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Zedi Inc.CONDENSED CONSOLIDATED INTERIM FINANCIAL STATEMENTS

March 31, 2011

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Condensed consolidated interim statement of financial position 3

Condensed consolidated interim statement of profit and comprehensive income 4

Condensed consolidated interim statement of changes in equity 5

Condensed consolidated interim statement of cash flows 6

Notes to the condensed consolidated interim statement of cash flows 7

Notes to the condensed consolidated interim financial statements 8-59

Zedi Inc.Contents for the unaudited condensed consolidated interim financial statements

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NotesMarch 31,

2011

December

31, 2010

January

1, 2010

CAD'000 CAD'000 CAD'000

ASSETS

Current assets 34,462 30,364 20,249

Cash and cash equivalents 844 9,642 1,245

Trade and other receivables 11 25,474 14,514 11,308

Inventories 10 8,144 6,208 7,696

Non-current assets 47,548 30,908 31,313

Property, plant and equipment 6 7,684 4,478 1,976

Investment in associate 9 1,162 1,089 -

Intangible assets 8 15,315 7,515 8,040

Goodwill 7 22,203 17,357 19,047Deferred tax asset 1,184 469 2,250

TOTAL ASSETS 82,010 61,272 51,562

LIABILITIES AND EQUITY

Current liabilities 20,801 12,496 7,778

Bank line of credit 18 1,450 - -

Trade and other payables 15 7,659 6,678 3,040

Provisions 16 1,254 889 227

Taxation 452 11 -

Deferred revenue 17 8,339 4,918 4,511

Current portion of term loan payable 18 1,647 - -

Non-current liabilities 12,761 1,305 1,062

Non-current debt 18 5,311 - -

Provisions 16 622 586 1,062

Deferred lease incentive 26 2,891 719 -

Deferred tax liability 3,937 - -

Equity 48,448 47,471 42,722

Issued capital 12 52,550 52,504 51,218

Equity-settled employee benefits reserve#

13 6,398 6,248 6,297

Accumulated currency translation adjustment (447) - -

Accumulated deficit 14 (10,053) (11,281) (14,793)

TOTAL LIABILITIES AND EQUITY 82,010 61,272 51,562

# Previously reported as "Contributed surplus"

Zedi Inc.Condensed consolidated interim statement of financial position

at March 31, 2011 (unaudited)

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Notes

3 monthsended March

31, 2011

3 monthsended March

31, 2010

CAD'000 CAD'000

CONTINUING OPERATIONS

Revenue 21,906 14,720

Cost of sales 12,139 7,582

Gross profit 9,767 7,138

Share of profit from associate 9 273 -

10,040 7,138

Warehousing and distribution expenses 671 671Administration expenses 3,582 1,831

Customer acquisition and service expenses 1,662 1,457

Product development expenses 988 1,150

Other operating expenses 1,101 663

Finance costs 116 53

Profit from operating activities prior to taxation 19 1,919 1,313

Taxation 20 691 421

PROFIT FOR THE PERIOD 1,228 892

Other comprehensive income items (net of tax):

Exchange differences on translating foreign operations (447) -

TOTAL COMPREHENSIVE INCOME FOR THE PERIOD 781 892

Profit per share from continuing operations

Basic (dollars) 22 0.01 0.01

Diluted (dollars) 22 0.01 0.01

Zedi Inc.Condensed consolidated interim statement of profit and comprehensive

income for the quarter ended March 31, 2011 (unaudited)

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Sharecapital

Equity-

settled

employee

benefitsreserve#

Accumu-lated deficit

Cumulative

currency

translationadjustment Total

CAD'000 CAD'000 CAD'000 CAD'000 CAD'000

Balance at January 1, 2010 51,218 6,133 (13,245) - 44,106

(per Canadian GAAP, refer note 14)

IFRS translation adjustments - 164 (1,548) - (1,384)

(refer note 14)

Balance at January 1, 2010 (note 14) 51,218 6,297 (14,793) - 42,722

Profit and total comprehensive income for the

period - - 892 - 892

Issue of ordinary shares under employee

share option plan 6 (6) - - -

Recognition of share-based payments - 163 - - 163

Balance at March 31, 2010 51,224 6,454 (13,901) - 43,777

Profit and total comprehensive income for the

period - - 2,620 - 2,620-


share option plan 1,280 (714) - - 566

Recognition of share-based payments 508 508

Balance at December 31, 2010 52,504 6,248 (11,281) - 47,471

Total comprehensive income for the period - - 1,228 (447) 781


share option plan 46 (14) - - 32

Recognition of share-based payments - 164 - - 164

Balance at March 31, 2011 52,550 6,398 (10,053) (447) 48,448


Zedi Inc.Condensed consolidated interim statement of changes in equity

for the quarter ended March 31, 2011 (unaudited)

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Notes

3 months

ended March

31, 2011

3 months

ended March

31, 2010

CAD'000 CAD'000

CASH FLOW FROM OPERATING ACTIVITIESCash generated from operations before working capital

changes A 3,322 2,257Changes in working capital B (1,717) 3,849

Finance costs paid (80) (16)

Income tax paid (11) -

Net cash generated from operating activities 1,514 6,089

CASH FLOW FROM INVESTING ACTIVITIES

Purchase of property, plant and equipment (2,228) (92)Purchase of intangible assets (10) (10)Addition to internally-generated intangible assets (597) (374)

Proceeds on disposal of property, plant and equipment

and intangible assets 329 -

Acquisition of Southern Flow, net of cash acquired (16,242) -

Net cash generated used in investing activities (18,748) (475)

CASH FLOW FROM FINANCING ACTIVITIESProceeds from share issues under employee share option

plan 32 -

Borrowing on line of credit 1,450 -Proceeds on long term debt 6,958 -

Net cash generated from financing activities 8,440 -

Foreign exchange gain (loss) on cash held in other currency (4) -

Net (decrease) increase in cash for the period (8,798) 5,614

Cash and cash equivalents at beginning of the period 9,642 1,245

Cash and cash equivalents at end of the period 844 6,859

Zedi Inc.Condensed consolidated interim statement of cash flows


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3 months

ended March

31, 2011

3 months

ended March

31, 2010CAD'000 CAD'000

A. Cash generated from operations before working

capital changes

Profit from operating activities prior to taxation 1,919 1,313

Adjustments for:

Depreciation of property, plant and equipment 479 259

Amortization of intangible assets 617 468

Income from associate recognized in period (273) -

Return on capital from associate in period 200 -

Share based compensation 164 164


Net loss on disposal of property, plant and equipment

and intangible assets 99 -

3,322 2,257

B. Changes in working capital

Decrease in inventory 243 916

Increase in trade and other receivables (7,802) (1,741)

Less amount related to accrued lease incentive 2,246 -

(Decrease) increase in trade and other payables (225) 1,799

Increase in deferred revenue 3,421 2,838Increase in provisions 401 37

(1,717) 3,849

Zedi Inc.Notes to the condensed consolidated interim statement of cash flows for

the quarter ended March 31, 2011 (unaudited)

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1. GENERAL INFORMATION

2. SIGNIFICANT ACCOUNTING POLICIES

2.1 Statement of complianceThe condensed consolidated interim financial statements (financial statements)

have been prepared in accordance with International Financial Reporting Standards

('IFRS') and the previous period statements have been restated accordingly. As

required by IFRS, an opening consolidated statement of financial position at

January 1, 2010 has also been presented. A reconciliation with closing equity as

previously reported under Canadian GAAP at December 31, 2009 and the opening

financial position at January 1, 2010 has been provided in note 14.

This is the first presentation of the consolidated financial statements per IFRS,accordingly, as per the election of IAS 34 paragraph 7, a complete set of

consolidated financial statements has been presented for this interim period. To

improve the understanding of this first IFRS interim report, where note disclosure

on balances and transactions are combined, e.g. reconciliation of intangible assets,

a rolling nine month ended analysis has been included to reconcile the movements

in quarter one of this and the previous year, to the balances of those accounts at

each reporting date.

