Management s Discussion and Analysis of Financial Condition and Result of Operations April 24, 2008

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1 Management s Discussin and Analysis f Financial Cnditin and Result f Operatins April 24, 2008 The fllwing Management s Discussin and Analysis f Financial Cnditin and Results f Operatins ( MD&A ) f Autmated Benefits Crp. ( the Crpratin ) shuld be read in cnjunctin with the audited cnslidated financial statements and accmpanying ntes, which are prepared in accrdance with Canadian generally accepted accunting principles ( GAAP ) fr the fiscal year ended December 31, All amunts are expressed in Canadian dllars unless therwise nted. Any reference t the Crpratin specifically relates t the parent cmpany as separate frm its perating subsidiaries. All perating results refer t the cnslidated financials f the parent cmpany and its subsidiaries unless specifically nted therwise. Additinal infrmatin abut the Crpratin is available n SEDAR at This MD&A cntains certain infrmatin that may cnstitute frward-lking infrmatin within the meaning f securities laws. In sme cases, frward-lking infrmatin can be identified by the use f terms such as may, will, shuld, expect, plan, anticipate, believe, intend, estimate, predict, ptential, cntinue r ther similar expressins cncerning matters that are nt histrical facts. Frward-lking infrmatin may relate t management s future utlk and anticipated events r results, and may include statements r infrmatin regarding the future financial psitin, business strategy and strategic gals, research and develpment activities, prjected csts and capital expenditures, financial results, prduct testing utcmes, taxes and plans and bjectives f r invlving the Crpratin. Withut limitatin, infrmatin regarding future sales and marketing activities, Autben sftware prduct placement targets, mbile claims TM prduct placement targets, future revenues and research and develpment activities is frward-lking infrmatin. Frward lking-infrmatin is subject t certain factrs, including risks and uncertainties that culd cause actual results, events r develpments t be materially different frm what we currently expect. These risks include, amng thers, prduct develpment risk, ptential prduct liability, risks related t third party cntractual perfrmance, cmpetitin and the risks psed by ptential technlgical advances, risks relating t the prtectin f the Crpratin s intellectual prperty and risks relating t fluctuatin in freign currency exchange rates. Yu shuld nt place undue imprtance n frwardlking infrmatin and shuld nt rely upn this infrmatin as f any ther date. While the Crpratin may elect t, the Crpratin is under n bligatin and des nt undertake t update this infrmatin at any particular time. Unless therwise indicated, this MD&A was prepared by management frm infrmatin available up t April 24, Overview The Crpratin is a hlding cmpany with its head ffice lcated in Trnt, Ontari and is dedicated t acquiring cmpanies which prvide sftware applicatins t the insurance industry. Its whlly-wned subsidiary, Autmated Benefits Inc. (Autben), is als lcated in Trnt, Ontari and prvides claims management sftware fr health and dental plans in additin t ther insurance prducts fr emplyer grups. The Crpratin s ther whlly-wned subsidiary, Symbility Slutins Inc. and its whlly-wned subsidiary, Symbility Slutins (U.S.A) Inc. (jintly referred t n a cnslidated basis as Symbility ) are sftware develpment cmpanies fcused n mbile cmmunicatin and efficiency tls fr the Nrth American prperty and casualty insurance industry. Symbility has ffices in Trnt, Ontari and Mntreal, Québec. Symbility U.S.A. has its registered ffice in the State f Delaware.

2 2 Autmated Benefits Crp. Financing and Share issuances On May 7, 2007, the Crpratin annunced that it had cmpleted the clsing f its previusly annunced private placement (the Private Placement ). The Private Placement was cmpleted with the issuance f 18,344,000 units f the Crpratin (the Units ) at a price f $0.20 per Unit fr aggregate grss prceeds f $3,668,800. Officers f the Crpratin subscribed fr $300,000 f the ttal grss prceeds. Each Unit is cmprised f ne cmmn share (a Cmmn Share ) and ne-half f ne Cmmn Share purchase warrant (a Warrant ). Each whle Warrant will entitle the hlder t subscribe fr ne Cmmn Share at a price f $0.25 per share fr a perid f twenty-fur (24) mnths frm the Clsing Date f May 4, 2007, prvided that, in the event that the Cmmn Shares trade fr nt less than 10 cnsecutive trading days at the clsing price f $0.60 r greater, the hlder shall exercise its Warrants within 30 days, failing which the Warrants will expire. The brkers assisting with the ffering were issued 842,200 units representing 5% f the grss prceeds f the Private Placement nt related t insiders. On May 23, 2007, the Crpratin annunced that it had cnverted 1,323,762 preferred Series A shares previusly issued t certain sharehlders f the Crpratin int 1,323,762 cmmn shares pursuant t the cnversin terms f these preferred Series A shares. At December 31, 2007, apprximately 2,375,357 preferred Series A shares are cnvertible t cmmn shares f the Crpratin. Sharing f Resurces Senir management at Autmated Benefits Crp. is making a cncerted effrt t prmte the sharing f resurces between the perating subsidiaries t achieve additinal synergies. Until the third quarter, mst f this effrt related t the cnslidatin f the accunting, human resurces ( HR ), infrmatin technlgy ( IT ) and administrative functins at the head ffice in Trnt. On July 9, 2007, the Crpratin achieved Micrsft Partner Certified status. This is a jint accmplishment between the Autben and Symbility subsidiaries. Autben and Symbility will benefit frm this certificatin in the frm f: - The use f the Micrsft Certified Partner lg in all prmtinal activities - Access t free licenses fr internal prductivity tls, matching license purchases, and dem, training, and develpment licenses - Access t additinal internal supprt issues, and free technical and pre-sale supprt fr Micrsft prducts - Access t business management tls such as MS CRM Free nline and CBT training frm Micrsft n a pre-release basis - Leveraging Micrsft relatinships fr sales pprtunities On Nvember 20, 2007 the Crpratin annunced that Richard Adair wuld be assuming the rle f Chief Operating Officer. In additin t his duties as Chief Financial Officer, he will als be taking respnsibility fr the Custmer Supprt and Quality Assurance functins. Fr the first time, these tw functins will jintly supprt Autben and Symbility as ppsed t having dedicated rganizatins in each subsidiary. Management expects t achieve additinal synergies and efficiencies in this new rganizatin structure by prviding bth functins with access t a wider pl f talent and skill sets.

