statements when you see words such as "may", "expect", "anticipate", "estimate", "believe", "intend"~~, "may"~~, and other similar expressions. These forward-looking statements relate, among other items to: . our future capital needs; . our ability to further develop our business to business relationships and revenues; . our expectations about the markets for our online products and services; . acceptance of our products and services; . competitive factors; . our ability to attract and retain employees; . new products and technological changes; . our ability to develop appropriate strategic alliances; . the validity of our patents and protection of our proprietary technology; . our ability to acquire complementary products or businesses and integrate them into our business; and . geographic expansion of our business.

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

We have based these forward-looking statements largely on our current plans and expectations. Forward-looking statements are subject to risks and uncertainties, ~~certain~~some of which are beyond our control. ~~Actual~~Our actual results could differ materially from those ~~anticipated~~described in our forward-looking statements as a result of the factors described in the ~~"Risks Factors"~~“Risk Factors” included elsewhere in this ~~annual report,~~Annual Report, including, among others: . our limited operating history; . the timing of our future capital needs and our ability to raise additional capital when needed; . uncertainty as to the success of our customers' e-commerce ventures and associated collection risks; . the potential delisting of our stock from the Nasdaq National Market; . volatility of the stock markets and fluctuations in our market price; . our ability to compete with other online e-commerce enablers; . our inability to attract and retain key personnel; . problems which may arise in connection with the acquisition or integration of new businesses, products, services, technologies or other strategic relationships; .

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

risk of ~~system failure or interruption; . uncertainty~~significant delays in product development;

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

We do not have, and services; . uncertainty about the acceptance of the Internet and/or dynamic pricing as a viable commercial medium; . failure to timely develop or license new technologies; and . implementation and enforcement of government regulations. 2 We do not undertake, any obligation to publicly update or revise any ~~forward- looking~~forward-looking statements contained in this ~~annual report,~~Annual Report, whether as a result of new information, future events or otherwise. Because of these risks and uncertainties, the forward-looking statements and circumstances discussed in this ~~annual report~~Annual Report might not transpire.

Trademarks or trade names ~~of Bid.Com~~which we own and are used in this ~~annual report~~Annual Report include: ~~BID.COM(TM)~~ADB™; ~~POWERED BY BID.COM(TM)~~PROCUREMATE™; ~~INTERNET LIQUIDATORS(TM)~~WORKMATE™; BID ~~BUDDY(TM)~~BUDDY™; SEARCH ~~BUDDY(TM)~~BUDDY™; DYNAMIC ~~BUYER(TM)~~BUYER™ and DYNAMIC ~~SELLER(TM)~~SELLER™. 3 ~~PART I~~ Each trademark, trade name, or service mark of any other company appearing in this Annual Report belongs to its holder.

TABLE OF CONTENTS

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

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

Unless otherwise indicated, all references in this ~~annual report~~Annual Report to ~~"dollars"~~“dollars” or ~~"$"~~“$” are references to Canadian dollars. Our financial statements are expressed in Canadian dollars. Except as otherwise noted, certain financial information presented in this ~~annual report~~Annual Report has been translated from Canadian dollars to U.S. dollars at an exchange rate of Cdn$~~1.4995~~1.2034 to US$1.00 (or US$ 0.8310 to Cdn 1.00), the noon buying rate in New York City on December 31, ~~2000~~2004 for cable transfers in Canadian dollars as certified for customs purposes by the Federal Reserve Bank of New York. ~~Such~~These translations ~~should~~are not ~~be construed as representations~~intended to suggest that ~~the~~ Canadian dollars ~~represent, or~~ have been or could be converted into U.S. dollars at that or any other rate.

On October 11, 2001, our shareholders approved a two-for-one share consolidation. Unless otherwise indicated, all share and option figures in this Annual Report that relate to the period prior to October 11, 2001 have been adjusted retroactively to reflect the share consolidation.

References to the “Company” and “ADB” refer to ADB Systems International Ltd., as successor to ADB Systems International Inc. as a result of the implementation of the plan of arrangement described on page 17 under the heading “Major Developments.”

PART I

ITEM 1 - IDENTITY OF DIRECTORS, SENIOR MANAGEMENT AND ADVISORS

Not applicable.

ITEM 2 - OFFER STATISTICS AND EXPECTED TIMETABLE

Not applicable.

ITEM 3 - KEY INFORMATION ~~A. SELECTED FINANCIAL DATA~~

A.	SELECTED FINANCIAL DATA

The selected financial data set forth below should be read in conjunction with, and ~~are~~is qualified by reference to, our consolidated financial statements and the related notes, ~~thereto,~~ and ~~our~~the section "Operating and Financial Review and Prospects" included elsewhere in this ~~annual report.~~Annual Report. The consolidated statement of operations data for the years ended ~~2000, 1999~~December 31, 2004, 2003 and ~~1998~~2002 and consolidated balance sheet data as of December 31, ~~2000~~2004 and ~~1999,~~2003, as set forth below, are derived from our consolidated audited financial statements and the related notes ~~thereto,~~ included elsewhere in this ~~annual report.~~Annual Report. The consolidated statement of operations data for the years ended ~~1997~~December 31, 2001 and ~~1996~~2000 and the consolidated balance sheet data as at December 31, ~~1997~~2002, 2001 and ~~1996~~2000 have been derived from our consolidated audited financial statements for those years, which are not included in this ~~annual report.~~ Annual Report.

We have prepared our audited financial statements in accordance with accounting principles generally accepted in Canada, which differ in certain respects from accounting principles generally accepted ~~accounting principles~~ in the United States. However, as applied to us, for all fiscal periods for which financial data ~~are~~is presented in this ~~annual report,~~Annual Report, Canadian GAAP and U.S. GAAP were substantially identical in all material respects, except as disclosed in Note ~~18 to~~24 of our consolidated financial statements. 4

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

Statement of Operations Data:

	Year Ended December 31
	2004 (Cdn$)			2004 (U.S.$)			2003 (Cdn$)			2002 (Cdn$)			2001 (Cdn$)			2000 (Cdn$)
	(Audited)
	(in thousands except for per share data)
Revenue		4,930			4,097			5,853			5,780			4,455			12,497
Less: Customer acquisition costs		-			-			-			-			(60	)		(157	)
Net Revenue		4,930			4,097			5,853			5,780			4,395			12,340
Expenses
Direct expenses		-			-			-			-			-			11,460
Advertising and promotion		-			-			-			-			-			5,040
General and administrative		4,365			3,627			4,648			6,288			7,622			16,236
Sales and marketing		749			622			1,098			1,875			4,040			3,161
Software development and technology		3,257			2,706			2,817			4,101			3,691			1,802
Employee stock options		39			32			193			-			-			-
Depreciation and amortization		1,190			989			1,901			2,602			1,572			1,130
Interest expense		433			360			280			155			(345	)		(467	)
Total expenses		10,033			8,336			10,937			15,021			16,580			38,362
Loss from operations		(5,103	)		(4,239	)		(5,084	)		(9,241	)		(12,185	)		(26,022	)
Loss from continuing operations
Net Loss		(5,104	)		(4,240	)		(2,815	)		(9,364	)		(18,714	)		(20,366	)
Loss per common share ⁽¹⁾		(0.08	)		(0.07	)		(0.05	)		(0.22	)		(0.64	)		(0.76	)
Net loss from continuing operations per common share ⁽²⁾
Weighted average number of common shares ⁽¹⁾		61,938			61,938			54,324			41,968			29,130			26,844

Balance Sheet Data: ⁽³⁾

	As at December 31
	2004 (Cdn$)			2004 (U.S.$)			2003 (Cdn$)		2002 (Cdn$)			2001 (Cdn$)		2000 (Cdn$)
	(Audited)
	(in thousands)
Working capital		381			317			486		(1,757	)		3,115		13,671
Total assets		2,493			2,072			3,211		6,355			10,592		20,801
Net assets
Long-term deferred revenue		-			-			-		-			33		1,195
Shareholders’ (deficiency) equity		(1,009	)		(838	)		1,026		1,198			8,014		15,860

Year Ended December 31 ----------- 2000 2000 1999 1998 1997 1996 ---- ---- ---- ---- ---- ---- (Cdn$) (U.S.$) (Cdn$) (Cdn$) (Cdn$) (Cdn$) (Audited) (in thousands except
(1)	In October 2001, our shareholders approved a 2 for 1 share consolidation. All per share ~~data)~~ Revenue......................... 12,497 8,334 31,001 20,001 2,619 51 Less: Customer acquisition costs (157) (105) Net Revenue 12,340 8,229 31,001 20,001 2,619 51 Expenses Direct expenses.................. 11,460 7,642 26,696 19,361 2,916 12 Advertising and promotion........ 5,040 3,361 11,870 12,594 2,521 403 General & administrative......... 19,397 12,936 12,405 5,751 3,157 1,453 Software development and technology................... 1,802 1,202 1,001 889 661 194 Depreciation and amortization.... 1,130 754 621 201 122 100 Interest (income)................ (467) (311) (767 (88) (33) - Total expenses................... 38,362 25,584 51,826 38,708 9,344 2,162 Loss beforeamounts have been adjusted retroactively to reflect the undernoted....... (26,022) (17,355) (20,825 (18,707) (6,725) (2,111) Non-recurring items.............. 5,656 3,772 - - - - Net (loss)....................... (20,366) (13,583) (20,825 (18,707) (6,725) (2,111) Loss per common share............ (0.38) (0.25) (0.42 (0.79) (0.55) (0.21) Weighted average numberconsolidation. See Note 8(d) of our consolidated financial statements for a discussion regarding the calculation of common shares ~~53,688 53,688 50,682 23,819 12,297 9,598 Balance Sheet Data:/(1)/~~
(2)	For each fiscal year, the Company excluded the effect of all convertible debt, stock options and share-purchase warrants, as their impact would have been anti-dilutive.
(3)	We have not paid dividends since our formation.

~~____________________________ /(1)/ We have not paid dividends since our formation.~~

EXCHANGE RATES

The following tables set forth, for the periods indicated, certain exchange rates based on the noon buying rate in New York City for cable transfers in Canadian dollars, as certified for customs purposes by the Federal Reserve Bank of New York. Such rates are the number of U.S. dollars per one Canadian dollar and are the inverse of the rates quoted by the Federal Reserve ~~Bank~~Board of New York for Canadian Dollars per U.S. $1.00. On May ~~18, 2001,~~31, 2005, the exchange rate was US$1.00 = Cdn$~~1.5328. 5~~ 0.7992.

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

Year Ended December 31, -------------------------------------------------------------- Rate 2000 1999 1998 1997 1996 ---- ---- ---- ---- ---- ---- ~~Last Day~~
(1)	The average rate is the average of ~~year $ .6669 $ .6925 $.6504 $.6999 $.7301 Average(1)~~the exchange rates on the last day of each month during year .6732 .6744 .6740 .7221 .7332 High during year .6967 .6925 .7105 .7487 .7513 Low during year .6410 .6439 .6341 .6945 .7235 the year.

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

Month	High during month		Low during month
November 2004		0.8493		0.8155
December 2004		0.8435		0.8064
January 2005		0.8346		0.8050
February 2005		0.8134		0.7961
March 2005		0.8315		0.8024
April 2005		0.8233		0.7957
May 2005		0.8082		0.7872

~~Month High during month Low during month ----- ----------------- ----------------~~ November 2000 $.6552 $.6410 December 2000 $.6669 $.6469 January 2001 $.6692 $.6595 February 2001 $.6696 $.6493 March 2001 $.6499 $.6336 April 2001 $.6510 $.6333
B.	CAPITALIZATION AND INDEBTEDNESS

~~B. CAPITALIZATION AND INDEBTEDNESS~~

Not applicable. ~~C. REASONS FOR THE OFFER AND USE OF PROCEEDS.~~

C.	REASONS FOR THE OFFER AND USE OF PROCEEDS.

Not applicable. ~~D. RISK FACTORS OUR LIMITED OPERATING HISTORY MAKES EVALUATING OUR BUSINESS DIFFICULT. While~~

D.	RISK FACTORS

The following is a summary of certain risks and uncertainties which we ~~were founded~~face in ~~September 1995, until 1999~~our business. This summary is not meant to be exhaustive. These Risk Factors should be read in conjunction with other cautionary statements which we ~~operated solely as an online retailer of computer and other goods. During 1999 we began to shift our focus to our e-commerce enabling strategy and related services,~~make in this Annual Report and in ~~October 2000 we terminated~~ our ~~on-line retail operations. Accordingly, there is only a limited operating history for you to base an evaluation of us~~other public reports, registration statements and our business prospects. Our business and prospects must be considered in light of the risks, uncertainties and expenses frequently encountered by companies in their early stages of development, particularly companies in new and rapidly evolving markets such as online commerce. Our business strategy may not be successful and we may not successfully address those risks. public announcements.

WE WILL NEED ADDITIONAL CAPITAL ~~IN THE FUTURE,~~ AND IF WE ARE UNABLE TO SECURE ADDITIONAL FINANCING WHEN WE NEED IT, WE MAY BE REQUIRED TO SIGNIFICANTLY CURTAIL OR CEASE OUR ~~OPERATIONS SIGNIFICANTLY, WHICH WOULD HAVE A MATERIAL ADVERSE EFFECT ON OUR BUSINESS, FINANCIAL CONDITION AND RESULTS OF~~ OPERATIONS.

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

Management believes that continued existence beyond 2005 is dependent on its ability to increase revenue from ~~operations are not sufficient~~existing products, and to ~~meet our anticipated financial requirements beyond early 2002.~~expand the scope of its product offering which entails a combination of internally developed software and partnerships with third parties. As of ~~March~~May 31, ~~2001,~~2005, we had cash on hand and

marketable securities of approximately ~~$14.453 million. Based on current plans and our recent implementation of cost cutting measures, including workforce reductions, we believe~~$610,000. Management believes that ~~current cash balances and anticipated funds from operations will be sufficient to meet 6~~ our needs into early 2002. However, the actual amount of funds that will be required until that time will be determined by many factors, some of which are beyond our control. As a result, we may need funds sooner or in greater amounts than currently anticipated. At the request of our auditors, we have included in footnote 2 to our financial statements, a discussion aboutit has the ability ~~of our company~~ to ~~continue to operate as a going concern.~~ raise additional financing if required.

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

WE ARE NOT PROFITABLE AND WE MAY NEVER BECOME PROFITABLE.

We have accumulated net losses of approximately ~~$69.478~~$104.9 million as of ~~March~~December 31, ~~2001.~~2004. For the year ended December 31, ~~2000~~2004 our net loss was ~~approximately $20.366~~$5.104 million. We have never ~~achieved profitability~~been profitable and expect to continue to incur losses for the foreseeable future. We cannot assure you that we will earn profits or generate positive cash flows from operations in the future.

OUR LIMITED OPERATING HISTORY IN OUR CURRENT BUSINESS AS A ~~RESULT OF~~COMBINED ENTITY AND OUR ~~CHANGE IN~~JOINT VENTURE WITH GE COMMERCIAL FINANCE MAKES EVALUATING OUR BUSINESS ~~MODEL, WE ARE NO LONGER GENERATING REVENUE FROM THE BUSINESS-TO-CONSUMER MARKET AND WE MAY NOT BE ABLE TO REPLACE THAT REVENUE WITH REVENUE FROM THE BUSINESS-TO-BUSINESS MARKET. During~~DIFFICULT.

Since we were founded in September 1995 and until 1999 we ~~began~~operated solely as an online retailer of computer and other goods. In 2000, we shifted our focus to ~~shift our primary business focus from the business-to-consumer market to the business-to-business market.~~providing dynamic pricing solutions. In October ~~2000,~~2001, we ~~closed our retail operations. During 1999~~acquired ADB Systemer ASA of Norway, a provider of enterprise asset management and ~~2000, the substantial majority of our revenues were generated from our business-to-consumer auctions~~electronic procurement software and ~~related~~ services. ~~We cannot assure~~While ADB Systemer has operated since 1988, we have only a limited operating history as a combined entity on which you ~~that we will be able to replace all lost revenue with the same level of revenue from our business-to-business services. The success~~can base your evaluation of our business isand prospects.

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

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

WE MAY EXPERIENCE INCREASINGLY LONGER SALES CYCLES.

A significant portion of our ~~ability~~revenue in any quarter is derived from a relatively small number of contracts. We often experience sales cycles of six (6) to ~~attract new customers.~~eighteen (18) months. If the ~~market grows more slowly than anticipated or we are not able to compete, we many not~~length of our sales cycles increases, our revenues may decrease and our quarterly results would be able to add new customers at a rate sufficient to replace such lost revenue. If we are unable to replace lost revenue, our business, results of operations, cash flow, financial condition and prospects could be materially adversely affected. THE E-COMMERCE INITIATIVES OF OUR CUSTOMERS MAY NOT BE SUCCESSFUL AND THIS MAY CREATE COLLECTION ISSUES FOR US AND REDUCE THE AMOUNT OF REVENUE-BASED FEES WE MAY RECEIVE There can be no assurance that our customers will be successful in their e-commerce initiatives. Success will be dependent on their willingness and ability to devote sufficient resources to such initiatives, and the demand for their products and services. If our clients are unsuccessful, they may be less willing or able to pay amounts owing to us for services. In addition, if our clients are unsuccessful they may generate less revenue, which would reduce the amount of revenue-based fees payable to us. Furthermore, a lack of success could reduce the number of clients willing or able to provide references to future prospects. POTENTIAL FLUCTUATIONS IN OUR FINANCIAL RESULTS MAKES FINANCIAL FORECASTING DIFFICULT Our operating results have varied on a quarterly basis in the past and may fluctuate significantly as a result of a variety of factors, many of which are outside our control. Factors that may affect our quarterly operating results include: 7 . general economic conditions as well as economic conditions specific to the Internet and online commerce industries; . any decision by us to reduce prices for our solutions in response to price reductions by competitors; . the amount and timing of operating costs and capital expenditures relating to expansion of our business, operations and infrastructure; . the announcement or introduction of new sites, services and products by us or our competitors; and . the timing of, and our ability to integrate, any future acquisition of businesses, technologies or products or any strategic investments or relationships into which we may enter. As a result of our limited operating history, the emerging nature of the markets in which we compete and the inherent degree of variability in dynamic pricing transactions, it is difficult for us to accurately forecast our revenues, earnings, cash flow and other financial information. Our current and future expense levels are based largely on our investment plans and estimates of future revenues and are, to a large extent, fixed. We may be unable to adjust spending in a timely manner to compensate for any unexpected revenue shortfall. Any significant shortfall in revenues relative to our planned expenditures would have an immediate adverse effect on our business, results of operations, cash flow and financial condition. Further, as a strategic response to changes in the competitive environment, we may from time to time make certain pricing, service or marketing decisions that could have a material adverse effect on our business, financial condition, cash flows and results of ~~operations, financial condition~~operations.

POTENTIAL FLUCTUATIONS IN OUR FINANCIAL RESULTS MAKE FINANCIAL FORECASTING DIFFICULT.

Our operating results have varied on a quarterly basis in the past and ~~prospects. In addition, payment and recognition~~may fluctuate significantly as a result of ~~revenues may be affected by implementation delays,~~a variety of factors, many of which are ~~not always in~~outside our control. Factors that may affect our quarterly operating results include:

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

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

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

OUR SHARE PRICE ~~COULD ADVERSELY AFFECT OUR SHAREHOLDERS.~~HAS FLUCTUATED SUBSTANTIALLY AND MAY CONTINUE TO DO SO.

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

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

YOUR ~~LIQUIDITY IN~~ABILITY TO BUY OR SELL OUR COMMON SHARES ON THE OTCBB MAY BE ~~AFFECTED IF OUR STOCK IS DELISTED FROM THE NASDAQ NATIONAL MARKET Our common shares are quoted on~~LIMITED.

On June 3, 2002, we transferred the ~~Nasdaq market under the symbol "BIDS". In order for our common shares to continue to be quoted on the Nasdaq market, we must satisfy various~~ listing ~~maintenance standards established by Nasdaq. Under these listing maintenance standards, if the closing bid price~~ of our common shares ~~is under US $1.00 per share for a specified period of time,~~from the Nasdaq ~~may delist~~National Market to the Nasdaq SmallCap Market. On August 22, 2002, our common shares were delisted from the Nasdaq SmallCap Market because we did not satisfy the minimum bid price per share requirement for continued listing on that market. Our common shares immediately became eligible for and began trading on the Nasdaq market. We have received a letter from Nasdaq advising us that our common shares have not met Nasdaq's minimum bid price closing requirement for thirty consecutive trading days and that, if we are unable to demonstrate 8 compliance with this requirement for ten consecutive trading days (and our ability to sustain compliance) by June 18, 2001, our common shares will be delisted (subject to any appeal). There can be no assurance that we will be able to satisfy Nasdaq in this regard. If our common shares are delisted from Nasdaq, we may apply to have our common shares quoted on Nasdaq's Bulletin Board or in the "pink sheets" maintained by the National Quotation Bureau, Inc.OTCBB. The ~~Bulletin Board and the "pink sheets" are~~OTCBB is generally considered to be a less efficient ~~markets that~~market than the Nasdaq National Market or the Nasdaq SmallCap Market on which our shares previously traded. As a result, your ability to buy or sell our common shares on the OTCBB may be limited. In addition, since our shares are ~~currently traded. Delisting~~no longer listed on the Nasdaq National Market or Nasdaq SmallCap Market, our shares may be subject to the “penny stock” regulations described below. De-listing from the Nasdaq National Market and the Nasdaq SmallCap Market will not affect the listing of the common shares on The Toronto Stock Exchange.

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

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

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

THE MARKETS IN WHICH WE OPERATE ARE HIGHLY ~~COMPETITIVE AND WE MAY NOT BE ABLE TO COMPETE EFFECTIVELY.~~ COMPETITIVE.

The ~~online commerce~~ market for asset lifecycle management solutions is ~~relatively new,~~ rapidly evolving and intensely competitive. We face significant competition in each segment of our business (sourcing, procurement, enterprise asset management and asset disposition). We expect that ~~online commerce~~ competition will further intensify as new companies enter the different segments of our market and larger existing companies expand their product lines. If the global economy continues to lag, we could face increased competition, particularly in the ~~future. Barriers to entry are minimal, and current and new competitors can launch new sites and technologies at a relatively low cost. We compete with a broad range~~form of ~~companies, including providers of on-line solutions, on-line communities, providers of physical auctions, and catalog companies.~~ lower prices.

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

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

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

In ~~April, 2001,~~2002, we implemented a workforce ~~reduction in which we eliminated 31 positions.~~reduction. We ~~anticipate that~~experienced some attrition during 2003 and 2004 as a result of the ~~remainder of 2001 additional employees may voluntarily elect to terminate their employment because~~reduction. The number of our employees as of March 15, 2005 represents a 5% decrease in our workforce ~~reductions. In~~as compared with the ~~future, we~~number of our employees as of May 12, 2004. We may need to hire new or additional personnel ~~because of~~to respond to attrition or future growth of our business. ~~Competition~~However, there is significant competition for ~~personnel, especially those with software development and other technical expertise, is intense.~~qualified personnel. We cannot be certain we will be able to retain existing personnel or hire additional, qualified ~~personnel. Our~~personnel when needed.

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

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

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

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

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

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

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

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

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

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

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

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

Despite the precautions we have taken and plan to take, the occurrence of any of these events or other unanticipated problems could result in service interruptions, which could damage our ~~key personnel could have a material adverse effect on us. Stock options are an important component~~reputation, and subject us to loss of ~~the compensation~~business and significant repair costs. Certain of our ~~personnel. We face~~contracts require that we pay penalties or permit a ~~significant challenge in retaining our employees~~customer to terminate the contract if ~~the value of these stock options is not substantial enough. To retain our employees,~~ we ~~expect~~are unable to maintain minimum performance levels. Although we continue to ~~grant new options~~take steps to ~~motivate~~enhance the security of our systems and ~~retain employees, which~~ensure that appropriate back-up systems are in place, our systems are not now, nor will they ever be, ~~dilutive to investors.~~fully secure.

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

Our business has undergone dramatic expansion and retraction since our ~~business grows,~~formation, which has placed significant strain on our management resources. If we should grow or retract dramatically in the future, there may be further significant demands on our management, administrative, operating and financial resources. In order to manage ~~any future growth~~these demands effectively, we will need to expand and improve our operational, financial and management information systems and ~~hire, train,~~ motivate, manage and retain ~~additional~~ employees. We cannot assure you that we will be able to ~~manage future growth effectively,~~do so, that our management, personnel or systems will be adequate, ~~to support such growth,~~ or that we will be able to achieve levels of revenue commensurate with the ~~increased~~resulting levels of operating ~~expenses associated with such growth. 9~~ ~~WE PLAN~~expenses.

INTERNATIONAL SALES ACCOUNT FOR A SIGNIFICANT PORTION OF OUR REVENUE, WHICH EXPOSES US TO ~~CONTINUE TO EXPAND INTERNATIONALLY AND ARE SUBJECT TO RISKS ASSOCIATED WITH GLOBAL EXPANSION.~~ CERTAIN RISKS.

We currently operate in Canada, Norway, Ireland, the United States ~~Canada, Ireland, England~~ and ~~Australia. We plan~~England. In the 2004 fiscal year, sales to ~~continue to expand~~customers outside North America represented approximately 84% of our ~~international presence. We may incur significant costs in connection with our international expansion.~~revenues. There are ~~also~~ risks inherent in doing business on a global level, including: . various laws and regulatory requirements; . tariffs, customs, duties and other trade barriers; . longer payment cycles and problems in collecting accounts receivable; . difficulties in managing foreign operations; . export and import restrictions; . political risks; . currency and foreign exchange controls; . seasonal reductions in business activity during the summer months in Europe and elsewhere; and . potentially adverse tax consequences.

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

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

ACQUISITIONS OF COMPANIES OR TECHNOLOGIES MAY RESULT IN DISRUPTIONS TO OUR BUSINESS AND/OR ~~THE DISTRACTION OF~~DISTRACTIONS FOR OUR MANAGEMENT. ~~As part~~

We acquired ADB Systemer ASA of ~~our business strategy,~~Norway in October 2001. In the future, we may seek to acquire other businesses or make investments in complementary businesses or technologies. We may not be able to acquire or manage additional businesses profitably or to successfully integrate any acquired businesses with our business. Businesses that we acquire may have liabilities that we underestimate or do not discover during our ~~pre- acquisition~~pre-acquisition investigations. Certain liabilities, even if we do not expressly assume them, may be imposed on us as the successor to the business. Further, each acquisition may involve other special risks that could cause the acquired businesses to fail to meet our expectations. For example: . the acquired businesses may not achieve expected results; . we may not be able to retain key personnel of the acquired businesses; . we may incur substantial, unanticipated costs, delays or other operational or financial problems when we try to integrate businesses we acquire with our own; . our management's attention may be diverted; or . our management may not be able to manage the combined entity effectively or to make acquisitions and grow our business internally at the same time.

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

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

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

Our performance and ability to compete are dependent in part on our ~~proprietary~~ technology. We rely on a combination of patent, copyright, trademark and trade secret laws as well as confidentiality agreements and technical measures, to establish and protect our ~~proprietary rights.~~rights in the technology we develop. We cannot guarantee that any patents issued to us 10 will afford meaningful protection for our technology. Competitors may develop similar technologies which do not conflict with our patents. Others may challenge our patents and, as a result, our patents could be narrowed or invalidated.

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

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

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

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

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

We believe that infringement claims will increase in the technology sector as competition intensifies. Despite our best efforts, we may be sued for infringing on the patent or other proprietary rights of others. Such litigation is costly, and even if we prevail, the cost of such litigation could harm us. If we do not prevail or cannot fund a complete defense, in addition to any damages we might have to pay, we could be required to stop the infringing activity or obtain a license. We cannot be certain that any required license would be available to us on acceptable terms, or at all. If we fail to obtain a license, or if the terms of a license are burdensome to us, ~~our business, financial condition and results of operations~~this could be materially harmed. WE MAY HAVE TO EXPEND SIGNIFICANT RESOURCES TO KEEP PACE WITH RAPID TECHNOLOGICAL CHANGE. The Internet and e-commerce industries are characterized by rapid technological change, changes in user and customer requirements, frequent new service or product introductions embodying new technologies and the emergence of new industry standards and practices. Any of these could render our proprietary technology obsolete. Our performance will depend, in part, on our ability to: . develop new proprietary technology that addresses the increasingly sophisticated and varied needs of our existing and prospective customers; . respond to technological advances and emerging industry standards and practices on a timely and cost-effective basis; . continually improve the performance, features and reliability of our services in response to evolving market demands; and . license leading technologies. We may be required to make substantial expenditures to accomplish the foregoing and to modify or adapt our services or infrastructure. 11 SYSTEMS DEFECTS, FAILURES OR BREACHES OF SECURITY COULD CAUSE A SIGNIFICANT DISRUPTION TO OUR BUSINESS, DAMAGE OUR REPUTATION AND EXPOSE US TO LIABILITY. We believe our reputation for providing reliable and efficient services is critical to our future success. Our systems are vulnerable to a number of factors that may cause interruptions in our ability to enable or host solutions for third parties, including, among others: . damage from human error, tampering and vandalism; . breaches of security; . fire and power losses; . telecommunications failures and capacity limitations; and . software or hardware defects. Service offerings involving complex technology often contain errors or performance problems. Defects are often found during the period immediately following introduction and implementation of new services or enhancements. Errors or performance problems could result in lost revenue or cancellation of customer agreements and may expose us to litigation, potential liability and damage to our reputation. Certain of our contracts provide the customer with penalties or a right of termination in the event we are unable to maintain minimum performance levels. We have developed a redundant system and a formal disaster recovery plan. Despite the precautions we have taken and plan to take, the occurrence of any of these events or other unanticipated problems could result in service interruptions, which could damage our reputation, subject us to loss of business and significant repair costs. Advances in computer capabilities, new discoveries in the field of cryptography, or other events or developments may result in a compromise or breach of the algorithms we use to protect customer transaction data, including credit card information. Security breaches could expose us to a risk of loss or litigation and possible liability for failing to secure confidential customer information. These factors could expose us to liabilities which could exceed our insurance coverage. Service disruptions could also damage our reputation, cause us to lose existing customers and make it difficult to attract new ones. Extensive repair costs could also affect our ability to operate. Although we continue to take steps to enhance the security and redundancy of our systems, our systems are not now, nor will they ever be, fully secure and redundant. IF THE WEB INFRASTRUCTURE IS UNABLE TO SUPPORT USER DEMAND OR IF OUR CONNECTION TO THE INTERNET IS INTERRUPTED OUR BUSINESS MAY BE HARMED. The success of our business-to-business offerings will depend, to a significant degree, upon the development and maintenance of the Web infrastructure and reliable Web access and services. The Web has experienced, and is expected to continue to experience, significant growth in the numbers of users and amount of traffic. There can be no assurance that the Web infrastructure will continue to be able to support the demands placed on it by this continued growth or that such growth will not adversely affect the performance or reliability of the Web. Furthermore, from time to time, the Web has experienced a variety of outages and other delays as a result of damage to portions of its infrastructure, and could face such outages and delays in the future. These outages and delays could adversely affect the level of Web usage and the level of traffic and the processing of on-line transactions. In addition, we do not own a gateway onto the Internet. Instead, we rely on Internet service providers to connect our Web site to the Internet. From time to time, we have experienced temporary interruptions in our Web site connection and in our telecommunications access. Continuous or prolonged interruptions in our Web site connection or in our telecommunications access would have a material adverse effect on our ~~operations. The Web could lose its viability due to delays in the development or adoption of new standards~~business, financial condition, cash flows and ~~protocols to handle increased levels of activity. If the necessary infrastructure, standards, protocols or complementary products, services or facilities are not developed, our business,~~ results of ~~operations, cash flow and financial condition will be materially and adversely affected. 12~~ operations.

OUR ~~LONG-TERM VIABILITY~~PRODUCT STRATEGY IS ~~SUBSTANTIALLY~~PARTIALLY DEPENDENT UPON THE ~~WIDESPREAD~~CONTINUED ACCEPTANCE AND USE ~~BY BUSINESSES AND CONSUMERS~~ OF THE INTERNET AS A MEDIUM OF COMMERCE.

Our ~~future~~ success depends in part on the continued growth of the Internet and reliance ~~by businesses~~on and ~~consumers on~~use of the Internet ~~particularly the growth of dynamic pricing as a basis for conducting transactions in the business-to-business and consumer markets.~~by businesses. Because use of the Internet as a source of information, products and services is a relatively recent phenomenon, it is difficult to predict whether the number of users drawn to the Internet will continue to increase and whether the market for commercial use of the Internet will continue to develop and expand. ~~Internet use patterns may decline as the novelty of the medium recedes.~~

The Internet may not be commercially viable for a number of reasons, including potentially inadequate development of the necessary network infrastructure, delayed development of enabling technologies and inadequate performance improvements. In addition, the ~~Internet's~~Internet’s viability as a commercial marketplace could be adversely affected by delays in the development of services or due to increased government regulation. Changes in or insufficient availability of telecommunications services to support the Internet also could result in slower response times and adversely affect usage of the Internet generally and our business in particular. Moreover, ~~adverse publicity and consumer~~ concern about the security of transactions conducted on the Internet and the privacy of users may also inhibit the growth of commerce on the Internet. If the use of the Internet does not continue to grow or grows more slowly than expected, or if the infrastructure for the Internet does not effectively support growth that may occur, our business would be materially and adversely affected. In addition, even if businesses and consumers accept the use of the Internet as a viable medium of commerce, we cannot assure you that dynamic pricing will develop successfully or achieve widespread acceptance. If the market for dynamic pricing fails to develop, or develops more slowly than expected or becomes saturated with competitors, our business, financial condition, results of operations, cash flow and prospects would be materially adversely affected. CHANGES IN GOVERNMENT REGULATIONS MAY RESULT IN INCREASED EXPENSES, WHICH COULD DECREASE THE DEMAND FOR OUR SERVICES AND NEGATIVELY IMPACT OUR RESULTS. We are not currently subject to direct regulation by any governmental agency, other than regulations applicable to businesses generally and laws and regulations directly applicable to access to or commerce on, the Internet. However, a number of legislative and regulatory proposals under consideration by federal, state, provincial, local and foreign governmental organizations may lead to laws or regulations concerning various aspects of the Internet, including but not limited to, on-line content, user privacy, taxation, access charges and liability for third-party activities. Additionally, it is uncertain how existing laws governing issues such as property ownership, copyright, trade secrets, libel and personal privacy will be applied to the Internet. The adoption of new laws or the broader application of existing laws may expose us to significant liabilities and additional operational requirements and expenses and may decrease the growth in the use of the Internet, which could in turn decrease the demand for our products and increase our cost of doing business. 13

OUR BUSINESS IS SENSITIVE TO THE OVERALL ECONOMIC ~~ENVIRONMENT, AND~~ENVIRONMENT. ANY SLOWDOWN IN ~~E-BUSINESS GROWTH OR OTHER FACTORS IMPACTING~~ INFORMATION TECHNOLOGY SPENDING BUDGETS COULD HARM OUR OPERATING ~~RESULTS The primary customers for our products are enterprises seeking to launch or expand e-business initiatives.~~ RESULTS.

Any significant downturn in our customers' markets or in general economic conditions that results in reduced information technology spending budgets would likely result in a decreased demand for our products and services, longer selling cycles and ~~will~~lower prices, any of which may harm our business. Industry downturns like these have been, and may continue to be, characterized by diminished demand for products and services and subsequent erosion of average selling prices. OUR BUSINESS MAY BE AFFECTED BY EVOLVING TAX REGULATIONS. A number of proposals have been made at the U.S. state and local level that would impose additional taxes on the sale of goods and services through the Internet. Such proposals, if adopted, could substantially impair the growth of electronic commerce, and could adversely affect our opportunity to derive financial benefit from such activities.

WE ARE SUBJECT TO RISKS ASSOCIATED WITH EXCHANGE RATE FLUCTUATIONS.

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

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

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

Our Board of Directors, without any further vote of our shareholders, may issue preference shares and determine the price, preferences, rights and restrictions of those shares. The rights of the holders of common shares will be subject to, and may be adversely affected by, the rights of the holders of any series of preference shares that may be issued in the future. That means, for example, that we can issue preference shares with more voting rights, higher dividend payments or more favorable rights upon distribution than those for ~~the~~our common shares. If we issue certain types of preference shares in the future, it may also be more difficult for a third party to acquire a majority of our outstanding voting shares and such issuance may, in certain circumstances, deter or delay mergers, tender offers or other possible transactions that may be favored by some or a majority of our shareholders. OUR COMMON SHARES MAY BECOME SUBJECT TO "PENNY STOCK" REGULATIONS WHICH MAY AFFECT YOUR LIQUIDITY IN OUR COMMON SHARES. Our common shares were first quoted on the Nasdaq National Market on April 20, 1999. Since then, our common shares have traded at prices below US$5.00 from time to time. Should our common shares continue to be traded below US$5.00, our common shares could become characterized as "penny stocks" which could severely affect market liquidity. The Securities Enforcement and Penny Stock Reform Act of 1990 requires additional disclosure relating to the market for penny stocks in connection with trades in any stock defined as a penny stock. Securities and Exchange Commission regulations generally define a penny stock to be an equity security that has a market price of less than US$5.00 per share, subject to certain exceptions. Such exceptions include any equity security listed on Nasdaq or a national securities exchange and any equity security issued by an issuer that has: . net tangible assets of at least US$2,000,000, if such issuer has been in continuous operation for three years . net tangible assets of at least US$5,000,000, if such issuer has been in continuous operation for less than three years; or . average annual revenue of at least US$6,000,000, if such issuer has been in continuous operation for less than three years 14 Unless an exception is available, the regulations require, prior to any transaction involving a penny stock, delivery of a disclosure schedule explaining the penny stock market and the risks associated therewith. The penny stock regulations would adversely affect the market liquidity of our common shares by limiting the ability of broker/dealers to trade the shares and the ability of purchasers of our common shares to sell in the secondary market. Certain institutions and investors will not invest in penny stocks. U.S. INVESTORS IN OUR COMPANY COULD SUFFER ADVERSE TAX CONSEQUENCES IF WE ARE CHARACTERIZED AS A PASSIVE FOREIGN INVESTMENT COMPANY. We may be treated as a passive foreign investment company, or PFIC, for United States federal income tax purposes during our 2000 tax year or in subsequent years. We would be a PFIC if 75% or more of our gross income in a taxable year is passive income. We would also be a PFIC if at least 50% of our assets averaged over the taxable year produce, or are held for the production of, passive income. For these purposes, the value of our assets would be calculated based on our market capitalization. Passive income includes, among other items, interest, dividends, royalties, rents and annuities. We may be deemed a PFIC because previous financings combined with proceeds of future financings may produce, or be deemed to be held to produce, passive income. If we are or become a PFIC, many of our U.S. shareholders will be subject to the following adverse tax consequences: . they will be taxed at the highest ordinary income tax rates in effect during their holding period on certain distributions on our common shares, and gains from the sale or other disposition of our common shares; . they will be required to pay interest on taxes allocable to prior periods; and . the tax basis of our common shares will not be increased to fair market value at the date of their death. If we become a PFIC, U.S. shareholders could avoid these tax consequences by making a qualified electing fund election or a mark-to-market election. These elections would need to be in effect for all taxable years during which we were a PFIC and during which they held our common shares. A U.S. shareholder who makes a qualified electing fund election, will be taxed currently on our ordinary income and net capital gain (unless a deferral election is in effect). A U.S. shareholder who makes a mark-to-market election will include as ordinary income each year an amount equal to the excess of the fair market value of our common shares over the adjusted tax basis as of the close of each year (with certain adjustments for prior years). If we become a PFIC, our U.S. shareholders will generally be unable to exchange our common shares for shares of an acquiring corporation on a tax- deferred basis under the reorganization rules of the Internal Revenue Code, and the benefits of many other nonrecognition provisions of the Internal Revenue Code will not apply to transfers of our common shares. In addition, if we become a PFIC, pledges of our common shares will be treated as sales for U.S. federal income tax purposes. U.S. citizens should note that state and local taxes may also apply if amounts are included in U.S. federal taxable income under the PFIC rules of the Internal Revenue Code. The PFIC rules are very complex. U.S. citizens are strongly encouraged to consult with their tax advisors concerning all of the tax consequences of investing in our common shares and the possible benefits of making a tax election given their circumstances. Additionally, U.S. citizens should review the section entitled "Taxation--U.S. Federal Income Tax Considerations--Tax Status of the Company--Passive Foreign Investment Companies" contained in this annual report for a more detailed description of the PFIC rules and how those rules may affect their ownership of our common shares.