2.2 Basis of preparation

The consolidated interim financial statements have been prepared on the historical

cost basis except for the revaluation of certain financial instruments. Historical cost

is generally based on the fair value of the consideration given in exchange for

assets.

2.3 Basis of consolidation

The consolidated interim financial statements incorporate the interim financial

statements of the company and entities (including special purpose entities)

controlled by the company (its subsidiaries). Control is achieved where the

company has the power to govern the financial and operating policies of an entity

so as to obtain benefits from its activities.

The results of subsidiaries acquired or disposed of during the period are included in

the condensed consolidated interim statement of profit and comprehensive income

from the effective date of acquisition and up to the effective date of disposal, as

appropriate. Where necessary, adjustments are made to the interim financialstatements of subsidiaries to bring their accounting policies in line with those used

by other members of the group.

All intra-group transactions, balances, income and expenses are eliminated in full

on consolidation.

Non-controlling interests in subsidiaries are identified separately from the groups

equity therein. As all subsidiaries are 100% owned and controlled, there are no non-

controlling interests.

Zedi Inc.Notes to the condensed consolidated interim financial statements


Zedi Inc. (the "company") is a publicly owned corporation incorporated in Canada and

listed on the TSX Venture Exchange under the trading symbol "ZED". The address of its

registered office and principal place of business is 902 11th

Avenue S.W., Calgary, AB T2R-

0E7. The company and its subsidiaries (the "group") deliver end-to-end solutions forproduction operations management, primarily to the energy industry.

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2. SIGNIFICANT ACCOUNTING POLICIES (continued)

2.3 Basis of consolidation (continued)

When the group loses or transfers control of a subsidiary, the profit or loss on

transfer / disposal is calculated as the difference between (i) the aggregate of the

fair value of the consideration received and the fair value of any retained interest

and (ii) the previous carrying amount of the assets (including goodwill), and

liabilities of the subsidiary and any non-controlling interests.

Amounts previously recognized in other comprehensive income in relation to the

subsidiary are accounted for (i.e. reclassified to profit or loss or transferred directly

to retained earnings) in the same manner as would be required if the relevant

assets or liabilities were disposed of. The fair value of any investment retained in

the former subsidiary at the date when control is lost is regarded as the fair value

on initial recognition for subsequent accounting under IAS 39 Financial Instruments:

Recognition and Measurement or, when applicable, the cost on initial recognition of

an investment in an associate or jointly controlled entity.

2.4 Investment in associates

An associate is an entity over which the group has significant influence and that is

neither a subsidiary nor an interest in a joint venture. Significant influence is the

power to participate in the financial and operating policy decisions of the investee

but is not control or joint control over those policies.

The results and assets and liabilities of associates are incorporated in these

consolidated interim financial statements using the equity method of accounting,

except when the investment is classified as held for sale, in which case it is

accounted for in accordance with IFRS 5 Non-current Assets Held for Sale and

Discontinued Operations. Under the equity method, investments in associates are

carried in the consolidated interim statement of financial position at cost as adjusted

for post-acquisition changes in the groups share of the net assets of the associate,

less any impairment in the value of individual investments. Losses of an associate in

excess of the groups interest in that associate (which includes any long-term

interests that, in substance, form part of the groups net investment in the

associate) are recognized only to the extent that the group has incurred legal or

constructive obligations or made payments on behalf of the associate.

Any excess of the cost of acquisition over the groups share of the net fair value of

the identifiable assets, liabilities and contingent liabilities of the associaterecognized at the date of acquisition is recognized as goodwill. The goodwill is

included within the carrying amount of the investment and is assessed for

impairment as part of that investment. Any excess of the groups share of the net

fair value of the identifiable assets, liabilities and contingent liabilities over the cost

of acquisition, after reassessment, is recognized immediately in profit or loss.

When a group entity transacts with an associate of the group, profits and losses are

eliminated to the extent of the groups interest in the relevant associate.



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2.5 Goodwill

Goodwill arising in a business combination is recognized as an asset at the date that

control is acquired (the acquisition date). Goodwill is measured as the excess of thesum of the consideration transferred, the amount of any non-controlling interests in

the acquiree, and the fair value of the acquirers previously held equity interest in

the acquiree (if any) over the net of the acquisition-date amounts of the identifiable

assets acquired and the liabilities assumed.

If, after reassessment, the groups interest in the fair value of the acquirees

identifiable net assets exceeds the sum of the consideration transferred, the amount

of any non-controlling interests in the acquiree and the fair value of the acquirers

previously held equity interest in the acquiree (if any), the excess is recognized

immediately in profit or loss as a bargain purchase gain.

Goodwill is not amortized but is reviewed for impairment at least annually. For the

purpose of impairment testing, goodwill is allocated to each of the groups cash-

generating units expected to benefit from the synergies of the combination. Cash-

generating units to which goodwill has been allocated are tested for impairment

annually, or more frequently when there is an indication that the unit may be

impaired. If the recoverable amount of the cash-generating unit is less than its

carrying amount, the impairment loss is allocated first to reduce the carrying

amount of any goodwill allocated to the unit and then to the other assets of the unit

pro-rata on the basis of the carrying amount of each asset in the unit. An

impairment loss recognized for goodwill is not reversed in a subsequent period.

On disposal of a subsidiary, the attributable amount of goodwill is included in thedetermination of the profit or loss on disposal.

2.6 Revenue recognitionRevenue is measured at the fair value of the consideration received or receivable.

Revenue is reduced for estimated customer returns, rebates and other similar

allowances.

2.6.1 Sale of goods

Revenue from the sale of goods is recognized when all the following conditions are

satisfied:

the group has transferred to the buyer the significant risks and rewards of

ownership of the goods;

the group retains neither continuing managerial involvement to the degree usually

associated with ownership nor effective control over the goods sold;

the amount of revenue can be measured reliably;

it is probable that the economic benefits associated with the transaction will flow

to the group; and

the costs incurred or to be incurred in respect of the transaction can be measured

reliably.



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2.6 Revenue recognition (continued)2.6.2 Ren ering o services

Revenue from field services, chart reading, and monthly network service fees arerecognized in the period in which the services are provided. Fees for network and

software services billed in advance are recorded as deferred revenue until such time

as the corresponding services are performed.

2.6.3 Income from associate

Income from an associate entity is recognized on an accrual basis in accordance

with the substance of the relevant agreement (provided that it is probable that the

economic benefits will flow to the group and the amount of revenue can be

measured reliably). Revenue arrangements that are based on production, sales and

other measures are recognized by reference to the underlying arrangement.

2.6.4 Interest revenue

Interest revenue is recognized when it is probable that the economic benefits will

flow to the group and the amount of revenue can be measured reliably. Interest

revenue is accrued on a time basis, by reference to the principal outstanding and at

the effective interest rate applicable, which is the rate that exactly discounts

estimated future cash receipts through the expected life of the financial asset to that

assets net carrying amount on initial recognition.

2.7 Leases

Leases are classified as finance leases whenever the terms of the lease transfer

substantially all the risks and rewards of ownership to the lessee. All other leases

are classified as operating leases.

2.7.1 The group as lessor

The group is not a lessor in any material finance lease arrangements.



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2.7 Leases (continued)

2.7.2 The group as lessee

The group is not a lessee in any material finance lease arrangements.

Operating lease payments are recognized as an expense on a straight-line basis

over the lease term, except where another systematic basis is more representative

of the time pattern in which economic benefits from the leased asset are consumed.

In the event that lease incentives are received to enter into operating leases, such

incentives are recognized as a liability. The aggregate benefit of incentives is

recognized as a reduction of rental expense on a straight-line basis, except where

another systematic basis is more representative of the time pattern in which

economic benefits from the leased asset are consumed.

2.8 Foreign currencies

The individual results of each group entity are reported in the currency of the

primary economic environment in which the entity operates (its functional

currency). For the purpose of the condensed consolidated interim financial

statements, the results and financial position of each group entity are expressed in

Canadian Dollars (CAD), which is the functional currency of the holding company

Zedi Inc. and the presentation currency for the condensed consolidated interim

financial statements. Where originating amounts are referenced in United States

dollars the prefix 'USD' is used.

