180 Connect Inc. reports annual 2006 revenue of $335.4 million representing growth of 19.9% over the prior year



    /NOT FOR DISTRIBUTION TO U.S. NEWSWIRE SERVICES OR DISSEMINATION IN THE
    UNITED STATES/

    Stock Symbol: TSX: NCT.U

    TORONTO, March 15 /CNW/ - 180 Connect Inc. ("180 Connect" or the
"Company"), One of North America's largest providers of installation,
integration and fulfillment services to the home entertainment, communication
and home integration service industries, today released its financial results
for the year ended December 31, 2006.

    Certain information contained in this news release constitutes
forward-looking information, including anticipated growth and financial
performance. See "Forward-Looking Information". All amounts are in U.S.
dollars.

    Selected Financial Highlights - Year Ended December 31, 2006

    For the year ended December 31, 2006 as compared to the year ended
    December 31, 2005:

    Year to Date Highlights

    
    -  Revenue grew to $335.4 million, an increase of $55.7 million, or 19.9%
       over revenue of $279.7 million in 2005.

    -  EBITDA from continuing operations(1) was $13.8 million, an increase of
       $12.4 million compared to $1.4 million in 2005.

    -  Total cash provided by operating activities was $8.3 million, an
       increase of $21.4 million from the cash used in continuing operations
       of $13.1 million in 2005.

    -  Loss from continuing operations was $9.5 million, an increase of $5.5
       million compared to $4.0 million in 2005.

    -  Net loss was $15.3 million, an increase of $8.1 million compared to
       $7.2 million in 2005.

    -  Loss per share is as follows:

         -  Loss from continuing operations, basic and diluted, was a loss of
            $0.39 per share compared to a loss of $0.17 per share in 2005.

         -  Net loss, basic and diluted, was a loss of $0.63 per share
            compared to a loss of $0.30 per share in 2005.

    Fourth Quarter Highlights

    -  Revenue grew to $95.6 million, an increase of $16.8 million, or 21.3%,
       compared to revenue of $78.8 million in 2005.

    -  EBITDA from continuing operations(1) was $5.0 million, an increase of
       $9.0 million compared to negative EBITDA of $4.0 million in 2005.

    -  Loss from continuing operations was $1.3 million, an improvement of
       $6.5 million compared to the $7.8 million loss from continuing
       operations in 2005.

    -  Net loss was $5.4 million, a decrease of $4.5 million compared to the
       $9.9 million net loss recorded in 2005.

    -  Loss per share is as follows:

         -  Loss from continuing operations, basic and diluted, was a loss of
            $0.05 per share compared to a loss of $0.32 per share in 2005.

         -  Net loss, basic and diluted loss, was a loss of $0.22 per share
            compared to a loss of $0.41 per share in 2005.

    (1) EBITDA from continuing operations excludes interest, income tax
        recovery, depreciation, amortization of customer contracts,
        impairment of goodwill and customer contracts and (gain) loss on sale
        of assets, and gain on extinguishment of debt. EBITDA from continuing
        operations is a non-Canadian GAAP measure and does not have a
        standardized meaning prescribed by GAAP. Therefore, it is not likely
        to be comparable to similar measures presented by other issuers.
        Management believes that this term provides a better assessment of
        cash flow from the Company's operations by eliminating the charge for
        depreciation, amortization of customer contracts and impairment of
        goodwill and customer contracts and income tax recovery which are
        non-cash expense items and gain on sale of assets and gain on
        extinguishment of debt which are not considered to be in the normal
        course of operating activity. The comparative Canadian GAAP measure
        is loss from continuing operations.
    

    Brian McCarthy, Executive Chairman of 180 Connect stated:

    "2006 was a significant and successful transition year for 180 Connect.
The reinvigorated management team, lead by Peter Giacalone and his new CFO,
Steven Westberg, have been highly focused on the consistent delivery of
results and rebuilding of shareholder confidence in the organization. Issues
of debt refinancing, pricing and operational efficiencies were dealt with.
Significant effort has gone into expanding and strengthening our relationship
with our major customers as well as revision and streamlining of the systems
and processes of control and management. Our employees continue to deliver
some of the best quality and consumer satisfaction metrics in the industry
despite the challenges of weather and geography.
    Against this backdrop of challenges 180 Connects team delivered
meaningful year over year growth in both revenues and operating margins with a
strong focus on cash management and delivery.
    I am personally very pleased with the Company's progress and am
additionally pleased that the market has begun to recognize the value of 180
Connect and the exciting prospects of its future.

    2006 Highlights

    180 Connect is at an inflection point in its lifecycle that presents a
significant opportunity to build on the progress and investments we have made
over the past year. While we viewed 2006 as a turnaround year, our financial
results were strong as we achieved significant revenue growth and record
growth in EBITDA from continuing operations. Revenue for 2006 increased to
$335 million, from $280 million in 2005. This 20% increase reflects
across-the-board volume increases in satellite and cable and also includes
contribution from our 180 Network Services and Digital Interiors - Home
businesses. DIRECTV volume increased 21% year over year, as they not only
continue to channel more work through the Home Service Provider Network, but
also continue to sell more advanced product. Cable revenues increased 36% year
over year as we continue to benefit from our investments in our cable
workforce.
    Earnings performance for 2006 was the strongest in the history of the
Company. EBITDA from continuing operations was $13.8 million for 2006, an
increase of $12.4 million compared to $1.4 million in 2005. These results were
attributable to underlying operational improvements implemented in
streamlining our management team, reduced recruiting costs as a result our
in-sourced initiative and negotiated cost reductions with our outsourced call
center vendor, coupled with volume increases in both our satellite and cable
operations. In addition, early investments made in 180 Network Services bore
fruit, contributing earnings from fiber-to-the-premise contracts. These
contracts represent the largest fiber deployment to residential communities in
the Western US and are important to 180 Connect, as an integrated company, as
they allow the Company to participate in multiple stages of a project's life
cycle, as we offer a suite of Digital Interiors - Home products, including
structured wiring, fiber drops, VoIP, security and television content.
    We continue rolling out our perpetual inventory system throughout our
operations and it is expected to be completed by the end of the first quarter
of 2007. This system is expected to improve our inventory process and controls
and reduce unnecessary costs.
    Subsequent to December 31, 2006, we negotiated a reduction in the
Company's letter of credit ("LOC") required as a result of the liquidation and
reduction in our insurance obligations. The LOC requirement, which is
collateralized with the Company's restricted cash, has been reduced by $3.2
million with an additional reduction of approximately $1.0 million to $1.5
million expected by May 2007. Furthermore, through our insurance renewal
process, the Company has negotiated a quarterly review of the liquidation and
reduction of our insurance obligations during the next insurance plan year
which is expected to further reduce the Company's collateral requirements by
approximately $3 million in 2007. This new plan reflects continued confidence
in both our ability to fund claims as they arise and in our commitment to
mitigate new claims from occurring.

    Looking Forward

    On March 14, 2007, the Company announced that it had entered into an
arrangement agreement with Ad.Venture Partners, Inc, a special purpose
acquisition company. The arrangement will result in 180 Connect becoming an
indirect, Canadian subsidiary of AVP. AVP, a Delaware corporation, will be
re-named 180 Connect Inc., and intends to apply for listing on the Nasdaq
Global Market concurrently with the closing of the transaction. As a result of
the transaction, 180 Connect expects to significantly increase its net cash
position by approximately $42 million and will be well-capitalized to continue
to pursue its core business and growth initiatives.
    We believe that combined with AVP we are well positioned to benefit from
a number of industry trends driving the demand for satellite and cable service
offerings. These include: the convergence of technology, the strong upgrade
trend from basic to digital cable and HDTV, the introduction and adoption of
other new technologies, including HDTVs, DVRs, VoIP, and wireless broadband,
and the growth of "digital homes" wired for sound, video, and data. This
increasing array of consumer technology choices is creating the need for
increased professional expertise and assistance. Furthermore, the
ever-changing complexity of in-home technology is expected to further drive
the demand for 180 Connect's additional in-home services.
    For fiscal 2007, 180 Connect expects revenue to reach approximately $365
to $375 million, or 9% to 12% year-over-year growth and EBITDA from continuing
operations(2) to be in the range of $24 million to $26 million, representing
significant double digit growth of 75% to 90% over the previous year.
    As we head into 2007 we have many reasons to be excited.  The catalysts
for stronger performance, primarily the execution and delivery of improved
margins, increased demand from our major customers at rational prices and
increased visibility of profitable new service revenue are firmly established.
  We foresee growth across multiple business lines and customers and as a
result, margins are expected to improve significantly throughout fiscal 2007."

    
    (2) EBITDA from continuing operations excludes interest estimated for
        2007 to be $12 million, income tax recovery, depreciation and
        amortization of customer contracts estimated for 2007 to be $18
        million. The comparable Canadian GAAP measure is loss from operations
        before taxes, estimated for 2007 to be $4 million to $6 million.
        EBITDA from continuing operations is a non-Canadian GAAP measure and
        does not have a standardized meaning prescribed by GAAP. Therefore,
        it is not likely to be comparable to similar measures presented by
        other issuers. Management believes that these terms provide a better
        assessment of cash flow from the Company's operations by eliminating
        the charge for depreciation, amortization of customer contracts and
        impairment of goodwill and customer contracts which are non-cash
        expense items and (gain) loss on sale of assets which is not
        considered to be in the normal course of operating activity. The
        comparative Canadian GAAP measure is loss from operations.
    

    Summary Results

    Copies of the audited annual financial statements of the Corporation are
attached to this news release. The Corporation will be releasing its year end
report on March 19, 2007 which will be available on SEDAR and the
Corporation's website. Additional information relating to the Corporation is
available on SEDAR at www.sedar.com and on the Corporation's website at
www.180connect.net.
    The following is a summary of selected consolidated financial and
operating information of the Corporation as of and for the three and twelve
months ended December 31, 2006 and 2005. The selected information is derived
from the Company's annual audited financial statements.

    
    -------------------------------------------------------------------------
                             Three         Three
                      Months Ended  Months Ended    Year Ended    Year Ended
                       December 31,  December 31,  December 31,  December 31,
                              2006          2005          2006          2005
    -------------------------------------------------------------------------
    Revenue.......... $ 95,638,547  $ 78,832,319  $335,446,741  $279,726,651
    -------------------------------------------------------------------------
    Direct expenses..   84,430,029    75,446,647   301,158,053   256,334,245
    -------------------------------------------------------------------------
    Direct
     contribution
     margin
     ("DCM")(3)......   11,208,518     3,385,672    34,288,688    23,392,406
    -------------------------------------------------------------------------
    General and
     administrative..    5,650,872     7,356,548    19,584,350    20,381,143
    -------------------------------------------------------------------------
    Foreign exchange
     loss (gain).....       27,328       (32,554)       30,361       (18,692)
    -------------------------------------------------------------------------
    Restructuring
     costs...........      499,809        88,000       892,688     1,672,485
    -------------------------------------------------------------------------
    EBITDA from
     continuing
     operations(4)...    5,030,509    (4,026,322)   13,781,289     1,357,470
    -------------------------------------------------------------------------
    (Gain) loss on
     sale of assets..      388,381       (30,492)     (726,086)   (6,897,291)
    -------------------------------------------------------------------------
    Impairment of
     goodwill and
     customer
     contracts.......            -       423,109             -       608,096
    -------------------------------------------------------------------------
    Depreciation.....    3,504,131     3,089,155    13,560,340     6,151,059
    -------------------------------------------------------------------------
    Amortization
     of customer
     contracts.......      923,493       936,441     3,712,673     4,093,985
    -------------------------------------------------------------------------
    Interest
     expense.........    2,991,461       993,187     9,501,854     3,440,690
    -------------------------------------------------------------------------
    Gain on
     extinguishment
     of debt.........            -                  (1,233,001)            -
    -------------------------------------------------------------------------
    Loss from
     continuing
     operations
     before income
     tax recovery....   (2,776,957)   (9,437,722)  (11,034,491)   (6,039,069)
    -------------------------------------------------------------------------
    Income tax
     recovery........   (1,445,106)   (1,593,727)   (1,503,271)   (2,001,727)
    -------------------------------------------------------------------------
    Loss from
     continuing
     operations......   (1,331,851)   (7,843,995)   (9,531,220)   (4,037,342)
    -------------------------------------------------------------------------
    Loss from
     discontinued
     operations......   (4,030,873)   (2,076,438)   (5,788,631)   (3,157,632)
    -------------------------------------------------------------------------
    Net loss for
     the period...... $ (5,362,724) $ (9,920,433) $(15,319,851) $ (7,194,974)
    -------------------------------------------------------------------------
                      -------------------------------------------------------
    Loss per share
     from continuing
     operations
    -------------------------------------------------------------------------
      Basic.......... $      (0.05) $      (0.32) $      (0.39) $      (0.17)
    -------------------------------------------------------------------------
      Diluted........ $      (0.05) $      (0.32) $      (0.39) $      (0.17)
    -------------------------------------------------------------------------
    Net loss per
     share
    -------------------------------------------------------------------------
      Basic.......... $      (0.22) $      (0.41) $      (0.63) $      (0.30)
    -------------------------------------------------------------------------
      Diluted........ $      (0.22) $      (0.41) $      (0.63) $      (0.30)
    -------------------------------------------------------------------------
    Weighted average
     number of
     shares
     - basic.........   24,476,626    24,152,104    24,401,683    23,948,106
    -------------------------------------------------------------------------
    Weighted average
     number of
     shares
     - diluted.......   24,476,626    24,152,104    24,401,683    23,948,106
    -------------------------------------------------------------------------