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

We are incorporated under the laws of the Province of Ontario, Canada. Certain of our directors and officers are residents of Canada and ~~a substantial part~~Norway and substantially all of our assets and ~~all or a substantial portion of~~ the assets of such persons are located outside the United States. As a result, it may be difficult for holders of common shares to effect service of legal process within the United States upon those directors and officers who are not residents of the United ~~States or~~States. It may also be difficult to realize in the United States upon judgments of courts of the United States ~~predicated upon civil 15~~ ~~liability~~without enforcing such judgments in our home jurisdiction or the jurisdiction of residence of the director or officer concerned.

ITEM 4 - INFORMATION ON THE COMPANY

A. COMPANY BACKGROUND

The name of the company is ADB Systems International Ltd (“ADB,”“ADB Systems” or the “Company”). The Company was formed pursuant to the Business Corporations Act (Ontario). The business began as Internet Liquidators Inc. (“IL Inc.”), a business corporation formed under the ~~Securities Act~~laws of 1933, as amended, or the Exchange Act or the rules and regulations promulgated under such statutes. We believe, based on advice of our Canadian counsel, that a judgment of a United States court predicated solely upon civil liability under such U.S. federal securities laws would probably be enforceable in Canada if the United States court in which the judgment was obtained had a basis for jurisdiction in the matter that was recognized by a Canadian court for such purposes. However, we believe, based on such counsel's advice, that there is substantial doubt whether an action could be brought successfully inOntario, Canada, in September 1995 and after a series of corporate reorganizations, as described below developed into the first instance on the basis of liability predicated solely upon such U.S. federal securities laws. ITEM 4 - INFORMATION ON THE COMPANY A. HISTORY AND DEVELOPMENT OF THE COMPANY BID.COM INTERNATIONAL INC. Our business was commenced by Internet Liquidators Inc., an Ontario corporation, in September 1995.present Company. In May 1996, Internet Liquidators International Inc. (“ILI Inc.”), also an Ontario ~~corporation,~~company, acquired all of the shares of ~~Internet Liquidators~~IL Inc. InThese two companies were amalgamated on January ~~1997, we were formed as an Ontario corporation by statutory amalgamation~~9, 1997. By articles of ~~Internet Liquidators~~amendment dated June 25 1998, ILI Inc. ~~and Internet Liquidators International Inc. In June 1998, we~~ changed ~~our~~its name ~~from Internet Liquidators International Inc.~~ to Bid.Com International Inc. We

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

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

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

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

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

The principal place of business and registered office of the Company is located at 302 The East Mall, Suite 300 Toronto, Ontario, Canada, M9B 6C7 and our telephone number is (416) 640-0400. In Norway, our principal business offices are located at ~~6725 Airport Road, Suite 201, Mississauga, Ontario L4V 1V2, Canada~~Vingveien 2, 4050 Sola, Norway and our telephone number is ~~(905) 672-7467.~~+47 51 64 71 00. In the United States, our principal business ~~offices are~~office is located at ~~2701N~~3001 North Rocky Point ~~Dr.,~~Drive East, Suite ~~930,~~200, Tampa, Florida 33607 and our telephone number is (813) ~~636-8025. MAJOR DEVELOPMENTS From~~281-4825.

Our shares trade on the ~~commencement of~~Toronto Stock Exchange under the symbol “ADY” and are traded on the Over the Counter Bulletin Board (the “OTCBB”) under the symbol “ADBYF”. Additional information about our ~~business operations in 1995 through 1998, our primary business was a business-to-consumer auction service~~company can be obtained at our web site ~~www.bid.com. Beginning~~- www.adbsys.com. The information contained on our web site is not deemed to be part of this Annual Report.

MAJOR DEVELOPMENTS

*Fiscal 2004*

•	ADB was engaged in a number of activities aimed at expanding our relationships with existing customers and developing relationships with new customer organizations. Through these efforts, which included the introduction of new technology enhancements to our suite of product offerings, the cross selling of ancillary applications, and the increase in the number of users of our technology, ADB was able to expand our working relationships with BP the National Health Services (UK), and GE CEF, among others.

•	In North America, the primary thrust of our activities in 2004 concentrated on the rollout of Asset Manager from GE, our joint venture with GE Commercial Finance. This joint venture is designed to combine GE’s equipment financing and asset management expertise together with our experience in providing mission-critical technology solutions for asset lifecycle management. Together, we have developed web-based solutions to help our customers:

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

•	Through the joint venture, we signed a customer agreement with Kraft Foods Global, Inc. (“Kraft”) and continued to service our customer agreement with the General Electric Company, acting through its GE Aircraft Engines division (“GE Aircraft Engines”).

•	ADB made a number of enhancements to our suite of technology product offerings in 2004. These enhancements, which centered on re-architecting the under-lying platform of our Dyn@mic Buyer solution and expanding the functionality of our WorkMate and Material Transfer applications, allow us to stay current with the latest technology trends while maintaining a competitive advantage.

•	A key cornerstone of our technology activities focused on the development of Asset Tracker, a new, web-based asset-tracking offering that is delivered through our joint venture with GE.

•	Effective November 15, 2004 our stock symbol on the Over The Counter Bulletin Board (the “OTCBB”) was changed to ADBYF. The addition of the F to the symbol was a requirement of the OTCBB to signify that we are a foreign issuer.

The Brick Transaction

On August 30, 2002, we entered into a series of agreements with The Brick Warehouse Corporation (“The Brick”) which contemplated a series of transactions among The Brick, ADB Systems International Inc. (“Old ADB”) and ADB. We refer to those transactions in ~~1999, we began~~this AIF as “The Brick Transaction”.

Pursuant to ~~focus our efforts away from retail - ----------- operations, ultimately resulting~~The Brick Transaction:

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

	•	ADB and Old ADB agreed to enter into the Arrangement (as defined above); and

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

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

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

	1.	Shareholders of Old ADB received from ADB one common share of ADB in exchange for each of their common shares of Old ADB. As a result (i) Old ADB became a wholly owned subsidiary of ADB and (ii) each former shareholder of Old ADB owns the same number of shares in ADB that it owned in Old ADB prior to the exchange.

	2.	Old ADB transferred all of its assets to ADB and ADB assumed all of the liabilities and obligations of Old ADB, except that Old ADB retained specific assets and liabilities of the Retail Business.

	3.	The registered office, articles of incorporation, by-laws, directors and executive officers of Old ADB immediately prior to the Arrangement became the registered office, articles, by-laws, directors and executive officers of ADB upon consummation of the Arrangement.

	4.	ADB adopted the Stock Option Plan of Old ADB. Upon consummation of the Arrangement, all options, warrants or debt that was exercisable or convertible into shares of Old ADB became convertible into the same number of shares of ADB.

	5.	The articles of amalgamation of Old ADB were amended to: (i) change the name of Old ADB to Bid.Com International Ltd. and (ii) delete the authorized Preference Shares (as defined in such articles) and the rights, preferences and restrictions on the transfer of such Preference Shares.

Upon completion of ~~2000. During~~the Arrangement, the Toronto Stock Exchange approved the listing of the ADB common shares issued in exchange for Old ADB common shares or issuable upon the exercise of options or warrants or conversion of debt. ADB common shares are listed on the Toronto Stock Exchange for trading under the symbol “ADY”. The shares of Old ADB ceased trading on the Toronto Stock Exchange on November 5, 2002. On April 2, 2003 an order was issued by the Ontario Securities Commission pursuant to which Old ADB has ceased to be a reporting issuer in all jurisdictions in Canada in which it was a reporting issuer.

Joint Venture with GE Commercial Finance, Commercial Equipment Financing

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

PRINCIPAL CAPITAL EXPENDITURES AND DIVESTITURES ~~We acquired common shares~~

For a description of the companies listed below during 1998, 1999 and 2000. We describe the accounting adjustments we have made to reflect the reduction in value of those investments (other than Quack.com), the sale of out interest in Quack.com and other principal capital expenditures and divestitures, see Item 5 - OPERATING AND FINANCIAL REVIEW AND PROSPECTS - REALIZED GAINS AND LOSSES ON MARKETABLE SECURITIES AND STRATEGIC INVESTMENTS and CAPITAL ASSETS. As of May 31, 2005 we do not have any significant current capital divestitures or any current capital expenditures so far in 2005.

B. BUSINESS OVERVIEW

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

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

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

INDUSTRY BACKGROUND AND OVERVIEW

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

The key value proposition for EAM solutions is that they can provide a quick and quantifiable return on investment (ROI) and return on assets (ROA). Cost and productivity improvements can immediately and measurably benefit organizations, and thus are highly desirable to potential customers, particularly in ~~Item 5 -Liquidity~~difficult economic times where the focus is increasingly bottom line oriented.

In addition to EAM solutions, we offer sourcing and ~~Capital Resources~~procurement solutions as well as sales solutions. These are natural extensions to EAM solutions, as organizations seek to extend asset management and ~~Item 7 - Major Shareholders~~corporate-level planning and ~~Related Party Transactions - Related Party Transactions.~~

~~(1) Based on publicly available information regarding each~~tracking onto other elements of the ~~investee companies B. BUSINESS OVERVIEW~~asset lifecycle.

PRODUCTS AND SERVICES

GE’s Asset Manager

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

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

Our industry-proven solutions enable our customers to:

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

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

Asset Tracker

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

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

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

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

With Asset Tracker, users can:

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

Asset Appraiser

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

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

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

Asset Seller

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

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

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

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

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

Asset Buyer

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

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

With Asset Buyer, organizations can:

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

Company Products

We offer solutions ~~for business-to-business (B2B)~~to manage all aspects of the asset lifecycle - sourcing/procurement, maintenance, materials management and ~~business-to-consumer (B2C) electronic commerce. Our hosted, online, client-branded dynamic pricing solutions run~~disposition. Below is a detailed description of our offerings:

Dyn@mic Buyer (TM)

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

Key features of the ~~elements~~product include:

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

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

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

ProcureMate (TM)

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

Key features of ProcureMate include:

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

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

WorkMate (TM)

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

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

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

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

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

Each WorkMate module also includes workflow and reporting tools.

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

Dyn@mic Seller (TM)

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

Key capabilities of the product include:

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

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

Related Services

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

Consulting. A significant number of our ~~comprehensive suite of pricing methods, as follows:~~

16 ~~We believe that~~customers request our ~~broad array of dynamic pricing solutions deliver a series of~~advice regarding their business and technical ~~benefits for our customers,~~processes, often in conjunction with a scoping exercise conducted both before and after the execution of a contract. This advice can relate to development or streamline of assorted business processes, such as ~~follows:~~ sourcing or procurement activities, assisting in the development of technical specifications, and recommendations regarding internal workflow activities.

Customization and Implementation. Enhanced brand equity and improved relationships with customers. Unlike public marketplace models that bring together various competitors into a single network of buyers and sellers, our client-branded approach helps strengthen, rather than dilute, our customer's brand equity. . Improved sales processes. By selling directly to their customers or dealing directly with suppliers, rather than dealing through an intermediary, our customers are able to establish and maintain long-term relationships. . Increased speed to market. Our modular and hosted solution can be implemented quickly, asBased generally upon the complexities of on-site implementations are avoided. . Reduced investments in technology. By providing our solutions on a hosted basis, we reduce our customers' initial costs and minimize the cost of upgrades and advancements. . Easy integration with existing information systems. By using XML standards (which are a uniform method for describing and exchanging electronic data),up-front scoping activities, we are able to ~~integrate~~customize our solutions as required to meet the customer's particular needs. This process can vary in length depending on the degree of customization, the resources applied by the customer and the customer's business requirements. We work closely with ~~existing Enterprise Resource Planning (ERP), Supply Chain Management (SCM)~~our customers to ensure that features and ~~Customer Relationship Management (CRM)and other internal databases and applications. . Reduced procurement costs. The combination of an expanded reach through~~functionality meet their expectations. We also provide the ~~Internet and reduced time and expense through electronic processes instead of phone, fax or face-to-face meetings can reduce procurement costs~~professional services work required for ~~organizations. Most~~the implementation of our ~~business-to-business contracts~~customer solutions, including loading of data, identification of business processes, and integration to ~~date~~other systems applications.

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

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

We have involved our DYNAMIC SELLER Solution. Our DYNAMIC BUYER Solution was introduced late in 2000. We anticipate that, in the future, demand for our Buy Side or procurement solution will be significant, and may ultimately out-weigh demand for our Sell Side solution during a downturn in the economy. Since October 24, 2000, with the termination of our retail operations, our revenues have consisted solely of license and service-related fees. Service fees (which are fixed or transaction-based) are derived from softwarebeen providing consulting, customization and implementation, ~~monthly operating~~training, maintenance and support services to our customers since 1988.

Third Party Offerings

In addition to the sale of our core solutions and ~~professional services. Our dynamic pricing solutions power sites for some of the largest companies in the world, including divisions of the GE Capital group~~services, we have entered into marketing or co-marketing agreements with a number of companies that offer services that are complementary to our offerings. We market these complementary services to our customers and ~~News International. We presently~~prospects and can earn a referral fee if these services are purchased. In some cases our marketing partner has agreed to market our solutions ~~through sales~~to its customers and prospects and can earn a referral fee. Our marketing representatives throughout Canada, the United States, the United Kingdom, Ireland and continental Europe, and Australia, and we maintain technical support centers in Canada and Ireland. INDUSTRY BACKGROUND The Internet and E-Commerce Businesses worldwide use the Internet to communicate and transact business. Forrester Research estimates that the US business-to-business trade market will grow from an estimated US $406 billion in 2000 to US $2.7 trillion by 2004. partners include:

Partner		Service or Offering
AMEC Services Limited		Engineering Services
RBT Consulting		Healthcare Consulting Services
Production Access, Inc.		Oil and Gas Data Management Solutions

Business Cycles

We ~~believe that Internet growth will continue~~experience some seasonality as a result of ~~a number~~lower activity in European markets during the summer months. In addition since many of ~~factors, including bandwidth improvements, increasing end-user acceptance, globalization~~our customers and ~~competitive pressures. Demand for Dynamic Price Solutions We believe dynamic price formats have a number of characteristics that make~~our joint venture Asset Manager are large organizations or quasi-governmental entities, we may experience increasingly longer sales and collection cycles.

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

STRATEGY

Our business strategy is to expand our customer base, particularly ~~attractive. While the traditional format for conducting commercial transactions is fixed 17~~ pricing, many businesses apply dynamic price formats both off-line and on-line. Retailers mark-down inventories, leasing companies auction off end-of-lease goods, and purchasing departments issue Requests for Proposals where elements other than price factor into the decision-making process. All of these scenarios exist in off-line and on-line marketplaces. Dynamically changing sales formats leverage the unique characteristics of the Internet, which allows the broad, quick and efficient dissemination of information. Immediate feedback is provided to distributors, vendors and e-tailers regarding price-points that are attractive to customers. Adjustments can be made in real-time. Forrester Research estimates that the dynamic pricing segment of US business-to-business trade will grow from US $29.4 billion in 2000 to an estimated US $746 billion by 2004. IDC expects annual revenues in the ~~procurement applications market to reach over US $8 billion by 2004, compared to US $1.4 billion in 2000. Our DYNAMIC SELLER~~oil and DYNAMIC BUYER solutions are ------- ------- offered to customers in these two markets. Demand for Hosted Solutions Customers may implement their e-commerce strategiesgas, healthcare, public authorities, and financial services sectors, through ~~a variety~~superior software functionality and through the industry expertise of means, including participation in exchanges, licensing and installing third party software, internal software development efforts, and outsourcing. The key advantage for companies that outsource online solutions is the reduced need to invest in additional hardware or software or maintain significant technical resources. This is a key selling point for our ~~offerings.~~employees. In addition, a hosted solution can be implemented quickly, scaled more effectively, and upgraded and maintained with less disruption to a customer's business. These benefits are similar to those obtained by participating in an exchange operated by a third party, with the significant difference being the ability of the customer to maintain brand and control over their hosted e-commerce initiative OUR BUSINESS STRATEGY Our objective is to provide leading businesses with e-commerce enabling and related service capabilities. Our businessparticular, our strategy is comprised of the following key components: ~~. Focussing~~

Expand joint venture with GE and increase our customer base

Since the launch of GE’s Asset Manager, we have focused our efforts on Powering Private Exchanges. We provide solutions to customer-branded exchanges, rather than industry or intermediary exchanges. We believe that customer-branded exchanges more effectively promote each customer's brand equityincreasing the number of joint venture customers and ~~strengthen customer relationships. . Productization and Verticalization. We are continuing to "productize"~~enhancing our ~~offerings by developing broad "generic" applications which involve minimal additional programming,~~portfolio of asset management technology. This focus will be a cornerstone of our efforts in ~~order to reduce implementation timeframes~~2005.

Strengthen our position as an EAM vendor and improve ~~efficiencies. As part~~our visibility among target sectors.

ADB has been ranked by a respected industry analyst as an emerging provider of ~~this process,~~enterprise asset management solutions. While we ~~expect to develop "productized" versions~~have expanded our customer base and increased the number of our solutions specifically targeted at industry verticals, such as leasing companies. . Expanding our Service Offerings. We are committed to expanding our service offerings through the enhancementusers of our technology, ADB is committed to solidifying our position as an EAM, particularly among oil and ~~through new strategic relationships and/or acquisitions. We plan~~gas, healthcare, public authorities, and financial services sectors.

Maintain and Enhance Our Technology.

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

Enter into ~~relationships with third party providers for various related services such as those identified under "Our Services~~ and ~~Offerings". . Entering into Significant Alliances with Industry Leaders.~~ Maximize Alliances.

We ~~seek to establish~~have marketing and other ~~significant~~ relationships with AMEC Services Limited, GE Capital, RBT Consulting, Production Access, Inc. and a number of other leading companies in a broad range of industries. We believe that these and future relationships will help provide us with access to important industry participants and will help increase our brand awareness. . Maintaining and Enhancing Our Technology. We have developed a proprietary e-commerce platform for the operation and support of dynamic pricing solutions. We believe our proprietary technology is competitive with other enablers of business-to-business offerings. To remain competitive, we must maintain and enhance our technology. We introduced enhanced procurement or Buy Side capabilities in 2000, and are continuing to develop new transaction formats and complementary technologies. . Penetration into Global Markets. We provide our services to customers in the US, Canada, and Europe. We are continuing to expand our markets in European Community countries from our office in Ireland and through 18 additional sales and marketing offices we have opened in Continental Europe during 2000. In 2000 and early 2001, we also opened sales and marketing offices in New York and Sacramento, and retained local sales representatives in Dallas, New Jersey and Chicago. We expect the rate of growth in number of new offices to slow, as we focus on market penetration from each of these new centers. We continue to maintain a sales and marketing presence in the Asia-Pacific region, however Europe and North America will remain the principal focus of our attention in 2001. .

Seeking Acquisitions and Strategic Investments - .

We plan ~~to continue~~ to expand by seeking technologies, products, and services that complement our existing business. If appropriate opportunities are available, we may acquire businesses, technologies or products or enter into strategic relationships that may further diversify revenue sources and product offerings, expand our customer base or enhance our technology platform. OUR SERVICES AND OFFERINGS We provide on-line dynamic pricing solutions under our POWERED BY BID.COM banner for the business-to-business and business-to-consumer e-commerce markets. The modular nature of our software allows us to tailor our products and services to the needs of each client. In addition, by offering our solutions primarily on a hosted or "business service provider" basis, we allow our customer to concentrate on its core competency while we manage and maintain the hardware, software and connectivity associated with the various pricing methodologies that we support. We offer a number of on-line transaction methods, and are continuing to develop new methods by which businesses can sell their products and services. Our "dynamic pricing" methods include: DYNAMIC SELLER Solutions ("Sell Side") Top Bid (Ascending Price) Auctions. In the conventional rising price auction format, the highest bids win the items auctioned. The rising price auction allows participants to competitively bid on available products and services by incrementally adjusting their bid positions. Our user interface allows users to easily identify current leading bidders, minimum new bids and initial bid pricing. Participants are informed of their bid status, stating whether they have won, been outbid, approved or declined via electronic mail. Dutch (Declining Price) Auctions. In our patented Dutch auction format, a starting price is set and a limited time period is allocated for a fixed quantity of the product to be auctioned. As time advances, the price drops in small increments. The longer one waits, the lower the price. However, if a bidder waits too long the limited quantity of the product being auctioned may be sold out. The declining bid auction allows participants to bid in a real-time format utilizing on-screen data which provides the time and quantity remaining as well as the falling price of the items for sale. The bidders remain online and actively participate throughout the auction process. In March 1999, we received a patent from the US Patent and Trademark Office covering our process for conducting Dutch auctions over electronic distribution channels. We have a patent application pending in Canada covering the same technology. Hybrid. We offer hybrid auction formats to meet clients' particular needs. One example of a hybrid format is an auction which begins on a declining (Dutch Auction) basis until the first bid is received, and then converts to a rising price (Top Bid) auction to reflect demand. This format mimics the 'true auction' format seen in many off-line auctions. Fixed Price Offerings. Our technology enables the sale of products and services on a fixed price basis. The vendor posts the good or service and the price in a catalogue or directory format. The purchaser cannot bid on the price, but merely elects whether or not to purchase the good or service. DYNAMIC BUYER Solutions ("Buy Side") 19 Our DYNAMIC BUYER Solutions are intended to help businesses automate the decision-making process involved when procuring goods, by providing automated analysis and selection of competing bids, based on a variety of factors. We offer the following DYNAMIC BUYER Solutions: Request-for-Quotation Auction. The RFQ system allows buyers to post an on-line offer to purchase such that pre-qualified suppliers may view the offer, download documentation related to it and then bid on-line. Buyers can let bidders see the details of all other bids, or alternatively customize the site for confidentiality reasons. Bidders or vendors can be pre-qualified by the buyer and provided with access to view and download only the documentation that the buyer specifies. Bidders can then request additional information from the buyer via a question and answer module which we provide. The buyer will examine the questions that the bidders post and then prepare a response document to those questions they wish to answer which is then posted online. Sealed Bid. Similar to the RFQ system, the sealed bid method allows the buyer to post its product or service requirements to a multitude of vendors. The system has the ability to incorporate such features as detailed technical information, question and answer forums, and automatic e-mail notification of amended or new buyer-posted documents. The sealed bid system differs from the RFQ in that the vendors only have one opportunity to supply a bid. Other bids placed by competing vendors are not visible to anyone during the actual auction. Only after the close of the auction is the buyer able to view the vendor bids. Strategic Sourcing (Multi-Parameter). The Strategic Sourcing solution incorporates multi-parameter measures, by which customers may assign values to criteria involved in the purchase decision, such as price, product availability, post-sales support and certification standards. Bidders input responses to questions relating to these criteria, and responses are weighted by the software for presentation to the customer. Features Our Solutions offer the following features, some of which are only applicable to certain pricing formats: Listing. Vendors upload product listings to the web-site or sub-site, either periodically or on an integrated real-time basis. The data comprising the listing is variable based on the customer's requirements, and can include price, category, graphics, and other attributes. Reporting. We are able to customize reports to capture data, such as bidding statistics, on an individual transaction or aggregated basis. Reports can be delivered by e-mail or posted for access, all encrypted to protect data. E-Mail Notification. Prior to an event, our e-mail notification system will automatically notify potential buyers of the date and specified details. Payment and Currency Capabilities. Our solutions support multi-currency transactions and a full range of on-line payment methods, including credit card, banking authorization, smart cards and cash. Multi-Language Capabilities. Our object-oriented technology enables customers to collect and deliver content in simple Roman text as well as multi-byte Asian and Arabic languages. Search and Bidding Proxy Agents. We have developed proprietary bidding agents for use in conjunction with our Dynamic Seller Solutions. Our BID BUDDY tools allow bidders to place absentee bids up to a pre-determined limit. This "intelligent" bidding agent checks bid activity at regular intervals and increases a customer's bid by the minimum required increment to ensure that products are purchased at the best possible price. If outbid, the customer receives an e-mail alert and is permitted to increase his bid. Our SEARCH BUDDY search tool may be pre-programmed up to a maximum seven days in duration, to find product offerings customized to a customer's 20 specific areas of interest. If a match is found for a customer's search, the customer receives immediate notification by e-mail with a direct link to the desired product. Mobile Applications. Our solutions permit bidders to bid through wireless devices such as the RIM Blackberry pager and determine the status of their bids through voice recognition applications such as QUACK's software solution. Related Services In addition to our dynamic pricing solutions, we provide the following services to our clients: Consulting. A significant number of our customers request our input into their business and technical processes, often in conjunction with a "scoping" exercise conducted both before and after the execution of a contract. This input can include comments with respect to the customer's proposed business case for their on-line business, assisting in the development of technical specifications, and recommendations regarding branding and promotional exercises. Customization and Implementation. Based generally upon the up-front "scoping" exercise, we customize our solutions as required to meet the customer's particular needs, and develop the customer's web-site or sub-site to expectations. This process can take as little as a few days, or as long as many months, depending on the degree of customization, the resources applied by the customer and the customer's business requirements. We work closely with customers to ensure branding, features and functionality meet their expectations. Training. Upon completion of implementation (and often during implementation), we train customer personnel to manage the web-site or sub-site through our administrative tools. Customers are able to upload and alter listings and monitor site activity. Customer Service and Support. We provide telephone, e-mail and pager support for our customers, we also monitor client site performance. Third Party Offerings We have entered into marketing or co-marketing agreements with a number of companies that offer services that are complementary to our offerings. We market these complementary services to our clients and prospects and can earn a referral fee if these services are purchased. In some cases our marketing partner has agreed to market our solutions to its clients and prospects and can earn a referral fee if our services are purchased. Some of our marketing partners are:

Retail Operations Prior to October 24, 2000, we operated two national business-to-consumer auction sites at www.bid.com, one in the United States and one in Canada. Following an extensive strategic review by Management and our Board of Directors, we chose to close our retail operations late in 2000 and focus solely on our business-to-business e-commerce enabling operations.

CUSTOMERS

We provide our ~~e-commerce~~ solutions ~~and related services~~ to customers in a variety of industries, including: ~~automotive, heavy machinery, retail~~oil and ~~shipping~~gas, healthcare, public authorities, and ~~transportation. Our customers 21~~ ~~typically use our technology~~financial services sectors.

The revenue structures and particular services ~~to implement~~provided vary depending upon the needs of the customer and ~~operate on-line business-to-business or business-to-consumer~~the solution concerned. For licensed offerings ~~for their customers, either by converting an existing off-line solution to the on-line space or by creating~~we generally collect a ~~new solution~~license fee based on number of users, service fees for ~~customers. We generate revenue from our business-to-business relationships in several ways. We typically receive some combination of license, consulting, customization and~~ implementation and training, and support and maintenance fees. For hosted offerings, we generally collect an up-front implementation fee, monthly hosting ~~fees for our technology. In many cases, we also may receive~~fee, and a ~~percentage~~share of ~~revenues~~revenue or ~~other transactional-based fees from on-line transactions. In limited cases, we may also invest in our customers, in connection with the delivery of our services.~~ transaction volumes.

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

Customer	Solution(s)	Industry Segment	Geographic Location
BP Norway AS	ProcureMate; WorkMate	Oil and Gas	Norway
Prosafe Drilling Company (Prosafe)	WorkMate	Oil and Gas	Norway
Halliburton Productos (Halliburton)	WorkMate	Oil and Gas	Brazil
AmecFluor	WorkMate	Oil and Gas	Korea
Talisman Energy Inc.	WorkMate	Oil and Gas	Canada, UK
Hordaland fylkeskommune (HFK)	ProcureMate	Public Authority	Norway
GE Commercial Equipment Financing (GE)	Dyn@mic Seller	Financial Services	US
National Health Services (UK)	ProcureMate	Health	UK
permanent TSB	Dyn@mic Seller	Financial Services	Ireland
Paramount Resources	WorkMate	Oil and Gas	Canada
Kraft Foods Global, Inc.	Serviced by our joint venture, Asset Manager, providing Asset Tracker

The Company operates in three reportable geographic segments (North America, Ireland/United Kingdom, and ~~implemented client-branded web-sites or sub-sites:~~

Norway). The Company has in the past earned revenue from both retail and non-retail customers. Currently all our revenue is derived from our current business of software licensing, and computer system support and implementation as described in Item 4.(b) of this Report, and no revenue is derived from retail activity.

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

SALES AND MARKETING

We market our ~~services~~solutions primarily through our direct sales force. Our sales organization is regional with personnel located in our principal offices in Toronto (Canada), Dublin (Ireland), London (UK) and Dublin, and in our sales and marketing offices in Tampa, New York, Sacramento, Los Angeles and London, England. In addition, we have sales representatives located in other major cities such as Dallas and Chicago. Stavanger (Norway).

Our marketing efforts are ~~focussed~~focused on targeted marketing campaigns, rather than ~~broad based~~broad-based "awareness" campaigns. Potential customers are identified through direct contact, responses to ~~request~~requests for information, attendance at trade shows and ~~the efforts of our lead generation group.~~through industry contacts. We ~~have conducted limited national advertising programs, but~~ principally focus on trade show participation, seminar series for specific industries or professionals and ~~outgoing~~ongoing lead ~~generation.~~ generation through our sales force.

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

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

TECHNOLOGY PLATFORM ~~We have~~

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

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

RESEARCH AND DEVELOPMENT

Based on the ~~basis~~relative pricing and functionality of our ~~hardware systems. 22~~ We license commercially available technology whenever possible, rather than seek a custom-made or internally-developed solution. We believe that this strategy lowers our operating costs and increases our ability to respond to changing demands resulting from growth and technological shifts. This approach also allows us to focus our development efforts on creating and enhancing the specialized proprietary software that is unique to our business. We have embraced high performance switching technologies, including Asynchronous Transfer Mode (ATM), to provide end usersproductsas compared with ~~what~~those of competitors, we believe is the fastest access possible to our clients' web sites. Our access to telecommunications infrastructure is scaleable on demand and has been proven to provide reliable transactional support. In November 1998, we won three Canadian Information Productivity Awards, for our online auction technology, including an Award of Excellence, Best of Category Award for Small Business, and top honors with the Best of Show Award. Presently, 26 staff members are dedicated to technical support and operations. We expect to continue to focus significant resources on system development to ensure the continued reliability and competitiveness of our technology. RESEARCH AND DEVELOPMENT We believe that our proprietary ~~dynamic pricing~~ software provides a competitive advantage, and that our future success depends, in part, on our ability to continue developing and enhancing that software. Therefore, we have focused our ~~research~~software development and ~~development~~technology efforts on the continued development of our proprietary software offerings. Presently, 14 of our staff members are dedicated to product development and maintenance.

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

Our ~~research~~software development and ~~development~~technology expenditures were approximately ~~$1.802~~$3.257 million for the year ended December 31, ~~2000, $1.0~~2004, $2.817 million for the year ended December 31, ~~1999~~2003 and ~~$889,000~~$4.101 million for the year ended December 31, ~~1998,~~2002, including salaries and related expenses of our personnel engaged in research and development. Research and development activities in ~~2000~~2004 included the ~~preliminary~~ development of version 2.0 of our ~~DYNAMIC~~DYN@MIC BUYER ~~Solutions~~Solution and ~~enhancements~~the development of a new materials tracking module within our WorkMate application.

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

INTELLECTUAL PROPERTY

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

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

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

Our major trademarks or tradenames include: ~~BID.COM;~~ADB; POWERED BY ~~BID.COM; INTERNET LIQUIDATORS; BID BUDDY, SEARCH BUDDY,~~ADB; PROCUREMATE, WORKMATE, DYNAMIC SELLER and DYNAMIC BUYER. Except for ~~INTERNET LIQUIDATORS, which is registered in Canada, and~~ DYNAMIC SELLER and DYNAMIC BUYER, 23 which are unregistered, all of these trademarks and tradenames are the subject of pending applications for registration in ~~either~~one or ~~both~~all of the United States, Canada and ~~Canada.~~Norway. We also claim rights in other unregistered ~~marks.~~ trademarks.

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

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

COMPETITION

The market for each solution comprising our ~~technology~~asset lifecycle management suite is primarily offered to customers remotely (hosted on our servers), we believe that the risk of unauthorized use of our technology is limited. COMPETITION The online commerce market is new, rapidly evolving and intensely competitive. We expect that online commerce competition, both as an intermediary and as an enabler, will further intensify in the future. Barriers to entry are minimal, and current and new competitors can launch new sites or technologies at a relatively low cost. The online dynamic pricing solutions market is new, rapidly evolving and intensely competitive. We believe that the principal competitive factors in the dynamic pricing solutions market are flexibility and breadthMany of the ~~technical solution, quality of service, reliability, technical expertise and price. We believe that we are competitive in each of these areas. The~~ companies we compete with in this market include: . companies providing hosted services such as Fairmarket Inc., and Opensite's Concierge service; . companies providing dynamic commerce solutions such as Moai Technologies, Seibel (through Opensite Inc.), IBM's Websphere product, Ariba (through Trading Dynamics), Commerce One (through CommerceBid), Webvision, Procuri, and PurchasePro; . In-house developers of pricing applications and . Exchanges and auction aggregation sites, such as eBay, the FairMarket Network, FreeMarkets and VerticalNet and industry-specific exchanges such as Covisint, which do not compete directly, but may affect demand for our services. Many of these companies and many of our other competitors have much greater financial, technical, research and development resources than us. ~~C. ORGANIZATIONAL STRUCTURE The table below lists~~

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

Although we ~~or one~~offer a broad range of ~~our subsidiaries, owns 100%~~asset lifecycle management solutions, we face significant competition in each of the ~~outstanding common shares~~component product areas from the following companies:

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

In addition, we face competition from organizations that use in-house developers to develop solutions for certain elements of the companies listed. Name of Subsidiary Country of Incorporation ------------------ ------------------------ Bid.Com USA Inc. USA Bid.Com International Limited Ireland Bid.Com International Pty. Ltd. Australia Bid.Com (U.K.) Limited England Internet Liquidators USA Inc. USA Point2 Internet Systems Inc./(1)/ Saskatchewan, Canada 24 ~~(1) We own 51% of~~asset lifecycle.

C. ORGANIZATIONAL STRUCTURE

The Company has the outstanding voting shares of Point2. We have granted an option to Point2's management to purchase our shares and assets in Point2 for $2.6 million. This option has not been exercised to date. following organizational structure, which include the subsidiaries set out below:

D. PROPERTY, ~~PLANTS~~ PLANT AND EQUIPMENT

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

~~--------------------------------------------------------------------------------------------------~~
Location	Use	Square Feet (Approximate)	Term of Lease ~~(Approximate) --------------------------------------------------------------------------------------------------~~ ~~Airport Road~~
302 The East Mall, Suite 300 Toronto, Ontario	Executive, Administrative, ~~15,638 Expires October, Mississauga, Ontario (1)~~ Engineering and Marketing ~~2001 (1) -------------------------------------------------------------------------------------------------- Lower Baggot Street~~	5,435	Expires Oct. 2009
Vingveien 2, 4050, Sola Norway	Executive, Administrative, Engineering ~~1,200 Monthly~~and Marketing	8,234	Expires July 2008
AS Kontorsenter 2 Tonsberg, Norway	Not in Use	2,851	Expires October 2005
52 Broomhill Rd., Suite 112 & 113 Broomhill Industrial Estate Tallaght, Dublin 24 Ireland ~~(2)~~	Administrative, Engineering and Marketing ~~--------------------------------------------------------------------------------------------------~~	500	Expires December 2005
3000 Cathedral Hill Guildford, Surrey, England	Marketing	no dedicated space	Month-by-Month
3001 North Rocky Point Drive ~~Executive and Marketing 2,467 Expires April 30,~~ East, Tampa, Florida 2002 -------------------------------------------------------------------------------------------------- Ninth Street Marketing 186 Expires June 18, Sacramento, Cal. 2001 -------------------------------------------------------------------------------------------------- Kilroy Airport Center Marketing 190 Monthly Long Beach, Cal. -------------------------------------------------------------------------------------------------- Penn Plaza Marketing single office Expires October 1, New York, New York 2001 -------------------------------------------------------------------------------------------------- Collins Street, Marketing single office Monthly Melbourne, Australia -------------------------------------------------------------------------------------------------- Chiswick High Road Marketing single office Expires May 31, London, England 2001 --------------------------------------------------------------------------------------------------	Executive	143	Month-by-Month

(1) We are presently negotiating a three year extension of this lease for approximately 10,165 square feet, on one of the two floors presently occupied, which space we anticipate will be sufficient for our requirements in light of our recent workforce reduction. (2) We are presently exploring leasing opportunities for 3,000 to 5,000 square feet of office space in the Dublin area.

