6-K 1 o16699e6vk.txt FORM 6-K FORM 6-K SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 REPORT OF FOREIGN ISSUER PURSUANT TO RULE 1a-16 OR 15d-16 OF THE SECURITIES EXCHANGE ACT OF 1934 For the month of May, 2005 Commission File Number: 000-29944 INFOWAVE SOFTWARE INC. (Translation of registrant's name into English) SUITE 200 - 4664 LOUGHEED HIGHWAY, BURNABY, BRITISH COLUMBIA, CANADA V5C 5T5 (Address of principal executive office) Indicate by check mark whether the registrant files or will file annual reports under cover Form 20-F or Form 40-F. Form 20-F [X] Form 40-F [ ] Indicate by check mark if the registrant is submitting the Form 6-K in paper as permitted by Regulation S-T Rule 101(b)(1): [ ] Indicate by check mark if the registrant is submitting the Form 6-K in paper as permitted by Regulation S-T Rule 101(b)(7): [ ] Indicate by check mark whether the registrant by furnishing the information contained in this Form is also thereby furnishing the information to the Commission pursuant to Rule 12g3-2(b) under the Securities Exchange Act of 1934. Yes [ ] No [X] If "Yes" is marked, indicate below the file number assigned to the registrant in connection with Rule 12g3-2(b) 82 - [ ] SIGNATURES Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized. Infowave Software Inc. Date: May 16, 2005 By: /s/ George Reznik ---------------------------------- Name: George Reznik Title: Chief Operating Officer and CFO INFOWAVE SOFTWARE, INC. INDEX to the FORM 6-K For the Three Months Ended March 31, 2005 PART I. FINANCIAL INFORMATION

~~TOTAL~~Page ~~NUMBER~~---- OFFinancial ~~RESIDENTIAL~~Statements ~~BUILDING~~a) ~~SITE~~Consolidated ~~AREA~~Balance ~~BUILDABLE~~Sheets ~~SQUARE~~March ~~CONDOMINIUM~~31, ~~UNITS~~2005 ~~PURCHASE~~and ~~SITE~~December ~~(SQ.FT.)~~31, ~~FEET~~2004 ~~(APPROXIMATE)~~1 ~~(APPROXIMATE~~b) ~~PRICE(~~Consolidated Statements of Operations and Deficit For the three months ended March 31, 2005 and 2004 2 c) ~~----~~Consolidated ~~--------~~Statements ~~------------------~~of ~~-----------------~~Cash ~~--------~~Flows 6AFor ~~21,429~~the 97three months ended March 31,~~070~~ 862005 ~~$9.5~~and ~~million~~2004 ~~6BD(1~~3 d) ~~53,175~~Notes ~~303,673~~to ~~223~~Consolidated ~~$35.2~~Financial ~~million~~Statements ~~------~~4 ~~-------~~Management's ~~---~~Discussion ~~-------------~~and ~~Total~~Analysis ~~74,604~~of ~~400,743~~Financial ~~309~~Condition ~~$44~~and Results of Operations 11 Quantitative and Qualitative Disclosures About Market Risk 21 PART II.7 ~~million~~OTHER ~~======~~INFORMATION ~~=======~~Legal ~~===~~Proceedings ~~=============~~21 Changes in Securities and Use of Proceeds 21 Commitments 22

PART I. FINANCIAL INFORMATION Financial Statements INFOWAVE SOFTWARE, INC. Consolidated Balance Sheets (Expressed in U.S. dollars)

~~NUMBER~~March OF31, ~~PERCENTAGE~~2005 OF(unaudited) ~~OUTSTANDING~~December ~~NAME~~31, ~~AND~~2004 ~~ADDRESS~~-------------- ~~COMMON~~----------------- ~~SHARES~~ASSETS ~~COMMON~~Current ~~SHARES~~assets: Cash and cash equivalents $ 7,278,605 $ 2,911,108 Restricted cash - 980,013 Accounts receivable, net of allowance of nil 260,773 560,334 Technology Partnership Canada ("TPC") receivable (note 5) 609,961 1,101,833 Prepaid expenses 192,892 160,881 -------------- ----------------- 8,342,231 5,714,169 Fixed assets 295,649 360,999 Intellectual property assets held for sale (note 6) 1,080,068 1,091,274 Other intangible assets (note 7) 5,856,974 6,306,697 Goodwill 3,391,378 3,426,565 Deferred transaction costs (note 1) - 954,710 -------------- ----------------- ~~Gerald~~$ L.18,966,300 ~~Trooien~~$ 6217,~~896~~854,~~536~~414 ============== ================= LIABILITIES AND SHAREHOLDERS' EQUITY Current liabilities: Accounts payable and accrued liabilities $ 760,656 $ 1,313,039 Convertible promissory notes (note 8) 184,752 278,836 Deferred revenue 485,382 173,835 -------------- ----------------- 1,430,790 1,765,710 Convertible promissory note (note 8) ~~26.5%~~87,439 ~~#800~~87,027 Shareholders' equity Share capital Authorized: Unlimited voting common shares without par value (notes 4 and 9) Issued: 239,149,570 (December 31, 2004: 237,145,351) common shares 18,637,500 81,273,081 Additional paid in capital (note 4) -10 ~~River~~15,941 ~~Park~~Contributed ~~Plaza~~surplus ~~St.~~(notes ~~Paul~~4 and 9) 148,689 MN1,006,082 ~~55107~~Other ~~Deloitte~~equity ~~Consulting~~instruments ~~L.P.~~(note 249) 3,~~568~~646,~~280~~526 ~~10.~~3,614,695 Deficit (note 4%) ~~1633~~(5,849,816) ~~Broadway~~(70,936,761) ~~New~~Cumulative ~~York~~translation account 865,172 NY1,028,639 ~~10019~~-------------- ----------------- 17,448,071 16,001,677 -------------- ----------------- $ 18,966,300 $ 17,854,414 ============== =================

See accompanying notes to interim consolidated financial statements. 1 INFOWAVE SOFTWARE, INC. Consolidated Statements of Operations and Deficit (Expressed in U.S. dollars)

~~HIGH~~Three ~~LOW~~months ended March 31, 2004 (~~CDN$)~~Unaudited and March 31, 2005 restated - (~~CDN$~~Unaudited) note 11) -------------- -------------- ~~2001 Q4~~Revenue: ~~Oct~~Sales -$ ~~Dec~~402,459 $ 1~~.86~~,273,682 ~~0.38~~Cost ~~2002~~of ~~Q1:~~sales ~~Jan~~187,534 567,519 -------------- ~~Mar~~-------------- ~~1.99~~214,925 ~~0.45~~706,163 Q2Expenses: ~~Apr~~Research -and ~~Jun~~development ~~0.60~~535,494 ~~0.17~~1,060,791 ~~Q3:~~Sales ~~Jul~~and -marketing ~~Sep~~469,972 ~~0.22~~971,053 ~~0.12~~Administration ~~Q4:~~661,583 ~~Oct~~984,902 Restructuring - ~~Dec~~225,746 ~~0.50~~Depreciation ~~0.10~~and ~~2003~~amortization ~~Q1:~~443,415 ~~Jan~~657,532 -------------- ~~Mar~~-------------- ~~0.38~~2,110,464 ~~0.19~~3,900,024 ~~Q2:~~-------------- ~~Apr~~-------------- Loss before interest, other expenses and non-controlling ~~Jun~~interest ~~0.28~~1,895,539 ~~0.15~~3,193,861 Q3Other earnings (expenses): ~~Jul~~Interest and other earnings 23,112 20,204 Interest expense (1,680) (1,102,705) Foreign exchange loss (note 11) 33,897 (43,470) Gain from corporate reorganization (note 1) 3,239,343 - ~~Sep~~-------------- ~~0.44~~-------------- ~~0.19~~3,294,672 ~~Q4:~~(1,125,971) ~~Oct~~-------------- -------------- ~~Dec~~Loss ~~0.40~~(income) ~~0.18~~for ~~2004~~the ~~Q1:~~period, ~~Jan~~before non-controlling ~~Mar~~interest ~~0.38~~(1,399,133) ~~0.24~~4,319,832 ~~Q2:~~Non-controlling ~~Apr~~interest - ~~Jun~~(72,308) ~~0.27~~-------------- ~~0.19~~-------------- ~~Q3:~~Loss ~~Jul~~(income) for the period (1,399,133) 4,247,524 Deficit, beginning of period 70,936,761 60,432,550 Deficit reduction from corporate reorganization (notes 1 and 4) (63,687,812) - ~~Sep~~-------------- -------------- Deficit, end of period $ 5,849,816 $ 64,680,074 ============== ============== Loss (earnings) per share, basic $ (0.1901) $ 0.0802 ~~Q4:~~============== ~~Oct~~============== -Loss ~~Dec~~(earnings) per share, fully diluted $ (0.1401) $ 0.1002 ============== ============== Weighted average number of shares outstanding 237,869,943 189,087,576 ============== ==============

See accompanying notes to interim consolidated financial statements. 2 INFOWAVE SOFTWARE, INC. Consolidated Statements of Cash Flows (Expressed in U.S. dollars)

~~NINE~~Three ~~MONTHS~~months ~~ENDED~~ended ~~SEPTEMBER~~March 3031, ~~YEARS~~2004 ~~ENDED~~March ~~DECEMBER~~ 31, 2005 (~~AUDITED)~~Unaudited and (~~UNAUDITED~~Unaudited) restated - note 11) -------------- ------------------- Cash flows from operations: Income (loss) for the period $ 1,399,133 $ (4,247,524) Items not involving cash: Depreciation and amortization 443,415 657,532 Amortization of TPC warrants 31,831 - Stock-based compensation 202,821 355,746 Gain from corporate reorganization (3,239,343) - Non controlling interest - (72,308) Non-cash interest and financing costs - 1,101,379 Changes in non-cash operating working capital: Accounts receivable 291,709 (1,094,560) TPC receivables 477,125 -- Prepaid expenses (33,423) 75,880 Accounts payable and accrued liabilities (535,050) 198,550 Deferred revenue 305,078 226,509 -------------- ~~2001 2002 2003 2004~~ ----------- -------- (656,704) (2,798,796) Cash flows from investing activities: Redemption of short-term investments, net - 223,322 Purchase of fixed assets - (6,749) Acquisition costs, net of cash acquired - 145,542 Restricted cash released 963,020 - Corporate reorganization, net proceeds 4,066,370 - -------------- ------------------- ~~Income~~5,029,390 ~~Statement~~362,115 ~~Data~~Cash ~~Sales~~flows $from ~~3,189,253~~financing $activities: ~~1,821,041~~Issuance $of ~~1,624,820~~shares $and ~~3,619,130~~warrants ~~Loss~~ for ~~the~~cash, ~~year~~net ~~20,860,436~~of ~~9,716,065~~issue costs - 5,~~757~~630,~~631~~811 ~~8,390,753~~-------------- ~~Loss~~------------------- ~~per~~Foreign ~~share~~exchange ~~0.90~~gain ~~0.18~~(loss) ~~0.05~~on ~~0.04~~cash ~~Balance~~and ~~Sheet~~cash ~~Data~~equivalents ~~Total~~held ~~assets~~in ~~13,657,675~~a ~~4,158,757~~foreign 9currency (5,~~935,349~~189) 195,~~409,474~~548 ~~Long term obligations~~ -------------- ------------------- ~~218,292~~Increase ~~465,007~~in ~~Share~~cash ~~capital~~and 42cash equivalents 4,~~447~~367,~~141~~497 563,~~539~~199,~~360~~678 65Cash and cash equivalents,~~700~~ beginning of period 2,~~311~~911,108 814,~~273~~911,~~081~~605 -------------- ------------------- Cash ~~dividends~~and ~~declared~~cash ~~per~~equivalents, ~~Common~~end ~~Share~~of -period -$ -7,278,605 -$ 8,111,283 ============== ===================

See accompanying notes to interim consolidated financial statements. 3 1. BASIS OF PRESENTATION: Infowave Software, Inc. ("Infowave", "New Infowave" or the "Company"), formerly 6311059 Canada Inc. was incorporated on November 16, 2004. The accompanying unaudited consolidated financial statements do not include all information and footnote disclosures required for an annual set of financial statements under Canadian generally accepted accounting principles. In the opinion of management, all adjustments (consisting solely of normal recurring accruals) considered necessary for a fair presentation of the financial position, results of operations and cash flows as at March 31, 2005 and for all periods presented, have been included. Interim results for the three-month period ended March 31, 2005 are not necessarily indicative of the results that may be expected for the fiscal year as a whole or for any interim period. On January 21, 2005, following regulatory approval, Infowave Software, Inc. ("Old Infowave") was reorganized under two separate Plans of Arrangement (the "Plans") pursuant to the Canada Business Corporations Act (the "CBCA"). The Plans were approved by the shareholders of Old Infowave on January 17, 2005 and by the Supreme Court of British Columbia on January 17, 2005 (the first "Plan") and January 21, 2005 (the second "Plan"), and were implemented on January 21, 2005. Under the Plans, Old Infowave transferred all of its business assets, ownership interest in subsidiary companies, liabilities and operations to a new company ("New Infowave"), which became the parent company of Old Infowave as a result of the reorganization. As part of the corporate reorganization, New Infowave subsequently divested 97.5% equity interest of its wholly owned subsidiary, Old Infowave, for cash consideration of $4.57 million (Cdn$5.45 million) less transaction costs of $1,333,473 resulting in a gain of approximately $3.24 million: Proceeds from corporate reorganization $ 4,572,816 Less: Costs incurred in 2004 (954,710) Less: Additional costs incurred in 2005 (378,763) ----------- Net gain on sale of assets $ 3,239,343 ===========

