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2 0 0 9 A N N U A L R E P O R T

VISUALIZE THE POWER

1 Financial Highlights

2 Letter from the Executive Chairman & Chief of Strategic Direction

4 Message from the Chief Executive Officer

6 Understanding the Market

7 Showing the Way

8 20-20’s Evolution and Future

9 A New Era: 20-20’s Open Business Software Platform

11 Management’s Discussion and Analysis

31 Consolidated Financial Statements

Table of Contents

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FINANCIAL HIGHLIGHTS(In thousands of U.S. dollars, except number of shares and per share data)

Fiscal years ended October 31, 2009 2008 2007 2006 2005

2005 2006 2007 2008 2009 2005 2006 2007 2008 2009 2005 2006 2007 2008 2009

Operating Results

Revenues 63,107 78,602 67,627 60,461 40,475

Gross margin 47,004 56,992 49,188 45,607 32,483

% of revenues 74.5% 72.5% 72.7% 75.4% 80.3%

EBITDA (1) 9,349 4,326 12,734 11,832 9,374

% of revenues 14.8% 5.5% 18.8% 19.6% 23.2%

Operating income (loss) 5,616 (2,690) (7,493) 6,295 5,937

Net earnings (loss) 2,581 (2,297) (5,249) 5,869 4,262

Per Share

Earnings (loss)

Basic $0.14 $(0.12) $(0.28) $0.31 $0.24

Diluted $0.14 $(0.12) $(0.28) $0.31 $0.24

Book Value $3.53 $2.99 $4.01 $3.62 $3.13

Financial Position

Working capital 12,617 4,947 37,150 27,600 33,568

Total assets 117,236 103,060 104,063 96,105 78,964

Shareholders’ equity 66,903 56,667 75,635 68,088 58,729

Total common shares outstanding 18,926,692 18,947,792 18,850,302 18,805,037 18,749,102

40.54.3

9.4

4.3

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(5.3)

67.678.6

5.9

11.812.7

63.1

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9.4

Revenues (millions of $) Net earnings (millions of $) EBITDA (millions of $)

(1) EBITDA is a Non-GAAP measure defined as operating income before restructuring and non-recuring charges plus amortization and depreciation expenses.

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When 20-20 Technologies first introduced its solutions to the interior design industry almost a quarter century ago, I intensely felt the motivation of the entrepreneur, the optimism of the builder, and the passion of the founder. These many years later, it delights me to say that the excitement about the future of 20-20 is as strong as it ever was.

While 20-20 enters a new phase that demands a bold extension of its strategy and a makeover of its character, my enthusiasm for breaking fresh trails is undiminished. Now that I have moved from the CEO’s chair to the positions of Executive Chairman and Chief of Strategic Direction, the crucial issues of the Company’s future have become my main focus – and nothing could more effectively inspire me.

The strategic plan discussed here represents both transformation in the sense of gearing 20-20’s approach to the latest trends in the industry and technology; and continuity in the sense of providing our clients with the best possible tools to advance their businesses.

The Single “Industry Standard” Platform: Consumers are increasingly demanding personalized furniture, as well as the ability to visualize, configure and order entire interior design projects over the Web. To meet these challenges, all the industry’s participants must collaborate, leveraging mass customization solutions, while sharing product and project data that is built and managed on the same foundation.

20-20 has developed and accumulated, in the course of mak-ing seventeen acquisitions, the knowledge, market position and applications to achieve a seamless end-to-end solution. To maxi-mize our solution’s ongoing growth and implementation, a further evolution in strategy is required to coalesce all industry participants. Up to now, 20-20 has succeeded and benefitted from establishing a single platform as the “industry standard” Point of Sales Design application in North America.

20-20 has acquired the knowledge and reached the market position to create and leverage an industry standard platform,

which addresses the clearly identified needs of the whole industry, ensuring that we remain the indisputable standard for all players in the industry.

The interior design industry will change dramatically over the next few years, to adjust to business and technology trends, and 20-20 will be at the centre of that change. To meet this challenge, we intend to leverage all the complementary players in the world, rather than attempt to “do everything by ourselves”, in a more open business model. Accordingly, we will work with our partners to integrate their applications on our platform in order to capture all industry revenues with them while sharing risks, efforts and expenses.

This major shift in our strategy is meant to attract talented people and organizations to work with us, and thus to minimize the duplication of efforts and bring together the otherwise disconnected parties serving our industry, while enabling all of us to move faster toward our shared goals.

As our mastery of product data has long distinguished us, our platform will both require and ensure that product and project data are built on a common foundation. The cost efficiency afforded by such data convergence and exploitation promises to be transformational.

The single software platform and open business model will serve as 20-20’s signature destination over the next few years. The fact that we have conceptualized the journey – and that we are the player best positioned to undertake it – is a measure of how far we have already come. By taking such leaps, we are communicating our determination to maintain our pre-eminence in the industry.

Knowledge and relationships are the key drivers: If the history of 20-20’s success could be distilled into a single component, the result-ing rare element would doubtless be our market knowledge and deep customer relationships. We have absorbed through acquisitions the wisdom of entrepreneurs who built successful companies by serving diverse sectors of the same industry. Today, our insight into every facet of interior design sales and manufacturing powers up our strategy and ensures our influence.

LETTER FROM THE EXECUTIVE CHAIRMAN & CHIEF OF STRATEGIC DIRECTION

OsnabruckGermany

Grand Rapids, MIU.S.A

São PauloBrasil

AshfordUK

ShanghaiChina

Cary, NCU.S.A

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CORPORATE GOVERNANCE AT 20-20 TECHNOLOGIES 20-20 Technologies does more than invent, market and support highly sophisticated information technology. We also effectively act as high-level advisors to our clients. Accordingly it is important that our Company be regarded as an exemplar of sound corporate governance.

The transition in 2009, at the highest levels of Company management, has not altered the strength of our good governance procedures – except in the sense of reinforcing them. My appoint-ment as Executive Chairman of the Board and Chief of Strategic Direction has had the effect of involving 20-20’s Board even more closely with the Company’s strategic mandate.

The Board, working with Jocelyn Proteau, the company’s Lead Director, has made the accountability of 20-20’s Directors to share-holders, the transparency of our reporting, and our determination to protect our investors, the essential means to maintain shareholder confidence and assure the achievement of our corporate objectives.

Jean MignaultExecutive Chairman &Chief of Strategic Direction

“Consumers are increasingly demanding personalized furniture, as well as the ability to visualize, configure and order entire interior design projects over the Web.”

Jean MignaultExecutive Chairman

& Chief of Strategic Direction

Creating the platform while continuously delivering current value: Concurrently with the development of the open platform, we envisage continuous and systematic delivery of new value to our customers within our existing products, and hence greater value to our shareholders.

As an example, one of the current global trends is that everything is going green. In the interior design and furniture industry, the increased cost of energy translates into higher transportation costs to ship materials and furniture over long distances. We feel that our collaborative software platform can, for instance, empower multibrand/ multiplant organizations to manufacture their products in plants closer to the end consumer, which saves energy and decreases pollution.

I want to take this opportunity to congratulate Jean-François Grou on his promotion to the position of Chief Executive Officer. Jean-François has demonstrated uncommon commitment and leadership skills through ten years of service, as our President and Chief Operating Officer. With the world class team of executives we have assembled, 20-20’s future rests in supremely capable hands. I also want to express sincere gratitude to our employees, whose dedication distinguished 20-20’s passage through a year of recession, and to our shareholders for their unrelenting confidence and support.

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MESSAGE FROM THE CHIEF EXECUTIVE OFFICERThroughout 2009, severely impacted by the recession, the interior design business remained in a fragile state. 20-20 Technologies, entrenched as a key supplier to the industry in all major markets, maintained profitability by consolidating its operation, reducing overhead and aligning costs to revenues. If such a humdrum report told the whole story of 20-20’s year, however, I would not be writing this message with an equal degree of satisfaction.

In fact the year produced cause for candid optimism. Our proactive measures in 2009 planted the seeds for substantial progress for years to come. During difficult times, the success of a company cannot depend on the behavior of the economy, but rather on how high the company reaches to offset its challenges.

We addressed the demanding year by doing much more than endure. We reached higher. While keeping 20-20’s bottom line healthy we created derivative versions of some of our products – applications for smaller projects such as bath and closet – that required less significant investments on the part of our customers. Our value proposition increasingly involved specific solutions that addressed particular circumstances. We continued to invest, targeting new growth opportunities.

Within 20-20, we also intelligently and selectively downsized. Our reconfiguration of the executive team included a smooth transition to the new CEO. Most tellingly, in regard to our long-term outlook, we started work during the second quarter on a new strategic plan. Its chief feature, the development by 20-20 of a single and open business software platform that places 20-20’s evolution squarely within the frame of industry leadership and is set to be the industry standard, is outlined earlier in this Report in the letter from Jean Mignault.

We accelerated our new strategy, even as we steered the Company through a difficult period, because 20-20’s role is to help determine industry trends rather than follow them. Consumers will make new demands once the recovery takes hold, particularly with regard to the ever-growing strength, convenience and ubiquity of the Web. Our strategy speaks to the most critical rule in the supplier/customer relationship: stay close, but become indispensable by stepping ahead of your customers. Accordingly, we are educating

them on what to expect, while presenting the tools they require to master the next generation of demand.

Revenue Performance: 20-20’s financial results in 2009 far exceeded 2008 results as the Company’s EBITDA exceeded $2 million in every quarter. Furthermore, we improved our results in net earnings over the previous year. This achievement in the face of abiding recession largely reflected the benefits of our cost reduction initiatives and strict control over expenses. Thus 20-20’s cost structure grew more manageable and entails great promise for our future financial performance.

Consolidation of Operations: At the beginning of 2009, the personnel of 20-20 worldwide totaled approximately 600. At the end of the year, we were some 500. However, we were surgical in our cuts. We did what was required at a difficult time, while keeping our eye fixed on a healthier future. In regions, where we did not anticipate achieving short- to mid- term significant gains, we closed offices. Where we could merge some operations with our distributors and thereby gain greater flexibility, we did so. While growing lean in structure, we preserved all our abilities to act. We have maintained the same geographic presence and the same lines of business.

We took particular care, in the reconfiguration of the Company, to protect the means by which 20-20 addresses the market. After consolidating operations in both North America and Europe, we feel that we have enhanced 20-20’s ability to translate opportunity into revenues. The nucleus of 20-20, fully preserved, has gained sharper focus. Moreover, the compact efficiency we have established positions us to benefit significantly as the market recuperates. Incremental volumes will not require our current cost structure to increase commensurate to rising revenues - our margins will benefit.

Looking Ahead: We expect market conditions to remain challenging through 2010, with the pace of recovery likely to be slow. Still, as we develop our open business platform for the long-term and position it as the industry standard, 20-20 is not waiting for the short-term market to improve – and neither are most of our clients.

Our sense is that the difference between the year ahead and the year past will be characterized by a general readying for the recovery. Accord-ingly, our clients have signaled that they are poised to make targeted

Jean-François GrouChief Executive Officer

“During difficult times, the success of a company cannot depend on the behavior of the economy, but rather on how high the company reaches to offset its challenges.“

5

In 2009, the founder of 20-20 Technologies, Jean Mignault, took the step of bowing out of the office of CEO and embracing the posts of Executive Chairman and Chief of Strategic Direction. At the same time, I was honoured by my promotion to Jean’s former office.

It is with humility that I sign this message above my new title. I succeed the man who has been 20-20’s leading light since the Company’s birth and who has traced a path of relentless innovation which helped revolutionize an industry. Jean has been my mentor and will remain so as he continues to guide our expansion strategy for many years to come.

I join Jean in saluting our employees for their sacrifice and devotion, and our shareholders for their steady support.


investments. For example, dealers who must forgo additional expensive licenses for the time being may instead purchase lower-priced derivative products to enter new niches of the business or add-on products to improve their sales and better manage their business.

Similarly, manufacturers who cannot invest at the moment in whole-factory solutions will instead enter or enhance ancillary channels of production with 20-20’s help. These are the types of events which will make a difference in 2010. All industry players will be seeking to be positioned for the upturn.

Meanwhile pent-up demand is building. As we go to press, our manu-facturing solutions have been selected by several manufacturers in North America. Each of these manufacturers are awaiting an in-house green light to close the contract. I mention this circumstance not only because it typifies a number of similar potential sales, but because it illustrates a notable change that is progressively taking place in the market. Previously the manufacturers would not have taken the contract process this far, since they knew funds for the purchase could not be approved. Now such expenditures are becoming viable again.

We entered 2010 with confidence that the gates to business expan-sion are re-opening, and that our Company is uniquely positioned to benefit from a resumption of growth in our industry.

6

In 2009, the interior design business faced a number of challenges made more pressing by the recession, and 20-20 Technologies was uniquely positioned to help its customers meet them. 20-20 brings to market best business practices that are well supported and often embedded in our applications. Our experience, together with our presence throughout the interior design industry, allows us to generate greater value than any other software company in the retailing and manufacturing sectors. This key differentiator raises the bar for new entrants and helps 20-20 maintain dominance in the market.

Challenges:

Identify New Opportunities in the IndustryInterior design retailers, in a recovering economy, require products that involve limited investment on their part and which in turn will attract budget-conscious consumers to less costly remodelling options.

Migrate to the WebConsumers are increasingly browsing and shopping online for products and even for whole interior design projects, and they will naturally take their business to vendors who can provide them with the best Web experience. The equation is simple for dealers: join the movement to the Web, or forfeit their share of ever-increasing online trade.

Simplify the Business ProcessConsiderable cost efficiencies can be gained in automating both sales and manufacturing processes by our customers once they adopt cutting edge technology into their daily routines.

Help Dealers Increase their Closing RatioThere is a trend towards one stop shopping for all products in a project. Furthermore, enabling consumers to finance their projects literally “on the spot” at the point-of-sale constitutes a dramatic enhancement of the in-store sales process.

Reduce Barriers to Client Entry In a difficult economic environment many small players cannot afford to pay for an outright purchase of a license; they require versatile programs to help them optimize their resources.

Throughout the difficult period of the recession, in addition to being a technology and solution provider to its clients, 20-20 carefully preserved its ability to also act as their advisor. The consultative dynamic has added to the Company’s role as a true partner to its customers.

UNDERSTANDING THE MARKET

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20-20’s investment in research and development in 2009 was rigorously aimed to generate best value for research dollars invested. We sought and implemented targeted improvements to meet current customer requirements and deliver additional value. We developed means to sell existing products into new markets and complementary products to existing customers. Our portfolio also evolved to make client innovations viable – we adapted existing solutions to support diversification into adjacent markets of many of our customers at both the point-of-sale and in manufacturing.

20-20 Solutions:

Applications for Complementary Projects20-20 expanded its product portfolio by tapping into the bathroom, closet and countertop markets to become the interior design industry’s prime source of solutions for these projects.

Web Tools and ExpertiseWe are helping our clients achieve a state-of-the-art Web presence. On their corporate websites in 2009 many retailers began the roll-out of capabilities provided by 20-20 Virtual Planner, our 3D Web visualization space planning software. Our ability to integrate Virtual Planner into their own e-commerce platform has generated wide industry interest. As our technology goes through its paces in many showcase environments, we have every confidence that it will become the preferred choice of leading companies for their online Web solution. Unrivalled Product Line to Meet All Client Needs20-20 launched the ShopWare suite of products to improve the business processes of cabinet makers, and rolled out for its office furniture clients updated versions of 20-20 CAP Studio, 20-20 Worksheet, 20-20 Giza, and 20-20 Office Sales. This aggressive product release program further highlighted 20-20’s matchless breadth of product and its reputation as a single supplier.

Complementary Financing 20-20 improved its product offering with a web-based Home Improvement Project Financing Application for the dealer market which enables consumers to obtain finance approval on the spot.

New Business Models to Lower Cost of PurchaseTo make our software affordable to buyers in untapped markets, 20-20 crafted new programs that had the effect of facilitating the acquisition of our technology while creating more revenues and improved gross margins for 20-20.

These initiatives in 2009 all represented incremental investment to gain access to high-potential markets, and they served to further cement 20-20’s position as the leading software and service provider to the global interior design industry.

SHOWING THE WAY

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20-20’S EVOLUTION AND FUTURE20-20 Technologies has long been the world’s leading provider of design and computer-aided selling software for the interior design and furniture manufacturing industries. The following provides an outline of the path we took to reach this position, as well as the strategy we are now pursuing to extend, strengthen and perpetuate our leadership.

Design and Sales Tools: 20-20, armed with extensive market knowledge of the interior design industry and driven to address its specific needs, introduced design and sales tools for the point-of-sale which enabled consumers, with the support and guidance of professional designers, to configure and visualize furniture and rooms. The perennial market leadership of the Company’s flagship design software products, 20-20 Design, Fusion and 20-20 Cap Studio, has been supported by the fact that 20-20 has always offered the greatest number of manufacturers’ catalogs.

Electronic Catalogs: 20-20 created catalogs for manufacturers that solved the complexity of how to present products at the point-of-sale with photo-realism for the consumer, while equipping the dealer with all the information (specifications, pricing and manufacturer’s validation) required to close the sale.

Order Entry and Factory Management: 20-20, demonstrating a strong ability to design innovative products, developed software to perform product configuration for the factory, bringing a unique level of sophistication, speed and automation to the interface between dealer and manufacturer, and to the flow in the plant of all parts to be created and assembled.

Administrative Systems: 20-20, acting with the knowledge and experience gained as a result of many years of close contact with its customers, provided dealers with digital tools designed to manage each project and each customer in a manner distinctively tailored to the interior design business.

Web Resources: 20-20 enabled dealers and manufacturers to present to the prospective online consumer the full range and richness of their products, as well as customized pricing.

End-To-End Enhancement: 20-20 accelerated the error-free pre-validated reception of orders on the factory floor and the handling of the entire business flow between the point-of-sale and the manufacturer.

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A NEW ERA: 20-20’S OPEN BUSINESS SOFTWARE PLATFORM20-20’s business and product strategy will continue to lead the penetration of Web and mobile applications

and services, recognizing that all parties in the interior design industry must achieve a high level of

collaboration to satisfy a marketplace in historic transformation. 20-20 will therefore open its foundational

platform and render it a collaborative environment. Application developers, particularly smaller and niche

players, will be able to scale their skills, excel in what they do best, and reap their share of revenues. The common

infrastructure promises to allow for lower financial risk for all involved. We believe the open platform will

become a space for extraordinary innovation and a means for easier access to market, as dealers and

manufacturers increasingly regard it as the place to acquire answers to their needs.

MD&A – Year ended October 31, 2009

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’(Year ended October 31, 2009)

1. Introduction

The following report, dated January 21, 2010, is a discussion relating to the financial results and position of 20-20 Technologies Inc. (―20-20‖ or the ―Company‖) for the year ended October 31, 2009. The discussion should be read in conjunction with the selected consolidated financial information shown in this report, and our audited consolidated financial statements and the accompanying notes. These financial statements have been prepared in accordance with Canadian generally accepted accounting principles (Canadian GAAP) and are presented in US dollars as a significant proportion of the Company’s revenues are recorded in US dollars. The Company’s financial statements have been translated from the measurement currency, the Canadian dollar, to the US dollar using the current rate method. Additional information relating to 20-20, including the Company’s Annual Information Form, Annual Report and the audited financial statements for the year ended October 31, 2009, can be obtained from SEDAR at www.sedar.com as well as from the Company’s web site at www.2020technologies.com in the Investors section. Information contained in this report is qualified by reference to the discussion concerning forward-looking statements detailed below.