We believe that we have adequate space for our current needs. As we expand, we expect that suitable additional space will be available on commercially reasonable terms. We do not own any real estate nor do we currently own or lease warehouse space. ~~ITEM 5 - OPERATING AND FINANCIAL REVIEW AND PROSPECTS MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS~~

ITEM 5 -	OPERATING AND FINANCIAL REVIEW AND PROSPECTS
	MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

YOU SHOULD READ THE FOLLOWING DISCUSSION AND ANALYSIS IN CONJUNCTION WITH "ITEM 33.A - SELECTED FINANCIAL DATA" AND OUR CONSOLIDATED FINANCIAL STATEMENTS AND THE RELATED NOTES ~~THERETO~~ INCLUDED ELSEWHERE IN THIS ANNUAL REPORT. IN ADDITION TO

HISTORICAL INFORMATION, THE FOLLOWING DISCUSSION CONTAINS CERTAIN FORWARD-LOOKING STATEMENTS THAT INVOLVE KNOWN AND UNKNOWN RISKS AND UNCERTAINTIES, SUCH AS STATEMENTS OF OUR PLANS, OBJECTIVES, EXPECTATIONS AND INTENTIONS. SEE "FORWARD-LOOKING STATEMENTS". 25 ~~OVERVIEW~~

Overview

We ~~offer e-commerce enabling technology~~develop and ~~related~~sell software solutions and services that allow our customers to source, manage, and sell their assets and capital equipment. We refer to our product and services suite as asset lifecycle management solutions. Our solutions help our customers reduce sourcing, procurement and maintenance costs, improve asset utilization, reduce operational downtime, and generate higher yields for businesses. Prior to October 24, 2000, we conducted on-line retail operations at our Web site located at www.bid.com. The closure of our on-line retail operations during the year was the final phase of our transition from an on-line retailer to an e-commerce enabling technology provider. surplus equipment.

We offer a comprehensive suite of e-commerce enabling technologies through our DYNAMIC SELLER and DYNAMIC BUYER solutions. These hosted, on-line, customer-branded dynamic pricing solutions run on a proprietary technology platform. History - ------- In September 1995, we commenced business as Internet Liquidators Inc., an Ontario corporation. In January 1997, we amalgamated with Internet Liquidators International Inc. and that name was assumed. In June 1998, we changed our name from Internet Liquidators International Inc. to Bid.Com International Inc. From incorporation through April 1996, we had no revenue as we focused on development of our proprietary technology and computer infrastructure. We launched our auction web siteoperate in April 1996 under the URL www.internetliquidators.com. Between April 1996 and May 1997, we focused on securing relationships with strategic partners, and developing an advertising and promotion plan for our business, while continuing to develop our technology infrastructure. We generated minimal revenue during this period. In May 1997, we initiated our marketing and advertising campaign and experienced a significant growth trend in on-line retailing throughout 1998, 1999, and into early 2000. During this period, we became aware of demand for our technology, and in 1999 we began to license our technology to other companies. Following an extensive strategic review by Managementthree reportable geographic segments: North America, Ireland and the ~~Board of Directors during the first half of 2000, we concluded that despite the revenue growth experienced, the on-line retail model was not sustainable,~~United Kingdom, and that we should focus exclusively on providing dynamic pricing solutions to businesses. On June 14, 2000, we announced our decision to accelerate the transition from an on-line retailer to a business-to-business e-commerce enabler. To achieve this goal, we significantly curtailed our business-to-consumer auctions and related services over the remainder of 2000. In October 2000, our on-line retail operation was terminated. As a result, revenue and expenses associated with our retail operations were significantly reduced for fiscal year 2000, as compared to fiscal year 1999. As a result of the termination of our on-line retail operation in October 2000, substantially all of our revenueNorway. We have also in the ~~fourth quarter of 2000 was generated~~past earned revenue from both retail and non-retail customers.

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

Our shares trade on both the business-to-business e-commerce enabling business model. We concluded the year with 27 new business-to-business customers ranging from small retailers to global renowned conglomerates. Business-to-Business. As a business-to-business e-commerce enabler, our value proposition lies in the fact that we have established and proven technology as evidenced by running an on-line retail store since 1996. We also have significant flexibility in adapting our technology to individual customer business needs. We offer a wide range of services, including consulting, hosting, training and implementation services. Consulting, customization and implementation generally can take several months, depending upon the objectives of the customer, the complexity of the customer's information technology environment,Toronto Stock Exchange (TSX: ADY) and the resources directed by the customer to the implementation. The revenue structures and particular services provided vary depending upon the needs of the customer. We typically obtain an up front consulting, implementation and training fee, and a fixed monthly hosting fee. In many cases, we may also participate in a share of revenue or net revenue from transactions conducted using our software. 26 Business-to-Consumer. As an on-line retailer, we generated revenue primarily from the sale of goods through on-line auctions. The product mix of our on-line retail activities was largely comprised of computers and related peripherals, consumer electronics, sporting goods and household accessories. We did not purchase inventory for resale on our auctions at www.bid.com. Rather, we usually acquired the right to sell the merchandise under arrangements with our vendors. These arrangements typically provided that the supplier would reserve for sale by us specified quantities of products for a fixed period of time without obligating us to purchase these products until sales were made to our customers. When an auction was completed, we charged the successful bidder's credit card. We typically purchased merchandise from suppliers only after a customer had purchased and paid for the product. Title to the inventory passed to us at the time the goods were shipped to the customer. We recorded the gross amount as revenue upon verification of the credit card authorization and shipment of the merchandise to the customer. Inventory on our balance sheets reflected sales returns in transit and some inventory for resale. Both were valued at the lower of cost and net realizable value. As part of a business-to-consumer marketing program, we applied a promotional pricing strategy under which products were sold below cost or at significantly reduced profit margins. We continued that approach throughout most of 1998, 1999, and into early 2000 due to competitive pressures. As a result, earnings were significantly impacted in 1998 and 1999. We significantly curtailed this program in 2000 in anticipation of ceasing on-line retail operations. On October 24th, 2000, we held our last on-line retail auction.OTC Bulletin Board (OTCBB: ADBYF).

A. OPERATING RESULTS ~~OF OPERATIONS~~

Comparison of Years Ended December 31, ~~2000~~2004 and December 31, ~~1999 - -----------------------------------------------------------------~~ 2003

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

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

Revenue. Revenue is comprised of ~~business-to-business e-commerce enabling~~software license sales, service fees for consulting, implementation, application hosting, training, maintenance and support activities and transaction fees from on-line ~~retail sales of merchandise and associated shipping revenue. E-commerce enabling~~ activities ~~include revenue from consulting, implementation, training, hosting, and licensing activities. Overall revenue declined~~performed for customers.

Revenue decreased to ~~$12.497~~$4.930 million for the year ended December 31, ~~2000~~2004 from ~~$31.001~~$5.853 million for the year ended December 31, ~~1999,~~2003, representing a decline of ~~59.7%. The~~15.8 percent. This decline was attributable to reduced revenue in North America of $415,000 and reduced revenue in Ireland/U.K. of $557,000. Revenue from Norway increased by $50,000 in 2004 as compared to 2003.

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

In the Ireland/UK region we did not experience an increase in customer acquisitions and activity in 2004 as we did 2003. The year-over-year revenue decline was primarily the result of reduced sales by the ~~planned exit from on-line retail operations, which commenced~~amount of $532,000 to customers in the second quarter and continued through to the fourth quarter. Retail operations generated $10.095 million of total revenue for the year ended December 31, 2000 and $26.590 million for the year ended December 31, 1999. As stated above, this decline in revenue was the result of the planned exit from on-line retail operations. Business-to-business e-commerce enabling activities generated $2.402 million of total revenue for the year ended December 31, 2000 and $4.411 million for the year ended December 31, 1999. The higher level in 1999 was a result of two significant software licensing arrangements signed in fiscal 1999 which did not recur in fiscal 2000 and a change in our business model from a licensed offering to a hosted offering. As at December 31, 2000, we had 27 business-to-business customers compared to 4 business-to-business customers at December 31, 1999. Customer Acquisition Costs. Customer acquisition costs reflect non-cash expenses incurred in attaining business to business contracts. Specifically, these costs represent the calculated value of share purchase warrants issued to GE Capital in return for certain business to business contracts. For the year ended December 31, 2000, these costs amounted to $1.005 million. There were no customer acquisition costs for 1999. Direct Expenses. Direct expenses are related solely to retail operations, and reflect negotiated reserve prices with vendors for the supply of goods sold by our company. Direct expenses were $11.460 million (113.5% of retail revenue) for the year ended December 31, 2000 as compared to $26.696 million (100.4% of retail revenue) for the year ended December 31, 1999. The decline in direct expenses was attributable to the exit from business to consumer retailing activities, which ceased on October 24, 2000. Advertising and Promotion Expenses. Advertising and promotion expenses consist primarily of advertising and marketing fees, promotional pricing expenses, and expenses paid to marketing partners from which we purchased 27 advertising space. Advertising and promotional expenses do not include salaries and related expenses of our sales and marketing personnel which are included in general and administrative expenses. Advertising and promotion expenses were $5.040 million for the year ended December 31, 2000 as compared to $11.870 million for the year ended December 31, 1999, a decrease of 57.5%. As a percentage of on-line retail revenue, advertising and promotion expenses were 49.9% of retail revenue in 2000 as compared to 44.6% of retail revenue in 1999. The higher proportion of advertising and promotion expenses to revenues for 2000 was directly attributable to our obligation to meet fixed advertising commitments while terminating retail activities. Advertising and promotion expenses for the year ended December 31, 2000 included $558,000 attributable to promotional pricing and $946,000 for expenses related to a marketing agreement with America Online, which ceased on March 31, 2000. Advertising and promotion expenses for the year ended December 31, 1999 include $4.044 million attributable to promotional pricing expenses and $3.548 million for expenses related to America Online. non-healthcare industry sectors.

in sales and marketing expenses), occupancy costs, foreign exchange gains or ~~losses;~~losses, professional ~~fees;~~fees, insurance, ~~costs;~~ investor ~~relations; computing and communications expenses;~~relations, regulatory filing fees, ~~business-to-business development costs,~~ and travel and related costs.

General and administrative expenses ~~increased~~decreased by $283,000 to ~~$19.397~~$4.365 million for the year ended December 31, ~~2000 from $12.405~~2004, as compared to $4.648 million for the year ended December 31, ~~1999, an increase~~2003, representing a decline of ~~56.4%. The increase~~6.1 percent.

Year-over-year savings in ~~general~~the amount of $183,000 resulted from salary expense reductions arising from a smaller administrative workforce and ~~administrative~~favourable Canadian dollar exchange rates pertaining to US dollar-denominated salaries. Continued cost containment efforts resulted in $67,000 savings in travel expenses ~~includes additional expenses related to the opening of sales offices in Sacramento and New York~~ and the ~~continued build-up~~reduction of ~~operations~~occupancy and connectivity costs in ~~Ireland, which we opened in 1999. During 2000, we also experienced a significant increase in staffing, primarily~~the amount of $65,000 associated with the ~~expansion~~change of ~~business-to-business activities. We had 31 dedicated business-to-business~~North American office locations and decreased utility costs as the result of Norway office leases renegotiations. Reductions in foreign exchange losses of $59,000 and in insurance costs of $41,000 also added to the savings. Expense reductions were partially offset by increased investor relation costs in the areas of consulting ($68,000) and increased professional services expenses associated with regulatory filings ($29,000). The salary expense savings were also partially offset by increased professional services employed in Norway ($34,000).

Sales and Marketing. Sales and marketing costs include all salaries and related expenses of sales and marketing ~~staff at December 31, 2000, an increase of 1033% over December 31, 1999. For~~personnel as well as business development expenses such as advertising, sales support materials, and trade show costs.

Sales and marketing costs for the year ended December 31, ~~2000, we also recorded~~2004 amounted to $749,000, as compared to $1.098 million for 2003, a ~~non-recurring charge~~decrease of ~~$1.0 million primarily~~31.8 percent. This decrease is attributable to lower staffing levels in the sales department combined with decreased advertising and tradeshow activities and related ~~to strategic consulting costs.~~ travel expenses throughout 2004.

Software Development and ~~Technology Expenses.~~Technology. Software development and technology expenses consist of costs associated with acquired and internally developed software, and research and development expenses, including fees to independent contractors and salaries and related expenses of personnel engaged in these activities. ~~Software development expenses associated with development of core software components for client applications are capitalized if they meet specific technological and economic feasibility measures.~~

Software development and technology expenses increased to ~~$1.802~~$3.257 million for the year ended December 31, ~~2000~~2004 from ~~$1.001~~$2.817 million for the year ended December 31, ~~1999,~~2003, an increase of ~~80.0%. The~~15.6 percent. This increase ~~in software development expenses was largely~~is attributable to redevelopment of core and non core software to improve scalability, functionality, and deployability in an e-commerce enabling environment. A significant portion of the 2000 software development and technology expense was borneincreased salary expenses resulting largely from increases in the ~~fourth quarter~~number of ~~2000, when virtually all~~technology personnel in Ireland/UK and Norway.

Employee Stock Options. Effective January 1, 2003, the Company adopted the accounting recommendations contained in the CICA handbook Section 3870 - “Stock-based Compensation and Other Stock-based Compensation Payments”. As a result, the Company recorded an employee stock option expense of ~~such resources were dedicated to business-to-business activities. Fourth quarter software development expenses were $817,000, or 45.3% of total software expense~~$39,000 for the ~~year. During~~year ended December 31, 2004 and $193,000 for the ~~second and third quarters~~year ended December 31, 2003. No employee stock options were granted in 2004. The 2004 expense arises from the vesting of ~~fiscal 2000,~~stock options that were granted in 2003. Prior to 2003, no accounting recognition was required for stock-based compensation expense however; the Company was required to disclose the impact of stock option related expenses for previous years on a significant amount of time and expense was devoted to redevelopment of core technology for client applications and as a result we capitalized $286,000 of software development expense in the second quarter and $255,000 in the third quarter of 2000. We did not capitalize any core software redevelopment in the fourth quarter of 2000. pro-forma basis.

Depreciation and Amortization. Depreciation and amortization expense was ~~$1.130~~$1.190 million for the year ended December 31, ~~2000~~2004 as compared to ~~$621,000~~$1.901 million for the year ended December 31, ~~1999, an increase~~2003, a decrease of ~~82.0%~~37.4 percent. This ~~increase was primarily due~~decrease reflects a $499,000 reduction in the amortization of deferred charges as deferred financing charges relating to a ~~full~~demand loan were fully amortized in 2003. Additionally, software acquired in the acquisition of ADB Systemer was fully amortized by the end of the third quarter of 2004, resulting in an amortization expense for the year that was $282,000 lower than that for fiscal 2003.

Interest Expense. Interest expense reflects interest incurred from debt instruments and loans. Interest expense for the year ended December 31, 2004 was $439,000 compared to $289,000 for December 31, 2003. During 2004, cash interest expense of ~~amortization~~$173,000 and non-cash interest expense of ~~goodwill as~~$266,000 was incurred related to secured subordinated notes. Comparatively, cash interest expense of $50,000 and non-cash interest expense of $112,000 was recorded in 2003. The interest expense for fiscal 2003 also included interest related to a ~~result~~demand loan of our investment in Point 2 Internet Systems Inc., amortization of capitalized core software development costs as well as a significant increase in server equipment and computers acquired to enhance the infrastructure supporting business-to-business activities. $126,000.

Interest Income. Interest income reflects interest from investments in cash and marketable securities. Interest income was ~~$467,000~~negligible for both years ended December 31, 2004 and 2003.

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

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

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

Net Income (Loss). Our net loss for the year ended December 31, ~~2000, as compared to $767,000~~2003 was $2.815 million, an improvement of 69.9 percent over the net loss of $9.364 million reported for the year ended December 28 31, ~~1999,~~2002. Excluding items outside of the normal course of operations, our loss was $5.084 million, as compared to $9.241 million in 2002, an improvement of 45.0 percent. The improvement in expenses of more than $4.0 million was achieved in 2003 when compared to 2002 in the areas of general and administrative of $1.6 million, sales and marketing of $777,000, software development and technology of $1.3 million and $700,000 in depreciation and amortization. In addition, during 2003 the Company recorded a ~~decrease~~realized gain on the settlement of ~~39%. This decrease was largely attributable~~a demand loan of $2.2 million.

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

Revenue increased to lower cash and money market funds on hand in 2000. Realized Gains and Losses on Disposal of Marketable Securities and Strategic Investments: Realized gains on disposal of marketable securities and strategic investments amounted to $20.946$5.853 million for the year ended December 31, 2000, with no comparative balance for the prior year. These gains are outside of the normal course of operations but are not considered extraordinary items. This amount includes the disposal of our strategic investment in Quack.com. As a result of America Online's acquisition of Quack.com, we converted our $1.221 million investment in Quack.com into shares of America Online valued at $21.918 million, effective August 31, 2000. We realized further gains of $249,000 in association with the disposal of some shares of America Online in the fourth quarter of 2000. Unrealized Gains and Losses on Revaluation of Marketable Securities and Provision for Impairments of Long Term Assets: Unrealized gains and losses on marketable securities and long term assets are the result of an assessment by management as to the recoverability of value of certain assets and are not realized losses on asset disposals. Unrealized losses are outside the normal course of operations but are not considered extraordinary. Unrealized losses for the year ended December 31, 2000 were $15.290 million, with no comparative balance for the prior year. We conducted an assessment of our long-term strategic investment portfolio at year end by analyzing the financial performance of the companies we invested in as well as general market conditions, and concluded that an impairment provision of $5.600 million was necessary. Our investments are all in companies in the technology sector. The market prices of technology companies have been significantly reduced in recent months. We also revalued our marketable securities at December 31, 2000, which were largely comprised of shares of America Online, resulting in an adjustment of $4.846 million to reflect market value. Subsequent to the end of the year, we disposed of a substantial portion of our shares in America Online and realized a gain of $3.696 million. In addition, at December 31, 2000, we also reviewed our investment in Point2 Internet Systems, and it was determined that the goodwill associated with this investment had become impaired, and the recoverability of funds loaned to Point2 was in doubt. As a result we decided to incur provisions of $3.593 million for the Point2 goodwill and $802,000 for a demand loan granted to Point2. Subsequent to year end, we granted Point2's management an option to purchase our investment and assets in Point2 for $2.6 million. This option has not been exercised to date. Comparison of Years Ended December 31, 1999 and December 31, 1998 - ----------------------------------------------------------------- Revenue. Revenue is comprised of services and auction enabling activities, and the sale of merchandise plus shipping revenue. Revenue increased to $31.0012003 from $5.780 million for the year ended December 31, ~~1999 from $20.001 million for the year ended December 31,1998,~~2002, representing an increase of ~~55.0%. The increase~~1.3 percent.

Revenue outside North America was due to higher revenue from our web site and from service and auction enabling activities during the year. From January 1, 1999 to December 31,1999, our customer base grew substantially as reflected by a 106% increase in registered bidders from approximately 87,000 to almost 179,000. Quarterly revenue for 1999 was $5.015 million in the first quarter, $6.250 million in the second quarter, $8.330 million in the third quarter, and $11.406 million in the fourth quarter representing quarter over quarter growth of over 24.6% in the second quarter, 33.3% in the third quarter, and 36.9% in the fourth quarter. Retail revenue for the year ended December 31, 1999 was $26.590 million, as compared to $20.001$4.642 million for the year ended December 31, ~~1998, an increase of 33%. Business-to-business e-commerce enabling activities generated $4.411~~2003, compared to $3.598 million for the year ended December 31, 1999, while no revenue from business-to-business e-commerce enabling activities was generated in 1998. In 1999, we signed two significant licensing contracts. Direct Expenses. Direct expenses reflect negotiated reserve prices with vendors for the supply of goods sold by us. Direct expenses were $26.696 million (100.4% of retail revenue) for the year ended December 31, 1999, as compared to $19.361 million (96.8% of retail revenue) for the year ended December 31, 1998.2002. The increase in ~~direct expenses reflected the significant growth of~~ revenue ~~during the year ended December 31, 1999 as compared to the year ended December 31, 1998. 29~~ ~~Advertising and Promotion Expenses. Advertising and promotion expenses consist~~outside North America is primarily of advertising and marketing fees, promotional pricing expenses, and expenses paid to strategic and marketing partners and other third parties from which we purchased advertising space, but does not include salaries and related expenses of sales and marketing personnel which are included in general and administrative expenses. Advertising and promotion expenses were $11.870 million for the year ended December 31, 1999, as compared to $12.594 million for the year ended December 31, 1998, a decrease of 5.7%. As a percentage of retail revenue, advertising and promotion expenses fell to 44.6% of revenue for the year ended December 31, 1999 from 63.0% during the year ended December 31, 1998. Advertising and promotion expenses for the year ended December 31, 1999 included $4.044 million (15.2% of retail revenue) attributable to ~~promotional pricing expenses~~an increase in customer acquisitions and ~~$3.548 million (13.3%~~activity in our Ireland/UK region that resulted in year-over-year revenue improvement of retail revenue) for expenses related to America Online in accordance with a marketing agreement with America Online. Advertising and promotion expenses for the year ended December 31, 1998 included $3.520 million (17.6% of retail revenue) for promotional pricing expenses and $7.0 million (35.0% of retail revenue) for expenses related to America Online in accordance with the America Online marketing agreement. The decrease in advertising and promotional pricing expenses during 1999, reflected the substantial impact of advertising and marketing which we undertook in 1998 to promote the Bid.Com brand name, attract track traffic to our Web site and our customer base. Reduction of advertising and promotion expenses as a percentage of revenue reflected the significant growth in revenues from 1999 over 1998. almost $800,000.

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

General and administrative expenses ~~increased~~decreased to ~~$12.405~~$4.648 million for the year ended December 31, ~~1999 from $5.751~~2003, as compared to $6.288 million for the year ended December 31, ~~1998, an increase~~2002, representing a decline of ~~115.7%. As~~26.1 percent.

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

Sales and ~~administrative~~Marketing. Sales and marketing costs include all salaries and related expenses ~~increased to 40.0%~~ of ~~revenues~~sales and marketing personnel as well as business development expenses such as advertising, sales support materials, and trade show costs.

Sales and marketing costs for the year ended December 31, ~~1999 from 28.8%~~2003 amounted to $1.098 million, as compared to $1.875 million for 2002, a decrease of ~~revenues for the year ended December 31, 1998. The increase in general and administrative expenses was~~41.4 percent. This decrease is attributable to ~~an increase~~lower staffing levels in ~~salary~~the sales department combined with decreased advertising and related expenses resulting from staff hired to accommodate growth and increased focus on business-to-business opportunities during 1999, increased legal and other fees relating to the attainment of a Nasdaq listing, regulatory filing fees, investor relations fees, live video streaming production expenses, rent, communication and other ancillary costs due primarily to our growth during 1999. tradeshow activities throughout 2003.

Software development and technology expenses ~~increased~~decreased to ~~$1.001~~$2.817 million for the year ended December 31, ~~1999~~2003 from ~~$889,000~~$4.101 million for the year ended December 31, ~~1998,~~2002, a ~~12.6% increase.~~decrease of 31.3 percent. This decrease is attributable to government research and development claims made by the Company and a decrease in technology personnel.

Employee Stock Options. Effective January 1, 2003, the Company adopted the accounting recommendations contained in the CICA handbook Section 3870 - “Stock-based Compensation and Other Stock-based Compensation Payments”. As a ~~percentage~~result, the Company recorded an employee stock option expense of revenue, software development and technology expenses decreased to 3.2% of revenue during 1999 from 4.4% during 1998. The increase in software development and technology expenses was attributable primarily to the increased expenses incurred in connection with the redesign of our web page, development of a fixed price site and the development of business-to-business auction technology. The decrease in software development and technology expense as a percentage of revenue was attributable to the significant growth in revenue during the period. Depreciation and Amortization. Depreciation and amortization expense was $621,000$193,000 for the year ended December 31, ~~1999 as compared~~2003. Prior to ~~$201,000~~2003, no accounting recognition was required for stock-based compensation expense however; the Company was required to disclose the impact of stock option related expenses for previous years on a pro-forma basis. In 2002, a pro-forma impact of $244,000 and $141,000 in 2003 related to options granted prior to January 1, 2003 is disclosed (Note 9(j)).

Depreciation and Amortization. Depreciation and amortization expense was $1.901 million for the year ended December 31, ~~1998, an increase of 209.0%. This increase was primarily due~~2003 as compared to amortization expenses relating to goodwill as a result of the investment in Point 2 Internet Systems Inc. as well as a significant increase in equipment, computers, furniture and fixtures acquired by us during 1999 as a result of our growth. Interest Income. Interest income was $767,000$2.602 million for the year ended December 31, ~~1999 as compared to $88,000~~2002, a decrease of 26.9 percent. This decrease reflects a maturing asset pool.

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

Interest expense for the year ended December 31, ~~1998.~~2003 was $289,000 compared to $200,000 for December 31, 2002. During 2003, cash interest expense of $50,000 and non-cash interest expense of $112,000 was incurred related to secured subordinated notes. Comparatively, cash interest expense of $23,000 and non-cash interest expense of $108,000 was recorded in 2002. Interest related to the demand loan was $126,000 in 2003 compared to $68,000 in 2002.

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

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

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

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

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

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

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

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

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

Continuation of the Business

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

Revenue Recognition

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

Software License Revenue

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

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

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

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

Implementation, Training & Consulting Service Fees

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

Product Maintenance & Customer Support Fees

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

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

Software Development Fees

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

Hosting Fees

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

Secured Subordinated Notes

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

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

B. LIQUIDITY AND CAPITAL RESOURCES 30 ~~Funding to Date. We have~~

LIQUIDITY

The Company has been funded to date primarily through a series of private placements of equity ~~in one instance a~~and convertible ~~debenture,~~debentures, sales of equity to and investments from strategic partners, gains from investments and option ~~exercises and cash flow from operations. We have~~exercises. Since inception, the Company has received aggregate net proceeds of ~~$78.2~~$87.7 million ~~as set out below. 1998 Fiscal Year. In July 1998, we issued a common share warrant for an aggregate purchase price of $1.9 million~~from debt and 1,500,000 common shares for no additional consideration to Rogers Media. The common share purchase warrant entitled Rogers Media to acquire up to 100,000 common shares at a price of $1.40 per common share. These warrants were fully exercised by September 30, 1999. In August 1998, we sold in a private placement a total of 8,100,000 special warrants at a price of $1.40 per special warrant for aggregate gross proceeds of $11.3 million. The special warrants were exercised on September 30, 1998, for 8,100,000 common sharesequity financing and 4,050,000 share purchase warrants, each exercisable to purchase one common share at $1.65 per share. These warrants were fully exercised by September 30, 1999 resulting in aggregate proceeds to our company of $6.682 million. We granted to Yorkton Securities Inc., placement agent for the offering, compensation warrants entitling Yorkton to receive, without payment of any further consideration, options to purchase up to 860,000 units (each unit consisting of one common share and one-half of one share purchase warrant) at a price of $1.40 per unit at any time until November 4, 1999. The options were exercised for 860,000 common shares and 430,000 share purchase warrants resulting in proceeds of $1.204 million. These warrants were fully exercised by September 30, 1999 resulting in proceeds to our company of $709,500. On November 30, 1998, we sold in a private placement 5,714,984 special warrants at a price of $1.75 per special warrant. We received proceeds of $10.001 million. The special warrants were exercised on January 28, 1999 for 5,714,984 common shares and 1,428,746 share purchase warrants, each exercisable to purchase one common share at $1.75 per share. As at December 31, 1999, all remaining share purchase warrants had been exercised. Yorkton, the placement agent for this offering, was issued compensation warrants that entitled Yorkton to receive, without payment of additional consideration, options to purchase up to 611,498 units at a price of $1.75 per unit at any time prior to December 31, 1999. In January 1999, Yorkton exercised the options for units consisting of 611,498 common shares and 152,875 common share purchase warrants, each exercisable to purchase one common share at $1.75 per share, resulting in proceeds of $1,070,122. These share purchase warrants were fully exercised by September 30, 1999 resulting in proceeds of $267,531. 1999 Fiscal Year. On September 30, 1999, we issued 1,854,678 special warrants at a price of $9.25 per warrant which were exchangeable into 1,854,678 common shares and 1,854,678 share purchase warrants for no additional consideration. The share purchase warrants, if and when exercised, are exercisable at a price of $10.00 per warrant until September 30, 2001 into an equivalent number of common shares. Gross proceeds were $17,155,772 from which was deducted commission of $857,789 (5%) and estimated expenses of approximately $250,000 to yield net proceeds of $16,047,983. 2000 Fiscal Year: In June 2000, Acqua Wellington Value Fund Ltd. invested U.S.$2.1has realized $23.7 million in ~~us. In exchange for its~~gains on investment we issued to Acqua Wellington a total of 900,790 common shares and common share purchase warrants to purchase 360,316 common shares. We sold the common shares and warrants to Acqua Wellington in units, at a purchase price of US$2.3313 per unit. Each unit was comprised of one common share and four-tenths (0.40) of a common share purchase warrant. Each whole warrant can be exercised to acquire one common share and is exercisable for two years at an exercise price of US$2.68 per warrant.disposals. The purchase price was determined based on a formula tied to the market price of common shares during the 15 day trading period ended June 8, 2000. On August 31, 2000, we exchanged our shares in Quack.com Inc., which had a cost of $1.221 million, for shares in America Online Inc. valued at $21.918 million, resulting in a gain of $20.697 million. During 2000, we began to liquidate our AOL shares to fund operations. Capital Assets. Additions to capital assets for the year ended December 31, 2000 were $1.426 million, primarily for computer hardware and server equipment associated with building infrastructure to support business-to-business activities. During 1999 we invested $693,000 in capital assets primarily 31 for computer hardware, equipment, furniture and fixtures and leasehold improvements. During 1998, we invested $351,000 in capital assets primarily for computer hardware. We currently have a capital lease obligation totaling $125,000 over the next 3 years relating to computer hardware. We anticipate that this commitment will be funded using existing funds. We do not currently have any other significant capital expenditure commitments. Intangible Assets. As a result of a shift in business model to a business-to- business e-commerce enabler, we capitalized $541,000 of software development costs as part of a core software redevelopment project. These costs will be amortized over the expected useful life of the software which is expected to be 24 months. Other. During the year ended December 31, 2000, we invested funds of $2.612 million in strategic partners including Quack.com Inc, The Art Vault, and Andaurex Industries Inc. See Item 4 - Principal Capital Expenditures and Divestitures. Present Status. We haveCompany has not earned profits to date and, at December 31, ~~2000 and March 31, 2001, we had~~2004, has an accumulated deficit of $68.869 million and $69,478 million, respectively. We have generated negative cash flow from operations since inception and we have expended and expect to continue to expend substantial funds to continue to develop technology, build an infrastructure to support business-to-business activities and expand other areas of our business including the acquisition of, or strategic investments in, complementary products, businesses or technologies. As a result, we expect$104.866 million. The Company expects to incur losses ~~for the foreseeable future~~into 2005 and there can be no assurance that weit will ever achieve profitability. Operating results have varied on a quarterly basis in the past and may fluctuate significantly in the future as a result of a variety of factors, many of which are outside of ~~our~~the Company’s control.

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

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

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

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

As of ~~December~~May 31, ~~2000, and March 31, 2001,~~2005, we had cash on hand and marketable securities of approximately ~~$15.5~~$610,000. Management believes that it has the ability to raise additional financing if required.

Cash Flows

Operating:

Cash outflows from operating activities remained relatively unchanged at $3.3 million ~~and $ 14.4~~in the current fiscal year compared to cash outflows from operating activities of $3.4 million ~~respectively. At this time, funds~~in the prior year. Non-cash working capital resulted in inflows of $322,000 in fiscal 2004 as compared to outflows of $728,000 in fiscal 2003, an increase of $1.05 million, as summarized in the following table:

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

Investing:

No significant cash flows resulted from ~~operations may not be sufficient~~investing activities in fiscal 2004. In 2004, $40,000 was spent on capital asset acquisitions as compared to meet our anticipated financial requirements beyond early 2002. Our management has developed a business and financial plan to reduce operating costs, and refocus our efforts on more profitable elements of our business model. As a short term measure to improve operating performance, management has implemented a revised financial and business plan requiring internal restructuring and cost cutting measures. As a result, we believe that current cash balances and anticipated funds from operations will be sufficient to meet our needs into early 2002. However,$45,000 in expenditures for 2003. In 2003, proceeds in the ~~actual~~ amount of ~~funds that will be required during~~$62,000 were earned from the ~~interim period will be determined by many factors, some~~disposal of ~~which are beyond our control. As a~~capital assets, strategic investments and marketable securities. No such proceeds were earned in 2004.

Financing:

Cash flows generated as the result ~~we may require funds sooner or~~of financing activities totaled $3.3 million in ~~greater amounts than currently anticipated. We do not have committed~~fiscal 2004. The sources of ~~financing at this time~~cash included an equity private placement and there can be no assurance that we will be able to obtain financing when needed on commercially reasonable terms or at all. If adequate funds are not available or not available on acceptable terms when needed, our business, operations, financial condition and future prospects will be materially adversely affected. If additional funds are raised through the issuance of ~~equity or~~ convertible debt, ~~securities,~~which was slightly offset by deferred financing costs related to the ~~percentage ownership~~convertible debt issuance. Cash flows generated in financing activities were $2.5 million for 2003, including an equity private placement and a convertible debt private placement.

CAPITAL RESOURCES

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

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

Funding

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

Funding - 2005

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

Funding - 2004

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

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

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

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

C. RESEARCH AND DEVELOPMENT

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

D. TREND INFORMATION

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

Foreign Currency Rate Fluctuations. ~~While our financial statements~~

The Company’s revenue from software licensing and related services and e-commerce enabling agreements is transacted in various currencies including the Canadian dollar, U.S. dollar, UK pound, EURO, and Norwegian krone. Correspondingly, operating expenses related to these activities are transacted in ~~Canadian dollars, revenue is generated in US dollars and other~~the above-denoted currencies. ~~We incur the majority of our expenses in Canadian dollars. As a result, we~~The Company may suffer losses due to fluctuations in exchange rates between the Canadian dollar ~~and US dollar, and the Canadian dollar~~or Norwegian krone and currencies of other countries. ~~We do~~The Company does not ~~currently engage in~~use derivative instruments to manage exposure to foreign exchange ~~hedging activities or use other financial instruments in this regard.~~ fluctuations.

Interest Rate and Investment Risk.

The ~~primary objective of our investment activities is~~Company has limited exposure to ~~preserve principal while at the same time maximizing income received from our investments without significantly increasing risk. Our investment portfolio is primarily comprised of cash, short term~~fluctuations in interest ~~bearing certificates and holdings in America Online Inc. Our remaining holding in America Online must remain in escrow until August 31, 2001. We are~~rates. The Company does not ~~using financial~~use derivative instruments to ~~manage our~~reduce its exposure to interest rate risk.

Credit Risk.

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

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

Net Operating Losses for Tax ~~Purposes.~~ Purposes.

We have available an aggregate of approximately ~~$51.3~~$20.9 million of net operating losses for tax purposes that may be used to reduce taxable income in future years, of which ~~$113,000 expires in 2002, $1.9~~$1.659 million expires in ~~2003, $6.4~~2009, 8.418 million expires in ~~2004, $19.8~~2010, $981,000 expires in 2011, and $3.569 million expires in ~~2005, $19.2~~2014. In addition, there is $6.242 million ~~expires~~that do not expire related to tax losses in ~~2006, and $3.7 million expires in 2007.~~Ireland. Our net operating losses are subject to assessment of our tax returns by taxation authorities. 32

E. OFF-BALANCE SHEET ARRANGEMENTS

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

F. TABULAR DISCLOSURE OF CONTRACTUAL OBLIGATIONS

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

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

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

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

ITEM 6 - DIRECTORS, SENIOR MANAGEMENT AND EMPLOYEES ~~A. DIRECTORS AND SENIOR MANAGEMENT~~

A.	DIRECTORS AND SENIOR MANAGEMENT

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


Name	Age	Position ~~---- --- --------~~
Directors ~~Pat Bourke/2/~~

Jeffrey Lymburner⁽¹⁾	48	Director and Chief Executive Officer
T. Christopher Bulger^(2),(3),(4)	48	Director
Paul Godin,^(2),(3)	52	Director
Jim Moskos	42	Director and President, ADB Technology Group
Darroch (Rick) Robertson⁽⁴⁾	53	Director
Jan Pedersen	47	Director and President, Norwegian Operations
Duncan G. Copeland^(2),(3),(4)	47	Director
Glen Whyte⁽⁵⁾	48	Former Director

Executive Officers (other than Messrs. Lymburner, Pedersen and Moskos)

Michael Robb	42	Chief Financial Officer and Corporate Secretary
Aidan Rowsome⁽⁶⁾	44	Former Vice-President, Global Sales

_______________________

⁽¹⁾	Mr. Lymburner is acting Chairman of the Board of ~~Directors Jeffrey Lymburner 44 Director, President~~Directors.
⁽²⁾	Member of the Management Resources and Chief Executive Officer T. Christopher Bulger/2/ 43 Director Dr. Duncan Copeland/3/ 44 Director Paul Godin/2/ 48 Director Howard Koenig/3/ 48 Director Jim Moskos 38 Director, President, Bid.Com Technology Group David Pamenter/1,3/ 53 Director and Assistant Secretary Ken Sexton/1/ 47 Director Charles S. Walker/1/ 65 Director Executive Officers (other than Messrs. Lymburner and Moskos) Mark Wallace 41 Chief Operating Officer John Mackie 36 Vice President, General Counsel and Secretary David Kirkconnell 40 Vice-President, Human Resources Compensation Committee.
⁽³⁾	Member of the Corporate Governance Committee.
⁽⁴⁾	Member of Audit Committee.
⁽⁵⁾	Resigned on June 23, 2004
⁽⁶⁾	Resigned on February 25, 2005

~~________________________ /(1)/ Member of Audit Committee. /(2)/ Member of the Management Resources and Compensation Committee /(3)/ Member of the Corporate Governance Committee.~~

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

Directors - --------- Patrick Bourke, Potomac, Maryland Director since June 14, 2000 Chairman of the Board of Directors Chairman of the Management Resources and Compensation Committee. Mr. Bourke is a private investor with over twenty-five years experience in the technology sector. From May, 1996 to April, 2000, Mr. Bourke was Vice President, Interactive Services Marketing for Merant Inc., an e-business software solutions company. Prior to this, he was an executive of Perot Systems Corporation where he held several senior executive positions from 1989 to 1996. Mr. Bourke came to Perot Data Systems from Electronic Data Systems Corporation, where he was Chief Information Officer for the General Motors Truck and Bus Group from 1984 to 1988. Mr. Bourke is a graduate of Arkansas State University. 33

Jeffrey Lymburner, Oldsmar, Florida

Director since May 28, 1996

Acting Chairman

Mr. Lymburnerhas been ~~President of~~ our ~~company since August 28, 1998 and~~ Chief Executive Officer since August 1, ~~1999. Mr. Lymburner is~~1999 and was a founding shareholder of our company. He was President of our company from its founding in 1995 to October 11, 2001. Prior to the founding of our company, Mr. Lymburner was President of Completely Mobile Inc., a cellular and wireless data company, from 1990 to 1995. In the 1980's, Mr. Lymburner held several management positions with responsibilities for advertising, purchasing, store management, sales management and strategic planning for Multitech Warehouse Direct, a national consumer electronics retail chain. Mr. Lymburner started his career as a Systems Engineer with IBM in 1978.