In recording the transactions of the individual entities, transactions in currenciesother than the entitys functional currency (foreign currencies) are recognized at the

rates of exchange prevailing at the dates of the transactions. At the end of each

reporting period, monetary items denominated in foreign currencies are retranslated

at the rates prevailing at that date. Non-monetary items carried at fair value that

are denominated in foreign currencies are translated at the rates prevailing at the

date when the fair value was determined and are not retranslated at the end of the

reporting period.

Exchange differences are recognized in profit or loss in the period in which they

arise except for exchange differences on monetary items receivable from or payable

to a foreign operation for which settlement is neither planned nor likely to occur

(therefore forming part of the net investment in the foreign operation), which arerecognized initially in other comprehensive income and reclassified from equity to

profit or loss on disposal or partial disposal of the net investment.



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2.8 Foreign currencies (continued)

For the purpose of presenting consolidated interim financial statements, the assets

and liabilities of the groups foreign operations are expressed in CAD using exchange

rates prevailing at the end of the reporting period. Income and expense items are

translated at the average exchange rates for the period, unless exchange rates

fluctuated significantly during that period, in which case the exchange rates at the

dates of the transactions are used. Exchange differences arising, if any, are

recognized in other comprehensive income and accumulated in equity.

On the disposal of a foreign operation, all of the accumulated exchange differences

in respect of that operation attributable to the group are reclassified to profit or loss.

Any exchange differences that have previously been attributed to non-controllinginterests are derecognized, but they are not reclassified to profit or loss.

Goodwill and fair value adjustments arising on the acquisition of a foreign operation

are treated as assets and liabilities of the foreign operation and translated at the

same rate used to translate other assets and liabilities of that foreign operation.

2.9 Share based payments

Equity-settled share-based payments to employees and non-employee directors are

measured at the fair value of the equity instruments at the grant date.

The fair value determined at the grant date of the equity-settled share-based

payments is expensed on a graded basis, with each tranche expensed on a straight-

line basis over the vesting period attributed to that tranche, based on the groups

estimate of equity instruments that will eventually vest. At the end of each reporting

period, the group revises its estimate of the number of equity instruments expected

to vest. The impact of the revision of the original estimates, if any, is recognized in

profit or loss such that the cumulative expense reflects the revised estimate, with a

corresponding adjustment to the equity-settled employee benefits reserve.

There have been no equity-settled share-based payment transactions with parties

other than employees and non-employee directors.

There have been no cash-settled share-based payments.



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2.10 Taxation2.10.1 Current tax

The tax currently payable is based on taxable profit for the period. Taxable profitdiffers from profit as reported in the consolidated interim statement of

comprehensive income because of items of income or expense that are taxable or

deductible in other periods and items that are never taxable or deductible. The

groups liability for current tax is calculated using tax rates that have been

substantively enacted by the end of the reporting period.

2.10.2 Deferred tax

Deferred tax is recognized on temporary differences between the carrying amounts

of assets and liabilities in the consolidated interim financial statements and the

corresponding tax bases used in the computation of taxable profit. Deferred tax

liabilities are generally recognized for all taxable temporary differences. Deferred

tax assets are generally recognized for all deductible temporary differences to theextent that it is probable that taxable profits will be available against which those

deductible temporary differences can be utilized. Such deferred tax assets and

liabilities are not recognized if the temporary difference arises from goodwill or from

the initial recognition (other than in a business combination) of other assets and

liabilities in a transaction that affects neither the taxable profit nor the accounting

profit.

Deferred tax liabilities are recognized for taxable temporary differences associated

with investments in subsidiaries and associates, except where the group is able to

control the reversal of the temporary difference and it is probable that the

temporary difference will not reverse in the foreseeable future. Deferred tax assets

arising from deductible temporary differences associated with such investments areonly recognized to the extent that it is probable that there will be sufficient taxable

profits against which to utilise the benefits of the temporary differences and they

are expected to reverse in the foreseeable future.

The carrying amount of deferred tax assets is reviewed at the end of each reporting

period and reduced to the extent that it is no longer probable that sufficient taxable

profits will be available to allow all or part of the asset to be recovered.

Deferred tax assets and liabilities are measured at the tax rates that are expected to

apply in the period in which the liability is settled or the asset realized, based on tax

rates (and tax laws) that have been substantively enacted by the end of thereporting period. This measurement reflects the tax consequences that would follow

from the manner in which the group expects, at the end of the reporting period, to

recover or settle the carrying amount of its assets and liabilities.



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2.10 Taxation (continued)

2.10.2 Deferred tax (continued)

Deferred tax assets and liabilities are offset when there is a legally enforceable right

to offset current tax assets against current tax liabilities and when they relate to

income taxes levied by the same taxation authority and the group intends to settle

its current tax assets and liabilities on a net basis.

2.10.3 Current and deferred tax for the period

Current and deferred taxes are recognized as an expense or income in profit or loss,

except when they relate to items that are recognized outside profit or loss (whether

in other comprehensive income or directly in equity), in which case the tax is also

recognized outside profit or loss, or where they arise from the initial accounting for

a business combination, in which case, the tax effect is included in the accounting

for the business combination.

2.11 Property, plant and equipment

Property, plant and equipment held for production, supply or administrative

purposes, or for purposes not yet determined, are carried at cost less accumulated

depreciation and accumulated impairment losses. Cost includes any directly

attributable costs required to bring the asset to the location and condition necessary

for it to be capable of operating in the manner as intended by management.

Depreciation commences when the assets are ready for their intended use.

Depreciation is recognized so as to write off the cost of assets (other than freehold

land and properties under construction) less their residual values over their usefullives, using the straight-line method. The estimated useful lives, residual values and

depreciation method are reviewed at the end of each financial year, with the effect

of any changes in estimate being accounted for on a prospective basis.

The gain or loss arising on the disposal or retirement of an item of property, plant

and equipment is determined as the difference between the sales proceeds and the

carrying amount of the asset and is recognized in profit or loss.



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2.12 Intangible assets2.12.1 Intangible assets acquired separately

Intangible assets acquired separately are carried at cost less accumulated

amortization and accumulated impairment losses. Amortization is recognized on a

straight-line basis over the estimated useful lives. The estimated useful life and

amortization method are reviewed at the end of each financial year, with the effect

of any changes in estimate being accounted for on a prospective basis.

2.12.2 Internally-generated intangible assets

Expenditures on research activities are recognized as an expense in the period in

which they are incurred. An internally-generated intangible asset arising from

development (or from the development phase of an internal project) is recognized

if, and only if, all of the following have been demonstrated:

the technical feasibility of completing the intangible asset so that it will be

available for use or sale;

the intention to complete the intangible asset and use or sell it;

the ability to use or sell the intangible asset;

how the intangible asset will generate probable future economic benefits;

the availability of adequate technical, financial and other resources to complete

the development and to use or sell the intangible asset; and

the ability to measure reliably the expenditure attributable to the intangible asset

during its development.

Subsequent to initial recognition, internally-generated intangible assets are reported

at cost less accumulated amortization and accumulated impairment losses, on the

same basis as intangible assets that are acquired separately.



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2.12 Intangible assets (continued)2.12.3 Intangible assets acquired in a business combination

Intangible assets acquired in a business combination and recognized separately

from goodwill are initially recognized at their fair value at the acquisition date

(which is regarded as their cost). Subsequent to initial recognition, intangible assets

acquired in a business combination are reported at cost less accumulated

amortization and accumulated impairment losses, on the same basis as intangible

assets that are acquired separately.

2.13 Impairment of tangible and intangible assets excluding goodwill

At the end of each reporting period, the group reviews the carrying amounts of its

tangible and intangible assets to determine whether there is any indication that

those assets have suffered an impairment loss. If any such indication exists, the

recoverable amount of the asset is estimated in order to determine the extent of the

impairment loss (if any). Where it is not possible to estimate the recoverable

amount of an individual asset, the group estimates the recoverable amount of the

cash-generating unit to which the asset belongs. Where a reasonable and consistent

basis of allocation can be identified, corporate assets are also allocated to individual

cash-generating units, or otherwise they are allocated to the smallest group of cash-

generating units for which a reasonable and consistent allocation basis can be

identified.

