Edgar Filing: COPERNIC INC

Unassociated Document

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, DC 20549

FORM 20-F


o	REGISTRATION STATEMENT PURSUANT TO SECTION 12(b) or (g) OF THE SECURITIES EXCHANGE ACT OF 1934


x	ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 for the fiscal year ended December 31, 2009


o	TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934


o	SHELL COMPANY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

Date of event requiring this shell company report ____________________

For the transition period from _______________________________ to _______________________________

Commission file number 0-17164

COPERNIC INC.

(Exact name of registrant as specified in its charter)

(formerly MAMMA.COM)

(Translation of Registrant’s name into English)

	PROVINCE OF ONTARIO (CANADA)
	(Jurisdiction of incorporation or organization)

360 Franquet Street, Suite 60

Sainte-Foy, Quebec

Canada, G1P 4N3

(Address of principal executive offices)

Marc Ferland

Telephone: (418) 527-0528, E-mail address: mferland@copernic.com, Facsimile: (418) 527-1751, Address: 360 Franquet Street, Suite 60, Sainte-Foy, Quebec, G1P 4N3

Securities registered or to be registered pursuant to Section 12(b) of the Act.

None

Securities registered or to be registered pursuant to Section 12(g) of the Act.

Common Shares, no par value

Securities for which there is a reporting obligation pursuant to Section 15(d) of the Act.

None

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Indicate the number of outstanding shares of each of the issuer’s classes of capital or common stock as of the close of the period covered by the annual report.

2,091,437 Common Shares

Indicate by check mark if the registrant is a well-know seasoned issuer, as defined in Rule 405 of the Act.


	o Yes	x No

If this report is an annual or transition report, indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934.


	o Yes	x No

Note- Checking the box above will not relieve any registrant required to file reports pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1932 from their obligations under those Sections.

Indicate by a check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.


	x Yes	o No

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, or a non-accelerated filer. See definition of “accelerated filer and large accelerated filer” in Rule 12b of the Exchange Act (Check one):


Large Accelerated Filer o	Accelerated Filer o	Non-Accelerated Filer x

Indicate by check mark which basis of accounting the registrant has used to prepare the financial statements included in this filing:

International Financial Reporting Standards as issued
by the International Accounting Standards

U.S. GAAP o

Board o

Other x

If “Other” has been checked in response to the previous question, indicate by check mark which financial statement item the registrant has elected to follow.


	x Item 17	o Item 18

If this is an annual report, indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).


	o Yes	x No

(APPLICABLE ONLY TO ISSUERS INVOLVED IN BANKRUPTCY PROCEEDINGS DURING THE PAST FIVE YEARS)

Indicate by check mark whether the registrant has filed all documents and reports required to be filed by Sections 12, 13, or 15(d) of the Securities Exchange Act of 1934 subsequent to the distribution of securities under a plan confirmed by a court.


	o Yes	o No

Explanatory Notes

On June 14, 2007, the Company changed its name from Mamma.com Inc. to Copernic Inc.

In this Annual Report on Form 20-F, unless otherwise indicated or the context otherwise requires, all monetary amounts are expressed in United States dollars.

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TABLE OF CONTENTS


SPECIAL NOTE ON FORWARD-LOOKING STATEMENTS		4
PART I		5
IDENTITY OF DIRECTORSM SENIOR MANAGEMENT AND ADVISERS		5
OFFER STATISTICS AND EXPECTED TIMETABLE		5
KEY INFORMATION		5
INFORMATION ON THE COMPANY		16
OPERATING AND FINANCIAL REVIEW AND PROSPECTS		25
DIRECTORS, SENIOR MANAGEMENT AND EMPLOYEES		56
MAJOR SHAREHOLDERS AND RELATED PARTY TRANSACTIONS MAJOR SHAREHOLDERS		70
FINANCIAL INFORMATION		71
THE OFFER AND LISTING		72
ADDITIONAL INFORMATION		77
QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK		83
DESCRIPTION OF SECURITIES OTHER THAN EQUITY SECURITIES		84
PART II		85
DEFAULTS, DIVIDEND ARREARAGES AND DELINQUENCIES		85
MATERIAL MODIFICATIONS TO THE RIGHTS OF SECURITY HOLDERS AND USE OF PROCEEDS		85
CONTROLS AND PROCEDURES		85
AUDIT COMMITTEE FINANCIAL EXPERT		86
CODE OF ETHICS		87
PRINCIPAL ACCOUNTANT FEES AND SERVICES		87
EXEMPTIONS FROM THE LISTING STANDARDS FOR AUDIT COMMITTEES		93
PURCHASES OF EQUITY SECURITIES BY THE ISSUER AND AFFILIATED PURCHASERS		93
FINANCIAL STATEMENTS		93
EXHIBITS		127
SIGNATURES		129

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Special Note on Forward-Looking Statements

INFORMATION CONTAINED IN THIS ANNUAL REPORT ON FORM 20-F INCLUDES FORWARD-LOOKING STATEMENTS, WHICH CAN BE IDENTIFIED BY THE USE OF FORWARD-LOOKING TERMINOLOGY SUCH AS “BELIEVES,” “EXPECTS,” “MAY,” “DESIRES,” “WILL,” “SHOULD,” “PROJECTS,” “ESTIMATES,” “CONTEMPLATES,” “ANTICIPATES,” “INTENDS,” OR ANY NEGATIVE SUCH AS “DOES NOT BELIEVE” OR OTHER VARIATIONS THEREOF OR COMPARABLE TERMINOLOGY. NO ASSURANCE CAN BE GIVEN THAT POTENTIAL FUTURE RESULTS OR CIRCUMSTANCES DESCRIBED IN THE FORWARD-LOOKING STATEMENTS WILL BE ACHIEVED OR OCCUR. SUCH INFORMATION MAY ALSO INCLUDE CAUTIONARY STATEMENTS IDENTIFYING IMPORTANT FACTORS WITH RESPECT TO SUCH FORWARD-LOOKING STATEMENTS, INCLUDING CERTAIN RISKS AND UNCERTAINTIES THAT COULD CAUSE ACTUAL RESULTS TO VARY MATERIALLY FROM THE PROJECTIONS AND OTHER EXPECTATIONS DESCRIBED IN SUCH FORWARD-LOOKING STATEMENTS. PROSPECTIVE INVESTORS, CUSTOMERS, VENDORS AND ALL OTHER PERSONS ARE CAUTIONED THAT FORWARD-LOOKING STATEMENTS ARE NOT ASSURANCES, FORECASTS OR GUARANTEES OF FUTURE PERFORMANCE DUE TO RELATED RISKS AND UNCERTAINTIES, AND THAT ACTUAL RESULTS MAY DIFFER MATERIALLY FROM THOSE PROJECTED. FACTORS WHICH COULD CAUSE RESULTS OR EVENTS TO DIFFER FROM CURRENT EXPECTATIONS INCLUDE, AMONG OTHER THINGS: THE SEVERITY AND DURATION OF THE ADJUSTMENTS IN OUR BUSINESS SEGMENTS; THE EFFECTIVENESS OF OUR RESTRUCTURING ACTIVITIES, INCLUDING THE VALIDITY OF THE ASSUMPTIONS UNDERLYING OUR RESTRUCTURING EFFORTS; FLUCTUATIONS IN OPERATING RESULTS; THE IMPACT OF GENERAL ECONOMIC, INDUSTRY AND MARKET CONDITIONS; THE ABILITY TO RECRUIT AND RETAIN QUALIFIED EMPLOYEES; FLUCTUATIONS IN CASH FLOW; INCREASED LEVELS OF OUTSTANDING DEBT; EXPECTATIONS REGARDING MARKET DEMAND FOR PARTICULAR PRODUCTS AND SERVICES AND THE DEPENDENCE ON NEW PRODUCT/SERVICE DEVELOPMENT; DELAYS IN MARKET ACCEPTANCE OF NEW PRODUCTS; THE ABILITY TO MAKE ACQUISITIONS AND/OR INTEGRATE THE OPERATIONS AND TECHNOLOGIES OF ACQUIRED BUSINESSES IN AN EFFECTIVE MANNER; THE IMPACT OF RAPID TECHNOLOGICAL AND MARKET CHANGE; THE IMPACT OF PRICE AND PRODUCT COMPETITION; THE UNCERTAINTIES IN THE MARKET FOR INTERNET-BASED PRODUCTS AND SERVICES; STOCK MARKET VOLATILITY; THE TRADING VOLUME OF OUR STOCK; THE POSSIBILITY THAT OUR STOCK MAY NOT SATISFY OUR REQUIREMENTS FOR CONTINUED LISTING ON THE NASDAQ CAPITAL MARKET INCLUDING WHETHER THE MINIMUM BID PRICE FOR THE STOCK FALLS BELOW $1; AND THE ADVERSE RESOLUTION OF LITIGATION OR RELATED EVENTS COULD HAVE A NEGATIVE IMPACT ON THE COMPANY, INCREASE COMPANY EXPENSES OR CAUSE EVENTS OR RESULTS TO DIFFER FROM CURRENT EXPECTATIONS. FOR ADDITIONAL INFORMATION WITH RESPECT TO THESE AND CERTAIN OTHER FACTORS THAT MAY AFFECT ACTUAL RESULTS, SEE THE REPORTS AND OTHER INFORMATION FILED OR FURNISHED BY THE COMPANY WITH THE UNITED STATES SECURITIES AND EXCHANGE COMMISSION (“SEC”) AND/OR THE ONTARIO SECURITIES COMMISSION (“OSC”) RESPECTIVELY ACCESSIBLE ON THE INTERNET AT WWW.SEC.GOV AND WWW.SEDAR.COM, OR THE COMPANY’S WEB SITE AT WWW.COPERNIC-INC.COM. ALL INFORMATION CONTAINED IN THIS ANNUAL REPORT ON FORM 20-F IS QUALIFIED IN ITS ENTIRETY BY THE FOREGOING AND REFERENCE TO THE OTHER INFORMATION THE COMPANY FILES WITH THE OSC AND SEC. UNLESS OTHERWISE REQUIRED BY APPLICABLE SECURITIES LAWS, THE COMPANY DISCLAIMS ANY INTENTION OR OBLIGATION TO UPDATE OR REVISE ANY FORWARD-LOOKING STATEMENTS, WHETHER AS A RESULT OF NEW INFORMATION, FUTURE EVENTS OR OTHERWISE.

Period-to-Period Comparisons

A VARIETY OF FACTORS MAY CAUSE PERIOD-TO-PERIOD FLUCTUATIONS IN THE COMPANY’S OPERATING RESULTS, INCLUDING BUSINESS ACQUISITIONS, REVENUES AND EXPENSES RELATED TO THE INTRODUCTION OF NEW PRODUCTS AND SERVICES OR NEW VERSIONS OF EXISTING PRODUCTS, NEW OR STRONGER COMPETITORS IN THE MARKETPLACE AS WELL AS CURRENCY FLUCTUATIONS, ECONOMIC RECESSIONS AND RECOVERIES. HISTORICAL OPERATING RESULTS ARE NOT INDICATIVE OF FUTURE RESULTS AND PERFORMANCE.

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PART I

ITEM 1.		IDENTITY OF DIRECTORS, SENIOR MANAGEMENT AND ADVISERS

Not Applicable

ITEM 2.		OFFER STATISTICS AND EXPECTED TIMETABLE

Not Applicable

ITEM 3.		KEY INFORMATION

SELECTED FINANCIAL DATA

The following consolidated statements of operations data for the years ended December 31, 2009, 2008 and 2007, and consolidated balance sheets data as at December 31, 2009 and 2008 is derived from the audited consolidated financial statements included in Item 17. All other financial information below is unaudited and derived from sources not included in Item 17. The selected consolidated financial data in the following tables should be read in conjunction with our audited consolidated financial statements, including the notes thereto, and “Item 5 – Operating and Financial Review and Prospects”, included elsewhere in this Form 20-F.

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CANADIAN GAAP
YEAR ENDED DECEMBER 31

	2009			2008			2007			2006			2005
		$			$			$			$			$
Consolidated Statements of Operations Data
Revenues		1,653,026			2,218,264			1,702,256			2,654,848			9,443,975
Earnings (loss) from continuing operations		(2,285,514	)		(7,529,104	)		(15,461,176	)		(5,621,340	)		-
Results of discontinued operations, net of income taxes		4,399,406			1,038,400			1,030,350			1,351,960			(5,658,318	)
Net earnings (loss) for the year		2,113,892			(6,490,704	)		(14,430,826	)		(4,269,380	)		(5,658,318	)
Basic and diluted earnings (loss) per share from continuing operations		(1.09	)		(3.60	)		(7.43	)		(2.74	)		-
Basic and diluted earnings (loss) per share from discontinued operations		2.10			0.50			0.50			0.66			(2.76	)
Basic and diluted net earnings (loss) per share		1.01			(3.10	)		(6.93	)		(2.08	)		(2.76	)
Weighted average number of shares – basic		2,091,437			2,091,437			2,080,699			2,049,049			2,049,049
Weighted average number of shares – diluted		2,091,437			2,091,437			2,080,699			2,049,049			2,049,049
		2009 $			2008 $			2007 $			2006 $			2005 $
Consolidated Balance Sheets Data
Total assets		12,711,841			10,782,059			18,357,856			33,339,488			38,327,198
Total liabilities		1,219,024			1,509,843			2,557,462			4,444,838			5,810,217
Net assets		11,492,817			9,272,216			15,800,394			28,894,650			32,516,981
Working capital		4,172,099			5,051,474			6,413,044			8,533,546			8,944,985
Capital stock		96,556,485			96,556,485			96,556,485			95,298,234			95,298,234
Contributed surplus		5,853,737			5,747,028			5,784,502			5,706,183			5,249,902
Accumulated other comprehensive income		561,137			561,137			561,137			561,137			370,369
Accumulated deficit		(91,478,542	)		(93,592,434	)		(87,101,730	)		(72,670,904	)		(68,401,524	)
Shareholders’ equity		11,492,817			9,272,216			15,800,394			28,894,650			32,516,981
Other
Cash dividends	None			None			None			None			None

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U.S. GAAP

YEAR ENDED DECEMBER 31st

	2009			2008			2007			2006			2005
		$			$			$			$			$
Consolidated Statements of Operations Data
Revenues		1,653,026			2,218,264			1,702,256			2,654,848			9,443,975
Earnings (loss) from continuing operations		(2,285,514	)		(7,529,104	)		(15,461,176	)		(5,621,340	)		-
Results of discontinued operations, net of income taxes		4,399,406			1,038,400			1,030,350			1,351,960			(5,658,318	)
Net earnings (loss) for the year		2,113,892			(6,490,704	)		(14,430,826	)		(4,269,380	)		(5,658,318	)
Basic and diluted earnings (loss) per share from continuing operations		(1.09	)		(3.60	)		(7.43	)		(2.74	)		-
Basic and diluted earnings (loss) per share from discontinued operations		2.10			0.50			0.50			0.66			(2.76	)
Basic and diluted net earnings (loss) per share		1.01			(3.10	)		(6.93	)		(2.08	)		(2.76	)
Weighted average number of shares – basic		2,091,437			2,091,437			2,080,699			2,049,049			2,049,049
Weighted average number of shares – diluted		2,091,437			2,091,437			2,080,699			2,049,049			2,049,049
		2009 $			2008 $			2007 $			2006 $			2005 $
Consolidated Balance Sheets Data
Total assets		12,711,841			10,782,059			18,357,856			33,339,488			38,327,198
Total liabilities		1,219,024			1,509,843			2,557,462			4,444,838			5,810,217
Net assets		11,492,817			9,272,216			15,800,394			28,894,650			32,516,981
Working capital		4,172,099			5,051,474			6,413,044			8,533,546			8,944,985
Capital stock		113,326,055			113,326,055			113,326,055			112,067,804			112,067,804
Contributed surplus		6,891,427			6,784,718			6,822,192			6,743,873			6,287,592
Accumulated other comprehensive income		561,137			561,137			561,137			561,137			370,369
Accumulated deficit		(109,285,802	)		(111,399,694	)		(104,908,990	)		(90,478,164	)		(86,208,784	)
Shareholders’ equity		11,492,817			(9,272,216	)		15,800,394			28,894,650			32,516,981
Other
Cash dividends	None			None			None			None			None

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CAPITALIZATION AND INDEBTEDNESS

The following tables set forth the consolidated cash and consolidated capitalization of the Company as at December 31, 2009 prepared in accordance with Canadian GAAP and United States GAAP, respectively.