The shares of Old Infowave not divested by New Infowave, representing a 2.5% or $107,292 equity interest, were then distributed to the previous shareholders of Old Infowave on a pro-rata basis. After the completion of the corporate reorganization, New Infowave was not related to the former Infowave legal entity, subsequently renamed Coopers Park Real Estate Corporation. New Infowave was renamed Infowave Software, Inc. and continues to focus on the software business. As the transfer of the business assets, liabilities, and operations to New Infowave represented a transaction between entities under common control, no accounting adjustments arise from said transfer. The three-month period ended March 31, 2005, the consolidated financial statements combined the financial results for the business carried on in Old Infowave from January 1 to 21, 2005 with these of New Infowave from January 22, 2005 to March 31, 2005, as New Infowave represents a continuation of the business and operations primarily carried on in Old Infowave. All references made to the Company's financial information will be those of Old Infowave. The unaudited consolidated balance sheets and statements of operations and deficit and cash flows include the accounts of the Company, and its wholly owned subsidiaries Telispark, Inc. and Infowave USA Inc. These financial statements have been prepared in accordance with Canadian generally accepted accounting principles for interim financial information. The accounting principles used in these financial statements are those used in the preparation of the Company's audited financial statements for the year ended December 31, 4 2004. These financial statements should be read in conjunction with the financial statements and notes thereto included in the Company's annual report on Form 20-F for the fiscal year ended December 31, 2004. 2. CONTINUING OPERATIONS: These financial statements have been prepared on a going concern basis notwithstanding the fact that the Company has experienced operating losses and negative cash flows from operations during the three-month period ended March 31, 2005 and in prior periods. To date, the Company has financed its continuing operations through revenue and equity financing. Continued operations of the Company will depend upon the attainment of profitable operations, which may require the successful completion of additional external financing arrangements. Management is of the opinion that expected future revenues, together with the ongoing exercise of options and warrants and the recent corporate reorganization in January 2005 that raised approximately $4.57 million (Cdn$5.45 million), before costs, will provide sufficient working capital to meet the Company's projected cash requirements for the remainder of 2005. However, if there are any unanticipated costs and expenses or lower than anticipated revenues this could require the Company to seek additional financing or engage in further reductions in expenditures which may include further restructuring of the Company. There can be no assurances that additional financing, if required, will be available on a timely or cost effective basis. To the extent that such financing is not available on terms favorable to the Company, or at all, or reductions in expenditures are required, the Company may not be able to, or may be delayed in being able to commercialize its products and services and to ultimately attain profitable operations. The Company will continue to evaluate its projected expenditures relative to its available cash and to evaluate additional means of financing and cost reduction strategies in order to satisfy its working capital and other cash requirements. 3. SIGNIFICANT ACCOUNTING POLICIES: These interim financial statements follow the same accounting policies and methods of application as described in note 2 to our Annual Consolidated Financial Statements except that with respect to the translation of foreign currency: (a) Translation of foreign currency: These consolidated financial statements are presented in U.S. dollars although the Company uses the Canadian dollar as its functional currency. For consolidation purposes, the financial statements of the Company's integrated foreign subsidiaries Infowave USA Inc. and Telispark, Inc., have been translated from U.S. dollars into Canadian dollars using the temporal method as their functional currency is considered to be the Canadian dollar. Under this method, monetary assets and liabilities, and non-monetary assets and liabilities carried at market, are translated at rates of exchange in effect at the balance sheet date. Non-monetary assets and liabilities other than those carried at market are translated at historical rates of exchange. Revenue and expenses are translated at rates of exchange in effect at the time of the transaction, except for depreciation and amortization which are translated at the same rates of exchange as related assets. Gains and losses on translation are included in income. Effective January 1, 2005, Telispark, Inc. became an integrated foreign subsidiary of the Company and as such, changed its functional currency from U.S. dollars to Canadian dollars. The consolidated Canadian dollar financial statements are translated into U.S. dollars for reporting purposes using the current rate method. Any gains or losses from this translation are included in a separate cumulative translation adjustment account in shareholders' equity on the balance sheet. 5 4. CORPORATE REORGANIZATION: In January 2005, in connection with the corporate reorganization described in note 1, and in accordance with the Company's incorporating legislation, the shareholders of the Company approved a reduction in the stated capital of the Company's common shares from Cdn$118,565,193 to Cdn$26,929,049. As a result, the following reductions took place: Reduction in Share Capital $62,773,081 Reduction in Additional Paid In Capital 15,941 Reduction in Contributed Surplus 1,006,082 ----------- Reduction in Deficit $63,795,104 ===========

As the Canadian operations of the Company have been continued by a new Canadian corporation, non-capital losses and Scientific Research and Development Expenditures generated from the operation of the business in preceding years are no longer available to the Company to reduce future taxable income earned. 5. TECHNOLOGY PARTNERSHIP CANADA RECEIVABLE: During the three months ended March 31, 2005, funding benefits of $98,616 were recognized and warrant expense of $31,831 was amortized. The Company claimed the benefit of $66,785, net of amortization of warrants, as a reduction of research and development expense for the current quarter ended. At March 31, 2005, TPC receivable totalled $609,960 with TPC warrants of $384,064 being recognized as other equity instruments in connection with the Company's cumulative obligation to issue the warrants in the future. 6. INTELLECTUAL PROPERTY ASSETS HELD FOR RESALE: On October 21, 2003, the Company acquired intellectual property assets of Sproqit Technologies, Inc ("Sproqit"), a wireless software company based in Kirkland, Washington. Sproqit offers a mobile application platform that enables users to obtain email and other data via hand held personal digital assistant and smartphone wireless devices running various operating systems. Under the terms of the acquisition agreement, the Company acquired all of the intellectual property assets of Sproqit and in consideration issued 4,038,550 common shares to Sproqit. The value assigned to the intellectual property assets was determined as follows: Consideration: Common shares $ 885,000 Acquisition costs 142,603 -------------- $ 1,027,603 ==============

The common shares are subject to a four-month hold period. Sproqit holds an option for one year to purchase back all of the intellectual property assets sold to the Company for cash consideration equal to the original purchase price plus a premium of 20%. Pursuant to the Option Agreement, dated September 23, 2003 between Infowave and Sproqit, in the event that the purchase option is exercised by Sproqit, Infowave will license the intellectual property on an exclusive basis in its core markets at preferential royalty rates. In the event that the option is not exercised by Sproqit, Infowave will retain ownership of the intellectual property with no future royalties payable to Sproqit. In December 2003, management determined that these 6 intellectual property assets were non-strategic for the Company. As such the Company and Sproqit agreed to extend the Option Agreement for an additional year. The intellectual property assets have been classified as assets held for sale in these consolidated balance sheets as of March 31, 2005 in anticipation of such option exercise by Sproqit before the expiration of the Option Agreement in September 2005. The difference in the value at the date of acquisition and the carrying value at $1,080,068 at March 31, 2005 is due to the effect of foreign exchange rate changes. 7. INTANGIBLE ASSETS: Intangible assets as of March 31, 2005 comprise of the following:

~~2001~~Accumulated ~~2002~~amortization ~~2003~~and Net book Cost write-down value ------------- ------------- ------------- ~~Income~~Intellectual ~~Statement~~property ~~Data Sales~~ $ 38,~~189~~433,~~253~~619 $ 12,~~821~~767,~~041~~486 $ 15,~~624~~666,~~820~~133 ~~Loss~~Employment ~~for~~contracts ~~the year 20~~336,~~986,922~~401 10233,~~138,827~~457 5102,~~757,631~~944 ~~Loss~~Patents ~~per~~108,063 ~~share~~49,465 ~~0.79~~58,598 ~~0.17~~Customer ~~0.05~~relationship ~~Balance Sheet Data Total assets 13~~54,~~657,675~~031 424,~~158,757~~732 929,~~935,349~~299 ~~Long~~------------- ~~term obligations~~ ------------- ------------- ~~Share capital~~ $43 8,~~618~~932,~~486~~114 $57 3,~~710~~075,~~705~~140 $66 5,~~871~~856,~~656~~974 ~~Cash~~============= ~~dividends~~============= ~~declared per Common Share - - -~~=============

The intangible assets are being amortized over their estimated useful lives on a straight-line basis. 8. CONVERTIBLE PROMISSORY NOTES: On September 1, 2004, the Company announced that it had resolved its outstanding dispute with Visto, over certain patented technology and entered into a settlement agreement that settled all claims between the two companies. As part of the settlement, the Company acknowledged the validity of Visto's complete patent portfolio and in exchange was granted a royalty-bearing license to those patents. Under terms of the settlement agreement, in addition to the royalties payable, Infowave agreed to pay $400,000 for the license to use the patented technology. The Company paid $50,000 of the obligation in cash. The remaining obligation of $350,000 was settled by issuing four convertible promissory notes (the "Notes"), each with a balance of $87,500. The Notes have maturity dates of February 28, 2005, May 31, 2005, December 31, 2005 and August 31, 2006, respectively. The Notes are convertible into Infowave common stock at any time prior to their respective maturity dates, are unsecured, and bear interest at 6% only on any balance remaining unpaid after their maturity dates. On February 28, 2005 the first promissory note matured with Infowave issuing 1,181,819 shares to fulfill the contractual obligation. As of March 31, 2005, two of the three remaining Notes will mature within the next 12 months. In accordance with Canadian generally accepted accounting principles, the Company had estimated the fair value of each Note by discounting its face value at maturity back to the issuance date at a rate of 6%, being the Company's best estimate of its incremental rate of borrowing on similar instruments in the absence of any conversion feature. The remainder of the $400,000 consideration, being $11,241, had been attributed to the conversion feature and recorded as contributed surplus. The resulting discount on each Note is being accreted to expense over the period to maturity using the interest method. The Company had assessed the potential impairment of its non-exclusive license to Visto Corporation's Patent Portfolio acquired during the year ended December 31, 2004 due to the significant uncertainty regarding the probable future economic benefit associated with this asset. As the Company did not attribute 7 the generation of future cash flows as being directly attributable to this asset, it had written down this asset to its estimated fair value of nil as at December 31, 2004. 9. SHAREHOLDERS' EQUITY: The share capital of the Company is as follows: (a) Authorized: Unlimited voting common shares without par value. (b) Issued:

~~QUARTER~~Number ~~ENDED~~of ~~(UNAUDITED)~~Shares Amount ---------------- ------------- Outstanding, December 31, 2004 237,145,351 $ 81,273,081 Reduction in share capital due to corporate reorganization - (62,773,081) ----------- -------------~~-------------------------------------------~~ ~~2002~~Outstanding, ~~2002~~January ~~2002~~21, ~~2002~~2005 ~~2003~~- ~~2003~~18,500,000 ~~2003~~Share ~~2003~~issuance Q1on Q2maturity Q3of Q4promissory Q1note Q21,181,819 Q387,500 Q4Share ~~----------~~issuance ~~----------~~pursuant ~~----------~~to ~~----------~~severance 822,400 50,000 -------- ---~~-----~~ ---------- ---~~-------~~ ~~Income Statement Sales $ 325~~Outstanding,~~261~~ $March ~~517~~31,~~977~~ $2005 ~~676~~239,~~415 $ 301~~149,~~388~~570 $~~411,856~~ ~~$505~~18,~~397 $ 381~~637,~~395~~500 $=========== ~~326,172 Loss for the period 3,376,025 4,234,514 1,069,608 1,035,918 955,460 919,970 1,505,648 2,376,553 Loss per share 0.09 0.07 0.02 0.02 0.01 0.01 0.01 0.02~~=============

(c) Share purchase options: On June 15, 2004, the 2004 Stock Incentive Plan ("2004 Plan") was approved by the shareholders of the Company. The 2004 Plan serves as the successor to the Director and Employee Stock Option Plan as amended ("2003 Plan") and supersedes that plan. The 2004 Plan permits the board of directors to issue common shares to employees, directors, senior officers or consultants as a stock bonus for past services actually performed for the Company. Under the terms of the 2004 Plan, up to 2,925,000 common shares are reserved for issuance as stock bonuses. This is an increase from the "2003 Plan" of 2,000,000 common shares. As well, the 2004 Plan also increased the number of common shares available for issuance under stock options by 10,875,000. This brings the aggregate number of common shares, which may be reserved for issuance, to 26,925,333 of which 24,000,333 are reserved for issuance for stock options and 2,925,000 for issuance as stock bonuses. Options are granted and exercisable in Canadian dollars, vest over periods from three to four years and expire five years from the date of grant. A summary of the status of the Company's stock option plan as of March 31, 2005 with changes during the periods presented below:

~~Quarter~~Three ~~ended~~Months ~~-------------------------------------------------------~~Ended ~~September 30, June 30,~~ March 31, ~~December~~2005 ~~31,~~Weighted ~~2004~~average ~~2004~~Shares ~~2004~~exercise ~~2003~~price ----------~~---~~ ---------- ------~~----~~ ~~------------ Revenue~~ US$~~1,500,093~~ /Cdn$ ~~845~~Outstanding,~~355~~ ~~$1,273,682~~December ~~$ 326~~31,~~172~~ ~~Costs~~2004 ~~of sales 566~~21,~~552 321~~461,~~766~~673 ~~567,519~~$0.24/0.28 ~~39,475~~Granted ~~---------- ---------- ---------- ---------- Gross margin 933,541 523,589 706,163 286,697 ---------- ---------- ---------- ---------- Operating expense Research and development 316,126 889,668~~ 1,~~060~~000,~~791~~000 ~~307,635~~0.06/0.08 ~~Sales~~Exercised ~~and marketing 688,442 1,237,949 971,053 663,848 Administration 581,817 739,916 984,902 718,556 Restructuring~~ - ~~61,885 225,746~~ - ~~Impairment~~ /- -Cancelled ~~- 614~~(2,~~578 Depreciation and amortization 378~~875,~~914~~382) ~~287,979~~0.42/0.52 ~~657,532 366,651~~ ---------- ---------- ~~---------- ---------- Total operating expenses 1~~Outstanding,~~965,299~~ ~~3,217,397~~March 331,~~900,024~~ ~~2,671,268~~2005 ~~---------- ---------- ---------- ---------- Net operating loss 1~~19,~~031~~586,~~758~~291 $~~2,693,808~~0.20/0.24 ~~$3,193,861 $2,384,571~~ ========== ========== ~~========== ========== HB 3870 Compensation Expense 80,380 59,863 40,890 33,655~~

8 (d) Weighted average estimate: As at March 31, 2005, the Company had 19,586,291 stock options outstanding with exercise prices ranging from Cdn$0.07 to Cdn$19.25 and 55,345,157 warrants outstanding with exercise prices ranging from Cdn$0.19 to Cdn$0.22. As at March 31, 2005, 7,932,917 stock options were exercisable with a weighted average exercise price of Cdn$0.38. Of these instruments, none were included in the diluted per share calculations for the three-months ended March 31, 2005 because they are anti-dilutive. The weighted average estimated fair value at the date of grant for options granted during the three months ended March 31, 2005 was Cdn$0.05 per share. The fair value of each option granted was estimated on the date of grant using the Black-Scholes option pricing model with the following assumptions:

~~Quarter~~Three months ended ~~--------------------------------------------------------- September 30, June 30,~~ March 31, ~~December~~2005 ~~31, 2003 2003 2003 2002~~ ------------- -----~~-----~~ Risk-~~---------~~free ~~------------~~interest ~~Revenue~~rate $2.45% ~~381,395~~Dividend $yield ~~505,397~~0% $Volatility ~~411,856~~factor $102% ~~301,388~~Weighted ~~Costs~~average ofexpected ~~sales~~life ~~41,535~~of ~~61,855~~the ~~56,839~~options ~~38,544~~3 ~~---------- ---------- ---------- ---------- Gross margin 339,860 443,542 355,017 262,844 ---------- ---------- ---------- ---------- Operating expense~~years

