UNITED STATES
SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

Form 6-K

REPORT OF FOREIGN PRIVATE ISSUER
PURSUANT TO RULE 13a-16 OR 15d-16
UNDER THE SECURITIES EXCHANGE ACT OF 1934

~~March~~July 2220, 2005

OFFSHORE SYSTEMS INTERNATIONAL LTD.

(Translation of registrant’s name into English)

107-930 West 1^st Street.
North Vancouver, BC V7P 3N4, Canada

(Address of principal executive offices)

Indicate by check mark whether the registrant files or will file annual reports under cover of Form 20-F or Form 40-F.

Form 20-F þ Form 40-F o

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 o No þ

~~OFFSHORE~~Press ~~SYSTEMS INTERNATIONAL LTD.~~ Release

~~NOTICE~~Offshore OFSystems ~~ANNUAL~~International ~~AND SPECIAL GENERAL MEETING OF SHAREHOLDERS~~Ltd.

NOTICE IS HEREBY GIVEN that the 2005 Annual and Special General Meeting (the “Meeting”) of the shareholders of OFFSHORE SYSTEMS INTERNATIONAL LTD. (the “Company”) will be held at The Fairmont Waterfront Hotel, 900 Canada Place, Vancouver, British Columbia, on Friday, April 8, 2005 at 1TSX:~~30 p.m.~~OSI ~~(Pacific~~| ~~Time) for the following purposes~~OCTBB:OFSYF

1.For ToImmediate ~~receive and consider the report of the directors;~~Release

2.Offshore ToSystems ~~receive~~International ~~and~~announces ~~consider~~Q2 ~~the~~2005 ~~audited~~ financial ~~statements of the Company for the financial year ended November 30, 2004 and the report of the auditor thereon;~~results

3Vancouver, Canada, July 14, 2005 – Offshore Systems International Ltd. To(TSX: ~~appoint~~OSI/ anOTCBB: OFSYF) ~~auditor~~today announced second quarter financial results for the ~~Company~~three months ended May 31, 2005. Revenues were $1.9 million, compared to $2.8 million for the ~~ensuing~~same quarter last year. ~~and~~Consolidated torevenues ~~authorize~~for the ~~board~~first six months were $4.1 million, compared with $6.8 million for the same period ended May 31, 2004. Revenues for the quarter were affected by the timing of contract ~~directors~~awards, toand ~~fix~~existing contract delivery schedules. The company confirmed the ~~remuneration~~guidance released toearlier this week that stated revenues for fiscal 2005 will be ~~paid~~in the range of $16 to $19 million, up from the ~~auditor;~~$13.5 million in 2004.

4The company reported a loss of $1.7 million Toin ~~elect~~Q2 ~~directors~~for fiscal 2005, compared to earnings of $380,088 for the ~~ensuing~~second quarter in 2004. For the three months ended May 31, 2005, net earnings available to common shareholders were a loss of $6.9 million, or a loss of $0.25 per share on a basic and diluted basis. This is largely the result of accounting for a one-time accretive dividend on the Class B Preference Shares Series 2, as required by U.S. GAAP accounting. For the six months ended May 31, 2005, the company reported a loss of $1.9 million, compared to earnings of $931,879 for the same period last year;. Net earnings available to common shareholders for the first six months of 2005 were a loss of $7.1 million, or a loss of $0.26 per share on a basic and diluted basis.

5.Total Tobacklog* ~~consider~~was ~~and,~~$20.2 million ifat ~~thought fit, pass a special resolution altering~~ the ~~Notice~~end of ~~Articles to remove~~ the ~~application~~second ofquarter ~~certain~~($12.7 million ~~provisions prescribed~~ in ~~the~~option backlog*) ~~British~~for ~~Columbia~~fiscal ~~Business Corporations Act called the “Pre-existing Company Provisions”~~2005, ~~particulars~~compared ofto ~~which~~$22.6 million ~~are~~($13.9 million ~~as set out~~ in ~~the~~option ~~Information~~backlog*) ~~Circular~~for ~~delivered~~Q2 ~~herewith;~~last year.

6.In Toreleasing ~~consider~~guidance ~~and,~~for ifthe ~~thought fit~~year, ~~pass~~OSI aannounced ~~special~~projected ~~resolution~~revenues ~~deleting~~in the ~~existing~~range ~~Articles~~ of $16 million to $19 million. This exceeds the ~~Company~~$13.5 million inthe ~~their~~company ~~entirety~~reported ~~and~~in ~~replacing~~fiscal ~~them~~2004. ~~with~~While ~~new~~its quarterly ~~form~~results ofcan ~~Articles~~vary substantially, ~~with~~OSI ~~such~~indicated ~~new~~year-over-year ~~form~~results ofhave ~~Articles~~a ~~being~~more meaningful ~~consistent~~trend. ~~with~~The company stated the ~~terminology~~guidance ~~and~~reflects ~~provisions~~current business indicators, with projected revenues based on management’s assessment of the ~~newly~~new ~~enacted~~order ~~British~~pipeline ~~Columbia~~and ~~Business~~existing contracts. ~~Corporations~~The ~~Act,~~guidance ~~particulars~~provided ofalso ~~which~~includes ~~are~~Mapcon asMapping ~~set~~results, ~~out~~but indoes not account for the effect ~~Information~~of ~~Circular~~any ~~delivered~~future ~~herewith;~~acquisitions. OSI’s actual results could differ materially.

7.Conference To consider and, if thought fit, pass a special resolution altering the authorized share capital of the Company by increasing the authorized number of voting common shares without par value from 100,000,000 to an unlimited number, and by creating a new class of shares, being an unlimited number of Class C Preference shares without par value issuable in series, particulars of which are as set out in the Information Circular delivered herewith;Call:

8.OSI Towill ~~consider~~host ~~and,~~a iflive ~~thought~~conference ~~fit,~~call ~~pass~~on anJuly 15 ~~ordinary~~at ~~resolution~~1:00 ~~approving~~p.m. ~~the~~Eastern ~~Company’s~~(10 ~~private~~a.m. ~~placement~~Pacific). ofYou upare invited to ~~19,500~~attend ~~units~~by ~~consisting~~calling of416-640-4127 ~~Class~~or B800-814-3911. ~~Series~~A 2taped ~~Preference~~replay ~~shares~~of ~~and~~the ~~common~~conference ~~share~~call will ~~purchase~~be ~~warrants~~available ~~for~~until ~~gross proceeds of up to CDN$19~~July 22,~~500,000,~~ ~~and~~2005 ~~the~~at ~~issuance~~11:59 p.m. ofEastern ~~common~~by ~~share~~calling ~~purchase~~416-640-1917 ~~warrants~~or 877-289-8525, topasscode ~~institutions~~21131159#. ~~which~~A ~~assist~~live inaudio ~~placing~~webcast of the ~~private~~conference ~~placement~~call ~~and~~will toalso ~~Mr.~~be ~~Brinton~~available ~~Coxe,~~at aOSI’s ~~director~~website ofat www.osil.com. ~~the~~This ~~Company,~~webcast ~~particulars~~will ofbe ~~which~~archived ~~are~~for ~~described~~approximately ~~in the Information Circular delivered herewith; and~~90 days.

9.Offshore ToSystems ~~transact~~International ~~such~~Ltd. 107 ~~other~~- ~~business~~930 asWest ~~may~~1st ~~properly~~Street North ~~come before the Meeting~~Vancouver, orBC ~~any~~Canada ~~adjournment~~V7P ~~or adjournments thereof.~~3N4

~~The~~TEL ~~text~~604 of904 ~~the~~4600 ~~proposed~~| ~~special~~FAX ~~resolutions~~604 ~~respecting~~987 ~~the matters referred to above, and the~~2555 ~~ordinary resolution respecting the Company’s private placement, are set out in the accompanying Information Circular in the section entitled “Particulars of Matters to be Acted Upon”~~www.osil.com

2 Press Release

~~The~~Offshore ~~accompanying~~Systems ~~Information~~International ~~Circular provides additional information relating to the matters to be dealt with at the Meeting and is deemed to form part of this Notice~~Ltd. ~~Copies of any documents to be~~ ~~considered, approved, ratified and adopted or authorized at the Meeting will be available for~~ ~~inspection at the registered and records office of the Company at Suite 1020 – 510 Burrard Street,~~ ~~Vancouver, British Columbia, V6C 3A8, during normal business hours up to the date of the Meeting,~~ ~~and at the Meeting.~~

~~The~~TSX:OSI ~~directors~~| ~~of the Company have fixed March 7, 2005 as the record date for the determination of~~OCTBB:OFSYF ~~the shareholders entitled to receive this Notice.~~

AFor ~~shareholder~~Immediate ~~who is entitled to attend and vote at the Meeting, or an intermediary holding shares~~Release ~~on behalf of an unregistered shareholder, is entitled to appoint a proxy to attend and vote in his,~~ ~~her or its stead. If you are unable to attend the Meeting in person, please complete, sign and date~~ ~~the enclosed form of proxy and return the same within the time and to the location in accordance~~ ~~with the instructions set out in the form of proxy and Information Circular accompanying this Notice.~~

~~Accompanying~~About ~~this~~Offshore ~~Notice~~Systems ~~are~~International an Information Circular, form of proxy, Return Card, and the Company’s Annual Report, which includes the Letter to Shareholders and other corporate information, the consolidated financial statements for the years ended November 30, 2004 and 2003 with the auditor’s report thereon, and Management’s Discussion & AnalysisLtd. ~~The Information Circular contains~~: ~~information relating to the matters to be addressed at the Meeting.~~

AOffshore ~~shareholder~~Systems ~~who~~International isLtd. ~~entitled~~(OSI) makes tocomputer-based ~~attend~~geospatial ~~and~~intelligence ~~vote~~software, systems atand ~~the~~data ~~Meeting,~~products ormainly anfor ~~intermediary~~large ~~holding~~government ~~shares on~~and ~~behalf~~civilian ofcustomers. anThe ~~unregistered~~company ~~member,~~has three isbusiness ~~entitled~~units: toOSI ~~appoint~~Navigation aSystems ~~proxy~~(moving tomap ~~attend~~display systems and ~~vote~~software infor ~~his or~~naval ~~her~~surface ~~stead.~~ships ~~Any~~and ~~shareholders~~submarines); ~~who~~OSI doApplications ~~not~~(network-based ~~expect~~map toand ~~attend~~target ~~the~~display ~~Annual~~software ~~General~~and services ~~Meeting~~for innational ~~person~~defence) ~~are requested~~and toMapcon ~~complete,~~Mapping ~~sign~~(digital ~~and~~map ~~date~~data ~~the~~production ~~enclosed~~services ~~form~~for civilian ofcustomers). ~~proxy~~OSI’s orcommon ~~other~~shares ~~form~~are oflisted ~~proxy~~for ~~and~~trading ~~return same~~on ~~within~~ the ~~time~~Toronto ~~and~~Stock toExchange (TSX: OSI) and the ~~location~~OTC inBulletin ~~accordance~~Board ~~with~~(OTCBB: ~~the~~OFSYF). ~~instructions~~Visit ~~set~~OSI’s ~~out~~website inat ~~the~~www.osil.com ~~form~~for ofmore ~~proxy~~information and ~~Information~~the ~~Circular~~latest ~~accompanying~~company ~~this Notice~~updates.

~~DATED~~*Non-GAAP ~~at North Vancouver, British Columbia, this 11th day of March, 2005.~~Definitions:

ONThe ~~BEHALF~~company OFreports ~~THE~~in ~~BOARD~~accordance OFwith ~~DIRECTORS~~U.S. OFGAAP. ~~OFFSHORE~~Total ~~SYSTEMS~~backlog, ~~INTERNATIONAL~~firm ~~LTD~~backlog, option backlog and working capital are non-GAAP measures that do not have a standardized meaning and are likely not comparable to similar measures presented by other issuers. ~~“John~~These Ameasures also do not have a comparable GAAP measure. ~~Jacobson”~~Total ~~JOHN~~backlog Ais the total of the firm and option backlogs. ~~JACOBSON~~Firm ~~President~~backlog consists of firm, fixed, signed orders issued to the company and ~~Chief~~executable ~~Executive~~by ~~Officer~~the company subsequent to the balance sheet date. Option backlog consists of unexercised contract options at the balance sheet date and indefinite-quantity contracts executable by the company subsequent to the balance sheet date. Should our customers elect to exercise contract options or place orders against indefinite-quantity contracts, the option backlog converts to firm backlog.

3Forward-Looking Statements:

~~OFFSHORE~~This ~~SYSTEMS~~news ~~INTERNATIONAL~~release ~~LTD~~contains items that constitute forward-looking statements within the meaning of securities laws including Section 27a of the Securities Act of 1933, as amended, and Section 21e of the Securities Exchange Act of 1934, as amended. These statements are made under the ‘safe harbour’ provisions of the Private Securities Litigation Reform Act of 1995 and, as such, involve known and unknown risks and uncertainties and other factors that may cause the actual results to be materially different from the results implied herein. Offshore Systems International can give no assurances that its representations will be achieved or that it will update them at any time in the future.

~~INFORMATION~~For ~~CIRCULAR~~more information:

~~THIS~~Deborah ~~INFORMATION~~Somerville Director, ~~CIRCULAR~~Corporate ~~CONTAINS~~Communications Phone: ~~INFORMATION~~(604) 904-4627 ASor ~~AT MARCH 11, 2005~~1-888-880-9797

~~PERSONS~~Offshore ~~MAKING~~Systems ~~THIS~~International ~~SOLICITATION~~Ltd. 107 OF- ~~PROXIES~~930 West 1st Street North Vancouver, BC Canada V7P 3N4

~~THIS~~TEL ~~INFORMATION~~604 ~~CIRCULAR~~904 IS4600 ~~FURNISHED~~| TOFAX ~~YOU~~604 IN987 ~~CONNECTION WITH THE SOLICITATION OF PROXIES BY THE~~2555 ~~MANAGEMENT OF OFFSHORE SYSTEMS INTERNATIONAL LTD~~www. (“WE”, “US” OR THE “COMPANY”) FOR USE AT THE ANNUAL AND SPECIAL GENERAL MEETING OF SHAREHOLDERS OF THE COMPANY (AND ANY ADJOURNMENT THEREOF) (THE “MEETING”) TO BE HELD ON FRIDAY, APRIL 8, 2005 AT THE TIME AND PLACE AND FOR THE PURPOSES SET OUT IN THE ACCOMPANYING NOTICE OF MEETINGosil. ~~While it is expected that the solicitation will be~~com ~~primarily by mail, proxies may be solicited personally or by telephone by the regular employees of~~ ~~the Company at nominal cost. All costs of solicitation by management will be borne by the Company.~~

~~THE~~Press ~~CONTENTS AND THE SENDING OF THIS INFORMATION CIRCULAR HAVE BEEN APPROVED BY THE DIRECTORS OF THE COMPANY.~~ Release

~~APPOINTMENT~~Offshore ~~AND~~Systems ~~REVOCATION~~International ~~OF PROXIES~~Ltd.

The individuals named in the accompanying form of proxy are directors and/or officers of the Company. A SHAREHOLDER WISHING TO APPOINT SOME OTHER PERSON (WHO NEED NOT BE A SHAREHOLDER) TO REPRESENT HIM AT THE MEETING HAS THE RIGHT TO DO SO, EITHER BY STRIKING OUT THE NAMES OF THOSE PERSONS NAMED IN THE ACCOMPANYING FORM OF PROXY AND INSERTING THE DESIRED PERSON’S NAME IN THE BLANK SPACE PROVIDED IN THE FORM OF PROXY OR BY COMPLETING ANOTHER FORM OF PROXY. A proxy will not be valid unless the completed form of proxy is received by Computershare Trust Company of Canada, AttentionTSX:OSI ~~Proxy~~| ~~Department, 9th Floor, 100 University Avenue, Toronto, Ontario, M5J 2Y1, or by fax~~OTCBB:OFSYF ~~at 1-866-249-7775, (the “Transfer Agent”) not less than 48 hours (excluding Saturdays, Sundays and~~ ~~holidays) before the time for holding the Meeting or any adjournment thereof, or delivered to the~~ ~~Chairman of the Meeting prior to the commencement of the Meeting.~~

AFor ~~shareholder~~Immediate ~~who has given a proxy may revoke it by an instrument in writing executed by the~~Release ~~shareholder or by his attorney authorized in writing or, where the shareholder is a corporation, by~~ ~~a duly authorized officer or attorney of the corporation, and delivered to the registered and~~ ~~records office of the Company, at Suite 1020 — 510 Burrard Street, Vancouver, British Columbia, V6C~~ 3A8, at any time up to and including the last business day preceding the day of the Meeting or if adjourned, any reconvening thereof, or to the Chairman of the Meeting on the day of the Meeting or, if adjourned, any reconvening thereof or in any other manner provided by law. A revocation of a proxy does not affect any matter on which a vote has been taken prior to the revocation.

4Offshore Systems International Ltd. Selected Consolidated Financial Information (Canadian dollars - U.S. GAAP) Statement of Earnings Information

ADVICE TO NON-REGISTERED SHAREHOLDERS


	Three months ended						Six months ended
	May 31						May 31
	2005			2004			2005			2004
	(unaudited)						(unaudited)
Revenue		1,881,685			2,773,835			4,141,542			6,803,595

Earnings (loss) for the period		(1,697,767	)		380,088			(1,917,358	)		931,879

Earnings (loss) for the period available to the common shareholder *		(6,880,135	)		303,366			(7,133,165	)		778,435

Basic earnings (loss) per share		(0.25	)		0.01			(0.26	)		0.03

Fully diluted earnings (loss) per share		(0.25	)		(0.01	)		(0.26	)		0.01

~~ONLY~~* ~~REGISTERED~~after ~~SHAREHOLDERS~~adjustment ORfor ~~DULY~~one-time ~~APPOINTED~~accretive ~~PROXYHOLDERS~~dividend ~~ARE~~on PERMITTED TO VOTE AT THE MEETING. SHAREHOLDERS WHO DO NOT HOLD THEIR SHARES IN THEIR OWN NAME (REFERRED TO HEREIN AS “BENEFICIAL SHAREHOLDERS”) ARE ADVISED THAT ONLY PROXIES FROM SHAREHOLDERS OF RECORD CAN BE RECOGNIZED AND VOTED AT THE MEETING. Beneficial shareholders who complete and return a form of proxy must indicate thereon the ~~person~~Class B ~~(usually~~Preference aShares ~~brokerage house) who holds their shares as a registered Shareholder.~~Series 2

If common shares are listed in an account statement provided to a shareholder by a broker, then in almost all cases those shares will not be registered in such shareholder’s name on the records of the Company. Such shares will more likely be registered under the name of the shareholder’s broker or an agent of that broker. In Canada, the vast majority of such shares are registered under the name of CDS & Co. (the registration name for The Canadian Depository for Securities, which company acts as nominee for many Canadian brokerage firms). Common shares held by brokers or their nominees can only be voted (for or against resolutions) upon the instructions of the beneficial shareholder. Without specific instructions, brokers/nominees are prohibited from voting shares for their clients. The directors and officers of the Company do not know for whose benefit the common shares registered in the name of CDS & Co. are held.


Balance Sheet Information	May 31		November 30
	2005		2004
	(unaudited)

Cash and cash equivalents		13,580,479		251,037

Working capital		19,485,967		8,287,798

Current assets		23,170,056		10,964,025

Total assets		25,464,611		12,310,738

Current liabilities		3,684,089		2,676,227

Total liabilities		3,761,976		2,676,227

Stockholders’ equity		21,702,635		9,634,511

InOffshore ~~accordance~~Systems ~~with~~International National Instrument 54-101 — Communication with Beneficial Owners of Securities of a Reporting Issuer, the Company has distributed copies of the Notice of Meeting, this Information Circular and the Proxy to the clearing agencies and intermediaries for onward distribution to beneficial shareholdersLtd. ~~Applicable regulatory policy requires~~ ~~intermediaries/brokers~~107 to- ~~seek~~930 ~~voting~~West ~~instructions~~1st ~~from beneficial shareholders in advance of~~Street ~~shareholders’~~North ~~meetings unless the beneficial shareholders have waived the right to receive Meeting materials. Every intermediary/broker has its own mailing procedures and provides its own return instructions~~Vancouver, ~~which~~BC ~~should~~Canada beV7P ~~carefully followed by beneficial shareholders in order to ensure that~~3N4 ~~their common shares are voted at the Meeting. Often the form of proxy supplied to a beneficial~~ ~~shareholder by its broker is identical to the form of proxy provided by the Company to the~~ registered shareholders. However, its purpose is limited to instructing the registered Shareholder how to vote on behalf of the beneficial shareholder. Should a beneficial shareholder receiving such a form wish to vote at the Meeting, the beneficial shareholder should strike out the names of the Management Proxyholders named in the form and insert the beneficial shareholder’s name in the blank provided and return the materials to the broker as directed.

~~The~~TEL ~~majority~~604 of904 ~~brokers~~4600 ~~now~~| ~~delegate~~FAX ~~responsibility~~604 ~~for~~987 ~~obtaining instructions from clients to~~2555 ~~independent ADP Investor Communications Services (“ADP”)~~www. ~~ADP typically applies a special sticker to the proxy forms, mails those forms to the beneficial shareholders and asks beneficial shareholders to return the proxy forms to ADP~~osil. ~~ADP then tabulates the results of all instructions~~com ~~received and provides appropriate instructions respecting the voting of common shares to be~~ ~~represented at the Meeting. A BENEFICIAL SHAREHOLDER RECEIVING A PROXY WITH AN ADP STICKER ON IT~~ CANNOT USE THAT PROXY TO VOTE COMMON SHARES DIRECTLY AT THE MEETING – THE PROXY MUST BE RETURNED TO ADP WELL IN ADVANCE OF THE MEETING IN ORDER TO HAVE THE COMMON SHARES VOTED. All references to shareholders in this Information Circular and the accompanying Instrument of Proxy and Notice of Meeting are to Shareholders of record unless specifically stated otherwise.

(OSI LOGO)

InOffshore ~~addition,~~Systems ~~there~~International ~~are two kinds of beneficial shareholders — those who object to their names being~~Ltd. ~~made known to the issuers of securities which they own called Objecting Beneficial Owners (“OBOs”),~~ ~~and~~

5MANAGEMENT’S DISCUSSION AND ANALYSIS

~~those~~For ~~who do not object to~~ the ~~issuers~~six ofmonths ~~the~~ended ~~securities they own knowing who they are, called Non-Objecting Beneficial Owners (“NOBOs”). NOBOs can expect to receive a scannable Voting Instruction Form (VIF)~~May ~~prepared by our transfer agent~~31, ~~Computershare Trust Company of Canada (or~~2005 ~~Computershare Investor Services Inc. as the case may be). These VIFs are to be completed and~~ ~~returned to Computershare in the envelope provided or by fax. In addition, Computershare provides~~ ~~both telephone voting and internet voting as described on the VIF itself, which contains complete~~ instructions. Computershare will tabulate the results of the VIFs received from NOBOs and will provide appropriate instructions at the Meeting with respect to the shares represented by the VIFs they receive.

~~VOTING~~Page ~~OF PROXIES~~1

~~SHARES~~Forward-Looking ~~REPRESENTED BY PROPERLY EXECUTED PROXIES IN FAVOUR OF PERSONS DESIGNATED IN THE ENCLOSED~~Statements ~~FORM OF PROXY WILL BE VOTED FOR ALL MATTERS TO BE VOTED ON AT THE MEETING AS SET OUT IN THIS~~ ~~INFORMATION CIRCULAR OR WITHHELD FROM VOTING IF SO INDICATED ON THE FORM OF PROXY.~~

~~The~~Statements ~~shares~~in ~~represented~~this byManagement’s ~~proxies~~Discussion ~~will~~and Analysis, onor any ~~poll~~document ~~where~~filed aby ~~choice~~Offshore Systems International Ltd. (the “Company”) with ~~respect~~the todifferent governing authorities, or in any other ~~matter~~written or oral communication by or on behalf of the Company, to bethe extent not directly and ~~acted~~exclusively ~~upon~~based ~~has~~on ~~been~~historical ~~specified~~events, inconstitute forward-looking statements within the ~~form~~meaning of securities ~~proxy~~laws including Section 27a of the Securities Act of 1933, beas ~~voted~~amended, inand ~~accordance~~Section 21e of the Securities Exchange Act of 1934, as amended, with respect to achieving corporate objectives, developing additional project interests, the ~~specification~~Company’s analysis of opportunities in the acquisition ~~made~~and development of various project interests and other matters. ~~SUCH~~These ~~SHARES~~statements ~~WILL~~are made under the ‘safe harbour’ provisions of the Private Securities Litigation Reform Act of 1995 and, ONas Asuch, involve ~~POLL~~known and unknown risks and uncertainties and other factors that may cause the actual results to be materially different from the results implied herein. Although the Company believes the expectations reflected in such forward-looking statements are based on reasonable assumptions, it BEcan ~~VOTED~~give INno ~~FAVOUR~~assurances OFthat ~~EACH~~its ~~MATTER~~expectations ~~FOR~~will ~~WHICH~~be NOachieved. ~~CHOICE~~Factors ~~HAS~~that ~~BEEN~~could cause actual ~~SPECIFIED~~results BYto ~~THE~~differ ~~SHAREHOLDER~~from expectations include the effects of general economic conditions, changing foreign exchange rates, actions by government authorities, uncertainties associated with contract negotiations, and industry supply.

The ~~enclosed~~Company ~~form~~disclaims ofany ~~proxy,~~intention ~~when properly completed and delivered and not revoked, confers discretionary authority upon the person appointed proxy under it to vote with respect to amendments~~ or ~~variations~~obligation ~~of matters identified in the Notice of Meeting, and with respect~~ to ~~other~~update ~~matters which may properly come before the Meeting. If amendments~~ or ~~variations~~revise ~~to matters identified in the Notice of Meeting are properly brought before the Meeting or~~ any ~~further or other business is~~forward-looking ~~properly brought before the Meeting~~statements, itwhether isas ~~the~~a ~~intention~~result of ~~the~~new ~~persons designated in the enclosed form of proxy to vote in accordance with their best judgment on such matters or business. At the time of the printing of this Information Circular~~information, ~~management~~future ofevents ~~the Company knows of no such amendment, variation~~ or ~~other matter which may be presented to the Meeting~~otherwise.

~~VOTING IN PERSON~~Overview

~~Any~~Effective ~~shareholder~~December 1, ~~attending~~2004, the ~~Meeting~~Company elected to ~~vote~~report ~~personally~~its orconsolidated financial statements in accordance with accounting principles generally accepted in the United States (“U.S. GAAP”) as ~~proxyholder~~now allowed ~~for~~by ~~another~~Canadian ~~shareholder~~regulators. The Company’s functional currency is Canadian dollars and therefore ~~shall~~the beCompany’s ~~required~~financial tostatements ~~produce~~are ~~identification~~presented ~~satisfactory~~in Canadian dollars unless otherwise noted. All references in this report to ~~the~~financial ~~Chairman~~information ofconcerning the ~~Meeting~~Company refer to such information ~~establishing~~in ~~his~~accordance orwith ~~her~~U.S. ~~identity~~GAAP and all dollar amounts in this Management’s Discussion and Analysis are in Canadian dollars unless otherwise indicated.

~~INTEREST~~The OFfollowing ~~CERTAIN~~discussion ~~PERSONS~~and ORanalysis ~~COMPANIES~~provides INa ~~MATTERS~~review TOof BEactivities, ~~ACTED~~results ~~UPON~~of operations and financial condition of the Company for the six months ended May 31, 2005 in comparison with those for the six months ended May 31, 2004 and for the three months ended May 31, 2005 in comparison with those for the three months ended May 31, 2004. This discussion should be read in conjunction with the Company’s unaudited interim consolidated financial statements for the three and six months ending May 31, 2005 and its 2004 Audited Consolidated Financial Statements, both prepared in accordance with U.S. GAAP, and the Company’s Management Discussion and Analysis for the year ended November 30, 2004.

~~None~~Founded ofin 1977, the ~~directors~~Company ordesigns, ~~senior~~develops ~~officers~~and ofmarkets the ~~Company,~~proprietary ~~nor~~ECPINSÒ ~~any~~line ~~person~~of electronic ~~who~~chart ~~has~~navigation ~~held~~systems ~~such~~for ~~a position~~commercial ~~since~~and military customers. ECPINSÒ helps to reduce the ~~beginning~~risk of ~~the~~navigation-related ~~last~~incidents ~~completed~~by ~~financial~~giving ~~year~~bridge ofcrews ~~the~~a ~~Company~~precise, ~~nor~~real-time ~~any proposed~~display ~~nominee~~of ~~for~~their ~~election~~position, ascourse and speed, against a ~~director~~background of ~~the~~fixed obstacles and other navigational hazards. The Company has developed a strong market position in military navigation, ~~nor~~and ~~any~~has ECPINSÒ ~~associate~~systems ordeployed ~~affiliate~~with ofthe Canadian and United States Coast Guards, the ~~foregoing persons~~Canadian Navy, the ~~has~~Royal ~~any~~New ~~substantial~~Zealand orNavy, ~~material~~the ~~interest~~Royal Danish Navy, ~~direct~~the orRoyal ~~indirect~~Australian Navy, bythe ~~way~~Royal Navy of ~~beneficial~~the ~~ownership~~United ofKingdom ~~securities~~and orthe United ~~otherwise~~States Navy. For the six months ended May 31, in2005, ~~any~~the ~~matter~~Company has also delivered software and system products to bethe ~~acted~~Portuguese onNavy, atthe Royal New Zealand Navy, commercial shipping fleets serving the ~~Meeting~~Great ~~other~~Lakes ~~than~~region of North America, and Teekay Shipping Corporation, the leading ~~election~~provider of ~~directors~~international commercial tanker transportation services.

6Page 2

~~VOTING~~In ~~SECURITIES~~2002, ~~AND~~the ~~PRINCIPAL~~Company ~~HOLDERS~~expanded OFthe ~~VOTING~~business ~~SECURITIES~~scope of its wholly-owned subsidiary Offshore Charts Ltd. beyond production of electronic navigation charts to include production of land-based mapping products. The Offshore Charts Ltd. subsidiary was also renamed OSI Geomatics Ltd. to better reflect its business expansion. The Company’s U.S. subsidiary – Offshore Systems International Inc. was renamed OSI Geomatics Inc. and reactivated to enter the U.S. mapping market. Collectively, the two subsidiaries form the Company’s new business unit – OSI Geomatics.

AsIn ofFebruary 2003, the ~~date~~Company ~~hereof,~~announced the ~~Company~~launch ~~has~~of ~~27,488,074~~a ~~common~~new ~~shares~~product, ~~without~~Common ~~par~~Operational ~~value,~~Picture ~~30,262~~- Image ~~Class~~Display Server (“ACOP-IDSÒ”), a client server application that allows ~~Preference~~customers ~~shares~~to ~~Series A~~integrate ~~Convertible~~the Company’s mapping and ~~57,711~~imagery ~~Class~~display technology into existing Command and Control (“BC2”) ~~Series 1~~systems ~~Convertible~~rapidly ~~Preference~~and ~~shares~~cost effectively. COP-IDS® facilitates the integration of ~~issued~~information ~~and~~from ~~outstanding~~multiple geo-spatial sources – such as land maps, ~~for~~nautical charts, aerial and space photo imagery and special military information – into a ~~total~~single fused display. COP-IDSÒ is designed to meet the emerging requirements of ~~27,576,047~~international ~~issued~~fleets to be able to operate from and ~~outstanding~~share ~~shares~~common ~~entitled~~tactical data in the field. COP-IDSÒ allows the Company’s customers to ~~vote~~share atdata across C2 systems, regardless of which C2 applications systems are in use. COP-IDSÒ is a C2 product that addresses the ~~Meeting~~needs of not only Navy applications but also Army, Air Force, Special Forces and joint forces operations.

~~The~~To ~~authorized~~capitalize ~~capital~~on of the ~~Company~~potential ~~consists~~ of ~~300,000,000~~the ~~shares~~new ~~divided~~COP-IDSÒ ~~into 100~~product,~~000,000 common~~ ~~shares~~the ~~without~~Company ~~par~~added ~~value,~~a new ~~100,000,000~~line ~~Class~~of ~~“A”~~business ~~Preference~~– ~~shares~~OSI ~~without~~Applications ~~par~~starting ~~value issuable~~ in ~~series,~~fiscal of2004. ~~which~~OSI ~~10,000,000~~Applications ~~shares~~develops ~~are designated Class “A” Preference Series A Convertible~~software ~~shares,~~applications and ~~100,000,000~~tools ~~Class~~for ~~“B”~~situational ~~Preference~~awareness. ~~shares~~OSI ~~with~~Applications is a ~~par~~division ~~value~~ of ~~$50~~the ~~per share issuable in~~Company’s ~~series,~~subsidiary ofOffshore ~~which~~Systems ~~10,000,000 are designated Class “B” Series 1 Convertible Preference shares~~Ltd. ~~The holders~~and ofprovides ~~common~~products ~~shares, Class “A” Preference Series A Convertible shares~~ and ~~Class~~services ~~“B” Series 1 Convertible Preference shares are entitled~~ to ~~receive~~military aforces, ~~notice~~government agencies of and tosystems ~~attend~~integrators ~~and~~to ~~vote~~enable atimproved ~~any meetings~~situational ~~of the members of the Company~~awareness.