(Prepared in accordance with Canadian GAAP)	As at December 31, 2009 $
Cash		465,949
Temporary investments		3,504,930
Indebtedness
Current liabilities		1,165,972
Obligations under capital leases		7,906
Future income taxes		45,146
Shareholders’ Equity
Capital stock		96,556,485
Contributed surplus		5,853,737
Cumulative translation adjustment		561,137
Accumulated deficit		(91,478,542	)
Total shareholders’ equity		11,492,817
Total capitalization		12,711,841

(Prepared in accordance with US GAAP)

	As at December 31, 2009 $
Cash		465,949
Temporary investments		3,504,930
Indebtedness
Current liabilities		1,165,972
Obligations under capital leases		7,906
Future income taxes		45,146
Shareholders’ Equity
Capital stock		113,326,055
Contributed surplus		6,891,427
Cumulative translation adjustment		561,137
Accumulated deficit		(109,285,802	)
Total shareholders’ equity		11,492,817
Total capitalization		12,711,841

Reasons for the Offer and Use of Proceeds

Not Applicable.

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RISK FACTORS

Risks associated with recently announced transactions.

Copernic announced, on February 12, 2010, that it had amended the terms and conditions of its previously announced private placement with 2208720, Ontario Limited. As described under the section Item 4. Information on the Company Subsequent Events in this report the proposed amended requires a series of transactions to be consummated. Although a break fee is payable in the event of a failure by the investors to close the transaction, there is no assurance that the transaction will close in a timely manner or at all. In addition, the consummation of such transaction will result in a substantial change in the nature of the business of Copernic. There is no assurance that if conusummated such new business shall be profitable in the short or medium term.

Our revenues depend to some degree on our relationship with some customers, the loss of which would adversely affect our business and results of operations.

For the year ended December 31, 2009, the Company had two major customers from which 45% or more of total revenues are derived. Revenues from these customers represented 34% (an ad placement agency settling revenues for thousands of retail transactions) and 11% of the Company’s revenues as compared to 28% and 10% for the same period last year. These customers have traditionally been good payers.

Our operating results may fluctuate, which makes our results difficult to predict and could cause our results to fall short of expectations.

Our operating results may fluctuate as a result of a number of factors, many of which are outside of our control. For these reasons, comparing our operating results on a period-to-period basis may not be meaningful, and our past results should not be relied on as an indication of our future performance. Our operating results may fluctuate as a result of many factors related to our business, including the competitive conditions in the industry, loss of significant customers, delays in the development of new services and usage of the Internet, as described in more detail below, and general factors such as size and timing of orders and general economic conditions. Our quarterly and annual expenses as a percentage of our revenues may be significantly different from our historical or projected rates. Our operating results in future quarters may fall below expectations. Any of these events could cause our stock price to fall. Each of the risk factors listed in this “Risk Factors” section, and the following factors, may affect our operating results:

●	Our ability to continue to attract users to our Web site

●	Our ability to monetize new products

●	Our ability to attract advertisers

●	The amount and timing of operating costs and capital expenditures related to the maintenance and expansion of our businesses, operations and infrastructure

●	Our focus on long term goals over short term results

●	The results of any investments in risky projects

●	Payments that may be made in connection with the resolution of litigation matters

●	General economic conditions and those economic conditions specific to Corporations, the Internet and Internet advertising

●	Our ability to keep our Web site operational at a reasonable cost and without service interruptions

●	Geopolitical events such as war, threat of war or terrorist actions

●	Our ability to generate revenues through licensing, subscriptions and revenue share.

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Because our business is changing and evolving, our historical operating results may not be useful in predicting our future operating results.

We face significant competition from Microsoft, Google and Enterprise Search vendors.

We face formidable competition in every aspect of our business, and particularly from other companies that seek to provide sophisticated search tools for increased productivity both on the internet, the desktop and wireless devices. Currently, we consider our primary competitors on the desktop to be Microsoft and Google. Microsoft and Google have a variety of products, services and content that directly competes with us. Although we do not directly compete in the Enterprise search market, vendors such as Oracle, SAP and SAS amongst others offer desktop search to complement their existing product line to offer a full service solution. However search technology is evolving to context search, commonly called the semantic web. The company believes that it is well positioned to provide innovative solutions in this evolving market but there are no assurances that these new technologies will be rapidly deployed or that the company can achieve a leadership position.

Microsoft, Google and others have more employees and cash resources than we do. These companies also have longer operating histories and more established relationships with customers. They can use their experience and resources against us in a variety of competitive ways, including by product bundling, making acquisitions, investing more aggressively in research and development and competing more aggressively for end users. Microsoft and Google also have a greater ability to attract and retain users than we do because they operate Internet portals with a broad range of products, services and content. In addition Microsoft and Google can vertically integrate with wireless devices by embedding search algorithms in the devices operating system, e.g. Android. To date the company has not attempted to offer products compatible with Apple computers and wireless devices due the significant differences in operating systems. As the IPhone achieves significant market share, such a limitation may become significant.

If we do not continue to innovate and provide products and services that are useful to users, we may not remain competitive, and our revenues and operating results could suffer.

Our success depends on providing products and services that people use for a high quality search experience. We believe that keyword search will evolve to semantic search and that context driven search from the desktop will significantly enhance internet searches yielding better results for end users. We believe that the end user will require more control on searches and that the web will become more specialized and fragmented with advertisers more focused on ROI and consummating sales transactions. Although representing a significant opportunity, our competitors are constantly developing innovations in Web search, desktop search and providing information to people. As a result, we must continue to invest significant resources in research and development in order to enhance our search technology and our existing products and services and introduce new high-quality products and services that people will use. If we are unable to predict user preferences or industry changes, or if we are unable to modify our products and services on a timely basis, we may lose end users who currently pay us for a leading technology. Our operating results would also suffer if our innovations were not responsive to the needs of our users and are not appropriately timed with market opportunity, effectively brought to market or well received in the market place. As search technology continues to develop, our competitors may be able to offer search results that are, or that are perceived to be, substantially similar or better than those generated by our search services.

Our business depends on a strong brand, and if we are not able to maintain and enhance our brand, our ability to expand our base of users will be impaired and our business and operating results will be harmed.

We believe that the brand identity that we have developed has significantly contributed to the success of our business. We also believe that maintaining and enhancing the Company’s brand is critical to expanding our base of users. Maintaining and enhancing our brand may require us to make substantial investments and these investments may not be successful. If we fail to promote and maintain the Copernic® brand, or if we incur excessive expenses in this effort, our business, operating results and financial condition will be materially and adversely affected. We anticipate that, as our market becomes increasingly competitive, maintaining and enhancing our brand may become increasingly difficult and expensive. Maintaining and enhancing our brand will depend largely on our ability to continue to provide high quality products and services, which we may not do successfully.

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We generate all of our revenue from software licensing, maintenance and subscription fees for the use of our products, and the reduction of spending by or loss of customers could seriously harm our business.

If we are unable to remain competitive and provide value to our end users, they may stop promoting our solutions, pay maintenance fees or renew annual subscription fees, which could negatively affect our net revenues and business. Copernic has on-going efforts to maintain high quality products to provide a high degree of confidence to our customer base that Copernic products are leading edge, state of the art solutions to searching for information and that the Company will maintain and renew these products with new enhancements as technology further develops. This positioning improves the brand, strengthens viral marketing and continuously grows our paying subscriber base.

We make investments in new products and services that may not be profitable.

We have made and will continue to make investments in research, development and marketing for new products, services and technologies. Our success in this area depends on many factors including our innovativeness, development support, marketing and distribution. We may not achieve significant revenue from a new product for a number of years, if at all. For the years 2007 and 2008 and 2009, we did not generate significant revenues from licensing Copernic® software and it cannot be assured that significant revenue will be generated from the licensing of Copernic® software going forward. In addition, our competitors are constantly improving their competing software, and if we fail to innovate and remain competitive our revenues from software licensing will decline.

Infringement and liability claims could damage our business.

Companies in the Internet, technology and media industries own large numbers of patents, copyrights, trademarks and trade secrets and frequently enter into litigation based on allegations of infringement or other violations of intellectual property rights. As we face increasing competition and become increasingly high profile, the possibility of intellectual property rights claims against us grows. Our technologies may not be able to withstand any third-party claims or rights against their use. Any intellectual property claims, with or without merit, could be time-consuming, expensive to litigate or settle and could divert resources and attention. In addition, many of our agreements with our advertisers require us to indemnify certain third-party intellectual property infringement claims, which would increase our costs as a result of defending such claims and may require that we pay damages if there were an adverse ruling in any such claims. An adverse determination also could prevent us from offering our services to others and may require that we procure substitute services for these members.

With respect to any intellectual property rights claim, to resolve these claims, we may enter into royalty and licensing agreements on less favourable terms, pay damages or stop using technology or content found to be in violation of a third party’s rights. We may have to seek a license for the technology or content, which may not be available on reasonable terms and may significantly increase our operating expenses. The technology or content also may not be available for license to us at all. As a result, we may also be required to develop alternative non-infringing technology, which could require significant effort and expense, or stop using the content. If we cannot license or develop technology or content for the infringing aspects of our business, we may be forced to limit our product and service offerings and may be unable to compete effectively. Any of these results could harm our brand and operating results.

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In addition, we may be liable to third-parties for content in the advertising we deliver if the artwork, text or other content involved violates copyright, trademark, or other intellectual property rights of third-parties or if the content is defamatory. Any claims or counterclaims could be time-consuming, could result in costly litigation and could divert management’s attention.

Additionally, we may be subject to legal actions alleging patent infringement, unfair competition or similar claims. Others may apply for or be awarded patents or have other intellectual property rights covering aspects of our technology or business. For example, we understand that X1 has won a patent to provide search results as you type a function utilised by other companies including Copernic Inc.

An inability to protect our intellectual property rights could damage our business.

We rely upon a combination of trade secret, copyright, trademark, patents and other laws to protect our intellectual property assets. We have entered into confidentiality agreements with our management and key employees with respect to such assets and limit access to, and distribution of, these and other proprietary information. However, the steps we take to protect our intellectual property assets may not be adequate to deter or prevent misappropriation. We may be unable to detect unauthorized uses of and take appropriate steps to enforce and protect our intellectual property rights. Additionally, the absence of harmonized patent laws between the United States and Canada makes it more difficult to ensure consistent respect for patent rights. Although senior management believes that our services and products do not infringe on the intellectual property rights of others, we nevertheless are subject to the risk that such a claim may be asserted in the future. Any such claims could damage our business.

Working capital may be inadequate.

For the years ended December 31, 1999 through the year ended December 31, 2003, for the years ended December 31, 2005 to December 31, 2008 and for year ended December 31, 2009, we have reported net losses from continuing operations. On June 30, 2009, the sale of Mamma.com and its AD Network for $5 million was consummated. The purchase price is to be paid in equal payments of $100,000 per month for 36 months beginning at the end of Q3 2009. The remaining balance will be payable at the end of the 36-month period. Management considers that liquidities as at December 31, 2009 will be sufficient to meet normal operating requirements throughout December 31, 2010. In the long term, we may require additional liquidity to fund growth, which could include additional equity offerings or debt finance. No assurance can be given that we will be successful in getting required financing in the future or that positive cash flow will be generated in the future.

The asset sale of Mamma.com and its AD Network

On June 30, 2009, the Company entered into an asset purchase agreement with Empresario, Inc., a private company located in Chicago, Illinois (the “Purchaser”), to sell certain of its assets relating to Mamma.com and its AD network which is comprised of third party publishers of search queries and advertisers who generate search results in an auction process that ranks the highest paid results to be delivered to the search query originator who completes the transaction by “clicking” on a desired result (the “AD Network”), (Mamma.com and AD Network collectively referred to as the “Mamma Unit”) for a total consideration of $5 million plus interest (the “Transaction”).

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Subject to the terms of the Asset Purchase Agreement, the Company has sold its Mamma Unit for $5 million to be paid in equal monthly instalments of $200,000 over 25 months (“Payments”) to the Purchaser. The first Monthly Payment was due on September 15, 2009 and, subject to adjustments pursuant to the Asset Purchase Agreement, the last Monthly Payment shall be payable on September 15, 2011. Interest shall accrue from the date of purchase on a monthly basis on the balance of the purchase price and any other amount payable under the Asset Purchase Agreement at a nominal interest rate of 4% compounded monthly and payable no later than 30 days after the date of the last Monthly Payment. Should the Purchaser make a Monthly Payment of less than $200,000, the Purchaser shall pay an amount equal to the difference between $200,000 and the actual amount of the Monthly Payment made by the Purchaser within 90 days of the date that such Monthly Payment was made to the Company. The shortfall amount shall bear interest at a rate of 4% per annum compounded monthly and shall be payable no later than 30 days after the date of the last Monthly Payment. If the Purchaser fails to perform or observe any one of its obligations under the Asset Purchase Agreement including, without limitation, in the event of (i) a shortfall amount equal to or more than $50,000 becoming due and payable, or (ii) a shortfall amount remaining unpaid by the Purchaser at the end of the 90-day period, the Purchaser be considered to be in default of the Asset Purchase Agreement and the Company may immediately terminate the Asset Purchase Agreement. Furthermore, after having given notice, the Company may on its absolute discretion, enter the premises where the Purchased Assets are located and take immediate possession of them.

Pursuant to the terms of the agreement concluded on June 30, 2009, the purchaser was to pay 25 equal monthly instalments of $200,000, beginning on September 15, 2009. Interest at the rate of 4% (effective rate at 13.6%), compounded monthly, was to be calculated on the outstanding balance of sale and was payable 30 days after all principal payments were completed. Pursuant to an amended agreement signed on November 12, 2009, the payment terms were changed from 25 to 36 equal monthly instalments of the greater of $100,000 or 85% of the revenues at an annual interest rate of 13.6%, compounded monthly, and calculated on the outstanding balance of sale. The remaining balance will be payable at the end of the 36-month period. That change had no impact on the fair value of the balance of sale receivable initially recorded. On June 30, 2009, an amount of $4,447,230, which represents the fair value at the transaction date, was booked as Balance of sale receivable. The net book value of the assets sold was nil. As at December 31, 2009, the total transaction fees amounted to $299,441, resulting in a net gain on disposal of assets amounting to $4,147,789.

There can be no assurance that the purchaser will not be in default, or that in the case of repossession the value of the assets can be maintained by operating the asset, or that the asset can be re-sold.

Goodwill may be written-down in the future.

Goodwill is evaluated for impairment annually, or when events or changed circumstances indicate impairment may have occurred. Management monitors goodwill for impairment by considering estimates including discount rate, future growth rates, amounts and timing of estimated future cash flows, general economic, industry conditions and competition. Future adverse changes in these factors could result in losses or inability to recover the carrying value of the goodwill. Consequently, our goodwill, which amounts to approximately $3.4M as at December 31, 2009, may be written-down in the future which could adversely affect our financial position.

Long-lived assets may be written-down in the future.

