Direct IT Canada Inc.

Direct IT Canada Inc.

March 29, 2005 11:10 ET

Direct IT Canada Reports 2004 Results


NEWS RELEASE TRANSMITTED BY CCNMatthews

FOR: DIRECT IT CANADA INC.

TSX VENTURE SYMBOL: DCT

MARCH 29, 2005 - 11:10 ET

Direct IT Canada Reports 2004 Results

TORONTO, ONTARIO--(CCNMatthews - March 29, 2005) - Direct IT Canada Inc.
(TSX VENTURE:DCT) is focused on serving the mid-sized North American
Local Government and Utility markets with strategic enterprise software
applications including:

- Work Management systems for use by Local Government and Utility
operating departments including Public Works, Transportation, Parks and
Recreation, Fleet, Facilities, Operations and Urban Forestry.

- Development Services systems for managing land use, building permits,
Economic Development and related functions.

- A GIS integration system for intelligently connecting the Maps with
related databases to bring together information for better decision
making at the Operating and Management levels.

- Corporate Services applications including Address management and Web
based Service Request Management.

Direct IT's strategic objective is to have the largest market share by
2006 in Ontario, and a solid base of reference accounts in the 6 U.S.
states bordering Canada within easy striking distance of Toronto. This
platform will be used to penetrate the large non-dominated market in the
US and Canada.

Fourth Quarter 2004

- Total Revenues of $200,551 for the quarter and $807,263 for the year
represent 95% of the annual forecasted revenue.

- Expenses were below the forecast by less than 1%. The Company's cash
position is $82,568, compared to $57,417, December 31st 2003. Management
measures monthly performance using cash flow as the yardstick, and this
continues to be the focal operating consideration for Management, as the
company moves to expand its market share and revenue base, without
resorting to capital or debt markets.

- The company now has over 40 Clients, approaching a 10% market share in
Ontario, the largest, by number, of any company in the same market
sector.

The following Business Drivers are increasing the acceptance and
implementation rate of software applications in the same categories as
those of Direct IT Canada, in both Ontario and the U.S.:

- Regional standardization initiatives such as Connect Ontario/Geosmart
programs, wherein groups of Local Governments associated by region, are
pooling their resources to implement a standard approach to
Infrastructure Asset Management (Roads, Water, Sewer), Development
Services, and Economic Development.

- Government Service Delivery performance measurement and benchmarking
initiatives such as MPMP (Municipal Performance Measurement Program)
that foster ongoing cost reductions per unit of delivered service (e.g.
Cost per lane kilometer of snow plowing).

- Safety and Quality legislation such as Ontario's Bill 175 dealing with
water and wastewater services, which require ever more rigorous
planning, tracking and reporting of associated Operations.

- Customer Service measurement and Service Level Standards legislation
such as Ontario Bill 124, designed to streamline the regulatory
interface between Municipal Development Services, Developers and
Property Owners.

- U.S. Asset Service Level Maintenance programs such as the GASB 34
Statement that mandates full accounting for maintaining transportation
(roads) infrastructure at specific service levels at least ten years
into the future.

- The Ontario Utility sector is emerging from a period of uncertainty
resulting from legislation that encourages consolidation. This
consolidation is expected to drive more demand for Work Management and
GIS related software applications that will be needed to support
expanded operations going forward.

- Web based applications services delivery models that remove much of
the current IT infrastructure overhead for Users of software
applications delivered, supported and maintained over the internet.

- The Company continues to develop and deliver new Web-enabled modules
for its Work Manager application. These web-enabled modules can be used
in seamless conjunction with the pre-existing applications to decrease
the technical complexity of broader User coverage, using a Web Browser.

- U.S. market penetration. The company intends to increase its presence
in Ohio and adjoining states at the County and Municipal Government
levels through strategic alliances with technology based service
provider companies with significant in-state presence and market share.

- Continued focus on the Utility sector in Ontario. The Company has
embarked on a series of marketing initiatives to heighten its profile in
this sector. The Company has also formed an alliance with an established
complementary software products provider, which strengthens both
companies' positions.

- The company continues to build upon its successful public-private
partnership within the Connecting Niagara / GeoSmart project to expand
use of its products and services broadly across the Niagara region.

The Company's revenues consist primarily of fees for software licenses
of the Company's software products, maintenance fees, and professional
service fees. Revenue is recognized in accordance with the CICA's
Emerging Issues Committee releases EIC-141 "Revenue Recognition",
EIC-142 "Revenue Arrangements with Multiple Deliverables" and EIC-143
"Accounting for Separately Priced Extended Warranty and Product
Maintenance Contracts". The company books software license revenue in
even increments over the life of any new contract. Support revenue,
although billed annually in advance, is booked in even monthly
increments over the 12 months of the contract. Services revenue is
booked as performed/as invoiced on a monthly basis. Annual support
revenue is based on a "fixed percentage of the License fee", and Clients
have historically continued annual support payments for at least five
years from the initial License contract.

The company earned revenue of $807,263, a 42% increase over fiscal 2003.

The actual revenue shortfall, versus 2004 forecast was $42,737.
At the end of 2004, there were outstanding contracts in the amount of
$160,000, which are expected to be invoiced during 2005.

Total revenues are projected at $750,000 in fiscal 2005. This forecast
is based on known qualified sales opportunities factored by the
likelihood of closing and anticipated revenue recognition in fiscal 2005.

The main factors that will determine the company's ability to meet these
forecasts are increased competition and the market's preference for
alternative technologies such as web-based applications. The economy is
not expected to be a major factor in 2005.

Auditors' Report

To the Shareholders of

Direct IT Canada Inc.

We have audited the consolidated balance sheets of Direct IT Canada Inc.
as at December 31, 2004 and 2003 and the consolidated statements of
income and deficit and cash flows for the years then ended. These
consolidated financial statements are the responsibility of the
Company's management. Our responsibility is to express an opinion on
these consolidated financial statements based on our audits.