(e) Contributed surplus:

~~September~~Amount 30------------- Balance, ~~Three~~December ~~largest~~31, ~~customers~~ 2004 ~~June~~$ 301,006,082 ~~2004~~Reduction ~~March~~due ~~31,~~to ~~2004~~corporate ~~September~~reorganization 30(1,006,082) ~~2003~~ ------------- ~~-------------~~Balance, January 21, 2005 -~~-------------~~ Equity component on promissory notes reclassified to debt (4,922) Compensation expense 153,611 -------------~~-----~~ ~~Revenues $1~~Balance,~~323,914~~ ~~$413,718~~March ~~$823~~31,~~377~~ 2005 $~~131~~ 148,~~089~~689 ~~Percentage of total revenues 88% 49% 65% 34%~~=============

(f) Other equity instruments:

~~Geographical~~Amount ~~September 30, June 30, March 31, September Location 2004 % 2004 % 2004 % 30, 2003 %~~ ------------ -~~---------~~ ~~--- -------- --- ---------- --- -------- --- United States $1~~Balance,~~444,426~~ ~~94%~~December ~~$391~~31,~~360~~ ~~47%~~2004 $~~1,084,842~~ ~~85% $268,065 70% Canada 5,500 1% 205,899 24% 74,316 6% 10,859~~ 3~~% Europe 40~~,~~000 3% 95~~614,~~670~~695 ~~11%~~Warrant ~~96,608~~expense 8%under ~~77,415~~TPC ~~20%~~funding ~~Asia/Other~~(note ~~10,167~~5) ~~2% 152~~31,~~426~~831 ~~18% 17,916 1% 25,056 7%~~ ---------- --- ~~-------- --- ---------- --- -------- --- Total $1~~Balance,~~500,093~~ ~~100%~~March ~~$845~~31,~~355~~ ~~100%~~2005 $1 3,~~273~~646,~~682~~526 ~~100% $381,395 100% ---------- --- -------- --- ---------- --- -------- ---~~=============

9 10. RESTRUCTURING: During the first quarter ended March 31, 2005, the Company incurred restructuring costs of $nil. During the same period in 2004, the Company completed a restructuring plan to significantly reduce operating expenses and preserve capital. The restructuring costs incurred resulted from reductions in staff at its Canadian, USA and UK operations, and related legal and lease termination costs. The number of employees terminated were 19 in Canada, 5 in the USA and 4 in the UK. A total restructuring cost of $225,746 was incurred during the three months ended March 31, 2004, which consisted of $175,540 for employee severance, $10,337 for legal, and $39,869 for lease termination costs. Restructuring charges totaling $124,798 had been settled during the three months ended March 31, 2004. The balance of the restructuring costs of $100,948 had been included in accounts payable at March 31, 2004 and consisted of $50,742 for employee severance, $10,337 for legal and $39,869 for lease termination. These amounts were settled throughout 2004. 11. FOREIGN EXCHANGE: The Company identified an adjustment to previously reported foreign exchange and net loss balances for the three months ended March 31, 2004, attributable to the method of accounting for translating foreign exchange utilized by the Company and its US subsidiaries, Infowave USA Inc. and Telispark, Inc. The financial impact of this adjustment is summarized below:

Three months ~~September~~ended ~~30, June 30,~~ March 31, ~~September 30, ended~~ 2004 ~~% 2004 % 2004 % 2003 %~~ ------------ ---- --- ---- --- ---- --- ---- ---- ~~Revenues $1,500,093 100% $845,355 100% $1,273,682 100% $381,395 100% Cost of Sales 566,552 38% 321,766 38% 567,519 45% 41,535 11%~~ -----~~-----~~ --- -------- --- ~~----------~~Foreign ~~----~~exchange ~~-------- --- Gross Margin $ 933~~loss,~~541~~ ~~62%~~as ~~$523,589~~previously ~~62%~~reported $ ~~706~~19,~~163~~763 ~~55%~~Adjustment ~~$339~~23,~~860~~707 ~~89%~~ ---------- --- -~~-------~~ ~~---~~Revised ~~----------~~foreign ~~----~~exchange ~~--------~~loss ~~---~~$ 43,470 ==============

~~September 30, September 30,~~ Three months ended ~~2004 June 30, 2004~~ March 31, 2004 ~~2003~~ ---- ------------- -------------- -~~---~~ ~~Total operating expenses $1,965,299 $3,217,397 $3,900,024 $2,080,083~~ ---------- ----~~------~~ ~~----------~~Net ~~----------~~loss, Asas apreviously ~~percentage~~reported of$ ~~total~~4,223,817 ~~revenues~~Foreign ~~131%~~exchange ~~381%~~loss ~~306%~~adjustment ~~545%~~23,707 ---------- ----~~------~~ ~~----------~~Revised ~~----------~~net loss $ 4,247,524 ==============

12. COMPARATIVE FIGURES: Certain prior period comparatives have been reclassified to conform to the current period presentation. 13. RELATED PARTY TRANSACTIONS: During the three months ended March 31, 2005, the Company earned no revenues nor incurred any expenses from a firm that is a significant shareholder of the Company. This is compared to the three months ended March 31, 2004 when the Company earned revenues of $334,710 for software, licenses and professional services and incurred expenses of $30,931 related to agency services and leases. As of March 31, 2005, a balance of $9,548 is still outstanding in the Company's accounts receivable. During the three month ended September 30, 2004, a director and significant shareholder of the Company acquired controlling interest of Sproqit Technologies, Inc. ("Sproqit"). The Company and Sproqit now share a common significant shareholder. Sproqit holds an option to purchase back all of the intellectual property assets held for sale as described in note 7 to our Annual Consolidated Financial Statements. 10 MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS INFOWAVE SOFTWARE, INC. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS FOR THE THREE MONTH PERIOD ENDED MARCH 31, 2005 The following Management's Discussion and Analysis of Financial Condition and Results of Operations ("MD&A") prepared in accordance with Canadian GAAP should be read in conjunction with the unaudited interim consolidated financial statements and related notes thereto prepared in accordance with Canadian GAAP included in Part I of this Quarterly Report. Investors should read the following in conjunction with the audited consolidated financial statements and accompanying notes for the year ended December 31, 2004 included in the Annual Report on Form 20-F. Additional information regarding the Company, including the Company's Annual Report, is available on the SEDAR web site at www.sedar.com. OVERVIEW The accompanying unaudited interim consolidated financial statements are presented for the three month period ended March 31, 2005 and 2004, and includes the accounts of Infowave Software, Inc. ("INFOWAVE" or the "COMPANY") and its U.S. subsidiaries. Infowave Software, Inc. provides enterprise mobile applications (EMA), including packaged configurable application software modules that integrate business operations required by mobile workers. Focused on enabling organizations with mobile workforces since 1993, Infowave solutions enable mobile workers of all types to access critical enterprise information at the point of work, including work orders, internal communications, asset information, customer details, calendars, schedulization and other important data required to perform their job functions more effectively and productively. The Company provides a suite of mobile software solutions which streamline and integrate business operations required by mobile workers, such as Enterprise Resource Planning (ERP), Field Service, Supply Chain and Asset Management operations. The Company is organized under the Canada Business Corporations Act and is listed on the Toronto Stock Exchange under the trading symbol IW. The Company's head office and development facilities are located at Suite 200, 4664 Lougheed Highway, Burnaby, British Columbia, Canada, V5C 5T5 (telephone 604.473.3600). The Company's registered office is at Suite 2600, Three Bentall Centre, 595 Burrard Street, PO Box 49314, Vancouver, British Columbia, Canada, V7X 1L3. The Company's wholly owned subsidiary, Infowave USA Inc., is incorporated under the laws of the State of Washington. Infowave's other subsidiary, Telispark Inc., is incorporated under the laws of the State of Delaware. CORPORATE SUMMARY Infowave's strategy is to become the leading enterprise mobile application software provider, delivering mobile application and infrastructure software solutions to organizations in need of real-time data access in the field. Today, the Company is focused on vertical industries that are more likely to make large capital investments which consist of utilities, oil and gas, governmental, telecommunications and high tech sectors to help maintain and service complex equipment and inventory in the field or in closed-campus environments like warehouses and plants. Infowave's strategy is to enable enterprises to streamline their business operations as they pertain to the mobile worker. By providing enterprise mobile end-users with an easy to navigate, intuitive mobile application that enables work flow automation, organizations can improve their asset utilization, minimize inventory investment levels, optimize the supply chain and financially depreciating assets, and provide more efficient service through optimized work processes that eliminate error-prone paper-based processes, increase wrench time, and improve data integrity in a mobile environment. Capital-intensive organizations have spent the past ten years implementing business operations designed to increase operational efficiency and improve asset utilization. Large, expensive systems like Supply Chain 11 Management, CRM, ERP, EAM, and SFA, helped enterprises make progress in preserving, protecting and extending the life of capital assets and increasing operational efficiencies. Unfortunately, these systems are often architected as disparate or non-integrated data sources, limiting the type and amount of enterprise information that can be accessed and interacted with by the mobile user. Today, large organizations find themselves at a crossroads. The current economics and the ever-increasing size of mobile workforces are forcing organizations to take a closer look at how they utilize their assets and the costs associated with their current operations. Many find that current capital-intensive operations, such as preventive and reactive maintenance, are ineffective and cost millions of dollars a year in lost time and equipment. In looking to fix the situation, organizations find themselves entrenched in isolated, proprietary business operations that cannot be integrated with one another without large services overhauls and the resulting expensive maintenance fees. The bottom line is that enterprises need to improve their approach to the mobile worker if they want to preserve their assets and save money. Many vendors claim to offer enterprise mobile solutions. Unfortunately, most options are characterized by expensive and non-integrated approaches to the problem. The end result is a limited, unreliable end-user application that is a mobilization of one back-end system. In order to have a successful mobile application deployment, organizations must consider the following: - THE MOBILE BUSINESS PROCESS IS UNIQUE: Mobile users are not at their most productive when a software application is a mirror of a single system. - INTEGRATED, CROSS-ENTERPRISE DATA BUSINESS PROCESSES: Mobile users, like utilities maintenance personnel, may need access to many different data sources. For example, a software application that meets the need would provide field techs with access to documentation for equipment information, work orders from Enterprise Asset Management systems, customer information from CIS systems, and Time and Materials capability from financial applications. In most organizations, these systems are disparate and unconnected. Organizations need these systems to talk. - VERTICAL EXPERTISE: Packaged software applications that address industry-specific issues cut down on initial services costs as well as deliver a solution that addresses an organization's unique business needs and optimal mobile workflows. - PACKAGED DELIVERY: Configurable, off-the-shelf software applications enable rapid deployment of full-featured applications. In addition, administrators can make application changes quickly and cost-effectively as needs change and user bases expand. - STANDARDS-BASED MOBILE TECHNOLOGY: Secure, robust mobile software infrastructure is essential to an effective deployment. Selecting a solution that enables uninterrupted application access, regardless of network connection, is critical to ROI and achieving the business objectives of the implementation. Robust synch, run-time, security and standards based architecture are key technology features for successful deployments. A mobile business process is the optimal application flow or order of access that results in a more productive end-user. Mobile business processes are designed with the mobile end-user at the center. They enable end users to access multiple business operation systems, like ERP, Supply Chain, Financials, Document Management and others. The result for the end-user is access to the right information at the point-of work. A mobile business process is designed very differently than traditional siloed business operations or "mobile" offerings from traditional solution vendors. These vendors often put a transcoder or mobile technology on top of a solution that was designed for a PC or a terminal. This ends up delivering limited functionality to the end-user and propagates the problems the mobile workforce was intended to solve: lack of data integrity, poor asset utilization and lags of productivity within the mobile workforce. Infowave believes that providing mobile access to corporate data provides the following advantages: - Improved productivity and efficiency by enabling mobile workers to stay connected to mission-critical data at all times, either in the field or at home. - Leveraging existing hardware and software investments by extending these applications out of the office and into the field. 12 - Improved revenue generation by selling the right product to the right customer at the right time. - Cost savings by providing faster and less expensive means to interact with employees and clients, and by lowering customer acquisition costs by reaching a wider audience unconstrained by time and place. - Competitive advantage by being able to respond to customer queries/concerns in a more timely and effective manner. SIGNIFICANT EVENTS FOR FIRST QUARTER 2005 Financial Highlights - The Company ended the quarter with $7.28 million in cash and cash equivalents. - The Company reduced operating expenses by 46% over the same period last year. Major Customer Win The Company was selected by Agfa Corporation's U.S. HealthCare Service Organization to deploy our mobile software solution throughout Agfa's HealthCare Division. This selection was the result of an exhaustive RFP process that reviewed all of the leading providers of mobile software solutions. Major Award Win The Company was the winner the prestigious IBM PartnerWorld Beacon Award for Best IBM Websphere On Demand Solution. The Company believes the award solidifies IBM's confidence in our products and will further strengthen our partnership and will open more customer opportunities. Major Business Partner Infowave formed a strategic relationship with ClickSoftware Technologies Ltd. (NasdaqSC: CKSW) for Field Force Automation, Workforce Management, Asset Monitoring and Enterprise Mobile Solutions. The Company believes that combining ClickSoftware's workforce and service optimization software with Infowave's enterprise mobile applications will promote seamless integration from backend systems to mobile devices - enabling customers to maximize the use of their field force, minimize costs and increase customer satisfaction. Corporate Reorganization On January 21, 2005, the Company announced that the corporate reorganization (the "Reorganization") involving Infowave and 0698500 B.C. Ltd. had been completed. The Reorganization provided gross proceeds of $4.57 million (Cdn$5.45 million) cash without diluting existing shareholders. In connection with the Reorganization and in accordance with the Company's incorporating legislation, the shareholders of the Company approved a reduction in the stated capital of the Company's common shares in the amount of $62,773,081 (Cdn$91,636,144). As the Canadian operations of the Company have been continued by a new Canadian corporation, non-capital losses and Scientific Research and Development Expenditures generated from the operation of the business in preceding years are no longer available to the Company to reduce future taxable income earned. 13 RESULTS OF OPERATIONS QUARTERLY FINANCIAL PERFORMANCE SUMMARY The following table summarizes unaudited and restated financial performance for the past eight quarters of the Company:

