================================================================================ UNITED STATES SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. 20549 ---------- FORM 40-F [X] REGISTRATION STATEMENT PURSUANT TO SECTION 12 OF THE SECURITIES EXCHANGE ACT OF 1934 OR [ ] ANNUAL REPORT PURSUANT TO SECTION 13(a) OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 FOR THE FISCAL YEAR ENDED _________ COMMISSION FILE NUMBER _________ POINTS INTERNATIONAL LTD. (EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER) CANADA 7389 NOT APPLICABLE (Province or other jurisdiction of (Primary Standard Industrial (I.R.S. Employer Identification No. incorporation or organization) Classification (if Applicable)) Code Number (if Applicable)) 800-179 JOHN STREET TORONTO, ONTARIO, CANADA M5T 1X4 (416) 595-0000 (Address and Telephone Number of Registrant's Principal Executive Offices) CT CORPORATION SYSTEM 111 EIGHTH AVENUE, 13TH FLOOR NEW YORK, NY 10011 (212) 894-8400 (Name, Address (Including Zip Code) and Telephone Number (Including Area Code) of Agent for Service in the United States) Securities registered pursuant to Section 12(b) of the Act: TITLE OF EACH CLASS NAME OF EACH EXCHANGE ON WHICH REGISTERED - ------------------- ----------------------------------------- NONE NONE Securities registered or to be registered pursuant to Section 12(g) of the Act: COMMON SHARES (Title of Class) Securities for which there is a reporting obligation pursuant to Section 15(d) of the Act: NONE For annual reports, indicate by check mark the information filed with this form: [ ] Annual Information Form [ ] Audited Annual Financial Statements Indicate the number of outstanding shares of each of the issuer's classes of capital or common stock as of the close of the period covered by the annual report: N/A

Indicate by check mark whether the registrant by filing the information contained in this form is also thereby furnishing the information to the Commission pursuant to Rule 12g3-2(b) under the Securities Exchange Act of 1934 (the "Exchange Act"). If "Yes" is marked, indicate the file number assigned to the registrant in connection with such rule. Yes [ ] No [X] Indicate by check mark whether the registrant: (1) has filed all reports required to be filed by Section 13(d) or 15(d) of the Exchange Act during the preceding 12 months (or for such shorter period that the registrant was required to file such reports); and (2) has been subject to such filing requirements for the past 90 days. Yes [ ] No [X] ================================================================================ -2-

FORWARD-LOOKING STATEMENTS The Exhibits incorporated by reference into this Registration Statement contain "forward-looking information," which may include, but is not limited to, statements with respect to the future or operating performance of Points International Ltd. (the "Registrant"), its subsidiaries and its projects. Often, but not always, forward-looking statements can be identified by the use of words such as "plans", "expects", "is expected", "budget", "scheduled", "estimates", "forecasts", "intends", "anticipates", or "believes" or variations (including negative variations) of such words and phrases, or state that certain actions, events or results "may", "could", "would", "might" or "will" be taken, occur or be achieved. Forward-looking statements involve known and unknown risks, uncertainties and other factors which may cause the actual results, performance of achievements of the Registrant and/or its subsidiaries to be materially different from any future results, performance or achievements expressed or implied by the forward-looking statements. Such factors include among others, limited financial resources, liabilities of the Registrant, technology and product developments risks, sensitivity to foreign exchange rates, and other factors discussed in the section entitled "Risk Factors" in the Renewal Annual Information Form of the Registrant dated as of March 21, 2005 filed as Exhibit 99.1 to this Registration Statement. Although the Registrant has attempted to identify important factors that could cause actual actions, events or results to differ materially from those described in forward-looking statements, there may be other factors that cause actions, events or results to differ from those anticipated, estimated or intended. Forward-looking statements contained in the Exhibits incorporated by reference into this Registration Statement are made as of the respective dates set forth in such Exhibits and the Registrant disclaims any obligation to update any forward-looking statements, whether as a result of new information, future events or results or otherwise. There can be no assurance that forward-looking statements will prove to be accurate, as actual results and future events could differ materially from those anticipated in such statements. Accordingly, readers should not place undue reliance on forward-looking statements. DOCUMENTS FILED PURSUANT TO GENERAL INSTRUCTIONS In accordance with General Instruction B.(1) of Form 40-F, the Registrant hereby incorporates by reference Exhibit 99.1 through Exhibit 99.4, inclusive, and Exhibit 99.6 through Exhibit 99.63, inclusive, as set forth in the Exhibit Index attached hereto. In accordance with General Instruction C.(2) of Form 40-F, the Registrant hereby incorporates by reference Exhibit 99.5, the reconciliation of the financial statements for the year ended December 31, 2004 to U.S. Generally Accepted Accounting Practices as required by Item 17 of Form 20-F, as set forth in the Exhibit Index attached hereto. In accordance with General Instruction D.(9) of Form 40-F, the Registrant has filed a written consent of certain experts named in the foregoing Exhibits as Exhibit 99.64, as set forth in the Exhibit Index attached hereto. OFF-BALANCE SHEET ARRANGEMENTS The following table contains information on material off-balance sheet arrangements that have or are reasonably likely to have a current or future effect on the Registrant's financial condition, revenues or expenses, results of operations, liquidity, capital expenditures or capital resources. PAYMENTS DUE BY PERIOD OFF-BALANCE SHEET ARRANGEMENTS ------------------------------------------------ (CDN $000,000S) TOTAL(1) 2009+ 2008 2007 2006 2005 - ------------------------------------ -------- ----- ----- ----- ----- ----- Operating Leases(2) 2.39 0.01 0.10 0.50 0.85 0.93 Partner Purchase Commitments(3) 3.85 0.08 0.14 1.34 1.11 1.18 ----- ----- ----- ----- ----- ----- Total Off-Balance Sheet Arrangements $6.23 $0.09 $0.23 $1.84 $1.96 $2.11 ===== ===== ===== ===== ===== ===== -3-

Notes: (1) Represents the aggregate amount for the full duration of the off-balance sheet arrangements (including years after 2009 and prior to 2005). (2) Includes technology services commitments and hardware and software operating leases. (3) Includes mileage purchase and co-marketing commitments. OPERATING LEASES Operating leases includes leasing facilities and the outsourcing of hosting services. Leasing facilities and the outsourcing of hosting services provide liquidity to the Registrant and allow the Registrant to focus on its core competencies. PARTNER PURCHASE COMMITMENTS Nature and Purpose The use of promotional miles and points as an acquisition and membership upgrade strategy is an integral component of the Points.com marketing plan. Miles and points purchased from Points.com's partners are used in three ways: 1. Points.com awards bonuses to new free registered users in partner promotions; 2. Miles and points are used as an incentive for customers to upgrade from a free account to a paid membership account; and 3. Miles and points are used as an incentive for customers to respond to affiliate offers displayed on the Points.com website. Importance and Benefit to Registrant Miles and points are a critical acquisition and membership upgrade strategy for the Registrant because they provide consumers with an incentive to conduct business with Points.com. Event that Could Result in Termination or Reduction of These Arrangements Miles and points are widely sold by our airline, hotel, and retail partners to a large number of promotional partners. While it is unlikely that our partners would stop selling miles or points to Points.com, one of the Registrant's partners could go bankrupt. In the event of such a bankruptcy, the Registrant would shift membership acquisition efforts to one of its other partners and would increase its external marketing efforts. TABULAR DISCLOSURE OF CONTRACTUAL OBLIGATIONS The following table contains information on payments for contractual obligations of the Registrant over the next five years. This disclosure should be read in conjunction with the management discussion and analysis found in the Annual Report for the year ended December 31, 2004 and the Registrant's financial statements and notes thereto. -4-

PAYMENTS DUE BY PERIOD -------------------------------------------------- FUTURE OBLIGATIONS (CDN $000,000S) TOTAL(1) 2009+ 2008 2007 2006 2005 - ---------------------------------- -------- ------ ----- ----- ------ ----- Long-Term Debt(2) (non-cash until repayment) $ 9.88 $ -- $ -- $ -- $ 9.11 $0.78 Series Two Preferred Share (non-cash until repayment) 19.60 16.12 0.87 0.87 0.87 0.87 Series Four Preferred Share (3) (non-cash until repayment) 5.37 4.48 0.24 0.24 0.24 0.18 Loan Payable 0.10 -- 0.01 0.03 0.03 0.03 Operating Leases(4) 2.39 0.01 0.10 0.50 0.85 0.93 Partner Purchase Commitments(5) 3.85 0.08 0.14 1.34 1.11 1.18 MilePoint Acquisition(6) 1.48 -- -- -- 0.40 1.08 ------ ------ ----- ----- ------ ----- Total Contractual Obligations $42.66 $20.66 $1.35 $2.99 $12.61 $5.05 ====== ====== ===== ===== ====== ===== Notes: (1) Represents the aggregate amount for the full duration of the contractual obligations (including years after 2009 and prior to 2005). (2) The Debenture is due on March 15, 2008. (3) The Series Four Preferred Share was issued on April 4, 2005. (4) Includes technology services commitments and hardware and software operating leases. (5) Includes mileage purchase and co-marketing commitments. (6) Cash commitments related to the MilePoint Acquisition include the payments relating to the acquisition. UNDERTAKING AND CONSENT TO SERVICE OF PROCESS A. UNDERTAKING The Registrant undertakes to make available, in person or by telephone, representatives to respond to inquiries made by the Commission staff, and to furnish promptly, when requested to do so by the Commission staff, information relating to: the securities registered pursuant to Form 40-F; the securities in relation to which the obligation to file an annual report on Form 40-F arises; or to transactions in said securities. B. CONSENT TO SERVICE OF PROCESS (1) Concurrently with the filing of the Registration Statement on Form 40-F, the Registrant will file with the Commission a written Irrevocable Consent and Power of Attorney on Form F-X. (2) Any change to the name or address of the Registrant's agent for service shall be communicated promptly to the Commission by amendment to the Form F-X referring the file number of the Registrant. -5-

SIGNATURES Pursuant to the requirements of the Exchange Act, the Registrant certifies that it meets all of the requirements for filing on Form 40-F and has duly caused this registration statement to be signed on its behalf by the undersigned, thereto duly authorized. Dated at Toronto, Ontario as of the 29th day of August, 2005. POINTS INTERNATIONAL LTD. By: /s/ Robert MacLean ------------------------------------ Name: Robert MacLean ---------------------------------- Title: Chief Executive Officer --------------------------------- By: /s/ Stephen Yuzpe ------------------------------------ Name: Stephen Yuzpe ---------------------------------- Title: Chief Financial Officer --------------------------------- -6-

EXHIBIT INDEX EXHIBIT DESCRIPTION ANNUAL INFORMATION 99.1 Renewal Annual Information Form dated March 21, 2005. 99.2 Renewal Annual Information Form dated April 22, 2004. 99.3 2004 Annual Report, including Consolidated Financial Statements and Management's Discussion and Analysis for the year ended December 31, 2004. 99.3.1 CEO and CFO Certification of Annual Filings for the year ended December 31, 2004. 99.4 2003 Annual Report, including Consolidated Financial Statements and Management's Discussion and Analysis for the year ended December 31, 2003. 99.5 Item 17 reconciliation to audited annual financial statements for the year ended December 31, 2004. QUARTERLY REPORTS 99.6 Unaudited Interim Financial Statements and Management's Discussion and Analysis for the three months ended March 31, 2005, and CEO and CFO certification of interim filings. 99.7 Unaudited Interim Financial Statements and Management's Discussion and Analysis for the nine months ended September 30, 2004, and CEO and CFO certification of interim filings. 99.8 Unaudited Interim Financial Statements and Management's Discussion and Analysis for the six months ended June 30, 2004, and CEO and CFO certification of interim filings. 99.9 Unaudited Interim Financial Statements and Management's Discussion and Analysis for the three months ended March 31, 2004, and CEO and CFO certification of interim filings. SHAREHOLDER MEETING MATERIALS 99.10 Report of Voting Results dated May 13, 2005 from 2005 Annual and Special Meeting of Shareholders. 99.11 Supplement to Management Information Circular dated April 22, 2005. 99.12 Management Information Circular dated March 8, 2005. 99.13 Notice of 2005 Annual and Special Meeting of Shareholders dated March 28, 2005. 99.14 Form of Proxy for 2005 Annual and Special Meeting of Shareholders. 99.15 Report of Voting Results dated July 2, 2004 from 2004 Annual and Special Meeting of Shareholders. 99.16 Management Information Circular dated April 22, 2004. 99.17 Notice of 2004 Annual and Special Meeting of Shareholders dated April 22, 2004. 99.18 Form of Proxy for 2004 Annual and Special Meeting of Shareholders. -7-

MATERIAL DOCUMENTS AND MATERIAL AGREEMENTS 99.19 Amended and Restated Unsecured Convertible Debenture issued by Points International Ltd., originally issued on March 15, 2001 and amended and restated on April 4, 2005. 99.20 Certificate of Amendment of Points International Ltd. dated March 29, 2005. 99.21 Securities Purchase Agreement dated March 28, 2005 among Points International Ltd. and certain purchasers identified on the signatures pages of the Securities Purchase Agreement. 99.22 Waiver dated January 31, 2005 granted by CIBC Capital Partners to Points International Ltd. 99.23 Amendment Agreement dated December 9, 2004 between CIBC Capital Partners and Points International Ltd. 99.24 Certificate of Continuance of Points International Ltd. dated November 10, 2004. 99.25 Investor's Rights Agreement dated as of April 11, 2003 between Points Investments, Inc., USA Interactive and Points International Ltd. 99.26 Consent and Amendment Agreement dated as of March 21, 2003 between CIBC Capital Partners, Points International Ltd. and USA Interactive. 99.27 Amended and Restated Convertible Debenture in the original principal amount of Cdn.$6,000,000 issued by Exclamation International Incorporated in favour of CIBC Capital Partners, originally issued on March 15, 2001 and amended and restated on February 8, 2002. MATERIAL CHANGE REPORTS 99.28 Material Change Report dated April 5, 2005 relating to the offering by Points International Ltd., by way of private placement, of 18.1 million common shares at a price of Cdn.$0.68 per share and one Series Four Preferred Share for $3.5 million, and the sale of its Cdn.$6 million convertible debenture originally issued to CIBC Partners in 2001. 99.29 Material Change Report dated March 18, 2004 relating to the entering into of an agreement by Points International Ltd. to acquire substantially all of the assets of MilePoint, Inc. PRESS RELEASES 99.30 Press release dated June 17, 2005 - "Hbc Rewards Launches on Points.com". 99.31 Press release dated June 15, 2005 - "Points International Enters Lucrative Corporate Incentive Market". 99.32 Press release dated May 16, 2005 - "Points International to Hold Investor Call on Tuesday May 17th at 4:30 p.m. Eastern". 99.33 Press release dated May 12, 2005 - "Points International Ltd. Reports First Quarter Results". 99.34 Press release dated April 5, 2005 - "Points International Announces the Completion of the Sale of Convertible Debenture". 99.35 Press release dated April 5, 2005 - "Points International Closes C$15.8 million Private Placement". 99.36 Press release dated March 29, 2005 - "Points International Announces C$15.8 Million Private Placement". 99.37 Press release dated March 29, 2005 - "Points International Announces the Sale of Convertible Debenture". -8-

99.38 Press release dated March 10, 2005 - "Points International Ltd. Reports Fourth Quarter and Year-End Results". 99.39 Press release dated March 1, 2005 - "Christopher Payne Resigns from Points International's Board of Directors". 99.40 Press release dated February 22, 2005 - "Points International Ltd. Options Exercised". 99.41 Press release dated January 5, 2004 - "Points International Ltd. and Intrawest Corporation Establish Partnership Agreement". 99.42 Press release dated January 5, 2004 - "Points International Ltd. Selects Spencer Francey Peters (SFP) to Develop New Brand Identity for Points.com". 99.43 Press release dated November 17, 2004 - "Points International and Delta Air Lines Expand Relationship with New Mileage Transfer Program". 99.44 Press release dated November 10, 2004 - "Points International Ltd. Reports 2004 Third Quarter Results". 99.45 Press release dated September 8, 2004 - "Hawaiian Airline's HawaiianMiles Teams with Points.com; Added Value to HawaiianMiles Members". 99.46 Press release dated August 10, 2004 - "Points International Ltd. Reports 2004 Second Quarter Results". 99.47 Press release dated July 29, 2004 - "Points International Partners with British Airways (BA), Enabling Executive Club Members Worldwide to Buy Miles Online". 99.48 Press release dated June 29, 2004 - "Points.com Partners with ACCENT Training to Offer a New Channel for Customer Loyalty Rewards". 99.49 Press release dated June 24, 2004 - "Frontier Airlines Partners with Points International". 99.50 Press release dated June 23, 2004 - "assistant(TM)Joins Points International's Points Exchange". 99.51 Press release dated May 19, 2004 - "Points.com Offers Coffee Lovers the Ability to Exchange Miles and Other Loyalty Points for Starbucks Cards". 99.52 Press release dated May 10, 2004 - "Points International Appoints Chief Marketing Officer". 99.53 Press release dated May 7, 2004 - "Points International Ltd. Reports 2004 First Quarter Results". 99.54 Press release dated April 29, 2004 - "Interval International Joins with Points.com to Offer its Members Unlimited Exchanges on The Points Exchange". 99.55 Press release dated April 28, 2004 - "S&H greenpoints Joins Points International's Points Exchange". 99.56 Press release dated April 26, 2004 - "Points International Ltd. Reports 2003 Year End Results". 99.57 Press release dated April 2, 2004 - "Points International Completes Acquisition of Assets of MilePoint, Inc.". 99.58 Press release dated March 23, 2004 - "eBay and Points International Enhance Points Exchange Agreement". 99.59 Press release dated March 11, 2004 - "Points International Announces Agreement to Acquire Assets of MilePoint, Inc. for Cash and Shares". -9-

99.60 Press release dated March 2, 2004 - "US Airways Joins Points International's Points Exchange". 99.61 Press release dated February 19, 2004 - "Points International Graduates to TSX". 99.62 Press release dated February 2, 2004 - "Online Romantics Can Exchange Loyalty Currency for Valentine's Day Gifts on Points.com". 99.63 Press release dated January 29, 2004 - "Points International Partners with Scandinavian Airline Systems (SAS), Enabling EuroBonus Members to Buy Points Online". CONSENTS 99.64 Consent of Mintz & Partners LLP, Chartered Accountants. -10-

Exhibit 99.1 POINTS INTERNATIONAL LTD. www.points.com ANNUAL INFORMATION FORM March 21, 2005 Information presented herein is current as of December 31, 2004, unless otherwise indicated. All dollar amounts are in Canadian dollars unless otherwise indicated.

TABLE OF CONTENTS INTRODUCTION .............................................................. 1 SUBSIDIARIES .............................................................. 2 GENERAL DEVELOPMENT OF THE BUSINESS ....................................... 2 Three-Year History ..................................................... 2 DESCRIPTION OF THE BUSINESS ............................................... 4 Core Business - Points Solutions ....................................... 4 Points.com ............................................................. 4 Points.com Business Solutions .......................................... 5 Specialized Skill and Knowledge ........................................ 5 Competitive Conditions ................................................. 5 Status of New Products ................................................. 6 Components - Raw Materials, Component Parts and Finished Products ...... 6 Intangible Property .................................................... 7 Seasonality ............................................................ 7 Economic Dependence .................................................... 8 Changes to Contracts ................................................... 8 Employees .............................................................. 8 Foreign Operations ..................................................... 8 Reorganizations ........................................................ 8 RISK FACTORS .............................................................. 8 Limited Financial Resources ............................................ 8 Maturity of the CIBC Capital Partners' Debenture ....................... 9 Liabilities of the Corporation ......................................... 9 Technology and Product Development Risks for Points.com version 3.0 .... 10 Sensitivity to Foreign Exchange Rate Changes ........................... 10 High Dependence on Key Customers ....................................... 10 Dependence upon Key Personnel .......................................... 11 Growth-Related Risks ................................................... 11 Impediments to Material Transactions ................................... 11 Conflicts of Interest .................................................. 11 Limited Customers ...................................................... 11 Revenues ............................................................... 12 DIVIDENDS ................................................................. 12 GENERAL DESCRIPTION OF CAPITAL STRUCTURE .................................. 12 MARKET FOR SECURITIES ..................................................... 14 ESCROWED SECURITIES ....................................................... 15 DIRECTORS AND OFFICERS .................................................... 15 Name, Address and Occupation of Directors .............................. 15 Current Officers of the Corporation .................................... 17 -i-

Security Holdings ...................................................... 18 BOARD COMMITTEES .......................................................... 18 Audit Committee ........................................................ 18 Human Resources and Corporate Governance Committee ..................... 20 Corporate Cease Trade Orders or Bankruptcies ........................... 20 Conflicts of Interest .................................................. 20 LEGAL PROCEEDINGS ......................................................... 20 INTERESTS OF MANAGEMENT AND OTHERS IN MATERIAL TRANSACTIONS ............... 20 Indebtedness by an Officer ............................................. 20 Shares of the Corporation Issued in Exchange for Property .............. 21 TRANSFER AGENT ............................................................ 22 MATERIAL CONTRACTS ........................................................ 22 ADDITIONAL INFORMATION .................................................... 22 -ii-

INTRODUCTION Points International Ltd. (herein referred to as "Points International" or the "Corporation") is a corporation existing under the Canada Business Corporations Act ("CBCA"). The address of the principal office of the Corporation is 800 - 179 John Street, Toronto, Ontario M5T 1X4. The Corporation was initially incorporated under the Business Corporations Act (Alberta) on January 5, 1999 under the name Sportek Systems Inc. Pursuant to Certificates of Amendment dated February 2, 1999 and April 16, 1999, respectively, the Corporation changed its name to Sports Technologies Group Inc. ("STGI") and amended its articles to remove its private company restrictions. By way of Articles of Amendment dated February 10, 2000, STGI's name was changed to Exclamation International Incorporated. The Corporation was then continued from the Business Corporations Act (Alberta) to the Business Corporations Act (Ontario) ("OBCA") on February 17, 2000. The Articles of Continuance were amended on December 20, 2001, June 27, 2002 and April 10, 2003 to, respectively, add a new series of preferred shares designated the "Series One Preference Share," to change the Corporation's name to "Points International Ltd.," and to add two new series of preferred shares designated the "Series Two Preferred Share" and "Series Three Preferred Share." Effective November 10, 2004, the Corporation was continued from the OBCA to the CBCA. As part of the continuance, the Corporation amended its Articles to remove the provisions relating to the "Series A Preferred Shares," to remove the provision disallowing the directors to appoint one or more additional directors between annual general meetings, and to remove the provision restricting meetings of shareholders to the City of Toronto and anywhere in Alberta. In connection with the continuance, the Corporation repealed its then existing by-laws and adopted by-laws that conform to CBCA requirements. Page 1 of 22

SUBSIDIARIES At December 31, 2004, the Corporation had the following subsidiaries: (FLOW CHART) Note: (1) The Corporation does not own 100% of Points.com Inc. on a fully-diluted basis due to certain outstanding options and warrants. See "General Development of the Business - Three-Year History" below. GENERAL DEVELOPMENT OF THE BUSINESS THREE-YEAR HISTORY On November 5, 2001, the Corporation's board of directors adopted a restructuring plan (hereafter referred to as the "Restructuring Plan"), pursuant to which, on February 8, 2002, the Corporation acquired the 5% of the issued shares of Points.com Inc. ("Points.com") not previously indirectly held by the Corporation. As a result, the Corporation and its affiliates own directly and indirectly 100% of the outstanding shares of Points.com. However, the Restructuring Plan did not result in the Corporation acquiring all of the shares of Points.com on a fully diluted basis. Points.com had previously issued to certain loyalty program partners "partner warrants", and rights to acquire warrants, which are exercisable to acquire common shares of Points.com. In addition, Points.com had previously issued options to acquire its common shares. Holders of the options to acquire common shares of Points.com have been granted the right to put those shares to the Corporation for common shares ("Common Shares") of the Corporation. The Corporation is now focused solely on the business of Points.com. In connection with the Restructuring Plan, the Corporation wound down or divested most of its remaining interests in other companies and minority holdings. The Corporation continues to hold an 8-10% (fully diluted) interest in ThinApse Corporation ("ThinApse"), a Vancouver-based technology company. In 2004, ThinApse sold its assets to a company listed on the TSX Venture Exchange. The Corporation still holds shares in ThinApse and, on December 31, 2004, wrote down its $161,629 investment to zero. On April 11, 2003, InterActiveCorp ("IAC"), through a wholly-owned affiliate, made a $15.1 million strategic investment in Points International (the "IAC Investment"). Under the IAC Investment, Points International issued one convertible preferred share, the Series Two Preferred Share and Common Share purchase warrants (the "Warrants") for aggregate cash consideration Page 2 of 22

of $12.4 million and $2.7 million, respectively. As at the date hereof, the Series Two Preferred Share is convertible, for no additional consideration, into up to 19,999,105 Common Shares, subject to certain anti-dilution adjustments. The Warrants are exercisable to acquire up to 55% of the Common Shares (calculated on an adjusted fully diluted basis) less the number of Common Shares issued or issuable on conversion of the Series Two Preferred Share, and expire on April 11, 2006. Under an investor rights agreement entered into on the closing of the IAC Investment, IAC and its affiliates have various rights, including prospectus qualification rights, pre-emptive rights in connection with further issuances of shares, matching rights for change of control transactions, approval rights over certain material transactions and rights to board and board committee representation. On March 31, 2004, the Corporation acquired the assets of MilePoint, Inc. (the "MilePoint Acquisition"), a loyalty program technology provider and operator, for $3.5 million in cash and four million common shares. At the beginning of the second quarter of 2005, the Corporation will begin making some important changes to the Points.com consumer Web site. Currently, the Points.com Web site is a transactional Web site that allows consumers to swap miles and points between over 45 reward programs. While established as the world's only service of its kind, Points.com, in its current form, represents only a small part of the Corporation's opportunity to service consumers' total reward program experience. The new Points.com Web site, referred to as "Points.com version 3.0," represents a major enhancement in the relationship with both reward program partners and the consumer. Today, the consumer interacts with a Web site that centres on a single feature: swap ("Swap"). Points.com version 3.0 will broaden the Web site's offerings and present each consumer with a personalized view of his or her reward program universe. Because of this personalized view of the consumer's reward program universe, Points.com will be able to help consumers release more value from their favourite programs and "Get More Rewards, Faster(TM)". This is accomplished by adding new mile and point management tools such as ways to purchase ("Buy") and earn ("Earn") more miles or points in their favourite programs. In addition, the system will be driven by an ATG Marketing Enterprise System that will use the consumer's unique reward program, reward goals and point balance mix to suggest ways to use the Earn, Buy and Swap tools most effectively. As a result of these changes, Points.com will become a "reward management portal" that provides a more comprehensive and engaging consumer experience. This functionality is expected to add new revenue streams to the Points.com business model. Most significantly, the loyalty management utility of the Web site is expected to allow Points.com to focus more on a subscription membership model as a core aspect of the business. Management expects that Points.com version 3.0 will be phased in over the course of 2005, with monthly releases beginning in the second quarter. In April 2005, Points.com users will Page 3 of 22

immediately notice a new look and feel that will reflect the more consumer-focused approach. Over the course of the spring and summer, Points.com will add or expand its Buy, Earn and Suggestion functionality. In the second half of 2005, management will begin driving consumer traffic to the new Points.com Web site to leverage the Web site's ongoing evolution. In accordance with Canadian generally accepted accounting principles and the Canadian Institute of Charted Accountants (CICA) handbook, Sections 3061 and 3062, Web site development costs incurred in the Web site application and infrastructure development associated with Points.com version 3.0 will be capitalized. For additional information, see the Corporation's Management's Discussion and Analysis ("MD&A"), "General and Administrative Expenses," page 23, "Property, Plant and Equipment," page 30 and "Capital Resources - Planned Capital Expenditures" page 36. DESCRIPTION OF THE BUSINESS The Corporation had only one operating segment, Points.com, in each of 2004 and 2003. CORE BUSINESS - POINTS SOLUTIONS The Corporation has developed a proprietary technology platform that allows it to offer a portfolio of solutions, referred to as the Points Solutions, to the loyalty program industry. The technology platform was designed to create value for consumers and loyalty programs alike. The Points Solutions are comprised of Points.com (referred to as the Points Exchange in past disclosures) and a suite of Points.com Business Solutions (referred to as the Private Branded Solutions in past disclosures) available to loyalty program operators. The Corporation's business is principally conducted over the internet (other than functions such as customer support), allowing its two primary categories of customers (loyalty program operators and loyalty program consumers) to be virtually anywhere in the world. Points Solutions accounted for 97% ($7.56 million) of the Corporation's revenues. The remaining 3% is attributed to interest income. Points.com The Corporation's cornerstone product is the proprietary Points.com Web site. Points.com is an online service allowing consumers who are members of participating loyalty programs to swap their loyalty program points and/or miles between other participating loyalty programs. As at December 31, 2004, Points.com had attracted 45 loyalty program participants (as at the date hereof, one additional partner is under contract but not yet launched and three partners have been launched), including the loyalty programs of leading airlines, hotels, online and retail businesses, and gift certificate programs. For more information on the development of new technology for Points.com, see "General Development of the Business - Three-Year History" herein Page 4 of 22

Points.com Business Solutions At December 31, 2004, the Corporation had 55 Points.com Business Solutions products in the marketplace. This suite of technologies includes: Buy and Gift - facilitates the online sale and gift of miles, points and other loyalty program currencies. Corporate - facilitates the sale of loyalty program currencies to corporate customers. Transfer - facilitates the amalgamation or transfer of loyalty program currencies among multiple accounts. Integrate - functions as a common platform to process transactions between third-party loyalty programs, to simplify and automate a complex and resource-intensive process with a single integration. Elite - facilitates the online sale of tier status to members of loyalty programs. Systems Design - custom applications developed for select large loyalty program partners. See page 6 "Status of New Products" of this AIF for an example of the redeemAAmiles program, an application built for a loyalty partner. Specialized Skill and Knowledge The Corporation employs 11 key senior managers. These managers possess over 60 years of aggregate loyalty experience, have managed large loyalty program sales organizations, and built large loyalty technology systems. The success of the Corporation is dependent on the experience of such key personnel and loss of such personnel could adversely affect the Corporation's business, operations and prospects. In addition, the Points Solutions are a proprietary technology. As a result, the Corporation is also dependent on its ability to retain talented and highly skilled information technology professionals to maintain, build and operate the technology infrastructure. The loss of key employees could adversely affect the Corporation's business, operations and prospects. Competitive Conditions Several indirect competitors are currently in the market with limited product offerings. Other internet Web sites that offer financial and account aggregation and management (e.g., MileageManager) are potential competitors. These indirect and potential competitors currently offer a product similar to the Corporation's "My Account" (previously referred to as the pointsfolio(TM)), but do not offer an swap function. Management believes that none of the competitors is actively partnering with loyalty programs to independently provide a solution similar to the Points.com service. Rather, these indirect competitors are only able to retrieve and display member account information. However it is possible that one or more of the indirect or potential competitors could, in the future, compete directly with Points.com. Page 5 of 22

The Corporation must compete with a wide range of companies that seek to provide business solutions technology, from small companies to large companies. Many existing and potential competitors do or could have greater technical or financial resources than the Corporation. The financial performance of the Corporation may be adversely affected by such competition. In particular, no assurances can be given that additional direct competitors to the Corporation may not be formed or the Corporation may not lose some or all of its arrangements with its loyalty program partners, including its key loyalty program partners, decreasing its ability to be competitive and operate as a viable business. Companies such as IBM Ltd. and Sabre Inc. ("Sabre") (a leading provider of technology for the travel industry) are potential competitors for Points.com's services. Sabre in particular has greater resources and extensive relationships with airlines, although a significant investment in time and resources would be required to develop offerings similar to those offered by Points.com. Points.com has established mutually beneficial relationships with potential competitors. During April 2002, Points.com and Sabre entered into a formal agreement that has resulted in the Points Solutions being marketed to loyalty programs internationally by Sabre. Sabre focuses on international markets, working in complement with Points.com's business development team, which focuses on North American markets, through Points.com and Points International (US) Ltd., and on international markets through Points International (UK) Limited. With operations in 45 countries, Sabre's marketing network has global reach and has established relationships with major loyalty programs. Any competition, as described above, could have a material adverse impact on the Corporation's business, operations and prospects. Status of New Products On September 17, 2004, a redemption platform was launched to enable American Airlines AAdvantage program members to redeem their miles online for hotel stays and other program points. Participating companies to date include Marriott, Diners Club, Intercontinental Hotels and Hilton. The participant list will be expanded in the first quarter of 2005 to include other partner options. The redeemAAmiles program adds value to the American Airlines AAdvantage(R) program and its members by increasing the utility of miles earned, and facilitating an online process that reduces transaction processing time from weeks to days. The redemption platform is an example of a Systems Design solution. The Corporation's economics are similar to a swap transaction at Points.com. Components - Raw Materials, Component Parts and Finished Products Predominantly all of Points.com's business is conducted electronically. Accordingly, the sources, pricing and availability of raw materials and component parts for the Corporation are not known to be subject to any material constraints. Page 6 of 22

Intangible Property The Corporation and Points.com hold the rights to several important trademarks, including the Points.com and Points.net domain names. Several other trademark applications are in process. On December 16, 2003, Points.com was awarded the registration of the trademark POINTS.COM and design in the U.S. and has an application pending in Canada for the trademark POINTS.COM. On July 5, 2001, MyPoints.com, Inc. ("MyPoints") filed a Statement of Opposition in Canada to the Corporation's application for the trade-mark POINTS.COM. On December 13, 2004, Points International and MyPoints signed a Mutual Coexistence Agreement stipulating that neither party will object to the use, application or registration of their respective marks, in Canada, for stated services. In January 2005, MyPoints withdrew its opposition to the Points.com registration. The Corporation has filed eight trademark applications in Canada. Four of the trademarks have been registered and four are pending. The Corporation has also filed six trademark applications in the U.S., of which four have been registered and two are pending. In connection with the MilePoint Acquisition, the Corporation acquired 10 registered trademarks and two pending trademark applications. The trademarks are filed in the U.S., the European Union, Australia and Japan. The proprietary technology used in the business is owned by Points.com, and Points.com has made two applications to register patents. The patent, entitled the "Apparatus and Method of Facilitating the swap of Points Between Selected Entities", has been filed in Canada and the U.S. while the patent entitled "Apparatus and Method of Distributing and Tracking the Distribution of Incentive Points", has been filed in Canada, the U.S. and Australia. In addition, as part of the MilePoint Acquisition, the Corporation acquired two patents - "Loyalty Program Tracking and Conversion System", filed in Canada, the U.S. and Australia and "Loyalty Currency Vending System" (a Continuation-in-Part of the previous MilePoint patent) has been filed in the U.S. Points.com is regularly granted the right to use its partners' trademarks in connection with the joint branding of its Web site and provision of services to members. As Points.com operates in a technology-based environment, its intellectual property and its access to the property of its loyalty program partners are critical to the Corporation's ongoing business. Seasonality Points Solutions (comprising Points.com and Points.com Business Solutions) is not subject to major seasonality factors. There is, however, one period in which growth slows or declines and one period in which certain products are active and generate revenue. During July and August, Points Solutions experiences a slight decline in activity as fewer consumers are online purchasing, transferring or exchanging miles. This modest decline has occurred in each of the past two years. Page 7 of 22

The Elite product is only available to certain loyalty programs' consumers from late January to mid April with most of the activity occurring during February and March. Economic Dependence See Note 21 of the Corporation's Audited Consolidated Financial Statements, which are incorporated by reference herein. Changes to Contracts The Corporation anticipates the renegotiation of contracts to occur in the normal course of business. In the event that contracts are not renegotiated on terms reasonably satisfactory to the Corporation, the Corporation's business could be materially adversely affected. However, the Corporation's management anticipates that material contracts will be successfully renegotiated. Employees As at December 31, 2004, the Corporation had 79 full-time employees (including three contractors replacing employees in a temporary leave of absence) and three short-term contractors. Foreign Operations Due to the nature of Points International's business, management of the Corporation does not believe that there are any particular risks associated with the foreign operations of the Corporation that differ materially from the risks associated with the domestic operations of the Corporation, although the Corporation believes it is possible that it may face competition within foreign markets. Reorganizations See "General Development of the Business - Three-Year History" herein for additional information. RISK FACTORS Investing in internet-based businesses can have a high degree of business risk. In addition to the other information contained in this AIF, investors should carefully consider the risk factors set out below, review the discussion under "Description of the Business" above and review the MD&A prior to making an investment decision with respect to the Corporation. LIMITED FINANCIAL RESOURCES The financial resources of the Corporation are limited. For 2004, Points International reported ($2,352,995) of cash flows used in operating activities, deposits of $13,153,623 and working capital of ($7,767,648). If cash flow provided by operations does not increase the Corporation's liquid and unencumbered cash position, it could impact the Corporation's ability to pay its liabilities and/or exploit its business opportunities and fund growth. Consequently, the Page 8 of 22

Corporation could in future be dependent upon its ability to obtain additional financing either by debt, equity or other means. The ability of the Corporation to arrange such additional financing in the future will depend in part upon the prevailing capital market conditions, as well as the business performance of the Corporation. There can be no assurance that the Corporation will be successful in its efforts to arrange additional financing on terms satisfactory to the Corporation. The nature of the relationship with IAC (including the ability of IAC to acquire control of the Corporation, to exercise pre-emptive rights and the right to match third-party offers for the Corporation) may result in difficulties for the Corporation in finding new third-parties willing to make debt or equity investments in the Corporation. If additional financing is raised by the issuance of shares from the treasury of the Corporation, control of the Corporation may change and/or shareholders may suffer additional dilution. If additional financing is raised by the issuance of debt, the Corporation will be more highly leveraged going forward and the repayment of or interest payments upon such debt could have a negative effect on the cash flow of the Corporation. If adequate financing is not available, or is not available on acceptable terms, the Corporation may not be able to take advantage of opportunities, invest in technological development and enhancements, or otherwise respond to competitive pressures and remain in business. In addition, the failure to secure additional financing could result in the failure of the Corporation to meet its liabilities as they become due, which would have a material adverse effect on the Corporation. MATURITY OF THE CIBC CAPITAL PARTNERS' DEBENTURE When the 11% $6,000,000 senior secured convertible debenture (as amended from time to time, the "Debenture") issued to CIBC Capital Partners, a division of Canadian Imperial Bank of Commerce, matures on July 4, 2005, the Corporation will be required to repay $6 million of principal and $3,413,118 of accrued interest to CIBC Capital Partners. The repayment of $9,413,118 of principal and accrued interest will cause the Corporation to be in a negative working capital position, may materially threaten its solvency and/or may severely restrict the ability to grow its business. There is no certainty that the Corporation would have sufficient cash at such time to make the repayment. However, CIBC Capital Partners has the option, exercisable prior to March 31, 2005, to extend the maturity date to March 15, 2006 and thereafter the right to extend the maturity of the Debenture for up to two additional one-year periods. For additional information see page 32, "Commitments Related to the Terms of Certain Financing Arrangements" of the Corporation's MD&A. LIABILITIES OF THE CORPORATION As at December 31, 2004, Points International had outstanding consolidated current liabilities of $24,775,900 including the Debenture and consolidated total liabilities of $39,115,680, including the Series One Preference Share and the Series Two Preferred Share, all of which are discussed in greater detail in the MD&A. There is no assurance that the Corporation will be able to repay such amounts when and if they are due, as any such repayment will be dependent upon generating sufficient cash reserves and may also be dependent upon securing additional financing. Page 9 of 22

TECHNOLOGY AND PRODUCT DEVELOPMENT RISKS FOR POINTS.COM VERSION 3.0 Points.com version 3.0 is a significant technology development project that the Corporation expects to release at the beginning of the second quarter of 2005. Monthly updates are planned into early 2006. See "General Development of the Business - Three-Year History" for additional information. With any substantial technology development project, the Corporation faces the real and material possibility that some of the risks outlined below will occur. Risks related to purchased third-party software include partial or incorrect software deployment and a lack of domain knowledge of the third-party software in the Corporation's IT department. Risks related to internally developed software include, but are not limited to, unanticipated complexity, software defects, design flaws or an incomplete design. Marketing risks include, but are not limited to, poor customer experience, insufficient perceived consumer value, deficiencies in reporting, tracking, and forecasting capabilities, poor customer retention rates, low customer acquisition rates and low customer activity rates. SENSITIVITY TO FOREIGN EXCHANGE RATE CHANGES The translation of the Corporation's revenues and expenses is, and will continue to be, sensitive to changes in the U.S./Canadian foreign exchange rates ("FX Rates"). Changes to FX Rates will have greater impact on the Corporation's revenues than on its expenses as approximately 92% of the Corporation's revenues are in U.S. dollars and the remaining 8% are split between Canadian dollars, Euros, Great Britain Pounds and Swiss Francs. Management expects that the percentage of U.S. dollar-based revenue will not decrease significantly in 2005. In 2004, approximately 69% of the Corporation's general and administrative expenses were in Canadian dollars, 28% were U.S. dollar-based and 3% were based in other foreign currencies. The Corporation does not have material foreign exchange risk with its cash expenses as it has sufficient foreign currency reserves to meet its foreign obligations. Over the past three years, the FX rate differential has been negative. In 2004, the decline in the U.S. dollar resulted in a 11% lower revenue growth, or approximately $905,500, offset by a 3.5% decrease in expense growth, or approximately $426,000. For additional information see page 22, "Foreign Exchange Rates" of the Corporation's MD&A. HIGH DEPENDENCE ON KEY CUSTOMERS Approximately 54% of the Corporation's revenues are from its three largest customers (the two largest customers represent 43% of revenues). In 2003, two customers represented 61% of the Corporation's revenues. In addition, 61% (2003 - - 58%) of the Corporation's deposits are due to these three customers. Page 10 of 22

DEPENDENCE UPON KEY PERSONNEL See "Description of the Business - Core Business - Points Solutions - Specialized Skill and Knowledge" herein. GROWTH-RELATED RISKS The Corporation may be subject to growth-related risks, including capacity constraints and pressure on its internal systems and controls. The Corporation's ability to manage its growth effectively will require it to continue to implement and improve its operational and financial systems and to expand, train and manage its employee base. Any inability of the Corporation to deal with this growth could have a material adverse impact on its business, operations and prospects. IMPEDIMENTS TO MATERIAL TRANSACTIONS Under the investor's rights agreement entered into by the Corporation and IAC in connection with the IAC Investment, in the event that there is an offer to effect any transaction that could result in any person (or group of persons) other than IAC acquiring (i) assets of Points International and/or its subsidiaries that are, individually or in the aggregate, material to Points International or any of its subsidiaries, or (ii) 20% or more of the equity of, or voting rights in respect of, Points International or any of its subsidiaries, IAC is entitled to notice of such transaction and the right to propose a matching transaction. The existence of this matching right in favour of IAC will significantly reduce the probability that a third party would propose a transaction in the nature described above and that could otherwise have been beneficial to the Corporation and its shareholders. CONFLICTS OF INTEREST There are potential conflicts of interest to which the directors and officers will be subject with respect to the operations of the Corporation. As a result of the Corporation's efforts to engage people who have experience in the Corporation's area of business, some of the directors and officers have been and will continue to be engaged in other businesses. Situations may arise where the directors and officers will be in direct competition or have an interest in parties that conflict with the Corporation. Any such conflicts will be subject to the governance practices of the board of directors and governed by the law applicable to directors' and officers' conflict of interest. LIMITED CUSTOMERS There can be no assurance that Points International will be successful in marketing its products to potential retail customers and loyalty program operating partners. Competitors of the Corporation may have long-standing relationships with their customers. As a result, it may be difficult for the Corporation to penetrate certain markets to gain new customers or loyalty program partners. In addition, it is possible that the Corporation will not be able to maintain its existing relationships with retail customers and loyalty program partners. Page 11 of 22

REVENUES Operating revenues are derived from contracts for Points Solutions. This includes revenue from Points.com Business Solutions, in the form of development fees, maintenance fees and commissions, and revenue from Points.com in the form of fees and commissions. Revenue growth is dependent on attracting new partners and customers for the Corporation's business, and in securing continued contracts for its Points.com Business Solutions. Competition or other business factors may have a material adverse effect on the Corporation's business. DIVIDENDS The Corporation has not declared or paid any dividends to its shareholders and may not do so without the prior approval of the holder of both the Debenture and Series Two Preferred Share in the capital of the Corporation. The Corporation will retain earnings for general corporate purposes to promote future growth. As such, the board of directors does not anticipate paying any dividends for the foreseeable future. The Corporation's Board of Directors will review this policy from time to time, having regard to the Corporation's financial condition, financing requirements and other relevant factors. GENERAL DESCRIPTION OF CAPITAL STRUCTURE The Corporation's share capital consists of an unlimited number of Common Shares and an unlimited number of preferred shares, issuable in series, of which three series consisting of one share each have been authorized. As at the date hereof, 74,072,456 Common Shares, one Series One Preference Share, one Series Two Preferred Share and no Series Three Preferred Shares are outstanding. The Common Shares carry one vote per share, are entitled to dividends if, as and when declared by the board of directors and participate rateably on any liquidation, dissolution or winding-up of the Corporation. Except as described below, the Common Shares rank subsequent to the preferred shares. The Series One Preference Share is a non-voting, convertible share. The Series One Preference Share will automatically convert into one Common Share upon (i) conversion into Common Shares of greater than $2,000,000 of the $6,000,000 principal amount of the Debenture, (ii) repayment in full of the Debenture or (iii) payment of the Dividend (as defined below) (each a "Conversion Event"). In the event of the liquidation, dissolution or winding-up of the Corporation prior to a Conversion Event, the holder of the Series One Preference Share is entitled to (a) receive $4,000,000 before any payment to holders of any Common Shares and (b) share pro-rata (on the basis that the Series One Preference Share represents that number of Common Shares into which the Debenture is then convertible) with the holders of all other participating shares in further distributions from the assets of Points International to an aggregate maximum of $20,000,000 in addition to the sum specified in (a). The holder of the Series One Preference Share is entitled to a dividend (the "Dividend") in the event that, prior to a Conversion Event, prescribed change of control or related events occur. The Dividend is approximately equal to the liquidation preference described above; in no event may the Dividend exceed $24,000,000. The Series One Preference Share is not entitled to dividends other than as set out above. Page 12 of 22

The Series Two Preferred Share is a voting, convertible share and ranks equally with the Series One Preferred Share. The Series Two Preferred Share is convertible until March 31, 2013, for no additional consideration, into 19,999,105 Common Shares, subject to adjustment in accordance with its anti-dilution protection provisions. If not converted, the Series Two Preferred Share will be redeemed by the Corporation on March 31, 2013 for the greater of $12,400,000 plus 7% per annum from the date of issuance and the market value of the Common Shares into which the Series Two Preferred Share then could be converted. The Series Two Preferred Share will also be redeemed if certain change of control events occur, for an amount equal to the greater of (i) 125% of the redemption amount described above and (ii) the greater of (A) the value of the Common Shares into which the Series Two Preferred Share then could be converted on the day immediately prior to public announcement of the change of control and (B) the product of the Common Shares into which the Series Two Preferred Share then could be converted and the value of the consideration paid per Common Share in the transaction resulting in the change of control. In the event of the liquidation, dissolution or winding-up of the Corporation, the holder of the Series Two Preferred Share will be entitled to receive an amount equal to the greater of $12,400,000 plus 7% per annum from the date of issuance and the product of the number of Common Shares into which it could then be converted and the per share amount to be distributed to the holders of the Common Shares after giving effect to any payments to be paid on shares ranking prior to the Common Shares. The Series Two Preferred Share entitles the holder to various rights, including to receive dividends with the holders of Common Shares on an "as converted" basis, vote with the holders of Common Shares on an "as converted" basis (in certain circumstances, to a maximum of 19.9% of the votes that may be cast), vote separately as a series with respect to certain material transactions and certain other matters involving the Corporation, and elect two members to the board of directors of the Corporation and have one member sit on each committee of the board of directors. If the Series Two Preferred Share ceases to be held by an affiliate of IAC, it will automatically convert into a Series Three Preferred Share. The Series Three Preferred Share is a non-voting, non-convertible share ranking equally with the Series One Preferred Share. The Corporation will redeem the Series Three Preferred Share upon the earlier of March 31, 2013 and the third business day following a prescribed change of control event. In the event of redemption on March 31, 2013, the amount payable will equal $12,400,000 plus 7% per annum from the date of issuance of the Series Two Preferred Share. In the event of redemption following a change of control, the amount payable will equal 125% of the amount specified in the preceding sentence. In the event of the liquidation, dissolution or winding-up of the Corporation, the holder of the Series Three Preferred Share will be entitled to receive an amount equal to $12,400,000 plus 7% per annum, calculated from the date of issue of the Series Two Preferred Share. The Corporation also has outstanding the 11% $6,000,000 Debenture. The Debenture will mature on July 4, 2005 subject to the right of the holder, exercisable prior to March 31, 2005, to extend the maturity date to March 31, 2006 and thereafter the right to extend the maturity of the Debenture for up to two additional one-year periods. The Corporation is entitled to pre-pay the Debenture, without interest (the payment of which is waived), following the exercise in full of the Warrant; the Debenture may not otherwise be prepaid. If the Warrant expires, the $6,000,000 principal amount of the Debenture will be convertible at the option of the holder into 18,908,070 Common Shares and accrued interest on any principal amount as converted ceases to Page 13 of 22

be payable. The Debenture will automatically convert into Common Shares in certain circumstances, including the sale of all outstanding Common Shares for a price per share of at least $1.26928 and the sale of all or substantially all of the assets of Points International yielding net proceeds per Common Share (after giving effect to the conversion of the Debenture) of at least $1.26928. The Debenture is not convertible into Common Shares at the option of the holder as long as the Warrant is outstanding and held by IAC or an affiliate thereof but is otherwise convertible at the option of the holder into 18,908,070 Common Shares. The Debenture contains negative covenants in favour of the holder such that the holder's consent is required for, among other things, (i) the sale by the Corporation of all or substantially all of its assets, (ii) any transaction to reorganize the Corporation's capital structure or merge with another person, (iii) certain sales of treasury stock, (iv) the payment of dividends or distributions on share capital or the purchase or redemption of outstanding securities, (v) amendments to the Corporation's articles or by-laws and (vi) material changes to the Corporation's business. Subsequent to year end, on January 31, 2005, CIBC Capital Partners waived the prohibitions on prepayment of the Debenture and acknowledged that Points.com may at any time prepay the principal amount together with all accrued and unpaid interest and other amounts payable under the Debenture (the "Waiver"). Pursuant to the Waiver, any prepayment would consist of an amount of cash equal in value to the unpaid principal amount and an amount in common shares of the Corporation equal in value to the amount of accrued but unpaid interest. The Waiver is in effect until March 31, 2005. MARKET FOR SECURITIES The Corporation's Common Shares are listed on the Toronto Stock Exchange ("TSX") under the symbol "PTS". The Corporation's common shares are also listed on the U.S. Pink sheets under the symbol "PTSEF.PK". FY 2004 HIGH LOW CLOSE VOLUME ------- ----- ----- ----- --------- December $0.94 $0.61 $0.94 3,138.135 November 0.88 0.58 0.63 1,214,388 October 0.90 0.62 0.84 1,603,477 September 0.95 0.72 0.82 574,028 August 1.06 0.69 0.90 388,872 July 1.03 0.85 1.02 789,345 June 1.17 0.96 1.01 1,947,197 May 1.30 0.95 1.11 1,331,763 April 1.54 1.08 1.23 7,042,289 Page 14 of 22

FY 2004 HIGH LOW CLOSE VOLUME ------- ----- ----- ----- --------- March 1.33 0.90 1.12 4,110,326 February 1.10 0.88 0.99 2,228,235 January 1.08 0.76 0.93 1,749,429 Note 1: January and February 1- 23, 2004, Points International was listed on the TSX Venture Exchange. On February 24, 2004, the Corporation began to trade on the TSX and ceased to trade on the TSX Venture Exchange. ESCROWED SECURITIES NUMBER OF SECURITIES PERCENTAGE OF DESIGNATION OF CLASS HELD IN ESCROW CLASS - -------------------- -------------------- ------------- Common Shares (1) 2,700,000 3.7% Note (1): Computershare Trust Company of Canada acts as the Escrow Agent and the shares are released as follows: 700,000 shares on March 31, 2005; 1,500,000 shares on September 30, 2005; and 500,000 shares on March 31, 2006. DIRECTORS AND OFFICERS NAME, ADDRESS AND OCCUPATION OF DIRECTORS The following table sets forth the name, municipalities of residence, term as director and current and five-year historic occupation of the directors of the Corporation. Each director is elected to hold office until the Corporation's next annual shareholders' meeting or until his successor is elected or appointed. Points International next annual and special meeting will be held on May 11, 2005. PRINCIPAL OCCUPATION WITHIN THE PRECEDING FIVE YEARS (CURRENT AND FOR PAST FIVE YEARS UNLESS NAME OFFICE TERM AS DIRECTOR OTHERWISE NOTED) - ------------------------ ---------------------- ------------------- ---------------------------------------------------------- Douglas A. Carty(1) Chairman of the Board Feb. 2002 - present Chief Financial Officer, Laidlaw International Ltd., a Glen Ellyn, Illinois transportation company (Jan. 2003 - present) Chief Financial Officer, Atlas Air Worldwide Holdings Inc., an air cargo company (Jul. 2001 - Dec. 2002) Chief Financial Officer, Canadian Airlines, an airline (Jul. 1996 - Jul. 2000) Marc B. Lavine(1) Vice-Chairman of the Feb. 2000 - present Chief Executive Officer, President and Director of Paris, France Board Chrysalis Capital Corporation II, a capital pool company (June 2004 - present) Chief Executive Officer, President and Director of Chrysalis Capital Corporation, a capital pool company (Oct. 1, 2003 - present) Chief Executive Officer, Exclamation International Incorporated (Jun. 1999 - Feb. 2002) Page 15 of 22

PRINCIPAL OCCUPATION WITHIN THE PRECEDING FIVE YEARS (CURRENT AND FOR PAST FIVE YEARS UNLESS NAME OFFICE TERM AS DIRECTOR OTHERWISE NOTED) - ------------------------ ---------------------- ------------------- ---------------------------------------------------------- T. Robert MacLean(3) Chief Executive Feb. 2002 - present Chief Executive Officer, Points International Ltd. (Feb. Toronto, Ontario Officer and Director 2002 - present) Chief Executive Officer, Points.com Inc. (Feb. 2000 - present) President, Points.com Inc. (Feb. 2000 - Feb. 2002) Vice President, other positions, Canadian Airlines, an airline (1988 - 2000) Christopher J.D. Barnard President and Director Feb. 2000 - present President, Points International Ltd. (Feb. 2000 - present) Toronto, Ontario President, Points.com Inc. (Feb. 2002 - present) Vice President, Exclamation International Incorporated (Jul. 1998 - Feb. 2000) Rowland W. Fleming(2) Director Feb. 2002 - present Public and private company director (Apr. 1999 - present) Mississauga, Ontario John W. Thompson(1) Director Feb. 2002 - present Public company director (Aug. 2000 - present) Toronto, Ontario Managing Director, Kensington Capital Partners Limited, an investment and advisory firm (Sept. 1999 - Oct. 2003) J. Grant McCutcheon(2) Director Feb. 2000 - present Director, Lawrence & Company Incorporated, an investment Toronto, Ontario firm (Dec. 1995 - present) Jim W. Kranias(2) Director Feb. 2000 - present President, International Consulting, a private consulting London, England company (Aug. 1998 - present) Eric A. Korman(1)(2),(4) Director June 2003 - present Senior Vice President, Mergers & Acquisitions, New York, New York InterActiveCorp, an interactive commerce company (Dec. 2004 - present) Other positions at InterActiveCorp (Sept. 2001 - Dec. 2004) Principal, and head of business development for ePartners Venture Capital, a $650 million venture fund (Jan. 2000 - Apr. 2001) Dan Marriott(4) Director Dec 2003 - present Senior Vice President, Interactive Development, New York, New York InterActiveCorp, an interactive commerce company (Dec. 2003 - present) Senior Vice President, Strategic Planning, InterActiveCorp (Feb. 2002 - Dec. 2003) Executive Vice President, Corporate Strategy and Development, Ticketmaster, Inc., an online consumer products company (Feb. 1999 - Feb. 2002) Notes: (1) Audit Committee (2) Human Resources and Corporate Governance Committee (3) Mr. MacLean serves as an observer for both the Audit and Human Resources and Corporate Governance Committees. (4) Nominee of Points Investments, Inc., a corporation controlled by InterActiveCorp, holder of the Series Two Preferred Share. Page 16 of 22

CURRENT OFFICERS OF THE CORPORATION The following table sets forth the name, municipalities of residence, office, term as officer and current and five-year historic occupation of the officers of the Corporation. PRINCIPAL OCCUPATION WITHIN THE PRECEDING FIVE YEARS (CURRENT AND FOR PAST FIVE YEARS UNLESS NAME OFFICE TERM AS OFFICER OTHERWISE NOTED) - ------------------------- --------------------------- -------------------- --------------------------------------------------- T. Robert MacLean Chief Executive Officer and Feb. 2002 - present Chief Executive Officer, Points International Ltd. Toronto, Ontario Director (Feb.2002 - present) Chief Executive Officer, Points.com Inc. (Feb. 2000 - present) President, Points.com Inc. (Feb. 2000 - Feb. 2002) Vice President, other positions, Canadian Airlines, an airline (1988 - 2000) Christopher J.D. Barnard President and Director Feb. 2000 - present President, Points International Ltd. (Feb. 2000 - Toronto, Ontario present) President, Points.com Inc. (Feb. 2002 - present) Vice President, Exclamation International Incorporated (Jul. 1998 - Feb. 2000) Darlene J. Higbee Clarkin Vice President and Chief Feb. 2002 - present Vice President and Chief Technology Officer, Delta, British Columbia Technology Officer Points.com Inc. (Jul. 2000 - present) and Points International Ltd. (Feb. 2002 - present) IT Manager, Canadian Airlines (1990 - 2000) Grad Conn Chief Marketing Officer May 2004 - present Chief Marketing Officer, Points International Ltd. Toronto, Ontario and Points.com Inc. (May 2004 - present) Vice President, Managing Director, Grey Direct + Interactive (2002 - May 2004) Chief Executive Officer, OpenCola Inc. (1998 - 2001) Peter Lockhard Vice President, Points.com Jan. 2005 - present Vice President, Points International Ltd and Toronto, Ontario Business Solutions Points.com Inc. (Jan. 2005 - present) Managing Director, Aquiam Partners Ltd. (May 2001 - Dec. 2004) Vice President, Professional Services, FloNetwork Inc. (Sept. 2000 - Apr. 2001) Account Director, Maritz Canada Inc. (Feb. 1998 - Aug. 2000) Stephen M. Yuzpe Chief Financial Officer and Feb. 2000 - present Chief Financial Officer, Points International Ltd. Toronto, Ontario Corporate Secretary (Feb. 2000 - present) and Points.com Inc. (Feb. 2002 - present) Catalyst, Exclamation International Incorporated (Feb. 1999 - Feb. 2000) William A. Thompson Senior Vice President, Feb. 2002 - present Senior Vice President, Partners, Points Flower Mound, Texas Partners International Ltd. and Points.com Inc. (Feb. 2003 - present) Vice President, Partner Relationships, other positions, Points.com Inc. (Aug. 2000 - Feb. 2003) Director and General Manager, American Airlines (Jun. 1996 - Aug. 2000) Page 17 of 22

PRINCIPAL OCCUPATION WITHIN THE PRECEDING FIVE YEARS (CURRENT AND FOR PAST FIVE YEARS UNLESS NAME OFFICE TERM AS OFFICER OTHERWISE NOTED) - ------------------------- --------------------------- -------------------- --------------------------------------------------- Sacha Diab Vice President, Partners Nov. 2004 - present Vice President, Partners, Points International Ltd. Toronto, Ontario and Points.com Inc. (Nov. 2004 - Present) Director, Business Development and other positions, Points.com Inc. (Aug. 2000 - Nov. 2004) Vice President, Partners, Triad Communication (1998 - 2000) Michael Glass Vice President, Product Aug. 2004 - present Vice President, Product Development, Points Seattle, Washington Development International Ltd. and Point.s.com Inc. (Aug. 2004 - Present) Senior Director, .NET Platform Strategy, Microsoft Corporation (Dec. 2001 - Aug. 2004) Product Unit Manager, Microsoft Learning Technologies, Microsoft Corporation (Nov. 1998 - Dec. 2001) Jerry J. Philip Vice President, Business Feb. 2002 - present Vice President, Business Development, Points.com Oakville, Ontario Development Inc. (Mar. 2000 - present) and Points International Ltd. (Feb. 2002 - present) Senior Manager, other positions, Canadian Airlines (1995 - Mar. 2000) Jason Sikora Vice President, Marketing Nov. 2004 - present Vice President, Marketing, Points International Markham, Ontario Ltd. and Points.com Inc. (Nov. 2004 - present) Director, Interactive Marketing, Grey Worldwide - Canada (Jan. 2001 - Nov. 2004) Director, Interactive Marketing & Strategic Partnerships, Chapters Online (Dec. 1998 - Jan. 2001) SECURITY HOLDINGS As of the date of this AIF, as a group, the directors and officers of the Corporation beneficially owned, directly or indirectly, or exercised control or direction over, 11,227,746 Common Shares representing approximately 15.2% of the issued and outstanding Common Shares. BOARD COMMITTEES AUDIT COMMITTEE Pursuant to the CBCA, the Corporation is required to have an audit committee ("Audit Committee" or "Committee") comprised of not fewer than three directors, the majority of whom are not officers or employees of the Corporation or any of its affiliates. The Audit Committee of the Corporation is comprised of the following four directors: Douglas Carty (Chair), Eric Korman (Series Two Preferred Share holder nominee), Marc Lavine, and John Thompson. None of the members of the Audit Committee is an officer or employee of the Corporation. The holder of the Series Two Preferred Share has the right to elect one member to the Audit Committee and the Committee size is set to four directors. The Audit Committee's mandate can be found in the investor relations section of the Corporation's Web site, www.points.com, and this mandate is incorporated by reference herein. Page 18 of 22

The board of directors believes that each of the members of the Audit Committee possesses a high level of financial literacy and expertise. Each member of the Committee has been determined by the board of directors to be an independent director. In addition, each member of the Audit Committee has personally acknowledged to the Corporation that his education and experience would qualify him as "financially literate", as defined under Canadian securities laws. Mr. Carty (Chair of the Committee) holds a Master of Business Administration from the University of Western Ontario (subsequently renamed the Ivey School of Business) and a Bachelor of Arts. (Honours) from Queen's University. Mr. Carty is the Chief Financial Officer of Laidlaw International Ltd., a NYSE listed issuer, and is responsible for the preparation of all internal and external financial reports. Mr. Korman received his Master of Business Administration from the J. L. Kellogg Graduate School of Management at Northwestern University, and his Bachelor of Arts with Honours in economics from Emory University. Mr. Korman is the Senior Vice President Mergers and Acquisitions at InterActiveCorp, requiring him to be able to understand and value very complex businesses through financial analysis. Mr. Lavine holds an Honours Business Administration degree from the Ivey School of Business at the University of Western Ontario. Mr. Lavine is the Chief Executive Officer, President and Chairman of the board of directors of Chrysalis Capital Corporation and has held the positions of director, audit committee member, Chief Executive Officer, President and Chief Financial Officer at two additional TSX or TSX Venture Exchange listed issuers (including the Corporation). Mr. Thompson holds an Honours degree in Business Administration from the University of Western Ontario and is a Chartered Accountant. Prior to spending three years at a merchant bank, Mr. Thompson spent 21 years at Loblaws Companies Limited, most recently holding the position of Executive Vice President. External Auditor Service Fees (By Category) The aggregate fees billed by the Corporation's external auditor in the last two fiscal years were as follows: 2004 2003 -------- ------- Audit Fees $ 49,750 $37,500 Audit-Related Fees (1) 22,250 7,500 Tax Fees (2) 2,150 16,470 All Other Fees (3) 42,152 22,650 Total Fees $116,302 $84,120 Page 19 of 22

Notes (1) Audit-related fees primarily relate to the review of interim financial periods and accounting advice. (2) Tax fees primarily relate to advice for the Corporation's tax returns, Scientific Research & Experimental Design claim, the tax treatment of non-resident directors' compensation, the tax treatment of employee stock options and other tax matters. (3) In 2004, $41,152 of All Other Fees is related to the MilePoint Acquisition and, in 2003, $13,550 is related to the investment by InterActiveCorp, $4,500 is related to the OSC's continuous disclosure review and $5,600 is related to other matters. HUMAN RESOURCES AND CORPORATE GOVERNANCE COMMITTEE The Human Resources and Corporate Governance Committee is comprised of four members of the board: Messrs. Fleming (Chairman of the Committee), Korman, Kranias and McCutcheon. The Human Resources and Corporate Governance Committee reviews the performance of the executive officers, the performance of the Corporation (including its separate divisions and subsidiaries) and establishes the compensation package for executive officers. In connection with the IAC Investment, the number of members of each of these board committees will be limited to four, with one member of each committee being a director elected by the holder of the Series Two Preferred Share. CORPORATE CEASE TRADE ORDERS OR BANKRUPTCIES In October 1996, J. Grant McCutcheon joined the board of directors of Innovadent Technologies Ltd. ("Innovadent") as the nominee of Innovadent's largest shareholder and secured lender. Innovadent made a proposal to creditors in May 1998, which was accepted. In April 1999, the Ontario Securities Commission issued a cease trade order against Innovadent for failure to file financial statements and, in August 1999, Innovadent filed a notice of intent to make a proposal to creditors. Mr. McCutcheon resigned from the board of Innovadent on August 31, 1999. In July of 1996, Mr. Carty was appointed to the position of Chief Financial Officer of Canadian Airlines Corporation ("CANADIAN"). In March of 2000, Canadian filed for bankruptcy protection under the Companies Creditors Arrangement Act. CONFLICTS OF INTEREST See "Risk Factors - Conflicts of Interest" above. LEGAL PROCEEDINGS The Corporation is not, to its knowledge, subject to any material legal proceedings. Please see "Description of the business - Core business - Points Solutions - Intangible Property" for disclosure of the successfully concluded MyPoints trademark dispute. INTERESTS OF MANAGEMENT AND OTHERS IN MATERIAL TRANSACTIONS INDEBTEDNESS BY AN OFFICER The Corporation provided a loan to Mr. Robert MacLean, the Corporation's Chief Executive Officer, to induce and assist Mr. MacLean in relocating from Calgary to Toronto and assume a leadership position with the Corporation. The following table sets forth certain details of Mr. MacLean's indebtedness. Mr. MacLean's loan had an initial 18-month term that commenced on February 24, 2000. The initial term to maturity expired on August 24, 2001 but was extended to Page 20 of 22

December 31, 2004. Interest accrues on the principal outstanding at the Canada Revenue Agency prescribed interest rate with accrued interest payable together with principal on the loan maturity date. Amount Amount outstanding Amount outstanding on Largest amount Fiscal year Security for at beginning forgiven during December 31 of outstanding ending indebtedness of fiscal year fiscal year(1), (2), (3) fiscal year during fiscal year - ----------- --------------------- -------------- ------------------------ ----------------------- ------------------------ 2002 Options in Points.com $75,000 $25,000 principal plus $50,000 principal plus $75,000 principal plus Inc. $8,680 accrued interest $1,135 accrued interest $8,680 accrued interest 2003 Options in Points.com $50,000 $25,000 principal plus $25,000 $50,000 principal plus Inc. $1,650 accrued interest $513.29 accrued interest 2004 Options in Points.com $25,000 $25,000 principal plus Nil $25,000 principal plus Inc. $825 accrued interest $825 accrued interest Notes: (1) $25,000 of principal and $8,680 of interest was forgiven on April 24, 2002. (2) $25,000 of principal was forgiven on April 24, 2003 and $1,650 of accrued interest was forgiven on December 31, 2003. (3) The remaining $25,000 of principal and $825 of accrued interest was forgiven on April 24, 2004. SHARES OF THE CORPORATION ISSUED IN EXCHANGE FOR PROPERTY The Corporation has granted to holders of options to acquire common shares of Points.com the right to put to the Corporation the common shares of Points.com in exchange for Common Shares having a fair market value equal to the fair market value of the common shares of Points.com so put. The Corporation has used a ratio of 2.5039 Common Shares per Points.com common share for this purpose. In fiscal years 2003 and 2004, certain officers, directors and former directors exercised stock options in Points.com and exercised their put rights. Points.com Common Shares Points International Ltd. Acquired Upon Exercise of Shares Issued in Exchange for Fiscal Year Options Points.com Shares - ----------- ------------------------- ----------------------------- 2002 39,600 99,155 2003 930,529 2,329,954 2004 524,554 1,313,433 Notes: (1) Subsequent to year end, 475,600 common shares in Points.com were exchanged for 1,190,856 Common Shares of the Corporation. Page 21 of 22

(2) Subsequent to year end, 75,000 options in Points.com were conditionally exercised. See the heading "PCI Option Extension" in the Corporation's Management Information Circular for additional information. TRANSFER AGENT Computershare Trust Company of Canada 600, 530 8th Avenue S.W. Calgary, Alberta T2P 3S8 Canada MATERIAL CONTRACTS The Corporation is party to three material contracts that were entered into outside of the ordinary course of business: (i) the Investor's Rights Agreement; (ii) the Debenture and certain amendments thereto, each of which is described in the material change report of the Corporation dated March 21, 2003 which is incorporated by reference herein; and (iii) the Waiver. This material change report is available at www.sedar.com. ADDITIONAL INFORMATION Additional information can be found on Sedar at www.sedar.com. Additional information, including directors' and officers' remuneration and indebtedness, principal holders of Points International's securities, options to purchase securities and interests of insiders in material transactions, if applicable, is contained in the Corporation's information circular for its most recent annual meeting of shareholders. Additional information can also be found in the Corporation's most recent MD&A, dated March 8, 2005. Page 22 of 22

Exhibit 99.2 (POINTS INTERNATIONAL LTD LOGO) POINTS INTERNATIONAL LTD. www.points.com ANNUAL INFORMATION FORM April 22, 2004 Information presented herein is current as of December 31, 2003, unless otherwise indicated. All dollar amounts are in Canadian dollars unless otherwise indicated.

TABLE OF CONTENTS POINTS INTERNATIONAL LTD................................................... 1 INTRODUCTION............................................................... 1 SUBSIDIARIES............................................................... 1 GENERAL DEVELOPMENT OF THE BUSINESS........................................ 2 THREE-YEAR HISTORY...................................................... 2 SIGNIFICANT ACQUISITIONS AND SIGNIFICANT DISPOSITIONS................... 3 TRENDS.................................................................. 3 DESCRIPTION OF THE BUSINESS................................................ 3 CORE BUSINESS - POINTS SOLUTIONS........................................ 3 COMPETITIVE CONDITIONS.................................................. 4 STATUS OF NEW PRODUCTS.................................................. 5 OTHER MATTERS........................................................... 5 FINANCIAL INFORMATION...................................................... 6 MANAGEMENT DISCUSSION & ANALYSIS........................................ 6 ANNUAL INFORMATION...................................................... 6 DIVIDENDS............................................................... 6 RISKS AND UNCERTAINTIES.................................................... 6 HIGH DEPENDENCE ON KEY CUSTOMERS........................................ 7 GROWTH-RELATED RISKS.................................................... 7 DEPENDENCE UPON KEY PERSONNEL........................................... 7 LIMITED FINANCIAL RESOURCES............................................. 7 IMPEDIMENTS TO MATERIAL TRANSACTIONS.................................... 8 LIABILITIES OF POINTS................................................... 8 CONFLICTS OF INTEREST................................................... 8 LIMITED OPERATING HISTORY............................................... 9 THE GROWTH AND DEVELOPMENT OF THE INTERNET.............................. 9 LIMITED CUSTOMERS....................................................... 9 REVENUES................................................................ 9 FINANCIAL INFORMATION OF MINORITY HOLDINGS.............................. 9 MARKET FOR SECURITIES...................................................... 10 DIRECTORS AND OFFICERS..................................................... 10 NAME, ADDRESS AND OCCUPATION OF DIRECTORS............................... 10 CURRENT OFFICERS OF THE CORPORATION..................................... 11 SECURITY HOLDINGS....................................................... 12 BOARD COMMITTEES........................................................ 12 CORPORATE CEASE TRADE ORDERS OR BANKRUPTCIES............................ 13 ADDITIONAL INFORMATION..................................................... 13

INTRODUCTION Points International Ltd. (herein referred to as "Points" or the "Corporation") is a corporation existing under the Business Corporations Act (Ontario). The address of the principal office of the Corporation is 300 - 134 Peter Street, Toronto, Ontario M5V 2H2. The Corporation was initially incorporated under the Business Corporations Act (Alberta) on January 5, 1999 under the name Sportek Systems Inc. Pursuant to Certificates of Amendment dated February 2, 1999 and April 16, 1999, respectively, the Corporation changed its name to Sports Technologies Group Inc. ("STGI") and amended its articles to remove its private company restrictions. STGI owned no significant assets other than cash and did not conduct operations or business of any kind except for identifying and evaluating potential major transactions. This process culminated on February 1, 2000, when Exclamation Inc. (which became a wholly-owned subsidiary of the Corporation) completed a reverse take-over of STGI. By way of Articles of Amendment dated February 10, 2000, STGI's name was changed to Exclamation International Incorporated. The Corporation was then continued from the Business Corporations Act (Alberta) to the Business Corporations Act (Ontario) on February 17, 2000. The Articles of Continuance were amended on December 20, 2001, June 27, 2002 and April 10, 2003 to, respectively, add a new series of preferred shares designated the "Series One Preferred Share", to change the Corporation's name to Points International Ltd, and add two new series of preferred shares designated the "Series Two Preferred Share" and "Series Three Preferred Share". SUBSIDIARIES At December 31, 2003, the Corporation had the following subsidiaries: (FLOW CHART) Note: (1) The Corporation does not own 100% of Points.com Inc. on a fully-diluted basis due to certain outstanding options and warrants. See "General Development of the Business - Three Year History" below.