The Company assesses the carrying value of its long-lived assets, which include property and equipment and intangible assets, for future recoverability when events or changed circumstances indicate that the carrying value may not be recoverable. Management monitors long-lived assets for impairment by considering estimates including discount rate, future growth rates, general economic, industry conditions and competition. Future adverse changes in these factors could result in losses or inability to recover the carrying value of the long-lived assets. Consequently, our long-lived assets, which amount to approximately $0.5M as at December 31, 2009, may be written-down in the future.

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Security breaches and privacy concerns may negatively impact our business.

Consumer concerns about the security of transmissions of confidential information including customer profiling over public telecommunications facilities is a significant barrier to increased electronic commerce and communications on the Internet that are necessary for growth of the Company’s business. Many factors may cause compromises or breaches of the security systems we use or other Internet sites use to protect proprietary information, including advances in computer and software functionality or new discoveries in the fields of cryptography and processor design. A compromise of security on the Internet would have a negative effect on the use of the Internet for commerce and communications and negatively impact our business. Security breaches of their activities or the activities of their customers and sponsors involving the storage and transmission of proprietary information, such as credit card numbers, may expose our operating business to a risk of loss or litigation and possible liability. We cannot assure you that the measures in place are adequate to prevent security breaches.

Our business is subject to a variety of U.S. and foreign laws that could subject us to claims or other remedies based on the nature and content of the information searched or displayed by our products and services, and could limit our ability to provide information regarding regulated industries and products.

The laws relating to the liability of providers of online services for activities of their users are currently unsettled both within the U.S. and abroad. Claims have been threatened and filed under both U.S. and foreign law for defamation, libel, invasion of privacy and other data protection claims, tort, unlawful activity, copyright or trademark infringement, or other theories based on the nature and content of the materials searched and the ads posted or the content generated by our users. Increased attention focused on these issues and legislative proposals could harm our reputation or otherwise affect the growth of our business.

The application to us of existing laws regulating or requiring licenses for certain businesses of our advertisers, including, for example, distribution of pharmaceuticals, adult content, financial services, alcohol or firearms and online gambling, can be unclear. Existing or new legislation could expose us to substantial liability, restrict our ability to deliver services to our users, limit our ability to grow and cause us to incur significant expenses in order to comply with such laws and regulations.

Several other federal laws could have an impact on our business. Compliance with these laws and regulations is complex and may impose significant additional costs on us. For example, the Digital Millennium Copyright Act has provisions that limit, but do not eliminate, our liability for listing or linking to third-party Web sites that include materials that infringe copyrights or other rights, so long as we comply with the statutory requirements of this act. The Children’s Online Protection Act and the Children’s Online Privacy Protection Act restrict the distribution of materials considered harmful to children and impose additional restrictions on the ability of online services to collect information from minors. In addition, the Protection of Children from Sexual Predators Act of 1998 requires online service providers to report evidence of violations of federal child pornography laws under certain circumstances. Any failure on our part to comply with these regulations may subject us to additional liabilities.

Changes in key personnel, labour availability and employee relations could disrupt our business.

Our success is dependent upon the experience and abilities of our senior management and our ability to attract, train, retain and motivate other high-quality personnel, in particular for our technical and sales teams. There is significant competition in our industries for qualified personnel. Labour market conditions generally and additional companies entering industries which require similar labour pools could significantly affect the availability and cost of qualified personnel required to meet our business objectives and plans. There can be no assurance that we will be able to retain our existing personnel or that we will be able to recruit new personnel to support our business objectives and plans. Currently, none of our employees are unionized. There can be no assurance, however, that a collective bargaining unit will not be organized and certified in the future. If certified in the future, a work stoppage by a collective bargaining unit could be disruptive and have a material adverse effect on us until normal operations resume.

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Strategic acquisitions and market expansion present special risks.

A future decision to expand our business through acquisitions of other businesses and technologies presents special risks. Acquisitions entail a number of particular problems, including (i) difficulty integrating acquired technologies, operations, and personnel with the existing businesses, (ii) diversion of management’s attention in connection with both negotiating the acquisitions and integrating the assets as well as the strain on managerial and operational resources as management tries to oversee larger operations, (iii) exposure to unforeseen liabilities relating to acquired assets, and (iv) potential issuance of debt instruments or securities in connection with an acquisition possessing rights that are superior to the rights of holders of our currently outstanding securities, any one of which would reduce the benefits expected from such acquisition and/or might negatively affect our results of operations. We may not be able to successfully address these problems. We also face competition from other acquirers, which may prevent us from realizing certain desirable strategic opportunities.

We do not plan to pay dividends on the Common Shares.

The Company has never declared or paid dividends on its shares of Common Shares. The Company currently intends to retain any earnings to support its working capital requirements and growth strategy and does not anticipate paying dividends in the foreseeable future. Payment of future dividends, if any, will be at the discretion of the Company’s Board of Directors after taking into account various factors, including the Company’s financial condition, operating results, current and anticipated cash needs and plans for expansion.

Rapidly evolving marketplace and competition may adversely impact our business.

The markets for our products and services are characterized by (i) rapidly changing technology, (ii) evolving industry standards, (iii) frequent new product and service introductions, (iv) shifting distribution channels, and (v) changing customer demands. The success of the Company will depend on its ability to adapt to its rapidly evolving marketplaces. There can be no assurance that the introduction of new products and services by others will not render our products and services less competitive or obsolete. We expect to continue spending funds in an effort to enhance already technologically complex products and services and develop or acquire new products and services. Failure to develop and introduce new or enhanced products and services on a timely basis might have an adverse impact on our results of operations, financial condition and cash flows. Unexpected costs and delays are often associated with the process of designing, developing and marketing enhanced versions of existing products and services and new products and services. The market for our products and services is highly competitive, particularly the market for Internet products and services which lacks significant barriers to entry, enabling new businesses to enter this market relatively easily. Competition in our markets may intensify in the future. Numerous well-established companies and smaller entrepreneurial companies are focusing significant resources on developing and marketing products and services that will compete with the Company’s products and services. Many of our current and potential competitors have greater financial, technical, operational and marketing resources. We may not be able to compete successfully against these competitors. Competitive pressures may also force prices for products and services down and such price reductions may reduce our revenues.

To the extent that some of our revenues and expenses are paid in foreign currencies, and currency exchange rates become unfavourable, we may lose some of the economic value in U.S. dollar terms.

Although we currently transact a majority of our business in U.S. dollars, as we expand our operations, more of our customers may pay us in foreign currencies. Conducting business in currencies other than U.S. dollars subjects us to fluctuations in currency exchange rates. This could have a negative impact on our reported operating results. We do not currently engage in hedging strategies, such as forward contracts, options and foreign exchange swaps related to transaction exposures to mitigate this risk. If we determine to initiate such hedging activities in the future, there is no assurance these activities will effectively mitigate or eliminate our exposure to foreign exchange fluctuations. Additionally, such hedging programs would expose us to risks that could adversely affect our operating results, because we have limited experience in implementing or operating hedging programs. Hedging programs are inherently risky and we could lose money as a result of poor trades. For year ended December 31, 2009, the increase of the net results is $160,000. For the continuing operations, the revenues are mostly in US currency and most of the expenses are paid in foreign currencies.

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Higher inflation could adversely affect our results of operations and financial condition.

We do not believe that the relatively moderate rates of inflation experienced in the United States and Canada in recent years have had a significant effect on our revenues or profitability. Although higher rates of inflation have been experienced in a number of foreign countries in which we might transact business, we do not believe that such rates have had a material effect on our results of operations, financial condition and cash flows. For the next twelve months inflationary pressures are not anticipated, nevertheless high inflation could have a material, adverse effect on the Company’s results of operations, financial condition and cash flows, if it were to occur.

Risks related to the economic environment.

The activities of Copernic are subject to the influence of the general economic environment. We believe that the current difficult economic situation has negatively affected business activities amongst customers of Copernic and, consequently the demand for our products in 2009. Management continues to focus on the distribution network and corporate sales to reduce its exposure to the less than favourable economy. However there are no assurances that the economic situation will improve in the short term or that management’s offset programs will be successful.

ITEM 4. INFORMATION ON THE COMPANY

GENERAL INFORMATION

The legal name of the Company is Copernic Inc. and the Company operates under the commercial name Copernic. The Company was incorporated on July 5, 1985, pursuant to the Business Corporations Act (Ontario), promulgated under the laws of the Province of Ontario, Canada. The Company’s principal executive officers are located at 360 Franquet Street, Suite 60, Sainte-Foy, Quebec, Canada G1P 4N3.

The Company maintains its registered office c/o Fasken Martineau DuMoulin LLP, Toronto Dominion Bank Tower, P.O. Box 20, Suite 4200, 66 Wellington Street West, Toronto-Dominion Centre, Toronto, Ontario, M5K 1N6, Canada.

RECENT EVENTS

Cost Reduction Plan

In Q4 2009, the Company continued to execute its cost reduction plan announced at the end of Q1 2008. Total expenses in 2009, excluding write-downs, termination costs and restructuring costs, were at $4,486,484 compared to $6,013,570 in 2008. Total expenses in Q4 2009, excluding write-downs, gain on disposal, termination costs and restructuring costs, were at $1,118,473 compared to $1,100,097 in Q4 2008.

In addition, the Company has closed its Montreal office in Q1 2009 and concentrated all its activities in Quebec City.

The total cost of this restructuring which includes termination costs, recruiting fees, lease termination costs and moving expenses, was estimated at approximately $150,000. In 2008, the Company recorded $101,012 of restructuring costs. For 2009, an amount of $33,677 was recorded.

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Nomination of Officers

Jean-Rock Fournier, Vice-President Finance since the beginning of Q1 2009, based in Quebec City, has assumed the duties of Chief Financial Officer (CFO) effective March 31, 2009. In addition, since November 12, 2009, Jean-Rock Fournier has assumed responsibility for the operations of the Company as Executive Vice-President.

Notice from NASDAQ

If, at any time before December 15, 2008, the bid price of the Company’s common stock closed at $1.00 per share or more for a minimum of 10 consecutive business days, NASDAQ Staff would provide written notification that it complied with the Rule. If compliance with this Rule could not be demonstrated by December 15, 2008, NASDAQ Staff would determine whether the Company meets The NASDAQ Capital Market initial listing criteria as set forth in Marketplace Rule 4310(c), except for the bid price requirement. If it met the initial listing criteria, NASDAQ Staff would notify the Company that it has been granted an additional 180 calendar day compliance period. If the Company was not eligible for an additional compliance period, NASDAQ Staff would provide written notification that the Company’s securities would be delisted. At that time, the Company could appeal NASDAQ Staff’s determination to delist its securities to a Listing Qualifications Panel (the “Panel”). These circumstances could adversely impact trading in the Company’s Common Shares and could also adversely affect our ability to access capital.

On October 22, 2008, the Company received a NASDAQ Notice, indicating that the Company has received an extension to comply with the minimum bid price requirement for continued listing.

The notice stated: “Given these extraordinary market conditions, NASDAQ has determined to suspend enforcement of the bid price and market value of publicly held shares requirements through Friday, January 16, 2009. In that regard, on October 16, 2008, NASDAQ filed an immediately effective rule change with the Securities and Exchange Commission to implement the suspension. As a result, all companies presently in a bid price or market value of publicly held shares compliance period will remain at that same stage of the process and will not be subject to being delisted for these concerns. These rules will be reinstated on Monday, January 19, 2009 and the first relevant trade date will be Tuesday, January 20, 2009.

Since your company had 59 calendar days remaining in its compliance period as of October 16, it will, upon reinstatement of the rules, still have this number of days, or until March 19, 2009, to regain compliance. The company can regain compliance, either during the suspension or during the compliance period resuming after the suspension, by achieving a $1 closing bid price for a minimum of 10 consecutive trading days”.

On December 19, 2008, NASDAQ issued an issuer alert #2008-005A stating “Given the continued extraordinary market conditions, NASDAQ is extending the suspension of the bid price and market value of publicly held shares requirements. Enforcement of these rules is scheduled to resume on Monday, April 20, 2009. Any company in the compliance process for a bid price or market value of publicly held shares concern will continue to be “frozen” at the same stage of the process until the end of the suspension. However, a company could be delisted for other reasons during the suspension. NASDAQ staff will contact each company affected by this extension and notify those that regain compliance with these requirements during the suspension. NASDAQ will continue to monitor closely these circumstances.” The Company had 59 calendar days remaining in its compliance period, and therefore, with the new extension, it has until June 18, 2009 to effect compliance.

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On March 18, 2009, the Company received a NASDAQ Notice, indicating that the Company has received an extension to comply with the minimum bid price requirement for continued listing. The NASDAQ Notice discussed a proposed rule change to extend until July 19, 2009, the temporary suspension of the continued listing requirements related to bid price and market value of publicly held shares for listing on NASDAQ Stock Market. Since Copernic had 59 calendar days remaining in its compliance period, it will, upon reinstatement of the rules, still have this number of days, or until September 18, 2009 to regain compliance. The Company can regain compliance, either during the suspension or during the compliance period resuming after the suspension, by achieving a $1 closing bid price for a minimum of 10 consecutive trading days.

During a special meeting of the shareholders on September 11, 2009, the Consolidation of issued and outstanding shares was approved effective as of September 14, 2009. The Consolidation factor was 7:1. No fractional shares were issued and those shareholders who otherwise would have been entitled to receive fractional shares had their post-consolidation shareholdings rounded up to the next whole common share. The purpose of the Consolidation was to allow the Company to achieve compliance with the NASDAQ Capital Market’s minimum bid requirement for continued listing. Prior to the completion of the Consolidation, the Company had 14,637,531 common shares outstanding, and upon completion of the Consolidation, the Company had 2,091,437 common shares outstanding.

All information related to shares, stock options and warrants in this document reflects this Consolidation.

As at December 31, 2009, the Company’s closing stock price was $2.70.

Granting, Exercising and Cancellation of Stock Options

On March 4, 2009, the Company granted 3,571 stock options to a new officer, at an exercise price of $1.33 expiring in five years.

On June 17, 2009, the Company granted 17,856 stock options to directors at an exercise price of $2.17 expiring in five years.

On June 30, 2009, the Company granted 8,571 stock options to officers and employees at an exercise price of $2.03 expiring in five years.

On November 13, 2009 the Company granted 15,000 stock options to an officer at an exercise price of $1.98 expiring in five years.

As at December 31, 2009, 23,737 stock options were forfeited or expired.

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Discontinued Operations

On May 14, 2009, the Company announced that it had signed an agreement with Empresario, a privately owned digital media network based in Chicago, Illinois, for the disposal of the assets of Mamma.com and its AD Network (search / media segment) for $5,000,000. On June 17, 2009, at the Company’s Annual General Meeting and Special Shareholders’ Meeting, the shareholders approved the proposed transaction which was officially concluded on June 30, 2009. Prior period results have been reclassified to conform with the presentation required for discontinued operations.

RECENT AGREEMENT

Sale of Mamma.com

SUBSEQUENT EVENTS

As announced on February 12, 2010, Copernic Inc. amended the agreement signed on November 12, 2009, pursuant to which the Company will issue, by way of private placement, 500,000 shares at $4.00 per share for a total proceeds of $2,000,000.

The amended agreement also proposes a purchase, by Copernic, of 70.1% of the common shares outstanding of Sunbay Canada Corporation (“Sunbay”), a company registered in Ontario. The Board of Directors of Sunbay will be comprised of three members elected by Copernic, one of which will be Mr. Marc Ferland, Chief Executive Officer of Copernic who will also hold this position for Sunbay. In addition, Newlook Industries Corporation and Sunbay Energy Corporation will each elect a representative. Based on this amended agreement, Copernic will issue 150,000 common shares in exchange of its equity position in Sunbay valued at $600,000 and 450,000 shares for cash of $1,400,000. The closing is scheduled no later than April 30, 2010.