Forward-looking Statements Certain statements contained in this report constitute forward-looking information within the meaning of securities laws.

Implicit in this information, particularly in respect of the Company’s future operating results and economic performance are assumptions regarding projected revenues and expenses. These assumptions, although considered reasonable by the Company at the time of preparation, may prove to be incorrect.

Readers are cautioned that the Company’s actual future operating results and economic performance are subject to a number of risks and uncertainties, including general economic, market and business conditions, and could differ materially from what is currently expected.

For more exhaustive information on these risks and uncertainties, please refer to our most recently filed Annual Information Form, which is available at www.sedar.com. Forward-looking information contained in this report is based on management’s current estimates, expectations and projections, which management believes are reasonable as of the current date. The reader should not place undue reliance on forward- looking statements and should not rely upon this information as of any other date. While the Company may elect to, it is under no obligation and does not undertake to update this information at any particular time, unless required by applicable securities law. In addition to presenting an analysis of results for the fourth quarter and years ended October 31, 2009 and 2008, this report also discusses certain important events that occurred between the fiscal year-end and January 21, 2010.

Non- Canadian GAAP Measures

EBITDA EBITDA is a non-Canadian GAAP measure related to cash earnings and is defined for these purposes as operating income, adjusted for non-recurring items plus amortization expenses.

Unless otherwise noted or the context otherwise indicates, ―20-20‖, the ―Company‖, ―we‖, ―us‖ and ―our‖ refers to 20-20 Technologies Inc. and its direct and indirect subsidiaries. Unless otherwise indicated, all dollar amounts in this report refer to US dollars. References to ―$‖ or ―US‖ are to US dollars and references to ―C$‖ are to Canadian dollars. Disclosure of information in this report has been limited to that which management has determined to be ―material‖, on the basis that omitting or misstating such information would influence or change a reasonable investor’s decision to purchase, hold or dispose of securities in the Company

http://www.sedar.com/


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2. Financial Highlights

Revenues down by 19.7%

EBITDA(1) rose to 9.3 million or 14.8% of revenues

Net earnings at $2.6 million (4.1%) or $0.14 per share

For the year ended October 31, 2009, reve-nues declined by $15.5 million (19.7 %), due to unfavorable economic conditions in all regions as well as unfavorable exchange rates that reduced revenues by $4.3 million (5.5%).

Considering the economic turmoil and uncertainty, the Company introduced differ-ent measures designed to align cost with revenues. In this challenging economy the Company’s EBITDA for the year ended October 31, 2009 rose from $4.3 million or 5.5% in 2008 to $9.3 million or 14.8% in 2009.

Despite the economic conditions and unfavorable exchange rates the Compa-ny’s net earnings rose to $2.6 million or 4.1% during the year ended October 31, 2009 compared to a net loss of $2.3 mil-lion or (2.9 %) for the year ended October 31, 2008.

(1) EBITDA is a non-GAAP measure for which we provide reconciliation on page 18 and 25.

Selected Consolidated Financial Information

The selected consolidated financial information set out below for the three months and years ended October 31, 2009 and 2008 has been derived from our audited annual consolidated financial statements.

The following information should be read in conjunction with our audited financial statements and accompanying notes for the year ended October 31, 2009.

(In thousands of dollars, except for share and per-share data)

Three months ended October 31,

(Unaudited) Years ended October 31,

(Audited)

2009 2008 2009 2008

Revenues 16,181 19,556 63,107 78,602

Profitability Gross margin 12,149 14,435 47,004 56,992 Gross margin (%) 75.1% 73.8% 74.5% 72.5%

EBITDA1 2,426 2,021 9,349 4,326 EBITDA (%) 15.0% 10.3% 14.8% 5.5%

Net earnings (loss) 735 (1,272) 2,581 (2,297) Net earnings (loss) (%) 4.5% (6.5)% 4.1% (2.9)%

Earnings per share2 Basic earnings (loss) per share 0.04 (0.07) 0.14 (0.12) Diluted earnings per share 0.04 - 0.14 -

Balance sheet Total assets 117,236 103,060 117,236 103,060 Total long-term liabilities 18,878 15,977 18,878 15,977

(1) EBITDA is a non-GAAP measures for which we provide reconciliations on page 18 and 25. (2) Please refer to Note 7 to the annual audited consolidated financial statements for further details relating to the calculation of earnings (loss) per share.

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3. Corporate overview

Our mission Making our customers more productive and competitive by providing software and services to integrate the entire sales, supply and manufacturing processes of the interior design and furniture industries.

Our Company Interior design dealers and furniture manufacturers have made 20-20 Technologies the world’s leading provider of computer-aided design, sales and manufacturing software for the interior design industry. 20-20 Technologies is offering an integrated software platform for industry-wide use from showroom to factory floor that is tailored specifically to the interior design business and employed across all environments, desktop and web. It not only represents a significant competitive advantage, but is a critical element to the Company’s success.

20-20 products and services are marketed and sold worldwide through a sales and marketing team in various locations complemented by a network of consultants and distributors. 20-20 has operations throughout North America and Europe as well as in Asian and Latin American markets.

Markets Served 20-20 Technologies serves a variety of interior design-related professions that include architects, commercial furniture dealers and retailers, facility managers, residential furniture dealers and retailers, manufacturers, interior designers, homebuilders and remodelers. Each can choose the software that best suits their needs and addresses their professional concerns and those of their customers. While our focus has traditionally been on the dealer channels and their respective furniture manufacturers, mostly for kitchen, office, we are actively increasing our sales and services activities for adjacent market such as remodelers, homebuilders, furniture retailers expanding our solutions coverage for product categories such as bathrooms, closets and home furniture.

The Company also believes in nurturing promising design talent. This is why 20-20 Technologies offers an educational version of its 20-20 Design software to accredited design academic institutions.

20-20 software is available in 23 languages, sold in more than 90 countries. Each is adapted for the specific measurement units and currency of the geographical area where the software is used. 20-20 solutions include applications for business-to-client (design and sales) business-to-business (order processing and e-procurement) and manufacturing facilities: enterprise resource planning (ERP) systems as well as computer-aided engineering (CAE) and manufacturing (CAM) software.

Leadership Team Hailing from various countries around the world, 20-20 Technologies’ global reach is reflected in its leadership team. The Company’s executive team members’ know-how in the interior design and software industries combined with their diversity of business and computer science education backgrounds have significantly contributed to 20-20’s continued

success, giving the Company an edge over its competitors. Their understanding of the global industry and customer needs puts 20-20 Technologies in a unique position to address each one.

Competitive Environment The Company currently faces competition from software providers in both the CAD and the ERP markets. The interior design software industry is highly fragmented and comprised generally of point solution (as opposed to end-to-end solution) software providers that address specific aspects of design software or software providers that have limited geographic coverage. Accordingly, none of the Company’s competitors competes in all of its products and markets. Generally, competitors can be described as follows:

CAD Software: Competitors include almost exclusively smaller, privately-owned companies whose products are principally focused on specific aspects of design software, and compete generally in some of our markets but not all.

ERP Software: As the Company increases the penetration of its ERP solution, it also faces competition from ERP software vendors which generally offer less targeted design, specification, photo-realistic rendering or 3-D visualization capabilities.

Large software providers typically find it more beneficial to form alliances with specialized software providers that provide a focused solution, like us, than to devote resources to developing and marketing their own specialized products.

Our leading market position, global presence and single tech-nology platform, end-to-end solution, as well as the breadth and size of the electronic catalog library that we have developed for our customers, are all significant competitive advantages that distinguish us from our existing competitors and would make it difficult for new entrants to compete with us effectively.

4. Corporate strategy

Market conditions In our fourth quarter, market conditions in North America where very similar to the ones experienced in our previous quarter i.e. stable with no improvement or deterioration. Most existing and new customers are seeking new market segments and even a diversification of their offering where they anticipate that their customers will eventually have demand which is mostly smaller interior design projects requiring lower level of investment with little or no financing. In the residential sector, dealers continue to acquire our design solutions as well as complementary solutions responding to our adapted sales programs. In general, our business in the Commercial sector is still down significantly with recurring revenue holding, as they are in the residential sector. Even though the mood in the industry is trending towards a more positive outlook, everyone remains prudent in their investment decisions.


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In European markets conditions are very similar in general to North America, unchanged from our previous quarter. Foreign exchange variations continue to create some fluctuations in our overall revenue. As in North America, it is too early to report any signs of recovery. Our International business continues to show signs of improvements, mostly in Brazil and China as their respective economies have recovered sooner than in North America or Europe while our distributors’ business in other smaller markets worldwide is still severely impacted by the global downturn.

Strategic objectives We managed to achieve our strategic objectives indicated in our last quarter’s report during this period of economic turmoil and uncertainty by successfully protecting our EBITDA, cash position and our core human capital. We have also protected our recurring revenue and market share in all our key markets. We continue to deliver on our selected strategic investment initiatives at the pace we can afford to improve our execution capabilities preparing for the recovery.

Existing business and growth strategy We maintain our efforts on selected short term strategic investment initiatives, each carefully validated with our customers to ensure that we meet their current needs and expectations as soon as they begin to reinvest again. Also we continue to aggressively pursue all opportunities adjusting our sales programs, making it easier for our customers and prospects to acquire our technologies even in these difficult

times, thereby delivering some incremental results as indicated by our slight improvement in revenues.

Cost reduction Our cost reduction measures are still in line with global economic conditions as they are key to protecting a reasonable profitability on lower overall revenue. We also continue to restrict operating expenses in areas such as trade shows, travel and other non-essential expenses.

5. Financial Review

Foreign exchange rates As 20-20 operates in a global environment, foreign exchange rate assumptions and sensitivity analyses are particularly significant due to their potential impact on our results. In fact, all of our main currencies, the $US, $C, the Euro and the Pound Sterling have fluctuated significantly in 2009 and are continuing to do so.

Although the European currencies affect earnings to a lesser extent as the exposure to fluctuations is limited to earnings in the European currency, variations in the Canadian dollar versus the US dollar can have a significant impact on net earnings as revenues in North America are essentially in US dollars while a significant component of expenses are in Canadian dollars.. The Company uses forward exchange contracts to sell US dollars forward on quarterly basis in order to partially offset this impact on earnings.

0.75

0.78

0.81

0.84

0.87

0.90

0.93

0.96

0.99

1.02

1.05

Q1-08 Q2-08 Q3-08 Q4-08 Q1-09 Q2-09 Q3-09 Q4-09

Average Rate 1.0093 0.9941 0.9908 0.9185 0.808 0.8033 0.8784 0.93

Closing Rate 0.9978 0.9906 0.9749 0.822 0.8088 0.8375 0.9268 0.9282

Exch

ange

Rat

es

Titre du graphiqueC$ - US$ Exchange Rates


15

The following tables show the variations of the closing and weighted average exchange rates for our primary operating currencies against the US Dollar.

Revenues Revenues from license sales are predominantly derived from licensing of the Company’s desktop and enterprise software. Each software license, for which users pay a one-time fee, is typically perpetual in nature. Each license is typically intended for use by a single user and is non-transferable.

Revenues from maintenance and other recurring revenues are generated by customer support, software and electronic catalog updates, Web services and annual software usage fees. Typical maintenance and other recurring service agreements have a twelve-month term and are renewable at the option of the customer.

Finally, revenues from professional services include revenues derived from training, electronic catalog creation and mainten-ance, and integration services such as consulting, application integration and hardware resale.

Revenue Distribution

The following charts provide information regarding our revenue composition for the year ended October 31, 2009:

Type Geography Sectors Licenses 27.5 % North America 55.1 % Residential 51.0 % Maintenance and recurring 52.8 % Europe 41.7 % Commercial 18.7 % Professional services 19.7 % International 3.2 % Manufacturing 30.3 %

17,341

33,300

12,466

0

5,000

10,000

15,000

20,000

25,000

30,000

35,000 34,752

26,328

2,027

0

5,000

10,000

15,000

20,000

25,000

30,000

35,000

40,000 32,189

11,799

19,119

0

5,00010,00015,000

20,00025,00030,000

35,000

Closing rates 2009 2008 Change

2009/2008

C$ 0.9282 0.8220 12.9% Euro 1.4754 1.2681 16.3% Sterling Pounds 1.6478 1.6156 2.0%

We used these closing foreign exchange rates to value our assets and liabilities in U.S. Dollars as at October 31.

Average rates 2009 2008 Change

2009/2008

C$ 0.8570 0.8859 - 3.3% Euro 1.2427 1.4967 - 17.0% Sterling Pounds 1.5523 1.9743 - 21.4%

We used these weighted average foreign exchange rates to value our revenues and expenses in U.S. Dollars for the two years ended October 31.


16

Revenue Analysis The following table provides a summary of our revenue variances due to foreign currency exchange rate variations between 2009 and 2008.

Years ended October 31

(in thousands of dollars except percentages) 2009 2008

Change 2009/2008

Revenues 63,107 78,602 (19.7 %)

Organic variance prior to foreign currency impact (17.4 %) Acquisition 3.2%

Constant currency variance (14.2 %) FX impact (5.5 %)

Variation over previous year (19.7%)

World economic difficulties affected our revenues throughout fiscal 2009. In North America revenues were mostly affected in the first quarter and we saw slight increases in the last two quarters of the year. In Europe the impact of the unfavorable currency rate and the economic conditions affected our revenues until the end of the second quarter.

During Fiscal 2009, some clients adopted a cautious approach, conserving cash and reviewing their investment plans with a focus on addressing near term profitability and cash flow pressure resulting in the suspension of their projects, the deferral of new projects or the re-evaluation of their operating budgets. These reactions have resulted in a reduction in our short term revenues of license and professional services. Our maintenance and recurring revenue were also affected by this downturn because many clients have reduced their personnel resulting in fewer active licenses; hence lowering the number of licenses they have under support and maintenance contracts.

For the year ended October 31, 2009 revenues were $63 million a decrease of 19.7% or $15.5 million compared to the same period in 2008. On a constant currency basis, organic revenue decreased by 14.2% year over year. A decline of $4.3 million (5.5%) was attributable to European currencies versus US dollar. In North America, most revenues, except for a portion of maintenance and support revenues, are recorded in US dollars so the Canadian dollar’s depreciation versus the US dollar had almost no effect on revenues realized in North America. Acquisitions however, contributed to a 3.2% increase in revenues overall. Organic revenues declined by $18.0 million (22.9%) for year ended October 31, 2009, compared with the same period in 2008. License sales accounted for 37.9% of this decline, with a decrease of $10.0 million. Organic recurring revenues were less affected with 8.9% reduction or $3.2 million and professional services decreased by 28.8% or $4.8 million.

The following tables provide a summary of variations in our revenue type and by sector showing the impact of foreign currency exchange rates between 2009 and 2008 periods

Revenue Type

(in thousands of dollars except percentages) Years ended October 31

2009 2008 Changes

License revenue prior to FX impact 18,722 26,392 (29.1 %) FX impact (1,381) -

License revenue 17,341 26,392 (34.3 %)

Maintenance and other recurring revenue prior to FX impact 35,229 35,368 (0.4%) FX impact (1,929) -

Maintenance and other recurring revenue 33,300 35,368 (5.8%)

Professional services revenue prior to FX impact 13,498 16,842 (19.9%) FX impact (1,032) -

Professional services revenue 12,466 16,842 (26.0%)

Total revenues 63,107 78,602 (19.7 %)


17

Economic conditions have mostly affected negatively the sales of new licenses and revenues from professional services compared to 2008. Also, many clients have reduced their personnel resulting in fewer active licenses.

Our revenues from license sales in all regions, prior to the effect of foreign exchange, declined by 29.1% or $7.7 million for the year ended October 31, 2009, compared with the same period last year. Excluding the effect of currency variations, license sales from North America declined by $5.9 million (42.2 %), while Europe and the rest of the world declined by $1.7 million (14.1%). License sales, excluding foreign exchange variations, declined in the manufacturing sector by 25.0%, in the residential sector by 34.7% and in the commercial sector by 46.9% during Fiscal 2009 compared with the same period in 2008.

For the year ended October 31, 2009, maintenance and other recurring revenues decreased by $2.1 million (5.8%), mostly due to unfavorable foreign exchange rates amounting to $1.9 million (5.5%). On a constant currency basis, in North America, recurring revenues declined by $0.7 million (3.5%), while in Europe acquisitions made in 2008 contributed to a growth of $0.6 million (4.6%). The residential sector saw a slight decrease, prior to foreign exchange, in recurring revenues of $0.4 million (2.0%) compared to year 2008. In the commercial and manufacturing sectors we had a slight growth of $0.1 million (1.1%) and $0.2 million (1.8%) respectively, mostly due to the license revenue in those sectors during the past year.

Decreases in license sales had a direct impact on revenues from professional services that declined from $16.8 million in 2008 to $12.5 million in Fiscal 2009. On a constant currency basis, revenues decreased by $3.3 million (19.9%). Europe and North America had reduction prior to foreign exchange impact of respectively $1.4 million and $1.9 million, in their professional services revenues in the year ended October 31, 2009 compared to the last year. During Fiscal 2009, the residential and commercial sector revenues from professional services, declined by $1.4 million (21.0%) and $0.3 million (15.3%)

respectively, while the manufacturing sector declined by $1.6 million (20.2%), all excluding currency variation.

Revenues by Geography

During Fiscal 2009, there were no important variations in the distribution of revenues by geography. The variations shown are before currency effect.

For the year ended October 31, 2009, revenues from North America were $34.8 million, down $8.6 million or 19.8% when compared to the same period in 2008. In Europe revenues, before exchange rate impact, ($30.7 million) decreased by $2.4 million compared to 2008. The exchange negative effect amounted to $4.3 million leaving a total decrease of $6.7 million in European revenue for 2009 compared to Fiscal year 2008. We have seen cautious behavior from North American and European clients as they have deferred new projects. Globally, the decrease in revenues is primarily attributable to challenging economic conditions.

Revenues by Sector

(in thousands of dollars except percentages) Years ended October 31

2009 2008 Changes

Residential sector revenues prior to FX impact 34,913 41,301 (15.5 %) FX impact (2,724) -

Residential sector revenues 32,189 41,301 (22.1 %)

Commercial sector revenues prior to FX impact 11,799 14,047 (16.0%) FX impact - -

Commercial sector revenues 11,799 14,047 (16.0%)

Manufacturing sector revenues prior to FX impact 20,737 23,255 (10.8%) FX impact (1,618) -

Manufacturing sector revenues 19,119 23,255 (17.8 %)

Total revenues 63,107 78,602 (19.7 %)

34,752

26,328

2,027

43,340

33,023

2,239

0

5,000

10,000

15,000

20,000

25,000

30,000

35,000

40,000

45,000

50,000

North America Europe International

2009 2008


18

For the year ended October 31, 2009, residential sector reve-nues decreased to $32.2 million down $9.1 million or 22.1%, compared to the same period last year. On a constant currency basis, revenues from the residential sector were down by $6.4 million or 15.5%. Again, on a constant currency basis, commer-cial sector revenues decreased by $2.2 million (16.0%) com-pared with the year ended October 31, 2008. Reductions in personnel for our clients contributed largely to the reduction in

license and professional services revenues in the residential and commercial sectors. During the same period, on a constant currency basis, the manufacturing sector decreased by 10.8% or $2.5 million. Manufacturing projects need more financial resources and more time for the implementation of our software solutions, so the adoption of a cautious approach by our clients by suspending or deferring the kick-off of new projects.