Quarter Ended March 31, December 31, September 30, ~~September~~June 30, ~~Three~~2005 ~~months~~2004 ~~ended~~2004 2004 ~~June~~---------- 30------------ ------------- ---------- Revenue $ 402,459 ~~2004~~$ ~~March~~484,904 31$ 1,500,093 ~~2004~~$ ~~2003~~845,355 Costs of sales 187,534 317,282 566,552 321,766 ---- ------ ------- ----- ------------- ---------- Gross margin 214,925 167,622 933,541 523,589 Operating expenses Research and development $535,494 235,547 316,126 $889,668 $Sales and marketing 469,972 442,605 688,442 1,~~060~~237,~~791~~949 ~~$653~~Administration 661,~~150~~583 647,066 581,817 739,916 Restructuring - - - 61,885 Impairment - 412,632 - - Depreciation and amortization 443,415 467,760 378,914 287,979 ---------- ------------ ------------- ---------- AsTotal aoperating ~~percentage~~expenses of2,110,464 ~~total~~2,205,610 ~~revenues~~1,965,299 ~~21%~~3,217,397 ~~105%~~---------- ~~83%~~------------ ~~171%~~------------- ---------- Net operating loss $1,895,539 $ 2,037,988 $ 1,031,758 $2,693,808 ---------- ------------ ------------- ---------- HB 3870 Compensation $ 153,611 $ 229,706 $ 92,474 $ 67,333 Stock-based compensation expense under the method adopted January 1, 2004 has been included in the above-noted figures and is allocated as follows: Research and development 16,011 18,065 13,800 25,236 Sales and marketing 40,430 46,904 33,405 21,364 Administration 97,170 164,737 45,269 20,733

~~September~~Quarter ~~30,~~Ended ~~Three~~March ~~months~~31, ~~ended~~December ~~2004~~31, ~~June~~September 30, ~~2004~~June ~~March 31~~30, 2004 ~~September~~2003 ~~30,~~2003 2003 ---------- ------------ ------------- ---------- Revenue $1,273,682 $ 326,172 $ 381,395 $ 505,397 Costs of sales 567,519 39,475 41,535 61,855 ---------- ------------ ------------- ~~Sales~~---------- ~~and~~Gross ~~marketing~~margin ~~$668~~706,~~442~~163 $286,697 339,860 443,542 Operating expenses Research and development 1,~~237~~060,~~949~~791 $307,635 653,150 489,137 Sales and marketing 971,053 $663,848 658,651 399,129 Administration 984,902 718,556 457,469 391,205 Restructuring 225,746 - - - Impairment - 614,578 - - Depreciation and amortization 657,532 366,651 310,813 99,972 ---------- ------------ ------------- ---------- AsTotal aoperating ~~percentage~~expenses of3,900,024 ~~total~~2,671,268 ~~revenues~~2,080,083 ~~45%~~1,379,443 ~~146%~~---------- ~~76%~~------------ ~~173%~~------------- ---------- Net operating loss $3,193,861 $ 2,384,571 $ 1,740,223 $ 935,901 ---------- ------------ ------------- ---------- HB 3870 Compensation $ 69,046 40,094 80,380 59,863 Stock-based compensation expense under the method adopted January 1, 2004 has been included retroactively, for quarters ended 2003, in the above-noted figures and is allocated as follows: Research and development 23,698 7,298 29,675 22,885 Sales and marketing 12,433 15,749 29,923 18,675 Administration 32,915 17,047 20,782 18,303

14 REVENUES Revenues are derived from the sale of software licenses, implementation and customization professional services ("professional services") and maintenance and support services. License and maintenance revenues are normally generated from licensing our products to end-users and value added resellers or system integrators. Service revenues are generated from professional services sold to end-users and also include software subscription services provided to customers. The licensing of Infowave Mobile Enterprise software products and provisioning of implementation and customization professional services ("EMA products and services") will continue to be the Company's core products and services revenue streams. As such, the Company's revenue streams will continue to be project-driven with varying mix of EMA product and service revenues as constrained by the number of project bookings, and by revenue recognition policies on timing of when revenue on projects should be recorded. As a result, it is expected that revenue unevenness will go on from quarter to quarter into the future. Revenues for the three months ended March 31, 2005 were $402,459 representing a decrease of 17% from $484,904 in the three months ended December 31, 2004 and a decrease of 68% from $1,273,682 in the three months ended March 31, 2004. The Company had begun work late in the quarter on a new project that further attributed to lower revenue as only a small percentage of service revenue could be recognized. The timing of revenue recognition for software license had an impact as well. The revenue mix for three months ended March 31, 2005 was comprised of 15% software license fees, 58% maintenance and support fees, and 27% professional services fees. Both license fees and professional services fees were integral components of the EMA solution delivered to customers. This compares to 4% from software license fees, 49% from maintenance and support fees, and 47% from professional service fees for the three month periods ended December 31, 2004. In comparison to the same period of 2004, the revenue mix was 58% from software license fees, 22% from maintenance and support fees, and 20% from service fees. The Company anticipates professional services to continue to comprise a significant percentage of its total revenue comparable to that experienced for the three month period ended March 31, 2005. The Company continued to have significant portion of revenues concentrated amongst its three largest customers. The Company expects future revenues to be concentrated amongst its most significant customers comparable to that experienced for the three month period ended March 31, 2005. They accounted for the following percentage of total revenue of the Company:

~~September~~Three ~~30,~~largest ~~Three~~customers ~~months~~March ~~ended~~31, ~~2004~~2005 ~~June~~December 3031, 2004 March 31, 2004 ~~September 30, 2003~~ ---- ------------------------ -------------- ----------------- -------------- ~~Administration~~Revenues $~~581~~226,~~817~~885 $~~739~~359,~~916~~927 $~~984~~823,~~902~~377 ~~$457,469~~ -------------- -------- --------- -------------- AsPercentage ~~a percentage~~ of total revenues 3956% 8874% 7765% ~~120%~~ -------------- -------- --------- --------------

The Company's geographical revenues are as follows with the largest attributable to customers located in the United States for the three months ended:

~~NAME~~Geographical ~~AGE~~Location ~~POSITION~~March 31, 2005 December 31, 2004 March 31, 2004 --------------------- ----------------- ------------------ ~~Jerry~~------------------- ~~Meerkatz.................................................~~United 47States ~~President~~$355,785 ~~and~~88% ~~Chief~~$323,467 ~~Executive~~67% ~~Officer George Reznik ................................................. 38 COO & Chief Financial Officer Tod Weber ..................................................... 41 SVP~~$1, ~~Sales~~084,842 ~~Marketing~~85% &Canada ~~Business~~21,408 ~~Development~~6% ~~Paul~~102,212 ~~Townsend..................................................~~21% ~~43 Vice President~~74,316 ~~Development~~6% ~~Thomas~~Europe ~~Koll~~19,636 ~~...................................................~~5% 4819,852 ~~Chairman~~4% of96,608 ~~the~~8% ~~Board~~Asia/Other (5,630 1)% ~~Jim~~39,373 ~~McIntosh~~8% ~~..................................................~~17,916 ~~40 Director (~~1)% ~~(3)~~-------- ~~Leonard~~--- ~~Brody~~-------- ~~.................................................~~--- 33---------- ~~Director~~--- ~~(3)~~Total ~~Tyron~~$402,459 ~~Williams~~100% ~~...............................................~~$484,904 64100% ~~Director (~~$1),273,682 ~~(2)~~100% ~~(3)~~-------- ~~Christine~~--- ~~Rogers...............................................~~-------- 48--- ~~Director~~---------- ~~(2) Jerry Trooien.................................................. 57 Director (2)~~---

Approximately 88% of the Company's revenue for the three months ended March 31, 2005 was from customers in the United States, 6% from customers in Canada and 6% from customers outside of North America primarily attributable to Europe. This compares to 67% from the United States, 21% from Canada and 12% from Europe and the rest of the world for the three months ended December 31, 2004. This also compares to 85% from the 15 United States, 6% from Canada and 9% from Europe and the rest of the world for the three months ended March 31, 2004. COST OF SALES Cost of sales consists of product related costs including product documentation and shipping, royalties to third parties for resale of technology, costs related to delivery of professional implementation and customization services and variable sales costs. The Company expects that labour costs from delivery of professional services to be the major component of the cost of sales going forward.

~~LONG-TERM~~Three ~~ANNUAL~~months ~~COMPENSATION~~ended ~~COMPENSATION~~March 31, 2005 December 31, 2004 March 31, 2004 ------------------ ---- ------------- ----- ~~ALL OTHER NAME AND PRINCIPAL POSITION SALARY BONUS SECURITIES COMPENSATION~~ ------------ ------------------ ~~(US$)~~Revenues ~~(US~~$)402,459 ~~UNDERLYING~~100% ~~OPTIONS~~$484,904 ~~(US~~100% $)1,273,682 100% Cost of Sales 187,534 47% 317,282 65% 567,519 45% --------- ---~~------~~ -------- ---~~-------~~ ---------- --- ~~Jerry~~Gross ~~Meerkatz~~Margin ~~2003~~ $ 25214,~~000~~925 $53% 6$167,~~250~~622 ~~2,650,000~~35% -$ ~~President~~706,163 &55% ~~Chief Executive 2002~~ - - - - ~~Officer(1) 2001~~ - - - - ~~George Reznik 2003 $ 125,057 $ 61,119 675,000~~ - ~~Chief Financial Officer(2) 2002 $ 88,152 $ 19,783 375,000~~ - ~~2001~~ - - - - ~~Sal Visca 2003 $ 167,151 $ 122,058 593,750~~ - ~~Chief Technology Officer 2002 $ 141,801 $ 12,200 230,000~~ - ~~2001 $ 141,291 $ 15,457 198,000~~ - ~~Thomas Koll 2003 $ 52,500~~ - ~~150,000 $ 350,000 Chairman of the Board(3) 2002 $ 204,808~~ - ~~675,000~~ - ~~Former President and CEO 2001 $ 305,577~~ - ~~930,000~~ - ~~Jim McIntosh 2003~~ - - ~~150,000~~ - ~~Director 2002~~ - - ~~75,000~~ - ~~Former President(4)(5) 2001~~ - - ~~25,000~~ - ~~Bill Tam 2003 $ 71,599 $ 11,686 231,250~~ - ~~Former Executive Vice President Sales and 2002 $ 48,224~~ - ~~254,000~~ - ~~Sales and Marketing(6) 2001~~ - ~~- - -~~

GROSS MARGIN Gross margins for the first quarter of 2005 were 53%, compared to 35% in the previous quarter ended December 31, 2004 and 55% in the quarter ended March 31, 2004. The decrease in gross margins in the quarter as compared to the quarter ended March 31, 2004 is attributable to the increased cost of professional service delivery resulting from increased service revenue. In comparison to the previous quarter ended, gross margin is higher as a result of lower utilization of professional services staff due to low project bookings and sales order backlog in conjunction with a higher license revenue mix. The Company expects to experience comparable gross margins going forward to that experienced during the three month period ended March 31, 2005 which is due to its increased percentage of total revenue attributable to professional service delivery. OPERATING EXPENSES

~~INDIVIDUAL~~Three ~~GRANTS~~months ~~POTENTIAL~~ended ~~REALIZABLE~~March 31, 2005 December 31, 2004 March 31, 2004 --------------------------------- -------------- --------- VALUE AT ASSUMED % OF TOTAL ANNUAL RATES OF STOCK NUMBER OF OPTIONS PRICE APPRECIATION FOR SECURITIES GRANTED TO OPTION TERM UNDERLYING EMPLOYEES EXERCISE PRICE (CDN$) OPTIONS IN FISCAL (PER SHARE)(2) EXPIRATION -------- -------------- ~~NAME~~Total ~~GRANTED~~operating ~~YEAR~~expenses ~~(1)~~$2,110,464 ~~(CDN~~$)2,205,610 ~~DATE~~$3,900,024 ~~5% 10%~~ -------------- -- --------------- -------------- As a percentage of total revenues 524% 455% 306% -------------- ---------- ------- -- -------- Jerry Meerkatz 150,000(3) 1.7% $0.21 Jul 1/08 $ 8,703 $ 19,231 2,500,000 28.8% $0.22 Nov 18/08 $ 151,955 $335,781 George Reznik 375,000 4.3% $0.21 Jul 1/08 $ 21,757 $ 48,078 300,000 3.5% $0.22 Nov 18/08 $ 18,235 $ 40,294 Sal Visca 293,750 3.4% $0.21 Jul 1/08 $ 17,043 $ 37,661 300,000 3.5% $0.22 Nov 18/08 $ 18,235 $ 40,294 Thomas Koll 150,000(3) 1.7% $0.21 Jul 1/08 $ 8,703 $ 19,231 Jim McIntosh 150,000(3) 1.7% $0.21 Jul 1/08 $ 8,703 $ 19,231 Bill Tam 231,250 2.7% $0.21 Jul 1/08 $ 13,417 $ 26,093----

Total operating expenses for the Company (comprised of research and development, sales and marketing, administration, restructuring and depreciation charges) for the first quarter ended March 31, 2005 were $2,110,464 which decreased 4% from $2,205,610 in the previous quarter primarily due to reduction of certain fourth quarter costs not typically incurred in the first quarter. A decrease of 46% from $3,900,024 in the same quarter of 2004 was realized as the integration of Telispark into the Company's operations was completed. The associated integration costs incurred during the March 31, 2004 quarter that drove expenses higher were not a factor this quarter. As at March 31, 2005, the Company's headcount was 46, compared to 40 as at December 31, 2004 and 59 as at March 31, 2004. Although the Company cannot anticipate that future quarterly total operating costs will be comparable to that achieved in Q1 2005 or Q4 2004, as the Company continues to build the business and increase its revenue growth, it expects that total operating costs will increase as well. The Company will prudently commit appropriate levels of financial resources to build and grow our business. 16 Research and Development

~~VALUE~~Three OFmonths ~~UNEXERCISED~~ended ~~BUT~~March ~~NUMBER~~31, OF2005 ~~SECURITIES~~December ~~EXERCISABLE~~31, ~~IN-THE-MONEY~~2004 ~~SECURITIES~~March ~~AGGREGATE~~31, ~~VALUE~~2004 ~~UNDERLYING UNEXERCISED OPTIONS AT YEAR END ACQUIRED ON REALIZED OPTIONS AT YEAR END (#) EXERCISABLE/UNEXERCISABLE NAME EXERCISE (#) (CDN$) EXERCISABLE/UNEXERCISABLE (CDN$) (1)~~ --------------------------------- -------------- ----------------- -------------- Research and development $535,494 $235,547 $1,060,791 -------------- ----------------- -------- ~~Jerry Meerkatz~~ - ----- ~~75,000/2,575,000~~As ~~$1,500/$26,500~~a ~~George~~percentage ~~Reznik~~of ~~225,000~~total ~~$11,200~~revenues ~~79,168/595,832~~133% $49% ~~1,417/$9,083~~83% ~~Sal Visca 107,000 $ 5,350 183,626/528,124 $ 7,046/$7,729 Thomas Koll~~ - - ~~650,000/175,000 $12,500/$2,500 Jim McIntosh~~ - ----------- ~~150,000/75,000 $ 7,500/$1,500 Bill Tam 62,500 $10,625~~ -/---------------- -/-------------