As announced on March 26, 2010, Copernic Inc. entered into a letter of intent with Fanotech Manufacturing Group with respect to the proposed acquisition by Copernic of the assets of Fanotech Manufacturing Group comprised of Fanotech Enviro Inc., Fanotech Waste Equipment Inc. and 1099958 Ontario Limited currently operating as FanoCore. The purchase price of approximately CND$ 3.5M. will be based on the Net Book Value as at March 31, 2010, estimated at CND$ 1.5M and 5 years of cumulative EBITDA estimated at CND$ 2M. The purchase price will be payable by the issuance to the vendor of 320,000 common shares of Copernic at US$ 6.00 / share for a total value of $1,920,000 and the remaining balance will be payable in cash in an amount approximating CND$ 1.5M subject to final determination of purchase price. The transaction is scheduled to close at the end of the second quarter and is subject to the receipt by Copernic of audited financial statements of Fanotech Manufacturing Group, satisfactory due diligence and board, shareholders and regulatory approvals.

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ACQUISITIONS, DIVESTITURES AND DISCONTINUED OPERATIONS

Acquisition of Copernic Technologies Inc.

On December 22, 2005, the Company acquired 100% of the issued and outstanding securities of Copernic Technologies Inc. including an amount to settle Copernic Technologies Inc.’s outstanding stock appreciation right obligations.

The consideration for the acquisition, including costs directly related to the acquisition, consisted of $15,851,922 in cash including $3,297,007 paid to settle Copernic Technologies Inc.’s stock appreciation right and severance obligations net of cash acquired. The Company also issued 2,380,000 common shares as part of the consideration paid. The fair value of the Company’s common shares issued to owners of Copernic Technologies Inc. has been determined to be $2.958 per share. This value has been determined using the average closing price of the Company’s common shares for the two days before and after August 17, 2005, the date the significant terms and conditions of the transaction were agreed to and publicly announced.

This acquisition has been accounted for using the purchase method and the results of operations have been included in the Company’s statement of operations from the date of acquisition. The purchase price allocation was finalized upon receipt of a valuation report.

On May 31, 2006, Copernic Technologies Inc. was wound up into the Company. The wind-up allows the Company to use carry forward tax losses where needed.

In 2006, the purchase price allocation was adjusted to reflect additional assets and liabilities assumed by the Company. These adjustments resulted by increasing accounts receivable by $480,091, liabilities by $22,286 and consequently decreasing original goodwill by $457,805. The increase in accounts receivable, which was not accounted for in the audited closing balance sheet of Copernic Technologies Inc. at the date of acquisition, was due to revenue recognition adjustment related to a specific contract that existed prior to the date of the transaction.

In 2006, $379,382 was received by the Company from the sellers of Copernic Technologies Inc. to compensate for a reduction of research and development tax credits prior to the acquisition date, the purchase price and goodwill were then reduced accordingly.

Discontinued Digital Arrow LLC and High Performance Broadcasting Inc. (“Digital Arrow”) Operations

In September 2005, following the poor performance of Digital Arrow LLC and High Performance Broadcasting, Inc. (“Digital Arrow”) located in Florida, management decided to discontinue its subsidiary’s operations. The Company has therefore not renewed the lease in Florida and recorded closing costs.

Consequently, the results of the operations of Digital Arrow were recorded as discontinued operations and the results of the Company for the years ended December 31, 2005 and 2004 were reclassified to account for the closure of the subsidiary’s operations.

Digital Arrow, which the Company acquired on June 10, 2004, was a privately held marketing company that was engaged in the distribution of online, opt-in e-mail marketing solutions via the Internet. In that acquisition, the Company’s wholly-owned subsidiary, Mamma.com USA, Inc., entered into a Securities Purchase Agreement with Digital Arrow and their equity holders, pursuant to which Mamma.com USA, Inc. acquired all equity interests in Digital Arrow. The consideration for the acquisition, including costs directly related to the acquisition, consisted of $1,264,210 in cash, net of cash acquired, and 90,000 of the Company’s common shares. The fair value of the Company shares issued to owners of Digital Arrow was determined to be $8.23 per share. The operations of the business have been included in the Company’s consolidated financial statements since June 1, 2004.

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This acquisition has been accounted for using the purchase method. The fair value of the net assets acquired was $1,535,744, which with goodwill of $556,196, resulted in a total purchase price of $2,091,940. From this purchase price, $740,782 was paid by issuance of the Company’s common shares, $86,948 for cash acquired at the transaction for a cash paid net of cash acquired of $1,264,210. Digital Arrow LLC and High Performance Broadcasting, Inc. have since been liquidated.

BUSINESS OVERVIEW

Copernic Inc. specializes in developing, marketing and selling cutting-edge search technology, providing innovative home and business software products and solutions for desktop, web and mobile users, through its online property www.copernic.com. With its award winning Copernic Desktop Search, the Company brings the power of a sophisticated, yet easy-to-use search engine to the user’s PC. It allows for instant indexing of files, calendar, emails, email attachments and all other information stored anywhere on a PC hard drive.

The desktop search application won the CNET Editors’ Choice Award, as well as the PC World Class award in 2005. In 2007, PC Pro, the UK’s most respected IT magazine for professionals, and Micro Hebdo, one of France’s most read IT magazines, each selected Copernic Desktop Search® 2.0 software search engine as the top desktop search tool. At the CTIA Wireless 2008® Copernic’s Desktop Search Wireless Access won first prize for innovation in the enterprise solutions category. Also in 2008, Copernic Desktop Search® 3.0 (Home Edition) received the prestigious “Gizmo’s Top Pick” award in the “Best Free Desktop Search Utility” category at Gizmo’s popular Best-ever Freeware site. In 2009, Germany’s Bilt magazine featured the privacy functions of Copernic Desktop Search® 3.0 (Home Edition) distributing over 800,000 copies.

In Q3 2008, the Company launched version 3.0 of its business-oriented desktop search product. The upgraded Copernic Desktop Search® (“CDS”) Corporate Edition further increases its competitive edge by adding Intranet integration features and expanding its MS Outlook® search capabilities. CDS Professional Edition also specifically targets knowledge workers with features such as the indexing of Microsoft Outlook’s calendar, tasks and notes. Some advanced search functions are now exclusive to the Professional and Corporate products: network drive indexing, “as you type” display of results, and saving of queries for frequently used searches. CDS Home Edition offers a unique competitive advantage with the new “One Search” feature which simultaneously searches the desktop and the Internet. Although the Home Edition is free to consumers, it does provide for contextual advertised sponsored banner ads based on search queries.

In Q1 2009, the Company launched a Desktop Search Product compatible with Lotus notes and a German language privacy version for the European market both designed to expand Copernic’s served market.

In Q2 2009, the Company sold the assets of its search / media segment defined as Mamma.com and its AD Network which closed an important chapter in the history of the Company (For more details, see the “Recent Event” section).

In Q3 2009, the Company unveiled its new personal search portal called myCopernicTM that is designed to provide solutions for today’s challenges: mobility and accessibility of personal data. It also provides innovative solutions to search and access information that help professionals do business while being an integral part of the new Cloud Computing paradigm.

In Q4 2009, as part of its ongoing marketing and product efforts, Copernic engaged in 2 major initiatives:

a)	Optimization of its web site, its most important distribution channel to increase the traffic and the conversion rate from visitors to customers;

b)	Strategic planning to set the strategic direction based on in-depth customer insights through surveys, customer meetings and pilot product testing.

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At the same time, the Company announced the availability of myCopernic TM on the Go! - the first service available from myCopernicTM personal search portal. myCopernic TM on the Go! offers the end-user an intelligent solution to search and access relevant information from virtually anywhere, using any internet enabled device or wireless handset.

The Company’s traditional products are sold with one time software licenses while new products in the myCopernicTM search portal are sold with annual renewable subscription fees.

PRINCIPAL MARKETS

Although we operate in the global on-line market, and now engage in the development and sale of information management and search solution products, the majority of our users and customers are concentrated in the U.S., Europe and Canada. Our total revenues in 2009 can be divided into several categories: search and graphic advertising, software licensing, customized development and maintenance support revenues. The following table gives a breakdown of the total revenues by category for the last five financial years. The operations of Copernic Technologies Inc. have been included since December 23, 2005.

year	search and graphic advertising		Software Licensing		Customized Development and Maintenance Support
	US $		US $		US $

2009		640,103		574,536		438,387

2008		5,606,383		951,022		454,226

2007		7,354,709		415,263		346,436

2006		8,024,972		957,488		613,942

2005		9,426,772		6,671		10,532

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SEASONALITY AND FLUCTUATION IN REVENUES

The Company is subject to seasonal fluctuations affecting its operations and results. Historically, the first and third quarters have shown significant decreases in search and graphic revenues, which the Company believes are respectively attributable to decreased advertising and Internet use during the post-Christmas lull and the Summer holiday season.

Although not seasonal, our software licensing revenues fluctuate from quarter to quarter based upon the quarters in which we obtain new agreements or existing agreements terminate.

MARKETING CHANNELS AND SALES METHODS

The Company maintains its own sales and marketing staff and has its own experienced direct sales force to address the new and evolving requirements of its target markets. Although the Company itself does not expend significant resources on public relations, the Company markets itself through on-line advertising, press releases, internally sponsored events and trade shows.

The Company solicits revenues by direct sales force, e-mail directly to the end client, or through specialized search engines through advertising agencies or network distribution business associates who mainly specialize in the online advertising market. Search listings are solicited either directly or through on-line marketing campaigns from the end client.

DEPENDENCE ON INTELLECTUAL PROPERTY AND OTHER MATTERS MATERIAL TO PROFITABILITY

We rely upon a combination of trade secret, copyright, trademark, patent and other laws to protect our intellectual property assets. We have entered into confidentiality agreements with our management and key employees with respect to such assets and limit access to, and distribution of, these assets and other proprietary information. However, the steps we take to protect our intellectual property assets may not be adequate to deter or prevent misappropriation. We may be unable to detect unauthorized uses of and take appropriate steps to enforce and protect our intellectual property rights. Although senior management believes that our services and products do not infringe on the intellectual property rights of others, we nevertheless are subject to the risk that such a claim may be asserted in the future. Any such claims could damage our business.

GOVERNMENT REGULATION

The laws relating to the liability of providers of online services for activities of their users are currently unsettled both within the U.S. and abroad. Claims have been threatened and filed under both U.S. and foreign law for defamation, libel, invasion of privacy and other data protection claims, tort, unlawful activity, copyright or trademark infringement, or other theories based on the nature and content of the materials searched and the ads posted or the content generated by users of other services similar to ours. Increased attention focused on these issues and legislative proposals could harm our reputation or otherwise affect the growth of our business.

The application to us of existing laws regulating or requiring licenses for certain businesses of our advertisers, including, for example, distribution of pharmaceuticals, adult content, financial services, online gambling, alcohol or firearms, can be unclear. Existing or new legislation could expose us to substantial liability, restrict our ability to deliver services to our users, limit our ability to grow and cause us to incur significant expenses in order to comply with such laws and regulations.

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Several other federal laws could have an impact on our business. Compliance with these laws and regulations is complex and may impose significant additional costs on us. For example, the Digital Millennium Copyright Act has provisions that limit, but do not eliminate, our liability for listing or linking to third-party web sites that include materials that infringe copyrights or other rights, so long as we comply with the statutory requirements of this act. The Children’s Online Protection Act and the Children’s Online Privacy Protection Act restrict the distribution of materials considered harmful to children and impose additional restrictions on the ability of online services to collect information from minors. In addition, the Protection of Children from Sexual Predators Act of 1998 requires online service providers to report evidence of violations of federal child pornography laws under certain circumstances. Any failure on our part to comply with these and similar regulations in other jurisdictions may subject us to additional liabilities.

COMPETITION

The Company primarily competes in the areas of on-line advertising and software licensing which includes sales of licenses, customization and maintenance support. The market for these services is in a constant state of flux and competition is intense.

The Company faces intense competition expects this competition will continue to intensify. The Company’s markets are subject to rapid changes in technology and marketing strategies and the Company is significantly affected by new product introductions and other market activities of its existing and potential competitors. The Company believes the principal competitive factors in this market are name recognition, product performance and functionality, ease of use, size of the Web index, user traffic, the speed with which search results return and the relevance of results, pricing and quality of customer support. Many of the Company’s current and potential competitors and software licensing, includes Google, Microsoft, Yahoo and X1 have significant operating histories, larger customer bases, greater brand name recognition, and significantly greater financial, marketing and other resources which give them a competitive advantage.

The markets for our products and services are characterized by (i) rapidly changing technology, (ii) evolving industry standards, (iii) frequent new product and service introductions, (iv) shifting distribution channels, and (v) changing customer demands. The success of the Company will depend on its ability to adapt to its rapidly evolving marketplaces. There can be no assurance that the introduction of new products and services by others will not render our products and services less competitive or obsolete. We expect to continue spending funds in an effort to enhance already technologically complex products and services and develop or acquire new products and services. Failure to develop and introduce new or enhanced products and services on a timely basis might have an adverse impact on our results of operations, financial condition and cash flows. Unexpected costs and delays are often associated with the process of designing, developing and marketing enhanced versions of existing products and services and new products and services. The market for our products and services is highly competitive. Competition in our markets may intensify in the future. Numerous well-established companies and smaller entrepreneurial companies are focusing significant resources on developing and marketing products and services that will compete with the Company’s products and services. Many of our current and potential competitors have greater financial, technical, operational and marketing resources. We may not be able to compete successfully against these competitors. Competitive pressures may also force prices for products and services down and such price reductions may reduce our revenues.

ORGANIZATIONAL STRUCTURE

On May 31, 2004, the wholly owned subsidiary, Mamma.com Enterprises Inc. was wound up into the Company. The transaction has allowed the Company to use carry forward tax losses. On May 31, 2006, the wholly owned subsidiary, Copernic Technologies Inc. which was acquired on December 22, 2005, was wound up into the Company. During 2007 and 2008, a few non-active companies were wound up into the Company. As at March 26, 2010 the Company had an active wholly-owned subsidiary, Mamma.com USA, Inc.

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Until March 31, 2009, the Company had leased two office locations: One in Quebec City, Canada with 13,000 square feet and one in Montreal, Canada with 3,400 square feet. The Montreal office was closed on March 31, 2009.

ITEM 5. OPERATING AND FINANCIAL REVIEW AND PROSPECTS

MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

The following Management’s Discussion and Analysis of Financial Condition and Results of Operations of Copernic Inc. for the three years ended December 31, 2009, 2008 and 2007 should be read in conjunction with its consolidated financial statements and the related notes. All statements in the following discussion, which are not reports of historical information or descriptions of current accounting policy, are forward-looking statements. Please consider our forward-looking statements in light of the risks referred to in this Management’s Discussion and Analysis of Financial Condition and Results of Operations cautionary note. It should be noted that the consolidated financial statements summarize operating details and gains on disposal of assets as related to the sale of Mamma.com and its AD Network while the 2008 Annual Report includes operating details of the assets. For ease of comparison, the consolidated financial statements of 2008 have been re-casted.

The Company’s consolidated financial statements are reported in US dollars and have been prepared in accordance with generally accepted accounting principles as applied in Canada (“Canadian GAAP”). As a registrant with the Securities and Exchange Commission in the United States, the Company is required to reconcile its financial results for significant measurement differences between Canadian GAAP and generally accepted accounting principles as applied in the United States (“U.S. GAAP”) as they specifically relate to the Company as described in Note 23 to its consolidated financial statements. This Management’s Discussion and Analysis of Financial Condition and Results of Operations is dated March 26, 2010.

The Company’s functional currency is the U.S. dollar. All amounts included herein are expressed in U.S. dollars, unless specified otherwise.

Business Overview

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In Q1 2009, the Company launched a Desktop Search Product compatible with Lotus notes and a German language privacy version for the European market both designed to expand Copernic’s served market.