GENERAL DEVELOPMENT OF THE BUSINESS THREE-YEAR HISTORY Until November 2001, the Corporation, through its subsidiary Exclamation Inc., operated as a holding company of Internet-based businesses. One such business, Points.com Inc., an indirect subsidiary of the Corporation, was incorporated in June 1999 for the purpose of developing a portfolio of technology solutions for the loyalty program industry referred to as the Points Solutions. On November 5, 2001, the Corporation's board of directors adopted a restructuring plan (hereafter referred to as the "Restructuring Plan"), pursuant to which, on February 8, 2002, the Corporation acquired the 5% of the issued shares of Points.com Inc. not previously indirectly held by the Corporation. As a result, the Corporation and its affiliates own directly and indirectly 100% of the outstanding shares of Points.com Inc. However, the Restructuring Plan did not result in the Corporation acquiring all of the shares of Points.com Inc. on a fully diluted basis. Points.com Inc. had previously issued to certain loyalty program partners "partner" warrants, and rights to acquire warrants, which are exercisable to acquire common shares of Points.com Inc. In addition, Points.com Inc. had previously issued options to acquire its common shares. Holders of the options to acquire common shares of Points.com Inc. have been granted the right to put those shares to the Corporation for common shares ("Common Shares") of the Corporation. The Corporation is now focused solely on the business of Points.com Inc. In connection with the Restructuring Plan, the Corporation wound down or divested most of its remaining interests in other companies and minority holdings. The Corporation continues to hold a 12% (fully diluted) interest in ThinApse Corporation ("ThinApse"), a Vancouver-based technology company. The Corporation intends to dispose of its interest in ThinApse as soon as commercially practicable. On April 11, 2003, InterActiveCorp ("IAC"), through a wholly-owned affiliate, made a $15.1 million strategic investment in Points (the "IAC Investment"). Under the IAC Investment, Points issued one convertible preferred share (the "Series Two Preferred Share") and Common Share purchase warrants (the "Warrants") for aggregate cash consideration of $12.4 million and $2.7 million, respectively. As at the date hereof, the Series Two Preferred Share is convertible, for no additional consideration, into up to 21,868,750 Common Shares of Points, subject to anti-dilution adjustment. The Warrants are exercisable over three years to acquire up to 55% of the Common Shares of Points (calculated on an adjusted fully diluted basis) less the number of Common Shares issued or issuable on conversion of the Series Two Preferred Share. Under an investor rights agreement entered into on the closing of the IAC Investment, IAC and its affiliates have various rights, including prospectus qualification rights, pre-emptive rights in connection with further issuances of shares, matching rights for change of control transactions, approval rights over certain material transactions and rights to board and board committee representation. Page 2 of 14

SIGNIFICANT ACQUISITIONS AND SIGNIFICANT DISPOSITIONS The Corporation did not make any significant acquisitions or dispositions in its most recently completed financial year. TRENDS A discussion of the trends, commitments, events and uncertainties that are both presently known to management and reasonably expected to have a material effect on the issuer's business, financial condition or results of operations are discussed in the Management's Discussion and Analysis dated April 22, 2004 which is incorporated herein by reference. DESCRIPTION OF THE BUSINESS The Corporation had only one operating segment, Points.com Inc., in each of 2003 and 2002. CORE BUSINESS - POINTS SOLUTIONS Points has developed a proprietary technology platform that allows it to offer a portfolio of solutions, referred to as the Points Solutions, to the loyalty program industry. The Points platform was designed to create value for consumers and loyalty programs alike. The Points Solutions are comprised of the Points Exchange and a suite of Private Branded Solutions available to loyalty program operators. The Points Exchange In April 2001, Points launched its cornerstone product, the proprietary Points Exchange. The Points Exchange is an online service allowing consumers who are members of participating loyalty programs to exchange their loyalty program points and/ or miles between the participating loyalty programs. The Points Exchange also serves as a central resource to help individuals track their account balances with a number of their major loyalty programs. Management believes that the Points Exchange is currently the only independent loyalty points exchange of its kind. As at December 31, 2003, the Points Exchange had attracted 35 loyalty program participants (39 as at the date hereof), including the loyalty programs of leading airlines, hotels, online businesses, retail businesses and gift certificate programs. Private Branded Solutions In addition to the Points Exchange, Points offers a portfolio of Private Branded Solutions to loyalty programs. This suite of technologies includes: POINTSpurchase and POINTSgift - facilitates the online sale and gift of miles, points and other loyalty program currencies. POINTScorporate - facilitates the sale of loyalty program currencies to corporate customers. Page 3 of 14

POINTStransfer - facilitates the amalgamation or transfer of loyalty program currencies among multiple accounts. POINTSintegrate - functions as a common platform to process transactions between third-party loyalty programs, to simplify and automate a complex and resource-intensive process with a single integration. POINTSelite - facilitates the online sale of tier status to members of loyalty programs. POINTScustom - custom applications developed for select large loyalty program partners. COMPETITIVE CONDITIONS Several indirect competitors are currently in the market with limited product offerings. Other internet sites that offer financial and account aggregation and management (e.g., MileageManager) are potential competitors. These indirect and potential competitors currently offer a product similar to the Corporation's pointsfolio(TM), but do not offer an exchange function. Management believes that none of the competitors is actively partnering with loyalty programs to independently provide a solution similar to the Points Exchange service. Rather, these indirect competitors are only able to retrieve and display member account information. However it is possible that one or more of the indirect or potential competitors could, in the future, compete directly with the Points Exchange. The Corporation must compete with a wide range of companies that seek to provide private branded technology services, from small companies to large companies. Many existing and potential competitors do or could have greater technical or financial resources than the Corporation. The financial performance of the Corporation may be adversely affected by such competition. In particular, no assurances can be given that additional direct competitors to the Corporation may not be formed or the Corporation may not lose some or all of its arrangements with its loyalty program partners, including its key loyalty program partners, decreasing its ability to be competitive and operate as a viable business. Companies such as IBM Ltd. and Sabre Inc. ("Sabre") (a leading provider of technology for the travel industry) are potential competitors for Points' services. Sabre in particular has greater resources and extensive relationships with airlines, although a significant investment in time and resources would be required to develop offerings similar to those offered by Points. Points has established mutually beneficial relationships with potential competitors. During April 2002, Points and Sabre entered into a formal agreement that has resulted in the Points Solutions being marketed to loyalty programs internationally by Sabre. Sabre focuses on international markets, working in complement with Points' business development team, which focuses on North American markets, through Points.com Inc. and Points International (US) Ltd., and on international markets through Points International (UK) Limited. With operations in 45 countries, Sabre's marketing network has global reach and established relationships with major loyalty programs. Any competition, as described above, could have a material adverse impact on Points' business, operations and prospects. Page 4 of 14

STATUS OF NEW PRODUCTS During 2003, Points developed the POINTSelite product, to facilitate the online sale of elite level memberships for loyalty programs. For more detail on the Points Solutions see "Core Business - Points Solutions - Private Branded Solutions" above. OTHER MATTERS Raw Materials, Component Parts and Finished Products Predominantly all of Points' business is conducted electronically. Accordingly, the sources, pricing and availability of raw materials and component parts for the Corporation are not known to be subject to any material constraints. Intangible Property Points holds the rights to the Points.com and Points.net domain names and has several trademark applications in process. On December 16, 2003, Points was awarded the registration of the trade-mark POINTS.COM and design in the United States and has an application pending in Canada for the trade-mark POINTS.COM. On July 5, 2001, MyPoints.com, Inc., ("MyPoints") (a wholly owned subsidiary of United New Ventures and part of the UAL Corporation family of companies) filed a Statement of Opposition in Canada to Points' application for the trade-mark POINTS.COM. Points filed a Counterstatement To Opposition on October 26, 2001. On May 23, 2002, MyPoints filed further evidence in the matter. On March 27, 2003, Points filed Rule 42 Evidence in the matter and expects cross-examinations to be concluded by June 2004. Management expects the POINTS.COM trade-mark will be found to be registrable in Canada. The proprietary technology used in the business is owned by Points, and Points has made two applications to register U.S. patents, one relating to the Points Exchange and the other in respect of the POINTScorporate solution. As part of the Points Exchange, Points is regularly granted the right to use its partners' trade-marks in connection with the joint branding of its website and provision of the exchange services to members. As Points operates in a technology-based environment, its intellectual property and its access to the property of its loyalty program partners are critical to the Corporation's ongoing business. Seasonality Over Points' course of operation, no significant seasonal trends have become evident to management. Contracts The Corporation anticipates the renegotiation of contracts to occur in the normal course of business. In the event that such contracts are not renegotiated on terms reasonably satisfactory to the Corporation, the Corporation's business could be materially adversely affected. However, the Page 5 of 14

Corporation's management does not anticipate that material contracts will not be successfully renegotiated. Environmental Due to the nature of Points' business, management of the Corporation does not expect the financial and operational effects of environmental protection requirements on the capital expenditures, earnings and competitive position of the Corporation to be material to the Corporation. Employees As at December 31, 2003, Points had 64 employees. Foreign Operations Due to the nature of Points' business, management of the Corporation does not believe that there are any particular risks associated with the foreign operations of the Corporation that differ materially from the risks associated with the domestic operations of the Corporation, although the Corporation believes that it is possible that it may face competition within foreign markets. FINANCIAL INFORMATION MANAGEMENT DISCUSSION & ANALYSIS A copy of Management's Discussion and Analysis dated April 22, 2004 (the "Management's Discussion and Analysis") has been filed with Canadian securities regulators, is available on www.sedar.com and is incorporated herein by reference. ANNUAL INFORMATION For information on the Corporation's selected consolidated financial information, please refer to the Management's Discussion and Analysis which is incorporated herein by reference. DIVIDENDS The Corporation has not declared or paid any dividends to its shareholders and may not do so without the prior approval of the holder of the Series Two Preferred Share in the capital of the Corporation. The Corporation will retain earnings for general corporate purposes to promote future growth. As such, the board of directors does not anticipate paying any dividends for the foreseeable future. Points' board of directors will review this policy from time to time, having regard to the Corporation's financial condition, financing requirements and other relevant factors. RISKS AND UNCERTAINTIES Investing in early-stage Internet-based businesses has a high degree of business risk. In addition to the other information contained in this AIF, investors should carefully consider the risk factors set out below, review the discussion under "Description of the Business" above and review the Page 6 of 14

Management Discussion and Analysis prior to making an investment decision with respect to the Corporation. HIGH DEPENDENCE ON KEY CUSTOMERS For the year ended December 31, 2003, two key customers represented approximately 61% (2002 - 77%) of the Corporation's gross revenues and two key customers represented approximately 58% (2002 - 91%) of the Corporation's deposits. Management expects the economic dependence on key customers to continue on a downward trend. However, the inability of the Corporation to maintain and/or renew these relationships, or a material change in a key customer's business, could have a material adverse impact on the Corporation's business, operations and prospects. GROWTH-RELATED RISKS The Corporation may be subject to growth-related risks, including capacity constraints and pressure on its internal systems and controls. The Corporation's ability to manage its growth effectively will require it to continue to implement and improve its operational and financial systems and to expand, train and manage its employee base. Any inability of the Corporation to deal with this growth could have a material adverse impact on its business, operations and prospects. DEPENDENCE UPON KEY PERSONNEL The success of the Corporation is substantially dependent on the services of key members of the management team. Despite the fact that the Corporation maintains "key man" insurance on certain of its officers, the success of the Corporation is dependent upon such key personnel and loss of such management or personnel could adversely affect the Corporation's business, operations and prospects. The Points Solutions are a proprietary technology. As a result, the Corporation is also dependent on its ability to retain talented and highly skilled information technology professionals to maintain, build and operate the technology infrastructure. The loss of key employees could adversely affect the Corporation's business, operations and prospects. LIMITED FINANCIAL RESOURCES The financial resources of Points are limited, although improved in 2003 as a result of the IAC Investment, pursuant to which IAC invested $15.1 million in the Corporation. For 2003, Points reported ($1,426,454) of cash flows used in operating activities, deposits held of $10,455,646 and working capital of $10,461,182. If cash flow provided by operations does not increase the Corporation's liquid and unencumbered cash position, it could impact Points' ability to pay its liabilities and/or exploit its business opportunities and fund growth. Consequently, the Corporation could in future be dependent upon its ability to obtain additional financing either by debt, equity or other means. Page 7 of 14

The ability of the Corporation to arrange such additional financing in the future will depend in part upon the prevailing capital market conditions as well as the business performance of the Corporation. There can be no assurance that the Corporation will be successful in its efforts to arrange additional financing on terms satisfactory to the Corporation. The nature of the relationship with IAC (including the ability of IAC to acquire control of the Corporation, to exercise pre-emptive rights and the right to match third party offers for the Corporation) may result in difficulties for the Corporation in finding new third parties willing to make debt or equity investments in the Corporation. If additional financing is raised by the issuance of shares from the treasury of the Corporation, control of the Corporation may change and/or shareholders may suffer additional dilution. If additional financing is raised by the issuance of debt, the Corporation will be more highly leveraged going forward and the repayment of or interest payments upon such debt could have a negative effect on the cash flow of the Corporation. If adequate financing is not available, or is not available on acceptable terms, the Corporation may not be able to take advantage of opportunities, invest in technological development and enhancements, or otherwise respond to competitive pressures and remain in business. In addition, the failure to secure additional financing could result in the failure of the Corporation to meet its liabilities as they become due, which would have a material adverse effect on the Corporation. IMPEDIMENTS TO MATERIAL TRANSACTIONS Under the investor's rights agreement entered into by the Corporation and IAC in connection with the IAC Investment, in the event that there is an offer to effect any transaction that could result in any person (or group of persons) other than IAC acquiring (i) assets of Points and/or its subsidiaries that are, individually or in the aggregate, material to Points or any of its subsidiaries, or (ii) 20% or more of the equity of, or voting rights in respect of, Points or any of its subsidiaries, IAC is entitled to notice of such transaction and the right to propose a matching transaction. The existence of this matching right in favour of IAC will significantly reduce the probability that a third party would propose a transaction in the nature described above and that could otherwise have been beneficial to the Corporation and its shareholders. LIABILITIES OF POINTS As at December 31, 2003, Points had outstanding consolidated current liabilities of $11,643,245 and consolidated total liabilities of $32,704,095, including the 11% $6,000,000 senior secured convertible debenture (the "Debenture") issued to CIBC Capital Partners, a division of Canadian Imperial Bank of Commerce on March 15, 2001 (plus accrued interest thereon), the Series One Preferred Share and the Series Two Preferred share, all of which are discussed in greater detail in the Management's Discussion and Analysis. There is no assurance that the Corporation will be able to repay such amounts when and if they are due, as any such repayment will be dependent upon generating sufficient cash reserves and may also be dependent upon securing additional financing. CONFLICTS OF INTEREST There are potential conflicts of interest to which the directors and officers will be subject with respect to the operations of the Corporation. As a result of the Corporation's efforts to engage Page 8 of 14

people who have experience in the Corporation's area of business, some of the directors and officers have been and will continue to be engaged in other businesses. Situations may arise where the directors and officers will be in direct competition or have an interest in parties that conflict with the Corporation. Any such conflicts will be subject to the governance practices of the board of directors and governed by the law applicable to directors' and officers' conflict of interest. LIMITED OPERATING HISTORY Points has a limited financial history and the Corporation's future success is reliant almost exclusively on its ability to develop new Private Branded Solutions contracts, such as its current POINTSpurchase agreements with partners, and to develop new customers and transactions for the Points Exchange. There can be no assurance that the Corporation will be successful in developing into a profitable corporation. THE GROWTH AND DEVELOPMENT OF THE INTERNET The development of the internet, the level of usage of the internet and the introduction of new products and services by Points or its competitors may materially affect the Corporation's business, operations and prospects. LIMITED CUSTOMERS There can be no assurance that Points will be successful in marketing its products to potential retail customers and loyalty program operating partners. Competitors of the Corporation may have long-standing relationships with their customers. As a result, it may be difficult for the Corporation to penetrate certain markets to gain new customers or loyalty program partners. In addition, it is possible that the Corporation will not be able to maintain its existing relationships with retail customers and loyalty program partners. REVENUES Operating revenues are derived from contracts for Points Solutions. This includes revenue from private branded technology services business, in the form of development fees, maintenance fees and commissions, and revenue from Points Exchange in the form of fees and commissions. Revenue growth is dependent on attracting new partners and customers for the Corporation's business, and in securing continued contracts for its Private Branded Solutions business. Competition or other business factors may have a material adverse effect on the Corporation's business. FINANCIAL INFORMATION OF MINORITY HOLDINGS Financial information for ThinApse contained herein or incorporated by reference has been obtained from, and is based on, internal financial information provided by ThinApse. No separate review or audit process on this information has been undertaken by the Corporation or the Corporation's auditors. Therefore, the financial information with respect to such minority positions may, if audited by the Corporation, vary materially from the information contained herein or incorporated by reference. Page 9 of 14

MARKET FOR SECURITIES Points' Common Shares are listed on the Toronto Stock Exchange ("TSX") under the symbol "PTS". DIRECTORS AND OFFICERS NAME, ADDRESS AND OCCUPATION OF DIRECTORS The following table sets forth the name, municipalities of residence, term as director and current and five-year historic occupation of the directors of the Corporation. Each director is elected to hold office until the Corporation's next annual shareholders' meeting or until his successor is elected or appointed. Points' next annual and special meeting is expected to be held on June 24, 2004. PRINCIPAL OCCUPATION WITHIN THE PRECEDING FIVE YEARS NAME OFFICE TERM AS DIRECTOR (CURRENT AND FOR PAST FIVE YEARS UNLESS OTHERWISE NOTED) - ------------------------ ----------------------- ------------------- --------------------------------------------------------- Douglas A. Carty(1) Chairman of the Board Feb. 2002 - present Chief Financial Officer, Laidlaw International Ltd. Glen Ellyn, Illinois (Jan. 2003 - present) Chief Financial Officer, Atlas Air Worldwide Holdings Inc. (Jul. 2001 - Dec. 2002) Chief Financial Officer, Canadian Airlines (Jul. 1996 - Jul. 2000) Marc B. Lavine Vice-Chairman of the Feb. 2000 - present Chief Executive Officer, President and Director of Paris, France Board Chrysalis Capital Corporation (Oct. 1, 2003 - present) Chief Executive Officer, Exclamation International Incorporated (Jun. 1999 - Feb. 2002) President, Exclamation International Incorporated (Dec. 1997 - Jun. 1999) T. Robert MacLean(3) Chief Executive Officer Feb. 2002 - present Chief Executive Officer, Points International Ltd. Toronto, Ontario and Director (Feb. 2002 - present) Chief Executive Officer, Points.com Inc. (Feb. 2000 - present) and President, Points.com Inc. (Feb. 2000 - Feb. 2002) Vice-President, other positions, Canadian Airlines (1988 - 2000) Christopher J.D. Barnard President and Director Feb. 2000 - present President, Points International Ltd. (Feb. 2000 - Toronto, Ontario present) and Points.com Inc. (Feb. 2002 - present) Vice-President, Exclamation International Incorporated (Jul. 1998 - Feb. 2000) Rowland W. Fleming(1, 2) Director Feb. 2002 - present Director for a number of public and private companies Mississauga, Ontario (Apr. 1999 - present) President and Chief Executive Officer, The Toronto Stock Exchange (Jan. 1995 - Apr. 1999) John W. Thompson(1, 2) Director Feb. 2002 - present Managing Director, Kensington Capital Partners Limited Toronto, Ontario (Aug. 2000 - Nov 2003) Executive Vice-President, Loblaw Companies Limited (Feb. 1978 - Apr. 1999) J. Grant McCutcheon(1) Director Feb. 2000 - present Director, Lawrence & Company Incorporated (Dec. 1995 - Toronto, Ontario present) Jim W. Kranias Director Feb. 2000 - present Entrepreneur and Consultant (1996 - present) London, England Page 10 of 14

PRINCIPAL OCCUPATION WITHIN THE PRECEDING FIVE YEARS (CURRENT AND FOR PAST FIVE YEARS NAME OFFICE TERM AS DIRECTOR UNLESS OTHERWISE NOTED) - ---------------------------- -------- --------------------- ---------------------------------------------------------------- Christopher E.M. Payne(2, 4) Director Feb. 2003 - present Managing Director, Financial Services, CIBC World Markets Toronto, Ontario (Jun. 2000 - present) Executive Vice-President, Financial Services, WhatifI.com (Jun. 1999 - Jun. 2000) Executive Vice-President, Financial Services, X. Com (Jan. 1999 - Jun. 1999) Executive Vice-President, Financial Services, BMO Nesbitt Burns Equity Partners (Nov. 1996 - Jan. 1999) Eric A. Korman(2, 5) Director June 2003 - present Vice President, Mergers & Acquisitions, InterActiveCorp, New York, New York an interactive commerce company (Nov. 2003 to Present); other positions at InterActiveCorp, (Sept. 2001 - Nov. 2003); Principal, and head of business development for ePartners Venture Capital, a $650 million venture fund (Jan. 2000 - Apr. 2001); Senior Analyst, Corporate Business Development for The Coca-Cola Co., a consumer products company (Aug. 1997 - Jan. 2000) Erik C. Blachford(5) Director June 2003 - June 2004 Chief Executive Officer of Expedia Inc. (Apr. 2003 - present) Seattle, Washington President of Expedia Inc., North America (Mar. 2002 - Apr. 2003) and other positions (1995 - Mar. 2002)) Notes: (1) Audit Committee (2) Human Resources Committee (3) Mr. MacLean serves as an observer for both the Audit and Human Resources Committees. (4) Nominee of CIBC Capital Partners, holder of the Debenture and the Series One Preferred Share. (5) Nominee of Points Investments, Inc. , a corporation controlled by InterActiveCorp, holder of the Series Two Preferred Share. CURRENT OFFICERS OF THE CORPORATION The following table sets forth the name, municipalities of residence, office, term as officer and current and five-year historic occupation of the officers of the Corporation. PRINCIPAL OCCUPATION WITHIN THE PRECEDING FIVE YEARS (CURRENT AND FOR PAST FIVE YEARS NAME OFFICE TERM AS OFFICER UNLESS OTHERWISE NOTED) - ------------------------ --------------------------- ------------------- ----------------------------------------------------- T. Robert MacLean Chief Executive Officer and Feb. 2002 - present Chief Executive Officer, Points (Feb. 2002 - present) Toronto, Ontario Director Chief Executive Officer, Points.com Inc. (Feb. 2000 - present) and President, Points.com Inc. (Feb. 2000 - Feb. 2002) Vice-President, other positions, Canadian Airlines (1988 - 2000) Christopher J.D. Barnard President and Director Feb. 2000 - present President, Points International Ltd. (Feb. 2000 - Toronto, Ontario present) and Points.com Inc. (Feb. 2002 - present) Vice-President, Exclamation International Incorporated (Jul. 1998 - Feb. 2000) Stephen M. Yuzpe Chief Financial Officer and Feb. 2000 - present Catalyst, Exclamation International Incorporated Toronto, Ontario Corporate Secretary (Feb. 1999 - Feb. 2000) Vice-President, Cougar Global Investments (Nov. 1995 - Feb. 1999) Page 11 of 14

PRINCIPAL OCCUPATION WITHIN THE PRECEDING FIVE YEARS (CURRENT AND FOR PAST FIVE YEARS NAME OFFICE TERM AS OFFICER UNLESS OTHERWISE NOTED) - ------------------------- --------------------------- ------------------- ---------------------------------------------------- William A. Thompson Senior Vice President, Sep. 2002 - present Senior Vice-President, Partners, Points Flower Mound, Texas Partners International Ltd. (Feb. 2003 - present) Vice-President, Partner Relationships, other positions, Points International Ltd. and Points.com Inc. (Aug. 2000 - Feb. 2003) Director and General Manager, Canadian Airlines (Jun. 1996 - Aug. 2000) Darlene J. Higbee Clarkin Vice President and Chief Feb. 2002 - present Vice-President and Chief Technology Officer, other Delta, British Columbia Technology Officer positions, Points.com Inc. (Jul. 2000 - present) IT Manager, Canadian Airlines (1990 - 2000) Jerry J. Philip Vice President, Business Feb. 2002 - present Vice-President, Business Development, Points.com Oakville, Ontario Development Inc. (Mar. 2000 - present) Senior Manager, other positions, Canadian Airlines (1995 - Mar. 2000) Stephen P. Ogden Vice President, Product Feb. 2002 - present Vice-President, Product Development, other Toronto, Ontario Development positions, Points.com Inc. (Mar. 2000 - present) Marketing Manager, Intrawest Corporation (Dec. 1999 - Mar. 2000) Marketing and Communication Manager, Canadian Airlines (1995 - Dec. 1999) Christine J. Vandaele Vice President, Consumer Feb. 2002 - present Vice-President, Consumer Marketing (Feb. 2003 - Toronto, Ontario Marketing present) Vice-President, Finance and Controller, other positions, Points.com Inc. (Sep. 2000 Feb. 2003) Controller, Sales, North America and other positions, Canadian Airlines (1996 - Aug. 2000) Morley S. Ivers Vice President, Business Apr. 2002 - present Director, Business Strategy, Points.com Inc. (Apr. Toronto, Ontario Strategy 2001 - Apr. 2002) President, College Home Safety Inc. (1999 - 2001) SECURITY HOLDINGS As of the date of this AIF, as a group, the directors and officers of Points beneficially owned, directly or indirectly, or exercised control or direction over, 9,000,693 Common Shares representing approximately14.4% of the issued and outstanding Common Shares. BOARD COMMITTEES Pursuant to the Business Corporations Act (Ontario), the Corporation is required to have an audit committee comprised of not fewer than three directors, the majority of whom are not officers or employees of the Corporation or any of its affiliates. The Audit Committee is comprised of four board members: Messrs. Carty (Chairman of the Committee), Fleming, McCutcheon and Thompson. No members of the Audit Committee are officers or employees of the Corporation. The Human Resources Committee is comprised of four members of the board: Messrs. Fleming (Chairman of the Committee), Korman, Payne and Thompson. The Human Resources Committee reviews the performance of the executive officers, the performance of the Corporation (including its separate divisions and subsidiaries) and fixes the compensation package for executive officers. In connection with the IAC Investment, the number of members of each of these board committees will be limited to four, with one member of each committee being a director elected by the holder of the Series Two Preferred Share. The Human Resource Committee was Page 12 of 14

reconstituted during 2003 to reflect these requirements. IAC, as holder of the Series Two Preferred Share, has waived its right to elect a member to the Audit Committee, but can, at any time, revoke this waiver and be entitled to elect a member to the Audit Committee. CORPORATE CEASE TRADE ORDERS OR BANKRUPTCIES In October of 1996, J. Grant McCutcheon joined the board of directors of Innovadent Technologies Ltd. ("Innovadent") as the nominee of Innovadent's largest shareholder and secured lender. Innovadent made a proposal to creditors in May of 1998, which was accepted. In April 1999, the Ontario Securities Commission issued a cease trade order against Innovadent for failure to file financial statements and in August 1999, Innovadent filed a notice of intent to make a proposal to creditors. Mr. McCutcheon resigned from the board of Innovadent on August 31, 1999. ADDITIONAL INFORMATION Upon request to the Corporate Secretary of the Corporation: Mr. Stephen Yuzpe 300 - 134 Peter Street Toronto, Ontario M5V 2H2(1) Tel: 416.596.6370 Fax: 416.595.6444 Points will provide to any person or company when the securities of Points are in the course of a distribution under a preliminary short form prospectus or a short form prospectus: (a) one copy of the AIF of Points, together with one copy of any document, or the pertinent pages of any document, incorporated by reference in the AIF; (b) one copy of the comparative financial statements of Points for its most recently completed financial year for which financial statements have been filed together with the accompanying report of the auditor and one copy of the most recent interim financial statements of Points that have been filed, if any, for any period after the end of its most recent completed financial year; (c) one copy of the information circular of Points in respect of its most recent annual meeting of shareholders that involved the election of directors or one copy of any annual filing prepared instead of that information circular, as appropriate; and (d) one copy of any other documents that are incorporated by reference into the preliminary short form prospectus or the short form prospectus and are not required to be provided under paragraphs (a), (b) or (c) above; or - ---------- (1) On May 1, 2004, the Corporation is moving its principle office to 800 - 179 John Street, Toronto, ON M5T 1X4 Page 13 of 14

at any other time, one copy of any documents referred to in paragraphs (a), (b) and (c) above, provided that Points may require the payment of a reasonable charge if the request is made by a person or company that is not a security holder of the Corporation. Additional information, including directors' and officers' remuneration and indebtedness, principal holders of Points' securities, options to purchase securities and interests of insiders in material transactions, if applicable, are contained in Points' information circular for its most recent annual meeting of shareholders. Additional financial information is provided in Points' comparative financial statements for its most recently completed financial year. Page 14 of 14

Exhibit 99.3 POINTS INTERNATIONAL LTD. (GRAPHIC) 2004 ANNUAL REPORT www.points.com

(POINTS.COM LOGO) GET MORE REWARDS, FASTER(TM) (GRAPHIC) Points International Ltd. is the owner and operator of Points.com, the world's leading reward program management portal. At Points.com consumers can earn, buy, and swap miles and points between reward programs so that they can Get More Rewards, Faster(TM). Points.com has attracted over 45 of the world's leading reward programs including American Airlines AAdvantage(R) program, Delta SkyMiles(R), eBay Anything Points, Membership Rewards(R) program by American Express, Cendant's TripRewards(R), Priority Club(R) Rewards, Asia Miles(R), and S&H greenpoints.

MORE ABOUT POINTS INTERNATIONAL LTD. AND POINTS SOLUTIONS Core Business - Points Solutions Points International Ltd. ("Points International or the "Corporation") has developed a proprietary technology platform that allows it to offer a portfolio of solutions, referred to as the Points Solutions, to the loyalty program industry. The technology platform was designed to create value for consumers and loyalty programs alike. The Points Solutions are comprised of Points.com (referred to as the Points Exchange in past disclosures) and a suite of Points.com Business Solutions (referred to as the Private Branded Solutions in past disclosures) available to loyalty program operators. The Corporation's business is principally conducted over the Internet (other than functions such as customer support), allowing its two primary categories of customers (loyalty program operators and loyalty program consumers) to be virtually anywhere in the world. Points Solutions accounted for 97% ($7.56 million) of the Corporation's revenues. The remaining 3% is attributed to interest income. Points.com The Corporation's cornerstone product is the proprietary Points.com Web site. Points.com is an online service allowing consumers who are members of participating loyalty programs to swap their loyalty program points and/or miles between other participating loyalty programs. As at December 31, 2004, Points.com had attracted 45 loyalty program participants (as at the date hereof, one additional partner is under contract but not yet launched and three partners have been launched), including the loyalty programs of leading airlines, hotels, online and retail businesses, and gift certificate programs. For more information on the development of new technology for Points.com, see page 2 "General Development of the Business - Three-Year History" of the Annual Information Form ("AIF"). Points.com Business Solutions At December 31, 2004, the Corporation had 55 Points.com Business Solutions products in the marketplace. This suite of technologies includes: BUY and GIFT - facilitates the online sale and gift of miles, points and other loyalty program currencies. CORPORATE - facilitates the sale of loyalty program currencies to corporate customers. TRANSFER - facilitates the amalgamation or transfer of loyalty program currencies among multiple accounts. INTEGRATE - functions as a common platform to process transactions between third-party loyalty programs, to simplify and automate a complex and resource-intensive process with a single integration. ELITE - facilitates the online sale of tier status to members of loyalty programs. SYSTEMS DESIGN - custom applications developed for select large loyalty program partners. See page 6 "Status of New Products" of the AIF for an example of the redeemAAmiles program, an application built for a loyalty partner.

(GRAPHIC) TABLE OF CONTENTS MESSAGE FROM THE CHAIRMAN 5 MESSAGE FROM THE CHIEF EXECUTIVE OFFICER 6 BUSINESS HIGHLIGHTS 8 MANAGEMENT TEAM 11 MANAGEMENT'S DISCUSSION AND ANALYSIS 12 MANAGEMENT'S RESPONSIBILITY FOR FINANCIAL REPORTING 40 FINANCIAL STATEMENT AND NOTES 41 AUDITOR'S REPORT 42 CORPORATE INFORMATION 66

MESSAGE FROM THE CHAIRMAN To Our Shareholders: I am pleased to report on the progress of our company as we emerge from a pivotal year in our history. It was a year in which we achieved several key milestones on the journey toward sustained success in our segment of the loyalty industry. The sector as a whole continues to proliferate. In an article dated May 2, 2002, The Economist estimated that one in three American adults and over 100 million people worldwide participate in frequent-flyer programs. According to a January 2005 update article published in The Economist, almost 14 trillion frequent-flyer miles had been accumulated worldwide as of the end of 2004 and the outstanding balances were still growing by almost 20% annually over the last decade. Calculations by the publication suggest that the global stock of frequent-flyer miles is now worth over US$700 billion, more than all the dollar notes and coins in circulation around the globe. Research conducted by our company indicates that almost 70% of frequent-flyer program members belong to five or more programs and that, on a global basis, consumers today are served by close to 100 frequent-flyer and guest plans, hundreds of credit-card-based points programs, and thousands of retailers' loyalty programs - not to mention many new options such as financial services programs. Capitalizing on the burgeoning opportunity created by such an expanding array of loyalty programs, Points International Ltd. has seen a significant increase in our total number of partnerships in recent years - from 16 in 2001 to 45 and growing as of the end of 2004 (four additional partners have been contracted in the first quarter of 2005). Today, we have an extremely broad base of relationships spanning major airlines throughout the world, as well as hotels, online and retail businesses, and gift certificate programs. As documented in our "Business Highlights" section of this report, we had many noteworthy highlights in 2004 regarding our partnerships, including expanding our relationships with British Airways, American Airlines and eBay through their adoption of new Points.com Business Solutions; Frontier Airlines, Hawaiian Airlines, Starbucks, S&H greenpoints, and the Gold Points Reward Network each joining Points.com; and our acquisition of MilePoint, Inc., which also brought new partners on board and significantly strengthened our industry leadership. The steps we took in 2004, and continue in 2005, move us further down the path toward profitability. Driven by our robust partnership growth, we experienced solid year-over-year improvement in our revenues, which rose in 2004 by more than 35% compared to 2003, reaching $7.8 million to set a new standard for our company. Another key milestone we reached in 2004 was our graduation from the TSX Venture Exchange to a listing on the TSX. This is not only symbolic of how we have grown as an organization, but it strengthens our future prospects with a higher profile, a larger pool of potential investors and improved access to capital. As a TSX-listed company, we appreciate how great the need is for all our stakeholders to have confidence that we adhere to only the highest standards of ethical business behavior. In that vein, I wish to assure our shareholders that we are dedicated to a culture of corporate governance. We are proud to have a well-balanced board of directors comprised of proactive individuals who bring to our company a wealth of experience, a broad range of knowledge and skills, and a firm commitment to performing their duties with the utmost of integrity. On behalf of our board of directors, I would like to thank the many people at Points International Ltd. who are responsible for our outstanding achievements in 2004. We are fortunate to possess a great team of talented employees who display tremendous focus and determination on a daily basis. I would also like to thank our customers and partners, without whose support our success would not have been possible, and I want to thank our shareholders as well for their ongoing belief in our company. The year ahead will see many challenges as our management team and all our employees work extremely hard to take Points.com to new heights. As an innovative company fast becoming a leading player in its space, we are pleased to have a strong foundation in place as we look forward to the continued growth of our business in 2005 and beyond. /s/ Douglas Carty - ------------------------------------- Douglas Carty Chairman of the Board 5

MESSAGE FROM THE CHIEF EXECUTIVE OFFICER To Our Shareholders: As the Chairman noted, 2004 was a great year for our business, enabling us to begin this year with solid momentum and a strong sense of optimism. Now that we are well into 2005, I'd like to use this letter to outline our plans for the year, which to a large extent focus on our efforts to significantly enhance Points.com, our consumer Web site. In fact, I am writing this letter at a particularly exciting time for us. Not long after this Annual Report is printed and mailed, we will be launching the new site. This is a critically important initiative that will drive our company's success for years to come. In recent years, we have placed our greatest strategic emphasis on growing our partnership base. We are continuing to strengthen that base in 2005, demonstrated convincingly by our recent announcement that American Express, with its Membership Rewards(R) program, has become our first financial-services partner. This is a very exciting development for our company. While success on the partnership front has certainly given us the underpinning we need to be a powerful player in this industry - and we know we will always need to grow and enhance our partnership pool on an ongoing basis - the time has come for us to focus more forcefully on enabling consumers to take full advantage of the compelling services offered through Points.com. This represents a key evolution for us in 2005, and the Web site functionality improvements are a catalyst for driving that transition. In 2001, we launched our proprietary Points.com Web site. The main objective for this cornerstone product was to provide a unique online service allowing consumers who are members of participating loyalty programs to swap their loyalty program points and/or miles between participating loyalty programs. While our Web site has long been the only tool consumers can utilize to swap miles and points between reward programs, this form of Points.com has until now represented only a small part of our company's opportunity to service consumers' total reward program experience. The new Points.com Web site represents a major step forward in our relationship with both reward program partners and the consumer. With the new site, each consumer will be presented with a personalized view of their reward program universe. As a result, we will be able to help consumers release more value from their favourite programs, so they can Get More Rewards, Faster(TM). This has been accomplished by adding new mile and point management tools, such as methods to purchase and earn more miles or points in their favourite programs. In addition, the system will be driven by the ATG Marketing Enterprise System that uses the consumer's unique program and point balance mix to suggest ways people can earn, buy and swap rewards like never before. In short, we are evolving Points.com into a "reward management portal" that provides an extremely comprehensive and engaging consumer experience. With the Web site's launch, users will immediately notice a new look and feel that reflects a highly consumer-focused approach. Moreover, we will gradually incorporate various functionality elements through upcoming monthly releases well into 2006 that, over time, will enhance the site's capabilities to an even greater extent. It's also important to note that we have aggressive plans in place for the second half of 2005 designed to leverage the changes and drive significant consumer traffic to the new Points.com. We look forward to dramatically increasing consumer awareness of our company. Tightly linked to this, and a vitally important goal for 2005, is the creation of new revenue streams. The new Web site provides us with an opportunity to achieve that - most notably through subscription membership becoming more of a core element of our business model. But to maximize that potential, we must be flawless in our execution, both in terms of the Web site and our associated marketing efforts. 6

I would also like to address one other important strategic thrust for us this year - the continued evolution of our suite of Points.com Business Solutions. This represents a very sizeable opportunity, and to date we have introduced several innovative solutions that are greatly valued by a number of our partners. In 2005, our objective in this area is to drive significant efficiency improvements, in terms of faster development time and lower development costs. In other words, we need to take the evolution of this key stream of business to the next level of maturation. Finally, let me echo Doug's comments about our exceptional team of employees and thank all our people for everything they have done to move this company forward and ensure our ongoing success. Through their efforts, I can confidently assure our shareholders that Points International Ltd. and Points.com are resolutely focused on seizing the exciting opportunities that await us. /s/ Robert MacLean - ---------------------------------------- Robert MacLean Chief Executive Officer 7

BUSINESS HIGHLIGHTS FIRST QUARTER 2005 (Inclusive to March 15, 2005) MEMBERSHIP REWARDS(R) PROGRAM FROM AMERICAN EXPRESS JOINS POINTS.COM On March 4th, 2005, Points International entered into an agreement with American Express Travel Related Services Company Inc. The agreement enables the Membership Rewards program from American Express to participate in the Points.com portal. Additionally, the Membership Rewards program will use Points.com's Business Solutions to offer real-time point transfers for select partners. Public launch is expected during the second quarter of the year. CENDANT JOINS POINTS.COM AND ALSO ADOPTS POINTS.COM BUSINESS SOLUTIONS PRODUCTS The Cendant Hotel Group, a subsidiary of Cendant Corporation, entered into an agreement to join Points.com. The TripRewards(R) program, with its large membership base and its diversified offering, is a significant addition to Points.com. In addition to the consumer offering, TripRewards will also be utilizing a number of Points.com Business Solutions products to enhance the program and its operations. STARBUCKS CARD DUETTO(TM) VISA(R) JOINS POINTS.COM The original partnership that allowed Points.com members to exchange loyalty currencies into Starbucks Stored Value Cards was expanded so that Starbucks members can also exchange Points.com partner currencies into dollars on their Duetto(TM) Card. The Duetto(TM) Card is a multi-functional credit card that combines a re-loadable stored value card with a Visa credit card. Loyalty currencies exchanged into either Starbucks Stored Value Cards or Duetto(TM) Card dollars can now be redeemed at over 4,000 Starbucks retail locations in Canada and the United States for products and merchandise. INTRAWEST TEAMS UP WITH POINTS.COM Points.com members now have the opportunity to exchange points and miles from their favourite programs into gift certificates that can be used at many Intrawest owned and/or operated ski and golf resorts. This agreement also gives Points.com the ability to reach Intrawest's members through resort publications and other communication channels. FOURTH QUARTER 2004 NEXT VERSION OF POINTS.COM CONSUMER SITE ANNOUNCED The new Web site will include broader consumer offerings and present each consumer with a comprehensive personalized view of their entire reward program universe. New management tools, such as Join, Earn and Buy, will help consumers realize more value from their favorite reward programs, to help them Get More Rewards, Faster(TM). These tools will also add additional revenue streams for the Corporation. The system will use the consumer's unique reward program, reward goals and point balance mix to suggest ways to use the Join, Earn, Buy and Swap tools most effectively. DELTA AIR LINES EXPANDS RELATIONSHIP WITH POINTS.COM The Delta Air Lines SkyMiles(R) program has hired Points.com to power the online transfer of miles between SkyMiles program accounts. This Transfer product is the fifth product in the suite of Points Solutions purchased by Delta Air Lines. The relationship highlights the opportunity for Points.com to sell additional products to the MilePoint business solutions partners. VOIPMDU INC. JOINS POINTS.COM The agreement will allow Points.com members to redeem certain points and miles for 'Voice over Internet Protocol' telephone services. Under the agreement, VoIP must enroll a certain number of its customers with Points.com to maintain a limited industry exclusivity. THIRD QUARTER 2004 EXPANSION OF POINTS.COM CONTINUES WITH ADDITION OF HAWAIIANMILES As of September 2004, members of HawaiianMiles, the loyalty program of Hawaiian Airlines, have been able to consolidate their other loyalty currencies into HawaiianMiles or exchange their HawaiianMiles for the currencies of other loyalty programs through Points.com. HawaiianMiles are earned by shopping at various stores, eating at restaurants throughout Hawaii, and flying with Hawaiian Airlines, as well as through the carrier's partners. Some of these include America West and Alaska Airlines, each of which is a Points.com partner. Hawaiian Airlines joining Points.com is another example of the Corporation's ability to sell additional products to MilePoint business solutions partners. 8

BRITISH AIRWAYS CHOOSES POINTS.COM BUSINESS SOLUTIONS British Airways (BA) launched its Buy Points.com Business Solutions in July of 2004. Members of the British Airways Executive Club program in over 190 countries are now buying BA Miles online at www.ba.com, enabling them to reach reward redemption levels faster. SECOND QUARTER 2004 SENIOR MARKETING EXECUTIVES BOLSTER MANAGEMENT TEAM Grad Conn joins as Chief Marketing Officer. Grad's background includes nine years in the CPG industry at Procter & Gamble, ten years running his own direct + interactive agency, and seven years running and angeling venture-funded software companies in the peer-to-peer and social networking spaces, including OpenCola Inc., which was declared by Fortune magazine to be "one of the 25 coolest technology companies of 2001". Prior to joining Points International, Grad was VP and Managing Director at Grey Direct + Interactive. Joining Grad are Mike Glass, Vice President, Product Development and Jason Sikora, Vice President, Marketing. Mike Glass joined Points International in the third quarter. He started his career at Compaq computer, and moved to Microsoft in 1989. While at Microsoft, Mike led the design and development of USB and he was the Software Development Manager for Windows 98. In fact, Mike has been awarded several patents related to OS/2 and Windows operating system design. Jason Sikora joined Points International in the fourth quarter as Vice President, Marketing and is responsible for consumer marketing and growing the business through customer acquisition and activation on Points.com. Jason has over 10 years of international marketing communications experience with proven success in building customer acquisition and retention strategies for companies such as Procter & Gamble, Masterfoods USA & Europe and Amazon.com, among many others. AGREEMENT WITH ACCENT TRAINING TO JOIN POINTS.COM In June 2004, Points.com signed a three-year agreement with ACCENT Training, a company that specializes in online training. The partnership creates new opportunities for My Smart Rewards, ACCENT Training's rewards program. Since September, ACCENT Training has been an official partner, allowing My Smart Rewards members to exchange their My Smart Rewards points for redemption opportunities with Points.com. FRONTIER AIRLINES BECOMES THE FIRST LOW-COST AIRLINE TO JOIN POINTS.COM EarlyReturns(R), the award-winning loyalty program of Frontier Airlines, had its potential value significantly increase following a five-year agreement. EarlyReturns became a tradable loyalty currency on the Points.com Web site as of August 2004. Frontier Airlines is also using Points.com Business Solutions to support the airline's loyalty program, as well as enable partner and third-party organizations to purchase frequent-flyer miles. NEW RELATIONSHIP WITH KNOWLEDGEFLOW INC. Points.com was strengthened with the addition of KnowledgeFlow Inc., which operates assistant(TM), the next generation of direct marketing systems for loyalty program operators. assistant(TM) is the only Web-based service that proactively matches an online shopper's buying intent with opportunities to earn loyalty points. By joining Points.com in June 2004, users are now collecting points and swapping them for their favourite currency or shopping experience. INNOVATIVE STARBUCKS AGREEMENT OPENS NEW AVENUE Starbucks Coffee Company, the leading retailer, roaster and brand of specialty coffee in the world, joined Points.com in May 2004. Points.com customers can use their loyalty currencies to reload their existing Starbucks Stored Value Cards or to order new Starbucks Cards. Customers can use their cards at over 4,000 Starbucks location in North America to purchase beverages and other products. POINTS.COM WELCOMES FIRST TIMESHARE PARTNER: INTERVAL INTERNATIONAL In April 2004, Interval International, a leading global vacation exchange company, signed a multi-year exclusive agreement. Points.com expands services to Interval's consumer members by providing unlimited exchanges on the Points.com Web site. A membership with Points.com is now included in Interval's basic U.S., Caribbean, and Canadian membership packages. Interval International is a wholly owned affiliate of InterActiveCorp. 9

BUSINESS HIGHLIGHTS POINTS.COM BROADENS BASE THROUGH DEAL WITH S&H GREENPOINTS Points.com has joined forces with the operator of the world's longest-running loyalty program, The Sperry & Hutchinson (S&H) Company. The S&H greenpoints reward program, the digital reinvention of S&H's Green Stamps that originated in 1896, is now a Points.com partner. As a result, Points.com members can swap miles or points from airlines, hotels and other retailers into greenpoints, gaining access to S&H greenpoints' extensive rewards catalog, while S&H greenpoints' members can trade their own accumulated values at Points.com. FIRST QUARTER 2004 ACQUISITION OF MILEPOINT STRENGTHENS INDUSTRY LEADERSHIP In March 2004, Points International Ltd. acquired substantially all the assets of MilePoint, Inc., a loyalty program technology provider and operator. The acquisition added to Points.com's impressive partner base and the potential of both the Points.com Web site and the company's portfolio of Points.com Business Solutions. MilePoint's current clients include Northwest Airlines, Delta Air Lines, Continental Airlines and Starwood Hotels and Resorts. There are also significant benefits related to economies of scales that are being realized by this transaction. LANDMARK AGREEMENT WITH EBAY ENHANCED AND EXTENDED As of March 2004, Points.com became the primary vehicle for all airline, hotel, and major online loyalty program partners wanting to trade with the eBay Anything Points program. This is one in a series of recent agreements between the Corporation and eBay. In November 2003, Points.com developed the eBay Offer Manager Tool, a custom technology application that allows eBay sellers to issue eBay Anything Points to buyers who purchase their items on eBay. US AIRWAYS(R) JOINS WITH POINTS.COM The Points.com Website was bolstered by the addition of US Airways in March of 2004. Since then, US Airways Dividend Miles(R) members have been able to visit the site to register for a free Points.com membership, view their account balances in participating loyalty programs and, after purchasing a PointsPlus membership, swap miles/points from other programs into their Dividend Miles account. TORONTO STOCK EXCHANGE LISTING On February 24, 2004, Points International Common Shares were listed for trading on the Toronto Stock Exchange under the symbol "PTS". The Corporation's Common Shares ceased to trade on the TSX Venture Exchange at the close of trading on February 23, 2004. SCANDINAVIAN AIRLINES SYSTEMS (SAS) PARTNERS WITH POINTS.COM TO OFFER POINTS.COM BUSINESS SOLUTIONS TO EUROBONUS MEMBERS SAS, the seventh largest airline in Europe, is constantly looking for ways to add value to its customers. In January 2004, SAS began offering the Points.com Business Solutions' Buy product to their customers so that EuroBonus members can purchase miles, top up their accounts and book reward flights sooner. 10

MANAGEMENT TEAM ROB MACLEAN, CHIEF EXECUTIVE OFFICER: Rob has served as Chief Executive Officer of Points International Ltd. since February 2002, and is a member of the Corporation's board of directors. A founder of the organization, Rob champions the vision for this revolutionary business, and directs an exceptional team of senior managers delivering impressive results. Previously, Rob held a variety of positions with major airlines in Canada over a 12-year period, most recently as Vice President, Sales with Canadian Airlines, with responsibility for the Canadian Plus loyalty program. CHRISTOPHER BARNARD, PRESIDENT: Christopher serves as President of Points International Ltd., and has been an officer of the Corporation since co-founding its predecessor, Exclamation, in 1998. In this role, Christopher leads financing and investment initiatives for the company, and plays a key role in guiding business strategy and the development of new partnerships. DARLENE HIGBEE CLARKIN, CHIEF TECHNOLOGY OFFICER & Vice President, INFORMATION TECHNOLOGY: Darlene leads the ongoing development of the Points.com Web application and partner integration and is responsible for Points.com technology planning. Darlene directs a highly skilled group of IT professionals to integrate new partnerships, support the Points Solutions Web applications and to research and implement future development. Darlene brings over 19 years of loyalty program and information technology experience to Points.com. GRAD CONN, CHIEF MARKETING OFFICER: Grad's background includes nine years in the CPG industry at Procter & Gamble, ten years running his own direct + interactive agency, and seven years running and angeling venture-funded software companies in the peer-to-peer and social networking spaces, including OpenCola Inc., which was declared by Fortune magazine to be "one of the 25 coolest technology companies of 2001." Prior to joining Points International Ltd., Grad was VP and Managing Director at Grey Direct + Interactive. SACHA DIAB, VICE PRESIDENT, PARTNERS: Sacha joined Points.com in August 2000 and holds the position of Vice President, Partners. Sacha's focus is on managing the Partner Relationship Group and adding high profile clients to our ever-growing partnership base. Before joining Points International Ltd., Sacha was Vice President at Triad Communication in New York, a communication enabler that assists its clients with communicating more effectively with employees, partners and customers through the use of technology. MIKE GLASS, VICE PRESIDENT, PRODUCT DEVELOPMENT: Mike started his career at Compaq computer, and moved to Microsoft in 1989. While at Microsoft, Mike led the design and development of USB, and he was the Software Development Manager for Windows 98. In fact, Mike has been awarded several patents related to OS/2 and Windows operating system design. Prior to joining Points International Ltd., Mike was the Senior Director for the .NET Platform Strategy Group, where he identified and developed strategic business opportunities by leveraging Microsoft .NET technology at Volkswagen, Robert Bosch, Kinko's, McGraw-Hill and Merck. PETER LOCKHARD, VICE PRESIDENT, POINTS.COM BUSINESS SOLUTIONS: Peter joined Points International Ltd. in January 2005 as Vice President, Points.com Business Solutions and is responsible for determining and implementing strategies to successfully grow Points.com Business Solutions. Peter has extensive senior and general management experience, including professional services, operations, sales and sales management, business and corporate development, marketing and client services. In addition, Peter has successfully worked in start-up and early-stage environments that have seen significant growth. JERRY PHILIP, VICE PRESIDENT, BUSINESS DEVELOPMENT: Jerry joined Points.com in March 2000, and holds the position of Vice President, Business Development. A 15-year veteran of the airline industry, Jerry supports business development for Points International Ltd. and plays a key role in acquiring and managing partner relationships. Before joining Points International Ltd., Jerry spent more than 10 years with Canadian Airlines, most recently in the position of Manager, Incentive Programs. JASON SIKORA, VICE PRESIDENT, MARKETING: Jason joined Points International Ltd. in December of 2004 as Vice President, Marketing and is responsible for consumer marketing and growing the business through customer acquisition and activation on Points.com. Jason has over 10 years of international marketing communications experience with proven success in building customer acquisition and retention strategies for companies such as Procter & Gamble, Masterfoods USA & Europe and Amazon.com among many others. BILL THOMPSON, SENIOR VICE PRESIDENT, PARTNERS: Bill joined Points.com in August 2000. Based in Dallas, Texas, he leads the Business Development team and is responsible for developing and managing loyalty program relationships for all Points International Ltd. partners. Bill brings the depth of more than 30 years of industry experience, and was previously a Managing Director with American Airlines. STEPHEN YUZPE, CHIEF FINANCIAL OFFICER AND CORPORATE SECRETARY: Steve joined the Corporation's predecessor, Exclamation, in February 1999. As CFO, Steve is responsible for managing the company's financial well-being and guiding the growth of the business. He plays a critical leadership role overseeing accounting, legal, regulatory affairs, investor relations and operations for the organization, and in this capacity manages relationships with a number of outside professional firms, including auditors and external legal counsel. 11

(GRAPHIC) MANAGEMENT'S DISCUSSION & ANALYSIS

The following management's discussion and analysis ("MD&A") of the performance, financial condition and future prospects of Points International Ltd. (which is also referred to herein as "Points International" or the "Corporation") should be read in conjunction with the Corporation's audited consolidated financial statements (including the notes thereon) for the year ended December 31, 2004 and with the Corporation's 2003 audited consolidated financial statements. Further information, including Points International Annual Information Form ("AIF") for the year ended December 31, 2004, may be accessed at www.sedar.com. All financial data herein has been prepared in accordance with Canadian generally accepted accounting principles ("GAAP") and all dollar amounts herein are in Canadian dollars unless otherwise specified. This MD&A is dated as of March 8, 2005. FORWARD-LOOKING STATEMENTS Some of the statements contained or incorporated by reference in this MD&A, including those relating to Points International strategies and other statements that are predictive in nature, that depend upon or refer to future events or conditions, or that include words such as "expect", "anticipate", "intend", "plan", "believe", "estimate" or similar expressions, are forward-looking statements within the meaning of Canadian securities laws. Forward-looking statements include, without limitation, the information concerning possible or assumed future results of operations of Points International as set forth herein. These statements are not historical facts but instead represent only the Corporation's expectations, estimates and projections regarding future events. The forward-looking statements contained or incorporated by reference in this MD&A are not guarantees of future performance and involve certain risks and uncertainties that are difficult to predict. The future results and shareholder value of Points International may differ materially from those expressed in the forward-looking statements contained or incorporated by reference in this MD&A due to, among other factors, the risks and uncertainties discussed herein, the matters set forth under "Risk Factors" contained in the AIF filed with Canadian securities regulators and the factors detailed in the Corporation's other filings with Canadian securities regulators, including the factors detailed in the Corporation's annual and interim financial statements and the notes thereto. Points International does not undertake any obligation to update or release any revisions to these forward-looking statements to reflect events or circumstances after the date of this MD&A or to reflect the occurrence of unanticipated events, except as required by law. RESPONSIBILITY OF MANAGEMENT The preparation of the financial statements, including the accompanying notes, is the responsibility of management. Management has the responsibility of selecting the accounting policies used in preparing the financial statements. In addition, management's judgement is required in preparing estimates contained in the financial statements. Management acknowledges its responsibility in its letter of representation to the Corporation's auditors, and this responsibility is referred to in the audit opinion. OVERVIEW OF POINTS INTERNATIONAL BUSINESS Core Business - Points Solutions Points International has developed a proprietary technology platform that allows it to offer a portfolio of solutions, referred to as the Points Solutions, to the loyalty program industry. The Points.com. technology platform was designed to create value for consumers and loyalty programs alike. The Points Solutions are comprised of Points.com (referred to as the Points Exchange in past disclosures) and a suite of Points.com Business Solutions (referred to as the Private Branded Solutions in past disclosures) available to loyalty program operators. The Corporation's business is primarily conducted over the Internet (other than 13

MANAGEMENT'S DISCUSSION & ANALYSIS functions such as customer support) allowing its two primary customers (loyalty program operators and loyalty programs' consumers) to be virtually anywhere in the world. Points.com The Corporation's cornerstone product is the proprietary Points.com Web site. Points.com is an online service allowing consumers who are members of participating loyalty programs to swap their loyalty program points and/or miles between the participating loyalty programs. As at December 31, 2004, Points.com had attracted 45 loyalty program participants (as at the date hereof one additional partner is under contract but not yet launched and three partners have been launched), including the loyalty programs of leading airlines, hotels, online and retail businesses, and gift certificate programs. Development Initiated for Points.com Version 3.0 At the beginning of the second quarter of 2005, the Corporation will begin making some important changes to the Points.com consumer Web site. Currently, the Points.com Web site is a transactional Web site that allows consumers to swap miles and points between over 45 reward programs. While established as the world's only service of its kind, Points.com, in its current form, represents only a small part of the Corporation's opportunity to service consumers' total reward program experience. The new Points.com Web site, referred to as "Points.com version 3.0", represents a major enhancement in the relationship with both reward program partners as well as the consumer. Today, the consumer interacts with a Web site that centres on a single feature, swap ("Swap"). Points.com version 3.0 will broaden the Web site's offerings, and present each consumer with a personalized view of its reward program universe. Because of this personalized view of the consumer's reward program universe, Points.com will be able to help consumers release more value from their favourite programs and Get More Rewards, Faster(TM). This is accomplished by adding new mile and point management tools such as ways to purchase ("Buy") and earn ("Earn") more miles or points in their favourite programs. In addition, the system will be driven by the ATG Marketing Enterprise System that will use the consumer's unique program, reward goals and point mix to suggest ("Suggestion") ways to use the Join, Earn, Buy and Swap tools most effectively. As a result of these changes, Points.com will become a "reward management portal," providing a more comprehensive and engaging consumer experience. This functionality is expected to add new revenue streams to the Points.com business model. Most significantly, the loyalty management utility of the Web site is expected to allow Points.com to focus more on a subscription membership model as a core aspect of the business. Management expects that Points.com version 3.0 will be phased in over the course of 2005, with monthly releases beginning in the second quarter. In April 2005, Points.com users will immediately notice a new look and feel that will reflect the more consumer-focused approach. Over the course of the spring and summer, Points.com will add or expand its Buy, Earn and Suggestion functionality. In the second half of 2005, management will begin driving consumer traffic to the new Points.com Web site to leverage the Web site's ongoing evolution. In accordance with Generally Accepted Accounting Principles ("GAAP") and Canadian Institute of Chartered Accountants 14

MANAGEMENT'S DISCUSSION & ANALYSIS ("CICA") handbook Sections 3061 and 3062, Web site development costs incurred in the Web site application and infrastructure development associated with Points.com version 3.0 will be capitalized. For additional information, see "General and Administrative Expenses" page 23, "Property, Plant and Equipment" page 30 and "Planned Capital Expenditures" page 36 of this MD&A. Points.com Business Solutions At December 31, 2004, the Corporation had 55 Points.com Business Solutions products in the marketplace. This suite of technologies includes: BUY AND GIFT - facilitates the online sale and gift of miles, points and other loyalty program currencies. CORPORATE - facilitates the sale of loyalty program currencies to corporate customers. TRANSFER - facilitates the amalgamation or transfer of loyalty program currencies among multiple accounts. INTEGRATE - functions as a common platform to process transactions between third-party loyalty programs, to simplify and automate a complex and resource-intensive process with a single integration. ELITE - facilitates the online sale of tier status to members of loyalty programs. SYSTEMS DESIGN - custom applications developed for select large loyalty program partners. See page 6 "Status of New Products'" of the AIF for an example of the redeemAAmiles program, an application built for the American Airlines AAdvantage(R) program. SIGNIFICANT BUSINESS DEVELOPMENTS IN 2004 AND TO THE DATE HEREOF 1. CENDANT JOINS POINTS.COM AND ALSO ADOPTS POINTS.COM BUSINESS SOLUTIONS PRODUCTS The Cendant Hotel Group, a subsidiary of Cendant Corporation, entered into an agreement to join Points.com. The TripRewards(R) program with its large membership base and its diversified offering, is a significant addition to Points.com. In addition to the consumer offering, TripRewards will also be utilizing a number of Points.com Business Solutions products to enhance the program and its operations. 2. MEMBERSHIP REWARDS(R) PROGRAM FROM AMERICAN EXPRESS JOINS POINTS.COM On March 4th, 2005, Points International entered into an agreement with American Express Travel Related Services Company Inc. The agreement enables the Membership Rewards program from American Express to participate in the Points.com portal. Additionally, the Membership Rewards program will use Points.com's Business Solutions to offer real-time point transfers for select partners. Public launch is expected during the second quarter of the year. 3. AMERICAN AIRLINES RE-LAUNCHES ELITE PROGRAM Effective January 27, 2005, American Airlines began offering a special opportunity for certain members that did not requalify for their 2005 elite status. Eligible AAdvantage members will have the opportunity to participate in this offer provided they have flown at least one elite qualifying segment during 2004. The program is expected to run until April 2005. 4. DELTA AIR LINES EXPANDS RELATIONSHIP WITH POINTS.COM The Delta Air Lines SkyMiles(R) program has hired Points.com to power the online transfer of miles between SkyMiles program accounts. This Transfer product is the fifth product in the suite of Points Solutions purchased by Delta Air Lines. The relationship highlights the opportunity for Points.com to sell additional products to the MilePoint business solutions partners. 15

MANAGEMENT'S DISCUSSION & ANALYSIS 5. AMERICAN AIRLINES LAUNCHES A PRIVATE BRANDED EXCHANGE (SYSTEMS DESIGN SOLUTION) With the September 17, 2004 launch of the redemption platform for American Airlines, AAdvantage(R) members may now redeem their miles online for hotel stays and hotel and other program points. Participating companies to date include Marriott, Diners Club, InterContinental Hotels Group and Hilton. The participant list will be expanded in 2005 to include other partner options. The redeemAAmiles program adds value to the AAdvantage(R) Program and its members by increasing the utility of miles earned, and facilitating an online process that reduces transaction processing time from weeks to days. 6. FRONTIER AIRLINES BECOMES THE FIRST LOW-COST AIRLINE TO JOIN POINTS.COM EarlyReturns(R), the award-winning loyalty program of Frontier Airlines, had its potential value significantly increase following a five-year agreement. EarlyReturns became a tradable loyalty currency on the Points.com Web site as of August 2004. Frontier Airlines is also using Points.com Business Solutions to support the airline's loyalty program, as well as enable partner and third-party organizations to purchase frequent-flyer miles. 7. ACQUISITION OF MILEPOINT STRENGTHENS INDUSTRY LEADERSHIP In March 2004, Points International Ltd. acquired substantially all the assets of MilePoint, Inc., a loyalty program technology provider and operator. The acquisition added to Points.com's impressive partner base and the potential of both the Points.com Web site and the company's portfolio of Points.com Business Solutions. MilePoint's current clients include Northwest Airlines, Delta Air Lines, Continental Airlines and Starwood Hotels and Resorts. There are also significant benefits related to economies of scales that are being realized by this transaction. 8. STRATEGIC RELATIONSHIP WITH EBAY In 2003, Points International developed a significant relationship with online leader eBay Inc. ("eBay") Under this relationship, the eBay Anything Points ("EAP") program became an anchor Points.com partner, and Points International implemented a number of Points Solutions to power core elements of the EAP program, including Integrate. In addition, in August 2003, eBay selected Points International to develop and operate a Systems Design product, the "Offer Manager", for its EAP program. The Offer Manager allows eBay sellers to issue EAPs to buyers who purchase their goods and services on eBay. In March 2004, Points International and eBay agreed to continue eBay's participation on Points.com through at least December 2005 and eBay made Points.com the exclusive swap vehicle for all airline, hotel, car rental and major online loyalty programs participating with eBay's EAP program. 9. TORONTO STOCK EXCHANGE LISTING On February 24, 2004, Points International's Common Shares were listed for trading on the Toronto Stock Exchange under the symbol "PTS". The Corporation's Common Shares ceased to trade on the TSX Venture Exchange at the close of trading on February 23, 2004. REVENUE RECOGNITION POLICIES The revenue recognition policies for the suite of Points Solutions are as follows: Points.com: - - Swap commissions are a percentage of the exchanged value and are recognized as the services provided under the terms of related contracts. - - Membership dues received in advance for services are recognized over the term of service. Membership dues are $29.95 annually for a PointsPlus membership. The annual membership increased from $19.95 on September 30, 2004. 16

MANAGEMENT'S DISCUSSION & ANALYSIS - - One-time trading fees ($9.95 per trade) are recognized at the time of the trade (for non-PointsPlus members). The one time trading fee increased from $5.95 on September 30, 2004. - - Non-refundable partner sign-up fees, for which the Corporation is under no further obligations, are recognized when the program becomes available as an swap partner on the Points.com Web site. Points.com Business Solutions: - - Revenues from the sale of loyalty program points are recorded net of costs. - - Hosting and management fees are recognized in the period of service. - - Non-refundable partner sign-up fees with no fixed term, and for which the Corporation is under no further obligations, are recognized as revenue when received. - - Technology design, development and maintenance revenues are recorded on a "percentage-of-completion" basis. KEY BUSINESS DRIVERS Revenue growth has historically been, and will continue to be, generated by growth of membership in and use of the suite of Points Solutions (i.e., Points.com and Points.com Business Solutions). Growth in the number of individual members using Points.com is driven by three factors that contribute to increased Web site traffic and the ease with which a consumer can join Points.com to conduct swap transactions. These factors are Web site usability and enhancements, marketing (awareness and brand) and partner activity. For additional information, see "Points.com Growth" on page 19 hereof. Growth in Points.com Business Solutions will occur from growth of existing partner relationships, supplemented with new business relationships established throughout the year. For additional information, see "Points.com Business Solutions Growth" on page 19 hereof. While the Corporation has no control over the growth of the loyalty program industry, management considers it an important factor in the Corporation's growth prospects. For additional information, see "Growth of Loyalty Program Industry" on page 22 hereof. RESULTS OF OPERATIONS - REVENUES Overview Revenue for the year ended December 31, 2004 was $7,791,591 representing a year-over-year increase of 33%. The provision of Points Solutions accounted for approximately 97% of the revenue (interest income accounted for the remaining 3%). Revenues from operations increased by 37% over 2003 due to growth in Points Solutions, the MilePoint Acquisition and offset by a weakening U.S. dollar. For additional information see "Revenue Growth" on page 18. Revenues from interest and other revenue declined by 35% due to a decrease in interest earned. See "Other Factors Contributing to Revenue Growth -Interest Income," on page 21 for additional information. REVENUES 2004 2003 2002 - -------- ---------- ---------- ---------- Points International Operations $7,560,012 $5,502,744 $2,308,846 Interest and other revenue 231,579 355,960 59,446 ---------- ---------- ---------- TOTAL REVENUE $7,791,591 $5,858,704 $2,368,292 ========== ========== ========== 17

MANAGEMENT'S DISCUSSION & ANALYSIS A substantial portion of the Corporation's revenue is generated through the provision of Points.com Business Solutions for loyalty programs by way of fees for technology services and transaction fees or commissions paid to Points International by the operators of the loyalty programs. The Corporation earns revenue from Points.com in three principal ways. First, Points International charges a commission on all swaps, based on a value of the loyalty currency tendered for swap by the loyalty program member. Through the Swap model, the participating loyalty program sets a value on the currency tendered for "sale". Based on this valuation, a percentage is remitted to Points International and the remaining balance is used to purchase the currency of another participating loyalty program. Second, loyalty program members pay Points International either a fee for each Swap transaction at Points.com or an annual fee for a membership that includes unlimited Swap transactions. Finally, the Corporation may earn a non-refundable partner sign-up fee when a partner joins Points.com. Approximately 54% of the Corporation's revenues are from its three largest customers (the two largest customers represented 43% of revenues). In 2003, two customers represented 61% of the Corporation's revenues. In addition, 61% (2003 - - 58%) of the Corporation's deposits are due to these three customers. As additional partner relationships are established and revenues grow, management expects the economic dependence on any specific customer to be reduced. In 2004, approximately 95% of the Corporation's revenues were recurring revenues (e.g., revenues from monthly management fees, membership fees and transaction fees) and 5% were from non-recurring sources (e.g., one-time Web development and integration fees). In 2004, recurring revenues grew by 58% year-over-year, and non-recurring revenues shrank by 67%. Management of the Corporation believes that, in the long term, focusing on growing recurring revenues, which generate revenues for both the partners and Points.com, is in the best interests of the Corporation. REVENUES 2004 2003 2002 - -------- ---------- ---------- ---------- Recurring revenues $7,400,243 $4,686,614 $1,868,631 Non-recurring revenues 391,348 1,172,090 499,661 ---------- ---------- ---------- TOTAL REVENUE $7,791,591 $5,858,704 $2,368,292 ========== ========== ========== Management recognizes that the Corporation must eventually achieve profitability through revenue growth and cost management. As significant resources have and will be allocated to the launch of Points.com version 3.0, management now expects that Points International's revenues will exceed its general and administrative costs in 2006. Revenue Growth Revenue growth has historically been, and will continue to be, generated by growth of membership in and use of the suite of Points Solutions products. Growth in product usage will occur from the growth of existing relationships, supplemented with new business relationships established throughout the year. Management expects the existing contracts to continue to generate growing revenues and, based on continuing business development efforts, is optimistic about new revenue sources in future quarters. Growth in Use of the Points Solutions The suite of Points Solutions experiences revenue growth based on the number of loyalty program partners and consumer members who participate in the various programs. 18

MANAGEMENT'S DISCUSSION & ANALYSIS Partner Summary - Total Number of Partners (1) NUMBER OF PARTNERS AS AT 2004 2003 2002 - ------------------------ ----- ----- ---- Points.com 45 35 25 Points.com Business Solutions (2) 21 12 6 Cumulative Points Transacted (000,000's) 7,944 3,027 873 NOTES: (1) Partners may be included in both Points.com Business Solutions and Points.com. (2) Includes seven additional partners acquired in the MilePoint Acquisition as at March 31, 2004. Points.com Growth The current Points.com business model is dependent on the number of consumer members paying for a Points.com PointsPlus membership and/or completing a Swap transaction. The number of consumers that will conduct a transaction is driven by three factors: Web site usability and enhancements; marketing (awareness and brand); and partner activity. As the Corporation is preparing to launch the updated version of the Web site, Points.com version 3.0, there have been only moderate changes in the usability and marketing of the existing Web site in the past two quarters. However, progress has continued in expanding and improving Points.com's partner mix. The number of loyalty program partners added and their industry mix are two important elements in the growth of Points.com because they directly impact the consumer's value proposition. Said differently, the more loyalty programs that a consumer participates in that are also Points.com partners, the greater the opportunity for that consumer to maximize the value of his or her collective loyalty programs. The number of loyalty programs participating on Points.com has increased by 29% since December 31, 2003 and 80% since December 31, 2002. See page 18, "Growth in Use of Points Solutions" for a summary of growth in the number of partners. Management expects to continue to round out the partner industry mix and add new partners in 2005. Management believes that the development and launch of Points.com version 3.0 will add a number of new features and improved functionality to the Web site. This functionality will incorporate new revenue streams into the Points.com business model by improving consumers' ability to manage and derive value from their loyalty program universe. The launch of Points.com version 3.0 is also an opportunity for the Corporation to begin to market and merchandise to its consumer base. Marketing programs are expected to begin testing in the second quarter of 2005 and ramp up during the course of the third and fourth quarters. Points.com Business Solutions Growth The Points.com Business Solutions have been designed with each partner's look and branding. As a result, the Corporation has little impact on driving traffic and transactions through its partners' Web sites. However, Points International has seen continuous growth in the products since each launch. Management expects this trend to continue for new and existing Points.com Business Solutions. POINTS.COM BUSINESS SOLUTIONS METRICS AS AT 2004 2003 2002 - ----------------------------- ---- ---- ---- Total Unique Partners (1) 21 12 6 Total Points.com Business Solutions (2) 55 30 17 NOTES: (1) Includes seven additional partners acquired in the MilePoint Acquisition as at March 31, 2004. (2) Includes 17 additional products acquired in the MilePoint Acquisition as at March 31, 2004. 19

MANAGEMENT'S DISCUSSION & ANALYSIS POINTS.COM BUSINESS SOLUTIONS (1)(2) NUMBER OF PRODUCTS AS AT 2004 2003 2002 - ------------------------------------ ---- ---- ---- Buy 16 9 6 Gift 16 8 6 Transfer 5 2 1 Corporate 8 4 2 Elite 2 2 1 Systems Design 4 2 0 Integrate (3)(4) 4 3 1 --- --- --- TOTAL POINTS.COM BUSINESS SOLUTIONS 55 30 17 === === === NOTES: (1) Includes products sold to new and existing customers. (2) Includes 17 additional products acquired in the MilePoint Acquisition as at March 31, 2004. (3) Each Integrate partner will have third parties integrated into its technology platform. (4) There are 24 existing partner integration add-ons among the four Integrate partners as at Dec. 31, 2004. Sources of Revenue Growth Approximately 97% of the Corporation's revenue in 2004 (94% in 2003) is generated through its Points Solutions, which have two primary sources for growth: growth and increased use of existing contracted Points Solutions; and the development of new contracted Points Solutions. The remaining 3% of revenues is interest income. PERCENTAGE OF REVENUES BY SOURCE 2004 2003 2002 - -------------------------------- ---- ---- ---- Existing Points Solutions (including growth of existing solutions) 70% 66% 63% New contracted Points Solutions with new and existing partners (1) 30% 34% 37% NOTE: (1) Includes 17 additional products acquired in the MilePoint Acquisition as at March 31, 2004. Existing Points Solutions The large majority of existing products that Points International operates, including those on behalf of partner loyalty programs, continue to grow through increased consumer awareness, consumer adoption and loyalty program growth. As Points International earns transaction fees or commissions on the majority of these products and as the products continue to grow, the Corporation expects to continue to derive significant revenues from its existing products. Revenues from existing Points Solutions grew by 45% from $3.63 million in 2003 to $5.26 million in 2004 (i.e., 70% of the total Points Solutions revenue). Management expects this trend to continue as the base of existing products continues to grow. New Contracted Points Solutions Selling additional Points Solutions is an important source of new revenue. New Points Solutions sold to loyalty program partners grow the base of products being managed and therefore the existing revenue base and, in the case of sales to new loyalty program partners, provide an opportunity to place additional Points Solutions with the same partner. Revenues from new Points Solutions during the year grew from $1.87 million in 2003 to $2.30 million in 2004. Points International has grown the number of products placed with partners from 30 to 55 as at December 31, 2004 from December 31, 2003. In addition, 24 third-party integrations have been implemented with four Integrate partners. Management believes that the suite of Points Solutions is applicable to all large loyalty program partners and will continue 20

MANAGEMENT'S DISCUSSION & ANALYSIS to focus business development resources on both the sale of new products to current partners and on sales to new partners. Management is continuing to focus on expanding the Points.com partnership base in 2005 across various loyalty markets. In particular, Points International will continue to focus on new partnerships in the financial services, airline, hotel, retail, car rental, and online categories throughout 2005. Projected revenues for 2005 attributed to the deployment of new Points Solutions are more difficult to project than growth in existing Points Solutions. Future revenue growth is still substantially dependent on generating new contracts for the suite of Points Solutions products. While management expects continued business development success, there is no certainty that Points.com will continue with its past success of acquiring new contracts with new or existing partners. Other Factors Contributing to Revenue Growth In addition to the sources of revenue and growth described above, three other factors contribute to the Corporation's financial performance: interest income, fluctuations in foreign exchange rates and the growth of the loyalty program industry. Interest Income The Corporation earned interest income of $231,579 for the 2004 fiscal year, compared with $355,960 in 2003. The decrease in interest income year over year is largely a function of reduced cash reserves, the strengthening U.S./Canadian foreign exchange rate, the shorter duration of the investment portfolio and the subsequently lower average yield of the investments. Management expects the interest income to continue to decline in the short term as cash reserves are reduced as a consequence of the MilePoint Acquisition and growth of its operations. Interest income is a function of the Corporation's cash balances and the prevailing interest rates. Canadian cash reserves are invested in a combination of short-term liquid assets and short-term bonds. The bond and money market portfolio has a duration of less than two years. Foreign currency continues to be invested in short-term and money market instruments. Points International cash and short-term investments are valued quarterly at the lower of cost and market value. In the long term, as Points International business continues to grow, cash reserves and related interest income are also expected to increase, although this growth is not expected to be a material portion of the Corporation's revenue going forward. Interest rates will continue to influence interest earnings. The Corporation's bond portfolio is exposed to financial risk that arises from the credit quality of the underlying bond issuers. The Corporation seeks to mitigate the credit risk by diversifying its bond holdings and only investing in securities with a credit rating of "A" or higher. A summary of the Corporation's investments is as follows: AS AT DEC. 31,2004 YIELD % (2) CREDIT RATING C$ TOTAL US$ DENOMINATED OTHER DENOMINATED - ----------------------- ----------- ------------- ----------- --------------- ----------------- Cash held at bank (1) 1. 01 n/a $13,209,873 $8,534,329 E1,113,558 GBP 318,990 CHF 12,029 Money market securities 2. 28 R1-High 544,945 n/a n/a Bonds (3) 3. 11 A-AAA n/a n/a TOTAL $13,754,818 $8,534,329 NOTES: (1) C$ Total represents total cash held at bank inclusive of all denominations; US$ Denominated and Other Denominated currencies are a subset of the C$ Total and are represented in their local currency amount. (2) Yield as at December 31, 2004. (3) Bond yield is calculated as the simple average of the portfolio's semi-annual yield to maturity. 21

MANAGEMENT'S DISCUSSION & ANALYSIS Foreign Exchange Rates The translation of the Corporation's revenues and expenses is, and will continue to be, sensitive to changes in the U.S./Canadian foreign exchange rates ("FX Rates"). Changes to FX Rates will have greater impact on the Corporation's revenues than on its expenses as approximately 92% of the Corporation's revenues are in U.S. dollars and the remaining 8% are split between Canadian dollars, Euros, British Pounds and Swiss Francs. Management expects that the percentage of U.S. dollar-based revenues will not decrease significantly in 2005. Approximately 69% of the Corporation's general and administrative expenses were in Canadian dollars, 28% were U.S. dollar-based and 3% were based in other foreign currencies. The Corporation does not have material foreign exchange risk with its cash expenses as it has sufficient foreign currency reserves to meet its foreign obligations. The average FX Rate (the 12-month average rate) with which revenues and expenses are translated into Canadian dollars has declined relative to the fiscal year 2003. The FX rate differential was negative and resulted in 11% lower revenue growth, or approximately $905,500, offset by a 3.5% decrease in expense growth, or approximately $426,000. U.S./CANADIAN FX RATES 2004 2003 2002 - ---------------------- ----- ----- ----- Period Start 1,297 1.573 1.592 Period End 1,205 1.295 1.577 Twelve Month Average 1,299 1.460 1.570 Growth of Loyalty Program Industry The Economist reported on the growing importance of loyalty programs in an article from its May 2, 2002 issue, entitled "Fly me to the moon", noting that on an annual basis, airlines sold "roughly US$10 billion worth of miles to partners, such as credit card firms". In another article (entitled "Frequent-flyer economics", from the same issue), The Economist reported that "frequent-flyer miles started as a marketing gimmick, but they have become a lucrative business", and that "roughly half of all miles are now earned on the ground, not in the air". In an updated article, dated January 6, 2005, and titled "In Terminal Decline, The dollar has already been toppled as the world's leading currency", The Economist reported that by the end of 2004, "the world-wide stock of unredeemed frequent-flyer miles is almost 14 trillion miles .... and the total global stock of frequent-flyer miles is worth over US$700 billion". Management understands that members of loyalty programs are much more likely to utilize Points.com and the other products from the suite of Points Solutions when they are close to a level at which they can redeem an award. The redemption level for an award varies by type of award (for example, a business-class flight takes more miles than an economy-class flight) and by program type (the "cost" of a flight typically starts between 15,000 and 25,000 miles whereas a night in a hotel starts at 10,000 points). Therefore, growth in consumer loyalty program account balances will create demand for Points Solutions. Growth in program balances is a function of growth in the number of programs, the number of participating consumers and the number of consumers moving through a loyalty redemption (for example, receiving an award of some type). Several respected periodicals estimate strong growth in the popularity of and participation in loyalty programs. For example, in addition to The Economist, cited above, according to the "frequent-flyer facts" section of the Web site of InsideFlyer magazine (www.webflyer.com), a leading publication for members of frequent traveler programs: loyalty programs grow at a rate of 11% per annum, with over 120 million members worldwide. While there are about 92 frequent-flyer/guest programs in the world, American AAdvantage, the largest frequent-flyer program in the world, began with 283,000 members in 1981 and has grown to more than 45 million members. [sic] 22