3 3 Outlk fr 2008 Autmated Benefits Crp. will cntinue t wrk with its whlly-wned subsidiaries t increase penetratin int their respective markets and fcus n their cst structure t ensure that they make prgress twards becming prfitable cmpanies. While there are n immediate plans t raise additinal financing, the Crpratin intends t cntinue t raise additinal equity r debt financing until the cnslidated entity is self-sufficient frm a cash flw perspective. Senir management will als cntinue t lk fr additinal pprtunities t cmbine resurces t achieve benefits in all areas f the Crpratin. Autmated Benefits Inc. Autben's prprietary sftware prduct and value-added services prvide insurance cmpanies, Third Party Administratrs ( TPA s ) and independent insurance brkers the ability t manage the adjudicatin and payment prcess f health and dental benefits with self-insured plans by allwing fr lcal adjudicatin and administratin f emplyee claims. As emplyers seek ways t reduce their benefit csts and prviders seek ways t deliver additinal value-added services t their custmers, Autben believes that the market fr its prduct will cntinue t increase. Prduct Develpment The develpment effrts in the first half f 2007 cntinued t be fcused n building a number f ther features that wuld enable the client t manage greater vlumes with less effrt. This included develping multi-prcedure dental screens, explanatin f benefit cdes, and the ability t tab thrugh screens. Autben als rlled ut an imprved versin f the Health Care Spending Accunt (HCSA) that prvides better reprting and greater flexibility in funding ptins fr the client. On August 10, 2007, Autben released versin f their sftware t its custmer base. This release incrprates a number f suggestins frm custmers which will imprve the user interface and verall efficiency and functinality f the service delivery. Autben sftware v features and enhancements include: Batch printing t adjudicatrs/administratrs, which nw allws them t print cheques that are payable t service prviders in batch frmat. The use f batch printing cheques payable t bth service prvider and emplyee cheques shuld reduce the adjudicatr/administratr s time substantially. Three new claim reprts have been added t ur reprt selectin. These new reprts enable the user t prvide custmized reprts as the menu ptins ffer many selectins regarding which data t include. Tw new training vides have been added t ur brker library fr the cnvenience f ur users. These vides cver the batch printing functins and the new claim reprts. Office Cnslidatin Management has made a strategic decisin t cnslidate the Edmntn ffice f Autben with the Crpratin s head ffice in Trnt. This will enable Autben t cntinue t pursue grwth in the Eastern Canadian market and will create additinal pprtunities by leveraging existing infrastructure and resurces in Ontari. As part f this strategy, Autben has successfully migrated its servers frm an incumbent facility in Edmntn t a facility in Mntreal shared by Symbility.

4 The cnslidatin f the tw ffices was cmpleted by Octber 31, Autben has maintained a custmer service presence in the Edmntn area t ensure service standards are maintained fr its Western custmers. After an extensive persnnel search, additinal staff have been hired t establish a self-sufficient rganizatin in Trnt and replace persnnel lst during the clsure f the Edmntn facility. Any ne-time csts assciated with this cnslidatin will be reflected as restructuring csts. Fr mre infrmatin n restructuring csts, please see Nte 18 f the audited cnslidated financial statements fr the twelve mnth perid ending December 31, Sales & Marketing Effrts Autben grew frm 27,000 certificates 1&2 at the end f 2006 t 35,000 certificates 1&2 at the end f 2007 and has nw surpassed $100 millin in cumulative claims paid n its sftware system. This increase represents a cmbinatin f cntinued rganic grwth frm existing custmers and vlume frm new larger accunts that take advantage f develpment initiatives that facilitated the management f increased vlumes by the users. Key Accunt Strategy Unin Benefit Plan Services (UBPS), f Waterl, Ontari is using the Autben sftware t facilitate medical and dental administratin and adjudicatin t their grup insurance custmers. This represented the first large custmer whse main ratinale fr buying was t utilize the Autben adjudicatin sftware and nt t purchase a significant amunt f ther insurance prducts. On December 19, 2007, Autben annunced that it had signed a new cntract with Sirius Benefit Plans, a TPA, wh will use the Autben sftware fr the administratin and adjudicatin f medical and dental benefits fr their grup insurance clients. Sirius Benefit Plans will transfer their current clients, numbering in excess f 10,000 emplyee certificates 1&2, nt the Autben system in Outlk fr 2008 On February 25, 2008, Autben released versin 2.16 f the Autben sftware slutin. This release gives Autben the same functinality as any large insurance cmpany and allws clients t manage larger vlumes f business using the sftware. Recent imprvements t the sftware include: Multiple dental prcedures may nw be entered at ne time fr either predetermining the eligibility f a claim r t adjudicate the claim. Weekly Indemnity benefit claims prcessing is nw ffered. Crdinatin f Benefits (COB) functinality nw includes the ability t track secnd payer status. Lagged Fee Guide functinality allws divisin level management, fr terms up t five years. 4 1 Currently Autben uses certificates as a key perfrmance indicatr (KPI) t measure vlume as a way t assist ptential investrs t understand the underlying variables that affect revenue. As the business evlves, different KPI s may be used t measure vlume r ther underlying indicatrs f revenue t reflect the business mdel at that time. 2 Autmated Benefits Crp. is nt aware f any unifrm standards fr calculating certificates and we believe that the Crpratin s presentatin f these measures may nt be calculated cnsistently with ther cmpanies in the same r similar business. Mrever, these measures are f peratinal perfrmance and nt measures f financial perfrmance under generally accepted accunting principles. All ther financial measures referenced herein have been prepared in accrdance with Canadian generally accepted accunting principles unless stated therwise.

5 5 On March 20, 2008, Autben annunced a partnership with Unisn Benefits. Autben streamlined its fferings, exiting all business lines nt directly related t the functinality and supprt f their prprietary sftware. Autben had been ffering a full range f administratin, including the resale f insured prducts, but will nw fcus exclusively n prviding health and dental claims administratin sftware t their client base. Unisn Benefits will take respnsibility fr these ther business lines. Unisn Benefits is a divisin f a privately wned insurance brkerage that has been prviding their clients with service and advice n bth individual and grup insurance prducts fr ver 20 years. The Autben sftware prduct is nw mre rbust and capable f handling larger vlumes and Autben is nw strategically psitined t fcus slely n sftware slutins fr the administratin f grup health and dental plans. The imprvements t the sftware will supprt the existing client base in their grwth strategies while als enabling the Autben sales team t market its adjudicatin slutin t a number f larger custmers, including rganizatins such as TPA s and insurance cmpanies. The cnslidatin f Autben s ffices in Trnt will supprt this strategy as the majrity f these types f cmpanies are lcated in Central and Eastern Canada. Symbility Slutins Inc. Since becming a whlly-wned subsidiary f the Crpratin n May 31, 2004, Symbility has cntinued t develp its mbile claims sftware and increase its penetratin f the prperty and casualty insurance estimating market. Prduct Develpment On February 21, 2007, Symbility annunced that they have taken insurance claims management t the next level with its next majr release f versin 2.8. Symbility s industry-leading value prpsitin was further strengthened by allwing custmers t expeditiusly address exterir damage, while cntinuing t imprve n the speed f claims settlement. Symbility mbile claims release 2.8 represents ne f their largest and mst significant effrts t date. The cmpany is pleased that a majrity f the enhancements (almst tw hundred features wrth), were driven by their direct custmers and partners. By certifying with bth Micrsft Windws Vista Business, and Micrsft Windws Vista Ultimate, Symbility mbile claims 2.8 delivers key platfrm cmpatibility t clients. With release 2.8, users can nw autmatically generate a 3D exterir view frm flr and rf plans and can actually wrk n the estimate right in the 3D view. Symbility is the first sftware prvider t ever accmplish this task. If users prefer, they can generate a 2D exterir plan, withut the need fr a flr plan r rf plan. This is a tremendus feature fr any carrier, independent adjuster, r cntractr wh wrk with catastrphe lsses, wind & hail damage r even fld damage. On August 9, 2007, Symbility annunced a majr milestne with the release f mbile claims versin 2.9. The 2.9 release ffers significant enhancements and new features fr bth the Symbility.NET web-based data warehuse applicatin and the mbile claims wireless, pen-based claim prcessing sftware. mbile claims v2.9 features and enhancements include: Rf plan scping mdule - fr the first time, field estimatrs can nw fully scpe and estimate damage t virtually any rf, n matter hw cmplex, with unparalleled accuracy and efficiency at the lss site. This feat was accmplished by cmpletely redesigning the rf plan interface using a unique 3-dimensinal drawing interface that is fully interactive. Users can build cmplex rfs by jining 3-dimensinal shapes which can be mved, resized and rtated in 360 degree 3-D space, and using nly a pen. Quantities fr any rfing items applied t any