    Selected Consolidated Balance Sheet Data

    -------------------------------------------------------------------------
                                                    Year Ended December 31,
    -------------------------------------------------------------------------
                                                     2006           2005
    -------------------------------------------------------------------------
    Cash and cash equivalents................... $  2,904,098   $  3,353,452
    -------------------------------------------------------------------------
    Working capital deficit.....................   (7,618,570)   (38,085,454)
    -------------------------------------------------------------------------
    Total assets................................  169,383,651    177,597,440
    -------------------------------------------------------------------------
    Total debt and capital lease obligations....   74,625,127     74,892,372
    -------------------------------------------------------------------------
    Total shareholders' equity..................   16,072,279     24,479,568
    -------------------------------------------------------------------------

    Following is a reconciliation of DCM to loss from continuing operations:

    -------------------------------------------------------------------------
                             Three         Three
                      Months Ended  Months Ended    Year Ended    Year Ended
                       December 31,  December 31,  December 31,  December 31,
                              2006          2005          2006          2005
    -------------------------------------------------------------------------
    Direct
     contribution
     margin
     ("DCM")(3)...... $ 11,208,518  $  3,385,672  $ 34,288,688  $ 23,392,406
    -------------------------------------------------------------------------
    General and
     administrative..    5,650,872     7,356,548    19,584,350    20,381,143
    -------------------------------------------------------------------------
    Foreign exchange
     loss (gain).....       27,328       (32,554)       30,361       (18,692)
    -------------------------------------------------------------------------
    Restructuring
     costs...........      499,809        88,000       892,688     1,672,485
    -------------------------------------------------------------------------
    EBITDA from
     continuing
     operations(4)...    5,030,509    (4,026,322)   13,781,289     1,357,470
    -------------------------------------------------------------------------
    (Gain) loss on
     sale of assets..      388,381       (30,492)     (726,086)   (6,897,291)
    -------------------------------------------------------------------------
    Impairment of
     goodwill and
     customer
     contracts.......            -       423,109             -       608,096
    -------------------------------------------------------------------------
    Depreciation.....    3,504,131     3,089,155    13,560,340     6,151,059
    -------------------------------------------------------------------------
    Amortization
     of customer
     contracts.......      923,493       936,441     3,712,673     4,093,985
    -------------------------------------------------------------------------
    Interest
     expense.........    2,991,461       993,187     9,501,854     3,440,690
    -------------------------------------------------------------------------
    Gain on
     extinguishment
     of debt.........            -                  (1,233,001)            -
    -------------------------------------------------------------------------
    Loss from
     continuing
     operations
     before income
     tax recovery.... $ (2,776,957) $ (9,437,722) $(11,034,491) $ (6,039,069)
    -------------------------------------------------------------------------
    Income tax
     recovery........   (1,445,106)   (1,593,727)   (1,503,271)   (2,001,727)
    -------------------------------------------------------------------------
    Loss from
     continuing
     operations...... $ (1,331,851) $ (7,843,995) $ (9,531,220) $ (4,037,342)
    -------------------------------------------------------------------------
                      -------------------------------------------------------

    The following sets forth a reconciliation of EBITDA from continuing
operations to loss from continuing operations:

    -------------------------------------------------------------------------
                             Three         Three
                      Months Ended  Months Ended    Year Ended    Year Ended
                       December 31,  December 31,  December 31,  December 31,
                              2006          2005          2006          2005
    -------------------------------------------------------------------------
    EBITDA from
     continuing
     operations(4)... $  5,030,509  $ (4,026,322) $ 13,781,289  $  1,357,470
    -------------------------------------------------------------------------
    Gain on sale
     of assets.......      388,381       (30,492)     (726,086)   (6,897,291)
    -------------------------------------------------------------------------
    Impairment of
     goodwill and
     customer
     contracts.......            -       423,109             -       608,096
    -------------------------------------------------------------------------
    Depreciation.....    3,504,131     3,089,155    13,560,340     6,151,059
    -------------------------------------------------------------------------
    Amortization of
     customer
     contracts.......      923,493       936,441     3,712,673     4,093,985
    -------------------------------------------------------------------------
    Interest
     expense.........    2,991,461       993,187     9,501,854     3,440,690
    -------------------------------------------------------------------------
    Gain on
     extinguishment
     of debt.........            -                  (1,233,001)            -
    -------------------------------------------------------------------------
    Loss from
     continuing
     operations
     before income
     tax recovery.... $ (2,776,957) $ (9,437,722) $(11,034,491) $ (6,039,069)
    -------------------------------------------------------------------------
    Income tax
     recovery........   (1,445,106)   (1,593,727)   (1,503,271)   (2,001,727)
    -------------------------------------------------------------------------
    Loss from
     continuing
     operations...... $ (1,331,851) $ (7,843,995) $ (9,531,220) $ (4,037,342)
    -------------------------------------------------------------------------
                      -------------------------------------------------------

    ----------
    (3) Direct Contribution Margin ("DCM") consists of revenue less direct
        expense and excludes general and administrative expense, foreign
        exchange loss (gain), restructuring costs, interest, depreciation,
        amortization of customer contracts, impairment of goodwill and
        customer contracts, gain on sale of assets, gain on extinguishment of
        debt and income tax recovery. DCM is a non-Canadian GAAP measure. The
        comparative Canadian GAAP measure is loss from continuing operations.
    (4) EBITDA from continuing operations excludes interest, income tax
        recovery, depreciation, amortization of customer contracts,
        impairment of goodwill and customer contracts and (gain) loss on sale
        of assets, and gain on extinguishment of debt. EBITDA from continuing
        operations is a non-Canadian GAAP measure and does not have a
        standardized meaning prescribed by GAAP. Therefore, it is not likely
        to be comparable to similar measures presented by other issuers.
        Management believes that these terms provide a better assessment of
        cash flow from the Company's operations by eliminating the charge for
        depreciation, amortization and impairment of goodwill and customer
        contracts which are non-cash expense items and (gain) loss on sale of
        assets and gain on extinguishment of debt which are not considered to
        be in the normal course of operating activity. The comparative
        Canadian GAAP measure is loss from continuing operations. In
        addition, financial analysts and investors use the EBITDA multiple
        for valuing companies within the same sector, in order to eliminate
        the differences in accounting treatment from one company to the next.
        Given that the Company is in a growth stage, the focus on EBITDA
        gives the investor or reader of the Company's financial statements
        and MD&A more insight into the operating capabilities of management
        and its utilization of the Company's operating assets. Management
        further believes that EBITDA is also the best metric for measuring
        the Company's valuation. Investors should be cautioned, however, that
        EBITDA from continuing operations should not be construed as an
        alternative to loss from continuing operations determined in
        accordance with Canadian GAAP as an indicator of the Company's
        performance. The comparative Canadian GAAP measure is loss from
        continuing operations. Loss from continuing operations for the year
        ended December 31, 2006 was $9.5 million, an increase of $5.5 million
        compared to a loss from continuing operations of $4.0 million in
        2005. Loss from continuing operations for the three months ended
        December 31, 2006 was $1.3 million compared to a loss from continuing
        operations of $7.8 million for the three months ended December 31,
        2005.
    

    Conference Call Information

    A live webcast of 180 Connect Inc.'s year end and fourth quarter 2006
earnings call will be available at www.180connect.net. The call will begin at
5:30 p.m. ET, March 15, 2007. The dial-in numbers for the call are
international dial 617.801.9714 and toll free at 800.299.7089, participant
pass code is 65471605. The webcast will be archived on the Company's website
and a replay of the call will be available beginning at 7:00 p.m. EST on
Thursday, March 15, 2007 through to 11:59 p.m. ET Thursday, March 22, 2007.
The dial-in numbers for the replay are 617.801.6888 International Dial and
toll free at 888.286.8010 pass code 44720539.

    180 Connect Inc.

    180 Connect Inc. is one of North America's largest providers of
installation, integration and fulfillment services to the home entertainment,
communications and home integration service industries. With more than 4,000
skilled technicians and 750 support personnel based in over 85 operating
locations, 180 Connect is well positioned as the only pure play national
residential service provider in the market. 180 Connect Inc. shares are traded
under the name of 180 Connect Inc. on the TSX under the symbol NCT.U.

    Forward-Looking Information

    This news release contains forward-looking statements which reflect
management's expectations regarding the Company's future growth, results of
operations, performance and business prospects and opportunities. Statements
about the Company's future plans and intentions, results, levels of activity,
performance, goals or achievements or other future events constitute
forward-looking statements. Wherever possible, words such as "may", "will",
"should", "could", "expect", "plan", "intend", "anticipate", "believe",
"estimate", "predict" or "potential" or the negative or other variations of
these words, or other similar words or phrases, have been used to identify
these forward-looking statements. These statements reflect management's
current beliefs and are based on information currently available to
management. Forward-looking statements involve significant risk, uncertainties
and assumptions. See "Risk Factors" contained in the Company's Annual
Information Form. Many factors, including those discussed under "Risk Factors"
in the Annual Information Form, could cause actual results, performance or
achievements to differ materially from the results discussed or implied in the
forward-looking statements. These factors should be considered carefully and
prospective investors should not place undue reliance on the forward-looking
statements. Although the forward-looking statements contained in this news
release are based upon what management believes to be reasonable assumptions,
the Company cannot assure investors that actual results will be consistent
with these forward-looking statements. These forward-looking statements are
made as of the date of this news release and the Company assumes no obligation
to update or revise them to reflect new events or circumstances, except as
required by law.


    
                      Consolidated Financial Statements

                              180 Connect Inc.
                         Consolidated Balance Sheets
                         (in United States Dollars)

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

                                                  December 31,   December 31,
                                                         2006           2005
                                                -----------------------------

    Assets (Note 11)
    Current Assets
    Cash and cash equivalents                    $  2,904,098   $  3,353,452
    Accounts receivable (less allowance for
     doubtful accounts of $2,506,637 and
     $1,167,310, respectively) (Note 24)           48,934,952     50,048,816
    Inventory  (Note 5)                            15,816,148     20,302,667
    Restricted cash (Notes 4 and 26)               14,503,000     14,750,366
    Prepaid expenses and other assets  (Note 6)     7,910,255      2,039,246
                                                -----------------------------
      TOTAL CURRENT ASSETS                         90,068,453     90,494,547

    Property, plant and equipment (Note 7)         34,882,890     41,658,071
    Goodwill (Note 8)                              15,161,264     15,474,466
    Customer contracts, net (Note 8)               25,072,756     28,964,807
    Other assets (Note 9)                           4,198,288      1,005,549
                                                -----------------------------
      TOTAL ASSETS                               $169,383,651   $177,597,440
                                                -----------------------------
                                                -----------------------------

    Liabilities and Shareholders' Equity
    Current liabilities
    Accounts payable and accrued liabilities
     (Note 10)                                   $ 78,686,245   $ 76,664,469
    Current portion of long-term debt (Note 11)     5,967,674     40,034,506
    Current portion of capital lease obligations
     (Note 13b)                                    13,033,104     11,881,026
                                                -----------------------------
      TOTAL CURRENT LIABILITIES                    97,687,023    128,580,001

    Future tax liabilities (Note 18)                        -      1,561,031
    Long-term debt (Note 11)                       32,799,043              -
    Convertible debt (Note 12)                      7,612,194              -
    Long-term portion of capital lease
     obligations (Note 13b)                        15,213,112     22,976,840
                                                -----------------------------
      TOTAL LIABILITIES                           153,311,372    153,117,872
                                                -----------------------------