Gross Margin

(in thousands of dollars except percentages) Years ended October 31,

2009 2008 Change

Licenses gross margin prior to FX impact 87.1% 89.2% (2.1 %) FX impact 0.4%

Gross margin variation from previous year 87.5% 89.2% (1.7 %)

Maintenance and other recurring services and professional services gross margin prior to FX impact 67.0% 64.1% 2.9% FX impact 2.6%

Gross margin variation from previous year 69.6% 64.1% 5.5%

Overall Gross margin prior to FX impact 72.6% 72.5% 0.1% FX impact 1.9%

Overall gross margin variation from previous year 74.5% 72.5% 2.0%

The growth in the overall gross margin prior to the foreign exchange impact in Fiscal 2009 was 2.0 percentage points compared to the same period in 2008. The Company proactively managed its cost structure in response to prevailing economic conditions, particularly with respect to costs relating to professional service. For the year ended October 31, 2009, the gross margin, prior to foreign exchange impact, on recurring and professional services revenue increased by 5.5 percentage points whereas the gross margin on license sales slightly decline by 1.7 points. The restructuring plan and the cost realignment program are mainly responsible for the growth in the overall gross margin excluding the foreign exchange effect.

Cost of Revenues Cost of revenues from license sales primarily consists of:

Cost of actual software products, including duplication, manuals and inserts, as well as packaging

Resale costs of third party software

Royalties’ payable on certain license sales to third parties whose technology is used by 20-20 software

Cost of revenues from maintenance and services primarily consists of:

Personnel costs and other related costs incurred for client support

Costs of personnel assigned to electronic catalog creation, update and maintenance

Costs of personnel assigned to Web services, training, integration services and hardware

Various direct personnel costs have been reduced since the restructuring plan was put in place in the third quarter of 2008. In addition, the fluctuation of foreign exchange rates compared with the year ended October 31, 2008 reduced the cost of revenues for a total amount of $2.4 million.

EBITDA (In thousands of dollars except percentages)


2009 2008

Operating income (loss) (GAAP) 5,616 (2,690)

Restructuring charge (228) 2,329

Amortization of property and equipment 1,389 1,733

Amortization of intangible assets 2,572 2,954

EBITDA 9,349 4,326

Margin (%) 14.8% 5.5%

The Restructuring plan, with its various cost reduction and cost realignment measures and favorable exchange rates with respect to costs are largely responsible for the growth in the EBITDA. The restructuring plan consolidated Company’s worldwide operations into a leaner and better integrated organization. It also aims to restore profitability to acceptable levels, align the Company’s cost structure to the realities of current market conditions in North America and elsewhere in the world, and benefit from cost synergies related to recent acquisitions.


19

For the year ended October 31, 2009, EBITDA grew from 5.5% to 14.8% compared with the same period in 2008. The exchange rate variations generated an increase in the EBITDA of approximately $2.9 million compared with the year ended October 31, 2008.

Operating Expenses Operating expenses include:

Sales and marketing expenses, which primarily consist of personnel costs relating to sales, marketing and product management activities, commissions paid to our sales force, fees paid to our industry consultants, fees related to shipping, advertising, telemarketing, trade shows and promotional items;

Research and development costs primarily relate to personnel and subcontractors for new product development, existing product enhancement, quality assurance and documentation activities and software development tools and equipment. Research and development costs are shown net of applicable tax credits;

General and administrative expenses primarily consist of costs relating to information technology, legal services, financial functions, human resources, legal and professional fees, insurance and other indirect corporate overhead; and

Stock-based compensation expense consists of the Company contribution to the employee share

purchases under the Employee Share Purchase Plan ESPP), the cost of stock-based awards to employees expensed over the options’ vesting period, and the cost associated with the deferred share units issued quarterly to the Company’s directors.

Restructuring Plans and Other Cost Reduction Measures In order to respond to the downturn in the economic conditions during 2008 and 2009, management implemented cost reduction plans combined with various restructuring plans, including both permanent and temporary measures aimed at aligning our cost structure with declining revenues resulting from current unfavorable economic conditions. For the year ended October 31, 2009 these measures generated cost reductions and savings amounted to $7.8 million in salaries and $2.7 million on other expenses.

Effect of Foreign Exchange Rate Changes on Expenses The Company’s currency of measurement is the Canadian dollar while the presentation currency is the US dollar. The US dollar’s weighted average exchange rate of $0.8859 in Fiscal 2008 compared with a weighted average rate of $0.8570 for Fiscal 2009. This variation (3.3%) in the exchange rate generat-ed a reduction in expenses denominated in Canadian dollars of $3.2 million for Fiscal 2009. The strength of the US dollar in 2009 compared with European currencies, Euro (17.0%) and British Pounds (21.4%) resulted in a reduction of $7.9 million in expenses for Fiscal 2009 compared with the same period in 2008.

Effect of Foreign Exchange Rate Changes on Operating Expenses (In thousands of dollars except percentages) Years ended October 31,

Operating expenses 2009 2008 Change

Sales & marketing expenses prior to FX impact 18,748 26,015 (28.0%) FX impact (2,161)

Sales & marketing expenses variation from previous year 16,587 26,015 (36.2%)

Research and development expenses prior to FX impact 13,095 16,945 (22.7%) FX impact (1,080)

Research and development expenses variation from previous year 12,015 16,945 (29.1%)

General and administrative expenses prior to FX impact 14,700 14,420 1.9 % FX impact (1,936)

General and administrative expenses variation from previous year 12,764 14,420 (11.5 %)

Stock-based compensation expenses prior to FX impact 293 (27) FX impact (43)

Stock-based compensation expenses variation from previous year 250 (27)

Restructuring cost expenses prior to FX impact (228) 2,329 FX impact -

Restructuring cost expenses variation from previous year (228) 2,329

Operating expenses variation from previous year 41,388 59,682 (30.7 %)


20

Sales and Marketing Expenses Sales and marketing expenses decreased by $9.4 million (36.2%) for the year ended October 31, 2009, compared to the same period in 2008. As indicated above, exchange rates had a positive effect of $2.2 million on Sales and Marketing expenses compared to Fiscal 2008. The restructuring plan resulted in a $3.4 million benefit on salaries and $0.8 million on traveling. The cost reduction plan resulted in savings of $1.4 million on show and event expenses and consultant fees. Declining revenues had a direct effect on variable compensation, reducing the expense by $1.6 million. Acquisitions completed in 2008 brought $1.0 million of additional expense in 2009 compared to the fiscal year 2008. In 2008 the Company sold its Benelux operations and closed its Japanese office, saving $0.4 million, for the year ended October 31, 2009. Finally consultant and other expenses were reduced by $0.6 million in fiscal 2009 compared to the same period in 2008.

Research and Development (R&D) Expenses For the year ended October 31, 2009, research and development expenses were down from $16.9 million in 2008 to $12.0 million or by 29.1%. Acquisitions made earlier in 2008 increased expenses by $0.5 million compared to Fiscal 2008 while cost reduction initiatives brought savings of $2.6 million in 2009. In addition foreign exchange accounted for a decrease of $1.1 million compared to the same period in 2008. Amortization of software costs acquired (excluding the amortization included in acquisitions) decreased by $0.2 million compared to 2008. Resources normally assigned to research and development activities were assigned to systems integration work in cost of revenues, thereby accounting for lower R&D cost of $0.8 million in Fiscal year 2009 compared to the year ended October 31, 2008. Expenses reallocated to other departments and lower consultants fees represented a decrease of $0.5 million for the year ended October 31, 2009 compared to 2008.

Tax credits earned during year ended October 31 2009 increased by $0.2 million compared to last year.

General and Administrative Expenses For the year ended October 31, 2009 general and administrative expenses declined by $1.7 million or 11.5% compared to Fiscal 2008. Favorable foreign exchange rates reduced these expenses by $1.9 million and cost reduction measures added savings of $0.5 million. Amortization and depreciation were lower versus the same period in 2008 by $0.5 million and the closing of Benelux and Japanese office resulted in savings of $0.4 million. Acquisition expenses represented additional cost of $0.5 million in 2009. All restructuring payments amounting to $1.0 million were accounted for as a reduction of general and

administrative expenses. They represent payments for employees in Sales and marketing ($0.5 million), in research and development ($0.3 million), in direct cost of revenues ($0.1 million) and in general and administrative expense ($0.1 million).

Stock-Based Compensation Expenses Stock-based compensation expenses amounted to $250,000 and ($27,000) respectively for the year ended October 31, 2009 and 2008 representing an increase of $277,000. The Company suspended its contributions to the Employees Share Purchase Plan at the beginning of the second quarter as a part of the cost reduction plan bringing savings of $70,000.

(1) The re-evaluation represents the impact of the market share price variation or the deferred share unit’s obligation payable to directors which is based on the share price.

In the year ended October 31, 2009, stock options were issued for a total amount of $19,000 compared with a charge for stock options of $56,000 in the same period of 2008. The DSU’s expense issued under the plan represented the most significant expense $79,000 for Fiscal 2009 compared to $100,000 for the same period in 2008. The largest variance came from the reevaluation of the DSU’s in Fiscal 2009. The increase of 30% in the share market value brought a reevaluation increase of $135,000 compared to a decrease of $270,000 in the same period of 2008.

Human Resources As at October 31, 2009, the Company had 505 active employees on a full-time and part-time basis in the following countries and regions, including employees of acquired companies:

As at October 31, 2009 2008

Number of employees %

Number of employees %

Canada 178 35.2 206 34.3 United States 84 16.6 113 18.9 United Kingdom 65 12.9 74 12.3 Germany 53 10.5 57 9.5 France 52 10.3 61 10.2 Rest of Europe 14 2.8 27 4.5 Rest of the world 59 11.7 62 10.3

505 100 600 100

(In thousands of dollars) Years ended October 31,

2009 2008

Gross expenses 12,401 17,084 Tax credits (1,731) (1,551) Software amortization 1,345 1,412

Expenses 12,015 16,945


2009 2008

Stock option expenses 19 56 Deferred share unit plan Expense for the period 79 100 Re-evaluation of units (1) 135 (270)

233 (114)

Employee Share Purchase Plan (ESPP) 17 87

Stock-based compensation 250 (27)


21

Financial Expenses For the year ended October 31, 2009, financial expenses amounted to $1.8 million compared to $1.0 million in 2008. In 2009, interest revenue decreased by $0.6 million compared to fiscal 2008 due to cash used to make acquisitions in January 2008. Unfavorable exchange rate fluctuations increased the exchange loss by $0.2 million for the year ended October 31, 2009, compared to the same period in 2008.

Liquidity The Company’s cash and investments were essentially held in AAA and R1 rated instruments issued by major Canadian chartered banks and federal and provincial governments. The Company has no exposure to asset-backed instruments.

As at October 31, 2009, cash and cash equivalents totaled $23.2 million compared with $13.5 million as at the same date in 2008. The table below shows the changes over the years ended October 31, 2009 and 2008.


2009 2008 Changes

Cash flows from operating activities 4,600 4,617 (17)

Cash flows from investing activities 1,148 (26,784) 27,932

Cash flows from financing activities 2,147 14,635 (12,488) Effect of changes in exchange rates on cash and cash equivalents 1,839 (4,261) 6,100

Net increase (decrease) in cash and cash equivalents 9,734 (11,793) 21,527

Cash Flows from Operating Activities For the year ended October 31, 2009, cash flows from operating activities totaled $4.6 million, same as per year ended October 31, 2008. Net earnings of $2.6 million realized during the year 2009 compared to a net loss of $2.3 million in 2008 combined with a decrease in the future income tax expense of $1.4 million and the reduction in the amortization of $0.7 million had positive effect on the cash flows. Those variances were offset by a $4.7 million variance in the unrealized gain on long term debt exchange due to significant variation in foreign exchange rates between October 31, 2009 and October 31, 2008 as described in the section below Balance Sheet and Financial Situation. The negative fluctuation of the working capital items (decrease of $29,000) relates mainly to the decrease in creditors of $2 million, of which $1.4 million is due to foreign exchange rate variations. Decrease of debtors for $1.4 million, of which $2.2 million is due to foreign exchange rate variation and finally an increase of deferred revenues for $0.5 million partially offset the creditors decrease.

Cash flows provided by the operating activities were $4.6 million or 7.3% of revenues for the twelve months ended October 31, 2009, compared to $4.6 million or 5.9% of revenues for the same period a year ago.

Cash Flows from Investing Activities During the year ended October 31, 2009, contingent considerations were paid to previous shareholders of 20-20 Icovia Inc. as per initial purchase agreements for $40,000. Furthermore, a slight adjustment to the initial purchase price for the acquisition of Planit* Fusion of $9,000 reduced the overall cost of this acquisition. Cash flows from investing activities totaled $1.1 million for the year ended October 31, 2009 and amounted to $26.8 million in 2008.

For the year ended October 31, 2009, cash flows from investing activities increased by $27.9 million compared to the same period in 2008. In 2008 the business acquisitions representing

$40.8 million were in part financed by short term investments of $15.2 million.

Cash Flows from Financing Activities Cash flows from financing activities decreased by $12.5 million over the same period last year. In 2009, the Company contracted new borrowing facilities for $7 million compare to $15.0 million obtained in the prior year to finance the business acquisitions. During the year ended October 31, 2009, financing activities consumed $4.8 million consisting in the partial repayment of the long-term debt. Those repayments were made in part after the Company did not meet its obligations under this credit facility during the first quarter of the year 2009.

Capital Resources Consolidated Balance Sheet Data

(In thousands of dollars)


2009 2008

Cash and cash equivalents 23,221 13,487 Short-term investments - 1,644 Working capital (including deferred revenue) 12,617 4,947 Total assets 117,236 103,060 Deferred revenue 14,665 12,481 Long-term debt (including current portion) 17,669 15,629 Total shareholders’ equity 66,903 56,667

As at October 31, 2009, our working capital was at $12.6 million, compared with $4.9 million at the end of fiscal 2008, mainly due to the following:


22

- Increase of $9.7 million in the cash and cash equivalent due to conservative liquidity management and new finance facilities.

- Net increase in debtors for $0.8 million related to the renewal of important support contracts and decrease in creditors for $1.4 million as a result of the cost reduction plan effective since 2008.

- Deferred revenue increased by $2.2 million. - Decrease in short term investments of $1.6 million.

We believe that our cash, investments and anticipated cash flows from operating activities will be sufficient to meet our working capital, contractual obligation, capital expenditure and corporate development program requirements for the foreseeable future. Furthermore, the Company has at its disposal authorized but unused bank credit facilities of $4.7 million for our current operational needs, subject to compliance with certain financial tests.

Balance Sheet and Financial Situation The changes in the balance sheet amounts as at October 31, 2009, compared with those as at October 31, 2008, resulted principally from the fluctuation of the $US exchange rate.

Accumulated other comprehensive income included in shareholders’ equity increased by $7.5 million, mainly due to the increase in the value of net assets denominated in Canadian dollars after translation into US dollars for presentation purposes. The exchange rate used to translate balance sheet items from the currency of measurement, the Canadian dollar, to the presentation currency, the US dollar, was $0.9282 as at October 31, 2009, compared with $0.8220 as at October 31, 2008. The main items comprising this increase are the translation of: i) goodwill of $6.7 million; ii) debtors of $2.2 million; iii) cash and cash equivalents and short-term investments totaling $2.6 million; and iv) impact on tangible and intangible assets of $1.3 million. These increases were partly offset by decreases in i) deferred revenue of $1.7 million ; ii ) accounts payable and income tax payable for an amount of $1.5 million; and iii) long-term debt of $2.0 million.

Off Balance Sheet Arrangements The Company's off balance sheet arrangements comprise operating lease agreements which are deemed to have been entered into in the normal course of business. The Company has no other off balance sheet arrangements and do not expect to enter into any arrangement other than in the normal course of business. Operational Restructuring Plan On October 14, 2009, the Company approved a restructuring plan in order to further adjust its cost structure due to slow mar-ket improvement. The total estimated restructuring charge re-lated to employee severance, associated to the Operational Restructuring Plan is $244,999. During 2009, additional restruc-turing charges for $102,041 in relation with other costs due to initial restructuration along with the adjustment mentioned above were recorded as restructuring costs line item within the Com-pany’s consolidated statement of earnings.

To ensure continuity in the face of ongoing unfavorable economic conditions, the Company approved a restructuring phase on October 15, 2008. The total estimated restructuring costs (primarily related to employee severance) for the operational restructuring plan was $1,360,392. In 2008, following numerous acquisitions, including their related offices, personnel and additional products, the Company announced that it had approved and initiated a restructuring plan to consolidate its worldwide operations into a leaner and better integrated organization. The restructuring plan also aims to restore profitability to acceptable levels, align the Company’s cost structure to the realities of current market conditions in North America and elsewhere in the world, and benefit from cost synergies related to recent acquisitions. The total estimated restructuring costs (primarily related to employee severance) for the Operational restructuring plan were $968,442 and are accounted for as restructuring costs in the consolidated statement of earnings for the quarter ended July 31, 2008. Restructuring Plan (In thousands of dollars) As at October 31,

2009 2008

Beginning balance 1,624 - Operational restructuring plan Severance 245 2,202 Outplacement fees - 47 Other 102 80

Total cost of restructuring plan 347 2,329

Restructuring payments (989) (705)

Adjustments (575) -

Balance payable 407 1,624

These restructuring plans enabled the Company to reduce its annual operating expenses for personnel by $9.1 million, resulting in the elimination, upon plan completion, of approximately 135 positions since the end of the second quarter of 2008. We will also continue to monitor our non-personnel related expenses, such as travel and marketing costs, to control our total spending. While these actions have immediately and gradually contributed to improving our profitability, we managed our cost structure throughout 2009 to ensure it remains relatively stable, thereby achieving our target profitability level.

Share Capital Information The Company is authorized to issue an unlimited number of common shares without par value and an unlimited number of preferred shares without par value. The common shares are voting and participating. The preferred shares may be issued in one or more series with specific terms, privileges and restrictions to be determined for each class by the Board of Directors of the Company at the time such class is created.


23

Issued and outstanding as at

October 31,

2009 January 21,

2010

Common Shares 18,926,692 18,926,692

Stock options 825,497 825,497

Warrants 102,459 102,459

On April 26, 2007, the Company announced its intention to purchase for cancellation purposes, by way of a normal course issuer bid (the ―Bid‖), some of its common shares, beginning on May 2, 2007 and ending on May 1, 2008. On May 16, 2008, the Company announced its intention to continue this bid from May 21, 2008 to May 20, 2009. This program was renewed on December 14, 2009 and ending December 13, 2010. The Company may repurchase for cancellation up to 946,000 common shares over a maximum period of 12 months, which amounts to 5% of its 18,926,692 issued and outstanding shares as at December 14, 2009. The consideration payable by the Company for these common shares under the Bid is their market price at the time of repurchase. During the year ended October 31, 2009, 20,600 shares were repurchased and cancelled.

The Company Employee Share Purchase Plan (ESPP) came into effect on May 23, 2007. The purpose of this plan is to provide the participants with an incentive to become shareholders of the Company. Under the ESPP, employees may contribute every year up to the lesser of 10% of their admissible compensation and C$10,000. The Company’s contribution amounts to one-third of each employee’s contribution. All contributions are then remitted to the Administrative Agent who will purchase common shares on the open market every month, on behalf of the employees. The Company also assumes all transaction fees related with share purchases. As part of the cost reductions put in place, the Company suspended its contribution indefinitely.

During the twelve months ended October 31, 2009, $16,923 ($ 87,497 in 2008) was charged as stock-based compensation expense in relation with the ESPP.