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

In our opinion, these consolidated financial statements present fairly,
in all material respects, the financial position of the Company as at
December 31, 2004 and 2003 and the results of its operations and its
cash flows for the years then ended, in accordance with Canadian
generally accepted accounting principles.

Signed "BDO Dunwoody LLP"

Chartered Accountants

Calgary, Alberta

February 2, 2005 (except for Note 9 which is dated March 17, 2005)



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Direct IT Canada Inc.
Consolidated Balance Sheets

As at December 31 2004 2003
---------------------------------------------------------------------

Assets

Current
Cash $82,568 $57,417
Accounts receivable 123,333 112,950
Prepaid expenses 16,468 6,151
Investment tax credits recoverable (Note 6) 40,521 -
----------- ---------
262,890 176,518

Equipment (Note 3) 111,472 138,215

Goodwill 115,000 115,000
----------- ---------

$489,362 $429,733

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---------------------------------------------------------------------

Liabilities and Shareholders' Equity

Current
Accounts payable and accrued liabilities $76,685 $66,243
Deferred revenue 141,706 114,108
----------- ---------
218,391 180,351
----------- ---------

Share capital (Note 4) 744,307 744,307

Deficit (473,336) (494,925)
----------- ---------
270,971 249,382
----------- ---------

$489,362 $429,733

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Approved on behalf of the Board:

signed "George Lykoudis" Director
George Lykoudis


signed "David W. Constable" Director
David W. Constable

The accompanying notes are an integral part of these consolidated
financial statements.


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Direct IT Canada Inc.
Consolidated Statements of Income and Deficit

For the years ended December 31 2004 2003
---------------------------------------------------------------------

Revenue
Sales $807,263 $568,893
---------- ----------

Expenses
Amortization 42,934 57,848
General and administrative 158,829 120,041
Professional fees 47,631 57,648
Salaries and benefits, net of investment tax
credits (Note 6) 476,636 409,917
Subcontracts 29,671 30,981
Travel and entertainment 29,467 34,119
---------- ----------
785,168 710,554
---------- ----------

Income (loss) from operations 22,095 (141,661)

Other income
Loss on foreign exchange (506) (11,192)
---------- ----------

Net income (loss) for the year 21,589 (152,853)

Deficit, beginning of year (494,925) (342,072)
---------- ----------

Deficit, end of year $(473,336) $(494,925)

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Income (loss) per common share - basic (i) $0.004 $(0.025)
Weighted average number of shares outstanding 6,008,000 6,008,000

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(i) No diluted loss per share has been disclosed as its effect would
be anti-dilutive.

The accompanying notes are an integral part of these consolidated
financial statements.


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Direct IT Canada Inc.
Consolidated Statements of Cash Flows

For the years ended December 31 2004 2003
---------------------------------------------------------------------

Cash flows from operating activities
Net income (loss) for the year $21,589 $(152,853)
Adjustment for:
Amortization 42,934 57,848
------------ ----------
64,523 (95,005)

Changes in non-cash working capital balances
Accounts receivable (10,382) 23,370
Investment tax credit receivable (40,521) -
Prepaid expenses (10,317) 18,603
Accounts payable and accrued liabilities 10,440 20,532
Deferred revenue, net of related costs 27,598 5,926
------------ ----------
41,341 (26,574)
------------ ----------

Cash flows from investing activity
Purchase of equipment (16,190) (10,699)
------------ ----------

Increase (decrease) in cash 25,151 (37,273)

Cash, beginning of year 57,417 94,690
------------ ----------

Cash, end of year $82,568 $57,417

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The accompanying notes are an integral part of these consolidated
financial statements.


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Direct IT Canada Inc.
Notes to Consolidated Financial Statements

December 31, 2004 and 2003
---------------------------------------------------------------------


1. Nature of Operations

The Company was incorporated under the Alberta Business Corporations Act
on March 16, 2000. The Company was originally called CSW Ventures Corp.
The Company changed its name to Direct IT Canada Inc. as at November 12,
2001. The Company specializes in software development.

These accompanying financial statements have been prepared on a going on
concern basis, which contemplates the realization of assets and the
satisfaction of liabilities and commitments in the normal course of
business. Should the Company be unable to continue as a going concern,
it may be unable to realize the carrying value of its assets and meet
its liabilities as they become due.

2. Significant Accounting Policies

The preparation of financial statements in conformity with Canadian
generally accepted accounting principles requires management to make
estimates and assumptions that affect the reported amounts of assets and
liabilities and disclosure of contingent assets and liabilities at the
date of the financial statements and the reported amounts of revenues
and expenses during the year. Actual results could differ from those
estimates. The following is a summary of significant accounting policies
of the Company:

(a) Principles of consolidation

The consolidated financial statements include the accounts of the
Company, and its wholly-owned subsidiaries Direct IT Inc. and
Consolidated Applied Planning Systems Inc. effective August 28, 2001.
All significant intercompany accounts and transactions have been
eliminated.

(b) Property and equipment

Property and equipment are recorded at cost. Amortization is provided on
a declining balance basis at rates designed to amortize the cost of the
assets over their estimated useful lives as follows:



Office equipment 20%
Computer hardware 30%
Computer software 30%


In the year of acquisition, only one-half the applicable rate of
amortization is applied.

(c) Foreign currency

Foreign currency transactions are translated into Canadian dollars by
use of the average exchange rate prevailing during the month the
transaction occurred. At year-end, monetary assets and liabilities are
translated into Canadian dollars by using the exchange rate in effect at
that date. Foreign exchange gains and losses are included in income in
the current year.

(d) Financial instruments

The Company carries various financial instruments. Unless otherwise
indicated, it is management's opinion that the Company is not exposed to
significant interest, currency or credit risks arising from these
financial instruments. The fair values of these financial instruments
approximate their carrying values, unless otherwise noted.