In Q4 2009, as part of its ongoing marketing and product efforts, Copernic engaged in 2 major initiatives:

a)	Optimization of its web site, its most important distribution channel to increase the traffic and the conversion rate from visitors to customers;

b)	Strategic planning to set the strategic direction based on in-depth customer insights through surveys, customer meetings and pilot product testing.

The Company’s traditional products are sold with one time software licenses while new products in the myCopernicTM search portal are sold with annual renewable subscription fees.

Recent Events

Cost Reduction Plan

In addition, the Company has closed its Montreal office in Q1 2009 and concentrated all its activities in Quebec City.

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Nomination of Officers

Notice from NASDAQ

On October 22, 2008, the Company received a NASDAQ Notice, indicating that the Company has received an extension to comply with the minimum bid price requirement for continued listing.

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All information related to shares, stock options and warrants in this document reflects this Consolidation.

As at December 31, 2009, the Company’s closing stock price was $2.70.

Granting, Exercising and Cancellation of Stock Options

On March 4, 2009, the Company granted 3,571 stock options to a new officer, at an exercise price of $1.33 expiring in five years.

On June 17, 2009, the Company granted 17,856 stock options to directors at an exercise price of $2.17 expiring in five years.

On June 30, 2009, the Company granted 8,571 stock options to officers and employees at an exercise price of $2.03 expiring in five years.

On November 13, 2009 the Company granted 15,000 stock options to an officer at an exercise price of $1.98 expiring in five years.

As at December 31, 2009, 23,737 stock options were forfeited or expired.

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Discontinued Operations

Critical Accounting Policies and Estimates

The Company prepares its consolidated financial statements in accordance with accounting principles generally accepted in Canada. In doing so, management has to make estimates and assumptions that affect reported amounts of assets, liabilities, revenues and expenses, as well as related disclosure of contingent assets and liabilities. In many cases, management reasonably has used different accounting policies and estimates. In some cases, changes in the accounting estimates are reasonably likely to occur from period to period. Accordingly, actual results could differ materially from our estimates. To the extent that there are material differences between these estimates and actual results, our financial condition or results of operations will be affected. Management bases its estimates on past experience and other assumptions that it believes are reasonable under the circumstances, and it evaluates these estimates on an ongoing basis. Management refers to accounting estimates of this type as critical accounting policies and estimates, which are discussed further below. Management has reviewed its critical accounting policies and estimates with its Board of Directors.

Use of Estimates

Significant estimates in these financial statements include the allowance for doubtful accounts, recovery of future income taxes, goodwill and annual goodwill impairment test, useful lives and impairment of long-lived assets, stock-based compensation costs and determination of the fair value of the intangible assets on acquisitions. Each of these critical accounting policies is described in more detail below.

Allowance for Doubtful Accounts

Judgments are made in the ability to collect outstanding receivables and provide allowances for the portion of receivables when collection becomes doubtful. Provisions are made based upon a specific review of all significant outstanding invoices. The allowance provided for doubtful accounts does not reflect the future ability to collect outstanding receivables, additional provisions for doubtful accounts may be needed and the Company’s future results of operations could be adversely impacted.

The Company also recorded a provision for revenue adjustments in the same period as the related revenues are recorded. These estimates are based on historical analysis of credit memo data and other factors. If the historical data the Company uses to calculate these estimates does not properly reflect future uncollectible revenues, then a change in the allowances would be made in the period in which such a determination is made and revenues in that period could be impacted.

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Recovery of Future Income Taxes

Significant judgment is used in determining consolidated recovery of future income taxes. Uncertainties may arise with respect to the tax treatment of certain transactions. Although it is believed that estimates are reasonable, there is no certainty that the final tax outcome of these matters will not be different than that which is reflected in financial statements. Such differences could have a material effect on future income taxes in the period in which such determination is made.

Goodwill and Annual Goodwill Impairment Test

Goodwill is evaluated for impairment annually on December 31 of each year or when events or changed circumstances indicate impairment may have occurred. In connection with the goodwill impairment test, if the carrying value of the Company to which goodwill relates exceeds its estimated fair value, the goodwill related to the Company is tested for impairment. If the carrying value of such goodwill is determined to be in excess of its fair value, an impairment loss is recognized in the amount of the excess of the carrying value over the fair value. Management’s determination of the fair value of the Company incorporates multiple inputs including discounted cash flow calculations, peer company price to earnings multiples, the Company’s share price and assumptions that market participants would make in valuing the Company. Other assumptions include levels of economic capital, future business growth, earnings projections and weighted average cost of capital used for purpose of discounting. Decreases in the amount of economic capital allocated, decreases in business growth, decreases in earnings projections and increases in the weighted average cost of capital will all cause the fair value to decrease. The Company completed its annual goodwill assessment as of December 31, 2009. As the results in 2009 are in line with the forecast and as assumptions used for the impairment test in 2008 remain the same, the goodwill assessment was completed without any impairment. Future adverse changes in these factors could result in losses or inability to recover the carrying value of the goodwill, thereby possibly requiring an impairment charge in the future.

Useful Lives and Impairment of Long-lived Assets

The Company assesses the carrying value of its long-lived assets which include property and equipment and intangible assets, for future recoverability when events or changed circumstances indicate that the carrying value may not be recoverable. Useful lives of long-lived assets are regularly reviewed for their appropriateness. An impairment loss is recognized if the carrying value of a long-lived asset exceeds the sum of its estimated undiscounted future cash flows expected from its use. The amount of impairment loss, if any, is determined as the excess of the carrying value of the assets over their fair value. Management assesses long-lived assets for impairment using estimates including discount rate, future growth rates, general economic, industry conditions and competition. Future adverse changes in these factors could result in losses or inability to recover the carrying value of the long-lived assets, thereby possibly requiring an impairment charge in the future.

Stock-based Compensation Costs

In determining the fair value of stock options and warrants issued to employees and service providers, using the Black-Scholes option pricing model, the Company must make estimates of the forfeiture rate, the period in which the holders of the options and warrants will exercise the options and warrants and the volatility of the Company’s stock over that same period. Different estimates would result in different amounts of compensation being recorded in the financial statements.

Revenue Recognition

Search advertising, graphic advertising, software licensing, subscription fees, customized development and maintenance support revenues are recognized when services are rendered, provided there is persuasive evidence of an arrangement, the fee is fixed or determinable, collection is considered probable, and fees are not subject to forfeiture, refund or other concessions.

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With respect to search advertising and graphic advertising revenues, insertion orders or signed contracts are generally used as evidence of an arrangement. Revenues are recognized in accordance with EIC-123, Reporting Revenue Gross as a Principal Versus Net as an Agent.

Software licensing agreements are recognized upon delivery of software if persuasive evidence of an arrangement exists, collection is probable, the fee is fixed or determinable and vendor-specific evidence of an arrangement exists to allocate the total fee to the different elements of an arrangement. Vendor-specific objective evidence is typically based on the price charged when an element is sold separately, or, in the case of an element not yet sold separately, the price established by management, if it is probable that the price, once established, will not change before market introduction.

Revenues from myCopernicTM on the Go! service are generated by a yearly subscription and are amortized over a twelve-month period.

Revenues from maintenance support for licenses previously sold and implemented are recognized rateably over the term of the contract.

Revenues from customized development, not considered as part of the implementation of software licenses, are recognized as the services are provided.

Amounts received in advance of the delivery of products or performances of services are classified as deferred revenue.

Estimates of collection likelihood are based on a number of factors, including past transaction history with the customer and the credit-worthiness of the customer. If it is determined that collection of a fee is not probable, management defers the fee and recognizes revenues at the time collection becomes probable, which is generally upon receipt of cash.

Recent Accounting Changes

Changes Affecting 2008

CICA Section 1535 - Capital Disclosures

In December 2006, the CICA issued Handbook Section 1535 – Capital Disclosures. The new accounting standard requires disclosure of information about an entity’s objectives, policies, and processes for managing capital, as well as quantitative data about capital and whether the entity has complied with any capital requirements.

This Handbook Section is effective for interim and annual periods beginning on or after October 1, 2007. The Company has adopted this new Section in its first quarter of 2008.

CICA Section 3862 – Financial Instruments – Disclosures

CICA Section 3863 – Financial Instruments – Presentation

In December 2006, the CICA issued Handbook Section 3862 and 3863 that provide additional guidance regarding disclosure of the risks associated with both recognized and unrecognized financial instruments and how those risks are managed. These Handbook Sections are also effective for interim and annual periods beginning on or after October 1, 2007. The Company has adopted these new Sections in its first quarter of 2008.

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EIC-169, Determining Whether a Contract is Routinely Denominated in a Single Currency

Issued on January 8, 2008, EIC-169 provides guidance on how to define or apply the term “routinely denominated in commercial transactions around the world” as discussed in Section 3855 when assessing contracts for embedded foreign currency derivatives. It also determines the factors that can be used to determine whether a contract for the purchase or sale of a non-financial item such as a commodity is routinely denominated in a particular currency in commercial transactions around the world. The accounting treatment of this Abstract should be applied retrospectively to embedded foreign currency derivatives in host contracts that are not financial instruments accounted for in accordance with Section 3855 in financial statements issued for interim and annual periods ending on or after March 15, 2008. The adoption of this Abstract did not have any impact on the Company’s financial statements.

Changes Affecting 2009

CICA Section 3064 - Goodwill and Intangible Assets

Section 3064, “Goodwill and Intangible Assets”, which replaces Section 3062, “Goodwill and Other Intangible Assets”, and Section 3450, “Research and Development Costs”. In addition, Section 1000, “Financial Statement Concepts” was amended to clarify the criteria for recognition of an asset. Finally, once an entity adopts this new section it may no longer apply the guidance in Emerging Issues Committee Abstract No. 27, “Revenues and Expenditures during the Pre-Operating Period”. This section applies to interim and annual consolidated financial statements relating to fiscal year beginning on or after October 1, 2008. This new section sets out standards for recognition, measurement, presentation and disclosure of goodwill and intangible assets and it reinforces the approach under which assets are recorded only if they satisfy the definition of an asset and the recognition criteria for an asset. The adoption of this section did not have a significant impact on the Company’s consolidated financial statements.

EIC-173, Credit Risk and the Fair Value of Financial Assets and Financial Liabilities

In January 2009, the CICA approved E1C-173 Credit Risk and the Fair Value of Financial Assets and Financial Liabilities. This guidance clarified that an entity’s own credit risk and the credit risk of the counterparty should be taken into account in determining the fair value of financial assets and financial liabilities including derivative instruments. This guidance is applicable to fiscal periods ending on or after January 20, 2009. The Company has adopted that new guidance in the first quarter of 2009. The application of this new standard had no impact on the Company’s operating results or financial position.

CICA, Amendments to Section 3862, Financial Instruments – Disclosures

In June 2009, the CICA issued amendments to Section 3862, Financial Instruments – Disclosures, that are effective for the Company’s financial statements for the year ended December 31, 2009. The amendments are intended to enhance disclosure regarding fair value measurement and liquidity risk of financial instruments. The additional disclosures are presented in Note 21.

Future Accounting Changes

CICA Section 1582 – Business Combinations

Section 1582, “Business Combinations” replaces Section 1581 of the same title. The Section establishes new standards for the accounting for a business combination. This Section constitutes the GAAP equivalent to the corresponding International Financial Reporting Standards (“IFRS”). This Section shall be applied prospectively to business combinations for which the acquisition date is on or after the beginning of the first annual reporting period beginning on or after January 1, 2011 and the Company will adopt this new Section as of such date upon its conversion to IFRS. Earlier application is permitted. The Company is currently evaluating the impact of the adoption of this new Section on its consolidated financial statements and on future business combinations.

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CICA Section 1601 - Consolidated Financial Statements and CICA Section 1602 - “Non-Controlling Interests”

Section 1601, “Consolidated Financial Statements” and Section 1602, “Non-Controlling Interests” together replace Section 1600, “Consolidated Financial Statements”. Section 1601 establishes 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. These Sections constitute the GAAP equivalent to the corresponding IFRS. These Sections apply to interim and annual consolidated financial statements relating to fiscal years beginning on or after January 1, 2011 and the Company will adopt these new Sections as of such date upon its conversion to IFRS. Earlier adoption is permitted as of the beginning of a fiscal year. The Company is currently evaluating the impact of the adoption of these new Sections on its consolidated financial statements.

EIC-175 – Multiple Deliverable Revenue Arrangements

In December 2009, the CICA issued EIC 175, Multiple Deliverable Revenue Arrangements, replacing EIC 142, Revenue Arrangements with Multiple Deliverables. This abstract was amended to (1) exclude from the application of the updated guidance those arrangements that would be accounted for in accordance with Financial Accounting Standards Board Statement (FASB) Statement of Position (SOP) 97-2, Software Revenue Recognition as amended by Account Standards Update (ASU) 2009-14; (2) provide guidance on whether multiple deliverables exist, how the deliverables in an arrangement should be separated, and the consideration allocated; (3) require in situations where a vendor does not have vendor-specific objective evidence (“VSOE”) or third-party evidence of selling price, require that the entity allocate revenue in an arrangement using estimated selling prices of deliverables; (4) eliminate the use of the residual method and require an entity to allocate revenue using the relative selling price method; and (5) require expanded qualitative and quantitative disclosures regarding significant judgments made in applying this guidance. The accounting changes summarized in EIC 175 are effective for fiscal years beginning on or after January 1, 2011, with early adoption permitted. Adoption may either be on a prospective basis or by retrospective application. If the Abstract is adopted early, in a reporting period that is not the first reporting period in the entity’s fiscal year, it must be applied retroactively from the beginning of the Company’s fiscal period of adoption. The Company is currently assessing the future impact of these amendments on its financial statements and has not yet determined the timing and method of its adoption.

CICA Section 1506 - Accounting Changes

In July 2009, the CICA amended Handbook Section 1506, Accounting Changes, to exclude from its scope changes in accounting policies upon the complete replacement of an entity’s primary basis of accounting. The amendments apply to interim and annual financial statements relating to years beginning on or after July 1, 2009. The Company does not expect that adoption of these amendments will have a significant impact on the consolidated financial statements.

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Results from Continuing Operations

Revenues

2009 as compared to 2008

Revenues for 2009 were $1,653,026 compared to $ 2,218,264 in 2008, a decrease of 25%.

In 2009 search revenues decreased by $172,911 or 21% to $640,103 from $813,014 last year. The variance is explained by reduced traffic.

Software licensing went from $951,023 in 2008 to $574,536 in 2009, a decrease of $376,486 or 39.5%. The decrease is explained by the importance of corporate sales in 2008 versus the poor economic conditions experienced in 2009 which resulted in no corporate sales in that period.

In 2009, customized development and maintenance support amounted to $438,387 compared to $454,227 in 2008, a decrease of $15,841.

2008 as compared to 2007

In 2008, the Company generated revenues of $2,218,264 compared to $1,702,256 for the previous year, an increase of 30%.

In 2008 search revenues decreased by $127,543 or 13.5% to $813,014 from $940,557 for the previous year. The variance is explained by reduced traffic.

Software licensing stood at $951,023 in 2008 compared to $415,263 in 2007, an increase of $535,760. The increase is explained by the sales of a new product ‘CDS Corporate Edition’ in 2008. Also, the launch of the new CDS Pro version in late Q3 2008 started having an impact on Q4 2008 results.

Customized development and maintenance support revenues generated $454,227 in 2008 compared to $346,436 for the same period the previous year, an increase of $107,791 or 31.1%.

Cost of Revenues

Cost of revenues is essentially bandwidth costs to deliver our services.

2009 as compared to 2008

For the fiscal year ended December 31, 2009 cost of revenues represented $62,304 or 9.5% of search revenues compared to $105,338 or 13% of search revenues last year. The decrease is explained by the opening of two (2) new data centers in Canada which were run in parallel with the ones in the US. In April 2008, our US data centers were shutdown and bandwidth costs related to these locations were eliminated in July 2008.