Intangible assets with indefinite useful lives and intangible assets not yet available

for use are tested for impairment at least annually, and whenever there is an

indication that the asset may be impaired.

Recoverable amount is the higher of fair value less costs to sell and value in use. Inassessing value in use, the estimated future cash flows are discounted to their

present value using a pre-tax discount rate that reflects current market assessments

of the time value of money and the risks specific to the asset for which the

estimates of future cash flows have not been adjusted.

If the recoverable amount of an asset (or cash-generating unit) is estimated to be

less than its carrying amount, the carrying amount of the asset (or cash-generating

unit) is reduced to its recoverable amount. An impairment loss is recognized

immediately in profit or loss.

Where an impairment loss subsequently reverses, the carrying amount of the asset

(or cash-generating unit) is increased to the revised estimate of its recoverable

amount, but so that the increased carrying amount does not exceed the carrying

amount that would have been determined had no impairment loss been recognized

for the asset (or cash-generating unit) in prior periods. A reversal of an impairment

loss is recognized immediately in profit or loss.



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2.14 InventoriesInventories are state at t e ower o cost an net rea iza e va ue. Costs, inc u ing

an appropriate portion of fixed and variable overhead expenses, are assigned toinventories by the method most appropriate to the particular class of inventory, with

the majority being valued on a first-in-first-out basis. Net realizable value

represents the estimated selling price for inventories less all estimated costs of

completion and costs necessary to make the sale.

2.15 Provisions

Provisions are recognized when the group has a present obligation (legal or

constructive) as a result of a past event, it is probable that the group will be

required to settle the obligation, and a reliable estimate can be made of the amount

of the obligation.

The amount recognized as a provision is the best estimate of the consideration

required to settle the present obligation at the end of the financial period, taking

into account the risks and uncertainties surrounding the obligation. Where a

provision is measured using the cash flows estimated to settle the present

obligation, its carrying amount is the present value of those cash flows.

When some or all of the economic benefits required to settle a provision are

expected to be recovered from a third party, a receivable is recognized as an asset if

it is virtually certain that reimbursement will be received and the amount of the

receivable can be measured reliably.

2.15.1 RestructuringsA restructuring provision is recognized when the group has developed a detailed

formal plan for the restructuring and has raised a valid expectation in those affected

that it will carry out the restructuring by starting to implement the plan or

announcing its main features to those affected by it. No restructurings are planned

at the end of the reporting period.

2.15.2 Vacation entitlement

Provisions for the expected cost of vacation time accrued to employees are

recognized as vacation time is earned, based on vacation entitlements under local

legislations and group policies.

2.15.3 Warranties

Provisions for the expected cost of warranty obligations under local sale of goods

legislation are recognized at the date of sale of the relevant products, at

management's best estimate of the expenditure required to settle the groups

obligation.

2.15.4 Contingent liabilities acquired in a business combination

Contingent liabilities acquired in a business combination are initially measured at

fair value at the date of acquisition. No new contingent liabilities were acquired as a

result of business combinations during the current or prior period.



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2.16 Financial assets

All financial assets are recognized and derecognized on trade date where the

purchase or sale of a financial asset is under a contract whose terms require

delivery of the financial asset within the timeframe established by the market

concerned, and are initially measured at fair value, plus transaction costs, except for

those financial assets classified as at fair value through profit or loss, which are

initially measured at fair value.

Financial assets are classified into the following specified categories: financial assets

at fair value through profit or loss ('FVTPL'), held-to-maturity investments,

available-for-sale ('AFS') financial assets and loans and receivables. The

classification depends on the nature and purpose of the financial assets and is

determined at the time of initial recognition. Disclosure of the accounting policy is

limited to categories relevant to the group.

2.16.1 Effective interest method

This is a method of calculating the amortized cost of a debt instrument and of

allocating interest income over the relevant period. The effective interest rate is the

rate that exactly discounts estimated future cash receipts (including all transactions

costs, premiums or discounts that form an integral part of the effective interest

rate) through the expected life of the debt instrument, or where appropriate a

shorter period, to the net carrying amount on initial recognition.

2.16.2 Loans and receivables

Trade receivables, loans, and other receivables that have fixed or determinable

payments that are not quoted in an active market are classified as loans and

receivables. Loans and receivables are measured at amortized cost using the

effective interest method, less any impairment. Interest income is recognized by

applying the effective interest rate, except for short-term receivables when the

recognition of interest would be immaterial.

2.16.3 Impairment of financial assets

Financial assets, other than those at FVTPL, are assessed for indicators of

impairment at the end of each reporting period. Financial assets are considered to

be impaired when there is objective evidence that, as a result of one or more events

that occurred after the initial recognition of the financial asset, the estimated future

cash flows have been adversely affected.



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2.16 Financial assets (continued)

2.16.3 Impairment of financial assets (continued)

Objective evidence of impairment could include events such as significant financial

difficulty, bankruptcy, financial re-organisation, and/or default or delinquency in

interest or principal repayments of the counterparty.

For financial assets carried at amortized cost, the amount of the impairment loss

recognized is the difference between the assets carrying amount and the present

value of estimated future cash flows, discounted at the financial assets original

effective interest rate.

The carrying amount of the financial asset is reduced by the impairment loss directly

for all financial assets with the exception of trade receivables, where the carrying

amount is reduced through the use of an allowance account. When a trade

receivable is considered uncollectible, it is written off against the allowance account.

Subsequent recoveries of amounts previously written off are credited against the

allowance account. Changes in the carrying amount of the allowance account are

recognized in profit or loss.

With the exception of AFS equity instruments, if, in a subsequent period, the

amount of the impairment loss decreases and the decrease can be related

objectively to an event occurring after the impairment was recognized, the

previously recognized impairment loss is reversed through profit or loss to the

extent that the carrying amount of the investment at the date the impairment is

reversed does not exceed what the amortized cost would have been had the

impairment not been recognized.

2.16.4 Derecognition of financial assets

The group derecognizes a financial asset only when the contractual rights to the

cash flows from the asset expire, or when it transfers the financial asset and

substantially all the risks and rewards of ownership of the asset to another entity. If

the group neither transfers nor retains substantially all the risks and rewards of

ownership and continues to control the transferred asset, the group recognizes its

retained interest in the asset and an associated liability for amounts it may have to

pay. If the group retains substantially all the risks and rewards of ownership of a

transferred financial asset, the group continues to recognize the financial asset and

also recognizes a collateralized borrowing for the proceeds received.

2.17 Financial liabilities and equity instruments issued by the group2.17.1 Classification as debt or equity

Debt and equity instruments are classified as either financial liabilities or as equity

in accordance with the substance of the contractual arrangement.

2.17.2 Equity instruments

An equity instrument is any contract that evidences a residual interest in the assets

of an entity after deducting all of its liabilities. Equity instruments issued by the

group are recognized at the proceeds received, net of direct issue costs.



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2.17 Financial liabilities and equity instruments issued by the group (continued)

2.17.3 Financial guarantee contract liabilities

Financial guarantee contract liabilities are initially measured at their fair values and,

if not designated as at FVTPL, are subsequently measured at the higher of:

the amount of the obligation under the contract, as determined in accordance with

IAS 37 Provisions, Contingent Liabilities and Contingent Assets; and

the amount initially recognized less, where appropriate, cumulative amortization

2.17.4 Financial liabilities

Financial liabilities are classified as either financial liabilities at FVTPL or other

financial liabilities. Disclosure of the accounting policy is limited to 'other financial

liabilities' as no financial liabilities are classified at FVTPL.

2.17.5 Other financial liabilities

Other financial liabilities, including borrowings, are initially measured at fair value,

net of transaction costs.