Research and development ("R&D") expenses consist primarily of salaries and related personnel costs, consulting fees associated with product development and costs of technology acquired from third parties to incorporate into products currently under development. Total research and development expenses for the first quarter of 2005 totaled $535,494 representing an increase of 127% from the prior quarter total of $235,547 and 50% decrease from $1,060,791 in the first quarter of 2004. The Company believes that its investment in R&D is sufficient to support its current product line. Approximately 33% of the Company's total headcount remains in R&D. This increase over the three month period ended December 31, 2004 is primarily attributable to professional service resources spending time on non-billable project activities and product related work. The staffing levels have also been increased in the professional services and product development areas so that appropriate resources are committed for ongoing and future projects. The associated costs, therefore, have increased over the prior quarter. The Company will continue to experience some fluctuations in its R&D expenses as the level of professional services and product development resources committed to billable projects varies according to project bookings. During the three months ended March 31, 2005, funding benefits of $98,616 was recognized and warrant expense of $31,831 was amortized. For the quarter ended March 31, 2005 the Company continued to focus its R&D efforts on projects that, in its opinion, had the greatest potential to positively impact revenue in the short to mid-term. Sales and Marketing

~~NUMBER~~Three OFmonths ~~SECURITIES~~ended ~~NUMBER~~March OF31, ~~SECURITIES~~2005 TODecember BE31, ~~ISSUED~~2004 ~~UPON~~March ~~WEIGHTED-AVERAGE REMAINING AVAILABLE FOR EXERCISE OF EXERCISE PRICE OF FUTURE ISSUANCE UNDER OUTSTANDING OPTIONS~~31, ~~OUTSTANDING~~2004 ~~OPTIONS, EQUITY COMPENSATION WARRANTS AND RIGHTS WARRANTS AND RIGHTS PLANS (EXCLUDING PLAN CATEGORY WARRANTS AND RIGHTS WARRANTS AND RIGHTS SECURITIES REFLECTED)~~ --------------------------------- -------------- ------ ----------- -------------- Sales and marketing $469,972 $442,605 $971,053 -------------- --------- ~~Equity compensation plans 21,542,199 $0.31 3,230,430 approved by security holders Equity compensation plans~~ - ~~nil~~ - - ~~nil~~ - - ~~nil~~ --- ~~no approved by security holders~~ ---------- ---- As a percentage of total revenues 117% 91% 76% --- ----------- ~~Total 21,542,199 $0.31 3,230,430~~ ---------- ------- --------------

Sales and marketing expenses consist primarily of salaries and related personnel costs, sales commissions, credit card fees, subscriber acquisition costs, consulting fees, trade show expenses, advertising costs and costs of marketing collateral. Sales & marketing expenses for the three months ended March 31, 2005 were $469,972 compared to $442,605 in the three months ended December 31, 2004 and $971,053 in the three months ended March 31, 2004. The increase of 6% from the previous quarter is attributable to severance paid to a senior level executive. Sales and marketing expenses decreased by 52% over the same period in the prior year due to a decrease in headcount as a result of the integration of Telispark operations. The Company will continue to invest appropriate levels of resource in sales and marketing in order to drive sales growth and enhance market awareness of our products. As such, the Company has hired a senior marketing resource in early second quarter to develop strategic marketing initiatives for the Company's products and services. 17 Administration

~~DIRECTORS,~~Three ~~EXECUTIVE~~months ~~OFFICERS~~ended ~~EARNING~~March ~~MORE~~31, ~~NUMBER~~2005 OFDecember ~~SHARES~~31, ~~PERCENT~~2004 OFMarch ~~TOTAL SHARES THAN $100~~31,~~000~~ ~~AND~~2004 ~~5% SHAREHOLDERS BENEFICIALLY OWNED OWNED~~ --------------------------------- -------------- ----------------- -------------- Administration $661,583 $647,066 $984,902 -------------- ----------------- -------------- ~~Gerald~~As ~~Trooien~~a ~~(1)~~percentage ~~62,996,536~~of ~~26.55%~~total ~~Deloitte~~revenues ~~Consulting LP (2) 24,568,280 10.36~~164% ~~Thomas Koll (3) 3,194,116 1.34~~133% ~~Jerry Meerkatz (4) 2,341,000 0.98~~77% ~~Jim~~-------------- ~~McIntosh~~----------------- (5) (6) 1,788,400 0.75% George Reznik (7) 579,561 0.24% Todd Weber (8) 512,455 0.22% Christine Rogers (9) 100,000 0.04% Leonard Brody (10) 100,000 0.04% Tyron (Tarnie) Williams (11) 100,000 0.04% Paul Townsend (12) 96,261 0.04% ALL DIRECTORS AND EXECUTIVE OFFICERS AS A GROUP (13) 96,376,609 40.60%--------------

Administration expenses consist primarily of salaries, related personnel costs, fees for professional and temporary services and other general corporate and contractor costs. Administration expenses of $661,583 increased by 2% from expenses of $647,066 in the prior quarter and decreased by 33% from expenses of $984,902 in the comparable quarter of 2004. The increase over the prior quarter was due to an increase in professional fees and insurance. The Company anticipates that administration expenses will continue to fluctuate as the business changes or as the business needs to meet certain statutory or other requirements of being a public company listed on the TSX and subject to public reporting obligations in the U.S. DEPRECIATION AND AMORTIZATION Amortization expense totaled $443,415 in the three months ended March 31, 2005 which is 5% lower than amortization expense of $467,760 in the three months ended December 31, 2004 and 33% lower than $657,532 in the same period of 2004. The decrease over the prior quarter was a result of a number of fixed assets being fully amortized. This decrease over the three months ended March 31, 2004 is a result of an adjustment of the acquired Telispark intangible assets from three to seven years straight line amortization. RESTRUCTURING AND ASSET IMPAIRMENT CHARGES During the three months ended March 31, 2005, there were no restructuring and asset impairment charges. In the first quarter of 2004, the Company completed a restructuring plan that significantly reduced operating expenses and preserved capital by implementing a headcount reduction of 24 staff from 55 at the beginning of the year. As at December 31, 2004, the Company did incur asset impairment charges and had written off $412,632 related to its non-exclusive license to Visto Corporation's Patent Portfolio. INTEREST AND OTHER INCOME Interest and other income for the three months ended March 31, 2005 was $23,112 compared to $18,605 and $20,204 for the three months ended December 31, 2004 and March 31, 2004, respectively. The increase in income is attributable to an increase in cash and cash equivalent balances for the majority of the three months ended March 31, 2005 offset by a decrease in interest rates offered on cash equivalent investments. FOREIGN EXCHANGE Foreign exchange gain was $33,897 for the three months ended March 31, 2005, compared to a loss of $94,075 in the three months ended December 31, 2004 and a loss of $43,470 in the same period last year. The changes are due to fluctuations in the foreign exchange rate between the Canadian and US Dollar. The Canadian dollar weakened approximately 1% against the US dollar during the three months ended March 31, 2005 that impacted the Company's results as significant portions of the Company's monetary balances are in Canadian denomination. Foreign currency risk is the risk to the Company's earnings that arises from fluctuations in foreign currency exchange rates, and the degree of volatility of these rates. A substantial portion of the Company's sales are derived in United States dollars and accordingly the majority of the Company's accounts receivable is 18 denominated in United States dollars. The Company has not entered into foreign exchange contracts to hedge against gains or losses from foreign exchange fluctuations. The Company identified an adjustment to previously reported foreign exchange balances for the three months ended March 31, 2004, June 30, 2004 and September 30, 2004 respectively attributable to the foreign exchange translation method of accounting utilized by the Company its US subsidiaries, Infowave USA and Telispark. The financial impacts of these adjustments are summarized below and the Company will report the adjusted numbers for future comparative balances:

~~FISCAL~~Three ~~2003~~months ~~FISCAL~~ended ~~2002~~March 31, 2004 June 30, 2004 September 30, 2004 ------------------------------------ -------------- ~~Audit~~------------- ~~fees~~------------------ $Foreign 55exchange loss,~~900~~ $as ~~67,330~~previously ~~Audit-related~~reported ~~fees~~$ ~~122~~19,~~448~~763 44$ 415,~~065~~442 ~~Tax~~$ ~~fees 27~~56,~~537~~841 -Adjustment ~~All~~23,707 ~~other~~(315,823) ~~fees 42~~155,~~973~~590 -------------- ------------- ------------------ ~~Total~~Revised ~~fees~~foreign exchange loss $ ~~248~~43,~~858~~470 $ ~~111~~99,~~395~~619 ~~=============~~$ ~~==============~~212,431 -------------- ------------- ------------------

~~NUMBER~~Three OFmonths ~~PERCENTAGE~~ended OFMarch ~~OUTSTANDING~~31, ~~NAME~~2004 ~~AND~~June ~~ADDRESS~~30, ~~COMMON~~2004 ~~SHARES~~September, ~~COMMON~~30, ~~SHARES~~2004 --------------------------------- -------------- ------------- ------------------- ~~Gerald~~Net L.loss, ~~Trooien~~as 62previously reported $ 4,~~896~~223,~~536(~~817 $ 3,088,801 $ 1),078,136 ~~26.5%~~Foreign ~~#800-10~~exchange ~~River~~loss ~~Park~~adjustment ~~Plaza~~23,707 ~~St.~~(315,823) ~~Paul~~155,590 MN-------------- ~~55107~~------------- ~~Deloitte~~------------------- ~~Consulting~~Revised ~~L.P.~~net 24loss $ 4,~~568~~247,~~280~~524 ~~10.4%~~$ ~~1633~~2,772,978 ~~Broadway~~$ ~~New York~~1,233,726 NY-------------- ~~10019~~------------- -------------------

NET LOSS The Company incurred a net loss before interest, other expenses and non-controlling interest of $1,895,539 for the three month ended March 31, 2005 in comparison to $2,037,988 for the three months ended December 31, 2004 compared with a loss of $3,193,861, for the three months ended March 31, 2004. The net income for the three months ended March 31, 2005 was $1,399,133 due to a gain from the corporate reorganization of $3,239,343 realized during the quarter. For the previous three months ended December 31, 2004, the Company incurred loss of $2,113,458 and for the same period of 2004, incurred loss of $4,247,524. Net losses for the Company will go on into the future as the Company continues to grow its revenue base and control its operating expenses. The Company believes that with successful deployments of our EMA products and services to key reference customers then that will open opportunities for larger scale deployments to them, and in turn make available other customer opportunities. LIQUIDITY AND CAPITAL RESOURCES In early January, 2005 the Company completed a corporate reorganization that raised $4.57 million (Cdn$5.45 million) resulting in net proceeds of approximately $3.24 million (Cdn$3.84 million) in non-dilutive equity funding. The Company used $656,704 in operations during the three months ended March 31, 2005. Non-cash working capital provided $505,439 and other operating activities used $1,162,143. This compared with cash used in operations during the three months ended March 31, 2004 of $2,798,796 that consisted of $593,621 used in non-cash working capital and $2,205,175 used in other operating activities. The Company anticipates that it will experience negative cash flows from operations in the future. The Company will strive to increase revenues, improve gross margins and control cash operating expenses in its effort reduce cash used in operations. 19 At March 31, 2005, the Company's cash and cash equivalents totaled $7,278,605 and working capital of $6,911,441. The Company's total working capital increased by $2,962,982 at March 31, 2005, compared to $3,948,459 at December 31, 2004 and $7,774,389 at March 31, 2004. The Company does not engage in any foreign exchange or other hedging activities, and is not a counter party to any derivative securities transactions. Net cash provided by investing activities was $5,029,390 which consisted of corporate reorganization net proceeds and release of restricted cash compared to $362,115 in same period of 2004. As at March 31, 2005, the Company held accounts receivable of $260,773 net of allowances for doubtful accounts of $nil which was a decrease of 53% over the three months ended December 31, 2004 and an decrease of 84% over the same period of 2004. As well, the Company held TPC receivable of $609,961 compared to $1,101,833 as at December 31, 2004. Capital assets decreased from $360,999 at December 31, 2004 to $295,649 at March 31, 2005 due to normal course of depreciation taken with no asset additions or disposals for the period. As at March 31, 2005, the Company's primary sources of liquidity consisted of cash and cash equivalents.. The convertible loan agreement, signed on March 8, 2002 with Hewlett Packard was terminated by the Company on January 16, 2005. The Company believes it has sufficient capital as at March 31, 2005, based on its current business plan, to meet all anticipated demands for the remainder of the fiscal year ended December 31, 2005. In the event that revenues are lower and/or expenses are higher than anticipated, the Company may be required to obtain additional cash resources in the form of external debt or equity financing to continue to support the execution of its business plan. OUTSTANDING SHARE DATA As of May 13, 2005, the Company had 239,149,570 issued and outstanding common shares. For additional detail, refer to note 11 to the 2004 Consolidated Financial Statements. OFF-BALANCE SHEET ARRANGEMENTS The Company did not have any off-balance sheet arrangements at March 31, 2005, other than operating leases and purchase obligations in the normal course of business previously disclosed in the MD&A as at December 31, 2004. During the three months ended March 31, 2005, the Company made operating lease payments totaling approximately $158,958 (December 31, 2004 - $158,958; March 31, 2004 - $216,412). CRITICAL ACCOUNTING POLICIES The Company prepares its consolidated financial statements in conformity with the Canadian generally accepted accounting principles, and makes estimates and assumptions that affect its reported amounts of assets, liabilities, revenue and expenses, and the related disclosure of contingent liabilities. The Company bases its estimates on historical experience and other assumptions that it believes are reasonable in the circumstances. Actual results may differ from these estimates. The Company's accounting policies are fundamental to understanding management's discussion and analysis of results of operations and financial condition since they involve significant estimates and assumptions used in preparing its consolidated financial statements. These policies are described in the Company's 2004 Annual Report on Form 20-F as filed with the SEC. During the three months ended March 31, 2005, the Company did not adopt any new accounting policies that would have a material impact on its consolidated financial statements, nor did it make changes to existing accounting policies. Effective January 1, 2005, Telispark, Inc. became an integrated foreign subsidiary of the Company and as such, changed its functional currency from U.S. dollars to Canadian dollars and changed its foreign currency translation method to the temporal method. Senior management has discussed with the Company's Audit and Governance Committee the development, selection and disclosure of accounting estimates used in the preparation of the consolidated financial statements. 20 FORWARD-LOOKING STATEMENTS Statements in this filing about future results, levels of activity, performance, goals or achievements or other future events constitute forward-looking statements. These statements involve known and unknown risks, uncertainties and other factors that may cause actual results or events to differ materially from those anticipated in any forward-looking statements. These factors include, among others, those described in connection with the forward-looking statements included herein and the risk factors set forth above. In some cases, forward-looking statements can be identified by the use of words such as "may," "will," "should," "could," "expect," "plan," "intend," "anticipate," "believe," "estimate," "predict," "potential" or "continue" or the negative or other variations of these words, or other comparable words or phrases. Although the Company believes that the expectations reflected in its forward-looking statements are reasonable, it cannot guarantee future results, levels of activity, performance or achievements or other future events. Moreover, neither the Corporation nor anyone else assumes responsibility for the accuracy and completeness of forward-looking statements. The Corporation is under no duty to update any of its forward-looking statements after the date of this filing. The reader should not place undue reliance on forward-looking statements. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK The Company conducts the majority of its transactions in Canadian dollars and, therefore, uses the Canadian dollar as its base currency of measurement. However, most of the Company's revenues and some of its expenses are denominated in United States dollars which results in an exposure to foreign currency gains and losses on the resulting US dollar denominated cash, accounts receivable, and accounts payable balances. As of March 31, 2005, the Company has not engaged in derivative hedging activities on foreign currency transactions and/or balances. Although realized foreign currency gains and losses have not historically been material, fluctuations in exchange rates between the United States dollar and other foreign currencies and the Canadian dollar could materially affect the Company's results of operations. To the extent that the Company implements hedging activities in the future with respect to foreign currency exchange transactions, there can be no assurance that the Company will be successful in such hedging activities. Telispark is a fully integrated subsidiary of the Company and thus the Canadian dollar is its functional currency. While the Company believes that inflation has not had a material adverse effect on its results of operations, there can be no assurance that inflation will not have a material adverse effect on the Company's results of operations in the future. PART II. OTHER INFORMATION LEGAL PROCEEDINGS None. CHANGES IN SECURITIES AND USE OF PROCEEDS On January 21, 2005 the Company announced that the corporate reorganization (the "Reorganization") involving Infowave and 0698500 B.C. Ltd. had been completed. The Reorganization provided gross proceeds of $4.57 million (Cdn$5.45 million) cash without diluting existing shareholders. In connection with the Reorganization and in accordance with the Company's incorporating legislation, the shareholders of the Company approved a reduction in the stated capital of the Company's common shares in the amount of $62,773,081 (Cdn$91,636,144). 21 COMMITMENTS The Company has entered into lease agreements for premises and equipment. These leases have been treated as operating leases for accounting purposes and consist primarily of the office space in Burnaby, B.C. (lease due to expire June 30, 2008), the former office space in Bothell, Washington (lease expired on March 30, 2005) and the office space in Reston, Virginia (lease due to expire March 31, 2006) which was entered into on March 23, 2004. The following table quantifies the Company's future contractual obligations on an annual basis, as of March 31, 2005: 2005 $ 489,342 2006 276,359 2007 243,036 2008 121,518 ----------- $ 1,130,255 ===========