T. Christopher Bulger, Toronto, Ontario

Director since May 28, 1996 ~~Member~~

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

Mr. Bulger ~~has been President~~is the Chairman and ~~Chief Executive Officer~~CEO of ~~eLab Technology Ventures~~Megawheels Technologies Inc. ~~since December, 1999.~~, a web-based classified advertising platform provider for the newspaper and real estate sectors, with enterprise systems for auto dealerships. Mr. Bulger served as Executive Vice President of our company from September 1998 to December 1999 and Chief Financial Officer of our company from April 1996 to September 1998. Mr. Bulger was a partner with HDL Capital Corporation, a Toronto based merchant bank which specializes in the venture capital sector, from 1993 until 1999. Mr. Bulger is currently a director of Megawheels Inc.

Paul Godin, a company listed on the Canadian Venture Exchange and in which we own an equity interest. Mr. Bulger is a Chartered Financial Analyst (CFA) and holds an MBA from the European Institute of Business Administration (INSEAD). Dr. Duncan Copeland, Potomac, Maryland Kleinburg, Ontario

Director since May 28, 1996 Chairman of the Corporate Governance Committee Dr. Copeland has been President of Copeland & Company, a Washington D.C. based international consultancy firm providing information counsel to management, since September 1990. Dr. Copeland served as a Visiting Professor at Georgetown University from September 1997 to May 1999. He served on the faculty of the Richard Ivey School of Business at the University of Western Ontario ("Western") from July 1989 to June 1996 as a Professor of Information Management in addition to being Chief Information Officer of the institution. Dr. Copeland earned his undergraduate business degree at Western and his doctorate from The Harvard Business School. Dr. Copeland has extensive consulting experience in both the United States and Canada, and is co-author of Waves of Change: Business Evolution Through Information Technology, a Harvard Business School Press publication. Paul Godin, Kettleby, Ontario Director since May 28, 1996

Member of the Management Resources and Compensation ~~Committee~~ and Corporate Governance Committees

Mr. Godin is a private investor. ~~From September 1999 to March 2001,~~Aside from being one of the founding shareholders of our company in 1995, Mr. Godin ~~was the Chairman of The Art Vault International Limited. Mr. Godin is a founding shareholder of our company. Mr. Godin~~ was Chief Executive Officer of our company from ~~August 28, 1998~~its founding in 1995 to August 1, 1999, and Chairman of the Board of Directors from June 17, 1996 to June 14, 2000. ~~Prior~~From September 1999 to ~~the founding of our company in September, 1995,~~March 2001, Mr. Godin was ~~Senior Vice-President, Corporate Sales and Marketing for Completely Mobile Inc., a Canadian company which designs and implements wireless data systems. He has~~Chairman of The Art Vault International Limited. In March 2001, The Art Vault made an ~~extensive marketing and management background spanning 20 years~~assignment in ~~retail and wholesale electronics and computer distributors. Howard Koenig, Brookside, New Jersey Director since October 31, 2000 Member~~bankruptcy under the laws of the ~~Corporate Governance Committee Mr. Koenig has been Chief Executive Officer~~Province of ~~Employeelife.com,~~Ontario, due to economic conditions and a ~~B2B internet benefits exchange and administration company, since April, 1999. Prior thereto he was Corporate Vice President, Operations/Client 34~~ ~~Services~~lack of Automatic Data Processing Inc. from January, 1994 to April, 1999 and Managing Partner for Andersen Consulting from January 1990 to January 1994. Prior to that he held executive positions with Oracle Corporation and Deloitte Haskins and Sells. Mr. Koenig holds a BA in Economics and an MBA from the University of Buffalo. available funding.

Jim Moskos, Toronto, Ontario

Director since June 7, 1999

Mr. Moskoshas been President of the ~~Bid.Com~~ADB Technology Group since October 19, 1999. Mr. Moskos served as Vice President - Technology of our company from September 1997 to October 19, 1999. From September 1994 to August ~~1997.~~1997, Mr. Moskos was Senior Technology Manager for the Canadian Department of Indian Affairs and Northern Development responsible for setting the technical direction for all aspects of application development. Mr. Moskos was the recipient of the 1996 Canadian Information Productivity Award from Canadian Business Magazine, the 1995 Smithsonian Innovator Award for Information Technology, the 1995 Government Technology Achievement Award and is a two-time recipient of the Deputy Ministers Outstanding Achievement Award. David Pamenter, Toronto, Ontario

Jan Pedersen, Stavanger, Norway

Director since June ~~18, 1997~~ 12, 2002

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

Darroch (Rick) Robertson, London, Ontario

Director since June 25, 2003

Chairman of the Audit Committee

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

Duncan Copeland

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

Mr. ~~Pamenter~~Copeland is President of Copeland and Company, a consultancy based in Potomac, Maryland. He has been a partner in Gowling, Lafleur, Henderson, a Canadian national law firm, since July 1, 1995. He is also a member of Gowlings' executive committee and the Toronto office management committee. Gowlings is oneDirector of the ~~largest Canadian national law firms with a strong focus on advising technology companies.~~Corporation since its inception, except for the period from 2001-2004. Mr. ~~Pamenter also serves on the boards of a number of client companies and community groups. Ken Sexton, Director since October 5, 2000 Chairman of the Audit Committee Mr. Sexton~~Copeland has been Senior Vice President of Finance and Administration and Chief Financial Officer of Merant Inc., since December 1998. Prior thereto he was Chief Financial Officer of Intersolv, an enterprise software product company from 1991. From 1984 to 1991, he was the Controller and Chief Accounting Officer of Life Technologies Inc. Mr. Sexton is also a director of Netrex's Frontier Adjusters of America. Charles S. Walker, Vancouver, British Columbia Director since February 15, 1999 Member of the Audit Committee Mr. Walker has been President and Chief Executive Officer of the Walker Group, Inc., a privately owned company involved in manufacturing, administration, fulfillment services and marketing to the automotive and consumer goods industries since 1968 . Mr. Walker is currently a director of Megawheels Inc., a company listed on the Canadian Venture Exchange, and a director of SCS Solars Computing Systems Inc. Our company owns an equity interest in both of these companies. Executive Officers (other than Messrs. Lymburner and Moskos) - ----------------------------------------- Mark Wallace became our Chief Operating Officer in November, 1999 and was previously Executive Vice-President, General Counsel and Secretary of our company. Prior to joining our company in May 1999, Mr. Wallace was Vice- President, General Counsel and Secretary of AT&T Canada Corp. In that capacity, he was principal advisor to that company on all legal, regulatory and corporate governance issues, and served as corporate secretary to its board of directors. Mr. Wallace joined AT&T Canada in 1991. Prior to joining AT&T Canada, Mr. Wallace worked for 4 years in private practice as a corporate commercial lawyer. 35 John Mackie joined us in November, 1999 as Vice President, General Counsel and Corporate Secretary. Prior to joining us, Mr. Mackie was Assistant General Counsel and Assistant Secretary for Imax Corporation. From August 1997 to June 1998, Mr. Mackie was a member of the ~~legal department~~faculties of ~~AT&T Canada Long Distance Services Company (now AT&T Canada Corp.), serving as Associate General Counsel from January 1998 to June 1998. Prior to August 1997, Mr. Mackie was an associate with~~ the ~~law firm~~Richard Ivey School of Fraser & Beatty (now Fraser Milner Casgrain). David Kirkconnell has been our Vice President, Human Resources since February 2000. Mr. Kirkconnell has approximately fourteen years human resource management experience in a variety of industries. He acted as a consultant to various businesses on Human Resources matters from October 1998 to February 2000. Prior to that time, he served as Vice-President, Human Resources (from February 1997 to May 1998) and Director Human Resources (from October 1991 to February 1997) for Ault Foods Ltd. Mr. Kirkconnell holds an Economics degree from theBusiness, The University of Western Ontario and Georgetown University. He is a ~~Master~~trustee of ~~Industrial Relations~~the Charles Babbage Foundation. Mr. Copeland holds a doctorate from the ~~University~~Harvard Business School.

Executive Officer

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

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

For a discussion of certain transactions involving directors and executive officers, see Item 7 - ~~Major Shareholders~~MAJOR SHAREHOLDERS and ~~Related Party Transactions - Related Party Transactions. B. COMPENSATION~~ RELATED PARTY TRANSACTIONS and Note 23 to Consolidated Financial Statements.

B.	COMPENSATION

Summary Compensation Table

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

					Awards		Payouts
	Annual Compensation					Restricted
					Options/	Shares or
				Other
				Annual	SARs	Restricted	LTIP	All Other
		Salary	Bonus	Compensation	Granted	Share Units	Payout	Compensation
Name And Principal Position	Year	($)	($)	($)⁽¹⁾	(#)⁽²⁾	($)	($)	($)
Jeffrey Lymburner	2004	130,130	Nil	15,616	Nil	Nil	Nil	Nil
CEO ⁽³⁾	2003	140,150	$3,503	16,818	Nil	Nil	Nil	Nil
	2002	157,760	Nil	25,242	110,000	Nil	Nil	Nil

Mike Robb	2004	144,583	Nil	6,600	Nil	Nil	Nil	Nil
CFO ⁽⁴⁾	2003	76,250	Nil	5,362	Nil	Nil	Nil	Nil

James Moskos	2004	190,000	Nil	12,000	Nil	Nil	Nil	Nil
President, Technology Group	2003	193,333	15,000	12,000	220,202	Nil	Nil	Nil
	2002	200,000	Nil	12,000	214,167	Nil	Nil	Nil

Jan Pedersen	2004	201,657	Nil	Nil	Nil	Nil	Nil	Nil
President, Norwegian Operations	2003	181,843	40,358	Nil	22,378	Nil	Nil	Nil
	2002	165,500	47,000	Nil	214,167	Nil	Nil	Nil

Aidan Rowsome	2004	205,166	1,020	16,955	Nil	Nil	Nil	Nil
Vice-President, Global Sales	2003	173,430	10,033	17,747	122,580	Nil	Nil	Nil
	2002	168,000	5,500	16,500	163,125	Nil	Nil	Nil

- ---------------------------------------------------------------------------------------------------------------------- Long Term Compensation ---------------------- Awards Payouts ------ ------- Annual Compensation Restricted ------------------- Options/ Shares or
	(1)	Other ~~Annual SARs Restricted LTIP~~ compensation reflects our company’s provision of automotive related expenses and options.

	(2)	All Other Salary Bonus Compensation Granted Share Units Payout Compensation Name And Principal Position Year ($) ($) ($)/(1)/ (#) ($) ($) ($) - ---------------------------------------------------------------------------------------------------------------------- Paul Godin...................... 2000 272,000 Nil Nil 57,500 Nil Nil Nil Chairman/(2)/ 1999 260,000 Nil 12,000 160,000 Nil Nil Nil 1998 178,300 Nil 12,000 50,000 Nil Nil Nil Jeffrey Lymburner............... 2000 267,815 Nil 4,498 100,000 Nil Nil Nil President & CEO 1999 225,684 Nil Nil 170,000 Nil Nil Nil 1998 170,500 Nil Nil 100,000 Nil Nil Nil Mark Wallace.................... 2000 250,000 Nil 12,000 75,000 Nil Nil Nil Chief Operating Officer/numbers have been adjusted to reflect the two for one consolidation of our shares in October, 2001.

	(3)/ 1999 112,750 Nil Nil 425,000 Nil Nil Nil James Moskos.................... 2000 231,250 Nil 12,000 75,000 Nil Nil Nil President, Technology Group 1999 188,500 Nil 12,000 225,000 Nil Nil Nil 1998 102,000 Nil 4,500 100,000 Nil Nil Nil Pete Sprukulis.................. 2000 175,000 10,000 12,000 75,000 Nil Nil Nil Sr. VP, Sales & Marketing/	Mr. Lymburner’s salary is U.S. $100,000.

	(4)/ 1999 9,138 Nil Nil 150,000 Nil Nil Nil John Mackie..................... 2000 164,167 25,000 9,000 50,000 Nil Nil Nil VP, General Counsel	Mike Robb joined our company on February 26, 2003 as Director of Finance and ~~1999 46,125 25,000 Nil 100,000 Nil Nil Nil~~was appointed as CFO and Corporate ~~Secretary/(5)/ - ----------------------------------------------------------------------------------------------------------------------~~ Secretary on August 12, 2003.

~~1. Received~~

Messrs. Lymburner, Moskos, Pedersen and Rowsome have volunteered salary reductions in the 2002, 2003, and 2004 calendar years, ranging from fifteen percent to fifty percent. In exchange for the foregone salary, the executives were granted stock options, vesting quarterly in arrears, in an amount equal to the amount of foregone salary divided by the exercise price of the options (being the market price of our company’s shares on ~~account~~the day prior to the date of ~~car reimbursement expenses. 2. Resigned~~the grant). These salary reductions took effect January 1, 2002. The salary reductions will not affect any severance entitlement for the individuals concerned.

Our company has a stock option plan which provides for the issuance of stock options to employees, which may expire as ~~Chairman~~much as 10 years from the date of grant, at prices not less than the fair market value of the common shares on the date of grant. The Management Resources and Compensation Committee of the Board ~~effective June 14, 2000. Mr. Godin was paid a lump sum equal~~of Directors reserves the right to his salary until December 31, 2000 in consideration for his ongoing assistance in transition of the business. 3. Joined the Corporation on May 17, 1999. Mr. Wallace was Executive Vice President, General Counsel and Corporate Secretary from 36 ~~May 1999~~attach vesting periods to ~~November 1999. 4. Joined our company on December 13, 1999. Ceased~~stock options granted. No options or stock appreciation rights were granted to ~~be an officer~~employees, officers or directors of our company ~~in April, 2001. 5. Joined our company on November 15, 1999.~~ during the fiscal year ended December 31, 2004.

During ~~1999,~~2004, we did not provide any pension, retirement or similar benefits to our directors and ~~officers.~~ officers as a group. Our employees based in Ireland and the United Kingdom participate in a retirement savings arrangement where employee contributions to personal retirement savings accounts are matched by the Company

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

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

Jan Pedersen entered into a ~~written~~new employment agreement with our company in 2003 which ~~provides, among other things, that~~sets out his salary and benefits as the Company’s President of Norwegian operations, as described in ~~the event of~~Item 6. The new agreement does not provide for termination ~~of his employment other than by death, disability~~payments or ~~cause, his previous 12 months salary level is guaranteed for the 12 months after termination.~~ retention bonuses.

Compensation of Directors ~~During the financial year ended December 31, 2000, the~~

Our directors ~~received~~receive no fees for meetings of the Board or ~~a committee~~committees of the Board which they ~~attended~~attend, and no fee for the signing of any resolution of directors or documents on behalf of ~~the~~our company. ~~For the 2001 financial year, directors, other than Messrs. Bourke, Lymburner and Moskos, will receive a fee of $20,000 per year.~~

All directors are reimbursed for reasonable out-of-pocket travel and other expenses incurred by them in attending Board meetings ~~of the Board~~ or Committee meetings. 37 ~~C. BOARD PRACTICES~~

C.	BOARD PRACTICES

Our ~~Articles~~articles of incorporation currently provide for a Board of Directors consisting of not less than 3 and not more than 15 directors, to be elected annually. The ~~Ontario~~ Business Corporations Act (Ontario) provides that, where a minimum and maximum number of directors is provided for in the articles of a company, the directors of that company may, if empowered by special resolution of the shareholders, by a resolution determine the number of directors to be elected at each annual meeting of the shareholders. Our Board of Directors has the authority to fix the number of directors to a number within the minimum and maximum number of directors as set forth in the ~~Articles,~~articles, and has determined by resolution that the size of the Board is 107 directors. ~~The~~

Our Board of Directors presently consists of 107 directors. Under Canadian law, a majority of our ~~board~~Board of directors and of each of our Board Committees must be residents of Canada, subject to certain exceptions. Each of our directors holds office until the next annual meeting of shareholders, or until his successor has been elected and ~~qualified.~~qualified, or his earlier resignation or removal. Our executive officers are appointed by our ~~board~~Board of directors and serve at the discretion of our Board of Directors.

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

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

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

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

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

The Corporate Governance Committee, all of whose members are unrelated as defined by the TSX Corporate Governance Guidelines, oversees the implementation of our governance practices. The committee also oversees the ~~governance guidelines enunciated above~~process for nominations to the Board and ~~where it deems appropriate, will develop modifications~~assesses the overall effectiveness of the Board. The Corporate Governance Committee consists of Paul Godin (Chairman), Chris Bulger, and Duncan Copeland, all of whom are directors of our company. The composition of the committee changed during fiscal 2004 due to ~~same. D. EMPLOYEES In April, 2001, we implemented a workforce reduction~~the resignation of Glen Whyte from the board of directors effective June 30, 2004. Mr. Copeland was appointed in ~~which we eliminated 31 positions.~~Mr. Whyte’s place.

D.	EMPLOYEES

As of ~~April 30, 2001,~~December 31, 2004 we employed 59a total of 46 full-time employees 1and one part-time ~~employees, and 2 independent contractors,~~employee as follows: ~~. 23 in sales and marketing; . 26 in technical support and operations; . 13 in finance, administrative and senior management functions. 38~~ ~~We have 45 employees based in Mississauga, Ontario, 10 in our Dublin, Ireland offices, and 7 in sales and marketing offices in the United States.~~

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

None of our employees isare represented by a labor union, and we consider our employee relations to be ~~good. E. SHARE OWNERSHIP~~ good.

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

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

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

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

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

E.	SHARE OWNERSHIP

The following table sets forth ~~certain~~ information concerning ~~the~~ share and option ownership of each of our current directors and ~~executive~~ officers as of ~~April 20, 2001:~~ June 1, 2005:

Name	Number of Common Shares Owned ⁽¹⁾⁽²⁾	Number of Common Shares Underlying Options ⁽³⁾	Range of Exercise Prices of Options	Range of Expiration Dates of Options	Percentage of Common Shares Beneficially Owned ⁽⁴⁾
T. Christopher Bulger	265,000	75,000	$0.22-$0.37	07/03/06-01/25/10	*

Paul Godin	332,667	70,000	$0.22	01/25/10	*

Jeffrey Lymburner	3,211,975	153,300	$0.22	01/25/10	4.44%

Jim Moskos	21,375	370,202	$0.22-$0.35	07/03/06 - 01/25/10	*

Darroch Robertson	5,000	110,000	$0.22-$0.37	07/03/06-01/25/10	*

Michael Robb	Nil	138,750	$0.22-$0.35	02/26/06-01/25/10	*

Jan Pedersen	767,019	442,292	$0.22-$ 0.33	07/03/06-01/25/10	1.06%

Duncan Copeland	87,050	70,000	$0.22	01/25/10	*

Aidan Rowsome	62,500	122,580	$0.33-$0.35	07/03/06-08/15/06	*

~~- ------------------------------------------------------------------------------------------------------------------------------------ Number~~
	*	Represents less than 1%.

	(1)	All numbers adjusted to reflect the two for one consolidation of our shares in October 2001.

	(2)	Represents shares owned beneficially by the named individual other than those shares which may be acquired under our Corporation's option plans. Unless otherwise noted, all persons referred to above have sole voting and sole investment power.

	(3)	Includes all shares which the named individual has the right to acquire under all vested and unvested options and warrants granted to such individual under our company's option plan.

	(4)	This information is based on 72,370,131 common shares outstanding as of May 31, 2005. Common ~~Percentage~~shares subject to options exercisable within 60 days are deemed outstanding for computing the percentage ownership of ~~Shares Which May Common Shares Number~~the person holding the options but are not deemed outstanding for computing the percentage ownership of Common be Acquired Under Range of Exercise Prices Range of Expiraton Beneficially Name Shares Owned (1) Option Plan (2) of Options Dates of Options Owned (3) - ------------------------------------------------------------------------------------------------------------------------------------ Patrick Bourke............... 5,000 160,000 $1.31 - $2.79 08/01/03 - 02/06/04 * T. Christopher Bulger........ 0 234,000 $1.31 - $6.35 01/22/02 - 02/06/04 * Duncan Copeland.............. 182,500 189,000 $1.31 - $6.35 01/25/02 - 02/06/04 * Paul Godin................... 328,300 242,500 $1.31 - $6.35 01/25/02 - 02/06/04 1.04% Howard Koenig................ 3,000 25,000 $1.37 01/22/03 * Jeffrey Lymburner............ 1,470,200 345,000 $1.31 - $6.35 08/12/02 - 02/06/04 3.18% Jim Moskos................... 75,000 375,000 $1.31 - $6.10 01/25/02 - 02/06/04 * David Pamenter............... 1,000 107,500 $1.31 - $6.35 08/13/02 - 02/06/04 * Ken Sexton................... 0 70,000 $1.31 - $3.42 10/05/03 - 02/06/04 * Chuck Walker................. 4,000 124,000 $1.31 - $9.25 08/12/02 - 02/06/04 * Mark Wallace................. 4,000 575,000 $1.31 - $10.00 04/22/02 - 02/06/04 * John Mackie.................. 1,900 210,000 $1.31 - $5.95 11/11/02 - 02/06/04 * David Kirkconnell............ 0 160,000 $1.31 - $6.65 08/01/03 - 02/06/04 * - ------------------------------------------------------------------------------------------------------------------------------------ any other person.

* Represents less than 1% (1) Represents shares owned beneficially by the named individual other than those shares which may be acquired under our company's option plans. Unless otherwise noted, all persons referred to above have sole voting and sole investment power. (2) Includes all shares which the named individual has the right to acquire under all vested and unvested options granted to such individual under our company's option plan. (3) This information is based on 54,638,468 common shares outstanding as of April 20, 2001. Common shares subject to options exercisable within 60 days are deemed outstanding for computing the percentage ownership of the person holding the options but are not deemed outstanding for computing the percentage ownership of any other person.

ITEM 7 - MAJOR SHAREHOLDERS AND RELATED PARTY TRANSACTIONS ~~A. MAJOR SHAREHOLDERS~~

A.	MAJOR SHAREHOLDERS

To our knowledge, no person beneficially owns, directly or indirectly, or exercises control or direction over more than 5%5.0% of our issued and outstanding common shares.

This information is based on our records, information provided to us by directors and executive officers and a review of any Schedules 13D and 13G filed ~~in 2000 and 2001~~ by our shareholders with the Securities and Exchange Commission prior to June 1, 2005, and insider reports filed with the Ontario Securities Commission. The Company’s major shareholders do not have any voting rights that differ from the rights of our other shareholders.

As ~~of May 4, 2001, we had 1,416~~at April 18, 2005, the shareholders of record ~~holding 54,638,468~~held 72,370,131 common shares, of which ~~389~~793 shareholders ~~holding 5,670,485 common shares~~ had an address of record in the United States. Common shares held by ~~the principal depositary~~CEDE & Co. in the United States on such date amounted to ~~5,536,074 common shares~~4,289,060 or ~~10.13%~~5.9% of our issued common shares, which shares are held for ~~participants'~~participants’ accounts. 39

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

B.	RELATED PARTY TRANSACTIONS

On ~~April 4, 2000, we completed~~August 30, 2002, the Company entered into a ~~transaction~~private placement agreement of secured subordinated notes (Series A, B and D notes) with a group of private investors for total gross proceeds of $1.12 million. The ~~Art Vault International Limited,~~following officers and directors purchased the Series D notes: Chris Bulger, a ~~company listed on~~director of the ~~Canadian Venture Exchange, under which we agreed to provide our online auction technology and related services to enable the implementation~~Company, purchased $20,000 of ~~The Art Vault's online auction of art and antiquities. In consideration for our license and services, we received 2,500,000 shares of The Art Vault and a share of future profits.~~Series D notes that have not yet been converted. Paul Godin, a director of ~~our company, was~~ the ~~founding shareholder, an executive officer~~Company, purchased $25,000 of Series D notes that were converted on December 13, 2002 to 208,333 common shares and 104,167 share purchase warrants. Jeff Lymburner, CEO and a director of the Company, purchased $75,000 of Series D notes of which $54,750 were converted on April 1, 2004 to 456,250 shares and 228,125 share purchase warrants The ~~Art Vault. Azim Fancy,~~228,125 common share purchase warrants were exercised into an equal number of common shares by April 19, 2004. The remaining $20,250 of Series D notes have yet to be converted as of June 18, 2004. Aidan Rowsome, who was then ~~one~~Vice President - Global Sales of ~~our~~the Company, purchased $15,000 of Series D notes that were converted on February 3, 2003 to 125,000 common shares and 62,500 share purchase warrants.

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

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

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

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

On December 6, 2004, the Company completed a private placement resulting in the issuance of 5,000,000 shares at a price of $0.20 per share and 5,000,000 common share-purchase warrants exercisable into one common share at a price of $0.35 for gross proceeds of $1.0 million. Included in this private placement were ~~shareholders~~100,000 shares issued to Paul Godin, a director of the Company for gross proceeds of $20,000. The ~~Art Vault. In March 2001, The Art Vault made an assignment in bankruptcy~~warrants were issued for a four year term and will expire on December 6, 2008.

For additional information regarding related party transactions, see Part I - Item 5 under the ~~laws of the Province of Ontario due~~heading “OPERATING AND FINANCIAL REVIEW AND PROSPECTS - MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS” and see Note 6(d) to ~~economic conditions and a lack of available funding. As their license and services agreements were fully paid up, the assignment had no material economic effect on us.~~ Notes Consolidated Financial Statements.

ITEM 8 - FINANCIAL INFORMATION

See ~~Item 17 for our audited consolidated financial statements.~~ the Consolidated Financial Statements and notes thereto accompanying this Annual Report beginning on page F-1. All contingencies and commitments set out in the Financial Statements have been reviewed and updated as at the date of filing this Annual Report.

LEGAL PROCEEDINGS

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

DIVIDEND POLICY

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

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

SIGNIFICANT CHANGES

None.

ITEM 9 - THE OFFER AND LISTING

Our common shares are listed on The Toronto Stock Exchange and are quoted for trading on the OTCBB. Our common shares were quoted on the Nasdaq National Market from April 20, 1999 until June 3, 2002 and ~~are~~were quoted on the Nasdaq SmallCap Market from June 3, 2002 until August 21, 2002 at which time they were delisted because we did not satisfy the minimum bid price per share requirement for continued listing on that market. The shares were listed on ~~The Toronto Stock Exchange.~~the Nasdaq exchanges from April 20, 1999 until October 17, 2001 under the symbol “BIDS” and from October 18, 2001 until August 21, 2002 under the symbol “ADBI”. Our common shares have been quoted for trading on ~~Nasdaq~~the OTCBB since ~~April 20, 1999~~August 22, 2002 under the symbol ~~"BIDS." Our common shares began trading~~“ADBY”. Effective November 15, 2004 our stock symbol on the Over the OTCBB was changed to “ADBYF”. The ~~Toronto Stock Exchange on February 9, 1998 under~~addition of the F to the symbol ~~"ILI" and, since July 18, 1998, our common shares traded under~~was a requirement of the ~~symbol "BII".~~ OTCBB to signify that we are a foreign issuer.

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

For additional information about the trading of our common shares, see Item ~~3 - Key Information~~3-D - Risk Factors - YOUR ~~LIQUIDITY IN~~ABILITY TO BUY OR SELL OUR COMMON SHARES ON THE OTCBB MAY BE ~~AFFECTED IF OUR STOCK IS DELISTED FROM THE NASDAQ NATIONAL MARKET. 40~~ LIMITED.

The following tables set forth the range of high and low sales prices (rounded to the nearest hundredth) as reported by ~~Canadian Dealing Network (through February 8, 1998),~~ The Toronto Stock Exchange, the OTCBB (beginning ~~February 8, 1998)~~June 4, 2002) and Nasdaq ~~(beginning April 20, 1999)~~(until June 3, 2002) during the periods indicated: The Toronto Stock Exchange High Low ---- --- (Cdn $) (Cdn $) Annual Market Prices -------------------- 1998 6.00 .56 1999 33.65 3.65 2000 13.10 .97 Quarterly Market Prices ----------------------- 1998 ---- 1/st/ Quarter 3.90 1.95 2/nd/ Quarter 3.80 1.12 3/rd/ Quarter 2.08 0.65 4/th/ Quarter 4.56 0.60 1999 ---- 1/st/ Quarter 17.60 3.80 2/nd/ Quarter 33.65 30.70 3/rd/ Quarter 13.05 4.90 4/th/ Quarter 8.95 5.65 2000 ---- 1/st/ Quarter 13.10 5.85 2/nd/ Quarter 9.20 3.11 3/rd/ Quarter 4.18 2.22 4/th/ Quarter 3.54 .97 2001 ---- 1/st/ Quarter 1.70 .73 April 1 - May 18 .86 .55 Monthly Market Prices --------------------- November 2000 2.85 1.54 December 2000 1.79 .97 January 2001 1.70 .95 February 2001 1.56 1.11 March 2001 1.15 .73 April 2001 .86 .55 Nasdaq 1999 High Low High Low ---- ---- --- ---- --- (Cdn$) (Cdn$) (US$) (US$) Annual Market Prices 1999 28.56 5.59 19.31 3.75 2000 13.30 .80 9.13 .53 41 Quarterly Market Prices 1999 2/nd/ Quarter 28.56 10.72 19.31 7.13 3/rd/ Quarter 12.54 5.59 8.53 3.75 4/th/ Quarter 8.85 5.63 6.00 3.84 2000 ---- 1/st/ Quarter 13.30 5.75 9.13 3.97 2/nd/ Quarter 9.69 3.01 6.50 2.06 3/rd/ Quarter 4.05 2.22 2.75 1.50 4/th/ Quarter 3.53 .80 2.34 .53 2001 ---- 1/st/ Quarter 1.65 .74 1.09 .47 April 1-May 18 .83 .53 .54 .34 Monthly Market Prices November 2000 2.87 1.58 1.88 1.03 December 2000 1.74 .80 1.13 .53 January 2001 1.65 .94 1.09 .63 February 2001 1.58 1.06 1.06 .69 March 2001 1.11 .74 .72 .47 April 2001 .83 .53 .54 .34 calendar years and quarters indicated. Note that all numbers have been adjusted to reflect the two-for-one share consolidation completed in October 2001.

THE TORONTO STOCK EXCHANGE

	High		Low
	(Cdn $)		(Cdn $)
ANNUAL MARKET PRICES
2000 Calendar Year		26.20		1.94
2001 Calendar Year		3.40		0.29
2002 Calendar Year		0.93		0.07
2003 Calendar Year		0.85		0.17
2004 Calendar Year		0.52		0.16
QUARTERLY MARKET PRICES
2003 CALENDAR YEAR
First Quarter		0.85		0.17
Second Quarter		0.41		0.19
Third Quarter		0.55		0.31
Fourth Quarter		0.54		0.37
2004 CALENDAR YEAR
First Quarter		0.52		0.34
Second Quarter		0.38		0.25
Third Quarter		0.36		0.19
Fourth Quarter		0.28		0.16
2005 CALENDAR YEAR
First Quarter		0.36		0.19
MONTHLY MARKET PRICES
November 2004		0.22		0.16
December 2004		0.28		0.19
January 2005		0.25		0.19
February 2005		0.36		0.23
March 2005		0.34		0.26
April 2005		0.29		0.25
May 2005		0.28		0.15

NASDAQ AND OTCBB

	High		Low		High		Low
	(Cdn $)		(Cdn $)		(U.S. $)		(U.S. $)
ANNUAL MARKET PRICES
2000 Calendar Year		26.60		1.60		19.26		1.06
2001 Calendar Year		3.30		0.30		2.18		0.19
2002 Calendar Year		0.93		0.06		0.59		0.04
2003 Calendar Year		0.79		0.16		0.54		0.11
2004 Calendar Year		0.54		0.14		0.41		0.12
QUARTERLY MARKET PRICES
2003 CALENDAR YEAR
First Quarter		0.79		0.16		0.54		0.11
Second Quarter		0.39		0.16		0.29		0.12
Third Quarter		0.57		0.27		0.42		0.20
Fourth Quarter		0.58		0.34		0.45		0.26
2004 CALENDAR YEAR
First Quarter		0.54		0.34		0.41		0.26
Second Quarter		0.39		0.24		0.29		0.18
Third Quarter		0.35		0.19		0.27		0.15
Fourth Quarter		0.27		0.14		0.22		0.12
2005 CALENDAR YEAR
First Quarter		0.36		0.18		0.29		0.15
MONTHLY MARKET PRICES
November 2004		0.21		0.14		0.18		0.12
December 2004		0.27		0.19		0.22		0.15
January 2005		0.25		0.18		0.20		0.15
February 2005		0.36		0.22		0.29		0.18
March 2005		0.33		0.24		0.27		0.20
April 2005		0.28		0.24		0.23		0.19
May 2005		0.32		0.23		0.25		0.18

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

ITEM 10 - ADDITIONAL INFORMATION ~~A. Share Capital~~

A.	Share Capital

Not applicable. B.

B.	Memorandum and Articles of Association

The Articles of ~~Association Our Articles of Amalgamation, as amended,~~Arrangement for ADB are on file with the Ministry of Consumer and Commercial Relations for the Province of Ontario under Ontario Corporation Number ~~1217515.~~1539169. Our articles do not include a stated purpose.

Directors

Directors of our company need not be shareholders. In accordance with our ~~by- laws~~by-laws and the ~~Ontario~~ Business Corporations Act (Ontario), a majority of our directors must be residents of Canada, subject to certain exceptions. In addition, 42 directors must be at least 18 years of age, of sound mind, and not bankrupt. Neither our articles or by-laws, nor the ~~Ontario~~ Business Corporations Act (Ontario), impose any mandatory retirement age for directors.

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

•	is an arrangement by way of security for money lent to or obligations undertaken by the director for the benefit of our company or an affiliate;

•	relates primarily to his or her remuneration as a director, officer, employee or agent of our company or an affiliate;

•	is for indemnity or insurance; or

•	is with an affiliate.

Our Board of security for money lent to or obligations undertaken by the director for the benefit of the company or an affiliate; . relates primarily to his or her remuneration as a director, officer, employee or agent of the company or an affiliate; . is for indemnity or insurance; or . is with an affiliate. Our board of directorsDirectors may, on behalf of ~~the~~our company and without authorization of our shareholders: . borrow money upon the credit of the company; . issue, reissue, sell or pledge bonds, debentures, notes or other evidences or indebtedness or guarantees of our company, either secured or unsecured; . subject to certain disclosure requirements of the Ontario Business Corporations Act, give, directly or indirectly, financial assistance to any person by means of a loan, a guarantee or otherwise on behalf of our company to secure performance or any present or future indebtedness, liability or obligation of any person; and . mortgage, hypothecate, pledge or otherwise create a security interest in all or any currently owned or subsequently acquired real or personal property of our company, movable or immovable, including without limitation book debts, rights, powers, franchises and undertakings, to secure any bonds, debentures, notes or other evidences of indebtedness or guarantee or any other obligation of the company.

•	borrow money upon the credit of our company;

•	issue, reissue, sell or pledge bonds, debentures, notes or other evidences or indebtedness or guarantees of our company, either secured or unsecured;

•	subject to certain disclosure requirements of the Business Corporations Act (Ontario), give, directly or indirectly, financial assistance to any person by means of a loan, a guarantee or otherwise on behalf of our company to secure performance or any present or future indebtedness, liability or obligation of any person; and

•	mortgage, hypothecate, pledge or otherwise create a security interest in all or any currently owned or subsequently acquired real or personal property of our company, movable or immovable, including without limitation book debts, rights, powers, franchises and undertakings, to secure any bonds, debentures, notes or other evidences of indebtedness or guarantee or any other obligation of our company.

Common Shares

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

Preference Shares 43

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

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

Action Necessary to Change the Rights of Shareholders

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

Meetings of Shareholders

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

Limitations on Rights to Own Securities

There is no limitation imposed by Canadian law or by the articles or other charter documents on the right of a non-resident to hold or vote common shares or preference shares with voting rights, other than as provided in the Investment Canada Act, as amended by the World Trade Organization Agreement Implementation Act. The Investment Canada Act generally prohibits implementation of a reviewable investment by an individual, government or agency thereof, corporation, partnership, trust or joint venture that is not a ~~"Canadian,"~~“Canadian,” as defined in the Investment Canada Act (a ~~"non-Canadian"~~“non-Canadian”), unless, after review, the minister responsible for the Investment Act is satisfied that the investment is likely to be a net benefit to Canada. 44

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

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

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

Change of Control

Our authorized capital consists of an unlimited number of common shares and an unlimited number of preference shares. The Board of Directors, without any further vote by the common shareholders, has the authority to issue preference shares and to determine the price, preferences, rights and restrictions, including voting and dividend rights, of these shares. The rights of the holders of common shares are subject to the rights of holders of any preference shares that the Board of Directors may issue in the future. That means, for example, that we can issue preference shares with more voting rights, higher dividend payments or more favorable rights upon dissolution, than the common shares. If we issued certain types of preference shares in the future, it may also be more difficult for a third-party to acquire a majority of our outstanding voting shares. C. Material Contracts The following is a summary of our company's material contracts entered into since January 1, 1999. 1. Underwriting Agreement, dated September 30, 1999, between Canaccord Capital Corporation and Bid.Com International Inc. Pursuant to

Our articles do not contain any provisions that govern the ~~terms and conditions of the agreement, we issued 1,854,678 special warrants at a price of $9.25 per warrant~~ownership threshold above which were exchangeable into 1,854,678 common shares and 1,854,678 share purchase warrants for no additional consideration. The share purchase warrants, if and when exercised, are exercisable at a price of $10.00 per warrant until September 30, 2001 into an equivalent number of common shares. Gross proceeds were $17,155,772 from which was deducted commission of $857,789 (5%) and estimated expenses of approximately $250,000 to yield net proceeds of $16,047,983. 2. Purchase Agreement, dated as of June 16, 2000, between Bid.Com International Inc. and Acqua Wellington Value Fund Ltd. Pursuant to the terms and conditions of this agreement, Acqua Wellington Value Fund Ltd. invested U.S. $2.1 million in us. In exchange for its investment, we issued to Acqua Wellington a total of 900,790 common shares and common share purchase warrants to purchase 360,316 common shares, which we agreed to register with the Securities and Exchange Commission. We sold the common shares and warrants to Acqua Wellington in units, at a purchase price of US$2.3313 per unit. Each unit was comprised of one common share and four-tenths (0.40) of a common share purchase warrant. Each whole warrant canshareholder ownership must be exercised to acquire one common share and is exercisable for two years at an exercise price of US$2.68 per warrant. The purchase price was determined based on a formula tied to the market price of common shares during the 15 day trading period ended June 8, 2000. 3. Registration Rights Agreement, dated as of June 16, 2000, between Bid.Com International Inc. and Acqua Wellington Value Fund Ltd. Pursuant to the terms and conditions of this agreement, Acqua Wellington received registration rights for the common shares, including those common shares issuable upon exercise of the warrants, acquired by it pursuant to the Purchase Agreement referred to in No. 2. In addition we agreed that if the registration statement covering these shares was not effective by a specified date, we would be subject to monetary and other penalties. We also agreed to grant Acqua Wellington piggyback registration rights. D. Exchange Controls disclosed.