Other financial liabilities are subsequently measured at amortized cost using the

effective interest method, with interest expense recognized on an effective yield

basis.

2.17.6 Derecognition of financial liabilities

The group derecognizes financial liabilities when, and only when, the groups

obligations are discharged, cancelled or they expire.

3.



CRITICAL ACCOUNTING JUDGEMENTS AND KEY SOURCES OF ESTIMATION

UNCERTAINTY

In the application of the groups accounting policies, which are described in note 2,

management is required to make judgements, estimates and assumptions about the

carrying amounts of assets and liabilities that are not readily apparent from other sources.

The estimates and associated assumptions are based on historical experience and other

factors that are considered to be relevant. Actual results may differ from these estimates.

The estimates and underlying assumptions are reviewed on an ongoing basis. Revisions to

accounting estimates are recognized in the period in which the estimate is revised if the

revision affects only that period, or in the period of the revision and future periods if the

revision affects both current and future periods.

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3.

3.1 Judgements made by management

3.1.1 Asset ives an resi ua va uesProperty, plant and equipment are depreciated over the useful life taking into

account residual values, where appropriate. The actual lives of the assets and

residual values are assessed annually taking into account factors such as

technological innovation, product life cycles and maintenance programmes. Residual

value assessments consider issues such as market conditions, the remaining life of

the asset and projected disposal values.

3.1.2 Impairment of assets

Ongoing assessments are made regarding any potential impairment of assets, using

assumptions made in terms of the models allowed under IFRS.

3.1.3 Recoverability of trade receivables

In assessing the amounts recoverable from trade receivables, assumptions are

made based on past default experience and review of specific account balances.

3.1.4 Recoverable value of inventory

The recoverable value of inventory takes into account current market conditions and

the amounts expected to be realized from the sale of inventory, less estimated costs

to sell.3.1.5 Impairment of goodwill

Determining whether goodwill is impaired requires an estimation of the value in use

of the cash-generating units to which goodwill has been allocated. The value in use

calculation requires management to estimate the future cash flows expected to arise

from the cash-generating unit and a suitable discount rate in order to calculate

present value.

3.1.6 Conversion of deferred revenue

In assessing the amount of deferred revenue that will ultimately be earned,

assumptions are made based on past contract cancellation experience and

assessment of market conditions as they affect customer operations.

3.2 Key sources of estimation uncertaintyThere are no other key assumptions concerning the future and other key sources of

estimation uncertainty at the end of the reporting period that management have

assessed as having a significant risk of causing material adjustment to the carrying

amounts of the assets and liabilities within the next twelve months.



CRITICAL ACCOUNTING JUDGEMENTS AND KEY SOURCES OF ESTIMATION

UNCERTAINTY (continued)

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4.

At the transition date to IFRS, the group adopted all of the new and revised

Standards and Interpretations issued by the International Accounting Standards

Board (the IASB) and the International Financial Reporting Interpretations

Committee (the IFRIC) of the IASB that are relevant to its operations and effective

for annual reporting periods beginning on or before January 1, 2010.

To comply with IFRS 1, the group has applied the same accounting policies in the

opening IFRS consolidated statement of financial position as that applied throughout

all periods presented in these financial statements, except as specified in

paragraphs 13-19 and Appendices B-E of that Standard as discussed in note 14.

4.1 Standards and Interpretations in issue not yet adopted

IFRS 9 Financial Instruments: Classification and measurement (effective for annualperiods beginning on or after January 1, 2013):

Management is in the process of evaluating the impact that the adoption of this

standard will have on the financial statements of the group in the future periods.



ADOPTION OF NEW AND REVISED INTERNATIONAL FINANCIAL REPORTING

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5.

Pro uction

operations

manage-

ment

Fie

operations

manage-

ment

Elimina-

tions

Consoli-

dated

CAD'000 CAD'000 CAD'000 CAD'000 CAD'000

March 31, 2011

Revenue

External revenue 9,630 6,665 - 5,611 21,906

Inter-segment revenue 3 - (3) - -Total revenue 9,633 6,665 (3) 5,611 21,906

Profit from operating activities 925 381 - 613 1,919

Taxation 508 117 - 66 691

Profit for the period 416 264 - 547 1,228

Other information

Depreciation and amortization 809 54 - 237 1,101Staff costs (including directors'

emoluments) 5,245 553 - 2,190 7,988

Segment assets 68,596 9,087 - 4,327 82,010

Segment liabilities 26,673 2,419 - 4,469 33,562

March 31, 2010

Revenue

External revenue 10,432 4,288 - - 14,720

Inter-segment revenue 2 - (2) - -Total revenue 10,434 4,288 (2) - 14,720

Profit from operating activities 1,217 97 1,313

Taxation 388 33 - - 421

Profit for the year 829 64 - - 892

Other information

Depreciation and amortization 649 14 - - 663Staff costs (including directors'

emoluments) 5,117 343 - - 5,460

December 31, 2010

Segment assets 56,465 4,807 - - 61,272Segment liabilities 12,368 1,433 - - 13,801

2010 (opening financial position)

Segment assets 45,229 6,333 - - 51,562Segment liabilities 7,827 1,013 - - 8,840



OPERATING SEGMENTS AND GEOGRAPHICAL DISCLOSURE

The acquisition of Southern Flow in January 2011 provided a significant geographic presence in the United

States (all other international revenues, with products or services provided from Canada, are reported as

part of Canadian operations). While Southern Flow provides services that would involve both reporting

segments, its profit, assets and liabilities are not segmented by service line at this time.

The accounting policies of the reportable segments are the same as the groups accounting policies

described in note 2.

Canadian Operations

United States

Operations

(not

segmented)

Information reported to the groups chief operating decision-maker for purposes of resource allocation and

assessment of segment performance is focused on two service lines productions operations

management and field operations management. The focus of these segments are as follows:

The productions operations management segment delivers systems and services that help oil and gasproducers to efficiently manage people, assets and information using hardware, web-based applications

and professional services. On their own or in combination, these products are the basis for Zedi's end-to-

end solutions that address all aspects of production operations.

The field operations management segment provides third party well operations management to over

400 wells in north-east British Columbia and north-west Alberta, with the primary services including

contract well operations, inspection and supervision.

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6.

Balances at March

31, 2011 and

December 31,

2010 respectivelyCost

2011

Accu-mulated

depre-

ciation

2011

Net book

value

2011

Cost

2010

Accu-mulated

depre-

ciation

2010

Net book

value

2010

CAD'000 CAD'000 CAD'000 CAD'000 CAD'000 CAD'000

Owned

Buildings 765 91 675 748 11 737

Land 92 - 92 - - -

Automobiles 535 199 336 428 142 287

Computer hardware 4,752 3,698 1,054 3,840 3,177 663

Computer software 2,509 2,311 198 2,454 2,251 202Office furniture and

fixtures 1,996 1,233 763 1,062 885 177

Equipment 3,058 1,945 1,114 1,719 1,192 527

Leasehold

improvements 3,836 384 3,452 2,102 218 1,884Total 17,543 9,859 7,684 12,457 7,980 4,478



PROPERTY, PLANT AND EQUIPMENT

March 31, 2011 December 31, 2010

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6.Years

Expected useful life

Buildings 10-20 years

Automobiles 4-5 years

Computer hardware 3-5 years

Computer software 2-3 yearsOffice furniture and fixtures 5-7 yearsEquipment 4-7 yearsLeasehold improvements 5-10 years

7.Mar 31, 2011 Dec 31, 2010 Jan 01, 2010

CAD'000 CAD'000 CAD'000Cost 22,203 17,357 19,047

22,203 17,357 19,047

CAD'000

Movement in goodwill

Net book value at January 1, 2010 and March 31, 2010 19,047

Net book value at April 1, 2010 19,047

Impairment losses recognized in the period -Derecognized on transfer of PetroNet software to associate (refer note 9) (1,690)

Net book value at December 31, 2010 17,357

Net book value at January 1, 2011 17,357

Impairment losses recognized in the period -

Recognized on acquisition of a subsidiary 4,979

Foreign exchange difference in the period

for balances translated in foreign susidiary (133)

Net book value at March 31, 2011 22,203

Zedi Inc.