~~Only~~The ~~shareholders~~Company ofplans ~~record~~to atgrow ~~the~~through ~~close~~internal ofgrowth, ~~business~~focused on ~~March 7,~~new ~~2005~~and ~~(the~~existing ~~“Record~~customers ~~Date”)~~in ~~who~~the ~~either~~military ~~personally~~agencies ~~attend~~of ~~the~~Canada, ~~Meeting~~U.S., orEuropean ~~who~~NATO ~~have completed~~ and ~~delivered~~other aallies ~~form~~ of ~~proxy~~Canada, inand ~~the manner~~national and international ~~subject~~commercial tomarine ~~the~~transportation ~~provisions~~companies. ~~described~~In ~~above~~addition, ~~shall~~the beCompany ~~entitled~~may topursue strategic ~~vote~~alliances, orinvestments toand ~~have~~acquisitions ~~their shares~~that ~~voted~~are atcomplimentary ~~the~~to ~~Meeting~~its existing lines of business.

~~Each~~In ~~shareholder~~April 2005, isthe ~~entitled~~Company tocompleted ~~one~~a ~~vote~~private ~~for~~placement ~~each~~in ~~common~~the ~~share~~aggregate amount of $19,500,195 through ~~Class~~the ~~“A”~~sale of 19,500 units, with each unit comprised of 20 voting Class B Preference Shares Series ~~A Convertible~~2 (Preference Shares) and 588 share orpurchase ~~Class~~warrants ~~“B”~~(warrants). ~~Series~~ The issue price was $1,000.01 ~~Convertible~~per ~~Preference~~unit. ~~share~~Compensation ~~registered~~in consideration of the provision of advisory services totalling $815,908 and an additional 350,000 warrants was paid in connection with this private placement to E. Brinton Coxe, a director of the Company. The cash compensation of $815,908 paid to Mr. Coxe ~~shareholder’s~~includes ~~name~~an onadjustment in the ~~list~~amount of ~~shareholders~~$15,908 ~~which~~to isreflect ~~available~~exchange ~~for~~rate ~~inspection~~changes ~~during~~between ~~normal~~the U.S. ~~business~~dollar ~~hours~~and atCanadian ~~Computershare~~Dollar. ~~Trust~~Finder’s ~~Company~~fees of ~~Canada~~$1,001,362 4and than ~~Floor~~additional 579,064 ~~510~~warrants ~~Burrard~~were paid ~~Street~~to the investment bankers, ~~Vancouver~~C.E. Unterberg, Towbin. The Preference Shares entitle the ~~British~~holders ~~Columbia~~to receive a fixed preferential cumulative 7% dividend payable semi-annually. Each Preference share is convertible at the option of the holder at any time into 58.82 of the Company’s common shares, ~~V6C~~calculated ~~3B9~~by ~~and~~dividing the issue price of $50.00 for each Preference share by the conversion price of $0.85. Each warrant entitles the holder to purchase one of the Company’s common shares at the ~~Meeting~~exercise price of $0.85 for a period of five years.

ToThe ~~the~~proceeds ~~knowledge~~ of the ~~directors~~private ~~and~~placement ~~senior~~financing ~~officers~~will ofbe ~~the~~used ~~Company~~to nopursue ~~person holds~~acquisitions, ~~directly~~to orincrease ~~indirectly,~~available ~~shares~~cash ~~carrying~~for ~~more~~operations, ~~than~~and ~~10%~~to ofrepurchase ~~the~~57,711 ~~voting~~issued ~~rights~~and ~~attached~~outstanding toClass B ~~all classes of voting~~Preference ~~shares~~Shares ofSeries 1 ~~the~~held ~~Company~~by ~~other~~two ~~than~~institutional ~~Howson~~investors ~~Tattersall~~at ~~Investment~~a ~~Counsel~~cost ~~Limited~~of ~~(“H.T.”). To the Company’s knowledge, H.T. owns or controls~~ approximately $2,~~811~~900,~~200 common shares, representing approximately 10~~000.~~2% of the Company’s issued and outstanding voting shares.~~

~~ELECTION~~In OFApril 2005, ~~DIRECTORS~~the Company completed the acquisition of all the outstanding shares of Mapcon Mapping Consultants Inc. (Mapcon) of Salt Lake City, Utah for U.S.$1,000,000, subject to final

~~Management~~Page ~~of the Company proposes that the number of directors for the ensuing year be fixed at~~3 ~~six. Management intends to nominate the persons named in the following table for election as~~ ~~directors of the Company. Each of management’s nominees currently serves as a director of the~~ ~~Company. Messrs. Tony Pezzotti and Peter Roberts, who currently serve as directors, have informed~~ the Company that they will not be standing for re-election as directors. Each director elected will hold office until the next annual general meeting or until his successor is duly elected or appointed, unless his office is earlier vacated in accordance with the Articles of the Company or he becomes disqualified to act as a director.

~~The~~closing ~~following~~adjustments. ~~information~~Mapcon ~~concerning~~is a land mapping company in the ~~proposed~~U.S. ~~nominees~~geomatics ~~has~~(digital ~~been~~map ~~furnished~~and electronic bychart ~~each~~data ofproduction) ~~them:~~market.

7Overall Performance

			No. of Shares
			Beneficially
Name and			Owned, Controlled
Present Position	Principal Occupation	Director	or Directed
in the Company	for the Past Five Years	Since	(1)
JOHN A. JACOBSON (3)(5) President & Chief Executive Officer Director	President and CEO of the Company.	Mar. 19, 1998	365,000
RAYMOND W. JOHNSTON (3)(4) Chairman & Director	President of Chamber of Maritime Commerce Dec/99 to present; C.E.O., Canada Steamship Lines, May/92 to June/99.	Nov. 14, 2000 (and from Dec. 21, 1994 to Sept. 28, 1998)	54,000
HELMUT F. LOBMEIER (2)(4) Director	Independent Businessman and formerly co-owner of PSL Steel Ltd.	April 26, 1990	631,951
CAPT. WALTER P. PURIO (2) (4) Director	Independent Marine Consultant 2000 to Present; President, P and H Marine Associates, Inc., 1993 to 2000; Shipmaster – Oceans, General Dynamics, American Overseas Marine Corporation, 1985 to present.	Jan. 14, 1999	133,000
E. BRINTON COXE (3)(5) Director	02/99 to present: Chairman of E.B. Coxe & Co., LLC a company which specializes in finding, funding, and managing small cap companies. 02/99 to present: Strategic partner of SDS Capital Partners, LLC, which is a group of investment funds.	July 20, 2004	0
GERALD J. SHIELDS (no current position)	Lawyer engaged in private practice with the firm of Strategic Business Lawyers (formerly known as Godinho Sinclair Shields).	N/A	50,000

Earnings/Loss

(1)		The approximate number of shares of the Company carrying the right to vote in all circumstances beneficially owned, directly or indirectly, or over which control or direction is exercised by each proposed nominee as of the date of this Information Circular.
(2)		Member of Audit Committee. The other member is Peter Roberts, who is not standing for re-election.
(3)		Member of Executive Committee.

For the six months ended May 31, 2005, the Company had a loss of $1,917,358. Earning available to common shareholders for the six months ended May 31, 2005 was a loss of $7,133,165 or $0.26 per share on a basic and diluted basis. For the three months ended May 31, 2005, the Company had loss of $1,697,767. Earnings available to common shareholders for the three months ended May 31, 2005 was a loss of $6,880,135 or $0.25 per share on a basic and diluted basis.

8The Company’s results for the three and six months ended May 31, 2005 were largely driven by lower revenues that resulted from timing of new contracts awarded to the Company and the delivery schedules of existing contracts and increased regulatory compliance costs offset by the financial assistance received from Technology Partnerships Canada (“TPC”).

(4)		Member of Human Resources and Compensation Committee.
(5)		Member of Corporate Finance and Development Committee.

Backlog

~~All~~Total backlog as at May 31, 2005 is $20.2 million compared to $21.1 million at November 30, 2004 and $22.6 million at May 31, 2004. Total backlog is the total of the ~~above~~firm ~~persons~~and ~~are~~option ~~ordinarily~~backlogs. Firm ~~resident~~backlog inconsists ~~Canada~~of ~~except~~firm, ~~Messrs~~fixed, signed orders issued to the Company and executable by the Company subsequent to the balance sheet date. Firm backlog as at May ~~Purio~~31, 2005 was at $7.5 million compared to $8.4 million at November 30, 2004 and ~~Coxe~~$8.7 million at May 31, ~~who~~2004. ~~are~~Option backlog ~~residents~~consists of unexercised contract options at the ~~United~~balance ~~States~~sheet ofdate ~~America~~and indefinite-quantity contracts executable by the Company subsequent to the balance sheet date. Option backlog as at May 31, 2005 was at $12.7 million compared to $12.7 million at November 30, 2004 and $13.9 million at May 31, 2004. There is no guarantee or certainty that the Company’s customers will elect to exercise their contract option backlog. Should the Company’s customers elect to exercise contract options or place orders against indefinite-quantity contracts, the option backlog converts to firm backlog, which then may convert to revenue as contract execution occurs. Total backlog, firm backlog and option backlog are non-GAAP measures that do not have a standardized meaning and are likely not comparable to similar measures presented by other issuers. These measures also do not have a comparable GAAP measure.

~~EXECUTIVE~~The ~~COMPENSATION~~timing of the awarding of major contracts to the Company can significantly impact the Company’s total backlog position and revenue for the period. Historically, major contracts that have been awarded to the Company have taken up to three years to finalize with the contracting process involving lengthy discussions and negotiations with several groups of people within the prospective customer’s organization. The Company has continually pursued, and will continue to pursue, major contracts with a lengthy sales cycle and, as a result, there could be large variations in its total backlog position and revenue from one fiscal quarter to another.

~~Compensation~~Because governments approve budget expenditures on an annual basis, multi-year contracts with government agencies have a termination-for-convenience clause that allows contracts to be terminated by the contracting government agency should future budget funding not be approved. Historically, the termination-for-convenience clause has not been exercised by any Company customer. The Company has included the full value of ~~Named~~these ~~Executive~~government ~~Officers~~contracts in total backlog.

~~The~~Page ~~table below sets out particulars of compensation paid to the following executive officers for~~4 ~~services to the Company during the three most recently completed financial years:~~

~~(a)~~Risks ~~the~~and ~~individual who served as the Company’s chief executive officer or acted in a similar capacity (“CEO”) during the most recently completed financial year;~~Uncertainties

~~(b)~~Certain statements made in this report by the ~~individual~~Company ~~who~~constitute ~~served~~forward-looking asstatements, ~~our~~and are ~~chief~~subject ~~financial~~to ~~officer~~risks orand ~~acted~~uncertainties inthat amay ~~similar~~cause ~~capacity~~future ~~(“CFO”)~~results ~~during~~to differ materially from those expected. Factors that may cause such differences include, but are not limited to, the factors ~~most~~discussed ~~recently~~below. ~~completed~~If any of these events actually occur, they could have a materially adverse effect on the Company, its financial ~~year;~~condition or results of operations.

~~(c)~~The ~~each~~Company ofdepends ~~our~~heavily ~~three~~on ~~most~~its ~~highly~~government ~~compensated~~contracts, ~~executive~~which ~~officers~~are only partially funded, ~~other~~subject to ~~than~~termination, ~~the~~heavily ~~CEO~~regulated and ~~CFO,~~audited. ~~who~~The ~~was~~termination ~~serving~~of asone anor ~~executive~~more ~~officer~~of atthese contracts could have a negative impact on the ~~end~~Company’s operations. The contract termination clauses are generally in favour of the ~~most~~government ~~recently~~agencies. ~~completed~~Typically ~~financial~~the ~~year~~termination ~~and~~clause ~~whose~~for ~~total~~convenience ~~salary~~is 30 days ~~and~~or ~~bonus~~less ~~exceeded~~with ~~$150,000~~the ~~per~~condition ~~year;~~that ~~and~~all costs to that date are paid by the government agencies.

~~(d)~~The ~~any~~termination ~~additional~~of ~~individuals~~funding for ~~whom~~a ~~disclosure~~government program would ~~have~~result ~~been~~in ~~provided~~a ~~under~~loss ~~(c)~~of ~~except~~anticipated future revenues attributable to that ~~the~~program. ~~individual~~That ~~was~~could ~~not~~have ~~serving~~a asnegative animpact ~~executive~~on ~~officer~~the ofCompany’s operations. Also, the Company atcannot give assurance that it would be able to procure new government contracts to offset the ~~end~~revenues lost as a result of any termination of its contracts. As the Company’s ~~most~~revenues ~~recently~~are ~~completed~~dependent ~~financial~~on ~~year~~its procurement, performance and payment under its contracts, the loss of one or more critical contracts could have a negative impact on the Company’s financial condition.

~~(each~~In ofaddition, ~~whom~~sales isto athe ~~“Named~~governments ~~Executive~~the ~~Officer”).~~Company works with may be affected by:

~~Summary~~• ~~Compensation~~changes ~~Table~~ in procurement policies; • changes in the structure and management of government departments; • budget considerations; • changing concepts of national defence; • political developments domestically and abroad; and • increased protectionism.

The ~~following~~influence ~~sets~~of ~~forth~~any ~~compensation~~of ~~for~~these factors, which are largely beyond the Company’s ~~Named~~control, ~~Executive~~could ~~Officers~~also negatively ~~for~~impact ~~the~~its ~~fiscal years~~financial ~~indicated:~~condition.

			Annual Compensation						Long Term Compensation
									Awards			Payout
											Restricted
									Securities Under		Shares or
							Other Annual		Options/		Restricted		All Other
			Salary		Bonus		Compensation		SARs Granted		Share Units	LTIP Payouts	Compensation
Name	Year		($)		($)		($)		(#)		($)	($)	($)
John A. Jacobson		2004	$	196,539	$	15,000	Nil			60,000	Nil	Nil	Nil
President & C.E.O.		2003	$	179,135	Nil		$	15,231		90,000	Nil	Nil	Nil
		2002	$	172,115	$	70,000	Nil			100,000	Nil	Nil	Nil
John T. Sentjens		2004	$	97,923		7,500	Nil			18,000	Nil	Nil	Nil
Corporate Controller		2003	$	86,636	Nil		Nil			27,000	Nil	Nil	Nil
		2002	$	78,077	$	12,000	Nil			30,000	Nil	Nil	Nil

The Company derives a significant amount of revenue from only a few customers. The Company depends on national and international governments for a significant portion of its sales, and the loss of any of these relationships or a shift in any of these governments’ funding could have severe consequences on the Company’s financial condition.

9Approximately 59% of the Company’s revenue for the six months ended May 31, 2005 was from the Royal Navy of the United Kingdom, the Royal New Zealand Navy and the Royal Australian Navy. For the six months ended May 31, 2004 approximately 75% of the Company’s revenue was from the U.S. Coast Guard, the Royal Navy of the United Kingdom and the Royal Australian Navy. Approximately 70% of the Company’s revenue for the three months ended May 31, 2005 was from national and international governments compared to 91% for the three months ended May 31, 2004. Therefore, any significant disruption or deterioration of any of the Company’s relationships with these entities’ governments would significantly reduce its revenues. These governments may choose to use other competing corporations for their navigational equipment. In addition, a shift in government spending to other programs in which the Company is not involved could have severe consequences for its results of operations.

			Annual Compensation						Long Term Compensation
									Awards			Payout
											Restricted
									Securities Under		Shares or
							Other Annual		Options/		Restricted		All Other
			Salary		Bonus		Compensation		SARs Granted		Share Units	LTIP Payouts	Compensation
Name	Year		($)		($)		($)		(#)		($)	($)	($)
Andrew A. Carniel		2004	$	138,269	$	10,000	$	1,679		45,000	Nil	Nil	Nil
V.P. Business		2003	$	129,135	Nil		Nil			67,500	Nil	Nil	Nil
Development		2002	$	122,115	$	35,000	Nil			50,000	Nil	Nil	Nil
Kenneth H. Kirkpatrick		2004	$	138,269	$	10,000	$	5,385		45,000	Nil	Nil	Nil
Chief Operating		2003	$	129,135	Nil		$	15,000		67,500	Nil	Nil	Nil
Officer		2002	$	124,038	$	35,000	Nil			50,000	Nil	Nil	Nil
Wayne Hoyle		2004	$	185,486	Nil		Nil		Nil		Nil	Nil	Nil
Director of Sales		2003	$	120,575	Nil		Nil			7,723	Nil	Nil	Nil
(1)		2002	$	155,035	Nil		Nil		Nil		Nil	Nil	Nil

Page 5

~~Note:~~The ~~(1) Mr. Hoyle~~Company’s ~~remuneration~~product ~~arrangement~~lines ~~includes~~are ~~compensation~~not ~~paid~~broadly ~~under a commission arrangement tied to the closing of sales~~diversified. ~~The above figures include variable compensation paid to him under this arrangement of $96,477 (fiscal 2004), $42,575 (fiscal 2003) and $77,035 (fiscal 2002).~~

~~Long-Term~~The ~~Incentive~~Company ~~Plans~~derives —and ~~Awards~~expects into ~~Financial~~derive ~~Year~~a ~~Ended~~substantial ~~November 30~~majority of its revenue from navigational software, ~~2004~~systems and equipment sales. If customers do not purchase the Company’s products as a result of competition, technological change, budget constraints or other factors, the Company does not have other product categories that it could rely on to make up any shortfall in sales. As a result, the Company’s revenue could decrease and its business and operating results would be adversely affected.

The Company ~~has~~derives noa ~~long-term~~significant ~~incentive~~portion ~~plans~~of inits ~~place.~~revenues Afrom ~~“Long-Term~~international ~~Incentive~~sales ~~Plan”~~and is ~~a plan under~~subject ~~which~~to ~~awards~~the ~~are~~risks ~~made~~of ~~based~~doing onbusiness ~~performance~~in ~~over~~foreign ~~a period longer than one financial year, other than a plan for options, SARs (stock appreciation rights) or restricted share compensation~~countries.

~~Option~~In ~~Grants~~the ~~During~~six months ended May 31, 2005, approximately 86% of the Company’s revenues were from ~~Financial~~international ~~Year~~customers, ~~Ended~~including ~~November 30~~governmental customers: 20% from the U.S. and 66% from other international countries. The Company has focussed its expansion efforts for the future on the American, ~~2004~~European and Australasian markets. As a result, the Company expects that international sales will continue to account for a significant portion of its revenues for the foreseeable future. As a result, the Company is subject to the risks of doing business internationally, including those risks related to:

~~The~~• ~~following~~changes ~~table~~in ~~sets~~regulatory ~~forth~~requirements; ~~grants~~• domestic and foreign government policies, including requirements to expend a portion of ~~stock~~program ~~options~~funds ~~during~~locally ~~the~~and ~~2004~~governmental ~~fiscal~~industrial ~~year~~co-operation torequirements; • fluctuations in foreign currency exchange rates; • the ~~Named Executive~~complexity ~~Officers:~~ and necessity of dealing with foreign representatives and consultants; • imposition of tariffs or embargoes, export controls and other trade restrictions; and • compliance with a variety of foreign laws.

									Market Value
									Of Securities
	Securities			% of Total					Underlying
	Under			Options/SARs					Options/SARs
	Options/SARs			Granted to			Exercise or		on the Date
	Granted			Employees in			Base price		of Grant
Name	(#)			Financial Year			($/Security)		($/Security)		Expiration Date
John A. Jacobson		20,000	(1)				$	1.13	$	1.13	Apr. 22/07
President & C.E.O.		20,000	(2)				$	1.13	$	1.13	Apr. 22/07
		20,000	(3)		12.08	%	$	1.13	$	1.13	Apr. 22/07
John T. Sentjens		6,000	(1)				$	1.13	$	1.13	Apr. 22/07
Corporate Controller		6,000	(2)				$	1.13	$	1.13	Apr. 22/07
		6,000	(3)		3.62	%	$	1.13	$	1.13	Apr. 22/07
Andrew A. Carniel		15,000	(1)				$	1.13	$	1.13	Apr. 22/07
V.P. Business		15,000	(2)				$	1.13	$	1.13	Apr. 22/07
Development		15,000	(3)		9.06	%	$	1.13	$	1.13	Apr. 22/07

While the presence of these factors and the impact of these factors are difficult to predict, any one or more of them could adversely affect the Company’s operations in the future.

10The Company’s revenues and costs are affected by fluctuations in the rate of exchange between the Canadian dollar, which is its reporting currency, the U.S. dollar, the Australian dollar and the Euro.

Market Value

Of Securities

Securities

% of Total

Underlying

Under

Options/SARs

Granted to

Exercise or

on the Date

Granted

Employees in

Base price

of Grant

Name

(#)

Financial Year

($/Security)

Expiration Date

Kenneth H. Kirkpatrick

15,000

(1)

1.13

Apr. 22/07

Chief Operating Officer

15,000

(2)

1.13

Apr. 22/07

15,000

(3)

9.06

1.13

Apr. 22/07

Wayne Hoyle Director of Sales

Nil

N/A

Director of Sales

Exposure to exchange rate fluctuations exists because a significant portion of the Company’s trade receivable and revenue transactions are in U.S. dollars, Australian dollars and Euros. In addition, certain of the Company’s subcontract payable and direct cost transactions are in U.S. dollars. For the six months ended May 31, 2005, approximately 28% of the Company’s revenue and 11% of its expenses were transacted in U.S. dollars. During the same period, approximately 8% and 1% of the Company’s revenue was transacted in Australian dollars and Euros respectively. For the six months ended May 31, 2004, approximately 63% of the Company’s revenues and 12% of its expenses were transacted in U.S. dollars. During the same period, the Company did not have material transactions in Australian dollars or Euros. The Company expects that U.S. dollar, Australian dollar and Euro sales will continue to account for a material portion of its revenues for the foreseeable future. As a result, exchange rate fluctuations may affect the Company’s revenue and earnings growth materially in the future. In order to reduce the impact of U.S. to Canadian dollar, Australian to Canadian dollar and Euro to Canadian dollar exchange rate fluctuations, the Company utilizes its foreign exchange forward contract facility. As at May 31, 2005, the Company had entered into foreign exchange forward contracts in the amount of U.S. $0, Australian $ 1,605,038 and €0.

(1)		These options vested on April 22, 2004
(2)		These options vest on April 22, 2005
(3)		These options vest on April 22, 2006

Page 6

~~Aggregated~~The ~~Option/SAR~~Company ~~Exercises~~has ~~During~~established teaming relationships and strategic partnerships with international corporations to pursue major international government procurements, and its reputation and results of operations could be adversely affected by the ~~Financial~~Company’s ~~Year~~inability to control their operations.

~~Ended~~The ~~November 30~~Company relies on agreements with international corporations to assist it in pursuing contracts for major government procurements. These international corporations often assist the Company with systems integration, ~~2004~~complimentary products and ~~Financial~~services, ~~Year-End~~and ~~Option/SAR~~local ~~Values~~domain knowledge necessary to successfully pursue major government procurements. The Company does not have assurance that these third parties will:

Value of

Unexercised

in-the-money

Securities

Aggregate

Options/SARs at

Acquired

Value

FY-End (#)

FY-End ($)

on Exercise

Realized

Exercisable/

Name

(#)

($)

Unexercisable

John A. Jacobson

210,000 exercisable

Nil exercisable

President & C.E.O.

Nil

40,000 unexercisable

Nil unexercisable

John T. Sentjens

63,000 exercisable

Nil exercisable

Corporate Controller

20,000

4,320

12,000 unexercisable

Nil unexercisable

Andrew A. Carniel

132,500 exercisable

Nil exercisable

V.P. Business Development

Nil

30,000 unexercisable

Nil unexercisable

Kenneth H. Kirkpatrick

132,500 exercisable

Nil exercisable

V.P. Operations

100,000

56,000

30,000 unexercisable

Nil unexercisable

Wayne Hoyle

Nil exercisable

Director of Sales

Nil

Nil unexercisable

•		remain in business;

•		maintain the financial stability required to fulfill the requirements of these international procurements; and

•		continue to consider the Company’s products in their business priorities.

~~Option~~There can be no assurance that the Company would be able to pursue and ~~SAR~~secure ~~Repricings~~major international government procurements without these third parties.

~~During~~The ~~the~~Company ~~most~~may ~~recently~~lose ~~completed financial year~~sales, ~~the~~or ~~Company~~sales ~~did~~may ~~not~~be ~~reprice~~delayed, ~~downward~~because ~~any~~of ~~options or~~the ~~freestanding~~long ~~SARs~~sales ~~held~~and implementation bycycles ~~any~~for ~~Named~~its ~~Executive~~products ~~Officer~~and services.

~~Defined~~The ~~Benefit~~Company’s customers have typically invested substantial time, money and other resources and have many people involved in the decision to license the Company’s software products and purchase its hardware products and services. As a result, the Company may wait up to two or ~~Actuarial~~three years ~~Plan~~after the first contact with a customer for that customer to enter into a purchase agreement while the customer seeks internal approvals for the purchase of the Company’s products and/or services. During this long sales cycle, events may occur that affect the size or timing of the purchase or even cause the order to be cancelled.

~~The~~Even if a purchase agreement is signed, the time period required to deploy the Company’s ~~does~~products varies ~~not~~significantly ~~have~~from aone ~~defined~~customer ~~benefit~~to ~~plan~~the next. Implementing the Company’s products can sometimes take several months or ~~actuarial~~even ~~plan~~a few years depending on the customer’s needs. It may be difficult to deploy the Company’s products if the customer has complicated deployment requirements. If a customer utilizes a third party to deploy the Company’s products, we cannot guarantee that the Company’s products will be deployed successfully.

11As a result, the Company’s revenue could decrease and its business and operating results would be adversely affected.

~~Employment~~Competition ~~Contracts~~within the Company’s markets may reduce its ability to procure future contracts and sales.

The ~~following~~defence industry in which the Company operates is ahighly ~~summary~~competitive. ofThe Company’s competitors range from companies, which are primarily targeting the ~~material~~pleasure ~~terms~~boat ~~and~~market, ~~conditions~~to diversified corporations in the radar/marine equipment segment of the ~~employment~~industry. ~~contracts~~Some ~~between~~of the Company’s competitors may have more extensive or more specialized engineering, manufacturing and ~~each~~marketing ofcapabilities. There can be no assurance that the ~~Named~~Company ~~Executive~~can ~~Officers:~~continue to compete effectively with these companies.

~~John Jacobson serves as President and Chief Executive Officer of the Company pursuant to an employment contract dated March 2, 1998, as amended.~~ The ~~contract is for no fixed term. The contract may be terminated by the~~ Company ~~at any time for cause, and at any time without cause upon payment of 12 months~~’ ~~base salary. Mr. Jacobson’~~s ~~current~~ability ~~base salary under the contract is $200,000. He is also eligible~~ to ~~receive~~procure ~~stock~~contracts ~~options~~and asgain ~~well~~sales ~~as cash bonuses~~ in ~~the~~foreign ~~discretion~~markets ~~of the~~may ~~board~~be ~~of directors, based on the Company’s performance. In addition, Mr. Jacobson is eligible~~negatively toimpacted ~~participate~~by inincreasing aprotectionism ~~plan offered to all employees whereby the Company will pay a maximum~~ of 4%foreign ~~of his base salary earned during the year to a designated registered retirement savings plan provided that he matches such payment~~governments. ~~The employment contract includes provisions in favour of the Company~~ ~~related to the confidentiality, proprietary rights and intellectual property, and non-competition~~ ~~and non-solicitation of employees and customers of the Company.~~

~~Andrew~~Some ~~Carniel~~foreign ~~serves~~governments ashave ~~Vice-President,~~come ~~Business~~under ~~Development~~increased ~~pursuant~~pressure to anprotect ~~employment~~their ~~contract dated~~domestic ~~August 18,~~economy ~~1998, as amended. The employment contract is for no fixed term. The contract may be terminated by the Company at any time for cause,~~ and ~~at any time without cause upon notice in~~ ~~writing~~national ~~of two months plus one additional month for each year of service to a maximum of twelve months, or payment of severance equal to base salary for the notice period in lieu of notice~~security. ~~Mr. Carniel’s~~Economic ~~current~~and ~~base~~security ~~salary~~concerns ~~under~~have ~~the~~resulted contract is $140,000. Mr. Carniel is also eligible to receive cash commissions on the gross sales for the Applications business unit. He is also eligible to receive stock options as well as cash bonuses in ~~the~~increasing ~~discretion~~protectionism of the board of directors, based on the Company’s performance. In addition, Mr. Carniel is eligible to participate in a plan offered to all employees whereby the Company will pay a maximum of 4% of his base salary earned during the year to a designated registered retirement savings plan provided that ~~he matches such payment. The~~ ~~employment~~excludes ~~contract~~foreign ~~also~~market ~~includes~~participants ~~provisions~~from insuccessfully ~~favour~~procuring ofcontracts ~~the Company related to the confidentiality, proprietary rights~~ and ~~intellectual property, and non-competition and~~ ~~non-solicitation of employees and customers of the Company.~~

~~Kenneth~~Page ~~Kirkpatrick provides his services as Chief Operating Officer pursuant to an employment~~7 ~~contract dated May 3, 2001, as amended. The employment contract is for no fixed term. The contract~~ ~~may be terminated by the Company at any time for cause, and at any time without cause upon 12~~ ~~months’ notice or payment of 12 months’ base salary in lieu of notice. Mr. Kirkpatrick’s current~~ base salary under the contract is $140,000. He is also eligible to receive stock options as well as cash bonuses in the discretion of the board of directors, based on the Company’s performance. In addition, Mr. Kirkpatrick is eligible to participate in a plan offered to all employees whereby the Company will pay a maximum of 4% of his base salary earned during the year to a designated registered retirement savings plan provided that he matches such payment. The employment contract also includes provisions in favour of the Company related to the confidentiality, proprietary rights and intellectual property, and non-competition and non-solicitation of employees and customers of the Company.

~~John~~gaining ~~Sentjens~~sales provides his services as Corporate Controller pursuant to an employment contract dated July 26, 2001, as amended. The employment contract is for no fixed term. The contract may be terminated by the Company at any time for cause, and at any time without cause upon 3 months’ notice or payment of 3 months’ base salary in ~~lieu of notice. Mr. Sentjens’ current base salary~~ ~~under~~foreign ~~the contract is $100,000~~markets. HeAs isa ~~also eligible to receive stock options as well as cash bonuses in the discretion of the board of directors~~result, ~~based on~~ the Company’s ~~performance.~~revenue ~~In addition,~~could ~~Mr. Sentjens~~decrease isand ~~eligible~~its tobusiness ~~participate~~and ~~in a plan offered to all employees whereby the~~operating ~~Company~~results ~~will~~would ~~pay~~be aadversely ~~maximum of 4% of his base salary earned during the year to a designated registered retirement savings plan provided that he matches such payment~~affected. ~~The employment contract~~ ~~also includes provisions in favour of the Company~~

12The Company’s future success will depend on its ability to develop new technologies that achieve market acceptance.

~~related~~The todefence ~~the~~market ~~confidentiality,~~is ~~proprietary~~characterized ~~rights~~by ~~and~~rapidly ~~intellectual~~changing ~~property,~~technologies and ~~non-competition~~evolving industry ~~and~~standards. ~~non-solicitation~~Accordingly, ofthe ~~employees~~Company’s ~~and~~future ~~customers~~performance depends on a number of ~~the~~factors, ~~Company.~~including its ability to:

~~Wayne~~• ~~Hoyle~~identify ~~serves~~emerging astechnological ~~Director~~trends ofin ~~Sales for~~ the ~~Navigation Systems business unit pursuant to an employment contract dated February 24, 2000, as amended. The employment contract is for no fixed term. The contract may be terminated by the~~ Company’s atmarket; ~~any~~• ~~time~~develop ~~for cause,~~ and atmaintain ~~any~~competitive ~~time~~products; ~~without cause~~• ~~upon~~enhance ~~notice in writing of three months plus one additional month for each year of service to a maximum of twelve months, or payment of severance equal to base salary for~~ the ~~notice period in lieu of notice. Mr. Hoyle~~Company’s ~~current~~products ~~base~~by ~~salary~~adding ~~under~~innovative ~~the~~features contract is $105,000. Mr. Hoyle is also eligible to receive cash commissions on the gross sales of the Navigation Systems business unit. In addition, Mr. Hoyle is eligible to participate in a plan offered to all employees whereby the Company will pay a maximum of 4% of his base salary earned during the year to a designated registered retirement savings plan provided that hedifferentiate ~~matches~~its ~~such~~products ~~payment.~~from ~~The~~those ~~employment contract also includes provisions in favour~~ of ~~the~~its ~~Company~~competitors; ~~related to the confidentiality, proprietary rights~~ and ~~intellectual~~• ~~property,~~manufacture and ~~non-competition~~bring ~~and~~products ~~non-solicitation~~to ofmarket ~~employees~~quickly ~~and customers~~at ofcost-effective ~~the Company~~prices.