MANAGEMENT'S DISCUSSION & ANALYSIS RESULTS OF OPERATIONS - GENERAL AND ADMINISTRATIVE EXPENSES General and Administrative Expenses General and administrative expenses increased by 52% relative to 2003. Material changes in expenses will be described in each section below. GENERAL AND ADMINISTRATIVE EXPENSES 2004 2003 2002 - ----------------------------------- ----------- ---------- ---------- Employment Costs (1) $ 7,119,165 $5,186,899 $4,004,093 Technology Services (2) 931,804 803,222 1,042,427 Marketing and Communications 1,503,381 386,512 120,861 Sales Commission and Related Expenses 418,508 238,730 59,138 Other (3) 2,257,795 1,414,108 1,714,550 TOTAL $12,230,652 $8,029,471 $6,941,069 NOTES: (1) Wages and employment costs include salaries, employee stock option expense, contract labour charges, recruiting, benefits and government charges (CPP and EI). (2) Technology expenses include online hosting and managed services, equipment rental, software licenses and capital lease expenses. (3) Other expenses include foreign exchange losses (or gains), travel expenses, professional fees, insurance, office rent and expenses and regulatory expenses. As the Corporation is still in the process of increasing loyalty program participation in and sales of the Points Solutions, significant resources continue to be required. While management has made controlling costs a priority, costs and/or capital expenditures will continue to increase in 2005. Management expects the general and administrative expenses in 2005 to be higher than in 2004. The Corporation will continue to scale its infrastructure, add new partners to its suite of products and move from trial/test marketing to a more comprehensive marketing and branding program. The Corporation still expects that a series of significant marketing and branding programs will begin in mid 2005 to support the launch of Points.com version 3.0. The actual expense incurred will be a function of the types of marketing media employed and incentives offered, as well as the timing of the programs' launch dates. If actual revenue growth projected from the marketing plan does not meet expectations, the expenditures can either be reduced or reallocated to more successful programs. Employment Costs Employment costs increased by 37% in 2004 versus 2003. A large portion of the increase in 2004 (19%) is from a change in accounting policy resulting in $362,343 of expenses relating to employee stock options. Effective January 1, 2004, the CICA handbook, Section 3870 "Stock-Based Compensation and Other Stock-Based Payments" was amended to require expense treatment of all stock-based compensation and payments for options granted beginning on or after January 1, 2002. For stock-based compensation issued to employees, the Corporation recognizes an expense. The Corporation accounts for its grants in accordance with the fair value based method of accounting for stock-based compensation. As permitted by this standard, this change in accounting policy has been applied retroactively without restatement of the prior years' financial statements; amounts charged to opening retained earnings for costs relating to 2002 and 2003 are $63,148 and $126,206, respectively. 2004 2003 2002 -------- -------- ------- Employee Stock Option Expense $362,343 $126,206(1) $63,148(1) NOTE: (1) 2002 and 2003 Employee Stock Option Expense represents the pro-forma impact to the general and administrative expenses. 23

MANAGEMENT'S DISCUSSION & ANALYSIS As at December 31, 2004, the Corporation had 79 full-time employees (including three contractors replacing employees on temporary leaves of absence) and three short-term contractors. HEADCOUNT(1) BY DEPARTMENT AS AT 2004 2003 2002 - -------------------------------- ---- ---- ---- Technology 43 41 26 Finance and Administration 13 10 2 Business Development 8 8 7 Marketing and Customer Service 15 5 2 --- --- --- TOTAL (2) 79 64 37 === === === NOTES: (1) Headcount includes active employees and contractors covering a leave of absence for full-time positions within the departments. (2) In addition to the full-time positions employed, the Corporation had three short-term contractors on staff at December 31, 2004. During 2004, 15 employees joined the Corporation. Twelve of the 15 new hires, and several existing employees, are directly dedicated to the Points.com version 3.0 technology development and ongoing maintenance. Employment costs increased as a result of a 42% increase in average number of employees in 2004 (72 versus 51 in 2003). Total employment costs in 2005 will grow as the Corporation maintains its existing employee base throughout the year. The Corporation expects there will be minimal growth in headcount throughout 2005. Technology Services Technology Services expenses increase in increments based on business growth and product performance. As Technology Services costs are a function of the number of partners and Points Solutions products, these costs grow as revenue grows. In general, as loyalty program partners and products are added to the infrastructure and transactional volume increases, additional servers, processors, bandwidth, memory, etc., are required to provide a secure and robust production environment. The year 2004 saw an increase of $128,581 (16%) as additional services were required for new products associated with the MilePoint Acquisition and the expansion of other Points Solutions. Management expects these costs to grow marginally in 2005 with the continued expansion of Points Solutions. Products launched and loyalty program partners acquired are the key drivers of Technology Services expenses. Marketing and Communications Marketing costs increased by $1,116,869 (289%) relative to 2003 as more promotions were in the market during the year. New marketing initiatives were launched in the latter half of the second quarter and ramped up in the third and fourth quarters to begin testing and refining the sensitivities of customer click-through rates, the cost to acquire registered users and the cost to convert registered users to paid members at Points.com. The major drivers of this increase are an increase in the use of promotional and bonus miles for paid memberships, promotional miles to generate transactional activity, public relations expenditures, and increased partner marketing initiatives to test and measure marketing responsiveness. The Corporation expects to increase its marketing expenditures at the beginning of the second quarter in 2005, to support the launch of Points.com version 3.0. The marketing and branding foundation built in 2004 has made it possible to expand audience reach and effectively execute large-scale, multi-channel promotions. Advertising expenditures will continue to be focused on partner media, as well as online media. This approach dovetails with business development strategies and is the most cost-effective means of reaching the Corporation's target audience. It is anticipated that marketing and communication expenses could increase substantially if the programs are successful at customer acquisition and retention. If the programs do not meet management's expectations in driving revenue growth, marketing expenses can be eliminated or reallocated in the short term. 24

MANAGEMENT'S DISCUSSION & ANALYSIS Management expects that the results of the carefully planned marketing strategy will accelerate Points.com activity. Sales Commissions and Expenses Sales commissions and expenses have increased by $179,778 (75%) over 2003. Sales commissions will continue to vary according to partners contracted and the growth of existing products. The increase in 2004 relates primarily to the additional products acquired through the MilePoint Acquisition and growth in existing Points Solutions. Other Operating Expenses Other operating expenses include office overhead, travel expenses, professional fees and foreign exchange gain and/or loss. Other operating expenses increased by $843,687 (60%) in 2004 relative to 2003. Approximately 5% of the increase relates to the foreign exchange loss from re-valuing certain balance sheet accounts (e.g., U.S. dollar-denominated cash and U.S. dollar-denominated deposits). Each quarter, certain balance sheet accounts are re-valued in accordance with the period-ending FX Rate. To the extent that the foreign denominated assets and liabilities are not equal, the net effect after translating the balance sheet accounts at the period-ending FX Rate is accounted for as a foreign exchange gain or loss on the income statement. Management has no control over the foreign exchange gain or loss from one period to the next. Excluding the foreign exchange gain and loss, other operating expenses increased by almost $750,000 compared to 2003. The following items represent the major variances: relocation to larger facilities resulted in $255,000 in additional rent and other related expenses; legal and securities fees associated with the move from the TSX Venture Exchange to the TSX amounted to approximately $150,000 in additional expenses; legal fees associated with international contracts amounted to $150,000; and other expenses related to an increase in employees were $165,000 of the increase. Management expects other operating expenses (excluding foreign exchange gain and loss) to remain stable in 2005. OTHER OPERATING EXPENSES 2004 2003 2002 - ------------------------ ---------- ---------- ---------- Foreign Exchange Gain/Loss (1) $ 74,901 $ 30,216 $ 25,450 Other Operating Expenses 2,182,894 1,383,892 1,689,100 ---------- ---------- ---------- TOTAL $2,257,795 $1,414,108 $1,714,550 ========== ========== ========== NOTE: (1) See definition on page 25, "Other Operating Expenses." RESULTS OF OPERATIONS - NON-CASH EXPENSES Forward-looking statements contained in this section with respect to future expenses of the Corporation are not guarantees of such future expenses and involve certain risks and uncertainties that are difficult to predict. Any changes in the Corporation's amortizing assets will subsequently change the Corporation's amortizing expenses. Amortization Expenses The Corporation recorded amortization expenses of $2,322,749 in 2004 compared to $2,877,321 for the year ending December 31, 2003. The decrease was attributed to the charges outlined in the following table: AMORTIZATION EXPENSES 2004 2003 2002 - --------------------- ---------- ---------- ---------- Deferred Costs $ 601,319 $ 531,914 $ 328,760 Intangible Assets 1,408,813 756,201 567,150 Property, Plant and Equipment 312,617 1,589,206 1,512,890 ---------- ---------- ---------- TOTAL $2,322,749 $2,877,321 $2,408,800 ========== ========== ========== 25

MANAGEMENT'S DISCUSSION & ANALYSIS Amortization of Deferred Costs DEFERRED COSTS 2004 2003 2002 - -------------- -------- -------- -------- Amortization $601,319 $531,914 $328,760 Charges incurred in respect of certain financings are deferred and charged to income on a straight-line basis over an applicable time period. Deferred finance charges represent legal, accounting and other related fees incurred to obtain the financings. Points International has incurred deferred costs in connection with the following financial transactions: a. In prior quarters, Points International reported deferred financing charges in connection with the 11% $6,000,000 senior secured convertible debenture (the "Debenture") issued to CIBC Capital Partners. The first quarter of 2004 was the final amortization period for the deferred costs associated with the Debenture. b. The Corporation reports deferred financing charges in connection with the Series Two Preferred Share issued pursuant to the IAC Investment, as this financial instrument is also classified as debt. The Series Two Preferred Share has 33 amortization quarters remaining. c. In consideration of the value to the Corporation of the Alignment Agreement with American Airlines, the Corporation issued 2,196,635 Common Shares to American Airlines valued at $2,240,568. The Common Shares have been classified as deferred costs and will be amortized over a five-year period. There are 15 amortization quarters remaining. d. Selected Points.com Business Solutions technology costs incurred ($123,390) have been deferred over the expected lifetime of certain partner relationships. The two relationships have eight and nine amortization quarters remaining. Amortization of Intangible Assets The excess of the cost over the value attributed to the underlying net assets of the shares of Points.com acquired in 2002 is amortized on a straight-line basis over a period of three years. The increase in the amortization expense of intangible assets which started in the second quarter is related to the intangible assets (i.e., partner contracts) acquired through the MilePoint Acquisition (see "Commitments Related to MilePoint Acquisition" on page 34 for additional information). Goodwill related to the acquisition will not be amortized. If the assets are deemed to have become impaired, the goodwill will be written off in the appropriate period. INTANGIBLE ASSETS 2004 2003 2002 - ----------------- ---------- -------- -------- Amortization $1,408,813 $756,201 $567,150 Amortization of Property, Plant and Equipment The decrease in the amortization expenses in 2004 reflects the fact that certain assets have been amortized to a zero cost base. PROPERTY, PLANT AND EQUIPMENT 2004 2003 2002 - ----------------------------- -------- ---------- ---------- Amortization $312,617 $1,589,206 $1,512,890 26

MANAGEMENT'S DISCUSSION & ANALYSIS Other Non-Cash Expenses Interest on Convertible Debenture Accrued interest on any principal amount of the Debenture that is converted into Common Shares ceases to be payable. In addition, in the event that an exercise of the Warrants (as defined in "IAC Investment" on page 28 herein) results in a change of control of Points International, accrued interest on the Debenture will be waived and the principal amount of the Debenture will be repayable within 30 days. See "Commitments Related to the Terms of Certain Financing Arrangements" on page 32 herein. INTEREST ON CONVERTIBLE DEBENTURE 2008 2007 2006 2005 2004 2003 2002 2001 - --------------------------------- ------ ------ ------ ----- ----- ----- ----- ----- Accrued Interest ($000's) 257 1,209 1,089 981 884 854 660 522 Debenture Value ($000's) 12,456 12,200 10,990 9,902 8,920 8,036 7,183 6,522 Interest on the outstanding principal amount of the Debenture accrues at a rate of 11% per annum. Interest compounds on an annual basis on the day immediately prior to each anniversary of the original issue date, being March 15, 2001. Thereafter, interest accrues on such compounds at the rate of 11% per annum. Interest on the Series Two Preferred Share INTEREST ON SERIES TWO PREFERRED SHARE 2013 2012 2011 2010 2009 2008 2007 2006 2005 2004 2003 - ---------------------- ---- ---- ---- ---- ---- ---- ---- ---- ---- ---- ---- Accrued Interest ($000's) 244 868 868 868 868 868 868 868 868 868 624 Series Two Preferred Share Value ($000,000's) 21.1 20.8 19.9 19.1 18.2 17.3 16.5 15.6 14.7 13.9 13.0 RESULTS OF OPERATIONS - EARNINGS AND SHAREHOLDER EQUITY Loss The Corporation reported a net loss of $8,808,284 for the fiscal year 2004, compared with a net loss of $6,536,191 for the fiscal year 2003. Shareholder Equity The deficit in shareholder equity increased from $5,222,809 at December 31, 2003 to $8,935,826 at December 31, 2004. The increase was a result of the net loss for the period of $8,808,284, offset by an increase in capital stock issued during 2004. Loss Per Share The Corporation's loss per share is calculated on the basis of the weighted average number of outstanding Common Shares for the period, which amounted to 67,744,345 shares at December 31, 2004, compared with 58,823,652 shares at December 31, 2003. The Corporation reported a net loss of $0.13 per share for the year ending December 31, 2004, compared with a net loss of $0.11 per share for the year ending December 31, 2003. For 2004 and 2003, the impact on the loss per share of the fully diluted shares outstanding has not been computed as the effect would be anti-dilutive (meaning that the loss per share would decrease on a fully diluted basis). Therefore, in accordance with GAAP, fully diluted loss per share is not provided. The fully diluted calculation for both 2004 and 2003 would have otherwise included Common Shares underlying outstanding securities, such as options, warrants and preferred shares convertible or exercisable to acquire Common Shares. 27

MANAGEMENT'S DISCUSSION & ANALYSIS LIQUIDITY Overview of Liquidity Management views liquidity as the Corporation's ability to generate sufficient cash (or cash equivalents) to meet its obligations as they become due. Balance sheet liquidity indicators provide management with a test of the Corporation's current liquidity. Balance sheet indicators of liquidity include cash, accounts receivable and accounts payable. Earnings (loss) before interest, amortization and other deductions ("EBITDA") are the key indicators of the change in the liquidity of Points International operations over a defined period of time. As the Corporation continues to add contracts to its portfolio of Points.com Business Solutions and to Points.com, revenues are expected to grow, resulting in increased liquidity. EBITDA Management believes that EBITDA is an important internal measure and financial benchmark for its shareholders because it is a recognizable and understandable measure of the Corporation's cash burn or growth, and is a standard often scrutinized by investors in small to mid-capitalization companies. For example, the Corporation has incurred large non-cash expenses (depreciation and amortization) over the past several fiscal years that distort the financial and strategic gains the Corporation has made. Primarily as a result of the Points.com version 3.0 related expenditures, including those costs that are not capitalized, management expects that the Corporation's revenues will exceed its general and administrative costs in 2006. For the year ending December 31, 2004, the Corporation's EBITDA was ($4,439,061). This compares with EBITDA of ($2,170,767) for the year ending December 31, 2003. IAC Investment The following is a general summary of the terms of the IAC Investment. More comprehensive disclosure of the IAC Investment is contained in Points International's Material Change Report dated March 21, 2003, which is incorporated by reference herein. See also "Commitments Related to the Terms of Certain Financing Arrangements" on page 32 below. Under the IAC Investment, Points International issued one convertible preferred share (the "Series Two Preferred Share") and Common Share purchase warrants (the "Warrants") for aggregate cash consideration of $12.4 million and $2.7 million, respectively. Based on the Corporation's capitalization as at the date hereof, the Series Two Preferred Share is convertible, for no additional consideration, into 19,999,105 Common Shares. The Warrants are exercisable for three years from their date of issue (April 11, 2003) to acquire up to 55% of the Common Shares of Points International (calculated on an adjusted fully diluted basis) less the number of Common Shares issued or issuable on conversion of the Series Two Preferred Share. As at the date hereof and based on the Corporation's current capitalization, the Warrants are exercisable to acquire 83,532,599 Common Shares at an effective price per Common Share of $1.03 between April 11, 2004 and April 10, 2005 and $1.15 between April 11, 2005 and April 10, 2006 (resulting in an additional investment by IAC in Points International, if exercised in full and depending on the year of exercise, of up to approximately $86.2 million or $95.7 million). Each of the Series Two Preferred Share and the Warrants contain anti-dilution protection provisions. Cash and Current Assets The Corporation had consolidated cash and cash equivalents of $13,754,818 at December 31, 2004, compared to $20,274,836 at December 31, 2003, and $7,341,700 at December 31, 2002. AS AT DEC. 31, 2004 DEC. 31, 2003 DEC. 31, 2002 - ----- ------------- ------------- ------------- Cash and Cash Equivalents $13,754,818 $20,274,836 $7,341,700 Accounts Receivable 2,024,342 1,004,370 267,632 Prepaids and Sundry Assets 1,229,091 825,221 657,367 ----------- ----------- ---------- TOTAL CURRENT ASSETS $17,008,251 $22,104,427 $8,266,699 =========== =========== ========== 28

MANAGEMENT'S DISCUSSION & ANALYSIS Cash and cash equivalents decreased by $6,520,019 from December 31, 2003. The primary reasons for the decrease in cash relative to 2003 were related to the operating loss for the year, expenditures on capitalized costs directly attributable to Points.com version 3.0, expenditures on capital assets and the MilePoint Acquisition. Cash from Exercise of Certain Warrants and Options Certain "in-the-money" warrants and options are due to expire within 12 months. Assuming that the market price of the Common Shares remains above the exercise price of these securities, management expects the securities to be exercised. If exercised in full, the proceeds from the exercise of these securities would increase cash by approximately $1.1 million. Assuming the exercise in full of these securities, issued and outstanding Common Shares would increase by over 8.6 million shares. Securities with Near-Term Expiry Dates - Outstanding Amounts as at December 31, 2004 SECURITY TYPE EXPIRY DATE NUMBER STRIKE PRICE PROCEEDS - ------------- ----------- --------- ------------------ ---------- Warrants 7/18/2005 166,667 $0.25 $ 41,667 Points International Ltd. Options 2/14/2005 1,752,000 0.50 876,000 Points International Ltd. Options 3/14/2005 201,400 0.50 100,700 Points International Ltd. Options 8/22/2005 25,000 0.69 17,250 Options in subsidiary with liquidity put 2/17/2005 627,479 Fair Market Value 13,783 Options in subsidiary with liquidity put 3/31/2005 4,500,321 Fair Market Value 72,272 Options in subsidiary with liquidity put (1) 7/9/2005 802,433 Fair Market Value 8,892 Options in subsidiary with liquidity put (1) 8/13/2005 355,803 Fair Market Value 7,816 Options in subsidiary with liquidity put (1) 8/20/2005 200,312 Fair Market Value 4,400 --------- ---------- TOTAL 8,606,415 $1,130,280 ========= ========== NOTE: (1) The Corporation currently intends to seek regulatory and shareholder approval for a two-year extension of the expiry date of certain options held in the subsidiary with a liquidity put right. Subsequent to quarter end, and as at March 8, 2005, the following securities have been exercised or expired: SECURITY TYPE EXPIRY DATE NUMBER STRIKE PRICE PROCEEDS - ------------- ----------- --------- ------------ -------- Points International Ltd. Options - expired 2/14/2005 25,000 $0.50 $ -- Points International Ltd. Options - exercised 2/14/2005 1,727,000 0.50 863,500 Points International Ltd. Options - exercised 3/14/2006 25,000 0.50 12,500 Points International Ltd. Options - exercised 5/7/2006 13,750 0.56 7,700 Points International Ltd. Options - exercised 2/8/2007 3,000 0.27 810 Points International Ltd. Options - exercised 6/26/2007 80,000 0.25 20,000 Options in subsidiary with liquidity put- exercised (1) 2/17/2005 439,686 0.02 30,283 Points International Ltd. Options - exercised 3/31/2005 751,170 0.02 16,500 --------- -------- TOTAL 3,064,606 $951,293 ========= ======== NOTE: (1) Excludes a conditional exercise of 1,050,684 options to acquire shares in Points.com Inc. which have been conditionally exchanged for 2,630,808 shares of the Corporation. The exercise is conditional on the Corporation not receiving shareholder and regulatory approval to extend the expiry dates of the options (see "PCI Option Resolution", in the Corporation's Management Information Circular for additional information). 29

MANAGEMENT'S DISCUSSION & ANALYSIS Accounts Receivable The Corporation expects accounts receivable to grow proportionately with growth in revenues; however there is some variability in this trend. Management deems the risk of bad debts to be minimal based on the structure and nature of the Corporation's cash flows. Ability to Fund Future Growth In 2004, the Corporation had cash flows used in operating activities of ($2,352,995) after changes in non-cash balances related to operations. Management is confident that the Corporation's cash position is adequate to cover operating expenses in the short term, even if revenue growth is slower than planned, and expects that the revenue from Points Solutions will generate sufficient cash to maintain capacity in the short term and grow capacity and resources in the long term. However, the Corporation is currently not generating an operating profit (revenues minus general and administrative expenses) and cannot be assured that revenue growth will be sufficient to meet its current liabilities, including the repayment of the Debenture, as they come due. See also "Maturity of the CIBC Capital Partners' Debenture" on page 33 for additional information. Long-Term Investment The Corporation's investment in ThinApse Corporation was written off in 2004, resulting in an expense of $161,629. For more information, refer to Note 5 of the Corporation's Audited Consolidated Financial Statements for the year ended December 31, 2004. Property, Plant and Equipment The Corporation reported an increase in property, plant and equipment in 2004 due to the capitalized costs of Points.com version 3.0 and an increase in office computer equipment and leasehold improvements related to the corporate move to new facilities. Refer to "Planned Capital Expenditures" on page 36 for additional information. Existing technology costs under capital lease are depreciated on a straight-line basis over three years. Management continues to make controlling the Corporation's technology costs a priority and has initiated a number of prudent cost containment initiatives in 2004. Additional leasehold improvements at the Corporation's new facility will increase property, plant and equipment and the corresponding amortization in 2004 and beyond. AS AT DEC. 31, 2004 DEC. 31, 2003 DEC. 31, 2002 - ----- ------------- ------------- ------------- Furniture and equipment $ 294,615 $124,868 $ 139,523 Computer equipment 308,003 206,494 98,013 Software 70,612 105,762 134,300 Technology costs 10,164 23,782 1,307,260 Points.com Version 3.0 Direct Development Costs 860,286 -- -- Leasehold improvements 515,602 52,817 85,104 ---------- -------- ---------- TOTAL PLANT, PROPERTY AND EQUIPMENT $2,056,282 $513,723 $1,764,188 ========== ======== ========== Goodwill and Intangible Assets The MilePoint Acquisition resulted in $3,740,000 allocated to amortizing intangible assets and $3,910,000 ($3,710,000 from goodwill and $200,000 for other costs and deductions) to goodwill. In accordance with CICA handbook, Section 3062, goodwill will not be expensed unless it is deemed to have become impaired. In accordance with GAAP, management has 30

MANAGEMENT'S DISCUSSION & ANALYSIS selected March 31, 2005, as the anniversary date of the transaction and will therefore test the acquisition goodwill for impairment at that time. In the year 2004, $584,585 of charges relating to incremental transition services and additional direct costs related to the MilePoint Acquisition were incurred and charged to goodwill. Current Liabilities Current liabilities at December 31, 2004 were $24,775,900, compared with $11,643,244 at December 31, 2003. The increase was primarily related to the reclassification of the Debenture from long-term liabilities to current liabilities, the increase in deposits and accounts payable related to the growth in the operations, and the liability relating to the MilePoint Acquisition. See page 33, "Maturity of the CIBC Capital Partners' Debenture" for additional information regarding the solvency risks associated with repayment. Through arrangements with partner loyalty programs such as those for Buy and Corporate products, the Corporation processes transactions involving the online sale of loyalty currencies and collects the funds on behalf of the loyalty program partner. Gross proceeds received on the sale of loyalty program points, net of the commissions earned, are included in deposits and deferred revenue in the attached consolidated balance sheets until ultimately remitted. The level of deposits is influenced by partner activity and trends in the overall loyalty industry. As activity increases, the Corporation's deposits increase. The Corporation expects deposits to increase as it experiences growth with existing partners, establishes new partner relationships and integrates the assets from the MilePoint Acquisition. The three key customers, measured by revenue, represented approximately 61% (December 31, 2003 - 58%) of the Corporation's deposits. CURRENT LIABILITIES AS AT DEC. 31, 2004 DEC. 31, 2003 DEC. 31, 2002 - ------------------------- ------------- ------------- ------------- Accounts payable and accrued liabilities $ 1,894,599 $ 1,187,598 $ 1,017,955 Deposits 13,153,623 10,455,646 8,946,631 Current portion of obligation under capital lease 407,128 Current portion of loan payable 29,860 Current portion of acquisition loan payable 777,443 Debenture 8,920,373 ----------- ----------- ----------- TOTAL CURRENT LIABILITIES $24,755,900 $11,643,244 $10,371,715 =========== =========== =========== The December 31, 2004 accounts payable and accrued liabilities include 2004 employee bonus accruals to be paid in March 2005, and other accrued charges. The Corporation has sufficient foreign currency reserves to meet its foreign currency obligations and, as such, does not utilize any hedging or other strategies involving interest rate or currency derivatives. Working Capital Working capital (defined as current assets minus current liabilities) has declined from $10,461,182 in 2003 to ($7,767,648). See pages 28 through 31 for additional information regarding the Corporation's current assets and current liabilities. As the Corporation increases the rate of expenditures to successfully launch Points.com version 3.0, it is highly likely that working capital will remain negative in 2005. The Corporation believes that it can fund its operations while it is in a negative working capital position in 2005. Management expects that, through growth of its products, working capital will improve in 2006. See page 8 "Risk Factors" of the Corporation's AIF, for additional information. 31

MANAGEMENT'S DISCUSSION & ANALYSIS Long-Term Liabilities and Commitments PAYMENTS DUE BY PERIOD (AGGREGATE AMOUNT FOR MULTI-PERIODS) ---------------------------------------------------- FUTURE OBLIGATIONS (000,000'S) TOTAL (1) 2009+ 2008 2007 2006 2005 - ------------------------------ --------- ------ ------ ----- ----- ------ Long-Term Debt (2) (non-cash until repayment) $ 9.41 $ -- $ -- $ -- $ -- $ 9.41 Series Two Preferred Share (non-cash until repayment) 21.08 16.12 0.87 0.87 0.87 0.87 Loan Payable 0.11 -- 0.01 0.03 0.03 0.03 Operating Leases (3) 1.61 0.01 0.10 0.36 0.39 0.75 Partner Purchase Commitments (4) 4.16 0.33 0.43 1.36 1.08 0.96 MilePoint Acquisition (5) 1.48 -- -- -- 0.40 1.08 ------ ------ ----- ----- ----- ------ TOTAL CONTRACTUAL OBLIGATIONS $37.85 $16.46 $1.40 $2.62 $2.77 $13.10 ====== ====== ===== ===== ===== ====== NOTES: (1) Represents the aggregate amount for the full duration of the contractual obligations (including years post 2009 and prior to 2005). (2) The Debenture is due on July 4, 2005. The holder of the Debenture has the right to extend the term, in increments, to March 15, 2008. See page 27 "Interest on Convertible Debenture" for a summary of payments to be made with respect to the Debenture. (3) Includes technology services commitments and hardware and software operating leases. (4) Includes mileage purchase and co-marketing commitments, see page 34 "Partner Purchase Commitments." (5) Cash commitments related to the MilePoint Acquisition include the payments relating to the acquisition and anticipated transition costs of $285,000. Elements of the foregoing table are explained in more detail in the following sections. Commitments Related to the Terms of Certain Financing Arrangements Background On March 15, 2001, Points International issued to CIBC Capital Partners, a division of Canadian Imperial Bank of Commerce ("CIBC Capital Partners"), the 11% $6,000,000 Debenture, which was amended and restated on February 8, 2002 and April 11, 2003 and further amended on December 9, 2004. The full principal amount of the Debenture was set to mature on March 15, 2004. However, in December 2004, CIBC Capital Partners exercised its right to extend the maturity date until July 4, 2005. CIBC Capital Partners has the option, exercisable by March 31, 2005, to extend the maturity date through March 15, 2006 and thereafter, has the right to extend the maturity of the Debenture for up to two additional one-year periods. Accrued interest on the Debenture as of December 31, 2004 is $2,920,373 and is included with the Debenture as a current liability in the consolidated balance sheet. In certain circumstances, the $6,000,000 principal amount of the Debenture is convertible at the option of CIBC Capital Partners into up to 18,908,070 Common Shares. Accrued interest on any principal amount as converted ceases to be payable. The Debenture will also automatically convert in full into Common Shares immediately preceding certain liquidity events. The Debenture contains certain negative covenants in favour of CIBC Capital Partners. As part of the reorganization of Points International completed on February 8, 2002, the Corporation issued to CIBC Capital Partners one preference share (the "Series One Preferred Share"). The holder of the Series One Preference Share is entitled to a dividend (the "Dividend") in the event that, prior to an automatic conversion of the Debenture, (i) there is a merger or consolidation of Points International (or a subsidiary of Points International which owns all or substantially all of the assets of Points International) with another corporation where, following such event, the shareholders of Points International will not hold at least a majority of the voting power of the surviving/acquiring corporation, (ii) any person (other than CIBC Capital Partners) or persons acting jointly or in concert acquire 50% voting control or 50% of the equity of Points International 32

MANAGEMENT'S DISCUSSION & ANALYSIS (a "Change of Control"), or (iii) there is a sale of all or substantially all of the assets of Points International. The Dividend is approximately equal to $4,000,000 plus an amount calculated on the basis of a notional dissolution of the Corporation where the holder of the Series One Preference Share is entitled to share pro-rata (on the basis that the Series One Preference Share represents that number of Common Shares into which the Debenture is then convertible) with the holders of all other participating shares in distributions from the assets of Points International and assuming, for this purpose, that the value of the assets of Points International available for distribution on this notional dissolution is the value attributable to the equity of Points International implied by the transaction giving rise to the dividend event, as adjusted for the value of non-Common Share equity not valued in the transaction giving rise to the Dividend. In no event may the Dividend exceed $24,000,000. Where an event occurs giving rise to the Dividend, CIBC Capital Partners is entitled to accelerate all amounts owing under the Debenture. In connection with the IAC Investment, the Debenture was amended such that (i) the Debenture is repayable (without accrued interest, the repayment of which is waived) by Points International within 30 days of a Change of Control of Points International resulting from the exercise of the Warrants and (ii) the Debenture is not convertible for so long as the Warrants are outstanding and will not be convertible after the Warrants are exercised if the Debenture is repaid within 30 days of the Change in Control resulting from the exercise of the Warrants. Points International and CIBC Capital Partners also acknowledged, in connection with the IAC Investment, that in the event of the exercise of the Warrants resulting in a Change of Control, the application of the terms of the Series One Preference Share in that situation results in the Dividend equalling the lesser of (i) $24,000,000 and (ii) $4,000,000 plus the number of Common Shares into which the Debenture is then convertible, multiplied by the exercise price paid per Common Share on the exercise of the Warrants. Points International has agreed that, within 30 days of the exercise of the Warrants in full, it will pay all amounts owing under the Debenture and the Series One Preference Share. Except in connection with the exercise of the Warrants by IAC, Points International is not entitled to pre-pay the Debenture. Subsequent to year end, on January 31, 2005, CIBC Capital Partners waived the prohibitions on prepayment of the Debenture and acknowledged that Points International may at any time prepay the principal amount together with all accrued and unpaid interest and other amounts payable under the Debenture. Pursuant to this waiver, any prepayment would consist of an amount of cash equal in value to the unpaid principal amount and an amount in common shares of the Corporation equal in value to the amount of accrued but unpaid interest. This waiver is in effect until March 31, 2005. Maturity of the CIBC Capital Partners' Debenture When the Debenture matures on July 4, 2005, the Corporation will be required to repay $6,000,000 of principal and $3,413,118 of accrued interest to CIBC Capital Partners. The repayment of $9,413,118 of principal and accrued interest will cause the Corporation to be in a negative working capital position, may materially threaten its solvency and/or may severely restrict the ability to grow its business. There is no certainty that the Corporation would have sufficient cash at such time to make the repayment. However, CIBC Capital Partners has the option, exercisable prior to March 31, 2005, to extend the maturity date to March 15, 2006 and thereafter the right to extend the maturity of the Debenture for up to two additional one-year periods. Exercise of IAC Warrants If the Warrants are exercised resulting in a Change of Control prior to the maturity of the Debenture, as at the date hereof and based on the Corporation's current share capitalization, the Corporation would receive between $86.2 million and $95.7 million, depending on the year of exercise. On the exercise of the Warrants resulting in a Change of Control, the Corporation would be required to repay the $6,000,000 principal amount of the Debenture and pay the Dividend, which would then be payable on the Series One Preference Share (up to a maximum of $24,000,000). In this situation, management expects that the Corporation would have sufficient cash to make such payments. 33

MANAGEMENT'S DISCUSSION & Analysis Redemption Rights of Series Two Preferred Share Holder Unless the Series Two Preferred Share has been converted at the option of the holder, Points International will be required to redeem the Series Two Preferred Share upon the earlier of (i) March 31, 2013, and (ii) a person (other than the holder of the Series Two Preferred Share) acquiring shares of Points International sufficient to elect a majority of the board of directors of Points International (a "Series Two Share Change of Control"). In the event of redemption of the Series Two Preferred Share on a Series Two Share Change of Control, the redemption amount payable will be equal to the greater of (i) 125% of the amount equal to (A) the subscription price of the Series Two Preferred Share plus (B) a return on that subscription price equal to 7% per annum, calculated from the date of issue of the Series Two Preferred Share to the date on which the Series Two Preferred Share is redeemed and (ii) the greater of (A) the value of the Common Shares into which the Series Two Preferred Share then could be converted on the day immediately prior to public announcement of the Series Two Share Change of Control and (B) the product of the Common Shares into which the Series Two Preferred Share then could be converted and the fair market value of the consideration paid per Common Share in the transaction resulting in the Series Two Share Change of Control. Other Change of Control Event Upon the occurrence of an event that is a Change of Control and a Series Two Share Change of Control, and is unrelated to the exercise of the Warrants by IAC, Points International may not have sufficient cash to pay the Dividend, the amounts due under the Debenture and/or the redemption amount on the Series Two Preferred Share. As such, it is unlikely that management would consider a transaction that triggered the above payments unless the transaction provided for payment of the outstanding obligations. Partner Purchase Commitments ASSET RELATED TO MILEAGE PURCHASES AS AT DEC. 31, 2004 DEC. 31, 2003 DEC. 31, 2002 - ---------------------------------------- ------------- ------------- ------------- Prepaid Mileage $ 639,644 $516,651 $313,454 Sundry assets and other prepaid expenses 589,447 308,570 343,913 TOTAL $1,229,091 $825,221 $657,367 As part of the contractual requirements of certain commercial agreements, Points International has committed to purchase miles and points from partners at predetermined rates. When purchased, the points are recorded as an asset (i.e., prepaid expense) until expensed as marketing expenditures in the period of use. A large portion of the current prepaids and sundry assets of the Corporation include prepaid mileage commitments purchased from the Corporation's partners. While prepaid points may remain the same or lower as an overall percentage of prepaids and sundry assets, management expects the prepaid points account to increase as a result of the mileage purchase commitments from various partners. Commitments Related to MilePoint Acquisition On March 31, 2004, Points International completed the MilePoint Acquisition. The purchase price for the assets of MilePoint was $7.5 million and was satisfied through a combination of $3.5 million in cash ("Acquisition Payable") and four million Common Shares (worth approximately $4 million at the time of the transaction). An initial $1.9 million was paid in cash on closing, with the balance payable semi-annually over two years. The four million shares were issued into escrow on closing and will be released to MilePoint in four unequal tranches over two years. To date, professional fees of approximately $420,000 and payments for transition services of $365,515 have been incurred in the transaction and have been capitalized and allocated to goodwill. A portion of the Acquisition Payable (short-term and long-term) are interest-free and discounted at the appropriate 34

MANAGEMENT'S DISCUSSION & Analysis current market rate. The total discount of $50,000 will be charged to interest expense over the life of the Acquisition Payable. Points International business objective in acquiring the assets of MilePoint was to increase its volume of business at minimal additional costs outside of the purchase price and transition costs. Management expects that the acquisition will continue to increase revenues and, including all amortizations, continue to be accretive to net income through 2005. It is expected that the revenue/cash flow from the acquired assets will be sufficient to pay the cash portion of the purchase price over the 24-month period following the acquisition. Management believes that the Corporation's established facilities and existing employees, working in conjunction with MilePoint resources retained during the transition period, will be sufficient to sustain the additional volume of business from the acquired assets. The impact of the acquisition to Points International balance sheet in 2004 was an increase to intangible assets by $3,740,000 and goodwill by $3,910,000. The amortization of the assets is based on the estimated life of the acquired assets (i.e., the partner contracts). The amortization and the balance of the purchased intangible assets are approximately as follows: Amount in ($000's) Dec. 31, 2004 - ---------------------------------- ------------- Accumulated Amortization $ 656 Intangible Asset - Closing Balance 3,092 Goodwill 4,495 In addition to the existing revenue streams acquired from MilePoint, offering Points Solutions to the partners acquired from MilePoint represents a potentially valuable stream of revenue. As with any acquisition, the smooth transition into the Corporation's operations poses challenges. Transition risks include difficulties in integrating MilePoint's business into the Corporation and the possibility of human resources capacity limits to launch additional new partners during the transition. The payment of the purchase price under the terms of the MilePoint Acquisition is as follows: Months from Closing --------------------------------------------------------------- Payout (000's) 0 4 6 12 18 24 Shares Cash - --------------- ------ ------ ---- ---- ------ ---- ------ ------ Cash $1,900 $ -- $400 $400 $ 400 $400 $3,500 Shares 1,300 700 1,500 500 4,000 4,000 Share Value (1) 1,300 700 1,500 500 4,000 $7,500 TOTAL Note: (1) Based on the simple 20-day weighted average Common Share price of $1.00 per share at signing. In 2004, the Corporation paid $1.9 million on April 1 and $400,000 on October 1 in cash in partial satisfaction of the purchase price for MilePoint's business. In addition, MilePoint and the Corporation are party to a Transition Services Agreement ("TSA") whereby MilePoint employees and resources continued to support the products and partner relationships. Under the TSA, the Corporation has agreed to reimburse MilePoint for expenses incurred in providing transition services, to a maximum of US$417,000 (of which $312,819 or US$235,000 has been paid to date). Points International has also 35

MANAGEMENT'S DISCUSSION & ANALYSIS entered into a consulting agreement with MilePoint and one of its senior business development principals. The consultant will be focused on supporting existing relationships and selling Points Solutions to existing and new partners. Management of Points International continues to expect that the cash cost of the MilePoint Acquisition will largely be recaptured through the new revenue provided by the purchased assets over the 24-month period following March 31, 2004. Commitments Related to Lease Financing Arrangements While the Corporation has completed its capital lease obligations in 2003, several operating leases for hardware and premises remain outstanding. In the second quarter, the Corporation signed a 45-month sublease agreement in a larger facility. In exchange for a 27-month lease extension, the landlord advanced the Corporation $107,000 for leasehold improvements (see "Loan Payable" in table below). The Loan Payable is to be repaid over the term of the original sub-lease. Each payment is approximately $2,600 and there are 38 monthly payment periods remaining. The Corporation's lease at its former premises expired in February 2005. In 2004, the Corporation paid approximately $226,000 for its former office facilities (approximately 8,050 square feet) and $190,000 for its new office facilities (approximately 18,000 square feet). Property lease costs are outlined in the table below. Beginning June 1, 2004, the Corporation was able to complete a sublet arrangement for a portion of the former premises. The sublet covered approximately 25% of the cost of the premises and expired in February 2005. The projected figures do not include leasehold improvement amounts for Points International's new facilities. Leasehold improvements for the new facilities are included in 2004 capital expenditures (see "Planned Capital Expenditures" below). The operating leases primarily relate to specific office technology and technology service commitments. ANNUAL AMOUNTS IN ($000'S) 2009 2008 2007 2006 2005 - -------------------------- ---- ---- ---- ---- ---- OPERATING LEASES Property lease $-- $88 $351 $355 $430 Technology services commitment 11 11 11 33 319 OPERATING LEASES TOTAL 11 $99 $363 $388 $749 LOAN PAYABLE $-- $ 5 $ 30 $ 30 $ 30 CAPITAL RESOURCES Planned Capital Expenditures In 2004, the Corporation incurred significant leasehold improvement costs in connection with its move to new facilities (see table below). The project is complete and management does not expect to incur any additional material expenditures related to the leasehold improvements. DEC. 31, DEC. 31, DEC. 31, CAPITAL EXPENDITURES AS AT 2004 2003 2002 - -------------------------- ---------- -------- -------- Leasehold Improvements $ 554,843 $ 20,793 $ 1,973 Points.com Version 3.0 Technology 860,286 Computer Hardware, Software and Other 440,048 317,936 43,578 ---------- -------- ------- TOTAL $1,855,177 $338,730 $45,551 ========== ======== ======= 36

MANAGEMENT'S DISCUSSION & ANALYSIS The Corporation expects to increase its capital expenditures related to computer software, hardware and other to approximately $1,000,000, with the majority of the expenses relating to software in support of Points.com version 3.0 and approximately $250,000 relating to protecting the Corporation's intellectual/intangible property (filing of patents and trademarks, etc.). Management believes that the hardware and software capital expenditures are necessary to keep the development of the Corporation's primary technology assets in line with industry standards. The Corporation expects to incur significant capital expenditures related to the development of Points.com version 3.0. In accordance with CICA handbook, Sections 3061 and 3062, and GAAP, Web site development costs incurred in the Web site application and infrastructure development will be capitalized and subsequently amortized in accordance with the Corporation's accounting policies. The Corporation will begin amortizing the capital asset when Points.com version 3.0 is launched (expected to be on or around April 2005). Direct new technology developed subsequent to the launch of Points.com version 3.0 will be capitalized in accordance with the Corporation's accounting policies. Costs to maintain Points.com version 3.0 will be expensed in the period the costs are incurred. Web site development costs incurred to date and capitalized to the Web site under property, plant and equipment consist of employment related costs of $728,122 and other direct costs of $132,163. The capitalized costs in 2005 will likely be greater than the costs incurred in 2004. The expected increase in the capitalized costs will be affected by whether management decides to contract any of the development to third-parties and by annualizing the costs of employees hired during the third and fourth quarter. Estimates are provided for the capitalized expenses for the fiscal year 2005 in the table below. WEB SITE DEVELOPMENT COSTS Q1 2005 Q2 2005 Q3 2005 Q4 2005 - -------------------------- -------- -------- -------- -------- Employment related costs $490,555 $309,980 $234,904 $102,306 Other direct costs 15,000 15,000 15,000 15,000 -------- -------- -------- -------- TOTAL $505,555 $324,980 $249,904 $117,306 ======== ======== ======== ======== Management will continue to fund 2005 capital expenditures from its working capital and/or cash flow from operations. Unplanned Securities Issuances Pursuant to the terms of the Debenture, the Investor's Rights Agreement dated April 11, 2003 between IAC, Points International and an affiliate of IAC and the terms of the Series Two Preferred Share, IAC and CIBC Capital Partners have significant control over the Corporation's ability to raise capital whether by way of an equity issuance or the incurrence of debt. However, in the event the Corporation requires additional capital, it does not expect that any required consents would be unreasonably withheld. Outstanding Share Data As at the date hereof, the Corporation has 74,072,456 Common Shares outstanding, one Series One Preference Share and one Series Two Preferred Share. The Series One Preference Share is convertible into one Common Share in certain circumstances. Subject to anti-dilution adjustment, based on the Corporation's current capitalization, the Series Two Preferred Share is convertible into 19,999,105 Common Shares. The Corporation has outstanding options exercisable to acquire up to 4,445,808 Common Shares. The options have exercise prices ranging from $0.22 to $1.37 with a weighted average exercise price of $0.80. The expiration dates of the options range from March 14, 2005 to January 24, 2010. The Corporation's subsidiary, Points.com, has outstanding options exercisable to acquire up to 2,114,899 common shares of 37

MANAGEMENT'S DISCUSSION & ANALYSIS Points.com. The holders of these options have been granted the right to put the shares acquired on the exercise thereof to the Corporation in return for Common Shares with a fair market value equal to the fair market value so put. The Corporation has used a ratio of 2.5039 Common Shares to one Points.com share for this purpose and has authorized the issuance of up to a maximum of 5,295,492 Common Shares in this regard. The Points.com options have exercise prices ranging from $0.005 to $0.055 with a weighted average exercise price of $0.04. The expiration dates of the options range from March 31, 2005 to August 20, 2005. The Corporation has outstanding warrants exercisable to acquire up to 84,294,933 Common Shares. The warrants have exercise prices ranging from $0.25 to $1.03 with a weighted average exercise price of $1.03. The expiration dates of the options range from July 18, 2005 to April 11, 2006. The Corporation has outstanding an 11% $6,000,000 senior secured convertible Debenture which is convertible into 18,908,070 Common Shares. The Debenture is not convertible into Common Shares at the option of the holder as long as the Warrants are outstanding. At the option of the Debenture holder, exercisable prior to March 31, 2005, the maturity of the Debenture is extendible to March 15, 2006 and thereafter the holder has the right to extend the maturity of the Debenture for up to two additional one-year periods. SELECTED FINANCIAL RESULTS AND HIGHLIGHTS INCOME STATEMENT FOR THE YEAR ENDED 2004 2003 2002 - ----------------------------------- ----------- ----------- ----------- Total Revenue $ 7,791,591 $ 5,858,704 $ 2,368,262 General and administrative expenses 12,230,652 8,029,471 6,941,069 Loss before interest, amortization and other deductions (4,439,061) (2,170,767) (4,572,777) Net income (loss) (8,808,284) (6,536,191) (7,807,378) Net income (loss) per share (1)(2) - basic ($0.13) ($0.11) ($0.15) - fully diluted n/a n/a n/a NOTES: (1) The fully diluted loss per share has not been computed, as the effect would be anti-dilutive. (2) In 2004, the Corporation's loss per share was increased by approximately $0.01 as a result of the requirement to expense stock options granted in 2004 (Section 3870, "Stock-Based Compensation and Other Stock-Based Payments" of the CICA handbook) combined with the write-down of the ThinApse investment. See page 50 of the Corporation's Audited Consolidated Financial Statements Note 3, for additional information on the accounting policy change relating to stock options. DEC. 31, DEC. 31, DEC. 31, BALANCE SHEET AS AT 2004 2003 2002 - ------------------- ------------ ------------ ------------ Cash and cash equivalents $ 13,754,818 $ 20,274,836 $ 7,341,700 Total assets (1) 30,179,854 27,481,286 13,140,020 Total liabilities 14,339,782 21,060,850 7,182,500 CASH DIVIDENDS DECLARED PER SHARE SHAREHOLDERS EQUITY - warrants 2,610,992 2,785,737 425,588 - capital stock and contributed surplus 23,187,826 17,791,609 14,361,033 - deficit (34,734,644) (25,800,155) (19,200,816) ------------ ------------ ------------ TOTAL $ (8,935,827) $ (5,222,809) $ (4,414,195) ============ ============ ============ NOTE: (1) Financial results from minority holdings are not consolidated into the Corporation's consolidated financial statements, as the Corporation does not exercise control in these entities. 38

MANAGEMENT'S DISCUSSION & ANALYSIS POINTS INTERNATIONAL LTD. SUMMARY OF QUARTERLY RESULTS (UNAUDITED) LOSS PER QUARTER ENDED REVENUES NET LOSS SHARE (1) - ------------- ---------- ------------ --------- December 31, 2004 $2,162,948 ($2,751,857) ($0.04) September 30, 2004 $1,978,942 ($2,001,764) ($0.03) June 30, 2004 $2,032,136 ($2,153,069) ($0.03) March 31, 2004 $1,617,565 ($1,901,594) ($0.03) December 31, 2003 $1,449,378 ($2,605,974) ($0.04) September 30, 2003 $1,647,566 ($1,628,391) ($0.03) June 30,2003 $1,457,568 ($1,283,337) ($0.02) March 31, 2003 $1,304,192 ($1,018,489) ($0.02) NOTE: (1) The fully diluted loss per share has not been computed as the effect would be anti-dilutive. 39

MANAGEMENT'S RESPONSIBILITY FOR FINANCIAL REPORTING Management has prepared the information contained in the financial statements and in the Annual Report. Some numbers presented in the financial statements are based on estimates and judgments; the integrity and fairness of this information is the responsibility of management. The company has prepared the financial statements according to Canadian generally accepted accounting principles. All of the information throughout the Annual Report is consistent with the financial statements. The company maintains internal control, accounting and administrative procedures to provide reasonable assurance that the financial information is relevant, reliable, accurate and fairly presented. The Board of Directors is responsible for governance and fair presentation of the financial statements. The Board of Directors accepts this charge and carries out this responsibility primarily through its audit committee. The Board of Directors appoints the audit committee. All members of the audit committee are outside directors. The committee met with management and auditors before approving the financial statements. The audit committee reports its findings to the Board of Directors and recommends approval of the financial statements by the Board of Directors. The company's external auditors, Mintz & Partners LLP, have conducted an independent audit of the financial statements in accordance with Canadian generally accepted auditing standards. The external auditors had full and unrestricted access to the audit committee and management. Management acknowledges its responsibility in its letter of representation to the Corporation's Auditors and to the Corporation's board of directors. This responsibility is referred to in the audit opinion. /s/ Robert MacLean /s/ Stephen Yuzpe - ------------------------------------- ---------------------------------------- Robert MacLean Stephen Yuzpe Chief Executive Officer Chief Financial Officer Points International Ltd. 40

(GRAPHIC) FINANCIAL STATEMENTS AUDITOR'S REPORT 42 CONSOLIDATED FINANCIAL STATEMENTS CONSOLIDATED BALANCE SHEETS 43 CONSOLIDATED STATEMENTS OF OPERATIONS 45 CONSOLIDATED STATEMENTS OF RETAINED EARNINGS (DEFICIT) 45 CONSOLIDATED STATEMENTS OF CASH FLOWS 46 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS 47 41

AUDITOR'S REPORT To the Shareholders of Points International Ltd. We have audited the consolidated balance sheets of Points International Ltd. as at December 31, 2004 and 2003 and the consolidated statements of operations and deficit and cash flows for the years then ended. These consolidated financial statements are the responsibility of the corporation's management. Our responsibility is to express an opinion on these consolidated financial statements based on our audit. We conducted our audits in accordance with Canadian generally accepted auditing standards. Those standards require that we plan and perform an audit to obtain reasonable assurance whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. In our opinion, these consolidated financial statements present fairly, in all material respects, the financial position of the corporation as at December 31, 2004 and 2003 and the results of its operations and its cash flows for the years then ended in accordance with Canadian generally accepted accounting principles. (MINTZ & PARTNERS LLP) Toronto, Ontario February 16, 2005 CHARTERED ACCOUNTANTS 42

FINANCIAL STATEMENTS POINTS INTERNATIONAL LTD. CONSOLIDATED BALANCE SHEETS AS AT DECEMBER 31 2004 2003 - ----------------- ----------- ----------- ASSETS CURRENT Cash and cash equivalents (Note 4) $13,754,818 $20,274,836 Accounts receivable 2,024,342 1,004,370 Prepaids and sundry assets 1,229,091 825,221 ----------- ----------- 17,008,251 22,104,427 PROPERTY, PLANT AND EQUIPMENT (Note 6) 2,056,282 513,723 GOODWILL AND INTANGIBLE ASSETS (Note 7) 8,282,453 1,320,692 DEFERRED COSTS (Note 23) 2,242,868 2,790,816 LONG-TERM INVESTMENTS (Note 5) -- 161,629 FUTURE INCOME TAXES RECOVERABLE 590,000 590,000 ----------- ----------- 13,171,603 5,376,859 $30,179,854 $27,481,286 =========== =========== APPROVED ON BEHALF OF THE BOARD: /s/ ROBERT MACLEAN - ------------------------------------- ROBERT MACLEAN Director /s/ CHRISTOPHER BARNARD - ------------------------------------- CHRISTOPHER BARNARD Director 43

FINANCIAL STATEMENTS POINTS INTERNATIONAL LTD. CONSOLIDATED BALANCE SHEETS AS AT DECEMBER 31 2004 2003 - ----------------- ------------ ------------ LIABILITIES CURRENT Accounts payable and accrued liabilities $ 1,894,599 $ 1,187,598 Deposits 13,153,623 10,455,646 Current portion of loan payable (Note 8) 29,860 -- Current portion of acquisition loan payment (Note 15) 777,443 -- Convertible debenture (Note 9) 8,920,373 -- ------------ ------------ 24,775,900 11,643,244 LOAN PAYABLE (Note 8) 67,186 -- ACQUISITION LOAN PAYABLE (Note 15) 380,118 -- CONVERTIBLE DEBENTURE (Note 9) -- 8,036,372 CONVERTIBLE PREFERRED SHARES (Note 10) 13,892,478 13,024,478 ------------ ------------ 39,115,681 32,704,094 SHAREHOLDERS' EQUITY CAPITAL STOCK (Note 11) 22,705,734 17,728,461 CONTRIBUTED SURPLUS (Note 12 (b)) 482,092 63,148 WARRANTS (Note 12) 2,610,992 2,785,737 DEFICIT (34,734,645) (25,800,155) ------------ ------------ (8,935,827) (5,222,809) ------------ ------------ $ 30,179,854 $ 27,481,286 ============ ============ 44

FINANCIAL STATEMENTS POINTS INTERNATIONAL LTD. CONSOLIDATED STATEMENTS OF OPERATIONS FOR THE YEARS ENDED DECEMBER 31 2004 2003 - ------------------------------- ----------- ----------- REVENUES Points International operations $ 7,560,012 $ 5,502,744 Interest income 231,579 355,960 ----------- ----------- 7,791,591 5,858,704 GENERAL AND ADMINISTRATION EXPENSES 12,230,652 8,029,471 LOSS - Before interest, amortization and other items (4,439,061) (2,170,767) Interest on Convertible Debenture (Note 9) 884,001 853,872 Interest on Series Two Preferred Share (Note 10) 868,000 624,478 Interest, loss on short-term investments and bank charges 132,843 9,753 Write-off of ThinApse Corporation (Note 5) 161,629 -- Amortization of property, plant and equipment, intangible assests and Deferred Costs 2,322,749 2,877,321 ----------- ----------- 4,369,223 4,365,424 LOSS (8,808,284) (6,536,191) ----------- ----------- LOSS PER SHARE (Note 13) ($0.13) ($0.11) =========== =========== POINTS INTERNATIONAL LTD. CONSOLIDATED STATEMENTS OF RETAINED EARNINGS (DEFICIT) FOR THE YEARS ENDED DECEMBER 31 2004 2003 - ------------------------------- ------------ ------------ DEFICIT - BEGINNING OF YEAR As previously reported ($25,800,155) ($19,200,816) Change in accounting policy (Note 3) (126,206) (63,148) As restated (25,926,361) (19,263,964) ------------ ------------ LOSS - FOR THE YEAR (8,808,284) (6,536,191) ------------ ------------ DEFICIT - END OF YEAR ($34,734,645) ($25,800,155) ============ ============ 45

FINANCIAL STATEMENTS POINTS INTERNATIONAL LTD. CONSOLIDATED STATEMENTS OF CASH FLOWS FOR THE YEARS ENDED DECEMBER 31 2004 2003 - ------------------------------- ----------- ----------- CASH FLOWS FROM OPERATING ACTIVITIES Net loss $(8,808,284) $(6,536,191) Items not affecting cash Amortization of property, plant and equipment 312,617 1,589,206 Amortization of deferred costs 601,319 531,914 Amortization of intangible assets 1,408,813 756,201 Employee stock option expense 362,343 -- Writedown of long-term investment 161,629 -- Cancellation of warrants issued for services (1,179) -- Interest on Series Two Preferred Share 868,000 624,478 Interest accrued on convertible debenture 884,001 853,872 ----------- ----------- (4,210,741) (2,180,520) Changes in non-cash balances related to operations (Note 14 (a)) 1,857,746 774,066 ----------- ----------- CASH FLOWS USED IN OPERATING ACTIVITIES (2,352,995) (1,406,454) ----------- ----------- CASH FLOWS FROM INVESTING ACTIVITIES Purchase of property, plant and equipment, net of proceeds (1,855,177) (338,730) Purchase of intangible assets (128,428) (130,353) Payments for the acquisition of MilePoint, Inc. (Note 15) (2,300,000) -- Costs related to the acquisition of MilePoint, Inc. (Note 15) (728,534) -- ----------- ----------- CASH FLOWS USED IN INVESTING ACTIVITIES (5,012,139) (469,083) ----------- ----------- CASH FLOWS FROM FINANCING ACTIVITIES Issuance of Warrants -- 2,700,000 Issuance of Series Two Preferred Share -- 12,400,000 Loan payable, net of repayments (Note 8) 97,047 -- Deferred financing costs 13,967 (3,039,774) Repayment of obligations under capital leases -- (407,128) Issuance of capital stock, net of share issue costs 734,101 3,155,575 ----------- ----------- CASH FLOWS PROVIDED BY FINANCING ACTIVITIES 845,115 14,808,673 ----------- ----------- INCREASE(DECREASE) IN CASH (6,520,019) 12,933,136 ----------- ----------- CASH AND CASH EQUIVALENTS - Beginning of period 20,274,836 7,341,700 ----------- ----------- CASH AND CASH EQUIVALENTS - END OF PERIOD $13,754,818 $20,274,836 46

FINANCIAL STATEMENTS POINTS INTERNATIONAL LTD. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS DECEMBER 31, 2004 AND 2003 1. BASIS OF PRESENTATION AND BUSINESS OF THE CORPORATION The accompanying consolidated financial statements of Points International Ltd. (the "Corporation") include the financial position, results of operations and cash flows of the Corporation and its wholly-owned subsidiaries, Exclamation Inc., Points International (US) Ltd., Points International (UK) Limited and its indirect wholly-owned subsidiary, Points.com Inc. The Corporation operates the Points.com Web site. Points.com is an online service allowing consumers to swap points and miles from one participating loyalty program to another to achieve the rewards they want faster than ever before. Points.com also serves as a central resource to help individuals track their account balances with a number of loyalty programs. In addition, the Corporation develops technology solutions for the loyalty program industry. The Corporation's portfolio of custom solutions facilitates the online sale, transfer and exchange of miles, points and currencies for a number of major loyalty programs. Notwithstanding that the Company has a working capital deficiency, which is cause by the CIBC Capital Partners Debenture (see Note 9) becoming classified as a current liability; these consolidated financial statements are prepared assuming that the Company will be successful in extending or refinancing the CIBC Capital Partners Debenture. 2. SIGNIFICANT ACCOUNTING POLICIES A) USE OF ESTIMATES The preparation of these consolidated financial statements, in conformity with Canadian generally accepted accounting principles ("GAAP"), has required management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent liabilities as at December 31, 2004 and 2003 and the revenues and expenses reported for the years then ended. Actual results may differ from those estimates. B) REVENUE RECOGNITION Revenues from transaction processing are recognized as the services are provided under the terms of related contracts. Membership fees received in advance for services to be provided over a future period are recorded as deferred revenue and recognized as revenue evenly over the term of service. Related direct costs are also recognized over the term of the membership. Revenues from the sales of loyalty program points are recorded net of costs, in accordance with Abstract 123 of the Emerging Issues Committee ("EIC") of the Canadian Institute of Chartered Accountants ("CICA"), "Reporting Revenue Gross as a Principal Versus Net as an Agent," when the collection of the sales proceeds is reasonably assured and other material conditions of the swap are met. Gross proceeds received on the resale of loyalty program points, net of the commissions earned, are included in deposits in the attached consolidated balance sheet until remitted. Non-refundable partner sign-up fees with no fixed term, and for which the Corporation is under no further obligations, are recognized as revenue when received. Custom Web site design revenues are recorded on a percentage-of-completion basis. C) CASH AND CASH EQUIVALENTS Cash and cash equivalents includes amounts on deposit at the Corporation's bank and amounts held for the Corporation by a third-party credit card processor. Such amounts represent a reserve in respect of purchases of miles/points. 47

FINANCIAL STATEMENTS Short-term investments are accounted for at the lower of cost and net realizable value. D) PROPERTY, PLANT AND EQUIPMENT Property, plant and equipment are recorded at cost less accumulated amortization. Rates and basis of amortization applied by the Corporation to write off the cost of the property, plant and equipment over their estimated useful lives are as follows: Furniture and equipment 20% declining balance basis Computer equipment 30% declining balance basis Software 30% straight-line basis Technology costs straight-line over 3 years Web site development costs straight-line over 3 years (upon launch of Web site) Leasehold improvements straight-line over 5 years E) GOODWILL AND INTANGIBLE ASSETS The Corporation follows Section 3062 ("Goodwill and Other Intangible Assets") of the CICA Handbook, in accounting for the value of its public listing. Since the public listing has an indefinite life, no amortization is recorded. Patents will be amortized over the remaining life of the patent commencing when the patents have been granted. The remaining life of the patent is determined as 20 years less the time between the date of filing and the patent grant date. Registered trademarks have an indefinite life and will not be amortized unless it is determined that they have become impaired. Acquired technology, representing the excess of the cost over the values attributed to the underlying net assets of the acquired shares of Points.com Inc., will be amortized on a straight-line basis over a period of three years. The MilePoint Acquisition represents the fair value of contracts acquired by the company as described in Note 15. The carrying value of these contracts is amortized on a straight-line basis over the life of the contracts. Goodwill represents the excess of the purchase price of acquired companies over the estimated fair value of the tangible and intangible net assets acquired. Goodwill is not amortized. The company currently compares the carrying amount of the goodwill to the fair value, at least annually, and recognizes in net income any impairment in value. If the Corporation determines that there is permanent impairment in the value of the unamortized portion of the intangible assets, as future earnings will not be realized as projected, an appropriate amount of unamortized balance of intangible assets will be charged to income as an "impairment charge" at that time. F) LONG-TERM INVESTMENTS Investments in shares of companies over which the Corporation exercises significant influence are accounted for using the equity method. Investments in shares of companies over which the Corporation does not exercise significant influence are accounted for using the cost basis. The Corporation reviews all of its long-term investments regularly and provides for any decline, other than a temporary decline, in the value of the investment to the estimated net recoverable amount. 48

FINANCIAL STATEMENTS G) DEFERRED FINANCE CHARGES Charges incurred in respect of certain financings are deferred and charged to income on a straight-line basis over three years. Deferred finance charges represent legal and other related fees incurred to obtain the financing described in Notes 9 and 10. H) CAPITAL LEASES Leases that transfer substantially all of the benefits and risks of ownership of the property to the Corporation are treated as an acquisition of an asset and an obligation. I) COSTS OF RAISING CAPITAL Incremental costs incurred in respect of raising capital are charged against equity proceeds raised. J) TRANSLATION OF FOREIGN CURRENCY Assets and liabilities denominated in foreign currencies are translated into Canadian dollars at exchange rates prevailing at the balance sheet date for monetary items. Income and expenses are translated at average exchange rates prevailing during the year. Realized and unrealized foreign exchange gains and losses are accounted for in general and administrative expenses and consequently included in net income. The results of foreign operations, which are financially and operationally integrated with the Corporation, are translated using the temporal method. Under this method, monetary assets and liabilities denominated in foreign currencies have been translated into Canadian dollars at the rate of exchange prevailing at year-end. Fixed assets have been translated at the rates prevailing at the dates of acquisition. Revenue and expense items are translated at the average rate of exchange for the year. Exchange gains or losses on translation are accounted for in general and administrative expenses and consequently included in net income. K) INCOME TAXES The Corporation follows the asset and liability approach to accounting for income taxes. The income tax provision differs from that calculated by applying the statutory rates to the changes in current or future income tax assets or liabilities during the year. Current income taxes payable differ from the total tax provisions as a result of changes in taxable and deductible temporary differences between the tax basis of assets and liabilities and their carrying amounts in the balance sheet. L) NON-MONETARY TRANSACTIONS Transactions in which shares or other non-cash consideration are exchanged for assets or services are valued at the fair value of the assets or services involved in accordance with Section 3830, "Non-monetary Transactions," of the CICA handbook. M) EARNINGS PER SHARE The Corporation uses Section 3500, "Earnings per Share," of the CICA handbook, which directs that the treasury stock method be used to calculate diluted earnings per share. Diluted earnings per share considers the dilutive impact of the exercise of outstanding stock options, warrants, conversion of preferred shares and the convertible debenture, as if the events had occurred at the beginning of the period or at a time of issuance, if later. Fully diluted loss per share has not been presented, as the effect would be anti-dilutive. 49

FINANCIAL STATEMENTS N) STOCK-BASED COMPENSATION EMPLOYEES For stock-based compensation issued to employees, the Corporation recognizes an expense. The Corporation accounts for its grants in accordance with the fair value-based method of accounting for stock-based compensation. NON-EMPLOYEES For stock-based compensation issued to non-employees, the Corporation recognizes an asset or expense based on the fair value of the equity instrument issued. 3. CHANGES IN ACCOUNTING POLICIES Effective January 1, 2004, the CICA handbook, Section 3870, "Stock-Based Compensation and Other Stock-Based Payments" was amended to require expense treatment of all stock-based compensation and payments for options granted beginning on or after January 1, 2002. As permitted by this standard, this change in accounting policy has been applied retroactively without restatement of the prior years' financial statements. This change results in a reduction of $63,148 to the 2003 opening retained earnings and an increase of $63,148 to 2003 contributed surplus. In 2004, this change resulted in a reduction of $126,206 to the opening retained earning and an increase of $71,248 to the contributed surplus and $54,958 to share capital. See also Note 12 (b). 4. CASH EQUIVALENTS Cash equivalents includes cash held at the company's bank and currently invested through an interest rate agreement earning prime rate less 225 basis points for Canadian funds (approximately 2%) and 80% of the U.S. T-Bill rate for U.S. funds (approximately 1%), and cash held by the third-party credit processor. Cash equivalents also includes investments in short and mid-term bonds maturing on various dates. The investments could be liquidated at any time at the option of the Corporation with no loss in value. 5. LONG-TERM INVESTMENTS The Corporations' original investment in ThinApse Corporation of $161,629 has been written off in 2004. In October 2004, certain assets of ThinApse Corporation were sold to Meridex Software Corporation in return for shares and cash. As the value of the investment is deemed by management to be impaired, management has chosen to write off the investment. 2004 2003 ---- -------- (i) ThinApse Corporation - 12% interest (fully diluted), cost basis SHARES AT COST $-- $161,629 === ======== 50

FINANCIAL STATEMENTS 6. PROPERTY, PLANT AND EQUIPMENT ACCUMULATED 2004 COST AMORTIZATION NET CARRYING - ---- ---------- ------------ ------------ Furniture and equipment $ 468,355 $ 173,740 $ 294,615 Computer equipment 590,619 282,616 308,003 Software 443,340 372,728 70,612 Technology costs 3,992,264 3,982,100 10,164 Web site development costs 860,286 -- 860,286 Leasehold improvements $ 752,718 $ 240,116 $ 512,602 ---------- ---------- ---------- $7,107,583 $5,051,300 $2,056,282 ========== ========== ========== ACCUMULATED 2003 COST AMORTIZATION NET CARRYING - ---- ---------- ------------ ------------ Furniture and equipment $ 251,998 $ 127,130 $124,868 Computer equipment 398,316 191,822 206,494 Software 411,951 306,189 105,762 Technology costs 3,992,264 3,968,482 23,782 Leasehold improvements 197,875 145,059 52,817 ---------- ---------- -------- $5,252,406 $4,738,683 $513,723 ========== ========== ======== Web site development costs capitalized in 2004 will begin to amortize when the Web site currently under development is launched. See Note 2 (d). 7. GOODWILL AND INTANGIBLE ASSETS ACCUMULATED 2004 COST AMORTIZATION NET CARRYING - ---- ----------- ------------ ------------ Public Status $ 150,000 $ 100,000 $ 50,000 MilePoint, Inc. Acquisition (Note 15) 8,242,146 655,945 7,586,201 Patents and Trademarks 462,376 -- 462,376 Acquired Technology 2,258,603 2,074,727 183,876 ----------- ---------- ---------- $11,113,125 $2,830,672 $8,282,453 =========== ========== ========== ACCUMULATED 2003 COST AMORTIZATION NET CARRYING - ---- ---------- ------------ ------------ Public Status $ 150,000 $ 100,000 $ 50,000 Patents and Trademarks 335,439 -- 335,439 Acquired Technology 2,258,603 1,323,351 935,253 ---------- ---------- ---------- $2,744,042 $1,423,351 $1,320,692 ========== ========== ========== 51

FINANCIAL STATEMENTS 8. LOAN PAYABLE In August 2004, the Corporation entered into an agreement with the landlord, whereby the landlord loaned the Corporation $107,000 in respect to amounts that the Corporation had spent on leasehold improvements. The loan is repayable over 43 months and bears an interest rate of 10%. 9. CONVERTIBLE DEBENTURE On March 15, 2001 the Corporation issued to CIBC Capital Partners, a division of Canadian Imperial Bank of Commerce, an 11% $6,000,000 senior secured convertible debenture (the "CIBC Debenture"), which debenture was amended and restated as of February 8, 2002 in connection with the reorganization of the Corporation effected on that date. The CIBC Debenture was subsequently amended on April 11, 2003 in connection with the issuance to Points Investments, Inc., an unrelated entity, of the Series Two Preferred Share and a Common Share purchase warrant (the "PII Warrant"). The CIBC Debenture is not convertible while the PII Warrant, as described in Note 10, is outstanding. On December 9, 2004, CIBC Capital Partners extended the CIBC Debenture's maturity date to July 4, 2005. Accordingly, the Debenture is classified as a current liability. An additional two one-year extensions at the option of CIBC Capital Partners are available. The Corporation is not entitled to pre-pay the CIBC Debenture other than in connection with a change in control of the Corporation upon the exercise in full of the PII Warrant (in which circumstances payment of accrued interest is waived). In the event that the PII Warrant ceases to be held by InterActiveCorp or an affiliate thereof, the $6,000,000 principal amount of the CIBC Debenture will be convertible at the option of CIBC Capital Partners into 18,908,070 Common Shares and accrued interest on any principal amount so converted ceases to be payable. The CIBC Debenture will automatically convert into Common Shares immediately preceding any one of (i) the sale of all outstanding Common Shares for a price per share of at least $1.26928, (ii) the sale of all or substantially all of the assets of the Corporation yielding net proceeds per Common Share (after giving effect to the conversion of the CIBC Debenture) of at least $1.26928, and (iii) a public offering of Common Shares raising at least $30,000,000 at an issue price per share of at least $1.26928 where the Corporation has a pre-offering equity value of at least $175,000,000 and the Common Shares are listed on the Toronto Stock Exchange. Subsequent to year end, on January 31, 2005, CIBC Capital Partners waived the prohibitions on prepayment of the Debenture and acknowledged that the Corporation may at any time prepay the principal amount together with all accrued and unpaid interest and other amounts payable under the Debenture. Under the terms of this agreement, any prepayment would consist of an amount of cash equal in value to the unpaid principal amount and an amount in common shares of the Corporation equal in value to the amount of accrued but unpaid interest. This waiver is in effect until March 31, 2005. The CIBC Debenture contains negative covenants in favour of CIBC Capital Partners such that CIBC Capital Partners' consent is required for, among other things, (i) the sale by the Corporation of all or substantially all of its assets, (ii) any transaction to reorganize the Corporation's capital structure or merge with another person, (iii) certain sales of treasury stock at a price per share of less than $0.40, (iv) the payment of dividends or distributions on share capital or the purchase or redemption of outstanding securities, (v) amendments to the articles or by-laws of the Corporation and (vi) material changes to the business of the Corporation. 10. PREFERRED SHARES A) SERIES ONE PREFERENCE SHARE The Series One Preference Share was created by Articles of Amendment dated December 20, 2001 and was issued on February 8, 2002. 52

FINANCIAL STATEMENTS The Series One Preference Share is non-voting and not entitled to dividends other than as set out below. The Series One Preference Share will automatically convert into one Common Share upon (i) conversion into Common Shares of greater than $2,000,000 of the $6,000,000 principal amount of the CIBC Debenture, (ii) repayment in full of the CIBC Debenture or (iii) payment of the Dividend (as defined below) (each a "Conversion Event"). In the event of the liquidation, dissolution or winding-up of the Corporation or other distribution of assets of the Corporation for the purpose of winding-up its affairs prior to a Conversion Event, the holder of the Series One Preference Share is entitled to (a) receive from the assets of the Corporation a payment of $4,000,000 before any amounts shall be paid to the holders of any Common Shares and (b) share pro-rata (on the basis that the Series One Preference Share represents that number of Common Shares into which the CIBC Debenture is then convertible) with the holders of all other participating shares in further distributions from the assets of the Corporation to an aggregate maximum of $20,000,000 in addition to the sum specified in (a). The holder of the Series One Preference Share is entitled to a dividend (the "Dividend") in the event that, prior to a Conversion Event, (i) there is a merger or consolidation of the Corporation (or a subsidiary of the Corporation which owns all or substantially all of the assets of the Corporation) with another corporation where, following such event, the shareholders of the Corporation will not hold at least a majority of the voting power of the surviving/acquiring corporation, (ii) any person (other than the Canadian Imperial Bank of Commerce or any of its affiliates) or any persons acting jointly or in concert beneficially own greater than 50% of (A) the votes attached to the Corporation's securities entitled to vote for the election of Corporation's Board of Directors, or (B) the equity, by value, of the Corporation, or (iii) there is a sale of all or substantially all of the assets of the Corporation. The Dividend is approximately equal to the liquidation preference described above and, for this purpose, the value of the assets of the Corporation available for distribution on this notional dissolution is the value attributable to the equity of the Corporation implied by the transaction giving rise to the dividend event, as adjusted for the value of non-Common Share equity not valued in the transaction giving rise to the Dividend. In no event may the Dividend exceed $24,000,000. The Series One Preference Share ranks equally with the Series Two Preferred Share and Series Three Preferred Share and in priority to the Common Shares. On April 8, 2003 the terms were amended to delete a redundant ranking provision. On June 27, 2003 the terms were amended to provide that a dividend was payable upon any person owning greater than 50% of the votes attached to the Corporation's securities entitled to vote for the election of Corporation's Board of Directors; prior to this amendment the Dividend was payable upon any person owning greater than 50% of the Common Shares. B) SERIES TWO PREFERRED SHARE The Series Two Preferred Share was created by Articles of Amendments dated April 10, 2003 and was issued on April 11, 2003. The Corporation is not entitled to declare or pay any dividend on the Common Shares unless it concurrently declares and pays a dividend on the Series Two Preferred Share in an amount equal to the product of the number of Common Shares comprising the Underlying Shares (as defined below) and the dividend declared or paid per Common Share. Any such dividend is to be paid to the holder of the Series Two Preferred Share in the same form as it is paid to the holders of the Common Shares. 53

FINANCIAL STATEMENTS The holder of the Series Two Preferred Share has the right, exercisable at any time prior to 5:00 p.m. (Eastern Standard Time) on March 31, 2013, to convert the Series Two Preferred Share, for no additional consideration, into 19,999,105 Common Shares (as at January 25, 2005) subject to anti-dilution adjustment (the "Underlying Shares"). In addition to anti-dilution adjustments for stock splits, consolidations, etc., the number of Common Shares issuable on the conversion of the Series Two Preferred Shares is subject to adjustment in connection with any issuance of Common Shares to extinguish rights to acquire securities in Points International's subsidiaries and in connection with the conversion of the CIBC Debenture, if convertible. The Series Two Preferred Share will automatically convert into one Series Three Preferred Share on the earlier of the date that (i) the Series Two Preferred Share is directly or indirectly transferred to a person that is not an affiliate of InterActiveCorp, and (ii) the holder of the Series Two Preferred Share ceases to be an affiliate of InterActiveCorp. Unless a notice of conversion has been delivered, the Corporation will redeem the Series Two Preferred Share upon the earlier of (i) March 31, 2013 and (ii) the third business day following a "Change of Control" of the Corporation. For this purpose, a "Change of Control" of the Corporation will be deemed to have occurred if, before the expiry of the PII Warrant (Note 9), any combination of a person (other than the holder of the Series Two Preferred Share), its affiliates or associates and persons acting jointly or in concert with any of them becomes the beneficial owner of shares of the Corporation sufficient to elect a majority of the Board of Directors. In the event of redemption on March 31, 2013, the amount payable will equal the greater of (i) the subscription price of the Series Two Preferred Share plus a return on that subscription price equal to 7% per annum, calculated from the date of issue of the Series Two Preferred Share to the date on which the Series Two Preferred Share is redeemed and (ii) the market value of the Common Shares into which the Series Two Preferred Share may then be converted. In the event of redemption on a Change of Control, the amount payable on redemption will equal the greater of (i) 125% of the amount specified in clause (i) of the preceding sentence and (ii) the greater of (A) the value of the Common Shares into which the Series Two Preferred Share then could be converted on the day immediately prior to public announcement of the Change of Control and (B) the product of the Common Shares into which the Series Two Preferred Share then could be converted and the fair market value of the consideration paid per Common Share in the transaction resulting in the Change of Control. In the event of the liquidation, dissolution or winding-up of the Corporation or other distribution of assets of the Corporation among its shareholders for the purpose of winding-up its affairs, the holder of the Series Two Preferred Share will be entitled to receive from the assets of the Corporation an amount equal to the greater of (i) the subscription price of the Series Two Preferred Share plus a return on that subscription price equal to 7% per annum, calculated on a daily basis from the date of issue of the Series Two Preferred Share to the date on which the liquidation event occurred and (ii) the product of the number of Underlying Shares and the per share amount to be distributed to the holders of the Common Shares upon the liquidation event after giving effect to any payments to be paid on the Series Two Preferred Share and any other shares (other than the Series Two Preferred Share) ranking prior to the Common Shares upon the liquidation event. The Series Two Preferred Share ranks equally with the Series One Preference Share and Series Three Preferred Share and in priority to the Common Shares. C) SERIES THREE PREFERRED SHARE The Series Three Preferred Share was created by Articles of Amendment dated April 10, 2003 and has not been issued. The Series Three Preferred Share is non-voting and not entitled to receive dividends. 54