6 prtin f the rf are autmatically generated, and, it can all be dne frm the grund withut the need t climb up n the rf. Create new claim files directly frm mbile claims - field users can nw create full claim files directly frm mbile claims withut needing t create the claim file n Symbility.NET and wrk with temprary claims in mbile claims. Cmbine all items fr related sub-rms and rfs int ne gruping there is nw n need t list the line items fr all sub-rms under separate rm headings n the estimate, all line items attached t all related sub-rms can be listed under a single heading. Gruping items instead f nly shwing items gruped by the rm in which they appear, users can chse t refrmat the estimate and shw items gruped by the database categry they are frm, by the trade they utilize, by the item s actin (all remve actins tgether, all replace actins tgether), r by the item descriptin. Cmbine all items fr related sub-rms and rfs int ne gruping there is nw n need t list the line items fr all sub-rms under separate rm headings n the estimate, all line items attached t all related sub-rms can be listed under a single heading. Sales and Marketing Effrts Symbility cntinues t make significant advances in the executin f its business plan. As Symbility s custmers rll-ut the mbile claims prduct t their adjusting base, the number f users has grwn frm 5,000 users 3&4 at the end f 2006 t 8,000 users 3&4 currently. During 2007, apprximately 52,000 claims 3&4 were prcessed n the mbile claims prduct as cmpared t apprximately 27,000 claims 3&4 in same perid fr the previus year. On February 12, 2007, Symbility was able t quantify the resulting custmer efficiency gains frm the use f its mbile claims prduct fr the first time. That data was cllected n the anniversary f Symbility s first mbile claims deplyment in the USA. The results are as fllws: Settlement Duratin: Reduced frm an average f 14 days t 5 days; First-Call Settlement: Increased frm 10% t 55% settlement n initial visit; Re-inspectin Rate: Claim site re-inspectin reduced frm 7% t 1% f claims; Adjuster Prductivity: Adjuster claim cunt increased by 50% per day; and Custmer Renewal Rate: Custmer renewal increased 3-4% ver the curse f the year. 6 3 Currently Symbility uses users and claims as a key perfrmance indicatr (KPI) t measure vlume as a way t assist ptential investrs t understand the underlying variables that affect revenue. As the business evlves, different KPI s may be used t measure vlume r ther underlying indicatrs f revenue t reflect the business mdel at that time. 4 Autmated Benefits Crp. is nt aware f any unifrm standards fr calculating users and claims and we believe that the Crpratin s presentatin f these measures may nt be calculated cnsistently with ther cmpanies in the same r similar business. Mrever, these measures are f peratinal perfrmance and nt measures f financial perfrmance under generally accepted accunting principles. All ther financial measures referenced herein have been prepared in accrdance with Canadian generally accepted accunting principles unless stated therwise.

7 This custmer efficiency data will greatly enhance the sales and marketing team s ability t quantify the cst savings t ptential custmers and assist them in perfrming return n investment calculatins t justify the purchase f the prduct. On March 27, 2007, Symbility annunced that it had signed a five year cntract with the Mercer Insurance Grup t prvide the cmpany with its industry leading mbile claims prcessing sftware. This represents the first custmer signed in the Nrth Eastern United States. On August 21, 2007, Symbility annunced that it had signed a cntract with Lautriv, LLC, a natinal prvider f Claims Management Slutins. Insurers utsurce pst-lss dcumentatin services by cntracting Lautriv t manage a fleet f specially equipped vehicles and trained inspectin technicians. Clients submit inspectin assignments via Lautriv.net. A field unit arrives nsite, cmpletes unbiased dcumentatin and uplads the inspectin file t Lautriv.net. The insurance carrier s claims representatives are able t view files remtely and make all settlement decisins. This cntract is significant as it represents the first time Symbility has used a Value Added Re-seller (VAR) t privately label its mbile claims prduct and integrate it int anther branded claims management slutin. Strategic Partnerships On May 14, 2007, Symbility annunced it is an Alliance Partner f Mtin Cmputing TM, a leader in mbile cmputing and wireless cmmunicatins. Mtin Cmputing s enhanced line f tablet PC s are designed t increase prductivity fr the n-the-g users while prviding prtability, security, pwer, and versatility. Under this agreement, bth cmpanies will invest in a marketing and sales strategy that fcuses specifically n the insurance market. On June 6, 2007 Symbility annunced that it has entered int a business relatinship with Lenv, a glbal PC manufacturer. The cmbinatin f Lenv s Tablet PCs with Symbility s pen-based mbile claims applicatin, which has been specifically designed t take full advantage f the tablet perating system, creates an efficient system fr carriers, adjusters and cntractrs t handle all claim activity right at the lss site. On September 4, 2007, Symbility annunced it s partnership with Panasnic Cmputer Slutins Cmpany. The partnership will allw Symbility t deliver a best-f-breed mbile claims platfrm fr the insurance market. The slutin cmbines Symbility s mbile claims sftware with Panasnic s fully rugged Tughbk 19 pen-based tablet PC, delivering a rugged, reliable and mbile platfrm that imprves adjuster prductivity in the field. On September 24, 2007, Symbility annunced a partnership with Enservi, Inc., a leading prvider f cntents pricing and services t the prperty and casualty industry. Enservi custmers represent a majrity f the tp 50 prperty insurance cmpanies in the United States. Enservi's services span frm a natinal team f field inventry specialists t expert valuatin services t prduct replacement. The Enservi executive team brings with them ver 80 years f P&C claim experience and ver 30 years f sftware develpment and cntents management experience. By integrating the technlgies frm bth cmpanies, custmers will nw have the ability t prcess cntent claims, while they are cmpleting their estimate. Symbility expects these strategic partnerships will increase their netwrk and further strengthen the brand, prduct, and market presence. 7