    Commitments and contingencies
     (Note 11,12, 13 and 22)

    Shareholders' Equity
    Share capital (Note 14b)                       66,397,608     64,809,968
    Contributed surplus (Note 14d)                 22,188,707     23,516,635
    Equity component of convertible debentures
     (Note 12)                                      2,434,258              -
    Warrants (Notes 11 and 12)                      4,218,592              -
    Deficit                                       (79,651,916)   (64,332,065)
    Cumulative translation adjustment account         485,030        485,030
                                                -----------------------------
      TOTAL SHAREHOLDERS' EQUITY                   16,072,279     24,479,568
                                                -----------------------------

                                                -----------------------------
      TOTAL LIABILITIES AND SHAREHOLDERS'
       EQUITY                                    $169,383,651   $177,597,440
                                                -----------------------------
                                                -----------------------------


    On behalf of the Board of Directors:
    (Signed)                                   (Signed)
    Matthew Roszak, Director                   Peter Giacalone, Director

                           See accompanying notes



                              180 Connect Inc.
              Consolidated Statements of Operations and Deficit
                         (in United States Dollars)

                                          Years Ended
                                  -------------------------------------------
                                                                 December 28,
                                                                     2003 to
                                   December 31,   December 31,   December 25,
                                          2006           2005           2004
                                  -------------------------------------------
    Revenue (Note 24)             $335,446,741   $279,726,651   $210,675,282
    Expenses
      Direct expenses              301,158,053    256,334,245    191,797,596
      General and administrative    19,584,350     20,381,143     13,656,397
      Foreign exchange loss (gain)      30,361        (18,692)      (272,585)
      Restructuring costs
       (Note 17)                       892,688      1,672,485              -
      Depreciation (Note 7)         13,560,340      6,151,059      2,129,959
      Amortization of customer
       contracts (Note 8)            3,712,673      4,093,985      2,851,590
      Interest expense               9,501,854      3,440,690      2,659,132
      Gain on extinguishment of
       debt (Note 11)               (1,233,001)             -              -
      Gain on sale of assets and
       asset write-down (Note 20)     (726,086)    (6,897,291)    (1,931,648)
      Impairment of goodwill and
       customer contracts (Note 8)           -        608,096      1,383,371
                                  -------------------------------------------
    Loss from continuing
     operations before income
     tax recovery                  (11,034,491)    (6,039,069)    (1,598,530)
    Income tax recovery (Note 18)   (1,503,271)    (2,001,727)      (621,000)
                                  -------------------------------------------
    Loss from continuing
     operations                     (9,531,220)    (4,037,342)      (977,530)
    Loss from discontinued
     operations, net of income
     taxes of nil (Note 21)         (5,788,631)    (3,157,632)    (3,759,662)
                                  -------------------------------------------
    Net loss for the period        (15,319,851)    (7,194,974)    (4,737,192)

    Deficit, beginning of period   (64,332,065)   (56,738,872)   (52,001,680)
    Normal course issuer bid
     (Note 14b)                              -       (398,219)             -
                                  -------------------------------------------
    Deficit, end of period        $(79,651,916)  $(64,332,065)  $(56,738,872)
                                  -------------------------------------------
                                  -------------------------------------------

    Loss per share from continuing
     operations (Note 19):
      Basic                       $      (0.39)  $      (0.17)  $      (0.05)
      Diluted                     $      (0.39)  $      (0.17)  $      (0.05)
    Net loss per share:
      Basic                       $      (0.63)  $      (0.30)  $      (0.22)
      Diluted                     $      (0.63)  $      (0.30)  $      (0.22)

    Weighted average number of
     shares outstanding - basic     24,401,683     23,948,106     21,660,799
    Weighted average number of
     shares outstanding - diluted   24,401,683     23,948,106     21,660,799

                           See accompanying notes



                              180 Connect Inc.
                    Consolidated Statements of Cash Flows
                         (in United States Dollars)

                                                                 December 28,
                                    Year Ended     Year Ended        2003 to
                                   December 31,   December 31,   December 25,
                                          2006           2005           2004
    Operating
    Loss from continuing
     operations                   $ (9,531,220)  $ (4,037,342)  $   (977,530)
    Add (deduct) items not
     affecting cash:
      Depreciation, amortization
       and impairment               17,273,013     10,853,140      6,364,920
      Amortization of deferred
       financing costs and
       accretion of loan discount    2,668,431        459,852      1,335,691
      Stock-based compensation
       (Note 14d)                            -         65,452        197,028
      Future income taxes
       (Note 18)                    (1,561,031)    (1,491,941)    (2,098,000)
      Gain on extinguishment
       of debt (Note 11)            (1,233,001)             -              -
      Gain on sale of assets
       (Note 20)                      (726,086)    (6,897,291)    (1,931,648)
      Other                               (291)         3,816              -
    Changes in non-cash working
     capital balances related to
     operations, net of business
     acquisition (Note 15)
      Accounts receivable              227,513     (6,464,271)       579,947
      Inventory                      4,486,519     (2,412,713)   (12,946,164)
      Other current assets             338,030       (688,922)       328,999
      Insurance premium deposits    (6,209,037)     1,126,896      1,623,871
      Settlement of class action
       lawsuit                               -     (7,973,623)             -
      Settlement of certain wage
       practices                             -     (1,217,639)             -
      Other assets                     (37,035)       (18,928)        81,081
      Restricted cash                  247,366     (8,696,719)    (5,156,010)
      Accounts payable and
       accrued liabilities           2,375,179     14,320,065     18,610,302
                                  -------------------------------------------
    Total cash provided by (used
     in) operating activities        8,318,350    (13,070,168)     6,012,487
                                  -------------------------------------------
    Investing
    Purchase of property, plant
     and equipment                  (2,742,727)    (5,656,286)    (1,898,151)
    Proceeds from sale of
     property, plant and equipment           -        665,000         36,200
    Short-term investments                   -     16,178,848    (18,160,149)
    Net proceeds from disposition
     of investments                  1,327,693     10,968,388      3,545,839
    Business acquisition (Note 15)           -       (429,603)       224,209
                                  -------------------------------------------
    Total cash provided by (used
     in) investing activities       (1,415,034)    21,726,347    (16,252,052)
                                  -------------------------------------------
    Financing
    Repayment of capital lease
     obligations                   (15,010,698)    (4,960,341)      (234,503)
    Repayment of long-term debt     (7,727,494)    (6,908,003)    (5,422,030)
    Proceeds from share issuance,
     net of issuance costs
     (Note 15c)                        259,712        728,335     27,225,209
    Repurchase of shares through
     normal course issuer bid                -     (1,158,047)        64,438
    Proceeds from refinancing of
     long-term debt                 42,140,497              -              -
    Extinguishment of long-
     term debt                     (32,863,525)             -              -
    Net proceeds from refinancing
     of vehicles (Note 20)           2,127,542              -              -
    Decrease in bank indebtedness            -              -       (454,167)
    Issuance costs on long-
     term debt                      (3,546,150)             -              -
    Proceeds from issuance of
     convertible debt (Note 12)     10,686,101              -              -
    Settlement with selling
     shareholders of Mountain
     Center Inc.                             -     (2,950,000)             -
    Proceeds from options and
     warrants exercised                      -         (4,727)             -
    Issuance costs on
     convertible debt (Note 12)     (1,388,985)             -              -
                                  -------------------------------------------
    Total cash provided by (used
     in) financing activities       (5,323,000)   (15,252,783)    21,178,947
    Effect of exchange rates on
     cash and cash equivalents             291         39,753              -
                                  -------------------------------------------
    Net cash provided by (used in)
     continuing operations           1,580,607     (6,556,851)    10,939,382
    Net cash used in discontinued
     operations                     (2,029,961)    (2,469,829)    (2,270,171)
                                  -------------------------------------------
    Net decrease in cash and cash
     equivalents during the period    (449,354)    (9,026,680)     8,669,211
    Cash and cash equivalents,
     beginning of period             3,353,452     12,380,132      3,710,921
                                  -------------------------------------------
    Cash and cash equivalents,
     end of period                $  2,904,098   $  3,353,452   $ 12,380,132
                                  -------------------------------------------
                                  -------------------------------------------
    Supplemental cash flow
     information:
    Interest paid                 $  6,091,487   $  2,485,035   $  3,384,328
    Income taxes paid             $    429,279   $  1,265,756   $          -

    Supplemental disclosure of non-cash investing and financing transactions:
    (a) As at December 31, 2006 and December 31, 2005, the Company leased
    2,589 and 2,262 vehicles, respectively, for $45,578,559 and $39,403,406,
    respectively, through a capital lease obligation.
    (b)The consolidated statements of cash flow exclude the following non-
    cash transaction in 2004; the balance of the purchase price consideration
    due related to the purchase or Mountain Center, Inc.

                           See accompanying notes



                              180 Connect Inc.

                 Notes to Consolidated Financial Statements
                         (in United States Dollars)

    

    1.  BASIS OF PRESENTATION

    180 Connect Inc. (the "Company"), formerly Launchworks Inc., is
    incorporated under the laws of Canada. On December 28, 2003, the Company
    and three of its subsidiaries amalgamated and changed its year end from
    December 31 to the last Saturday in December. Subsequent to December 31,
    2005, the Company changed its year end accounting period from a 52/53
    week year to a calendar year basis. Accordingly, the consolidated
    financial statements presented for 2006, 2005 and 2004 have year-end
    dates of December 31, December 31, and December 25, respectively. The
    Company provides installation, integration and fulfillment services to
    the home entertainment, communications and home integration service
    industries. The principal market for these services is the United States.

    2.  SIGNIFICANT ACCOUNTING POLICIES

    Principles of Consolidation

    The accompanying consolidated financial statements have been prepared in
    conformity with Canadian generally accepted accounting principles
    ("GAAP") and include the accounts of the Company and its subsidiaries.
    All inter-company items and transactions have been eliminated in
    consolidation.

    Revenue Recognition

    The Company provides installation, integration and fulfillment services
    to the home entertainment, communications and home integration service
    industries. Revenue from services is recognized when all of the following
    criteria are met: persuasive evidence of an arrangement exists, service
    has been provided, the fee is fixed or determinable, and collection is
    reasonably assured. Fulfillment services include installations, upgrades
    and service of DIRECTV systems.  Fulfillment revenues are recognized when
    the work orders are closed. A provision is recorded for estimated billing
    discrepancies or penalties due to poor service. Revenue relating to
    certain equipment purchased from DIRECTV for which the Company is
    directly reimbursed is recorded on a net basis in accordance with EIC 123
    Recording Revenue Gross as a Principal Versus Net as an Agent.

    Revenue for services provided to the Company's cable customers is
    contracted via work orders; revenue is recorded as services are completed
    and work orders are closed.  A provision is recorded for estimated
    billing discrepancies.

    The services provided to the Company's Network Services and Digital
    Interiors customers are for the installation of communication systems.
    Revenues earned by these businesses are recognized upon the completion of
    contractual obligations. Contracts may extend over several months but
    often include discernible projects that have stated completion milestones
    and contractual amounts that are billed as these services are completed.

    Allowance for Doubtful Accounts

    The Company maintains an allowance for doubtful accounts for estimated
    losses resulting from uncollectible amounts. Management specifically
    analyzes accounts receivable balances, customer credit-worthiness and
    current economic trends when evaluating the adequacy of the allowance for
    doubtful accounts.

    Cash and Cash Equivalents

    The Company considers all highly liquid investments with a remaining
    maturity at the date of purchase of three months or less to be cash
    equivalents. There were no cash equivalents for all periods presented.

    Inventory

    Inventory of materials, components and direct broadcast satellite
    equipment is stated at the lower of cost or market, determined on a
    first-in, first-out basis. Market is determined as replacement cost for
    materials and components and net realizable value for direct broadcast
    satellite equipment.

    Property, Plant and Equipment

    Property, plant and equipment are stated at cost, less accumulated
    depreciation. Repairs and maintenance expenditures are charged to
    operating expense as incurred. Depreciation is calculated on a straight-
    line basis over the expected useful lives of the property, plant and
    equipment as follows:

    

    Vehicles............................... 4 years
    Tools.................................. 2 years
    Equipment.............................. 5 years
    Computer equipment and software........ 3 years
    Office furniture and equipment......... 5-7 years
    Leasehold improvements................. Shorter of economic life or term
                                            of the lease

    Software developed for internal use is capitalized in accordance with
    Emerging Issues Committee Abstract Number 86, "Accounting for Cost of a
    Business Process Re-engineering Project", and is amortized over its
    estimated useful life of three years.