FINANCIAL STATEMENTS If issued, the Corporation will redeem the Series Three Preferred Share upon the earlier of (i) March 31, 2013 and (ii) the third business day following a "Change of Control" of the Corporation. For this purpose, a "Change of Control" of the Corporation will be deemed to have occurred if, before the expiry of the PII Warrant, any combination of a person (other than the holder of the Series Two Preferred Share), its affiliates or associates and persons acting jointly or in concert with any of them becomes the beneficial owner of shares of the Corporation sufficient to elect a majority of the Board of Directors. In the event of redemption on March 31, 2013, the amount payable will equal the subscription price of the Series Two Preferred Share plus a return on that subscription price equal to 7% per annum, calculated from the date of issue of the Series Two Preferred Share (April 11, 2003) to the date on which the Series Three Preferred Share is redeemed. In the event of redemption on a Change of Control, the amount payable on redemption will equal an amount equal to 125% of the amount specified in the preceding sentence. In the event of the liquidation, dissolution or winding-up of the Corporation or other distribution of assets of the Corporation among its shareholders for the purpose of winding-up its affairs, whether voluntary or involuntary, the holder of the Series Three Preferred Share will be entitled to receive from the assets of the Corporation an amount equal to the subscription price of the Series Two Preferred Share plus a return on that subscription price equal to 7% per annum, calculated on a daily basis from the date of issue of the Series Two Preferred Share to the date on which the liquidation event occurred. The Series Three Preferred Share ranks equally with the Series One Preference Share and Series Two Preferred Share and in priority to the Common Shares. 11. CAPITAL STOCK AUTHORIZED Unlimited Common Shares - --------- ------------- 1 Series One Preference Share, non-voting, convertible into one common share 1 Series Two Preferred Share 1 Series Three Preferred Share ISSUED The balance of capital stock is summarized as follows: 2004 2003 ----------- ----------- Common shares $22,705,732 $17,728,459 Series One preference share 1 1 Series Two Preferred share 1 1 ----------- ----------- $22,705,734 $17,728,461 =========== =========== 55

FINANCIAL STATEMENTS COMMON SHARES NUMBER AMOUNTS - ------------- ---------- ----------- Balance January 1, 2003 54,496,317 $14,361,032 Issued on exercise of warrants (i) 3,139,943 1,001,869 Issued on exercise of stock options (ii) 446,773 122,975 Issued on exchange for property (shares in subsidiary) (iii) 2,329,954 13,961 Issued in exchange for property (iv) 2,196,635 2,240,568 ---------- ----------- 62,609,622 $17,739,405 Less: share issue costs -- $ 10,944 ---------- ----------- Balance December 31, 2003 62,609,622 17,728,461 Issued on the acquisition of MilePoint, Inc. (v) 4,000,000 $4,000,000 Issued on exercise of warrants (vi) 2,318,006 753,068 Issued on exercise of stock options (vii) 816,789 248,966 Issued on exchange for property (shares in subsidiary)(viii) 1,313,433 10,463 ---------- ----------- 71,057,850 $22,740,958 Less: share issue costs -- 35,224 ---------- ----------- BALANCE DECEMBER 31, 2004 71,057,850 $22,705,734 ========== =========== (i) 2,128,443 common share purchase warrants, issued in connection with restructuring and acquisition of the interest in Points.com Inc. that the Corporation did not already own, were exercised at $0.25 per share. In addition, 922,000 broker warrants issued in respect of a financing in 2003 were exercised at $0.25 per share and 89,500 warrants issued in respect of a consulting agreement with an independent consulting firm were exercised at $0.28 per share. (ii) 446,773 options previously issued to employees, directors, advisors and consultants were exercised at prices ranging from $0.20 to $0.50 per share. (iii) 930,529 options previously issued to Points.com Inc. founders, employees, directors and advisors were exercised in Points.com Inc. and put to the Corporation at fair market value for 2,329,954 of the Corporation's common shares. (iv) 2,196,635 shares were issued to a commercial partner for warrants to acquire 1,055,328 common shares of subsidiary Points.com Inc., warrant acquisition rights to acquire warrants exercisable to acquire 3,771,927 common shares of subsidiary Points.com Inc. and for a series of amendments to commercial agreements, including a long-term extension to the contract term, as described in Note 12 (e). (v) 4,000,000 shares (valued at $4,000,000) of the Corporation were issued as part consideration in the acquisition of MilePoint, Inc. (see Note 15). (vi) 2,268,006 common share purchase warrants, issued in connection with restructuring and acquisition of the interest in Points.com Inc. that the Corporation did not already own, were exercised at $0.25 per share. In addition, 50,000 warrants issued in respect of a financing engagement were exercised at $0.25 per share. (vii) 816,789 options previously issued to employees, directors, advisors and consultants were exercised at prices ranging 56

FINANCIAL STATEMENTS from $0.20 to $0.50 per share. (viii) 524,554 options previously issued to Points.com Inc. founders, employees, directors and advisors were exercised in Points.com Inc. and put to the Corporation at fair market value for 1,313,433 of the Corporation's common shares. 12. OPTIONS AND WARRANTS A) STOCK OPTION PLAN The Corporation has a stock option plan under which employees, directors and consultants are periodically granted stock options to purchase common shares at prices not less than the market price of the share on the day of grant. The options vest over a three-year period and expire five years from the grant date. 2004 2003 ---------- ---------- Options Authorized by Shareholders 10,206,948 8,030,424 Less: Options Exercised (2,382,312) (1,565,523) ---------- ---------- Net Options Authorized 7,824,636 6,464,901 Less: Options Granted (6,184,558) (5,598,127) ---------- ---------- Options Available to Grant 1,640,078 866,774 ========== ========== B) STOCK OPTIONS STOCK-BASED COMPENSATION PLAN At December 31, 2004, the Corporation had one stock-based compensation plan, which is described in Note 12 (a). The Corporation accounts for stock options granted in this plan in accordance with the fair value based method of accounting for stock-based compensation. The compensation cost that has been charged against income for this plan is $362,343 for 2004. In respect to the effect of the change in accounting policy see Note 3. FAIR VALUE The fair value of each option grant is estimated at the date of grant using the Black-Scholes option pricing model with the following weighted average assumptions used for grants in 2002, 2003 and 2004, respectively: dividend yield of nil for all three years; expected volatility of 65, 73 and 46 percent, risk-free interest rates of 5.2, 4.0 and 4.0 percent and expected lives of 3.9, 3.1, and 3.0 years. A summary of the status of the company's stock option plan as of December 31, 2003 and 2004, and changes during the years ending on those dates is presented below. 57

FINANCIAL STATEMENTS 2004 2003 ----------------------------- ----------------------------- NUMBER OF WEIGHTED AVERAGE NUMBER OF WEIGHTED AVERAGE OPTIONS EXERCISE PRICE OPTIONS EXERCISE PRICE ---------- ---------------- ---------- ---------------- Beginning of Year 5,598,127 $0.51 5,131,900 $0.43 Granted 1,639,407 1.17 1,322,000 0.88 Exercised (816,789) 0.22 (446,773) 0.28 Forfeited (236,187) 1.04 (409,000) 0.88 ---------- ----- ---------- ----- End of year 6,184,558 $0.71 5,598,127 $0.51 ========== ===== ========== ===== EXERCISABLE AT END OF YEAR 3,832,429 $0.50 3,937,228 $0.41 ========== ===== ========== ===== WEIGHTED AVERAGE FAIR VALUE OF OPTIONS GRANTED $ 0.41 $ 0.43 ========== ========== OPTIONS OUTSTANDING OPTIONS EXERCISABLE -------------------------------------------------- -------------------------- WEIGHTED AVERAGE WEIGHTED WEIGHTED NUMBER OF REMAINING CONTRACTUAL AVERAGE NUMBER OF AVERAGE RANGE OF EXERCISE PRICE OPTIONS LIFE (YEARS) EXERCISE PRICE OPTIONS EXERCISE PRICE - ----------------------- --------- --------------------- -------------- --------- -------------- $0.01 to $0.49 1,201,001 2.43 $0.25 924,207 $0.26 $0.50 to $0.99 2,922,150 0.86 $0.55 2,653,802 $0.52 $1.00 and over 2,061,407 4.26 $1.19 254,420 $1.11 Subsequent to year-end, as described in Note 22, 1,823,750 options were exercised. C) STOCK OPTIONS OF POINTS.COM INC. In addition to the stock options described above, Points.com Inc., the Corporation's indirect wholly-owned subsidiary has one stock compensation plan. Under this plan, Points.com Inc. founders, employees, directors and advisors were previously issued and, therefore, have outstanding stock options. No options were granted in this plan in 2002, 2003 or 2004. The options outstanding are as follows: 2004 2003 ---------------------------- ---------------------------- NUMBER OF WEIGHTED AVERAGE NUMBER OF WEIGHTED AVERAGE OPTIONS EXERCISE PRICE OPTIONS EXERCISE PRICE --------- ---------------- --------- ---------------- Beginning of Year 3,115,052 $0.04 4,077,781 $0.03 Granted -- -- -- -- Exercised (524,554) 0.02 (930,529) 0.02 Forfeited -- -- (32,200) 0.06 --------- ----- --------- ----- End of year 2,590,498 $0.04 3,115,052 $0.04 ========= ===== ========= ===== EXERCISABLE AT END OF YEAR 2,590,498 $0.04 3,115,052 $0.04 ========= ===== ========= ===== 58

FINANCIAL STATEMENTS OPTIONS OUTSTANDING OPTIONS EXERCISABLE -------------------------------------------------- -------------------------- WEIGHTED AVERAGE WEIGHTED WEIGHTED NUMBER OF REMAINING CONTRACTUAL AVERAGE NUMBER OF AVERAGE RANGE OF EXERCISE PRICE OPTIONS LIFE (YEARS) EXERCISE PRICE OPTIONS EXERCISE PRICE - ----------------------- --------- --------------------- -------------- --------- -------------- $0.01 to $0.49 2,590,498 0.31 $0.04 2,590,498 $0.04 The holders of 2,590,498 options (all with strike prices at or below $0.055 per share) have the right to put to the Corporation the common shares of Points.com Inc. acquired on the exercise of such options for common shares in the Corporation. The Corporation has used a ratio of 2.5039 common shares per Points.com Inc. common share (equivalent to 6,486,347 common shares) for this purpose. In 2004, 524,554 options were exercised for 1,313,433 common shares of the Corporation. Subsequent to year end, as described in Note 22, 475,600 shares in Points.com Inc., acquired from the exercise of options, were exchanged for 1,190,856 common shares of the Corporation. In addition, 1,050,684 options of Points.com Inc. have been conditionally exercised for 2,630,808 common shares of the Corporation. D) WARRANTS 2004 2003 ----------------------------- ----------------------------- NUMBER OF WEIGHTED AVERAGE NUMBER OF WEIGHTED AVERAGE WARRANTS EXERCISE PRICE WARRANTS EXERCISE PRICE ---------- ---------------- ---------- ---------------- Beginning of Year 79,431,399 $0.94 7,056,116 $0.25 Granted (1) nil n/a 72,247,692 0.97 Issued-Anti-Dilution Provision 7,049,596 1.03 4,100,867 0.97 Exercised (2,318,006) 0.25 (3,139,943) 0.25 Forfeited (2,500) 0.28 (833,333) 0.25 ---------- ----- ---------- ----- End of year 84,160,489 $1.03 79,431,399 $0.94 ========== ===== ========== ===== EXERCISABLE AT END OF YEAR 84,160,489 $1.03 79,428,899 $0.94 ========== ===== ========== ===== NOTE: (1) The strike price of the PII Warrant (Note 9) will change in accordance with its anti-dilution provisions. For example, as the number of Common Shares that the PII Warrant is exercisable into increases, the strike price will decrease proportionately. WARRANTS OUTSTANDING WARRANTS EXERCISABLE ----------------------------------------------------- ----------------------------- WEIGHTED AVERAGE NUMBER REMAINING CONTRACTUAL WEIGHTED AVERAGE NUMBER OF WEIGHTED AVERAGE RANGE OF EXERCISE PRICE WARRANTS LIFE (YEARS) EXERCISE PRICE WARRANTS EXERCISE PRICE - ----------------------- ---------- --------------------- ---------------- ---------- ---------------- $0.01 to $0.49 762,334 1.06 $0.25 762,334 $0.25 $0.50 to $0.99 -- -- -- -- -- $1.00 and over 83,398,155 1.28 $1.03 83,398,155 $1.03 E) WARRANTS OF POINTS.COM INC. On September 5, 2003, the Corporation acquired warrants and warrant acquisition rights exercisable to acquire 4,827,255 common shares in the Corporation's indirect wholly-owned subsidiary, Points.com Inc., from an airline partner, as described in Note 11 (iv). In addition to the warrants and warrant acquisition rights acquired by the Corporation, Points.com Inc., has issued or committed to issue an additional 4,103,378 warrants to airline partners with expiry dates between March 28, 2006 and 59

FINANCIAL STATEMENTS April 1, 2007. Each warrant entitles the holder to acquire one common share of Points.com Inc. with an exercise price of US$1.96. The exercise of these warrants would dilute the Corporation's interest in Points.com Inc. by 11%. F) FAIR VALUE No warrants were granted during 2004. The weighted-average grant-date fair value of warrants granted during 2003 has been estimated at $0.035 using the Black-Scholes option-pricing model. The pricing model assumes a weighted-average risk-free interest rate of 4.5%, weighted-average expected dividend yields of nil, weighted-average expected common stock price volatility of 12.88% and a weighted-average expected life of 3.5 years. G) PRO-FORMA INFORMATION In accordance with CICA handbook, Section 3870, "Stock-based compensation and other stock-based payments," the Corporation is required to disclose pro-forma information for stock-based employee compensation for fiscal year 2003. Estimating the fair values using the Black-Scholes option-pricing model, the Corporation's pro-forma net loss under Canadian GAAP would be increased by $126,206 for the year ended Dec. 31, 2003. Loss per share figures would not have changed (see note 12 (b) for more infomation). 13. LOSS PER SHARE A) LOSS PER SHARE Loss per share is calculated on the basis of the weighted average number of common shares outstanding for the year which amounted to 67,744,345 shares (2003 - 58,823,652). B) FULLY-DILUTED LOSS PER SHARE The fully-diluted loss per share has not been computed, as the effect would be anti-dilutive. 14. STATEMENT OF CASH FLOWS A) CHANGES IN NON-CASH BALANCES RELATED TO OPERATIONS ARE AS FOLLOWS: 2004 2003 ----------- ----------- (Increase) in accounts receivable $(1,019,972) $ (736,738) (Increase) in prepaids and sundry assets (403,870) (167,854) (Increase) in deferred costs (123,390) -- Increase in accounts payable and accrued liabilities 707,002 169,643 Increase in deposits 2,697,976 1,509,015 ----------- ---------- $ 1,857,746 $ 774,066 =========== ========== B) SUPPLEMENTAL INFORMATION Interest, taxes and loss on short-term investments Interest of $4,196 (2003 - $7,378) was paid during the year. In addition to this, the Corporation incurred $70,264 in losses on short-term investments and capital taxes of $24,644 were paid in 2004. Interest revenue of $230,294 (2003 - $355,960) was received during the year. NON-CASH TRANSACTIONS IN 2004 WERE AS FOLLOWS: (i) 524,554 shares of Points.com Inc. were acquired in exchange for 1,313,433 shares of the Corporation (Note 11 (viii)). 60

FINANCIAL STATEMENTS (ii) 4,000,000 shares (valued at $4,000,000) of the Corporation were issued as part consideration in the acquisition of MilePoint, Inc. (see Notes 15 and 11 (v)). (iii) $38,959 of revenue earned for hosting services provided was paid in loyalty currency which was comprised of partner miles. The currency was valued at the purchase price of the miles. The prepaid asset will be charged to income as the currency is used. (iv) $125,809 of revenue earned for membership fees provided was paid in one-week accommodation certificates. The certificates are valued at their average cost. The prepaid asset will be charged to income as the accommodation certificates are used (v) The Corporation received $136,416 of loyalty currency from a partner as reimbursement of a portion of the partner's direct expenses for the services provided by the Corporation. (vi) The Corporation's long-term investment of $161,629 in ThinApse Corporation was written off as the asset was determined to be impaired. (vii) Interest of $2,499 was accrued on the acquisition of MilePoint, Inc. (viii) Interest of $884,001 was accrued on the convertible debenture (Note 9). (ix) Interest on $868,000 was accrued on the Series Two Preferred Share (Note 10 (b)). (x) Deferred cost of $56,051 related to the MilePoint Acquisition in 2003 was re-allocated to goodwill in 2004 (Note 15). NON-CASH TRANSACTIONS IN 2003 WERE AS FOLLOWS: (xi) 930,529 shares of Points.com Inc. were acquired in exchange for 2,329,954 shares of the Corporation (Note 11 (iii)). (xii) 2,196,635 shares were issued in connection with the acquisition of warrants, warrant acquisition rights and amendment to the commercial agreement (Note 11 (iv)). (xiii) $42,030 of revenue earned for hosting services provided was paid in loyalty currency. The currency was valued at the purchase price of the miles. The expense will be recognized as the currency is used. (xiv) The Corporation received $114,394 of loyalty currency from a partner as reimbursement of a portion of the partner's direct expenses for the services provided by the Corporation. (xv) Interest of $853,872 was accrued on the convertible debenture (Note 9). (xvi) Interest on $624,478 was accrued on the Series Two Preferred Share (Note 10 (b)). (xvii) The company issued share capital of $211,851 on the exercise of warrants. C) CASH AND SHORT-TERM INVESTMENTS CONSISTS OF: 2004 2003 ----------- ----------- Cash (Note 4) $10,086,111 $ 9,046,701 Short-term investments (Note 4) 544,945 9,627,468 Cash held by credit card processor 3,123,762 1,600,667 ----------- ----------- $13,754,818 $20,274,836 =========== =========== 61

FINANCIAL STATEMENTS 15. MILEPOINT, INC. ACQUISITION MILEPOINT, INC. ACQUISITION On March 31, 2004, Points International acquired substantially all of the assets of MilePoint, Inc., a loyalty program technology provider and operator. The purchase price of $7.5 million was satisfied through a combination of $3.5 million in cash payable, without interest, over two years and four million common shares. The cost of the acquisition and the fair values assigned are as follows: Intangibles $ 225,000 Contracts with Partners 3,522,461 Goodwill 4,494,585 ---------- $8,242,146 ========== Consideration: Cost of Transaction $ 784,585 Capital Stock Issued 4,000,000 Acquisition Loan Payable 3,457,561 ---------- $8,242,146 ========== The acquired contracts with partners will be amortized over the life of the contracts. The goodwill and other intangibles will not be amortized; these will be reviewed annually and any permanent impairment will be recorded and charged to income in the year that the impairment has occurred. The loan payable, which has a face value of $3,500,000, is discounted to its fair value as it is non-interest bearing and due over two years. MILEPOINT, INC. ACQUISITION PAYMENTS Remaining payments under the terms of the acquisition loan payable are as follows: ACQUISITION LOAN PAYABLE: Current Portion $ 777,443 Long-Term Portion 380,118 Accretion of Interest 42,439 ---------- TOTAL $1,200,000 ========== 16. FINANCIAL INSTRUMENTS The Corporation's significant financial assets and liabilities are cash, short-term investments and convertible loans, which are substantially stated at fair value. Interest rates, maturities and security affecting the currency, interest and credit risk of the Corporation's financial assets and liabilities have been disclosed in Notes 5 and 9. The Corporation is not exposed to financial risk that arises from fluctuations in interest rates as all of its interest-bearing obligations are fixed rate. As well, the Corporation has sufficient foreign currency to satisfy its foreign currency-based obligations. 62

FINANCIAL STATEMENTS A) FAIR VALUE: In accordance with the disclosure requirements of the CICA handbook, Section 3860 (paragraphs 3860.78, .101), the Corporation is required to disclose certain information concerning its "financial instruments," defined as a contractual right to receive or deliver cash or another financial asset. The fair value of the majority of the Corporation's financial assets and liabilities approximate their recorded values at December 31, 2004. In these circumstances, the fair value of the assets or liabilities is determined to be the lower of cost and market value. Fair value estimates are made at a specific point in time, based on relevant market information and information about the financial instruments. These estimates are subjective in nature and involve uncertainties and matters of significant judgment and therefore cannot be determined with precision. Changes in assumptions could significantly affect estimates. B) SUMMARY OF SIGNIFICANT FINANCIAL INSTRUMENTS The significant financial instruments of the Corporation, their carrying values and exposure to U.S. dollar-denominated monetary assets and liabilities, as of December 31, 2004 are as follows: C$ TOTAL(1) US$ DENOMINATED (1) OTHER DENOMINATED(1) ----------- ------------------- -------------------- Cash and cash equivalents $13,754,818 US$8,534,329 E1,113,558 GBP 318,990 CHF 12,029 Accounts receivable 2,024,342 1,407,145 E37,050 Accounts payable and accrued liabilities 1,894,599 825,269 GBP 5,288 Deposits 13,153,623 8,749,441 E926,478 GBP318,181 NOTE: (1) C$ Total is inclusive of all denominations; US$ Denominated and Other Denominated are a subset of the C$ Total and are represented in their local currency amount. 17. INCOME TAXES The total provision for income taxes differs from that amount which would be computed by applying the Canadian federal income tax rate to the loss before provision for income taxes. The reasons for these differences are as follows: 2004 2003 ----------- ----------- Income tax recovery at statutory rate $(2,917,000) $(2,392,000) Non-deductible items for which there is no tax effect 874,000 505,000 Losses for which no benefit has been recorded 2,043,000 1,887,000 ----------- ----------- NET INCOME TAX RECOVERY $ -- $ -- =========== =========== The Corporation has non-capital losses carry-forward for income tax purposes in the amount of $26,052,000 which may be applied against future years'taxable income. The losses may be used to reduce future years' taxable income and expire approximately as follows: 2005 $ 400,000 2006 $ 890,000 2007 $2,759,000 2008 $6,976,000 2009 $5,868,000 2010 $3,147,000 2014 $6,012,000 63

FINANCIAL STATEMENTS The nature and tax effects of the temporary differences that give rise to significant portions of the future income tax assets and future income tax liabilities are as follows: FUTURE INCOME TAX ASSETS ARE COMPRISED OF: 2004 2003 - ------------------------------------------ ----------- ----------- Losses carried forward $ 8,629,000 $ 7,608,000 Property, plant and equipment 1,427,000 1,468,000 Share issue costs 77,000 499,000 ----------- ----------- 10,133,000 9,575,000 Valuation allowance (9,543,000) (8,985,000) ----------- ----------- NET FUTURE INCOME TAX ASSET $ 590,000 $ 590,000 18. RELATED PARTY TRANSACTIONS The following are the transactions and balances with related parties: a) Prepaids and sundry assets included a loan to a senior officer of the Corporation of $25,000 in fiscal 2004 and accrued interest of $825. This receivable was forgiven in 2004 and expensed to employment costs. b) In fiscal 2004, certain officers and directors exercised stock options in the Corporation and the Corporation's subsidiary Points.com Inc. (Note 11 (vii) and Note 11 (viii)). 19. COMMITMENTS The Corporation is obligated under various operating leases for premises, purchase commitments and equipment and service agreements for Web hosting services expiring through 2009 to aggregate annual rentals as follows: 2005 $1,705,000 2006 $1,473,000 2007 $1,724,000 2008 $ 530,000 2009 $ 340,000 20. SEGMENTED INFORMATION A) REPORTABLE SEGMENTS The Corporation has only one operating segment, the portfolio of technology solutions to the loyalty program industry (refer to the Management's Discussion and Analysis for a description of Points Solutions), in each of 2004 and 2003, whose operating results were regularly reviewed by the Corporation's chief operating decision maker and for which complete and discrete financial information is available. B) ENTERPRISE-WIDE DISCLOSURES - GEOGRAPHIC INFORMATION $7,129,901 (2003 - $5,391,735) representing 92% of the Corporation's revenues were generated in the U.S., $396,218 (2003 - $466,969) representing 5%, were generated in Canada and the remaining revenues generated outside North America. At December 31, 2004 and 2003, substantially all of the Corporation's assets were in Canada. 64

FINANCIAL STATEMENTS 21. ECONOMIC DEPENDENCE Approximately 54% of the Corporation's revenues are from its three largest customers (the two largest customers represented 43% of revenues). In 2003, two customers represented 61% of the Corporation's revenues. In addition, 61% (2003 - - 58%) of the Corporation's deposits are due to these three customers. 22. SUBSEQUENT EVENTS a) Subsequent to year-end, 1,823,750 options in the Corporation were exercised at a weighted average exercise price of $0.49 per share (see Note 12(b)). b) Also subsequent to year-end, 475,600 options in Points.com Inc. were exercised at a weighted average exercise price of $0.055 per share and put to the Corporation for 1,190,856 common shares. In addition, 1,050,684 options in Points.com Inc. were conditionally exercised and put to the Corporation for 2,630,808 common shares (see Note 12(c)). 23. DEFERRED COSTS Charges incurred in respect of certain financings are deferred and charged to income on a straight-line basis over an applicable time period. Deferred finance charges represent legal, accounting and other related fees incurred to obtain the financings. ACCUMULATED NET CARRYING 2004 COST AMORTIZATION AMOUNT - ---- ---------- ------------ ------------ Convertible Debenture $ 986,289 $ 986,289 $ -- Series Two Preferred Share and Warrant 717,050 125,484 591,566 Technology Costs of Partner Relationships & Other 135,529 21,707 113,822 Share Issuance to Partner 2,112,568 575,088 1,537,480 ---------- ---------- ---------- $3,951,436 $1,708,568 $2,242,868 ========== ========== ========== ACCUMULATED NET CARRYING 2003 COST AMORTIZATION AMOUNT - ---- ---------- ------------ ------------ Convertible Debenture $ 986,289 $ 904,098 $ 82,191 Series Two Preferred Share and Warrant 717,050 53,779 663,271 MilePoint Acquisition & Other 82,158 -- 82,158 Share Issuance to Partner 2,112,568 149,372 1,963,196 ---------- ---------- ---------- $3,898,065 $1,107,249 $2,790,816 ========== ========== ========== $123,390 of Points.com Business Solutions technology costs incurred have been deferred over the expected lifetime of certain partner relationships. The technology costs will be amortized over a 30-month period. Costs related to the MilePoint Acquisition in 2003 were reallocated to goodwill in 2004. 24. COMPARATIVE FIGURES Certain of the comparative figures have been reclassified in accordance with the current year's presentation. 65

CORPORATE INFORMATION DIRECTORS DOUGLAS CARTY (Chairman) Senior Vice President & Chief Financial Officer, Laidlaw Inc. MARC LAVINE (Vice-Chairman) Chief Executive Officer, President and Chief Financial Officer, Chrysalis Capital Corporation ROBERT MACLEAN (Chief Executive Officer) CHRISTOPHER BARNARD (President) ROWLAND FLEMING Director of a number of public and private companies Former President, Toronto Stock Exchange JIM KRANIAS Consultant ERIC KORMAN Senior Vice President, Mergers & Acquisitions, InterActiveCorp DAN MARRIOTT Senior Vice President, Interactive Development, InterActiveCorp GRANT MCCUTCHEON Partner, Lawrence & Company Incorporated JOHN THOMPSON Former Managing Director, Kensington Capital Partners Limited AUDIT COMMITTEE Douglas Carty (Chair) Eric Korman Marc Lavine John Thompson HUMAN RESOURCES COMMITTEE Rowland Fleming (Chair) Eric Korman Jim Kranias Grant McCutcheon OFFICERS Christopher Barnard President Darlene Higbee Clarkin Chief Technology Officer & Vice President Grad Conn Chief Marketing Officer Sacha Diab Vice President, Partners Mike Glass Vice President, Product Development Peter Lockhard Vice President, Points.com Business Solutions Robert MacLean Chief Executive Officer Jerry Philip Vice President, Business Development Jason Sikora Vice President, Marketing William Thompson Senior Vice President, Partners Stephen Yuzpe Chief Financial Officer and Corporate Secretary INVESTOR RELATIONS Stephen Yuzpe (416.596.6382) steve.yuzpe@points.com Robert MacLean (416.596.6390) rob.maclean@points.com PARTNER RELATIONS Christopher Barnard (416.596.6381) christopher.barnard@points.com AUDITORS Mintz & Partners LLP EXTERNAL LEGAL COUNSEL Davies Ward Phillips & Vineberg LLP TRANSFER AGENT Computershare Trust Company of Canada LISTING Shares are listed on the Toronto Stock Exchange (TSX) under symbol PTS and on the Pink Sheets under symbol PTSEF ANNUAL MEETING May 11, 2005 at 12:00 p.m. Stock Market Place The Exchange Tower 130 King Street West Toronto, Ontario M5X 1J2 ADDRESS Points International Ltd. 800 - 179 John Street Toronto, Ontario M5T 1X4 Phone: 416.595.0000 Fax: 416.595.6444 www.points.com 66

POINTS INTERNATIONAL LTD. 800 - 179 John Street Toronto, Ontario M5T 1X4 Phone: 416 595 0000 Fax: 416 595 6444 www.points.com

Exhibit 99.3.1 FORM 52-109FT1 - CERTIFICATION OF ANNUAL FILINGS DURING TRANSITION PERIOD I, T. Robert MacLean, Chief Executive Officer of Points International Inc., certify that: 1. I have reviewed the annual filings (as this term is defined in Multilateral Instrument 52-109 Certification of Disclosure in Issuers' Annual and Interim Filings) of Points International Inc. (the issuer) for the period ending December 31, 2004; 2. Based on my knowledge, the annual filings do not contain any untrue statement of a material fact or omit to state a material fact required to be stated or that is necessary to make a statement not misleading in light of the circumstances under which it was made, with respect to the period covered by the annual filings; and 3. Based on my knowledge, the annual financial statements together with the other financial information included in the annual filings fairly present in all material respects the financial condition, results of operations and cash flows of the issuer, as of the date and for the periods presented in the annual filings. Date: March 4, 2005 [Original Signature] ---------------------------------------- T. Robert MacLean Chief Executive Officer

FORM 52-109FT1 - CERTIFICATION OF ANNUAL FILINGS DURING TRANSITION PERIOD I, Stephen Yuzpe, Chief Financial Officer of Points International Inc., certify that: 1. I have reviewed the annual filings (as this term is defined in Multilateral Instrument 52-109 Certification of Disclosure in Issuers' Annual and Interim Filings) of Points International Inc. (the issuer) for the period ending December 31, 2004; 2. Based on my knowledge, the annual filings do not contain any untrue statement of a material fact or omit to state a material fact required to be stated or that is necessary to make a statement not misleading in light of the circumstances under which it was made, with respect to the period covered by the annual filings; and 3. Based on my knowledge, the annual financial statements together with the other financial information included in the annual filings fairly present in all material respects the financial condition, results of operations and cash flows of the issuer, as of the date and for the periods presented in the annual filings. Date: March 4, 2005 /s/ Stephen Yuzpe ---------------------------------------- Stephen Yuzpe Chief Financial Officer

Exhibit 99.4 (GRAPHIC) Points International Ltd. 2003 Annual Report (POINTS INTERNATIONAL LTD LOGO)

Points operates the leading loyalty program currency exchange, located at www.points.com. Now, consumers can exchange their loyalty points and miles to earn the rewards they want - faster than ever before. Points also offers a suite of private branded solutions for its loyalty program partners. (GRAPHIC)

More About Points International Ltd. and the Points Solutions Points International Ltd. (herein referred to as "Points" or the "Corporations") has developed a proprietary technology platform that allows it to offer a portfolio of solutions, referred to as the Points Solutions, to the loyalty program industry. The Points platform was designed to create value for consumers and loyalty programs alike. The Points Solutions are comprised of the Points Exchange and a suite of Private Branded Solutions available to loyalty program operators. The Points Exchange In April 2001, Points launched its cornerstone product, the proprietary Points Exchange. The Points Exchange is an online service allowing consumers who are members of participating loyalty programs to exchange their loyalty program points and/or miles between the participating loyalty programs. The Points Exchange also serves as a central resource to help individuals track their account balances with a number of their major loyalty programs. Management believes that the Points Exchange is currently the only independent loyalty points exchange of its kind. As at December 31, 2003, the Points Exchange had attracted 35 loyalty program participants (39 as at the date hereof), including the loyalty programs of leading airlines, hotels, online businesses, retail businesses and gift certificate programs. Private Branded Solutions In addition to the Points Exchange, Points offers a portfolio of Private Branded Solutions to loyalty programs. This suite of technologies includes: POINTSpurchase and POINTSgift - facilitates the online sale and gift of miles, points and other loyalty program currencies. POINTScorporate - facilitates the sale of loyalty program currencies to corporate customers. POINTStransfer - facilitates the amalgamation or transfer of loyalty program currencies among multiple accounts. POINTSintegrate - functions as a common platform to process transactions between third-party loyalty programs, to simplify and automate a complex and resource-intensive process with a single integration. POINTSelite - facilitates the online sale of tier status to members of loyalty programs. POINTScustom - custom applications developed for select large loyalty program partners. For more information, visit us online at www.points.com.

Table of Contents (GRAPHIC)

MESSAGE FROM CHAIRMAN AND CEO ............................................. 4 CORPORATE HIGHLIGHTS ...................................................... 6 MANAGEMENT TEAM ........................................................... 8 MANAGEMENT'S DISCUSSION AND ANALYSIS ...................................... 10 MANAGEMENT'S RESPONSIBILITY FOR FINANCIAL REPORTING ....................... 38 FINANCIAL STATEMENTS AND NOTES ............................................ 40 AUDITORS'REPORT ........................................................... 42 CORPORATE INFORMATION ..................................................... 68 3

(GRAPHIC) Message from Chairman and CEO

The year 2003 has been an impressive one for Points - with the development of major partnerships and corporate relationships among our most important achievements. Through 2003 and into early 2004, the Points team launched and enhanced a number of vital relationships with the world's leading loyalty players, including American Airlines, eBay and many others. In addition, 2004 got off to an exciting start when, on March 11, 2004, Points announced the acquisition of the assets of MilePoint. Through this transaction, we look forward to further developing relationships with its major loyalty program partners, including Northwest Airlines, Delta Air Lines and Starwood Hotels & Resorts. When MilePoint's partners and our dynamic partner base are combined, the prospects for the suite of Points Solutions, particularly our key focus - the Points Exchange - are truly impressive. To date, billions of points and miles have been exchanged, sold and transferred, and we look forward to accelerating our growth through 2004 and beyond. In 2003, Points entered into an important strategic partnership with InterActiveCorp ("IAC"), the leading online travel and retail player. This transaction closed during the second quarter of 2003, raising $15.1 million. We believe that the relationship with IAC gives Points the momentum and resources to capitalize on opportunities in the growing loyalty industry. In addition, Points believes that there are interesting revenue opportunities presented within the IAC group of companies and their numerous partners in the travel, retail, ticketing, personals, local services and financial services. As Points builds initiatives with a number of IAC properties, the team is also in a strong position to develop relationships with the important industry players currently partnering with IAC properties. The unique suite of Points Solutions, combined with the strengths of the IAC group, provides a foundation for business development opportunities. It is also important to highlight a new multi-year agreement with cornerstone partner the American Airlines Aadvantage program, the world's largest loyalty program. The additional commitment of the AAdvantage program offers significant growth potential for Points, extending a number of existing short-term agreements through 2007, including those for the Points Exchange solution, along with other Points Solutions including POINTSpurchase, POINTStransfer and POINTSelite. An exciting new relationship was commenced in 2003 with eBay, the "World's Online Marketplace". Points invested significant resources and effort to build and launch several critical solutions for the eBay Anything Points(TM) program - eBay's new loyalty program. These solutions, along with participation in the Points Exchange, have provided the early basis for a great long-term relationship. In fact, what excites management about the future with eBay is that every eBay Anything Point that is exchanged, sold or earned moves through Points' technology platform. During 2003, Points enhanced the points.com site to increase customer usability. The initial feedback has been very positive and management will continue to enhance the customer experience through 2004. While Points'board of directors has remained relatively consistent over the past few years, we had the opportunity to welcome two new members in 2003 - Erik Blachford and Eric Korman. We would like to take this opportunity to thank Erik Blachford for his contribution to the board of directors in the past year. Erik leaves Points to accept additional responsibilities within the IAC group of companies. We wish Erik well in his expanded role within IAC. Dan Marriott will be replacing Erik as one of the two board nominees from IAC. Dan, currently the Senior Vice President, Interactive Development, at IAC brings a wealth of online experience to Points. Prior to directly joining IAC, Dan held a senior role at IAC affiliate Ticketmaster, the world's leading ticketing company. The Points team continues to achieve extraordinary results, capitalizing on important opportunities in a growing industry. On behalf of the Points' board of directors, we recognize this impressive contribution and thank all Points employees. The year ahead holds much promise. We look forward to continued revenue growth and exciting new partnerships. Around the globe, the opportunities for Points continue to abound. /s/ Douglas Carty /s/ Robert MacLean - ------------------------------------- ---------------------------------------- Douglas Carty Robert MacLean Chairman Chief Executive Officer April 22, 2004 5

(GRAPHIC) Corporate Highlights

HIGHLIGHTS April 2004 - Starbucks, the leading retailer, roaster and brand of specialty coffee in the world, joins the Points Exchange. - S&H greenpoints(R), the digital reincarnation of S&H Green Stamps, the most successful loyalty program in history, also joins the Points Exchange. - Points reaches commercial agreement with IAC affiliate Interval International. - Launched renewal functionality on the Points Exchange including the addition of PAY WITH POINTS technology allowing members to perform exchanges and renew their membership using loyalty miles and points. March 2004 - Points announces and completes the acquisition of the assets of MilePoint. - Points celebrates over 3 billion points and miles exchanged through the Points Exchange. - Implemented large-scale, back-end architecture enhancements to the Points Exchange; setting the stage for cost effective growth, enhanced security and future development efficiencies. - US Airways(R) joins the Points Exchange. February 2004 - Points re-launches POINTSelite solution for American Airlines. - Points shares graduate to trading on the TSX. January 2004 - Points receives conditional TSX listing approval. - Points partners with Scandinavian Airlines Systems (SAS), enabling EuroBonus members to buy points online. - Points launches POINTSgift, the second product for Lufthansa. December 2003 - Focused on merchandising 3,600 available exchange options with the launch of a redesigned look and feel, navigation and brand on the Points Exchange. - IAC affiliate ReserveAmerica joins the Points Exchange. - Points reaches an agreement with Hbc; Points will deliver POINTScorporate solution, powering the sale of Hbc Rewards to corporate partners. - New relationship between Marriott International Inc. and Points begins. Agreement allows members to exchange their loyalty program miles and points into Marriott TravelCards(sm). November 2003 - Points is selected by eBay as vendor for new loyalty initiative; eBay Anything Points(TM) "Offer Manager" powered by Points. - Points and Vesdia Corp. sign exclusive multi-year agreement. U.S. residents are now allowed to convert points and miles into college and retirement savings. - Optimized the customer experience on the Points Exchange with the implementation of a guided 3-step process for completion of exchanges. September 2003 - Points and American Airlines expand their relationship with a comprehensive multi-year agreement. The agreement significantly enhances the commercial relationship for both parties. - Supported an enhanced member acquisition strategy with deployment of a simplified one-page enrolment process on the Points Exchange. August 2003 - Points and eBay execute an additional commercial agreement to enhance eBay's Anything Points(TM) program and select Points as the key vendor in supplying technology and services to eBay's program. The agreement engages Points to develop and power new functionality for eBay Anything Points that will enable sellers to offer points to buyers. The Offer Manager will allow eBay sellers to issue eBay Anything Points to buyers who purchase their goods and services on eBay. - Ramada(R) selects Points technology for its TripRewards program. June 2003 - Points welcomes board members Erik Blachford and Eric Korman from InterActiveCorp. May 2003 - Implemented a major initiative to re-launch the Points Exchange with a focus on usability and functionality enhancements. - Points and eBay form a strategic relationship to launch eBay's new Anything Points(TM) program. April 2003 - POINTSpurchase solution is launched for Lufthansa. Points welcomes this relationship with its first European partner. - Points and InterActiveCorp ("IAC") close $15.1 million strategic investment. IAC acquires a 19.9% stake in Points, able to acquire 55% within three years (as of the date hereof, approximately two years remain in the term of the warrant and the investment would require an additional investment of $82.4 million to $91.6 million by IAC into Points). - Spiegel Incentives joins the Points Exchange; adds new retail option. - Points and InterContinental Hotels launch a suite of Points Solutions. Points powers the online sale of Priority Club(R) Rewards member benefits, along with other enhancements. March 2003 - Points celebrates over a billion points and miles transacted. - Points welcomes new board member Christopher Payne of CIBC Capital Partners. February 2003 - eBay enters into an agreement with Points. Points celebrates exciting new relationship, with work underway to develop a number of solutions for eBay. 7

(GRAPHIC) Management Team

ROBERT MACLEAN, Chief Executive Officer: Mr. MacLean has served as Chief Executive Officer of Points since February 2000, and is a member of the Corporation's board of directors. A founder of the organization, Rob champions the vision for this revolutionary business and directs an exceptional team of senior managers delivering impressive results. Previously, Rob held a variety of positions with major airlines in Canada over a 12-year period, most recently as Vice President, Sales with Canadian Airlines, with responsibility for the Canadian Plus loyalty program. CHRISTOPHER BARNARD, President: Mr. Barnard serves as President of Points, and has been an officer of the Corporation since co-founding its predecessor, Exclamation International Incorporated, in 1998. In this role, Christopher leads financing and investment initiatives for the company and plays a key role in guiding business strategy and the development of new partnerships. STEPHEN YUZPE, Chief Financial Officer and Corporate Secretary: Mr. Yuzpe joined the Corporation's predecessor, Exclamation International Incorporated, in February 1999.As CFO, Stephen is responsible for managing the company's financial well-being and guiding the growth of the business. He plays a critical leadership role, overseeing accounting, legal, regulatory affairs, investor relations and operations for the organization. In this capacity, he manages relationships with a number of outside professional firms, including auditors and external legal counsel. DARLENE HIGBEE CLARKIN, Chief Technology Officer & Vice President: Ms. Higbee Clarkin leads the ongoing development of Points web application and partner integration and is responsible for Points' technology planning. Darlene directs a highly skilled group of IT professionals to integrate new partnerships, to support the Points Solutions web applications and to research and implement future development. Darlene brings over 18 years of loyalty program and information technology experience to Points. GRAD CONN, Chief Marketing Officer: The Corporation was pleased to announce the hiring of Grad Conn, Chief Marketing Officer, in May 2004. Grad will be responsible for building a world-class marketing organization at Points. Grad's 20-year history in marketing includes nine years at Procter & Gamble, and most recently as Vice President, Managing Director for Grey Direct + Interactive. Grad also has a strong entrepreneurial background which includes CEO and Founder of OpenCola Inc., which was declared by Fortune magazine to be "one of the 25 coolest technology companies of 2001". WILLIAM THOMPSON, Senior Vice President, Partners: Bill Thompson joined Points in August 2000. Based in Dallas, Texas, he leads the business development team and is responsible for developing and managing loyalty program relationships for all Points partners. Bill brings the depth of more than 30 years of industry experience, and was previously a managing director with American Airlines. MORLEY IVERS, Vice President, Business Strategy: In the role of Vice President, Business Strategy, Mr. Ivers is responsible for developing strategies and implementing solutions and key partnerships for many areas of the organization. Since joining the team in April 2001, Morley has successfully identified, developed and executed a number of strategic relationships for Points, including those with eBay Inc. and Sabre Airline Solutions. He is currently focused on establishing partnerships with industry-leading organizations in several business verticals. Mr. Ivers is a graduate of The Richard Ivey School of Business. STEVE OGDEN, Vice President, Product Development: As Vice President of Product Development and one of the original Points founders, Steve Ogden is responsible for the design and implementation of the company's suite of custom technology products. A strong professional asset to Points, Steve contributes 16 years of product development, marketing, communications and loyalty program experience in the dynamic and highly competitive airline industry. JERRY PHILIP, Vice President, Business Development: Jerry Philip joined Points in March 2000 as one of the original Points founders, and holds the position of Vice President, Business Development. A 15-year veteran of the airline industry, Mr. Philip supports business development for Points and plays a key role in acquiring and managing partner relationships. Before joining Points, Jerry spent more than 10 years with Canadian Airlines, most recently in the position of Manager, Incentive Programs. CHRISTINE VANDAELE, Vice President, Consumer Marketing: As the Vice President, Consumer Marketing, Ms. Vandaele is responsible for strategic direction and operations in the areas of product development, direct marketing, partner marketing and public relations. Ms. Vandaele contributes over eight years of experience in the areas of loyalty marketing and finance, specializing in product development, pricing, financial modeling and supplier negotiations. Prior to joining Points, she was a divisional controller at Canadian Airlines and more recently, at Points, she headed up the business planning area. Ms. Vandaele holds an MBA from Simon Fraser University. IAIN WEBSTER, Vice President, Europe, the Middle East & Africa (U.K. subsidiary): Iain Webster joined Points in June 2002, driving the expansion of Points Solutions across key overseas markets. Based in London, England, Iain works closely with Points distribution partner Sabre to accelerate business development in these markets. Iain is a highly experienced loyalty-marketing manager with a 25-year background in the global travel industry and new technologies. 9

(GRAPHIC) Management's Discussion and Analysis

The following management's discussion and analysis ("MD&A") of the performance, financial condition and future prospects of Points should be read in conjunction with the Corporation's audited consolidated financial statements (including the notes thereon) for the year ended December 31, 2003. Further information, including Points' Annual Information Form ("AIF") for the year ended December 31, 2003, may be accessed at www.sedar.com. All financial data herein has been prepared in accordance with Canadian generally accepted accounting principles ("GAAP") and all dollar amounts herein are in Canadian dollars unless otherwise specified. This MD&A is dated as of April 22, 2004. Forward-looking Statements Some of the statements contained or incorporated by reference in this MD&A, including those relating to Points' strategies and other statements that are predictive in nature, that depend upon or refer to future events or conditions, or that include words such as "expects," "anticipates," "intends," "plans," "believes," "estimates" or similar expressions, are forward-looking statements within the meaning of Canadian securities laws. Forward-looking statements include, without limitation, the information concerning possible or assumed future results of operations of Points as set forth herein. These statements are not historical facts but instead represent only Points' expectations, estimates and projections regarding future events. The forward-looking statements contained or incorporated by reference in this MD&A are not guarantees of future performance and involve certain risks and uncertainties that are difficult to predict. The future results and shareholder value of Points may differ materially from those expressed in the forward-looking statements contained or incorporated by reference in this MD&A due to, among other factors, the risks and uncertainties discussed herein, the matters set forth under "Risks and Uncertainties" contained in Points' AIF filed with Canadian securities regulators and the factors detailed in Points' other filings with Canadian securities regulators, including the factors detailed in Points' annual and interim financial statements and the notes thereto. Points does not undertake any obligation to update or release any revisions to these forward-looking statements to reflect events or circumstances after the date of this MD&A or to reflect the occurrence of unanticipated events, except as required by law. Responsibility of Management The preparation of the financial statements, including the accompanying notes, is the responsibility of management. Management has the responsibility for selecting the accounting policies used in preparing the financial statements. In addition, management's judgement is required in preparing estimates contained in the financial statements. Management acknowledges their responsibility in their letter of representation to the Corporation's Auditors, and this responsibility is referred to in the audit opinion. Overview of Points' Business Core Business - Points Solutions Points has developed a proprietary technology platform that allows it to offer a portfolio of solutions, referred to as the Points Solutions, to the loyalty program industry. The Points platform was designed to create value for consumers and loyalty programs alike. The Points Solutions are comprised of the Points Exchange and a suite of Private Branded Solutions available to loyalty program operators. The Points Exchange In April 2001, Points launched its cornerstone product, the proprietary Points Exchange. The Points Exchange is an online service allowing consumers who are members of participating loyalty programs to exchange their loyalty program points and/or 11

miles between the participating loyalty programs. The Points Exchange also serves as a central resource to help individuals track their account balances with a number of their major loyalty programs. Management believes that the Points Exchange is currently the only independent loyalty points exchange of its kind. As at December 31, 2003, the Points Exchange had attracted 35 loyalty program participants (39 as at the date hereof), including the loyalty programs of leading airlines, hotels, online businesses, retail businesses and gift certificate programs. Private Branded Solutions In addition to the Points Exchange, Points offers a portfolio of Private Branded Solutions to loyalty programs. This suite of technologies includes: POINTSpurchase and POINTSgift - facilitates the online sale and gift of miles, points and other loyalty program currencies. POINTScorporate - facilitates the sale of loyalty program currencies to corporate customers. POINTStransfer - facilitates the amalgamation or transfer of loyalty program currencies among multiple accounts. POINTSintegrate - functions as a common platform to process transactions between third-party loyalty programs, to simplify and automate a complex and resource-intensive process with a single integration. POINTSelite - facilitates the online sale of tier status to members of loyalty programs. POINTScustom - custom applications developed for select large loyalty program partners. Significant Business Developments in 2003 and the First Quarter of 2004 Strategic Investment by InterActiveCorp On April 11, 2003, InterActiveCorp (formerly USA Interactive) ("IAC") made a $15.1 million strategic investment (the "IAC Investment") in Points. The investment was made through a wholly-owned affiliate of IAC, created for this purpose, which purchased one Series Two Preferred Share and Common Share purchase warrants. In addition to strategic guidance, Points enjoys cost savings by being part of IAC's purchasing group. For example, Points receives cost savings on procurement of computer hardware and software as a direct result of its association with IAC. Points believes that there are revenue opportunities available through its association with the IAC group of companies as it develops or enhances its individual loyalty strategies. Furthermore, numerous marketing opportunities exist among the IAC group of companies. For more information on the investment by IAC, see "Liquidity" below. Enhanced Relationship with American Airlines On September 5, 2003 (effective August 27, 2003), Points consummated an agreement (the "Alignment Agreement") with American Airlines, Inc. ("American Airlines") which significantly enhanced the commercial relationship between the parties. Under the alignment agreement, certain contracts between the parties were extended for five years. In addition, Points acquired from American Airlines outstanding warrants and warrant acquisition rights exercisable to acquire up to 4,827,255 common shares of Points' subsidiary Points.com Inc. ("Points.com"). American Airlines, through its AAdvantage program, has been and continues to be Points' most important business partner. New Strategic Relationship with eBay In 2003, Points developed a significant relationship with online leader eBay Inc. ("eBay"). Under this relationship, eBay's Anything Points ("EAP") program became an anchor Points Exchange partner, and Points implemented a number of Points Solutions to power core elements of the EAP program, including POINTSintegrate. In addition, in August 2003, eBay selected

Points to develop and operate a POINTScustom product, the "Offer Manager", for their EAP program. The Offer Manager allows eBay sellers to issue EAPs to buyers who purchase their goods and services on eBay. In March 2004, Points and eBay agreed to continue eBay's participation on the Points Exchange through at least December 2005 and eBay made Points the exclusive exchange vehicle for all airline, hotel, car rental and major online loyalty programs participating with eBay's EAP program. Toronto Stock Exchange Listing On February 24, 2004, Points' Common Shares were listed for trading on the Toronto Stock Exchange under the symbol "PTS". The Corporation's Common Shares ceased to trade on the TSX Venture Exchange at the close of trading on February 23, 2004. MilePoint Acquisition On March 31, 2004, Points acquired substantially all of the assets of MilePoint, Inc. ("MilePoint"), a leading loyalty program technology and service provider (the "MilePoint Acquisition"). The MilePoint Acquisition has allowed Points to add to its partner base relationships with Northwest Airlines, Delta Air Lines and Starwood Hotels, among others, and increase the potential of both the Points Exchange and the Corporation's broad portfolio of Private Branded Solutions. In connection with the MilePoint Acquisition, Points has retained for one year, as consultants, MilePoint's founders and loyalty industry veterans, Mark Lacek and Peter Brennan. In 2003, MilePoint had unaudited earned revenue of $2.2 million and was slightly profitable. Points expects to realize significant operating synergies by integrating MilePoint's products into Points' operations. Management expects that most of the synergies will be achieved by the end of 2004. For further information on the MilePoint Acquisition, see "Results of Operations" below. Revenue Recognition Policies The revenue recognition policies for the Points Solutions are as follows: Points Exchange: - Revenues from transaction processing are recognized as the services are provided under the terms of related contracts. - Membership dues received in advance for services are recognized over the term of service. Membership dues are $19.95 annually for a PointsPlus membership. - One-time trading fees ($5.95 per trade) are recognized at the time of the trade (for non-PointsPlus members). - Exchange commissions are a percentage of the exchanged value. Private Branded Solutions: - Revenues from the sale of loyalty program points are recorded net of costs. - Hosting and management fees are recognized in the period of service. - Non-refundable partner sign-up fees with no fixed term, and for which the Corporation is under no further obligations, are recognized as revenue when received. - Technology design, development and maintenance revenues are recorded on a "percentage-of-completion" basis. 13

Key Business Drivers Revenue growth has historically been, and will continue to be, generated by growth of membership in and use of the suite of Points Solutions (i.e., the Points Exchange and Private Branded Solutions). Growth in the number of individual members using the Points Exchange is driven by three factors which contribute to increased site traffic and the ease with which a consumer can join the Points Exchange to conduct exchange transactions. These factors are website usability and enhancements, marketing (awareness and brand) and partner activity. For additional information, see "Points Exchange Growth" on page 15 hereof. Growth in Private Branded Solutions will occur from organic growth of existing partner relationships, supplemented with new business relationships established throughout the year. For additional information, see "Private Branded Solutions Growth" on page 16 hereof. While the Corporation has no control over the growth of the loyalty program industry, management considers it an important factor in the Corporation's growth prospects. For additional information, see "Growth of Loyalty Program Industry" on page 19 hereof. Results of Operations - Revenues Overview 2003 2002 2001 ---------- ---------- ---------- Points operations $5,502,744 $2,308,846 $ 686,194 Revenue from other sources(1) -- -- 112,033 Interest and other revenue 355,960 59,446 207,744 TOTAL REVENUE $5,858,704 $2,368,392 $1,005,971 Note: (1) In 2001, prior to restructuring, a subsidiary of the Corporation recognized revenues of $89,035 attributed to "appreciation on dilution of investment" and $22,998 attributed to "consulting". Total revenue increased from $2,368,392 in 2002 to $5,858,704 in 2003, an increase of 147%. The increase in revenue in 2002 relative to 2001 was 135%. The provision of Points Solutions accounted for approximately 94% of the revenues in 2003 ($5,502,744). Interest income accounted for the remaining 6% of the Corporation's revenues. A substantial portion of Points' revenue is generated through the provision of Private Branded Solutions for loyalty programs by way of fees for technology services and transaction fees or commissions paid to Points by the operators of the loyalty programs. Points earns revenue from the Points Exchange in two principal ways. First, Points charges a commission on all exchanges, based on a value of the loyalty currency tendered for exchange by the loyalty program member. Through the exchange model, the participating loyalty program sets a value on the currency tendered for "sale". Based on this valuation, a percentage is remitted to Points and the remaining balance is used to purchase the currency of another participating loyalty program. Second, loyalty program members pay Points either a fee for each exchange transaction on the Points Exchange or an annual fee for a membership that includes unlimited exchange transactions. For the year ended December 31, 2003, two key customers represented approximately 61% (2002 - 77%) of the Corporation's gross revenues and two key customers represented approximately 58% (2002 - 91%) of the Corporation's deposits. Management expects the economic dependence on key customers to continue on a downward trend. Management recognizes that the Corporation must achieve profitability through revenue growth and cost management. By

2005, management expects that Points' revenues will exceed its general and administrative expenses. Revenue Growth Revenue growth has historically been, and will continue to be, generated by growth of membership in and use of the suite of Points Solutions products. Growth in product usage will occur from the organic growth of existing relationships, supplemented with new business relationships established throughout the year. Management expects the existing contracts to continue to generate growing revenues and, based on on-going business development efforts, is optimistic about new revenue sources in 2004. Growth in Use of the Points Solutions The suite of Points Solutions experiences revenue growth based on the number of loyalty program partners and consumer members who participate in the various programs. Partner Summary - Total Number of Partners(1) 2003 2002 2001 - --------------------------------------------- ----- ---- ---- Points Exchange 35 25 13 Private Branded Solutions 12 6 3 Cumulative Miles Transacted (000,000's) 3,027 977 100 Notes: (1) Partners may be included in both the Private Branded Solutions and the Points Exchange. Points Exchange Growth Growth in the number of consumer members using the Points Exchange is driven by three factors that contribute to both increased site traffic and the ease with which a consumer can join the Points Exchange and then conduct exchange transactions: website usability and enhancements, marketing (awareness and brand) and partner activity. The Corporation has been focused on website usability and other enhancements throughout 2002 and 2003. In particular, 2003 saw numerous important product enhancements to the Points Exchange, including three version releases enhancing website usability and the addition and implementation of email promotions, off-line databases, and message centre tools. In 2004, Points expects to release further website enhancements and expand its marketing promotions and programs to accelerate growth of the Points Exchange. Growth in activity on the Points Exchange is heavily affected by partner activity. The number of loyalty program participants, their industry mix and the average ratio of loyalty currency exchanged to new loyalty currency issued (the "Trade Ratio"), which has been steadily improving, are important elements in the growth of the Points Exchange. Points continues to focus its business development efforts on adding the optimal partners according to size and industry to the Points Exchange, and has been and will continue to work with existing program participants to improve the Trade Ratio. Management expects to continue to see successes in these areas in 2004. The number of trades completed on the Points Exchange has grown year over year and management expects this trend to continue. Points Exchange METRICS DEC. 31, 2003 DEC. 31, 2002 DEC. 31, 2001 - ----------------------- ------------- ------------- ------------- Total Loyalty Programs 35 25 13 Trade Ratio(1) 1.68 to 1 1.94 to 1 2.58 to 1 Year over Year Growth in Total Trades (%) 279 230 n/a Notes: (1) Average rates are based on all miles and points exchanged and excludes gift certificates. The results are based on actual trades made during the fiscal year. 15

Private Branded Solutions Growth The Private Branded Solutions have been designed with each partner's look and branding. As a result, Points has little impact on driving traffic and transactions through its partners' sites. However, Points has seen continuous growth in the products since each launch. Management expects this trend to continue for new and existing Private Branded Solutions. Private Branded Solution METRICS DEC. 31, 2003 DEC. 31, 2002 DEC. 31, 2001 - -------------------------------- ------------- ------------- ------------- Total Unique Partners 12 6 3 Total Private Branded Solutions 30 17 6 Product Summary - Total Number of Private Branded Solutions Private Branded Solutions(1) 2003 2002 2001 - ---------------------------- ---- ---- ---- POINTSpurchase 9 6 3 POINTSgift 8 6 3 POINTStransfer 2 1 0 POINTScorporate 4 2 0 POINTSelite 2 1 0 POINTScustom 2 0 0 POINTSintegrate partners(2) 3 1 0 TOTAL PRIVATE BRANDED SOLUTIONS 30 17 6 Notes: (1) Includes products sold to new and existing customers.(2) Each POINTSintegrate partner will have third parties integrated into their technology platform. There are 14 existing partner integration add-ons among the three POINTSintegrate partners. Sources of Revenue Growth Approximately 94% of the Corporation's revenue is generated through its Points Solutions, which have two primary sources for growth: organic growth through increased use of existing contracted Points Solutions; and the development of new contracted Points Solutions. % of Revenues From: 2004 (PROJECTED) 2003 (ACTUAL) 2002 (ACTUAL) - ------------------- ---------------- ------------- ------------- Organic growth of existing Points Solutions(1) 73% 66% 63% New contracted Points Solutions with new and existing partners 27% 34% 37% TOTAL 100% 100% 100% Note: (1) Includes MilePoint solutions placed with partners acquired from MilePoint.

Organic Growth of Existing Points Solutions The large majority of existing products that Points operates, including those on behalf of partner loyalty programs, continue to grow through increased consumer awareness, consumer adoption and loyalty program growth. As Points earns transaction fees or commissions on the majority of these products and as the products continue to grow, Points expects to continue to derive a large portion of its revenues in this manner. Organic growth of existing Points Solutions accounted for 66% of revenues in 2003. Revenue from organic growth grew by 150%, from $1.45 million in 2002 to $3.6 million in 2003. Management expects this trend to continue as the base of existing products continues to grow. New Contracted Points Solutions Selling new Points Solutions is an important source of new revenue. New Points Solutions sold to loyalty program partners grow the base of products being managed and therefore the organic revenue base and, in the case of sales to new loyalty program partners, provide an opportunity to place additional Points Solutions with the same partner. Revenue from the sale of new Points Solutions grew by 119%, from $845,000 in 2002 to $1.9 million in 2003. Revenue growth was attributed to growth in both the number of partners participating on the Points Exchange and the number of Private Branded Solutions placed with existing and new partners. Points sold new Private Branded Solutions products to six new loyalty program partners in 2003, doubling its unique partnership base for the sale of these products (in particular, Points deployed three new POINTSpurchase products, two new POINTSgift products, one POINTStransfer product, two new POINTScorporate products, one POINTSelite product, two POINTScustom products and two new POINTSintegrate products with 14 add-on integrations). In addition, 10 new loyalty program partners were added to the Points Exchange during 2003. Points believes that its suite of Points Solutions is applicable to all of its large loyalty program partners and will continue to focus business development resources on both the sale of new products to current partners and to sales to new partners. Management is focused on expanding the Points Exchange partnership base in 2004 across various loyalty verticals. In particular, Points will continue to focus on new partnerships in the hotel, retail, car rental, online, and financial services categories throughout 2004. Projected revenues for 2004 attributed to the deployment of Points Solutions to new loyalty program partners are considerably riskier than organic growth of existing Points Solutions. Revenue growth is still substantially dependent on generating new contracts for the purchase of Points Solutions products. While management expects continued business development success, there is no certainty that Points will continue with its past success of acquiring new contracts with new or existing partners. Other Factors Contributing to Revenue Growth In addition to the sources of revenue and growth described above, three other factors contribute to the Corporation's financial performance: interest income, fluctuations in foreign exchange rates and the growth of the loyalty program industry. Interest Revenue The Corporation earned interest income of $355,960 in 2003, compared with $59,446 in 2002. The major factor resulting in higher interest income is the growth in the Corporation's cash reserves. Interest revenue is a function of the Corporation's cash balances and the prevailing interest rates. Canadian cash reserves are invested in a combination of short-term liquid assets and short-term bonds. The bond portfolio has a duration of less than three years and yield over 3%. Foreign currency continues 17

to be invested in short-term and money market instruments. Points' cash and short-term investments are valued quarterly at the lower of cost and market value. As Points' business continues to grow, cash reserves and related interest income are also expected to increase, although this growth is not expected to be a material portion of the Corporation's revenue going forward. Interest rates will continue to influence interest earnings. The Corporation's bond portfolio is exposed to financial risk that arises from the credit quality of the underlying bond issuers. The Corporation seeks to mitigate the credit risk by diversifying its bond holdings and only investing in securities with a credit rating of "A" or higher. A summary of the Corporation's investments is as follows: US$ OTHER YIELD (%) CREDIT RATING C$ TOTAL DENOMINATED DENOMINATED --------- ------------- ----------- ----------- ----------- Cash held at bank(1) 0.78 n/a $10,651,461 $6,938,320 534,303 Money market securities 2.44(2) R1 - High 41,620 n/a n/a Bonds(3) 4.46 A - AAA 9,581,755 n/a n/a TOTAL $20,274,836 $6,938,320 534,303 Notes:(1) C$ Total represents total cash held at bank inclusive of all denominations; US$ and Other Denominated currencies are a subset of the C$ Total and are represented in their local currency amount. (2) Yield as at December 31, 2003. (3) Bond yield is calculated as the simple average of the portfolio's semi-annual yield to maturity. Foreign Exchange Rates The translation of the Corporation's revenues and expenses from U.S. to Canadian dollars is, and will continue to be, sensitive to changes in the U.S./Canadian foreign exchange rates ("FX Rates"). Changes to FX Rates will have greater impact on the Corporation's revenues than on its expenses as approximately 92% of the Corporation's revenues are in U.S. dollars and the remaining 8% are split between Canadian dollars and Euros. Management expects that the percentage of US dollar-based revenue will not decrease significantly in 2004. Approximately 61% of the Corporation's expenses are in Canadian dollars, 37% are U.S. dollar-based and 2% are based in other foreign currencies. The Corporation does not have material foreign exchange risk with its cash expenses as it has sufficient foreign currency reserves to meet its foreign obligations. As the following table highlights, the Canadian dollar strengthened in 2003, which had a material, negative impact on the translation of the Corporation's U.S. dollar revenues. Compared to 2002, the Canadian-based revenue growth was reduced by 11.2% relative to U.S. - dollar revenue growth in 2003. In dollar terms, Points revenue would have been approximately $6,512,000 (actual revenues for 2003 were $5,858,704, a difference of approximately $655,000) had FX Rates in 2003 been the same as the rates in 2002. U.S. dollar expenses and commitments were also reduced by 4.7% due to the strengthening Canadian dollar. In dollar terms, Points' general and administrative expenses would have been approximately $8,409,000 (actual expenses for 2003 were $8,029,471, a difference of approximately $380,000) had FX Rates in 2003 been the same as the rates in 2002. In summary, the strengthening Canadian dollar increased Points'net loss in 2003 by approximately $275,000 or 4%. The Corporation's revenue growth will slow (in Canadian dollar terms) if the Canadian dollar continues its trend of strengthening relative to the U.S. dollar. Similarly, it is expected that Points' expenses should also decrease, dampening the negative impact to net income.

U.S. - CANADIAN FX RATES 2003 2002 2001 - ------------------------ ----- ----- ----- Year Start 1.573 1.592 1.499 Year End 1.295 1.577 1.591 Year Average 1.401 1.570 1.549 Growth of Loyalty Program Industry The Economist reported on the growing importance of loyalty programs in an article from its May 2, 2002 issue, entitled "Fly me to the moon", noting that on an annual basis, airlines sold "roughly US$10 billion worth of miles to partners, such as credit card firms". In another article (entitled "Frequent-flyer economics," from the same issue), The Economist reported that "frequent flyer miles started as a marketing gimmick, but they have become a lucrative business," that "roughly half of all miles are now earned on the ground, not in the air," and that with "the world-wide stock of unredeemed miles ....close to 8.5 trillion ...the total global stock of frequent flyer miles may now be worth almost US$500 billion". Management understands that members of loyalty programs are much more likely to utilize the Points Exchange and the other products from the suite of Points Solutions when they are close to a level at which they can redeem an award. The redemption level for an award varies by type of award (for example, a business-class flight takes more miles that an economy-class flight) and by program type (the "cost" of a flight typically starts between 15,000 and 25,000 miles whereas a night in a hotel starts at 10,000 points). Therefore, growth in consumer loyalty program account balances will create demand for Points Solutions. Growth in program balances is a function of the growth in the number of programs, the number of participating consumers, time and the number of consumers moving through a loyalty redemption (for example, receiving an award of some type). Several respected periodicals estimate strong growth in the popularity and participation in loyalty programs. For example, in addition to The Economist, cited above, according to the "frequent flyer facts" section of the website of InsideFlyer magazine (www.webflyer.com), a leading publication for members of frequent traveler programs. loyalty programs grow at a rate of 11% per annum, with over 120 million members worldwide. While there are about 92 frequent flyer/guest programs in the world, American AAdvantage, the largest frequent flyer program in the world, began with 283,000 members in 1981 and has grown to more than 45 million members. Results of Operations - General and Administrative Expenses General and Administrative Expenses General and administrative expenses grew by 16% in 2003. This increase reflects the cost of expanding operations, including the launch of a number of Private Branded Solutions to new and existing customers. The Corporation continues to make significant expenditures for its technology, its technological expertise and its industry expertise, in order to have the appropriate infrastructure and personnel required to deal with large, established companies. The Corporation's investment in the above areas was critical in completing its commercial agreements with its strategic partners (for example, American Airlines, eBay and IAC). In the past two years, there has been little inflationary pressure on costs. Management expects that, while unlikely in 2004, inflation may be a factor in 2005 and beyond. The Corporation will manage its expenses accordingly, should inflation in technology-related costs (employment expenses, technology services, etc.) occur again, as it did in 1998 to 2000. As the Corporation is still in the process of enhancing and maintaining its technology and increasing loyalty program participation in and sales of the Points Solutions, significant resources continue to be required. While management has made 19

controlling costs a priority, costs are expected to rise in 2004 by more than the increase in 2003 over 2002, as the Corporation continues to scale its infrastructure, add new partners to its suite of products, move from trial/test marketing to a more comprehensive marketing and branding program and begin the transition associated with assimilating the business of MilePoint. A significant percentage of the planned expense increases in 2004 are either discretionary or variable. Points expects that a series of significant marketing and branding programs will begin in the latter half of 2004. The actual expense incurred will be a function of the types of marketing media employed and incentives offered, as well as the timing of the programs' launch dates. If actual revenue growth projected from the marketing plan does not meet expectations, the expenditures can either be reduced or reallocated to more successful programs. A summary of the Corporation's general and administrative expenses are as follows: GENERAL AND ADMINISTRATIVE EXPENSES 2003 2002 2001 - ----------------------------------- ---------- ---------- ---------- Employment Costs(1) $5,186,899 $4,004,093 $3,132,263 Technology Services(2) 803,222 1,042,427 1,279,624 Marketing and Communications 386,512 120,861 872,057 Other(3) 1,652,838 1,773,688 884,539 TOTAL $8,029,471 $6,941,069 $6,168,483 Notes:(1) Wages and employment costs include salaries, contract labour charges, recruiting, benefits and government charges (CPP and EI). (2) Technology expenses include online hosting and managed services, equipment rental, software licenses and capital lease interest expenses. (3) Other expenses include foreign exchange losses (or gains), sales commissions and related expenses, travel expenses, professional fees, insurance, office rent and expenses and regulatory expenses. Employment Costs As at December 31, 2003, Points had 64 employees. As at March 31, 2004, Points had 68 full-time employees. 2003 2002 ---------------------- ---------------------- HEADCOUNT % OF TOTAL HEADCOUNT % TO TOTAL --------- ---------- --------- ---------- Technology Group 41 64 26 70 Finance 10 16 2 5 Business Development 8 13 7 19 Marketing 5 8 2 5 TOTAL 64 100% 37 100% The Corporation saw an increase in employment costs in 2003 due predominantly to growth in its technology group to meet the demand for its Private Branded Solutions and continued version enhancements of the Points Exchange platform. Management expects that in 2004 the Corporation will hire additional personnel in business development, marketing and the technology group. Overall, 2004 employment costs are likely to increase moderately relative to 2003. This increase is expected to result from new hiring, annualizing the employment costs of employees hired part way through 2003 and annual salary increases. The Corporation expects to hire fewer personnel in 2004 than in previous years.

Technology Services Technology Services expenses increase in increments based on business growth and product performance. In general, as loyalty program partners and products are added to the infrastructure, and transactional volume increases, additional servers, processors, bandwidth, memory, etc. are required to provide a secure and robust production environment. The increase in 2004 will be driven by products launched, loyalty program partners acquired and the speed with which Points completes the transition of the MilePoint business. As technology services costs are a function of the number of partners and Points Solutions products, these costs grow proportionately to revenue growth. Marketing and Communications In 2003, external marketing expenditures primarily involved partner media sources (for example, in-flight magazines, e-mail and newsletter campaigns, etc.) and/or bonus miles (from the Corporation's prepaid miles - see "Long-term Liabilities and Commitments" for additional information on prepaid miles) awarded for purchasing a PointsPlus membership, conducting an exchange or entering a promotional sweepstakes. Marketing expenses associated with the sale of PointsPlus memberships are amortized over the term of the membership, while the other marketing expenditures are recognized in the period of use. The Corporation expects to significantly increase its marketing expenditures in the latter half of 2004, primarily focusing on customer acquisition and retention. The marketing and branding foundation built in 2003 has made it possible to expand audience reach and effectively execute large-scale, multi-channel promotions. Advertising expenditures will continue to be focused on partner media as this approach dovetails with business development strategies and is the most cost-effective means to reach Points' target audience. A smaller portion of the budget will be used for targeted non-partner advertising. It is anticipated that marketing and communication expenses could increase substantially if the programs are successful at customer acquisition and retention. If the programs do not meet management's expectations in driving revenue growth, marketing expenses can be eliminated or reallocated in the short term. Management expects that the results of the carefully planned marketing strategy will accelerate Points Exchange activity. Results of Operations - Operating Efficiency In 2003, the Corporation experienced 147% revenue growth, improved efficiencies in employment costs and initiated a very targeted approach to its marketing expenditures. The Corporation's operating ratio (defined as the ratio of general and administrative expenses to revenues) has improved by 52% over 2002 and is expected to continue to improve in 2004. The Corporation expects the improvement in operating efficiencies to continue through to 2005 as revenues grow and costs stabilize, thereby achieving a ratio less than one. EFFICIENCY MEASURE 2003 2002 2001 - ------------------ ---- ---- ---- Operating Ratio 1.4 2.9 6.1 Results of Operations - Non-Cash Expenses Forward-looking statements contained in this section, "Results of Operations - Non-Cash Expenses", with respect to future expenses of the Corporation, are not guarantees of such future expenses and involve certain risks and uncertainties that are difficult to predict. Any changes in the Corporation's amortizing assets will subsequently change the Corporation's amortizing expenses. 21

Amortization Expenses The Corporation recorded amortization expenses of $2,877,321 in 2003, compared to $2,408,800 in 2002. The increase was attributed to the charges outlined in the following table: AMORTIZATION EXPENSE 2004 2003 2002 - -------------------- ---------- ---------- ---------- Deferred costs $ 658,064 $ 531,914 $ 328,763 Intangible assets(1) 1,287,655 756,201 567,150 Property, Plant and Equipment 358,585 1,589,206 1,512,887 TOTAL AMORTIZATION $2,304,304 $2,877,321 $2,408,800 Note: (1) 2004 includes amortization of intangible assets ($3,725,000) acquired in the MilePoint Acquisition. Amortization of Deferred Costs 2004 2003 2002 2001 ---------- ---------- -------- -------- Annual amortization $ 658,064 $ 531,914 $328,763 $246,572 Closing balance $2,234,646 $2,790,816 $410,954 $739,717 Charges incurred in respect of certain financings are deferred and charged to income on a straight-line basis over an applicable time period. Deferred finance charges represent legal, accounting and other related fees incurred to obtain the financings. Points has incurred deferred costs in connection with the following financial transactions: a. Points reports deferred financing charges in connection with the 11%, $6,000,000 senior secured convertible debenture (the "Debenture") issued to CIBC Capital Partners as this financial instrument is classified as debt. The related balance sheet value will be nil at March 31, 2004. b. The Corporation reports deferred financing charges in connection with the Series Two Preferred Share issued pursuant to the IAC Investment, as this financial instrument is also classified as debt. The Series Two Preferred Share has 37 amortization periods remaining. c. In consideration of the value to the Corporation of the Alignment Agreement with American Airlines, the Corporation issued 2,196,635 Common Shares to American Airlines valued at $2,240,568. The Common Shares have been classified as deferred costs and will be amortized over a period of five years. There are 19 amortization periods remaining. d. The Corporation posted approximately $57,000 in fees in 2003 associated with the MilePoint Acquisition. These deferred costs and all other fees associated with MilePoint Acquisition incurred in 2004 will be included as part of the costs of acquisition. Amortization of Intangible Assets 2004 2003 2002 ---------- ---------- ---------- Annual Amortization(1) $1,287,655 $ 756,201 $ 567,150 Closing balance $3,758,037 $1,320,692 $1,946,539 Note: (1) 2004 includes amortization of intangible assets ($3,725,000) acquired in the MilePoint Acquisition.