Related Party Transactions During the year ended October 31, 2009, consultant fees were paid to a director of the Company for a total amount of $80,500. These transactions were made in the normal course of business, at a fair exchange value accepted by the related parties.

6. Comparative Quarterly Financial Data

The following quarterly information is presented on the same basis as the audited consolidated financial statements, and all necessary adjustments have been included in the amounts stated below to present fairly the unaudited quarterly results when read in conjunction with our audited consolidated financial statements and the notes thereto. Quarterly operating results should not be relied upon as any indication of results for any future period.

There are factors causing quarterly variances which may not be reflective of the Company’s future performance.

First, there as seasonality, and the quarterly performance of these operations is impacted by occurrences such as vacations, major trade shows and the number of statutory holidays in any given quarter.

Second, the workflow from some clients may fluctuate from quarter to quarter based on their business cycle and the seasonality of their own operations.

Third, foreign exchange rate fluctuations also contribute to quarterly variances, and these variances are likely to increase as the percentage of revenues and monetary assets held in foreign currencies increases.

In general, cash flows from operating activities could vary significantly from quarter to quarter depending on the timing of monthly payments received from large clients, cash requirements associated with large acquisitions and outsourcing contracts, and the timing of reimbursements for various tax credits.

Financial Analysis for the Fourth Quarter of 2009

Revenues down by 17.3%

EBITDA

(1) rose to 2.4 million

or 15.0% of revenues Net earnings at $0.7 million

(4.5%) or $0.04 per share

For the fourth quarter ended October 31, 2009, revenues declined by $3.4 million (17.3%), due to unfavorable economic conditions in all regions.

The Company’s EBITDA for the fourth quarter ended October 31, 2009 rose from $2.0 million or 10.3% in 2008 to $2.4 mil-lion or 15.0% in 2009.

Company’s net earnings rose to $0.7 mil-lion or 4.5% during the fourth quarter ended October 31, 2009 compared to a net loss of $1.3 million or (6.5%) for the same period in 2008.

(1) EBITDA is a non-GAAP measures for which we provide reconciliation on page 25.


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In the fourth quarter of fiscal 2009, the Company continued to proactively rationalize its cost structure by cost reduction and by putting in place more measure to enhance productivity in order to improve its margins prospectively.

Comparative Quarterly Financial Data (In thousands of dollars, except per-share amounts)

(Unaudited) 2009 2008

Q4 Q3 Q2 Q1 Q4 Q3 Q2 Q1

Revenues 16,181 16,148 15,158 15,620 19,556 20,407 21,870 16,769 Profitability Gross Margin 12,149 11,969 11,343 11,543 14,435 15,067 15,741 11,749 Gross margin (%) 75.1% 74.1% 74.8% 73.9% 73.8% 73.8% 72.0% 70.0%

EBITDA1,2 2,426 2,050 2,318 2,555 2,021 906 1,133 266 EBITDA (%) 15.0% 12.7% 15.3% 16.4% 10.3% 4.4% 5.2% 1.6%

Net income (loss) 735 1,045 621 180 (1,272) (1,586) 37 524 Net income (loss) (%) 4.5% 6.5% 4.1% 1.1% (6.5 %) (7.8%) 0.2% 3.1%

Income (loss) per share3 Basic income (loss) per share $0.04 $0.06 $0.03 $0.01 $(0.07) $(0.08) $0.00 $0.03 Diluted income per share $0.04 $0.06 $0.03 $0.01 - - $0.00 $0.03

Balance sheet Total assets 117,236 109,395 101,464 99,897 103,060 117,998 123,065 148,942 Total long-term liabilities 18,878 15,046 14,870 14,737 15,977 20,389 20,451 5,083

(1) EBITDA is a non-GAAP measures for which we provide reconciliation on page 25. (2) For the year ended October 31, 2009 a reclassification of the adjustments to the restructuring provision, which were initially recorded in General and administrative

expenses, was made, thereby removing them from the calculation of quarterly EBITDA. (3) Please refer to Note 7 to the annual audited consolidated financial statements for further details on the calculation of basic and diluted earnings (loss) per share.

Revenues The following table provides a summary of our revenues variation showing the impact of foreign currency exchange rate variations between the fourth quarter ended October 2009 and 2008.

Fourth Quarter ended October 31, (in thousands of dollars except percentages)

2009 2008 Change

2009/2008

Revenues 16,181 19,556 (17.3 %)

Organic variation prior to FX impact (16.1 %) FX impact (1.2 %)

Variation over previous period (17.3%)

For the fourth quarter ended October 31, 2009, revenues were $16.2 million, representing a 17.3% decrease compared to the same period in 2008. The impact of currency was (1.2%) primarily due to unfavorable fluctuations for the Sterling pound.

Revenues from license sales were $4.4 million for the fourth quarter ended October 31, 2009. This represents a decrease of $2.2 million or 33.2% against the comparable quarter of 2008. International license sales grew by 15.9% from $0.6 million in the fourth quarter of 2008 to $0.7 million in 2009 this fluctuation is attributable to the growth in the Chinese market. North America was the most affected during the fourth quarter of 2009, with a decrease of 44.1% in license sales while Europe accounted for a decline of 28.8% compared to the fourth quarter of 2008.

On a constant currency basis license sales in the residential sector declined by 22.9% in the fourth quarter compared to last

year. Revenues from license sales in the commercial and the manufacturing sectors were more affected in the fourth quarter of 2009 as they declined respectively by 57.7% and 35.4% compared to the last quarter of 2008. Revenues from maintenance and other recurring services increased by 2.0%, or $0.2 million to $9.0 million for the fourth quarter ended October 31, 2009. North America recorded the most significant change in revenues with a growth of 7.6% from the fourth quarter of 2008 while Europe experienced a decrease of 6.5%. International maintenance and other recurring revenues remained almost the same with a growth of 0.5%. In the fourth quarter of 2009 compared to 2008 the revenues from maintenance and other recurring services in the residential sector rose by 13.6% reflecting the increasing volumes of Virtual Planner recurring annual license sales. The Commercial and the manufacturing sectors decreased respectively by $0.1 million (3.9%) and $0.4 million (15.8%) compared to the fourth quarter of 2008.


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Revenues from professional services recorded a decrease of $1.4 million (32.6%) for the fourth quarter of 2009, a total of $2.8 million compared with $4.2 million in the same period of 2008. In the fourth quarter of 2009 on a constant currency basis,

all sectors declined; residential and commercial by 32.5% and the manufacturing sector by 31.8%. A decline in license reve-nues is the main reason for those fluctuations.

Revenues by Geography

Lower revenues from North America and Europe combined with a growth of 13.8% in the International revenue are responsible for the change in the distribution of revenues by geography. International revenues were up to $0.9 million during the fourth quarter of 2009 compared to $0.8 million in 2008. In North America revenue declined to $9.0 million compared to $11.0

million, a fluctuation of $2.0 million or 18.4% compared to the fourth quarter of 2008. In Europe we had almost the same unfavorable economic conditions and revenues declined by 18.7% or $1.4 million in the fourth quarter of 2009 compared to the same period in 2008.

Gross margin

Fourth quarter ended October 31,

2009 2008 Change

Licenses gross margin prior to FX impact 86.8% 90.1% (3.3 %) FX impact (1.1%)

Gross margin variation from previous year 85.7% 90.1% (4.4 %)

Maintenance and other recurring services and professional services gross margin prior to FX impact 74.8% 65.6% 9.2% FX impact (3.7%)

Gross margin variation from previous year 71.1% 65.6% 5.5%

Overall Gross margin prior to FX impact 78.1% 73.8% 4.3% FX impact (3.0%)

Overall gross margin variation from previous year 75.1% 73.8% 1.3%

For the three-month period ended October 31, 2009, the gross margin, prior to foreign exchange impact, on recurring and professional services revenues increased by 9.2 percentage points whereas the gross margin on license sales slightly decline by 3.3 points. The restructuring plan and the cost realignment program are for the most part responsible for the growth of 4.3 percentage points in the overall gross margin excluding the foreign exchange effect.

For the fourth quarter ended October 31, 2009, EBITDA grew from 10.3% to 15.0% compared with the same period in 2008. Again all cost reduction measures implemented since the third quarter of 2008 have made possible the achievement of the Company objectives.

55.7%38.9%

5.4%

Fourth Quarter - 2009

North America

Europe

Int'l


56.5%39.6%

3.9%


North America

Europe

Int'l


EBITDA (In thousands of dollars)

Fourth Quarter ended October 31,

2009 2008

Operating income (loss) (GAAP) 1,076 (507) Restructuring costs 199 1,361 Amortization of property and equipment 421 333 Amortization of intangible assets 730 834

EBITDA 2,426 2,021

Margin (%) 15.0% 10.3%


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Operating expenses Operating expenses in the fourth quarter of 2009 decreased by $3.9 million from the fourth quarter of 2008. The decrease in expenses is mainly explained by the following:

Restructuring plan and cost reduction measures reduced the operating expenses by $1.8 million in salaries and by $0.3 million in other expenses.

Declining revenues had a direct effect on variable compensation and in bad debt, reducing these expenses by $0.7 million.

The overall reduction in business volumes and other cost reduction efforts resulted in a reduction in sales and marketing expenses of $0.4 million, in research and development expenses of $0.3 million and in general and administrative expense of $0.2 million compared to the fourth quarter of 2008.

Stock options granted in the fourth quarter increased the stock-based compensation expense by $0.2 million compared to the same period in 2008.

7. Responsibilities, Controls and Accounting Policies Management’s Responsibility for Financial Reporting The consolidated financial statements and Management Discussion and Analysis (―MD&A‖) of 20-20 Technologies Inc. (the ―Company‖ or ―20-20‖) and all other information in this annual MD&A are the responsibility of management and have been reviewed and approved by its Board of Directors.

The consolidated financial statements have been prepared by management in accordance with Canadian generally accepted accounting principles. The MD&A has been prepared in accordance with the requirements of securities regulators. The consolidated financial statements and MD&A include amounts that are based on best estimates and judgments of the expected effects of current events and transactions. Management has determined such amounts on a reasonable basis in order to ensure that the financial statements and MD&A are presented fairly in all material respects.

The Company’s Chief Executive Officer (CEO) and Chief Financial Officer (CFO) have designed disclosure controls and procedures, or have caused them to be designed under their supervision, to provide reasonable assurance that material information related to the Company has been made known to them and has been properly disclosed in the audited consolidated financial statements and MD&A. In compliance with Multilateral Instrument 52-109, the Company’s CEO and CFO have provided to the Canadian Securities Administrators a certification related to the Company’s annual disclosure documents, including the audited consolidated financial statements and MD&A.

The Board of Directors is responsible for ensuring that management fulfills its responsibilities for financial reporting and is ultimately responsible for reviewing and approving the audited consolidated financial statements and MD&A. The Board of Directors carries out this responsibility principally through its Audit Committee.

The Audit Committee is appointed by the Board of Directors and is comprised entirely of independent and financially literate directors. The Audit Committee meets periodically with Management, as well as with the external auditors, to review the audited Consolidated Financial Statements, the MD&A, auditing matters and financial reporting issues, to discuss internal controls over the financial reporting process, and to satisfy it that each party is properly discharging its responsibilities. In addition, the Audit Committee has the duty to review the appropriateness of the accounting policies and significant estimates and judgments underlying the audited Consolidated Financial Statements as presented by Management and to review and make recommendations to the Board of Directors with respect to the fees of the external auditors. The Audit Committee reports its findings to the Board of Directors for its consideration when it approves the Consolidated Financial Statements and MD&A for issuance to shareholders.

Raymond Chabot Grant Thornton LLP, external auditors approved by the shareholders, meets regularly with the Audit Committee to discuss audit activities, financial reporting matters and other related subjects.

This report and our audited consolidated financial statements were reviewed by the Company’s Audit Committee on January 21, 2010 and approved by 20-20’s Board of Directors on January 27, 2010. Disclosure Controls The CEO and CFO are responsible for establishing and maintaining disclosure controls and procedures for the Company. Disclosure controls and procedures have been conducted under the supervision of the CEO and the CFO to provide reasonable assurance that material information related to the Company has been made known to management over the period covered by the annual filings. The CEO and CFO determined, according to their evaluation, that the disclosure controls and procedures of the Company are effective at the financial year end.

Internal Control over Financial Reporting Management is responsible for establishing and maintaining adequate internal control over financial reporting to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with GAAP. The CEO and CFO have evaluated whether the Company has made changes to internal control over financial reporting during the year ended October 31, 2009 that have materially affected, or are reasonably likely to materially affect, internal control over financial reporting.

In March 2009 the Company became aware of two weaknesses associated with the accounting for foreign exchange contracts and the foreign currency translation of a balance sheet item. The internal control weaknesses are as follows:

Inadequate design of review controls regarding the recording of foreign exchange contracts; and

Inadequate design of review controls over the conversion of balance sheet items of foreign subsidiary during the consolidation process.


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These weaknesses could result in material misstatements in amounts reported for foreign exchange gain/losses. They have been addressed and management has modified some processes and added controls to correct these weaknesses.

The Company’s internal control over financial reporting includes policies and procedures that:

Pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect transactions and dispo-sitions of the assets of the Company;

Provide reasonable assurance that transactions are recorded as necessary to permit preparation of consolidated financial statements in accordance with accounting principles generally accepted in Canada, and that receipts and expenditures are being made only in accordance with authorizations of management and the directors of the Company; and,

Provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use or disposition of the Company’s assets that could have a material effect on the Company’s consolidated financial statements.

As of the end of the Company’s 2009 fiscal year, management conducted an assessment of the effectiveness of the Compa-ny’s internal control over financial reporting based on the framework established in Internal Control — Integrated Frame-work issued by the Committee of Sponsoring Organizations of the Treadway Commission. Based on this assessment, the CEO and CFO have determined that the Company’s internal control over financial reporting as at October 31, 2009, was effective.

Changes in accounting policies In November 2009 the Company adopted two new Handbook sections issued by the Canadian Institute of Chartered Accountants (CICA).

i) Section 3064, Goodwill and Intangibles Assets which is effective for periods beginning on or after October 1, 2008 replaces Section 3062, Goodwill and Other Intangibles Assets and Section 3450, Research and Development Costs and establishes standards for the recognition, mea-surement and disclosure of goodwill and intangibles as-sets. The impact of the adoption of this standard is not significant.

ii) Section 1400, General Standards of Financial Statement Presentation which is effective for periods on or after January 1, 2008 requires management to assess the Company’s ability to continue as a going concern. The adoption of this new section has no impact on the Company’s consolidated financial statements.

In June 2009, the CICA amended 3862, Financial instrument- Disclosure. This section has been amended to introduce new financial disclosure requirements, particularly with respect to fair value measurement of financial instrument and entity exposure to liquidity risk. The amendments to this section apply to annual statements for year ending after September 2009. The

Company adopted the amendment of 3862 in October 2009 and the impact of the adoption of this standard is not significant.

In addition, on January 20, 2009, the CICA issued Emerging Issues Committee Abstract 173, ―Credit Risk and the Fair Value of Financial Assets and Financial Liabilities‖ (―EIC 173‖), to be applied retroactively without restatement of prior periods to all financial assets and liabilities measured at fair value in interim and annual consolidated financial statements. EIC 173 requires the Company to consider its own credit risk and the credit risk of the counterparty in determining the fair value of financial assets and financials liabilities, including derivative instruments. The Company adopted EIC 173 in February 2009. The adoption of this standard has no impact on the Company’s consolidated financial statements.

Future Accounting Changes The CICA has issued the following new Handbook sections which have not yet been implemented by the Company;

a) Section 1582, Business combination, which replaces 1581, Business Combinations which is effective for period beginning on or after January 1, 2011. The section establishes standards for the accounting for a business combination. It provides the Canadian equivalent to the IFRS Standard, IFRS 3, Business Combinations. The Company will apply this section prospectively to business combinations for which the acquisition date is on or after November 1, 2011. Ear-ly adoption is permitted. The Company is evaluating the impact of the adoption of this new Section on the consolidated financial statements.

b) Section 1601 Consolidated financial statements, and Section 1602 Non-Controlling Interests, which togeth-er replace Section 1600, Consolidated Financial Statements are effective for periods beginning on or after January 1, 2011. Section 1601 established stan-dards for the preparation of consolidated financial statements. Section 1602 establishes standards for accounting for a non-controlling interest in a subsidi-ary in the consolidated financial statements subse-quent to a business combination. It is equivalent to the corresponding provisions of IFRS standard, IAS 27, Consolidated and Separate Financial Statements. The Company will apply these sections to interim and an-nual consolidated financial statements relating to fis-cal years beginning in November 1, 2011. Earlier adoption is permitted. The Company is evaluating the impact of the adoption of these new Sections on the consolidated financial statements.

Additionally, in February 2008 the Canadian Accounting Stan-dards Board (AcSB) confirmed that the use of IFRS would be required for Canadian publicly accountable enterprises for years beginning on or after January 1, 2011 and the Company will implement it as at November 1, 2011. The AcSB also stated that, during the transition period, enterprises will be required to pro-vide comparative figures established in accordance with IFRS. The IFRS will require additional financial statement disclosures and, while the organization’s conceptual framework is similar to


28

Canadian GAAP, enterprises will have to take account of differ-ences in accounting principles.

IFRS conversion The Company has established its transition plan and has for-mally established a project team. The project team consists of members from Finance and IT department and is being over-seen by the Company’s Chief Financial Officer. Reporting is done to the Company’s Chief Financial Officer and to the Audit Committee of the Company’s Board of Directors, on a regular basis. The Company uses an external advisor to assist in the conversion project.

The Company is currently evaluating the impact of adopting IFRS on the consolidated financial statements. The Company is actually in the first phase of its transition program, which included scoping to identify the significant accounting policy differences and their related areas of impact in terms of systems, procedures and financial statements. The Company also is in the assessment of the design and work plan to measure the differences between IFRS and Canadian GAAP, and the impact on its financial statements, disclosures and operations. The Company will address the design, planning, solution development and implementation of the conversion in 2010.

8. Risks and Uncertainties

The Company must take into account the risks and uncertainties described below, which could have an impact on its capacity to achieve its growth objectives. The following factors should be taken into consideration when evaluating the Company’s future prospects as an investment. Management is confident about the Company’s long-term prospects.

Economic Risks Current economic conditions – An economic slowdown could cause demand for our products to decline. Growth in our customers’ businesses is affected by the economic environment and could therefore have an impact on the Company’s operating results. We can neither predict the impact current economic conditions will have on our future results, nor predict when the economy will show meaningful improvement. During the current period of recession, our current and potential customers might reduce or delay purchases or projects or defer contracts currently underway. This situation could also lead to greater delays and defaults in payments or debt collection, resulting in lower operating results. Because of lower sales and contracts during an economic slowdown, competition increases and prices might be reduced by certain competitors to maintain or expand their market share. Our pricing and profitability could be adversely affected as a result of such factors.

Foreign exchange risk – A substantial portion of our revenues is earned in US dollars while a substantial portion of our operating expenses is incurred in Canadian dollars. Fluctuations in the exchange rate between the US dollar and other currencies, such as the Canadian dollar, may have a material adverse effect on our business, financial position and operating results. With respect to other currencies such as the Euro and the Sterling pound, however, we have a natural hedge since most revenues and expenses are incurred in the same currency. Our policy is to hedge a portion of our foreign exchange exposure

with the objective of minimizing the impact of adverse foreign exchange movements. However, we do not entirely hedge the exposure related to foreign currencies. In addition, the use of forward contracts to hedge our foreign exchange exposure carries risk and could limit our gains, or result in a loss.