C.	Material Contracts

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

1.	SERIES E NOTES: During the year ended December 31, 2003, the Company issued Series E secured subordinated notes with a face value of $1.0 million for net proceeds of $994,000. The Series E notes have an annual rate of interest of 11 percent that is paid quarterly in arrears, mature August 19, 2006 and are convertible into equity units at a price of $0.35 per unit. Each equity unit consists of one common share and one half of a share-purchase warrant with an exercise price of $0.50. The Series E secured subordinated notes will automatically convert into units when the share price of the Company closes above $0.70 for five consecutive trading days during the term. Note holders may convert into units at anytime following a four-month hold period. If the holder does not convert and no automatic conversion takes place, the Company must repay the principal amount to the holders of the Series E secured subordinated notes in cash. As part of this private placement, the Company issued 30,000 common share-purchase warrants to an associate of Stonestreet Limited Partnership (“Stonestreet”) in consideration for professional fees. Each such warrant entitles the holder to purchase one common share of the Company for $0.50 at any time up to and including August 18, 2006. The Series E notes are secured by a general security agreement on the assets of the Company, subordinated to the security claims provided to the holders of previously issued notes.

	The Series E notes were issued to private investors including an amount totaling $100,000 issued to directors and/or senior officers of the Company. Costs in the amount of $6,000 associated with the issuance of the Series E secured subordinated notes were recorded as a reduction of the equity component of these notes.

2.	On June 26, 2003, the Company completed a transaction resulting in the issuance of 4,879,000 common shares at a price of $0.24 and 2,733,000 common share-purchase warrants exercisable into one common share at $0.40 for net proceeds of $1.148 million. The warrants expire on June 26, 2005. This private placement included the issuance of 693,000 common shares and 347,000 common share-purchase warrants in settlement of an account payable in the amount of $166,000. Included in this private placement were 2,146,000 shares issued to a director and officer of the Company for total net proceeds of $505,000.

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

4.	SERIES G NOTES: On June 15, 2004, the Company issued Series G secured subordinated notes with a face value of $1,710,000 for net proceeds of $1,624,000. The Series G notes mature June 15, 2007, have an annual rate of interest of 11 percent (as amended October 21, 2004) payable upon the earlier of maturity and conversion and are convertible into equity units at a price of $0.31 per unit. Each equity unit consists of one common share and one half of a common share purchase warrant with an exercise price of $0.50. The warrants expire on June 15, 2008. The Series G secured subordinated notes will automatically convert into units when the volume-weighted average share price of the Company closes above $0.70 for 20 consecutive trading days during the term. Holders may convert the notes into units at anytime following a four-month hold period. If the holder does not convert and no automatic conversion takes place, the Company must repay the principal amount in cash. The Series G notes are secured by a general security agreement on the assets of the Company, subordinated to the security claims provided to the holders of previously issued notes.

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

6.	EQUITY PRIVATE PLACEMENT: On November 25 and December 6, 2004, the Company completed a transaction resulting in the issuance of 5,000,000 shares at a price of $0.20 per share and 5,000,000 common share-purchase warrants exercisable into one common share at a price of $0.35 for gross proceeds of $1,000,000. The warrants expire on December 6, 2008. Gross proceeds were comprised of $800,000 in cash and $200,000 in past services. Issuance costs in the amount of $61,000 were incurred, including $19,000 representing the fair value of 150,000 compensation options issued to First Associates Investments Inc. The compensation options are exercisable into 150,000 equity units at a price of $0.20 per unit. Each equity unit consists of one common share and one common share-purchase warrant with an exercise price of $0.35 and an expiry date of December 6, 2008. The compensation options expire on December 6, 2006. Included in this private placement were 100,000 shares issued to a director of the Company for net proceeds of $20,000.

7.	EQUITY PRIVATE PLACEMENT: On February 23, 2005, the Company competed a transaction resulting in the issuance of 2,500,000 units (“Units”) of the Company, each Unit consisting of one common share of the Company and one half of one non-transferable Common Share purchase Warrant, at a price of $0.23 per Unit, each whole Warrant entitling the holder to acquire one Common Share at an exercise price of $0.40. The Warrants comprising part of the Units were issued for a term of 4 years and will expire on February 23, 2009. The aggregate consideration in money received by our company from the subscribers for Units was $575,000.

D.	Exchange Controls

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

E.	Taxation

The following summary describes material Canadian federal income tax consequences generally applicable to a holder of our common shares who is not a resident of Canada, and who, for purposes of the Income Tax Act (Canada), (i) holds such shares as capital property and (ii) deals at ~~arm's~~arm’s length with us. Generally, common shares will be considered capital property to a holder provided that such holder does not hold such securities in the course of carrying on a business and has not acquired such securities in a transaction or transactions considered to be an 45 adventure or concern in the nature of trade which includes a transaction or transactions of the same kind and carried on in the same manner as a transaction or transactions of an ordinary trader or dealer in property of the same kind.

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

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

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

Taxation of Dividends.

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

Disposition of common shares.

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

An interest in or option in respect of common shares or other securities convertible into or exchangeable for common shares could constitute taxable Canadian property if the common shares that could be acquired upon the exercise of the option, the conversion or exchange rights or in which there is such interest are themselves taxable Canadian property. Taxable Canadian property also includes any common share held by a non-resident if the non-resident used the common share in carrying on a business (other than an insurance business) in Canada, or, if the non-resident is a non-resident insurer, any common share that is its ~~"designated~~“designated insurance ~~property"~~property” for the year. A non-resident whose common shares constitute or are deemed to constitute taxable Canadian property will realize upon the disposition or deemed disposition of a common share, a capital gain (or a capital loss) to the extent that the proceeds of disposition are greater than (or less than) the aggregate of the adjusted cost base to the holder of a common share and any reasonable costs of disposition. 46

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

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

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

U.S. Federal Income Tax Considerations

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

federal gift or estate tax. This summary is addressed only to a holder of common shares who is (i) a citizen or resident of the United States who owns less than 10% of our company's outstanding voting ~~stock,~~shares, (ii) a corporation organized in the United States or under the laws of the United States or any state thereof, (iii) an estate, the income of which is includable in gross income for United States federal income tax purposes regardless of source, or (iv) a trust, if (1) a court within the United States is able to exercise primary supervision over the administration of the trust and one or more U.S. persons have the authority to control all substantial decisions of the trust (aor (2) has a valid election in effect under applicable United States Treasury Regulations to be treated as a U.S. person (each, a "U.S. Holder"). This summary is for general information purposes only and does not purport to be a comprehensive description of all of the tax considerations that may be relevant to a decision to purchase common shares. This summary generally considers only U.S. Holders that will own their common shares as capital assets. 47

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

Treatment of Dividend Distributions

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

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

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

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

Sale or Exchange of a Common Share 48

Subject to the discussion below under "Tax Status Of The Company - Passive Foreign Investment Companies," the sale or exchange by a U.S. Holder of a common share generally will result in the recognition of gain or loss by the U.S. Holder in an amount equal to the difference between the amount realized and the U.S. Holder's basis in the common share sold. Such gain or loss will be capital gain or loss provided that the common share is a capital asset in the hands of the holder. The gain or loss realized by ~~a noncorporate~~an individual (noncorporate) U.S. Holder on the sale or exchange of a common share will be long-term capital gain or loss subject to ~~tax at~~ a ~~maximum tax~~reduced rate of ~~20%~~tax if the common share had been held for more than one year. If the common share had been held by such ~~noncorporate~~individual U.S. Holder for not more than one year, such gain will be short-term capital gain subject to tax at a maximum rate of 39.6%. Finally, gain realized by a noncorporate U.S. Holder with respect to common shares acquired after December 31, 2000 and held for more than five years, shall be taxed at a maximum rate of 18%. Gain realized by a corporate U.S. Holder will be subject to tax at a maximum rate of 35%.gain. Gains recognized by a U.S. Holder on a sale, exchange or other disposition of common shares generally will be treated as United States source income for United States foreign tax credit purposes. A loss recognized by a U.S. Holder on the sale, exchange or other disposition of common shares generally is allocated to U.S. source ~~income under recently finalized regulations.~~income. However, ~~those regulations require~~ such loss tomust be allocated to foreign source income to the extent certain dividends were received by the ~~taxpayer~~U.S. Holder within the 24-month period preceding the date on which the ~~taxpayer~~U.S. Holder recognized the loss. The deductibility of a capital loss recognized on the sale, exchange or other disposition of common shares is subject to limitations. A U.S. Holder that receives foreign currency upon disposition of common shares and subsequently converts the foreign currency into U.S. dollars generally will have foreign exchange gain or loss based on any appreciation or depreciation in the value of the foreign currency against the U.S. dollar. U.S. Holders should consult their own tax advisors regarding treatment of any foreign currency gain or loss on any Canadian dollars received in respect of the sale, exchange or other disposition of common shares.

Tax Status of the Company

Personal Holding Companies. A non-U.S. corporation may be classified as a personal holding company for United States federal income tax purposes if both of the following two tests are satisfied: (i) if at any time during the last half of the company's taxable year, five or fewer individuals (without regard to their citizenship or residency) own or are deemed to own (under certain attribution rules) more than 50% of the stock of the corporation by value and (ii) 60% or more of such non-U.S. corporation's gross income derived from U.S. sources or effectively connected with a U.S. trade or business, as specifically adjusted, is from certain passive sources such as dividends and royalty payments. Such a corporation generally is taxed ~~(currently at a rate of 39.6% of "undistributed personal holding company income")~~ on the amounts of such passive source income, after making adjustments such as deducting dividends paid and income taxes, that are not distributed to shareholders. We believe that our company was not a personal holding company in ~~1999~~2004 and is not currently a personal holding company. However, no assurance can be given that either test will not be satisfied in the future.

Foreign Personal Holding Companies. A non-U.S. corporation will be classified as a foreign personal holding company for United States federal income tax purposes if both of the two following tests are satisfied: (i) five or fewer individuals who are United States citizens or residents own or are deemed to own (under certain attribution rules) more than 50% of all classes of the corporation's stock measured by voting power or value and (ii) the corporation receives at least 60% (50% if previously ana foreign personal holding company) of its gross income (regardless of source), as specifically adjusted, from certain passive sources. If such a corporation is classified as a foreign personal holding company, a portion of its "undistributed foreign personal holding company income" (as defined for United States federal income tax purposes) would be imputed to all of its shareholders who are U.S. Holders on the last taxable day of the corporation's taxable year, or, if earlier, the last day on which it is classifiable as a foreign personal holding company. Such income would be taxable as a dividend, even if no cash dividend is actually paid. U.S. Holders who dispose of their shares prior to such date would not be subject to tax under these rules. We believe that our company was not a foreign personal holding company in ~~1999~~2004 and is not currently a foreign personal holding company. However, no assurance can be given that our company will not qualify as a foreign personal holding company in the future.

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

investment 49 company if at least 50% of the value of the company's assets (averaged over the year) (including the pro rata share of the value of the assets of any company in which the company is considered to own 25% or more of the shares (determined by market value)) in a taxable year are held for the production of, or produce, passive income. For these purposes, the value of our assets is calculated based on our market capitalization. Passive income generally includes, among others, interest, dividends, royalties, rents and annuities.

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

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

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

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

We do not believe our company was a passive foreign investment company during ~~1999.~~2004. However, there can be no assurance that our company will not be classified as a passive foreign investment company in ~~2000~~2005 or 50 thereafter because the tests for determining passive foreign investment company status are applied annually and it is difficult to make accurate predictions of future income and assets, which are relevant to this determination. U.S. Holders who hold common shares during a period when our company is a passive foreign investment company will be subject to the foregoing rules, even if our company ceases to be a passive foreign investment company, subject to certain exceptions for U.S. Holders who made a QEF election. U.S. Holders are urged to consult with their own tax advisors about making a QEF election or mark-to-market election and other aspects of the passive foreign investment company rules.

Back-Up Withholding and Information Reporting

U.S. Holders generally are subject to information reporting requirements and back-up withholding with respect to dividends paid in the United States on common ~~shares. Back-up withholding will not apply if a U.S. holder provides an IRS Form W-9~~shares, or ~~otherwise establishes an exemption. U.S. holders are subject to information reporting and back-up withholding at a rate of 31% on~~ proceeds paid from the disposition of common shares, unless the U.S. ~~holder~~Holder provides an IRS Form W-9 or otherwise establishes an exemption. Non-U.S. holders generally are not subject to information reporting or back-up withholding with respect to dividends paid on, or the proceeds from the disposition of, common shares, provided that such non-U.S. holder provides a taxpayer identification number, certifies to its foreign status, or otherwise establishes an exemption.

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

F.	Dividends and Paying Agents

Not applicable. ~~G. Statements by Experts~~

G.	Statements by Experts

Not applicable. ~~H. Documents on display.~~

H.	Documents on Display.

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

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

450 Fifth Street N.W. ~~7 World Trade Center~~	500 West Madison Street
Room 1024 ~~New York, New York 10048~~	Suite 1400
Washington D.C. 20549	Chicago, Illinois 60661

You can also obtain copies of this material by mail from the Public Reference Section of the Securities and Exchange Commission, 450 Fifth Street, N.W., Washington, D.C. 20549, at prescribed rates. Additionally, copies of this material may also be obtained from the Securities and Exchange ~~Commission's~~Commission’s Internet site at http://www.sec.gov. The ~~Commission's~~Commission’s telephone number is ~~1-800- SEC-0330. 51~~ 1-800-SEC-0330.

I.	Subsidiary Information.

~~Not applicable.~~

~~ITEM 11 - QUANTITATIVE AND QUALITATIVE DISCLOSURE ABOUT MARKET RISK ~~(a)~~~~

(a)	Quantitative Information about Market Risk

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

(b)	Qualitative Information about Market Risk

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

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

~~Not applicable.~~

~~PART II~~

~~ITEM 13 - DEFAULT, DIVIDEND ARREARAGES AND DELINQUENCIES~~

~~None.~~

~~ITEM 14 - MATERIAL MODIFICATIONS TO THE RIGHTS OF SECURITY HOLDERS AND USE OF PROCEEDS~~

There were no material modifications ~~effecting~~to the rights of ~~securities~~our security holders ~~made~~ during the fiscal year ended December 31, ~~2000.~~ 2004.

~~ITEM 15 - CONTROLS AND PROCEDURES~~

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

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

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

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

~~ITEM 16B - CODE OF ETHICS~~

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

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

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

FEES OF AUDITORS

Year

Audit Fees⁽¹⁾

Audit-Related Fees⁽²⁾

Tax Fees⁽³⁾

Other Fees⁽⁴⁾

2003 $ 160,000 $ 66,000 $
71,450⁽⁵
⁾
$ 18,750
2004 $ 243,000 $ 60,000 $ 36,000 $ 9,000

	(1)	Audit Fees represent costs associated with the audit of our company’s financial statements including U.S. GAAP and U.S. GAAS.

	(2)	Audit-Related Fees represent costs associated with reviews of our company’s quarterly financial press releases and shareholders reports.

	(3)	Tax Fees represent costs associated with the preparation of our company’s annual tax filings, tax planning & advice.

	(4)	Other fees represent costs associated with the review and recommended accounting treatment related to complicated contracts or arrangements.

	(5)	$28,500 of this amount represents a fee that was recovered by the company.

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

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

~~Not applicable.~~

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

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

~~PART III~~

~~ITEM ~~17-~~17- FINANCIAL STATEMENTS~~

~~Not applicable.~~

~~ITEM 18 - FINANCIAL STATEMENTS~~

~~See the Index to Consolidated Financial Statements accompanying this report on page F-1. ~~ITEM 18 - FINANCIAL STATEMENTS Not applicable.~~~~

~~ITEM 19 - EXHIBITS~~

Exhibits filed as part of this Annual Report. 1.1 Articles of Incorporation of the Company.(1) 1.2 By-laws of the Company.(2) 3.1 Underwriting Agreement dated September 30, 1999, between the Company and Canaccord Capital Corporation. (3) 3.2 Warrant Indenture dated September 30, 1999, between the Company and CIBC Mellon Trust Company. (4) 3.3 Special Warrant Indenture dated September 30, 1999, between the Company and CIBC Mellon Trust Company. (5) 3.4 Purchase Agreement, dated as of June 16, 2000, between Bid.Com International Inc. and Acqua Wellington Value Fund Ltd. 3.5 Registration Rights Agreement, dated as of June 16, 2000, between Bid.Com International and Acqua Wellington Value Fund Ltd. 3.6 Warrant dated June 16, 2000, between Bid.Com International and Acqua Wellington Value Fund Ltd. 3.7 Form of Subscription Agreement dated October 3, 1997 between the Company and each of the Investors in the October 3, 1997 private placement. (6) 3.8 Special Warrant Indenture dated October 3, 1997 between the Company and CIBC Mellon Trust Company. (7) 3.9 Share Purchase Warrant Indenture dated October 3, 1997 between the Company and CIBC Mellon Trust Company. (8) 3.10 Underwriting Agreement dated October 3, 1997 between the Company, Yorkton Securities Inc. and First Marathon Securities Limited. (9) 3.11 Form of Subscription Agreement dated August 4, 1998 between the Company and each of the Investors in the August 4, 1998 private placement. (10) 3.12 Special Warrant Indenture dated August 4, 1998 among the Company, certain Selling Shareholders and CIBC Mellon Trust Company. (11) 3.13 Share Purchase Warrant Indenture dated August 4, 1998 among the Company, certain Selling Shareholders and CIBC Mellon Trust Company. (12) 3.14 Underwriting Agreement dated August 4, 1998 between the Company and Yorkton Securities Inc. (13) 3.15 Form of Subscription Agreement dated November 30, 1998 among the Company and the Investors in the November 30, 1998 private placement. (14) 3.17 Underwriting Agreement dated November 30, 1998 between the Company and Yorkton Securities Inc. (15) 3.18 Special Warrant Indenture dated November 30, 1998 among the Company, certain Selling Shareholders and CIBC Mellon Trust Company. (16) 3.19 Share Purchase Warrant Indenture dated November 30, 1998 among the Company, certain Selling Shareholders and CIBC Mellon Trust Company. (17) 3.20 Salary Protection Letter, dated February 12, 1997, between the Company and Jeffrey Lymburner. (18) -------------------- (1) Incorporated by reference from Exhibit 1.1 of Amendment No. 1 to the Company's Registration Statement on Form 20-F, File No. 001-14835, filed with the Securities and Exchange Commission on March 29, 1999. (2) Incorporated by reference from Exhibit 1.2 of Amendment No. 1 to the Company's Registration Statement on Form 20-F, File No. 001-14835, filed with the Securities and Exchange Commission on March 29, 1999. (3) Incorporated by reference from Exhibit 3.1 to the Company's Annual Report on Form 20-F, File No. 001-14835, filed with the Securities and Exchange Commission on May 19, 2000. (4) Incorporated by reference from Exhibit 3.2 to the Company's Annual Report on Form 20-F, File No. 001-14835, filed with the Securities and Exchange Commission on May 19, 2000. (5) Incorporated by reference from Exhibit 3.3 to the Company's Annual Report on Form 20-F, File No. 001-14835, filed with the Securities and Exchange Commission on May 19, 2000. (6) Incorporated by reference from Exhibit 3.7 of the Company's Registration Statement on Form 20-F, File No. 001-14835, filed with the Securities and Exchange Commission on February 16, 1999. (7) Incorporated by reference from Exhibit 3.8 of the Company's Registration Statement on Form 20-F, File No. 001-14835, filed with the Securities and Exchange Commission on February 16, 1999. (8) Incorporated by reference from Exhibit 3.9 of Amendment No. 1 to the Company's Registration Statement on Form 20-F, File No. 001-14835, filed with the Securities and Exchange Commission on March 29, 1999. (9) Incorporated by reference from Exhibit 3.10 of the Company's Registration Statement on Form 20-F, File No. 001-14835, filed with the Securities and Exchange Commission on February 16, 1999. (10) Incorporated by reference from Exhibit 3.11 of the Company's Registration Statement on Form 20-F, File No. 001-14835, filed with the Securities and Exchange Commission on February 16, 1999. (11) Incorporated by reference from Exhibit 3.12 of the Company's Registration Statement on Form 20-F, File No. 001-14835, filed with the Securities and Exchange Commission on February 16, 1999. (12) Incorporated by reference from Exhibit 3.13 of the Company's Registration Statement on Form 20-F, File No. 001-14835, filed with the Securities and Exchange Commission on February 16, 1999. (13) Incorporated by reference from Exhibit 3.14 of the Company's Registration Statement on Form 20-F, File No. 001-14835, filed with the Securities and Exchange Commission on February 16, 1999. (14) Incorporated by reference from Exhibit 3.17 of the Company's Registration Statement on Form 20-F, File No. 001-14835, filed with the Securities and Exchange Commission on February 16, 1999. (15) Incorporated by reference from Exhibit 3.18 of the Company's Registration Statement on Form 20-F, File No. 001-14835, filed with the Securities and Exchange Commission on February 16, 1999. (16) Incorporated by reference from Exhibit 3.19 of the Company's Registration Statement on Form 20-F, File No. 001-14835, filed with the Securities and Exchange Commission on February 16, 1999. (17) Incorporated by reference from Exhibit 3.20 of the Company's Registration Statement on Form 20-F, File No. 001-14835, filed with the Securities and Exchange Commission on February 16, 1999. (18) Incorporated by reference from Exhibit 3.27 of Amendment No. 1 to the Company's Registration Statement on Form 20-F, File No. 001-14835, filed with the Securities and Exchange Commission on March 29, 1999. 52

	1.1	Articles of Arrangement of the Company filed with the Ontario Ministry of Consumer and Business Services on October 31, 2002.⁽¹⁾

	1.2	By-laws of the Company.⁽²⁾

	2.1	Form of Convertible Secured Note.⁽⁶⁾

	2.2	Registration Rights Agreement, dated as of June 16, 2000, between Bid.Com International and Acqua Wellington Value Fund Ltd.⁽⁴⁾

	2.3	Form of Warrant issued or issuable upon exercise of Convertible Secured Notes.⁽⁶⁾

	4.1	Salary Protection Letter, dated February 12, 1997, between the Company and Jeffrey Lymburner.⁽³⁾

	4.2	Option Agreement dated February 19, 2001 between Bid.Com International Inc. and Wendell Willick.⁽⁵⁾

	4.3	Amendment to Option Agreement dated May 2, 2001 between Bid.Com International Inc. and Wendell Willick.⁽⁵⁾

	4.4	Board Support Agreement, dated as of September 7, 2001 between Bid.Com International Inc. and ADB Systemer ASA.⁽⁵⁾

	4.5	Board Representation Agreement, dated as of September 7, 2001 between Bid.Com International Inc. and LimeRock Partners LLC, Jan Pedersen, Sandnes Investering, Rogaland Investering, AIG Private Bank Ltd. and Karstein Gjersvik.⁽⁵⁾

	4.6	Employment Agreement, dated as of September 18, 2001 between Bid.Com International Inc. and Jan Pedersen.⁽⁵⁾

	4.7	Subscription Agreement, dated as of April 25, 2002, between ADB Systems International Inc. and Stonestreet Limited Partnership.⁽⁵⁾

	4.8	Arrangement Agreement, dated as of August 23, 2002, between ADB Systems International Inc. and ADB Systems International Ltd.⁽¹⁾

	4.9	General Conveyance and Assumption Agreement, dated August 23, 2002, between ADB Systems International Inc. and ADB Systems International Ltd.⁽²⁾

	4.10	Loan Agreement, dated August 23, 2002, and Loan Agreement Amending Agreement entered into as of August 30, 2002 among The Brick Warehouse Corporation, ADB Systems International Inc. and ADB Systems International Ltd.⁽⁶⁾

	4.11	Form of Supply Services and Licensing Agreement, dated August 23, 2002, among The Brick Warehouse Corporation, ADB Systems International Inc., and ADB Systems International Ltd.⁽⁶⁾

	4.12	Form of General Security Agreement, dated as of April 30, 2002, between ADB Systems International Inc. and each of Stonestreet Limited Partnership and Greenwich Growth Fund Ltd.⁽⁶⁾

	4.13	Form of Subscription Agreement, dated August 30, 2002, between ADB Systems International Inc. and Stonestreet Limited Partnership.⁽⁶⁾

	4.14	Form of Subscription Agreement, dated August 30, 2002, between ADB Systems International Inc. and Greenwich Growth Fund Ltd.⁽⁶⁾

	4.15	Co-operation Agreement made as of August 23, 2002 between ADB Systems International Inc., ADB Systems International Ltd. and The Brick Warehouse Corporation.⁽⁶⁾

	4.16	Agency Agreement dated June 15, 2004 between ADB Systems International Ltd. and First Associates Investments Inc.⁽⁷⁾

	4.17	General Security Agreement dated as of May 19, 2004 between ADB Systems International Ltd. and Stonestreet Limited Partnership.⁽⁷⁾

	4.18	Form of Subscription Agreement between ADB Systems International Ltd. and First Associates Investments Inc.⁽⁷⁾

	4.19	Subscription Agreement dated May 19, 2004 between ADB Systems International Ltd. and Stonestreet Limited Partnership.⁽⁷⁾

	4.20	Formof Subscription Agreement for Equity Private Placements.*

	8.1	List of Subsidiaries.*

	10.1	Certification pursuant to 18 U.S.C. Section 1350.*

	11.1	Code of Ethics of ADB Systems International Ltd.⁽⁷⁾

	*	Filed herewith

	(1)	Incorporated by reference from Exhibit 1 to the Company’s Current Report on Form 6-K, Filing No. 1 for the Month of November 2002, filed with the Securities and Exchange Commission on November 5, 2002.

	(2)	Incorporated by reference from Exhibit 1.2 of Amendment No. 1 to the Company’s Registration Statement on Form 20-F, File No. 001-14835, filed with the Securities and Exchange Commission on March 30, 1999.

	(3)	Incorporated by reference from Exhibit 3.27 of Amendment No. 1 to the Company’s Registration Statement on Form 20-F, File No. 001-14835, filed with the Securities and Exchange Commission on March 30, 1999.

	(4)	Incorporated by reference from the Exhibits to the Company’s Annual Report on Form 20-F, File No. 001-14835, filed with the Securities and Exchange Commission on May 23, 2001.

	(5)	Incorporated by reference from the Exhibits to the Company’s Annual Report on Form 20-F, File No. 001-14835, filed with the Securities and Exchange Commission on May 17, 2002.

	(6)	Incorporated by reference from Exhibits to the Company’s Annual Report on Form 20-F, File No. 001-14835, filed with the Securities and Exchange Commission on May 20, 2003.

	(7)	Incorporated by reference from Exhibits to the Company’s Annual Report on Form 20-F, File No. 001-14835, filed with the Securities and Exchange Commission on June 30, 2004.

~~SIGNATURES~~

The registrant hereby certifies that it meets all of the requirements for filing on Form 20-F and has duly caused and authorized the undersigned to sign this ~~annual~~Annual Report on its behalf. ~~BID.COM INTERNATIONAL INC. By: /s/~~

	ADB SYSTEMS INTERNATIONAL INC.


	By:	/s/ Jeffrey Lymburner
		Name:	Jeffrey Lymburner
		Title:	Chief Executive Officer



Dated: June 24, 2005	By:	/s/ Michael Robb
		Name:	Michael Robb
		Title:	Chief Financial Officer and Corporate Secretary

~~Certification~~

I, Jeffrey Lymburner, ~~------------------------------------ Name: Jeffrey Lymburner Title: President~~certify that:

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

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

3. Based on my knowledge, the financial statements, and Chief Executive Officer Dated: May 18, 2001 By: /s/ John Mackie ------------------------------------ Name: John Mackie Title: Vice-President, General Counselother financial information included in this report, fairly present in all material respects the financial condition, results of operations and ~~Corporate Secretary 53~~ ~~Bid.Com~~cash flows of the company as of, and for, the periods presented in this report;

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

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

	b) not applicable;

	c) Evaluated the effectiveness of the company’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

	d) Disclosed in this report any change in the company’s internal control over financial reporting that occurred during the period covered by the annual report that has materially affected, or is reasonably likely to materially affect, the company’s internal control over financial reporting; and

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

	a) All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the company's ability to record, process, summarize and report financial information; and

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

Dated: June 24, 2005	/s/ Jeffrey Lymburner
	Jeffrey Lymburner
	Chief Executive Officer

~~Certification~~

~~I, Michael Robb, certify that:~~

~~1. I have reviewed this annual report on Form 20-F of ADB Systems International ~~Inc. Consolidated Financial Statements~~ Ltd.;~~

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

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

	b) not applicable;

	c) Evaluated the effectiveness of the company’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

	d) Disclosed in this report any change in the company’s internal control over financial reporting that occurred during the period covered by the annual report that has materially affected, or is reasonably likely to materially affect, the company’s internal control over financial reporting; and

	a) All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the company's ability to record, process, summarize and report financial information; and

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

Dated: June 24, 2005	/s/ Michael Robb
	Michael Robb
	Chief Financial Officer

~~INDEX TO CONSOLIDATED FINANCIAL STATEMENTS~~

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

~~Page ----~~ ~~Audited Consolidated Financial Statements for the years ended December 31, 2000, 1999 and 1998~~
Report of Independent ~~Auditors' Report............................................................................ F-2~~ Registered Chartered Accountants			F-1
Consolidated Balance Sheets as at December 31, ~~2000~~2004 and ~~1999............................................~~ 2003			F-3
Consolidated Statements of Operations for the years ended December 31, ~~2000, 1999~~2004, 2003 and ~~1998..............~~ 2002			F-4
Consolidated Statements of Deficit for the years ended December 31, ~~2000, 1999~~2004, 2003 and ~~1998.................~~ 2002			F-5
Consolidated Statements of Cash Flows for the years ended December 31, ~~2000, 1999~~2004, 2003, and ~~1998..............~~ 2002			F-6
Notes to Consolidated Financial ~~Statements..............................................................~~ Statements			F-7

~~F-1~~ ~~Auditors'~~

~~Management’s Report~~

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

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


Jeff Lymburner	Michael Robb
CEO	Chief Financial Officer

~~Report of Independent Registered Chartered Accountants~~

~~To the Shareholders of ~~Bid.Com~~ADB Systems International ~~Inc.~~ Ltd.~~

We have audited the consolidated balance sheets of ~~Bid.Com~~ADB Systems International ~~Inc.~~Ltd. as at December 31, ~~2000~~2004 and ~~1999,~~2003, and the consolidated statements of operations, deficit and cash flows for each of the ~~three~~ years in the three year period ended December 31, ~~2000.~~2004. These financial statements are the responsibility of the Company's management. Our responsibility is to express an opinion on these financial statements based on our audits. With respect to the consolidated financial statements for the year ended December 31, 2000, we conducted our audit in accordance with Canadian generally accepted auditing standards and United States generally accepted auditing standards. With respect to the consolidated balance sheet as at December 31, 1999 and the consolidated statements of operations, deficits and cash flows for each of the two years in the period ended December 31, 1999, we

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

In our opinion, these consolidated financial statements present fairly, in all material respects, the financial position of the Company as at December 31, ~~2000~~2004 and ~~1999~~2003 and the results of its operations and its cash flows for each of the ~~three~~ years in the three year period ended December 31, ~~2000~~2004 in accordance with Canadian generally accepted accounting principles. ~~Effective January 1, 2000,~~

The Company is not required to have, nor were we engaged to perform, an audit of its internal control over financial reporting. Our audit included consideration of internal control over financial reporting as a basis for designing audit procedures that are appropriate in the ~~Company adopted~~circumstances, but not for the ~~liability method~~purpose of ~~accounting for income taxes for reporting under Canadian generally accepted accounting principles. The change, which had no effect~~expressing an opinion on the ~~financial statements~~effectiveness of the ~~Company, is explained in Note 6. /s/ Deloitte & Touche LLP~~Company’s internal control over financial reporting. Accordingly we express no such opinion.

~~ADB Systems International Ltd. F-1~~

~~Independent Registered Chartered Accountants~~

~~Toronto, Ontario, Canada ~~February 9, 2001~~~~

~~March 6, 2005~~

~~Comments by ~~Auditors for U.S. readers~~Independent Registered Chartered Accountants on ~~Canadian~~Canada - United States Reporting ~~Differences United States reporting~~Difference~~

The standards ~~for auditors~~of the Public Company Accounting Oversight Board (United States) require the addition of an explanatory ~~paragraph following the opinion~~ paragraph when the financial statements are affected by conditions and events that cast substantial doubt on the ~~Company's~~Company’s ability to continue as a going concern, such as those described in Note 2 to the financial statements. Although we conducted our audits in accordance with ~~both~~ Canadian generally accepted auditing standards and ~~United States generally accepted auditing standards,~~the Standards of the Public Company Accounting Oversight Board (United States), our report to the Shareholders dated ~~February 9, 2001~~March 6, 2005 is expressed in accordance with Canadian reporting standards which do not permit a reference to such conditions and events in the ~~auditors'~~auditors’ report when these are adequately disclosed in the financial statements.