~~Composition~~The Company believes that, in order to remain competitive in the future, it will need to continue to develop new products, which will require the investment of significant financial resources in new product development. In addition, there can be no assurance that the ~~Human~~market ~~Resources~~for the Company’s products will develop or continue to expand as the Company currently anticipates. The failure of the Company’s technology to gain market acceptance could significantly reduce its revenues and ~~Compensation~~harm its ~~Committee~~business. Furthermore, the Company cannot be sure that its competitors will not develop competing technology, which gains market acceptance in advance of the Company’s products. The possibility that the Company’s competitors might develop new technology or products might cause the Company’s existing technology and products to become obsolete. If the Company fails in its new product development efforts or its products fail to achieve market acceptance more rapidly than the Company’s competitors, its revenues will decline and its business, financial condition and results of operations will be negatively affected.

~~For~~The ~~the~~Company ~~financial~~depends ~~year~~on ~~ended~~the ~~November 30,~~recruitment ~~2004,~~and ~~the~~retention ~~members~~ of ~~the~~qualified ~~Human~~personnel, ~~Resources~~ and ~~Compensation Committee~~its ~~were~~failure ~~Helmut~~to attract ~~Lobmeier, Walter Purio~~ and ~~Raymond~~retain ~~Johnston,~~such ~~all~~personnel ofcould ~~whom~~seriously ~~are~~harm ~~unrelated directors~~its business.

~~Report~~Due onto ~~Executive~~the ~~Compensation~~specialized nature of the Company’s business, its future performance is highly dependent upon the continued services of its key engineering personnel and executive officers. The Company’s prospects depend upon its ability to attract and retain qualified engineering, manufacturing, marketing, sales and management personnel for its operations. Competition for personnel is intense, and the Company may not be successful in attracting or retaining qualified personnel. The Company’s failure to compete for these personnel could seriously harm its business, results of operations and financial condition.

The Company’s ~~compensation~~does ~~program~~not ~~for~~have ~~executive~~fixed-term ~~officers~~employment ~~consists~~agreements ~~principally~~with ofits ~~base~~officers ~~salary~~ and ~~bonuses~~ inkey ~~pre-set amounts payable based on the Company meeting certain performance objectives set~~employees byand the ~~board.~~loss ~~Consistent~~of ~~with~~any ~~market~~officer ~~practice,~~or ~~incentive~~key ~~stock~~employee ~~options~~could ~~are~~seriously ~~also~~harm ~~awarded from time to time as an effective means to align~~ the ~~interest~~Company’s ~~of management and shareholders~~business.

~~Pursuant~~The ~~to the~~ Company’s ~~compensation~~has ~~policy,~~not ~~the~~entered ~~compensation~~into ~~program~~fixed-term isemployment ~~designed~~agreements ~~so that the annual compensation for executive officers remains reasonably competitive~~ with ~~the~~its ~~compensation offered to executive~~ officers ~~with comparable employment responsibilities~~ and ~~skills by other~~key ~~Canadian~~employees. ~~companies~~The ~~whose business endeavours and size are similar to those of the~~ Company.’s ~~During the~~success ~~early~~depends ~~part~~upon of the ~~2002~~abilities ~~fiscal year the Human Resources~~ and ~~Compensation~~experience ~~Committee (then known as the Compensation Committee), at the request~~ of ~~the Board, engaged the services of an independent consulting firm to assist it in conducting a review of compensation for~~ its ~~executive~~ officers and ~~directors~~ ~~in comparison to other companies. The Human Resources and Compensation Committee reported~~key ~~its findings to the board~~employees. ~~Having~~Competition ~~regard~~for tohighly ~~the~~skilled ~~review~~management, ~~and the recommendations of the independent consulting firm~~engineering, ~~and~~technical ~~the Human Resources~~ and ~~Compensation~~other ~~Committee, the board implemented a~~key ~~compensation~~employees ~~policy~~is ~~for~~intense. ~~executive~~The ~~officers~~loss ~~with cash components consisting~~ of ~~base~~officers ~~salary~~ and ~~bonuses~~ inkey ~~fixed~~employees ~~amounts~~could ~~set~~seriously ~~early~~disrupt in the ~~fiscal year and payable in the discretion of the board based on the~~ Company ~~meeting or exceeding revenue and profit targets set by the board for the~~’s ~~fiscal~~operations ~~year. The board determined that 50% of the bonuses would be payable upon achieving the revenue~~ and ~~profit~~impair ~~targets~~its ~~set~~ability ~~by the Board, with the balance~~ to ~~be paid in the discretion of the board for exceptional performance~~compete. ~~This policy remains in effect.~~

InThe ~~February,~~Company ~~2005~~depends ~~the~~on ~~board~~offshore ~~awarded~~sub-contract ~~the~~labour ~~following~~in ~~bonuses~~its togeomatics ~~the~~operations ~~Named~~to ~~Executive~~maintain ~~Officers in~~a ~~respect~~competitive ofposition ~~the performance of the Company~~ in the ~~financial~~geomatics ~~year ended November 30, 2004:~~marketplace.

Ken Kirkpatrick	$	22,500
Andrew Carniel	$	7,500
John Sentjens	$	15,000

The Company’s geomatics operations are dependent upon labour resources located outside North America. While the Company enters into sub-contract agreements with these suppliers, it cannot be sure that the labour resources will be available when required and at the levels

13Page 8

~~The compensation of John Jacobson, the President and Chief Executive Officer, consists of the same~~required. elements as are included in the compensation of other executive officers as described above and is established by the board in consultation with the Human Resources and Compensation Committee based on its opinion as to a fair and reasonable compensation packageAccordingly, ~~taking~~maintaining ~~into account his contribution to~~ the Company’s ~~performance,~~competitiveness ~~long-term~~will ~~growth~~depend ~~and~~upon ~~corporate~~a ~~remuneration~~number ~~practices~~of infactors, ~~Canada and abroad.~~including:

~~The~~• ~~Company’s~~the ~~executive~~geopolitical ~~compensation~~uncertainties ~~programs~~specific ~~are also designed~~ to ~~attract~~the ~~and~~home ~~retain~~country ~~highly qualified~~of ~~senior~~each ~~executives and recognize that long~~sub-~~term~~contractor; ~~performance~~• ~~incentives are an integral part of aligning~~ the ~~interest~~cultural ofcompatibility ~~executive~~between ~~officers~~Canada and the ~~Company’s~~home ~~shareholders.~~country ~~Long-term incentives~~of ~~are~~each ~~principally~~sub-contractor; in• the ~~form~~English oflanguage ~~stock~~proficiency ~~options.~~of ~~When~~the ~~determining~~labour ~~whether~~resources ~~and~~made ~~how~~available ~~new options are~~ to ~~be granted,~~ the ~~Human~~Company; ~~Resources~~• ~~and~~labour ~~Compensation~~pool ~~Committee~~characteristics ~~will~~such ~~consider~~as awork ~~number~~ethic, ~~of factors including salary~~education, skill level ~~of responsibility~~ and ~~the~~attrition; ~~amount~~ and ~~terms~~• of the ~~options.~~infrastructure ~~Stock options~~of toboth ~~executive~~the ~~officers~~sub-contractor’s ~~are~~home ~~typically~~country ~~granted early in each fiscal year~~ and ~~are~~the ~~generally subject to vesting over a period of three years~~sub-contractor.

~~During~~While ~~fiscal 2002,~~ the ~~Human~~presence ~~Resources and Compensation Committee also conducted a review~~ of ~~the Company’s~~these ~~compensation~~factors ~~program to employees with a view to decreasing the emphasis on stock options as a component of long-term compensation~~ and ~~increasing~~ the ~~emphasis~~impact ~~on other forms~~ of ~~compensation.~~ Inthese ~~January~~factors ofare ~~2003,~~difficult the board of directors, on the recommendation of the Human Resources and Compensation Committee, implemented a new plan for all employees, including the Named Executive Officers, whereby the Company will pay a maximum percentage of an employee’s base salary earned during the year to ~~a designated registered retirement savings plan~~predict, ~~provided that the~~any ~~employee~~one ~~matches~~or ~~such~~more ~~payment. The percentage~~ of ~~base~~them ~~salary~~could ~~was~~adversely ~~initially~~affect set at 3% in fiscal 2003 and 2004, and was increased to 4% for fiscal 2005. The Human Resources and Compensation Committee proposed this plan as a new benefit for employees to encourage saving while providing an incentive package which is competitive with those offered by similar companies. Concurrently with the ~~implementation~~ ~~of this new plan, the~~ Company ~~informed its employees that, starting in the fiscal year 2004, the Company reduced the number of incentive stock options granted under the Company~~’s ~~incentive~~ ~~stock~~geomatics ~~option~~operations ~~plans~~ in ~~order to reduce~~ the ~~dilutive effects on the Company’s shares arising from the exercise of stock options~~future.

The ~~above~~Company ~~report~~may isbe ~~submitted~~unable byto ~~the~~adequately ~~Human~~protect ~~Resources~~its ~~and~~intellectual ~~Compensation~~property ~~Committee~~rights, ~~for~~which ~~the financial~~could ~~year~~affect ~~ended~~its ~~November 30,~~ability ~~2004:~~to compete.

~~“Helmut~~Protecting ~~Lobmeier~~the Company’s intellectual property rights is critical to its ability to compete and succeed as a company. The Company has trademark and copyright registrations, ~~Walter~~which ~~Purio~~are necessary and ~~Raymond~~contribute ~~Johnston”~~significantly to the preservation of its competitive position in the market. There can be no assurance that any of the trademarks, copyrights and other intellectual property will not be challenged, invalidated or circumvented by third parties. In the future, the Company may not be able to obtain necessary licenses on commercially reasonable terms. The Company enters into confidentiality and invention assignment agreements with its employees, and enters into nondisclosure agreements with its suppliers and customers, as appropriate, so as to limit access to and disclosure of the Company’s proprietary information. These measures may not suffice to deter misappropriation or independent third party development of similar technologies.

~~Performance~~The ~~Graph~~Company’s operations depend on component availability and its key suppliers to manufacture and deliver its products and services.

The ~~following~~Company’s ~~graph~~operations ~~compares~~are highly dependent on the ~~total~~timely ~~cumulative~~delivery ~~shareholder~~of ~~return~~materials ~~for~~by ~~$100~~outside suppliers. ~~invested~~While the Company enters into purchase agreements with a few of its suppliers, the Company cannot be sure that materials, components, and subsystems will be available in the ~~common~~quantities ~~shares~~required, if at all. If any of the suppliers fail to meet the Company’s ~~with~~needs, it may not have readily available alternatives. The Company’s inability to fill its supply needs would jeopardize its ability to satisfactorily complete the ~~TSX~~Company’s ~~Composite~~obligations ~~Index~~under its contracts on a timely basis. This might result in reduced sales, contractually imposed penalties for delay in delivery, termination of ~~the~~one ~~TSX~~or ~~during~~more of these contracts or damage to the ~~period~~Company’s ~~December 1,~~reputation and ~~1999~~relationships ~~through~~with ~~November 30,~~its ~~2004~~customers. All of these events could have a negative effect on the Company’s financial condition.

14The unpredictability of the Company’s results may harm or contribute to the volatility of the trading price of its common stock.

~~Compensation~~The Company’s operating results may vary significantly over time for a variety of ~~Directors~~reasons, many of which are outside its control and any of which may harm its business. The value of the Company’s common stock may fluctuate as a result of considerations that are difficult to forecast, such as:

~~During~~• the ~~early~~volume ~~part of the 2002 fiscal year the Compensation Committee (now known as the Human Resources~~ and ~~Compensation~~timing ~~Committee), at the request~~ of ~~the~~product ~~board,~~orders ~~engaged~~received ~~the~~and ~~services~~delivered; of• ~~an independent~~levels ~~consulting firm to assist it in conducting a review~~ of ~~compensation~~product ~~for~~demand; ~~both~~• ~~its executive~~government ~~officers~~ and ~~directors~~corporate inspending ~~comparison~~patterns; to• ~~other companies. The Compensation Committee made recommendations to~~ the ~~board~~timing ~~respecting director compensation based on the report~~ of ~~the independent~~contract ~~consultant.~~receipt ~~The~~and ~~Company~~funding ~~continues~~and toresulting ~~compensate~~impact ~~its~~on ~~directors with reference to that report. During~~ the ~~financial year ended November 30, 2004, each member of the board of directors of the~~ Company’s ~~whowas~~working ~~not~~capital anposition; ~~employee~~• of the Company’s ~~was~~ability ~~entitled to receive $1,500 for each board meeting attended in person,~~ and ~~$1,000 for each board meeting which was held by means of telephone conference call if of significant length or involving significant preparation. The two directors who are resident in~~ the ~~United~~ability States were paid in U. S. funds, while the other directors (all Canadian residents) were paid in Canadian funds. During the fiscal year the board held three face-to-face meetings and three telephone conference call meetings. All of ~~the~~its ~~directors~~key ~~attended or~~suppliers ~~participated in all of the meetings with the exception of Brian Walsh (a former director who did not stand for re-election at the 2004 annual general meeting), who missed one face-~~to~~-face~~ ~~meeting and~~respond two conference call meetings. The directors as a group were paid an aggregate of approximately $66,350 for attending or participating in these meetings. In addition, the Chairman of the board was paid an annual retainer of $30,000. Each of the remaining directors was paid an annual retainer of $15,000. The Audit Committee chair was paid an annual retainer of $5,000 and the Human Resources and Compensation Committee chair was paid an annual retainer of $3,500. Each member of the Audit Committee was entitled to ~~receive~~changes $1,000 for each Audit Committee meeting attended and each member of the Human Resources and Compensation Committee was paid $1,000 for each Human Resources and Compensation Committee meeting attended. Members of the Audit Committee were paid a total of $17,500 for attending or participating in acustomer total of four Audit Committee meetings. Members of the Human Resources and Compensation Committee were paid a total of $14,200 for attending or participating in a total of four Human Resources and Compensation Committee meetings. orders;

~~SECURITIES~~Page ~~AUTHORIZED FOR ISSUANCE UNDER EQUITY COMPENSATION PLANS~~9

~~The~~• ~~only~~the ~~compensation~~timing ~~plans under which equity securities~~ of the Company’s ~~are~~new ~~authorized~~product ~~for issuance~~introductions ~~are~~and ~~the~~its ~~three~~competitors’ ~~Stock~~new ~~Option~~product ~~Plans~~introductions; of• the ~~Company,~~cost ~~all~~and availability of ~~which~~components ~~have~~and ~~been~~subsystems; ~~approved~~• byprice erosion; • the ~~shareholders.~~ ~~The~~adoption ~~following~~of ~~table~~new ~~sets~~technologies ~~out~~and aindustry ~~summary~~standards; of• ~~the~~competitive ~~number~~factors, ofincluding ~~securities~~pricing, toavailability beand ~~issued~~demand ~~upon the~~for ~~exercise~~competing ofproducts; ~~outstanding~~• ~~options~~fluctuations asin atforeign ~~the~~currency ~~Company’s~~exchange ~~year-end~~rates; ofand ~~November 30,~~• ~~2004~~regulatory developments.

Number of Securities

Remaining Available

Number of

for Future Issuance

Securities to be

Under Equity

Issued Upon

Weighted-Average

Compensation Plans

Exercise of

Exercise Price of

(Excluding

Outstanding

Securities

Options, Warrants

Reflected in

and Rights

Column (a))

Plan Category

(a)

(b)

(c)

Equity compensation plans approved by securityholders

2,254,047

1.11

2,121,447

Equity compensation plans not approved by securityholders

Total

2,254,047

1.11

2,121,447

The Company may pursue strategic relationships, investments and acquisitions. The Company may not be able to successfully manage its operations if it fails to successfully integrate the acquired technologies and/or businesses.

15As part of the Company’s business strategy, it may expand its product offerings to include application software products that are complementary to the Company’s existing products. This strategy may involve technology licensing agreements, joint development agreements, investments or acquisitions of other businesses that offer complementary products. The risks that the Company may encounter in acquiring or licensing technology from third parties include the following:

~~Directors’~~• difficulty in integrating the third party product with its products; • undiscovered software errors in the third party product; • difficulties in selling the third party product; • difficulties in providing satisfactory support for the third party product; • potential infringement claims from the use of the third party product; and ~~Officers’~~• ~~Liability~~discontinuation ~~Insurance~~ of third party product lines.

During the 2003/04 fiscal year the Company carried directors’ and officers’ liability insurance providing coverage of up to $5,000,000, subject to a deductible of $25,000, with respect to its directors and officers as a group. The ~~total~~risks ~~annual~~commonly ~~premium~~encountered in ~~respect of such insurance was approximately $75,000. During~~ the ~~current~~investment ~~fiscal~~in ~~year,~~or ~~the~~acquisition ~~Company carries liability insurance providing coverage~~ of upbusinesses towould ~~$5,000,000 subject to a deductible of $25,000 with respect to its~~accompany ~~directors~~any ~~and~~future ~~officers~~investments asor aacquisitions ~~group.~~by ~~The total annual premium in respect of such insurance is approximately $82,000. In addition,~~ the Company ~~carries an excess directors’ and officers’ liability policy providing coverage of an additional $5,000,000 with no deductible at an annual premium of $66,000~~. ~~The~~Such ~~premiums~~risks ~~respecting~~may ~~these~~include ~~policies were and are paid by~~ the ~~Company and~~following: ~~charged to income.~~

~~STATEMENT~~• OFissues ~~CORPORATE~~related ~~GOVERNANCE~~to ~~PRACTICES~~ product transition (such as development, distribution and customer support);

~~The~~• ~~Toronto Stock Exchange (~~the ~~“TSX”)~~substantial ~~requires~~management atime ~~listed~~devoted ~~company~~ to annually disclose its approach to corporate governance with specific reference to a series of guidelines for effective corporate governance (the “TSX Guidelines”). The TSX Guidelines address matters such ~~as the constitution and independence of corporate boards, the functions to be performed by boards and their committees and the effectiveness and education of board members.~~ activities;

~~The~~• ~~Company’s board of directors and senior management consider good corporate governance to be central to~~ the ~~effective,~~potential ~~efficient~~disruption ~~and prudent operation~~ of the Company~~. One key element of sound corporate governance emphasized by the Company is having a board of directors which is relatively independent of management. To that end, six of the Company~~’s ~~seven~~ongoing directors are outside directors, while only one member of management (being John Jacobson, the President and CEO), serves on the Board. The Company’s approach to corporate governance is described below. business;

1. The board of directors should explicitly assume responsibility for the stewardship of the Company and adopt a formal mandate setting out the Board’s stewardship responsibilities		The board of directors has assumed responsibility for the stewardship of the Company by overseeing the management and operations of the business of the Company and supervising management, which is responsible for the day-to-day conduct of the business.
		The board establishes the overall policies for the Company and monitors and evaluates the Company’s strategic direction and retains plenary power for those functions not specifically delegated by it to management.
		The board has a corporate governance policy setting out, among other things, the Board’s responsibility for stewardship, including such matters as decisions requiring board approval, measures for receiving shareholder feedback and the Board’s expectation of management. The board has developed a code of business ethics which governs the behavior of directors, officers and employees.

•

undisclosed liabilities;

16 • failure to realize anticipated benefits (such as synergies and cost savings);

Specifically the board of directors should assume responsibility for:
(a) adoption of a strategic planning process and the approval and review of a strategic plan on at least an annual basis		Long-term goals and strategies for the Company are developed as part of an annual strategic planning process with the board. The strategic planning process also includes the preparation of a detailed one-year operating plan which takes into account, among other things, the opportunity and risks of the business. Through this process, led by the C.E.O. and senior management of the Company, the board adopts the operating plan for the coming financial year and monitors senior management’s relative progress through a regular reporting and review process. The board reviews on a quarterly basis the extent to which the Company has met the current year’s operating plan. The board has regular discussions on corporate strategies and implementation.
		In addition, in February, 2005 the board appointed a new committee, known as the Corporate Finance and Development Committee, whose mandate is to liaise with and provide guidance to management with respect to corporate finance matters, potential acquisitions and other strategic initiatives, and to provide reports and recommendations to the board from time to time with respect to such matters. The members of the Committee are John Jacobson and Brinton Coxe. Gerald Shields, corporate counsel to the Company, serves as an advisor to the committee.
(b) the identification of the principal risks and ensuring the implementation of appropriate systems to manage these risks		The board has identified the principal risks of the Company’s business, which it monitors through established systems and procedures.
		The Audit Committee reviews and monitors risk-management systems, disaster recovery plans and financial exposure and also undertakes ongoing efforts to identify risks and appropriate safeguards.
(c) succession planning, including appointing, training and monitoring senior management and C.E.O. in particular		The board reviews and approves all appointments of senior officers. The Human Resources and Compensation Committee also has responsibility for assessing the requirements and performance, on an overall basis, of the CEO and other senior officers in order to recommend salaries and incentive awards for performance. The CEO has put in place a process whereby senior managers develop objectives, review them with the CEO and are measured against them.

•

the difficulty of integrating previously distinct businesses into one business unit; and

17 • technological uncertainty regarding the current and future functionality of the product.

(d) communication policies		The board has implemented appropriate procedures and processes to ensure complete, timely and effective communications between the Company, its members, the public and regulatory agencies. All public financial information is reviewed and approved by the board prior to its release.
(e) integrity of internal control and management information systems		The Board, through its Audit Committee, meets with the Company’s external auditor to discuss the results. Those discussions include, in accordance with generally accepted auditing standards, a review of the Company’s financial systems and related internal controls. The Audit Committee also reviews, quarterly with management, the Company’s internal control and management information systems as part of financial risk assessment and reviews accounting policies in place.
2. A majority of the board of directors should be “unrelated directors”		The TSX Guidelines recommend that the board of every Company be constituted with a majority of individuals who qualify as unrelated directors. An unrelated director is a director who is: (i) not a member of management and is free from any interest and any business, family or other relationship which could reasonably be perceived to materially interfere with the director’s ability to act with a view to the best interests of the Company, other than interests and relationships arising solely from holdings in the Company, (ii) not currently, or has not been within the last three years, an officer, employee of or material service provider to the Company or any of its subsidiaries or affiliates; and (iii) not a director (or similarly situated individual), officer, employee or significant shareholder of an entity that has a material business relationship with the Company. The chair or a vice chair of the board of directors, if he or she is not a member of management, will not be considered to be a related director. A related director is a director who is not an unrelated director.
		On application of this definition, five of the Company’s seven directors who served during the fiscal year are unrelated.
3. Disclose whether each director is “unrelated”		The board of directors is currently comprised of Raymond Johnston (Chair), John Jacobson, Tony Pezzotti, Helmut Lobmeier, Walter Purio, Brinton Coxe and Peter Roberts. Messrs. Pezzotti and Roberts are not standing for re-election to the board at the Meeting.

The Company may require additional capital, in which case it may need to raise additional funds from lenders and equity markets in the future.

18If the Company’s expenditures exceed its incoming cash flows, the Company may be required to raise additional capital. In addition, the Company may choose to pursue additional financing in order to capitalize on potential opportunities in the marketplace that may accelerate its growth objectives. The Company’s ability to arrange such financing in the future will depend in part on the prevailing capital market conditions as well as on its business performance. There can be no assurance that the Company will be successful in its efforts to raise additional funds, if needed, on terms satisfactory to it. If additional capital is raised by the issuance of shares, shareholders may experience dilution to their equity interest in the Company.

		All of the Directors are unrelated except for John Jacobson, who is the President and Chief Executive Officer of the Company, and Brinton Coxe, who is a related director by virtue of the fact that the Company has agreed to pay him substantial compensation in consideration of the provision of advisory services in connection with a proposed private placement. See “Private Placement” under “Particulars of Matters to be Acted Upon” below.
		Additional disclosure on board members with respect to their business experience and backgrounds can be found under the section entitled “Election of Directors” in this Information Circular, as well as in the Annual Information Form and Annual Report of the Company.
4. Appoint a committee responsible for appointment/assessment of directors, composed solely of non-management directors, the majority of whom are unrelated directors		Due to the relatively small size of the board (currently 7 in number), the board as a whole assumes responsibility to assess and make recommendations regarding board effectiveness and to establish a process for identifying, recruiting, appointing, reappointing and providing ongoing education and development for directors.
5. Implement a process for assessing the effectiveness of the Board, its committees and individual directors		During the financial year ended November 30, 2004, the board engaged the services of an independent consultant to review the overall effectiveness of the board and make recommendations on how to improve board effectiveness. The board has implemented a process for assessing its effectiveness on an annual basis.
6. Provide orientation and education programs for new directors, and continuing education for all directors.		New directors are given extensive briefings by the Chairman of the board, the C.E.O. and other members of senior management with respect to the business and operations of the Company, and they make an on-site visit to the Company’s headquarters. New directors are also provided with a record of public and other pertinent information concerning the Company and a corporate manual. Directors are provided with summaries of developments and regulatory amendments to corporate governance policies on an ongoing basis. At the last board meeting of each year a proposed schedule for board meetings for the forthcoming year is presented, and the time commitment required of the board and committee members is reviewed to ensure that all directors and committee members are made aware of what is expected of them.

The Company’s business could be adversely affected if it fails to manage its growth effectively.

19If the Company fails to manage its growth effectively, the Company’s business and operating results could be adversely affected. The Company expects to continue to grow its operations domestically and internationally, and to hire additional employees. The growth in the Company’s

7. Examine the size and composition of the Board, and undertake, where appropriate, a program to establish a board comprised of members who facilitate effective decision-making		The board of directors is of the view that its size and composition are currently well suited to the circumstances of the Company and allows for the effective functioning of the board of directors.
8. A board committee comprised solely of unrelated directors should review the adequacy and form of the compensation of senior management and directors, with such compensation realistically reflecting the responsibilities of such positions		The Human Resource and Compensation Committee is mandated to review, and recommend to the board for approval, the remuneration of senior management and directors. That Committee does so not less than annually. The Human Resource and Compensation Committee and the board consider responsibilities, risks, time commitment and comparative remuneration in determining compensation.
9. Committees should generally be composed of outside directors, with a majority of unrelated directors		The board has established four standing committees consisting of the Audit Committee, the Human Resources and Compensation Committee, the Executive Committee and the Corporate Finance and Development Committee.
		The members of the Audit Committee are Peter Roberts (Chair, who is not standing for re-election at the Meeting), Walter Purio and Helmut Lobmeier, all of whom are unrelated directors. The Company has commenced a search to find an individual with financial literacy to replace Mr. Roberts as a director and a member of the Audit Committee.
		The members of the Human Resources and Compensation Committee are Helmut Lobmeier (Chair), Walter Purio and Raymond Johnston, all of whom are unrelated directors.
		The members of the Executive Committee are Raymond Johnston (Chair) and Brinton Coxe, who are unrelated directors, and John Jacobson, who is President and CEO.
		The members of the Corporate Finance and Development Committee are Brint Coxe (Chair) who is an unrelated director, and John Jacobson, who is President and C.E.O. Gerald Shields, the Company’s corporate legal counsel, serves as an advisor to that Committee.

Page 10

20operations and staff has placed, and will continue to place, a significant strain on its management systems and resources. If the Company fails to manage its future anticipated growth, the Company may experience higher operating expenses, and it may be unable to meet the expectations of investors with respect to future operating results. To manage this growth the Company must, among other things, continue to:

10. Assume responsibility for, or appoint a committee responsible for, determining the Company’s approach to corporate governance issues, including the Company’s response to TSX Governance Guidelines		The board is responsible for the Company’s approach to corporate governance issues, including the Company’s disclosure in response to TSX Guidelines, the periodic review of board and Committee composition and ensuring that the corporate governance system effectively supports the discharge of its obligations to the shareholders of the Company. The board has decided not to appoint a committee to handle these responsibilities due to the relatively small size of the Board.
11. Define limits to management’s responsibilities by developing mandates for the board and for the CEO		The board has delegated to the CEO and senior management the responsibility for day-to-day management of the business of the Company, subject to compliance with the plans approved from time to time by the board. In addition to those matters which must by law or by the Articles of the Company be approved by the board, the board has specified limits to management’s responsibility, and retains responsibility for significant changes in the Company’s affairs such as approval of major capital expenditures, debt and equity financing arrangements, significant acquisitions and dispositions and appointment of senior management.
		As part of its annual strategic planning process, the board’s expectations of senior management over the next financial year, and in the context of the longer-term strategic plan, are specified. The board also reviews and approves the annual corporate performance objectives for which the CEO is responsible. The CEO, COO, Vice-President Business Development and Corporate Controller generally review the Company’s progress at board meetings, normally held every quarter. The reports of senior management also cover strategic, operational, financial and marketing issues facing the Company.
12. Establish structures and procedures to enable the board to function independently of management		The board is responsible for putting structures and processes in place to ensure the board can function independently.
		The independence of the board is reinforced through the Executive Officer. The Chair must not be a member of management. The Chair has the responsibility to oversee the discharge by the board of its responsibilities.

•

improve its financial and management controls, reporting systems and procedures;

21 • add and integrate new senior management personnel;

		Each of the Committees has specific authority to retain external advisors, as appropriate (at the expense of the Company) upon notice to the Chair of the Board.
		Members of the board may request at any time, through the Chairman, that a meeting or a portion thereof be restricted to outside members of the board for the purpose of discussing matters independently of management. The board meets annually without the participation of related directors for the purpose of receiving the report of the Human Resources and Compensation Committee concerning recommendations for any adjustment to compensation of senior management. The board also excludes related directors from participation in a portion of meetings from time to time as the Board deems necessary for the proper consideration of matters involving senior management. The board adopts the same practice in cases where a director has an interest in a proposed transaction. separation of the positions of Chairman and Chief
13. Establish an Audit Committee composed solely of unrelated directors, all of whom should be financially literate and at least one of whom should have accounting or related financial experience		The Audit Committee, which is composed entirely of unrelated directors, is responsible for reviewing audit functions and the preparation of financial statements, and reviewing and recommending for approval to the board all public disclosure information such as financial statements, quarterly reports, financial news releases, annual information forms, management discussion and analysis, and prospectuses. The Audit Committee held four face-to-face meetings and one telephone conference meetings during the 2004 financial year.
		The board has adopted the following definition of “financial literacy”: the ability to read and understand a balance sheet, an income statement, a cash flow statement and the notes attached thereto. The board has adopted the following definition of “accounting or related financial experience”: the ability to analyze and interpret a full set of financial statements, including the notes attached thereto, in accordance with Canadian generally accepted accounting principles. Mr. Peter Roberts joined the board in September of 2003 and accepted an appointment to the Audit Committee at that time. Mr. Roberts has informed the Company that he will not be standing for re-election as a member of the board at the Meeting.

•

improve its licensing models and procedures;

22 • hire, train and retain qualified employees;

		The Company has commenced a search to find an individual with financial literacy to replace Mr. Roberts as a director and as a member of the Audit Committee.
		The Audit Committee also ensures that management has effective internal control systems and an appropriate relationship with the external auditors and meets regularly with them without management present.
14. The Audit Committee Charter should set out explicitly the role and oversight responsibility of the Audit Committee		The Audit Committee of the board of directors has reviewed the Company’s financial statements and its internal controls and audit process since the Company acquired Offshore Systems Ltd. in 1990. The board adopted a revised charter for the Audit Committee in April, 2003 which sets out its mandate and operating principles and procedures. A copy of the Audit Committee Charter is available on the Company’s website at www.osil.com.
15. Implement a system to enable an individual director to engage an external advisor, at the Company’s expense in appropriate circumstances, subject to approval of an appropriate committee of the Board		Individual directors of the Company may engage outside advisors at any time at the Company’s expense to provide advice with respect to a corporate decision or action, subject to the approval of the executive Committee.