(e) Revenue recognition

The Company's revenues consist primarily of fees for software licenses
of the Company's software products, maintenance fees, and professional
service fees. Revenue is recognized in accordance with the CICA's
Emerging Issues Committee releases EIC-141 "Revenue Recognition",
EIC-142 "Revenue Arrangements with Multiple Deliverables" and EIC-143
"Accounting for Separately Priced Extended Warranty and Product
Maintenance Contracts".

When a license agreement includes one or more elements to be delivered
at a future date, and vendor specific objective evidence ("VSOE") of the
fair value of all undelivered elements exists, the Company uses the
residual method to recognize revenue. Under the residual method, the
fair value of the undelivered elements is deferred and the remaining
portion of the arrangement fee is recognized as revenue. If evidence of
the fair value of one or more undelivered elements does not exist, all
revenue is deferred and recognized when delivery of those elements
occurs. VSOE for all elements of an arrangement is based upon the normal
pricing for those elements when sold separately, and for maintenance
services, is additionally measured by the renewal rate.

For software license arrangements that do not require significant
modifications or customization of the software, the Company recognizes
software license revenue when the product has been delivered, the fee is
fixed or determinable, and collection of the resulting receivable is
probable.

Maintenance revenue is comprised of fees charged for ongoing customer
support and the right to product updates "if and when available."
Customer payments for maintenance are generally received in advance and
are non-refundable. Maintenance revenue is deferred and recognized on a
straight-line basis over the life of the related agreement, which is
typically one year.

Revenues for professional services, including implementation services,
are generally recognized as the services are performed. When software
license arrangements include professional services, the software license
fees are recognized upon delivery, provided that (1) payment of the
license fees is not dependent upon the performance of the services; (2)
the services are not essential to the functionality of the software; and
(3) VSOE exists on the undelivered services. When professional services
are not considered essential to the functionality, the Company
recognizes time and materials service contracts as the services are
performed.

The timing of revenue recognition may differ from contract payment
schedules, which may result in revenues that have been earned but not
yet billed. These amounts would be included in unbilled receivables.
Customer payments in excess of revenue earned is recorded as deferred
revenue.

(f) Goodwill

The Company has adopted the new recommendations of the Canadian
Institute of Chartered Accountants (CICA) Handbook Section 3062.
Goodwill and other intangible assets, which are determined to have
indefinite lives, are no longer amortized but are tested for impairment
annually by comparison to their fair values. Impairment tests for
goodwill are conducted during every financial reporting period and, if
applicable, any impairment loss is charged to earnings in the period
that the determination is made that impairment has occurred.

(g) Future income taxes

The Company adopted the new recommendations of the Canadian Institute of
Chartered Accountants with respect to accounting for income taxes. Under
the new recommendations, the liability method of tax allocation is used
in accounting for income taxes. Under this method, future tax assets and
liabilities are determined based on differences between financial
reporting and tax
bases of assets and liabilities, and measured using substantially
enacted tax rates and laws that will be in effect when the differences
are expected to reverse.

(h) Stock-based compensation

Effective January 1, 2002, the Company adopted the recommendations of
the CICA Handbook Section 3870, Stock-based compensation and stock-based
payments. This section requires that direct awards of stock and
liabilities based on the price of the common stock be measured at fair
value at each reporting date, with the change in fair value reported in
the statements of operations and deficit. In accordance with the
recommendations the Company has elected to use the fair value method to
recognize stock based compensation to employees. None of the company's
plans qualify as direct awards of stock or as plans that create
liabilities based on the price of the Company's stock.

In 2003, the Company adopted the new recommendation of the CICA Handbook
to record the fair value of all compensation expenses when stock or
stock options are issued after January 1, 2003 under the plan.

(i) Per share amounts

Basic earnings per common share are computed by dividing earnings by the
weighted average number of common shares outstanding for the year.
Diluted per share amounts reflect the potential dilution that could
occur if securities or other contracts to issue common shares were
exercised or converted to common shares. The treasury stock method is
used to determine the dilutive effect of stock options and other
dilutive instruments, in accordance with standards approved by the
Canadian Institute of Chartered Accountants.

(j) Prepaid expenses

Prepaid expenses include costs incurred on contracts that have not been
completed as of the balance sheet date.

(k) Research and development and government tax credits

The Company carries on various research and development programs as part
of its software development activities. Some of these costs may qualify
for government assistance in the form of investment tax credits.
Research and development costs are expensed in the period in which they
are incurred, and generally consist of salaries and fees. Tax credits
are accounted for as a reduction of the related expenses and are
recognized in the same period in which the costs are incurred, provided
that their realization is reasonably assured. If there is uncertainty
regarding the Company's eligibility or the amounts that qualify for
government assistance, then the tax credits will only be recorded when
government approval has been received. Tax credits claimed in respect of
qualifying capital asset purchases are deducted from the cost of the
assets acquired.

Claims for investment tax credits may be subject to audit by the Canada
Revenue Agency and as a result any amounts recorded may be subject to
specific measurement uncertainty.

(l) Measurement uncertainty

The preparation of financial statements in conformity with Canadian
generally accepted accounting principles requires management to make
estimates and assumptions that affect the amounts reported in the
consolidated financial statements and accompanying notes. Actual results
could differ from those estimates. The consolidated financial statements
have, in management's opinion, been properly prepared using careful
judgment with reasonable limits of materiality. The effect on the
consolidated financial statements resulting from such adjustments, if
any, will be reflected prospectively.