In addition to the exposure identified above which affects operating income due to variations in operating expenses and cost of sales denominated in Canadian dollars, the Company is exposed to unrealized exchange gains and losses with respect to the translation of monetary assets and liabilities held in currencies other than the Canadian dollar. For the Canadian dollar, which is our currency of measurement, the largest exposure is with respect to the US dollar.

Capacity to attract and retain personnel – To ensure success for the Company, management and key technical personnel must have sound knowledge of products, the industry, customers and the market. Against the current economic background, the Company must be able to retain its key personnel and attract new employees in order to continue growing. The personnel are currently spread across the world according to the products and markets. With such decentralization of human capital, the Company can better manage its growth and reduce the risk of exposure to a single market. The IT labor market is highly competitive and we may not be able to hire and retain the employees we need and as a result, the Company may have to resort to subcontractors, which would have an impact on our operating margins.

International activities – We currently conduct operations in Canada, the United States, Europe, Latin America and Asia. We intend to continue to expand our international operations and to increase the proportion of our revenues from outside North America. These operations require significant management attention and financial resources while additionally subjecting us to risks inherent in doing business internationally. Our failure to properly comply or address any of the above factors could greatly mitigate the success of our international operations and have a material adverse effect on our operating performance and financial condition.

Risk related to transfer pricing – We conduct business operations through subsidiaries in various jurisdictions. Certain of these subsidiaries provide products and services to, and may from time to time undertake certain significant transactions with, other of our subsidiaries in different jurisdictions. Our method for determining transfer pricing is well documented and supported. Our future income and cash may be adversely affected if any of the taxation authorities in these various jurisdictions were successful in challenging our documentation and transfer pricing policies.

Tax credits of the Carrefour de la nouvelle économie – The Carrefour de la nouvelle économie (―CNE‖) program offers tax incentives to companies that conduct their business activities in CNE-designated buildings in Québec. As a result of the June 12, 2003 Québec budget, the credit would be eliminated in the event of an acquisition of control of the Company. There can be no guarantee that we will continue to meet the eligibility criteria


29

or that the CNE program will not be amended or cancelled in the future.

Other tax issues – Although we are of the view that all expenses and tax credits claimed by the Company, including research and development expenses and tax credits, are reasonable and deductible and have been correctly determined, there can be no assurance that the Canadian taxation authorities will agree. If the Canadian taxation authorities successfully challenge the deductibility of our expenses or the correctness of income tax credits claimed, our operating results could be adversely affected. We may, directly or indirectly, through our subsidiaries, be subject to taxes with respect to our operations in foreign jurisdictions. Although we are of the view that the liability with respect to such foreign taxes has been provided for in our books and financial statements, our future income and cash may be adversely affected if taxation authorities were successful in challenging our liabilities for such foreign taxes.

Business Risks Sales and implementation cycle duration – Typically, the larger the potential sale, the more time, money and other resources will be invested. As a result, it may take an extended period of time after our first contact with a customer before a sale can actually be completed. We may invest significant sales and other resources in a potential customer that may not generate revenues for a substantial period of time, if at all. During these lengthening sales and implementation cycles, events may occur that affect the size or timing of the order or even cause it to be cancelled. If these events were to occur, sales of certain of our new enterprise solutions or services may be adversely affected, which would reduce our operating revenue.

Competitive environment – The Company currently faces competition from software providers in both the computer-aided design (CAD) and enterprise resource planning (ERP) markets. The interior design software industry is highly fragmented and comprises generally of point-of-solution (as opposed to complete solutions) software providers that address specific aspects of design software or software providers that have limited geographic coverage. Accordingly, none of the Company’s competitors competes in all of its product and geographic markets. Generally, competitors can be described as follows:

CAD Software: Competitors include smaller, mostly privately-owned, companies whose products generally have limited functionality when compared with those of the Company, which are principally focused on specific aspects of design software, and compete generally in some of our geographic markets but not all.

ERP Software: As the Company increases the penetration of its ERP solution, it also faces competition from ERP software vendors, such as SAP, Lawson and Oracle, which generally offer less targeted design, specification, photo-realistic rendering or 3-D visualization capabilities. In addition, 20-20 also faces competition from ERP software vendors targeting the windows and doors and cabinet maker markets.

Large software providers typically find it more beneficial to form alliances with specialized software providers that provide a

focused solution, like us, than to devote resources to developing and marketing their own specialized products.

As our software solutions expand, potential competitors may have significantly greater resources than we do, and therefore, we may be at a disadvantage when competing against them. As a result, they may be able to adapt more quickly to new or emerging technologies and changes in customer requirements or to devote greater resources to the development, promotion and sale of their products than we can. Any of these factors could materially impair our ability to compete and have a material adverse effect on our operating performance and financial position.

Capacity to adapt our business model – Customer behaviour reacting to market conditions and/or to industry and technology trends might change their buying and contractual habits like renting software as opposed to buying. Any such change could impact our business model and practices which could have a material adverse effect on our operating performance and finan-cial position.

Capacity to integrate new technologies following acquisitions – The different acquisitions made in the past three fiscal years enabled us to add new technologies that must be integrated into our current software platforms and to market new solutions. Management has to implement processes and systems to evaluate technologies in all business units in order to prioritize the development of certain integrated software solutions. The integration of new businesses may cause unexpected operational problems and expenditures. In addition, as management is obliged to devote much time, attention and resources to the integration of these operations, we might not be able to maintain our usual quality of products offered to established customers and as a result, our revenues and operating results could be adversely affected.

Capacity to capitalize on new software solutions – The addition of new software solutions also gives rise to risks. There may be little demand for our new solutions, and they may not be broadly accepted by the market. If we do not derive any benefit as a result of our efforts to market our new solutions, our operating results could be adversely affected.

Capacity to improve our software offering – We do our best to remain the leader in our industry. To do so, we have to successfully develop new products or enhance and improve our existing software platforms, and position and price our products to meet market demand. We have to continually invest in accelerating product introductions and shortening product life cycles, which requires ongoing expenditures for research and development. Furthermore, any new products we develop could require long development and testing periods and may not be introduced in a timely manner or may not achieve the broad market acceptance necessary to generate significant revenues. Our competitors are alert and if we are unable to continue product development and marketing, our operating revenue and margins could be affected.


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Capacity to protect our intellectual property - We rely on various intellectual property protections, including contractual provisions, copyright, trademark and trade secret laws, to preserve our intellectual property rights. To protect our intellectual property, we may become involved in litigation, which could result in substantial expenses, divert the attention of our management, cause significant delays, materially disrupt the conduct of our business or adversely affect our revenues, financial position and results of operations.

We cannot determine with certainty whether any existing third-party trademarks or patents or the issuance of any third-party trademarks or patents would require us to alter our names or our technology, obtain licenses or cease certain activities. We may become subject to claims by third parties that we infringe their property rights due to the growth of software products in our target markets, the overlap in functionality of these products and the prevalence of software products. Litigation may be necessary to determine the scope, enforceability and validity of such third-party proprietary rights or to establish our proprietary rights. Regardless of their merit, any such claims could result in substantial expenses, divert the attention of our management, cause significant delays, materially disrupt the conduct of our business or adversely affect our revenues, financial position and results of operations.

Bugs in our products could result in significant costs and hurt sales - Our products are complex and, accordingly, they may contain errors, or "bugs", that could be detected at any point in their product life cycle. Errors in our products could materially and adversely affect our reputation, result in significant costs to us, delay planned release dates and impair our ability to sell our products in the future.

Risk of legal proceedings – In the normal course of business, the Company might be subject to lawsuits, claims and litigation for amounts not covered by our liability insurance. Some of these proceedings could result in significant costs. Although the outcome of such proceedings is not predictable with assurance, the Company has no reason to believe that the disposition of such matters could have a significant impact on its financial position, operating results or ability to carry on its business activities. As at October 31, 2009, no material claims or litigation have been brought against the Company, Other than a counter-claim in response to a claim initiated by the Company against the former owners of Planit* Fusion relating to certain claims concerning the acquisition which will likely be offset by the greater amount claimed by the Company.

Capacity to manage strategic alliances, partnerships and distributor relationships that will contribute to future growth – We may be unable to: (i) retain distributor relationships under acceptable business terms; (ii) partner with parties that are not suitable for driving future growth or; (iii) complete required agreements on a timely basis. Furthermore, identifying alliances and partnerships and concluding such agreements, could divert management's attention and financial resources which may negatively affect our operating results.

Capacity to identify and complete strategic acquisitions that will contribute to future growth – We may be unable to: (i) identify suitable acquisition targets available for sale at reasonable prices; (ii) properly evaluate the fair value of the target businesses or; (iii) complete any acquisition in a given timeframe. In addition, if we proceed with acquisitions, available cash may be used to complete such transactions, diminishing our liquidity and capital resources or shares may be issued which could cause significant dilution to existing shareholders. Furthermore, identifying acquisitions and the completion of acquisitions per se, could divert management's attention and financial resources which may negatively affect our operating results.

Capacity to maintain rights to use third party software – We license certain technologies used in our products from third parties, generally on a non-exclusive basis. The termination of any of these licenses, or the failure of the licensors to adequate-ly maintain or update their products, could delay our ability to ship our products while we seek to implement alternative tech-nology offered by other sources and require significant un-planned investments on our part. In addition, alternative tech-nology may not be available on commercially reasonable terms.

31

MANAGEMENT’S RESPONSIBILITY FOR FINANCIAL REPORTING The Consolidated Financial Statements and Management Discussion and Analysis (“MD&A”) of 20-20 Technologies Inc. (the “Company” or “20-20”) and all other information in this Annual Report are the responsibility of Management. The Consolidated Financial Statements and the Management Discussion and Analysis have been reviewed and approved by its Board of Directors. The Consolidated Financial Statements have been prepared by Management in accordance with Canadian generally accepted accounting principles. The MD&A has been prepared in accordance with the requirements of securities regulations. The Financial Statements and MD&A include items that are based on best estimates and judgments of the expected effects of current events and transactions. Management has determined such items on a reasonable basis in order to ensure that the Financial Statements and MD&A are presented fairly in all material respects. Financial information presented elsewhere in the Annual Report is consistent with that in the Consolidated Financial Statements. The Company’s Chief Executive Officer and Chief Financial Officer have designed disclosure controls and procedures, or have caused them to be designed under their supervision, to provide reasonable assurance that material information related to the Corporation has been made known to them and has been properly disclosed in the Consolidated Financial Statements and MD&A. The Company’s Chief Executive Officer and Chief Financial Officer have also evaluated the effectiveness of such disclosure controls and procedures as of the end of fiscal year 2009. As at year end, Management believes that the disclosure controls and procedures effectively provide reasonable assurance that material information related to the Company has been disclosed in the Consolidated Financial Statements and MD&A. In compliance with Multilateral Instrument 52-109, the Company’s Chief Executive Officer and Chief Financial Officer have provided to the Canadian Securities Administrators a certification related to the Company’s annual disclosure documents, including the Consolidated Financial Statements and MD&A. The Board of Directors is responsible for ensuring that Management fulfills its responsibilities for financial reporting and is ultimately responsible for reviewing and approving the Consolidated Financial Statements and MD&A. The Board of Directors carries out this responsibility principally through its Audit Committee. The Audit Committee is appointed by the Board of Directors and is comprised entirely of independent and financially literate directors. The Audit Committee meets periodically with Management, as well as with the external auditors, to review the Consolidated Financial Statements, the MD&A, auditing matters and financial reporting issues, to discuss internal controls over the financial reporting process, and to satisfy it that each party is properly discharging its responsibilities. In addition, the Audit Committee has the duty to review the appropriateness of the accounting policies and significant estimates and judgments underlying the Consolidated Financial Statements as presented by Management, and to review and make recommendations to the Board of Directors with respect to the fees of the external auditors. The Audit Committee reports its findings to the Board of Directors for its consideration when it approves the Consolidated Financial Statements and MD&A for issuance to shareholders. Raymond Chabot Grant Thornton LLP, external auditors approved by the shareholders, meets regularly with the Audit Committee to discuss audit activities, financial reporting matters and other related subjects. This report and our audited consolidated financial statements were reviewed by the Company’s Audit Committee on January 21, 2010 and approved by 20-20’s Board of Directors on January 27, 2010.

/s/ Jean Mignault /s/ Jean-François Grou /s/ Steve Perrone, C.A.

Executive chairman Chief Executive Officer Chief Financial Officer

Laval, Canada December 23, 2009

32

Auditors' Report

To the Shareholders of 20-20 Technologies Inc.

Auditors' Report

To the Shareholders of

20-20 Technologies Inc.

Raymond Chabot Grant Thornton LLP

Suite 2000 National Bank Tower 600 De La Gauchetière Street West Montréal, Québec H3B 4L8 Telephone: 514-878-2691 Fax: 514-878-2127 www.rcgt.com

We have audited the consolidated balance sheets of 20-20 Technologies Inc. as at October 31, 2009 and 2008 and the consolidated statements of earnings, shareholders’ equity and cash flows for the years then ended. These financial statements are the responsibility of the Company's management. Our responsibility is to express an opinion on these financial statements based on our audits.

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 October 31, 2009 and 2008 and the results of its operations and its cash flows for the years then ended in accordance with Canadian generally accepted accounting principles.

1

Montréal, Canada December 23, 2009

1 Chartered accountant auditor permit no. 19007

Chartered Accountants Member of Grant Thornton International Ltd

33

20-20 Technologies Inc. CONSOLIDATED BALANCE SHEETS (Amounts in thousands of U.S. dollars)

October 31,

2009 2008

$ $ ASSETS Current assets Cash and cash equivalents (Note 10) 23,221 13,487 Short-term investments (Note 11) - 1,644 Accounts receivable (Note 12) 18,910 17,538 Income taxes receivable 24 585 Contracts in progress 253 267 Prepaid expenses 1,243 1,244 Future income taxes (Note 6) 421 598

44,072 35,363 Property and equipment (Note 13) 2,322 2,894 Intangibles (Note 14) 9,099 10,417 Goodwill (Note 15) 58,161 52,367 Future income taxes (Note 6) 3,131 1,500 Other assets 451 519

117,236 103,060

LIABILITIES Current liabilities Bank loan (Note 16) 149 - Accounts payable 11,040 12,665 Income taxes payable 1,674 1,465 Deferred revenue 14,665 12,481 Installment on long-term debt (Note 17) 3,024 3,805 Future income taxes (Note 6) 903 -

31,455 30,416 Long-term debt (Note 17) 14,645 11,824 Leasehold inducements 343 364 Non-controlling interest 37 33 Future income taxes (Note 6) 3,853 3,756

50,333 46,393

SHAREHOLDERS’ EQUITY Capital stock (Note 19) 58,582 58,647 Common stock options and warrants 1,279 1,145 Contributed surplus 1,015 961 Deficit (4,268) (6,883) Accumulated other comprehensive income 10,295 2,797

6,027 (4,086)

66,903 56,667

117,236 103,060

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

On behalf of the Board,

/s/ Jean Mignault /s/ Benoit La Salle Director Director

34

20-20 Technologies Inc. CONSOLIDATED EARNINGS (Amounts in thousands of U.S. dollars, except per-share data)

Years ended October 31,

2009 2008

$ $ Revenues License sales 17,341 26,392 Maintenance and other recurring revenues 33,300 35,368 Professional services 12,466 16,842

63,107 78,602

Cost of revenues License sales 2,169 2,854 Maintenance and services 13,934 18,756

16,103 21,610

Gross margin 47,004 56,992

Operating expenses Sales and marketing 16,587 26,015 Research and development (Note 4) 12,015 16,945 General and administrative 12,764 14,420 Stock-based compensation (Note 18) 250 (27)

Restructuring costs (Note 5) (228) 2,329

41,388 59,682

Operating Income (loss) 5,616 (2,690) Financial expenses 1,836 971 Non-controlling interest 4 28

Earnings (loss) before income taxes 3,776 (3,689)

Income taxes (Note 6) Current 1,894 735 Future (699) (2,127)

1,195 (1,392)

Net earnings (loss) 2,581 (2,297)

Earnings (loss) per share (Note 7) Basic and diluted 0.14 (0.12)

The accompanying notes are an integral part of the consolidated financial statements and Note 3 provides additional information on consolidated earnings.

35

20-20 Technologies Inc. CONSOLIDATED SHAREHOLDERS’ EQUITY (Amounts in thousands of U.S. dollars, except share data)

Accumulated Common other Retained Common Shares stock options Contributed comprehensive earnings

Number Amount and warrants surplus income (deficit) Total

$ $ $ $ $ $

Balance as at October 31, 2007 18,850,302 58,183 1,600 963 19,363 (4,474) 75,635

Net loss - - - - - (2,297) (2,297)

Translation adjustment - - - - (16,566) - (16,566)

Comprehensive loss - - - - (16,566) (2,297) (18,863)

Options exercised 150,790 712 (511) - - - 201

Promissory note receivable from a director (Note 8)

- (82) - - - - (82)

Options granted - - 56 - - - 56

Common shares buyback for cash consideration

(53,800) (166) - (2) - (112) (280)

Balance as at October 31, 2008 18,947,292 58,647 1,145 961 2,797 (6,883) 56,667

Net earnings - - - - - 2,581 2,581

Translation adjustment - - - - 7,498 - 7,498

Comprehensive income - - - - 7,498 2,581 10,079

Options granted - - 19 - - - 19

Warrants issued - - 169 169

Options forfeited - - (54) 54 - - -

Common shares buyback for cash consideration

(20,600) (65) - - - 34 (31)

Balance as at October 31, 2009 18,926,692 58,582 1,279 1,015 10,295 (4,268) 66,903


36

20-20 Technologies Inc. CONSOLIDATED CASH FLOWS (Amounts in thousands of U.S. dollars)


2009 2008

$ $ OPERATING ACTIVITIES Net earnings (loss) 2,581 (2,297) Non-cash items Amortization 3,961 4,687 Leasehold inducements (63) 53 Stock-based compensation 233 (115) Capitalized interest on long-term debt 29 27 Non-controlling interest 4 28 Future income taxes (699) (2,127) Unrealized loss (gain) on foreign exchange (1,497) 3,215 Unrealized loss (gain) on forward exchange contracts and currency options 80 461 Changes in working capital items (Note 8) (29) 685

Cash flows from operating activities 4,600 4,617

INVESTING ACTIVITIES Business acquisitions (Note 9) (31) (40,765) Short-term investments (1,719) (24,790) Short-term investments dispositions 3,421 39,998 Property and equipment (520) (1,103) Other assets (3) (124)

Cash flows from investing activities 1,148 (26,784)

FINANCING ACTIVITIES Long-term debt 6,985 15,000 Repayment of long-term debt (4,807) (203) Options exercised - 118 Common shares buyback (31) (280)

Cash flows from financing activities 2,147 14,635

Effect of changes in exchange rate on cash held in foreign currencies 1,839 (4,261)

Net increase (decrease) in cash and cash equivalents 9,734 (11,793) Cash and cash equivalents, beginning of year 13,487 25,280

Cash and cash equivalents, end of year 23,221 13,487


37

20-20 Technologies Inc. Notes to Consolidated Financial Statements (Amounts in U.S. dollars, tabular amounts in thousands, except share and per-share data)

1- GOVERNING STATUTES AND NATURE OF OPERATIONS

The Company, incorporated under Part 1A of the Companies Act (Québec), is a developer and provider of computer-aided design, sales and manufacturing software tailored for the interior design industry, including a suite of proprietary e-commerce solutions and related services.