•

maintain sufficient working capital;

~~INTEREST~~• OFcontrol ~~INFORMED PERSONS IN MATERIAL TRANSACTIONS~~ expenses;

~~Other~~• ~~than~~diversify aschannel ~~set~~sales ~~forth~~strategies; ~~in this or any previous Information Circular,~~ and other than transactions carried out in the normal course of business of the Company or any of its affiliates, none of the directors or senior officers of the Company, any member beneficially owning shares carrying more than 10% of the voting rights attached to the shares of the Company, nor an associate of affiliate of any of the foregoing persons, had since December 1, 2004, being the date of commencement of the Company’s last completed financial year, any material interest, direct or indirect in any transactions which materially affected the Company or in any proposed transaction which has or would materially affect the Company.

~~APPOINTMENT~~• ~~AND~~invest ~~REMUNERATION~~in OFits ~~AUDITOR~~ internal networking infrastructure and facilities.

~~Management~~The ~~of the~~ Company ~~proposes~~has ~~that~~committed ~~Ernst~~funds &to ~~Young~~obtaining ~~LLP,~~additional ~~Chartered~~systems ~~Accountants,~~and offacilities ~~Suite 1600~~to –accommodate its ~~700~~current ~~West~~and ~~Georgia~~future ~~Street,~~anticipated ~~Vancouver,~~growth. ~~British~~To ~~Columbia,~~the beextent ~~re-appointed~~that asthis ~~auditor~~anticipated ofgrowth ~~the~~does ~~Company~~not tooccur or ~~hold~~occurs ~~office~~more ~~until~~slowly than the ~~next~~Company ~~annual~~anticipates, ~~general~~it ~~meeting~~may ofnot be able to reduce expenses to the ~~members~~same degree. ~~Management~~If ~~further~~the ~~proposes~~Company ~~that~~incurs operating expenses ~~the~~out ~~shareholders~~of ~~pass~~proportion ato ~~resolution~~revenue ~~authorizing~~in ~~the~~any ~~directors~~given toquarter, ~~fix~~its ~~the~~operating ~~remuneration~~results ~~payable~~may tobe ~~the auditor~~adversely impacted.

~~MANAGEMENT~~Third ~~CONTRACTS~~parties may claim that the Company infringes their proprietary rights.

~~Management~~The ~~services~~Company ~~for~~potentially may receive claims that it has infringed the intellectual property rights of others. As the number of products in the software industry increases and the functionality of these products further overlap, the Company ~~are~~may ~~not~~become increasingly subject to infringement claims, including patent, trademark and copyright infringement claims. In addition, former employers of the Company’s former, current or future employees may assert claims that such employees have improperly disclosed to ~~any~~the ~~material~~Company ~~degree~~the confidential or proprietary information of these former employers. Any such claim, ~~performed~~with byor ~~persons~~without ~~other~~merit, could be time-consuming to defend, result in costly litigation, ~~than~~divert management’s attention from the ~~directors~~Company’s ~~and~~core ~~senior~~business, ~~officers~~require it to stop selling or delay shipping, or cause the redesign of its product or products. In addition, the Company may be required to pay monetary amounts as damages, for royalty or licensing arrangements, or to satisfy indemnification obligations that it has with some of its customers.

23The Company licenses and uses software from third parties in its business. These third party software licenses may not continue to be available to the Company on acceptable terms. Also, these third parties may from time to time receive claims that they have infringed the intellectual property rights of others, including patent and copyright infringement claims, which may affect the Company’s ability to continue licensing this software. The Company’s inability to use any of this third party software could result in shipment delays or other disruptions in its business, which could materially and adversely affect the Company’s operating results.

~~PARTICULARS~~The OFCompany ~~MATTERS~~may TOnot BEbe ~~ACTED~~able ~~UPON~~to protect its proprietary information.

~~NEW~~The ~~BUSINESS~~Company ~~CORPORATIONS~~relies ~~ACT~~on ~~(BRITISH~~a ~~COLUMBIA)~~combination of copyright, trademark and trade secret laws, confidentiality procedures, contractual provisions and other measures to protect its proprietary information. All of these measures afford only limited protection. These measures may be invalidated, circumvented or challenged, and others may develop technologies or processes that are similar or superior to the Company’s technology. Despite the Company’s efforts to protect its proprietary rights, unauthorized parties may attempt to copy the Company’s products or to obtain or use information that the Company regards as proprietary.

OnPage ~~March 29, 2004, the British Columbia legislature enacted the Business Corporations Act (the “New~~11 ~~Act”) and repealed the Company Act (the “Former Act”) which previously governed the Company. The~~ ~~New Act removes many of the restrictions contained in the Former Act, including restrictions on the~~ ~~residency of directors, the place of annual general meetings and limits on authorized share~~ capital. The New Act also uses new forms and terminology. In accordance with the BCA, the Company has filed a transition application with the Registrar of Companies, the principal element of which involved replacing the Company’s Memorandum with a new form designated as a Notice of Articles. The Company filed its transition application and was issued a Notice of Articles on May 14, 2004.

The Company is seeking shareholder approval to amend its Notice of Articles by removing the pre-existing company provisions (the “Pre-existing Provisions”) applying to the Company that relate to certain restrictions contained in the Former Act (and that are no longer required under the New Act). In addition, the Company is also seeking shareholder approval to replace the Company’s ~~current~~ ~~articles~~products ~~(the~~may ~~“Existing~~contain ~~Articles”)~~significant ~~with~~defects, ~~new articles (the “New Articles”)~~ which ~~will incorporate~~may ~~some~~result ofin ~~the~~liability ~~more flexible provisions of the New Act. The directors of the Company believe that amending the Company’s Notice of Articles to delete the Pre-existing Provisions~~ and/or ~~then~~decreased replacing the Existing Articles with the New Articles will enable the Company to be more efficient, flexible and cost-effective and will bring the Company’s charter documents into line with the New Actsales.

InSoftware ~~order~~products frequently contain bugs, errors or failures, especially when first introduced or when new versions are released. Despite the Company’s efforts to betest ~~effective~~its products, the ~~proposed~~Company might ~~special~~experience ~~resolutions~~significant ~~must~~errors beor ~~approved~~failures byin aits ~~three-quarter~~products, or they might not work with other ~~majority~~hardware ~~vote~~or ~~cast~~software byas ~~those~~expected. ~~shareholders~~This could delay the development or release of new products or new versions of products, or could adversely affect market acceptance of the Company’s ~~who,~~products. Customers ~~being~~use ~~entitled~~the Company’s products for applications that are critical to dotheir sobusinesses, ~~vote~~and they inhave a greater sensitivity to product defects than the market for other software products ~~person~~generally. orThe Company’s customers may claim that the Company is responsible for damages to the extent they are harmed by ~~proxy~~the atfailure of any of the ~~Meeting~~Company’s products. If the Company were to experience significant delays in ~~respect~~the release of ~~such~~new ~~resolutions~~products or new versions of products, or if customers were dissatisfied with product functionality or performance, the Company could lose revenue or be subject to liability for service or warranty costs. Should this occur, the Company’s business and operating results could be adversely affected.

The ~~directors of the~~ Company’s ~~believe~~products ~~that~~depend ~~the~~on ~~passing~~third ofparty ~~the~~software ~~following~~products ~~special~~and ~~resolutions~~its isreputation ~~in the~~and ~~best~~results ~~interests~~ of operations ~~the~~could ~~Company~~be ~~and~~adversely ~~recommend~~affected ~~that~~by ~~shareholders of~~ the Company’s ~~vote~~inability into ~~favour~~control ~~of the~~their ~~resolutions~~operations.

~~Removal~~The ofCompany’s ~~Application~~products ofincorporate ~~Pre~~and ~~-existing~~use software products developed by other entities. The Company ~~Provisions~~does not have assurance that such third parties will:

~~Under~~• the New Act, a company existing under the Former Act is subject to Pre-existing Provisions reflecting certain restrictions contained in the Former Act that are required to be incorporated in its Notice of Articles. The Pre-existing Provisions remain ~~operative until the shareholders of the company remove them by special resolution. If Pre-existing Provisions are to be removed from a company’s Notice of Articles, they must be removed~~ in their entirety. Because the Company is a reporting issuer, the only significant Pre-existing Provision that is applicable is the requirement that a special resolution be approved by not less than three quarters (3/4) of the votes cast, as opposed to the two-thirds (?) majority applicable under the BCA. Removal of the Pre-existing Provisions will allow a special resolution of the Company to be approved by a two-thirds (?) majority vote, which will provide the Company with greater flexibility for future corporate activities and be consistent with companies in other jurisdictions. business;

~~Accordingly,~~• atsupport the ~~Meeting, the shareholders of the~~ Company’s ~~will~~product ~~be asked to pass the following special resolution to alter the Notice of Articles of the Company:~~ lines;

~~“BE~~• ITmaintain ~~RESOLVED,~~viable asand afunctional ~~special~~product ~~resolution,~~lines; ~~that:~~ and

~~(a)~~• ~~the~~make ~~Pre-existing~~their ~~Company~~product ~~Provisions~~lines ~~(as~~available ~~defined~~to in the ~~Business Corporations Act (British Columbia) in the Notice of Articles of the~~ Company ~~are~~on ~~hereby~~commercially ~~deleted;~~acceptable ~~(b) the Company’s Notice of Articles be altered accordingly;~~terms.

24Any significant interruption in the supply of such third-party technology could have a materially adverse effect on the Company’s business, results of operation, cash flows and financial condition.

~~(c)~~The ~~any~~Company’s ~~one~~products ~~director~~may ornot ~~officer of the Company~~ be ~~and~~compatible iswith ~~hereby~~various ~~authorized~~operating tosystems ~~execute~~ and ~~deliver~~therefore ~~all such documents and instruments, including~~ the ~~Notice of Alteration reflecting the removal of the Pre-existing~~ Company ~~Provisions, and to do such further acts as~~ may not be ~~necessary~~able to ~~give~~sell ~~full effect to this special resolution; and (d) the board of directors of the Company is hereby authorized, at any time in~~ its ~~sole~~products ~~discretion,~~ to ~~determine~~potential ~~whether or not to proceed with this resolution without further approval, ratification or confirmation by the shareholders of the Company”~~customers.

~~This~~The ~~special~~Company’s ~~resolution~~products ~~must~~are beused ~~approved~~in bycombination awith ~~majority~~various ofoperating ~~three~~systems. The Company’s future success depends on our ability to continue to support widely-~~quarters~~used ~~(3/4)~~operating ofsystems. The Company’s applications run on Microsoft operating systems. Therefore, the ~~votes~~Company’s ~~cast~~ability byto increase sales depends on the ~~shareholders~~continued acceptance of ~~the~~Microsoft ~~Company~~operating ~~who,~~system ~~being~~products. ~~entitled~~If the Company is unable to dodevelop ~~so,~~and ~~vote~~market inproducts ~~person~~that support Microsoft’s operating platforms or develop byand ~~proxy~~market atproducts ~~the~~that support other operating systems on a timely and cost effective ~~Meeting~~basis, inits ~~respect~~business ofand ~~such~~operating ~~special~~results ~~resolution~~could be adversely affected.

~~The~~Page ~~form of the proposed resolution set forth above is subject to such amendments as management may~~12 ~~propose at the Meeting but which do not materially affect the substance of the proposed resolution.~~

~~The~~Selected ~~Company’s board of directors recommends that shareholders vote in favour of the foregoing~~Information ~~special resolution. Proxies received in favour of management will be voted in favour of such~~ ~~special resolution, unless the shareholder has specified in the proxy that the shares are to be~~ ~~voted against such resolution.~~

Adoption of New Articles


Statement of Earnings
Information	For the six months ended May 31						For the years ended November 30
	2005			2004			2004			2003			2002
	$			$			$			$			$
Revenue		4,141,542			6,803,595			13,451,303			11,520,793			13,814,133

Gross profit		1,602,460			4,343,776			7,781,979			6,361,725			6,713,382

Gross profit percentage		38.7	%		63.8	%		57.9	%		55.2	%		48.6	%

Net earnings (loss) for the period		(1,917,358	)		931,879			248,017			352,016			1,694,126

Basic earnings per share		(0.26	)		0.03			0.00			(0.02	)		0.07

Diluted earnings per share		(0.26	)		0.01			(0.01	)		(0.02	)		0.06

The Company proposes to replace its Existing Articles with New Articles so that its articles will reflect the more flexible provisions of the New Act and new terminology contained in the New Act. A summary of the main differences between the Company’s Existing Articles and the New Articles is contained in Appendix A attached to this Information Circular.


Balance Sheet	As at May 31				As at November 30
Information	(Unaudited)				(Audited)
	2005		2004		2004		2003		2002
	$		$		$		$		$
Cash		13,580,479		1,017,005		251,037		3,837,555		3,244,048

Working capital*		19,485,967		8,977,443		8,287,798		8,071,926		4,449,492

Current assets		23,170,056		11,532,250		10,964,025		10,377,836		8,810,568

Total assets		25,464,611		12,965,217		12,310,738		11,728,257		10,766,438

Current liabilities		3,684,089		2,554,807		2,676,227		2,305,910		4,361,076

Long term liabilities		77,887		93,694		—		187,384		372,717

Total liabilities		3,761,976		2,648,501		2,676,227		2,493,294		4,733,793

Shareholders’ equity		21,702,635		10,316,716		9,634,511		9,234,963		6,032,645

A copy of the proposed form of New Articles is available for inspection by shareholders during normal business hours at any time up to the Meeting at the Company’s registered office located at Suite 1020, 510 Burrard Street, Vancouver, British Columbia, Canada V6C 3A8 and will be available at the Meeting. Additionally, a copy of the proposed New Articles will be mailed, free of charge, to any shareholder who requests, in writing, a copy from the Company at the above mentioned address.


Balance Sheet Information	As at				As at November 30
	May 31, 2005		May 31, 2004		2004		2003		2002
	$		$		$		$		$
Dividends declared per share
Common shares		—		—		—		—		—
Class A preference shares		—		—		—		—		—
Class B preference shares – series 1		1.26		1.50		3.00		2.37		—
Class B preference shares – series 2		0.46		—		—		—		—

AtPage ~~the Meeting, the shareholders of the Company will be asked to pass the following special~~13 ~~resolution to adopt the New Articles for the Company:~~

~~“BE~~* ITWorking ~~RESOLVED,~~Capital asis a ~~special~~non–GAAP ~~resolution,~~measure that: does not have a standardized meaning and may not be comparable to similar measures presented by other issuers. This measure does not have a comparable GAAP measure. Working Capital is defined as current assets less current liabilities.

~~(a)~~The ~~the Articles of the~~ Company’s beannual ~~altered by deleting~~ and ~~canceling~~quarterly ~~the~~results ~~existing~~are ~~Articles~~primarily ~~and~~affected ~~that~~by the ~~form of Articles presented to the meeting~~level, ~~and~~timing ~~initialed for identification by the President of the Company on the first~~ and ~~last pages thereof, be adopted as the Articles~~ duration of ~~the~~customer ~~Company~~orders ~~in substitution for,~~ and tocustomer ~~the~~product ~~exclusion~~delivery ~~of,~~requirements. ~~the~~The ~~existing Articles of the~~ Company; ~~(b)~~depends ~~any~~heavily ~~one~~on government ~~director~~contracts ~~or officer of the Company be~~ and isderives ~~hereby~~a ~~authorized~~significant toamount ~~execute~~of ~~and~~revenue ~~deliver~~from ~~all~~a ~~such~~few ~~documents and instruments~~customers, ~~including~~which ~~any required Notice of Alteration, and to do such further acts as~~ may result ~~be necessary to give full effect to the foregoing; and (c) the board of directors of the Company is hereby authorized, at any time~~ in ~~its~~varying ~~absolute discretion~~revenue, togross ~~determine~~profit ~~whether~~and ~~or not to proceed with the foregoing without further approval, ratification or confirmation by the shareholders of the Company~~earnings.”

25The lower revenue for the six months ended May 31, 2005 as compared to the six months ended May 31, 2004 is attributable to the timing of new contracts that are awarded to the Company, the delivery schedules of existing contracts and the Company experiencing continuing difficulties in penetrating the U.S. markets for its products and services. The Company is addressing these issues by acquiring Mapcon Mapping Consultants Inc. of Salt Lake City, Utah and having completed a private placement of preference shares and warrants of $19.5 million — part of the proceeds of which will be used to pursue additional acquisitions. Mapcon’s acquisition will increase the Company’s geomatics revenue in the U.S. market and the private placement will allow the Company to pursue primarily U.S. acquisitions which will provide the Company with U.S. sales channels for its Navigation Systems and Applications products and services.

~~This~~The ~~special~~lower ~~resolution~~revenue ~~must~~in befiscal ~~approved~~2003 byas acompared ~~majority~~to offiscal ~~three-quarters~~2002 ~~(3/4)~~was oflargely attributable to the substantial ~~votes~~completion ~~cast~~in by fiscal 2002 of the ~~shareholders~~Canadian Department of National Defence contract awarded to the Company ~~who~~in fiscal 2001, ~~being~~the ~~entitle~~Marinette dMarine Corp. contracts to doprovide soECDIS systems for the U.S. Coast Guard Juniper class buoy tenders, ~~vote~~and the substantial completion of the Danish Navy contract in ~~person~~early orfiscal by2003. ~~proxy~~The atincrease in revenue in fiscal 2004 over fiscal 2003 was the result of contracts from the Royal Navy of the United Kingdom and the Royal Australian Navy ~~Meeting~~that were awarded to the Company in ~~respect~~late fiscal 2003 and early fiscal 2004. The Company was not awarded contracts of ~~such~~this ~~special~~magnitude ~~resolution~~in the first or second quarters of fiscal 2005.

The ~~form~~fluctuations in gross profit year over year are impacted negatively by projects that include a large proportion of ~~the~~third-party ~~proposed~~systems ~~resolution~~or ~~set~~labour ~~forth~~resulting ~~above~~in ishigher ~~subject~~cost toof ~~such~~sales. ~~amendments~~Certain contracts asawarded ~~management~~to the Company may require the Company to include third-party systems or labour. ~~propose~~In atorder to maintain competitiveness on these contracts, the ~~Meeting~~Company ~~but~~may ~~which~~elect doto ~~not~~reduce ~~materially~~its ~~affect~~usual margins on the ~~substance~~third party components. In addition, the product mix of Software, Geomatics, Systems and systems components in any given period may impact the ~~proposed~~gross ~~resolution~~profit for the period.

The ~~Company’s~~lower ~~board~~gross ofmargin ~~directors~~percentage ~~recommends~~for ~~that~~the ~~shareholders~~six ~~vote~~months inended ~~favour~~May 31, of2005 as compared to the ~~foregoing~~six ~~special~~months ~~resolution.~~ended ~~Proxies~~May 31, ~~received~~2004 inis ~~favour~~the result of ~~management~~the ~~will~~Company berealizing ~~voted~~higher insoftware ~~favour~~sales ofin ~~such~~the six ~~special~~months ~~resolution~~ended May 31, ~~unless~~2004 when compared to the ~~shareholder~~six ~~has~~months ~~specified~~ended inMay 31, ~~the~~2005. ~~proxy~~Software ~~that~~revenue generates ~~the~~more ~~shares~~favourable ~~are~~margins tothan ~~be voted~~the ~~against~~Company’s ~~such~~other ~~resolution~~revenue streams.

~~ALTERATION~~During OFthe ~~SHARE~~first ~~CAPITAL~~six months of fiscal 2004, the Company’s gross profit percentage increased because of an increase in software revenue. During the last six months of fiscal 2004, the Company’s gross profit percentage was lower when compared to the first six months as the Software revenue decreased and Systems and systems components revenue increased. During the six months ended May 31, 2005, the Company’s gross profit percentage decreased as a result of decreased software revenue when compared to the same period last year.

~~The~~Page ~~authorized capital of the Company consists of 300,000,000 shares divided into 100,000,000~~14 ~~common shares without par value, 100,000,000 Class “A” Preference shares without par value issuable~~ ~~in series, (the “Class A Shares”) of which 10,000,000 shares are designated Class “A” Preference~~ ~~Series A Convertible shares, and 100,000,000 Class “B” Preference shares with a par value of $50~~ per share issuable in series (“Class B Shares”), of which 10,000,000 are designated as Class B Series 1 Convertible Preference shares. In addition, the board of directors, in accordance with powers conferred upon it by the Articles of the Company, has authorized the creation of a new series of Class B Shares, to be designated as 40,000 Class B Series 2 Convertible Preference Shares. A portion of the Class B Series 2 Convertible Preference Shares are to be issued in connection with the private placement of the Company described below under the heading “Private Placement”. As of the date hereof that series of shares has not yet been created; however, it is anticipated that such series of shares will be created prior to the Meeting.

~~The~~Results ~~Company proposes to alter its share capital by increasing the number~~ of ~~authorized voting~~Operations ~~common shares without par value from 100,000,000 to an unlimited number in order to give the~~ ~~Company maximum flexibility to pursue its corporate objectives without incurring the expense of~~ seeking shareholder authorization to amend its share capital further. In addition, the Company is proposing to create a new class of shares to be known as Class “C” Preference Shares without par value (the “Class C Shares”) which will be issuable in series with such rights, privileges and restrictions as may be determined by the board of directors. The purpose of making this proposal is to give the Company greater flexibility in creating shares with appropriate terms for use in connection with acquisitions, financings and other transactions. The rights, privileges and restrictions attached to the existing Class A Shares are such that, having regard to the fact that 30,261 of these shares are outstanding, the Company is restricted in its ability to issue any further series of those shares with terms that are appropriate for financings and other transactions. The existing Class B Shares have a par value of $50.00, which par value makes such shares suitable for some transactions but unsuitable for others. Accordingly, the Company is proposing to create the Class C Shares to increase its flexibility to issue shares on a timely basis which have rights and restrictions tailored to specific transactions and financings.

The ~~proposed~~table ~~rights~~below presents, ~~privileges~~for ~~and~~the ~~restrictions~~periods toindicated, beselected ~~attached~~financial todata of the ~~Class C Shares are described~~Company inexpressed ~~Appendix B~~as toa ~~this~~percentage ~~Information~~of ~~Circular.~~total revenues:

At the Meeting, the shareholders of the Company will be asked to pass the following special resolution to amend the share capital of the Company:


	Three months ended May 31						Six months ended May 31
	2005			2004			2005			2004
	%			%			%			%
Revenue
Software		15.0	%		50.4	%		42.8	%		64.5	%
Geomatics		48.1	%		36.0	%		29.3	%		25.2	%
Systems and system components		29.5	%		8.2	%		23.2	%		6.2	%
Other		7.4	%		5.4	%		4.7	%		4.1	%


		100.0	%		100.0	%		100.0	%		100.0	%

Direct costs		80.3	%		36.0	%		61.3	%		36.2	%


Gross profit		19.7	%		64.0	%		38.7	%		63.8	%


Expenses
General and administrative		53.1	%		33.3	%		49.2	%		24.3	%
Research and development		24.5	%		21.0	%		18.9	%		15.4	%
Sales and marketing		35.8	%		26.5	%		29.6	%		22.5	%
Amortization		4.2	%		2.0	%		3.2	%		1.6	%
Interest		0.5	%		0.0	%		0.5	%		0.0	%
Foreign exchange loss (gain)		2.7	%		0.3	%		(0.5	%)		(0.2	%)
Technology Partnerships Canada royalty		2.0	%		0.3	%		2.2	%		0.8	%
Technology Partnerships Canada contribution		(25.0	%)		(30.7	%)		(17.8	%)		(12.5	%)


		97.8	%		52.7	%		85.3	%		51.9	%


Earnings before income taxes		(78.1	%)		11.3	%		(46.6	%)		11.9	%

Income tax (recovery)		12.0	%		(2.5	%)		(0.3	%)		(1.7	%)


Net earnings for the period		(90.1	%)		13.8	%		(46.3	%)		13.6	%

~~“BE IT RESOLVED, as a special resolution, that:~~Revenues

~~(a)~~The Company’s core revenue stream is derived from four sources: Software, Systems and system components, Geomatics, and Other which includes system repairs and servicing, training and consulting. The ~~authorized~~Company’s ~~share~~principal ~~capital~~developed and manufactured product, the Electronic Chart Precise Integrated Navigation System (“ECPINS®”), delivers the majority of the revenue. The Company bealso ~~altered~~derives byrevenue ~~increasing~~from the ~~authorized~~delivery ~~number~~of the ECPINS® software component of ~~voting~~its ~~common~~system ~~shares~~product. ~~without~~Combined, ~~par~~ECPINS® ~~value~~systems ~~from~~and ~~100~~software delivered 67.0% of the Company revenue for the six months ended May 31,~~000,000~~ to2005 anand ~~unlimited~~70.6% ~~number;~~for the six months ended May 31, 2004.

26Page 15

~~(b)~~Consolidated ~~there~~revenue befor ~~created~~the anthree ~~unlimited~~months ~~number~~ended ofMay 31, ~~Class~~2005 Cwas ~~Preference~~$1,881,685 ~~shares~~compared ~~without~~with $2,773,835 ~~par~~for ~~value; (c) there be created and attached to~~ the ~~Class~~three Cmonths ~~Preference~~ended ~~shares~~May 31, ~~the~~2004, ~~special~~resulting ~~rights and restrictions set out~~ in ~~Part~~a 3decrease of ~~Schedule~~32%. ~~“A”~~Consolidated revenue offor the ~~Articles~~six ofmonths ~~the~~ended ~~Company~~May 31, as2005 ~~adopted~~was by$4,141,542 ~~paragraph~~compared ~~(d)~~with of$6,803,595 ~~this~~for ~~resolution; (d)~~ the ~~Articles~~six months ofended ~~the~~May 29, ~~Company~~2004, beresulting ~~altered~~in bya ~~deleting~~decrease ~~section~~of 239%.1 ~~and~~The ~~substituting~~decrease ~~therefor~~is aattributable ~~new~~to ~~section~~the timing ~~2.1,~~that ~~and~~new bycontracts ~~adding~~are toawarded ~~Schedule “A” attached~~ to ~~and~~the ~~forming~~Company, ~~a part of~~ the ~~Articles~~delivery aschedules ~~new~~of ~~Part~~existing ~~3 thereof~~contracts, continuing ~~both~~difficulties in ~~the~~penetrating ~~form presented to~~ the ~~Meeting~~U.S. ~~and~~markets ~~initialed~~ for ~~identification~~its byproducts ~~the~~and ~~President~~services, ofand the lengthy ~~Company,~~sales ~~such~~cycle ~~alterations~~in ~~not to take effect until~~ the ~~Notice~~international ofmarket. ~~Articles~~Revenue offrom the ~~Company~~Royal isNavy ~~altered~~and ~~to reflect such alteration to~~ the ~~Articles~~Royal Australian ofNavy ~~the~~in ~~Company; (e)~~ the ~~Notice~~first ofsix ~~Articles~~months of ~~the~~fiscal ~~Company~~2004 beamounted ~~altered~~ to ~~reflect~~approximately ~~the~~$4.2 million. Contracts ~~alterations~~with ~~authorized~~revenue ~~by paragraphs (a) to (d)~~ of this ~~resolution;~~magnitude ~~(f)~~did ~~any~~not ~~one~~occur ~~director~~in ~~or officer of~~ the ~~Company~~first beor ~~and~~second isquarters ~~hereby~~of ~~authorized~~fiscal 2005. Subsequent to ~~execute~~May 31, ~~and deliver all such documents and instruments~~2005, ~~including~~ the ~~Notice of Alteration reflecting the removal of the Pre-existing~~ Company ~~Provisions,~~announced ~~and~~two tonew docontracts ~~such~~for ~~further~~its ~~acts~~technology as– ~~may~~a $1.7 million becontract ~~necessary~~ to ~~give~~supply ~~full~~an ~~effect~~integrated tosubmarine ~~this~~navigation ~~special resolution;~~ and ~~(g)~~weapons ~~the~~management ~~board~~system for ~~of directors of~~ the ~~Company~~Canadian isNavy’s ~~hereby~~Victoria ~~authorized,~~Class atsubmarines ~~any~~and ~~time~~a in$3.8 million ~~its~~contract ~~sole~~for ~~discretion,~~additional software toand ~~determine~~long ~~whether~~term orsupport ~~not~~ to ~~proceed with this resolution in whole or in part without further approval, ratification or confirmation by~~ the ~~shareholders~~Royal ~~of the Company”~~Navy.

~~This~~The ~~special~~main ~~resolution~~customers ~~must~~for bethe ~~approved~~Company’s byproducts aand ~~majority~~services offor the three~~-quarters~~ ~~(3/4)~~months ended May 31, 2005 were the Royal Navy of the ~~votes~~United ~~cast~~Kingdom bythrough Lockheed-Martin UK, the Royal New Zealand Navy through Air Affairs Ltd., and the ~~shareholders~~Royal Australian Navy through Nautronix Ltd. Revenue from these customers accounted for 37% of the ~~Company~~consolidated ~~who,~~revenue. ~~being~~For ~~entitled~~the tothree domonths soended May 31, ~~vote~~2004, the inmain ~~person~~customers orfor bythe ~~proxy~~Company’s atproducts and services were the Royal Navy of the United ~~Meeting~~Kingdom inthrough ~~respect~~Lockheed-Martin UK, the U.S. Coast Guard and the Royal Australian Navy through Nautronix Ltd. Revenue from these customers accounted for 60% of ~~such~~the ~~special~~consolidated ~~resolution~~revenue for the three months ended May 31, 2004.

The ~~form~~main customers for the Company’s products and services for the six months ended May 31, 2005 were the Royal Navy of the ~~proposed~~United ~~resolution~~Kingdom ~~set~~through ~~forth~~Lockheed-Martin ~~above~~UK, isthe ~~subject~~Royal toNew ~~such~~Zealand ~~amendments~~Navy through asAir ~~management~~Affairs ~~may~~Ltd, and the Royal Australian Navy through Nautronix Ltd. Revenue from these ~~propose~~customers ataccounted for 59% of the ~~Meeting~~consolidated ~~but~~revenue. ~~which~~For dothe ~~not~~six ~~materially~~months ~~affect~~ended May 31, 2004, the main ~~substance~~customers for the Company’s products and services were the Royal Navy of the ~~proposed~~United ~~special~~Kingdom ~~resolution~~through Lockheed-Martin UK, the U.S. Coast Guard and the Royal Australian Navy through Nautronix Ltd. Revenue from these customers accounted for 75% of the consolidated revenue for the six months ended May 31, 2004.

~~The~~Segment ~~Company’s board of directors recommends that shareholders vote in favour of the foregoing~~Results ~~special resolution. Proxies received in favour of management will be voted in favour of such~~ ~~special resolution, unless the shareholder has specified in the proxy that the shares are to be~~ ~~voted against such resolution.~~

~~PRIVATE~~Revenue ~~PLACEMENT~~from the Navigation Systems business unit for the three months ended May 31, 2005 was $956,378 compared to $1,691,056 for the same period last year, a decrease of $734,678 or 43%. Revenue for the six months ended May 31, 2005 was $2,897,155 compared to $4,971,154 for he six months ended May 31, 2004, a decrease of $2,073,999 or 42%. The decrease is attributable to the timing that new contracts are awarded to the Company, the delivery schedules of existing contracts and the Company having realized higher software sales in the first and second quarter of 2004 when compared to the same period in the current year.

~~Introduction~~Revenue from the Geomatics business unit for the three months ended May 31, 2005 was $905,895 compared to $1,042,793 for the three months ended May 31, 2004, a decrease of $136,898 or 13%. Revenue for the six months ended May 31, 2005 was $1,213,475 compared to $1,764,137 for the same period last year, a decrease of $550,662 or 31%. The decrease is primarily the result of the Company experiencing increased difficulty in penetrating the U.S. geomatics market. The Company is implementing changes in the strategies to improve its market position in the U.S. through the acquisition of Mapcon Mapping Consultants Inc., a U.S. land mapping company based in Salt Lake City, Utah. For the three and six months ended May 31, 2005, revenue increased approximately $285,000 as a result of the acquisition.