2008 as compared to 2007

For the fiscal year ended December 31, 2008 cost of revenues represented $105,338 or 13% of search revenues compared to $106,511 or 11% of search revenues for the same period last year.

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Marketing, Sales and Services

Marketing, sales and services consist primarily of salaries, commissions and related personnel expenses for our sales force, advertising and promotional expenses, as well as the provision for doubtful accounts.

2009 as compared to 2008

For the year ended December 31, 2009, marketing, sales and services expenses stood at $625,243 compared to $386,486 in 2008, an increase of $238,757 or 61%. The variance is mainly explained by the fact that some of the employees who were working for the discontinued division were retained and are now working for the continuing division, as the Company focused extra resources to mitigate the lost of Corporate accounts.

2008 as compared to 2007

For the fiscal year ended December 31, 2008, marketing, sales and services decreased by $420,305 from $806,791 in 2007 to $386,486. The variance for the year is explained by the decrease in salaries and relating costs and a decrease of stock-based compensation expenses in relation with the termination of employments and employees departures.

General and Administration

General and administrative expenses include salaries, stock-based compensation and associated costs of employment of executive management and finance personnel. These costs also include facility charges, investor relations, as well as legal, tax and accounting, consulting and professional service fees associated with operating our business and corporate compliance requirements.

2009 as compared to 2008

In 2009, general and administrative expenses amounted to $2,329,947 compared to $2,907,964 in 2008, a decrease of $578,017. The variance is explained by the decrease in salaries, bonuses and stock-based compensation expenses for $306,834 and the reduction in insurance cost for $100,536. These differences occurred following the cost reduction plan which includes a reduction of our number of employees. The Company also has a better control on its professional service fees.

2008 as compared to 2007

In 2008, general and administrative expenses amounted to $2,907,964 compared to $4,691,572 in 2007, a decrease of $1,783,608. Salaries and stock-based compensation expenses were decreased by respectively $338,000 and $428,000. The difference is also related to the decrease in professional fees for $650,000 mainly due to the reduction of legal fees. Finally, investor relation expenses were decreased by $147,000 due to lower expenses related to the annual reporting and the insurance expenses decreased by $142,000 due to lower premium for D&O insurance.

Product Development and Technical Support

Product development and technical support costs include the salaries and associated costs of employment of our team’s software developers and maintenance of our metasearch engine and other IT systems. These charges also include the costs of technical support and license maintenance. Research and development (R&D) tax credits are also recorded against product development and technical support expenses.

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2009 as compared to 2008

In 2009, product development and technical support expenses amounted to $1,125,102 compared to $1,836,986 last year, a decrease of $711,884 mainly explained by a decrease in salaries, bonuses and stock-based compensation expenses for $645,171.

2008 as compared to 2007

In 2008, product development and technical support expenses amounted to $1,836,986 compared to $2,198,673 for the previous year, a decrease of $361,687.

Amortization of Property and Equipment

2009 as compared to 2008

In 2009, amortization of property and equipment stood at $117,909 compared to $89,169 in 2008. j

2008 as compared to 2007

In 2008, amortization of property and equipment stood at $89,169 compared to $138,515 in 2007 explained by the decrease of the asset’s net book value at the beginning of 2008.

Amortization of Intangible Assets

2009 as compared to 2008

Amortization of intangible assets stood at $720,729 in 2009 compared to $980,285 in 2008. The decrease is explained by the write-downs of intangible assets of $343,768 recorded in Q4 2008.

2008 as compared to 2007

Amortization of intangible assets stood at $980,285 in 2008 compared to $1,941,771 in 2007. The decrease is explained by the write-downs of intangible assets of $1,985,470 recorded in Q4 2007.

Write-downs and Settlement Costs

2009 as compared to 2008

For the fiscal year ended December 31, 2009, write-down and settlement costs totalled $10,924 compared to $4,381,840 in 2008.

In 2009, the low amount of write-down of intangibles is explained by the accuracy of the fair value of the Company’s assets.

In 2008, faced with improved competitive offerings, the underlying core technology in Copernic Desktop Search® needed to be significantly enhanced and therefore, the Company concluded, based on the assessment of the fair value of the Company’s assets related to the software unit that the assets had suffered a loss in value and the fair value of goodwill and intangible assets was less than the carrying value of these assets.

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2008 as compared to 2007

For the fiscal year ended December 31, 2008, write-down and settlement costs totalled $4,381,840 compared to $9,300,001 in 2007.

The variance is mainly explained by the write-downs of goodwill and intangible assets related to the acquisition of Copernic Technologies Inc. of $4,327,000 in 2008 compared to $9,200,000 in 2007.

Restructuring Costs

In order to reduce its costs, the Company has decided to close the Montreal office in Q1 2009 and concentrate all its activities in Quebec City.

2009 as compared to 2008

The total cost of the restructuring which includes termination costs, head hunters’ fees, lease termination costs and moving expenses amounted to $33,677 in 2009 and $101,012 in 2008.

Interest and Other Income

2009 as compared to 2008

Interest and other income increased to $333,979 in 2009 from $162,880 in 2008. The increase is explained by the interest earned on the balance of sale receivable. On the other hand, rates on investments were lower for last year.

2008 as compared to 2007

Interest and other income decreased to $162,880 in 2008 from $401,183 in 2007. The decrease reflected lower liquidities and lower interest rates in 2008.

Gain on Disposal of an Investment

2009 as compared to 2008

In Q1 2009, the Company sold shares it owned in a private company for the amount of $169,239. This investment was acquired on March 30, 2000 and was accounted for as an investment in a company subject to significant influence. During 2001, the investment was written down to nil.

Gain /Loss on Foreign Exchange

Loss on foreign exchange totalled $70,772 for the year ended December 31, 2009 compared to a gain of $24,440 in 2008 and a loss of $115, 071 in 2007.

The gain / loss in foreign exchange is mainly due to the fluctuation of the Canadian dollar in 2009.

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Income Taxes

For the fiscal year ended December 31, 2009, the recovery for current and future income taxes amounted to $654,849 compared to $854,392 in 2008 and $2,005,279 in 2007.

In 2009, the income tax provision is explained by current income taxes paid of $1,498 and the recovery of future income taxes in the amount of $656,347 due to current amortization of intangible assets and the recovery of the income tax effect on the discontinued operation.

In 2008, the income tax provision is explained by current income taxes paid of $522 and the recovery of future income taxes in the amount of $854,914 due to current amortization of intangible assets and the recovery of the income tax effect on the discontinued operation.

In 2007, the income tax provision is explained by current income taxes paid of $1,479 and the recovery of future income taxes in the amount of $1,735,769 due to current amortization of intangible assets and the recovery of the income tax effect on the discontinued operation.

Net Loss and Net Loss per Share from Continuing Operations

The Company reported a loss from continuing operations of $2,285,514 ($1.09 per share) in 2009, compared to a loss of $7,529,104 ($3.60 per share) in 2008 and a loss of $15,461,176 ($7.43 per share) in 2007.

Net Earnings and Earnings per Share (Basic and Diluted) from Discontinued Operations

The Company reported a net income from discontinued operations of $4,399,406 ($2.10 per share) in 2009, compared to a net income of $1,038,400 ($0.50 per share) in 2008 and a net income of $1,030,350 ($0.50 per share) in 2007.

Net Earnings (Loss) for the Year

The net earnings for the year totalled $2,113,892 ($1.01 per share) in 2009 compared to a net loss of $6,490,704 ($3.10 per share) in 2008 and net loss of $14,430,826 ($6.93 per share) in 2007. For 2009, 2008 and 2007, there is no difference between net loss under US GAAP as compared to Canadian GAAP.

Q4 2009 Results from Continuing Operations

Revenues

Revenues for the three-month period ended December 31, 2009 totalled $372,943 compared to $693,467 for the same period in 2008, a decrease of $320,524 or 46%. The variance is mainly explained by the decrease in software licensing revenues in the corporate sales channel.

Cost of Revenues

Cost of revenues is essentially bandwidth costs to deliver our services. In Q4 2009, cost of revenues represented $7,136, compared to $16,513 for the same period in 2008.

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Marketing, Sales and Services

In Q4 2009, marketing, sales and services expenses increased to $193,312 from $72,239 in Q4 2008, an increase of $121,073. The variance is mainly explained by the fact that some of the employees who were working for the discontinued division were retained and are now working for the continuing division.

General and Administration

General and administrative expenses in Q4 2009 totalled $566,536 as compared to $525,309 for the same period last year, an increase of $41,227 or 8%.

Product Development and Technical Support

Product development and technical support expenses amounted to $271,085 in Q4 2009, compared to $315,403 for the same period last year. These amounts are net of tax credits of $83,884 for Q4 2009 and $7,578 for Q4 2008.

The difference is mainly explained by a decrease in salaries, fringe benefits and bonuses. Following the cost reduction plan, management changed the R&D strategy to an approach allowing them to integrate existing technology.

Amortization of Property and Equipment

Amortization of property and equipment totalled $30,834 in Q4 2009, compared to $979 for the same period last year.

Amortization of Intangible Assets

Amortization of intangible assets decreased to $182,335 in Q4 2009, compared to $244,688 for the same period last year. The decrease is explained by the write-down of intangible assets in Q4 2008.

Restructuring Costs

In order to reduce its costs, the Company has decided to close the Montreal office in 2009 and concentrate all its activities in Quebec City.

For the year 2009, an amount of $33,677 was recorded.

Interest and Other Income

Interest and other income increased to $149,272 in Q4 2009 from $40,306 in Q4 2008. The increase is explained by the interests earned on the balance of sale receivable. On the other hand, rates on investments were lower than last year.

Gain /Loss on Foreign Exchange

Loss on foreign exchange totalled $23,643 for Q4 2009, compared to a gain of $18,218 for the same period in 2008.

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Income Taxes

The recovery of future income taxes relates to the amortization of intangible assets which do not have the same asset bases for accounting and tax purposes. Recovery of future income taxes totalled $60,067 in Q4 2009, compared to $314,960 for the same period last year. The decrease of the future income taxes recovery is explained by the write-down of intangible assets in Q4 2008.

Net Loss and Net Loss per Share from Continuing Operations

Net loss from continuing operations for the three months ended December 31, 2009 totalled $716,576 ($0.34 per share) compared to $4,559,641 ($2.18 per share) for the same period last year.

Net Earnings (Loss) and Earnings (Loss) per Share (Basic and Diluted) from Discontinued Operations

Net earnings from discontinued operations for the three months ended December 31, 2009 totalled $14,295 or $0.01 per share compared to net earnings of $ 299,204 or $0.14 per share for the same period last year.

Selected Annual Information

(in thousand of US dollars, except per share data and in accordance with generally accepted accounting principles in Canada)

For the years ended December 31,	2009 $		2008 $		2007 $		2006 $		2005 $
Revenues	1,653		2,218		1,702		2,655		-
Earnings (loss) from continuing operations	(2,285	)	(7,529	)	(15,461	)	(5,621	)	-
Results of discontinued operations, net of income taxes	4,399		1,038		1.030		1,352		(5,658	)
Earnings (loss) for the year	2,114		(6,490	)	(14,431	)	(4,269	)	(5,658	)
Loss per share from continuing operations (basic and diluted)	(1.09	)	(3.60	)	(7.43	)	(2.74	)	-
Earnings (loss) per share from discontinued operations (basic and diluted)	2.10		0.50		0.50		0.66		(2.76	)
Net earnings (loss) per share (basic and diluted)	1.01		(3.10	)	(6.93	)	(2.08	)	(2.76	)
Total assets	12,712		10,782		18,358		33,339		38,327

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Quarterly Financial Highlights

(in thousand of US dollars, except per share data and in accordance with generally accepted accounting principles in Canada)

(unaudited)


	2009									2008
		Q4 $		Q3 $		Q2 $		Q1 $			Q4 $		Q3 $		Q2 $		Q1 $

Revenues		373		353		413		514			693		498		599		428

Net loss from continuing operations		(716	)	(783	)	(261	)	(525	)		(4,560	)	(916	)	(599	)	(1,453	)

Net loss per share from continuing operations (basic and diluted)		(0.34	)	(0.37	)	(0.12	)	(0.25	)		(2.18	)	(0.44	)	(0.29	)	(0.69	)

Concentration of Credit Risk with Customers

As at December 31, 2009, one customer represented 34% of net trade accounts receivable, compared to 32% from one customer for the same period last year, resulting in a significant concentration of credit risk. Management maintains that this is in fact a short term credit risk since it involves a revenue share deal in that the company sends thousands of retail transactions to an ad placement agency that collects settlement funds and remits a portion to the Company. Should the customer become delinquent in its payments, the Company can immediately switch its traffic to comparable suppliers on similar terms and conditions. This customer has paid its accounts receivable as per commercial agreement. The Company also monitors all other accounts receivable and there is no indication of credit risk deterioration.

Liquidity and Capital Resources

Operating Activities

In 2009, the cash used for operating activities of $2,214,826 is explained by the loss from continuing operations net of non-cash items of $2,345,123 offset by net change in non-cash working capital items of $130,297.

In 2008, the cash used for operating activities of $3,340,687 is mainly due to the loss from continuing operations net of non-cash items of $2,949,676 and net change in non-cash working capital items of $391,011.

In 2007, the cash used for operating activities was $5,070,217 explained by the loss from continuing operations net of non-cash items of $5,136,122 offset by net change in non-cash working capital items of $65,905.

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Investing Activities

In 2009, investing activities generated cash of $3,129,466 mainly explained by the decrease in temporary investments of $3,005,224, the disposal of an investment of $169,239 and the purchase of property and equipment and intangible assets of $45,000.

In 2008, investing activities provided cash of $939,224 mainly explained by the decrease in temporary investment of $960,157 offset by the purchases of property and equipment and intangible assets of $20,933.

In 2007, investing activities provided cash of $1,408,367 mainly explained by the decrease in temporary investment of $1,626,458 offset by the purchases of property and equipment and intangible assets of $218,091.

Financing Activities

In 2009, financing activities used cash of $62,106 for the repayment of obligations under capital leases.

In 2008, financing activities used cash of $57,976 for the repayment of obligations under capital leases.

In 2007, financing activities provided cash totalling $676,258 from issuance of capital stock upon exercise of options offset by repayment of obligations under capital leases of $23,071.

The Company considers that the cash and cash equivalents will be sufficient to meet normal operating requirements until Q4 of 2010. In the long term, the Company may require additional liquidity to fund growth, which could include additional equity offerings or debt financing.

Dividend Policy

The Company has never paid dividends on any class of its common stock. The Company’s management anticipates that earnings generated from the Company’s operations will be used to finance the Company’s working capital and market expansion opportunities and that, for the foreseeable future, cash dividends will not be paid to holders of the Company’s Common Stock.

Commitments

The Company is committed under operating and capital lease agreements expiring at various dates until 2014. Future minimum payments under these leases as at December 31, 2009 are as follows:

			$

2010			135,870
2011			90,609
2012			31,042
2013			22,914
2014			1,673

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Off-balance Sheet Arrangements

As at December 31, 2009, the Company has no off-balance sheet arrangements.

Financial Instruments

As at December 31, 2009, the Company has no derivative financial instruments.

Related Party Transactions

The Company and Dave Goldman Advisors Ltd., a company controlled by Mr. Goldman, a member of the Board of Directors, entered into a consulting agreement pursuant to which David Goldman provides services as Chairman of the Board of Directors. Total fees for 2009 and 2008 were respectively $31,651 and $41,455. The transactions are in the normal course of operations and are measured at the exchange amount which is the amount of the consideration established and agreed to by the related parties.

The Company and Gen24Capital, a company co-owned by Marc Ferland, a member of the Board of Directors of the Company, entered into an agreement pursuant to which Marc Ferland performed various sales and marketing projects. Total fees for 2008 were $16,245 and $ nil for 2009. On March 3, 2008, Mr. Ferland was appointed President and CEO, and the consulting agreement was thereby terminated.