The excess of the cost over the value attributed to the underlying net assets of the shares of Points.com acquired in 2002 is amortized on a straight-line basis over a period of three years. Certain intangible assets (i.e., partner contracts) acquired through the MilePoint Acquisition will be amortized commencing in 2004 (see "Commitments Related to MilePoint Acquisition" for additional information). Goodwill related to the acquisition will not be amortized unless the assets are deemed to have become impaired, in which case the goodwill will be written off in the appropriate period. Amortization of Property, Plant and Equipment 2004 2003 2002 ---------- ---------- ---------- Annual amortization $ 358,585 $1,589,206 $1,512,890 Closing balance $1,482,951 $ 513,723 $1,764,199 The following initiatives in 2004 are expected to affect future period plant, property and equipment amortization expense: a. Leasehold improvements and furniture and equipment costs are expected to increase by approximately $517,800 as a result of the move to a new facility. b. Technology costs are expected to increase by approximately $811,000 as a result of the MilePoint Acquisition and organic growth of the Corporation's existing products. Other Non-Cash Expenses Interest on Convertible Debenture Accrued interest on any principal amount of the Debenture that is converted into common shares ceases to be payable. In addition, in the event that an exercise of the Warrants (as defined in "Liquidity - IAC Investment" below) results in a change of control of Points, accrued interest on the Debenture will be waived and the principal amount of the Debenture will be repayable within 30 days. See "Commitments Related to the Terms of Certain Financing Arrangements" below. Interest on the outstanding principal amount of the Debenture accrues at a rate of 11% per annum. Interest compounds on an annual basis on the day immediately prior to each anniversary of the original issue date, being March 15, 2001. Thereafter, interest accrues on such compounded interest at the rate of 11% per annum. 2008 2007 2006 2005 2004 2003 2002 2001 ------ ------ ------ ----- ----- ----- ----- ----- Accrued Interest ($000's) 257 1,209 1,089 981 884 854 660 522 Debenture Value ($000's) 12,457 12,200 10,991 9,902 8,920 8,036 7,183 6,522 Interest on the Series Two Preferred Share 2013 2012 2011 2010 2009 2008 2007 2006 2005 2004 2003 ---- ---- ---- ---- ---- ---- ---- ---- ---- ---- ---- Accrued Interest ($000's) 244 868 868 868 868 868 868 868 868 868 624 Series Two Preferred Share Value ($000,000's) 21.1 20.9 20.0 19.1 18.2 17.4 16.5 15.6 14.8 13.9 13.0 23

Results of Operations - Earnings and Shareholder Equity Net Loss The Corporation reported a net loss of $6,536,191 for 2003, compared with a net loss of $7,807,378 for 2002. The major factor in the reduction of net losses was the growth in revenue. Included in the 2003 net loss amount are non-cash expenses totalling $4,355,671, accounting for approximately 67% of the net loss and 35% of total expenses. Non-cash expenses contributing to the 2002 net loss totalled $3,068,800 or 39% of the net loss and 30% of total expenses. Shareholder Equity The deficit in shareholder equity has increased from $4,414,195 at December 31, 2002 to $5,222,809 at December 31, 2003. The increased deficit was largely related to Points' operating loss for 2003. Management expects the growth in this deficit to decrease as Points' business grows. Loss Per Share The Corporation's loss per share is calculated on the basis of the weighted average number of outstanding Common Shares for the year, which amounted to 58,823,652 shares at December 31, 2003, compared with 51,656,033 shares at December 31, 2002. The Corporation reported a net loss of $0.11 per share for 2003, compared to a net loss of $0.15 for 2002. For 2003 and 2002, the number of fully diluted shares outstanding has not been computed as the effect would be anti-dilutive (meaning that the loss per share would decrease on a fully diluted basis) and therefore, in accordance with Canadian generally accepted accounting principles, fully-diluted loss per share is not computed. The fully diluted calculation for both fiscal 2003 and 2002 would have otherwise included Common Shares underlying outstanding securities, such as options, warrants and preferred shares convertible or exercisable to acquire Common Shares. Liquidity Overview of Liquidity Management views liquidity as the Corporation's ability to generate sufficient cash (or cash equivalents) to meet its obligations as they become due. Balance sheet liquidity indicators provide management with a test of the Corporation's current liquidity. Balance Sheet indicators of liquidity include cash, accounts receivable and accounts payable. Earnings before interest, taxes, depreciation and amortization ("EBITDA") are the key indicator of the change in the liquidity of Points' operations over a defined period of time. As the Corporation continues to add contracts to its portfolio of Private Branded Solutions and to the Points Exchange, revenues are expected to grow, resulting in increased liquidity. Earnings (Loss) Before Interest, Amortization and Other Deductions The Corporation uses earnings (loss) before interest, amortization and other deductions ("EBITDA") as an internal measure. Management believes that EBITDA is an important financial benchmark for its shareholders because it is a recognizable and understandable measure of the Corporation's cash burn or growth, and is a standard often scrutinized by investors in small to mid-capitalization companies. For example, the Corporation has incurred large non-cash expenses (depreciation and amortization) over the past several fiscal years that distort the financial and strategic gains the Corporation has made. Management expects the Corporation to have a positive EBITDA in 2005.

For the year ending December 31, 2003, the Corporation's EBITDA was ($2,170,767), compared with ($4,572,777) for 2002. The decrease in the loss was related to the growth of revenues, partially offset by a smaller increase in the management of general and administrative expenses, each as discussed herein. IAC Investment The following is a general summary of the terms of the IAC Investment. More comprehensive disclosure of the IAC Investment is contained in Points' Material Change Report dated March 21, 2003, which is hereby incorporated by reference. See also "Commitments Related to the Terms of Certain Financing Arrangements" below. Under the IAC Investment, Points issued one convertible preferred share (the "Series Two Preferred Share") and Common Share purchase warrants (the "Warrants") for aggregate cash consideration of $12.4 million and $2.7 million, respectively. Based on Points' capitalization as at the date hereof, the Series Two Preferred Share is convertible, for no additional consideration, into 21,868,750 Common Shares. The Warrants are exercisable for three years from their date of issue (April 11, 2003) to acquire up to 55% of the Common Shares of Points (calculated on an adjusted fully diluted basis) less the number of Common Shares issued or issuable on conversion of the Series Two Preferred Share. As at the date hereof and based on Points' current capitalization, the Warrants are exercisable to acquire 80,743,867 Common Shares at an effective price per Common Share of $1.02 between April 11, 2004 and April 10, 2005 and $1.13 between April 11, 2005 and April 10, 2006 (resulting in an additional investment by IAC in Points, if exercised in full and depending on the year of exercise, of up to approximately $82.4 million or $91.6 million). Each of the Series Two Preferred Share and the Warrants contain anti-dilution protection provisions. Cash and Current Assets At December 31, 2003, the Corporation had a consolidated cash position of $20,274,836, compared with $7,341,700 at December 31, 2002. Current assets at December 31, 2003 were $22,104,427, compared with $8,266,699 at December 31, 2002. 2003 2002 2001 ----------- ---------- ---------- Current assets $22,104,427 $8,266,699 $3,568,458 Cash increased by $12,933,136 in 2003 over 2002. The primary reason for this increase in cash was the $15.1 million investment by IAC. This transaction was a one-time event and Points does not expect to raise capital again in this fashion. In addition, the growing operations of Points, including the number of new partners and Points Solutions contracted, increased cash (and, to a lesser extent, deposits). Management expects Points to continue to generate increasing amounts of cash through operations in 2004. 2003 2002 2001 ----------- ---------- ---------- Cash and short-term investments $20,274,836 $7,341,700 $2,894,380 Cash From Exercise of Certain Warrants and Options Certain "in-the-money" warrants and options are due to expire in 2004 and in the first quarter of 2005. Assuming that the market price of the Common Shares remains above the exercise price of these securities, management expects the securities to be exercised. If exercised in full, the proceeds from the exercise of these securities will increase cash by approximately $1.65 million - assuming the exercise in full of these securities, issued and outstanding Common Shares will increase by over 10 million shares. 25

EXERCISE / CONVERSION ------------------------------- PROCEEDS UPON SECURITY TYPE EXPIRY DATE NUMBER PRICE EXERCISE - ------------- ----------- ---------- ------------------ ------------- Warrants 21-Oct-04 2,500 $ 0.28 $ 700 Broker Warrants 30-Nov-04 88,525 $ 0.25 $ 22,131 Warrants 30-Nov-04 2,229,481 $ 0.25 $ 557,370 Points International Ltd. Options 14-Feb-05 1,752,000 $ 0.50 $ 876,000 Points International Ltd. Options 14-Mar-05 201,400 $ 0.50 $ 100,700 Options in subsidiary with liquidity put 17-Feb-05 641,501 Fair Market Value $ 14,091 Options in subsidiary with liquidity put 31-Mar-05 5,455,288 Fair Market Value $ 80,059 TOTAL 10,370,695 $1,651,051 It is probable that investors will sell some amount of the Common Shares acquired through the exercise of these securities to cover the cash cost, any tax expense or simply to realize a gain. Increased selling pressure on the Common Shares may cause short-term downward pressure on the market price of the Common Shares. Accounts Receivable The Corporation's accounts receivable, which primarily reflect December Points Solutions revenues, account for, on average, 17% of annual revenues. The Corporation expects accounts receivable to grow proportionately with growth in revenues. Management deems the risk of bad debts to be minimal based on the structure and nature of the Corporation's cash flows. 2003 2002 2001 ---------- -------- -------- Accounts receivables $1,004,370 $267,632 $103,180 Ability to Fund Future Growth In 2003 the Corporation had cash flows of ($1,406,454) after changes in non-cash balances related to operations, after reporting positive cash flows in 2002. Management expects that the Corporation will generate positive cash flows from its operating activities in 2004 and beyond. Management is confident that the Corporation's cash position is adequate to cover expenses and commitments in the short term, even if revenue growth is slower than planned, and expects that the revenue from the Points Solutions will generate sufficient cash to maintain capacity in the short term and grow capacity and resources in the long term. However, the Corporation is currently not generating an operating profit (revenues minus general and administrative expenses) and cannot be assured that revenue growth will be sufficient to meet liabilities as they come due. Working Capital Working capital (defined as current assets minus current liabilities) has reversed from a negative position in 2002 to $10,461,182 in 2003 as a result of both the IAC Investment and growth of the Corporation's revenues. Management expects working capital to remain positive and not degrade materially in 2004. As revenues increase, the Corporation expects cash and current assets to increase proportionately. If, as expected, the Corporation achieves operating profitability in 2005, working capital will continue to grow. Pursuant to contractual commitments, the Corporation will take the necessary actions to ensure that its current assets are greater than its current liabilities.

Property, Plant and Equipment The Corporation reported a decrease in property, plant and equipment to $513,723 at December 31, 2003, from $1,764,199 at December 31, 2002. The decrease was related to the amortization of property, plant and equipment during the year. Technology costs under capital lease are depreciated on a straight-line basis over three years. These costs account for 58% of gross property, plant and equipment costs in 2003. The Corporation's technology costs are currently, and are expected to remain, below industry averages as a result of prudent cost containment initiatives. The carrying amount of existing property, plant and equipment will continue to decrease in 2004. However, leasehold improvements at the Corporation's new facility will increase property, plant and equipment and the corresponding amortization in 2004 and beyond. Property, Plant and Equipment (net carrying amount) 2003 2002 2001 -------- ---------- ---------- Furniture and equipment $124,868 $ 139,523 $ 172,186 Computer equipment 206,494 98,013 140,018 Software 105,762 134,300 218,497 Technology costs 23,782 317,361 597,575 Technology costs under capital lease -- 989,898 1,979,793 Leasehold improvements 52,817 85,104 123,466 TOTAL PLANT, PROPERTY AND EQUIPMENT $513,723 $1,764,199 $3,231,535 Goodwill 2003 2002 2001 ---------- ---------- -------- Goodwill and Other Intangibles(1) $1,320,692 $1,946,539 $120,312 Note: (1) On February 8, 2002, the Corporation completed a restructuring in which it acquired the 5% interest in its subsidiary Points.com that it did not already own, and discontinued all of its other operations. To acquire the remaining shares and outstanding broker warrants of Points.com, the Corporation issued 7,286,160 Common Shares, valued at $1,821,540 and 4,446,453 share purchase warrants with an exercise price of $0.25, valued at $331,512. An additional 595,667 share purchase warrants with an exercise price of $0.25, valued at $37,825, were issued to acquire existing warrants of Points.com and an additional 250,000 common shares, valued at $62,500, were issued to CIBC Capital Partners as a restructuring fee in connection with the restructuring of the Debenture. Legal fees of $139,750 were incurred with respect to the restructuring. The total consideration in the restructuring was $2,393,127, of which $134,524 was allocated to non-controlling interests and $2,258,603 to the cost of acquired technology. Subsequent to the 2003 year-end, the Corporation completed the MilePoint Acquisition with $3,725,000 to be allocated to amortizing intangible assets and $3,775,000 to (non-amortizing) goodwill. In accordance with CICA handbook, Section 3062, goodwill will not be expensed unless it is deemed to have become impaired. Management has tested, and concluded, that none of the Corporation's goodwill has become impaired. Current Liabilities Current liabilities at December 31, 2003 were $11,643,245, compared with $10,371,715 at December 31, 2002. The increase was related to increased deposits, accounts payable and deferred revenue (membership fees received in advance for services to be provided over a future period are recorded as deferred revenue and recognized as revenue evenly over the term of service). 27

Through arrangements with partner loyalty programs such as those for POINTSpurchase and POINTScorporate solutions, Points processes transactions involving the online sale of loyalty currencies and collects the funds on behalf of the loyalty program partner. Gross proceeds received on the sale of loyalty program points, net of the commissions earned, are included in deposits and deferred revenue until ultimately remitted. The level of deposits is influenced by partner activity and trends in the overall loyalty industry. As activity increases, the Corporation's deposits increase. The Corporation expects deposits to increase as it experiences organic growth with existing partners, establishes new partner relationships and integrates the MilePoint Acquisition. The 2003 accounts payable and accrued liabilities include 2003 employee bonus accruals paid in January 2004, and other accrued charges. Accounts payable and accrued liabilities as a percent of annual revenues have declined from 48% in 2001 to 20% in 2003. It is expected that this percentage will continue its downward trend as the Corporation realizes economies of scale resulting in cost containment and increased revenues. The Corporation has sufficient foreign currency reserves to meet its foreign currency obligations and, as such, does not utilize any hedging or other strategies involving interest rate or currency derivatives. 2003 2002 2001 ----------- ---------- ---------- Accounts payable and accrued liabilities $ 1,187,598 $1,017,955 $ 486,605 Deposits 10,455,646 8,946,631 2,096,865 Current portion of obligation under capital lease -- $ 407,128 $ 736,749 Long-Term Liabilities and Commitments PAYMENTS DUE BY PERIOD (AGGREGATE AMOUNT FOR MULTI-YEAR PERIODS) (000'S) ---------------------------------------------------------------------------- CONTRACTUAL OBLIGATIONS TOTAL(1) 2009 + 2008 2007 2006 2005 2004 - ----------------------- --------- --------- -------- -------- -------- -------- -------- Long Term Debt(2) (non-cash until repayment) $ 12,457 -- $6,257.2 $1,209.0 $1,089.2 $ 981.2 $ 884.0 Series Two Preferred Share (non-cash until repayment) 21,080.0 16,115.5 868.0 868.0 868.0 868.0 868.0 Capital Lease Obligations -- -- -- -- -- -- -- Operating Leases(3) 2,487.2 11.3 107.4 395.6 395.6 436.9 1,140.4 Partner Purchase Commitments(4) 3,974.2 -- 299.4 1,365.8 1,025.4 748.2 535.4 MilePoint Acquisition(5) (6) 4,419.5 400.0 842.0 3,177.5 TOTAL CONTRACTUAL OBLIGATIONS (000'S) $44,417.9 $16,126.8 $7,531.9 $3,838.4 $3,778.2 $3,876.3 $6,605.3 Notes:(1) Represents the aggregate amount for the full duration of the contractual obligations (including years post 2008 and prior to 2004). (2) The Debenture is due on March 15, 2005. The holder of the Debenture has the right to extend the term by one year for up to three consecutive years. See "Interest on Convertible Debenture" above for a summary of payments in a fiscal year if the Debenture matures. (3) Includes technology services commitments and hardware and software operating leases. (4) Includes mileage purchase and co-marketing commitments, see "Partner Purchase Commitments" below. (5) Operating leases and partner purchase commitments, when combined, are equal to Note 17, "Commitments", of the audited annual consolidated financial statements. (6) Cash commitments related to the MilePoint Acquisition include the purchase price ($3.5 million), anticipated transition costs (up to US$505,000) and anticipated consulting fees (US$120,000).

Elements of the foregoing table are explained in more detail in the following sections. Commitments Related to the Terms of Certain Financing Arrangements Background On March 15, 2001, Points issued to CIBC Capital Partners, a division of Canadian Imperial Bank of Commerce ("CIBC Capital Partners"), the 11% $6,000,000 Debenture, which was amended and restated on February 8, 2002 and further amended effective April 11, 2003. The full principal amount of the Debenture was set to mature on March 15, 2004. However, in December 2003, CIBC Capital Partners exercised its right to extend the maturity date until March 15, 2005. CIBC Capital Partners has the option to extend the maturity date from March 15, 2005 for up to three more one-year extensions. Accrued interest on the Debenture as of December 31, 2003 is $2,036,372 and is included with the Debenture in long-term debt as a non-current liability in the consolidated balance sheet. The $6,000,000 principal amount of the Debenture is convertible at the option of CIBC Capital Partners into up to 18,908,070 Common Shares. Accrued interest on any principal amount as converted ceases to be payable. The Debenture will also automatically convert in full into Common Shares immediately preceding certain liquidity events. The Debenture contains certain negative covenants in favour of CIBC Capital Partners. As part of the reorganization of Points completed on February 8, 2002, Points issued to CIBC Capital Partners one preference share (the "Series One Preferred Share"). The holder of the Series One Preferred Share is entitled to a dividend (the "Dividend") in the event that, prior to an automatic conversion of the Debenture, (i) there is a merger or consolidation of Points (or a subsidiary of Points which owns all or substantially all of the assets of Points) with another corporation where, following such event, the shareholders of Points will not hold at least a majority of the voting power of the surviving/acquiring corporation, (ii) any person (other than CIBC Capital Partners) or persons acting jointly or in concert acquire 50% voting control or 50% of the equity of Points (a "Change of Control"), or (iii) there is a sale of all or substantially all of the assets of Points. The Dividend is approximately equal to $4,000,000 plus an amount calculated on the basis of a notional dissolution of the Corporation where the holder of the Series One Preferred Share is entitled to share pro rata (on the basis that the Series One Preferred Share represents that number of Common Shares into which the Debenture is then convertible) with the holders of all other participating shares in distributions from the assets of Points and assuming, for this purpose, that the value of the assets of Points available for distribution on this notional dissolution is the value attributable to the equity of Points implied by the transaction giving rise to the dividend event, as adjusted for the value of non Common Share equity not valued in the transaction giving rise to the Dividend. In no event may the Dividend exceed $24,000,000. Where an event occurs giving rise to the Dividend, CIBC Capital Partners is entitled to accelerate all amounts owing under the Debenture. In connection with the IAC Investment, the Debenture was amended such that (i) the Debenture is repayable (without accrued interest, the repayment of which is waived) by Points within 30 days of a Change of Control of Points resulting from the exercise of the Warrants and (ii) the Debenture is not convertible for so long as the Warrants are outstanding and will not be convertible after the Warrants are exercised if the Debenture is repaid within 30 days of the Change in Control resulting from the exercise of the Warrants. Points and CIBC Capital Partners also acknowledged, in connection with the IAC Investment, that in the event of the exercise of the Warrants resulting in a Change of Control, the application of the terms of the Series One Preferred Share in that situation results in the Dividend equalling the lesser of (i) $24,000,000 and (ii) $4,000,000 plus the number of Common Shares into which the Debenture is then convertible, multiplied by the exercise price paid per Common Share on the exercise of the Warrants. Points has agreed that, within 30 days of the exercise of the Warrants in full, it will pay all amounts owing under the Debenture and the Series One Preferred Share. Except in connection with the exercise of the Warrants by IAC, Points is not entitled to pre-pay the Debenture. 29

Maturity of Debenture Assuming the Warrants have not been exercised and the Debenture matures on March 15, 2005, the Corporation will be required to repay $6 million of principal and $3,108,422 of accrued interest. It is possible that the repayment of $9,108,422 of principal and accrued interest will cause the Corporation to be in a negative working capital position, may materially threaten its solvency and/or may severely restrict the ability to grow its business. There is no certainty that the Corporation would have sufficient cash at such time to make the repayment. Exercise of Warrants If the Warrants are exercised resulting in a Change of Control prior to the maturity of the Debenture, as at the date hereof and based on the Corporation's current share capitalization, the Corporation would receive between approximately $82.4 million and $91.6 million, depending on the year of exercise. On the exercise of the Warrants resulting in a Change of Control, the Corporation would be required to repay the $6 million principal amount of the Debenture and pay the Dividend, which would then be payable on the Series One Preferred Share (up to a maximum of $24 million). In this situation, management expects that Points would have sufficient cash to make such payments. Redemption Rights of Series Two Preferred Share Holder Unless the Series Two Preferred Share has been converted at the option of the holder, Points will be required to redeem the Series Two Preferred Share upon the earlier of (i) March 31, 2013 and (ii) a person (other than the holder of the Series Two Preferred Share) acquiring shares of Points sufficient to elect a majority of the board of directors of Points (a "Series Two Share Change of Control"). In the event of redemption of the Series Two Preferred Share on a Series Two Share Change of Control, the redemption amount payable will be equal to the greater of (i) 125% of the amount equal to (A) the subscription price of the Series Two Preferred Share plus (B) a return on that subscription price equal to 7% per annum, calculated from the date of issue of the Series Two Preferred Share to the date on which the Series Two Preferred Share is redeemed and (ii) the greater of (A) the value of the Common Shares into which the Series Two Preferred Share then could be converted on the day immediately prior to public announcement of the Series Two Share Change of Control and (B) the product of the Common Shares into which the Series Two Preferred Share then could be converted and the fair market value of the consideration paid per Common Share in the transaction resulting in the Series Two Share Change of Control. Other Change of Control Event Upon the occurrence of an event that is a Change of Control and a Series Two Share Change of Control, and is unrelated to the exercise of the Warrants by IAC, Points may not have sufficient cash to pay the Dividend, the amounts due under the Debenture and/or the redemption amount on the Series Two Preferred Share. As such, it is unlikely that management would consider a transaction that triggered the above payments unless the transaction provided for payment of the outstanding obligations.

Partner Purchase Commitments(1) 2008 2007 2006 2005 2004 -------- ---------- ---------- -------- -------- Mileage/ Point Purchase Commitments $278,339 $ 990,369 $ 727,673 $536,180 $396,471 Marketing Commitments 21,037 375,434 297,758 211,991 138,914 TOTAL PARTNER PURCHASE COMMITMENTS $299,376 $1,365,803 $1,025,431 $748,171 $535,385 Note: (1) U.S.dollar commitments have been converted at the year-end exchange rate of US$1 = C$1.2946. As part of the contractual requirements of certain commercial agreements, Points has committed to purchase miles and points from partners at predetermined rates. When purchased, the miles are recorded as an asset (i.e., prepaid expense) until expensed as marketing expenditures in the period of use. A large portion of the current prepaids and sundry assets of the Corporation include prepaid mileage commitments purchased from the Corporation's partners. The percent of prepaids and sundry assets as a percentage of annual revenues has declined from 57% in 2001 to 14% in 2003. It is expected that this percentage will level off as the Corporation continues to offer incentives and other marketing programs. While prepaid miles may remain the same or lower as an overall percentage of prepaids and sundry assets, management expects the prepaid miles account to increase as a result of the mileage purchase commitments from various partners. 2003 2002 2001 -------- -------- -------- Prepaid mileage $516,651 $313,454 $ 35,000 Sundry assets 308,570 343,913 535,899 TOTAL $825,221 $657,367 $570,899 Commitments Related to MilePoint Acquisition On March 31, 2004 Points completed the MilePoint Acquisition. The purchase price for the assets of MilePoint was $7.5 million and was satisfied through a combination of $3.5 million in cash and four million Common Shares (worth approximately $4 million). An initial $1.9 million was paid in cash on closing, with the balance payable semi-annually over two years. The four million shares were issued into escrow on closing and will be released to MilePoint in four unequal tranches over two years. Fees incurred in the transaction, estimated at $200,000, have been capitalized as goodwill. In 2003, MilePoint earned revenue of $2.2 million (unaudited) and was slightly profitable. Points expects to realize significant operating synergies by integrating MilePoint's products into Points' operations. Management expects that most of the synergies will be achieved by the end of 2004. Points' business objective in acquiring the assets of MilePoint was to increase its volume of business at minimal additional costs outside of the purchase price and transition costs. Management expects that the acquisition will increase revenues and, including all amortizations, be accretive to net income by the end of 2004. It is expected that the revenue/cash flow from the acquired assets will be sufficient to pay the cash portion of the purchase price over the 24-month period following the acquisition. 31

Management believes that the Corporation's established facilities and existing employees, working in conjunction with MilePoint resources retained during the transition period, will be sufficient to sustain the additional volume of business from the acquired assets. The impact of the acquisition to Points' balance sheet in 2004 will be to increase intangible assets by $3,725,000 and goodwill by $3,975,000 ($3,775,000 attributed to the purchased assets and $200,000 to fees incurred). The amortization of the assets is based on the estimated life of the acquired assets (i.e., the partner contracts). The amortization and the balance of the purchased intangible assets at December 31, 2004 are expected to be as follows: 2004 ---------- Amortization Expense 534,787 Closing Balance (Intangible Assets) $3,390,213 Goodwill 3,975,000 In addition to the existing revenue streams acquired from MilePoint, offering Points Solutions to the customers acquired from MilePoint represents a potentially valuable stream of revenue. As with any acquisition, the smooth transition into the Corporation's operations poses challenges. Transition risks include difficulties in integrating MilePoint's business into the Corporation's and the possibility of human resources capacity limits to launch additional new partners during the transition. The payment of the purchase price under the terms of the MilePoint Acquisition is as follows: MONTHS FROM CLOSING TOTALS --------------------------------------------------------------------- ---------------------- PAYOUT 0 4 6 12 18 24 SHARES CASH - ------ ---------- ---------- -------- -------- ---------- -------- --------- ---------- Cash $1,900,000 $400,000 $400,000 $ 400,000 $400,000 $3,500,000 Shares 1,300,000 700,000 1,500,000 500,000 4,000,000 Share Value(1) $1,300,000 $700,000 $1,500,000 $500,000 $4,000,000 TOTAL 4,000,000 $7,500,000 Note: (1) Based on the simple 20-day weighted average Common Share price of $1.00 per share at signing. In 2004, the Corporation is required to pay $2,300,000 ($1.9 million on March 31 and $400,000 on September 30) in cash in partial satisfaction of the purchase price for MilePoint's business. In addition, MilePoint and the Corporation are party to a Transition Services Agreement ("TSA") whereby MilePoint employees and resources will continue to support the products and partner relationships throughout 2004. Under the TSA, the Corporation has agreed to reimburse MilePoint for expenses incurred in providing transition services, to a maximum of US$505,000. Points has also entered into two consulting agreements with MilePoint and the senior business development principals at MilePoint. The two consultants will be focused on supporting existing relationships and selling Points Solutions to existing and new partners. Management of Points expects that the cash cost of the MilePoint Acquisition will largely be recaptured through the new revenue provided by the purchased assets over the 24-month period following March 31, 2004. Commitments Related to Lease Financing Arrangements While the Corporation has completed its capital lease obligations in 2003, several operating leases for hardware and premises remain outstanding.

The Corporation's lease on its current premises will expire in February 2005. The Corporation has signed a 45-month sublease agreement and will move to significantly larger facilities in the second quarter of 2004 to accommodate the increase in employees. In 2004, the Corporation will be paying approximately $240,000 for its current office facilities and $104,000 for its new office facilities. Property lease costs are outlined in the table below. Management is seeking a sublet arrangement for the remaining duration of its lease at its current location, which expires in February 2005. The projected figures do not include leasehold improvement amounts for Points' new facilities. Leasehold improvements for the new facilities are included in 2004 capital expenditures (see "Planned Capital Expenditures" below). The operating leases primarily relate to specific office technology and technology service commitments. Capital Leases 2003 2002 2001 ---- -------- -------- Current portion of obligation under capital leases -- $407,128 $736,749 Operating Leases 2008 2007 2006 2005 2004 -------- -------- -------- -------- ---------- Property Lease $ 96,075(1) $384,300 $384,300 $402,911 $ 344,228 Technology Services Commitments 11,287 11,287 11,287 34,051 796,189 OPERATING LEASE COMMITMENTS $107,362 $395,587 $395,587 $436,962 $1,140,417 Note: (1) Commitment ends February 28, 2008. Capital Resources Planned Capital Expenditures In 2003, the Corporation purchased new equipment to allocate to new and existing partners and products. Approximately 91% of the Corporation's gross capital expenditure costs are technology (hardware and software) related. 2004 2003 2002 2001 ---------- -------- ------- ---------- Leasehold Improvements $ 516,800 $ 20,794 $ 1,973 $ 84,105 Computer Hardware and Software 811,013 317,936 43,578 1,241,381 TOTAL CAPITAL EXPENDITURES $1,327,813 $338,730 $45,551 $1,325,486 In 2004, the Corporation will incur significant costs in connection with its move to new facilities in the second quarter of 2004. Management expects that leasehold improvements and furniture for the new premises will cost approximately $516,800. The Corporation expects to increase its capital expenditures related to computer hardware and software to approximately $811,000; a 255% increase over 2003. Expected software expenditures include: licenses ($225,000), marketing tools ($135,000), upgrades to internal reporting tools ($215,000) and development tools ($60,000). Management believes that the hardware and software capital expenditures are necessary to keep the development of the Corporation's primary technology assets in line with industry standards. Management expects to fund 2004 capital expenditures from its working capital. 33

Unplanned Securities Issuances Pursuant to the terms of the Debenture, the Investor's Rights Agreement dated April 11, 2003 between IAC, Points and an affiliate of IAC and the terms of the Series Two Preferred Share, IAC and CIBC Capital Partners have significant control over the Corporation's ability to raise capital whether by way of an equity issuance or the incurrence of debt. However, in the event that the Corporation requires additional capital, it does not expect that any required consents would be unreasonably withheld. Based on expected revenue and available resources, Points does not expect to require any additional equity financing to facilitate growth of the business or current operations. Outstanding Share Data As at the date hereof, the Corporation has 68,046,319 Common Shares outstanding, one Series One Preferred Share and one Series Two Preferred Share. The Series One Preferred Share is convertible into one Common Share in certain circumstances. Subject to anti-dilution adjustment, based on Points' current capitalization, the Series Two Preferred Share is convertible into 21,868,750 Common Shares. The Corporation has outstanding options exercisable to acquire up to 5,777,784 Common Shares. The options have exercise prices ranging from $0.20 to $1.37 with a weighted average exercise price of $0.68. The expiration dates of the options range from March 22, 2004 to April 21, 2009. The Corporation's subsidiary, Points.com, has outstanding options exercisable to acquire up to 2,929,054 common shares of Points.com. The holders of these options have been granted the right to put the shares acquired on the exercise thereof to the Corporation in return for Common Shares with a fair market value equal to the fair market value so put. The Corporation has used a ratio of 2.5039 Common Shares to one Points.com share for this purpose and has authorized the issuance of up to a maximum of 7,334,057 Common Shares in this regard. The Points.com options have exercise prices ranging from $0.005 to $0.055 with a weighted average exercise price of $0.04. The expiration dates of the options range from February 17, 2005 to September 1, 2005. The Corporation has outstanding warrants exercisable to acquire up to 83,541,484 Common Shares. The warrants have exercise prices ranging from $0.25 to $1.02 with a weighted average exercise price of $1.00. The expiration dates of the options range from October 21, 2004 to April 11, 2006. The Corporation has outstanding an 11% $6,000,000 senior secured convertible Debenture which is convertible into 18,908,070 Common Shares. The Debenture is not convertible for the period that the Warrants are outstanding. At the option of the Debenture holder, the maturity of the Debenture is extendible for up to three additional one-year periods. Assuming the Warrants have not been exercised and the Debenture matures on March 15, 2005, the Corporation will be required to repay $6 million of principal and $3,108,422 of accrued interest. It is possible that the repayment of $9,108,422 million of principal and accrued interest will cause the Corporation to be in a negative working capital position, may materially threaten its solvency and/or may severely restrict the ability to grow its business. There is no certainty that the Corporation would have sufficient cash at such time to make the repayment.

Selected Financial Results and Highlights (Prior years restated to reflect the 2002 restructuring) INCOME STATEMENT YEAR ENDED DECEMBER 31 ---------------------------------------- 2003 2002 2001 ----------- ----------- ------------ Revenue $ 5,858,704 $ 2,368,292 $ 1,005,971(1) General and administrative expenses 8,029,471 6,941,069 6,168,483 Loss before interest, amortization and other deductions (2,170,767) (4,572,777) (5,162,512) Income (loss) before discontinued operations and extraordinary items (6,536,191) (7,691,648) (7,365,633) Net income (loss) per share - before discontinued operations and extraordinary items - basic (0.11) (0.15) (0.24) - fully diluted n/a n/a n/a Net income (loss) (6,536,191) (7,807,378) (11,199,492) Net income (loss) per share - basic (0.11) (0.15) (0.36) - fully diluted n/a n/a n/a Note: (1) In 2001, prior to restructuring, a subsidiary of the Corporation recognized revenues of $89,035 attributed to "appreciation on dilution of investment" and $22,998 attributed to "consulting". BALANCE SHEET AS AT DECEMBER 31 ------------------------------------------ 2003 2002 2001 ------------ ------------ ------------ Cash and short-term investments $ 20,274,836 $ 7,341,700 $ 2,894,380 Total assets(1) 27,481,286 13,140,020 8,421,152 Long-term liabilities 21,060,850 7,182,500 6,962,198 CASH DIVIDENDS DECLARED - PER SHARE -- -- -- SHAREHOLDERS EQUITY - warrants 2,785,737 425,588 -- - capital stock 17,728,461 14,361,033 9,532,173 - retained earnings (25,737,007) (19,200,816) (11,393,438) TOTAL ($5,222,809) ($4,414,195) ($1,861,265) Note: (1) Financial results from minority holdings are not consolidated into the Corporation's consolidated financial statements, as the Corporation does not exercise control in these entities. 35

Selected Quarterly Information (Consolidated) 2003 INCOME STATEMENT Q4 Q3 Q2 Q1 ----------- ----------- ----------- ----------- Revenue $ 1,449,378 $ 1,647,566 $ 1,457,568 $ 1,304,192 General and administrative 2,651,317 2,160,978 1,710,455 1,506,721 Operating Loss - before interest, amortization and other deductions (1,201,939) (513,412) (252,887) (202,529) Income (loss) before discontinued operations and extraordinary items (2,605,974) (1,628,391) (1,283,337) (1,018,489) Net income (loss) per share - continuing operations (0.04) (0.03) (0.02) (0.02) Net income (loss) (2,605,974) (1,628,391) (1,283,337) (1,018,489) Net income (loss) per share (0.04) (0.03) (0.02) (0.02) 2003 BALANCE SHEET Q4 Q3 Q2 Q1 ------------ ------------ ------------ ------------ Cash and short-term investments $ 20,274,836 $ 21,833,287 $ 24,396,879 $ 10,470,735 Total assets(1) 27,481,286 29,456,797 30,507,645 16,144,871 Long-term liabilities 21,060,850 20,484,978 20,102,978 7,347,500 CASH DIVIDENDS DECLARED - PER SHARE -- -- -- -- SHAREHOLDERS EQUITY - warrants 2,785,737 2,785,737 2,805,308 390,573 - capital stock 17,728,461 17,726,761 15,371,255 14,549,703 - retained earnings (25,737,007) (23,131,032) (21,502,641) (20,219,305) TOTAL ($5,222,809) ($2,618,534) ($3,326,078) ($5,279,029) Note: (1) Financial results from minority holdings are not consolidated into the Corporation's consolidated financial statements, as the Corporation does not exercise control in these entities.

2002 INCOME STATEMENT Q4 Q3 Q2 Q1 ----------- ------------ ----------- ----------- Revenue $ 911,940 $ 729,467 $ 427,534 $ 299,351 General and administrative 1,772,433 1,656,786 2,044,452 1,467,398 Operating Loss - before interest, amortization and other deductions (860,493) (927,319) (1,616,918) (1,168,047) Income (loss) before discontinued operations and extraordinary items. (1,762,215) (1,725,072) (2,390,069) (1,814,292) Net income (loss) per share - continuing operations (0.03) (0.03) (0.05) (0.04) Net income (loss) (1,762,000) (1,725,072)) (2,390,069) (1,930,237) Net income (loss) per share (0.03) (0.03) (0.05) (0.04) 2002 BALANCE SHEET Q4 Q3 Q2 Q1 ------------ ------------ ------------ ------------ Cash and short-term investments $ 7,341,700 $ 4,424,308 $ 4,985,387 $ 5,341,778 Total assets(1) 13,140,020 10,864,170 11,370,933 12,380,615 Long-term liabilities 7,182,500 7,017,500 6,856,810 6,780,292 CASH DIVIDENDS DECLARED - PER SHARE -- -- -- -- SHAREHOLDERS EQUITY - warrants 425,588 425,588 -- -- - capital stock 14,361,033 14,362,084 14,213,686 14,337,092 - retained earnings (19,200,816) (17,438,815) (15,713,743) (13,323,674) TOTAL ($4,414,195) ($2,651,143) ($1,500,057) $ 1,013,418 Note: (1) Financial results from minority holdings are not consolidated into the Corporation's consolidated financial statements, as the Corporation does not exercise control in these entities. 37

(GRAPHIC) MANAGEMENT'S RESPONSIBILITY FOR FINANCIAL REPORTING

Management has prepared the information contained in the financial statements and in the Annual Report. Some numbers presented in the financial statements are based on estimates and judgments; the integrity and fairness of this information is the responsibility of management. The company has prepared the financial statements according to Canadian generally accepted accounting principles. All of the information throughout the Annual Report is consistent with the financial statements. The company maintains internal control, accounting and administrative procedures to provide reasonable assurance that the financial information is relevant, reliable, accurate and fairly presented. The Board of Directors is responsible for governance and fair presentation of the financial statements. The Board of Directors accepts this charge and carries out this responsibility primarily through its audit committee. The Board of Directors appoints the audit committee. All members of the audit committee are outside directors. The committee met with management and auditors before approving the financial statements. The audit committee reports its findings to the Board of Directors and recommends approval of the financial statements by the Board of Directors. The company's external auditors, Mintz & Partners LLP, have conducted an independent audit of the financial statements in accordance with Canadian generally accepted auditing standards. The external auditors had full and unrestricted access to the audit committee and management. Management acknowledges their responsibility in their letter of representation to the Corporation's Auditors and to the Corporation's board of directors. This responsibility is referred to in the audit opinion. /s/ Robert MacLean /s/ Stephen Yuzpe - ------------------------------------- ---------------------------------------- Robert MacLean Stephen Yuzpe Chief Executive Officer Chief Financial Officer Points International Ltd. 39

(GRAPHIC) Financial Statements

AUDITORS' REPORT .......................................................... 42 CONSOLIDATED FINANCIAL STATEMENTS: - CONSOLIDATED BALANCE SHEETS .......................................... 44 - CONSOLIDATED STATEMENTS OF OPERATIONS AND DEFICIT .................... 46 - CONSOLIDATED STATEMENTS OF CASH FLOWS ................................ 47 - NOTES TO CONSOLIDATED FINANCIAL STATEMENTS ........................... 48 41

(GRAPHIC) Auditor's Report

To the Shareholders of Points International Ltd., We have audited the consolidated balance sheets of Points International Ltd. as at December 31, 2003 and 2002 and the consolidated statements of operations and deficit and cash flows for the years then ended. These consolidated financial statements are the responsibility of the corporation's management. Our responsibility is to express an opinion on these consolidated financial statements based on our audit. We conducted our audits in accordance with Canadian generally accepted auditing standards. Those standards require that we plan and perform an audit to obtain reasonable assurance whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. In our opinion, these consolidated financial statements present fairly, in all material respects, the financial position of the corporation as at December 31, 2003 and 2002 and the results of its operations and its cash flows for the years then ended in accordance with Canadian generally accepted accounting principles. (MINTZ & PARTNERS LLP) CHARTERED ACCOUNTANTS Toronto, Ontario March 4, 2004 43

POINTS INTERNATIONAL LTD. CONSOLIDATED BALANCE SHEETS AS AT DECEMBER 31 2003 2002 - ----------------- ----------- ----------- ASSETS CURRENT Cash and cash equivalents (Note 3) $20,274,836 $ 7,341,700 Accounts receivable 1,004,370 267,632 Prepaids and sundry assets 825,221 657,367 ----------- ----------- 22,104,427 8,266,699 LONG-TERM INVESTMENTS (Note 4) 161,629 161,629 PROPERTY, PLANT AND EQUIPMENT (Note 5) 513,723 1,764,199 INTANGIBLE ASSETS (Note 6) 1,320,692 1,946,539 FUTURE INCOME TAXES RECOVERABLE 590,000 590,000 DEFERRED COSTS (Note 23) 2,790,816 410,954 ----------- ----------- $27,481,286 $13,140,020 =========== =========== APPROVED ON BEHALF OF THE BOARD: /s/ Robert MacLean ---------------------------------------- Robert MacLean Director /s/ Christopher Barnard ---------------------------------------- Christopher Barnard Director

POINTS INTERNATIONAL LTD. CONSOLIDATED BALANCE SHEETS AS AT DECEMBER 31 2003 2002 - ----------------- ------------ ------------ LIABILITIES CURRENT Accounts payable and accrued liabilities $ 1,187,598 $ 1,017,955 Deposits 10,455,646 8,946,631 Current portion of obligation under capital leases -- 407,128 ------------ ------------ 11,643,245 10,371,715 CONVERTIBLE DEBENTURE (Note 7) 8,036,372 7,182,500 CONVERTIBLE PREFERRED SHARES (Note 8) 13,024,478 -- ------------ ------------ 32,704,095 17,554,215 ------------ ------------ SHAREHOLDERS' EQUITY CAPITAL STOCK (Note 9) 17,728,461 14,361,033 WARRANTS (Note 10) 2,785,737 425,588 DEFICIT (25,737,007) (19,200,816) ------------ ------------ (5,222,809) (4,414,195) ------------ ------------ $ 27,481,286 $ 13,140,020 ============ ============ 45

POINTS INTERNATIONAL LTD. CONSOLIDATED STATEMENTS OF OPERATIONS AND DEFICIT AS AT DECEMBER 31 2003 2002 - ----------------- ------------ ------------ REVENUES Points operations $ 5,502,744 $ 2,308,846 Interest and other revenue 355,960 59,446 ------------ ------------ 5,858,704 2,368,292 GENERAL AND ADMINISTRATION 8,029,471 6,941,069 ------------ ------------ LOSS - Before interest, amortization and other deductions (2,170,767) (4,572,777) ------------ ------------ Interest on convertible debenture (Note 7) 853,872 660,000 Interest on Series Two Preferred Share (Note 8) 624,478 -- Interest and bank charges 9,753 50,071 Amortization of property, plant and equipment, intangible assets and deferred costs 2,877,321 2,408,800 ------------ ------------ 4,365,424 3,118,871 ------------ ------------ LOSS - From continuing operations (6,536,191) (7,691,648) Loss from discontinued operations -- (115,730) ------------ ------------ NET LOSS (6,536,191) (7,807,378) DEFICIT - Beginning of year (19,200,816) (11,393,438) ------------ ------------ DEFICIT - End of year $(25,737,007) $(19,200,816) ============ ============ LOSS PER SHARE - From continuing operations (Note 11) $ (0.11) $ (0.15) ============ ============ NET LOSS PER SHARE (Note 11) $ (0.11) $ (0.15) ============ ============

POINTS INTERNATIONAL LTD. CONSOLIDATED STATEMENTS OF CASH FLOWS AS AT DECEMBER 31 2003 2002 - ----------------- ----------- ----------- CASH FLOWS FROM OPERATING ACTIVITIES Net loss from continuing operations $(6,536,191) $(7,691,648) Items not affecting cash Amortization of property, plant and equipment 1,589,206 1,512,887 Amortization of deferred costs 531,914 328,763 Amortization - acquired technology 756,201 567,150 Shares issued in exchange for services -- 366,379 Warrants issued in exchange for services -- 2,775 Interest on Series Two Preferred Share 624,478 -- Interest accrued on convertible debenture 853,872 660,000 ----------- ----------- (2,180,520) (4,253,694) Changes in non-cash balances related to operations (Note 12 (a)) 774,066 7,130,198 ----------- ----------- CASH FLOWS PROVIDED BY (USED IN) OPERATING ACTIVITIES (1,406,454) 2,876,504 ----------- ----------- CASH FLOWS FROM INVESTING ACTIVITIES Repayment of loans receivable from significantly influenced companies -- 19,500 Purchase of property, plant and equipment, net of proceeds (338,730) (45,551) Purchase of intangible assets (130,353) (144,774) Fees paid on acquisition (Note 13) -- (139,750) ----------- ----------- CASH FLOWS USED IN INVESTING ACTIVITIES (469,083) (310,575) ----------- ----------- CASH FLOWS FROM FINANCING ACTIVITIES Deferred financing costs (3,039,774) -- Repayment of obligations under capital leases (407,128) (634,795) Issuance of warrants 2,700,000 -- Issuance of Series Two Preferred Share 12,400,000 -- Issuance of capital stock, net of share issue costs 3,155,575 2,631,916 ----------- ----------- CASH FLOWS PROVIDED BY FINANCING ACTIVITIES 14,808,673 1,997,121 ----------- ----------- INCREASE IN CASH FROM CONTINUING ACTIVITIES 12,933,136 4,563,050 CASH FLOWS USED IN DISCONTINUED OPERATIONS -- (115,730) ----------- ----------- INCREASE IN CASH FROM ALL ACTIVITIES 12,933,136 4,447,320 CASH AND CASH EQUIVALENTS - Beginning of year 7,341,700 2,894,380 ----------- ----------- CASH AND CASH EQUIVALENTS - End of year $20,274,836 $ 7,341,700 =========== =========== 47

POINTS INTERNATIONAL LTD. Notes to consolidated financial statements December 31, 2003 and 2002 1. BASIS OF PRESENTATION AND BUSINESS OF THE CORPORATION The accompanying consolidated financial statements of Points International Ltd. (the "Corporation") include the financial position, results of operations and cash flows of the Corporation and its wholly-owned subsidiaries, Exclamation Inc., Points International (US) Ltd. and Points International (UK) Limited and its indirect wholly-owned subsidiary, Points.com Inc. The Corporation operates the Points Exchange, the only independent loyalty points exchange allowing consumers to exchange points and miles from one participating loyalty program to another to achieve the rewards they want faster than ever before. In addition, the Corporation develops technology solutions for the loyalty program industry. The Corporation's portfolio of custom solutions facilitates the online sale, transfer and exchange of miles, points and currencies for a number of major loyalty programs. 2. SIGNIFICANT ACCOUNTING POLICIES a) Use of estimates The preparation of these consolidated financial statements, in conformity with Canadian generally accepted accounting principles, has required management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent liabilities as at December 31, 2003 and 2002 and the revenues and expenses reported for the years then ended. Actual results may differ from those estimates. b) Revenue recognition Revenues from transaction processing are recognized as the services are provided under the terms of related contracts. Membership fees received in advance for services to be provided over a future period are recorded as deferred revenue and recognized as revenue evenly over the term of service. Related direct costs are also recognized over the term of the membership. Revenues from the sales of loyalty program points are recorded net of costs, in accordance with Abstract 123 of the Emerging Issues Committee ("EIC") of the Canadian Institute of Chartered Accountants ("C.I.C.A."), "Reporting Revenue Gross as a Principal Versus Net as an Agent", when the collection of the sales proceeds is reasonably assured and other material conditions of the exchange are met. Gross proceeds received on the resale of loyalty program points, net of the commissions earned, are included in deposits in the attached consolidated balance sheet until remitted. Nonrefundable partner sign-up fees with no fixed term, and for which the Corporation is under no further obligations, are recognized as revenue when received. Custom website design revenues are recorded on the percentage-of-completion basis. c) Cash and cash equivalents Cash and cash equivalents include amounts on deposit at the Corporation's bank and amounts held for the Corporation by a third party credit card processor. Such amounts represent a reserve in respect of purchases of miles/points. Short-term investments are accounted for at the lower of cost and net realizable value.

d) Property, plant and equipment Property, plant and equipment are recorded at cost less accumulated amortization. Rates and basis of amortization applied by the Corporation to write off the cost of the property, plant and equipment over their estimated useful lives are as follows: Furniture and equipment 20% declining balance basis Computer equipment 30% declining balance basis Software 30% straight-line basis Technology costs straight-line over 3 years Technology costs under capital lease straight-line over 3 years Leasehold improvements straight-line over 5 years e) Intangible assets Effective January 1, 2002, the Corporation adopted Section 3062 ("Goodwill and Other Intangible Assets") of the C.I.C.A. Handbook. The effect of this was to reclassify $50,000 of goodwill, representing the value of the public listing, to intangible assets. Since the public listing has an indefinite life, no further amortization will be recorded. Patents will be amortized over the remaining life of the patent commencing when the patents have been granted. The remaining life of the patent is determined as 20 years less the time between the date of filing and the patent grant date. Registered trademarks have an indefinite life and will not be amortized unless it is determined that they have become impaired. Acquired technology, representing the excess of the cost over the values attributed to the underlying net assets of the acquired shares of Points.com Inc. (Note 13), will be amortized on a straight-line basis over a period of three years. If the Corporation determines that there is permanent impairment in the value of the unamortized portion of the intangible assets, and future earnings will not be realized as projected, an appropriate amount of unamortized balance of intangible assets will be charged to income as an "impairment charge" at that time. f) Long-term investments Investments in shares of companies over which the Corporation exercises significant influence are accounted for using the equity method. Investments in shares of companies over which the Corporation does not exercise significant influence are accounted for using the cost basis. The Corporation reviews all of its long-term investments regularly and provides for any decline, other than a temporary decline, in the value of the investment to the estimated net recoverable amount. g) Deferred finance charges Charges incurred in respect of certain financings are deferred and charged to income on a straight-line basis over three years. Deferred finance charges represent legal and other related fees incurred to obtain the financing described in Notes 7 and 8. 49

h) Capital leases Leases that transfer substantially all of the benefits and risks of ownership of the property to the Corporation are treated as an acquisition of an asset and an obligation. i) Costs of raising capital Incremental costs incurred in respect of raising capital are charged against equity proceeds raised. j) Translation of foreign currency Assets and liabilities denominated in foreign currencies are translated into Canadian dollars at exchange rates prevailing at the balance sheet date for monetary items. Income and expenses are translated at average exchange rates prevailing during the year. Realized and unrealized foreign exchange gains and losses are accounted for in general and administrative expenses and consequently included in net earnings. The results of foreign operations, which are financially and operationally integrated with the Corporation, are translated using the temporal method. Under this method, monetary assets and liabilities denominated in foreign currencies have been translated into Canadian dollars at the rate of exchange prevailing at year-end. Fixed assets have been translated at the rates prevailing at the dates of acquisition. Revenue and expense items are translated at the average rate of exchange for the year. Exchange gains or losses on translation are accounted for in general and administrative expenses and consequently included in net income. k) Income taxes The Corporation follows the asset and liability approach to accounting for income taxes. The income tax provision differs from that calculated by applying the statutory rates to the changes in current or future income tax assets or liabilities during the year. Current income taxes payable differ from the total tax provisions as a result of changes in taxable and deductible temporary differences between the tax basis of assets and liabilities and their carrying amounts in the balance sheet. l) Non-monetary transactions Transactions in which shares or other non-cash consideration are exchanged for assets or services are valued at the fair value of the assets or services involved in accordance with Section 3830 ("Non-monetary Transactions") of the C.I.C.A. Handbook. m) Earnings per share The Corporation uses Section 3500 ("Earnings per Share") of the C.I.C.A. Handbook, which directs that the treasury stock method be used to calculate diluted earnings per share. Diluted earnings per share considers the dilutive impact of the exercise of outstanding stock options, warrants, conversion of preferred shares and the convertible debenture, as if the events had occurred at the beginning of the period or at a time of issuance, if later. Fully diluted loss per share has not been presented, as the effect would be anti-dilutive.

n) Stock-based compensation Effective January 1, 2002, the Corporation adopted Section 3870 ("Stock-Based Compensation and Other Stock-Based Payments") of the C.I.C.A. Handbook. As permitted by Section 3870, the Corporation has applied this change prospectively for new awards granted on or after January 1, 2002. In periods prior to January 1, 2002, the Corporation recognized no compensation when stock options or warrants were issued to employees or non-employees. Employees The Corporation has chosen to recognize no compensation when stock options are granted to employees and directors under stock option plans with no cash settlement features. Pro-forma net income and earnings per share, as if the fair value based accounting method had been used to account for stock-based compensation cost, are provided. Non-employees For stock-based compensation issued to non-employees, the Corporation recognizes an asset or expense based on the fair value of the equity instrument issued. 3. CASH AND CASH EQUIVALENTS Cash equivalents include cash held at the company's bank, invested through an interest rate agreement earning prime rate less 225 basis points for Canadian funds and 80% of the U.S. T-Bill rate for U.S. funds, and cash held by the third party credit processor. Cash equivalents also include investments in short- and mid-term bonds maturing on various dates. The investments could be liquidated at any time at the option of the Corporation with no loss in value. 4. LONG-TERM INVESTMENTS The Corporation's investment that is not consolidated in the attached financial statements is: 2003 2002 -------- -------- (i) ThinApse Corporation - 12% interest (fully diluted), cost basis Shares at cost $161,629 $161,629 ======== ======== The share component of this investment has options and warrants attached. No value has been assigned to these options and warrants or any other interest attached to the long-term investment. 51

5. PROPERTY, PLANT AND EQUIPMENT Accumulated Net Carrying 2003 Cost Amortization Amount - ---- ---------- ------------ ------------ Furniture and equipment $ 251,998 $ 127,130 $124,868 Computer equipment 398,316 191,822 206,494 Software 411,951 306,189 105,762 Technology costs 958,446 934,664 23,782 Technology costs under capital lease 3,033,818 3,033,818 -- Leasehold improvements 197,875 145,059 52,817 ---------- ---------- -------- $5,252,406 $4,738,683 $513,723 ========== ========== ======== Accumulated Net Carrying 2002 Cost Amortization Amount - ---- ---------- ------------ ------------ Furniture and equipment $ 237,277 $ 97,753 $ 139,523 Computer equipment 236,098 138,086 98,012 Software 330,431 196,131 134,300 Technology costs 948,372 631,011 317,361 Technology costs under capital lease 2,969,694 1,979,796 989,898 Leasehold improvements 191,804 106,700 85,104 ---------- ---------- ---------- $4,913,676 $3,149,477 $1,764,199 ========== ========== ========== Included in property, plant and equipment are assets originally acquired under capital lease with a cost of $3,033,818 (2002 - $2,969,694). During the year, amortization of $1,054,022 (2002 - $989,898) were recorded on these assets. 6. INTANGIBLE ASSETS Accumulated Net Carrying 2003 Cost Amortization Amount - ---- ---------- ------------ ------------ Public status $ 150,000 $ 100,000 $ 50,000 Patents and trademarks 335,439 -- 335,439 Acquired technology 2,258,603 1,323,351 935,253 ---------- ---------- ---------- $2,744,042 $1,423,351 $1,320,692 ========== ========== ==========

Accumulated Net Carrying 2002 Cost Amortization Amount - ---- ---------- ------------ ------------ Public status $ 150,000 $100,000 $ 50,000 Patents and trademarks 205,086 -- 205,086 Acquired technology 2,258,603 567,150 1,691,453 ---------- -------- ---------- $2,613,689 $667,150 $1,946,539 ========== ======== ========== 7. CONVERTIBLE DEBENTURE On March 15, 2001 the Corporation issued to CIBC Capital Partners, a division of Canadian Imperial Bank of Commerce, an 11% $6 million senior secured convertible debenture (the "CIBC Debenture"), which debenture was amended and restated as of February 8, 2002 in connection with the reorganization of the Corporation effected on that date. The CIBC Debenture was subsequently amended on April 11, 2003 in connection with the issuance to Points Investments, Inc., an unrelated entity, of the Series Two Preferred Share and a Common Share purchase warrant (the "PII Warrant"). The CIBC Debenture is not convertible while the PII Warrant, as described in Note 8, is outstanding. On December 16, 2003, CIBC Capital Partners extended the CIBC Debenture's maturity date, by one year, to March 15, 2005. An additional three one-year extensions at the option of CIBC Capital Partners are available. The Corporation is not entitled to pre-pay the CIBC Debenture other than in connection with a change in control of the Corporation upon the exercise in full of the PII Warrant (in which circumstances payment of accrued interest is waived). In the event that the PII Warrant ceases to be held by InterActiveCorp or an affiliate thereof, the $6,000,000 principal amount of the CIBC Debenture will be convertible at the option of CIBC Capital Partners into 18,908,070 Common Shares and accrued interest on any principal amount so converted ceases to be payable. The CIBC Debenture will automatically convert into Common Shares immediately preceding any one of (i) the sale of all outstanding Common Shares for a price per share of at least $1.26928, (ii) the sale of all or substantially all of the assets of the Corporation yielding net proceeds per Common Share (after giving effect to the conversion of the CIBC Debenture) of at least $1.26928, and (iii) a public offering of Common Shares raising at least $30 million at an issue price per share of at least $1.26928 where the Corporation has a pre-offering equity value of at least $175 million and the Common Shares are listed on the Toronto Stock Exchange. The CIBC Debenture contains negative covenants in favour of CIBC Capital Partners such that CIBC Capital Partners' consent is required for, among other things, (i) the sale by the Corporation of all or substantially all of its assets, (ii) any transaction to reorganize the Corporation's capital structure or merge with another person, (iii) certain sales of treasury stock at a price per share of less than $0.40, (iv) the payment of dividends or distributions on share capital or the purchase or redemption of outstanding securities, (v) amendments to the articles or by-laws of the Corporation and (vi) material changes to the business of the Corporation. 8. CONVERTIBLE PREFERRED SHARES a) Series One Preferred Share The Series One Preferred Share was created by Articles of Amendment dated December 20, 2001 and was issued on February 8, 2002. The Series One Preferred Share is non-voting and not entitled to dividends other than as set out below. 53

The Series One Preferred Share will automatically convert into one Common Share upon (i) conversion into Common Shares of greater than $2,000,000 of the $6,000,000 principal amount of the CIBC Debenture, (ii) repayment in full of the CIBC Debenture or (iii) payment of the Dividend (as defined below) (each a "Conversion Event"). In the event of the liquidation, dissolution or winding-up of the Corporation or other distribution of assets of the Corporation for the purpose of winding-up its affairs prior to a Conversion Event, the holder of the Series One Preferred Share is entitled to (a) receive from the assets of the Corporation a payment of $4,000,000 before any amounts shall be paid to the holders of any Common Shares and (b) share pro rata (on the basis that the Series One Preferred Share represents that number of Common Shares into which the CIBC Debenture is then convertible) with the holders of all other participating shares in further distributions from the assets of the Corporation to an aggregate maximum of $20,000,000 in addition to the sum specified in (a). The holder of the Series One Preferred Share is entitled to a dividend (the "Dividend") in the event that, prior to a Conversion Event, (i) there is a merger or consolidation of the Corporation (or a subsidiary of the Corporation which owns all or substantially all of the assets of the Corporation) with another corporation where, following such event, the shareholders of the Corporation will not hold at least a majority of the voting power of the surviving/acquiring corporation, (ii) any person (other than the Canadian Imperial Bank of Commerce or any of its affiliates) or any persons acting jointly or in concert beneficially own greater than 50% of (A) the votes attached to the Corporation's securities entitled to vote for the election of the Corporation's Board of Directors, or (B) the equity, by value, of the Corporation, or (iii) there is a sale of all or substantially all of the assets of the Corporation. The Dividend is approximately equal to the liquidation preference described above and, for this purpose, the value of the assets of the Corporation available for distribution on this notional dissolution is the value attributable to the equity of the Corporation implied by the transaction giving rise to the dividend event, as adjusted for the value of non Common Share equity not valued in the transaction giving rise to the Dividend. In no event may the Dividend exceed $24,000,000. The Series One Preferred Share ranks equally with the Series Two Preferred Share and Series Three Preferred Share and in priority to the Common Shares. The terms of the Series One Preferred Share have been amended twice. On April 8, 2003 the terms were amended to delete a redundant ranking provision. On June 27, 2003 the terms were amended to provide that a dividend was payable upon any person owning greater than 50% of the votes attached to the Corporation's securities entitled to vote for the election of the Corporation's Board of Directors; prior to this amendment the Dividend was payable upon any person owning greater than 50% of the Common Shares. b) Series Two Preferred Share The Series Two Preferred Share was created by Articles of Amendment dated April 10, 2003 and was issued on April 11, 2003. The Corporation is not entitled to declare or pay any dividend on the Common Shares unless it concurrently declares and pays a dividend on the Series Two Preferred Share in an amount equal to the product of the number of Common Shares comprising the Underlying Shares (as defined below) and the dividend declared or paid per Common Share. Any such dividend is to be paid to the holder of the Series Two Preferred Share in the same form as it is paid to the holders of the Common Shares.

The holder of the Series Two Preferred Share has the right, exercisable at any time prior to 5:00 p.m. (Eastern Standard Time) on March 31, 2013, to convert the Series Two Preferred Share, for no additional consideration, into 20,323,561 Common Shares (as at February 20, 2004), subject to anti-dilution adjustment (the "Underlying Shares"). In addition, the Series Two Preferred Share benefits from anti-dilution for the issuance of any Common Shares or securities convertible into Common Shares of the Corporation after April 11, 2003 other than any issuance of Common Shares in connection with convertible instruments outstanding on March 21, 2003. The Series Two Preferred Share will automatically convert into one Series Three Preferred Share on the earlier of the date that (i) the Series Two Preferred Share is directly or indirectly transferred to a person that is not an affiliate of InterActiveCorp, and (ii) the holder of the Series Two Preferred Share ceases to be an affiliate of InterActiveCorp. Unless a notice of conversion has been delivered, the Corporation will redeem the Series Two Preferred Share upon the earlier of (i) March 31, 2013 and (ii) the third business day following a "Change of Control" of the Corporation. For this purpose, a "Change of Control" of the Corporation will be deemed to have occurred if, before the expiry of the PII Warrant (Note 7), any combination of a person (other than the holder of the Series Two Preferred Share), its affiliates or associates and persons acting jointly or in concert with any of them becomes the beneficial owner of shares of the Corporation sufficient to elect a majority of the Board of Directors. In the event of redemption on March 31, 2013, the amount payable will equal the greater of (i) the subscription price of the Series Two Preferred Share plus a return on that subscription price equal to 7% per annum, calculated from the date of issue of the Series Two Preferred Share to the date on which the Series Two Preferred Share is redeemed and (ii) the market value of the Common Shares into which the Series Two Preferred Share may then be converted. In the event of redemption on a Change of Control, the amount payable on redemption will equal the greater of (i) 125% of the amount specified in clause (i) of the preceding sentence and (ii) the greater of (A) the value of the Common Shares into which the Series Two Preferred Share then could be converted on the day immediately prior to public announcement of the Change of Control and (B) the product of the Common Shares into which the Series Two Preferred Share then could be converted and the fair market value of the consideration paid per Common Share in the transaction resulting in the Change of Control. In the event of the liquidation, dissolution or winding-up of the Corporation or other distribution of assets of the Corporation among its shareholders for the purpose of winding up its affairs, the holder of the Series Two Preferred Share will be entitled to receive from the assets of the Corporation an amount equal to the greater of (i) the subscription price of the Series Two Preferred Share plus a return on that subscription price equal to 7% per annum, calculated on a daily basis from the date of issue of the Series Two Preferred Share to the date on which the liquidation event occurred and (ii) the product of the number of Underlying Shares and the per share amount to be distributed to the holders of the Common Shares upon the liquidation event after giving effect to any payments to be paid on the Series Two Preferred Share and any other shares (other than the Series Two Preferred Share) ranking prior to the Common Shares upon the liquidation event. The Series Two Preferred Share ranks equally with the Series One Preferred Share and Series Three Preferred Share and in priority to the Common Shares. 55

c) Series Three Preferred Share The Series Three Preferred Share was created by Articles of Amendment dated April 10, 2003 and has not been issued. The Series Three Preferred Share is non-voting and not entitled to receive dividends. If issued, the Corporation will redeem the Series Three Preferred Share upon the earlier of (i) March 31, 2013 and (ii) the third business day following a "Change of Control" of the Corporation. For this purpose, a "Change of Control" of the Corporation will be deemed to have occurred if, before the expiry of the PII Warrant, any combination of a person (other than the holder of the Series Two Preferred Share), its affiliates or associates and persons acting jointly or in concert with any of them, becomes the beneficial owner of shares of the Corporation sufficient to elect a majority of the Board of Directors. In the event of redemption on March 31, 2013, the amount payable will equal the subscription price of the Series Two Preferred Share plus a return on that subscription price equal to 7% per annum, calculated from the date of issue of the Series Two Preferred Share (April 11, 2003) to the date on which the Series Three Preferred Share is redeemed. In the event of redemption on a Change of Control, the amount payable on redemption will equal an amount equal to 125% of the amount specified in the preceding sentence. In the event of the liquidation, dissolution or winding-up of the Corporation or other distribution of assets of the Corporation among its shareholders for the purpose of winding up its affairs, whether voluntary or involuntary, the holder of the Series Three Preferred Share will be entitled to receive from the assets of the Corporation an amount equal to the subscription price of the Series Three Preferred Share plus a return on that subscription price equal to 7% per annum, calculated on a daily basis from the date of issue of the Series Three Preferred Share to the date on which the liquidation event occurred. The Series Three Preferred Share ranks equally with the Series One Preferred Share and Series Two Preferred Share and in priority to the Common Shares. 9. CAPITAL STOCK Authorized Unlimited Common Shares Unlimited Series A preference shares, convertible into one common share and one half of one Series B common share purchase warrant 1 Series One preference share, non-voting, convertible into one common share 1 Series Two Preferred Share 1 Series Three Preferred Share

Issued The balance of capital stock is summarized as follows: 2003 2002 ----------- ----------- Common shares $17,728,459 $14,361,032 Series One preference share 1 1 Series Two preference share 1 -- ----------- ----------- $17,728,461 $14,361,033 =========== =========== Common shares Number Amounts - ------------- ---------- ----------- Balance January 1, 2002 32,812,712 $ 9,532,173 Issued on acquisition of Points.com Inc. shares (i) 7,536,160 1,884,040 Issued in exchange for consulting services (ii) 1,187,290 151,379 Issued in private placement (iii) 12,000,000 3,000,000 Issued on exercise of options 99,155 2,178 Issued in exchange for services (iv) 861,000 215,000 ---------- ----------- 54,496,317 14,784,770 Less: share issue costs -- 423,738 ---------- ----------- Balance December 31, 2002 54,496,317 14,361,032 Issued on exercise of warrants (v) 3,139,943 1,001,869 Issued on exercise of stock options (vi) 446,773 122,975 Issued on exchange for property (shares in subsidiary) (vii) 2,329,954 13,961 Issued in exchange for property (viii) 2,196,635 2,240,568 ---------- ----------- 62,609,622 17,739,405 Less: share issue costs -- 10,944 ---------- ----------- Balance December 31, 2003 62,609,622 $17,728,461 ========== =========== Series One Preference Shares Number Amounts - ---------------------------- ------ ------- Issued on restructuring of convertible debenture (Note 8) 1 $-- === === 57

Series Two Preferred Share Number Amounts - -------------------------- ------ ------- Issued on restructuring of convertible debenture (Note 8) 1 $-- === === (i) On February 8, 2002, the Corporation completed its restructuring described in Note 19 and issued 7,286,160 common shares in exchange for the remaining 5% interest in Points.com Inc. The Corporation issued an additional 250,000 common shares to the holder of the debenture described in Note 7 as compensation for renegotiating the terms. (ii) The Corporation issued 1,187,290 common shares in exchange for consulting services provided by a director of the Corporation. These services were provided under a contract that expired in 2002. (iii) The Corporation issued 12,000,000 common shares in a private placement at $0.25 per share. 922,000 warrants, valued at $53,476 and a commission of $230,500 were paid in connection with this private placement. (iv) 611,000 common shares were issued to pay off outstanding accounts payable of $152,500 and 250,000 common shares were issued in exchange for marketing services of $62,500. (v) 2,128,443 common share purchase warrants, issued in connection with restructuring and acquisition of the interest in Points.com Inc. that the Corporation did not already own, were exercised at $0.25 per share. In addition, 922,000 broker warrants issued in respect of a financing in 2003 were exercised at $0.25 per share and 89,500 warrants issued in respect of a consulting agreement with an independent consulting firm were exercised at $0.28 per share. (vi) 446,773 options previously issued to employees, directors, advisors and consultants were exercised at prices ranging from $0.20 to $0.50 per share. (vii) 2,329,954 options previously issued to Points.com Inc. founders, employees, directors and advisors were exercised in Points.com Inc. and put to the Corporation at fair market value. (viii) 2,196,635 shares were issued to a commercial partner for warrants to acquire 1,055,328 common shares of subsidiary Points.com Inc., warrant acquisition rights to acquire warrants exercisable to acquire 3,771,927 common shares of subsidiary Points.com Inc. and for a series of amendments to commercial agreements, including a long-term extension to the contract term, as described in Note 10 (e). 10. OPTIONS AND WARRANTS a) Stock option plan The Corporation has a stock option plan under which employees, directors and consultants are periodically granted stock options to purchase common shares at prices not less than the market price of the share on the day of grant. The options vest over a three-year period and expire five years from the grant date. 2003 2002 ---------- ---------- Options Authorized by Shareholders 8,030,424 7,559,496 Less: Options Exercised (1,565,523) (1,118,750) ---------- ---------- Net Options Authorized 6,464,901 6,440,746 Less: Options Granted (5,598,127) (5,131,900) ---------- ---------- Options Available to Grant 866,774 1,308,846

b) Stock options 2002 2001 -------------------- -------------------- Weighted Weighted Average Average Number of Exercise Number of Exercise Options Price Options Price --------- -------- --------- -------- Beginning of year 5,131,900 $0.43 4,248,400 $0.52 Granted 1,322,000 0.88 1,553,357 0.27 Exercised (446,773) 0.28 -- -- Forfeited (409,000) 0.88 (669,857) 0.66 --------- ----- --------- ----- End of year 5,598,127 $0.51 5,131,900 $0.43 ========= ===== ========= ===== Exercisable at end of year 3,937,228 $0.41 3,555,176 $0.47 ========= ===== ========= ===== Options outstanding ---------------------------------- Weighted Options exercisable average -------------------- remaining Weighted Weighted contractual average average Number of life exercise Number of exercise Range of exercise prices options (years) price options price - ------------------------ --------- ----------- -------- --------- -------- $0.01 to $0.49 2,015,477 2.31 $0.39 1,511,775 $0.23 $0.50 to $0.99 2,750,650 1.56 0.53 2,425,453 0.51 $1.00 and over 832,000 4.89 1.11 -- -- Subsequent to year-end, as described in Note 22, 583,250 options were exercised. 59

c) Stock options of Points.com Inc. In addition to the stock options described above, Points.com Inc., the Corporation's indirect wholly-owned subsidiary, previously issued and, therefore, has outstanding stock options. The options outstanding are as follows: 2003 2002 --------------------------- -------------------------- Weighted Weighted Number of Average Number of Average Options Exercise Price Options Exercise Price ---------- -------------- --------- -------------- Beginning of year 4,077,781 $0.03 4,868,238 $0.49 Granted -- -- -- -- Exercised (930,529) 0.02 (39,600) 0.06 Forfeited (32,200) 0.06 (750,857) 2.91 --------- ----- --------- ----- End of year 3,115,052 $0.04 4,077,781 $0.03 ========= ===== ========= ===== Exercisable at end of year 3,115,052 $0.04 3,361,617 $0.03 ========= ===== ========= ===== Options outstanding ---------------------------- Weighted Options exercisable average ------------------------------------------- remaining Weighted Weighted Number of contractual life average Number of average Range of exercise prices options (years) exercise price options exercise price - ------------------------ --------- ---------------- -------------- --------- -------------- $0.01 to $0.49 3,115,052 1.31 $0.04 3,115,052 $0.04 The holders of 3,115,052 options (all with strike prices at or below $0.055 per share) have been granted the right to put to the Corporation the common shares of Points.com Inc. acquired on the exercise of such options for common shares in the Corporation. The Corporation has used a ratio of 2.5039 common shares per Points.com Inc. common share (equivalent to 7,799,781 common shares) for this purpose. Subsequent to year end, as described in Note 22,63,901 shares in Points.com Inc., acquired from the exercise of options, were exchanged for 160,003 common shares of the Corporation.

d) Warrants 2003 2002 --------------------------- --------------------------- Weighted Weighted Number of Average Number of Average Options Exercise Price Options Exercise Price ---------- -------------- ---------- -------------- Beginning of year 7,056,116 $0.25 -- $ -- Granted 76,348,559 0.97 7,056,116 0.25 Exercised (3,139,943) 0.25 -- -- Forfeited (833,333) 0.25 -- -- ---------- ----- --------- ----- End of year 79,431,399 $0.94 7,056,116 $0.25 ========== ===== ========= ===== Exercisable at end of year 79,428,899 $0.94 6,036,116 $0.25 ========== ===== ========= ===== Warrants outstanding ---------------------------------------------- Weighted Warrants exercisable average --------------------------- remaining Weighted Weighted Number of contractual life average Number of average Range of exercise prices options (years) exercise price options exercise price - ------------------------ ---------- ---------------- -------------- ---------- -------------- $0.20 to $0.49 3,082,840 1.19 $0.25 3,080,340 $0.25 $0.50 to $0.99 76,348,559 2.28 0.97 76,348,559 0.97 Subsequent to year-end, as described in Note 22,285,223 warrants were exercised. e) Warrants of Points.com Inc. On September 5, 2003 the Corporation acquired warrants and warrant acquisition rights exercisable to acquire 4,827,255 common shares in the Corporation's indirect wholly-owned subsidiary Points.com Inc. from an airline partner, as described in Note 9 (viii). In addition to the warrants and warrant acquisition rights acquired by the Corporation, Points.com Inc. has issued or committed to issue an additional 4,103,378 warrants to airline partners with expiry dates between March 28, 2006 and April 1, 2007. Each warrant entitles the holder to acquire one common share of Points.com Inc. with an exercise price of US$1.96. The exercise of these warrants would dilute the Corporation's interest in Points.com Inc. by 11%. f) Fair value The weighted-average grant-date fair value of stock options granted to employees and directors during 2003 has been estimated to range from $0.21 to $1.09 (2002 - $0.06) using the Black-Scholes option-pricing model. For purposes of pro-forma disclosures, the estimated fair value of the options granted after January 1, 2002 is amortized to expense over the options' vesting periods. The Corporation's pro-forma net loss under Canadian generally accepted accounting principles would be increased by $106,603 (2002 - $27,394) for the year ended December 31, 2003. Loss per share figures would not 61

have changed. The pricing model assumes weighted-average risk-free interest rates of 4.5%, weighted-average expected dividend yields of nil, weighted-average expected common stock price volatility ranging from 12.88% to 187% and a weighted-average expected life of 5 years. The weighted-average grant-date fair value of warrants granted during 2003 has been estimated at $0.035 (2002 - $0.06) using the Black-Scholes option-pricing model. The pricing model assumes a weighted-average risk-free interest rates of 4.5%, weighted-average expected dividend yields of nil, weighted-average expected common stock price volatility of 12.88% and a weighted-average expected life of 3.5 years. 11. EARNINGS PER SHARE a) Basic loss per share Loss per share is calculated on the basis of the weighted average number of common shares outstanding for the year that amounted to 58,823,652 shares (2002 - 51,656,033). b) Fully-diluted earnings per share The fully-diluted earnings per share have not been computed, as the effect would be anti-dilutive. 12. STATEMENT OF CASH FLOWS a) Changes in non-cash balances related to operations are as follows: 2003 2002 ---------- ---------- (Increase) in accounts receivable $ (736,738) $ (165,452) (Increase) in prepaids and sundry assets (167,854) (86,468) Increase in accounts payable and accrued liabilities 169,643 531,352 Increase in deposits 1,509,015 6,849,766 ---------- ---------- $ 774,066 $7,130,198 ========== ========== b) Supplemental information Interest and taxes Interest of $7,378 (2002 - $50,071) was paid during the year. Interest revenue of $355,960 (2002 - $59,446) was received during the year. No income taxes have been paid. Non-cash transactions Non-cash transactions in 2003 were as follows: (i) 930,529 shares of Points.com Inc. were acquired in exchange for 2,329,954 shares of the Corporation (Note 9 (vii)). (ii) 2,196,635 shares were issued in connection with the acquisition of warrants, warrant acquisition rights and amendment to the commercial agreement. (Note 9 (viii)). (iii) $42,030 of revenue was earned for hosting services provided was paid in loyalty currency. The currency was valued at the purchase price of the miles. The expense will be recognized as the currency is used. (iv) The Corporation received $114,394 of loyalty currency from a partner as reimbursement of a portion of the partner's direct expenses for the services provided by the Corporation.