~~The~~Revenue ~~Company~~from isthe ~~currently~~Applications inbusiness ~~the~~unit ~~process~~for ofthe ~~completing~~three amonths ~~private~~ended ~~placement~~May 31, ~~financing~~2005 ofwas ~~up to CDN~~$19~~.5 million.~~,412 compared ~~The~~to ~~financing is being led by SDS Capital Group SPC~~$39,986 ~~Ltd.~~for asthe athree ~~principal investor.~~months ~~C.E.~~ended ~~Unterberg~~May 31, ~~Towbin~~2004, ~~LLC is acting as agent to offer the securities on~~ a ~~best~~decrease ~~efforts basis~~of to$20,574 ~~other~~or ~~institutions and accredited investors~~51%. ~~The~~Revenue for ~~proceeds of~~ the ~~financing~~six ~~will~~months beended ~~used to pursue acquisitions~~May 31, to2005 ~~increase~~was ~~available cash for operations~~$30,912 ~~and~~compared to ~~redeem 57~~$68,~~711~~304 ~~issued~~for ~~and outstanding~~the ~~Class~~same ~~“B”~~period ~~Series 1~~last year, ~~Preference shares held by two institutional investors at~~ a ~~cost~~decrease of ~~approximately~~ ~~CDN~~$~~2.9 million.~~37,392 ~~The~~or ~~Company anticipates that the private placement will be closed before the date of the Meeting~~55%. The ~~private~~Applications ~~placement~~business ~~will be closed in escrow pending receipt of~~unit ~~shareholder approval.~~

27Page 16

~~The~~develops ~~policies~~software ofapplications and ~~the~~tools ~~TSX~~for ~~require~~situational ~~that~~awareness ~~the~~and ~~Company~~provides ~~obtain~~products ~~shareholder~~and ~~approval~~services ~~for~~to ~~the~~military ~~private placement~~forces, government agencies and ~~for~~systems ~~the~~integrators ~~issuance of share purchase warrants~~ to ~~participating~~enable ~~institutions~~improved ~~and~~situational toawareness. ~~one~~The sales ofcycle ~~its~~with ~~directors~~government ascustomers ~~fees~~ for ~~providing~~Applications ~~advisory~~products ~~services~~can inbe ~~connection~~upwards ~~with~~of ~~the~~three ~~private placement~~years. The business ~~material~~unit’s ~~terms~~initial ofproduct ~~the~~is ~~private~~Common ~~placement~~Operational ~~and~~Picture ~~the~~– ~~matters~~Image ~~for~~Display ~~which~~Server ~~the~~(COP- ~~Company~~IDS®). This isApplications ~~seeking shareholder~~business ~~approval~~unit ~~are~~commenced ~~described~~operations in ~~detail~~fiscal ~~below~~2004. ~~The Company is seeking shareholder approval at~~ ~~the Meeting.~~

~~Summary~~In ofall ~~Financing~~three ~~Terms~~business units, the Company continues to invest significant corporate, sales and marketing resources in identifying and pursuing new opportunities and contracts, both in its existing customer base and with new prospective customers.

~~Unit~~Gross ~~Structure~~Profit

The Company’s isgross ~~offering~~profit updecreased ~~to 19~~$1,~~500 units~~404,652 ~~each~~to ~~comprised~~$370,351 offor 20the ~~voting~~three ~~Class~~months ~~“B”~~ended ~~Series~~May 231, ~~Preference~~2005 ~~shares~~from ~~(“preference~~$1,775,003 ~~shares”)~~for ~~and~~the ~~588~~same ~~common~~period ~~share~~last ~~purchase~~year. ~~warrants~~Gross ~~(“warrants”)~~profit percentage decreased to 19.8% ~~The~~for ~~issue~~the ~~price~~three ~~will~~months beended ~~CDN$1~~May 31,~~000~~ ~~per~~2005 ~~unit~~from 64.0% ~~The~~for ~~preference~~the ~~shares~~three ~~will~~months ~~entitle~~ended ~~the~~May 31, ~~holders~~2004. toFor ~~receive~~the asix ~~fixed~~months ~~preferential~~ended ~~cumulative~~May 31, 7%2005, ~~dividend~~the ~~payable~~Company’s ~~semi-annually.~~gross ~~Each~~profit ~~preference~~decreased ~~share~~$2,741,316 ~~will~~to be$1,602,460 from ~~convertible~~$4,343,776 atfor the ~~option~~six ofmonths ~~the~~ended ~~holder~~May 31, at2004. ~~any~~Gross ~~time~~profit ~~into~~percentage 58decreased to 38.826% ~~common~~from 63.8% ~~shares,~~period ~~calculated~~over ~~by dividing~~period. ~~the~~The ~~issue~~lower ~~price~~gross margin percentage is the result of ~~CDN$50.00~~the ~~for~~Company ~~each~~realizing lower ~~preference~~software ~~share~~sales byin the ~~conversion~~three ~~price~~and ~~of CDN$0.85.~~six ~~Each~~months ~~warrant~~ended ~~will~~May 31, ~~entitle~~2005 ~~the~~when ~~holder~~compared to ~~purchase~~same ~~one~~periods last ~~common~~year ~~share~~and of the ~~Company~~lower atrevenues ~~the exercise~~in ~~price~~general ofthat ~~CDN$0.85~~could ~~for~~not aadequately ~~period~~offset ofthe ~~five~~fixed ~~years~~costs in cost of sales.

~~Shareholder~~Segment ~~Approval~~Results

~~TSX~~Gross ~~policies~~profit ~~require~~from ~~that~~ the ~~Company~~Navigation ~~obtain~~Systems ~~shareholder~~business ~~approval~~unit for the ~~financing.~~three ~~Consequently, an~~months ~~escrow~~ended ~~agent~~May 31, ~~will~~2005 was be$105,823 ~~appointed~~compared to ~~hold~~$1,252,341 ~~all~~for ~~subscription~~the ~~funds~~same ~~and~~period ~~agreements~~last inyear, ~~escrow~~a ~~pending receipt~~decrease of ~~shareholder approval~~$1,146,518. ~~The~~Gross profit ~~Company~~percentage ~~intends~~decreased to ~~seek~~11.1% ~~shareholder~~from ~~approval~~74.1% ~~for~~period ~~the~~over ~~financing at~~period. ~~the~~Gross ~~Meeting.~~profit ~~During~~from the Navigation ~~escrow~~Systems ~~period,~~business unit for the ~~purchasers~~six ~~will~~months ~~receive~~ended ~~interest~~May 31, on2005 ~~the~~was ~~subscription~~$1,303,913 compared to ~~funds~~$3,648,387 atfor the ~~rate~~same ofperiod ~~12%~~last ~~per~~year, ~~annum.~~a Ifdecrease ~~shareholder~~of ~~approval is obtained~~$2,344,474 ~~the~~or ~~financing~~64.3%. ~~will~~Gross beprofit ~~closed~~percentage ~~promptly~~decreased ~~and accrued interest paid~~ to ~~the purchasers~~45.0% Iffrom ~~shareholder~~73.4% ~~approval~~period isover ~~not obtained,~~period. ~~the~~The ~~subscription~~decrease ~~funds~~was ~~and~~attributable ~~accrued~~to ~~interest~~a decreased ~~will~~percentage beof ~~paid immediately by~~ the ~~escrow agent~~Company’s torevenue ~~the~~being ~~purchasers.~~attributable ~~All~~to ~~payments~~Software ofrevenue ~~interest~~and ~~will~~an beincreased ~~net~~percentage ofbeing ~~applicable~~attributable ~~withholding~~to Systems ~~tax.~~and ~~If shareholder~~system ~~approval~~components isrevenue ~~not~~when ~~obtained,~~compared ~~all~~to ~~legal,~~the ~~accounting~~same three and ~~other~~six ~~advisory~~month ~~service~~periods ~~fees~~last ~~incurred~~year ~~will~~and bethe ~~recorded~~lower asrevenues ain ~~charge~~general ~~against~~that ~~earnings~~could ~~for~~not ~~the~~adequately ~~three~~offset ~~and~~the ~~six~~fixed ~~months~~costs ~~ended~~in ~~May 30,~~cost of ~~2005~~sales.

Gross profit from the Geomatics business unit for the three months ended May 31, 2005 was $247,082 compared to $492,963 for the same period last year, a decrease of $245,881 or 49.9%. Gross profit percentage decreased to 27.3% from 47.3% period over period. Gross profit from the Geomatics business unit for the six months ended May 31, 2005 was $271,090 compared to $646,722 for the six months ended May 31, 2004, a decrease of $375,632 or 58.1%. Gross profit percentage decreased to 22.3% from 36.7% period over period. The decrease is the result of the competitive nature of the geomatics market where customers are very price sensitive and the increasing protectionism the Geomatics business unit has encountered entering the U.S. geomatics market. As stated above, the Company ~~Right~~is implementing changes in the strategies to improve its market position in the U.S. through the acquisition of ~~Redemption~~Mapcon Mapping Consultants Inc., of Salt Lake City, Utah.

~~The~~Gross profit from the Company’s ~~will~~new ~~have~~business unit – Applications for the ~~right~~three months ended May 31, 2005 was $17,446 compared to ~~redeem~~$29,699 for the ~~preference~~same ~~shares~~period atlast ~~any~~year, ~~time~~a ~~after~~decrease ~~three~~of ~~years~~$12,253 or 41.3%. ~~following~~Gross profit percentage increased to 89.9% from 74.3% period over period. Gross profit from the Applications ~~closing~~business ~~date,~~unit atfor the ~~redemption~~six ~~price~~months ofended ~~CDN~~May 31, 2005 was $6027,457 ~~per~~compared ~~share~~to ~~plus~~$48,667 for ~~payment~~the ofsix ~~any~~months ~~accrued but~~ended ~~unpaid~~May 31, ~~dividends~~2004, a decrease of $21,210 or 43.6%. AThe ~~holder~~gross ~~will~~profit ~~have~~percentage for ~~20 days~~the ~~after~~six ~~receipt~~months ofended ~~notice~~May 31, 2005 of ~~redemption~~88.8% ~~from~~reflected the ~~Company~~ ~~within~~contract ~~which~~mix tothat ~~convert~~included ~~the~~more applications ~~preference~~software ~~shares~~contracts tothan ~~common~~applications ~~shares~~systems contracts.

~~Right~~Page ~~to Force Conversion~~17

~~The~~General Company will have the right to require the holders to convert their preference shares to common shares if: (i) at any time after 12 months following the closing date, the closing trading price of the Company’s common shares is greater than CDN$2.13 for at least 20 consecutive trading days, or (ii) at any time the Company completes a firm commitment public underwritten offering of its common shares of at least CDN$40 million at an offering price of more than CDN$1.70, and ~~the~~Administrative ~~common shares~~Expenses ~~into which the preference shares are convertible are freely tradable.~~

28General and administrative (“G&A”) expenses consist mainly of salaries and benefits of management and administrative personnel, professional fees, public company expenses, related facility costs and other general administrative expenses, interest and other income. G&A increased $74,833 for the three months ended May 31, 2005 to $999,877 from $925,044 for the same period last year. As a percentage of revenue, G&A increased to 53.1% from 33.3% period over period. For the six months ended May 31, 2005, G&A increased $380,844 to $2,035,961 from $1,655,117 for the six months ended May 31, 2004. As a percentage of revenue, G&A increased to 49.2% from 24.3% period over period. The increase is the result of increased salaries and internal re-alignment of sales staff to G&A activities, professional fees, directors’ fees and directors and officers insurance. The Company anticipates that as a result of recently introduced reporting regulations in Canada and the U.S., the Company will continue to experience increases in costs primarily relating to professional fees and increased infrastructure costs to meet the increased reporting obligations. The Company estimates that the direct and incremental costs of being a publicly company for the six months ended May 31, 2005 are in excess of $660,000.

~~Warrants~~Research and Development Expenses

~~Each~~Research ~~common~~and ~~share~~development ~~purchase~~(“R&D”) ~~warrant~~expenses ~~will~~consist ~~entitle~~mainly ~~the holder to purchase one common share~~ of ~~the Company~~salaries atand ~~the~~benefits ~~exercise price~~ of ~~CDN$0.85 for a period of five years from the date of issuance. The~~software ~~Company~~and ~~has~~hardware ~~the~~engineering ~~right~~personnel, tosub-contractor ~~redeem the warrants for CDN$0.10 each upon 20 days notice~~costs, ~~provided~~facilities ~~the closing~~expenses ~~trading~~and ~~price~~related ~~of the Company’s common shares is greater than CDN$2~~expenses.~~55 for a period of 20~~ ~~consecutive~~The ~~trading~~Company ~~days,~~expenses research and ~~provided~~development ~~the~~costs ~~common~~in ~~shares underlying~~ the ~~warrants~~period ~~are freely tradable~~incurred. ~~Any warrants which are the subject of a redemption notice may be exercised by the holders~~ ~~within the 20 day notice period.~~

~~Dilution~~The Company believes that in order to maintain its technological capabilities, it must continue to develop existing products and ~~Exclusion~~introduce new high quality products that challenge and redefine the industry standards. R&D costs decreased $121,425 to $461,926 or 24.5% of ~~Control~~revenue ~~Blocks~~for the three months ended May 31, 2005, compared to $583,351 or 21.0% of revenue in the same period last year. For the six months ended May 31, 2005, R&D costs decreased $265,417 to $781,158 or 18.9% of revenue, compared to $1,046,575 or 15.4% of revenue for the six months ended May 31, 2004. The decrease is largely the result of approximately $345,000 in engineering labour costs charged to cost of sales from R&D for the six months ended May 31, 2005 compared to approximately $167,000 for the six months ended May 31, 2004, an increase of approximately $178,000. These costs are to support the software customization required to meet the needs of specific customers.

~~The~~In ~~Company~~November ~~currently~~of ~~has 27~~1999,~~488,074~~ ~~common~~the ~~shares~~Company ~~outstanding~~announced on an ~~undiluted~~agreement ~~basis.~~with IfTechnology ~~the~~Partnerships Canada whereby ~~financing~~TPC isgranted ~~fully~~financial ~~subscribed,~~assistance ~~390,000~~to ~~preference~~the ~~shares~~Company ~~will~~to befund ~~issued~~research ~~which~~and ~~would,~~development ~~upon~~activities to ~~conversion~~March 31, 2003. As at November 30, 2003, the ~~proposed~~Company ~~fixed~~had ~~price~~received the maximum eligible contribution of ~~CDN~~$~~0.85~~4,000,177. ~~result~~Under in the ~~issuance~~terms of anthe ~~additional 22~~agreement,~~939,800~~ ~~shares.~~the InCompany ~~addition,~~is required to pay TPC a ~~total~~royalty based on the revenue of 11its subsidiary Offshore Systems Ltd. To May 31,~~466~~ 2005,~~000~~ ~~warrants~~the ~~will~~Company behad ~~issued~~paid royalties ~~which~~of $1,242,022 ~~upon~~and ~~exercise at~~accrued ~~the~~for ~~price~~future ofpayment ~~CDN~~an additional $~~0.85~~92,559. ~~would~~Royalty ~~result~~payments inwill continue until the ~~issuance~~cumulative ofroyalties apaid ~~further~~or 11payable to November 30,~~466~~ 2008 are at least $7,~~000~~810,230 ~~common~~or ~~shares~~until November 30, 2014.

~~The~~In April of 2004, TPC announced an agreement with the Company ~~has~~whereby TPC granted financial assistance to the ~~right~~Company to ~~accept~~fund orresearch ~~reject~~and ~~subscriptions~~development ~~from~~activities ~~prospective~~to ~~purchasers~~March 31, 2007. The ~~Company~~maximum ~~intends~~eligible tocontribution ~~allot~~is $3,768,391. As at May 31, 2005, the ~~financing~~Company ~~such~~had ~~that~~claimed nofor $2,207,559 ~~subscriber~~of ~~will~~eligible ~~purchase~~assistance aunder ~~sufficient~~the ~~number~~TPC program which includes a receivable of $470,628. ~~preference~~The ~~shares~~Company ~~that~~will ~~would,~~receive ifthe ~~converted,~~remaining ~~result~~contributions inover ~~that~~the ~~purchaser~~remaining ~~acquiring~~term. aAlso, ~~control~~under ~~position~~the terms inof the agreement, the Company asis required to pay TPC a ~~consequence~~royalty based on the revenue of ~~that~~its subsidiary ~~conversion~~Offshore Systems Ltd. commencing January 2006. Royalty payments will continue until the cumulative royalties paid or payable to December 31, 2013 are at least

~~Other~~Page ~~Rights of the Purchasers~~18

~~The purchasers of the preference shares will have a right of first offer to participate on a pro-rata basis in any equity~~$6, ~~equity linked~~079,176 or ~~debt~~until ~~financing proposed by the Company for 24~~December ~~months~~31, ~~after the closing date~~2017. ~~The~~There ~~purchasers~~were ~~will~~no ~~have~~royalties ~~ten~~paid ~~trading~~or ~~days~~payable ~~within which to exercise their right. This pre-emptive right will not apply to any proposed issuance of stock by the Company~~ in connection with ~~strategic~~this ~~partnerships,~~agreement ~~acquisitions~~for ~~and public underwritten offerings. The Company has also agreed that it will not issue any securities or unsecured debt obligations senior to~~ the ~~preference shares without the prior written approval of the holders of a majority of the~~six ~~preference~~months ~~shares~~ended May 31, ~~such approval not to be unreasonably withheld~~2005.

~~Liquidation~~Although ~~Preference~~the Company believes that its submissions for TPC funding meet the terms and conditions of the TPC agreements, the final determination is subject to audit by government authorities in the ordinary course of business. During the year ended November 30, 2004, the Company was subject to an audit by government authorities. The results of the audit have not been communicated to the Company however the Company has no reason to believe that the audit will have a material impact on the Company’s financial results. If the Company causes an event of default, as defined in the agreement, TPC can suspend or terminate any obligation.

InSales the event of the liquidation of the Company, the holders of the preference shares will have the right to repayment of the original purchase price of the shares, plus all accrued but unpaid dividends thereon in priority to any payments to the holders of common shares and ~~any~~Marketing ~~other shares~~Expenses ~~ranking junior to the preference shares.~~

~~Trading~~Sales ~~Provisions~~and marketing (“S&M”) expenses consist primarily of compensation of sales and marketing personnel, as well as expenses associated with advertising, trade shows, facilities and other expenses related to the sales and marketing of the Company’s products and services. S&M expenses decreased $60,979, or 8.3%, for the three months ended May 31, 2005 to $674,562 (35.8% of revenue) from $735,541 (26.5% of revenue) for the same period last year. For the six months ended May 31, 2005, S&M expenses decreased $302,000, or 19.8%, to $1,226,818 (29.6% of revenue) from $1,528,818 (22.5% of revenue) for the six months ended May 31, 2004. The reduction is primarily the result of a decrease of approximately $130,000 in expenses relating to the internal re-alignment of sales staff to G&A activities to support corporate and operations initiatives, a decrease of approximately $72,000 in travel costs because of more efficient travel planning and a decrease of approximately $52,000 in sales commissions as the result of lower sales achievements for the quarter. The Company’s current level of S&M staff continues to allow the Company to pursue business development activity relating to its expansion efforts into American, European and Australasian markets. The expansion effort targets new and existing customers in the military agencies of Canada, U.S., European NATO and other allies of Canada, and national and international commercial marine transportation companies to increase the profile of the Company and its products through the establishment of marketing agreements with companies local to the targeted regions and to broaden the Company’s customer base thereby reducing its dependence on the current few international customers. Some of these activities may not result in closing orders during the current year but may yield orders in subsequent fiscal years.

~~The~~Depreciation ~~preference shares~~ and ~~warrants will not be listed or quoted for trading but will be freely~~amortization ~~tradable, subject to such trading restrictions and hold periods as are imposed under applicable~~ ~~securities regulations and by the TSX in accordance with its policies.~~

29Total depreciation and amortization increased slightly to $118,184 for the three months ended May 31, 2005 from $83,802 for the three months ended May 31, 2004, and to $202,854 for the six months ended May 31, 2005 from $161,849 for the six months ended May 31, 2004. The increase reflects the acquisitions in the period and mix of plant and equipment in the Company at May 31, 2005 and the amortization of intangibles related to the acquisition of Mapcon Mapping Inc. For the three months ended May 31, 2005 and 2004, depreciation of $39,213 and $27,824, respectively was included in cost of sales. For the six months ended May 31, 2005 and 2004, depreciation of $70,137 and $53,805, respectively was included in cost of sales.

~~Fees, Broker Warrants and Expenses~~Interest

~~The~~Interest ~~Company~~expense ~~will~~increased ~~pay investment banking fees~~ to ~~participating~~$8,687 ~~institutions~~for ~~which assist in placing~~ the ~~financing~~three inmonths anended ~~amount~~May 31, ~~equal~~2005 tofrom 7%$103 offor ~~gross proceeds of~~ the ~~financing placed with their~~ ~~respective~~three ~~clients.~~months Inended ~~addition~~May 31, ~~the~~2004 ~~Company~~and ~~will issue common share purchase warrants~~ to ~~those institutions~~$21,403 ~~which~~for ~~place~~ the ~~financing~~six ~~with~~months ~~their~~ended ~~clients.~~May 31, ~~The~~2005 ~~warrants~~from ~~will~~$371 ~~have the same terms as~~for ~~those issued to~~ the ~~purchasers~~six ofmonths ~~the~~ended ~~units~~May 31, 2004. The ~~number~~increases ofin ~~warrants~~interest toexpense beare ~~issued to each institution which assists in placing~~ the ~~financing~~result ~~will be determined by dividing 50%~~ of the Company ~~investment~~having ~~banking~~utilized ~~fee~~a ~~payable~~portion toof itits byoperating ~~the~~line ~~exercise~~credit ~~price~~facility of ~~CDN~~$~~0.85.~~2,000,000 ~~The~~during ~~proposed~~the ~~issuance~~six ofmonths ~~those~~ended ~~warrants is subject to shareholder approval. SDS Capital Group SPC~~May 31, ~~Ltd~~2005. isThe ~~participating~~Company ~~as a~~did ~~principal investor and will~~ not beutilize ~~paid~~its ~~any~~operating ~~fees~~line orcredit ~~issued~~facility ~~any~~during ~~“finder’s” warrants for~~Fiscal ~~participating~~2004.

~~Fees~~Page ~~and Warrants to be Paid to Related Party Subject to Shareholder Approval~~19

~~Mr. Brinton~~Foreign ~~Coxe, a director of the Company, has been instrumental in assisting the Company in~~exchange ~~structuring and arranging the financing. In consideration for providing his services, the Company~~ ~~has agreed to pay Mr. Coxe an advisory services fee in the amount of CDN$800,000. In addition, the~~ ~~Company has agreed to issue to Mr. Coxe 350,000 common share purchase warrants which will have the~~ same terms and conditions as the warrants to be issued to the purchasers of the units. The proposed issuance of 350,000 warrants to Mr. Coxe is subject to shareholder approval. In considering the issue of compensation to Mr. Coxe, the board, in consultation with legal counsel, reviewed carefully the policies of the TSX and securities regulators respecting related party transactions and believes that it is in full compliance with such policies.

~~Conditions~~Foreign ~~Respecting~~exchange ~~Payment~~loss ofincreased ~~Fees~~to $50,912 ~~Issuance~~for ofthe ~~Warrants~~three months ended May 31, 2005 from $8,101 for the three months ended May 31, 2004 and ~~Redemption~~the offoreign ~~Class~~exchange gain increased to $22,232 for the six months ended May B31, ~~Series~~2005 from $16,640 for the six months ended May 131, 2004. The ~~Preference~~changes ~~Shares~~were the result of exchange rate movements of the Australian dollar and the Company’s reduced U.S. dollar exposure at May 31, 2005 when compared to May 31, 2004.

~~The~~Technology ~~Company’s~~Partnerships ~~obligation~~Canada ~~to pay the fees and issue warrants to the institutions which assist with~~royalty ~~the financing and to Mr. Coxe is subject to the condition that the Company obtain shareholder~~ ~~approval for the private placement, including the issuance of all warrants to Mr. Coxe and the~~ ~~participating institutions. If shareholder approval is not obtained, the private placement will not~~ ~~close and no fees will be paid or warrants issued to the participating institutions or to Mr. Coxe.~~

The ~~redemption~~Company byis ~~the~~required ~~Company~~to pay a royalty of 3% on annual gross revenue for the ~~outstanding~~Navigation Systems ~~Class B~~and ~~Series~~Applications business units for the period December 1, ~~Preference~~1999 ~~shares~~to isNovember 30, ~~also~~2008. ~~conditional~~Royalty ~~upon~~expense increased to $37,867 for the ~~Company~~three ~~obtaining~~months ~~shareholder~~ended ~~approval~~May 31, 2005 from $7,708 for the same ~~financing~~period last year. Royalty expense increased to $92,558 for the six months ended May 31, 2005 from $56,634 for the same period last year.

~~Regulatory~~Income ~~Matters~~Taxes

~~Completion~~Based ofon the ~~financing~~information isavailable ~~subject~~at tothe ~~satisfaction~~time of athe ~~number~~issue of ~~conditions~~the ~~precedent~~unaudited interim consolidated financial statements for the three and six months ended May 31, 2005, the Company ~~including~~estimated ~~completion~~that ofit ~~legal~~will ~~documentation~~have sufficient taxable earnings in future periods from the Navigation Systems and ~~due~~Geomatics ~~diligence~~business ~~satisfactory~~units to ~~both~~utilize a portion of the Company’s $2,820,108 Canadian and $250,358 U.S. non-capital losses carried forward and other tax balances. As a result of this assessment, the ~~purchasers~~Company has recognized deferred tax expense amount of $143,189 for the three months ended May 31, 2005 and ~~receipt~~a deferred tax recovery amount of ~~all~~$95,176 ~~necessary~~for ~~regulatory~~the ~~approvals~~six months ended May 31, 2005 ~~including~~compared ~~final~~to ~~TSX~~deferred ~~acceptance~~tax recovery amounts of $217,363 and $496,266 for the same periods the previous year. The recovery amounts for the three and six months ended May 31, 2005 were calculated by using the projected effective tax rate for the fiscal year. The ~~TSX~~recovery ~~has~~is ~~granted~~expected ~~its~~to ~~conditional~~reverse as ~~acceptance~~the Company generates profitable results for the remainder of the ~~private~~fiscal ~~placement~~year. In accordance with U.S. GAAP, ~~subject~~the toCompany ~~satisfaction~~provided a valuation allowance against the total deferred tax asset as it is not considered “more likely than not” that the remaining deferred tax asset will be recovered. The Company continues to evaluate its taxable position quarterly and considers factors asuch ~~number~~as estimated taxable income, the history of ~~conditions~~losses ~~including~~for ~~review~~tax purposes and ~~approval~~the growth of the Company, ~~form~~among ofothers. For the ~~Company’s~~three ~~documents~~months ended May 31, 2005, the Company recorded a current tax ~~receipt~~expense of ~~shareholder~~$82,756, ~~approval~~compared ~~and~~to ~~submission~~a ofcurrent ~~final~~tax ~~materials~~expense ~~confirming~~for the ~~closing~~same period last year of $147,994. For the six months ended May 31, 2005, the Company recorded a current tax expense of $82,756, ~~private~~compared ~~placement~~to a current tax expense for the same period last year of $380,786.

30Earnings/Loss

~~Board~~As ~~Review~~a ~~and~~result ~~Approval~~of ~~Process~~the above factors, the Company had a loss for the three months ended May 31, 2005 of $1,697,767 or 90.1% of revenue, compared to earnings of $380,088 for the three months ended May 31, 2004, or 13.8% of revenue. The loss for the six months ended May 31, 2005 was $1,917,358, or 46.3% of revenue, compared to earnings of $931,879 for the six months ended May 31, 2004, or 13.6% of revenue.

~~The~~Page ~~Company’s board of directors held one face to face meeting as well as four conference call~~20 meetings between January 25, 2005 and March 7, 2005 in which they reviewed the proposed financing. The first two meetings were convened to consider the financing as well as other matters, while the last three meetings were called for the sole purpose of reviewing the financing. Due to the relatively small size of the board, the board did not appoint a special committee to review the financing.

AsSummary ~~noted above, the Company has agreed to pay Mr. Brinton Coxe CDN$800,000 and to issue to him 350,000 common share purchase warrants in consideration~~ of ~~the~~Quarterly ~~provision of advisory services by~~Results ~~him to the Company in connection with the financing. Mr. Coxe is a director of the Company, and~~ ~~consequently has a conflict of interest in that he will be substantially rewarded if the financing~~ is completed. Accordingly, Mr. Coxe declared his interest in the proposed financing and related transactions, and abstained from voting on all resolutions of the board respecting the financing, including resolutions approving his compensation, at all stages of the review and approval process. Mr. Coxe also excused himself from the board meetings (or the portions thereof, as applicable) at which the proposed financing was considered so that the remaining members of the board could discuss freely the proposed financing and all matters related thereto, including the proposed compensation of Mr. Coxe.

All of the other directors of the Company voted in favour of the proposed financing and the proposed compensation to be paid to Mr. Coxe, with the exception of Mr. Peter Roberts. Mr. Roberts, who is Chairman of the board’s Audit Committee, informed the board that he did not intend to stand for re-election to the board at the Meeting due to other commitments. He informed the Company of his decision before the proposed financing was brought to the board for consideration. Mr. Roberts advised the board that in view of his imminent departure he felt it was inappropriate to vote on the resolutions respecting the proposed financing, and accordingly, Mr. Roberts abstained from voting on the resolutions respecting the financing.


								Basic			Diluted
					Net			Earnings			Earnings
			Gross		Earnings/			(Loss) per			(Loss) per
For the three months ended	Revenue		Profit		(Loss)			Share			Share
(unaudited)	$		$		$			$			$
May 31, 2005		1,881,685		370,351		(1,697,767	)		(0.25	)		(0.25	)

February 28, 2005		2,259,863		1,232,108		(219,591	)		(0.01	)		(0.01	)

November 30, 2004		3,696,137		1,968,649		(227,940	)		(0.01	)		(0.02	)

August 31, 2004		2,951,571		1,469,554		(455,922	)		(0.02	)		(0.03	)

May 31, 2004		2,773,835		1,775,003		380,088			0.01			(0.01	)

February 29, 2004		4,029,760		2,568,773		551,791			0.02			0.00

November 30, 2003		2,724,439		1,630,782		315,417			0.01			0.01

August 31, 2003		2,275,152		1,176,210		(347,135	)		(0.01	)		(0.01	)

~~The~~For board consulted extensively with professional advisors in assessing the merits and implications of the private placement. The board examined carefully the securities regulatory issues and TSX policy requirements respecting the private placement, having regard to the magnitude of it, the potential dilutive effects and the fact that there is a ~~related~~discussion ~~party~~on ~~component to~~ the ~~financing and~~factors that ~~Mr. Brint~~affect ~~Coxe, a director, will receive considerable compensation for providing his advisory services in connection with~~ the ~~financing.~~quarterly ~~The board also reviewed other financings analyzed for comparative purposes~~results, ~~but~~please ~~could~~refer ~~find no financing which was reasonably comparable. In making the decision~~ to ~~approve~~ the ~~financing, the board took into account a number of risks~~section ~~associated~~Selected with the financing, including the following: (i) the financing is highly dilutive to the current shareholders; (ii) while it is anticipated that a substantial portion of the financing will be used to fund acquisitions, to date only one acquisition agreement has been signed and therefore the Company is relying upon management to ensure that the Company actively pursues and completes strategic acquisitions (all of which will be subject to board approval); (iii) the financing is relatively large and may be riskier than pursuing a series of smaller financings staged over time; and (iv) the financing is relatively expensiveInformation. ~~The board weighed these and other concerns against~~ ~~the unique opportunity for raising a financing of considerable magnitude largely through the~~ ~~participation of institutions and accredited investors, and the potential for rapid growth which~~ ~~the board believes the financing would create. The board is also of the view that having regard to~~ ~~the magnitude of the financing and its potential effect on the Company, it is appropriate that the Company seek shareholder approval for the financing.~~

31Liquidity and Capital Resources

~~Text~~The ofCompany ~~Proposed~~strives ~~Resolution~~to maintain cash-contributing profitable operations that provide an adequate liquidity and capital resource base for ~~Approval~~growth. byEvery ~~Shareholders~~business endeavour the Company develops or acquires targets a positive cash flow from the outset.

The ~~following~~Company isbelieves ~~the~~that ~~text~~cash flow from operating activities, together with line of ~~the~~credit borrowings ~~proposed~~of ~~resolution~~$2,000,000 ~~which~~available under its revolving credit facilities, will be ~~presented~~sufficient to fund ~~the~~currently ~~shareholders~~anticipated working capital, planned capital spending and debt service requirements for ~~consideration~~the atnext 12 months. The Company expects cash flow from operations will continue improve for the remainder ~~Meeting:~~of the year as scheduled contract milestone payments will be made on several contracts. The expenditures associated with these contracts have been incurred in prior periods. There can be no assurance that these resources will be adequate or that additional financing will be available to the Company.

~~“RESOLVED~~At May 31, AS2005, ANthe ~~ORDINARY~~Company ~~RESOLUTION~~had current assets of $23,170,056, ~~THAT~~current ~~THE~~liabilities ~~FOLLOWING~~of BE$3,684,089. Working ~~AND~~capital ~~ARE~~increased ~~HEREBY~~$11,198,169 ~~APPROVED:~~to $19,485,967 at May 31, 2005 from $8,287,798 at November 30, 2004 primarily due to the increases in cash resulting from the private placement issuance of Class B preference shares, and a decrease in cash resulting from the net loss for the six months ended May 31, 2005, offset by an increase in accounts payable, a decrease in accounts receivable and the acquisition of Mapcon Mapping Inc..