8 8 Office Cnslidatin Management has made a strategic decisin t cnslidate the Kitchener ffice f Symbility with the Crpratin s head ffice in Trnt. The cnslidatin f the tw ffices was cmpleted by December 31, Symbility has maintained its develpment center in Mntreal, Québec. Any ne-time csts assciated with this cnslidatin will be reflected as restructuring csts. Fr mre infrmatin n restructuring csts, please see Nte 18 f the audited cnslidated financial statements fr the twelve mnth perid ending December 31, Organizatinal Changes The release f versin 2.9 represented the cmpletin f the majrity f the functinality required fr the mbile claims prduct. Management has determined that the resurces required t supprt the prduct ging frward culd be reduced. This resulted in a reductin f five full-time psitins in the develpment team and related supprt staff during the third quarter. Any ne-time csts assciated with this cnslidatin will be reflected as restructuring csts. Fr mre infrmatin n restructuring csts, please see Nte 18 f the audited cnslidated financial statements fr the twelve mnth perid ending December 31, On Octber 30, 2007, Symbility annunced the hiring f Perry Gldman as Reginal V.P. Sales and Jackie Gennett as Business Slutins Cnsultant. Bth f these individuals bring significant experience frm the prperty & casualty industry and will devte their effrts t grwing Symbility s presence in the U.S. market. Outlk fr 2008 Symbility has already started t generate psitive sales mmentum in early On March 17, 2008, Symbility annunced the extensin f their existing cntract with Farmers Mutual f Nebraska ( FMNE ) fr an additinal five year perid. This extensin cnfirms that Symbility s clients are benefiting frm ur prduct and are cmmitted t utilizing ur technlgy. With this cntract, Symbility will see minimum guaranteed revenue f mre than $750,000 ver the curse f five years, based n FMNE s current usage f the system. On March 25, 2008, Symbility annunced that Schafer, Wd & Assciates had signed a tw year cntract fr use f Symbility s mbile claims sftware slutin. Schafer, Wd & Assciates is a full service adjusting cmpany that prvides independent adjusters t the insurance industry during catastrphic events. Symbility is currently at varius stages f Phase 1 evaluatin (defined as prf f cncept) with five cmpanies, primarily in the United States. These cmpanies are gegraphically diverse and include a natinal carrier in Canada and cmpanies dmiciled n the West Cast f the USA; Midwestern USA; and Nrtheastern USA. On March 27, 2008, Symbility annunced the integratin f its mbile claims sftware with Enservi. The tw cmpanies jintly develped this slutin t serve adjusters n the claim site, allwing them t quickly and efficiently manage cntents claims valuatins. With this integratin, Symbility users can nw assign an Enservi inventry specialist r inventry cntents directly at a lss site, eliminating the need fr multiple visits t the lss site. With this reductin in site visits, faster, ttal claim prcessing can be achieved, increasing the efficiency f all parties invlved. On March 31, 2008, Symbility annunced the release f versin 3.0 f its mbile claims sftware package. Versin 3.0 f Symbility mbile claims cntains a number f value-added elements including:

9 9 Cmmercial database updated reginalized, light cmmercial pricing data frm Craftsman is nw integrated int the Symbility mbile claims sftware slutin Redesigned administratin page with a clearer layut and better rganizatin Increased drawing flexibility with freedm drawing tl, allwing users t draw partial rms and single wall elements Handwritten ntes allws the user t recrd any detail in electrnic ink. The handwritten ntes pager is embedded directly int the claim file and can easily be shared with ther users and later cnverted int text fr use thrughut the claim These new advancements in the sftware fcus primarily n pen-based features and usability, which allws Symbility t streamline the prperty claims prcess even further. With the cmpletin f the cnslidatin f the Kitchener ffice t Trnt, management has determined that the resurces required t supprt the divisin ging frward culd be reduced. This will result in a reductin f fur full-time psitins in the first half f These respnsibilities will be absrbed by staff in the Trnt and Mntreal ffices and by ther remte emplyees. We believe that we nw have a very efficient cst structure that will enable Symbility t add revenue prfitably, while prviding ur custmers with the supprt that they require. On April 24, 2008, Symbility annunced a strategic partnership with The Innvatin Grup ( Innvatin Grup ) fr the expansin f the Symbility mbile claims platfrm. Initial implementatin will ccur this summer in the United Kingdm with additinal Eurpean cuntries t fllw shrtly thereafter. Prduct demnstratins t Innvatin Grup peratins in Suth Africa and Australia have initiated plans fr further glbal expansin in Innvatin Grup, headquartered in the United Kingdm, will becme bth a user and exclusive value added reseller f Symbility Slutins mbile claims sftware slutin utside f Nrth America. Innvatin Grup is a glbal prvider f technlgy-enabled utsurcing and sftware slutins t the prperty and casualty industry. With an internatinal reach spanning 11 cuntries and ver 220 glbal custmers, Innvatin Grup is respnsible fr the prcessing f mre than 20 millin plicies annually. Innvatin Grup will begin using the Symbility applicatin in the UK thrugh its internal utsurcing peratins fr claims handling, netwrk and cntractr management and custmer fulfillment. Cncurrent with these deplyments, Innvatin Grup will leverage its custmer relatinships in multiple territries as a reseller while acting as a reference site thrugh these internal deplyments. The Symbility applicatin has been mdified t adapt t the Eurpean market with bth English and French language capabilities. Grup Insurance Sftware Business In the Crpratin s financial statements the segmented infrmatin fr Autben is described as Grup Insurance Sftware. Thrugh the sale f its medical and dental adjudicatin sftware t insurance brkers, Autmated Benefits Inc. generates revenues frm: Transactin fees earned as a percentage f medical and dental grup insurance claims run thrugh Autben s sftware by its custmer base. Resale f premium grup insurance benefits prducts t brkers and self-insured emplyers. This includes stp-lss, ut f cuntry, shrt term disability, lng term disability, life and accidental death and dismemberment insurance.