    Investments

    Investments in entities that are not consolidated but over which the
    Company exercises significant influence are accounted for using the
    equity method of accounting. If the Company does not have the ability to
    exercise significant influence, the investment is accounted for using the
    cost method of accounting. A decline in the market value, if it is not
    deemed temporary, of any available-for-sale security to below cost
    results in a reduction in carrying amount to fair value. The impairment
    is charged to earnings and a new cost basis for the security is
    established.

    Deferred Financing Costs

    Deferred charges relating to financing costs and credit facility
    arrangement fees associated with the issuance of long-term debt are
    included in other assets and are amortized to interest expense over the
    period to maturity of the related debt.

    Insurance Premium Deposits

    The Company maintains a self-insurance program for property and casualty
    coverage, including workers compensation, automobile and general
    liability coverage. The program is administered by a U.S. based insurance
    company. As part of the self insurance program, the Company is required
    to pay up to $500,000 for each individual workers compensation claim and
    up to $350,000 for each auto liability claim. For the most recent plan
    year, the amount payable by the Company was reduced to $100,000 for each
    individual workers compensation claim in the state of California. The
    aggregate limit is $26,650,000 for all workers compensation and
    automobile liability claims. The Company is required to pay up to
    $500,000 for each general liability claim for the period ended April 30,
    2007. Any amounts exceeding the maximum amounts are covered by the
    Company's umbrella insurance policy. As is common with these types of
    insurance programs, the Company is required to make periodic estimates of
    its ultimate actuarially determined liability, based on experience,
    claims filed and an estimate of claims incurred but not yet reported.
    These estimates take into account policy loss limits and future
    anticipated payouts on an individual claims basis. The Company makes
    periodic premium payments to the program administrator to cover claim
    payments as well as fixed costs associated with the administration of the
    plan. Such periodic payments can fluctuate based on the loss experience
    and actuarial estimates.

    The Company has restricted cash of $14,503,000 on deposit at December 31,
    2006, and $14,750,366 at December 31, 2005, primarily related to the
    Company's insurance plan (Note 4). The sufficiency of the restricted cash
    amount is determined by the insurance carrier and is based upon several
    factors which include the Company's credit history, work force
    characteristics and historical claim results.

    The Company calculates the annual insurance cost using actuarial
    estimates provided by third-party service providers at the beginning of
    the plan year. For the most recent plan and the plan years prior to
    May 1, 2004, the Company was required to pre-pay the full estimated costs
    of insurance for the plan year. The accounting for these periods was to
    record a prepaid asset for the payments made in advance of the plan year.
    The prepaid asset is then amortized on a pro-rata basis each month during
    which the coverage is provided. For the plan years beginning on May 1,
    2004 and May 1, 2005, the Company entered into an alternative arrangement
    with its insurance carrier which required the Company to pay the fixed
    costs associated with the insurance plan upfront, and pay the actual
    claim amounts as they were settled.

    Goodwill

    Goodwill represents the excess of the purchase price paid in a business
    acquisition over the fair values of the identifiable assets acquired and
    liabilities assumed. The Company tests for goodwill impairment by
    reporting units on an annual basis and at any other time if events occur
    or circumstances change that suggest that goodwill could be impaired.

    The Company uses the two-step impairment process. The fair value of a
    reporting unit is compared with its carrying amount, including goodwill,
    in order to identify a potential impairment. When the fair value of a
    reporting unit exceeds its carrying amount, goodwill of the reporting
    unit is considered not to be impaired and the second step is unnecessary.

    If step one of the test is not met, an impairment loss is recorded for
    the carrying amount of the goodwill exceeding the implied value of that
    goodwill. Measurement of the fair value of a reporting unit is based on a
    fair value measure using the sum of the discounted estimated future cash
    flows (Note 8).

    Intangible Assets

    Intangible assets primarily represent the value of customer contracts
    acquired. All intangible assets are charged to operations on a straight-
    line basis over their estimated useful life of 10 years.

    Impairment or Disposal of Long-Lived Assets

    The Company tests long-lived assets or asset groups for recoverability
    when events or changes in circumstances indicate that their carrying
    amount may not be recoverable. Recoverability is assessed based on the
    carrying amount of the asset and their net recoverable value, which is
    generally determined based on undiscounted cash flows expected to result
    from the use and the eventual disposal of the asset. An impairment loss
    is recognized to write the assets down to their fair value.

    Income Taxes

    The Company accounts for income taxes using the liability method, whereby
    future tax assets and liabilities are determined based on differences
    between the financial reporting and tax bases of assets and liabilities
    measured using income tax rates and laws that are expected to be in
    effect when the differences are expected to reverse. Income tax expense
    for the period is the tax payable for the period and any change during
    the period in future tax assets and liabilities. A valuation allowance is
    provided to the extent that it is more likely than not that future tax
    assets will not be realized.

    Use of Estimates

    The preparation of financial statements in conformity with Canadian
    generally accepted accounting principles requires management to make
    estimates and assumptions that affect the reported amounts of assets and
    liabilities and disclosure of contingent assets and liabilities at the
    date of the consolidated financial statements and the reported amounts of
    revenue and expenses during the reporting periods. The most significant
    assumptions made by management in the preparation of the Company's
    consolidated financial statements include provisions for credit
    adjustments and doubtful accounts to reflect credit exposures and
    unrecoverable amounts, valuation allowances and impairment assessments
    for various assets including customer contracts and goodwill, property
    plant and equipment, future income taxes, accruals related to liabilities
    arising from legal claims, periodic estimates of ultimate liabilities
    related to losses associated with workers compensation and employment
    liability, business automotive liability and general liability insurance
    claims. Actual results could differ as a result of revisions to estimates
    and assumptions which may have a material impact on financial results of
    future periods.

    Foreign Currency Translation

    The Company's functional currency is the United States dollar. The
    financial statements of the foreign subsidiaries are measured using the
    United States dollar as the functional currency. Included in the
    Company's consolidated financial statements are the results of all
    foreign operations. Consequently, monetary assets and liabilities of the
    wholly-owned subsidiaries are translated into United States dollars at
    exchange rates in effect at the consolidated balance sheet dates with
    non-monetary assets and liabilities being translated into United States
    dollars at historical exchange rates. Revenue and expense items were
    translated at average exchange rates prevailing during the period. The
    resulting gains or losses were reflected in net loss for the period.

    Net Loss per Share

    Basic net loss per share is computed using the weighted average number of
    common shares outstanding during the period. The computation of diluted
    loss per share assumes the basic weighted average number of common shares
    outstanding during the period is increased to include the number of
    additional common shares that would have been outstanding if the dilutive
    potential common shares had been issued. The dilutive effect of warrants
    and stock options is determined using the treasury stock method. For the
    periods ended December 31, 2006, December 31, 2005 and December 25, 2004,
    diluted loss per share is equivalent to basic loss per share as the
    outstanding options and warrants are anti-dilutive.

    Leases

    Leases have been classified as either capital or operating leases. Leases
    which transfer substantially all of the benefits and risks incidental to
    the ownership of assets are accounted for as if there were an acquisition
    of an asset and incurrence of an obligation at the inception of the lease
    and are accounted for as capital leases. All other leases are accounted
    for as operating leases wherein rental payments are expensed as incurred.

    Stock-Based Compensation

    Effective January 1, 2002, the Company adopted, on a prospective basis,
    The Canadian Institute of Chartered Accountants' ("CICA") recommendations
    on Stock-Based Compensation and Other Stock-Based Payments. These
    recommendations require that compensation for all awards made to non-
    employees and certain awards made to employees, including stock
    appreciation rights, direct awards of stock and awards that call for
    settlements in cash or other assets, be measured and recorded in the
    financial statements at fair value.

    3.  FINANCIAL INSTRUMENTS

    The estimated fair values of financial instruments are based on the
    relevant market prices and information available. These fair value
    estimates are not indicative of the amounts that the Company might
    receive or incur in actual market transactions. The carrying values of
    cash and cash equivalents, accounts receivable, insurance premium
    deposits, accounts payable and accrued liabilities approximate their fair
    values due to the relatively short periods to maturity of these financial
    instruments. The carrying values of long-term debt and capital lease
    obligations approximate their fair values as these financial instruments
    bear market rates of interest, and as such are subject to risk relating
    to interest rate fluctuations.

    Credit exposure on financial instruments arises from the possibility that
    a counterparty to an instrument fails to perform. The Company performs
    ongoing credit evaluations of customers and generally does not require
    collateral. Allowances are maintained for potential credit losses. The
    Company is economically dependent on one customer and the temporary or
    permanent loss of this customer would have a material adverse effect on
    the Company's results of operations and financial condition (Note 24).

    The Company's financial instruments include loans bearing an interest
    rate based on the prime rate plus 3% to prime plus 5% and are therefore
    subject to risk relating to interest rate fluctuations.

    4.  RESTRICTED CASH

    As of December 31, 2006 and December 31, 2005, the Company has restricted
    cash, in the form of term deposits of approximately $14.5 million and
    $14.8 million, respectively. These term deposits are used to
    collateralize obligations associated with its insurance program and for
    contractor licensing surety bonds in several states. Interest earned of
    1% to 5% on these funds is received monthly and is not subject to
    restriction.

    5.  INVENTORY

    Inventory consists of the following:

                                                  December 31,   December 31,
                                                         2006           2005
                                                -----------------------------
    Direct broadcast satellite equipment.......  $ 12,633,189   $ 16,676,629
    Materials and components...................     3,182,959      3,626,038
                                                -----------------------------
                                                 $ 15,816,148   $ 20,302,667
                                                -----------------------------
                                                -----------------------------

    Direct broadcast satellite equipment represents equipment purchased from
    DIRECTV to service DIRECTV's customers. Certain items of this inventory
    are directly reimbursed to the Company on installation for an amount
    equal to the initial purchase price. Therefore, no revenue or cost of
    sales are recorded with respect to this inventory with the exception of a
    charge to direct expenses for loss due to theft or damage.

    6.  PREPAID EXPENSES AND OTHER ASSETS

    Prepaid expenses and other assets consist of the following:

                                                  December 31,   December 31,
                                                         2006           2005
                                                -------------- --------------
    Prepaid rent...............................  $     83,481   $    375,615
    Prepaid expenses...........................     1,301,894      1,017,462
    Insurance premium deposits.................     6,524,880        646,169
                                                -----------------------------
                                                 $  7,910,255   $  2,039,246
                                                -----------------------------
                                                -----------------------------

    7.  PROPERTY, PLANT and EQUIPMENT

    Property, plant and equipment consist of the following:

                                                  December 31,   December 31,
                                                         2006           2005
                                                -------------- --------------
    Cost
    Vehicles...................................  $ 49,307,080   $ 44,439,884
    Tools and equipment........................     4,629,918      2,855,997
    Computer equipment and software............     4,115,997      5,529,273
    Office furniture and equipment.............     1,537,515      1,643,576
    Leasehold improvements.....................       602,592        562,871
                                                -----------------------------
                                                 $ 60,193,102   $ 55,031,601

    Accumulated Depreciation
    Vehicles...................................  $(18,533,260)  $ (8,091,288)
    Tools and equipment........................    (2,754,619)    (1,879,379)
    Computer equipment and software............    (2,738,050)    (2,055,666)
    Office furniture and equipment.............      (960,480)    (1,017,485)
    Leasehold improvements.....................      (323,803)      (329,712)
                                                -----------------------------
                                                 $(25,310,212)  $(13,373,530)
                                                -----------------------------
    Net book value.............................  $ 34,882,890   $ 41,658,071
                                                -----------------------------
                                                -----------------------------

    Depreciation expense charged to continuing operations for fiscal years
    2006, 2005 and 2004 was $13,560,340, $6,151,059 and $2,129,959,
    respectively. Property, plant and equipment include assets under capital
    leases of $30,805,454, net of accumulated depreciation of $15,761,508 as
    of December 31, 2006, and $36,396,714, net of accumulated depreciation of
    $4,436,366 as of December 31, 2005. The fiscal years ended December 31,
    2006 and  2005 included depreciation of $232,289 and $11,159 in loss from
    discontinued operations.