~~(a)~~ The Company’s ~~private~~has ~~placement~~credit ~~offering~~facilities ~~(the~~consisting ~~“private placement”)~~ of upan tooperating 19line,~~500 units,~~ ~~each~~standby ~~comprised~~letters of 20credit ~~voting Class B Series 2 Preference shares (“preference shares”)~~ and forward ~~588~~exchange ~~share~~contract ~~purchase warrants (“Warrants”) at the issue price of CDN$1,000 per unit~~facilities. The ~~preference~~ ~~shares~~credit ~~will~~facilities ~~entitle~~permit the ~~holders~~Company to ~~receive~~borrow ~~a fixed preferential cumulative 7%~~funds ~~dividend~~directly ~~payable~~for ~~semi-annually.~~general ~~Each~~corporate ~~preference~~purposes ~~share~~(including ~~will~~acquisitions) beat ~~convertible~~floating atrates. ~~the~~At ~~option~~May 31, of2005 the ~~holder~~Company athad ~~any~~$193,301 ~~time~~borrowings ~~into~~against 58its U.82S. ofdollar ~~the~~operating ~~Company’s~~line. ~~common~~The ~~shares,~~Company ~~calculated~~has ~~by dividing the~~an ~~issue~~operating ~~price~~line of ~~CDN~~$~~50.00~~2,000,000 ~~for~~available ~~each~~with ~~preference~~a ~~share~~Canadian chartered bank collateralized by ~~the~~accounts receivable. ~~conversion~~The ~~price~~Company ofhas ~~CDN$0.85.~~issued ~~Each warrant~~a ~~will~~standby ~~entitle~~letter ~~the~~of ~~holder~~credit tototalling ~~purchase~~Australian ~~one~~$283,886. ~~common~~The Company ~~share~~has atutilized the ~~exercise~~standby ~~price~~letter of ~~CDN$0.85~~ ~~for~~credit ato ~~period~~support ofcertain ~~five years;~~performance

~~(b) the~~Page ~~issuance to institutions which assist in the Private Placement of up to 577,000~~21 ~~share purchase warrants having the same terms as the Warrants; and~~

~~(c) the~~obligations ~~issuance~~to ofour customers. upAt toMay 31, ~~350~~2005,~~000~~ ~~warrants having~~ the ~~same~~Company ~~terms~~had asentered ~~the~~into ~~Warrants~~foreign toexchange ~~Mr. Brinton~~forward ~~Coxe,~~contracts ain ~~director~~the amount of ~~the~~Australian ~~Company~~$1,605,038. inThe ~~consideration~~Company ofutilizes ~~the~~its ~~provision~~forward byexchange ~~him~~contract ~~of advisory~~facility ~~services~~ to reduce ~~the~~its ~~Company~~exposure into ~~connection~~exchange ~~with~~rate ~~the private placement”~~movements.

~~The~~Cash ~~form~~flows offrom operating activities for the ~~proposed~~three ~~resolution~~months ~~set~~ended ~~forth~~May 31, ~~above~~2005, iswere ~~subject~~a tocontribution of ~~such~~$1,411,462, ~~amendments~~compared aswith ~~management~~a ~~may~~usage of $742,355 for the three months ended May 31, 2004, an ~~propose~~increase atof $2,153,817. Cash flows from operating activities for the ~~Meeting~~six ~~but~~months ~~which~~ended doMay 31, ~~not~~2005, were ~~materially~~a ~~affect~~contribution of $739,604, compared with a usage of $2,779,590 for the ~~substance~~six months ended May 31, 2004, an increase of $3,519,194. The main changes were the ~~proposed~~increase ~~resolution~~in the deferred income taxes balance offset by the increases in the net earnings for the periods, accounts receivable, accounts payable and accrued liabilities.

InNet ~~order~~cash provided by financing activities for the three months ended May 31, 2005 amounted to $14,029,337 becompared ~~effective~~to net cash provided of $244,124 for the ~~proposed~~same ~~resolution~~period ~~must~~in be2004. ~~approved~~The byCompany raised $17,081,832 net of issuance costs as a ~~simple~~result ~~majority~~of the private placement of ~~votes~~Class B Preference ~~cast~~shares Series 2 and warrants. This was offset by ~~those~~the ~~shareholders~~repurchase of ~~the~~Series 1 ~~Company~~Class B ~~who,~~Preference shares ~~being~~in ~~entitled~~the toamount doof so$2,885,550, ~~vote~~and inby ~~person~~Class B orpreference byshares ~~proxy at~~dividends ~~the~~declared ~~Meeting~~and paid, in ~~respect~~the amount of ~~such resolution~~$166,945.

~~The~~Net ~~form~~cash ofprovided by financing activities for the ~~proposed~~six ~~resolution~~months ~~set~~ended ~~forth~~May 31, ~~above~~2005 isamounted ~~subject~~to $13,942,771 compared to ~~such~~net ~~amendments~~cash asprovided ~~management~~of ~~may~~$203,435 for the same period in 2004. The Company ~~propose~~raised at$17,081,832 net of issuance costs as a result of the ~~Meeting~~private ~~but~~placement ~~which~~of doClass B ~~not~~Preference shares ~~materially~~Series 2 ~~affect~~and warrants. This was offset by the ~~substance~~repurchase of Series 1 Class B Preference shares in the ~~proposed~~amount ~~resolution~~of $2,885,550, and by Class B preference shares dividends declared and paid, in the amount of $253,511.

~~The~~Cash ~~Company’s~~used ~~board~~in ofinvesting ~~directors~~activities ~~recommends~~totalled ~~that~~$1,887,370 ~~shareholders~~for ~~vote~~the inthree ~~favour~~months ofended ~~the~~May 31, ~~foregoing~~2005 and ~~ordinary~~$1,379,983 ~~resolution.~~for ~~Proxies~~the ~~received~~six inmonths ~~favour~~ended ofMay 31, ~~management~~2005, ~~will~~compared bewith ~~voted~~$201,759 inand ~~favour~~$244,395 offor ~~such~~the same ~~ordinary~~periods ~~resolution,~~in ~~unless~~2004. The increases are reflective of the ~~shareholder~~acquisition ~~has~~of ~~specified~~Mapcon inMapping Consultants Inc., the ~~proxy~~acquisitions ~~that~~of property, plant and equipment commensurate with the ~~shares~~Company’s ~~are~~plans to obtain beadditional systems and facilities to accommodate its current and future anticipated growth ~~voted~~and ~~against~~the ~~such~~restriction ~~resolution~~in usage of $220,000 in cash.

~~PARTICULARS~~As OFa ~~OTHER~~result ~~MATTERS~~of TOthe BEabove ~~ACTED~~mentioned ~~UPON~~changes and a translation adjustment of $27,050, a net increase in cash amounted to $13,580,479 for the three months ended May 31, 2005 compared to a decrease of $699,190 for the three months ended May 31, 2004 and a net increase of $13,329,442 for the six months ended May 31, 2005 compared to a decrease of $2,820,550 for the six months ended May 31, 2004.

~~Management~~As ofat May 31, 2005, the Company ~~knows~~estimates ofthat noa ~~matters~~U.S. to$0.01 ~~come~~increase ~~before~~in the ~~Meeting~~exchange ~~other~~rate ~~than~~of ~~those referred~~the toU.S. indollar relative to the ~~Notice~~Canadian dollar would have an annualized impact of ~~Meeting~~reducing ~~accompanying~~earnings before ~~this~~income ~~Information~~taxes ~~Circular~~by approximately $2,000. ~~However~~As at May 31, if2005, ~~any~~the ~~other~~Company ~~matters~~estimates that an ~~properly~~Australian ~~come~~$0.01 ~~before~~increase in the ~~Meeting,~~exchange itrate isof the ~~intention~~Australian ofdollar relative to the ~~persons~~Canadian dollar ~~named~~would inhave an annualized impact of reducing earnings before income taxes by approximately $3,000. As at May 31, 2005, the ~~form~~Company does not expect to have a material number of ~~proxy~~Euro ~~accompanying~~transactions ~~this~~and ~~Information~~therefore ~~Circular~~does not expect earnings to ~~vote~~be ~~the~~impacted ~~same~~by changes in ~~accordance~~the ~~with~~exchange ~~their~~rate of ~~best~~the ~~judgment~~Euro ~~of such~~relative ~~matters~~to the Canadian dollar.

32In order to reduce the impact of U.S. to Canadian dollar, Australian to Canadian dollar and Euro to Canadian dollar exchange rate fluctuations, the Company has used the forward exchange contract facility described above. The Company used the forward exchange contract facility to set the exchange rate between the U.S. and Canadian dollar, the Australian to Canadian dollar and the Euro to Canadian dollar for specific transactions at a specific agreed upon rate, thereby mitigating any foreign exchange gain or loss that might occur on those transactions. The Company uses the forward exchange contract facility only for known or reasonably certain future U.S., Australian dollar and Euro transactions.

~~ADDITIONAL~~Page ~~INFORMATION~~22

~~Additional~~Contractual ~~information respecting the Company is available on the SEDAR website at www.sedar.com.~~Obligations ~~Security holders may contact the Company to request copies of the Company’s financial statements~~ ~~and MD&A at the following address:~~

OFFSHORE SYSTEMS INTERNATIONAL LTD. Suite 107 – 930 West 1 st Street North Vancouver, British Columbia, Canada V7P 3N4 Phone: 604-904-4600


	Payments due by period
			Less than 1		1 to 3		4 to 5		After 5
	Total		year		years		years		years
Facility leases		558,851		259,362		299,489		—		—
Equipment leases		25,931		12,737		13,194		—		—


Total contractual obligations		584,782		272,099		312,683		—		—

~~Financial~~Off-Balance ~~information~~Sheet ~~is provided in the Company’s comparative financial statements and MD&A for~~Arrangements ~~the financial year ended November 30, 2004.~~

~~BOARD APPROVAL~~Guarantees

The ~~contents~~Company ~~and~~has ~~sending~~issued a standby letter of ~~this~~credit ~~Information~~totalling ~~Circular~~Australian $283,886. The standby letter of credit is repayable on demand after certain conditions have been ~~approved~~met. byThe ~~the~~Company utilizes ~~board~~standby ofletters ~~directors~~ of ~~the~~credit ~~Company~~to support certain performance obligations to its customers.

~~CERTIFICATE~~The Company warrants that its software and hardware products will operate substantially in conformity with product documentation and that the physical media will be free from defect. The specific terms and conditions of the warranties are generally one year but may vary depending on the country in which the products are sold. The Company accrues for known warranty issues if a loss is probable and can be reasonably estimated, and accrues for estimated incurred but unidentified warranty issues based on historical activity. To date, the Company has had no material warranty claims.

~~The~~Transactions ~~foregoing~~with ~~contains~~Related ~~no untrue statement of a material fact and does not omit to state a material~~Parties ~~fact that is required to be stated or that is necessary to make a statement not misleading in the~~ ~~light of the circumstances in which it was made.~~

ONDuring ~~BEHALF~~the OFlast ~~THE~~two ~~BOARD~~fiscal OFyears ~~DIRECTORS~~ended ~~Per:~~2004 ~~“John~~and A2003, the Company did not enter into any transactions with its management, members of its Board of Directors or major shareholders. ~~Jacobson”~~In ~~JOHN~~the second Aquarter of 2005, E. ~~JACOBSON~~Brinton ~~President~~Coxe, a member of the Company’s Board of Directors, became a related party by virtue of the fact that the Company has paid him compensation of $815,908 and 350,000 ~~Chief~~common ~~Executive~~share ~~Office~~purchase ~~“John~~warrants Tin consideration of the provision of advisory services in connection with the private placement completed April 8, 2005. ~~Sentjens”~~The ~~JOHN~~cash Tcompensation of $815,908 paid to Mr. Coxe ~~SENTJENS~~included ~~Corporate~~an ~~Controller~~adjustment in the amount of $15,908 to reflect exchange rate changes between the U.S. dollar and Canadian Dollar. Mr. Coxe has also participated in the financing by purchasing 100 units personally. Also subsequent to the 2004 fiscal year end, Gerald J. Shields, elected to the Company’s Board of Directors on April 8, 2005, became a related party by virtue of the provision of legal services to the Company by a law firm in which Mr. Shields has an interest. During FY2004 fees billed to the Company by this firm were under $60,000. It is anticipated that fees billed to the Company by this firm will exceed $60,000 for FY2005.

33Proposed Transactions

~~APPENDIX~~The ~~“A”~~Company announced on July 11, 2005 that it has signed a non-binding letter of intent to acquire a United States defense contracting company. The acquisition is expected to approximately double OSI’s revenue and employee base. The target company, with multiple offices in the United States, is a supplier of technology and services to the U.S. Department of Defense and key defense prime contractors.

~~Changes~~Page ~~under the Proposed New Articles of~~23 ~~Offshore Systems International Ltd.~~

~~Set~~Critical ~~out~~Accounting ~~below is a discussion of changes reflected under the Company’s proposed New Articles,~~Policies ~~including a discussion of substantive changes included in the New Article s and changes included~~ ~~that are as a result of changes under the New Act. The New Articles incorporate a number of~~ ~~non-substantive changes, including the use of the new terminology adopted under the New Act. For~~ example, “members” are now “shareholders” and “register of members” is now “central securities register” under the New Act. Many of these terminology and wording changes are not discussed in detail here as they reflect statutory requirements that the Company cannot alter or amend.

The ~~following~~Company isprepares aits ~~discussion~~consolidated financial statements in accordance with United States generally accepted accounting principles, and makes estimates and assumptions that affect its reported amounts of assets, liabilities, revenue and expenses, and the ~~substantive~~related ~~changes~~disclosure ~~proposed~~of contingent liabilities. The Company bases its estimates on historical experience and other assumptions that it believes are reasonable in the ~~New~~circumstances. ~~Articles~~Actual results may differ from these estimates.

~~Special~~The ~~Majority~~following ~~for~~critical ~~Resolutions~~accounting policies affect the Company’s more significant estimates and assumptions used in preparing its consolidated financial statements:

~~Under the Former Act and the Existing Articles, the majority of votes required to pass a special~~Revenue ~~resolution at a general meeting of shareholders was not less than three-quarters (3/4) of the votes~~ ~~cast on a resolution. Under the New Act, the Company is authorized to determine whether a special~~ ~~resolution requires not less than two-thirds (2/3) or not less than three-quarters (3/4) of the~~ ~~votes cast on a resolution. The New Articles propose that a special resolution require a majority of not less than two-thirds (2/3) of the votes cast on a resolution.~~

~~Resolutions~~The ~~Required~~Company is required to estimate the costs to complete certain systems and geomatics services contracts. Revenues from these contracts are recognized on the percentage-of-completion method measured by the percentage of costs incurred to total estimated costs to complete each contract. The Company may need to adjust the estimated costs to complete for these projects, if the actual results differ from the Company’s estimates. If the Company anticipates that a contract or a contract segment will generate a loss, the Company estimates that loss and records the total expected loss on the contract or contract segment. When revenues exceed amounts invoiced under a contract, the difference is recorded as unbilled revenue. The Company believes that unbilled revenue will be invoiced and collected. Billings in excess of revenues are amounts that have been billed to the customer but have not been recognized in revenue.

~~Under~~Income ~~the New Act, the Company is, subject to shareholder approval, now permitted in its New~~Taxes ~~Articles to set out the type of approval required for certain corporate changes. This change in the~~ ~~New Act reflects an increasing need for companies to react and adapt to changing business~~ ~~conditions and to have a system in place that allows for quick responses. Under the New Act, a~~ Company may choose different thresholds of support for specific resolutions, including changes such as alterations to share capital, the subdivision and consolidation of shares and company name changes. Changes such as the alteration of share capital and name changes were previously required under the Former Act to be approved by a special resolution of the shareholders of a company. Traditionally, where these changes are proposed between annual general meetings of shareholders, the Company would be required to hold a special general meeting to have the change approved. This is expensive for the Company and results in time delays and costs.

AsThe aCompany ~~result,~~is ~~the~~required ~~board~~to estimate its income taxes in each of ~~directors~~the jurisdictions in which it operates. This process involves estimating the Company’s actual current tax exposure, together with assessing temporary differences resulting from differing treatment of items for tax and accounting purposes. These differences result in deferred tax assets and liabilities that may be included on the Company’s isconsolidated ~~proposing~~balance sheet. The Company recognizes deferred income tax assets to the extent that their realizations are considered more likely than not and provides a valuation allowance against any remaining balance. The valuation allowance is based on the ~~New~~Company’s estimates ~~Articles~~of ~~provide~~taxable income by jurisdiction in which it operates and the period over which its deferred tax assets will be recoverable. In the event that actual results differ from these estimates, or the Company ~~may~~adjusts these estimates in future periods, ~~subject~~the Company may need to adjust the ~~New~~valuation ~~Act,~~allowance. ~~alter~~Although ~~its~~we ~~Notice~~believe ofthat ~~Articles,~~our ~~New~~tax ~~Articles~~estimates ~~and~~are ~~share~~reasonable, the ultimate ~~structure~~tax determination involves significant judgement that is subject to audit by tax authorities in the ordinary ~~following~~course ~~manner:~~of business.

1.Stock-based byCompensation ~~directors’~~and ~~resolution~~Other orStock-based ~~ordinary resolution (being a simple majority of the votes cast by shareholders on a resolution), as determined in each case by the directors, to:~~Payments

~~(a)~~The ~~create~~Company ~~one~~has orestablished ~~more~~three ~~classes~~stock oroption ~~series~~plans ofunder which options to purchase common shares may ~~and~~be granted to directors, ifofficers ~~none~~and employees of the ~~shares~~Company ofand ato ~~class~~any other person or company ~~series~~permitted ~~are~~by ~~allotted~~the orapplicable ~~issued~~regulatory authorities to purchase unissued common shares. The Company recognizes compensation as stock options, ~~eliminate~~which ~~that~~have ~~class~~been orgranted ~~series~~and vested to third parties under stock option plans with no cash settlement feature based on the fair value method. The fair value of ~~shares;~~the ~~(b)~~stock ~~establish,~~options ~~increase~~was estimated using the Black-Scholes option pricing model, using ~~reduce~~weighted-average orassumptions ~~eliminate~~for the ~~maximum~~following: ~~number~~dividend yield, volatility rate, risk-free interest rate and expected average life. Direct awards of ~~shares~~stock ~~that~~to ~~the~~employees, ~~Company~~stock isoption ~~authorized~~and stock awards granted to ~~issue~~non-employees ~~out~~are ofalso ~~any~~accounted ~~class~~for orin ~~series~~accordance with the intrinsic method of ~~shares;~~accounting ~~and~~for stock-based compensation.

~~(c)~~Page authorize alterations to the New Articles that are procedural or administrative in nature or are matters that pursuant to the New Articles are solely within the directors’ powers, control or authority.24

~~Directors’~~Accounts ~~Authority to Set Auditor’s Remuneration~~Receivable

~~Under~~The ~~the~~Company ~~New~~maintains ~~Act,~~an ~~the~~allowance ~~Company~~for ~~is,~~doubtful ~~subject~~accounts tofor ~~shareholder~~estimated ~~approval,~~losses ~~permitted~~that tomay ~~include~~arise inif ~~the New~~any ~~Articles~~of ~~authorization~~its ~~for~~customers ~~the~~are ~~directors~~unable to ~~set~~make ~~the~~required ~~remuneration~~payments. ~~paid~~Management tospecifically analyses the ~~auditor~~age of ~~the~~ ~~Company.~~outstanding ~~The~~customer ~~Former~~balances, ~~Act~~historical ~~required~~bad ~~the~~debts, ~~shareholders~~customer tocredit-worthiness ~~set~~and ~~the~~changes ~~remuneration or the shareholders to~~in ~~authorize,~~customer onpayment anterms ~~annual~~when ~~basis,~~making ~~the~~estimates ~~directors~~of ~~to set~~ the ~~remuneration.~~uncollectability ~~Historically, shareholders~~ of ~~the~~ ~~Company have always authorized~~ the ~~directors to set the auditor~~Company’s ~~remuneration~~accounts receivable. AsIf ~~a result,~~ the ~~inclusion~~Company ofdetermines that the ~~authority~~financial ~~for~~condition ~~directors~~of toany ~~set~~of ~~the~~its ~~auditor’s~~customers deteriorates, ~~remuneration~~increases in the ~~New~~allowance ~~Articles merely~~may ~~codifies~~be ~~existing practice~~made. ~~More~~The ~~importantly,~~Company ~~however,~~reviews ~~this~~the ~~change~~unbilled ~~also~~revenue balance ~~codifies~~on ~~new corporate~~a ~~governance~~regular ~~rules~~basis ~~and~~to ~~regulations~~assess ~~relating~~its tofair ~~audit~~market ~~committees~~value and ~~the~~provides ~~appointment~~a ~~and~~reserve against any ~~remuneration~~amounts ofthat ~~auditors~~are impaired.

~~Share Certificates~~Inventory

~~Under~~Materials ~~the~~and ~~Existing~~components ~~Articles,~~are astated ~~shareholder~~at isthe ~~entitled~~lower toof acost ~~share~~and ~~certificate~~replacement ~~representing~~value as determined by the ~~number~~first-in offirst-out ~~shares~~method. ofWork-in-process ~~the~~and ~~Company~~manufactured ~~the~~parts ~~shareholder~~are ~~holds.~~stated ~~Under~~at the ~~New~~cost ~~Act,~~of materials aand ~~shareholder~~direct islabour ~~now entitled~~applied to athe ~~share~~product ~~certificate~~and ~~representing~~ the ~~number~~applicable ofshare ~~shares~~ of ~~the~~overhead. ~~Company the shareholder~~Finished ~~holds~~goods orare astated ~~written~~at ~~acknowledgement of~~ the ~~shareholder’s~~lower ~~right~~of tocost ~~obtain~~and ~~such~~net arealizable ~~share certificate~~value. As aThe ~~result,~~Company assesses the ~~New~~need ~~Articles~~for inventory ~~have~~write-downs ~~been~~based ~~amended~~on toits ~~provide~~assessment ~~for~~of ~~this~~estimated ~~additional~~net ~~right.~~realizable ~~The~~value ~~addition~~using assumptions ofabout ~~the~~future ~~ability~~demand toand ~~issue~~market aconditions. ~~written~~If ~~acknowledgement~~market isconditions ~~very~~differ ~~useful~~from ~~for~~those ~~public~~originally estimated ~~companies~~by ~~such as~~ the Company, ~~since~~an itadditional ~~permits~~inventory ~~flexibility~~write-down inmay ~~corporate~~be ~~and securities transactions~~required.

~~Dividends~~Changes in Accounting Policies including Initial Adoption

~~Under~~Effective ~~the~~December 1, ~~New Act~~2004, athe ~~company~~Company ~~may~~elected ~~pay~~to ~~dividends~~report ~~out~~its ofconsolidated ~~profits,~~financial statements ~~capital~~in oraccordance ~~otherwise~~with U.S. ~~This~~GAAP. isThe Company prepares a ~~significant~~ ~~change~~reconciliation ~~from~~highlighting the material ~~situation~~differences asbetween itits ~~existed~~unaudited ~~under~~interim ~~the~~consolidated ~~Former~~financial ~~Act,~~statements ~~which~~prepared ~~was silent on the~~in ~~issue~~accordance ~~and~~with ~~did~~U.S. ~~not~~GAAP ~~contain~~as ~~rules~~compared ~~comparable~~ to ~~those~~unaudited ~~set~~interim ~~out~~consolidated infinancial ~~the New Act governing the payment of~~statements ~~dividends.~~prepared Asunder aCanadian ~~result,~~GAAP ~~payment~~(see ofNote ~~dividends~~16 byto ~~companies under~~ the ~~Former~~unaudited ~~Act~~interim ~~was~~consolidated ~~governed by the~~financial ~~common~~statements. ~~law,~~Additional ~~which~~disclosure ~~provided~~with ~~that~~respect ~~dividends~~to ~~were~~the ~~payable~~effects ~~out~~ of ~~profits~~the ~~only,~~Company’s ~~and~~election ~~not~~to ~~out~~report on ofits ~~capital or~~consolidated ~~otherwise.~~financial Instatements ~~order~~in toaccordance ~~provide~~with ~~greater~~U.S. ~~flexibility~~GAAP tois ~~the~~provided ~~Company,~~in ~~the~~Notes ~~New~~1, ~~Articles~~2 ~~contain~~and ~~provisions~~17 ~~that~~of ~~permit~~ the Company’s tounaudited ~~pay~~interim ~~dividends~~consolidated infinancial ~~the manner permitted under the New Act~~statements.

~~Residency~~In December 2004, the Financial Accounting Standards Board issued Statement of ~~Directors~~Financial Accounting Standard No. 123R — Share-Based Payment (“SFAS 123R”), a revision to SFAS 123 “Accounting for Stock Based Compensation”. SFAS 123R requires all share-based payments to be recognized in the financial statements based on their values using either a modified-prospective or modified-retrospective transition method. The standard no longer permits pro-forma disclosure or prospective recognition. Accordingly, from the date of adoption of the revised standard, the Company will be required to recognize compensation expense for all share-based payments based on grant-date fair value, including those granted, modified or settled prior to September 1, 2005, that were previously disclosed on a pro-forma basis. The Company is currently evaluating the impact of SFAS 123R in its consolidated financial statements.

~~Under~~Financial ~~the~~Instruments ~~Former~~and ~~Act,~~Other ~~the majority of directors of a company had to be residents of Canada with at~~Instruments ~~least one director being a resident of British Columbia. The New Act no longer specifies residency~~ ~~requirements for directors of a company. Accordingly, the New Articles do not specify any residency~~ ~~requirements for the Company’s directors.~~

~~Disclosure~~Foreign ofExchange ~~Interests~~Forward ~~of Directors and Senior Officers~~Contracts

~~Under~~The ~~the~~Company ~~New~~uses ~~Act,~~foreign ~~the~~exchange ~~provisions~~forward ~~relating~~contracts to ~~the~~hedge ~~disclosure~~transactions ofdenominated ~~interests~~in byU.S. dollars, ~~directors~~Australian ~~have~~dollars ~~been revised~~ and ~~updated~~Euros. ~~Under~~The ~~the~~purpose ~~Former Act, a director~~ of ~~a company was required to disclose~~ the ~~nature~~ ~~and extent of the director~~Company’s ~~direct~~hedging oractivities ~~indirect~~is ~~interest~~to inreduce the ~~any~~level ~~proposed~~of ~~contract~~exposure ~~or transaction~~to ~~involving~~exchange ~~the~~rate ~~company~~movements. ~~The~~At ~~New~~May 31, ~~Act~~2005, ~~expands~~ the ~~application~~Company ofhad ~~the~~foreign ~~disclosure~~exchange ~~requirement~~forward contracts to ~~include~~sell ~~senior~~Australian ~~officers of a company~~$1,605,038. ~~but~~The ~~inserts~~exchange arates ~~two-fold~~set ~~materiality~~in ~~test~~the asforeign ~~the~~exchange ~~threshold~~forward ~~for~~contracts ~~disclosure~~ranged bybetween a$0.9486 ~~director~~to or$0.9578 ~~senior~~for ~~officer:~~Australian ~~(a) the~~$1.00. ~~proposed~~The ~~contract~~contracts ~~or transaction~~mature ~~must~~between beJune 2005 ~~material to the company;~~ and ~~(b)~~July ~~the director or~~2005.

~~senior~~Derivative ~~officer~~financial ofinstruments ~~the~~are ~~company~~utilized ~~must~~by ~~either:~~the ~~(i) have~~Company ~~a material interest~~ in such proposed contract or transaction; or (ii) if such director or senior officer is a director or senior officer of (or has a material interest in) an entity, and that entity has a material interest in the ~~proposed contract~~management ~~or transaction. All directors and senior officers~~ of aits ~~company are bound by these new~~foreign ~~provisions.~~currency ~~The~~exposure ~~New~~to ~~Articles~~reduce ~~incorporate~~its byexposure ~~reference~~to ~~these~~fluctuations ~~provisions~~in offoreign ~~the~~exchange ~~New~~on ~~Act.~~certain

~~Directors’~~Page ~~Meetings~~25

~~Under~~committed ~~the~~and ~~New~~anticipated ~~Act,~~transactions. ~~the~~The ~~provisions~~Company ~~relating~~formally todocuments ~~directors’~~the ~~meetings~~relationships ~~have~~between derivative ~~been~~financial ~~revised~~instruments and ~~updated~~hedged ~~to allow~~items, ~~directors to participate by telephone or other communication mediums~~ as ~~long~~well as the ~~directors are~~risk ~~able~~management toobjective ~~communicate with each other~~and strategy. The ~~New~~Company ~~Articles~~assesses, ~~have~~on ~~been~~an ~~drafted~~ongoing tobasis, ~~broaden~~whether the ~~ability of~~derivative ~~directors~~financial toinstruments continue ~~participate in meetings through other communication mediums~~ to ~~allow directors who may not~~ be ~~able~~effective ~~to attend~~ in ~~person~~offsetting tochanges ~~still participate~~ in ~~meetings~~fair ofvalues ~~the~~or ~~directors.~~cash Inflows ~~addition, the New Articles have been updated to allow directors to receive notices~~ of ~~meetings by electronic means, which allows for quicker and more efficient communication with directors of~~ the ~~Company~~hedged transactions.

~~Indemnification~~Derivatives are recorded as assets or liabilities, measured at fair value. Derivatives that are not hedges are adjusted to fair value through income. If the derivative is a hedge, depending upon the nature of ~~Directors~~the ~~and~~hedge, ~~Officers~~changes in the fair value of the derivative are either offset against the fair value of assets, liabilities or firm commitments through income, or recognized in other comprehensive income until the hedged item is recognized in income. The ineffective portion of a derivative’s change in fair value is immediately recognized into income. The requirement to record derivatives at their fair market value has not had a material impact on the Company’s financial statements.

~~Under~~Disclosure the Former Act, a company could only indemnify directors where it obtained prior court approval, except in certain limited circumstances. The Existing Articles permit the Company to indemnify directors, subject to the requirements of ~~the~~Outstanding ~~Former~~Share ~~Act. Under the New Act, a company is~~Data ~~now permitted to indemnify a past or present director or officer without obtaining prior court~~ ~~approval in respect of an “eligible proceeding”. An “eligible proceeding” includes any legal~~ ~~proceeding relating to the activities of the individual as a director, former director, officer or~~ ~~former officer of a company. Under the New Act, however, a company will be prohibited from paying an indemnity if:~~

~~(a)~~As at June 30, 2005, the ~~party~~Company ~~did~~had ~~not~~issued ~~act~~and ~~honestly~~outstanding 27,488,074 common shares, and 2,448,947 inoutstanding ~~good~~stock ~~faith~~options. ~~with~~As aat ~~view~~June 30, to2005 the ~~best~~Company ~~interests~~also had 30,262 issued and outstanding Class A preference shares and 390,000 issued and outstanding Class B preference shares series 2 convertible into common shares at conversion ratios of 1:1 and 1:58.82 respectively which represents 22,970,062 common shares. Also at June 30, 2005 the ~~company;~~Company had outstanding 13,788,365 common share purchase warrants convertible to common shares at a conversion ratio of 1:1, representing 13,788,365 common shares.

~~(b)~~Other ~~the~~MD&A ~~proceeding was not a civil proceeding and the party did not have reasonable grounds for believing that his or her conduct was lawful; and~~Requirements

~~(c)~~Additional information is also contained in the Company’s Annual Report, including the financial statements, for the financial year ended November 30, 2004, the ~~proceeding~~Company’s isInformation Circular ~~brought~~dated ~~against~~March 11, 2005 and in the ~~party~~Company’s Annual Information Form dated March 17, 2005. The information contained in those documents is hereby incorporated by reference. This and other additional information relating to the ~~company~~Company ormay anbe ~~associated~~found ~~corporation~~on SEDAR at www.sedar.com. Also, copies of these documents will be provided to any person, on request to the Secretary of the Corporation at 107-930 West 1st Street, North Vancouver, British Columbia, Canada, V7P 3N4, telephone (604) 904-4600, fax (604) 986-4454.

AsPage ~~a result, the New Articles provide that the Company will indemnify past and present directors~~26 and officers of the Company, subject to the limits imposed under the New Act. The board of directors of the Company believes that it is in the best interests of the Company to indemnify past and present directors and officers, subject to the limits and conditions of the New Act.

~~Delivery~~Offshore ofSystems ~~Documents~~International ~~to Shareholders~~Ltd.