3. Equipment 2004 2003
---------------------------------------------------------------------

Accumulated Accumulated
Cost Amortization Cost Amortization
-------------------------------------------
Office equipment $16,756 $7,249 $13,098 $5,329
Computer hardware 51,879 32,051 39,590 26,186
Computer software 285,995 203,858 285,751 168,709
-------------------------------------------
$354,630 $243,158 $338,439 $200,224
-------------------------------------------

Net book value $111,472 $138,215
-------- --------
-------- --------

4. Share Capital

(a) Authorized
Unlimited number of Common Shares
Unlimited number of Preferred Shares issuable in series, rights
and privileges to be determined upon issue

(b) Issued
Common Shares Number Amount
------------------
Balance December 31, 2003 and 2004 6,008,000 $744,307

(c) Stock options
The Company has granted stock options to its officers and directors
as follows:
Number of Option Weighted
Shares Price Average
per Share Exercise
Range Price
------------------------------
Options exercisable December 31, 2003 529,400 $0.05-$0.25 $0.10
------------------------------

Options outstanding December 31, 2003 529,400 $0.05-$0.25 0.10
Options - granted 120,000 0.06 0.06
------------------------------
Options outstanding December 31, 2004 649,400 0.05-0.25 0.09
------------------------------

Options exercisable December 31, 2004 649,400 $0.05-$0.25 $0.09
------------------------------

The following table summarizes information about the stock options
outstanding at December 31, 2004:

Weighted
Weighted Average

Weighted Average Number of Exercise Price
Options Option Average Remaining Options of Options
Outstanding price Exercise Contractual Currently Currently
Price Life Exercisable Exercisable
---------------------------------------------------------------------
109,400 $0.25 $0.25 1.62 years 109,000 $0.25
40,000 0.05 0.05 0.25 years 40,000 0.05
40,000 0.05 0.05 0.84 years 40,000 0.05
40,000 0.05 0.05 1.84 years 40,000 0.05
100,000 0.06 0.06 0.25 years 100,000 0.06
100,000 0.06 0.06 0.84 years 100,000 0.06
100,000 0.06 0.06 1.84 years 100,000 0.06
40,000 0.06 0.06 0.15 years 40,000 0.06
40,000 0.06 0.06 1.15 years 40,000 0.06
40,000 0.06 0.06 2.15 years 40,000 0.06
---------------------------------------------------------------------

649,400 $0.05-0.25 $0.09 649,000 $0.09


The Company measures compensation costs associated with stock-based
compensation using the fair value method and the cost is recognized over
the vesting period of the underlying security. For options issued in
2003, the fair value of each option is determined at the grant date
using the Black-Scholes model with the following assumptions: Dividend
yield (Nil), Expected volatility (0.02), risk-free interest rate (5%),
and weighted average life of 2 years. The Company did not recognize
stock-based compensation expense related to the 2003 grants as the
amount was considered immaterial.

For options issued in 2004, the fair value of each option was determined
using the Black-Scholes model with the following assumptions: Dividend
yield (Nil), Expected volatility (1.57), risk-free interest rate (3.5%),
and weighted average life of 2 years. The Company did not recognize
stock-based compensation expense related to the 2004 grants as the
amount was considered immaterial.

(d) Escrow common shares

(i) Pursuant to an escrow agreement dated July 13, 2000, 2,188,000
Common Shares acquired by the original shareholders are subject to
escrow; 10% were released when the qualifying transaction was approved
and the remaining 90% are releasable 15% thereof on each of 6, 12, 18,
24, 30, and 36 months from November 8, 2001. At December 31, 2004 no
shares remain in escrow, (656,400 shares in escrow at December 31, 2003).

(ii) Pursuant to an escrow agreement dated August 28, 2001, 2,120,000
Common Shares acquired in the business combination are subject to
escrow. Of these, 10% were released when the qualifying transaction was
approved and the remaining 90% are releasable 15% thereof on each of 6,
12, 18, 24, 30, and 36 months from November 8, 2001. At December 31,
2004 no shares remain in escrow, (636,000 shares in escrow at December
31, 2003).

5. Related Party Transactions

Except as disclosed elsewhere in these consolidated financial
statements, the Company was involved in the following related party
transactions:

(a) Included in accounts payable is $16,356 (2003 - $17,137) due to
certain directors of the Company or companies controlled by them or
parties related to them. The balance due is at standard terms
(unsecured, non interest bearing) and due within 30 days.

(b) Included in general and administration expense is $19,200 (2003 -
$19,200) paid to two directors for home office use.

(c) Included in subcontracting expense is $Nil (2003 - $24,754) paid to
a company for various duties. The company is related by virtue of being
controlled by a person related to a director and officer of the Company.

These transactions are in the normal course of operations and have been
measured at the agreed to exchange amounts, which approximate fair
market values.



6. Income Taxes

The effective tax rate of income tax varies from the statutory rate
as follows:

2004 2003
------------------

Combined tax rates 36.1% 36.7%
------------------

Expected income tax provision at statutory rate $8,000 $(56,000)
Other permanent differences 2,000 10,000
Future benefit of loss carryovers not recognized - 46,000
Benefit of loss carryovers recognized (10,000)
------------------
Actual income tax provision $- $-
------------------
------------------

At December 31, 2004, subject to confirmation by income tax
authorities, the Company has approximately the following undeducted
tax pools:

2004 2003
------------------
Undepreciated capital cost $347,000 $345,000
Non-capital losses carried forward for tax
purposes available from time to time until 2011 378,000 365,500
Scientific Research and Development expenditures 75,000 65,000
Undeducted share issue costs 15,000 48,000
------------------
$815,000 $823,500
------------------
------------------

These pools are deductible from future income at rates prescribed by
the Canadian Income Tax Act.

The components of the Company's future income tax asset are a result
of the origination and reversal of temporary differences and are
comprised of the following:

Nature of temporary differences 2004 2003
-------------------
Property, plant and equipment and goodwill $44,000 $34,000
Share issue costs 6,000 18,000
Scientific Research and Development 23,000 -
Unused tax losses carry forward 136,000 134,000
-------------------
Future income tax asset 209,000 186,000
Valuation allowance (209,000) (186,000)
-------------------
Future income tax asset (liability) $- $-
-------------------
-------------------


Investment tax credits

During 2004, it was determined that the Company qualified for government
tax credits on some of its research and development activities of 2003
and 2002. No amounts were reported in the prior consolidated financial
statements for either of 2003 or 2002.