As at December 31, 2009, the Company owes its currents directors $9,074 compared to $7,456 at the end of 2008.

Capital Stock Information

The following table discloses the Company’s outstanding share data:


Number of issued and outstanding shares as at March 26, 2010	Book value as at December 31, 2009 under Canadian GAAP	Book value as at December 31, 2009 under US GAAP
2,091,913	$96,556,485	$113,326,055

As at March 26, 2010, the Company had no warrants and 132,343 stock options outstanding.

Period-to-Period Comparisons

A variety of factors may cause period-to-period fluctuations in the Company’s operating results, including business acquisitions, revenues and expenses related to the introduction of new products and services or new versions of existing products, new or stronger competitors in the marketplace as well as currency fluctuations. Historical operating results are not indicative of future results and performance.

Subsequent Events

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The amended agreement also proposes a purchase, by Copernic, of 70.1% of the common shares outstanding of Sunbay Canada Corporation (‘‘Sunbay’’), a company registered in Ontario. The Board of Directors of Sunbay will be comprised of three members elected by Copernic, one of which will be Mr. Marc Ferland, Chief Executive Officer of Copernic who will also hold this position for Sunbay. In addition, Newlook Industries Corporation and Sunbay Energy Corporation will each elect a representative. Based on this amended agreement, Copernic will issue 150,000 common shares in exchange of its equity position in Sunbay valued at $600,000 and 450,000 shares for cash of $1,400,000. The closing is scheduled no later than April 30, 2010.

Risks and Uncertainties

Copernic Inc.’s Management considers that these following factors, among others, should be considered in evaluating its future results of operations.

Risks associated with recently announced transactions.

Copernic announced, on February 12, 2010, that it had amended the terms and conditions of its previously announced private placement with 2208720, Ontario Limited. As described under the section Item 4, Information on the Company Subsequent Events in this report the proposed amended requires a series of transactions to be consummated. Although a break fee is payable in the event of a failure by the investors to close the transaction, there is no assurance that the transaction will close in a timely manner or at all. In addition, the consummation of such transaction will result in a substantial change in the nature of the business of Copernic. There is no assurance that if conusummated such new business shall be profitable in the short or medium term.

Our revenues depend to some degree on our relationship with some customers, the loss of which would adversely affect our business and results of operations.

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Our operating results may fluctuate, which makes our results difficult to predict and could cause our results to fall short of expectations.

●	Our ability to continue to attract users to our Web site

●	Our ability to monetize new products

●	Our ability to attract advertisers

●	The amount and timing of operating costs and capital expenditures related to the maintenance and expansion of our businesses, operations and infrastructure

●	Our focus on long term goals over short term results

●	The results of any investments in risky projects

●	Payments that may be made in connection with the resolution of litigation matters

●	General economic conditions and those economic conditions specific to Corporations, the Internet and Internet advertising

●	Our ability to keep our Web site operational at a reasonable cost and without service interruptions

●	Geopolitical events such as war, threat of war or terrorist actions

●	Our ability to generate revenues through licensing, subscriptions and revenue share.

Because our business is changing and evolving, our historical operating results may not be useful in predicting our future operating results.

We face significant competition from Microsoft, Google and Enterprise Search vendors.

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If we do not continue to innovate and provide products and services that are useful to users, we may not remain competitive, and our revenues and operating results could suffer.

We make investments in new products and services that may not be profitable.

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Volatility of stock price and trading volume could adversely affect the market price and liquidity of the market for our Common Shares.

Our Common Shares are subject to significant price and volume fluctuations, some of which result from various factors including (a) changes in our business, operations, and future prospects, (b) general market and economic conditions, and (c) other factors affecting the perceived value of our Common Shares, including the current threat of delisting from Nasdaq Capital Markets. Significant price and volume fluctuations have particularly impacted the market prices of equity securities of many technology companies including without limitation those providing communications software or Internet-related products and services. Some of these fluctuations appear to be unrelated or disproportionate to the operating performance of such companies. The market price and trading volume of our Common Shares have been, and may likely continue to be, volatile, experiencing wide fluctuations. In addition, the stock market in general, and market prices for Internet-related companies in particular, have experienced volatility that often has been unrelated to the operating performance of such companies. These broad market and industry fluctuations have adversely affected the price of our stock, regardless of our operating performance.

On June 16, 2008 a notice from NASDAQ Listing Qualifications was received by the Company. The notice stated that for the last 30 consecutive business days, the bid price of the Company’s common stock had closed below the minimum $1.00 per share requirement for continued inclusion under Marketplace Rule 4310(c)(4) (the “Rule”). Therefore, in accordance with Marketplace Rule 4310(c)(8)(D), the Company was provided 180 calendar days, or until December 15, 2008 to regain compliance. If, at any time before December 15, 2008, the bid price of the Company’s common stock closed at $1.00 per share or more for a minimum of 10 consecutive business days, NASDAQ Staff would provide written notification that it complied with the Rule. If compliance with this Rule could not be demonstrated by December 15, 2008, NASDAQ Staff would determine whether the Company meets The NASDAQ Capital Market initial listing criteria as set forth in Marketplace Rule 4310(c), except for the bid price requirement. If it met the initial listing criteria, NASDAQ Staff would notify the Company that it has been granted an additional 180 calendar day compliance period. If the Company was not eligible for an additional compliance period, NASDAQ Staff would provide written notification that the Company’s securities would be delisted. At that time, the Company could appeal NASDAQ Staff’s determination to delist its securities to a Listing Qualifications Panel (the “Panel”). These circumstances could adversely impact trading in our Common Shares and could also adversely affect our ability to access capital.

On October 22, 2008, the Company received a NASDAQ Notice, indicating that the Company has received an extension to comply with the minimum bid price requirement for continued listing.

Since your company had 59 calendar days remaining in its compliance period as of October 16th, it will, upon reinstatement of the rules, still have this number of days, or until March 19, 2009, to regain compliance. The company can regain compliance, either during the suspension or during the compliance period resuming after the suspension, by achieving a $1 closing bid price for a minimum of 10 consecutive trading days”.

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On July 13, 2009 the Company received another letter from NASDAQ extending the temporary suspension, which means that the Company has until September 30, 2009 to comply with the minimum bid requirement for continued listing. Based on discussions with the SEC, NASDAQ does not expect any further extensions of the suspension. In order to satisfy NASDAQ Capital Market’s minimum bid price requirement for continued listing, the Company’s shares must trade at the minimum bid price requirement for a minimum of ten consecutive trading days. Therefore the Company announced on July 21 that it intends to seek shareholder approval to complete a share consolidation on the basis of one (1) post consolidation common share for every two (2) to ten (10) pre-consolidation shares. The exact consolidation factor will be determined at the discretion of the board of directors. The proposed share consolidation is subject to shareholder approval, and to this end, will be submitted for approval by the shareholders at a special shareholders’ meeting scheduled to take place on Friday September 11, 2009 at 10 am at the offices of Fasken Martineau DuMoulin at 800 Place Victoria, 37th Floor, Montreal, Quebec. In addition to obtaining the requisite shareholder approval, the proposed share consolidation is subject to the ultimate discretion of the board of directors to implement the share consolidation.

In the event that the Consolidation Resolution does not receive the requisite approval, the articles will remain unchanged and then in all likelihood, the Company will not maintain its listing or re-list on any other exchange, or secondary markets, which could severely restrict trading activity in the common shares.

Furthermore despite the anticipated increase in the market value of the Company’s common shares following the Consolidation, the future effect of the Consolidation on the market price of the Company’s common shares cannot be accurately predicted.

In particular, there is no guarantee that after the Consolidation the price for the Company’s common shares will range between two (2) and ten (10) times the market price for common shares immediately prior to the Consolidation. This is particularly the case since there are numerous factors and contingencies which could affect such market price, including the status of the market for the common shares at the time, the Company’s reported results of operations in future periods and the general economic, political, stock market and industry conditions.

During a special meeting of the shareholders on September 11, 2009, the consolidation of issued and outstanding shares was approved effective as of September 14, 2009. The consolidation factor was 7:1. No fractional shares were issued and those shareholders who otherwise would have been entitled to receive fractional shares had their post-consolidation shareholdings rounded up to the next whole common share. The purpose of the Consolidation was to allow the Company to achieve compliance with the NASDAQ Capital Market’s minimum bid requirement for continued listing. Prior to the completion of the Consolidation, the Company had 14,637,531 common shares outstanding, and upon completion of the Consolidation, the Company had 2,091,437 common shares outstanding.

As at December 31, 2009, the Company’s closing stock price was $2.70.

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Infringement and liability claims could damage our business.

An inability to protect our intellectual property rights could damage our business.

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Working capital may be inadequate.

The asset sale of Mamma.com and its AD Network

Pursuant to the terms of the agreement concluded on June 30, 2009, the purchaser was to pay 25 equal monthly instalments of $200,000, beginning on September 15, 2009. Interest at the rate of 4% (effective rate at 13.6%), compounded monthly, was to be calculated on the outstanding balance of sale and was payable 30 days after all principal payments were completed. Pursuant to an amended agreement signed on November 12, 2009, the payment terms were changed from 25 to 36 equal monthly instalments of the greater of $100,000 or 85% of the revenues at an annual interest rate of 13.6%, compounded monthly, and calculated on the outstanding balance of sale. The remaining balance will be payable at the end of the 36-month period. That change had no impact on the fair value of the balance of sale receivable. Initially recorded on June 30, 2009, an amount of $4,447,230, which represents the fair value at the transaction date, was booked as Balance of sale receivable. The net book value of the assets sold was nil. As at December 31, 2009, the total transaction fees amounted to $299,441, resulting in a net gain on disposal of assets amounting to $4,147,789.

There can be no assurance that the purchaser will not be in default or that in the case of repossession the value of the assets can be maintained by operating the asset, or that the asset can be re-sold.

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Goodwill may be written-down in the future.

Long-lived assets may be written-down in the future.

Security breaches and privacy concerns may negatively impact our business.

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Changes in key personnel, labour availability and employee relations could disrupt our business.

Strategic acquisitions and market expansion present special risks.

We do not plan to pay dividends on the Common Shares.

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Rapidly evolving marketplace and competition may adversely impact our business.

To the extent that some of our revenues and expenses are paid in foreign currencies, and currency exchange rates become unfavourable, we may lose some of the economic value in U.S. dollar terms.

Higher inflation could adversely affect our results of operations and financial condition.

Risks related to the economic environment.

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Forward-Looking Statements

Information contained in this Management’s Discussion and Analysis of Financial Condition and Results of Operations includes forward-looking statements, which can be identified by the use of forward-looking terminology such as “believes,” “expects,” “may,” “desires,” “will,” “should,” “projects,” “estimates,” “contemplates,” “anticipates,” “intends,” or any negative such as “does not believe” or other variations thereof or comparable terminology. No assurance can be given that potential future results or circumstances described in the forward-looking statements will be achieved or occur. Such information may also include cautionary statements identifying important factors with respect to such forward-looking statements, including certain risks and uncertainties that could cause actual results to vary materially from the projections and other expectations described in such forward-looking statements. Prospective investors, customers, vendors and all other persons are cautioned that forward-looking statements are not assurances, forecasts or guarantees of future performance due to related risks and uncertainties, and that actual results may differ materially from those projected. Factors which could cause results or events to differ from current expectations include, among other things: the severity and duration of the adjustments in our business segments; the effectiveness of our restructuring activities, including the validity of the assumptions underlying our restructuring efforts; fluctuations in operating results; the impact of general economic, industry and market conditions; the ability to recruit and retain qualified employees; fluctuations in cash flow; increased levels of outstanding debt; expectations regarding market demand for particular products and services and the dependence on new product/service development; the ability to make acquisitions and/or integrate the operations and technologies of acquired businesses in an effective manner; the impact of rapid technological and market change; the impact of price and product competition; the uncertainties in the market for Internet-based products and services; stock market volatility; the trading volume of our stock; the possibility of delisting our stock since the Company may not satisfy the requirements for continued listing on the NASDAQ Capital Market including whether the minimum bid price for the stock falls below $1; and the adverse resolution of litigation. For additional information with respect to these and certain other factors that may affect actual results, see the reports and other information filed or furnished by the Company with the United States Securities and Exchange Commission (“SEC”) and/or the Ontario Securities Commission (“OSC”) respectively accessible on the Internet at www.sec.gov and www.sedar.com, or the Company’s Web site at www.copernic.com. All information contained in these audited financial statements and Management’s Discussion and Analysis of Financial Condition and Results of Operations is qualified in its entirety by the foregoing and reference to the other information the Company files with the SEC and the OSC. Unless otherwise required by applicable securities laws, the Company disclaims any intention or obligation to update or revise any forward-looking statements, whether as a result of new information, future events or otherwise.

On behalf of Management,

Quebec City, Canada

March 26, 2010

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Capital Stock Information

The following table discloses the Company’s outstanding share data:


Number of issued and outstanding common shares as at December 31, 2009	Book value as at December 31, 2009 under Canadian GAAP	Book value as at December 31, 2009 under US GAAP
2,091,437	$96,556,485	$113,326,055

As at December 31, 2009, the Company also had no warrants and 132,343 stock options outstanding.

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ITEM 6. DIRECTORS, SENIOR MANAGEMENT AND EMPLOYEES

DIRECTORS AND SENIOR MANAGEMENT

Following is a table, which discloses the names, functions, areas of expertise within the Company and present principal occupation(s) of the Company’s directors and senior management.

Name	Functions and areas of experience within the Company	Present Principal Occupation(s)	Date first elected Director or appointed Senior Officer of the Company

Marc Ferland1	Director and Officer	President, and Chief Executive Officer Copernic Inc.	September 21, 2007

David Goldman	Director	Chairman, Copernic Inc. Director, SNC-Lavalin Group Inc. (an engineering and construction company listed on the Toronto Stock Exchange)	May 24, 2001

Claude E. Forget	Director	Consultant	October 11, 1999

Irwin Kramer	Director	President, iCongo, Inc. (an e-commerce and service company)	May 24, 2001

Dr. David Schwartz	Director	Associate Professor, Bar Ilan University School of Business Administration	May 23, 2002

Lawrence Yelin	Director	Attorney, Lawrence Yelin, Attorney	September 21, 2007

Jean-Rock Fournier2	Officer	Executive Vice President - Chief Financial Officer.	March 31, 2009

Dennis Dion	Officer	Vice President - Sales Copernic Inc.	November 11, 2008

Benoit Godbout	Officer	Vice President - Chief Technology Officer Copernic Inc.	June 17, 2008

Each Director’s term of office expires at the earliest of the next annual meeting of shareholders or his resignation as Director.

To the knowledge of the Company, there is no family relationship among any of the persons named in this Item 6, nor were any such persons selected as directors or members of senior management pursuant to any arrangement or understanding with major shareholders, customers, suppliers or others.

1 Marc Ferland served as acting CFO through March 31, 2009.

2 Jean-Rock Fournier was hired as Vice President Finances on January 5, 2009 and named Chief Financial Officer on March 31, 2009.

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STATEMENT OF CORPORATE GOVERNANCE PRACTICES

The directors of the Company strongly believe that sound corporate governance is essential to produce maximum value to shareholders. The following is a summary of the governance practices of the Company.

The Board of Directors has approved and adopted a document entitled “Responsibilities of the Board of Directors and its three Committees” which sets forth the responsibilities for the Board and these three committees. That document is available on SEDAR at www.sedar.com. That document includes the Board’s mandate, the Charters of the Board’s three committees and the Company’s insider trading policy and code of ethics. The Company’s code of ethics is available on SEDAR at www.sedar.com. In accordance with the policies and guidelines outlined in that document, the Board of Directors constantly strives to promote a culture of ethical conduct in an effort to meet the highest industry standards. All decisions are carefully considered from this point of view and the Board of Directors does not act until all factors have been adequately considered. This approach is expected of management and, to a relevant degree, all employees of the Company.