GOODWILL

PROPERTY, PLANT AND EQUIPMENT (continued)

Notes to the condensed consolidated interim financial statements


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8.Mar 31, 2011 Dec 31, 2010 Jan 01, 2010

CAD'000 CAD'000 CAD'000

Cost 29,281 17,283 15,985

Accumulated amortization 13,965 9,769 7,945

15,315 7,514 8,040

Acquired

Internally

generated Total

CAD'000 CAD'000 CAD'000

Movement in intangible assets

Net book value at January 1, 2010 3,926 4,114 8,040Acquired 10 374 384

Disposed - - -

Amortization (236) (232) (468)

Net book value at March 31, 2010 3,700 4,256 7,956

Net book value at April 1, 2010 3,700 4,256 7,956

Acquired 38 1,026 1,064

Disposed - (87) (87)

Amortization (620) (799) (1,419)

Net book value at December 31, 2010 3,118 4,396 7,514

Net book value at January 1, 2011 3,118 4,396 7,514

Additions 10 597 607Additions through business combinations 8,125 - 8,125Effect of change in foreign currency rate (218) - (218)

Disposals (95) - (95)

Depreciation (319) (298) (617)

Net book value at March 31, 2011 10,621 4,695 15,315

Zedi Inc.

INTANGIBLE ASSETS



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Zedi Inc.

9.

Name of associate

Principlebusiness

activity

Place of

incorpo-ration and

operation

Mar 31, 2011 Dec 31, 2010 Jan 01, 2010

PetroNet Systems LP

Production

operations

management Canada 50% 50%

100%

(consoli-

dated)

Summary of investment in PetroNet Systems LP:August 1,

2010

- Goodwill 1,690- Unamortized intangible assets 87

Less cash received (1,000)

Initial value of investment in associate 777

3 months

ended

Mar 31, 2011

9 months

ended

Dec 31, 2010

3 months

ended

Mar 31, 2010

CAD'000 CAD'000 CAD'000

Opening value of investment in associate 1,089 - -

Initial investment, as detailed above 777

Deferred tax asset recognized on transfer - 55

Equity in earnings for period 273 457

Cash advance from the partnership (200) (200) -

1,162 1,089 -Investment in associate - end of period

INVESTMENT IN ASSOCIATE



Proportion of ownership interest and

voting power held

Value of business unit transferred to PetroNet

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Zedi Inc.

9.

3 months

ended

Mar 31, 2011

9 months

ended

Dec 31, 2010

3 months

ended

Mar 31, 2010

CAD'000 CAD'000 CAD'000

Total revenue of associate 683 1,143 -

273 457 -

INVESTMENT IN ASSOCIATE (continued)

On August 1, 2010, the group contributed $1,777 of non-monetary assets to PetroNet

Systems LP ('PetroNet') in exchange for CAD 1,000 in cash and a 50% interest in this

newly created limited partnership. No gain or loss was recognized on this transaction.

The group's share of earnings from PetroNet is based solely on revenues and as such, the

other partner, who is not related to Zedi, bears the risk of any losses that may be incurred

by the partnership. The group views its interest in this associate as part of its operations.



Group's share of profit of associate (equal to

40% of reported revenue of associate)

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10.Mar 31, 2011 Dec 31, 2010 Jan 01, 2010

CAD'000 CAD'000 CAD'000

Raw materials 2,574 2,729 2,430

Work in progress 825 422 137

Finished goods 4,745 3,057 5,129

8,144 6,208 7,696

11.Mar 31, 2011 Dec 31, 2010 Jan 01, 2010

CAD'000 CAD'000 CAD'000

Trade receivables 23,060 14,527 11,836

Lease incentive receivable 2,246 - -

Prepaid expenses and deposits 662 476 299

Gross trade and other receivables 25,968 15,003 12,135

Allowance for doubtful receivables (494) (489) (827)

Trade and other receivables 25,474 14,514 11,308

11.1 Trade receivables

TRADE AND OTHER RECEIVABLES

Trade receivables disclosed above are classified as loans and receivables and aretherefore measured at amortized cost.

The average credit period provided on sales of goods is 30 days. No interest is charged

on trade receivables for the first 30 days from the date of the invoice. Thereafter,

interest is charged at 18% per annum on the outstanding balance. The group has

recognized an allowance for doubtful receivables of CAD 494 against all receivables

based on a detailed account by account assessment, considering prior credit history,

and knowledge of debtor insolvency or other credit risk. The receivables that were

assessed as uncollectible were considered impaired.

Zedi Inc.

INVENTORIES

The cost of inventories recognized as an expense during the period in respect of continuing

operations was CAD 3,691 (2010: CAD 7,813).



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11.11.1 Trade receivables (continued)

Mar 31, 2011 Dec 31, 2010

CAD'000 CAD'000

Current to 60 days 17,248 10,006

Beyond 60 days 7,565 4,032

Total 24,813 14,038

The groups policy requires customers to pay in accordance with agreed payment

terms. Depending on the customer segment, our settlement terms are generally 30

days from date of invoice.

The definition of items that are past due is determined by reference to terms agreed

with individual customers. None of the amounts outstanding have been challengedby the respective customer(s) and the group continues to conduct business with

them on an ongoing basis. Accordingly, management has no reason to believe that

this balance is not fully collectable in the future.

Zedi Inc.

TRADE AND OTHER RECEIVABLES (continued)

Before accepting any new customer, the group evaluates external credit ratings to

assess the potential customers credit quality and defines credit limits by customer.

11.1.1 Aging of past due but not impaired

Trade receivables disclosed above include amounts (see below for aged analysis)

that are past due at the end of the reporting period but against which the group has

not recognized an allowance for doubtful receivables because there has not been a

significant change in credit quality and the amounts are still considered recoverable.

The group does not hold any collateral or other credit enhancements over these

balances nor does it have a legal right of offset against any amounts owed by the

group to the counterparty.



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11.11.1 Trade receivables (continued)

11.1.2 Movement in the allowance for doubtful debts

3 months

ended

Mar 2011

9 months

ended

Dec 2010

3 months

ended

Mar 2010

CAD'000 CAD'000 CAD'000

At beginning of the period 489 827 827Impairment losses recognized on

receivables - 284 -Amounts written off during the period as

uncollectible - (622) -

Amounts recovered during the period 5 - -

At end of the period 494 489 827

Zedi Inc.

TRADE AND OTHER RECEIVABLES (continued)

In determining the recoverability of a trade receivable, the group considers any

change in the credit quality of the trade receivable from the date credit was initially

granted up to the end of the reporting period. The concentration of credit risk is

limited due to the customer base being large and unrelated.



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12. ISSUED CAPITAL

12.1 Authorized and issued share capital

Number of shares Share capital

CAD'000

Balance at January 1, 2010 94,772,021 51,218

Issued under restricted share unit plan for

employees 8,025 6

Balance at March 31, 2010 94,780,046 51,224

Issued under employee share option plan 996,198 814

Issued under restricted share unit plan for non-

employee directors 60,000 36


employees 698,227 430

Balance at December 31, 2010 96,534,471 52,504

Issued under employee share option plan 36,513 41


employees 8,318 5

Balance at March 31, 2011 96,579,302 52,550

Zedi Inc.

The company is authorized to issue an unlimited number of common voting shares

without nominal or par value. The following is a summary of the companys issued

and outstanding common shares.

All issued shares are fully paid.



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13. EQUITY-SETTLED EMPLOYEE BENEFITS RESERVE#

3 months ended

Mar 2011

9 months ended

Dec 2010

3 months ended

Mar 2010

CAD'000 CAD'000 CAD'000

Balance at beginning of the period 6,248 6,454 6,297

Stock option expense 111 310 92

Fair value of options exercised (14) (250) -

Fair value of restricted share units settled - (465) (6)

Restricted share unit plan expense 52 199 71

Value of restricted share units released - - -

6,398 6,248 6,454

14. FIRST TIME ADOPTION OF IFRS (IFRS 1)




The policies set out in the summary of significant accounting policies section have been applied

in preparing the unaudited condensed consolidated interim financial statements for the threemonth period ended March 31, 2011, the comparative information for the three month period

ended March 31, 2010, the preparation of an opening IFRS consolidated balance sheet at

January 1, 2010 (Transition Date) and the preparation of a condensed consolidated financial

statements as at and for the year ended December 31, 2010.