    8.  GOODWILL AND CUSTOMER CONTRACTS

    2006

                               Net                                       Net
                        Book Value                                Book Value
                       December 31,                 Impairment   December 31,
                              2005  Amortization        Charge          2006
                      -------------------------------------------------------
      Goodwill....... $ 15,474,466  $          -  $    313,202  $ 15,161,264
                      -------------------------------------------------------
                      -------------------------------------------------------
      Customer
       contracts..... $ 28,964,807  $  3,714,850  $    177,201  $ 25,072,756
                      -------------------------------------------------------
                      -------------------------------------------------------

    2005

                          Net                                             Net
                   Book Value                             Impair-  Book Value
                  December 25,   Additions      Amorti-     ment     December
                         2004  (Reductions)     zation    Charge     31, 2005
                  -----------------------------------------------------------
      Goodwill... $15,358,150  $   313,202  $        -  $196,886  $15,474,466
                  -----------------------------------------------------------
      Customer
       con-
       tracts.... $35,792,994  $(2,013,966) $4,097,436  $716,785  $28,964,807
                  -----------------------------------------------------------
                  -----------------------------------------------------------

    Amortization expense charged to continuing operations for the fiscal
    years ended December 31, 2006, December 31, 2005 and December 25, 2004
    was $3,712,673, $4,093,985 and $2,851,590, respectively. The fiscal year
    ended December 31, 2006 and December 31, 2005 included amortization of
    $2,177 and $3,451 in loss from discontinued operations.

    Estimated future amortization expense is as follows:

                     2007              $  3,681,503
                     2008                 3,681,503
                     2009                 3,681,503
                     2010                 3,681,503
                     2011                 3,681,503
                     Thereafter           6,665,241
                                      --------------
                     Total             $ 25,072,756
                                      --------------
                                      --------------

    Additions to goodwill and customer contracts in 2005 relates to a
    business acquisition completed by the Company on March 22, 2005 (Note
    15). Reductions in customer contracts relate to the settlement of the
    outstanding litigation with the selling shareholders of Mountain Center
    Inc. ("Mountain") which resulted in a reduction of long-term debt of $1.2
    million, a reduction in the future tax liability of $0.8 million and a
    corresponding reduction of customer contracts of $2.0 million.

    Goodwill impairment is deemed to exist if the net book value of a
    reporting unit exceeds its estimated fair value. Goodwill impairment is
    evaluated on an annual basis (or sooner if indicators of impairment are
    identified) using the two-step impairment process. As a result of the
    shutdown of certain operating branch locations, the Company wrote off the
    remaining goodwill and customer contracts associated with those branches.
    In 2006, the Company recorded a goodwill impairment charge of $313,202
    and a customer contract impairment charge of $177,202 in loss from
    discontinued operations. In 2005, the Company recorded a goodwill
    impairment charge of $196,886 and a customer contract impairment charge
    of $716,785, of which $305,575 was included in loss from discontinued
    operations in 2005. In 2004, the Company recorded a goodwill impairment
    charge of $233,648 and a customer contract impairment charge of
    $2,394,795, of which $1,245,072 was included in loss from discontinued
    operations.

    The customer contracts represent the agreement between the Company and
    its customers to provide installation, upgrade and repair services to the
    customers' subscribers. The contracts typically include exclusivity
    arrangements. The exclusivity arrangements limit the Company's ability to
    sign contracts with the Company's customers' competitors if the
    competitor sells the same services in the same markets as the Company's
    current customers. These contracts were recognized apart from goodwill
    as the assets resulted from contractual or other legal rights and  are
    capable of being separated or divided from the acquired enterprise. The
    acquired companies had existing contracts with their customers at the
    time of the acquisition. These contracts required the Company to provide
    installation and other services over a period of time in a specific
    geographic area on an exclusive basis for the Company's customers. As
    such, a value was assigned to the future benefits to be realized from
    this exclusive contractual arrangement with the Company's customers.

    9.  OTHER ASSETS

    Other assets consist of the following:

                                                  December 31,   December 31,
                                                         2006           2005
                                                -------------- --------------
    Deferred financing costs
     (net of accumulated amortization
     of $1,329,775 and $390,680,
     respectively).............................  $  3,475,136   $    300,674
    Security deposits..........................       666,002        639,042
    Other miscellaneous........................        57,150         65,833
                                                -----------------------------
                                                 $  4,198,288   $  1,005,549
                                                -----------------------------
                                                -----------------------------

    10. ACCOUNTS PAYABLE AND ACCRUED LIABILITIES

    Accounts payable and accrued liabilities consist of the following:

                                                  December 31,   December 31,
                                                         2006           2005
                                                -----------------------------
    Equipment purchase liability...............  $ 44,497,745   $ 41,291,915
    Accrued insurance..........................     9,556,789     12,471,009
    Trade accounts payable.....................     8,461,228      8,910,330
    Accrued payroll and employee benefits......     7,238,919      2,799,148
    Accrued costs for legal settlements
     (Note 22).................................     1,671,000      2,500,000
    Taxes payable..............................       584,659        913,598
    Restructuring reserve (Note 17)............         6,825        577,437
    Other accrued expenses.....................     6,669,080      7,201,032
                                                -----------------------------
                                                 $ 78,686,245   $ 76,664,469
                                                -----------------------------
                                                -----------------------------

    The accounts payable and accrued liabilities amount includes $44.5
    million and $41.3 million as of December 31, 2006 and December 31, 2005
    respectively, payable to DIRECTV, a major supplier of the equipment used
    by the Company in its installation business. The amount due from DIRECTV
    once this equipment is installed is included in accounts receivable and
    was $17.9 million and $19.5 million at December 31, 2006 and 2005,
    respectively.

    The Company is currently party to a class action lawsuit filed in federal
    court in Seattle, Washington brought by current and former employees.
    The claims relate to alleged violations of Washington wage and hour laws.
    The class period dates back to April 2002. As a result of this class
    action, the Company established a reserve for estimated costs of $2.5
    million at December 31, 2005 (Note 22). As of December 31, 2006, $1.7
    million remained in this reserve.

    11. LONG-TERM DEBT AND COMMON STOCK PURCHASE WARRANTS

    Long-term debt consists of the following:


                                                  December 31,   December 31,
                                                         2006           2005
                                                  ------------   ------------
    Revolving credit facility and over
     advance facility of up to $37,000,000
     bearing interest at prime plus 3% to 5%,
     subject to a minimum interest rate of 10%
     to 11% with interest payable monthly. The
     revolving credit facility is subject to
     the Company's eligible trade receivables
     and inventory as per the debt agreement
     and collateralized by the Company's real
     and personal property. For the period of
     August 1, 2006 to July 31, 2007, the
     Company can draw in excess of the
     eligible trade receivables and inventory
     an over advance of up to $9,000,000 but
     not to exceed a cumulative amount of
     $37,000,000. At December 31, 2006 the
     interest rate for the revolving credit
     facility was 11.25% and the interest rate
     for the over advance facility was 13.25%
     with an effective interest rate of
     12.21%. Repayment is due on or before
     July 31, 2009. The credit facility may
     be borrowed, repaid, and reborrowed in
     accordance with the terms of the
     Security Agreement.........................   19,758,475              -
    Term note, bearing interest at prime plus
     5%, subject to a minimum interest rate of
     12% and interest is payable monthly. At
     December 31, 2006, the interest rate was
     13.25% with an effective interest rate of
     17.5%. Repayments of the term note
     commence on February 1, 2007 for $666,667
     per month, with the final payment due on
     July 31, 2009..............................   19,008,242              -
    Revolving credit facility of up to
     $16,500,000, bearing interest at prime
     plus 3.00% or LIBOR plus 4.50% at the
     option of the Company, and is payable
     quarterly. The revolving credit facility
     is secured by all of the Company's
     existing and after-acquired real and
     personal property. At December 31, 2005,
     the interest rate was 8.2431% and
     repayment on the revolving credit
     facility commenced March 31, 2004 at
     specified reduction rates running through
     September 30, 2006. This revolving credit
     facility was paid in full to the lender
     during the third quarter of 2006...........            -     16,500,000
    Term Note A bearing interest at prime plus
     3.50% or LIBOR plus 5.00% at the option of
     the Company, accrues monthly interest
     commencing in April 2002 and is payable
     quarterly commencing in April 2003. The
     note is secured by all of the Company's
     existing and after-acquired real and
     personal property. At December 31, 2005,
     the interest rate was 8.7431%. The note is
     repayable in one final payment of
     $12,459,721 on September 30, 2006. This
     Term Note A was paid in full to the lender
     during the third quarter of 2006...........            -     12,459,721
    Term Note B, bearing interest at prime plus
     4.50% or LIBOR plus 6.00% at the option of
     the Company, accrues monthly interest
     commencing in April 2002 and is payable
     quarterly commencing in May 2005. The note
     is secured by all of the Company's
     existing and after-acquired real and
     personal property. At December 31, 2005,
     the interest rate was 9.7431%. The Company
     made a payment of $6,600,000 in the first
     quarter of 2006 and one final payment of
     $3,835,788 during the third quarter of
     2006.......................................            -     10,435,788
    Debt issuance cost, unsecured and
     non-interest bearing, discounted at 10.9%,
     due on September 30, 2006..................            -        638,997
                                                 ----------------------------
    Total long-term debt .......................   38,766,717     40,034,506
    Less: current portion ......................   (5,967,674)   (40,034,506)
                                                 ----------------------------
                                                 $ 32,799,043   $          -
                                                 ----------------------------
                                                 ----------------------------

    On August 1, 2006, the Company refinanced its current long-term debt with
    Laurus Master Fund (the "Investor"), an arm's-length third party.

    Pursuant to the terms of the debt agreement, the Company will have
    available a maximum amount of $57 million of debt comprising a term
    facility of $20 million and a combined revolving credit facility and
    over-advance facility of up to $37 million. The revolving credit facility
    is subject to the Company's eligible trade receivables and inventory as
    per the debt agreement. For the period of August 1, 2006 to July 31,
    2007, the Company can draw in excess of the eligible trade receivables
    and inventory an over-advance amount up to $9 million but not to exceed a
    cumulative amount of $37 million. The interest rates on the new debt
    range from prime plus 3% to prime plus 5%, subject to a minimum interest
    rate of 10% to 12%, and are therefore subject to risk relating to
    interest rate fluctuations. Monthly term loan repayments commence
    February 1, 2007 for $666,667.

    The debt agreement states that there are no financial covenants of the
    Company with respect to such facilities but includes other covenants and
    events of default typical for credit facilities of this nature. This
    facility is collateralized by a security interest in all of the assets of
    the Company.

    The debt agreement includes a stock purchase agreement which provides for
    the Company to issue warrants for the Investor to purchase up to
    two million common shares for nominal consideration of Canadian $0.01 per
    share, having a term of seven years. The issuance of the warrants to the
    Investor was approved by the shareholders of the Company at the Company's
    annual and special meeting held June 30, 2006. The Investor has agreed
    not to sell any common shares of the Company issuable upon exercise of
    the warrants for a period of twelve months following the date of issuance
    of the warrants. Thereafter, the Investor may, at its option and assuming
    exercise of the warrants, sell up to 250,000 common shares of the Company
    per calendar quarter (on a cumulative basis) over each of the following
    eight quarters.

    The common stock purchase warrants were valued using the Black-Scholes
    option pricing model using the following variables: volatility of 76.64%,
    expected life of seven years, a risk free interest rate of 4.5% and a
    dividend of nil. The fair value of the loan was measured using a three-
    year maturity and the present value of the cash payments of interest and
    principal due under the terms of the debt agreement discounted at a rate
    of 17.5% which approximates a similar non-convertible financial
    instrument with comparable terms and risk. These fair values were pro-
    rated based on the actual funds received resulting in a credit to
    warrants of $3,586,132 and a loan discount which was recorded as a
    reduction to long-term debt of $3,586,132. At December 31, 2006, the
    Company has recorded $589,845 of interest expense for the accretion of
    the loan discount.

    The Company paid $3,515,471 of issuance costs to complete the long-term
    debt financing. The issuance costs have been recorded in other assets and
    equity based on a pro rata calculation of the fair value of the
    components of the debt and warrants. The issuance costs in other assets
    are being amortized over the three year period to maturity of the debt
    agreement with the Investor.

    The replacement credit facilities resulted in the extinguishment of
    approximately $33 million of short-term debt maturing September 30, 2006.
    These facilities were collateralized by a security interest in and lien
    upon all of the Company's real and personal property. During the third
    quarter of 2006, the Company recognized a gain of $1,233,001 on the
    extinguishment of this debt with its previous lender. The gain was a
    result of the Company's negotiations with its prior lender, reducing the
    amount of its final payment including any accrued interest to an agreed
    upon amount below what had previously been recorded by the Company.