~~Independent Registered Chartered Accountants~~

~~Toronto, Ontario, Canada~~

~~March 6, 2005~~

~~ADB Systems International Ltd. F-2 ~~BID.COM INTERNATIONAL INC.~~~~

~~Consolidated Balance Sheets~~

~~December 31, ~~2000~~2004 and ~~1999 (in~~2003~~

~~(in thousands ofCanadian dollars)~~

2004

2003

ASSETS

CURRENT
Cash
$ 440 $ 432
Marketable securities
13 13
Accounts receivable
1,535 1,384
Deposits and prepaid expenses
208 118
2,196 1,947
CAPITAL ASSETS (Note 4) 142 266
ACQUIRED SOFTWARE (Note 20) - 846
DEFERRED CHARGES (NET) (Note 5) 155 -
ACQUIRED AGREEMENTS (Note 21) - 150
TRADEMARKS AND INTELLECTUAL PROPERTY (NET)
- 2
$ 2,493 $ 3,211
LIABILITIES

CURRENT
Accounts payable
$ 870 $ 700
Accrued liabilities
810 670
Deferred revenue
135 91
1,815 1,461
SECURED SUBORDINATED NOTES (Note 6) 1,684 721
3,499 2,182
NON-CONTROLLING INTEREST 3 3
COMMITMENTS AND CONTINGENCIES (Notes 2 and 14)
SHAREHOLDERS’ DEFICIENCY

Share capital (Note 8)
100,052 97,674
Contributed surplus (Note 9)
1,282 1,289
Warrants (Note 10)
405 324
Stock options (Note 11)
936 898
Other options (Note 12)
78 -
Conversion feature on secured subordinated notes (Note 6)
992 497
Cumulative translation account
112 106
Deficit
(104,866 ) (99,762 )
(1,009 ) 1,026
$ 2,493 $ 3,211

~~On behalf of the Board:~~


Director	Director

~~See notes to consolidated financial statements.~~

~~ADB Systems International Ltd. F-3~~

Consolidated Statements of Operations
Years ended December 31, 2004, 2003 and 2002
(in thousands ofCanadian dollars, except per share amounts)

2004

2003

2002

Revenue

$
4,930

$
5,853

$
5,780

General and administrative

4,365

4,648

6,288

Sales and marketing

749

1,098

1,875

Software development and technology

3,257

2,817

4,101

8,371

8,563

12,264

Loss before employee stock options, depreciation and amortization, interest expense and interest income

(3,441
)
(2,710
)
(6,484
)
Employee stock options (Note 11)

39

193

—

Depreciation and amortization

1,190

1,901

2,602

Interest expense

439

289

200

Interest income

(6
)
(9
)
(45
)

1,662

2,374

2,757

Loss before the undernoted

(5,103
)
(5,084
)
(9,241
)

Realized gain on settlement of demand loan (Note 19)

—

2,195

—

Realized gains and losses on disposal of marketable securities, strategic investments and capital assets (Note 17)

(1
)
7

(85
)
Unrealized gains and losses on revaluation of strategic investments
(Note 18)

—

—

(24
)
Goodwill impairment (Note 22)

—

—

(14
)
Retail activities (Note 16)

—

67

—

(1
)
2,269

(123
)

NET LOSS FOR THE YEAR

$
(5,104
)
$
(2,815
)
$
(9,364
)
LOSS PER SHARE (Note 8(d))

$
(0.08
)
$
(0.05
)
$
(0.22
)

~~See notes to consolidated financial statements.~~

~~ADB Systems International Ltd. F-4~~

~~Consolidated Statements of Deficit~~

~~Years ended December 31, 2004, 2003 and 2002~~

(in thousands of Canadian dollars) ~~================================================================================~~
December 31, - --------------------------------------------------------------------------------------------------------------------- 2000 2000 1999 - --------------------------------------------------------------------------------------------------------------------- Convenience translation into U.S. $ (Note 21) ASSETS CURRENT Cash $ 7,363 $ 4,910 $ 5,019 Marketable securities 8,124 5,418 16,478 Accounts receivable 701 467 1,761 Inventory (Note 4) - - 155 Deposits and prepaid expenses 1,180 787 4,579 - ---------------------------------------------------------------------------------------------------------------------- 17,368 11,582 27,992 CAPITAL ASSETS (Note 5) 1,760 1,174 977 STRATEGIC INVESTMENTS 1,176 784 5,386 CAPITALIZED SOFTWARE 473 315 - TRADEMARKS AND INTELLECTUAL PROPERTY (NET) 24 16 503 GOODWILL - (at cost less accumulated amortization 2000 - $ 4,045, US $2,698; 1999 - $160) - - 1,885 - ---------------------------------------------------------------------------------------------------------------------- $20,801 $13,871 $36,743 ====================================================================================================================== LIABILITIES CURRENT Accounts payable $ 1,213 $ 809 $ 3,604 Accrued liabilities 807 538 1,900 Current portion of capital lease obligation 66 44 - Current portion of deferred revenue 1,611 1,075 965 - ---------------------------------------------------------------------------------------------------------------------- 3,697 2,466 6,469 DEFERRED REVENUE 1,185 790 1,289 CAPITAL LEASE OBLIGATION 59 39 - - ---------------------------------------------------------------------------------------------------------------------- 4,941 3,295 7,758 ====================================================================================================================== Commitments and Contingencies [Notes 2 and 10] SHAREHOLDERS' EQUITY Share capital (Note 7) 83,724 55,835 77,488 Warrants (Note 7(h)) 1,005 670 - Deficit (68,869) (45,929) (48,503) - ---------------------------------------------------------------------------------------------------------------------- 15,860 10,576 28,985 - ---------------------------------------------------------------------------------------------------------------------- $ 20,801 $ 13,871 $ 36,743 ======================================================================================================================
~~F-3~~ BID.COM INTERNATIONAL INC. Consolidated Statements of Operations Years ended December 31, 2000, 1999 and 1998 (in thousands of Canadian dollars, except per share amount) ================================================================================
Year ended December 31, - -------------------------------------------------------------------------------------------------------------------------------- 2000 2000 1999 1998 - -------------------------------------------------------------------------------------------------------------------------------- Convenience translation into U.S. $ (Note 21) Revenue (Note 19) $ 12,497 $ 8,334 $ 31,001 $ 20,001 Less: Customer acquisition costs (157) (105) - - - -------------------------------------------------------------------------------------------------------------------------------- Net revenue 12,340 8,229 31,001 20,001 - -------------------------------------------------------------------------------------------------------------------------------- Direct expenses 11,460 7,642 26,696 19,361 Advertising and promotion (Note 12) 5,040 3,361 11,870 12,594 General and administrative 19,397 12,936 12,405 5,751 Software development and technology expense 1,802 1,202 1,001 889 Depreciation and amortization 1,130 754 621 201 Interest income (467) (311) (767) (88) - -------------------------------------------------------------------------------------------------------------------------------- 38,362 25,584 51,826 38,708 - -------------------------------------------------------------------------------------------------------------------------------- Loss before the undernoted (26,022) (17,355) (20,825) (18,707) - -------------------------------------------------------------------------------------------------------------------------------- Realized gains on disposal of marketable securities and strategic investments (Note 13) 20,946 13,969 - - Unrealized losses on revaluation of marketable securities and provision for impairment of long term assets (Note 14) (15,290) (10,197) - - - -------------------------------------------------------------------------------------------------------------------------------- 5,656 3,772 - - - -------------------------------------------------------------------------------------------------------------------------------- NET LOSS FOR THE YEAR $ (20,366) $ (13,583) $ (20,825) $ (18,707) ================================================================================================================================ LOSS PER SHARE $ (0.38) $ (0.25) $ (0.42) $ (0.79) ================================================================================================================================
~~F-4~~ BID.COM INTERNATIONAL INC. Consolidated Statements of Deficit Years ended December 31, 2000, 1999 and 1998 (in thousands of Canadian dollars) ================================================================================
Year ended December 31, - -------------------------------------------------------------------------------------------------------------------------------- 2000 2000 1999 1998 - -------------------------------------------------------------------------------------------------------------------------------- Convenience translation into U.S. $ (Note 21) DEFICIT, BEGINNING OF YEAR $ (48,503) $ (32,346) $ (27,678) $ (8,971) NET LOSS FOR THE YEAR (20,366) (13,583) (20,825) (18,707) ================================================================================================================================ DEFICIT, END OF YEAR $ (68,869) $ (45,929) $ (48,503) $ (27,678) ================================================================================================================================

2004

2003

2002

DEFICIT, BEGINNING OF YEAR

$
(99,762
)
$
(96,947
)
$
(87,583
)
NET LOSS FOR THE YEAR

(5,104
)
(2,815
)
(9,364
)
DEFICIT, END OF YEAR

$
(104,866
)
$
(99,762
)
$
(96,947
)

~~See notes to consolidated financial statements.~~

~~ADB Systems International Ltd. F-5 ~~BID.COM INTERNATIONAL INC.~~~~

Consolidated Statements of Cash Flows
Years ended December 31, ~~2000, 1999~~2004, 2003 and ~~1998 (in~~2002
(in thousands of Canadian Dollars) ~~================================================================================~~
Year ended December 31, - -------------------------------------------------------------------------------------------------------------------------------- 2000 2000 1999 1998 - -------------------------------------------------------------------------------------------------------------------------------- Convenience NET INFLOW (OUTFLOW) OF CASH translation RELATED TO THE FOLLOWING ACTIVITIES into U.S. $ (Note 21) OPERATING Net loss for the year $ (20,366) $ (13,583) $ (20,825) $ (18,707) Items not affecting cash Depreciation and amortization 1,130 754 621 201 Non cash customer acquisition costs 1,005 670 - - Realized gains on disposal of marketable securities and Strategic investments (Note 13) (20,946) (13,969) - - Unrealized losses on revaluation of marketable securities and provision for impairment of long term assets (Note 14) 15,290 10,197 - - - --------------------------------------------------------------------------------------------------------------------------------- (23,887) (15,931) (20,204) (18,506) Changes in non-cash operating working capital (Note 11) 822 548 738 1,702 - --------------------------------------------------------------------------------------------------------------------------------- (23,065) (15,383) (19,466) (16,804) - --------------------------------------------------------------------------------------------------------------------------------- INVESTING Capital assets (1,426) (951) (693) (351) Strategic investments (2,612) (1,742) (5,386) - - Capitalized Software, trademarks and intellectual property (590) (393) (555) (68) Marketable securities 25,676 17,123 (9,672) (5,648) - --------------------------------------------------------------------------------------------------------------------------------- 21,048 14,037 (16,306) (6,067) - --------------------------------------------------------------------------------------------------------------------------------- FINANCING Issuance of common shares (Note 7) 4,236 2,825 28,688 31,077 Capital lease obligation 148 99 - - Repayment of capital lease (23) (15) - - Issuance of special warrants (net of expenses) - - - 689 Special warrants receivable - - 2,311 (122) - --------------------------------------------------------------------------------------------------------------------------------- 4,361 2,909 30,999 31,644 - --------------------------------------------------------------------------------------------------------------------------------- NET CASH INFLOW (OUTFLOW) DURING THE YEAR 2,344 1,563 (4,773) 8,773 CASH, BEGINNING OF YEAR 5,019 3,347 9,792 1,019 ================================================================================================================================ CASH, END OF YEAR $ 7,363 $ 4,910 $ 5,019 $ 9,792 ================================================================================================================================ SUPPLEMENTAL DISCLOSURE OF CASH PAYMENTS Interest expense $ - $ - $ - $ - Income taxes $ - $ - $ - $ -

2004

2003

2002

NET INFLOW (OUTFLOW) OF CASH RELATED TO THE FOLLOWING ACTIVITIES

OPERATING

Net loss for the year

$
(5, 104
)
$
(2,815
)
$
(9,364
)
Items not affecting cash

Depreciation and amortization

1,190

1,901

2,602

Non cash customer acquisition costs

—

38

—

Non cash interest expense

266

239

108

Employee stock options

39

193

—

Stock compensation to third parties

—

—

25

Realized gain on settlement of demand loan (Note 19)

—

(2,195
)
—

Realized gains and losses on disposal of marketable securities, strategic investments, and capital assets (Note 17)

1

(7
)
85

Unrealized gains and losses on revaluation of strategic investments
(Note 18)

—

—

24

Goodwill impairment (Note 22)

—

—

14

Changes in non cash operating working capital (Note 15)

322

(728
)
61

(3,286
)
(3,374
)
(6,445
)
INVESTING

Capital assets

(40
)
(45
)
(43
)
Capitalized software, trademarks and intellectual property

—

—

(7
)
Marketable securities

—

8

1,556

Proceeds from disposal of capital assets

—

34

167

Proceeds from disposal of joint venture and strategic investments
(Note 17 (a))

—

20

126

Purchase of non-controlling interest

—

—

(14
)

(40
)
17

1,785

FINANCING

Issuance of common shares for cash (Note 8 (b))

903

1,458

1,506

Repayment of capital lease

—

—

(42
)
Secured subordinated notes (Note 6)

2,598

994

1,000

Deferred charges (Note 5)

(167
)
—

(1,024
)
Demand loan (Note 19)

—

—

2,000

3,334

2,452

3,440

NET CASH INFLOW (OUTFLOW) DURING THE YEAR

8

(905
)
(1,220
)
CASH, BEGINNING OF YEAR

432

1,337

2,557

CASH, END OF YEAR

$
440

$
432

$
1,337

SUPPLEMENTAL DISCLOSURE OF CASH PAYMENTS

Interest paid

$
60

$
48

$
24

Income taxes

$
—

$
—

$
—

~~SUPPLEMENTAL DISCLOSURE OF NON-CASH FINANCING ACTIVITIES – See Note 15~~

~~See notes to consolidated financial statements.~~

~~ADB Systems International Ltd. F-6 ~~BID.COM INTERNATIONAL INC. Years ended December 31, 2000, 1999 and 1998~~~~

Notes to the Consolidated Financial Statements ~~================================================================================~~
Years ended December 31, 2004, 2003 and 2002
(in Canadian dollars)

~~1.DESCRIPTION OF BUSINESS ~~Since inception,~~~~

ADB Systems International Ltd. (“ADB” or the “Company”) delivers asset lifecycle management solutions that enable companies to source, manage and sell assets for maximum value. ADB works with a growing number of customers and partners in a variety of sectors including the asset-intensive oil and gas industry to improve operational efficiencies. ADB also enables customers in government, manufacturing and financial services sectors to reduce purchasing costs and improve procurement processes.

ADB was created on August 30, 2002. Upon implementation of a special resolution of the shareholders of the Company and shareholders of ADB Systems International Inc. (“Old ADB”, formerly Bid.Com International Inc. ~~("Bid.Com"~~(“Bid.Com”)), pursuant to Section 182 of the Business Corporations Act (Ontario), the shareholders of Old ADB exchanged their shares for shares of the Company on a one-for-one basis on October 22, 2002. All assets and liabilities of Old ADB, other than those related to retail activities (Note 16) were transferred to the Company on that date in the form of a return of capital. ADB conducted no activities prior to October 22, 2002. Old ADB subsequently changed its name to Bid.Com International Ltd. (“Bid.Com Ltd.”).

These consolidated financial statements reflect the financial position of the Company as at December 31, 2004 and 2003, and results of its operations and its cash flows subsequent to October 22, 2002, and results of operations and of cash flows of Old ADB for the 2002 period prior to October 22, 2002 based upon continuity of interests accounting as no substantive change of ownership occurred.

Bid.Com was an on-line auction service provider and e-tailer. During 2000, the Company refocused its business model to become an on-line ~~enabler for~~enabling service to other businesses ~~desiring~~seeking to ~~take advantage of e-commerce. In October 2000, the Company conducted~~use its ~~last~~ on-line ~~retail auction. As an e-commerce enabler the~~retailing technologies. The Company provides businesses with the use of its software and hardware technology over a specific term in addition to consulting, implementation, and training services. In October 2001, Bid.Com acquired ADB Systemer ASA (“ADB Systemer”), a Norway-based software vendor of enterprise asset management and electronic procurement applications. The Company is constituted under the laws of Ontario by Articles of Amalgamation dated January 9, 1997, which amalgamated Internet Liquidators Inc., and Internet Liquidators International Inc. Internet Liquidators Inc. was incorporated by Articles of Incorporation under the laws of Ontario on September 1, 1995. The business of the Company was developed and carried on by Internet Liquidators Inc. prior to the formation of Internet Liquidators International Inc. Internet Liquidators International Inc. changed its name to ~~Bid.Com~~ADB Systems International Inc. ~~pursuant~~ to ~~Articles of Amendment dated June 25, 1998.~~ reflect its expanded product offering.

~~2.CONTINUATION OF THE BUSINESS~~

While the accompanying consolidated financial statements have been prepared on the basis of accounting principles applicable to a going concern, ~~basis, which contemplates the realization of assets and liquidation of liabilities during the normal course of operations,~~ certain adverse conditions and events cast substantial doubt upon the validity of this assumption. The Company has not yet realized profitable operations and has relied on non-operational sources of financing to fund operations. The ~~Company's~~Company’s ability to continue as a going concern will be dependent on ~~management's~~management’s ability to successfully execute its business plan ~~which~~including a substantial increase in revenue as well as maintaining operating expenses at or near the same level as 2004. Management’s 2005 business plan includes a ~~reduction of operating costs and~~significant increase in ~~revenue.~~revenue and operating cash flow primarily from major new contracts in Norway, the UK and North America. Management believes that it has the ability to raise additional financing if required. The Company ~~may seek additional forms of debt or equity financing, but~~ cannot provide assurance that it will be ~~successful in doing so.~~ able to execute on its business plan or assure that efforts to raise additional financings would be successful.

These financial statements do not include adjustments or disclosures that may result from the ~~Company's~~Company’s inability to continue as a going concern. If the going concern assumption iswere not appropriate for these financial statements, then adjustments would be necessary in the carrying ~~value~~values of assets and liabilities, ~~and~~ the reported net losses and the balance sheet classifications used. The Company's management has developed a business and financial plan to reduce operating costs, and refocus its efforts on more profitable elements of its business model. As a short term measure to improve operating performance, management has implemented a revised financial and business plan requiring internal restructuring and cost cutting measures. Management anticipates that as a result of these measures sufficient cash is on hand to fund operations into early 2002.

Management believes that continued existence beyond ~~this time period~~2004 is dependent on its ability to increase revenue from existing products, and to expand the scope of its product offering which entails a combination of internally developed software and partnerships with third ~~parties, and/or the acquisition of certain independent products or product components developed by third~~ parties. ~~Management also believes that additional equity or debt based financing may be required to continue its operations.~~

~~ADB Systems International Ltd. F-7 ~~BID.COM INTERNATIONAL INC.~~~~

Notes to the Consolidated Financial Statements ~~================================================================================~~
Years ended December 31, 2004, 2003 and 2002
(in Canadian dollars)

~~3.SIGNIFICANT ACCOUNTING POLICIES~~

The accompanying consolidated financial statements are prepared in accordance with accounting principles generally accepted in Canada (Canadian GAAP), which are substantially the same as generally accepted accounting principles in the United States ~~(United States~~(U.S. GAAP) ~~(see~~, except as disclosed in Note ~~18).~~24. The accompanying consolidated financial statements ~~were~~are prepared using accounting principles applicable to a going concern, which assumes that the Company will continue in operation for a reasonable period of time and will be able to realize its assets and discharge its liabilities in the normal course of operations (see Note 2). ~~Principles of consolidation~~

~~PRINCIPLES OF CONSOLIDATION~~

The accompanying consolidated financial statements include the accounts of the Company and ~~its wholly owned~~ subsidiaries over which it exercises control. Business acquisitions are accounted for under the purchase method and ~~its proportionate share~~operating results are included in the consolidated financial statements as of the ~~assets, liabilities, revenue and expenses~~date of ~~a jointly controlled company.~~the acquisition of control. All material inter-company transactions have been eliminated.

~~INVESTMENT IN ASSOCIATED COMPANY~~

The investment in Bid.Com Ltd. was accounted for under the equity method (see Note 23). This method was considered appropriate based upon management’s inability to determine the strategic operating policies of the associated company without the cooperation of others, its inability to obtain future economic benefits from the associated company, and its lack of exposure to the related risks of ownership. U.S. GAAP required consolidation of the investment in associated company. The impact of this difference in U.S. GAAP from Canadian GAAP is disclosed in these financial statements in Note 24 — Reconciliation of United States GAAP.

~~MARKETABLE SECURITIES~~

Marketable securities ~~Marketable securities include unregistered equity instruments~~are comprised of publicly traded companies that are not freely trading until a future date. Unregistered equity instruments have been valued at freely trading market values less a discount factor (see Notes 13 and 17). Marketable securities also include interest bearinginterest-bearing certificates carried at cost plus accrued interest which ~~approximates~~approximate market value. Inventory The Company's operating policy is to purchase products and arrange for shipment directly from suppliers to customers by third party freight carriers. Title to the inventory passes to the Company at the time that the goods are shipped to the customer. Inventory of sales returns are valued at the lower of cost and net realizable value and are held for resale or returned to suppliers for credit. Inventory purchased for resale is valued at the lower of cost determined on the first-in first-out basis and net realizable value. Advertising The Company expenses the costs of producing advertisements at the time production occurs, and expenses the costs of communicating advertising in the period in which the advertising space or airtime is used. Internet advertising expenses are recognized based on specifics of the individual agreements, but generally using the greater of (i) the ratio of the number of impressions delivered over the total number of impressions and (ii) the straight-line basis over the term of the contract. This policy complies with the requirements of Statement of Position No. 93-7, "Reporting on Advertising Costs" issued by the American Institute of Certified Public Accountants. F-8 BID.COM INTERNATIONAL INC. Notes to the Consolidated Financial Statements ================================================================================ 3. SIGNIFICANT ACCOUNTING POLICIES (continued) Capital assets and depreciation

~~CAPITAL ASSETS AND AMORTIZATION~~

Capital assets are carried at cost less accumulated ~~depreciation. Depreciation~~amortization. Amortization is calculated on a straight-line basis in amounts sufficient to amortize the cost of capital assets over their estimated useful lives as follows: Computer hardware 30% per year Furniture and fixtures 20% per year Leasehold improvements life of the lease Strategic Investments Strategic investments are carried at the lower of cost and estimated net realizable value. Management has assessed the carrying value of the investments and recorded an impairment provision based on management's best estimate of net realizable value. Software development costs

Computer hardware		3 years
Computer software		1 year or life of the license
Furniture and fixtures		5 years
Leasehold improvements		life of the lease

~~SOFTWARE DEVELOPMENT COSTS~~

The cost of ~~acquired software and internally developed software for use in on-line retail operations are expensed as incurred. The cost of core~~ software internally developed for client applications through e-commerce enabling agreements and software licensing ~~contracts has been capitalized and~~ is ~~being amortized over two years.~~ expensed as incurred.

~~ACQUIRED SOFTWARE~~

The cost of ~~non-core~~core software ~~internally developed~~acquired as a result of the acquisition of ADB Systemer ASA was capitalized and amortized over three years, the estimated useful life of the software.

~~ACQUIRED AGREEMENTS~~

Acquired agreements were capitalized based on the estimated fair value of common share purchase warrants issued in exchange for ~~client applications through e-commerce enabling~~entering into certain agreements and ~~software licensing contracts has been expensed as incurred. Trademarks~~are amortized over the initial term of the agreements. The fair value of these warrants is calculated based on the Cox-Rubinstein binomial valuation model.

~~ADB Systems International Ltd. F-8~~

Notes to the Consolidated Financial Statements
Years ended December 31, 2004, 2003 and ~~intellectual property~~ 2002
(in Canadian dollars)

~~TRADEMARKS AND INTELLECTUAL PROPERTY~~

Trademarks and intellectual property are recorded at cost and amortized on a straight-line basis over two years. ~~Goodwill The excess~~Trademarks and intellectual property acquired as a result of ~~the cost over the net assets arising on~~ the acquisition of ~~the jointly controlled company acquired in 1999 was being~~ADB Systemer ASA, and directly attributable to core software products, were capitalized and have been amortized over ~~seven years.~~three years, the estimated useful life of the related software.

~~GOODWILL~~

In 2001, the Company adopted the provisions of the Canadian Institute of Chartered Accountants (“CICA”) Handbook sections 1581 and 3062, whereby the purchase price of an acquired business is allocated to all assets and liabilities, including identifiable intangible assets, based on their fair values. Any purchase price in excess of those fair values is recorded as goodwill. Goodwill must be tested annually for impairment on a fair value basis, and where the carrying value exceeds fair value, a goodwill impairment loss must be recorded. This accounting policy became effective January 1, 2002 with a transition provision beginning July 1, 2001. Management assessed the carrying value of the goodwill arising from the acquisition of ADB Systemer, and ~~recorded an impairment provision~~determined that a permanent decline had occurred in the fair value of goodwill at December 31, 2002 based on ~~management's best estimate of~~estimated future ~~cashflow expectations. Translation of foreign currencies~~ cash flows from the business acquired.

~~TRANSLATION OF FOREIGN CURRENCIES~~

The accompanying consolidated financial statements are prepared in Canadian dollars. ~~All~~The Company’s foreign ~~denominated transactions~~subsidiaries in the United States, Ireland and the United Kingdom are ~~translated using~~classified as fully integrated with the functional currency being the Canadian dollar. The Company uses the temporal method ~~whereby monetary~~of foreign currency translation for these operations. Monetary assets and liabilities are translated at the exchange rates in effect on the balance sheet ~~date, non-monetary items~~date. Non-monetary assets are translated at ~~historical rates~~historic exchange rates. Revenue and ~~revenue and expenses at~~expense amounts are translated using the average ~~monthly rate.~~exchange rate for the year except amortization of capital assets which is translated at historic exchange rates. Gains orand losses from foreign exchange translations are included in the ~~statements~~statement of operations. ~~F-9~~ ~~BID.COM INTERNATIONAL INC. Notes to~~

The Company’s subsidiary in Norway is classified as a self-sustaining operation whereby the ~~Consolidated Financial Statements ================================================================================ 3. SIGNIFICANT ACCOUNTING POLICIES (continued)~~functional currency of the operation is the Norwegian krone. The Company ~~accounts~~uses the current rate method of translation for these operations. Assets and liabilities are translated at the rate of exchange in effect at the balance sheet date. Revenue and expenses (including depreciation and amortization) are translated using the average exchange rate for the year. Gains and losses from foreign ~~currency transactions in its subsidiaries on~~exchange translations are included as a ~~temporal basis, based on management's determination that all operations~~separate component of ~~foreign subsidiaries are fully integrated. Loss~~shareholders’ equity.

~~LOSS PER SHARE~~

The treasury stock method of calculating diluted earnings per share is used. For the years presented, all stock options, convertible debentures and warrants are anti-dilutive, therefore diluted loss per share is equal to basic loss per share. The basic loss per share calculation is based on the weighted average number of shares outstanding during the year. ~~No fully diluted calculation is included, as it would reduce~~

~~ADB Systems International Ltd. F-9~~

Notes to the ~~loss per share. Revenue Recognition a) Sale of products~~Consolidated Financial Statements
Years ended December 31, 2004, 2003 and ~~related activities Revenue from product sales, commissions, shipping and handling~~2002
(in Canadian dollars)

~~REVENUE RECOGNITION~~

The Company’s revenues are ~~recognized when the goods are shipped to customers. b) License revenue License revenue consists primarily of revenue~~derived from software license ~~agreements~~fees, implementation, training and ~~is amortized over the term~~consulting services, product maintenance and customer support, and software development, and hosting fees. Fees for services are billed separately from licenses of the agreement or three years when a revenue sharing arrangement exists. Revenue from net revenue sharing arrangements is recorded as received. c) E-commerce enabling agreementsCompany’s product. The Company ~~has entered into agreements where it has become an e-commerce enabler to various businesses. The Company adopted~~recognizes revenue in accordance with Canadian GAAP, which in the Company’s circumstances, are not materially different from the amounts that would be determined under provisions of ~~Statement of Position 98-9, "Software Revenue Recognition" issued by~~ the American Institute of Certified Public Accountants Statements of Position (SOP) No. 97-2, “ Software Revenue Recognition”, and as amended by Statement of Position 98-9, “Modification of SOP 97-2, Software revenue Recognition, With Respect to Certain Transactions”. The Company also considers the provisions of CICA EIC 141, which is analogous to Staff Accounting Bulletin (SAB) 104, “Revenue Recognition in ~~its accounting~~Financial Statements”, and CICA EIC 142, which is analogous to the Emerging Issues Task Force consensus on EITF 00-21, “Accounting for Revenue Arrangements with Multiple Elements,” in determining the appropriate revenue recognition methodology.

~~SOFTWARE LICENSE REVENUE~~

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

~~• persuasive evidence of an arrangement exists,~~

~~• delivery has occurred,~~

~~• the fee is fixed or determinable, and~~

~~• collectibility is probable.~~

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

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

~~IMPLEMENTATION, TRAINING & CONSULTING SERVICE FEES~~

~~PRODUCT MAINTENANCE & CUSTOMER SUPPORT FEES~~

The Company receives revenue from maintaining its products and the provision of on-going support services to customers. The maintenance and support fees are typically equal to a specified percentage of the customers’ license fee. If associated with the fixed fee license model, the maintenance revenues received are recorded as deferred revenue and recognized on a straight-line basis over the contract period.

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

~~SOFTWARE DEVELOPMENT FEES~~

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

~~ADB Systems International Ltd. F-10~~

Notes to the Consolidated Financial Statements
Years ended December 31, 2004, 2003 and 2002
(in Canadian dollars)

~~HOSTING FEES~~

The Company ~~defers and amortizes all~~earns revenue from ~~individual contract elements ratably over~~ the ~~term~~hosting of customer websites. Under our existing hosting contracts, we charge customers a recurring periodic flat fee. The fees are recognized as the ~~contract. Deferred revenue~~ hosting services are provided.

~~DEFERRED REVENUE~~

Deferred revenue is comprised of ~~payments received on goods which have not been shipped to customers, the unrecognized portion of license fees, and~~ the unrecognized portion of consulting and implementation fees received ~~but not earned in~~from maintenance and support e-commerce enabling agreements, ~~F-10~~ ~~BID.COM INTERNATIONAL INC. Notes to~~and the Consolidated Financial Statements ================================================================================ 3. SIGNIFICANT ACCOUNTING POLICIES (continued) Customer acquisition costs unrecognized portion of license, installation, and consulting revenue on the sale of software licenses and related services.

~~CUSTOMER ACQUISITION COSTS~~

Customer acquisition costs are comprised of the calculated fair value of common share purchase warrants issued to customers in return for certain ~~business to business contracts.~~agreements. These amounts are deducted from gross revenue to the extent that revenue is earned, and are otherwise included in general and administrative expenses. ~~Use~~The fair value of ~~significant accounting estimates.~~these warrants is calculated based on the Cox-Rubinstein binomial valuation model.

~~DEFERRED CHARGES~~

Deferred charges are comprised of expenditures incurred in the issuance of secured subordinated notes. The ~~preparation~~deferred charges are amortized over the term of ~~financial statements~~the underlying notes on a straight-line basis. In accordance with Canadian GAAP, conversion of the underlying notes results in ~~conformity with generally accepted accounting principles requires management~~the allocation of the associated unamortized deferred charge to ~~make estimates and assumptions that affect~~shareholders’ equity. Under U.S. GAAP, note conversion results in the ~~reported amounts~~expensing of ~~assets and liabilities and disclosure~~the associated unamortized deferred charge. The impact of ~~contingent assets and liabilities at the date of~~this difference in Canadian GAAP from U.S. GAAP is disclosed in these notes to the financial statements under Reconciliation of United States GAAP (Note 24).

~~The 2003 opening balance of deferred charges consisted of expenditures incurred in obtaining a demand loan. This balance was completely amortized in 2003.~~

~~SECURED SUBORDINATED NOTES~~

Financial instruments that contain both a liability and an equity element are required to have the ~~reported amounts~~instrument’s component parts classified separately under Canadian GAAP. The Company uses the Cox-Rubinstein binomial valuation model to determine the fair value of ~~revenue~~the conversion feature at the issue dates of convertible secured subordinated notes and ~~expenses during~~discloses the ~~reporting periods. Actual results could differ~~liability and equity components separately on its balance sheet. U. S. GAAP does not permit separate disclosure of different elements of a financial instrument in the financial statements. The impact of this difference in U. S. GAAP from ~~those estimates. Stock based~~Canadian GAAP is disclosed in the notes to these financial statements under Reconciliation of United States GAAP (Note 24).

~~STOCK-BASED COMPENSATION~~

The Canadian Institute of Chartered Accountants issued Handbook section 3870, “Stock-based Compensation and Other Stock-based Payments,” effective January 1, 2002. During the fourth quarter of fiscal 2003, the Company elected to adopt the fair value method for stock-based compensation ~~Under~~on a prospective basis. As a result, the annual financial statements reflect the cost of stock-based compensation to employees effective January 1, 2003. The impact of this standard is disclosed in Note 11 to the financial statements. The impact of Statement of Financial Accounting Standards (SFAS) 123, “Accounting for Stock-Based Compensation,” is disclosed in the notes to these financial statements under Reconciliation of U.S. GAAP (Note 24).

Prior to January 1, 2003, under Canadian ~~generally accepted accounting principles,~~GAAP, stock ~~based compensation is~~options granted to employees were not required to be recorded in the accounts of the Company. Stock ~~based compensation~~options to employees under ~~United States~~U.S. GAAP isare accounted for in accordance with the provisions of Accounting Principles Board (APB) Opinion No. 25, ~~"Accounting~~“Accounting for Stock Issued to ~~Employees"~~Employees”. ~~Accordingly,~~Because options granted to employees have been fixed options with the exercise price equal to the market price of stock, under ~~both Canadian and United States~~US GAAP no accounting recognition iswas given to stock options granted to employees at fair market value until they are exercised. ~~Upon exercise, the net proceeds are credited~~

Stock-based compensation to ~~shareholders' equity. The impact of Statement of Financial Accounting Standards (SFAS) 123, "Accounting for Stock Based Compensation,"~~third parties is ~~disclosed~~recognized and recorded in the ~~notes~~accounts of the Company at the fair market value of the equity instrument as determined by the Cox-Rubinstein binomial valuation model.

~~ADB Systems International Ltd. F-11~~

Notes to ~~these financial statements under Reconciliation of United States GAAP. Income taxes~~ the Consolidated Financial Statements
Years ended December 31, 2004, 2003 and 2002
(in Canadian dollars)

~~INCOME TAXES~~

The Company accounts for income taxes in accordance with the liability method. The determination of future tax assets and liabilities is based on ~~the~~ differences between the financial statement and income tax bases of assets and liabilities, using substantively enacted tax rates in effect for the period in which the differences are expected to reverse. Future tax assets are recorded to recognize tax benefits only to the extent that, based on available evidence, it is more likely than not that they will be realized.

~~USE OF SIGNIFICANT ACCOUNTING ESTIMATES~~

The preparation of financial statements in conformity with generally accepted accounting principles requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenue and expenses during the reporting periods. Estimates are used when determining items such as the allowance for doubtful accounts, the fair value assigned to the debt and equity components of the secured subordinated notes and the expected requirements for non-operational funding in 2005. Actual results could differ from those estimates.

~~4. ~~INVENTORY~~CAPITAL ASSETS~~

2004

2003

Cost

Accumulated Amortization

Net Book Value

Cost

Accumulated Amortization

Net Book Value

(in thousands)

Computer hardware

$
2,601

$
2,547

$
54

$
2,588

$
2,428

$
160

Computer software

28

28

—

28

—

28

Furniture and fixtures

405

343

62

411

333

78

Leasehold improvements

27

1

26

151

151

—

$
3,061

$
2,919

$
142

$
3,178

$
2,912

$
266

During 2004, the Company recorded capital asset amortization in the amount of $160,000 (2003 - ~~-------------------------------------------------------------------------------- 2000 1999~~$162,000)

~~5.DEFERRED CHARGES~~

During 2004, financing costs in the amount of $15,000, $162,000 and $23,000 associated with the liability component of the Series F, Series G and Series H notes, respectively were recorded as deferred charges. The financing costs for the Series G notes include $33,000 representing the allocation of the fair value of compensation options issued in conjunction with these notes (See Note 6 (b)). The deferred charges are being amortized on a straight-line basis over the term of the underlying debt.

During the year ended December 31, 2004, conversion of the Series F notes resulted in the allocation of $13,000 in unamortized deferred charges to contributed surplus. For 2004, amortization of deferred charges in the amount of $32,000 (2003 - -------------------------------------------------------------------------------- (in thousands) Inventory purchased for resale $ - $ 14 Inventory held for resale or refund - 141 - -------------------------------------------------------------------------------- $ - $155 - -------------------------------------------------------------------------------- F-11 ~~BID.COM INTERNATIONAL INC.~~ $513,000) was recorded and included in depreciation and amortization expense.

~~The following table summarizes the transactions within deferred charges.~~

2004

2003

(in thousands)

Opening balance

$
—

$
513

Series F financing costs

15

—

Series G financing costs

162

—

Series H financing costs

23

—

Amortization

(32
)
(513
)
Allocation to contributed surplus

(13
)
—

Closing balance

$
155

$
—

~~ADB Systems International Ltd. F-12~~

Notes to the Consolidated Financial Statements ~~================================================================================ 5. CAPITAL ASSETS~~
- ----------------------------------------------------------------------------------------------------------------------- 2000 1999 - ----------------------------------------------------------------------------------------------------------------------- Cost Accumulated Net Book Cost Accumulated Net Book Amortization Value Amortization Value - ----------------------------------------------------------------------------------------------------------------------- (in thousands) - ----------------------------------------------------------------------------------------------------------------------- - ----------------------------------------------------------------------------------------------------------------------- Computer hardware $ 2,773 $ 1,217 $ 1,556 $ 1,373 $ 671 $ 702 Furniture and fixtures 284 120 164 267 67 200 Leasehold improvements 127 87 40 118 43 75 - ----------------------------------------------------------------------------------------------------------------------- $ 3,184 $ 1,424 $ 1,760 $ 1,758 $ 781 $ 977 - -----------------------------------------------------------------------------------------------------------------------

Years ended December 31, 2004, 2003 and 2002
(in Canadian dollars)

~~6. ~~INCOME TAXES~~SECURED SUBORDINATED NOTES~~

a) During the year ended December 31, 2004, the Company issued Series F secured subordinated notes with a face value of $500,000. The Series F notes have an annual rate of interest of 7 percent paid quarterly in arrears, mature May 19, 2007 and are convertible into equity units at a price of $0.31 per unit. Each equity unit consists of one common share and one half of a share-purchase warrant with an exercise price of $0.50. The share-purchase warrants expire on May 19, 2007. The Series F secured subordinated notes will automatically convert into units when the share price of the Company closes above $0.70 for five consecutive trading days during the term. Holders may convert the notes into units at anytime following a four-month hold period. If the holder does not convert and no automatic conversion takes place, the Company must repay the principal amount in cash. The Series F notes are secured by a general security agreement on the assets of the Company, subordinated to the security claims provided to the holders of previously issued notes.

As required by Canadian GAAP, the Company has separated the liability and equity components of the Series F secured subordinated notes. The Company has determined the fair value of the liability component of the Series F notes by calculating the present value of the associated cash flows, using a discount rate that reflects the Company’s underlying rate of borrowing. The Company has determined the fair value of the conversion feature at the issue date of the Series F notes using the Cox-Rubinstein binomial valuation model. The resulting pro rata fair values of the liability component of the notes and the conversion features of the units, comprised of shares and attached warrants, was $286,000, $159,000 and $55,000, respectively. The liability component will be accreted to $500,000 over the term of the Series F notes through the recording of a non-cash interest expense until such date at which the underlying notes are converted into common shares.

Financing costs in the amount of $26,000 were incurred in the issuance of the Series F notes. Financing costs of $15,000 attributed to the liability component of the notes were allocated to deferred charges (See Note 5). Financing costs of $11,000 attributed to the equity portions of the notes were recorded as a reduction to shareholders’ equity.

~~During the year, all of the Series F notes were converted into equity units. (See table below.)~~

b) During the year ended December 31, 2004, the Company issued Series G secured subordinated notes with a face value of $1,710,000. The Series G notes were issued to private investors including an amount totaling $170,000 issued to directors of the Company. The Series G notes mature June 15, 2007, have an annual rate of interest of 7 percent payable upon the earlier of maturity and conversion and are convertible into equity units at a price of $0.31 per unit. Each equity unit consists of one common share and one half of a share-purchase warrant with an exercise price of $0.50. The share-purchase warrants expire on June 15, 2008. The Series G secured subordinated notes will automatically convert into units when the volume-weighted average share price of the Company closes above $0.70 for 20 consecutive trading days during the term. Holders may convert the notes into units at anytime following a four-month hold period. If the holder does not convert and no automatic conversion takes place, the Company must repay the principal amount in cash. The Series G notes are secured by a general security agreement on the assets of the Company, subordinated to the security claims provided to the holders of previously issued notes.

As required by Canadian GAAP, the Company has separated the liability and equity components of the Series G secured subordinated notes. The Company has determined the fair value of the liability component of the Series G notes by calculating the present value of the associated cash flows, using a discount rate that reflects the Company’s underlying rate of borrowing. The Company has determined the fair value of the conversion feature at the issue date of the Series G notes using the Cox-Rubinstein binomial valuation model. The resulting pro rata fair values of the liability component of the notes and the conversion features of the units, comprised of shares and attached warrants, was $959,000, $539,000 and $212,000, respectively. The liability component will be accreted to $1,710,000 over the term of the Series G notes through the recording of a non-cash interest expense until such date at which the underlying notes are converted into common shares.

~~ADB Systems International Ltd. F-13~~

Notes to the Consolidated Financial Statements
Years ended December 31, 2004, 2003 and 2002
(in Canadian dollars)

Financing costs in the amount of $230,000 were incurred in the issuance of the Series G notes. Financing costs of $129,000 attributed to the liability component of the notes were allocated to deferred charges (See Note 5). Financing costs of $101,000 attributed to the equity portions of the notes were recorded as a reduction to shareholders’ equity.

In addition to the financing costs described above, the Company issued to First Associates Investment Inc. (“First Associates”) an option to purchase up to 485,000 equity units at a purchase price of $0.31 per unit. The option expires on June 15, 2006. Each equity unit consists of one common share and one half of a share-purchase warrant with an exercise price of $0.50. The share-purchase warrants expire on June 15, 2008. Using the Cox-Rubinstein binomial valuation model, the Company has determined the fair value of these equity units to be $59,000. The portion of the fair value of these options, in the amount of $33,000, attributable to the liability component of the notes was allocated to deferred charges. The remaining portion, in the amount of $26,000, attributable to the equity components of the notes was recorded as a reduction to shareholders’ equity.