(v) Interest of $853,872 was accrued on the convertible debenture (Note 7). (vi) Interest on $624,478 was accrued on the Series Two Preferred Share (Note 8 (b)). (vii) The company issued share capital of $211,851 on the exercise of warrants. Non-cash transactions in 2002 were as follows: (vii) Shares of Points.com Inc. were acquired in exchange for shares of the Corporation valued at $1,821,540 and warrants valued at $331,512. Fees associated with this transaction valued at $100,325 were also settled in exchange for shares and warrants (Note 9 (i)(iv) and Note 13). (ix) Consulting fees of $151,379 were paid by the issuance of shares (Note 9 (ii)). (x) Share issue costs were paid by the issuance of warrants with a fair value of $53,476 and advertising costs were paid by the issuance of warrants with a fair value of $2,775 (Note 10 (f)). (xi) Marketing services of $62,500 were paid by the issuance of shares and are being expensed over a one-year period (Note 9 (iv)). (xii) Other accounts payable of $152,500 were settled with shares of the Corporation (Note 9 (iv)). (xiii) $31,315 of miles, received in exchange for hosting services provided, were valued at the purchase price of the miles. These were recognized as a charge to prepaid expenses and included in revenue. The expense will be recognized as the miles are used. (xiv) Interest of $660,000 was accrued on the convertible debenture (Note 7). c) Cash and short-term investments consist of: 2003 2002 ----------- ---------- Cash (Note 3) $ 9,046,701 $3,845,470 Short-term investments (Note 3) 9,627,468 2,193,891 Cash held by credit card processor 1,600,667 1,302,339 ----------- ---------- $20,274,836 $7,341,700 =========== ========== 13. ACQUISITIONS Acquisition of Points.com Inc. On February 8, 2002, the Corporation completed a restructuring in which it acquired the 5% interest in Points.com Inc. it did not already own and discontinued all of its other operations (Note 19). To acquire the remaining common and Class C shares and outstanding broker warrants of Points.com Inc., the Corporation issued 7,286,160 common shares, valued at $1,821,540 (Note 9(i)) and 4,446,453 share purchase warrants with an exercise price of $0.25, valued at $331,512 (Note 10 (f)). 595,667 common share purchase warrants with an exercise price of $0.25, valued at $37,825, were issued to acquire existing warrants of Points.com Inc. 250,000 common shares, valued at $62,500, were issued to the debenture holder, described in Note 9 (iv), in consideration for the restructuring. Legal fees of $139,750 were incurred with respect to the restructuring. The total consideration paid in respect of this transaction was $2,393,127. $134,524 was allocated to non-controlling interests with the excess, $2,258,603, allocated to the cost of acquired technology (Note 6). 63

14. FINANCIAL INSTRUMENTS The Corporation's significant financial assets and liabilities are cash, short-term investments and convertible loans, which are substantially stated at fair value. Interest rates, maturities and security affecting the currency, interest and credit risk of the Corporation's financial assets and liabilities have been disclosed in Notes 3 and 7. 15. INCOME TAXES The total provision for income taxes differs from that amount which would be computed by applying the Canadian federal income tax rate to the loss before provision for income taxes. The reasons for these differences are as follows: 2003 2002 ----------- ----------- Income tax recovery at statutory rate $(2,450,000) $(3,017,000) Amortization of intangible assets for which there is no tax effect 1,323,531 567,000 Losses for which no benefit has been recorded 1,126,649 2,450,000 ----------- ----------- Net income tax recovery $ -- $ -- =========== =========== The Corporation has non-capital losses carry-forward for income tax purposes in the amount of $19,701,019, which may be applied against future years' taxable income. The losses may be used to reduce future years' taxable income and expire approximately as follows: 2005 $ 179,000 2006 $ 604,000 2007 $2,662,000 2008 $6,659,000 2009 $5,729,000 2010 $3,868,000 The nature and tax effects of the temporary differences that give rise to significant portions of the future income tax assets and future income tax liabilities are as follows: Future income tax assets are comprised of: 2003 2002 ----------- ----------- Losses carried forward $ 7,608,000 $ 6,114,000 Property, plant and equipment 1,468,000 964,000 Share issue costs 499,000 492,000 ----------- ----------- 9,575,000 7,570,000 Valuation allowance (8,985,000) (6,980,000) ----------- ----------- Net future income tax asset $ 590,000 $ 590,000 =========== ===========

16. RELATED PARTY TRANSACTIONS The following are the transactions and balances with related parties: a) Prepaids and sundry assets include a loan of $25,000 (2002 - $50,000) plus accrued interest due from a director of the Corporation. b) In fiscal 2003, certain officers and directors exercised stock options in the Corporation and the Corporation's subsidiary Points.com Inc. (Note 9 (vi) and Note 9 (vii)). 17. COMMITMENTS The Corporation is obligated under various operating leases for premises, purchase commitments and equipment and service agreements for web hosting services expiring through 2008 to aggregate annual rentals as follows: 2004 $1,675,802 2005 $1,185,133 2006 $1,421,019 2007 $1,761,390 2008 $ 406,739 2009 $ 11,287 18. SEGMENTED INFORMATION a) Reportable segments The Corporation has only one operating segment, the portfolio of technology solutions to the loyalty program industry (refer to the Management Discussion and Analysis for a description of Points Solutions, the Points Exchange and Points' Private Branded Solutions), in each of 2003 and 2002 whose operating results were regularly reviewed by the Corporation's chief operating decision maker and for which complete and discrete financial information is available. b) Enterprise-wide disclosures - Geographic information $5,391,735 (2002 - $1,931,723) of the Corporation's revenues were generated in the U.S., $466,969 were generated in Canada and the remaining revenues generated outside North America. At December 31, 2003 and 2002, substantially all of the Corporation's assets were in Canada. 19. DISCONTINUED OPERATIONS During the fourth quarter of the year ended December 31, 2001, the Corporation adopted a formal plan of disposal of Exclamation Europe S.A., ThinOffice Inc. and Exponential Entertainment Inc. On February 25, 2002, as part of the restructuring, the Corporation signed an agreement to dispose of its interest in Bigtree.com Ltd. Prior to December 31, 2001, the Corporation sold its entire interest in Exclamation Europe S.A. to a shareholder and director of the Corporation for $2. In 2002, the Corporation sold its entire interest in ThinOffice Inc. to an employee of ThinOffice Inc. for $2 and an option to acquire 15% of ThinOffice Inc. No value has been assigned to this option. The Corporation still owns the shares of Exponential Entertainment Inc. but the entity has ceased all operations. 65

None of the above entities recorded any revenues for either fiscal 2002 or fiscal 2001, with the exception of ThinOffice Inc., which recorded revenues of $29,280 in fiscal 2001. The loss from discontinued operations is comprised as follows: 2003 2002 ---- -------- Net loss from ThinOffice Inc. $-- $110,730 Net loss from Exponential Entertainment Inc. -- 5,000 Net loss from Exclamation Europe S.A. -- -- Amortization of goodwill related to Exponential Entertainment Inc. -- -- Amortization of goodwill related to Bigtree.com Ltd. -- -- --- -------- $-- $115,730 === ======== 20. FINANCIAL INSTRUMENTS The Corporation is not exposed to financial risk that arises from fluctuations in interest rates as all of its interest-bearing obligations are fixed rate. As well, the Corporation has sufficient foreign currency to satisfy its foreign currency based obligations. a) Fair Value: In accordance with the disclosure requirements of the CICA Handbook Section 3860 (paragraphs 3860.78, .101), the Corporation is required to disclose certain information concerning its "financial instruments", defined as a contractual right to receive or deliver cash or another financial asset. The fair value of the majority of the Corporation's financial assets and liabilities approximate their recorded values at December 31, 2003. In these circumstances, the fair value of the assets or liabilities is determined to be the lower of cost and market value. Fair value estimates are made at a specific point in time, based on relevant market information and information about the financial instruments. These estimates are subjective in nature and involve uncertainties and matters of significant judgment and therefore cannot be determined with precision. Changes in assumptions could significantly affect estimates. b) Summary of Significant Financial Instruments The significant financial instruments of the Corporation, their carrying values and exposure to U.S. dollar denominated monetary assets and liabilities, as of December 31, 2003 are as follows: C$ Total US$ Denominated ----------- --------------- Cash and cash equivalents $20,274,836 US$6,938,320 Accounts receivable 1,004,370 497,723 Accounts payable and accrued liabilities 1,187,598 275,521 Deposits 10,455,646 7,067,550

21. ECONOMIC DEPENDENCE Approximately 61% (2002 - 77%) of the Corporation's revenues are from its two largest customers. In addition, 58% (2002 - 91%) of the Corporation's deposits are due to these two customers. 22. SUBSEQUENT EVENTS a) Subsequent to year-end, 583,250 options in the Corporation were exercised at a weighted average exercise price of $0.20 per share (Note 10(b)). b) Also subsequent to year-end, 63,901 options in Points.com Inc. were exercised at a weighted average exercise price of $0.002 per share and put to the Corporation for 160,003 common shares (Note 10(c)). c) Subsequent to year-end, the Corporation acquired substantially all of the assets of MilePoint, Inc., an unrelated entity in a similar line of business, in consideration for a combination of cash and Common Shares. Certain expenses incurred in 2003, totaling approximately $57,000, related to the transaction, have been classified as deferred costs and will be included as part of the costs of acquisition in 2004. 23. DEFERRED COSTS Charges incurred in respect of certain financings are deferred and charged to income on a straight-line basis over an applicable time period. Deferred finance charges represent legal, accounting and other related fees incurred to obtain the financings. Accumulated Net Carrying 2003 Cost Amortization Amount - ---- ---------- ------------ ------------ Convertible Debenture $ 986,289 $ 904,098 $ 82,191 Series Two Preferred Share and Warrant 717,050 53,779 663,271 MilePoint Acquisition & Other 82,158 -- 82,158 Share Issuance to Partner 2,112,568 149,372 1,963,196 ---------- ---------- ---------- $4,026,064 $1,107,249 $2,790,816 ========== ========== ========== Accumulated Net Carrying 2002 Cost Amortization Amount - ---- -------- ------------ ------------ Convertible Debenture $986,289 $575,335 $410,954 -------- -------- -------- $986,289 $575,335 $410,954 ======== ======== ======== 24. COMPARATIVE FIGURES Certain of the comparative figures have been reclassified in accordance with the current year's presentation. 67

Corporate Information (GRAPHIC)

DIRECTORS Douglas Carty (Chairman) Chief Financial Officer, Laidlaw Inc. Marc Lavine (Vice-Chairman) Chief Executive Officer, President and Chief Financial Officer, Chrysalis Capital Corporation Robert MacLean (Chief Executive Officer) Christopher Barnard (President) Erik Blachford(1) President and Chief Executive Officer, Travel Division, InterActiveCorp Rowland Fleming Director of a number of public and private companies Former President, Toronto Stock Exchange Jim Kranias Consultant Eric Korman Vice President, Mergers & Acquisitions, InterActiveCorp Grant McCutcheon Partner, Lawrence & Company Incorporated Christopher Payne Managing Director, CIBC World Markets John Thompson Former Managing Director, Kensington Capital Partners Limited AUDIT COMMITTEE Douglas Carty (Chair) Rowland Fleming Grant McCutcheon John Thompson HUMAN RESOURCES COMMITTEE Rowland Fleming (Chair) Eric Korman Christopher Payne John Thompson OFFICERS Christopher Barnard President Darlene Higbee Clarkin Chief Technology Officer & Vice President Grad Conn (hired in Q2 2004) Chief Marketing Officer Morley Ivers Vice President, Business Strategy Robert MacLean Chief Executive Officer Steve Ogden Vice President, Product Development Jerry Philip Vice President, Business Development William Thompson Senior Vice President, Partners Christine Vandaele Vice President, Consumer Marketing Stephen Yuzpe Chief Financial Officer and Corporate Secretary INVESTOR RELATIONS Stephen Yuzpe (416.596.6382) steve.yuzpe@points.com Robert MacLean (416.596.6390) rob.maclean@points.com AUDITORS Mintz & Partners LLP EXTERNAL LEGAL COUNSEL Davies Ward Phillips & Vineberg LLP TRANSFER AGENT Computershare Trust Company of Canada LISTING Shares are listed on the Toronto Stock Exchange (TSX) under the symbol PTS ANNUAL MEETING June 24, 2004 at 4:30 p.m. Stock Market Place The Exchange Tower 130 King Street West Toronto, Ontario M5X 1J2 ADDRESS Points International Ltd. 800 - 179 John Street Toronto, Ontario M5T 1X4 Phone: 416.595.0000 Fax: 416.595.6444 www.points.com (1) Dan Marriott (board nominee June 2004), Senior Vice President, Interactive Development, InterActiveCorp will replace Erik Blachford as the holder of the Series Two Preferred Share's second (of two) board nominees. 69

Points International Ltd. 800 - 179 John Street Toronto, Ontario M5T 1X4 Phone: 416.595.0000 Fax: 416.595.6444 www.points.com (GRAPHIC)

Exhibit 99.5 CANADIAN AND UNITED STATES ACCOUNTING POLICY DIFFERENCES The consolidated financial statements of the company have been prepared in accordance with Canadian GAAP. The significant differences between Canadian and U.S. GAAP, and their effect on the consolidated financial statements of the Company, are described below. Consolidated statements of operations: The following table reconciles net loss as reported in the accompanying consolidated statements of loss to net loss that would have been reported had the financial statements been prepared in accordance with U.S. GAAP: YEAR ENDED DECEMBER 31 ---------------------------------------- 2002 2003 2004 ------------ ----------- ----------- Net loss in accordance with Canadian GAAP $(10,311,130) $(6,948,040) $(8,774,864) Website Development (a) $ -- $ -- $ (295,585) Website Development Amortization (a) $ 174,605 $ 174,605 $ -- Non-Employee Stock Options (b) $ (560,214) $ (81,338) $ -- ------------ ----------- ----------- Net loss in accordance with U.S. GAAP $(10,696,739) $(6,854,773) $(9,070,449) Other comprehensive income (loss): Foreign currency translation adjustment $ -- $ (43,633) $ (33,420) ------------ ----------- ----------- Comprehensive loss in accordance with U.S. GAAP $(10,696,739) $(6,898,406) $(9,103,869) Loss per Share $ (0.21) $ (0.12) $ (0.13) The cumulative effect of these adjustments on shareholders' equity is as follows: YEAR ENDED DECEMBER 31 --------------------------------------- 2002 2003 2004 ----------- ----------- ----------- Shareholders' Equity in accordance with Canadian GAAP $(4,414,195) $(5,222,807) $(8,935,827) Website Development Costs (a) $ (523,815) $ (523,815) $ (819,400) Website Development Amortization (a) $ 349,210 $ 523,815 $ 523,815 Public Status (d) $ (50,000) $ (50,000) $ (50,000) ----------- ----------- ----------- Shareholders' Equity in accordance with U.S. GAAP $(4,638,800) $(5,272,807) $(9,281,412) The cumulative effect of these adjustments on the company's reported assets is as follows:

YEAR ENDED DECEMBER 31 --------------------------------------- 2002 2003 2004 ----------- ----------- ----------- Assets in accordance with Canadian GAAP $13,140,020 $27,481,287 $30,179,854 Website Development Costs (a) $ (523,815) $ (523,815) $ (819,400) Website Development Amortization (a) $ 349,210 $ 523,815 $ 523,815 Public Status (d) $ (50,000) $ (50,000) $ (50,000) ----------- ----------- ----------- Assets in accordance with U.S. GAAP $12,915,415 $27,431,287 $29,834,269 Effect of these adjustments on the consolidated statement of cash flows is as follows: YEAR ENDED DECEMBER 31 -------------------------------------- 2002 2003 2004 ---------- ----------- ----------- CASH FLOWS USED IN OPERATING ACTIVITIES Cash flows provided by (used in) operating activities in accordance with Canadian GAAP $2,876,504 $(2,352,995) $(1,406,454) Website Development (a) $ -- $ -- $ (295,585) ---------- ----------- ----------- Cash flows provided by (used in) operating activities in accordance with U.S. GAAP $2,876,504 $(2,352,995) $(1,702,039) CASH FLOWS USED INVESTING ACTIVITIES Cash flows used in investing activities in accordance with Canadian GAAP $ (310,575) $ (469,083) $(5,012,139) Website Development (a) $ -- $ -- $ 295,585 ---------- ----------- ----------- Cash flows used in investing activities in accordance with U.S. GAAP $ (310,575) $ (469,083) $(4,716,554) (a) Canadian GAAP allows the capitalization and amortization of website development costs incurred, subject to there being reasonable assurance that future benefits will be realized. Under United States GAAP, SOP 98-1 provides specific guidance on when capitalization may commence, and what direct costs may be capitalized. For United States GAAP purposes, costs incurred in the preliminary project phased have been expensed at the time the costs were incurred and the amortization recorded under Canadian GAAP would have been reversed. (b) Financial Accounting Standards Board ("FASB") Statement of Financial Accounting Standards 123 ("SFAS No. 123"), Accounting for Stock-based Compensation, requires recognition of compensation expense costs at fair value for stock options and warrants issued after December 15, 1995, to non-employees, such as members of the Board of Advisors, and other consultants and advisors. The fair value of the non-employee stock options and warrants granted after December 15, 1995 has been estimated as the

performance occurs and the options are earned using the Black-Scholes option pricing model. Under Canadian GAAP, all stock-based compensation granted to non-employees prior to January 1, 2002 has not been accounted for, however, the company has accounted for all stock-based compensation granted to non-employees after January 1st, 2002 using the fair value method. Accordingly, for United States GAAP purposes the company has calculated the fair value of stock options granted to non-employee prior to January 1st, 2002 and recorded the cost by increasing the deficit with the offsetting increase to contributed surplus (no impact to total shareholders' equity). (c) Prior to 2002, the company accounted for the stock option plans under the recognition and measurement provisions of AFB Opinion No. 25, Accounting for Stock Issued to Employees, and related Interpretations using the intrinsic value method of accounting. No expense had been recorded prior to 2002 as all options granted under the plans had an exercise price equal to the market value of the underlying common stock on the date of the grant. Starting January 1, 2002 the company adopted the fair value recognition provisions of FASB Statement No. 123, Accounting for Stock-Based Compensation, prospectively to all employee awards granted, modified or settled after January 1, 2002 for United States GAAP and Canadian GAAP purposes. In accordance with United States GAAP, pro forma disclosure of all stock options issued prior to January 1, 2002 that are not accounted for under SFAS No. 123 is required. Below is the pro forma disclosure showing the effect on the company's loss had the company accounted for these options using the fair-value method prescribed in SFAS No. 123. The pro forma disclosure for U.S. GAAP is as follows: YEAR ENDED DECEMBER 31 ---------------------------------------- 2002 2003 2004 ------------ ----------- ----------- Net loss in accordance with United States GAAP $(10,696,739) $(6,898,406) $(9,103,869) Deduct: Stock based compensation costs using fair value method for options issued prior to Jan 1, 2002 $ (146,333) $ (102,831) $ (16,964) ------------ ----------- ----------- Pro forma net loss in accordance with U.S. GAAP $(10,843,072) $(7,001,237) $(9,120,833) Loss per share: Basic - as reported $ (0.21) $ (0.12) $ (0.13) Basic - pro forma $ (0.21) $ (0.12) $ (0.13) (d) In accordance with Canadian GAAP- EIC 10 (prior to 2002), the Company capitalized $150,000 (which was credited to share capital), representing the value assigned to its

public listing in connection with the reverse takeover when it went public. __, $100,000 of these costs were subsequently amortized. Effective fiscal 2002, in accordance with the CICA Handbook Section 3061/3062, the Company ceased amortization of these costs as the balance of intangible assets was not subject to amortization. United States GAAP does not permit the recognition of such an asset in conjunction with a reverse takeover. As a result, share capital prior to 2002 would be decreased by $150,000, intangible assets would be decreased by $50,000 and the deficit would be reduced by $100,000.

Exhibit 99.6 POINTS INTERNATIONAL LTD. UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS MARCH 31, 2005 Page 1 of 10

POINTS INTERNATIONAL LTD. UNAUDITED CONSOLIDATED BALANCE SHEETS MARCH 31, DECEMBER 31, AS AT 2005 2004 - ----- ----------- ------------ ASSETS CURRENT Cash and cash equivalents (Note 7) 19,654,600 13,754,818 Accounts receivable 1,609,279 2,024,342 Prepaids and sundry assets 1,352,473 1,229,091 ----------- ----------- 22,616,352 17,008,251 PROPERTY, PLANT AND EQUIPMENT 3,118,364 2,056,282 GOODWILL AND INTANGIBLE ASSETS 8,152,308 8,282,453 DEFERRED COSTS 2,097,804 2,242,868 FUTURE INCOME TAXES RECOVERABLE 590,000 590,000 ----------- ----------- 13,958,476 13,171,603 ----------- ----------- $36,574,828 $30,179,854 =========== =========== Page 2 of 10

POINTS INTERNATIONAL LTD. UNAUDITED CONSOLIDATED BALANCE SHEETS MARCH 31, DECEMBER 31, AS AT 2005 2004 - ----- ------------ ------------ LIABILITIES CURRENT Accounts payable and accrued liabilities 1,694,133 1,894,599 Deposits 17,776,537 13,153,623 Current portion of loan payable 33,515 29,860 Current portion of acquisition loan payable 765,123 777,443 Convertible Debenture (Note 8) -- 8,920,373 ------------ ------------ 20,269,308 24,775,898 ============ ============ LOAN PAYABLE 55,614 67,186 ACQUISITION LOAN PAYABLE -- 380,118 CONVERTIBLE DEBENTURE (NOTE. 8) 9,150,169 -- CONVERTIBLE PREFERRED SHARES (NOTE 9) 17,564,089 13,892,478 ------------ ------------ 26,769,872 14,339,782 ------------ ------------ 47,039,180 39,115,680 ------------ ------------ SHAREHOLDERS' EQUITY CAPITAL STOCK 23,659,566 22,705,734 WARRANTS 2,610,992 2,610,992 CONTRIBUTED SURPLUS 567,949 482,092 DEFICIT (37,302,859) (34,734,644) ------------ ------------ (10,464,352) (8,935,826) ============ ============ $ 36,574,828 $ 30,179,854 ============ ============ Page 3 of 10

POINTS INTERNATIONAL LTD. UNAUDITED CONSOLIDATED STATEMENTS OF OPERATIONS AND DEFICIT MARCH 31, MARCH 31, FOR THE THREE MONTHS ENDED 2005 2004 - -------------------------- ------------ ------------ REVENUES Points operations $ 2,540,658 $ 1,532,513 Interest income 37,251 85,052 ------------ ------------ 2,577,909 1,617,565 GENERAL AND ADMINISTRATION EXPENSES 4,005,639 2,711,438 ------------ ------------ LOSS- Before interest, amortization and other items (1,427,730) (1,093,874) ------------ ------------ Interest on convertible debenture 229,796 207,024 Interest on Series Two Preferred Share 217,000 217,000 Interest and bank charges 4,791 261 Amortization of property, plant and equipment, intangible assets and deferred costs 688,898 443,917 ------------ ------------ 1,140,485 868,202 ------------ ------------ LOSS (2,568,215) (1,962,076) DEFICIT - Beginning of period (34,734,644) (25,926,361) DEFICIT - End of period (37,302,859) (27,888,437) ============ ============ LOSS PER SHARE (Note 2) ($0.04) ($0.03) ============ ============ Page 4 of 10

POINTS INTERNATIONAL LTD. UNAUDITED CONSOLIDATED STATEMENTS OF CASH FLOWS MARCH 31, MARCH 31, FOR THE THREE MONTHS ENDED 2005 2004 - -------------------------- ------------ ------------ CASH FLOWS FROM OPERATING ACTIVITIES Net Loss ($2,568,215) ($1,962,076) Items not affecting cash Amortization of property, plant and equipment 102,467 56,354 Amortization of deferred costs 132,925 199,346 Amortization of intangible assets 453,506 188,217 Deferred costs on convertible debenture 12,139 -- Employee stock option expense (Note 5) 99,503 60,482 Cancellation of warrants issued for services -- (1,167) Interest on Series Two Preferred Shares 217,000 217,000 Interest accrued on convertible debenture 229,796 207,024 ------------ ------------ (1,320,879) (1,034,820) Changes in non-cash balances related to operations (Note 6 (a)) 4,714,130 5,159,380 ------------ ------------ CASH FLOWS PROVIDED BY OPERATING ACTIVITIES 3,393,251 4,124,560 ------------ ------------ CASH FLOWS FROM INVESTING ACTIVITIES Purchase of property, plant and equipment, net of proceeds (1,164,548) (211,664) Purchase of intangible assets (9,662) (17,004) Payments for the acquisition of MilePoint, Inc. (400,000) -- Costs related to the acquisition of MilePoint, Inc. (306,138) (200,000) ------------ ------------ CASH FLOWS USED IN INVESTING ACTIVITIES (1,880,348) (428,668) ------------ ------------ CASH FLOWS FROM FINANCING ACTIVITIES Issuance of Series Four Preferred Share (Note 9) 3,454,611 -- Repayments on loan payable (7,917) -- Deferred financing costs -- 70,018 Issuance of capital stock, net of share issue costs 940,186 202,485 ------------ ------------ CASH FLOWS PROVIDED BY FINANCING ACTIVITIES 4,386,880 272,503 ------------ ------------ INCREASE (DECREASE) IN CASH 5,899,782 3,968,395 CASH AND CASH EQUIVALENTS - Beginning of period 13,754,818 $ 20,274,836 ------------ ------------ CASH AND CASH EQUIVALENTS - End of period $ 19,654,600 $ 24,243,231 ============ ============ Page 5 of 10

POINTS INTERNATIONAL LTD. NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS MARCH 31, 2005 1. Accounting policies The company's interim financial statements have been prepared using accounting policies consistent with those used for the preparation of its annual financial statements. These interim financial statements should be read in conjunction with the company's 2004 audited consolidated financial statements. These financial statements contain all adjustments which management believes necessary for fair presentation of the financial position, results of operations and cash flows. a) Basis of presentation The consolidated financial statements include the accounts of the Company and from their respective dates of acquisition of control or formation of its wholly owned subsidiaries. All inter-company transactions and amounts have been eliminated on consolidation. 2. Loss per share a) Loss per share Loss per share is calculated on the basis of the weighted average number of common shares outstanding for the three months ended March 31, 2005 that amounted to 71,561,017 shares (March 31, 2004 - 63,394,531). b) Fully-diluted loss per share The fully-diluted loss per share has not been computed, as the effect would be anti-dilutive. 3. Segmented information Reportable segments: The company has only one operating segment whose operating results are regularly reviewed by the company's chief operating decision maker and for which complete and discrete financial information is available. The company's business is carried on in the industry of loyalty program asset management. The attached consolidated balance sheets as at March 31, 2005 and December 31, 2004 present the financial position of this segment. The continuing operations reflected on the attached consolidated statements of operations are those of this operating segment. Enterprise-wide disclosures: $2,389,066 (March 31, 2004 - $1,475,886) of the company's revenues were generated in the U.S. for the quarter, with the remaining revenues generated in Canada, Europe and Asia. A significant majority of the company's assets are located in Canada. page 6 of 10

4. Major Customers For the quarter ended March 31, 2005, there are four customers that individually represent greater than ten percent of the Corporation's consolidated revenues. In aggregate, the four customers represent approximately 64% of the Corporation's consolidated revenues. Two customers individually represented greater than ten percent of consolidated revenues in the first quarter of 2004 (65% in aggregate) and two customers individually represented greater than ten percent of consolidated revenues in the fourth quarter of 2004 (34% in aggregate). In addition, as at March 31, 2005, 63% (first quarter 2004 - 80% and fourth quarter 2004 - 59%) of the Corporation's deposits are due to these customers. 5. Stock-based compensation The Corporation accounts for stock options granted in this stock option plan in accordance with the fair value based method of accounting for stock-based compensation. The compensation cost that has been charged against income for this plan is $99,503 for the three months ended March 31, 2005 ($60,482 for the three months ended March 31, 2004). During the quarter ended March 31, 2005, 200,000 options were issued to employees and 40,000 options previously granted were cancelled (no options were issued in the first quarter of 2004). 6. Statement of Cash Flows a) Changes in non-cash balances related to operations are as follows: THREE MONTHS ENDED MAR, 31 ----------------------- 2005 2004 ---------- ---------- Decrease (Increase) in accounts receivable $ 415,063 $ 117,270 Decrease (Increase) in prepaid and sundry assets $ (123,382) $ (300,445) Increase in liability related to the Acquisition of MilePoint, Inc. $ -- $ 74,509 Increase (Decrease) in accounts payable and accrued liabilities $ (200,466) $ (225,791) Increase (Decrease) in deposits $4,622,914 $5,493,837 ---------- ---------- $4,714,130 $5,159,380 ========== ========== b) Supplemental information Interest and taxes Interest of $4,631 was paid during the quarter ended March 31, 2005. Interest of $35,412 was received during the quarter ended March 31, 2005. No income taxes have been paid. Non-cash transactions page 7 of 10

Non-cash transactions for the quarter ended March 31, 2005 are as follows: (i) 475,600 shares of Points.com Inc. were acquired in exchange for 1,190,856 shares of the Corporation. (ii) $9,000 of revenue earned for hosting services provided was paid in loyalty currency. The currency was valued at the purchase price of the miles and the amount is included in prepaid and sundry assets. The expense will be recognized as the currency is used. (iii) $39,786 of revenue earned for membership fees provided was paid in one-week accommodation certificates. The certificates are valued at their average cost and are included in prepaid and sundry assets. The expense will be recognized as the accommodation certificates are used. (iv) The Corporation received $43,539 of loyalty currency from a partner as reimbursement of a portion of the partner's direct expenses for the services provided by the Corporation. This amount is included in prepaid and sundry assets and will be expensed as the currency is used. (v) Interest of $7,562 was accrued on the acquisition of MilePoint, Inc. (vi) Interest of $229,796 was accrued on the convertible debenture. (vii) Interest of $217,000 was accrued on the Series Two Preferred Share. c) Cash and cash equivalents consist of: March 31, December 31, AS AT 2005 2004 - ----- ----------- ------------ Cash $16,124,713 $10,086,111 Short -Term Investments 46,073 544,945 Cash held by credit card processor 3,483,814 3,123,762 ----------- ----------- Total 19,654,600 13,754,818 =========== =========== 7. Private Placement On March 29, 2005, the Corporation entered into binding agreements to issue approximately 18.1 million common shares at $0.683 per share and one Series Four Preferred Share for approximately $3.5 million (collectively, the "Private Placement Transaction"). On the same date CIBC Capital Partners, a division of Canadian Imperial Bank of Commerce, ("CIBC") agreed to sell to the purchasers in the Private Placement Transaction an amended version of the $6 million debenture issued by the Corporation to CIBC in 2001 (the "Debenture") and the Series One Preferred Share in the capital of the Corporation held by CIBC (the "Debenture Transaction"). The Private Placement Transaction and the Debenture Transaction closed on April 4, 2005. The Series Four Preferred Share has been included, and the Debenture reclassified to long-term liabilities, in the Corporation's unaudited consolidated balance sheet as at March 31, 2005. See Notes 8 and 9 for additional information. Page 8 of 10

The Pro Forma effect of the Private Placement Transaction is an increase to share capital and cash of approximately $11 million. As a result the Corporation's working capital at March 31, 2005 on a Pro Forma basis would be increased to $13.3 million. UNAUDITED CONSOLIDATED PRO FORMA BALANCE SHEETS MARCH 31, TRANSACTION MARCH 31, AS AT 2005 ADJUSTMENTS 2005 - ----- ---------------- ----------- ------------ POST TRANSACTION ACTUAL ASSETS CURRENT Cash and cash equivalents $ 30,654,600 $11,000,000 $ 19,654,600 Accounts receivable 1,609,279 -- 1,609,279 Prepaids and sundry assets 1,352,473 -- 1,352,473 ------------ ----------- ------------ 33,616,352 11,000,000 22,616,352 PROPERTY, PLANT AND EQUIPMENT 3,118,364 -- 3,118,364 GOODWILL AND INTANGIBLE ASSETS 8,152,308 -- 8,152,308 DEFERRED COSTS 2,097,804 -- 2,097,804 FUTURE INCOME TAXES RECOVERABLE 590,000 -- 590,000 ------------ ----------- ------------ 13,958,476 -- 13,958,476 $ 47,574,828 $11,000,000 $ 36,574,828 ============ =========== ============ LIABILITIES CURRENT Accounts payable and accrued liabilities 1,694,133 $ -- 1,694,133 Deposits 17,776,537 -- 17,776,537 Current portion of loan payable 33,515 -- 33,515 Current portion of acquisition loan payable 765,123 -- 765,123 ------------ ----------- ------------ 20,269,308 -- 20,269,308 LOAN PAYABLE 55,614 -- 55,614 ACQUISITION LOAN PAYABLE -- -- -- CONVERTIBLE DEBENTURE 9,150,169 -- 9,150,169 CONVERTIBLE PREFERRED SHARES 17,564,089 -- 17,564,089 ------------ ----------- ------------ 47,039,180 -- 47,039,180 ------------ ----------- ------------ SHAREHOLDERS' EQUITY CAPITAL STOCK(1) 34,472,862 10,813,296 23,659,566 CONTRIBUTED SURPLUS 567,949 567,949 WARRANTS 2,797,696 186,704 2,610,992 DEFICIT (37,302,859) -- (37,302,859) ------------ ----------- ------------ 535,648 11,000,000 (10,464,352) ------------ ----------- ------------ $ 47,574,828 $11,000,000 $ 36,574,828 ============ =========== ============ Note: (1) - Capital stock is net of share issue costs of CAD $1.3M. Page 9 of 10

8. Sale of the Convertible Debenture On March 29, 2005 the Corporation and the purchasers in the Private Placement Transaction had entered into a binding agreement to purchase the Debenture (in its amended and restated form) from CIBC. As a result, the Debenture was reclassified to long-term liabilities in the Corporation's unaudited consolidated balance sheet as at March 31, 2005. In connection with this transaction, the Debenture was amended to, among other things, (i) reduce the interest rate from 11% to 8%, (ii) eliminate all negative covenants, (iii) eliminate certain positive covenants, (iv) remove certain events of default and (v) release all security over the assets of Points and its subsidiaries. Under the terms of the Debenture, (i) the Debenture is repayable (without accrued interest, the repayment of which is waived) by the Corporation within 30 days of a change of control of the Corporation resulting from the exercise of certain warrants issued by the Corporation on April 11, 2003 to Points Investments, Inc, an affiliate of InterActiveCorp and (ii) the principal amount of the Debenture will automatically convert into Common Shares immediately preceding certain liquidity events and, unless previously repaid, will automatically convert in 18,908,070 common shares in April 2006. Except in connection with the exercise of the Warrants, Points is not entitled to pre-pay the Debenture. 9. Issuance of Series Four Preferred Share In the 2005 investment, Points issued one Series Four Preferred Share for aggregate cash consideration of $3,454,611. On March 29, 2005 the Corporation and IAC entered into a binding agreement to issue the Series Four Preferred Share and the cash was received by the Corporation prior to quarter end. As a result, the cash and the preferred share are included in the Corporation's unaudited consolidated balance sheet as at March 31, 2005. The Series Four Preferred Share is convertible, for no additional consideration, into 4,504,069 Common Shares. The Series Four Preferred Share contains anti-dilution protection provisions identical to the Series Two Preferred Share (see the Corporation's 2004 audited consolidated financial statements for information with respect to the terms of the Series Two Preferred Share). Page 10 of 10

POINTS INTERNATIONAL LTD. INTERIM MANAGEMENT'S DISCUSSION AND ANALYSIS The following interim management's discussion and analysis ("MD&A") of the performance, financial condition and future prospects of Points International Ltd. (which is also referred to herein as "Points" or the "Corporation") should be read in conjunction with the Corporation's consolidated financial statements (including the notes thereon) for the quarter ended March 31, 2005 and with the Corporation's 2004 audited consolidated financial statements. Further information, including Points' Annual Information Form ("AIF") for the year ended December 31, 2004, may be accessed at www.sedar.com. All financial data herein has been prepared in accordance with Canadian generally accepted accounting principles ("GAAP") and all dollar amounts herein are in Canadian dollars unless otherwise specified. This MD&A is dated as of May 11, 2005. FORWARD-LOOKING STATEMENTS Some of the statements contained or incorporated by reference in this MD&A, including those relating to Points' strategies and other statements that are predictive in nature, that depend upon or refer to future events or conditions, or that include words such as "expects", "anticipates", "intends", "plans", "believes", "estimates" or similar expressions, are forward-looking statements within the meaning of Canadian securities laws. Forward-looking statements include, without limitation, the information concerning possible or assumed future results of operations of Points as set forth herein. These statements are not historical facts but instead represent only Points' expectations, estimates and projections regarding future events. The forward-looking statements contained or incorporated by reference in this MD&A are not guarantees of future performance and involve certain risks and uncertainties that are difficult to predict. The future results and shareholder value of Points may differ materially from those expressed in the forward-looking statements contained or incorporated by reference in this MD&A due to, among other factors, the risks and uncertainties discussed herein, the matters set forth under "Risks and Uncertainties" contained in the AIF filed with Canadian securities regulators and the factors detailed in Points' other filings with Canadian securities regulators, including the factors detailed in Points' annual and interim financial statements and the notes thereto. Points does not undertake any obligation to update or release any revisions to these forward-looking statements to reflect events or circumstances after the date of this MD&A or to reflect the occurrence of unanticipated events, except as required by law. Page 1 of 33

OVERVIEW OF POINTS' BUSINESS CORE BUSINESS - Points Solutions The Corporation has developed a proprietary technology platform that allows it to offer a portfolio of solutions, referred to as the Points Solutions, to the loyalty program industry. The Points platform was designed to create value for consumers and loyalty programs alike. The Points Solutions are comprised of Points.com, a consumer reward program management portal, and a suite of Points.com Business Solutions available to loyalty program operators. The Corporation's business is primarily conducted over the internet (other than functions such as customer support) allowing its two primary customers (loyalty program operators and loyalty programs' consumers) to be virtually anywhere in the world. Points.com The Corporation's cornerstone product is the proprietary Points.com Web site. Points.com is an online service allowing consumers who are members of participating loyalty programs to exchange their loyalty program points and/or miles between the participating loyalty programs. As at March 31, 2005, Points.com had partnered with 26 loyalty program operators including the loyalty programs of leading airlines, hotels, online and retail businesses, and gift certificate programs, and with an additional 21 gift certificate or retail partners. Points.com version 3.0 Launched On April 10, 2005, the Corporation launched a new Web site incorporating some important changes designed to improve consumers' ability to manage their loyalty assets. The new Points.com Web site, referred to as "Points.com version 3.0", represents a major enhancement in the relationship with both reward program partners as well as the consumer. Points.com version 3.0 will broaden the Web site's offerings, and present consumers with a personalized view of their reward program universe. Through this personalized view of consumers' reward program universe, Points.com will be able to help consumers release more value from their favourite programs and "Get More Rewards, Faster(TM)". This is accomplished by adding new mile and point management tools such as ways to join new rewards programs ("Join"), to purchase ("Buy") and earn ("Earn") more miles or points in their favourite programs. In addition, the system will be driven by the ATG Marketing Enterprise System that will use consumers' unique program reward goals and point mix to suggest ("Suggest") ways to Join, Buy, Earn and Swap their reward program currencies most effectively. As a result of these changes, Points.com will become a reward program management portal, providing a more comprehensive and engaging consumer experience. This functionality is expected to add new revenue streams to the Points.com business model. Most significantly, the loyalty management utility of the Web site is expected to allow Points.com to focus on a subscription membership model as a core aspect of the business. Page 2 of 33

Management expects that Points.com version 3.0 will be phased in over the course of 2005, with monthly releases beginning at the end of the second quarter. Over the course of the spring and summer, Points.com will add or expand its Buy, Earn and Suggest functionalities. In the second half of 2005, management will begin driving consumer traffic to the new Points.com Web site to leverage the Web site's ongoing evolution through online communications with members of the Corporation's reward program partners and through other online channels. In accordance with GAAP and Canadian Institute of Chartered Accountants ("CICA") Handbook Sections 3061 and 3062, web site development costs incurred in the web site application and infrastructure development associated with Points.com version 3.0 will be capitalized. For additional information, see page 13, "General and Administrative Expenses", page 22, "Property, Plant and Equipment", and page 29 "Capital Resources - Planned Capital Expenditures". Points.com Business Solutions At March 31, 2005, the Corporation had 55 Points.com Business Solutions products in the marketplace. This suite of technologies includes: Buy and Gift - facilitates the online sale and gift of miles, points and other loyalty program currencies. Corporate - facilitates the sale of loyalty program currencies to corporate customers. Transfer - facilitates the amalgamation or transfer of loyalty program currencies among multiple accounts. Integrate - functions as a common platform to process transactions between third-party loyalty programs, to simplify and automate a complex and resource-intensive process with a single integration. Elite - facilitates the online sale of tier status to members of loyalty programs. Systems Design - custom applications developed for select large loyalty program partners. See page 6 "Status of New Products" of the AIF for an example of the redeemAAmiles program, an application built for the American Airlines AAdvantage Program. SIGNIFICANT 2005 BUSINESS DEVELOPMENTS TO THE DATE HEREOF 1. The Corporation completes a $15.8 million private placement; CIBC restructures and sells the Debenture On March 29, 2005, Points entered into binding agreements to issue approximately 18.1 million common shares at $0.683 per share and one Series Four Preferred Share for approximately $3.5 million (collectively, the "Private Placement Transaction"). On the same date CIBC Capital Partners, a division of Canadian Imperial Bank of Commerce, ("CIBC") agreed to sell to the purchasers in the Private Placement Transaction an amended and restated Page 3 of 33

version of the $6 million debenture issued by Points to CIBC in 2001 ("the Debenture") and the Series One Preferred Share in the capital of Points held by CIBC (the "Debenture Transaction"). The Private Placement Transaction and the Debenture Transaction closed on April 4, 2005. See page 20, "InterActiveCorp Investment" for a description of the terms of the Series Four Preferred Share and page 25, "Debenture and Series One Preferred Share" for a description of the amended and restated Debenture. 2. American Express Membership Rewards to join Points.com American Express Travel Related Services Company Inc. has entered into an agreement to enable the Membership Rewards Program(R) from American Express to participate on the Points.com portal. In addition, the Membership Rewards Program will use Points.com technology services to offer real-time point transfers for select partners. Public launch is expected during the second quarter of this year. 3. Cendant partners with Points.com The Cendant Hotel Group, a subsidiary of Cendant Corporation, has entered into an agreement with Points.com that allows its TripRewards members to transfer points and miles from one loyalty program to another utilizing Points.com. Points.com will offer more than 3,600 exchange opportunities and over 46 redemption partners to Cendant's customers. TripRewards members have points-earning opportunities at more than 6,000 participating hotels (e.g., Ramada, Days Inn, etc.) and 46 partners. REVENUE RECOGNITION POLICIES The revenue recognition policies for the suite of Points Solutions are as follows: Points.com: - Swap commissions are a percentage of the exchanged value and are recognized as the services are provided under the terms of related contracts. - Membership dues received in advance for services are recognized over the term of service. In the first quarter of 2005 membership dues were $29.95 annually for a PointsPlus membership. - On April 10, 2005, PointsPlus membership sales were discontinued and replaced with a subscription service. Subscription revenues received in advance for services are recognized over the term of service. Subscription fees are currently $19.95 for a one-month membership, $44.85 for a three-month membership and $59.70 for a six-month membership. The Corporation will continue to test different subscription rates, resulting in subscription fees different from the above pricing. - One-time trading fees ($9.95 per trade) were recognized at the time of the trade (for non-PointsPlus members). On April 10, 2005, one-time trading fees were discontinued and replaced with a one-month subscription fee. Page 4 of 33

- Non-refundable partner sign-up fees, for which the Corporation is under no further obligations, are recognized when the program becomes available as an exchange partner on the Points.com Web site. Points.com Business Solutions: - Revenues from the sale of loyalty program points are recorded net of costs. - Hosting and management fees are recognized in the period of service. - Non-refundable partner sign-up fees with no fixed term, and for which the Corporation is under no further obligations, are recognized as revenue when received. - Technology design, development and maintenance revenues are recorded on a "percentage-of-completion" basis. KEY BUSINESS DRIVERS Revenue growth has historically been, and will continue to be, generated by growth of membership in and use of the suite of Points Solutions. Growth in the number of individual members using Points.com is driven by three factors that contribute to increased Web site traffic and the ease with which a consumer can join Points.com to conduct exchange transactions. These factors are Web site usability and enhancements, marketing (awareness and brand) and partner activity. For additional information, see "Points.com Growth" on page 7 hereof. Growth in Points.com Business Solutions will occur through growth of existing partner relationships, supplemented with new business relationships established throughout the year. For additional information, see "Points.com Business Solutions Growth" on page 8 hereof. While the Corporation has no control over the growth of the loyalty program industry, management considers it an important factor in the Corporation's growth prospects. For additional information, see "Growth of Loyalty Program Industry" on page 12 hereof. RESULTS OF OPERATIONS - REVENUES OVERVIEW Revenue for the quarter ended March 31, 2005 was $2,577,909 representing a year-over-year increase of $960,344 (59%) and a quarter over quarter increase of $414,960 (19%). The provision of Points Solutions accounted for greater than 98.6% of the revenue (interest income accounted for the remaining approximately 1.4%). Year over year, revenues from operations increased due to growth in Points Solutions, the MilePoint Acquisition (see "Commitments Related to MilePoint Acquisition" on page 27) and offset by a weakening U.S. dollar while quarter over quarter the revenues improved due to an increase in the use of existing Points.com Business Solutions, the seasonal nature of Elite and also offset by a weakening U.S. dollar. For additional information see "Revenue Growth" on page 7. Interest and other revenue increased by 26% quarter over quarter due to a better yield on invested assets and a larger average period cash balance but declined year over year as a smaller average period cash balance was invested in Page 5 of 33

shorter-term, lower yielding securities. See "Other Factors Contributing to Revenue Growth - Interest Income" on page 10 for additional information. FOR THE THREE MONTHS ENDED ------------------------------------ MARCH 31 DEC. 31 MARCH 31 REVENUES 2005 2004 2004 - -------- ---------- ---------- ---------- Points Operations $2,540,658 $2,133,330 $1,532,513 Interest and other revenue 37,251 29,618 85,052 ---------- ---------- ---------- TOTAL REVENUE $2,577,909 $2,162,948 $1,617,565 ========== ========== ========== A substantial portion of Points' revenue is generated through the provision of Points.com Business Solutions for loyalty programs by way of fees for technology services and transaction fees or commissions paid to Points by the operators of the loyalty programs. The Corporation earns revenue from Points.com in three principal ways. First, loyalty program members pay Points either a fee for each Swap transaction conducted at Points.com or an annual fee for a membership that includes unlimited Swap transactions (on April 10, 2005, the annual membership fee was discontinued and replaced with a subscription fee whereby consumers can join for one, three or six months). Second, Points charges a commission on all Swaps, based on a value of the loyalty currency tendered for exchange by the loyalty program member. Through the Swap model, the participating loyalty program sets a value on the currency tendered for "sale". Based on this valuation, a percentage is remitted to Points and the remaining balance is used to purchase the currency of another participating loyalty program. As part of Points.com version 3.0, the Corporation will be launching its Earn and Buy product features which are expected to be revenue generating services. Finally, Points may earn a non-refundable partner sign-up fee when a partner joins Points.com. There are four customers that individually represent greater than ten percent of the Corporation's consolidated revenues. In aggregate, the four customers represent approximately 64% of the Corporation's consolidated revenues. Two customers individually represented greater than ten percent of consolidated revenues in the first quarter of 2004 (65% in aggregate) and two customers individually represented greater than ten percent of consolidated revenues in the fourth quarter of 2004 (34% in aggregate). In addition, 63% (first quarter 2004 - 80% and fourth quarter 2004 - 59%) of the Corporation's deposits are due to these customers. In the first quarter of 2005, approximately 96% of the Corporation's revenues were recurring revenues (e.g., revenues from monthly management fees, membership fees, transaction fees and interest) and 4% were from non-recurring sources (e.g., one-time web development and integration fees). The percentage of recurring revenues was consistent with both the first and fourth quarters of 2004. Management of the Corporation believes that, in the long term, focusing on growing recurring revenues, which generate revenues for both the partners and Points.com, is in the best interests of the Corporation. Page 6 of 33

FOR THE THREE MONTHS ENDED ------------------------------------ MARCH 31 DEC. 31 MARCH 31 REVENUES 2005 2004 2004 - -------- ---------- ---------- ---------- Recurring revenues $2,474,115 $2,025,134 $1,572,115 Non-recurring revenues 103,793 137,815 45,449 ---------- ---------- ---------- TOTAL REVENUE $2,577,909 $2,162,948 $1,617,565 ========== ========== ========== Management recognizes that the Corporation must achieve profitability through revenue growth and cost management. Management expects that Points' revenues will exceed its general and administration costs in 2006. REVENUE GROWTH Revenue growth has historically been, and will continue to be, generated by growth of membership in and use of the suite of Points Solutions products. Growth in product usage will occur from the growth of existing relationships, supplemented with new business relationships established throughout the year. Management expects the existing contracts to continue to generate growing revenues and, based on continuing business development efforts, is optimistic about new revenue sources in future quarters. Growth in Use of Points Solutions The suite of Points Solutions experiences revenue growth based on the number of loyalty program partners and consumer members who participate in the various programs. Partner Summary - Total Number of Partners(1) AS AT ------------------------------- MARCH 31 DEC. 31 MARCH 31 NUMBER OF PARTNERS AS AT 2005 2004 2004 - ------------------------ -------- -------- --------- Points.com(2) 47 45 36 Points.com Business Solutions 21 21 18 Cumulative Points Transacted (000,000's) 9,568 7,944 3,810 Notes: (1) Partners may be included in both Points.com Business Solutions and Points.com. (2) On March 31, 2005, Points.com partners included 26 loyalty program operators and 21 gift certificate programs. Points.com Growth Currently, the Points.com business model is dependent on the number of consumer members paying for a Points.com membership and / or completing a Swap transaction. In addition, at the end of the third quarter of 2005, the Corporation expects to begin generating revenues through the Earn and Buy functionalities currently being developed. The number of consumers that will conduct a transaction is driven by three factors: Web site usability and enhancements; marketing (awareness and brand); and partner activity. As the Corporation's primary efforts have been focused on the April 10, 2005 launch of Points.com version 3.0, there were only moderate changes in the usability and marketing of the existing Web site. However, progress has continued Page 7 of 33

in expanding and improving Points.com's partner mix. The number of loyalty program partners added and their industry mix are two important elements in the growth of Points.com as they directly impact the consumers' value proposition. Said differently, the more loyalty programs that a consumer participates in, that are also Points.com partners, the greater the opportunity for that consumer to maximize the value of his or her collective loyalty programs. The number of loyalty programs participating on Points.com has increased by 31% since March 31, 2004 and 4% since December 31, 2004 and the Corporation made significant progress by announcing a partnership with its first financial services partner and adding another significant travel partner. See page 7, "Growth in Use of Points Solutions" for a summary of growth in the number of partners. Management expects to continue to round out the partner industry mix and add new partners in 2005. Points.com version 3.0 will add a number of new features and improved functionality to the Web site. This functionality is expected to incorporate new revenue streams into the Points.com business model by improving consumers' ability to manage and derive value from their loyalty program universe. The launch of Points.com version 3.0 will allow the Corporation to begin to market and merchandise to its consumer base in a more effective manner than the previous version of Points.com. Testing of marketing programs are expected to begin at the end of the second quarter of 2005 and ramp up during the course of the third and fourth quarters. Points.com Business Solutions Growth The Points.com Business Solutions have been designed with each partner's look and branding. As a result, Points has little impact on driving traffic and transactions through its partners' Web sites. However, Points has seen continuous growth in the products since each launch. Management expects this trend to continue for new and existing Points.com Business Solutions. FOR THE THREE MONTHS ENDED ----------------------------- MARCH 31 DEC. 31 MARCH 31 POINTS.COM BUSINESS SOLUTIONS METRICS AS AT 2005 2004 2004 - ------------------------------------------- -------- ------- -------- Total Unique Partners 21 21 18 Total Points.com Business Solutions 55 55 45 Page 8 of 33

FOR THE THREE MONTHS ENDED ----------------------------- POINTS.COM BUSINESS SOLUTIONS(1) MARCH 31 DEC. 31 MARCH 31 NUMBER OF PRODUCTS AS AT 2005 2004 2004 - -------------------------------- -------- ------- -------- Buy 16 16 13 Gift 16 16 13 Transfer 5 5 3 Corporate 8 8 7 Elite 2 2 2 Systems Design 4 4 3 Integrate partners(2)(3) 4 4 4 --- --- --- Total Points.com Business Solutions 55 55 45 === === === Notes: (1) Includes products sold to new and existing customers. (2) Each Integrate partner will have third-parties integrated into its technology platform. (3) There are 24 existing partner integration add-ons among the four Integrate partners as at March 31, 2005. SOURCES OF REVENUE GROWTH Approximately 98.6% of the Corporation's revenue in the first quarter of 2005 (approximately 95% in first quarter and 98% in the fourth quarter of 2004) was generated through its Points Solutions, which have two primary sources for growth: growth and increased use of existing contracted Points Solutions; and the development of new contracted Points Solutions. The remaining 1.4% of revenues is interest income. The following table indicates the split between existing Points Solutions and excludes revenues from interest income. FOR THE THREE MONTHS ENDED ----------------------------- MARCH 31 DEC. 31 MARCH 31 PERCENTAGE OF REVENUES BY SOURCE 2005 2004 2004 - -------------------------------- -------- ------- -------- Existing Points Solutions (including growth of existing solutions) 96% 89% 97% New contracted Points Solutions with new and existing partners 4% 11% 3% Existing Points Solutions The large majority of existing products that Points operates, including those on behalf of partner loyalty programs, continue to grow through increased consumer awareness, consumer adoption and loyalty program growth. As Points earns transaction fees or commissions on the majority of these products and as the products continue to grow, Points expects to continue to derive significant revenues from its existing products. Revenue from existing Points Solutions grew by 64% from $1.49 million year over year and 29% quarter over quarter to $2.44 million in the first quarter of 2005 (i.e., 96% of the total Points Solutions revenue). Revenue in the first quarter of 2004 does not include the MilePoint Acquisition which was completed on March 31, 2005. Management expects this trend to continue as the base of existing products continues to grow. Page 9 of 33

New Contracted Points Solutions Selling additional Points Solutions is an important source of new revenue. New Points Solutions sold to loyalty program partners grow the base of products being managed and therefore the existing revenue base and, in the case of sales to new loyalty program partners, provide an opportunity to place additional Points Solutions with the same partner. Revenues from new Points Solutions during the quarter decreased from $237,169 to $103,793 in the first quarter ended March 31, 2005 as the Corporation focused on the development and launch of Points.com version 3.0 and the launch of Points.com Business Solutions ordered by partners in prior periods. Points has grown the number of products placed with partners from 45 to 55 as at March 31, 2005 from March 31, 2004. In addition, 24 third-party integrations have been implemented with the four Integrate partners. Management believes that the suite of Points Solutions is applicable to all large loyalty program partners and will continue to focus business development resources on both the sale of new products to current partners and on sales to new partners. Management is continuing to focus on expanding the Points.com partnership base in 2005 across various loyalty markets. In particular, Points will continue to focus on new partnerships in the financial services, hotel, retail, car rental, and online categories throughout 2005. Projected revenues for 2005 attributed to the deployment of new Points Solutions are more difficult to project than growth in existing Points Solutions. Future revenue growth is still substantially dependent on generating new contracts for the suite of Points Solutions products. While management expects continued business development success, there is no certainty that Points.com will continue with its past success of acquiring new contracts with new or existing partners. OTHER FACTORS CONTRIBUTING TO REVENUE GROWTH In addition to the sources of revenue and growth described above, three other factors contribute to the Corporation's financial performance: interest income; fluctuations in foreign exchange rates; and the growth of the loyalty program industry. Interest Income The Corporation earned interest income of $37,251 for the first quarter of 2005, compared with $85,052 in the same quarter last year and $29,618 compared to the fourth quarter of 2004. The decrease in interest income year over year is largely a function of reduced cash reserves, the strengthening U.S. / Canadian foreign exchange rate, the shorter duration of the investment portfolio and the subsequently lower average yield of the investments. The increase in interests income quarter over quarter is a function of better yielding investments during the time period. Management expects the interest income to significantly increase over the remainder of the year due entirely to the completion of the Private Placement Transaction. The proceeds raised from the Private Placement Transaction have been invested in a combination of short-term liquid assets and short-term bonds. The bond and money market portfolio has a duration of less than two years. Foreign currency continues to be invested in short-term and money market instruments. Points' cash and short-term investments are valued quarterly at the lower of cost or Page 10 of 33

market value. In the long term, as Points' business continues to grow, cash reserves and related interest income are also expected to increase, although this growth is not expected to be a material portion of the Corporation's revenue going forward. Interest rates will continue to influence interest earnings. The Corporation's bond portfolio is exposed to financial risk that arises from the credit quality of the underlying bond issuers. The Corporation seeks to mitigate the credit risk by diversifying its bond holdings and only investing in securities with a credit rating of "A" or higher. A summary of the Corporation's investments is as follows: US$ OTHER AS AT MAR. 31, 2005 YIELD %(2) CREDIT RATING C$ TOTAL DENOMINATED DENOMINATED - ----------------------- ---------- ------------- ----------- ----------- ----------- Cash held at bank(1) 1.385 n/a $19,608,527 $11,160,114 E 1,081,443 GBP 316,885 CHF 13,473 Money market securities 2.28 R1-High 46,073 n/a n/a Bonds(3) n/a A - AAA -- n/a n/a ----------- ----------- TOTAL $19,654,600 $11,160,114 =========== =========== Notes: (1) C$ Total represents total cash held at bank inclusive of all denominations; US$ Denominated and Other Denominated currencies are a subset of the C$ Total and are represented in their local currency amount. (2) Yield as at March 31, 2005. (3) Bond yield is calculated as the simple average of the portfolio's semi-annual yield to maturity. Foreign Exchange Rates The translation of the Corporation's revenues and expenses is, and will continue to be, sensitive to changes in the U.S. / Canadian foreign exchange rates ("FX Rates"). Changes to FX Rates will have greater impact on the Corporation's revenues than on its expenses as approximately 93% of the Corporation's revenues are in U.S. dollars and the remaining 7% are split between Canadian dollars, Euros, British Pounds and Swiss Francs. Management expects that the percentage of U.S. dollar-based revenue will not decrease significantly throughout 2005. Approximately 75% of the Corporation's general and administration expenses were in Canadian dollars and 25% were U.S. dollar-based. The Corporation does not have material foreign exchange risk with its cash expenses as it has sufficient foreign currency reserves to meet its foreign obligations. The three-month average FX Rate used to translate revenues and expenses into Canadian dollars has declined in each of the two comparable quarters. The FX rate differential compared to the fourth quarter of 2004 was negative and resulted in 5% lower revenue growth, or approximately $129,782 offset by a 1% decrease in expense growth, or approximately $53,617. Page 11 of 33

FOR THE THREE MONTHS ENDED ----------------------------- MARCH 31 DEC. 31 MARCH 31 U.S. / CANADIAN FX RATES 2005 2004 2004 - ------------------------ -------- ------- -------- Period Start 1.205 1.262 1.297 Period End 1.217 1.205 1.308 Three-Month Average 1.232 1.299 1.318 Growth of Loyalty Program Industry The Economist reported on the growing importance of loyalty programs in an article from its May 2, 2002 issue, entitled "Fly me to the moon", noting that on an annual basis, airlines sold "roughly US$10 billion worth of miles to partners, such as credit card firms". In another article (entitled "Frequent-flyer economics", from the same issue), The Economist reported that "frequent flyer miles started as a marketing gimmick, but they have become a lucrative business", and that "roughly half of all miles are now earned on the ground, not in the air". In an updated article, dated January 6, 2005, and titled "In Terminal Decline, The dollar has already been toppled as the world's leading currency") The Economist reported that, by the end of 2004, "the world-wide stock of unredeemed frequent flyer miles is almost 14 trillion miles .. . . and the total global stock of frequent flyer miles is worth over US$700 billion". Management understands that members of loyalty programs are much more likely to utilize Points.com and the other products from the suite of Points Solutions when they are close to a level at which they can redeem an award. The redemption level for an award varies by type of award (for example, a business-class flight takes more miles that an economy-class flight) and by program type (the "cost" of a flight typically starts between 15,000 and 25,000 miles whereas a night in a hotel starts at 5,000 points). Therefore, growth in consumer loyalty program account balances will create demand for Points Solutions. Growth in program balances is a function of the growth in the number of programs, the number of participating consumers, time and the number of consumers moving through a loyalty redemption (for example, receiving an award of some type). Several respected periodicals estimate strong growth in the popularity of and participation in loyalty programs. For example, in addition to The Economist, cited above, according to the "frequent flyer facts" section of the Web site of InsideFlyer magazine (www.webflyer.com), a leading publication for members of frequent traveler programs: "Loyalty programs grow at a rate of 11% per annum, with over 120 million members worldwide. While there are about 92 frequent flyer/guest programs in the world, American AAdvantage, the largest frequent flyer program in the world, began with 283,000 members in 1981 and has grown to more than 45 million members." (sic) Page 12 of 33

RESULTS OF OPERATIONS - GENERAL AND ADMINISTRATION EXPENSES GENERAL AND ADMINISTRATION EXPENSES General and administration expenses increased by 48% relative to the first quarter of 2004 and 21% relative to the fourth quarter. Material changes in expenses will be described in each section below. FOR THE THREE MONTHS ENDED ------------------------------------ MARCH 31 DEC. 31 MARCH 31 GENERAL AND ADMINISTRATION EXPENSES 2005 2004 2004 - ----------------------------------- ---------- ---------- ---------- Employment Costs(1) $2,474,711 $1,843,784 $1,891,596 Technology Services(2) 326,055 231,572 161,306 Marketing and Communications 390,006 512,135 202,102 Sales Commission and Related Expenses 158,464 141,210 24,703 Other(3) 656,402 591,159 431,731 ---------- ---------- ---------- TOTAL $4,005,639 $3,319,861 $2,711,438 ========== ========== ========== Notes: (1) Wages and employment costs include salaries, employee stock option expense, contract labour charges, recruiting, benefits and government charges (CPP and EI). (2) Technology expenses include online hosting and managed services, equipment rental, software licenses and capital lease expenses. (3) Other expenses include foreign exchange losses (or gains), travel expenses, professional fees, insurance, office rent and expenses and regulatory expenses. As the Corporation is still in the process of increasing loyalty program participation in and sales of the Points Solutions, significant resources continue to be required. Management has made growing revenues and the underlying business the highest priority, while continuing to be diligent about controlling costs and capital expenditures. Management does not expect that the general and administration expenses or capital expenditures in the second through fourth quarters of 2005 will be higher than in the first quarter of 2005. In the latter half of the year, more comprehensive marketing and branding programs and fewer employment costs capitalized in the development of Points.com Web site technology will be offset by lower overall employment costs and capital expenditures. Points expects that a series of significant marketing and branding programs will begin in mid 2005 to support the launch of Points.com version 3.0. The actual expense incurred will be a function of the types of marketing media employed and incentives offered, as well as the timing of the programs' launch dates. If actual revenue growth projected from the marketing plan does not meet expectations, the expenditures can either be reduced or reallocated to more successful programs. EMPLOYMENT COSTS Employment costs increased by 31% over the first quarter of 2004 and by 34% over the fourth quarter of 2004. The increase over the prior year is the result of an increase in total bonuses paid versus the amount that had been accrued, higher contractor expenses and the increase in the number of full-time employees hired between the second quarter of 2004 through first quarter of Page 13 of 33

2005. The increase is partially offset by an increase in capitalized employment costs associated with the Points.com version 3.0 technology development. The increase over the fourth quarter of 2004 was due to similar factors as the prior year increases, with the most significant factor being the increase in bonuses paid. Effective January 1, 2004, the CICA Handbook Section 3870, "Stock-Based Compensation and Other Stock-Based Payments" was amended to require expense treatment of all stock-based compensation and payments for options granted beginning on or after January 1, 2002. For stock-based compensation issued to employees, the Corporation recognizes an expense. The Corporation accounts for its grants in accordance with the fair value based method of accounting for stock-based compensation. As permitted by this standard, this change in accounting policy had been applied retroactively in 2004 without restatement of the prior years' financial statements; the amounts charged to expense for costs relating to the quarter ended March 31, 2005 are $99,503, compared to $60,482 for the quarter ended March 31, 2004 and $106,498 for the quarter ended December 31, 2004. FOR THE THREE MONTHS ENDED ------------------------------ MARCH 31 DEC. 31 MARCH 31 2005 2004 2004 -------- -------- -------- Employee Stock Option Expense $99,503 $106,498 $60,482 As at March 31, 2005, the Corporation had 76 full-time employees (including three contractors replacing employees on temporary leaves of absence) and ten short-term contractors. FOR THE THREE MONTHS ENDED ----------------------------- MARCH 31 DEC. 31 MARCH 31 FULL TIME HEADCOUNT(1) BY DEPARTMENT AS AT 2005 2004 2004 - ------------------------------------------ -------- ------- -------- Technology 44 43 42 Finance and Administration 13 13 10 Business Development 5 8 8 Marketing and Customer Service 14 15 8 --- --- --- TOTAL(2) 76 79 68 === === === Notes: (1) Headcount includes active employees and contractors covering a leave of absence, for full-time positions within the departments. (2) In addition to the full-time positions employed, the Corporation had ten short-term contractors on staff at March 31, 2005. The majority of the new hires and short-term contractors are directly dedicated to the Points.com version 3.0 technology development and ongoing maintenance. TECHNOLOGY SERVICES Technology services expenses increase in increments based on business growth and product performance. As Technology services costs are a function of the number of partners and Points Page 14 of 33

Solutions products, these costs grow as revenue grows. In general, as loyalty program partners and products are added to the infrastructure and transactional volume increases, additional servers, processors, bandwidth, memory, etc., are required to provide a secure and robust production environment. The first quarter of 2005 saw an increase of $164,749 (102%) versus the prior year and $94,483 (41%) over the fourth quarter of 2004 as additional software licences were purchased for Points.com version 3.0 and for new products associated with the MilePoint Acquisition. Management expects these costs to grow marginally in 2005 with the continued expansion of Points Solutions. Products launched and loyalty program partners acquired are the key drivers of Technology Services expenses. MARKETING AND COMMUNICATIONS Marketing costs increased by $187,905 (93%) relative to the quarter ending March 31, 2004 as more marketing promotions were in the market during the period. Marketing expenditures decreased $122,129 (24%) relative to the fourth quarter of 2004 as fewer campaigns were in market. The decrease relative to the prior quarter was deliberate as the marketing team was focused on the launch of the new Web site in the second quarter of 2005. The Corporation expects to increase its marketing expenditures at the end of the second quarter of 2005 to support the launch of Points.com version 3.0. The marketing and branding foundation built in 2004 has made it possible to expand audience reach and effectively execute large-scale, multi-channel promotions. Advertising expenditures will continue to be focused on partner media, as well as online media. This approach dovetails with business development strategies and is the most cost-effective means to reach Points' target audience. It is anticipated that marketing and communication expenses could increase substantially if the programs are successful at customer acquisition and retention. If the programs do not meet management's expectations in driving revenue growth, marketing expenses can be eliminated or reallocated in the short term. Management expects that the results of the carefully planned marketing strategy will accelerate Points.com activity. SALES COMMISSIONS AND EXPENSES Sales commissions and expenses have increased by $133,761 (541%) year over year and $17,254 (12%) quarter over quarter. Sales commissions will continue to vary according to partners contracted and growth of existing products. Management expects sales commissions to increase throughout the remainder of 2005 through growth in existing Points Solutions. OTHER OPERATING EXPENSES Other operating expenses include office overhead, travel expenses, professional fees and foreign exchange gain and/or loss. Other operating expenses increased by $224,671 (52%) year over year and by $65,243 (11%) quarter over quarter. Approximately 5% of the quarter over quarter increase relates to the foreign exchange loss from re-valuing certain balance sheet accounts (e.g., U.S. dollar denominated cash and U.S. dollar denominated deposits). Each quarter, certain balance sheet accounts are re-valued in accordance with the period ending FX Rate. To the extent that the foreign denominated assets and liabilities are not equal, the net effect after translating the Page 15 of 33

balance sheet accounts on the income statement. Management has no control over the foreign exchange gain or loss from one period to the next. Excluding the foreign exchange gain and loss, other operating expenses increased by approximately $199,462 (46%) compared against the first quarter of 2004 and by $82,927 (15%) compared against the fourth quarter of 2004. Year over year, the material variances include the relocation to larger facilities, increased professional fees and one-time legal fees associated with the second amendment and restatement of the Debenture. Management expects other operating expenses (excluding foreign exchange gain and loss) to remain stable in 2005. FOR THE THREE MONTHS ENDED ------------------------------ MARCH 31 DEC. 31 MARCH 31 OTHER OPERATING EXPENSES 2005 2004 2004 - ------------------------ -------- -------- -------- Foreign Exchange Gain/Loss(1) $ 22,900 $ 40,584 $(2,309) Other Operating Expenses 633,502 550,575 434,040 -------- -------- -------- TOTAL $656,402 $591,159 $431,731 ======== ======== ======== Note: (1) See definition on page 15, "Other Operating Expenses". RESULTS OF OPERATIONS - NON-CASH EXPENSES Forward-looking statements contained in this section with respect to future expenses of the Corporation are not guarantees of such future expenses and involve certain risks and uncertainties that are difficult to predict. Any changes in the Corporation's amortizing assets will subsequently change the Corporation's amortizing expenses. AMORTIZATION EXPENSES The Corporation recorded amortization expenses of $688,898 in the first quarter of 2005 compared to $443,917 for the quarter ending March 31, 2004 and $674,416 for the period ending December 31, 2004. The change was attributed to the charges outlined in the following table: FOR THE THREE MONTHS ENDED ------------------------------ MARCH 31 DEC. 31 MARCH 31 AMORTIZATION EXPENSES 2005 2004 2004 - --------------------- -------- -------- -------- Deferred Costs $132,925 $133,386 $199,346 Intangible Assets 453,506 457,538 188,217 Property, Plant and Equipment 102,467 83,492 56,354 -------- -------- -------- TOTAL $688,898 $674,416 $443,917 ======== ======== ======== AMORTIZATION OF DEFERRED COSTS FOR THE THREE MONTHS ENDED ------------------------------ MARCH 31 DEC. 31 MARCH 31 DEFERRED COSTS 2005 2004 2004 - -------------- -------- -------- -------- Amortization $132,925 $133,386 $199,346 Page 16 of 33

Charges incurred in respect of certain financings are deferred and charged to income on a straight-line basis over an applicable time period. Deferred finance charges represent legal, accounting and other related fees incurred to obtain the financings. Points has incurred deferred costs in connection with the following financial transactions: a. In prior quarters, Points reported deferred financing charges in connection with the Debenture issued to CIBC in 2001. The first quarter of 2004 was the final amortization period for the deferred costs associated with the Debenture. b. The Corporation reports deferred financing charges in connection with the Series Two Preferred Share as this financial instrument is also classified as debt. The Series Two Preferred Share has 32 amortization quarters remaining. c. In consideration of the value to the Corporation of the Alignment Agreement with American Airlines, the Corporation issued 2,196,635 Common Shares to American Airlines valued at $2,240,568. The Common Shares have been classified as deferred costs and will be amortized over a five-year period. There are 14 amortization quarters remaining. d. Selected Points.com Business Solution technology costs incurred ($123,390) have been deferred over the expected lifetime of certain partner relationships. The two relationships have 7 and 8 amortization quarters remaining. AMORTIZATION OF INTANGIBLE ASSETS The excess of the cost over the value attributed to the underlying net assets of the shares of Points.com acquired in 2002 is amortized on a straight-line basis over a period of three years. The amortization of the intangible asset related to the acquired technology in Points.com was completed during the first quarter of 2005. The increase in the amortization expense of intangible assets which started in the second quarter of 2004 is related to the intangible assets (i.e., partner contracts) acquired through the MilePoint Acquisition. Goodwill related to the acquisition will not be amortized. If the assets are deemed to have become impaired, the goodwill will be written off in the appropriate period. FOR THE THREE MONTHS ENDED ------------------------------ MARCH 31 DEC. 31 MARCH 31 INTANGIBLE ASSETS 2005 2004 2004 - ----------------- -------- -------- -------- Amortization $453,506 $457,538 $188,217 AMORTIZATION OF PROPERTY, PLANT AND EQUIPMENT The increase in the amortization expenses reflects that purchased assets have been capitalized and the amortizations have period begun. Page 17 of 33

FOR THE THREE MONTHS ENDED ------------------------------ MARCH 31 DEC. 31 MARCH 31 PROPERTY, PLANT AND EQUIPMENT 2005 2004 2004 - ----------------------------- -------- ------- -------- Amortization $102,467 $83,492 $56,354 OTHER NON-CASH EXPENSES Interest on the Debenture Accrued interest on any principal amount of the Debenture that is converted into common shares ceases to be payable. In addition, in the event that an exercise of the Warrants (see "Liquidity - InterActiveCorp Investment" on page 20 hereof) results in a change of control of Points, accrued interest on the Debenture will be waived and the principal amount of the Debenture will be repayable within 30 days. See "Commitments Related to the Terms of Certain Financing Arrangements" on page 25 herein. INTEREST ON DEBENTURE 2008 2007 2006 2005 2004 2003 2002 2001 - --------------------- ---- ---- ----- ----- ----- ----- ----- ----- Accrued Interest ($000's) nil nil 185 778 884 854 660 522 Debenture Value ($000's) nil nil 9,884 9,699 8,920 8,036 7,183 6,522 During the first quarter of 2005, interest on the outstanding principal amount of the Debenture accrued at a rate of 11% per annum. Interest compounds on an annual basis on the day immediately prior to each anniversary of the original issue date, being March 15, 2001. Thereafter, interest accrues on such compounded interest at the rate of 11% per annum. Effective April 4, 2005, the interest on the outstanding principal amount of the Debenture accrues at 8% per annum. Interest on the Series Two and Series Four Preferred Shares INTEREST ON SERIES TWO PREFERRED SHARE 2013 2012 2011 2010 2009 2008 2007 2006 2005 2004 2003 - --------------------------------- ---- ---- ---- ---- ---- ---- ---- ---- ---- ---- ---- Series Two Preferred Accrued 244 868 868 868 868 868 868 868 868 868 624 Interest ($000's) Series Two Preferred Share Value 21.1 20.8 19.9 19.1 18.2 17.3 16.5 15.6 14.7 13.9 13.0 ($000,000's) Series Four Preferred Accrued 60 242 242 242 242 242 242 242 181 nil nil Interest ($000's) Series Four Preferred Share Value 5.4 5.3 5.1 4.8 4.6 4.4 4.1 3.9 3.6 nil nil ($000,000's) Page 18 to 33

RESULTS OF OPERATIONS - EARNINGS AND SHAREHOLDER'S EQUITY LOSS The Corporation reported a net loss of $2,568,215 for the first quarter of 2005, compared with a net loss of $1,962,076 for the same period in 2004 and a net loss of $2,496,011 during the fourth quarter of 2004. SHAREHOLDER'S EQUITY The deficit in shareholder's equity increased from $8,935,826 at December 31, 2004 to $10,464,352 at March 31, 2005. The increase was a result of the net loss for the period of $2,568,215 partially offset by an increase in capital stock of $940,186 during the first quarter of 2005. LOSS PER SHARE The Corporation's loss per share is calculated on the basis of the weighted average number of outstanding Common Shares for the period, which amounted to 71,561,017 shares at March 31, 2005, compared with 63,394,531 shares at March 31, 2004 and 67,744,345 Common Shares at December 31, 2004. The Corporation reported a net loss of $0.04 per share for the quarter ending March 31, 2005, compared with a net loss of $0.03 per share for the quarter ending March 31, 2004 and $0.04 for the quarter ending December 31, 2004. For the comparable periods, the impact on the loss per share of the fully diluted shares outstanding has not been computed as the effect would be anti-dilutive (meaning that the loss per share would decrease on a fully diluted basis). Therefore, in accordance with GAAP, fully diluted loss per share is not provided. The fully diluted calculation would have otherwise included Common Shares underlying outstanding securities, such as options, warrants and preferred shares convertible or exercisable to acquire Common Shares. LIQUIDITY OVERVIEW OF LIQUIDITY Management views liquidity as the Corporation's ability to generate sufficient cash (or cash equivalents) to meet its obligations as they become due. Balance sheet liquidity indicators provide management with a test of the Corporation's current liquidity. Balance sheet indicators of liquidity include cash, accounts receivable and accounts payable. Earnings (losses) before interest, amortization and other deductions ("EBITDA") is the key indicator of the change in the liquidity of Points' operations over a defined period of time. As the Corporation continues to add contracts to its portfolio of Points.com Business Solutions and to Points.com, revenues are expected to grow, resulting in increased liquidity. EBITDA Management believes that EBITDA is an important internal measure and financial benchmark for its shareholders because it is a recognizable and understandable measure of the Corporation's Page 19 of 33

cash burn or growth, and is a standard often scrutinized by investors in small to mid-capitalization companies. For example, the Corporation has incurred large non-cash expenses (depreciation and amortization) over the past several fiscal years that distort the financial and strategic gains the Corporation has made. Primarily as a result of the Points.com version 3.0 related expenditures, including those costs that are not capitalized, management expects that Points' revenues will exceed its general and administrative costs in 2006. For the quarter ending March 31, 2005, the Corporation's EBITDA was ($1,427,730). This compares with EBITDA of ($1,093,874) for the quarter ending March 31, 2004 and ($1,156,912) for the quarter ending December 31, 2004. INTERACTIVECORP INVESTMENT The following is a general summary of the terms of two investments in the Corporation by InterActiveCorp ("IAC"), through its affiliate Points Investments, Inc. Comprehensive disclosure of these investments is set out in Points' Material Change Reports dated March 21, 2003 and April 5, 2005, which are incorporated by reference herein. See also "Commitments Related to the Terms of Certain Financing Arrangements" on page 25 below. In the 2003 investment, Points issued one Series Two Preferred Share and Common Share purchase warrants (the "Warrants") for aggregate cash consideration of $12.4 million and $2.7 million, respectively. Based on Points' capitalization as at the date hereof, the Series Two Preferred Share is convertible, for no additional consideration, into 19,999,105 Common Shares. The Warrants are exercisable for three years from their date of issue (April 11, 2003) to acquire up to 55% of the Common Shares of Points (calculated on an adjusted fully diluted basis) less the number of Common Shares issued or issuable on conversion of the Series Two Preferred Share. As at the date hereof and based on Points' current capitalization, the Warrants are exercisable to acquire 102,107,118 Common Shares at an effective price per Common Share of $0.94 (resulting in an additional investment by IAC in Points of up to approximately $95.7 million). Each of the Series Two Preferred Share and the Warrants contain anti-dilution protection provisions. In the 2005 investment, Points issued one Series Four Preferred Share for aggregate cash consideration of $3,454,611. On March 29, 2005 the Corporation and IAC entered into a binding agreement to issue the Series Four Preferred Share and the cash was received by the Corporation prior to quarter end. As a result, the cash and the preferred share are included in the Corporation's unaudited consolidated balance sheet as at March 31, 2005. The Series Four Preferred Share is convertible, for no additional consideration, into 4,504,069 Common Shares. The Series Four Preferred Share contains anti-dilution protection provisions identical to the Series Two Preferred Share. CASH AND CURRENT ASSETS The Corporation had cash and cash equivalents of $19,654,600 at March 31, 2005, compared to $24,243,231 at March 31, 2004, and $13,754,818 at December 31, 2004. Page 20 of 33