    12. CONVERTIBLE DEBENTURES AND WARRANTS

    On March 22, 2006 the Company completed a private placement with a group
    of qualified, accredited institutional investors of $10,686,101 of
    convertible debentures and warrants. The convertible debentures bear
    interest at 9.33% per annum, have a term of five years are due March 22,
    2011, and are convertible into 4,486,000 common shares at an initial
    conversion price of $2.3821 per share. The warrants, which have a four-
    year term, are exercisable into 1,570,100 common shares of the Company at
    an exercise price of $2.5986 per share.

    On March 7, 2007, the Company received written approval from the
    institutional investors of the holders of the Company's convertible
    debentures and warrants for an extension of the original requirement to
    be listed or quoted on a U.S. trading market. If the Company's common
    stock, or the shares of Ad.Venture Partners, Inc. ("AVP"), in the event
    of a successful merger, is not listed on a U.S. trading market as soon as
    reasonably practicable after the earlier of the date on which the
    transaction proposed in the Arrangement Agreement (see Note 26 -
    Subsequent Events) is consummated or the ninetieth day following the date
    on which the Arrangement Agreement is terminated by either party, or
    August 31, 2007 (the "Required Listing Date"), the Company shall be
    required to immediately pay retroactive monthly principal payments of
    $1.0 million from January 1, 2007. The Company shall thereafter be
    obligated to make monthly principal payments of $1.0 million on each
    ensuing monthly redemption date until fully paid by November 30, 2007
    regardless of whether or not the Company subsequently obtains a listing
    of the common stock on a U.S. trading market. The Company's obligation to
    delist from the Toronto Stock Exchange ("TSX") on or before December 31,
    2006 has also been conditionally waived and replaced with an obligation
    to delist the common stock from the TSX on or before the ninetieth day
    following the Required Listing Date (this date to be known as the
    Required Delisting Date).

    In the event the Company does not meet deadlines relating to the filing
    and effectiveness of the registration statement, the Company is required
    to pay, on a monthly basis, liquidated damages of approximately $214,000
    per month (2% of the aggregate purchase price paid by the investors in
    the private placement), up to a maximum of approximately $3.4 million,
    until such obligations are fulfilled.

    The debentures are convertible, in whole or in part into common shares at
    the option of the holder, at any time after the original issue date,
    subject to certain conversion limitations. The holder also has the option
    to force redemption of some or all of its outstanding debentures at any
    time after the three-year anniversary of the original issue date. If the
    price of the Company's common stock exceeds $5.9551 for a period of any
    20 consecutive days, on a U.S. trading market, the Company may have the
    holder convert up to 50% of the then outstanding principal amount of
    debentures. If the price of the Company's common stock exceeds $7.0379
    per share for any 20 consecutive trading days, the Company may force a
    holder to convert all or part of the outstanding principal amount of the
    debentures.

    The Company shall pay interest to the holder on the aggregate unconverted
    and then outstanding principal amount of the debenture at the rate of
    9.33% per annum, increasing to 12% per annum if the Company's common
    stock, or the shares of AVP, in the event of a successful merger, is not
    listed or quoted on a U.S. trading market on or before the Required
    Listing Date, payable quarterly, in arrears. If the Company's common
    stock, or the shares of AVP, in the event of a successful merger, is not
    listed on a U.S. trading market on or before the Required Listing Date,
    the Company shall be required to immediately pay the interest rate
    increase retroactive to January 1, 2007 and the interest rate increase
    shall apply prospectively thereafter, regardless of whether or not the
    Company subsequently obtains a listing of the common stock on a U.S.
    trading market. The interest rate shall be reduced by 1.33% beginning in
    the month following the date the holder receives an opinion from counsel
    to the Company, in form and substance reasonably satisfactory to the
    holder, that distributions including interest payments under this
    debenture are no longer subject to mandatory tax withholding under the
    Income Tax Act (Canada).

    As of December 31, 2006, the debt component of $7,612,194 consisting of
    the initial fair value of $6,872,909 and accretion of the loan discount
    of $739,285 is presented as a long term liability. The fair value of the
    debt was determined at the time of issuance using a three-year maturity
    and the present value of the cash payments of interest and principal due
    under the terms of the debentures discounted at a rate of 18% which
    approximates a similar non-convertible financial instrument with
    comparable terms and risk. The resulting discount is being amortized over
    the life of the debt as accreted interest. The equity components were
    valued using the Black-Scholes option pricing model using the following
    variables: volatility of 59.5%, expected life of three years for the
    options and four years for the warrants, a risk free rate of 4.7% and a
    dividend of nil. The fair value of the equity component and warrants have
    been recorded as a credit to shareholders' equity for $2,370,550 and
    $1,070,809, respectively, based on a pro rata calculation of the fair
    value components of the debt, options and warrants.

    If at any time after one year from the date of issuance of the warrants
    there is no effective registration statement registering, or no current
    prospectus available for, the resale of the warrant shares by the holder,
    and the common stock is listed on a U.S. trading market, then the warrant
    may also be exercised at such time by means of a cashless exercise in
    which the holder shall be entitled to receive a certificate for the
    number of warrant shares equal to the quotient obtained by dividing the
    average stock price for the five trading days immediately preceding the
    date of such election less the exercise price of the warrant, as adjusted
    multiplied by the number of warrant shares issuable upon exercise of the
    warrant in accordance with the terms of the warrant by means of a cash
    exercise rather than a cashless exercise.

    The Company paid $1,388,985 of issuance costs to complete the private
    placement. The issuance costs have been recorded in other assets and
    equity based on a pro rata calculation of the fair value components of
    the debt, and equity. The issuance costs in other assets are being
    amortized over the deemed life of three years.

    13. LEASE COMMITMENTS

    (a) Operating Leases

    The Company leases office, warehouse facilities and equipment under
    various non-cancelable operating lease agreements which expire on various
    dates through 2012.

    Future minimum annual lease payments under such lease agreements that
    have initial or remaining terms in excess of one year at December 31,
    2006 are as follows:

    2007                                                        $  3,979,706
    2008                                                           3,172,658
    2009                                                           2,324,508
    2010                                                           1,735,670
    2011                                                           1,137,911
    2012                                                             263,042
                                                                -------------
                                                                $ 12,613,495
                                                                -------------
                                                                -------------



    The Company has a contingent exposure on certain property leases related
    to repairs and/or maintenance costs that the landlord, at its discretion,
    may incur and charge to the Company.

    (b) Capital Leases

    At December 31, 2006, the future minimum annual payments under capital
    lease obligations are as follows:

    2007....................................................... $ 14,214,126
    2008.......................................................   11,332,805
    2009.......................................................    4,393,730
    2010.......................................................      121,597
                                                                -------------
    Future minimum lease payments..............................   30,062,258
    Less: amount representing interest.........................    1,816,042
                                                                -------------
    Present value of minimum lease payments....................   28,246,216
    Less: current portion......................................   13,033,104
                                                                -------------
                                                                $ 15,213,112
                                                                -------------
                                                                -------------



    As of December 31, 2006, the Company has acquired 2,589 vehicles which
    relate to $28.0 million of remaining principal related to capital lease
    obligations. The interest rates for the remaining lease obligations are
    both fixed and variable. The fixed interest rates range from 5.2% through
    6.2% and the variable interest rates are determined quarterly using the
    Merrill Lynch AA published trading Corporate Bond index plus 0.25%.

    14. SHARE CAPITAL

    (a) Authorized

    Unlimited number of voting common shares.

    (b) Issued

                                                  ---------------------------
                                 Class B
                         Series 1 Special Shares           Common Shares
                      -------------------------------------------------------
                            Shares             $        Shares             $
                      -------------------------------------------------------
    Balance,
     December 27,
     2003............   16,324,272  $ 30,324,102       631,667  $    640,848
    Issuance on
     exercise of
     stock options
      - for cash.....            -             -       223,778     1,324,098
      - for other
        consider-
        ation........            -             -     2,747,985     1,958,556
    Conversion of
     Class B shares
     to common
     shares..........  (16,324,272)  (30,388,540)   16,324,272    30,388,540
    Repayment of
     share purchase
     loans(i)........            -        64,438             -             -
    Issuance of
     shares from
     initial public
     offering........            -             -     3,750,000    30,000,000
    Issuance of
     shares from
     over allotment..            -             -       150,000     1,200,000
    Share issue
     costs...........            -             -             -    (4,154,694)
                      -------------------------------------------------------
    Balance,
     December 25,
     2004............            -  $          -    23,827,702  $ 61,357,348
    Issuance on
     exercise of
     stock options
      - for cash.....            -             -       681,412     4,212,448
      Normal course
       issuer bid
       (ii)..........            -             -      (292,200)     (759,828)
                      -------------------------------------------------------
    Balance,
     December 31,
     2005                        -             -    24,216,914  $ 64,809,968
    Issuance on
     exercise of
     stock options
      - for cash.....            -             -       259,712     1,587,640
                      -------------------------------------------------------
    Balance,
     December 31,
     2006............            -  $          -    24,476,626  $ 66,397,608
                      -------------------------------------------------------
                      -------------------------------------------------------


    (i)  Employee share purchase loans in the aggregate amount of $64,438
         were repaid in the first quarter of 2004. As of December 31, 2005
         and December 25, 2004, total employee loans debited to share capital
         amounted to nil and nil, respectively.

    (ii) During the twelve months ended December 31, 2005, the Company
         purchased for cancellation 292,200 of its common shares for
         $1,158,047 in connection with the normal course issuer bid, of which
         $759,828 was attributed to share capital and the remaining $398,219
         was attributed to the deficit.

    (c) Employee stock options

    As of December 31, 2006, the Company has 583,244 options outstanding to
    employees and directors of the Company (December 31, 2005 - 1,426,666) to
    purchase an equal amount of common shares for an exercise price equal to
    the fair market value of the Company's common shares on the date of the
    grant. The options have a life of up to 10 years from the date of grant.
    Vesting terms and conditions are determined by the Board of Directors at
    the time of grant and vesting terms range from three to five years. The
    Company does not have a stock option plan; rather it has stock option
    agreements with certain individuals.

    The following table summarizes the Company's stock option activity:

                                             Period from       Period from
                                             December 26,      December 28,
                            Year Ended         2004 to           2003 to
                           December 31,      December 31,      December 25,
                               2006              2005              2004
                      -------------------------------------------------------
                                 Weighted          Weighted          Weighted
                          Number  Average   Number  Average   Number  Average
                            of   Exercise     of   Exercise     of   Exercise
                         Options   Price   Options   Price   Options   Price
                      -------------------------------------------------------
    Outstanding,
     beginning of
     period             1,426,666  $1.31  2,154,349  $1.19  5,775,405  $1.37
    Granted                     -      -          -      -          -      -
    Exercised            (259,712) $1.00   (681,412) $1.07 (3,605,633) $1.00
    Cancelled            (583,710) $1.00    (46,271) $1.00    (15,423) $1.00
                      -------------------------------------------------------
    Outstanding,
     end of period        583,244  $1.75  1,426,666  $1.31  2,154,349  $1.19
                      -------------------------------------------------------
                      -------------------------------------------------------

    Options
     exercisable,
     end of period        583,244  $1.75  1,037,369  $1.31  1,241,751  $1.19
                      -------------------------------------------------------
                      -------------------------------------------------------



    The following table summarizes information about stock options
    outstanding as at December 31, 2006:

                                        Options Outstanding and Exercisable
                                      ---------------------------------------
                                                    Weighted
                                                     Average
                                                    Remaining       Weighted
                                                   Contractual       Average
                                        Number         Life         Exercise
    Exercise Price                    of Shares      (Years)           Price
    -------------------------------------------------------------------------
    $1.00........................      182,904            0.9   $       1.00
    $2.09........................      400,340            4.0   $       2.09


    Stock based compensation for non-employees and employees is measured and
    recorded in the consolidated financial statements at fair value.

    (d) Contributed surplus

    Contributed surplus consists of:

                                                  Period from    Period from
                                                  December 26,   December 28,
                                    Year Ended      2004 to        2003 to
                                   December 31,   December 31,   December 25,
                                       2006           2005           2004
                                  -------------  -------------  -------------
    Balance, beginning of
     period...................... $ 23,516,635   $ 26,935,298   $ 29,841,021
    Issuance on cashless
     exercise of stock options...            -              -     (1,958,556)
    Issuance on exercise of
     stock options for cash......   (1,327,928)    (3,484,115)    (1,144,195)
    Stock-based compensation
     (Note 14c)..................            -         65,452        197,028
                                  -------------------------------------------
    Balance, end of period....... $ 22,188,707   $ 23,516,635   $ 26,935,298
                                  -------------------------------------------
                                  -------------------------------------------

    15. ACQUISITIONS

    (a) 2005

    On March 22, 2005, the Company acquired certain assets and liabilities of
    Digital Interiors, Inc., including customer contracts, for $429,603 cash
    plus additional contingent purchase consideration based upon certain
    operating performance metrics for Digital Interiors, Inc. over the next
    18 months. This additional contingent consideration is not included as
    part of the purchase equation as no additional amounts are due.