2- ACCOUNTING POLICIES

Basis of presentation

The consolidated financial statements have been prepared in accordance with Canadian generally accepted accounting principles (Canadian GAAP) and are presented in United States of America dollars (U.S. dollars).

Changes in accounting policies

On November 1, 2008 in accordance with the applicable transitional provisions, the Company adopted two new Handbook sections issued by the Canadian Institute of Chartered Accountants (CICA);

i) Section 3064, Goodwill and Intangibles Assets which is effective for periods beginning on or after October 1, 2008 replaces Section 3062, Goodwill and Other Intangibles Assets and Section 3450, Research and Development Costs and establishes standards for the recognition, measurement and disclosure of goodwill and intangibles assets. The impact of the adoption of this standard is not significant.

ii) Section 1400, General Standards of Financial Statement Presentation which is effective for periods on or after January 1,

2008 requires management to assess the Company’s ability to continue as a going concern. The adoption of this new section has no impact on the Company’s consolidated financial statements.

In June 2009, the CICA amended 3862, Financial instrument- Disclosure. This section has been amended to introduce new financial disclosure requirements, particularly with respect to fair value measurement of financial instruments and entity exposure to liquidity risk. The amendments to this section apply to annual statements for years ending after September 2009. The Company adopted the amendment of 3862 in October 2009 and the impact of the adoption of this standard is not significant.

In addition, on January 20, 2009, the CICA issued Emerging Issues Committee Abstract 173, “Credit Risk and the Fair Value of Financial Assets and Financial Liabilities” (“EIC 173”), to be applied retroactively without restatement of prior period to all financial assets and liabilities measured at fair value in interim and annual consolidated financial statements. EIC 173 requires the Company to consider its own credit risk and the credit risk of the counterparty in determining the fair value of financial assets and financials liabilities, including derivative instruments. The Company adopted EIC 173 in February 2009. The adoption of this standard has no impact on the Company’s consolidated financial statements.

Use of estimates

The consolidated financial statements have been prepared in conformity with Canadian GAAP, which requires management to make estimates and assumptions that affect the reported amounts of revenues and expenses, the reported amounts of assets and liabilities, and the disclosure of contingent assets and liabilities at the date of the financial statements. Actual results could differ from these estimates.

Significant estimates in these consolidated financial statements include the valuation of accounts receivable, intangibles and goodwill, tax credits, restructuring costs, income taxes and the determination of the amount and timing of revenue to be recognized. In its determination of the valuation of accounts receivable, including the allowance for doubtful accounts, management relies on current customer information and its planned course of action as well as assumptions about business and economic conditions in the future period over which the receivables are collectible. Management has estimated the useful life of its intangibles based upon rapidly changing industry trends and changes in its customers' businesses.

Management is required to make assumptions for the research and development tax credits and those are subject to review and approval by tax authorities. In its determination of the amount and timing of revenue to be recognized, management relies on assumptions supporting its revenue recognition policy. Estimates of the percentage of completion for contracts are based upon current actual and forecasted information and contractual terms.

38


2- ACCOUNTING POLICIES (Continued)

Principles of consolidation

The consolidated financial statements include the accounts of the Company and its subsidiaries:

October 31,

2009 2008

% owned % owned Twenty-Twenty Europe B.V. 100 100 Twenty-Twenty UK Ltd. 100 100 Interior Design Software Ltda. 100 100 20-20 Technologies (Asia), Co., Ltd. 100 100 20-20 Technologies SAS and its subsidiary 100 100 Power Computing Technologies Ltd. 100 100 20-20 Technologies Commercial Corp. 100 100 20-20 Technologies International Inc. 100 100 20-20 Technologies Bangladesh Ltd. 100 100 20-20 Technologies GmbH and its subsidiary 100 100 20-20 Technologies China 100 100 20-20 Fusion Limited 100 100 20-20 Icovia Inc. 51 51

Reporting currency and translation of foreign currencies

The Company uses the U.S. dollar as its reporting currency since a significant proportion of the Company's revenues are recorded in U.S. dollars. The Company's financial statements have been translated from the functional currency, the Canadian dollar (C$), into the reporting currency using the current rate method as follows: assets and liabilities are translated using the exchange rate in effect at year-end and revenues and expenses are translated using the average rate for the period. The cumulative translation gains or losses have been included as a separate component of shareholders' equity, under “Accumulated other comprehensive income”.

Transactions concluded in currencies other than the functional currency have been translated as follows:

– Monetary assets and liabilities in foreign currencies of Canadian companies and of integrated foreign operations have been translated at the exchange rates in effect at the balance sheet dates, whereas other assets and liabilities have been translated at the rate in effect at transaction dates;

– Revenues and expenses have been translated at the weighted average exchange rates for the fiscal years, except for amortization, which is translated at the historical rate.

Exchange gains and losses arising from such transactions have been included in earnings.

Revenue recognition

The Company's revenues are derived from license, maintenance and other service fees. The Company licenses its desktop and enterprise software solutions under single-user license agreements that are non-transferable. Each software license, for which the user pays a one-time fee, is typically perpetual in nature. The Company also provides maintenance and other recurring services, including customer support, software and electronic catalog updates and web services, which are renewable at the option of the client. Finally, the Company provides professional services that include training, electronic catalog creation and maintenance and integration services. The Company recognizes revenue in accordance with provisions of Section 3400, Revenue, Emerging Issues Committee Abstracts No. 141 (EIC-141), Revenue Recognition, and No. 142 (EIC-142), Revenue Arrangements with Multiple Deliverables of the CICA Handbook.

The Company recognizes license revenue when it has persuasive evidence that an agreement exists, the software product has been delivered, the amount to be paid by the customer is fixed and determinable, and collection is deemed probable.

39



Revenue from maintenance and other recurring services is recognized over the term of the agreement, which typically is 12 months. If it is not considered probable that the revenue is collectible, then it is only recognized when the fee is collected.

Revenue from professional services is recognized when the services are provided.

For contracts with multiple deliverables (e.g., licenses, maintenance and other services), the Company allocates revenue to each element of the contract based on the relative fair value of each of the elements. The fair value of an element must be based on evidence that is specific to the vendor. The Company limits its assessment of vendor-specific objective evidence (VSOE) of fair value for each element to the price charged when the same element is sold separately. If VSOE of all undelivered elements exists but evidence does not exist for one or more delivered elements, then revenue is recognized using the residual method. Under the residual method, the fair value of the undelivered elements is deferred, and the remaining portion of the agreement fee related to the delivered elements is recognized as revenue, provided that all other revenue recognition criteria are met. If evidence of fair value of one or more undelivered elements cannot be established, revenue is deferred and recognized ratably over the last undelivered element.

The Company also enters into various contracts with its clients for services such as electronic catalog creation and updates, training and integration services. Contract revenue is recorded under the percentage-of-completion method. Under this method, contract revenue and profits are recognized proportionately with the percentage of completion of work.

The Company uses the efforts expended method to calculate the percentage of completion of work based on direct labour cost incurred at the date of the financial statements compared to estimated total direct labour costs. Contracts in progress are valued considering labour, including estimated profits. Contracts in progress represent contracts for which services have been rendered and which have not yet been invoiced. Losses are recorded when total cost estimates indicate a loss.

Deferred revenue is comprised of revenue from services invoiced that have not met recognition criteria.

Research and development costs and related tax credits

Research and development costs, net of tax credits, are charged to the consolidated earnings in the period in which they are incurred unless the criteria for capitalization for development costs under Canadian GAAP are met, in which case they are deferred and amortized.

The Company is entitled to certain Canadian tax credits for qualifying research and development activities performed in Canada and credits pursuant to the Carrefour de la Nouvelle Économie program. Tax credits are recognized once the Company has reasonable assurance that they will be realized. The tax credits recorded by the Company are subject to review and approval by tax authorities and it is possible that these amounts will be different from the amounts accounted for. Tax credits are accounted for as a reduction of the related expenditures for items expensed in the consolidated earnings and a reduction of the related asset cost for items capitalized on the consolidated balance sheets.

Income taxes

The Company uses the liability method of accounting for income taxes. Under this method, future income tax assets and liabilities are determined according to differences between the carrying amounts and tax bases of assets and liabilities. They are measured by applying enacted or substantively enacted tax rates and laws at the date of the financial statements for the years in which the temporary differences are expected to reverse. The Company records a valuation allowance against any future income tax asset if, according to management, it is more likely than not that the asset will not be realized.

40



Stock-based compensation and other stock-based payments

The Company has stock-based compensation plans as described in Note 18. The Company uses the fair value method to account for stock options granted to employees, using the Black-Scholes option pricing model. Compensation expense is recognized over the applicable vesting period with a corresponding increase in Shareholders’ Equity under Common stock options. When stock options are exercised, the exercise price and the related portion previously recorded in Common stock options are credited to Common shares.

Deferred Share Units ("DSUs")

The Company granted deferred share units to directors as described in Note 18. The number of DSUs issued is calculated by dividing the compensation by the fair market value of the Company’s shares on the date of grant. The DSUs outstanding are reevaluated monthly at the share market price and all changes are recorded as stock-based compensation.

Employee Share Purchase Plan (ESPP)

The Company implemented a purchase plan of the Company’s shares available to employees as described in Note 18. Compensation costs are included in the statement of earnings as stock-based compensation.

Earnings (loss) per share

Earnings (loss) per share is calculated by dividing net earnings (loss) by the weighted average number of common shares outstanding during the year. Diluted earnings (loss) per share are calculated taking into account the dilution that would occur if the securities or other agreement for the issuance of common shares were exercised or converted into common shares at the later of the beginning of the period or the issuance date. The treasury stock method is used to determine the dilutive effect of the stock options. This method assumes that proceeds of exercise of the stock options during the year are used to redeem common shares at their average price during the period.

Cash and cash equivalents

Cash and cash equivalents which include cash and short-term investments with original maturities of three months or less are presented at their fair value.

Short-term investments

Short-term investments consist of debt instruments of companies meeting investment guidelines approved by the Board of Directors. Short-term investments are recorded at fair value.

Depreciation and amortization

Property and equipment and intangible assets are accounted for at cost and are amortized over their estimated useful lives according to the straight-line method and the following periods:

Property and equipment (Note 13) Office furniture 5 years Computer equipment 3 years Leasehold improvements Lease term equivalent to 10 years Automotive equipment 6 years Intangible assets (Note 14) Client lists 3 or 7 years Software 3 or 4 years Trade name 3 or 5 years Non-compete agreement 10 or 15 years Distributor relationships 7 or 10 years

41



Impairment of long-lived assets

The Company reviews the carrying values of its property and equipment and intangible assets for impairment on a regular basis or whenever events or circumstances indicate that the carrying amount may not be recoverable. If the carrying value exceeds the amount recoverable, based on undiscounted estimated future cash flows, a write-down to their fair value is charged to the consolidated statement of earnings. The fair value is calculated based on evaluation of discounted cash flows.

Goodwill

Goodwill is assessed for impairment through an estimation of the fair value of the reporting unit, using the discounted cash flow method, annually or more frequently when an event or circumstance occurs that more likely than not reduces the fair value of a reporting unit below its carrying amounts. In the event that the carrying amount exceeds fair value, a second step must be performed whereby the fair value of the reporting unit's goodwill must be estimated to determine if it is less than its carrying amount. An impairment charge is recorded when the goodwill carrying amount of the reporting unit exceeds its fair value. As at October 31, 2009 and 2008, the Company determined that it had one reporting unit.

Leasehold inducements

Leasehold inducements received in connection with the leasing of premises are amortized on a straight-line basis over the lease term.

Financial instruments

All financial assets are classified as held for trading or loans and receivables categories. Also, all financial liabilities are classified as other financial liabilities. On initial recognition, financial instruments are measured and recorded on the consolidated balance sheet at fair value. After initial recognition, the financial instruments are measured at amortized cost except for those held for trading category which should be measured at fair value. The effective interest related to the financial liabilities and the gain or loss arising from a change in the fair value of a financial asset or financial liability classified as held for trading are included in net earnings for the period in which it arises.

The Company has classified its cash and cash equivalents, short-term investments and forward exchange contracts as held for trading. The trade accounts receivable, rental deposits, balance receivable on asset disposal, loan receivable, promissory note receivable and balance of sale receivable were classified as loans and receivables, and the accounts payable and the long-term debt were classified as other financial liabilities. Gains and losses on cash and cash equivalents and short-term investment are presented in financial expenses in the consolidated earnings.

Transactions costs

Transactions costs, related to financial assets and liabilities, are accounted for in the financial expenses.

Forward exchange contracts

The Company enters into forward exchange contracts to manage portions of its currency risk exposure. The Company does not account for these forward contracts using hedge accounting and forward exchange contracts are recorded at fair value. Gains or losses resulting from changes in fair values are included in the financial expenses, in consolidated earnings.

Embedded derivatives

An embedded derivative is a component of a hybrid instrument that also includes a non-derivative host contract, with the effect that some of the cash flows of the combined instrument vary in a way similar to a stand-alone derivative. If certain conditions are met, an embedded derivative is separated from the host contract and accounted for as a derivative in the balance sheet, at his fair value. The Company recognizes embedded derivatives in its consolidated balance sheet, if applicable.

42



Future accounting changes The CICA has issued the following new Handbook sections which have not yet been implemented by the Company; a) Section 1582, Business combination, which replaces 1581, Business Combinations which is effective for periods beginning on or

after January 1, 2011 establishes standards for the accounting for a business combination. It provides the Canadian equivalent to the IFRS Standard, IFRS 3, Business Combinations. The Company will apply this section prospectively to business combinations for which the acquisition date is on or after November 1, 2011. Earlier application is permitted. The Company is evaluating the impact of the adoption of this new Section on the consolidated financial statements.

b) Section 1601 Consolidated financial statement, and Section 1602 Non-Controling Interests, which together replace Section

1600, Consolidated Financial Statements are effective for periods beginning on or after January 1, 2011. Section 1601 established standards for the preparation of consolidated financial statements. Section 1602 establishes standards for accounting for a non-controlling interest in a subsidiary in the consolidated financial statements subsequent to a business combination. It is equivalent to the corresponding provisions of IFRS standard, IAS 27, Consolidated and Separate Financial Statements. The Company will apply these sections to interim and annual consolidated financial statements relating to fiscal years beginning in November 1, 2011. Earlier adoption is permitted. The Company is evaluating the impact of the adoption of these new Sections on the consolidated financial statements.

Additionally, in February 2008 the Canadian Accounting Standards Board (AcSB) confirmed that the use of IFRS would be required for Canadian publicly accountable enterprises for years beginning on or after January 1, 2011 and the Company will implement it as at November 1, 2011. The AcSB also stated that, during the transition period, enterprises will be required to provide comparative figures established in accordance with IFRS. The IFRS will require additional financial statement disclosures and, while the organization’s conceptual framework is similar to Canadian GAAP, enterprises will have to take account of differences in accounting principles.

The Company has established its transition plan and has formally established a project team. The project team consists of members from Finance department and is being overseen by the Company’s Chief Financial Officer. Reporting is done to the Company’s Chief F inancial Officer and to the Audit Committee of the Company’s Board of Directors, on a regular basis. The Company uses an external advisor to assist in the conversion project.

The Company is currently evaluating the impact of adopting IFRS on the consolidated financial statements. The Company is actually in the first phase of its transition program, which included scoping to identify the significant accounting policy differences and their related areas of impact in terms of systems, procedures and financial statements. The Company also is in the assessment of the design and work plan to measure the differences between IFRS and Canadian GAAP, and the impact on its financial statements, disclosures and operations. The Company will address the design, planning, solution development and implementation of the conversion in 2010.

3- ADDITIONAL INFORMATION RELATED TO THE CONSOLIDATED STATEMENTS OF EARNINGS


2009 2008

$ $ Amortization of property and equipment 1,389 1,733 Amortization of intangible assets 2,572 2,954 Gain on asset disposal - 175 Interest on long-term debt 712 589 Other interest 187 4 Bank charges 438 701 Exchange gain (loss) (586) 393 Gain on cash and cash equivalent and short-term investments 87 716 Tax credits 2,141 1,954

43


4- RESEARCH AND DEVELOPMENT EXPENSES

The research and development expenses and the related tax credits included in the consolidated statement of earnings are as follows:


2009 2008

$ $ Research and development expenses 12,401 17,084 Less: Tax credits – research and development (1,731) (1,551) Plus : Amortization of software 1,345 1,412

12,015 16,945

5 – RESTRUCTURING COSTS

Operational Restructuring Plan

On October 14, 2009, the Company approved a restructuring plan in order to further adjust its cost structure due to slow market improvement. The total estimated restructuring charge related to employee severance, associated to the Operational Restructuring Plan is $244,999. During 2009, additional restructuring charges for $102,041 in relation with other costs due to initial restructuration along with the adjustment mentioned above were recorded as restructuring costs line item within the Company’s consolidated statement of earnings.

On October 15, 2008, the Company approved a restructuring plan in order to further adjust its cost structure due to continuing weaker market conditions. The total estimated restructuring charge related to employee severance, associated to the Operational Restructuring Plan was $1,360,392 and was recorded as restructuring costs line item within the Company’s consolidated statement of earnings.

On June 11, 2008, the Company approved a restructuring plan in order to restore profitability and align its cost structure to the realities of current market conditions in North America as well as benefit from cost synergies related to its recent acquisitions. The total estimated restructuring charge (primarily related to employee severance) associated with the Operational Restructuring Plan was $968,442 and was recorded as restructuring costs line item within the Company’s consolidated statement of earnings.

Any changes to the estimates of executing the Operational Restructuring Plan will be reflected in the future results of operations. The Company expects to complete all payments under these plans by October 2010.

The adjustments made to the operational restructuring provision are mainly due to the following reasons: - The actual amounts paid for restructuring costs included in the provision were less than the initial estimate done. - Due to a new government employment program implemented in Germany to respond to economic conditions, the Company modified

its initial restructuring plan conditions for certain employees. The modification allowed those people to continue their employment with the Company on a part-time basis and as a result, the Company revised the initial provision.