AsInterim aConsolidated ~~result~~Financial ofStatements ~~changes under the New Act, the New Articles now permit the delivery of documents to~~(Unaudited) aThree ~~shareholder by facsimile transmission, email~~ and ~~any~~Six ~~other~~Months ~~method~~Ended ~~permitted~~May 31, ~~under~~2005 ~~securities legislation. This change reflects recent developments under securities legislation. As part of its efforts to modernize~~ and ~~adopt new, less expensive methods of shareholder communication, the board~~2004 of(expressed ~~directors of the Company believes that it is~~ in ~~the~~Canadian ~~best interests of the Company to allow for~~dollars) ~~facsimile~~(Prepared ~~transmission,~~in ~~email~~accordance ~~and~~with ~~other~~United ~~permitted~~States ~~methods~~Generally ofAccepted ~~delivery~~Accounting ~~of documents to shareholders.~~Principles) ~~As a result, the New Articles propose to allow the Company to deliver documents to shareholders by~~ ~~facsimile transmission, email and other methods permitted under securities legislation.~~

~~Location~~Offshore Systems International Ltd. U.S. GAAP Consolidated Balance Sheets (unaudited) (Incorporated under the laws of ~~Shareholder~~the ~~Meetings~~Province of British Columbia, Canada) (expressed in Canadian dollars)

Under the Former Act, annual general meetings were required to be held in British Columbia or at such other location as may be approved by the Registrar of Companies upon application by a company. Under the New Act, as long as it is provided for in a company’s articles, companies may hold their shareholder meetings inside or outside of British Columbia. The New Articles specifically allow the directors to authorize, by directors’ resolution, the holding of the Company’s shareholder meetings anywhere in North America.


	As at
	May 31,			November 30,
	2005			2004
	$			$
Assets (note 10)
Current assets
Cash		13,580,479			251,037
Restricted cash (note 4)		220,000			—
Accounts receivable (note 5)		7,306,453			9,140,478
Inventory (note 6)		893,754			649,427
Prepaid expenses and deposits		325,229			142,752
Deferred income taxes		844,141			780,331

		23,170,056			10,964,025
Deferred income taxes		31,366			—
Plant and equipment (note 7)		989,952			938,102
Intangible and other assets (note 8)		876,098			408,611
Goodwill (note 3)		397,139			—

		25,464,611			12,310,738

Liabilities
Current liabilities
Bank indebtedness		193,301			—
Accounts payable and accrued liabilities (note 9)		3,139,283			2,596,362
Income taxes payable		209,650			—
Unearned revenue		98,088			79,865
Deferred income taxes		43,767			—

		3,684,089			2,676,227
Deferred income taxes		77,887			—

		3,761,976			2,676,227

Stockholders’ Equity
Capital stock
Authorized (note 11(a))
Issued and outstanding
30,262 Class A preference shares – Series A (2004 – 30,262) (note 11(b))		30,262			30,262
390,000 Class B preference shares – Series 2 (2004 – nil) (note 11(c)(ii))		12,649,066			—
nil Class B preference shares – Series 1 (2004 – 57,711) (note 11(c)(i))		—			2,163,621
27,488,074 common shares (2004 - 27,488,074)		20,047,731			20,047,731

		32,727,059			22,241,614
Warrants (note 11(c))		5,206,844			661,575
Additional Paid in Capital		5,071,694			928,169
Accumulated deficit		(21,330,012	)		(14,196,847	)
Accumulated other comprehensive income		27,050			—

		21,702,635			9,634,511

		25,464,611			12,310,738

Contingencies (note 14)

~~APPENDIX~~The Baccompanying notes are an integral part of these unaudited interim consolidated financial statements.

~~PROPOSED~~Offshore ~~REVISED~~Systems ~~SECTION~~International 2Ltd.1 OFU.S. ~~ARTICLES~~ GAAP Consolidated Statements of Earning (unaudited) (expressed in Canadian dollars)

2.1 Authorized Share Structure


	Three Months Ended May 31,						Six Months Ended May 31,
	2005			2004			2005			2004
	$			$			$			$
Revenue
Software		281,521			1,397,516			1,772,689			4,390,779
Geomatics		906,015			998,970			1,213,596			1,717,703
Systems and system components		555,079			227,344			960,808			414,238
Other		139,070			150,005			194,449			280,875


		1,881,685			2,773,835			4,141,542			6,803,595

Cost of sales		1,511,334			998,832			2,539,082			2,459,819


Gross profit		370,351			1,775,003			1,602,460			4,343,776

Expenses
General and administrative		999,877			925,044			2,035,961			1,655,117
Research and development		461,925			583,351			781,158			1,046,575
Sales and marketing		674,562			735,541			1,226,818			1,528,818
Depreciation and amortization		78,971			55,978			132,717			108,044
Interest		8,687			103			21,403			371
Foreign exchange loss (gain)		50,912			8,101			(22,232	)		(16,640	)
Technology Partnerships Canada royalty (note 12)		37,867			7,708			92,558			56,634
Technology Partnerships Canada contribution (note 12)		(470,628	)		(851,542	)		(736,145	)		(851,542	)


		1,842,173			1,464,284			3,532,238			3,527,377


Net earnings (loss) before income taxes		(1,471,822	)		310,719			(1,929,778	)		816,399

Income tax expense (recovery) (note 15)
Deferred income tax expense (recovery)		143,189			(217,363	)		(95,176	)		(496,266	)
Current income tax expense		82,756			147,994			82,756			380,786


		225,945			(69,369	)		(12,420	)		(115,480	)


Net earnings (loss)		(1,697,767	)		380,088			(1,917,358	)		931,879
Foreign currency translation adjustment		27,050			—			27,050			—


Comprehensive income (loss)		(1,670,717	)		380,088			(1,890,308	)		931,879

Net earnings (loss) available to common shareholders (note 11(e))		(6,880,135	)		303,366			(7,133,165	)		778,435

Earnings per share (note 11(e))
Basic earnings per share		(0.25	)		0.01			(0.26	)		0.03
Diluted earnings per share		(0.25	)		(0.01	)		(0.26	)		0.01
Weighted average number of common shares outstanding (note 11(e))
Basic		27,488,074			27,145,769			27,488,074			26,964,789
Diluted		27,488,074			29,771,620			27,488,074			32,525,826

The ~~authorized~~accompanying ~~share~~notes ~~structure~~are an integral part of ~~the~~these ~~Company~~unaudited ~~consists~~interim ~~of:~~consolidated financial statements.

(a) an unlimited number of common shares without par value;


Offshore Systems International Ltd.		U.S. GAAP
Consolidated Statements of Stockholders’ Equity and Accumulated Deficit(unaudited)
For the six months ended May 31, 2005
(Incorporated under the laws of the Province of British Columbia)
(expressed in Canadian dollars)

(b) 100,000,000 Class “A” Preference shares without par value, of which 10,000,000 shares are designated as Class “A” Preference shares Series A Convertible;


	Class A Preference				Class B Preference																			Accumulated
	Shares				Shares						Common Shares			Warrants				Additional			Accumulated			Other		Total
																		Paid In						Comprehensive		Stockholders’
	Number		Amount		Number			Amount			Number		Amount		Number		Amount		Capital			Deficit			Income		Equity
			$					$			$					$		$			$			$		$
Balance - November 30, 2004		30,262		30,262		57,711			2,163,621			27,488,074	20,047,731		1,393,301		661,575		928,169			(14,196,847	)		—		9,634,511

Accretion of discount on Class B preference shares Series 1									33,439			—	—		—		—		—			(33,439	)		—		—
Stock-based compensation		—		—		—			—			—	—		—		—		2,524			—			—		2,524

		30,262		30,262		57,711			2,197,060			27,488,074	20,047,731		1,393,301		661,575		930,693			(14,230,286	)		—		9,637,035
Net loss for the period		—		—		—			—						—		—		—			(219,591	)		—		(219,591	)

Balance – February 28, 2005		30,262		30,262		57,711			2,197,060			27,488,074	20,047,731		1,393,301		661,575		930,693			(14,449,877	)		—		9,417,444

Accretion of discount on Class B preference shares Series 1		—		—		—			390,672			—			—		—		—			(390,672	)		—		—
Repurchase of Class B preference shares Series 1		—		—		(57,711	)		(2,587,732	)		—	—		—		—		(668,785	)		370,967			—		(2,885,550	)
Issue of Class B preference shares Series 2 and warrants, net of issue costs		—		—		390,000			12,536,563			—	—		12,395,064		4,545,269		—			—			—		17,081,832
Beneficial conversion feature on Class B preference shares Series 2		—		—		—			(4,796,649	)		—	—		—		—		4,796,649			—			—		—
Accretion of discount on Class B preference shares Series 2		—		—		—			112,503			—	—		—		—		—			(112,503	)		—		—
Accretion of beneficial conversion feature on Class B preference shares Series 2		—		—		—			4,796,649			—	—		—		—		—			(4,796,649	)		—		—
Foreign currency translation adjustment		—		—		—			—			—	—		—		—		—			—			27,050		27,050
Dividends on Class B preference shares series 1		—		—		—			—			—	—		—		—		—			(62,785	)		—		(72,785	)
Dividends on Class B preference shares series 2		—		—		—			—			—	—		—		—		—			(190,726	)		—		(180,726	)
Stock-based compensation		—		—		—			—			—	—		—		—		13,137			—			—		13,137

		30,262		30,262		390,000			12,649,066			27,488,074	20,047,731		13,788,365		5,206,844		5,071,694			(19,632,245	)		27,050		23,400,402
Net loss for the period		—		—		—			—						—		—		—			(1,697,767	)		—		(1,697,767	)

Balance – May 31, 2005		30,262		30,262		390,000			12,649,066			27,488,074	20,047,731		13,788,365		5,206,844		5,071,694			(21,330,012	)		27,050		21,702,635

~~(c)~~The ~~100,000,000~~accompanying ~~Class~~notes ~~“B”~~are ~~Preference~~an ~~shares~~integral ~~with~~part ~~a par value~~ of ~~$50.00~~these ~~each~~unaudited ofinterim ~~which~~consolidated ~~10,000,000~~financial ~~shares are designated as Class B Series 1 Preference Shares; and~~statements.

~~(d) an~~Page ~~unlimited number of Class C Preference share without par value.~~3

~~The~~Offshore ~~special~~Systems ~~rights~~International ~~and~~Ltd. ~~restrictions~~Consolidated ~~attached~~Statement toof ~~the~~Cash ~~Class~~Flows ~~“A”~~(unaudited) ~~Preference~~Three ~~shares, the Class “B” Preference shares~~ and ~~the~~Six ~~Class~~Months ~~“C”~~Ended ~~Preference~~May ~~Shares~~31, ~~are~~2005 asand ~~set~~2004 ~~out~~(expressed in ~~Schedule~~Canadian ~~“A”~~dollars) ~~to these Articles~~U. S. GAAP

PROPOSED RIGHTS, PRIVILEGES AND RESTRICTIONS ATTACHED TO CLASS C PREFERENCE SHARES TO BE ADDED AS PART 3 TO SCHEDULE “A” OF ARTICLES


	Three Months Ended						Six Months Ended
	May 31						May 31
	2005			2004			2005			2004
	$			$			$			$
Cash flows from (used in) operating activities
Net earnings (loss) for the period		(1,697,767	)		380,088			(1,917,358	)		931,879
Items not affecting cash
Depreciation and amortization		118,184			83,802			202,854			161,849
Stock based compensation		13,137			33,006			15,661			33,006
Deferred income taxes		143,189			(64,470	)		(95,176	)		(115,480	)
Other		4,420			—			4,420			—

		(1,418,837	)		432,426			(1,789,599	)		1,011,254


Changes in non-cash working capital items
Accounts receivable		1,403,092			(1,359,153	)		2,383,378			(3,983,827	)
Inventory		(31,200	)		(81,880	)		(244,327	)		(51,644	)
Prepaid expenses and deposits		114,844			91,029			(182,477	)		175,987
Accounts payable and accrued liabilities		1,258,425			312,017			493,011			253,801
Income taxes payable		87,366			—			87,366			—
Unearned revenue		(2,228	)		43,993			(7,748	)		42,471
Rent payable		—			(133,942	)		—			(133,942	)
Accrued long term royalties		—			(46,845	)		—			(93,690	)

		2,830,299			(1,174,781	)		2,529,203			(3,790,844	)

		1,411,462			(742,355	)		739,604			(2,779,590	)


Cash flows from (used in) financing activities
Issue of Common shares		—			264,239			—			315,416
Share issue cost — Class B preference shares — Series 1		—			(20,115	)		—			(20,115	)
Issue of Class B preference shares — Series 2 and warrants, net of issue costs		17,081,832			—			17,081,832			—
Repurchase of Class B preference shares — Series 1		(2,885,550	)		—			(2,885,550	)		—
Class B preference share dividends declared and paid		(166,945	)		—			(253,511	)		(91,866	)

		14,029,337			244,124			13,942,771			203,435


Cash flows from (used in) investing activities
Purchase of Mapcon Mapping Consultants Inc, net of cash acquired (note 3)		(1,176,241	)		—			(1,176,241	)		—
Advances from (payment to) operating line of credit		(355,093	)		—			193,301
Increase in restricted cash		(220,000	)		—			(220,000	)		—
Additions to plant and equipment		(77,955	)		(35,666	)		(105,379	)		(65,364	)
Additions to intangibles		(58,081	)		(166,093	)		(71,664	)		(179,031	)

		(1,887,370	)		(201,759	)		(1,379,983	)		(244,395	)

Translation adjustment		27,050			—			27,050			—

Increase (decrease) in cash		13,580,479			(699,190	)		13,329,442			(2,820,550	)
Cash — Beginning of period		—			1,716,195			251,037			3,837,555

Cash — End of period		13,580,479			1,017,005			13,580,479			1,017,005

~~(1)~~Offshore ~~The~~Systems ~~Class~~International CLtd. ~~Preference~~Notes ~~Shares~~to asthe aconsolidated ~~class~~Financial ~~shall~~Statements ~~have~~(unaudited) ~~attached~~Three toand ~~them~~Six ~~the~~Months ~~special~~Ended ~~rights~~May 31, 2005 and ~~restrictions~~2004 ~~specified~~(expressed in ~~this~~Canadian ~~section~~dollars) U.S. GAAP

(2) The Class C Preference Shares may be issued in one or more series.

1		Basis of presentation

		These unaudited interim consolidated financial statements have been prepared by management and include the accounts of Offshore Systems International Ltd. and its subsidiaries, collectively referred to as the Company. These unaudited interim consolidated financial statements have been prepared in accordance with accounting principles generally accepted in the United States (“U.S. GAAP”) and all amounts herein have been expressed in Canadian dollars unless otherwise noted. These unaudited interim consolidated financial statements do not include all the information and footnote disclosures required for compliance with U.S. GAAP for annual financial statements applied on a consistent basis. These unaudited interim consolidated financial statements should be read in conjunction with the Company’s audited consolidated financial statements and notes thereto. These unaudited interim consolidated financial statements conform in all material respects with Canadian generally accepted accounting principles (“Canadian GAAP”), except as disclosed in notes 19 and 20.

		The preparation of these unaudited interim consolidated financial statements and the accompanying notes requires management to make estimates and assumptions that affect the amounts reported. In the opinion of management, these unaudited interim consolidated financial statements reflect all adjustments (which include only normal recurring adjustments) necessary to state fairly the results for the periods presented. Actual results could vary from these estimates and the operating results for the interim period presented are not necessarily indicative of the results expected for the full year.

2		Accounting changes

		a) Changes in accounting policies relating to the adoption of U.S. GAAP

		Effective December 1, 2004, the Company elected to report its consolidated financial statements in conformity with U.S. GAAP. The Company continues to report all amounts in Canadian dollars. All accounting policies are the same as described in note 2 to the Company’s audited financial statements for the year ended November 30, 2004, which were prepared accordance with Canadian GAAP filed with the appropriate securities commissions except for the following which have been retroactively adopted to comply with U.S. GAAP:

		Stock Based Compensation

		The Company grants stock options to employees, officers, directors, and persons providing management or consulting services to the Company pursuant to the stock option plans described in note 11(d). As allowed by Statement of Financial Accounting Standard 123 Accounting for Stock Based Compensation, (“SFAS 123”) as amended by Statement of Financial Accounting Standard 148, the Company followed the Accounting Principles Board Opinion 25, Accounting for Stock Issued to Employees, (“APB 25”) and presented pro forma information that is required by SFAS 123. APB 25 requires compensation cost for stock-based employee compensation plans to be recognized over the vesting period based on the difference, if any, between the quoted market price of the Company’s stock as of the grant date and the amount an employee must pay to acquire the stock.

		For stock options granted to non-employees, the Company follows the requirements of SFAS 123 and related interpretations. Costs are measured at the estimated fair value of the consideration received or the estimated fair value of the options issued, whichever is more reliably measurable. The value of the options issued for consideration other than employee services is determined on the earlier of a performance commitment or completion of performance by the provider of goods or services.

		Beneficial conversion feature and accretion of discount on preference shares issued with attached warrants

		For U.S. GAAP purposes, during the fiscal year 2003 and the three months ended May 31, 2005 the Company recorded beneficial conversion features of $668,785 and $4,796,649 on the issuance of Class B preference shares Series 1 and 2, respectively, as a reduction to the net earnings available to common shareholders calculated on the effective conversion price of the preference shares to common shares based on the proceeds allocated to the preference shares. In both cases, the conversion feature of the preference shares vested immediately and the Company recorded the accretion of the full amount of

~~(3)~~Page Subject to the Business Corporations Act, the directors may from time to time, by resolution, if none of the Class C Preference Shares of any particular series are issued, alter the Articles of the Company and authorize the alteration of the Notice of Articles of the Company, as the case may be, to do one or more of:1

~~(a)~~Offshore ~~determine~~Systems ~~the~~International ~~maximum~~Ltd. ~~number~~Notes ~~of shares of that series that the Company is authorized~~ to ~~issue, determine that there is no such maximum number, or alter any such determination; (b) create an identifying name for~~ the ~~shares~~consolidated ofFinancial ~~that~~Statements ~~series, or alter any such identifying name;~~ (cunaudited) ~~attach~~Three special rights or restrictions to the shares of that series, including, but without limiting or restricting the generality of the foregoing, the rate or amount of dividends (whether cumulative, non-cumulative or partially cumulative), the dates and ~~places~~Six ofMonths ~~payment~~Ended ~~thereof,~~May ~~the consideration for~~31, ~~and~~2005 ~~the terms~~ and ~~conditions~~2004 ~~of, any purchase for cancellation or redemption thereof~~ (~~including~~expressed ~~redemption~~in ~~after~~Canadian ~~a fixed term or at a premium~~dollars), ~~conversion~~U.S. ~~or exchange rights, the terms and conditions of any share purchase plan or sinking fund, restrictions respecting payment of dividends on, or the~~GAAP

repayment of capital in respect of, any other shares of the Company and voting rights and restrictions; or alter any such special rights or restrictions; but no such special right or restriction shall contravene the provisions of subclause (4) of this section.

		the beneficial conversion feature. For both the Series 1 and Series 2 Class B preference shares, the discount on these shares that resulted from the allocation of the gross proceeds to the Class B preference shares and to the attached warrants is accreted over the five-year life of the warrants. This resulted in an accretion of $503,175 and $536,614 to Deficit for the three and six months ended May 31, 2005 respectively ($33,439 and $66,878 for the three and six months ended May 31, 2004 respectively).

		Under Canadian GAAP, there is not a requirement to record the beneficial conversion feature and accretion of discount when preference shares are issued with attached warrants.

		Derivative Financial Instruments

		Under Canadian GAAP, there is a requirement for derivatives outside of hedging relationships to be recognized on the balance sheet at fair market value; however for derivatives in hedging relationships, Canadian GAAP does not specify how such derivatives should be recorded. As a result, under Canadian GAAP, in some instances derivatives may not be recorded on the balance sheet. Under U.S. GAAP it is required that all derivatives be recorded as assets or liabilities, measured at fair value. Derivatives that are not hedges are adjusted to fair value through income. If the derivative is a hedge, depending upon the nature of the hedge, changes in the fair value of the derivative are either offset against the fair value of assets, liabilities or firm commitments through income, or recognized in other comprehensive income until the hedged item is recognized in income. The ineffective portion of a derivative’s change in fair value is immediately recognized into income.

		b) Recent pronouncements

		In December 2004, the Financial Accounting Standards Board issued Statement of Financial Accounting Standard 123R, Share-Based Payment, (“SFAS 123R”) a revision to SFAS 123. SFAS 123R requires all share-based payments to be recognized in the financial statements based on their values using either a modified-prospective or modified-retrospective transition method. The standard no longer permits pro-forma disclosure or prospective recognition. Accordingly, from the date of adoption, December 1, 2005, of the revised standard, the Company will be required to recognize compensation expense for all share-based payments based on grant-date fair value, including those granted, modified or settled prior to September 1, 2005, that were previously disclosed on a pro-forma basis. The Company is currently evaluating the impact of SFAS 123R on its consolidated financial statements.

		In December 2004, the FASB issued SFAS No. 153, “Exchange of Nonmonetary Assets, an amendment of APB Opinion No. 29, Accounting for Nonmonetary Transactions” (“SFAS No. 153”). The amendments made by SFAS No. 153 are based on the principle that exchanges of nonmonetary assets should be measured based on the fair value of the assets exchanged. Further, the amendments eliminate the narrow exception for nonmonetary exchanges of similar productive assets and replace it with a broader exception for exchanges of nonmonetary assets that do not have commercial substance. SFAS No. 153 is to be applied prospectively and is effective for nonmonetary asset exchanges occurring in fiscal periods beginning after June 15, 2005. The Company is currently evaluating the impact of SFAS No. 153 on its consolidated financial statements.

3		Acquisition

		On April 8, 2005, the Company acquired all of the issued and outstanding shares of Mapcon Mapping Consultants Inc. (“Mapcon”) of Salt Lake City, Utah for $1,347,382 (USD$1,113,907). The acquisition was effective April 1, 2005. Mapcon is a privately held land mapping company in the U.S. geomatics (digital and electronic chart data production) market. The results of Mapcon’s operations have been included in the consolidated financial statements commencing April 1, 2005.

		The following table summarizes the fair value of the assets acquired and liabilities assumed by the Company at April 1, 2005, the date of acquisition. The acquisition was accounted for using the purchase method whereby assets acquired and liabilities assumed were recorded at their fair values at April 1, 2005. The excess of the purchase price over the fair market value was recorded as goodwill. The allocation of the purchase price is preliminary and the final allocation may be subject to refinement in the next 12 months. The purchase price is subject to certain adjustments related to working capital and the achievement of a minimum level of sales bookings against a specific contract.

~~(4)~~Page The holders of Class C Preference Shares shall be entitled, on the liquidation or dissolution of the Company, whether voluntary or involuntary, or on any other distribution of its assets among its shareholders for the purpose of winding up its affairs, to receive, before any distribution is made to the holders of common shares or any other shares of the Company ranking junior to the Class C Preference Shares with respect to repayment of capital on the liquidation or dissolution of the Company, whether voluntary or involuntary, or on any other distribution of its assets among its shareholders for the purpose of winding up its affairs, the amount paid up with respect to each Preferred share held by them, together with the fixed premium (if any) thereon, all accrued and unpaid cumulative dividends (if any and if preferential) thereon, which for such purpose shall be calculated as if such dividends were accruing on a day-to-day basis up to the date of such distribution, whether or not earned or declared, and all declared and unpaid non-cumulative dividends (if any and if preferential) thereon. After payment to the holders of Class C Preference Shares of the amounts so payable to them, they shall not, as such, be entitled to share in any further distribution of the property or assets of the Company except as specifically provided in the special rights and restrictions attached to any particular series.2

~~OFFSHORE~~Offshore ~~SYSTEMS~~Systems ~~INTERNATIONAL~~International ~~LTD~~Ltd. ~~Request~~ ~~for~~Notes ~~Interim~~to the consolidated Financial Statements (unaudited) Three and Six Months Ended May 31, 2005 and 2004 (expressed in Canadian dollars) U.S. GAAP

In accordance with National Instrument 54-102 of the Canadian Securities Administrators, registered and beneficial shareholders of the subject Corporation may elect annually to receive interim corporate mailings, including interim financial statements of the Corporation, if they so request. If you wish to receive such mailings, please complete and return this form to:


	$
Assets
Current assets		819,568
Equipment		208,791
Intangible assets		350,784
Goodwill		382,712

Total assets acquired		1,761,855

Liabilities
Current liabilities not including deferred tax liabilities		198,165
Deferred tax liabilities — current		42,177
Deferred tax liabilities — long term		75,058

Total liabilities assumed		315,400
Net assets acquired (cash consideration)		1,347,382
Direct acquisition costs incurred by the Company		99,073
Cash of acquired operations		270,214

~~Computershare~~The ~~Trust~~following ~~Company~~table ofpresents ~~Canada 100~~details ~~University~~of ~~Avenue 9thFloor Toronto,~~the ~~ON M5J~~purchased ~~2Y1~~ intangible assets:

NAME: ADDRESS:


	Estimated useful life		Amount
			$
Customer contract	16 months			157,248
Customer relationships		4 to 10 years		193,536

~~POSTAL~~The ~~CODE:~~pro ~~___________________________~~ forma Offshore Systems International Ltd. consolidated operating results assuming the acquisition of Mapcon had occurred as of December 1, 2004, are as follows:

I confirm that I am an owner of common shares of the Corporation.


	3 Months Ended May 31,					6 Months Ended May 31,
	2005			2004		2005			2004
	$			$		$			$

Revenue		2,024,702			3,049,028		4,660,036			7,353,981
Earnings (loss)		(1,651,780	)		417,492		(1,767,503	)		1,006,686
Earnings (loss) per share — basic		(0.25	)		0.01		(0.25	)		0.03
Earnings (loss) per share — diluted		(0.25	)		0.00		(0.25	)		0.01

~~SIGNATURE~~4 ~~OF SHAREHOLDER:~~Restricted ~~___________________________________~~cash ~~DATE:~~Restricted ~~_______~~ cash consists of cash pledged with a bank as collateral for bid bonds.

~~CUSIP:~~Page ~~67627E101~~3

~~COMPANY~~Offshore ~~CODE:~~Systems ~~OSIQ~~ International Ltd. Notes to the consolidated Financial Statements (unaudited) Three and Six Months Ended May 31, 2005 and 2004 (expressed in Canadian dollars) U.S. GAAP

Accounts receivable


	May 31,			November 30,
	2005			2004
	$			$
Trade		2,125,855			4,679,207
Unbilled revenue		4,636,448			4,116,828
Technology Partnerships Canada contribution (note 12)		470,628			257,266
Other		109,884			111,234
Allowance for doubtful accounts		(36,362	)		(24,057	)


		7,306,453			9,140,478

The Company has collateralized its accounts receivable as security against its operating line facility.

Inventory


	May 31,		November 30,
	2005		2004
	$		$
Materials and components		714,429		638,127
Finished goods		165,451		11,300
Work in process		13,874		—


		893,754		649,427

Plant and equipment


	May 31, 2005
			Accumulated
	Cost		Depreciation		Net
	$		$		$
Equipment		4,044,913		3,126,015		918,898
Furniture and fixtures		138,283		103,088		35,195
Leasehold improvements		234,175		198,316		35,859


		4,417,371		3,427,419		989,952


	November 30, 2004
			Accumulated
	Cost		Depreciation		Net
	$		$		$
Equipment		3,910,980		3,038,921		872,059
Furniture and fixtures		131,095		94,705		36,390
Leasehold improvements		222,737		193,084		29,653


		4,264,812		3,326,710		938,102

Page 4


Offshore Systems International Ltd. Notes to the Consolidated Financial Statements (unaudited) Three and Six Months Ended May 31, 2005 and 2004 (expressed in Canadian dollars)		U.S. GAAP

Intangible and other assets


	May 31, 2005
			Accumulated
	Cost		Amortization		Net
	$		$		$
Computer software		1,141,984		621,752		520,232
Customer contract		163,176		20,397		142,779
Customer relationships		200,832		5,029		195,803
Licenses and patents		57,267		39,983		17,284


		1,563,259		687,161		876,098


	November 30, 2004
			Accumulated
	Cost		Amortization		Net
	$		$		$
Computer software	$	936,591	$	546,190	$	390,401
Licenses and patents		57,267		39,057		18,210


	$	993,858	$	585,247	$	408,611

Accounts payable and accrued liabilities


	May 31,		November 30,
	2005		2004
	$		$
Trade		1,285,005	$	1,343,129
Accrued employee costs		637,425		572,589
Accrued liabilities		1,125,162		282,227
Accrued royalties (note 12)		91,691		311,851
Class B preference shares Series 1 dividends declared and unpaid		—		86,566


		3,139,283	$	2,596,362

10		Credit facilities

		In February 2005, the Company renewed certain credit facilities with a Canadian chartered bank, which consist of an operating line, a foreign exchange forward contract facility and standby letters of credit. The operating line bears interest at the chartered bank’s prime lending rate plus 0.5% with interest payable monthly. The prime lending rate at May 31, 2005 was 4.25% (2004 – 4.25%). The standby letters of credit are denominated in U.S. dollars and bear interest at the rate of 1.25% per annum. Funds drawn on the operating line and the standby letters of credit are repayable on demand. As of May 31, 2005, letters of credit, relating principally to customer contracts, amounting to U.S. $nil (2004 – U.S. $818,398) and Australian

Page 5


Offshore Systems International Ltd. Notes to the Consolidated Financial Statements (unaudited) Three and Six Months Ended May 31, 2005 and 2004 (expressed in Canadian dollars)		U.S. GAAP

$1,605,038 (2004 – Australian $2,750,000) have been issued. The Company utilizes letters of credit to back certain performance obligations with its customers.

The maximum amount(s) available to the Company under the operating line is $2,000,000 and under the foreign exchange forward contract facility are U.S. $2,000,000 and Australian $2,500,000. The credit facilities are collateralized by an assignment of accounts receivable, a general security agreement from the Company and its subsidiaries Offshore Systems Ltd., OSI Geomatics Ltd. and OSI Geomatics Inc. In addition, the Company is required to meet certain covenants as outlined in the credit facilities agreement. As at May 31, 2005, the Company had drawn on its foreign exchange contract facility in the amount of U.S. $nil (2004 – U.S. $818,398) and Australian $1,605,038 (2004 – $2,750,000).

11		Capital Stock

(a)		Authorized

		100,000,000 Class A preference shares with no par value, issuable in series, of which: 10,000,000 shares are designated Series A voting non-cumulative, retractable, convertible at a ratio of 1:1, 1% preference shares 100,000,000 Class B preference shares with a par value of $50 each, issuable in series, of which: 10,000,000 share are designated Series 1 voting, cumulative, convertible shares at a ratio of 1:45.5, 6% preference shares, and 10,000,000 are designated Series 2 voting, cumulative, convertible shares at a ratio of 1:58.82, 7% preference shares Unlimited Class C preference shares without par value, issuable in series Unlimited common shares without par value

(b)		Class A preference shares

		The Company has 30,262 (November 30, 2004 — 30,262) Class A preference shares outstanding that have a carrying value of $30,262 for financial statement purposes. These Class A preference shares are being held in escrow but are no longer subject to any escrow restrictions and may be converted at any time into common shares of the Company, by notice in writing from the holders.

(c)		Class B preference shares

(i) Series 1

The Company completed a private placement on February 13, 2003 consisting of 61,244 units for total gross proceeds of $3,004,200. Each unit consists of one Class B Series 1 preference share and 22.75 common share purchase warrants exercisable at $1.10. The preference shares are voting convertible shares at a ratio of 1:45.5 and have a cumulative dividend of 6% per annum. The Company has the right to redeem the preference shares after five years. The share purchase warrants are convertible to common shares at a ratio of 1:1 and expire five years after issue. The private placement incurred share issue costs of $297,320.

The gross proceeds of $3,004,200 were allocated between the preference shares and warrants based on their relative fair value at the date of issuance. The $2,342,625 fair value of the preference shares has been estimated based on the fair value of the underlying common shares. The $661,575 fair value of the warrants has been estimated using the Black-Scholes option pricing model. Assumptions used in the pricing model included: (i) risk free interest rate of 2.7%, (ii) expected volatility of 66%, (iii) an estimated life of 5 years and (iv) an expected dividend rate of 0%. During the fiscal year 2003, the Company has recorded a beneficial conversion feature of $668,785 in dividends calculated on the effective conversion price of the preference shares to common shares based on the proceeds allocated to the preference shares. The conversion feature of the preference shares vested immediately and the Company recorded the accretion of the full amount of the beneficial conversion feature. The preference share discount that resulted from the allocation of the gross proceeds is accreted over the five-year life of the warrants. This resulted in an accretion of $390,672 and $33,439

Page 6


Offshore Systems International Ltd. Notes to the Consolidated Financial Statements (unaudited) Three and Six Months Ended May 31, 2005 and 2004 (expressed in Canadian dollars)		U.S. GAAP

to accumulated deficit for the three and six months ended May 31, 2005 respectively ($33,439 and $66,878 for the three and six months ended May 31, 2004 respectively). During fiscal 2004 3,533 Class B Series 1 preference shares were converted into common shares.