10 10 Resale f drug cards fr prcessing medical prescriptins and dental services. Prfessinal services earned frm prviding custmized prgramming slutins t custmers. Help desk and maintenance supprt t its custmers wh use Autben s sftware. Autben has histrically seen lwer grss margins than a traditinal sftware business. This is due t the fact that its existing business mdel requires the resale f certain lwer-margin insurance prducts t insurance brkers in rder fr them t ffer their custmers a full self-insured benefits plan. Management has transitined ut f the lwest margin prduct lines t fcus n the sale f sftware and services. When cmbined with targeting larger custmers wh have the purchasing pwer t buy insurance prducts directly frm the carriers, Autben expects t imprve its grss margins as its sales mix shifts t mre sales f higher margin transactin fees fr the use f its sftware. Prperty and Casualty Sftware Business In the Crpratin s financial statements the segmented infrmatin fr Symbility is described as Prperty and Casualty Sftware. Bth Symbility Slutins Inc. and Symbility Slutins (U.S.A.) generate revenue frm: Transactin fees frm insurance carriers and independent adjusters prcessing claims using the cmpany s prprietary sftware slutin. License fees frm insurance carriers wh are charged n a per-user basis fr the use f the cmpany s prprietary sftware slutin. Prfessinal services earned frm prviding training and custmized prgramming slutins t custmers. Symbility nw has eleven cntracts as well as several ther initiatives underway. While there has been a large acceptance f its technlgy by thse in the field, Symbility has learned that the rllut f its system takes a great deal f time and t sme extent a lt f training f custmer staff. Management expects revenues t cntinue t increase as these existing custmers ramp-up the use f Symbility s technlgy and management s fcus n sales and marketing and strategic partnerships enables the acquisitin f new custmer cntracts. Selected Financial Infrmatin These financials have been prepared in accrdance with Canadian GAAP. Fr further infrmatin, please see Nte 1 and Nte 2 f the audited cnslidated financial statements fr the year ended December 31, The fllwing table shws selected financial infrmatin fr the twelve mnth perid ended December 31, 2007 and a cmparisn t the same perids in the last tw prir years. The results fr the year ended December 31, 2007 and December 31, 2006 are audited in thusands f dllars, except per share amunts. The results fr the year ended December 31, 2005 are unaudited in thusands f dllars, except per share amunts. The cmparative results are unaudited because they reflect a restatement f results which has nt been audited.

11 11 YEAR ENDED DEC. 31, 2007 YEAR ENDED DEC. 31, 2006 YEAR ENDED DEC. 31, 2005 (RESTATED) Revenue 3,231 2,447 1,607 Net Lss (4,020) (6,643) (5,469) Lss per Share (0.04) (0.08) (0.10) Ttal Assets 4,740 4,883 2,234 Ttal Lng-Term Nil Financial Liabilities Over the past three years, revenue has increased as Autben has grwn its custmer base and Symbility has started t recgnize the revenue frm the rllut f its new cntracts. During this perid, the Crpratin has incurred lsses as bth divisins invest in prduct develpment, sales and marketing, and general and administratin t establish and grw a presence fr their prducts in the insurance industry. These lsses have started t decline during the year ended December 31, 2007 due t a cmbinatin f grwth in high-margin revenue and a reductin in csts as a result f effrts by management t cnslidate peratins. Results frm Operatins Year Ended December 31, 2007 as cmpared t the year ended December 31, Current Assets Accunts receivable has decreased by apprximately $292,000 since December 31, This decrease is principally explained by an increased fcus n the cllectin f receivables fr Autben and Symbility after the centralizatin f the cllectins functin in Trnt. This was smewhat ffset by the SR&ED tax credit receivable f $124,840 related t the 2006 claim which was nt cllected until the first quarter f Please see additinal disclsure related t SR&ED tax credits under critical accunting plicies in this dcument. Nte receivable has increased by apprximately $1,585 as the lan t sharehlder cntinues t accrue interest until it is repaid. Prepaid expenses have decreased by apprximately $28,500. This decrease relates t items that were expensed during the perid including insurance, recruiting fees, database licenses and agency fees related t a particular cntractr. This was smewhat ffset by certain prepayments made in the Trnt ffice related t the cnslidatin f the Edmntn and Kitchener ffice. Restricted Cash Depsits The Crpratin s restricted cash depsits have decreased by apprximately $48,250. This relates t a reductin in the cash cllateral required t supprt a letter f credit and certain crprate credit cards. Please see the liquidity and capital resurces sectin f this dcument fr mre infrmatin. Prperty and Equipment The Crpratin s net fixed assets decreased by apprximately $75,700 since December 31, This decrease can be attributed t the net impact f certain purchases related t the integratin f Autben with the Trnt ffice net f the impact f amrtizatin f fixed assets and a write-dwn f certain assets in Edmntn and Kitchener related t the ffice cnslidatin.

12 12 Sftware develpment csts Sftware develpment csts are nw fully amrtized and have decreased by apprximately $59,000 since December 31, Intangible Asset Intangible assets have increased by apprximately $6,060 since December 31, The grss amunt f $15,000 paid t Sinisft fr its pricing database has nw been fully amrtized ver its estimated useful life f ne year. This was ffset by the purchase f indefinite-life intangible assets which cnsist f trademarks fr Autben and Symbility. The Crpratin will assess these assets fr impairment n an annual basis and when events r changes in circumstances indicate that an asset might be impaired. See Nte 2(f) Impairment f Lng-lived assets in the ntes t the audited financial statements fr the year ended December 31, 2007 fr the Crpratin s accunting plicy fr evaluating impairment. Revenues Revenues fr the twelve mnths ended December 31, 2007 increased t apprximately $3,231,000. This cmpares t revenues f apprximately $2,447,000 fr the same perid in the previus year. This represents an increase f apprximately $784,000 r 32%. The majrity f this increase relates t grwth in Symbility s sales as custmers rlled-ut the mbile claims prduct. Fr the twelve mnths ended December 31, 2007, Symbility had revenues f apprximately $1,188,000. This cmpares t revenues f apprximately $662,000 fr the same perid in the previus year. This represents an increase f apprximately $526,000 r 79%. The balance f this increase is attributed t Autben which is seeing grwing acceptance f new technlgy and adding new custmers as users f the Autben sftware. Revenues fr the twelve mnths ended December 31, 2007 fr Autben increased t apprximately $2,043,000. This cmpares t revenues f apprximately $1,786,000 fr the same perid in the previus year. This represents an increase f apprximately $257,000 r 14%. Cst f Sales Cst f sales represents csts f certain insurance prducts, which are in turn sld t brker custmers f Autben, as well as the cst f certain database license fees and fees fr claims transferred t the mbile claims prduct paid t third parties by Symbility. The cst f sales fr the twelve mnths ended December 31, 2007 increased t apprximately $1,121,000, and represents 35% f related revenue. This cmpares t cst f sales f apprximately $1,089,000 fr the same perid in the previus year which represented 45% f related revenues during this perid. In general, as sales f Symbility s high-margin technlgy grws, the verall cst f sales as a percentage f revenue decreases and the verall grss margin f the Crpratin is imprving. Autben s csts related t direct insurance and distributin in the twelve mnth perid ended December 31, 2007 were apprximately $1,080,000 and represents 53% f related revenue. This cmpares t apprximately $1,019,000 in the same perid in the previus year which represents 57% f related revenue. The primary reasn fr the increase in the cst f sales fr direct insurance csts is the result f higher sales f these prducts. The cst f sales has decreased as a percentage f revenue as the mix f high margin sales related t transactin fees has increased as cmpared t the sale f lwer-margin insurance prducts. Symbility s cst f sales attributed t database licenses and fees paid fr claims during the twelve mnth perid ended December 31, 2007 was apprximately $42,000 which represents 4.0% f related