    This acquisition was accounted for under the purchase method of
    accounting, the application of which requires the use of management's
    judgment and estimates and third-party valuation professionals as to the
    determination of the fair market values of the assets and liabilities
    acquired.

    The allocation of fair value is as follows:

    Inventory...................................................... $ 77,366
    Property, plant and equipment..................................  129,773
    Goodwill.......................................................  313,202
    Customer contracts.............................................   27,000
    Trade name.....................................................  187,000
                                                                    ---------
                                                                    ---------
    Net assets acquired............................................ $734,341
    Net liabilities assumed........................................  304,738
    Cash consideration............................................. $429,603
                                                                    ---------
                                                                    ---------

    The Company has included the revenue and expenses of this acquired
    company in these consolidated financial statements from the date of
    acquisition (March 22, 2005).

    (b) 2004

    In January 2004, the Company acquired all of the outstanding stock of
    Mountain for a purchase price, net of estimated amounts due from the
    sellers and discount of the consideration to present value, including
    acquisition related costs of approximately $7.2 million. The Company paid
    $3.0 million at the closing of the purchase, with additional amounts
    payable of $1.0 million 30 days after the closing of the Company's
    initial public offering and six annual non-interest bearing payments of
    $1.0 million commencing in January 2005, subject to the Company's right
    of offset for certain pre-acquisition claims. At the time of the
    acquisition, Mountain was a defendant in three lawsuits filed in the
    state of California for employment-related breaches. The Company stopped
    making payments to Mountain when it was determined that the expected
    settlement amount exceeded that agreed to in the purchase price. Mountain
    sued the Company for non-payment. The California lawsuits were settled at
    mediation on February 24, 2005 for $8.0 million which included legal fees
    incurred by the Company. The Company was responsible for paying the
    damages and offset the amounts paid on the previous owners' behalf
    against amounts owed to the previous owner. During the fourth quarter of
    2005, the Company settled all outstanding litigation matters with the
    selling shareholders of Mountain for $2.95 million. The settlement
    resulted in the reduction of long-term debt of $1.2 million, a reduction
    in the future tax liability of $0.9 million and a corresponding reduction
    in customer contracts of $2.1 million.

    This acquisition was accounted for under the purchase method of
    accounting, the application of which requires the use of judgment and
    estimates as to the determination of the fair market values of the assets
    and liabilities acquired.

    The allocation of fair value, adjusted in 2005, is as follows:

    Cash........................................................ $ 3,551,425
    Other assets................................................      15,612
    Property plant and equipment................................     696,982
    Customer contracts..........................................  21,189,221
    Debt assumed................................................  (1,045,605)
    Working capital deficit.....................................  (7,042,751)
    Future tax liability........................................  (6,594,957)
    Additional liabilities assumed..............................  (3,611,631)
                                                                 ------------
    Net assets acquired......................................... $ 7,158,296
                                                                 ------------
                                                                 ------------

    16. RELATED PARTY TRANSACTIONS

    During the second quarter of 2006, the Company entered into an
    arrangement with a member of its Board of Directors for professional
    services to be provided in connection with the Company's long-term debt
    refinancing and strategic alternatives process. The agreements provide
    for maximum base compensation of $300,000. During 2006, in addition to
    base salary payments, the director earned and was paid $240,000 in
    connection with the Company's debt refinancing. Included in accounts
    payable and accrued liabilities is an amount of $150,000 related to a
    discretionary performance bonus payable as at December 31, 2006.
    Additional bonuses up to $360,000 can be earned by the director by the
    end of the arrangement, in connection with the completion of certain
    business events or as part of the Company's discretionary bonus plan.

    Beginning in fiscal 2004, the Company required its senior management to
    spend the majority of their time at the Company's Fort Lauderdale
    headquarters. To that end, the Company paid $245,000 to purchase 17.19%
    of the former Chief Executive Officer's home in the United States. The
    former Chief Executive Officer had the option to purchase the Company's
    interest at a later date. Subsequent to December 25, 2004, the former
    Chief Executive Officer purchased the 17.19% interest in the home from
    the Company. There was no gain or loss recorded on this transaction.

    17. RESTRUCTURING COSTS

    Restructuring costs and remaining reserve as of December 31, 2006 consist
    of the following:

                                    Restructuring
                         Reserve         Costs         Paid        Reserve
                       December 31,    Incurred       During     December 31,
                           2005        in 2006         2006          2006

    Severance........ $    549,987  $    560,173  $  1,110,160  $          -
    Moving expenses..            -       185,261       184,761           500
    Rent expense.....       27,450             -        27,450             -
    Other............            -       147,254       140,929         6,325
                      -------------------------------------------------------
    Total
     restructuring... $    577,437  $    892,688  $  1,463,300  $      6,825
                      -------------------------------------------------------
                      -------------------------------------------------------



    In 2006, there was an additional charge of $0.8 million for employee
    severance and related costs associated with the Company's relocation of
    its back office operations and corporate offices to Denver.

    Restructuring costs and remaining reserve as of December 31, 2005 consist
    of the following:

                                     Restructuring
                         Reserve         Costs         Paid
                       December 25,    Incurred       During     December 31,
                           2004        in 2005         2005          2005
                      -------------------------------------------------------
    Severance........ $          -  $  1,439,339  $    889,352  $    549,987
    Moving expenses..            -       136,341       136,341             -
    Rent expense.....            -        32,805         5,355        27,450
    Other............            -        64,000        64,000             -
    Total
                      -------------------------------------------------------
     restructuring... $          -  $  1,672,485  $  1,095,048  $    577,437
                      -------------------------------------------------------
                      -------------------------------------------------------


    In 2005, there was a charge of $1.7 million for employee severance and
    related costs associated with the Company's relocation of its back office
    operations and corporate offices to Denver. Employee severance was
    $1.4 million and employee moving and other expenses amounted to
    $0.3 million.

    18. INCOME TAXES

    The income tax benefit differs from the amount computed by applying the
    Canadian statutory tax rates to loss from continuing operations before
    income taxes for the following reasons:

                                    January 1,    December 26,   December 28,
                                     2006 to        2004 to        2003 to
                                   December 31,   December 31,   December 25,
                                      2006           2005           2004
                                  -------------------------------------------
    Tax expense/(benefit) on
     loss from continuing
     operations at Canadian
     statutory rate
     (2006 - 32.50%:
     2005 - 33.75%:
     2004 - 33.75%).............. $ (3,586,210)  $ (2,038,186)  $   (518,519)
    Increase in taxes resulting
     from non-deductible Items...      397,161         77,179        506,247
    Foreign rate differences.....   (1,080,076)      (688,308)       527,335
    Non-taxable portion of gain
     from sale of investment.....     (216,877)    (1,100,588)             -
    Future tax asset valuation
     allowance...................    2,982,731      1,748,176     (1,358,190)
    Other........................            -              -        222,127
                                  -------------------------------------------
    Total income tax recovery.... $ (1,503,271)  $ (2,001,727)  $   (621,000)
                                  -------------------------------------------
                                  -------------------------------------------

    Allocation of income tax recovery

    Current income tax expense
     (recovery).................. $     57,760   $   (509,786)  $  1,477,000
    Future income tax recovery...   (1,561,031)    (1,491,941)    (2,098,000)
                                  -------------------------------------------
    Income tax recovery.......... $ (1,503,271)  $ (2,001,727)  $   (621,000)
                                  -------------------------------------------
                                  -------------------------------------------

    The Company recorded a net $1.5 million income tax recovery for the year
    ended December 31, 2006, which includes a current tax recovery of
    $0.1 million for state tax liabilities and a future tax recovery of
    $1.6 million to record the amortization of the future tax liability
    associated with certain intangible assets (customer contracts) recognized
    as part of the acquisition of Mountain and the establishment of a future
    tax asset associated with a portion of the loss carryforwards in that
    entity. At this point in time a partial valuation reserve has been
    recorded against the future tax assets in Canada and the U.S. (with the
    exception of Mountain) since these entities do not meet the more likely
    than not test to recognize a future tax asset.

    Future income taxes reflect the net tax effects of temporary differences
    between the carrying amounts of assets and liabilities for financial
    reporting purposes and the amounts used for income tax purposes. The
    components of the Company's future tax assets and liabilities are as
    follows:

                                                  December 31,   December 31,
                                                         2006           2005
                                                 ----------------------------
    Future tax assets
    Loss carryforwards.......................... $ 19,616,110   $ 13,943,312
    Goodwill and customer contracts.............    6,703,610      6,880,469
    Deductible temporary differences............    6,737,751      6,830,064
    Tax cost of venture investments in excess
     of carrying value..........................       94,517        409,173
    Undeducted share issuance costs.............      670,057        983,205
                                                 ----------------------------
    Total future tax assets.....................   32,822,045     29,046,223
    Valuation allowance.........................  (24,444,114)   (22,093,355)
                                                 ----------------------------
    Future tax assets........................... $  9,377,931   $  6,952,868
                                                 ----------------------------
                                                 ----------------------------
    Future tax liabilities
      Intangibles............................... $  6,819,573   $  7,106,793
      Capital assets............................    2,558,358      1,407,106
                                                 ----------------------------
      Future tax liabilities.................... $  9,377,931   $  8,513,899

                                                 ----------------------------
    Net future tax liabilities.................. $          -   $  1,561,031
                                                 ----------------------------
                                                 ----------------------------

    The Company provides a valuation allowance for the amount of future tax
    assets where it is more likely than not that the asset will not be
    realized.

    The future tax assets and liabilities associated with Mountain have been
    presented on a net basis on the consolidated balance sheets as follows,
    since the temporary differences will reverse in the same jurisdiction:

                                                  December 31,   December 31,
                                                         2005           2006
                                                 ----------------------------
    Future tax assets related to loss
     carryforwards and other temporary
     differences................................ $  7,727,121   $  6,084,521
    Future tax liabilities related to
     intangible assets..........................   (6,819,573)    (7,106,793)
    Future tax liabilities related to capital
     assets.....................................     (907,548)      (538,759)
                                                 ----------------------------
    Net future tax liabilities.................. $          -   $ (1,561,031)
                                                 ----------------------------
                                                 ----------------------------

    The Company and its Canadian subsidiaries have non-capital loss
    carryforwards for income tax purposes totaling $18,112,279, $2,491,768 of
    which expires in 2007, $5,690,637 in 2008, $2,400,082 in 2009, $2,847,483
    in 2010, $1,977,491 in 2014 and $2,704,817 in 2015.

    Subsidiaries of the Company have losses for U.S. tax purposes of
    approximately $33,849,000 which will begin to expire in 2021.

    19. LOSS PER SHARE

    The following table sets forth the computation of basic and diluted loss
    per share for the fiscal years ended December 31, 2006, December 31, 2005
    and December 25, 2004 respectively.

                                     January 1,   December 26,   December 28,
                                       2006 to        2004 to        2003 to
                                   December 31,   December 31,   December 25,
    Numerator:                            2006           2005           2004
                                  -------------------------------------------
    Loss from continuing
     operations.................. $ (9,531,220)  $ (4,037,342)  $   (977,530)
    Loss from discontinued
     operations..................   (5,788,631)    (3,157,632)    (3,759,662)
                                  -------------------------------------------
    Net loss for the period...... $(15,319,851)    (7,194,974)    (4,737,192)
                                  -------------------------------------------
                                  -------------------------------------------

    Denominator:
    Denominator for basic loss
     per share - weighted
     average number of shares....   24,401,683     23,948,106     21,660,799
    Effect of dilutive stock
     options.....................            -              -              -
    Denominator for diluted loss
     per share - adjusted
     weighted average shares
     and assumed conversions.....   24,401,683     23,948,106     21,660,799
    Loss per share data:
      Basic and diluted - from
       continuing operations..... $      (0.39)  $      (0.17)  $      (0.05)
      Basic and diluted - from
       discontinued operations
       (Note 21).................        (0.24)         (0.13)         (0.17)
                                  -------------------------------------------
    Basic and diluted, net....... $      (0.63)  $      (0.30)  $      (0.22)
                                  -------------------------------------------
                                  -------------------------------------------

    Basic net loss per share is computed using the weighted average number of
    common shares outstanding during the period. Diluted net loss per share
    is derived by using the weighted average number of common shares
    outstanding during the period plus the effect of dilutive stock options.
    For the fiscal years ended 2006, 2005 and 2004, respectively, the diluted
    net loss per share is equivalent to basic net loss per share as the
    outstanding options, convertible debt and warrants are anti-dilutive.