Initial estimated

cost

Accounts payable as

at

October 31, 2008

Restructuring expense

Cash payments

Adjustment

Accounts payable as

at

October 31, 2009

Operational Restructuring Plan

Severance 2,202 1,558 245 (932) (575) 296 Outplacement fees 47 - - - - - Other 80 66 102 (57) - 111

Total 2,329 1,624 347 (989) (575) 407

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6- INCOME TAXES


2009 2008

% % Combined statutory income tax rate in Canada (a) 30.9 31.1 Foreign income taxed at different rates (0.3) 5.0 Non deductible items 5.7 (15.5) Change in valuation allowance (3.9) (13.2) Impact of reduction in income tax rates on future income taxes 1.9 (2.6) Uncertainties allowance reversal - 19.2 Other differences (2.6) 14.0

Effective income tax rate 31.7 38.0 (a) The Company’s combined statutory income tax rate in Canada includes the appropriate provincial income tax

rates. The income tax effects of temporary differences that give rise to significant future income tax assets and liabilities are as follows: October 31,

2009 2008

$ $ Future income tax assets Property and equipment 223 218 Intangible assets and goodwill 1,723 862 Financing costs - 170 Restructuring costs 90 390 Leasehold inducement 92 105 Net operating loss carry-forwards 1,642 753 Capital losses 286 487 Other 304 208

4,360 3,193

Future income tax liabilities

Tax credits (1,089) (608) Property and equipment - (6) Intangible assets and goodwill (3,963) (3,727) Other (226) (23)

Total future income tax liabilities (5,278) (4,364)

(918) (1,171)

Valuation allowance (286) (487)

Total future income tax (liabilities) assets (1,204) (1,658)

45


6- INCOME TAXES (Continued)

As at October 31, 2009, the Company had operating losses carried forward of $4,431,123 for which a tax benefit was not recorded. These operating losses, in the amounts indicated, are available indefinitely in the following countries:

7- EARNINGS (LOSS) PER SHARE

The following table presents a reconciliation of earnings per share and diluted earnings per share:


2009 2008

$ $ Basic Net earnings (loss) 2,581 (2,297)

Weighted average number of common shares outstanding 18,929,769 18,852,189 Basic earnings (loss) per share 0.14 (0.12)

Diluted Net earnings (loss) 2,581 (2,297)

Weighted average number of common shares outstanding 18,929,769 18,852,189 Effect of dilutive stock options 3,146 -

Adjusted weighted average number of common shares outstanding 18,932,915 18,852,189 Diluted earnings (loss) per share 0.14 (0.12)

In 2009, the options and warrants not included in the computation of the diluted earnings per share because their exercise prices were greater than the average market price of the common shares are as follows:

Year ended October 31,

2009

Options 825,497 Warrants 102,459

In 2008, all of the options are not included in the computation of the diluted loss per share since the Company incurred losses and therefore the options would be anti-dilutive.

Amounts recognized in the consolidated balance sheet consist of : October 31,

2009 2008

$ $ Future income tax assets – current 421 598 Future income tax assets – non-current 3,131 1,500 Future income tax liabilities – current (903) - Future income tax liabilities – non-current (3,853) (3,756)

Net future income tax liabilities (1,204) (1,658)

2009 $

Austria 2,264

France 2,167

Total 4,431

46


8- ADDITIONAL INFORMATION RELATED TO THE CONSOLIDATED STATEMENTS OF CASH FLOWS

The changes in working capital items are detailed as follows:


2009 2008

$ $ Accounts receivable 858 (3,058) Income taxes receivable 584 (695) Contracts in progress 44 33 Prepaid expenses 37 665 Accounts payable (3,014) 2,908 Income taxes payable 937 1,412 Deferred revenues 525 (580)

(29) 685

Cash flows relating to interest and income taxes on operating activities are detailed as follows:


2009 2008

$ $ Interest paid 858 407 Income taxes paid 632 (194)

As of October 31, 2009, the accounts payable included $27,018 ($10,328 in 2008) in relation with the acquisition of property and equipment. In October 2008, the Company made a loan to a director who is an officer, for an amount of $82,463 to permit him to exercise outstanding stock options. The promissory note is payable upon demand, is recorded against Capital Stock and bears interest at the rate published quarterly by Canada Revenue Agency (1% as at October 31, 2009; 3% as at October 31, 2008).

9- BUSINESS ACQUISITIONS

In 2008, the Company completed business acquisitions that were recorded using the purchase method. Results from these acquisitions have been included in the statement of earnings from the date of acquisition.

Year ended October 31, 2009

During the year ended October 31, 2009 there were no business or asset acquisitions but the Company modified the purchase price allocation due to contingent considerations paid and an adjustment made to the estimated income taxes payable recorded at acquisition. These adjustments relating to certain business acquisitions resulted in a net decrease in goodwill of $888,000.

20-20 Icovia Inc. (formerly Hookumu Inc.)

The Company modified the purchase price allocation due to a contingent consideration paid as part of the original agreement resulting in an increase of goodwill for $40,000 and cash consideration paid, accordingly.

Planit* Fusion

The Company modified the purchase price allocation due to an adjustment made to the income taxes payable initially recorded at acquisition, resulting in a decrease of income tax payable and of the goodwill for $928,000 (£ 561,000).

* - Planit is a Trademark used under License from Planit Holdings Limited

47


9- BUSINESS ACQUISITIONS (Continued)


Conceptor Sarl

On May 5, 2008, a wholly-owned subsidiary of the Company acquired a portion of the assets, such as employees and accounts receivable, of Conceptor Sarl, a software distribution company that sold Planit* Fusion products, based in France, for a consideration of $400,972 (€ 257,083) excluding transaction costs. The unallocated balance of the purchase price was allocated to goodwill.

20-20 Icovia Inc. (formerly Hookumu Inc.)

On January 31, 2008 the Company concluded an agreement to acquire 51% of the outstanding shares of Hookumu Inc., based in New Hampshire, USA, for a cash consideration of $1,625,000 excluding transaction costs, with management of Icovia holding the remaining 49%. Should certain revenue objectives be attained by December 31, 2010, an additional amount of $150,000 will become payable. Icovia provides interactive, online space planning solutions for the home furnishings, real estate and interior design industry. As part of the agreement, the Company has an option to acquire the remaining 49% from January 1, 2010 to September 1, 2010 based on a pre-determined formula. The unallocated balance of the purchase price was allocated to goodwill. The name of the company has been changed for 20-20 Icovia Inc. (Icovia).

Planit* Fusion

On January 29, 2008 the Company concluded an agreement to acquire the Planit* Fusion business from Planit Holdings Limited for a cash consideration of $37.7 million (£19 million) excluding transaction costs. The acquisition consists of the worldwide kitchen and bath software business including 2 subsidiaries Planit International Limited (U.K.), Planit S.A. (France) and all of their US assets related to that business.

The values attributed to the assets acquired as of May 5, 2008 were : $

Accounts receivable 48 Goodwill, not deductible for tax purposes 368

Total consideration paid in cash, including transaction costs of $ 16 416

The values attributed to the assets acquired and liabilities assumed as of January 31, 2008 were:

$

Cash 51 Accounts receivable 280 Prepaid expenses 15 Property and equipment 42 Software 259 Client list 168 Accounts payable (296) Deferred revenue (70) Future income taxes (154) Non-controlling interest (11) Goodwill, not deductible for tax purposes 1,505

Total consideration, including transaction costs of $164 1,789

Consideration payable: $

In cash 1,789 Less : Cash acquired (51)

Net cash consideration paid 1,738

48



Planit* Fusion is the retail design business of the United Kingdom-based Planit Holdings Limited and offers interior design programs that combine innovative design features with essential sales management tools to provide total support for businesses, including kitchens, baths and bedrooms. The allocation of the purchase price is subject to change as the Company completes its evaluation of the assets. Furthermore the Company initiated litigation against the seller that could have an effect on the purchase price. The unallocated balance of the purchase price was allocated to goodwill.

The values attributed to the assets acquired and liabilities assumed as of January 29, 2008 were:

$

Cash 669 Accounts receivable 2,330 Prepaid expenses 320 Property and equipment 537 Software 2,402 Distributor relationships 2,939 Client list 3,971 Trade name 298 Non-compete agreement 179 Other assets 56 Accounts payable (2,874) Deferred revenue (1,067) Long-term debt (302) Future income taxes (3,337) Goodwill, not deductible for tax purposes 33,522

Total consideration, including transaction costs of $2,062 39,643


In cash 39,643 Less : Cash acquired (669) Purchase price balance payable (154)

Net cash consideration paid ( $239 paid in 2007) 38,820

* - Planit is a Trademark used under License from Planit Holdings Limited

Shanghai Rena and DesignTec Co. Ltd

As at November 1, 2007, a subsidiary of the Company concluded an agreement to acquire all of the assets of Shanghai Rena and DesignTec Co. Ltd for a total consideration of $398,565 in the form of a settlement of an amounts receivable from the vendor. Shanghai Rena and DesignTec Co. Ltd are related companies with a common shareholder and they have been distributors for the Company in China and Taiwan respectively, since March 2002. The unallocated balance of the purchase price was allocated to goodwill.

The values attributed to the assets acquired and liabilities assumed as of November 1, 2007 were:

$

Cash 11 Property and equipment 1 Client list 126 Accounts payable (12) Future income taxes (42) Goodwill, not deductible for tax purposes 356

Total consideration, including transaction costs of $41 440

49



10- CASH AND CASH EQUIVALENTS


2009 2008

$ $ Cash 21,014 8,392 Cash equivalents Term deposits matured between November 2008 and January 2009, interest rate 2.42% to 3.35% - 2,894 Banker’s acceptance, matured in December 2008, interest rate 1.85% - 2,201 Commercial high interest corporate bank accounts, with no maturity date and interest rate of 0.65% to 0.95%

2,207 -

23,221 13,487

11 – SHORT-TERM INVESTMENTS


2009 2008

$ $ Bankers acceptance, bearing interest at 3.14% matured in November 2008 - 1,644

- 1,644

12 – ACCOUNTS RECEIVABLE

October 31,

2009 2008

$ $ Trade accounts 13,588 13,795 Balance receivable on asset disposal 177 279 Fair value of forward exchange contracts - 63 Interest on investments - 19 Balance of sale receivable on demand without interest 50 50 Loan receivable on demand without interest 185 100 Tax credits receivable 4,585 2,627 Other 325 605

18,910 17,538


In cash 440 Less : Application of amounts receivable from the vendor 399 Cash acquired 11

Net cash consideration paid 30

50


13 – PROPERTY AND EQUIPMENT

October 31, 2009

Accumulated Cost amortization Net

$ $ $ Office furniture 1,782 1,392 390 Computer equipment 4,353 3,564 789 Leasehold improvements 2,619 1,607 1,012 Automotive equipment 390 259 131

9,144 6,822 2,322

October 31, 2008


$ $ $ Office furniture 1,799 1,304 495 Computer equipment 4,298 3,087 1,211 Leasehold improvements 2,229 1,219 1,010 Automotive equipment 361 183 178

8,687 5,793 2,894

14- INTANGIBLE ASSETS

October 31, 2009


$ $ $ Client lists 8,788 4,269 4,519 Software 6,108 4,282 1,826 Trade names 496 381 115 Non-compete agreement 509 115 394 Distributor relationships 2,721 476 2,245

18,622 9,523 9,099

October 31, 2008


$ $ $ Client lists 7,783 2,736 5,047 Software 5,303 2,729 2,574 Trade names 439 256 183 Non-compete agreement 451 67 384 Distributor relationships 2,410 181 2,229

16,386 5,969 10,417

During the year ended October 31, 2009, $121,000 was reallocated from prepaid expense to software. During the year ended October 31, 2009, no intangible assets were acquired ($10.3 million in 2008).

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15 – GOODWILL

October 31,

2009 2008

$ $ Balance, beginning of year 52,367 29,407 Business acquisitions (Note 9) - 35,751 Change in purchase price allocation (Note 9) (888) - Effect of foreign currency exchange rate changes 6,682 (12,791)

Balance, end of year 58,161 52,367

16 – AUTHORIZED BANK LINE OF CREDIT

a) The Company obtained in January 2008 a credit facility of up to C$25 million in the form of a secured and committed revolving credit line in place with two Canadian banks. On January 31, 2009, the Company did not meet a covenant under this credit facility and obtained a waiver from the lender with respect to the obligation. Consequently, the Company was obliged to reimburse the sum of $1 million and the facility was amended in July 2009. The modified terms are as follow: a credit facility of up to $15 million, a three-year term but payable at the discretion of the Company at any time and the option to draw loans based on Cnd prime rate, U.S. base rate, Libor or banker’s acceptances. The interest rate charged is the sum of the base rate applicable according to the type of loan (Libor, US Prime, CND Prime) and a premium which is based on certain financial test results achieved on a quarterly basis. The maximum interest rate premium is either 2.5% on U.S. base rate and on Cnd prime rate or 4% on Libor (2.375% on U.S. base rate in 2009 and 1.875% on Libor in 2008). As of October 31, 2009, the interest rate applicable to this facility is 6.125% (4.68% in 2008). The facility is secured by a moveable hypothec of C$37.5 million on the Company’s and two of its subsidiaries’ assets. The amount that can be borrowed under this facility is subject to the maintenance of certain financial covenants which include a leverage ratio and an interest and rent coverage ratio. As of October 31, 2009, the unused portion of the facility amounted to $4.7 million. At October 31, 2009, the Company meets its obligations under this credit facility.

b) A 51% owned subsidiary of the Company has a demand credit facility of $300,000 in the form of a secured revolving line of credit renewal with a United States bank. The facility is renewable annually, bears interest at 0.5% plus a premium based on the US Prime rate and is secured by the subsidiary’s assets. This loan contains a covenant that requires the subsidiary to maintain a financial ratio. As of October 31, 2009, the unused portion of the facility amounted to $150,716. At October 31, 2009, the subsidiary did not meet its obligations under this credit facility but the facility was renewed after year end.

17 – LONG-TERM DEBT

As at October 31,

Current portion 2009 2008

$ $ $ Payable in Canadian dollars Government loan, without interest, maturing in 2009 - - 16

Government loan (a) 2,345 2,345 -

Government loan (b) 128 4,473 -

Payable in U.S. dollars

Revolving credit line (Note 16) - 10,300 15,000

Balance of purchase price (c) 494 494 464

Other loans - - 4 Payable in Pounds Sterling Other loans 57 57 145

3,024 17,669 15,629

Installments due within one year 3,024 3,805

14,645 11,824

52


17 – LONG-TERM DEBT (Continued)

a) Government loan, maximum authorized amount of C$4,800,000 to finance 2008, 2009 and 2010 research and development tax credits. As of October 31, 2009, C$2,526,000 was drawn to finance 2008 and part of 2009 tax credits. The amount outstanding as of October 31, 2009 is payable in installments of C$700,000 upon reception of the 2008 research and development tax credits or at the latest April, 30, 2010; C$1,826,000 upon reception of the 2009 research and development tax credits or at the latest April, 30, 2011; bearing interest at Investissement Québec’s weekly variable rate plus 2% (4% as of October 31, 2009). The facility is secured by a moveable hypothec of C$5,760,000 on the Company’s tax credits receivable. Except for 2008, 2009 and 2010 research and development tax credits, the hypothec is subordinated in favor of the lender of the credit facility of the Company described in Note 16. This loan contains covenants that require the Company to maintain certain financial ratios. At October 31, 2009, the Company met its obligations under this credit facility.

b) Government loan, maximum authorized amount of C$5,000,000, payable commencing 12 months after initial disbursement in eighty four monthly installments of C$59,523 plus an additional amount based on the Company’s net income up to a maximum of C$350,000 per year, bearing interest at Investissement Québec’s preferred rate plus 2% (4.25% as of October 31, 2009), maturing on September 14, 2017. The loan is secured by a moveable hypothec of C$6,000,000 on the Company’s assets. The hypothec is subordinated in favor of the lender of the credit facility of the Company described in Note 16. This loan contains covenants that require the Company to maintain certain financial ratios. At October 31, 2009, the Company met its obligations under this credit facility.

In addition, the lender was granted 102,459 warrants for no additional consideration. The fair value of the warrants was determined upon issuance using the Black-Scholes option pricing model and amounted to an aggregate of C$182,203 and was credited to Common stock options and warrants in the Shareholders’ Equity. The nominal value of the loan (C$5,000,000) was reduced by the fair value of the warrants for C$182,203. The interest expense on the loan is determined by applying an effective interest rate of 5.33% to the outstanding liability component. The difference between the actual interest payment and the interest expense is accreted to the loan up to its face value.

c) Balance of purchase price of $500,000, without interest, effective rate of 4.5%, payable by installments of $500 for each copy of the Build-Rite software sold by the Company. The remaining balance is payable in July 2010 (Note 20)

The installments on long-term debt for the next five years assume that the maximum payment is made yearly in relation with loan Government loan b). The payments are as follows:

2010 : 3,006 2013 : 988 2011 : 11,288 2014 : 988 2012 : 988 2015 and thereafter : 579

18- STOCK-BASED COMPENSATION

Stock option plans

Under a stock option plan adopted in 1999, the Company could grant a maximum of 720,000 options to its officers and key employees, all of which have been granted. Since its inception, 214,360 shares have been issued following the exercise of options. The options granted to officers could be exercised as of the grant date or on another basis as determined by the Board. Unless determined otherwise by the Board, options granted to other employees could be exercised at the rate of 20% per year beginning on the grant date anniversary. These options expire 6 to 12 years after being granted. When an employee leaves the Company, options held must be exercised within 90 days.

In connection with the acquisition of 20-20 Giza Inc. in 2001, 172,860 common share stock options were issued outside of the stock option plan. These options can be exercised for $0.71 each and expire in 2010. An employee who leaves the Company has 90 days during which to exercise the options.

53


18- STOCK-BASED COMPENSATION (Continued)

For the year ended October 31, 2009 there were no changes in the number of options outstanding, related to the 20-20 Giza options.

Giza Options Number

Balance as at October 31, 2007 9,800 Options exercised in 2008 (4,200)

Balance as at October 31, 2008 5,600 Options exercised in 2009 -

Balance as at October 31, 2009 5,600

On May 27, 2004, the Board of Directors approved the termination of the above plans, and such resolution was effective following the completion of the initial public offering. Such terminations did not affect options previously granted under these plans which were not exercised or expired. In conjunction with its initial public offering, the Company established a new share option plan (the “Share Option Plan”). Under the Share Option Plan, options to acquire Common Shares may be granted to officers, consultants and full-time employees of the Company and its subsidiaries. The terms, exercise price and number of Common Shares covered by each option as well as the vesting periods of such options is determined by the Board of Directors at the time the options are granted but cannot be more favorable than those permitted under applicable securities legislation. The total number of Common Shares that is reserved for issuance under the Share Option Plan and the previous stock option plans cannot exceed, in the aggregate, 10% of the issued and outstanding Common Shares.

Since its inception, 532,277 options have been granted under the Share Option Plan. Options granted vest 33.3% each anniversary date of the grant and expire 10 years after being granted. During the year ended October 31, 2009, the Company granted 317,277 options under the Share Option Plan having an exercise price and expiration date as listed below.

The following table presents the changes in the number of options outstanding for the previous stock option plan and the Share Option Plan (excluding 20-20 Giza options):

October 31, 2009 October 31, 2008

Weighted Weighted Average Average Number Exercise Price Number Exercise Price

C$ C$ Balance, beginning of year 548,220 6.80 694,840 5.69 Options exercised - (146,590) 1.55 Options granted 317,277 2.94 - - Options forfeited (40,000) 4.65 (30) 1.55

Balance, end of year 825,497 5.42 548,220 6.80

Options exercisable, end of year 508,220 6.97 508,220 6.68

54



The following table summarizes information about options outstanding and exercisable:

October 31, 2009

Weighted Average Remaining

Contractual Life in Years

Exercise Outstanding Exercisable Outstanding Exercisable Price Expiration date Number Number

C$ 2.44 September 2019 120,000 - 10.0 - 3.24 October 2019 197,277 - 10.0 - 4.65 October 2013 120,000 120,000 4.0 4.0 6.01 November 2013 103,220 103,220 4.0 4.0 6.50 November 2014 15,000 15,000 5.1 5.1 8.03 November 2013 100,000 100,000 4.0 4.0 8.26 January 2016 120,000 120,000 6.2 6.2 9.41 April 2015 50,000 50,000 5.4 5.4

825,497 508,220 6.7 4.7

The fair value of the stock options and warrants granted was estimated at the grant date using the Black-Scholes option-pricing model on the basis of the following weighted average assumptions for the stock options and warrants granted during the year:


Stock option plan

Warrants

Risk-free interest rate 3.40% 2.86% Expected dividend rate 0% 0% Weighted average expected life of the options (years) 10 8 Expected volatility 75% 75%

The estimated fair value of the options is expensed over the options’ vesting period. The weighted average fair value per option granted in 2009 is C$2.33 for the stock option plan and C$1.78 for the warrants.