At December 31, 2004, the Company accrued $40,521 for investment taxes
receivable of which $21,183 related to qualifying expenditures of
approximately $145,000 in 2003, $18,360 related to qualifying
expenditures of approximately $142,000 in 2002 and $978 for interest
receivable.

Accordingly, the investment tax credits of $39,543 were recorded as a
reduction of salaries and fees in 2004.

No determination has yet been made regarding the amount of the Company's
2004 qualifying expenditures and accordingly, no accrual for investment
tax credits has been recorded in these consolidated financial statements.

7. Financial Instruments

As disclosed in Note 2(d) the Company holds various forms of financial
instruments. The nature of these instruments and the Company's
operations expose the Company to foreign currency risk and credit risk.

a) Foreign currency rate risk

A portion of the Company's transactions are conducted with foreign
corporations and accordingly the related financial assets and
liabilities are subject to fluctuations in exchange rates. The Company
does not have any exposure to any highly inflationary foreign currencies.

b) Credit risk

The Company's trade accounts receivable are mainly from municipalities
and government agencies. The receivables are unsecured and are subject
to normal trade risks.

8. Major Customers

The Company had four (2003 - six) significant contracts from four (2003
- three) Canadian customers. These customers accounted for $475,025
(2003 - $194,400) of revenue or 58% (2003 - 34%).

9. Subsequent Event

On November 1, 2004 the Company entered into a letter of intent with
Candax Energy Inc. ("Candax"), a private Canadian company, and Ian Lucas
and George Lykoudis (collectively "Management") pursuant to which
Management would acquire the existing operating business of the Company
and the Company would acquire all of the outstanding securities of
Candax.

On March 17, 2005, Candax and the Company agreed to terminate the
proposed transaction. Under the terms of the letter of intent and letter
of termination, Candax has agreed to advance the Company approximately
$100,000, of which the Company has received approximately $42,000. This
payment is for the Company's legal, accounting and related fees and
expenses for the proposed transaction. Subject to regulatory approval,
Candax will issue 125,000 common shares to the Company.



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Direct IT Canada Inc.
Consolidated Balance Sheets

As at December 31 2004 2003
---------------------------------------------------------------------

Assets

Current
Cash $82,568 $57,417
Accounts receivable 123,333 112,950
Prepaid expenses 16,468 6,151
Investment tax credits recoverable (Note 6) 40,521 -
---------- ---------
262,890 176,518

Equipment (Note 3) 111,472 138,215

Goodwill 115,000 115,000
---------- ---------

$489,362 $429,733

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Liabilities and Shareholders' Equity

Current
Accounts payable and accrued liabilities $76,685 $66,243
Deferred revenue 141,706 114,108
---------- ---------
218,391 180,351
---------- ---------

Share capital (Note 4) 744,307 744,307

Deficit (473,336) (494,925)
---------- ---------
270,971 249,382
---------- ---------

$489,362 $429,733

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Approved on behalf of the Board:

signed "George Lykoudis" Director
George Lykoudis


signed "David W. Constable" Director
David W. Constable

The accompanying notes are an integral part of these consolidated
financial statements.


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Direct IT Canada Inc.
Consolidated Statements of Income and Deficit
3 Months 3 Months 12 Months 12 Months
Ending Ending Ending Ending
Dec. 31 Dec. 31 Dec. 31 Dec. 31
For the years ended 2004 2003 2004 2003
December 31 (unaudited) (unaudited) (audited) (audited)
----------------------------------- ----------- ---------- ----------
Revenue
Sales $200,551 143,436 $807,263 $568,893
----------- ----------- ---------- ----------
Expenses
Amortization 10,264 15,848 42,934 57,848
General and administrative 59,561 45,249 158,829 120,041
Professional fees 25,194 23,762 47,631 57,648
Salaries and benefits, net
of investment tax
credits (Note 6) 108,263 121,866 476,636 409,917
Subcontracts 18,003 5,574 29,671 30,981
Travel and entertainment 12,154 5,301 29,467 34,119
----------- ----------- ---------- ----------
233,439 217,600 785,168 710,554
----------- ----------- ---------- ----------
Income (loss) from
operations (32,888) (74,164) 22,095 (141,661)

Other income
Loss on foreign exchange (755) (376) (506) (11,192)
----------- ----------- ---------- ----------

Net income (loss) for
the period (33,643) (74,540) 21,589 (152,853)

Deficit, beginning of
period (439,693) (420,385) (494,925) (342,072)
----------- ----------- ---------- ----------

Deficit, end of period (473,336) (494,925) ($473,336) ($494,925)

---------------------------------------------------------------------
---------------------------------------------------------------------

Income (loss) per common
share - basic (i) ($0.006) ($0.012) $0.004 ($0.025)
Weighted average number
of shares outstanding 6,008,000 6,008,000 6,008,000 6,008,000

---------------------------------------------------------------------
---------------------------------------------------------------------

(i) No diluted loss per share has been disclosed as its effect would be
anti-dilutive.

The accompanying notes are an integral part of these consolidated
financial statements.