FOR THE THREE MONTHS ENDED --------------------------------------- MARCH 31 DEC. 31 MARCH 31 AS AT 2005 2004 2004 - ----- ----------- ----------- ----------- Cash and Cash Equivalents $19,654,600 $13,754,818 $24,243,231 Accounts Receivable 1,609,279 2,024,342 887,100 Prepaids and Sundry Assets 1,352,473 1,229,091 1,125,666 ----------- ----------- ----------- TOTAL CURRENT ASSETS $22,616,352 $17,008,251 $26,255,997 =========== =========== =========== Cash and cash equivalents decreased by $4,588,631 from March 31, 2004 and increased by $5,899,782 compared to December 31, 2005. The primary reasons for the year over year decrease in cash relative were related to the operating loss for the year, expenditures on capitalized costs directly attributable to Points.com version 3.0, expenditures on capital assets and the MilePoint Acquisition. See page 20 "InterActiveCorp Investment" for the impact of the issuance of the Series Four Preferred Share on the Corporation's March 31, 2005 cash position and Note 7 of the Corporation's first quarter 2005 interim financial statements for the proforma impact of the changes directly attributable to the issuance of Common Shares in the Private Placement Transaction. Cash From Exercise of Certain Warrants and Options Certain "in-the-money" or "at-the-money" warrants and options are currently due to expire within twelve months. Assuming that the market price of the Common Shares remains above the exercise price of these securities, management expects the securities to be exercised. If exercised in full, the proceeds from the exercise of these securities would increase cash by approximately $96 million. Assuming the exercise in full of these securities, issued and outstanding Common Shares would increase by over 107 million shares. Securities with Near-Term Expiry Dates - Outstanding Amounts as at March 31, 2005 SECURITY TYPE EXPIRY DATE NUMBER STRIKE PRICE PROCEEDS - ------------- ----------- ----------- ----------------- ---------- Warrants 7/18/2005 166,667 0.25 41,667 Warrants 3/15/2006 595,667 0.25 148,917 Warrants 4/11/2006 102,107,118 0.94 95,655,615 Points International Ltd. Options 8/22/2005 25,000 0.69 17,250 Points International Ltd. Options 5/7/2005 657,500 0.56 368,200 Options in subsidiary with liquidity put(1, 2) 2/17/2005 187,793 Fair Market Value 4,125 Options in subsidiary with liquidity put(1, 2) 3/31/2005 3,749,151 Fair Market Value 55,772 Options in subsidiary with liquidity put(1) 7/9/2005 802,433 Fair Market Value 8,892 Options in subsidiary with liquidity put(1) 8/13/2005 355,803 Fair Market Value 7,816 Options in subsidiary with liquidity put(1) 8/20/2005 200,312 Fair Market Value 4,400 ----------- ---------- TOTAL 107,488,896 96,291,546 =========== ========== Note: (1) The Corporation currently intends to seek regulatory and shareholder approval for a two-year extension of the expiry date of certain options held in the subsidiary with liquidity put rights. (2) Points.com options have been conditionally exercised and the common shares conditionally put to the Corporation for 3,936,944 Common Shares. If the shareholders to not vote to extend the options, the conditionally exercised options will be deemed to have been exercised on the original notice date prior to expiry. Subsequent to quarter end, and as at May 11, 2005, the following securities have been exercised or expired: Page 21 of 33

SECURITY TYPE(1) EXPIRY DATE NUMBER STRIKE PRICE PROCEEDS - ---------------- ----------- --------- ------------------ -------- Points International Ltd. Options- cancelled 2/16/2008 6,670 $ 0.22 $ -- Points International Ltd. Options- cancelled 2/27/2008 3,340 $ 0.28 $ -- Points International Ltd. Options-- exercised 2/21/2007 1,000 0.25 250 Points International Ltd. Options-- exercised 2/21/2007 30,000 0.25 7,500 Points International Ltd. Options-- exercised 11/14/2007 3,330 0.25 833 Points International Ltd. Options-- exercised 11/14/2007 3,330 0.25 833 Points International Ltd. Options-- exercised 2/16/2008 13,334 0.22 2,934 Points International Ltd. Options-- exercised 4/17/2007 3,333 0.38 1,267 Points International Ltd. Options-- exercised 2/16/2008 13,330 $ 0.22 2,933 Points International Ltd. Options-- exercised 2/27/2008 6,660 $ 0.28 1,865 Options in subsidiary with liquidity put(1) 2/17/2005 187,793 Fair Market Value 4,125 Options in subsidiary with liquidity put(1) 3/31/2005 3,749,151 Fair Market Value 55,772 --------- -------- TOTAL 4,021,271 $78,061 ========= ======== Note: (1) Points.com options have been conditionally exercised and the common shares conditionally put to the Corporation for 3,936,944 Common Shares. If the shareholders do not vote to extend the options, the conditionally exercised options will be deemed to have been exercised on the original notice date prior to expiry. Accounts Receivables The Corporation expects accounts receivables to grow proportionately with growth in revenues; however there is some variability in this trend. Management deems the risk of bad debts to be minimal based on the structure and nature of the Corporation's business and the corresponding cash flows. ABILITY TO FUND FUTURE GROWTH In the quarter ending March 31, 2005, the Corporation had cash flows provided by operating activities of 3,393,251 after changes in non-cash balances related to operations. Management is confident that the Private Placement and Debenture Transactions afford the Corporation the time to build the business and the revenues, through to profitability. However, the Corporation is currently not generating an operating profit (revenues minus general and administration expenses) and has never had a profitable quarter in its operating history. PROPERTY, PLANT AND EQUIPMENT The Corporation reported an increase in property, plant and equipment in the first quarter of 2005 primarily due to capitalized employment costs and the purchase of software for Points.com version 3.0. See "Capital Resources - Planned Capital Expenditures" on page 29 for additional information. Existing technology costs under capital lease are depreciated on a straight-line basis over three years. Management continues to make controlling the Corporation's technology costs a priority. Additional capitalized development costs associated with the Points.com version 3.0 technology increase property, plant and equipment and the corresponding amortization in 2005 and beyond. Page 22 of 33

FOR THE THREE MONTHS ENDED ----------------------------------- MARCH 31 DEC. 31 MARCH 31 AS AT 2005 2004 2004 - ----- ---------- ----------- -------- Furniture and equipment $ 290,134 $ 294,615 $119,489 Computer equipment 307,543 308,003 213,686 Software 557,799 70,612 116,827 Technology costs -- 10,164 21,815 Points.com version 3.0 direct development costs 1,480,427 860,286 -- Leasehold improvements 482,460 512,602 197,215 ---------- ----------- -------- TOTAL PLANT, PROPERTY AND EQUIPMENT $3,118,364 $ 2,056,282 $669,032 ========== =========== ======== GOODWILL The MilePoint Acquisition resulted in $3,740,000 allocated to amortizing intangible assets and $3,910,000 ($3,710,000 from goodwill and $200,000 for other costs) to goodwill. In accordance with CICA Handbook Section 3062, goodwill will not be expensed unless it is deemed to have become impaired. In accordance with GAAP, management selected March 31, 2005 as the anniversary date of the transaction and tested the acquisition goodwill for impairment at that time. The acquisition goodwill was deemed to not be impaired. In the quarter, $306,138 of charges relating to incremental transition services and additional direct costs related to the MilePoint Acquisition were incurred and charged to goodwill. Management does not expect to incur any additional material expenses related to the MilePoint Acquisition. CURRENT LIABILITIES Current liabilities at March 31, 2005 were $20,269,308, compared with $19,670,674 at March 31, 2004 and $24,775,898 at December 31, 2004. The decrease compared to the fourth quarter of 2004 was primarily related to the reclassification of the Debenture from short-term liabilities to long-term liabilities subsequent to the completion of Debenture Transaction. The reclassification of the Debenture is in accordance with Canadian GAAP. The decrease in current liabilities compared to the fourth quarter was partially offset by an increase in deposits. Through arrangements with partner loyalty programs such as those for Buy and Corporate solutions, Points processes transactions involving the online sale of loyalty currencies and collects the funds on behalf of the loyalty program partner. Gross proceeds received on the sale of loyalty program points, net of the commissions earned, are included in deposits until remitted. The level of deposits is influenced by partner activity and trends in the overall loyalty industry. As activity increases, the Corporation's deposits increase. The Corporation expects deposits to increase as it experiences growth with existing partners, establishes new partner relationships and integrates the assets from the MilePoint Acquisition. The customers that represented greater than ten percent of consolidated revenues in the first quarter of 2004 represented 63% of the Corporation's deposits (first quarter 2004 - 80% and fourth quarter 2004 - 59%). Page 23 of 33

FOR THE THREE MONTHS ENDED --------------------------------------- MARCH 31 DEC. 31 MARCH 31 CURRENT LIABILITIES AS AT 2005 2004 2004 - ------------------------- ----------- ----------- ----------- Accounts payable and accrued liabilities $ 1,694,133 $ 1,894,599 $ 961,808 Deposits 17,776,537 13,153,623 15,949,483 Current portion of obligation under capital lease -- -- Current portion of loan payable 33,515 29,860 -- Current portion of acquisition loan payable 765,123 777,443 2,759,384 Debenture -- 8,920,373 -- ----------- ----------- ----------- TOTAL CURRENT LIABILITIES $20,269,308 $24,775,898 $19,670,676 =========== =========== =========== In each period, the accounts payable and accrued liabilities account includes an accrual for projected employee bonuses to be paid in March of the following year, and other accrued charges. The Corporation has sufficient foreign currency reserves to meet its foreign currency obligations and, as such, does not utilize any hedging or other strategies involving interest rate or currency derivatives. WORKING CAPITAL Working capital (defined as current assets minus current liabilities) has improved relative to December 31, 2004 by $10,114,692. The significant changes are the reclassification of the Debenture to a long-term liability (positive $8,920,373 impact) (see page 25, commitments related to the terms of certain financing arrangements - debenture and series one preferred share), the proceeds received for the issuance of the Series Four Preferred Share (positive $3,454,611 impact) and offset by the cash spent in funding the operating loss for the quarter (negative $1,320,879 impact). Gross proceeds of approximately $12.3 million (approximately $11 million net proceeds) from the sale of Common Shares (Private Placement Transaction) further improved the Corporation's working capital subsequent to quarter end. See Notes 7 and 9 of the Corporation's first quarter 2005 interim financial statements for the proforma impact of the transaction. See page 20 through 23 for additional information regarding the Corporation's current assets and current liabilities. As the Corporation increases the rate of expenditure to successfully launch Points.com version 3.0, it is highly likely that working capital will decline throughout 2005. Management expects that, through growth of its products, working capital will improve in 2006. See page 8 of the Corporation's Annual Information Form, "Risk Factors" for additional information. Page 24 of 33

LONG-TERM LIABILITIES AND COMMITMENTS PAYMENTS DUE BY PERIOD (AGGREGATE AMOUNT FOR MULTI-PERIODS) -------------------------------------------------- FUTURE OBLIGATIONS (000,000'S) TOTAL(1) 2009+ 2008 2007 2006 2005 - ------------------------------ -------- ------ ----- ----- ------ ----- Long-Term Debt(2) $ 9.88 $ -- $ -- $ -- $ 9.11 $0.78 (non-cash until repayment) Series Two Preferred Share 21.08 16.12 0.87 0.87 0.87 0.87 (non-cash until repayment) Series Four Preferred Share (3) (non-cash until repayment) 5.39 4.48 0.24 0.24 0.24 0.18 Loan Payable 0.10 -- 0.01 0.03 0.03 0.03 Operating Leases(4) 2.47 0.01 0.10 0.50 0.85 1.00 Partner Purchase Commitments(5) 3.19 0.08 0.14 1.12 0.90 0.96 MilePoint Acquisition(6) 1.48 -- -- -- 0.40 1.08 ------ ------ ----- ----- ------ ----- Total Contractual Obligations $43.59 $20.69 $1.36 $2.76 $12.40 $4.90 ====== ====== ===== ===== ====== ===== Notes: (1) Represents the aggregate amount for the full duration of the contractual obligations (including years post 2009 and prior to 2005). (2) The Debenture is due on March 15, 2008. (3) The Series Four Preferred Share was issued on April 4, 2005. (4) Includes technology services commitments and hardware and software operating leases. (5) Includes mileage purchase and co-marketing commitments, see "Partner Purchase Commitments" below. (6) Cash commitments related to the MilePoint Acquisition include the payments relating to the acquisition. Elements of the foregoing table are explained in more detail in the following sections. Commitments Related to the Terms of Certain Financing Arrangements Debenture and Series One Preferred Share The Corporation has outstanding $6 million principal amount of Debentures. The original instrument was issued to CIBC on March 15, 2001 and was subsequently amended and amended and restated prior to the sale thereof by CIBC on April 4, 2005 to the purchasers in the Private Placement Transaction. These purchasers also acquired from CIBC the Series One Preferred Share. On March 29, 2005 the Corporation and the purchasers in the Private Placement Transaction had entered into a binding agreement to purchase the Debenture (in its amended and restated form) from CIBC. As a result, the Debenture was reclassified to long-term liabilities in the Corporation's unaudited consolidated balance sheet as at March 31, 2005. In connection with this transaction, the Debenture was amended to, among other things, (i) reduce the interest rate from 11% to 8%, (ii) eliminate all negative covenants, (iii) eliminate Page 25 of 33

certain positive covenants, (iv) remove certain events of default and (v) release all security over the assets of Points and its subsidiaries. Under the terms of the Debenture, (i) the Debenture is repayable (without accrued interest, the repayment of which is waived) by Points within 30 days of a Change of Control of Points resulting from the exercise of the Warrants and (ii) the principal amount of the Debenture will automatically convert into Common Shares immediately preceding certain liquidity events and, unless previously repaid, will automatically convert in 18,908,070 common shares in April 2006. Except in connection with the exercise of the Warrants, Points is not entitled to pre-pay the Debenture. The holder of the Series One Preferred Share is entitled to a dividend (the "Dividend") in the event that, prior to an automatic conversion of the Debenture, (i) there is a merger or consolidation of Points (or a subsidiary of Points which owns all or substantially all of the assets of Points) with another corporation where, following such event, the shareholders of Points will not hold at least a majority of the voting power of the surviving/acquiring corporation, (ii) any person (other than CIBC Capital Partners) or persons acting jointly or in concert acquire 50% voting control or 50% of the equity of Points (a "Change of Control"), or (iii) there is a sale of all or substantially all of the assets of Points. The Dividend is approximately equal to $4,000,000 plus an amount calculated on the basis of a notional dissolution of the Corporation where the holder of the Series One Preferred Share is entitled to share pro rata (on the basis that the Series One Preferred Share represents that number of Common Shares into which the Debenture is then convertible) with the holders of all other participating shares in distributions from the assets of Points and assuming, for this purpose, that the value of the assets of Points available for distribution on this notional dissolution is the value attributable to the equity of Points implied by the transaction giving rise to the dividend event, as adjusted for the value of non Common Share equity not valued in the transaction giving rise to the Dividend. In no event may the Dividend exceed $24,000,000. Where an event occurs giving rise to the Dividend, the holder of the Debenture is entitled to accelerate all amounts owing under the Debenture and the Corporation is entitled to repay the Debenture. In the event of the exercise of the Warrants resulting in a Change of Control under the Series One Preferred Share, the application of the terms of the Series One Preferred Share in that situation results in the Dividend equalling the lesser of (i) $24,000,000 and (ii) $4,000,000 plus the number of Common Shares into which the Debenture is then convertible, multiplied by the exercise price paid per Common Share on the exercise of the Warrants. Exercise of IAC Warrants ("Warrants") If the Warrants are exercised resulting in a Change of Control prior to the maturity of the Debenture, as at the date hereof and based on the Corporation's current share capitalization, the Corporation would receive approximately $95.7 million. On the exercise of the Warrants resulting in a Change of Control, the Corporation would be required to repay the $6 million principal amount of the Debenture and pay the Dividend, which would then be payable on the Series One Preferred Share (up to a maximum of $24 million). In this situation, management expects that the Corporation would have sufficient cash to make such payments. Page 26 of 33

Redemption Rights of Series Two and Series Four Preferred Share Holder (Collectively the "Preferred Shares") Unless the Preferred Shares have been converted at the option of the holder, Points will be required to redeem the Preferred Shares upon the earlier of (i) March 31, 2013, and (ii) a person (other than the holder of the Preferred Shares) acquiring shares of Points sufficient to elect a majority of the board of directors of Points (a "Preferred Share Change of Control"). In the event of redemption of the Preferred Shares on a Preferred Share Change of Control, the redemption amount payable will be equal to the greater of (i) 125% of the amount equal to (A) the subscription price of the Preferred Shares plus (B) a return on that subscription price equal to 7% per annum, calculated from the date of issue of the Preferred Shares to the date on which the Preferred Shares are redeemed and (ii) the greater of (A) the value of the Common Shares into which the Preferred Shares then could be converted on the day immediately prior to public announcement of the Preferred Share Change of Control and (B) the product of the Common Shares into which the Preferred Shares then could be converted and the fair market value of the consideration paid per Common Share in the transaction resulting in the Preferred Share Change of Control. Other Change of Control Event Upon the occurrence of an event that is a Change of Control and a Preferred Share Change of Control, and is unrelated to the exercise of the Warrants, Points may not have sufficient cash to pay the Dividend, the amounts due under the Debenture and/or the redemption amount on the Preferred Shares. As such, it is unlikely that management would consider a transaction that triggered the above payments unless the transaction provided for payment of the outstanding obligations. Partner Purchase Commitments FOR THE THREE MONTHS ENDED ------------------------------------ MARCH 31 DEC. 31 MARCH 31 ASSET RELATED TO MILEAGE PURCHASES AS AT 2005 2004 2004 - ---------------------------------------- ---------- ---------- ---------- Prepaid Mileage $ 774,027 $ 639,644 $ 655,294 Sundry assets and other prepaid expenses 578,446 589,447 470,372 ---------- ---------- ---------- TOTAL $1,352,473 $1,229,091 $1,125,666 ========== ========== ========== As part of the contractual requirements of certain commercial agreements, Points has committed to purchase miles and points from partners at predetermined rates. When purchased, the points are recorded as an asset (i.e., prepaid expense) until expensed as marketing expenditures in the period of use. A large portion of the current prepaids and sundry assets of the Corporation include prepaid mileage commitments purchased from the Corporation's partners. Management expects that, in the near term, the prepaid miles may remain approximately the same as an overall percentage of prepaids and sundry assets. Page 27 of 33

Commitments Related to MilePoint Acquisition On March 31, 2004, Points completed the acquisition of substantially all of the assets of MilePoint, Inc. ("MilePoint") (the "MilePoint Acquisition"). The purchase price for the assets of MilePoint was $7.5 million and was satisfied through a combination of $3.5 million in cash ("Acquisition Payable") and four million Common Shares (worth approximately $4 million at the time of the transaction). An initial $1.9 million was paid in cash on closing, with the balance payable semi-annually over two years. The four million shares were issued into escrow on closing and will be released to MilePoint in four unequal tranches over two years. To date, professional fees of approximately $420,000 and payments for transition services of $671,653 have been incurred in the transaction and have been capitalized and allocated to goodwill. A portion of the Acquisition Payable (short-term and long-term) is interest-free and discounted at the appropriate current market rate. The total discount of $50,000 will be charged to interest expense over the life of the Acquisition Payable. Points' business objective in acquiring the assets of MilePoint was to increase its volume of business at minimal additional costs outside of the purchase price and transition costs. Management expects that the acquisition will continue to increase revenues and, including all amortizations, continue to be accretive to net income through 2005. It is expected that the revenue/cash flow from the acquired assets will be sufficient to pay the cash portion of the purchase price over the 24-month period following the acquisition. Page 28 of 33

The impact of the acquisition to Points' balance sheet in 2004 was an increase to intangible assets by $3,740,000 and goodwill by $3,910,000. The amortization of the assets is based on the estimated life of the acquired assets (i.e., the partner contracts). The amortization and the balance of the purchased intangible assets are approximately as follows: AMOUNT IN) MAR. 31, 2005 - ---------- ------------- Accumulated Amortization $ 927,067 Intangible Asset - Closing Balance 2,828,056 Goodwill 4,800,722 In addition to the existing revenue streams acquired from MilePoint, offering Points Solutions to the customers acquired from MilePoint represents a potentially valuable stream of revenue. The payment of the purchase price under the terms of the MilePoint Acquisition is as follows: Months from Closing --------------------------------------------- Payout (000's) 0 4 6 12 18 24 SHARES CASH - -------------- ------ ------ ---- ---- ------ ---- ------ ------ Cash $1,900 $ -- $400 $400 $ 400 $400 $3,500 Shares -- 1,300 -- 700 1,500 500 4,000 Share Value(1) -- 1,300 -- 700 1,500 500 4,000 ----- ------ TOTAL 4,000 $7,500 ===== ====== Note: (1) Based on the simple 20-day weighted average Common Share price of $1.00 per share at signing. Management continues to expect that the cash cost of the MilePoint Acquisition will largely be recaptured through the new revenue provided by the purchased assets over the 24-month period following March 31, 2004. Commitments Related to Lease Financing Arrangements The Corporation has several operating leases for hardware and its premises outstanding. In the second quarter of 2004, the Corporation signed a 45-month sublease agreement in a larger facility. In exchange for a 27-month lease extension, the landlord advanced the Corporation $107,000 for leasehold improvements (see "Loan Payable" in table below). The Loan Payable is to be repaid over the term of the original sub-lease. Each payment is approximately $2,600 and there are 35 monthly payment periods remaining. The Corporation's lease at its former premises expired in February 2005. In the first quarter of 2005, the Corporation paid approximately $25,000 for its former office facilities (approximately 8,050 square feet) and $109,000 for its new office facilities (approximately 18,000 square feet). Property lease costs are outlined in the table below. Page 29 of 33

Beginning June 1, 2004, the Corporation was able to complete a sublet arrangement for a portion of the former premises. The sublet covered approximately 25% of the cost of the premises lease that expired in February 2005. The projected figures do not include leasehold improvement amounts for Points' new facilities. Leasehold improvements for the new facilities are included in capital expenditures (see "Capital Resources-Planned Capital Expenditures" below). The operating leases primarily relate to specific office technology and technology service commitments. ANNUAL AMOUNTS IN ($000'S) 2009 2008 2007 2006 2005 - -------------------------- ---- ---- ---- ---- ------ OPERATING LEASES $-- $88 $351 $355 $ 430 Property lease Technology services 11 11 153 492 575 commitment OPERATING LEASES TOTAL $11 $99 $504 $847 $1,005 LOAN PAYABLE $-- $ 5 $ 30 $ 30 $ 30 CAPITAL RESOURCES PLANNED CAPITAL EXPENDITURES The Corporation expects to incur some nominal expenditures related to the leasehold improvements to continue to maintain the premises. FOR THE THREE MONTHS ENDED -------------------------------- MARCH 31 DEC. 31 MARCH 31 CAPITAL EXPENDITURES AS AT 2005 2004 2005 - -------------------------- ---------- -------- -------- Leasehold Improvements -- $ 7,339 $158,248 Points.com version 3.0 Technology 612,098 387,225 -- Computer Hardware, Software and Other 552,450 44,309 53,416 ---------- -------- -------- TOTAL $1,164,548 $438,872 $211,664 ========== ======== ======== In 2005, the Corporation expects to incur capital expenditures related to computer software, hardware and other to approximately $1,000,000, with the majority of the expenses relating to software in support of Points.com version 3.0 and approximately $250,000 relating to protecting the Corporation's intellectual/intangible property (filing of patents and trademarks, etc.). Management believes that the hardware and software capital expenditures are necessary to keep the development of the Corporation's primary technology assets in line with industry standards. The Corporation has incurred and expects to continue to incur significant capital expenditures related to the development of Points.com version 3.0. In accordance with CICA Handbook, Sections 3061 and 3062, and GAAP, Web site development costs incurred in the Web site application and infrastructure development is and will be capitalized and subsequently amortized in accordance with the Corporation's accounting policies. Direct net new technology developed Page 30 of 33

subsequent to the launch of Points.com version 3.0 will be capitalized in accordance with the Corporation's accounting policies. Costs to maintain Points.com version 3.0 will be expensed in the period the costs are incurred. Web site development costs incurred to date and capitalized to the Web site under property, plant and equipment consist of employment related costs of $1,303,908 and other direct costs of $168,477. The capitalized costs in 2005 will likely be greater than the costs incurred in 2004. The expected increase in the capitalized costs will be impacted by whether management decides to contract any of the development to third-parties and by annualizing the costs of employees hired during the third and fourth quarter. Estimates are provided for the capitalized expenses for the fiscal year 2005 in the table below. WEB SITE DEVELOPMENT COSTS Q1 2005 Q2 2005 Q3 2005 Q4 2005 - -------------------------- -------- -------- -------- -------- Employment related costs $575,786 $368,790 $278,323 $131,116 Other direct costs 36,312 15,000 15,000 15,000 -------- -------- -------- -------- TOTAL $612,098 $383,790 $293,323 $146,116 ======== ======== ======== ======== Management will continue to fund 2005 capital expenditures from its working capital and/or cash flow from operations. UNPLANNED SECURITIES ISSUANCES Pursuant to the terms of the Investor's Rights Agreement dated April 11, 2003 between IAC, Points and an affiliate of IAC and the terms of the Series Two Preferred Share, IAC has significant control over the Corporation's ability to raise capital whether by way of an equity issuance or the incurrence of debt. However, in the event the Corporation requires additional capital, it does not expect that consent would be unreasonably withheld. OUTSTANDING SHARE DATA As at the date hereof, the Corporation has 92,386,073 Common Shares outstanding, one Series One Preferred Share, one Series Two Preferred Share and one Series Four Preferred Share. The Series One Preferred Share is convertible into one Common Share in certain circumstances. Subject to anti-dilution adjustment, based on Points' current capitalization, the Series Two Preferred Share is convertible into 19,999,105 Common Shares and the one Series Four Preferred Share is convertible into 4,504,069 Common Shares. The Corporation has outstanding options exercisable to acquire up to 4,236,751 Common Shares. The options have exercise prices ranging from $0.22 to $1.37 with a weighted average exercise price of $0.80. The expiration dates of the options range from August 22, 2005 to March 7, 2010. The Corporation's subsidiary, Points.com Inc., has outstanding options exercisable to acquire up to 2,114,899 common shares of Points.com. The holders of these options have been granted the Page 31 of 33

right to put the shares acquired on the exercise thereof to the Corporation in return for Common Shares with a fair market value equal to the fair market value so put. The Corporation has used a ratio of 2.5039 Common Shares to one Points.com share for this purpose and has authorized the issuance of up to a maximum of 5,295,492 Common Shares in this regard. The Points.com options have exercise prices ranging from $0.005 to $0.055 with a weighted average exercise price of $0.04. The Corporation has asked the shareholders to consider at the annual and special meeting a resolution to extend the term of the Points.com options by two years. 1,572,325 Points.com options have been conditionally exercised and conditionally put the common shares to the Corporation for 3,936,944 Common Shares. If the shareholders do not vote to extend the options, the conditionally exercised options will be deemed to have been exercised on the original notice date prior to expiry. The expiration dates of the options not conditionally exercised ranges from July 9, 2005 to August 20, 2005. The Corporation has outstanding warrants exercisable to acquire up to 103,775,700 Common Shares. The warrants have exercise prices ranging from $0.25 to $0.94 with a weighted average exercise price of $0.94. The expiration dates of the options range from July 18, 2005 to April 4, 2008. The Corporation has outstanding an 8% $6,000,000 convertible Debenture which is convertible into 18,908,070 Common Shares. The Debenture is not convertible into Common Shares at the option of the holder as long as the Warrants are outstanding. The Debenture matures on March 15, 2008. However, unless previously repaid, the Debenture, as amended, will automatically convert in 18,908,070 common shares in April 2006. Selected Financial Results and Highlights INCOME STATEMENT FOR THE YEAR ENDED MARCH 31, 2005 DEC. 31, 2004 MARCH 31, 2004 - ----------------------------------- -------------- ------------- -------------- Total Revenue $ 2,577,909 $ 2,162,948 $ 1,617,565 General and administrative expenses 4,005,639 3,319,861 2,711,438 Loss before interest, amortization and other deductions (1,427,730) (1,156,912) (1,093,874) Net income (loss) (2,568,215) (2,496,011) (1,962,076) Net income (loss) per share (1)(2) - basic ($0.04) ($0.04) ($0.03) - fully diluted n/a n/a n/a Notes: (1) The fully diluted loss per share has not been computed, as the effect would be anti-dilutive. (2) In 2004, the Corporation's loss per share was increased by approximately $0.01 as a result of the requirement to expense stock options granted in 2004 (Section 3870, Stock-Based Compensation and Other Stock-Based Payments of the Canadian Institute of Chartered Accountants Handbook). See Page 11 of the Corporation's Audited Consolidated Financial Statements Note 3, for additional information on the accounting policy change relating to stock options. Page 32 of 33

BALANCE SHEET AS AT MARCH 31, 2005 DEC. 31, 2004 MARCH 31, 2004 - ------------------- -------------- ------------- -------------- Cash and cash equivalents $ 19,654,600 $ 13,754,818 $ 24,243,231 Total assets 36,574,828 30,179,854 38,997,588 Total liabilities 47,039,180 39,115,680 41,920,672 CASH DIVIDENDS DECLARED PER SHARE -- -- -- SHAREHOLDERS EQUITY - warrants 2,610,992 2,610,992 2,766,610 - capital stock and contributed surplus 24,227,515 23,187,826 22,198,743 - deficit (37,302,859) (34,734,644) (27,888,437) TOTAL $(10,464,352) $ (8,935,827) $ (2,923,084) POINTS INTERNATIONAL LTD. SUMMARY OF QUARTERLY RESULTS (UNAUDITED) QUARTER ENDED REVENUES NET LOSS LOSS PER SHARE(1) - ------------- ---------- ----------- ----------------- March 31, 2005 $2,577,909 ($2,568,215) ($0.04) December 31, 2004 $2,162,948 ($2,496,011) ($0.04) September 30, 2004 $1,978,942 ($2,103,413) ($0.03) June 30, 2004 $2,032,136 ($2,246,784) ($0.03) March 31, 2004 $1,617,565 ($1,962,076) ($0.03) December 31, 2003 $1,449,378 ($2,605,974) ($0.04) September 30, 2003 $1,647,566 ($1,628,391) ($0.03) June 30, 2003 $1,457,568 ($1,283,337) ($0.02) Note: (1) The fully diluted loss per share has not been computed, as the effect would be anti-dilutive. Page 33 of 33

FORM 52-109FT2 - CERTIFICATION OF INTERIM FILINGS DURING TRANSITION PERIOD I, T. Robert MacLean, Chief Executive Officer of Points International Ltd., certify that: 1. I have reviewed the interim filings (as this term is defined in Multilateral Instrument 52-109 Certification of Disclosure in Issuers' Annual and Interim Filings) of Points International Ltd., (the issuer) for the interim period ending March 31, 2005; 2. Based on my knowledge, the interim filings do not contain any untrue statement of a material fact or omit to state a material fact required to be stated or that is necessary to make a statement not misleading in light of the circumstances under which it was made, with respect to the period covered by the interim filings; and 3. Based on my knowledge, the interim financial statements together with the other financial information included in the interim filings fairly present in all material respects the financial condition, results of operations and cash flows of the issuer, as of the date and for the periods presented in the interim filings. DATED this 11th day of May, 2005. [original signature] ---------------------------------------- T. Robert MacLean Chief Executive Officer

FORM 52-109FT2 - CERTIFICATION OF INTERIM FILINGS DURING TRANSITION PERIOD I, Stephen Yuzpe, Chief Financial Officer of Points International Ltd., certify that: 1. I have reviewed the interim filings (as this term is defined in Multilateral Instrument 52-109 Certification of Disclosure in Issuers' Annual and Interim Filings) of Points International Ltd., (the issuer) for the interim period ending March 31, 2005; 2. Based on my knowledge, the interim filings do not contain any untrue statement of a material fact or omit to state a material fact required to be stated or that is necessary to make a statement not misleading in light of the circumstances under which it was made, with respect to the period covered by the interim filings; and 3. Based on my knowledge, the interim financial statements together with the other financial information included in the interim filings fairly present in all material respects the financial condition, results of operations and cash flows of the issuer, as of the date and for the periods presented in the interim filings. DATED this 11th day of May, 2005. [original signature] ---------------------------------------- Stephen Yuzpe Chief Financial Officer

Exhibit 99.7 POINTS INTERNATIONAL LTD. UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS SEPTEMBER 30, 2004 Page 1 of 9

POINTS INTERNATIONAL LTD. UNAUDITED CONSOLIDATED BALANCE SHEETS September 30, December 31, AS AT 2004 2003 - ----- ------------- ------------ ASSETS CURRENT Cash and cash equivalents 15,251,307 20,274,836 Accounts receivable 1,196,865 1,004,370 Prepaid and sundry assets 1,228,039 825,221 ----------- ----------- 17,676,211 22,104,427 LONG-TERM INVESTMENTS 161,629 161,629 PROPERTY, PLANT AND EQUIPMENT 1,700,903 513,723 INTANGIBLE ASSETS 8,705,708 1,320,692 DEFERRED COSTS 2,375,793 2,790,816 FUTURE INCOME TAXES RECOVERABLE 590,000 590,000 ----------- ----------- 13,534,032 5,376,859 $31,210,243 $27,481,286 =========== =========== Page 2 of 9

POINTS INTERNATIONAL LTD. UNAUDITED CONSOLIDATED BALANCE SHEETS September 30, December 31, AS AT 2004 2003 - ----- ------------- ------------ LIABILITIES CURRENT Accounts payable and accrued liabilities 1,199,546 1,187,598 Deposits 12,974,925 10,455,646 Current portion of loan payable 29,860 -- Current portion of acquisition loan payable 1,174,921 -- ------------ ------------ 15,379,252 11,643,244 LOAN PAYABLE 72,163 -- ACQUISITION LOAN PAYABLE 380,118 -- CONVERTIBLE DEBENTURE 8,694,714 8,036,372 CONVERTIBLE PREFERRED SHARES 13,675,478 13,024,478 ------------ ------------ 38,201,725 32,704,094 ------------ ------------ SHAREHOLDERS' EQUITY CAPITAL STOCK 22,057,996 17,728,461 WARRANTS 2,743,957 2,785,737 RETAINED EARNINGS (31,793,434) (25,737,007) ------------ ------------ (6,991,482) (5,222,809) ------------ ------------ $ 31,210,243 $ 27,481,286 ============ ============ Page 3 of 9

POINTS INTERNATIONAL LTD. UNAUDITED CONSOLIDATED STATEMENTS OF OPERATIONS AND DEFICIT 9 Month Period 3 Month Period ----------------------------- ----------------------------- FOR THE PERIOD ENDED SEPTEMBER 30, 2004 Jan-Sep 30/04 Jan-Sep 30/03 Jul-Sep 30/04 Jul-Sep 30/03 - --------------------------------------- ------------- ------------- ------------- ------------- REVENUES Points operations $ 5,426,681 $ 4,166,147 $ 1,945,599 $ 1,539,780 Interest income 201,961 243,179 33,343 107,786 ------------ ------------ ------------ ------------ 5,628,642 4,409,326 1,978,942 1,647,566 GENERAL AND ADMINISTRATION 8,654,946 5,378,154 2,905,198 2,160,979 ------------ ------------ ------------ ------------ LOSS- Before interest, amortization and other items (3,026,304) (968,828) (926,256) (513,413) ------------ ------------ ------------ ------------ Interest on Convertible Debenture 658,342 495,000 225,659 165,000 Interest on Series Two Preferred Shares 651,000 407,478 217,000 217,000 Interest and Bank Charges 72,448 9,537 1,745 2,625 Amortization of Capital & Intangible Assets and Deferred Costs 1,648,334 2,049,372 631,105 730,353 ------------ ------------ ------------ ------------ 3,030,123 2,961,386 1,075,509 1,114,978 ------------ ------------ ------------ ------------ LOSS (6,056,427) (3,930,215) (2,001,764) (1,628,391) ------------ ------------ ------------ ------------ DEFICIT - Beginning of period (25,737,007) (19,200,816) (29,791,670) (21,502,641) DEFICIT - End of period (31,793,434) (23,131,031) (31,793,434) (23,131,032) ============ ============ ============ ============ LOSS PER SHARE (Note 2) ($0.09) ($0.07) ($0.03) ($0.03) ============ ============ ============ ============ Page 4 of 9

POINTS INTERNATIONAL LTD. UNAUDITED CONSOLIDATED STATEMENTS OF CASH FLOWS 9 Month Period 3 Month Period ----------------------------- ----------------------------- FOR THE PERIOD ENDED SEPTEMBER 30, 2004 Jan-Sep 30/04 Jan-Sep 30/03 Jul-Sep 30/04 Jul-Sep 30/03 - --------------------------------------- ------------- ------------- ------------- ------------- CASH FLOWS FROM OPERATING ACTIVITIES Net Loss ($6,056,427) ($3,930,215) ($2,001,764) ($1,628,391) Items not affecting cash Amortization of property, plant and equipment 229,125 1,162,453 80,064 403,842 Amortization of deferred costs 467,934 319,766 140,461 137,460 Amortization of intangible assets 951,275 567,150 410,579 189,050 Cancellation of warrants issued for services (1,167) -- -- Interest on Series Two Preferred Shares 651,000 407,478 217,000 217,000 Interest accrued on convertible debenture 658,342 495,000 225,659 165,000 ------------ ------------ ------------ ------------ (3,099,918) (978,368) (928,001) (516,039) Changes in non-cash balances related to operations (Note 6 (a)) 1,812,985 778,853 (1,335,031) (1,987,151) ------------ ------------ ------------ ------------ CASH FLOWS USED IN OPERATING ACTIVITIES (1,286,934) (199,515) (2,263,031) (2,503,190) ------------ ------------ ------------ ------------ CASH FLOWS FROM INVESTING ACTIVITIES Purchase of property, plant and equipment, net of proceeds (1,416,305) (234,774) (664,810) (113,063) Purchase of intangible assets (96,646) (118,155) (76,362) (26,193) Payments for the acquisition of MilePoint, Inc. (1,900,000) -- Costs related to the acquisition of MilePoint, Inc. (Note 7) (784,608) -- (332,554) -- ------------ ------------ ------------ ------------ CASH FLOWS USED IN INVESTING ACTIVITIES (4,197,558) (352,929) (1,073,726) (139,256) ------------ ------------ ------------ ------------ CASH FLOWS FROM FINANCING ACTIVITIES Issuance of Warrants -- 2,700,000 -- -- Issuance of Series Two Preferred Share -- 12,400,000 -- -- Loan payable 102,023 -- 102,023 -- Deferred financing costs 70,018 (717,048) -- -- Repayment of obligations under capital leases -- (252,230) -- (16,514) Issuance of capital stock, net of share issue costs 288,921 913,309 58,867 95,367 ------------ ------------ ------------ ------------ CASH FLOWS PROVIDED BY FINANCING ACTIVITIES 460,963 15,044,031 160,890 78,853 ------------ ------------ ------------ ------------ INCREASE (DECREASE) IN CASH (5,023,529) 14,491,587 (3,175,867) (2,563,592) CASH AND CASH EQUIVALENTS - Beginning of period 20,274,836 7,341,700 18,427,174 24,396,879 ------------ ------------ ------------ ------------ CASH AND CASH EQUIVALENTS - End of period $ 15,251,307 $ 21,833,287 $ 15,251,307 $ 21,833,287 ============ ============ ============ ============ Page 5 of 9

POINTS INTERNATIONAL LTD. NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS SEPTEMBER 30, 2004 1. Accounting policies The company's interim financial statements have been prepared using accounting policies consistent with those used for the preparation of its annual financial statements. These interim financial statements should be read in conjunction with the company's 2003 audited consolidated financial statements. These financial statements contain all adjustments which management believes necessary for fair presentation of the financial position, results of operations and cash flows. a) Basis of presentation The consolidated financial statements include the accounts of the Company and from their respective dates of acquisition of control or formation of its wholly owned subsidiaries. All inter-company transactions and amounts have been eliminated on consolidation. b) Goodwill Goodwill represents the excess of the purchase price of acquired companies over the estimated fair value of the tangible and intangible net assets acquired. Goodwill is not amortized. The company currently compares the carrying amount of the goodwill to the fair value, at least annually, and recognizes in net income any impairment in value. c) Intangible assets Intangible assets represent the fair value of contracts acquired by the company on MilePoint, Inc, acquisition. The carrying value of these contracts will be amortized on a straight-line basis over the life of the contracts. 2. Loss per share a) Loss per share Loss per share is calculated on the basis of the weighted average number of common shares outstanding for the nine months ended September 30, 2004 that amounted to 65,810,352 shares (September 30, 2003 - 56,773,936). b) Fully-diluted loss per share The fully-diluted loss per share has not been computed, as the effect would be anti-dilutive. Page 6 of 9

3. Segmented information Reportable segments: The company has only one operating segment whose operating results are regularly reviewed by the company's chief operating decision maker and for which complete and discrete financial information is available. The company's business is carried on in the industry of loyalty program asset management. The attached consolidated balance sheets as at September 30, 2004 and December 31, 2003 present the financial position of this segment. The continuing operations reflected on the attached consolidated statements of operations are those of this operating segment. Enterprise-wide disclosures: $5,204,733 (September 30, 2003 - $4,110,915) of the company's revenues were generated in the U.S. for the nine month period, with the remaining revenues generated in Canada, Europe and Asia. A significant majority of the company's assets are located in Canada. 4. Economic dependence For the nine-month period ended September 30, 2004, approximately 46% of the company's revenues are from its two largest customers (65% at September 30, 2003). In addition, as at September 30, 2004, 64% of the company's deposits are due to these customers (59% as at September 30, 2003). 5. Stock-based compensation Effective January 1, 2002 the company adopted CICA 3870 ("Stock-based Compensation and Other Stock-based Payments"). As permitted by CICA 3870 the company has applied this change prospectively for new awards granted on or after January 1, 2002. The company has chosen to recognize no compensation when stock options are granted to employees and directors under stock option plans with no cash settlement features. In periods prior to January 1, 2002 the company recognized no compensation when stock or stock options were issued to employees. Supplementary pro forma information regarding net income is required by CICA 3870 as if the company had accounted for its employee stock options granted after December 31, 2001 under the fair value method. During the quarter ended September 30, 2004, 510,000 options were issued to employees. For purposes of pro forma disclosures, the estimated fair value of the options is amortized to expense over the options' vesting periods. The company's pro forma net income under Canadian GAAP would be reduced [loss increased] by approximately $288,290 for the nine months ended September 30, 2004. Loss-per-share figures would not have changed. Page 7 of 9

6. Statement of Cash Flows a) Changes in non-cash balances related to operations are as follows: THREE MONTHS ENDED NINE MONTHS ENDED SEPT 30, SEPT 30, ------------------------- ----------------------- 2004 2003 2004 2003 ----------- ----------- ---------- ---------- Decrease (Increase) in accounts receivable $ 142,373 $ 189,234 $ (192,495) $ (502,911) Decrease (Increase) in prepaid and sundry assets $ 43,411 $ (52,506) $ (402,819) $ (189,090) Decrease (Increase) in deferred costs $ (95,509) $ (122,929) Increase (Decrease) in accounts payable and accrued liabilities $ 268,358 $ (346,789) $ 11,948 $ (128,100) Increase (Decrease) in deposits $(1,693,663) $(1,777,089) $2,519,279 $1,598,953 ----------- ----------- ---------- ---------- $(1,335,031) $(1,987,151) $1,812,985 $ 778,852 =========== =========== ========== ========== b) Supplemental information Interest and taxes Interest of $72,488 was paid during the nine month period ended September 30, 2004. Interest of $194,408 was received during the nine month period ended September 30, 2004. No income taxes have been paid. Non-cash transactions Non-cash transactions for the nine months ended September 30, 2004 are as follows: (i) 406,954 shares of Points.com Inc. were acquired in exchange for 1,018,974 shares of the Corporation. (ii) 4,000,000 shares (valued at $4,000,000) of the Corporation were issued as part consideration in the acquisition of MilePoint, Inc. (see Note 7). (iii) $30,000 of revenue earned for hosting services provided was paid in loyalty currency. The currency was valued at the purchase price of the miles. The expense will be recognized as the currency is used. (iv) $82,044 of revenue earned for membership fees provided was paid in one week accommodation certificates. The certificates are valued at their average cost. The expense will be recognized as the accommodation certificates are used. (v) The Corporation received $107,905 of loyalty currency from a partner as reimbursement of a portion of the partner's direct expenses for the services provided by the Corporation. (vi) Interest of $5,062 was accrued on the acquisition of MilePoint, Inc. (vii) Interest of $658,342 was accrued on the convertible debenture. (viii) Interest of $651,000 was accrued on the Series Two Preferred. Page 8 of 9

c) Cash and cash equivalents consist of: September 30, December 31, AS AT 2004 2003 - ----- ------------- ------------ Cash $11,360,089 $ 9,046,701 Short -Term Investments 1,236,162 9,627,468 Cash held by credit card processor 2,655,055 1,600,667 ----------- ----------- Total 15,251,307 20,274,836 =========== =========== 7. MilePoint Inc. Acquisition On March 31, 2004 Points acquired substantially all of the assets of MilePoint, Inc., a loyalty program technology provider and operator. The purchase price of $7.5 million was satisfied through a combination of $3.5 million in cash payable, without interest, over two years and four million common shares. The cost of the acquisition and the fair values assigned are as follows: Intangibles $ 225,000 Contracts with Partners 3,455,062 Goodwill 4,559,584 ---------- $8,239,646 ========== Consideration: Cost of Transaction $ 784,584 Capital Stock Issued 4,000,000 Acquisition Loan Payable 3,455,062 ---------- $8,239,646 ========== The acquired contracts with partners will be amortized over the life of the contracts. The goodwill and other intangibles will not be amortized; these will be reviewed annually and any permanent impairment will be recorded and charged to income in the year that the impairment has occurred. The loan payable, which has a face value of $3,500,000, is discounted to its fair value as it is non interest bearing and due over two years. 8. MilePoint Inc. Acquisition Payments Remaining payments under the terms of the acquisition loan payable are as follows: Acquisition Loan Payable Current Portion $1,174,921 Long-Term Portion 380,118 Accretion of Interest 44,961 ---------- Total $1,600,000 ========== Page 9 of 9

POINTS INTERNATIONAL LTD. INTERIM MANAGEMENT'S DISCUSSION AND ANALYSIS The following interim management's discussion and analysis ("MD&A") of the performance, financial condition and future prospects of Points International Ltd. (which is also referred to herein as "Points" or the "Corporation") should be read in conjunction with the Corporation's consolidated financial statements (including the notes thereon) for the quarter ended September 30, 2004 and with the Corporation's 2003 audited consolidated financial statements. Further information, including Points' Annual Information Form ("AIF") for the year ended December 31, 2003, may be accessed at www.sedar.com. All financial data herein has been prepared in accordance with Canadian generally accepted accounting principles ("GAAP") and all dollar amounts herein are in Canadian dollars unless otherwise specified. This MD&A is dated as of September 30, 2004. FORWARD-LOOKING STATEMENTS Some of the statements contained or incorporated by reference in this MD&A, including those relating to Points' strategies and other statements that are predictive in nature, that depend upon or refer to future events or conditions, or that include words such as "expects," "anticipates," "intends," "plans," "believes," "estimates" or similar expressions, are forward-looking statements within the meaning of Canadian securities laws. Forward-looking statements include, without limitation, the information concerning possible or assumed future results of operations of Points as set forth herein. These statements are not historical facts but instead represent only Points' expectations, estimates and projections regarding future events. The forward-looking statements contained or incorporated by reference in this MD&A are not guarantees of future performance and involve certain risks and uncertainties that are difficult to predict. The future results and shareholder value of Points may differ materially from those expressed in the forward-looking statements contained or incorporated by reference in this MD&A due to, among other factors, the risks and uncertainties discussed herein, the matters set forth under "Risks and Uncertainties" contained in Points' AIF filed with Canadian securities regulators and the factors detailed in Points' other filings with Canadian securities regulators, including the factors detailed in Points' annual and interim financial statements and the notes thereto. Points does not undertake any obligation to update or release any revisions to these forward-looking statements to reflect events or circumstances after the date of this MD&A or to reflect the occurrence of unanticipated events, except as required by law. Page 1 of 32

OVERVIEW OF POINTS' BUSINESS CORE BUSINESS - Points Solutions Points has developed a proprietary technology platform that allows it to offer a portfolio of solutions, referred to as the Points Solutions, to the loyalty program industry. The Points platform was designed to create value for consumers and loyalty programs alike. The Points Solutions are comprised of Points.com (referred to as the Points Exchange in past disclosures) and a suite of Private Branded Solutions available to loyalty program operators. Points.com In April 2001, Points launched its cornerstone product, the proprietary Points.com website. Points.com is an online service allowing consumers who are members of participating loyalty programs to exchange their loyalty program points and/or miles between the participating loyalty programs. Points.com also serves as a central resource to help individuals track their account balances with a number of their major loyalty programs. As at September 30, 2004, Points.com had attracted 43 loyalty program participants (as at the date hereof 3 additional partners are under contract but not yet launched), including the loyalty programs of leading airlines, hotels, online and retail businesses, and gift certificate programs. Development Initiated for Points.com Version 3.0 At the beginning of the second quarter of 2005, Points International Ltd. will begin making some important changes to the Points.com consumer Web site. Currently, Points.com is a transactional site that allows consumers to exchange miles and points between over 40 reward programs. In addition to this unique functionality, consumers may also track balances in many of their valued reward programs. While established as the world's only service of its kind, Points.com in its current form represents only a small part of the Company's opportunity to service consumers' total reward program experience. The new Points.com internally referred to as "Points.com version 3.0", represents a major enhancement in our relationship with both reward program partners as well as the consumer. Today, the consumer interacts with a site that centers on a single feature: Exchange. The new Points.com version 3.0 will broaden its offerings, and present each consumer with a personalized view of their reward program universe. Because of this personalized view of the consumer's reward program universe, we will be able to help the consumer release more value from their favourite programs, so that they can "Get More Rewards, Faster(TM)". This is accomplished by adding new mile and point management tools such as ways to purchase and earn more miles or points in their favourite programs. In addition, the system will be driven by an Amazon-style associative relevance suggestion engine that will use the consumer's unique program and point balance mix to suggest ways to use the Earn, Buy and Exchange tools to "Get More Rewards, Faster(TM)". Page 2 of 32

The result of these changes is that Points.com will become a "reward management portal", providing a more comprehensive and engaging consumer experience. Importantly, this functionality will add new revenue streams to the Points.com business model. Most significantly, the loyalty management utility of the site will allow us to focus more on subscription membership as a core aspect of the business. Additionally, management anticipates significant revenue streams from the additional functionality incorporated into the site. These changes will be phased in over the course of 2005, with monthly releases beginning in the second quarter. In April 2005, Points.com users will immediately notice a new look and feel that will reflect our more consumer-focused approach. Over the course of the spring and summer, Points.com will add Purchase, Earn, and Suggestion functionality. In the second half of 2005, management will begin driving significant consumer traffic to the new Points.com to leverage the site's ongoing evolution. In accordance with Canadian GAAP and CICA handbook sections 3061 and 3062, website development costs incurred in the website application and infrastructure development associated with Points.com Version 3.0 will be capitalized. For additional information, see "General and Administrative Expenses", page 13, and "Capital Resources - Planned Capital Expenditures", page 29. Private Branded Solutions In addition to Points.com, Points offers a portfolio of Private Branded Solutions to loyalty programs. This suite of technologies includes: POINTSpurchase and POINTSgift - facilitates the online sale and gift of miles, points and other loyalty program currencies. POINTScorporate - facilitates the sale of loyalty program currencies to corporate customers. POINTStransfer - facilitates the amalgamation or transfer of loyalty program currencies among multiple accounts. POINTSintegrate - functions as a common platform to process transactions between third-party loyalty programs, to simplify and automate a complex and resource-intensive process, with a single integration. POINTSelite - facilitates the online sale of tier status to members of loyalty programs. POINTScustom - custom applications developed for select large loyalty program partners. Page 3 of 32

SIGNIFICANT BUSINESS DEVELOPMENTS IN THE THIRD QUARTER OF 2004 1. Points International partners with British Airways (BA), enabling Executive Club Members worldwide to Buy BA Miles online Members of the British Airways Executive Club program in over 190 countries can now buy BA Miles online at www.ba.com, enabling them to reach reward redemption levels faster. 2. Hawaiian Airline's HawaiianMiles teams up with Points.com HawaiianMiles members now have the opportunity to consolidate their other loyalty currencies into HawaiianMiles or exchange their HawaiianMiles for the currencies of other loyalty programs in order to reach their reward goals faster. Members of Points.com have the added convenience of being able to earn, redeem, exchange, and manage their loyalty currencies in one place. 3. Prime Hospitality partners with Points.com Prime Hospitality, which owns and operates three proprietary brands, Prime Hotels & Resort, AmeriSuites, and Wellesley Inns & Suites(R), has joined Points.com. Now their loyalty program members will have exciting new ways to acquire Prime Rewards points. By exchanging points or miles into their Prime Rewards account, customers can top up their account and achieve their award levels faster than ever before. 4. Gold Points Reward Network partners with Points.com The Gold Points Reward Network has over 8 million members that can earn and redeem their points at more than 1,000 Gold Points partner locations. The relationship between Goldpoints and Points.com allows all Goldpoints members, apart from those holding a membership card in one of their hotel properties, to exchange into and out of the Goldpoints currency. 5. ACCENT Becomes the First Online Training Program to Join Points.com Beginning in September, ACCENT Training will join Points.com as an official partner, which will allow Smart Rewards members to exchange their Smart Rewards for redemption opportunities on Points.com. 6. Starbucks Duetto(TM) Card - joins Points.com The original partnership that allowed Points.com members to exchange loyalty currencies into Starbucks Gift cards has been expanded so that Starbucks members can now also exchange Points.com partner currencies into their Starbucks Duetto(TM) Visa. The Duetto card is a multi-functional credit card that combines a re-loadable stored value card with a Visa credit card. Loyalty currencies exchanged into either Starbucks gift cards or Duetto dollars can then be redeemed at over 4000 Starbucks retail locations in Canada and the United States for products and merchandise. Page 4 of 32

7. American Airlines - launched a Private Branded Exchange (POINTScustom Solution) With the September 17th launch of the redemption platform for American Airlines, AAdvantage members may now redeem their miles online for hotel stays and hotel and other program points. Participating companies to date include Marriott, Diners Club, Intercontinental Hotels and Hilton. The participant list will be expanded in first quarter of 2005 to include other partner options. The redeem AAmiles program adds value to the AAdvantage Program and its members by increasing the utility of miles earned, and facilitating an online process that reduces transaction processing time from weeks to days. REVENUE RECOGNITION POLICIES The revenue recognition policies for the suite of Points Solutions are as follows: Points.com: - Exchange commissions are a percentage of the exchanged value and are recognized as the services are provided under the terms of related contracts. - Membership dues received in advance for services are recognized over the term of service. Membership dues are $29.95 annually for a PointsPlus membership. The annual membership increased from $19.95 on Sept. 30, 2004. - One-time trading fees ($9.95 per trade) are recognized at the time of the trade (for non-PointsPlus members). The one-time trading fee increased from $5.95 on Sept. 30, 2004. - Non-refundable partner sign-up fees, for which the Corporation is under no further obligations, are recognized when the program becomes available as an exchange partner on the Points.com. Private Branded Solutions: - Revenues from the sale of loyalty program points are recorded net of costs. - Hosting and management fees are recognized in the period of service. - Non-refundable partner sign-up fees with no fixed term, and for which the Corporation is under no further obligations, are recognized as revenue when received. - Technology design, development and maintenance revenues are recorded on a "percentage-of-completion" basis. KEY BUSINESS DRIVERS Revenue growth has historically been, and will continue to be, generated by growth of membership in and use of the suite of Points Solutions (i.e., Points.com and Private Branded Solutions). Growth in the number of individual members using Points.com is driven by three factors that contribute to increased site traffic and the ease with which a consumer can join Points.com to Page 5 of 32

conduct exchange transactions. These factors are website usability and enhancements, marketing (awareness and brand) and partner activity. For additional information, see "Points.com Growth" on page 8 hereof. Growth in Private Branded Solutions will occur from organic growth of existing partner relationships, supplemented with new business relationships established throughout the year. For additional information, see "Private Branded Solutions Growth" on page 9 hereof. While the Corporation has no control over the growth of the loyalty program industry, management considers it an important factor in the Corporation's growth prospects. For additional information, see "Growth of Loyalty Program Industry" on page 12 hereof. RESULTS OF OPERATIONS - REVENUES OVERVIEW Revenue for the three months ended September 30, 2004 was $1,978,942 representing a year over year increase of 20% and a decrease of 2.6% over the prior quarter (June 30, 2004). The provision of Points Solutions accounted for approximately 98% of the revenues in the third quarter (interest income accounted for the remaining two percent). The results for the nine-month period ended September 30, 2004 represented a 28% increase in revenues year over year. Revenues declined in the third quarter relative to the second quarter due to a decrease in interest earned. See "Other factors Contributing to Revenue Growth - Interest Income, page 9" for additional information. Revenues from operations were flat. Revenues from operations are expected to increase in the fourth quarter as additional Private Branded Solutions are launched. For additional information see "Revenue Growth", page 7. For the three months ended For the nine months ended ------------------------------------ ------------------------- SEPT. 30 JUNE 30 SEPT. 30 SEPT. 30 SEPT. 30 REVENUES 2004 2004 2003 2004 2003 - -------- ---------- ---------- ---------- ---------- ---------- Points Operations $1,945,599 $1,948,570 $1,539,780 $5,426,681 $4,166,147 Interest and other revenue 33,343 83,566 107,786 201,961 243,179 ---------- ---------- ---------- ---------- ---------- TOTAL REVENUE $1,978,942 $2,032,136 $1,647,566 $5,628,642 $4,409,326 ========== ========== ========== ========== ========== A substantial portion of Points' revenue is generated through the provision of Private Branded Solutions for loyalty programs by way of fees for technology services and transaction fees or commissions paid to Points by the operators of the loyalty programs. Points earns revenue from Points.com in three principal ways. First, Points charges a commission on all exchanges, based on a value of the loyalty currency tendered for exchange by the loyalty program member. Through the exchange model, the participating loyalty program sets a value on the currency tendered for "sale". Based on this valuation, a percentage is remitted to Points and the remaining balance is used to purchase the currency of another participating loyalty program. Second, loyalty program members pay Points either a fee for each exchange transaction at Points.com or an annual fee for a membership that includes unlimited exchange transactions. Finally, Points may earn a non-refundable partner sign-up fee when a partner joins Points.com. Page 6 of 32

For the three-month period ended September 30, 2004, two key customers represented approximately 37% of the Corporation's gross revenues (for the three-month period ended September 30, 2003, two key customers represented 65% of the Corporation's gross revenues). In addition, two key customers, measured by revenue, represented approximately 64% (September 30, 2003 - 59%) of the Corporation's deposits. One of the two customers in 2004 is not the same customer as in 2003. As additional partner relationships are established and revenues grow, management expects the economic dependence on any key customer to be reduced. In the third quarter of 2004, approximately 92% of the Corporation's revenues were recurring revenues (e.g. revenues from monthly management fees, membership fees and transaction fees) and 8% were from non-recurring sources (e.g. one-time web development and integration fees). For the three months ended For the nine months ended ------------------------------------ ------------------------- SEPT. 30 JUNE 30 SEPT. 30 SEPT. 30 SEPT. 30 REVENUES 2004 2004 2003 2004 2003 - -------- ---------- ---------- ---------- ---------- ---------- Recurring revenues $1,829,762 $1,973,231 $1,257,890 $5,375,109 $3,481,564 Non-recurring revenues 149,180 58,905 389,676 253,534 927,762 ---------- ---------- ---------- ---------- ---------- TOTAL REVENUE $1,978,942 $2,032,136 $1,647,566 $5,628,642 $4,409,326 ========== ========== ========== ========== ========== Management recognizes that the Corporation must eventually achieve profitability through revenue growth and cost management. As significant resources have and will be allocated to the launch of Points.com Version 3.0, management now expects that Points' revenues will exceed its general and administrative in 2006 rather than, as previously stated, in 2005. REVENUE GROWTH Revenue growth has historically been, and will continue to be, generated by growth of membership in and use of the suite of Points Solutions products. Growth in product usage will occur from the organic growth of existing relationships, supplemented with new business relationships established throughout the year. Management expects the existing contracts to continue to generate growing revenues and, based on continuing business development efforts, is optimistic about new revenue sources in future quarters. 12. Growth in Use of the Points Solutions The suite of Points Solutions experiences revenue growth based on the number of loyalty program partners and consumer members who participate in the various programs. Page 7 of 32

Partner Summary - Total Number of Partners(1) SEPT. 30 JUNE 30 SEPT. 30 NUMBER OF PARTNERS AS AT 2004 2004 2003 - ------------------------ -------- ------- -------- Points.com 43 40 30 Private Branded Solutions(2) 20 19 11 Cumulative Points Transacted (000,000's) 6,492 5,318 2,487 Notes: (1) Partners may be included in both the Private Branded Solutions and the Points.com. (2) Includes seven additional partners acquired in the MilePoint Acquisition as at March 31, 2004. Points.com Growth Growth in the number of consumer members paying for a Points.com PointsPlus membership and/or completing an exchange transaction is driven by three factors that contribute to both increased site traffic and the ease with which a consumer can join Points.com and then conduct exchange transactions: website usability and enhancements; marketing (awareness and brand) and partner activity. Continued enhancements have been made to the website that simplify processes and will allow Points to grow while incurring fewer costs. The release of Points.com version 3.0 will also add a significant number of new features and improved functionality. Growth in activity at Points.com is also heavily impacted by partner activity. The number of loyalty program partners and their industry mix are two important elements in the growth of Points.com because it directly impacts the consumers' value proposition. Said differently, the more loyalty programs that a consumer participates in, that are also Points.com partners, the greater the opportunity for that consumer to maximize the value of his or her collective loyalty programs. Management expects to round out the partner industry mix and add several partners over the next two quarters. Another measure of the value received by consumers upon completing a transaction is the "Trade Ratio", defined as the number of points or miles of one program required to acquire one point or mile of another loyalty currency. The Trade Ratio is an average for all exchange transactions completed in a period. For the three months ended --------------------------------- SEPT. 30 JUNE 30 SEPT. 30 POINT.COM METRICS 2004 2004 2003 - ------------------ --------- --------- --------- Total Loyalty Programs - cumulative 43 40 30 Trade Ratio(1) 1.78 to 1 1.48 to 1 1.70 to 1 Notes: (1) Average rates are based on all miles and points exchanged and excludes exchanges into gift certificates. The results are based on actual trades made during the applicable period. The number of loyalty programs participating on Points.com has increased by 47% since the third quarter of 2003 and 8% since June 30, 2004. Points continues to focus its business development efforts on adding the optimal partners by size and industry to Points.com. Management continuously works with new and existing program participants in an effort to Page 8 of 32

improve the Trade Ratio. Management believes that the Trade Ratio is an important (and relative) measure since a lower ratio implies a more attractive consumer value proposition. An improved consumer value proposition should lead to more members and more trades. The Trade Ratio is, however, impacted by the number and type of promotions run by the Corporation and by the partners. It can be expected that the Trade Ratio will fluctuate (positively and negatively) over time. Total trades grew by 187% compared to the third quarter of 2003. Management expects to continue to see improvement throughout 2004. Private Branded Solutions Growth The Private Branded Solutions have been designed with each partner's look and branding. As a result, Points has little impact on driving traffic and transactions through its partners' sites. However, Points has seen continuous growth in the products since each launch. Management expects this trend to continue for new and existing Private Branded Solutions. SEPT. 30 JUNE 30 SEPT. 30 PRIVATE BRANDED SOLUTIONS METRICS AS AT 2004 2004 2003 - --------------------------------------- -------- ------- -------- Total Unique Partners(1) 20 19 11 Total Private Branded Solutions(2) 51 48 27 Notes: (1) Includes seven additional partners acquired in the MilePoint Acquisition as at March 31, 2004. (2) Includes 17 additional products acquired in the MilePoint Acquisition as at March 31, 2004. PRIVATE BRANDED SOLUTIONS(1)(2) SEPT. 30 JUNE 30 SEPT. 30 NUMBER OF PRODUCTS AS AT 2004 2004 2003 - ------------------------------- -------- ------- -------- POINTSpurchase 15 14 8 POINTSgift 15 14 7 POINTStransfer 3 3 2 POINTScorporate 8 8 4 POINTSelite 2 2 2 POINTScustom 4 3 1 POINTSintegrate partners(3)(4) 4 4 3 Total Private Branded Solutions 51 48 27 Notes: (1) Includes products sold to new and existing customers. (2) Includes 17 additional products acquired in the MilePoint Acquisition as at March 31, 2004. (3) Each POINTSintegrate partner will have third parties integrated into its technology platform. (4) There are 23 existing partner integration add-ons among the four POINTSintegrate partner as at Sept. 30, 2004. SOURCES OF REVENUE GROWTH Approximately 98% of the Corporation's revenue in the third quarter (96% year to date) is generated through its Points Solutions, which have two primary sources for growth: organic growth through increased use of existing contracted Points Solutions; and the development of new contracted Points Solutions. The remaining 2% of revenues (4% year to date) is interest income. Page 9 of 32

For the three months ended For the nine months ended ----------------------------- ------------------------- SEPT. 30 JUNE 30 SEPT. 30 SEPT. 30 SEPT. 30 PERCENTAGE OF REVENUES BY SOURCE 2004 2004 2003 2004 2003 - -------------------------------- -------- ------- -------- -------- -------- Organic Growth of existing Points Solutions 90% 97% 76% 94% 56% New contracted Points Solutions with new and existing partners 10% 3% 24% 6% 44% Organic Growth of Existing Points Solutions The large majority of existing products that Points operates, including those on behalf of partner loyalty programs, continue to grow through increased consumer awareness, consumer adoption and loyalty program growth. As Points earns transaction fees or commissions on the majority of these products and as the products continue to grow, Points expects to continue to derive a large portion of its revenues in this manner. Organic growth of existing Points Solutions accounted for 90% of revenues in the third quarter of 2004. Revenue from organic growth grew by 42% from $1.26 million in the third quarter of 2003 to $1.78 million in the third quarter of 2004. Management expects this trend to continue as the base of existing products continues to grow. Revenues from existing Points Solutions generated less revenue in the third quarter than the second quarter of 2004. This is the result of reduced sales during the summer months and the strengthening Canadian dollar (impact of negative FX Rate movement). New Contracted Points Solutions Selling additional Points Solutions is an important source of new revenue. New Points Solutions sold to loyalty program partners grow the base of products being managed and therefore the organic revenue base and, in the case of sales to new loyalty program partners, provide an opportunity to place additional Points Solutions with the same partner. Points has grown the number of products placed with partners from 27 to 51 as at September 30, 2004 from September 30, 2003. In addition, 23 third party integrations have been implemented with the four POINTSintegrate partners. Points believes that its suite of Points Solutions is applicable to all of its large loyalty program partners and will continue to focus business development resources on both the sale of new products to current partners and on sales to new partners. Management is continuing to focus on expanding the Points.com partnership base in 2004 across various loyalty verticals. In particular, Points will continue to focus on new partnerships in the financial services, hotel, retail, car rental, and online categories throughout 2004. Projected revenues for 2004 attributed to the deployment of Points Solutions to new loyalty program partners are considerably riskier than organic growth of existing Points Solutions. Revenue growth is still substantially dependent on generating new contracts for the purchase of Points Solutions products. While management expects continued business development success, there is no certainty that Points will continue with its past success of acquiring new contracts with new or existing partners. Page 10 of 32

OTHER FACTORS CONTRIBUTING TO REVENUE GROWTH In addition to the sources of revenue and growth described above, three other factors contribute to the Corporation's financial performance: interest income, fluctuations in foreign exchange rates and the growth of the loyalty program industry. Interest Income The Corporation earned interest income of $33,343 for the third quarter of 2004, compared with $107,786 in the third quarter of 2003 and $83,566 in the second quarter of 2004. The decrease in interest income year over year and quarter over quarter is largely a function of reduced cash reserves, the strengthening Canadian/US foreign exchange rate, the shorter duration of the investment portfolio and the subsequently lower average yield of the investments. Management expects the interest income to continue to decline in the short term as cash reserves are reduced as a consequence of the MilePoint Acquisition and growth of its operations. Interest income is a function of the Corporation's cash balances and the prevailing interest rates. Canadian cash reserves are invested in a combination of short-term liquid assets and short-term bonds. The bond and money market portfolio has a duration of less than two years. Foreign currency continues to be invested in short-term and money market instruments. Points' cash and short-term investments are valued quarterly at the lower of cost and market value. In the longer term, as Points' business continues to grow, cash reserves and related interest income are also expected to increase, although this growth is not expected to be a material portion of the Corporation's revenue going forward. Interest rates will continue to influence interest earnings. The Corporation's bond portfolio is exposed to financial risk that arises from the credit quality of the underlying bond issuers. The Corporation seeks to mitigate the credit risk by diversifying its bond holdings and only investing in securities with a credit rating of "A" or higher. A summary of the Corporation's investments is as follows: US$ OTHER AS AT SEPT. 30, 2004 YIELD % CREDIT RATING C$ TOTAL DENOMINATED DENOMINATED - -------------------- ------- ------------- ----------- ----------- ----------- Cash held at bank(1) 1.30 n/a $14,017,542 $8,426,304 E 1,311,872 GBP 223,456 CHF 9,246 Money market securities n/a n/a n/a Bonds(3) 3.11 A - AAA 1,233,765 n/a n/a ----------- ---------- TOTAL $15,251,307 $8,426,304 =========== ========== Notes: (1) C$ Total represents total cash held at bank inclusive of all denominations; US$ and Other Denominated currencies are a subset of the C$ Total and are represented in their local currency amount. (2) Yield as at September 30, 2004. (3) Bond yield is calculated as the simple average of the portfolio's semi-annual yield to maturity. Foreign Exchange Rates The translation of the Corporation's revenues and expenses is, and will continue to be, sensitive to changes in the U.S./Canadian foreign exchange rates ("FX Rates"). Changes to FX Rates will have greater impact on the Corporation's revenues than on its expenses as approximately 94% of Page 11 of 32

the Corporation's revenues are in U.S. dollars and the remaining 6% are split between Canadian dollars, Euros, Great Britain Pounds and Swiss Francs. Management expects that the percentage of U.S. dollar-based revenue will not decrease significantly in 2004. Approximately 63% of the Corporation's expenses were in Canadian dollars, 32% are U.S. dollar-based and 5% are based in other foreign currencies. The Corporation does not have material foreign exchange risk with its cash expenses as it has sufficient foreign currency reserves to meet its foreign obligations. The average FX Rate (the nine-month average rate) with which revenues and expenses are translated into Canadian dollars has stabilized relative to the second quarter 2004 (the six-month average rate). The FX rate differential was negative, but not material. The translation of the Corporation's revenues will be lower in Canadian dollar terms if the Canadian dollar strengthens relative to the U.S. dollar. Conversely, Points' expenses would decrease, dampening the negative impact to net income. The opposite would be true if the Canadian dollar weakened relative to the U.S. dollar. For the nine For the three months ended months ended ----------------------------- ------------------- SEPT. 30 JUNE 30 SEPT. 30 SEPT. 30 SEPT. 30 U.S. - CANADIAN FX RATES 2004 2004 2003 2004 2003 - ------------------------ -------- ------- -------- -------- -------- Period Start 1.334 1.311 1.347 1.297 1.573 Period End 1.270 1.345 1.351 1.270 1.351 Period Average 1.309 1.359 1.383 1.327 1.428 Growth of Loyalty Program Industry The Economist reported on the growing importance of loyalty programs in an article from its May 2, 2002 issue, entitled "Fly me to the moon", noting that on an annual basis, airlines sold "roughly US$10 billion worth of miles to partners, such as credit card firms". In another article (entitled "Frequent-flyer economics," from the same issue), The Economist reported that "frequent flyer miles started as a marketing gimmick, but they have become a lucrative business," that "roughly half of all miles are now earned on the ground, not in the air," and that with "the world-wide stock of unredeemed miles .. . . close to 8.5 trillion . . . the total global stock of frequent flyer miles may now be worth almost US$500 billion". Management understands that members of loyalty programs are much more likely to utilize Points.com and the other products from the suite of Points Solutions when they are close to a level at which they can redeem an award. The redemption level for an award varies by type of award (for example, a business-class flight takes more miles that an economy-class flight) and by program type (the "cost" of a flight typically starts between 15,000 and 25,000 miles whereas a night in a hotel starts at 10,000 points). Therefore, growth in consumer loyalty program account balances will create demand for Points Solutions. Growth in program balances is a function of the growth in the number of programs, the number of participating consumers, time and the number of consumers moving through a loyalty redemption (for example, receiving an award of some type). Several respected periodicals estimate strong growth in the popularity of and participation in loyalty programs. For example, in addition to The Economist, cited above, according to the Page 12 of 32

"frequent flyer facts" section of the website of InsideFlyer magazine (www.webflyer.com), a leading publication for members of frequent traveler programs: "loyalty programs grow at a rate of 11% per annum, with over 120 million members worldwide. While there are about 92 frequent flyer/guest programs in the world, American AAdvantage, the largest frequent flyer program in the world, began with 283,000 members in 1981 and has grown to more than 45 million members". RESULTS OF OPERATIONS - GENERAL AND ADMINISTRATIVE EXPENSES GENERAL AND ADMINISTRATIVE EXPENSES General and administrative expenses declined by 6% relative to the second quarter of 2004 and grew by 34% over the third quarter of 2003. Material changes in expenses will be described in each section below. For the nine For the three months ended months ended ------------------------------------ ----------------------- SEPT. 30 JUNE 30 SEPT. 30 SEPT. 30 SEPT. 30 GENERAL AND ADMINISTRATIVE EXPENSES 2004 2004 2003 2004 2003 - ----------------------------------- ---------- ---------- ---------- ---------- ---------- Employment Costs(1) $1,522,691 $1,665,730 $1,398,813 $5,019,535 $3,675,509 Technology Services(2) 274,069 264,856 262,154 700,231 716,535 Marketing and Communications 336,623 452,521 49,634 991,246 102,341 Sales Commission and Related Expenses 119,841 132,754 31,724 277,298 182,507 Other(3) 651,973 582,931 418,655 1,666,636 701,262 ---------- ---------- ---------- ---------- ---------- TOTAL $2,905,198 $3,098,792 $2,160,979 $8,654,946 $5,378,154 ========== ========== ========== ========== ========== Notes: (1) Wages and employment costs include salaries, contract labour charges, recruiting, benefits and government charges (CPP and EI). (2) Technology expenses include online hosting and managed services, equipment rental, software licenses and capital lease expenses. (3) Other expenses include foreign exchange losses (or gains), travel expenses, professional fees, insurance, office rent and expenses and regulatory expenses. As the Corporation is still in the process of increasing loyalty program participation in and sales of the Points Solutions, significant resources continue to be required. While management has made controlling costs a priority, costs and/or capital expenditures will continue to increase in 2004 and 2005. Management expects the general and administrative expenses in the fourth quarter to be marginally higher than in the third quarter. A large percentage of the marketing expenses expected to be incurred will continue to be non-cash, as the Corporation is expensing its pre-paid mileage asset account. The Corporation will continue to scale its infrastructure, add new partners to its suite of products, move from trial/test marketing to a more comprehensive marketing and branding program. Points still expects that a series of significant marketing and branding programs will begin in mid 2005 to coincide with the launch of Points.com Version 3.0. The actual expense incurred will be a function of the types of marketing media employed and incentives offered, as well as the timing of the programs' launch dates. If actual revenue growth projected from the marketing Page 13 of 32

plan does not meet expectations, the expenditures can either be reduced or reallocated to more successful programs. EMPLOYMENT COSTS As at September 30, 2004, Points had 77 full-time employees. SEPT.30 JUNE 30 SEPT.30 HEADCOUNT BY DEPARTMENT AS AT 2004 2004 2003 - ----------------------------- ------- ------- ------- Technology 43 36 34 Finance and Administration 13 12 11 Business Development 8 8 7 Marketing and Customer Service 13 10 10 --- --- --- TOTAL 77 66 62 === === === During the third quarter, 11 employees joined the Corporation. Ten of the eleven new hires, and several existing employees, are directly dedicated to the Points.com Version 3.0 technology development. Employment costs decreased as a result of lower recruiting charges and several employees being re-allocated from supporting the existing businesses to the development team for Points.com Version 3.0. Total employment costs in the fourth quarter are likely to remain flat relative to the third quarter. TECHNOLOGY SERVICES Technology Services expenses increase in increments based on business growth and product performance. As Technology Services costs are a function of the number of partners and Points Solutions products, these costs grow as revenue grows. In general, as loyalty program partners and products are added to the infrastructure and transactional volume increases, additional servers, processors, bandwidth, memory, etc., are required to provide a secure and robust production environment. The third quarter of 2004 saw a quarter over quarter increase of $9,213 (3.5%) as additional services were required for new products associated with the MilePoint Acquisition and the expansion of other Points Solutions. Management expects these costs to be flat for the fourth quarter of 2004. Products launched and loyalty program partners acquired are the key drivers of Technology Services expenses. MARKETING AND COMMUNICATIONS Marketing costs decreased by $115,898 (26%) relative to the second quarter of 2004 as fewer marketing promotions were in market during the quarter. Beginning in the first quarter of 2003, an accounting adjustment related to the expense recognition of promotional points tied to PointsPlus membership purchases was enacted. Prior to the first quarter of 2003, the cost of these points was recorded as an expense in the period they were issued. Beginning January 1, 2003, marketing expenses associated with the sale of PointsPlus memberships are being amortized over the term of the membership, while the other marketing expenditures are recognized in the period of use. Page 14 of 32