In preparing these unaudited condensed consolidated financial statements, the company applied

the following optional exemptions and mandatory exceptions from full retrospective application

of IFRS:

- the group elected not to apply IFRS 3 Business Combinations retrospectively to business

combinations that occurred before the Transition Date.

- the group elected not to apply IFRS 2 Share Based Payments to equity instruments that had

vested, and liabilities from share-based payment transactions that were settled, prior to the

transition date

- application of IFRS for the 2010 comparative periods resulted in restatement of the accounting

for the Skyways acquisition that occurred in August of 2010 to comply with IFRS 3 Business

Combinations by expensing transaction costs that had been capitalized under the original

treatment (see note 14.1.4).

- application of IFRS for the 2010 comparative periods resulted in reclassification of transaction

expenses incurred in the fourth quarter of 2010 related to the Southern Flow acquisition, which

had been capitalized as a prepaid expense as the acquisition had not closed prior to December

31, 2010. Under IFRS these costs were expensed in the period incurred (see note 14.1.4).

- however, the IASB has determined that contingent consideration outstanding as of the

transition date must be recognized as a provision (see note 14.1.3).

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14. FIRST TIME ADOPTION OF IFRS (IFRS 1)14.1 IFRS reconciliation of accumulated deficit

Accumulateddeficit

Total

comprehensiveincome

CAD'000 CAD'000

(13,245) -

(164) -

(436) -

(1,062)

114 -

Balance at January 1, 2010 restated per IFRS (14,793) -

(9,570) 3,675

51 215

(620) (183)

(1,208) (146)

160 46

(123) (123)Deferred income tax effect of change in

treatment of acquisition expenses 29 29

Balance at December 31, 2010 restated per IFRS (11,281) 3,512

Recognition of contingent consideration provision upon

transition (refer note 14.1.3)



Balance at January 1, 2010 as previously reported per

Canadian GAAP

Transition restatement of stock option expense (refer

note 14.1.1)

Transition restatement of depreciation of property plant

and equipment (refer note 14.1.2)

Change in treatment of acquisition expenses (refer note

14.1.4)

Deferred income tax effect of above transition

adjustments

Balance at December 31, 2010 as previously reported per

Canadian GAAP

Transition restatement of stock option expense (refer

note 14.1.1)Transition restatement of depreciation of property plant

and equipment (refer note 14.1.2)Recognition of contingent consideration provision upon

transition (refer note 14.1.3)

Deferred income tax effect of above transitionadjustments

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Zedi Inc.

14. ACCUMULATED DEFICIT (continued)

14.1IFRS reconciliation (continued)14.1.1 Restatement of stock based compensation expense

Prior to adopting IFRS, the group utilized a zero forfeiture rate within the Black-

Scholes valuation calculation for stock options and amortized the resulting stock

option expense evenly over the entire vesting term of each grant.

Upon adoption of IFRS 2 Share Based Payments, the group estimated its actual

forfeiture rate based on recent experience and determined that a 5% forfeiture

rate was appropriate. In addition, the group adopted a graded vesting approach

to amortization, so that each individual tranche of options within a grant is

amortized over its specific vesting period.

The net impact of incorporation of the forfeiture rate to account for futureemployee departures and expiry of unexercised options was a slight decrease in

total calculated expense associated with each individual grant of stock based

compensation. However, this revised total expense for any given grant of stock

options was then amortized more quickly given the graded amortization pattern.

Other than the lower total amount to be amortized, there was no impact on the

pattern of amortization associated with restricted share units as they do not

have a graded vesting period. All outstanding stock compensation grants that

were not fully amortized as of the transition date were revalued under the new

IFRS 2 policy with the net impact being an increase in accumulated expense of

CAD 164 at that date, driven by the accelerated expensing as described above.

Beyond the initial impact of CAD164, the expected impact on future periods isnot expected to be significant as older grants with lower associated amortization

are typically offset by newer grants with higher initial amortization.

14.1.2 Restatement of depreciation of property, plant and equipment

Prior to adopting IFRS, the group utilized declining balance amortization

methods for a number of categories of property, plant and equipment, namely

computer hardware, computer software, office equipment and tools.

Upon adoption of IAS 16 Property Plant and Equipment, the group selected the

straight line method of amortization after determining that this method best

reflected the pattern of benefits realized from the underlying assets. There

were no significant changes to estimated useful lives or salvage values

associated with the underlying assets.

The net impact of the change in amortization method as an increase in

accumulated amortization as of the transition date of CAD 436.

Beyond the initial impact of CAD 436, the expected impact on future periods is

not expected to be significant as carryforward amortization impacts associated

with pre-transition date assets are offset by amortization of post-transition date

asset acquisitions.



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Zedi Inc.

14. ACCUMULATED DEFICIT (continued)

14.1IFRS reconciliation (continued)14.1.3 Recognition of contingent consideration provision upon transition

Prior to adopting IFRS, the group did not recognize contingent consideration in the

form of earnouts on business acquisitions until the amounts payable under the

respective earnout formulae were confirmed by actual results.

Under IFRS 1 the group elected not to retrospectively restate the accounting for any

business acquisitions completed prior to the transition date, however, the IASB has

determined that contingent consideration outstanding as of the transition date must

be recognized as a provision.

As of the transition date contingent consideration was still due to the vendors of J&J

Oilfield Services Ltd. which was acquired by the group in January 2008. Management

determined that the full remaining amount of unpaid earnout CAD 1,300 is expectedto be paid and that the fair value on a discounted basis as of January 1, 2010 was

CAD 1,062. This was recognized as a provision as of that date and then the provision

was subsequently adjusted to fair value at each period end throughout 2010. The net

change in fair value between January 1 and March 31 of 2011 was CAD 37 and for

fiscal 2010 it was CAD 146. There is no deferred taxation impact associated with

recognition of this provision.

Beyond the initial impact specified above, the expected impact on future periods is

not expected to be significant and will primarily represent interest as the present

value of the provision converges with the ultimate expected payout as above.

14.1.4 Change in treatment of acquisition expenses

Prior to adopting IFRS, the group capitalized transaction costs associated with

business acquisitions as part of the purchase price allocation.

Upon adoption of IAS 3 Business Combinations, these costs must be expensed in the

period incurred. This affects initial accounting for both Skyways and Southern Flow

(see note 21). The initial accounting for Skyways involved capitalization of CAD 55 of

transaction costs which were allocated to property, plant and equipment in the

purchase price allocation. Under IFRS, the 2010 presentation has been changed to

reflect these costs as expense in the period. Also in 2010, CAD $68 of transaction

costs related to Southern Flow were initially capitalized as prepaid, as the acquisition

had not closed as of December 31, 2010. Under IFRS, this amount was expensed in

the fourth quarter of 2010. The impact of these two adjustments to the nine monthsended December 31, 2010 was a CAD 123 increase in administrative expenses.

The deferred tax impact of the two adjustments above was a reduction in taxation

expense for 2010 of CAD 29.

Beyond the initial impact specified above, the expected impact on future periods is

not expected to be significant.



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15.