---------------------------------------------------------------------
---------------------------------------------------------------------

Direct IT Canada Inc.
Consolidated Statements of Cash Flows
3 Months 3 Months 12 Months 12 Months
Ending Ending Ending Ending
Dec. 31 Dec. 31 Dec. 31 Dec. 31
2004 2003 2004 2003
For the: (unaudited) (unaudited) (audited) (audited)
------------------------------------ ----------- --------- ----------

Cash flows from operating
activities
Net income (loss) for the
period ($33,643) ($74,540) $21,589 ($152,853)
Adjustment for:
Amortization 10,264 15,848 42,934 57,848
----------- ----------- --------- ----------
(23,379) (58,692) 64,523 (95,005)

Changes in non-cash working
capital balances
Accounts receivable 28,268 33,678 (10,382) 23,370
Investment tax credit
receivable (40,521) (40,521) -
Prepaid expenses (967) 793 (10,317) 18,603
Accounts payable and
accrued liabilities 14,248 7,545 10,440 20,532
Deferred revenue, net of
related costs 86,975 66,685 27,598 5,926
----------- ----------- --------- ----------
64,624 50,009 41,341 (26,574)
----------- ----------- --------- ----------

Cash flows from investing
activity
Purchase of equipment (10,108) (5,008) (16,190) (10,699)
----------- ----------- --------- ----------
----------- ----------- --------- ----------

Increase (decrease) in cash 54,516 45,001 25,151 (37,273)

Cash, beginning of period 28,052 12,416 57,417 94,690
----------- ----------- --------- ----------
----------- ----------- --------- ----------

Cash, end of period $82,568 $57,417 $82,568 $57,417

---------------------------------------------------------------------
---------------------------------------------------------------------

The accompanying notes are an integral part of these consolidated
financial statements.


1. Nature of Operations

The Company was incorporated under the Alberta Business Corporations Act
on March 16, 2000. The Company was originally called CSW Ventures Corp.
The Company changed its name to Direct IT Canada Inc. as at November 12,
2001. The Company specializes in software development.

These accompanying financial statements have been prepared on a going on
concern basis, which contemplates the realization of assets and the
satisfaction of liabilities and commitments in the normal course of
business. Should the Company be unable to continue as a going concern,
it may be unable to realize the carrying value of its assets and meet
its liabilities as they become due.

2. Significant Accounting Policies

The preparation of financial statements in conformity with Canadian
generally accepted accounting principles requires management to make
estimates and assumptions that affect the reported amounts of assets and
liabilities and disclosure of contingent assets and liabilities at the
date of the financial statements and the reported amounts of revenues
and expenses during the year. Actual results could differ from those
estimates. The following is a summary of significant accounting policies
of the Company:

(a) Principles of consolidation

The consolidated financial statements include the accounts of the
Company, and its wholly-owned subsidiaries Direct IT Inc. and
Consolidated Applied Planning Systems Inc. effective August 28, 2001.
All significant intercompany accounts and transactions have been
eliminated.

(b) Property and equipment

Property and equipment are recorded at cost. Amortization is provided on
a declining balance basis at rates designed to amortize the cost of the
assets over their estimated useful lives as follows:



Office equipment 20%
Computer hardware 30%
Computer software 30%


In the year of acquisition, only one-half the applicable rate of
amortization is applied.

(c) Foreign currency

Foreign currency transactions are translated into Canadian dollars by
use of the average exchange rate prevailing during the month the
transaction occurred. At year-end, monetary assets and liabilities are
translated into Canadian dollars by using the exchange rate in effect at
that date. Foreign exchange gains and losses are included in income in
the current year.

(d) Financial instruments

The Company carries various financial instruments. Unless otherwise
indicated, it is management's opinion that the Company is not exposed to
significant interest, currency or credit risks arising from these
financial instruments. The fair values of these financial instruments
approximate their carrying values, unless otherwise noted.

(e) Revenue recognition

The Company's revenues consist primarily of fees for software licenses
of the Company's software products, maintenance fees, and professional
service fees. Revenue is recognized in accordance with the CICA's
Emerging Issues Committee releases EIC-141 "Revenue Recognition",
EIC-142 "Revenue Arrangements with Multiple Deliverables" and EIC-143
"Accounting for Separately Priced Extended Warranty and Product
Maintenance Contracts".

When a license agreement includes one or more elements to be delivered
at a future date, and vendor specific objective evidence ("VSOE") of the
fair value of all undelivered elements exists, the Company uses the
residual method to recognize revenue. Under the residual method, the
fair value of the undelivered elements is deferred and the remaining
portion of the arrangement fee is recognized as revenue. If evidence of
the fair value of one or more undelivered elements does not exist, all
revenue is deferred and recognized when delivery of those elements
occurs. VSOE for all elements of an arrangement is based upon the normal
pricing for those elements when sold separately, and for maintenance
services, is additionally measured by the renewal rate.

For software license arrangements that do not require significant
modifications or customization of the software, the Company recognizes
software license revenue when the product has been delivered, the fee is
fixed or determinable, and collection of the resulting receivable is
probable.

Maintenance revenue is comprised of fees charged for ongoing customer
support and the right to product updates "if and when available."
Customer payments for maintenance are generally received in advance and
are non-refundable. Maintenance revenue is deferred and recognized on a
straight-line basis over the life of the related agreement, which is
typically one year.

Revenues for professional services, including implementation services,
are generally recognized as the services are performed. When software
license arrangements include professional services, the software license
fees are recognized upon delivery, provided that (1) payment of the
license fees is not dependent upon the performance of the services; (2)
the services are not essential to the functionality of the software; and
(3) VSOE exists on the undelivered services. When professional services
are not considered essential to the functionality, the Company
recognizes time and materials service contracts as the services are
performed.

The timing of revenue recognition may differ from contract payment
schedules, which may result in revenues that have been earned but not
yet billed. These amounts would be included in unbilled receivables.
Customer payments in excess of revenue earned is recorded as deferred
revenue.

(f) Goodwill

The Company has adopted the new recommendations of the Canadian
Institute of Chartered Accountants (CICA) Handbook Section 3062.
Goodwill and other intangible assets, which are determined to have
indefinite lives, are no longer amortized but are tested for impairment
annually by comparison to their fair values. Impairment tests for
goodwill are conducted during every financial reporting period and, if
applicable, any impairment loss is charged to earnings in the period
that the determination is made that impairment has occurred.