On April 11, 2005, 57,711 Class B Series 1 preference shares were repurchased by the Company at their par value of $50 per share for aggregate cash consideration of $2,885,550. The unamortized discount in the amount of $390,672 as of the repurchase date was amortized and accreted to the Class B series 1 preference shares and the beneficial conversion feature of $668,785 was deducted from additional paid in capital. The repurchase resulted in a decrease of $370,967 to deficit.

(ii) Series 2

On April 11, 2005, the Company completed a private placement consisting of 19,500 units for total gross proceeds of $19,500,195. The issue price was $1,000.01 per unit. Each unit consist of 20 voting Class B preference shares Series 2 (“Preference Shares”) and 588 share purchase warrants (“Warrants”). The Preference Shares entitle the holders to receive a fixed preferential cumulative 7% dividend payable semi-annually. Each Preference Share is convertible at the option of the holder at any time into 58.82 of the Company’s common shares, calculated by dividing the issue price of $50.00 for each Preference Share by the conversion price of $0.85. Each Warrant entitles the holder to purchase one of the Company’s common shares at the exercise price of $0.85 for a period of five years. Fees for advisory, investment banking and legal and other professional services in connection with this private placement were paid in the amount of $2,418,363 and 929,064 warrants were issued to an investment bank and related party (note 13) in connection with the private placement. The fair value of the finder’s fee warrants was estimated to be $0.47 per warrant, using the Black-Scholes option pricing model, and has been recognized as a share issue cost.

The gross proceeds of $19,500,195 were allocated between the Preference Shares and Warrants based on their relative fair value at the date of issuance. The $20,188,235 fair value of the preference shares has been estimated based on the fair value of the underlying common shares. The $5,389,020 fair value of the warrants has been estimated using the Black-Scholes option pricing model. Assumptions used in the pricing model included: (i) risk free interest rate of 2.88%, (ii) expected volatility of 59%, (iii) an estimated life of 5 years and (iv) an expected dividend rate of 0%. The Company has recorded a beneficial conversion feature of $4,796,649 as a reduction to the net earnings available to common shareholders calculated on the effective conversion price of the preference shares to common shares based on the proceeds allocated to the Preference Shares. The conversion feature of the Preference Shares vested immediately and the Company recorded the accretion of the full amount of the beneficial conversion feature. The Preference Share discount that resulted from the allocation of the gross proceeds is accreted over the five-year life of the Warrants. This resulted in an accretion of $112,503 to accumulated deficit for the three and six months ended May 31, 2005.

Each Class B Series 2 Preference Share entitles the holder to one vote either in person or by proxy at any general meeting of the shareholders of the Company. The Company has the right to require the shareholders of the Preference Shares to convert each such share into 58.82 Common Shares if (i) at any time after 13 months following the issuance of the Preference Shares, the closing trade price of the Company’s common shares exceeds $2.13 for at least 20 consecutive trading days, or (ii) at any time, the Company completes a firm public underwritten offering of its common shares for more than $40,000,000 at a price per common share greater than $1.70. The Preference Shares are redeemable at the option of the Company at any time after the third anniversary of the issuance date for an amount equal to the original issuance price plus a premium of 20% of the original issue price. The Preference Shares are not subject to any right of redemption at the option of the holder.

Page 7


Offshore Systems International Ltd. Notes to the Consolidated Financial Statements (unaudited) Three and Six Months Ended May 31, 2005 and 2004 (expressed in Canadian dollars)		U.S. GAAP

(d) Stock option plans

The Company has established three stock option plans under which options to purchase common shares may be granted to directors, officers and employees of the Company and to any other person or Company permitted by the applicable regulatory authorities to purchase unissued common shares. The number of common shares authorized for grant under the Company’s stock option plans is 10,930,732, of which 4,375,494 are available for granting. The exercise price of options granted pursuant to the plans may not be less than the market price of the common shares at the time of grant. The plans provide that options may be granted with vesting periods and expiry dates at the discretion of the board of directors. Options granted to directors and executives vest over periods ranging from immediately to three years and options granted to employees vest one year after the date granted.

A summary of the Company’s stock options outstanding and exercisable at May 31, 2005 is as follows:


	Options outstanding						Options exercisable
			Weighted		Weighted				Weighted
			average		average				average
Range of	Number		remaining		exercise		Number		exercise
exercise prices	outstanding at		contractual		price		exercisable at		price
$	May 31, 2005		life (years)		$		May 31, 2005		$
0.75 – 1.00		768,000		3.94		0.85		618,000		0.87
1.01 – 1.35		1,620,947		1.00		1.06		1,474,947		1.06
1.36 – 1.41		60,000		0.05		1.41		60,000		1.41

0.75 – 1.41		2,448,947		1.90		1.00		2,252,947		1.01

Stock-based compensation

For the three and six months ended May 31, 2005, the Company incurred non-cash stock-based compensation expense of $13,137 and $15,661 respectively, related to stock options granted to third parties (three and six month period ended May 31, 2004 — $33,006). The expense was included in general and administrative costs and was recorded in additional paid-in capital.

The fair value of stock options was estimated using the Black-Scholes option pricing model using the following weighted average assumptions by grant year:


	3 Months Ended May 31,						6 Months Ended May 31,
	2005			2004			2005			2004

Risk-free interest rate		2.78	%		2.21	%		2.78	%		2.20	%
Volatility		41	%		58	%		41	%		83	%
Estimated average option lives	1.38 years			3.00 years			1.38 years			1.10 years
Dividend yield		0.00	%		0.00	%		0.00	%		0.00	%

Pro forma disclosure

The Company applies the intrinsic value method for employee stock options granted as prescribed in APB 25. Had compensation cost been determined using the fair value approach set forth in SFAS 123, the Company’s earnings for the three and six months ended May 31, 2005 and 2004 and earnings (loss) per share would have been in accordance with the pro forma amounts indicated below:

Page 8


Offshore Systems International Ltd. Notes to the Consolidated Financial Statements (unaudited) Three and Six Months Ended May 31, 2005 and 2004 (expressed in Canadian dollars)		U.S. GAAP


	For the three months ended						For the six months ended
	May 31,			May 31,			May 31,			May 31,
	2005			2004			2005			2004
	$			$			$			$
Earnings (loss) as reported		(1,697,767	)		380,088			(1,917,358	)		931,879
Add: Stock-based compensation cost		13,137			33,006			15,661			33,006
Less: Pro forma stock-based compensation cost		(220,582	)		(120,724	)		(253,051	)		(127,024	)

Pro forma income (loss)		(1,905,212	)		292,370			(2,154,748	)		837,861

Pro forma basic earnings (loss) per share		(0.26	)		0.01			(0.27	)		0.03
Pro forma diluted earnings (loss) per share		(0.26	)		(0.01	)		(0.27	)		0.01

Weighted average number of common shares outstanding – basic		27,488,074			27,145,769			27,488,074			26,964,789

Weighted average number of common shares outstanding – diluted		27,488,074			29,771,620			27,488,074			32,525,826

The fair value of stock options was estimated using the Black-Scholes option pricing model using the following weighted average assumptions by grant year:


	3 Months Ended May 31,						6 Months Ended May 31,
	2005			2004			2005			2004

Risk-free interest rate		2.85	%		2.21	%		2.85	%		2.21	%
Volatility		54	%		58	%		54	%		58	%
Estimated average option lives	4.06 years			3.00 years			4.06 years			3.00 years
Dividend yield		0.00	%		0.00	%		0.00	%		0.00	%

(e) Earnings per share


	Three Months Ended						Six Months Ended
	May 31						May 31
	2005			2004			2005			2004
Basic earnings (loss) per share	$			$			$			$
Net earnings (loss)		(1,697,767	)		380,088			(1,917,358	)		931,879
Less: Accretion of discount on Class B preference shares Series 1		(390,672	)		(33,439	)		(424,111	)		(66,878	)
Accretion of beneficial conversion feature on Class B preference shares Series 2		(4,796,649	)		—			(4,796,649	)		—
Accretion of discount on Class B preference shares Series 2		(112,503	)		—			(112,503	)		—
Class B preference share dividends Series 1		(62,785	)		(43,283	)		(62,785	)		(86,566	)
Class B preference share dividends Series 2		(190,726	)		—			(190,726	)		—
Add: Excess of carrying value of Class B preference shares series 1 and beneficial conversion feature over repurchase consideration paid.		370,967			—			370,967			—

Net earnings (loss) available to common shareholders		(6,880,135	)		303,366			(7,133,165	)		778,435

Weighted average number of common shares outstanding		27,488,074			27,145,769			27,488,074			26,964,789

Basic earnings (loss) per share		(0.25	)		0.01			(0.26	)		0.03

Page 9


Offshore Systems International Ltd.		U.S. GAAP
Notes to the Consolidated Financial Statements (unaudited)
Three and Six Months Ended May 31, 2005 and 2004
(expressed in Canadian dollars)


	Three Months Ended						Six Months Ended
	May 31						May 31
	2005			2004			2005			2004
	$			$			$			$
Diluted earnings (loss) per share

Net earnings		(1,697,767	)		380,088			(1,917,358	)		931,879

Less: Accretion of discount on Class B preference shares Series 1		(390,672	)		(531,638	)		(424,111	)		(565,078	)
Accretion of beneficial conversion feature on Class B preference shares Series 2		(4,796,649	)		—			(4,796,649	)		—
Accretion of discount on Class B preference shares Series 2		(112,503	)		—			(112,503	)		—
Class B preference share dividends Series 1		(62,785	)		—			(62,785	)		—
Class B preference share dividends Series 2		(190,726	)		—			(190,726	)		—
Add: Excess of carrying value of Class B preference shares series 1 and beneficial conversion feature over repurchase consideration paid.		370,966			—			370,967			—

Net earnings (loss) available to common shareholders		(6,880,135	)		(151,550	)		(7,133,165	)		366,801

Weighted average number of common shares outstanding		27,488,074			27,145,769			27,488,074			26,964,789

Dilutive effect of Class A preference shares – Series A (*1)		—			—			—			30,262
Dilutive effect of Class B preference shares – Series 1		—			2,625,851			—			2,625,851
Dilutive effect of Class B preference shares – Series 2 (*2)		—			—			—			—
Dilutive effect of warrants (*3)		—			—			—			1,393,301
Dilutive effect of stock options (*1)		—			—			—			1,511,623


Adjusted weighted average number of common shares outstanding		27,488,074			29,771,620			27,488,074			32,525,826

Diluted earnings (loss) per share		(0.25	)		(0.01	)		(0.26	)		0.01

(*1) The Class A preference shares – Series A and stock options were anti-dilutive for the purposes of calculating diluted earnings per share for the three and six months ended May 31, 2005 and for the three months ended May 31, 2004.

(*2) The Class B preference shares – Series 2 were anti-dilutive for the purposes of calculating diluted earnings per share for the three and six months ended May 31, 2005.

(*3) For the three and six months ended May 31, 2005, the outstanding 13,788,365 warrants were not included in the diluted earnings per share calculation as they were anti-dilutive. For the three months ended May 31, 2004, the outstanding 1,393,301 warrants were not included in the diluted earnings per share calculation as they were anti-dilutive.

12		Technology Partnerships Canada

		On April 26, 2004, the Company entered into an agreement with Technology Partnerships Canada (“TPC”) whereby TPC granted financial assistance to the Company for the purpose of funding research and development activities to be completed on or before March 31, 2007. The maximum eligible contribution by TPC is $3,768,391. As at May 31, 2005, the Company has claimed $2,207,559 of assistance under the agreement. Accounts receivable at May 31, 2005 includes $470,628 of amounts receivable from TPC in connection with these claims (November 30, 2004 – $257,266).

		In addition, under the April 26, 2004 agreement, the Company is required to pay a royalty of 1.4% on annual gross Navigation Systems and Applications revenue for the period January 1, 2006 to December 31, 2008 and a royalty of 2.5% on

Page 10


Offshore Systems International Ltd.		U.S. GAAP
Notes to the Consolidated Financial Statements (unaudited)
Three and Six Months Ended May 31, 2005 and 2004
(expressed in Canadian dollars)

annual gross Navigation Systems and Applications revenue for the period January 1, 2009 to December 31, 2013. Royalty payments will continue until the cumulative royalties paid or payable to December 31, 2013 are at least $6,079,176 or until December 31, 2017. No amounts for royalty payments in connection with this agreement have been recorded in the financial statements.

On November 15, 1999, the Company entered into an agreement with TPC whereby TPC granted financial assistance to the Company for the purpose of funding research and development activities to be completed on or before March 31, 2003. Under the agreement with TPC, the Company was eligible to receive contributions to a maximum of $4,000,177 over the period from December 23, 1998 to March 31, 2003. As of March 31, 2003, the Company had received the maximum allowed under the agreement. There are no amounts recorded in accounts receivable with respect to these claims.

In addition, under the November 15, 1999 agreement, the Company is required to pay a royalty of 3% on annual gross Navigation Systems and Applications business unit revenue for the period December 1, 1999 to November 30, 2008. The Company has paid royalties of $1,242,022 to date (November 30, 2004 – $929,303) and has accrued royalties of $91,691 at May 31, 2005 (November 30, 2004 — $311,851). Royalty payments will continue until the cumulative royalties paid or payable to November 30, 2008 are at least $7,810,230 or until November 30, 2014.

Although the Company believes that its submissions for TPC funding meet the terms and conditions of the TPC agreements, the final determination may be subject to audit by government authorities in the ordinary course of business. During fiscal year 2004, the Company was subject to an audit by government authorities. The results of the audit have not been communicated to the Company. The Company has no reason to believe that the outcome of the audit will have a material impact on the Company’s financial results.

If the Company causes an event of default, as defined in the agreement, TPC can suspend or terminate any obligation to contribute to the costs of the project or require the Company to repay all or part of the contributions made, together with interest, from the date of demand.

13		Related party transactions

		On April 11, 2005, Mr. E. Brinton Coxe, a director of the Company, assisted the Company in structuring and arranging the private placement financing (note 11(c)(ii)). In consideration for his services, the Company paid him compensation of $815,908 and 350,000 common share purchase warrants. The cash compensation of $815,908 paid to Mr. Coxe included an adjustment in the amount of $15,908 to reflect exchange rate changes between the U.S. dollar and Canadian Dollar. Mr. Coxe has also participated in the financing by purchasing 100 units personally.

		On April 8, 2005, Gerald J. Shields was elected to the Company’s Board of Directors and became a related party as he provides legal services to the Company through a law firm in which he has an interest.

14		Contingencies

		In July 2002, two of the Company’s subsidiaries, Offshore Systems Ltd. and OSI Geomatics Ltd., and four employees became subject to a lawsuit for an undisclosed amount by Triathlon Ltd., a subsidiary of MacDonald, Dettwiler and Associates Ltd., related to use of confidential information and breach of fiduciary duty. No amount has been accrued at May 31, 2005 in respect of these claims because the potential liability for the claims and the amount of damages, if any, cannot be reasonably estimated. Management believe that the claims are without merit.

15		Income taxes

		The Company is subject to income taxes in Canada and the United States and the use of estimates is required in determining the Company’s provision for income taxes. Although the Company believes its tax estimates are reasonable, the ultimate tax determination involves significant judgement that could become subject to audit by tax authorities in the ordinary course of business. The effective rate used to record income tax expense for the three and six months ended May 31, 2005 differed

Page 11


Offshore Systems International Ltd.		U.S. GAAP
Notes to the Consolidated Financial Statements (unaudited)
Three and Six Months Ended May 31, 2005 and 2004
(expressed in Canadian dollars)

from the Canadian federal and provincial combined statutory tax rate primarily due to the change in valuation allowance to reflect those future tax benefits that were more likely than not to be realized, future income tax payments that will result from the payment of Class B preference share dividends and, also, items not deductible for income tax purposes. The change in effective tax rate from 2004 to 2005 was due primarily to the effect of the change in valuation allowance.

At May 31, 2005, the Company adjusted its valuation allowance against deferred tax assets to reflect the amount of the future tax benefit that was more likely than not to be realized. A valuation allowance continues to be provided against those deferred tax assets for which there is uncertainty of future realization.


	For the three months ended						For the six months ended
	May 31,			May 31,			May 31,			May 31,
	2005			2004			2005			2004
	$			$			$			$
Deferred income tax expense (recovery)		143,189			(217,363	)		(95,176	)		(496,266	)
Current income tax expense		82,756			147,994			82,756			380,786

Income tax expense (recovery)		225,945			(69,369	)		(12,420	)		(115,480	)

Effective tax rate		(15	%)		(22	%)		(1	%)		(14	%)

16		Segmented information

		The Company’s reportable segments are as outlined below. Accounting policies used by these segments are the same as those described in the significant accounting policies as disclosed in note 2 of the Company’s audited consolidated annual financial statements for the year ended November 30, 2004 prepared in accordance with U.S. GAAP. The Company defines reportable segments as components of the Company about which separate financial information is available and which is evaluated regularly by the chief operating decision maker in deciding how to allocate resources and in assessing performance.


	Three Months Ended May 31, 2005
	Navigation
	Systems			Applications			Geomatics			Total
	$			$			$			$
Revenue		956,378			19,412			905,895			1,881,685
Gross profit		105,823			17,446			247,082			370,351
Technology Partnerships Canada — net		(432,761	)		—			—			(432,761	)
Interest expense		8,596			—			91			8,687
Income tax expense (recovery)		118,934			—			107,011			225,945
Net earnings (loss)		(999,747	)		(211,722	)		(486,298	)		(1,697,767	)
Property, plant and equipment expenditures		64,969			—			12,986			77,955
Intangible expenditures		5,519			—			52,562			58,081
Depreciation and amortization		52,003			1,074			65,107			118,184

Page 12


Offshore Systems International Ltd.		U.S. GAAP
Notes to the Consolidated Financial Statements (unaudited)
Three and Six Months Ended May 31, 2005 and 2004
(expressed in Canadian dollars)


	Six Months Ended May 31, 2005
	Navigation
	Systems			Applications			Geomatics			Total
	$			$			$			$
Revenue		2,897,155			30,912			1,213,475			4,141,542
Gross profit		1,303,913			27,457			271,090			1,602,460
Technology Partnerships Canada — net		(643,587	)		—			—			(643,587	)
Interest expense		19,827			—			1,576			21,403
Income tax expense (recovery)		(95,176	)		—			82,756			(12,420	)
Net earnings (loss)		(810,017	)		(384,548	)		(722,793	)		(1,917,358	)
Property, plant and equipment expenditures		92,393			—			12,986			105,379
Intangible expenditures		15,867			1,213			54,584			71,664
Depreciation and amortization		104,896			2,149			95,809			202,854


	Three Months Ended May 31, 2004
	Navigation
	Systems			Applications			Geomatics		Total
	$			$			$		$
Revenue		1,691,056			39,986			1,042,793		2,773,835
Gross profit		1,252,341			29,699			492,963		1,775,003
Technology Partnerships Canada — net		(782,654	)		(61,180	)		—		(843,834	)
Interest expense		37			—			66		103
Income tax recovery		(69,369	)		—			—		(69,369	)
Net earnings (loss)		446,985			(214,047	)		147,150		380,088
Property, plant and equipment expenditures		23,737			11,929			—		35,666
Intangible expenditures		10,269			—			155,824		166,093
Depreciation and amortization		55,811			538			27,453		83,802


	Six Months Ended May 31, 2004
	Navigation
	Systems			Applications			Geomatics		Total
	$			$			$		$
Revenue		4,971,154			68,304			1,764,137		6,803,595
Gross profit		3,648,387			48,667			646,722		4,343,776
Technology Partnerships Canada — net		(733,728	)		(61,180	)		—		(794,908	)
Interest expense		228			—			143		371
Income tax recovery		(115,480	)		—			—		(115,480	)
Net earnings (loss)		1,417,635			(525,346	)		39,590		931,879
Property, plant and equipment expenditures		50,955			14,409			—		65,364
Intangible expenditures		20,062			—			158,969		179,031
Depreciation and amortization		110,614			615			50,620		161,849


	Navigation
	Systems		Applications		Geomatics		Total
Total assets employed	$		$		$		$
As at May 31, 2005		22,491,606		16,421		2,956,584		25,464,611

As at November 30, 2004		10,562,064		17,357		1,731,317		12,310,738

Page 13


Offshore Systems International Ltd.		U.S. GAAP
Notes to the Consolidated Financial Statements (unaudited)
Three and Six Months Ended May 31, 2005 and 2004
(expressed in Canadian dollars)

Geographically, revenues reported are based on the location of the Company’s customers.


	For the three months ended				For the six months ended
	May 31,		May 31,		May 31,		May 31,
	2005		2004		2005		2004
	$		$		$		$
Europe		293,678		415,953		1,920,679		2,480,974
Australia/New Zealand		477,049		1,019,610		788,936		1,967,873
United States		631,572		832,518		832,285		1,728,111
Canada		479,386		505,754		599,642		626,637


Total		1,881,685		2,773,835		4,141,542		6,803,595

Geographically, plant and equipment and intangible and other assets are reported based on location. At May 31, 2005 and November 30, 2004, all of the Company’s plant and equipment and intangible and other assets were located in Canada and the U.S. as follows:


	Canada				United States
	May 31,		November 30,		May 31,		November 30,
	2005		2004		2005		2004
	$		$		$		$
Plant and equipment		932,741		938,102		57,212		—
Intangible and other assets		359,599		408,611		913,636		—

Total		1,292,340		1,346,713		970,848		—

17		Financial instruments

		Fluctuations in foreign currency exchange rates

		The Company enters into transactions denominated in U.S. dollars, Australian dollars and Euros and as such its revenue, expenses, monetary assets and liabilities will be affected by fluctuations in the various currencies relative to its functional currency, the Canadian dollar.

		The Company uses foreign exchange forward contracts to hedge transactions denominated in U.S. dollars, Australian dollars and Euros. The purpose of the Company’s hedging activities is to reduce the level of exposure to exchange rate movements. At May 31, 2005, the Company had foreign exchange forward contracts maturing in the following periods to sell Australian $1,605,038 (May 31, 2004 – $2,750,000). As at May 31, 2005, the Company had drawn on its foreign exchange contract facility in the amount of U.S. $nil (2004 – U.S. $818,398) and Australian $1,605,038 (2004 – $2,750,000). The exchange rates set in the forward exchange contracts ranged between 0.9486 to 0.9578 for Australian $1.00. The contracts mature between June and July 2005.

18		Financial guarantees

		The Company utilizes letters of credit to back certain performance obligations with its customers. The standby letters of credit are repayable on demand after certain conditions have been met. As of May 31, 2005, one letter of credit, relating principally to a customer contract, had been issued for Australian $283,886 (November 30, 2004 – Australian $283,886).

Page 14


Offshore Systems International Ltd.		U.S. GAAP
Notes to the Consolidated Financial Statements (unaudited)
Three and Six Months Ended May 31, 2005 and 2004
(expressed in Canadian dollars)

Reconciliation of generally accepted accounting principles

The Company prepares its unaudited interim consolidated financial statements in accordance with U.S. generally accepted accounting principles which, as applied in these unaudited interim consolidated financial statements, conform in all material respects to Canadian GAAP, except for the differences below as follows:

(a) Under Canadian GAAP, for stock option awards granted by the Company after December 1, 2003, the Company is required to recognize compensation when stock options are granted to employees and directors under stock option plans with no cash settlement feature based on the fair value method. As permitted by the standard, the Company had applied this change prospectively for new awards granted on or after December 1, 2003. Under U.S. GAAP, the Company accounts for stock based compensation to employees and directors in accordance with the intrinsic value method of the Accounting Principles Board Opinion No. 25, “Accounting for Stock Issued to Employees”.

(b) Under Canadian GAAP, there is not a requirement to record the beneficial conversion feature and accretion of discount when preference shares are issued with attached warrants. For U.S. GAAP purposes, during the fiscal year 2003 and the three and six months ended May 31, 2005 the Company recorded beneficial conversion features of $668,785 and $4,796,649 on the issuance of Class B preference shares Series 1 and 2, respectively as a reduction to the net earnings available to common shareholders calculated on the effective conversion price of the preference shares to common shares based on the proceeds allocated to the preference shares. In both cases, the conversion feature of the preference shares vested immediately and the Company recorded the accretion of the full amount of the beneficial conversion feature. For both the Series 1 and Series 2 Class B preference shares, the discount on these shares that resulted from the allocation of the gross proceeds to the Class B preference shares and to the attached warrants is accreted over the five-year life of the warrants. This resulted in an accretion of $503,175 and 536,614 to deficit for the three and six months ended May 31, 2005, respectively ($33,439 and $66,878 for the three and six months ended May 31, 2004, respectively).

(c) Under Canadian GAAP, there is a requirement for derivatives outside of hedging relationships to be recognized on the balance sheet at fair market value, however for derivatives in hedging relationships, Canadian GAAP does not specify how such derivatives should be recorded. As a result, under Canadian GAAP in some instances derivatives may not be recorded on the balance sheet. Under U.S. GAAP it is required that all derivatives be recorded as assets or liabilities, measured at fair value. Derivatives that are not hedges are adjusted to fair value through income. If the derivative is a hedge, depending upon the nature of the hedge, changes in the fair value of the derivative are either offset against the fair value of assets, liabilities or firm commitments through income, or recognized in other comprehensive income until the hedged item is recognized in income. The ineffective portion of a derivative’s change in fair value is immediately recognized into income. With respect to the ineffective portion of derivative’s changes in fair value, the Company has recorded a foreign exchange loss amount of $7,748 for the three and six months ended May 31, 2005 under U.S. GAAP which has not been recorded under Canadian GAAP.

(d) Under Canadian GAAP, the Company was not required to record stock based compensation for options granted to third parties prior to December 1, 2001. Under U.S. GAAP, the Company is required to record stock based compensation for options granted to third parties based on the fair value method as required by SFAS 123 retroactive for all prior periods. As a result, these stock based compensation transactions, result in differences when compared to the same balances as previously reported under Canadian GAAP.

(e) For Canadian GAAP financial statement purposes, the Company’s 30,262 (November 30, 2004 - 30,262) Class A preference shares have been presented at a nominal value. For U.S. GAAP financial statement purposes, these shares have been presented at a value of $30,362.

(f) For Canadian GAAP financial statement purposes, the Company has recorded a cumulative translation adjustment of $23,091 which is a separate component of shareholders’ equity. For U.S. GAAP purposes changes in the cumulative translation adjustment are included as a component of accumulated other comprehensive income.

Page 15


Offshore Systems International Ltd.		U.S. GAAP
Notes to the Consolidated Financial Statements (unaudited)
Three and Six Months Ended May 31, 2005 and 2004
(expressed in Canadian dollars)

(g) If Canadian GAAP were followed:

i) the effect on the Consolidated Statements of Earnings would be:


	For the three months ended						For the six months ended
	May 31,			May 31,			May 31,			May 31,
	2005			2004			2005			2004
	$			$			$			$
Earnings (loss) for the period, U.S. GAAP		(1,697,767	)		380,088			(1,917,358	)		931,879
Adjustment for stock based compensation (a),(d)		(201,145	)		(81,418	)		(224,790	)		(81,418	)
Adjustment for loss on derivative (c)		7,748			—			7,748			—

Earnings (loss) for the period, Canadian GAAP		(1,891,164	)		298,670			(2,134,400	)		850,461

Basic earnings (loss) per common share, Canadian GAAP		(0.08	)		0.01			(0.09	)		0.03
Diluted earnings (loss) per common share, Canadian GAAP		(0.08	)		0.01			(0.09	)		0.03
Weighted average number of common shares - basic, Canadian GAAP		27,488,074			27,023,112			27,488,074			27,023,112
Weighted average number of common shares - diluted, Canadian GAAP		27,488,074			27,802,463			27,488,074			27,802,463

ii) Balance Sheet items which would differ under Canadian GAAP are as follows:


	May 31,			November 30,
	2005			2004
	$			$
Common shares (d)		19,026,125			19,026,125
Class A preference shares – Series A (e)		—			—
Class B preference shares – Series 1 (b)		—			1,926,157
Class B preference shares – Series 2 (b)		17,081,637			—
Warrants (b)		661,770			661,575
Additional paid in capital (a), (d)		454,943			214,492
Accumulated Deficit (a), (b), (c), (d)		(12,495,870	)		(12,193,838	)
Cumulative translation adjustment (f)		27,050			—

(h) Pro forma information – Stock based compensation

The following pro forma financial information as required by The Canadian Institute of Chartered Accountants (“CICA”) Handbook section 3870, Stock-Based Compensation and Other Stock – based Payments, presents the earnings had the Company recognized stock-based compensation using a fair value method for all stock awards granted, modified or settled prior to December 1, 2003:

Page 16


Offshore Systems International Ltd.		U.S. GAAP
Notes to the Consolidated Financial Statements (unaudited)
Three and Six Months Ended May 31, 2005 and 2004
(expressed in Canadian dollars)


	For the three months ended						For the six months ended
	May 31,			May 31,			May 31,			May 31,
	2005			2004			2005			2004
	$			$			$			$
Earnings (loss) for the period, Canadian GAAP		(1,891,164	)		298,670			(2,134,400	)		850,461
Add: Stock-based compensation cost		214,282			114,424			240,451			114,424
Less: Pro forma stock-based compensation cost		(220,582	)		(120,724	)		(253,051	)		(127,024	)
Pro forma income (loss)		(1,897,464	)		292,370			(2,147,000	)		837,861

Pro forma basic earnings (loss) per share		(0.08	)		0.01			(0.09	)		0.03
Pro forma diluted earnings (loss) per share		(0.08	)		0.01			(0.09	)		0.03

Weighted average number of common shares – basic		27,488,074			27,023,112			27,488,074			27,023,112
Weighted average number of common shares – diluted		27,488,074			27,802,463			27,488,074			27,802,463

The fair value of the stock options was estimated using the Black-Scholes option pricing model using the following weighted average assumptions by grant year:


	3 Months Ended May 31,						6 Months Ended May 31,
		2005			2004			2005			2004

Risk-free interest rate		2.85	%		2.21	%		2.85	%		2.21	%
Volatility		54	%		58	%		54	%		58	%
Estimated average option lives	4.06 years			3.00 years			4.06 years			3.00 years
Dividend yield		0.00	%		0.00	%		0.00	%		0.00	%

Other Information

The following presents the conversion of the Company’s comparative financial information from Canadian GAAP to U.S. GAAP and presents a comparison for amounts which differ between Canadian GAAP and U.S. GAAP:

(a) Balance sheet at November 30, 2004:


	As previously			As currently
	reported under			reported under
	Canadian GAAP			U.S. GAAP
	$			$
Shareholders’ Equity
Capital stock
Issued and outstanding
30,262 Class A preference shares – Series A		—			30,262
57,711 Class B preference shares – Series 1		1,926,157			2,163,621
27,488,074 common shares		19,026,125			20,047,731


		20,952,282			22,241,614

Additional Paid in Capital		214,492			928,169

Accumulated Deficit		(12,193,838	)		(14,196,847	)

Page 17


Offshore Systems International Ltd.		U.S. GAAP
Notes to the Consolidated Financial Statements (unaudited)
Three and Six Months Ended May 31, 2005 and 2004
(expressed in Canadian dollars)

(b) Statement of Earnings and Accumulated Deficit for the three months and six months ended May 31, 2004


	As previously reported under						As currently reported under U.S.
				Canadian GAAP						GAAP
	For the three			For the six			For the three			For the six
	months ended			months ended			months ended			months ended
	May 31, 2004			May 31, 2004			May 31, 2004			May 31, 2004
	$			$			$			$
Accumulated Deficit – Beginning of period		(11,583,655	)		(12,043,580	)		(13,619,622	)		(14,046,108	)

Class B preference share dividend paid		86,567			178,433			86,567			178,433
Class B preference share dividend accreted		—			—			33,439			66,878

Accumulated Deficit – End of period		(11,371,552	)		(11,371,552	)		(12,933,054	)		(12,933,054	)

Subsequent event

On July 11, 2005, the Company announced that it has signed a non-binding letter of intent to acquire a United States defence contracting company. The acquisition is expected to approximately double the Company’s revenue and employee base. The target company, with multiple offices in the United States, is a supplier of technology and services to the U.S. Department of Defence and key defence prime contractors.

Page 18

SIGNATURE

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.


		By:		“ John A. Jacobson”


				Title: President & CEO

Date: ~~March~~July 2220, 2005

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