For 2005, this includes commitments for both the three month period ending March 31, 2005 as well as the remainder of the fiscal year ending December 31, 2005. 22

---------------------------- 2003 2002 ----------- ----------- Assets Current assets: Cash and cash equivalents $ 4,911,605 $ 2,755,929 Short-term investments 227,393 355,614 Accounts receivable, net of allowance of $70,094 (2002 - $67,125) 331,202 394,712 Technology Partnership Canada ("TPC") receivable (note 4) 798,038 -- Inventory -- 951 Prepaid expenses (note 9) 334,534 135,402 ----------- ----------- 6,602,772 3,642,608 Fixed assets (note 6) 526,330 490,783 Intellectual property assets held for sale (note 8) 1,018,681 -- Intangible assets (note 7) 1,562,566 -- Other assets (note 3(a)) 225,000 25,366 ----------- ----------- $ 9,935,349 $ 4,158,757 =========== =========== Liabilities and Shareholders' Equity Current liabilities: Accounts payable and accrued liabilities $ 1,333,064 $ 463,096 Deferred revenue 284,800 364,847 ----------- ----------- 1,617,864 827,943 Long-term liabilities (note 4) 218,292 -- Shareholders' equity: Share capital (note 12): Authorized: Unlimited voting common shares without par value Issued: 148,369,989 (2002 - 66,439,578) common shares 65,700,311 56,539,360 Additional paid in capital 15,941 15,941 Other equity instruments (notes 5(a) and 12(f)(vii)) 2,150,511 1,613,096 Deficit (60,099,773) (54,342,142) Cumulative translation account 332,203 (495,441) ----------- ----------- 8,099,193 3,330,814 ----------- ----------- $ 9,935,349 $ 4,158,757 =========== =========== Continuing operations (note 2(a)) Commitments and contingencies (note 15) Subsequent events (note 3)

------------------------------------------------- 2003 2002 2001 ------------ ------------ ------------ Revenues: Sales $ 1,624,820 $ 1,821,041 $ 3,189,253 Cost of sales 199,704 408,654 416,082 ------------ ------------ ------------ 1,425,116 1,412,387 2,773,171 Expenses: Research and development (note 4) 1,879,868 2,505,329 5,394,684 Sales and marketing 2,013,556 3,855,068 9,298,149 Administration 1,828,883 2,016,675 4,408,576 Restructuring (note 14) -- 1,415,380 1,253,707 Impairment (note 2(i)) 614,578 -- -- Depreciation and amortization 885,746 1,383,675 1,831,301 ------------ ------------ ------------ 7,222,631 11,176,127 22,186,417 ------------ ------------ ------------ Operating loss 5,797,515 9,763,740 19,413,246 Other earnings (expenses): Interest and other earnings 75,189 47,675 258,792 Interest and financing costs (35,305) -- (1,705,982) ------------ ------------ ------------ Loss for the year 5,757,631 9,716,065 20,860,436 Deficit, beginning of year 54,342,142 44,626,077 23,765,641 ------------ ------------ ------------ Deficit, end of year $ 60,099,773 $ 54,342,142 $ 44,626,077 ============ ============ ============ Loss per share, basic and diluted $ 0.05 $ 0.18 $ 0.90 ============ ============ ============ Weighted average number of shares outstanding 104,913,864 52,877,973 23,125,831 ============ ============ ============

----------------------------------------------------- 2003 2002 2001 ------------ ------------ ------------- Cash flows from operations: Loss for the year $ (5,757,631) $ (9,716,065) $ (20,860,436) Items not involving cash: Depreciation and amortization 885,746 1,383,675 1,831,301 Amortization of TPC warrants (note 4) 218,292 -- -- Impairment (notes 2(i) and 14) 614,578 777,753 287,585 Non-cash interest and financing costs -- -- 1,590,184 Stock-based compensation (note 12(c)) 158,236 15,941 -- Allowance for obsolescence of inventory 1,071 46,206 30,000 Changes in non-cash operating working capital: Accounts receivable 138,224 1,067,848 (1,036,049) TPC receivables (737,446) -- -- Inventory -- 49,891 8,913 Prepaid expenses and deposits (156,729) 48,918 176,496 Accounts payable and accrued liabilities 243,931 (1,090,219) 569,201 Deferred revenue (147,487) 82,302 91,316 ------------ ------------ ------------- (4,539,215) (7,333,750) (17,311,489) Cash flows from investing activities: Redemption (purchase) of short-term investments, net 190,360 (6,371) 6,071,499 Purchase of fixed assets (201,984) (113,717) (2,288,424) Other assets -- (25,604) -- Proceeds on disposal of assets -- 11,807 -- Acquisition costs (380,250) -- -- ------------ ------------ ------------- (391,874) (133,885) 3,783,075 Cash flows from financing activities: Issuance of shares and special warrants for cash, net of issue costs 6,624,025 1,031,657 20,303,441 Foreign exchange gain (loss) on cash and cash equivalents held in a foreign currency 462,740 104,177 (55,389) ------------ ------------ ------------- Increase (decrease) in cash and cash equivalents 2,155,676 (6,331,801) 6,719,638 Cash and cash equivalents, beginning of year 2,755,929 9,087,730 2,368,092 ------------ ------------ ------------- Cash and cash equivalents, end of year $ 4,911,605 $ 2,755,929 $ 9,087,730 ============ ============ =============

------------------------------------------------- 2003 2002 2001 ------------ ------------ ------------ Supplementary information: Interest paid $ 4,487 $ 7,958 $ 48,727 Interest received 70,702 70,189 243,033 Non-cash transactions: Issuance of common shares and warrants on acquisitions (notes 5 and 8) 2,916,105 -- -- Conversion of special warrants into common shares (note 12(g)(ii)) -- 13,095,742 7,243,914 Warrants issued for financing costs (note 12(g)(i)) -- -- 1,613,096 Acquisition costs 466,669 -- -- ============ ============ ============

--------------------------------------------------------------------------------------- Asset Basis Rate ------------------------------------------- ----------------- ---------------- Computer equipment and system software Straight-line 3 years Computer software Straight-line 2 years Leasehold improvements Straight-line shorter of lease term or 5 years Office equipment Declining balance 20% Software licenses and purchased source code Declining balance 30%

----------------------------- 2003 2002 ---------- ----------- (unaudited) Revenue $1,728,560 $ 2,582,825 Loss for the year 7,617,693 30,120,105 ---------- ----------- Loss per share $ 0.05 $ 0.40 ========== ===========

--------------------------------------------------------- Accumulated Net book 2003 Cost depreciation value -------------------------------------- ------------- ------------- ----------- Computer equipment and system software $ 1,940,519 $ 1,721,724 $ 218,795 Computer software 2,409,153 2,267,635 141,518 Leasehold improvements 126,808 83,250 43,558 Office equipment 203,150 118,254 84,896 Software licenses and purchased source code 73,855 36,292 37,563 ------------- ------------- ----------- $ 4,753,485 $ 4,227,155 $ 526,330 ============= ============= ===========

--------------------------------------------------------- Accumulated Net book 2002 Cost depreciation value -------------------------------------- ------------- ------------- ----------- Computer equipment and system software $ 1,602,594 $ 1,319,154 $ 283,440 Computer software 1,812,971 1,795,718 17,253 Leasehold improvements 245,603 189,217 56,386 Office equipment 262,693 173,850 88,843 Software licenses and purchased source code 60,634 15,773 44,861 ------------- ------------- ----------- $ 3,984,495 $ 3,493,712 $ 490,783 ============= ============= ===========

--------------------------------------------------------- Accumulated amortization and Net book Cost write-down value ------------- ------------- ------------- (note 13) Intellectual property $ 2,177,543 $ 856,622 $ 1,320,921 Employment contracts 316,314 123,984 192,330 Patents 54,071 21,194 32,877 Customer relationship 27,035 10,597 16,438 ------------- ------------- ------------- $ 2,574,963 $ 1,012,397 $ 1,562,566 ============= ============= =============

-------------------------------------- Number of shares Amount ----------- -------------- Balance, December 31, 2000 21,095,458 $ 35,148,040 Share issuance pursuant to exercise of share options 72,017 55,187 Share issuance pursuant to issue and conversion of special warrants, net of issue costs of $886,205 2,272,728 7,243,914 ----------- -------------- Balance, December 31, 2001 23,440,203 42,447,141 Share issuance pursuant to a private placement, net of issue costs of $1,791,510 34,121,289 13,095,742 Share issuance pursuant to exercise of share options 193,086 41,488 Share issuance pursuant to a private placement, net of issue costs of $132,807 8,685,000 954,989 ----------- -------------- Balance, December 31, 2002 66,439,578 56,539,360 Share issuance pursuant to a private placement, net of issue costs of $330,827 29,942,114 3,253,068 Share issuance pursuant to the acquisition of HiddenMind (notes 5 and 12(f)(ii)) 14,966,034 1,493,690 Share issuance pursuant to the private placement with the majority shareholder of HiddenMind, net of issuance costs of $49,778 (note 12(f)(i)) 29,473,684 2,950,222 Share issuance pursuant to exercise of share options 749,750 99,875 Share issuance pursuant to exercise of purchase warrants 1,341,781 234,966 Share issuance pursuant to exercise of agent warrants 493,498 85,894 Share issuance pursuant to management bonus (note 12(c)) 925,000 158,236 Share issuance pursuant to Sproqit acquisition (note 8) 4,038,550 885,000 ----------- -------------- Balance, December 31, 2003 148,369,989 $ 65,700,311 =========== ==============

------------------------------------------------------------------------------------ 2003 2002 2001 -------------------------- ----------------------- ------------------------- Weighted Weighted Weighted average average average exercise exercise exercise Shares price Shares price Shares price ---------- ------------- --------- ----------- --------- ------------ US$/Cdn$ US$/Cdn$ US$/Cdn$ Outstanding, beginning of year 5,255,183 $ 1.78/2.77 6,416,689 $ 3.88/6.18 4,269,883 $ 7.02/10.52 Granted 6,187,750 0.15/0.21 3,350,400 0.17/0.26 3,468,908 1.42/2.26 Exercised (749,750) 0.14/0.19 (193,086) 0.23/0.35 (72,017) 0.77/1.22 Cancelled (2,855,791) 1.90/2.66 (4,318,820) 3.84/5.99 (1,250,085) 6.35/10.10 ---------- ------------ ---------- ----------- ---------- ------------ Outstanding, end of year 7,837,392 $ 0.80/1.03 5,255,183 $ 1.78/2.77 6,416,689 $ 3.88/6.18 ========== ============ ========== =========== ========== ============ Options exercisable, end of year 3,621,166 $ 1.45/1.88 2,077,298 $ 3.17/4.94 2,530,783 $ 4.81/7.66 ========== ============ ========== =========== ========== ============