(g) Future income taxes

The Company adopted the new recommendations of the Canadian Institute of
Chartered Accountants with respect to accounting for income taxes. Under
the new recommendations, the liability method of tax allocation is used
in accounting for income taxes. Under this method, future tax assets and
liabilities are determined based on differences between financial
reporting and tax
bases of assets and liabilities, and measured using substantially
enacted tax rates and laws that will be in effect when the differences
are expected to reverse.

(h) Stock-based compensation

Effective January 1, 2002, the Company adopted the recommendations of
the CICA Handbook Section 3870, Stock-based compensation and stock-based
payments. This section requires that direct awards of stock and
liabilities based on the price of the common stock be measured at fair
value at each reporting date, with the change in fair value reported in
the statements of operations and deficit. In accordance with the
recommendations the Company has elected to use the fair value method to
recognize stock based compensation to employees. None of the company's
plans qualify as direct awards of stock or as plans that create
liabilities based on the price of the Company's stock.

In 2003, the Company adopted the new recommendation of the CICA Handbook
to record the fair value of all compensation expenses when stock or
stock options are issued after January 1, 2003 under the plan.

(i) Per share amounts

Basic earnings per common share are computed by dividing earnings by the
weighted average number of common shares outstanding for the year.
Diluted per share amounts reflect the potential dilution that could
occur if securities or other contracts to issue common shares were
exercised or converted to common shares. The treasury stock method is
used to determine the dilutive effect of stock options and other
dilutive instruments, in accordance with standards approved by the
Canadian Institute of Chartered Accountants.

(j) Prepaid expenses

Prepaid expenses include costs incurred on contracts that have not been
completed as of the balance sheet date.

(k) Research and development and government tax credits

The Company carries on various research and development programs as part
of its software development activities. Some of these costs may qualify
for government assistance in the form of investment tax credits.
Research and development costs are expensed in the period in which they
are incurred, and generally consist of salaries and fees. Tax credits
are accounted for as a reduction of the related expenses and are
recognized in the same period in which the costs are incurred, provided
that their realization is reasonably assured. If there is uncertainty
regarding the Company's eligibility or the amounts that qualify for
government assistance, then the tax credits will only be recorded when
government approval has been received. Tax credits claimed in respect of
qualifying capital asset purchases are deducted from the cost of the
assets acquired.

Claims for investment tax credits may be subject to audit by the Canada
Revenue Agency and as a result any amounts recorded may be subject to
specific measurement uncertainty.

(l) Measurement uncertainty

The preparation of financial statements in conformity with Canadian
generally accepted accounting principles requires management to make
estimates and assumptions that affect the amounts reported in the
consolidated financial statements and accompanying notes. Actual results
could differ from those estimates. The consolidated financial statements
have, in management's opinion, been properly prepared using careful
judgment with reasonable limits of materiality. The effect on the
consolidated financial statements resulting from such adjustments, if
any, will be reflected prospectively.



3. Equipment 2004 2003
---------------------------------------------------------------------

Accumulated Accumulated
Cost Amortization Cost Amortization
-------------------------------------------
Office equipment $16,756 $7,249 $13,098 $5,329
Computer hardware 51,879 32,051 39,590 26,186
Computer software 285,995 203,858 285,751 168,709
-------------------------------------------
$354,630 $243,158 $338,439 $200,224
-------------------------------------------

Net book value $111,472 $138,215
-------- --------
-------- --------

4. Share Capital

(a) Authorized
Unlimited number of Common Shares
Unlimited number of Preferred Shares issuable in series, rights
and privileges to be determined upon issue

(b) Issued
Common Shares Number Amount
------------------
Balance December 31, 2003 and 2004 6,008,000 $744,307


(c) Stock options
The Company has granted stock options to its officers and directors
as follows:
Number of Option Weighted
Shares Price Average
per Share Exercise
Range Price
------------------------------
Options exercisable December 31, 2003 529,400 $0.05-$0.25 $0.10
------------------------------

Options outstanding December 31, 2003 529,400 $0.05-$0.25 0.10
Options - granted 120,000 0.06 0.06
------------------------------
Options outstanding December 31, 2004 649,400 0.05-0.25 0.09
------------------------------

Options exercisable December 31, 2004 649,400 $0.05-$0.25 $0.09
------------------------------

The following table summarizes information about the stock options
outstanding at December 31, 2004:

Weighted
Weighted Average

Weighted Average Number of Exercise Price
Options Option Average Remaining Options of Options
Outstanding price Exercise Contractual Currently Currently
Price Life Exercisable Exercisable
---------------------------------------------------------------------
109,400 $0.25 $0.25 1.62 years 109,000 $0.25
40,000 0.05 0.05 0.25 years 40,000 0.05
40,000 0.05 0.05 0.84 years 40,000 0.05
40,000 0.05 0.05 1.84 years 40,000 0.05
100,000 0.06 0.06 0.25 years 100,000 0.06
100,000 0.06 0.06 0.84 years 100,000 0.06
100,000 0.06 0.06 1.84 years 100,000 0.06
40,000 0.06 0.06 0.15 years 40,000 0.06
40,000 0.06 0.06 1.15 years 40,000 0.06
40,000 0.06 0.06 2.15 years 40,000 0.06
---------------------------------------------------------------------

649,400 $0.05-0.25 $0.09 649,000 $0.09


The Company measures compensation costs associated with stock-based
compensation using the fair value method and the cost is recognized over
the vesting period of the underlying security. For options issued in
2003, the fair value of each option is determined at the grant date
using the Black-Scholes model with the following assumptions: Dividend
yield (Nil), Expected volatility (0.02), risk-free interest rate (5%),
and weighted average life of 2 years. The Company did not recognize
stock-based compensation expense related to the 2003 grants as the
amount was considered immaterial.

For options issued in 2004, the fair value of each option was determined
using the Black-Scholes model with the following assumptions: Dividend
yield (Nil), Expected volatility (1.57), risk-free interest rate (3.5%),
and weighted average life of 2 years. The Company did not recognize
stock-based compensation expense related to the 2004 grants as the
amount was considered immaterial.