Subsequent to the issuance of the Series G notes, the interest rate payable on the notes was retroactively increased to 11 percent. The increase in the interest rate was a condition of the issuance of the Series H notes (See c) below).

c) During the year ended December 31, 2004, the Company issued Series H secured subordinated notes with a face value of $520,000. The Series H notes were issued to private investors including an amount totaling $270,000 issued to directors of the Company. The Series H notes mature October 21, 2007, have an annual rate of interest of 11 percent payable upon the earlier of maturity and conversion and are convertible into equity units at a price of $0.20 per unit. Each equity unit consists of one common share and one half of a share-purchase warrant with an exercise price of $0.40. The share-purchase warrants expire on October 21, 2008. The Series H secured subordinated notes will automatically convert into units when the share price of the Company closes at or above $0.45 for 10 consecutive trading days during the term. Holders may convert the notes into units at anytime following a four-month hold period. If the holder does not convert and no automatic conversion takes place, the Company must repay the principal amount in cash. In order to obtain the required approvals to issue the Series H notes, the Company retroactively increased the interest rate on the Series G notes from an annual rate of 7 percent to an annual rate of 11 percent. The Series H notes are secured by a general security agreement on the assets of the Company, subordinated to the security claims provided to the holders of previously issued notes.

As required by Canadian GAAP, the Company has separated the liability and equity components of the Series H secured subordinated notes. The Company has determined the fair value of the liability component of the Series H notes by calculating the present value of the associated cash flows, using a discount rate that reflects the Company’s underlying rate of borrowing. The Company has determined the fair value of the conversion feature at the issue date of the Series H notes using the Cox-Rubinstein binomial valuation model. The resulting pro rata fair values of the liability component of the notes and the conversion features of the units, comprised of shares and attached warrants, was $282,000, $184,000 and $54,000, respectively. The liability component will be accreted to $520,000 over the term of the Series H notes through the recording of a non-cash interest expense until such date at which the underlying notes are converted into common shares.

Financing costs in the amount of $43,000 were incurred in the issuance of the Series H notes. Included in the financing costs was the incremental interest expense associated with the retroactive increase of the interest rate on the Series G notes. Financing costs of $23,000 attributed to the liability component of the notes were allocated to deferred charges (See Note 5). Financing costs of $20,000 attributed to the equity portions of the notes were recorded as a reduction to shareholders’ equity.

~~ADB Systems International Ltd. F-14~~

Notes to the Consolidated Financial Statements
Years ended December 31, 2004, 2003 and 2002
(in Canadian dollars)

d) During the year ended December 31, 2003, the Company issued Series E secured subordinated notes with a face value of $1.0 million for net proceeds of $994,000. The Series E notes have an annual rate of interest of 11percent that is paid quarterly in arrears, mature August 19, 2006 and are convertible into equity units at a price of $0.35 per unit. Each equity unit consists of one common share and one half of a share-purchase warrant with an exercise price of $0.50. The Series E secured subordinated notes will automatically convert into units when the share price of the Company closes above $0.70 for five consecutive trading days during the term. Note holders may convert into units at anytime following a four-month hold period. If the holder does not convert and no automatic conversion takes place, the Company must repay the principal amount to the holders of the Series E secured subordinated notes in cash. As part of this private placement, the Company issued 30,000 common share-purchase warrants to an associate of Stonestreet Limited Partnership (“Stonestreet”) in consideration for professional fees. Each such warrant entitles the holder to purchase one common share of the Company for $0.50 at any time up to and including August 18, 2006. The Series E notes are secured by a general security agreement on the assets of the Company, subordinated to the security claims provided to the holders of previously issued notes.

The Series E notes were issued to private investors including an amount totaling $100,000 issued to directors and/or senior officers of the Company. Costs in the amount of $6,000 associated with the issuance of the Series E secured subordinated notes were recorded as a reduction of the equity component of these notes.

As required by Canadian GAAP, the Company has separated the liability and equity components of the Series E secured subordinated notes. The Company has determined the fair value of the debt component of the Series E notes by calculating the present value of the associated cash flows, using a discount rate that reflects the Company’s underlying rate of borrowing. The Company has determined the fair value of the conversion feature at the issue date of the Series E notes using the Cox-Rubinstein binomial valuation model. The resulting pro rata fair value of the liability component of the secured subordinated notes and the conversion features of the units, comprised of shares and attached warrants, was $596,000, $292,000 and $106,000, respectively. The liability component will be accreted to $1 million over the term of the Series E notes through the recording of non-cash interest expense until such date at which the underlying notes are converted into common shares.

~~ADB Systems International Ltd. F-15~~

Notes to the Consolidated Financial Statements
Years ended December 31, 2004, 2003 and 2002
(in Canadian dollars)

~~e) The following summarizes the nominal and fair values of the liability and equity components of the Series A through H secured subordinated notes.~~

~~Secured subordinated notes~~

2004

2003

Nominal
Value

Fair
Value

Nominal
Value

Fair
Value

(in thousands)

Opening balance

$
1,115

$
721

$
205

$
34

Issuance of notes:

Series E

—

—

1,000

596

Series F

500

286

—

—

Series G

1,710

959

—

—

Series H

520

282

—

—

Non-cash interest

—

266

—

112

Conversion of notes

Series D

(115
)
(96
)
(90
)
(21
)
Series E

(625
)
(428
)
—

—

Series F

(500
)
(306
)
—

—

Closing balance

$
2,605

$
1,684

$
1,115

$
721

~~Conversion features on secured subordinated notes including conversion of attached warrants~~

2004

2003

Common
Shares

Fair
Value

Common
Shares

Fair
Value

(in thousands)

Opening balance

5,723

$
497

2,562

$
175

Issuance of notes

Series E

—

—

4,286

398

Series F

2,419

203

—

—

Series G

8,274

624

—

—

Series H

3,900

218

—

—

Conversion of notes

Series D

(1,437
)
(99
)
(1,125
)
(76
)
Series E

(2,679
)
(248
)

Series F

(2,419
)
(203
)

Closing balance

13,781

$
992

5,723

$
497

~~ADB Systems International Ltd. F-16~~

Notes to the Consolidated Financial Statements
Years ended December 31, 2004, 2003 and 2002
(in Canadian dollars)

~~7.INCOME TAXES~~

The Company adopted accounting for income taxes under the liability method in accordance with Section 3465 of the Canadian Institute of Chartered Accountants' Handbook. This new accounting policy, which was adopted as of January 1, 2000, was applied retroactively without restatement of comparative figures, as the adoption of the liability method of tax allocation had no significant effect on opening deficit. Prior to January 1, 2000, the Company had not recorded any deferred tax asset with respect to the tax loss carried forward of approximately $47.5 million, and the undepreciated capital cost for tax purposes in excess of the capital assets and investments of approximately $53,000.method. Under the liability method, a future tax asset ~~would be~~is recorded ~~as of January 1, 2000 only to~~based upon tax losses carried forward and differences in tax and accounting values in the ~~extent that, based on available evidence, it is more likely than not that a future tax asset would be realized.~~Company’s assets and liabilities. The tax asset is reduced by a valuation allowance to the extent that it is more likely than not that the asset would not be realized. The valuation allowance will be reviewed and adjusted as appropriate for each reporting period. At ~~January 1, 2000 and~~ December 31, ~~2000,~~2004 and 2003, the Company established the valuation allowance at ~~100%~~100 percent of the future tax asset.
December 31, January 1, 2000 2000 ------------------------------------------ (in thousands) ------------------------------------------ Future tax asset Tax losses carried forward $ 19,483 $ 18,060 Difference in tax and accounting valuations for capital assets and investments 4,344 (20) - ----------------------------------------------------------------- ------------------ ---- ------------------ 23,827 18,040 Valuation allowance 23,827 18,040 - ----------------------------------------------------------------- ------------------ ---- ------------------ Future tax asset $ - $ - - ----------------------------------------------------------------- ------------------ ---- ------------------ Provision for income taxes Income taxes at statutory rate (5,787) Tax losses carried forward 1,423 Difference in tax and accounting valuations for capital assets and investments 4,364 - ----------------------------------------------------------------- ------------------ ---- ------------------ Provision for income taxes $ - - ----------------------------------------------------------------- ------------------ ---- ------------------
~~F-12~~ ~~BID.COM INTERNATIONAL INC.~~

2004

2003

(in thousands)

FUTURE TAX ASSET

Tax losses carried forward

$
5,618

$
3,229

Difference in tax and accounting valuations for capital assets and investments

207

55

5,825

3,284

Valuation allowance

(5,825
)
(3,284
)
Future tax asset

$
—

$
—

PROVISION FOR INCOME TAXES

Income taxes at statutory rate

$
(1,388
)
$
(467
)
Adjustments to loss

2,195

(316
)
Net reduction in tax rates

—

(896
)
(Increase) reduction to valuation allowance on future tax asset

(2,541
)
1,212

Tax losses carried forward

1,412

226

Difference in tax and accounting valuations for capital assets and investments

152

360

Permanent differences for tax and accounting income

170

(119
)
Provision for income taxes

$
—

$
—

The $2.195 million adjustment to loss represents the difference between estimated 2003 loss carry-forwards and actual 2003 loss carry-forwards. The $316,000 adjustment to loss represents the difference between estimated 2002 loss carry-forwards and actual 2002 loss carry-forwards.

~~Tax loss carry-forwards at December 31, 2004 expire as follows:~~

(in thousands)

2009

$
1,659

2010

8,418

2011

981

2012

—

2013

—

2014

3,569

Tax loss carry-forwards that do not expire (a)

6,242

$
20,869

~~(a) Under Irish local tax laws, tax loss carry-forwards do not expire.~~

~~ADB Systems International Ltd. F-17~~

Notes to the Consolidated Financial Statements ~~================================================================================ 6. INCOME TAXES (continued) The Company's tax loss carryforwards at~~
Years ended December 31, ~~2000 expire as follows: (in thousands)~~2004, 2003 and 2002 $ 113 2003 1,924 2004 6,401 2005 19,828 2006 19,262 2007 3,744 ----- $51,272 ------- 7.
(in Canadian dollars)

~~8.SHARE CAPITAL~~

a) ~~Authorized~~ AUTHORIZED

~~Unlimited number of common shares~~

~~Unlimited number of preference shares -– issuable in series~~

b) ~~Common~~COMMON SHARES

2004

2003

Number

Amount

Number

Amount

(in thousands of shares and dollars)

Opening balance

59,423

$
97,674

50,140

$
95,633

Shares issued pursuant to:

Private placement

5,000

930

5,181

1,254

Conversion of debentures

4,357

1,227

750

72

Exercise of warrants

920

195

3,313

703

Exercise of options

72

26

39

12

Re-issuance of treasury shares

98

—

—

—

Closing balance

69,870

$
100,052

59,423

$
97,674

During 2004, the issuance of common shares
--------------------------------------------------------------------------------------------------------- 2000 1999 --------------------------------------------------------------------------------------------------------- Common Common Shares Amount Shares Amount --------------------------------------------------------------------------------------------------------- (in thousands of shares and dollars) Opening balance 52,647 $ 77,488 37,167 $37,217 Issued for Cash: Exercise of options (Notes 7(c)) 548 1,116 1,434 2,164 Issuance of shares (Note 7(d)) 901 3,120 - - Exercise of warrants (Note 7(e)) - - 6,262 10,521 Exercise of special warrants (Note 8) - - 7,570 25,086 Acquisition of Point 2 (Note 15(a)) - - 214 2,500 Exercise of Point2 warrants (Note 7 (f)) 543 2,000 - - --------------------------------------------------------------------------------------------------------- Closing balance 54,639 $83,724 52,647 $ 77,488 =========================================================================================================
~~F-13~~ ~~BID.COM INTERNATIONAL INC.~~ generated cash proceeds of $903,000 (2003 - $1.458 million) as follows: $749,000 (2003 - $982,000) from private placement issuances, $129,000 (2003 – $464,000) from the exercise of warrants and $25,000 (2003 - $12,000) from the exercise of options.

An unclaimed certificate for 98,000 common shares previously issued from treasury in the 2001 acquisition of ADB Systemer ASA, and not included in the number of shares outstanding, was reissued during 2004.

The conversion of the remaining secured subordinated notes would result in the issuance of Nil (2003 – 958,000) common shares for Series A, B and D notes, 1,071,000 (2003 – 2,857,000) common shares for Series E notes, 5,516,000 common shares for Series G notes and 2,600,000 common shares for Series H notes.

~~c)PRIVATE COMMON SHARE PLACEMENT~~

On December 6, 2004, the Company completed a transaction resulting in the issuance of 5,000,000 shares at a price of $0.20 per share and 5,000,000 common share-purchase warrants exercisable into one common share at a price of $0.35 for gross proceeds of $1,000,000. The warrants expire on December 6, 2008. Gross proceeds were comprised of $800,000 in cash and $200,000 in legal services. The $200,000 was applied, in part, to outstanding payables and the remainder was recorded as a prepaid retainer for legal services. Issuance costs in the amount of $70,000 were incurred, including $19,000 representing the fair value of 150,000 compensation options issued to First Associates. The compensation options are exercisable into 150,000 equity units at a price of $0.20 per unit. Each equity unit consists of one common share and one common share-purchase warrant with an exercise price of $0.35 and an expiry date of December 6, 2008. The compensation options expire on December 6, 2006. Included in this private placement were 100,000 shares issued to a director of the Corporation for gross proceeds of $20,000.

~~ADB Systems International Ltd. F-18~~

Notes to the Consolidated Financial Statements ~~================================================================================ 7. SHARE CAPITAL (continued)~~
Years ended December 31, 2004, 2003 and 2002
(in Canadian dollars)

On June 26, 2003, the Company completed a transaction resulting in the issuance of 4,879,000 common shares at a price of $0.24 and 2,733,000 common share-purchase warrants exercisable into one common share at $0.40 for net proceeds of $1.148 million. The warrants expire on June 26, 2005. This private placement included the issuance of 693,000 common shares and 347,000 common share-purchase warrants in settlement of an account payable in the amount of $166,000. Included in this private placement were 2,146,000 shares issued to a director and officer of the Company for total net proceeds of $505,000.

~~On September 19, 2003 the Company issued 302,250 shares in settlement of an account payable in the amount of $106,000.~~

On April 25, 2002, the Company entered into an agreement with Stonestreet for a $1.1 million private placement resulting in net proceeds of $945,000 after deducting costs of issue of approximately $155,000. As a result, the Company issued 3.3 million common shares and 1 million common share-purchase warrants exercisable into common shares at US$0.35 per share.

On December 17, 2002, Stonestreet exercised all of these warrants for proceeds of $550,000. Pursuant to the April 25, 2002 private placement, the Company issued 50,000 share-purchase warrants to an associate of Stonestreet for partial consideration in securing the funding and due diligence services. These warrants expire on April 25, 2005 and are exercisable into common shares at US$ 0.35 per common share.

~~d)The following table sets forth the computation of basic and diluted loss per share.~~

2004

2003

2002

(in thousands, except per share amounts)

Numerator:

Net Loss (numerator for basic loss per share applicable to common shares)

$
(5,104
)
$
(2,815
)
$
(9,364
)

Denominator:

Weighted average shares (denominator for basic loss per share)

61,938

54,324

41,968

Basic loss per share

$
(0.08
)
$
(0.05
)
$
(0.22
)

~~For each fiscal year, the Company excluded the effect of all convertible debt, stock options and share-purchase warrants, as their impact would have been anti-dilutive.~~

~~9.CONTRIBUTED SURPLUS~~

~~During the year ended December 31, 2004, recorded value of $6,000 (2003 - $1,289,000) related to expired warrants was allocated from warrants to contributed surplus.~~

During the year ended December 31, 2004, conversion of the Series F secured subordinated notes resulted in the reduction of contributed surplus by $13,000 due to the allocation of unamortized deferred charges. (See Note 5.)

~~ADB Systems International Ltd. F-19~~

Notes to the Consolidated Financial Statements
Years ended December 31, 2004, 2003 and 2002
(in Canadian dollars)

~~10.WARRANTS~~

~~a)A summary of changes in the warrants issued and vested for the two years ended December 31, 2004 is as follows:~~

2004

2003

Number

Amount

Number

Amount

(in thousands)

Opening balance

5,338

$
324

6,121

$
1,599

Issued to key customer (Note 10 (c))

—

—

—

226

Issued in private equity placement (Note 8 (c))

5,000

—

2,733

—

Issued upon conversion of debt (Note 10 (b))

2,178

153

375

27

Issued in lieu of fees

—

—

30

—

Cancelled

(84
)
(6
)
(608
)
(1,289
)
Exercised

(920
)
(66
)
(3,313
)
(239
)
Closing balance

11,512

$
405

5,338

$
324

The conversion of the remaining secured subordinated notes would result in the issuance of Nil (2003 – 479,000) common share-purchase warrants for Series A, B and D notes, 536,000 (2003 – 1,429,000) common share-purchase warrants for Series E notes, 2,758,000 common share-purchase warrants for Series G notes and 1,300,000 common share-purchase warrants for Series H notes.

~~b)CONVERTIBLE SECURED SUBORDINATED DEBENTURES~~

During the year, the Company issued a total of 2,178,000 share-purchase warrants as follows: 479,000 with an exercise price of $0.14 per share and 1,699,000 with an exercise price of $0.50 per share (2003 – 375,000 with an exercise price of $0.14 per share) as the result of the conversion of secured subordinated notes.

~~During the year, 84,000 share-purchase warrants, that arose from of the conversion of Series D secured subordinated notes, expired and as a result were cancelled.~~

~~c)STRATEGIC MARKETING AGREEMENT~~

On December 13, 2002, the Company issued 2 million warrants convertible into common shares of the Company to a customer at an exercise price of $0.45 per warrant. The warrants expired on January 5, 2005. Warrants that have vested are to be automatically exercised when the share price of the Company closes at or above $1.02 for three consecutive trading days. The vesting of warrants is based on achieving a number of performance objectives associated with the GE Asset Manager LLC joint venture (See Note 21).

During 2003, a total of 1.25 million of the above warrants vested; 250,000 warrants vested when three initial customers of the joint venture were identified and the remaining 1 million warrants vested upon the legal establishment of the joint venture. The remaining 750,000 warrants have not vested as at December 31, 2004. Vesting was contingent upon the achievement of certain performance and business related goals, which are currently undefined, associated with the GE Asset Manager joint venture.

~~ADB Systems International Ltd. F-20~~

Notes to the Consolidated Financial Statements
Years ended December 31, 2004, 2003 and 2002
(in Canadian dollars)

~~d)ACQUISITION OF ADB SYSTEMER ASA~~

On October 11, 2001, the Company acquired 98.3 percent of the outstanding common shares of ADB Systemer ASA. As a result of the acquisition, the Company issued 607,600 share-purchase warrants with a strike price of two Norwegian krone, in exchange for 700,000 share purchase warrants in ADB Systemer ASA. These warrants retained all of the characteristics of the original warrants and had specific exercise dates of March 31, 2002 and March 31, 2003, expiring March 31, 2003 (see Note 20). All of the 607,600 warrants were cancelled on March 31, 2003.

~~11.STOCK OPTIONS~~

~~a)Stock options ~~(i)~~ are comprised of the following components:~~

2004

2003

Number

Amount

Number

Amount

(in thousands of options and dollars)

Employees

853

$
820

2,645

$
782

Non-employees

—

116

27

116

Total

853

$
936

2,672

$
898

~~b)EMPLOYEE STOCK OPTIONS~~

The Company has a stock option plan which provides for the issuance ~~to employees~~ of stock options to employees, which may expire as much as 10 years from the date of grant, at prices not less than the fair market value of the common shares on the date of grant. The aggregate ~~purchase~~exercise price for employee options outstanding at December 31, ~~2000~~2004 was approximately ~~$21.3 million.~~$296,000 (2003 – $1.8 million). The Management Resources and Compensation Committee of the Board of Directors reserves the right to attach vesting periods to stock options granted. ~~Certain~~All of the stock options ~~out-standing~~outstanding at the end of ~~2000~~2004 are exercisable ~~immediately, while the remainder have vesting periods attached which range from six months to thirty-six months.~~immediately. The options expire between ~~2001~~2005 and ~~2004.~~ 2006.

A summary of changes in the stock option plan for the two years ended December 31, ~~2000~~2004 is as follows:
Number of Options Average Price ------------------------------------------------------------------------------------------------- 2000 1999 2000 1999 ------------------------------------------------------------------------------------------------- (in thousands) Opening balance 2,719 1,441 $5.51 $1.55 Granted 2,081 2,290 5.10 5.91 Exercised (498) (1,004) 2.00 1.69 Cancelled (453) (8) 5.68 1.72 ------------------------------------------------------------------------------------------------- Closing balance 3,849 2,719 $ 5.54 $ 5.51 ------------------------------------------------------------------------------------------------- Exercisable, end of year 2,769 1,575 $ 5.61 $ 5.11 ------------------------------------------------------------------------------------------------- Options remaining for issuance 2,376 410 under stock option plan -------------------------------------------------------------------------------------------------
Number Outstanding Weighted Number Exercisable at Average Weighted at WeightedAverage Range of December 31, 2000 Remaining Average December 31, 2000 Exercise Exercise (in thousands) Contractual Exercise (in thousands) Price Prices Life Price - --------------------------------------------------------------------------------------------------------- $1-$3 974 2.8 years $2.78 541 $2.70 $3-$6 911 1.9 years $5.23 747 $5.40 $6-$10 1,696 2.1 years $6.53 1,345 $6.45 $10-$13 268 1.9 years $10.38 136 $10.12 - --------------------------------------------------------------------------------------------------------- 3,849 2,769 ==========================================================================================================
~~F-14~~ ~~BID.COM INTERNATIONAL INC.~~

Number of Options

Weighted Average
Exercise Price

2004

2003

2004

2003

(in thousands)

Opening balance

2,645

2,793

$
0.68

$
1.84

Granted

—

1,095

—

0.37

Exercised

(72
)
(39
)
0.34

0.30

Cancelled

(1,720
)
(1,204
)
0.84

3.38

Closing balance

853

2,645

$
0.35

$
0.68

Exercisable, end of year

853

2,057

$
0.35

$
0.74

Options remaining for issuance under stock option plan

3,191

1,224

~~ADB Systems International Ltd. F-21~~

Notes to the Consolidated Financial Statements ~~================================================================================ 7. SHARE CAPITAL (continued) (ii)~~
Years ended December 31, 2004, 2003 and 2002
(in Canadian dollars)

Range of
Exercise
Prices

Number Outstanding and Exercisable at December 31, 2004

Weighted
Average
Remaining
Contractual
Life

Weighted
Average
Exercise
Price

(in thousands)

$0.22-$0.33

167

1.1 years

$
0.32

$0.34-$0.37

684

1.6 years

$
0.35

$0.76

2

1.0 years

$
0.76

853

During the fourth quarter of fiscal 2003, the Company adopted the accounting recommendations contained in the CICA Handbook Section 3870 –“Stock-based Compensation and Other Stock-based Payments” effective January 1, 2003. This Section establishes standards for the recognition, measurement and disclosure of stock-based compensation and other stock-based payments made in exchange for goods and services, and applies to transactions, including non-reciprocal transactions, in which an enterprise grants shares of common stock, stock options, or other equity instruments, or incurs liabilities based on the price of common stock or other equity instruments. Commencing in fiscal 2003, the Company recorded a compensation expense for stock options granted to employees on or after January 1, 2003, based on the fair value method of accounting. For the year ended December 31, 2004, the employee stock option expense was $39,000 (2003 - $193,000). For the year ended December 31, 2003, expenses in the first, second and third quarters increased by $2,000, $1,000 and $130,000, respectively as the result of the early adoption of these recommendations. Accordingly, quarterly net income (loss) in 2003 for such quarters previously reported as ($1,755,000), $527,000 and ($460,000), respectively were revised to ($1,757,000), $526,000 and ($590,000), respectively.

For the year ended December 31, 2002, the Company did not record a compensation expense for stock options granted to employees. Instead, the Company disclosed the pro forma net income (loss) and the pro forma income (loss) per share had the Company adopted the fair value method of accounting for stock-based compensation awarded on or after January 1, 2002.

~~The Company ~~also~~determined the fair value of employee stock option grants using the Cox-Rubinstein binomial valuation model with the following assumptions on a weighted average basis:~~

2004

2003

2002

Dividend yield

N/A

—

—

Risk free interest rate

N/A

3.53
%
3.69
%
Volatility

N/A

137.51
%
131.51
%
Expected term, in years

N/A

2.94

2.00

~~ADB Systems International Ltd. F-22~~

Notes to the Consolidated Financial Statements
Years ended December 31, 2004, 2003 and 2002
(in Canadian dollars)

For the years ended December 31, 2004, 2003 and 2002, the amortization of the value of the stock-based compensation granted by the Company to employees in 2002, over the vesting period of the awards as specified under CICA 3870, would have resulted in the following pro forma loss attributable to common shareholders and pro forma basic and diluted loss per share:

2004

2003

2002

Loss attributable to common shareholders

As reported

$
(5,104
)
$
(2,815
)
$
(9,364
)
Pro forma

$
(5,104
)
$
(2,956
)
$
(9,608
)

Basic and diluted net loss per share:

As reported

$
(0.08
)
$
(0.05
)
$
(0.22
)
Pro forma

$
(0.08
)
$
(0.05
)
$
(0.23
)

~~c)NON-EMPLOYEE STOCK OPTIONS~~

The Company had no stock options outstanding to third parties at December 31, ~~2000. The aggregate purchase price for third party stock options outstanding at December 31, 2000 was $1,096,000. These options expire in 2003.~~2004. A summary of changes in the stock options to third parties for the two years ended December 31, ~~2000~~2004 is as follows:
Number of Options Average Price ------------------------------------------------------------------------------------------------- 2000 1999 2000 1999 ---- ---- ---- ---- ------------------------------------------------------------------------------------------------- (in thousands) Opening balance 145 540 $ 7.33 $1.20 Granted 67 95 6.04 9.92 Exercised (50) (430) 2.42 1.10 Cancelled (20) (60) 12.45 1.00 ------------------------------------------------------------------------------------------------- Closing balance 142 145 $ 7.74 $ 7.33 ------------------------------------------------------------------------------------------------- Exercisable, end of year 108 145 $8.26 $ 7.33 =================================================================================================
~~d) Private common share placement On June 16, 2000,~~

Number of Options

Weighted Average
Exercise Price

2004

2003

2004

2003

(in thousands)

Opening balance

27

253

$
2.88

$
2.88

Granted

—

—

—

—

Exercised

—

—

—

—

Cancelled

(27
)
(226
)
2.56

2.91

Closing balance

—

27

$
—

$
2.56

Exercisable, end of year

—

27

$
—

$
2.56

~~12.OTHER OPTIONS~~

During the year ended December 31, 2004, the Company issued ~~900,790 common shares at~~485,000 compensation options with a ~~price~~fair value of ~~$3.49 per share in a private placement. The Company received net proceeds of $3.12 million (after deducting costs of issue of approximately $21,000). Pursuant~~$59,000 relating to the ~~agreement to issue common shares, the Company issued 0.4 share purchase warrants for each common share, entitling the investee to 360,316 additional shares at a price~~issuance of US$2.68 per share. These share purchase warrants were outstanding at December 31, 2000 and are exerciseable until June 16, 2002. e) Share purchase warrants under private placement equity issues A summary of changes in the warrants to investors for the two years ended December 31, 2000 is as follows:
2000 1999 ------------------------------------------------------------------------------------------------------ Warrants Amounts Warrants Amounts ------------------------------------------------------------------------------------------------------ (in thousands) Opening balance 1,855 $ 18,550 6,135 $10,305 Granted 1,385 9,524 1,855 18,550 Cancelled - - (69) (121) Exercised - - (6,066) (10,184) ------------------------------------------------------------------------------------------------------ Closing balance 3,240 $ 28,074 1,855 $ 18,550 ======================================================================================================
As at December 31, 1998 a further 43,000 share purchase warrants exercisable at $1.65, and 152,875 share purchase warrants exercisable at $1.75 were subject to issuance upon the exercise of outstanding compensation warrants and are not included in the above table. As of December 31, 1999 these share purchase warrants have been exercised. F-15 BID.COM INTERNATIONAL INC. Notes to the Consolidated Financial Statements ================================================================================ 7. SHARE CAPITAL (continued) f) Point 2 Warrants During 2000, two share purchase warrants were exercised into 542,810 common shares having a value of $2 million for no additional consideration (seeSeries G secured subordinated notes (See Note 15 (a)). g) Compensation Warrants under private placement equity issues As of December 31, 2000, there were 185,468 outstanding compensation warrants, which were issued to the underwriter for the September 30, 1999 private placement (see Note 86 (b)). ~~These compensation~~The options entitle the ~~underwriter~~holder to ~~acquire up to 185,468 units~~purchase an equity unit at a purchase price of ~~$9.25~~$0.31 per unit ~~at any time until September 30, 2001.~~ and expire on June 15, 2006. Each equity unit consists of one common share and one ~~share purchase warrant. h) Strategic Marketing Agreement On March 28, 2000, pursuant to~~half of a ~~strategic marketing agreement~~share-purchase warrant with ~~one its key customers,~~an exercise price of $0.50. The share-purchase warrants expire on June 15, 2008.

Also during the year ended December 31, 2004, the Company issued ~~1,025,000 common share purchase warrants at~~150,000 compensation options with a ~~price~~fair value of ~~$7.90 per warrant. Each common share purchase warrant entitles~~$19,000 relating to the ~~holder to acquire one common share. These warrants expire March 27, 2003. 8. SPECIAL WARRANTS (a) On November 30, 1998 the Company closed a~~December private equity placement ~~of $10,001,000 in equity for net proceeds of $6,863,000 with the remaining $2,311,000 of net proceeds held in trust pending the filing of a final prospectus.~~(See Note 8 (c)). The Company issued 5,714,984 special warrants, each special warrant being exercisable to acquire one unit (subject to adjustment in certain circumstances) for no additional consideration, at a price of $1.75 per special warrant. Each unit consisted of one common share of the Company and one quarter of one common share purchase warrant. Each common share purchase warrant entitledoptions entitle the holder to purchase ~~one common share~~an equity unit at a purchase price of $1.75 per common share up to December 31, 1999. On January 21, 1999, the final prospectus was filed resulting in the conversion of 5,714,984 special warrants into 5,714,984 common shares and the issue of 1,428,746 common share purchase warrants. The Company also issued 611,498 compensation warrants. Each compensation warrant entitled the underwriter to purchase one unit, consisting of one common share and one quarter of one common share purchase warrant at a price of $1.75$0.20 per unit ~~up to~~and expire on December 31, 1999. (b) On September 30, 1999, the Company issued 1,854,678 special warrants at a price of $9.25 per warrant for total net proceeds of $16,047,000 (after deducting the costs of issue estimated to be $251,000). Pursuant to the issuance of the special warrants, the Company agreed to pay the underwriter a fee of $858,000, being 5% of the issue price of the special warrants.6, 2006. Each special warrant entitled the holder to acquire one unit for no additional consideration. Each unit consisted of one common share and one share purchase warrant. Each whole share purchase warrant can be exercised to acquire one additional common share at an exercise price of $10.00 up until September 30, 2001. F-16 BID.COM INTERNATIONAL INC. Notes to the Consolidated Financial Statements ================================================================================ 8. SPECIAL WARRANTS (continued) (b) On December 9, 1999, the final prospectus for this offering was filed resulting in the conversion of 1,854,678 special warrants into 1,854,678 common shares and the issue of 1,854,678 common share purchase warrants. On September 30, 1999, the Company also issued compensation warrants to the underwriter entitling the underwriter to receive compensation options. The compensation options entitled the underwriter to acquire up to 185,468 units at a price of $9.25 per unit at any time until September 30, 2001. Eachequity unit consists of one common share and one ~~share purchase warrant. 9.~~ share-purchase warrant with an exercise price of $0.35. The share-purchase warrants expire on December 6, 2008.

~~ADB Systems International Ltd. F-23~~

Notes to the Consolidated Financial Statements
Years ended December 31, 2004, 2003 and 2002
(in Canadian dollars)

~~13.FINANCIAL INSTRUMENTS~~

~~Foreign exchange risk~~

The ~~Company transacts~~Company’s revenue from software licensing and related services and e-commerce enabling agreements is transacted in various currencies including the ~~majority of its retail product sales~~Canadian dollar, U.S. dollar, UK pound, EURO, and ~~purchases in United States dollars and certain~~Norwegian krone. Correspondingly, operating ~~expenditures are in United States dollars. E-commerce enabling and licensing~~expenses related to these activities are transacted in ~~United States dollars and other~~the above-denoted currencies. The Company does not use derivative instruments to manage exposure to foreign exchange fluctuations. The Company incurred $24,000 in foreign exchange losses in 2004 (2003 - $84,000; 2002 - $29,000).

~~The Company transacted the majority of its retail product sales and purchases in U.S. dollars.~~

~~Interest rate risk~~

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

~~Credit risk~~

Credit risk arises from the potential that a customer will fail to meet its ~~obligations. The collection risk is minimized because the majority of retail product sales are settled before shipping by pre-authorized credit card payments through~~contractual obligations under a ~~significant financial institution. In addition, the diverse customer base minimizes any concentration of credit risk. Credit risk from receivables of~~software licensing and related services agreement or an e-commerce enabling ~~activities arises from the potential~~agreement.

In 2004, one customer accounted for 31 percent (2003 – two customers accounted for 26 percent and 15 percent) of total revenues. At December 31, 2004, there were three customers that ~~a customer will fail to meet their contractual obligations.~~ accounted for 18 percent, 13 percent and 11 percent, respectively, of total accounts receivable. At December 31, 2003, three customers accounted for 25 percent, 19 percent and 14 percent, respectively, of total accounts receivable.

~~Fair value ~~Fair~~~~

The fair value of monetary assets and liabilities ~~approximate~~approximates amounts at which they ~~could~~would be exchanged between knowledgeable and unrelated persons. The amounts recorded in the financial statements approximate fair value. ~~F-17~~ ~~BID.COM INTERNATIONAL INC. Notes to the Consolidated Financial Statements ================================================================================ 10.~~

~~14.COMMITMENTS AND CONTINGENCIES~~

(a) As a condition of the agreement with a financial institution to settle sales transactions through pre-authorized credit card payments, the Company must maintain a cash reserve account based on a percentage of sales for the preceding six months. At December 31, 2000, the Company was required to maintain $143,000 in this reserve account (December 31, 1999- $1,520,000). (b) Minimum payments under operating leases during the next ~~three~~five years are as follows: ~~2001 $ 548,000 2002 261,000 2003 32,000 (c)~~

(in thousands)

2005

$
416

2006

369

2007

339

2008

310

2009

279

2010 and thereafter

154

(b) As a result of a review of statutory reporting obligations regarding employee benefits, the Company has identified a potential ~~non compliance.~~for non-compliance. The employees and regulators concerned have been notified. The probability and amount of any potential liability relating to this situation is presently not determinable. ~~(d)~~

(c) The Company has entered into compensation arrangements with certain of its employees. In the event of involuntary termination, the Company may be liable for potential ~~payment of $562,000~~payments totaling $182,000 to these employees. 11. CHANGE IN NON-CASH OPERATING WORKING CAPITAL - --------------------------------------------------- ------------ ------------ 2000 1999 1998 ---- ---- ---- - ----------------------------------------------------------------------------- (in thousands) Accounts receivable $ 210 $ (543) $ (936) Inventory 155 14 32 Deposits and prepaid expenses 3,399 (4,289) 1,504 Accounts payable (2,391) 1,913 939 Accrued liabilities (1,093) 1,525 26 Deferred revenue 542 2,118 137 - ----------------------------------------------------------------------------- $ 822 $ 738 $ 1,702 - ----------------------------------------------------------------------------- 12. OPERATIONS In June 1997,

(d) The Company entered into a licensing agreement with NCR Corporation on April 29th, 2002. The agreement provides the Company ~~introduced special promotional pricing in order~~with access to stimulate new bidder registrations and first time sales. This special promotional pricing cost the Company approximately $558,000 in 2000, $4,044,000 in 1999, and $3,520,000 in 1998 and has been included in advertising and promotion. F-18 ~~BID.COM INTERNATIONAL INC.~~ specific technology patents over a seven-year period for US$100,000 annually.

~~ADB Systems International Ltd. F-24~~

Notes to the Consolidated Financial Statements ~~================================================================================ 13.~~
Years ended December 31, 2004, 2003 and 2002
(in Canadian dollars)

~~15.CHANGES IN NON-CASH OPERATING WORKING CAPITAL~~

~~The following table sets forth the changes in non-cash working capital items resulting from the inflow (outflow) of cash in the period.~~

2004

2003

2002

(in thousands)

Accounts receivable

$
(151
)
$
444

$
(540
)
Deposits and prepaid expenses

(8
)
60

(47
)
Accounts payable

288

(87
)
218

Accrued liabilities

139

(491
)
416

Deferred revenue

44

(741
)
9

Effect of currency translation

10

87

5

$
322

$
(728
)
$
61

~~The following table summarizes the non-cash financing activities of the Company~~

2004

2003

2002

Issuance of common shares in settlement of accounts payable (Note 8(c))

$
118

$
272

$
—

Issuance of common shares in return for prepaid services (Note 8(c))

82

—

—

Reduction in debt from conversion of secured subordinated notes (Note 6(e))

(830
)
(21
)
(51
)
Reduction in conversion feature from conversion of secured subordinated notes (Note 6(e))

(550
)
(76
)
(761
)
Settlement of demand loan by transfer of Bid.Com Ltd. Shares (Note 19)

—

(2,000
)
—

Settlement of accrued liability by transfer of Bid.Com Ltd. shares

—

(68
)
—

~~16.RETAIL ACTIVITIES~~

The Company ceased its on-line retail activities in October 2000; however, during 2003, the Company received a $67,000 refund from a U.S.-based credit card institution formally engaged by the Company when it operated its on-line retail activities in the U.S.

The Company’s non-consolidated investment, Bid.Com, recommenced on-line retail activities in 2002 (Note 23). The shares of Bid.Com were transferred in settlement of a demand loan on June 30, 2003 (Note 19).

~~ADB Systems International Ltd. F-25~~

Notes to the Consolidated Financial Statements
Years ended December 31, 2004, 2003 and 2002
(in Canadian dollars)

17.REALIZED GAINS AND LOSSES ON DISPOSAL OF MARKETABLE SECURITIES, STRATEGIC INVESTMENTS AND MARKETABLE SECURITIES 2000 1999 1998 - -------------------------------------------------------------------------------- (in thousands) - -------------------------------------------------------------------------------- Gain on disposalCAPITAL ASSETS, AND RECOVERY OF ASSETS

2004

2003

2002

(in thousands)

Gain on disposal of strategic investment (Note 17(a))

$
—

$
20

$
41

(Loss) gain on disposal of capital assets (Note 17(b))

(1
)
(13
)
23

Loss on disposal of marketable securities (Note 17(c))

—

—

(149
)

$
(1
)
$
7

$
(85
)

(a) During 2003, the Company sold shares in Megawheels Technologies Inc. for proceeds of $20,000. During 2002, the Company disposed of its strategic ~~investment $ 20,697 $ - $ -~~investments, resulting in ~~Quack.com Inc Gain~~cash proceeds of $126,000 and a realized gain of $41,000.