    As of December 31, 2006, the Company had issued convertible debentures
    and warrants (see Notes 11 and 12). The conversion of the convertible
    debentures and warrants would be anti-dilutive. The potential dilution of
    the convertible debentures and warrants could result in an additional
    8.1 million common shares of the Company outstanding.

    20. GAIN ON SALE OF ASSETS AND ASSET WRITE-DOWN

    Gain on sale of assets and asset write-down consists of the following:

                                     January 1,   December 26,   December 28,
                                       2006 to        2004 to        2003 to
                                   December 31,   December 31,   December 25,
                                          2006           2005           2004
                                  -------------------------------------------
    Gain from investments........ $  1,320,193   $  6,522,324   $  2,982,559
    Write-down of investments
     and assets..................     (297,960)             -     (1,050,911)
    Refinancing of vehicles
     under capital lease.........     (296,147)             -              -
    Gain on sale of asset........            -        374,967              -
                                  -------------------------------------------
                                  $    726,086   $  6,897,291   $  1,931,648
                                  -------------------------------------------
                                  -------------------------------------------

    During the first quarter of 2006, the Company sold its remaining interest
    in Control F-1 Corporation. This resulted in net proceeds of $1,327,693.
    The investment had been previously written down to nil in 2004 due to
    prevailing market conditions. However, during the first quarter of 2006,
    an agreement was reached between the Company and Computer Associates
    International, Inc. and Computer Associates Canada Company for the
    Company's holding in Control F-1 Corporation. The Company recognized a
    pre-tax gain of $1,320,193 on the sale of the investment in the first
    quarter of 2006.

    For the fiscal year ended December 31, 2006, the Company had a loss of
    $297,960 on the write-down of leased vehicles and a net loss on
    refinancing of vehicle capital leases of $296,147. The refinancing of
    vehicles under capital leases involved the sale of 750 vehicles under the
    Company's capital lease obligations to a new third-party leasing company.
    The loss of $296,147 is primarily attributable to the fair value of the
    asset being less than the undepreciated cost of the vehicles at the time
    of the transaction. The refinancing transaction resulted in net proceeds
    of $2,127,542.

    In 2005, the Company sold its remaining interest in Guest-Tek for net
    cash proceeds of $9.0 million, of which the Company recognized a pre-tax
    gain on the sale of approximately $6.5 million. During the third quarter
    of 2005, the Company sold a building in California. In connection with
    the sale, the Company recognized a gain of $0.3 million.

    In 2004, the Company sold 500,000 shares of its interest in Guest-Tek
    pursuant to a secondary offering of common shares of Guest-Tek for net
    cash proceeds to the Company of $3.5 million and recognized a gain on the
    sale of approximately $3.0 million.

    As of December 25, 2004, as a result of changing conditions in the
    technology sector, management reviewed the carrying value of its
    investments. The Company has determined that a write-down in the carrying
    value of its investment in Control F-1 is appropriate and recorded an
    investment write-down of $1,050,911 in the current period.

    21. DISCONTINUED OPERATIONS

    The Company discontinued its operations at certain non-profitable
    branches in 2006, 2005 and 2004, including its New York City unionized
    location in May 2004. The revenues and expenses for these locations have
    been reclassified as discontinued operations for all periods presented in
    the consolidated financial statements. The Company was able to determine
    the financial results of the discontinued branches as financial
    information is available for each branch, the operations and cash flows
    of the branches have been eliminated from the ongoing operations of the
    entity as a result of the disposal transaction and the Company will not
    have any significant continuing involvement in the operations of the
    branches after the disposal transaction.

    The Company's current assets for discontinued operations consisted of
    accounts receivable of nil and $214,410 for the periods ended
    December 31, 2006 and December 31, 2005, respectively. Accounts payable
    and accrued liabilities for discontinued operations was approximately
    $1.0 million and nil for the periods ended December 31, 2006 and
    December 31, 2005 respectively.

    Consolidated statements of operations and deficit for discontinued
    operations is as follows:

                                     January 1,   December 26,   December 28,
                                       2006 to        2004 to        2003 to
                                   December 31,   December 31,   December 25,
                                          2006           2005           2004
                                  -------------------------------------------
    Revenue from discontinued
     operations.................. $  1,237,839   $  3,036,671   $  9,765,841
                                  -------------------------------------------
                                  -------------------------------------------
    Impairment of goodwill and
     customer contracts.......... $    490,404   $    305,575   $  1,245,072
                                  -------------------------------------------
                                  -------------------------------------------
    Loss from discontinued
     operations, net of income
     taxes of nil................ $ (5,788,631)  $ (3,157,632)  $ (3,759,662)
                                  -------------------------------------------
                                  -------------------------------------------
    Diluted loss per share from
      discontinued operations.... $      (0.24)  $      (0.13)  $      (0.17)
                                  -------------------------------------------
                                  -------------------------------------------


    (a) Discontinued cable, security and high definition branches

    Throughout all the reportable periods, the Company closed certain branch
    locations throughout the United States. As a result of these closings,
    the Company recognized a loss from discontinued operations excluding any
    impairment charge of $5,298,227, $2,852,057 and $2,430,404 for the years
    ended December 31, 2006, December 31, 2005 and December 25, 2004,
    respectively. The impairment charges reducing goodwill and customer
    contracts were $490,404, $305,575 and $1,245,072 for the years ended
    December 31, 2006, December 31, 2005 and December 25, 2004, respectively.
    Revenues applicable to the closed branches were $1,237,839, $3,036,671
    and $9,765,841 for the years ended December 31, 2006, December 31, 2005
    and December 25, 2004, respectively.

    (b) Sale of construction operations

    As of December 27, 2003, the Company had made the decision to dispose of
    the construction operations of its wholly-owned subsidiary, Wirecomm
    Systems, Inc. For the year ended December 25, 2004, the Company incurred
    a loss of $84,186 from discontinued construction operations.

    22. CONTINGENCIES

    During the fourth quarter of 2005, the Company was notified by regulatory
    authorities of the initiation of an investigation of certain wage
    practices in Washington. As a result of this, the Company has provided
    for estimated costs of $2.5 million. The provision is reflected on the
    consolidated statements of operations and deficit in general and
    administrative expenses, and on the consolidated balance sheets in
    accrued liabilities (Note 10). By their nature, these estimates are
    subject to measurement uncertainty and relate to events whose outcome
    will not be fully resolved until future periods. As a result revisions to
    these estimates could have a material impact on financial results of
    future periods.

    In 2006, the Company was named as a defendant in a purported class action
    case in California for which the Company has not established reserves.
    The Company intends to vigorously contest each of these claims. In
    addition, the Company is subject to a number of individual employment-
    related lawsuits. No reserve has been recorded for these cases as the
    Company is unable to estimate the amount of probable and reasonably
    estimable loss. These lawsuits are not expected to have a material impact
    on the Company's results of operations, financial position or liquidity.

    23. COMPARATIVE CONSOLIDATED FINANCIAL STATEMENTS

    Certain amounts in the comparative consolidated financial statements have
    been reclassified from statements previously presented to conform to the
    presentation of the 2006 consolidated financial statements, including
    amounts reclassified related to discontinued operations.

    24. SEGMENT INFORMATION

    The Company provides installation, integration and fulfillment services
    to the home entertainment, communications, security and home integration
    service industries. As such the revenue derived from this business is
    part of an integrated service offering provided to the Company's
    customers and thus is reported as one operating segment.

    The Company's operations are located in the United States and Canada.
    Revenue is attributed to geographical segments based on the location of
    the customers.

    The following table sets out property, plant and equipment, goodwill and
    customer contracts from continuing operations by country as of
    December 31, 2006 and December 31, 2005 and revenue from continuing
    operations for the fiscal years ended December 31, 2006, December 31,
    2005 and December 25, 2004.

    Geographic information
                                                  December 31,   December 31,
                                                         2006           2005
                                                 ----------------------------
    Property plant and equipment, goodwill and
     customer contracts
    Canada...................................... $  1,468,498   $    510,732
    United States...............................   73,648,412     85,586,612
                                                 ----------------------------
    Total....................................... $ 75,116,910   $ 86,097,344
                                                 ----------------------------
                                                 ----------------------------


                                     January 1,   December 26,   December 28,
                                       2006 to        2004 to        2003 to
                                   December 31,   December 31,   December 25,
                                          2006           2005           2004
                                  -------------------------------------------
    Revenue
    Canada....................... $  9,161,281   $  6,737,941   $  4,804,219
    United States................  326,285,460    272,988,710    205,871,063
                                  -------------------------------------------
    Total........................ $335,446,741   $279,726,651   $210,675,282
                                  -------------------------------------------
                                  -------------------------------------------

    For the fiscal years ended December 31, 2006, December 31, 2005 and
    December 25, 2004, one customer accounted for approximately 83%, 86% and
    86% of consolidated revenues, respectively. This customer accounted for
    76%, 89% and 84% of consolidated accounts receivable at December 31,
    2006, December 31, 2005, and December 25, 2004, respectively.

    The Company is economically dependent on this customer and the loss of
    this customer would have a material adverse effect on the Company's
    results of operations and financial condition.

    25. LONG-TERM SHARE COMPENSATION PLAN

    During 2004, the Company established the Long-Term Share Compensation
    Plan (the "LTIP") for the benefit of executive officers and key
    employees. Outside directors of the Company and consultants to the
    Company are not entitled to participate in the LTIP. The LTIP was
    designed to (i) strengthen the ability of the Company to attract and
    retain qualified officers and employees which the Company and its
    affiliates require; (ii) encourage the acquisition of a proprietary
    interest in the Company by such officers and employees, thereby aligning
    their interests with the interests of the Company's shareholders; and
    (iii) focus management of the Company and its affiliates on operating and
    financial performance and total long-term shareholder return by providing
    an increased incentive to contribute to the Company's growth and
    profitability. Pursuant to the LTIP, the Board of Directors may grant
    options to purchase common shares, share appreciation rights or
    performance share units. The maximum number of common shares reserved for
    issuance pursuant to the LTIP shall not exceed 13% of the issued and
    outstanding common shares from time to time. The LTIP is a separate plan
    from the employee stock options (Note 14c), and is subject to Board and
    shareholder approval. During the fourth quarter of 2006, the Company's
    Board of Director's granted 299,999 share appreciation rights to eight of
    the Company's officers and senior management, subject to shareholder
    approval. The share appreciation rights have an exercise price of $1.50
    and expire December 6, 2011.

    As the LTIP has not yet been approved by the shareholders, no
    compensation expense has been recorded in 2006. When approval is
    received, the fair value of the share appreciation rights will be
    measured at that date and compensation expense will be recorded in that
    period.

    26. SUBSEQUENT EVENTS

    (a) On February 8, 2007, the Company has negotiated a reduction in its
    letter of credit ("LOC") required as a result of the liquidation and
    reduction in its insurance obligations. The LOC requirement, which is
    collateralized with the Company's restricted cash (Note 4), has been
    reduced by $3.2 million. This reduction in the Company's restricted cash
    balance has been partially offset by a $1.1 million increase in
    restricted cash as collateral for a $1.6 million bond for the Boise
    airport project currently in progress by the Company's Network Services
    operation.

    (b) On March 13, 2007, the Company announced it had entered into an
    arrangement agreement ("Arrangement Agreement") with Ad.Venture Partners,
    Inc. ("AVP") (OTCBB: AVPA.OB), a special purpose acquisition company,
    that will result in the merger of the Company into an indirect wholly-
    owned Canadian subsidiary of AVP. AVP, a U.S. corporation, will be re-
    named "180 Connect" and is expected to qualify for listing on NASDAQ soon
    after the conclusion of the transaction. AVP is required by the terms of
    its charter to liquidate if it does not consummate a business combination
    by August 31, 2007, irrespective of the status of such approvals or
    review.

    After giving effect to the arrangement, assuming the full dilutive effect
    of the Company's securities and full participation of the AVP security
    holders, security holders of the Company will own approximately 64.1% of
    the outstanding voting stock of AVP and the existing security holders of
    AVP will own the balance on a fully diluted basis.

    

    %SEDAR: 00020398E




For further information:

For further information: please contact the following or visit our
website at www.180connect.net; Claudia A. Di Maio, Director Investor
Relations, TEL: (866) 995-8888, DIRECT LINE: (416) 930-7710, EMAIL:
cdimaio@180connect.net

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