(d) Escrow common shares

(i) Pursuant to an escrow agreement dated July 13, 2000, 2,188,000
Common Shares acquired by the original shareholders are subject to
escrow; 10% were released when the qualifying transaction was approved
and the remaining 90% are releasable 15% thereof on each of 6, 12, 18,
24, 30, and 36 months from November 8, 2001. At December 31, 2004 no
shares remain in escrow, (656,400 shares in escrow at December 31, 2003).

(ii) Pursuant to an escrow agreement dated August 28, 2001, 2,120,000
Common Shares acquired in the business combination are subject to
escrow. Of these, 10% were released when the qualifying transaction was
approved and the remaining 90% are releasable 15% thereof on each of 6,
12, 18, 24, 30, and 36 months from November 8, 2001. At December 31,
2004 no shares remain in escrow, (636,000 shares in escrow at December
31, 2003).

5. Related Party Transactions

Except as disclosed elsewhere in these consolidated financial
statements, the Company was involved in the following related party
transactions:

(a) Included in accounts payable is $16,356 (2003 - $17,137) due to
certain directors of the Company or companies controlled by them or
parties related to them. The balance due is at standard terms
(unsecured, non interest bearing) and due within 30 days.

(b) Included in general and administration expense is $19,200 (2003 -
$19,200) paid to two directors for home office use.

(c) Included in subcontracting expense is $Nil (2003 - $24,754) paid to
a company for various duties. The company is related by virtue of being
controlled by a person related to a director and officer of the Company.

These transactions are in the normal course of operations and have been
measured at the agreed to exchange amounts, which approximate fair
market values.



6. Income Taxes

The effective tax rate of income tax varies from the statutory rate
as follows:

2004 2003
------------------

Combined tax rates 36.1% 36.7%
------------------

Expected income tax provision at statutory rate $8,000 $(56,000)
Other permanent differences 2,000 10,000
Future benefit of loss carryovers not recognized - 46,000
Benefit of loss carryovers recognized (10,000)
------------------
Actual income tax provision $- $-
------------------
------------------

At December 31, 2004, subject to confirmation by income tax
authorities, the Company has approximately the following undeducted
tax pools:

2004 2003
------------------
Undepreciated capital cost $347,000 $345,000
Non-capital losses carried forward for tax
purposes available from time to time until 2011 378,000 365,500
Scientific Research and Development expenditures 75,000 65,000
Undeducted share issue costs 15,000 48,000
------------------
$815,000 $823,500
------------------
------------------

These pools are deductible from future income at rates prescribed by
the Canadian Income Tax Act.

The components of the Company's future income tax asset are a result
of the origination and reversal of temporary differences and are
comprised of the following:

Nature of temporary differences 2004 2003
-------------------
Property, plant and equipment and goodwill $44,000 $34,000
Share issue costs 6,000 18,000
Scientific Research and Development 23,000 -
Unused tax losses carry forward 136,000 134,000
-------------------
Future income tax asset 209,000 186,000
Valuation allowance (209,000) (186,000)
-------------------
Future income tax asset (liability) $- $-
-------------------
-------------------


Investment tax credits

During 2004, it was determined that the Company qualified for government
tax credits on some of its research and development activities of 2003
and 2002. No amounts were reported in the prior consolidated financial
statements for either of 2003 or 2002.

At December 31, 2004, the Company accrued $40,521 for investment taxes
receivable of which $21,183 related to qualifying expenditures of
approximately $145,000 in 2003, $18,360 related to qualifying
expenditures of approximately $142,000 in 2002 and $978 for interest
receivable.

Accordingly, the investment tax credits of $39,543 were recorded as a
reduction of salaries and fees in 2004.

No determination has yet been made regarding the amount of the Company's
2004 qualifying expenditures and accordingly, no accrual for investment
tax credits has been recorded in these consolidated financial statements.

7. Financial Instruments

As disclosed in Note 2(d) the Company holds various forms of financial
instruments. The nature of these instruments and the Company's
operations expose the Company to foreign currency risk and credit risk.

a) Foreign currency rate risk

A portion of the Company's transactions are conducted with foreign
corporations and accordingly the related financial assets and
liabilities are subject to fluctuations in exchange rates. The Company
does not have any exposure to any highly inflationary foreign currencies.

b) Credit risk

The Company's trade accounts receivable are mainly from municipalities
and government agencies. The receivables are unsecured and are subject
to normal trade risks.

8. Major Customers

The Company had four (2003 - six) significant contracts from four (2003
- three) Canadian customers. These customers accounted for $475,025
(2003 - $194,400) of revenue or 58% (2003 - 34%).

9. Subsequent Event

On November 1, 2004 the Company entered into a letter of intent with
Candax Energy Inc. ("Candax"), a private Canadian company, and Ian Lucas
and George Lykoudis (collectively "Management") pursuant to which
Management would acquire the existing operating business of the Company
and the Company would acquire all of the outstanding securities of
Candax.

On March 17, 2005, Candax and the Company agreed to terminate the
proposed transaction. Under the terms of the letter of intent and letter
of termination, Candax has agreed to advance the Company approximately
$100,000, of which the Company has received approximately $42,000. This
payment is for the Company's legal, accounting and related fees and
expenses for the proposed transaction. Subject to regulatory approval,
Candax will issue 125,000 common shares to the Company.

-30-

Contact Information

  • FOR FURTHER INFORMATION PLEASE CONTACT:
    Direct IT Canada Inc.
    George Lykoudis
    President and CEO
    (905) 530-2370
    (905) 530-2219 (FAX)
    george@directitcanada.com
    www.directitcanada.com
    The TSX Venture Exchange has not reviewed and does not accept
    responsibility for the adequacy or accuracy of the content of this News
    Release.