13 revenue. This cmpares t apprximately $70,000 in the same perid in the previus year which represented 11% f related revenue. Database licensing csts decreased despite the increase in the number f users fr the mbile claims prduct due t a renegtiatin f the cntract terms with the vendr. In 2007, there were n sales f hardware due t a decisin t exit that business line. The cmbinatin f these tw factrs resulted in a lwer cst f sales as a percentage f revenue fr Symbility. General and Administratin General and administratin expense fr the twelve mnths ended December 31, 2007 was apprximately $3,245,000. This cmpares t apprximately $3,748,000 fr the same perid in the previus year fr a decrease f $503,000. Apprximately $415,000 f this decrease is related t a reductin in general and administratin expenses at Symbility. The settlement f the lawsuit with Xactware in 2006 reduced legal csts significantly at Symbility. A prtin f these savings were ffset by an increased investment int additinal senir management, custmer service, and training t supprt the grwth in Symbility s custmer base. General and administratin expenses at Autben als decreased by apprximately $82,000, mainly due t cnslidatin f the accunting functin at head ffice during the year. The balance f the increase relates t a nminal decrease in general and administrative csts at head ffice after the centralizatin f the accunting, HR, administrative, and IT functins there. Research and Develpment Research and develpment fr the twelve mnth perid ended December 31, 2007 decreased t apprximately $1,168,000. This cmpares t apprximately $1,375,000 fr the same perid in the previus year fr a decrease f apprximately $207,000. Apprximately $163,000 f this decrease reflects a reductin in resurces at Autben as a result f the cnslidatin f the Edmntn ffice. The balance f $44,000 f the decrease relates t a reductin f resurces at Symbility as the develpment prcess was streamlined and certain develpment prjects were cmpleted. Sales and Marketing Sales and marketing fr the twelve mnth perid ended December 31, 2007 decreased t apprximately $1,261,000. This cmpares t apprximately $1,970,000 during the same perid in the previus year fr a decrease f $709,000. The majrity f this decrease relates t a reductin f $568,000 in sales and marketing csts at Symbility related t a reductin in sales agency fees paid t a particular cntractr and public relatins fees paid t a U.S. cnsultant. The balance f $141,000 f this decrease related t a reductin in marketing staff and cnsultants at Autben. Stck Based Cmpensatin Stck based cmpensatin expense fr the twelve mnth perid ended December 31, 2007 was apprximately $412,000. This cmpares t apprximately $756,000 during the same perid in the previus year fr a decrease f $344,000. The decrease relates t certain ptins cntracts which have nw been fully expensed, a lwer number f ptins issued, and a higher number f frfeitures as cmpared t the same perid in the previus year. 13

14 14 Amrtizatin Amrtizatin expense fr the twelve mnth perid ended December 31, 2007 decreased t apprximately $244,000. This cmpares t an amrtizatin expense f apprximately $263,000 during the same perid in the previus year fr a decrease f $19,000. The decrease relates t the fact that certain sftware develpment csts have been fully amrtized and is smewhat ffset by the amrtizatin assciated with investment in new prperty and equipment during the past twelve mnths. Gain n Sale f Custmer Cntracts On Octber 26, 2007, the Crpratin entered int a cmmercial agreement with Unisn Benefits, a divisin f a privately wned insurance brkerage lcated in Thunder Bay. Unisn Benefits has been prviding their clients with service and advice n bth individual and grup insurance prducts fr ver 20 years. The custmer cntracts were transferred fr prceeds f $44,000 and a gain f $38,000 was recgnized net f applicable csts. Adjusted EBITDA In additin t disclsing results in accrdance with GAAP, the Crpratin als prvides supplementary nn-gaap measures as a methd f evaluating the Crpratin s perfrmance. Management uses Adjusted EBITDA as a measure f enterprise-wide perfrmance. Adjusted EBITDA is defined as earnings befre interest incme, taxes, depreciatin and amrtizatin, stck based cmpensatin, restructuring csts, impairment charges, and ther ne time gains r lsses. Management believes Adjusted EBITDA is a useful measure that facilitates perid-t-perid perating cmparisns. Adjusted EBITDA des nt have any standardized meaning prescribed by GAAP and is nt necessarily cmparable t similar measures presented by ther cmpanies. Adjusted EBITDA shuld nt be cnsidered in islatin f as a substitute fr net earnings (lss) prepared in accrdance with GAAP. The Crpratin has prvided a recnciliatin f Adjusted EBITDA t GAAP net earnings (lss) in the fllwing table. Unaudited in thusands f dllars Twelve Mnths Ended December 31, 2007 Net Lss (4,020) (6,644) Interest and ther (162) (110) incme Incme Tax Benefit 0 0 Depreciatin and Amrtizatin Stck-Based Cmpensatin Restructuring Csts Impairment Charges Gain n Sale (38) 0 Adjusted EBITDA (3,342) (5,735) Twelve Mnths Ended December 31, 2006

15 Adjusted EBITDA fr the twelve mnth perid ended December 31, 2007 was apprximately $(3,342,000). This cmpares t apprximately $(5,735,000) fr the same perid last year fr an imprvement f $2,393,000. Summary f Quarterly Results The fllwing table shws selected financial infrmatin fr each f the eight mst recently cmpleted quarters. Fr the Quarters Ended Fiscal Year 2007 Fiscal Year Dec. 31, 2007 Sept. 30, 2007 Jun 30, 2007 Mar 31, 2007 Dec. 31, 2006 Sept. 30, 2006 Jun 30, 2006 Mar 31, 2006 Revenue Net Lss (876) (723) (1,103) (1,318) (1,716) (1,534) (1,767) (1,630) Net Lss per Share Over the past eight quarters, revenue has increased as Autben has grwn its custmer base and Symbility has started t recgnize the revenue frm the rllut f its new cntracts. During Fiscal Year 2006, the Crpratin has incurred increasing lsses as bth divisins invested in prduct develpment, sales and marketing, and general and administratin t establish and grw a presence fr their prducts in the insurance industry. These lsses began t decline in Fiscal Year 2007 due t a cmbinatin f grwth in high-margin revenue and a reductin in csts as a result f effrts by management t cnslidate peratins. Critical Accunting Plicies Measurement uncertainties The preparatin f financial statements in cnfrmity with GAAP requires management t make estimates and assumptins that affect the reprted amunts f assets and liabilities, related amunts f revenue and expenses, and disclsure f cntingent assets and liabilities at the date f the cnslidated financial statements. Actual results culd differ frm these estimates and the differences culd be material. Significant areas requiring the use f management's estimates include reasnability f cllectin f receivables, equity-based cmpensatin, indefinite life intangible assets, the useful lives f definite life assets and the estimatin f certain accrued liabilities. Revenue Recgnitin (0.01) (0.01) (0.01) (0.02) (0.01) (0.02) (0.02) (0.03) Autben has develped a nn-traditinal supply chain fr grup insurance, determining that it is a reseller, as ppsed t a sales agent in these transactins. Management has taken this psitin due t the fact that Autben acts as a principal in the transactin, retains title t the prduct until the transactin is cmplete, assumes the risks and rewards f wnership, and has the ability t set the pricing fr its fees. Autben s revenue reflects the grss revenue fr certain insurance prducts in which Autben is classified as a re-seller.