Warrants

On September 14, 2009, the Company according to the condition of a loan agreement with Investissement Québec (Note 17), issued 102,459 warrants. Each warrant permits the acquisition of one common share at an exercise price of C$2.44 and will expire 2 years after the full reimbursement of the loan or at the on latest August 27, 2018.

Deferred share unit plan

On November 29, 2004, the Board of Directors of the Company approved a deferred share unit ("DSU") plan for the benefit of the directors under which they will receive 100% or less of their annual retainer or total compensation in the form of DSUs. Under the terms of the DSU plan, at the end of each quarter, a number of DSUs equal to the number of common shares that could be purchased on the open market for a dollar amount equal to the elected deferral amount is credited to an account the Company will maintain for each director. At such time as any director leaves the Board of Directors, such director will receive lump sum cash payment equal to his credit balance under the DSU plan. During the year ended October 31, 2009, 59,920 DSUs (22,723 in 2008) were issued under the plan and an amount of $78,699 ($99,640 in 2008) was charged to stock-based compensation expense. As of October 31, 2009, the Company had recorded an amount payable of $386,249 ($151,809 in 2008) which will be paid to directors if they leave the Board of Directors. An amount of $134,778 in 2009 (($270,030) in 2008) was accounted for in stock-based compensation expense and resulted from a reevaluation of the liability based on the Company’s share market value.

55



Employee Share Purchase Plan (ESPP)

The Company Employee Share Purchase Plan (ESPP) came into effect on May 23, 2007. The purpose of this plan is to provide the participants with an incentive to become Shareholders of the Company. The ESPP allows employees to contribute up to the lesser of 10% of their eligible compensation and C$10,000 annually. The Company contributes one-third of each employee’s contribution. All contributions are then remitted to the Administrative Agent who purchases monthly, on behalf of the employees, Common shares on the open market. The Company also assumes all transaction fees related to the purchases of shares.

During the year ended October 31, 2009, an amount of $16,923 ($87,497 in 2008) related to the Company’s contribution, was charged to stock-based compensation expense.

19- CAPITAL STOCK

Authorized:

• Unlimited number of Common shares, voting and participating • Unlimited number of preferred shares whose privileges, terms and conditions are to be established when they are issued.

October 31,

2009 2008

Issued: Common Shares 18,926,692 18,947,292

Normal Course Issuer Bid

On April 26, 2007, the Company announced its intention to purchase for cancellation purposes, by way of a normal course issuer bid (the “Bid”), some of its common shares, beginning on May 2, 2007 and ending May 1, 2008. On May 16, 2008, the Company announced its intention to continue this program beginning on May 21, 2008 and ending on May 20, 2009. This program was renewed on December 14, 2009 and expires on December 13, 2010.

The Company may repurchase for cancellation, up to 946,000 common shares over a maximum period of 12 months representing approximately 5% of its 18,926,692 issued and outstanding shares as of December 14, 2009. The consideration to be paid by the Company for any common shares it will repurchase under the Bid will be the market price of such common shares at the time of acquisition.

Shareholder rights plan

The Company’s shareholder rights plan requires anyone who seeks to acquire 20% or more of the Company’s voting shares to make a bid complying with specific provisions.

20 – FINANCIAL INSTRUMENTS

The Company is exposed to risks of varying degrees of significance which could affect its ability to achieve its strategic objectives for growth and shareholder returns. The principal financial risks to which the Company is exposed are described below.

Credit Risk

The Company’s maximum exposure to credit risk consists in the carrying value of its cash and cash equivalents, short-term investments and accounts receivable.

The Company’s exposure to credit risk associated with its accounts receivable is the risk that a client will be unable to pay amounts due to the Company. Allowances are provided for potential losses that have been incurred at the balance sheet date. The amounts disclosed in the balance sheet are net of these allowances for bad debts. Accounts receivable are considered for impairment on a case-by-case basis when they are past due or when objective evidence is received that a customer will default. The Company takes into consideration the customer’s payment history, his credit worthiness and the then current economic environment in which the customer operates to assess impairment. The Company accounts for a specific bad debt provision when management considers that the expected recovery is less than the actual account receivable. All bad debt write-offs are charged to sales and marketing expenses.

56


20 – FINANCIAL INSTRUMENTS (Continued)

The Company believes that the credit risk of accounts receivable is affected by the following:

i. A broad client base dispersed across various geographic locations. However, the client base is somewhat concentrated in the interior design and furniture manufacturing sectors and may be affected by any downturns due to prevailing economic conditions in any given geography.

ii. Approximately 70.3% (81.8% in 2008) of trade receivables are outstanding for less than 90 days. The Company does not require collateral or other security from clients for trade receivables; however credit is extended to clients following an evaluation of creditworthiness. In addition, the Company performs periodic credit reviews of its clients.

iii. The Company’s three largest customers do not account for 10% of total revenues.

iv. The Company’s management considers that all the financial assets that are not impaired or past due for each of the reporting dates under review are of good quality.

All of the Company’s accounts receivable has been reviewed for indicators of impairment. Certain accounts receivable were found to be impaired and a provision of $2.4 million ($1.4 in 2008) has been recorded accordingly. The impaired accounts receivable are mostly due from customers that are experiencing financial difficulties. As at October 31, 2009, the aging of accounts receivable is as follows:

October 31,

2009 2008

Current: 4,315 5,838 Past due 1-30 days 2,683 2,506 Past due 31-90 days 2,559 2,948 Past due over 90 days 6,434 3,908

Trade accounts receivable 15,991 15,200 Less allowance for doubtful accounts (2,403) (1,405)

13,588 13,795

The following table provides the change in allowance for doubtful accounts for trade accounts receivable:

October 31,

2009 2008

Balance as at October 31, 2008 1,405 1,523 Acquisitions - 404

1,405 1,927 Accounts written off (373) (702) Allowance for doubtful accounts 1,190 458 Effect of foreign currency exchange rate changes 181 (278)

Balance as at October 31, 2009 2,403 1,405

The credit risk on cash and cash equivalents, short-term investments and forward exchange contracts is limited because the counterparties are banks with high credit ratings assigned by international credit-rating agencies. This credit risk is generally diversified since the Company deals with many different establishments.

57



Fair value of derivative financial instruments

The Company enters into forward exchange contracts to sell amounts of currency in the future at predetermined exchange rates. These forward exchange contracts serve to protect against the risk exposure to future exchange rate fluctuations. As at October 31, 2009, the fair value of such derivative financial instruments is determined based on prices obtained from the Company's financial institution for identical or similar financial instruments. The following table summarizes the amounts of committed currency sales, the average rate and the favorable (unfavorable) fair value at the specified date of the forward contracts according to their remaining terms:

October 31, 2009

Remaining term Contract amount Average rate Fair value

$ C$ $ Less than three months Forward contracts 1,000 1.0635 (17)

The fair value of forward exchange contracts has been accounted for as an unrealized foreign exchange loss, presented in financial expenses in the consolidated earnings, and in accounts payable for $17,000 ($63,000 in accounts receivable in 2008). The realized loss on forward exchange contracts amounted to $5,600 ($162,600 of gain in 2008) for the year ended October 31, 2009 and is accounted for as a foreign exchange loss, presented in financial expenses in the consolidated earnings.

Foreign exchange risk

The Company operates internationally and is exposed to risk resulting from changes in foreign currency rates. The functional currency used by the Company is the Canadian dollar; however, the Company’s financial statements are presented in U.S. dollars. Therefore, only earnings resulting from transactions in currencies other than the Canadian dollar expose the Company to fluctuations in currency rates. With respect to Canadian operations, the great majority of revenues are billed and recognized in U.S. dollars while the majority of expenses are incurred in Canadian dollars. The Company uses forward exchange contracts to sell U.S. dollars in order to meet future Canadian dollar expense requirements thereby reducing, but not eliminating, the impact of changes in exchange rates.

The Company is exposed to financial risk arising from fluctuations in foreign exchange rates and their degree of volatility. As of October 31, 2009 and 2008, financial assets totaling $37,397,000 ($30,360,000 in 2008) and financial liabilities totaling $28,860,000 ($28,294,000 in 2008) include these amounts expressed in foreign currencies and the equivalent total in U.S. dollars:

As at October 31, 2009 Total $ $ € £ BDT RMB BRL

Financial assets

Cash and cash equivalents 10,749 2,615 1,455 3,098 1,853 5,479 91

Short-term investments - - - - - - -

Accounts receivable 13,958 6,882 3,359 1,050 - 1,752 232

24,707 9,497 4,814 4,148 1,853 7,231 323

Financial liabilities

Bank loan 149 149 - - - - -

Accounts payable 6,765 2,658 2,160 403 180 1,049 172

Long-term debt 10,852 10,794 - 35 - - -

17,766 13,601 2,160 438 180 1,049 172

58



As at October 31, 2008 Total $ $ € £ BDT RMB BRL

Financial assets

Cash and cash equivalents 10,082 5,868 1,321 1,329 2,230 2,329 37

Short-term investments - - - - - - -

Accounts receivable 14,441 8,271 3,175 1,195 - 628 257

24,523 14,139 4,496 2,524 2,230 2,957 294

Financial liabilities

Bank loan - - - - - - -

Accounts payable 7,372 3,737 2,071 526 321 619 136

Long-term debt 15,613 15,468 - 90 - - -

22,985 19,205 2,071 616 321 619 136

Currencies Legend:

$ - U.S. Dollar RMB - Chinese Renminbi € - European Euro BRL - Brazilian Real

£ - U.K. Pound Sterling BDT - Bangladesh taka

The Company is mainly exposed to fluctuations in the U.S. dollar, Euro and on the U.K Pound Sterling. The following table details the Company’s sensitivity to a 10% variation of the U.S. dollar, the Euro and the U.K. Pound Sterling on net earnings and comprehensive income against the Canadian dollar. The sensitivity analysis includes foreign currency denominated monetary items and adjusts their translation at period end for a 10% change in foreign currency rates. A weaker U.S. dollar or a stronger Euro and U.K. Pound Sterling with respect to the Canadian dollar will result in a positive impact while the reverse would result from a stronger U.S. dollar or a weaker Euro and U.K. Pound Sterling.

Interest rate risk

The Company does not enter into derivative financial instruments for speculative purposes. It is exposed to interest rate risk on a portion of its long-term debt and does not currently hold any financial instruments that mitigate this risk. A 1% variation in interest rates would have an impact of approximately $118,000 on the net earnings, on an annual basis.

Fair value of other than derivative financial instruments

Trade accounts receivable, balance receivable on asset disposal, loan receivable, promissory note receivable and balance of sale receivable as well as accounts payable are short-term financial instruments whose fair value is equivalent to their carrying value given that they will mature shortly.

The fair value of rental deposits is equal to its carrying value of $ 451,000. For the rental deposits consisting in term deposits, the fair value was established using the market value with an interest rate of 6.125%. For the other rental deposits, the present value of future cash flows at the current market rate (6.125%) the Company could have obtained at the balance sheet date for bankers acceptances was used.

The fair value of the Build-Rite balance of purchase price was calculated with the present value of future payments using interest rates which the Company could have obtained, as of October 31, 2009, for a loan with similar terms, conditions and maturity dates. The fair value was approximated to the carrying value.

U.S. dollar impact Euro impact UK Pound

impact

Exchange rate as at October 31, 2009 1.0774 1.5896 1.7753 On net earnings C$426,000 C$422,000 C$371,000 On comprehensive income - increase 6,1 million N/A N/A - decrease (7,4 million) N/A N/A

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The fair value of the revolving credit line is equal to its carrying value of $10,300,000.

The fair value of the government loan assorted with warrant upon disbursement is C$4,825,000 compared to a carrying value of C$4,819,000. The fair value was established using the cost of borrowing that the Company could have obtained as of October 31, 2009 (5.332%) for a loan with similar terms, conditions and maturity dates.

The fair value of the other government loan and other loans approximates the carrying value at the balance sheet date because of their shorter term maturities.

Liquidity risk

Liquidity risk is the risk that the Company is not able to meet its financial obligations as they become due or can do so only at excessive cost. The Company’s growth is financed through a combination of the cash flows from operations, borrowing under the existing credit facilities and the issuance of equity. One of management’s primary goals is to maintain an optimal level of liquidity through the active management of the assets and liabilities as well as the cash flows. Even if the Company did not meet the covenant at the beginning of the 2009 fiscal year from its main lender that resulted in an amendment of the terms of the original agreement, the credit facility covenants were respected for the rest of the year and as of October 31, 2009. Given the Company’s available liquid resources as compared to the timing of the payments of liabilities, management assesses the Company’s liquidity risk to be low.

The Company’s liabilities have contractual maturities which are summarized below: Current within Non-Current later than

12 months 1-5 years 5 years

$ $ $ Bank loan 149 - - Accounts payable 11,040 - - Long-term debt 3,006 14,252 579

14,195 14,252 579

21 – CAPITAL RISK MANAGEMENT

The Company’s objective when managing its capital is to safeguard the Company’s assets and its ability to continue as a going concern while at the same time maximizing the growth of its business and the returns to its shareholders. The Company’s capital consists of shareholders equity, excluding accumulated other comprehensive income. In its capital structure, the Company considers its share repurchase program (Normal Course Issuer Bid) as a means to achieve its objectives.

This objective is achieved by prudently managing the capital generated through internal growth, optimizing the use of lower cost capital and raising share capital when required to fund growth initiatives as well as a conservative approach to safeguarding its balance sheet.

Consistent with others in the industry, the Company monitors capital on the basis of the ratio of return on capital (net earnings, excluding non-recurring items divided by the average book value of shareholders’ equity, excluding accumulated other comprehensive income). The Company also monitors capital on the basis of the ratio of interest bearing debt to capital which the Company expects to maintain in the range of 0.2 to 0.5 to 1.0. The Company set this range following its acquisition of the Planit* Fusion business described in Note 9.

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21 – CAPITAL RISK MANAGEMENT (Continued)

The Company monitors these ratios and reports them to its Board of directors on a quarterly basis. The Company’s objectives for capital for the 2009 fiscal year include:

Objectives As of October 31,

2009 2008

i - Long term debt to Capital ratio not to exceed

0.3 to 1.0 0.3 to 1.0 0.28 to 1.0

ii - Current Assets to Current Liabilities ratio

a minimum of 1.25 to 1.0 1.40 to 1.0 1.16 to 1.0

iii – Interest bearing debt to EBITDA(1) not to exceed

2.5 to 1.0 1.84 to 1.0 3.50 to 1.0

1) EBITDA is a non-Canadian GAAP measure that the Company defines as earnings from operations excluding non-recurring items plus depreciation and amortization.

The Company’s intends to maintain a flexible capital structure consistent with the objectives stated above and to respond to changes in economic conditions and the risk characteristics of underlying assets. In order to maintain or adjust its capital structure, the Company may purchase shares for cancellation pursuant to normal course issuer bids, issue new shares, raise debt (secured, unsecured, convertible and/or other types of available debt instruments) or refinance existing debt with different characteristics. Due to an externally imposed capital requirement related to its credit facility, the Company also monitors the long term debt to net worth ratio to ensure that it does not exceed 1.0. The Company was in compliance with the above requirement during the year ended October 31, 2009.

22 - COMMITMENTS

The Company has entered into various leases expiring on different dates until September 30, 2017, which call for lease payments of $11,134,218 for the rental of buildings and other operating leases. The minimum lease payments for the coming years are:

Years ending October 31,

$ 2010 3,059 2011 2,389 2012 2,085 2013 1,895 2014 889 Subsequent years 817

The Company received a certificate of eligibility for the Carrefour de la Nouvelle Économie (CNE) program, which enables it to receive refundable tax credits on eligible salaries until October 2012.

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23- SEGMENTED INFORMATION

The Company operates in a single reportable operating segment. The single reportable operating segment derives its revenue from the sale of software solutions and related services. The following information provides the required enterprise-wide disclosures:


2009 2008

$ $ Revenue by geographic location Canada 17,709 23,638 United States 17,638 20,596 Germany 7,113 8,713 France 7,323 8,863 United Kingdom 10,013 11,911 Europe – others 1,880 3,537 Other countries 1,431 1,344

63,107 78,602

Revenue is attributed to geographic locations based on the selling point of origin. Most of the revenues originating from Canada are destined to customers in the United States.

October 31,

2009 2008

$ $ Property and equipment by geographic location Canada 1,190 1,622 United States 240 354 Germany 158 184 France 295 319 United Kingdom 366 352 Europe – others 8 13 Other countries 65 50

2,322 2,894

Goodwill by geographic location Canada 990 878 United States 19,333 17,083 Germany 3,681 3,260 France 5,650 5,004 United Kingdom 26,770 24,605 Europe – others 1,336 1,183 Other countries 401 354

58,161 52,367

DIRECTORS AND MANAGEMENT

BOARD OF DIRECTORS

MANAGEMENT

CORPORATE INFORMATION

Jean Mignault (3) Executive Chairman of the Board and Chief of Strategic Direction20-20 Technologies Inc.

Jean Mignault Executive Chairman of the Board and Chief of Strategic Direction

Banking InstitutionTD Toronto Dominion Bank

Head Office20-20 Technologies Inc.400 Armand-Frappier Blvd.Suite 2020Laval, QuebecCANADA H7V 4B4Tel.: (514) 332-4110

Christine LabelleVice President Human Resources

André ChartierVice President R&D Point-of-sale Solutions

Craig RothwellVice President Sales & Servicesfor Northern Europe

Philippe Frenière (1) Vice President Investments Montreal Partners & Bourgie Financial Corporation

Jacques Malo (2) (3)

Corporate Director

Jocelyn Proteau (2)

Vice Chairman of the Board and Lead Director20-20 Technologies Inc.

AuditorsRaymond Chabot Grant Thornton LLPChartered Accountants

Stock ListingToronto Stock Exchange (TSX)Ticker symbol: TWT

Mr. Steve PerroneChief Financial OfficerTel.: (514) [email protected]

Jean-Michel BrièreVice President Marketing

Klaus GuenikerVice President R&D Manufacturing Solutions

Steve ComptonDirector Sales and ServicesCommercial Solutions

Me Pierre L. Lambert (2)

Partner Dunton Rainville S.E.N.C.R.L.

Ghislain St-Pierre (2) (3)

Consultant

Jean-François Grou (3)

Chief Executive Officer20-20 Technologies Inc.


External Legal CounselStikeman Elliott LLP

Investors RelationsFor further information about the company, copies of this report and any other financial information, Please contact us:

Jörg WitthusExecutive Vice President Sales and Services for Europe

Christian DubucVice President Product Innovation Point-of-Sale Solutions

Jean SoucyDirector Sales & ServicesInternational

Benoit La Salle (1)

President and Chief Executive Officer Semafo Inc.

Yves Archambault (1)

Corporate Director

Me Yannick GodeauGeneral Counsel

Steve PerroneChief Financial Officer

Transfer AgentComputershare Trust Company of Canada

Craig YamauchiExecutive Vice President Sales and Services Manufacturing & Residential for North America

Thierry RacinaisVice President Sales & Servicesfor Southern Europe

Richard Lord (1)

President and Chief Executive Officer Richelieu Hardware Ltd.

(1) Member of the Audit Committee (2) Member of the Human Resources and Governance Committee (3) Member of the Strategic Direction Committee

www.2020Technologies.com

2020 technologies annual report 2009

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