--------------------------------------------------------------------------------------------- Options outstanding Options exercisable ------------------------------------------------------ ---------------------------------- Number Weighted Weighted Number outstanding, average average exercisable, Weighted Range of December 31, remaining exercise December 31, average exercise prices 2003 contractual life price 2003 exercise price ------------------ ------------ ---------------- -------------- ------------ -------------- US$/(Cdn$) US$/Cdn $US$/Cdn$ $0.10 to $0.63 ($0.15 to $0.99) 7,214,850 4.12 years $ 0.19 / $0.24 3,043,140 $ 0.19 / $0.23 $0.64 to $1.28 ($1.00 to $1.99) 57,600 2.90 1.16 / 1.50 54,150 1.18 / 1.53 $1.29 to $1.92 ($2.00 to $2.99) 13,600 2.35 2.09 / 2.71 9,000 2.10 / 2.72 $1.92 to $2.56 ($3.00 to $3.99) 4,800 2.43 2.58 / 3.34 3,000 2.58 / 3.34 $2.57 to $3.84 ($4.00 to $5.99) 140,300 1.10 3.99 / 5.17 133,142 4.00 / 5.18 $3.85 to $5.12 ($6.00 to $7.99) 93,534 2.04 4.75 / 6.15 70,426 4.72 / 6.12 $5.13 to $6.41 ($8.00 to $9.99) 37,400 1.48 6.73 / 8.71 35,000 6.68 / 8.65 $6.41 to $7.69 ($10.00 to $11.99) 73,510 1.60 8.25 / 10.68 71,510 8.23 / 10.66 $7.70 to $9.61 ($12.00 to $14.99) 138,198 0.99 10.17 / 13.17 138,198 10.17 / 13.17 $9.62 to $12.82 ($15.00 to $19.99) 30,000 1.42 13.08 / 16.94 30,000 13.09 / 16.94 $12.83 to $41.37 ($20.00 to $64.50) 33,600 1.14 33.25 / 43.05 33,600 33.25 / 43.05 -------------------- ------------ ---------------- -------------- ------------ -------------- $0.10 to $41.37 ($0.15 to $64.50) 7,837,392 3.91 $ 0.80 / $1.03 3,621,166 $ 1.45 / $1.88 ==================== ============ ================ ============== ============ ==============

------------------------------------- 2003 2002 ------------- ------------- Loss - as reported $ 5,757,631 $ 9,716,065 Loss - pro forma 6,050,794 9,802,575 Loss per share - as reported 0.05 0.18 Loss per share - pro forma 0.06 0.19 ============= =============

2003 2002 2001 ------------ ------------ ------------- Net loss before income taxes $ 5,797,515 $ 9,716,065 $ 20,860,436 ============ ============ ============= Expected tax recovery $ 2,179,866 $ 3,849,505 $ 9,307,927 Tax effect of: Loss of U.S. subsidiary taxed at lower rates (25,200) (207,848) (776,192) Change in enacted tax rates - (240,946) (958,830) Non-deductible interest expense - (8,110) (27,355) Permanent and other (145,746) (29,155) (709,576) Change in valuation allowance (2,008,920) (3,363,446) (6,835,974) ------------ ------------ ------------- $ - $ - $ - ============ ============ =============

2003 2002 ------------ ------------ Future income tax assets: Deferred revenues $ - $ 56,715 Fixed assets and intangibles, principally due to differences between accounting and tax depreciation and amortization 1,046,045 1,558,189 Loss carry forwards 18,124,685 16,611,424 Scientific research and development expenditure carry forwards 155,227 360,913 Share issue costs 725,745 841,656 Long-term investments 10,999 - Long-term liability 77,708 - ------------ ------------ Total gross future income tax assets 20,140,409 19,428,897 Valuation allowance (20,140,409) (19,428,897) ------------ ------------ Net future income tax asset $ - $ - ============ ============

2003 2002 2001 ---------- ---------- ---------- By region: Canada $ 150,482 $ 254,946 $ 829,206 United States 881,200 1,001,573 2,264,370 Other 593,138 564,522 95,677 ---------- ---------- ---------- Total sales $1,624,820 $1,821,041 $3,189,253 ========== ========== ==========

2003 2002 2001 ------------- ------------- ---------- By major customer: Company A $ 335,815 less than 10% $ - Company B 201,815 - - Company C less than 10% 349,947 - Company D less than 10% 195,460 - Company E less than 10% 376,500 503,970 Company F less than 10% 220,000 450,000 ============ ======= =======

2003 2002 2001 ------------ ------------ ------------ Loss in accordance with Canadian GAAP $ 5,757,631 $ 9,716,065 $ 20,860,436 Adjustment for stock based compensation relating to stock options issued to non-employees (c)(i) - - 126,486 ------------ ------------ ------------ Loss in accordance with United States GAAP $ 5,757,631 $ 9,716,065 $ 20,986,922 ============ ============ ============ Weighted average number of shares outstanding in accordance with Canadian and United States GAAP 104,913,864 52,877,973 23,125,831 Adjustment for special warrants (e) - 5,328,530 3,458,870 ------------ ------------ ------------ Weighted average number of shares outstanding in accordance with United States GAAP 104,913,864 58,206,503 26,584,701 ============ ============ ============ Loss per share in accordance with United States GAAP: $ 0.05 $ 0.17 $ 0.79 ============ ============ ============

2003 2002 2001 ------------ ------------ ------------ Loss in accordance with United States GAAP $ 5,757,631 $ 10,138,827 $ 20,986,922 Other comprehensive loss (income): Foreign currency translation adjustment (827,644) (135,107) 399,615 ------------ ------------ ------------ Comprehensive loss $ 4,929,987 $ 10,003,720 $ 21,386,537 ============ ============ ============

2003 2002 ------------ ------------ TOTAL ASSETS Total assets in accordance with Canadian and United States GAAP $ 9,935,349 $ 4,158,757 ============ ============ TOTAL LIABILITIES Total liabilities in accordance with Canadian GAAP and United States GAAP $ 1,836,156 $ 827,943 ============ ============ SHAREHOLDERS' EQUITY Share capital in accordance with Canadian GAAP $ 65,700,311 $ 56,539,360 Adjustments to share capital: Foreign exchange effect on conversion of 1998 and prior share capital transactions (d) 543,269 543,269 Additional paid in capital from stock based compensation relating to stock options issued to non-employees (c)(i) 520,999 520,999 Additional paid in capital from stock based compensation relating to escrow shares (c)(ii) 107,077 107,077 ------------ ------------ Share capital in accordance with United States GAAP $ 66,871,656 $ 57,710,705 ============ ============ Additional paid-in capital in accordance with Canadian and United States GAAP $ 15,941 $ 15,941 ============ ============ Other equity instruments in accordance with Canadian and United States GAAP $ 2,150,511 $ 1,613,096 ============ ============ Deficit in accordance with Canadian GAAP $(60,099,773) $(54,342,142) Adjustments to deficit: Cumulative effect of stock based compensation relating to stock options issued to non-employees(c)(i) (519,411) (519,411) Foreign exchange effect on conversion of 1998 and prior income statements (d) (189,240) (189,240) Cumulative effect of stock based compensation relating to escrow shares (c)(ii) (101,474) (101,474) Cumulative translation account in accordance with Canadian GAAP 332,203 (495,441) Adjustments to cumulative translation account: Foreign exchange effect on conversion of 1998 and prior income statements (d) (341,140) (341,140) Cumulative foreign exchange effect of United States GAAP adjustments (20,080) (20,080) ------------ ------------ (29,017) (856,661) ------------ ------------ Shareholders' equity in accordance with United States GAAP $ 8,099,193 $ 3,330,814 ============ ============

2003 2002 2001 ------- ------- ------- Expected dividend yield 0% 0% 0% Expected stock price 150% 134% 150% volatility Risk-free interest rate 2.75% 2.59% 4.23% Expected life of options 5 years 5 years 5 years

2003 2002 2001 ------------ ------------- -------------- Loss in accordance with United States GAAP, as reported $ (5,757,631) $ (10,138,827) $ (20,986,922) Add: Employee stock-based compensation expense (recovery), as reported 158,236 15,941 - Deduct: Employee stock-based compensation expense determined under the fair value method (2,803,333) (4,946,214) (8,603,513) ------------ ------------- ------------- Pro forma loss in accordance with United States GAAP $ (8,402,728) $ (15,069,100) $ (29,590,435) ============ ============= ============= Pro forma loss per share, basic and diluted in accordance with United States GAAP $ (0.08) $ (0.26) $ (1.11) ============ ============= =============

Year ending December 31: 2004 $ 626,267 2005 626,267 2006 310,032

Effect of foreign Beginning exchange on End of of year Charged to Recoveries conversion year balance expenses and write-offs to US$ balance -------- ---------- -------------- ------------------ ------- Allowance for doubtful accounts: Year ended December 31, 2003 $ 67,125 $ 1,950 $ - $ 1,019 $70,094 Year ended December 31, 2002 136,471 70,390 139,833 97 67,125 Year ended December 31, 2001 12,698 172,067 45,711 (2,583) 136,471 Allowance for sales return: Year ended December 31, 2003 - - - - - Year ended December 31, 2002 12,068 - 12,068 - - Year ended December 31, 2001 6,346 205,395 199,231 (442) 12,068

======================================================================================================== September 30, 2004 December 31, 2003 (unaudited) (restated note 4) -------------------------------------------------------------------------------------------------------- ASSETS Current Assets: Cash and cash equivalents $ 5,124,545 $ 4,911,605 Short term investments -- 227,393 Accounts receivable 1,198,233 331,202 TPC receivable (note 5) 950,683 798,038 Prepaid expenses and deposits 177,968 334,534 -------------------------------------------------------------------------------------------------------- 7,451,429 6,602,772 Fixed assets 406,569 526,330 Deferred charges 59,060 -- Intellectual property assets held for sale (note 11) 1,035,331 1,018,681 Goodwill (note 6) 3,426,565 -- Intangible assets (note 7) 7,030,520 1,787,566 -------------------------------------------------------------------------------------------------------- $ 19,409,474 $ 9,935,349 ======================================================================================================== LIABILITIES AND SHAREHOLDERS' EQUITY Current Liabilities: Accounts payable and accrued liabilities $ 1,095,467 $ 1,333,064 Short term debt (note 10) 168,441 -- Deferred revenue 538,322 284,800 -------------------------------------------------------------------------------------------------------- 1,802,230 1,617,864 Long-term liabilities (notes 5 & 10) 465,007 218,292 Shareholders' equity Share capital Authorized: Unlimited voting common shares without par value (notes 6 & 8) Issued: 237,145,351(December 31, 2003: 148,369,989) 81,273,081 65,759,745 Additional paid-in capital 15,941 15,941 Contributed surplus (notes 4, 6 & 10) 745,445 273,343 Other equity instruments 3,259,039 2,150,511 Deficit (68,823,303) (60,432,550) Cumulative translation account 672,034 332,203 -------------------------------------------------------------------------------------------------------- 17,142,237 8,099,193 -------------------------------------------------------------------------------------------------------- $ 19,409,474 $ 9,935,349 ========================================================================================================

==================================================================================================================================== Three months ended Nine months ended September 30, September 30, September 30, September 30, 2004 2003 2004 2003 (Unaudited) (Unaudited (Unaudited) (Unaudited and restated and restated note 4) note 4) ------------------------------------------------------------------------------------------------------------------------------------ Sales $ 1,500,093 $ 381,395 $ 3,619,130 $ 1,298,648 Cost of sales 566,552 41,535 1,455,836 160,229 ------------------------------------------------------------------------------------------------------------------------------------ 933,541 339,860 2,163,294 1,138,419 ------------------------------------------------------------------------------------------------------------------------------------ Expenses: Research and development (note 5) 316,126 653,151 2,266,585 1,649,299 Sales and marketing 688,442 658,651 2,897,444 1,426,571 Administration 581,817 457,468 2,306,635 1,177,625 Restructuring (note 12) -- -- 287,631 -- Depreciation and amortization 378,914 310,813 1,324,425 519,095 ------------------------------------------------------------------------------------------------------------------------------------ 1,965,299 2,080,083 9,082,720 4,772,590 ------------------------------------------------------------------------------------------------------------------------------------ Operating loss 1,031,758 1,740,223 6,919,426 3,634,171 Other expenses (income) Interest and other income (10,463) (27,042) 1,051,589 (53,816) Foreign exchange 56,841 (127,153) 492,046 (18,144) ------------------------------------------------------------------------------------------------------------------------------------ Loss before non-controlling interest 1,078,136 1,586,028 8,463,061 3,562,211 Non-controlling interest (note 6) -- -- (72,308) -- ------------------------------------------------------------------------------------------------------------------------------------ Net loss for the period 1,078,136 1,586,028 8,390,753 3,562,211 Deficit, beginning of period 67,745,167 56,400,144 60,432,550 54,423,961 ------------------------------------------------------------------------------------------------------------------------------------ Deficit, end of period $ 68,823,303 $ 57,986,172 $ 68,823,303 $ 57,986,172 ------------------------------------------------------------------------------------------------------------------------------------ Net loss per share $0.01 $0.01 $0.04 $0.04 ------------------------------------------------------------------------------------------------------------------------------------ Weighted average number of shares outstanding 235,421,485 137,999,297 219,580,979 90,690,326 ====================================================================================================================================

==================================================================================================================================== Three months ended Nine months ended September 30, September 30, September 30, September 30, 2004 2003 2004 2003 (Unaudited) (Unaudited and (Unaudited) (Unaudited and restated note 4) restated note 4) ------------------------------------------------------------------------------------------------------------------------------------ Cash flows from operations: Net loss for the period $(1,078,136) $(1,586,028) $(8,390,754) $(3,562,211) Items not involving cash: Depreciation and amortization 378,914 310,813 1,324,425 519,095 Amortization of TPC warrants (note 5) 81,814 -- 81,814 -- Stock-based compensation 404,494 238,616 1,411,618 339,369 Non-controlling interest -- -- (72,308) -- Non-cash interest and financing costs -- -- 1,101,379 -- ------------------------------------------------------------------------------------------------------------------------------------ (212,914) (1,036,599) (4,543,826) (2,703,747) Changes in non-cash operating working capital: Short term investments -- 683 -- 47,470 Accounts receivable 175,636 201,075 (607,968) 143,620 TPC receivable (133,034) -- (133,034) -- Prepaid expenses and deposits 70,521 (71,283) 294,454 19,903 Accounts payable and accrued liabilities (658,382) 41,531 (1,087,773) 581,225 Deferred costs -- (151,929) -- (149,250) Deferred revenue (192,776) (20,798) 83,235 (114,289) ------------------------------------------------------------------------------------------------------------------------------------ Net cash used in operations $ (950,949) $(1,037,320) $(5,994,912) $(2,175,068) Cash flows from investing activities: Redemption of short-term investments, net -- (2,474) 223,322 (1,148) Purchase of fixed assets (5,501) (25,777) (24,692) (492,768) Purchase of intangible assets (388,252) -- (388,252) -- Less: Purchase of intangible assets in exchange for issuance of convertible debt 339,564 -- 339,564 -- Deferred charges (57,299) (233,470) (57,299) (233,470) Acquisition costs, net of cash acquired -- -- 145,542 -- ------------------------------------------------------------------------------------------------------------------------------------ (111,488) (261,721) 238,185 (727,386) Cash flows from financing activities: Issuance of shares and warrants for cash, net of issue costs 4,485 6,297,201 5,659,468 6,322,804 Foreign exchange gain on cash and cash equivalents held in a foreign currency 252,537 88,040 310,199 439,845 ------------------------------------------------------------------------------------------------------------------------------------ Increase (decrease) in cash and cash equivalents (805,415) 5,086,200 212,940 3,860,195 Cash and cash equivalents, beginning of period 5,929,960 1,529,924 4,911,605 2,755,929 ------------------------------------------------------------------------------------------------------------------------------------ Cash and cash equivalents, end of period $ 5,124,545 $ 6,616,124 $ 5,124,545 $ 6,616,124 ====================================================================================================================================