16 The fllwing table summarizes the revenue and net revenue fr the re-selling f premium and pled insurance prducts: Unaudited in thusands f dllars. 16 Twelve Mnths Ended Dec. 31, 2007 Twelve Mnths Ended Dec. 31, 2006 Revenue 1,831 1,628 Cst f Sales Net Revenue Leases Leases are classified as either capital r perating leases. Leases which transfer substantially all f the benefits and risks incidental t wnership f assets are accunted fr as if they were an acquisitin f an asset and incurrence f an bligatin at the inceptin f the lease and are accunted fr as capital leases. All ther leases are accunted fr as perating leases and expensed as incurred. Changes in Accunting Plicy Effective January 1, 2007, the Crpratin adpted the new recmmendatins f The Canadian Institute f Chartered Accuntants ["CICA"] Handbk Sectin 3251, "Equity", Sectin 1530, "Cmprehensive Incme", Sectin 3855, "Financial Instruments - Recgnitin and Measurement", Sectin 3861, "Financial Instruments Disclsure and Presentatin", and Sectin 3865, "Hedges", retractively, withut prir perid restatement. These new Handbk Sectins, which apply t fiscal years beginning n r after Octber 1, 2006, prvide requirements fr the recgnitin and measurement f financial instruments and n the use f hedge accunting. With the adptin f these standards, there was n significant impact n net incme fr the year ended December 31, Additinal disclsures have been made in the financial statements as a result f the adptin f these standards. Changes in accunting plicies nt yet adpted The fllwing accunting prnuncements have been released in Octber 2006 but have nt yet been adpted by the Crpratin: [i] Capital disclsures [ii] Financial instruments - disclsures [iii] Financial instruments - presentatin The Crpratin des nt expect the adptin f these standards t have a material impact n its cnslidated financial statements. Additinal disclsures have been made in the financial statements relating t the adptin f these standards.

17 17 [iv] Internatinal Financial Reprting Standards The CICA plans t cnverge Canadian GAAP with Internatinal Financial Reprting Standards [ IFRS ] ver a transitin perid expected t end in The impact n the transitin t IFRS n the Crpratin s cnslidated financial statements has nt been determined. [v] Gdwill and intangible assets In 2008, the CICA issued Handbk Sectin 3064 [ CICA 3064 ], Gdwill and Intangible Assets. CICA 3064 replaces Sectin 3062, Gdwill and Intangible Assets, and Sectin 3450, Research and Develpment Csts. It establishes standards fr the recgnitin, measurement and disclsure f gdwill and intangible assets. This new standard is effective fr the Crpratin s interim and annual cnslidated financial statements cmmencing January 1, The Crpratin is currently assessing the impact f the new standard. [vi] General standards f financial statement presentatin Sectin 1400, General Standards f Financial Statement Presentatin, was amended t include requirements t assess and disclse an entity s ability t cntinue as a ging cncern. The new requirements are effective fr interim and annual financial statements relating t fiscal years beginning n r after January 1, The Crpratin will adpt the amendments t Sectin 1400 n January 1, 2008 and is currently evaluating the effects f adpting the new requirements f this standard. Scientific Research and Experimental Develpment Tax Credits In 2007, Symbility has recrded investment tax credits related t the 2006 fiscal year ttaling $124,840 ( $179,509 related t 2004 and 2005) and reduced research and develpment expenditures by this amunt. The Crpratin has accumulated $105,000 f nn-refundable investment tax credits which can be carried frward t reduce future Federal incme taxes payable and will begin t expire in Disclsure f Outstanding Share Data The fllwing chart summarizes the equity securities utstanding as f the date heref: EQUITY SECURITY NUMBER OUTSTANDING APRIL 24, 2008 Cmmn Shares 108,780,682 Warrants 21,588,100 Brker s Warrants 3,598,500 Preferred Shares 6,162,239 Stck Optins 6,139,767 Liquidity and Capital Resurces At December 31, 2007, the Crpratin s cnslidated cash psitin was $3,089,320 cmpared t $2,738,125 at December 31, This increase is principally explained by the net prceeds frm the Private Placement which was ffset by the cash required t fund the Crpratin s peratins during the perid. The Crpratin has a wrking capital psitin f $2,750,499 at December 31, 2007 as cmpared t $2,568,625 f wrking capital at December 31, The Crpratin cntinues t use its cash t fund peratins as its divisins establish market share in their respective segments f the insurance

18 industry. Management expects t be able t fund future peratins fr at least anther twelve mnths fr the fllwing reasns: The settlement f the lawsuit with Xactware has enabled Symbility t refcus and reinvest funds int value-added activities instead f paying legal fees. As Symbility s new U.S. custmers finish rlling ut the mbile claims prduct, high margin revenues shuld cntinue t increase and reduce the perating cash flw requirements. The Private Placement which clsed n May 7, 2007 prvided an additinal $3,605,732 in cash t fund wrking capital requirements. Management cntinues t review the cst structure fr the Crpratin and will reduce csts as necessary t ensure that they are in line with revenue grwth. The Crpratin has n significant debt n its balance sheet which enables it t pursue venture debt r bridge financing if it cannt raise additinal equity t fund peratins as required. The Crpratin has nt entered int any cntractual bligatins which will require future payments, including lng-term debt ther than perating leases fr equipment and premises, capital leases fr equipment and certain payments under certain vendr cntracts. The fllwing chart is a summary f cntractual bligatins f the Crpratin, including payments fr each f the next fur years and thereafter as at April 24, Payments Due by Perid Cntractual Obligatins Ttal Up t 1 year 1 3 years 4 5 years After 5 years Lng Term Debt $Nil $Nil $Nil $Nil $Nil Capital Lease Obligatins $ 43,729 $ 12,132 $ 28,056 $ 3,540 $Nil Operating Leases $553,716 $131,576 $350,292 $71,848 $Nil Purchase Obligatins 5 $371,687 $100,245 $241,443 $30,000 $Nil Other Lng Term Obligatins 6 $Nil $Nil $Nil $Nil $Nil 18 Ttal Cntractual Obligatins $969,132 $243,953 $619,791 $105,388 $Nil The Crpratin has entered int cmmitments fr additinal capital expenditures ttalling apprximately $35,000 at this time. Restricted Cash Depsits On Nvember 1, 2006, the Crpratin entered int a cash cllateral agreement with the Ryal Bank f Canada fr $59,000 t secure certain crprate credit cards issued. The agreement was amended t $25,750 n Nvember 21, On March 28, 2008, the cash cllateral agreement was further amended t $15, "Purchase Obligatin" means an agreement t purchase gds r services that is enfrceable and legally binding n the Crpratin that specifies all significant terms, including: fixed r minimum quantities t be purchased; fixed, minimum r variable price prvisins; and the apprximate timing f the transactin. 6 Other Lng Term Obligatins" means ther lng-term liabilities reflected n the Crpratin's balance sheet.