Mar 31, 2011 Dec 31, 2010 Jan 01, 2010

CAD'000 CAD'000 CAD'000

Trade payables 4,836 2,413 1,463

Accrued liabilities 2,823 4,265 1,577

7,659 6,678 3,040

16.Mar 31, 2011 Dec 31, 2010 Jan 01, 2010

CAD'000 CAD'000 CAD'000

Contingent consideration provision 1,244 1,208 1,062

Warranty provision 56 61 47

Vacation provision 576 206 180

1,876 1,475 1,289

Current 1,254 889 227

Non-current 622 586 1,062

1,876 1,475 1,289

Contingent

consideration Warranty Vacation

CAD'000 CAD'000 CAD'000

1,208 61 206

Additional provision recognized 36 14 192

Reduction from payments / sacrifice - - (129)

- (19) -

- - 307

1,244 56 576

Balance at December 31, 2010

Reduction from remeasurement / settlement

without cost

Provision recognized on acquisition of company

Balance at March 31, 2011

Zedi Inc.

TRADE AND OTHER PAYABLES

The average credit period on purchases of certain goods from Canada is one month. The group

has financial risk management policies in place to ensure that all payables are paid within the pre-

agreed credit terms.

PROVISIONS

Movement in provisions



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17.

Mar 31, 2011 Dec 31, 2010 Jan 01, 2010

CAD'000 CAD'000 CAD'000

8,339 4,918 4,511

8,339 4,918 4,511

18. Mar 31, 2011 Dec 31, 2010 Jan 01, 2010

CAD'000 CAD'000 CAD'000

Secured at amortized cost

Bank overdraft (i) 1,450 - -Bank loans (ii) 6,958 - -

8,408 - -

Current 3,097 - -Non-current 5,311 - -

8,408 - -

18.1 Summar of borrowin arran ements

(i) Bank line of credit denominated in Canadian dollars at effective interest rate of

Royal Bank Prime + 1.15% secured by trade receivables and inventory.

(ii) Variable rate term loan, issued January 13, 2011 with repayment to occur over a

three year period of blended monthly payments beginning July 1, 2011. Interest is

payable at Royal Bank Prime + 1.65% per annum, which based on March 31, 2011

rates leads to an effective interest rate of 5.44% per annum after consideraton of

all facility fees. As at March 31 2011, CAD 7,000 had been advanced under this

loan facility, with the facility capped at CAD 9,000 so that additional draws of up toCAD 2,000 can be made prior to July 1, 2011. The loan is secured by a general

security agreement.

Zedi Inc.

DEFERRED REVENUE

Arising from contract services billed in advance

of delivery, with terms of 12 months or less



BORROWINGS

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19. PROFIT FROM OPERATING ACTIVITIES3 months

ended March31, 2011

3 months

ended March31, 2010

CAD'000 CAD'000

19.1 Other operating income, from associate

Equity in earnings of associate, PetroNet Systems LP 273 -

19.2 ExpensesExpenses associate wit purc asing, receiving,

warehousing, shipping of products (but excluding

assembly and related costs which are applied to

products in finished goods inventory) and information

technology 671 671

Warehousing and distribution 671 671

Expenses associated with corporate management,

finance, legal, human resources, quality assurance,

office facilities, corporate development and investor

relations 3,419 1,667Stock based compensation 164 164

Administration 3,582 1,831

Expenses associated with marketing, sales, customer

service, support center and training 1,662 1,457Customer acquisition and service 1,662 1,457

Costs associated with research, design, prototypes,

testing, commercialization and ongoing technical

support to customers 1,585 1,524Less qualifying amounts capitalized to internally

generated intangible assets (597) (374)Product development 988 1,150

Depreciation of property, plant and equipment 479 259Amortization of intangibles 617 468

Losses (gains) on foreign exchange (94) (63)

Losses (gains) on disposal of property, plant andequipment and intangibles 99 -

Other operating expenses 1,101 663

Interest on term loan 70 -

Interest on bank advances and other finance charges 46 53


Zedi Inc.

Profit from operating activities is arrived at after taking intoaccount:



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20. TAXATION

20.1 Taxation recognized in income3 months

ended March31, 2011

3 months

ended March31, 2010

CAD'000 CAD'000

Current taxation

- Current period 739 -

- Adjustments in the current period in

relation to current tax of prior periods - -

Deferred taxation relating to the origination

and reversal of temporary differences (48) 421

Taxation recognized in income 691 421

20.2Reconc at on o taxat on expense to

accounting profit

Profit before taxation 1,919 1,313

Statutory tax rate applicable during period 26.5% 28.0%

Taxation at statutory rate 509 368

Effect of expense not deductible in

determining taxable income 117 53

Effect of different tax rates of subsidiaries

operating in other jurisdictions 65 -

691 421

Adjustments recognized in the current period

in relation to the current tax of prior periods - -

Taxation recognized in income 691 421



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21 BUSINESS COMBINATIONS

The group completed a number of acquisitions in 2010 and the first quarter of 2011. The acquisitionof two subsidiaries, Southern Flow Companies Inc. and Skyways Technical Services Ltd., is described

below, while the acquisition of a partnership interest in PetroNet Systems LP is described in note 9.

Southern Flow Companies Inc. (Southern Flow):

In January 2011, the group executed an agreement to acquire all the issued and outstanding shares

of Southern Flow effective January 1, 2011. The acquisition price of CAD 16,492 (USD 16,515) was

paid in entirely in cash upon closing. There was no contingent consideration. Southern Flow was a

wholly owned subsidiary of a public company providing production optimization services to the oil and

gas industry through 12 locations in the southern United States.

The initial accounting for the acquisition of Southern Flow has only been provisionally determined at

the end of the reporting period. For tax purposes, the tax values of Southern Flow's assets will remain

based on pre-acquisition values of the assets. At the date of finalization of these consolidated

financial statements, the necessary market valuations and other calculations had not been finalized

and they have therefore only been provisionally determined based on management's best estimate.

Goodwill arose in the acquisition of Southern Flow because the consideration paid for the combination

effectively included amounts in relation to the benefit of revenue growth, expected synergies, future

market development and the assembled workforce of Southern Flow. These benefits are not

recognized separately from goodwill because they do not meet the recognition criteria for identifiable

intangible assets.

None of the goodwill arising on acquisition is expected to be deductible for tax purposes.

Acquisition-related costs amounting to CAD 112 have been excluded from the considerationtransferred and have been recognised as an expense in the current year, within the other expenses'

line item in the consolidated statement of comprehensive income.

Skyways Technical Services Ltd. (Skyways):

In August 2010, the group executed an agreement to acquire all the issued and outstanding shares of

Skyways effective as of August 1, 2010. The purchase price of CAD 1,883 was comprised of an

upfront cash payment of CAD 483 and earn out payments to a maximum of CAD 1,400, based on

certain earnings targets being met. Skyways was a private corporation providing field operations and

management services to the oil and gas industry in north-east British Columbia.

The remaining consideration, to a maximum of CAD 1,400 will be paid out only upon the achievement

of certain earnings and growth targets over the three year period following the acquisition date and

will be accounted for as employee compensation expense in the period earned.

Acquisition-related costs amounting to CAD 55 were included in the consideration transferred under

the initial recording of this acquisition in 2010, but under IFRS have been reclassified to expense in

the period of acquisition and are included in administration expenses in the consolidated statement of

comprehensive income.

edi Inc.otes to the condensed consolidated interim financial statements

or the quarter ended March 31, 2011 (unaudited)

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Zedi Inc.

21 BUSINESS COMBINATIONS (continued)

Southern

Flow Skyways

CAD'000 CAD'000

Principal activityProduction

Optimization Field Services

Date o acqu s t on an eg nn ng o

inclusion of results of acquired business

within group financial results January 1, 2011 August 1, 2010

Purchase consideration

Cash paid on closing 16,492 48316,492 483

Current assets

Cash and & cash equivalents 250 56

Trade and other receivables 3,591 70Inventories 2,179 -

6,020 126

Non-current assets

Property, plant and equipment 1,808 461

Intangibles 8,125 -

Goodwill 4,979 -

14,912 461

Current liabilities

Trade and other payables 1,336 43

Non-current liabilities

Deferred tax liabilities 3,104 61

Net Assets Acqu re an Recogn ze at

Date of Acquisition 16,492 483

Goodwill arising on acquisition:

Consideration transferred, as above 16,492 483

Less: fair value of identifiable net assets

acquired:

Working Capital 4,684 83

Zedi Inc._2

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