=============================================================================================== Adjustment for As previously stock-based reported compensation Restated ----------------------------------------------------------------------------------------------- As at December 31, 2003 Deficit (60,099,773) (332,777) (60,432,550) Share capital 65,700,311 59,434 65,759,745 Contributed surplus -- 273,343 273,343 ----------------------------------------------------------------------------------------------- Three months ended September 30, 2003: Research and development 623,476 29,675 653,151 Sales and marketing 628,728 29,923 658,651 Administration 436,686 20,782 457,468 ----------------------------------------------------------------------------------------------- Net loss for the period 1,505,648 80,380 1,586,028 ----------------------------------------------------------------------------------------------- Net loss per share $0.01 -- $0.01 ----------------------------------------------------------------------------------------------- Nine months ended September 30, 2003: Research and development 1,579,531 69,767 1,649,299 Sales and marketing 1,365,457 61,114 1,426,571 Administration 1,127,374 50,252 1,177,625 ----------------------------------------------------------------------------------------------- Net loss for the period 3,381,078 181,133 3,562,211 ----------------------------------------------------------------------------------------------- Net loss per share $0.04 -- $0.04 -----------------------------------------------------------------------------------------------

========================================================================================= 1st Tranche 2nd Tranche January 7, 2004 April 2, 2004 Total ----------------------------------------------------------------------------------------- Intangible assets: Intellectual property $4,592,956 $1,457,768 $ 6,050,724 Patents 37,954 12,046 50,000 Customer relationship 18,515 6,485 25,000 ----------------------------------------------------------------------------------------- 4,649,425 1,476,299 6,125,724 Deferred compensation 809,466 257,024 1,066,490 Current assets 659,182 -- 659,182 Fixed assets 85,664 -- 85,664 Current liabilities (511,420) -- (511,420) Goodwill 3,001,081 425,484 3,426,565 ----------------------------------------------------------------------------------------- $8,693,398 $2,158,807 $10,852,205 -----------------------------------------------------------------------------------------

========================================================================================= 1st Tranche 2nd Tranche January 7, 2004 April 2, 2004 Total ----------------------------------------------------------------------------------------- Consideration at fair value: Common shares $6,801,703 $2,158,807 $ 8,960,510 Employee stock options assumed 264,091 - 264,091 Severance costs 669,592 - 669,592 Transaction costs 958,012 - 958,012 ----------------------------------------------------------------------------------------- Purchase Price $8,693,398 $2,158,807 $10,852,205 -----------------------------------------------------------------------------------------

================================================================================ September 30, 2003 -------------------------------------------------------------------------------- Revenue $4,440,281 Loss for the period 7,442,793 -------------------------------------------------------------------------------- Loss per share $0.06 --------------------------------------------------------------------------------

================================================================================ Accumulated amortization and Net book Cost write-down value -------------------------------------------------------------------------------- Intellectual property $8,762,080 $1,971,678 $6,790,402 Employment contracts 322,467 185,157 137,310 Patents 105,881 37,342 68,539 Customer relationship 52,940 18,671 34,269 -------------------------------------------------------------------------------- $9,243,368 $2,212,848 $7,030,520 ================================================================================

=========================================================================================== Number of Shares Amount ------------------------------------------------------------------------------------------- Outstanding, June 30, 2004 234,756,992 $81,089,752 Exercise of options 45,161 4,781 Share bonus 1,770,000 117,348 Shares issued to Telispark employees for severance 573,198 61,200 ------------------------------------------------------------------------------------------- Outstanding, September 30, 2004 237,145,351 $81,273,081 ===========================================================================================

================================================================================ Three Months Ended March 31, 2004 Weighted average Shares exercise price -------------------------------------------------------------------------------- US$/Cdn$ Outstanding, at December 31, 2003 10,337,392 $0.72/0.93 Granted 2,483,362 0.13/0.17 Exercised (631,697) 0.13/0.17 Cancelled (1,203,891) 0.68/0.89 -------------------------------------------------------------------------------- Outstanding, at March 31, 2004 10,985,166 $0.78/1.01 ================================================================================

================================================================================ Three Months Ended June 30, 2004 Weighted average Shares exercise price -------------------------------------------------------------------------------- US$/Cdn$ Outstanding, at March 31, 2004 10,985,166 $0.78/1.01 Granted 410,000 0.17/0.23 Exercised (173,134) 0.13/0.17 Cancelled (492,941) 0.26/0.35 -------------------------------------------------------------------------------- Outstanding, at June 30, 2004 10,729,091 $0.54/0.72 ================================================================================

================================================================================ Three Months Ended September 30, 2004 Weighted average Shares exercise price -------------------------------------------------------------------------------- US$/Cdn$ Outstanding, at June 30, 2004 10,729,091 $0.54/0.72 Granted 12,295,000 0.09/0.12 Exercised (45,161) 0.10/0.13 Cancelled (1,546,868) 0.31/0.40 -------------------------------------------------------------------------------- Outstanding, at September 30, 2004 21,432,062 $0.32/0.40 ================================================================================

================================================================================ Three months ended September 30, 2004 -------------------------------------------------------------------------------- Risk-free interest rate 2.06% Dividend yield 0% Volatility factor 124% Weighted average expected life of the options 3 years ================================================================================

============================================================================================== Severance Lease Legal Total ---------------------------------------------------------------------------------------------- Accrual balance, December 31, 2003 $ -- $ -- $ -- $ -- Restructuring accrual 175,540 39,869 10,337 225,746 Expenditures / utilization (124,798) -- -- (124,798) ---------------------------------------------------------------------------------------------- Accrual balance, March 31, 2004 $ 50,742 $ 39,869 $ 10,337 $ 100,948 Restructuring accrual 61,885 -- -- 61,885 Expenditures / utilization (50,742) (39,869) (10,337) (100,948) ---------------------------------------------------------------------------------------------- Accrual balance, June 30, 2004 $ 61,885 $ -- $ -- $ 61,885 Restructuring accrual -- -- -- -- Expenditures / utilization (42,677) -- -- (42,677) ---------------------------------------------------------------------------------------------- Accrual balance, September 30, 2004 $ 19,208 $ -- $ -- $ 19,208 ==============================================================================================

Pro forma Infowave adjustments Pro forma -------------- --------------- --------------- (note 3) Assets Current assets: Cash and cash equivalents $ 5,124,545 $ 4,291,677 (c) $ 9,416,222 Accounts receivable 1,198,233 - 1,198,233 TPC receivable 950,683 - 950,683 Prepaid expenses and deposits 177,968 - 177,968 -------------- --------------- --------------- 7,451,429 4,291,677 11,743,106 Investment in Coopers Park Real Estate Corporation - 107,292 (c) - (107,292) (d) Fixed assets 406,569 406,569 Deferred charges 59,060 59,060 Intellectual property assets held for sale 1,035,331 1,035,331 Goodwill 3,426,565 3,426,565 Intangible assets 7,030,520 7,030,520 -------------- --------------- --------------- $ 19,409,474 $ 4,291,677 $ 23,701,151 ============== =============== ===============

Pro forma Infowave adjustments Pro forma -------------- --------------- --------------- (note 3) Liabilities and Shareholders' Equity Current liabilities: Accounts payable and accrued liabilities $ 1,095,467 $ 984,330 (e) $ 2,079,797 Short-term debt 168,441 - 168,441 Deferred revenue 538,322 - 538,322 -------------- --------------- --------------- 1,802,230 984,330 2,786,560 Long-term liabilities 465,007 - 465,007 Shareholders' equity: Share capital 81,273,081 (62,773,081) (a) 18,500,000 Additional paid-in capital 15,941 (15,941) (a) - Contributed surplus 745,445 (745,445) (a) - Other equity instruments 3,259,039 - 3,259,039 Deficit (68,823,303) 63,534,467 (a) 4,398,969 (c) (107,292) (d) (984,330) (e) (1,981,489) Cumulative translation account 672,034 - 672,034 -------------- --------------- --------------- 17,142,237 3,307,347 20,449,584 -------------- --------------- --------------- $ 19,409,474 $ 4,291,677 $ 23,701,151 ============== =============== ===============

Pro Forma Pro Forma Coopers Park Adjustments Notes Consolidated ------------ ------------- ----- ------------ Assets Deposit with a related party for property acquisitions $ - $ 12,500,000 2(c) $ 12,500,000 Future income tax assets - 5,450,000 2(a) 5,450,000 Cash and cash equivalents 1 13,500,000 2(b) 1,000,001 (12,500,000) 2(c) -------- ------------- ------------ $ 1 $ 18,950,000 $ 18,950,001 ======== ============= ============ Shareholders' Equity Share capital - voting and non-voting common shares $ 1 $ 5,450,000 2(a) $ 18,950,001 13,500,000 2(b) Retained earnings - - - -------- ------------- ------------ $ 1 $ 18,950,000 $ 18,950,001 ======== ============= ============

TOTAL NUMBER BUILDING SITE AREA BUILDABLE OF RESIDENTIAL PURCHASE SITE (SQ.FT.) SQUARE FEET CONDOMINIUM UNITS PRICE(2) -------- --------- ----------- ----------------- -------- 6A 21,429 97,070 86 $ 9.5 million 6BD(1) 53,175 303,673 223 $35.2 million ------ ------- --- ------------- Total 74,604 400,743 309 $44.7 million ====== ======= === =============

NUMBER OF RESIDENTIAL YEAR OF COMPLETION OF NAME OF BUILDING CONDOMINIUM UNITS CONSTRUCTION AND SALE ---------------- --------------------- --------------------- Parkview Tower 100 1994 Parkview Gardens 91 1994 Pacific Plaza 146 1994 Concordia Tower I 88 1995 Governor's Tower & Villas 237 1996 Concordia Tower II 82 1996 The Peninsula 139 1996 The Crestmark 84 1997 The Crestmark II 139 1997 Waterworks 209 1997 Yaletown LTD 69 1997 Landmark 33 252 1998 Columbus 121 1998 Aquarius 480 1999 1077 Marinaside 119 2000 1099 Marinaside 34 2000 193 Bayside Mews 206 2000 Quaywest 396 2001 The Concord 85 2003 West One 246 2003 The Waterford 129 2003 Azura 207 2004 Azura II 207 2004 ----- Total 3,866 =====

NUMBER OF RESIDENTIAL EXPECTED YEAR OF COMPLETION OF NAME OF BUILDING CONDOMINIUM UNITS CONSTRUCTION ---------------- --------------------- ------------------------------ Park West 173 2005 Two Park West 175 2005 Aqua 142 2005 The Max 526 2005

TOTAL NUMBER OF RESIDENTIAL SITE BUILDABLE SQUARE FEET CONDOMINIUM UNITS ---- --------------------- ----------------- 6A(1) 97,070 86 6BD(1) 303,673 223 6C(2) 230,482 221 6F(2) 14,074 15 ------- --- Total 645,300 545 ======= ===

1 Bedroom 27 1 Bedroom plus Den/1 Bedroom plus Study Loft 62 2 Bedrooms/2 Bedrooms plus Den or Nook 112 3 Bedrooms/3 Bedrooms plus Den or Nook or Family Room 14 2 and 3 Bedrooms plus Den Townhomes 6 --- Total 221 ===

Site Purchase Price(1)(2) ---- -------------------- 6A $ 9.5 million 6BD $35.2 million ------------- Total $44.7 million =============

SITE FAIR MARKET VALUE ---- ----------------- 6A $ 9.5 million 6BD $35.2 million ------------- Total $44.7 million =============

TO BE OUTSTANDING AFTER GIVING TO BE OUTSTANDING EFFECT TO THE REORGANIZATION AND AFTER GIVING EFFECT THE FOLLOW-ON REAL ESTATE SECURITY TO THE REORGANIZATION TRANSACTION -------- --------------------- --------------------------------- Voting Shares 33,877,907 shares 33,877,907 shares Non-voting Shares 914,703,497 shares 3,205,658,126 shares Total Shares 948,581,404 shares 3,239,536,033 shares

PERCENTAGE PERCENTAGE PERCENTAGE NUMBER OF OF OF TOTAL NAME AND NUMBER OF OF VOTING NON-VOTING NON-VOTING TOTAL NUMBER NUMBER OF ADDRESS VOTING SHARES SHARES SHARES SHARES OF SHARES SHARES ------- ------------- ------ ------ ------ --------- ------ Gerald L. Trooien 6,289,653 18.6% -0- 0% 6,289,653 0.19% #800-10 River Park Plaza, St. Paul, MN 55107 0698500 B.C. Ltd. 10,163,372 30% 3,205,658,126 100% 3,215,821,498 99.27% 9th Floor - 1095 West Pender Street Vancouver, B.C. V6E 2M6

NAME AND MUNICIPALITY OF RESIDENCE POSITION PRINCIPAL OCCUPATION SHARES ------------------------ -------- -------------------- ------ Terence Hui Director, Chair and President, Concord Pacific Group 10,163,373 Vancouver, President Inc. Voting Shares and British Columbia 3,205,167,142 Non-voting Shares Dennis Au-Yeung Director and Vice Vice President, Finance, Concord Toronto, Ontario President, Finance and Pacific Group Inc. - 0 - Corporate Secretary Jerry Meerkatz Director President and Chief Executive 121,875 Lakeside, Montana Officer, Infowave Software, Inc. Voting Shares

For Against 1. To approve the First Arrangement Resolution, as set forth in Appendix A2 of the Information Circular ----------- ----------- 2. To transact such other business as may properly come before the Meeting ----------- -----------

For Against --- ------- 1. To approve the Stated Capital Resolution, as set forth in Appendix A1 of the Information Circular ----------- ----------- 2. To approve the First Arrangement Resolution, as set forth in Appendix A2 of the Information Circular ----------- ----------- 3. To transact such other business as may properly come before the Meeting ----------- -----------

For Withhold 1. To elect as director of 6322310 Canada Inc. ("Newsub"), Terence Hui ------ --------- 2. To elect as director of 6322310 Canada Inc. ("Newsub"), Dennis Au-Yeung ------ --------- 3. To elect as director of 6322310 Canada Inc. ("Newsub"), Jerry Meerkatz ------ ---------

For Against ------ --------- 4. To approve the Second Arrangement Resolution, as set forth in Appendix A3 of the Information Circular ------ --------- 5. To approve the Follow-on Real Estate Transaction as set forth in Appendix K of the Information Circular ------ --------- 6. To transact such other business as may properly come before the Meeting ------ ---------

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