19 On Nvember 15, 2006, the Crpratin entered int a cash cllateral agreement with the Ryal Bank f Canada fr $295,000 t secure the letter f credit and certain crprate credit cards with the Ryal Bank. The agreement was amended t $282,500 n Nvember 21, On Nvember 15, 2006, the Crpratin entered int a cash cllateral agreement with the Ryal Bank f Canada fr $20,000 t secure certain crprate credit cards issued. The agreement was amended t $17,500 n Nvember 21, The interest incme earned n these restricted cash depsits accrues t the Crpratin at rates ranging frm 3.5% t 4% annually. Related party transactins Fr the year ended December 31, 2007, the Crpratin expensed $45,000 ($90, ) in cnsulting fees paid t a private cmpany cntrlled by a directr. The ne year agreement signed September 21, 2006 expired June 30, 2007 and has nt been renewed. Fr the year ended December 31, 2007, the Crpratin expensed $9,514 ($61, ) in cnsulting fees paid t an fficer. The cntract fr these cnsulting services was terminated n June 5, These fees were settled fr cash cnsideratin and were recrded at the exchange amunt, which is the estimated fair value f the services rendered t the Crpratin by the directr and fficer. Fr the year ended December 31, 2007, the Crpratin expensed $18,000 ($36, ) fr services prvided by the independent directrs f the Crpratin. These fees were recrded at the exchange amunt, which is the estimated fair value f the services rendered t the crpratin by the independent directrs. On February 25, 2008, the Crpratin annunced that it issued 189,476 Cmmn Shares with a fair value f $0.19 per share fr an aggregate value f $36,000 t the independent directrs f Autmated Benefits Crp. fr services prvided t the Crpratin fr 2006 and Each independent directr receives $5,000 per annum, and an additinal $1,500 is payable t the chairman f each f the Cmpensatin Cmmittee and the Audit Cmmittee f the Crpratin. The issuance f the 189,476 Cmmn Shares t the directrs was apprved by the TSX Venture Exchange n February 20, 2008 and the shares were issued n February 22, The Crpratin agreed t lan $40,000 t its President and Chief Executive Officer t enable him t purchase additinal cmmn shares f the Crpratin n Octber 17, This prmissry nte matured n December 31, 2007 with an annual interest rate f 4%. There is a pledge in favur f the Crpratin f 227,273 shares with a market value f $61,364 being purchased as cllateral t secure the lan. The Crpratin has full recurse t the President and Chief Executive Officer fr the full balance f the principal and the interest wed n the lan. On January 25, 2008, the Crpratin s President and Chief Executive Officer repaid the prmissry nte fr $40,000 plus $2,087 in accrued interest. The Crpratin subsequently returned 227,273 cmmn shares that had been held as cllateral t secure the lan t the President and Chief Executive Officer. On May 16, 2007 the Crpratin annunced under Natinal Instrument The Early Warning System and Related Take-ver Bid and Insider Reprting Issues, that its President and C.E.O. had an wnership psitin in the Crpratin exceeding 10%. Mr. James Swayze held 10,733,684 cmmn shares which represented 10.08% f the ttal basic number f shares utstanding f the Crpratin at that time. He acquired additinal securities fr investment purpses as part f a private placement cmpleted n May 7, 2007 which put him ver the 10% threshld. 19

20 20 On May 22, 2007, a directr f the Crpratin was issued 511,846 cmmn shares ut f the 1,323,762 cmmn shares issued as a result f the cnversin f preferred Series A shares. A relative f that directr was als issued 71,658 cmmn shares. On Octber 16, 2007, the Crpratin granted ptins t fur members f the Bard f Directrs t acquire a ttal f 375,000 cmmn shares f the Crpratin at an exercise price f $0.24 per cmmn share. These vest at the rate f 1/3 immediately and 1/3 n each f the 12 and 24 mnths frm the date f the grant. Off Balance Sheet Arrangements The Crpratin has nt entered int any ff balance sheet arrangements as at December 31, Financial Instruments The Crpratin s financial instruments cnsist f accunts receivable, accunts payable and accrued liabilities and capital lease bligatins and their carrying value apprximates fair value due t their immediate r shrt-term maturity. - Credit risk The Crpratin is expsed t credit risk in the event f nn-perfrmance by custmers. The Crpratin mnitrs the credit risk f custmers n a regular basis. The maximum credit risk is the carrying value f the accunts receivable. - Interest rate risk The Crpratin is expsed t interest rate risk arising frm fluctuatins in interest rates n its cash, as defined in Nte 2 f the audited financial statements fr the twelve mnth perid ending December 31, The Crpratin des nt use derivative instruments t reduce its expsure t interest rate risk. - Currency risk The Crpratin perates primarily within Canada and the United States, and is therefre expsed t significant freign currency risk. The Crpratin has nt entered int freign exchange derivative cntracts. Disclsure Cntrls As at the financial year ended December 31, 2006, an evaluatin was carried ut under the supervisin f and with the participatin f the Crpratin s management, including the Chief Executive Officer and the Chief Financial Officer, f the effectiveness f the Crpratin s disclsure cntrls and prcedures. Based n that evaluatin, the Chief Executive Officer and the Chief Financial Officer cncluded that the design and peratin f these disclsure cntrls and prcedures were effective as at December 31, 2006 t prvide reasnable assurance that material infrmatin relating t the Crpratin and its cnslidated subsidiaries wuld be made knwn t them by thers within thse entities. A cntrl system, n matter hw well cnceived r perated, can prvide nly reasnable, nt abslute assurance that the bjectives f the cntrl system are met. As a result f this review, the Bard f Directrs f the Crpratin apprved the establishment f a disclsure plicy which became effective December 31, A disclsure cmmittee cnsisting f senir management f the Crpratin and its subsidiaries nw meets quarterly t review disclsure cntrls and reprt t the Bard f Directrs n their findings.