1. Composition of the Board of Directors

More than fifty percent of the directors of the Company are “independent” directors. An independent director is independent of management and free of any business or other relationship which could, or could reasonably be perceived to, materially interfere with the director’s ability to act in the best interest of the Company, as required by the standards of the NASDAQ Stock Exchange® and the Ontario Securities Commission.

The Chair of the Board of Directors is David Goldman, who is not an independent director. Mr. Goldman also sits on the board of directors of SNC-Lavalin Group Inc. The Board feels strongly that Mr. Goldman’s abilities, extensive experience as a director of listed companies and role in the Company make him best suited for this position. The Board will continue to consider whether or not the position of Chairman should be occupied by an independent director and, if circumstances change, will take action to adjust the composition of the Board accordingly or appoint a lead director who is independent. Independent directors meet, when they deem it advisable, through in camera sessions conducted after or during each meeting of the Board. The independent directors, when they deem it advisable, make recommendations to the Board on various matters. The Board will continue to encourage regular meetings of the independent directors through in camera sessions as it feels that it is a good way to facilitate Board operations independently of management and to maintain and improve the quality of governance.

The directors consider the following nominees to be independent to the Company: Claude E. Forget, Irwin Kramer, Dr. David Schwartz, and Lawrence Yelin. Through October 2, 2001, Claude E. Forget was Chief Executive Officer of Intasys Billing Technologies, a subsidiary of the Company, whose business was subsequently sold. The Board of Directors has determined that Marc Ferland and David Goldman are not independent because they are officers of the Company.

In June 2008, David Goldman resigned as an officer of the Company.

During the 2009 fiscal year, the Board of Directors met 15 times and all of the Directors attended all of the meetings, except for two directors, David Schwarz and David Goldman, who did not attend three special meetings.

The Board of Directors’ mandate is set forth in the document entitled “Responsibilities of the Board of Directors and its Three Committees,” which provides in pertinent part:

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It is the explicit responsibility of the Board of Directors to assume the global stewardship of the Company and to ensure itself of the pertinence and efficiency of the key functions and of the following matters:

●	Strategic planning.

●	Financial management.

●	Identification of the principal risks associated with the activities of the Company and the establishment of an appropriate system to manage these risks.

●	Succession planning, including appointing, training and monitoring officers.

●	The communications policy of the Company with its shareholders.

●	The integrity of the Company’s internal control and management information systems.

The Board has drawn up a written position description for the Chairman of the Board and CEO. The Chairman of a Board committee is mainly responsible for overseeing how the committee is managed and that it effectively performs its duties and to guide the committee in the performance of its charter mandate and any other matter which the Board delegates to the committee.

The Board ensures that each new director has the necessary abilities, expertise, availability and knowledge to properly perform his duties and provides him with the corporate information and documentation required to do so. Additional education of directors and information about our activities is available upon request.

All directors, officers and employees who have information giving them reasonable grounds to believe that certain accounting practices or the auditing of the Company are illegal or irregular, or that other violations of our Code of Ethics have or are occurring, can and are encouraged to utilize the Company’s Whistleblower Policy.

No material change report that pertains to any conduct of a director or officer that constitutes a departure from the Code of Ethics was filed during financial year 2009.

Our Code of Ethics clearly states that the directors and executive officers must avoid any transaction or event which could give rise to a conflict of interest. If an event or transaction occurs in which a director has a material interest, he must disclose his interest to the Board and refrain from voting with respect to any matter related thereto.

The role of the Nominating and Governance Committee is, among other things, to assess the effectiveness of the Board, its committees and its directors.

2. Committees of the Board of Directors

The Company maintains three standing committees: the Audit and Finance Committee, the Nominating and Governance Committee and the Compensation Committee.

As part of its ongoing review of corporate governance matters, on March 29, 2006 the Company’s Board of Directors approved Charters constituting a Compensation Committee and a Nominating and Governance Committee to segregate the nominating and executive compensation functions into separate Charters as required by the standards of the NASDAQ Stock Exchange®.

Composition of the Audit and Finance Committee

The current members of the Audit and Finance Committee are Irwin Kramer, Dr. David Schwartz, Claude E. Forget and Lawrence Yelin all of whom are independent. On March 29, 2006, the Board approved a new Charter of the Audit and Finance Committee of the Company. The Charter provides that the Audit and Finance Committee shall assist the Board in fulfilling its responsibilities relating to corporate accounting and reporting practices of the Company and in the quality and integrity of financial reports of the Company. The Audit and Finance Committee meets with the financial officers of the Company, including the Chief Financial Officer, and the independent auditors to review financial reporting matters, the system of internal accounting controls and the overall audit plan and examines the quarterly and year-end financial statements before their presentation to the Board. In addition, the Audit Committee fixes the compensation and other terms of engagement of the Company’s independent auditors. In 2009, the Audit and Finance Committee met 6 times and the Company’s independent auditors were present at 5 of these meetings.

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Composition of the Nominating and Governance Committee

The current members of the Nominating and Governance Committee are Irwin Kramer, Dr. David Schwartz, Claude E. Forget and Lawrence Yelin.

The Nominating and Governance Committee is responsible for, among other things, overseeing and making recommendations to the Board on the following matters:

(i) the search for and compensation of all senior executives and management of the Company and its subsidiaries, including periodic review of same;

(ii) the Company’s management structure and succession plans;

(iii) the recommendation of new candidates as potential directors of the Company and the assessment of the performance of current directors and committees; and

(iv) the review and recommendation of procedures to be followed with respect to corporate governance guidelines.

Composition of the Compensation Committee

The current members of the Compensation Committee are Irwin Kramer, Dr. David Schwartz, Claude E. Forget and Lawrence Yelin.

The Compensation Committee is responsible for, among other things, overseeing and making recommendations to the Board on the following matters:

(i) the compensation of all senior executives and management of the Company and its subsidiaries, including periodic review of same;

(ii) the incentive plans for employees of the Company and its subsidiaries; and

(iii) the Company’s Stock Option Plan and the granting of stock options thereunder.

Report on Executive Compensation

As part of its ongoing dedication to creating shareholder value and promoting corporate success, the Compensation Committee establishes executive compensation in order to attract, retain and motivate key executives in the increasing competitive Internet and information technology sectors and to reward significant performance achievements.

Consistent with the Company’s objectives, and in order to further align shareholder and executive interests, the Compensation Committee places emphasis on base salary, incentive compensation, discretionary bonus and long-term incentive compensation by granting of stock options in establishing executive compensation. Consequently, the standard executive compensation package of the Company is composed of four major components: (i) base salary and benefits, (ii) short-term incentive and (iii) long-term incentive compensation.

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In making compensation decisions with respect to each of these components, the Compensation Committee considers external market data for executives. Towers Perrin was retained by the Chair of the Compensation Committee in 2007, 2006 and 2005 to assist with preparing information and providing advice on officer and Board of Director compensation arrangements. Materials prepared by Towers Perrin have been presented by the Chair to the Compensation Committee for review and decisions. Towers Perrin’s scope of services in the most recent fiscal year included providing advice and market data related to Board of Director and officer compensation arrangements, assisting with the design of special compensation programs, and other general executive compensation assistance. Towers Perrin does not provide any other services to the Company. The Compensation Committee uses the compensation data from Towers Perrin as one of several factors in determining the appropriate levels of base salary, short-term and long-term incentives that fairly compensate the Company’s executive officers.

In setting the compensation package for executives, the Compensation Committee balances consideration of base salary with short-term incentive compensation so that a significant proportion of executive officers’ compensation is linked to objectives aligned with the interests of the Company’s shareholders. The compensation packages include:

i)	Salary and Benefits

Salary and benefits policies of the Company are determined by bench marking similar businesses in the Internet sector and are targeted at the mid range in the sectors, taking into account the economic trends, the Company’s competitive position and performance and extraordinary contributions to the Company.

ii)	Short-Term Incentive Compensation

The Company provides short-term cash incentive compensation to employees and officers whose responsibilities and attainment of Company objectives exceed established expectations, based on operating results and financial performance. The amount of these payments is approved by the Compensation Committee.and is based on specific goals in these areas. Incentive compensation targets are set during the first quarter of each year.

In the case of Named Executive Officers, as defined hereinafter under the heading “Statement of Executive Compensation”, targeted incentive compensation varies primarily on the level of responsibility of the individual. Generally, bonuses are higher when operating results and financial performance objectives are exceeded and when the objectives are not met, the incentive bonuses are lower or nil depending on the circumstances and the individual’s contribution to the Company.

The Board of Directors, upon recommendation of the Compensation Committee, also may award bonuses as deemed necessary to compensate management for circumstances where warranted to reward extraordinary contributions to the Company not reflected in our results of operations if and when deemed in the Company’s best interest.

For the year ended December 31, 2009, for all employees, incentive compensation was earned related to Company objectives as minimal financial targets were realized.

iii) Long-Term Incentive Compensation

The long-term incentive component of the Company’s compensation program consists of the stock option plan of the Company which provides for the issuance of options to executive officers and other employees, directors or consultants to purchase common shares of the Company. The stock option plan of the Company is described below under the heading “Stock Option Plan”.

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The Compensation Committee determines the executives, employees and directors eligible for the granting of options pursuant to the stock option plan. It also determines the size of each grant and the date on which each grant is to become effective. The exercise price of options granted may not be less than the market price of the Company’s common shares as traded on the NASDAQ Stock Exchange® in U.S. dollars determined as of the date the options are granted. The number of options granted annually to recipients is determined by the Compensation Committee on a discretionary basis.

The Compensation Committee may, in its discretion, determine when the options granted under the stock option plan may be exercised or vested, provided that the term of such options can not exceed ten (10) years.

Unless otherwise stipulated by the terms of a stock option grant, which terms are approved by the Compensation Committee, options granted pursuant to the stock option plan will lapse thirty (30) days after the holder ceases to be employed by the Company. In the event of death, any vested option of a holder lapses three (3) months after his or her death. In the event that the holder’s employment terminates due to disability, the holder may exercise the vested options for one (1) year after the date of termination of employment. If the holder is terminated for cause, vested options terminate immediately.

In July 2007, the Company reviewed its stock option plan to assess its retention potential for key employees. The review was initiated following the resignation of a number of key employees due to a competitive labor market in the high tech industry in the Quebec City region. PCI Perrault Consulting Inc. was retained by the Chair of the Compensation Committee to assist with preparing information and providing advice.

In light of the above and consistent with the Company’s objectives to retain key employees, the Board of Directors has, on September 18, 2007, reviewed and accepted stock option grants to key employees that would vest on equal increments over a three-year period.

At the time that the Stock Option Plan was reviewed in July 2007, 200,000 Common Shares were reserved for issuance under this plan. Taking into account options that have been cancelled of forfeited, options to acquire a net total of 93,143 Common Shares have been granted on September 18, 2007 under the Stock Option Plan. As of January 1, 2010, 16,409 Common Shares remain available for future grants.

Conclusion

The Company’s executive compensation policy links executive compensation to corporate results and individual contribution, as well as stock performance and long-term results. The Compensation Committee regularly reviews the various executive compensation components to ensure that they maintain their competitiveness in the industry and continue to focus on the Company’s objectives, values and business strategies.

Depending on specific circumstances, the Compensation Committee may also recommend employment terms and conditions that deviate from the above described policies.

Statement of Executive and Board Compensation

In 2009, the Directors received US 5,000 per quarter and US $1,000 per meeting in person and US $500 by phone. Per quarter, the Chairman of the Board also received US $3,125, the Audit Committee Chairman received US $2,500 and of the other two Board Committees received US $1,250 each.

The following summary table, presented in accordance with applicable securities legislation, sets forth all compensation provided by the Company and its affiliates for the fiscal years ended December 31, 2007, 2008 and 2009 to:

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(i)	the Chief Executive Officer;

(ii)	the Chief Financial Officer;

(iii)	each of the Company’s three most highly compensated executive officers, other than the Chief Executive Officer and the Chief Financial Officer, who were serving as executive officers at the end of December 31, 2008 and whose total salary and bonus exceeded CDN $150,000, and

(iv)	such other individuals for whom the foregoing disclosure would have been made but for the fact that such individual was not an officer of the Company at the end of December 31, 2008 (collectively, the “Named Executive Officers”).

Summary Compensation Table

Compensation is payable in Canadian dollars and converted by using the yearly average U.S. exchange rate. Exchange rate conversions were 0.9352 in 2007, 0.9443 in 2008 and 0.8802 in 2009.


		Annual Compensation
Name and Principal Occupation	Year	Salary U.S. $	Bonus U.S. $	Other Annual Compensation (Taxable Benefits Related to Exercised Options and Other)

Marc Ferland	2009	243,768	110,025	Nil
President and Chief Executive Officer and	2008	190,636	Nil	7,077
Acting CFO	2007	N/A	N/A	N/A
Éric Bouchard1	2009	17,843	8,802	Nil
Vice President - Products	2008	177,560	18,882	3,813
	2007	169,155	10,161	3,813
Daniel Bertrand2	2009	N/A	N/A	N/A
Executive Vice President and Chief Financial	2008	136,310	9,441	3,387
Officer	2007	172,897	12,982	117,534

Martin Bouchard3	2009	N/A	N/A	N/A
President and Chief Executive Officer	2008	60,999	Nil	750
	2007	220,526	22,456	3,813
Guy Fauré4	2009	N/A	N/A	N/A
President and Chief Executive Officer	2008	N/A	N/A	N/A
	2007	46,403	Nil	502,977
Patrick Hopf5	2009	N/A	N/A	N/A
Vice President - Business Development	2008	21,569	Nil	750
	2007	154,145	Nil	47,817
Jean-Rock Fournier	2009	109,179	17,604	Nil
Executive Vice President – Chief Financial	2008	N/A	N/A	N/A
Officer	2007	N/A	N/A	N/A

1 Eric Bouchard did not renew his employment contract which expired on December 31, 2008.

2 Daniel Bertrand resigned from his position as Executive Vice President and Chief Finacial Officer on September 8, 2008. In connection with his resignation, the Company paid Mr. Bertrand termination compensation and recorded termination costs of CDN159,100 in Q3 2008.

3 Martin Bouchard resigned from his position as the President and Chief Executive Officer effective as of March 3, 2008 for personal reasons. He was replaced by Marc Ferland.

4 Guy Fauré resigned from his positions as the President, Chief Executive Officer and member of the Board of Directors of the Company effective as of January 31, 2007. In connection with his resignation, the Company paid Mr. Fauré termination compensation and recorded termination costs of CDN$510,000 in Q1 2007, changed the duration of option agreements and allowed accelerated vesting of options. These changes represented an additional non-cash item expense of approximately US$ 267,000 which was recoreded in Q1 2007.

5 On February 11, 2008, the Company announcced the departure of Patrick Hopf, effective February 11, 2008.

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Option Grants During the Most Recently Completed Financial Year

Long Term Compensation

All other

Compensation

Name and Principal Occupation

Year

Awards

Payouts

US$

Securities

under

Options #

Shares or Units

Subject to Resale

Restrictions ($)

LTIP Payouts

Marc Ferland

2009

2,857

Nil

President and Chief Executive Officer

2008

14,286

Nil

16,245

2007

3,571

Nil

15,455

Éric Bouchard1

2009

N/A

Vice President - Products

2008

Nil

2007

11,143

Nil

Daniel Bertrand2

2009

N/A

Executive Vice President and Chief Financial Officer

2008

Nil

149,420

2007

14,000

Nil

Martin Bouchard3

2009

N/A

President and Chief Executive Officer

2008

Nil

2007

22,143

Nil

Guy Fauré4

2009

N/A

President and Chief Executive Officer

2008

Nil