(b) During 2004, the Company disposed of capital assets that were no longer required resulting in a loss of $1,000. Similar disposals in 2003 resulted in a loss of $13,000 and a gain of $23,000 in 2002.

(c) The loss on disposal of marketable securities 249 - - - -------------------------------------------------------------------------------- $ 20,946 $ - $ - - -------------------------------------------------------------------------------- On August 31, 2000 the Company's investment in Quack.com Inc. was acquired in whole by America Online Inc. In exchange for its shares in Quack.com Inc., the Company received 278,027 unregistered sharesincludes a loss of America Online Inc. valued at $21.9 million. The Company disposed of a portion of its unregistered shares in November 2000, and recognized a gain of $249,000. At December 31, 2000, 158,027 shares were held as part of marketable securities of which 35,226 shares must remain in escrow until August 31, 2001 to satisfy any indemnification claims arising$143,000 resulting from the ~~transaction. To date, there have been no significant claims made under the indemnification provisions~~January 2002 sale of the ~~original agreement. 14.~~ Company’s remaining AOL shares for gross proceeds of $1.3 million.

18.UNREALIZED GAINS AND LOSSES ON REVALUATION OF ~~MARKETABLE SECURITIES AND PROVISON FOR IMPAIRMENT OF LONG TERM ASSETS~~
2000 1999 1998 - -------------------------------------------------------------------------------------------------------------- (in thousands) - -------------------------------------------------------------------------------------------------------------- Revaluation of impaired $ (5,600) $ - $ - strategic investments (Note 14(a)) Revaluation of marketable securities (Note 14(b)) (4,846) - - Provision for impaired goodwill (Note 14(c)) (3,593) - - Provision for receivable from joint venture (Note 14(d)) (802) - - Provision for impaired intangible asset (Note 14(e)) (401) - - Provision for non trade receivable (48) - - - -------------------------------------------------------------------------------------------------------------- $ (15,290) $ - $ - - --------------------------------------------------------------------------------------------------------------
STRATEGIC INVESTMENTS

2004

2003

2002

(in thousands)

Revaluation of strategic investments (Note 18(a))

$
—

$
—

$
(24
)

$
—

$
—

$
(24
)

(a) ~~The~~ During 2002, the Company reviewed the carrying value of each of its strategic investments and determined that in light of ~~the~~ recent financial performance of each investment and market conditions, the decline in value of these investments was other than temporary, and a revaluation was required. ~~14. UNREALIZED LOSSES~~

~~19.REALIZED GAIN ON ~~REVALUATION~~SETTLEMENT OF ~~MARKETABLE SECURITIES AND PROVISON FOR IMPAIRMENT OF LONG TERM ASSETS (continued) (b)~~DEMAND LOAN~~

During the year ended December 31, 2002, the Company completed a series of transactions whereby the Company received a secured demand loan in the aggregate principal amount of $2,000,000. The loan carried an interest rate of 12 percent compounded monthly, and was secured by a general security agreement on the assets of the Company and a pledge of the shares of the Company’s Norwegian subsidiary. The loan matured on June 30, 2003. The Company ~~reviewed~~could, at its discretion, repay the ~~market value~~loan in cash or transfer to the lender 100 percent of the issued shares of its ~~unregistered shares~~investment in ~~America Online Inc, at December 31, 2001,~~an associated company in full settlement of the outstanding principal amount and ~~determined that~~accrued interest then owing to the lender (Note 23).

On June 30, 2003, the Company exercised its option to transfer its investment in the associated company, which had a ~~mark~~nominal carrying value, to ~~market adjustment was required. F-19~~ ~~BID.COM INTERNATIONAL INC.~~ the lender in full settlement of the outstanding principal and accrued interest amounts. This transfer resulted in a gain on settlement of the demand loan in the amount of $2,195,000.

~~ADB Systems International Ltd. F-26~~

Notes to the Consolidated Financial Statements ~~================================================================================ (c)~~
Years ended December 31, 2004, 2003 and 2002
(in Canadian dollars)

~~20.ACQUISITION OF ADB SYSTEMER ASA~~

On October 11, 2001, the Company acquired 98.3 per cent of the outstanding shares of ADB Systemer of Sola, Norway. ADB Systemer was a publicly traded software vendor focused on enterprise asset management and integrated electronic procurement. ADB Systemer has wholly-owned subsidiaries in the United States and in the United Kingdom.

The purchase price for 12,518,493 of the outstanding ADB Systemer common shares was $13.762 million. The purchase price was comprised of $2.293 million in cash, $9.844 million of common stock issued from treasury, acquisition costs of $765,000, employee stock options with a fair market value of $576,000 granted to ADB Systemer employees as replacement options and warrants with a fair market value of $284,000 issued to ADB Systemer warrant holders as replacement warrants. Common stock issued from treasury totaled 10,866,052 shares (21,732,104 pre-consolidation) with a value of $9.844 million based on a five-day trading average before and after September 10, 2001, the date the acquisition was announced to the general public. The purchase price for ADB Systemer did not include any contingent payments, options, or commitments. The purchase price of $13.762 million was allocated as follows:

2001

(in thousands)

Net monetary assets (including cash of $814)

$
418

Capital assets

308

Contractual agreements

177

Acquired software and related intellectual property

3,383

Goodwill

9,476

Total purchase price

$
13,762

~~ADB Systemer’s operations were consolidated after the effective date of the acquisition, October 11, 2001.~~

The amortization periods for contractual agreements and software and related intellectual property are 12 and 36 months respectively. An amortization expense relating to software in the amount of $846,000 was recorded in 2004 (2003 - $1,128,000). At the end of fiscal 2004, acquired software had been fully amortized. At the end of fiscal 2003, accumulated amortization for acquired software amounted to $2,537,000, resulting in a net book value of $846,000.

Goodwill was not amortized, but was subject to an impairment test where the carrying value of goodwill was compared to its fair value. In the event the carrying value of goodwill exceeded its fair value, a goodwill impairment would be recorded. At December 31, 2001, the carrying value of goodwill was tested for impairment, and it was determined that a goodwill impairment of $9.476 million was required. Goodwill is not deductible for tax purposes.

~~ADB Systems International Ltd. F-27~~

Notes to the Consolidated Financial Statements
Years ended December 31, 2004, 2003 and 2002
(in Canadian dollars)

~~21.INVESTMENTS IN JOINTLY CONTROLLED COMPANY~~

On September 25, 2003 the Company established a joint venture with GE Commercial Equipment Financing, a unit of GE Commercial Finance, with each entity holding a 50 percent interest in the joint venture. The joint venture operates under the name of GE Asset Manager LLC. The joint business venture develops and markets asset management technology to customers in a broad range of industries. Upon the establishment of this joint venture, 1 million share-purchase warrants issued by ADB to GE Capital Corporation vested. The fair value of these warrants of $188,000, calculated at the vesting date, is reflected on the Consolidated Balance Sheets as an Acquired Agreement. An amortization expense of $150,000 was recorded in 2004 (2003 - $38,000). This acquired agreement has been fully amortized as of December, 2004.

As at December 31, 2004, the joint venture held no assets or liabilities, and earned no revenue. A nominal amount of incremental expenses has been incurred by the Company in development and marketing activities pertaining to the joint venture. Such expenses have been included in the financial statements of the Company.

~~22.GOODWILL IMPAIRMENT~~

The Company ~~determined that~~reviewed the carrying value of goodwill acquired in connection with the acquisition of ADB Systemer. The carrying value of goodwill was tested against its fair value and it was determined that a ~~jointly controlled company in 1999 had become permanently impaired as~~goodwill impairment of $9.476 million was required at December 31, ~~2000~~2001 (Note ~~15 (a))~~20). ~~(d) As~~For the year ended December 31, 2002 a ~~result~~goodwill impairment of ~~reviewing~~$14,000 was recorded on goodwill acquired in connection with the ~~carrying~~purchase of shares of the non-controlling interest shareholders of ADB Systemer. The permanent decline in the fair value arose on a downturn in economic conditions resulting in lower than previously anticipated cash flows.

~~23.RELATED PARTY TRANSACTIONS~~

On August 30, 2002, the Company entered into a series of agreements with a lender, an unrelated party, whereby the lender granted to the Company a secured loan in the aggregate principal amount of $2 million (Note 19). The Company and the same unrelated party also entered into an agreement whereby on-line retail operations were to be conducted by Bid.Com Ltd. These operations utilized the on-line retail technology, experience and expertise of the Company developed and operated under the name “Bid.Com International Inc.” in the on-line selling of consumer products supplied by the lender.

~~On June 30, 2003, the Company exercised its option to transfer 100 percent of the issued shares of Bid.Com Ltd. in full settlement of the outstanding principal and accrued interest owed to the lender.~~

The Company owned 100 percent of the issued and outstanding shares of Bid.Com Ltd., but determined that, for accounting purposes, consolidation of Bid.Com Ltd. was not appropriate. This determination was based upon the Company’s inability to determine the strategic operating policies of Bid.Com without the cooperation of others, its inability to obtain the future economic benefits from the resources of Bid.Com Ltd., and its lack of exposure to the related risk of ownership. Therefore, the Company accounted for its investment in Bid.Com Ltd. on the equity basis. The Company was not exposed to losses incurred by Bid.Com Ltd., and accordingly this investment was carried at a ~~jointly controlled company, the Company determined that a portion~~nominal amount. U.S. GAAP required consolidation of the ~~receivable~~investment in Bid.Com Ltd. in the Company’s financial statements. The impact of this U.S. GAAP difference from that investee may not be recoverable. (e) The Company determined that intangible assets of a proportionately consolidated jointly controlled company had become permanently impaired as atCanadian GAAP is disclosed in note 24.

~~ADB Systems International Ltd. F-28~~

Notes to the Consolidated Financial Statements
Years ended December 31, ~~2000. 15. ACQUISITION, LICENSING AND SERVICE AGREEMENTS (a) In June, 1999~~2004, 2003 and ~~August, 1999 the Company issued $2,500,000 of common shares and exercised an option to acquire a 51% interest~~ 2002
(in Point2 Internet Systems Inc. ("Point2"). Under the agreement, two warrants for shares in the Company were issued each of which is exercisable into $1,000,000 of common shares of Bid.Com for no additional consideration and are exercisable by the shareholders of Point2, These two warrants were exercised during 2000 in exchange for 542,810 Common Shares of the Company with a value of $2 million. Pursuant to the shareholders agreement among the Company and the shareholders of Point2, the Company acquired 51% of the shares but can only elect 50% of the board of directors. The investment in the jointly controlled company is accounted for on a proportionate consolidation basis and the Company has recorded its proportionate share of revenue and expenses since the date of acquisition. Of the total purchase price, $134,000 was allocated to current assets, $521,000 to non-current assets and $28,000 to current liabilities resulting in goodwill of $2,044,000. An additional $2 million of goodwill arose on the exercise of two warrants during 2000. At December 31, 2000, the Company provided $3,593,000 for the unamortized portion of goodwill (Note 14(c)). Condensed balance sheet information for Point2 as at December 31, 2000 and December 31, 1999 is as follows: ---------------------------------------------------------------- 2000 1999 ---------------------------------------------------------------- (in thousands) Current assets $ 117 $ 131 Capital assets 205 102 Intellectual property - 905 Current liabilities 775 141 Shareholder advances 1,633 80 Shareholder equity (2,086) 917 Canadian dollars)

~~Condensed income statement and cash flow information for ~~Point2~~Bid.Com Ltd. for the ~~twelve month~~six-month period ended June 30, 2003 is as follows:~~

2003

(in thousands)

Revenue

$
3,614

Net income

208

Change in cash resources

(358
)

Revenue of $35,000 related to web-site development, support and maintenance services provided to Bid.com Ltd. was included in the consolidated results of the Company for the six months ended June 30, 2003. In addition, the Company charged overhead-related costs of $76,000 for rent, connectivity and management fees to Bid.com Ltd. for the six-month period ended June 30, 2003. These overhead charges were recorded as a reduction of expenses in the consolidated financial statements for the year ended December 31, ~~2000, and the four month period ended December 31, 1999 is as follows: F-20~~ BID.COM INTERNATIONAL INC. Notes to the Consolidated Financial Statements ================================================================================ 15. ACQUISITION, LICENSING AND SERVICE AGREEMENTS (continued) ---------------------------------------------------------------- 2000 1999 ---------------------------------------------------------------- (in thousands) Revenue $ 348 $ 221 Net loss 3,003 222 Change in cash resources (14) (185) (b) In September, 1999 the Company invested $735,400 (US $500,000) to acquire 490,909 common shares of Quack.com Inc., a California based company. Quack.com is focused on leading edge applications of voice recognition technology and advanced Internet spidering technology to make the information of the Internet accessible via the telephone. On January 18, 2000 the Company entered into an agreement to purchase a convertible subordinated debenture due January 18, 2001 for U.S. $182,000. Under the terms of the debenture the outstanding principal and all accrued and unpaid interest could be converted into shares of Class A or Class B common stock at $0.01 par value per share. The Company converted this debenture into common shares in August 2000. On August 31, 2000, the Company disposed of its investment in Quack.com Inc. and realized a gain of $20.697 million (See Note 13). 16. RELATED PARTY In February 2000, the Company entered into an agreement, valued at $1.5 million in shares in Art Vault Limited, plus a hosting fee and a share of net on-line auction revenues, under which it will provide its on-line auction technology and related services to Art Vault in which certain Directors of Bid.Com, in aggregate, have a controlling interest. During the year the Company recorded $500,000 in revenue relating to this agreement. As a result of a revaluation of its strategic investments (Note 14), the carrying value of the Company's investment in Art Vault was $281,000. 17. SUBSEQUENT EVENT On January 11, 2001, the Company's unregistered shares in America Online Inc. became registered and freely trading. Between January 19, 2001 and January 26, 2001, the Company sold 122,801 freely trading shares in America Online Inc. for gross proceeds of $10.0 million and a realized gain of $3.7 million. The remaining 35,226 shares of America Online must remain in escrow until August 31, 2001. 18.2003.

~~24. RECONCILIATION OF UNITED STATES GAAP ~~Under Canadian~~~~

The financial statements of the Company have been prepared in accordance with generally accepted accounting principles ~~stock based compensation is not recorded~~as applied in Canada, which conform in all material respects with generally accepted accounting principles in the ~~accounts of the Company. Stock based compensation under~~ United States, except as noted below.

~~(a) STOCK-BASED COMPENSATION TO EMPLOYEES~~

In fiscal 2003, the Company adopted the accounting recommendations contained in the CICA Handbook Section 3870 —“Stock-based Compensation and Other Stock-based Payments” effective January 1, 2003 regarding expensing of employee stock-based compensation. Accordingly, commencing in fiscal 2003, the Company records a compensation expense for stock options granted to employees on or after January 1, 2003, based on the fair value method of accounting. For fiscal 2002, the Company did not recognize compensation expense for employee stock options, however pro-forma disclosure giving recognition to the fair market value of options granted from January 1, 2002 has been provided in Note 11.

Under U.S. GAAP stock-based compensation granted to employees is accounted for in accordance with the provisions of Accounting Principles Board (APB) Opinion No. 25, ~~"Accounting~~“Accounting for Stock Issued to ~~Employees". Accordingly,~~Employees,” or in accordance with SFAS 123 “Accounting for Stock-Based Compensation.” Prior to 2003, under ~~both Canadian and~~ United States GAAP the Company elected to follow APB 25 and no accounting recognition iswas given to stock options granted at fair market value until they ~~are~~were exercised. ~~F-21~~ ~~BID.COM INTERNATIONAL INC. Notes~~Upon exercise, the proceeds were credited to shareholders’ equity. In December 2002, the ~~Consolidated Financial Statements ================================================================================ 18. RECONCILIATION OF UNITED STATES GAAP (continued)~~FASB issued SFAS No. ~~123, "Accounting~~148, “Accounting for Stock-Based Compensation~~" requires the disclosure~~ – Transition and Disclosure,” an amendment of ~~pro forma net income (loss) and earnings (loss) per share had~~FASB Statement No. 123. This Statement amends FASB Statement No. 123, “Accounting for Stock- Based Compensation,” to provide alternative methods of transition for a voluntary change to fair value method of accounting for stock-based employee compensation. In fiscal 2003, the Company ~~adopted~~elected to prospectively adopt the fair value method ~~since the Company's inception. Under~~for stock-based compensation as prescribed in SFAS No. ~~123,~~148. Under CICA 3870 and SFAS No. 148, the fair value of stock-based awards to employees is calculated through the use of option pricing models, even though such models were developed to estimate the fair value of freely tradable, fully transferable options without vesting restrictions, which significantly differ from the ~~Company's~~Company’s stock option awards. The ~~Company's~~Company’s calculations for employee grants were made using the ~~Cox Rubinstein Binomial Model~~Cox-Rubinstein binomial model with weighted average assumptions as described in the following table. As a result, the 2004 annual financial statements under U.S. GAAP reflect a stock-based compensation expense to employees of $39,000 (2003 - $193,000) for options granted on or after January 1, 2003.

~~ADB Systems International Ltd. F-29~~

Prior to fiscal 2003, SFAS No. 123, “Accounting for Stock-Based Compensation,” requires the disclosure of pro forma net income (loss) and earnings (loss) per share had the Company adopted the fair value method from the date the standard was applicable. The calculations for the pro forma disclosures of stock options granted prior to 2004 are reported below and were made using the Cox-Rubinstein binomial valuation model with the following weighted average assumptions: 2000 1999 1998 ---------------------------------------------------------------------- Dividend yield - - - Risk free interest rate 6.20% 5.50% 4.80% Expected term, in years 3.11 2.51 1.18

2004

2003

2002

Dividend yield

N/A

—

—

Risk free interest rate

N/A

3.53
%
3.69
%
Volatility

N/A

137.51
%
131.51
%
Expected term, in years

N/A

2.94

2.00

If the ~~computed minimum~~estimated fair values of the ~~Company's stock-based awards~~Company’s stock options granted to employees had been amortized to expense over the vesting period of the awards as specified under SFAS No. 123, the loss attributable to common shareholders and the basic and diluted loss per share on a pro forma basis (as compared to such items as reported) would have been:
2000 1999 1998 ------------------------------------------------------------------------------------------------------ (in thousands) ------------------------------------------------------------------------------------------------------ Loss attributable to common shareholders As reported $ (20,366) $ (20,825) $ (18,707) Pro forma $ (26,865) $ (34,191) $ (19,941) Basic and diluted net loss per share: As reported $ (0.38) $ (0.42) $ (0.79) Pro forma $ (0.50) $ (0.69) $ (0.84)
~~Impact of new accounting pronouncements~~

2004

2003

2002

(in thousands)

Loss attributable to common shareholders under U.S. GAAP

As calculated (Note 24(g))

$
(5,013
)
$
(2,572
)
$
(9,947
)
Stock-based compensation included in net loss

39

193

—

(4,974
)
(2,379
)
(9,947
)
Stock-based compensation if fair value applied to all awards

(39
)
(337
)
(797
)
Pro forma net loss as if fair value applied to all awards

$
(5,013
)
$
(2,716
)
$
(10,744
)
Basic and diluted net loss per share:

As calculated

$
(0.08
)
$
(0.05
)
$
(0.24
)
Pro forma

$
(0.08
)
$
(0.05
)
$
(0.26
)

(b)COMPREHENSIVE INCOME

Financial Accounting Standards Board Statement of Financial Accounting Standards No. ~~133, "Accounting~~130, “Reporting Comprehensive Income,” requires disclosure of comprehensive income, which includes reported net earnings adjusted for ~~Derivative Instruments~~other comprehensive income. Comprehensive income is defined as the change in net assets of a business enterprise during a period from transactions and Hedging Activities" ("FAS 133"): The Financial Accounting Standards Board ("FASB") has issued FAS 133 to be effective for all fiscal years beginning after June 15, 2000. FAS 133 requires that an entity recognize all derivativesother events and circumstances from non-owner sources.

Under Canadian GAAP, gains and losses from foreign exchange translations of subsidiaries classified as ~~either assets or liabilities~~self-sustaining are included in the ~~statement~~foreign cumulative translation account component of ~~financial position~~shareholders’ equity. Under U.S. GAAP, these gains and ~~measure those instruments at fair value. The accounting for changes in the fair value~~losses are included as a component of a derivative will depend on the intended use of the derivative and the resulting designation. Management has determined that the adoption of the pronouncement will not have any significant effect upon the Company's financial statements. F-22 ~~BID.COM INTERNATIONAL INC.~~ comprehensive income (loss).

~~ADB Systems International Ltd. F-30~~

Notes to the Consolidated Financial Statements ~~================================================================================~~
Years ended December 31, 2004, 2003 and 2002
(in Canadian dollars)

~~(c) MARKETABLE SECURITIES~~

U.S. GAAP requires that the Company disclose marketable securities into one of three categories: held to maturity; available for sale; or trading. As at December 31, 2004 and 2003, the marketable securities held were classified as follows:

2004

2003

(in thousands)

Trading

$
13

$
13

~~(d) FINANCIAL INSTRUMENTS WITH LIABILITY AND EQUITY ELEMENTS~~

Under Canadian GAAP, the secured subordinated notes (see Note 6) are recorded based upon the relative fair values of the liability and equity components of the instruments. The liability component is accreted to the face value of the subordinated notes over the term to maturity until the underlying notes are converted into common shares. Under U.S. GAAP, upon issuance, the secured subordinated notes would have been recorded as a liability and reclassified to equity only upon conversion. Accordingly, the interest accretion of $266,000 (2003 - $112,000) that is recorded under Canadian GAAP is reversed under U.S. GAAP.

Additionally, under Canadian GAAP, the financing costs arising from the issuance of the convertible notes are allocated between the liability and equity components of the notes. The financing costs associated with the liability component of the notes are deferred and amortized over the term of the underlying debt (see Note 5). The financing costs associated with the equity component of the notes are charged to shareholders’ equity. Under U.S. GAAP, all of the financing costs are deferred and amortized over the term of the underlying debt. As a result, the 2004 amortization expense under U.S GAAP is $58,000 compared to an amortization expense of $32,000 under Canadian GAAP. Furthermore, under Canadian GAAP, conversion of debt results in the allocation of any unamortized deferred financing charges associated with that debt to shareholders’ equity. Under U.S. GAAP, such unamortized financing charges are expensed upon conversion of the associated debt. Accordingly, under U.S. GAAP, an additional amount of $23,000, representing the unamortized financing charges associated with the Series F notes, is expensed. The unamortized financing charges under Canadian GAAP, in the amount of $13,000, were allocated to contributed surplus upon the conversion of the Series F notes.

Further, under U.S. GAAP, the beneficial conversion feature represented by the excess of the fair value of the shares issuable on conversion of the subordinated notes, measured on the commitment date, over the amount of the loan proceeds to be allocated to the common shares upon conversion would be allocated to contributed surplus. This results in a discount on the subordinated notes that is recognized as additional interest expense over the term of the subordinated notes and any unamortized balance is expensed immediately upon conversion of the subordinated notes. Accordingly, for U.S. GAAP purposes, the Company has recognized beneficial conversion features in 2004 of $20,000, $90,000 and $49,000 relating to Series F subordinated notes, Series G subordinated notes and Series H subordinated notes, respectively. In 2003, the Company has recognized a beneficial conversion feature of $96,000 with respect to the Series E subordinated notes. An interest expense of $126,000 (2003 - $64,000) results from the amortization of the discount over the term to maturity of those subordinated notes as well as the unamortized discount for those subordinated notes converted during the year. Canadian GAAP does not require the recognition of any beneficial conversion feature.

~~ADB Systems International Ltd. F-31~~

Notes to the Consolidated Financial Statements
Years ended December 31, 2004, 2003 and 2002
(in Canadian dollars)

~~(e) ADDITIONAL DISCLOSURES AS REQUIRED IN ACCORDANCE WITH UNITED STATES GAAP~~

U.S. GAAP requires the disclosure of the allowance for doubtful accounts. The accounts receivable balance reported on the consolidated balance sheets at December 31, 2004, includes an allowance for doubtful accounts in the amount of $51,000 (2003 - $65,000).

U.S. GAAP requires the disclosure of accrued liabilities that exceed five percent of current liabilities. Included in accrued liabilities at December 31, 2004 are accrued audit fees of $193,000 (2003 - $145,000) and accrued compensation expenses (severance and unpaid vacation) of $274,000 (2003 - $228,000).

U.S. GAAP requires the disclosure of non-cash interest components incurred during the year. In 2004, the Company incurred $126,000 (2003 - $64,000) in non-cash interest expense associated with secured subordinated notes. In 2003, the Company incurred $126,000 in non-cash interest expense associated with a demand loan that was settled through the transfer of the investment in an associated company (Note 19).

Under U.S. GAAP, EITF 01-09 requires, in certain circumstances, that the warrants issued to customers be recorded as a reduction of revenue. There is no similar guidance in Canadian GAAP. Accordingly, depreciation and amortization and revenue would be reduced by $150,000 (2003 - $38,000) under U.S. GAAP.

~~(f) INVESTMENT IN ASSOCIATED COMPANY/DISCONTINUED OPERATIONS~~

U.S. GAAP requires consolidation of the Company’s investment in the associated company described in Note 19. ~~REVENUE FORM EXTERNAL CUSTOMERS~~Furthermore, under FAS 144, the Bid.Com Ltd. component would be classified as an asset held for sale and be subject to the reporting requirements for discontinued operations. The effect of consolidation of this entity upon the Canadian GAAP balance sheet is reported in Note 24(g).

Consolidation of this associated company results in a decrease in the net loss attributable to common shareholders due to income from discontinued operations in the amount of $195,000 for fiscal 2003. For fiscal 2002, the net loss attributable to common shareholders is increased due to a loss from discontinued operations of $195,000. Revenue in the amount of $1.074 million is ~~comprised~~included in the 2003 income from discontinued operations. Revenue of ~~business~~$15,000 is included in the 2002 loss from discontinued operations.

For fiscal 2003, the impact of consolidation of the associated company upon cash flows was to ~~business e-commerce enabling~~decrease cash flows as a result of cash outflows from discontinued operations in the amount of $358,000. For fiscal 2002, the impact upon cash flows was to increase cash flows as the result of cash inflows from discontinued operations in the amount of $358,000.

~~ADB Systems International Ltd. F-32~~

Notes to the Consolidated Financial Statements
Years ended December 31, 2004, 2003 and 2002
(in Canadian dollars)

~~(g) The effect of the above differences described in Note 24(b), (d) and (f) on the Company’s financial statements is set out below:~~

~~Consolidated Balance Sheets~~

2004

2003

(in thousands)

Cash and marketable securities

$
453

$
445

Accounts receivable

1,535

1,384

Deposits and prepaid expense

208

118

Capital assets

142

266

Intangible assets

277

998

Accounts payable and accrued liabilities

1,680

1,370

Deferred revenue

135

91

Secured subordinated notes (Note 24(e))

2,465

1,009

Non-controlling interest

3

3

Shareholders’ equity

$
(1,668
)
$
738

~~Consolidated Statements of Operations~~

2004

2003

2002

(in thousands)

Net loss for the year as reported under Canadian GAAP

$
(5,104
)
$
(2,815
)
$
(9,364
)
Adjustments:

Accretion of interest on secured subordinated notes (Note 24(d))

266

112

68

Gain on settlement of demand loan (Note 24(f))

—

(2,195
)
—

Amortization of deferred charges relating to secured subordinated notes under Canadian GAAP (Note 24(d))

32

—

—

Amortization of deferred charges relating to secured subordinated notes under U.S. GAAP (Note 24(d))

(81
)
—

—

Amortization of beneficial conversion feature (Note 24(d))

(126
)
(64
)
(316
)
Net loss from continuing operations for the year as reported under U.S. GAAP

(5,013
)
(4,962
)
(9,612
)
Income (loss) from discontinued operations (Note 24(f))

—

2,390

(195
)
Net loss for the year as reported under U.S. GAAP

(5,013
)
(2,572
)
(9,807
)
Preferential distribution to shareholder (Note 24(j))

—

—

(140
)
Net loss attributable to common shareholders under U.S. GAAP

$
(5,013
)
$
(2,572
)
$
(9,947
)

Net loss for the year as reported under U.S. GAAP

$
(5,013
)
$
(2,572
)
$
(9,807
)
Other comprehensive income (loss) (Note 24(b))

6

74

32

Comprehensive income (loss) as reported under U.S. GAAP

$
(5,007
)
$
(2,498
)
$
(9,775
)
Basic and diluted loss per share from continuing operations

$
(0.08
)
$
(0.09
)
$
(0.23
)
Basic and diluted net loss per share

$
(0.08
)
$
(0.05
)
$
(0.24
)

~~ADB Systems International Ltd. F-33~~

Notes to the Consolidated Financial Statements
Years ended December 31, 2004, 2003 and 2002
(in Canadian dollars)

~~(h) IMPACT OF NEW ACCOUNTING PRONOUNCEMENTS~~

On September 30, 2004, the FASB issued staff position EITF Issue No. 03-1-1 “Effective Date of 10-20 of EITF Issue No. 03-1 – The Meaning of Other-Than-Temporary Impairment and its Application to Certain Investments”. The staff position delays the effective date for the measurement and recognition guidance contained in paragraphs 10-20 of Issue 03-1. The adoption of EITF Issue No. 03-1-1 had no effect on the Company’s results of operations and financial position for 2004.

In December 2004, the FASB issued staff position No. SFAS 109-1, “Application of FASB Statement 109, Accounting for Income Taxes, for the Tax Deduction Provided to U.S. Based Manufacturers by the American Jobs Creation Act of 2004”. The staff position addresses the issue as to whether this deduction should be accounted for as a special deduction or a tax rate reduction. This guidance was effective upon issuance on December 21, 2004. The adoption of SFAS No. 109-1 had no effect on the Company’s results of operations and financial position for 2004.

The FASB issued SFAS No. 123 (revised 2004), “Share-Based Payment”. This Statement is a revision of FASB Statement No. 123, “Accounting for Stock- Based Compensation” and supersedes APB Opinion No. 25, “Accounting for Stock Issued to Employees.” This Statement establishes standards for the accounting for transactions in which an entity exchanges its equity instruments for goods or services. It also addresses transactions in which an entity incurs liabilities in exchange for goods or services that are based on the fair value of the entity’s equity instruments or that may be settled by the issuance of those equity instruments. This Statement focuses primarily on accounting for transactions in which an entity obtains employee services in share-based payment transactions. This Statement is effective for annual or interim financial statements commencing after June 15, 2005. The Company currently accounts for its employee stock option plan in accordance with the provisions of SFAS No. 123 (revised 2004), accordingly the adoption of these standards is not expected to have a material impact on the Company’s financial position, results of operations or cash flows.

In January 2003 and December 2003, the FASB issued interpretation No. 46, “Consolidation of Variable Interest Entities” (“FIN 46”), and its revision, FIN 46-R, respectively. FIN 46 and FIN 46-R address the consolidation of entities whose equity holders have either not provided sufficient equity at risk to allow the entity to finance its own activities ~~including consulting, implementation, training~~or do not possess certain characteristics of a controlling financial interest. FIN 46 and ~~hosting fees combined with on-line retail sales~~FIN 46-R require the consolidation of ~~merchandise~~these entities, known as variable interest entities (“VIE”), by the primary beneficiary of the entity. The primary beneficiary is the entity, if any, that is subject to a majority of the risk of loss from the VIE’s activities, entitled to receive a majority of the VIE’s residual returns, or both. FIN 46 and ~~associated shipping revenue. Retail~~FIN 46-R is effective for the Company’s annual financial statements commencing January 1, 2004. Adoption of both of these standards had no effect on the Company’s financial position, results of operations ~~generated $10.095 million~~or cash flows.

The Emerging Issues Task Force provided guidance on Issue 03-1, “The meaning of ~~total revenue~~Other-Than-Temporary Impairment and its Application to Certain Investments. This Task Force guidance for evaluating whether an investment is other-than-temporarily impaired should be applied in other-than-temporary impairment evaluations made in reporting periods beginning after June 15, 2004. The disclosures are effective in annual financial statements for fiscal years ending after December 15, 2003, for investments accounted for under Statements 115 and 124. For all other investments within the scope of this Issue, the disclosures are effective in annual financial statements for fiscal years ending after June 15, 2004. The additional disclosures for cost method investments are effective for fiscal years ending after June 15, 2004. Comparative information for periods prior to initial application is not required.

The Emerging Issues Task Force reached a consensus on Issue 03-10, “Application of EITF Issue No. 02-16 — Accounting by a Customer for Certain Consideration Received from a Vendor by Resellers to Sales Incentives Offered to Consumers by Manufacturers. The Company has determined that EITF Issue No. 02-16 had no effect on the Company’s results of operations and financial position for 2004.

~~ADB Systems International Ltd. F-34~~

Notes to the Consolidated Financial Statements
Years ended December 31, 2004, 2003 and 2002
(in Canadian dollars)

~~(i) OPERATING LOSS~~

U.S. GAAP requires that the Company disclose operating loss. Operating loss of the Company for the year ~~ended~~ was $5.013 million, comprised of net loss of $5.013 million less realized and unrealized gains and losses on marketable securities and strategic investments of $Nil (2003 - $4.982 million, comprised of net loss from continuing operations of $4.962 million less $20,000; 2002 - $9.480 million, comprised of net loss from continuing operations of $9.612 million plus $132,000).

~~(j) PREFERENTIAL DISTRIBUTION TO SHAREHOLDERS~~

In accordance with U.S. GAAP, the $120,000 Series C secured subordinated debentures issued in exchange for the waiver of certain US registration rights granted to Stonestreet pursuant to a subscription agreement dated April 25, 2002 is recorded as preferential distribution to Stonestreet and deducted from the net loss to determine net loss attributable to common shareholders. The Series C secured subordinated debentures include a beneficial conversion feature; accordingly, a preferential distribution of $140,000 has been recorded.

~~25. SEGMENTED INFORMATION~~

~~The Company operates in the following reportable geographic segments: North America, Ireland and the United Kingdom, and Norway.~~

~~Assets by Geographic Region:~~

2004

2003

(in thousands)

Capital Assets

Intangible and Other
Assets

Capital Assets

Intangible and
Other Assets

North America

$
39

$
155

$
106

$
152

Ireland and U.K.

6

—

16

—

Norway

97

—

144

846

$
142

$
155

$
266

$
998

~~Net Revenue by Geographic Region:~~

2004

2003

2002

(in thousands)

North America

$
796

$
1,211

$
2,182

Ireland and U.K.

681

1,239

472

Norway

3,453

3,403

3,126

$
4,930

$
5,853

$
5,780

~~26. SUBSEQUENT EVENT~~

~~ADB Systems International Ltd. F-35~~

~~Corporate Directory~~

~~Directors~~

Jeffrey Lymburner
CEO

~~T. Christopher Bulger(1),(2),(3)~~

~~CEO, Megawheels~~

Duncan Copeland(1),(2),(3)
President, Copeland and Company

~~Paul Godin(2),(3)~~

Jim Moskos
President,
ADB Technologies Group

Jan Edvin Pedersen
President, ADB Systems, European Operations

Rick Robertson(1)
Associate Professor of Business
Richard Ivey School of Business,
The University of Western
Ontario

Officers
Jeffrey Lymburner
CEO

~~Mike Robb~~

~~Chief Financial Officer~~

~~Jim Moskos~~

~~President, ADB Technology Group~~

~~Jan Pedersen~~

~~President ADB Systems, European Operations~~

~~Aidan Rowsome~~

~~Vice President, Global Sales~~

~~(1) Member of the Audit Committee~~

~~(2) Member of the Management Resources and Compensation Committee~~

~~(3) Member of the Corporate Governance Committee~~

~~ADB Systems Offices~~

North America
Corporate Headquarters
ADB Systems International Ltd.
302 The East Mall, Suite 300
Toronto, Ontario ML4V 1V2
1 888 287 7467

ADB Systems International Ltd.
3001 North Rocky Point Drive East,
Suite 200, Tampa, Florida 33607
1 888 750 7467

Europe
ADB Systemer International ASA
Vingveien 2, N-4050
Sola, Norway
+ 47 51 64 71 00

ADB Systems International Ltd.
3000 Cathedral Hill
Guildford, Surrey GU2 7YB UK
+ 44 (0) 1483 243 577

ADB Systems International Ltd.
52 Broomhill Road, Suite 108
Broomhill Industrial Estate
Tallaght, Dublin 24, Ireland
+ 353 1 431 0513

Additional Shareholder Information
www.adbsys.com
investor-relations@adbsys.com
Registrar and Transfer Agent
Equity Transfer Services
120 Adelaide Street West
Suite 420, Toronto, ON M5W 4C3
(416) 361-0152
Auditors
Deloitte & Touche LLP
Toronto, Ontario, Canada
Lawyers
Brown Raysman Millstein
Felder & Steiner LLP, New York
Gowling Lafleur Henderson LLP,
Toronto
Stock Exchange Listings
Toronto Stock Exchange
Symbol: ADY
OTC Bulletin Board
Symbol: ADBYF
Shares Outstanding
Issued: 69,870,131
December 31, ~~2000, $26.590 million for the year ended December 31, 1999~~2004
ADB Systems, Dyn@mic Buyer, ProcureMate, WorkMate and ~~$20.001 million for the year ended December 31,1998. Business to business e-commerce enabling activities generated $2.402 million~~Dyn@mic Seller are trademarks of ~~total revenue for the year ended December 31, 2000~~ADB Systems International Ltd. and $4.411 million for the year ended December 31, 1999. 20. RECLASSIFICATION OF PRIOR YEARS Certain prior years amounts have been reclassified to conform to the current year basis of presentation. 21. CONVENIENCE TRANSLATION The financial statements as at December 31, 2000 and for the year then ended have been translated into U.S. dollars using the exchange rate of the U.S. dollar at December 31, 2000 as published by the Federal Reserve Bank of New York (U.S. $1.000 = Cdn. $1.4995). The translation was made solely for the convenience of readers in the United States. The translated U.S. dollar figures should not be construed as a representation that the Canadian currency amounts actually represent or could be converted into U.S. dollars. F-23 its affiliates.
© 2005 ADB Systems International Ltd.