The Corporation expects to increase its marketing expenditures at the beginning of the second quarter in 2005, to coincide with the launch of Point.com Version 3.0. The marketing and branding foundation built in 2003 has made it possible to expand audience reach and effectively execute large-scale, multi-channel promotions. Advertising expenditures will continue to be focused on partner media as this approach dovetails with business development strategies and is the most cost-effective means to reach Points' target audience. A smaller portion of the budget will be used for targeted non-partner advertising. It is anticipated that marketing and communication expenses could increase substantially if the programs are successful at customer acquisition and retention. If the programs do not meet management's expectations in driving revenue growth, marketing expenses can be eliminated or reallocated in the short term. Management expects that the results of the carefully planned marketing strategy will accelerate Points.com activity. SALES COMMISSIONS AND EXPENSES Sales Commissions and Expenses have decreased by $12,913 (10%) in the third quarter of 2004 over the second quarter. Sales Commissions will continue to adjust according to partners' contracted, and growth of existing, products. OTHER OPERATING EXPENSES Other Operating Expenses include office overhead, travel expenses professional fees and foreign exchange gain and/or loss. Other Operating Expenses increased by $69,042 (12%) in the third quarter relative to the second quarter. The most significant component of the increase in the general and administrative expenses relates to the foreign exchange loss from re-valuing certain balance sheet accounts (e.g. US dollar denominated cash and US dollar denominated deposits). Each quarter, certain balance sheet accounts are re-valued in accordance with the period ending FX Rate. To the extent that the foreign denominated assets and liabilities are not equal, the net effect after translating the balance sheet accounts at the period ending FX Rate is accounted for as a foreign exchange gain or loss on the income statement. Management has no control over the foreign exchange gain or loss from one period to the next. Excluding the foreign exchange gain and loss, Other Operating Expenses in the third quarter decreased by almost $90,000 compared to the second quarter of 2004. Management expects Other Operating Expenses (excluding foreign exchange gain and loss) to remain flat in the fourth quarter relative to the third quarter. For the three months ended For the nine months ended ------------------------------- ------------------------- SEPT. 30 JUNE 30 SEPT. 30 SEPT. 30 SEPT. 30 OTHER OPERATING EXPENSES 2004 2004 2003 2004 2003 - ------------------------ -------- --------- -------- ---------- --------- Foreign Exchange Gain/Loss(1) $ 97,687 ($61,061) $ 89,974 $ 33,424 ($98,939) Other Operating Expenses 554,286 643,992 328,680 1,632,319 800,202 -------- --------- -------- ---------- --------- TOTAL $651,973 $ 582,931 $418,654 $1,665,743 $ 701,262 ======== ========= ======== ========== ========= Note: (1) See definition above. page 15 of 32

RESULTS OF OPERATIONS - NON-CASH EXPENSES Forward-looking statements contained in this section, "Results of Operations - Non-Cash Expenses", with respect to future expenses of the Corporation, are not guarantees of such future expenses and involve certain risks and uncertainties that are difficult to predict. Any changes in the Corporation's amortizing assets will subsequently change the Corporation's amortizing expenses. AMORTIZATION EXPENSES The Corporation recorded amortization expenses of $631,105 in the third quarter compared to $573,312 for the quarter ended June 30, 2004 and $730,353 for the quarter ending September 30, 2003. The increase was attributed to the charges outlined in the following table: For the three months ended For the nine months ended ------------------------------ ------------------------- SEPT. 30 JUNE 30 SEPT. 30 SEPT. 30 SEPT. 30 AMORTIZATION EXPENSES 2004 2004 2003 2004 2003 - --------------------- -------- -------- -------- ---------- ---------- Deferred Costs $140,461 $128,126 $137,460 $ 467,934 $ 319,766 Intangible Assets 410,579 352,479 189,050 $ 951,275 $ 567,150 Property, Plant and Equipment 80,064 92,707 403,842 $ 229,125 $1,162,453 -------- -------- -------- ---------- ---------- TOTAL $631,105 $573,312 $730,352 $1,648,334 $2,049,369 ======== ======== ======== ========== ========== AMORTIZATION OF DEFERRED COSTS For the three months ended For the nine months ended ------------------------------ ------------------------- SEPT. 30 JUNE 30 SEPT. 30 SEPT. 30 SEPT. 30 DEFERRED COSTS 2004 2004 2003 2004 2003 - -------------- -------- -------- -------- -------- -------- Amortization $140,461 $128,126 $137,460 $467,934 $319,766 Charges incurred in respect of certain financings are deferred and charged to income on a straight-line basis over an applicable time period. Deferred finance charges represent legal, accounting and other related fees incurred to obtain the financings. Points has incurred deferred costs in connection with the following financial transactions: a. In prior quarters, Points reported deferred financing charges in connection with the 11%, $6,000,000 senior secured convertible debenture (the "Debenture") issued to CIBC Capital Partners. The first quarter of 2004 was the final amortization period for the deferred costs associated with the Debenture. b. The Corporation reports deferred financing charges in connection with the Series Two Preferred Share issued pursuant to the IAC Investment, as this financial instrument is also classified as debt. The Series Two Preferred Share has 34 amortization periods remaining. c. In consideration of the value to the Corporation of the Alignment Agreement with American Airlines, the Corporation issued 2,196,635 Common Shares to American Airlines valued at $2,240,568. The Common Shares have been classified as deferred Page 16 of 32

costs and will be amortized over a five year period. There are 16 amortization periods remaining. d. Selected Private Branded Solution technology costs incurred ($123,390) have been deferred over the expected lifetime of certain partner relationships. The two relationships have 28 and 30 amortization periods remaining. AMORTIZATION OF INTANGIBLE ASSETS The excess of the cost over the value attributed to the underlying net assets of the shares of Points.com acquired in 2002 is amortized on a straight-line basis over a period of three years. The increase in the amortization expense of intangible assets in the second quarter is related to the intangible assets (i.e., partner contracts) acquired through the MilePoint Acquisition (see "Commitments Related to MilePoint Acquisition" on page 26 for additional information). Goodwill related to the acquisition will not be amortized. If the assets are deemed to have become impaired, the goodwill will be written off in the appropriate period. For the three months ended For the nine months ended ------------------------------ ------------------------- SEPT. 30 JUNE 30 SEPT. 30 SEPT. 30 SEPT. 30 INTANGIBLE ASSETS 2004 2004 2003 2004 2003 - ----------------- -------- -------- -------- -------- -------- Amortization $410,579 $352,479 $189,050 $951,275 $567,150 AMORTIZATION OF PROPERTY, PLANT AND EQUIPMENT The decrease in the amortization expenses relative to the second quarter of 2004 reflects that certain assets have been amortized to a zero cost base. For the three months ended For the nine months ended ------------------------------ ------------------------- SEPT. 30 JUNE 30 SEPT. 30 SEPT. 30 SEPT. 30 PROPERTY, PLANT AND EQUIPMENT 2004 2004 2003 2004 2003 - ----------------------------- -------- -------- -------- -------- ---------- Amortization $80,064 $92,707 $403,842 $229,125 $1,162,453 OTHER NON-CASH EXPENSES Interest on Convertible Debenture Accrued interest on any principal amount of the Debenture that is converted into common shares ceases to be payable. In addition, in the event that an exercise of the Warrants (as defined in "Liquidity - IAC Investment" on page 19) results in a change of control of Points, accrued interest on the Debenture will be waived and the principal amount of the Debenture will be repayable within 30 days. See "Commitments Related to the Terms of Certain Financing Arrangements" on page 23. Page 17 of 32

INTEREST ON CONVERTIBLE DEBENTURE 2008 2007 2006 2005 2004 2003 2002 2001 - --------------------------------- ------ ------ ------ ----- ------ ----- ----- ----- Accrued Interest ($000's) 257 1,209 1,089 981 884 854 660 522 Debenture Value ($000's) 12,456 12,199 10,990 9,901 8,920 8,036 7,182 6,522 Interest on the outstanding principal amount of the Debenture accrues at a rate of 11% per annum. Interest compounds on an annual basis on the day immediately prior to each anniversary of the original issue date, being March 15, 2001. Thereafter, interest accrues on such compounded interest at the rate of 11% per annum. Interest on the Series Two Preferred Share INTEREST ON SERIES TWO PREFERRED SHARED 2013 2012 2011 2010 2009 2008 2007 2006 2005 2004 2003 - -------------------------------- ---- ---- ---- ---- ---- ---- ---- ---- ---- ---- ---- Accrued Interest ($000's) 244 868 868 868 868 868 868 868 868 868 624 Series Two Preferred Share Value ($000,000's) 21.1 20.8 19.9 19.1 18.2 17.3 16.5 15.6 14.7 13.9 13.0 RESULTS OF OPERATIONS - EARNINGS AND SHAREHOLDER EQUITY LOSS The Corporation reported a net loss of $2,001,764 for the third quarter of 2004, compared with a net loss of $1,628,391 for the third quarter of 2003 and a net loss of $2,153,069 for the second quarter of 2004. The net loss decreased relative to the second quarter of 2004. SHAREHOLDER EQUITY The deficit in shareholder equity increased from $5,048,584 at June 30, 2004 to $6,991,482 at September 30, 2004. The increase was a result of the net loss for the period of $2,001,764. LOSS PER SHARE The Corporation's loss per share is calculated on the basis of the weighted average number of outstanding Common Shares for the period, which amounted to 65,810,352 shares at September 30, 2004, compared with 64,250,018 shares at June 30, 2004 and 56,773,936 at September 30, 2003. The Corporation reported a net loss of $0.03 per share for each of the quarters ending September 30 and June 30, 2004, compared with a net loss of $0.03 per share for the third quarter of 2003. For 2004 and 2003, the number of fully diluted shares outstanding has not been computed as the effect would be anti-dilutive (meaning that the loss per share would decrease on a fully diluted basis) and therefore, in accordance with Canadian generally accepted accounting principles, fully diluted loss per share is not computed. The fully diluted calculation for both 2004 and 2003 Page 18 of 32

would have otherwise included Common Shares underlying outstanding securities, such as options, warrants and preferred shares convertible or exercisable to acquire Common Shares. LIQUIDITY OVERVIEW OF LIQUIDITY Management views liquidity as the Corporation's ability to generate sufficient cash (or cash equivalents) to meet its obligations as they become due. Balance sheet liquidity indicators provide management with a test of the Corporation's current liquidity. Balance Sheet indicators of liquidity include cash, accounts receivable and accounts payable. Earnings (loss) before interest, amortization and other deductions ("EBITDA") are the key indicator of the change in the liquidity of Points' operations over a defined period of time. As the Corporation continues to add contracts to its portfolio of Private Branded Solutions and to Points.com, revenues are expected to grow, resulting in increased liquidity. EARNINGS (LOSS) BEFORE INTEREST, AMORTIZATION AND OTHER DEDUCTIONS Management believes that EBITDA is an important internal measure and financial benchmark for its shareholders because it is a recognizable and understandable measure of the Corporation's cash burn or growth, and is a standard often scrutinized by investors in small to mid-capitalization companies. For example, the Corporation has incurred large non-cash expenses (depreciation and amortization) over the past several fiscal years that distort the financial and strategic gains the Corporation has made. Primarily as a result of the Points.com Version 3.0 related expenditures, including those costs that are not capitalized, management now expects that Points' revenues will exceed its general and administrative in 2006 rather than 2005. For the quarter ending September 30, 2004, the Corporation's EBITDA was ($0.926 million). This compares with EBITDA of ($1.07 million) for the quarter ending June 30, 2004. IAC INVESTMENT The following is a general summary of the terms of the IAC Investment. More comprehensive disclosure of the IAC Investment is contained in Points' Material Change Report dated March 21, 2003, which is hereby incorporated by reference. See also "Commitments Related to the Terms of Certain Financing Arrangements" on page 23 below. Under the IAC Investment, Points issued one convertible preferred share (the "Series Two Preferred Share") and Common Share purchase warrants (the "Warrants") for aggregate cash consideration of $12.4 million and $2.7 million, respectively. Based on Points' capitalization as at the date hereof, the Series Two Preferred Share is convertible, for no additional consideration, into 22,030,844 Common Shares. The Warrants are exercisable for three years from their date of issue (April 11, 2003) to acquire up to 55% of the Common Shares of Points (calculated on an adjusted fully diluted basis) less the number of Common Shares issued or issuable on conversion of the Series Two Preferred Share. As at the date hereof and based on Points current capitalization, the Warrants are exercisable to acquire 81,160,080 Common Shares at an effective price per Common Share of $1.01 between April 11, 2004 and April 10, 2005 and $1.13 between April 11, 2005 and April 10, 2006 (resulting in an additional investment by IAC in Points, if Page 19 of 32

exercised in full and depending on the year of exercise, of up to approximately $82.3 million or $91.5 million). Each of the Series Two Preferred Share and the Warrants contain anti-dilution protection provisions. CASH AND CURRENT ASSETS The Corporation had consolidated cash and cash equivalents of $15,251,307 at September 30, 2004, compared to the $18,427,174 at June 30, 2004, and $21,833,287 at September 30, 2003. SEPT. 30 JUNE 30 SEPT. 30 AS AT 2004 2004 2003 - ----- ----------- ----------- ----------- Cash and Cash Equivalents $15,251,307 $18,427,174 $21,833,287 Accounts Receivable 1,196,865 1,339,237 770,543 Prepaids and Sundry Assets 1,228,039 1,271,451 846,469 ----------- ----------- ----------- TOTAL CURRENT ASSETS $17,676,211 $21,037,862 $23,450,299 =========== =========== =========== Cash and cash equivalents decreased by $3,175,867 from June 30, 2004. The primary reasons for the decrease in cash relative to the second quarter of 2004 was related to the operating loss for the quarter, expenditures on capitalized costs directly attributable to Points.com Version 3.0, expenditures on capital assets and the decrease in deposits. CASH FROM EXERCISE OF CERTAIN WARRANTS AND OPTIONS Certain "in-the-money" warrants and options are due to expire within 12 months. Assuming that the market price of the Common Shares remains above the exercise price of these securities, management expects the securities to be exercised. If exercised in full, the proceeds from the exercise of these securities will increase cash by approximately $1.57 million assuming the exercise in full of these securities, issued and outstanding Common Shares will increase by over 10.64 million shares. Securities with Near-Term Expiry Dates - Outstanding Amounts as at September 30, 2004 SECURITY TYPE EXPIRY DATE NUMBER STRIKE PRICE PROCEEDS ------------- ----------- ---------- ------------------ ---------- Warrants 10/21/2004 2,500 $ 0.28 $ 700 Broker Warrants 11/30/2004 88,525 0.25 22,131 Warrants 11/30/2004 1,646,191 0.25 411,548 Warrants 7/18/2005 166,667 0.25 41,667 Points International Ltd. Options 2/14/2005 1,727,000 0.50 863,500 Points International Ltd. Options 3/14/2005 201,400 0.50 100,700 Points International Ltd. Options 8/22/2005 25,000 0.69 17,250 Options in subsidiary with liquidity put 2/17/2005 627,479 Fair Market Value 13,783 Options in subsidiary with liquidity put 3/31/2005 4,794,780 Fair Market Value 78,740 Options in subsidiary with liquidity put 7/9/2005 802,433 Fair Market Value 8,892 Options in subsidiary with liquidity put 8/13/2005 355,803 Fair Market Value 7,816 Options in subsidiary with liquidity put 8/20/2005 200,312 Fair Market Value 4,400 ---------- ---------- TOTAL 10,638,090 $1,571,127 ========== ========== Subsequent to quarter end, and as at October 25, 2004, the following securities have been exercised or expired: Page 20 of 32

SECURITY TYPE NUMBER STRIKE PRICE PROCEEDS - ------------- ------- ------------ -------- Warrants - expired 2,500 $0.28 $ 700 Broker Warrants - exercised 88,525 0.25 22,131 Warrants - exercised 830,536 0.25 207,634 ------- -------- TOTAL 921,561 230,465 ======= ======== Accounts Receivable The Corporation expects accounts receivable to grow proportionately with growth in revenues, however there is some variability in this trend. Management deems the risk of bad debts to be minimal based on the structure and nature of the Corporation's cash flows. ABILITY TO FUND FUTURE GROWTH In the third quarter of 2004, the Corporation had cash flows used in operating activities of ($2,292,324) after changes in non-cash balances related to operations. Management is confident that the Corporation's cash position is adequate to cover expenses and commitments in the short term, even if revenue growth is slower than planned, and expects that the revenue from the Points Solutions will generate sufficient cash to maintain capacity in the short term and grow capacity and resources in the long term. However, the Corporation is currently not generating an operating profit (revenues minus general and administrative expenses) and cannot be assured that revenue growth will be sufficient to meet liabilities as they come due. PROPERTY, PLANT AND EQUIPMENT The Corporation reported an increase in property, plant and equipment in the third quarter due to the capitalized costs of Points.com Version 3.0 and an increase in office computer equipment. Refer to "Capital Resources - Planned Capital Expenditure" on page 29 for additional information. Existing technology costs under capital lease are depreciated on a straight-line basis over three years. The Corporation's technology costs are currently, and are expected to remain, below industry averages as a result of prudent cost containment initiatives. Additional leasehold improvements at the Corporation's new facility will increase property, plant and equipment and the corresponding amortization in 2004 and beyond. SEPT. 30 JUNE 30 SEPT. 30 AS AT 2004 2004 2003 - ----- ---------- ---------- -------- Furniture and equipment $ 296,360 $ 295,979 $131,345 Computer equipment 301,087 234,339 168,600 Software 84,122 100,756 83,162 Technology costs 13,568 16,973 393,952 Points.com Version 3.0 Direct Development Costs 473,067 -- -- Leasehold improvements 532,703 468,109 59,460 ---------- ---------- -------- TOTAL PLANT, PROPERTY AND EQUIPMENT $1,700,903 $1,116,157 $836,520 ========== ========== ======== Page 21 of 32

GOODWILL The MilePoint Acquisition resulted in $3,675,000 allocated to amortizing intangible assets and $3,975,000 ($3,775,000 from goodwill and $200,000 for other costs and deductions) to goodwill. In accordance with CICA handbook, Section 3062 goodwill will not be expensed unless it is deemed to have become impaired. Management has tested, and concluded, that none of the Corporation's goodwill has become impaired. In the third quarter, $303,262 of charges relating to incremental transition services and additional direct costs related to the MilePoint acquisition were incurred and charged to Goodwill. CURRENT LIABILITIES Current liabilities at September 30, 2004 were $15,379,252, compared with $16,418,985 at June 30. The decrease was primarily related to the decrease in deposits, the strengthening Canadian dollar (FX rate) and lower activity during the quarter. The decrease was offset by higher accounts payable and $385,005 of the long term MilePoint Acquisition liability allocated to current liabilities from long-term liabilities. Through arrangements with partner loyalty programs such as those for POINTSpurchase and POINTScorporate solutions, Points processes transactions involving the online sale of loyalty currencies and collects the funds on behalf of the loyalty program partner. Gross proceeds received on the sale of loyalty program points, net of the commissions earned, are included in deposits and deferred revenue in the attached consolidated balance sheets until ultimately remitted. The level of deposits is influenced by partner activity and trends in the overall loyalty industry. As activity increases, the Corporation's deposits increase. The Corporation expects deposits to increase as it experiences organic growth with existing partners, establishes new partner relationships and integrates the MilePoint Acquisition. SEPT. 30 JUNE 30 SEPT. 30 CURRENT LIABILITIES AS AT 2004 2004 2003 - ------------------------- ----------- ----------- ----------- Accounts payable and accrued liabilities $ 1,199,546 $ 931,188 $ 889,869 Deposits 12,974,925 14,668,589 10,545,585 Current portion of obligation under capital lease -- -- 154,898 Current portion of loan payable 29,860 Current portion of acquisition loan payable 1,174,921 819,208 -- ----------- ----------- ----------- TOTAL CURRENT LIABILITIES $15,379,252 $16,418,985 $11,590,352 =========== =========== =========== The September 30, 2004 accounts payable and accrued liabilities includes 2004 employee bonus accruals to be paid in January 2005, and other accrued charges. The Corporation has sufficient foreign currency reserves to meet its foreign currency obligations and, as such, does not utilize any hedging or other strategies involving interest rate or currency derivatives. Page 22 of 32

WORKING CAPITAL Working capital (defined as current assets minus current liabilities) has declined relative to the second quarter of 2004 to $2,296,958. Management expects working capital to remain positive throughout the remainder of 2004. However, as previously stated, as the Corporation increases the rate of expenditure to successfully launch Points.com Version 3.0, it is probable that working capital will be negative in 2005. The Corporation is confident that it can fund its operations, while it is in a negative working capital position in 2005. Management believes that through growth of its products, working capital will improve in 2006. LONG-TERM LIABILITIES AND COMMITMENTS PAYMENTS DUE BY PERIOD (AGGREGATE AMOUNT FOR MULTI-PERIODS) ----------------------------------------------------------- FUTURE OBLIGATIONS (000,000'S) TOTAL(1) 2009+ 2008 2007 2006 2005 2004 - ------------------------------- -------- ------ ----- ----- ----- ----- ----- Long-Term Debt(2) (non-cash until repayment) $12.46 -- $6.26 $1.21 $1.09 $0.98 $0.88 Series Two Preferred Share (non-cash until repayment) 21.08 16.12 0.87 0.87 0.87 0.87 0.87 Loan Payable -- -- .01 .03 .03 .03 .01 Operating Leases(3) 2.74 0.11 0.11 0.40 0.41 0.50 1.21 Partner Purchase Commitments(4) 4.61 0.02 0.35 1.49 1.14 0.87 0.74 MilePoint Acquisition(5) 4.22 -- -- -- 0.40 0.83 2.99 ------ ------ ----- ----- ----- ----- ----- Total Contractual Obligations $45.10 $16.24 $7.59 $3.99 $3.94 $4.09 $6.70 ====== ====== ===== ===== ===== ===== ===== Notes: (1) Represents the aggregate amount for the full duration of the contractual obligations (including years post 2008 and prior to 2004). (2) The Debenture is due on March 15, 2005. However, for the purposes of the above table, the maximum obligation with all four extensions exercised has been included. The holder of the Debenture has the right to extend the term by one year for up to three consecutive years. See "Interest on Convertible Debenture" above for a summary of payments in a fiscal year if the Debenture matures. (3) Includes technology services commitments and hardware and software operating leases. (4) Includes mileage purchase and co-marketing commitments, see "Partner Purchase Commitments" below. (5) Cash commitments related to the MilePoint Acquisition include the purchase price ($3.5 million), anticipated transition costs (up to US$417,000) and anticipated consulting fees (US$120,000). Elements of the foregoing table are explained in more detail in the following sections. Commitments Related to the Terms of Certain Financing Arrangements Background On March 15, 2001, Points issued to CIBC Capital Partners, a division of Canadian Imperial Bank of Commerce ("CIBC Capital Partners"), the 11% $6,000,000 Debenture, which was amended and restated on February 8, 2002 and further amended effective April 11, 2003. The full principal amount of the Debenture was set to mature on March 15, 2004. However, in December 2003, CIBC Capital Partners exercised its right to extend the maturity date until Page 23 of 32

March 15, 2005. CIBC Capital Partners has the option to extend the maturity date from March 15, 2005 for up to three more one-year extensions. Accrued interest on the Debenture as of September 30, 2004 is $2,694,714 and is included with the Debenture in long-term debt as a non-current liability in the consolidated balance sheet. The $6,000,000 principal amount of the Debenture is convertible at the option of CIBC Capital Partners into up to 18,908,070 Common Shares. Accrued interest on any principal amount as converted ceases to be payable. The Debenture will also automatically convert in full into Common Shares immediately preceding certain liquidity events. The Debenture contains certain negative covenants in favour of CIBC Capital Partners. As part of the reorganization of Points completed on February 8, 2002, Points issued to CIBC Capital Partners one preference share (the "Series One Preferred Share"). The holder of the Series One Preferred Share is entitled to a dividend (the "Dividend") in the event that, prior to an automatic conversion of the Debenture, (i) there is a merger or consolidation of Points (or a subsidiary of Points which owns all or substantially all of the assets of Points) with another corporation where, following such event, the shareholders of Points will not hold at least a majority of the voting power of the surviving/acquiring corporation, (ii) any person (other than CIBC Capital Partners) or persons acting jointly or in concert acquire 50% voting control or 50% of the equity of Points (a "Change of Control"), or (iii) there is a sale of all or substantially all of the assets of Points. The Dividend is approximately equal to $4,000,000 plus an amount calculated on the basis of a notional dissolution of the Corporation where the holder of the Series One Preferred Share is entitled to share pro rata (on the basis that the Series One Preferred Share represents that number of Common Shares into which the Debenture is then convertible) with the holders of all other participating shares in distributions from the assets of Points and assuming, for this purpose, that the value of the assets of Points available for distribution on this notional dissolution is the value attributable to the equity of Points implied by the transaction giving rise to the dividend event, as adjusted for the value of non Common Share equity not valued in the transaction giving rise to the Dividend. In no event may the Dividend exceed $24,000,000. Where an event occurs giving rise to the Dividend, CIBC Capital Partners is entitled to accelerate all amounts owing under the Debenture. In connection with the IAC Investment, the Debenture was amended such that (i) the Debenture is repayable (without accrued interest, the repayment of which is waived) by Points within 30 days of a Change of Control of Points resulting from the exercise of the Warrants and (ii) the Debenture is not convertible for so long as the Warrants are outstanding and will not be convertible after the Warrants are exercised if the Debenture is repaid within 30 days of the Change in Control resulting from the exercise of the Warrants. Points and CIBC Capital Partners also acknowledged, in connection with the IAC Investment, that in the event of the exercise of the Warrants resulting in a Change of Control, the application of the terms of the Series One Preferred Share in that situation results in the Dividend equalling the lesser of (i) $24,000,000 and (ii) $4,000,000 plus the number of Common Shares into which the Debenture is then convertible, multiplied by the exercise price paid per Common Share on the exercise of the Warrants. Points has agreed that, within 30 days of the exercise of the Warrants in full, it will pay all amounts owing under the Debenture and the Series One Preferred Share. Except in connection with the exercise of the Warrants by IAC, Points is not entitled to pre-pay the Debenture. Page 24 of 32

Maturity of Debenture Assuming the Warrants have not been exercised and the Debenture matures on March 15, 2005, the Corporation will be required to repay $6 million of principal and $3,108,422 of accrued interest. The repayment of $9,108,422 of principal and accrued interest will cause the Corporation to be in a negative working capital position, may materially threaten its solvency and/or may severely restrict the ability to grow its business. There is no certainty that the Corporation would have sufficient cash at such time to make the repayment. However, CIBC Capital Partners has the option to extend the maturity date from March 15, 2005 for up to three additional one-year extensions. Exercise of Warrants If the Warrants are exercised resulting in a Change of Control prior to the maturity of the Debenture, as at the date hereof and based on the Corporation's current share capitalization, the Corporation would receive between approximately $82.3 million and $91.5 million, depending on the year of exercise. On the exercise of the Warrants resulting in a Change of Control, the Corporation would be required to repay the $6 million principal amount of the Debenture and pay the Dividend, which would then be payable on the Series One Preferred Share (up to a maximum of $24 million). In this situation, management expects that Points would have sufficient cash to make such payments. Redemption Rights of Series Two Preferred Share Holder Unless the Series Two Preferred Share has been converted at the option of the holder, Points will be required to redeem the Series Two Preferred Share upon the earlier of (i) March 31, 2013 and (ii) a person (other than the holder of the Series Two Preferred Share) acquiring shares of Points sufficient to elect a majority of the board of directors of Points (a "Series Two Share Change of Control"). In the event of redemption of the Series Two Preferred Share on a Series Two Share Change of Control, the redemption amount payable will be equal to the greater of (i) 125% of the amount equal to (A) the subscription price of the Series Two Preferred Share plus (B) a return on that subscription price equal to 7% per annum, calculated from the date of issue of the Series Two Preferred Share to the date on which the Series Two Preferred Share is redeemed and (ii) the greater of (A) the value of the Common Shares into which the Series Two Preferred Share then could be converted on the day immediately prior to public announcement of the Series Two Share Change of Control and (B) the product of the Common Shares into which the Series Two Preferred Share then could be converted and the fair market value of the consideration paid per Common Share in the transaction resulting in the Series Two Share Change of Control. Other Change of Control Event Upon the occurrence of an event that is a Change of Control and a Series Two Share Change of Control, and is unrelated to the exercise of the Warrants by IAC, Points may not have sufficient cash to pay the Dividend, the amounts due under the Debenture and/or the redemption amount on the Series Two Preferred Share. As such, it is unlikely that management would consider a Page 25 of 32

transaction that triggered the above payments unless the transaction provided for payment of the outstanding obligations. Partner Purchase Commitments SEPT. 30 JUNE 30 SEPT. 30 ASSET RELATED TO MILEAGE PURCHASES AS AT 2004 2004 2003 - ---------------------------------------- ---------- ---------- -------- Prepaid Mileage $ 575,950 $ 592,707 $517,977 Sundry assets and other prepaid expenses 652,090 678,744 328,492 ---------- ---------- -------- TOTAL $1,228,040 $1,271,451 $846,469 ========== ========== ======== As part of the contractual requirements of certain commercial agreements, Points has committed to purchase miles and points from partners at predetermined rates. When purchased, the points are recorded as an asset (i.e., prepaid expense) until expensed as marketing expenditures in the period of use. A large portion of the current prepaids and sundry assets of the Corporation include prepaid mileage commitments purchased from the Corporation's partners. While prepaid points may remain the same or lower as an overall percentage of prepaids and sundry assets, management expects the prepaid points account to increase as a result of the mileage purchase commitments from various partners. Commitments Related to MilePoint Acquisition On March 31, 2004 Points completed the MilePoint Acquisition. The purchase price for the assets of MilePoint was $7.5 million and was satisfied through a combination of $3.5 million in cash and four million Common Shares (worth approximately $4 million at the time of the transaction). An initial $1.9 million was paid in cash on closing, with the balance payable semi-annually over two years. The four million shares were issued into escrow on closing and will be released to MilePoint in four unequal tranches over two years. To date, professional fees of approximately $425,000 and payments for transition services of $365,515 have been incurred in the transaction and have been capitalized and allocated to goodwill. A portion of the Acquisition Payable (short term and long term) are interest free and discounted at the appropriate current market rate. The total discount of $50,000 will be charged to interest expense over the life of the Acquisition Payable. Points' business objective in acquiring the assets of MilePoint was to increase its volume of business at minimal additional costs outside of the purchase price and transition costs. Management expects that the acquisition will increase revenues and, including all amortizations, be accretive to net income by the end of 2004. It is expected that the revenue/cash flow from the acquired assets will be sufficient to pay the cash portion of the purchase price over the 24-month period following the acquisition. Management believes that the Corporation's established facilities and existing employees, working in conjunction with MilePoint resources retained during the transition period, will be sufficient to sustain the additional volume of business from the acquired assets. Page 26 of 32

The impact of the acquisition to Points' balance sheet in 2004 will be to increase intangible assets by $3,675,000 and goodwill by $3,975,000. The amortization of the assets is based on the estimated life of the acquired assets (i.e., the partner contracts). The amortization and the balance of the purchased intangible assets are approximately as follows: AMOUNT IN ($000'S) SEPT 30, 2004 - ------------------ ------------- Accumulated Amortization $ 387 Intangible Asset - Closing Balance 3,293 Goodwill 4,559 In addition to the existing revenue streams acquired from MilePoint, offering Points Solutions to the customers acquired from MilePoint represents a potentially valuable stream of revenue. As with any acquisition, the smooth transition into the Corporation's operations poses challenges. Transition risks include difficulties in integrating MilePoint's business into the Corporation's and the possibility of human resources capacity limits to launch additional new partners during the transition. The payment of the purchase price under the terms of the MilePoint Acquisition is as follows: Months from Closing ---------------------------------------------- Payout (000's) 0 4 6 12 18 24 SHARES CASH - -------------- ------ ------ ---- ---- ------ ----- ------ ------ Cash $1,900 $ -- $400 $400 $ 400 $400 $3,500 Shares -- 1,300 -- 700 1,500 500 4,000 Share Value(1) -- 1,300 -- 700 1,500 500 4,000 ----- ------ TOTAL 4,000 $7,500 ===== ====== Note: (1) Based on the simple 20-day weighted average Common Share price of $1.00 per share at signing. In 2004, the Corporation paid $1.9 million on April 1st and $400,000 on October 1st in cash in partial satisfaction of the purchase price for MilePoint's business. In addition, MilePoint and the Corporation are party to a Transition Services Agreement ("TSA") whereby MilePoint employees and resources will continue to support the products and partner relationships throughout 2004. Under the TSA, the Corporation has agreed to reimburse MilePoint for expenses incurred in providing transition services, to a maximum of US$417,000 (of which C$312,819 or US$235,000 has been paid to date). Points has also entered into a consulting agreements with MilePoint and one of its senior business development principals. The consultant will be focused on supporting existing relationships and selling Points Solutions to existing and new partners. Page 27 of 32

Management of Points expects that the cash cost of the MilePoint Acquisition will largely be recaptured through the new revenue provided by the purchased assets over the 24-month period following March 31, 2004. Commitments Related to Lease Financing Arrangements While the Corporation has completed its capital lease obligations in 2003, several operating leases for hardware and premises remain outstanding. In the second quarter, the Corporation signed a 45-month sublease agreement in a larger facility. In exchange for a 27-month lease extension, the landlord advanced the Corporation $107,000 for leasehold improvements (see "Loan Payable" in table below). The Loan Payable is to be repaid over the term of the original sub-lease. Each payment is approximately $2,600 and there are 41 payment periods remaining. The Corporation's lease at its former premises will expire in February 2005. In 2004, the Corporation will be paying approximately $226,000 for its former office facilities (approximately 8,050 square feet) and $190,000 for its new office facilities (approximately 18,000 square feet). Property lease costs are outlined in the table below. Beginning June 1, 2004, the Corporation was able to complete a sublet arrangement for a portion of the former premises. The sublet covers approximately 25% of the cost of the premises and expires in February 2005. The projected figures do not include leasehold improvement amounts for Points' new facilities. Leasehold improvements for the new facilities are included in 2004 capital expenditures (see "Planned Capital Expenditures" below). The operating leases primarily relate to specific office technology and technology service commitments. ANNUAL AMOUNTS IN ($000'S) 2008 2007 2006 2005 2004 - -------------------------- ---- ---- ---- ---- ------ OPERATING LEASES $ 96 $384 $401 $418 $ 346 Property lease Technology services commitment 11 11 11 84 866 ---- ---- ---- ---- ------ OPERATING LEASES TOTAL 107 396 412 502 1,212 ==== ==== ==== ==== ====== LOAN PAYABLE $ 5 $ 30 $ 30 $ 30 $ 12 ==== ==== ==== ==== ====== Page 28 of 32

CAPITAL RESOURCES Planned Capital Expenditures In the second quarter of 2004, the Corporation incurred significant Leasehold Improvement costs in connection with its move to new facilities (see table below). The project is complete and management does not expect to incur any additional material expenditures related to the leasehold improvements. For the three months ended For the nine months ended ------------------------------ ------------------------- SEPT. 30 JUNE 30 SEPT. 30 SEPT. 30 SEPT. 30 CAPITAL EXPENDITURES AS AT 2004 2004 2003 2004 2003 - -------------------------- -------- -------- -------- ---------- -------- Leasehold Improvements $ 84,098 $305,158 $ -- $ 547,504 $ -- Points.com Version 3.0 Technology 473,062 $ -- $ -- 473,062 -- Computer Hardware, Software and Other 107,650 234,673 113,063 395,739 $234,774 -------- -------- -------- ---------- -------- TOTAL $664,810 $539,831 $113,063 $1,416,305 $234,774 ======== ======== ======== ========== ======== The Corporation expects to increase its capital expenditures related to computer hardware and software to approximately $156,000. Expected software expenditures include: licenses ($87,000), upgrades to internal reporting tools ($49,000) and hardware ($20,000). Management believes that the hardware and software capital expenditures are necessary to keep the development of the Corporation's primary technology assets in line with industry standards. The Corporation expects to incur significant capital expenditure related to the development of Points.com Version 3.0. In accordance with CICA handbook sections 3061 and 3062 and Canadian GAAP, website development costs incurred in the website application and infrastructure development will be capitalized and subsequently amortized in accordance with the Corporation's accounting policies. The Corporation will begin amortizing the capital asset when Points.com Version 3.0 is launched (expected to be on or around April 1, 2005). Direct net new technology developed subsequent to the launch of Points.com Version 3.0 will be capitalized in accordance with the Corporation's accounting policies. Costs to maintain Points.com Version 3.0 will be expensed in the period the costs are incurred. Website development costs incurred to date and capitalized to the website under property, plant and equipment consist of employment related costs of $384,796 and other direct costs of $88,266. The capitalized costs in each of the fourth quarter 2004 and the first three quarters of 2005 will likely be greater than the costs incurred in the third quarter of 2004. The expected increase in the capitalized costs will be impacted by whether management decides to contract any of the development to third parties and by annualizing the costs of employees hired during the third quarter. Estimates are provided for the capitalized expenses for the fourth quarter of 2004 and the fiscal year 2005 in the table below. Page 29 of 32

For the three months ended --------------------------------------------------------------- SEPT 30 DEC 31 MAR 31 JUNE 30 SEPT 30 DEC 31 WEBSITE DEVELOPMENT COSTS 2004 2004 2005 2005 2005 2005 - ------------------------- -------- -------- -------- -------- -------- -------- Employment related costs $384,796 $613,521 $692,377 $468,929 $453,955 $409,421 Other direct costs 88,266 115,000 125,000 75,000 50,000 50,000 -------- -------- -------- -------- -------- -------- TOTAL $473,062 $758,521 $817,377 $543,929 $503,955 $459,421 ======== ======== ======== ======== ======== ======== Management will continue to fund 2004 and 2005 capital expenditures from its working capital and/or cash flow from operations. UNPLANNED SECURITIES ISSUANCES Pursuant to the terms of the Debenture, the Investor's Rights Agreement dated April 11, 2003 between IAC, Points and an affiliate of IAC and the terms of the Series Two Preferred Share, IAC and CIBC Capital Partners have significant control over the Corporation's ability to raise capital whether by way of an equity issuance or the incurrence of debt. However, in the event the Corporation requires additional capital, it does not expect that any required consents would be unreasonably withheld. Based on expected revenue and available resources, Points does not expect to require any additional equity financing to facilitate growth of the business or current operations. 34. Outstanding Share Data As at the date hereof, the Corporation has 69,928,403 Common Shares outstanding, one Series One Preferred Share and one Series Two Preferred Share. The Series One Preferred Share is convertible into one Common Share in certain circumstances. Subject to anti-dilution adjustment, based on Points' current capitalization, the Series Two Preferred Share is convertible into 22,030,844 Common Shares. The Corporation has outstanding options exercisable to acquire up to 6,050,558 Common Shares. The options have exercise prices ranging from $0.22 to $1.37 with a weighted average exercise price of $0.71. The expiration dates of the options range from Feb. 14, 2005 to April 21, 2009. The Corporation's subsidiary, Points.com, has outstanding options exercisable to acquire up to 2,590,499 common shares of Points.com. The holders of these options have been granted the right to put the shares acquired on the exercise thereof to the Corporation in return for Common Shares with a fair market value equal to the fair market value so put. The Corporation has used a ratio of 2.5039 Common Shares to one Points.com share for this purpose and has authorized the issuance of up to a maximum of 6,486,347 Common Shares in this regard. The Points.com options have exercise prices ranging from $0.005 to $0.055 with a weighted average exercise price of $0.04. The expiration dates of the options range from February 17, 2005 to September 1, 2005. Page 30 of 32

The Corporation has outstanding warrants exercisable to acquire up to 82,740,569 Common Shares. The warrants have exercise prices ranging from $0.25 to $1.01 with a weighted average exercise price of $1.00. The expiration dates of the options range from October 21, 2004 to April 11, 2006. The Corporation has outstanding an 11% $6,000,000 senior secured convertible Debenture which is convertible into 18,908,070 Common Shares. The Debenture is not convertible for the period that the Warrants are outstanding. At the option of the Debenture holder, the maturity of the Debenture is extendible for up to three additional one-year periods. Assuming the Warrants have not been exercised and the Debenture matures on March 15, 2005, the Corporation will be required to repay $6 million of principal and $3,108,422 of accrued interest. It is possible that the repayment of $9,108,422 million of principal and accrued interest will cause the Corporation to be in a negative working capital position, may materially threaten its solvency and/or may severely restrict the ability to grow its business. There is no certainty that the Corporation would have sufficient cash at such time to make the repayment. Page 31 of 32

Selected Financial Results and Highlights THREE MONTHS ENDED NINE MONTHS ENDED --------------------------------------- ------------------------- SEPT. 30, JUNE 30, SEPT. 30, SEPT. 30, SEPT. 30, INCOME STATEMENT 2004 2004 2003 2004 2003 - ---------------- ----------- ----------- ----------- ----------- ----------- Revenue $ 1,978,942 $ 2,032,136 $ 1,647,566 $ 5,628,642 $ 4,409,326 General and administrative expenses 2,905,198 3,098,792 2,160,979 8,654,946 5,378,154 Loss before interest, amortization and other deductions (926,256) (1,066,656) (513,413) (3,026,304) (968,828) Net income (loss) (2,001,764) (2,153,069) (1,628,391) (6,056,427) (3,930,215) Net income (loss) per share - - basic ($0.03) ($0.03) ($0.03) ($0.09) ($0.07) - - fully diluted n/a n/a n/a n/a n/a BALANCE SHEET AS AT SEPT. 30, 2004 JUNE 30, 2004 DEC 31, 2003 SEPT. 30, 2003 - ------------------- -------------- ------------- ------------ -------------- Cash and cash equivalents $ 15,251,307 $ 18,427,174 $ 20,274,836 $ 21,833,287 Total assets(1) $ 31,210,243 $ 34,063,056 27,481,286 29,456,796 Long-term liabilities 22,822,472 22,692,655 21,060,850 20,484,978 CASH DIVIDENDS DECLARED PER SHARE -- -- -- -- SHAREHOLDERS EQUITY - - warrants 2,743,957 2,759,390 2,785,737 2,785,737 - - capital stock 22,057,996 21,983,696 17,728,461 17,726,761 - - retained earnings (31,793,434) (29,791,670) (25,737,007) (23,131,031) ------------ ------------ ------------ ------------ TOTAL $ (6,991,482) $ (5,048,584) $ (5,222,809) $ (2,618,533) ============ ============ ============ ============ Note: (1) Financial results from minority holdings are not consolidated into the Corporation's consolidated financial statements, as the Corporation does not exercise control in these entities. POINTS INTERNATIONAL LTD. SUMMARY OF QUARTERLY RESULTS (UNAUDITED) QUARTER ENDED REVENUES NET LOSS LOSS PER SHARE(1) - ------------- ---------- ----------- ----------------- September 30, 2004 $1,978,942 ($2,001,764) ($0.03) June 30, 2004 $2,032,136 ($2,153,069) ($0.03) March 31, 2004 $1,617,565 ($1,901,594) ($0.03) December 31, 2003 $1,449,378 ($2,605,974) ($0.04) September 30, 2003 $1,647,566 ($1,628,391) ($0.03) June 30, 2003 $1,457,568 ($1,283,337) ($0.02) March 31, 2003 $1,304,192 ($1,018,489) ($0.02) December 31, 2002 $ 911,940 ($1,762,000) ($0.03) September 30, 2002 $ 729,467 ($1,725,072) ($0.03) Note: (1) The fully diluted loss per share has not been computed, as the effect would be anti-dilutive. Page 32 of 32

FORM 52-109FT2 - CERTIFICATION OF INTERIM FILINGS DURING TRANSITION PERIOD I, T. Robert MacLean, Chief Executive Officer of Points International Ltd., certify that: 1. I have reviewed the interim filings (as this term is defined in Multilateral Instrument 52-109 Certification of Disclosure in Issuers' Annual and Interim Filings) of Points International Ltd., (the issuer) for the interim period ending September 30, 2004; 2. Based on my knowledge, the interim filings do not contain any untrue statement of a material fact or omit to state a material fact required to be stated or that is necessary to make a statement not misleading in light of the circumstances under which it was made, with respect to the period covered by the interim filings; and 3. Based on my knowledge, the interim financial statements together with the other financial information included in the interim filings fairly present in all material respects the financial condition, results of operations and cash flows of the issuer, as of the date and for the periods presented in the interim filings. DATED this 9th day of November, 2004. [original signature] ---------------------------------------- T. Robert MacLean Chief Executive Officer

FORM 52-109FT2 - CERTIFICATION OF INTERIM FILINGS DURING TRANSITION PERIOD I, Stephen Yuzpe, Chief Financial Officer of Points International Ltd., certify that: 1. I have reviewed the interim filings (as this term is defined in Multilateral Instrument 52-109 Certification of Disclosure in Issuers' Annual and Interim Filings) of Points International Ltd., (the issuer) for the interim period ending September 30, 2004; 2. Based on my knowledge, the interim filings do not contain any untrue statement of a material fact or omit to state a material fact required to be stated or that is necessary to make a statement not misleading in light of the circumstances under which it was made, with respect to the period covered by the interim filings; and 3. Based on my knowledge, the interim financial statements together with the other financial information included in the interim filings fairly present in all material respects the financial condition, results of operations and cash flows of the issuer, as of the date and for the periods presented in the interim filings. DATED this 9th day of November, 2004. [original signature] ---------------------------------------- Stephen Yuzpe Chief Financial Officer

Exhibit 99.8 POINTS INTERNATIONAL LTD. UNAUDITED INTERIM CONSOLIDATED FINANCIAL STATEMENTS JUNE 30, 2004 Page 1 of 9

POINTS INTERNATIONAL LTD. UNAUDITED CONSOLIDATED BALANCE SHEETS June 30, December 31, AS AT 2004 2003 - ----- ----------- ------------ ASSETS CURRENT Cash and cash equivalents 18,427,174 20,274,836 Accounts receivable 1,339,237 1,004,370 Prepaids and sundry assets 1,271,451 825,221 ----------- ----------- 21,037,862 22,104,427 LONG-TERM INVESTMENTS 161,629 161,629 PROPERTY,PLANT AND EQUIPMENT 1,116,157 513,723 INTANGIBLE ASSETS (Note 7) 8,736,664 1,320,692 DEFERRED COSTS 2,420,745 2,790,816 FUTURE INCOME TAXES RECOVERABLE 590,000 590,000 ----------- ----------- 13,025,194 5,376,859 $34,063,056 $27,481,286 =========== =========== Page 2 of 9

POINTS INTERNATIONAL LTD. UNAUDITED CONSOLIDATED BALANCE SHEETS June 30, December 31, AS AT 2004 2003 - ----- ------------ ------------ LIABILITIES CURRENT Accounts payable and accrued liabilities 931,188 1,187,598 Deposits 14,668,589 10,455,646 Current portion of acquisition loan payable 819,208 -- ------------ ------------ 16,418,985 11,643,244 ACQUISITION LOAN PAYABLE 765,123 -- CONVERTIBLE DEBENTURE 8,469,055 8,036,372 CONVERTIBLE PREFERRED SHARES 13,458,478 13,024,478 ------------ ------------ 39,111,640 32,704,094 ------------ ------------ SHAREHOLDERS' EQUITY CAPITAL STOCK 21,983,696 17,728,461 WARRANTS 2,759,390 2,785,737 RETAINED EARNINGS (29,791,670) (25,737,007) ------------ ------------ (5,048,584) (5,222,809) ------------ ------------ $ 34,063,056 $ 27,481,286 ============ ============ Page 3 of 9

POINTS INTERNATIONAL LTD. UNAUDITED INTERIM CONSOLIDATED STATEMENTS OF OPERATIONS AND DEFICIT 6 Month Period 3 Month Period ----------------------------- ----------------------------- FOR THE PERIOD ENDED JUNE 30, 2004 Jan-Jun 30/04 Jan-Jun 30/03 Apr-Jun 30/04 Apr-Jun 30/03 - ---------------------------------- ------------- ------------- ------------- ------------- REVENUES Points operations $ 3,481,082 $ 2,626,368 $ 1,948,570 $ 1,342,847 Interest revenue 168,618 135,393 83,566 114,721 ------------ ------------ ------------ ------------ 3,649,700 2,761,761 2,032,136 1,457,568 GENERAL AND ADMINISTRATION 5,749,749 3,217,177 3,098,792 1,710,455 ------------ ------------ ------------ ------------ LOSS - Before interest, amortization and other deductions (2,100,048) (455,416) (1,066,656) (252,887) ------------ ------------ ------------ ------------ Interest on Convertible Debt 432,683 330,000 225,659 165,000 Interest on Series Two Preferred Share 434,000 190,478 217,000 190,478 Interest and Bank Charges 70,702 6,912 70,441 2,364 Amortization of Capital & Intangible Assets and Deferred Costs 1,017,229 1,319,019 573,312 672,608 ------------ ------------ ------------ ------------ 1,954,614 1,846,409 1,086,412 1,030,450 ------------ ------------ ------------ ------------ LOSS - From continuing operations (4,054,663) (2,301,825) (2,153,069) (1,283,337) ------------ ------------ ------------ ------------ NET LOSS (4,054,663) (2,301,825) (2,153,069) (1,283,337) DEFICIT - Beginning of period (25,737,007) (19,200,816) (27,638,601) (20,219,304) DEFICIT - End of period (29,791,670) (21,502,641) (29,791,670) (21,502,641) ============ ============ ============ ============ LOSS PER SHARE (Note 2) ($0.06) ($0.04) ($0.03) ($0.02) ============ ============ ============ ============ Page 4 of 9

POINTS INTERNATIONAL LTD. UNAUDITED INTERIM CONSOLIDATED STATEMENTS OF CASH FLOWS 6 Month Period 3 Month Period ------------------------------ ----------------------------- FOR THE PERIOD ENDED JUNE 30, 2004 Jan-June 30/04 Jan-Jun 30/03 Apr-Jun 30/04 Apr-Jun 30/03 - ---------------------------------- -------------- ------------- ------------- ------------- CASH FLOWS FROM OPERATING ACTIVITIES Net loss $(4,054,663) $(2,301,825) $(2,153,069) $(1,283,337) Items not affecting cash Amortization of property, plant and equipment 149,061 758,611 92,707 383,440 Amortization of deferred costs 327,472 182,306 128,126 100,116 Amortization of intangible assets 540,696 378,100 352,479 189,050 Cancellation of warrants issued for services (1,167) -- -- -- Interest on Series Two Preferred Shares 434,000 190,478 217,000 190,478 Interest accrued on convertible debenture 432,683 330,000 225,659 165,000 ----------- ----------- ----------- ----------- (2,171,918) (462,330) (1,137,098) (255,253) Changes in non-cash balances related to operations (Note 6 a) 3,182,347 2,766,004 (1,977,032) (646,686) ----------- ----------- ----------- ----------- CASH FLOWS PROVIDED BY OPERATING ACTIVITIES 1,010,429 2,303,674 (3,114,130) (901,939) ----------- ----------- ----------- ----------- CASH FLOWS FROM INVESTING ACTIVITIES Purchase of property, plant and equipment, net of proceeds (751,495) (121,711) (539,831) (41,764) Purchase of intangible assets (20,283) (91,962) (3,279) (56,588) Payments for the acquisition of MilePoint, Inc. (1,900,000) (1,900,000) Costs related to the acquisition of MilePoint, Inc. (Note 7) (486,385) -- (286,385) -- ----------- ----------- ----------- ----------- CASH FLOWS USED IN INVESTING ACTIVITIES (3,158,163) (213,673) (2,729,495) (98,352) ----------- ----------- ----------- ----------- CASH FLOWS FROM FINANCING ACTIVITIES Issuance of Warrants -- 2,700,000 -- 2,700,000 Issuance of Series Two Preferred Share -- 12,400,000 -- 12,400,000 Deferred financing costs 70,018 (717,048) -- (717,048) Repayment of obligations under capital leases -- (235,716) -- (120,804) Issuance of capital stock, net of share issue costs 230,053 817,942 27,568 664,287 ----------- ----------- ----------- ----------- CASH FLOWS PROVIDED BY FINANCING ACTIVITIES 300,071 14,965,178 27,568 14,926,435 ----------- ----------- ----------- ----------- INCREASE (DECREASE) IN CASH (1,847,662) 17,055,179 (5,816,057) 13,926,144 CASH AND CASH EQUIVALENTS - Beginning of period 20,274,836 7,341,700 24,243,231 10,470,735 ----------- ----------- ----------- ----------- CASH AND CASH EQUIVALENTS - End of period $18,427,174 $24,396,879 $18,427,174 $24,396,879 =========== =========== =========== =========== Page 5 of 9

POINTS INTERNATIONAL LTD. NOTES TO UNAUDITED INTERIM CONSOLIDATED FINANCIAL STATEMENTS JUNE 30, 2004 1. Accounting policies The company's interim financial statements have been prepared using accounting policies consistent with those used for the preparation of its annual financial statements. These interim financial statements should be read in conjunction with the company's 2003 audited consolidated financial statements. These financial statements contain all adjustments which management believes necessary for fair presentation of the financial position, results of operations and cash flows. a) Basis of presentation The consolidated financial statements include the accounts of the Company and from their respective dates of acquisition of control or formation of its wholly owned subsidiaries. All inter-company transactions and amounts have been eliminated on consolidation. b) Goodwill Goodwill represents the excess of the purchase price of acquired companies over the estimated fair value of the tangible and intangible net assets acquired. Goodwill is not amortized. The company currently compares the carrying amount of the goodwill to the fair value, at least annually, and recognizes in net income any impairment in value. c) Intangible assets Intangible assets represent the fair value of contracts acquired by the company on MilePoint, Inc, acquisition. The carrying value of these contracts will be amortized on a straight-line basis over the life of the contracts. 2. Loss per share a) Loss per share Loss per share is calculated on the basis of the weighted average number of common shares outstanding for the six months ended June 30, 2004 that amounted to 64,250,018 shares (June 30, 2003 - 55,287,446). b) Fully-diluted loss per share The fully-diluted loss per share has not been computed, as the effect would be anti-dilutive. Page 6 of 9

3. Segmented information Reportable segments: The company has only one operating segment whose operating results are regularly reviewed by the company's chief operating decision maker and for which complete and discrete financial information is available. The company's business is carried on in the industry of loyalty program asset management. The attached consolidated balance sheets as at June 30, 2004 and December 31, 2003 present the financial position of this segment. The continuing operations reflected on the attached consolidated statements of operations are those of this operating segment. Enterprise-wide disclosures: $3,351,765 (June 30, 2003 - $2,598,340) of the company's revenues were generated in the U.S. for the six month period, with the remaining revenues generated in Canada, Europe and Asia. A significant majority of the company's assets are located in Canada. 4. Economic dependence For the six-month period ended June 30, 2004, approximately 51% of the company's revenues are from its two largest customers (63% at June 30, 2003). In addition, as at June 30, 2004, 73% of the company's deposits are due to these customers (64% as at June 30, 2003). 5. Stock-based compensation Effective January 1, 2002 the company adopted CICA 3870 ("Stock-based Compensation and Other Stock-based Payments"). As permitted by CICA 3870 the company has applied this change prospectively for new awards granted on or after January 1, 2002. The company has chosen to recognize no compensation when stock options are granted to employees and directors under stock option plans with no cash settlement features. In periods prior to January 1, 2002 the company recognized no compensation when stock or stock options were issued to employees. Supplementary pro forma information regarding net income is required by CICA 3870 as if the company had accounted for its employee stock options granted after December 31, 2001 under the fair value method. During the quarter ended June 30, 2004, 869,407 were issued to employees. For purposes of pro forma disclosures, the estimated fair value of the options is amortized to expense over the options' vesting periods. The company's pro forma net income under Canadian GAAP would be reduced [loss increased] by approximately $173,579 for the six months ended June 30, 2004. Loss-per-share figures would not have changed. Page 7 of 9

6. Statement of Cash Flows a) Changes in non-cash balances related to operations are as follows: THREE MONTHS ENDED SIX MONTHS ENDED JUNE 30, JUNE 30, ----------------------- ----------------------- 2004 2003 2004 2003 ----------- --------- ---------- ---------- Decrease (Increase) in accounts receivable $ (452,137) $(458,002) $ (334,867) $ (692,145) Decrease(Increase) in prepaid and sundry assets (145,784) 36,166 (446,230) (136,596) Decrease(Increase) in deferred costs (27,420) -- (27,420) -- Increase (Decrease) in accounts payable and accrued liabilities (30,620) 357,722 (256,411) 218,702 Increase (Decrease) in deposits (1,280,895) (582,572) 4,212,942 3,376,043 Increase (Decrease) in liability related to MilePoint, Inc. acquisition (40,176) -- 34,333 -- ----------- --------- ---------- ---------- $(1,977,032) $(646,686) $3,182,347 $2,766,004 =========== ========= ========== ========== b) Supplemental information Interest and taxes Interest of $70,702 was paid during the six month period ended June 30, 2004. Interest of $154,354 was received during the six month period ended June 30, 2004. No income taxes have been paid. Non-cash transactions Non-cash transactions for the six months ended June 30, 2004 are as follows: (i) 406,954 shares of Points.com Inc. were acquired in exchange for 1,018,974 shares of the Corporation. (ii) 4,000,000 shares (valued at $4,000,000) of the Corporation were issued as part consideration in the acquisition of MilePoint, Inc. (see Note 7). (iii) $20,000 of revenue earned for hosting services provided was paid in loyalty currency. The currency was valued at the purchase price of the miles. The expense will be recognized as the currency is used. (iv) The Corporation received $80,643 of loyalty currency from a partner as reimbursement of a portion of the partner's direct expenses for the services provided by the Corporation. (v) Interest of $432,683 was accrued on the convertible debenture. (vi) Interest of $434,000 was accrued on the Series Two Preferred. Page 8 of 9

c) Cash and cash equivalents consist of: June 30, December 31, AS AT 2004 2003 - ----- ----------- ------------ Cash $11,826,968 $ 9,046,701 Short-term investments $ 4,366,931 $ 9,627,468 Cashheld by credit card processor $ 2,233,275 $ 1,600,667 ----------- ----------- Total $18,427,174 $20,274,836 =========== =========== 7. MilePoint Inc. Acquisition On March 31, 2004 Points acquired substantially all of the assets of MilePoint, Inc., a loyalty program technology provider and operator. The purchase price of $7.5 million was satisfied through a combination of $3.5 million in cash payable, without interest, over two years and four million common shares. The cost of the acquisition and the fair values assigned are as follows: Intangibles $ 225,000 Contracts with Partners 3,450,000 Goodwill 4,261,385 ---------- $7,936,385 ========== Consideration: Cost of Transaction $ 486,385 Capital Stock Issued 4,000,000 Acquisition Loan Payable 3,450,000 ---------- $7,936,385 ========== The acquired contracts with partners will be amortized over the life of the contracts. The goodwill and other intangibles will not be amortized; these will be reviewed annually and any permanent impairment will be recorded and charged to income in the year that the impairment has occurred. The loan payable, which has a face value of $3,500,000, is discounted to its fair value as it is non interest bearing and due over two years. 8. MilePoint Inc. Acquisition Payments Remaining payments under the terms of the acquisition loan payable are as follows: Acquisition Loan Payable $1,584,331 Less: Current Portion 819,208 ---------- Long-Term Portion $ 765,123 ========== Page 9 of 9

POINTS INTERNATIONAL LTD. INTERIM MANAGEMENT'S DISCUSSION AND ANALYSIS The following interim management's discussion and analysis ("MD&A") of the performance, financial condition and future prospects of Points International Ltd. (which is also referred to herein as "Points" or the "Corporation") should be read in conjunction with the Corporation's consolidated financial statements (including the notes thereon) for the quarter ended June 30, 2004 and with the Corporation's 2003 audited consolidated financial statements. Further information, including Points' Annual Information Form ("AIF") for the year ended December 31, 2003, may be accessed at www.sedar.com. All financial data herein has been prepared in accordance with Canadian generally accepted accounting principles ("GAAP") and all dollar amounts herein are in Canadian dollars unless otherwise specified. This MD&A is dated as of July 30, 2004. FORWARD-LOOKING STATEMENTS Some of the statements contained or incorporated by reference in this MD&A, including those relating to Points' strategies and other statements that are predictive in nature, that depend upon or refer to future events or conditions, or that include words such as "expects," "anticipates," "intends," "plans," "believes," "estimates" or similar expressions, are forward-looking statements within the meaning of Canadian securities laws. Forward-looking statements include, without limitation, the information concerning possible or assumed future results of operations of Points as set forth herein. These statements are not historical facts but instead represent only Points' expectations, estimates and projections regarding future events. The forward-looking statements contained or incorporated by reference in this MD&A are not guarantees of future performance and involve certain risks and uncertainties that are difficult to predict. The future results and shareholder value of Points may differ materially from those expressed in the forward-looking statements contained or incorporated by reference in this MD&A due to, among other factors, the risks and uncertainties discussed herein, the matters set forth under "Risks and Uncertainties" contained in Points' AIF filed with Canadian securities regulators and the factors detailed in Points' other filings with Canadian securities regulators, including the factors detailed in Points' annual and interim financial statements and the notes thereto. Points does not undertake any obligation to update or release any revisions to these forward-looking statements to reflect events or circumstances after the date of this MD&A or to reflect the occurrence of unanticipated events, except as required by law. Page 1 of 29

OVERVIEW OF POINTS' BUSINESS CORE BUSINESS - Points Solutions Points has developed a proprietary technology platform that allows it to offer a portfolio of solutions, referred to as the Points Solutions, to the loyalty program industry. The Points platform was designed to create value for consumers and loyalty programs alike. The Points Solutions are comprised of the Points Exchange and a suite of Private Branded Solutions available to loyalty program operators. The Points Exchange In April 2001, Points launched its cornerstone product, the proprietary Points Exchange. The Points Exchange is an online service allowing consumers who are members of participating loyalty programs to exchange their loyalty program points and/or miles between the participating loyalty programs. The Points Exchange also serves as a central resource to help individuals track their account balances with a number of their major loyalty programs. Management believes that the Points Exchange is currently the only independent loyalty Points Exchange of its kind. As at June 30, 2004, the Points Exchange had attracted 40 loyalty program participants (as at the date hereof 4 additional partners are under contract but not yet launched), including the loyalty programs of leading airlines, hotels, online businesses, retail businesses and gift certificate programs. Private Branded Solutions In addition to the Points Exchange, Points offers a portfolio of Private Branded Solutions to loyalty programs. This suite of technologies includes: POINTSpurchase and POINTSgift - facilitates the online sale and gift of miles, points and other loyalty program currencies. POINTScorporate - facilitates the sale of loyalty program currencies to corporate customers. POINTStransfer - facilitates the amalgamation or transfer of loyalty program currencies among multiple accounts. POINTSintegrate - functions as a common platform to process transactions between third-party loyalty programs, to simplify and automate a complex and resource-intensive process, with a single integration. POINTSelite - facilitates the online sale of tier status to members of loyalty programs. POINTScustom - custom applications developed for select large loyalty program partners. Page 2 of 29

SIGNIFICANT BUSINESS DEVELOPMENTS IN THE SECOND QUARTER OF 2004 SUITE OF POINTS SOLUTIONS SOLD TO FRONTIER AIRLINES As previously announced, EarlyReturns, the loyalty program for Frontier Airlines ("FRONTIER"), will join the Points Exchange as a tradable loyalty currency. Frontier will also begin using the suite of Points Solutions to support EarlyReturns. These components, hosted and maintained by Points will work seamlessly with Frontier's website to enhance the capabilities of EarlyReturns, allowing members to buy, share, or transfer frequent flyer miles among friends, family and other members. The suite of Points Solutions, expected to launch in 2004, includes POINTSpurchase, POINTSgift, POINTStransfer, and the POINTScorporate solution. EIGHT NEW PARTNERS JOIN THE POINTS EXCHANGE In the second quarter of 2004 Points added four new partners to the Point Exchange. In addition, Points completed contracts to add an additional four new partners to the Points Exchange. These new partners add breadth to the Points Exchange, further expanding the number and variety of exchange options. MILEPOINT ACQUISITION On March 31, 2004, Points acquired substantially all of the assets of MilePoint, Inc. ("MilePoint"), a leading loyalty program technology and service provider (the "MilePoint Acquisition"). The MilePoint Acquisition has allowed Points to add to its partner base relationships with Northwest Airlines, Delta Air Lines and Starwood Hotels, among others, and increase the potential of both the Points Exchange and the Corporation's broad portfolio of Private Branded Solutions. In connection with the MilePoint Acquisition, Points has retained for one year, as consultants, MilePoint's founders and loyalty industry veterans, Mark Lacek and Peter Brennan. Beginning April 1, Points began to recognize both the revenue and expenses associated with the transaction. All revenue and expenses are incorporated into Points' financial results. REVENUE RECOGNITION POLICIES The revenue recognition policies for the suite of Points Solutions are as follows: Points Exchange: - Exchange commissions are a percentage of the exchanged value and are recognized as the services are provided under the terms of related contracts. - Membership dues received in advance for services are recognized over the term of service. Membership dues are $19.95 annually for a PointsPlus membership. - One-time trading fees ($5.95 per trade) are recognized at the time of the trade (for non-PointsPlus members). Page 3 of 29

- Non-refundable partner sign-up fees, for which the Corporation is under no further obligations, are recognized when the program becomes available as an exchange partner on the Points Exchange. Private Branded Solutions: - Revenues from the sale of loyalty program points are recorded net of costs. - Hosting and management fees are recognized in the period of service. - Non-refundable partner sign-up fees with no fixed term, and for which the Corporation is under no further obligations, are recognized as revenue when received. - Technology design, development and maintenance revenues are recorded on a "percentage-of-completion" basis. KEY BUSINESS DRIVERS Revenue growth has historically been, and will continue to be, generated by growth of membership in and use of the suite of Points Solutions (i.e., the Points Exchange and Private Branded Solutions). Growth in the number of individual members using the Points Exchange is driven by three factors that contribute to increased site traffic and the ease with which a consumer can join the Points Exchange to conduct exchange transactions. These factors are website usability and enhancements, marketing (awareness and brand) and partner activity. For additional information, see "Points Exchange Growth" on page 6 hereof. Growth in Private Branded Solutions will occur from organic growth of existing partner relationships, supplemented with new business relationships established throughout the year. For additional information, see "Private Branded Solutions Growth" on page 7 hereof. While the Corporation has no control over the growth of the loyalty program industry, management considers it an important factor in the Corporation's growth prospects. For additional information, see "Growth of Loyalty Program Industry" on page 11 hereof. RESULTS OF OPERATIONS - REVENUES OVERVIEW Revenue for the three months ended June 30, 2004 was $2,032,136 representing a year over year increase of 39% and an increase of 26% over the prior quarter (March 31, 2004). The provision of Points Solutions accounted for approximately 96% of the revenues in the second quarter (interest and other revenue accounted for the remaining four percent). The results for the six-month period ended June 30, 2004 represented a 32% increase in revenues year over year. Page 4 of 29

For the three months ended For the six months ended ------------------------------------ ------------------------ JUNE 30 MARCH 31 JUNE 30 JUNE 30 JUNE 30 REVENUES 2004 2004 2003 2004 2003 - -------- ---------- ---------- ---------- ---------- ---------- Points Operations $1,948,570 $1,532,513 $1,342,847 $3,481,083 $2,626,368 Interest and other revenue 83,566 85,052 114,721 168,618 135,392 ---------- ---------- ---------- ---------- ---------- TOTAL REVENUE $2,032,136 $1,617,565 $1,457,568 $3,649,701 $2,761,760 ========== ========== ========== ========== ========== A substantial portion of Points' revenue is generated through the provision of Private Branded Solutions for loyalty programs by way of fees for technology services and transaction fees or commissions paid to Points by the operators of the loyalty programs. Points earns revenue from the Points Exchange in three principal ways. First, Points charges a commission on all exchanges, based on a value of the loyalty currency tendered for exchange by the loyalty program member. Through the exchange model, the participating loyalty program sets a value on the currency tendered for "sale". Based on this valuation, a percentage is remitted to Points and the remaining balance is used to purchase the currency of another participating loyalty program. Second, loyalty program members pay Points either a fee for each exchange transaction on the Points Exchange or an annual fee for a membership that includes unlimited exchange transactions. Finally, Points may earn a non-refundable partner sign-up fee when a partner joins the Points Exchange. For the three-month period ended June 30, 2004, two key customers represented approximately 40% of the Corporation's gross revenues (for the three-month period ended June 30, 2003, two key customers represented 63% of the Corporation's gross revenues). In addition, two key customers, measured by revenue, represented approximately 73% (June 30, 2003 - 64%) of the Corporation's deposits. One of the two customers in 2004 is not the same customer as in 2003. As additional partner relationships are established and revenues grow, management expects the economic dependence on any key customer to be reduced. In 2004, approximately 97% of the Corporation's revenues were recurring revenues (e.g. revenues from monthly management fees, membership fees and transaction fees) and 3% were from non-recurring sources (e.g. one-time web development and integration fees). For the three months ended For the six months ended ------------------------------------ ------------------------ JUNE 30 MARCH 31 JUNE 30 JUNE 30 JUNE 30 REVENUES 2004 2004 2003 2004 2003 - -------- ---------- ---------- ---------- ---------- ---------- Recurring revenues $1,973,231 $1,572,116 $1,209,788 $3,545,347 $2,223,674 Non-recurring revenues 58,905 45,449 247,780 104,354 538,086 ---------- ---------- ---------- ---------- ---------- TOTAL REVENUE $2,032,136 $1,617,565 $1,457,568 $3,649,701 $2,761,760 ========== ========== ========== ========== ========== Management recognizes that the Corporation must achieve profitability through revenue growth and cost management. As stated in prior disclosure, management continues to expect that Points' revenues will exceed its general and administrative expenses at some point during 2005. Page 5 of 29

REVENUE GROWTH Revenue growth has historically been, and will continue to be, generated by growth of membership in and use of the suite of Points Solutions products. Growth in product usage will occur from the organic growth of existing relationships, supplemented with new business relationships established throughout the year. Management expects the existing contracts to continue to generate growing revenues and, based on continuing business development efforts, is optimistic about new revenue sources in 2004. Growth in Use of the Points Solutions The suite of Points Solutions experiences revenue growth based on the number of loyalty program partners and consumer members who participate in the various programs. For the three months ended Partner Summary - Total Number ---------------------------- of Partners(1) JUNE 30 MARCH 31 JUNE 30 NUMBER OF PARTNERS AS AT 2004 2004 2003 - ------------------------------ ------- -------- ------- Points Exchange 40 36 30 Private Branded Solutions(2) 19 18 10 Cumulative Points Transacted (000,000's) 4,866 3,810 1,827 Notes: (1) Partners may be included in both the Private Branded Solutions and the Points Exchange. (2) Includes seven additional partners acquired in the MilePoint Acquisition as at March 31, 2004. Points Exchange Growth Growth in the number of consumer members using the Points Exchange is driven by three factors that contribute to both increased site traffic and the ease with which a consumer can join the Points Exchange and then conduct exchange transactions: website usability and enhancements; marketing (awareness and brand) and partner activity. Continued enhancements have been made to the website that simplify processes and will allow Points to grow while incurring fewer costs. Points will continue to explore feature and functional improvements, release further enhancements and expand its marketing promotions and programs. To support growth in the Points Exchange, the Corporation hired a Chief Marketing Officer in May 2004 to lead the marketing group. Growth in activity on the Points Exchange is also heavily impacted by partner activity. The number of loyalty program participants, their industry mix and the average number of points/miles required to acquire one point/mile of another loyalty currency (the "Trade Ratio") are important elements in the growth of the Points Exchange. Page 6 of 29

For the three months ended --------------------------------- JUNE 30 MARCH 31 JUNE 30 POINTS EXCHANGE METRICS 2004 2004 2003 - ----------------------- --------- --------- --------- Total Loyalty Programs - cumulative 40 36 30 Trade Ratio(1) 1.48 to 1 1.59 to 1 1.59 to 1 Notes: (1) Average rates are based on all miles and points exchanged and excludes gift certificates. The results are based on actual trades made during the applicable period. The number of loyalty programs participating on the Points Exchange has increased by 33% since the second quarter of 2003 and 11% since the March 31, 2004. Points continues to focus its business development efforts on adding the optimal partners by size and industry to the Points Exchange. Management continuously works with new and existing program participants in an effort to improve the Trade Ratio. Through these efforts, the Trade Ratio has improved relative to June 30, 2003 and March 31, 2004. Management believes that the Trade Ratio is an important (and relative) measure since a better ratio implies a more attractive consumer value proposition. An improved consumer value proposition should lead to more members and more trades. The Trade Ratio is, however, impacted by the number and type of promotions run by the Corporation and by the partners. It can be expected that the Trade Ratio will fluctuate (positively and negatively) over time. Total trades grew by 131% compared to the first quarter of 2004. Management expects to continue to see improvement in this area in 2004. Private Branded Solutions Growth The Private Branded Solutions have been designed with each partner's look and branding. As a result, Points has little impact on driving traffic and transactions through its partners' sites. However, Points has seen continuous growth in the products since each launch. Management expects this trend to continue for new and existing Private Branded Solutions. JUNE 30 MARCH 31 JUNE 30 PRIVATE BRANDED SOLUTIONS METRICS AS AT 2004 2004 2003 - --------------------------------------- ------- -------- ------- Total Unique Partners(1) 19 18 10 Total Private Branded Solutions(2) 48 45 26 Notes: (1) Includes seven additional partners acquired in the MilePoint Acquisition as at March 31, 2004. (2) Includes 17 additional products acquired in the MilePoint Acquisition as at March 31, 2004. Page 7 of 29

PRIVATE BRANDED SOLUTIONS(1)(2) JUNE 30 MARCH 31 JUNE 30 NUMBER OF PRODUCTS AS AT 2004 2004 2003 - ------------------------------- ------- -------- ------- POINTSpurchase 14 13 8 POINTSgift 14 13 7 POINTStransfer 3 3 2 POINTScorporate 8 7 3 POINTSelite 2 2 2 POINTScustom 3 3 1 POINTSintegrate partners(3)(4) 4 4 3 Total Private Branded Solutions 48 45 26 Notes: (1) Includes products sold to new and existing customers. (2) Includes 17 additional products acquired in the MilePoint Acquisition as at March 31, 2004. (3) Each POINTSintegrate partner will have third parties integrated into its technology platform. (4) There are 22 existing partner integration add-ons among the four POINTSintegrate partner as at June 30, 2004. SOURCES OF REVENUE GROWTH Approximately 96% of the Corporation's revenue is generated through its Points Solutions, which have two primary sources for growth: organic growth through increased use of existing contracted Points Solutions; and the development of new contracted Points Solutions. For the three months ended For the six months ended ---------------------------- ------------------------ JUNE 30 MARCH 31 JUNE 30 JUNE 30 JUNE 30 PERCENTAGE OF REVENUES BY SOURCE 2004 2004 2003 2004 2003 - -------------------------------- ------- -------- ------- ------- ------- Organic Growth of existing Points Solutions 97.1% 97.0% 72.3% 97.1% 75.7% New contracted Points Solutions with new and existing partners 2.9% 3.0% 27.7% 2.9% 24.3% Organic Growth of Existing Points Solutions The large majority of existing products that Points operates, including those on behalf of partner loyalty programs, continue to grow through increased consumer awareness, consumer adoption and loyalty program growth. As Points earns transaction fees or commissions on the majority of these products and as the products continue to grow, Points expects to continue to derive a large portion of its revenues in this manner. Organic growth of existing Points Solutions accounted for 97% of revenues in the second quarter of 2004. Revenue from organic growth grew by 87% from $1.05 million in the second quarter of 2003 to $1.973 million in the second quarter of 2004, and by 26% from the first quarter of 2004. Management expects this trend to continue as the base of existing products continues to grow. Sales of the POINTSelite product are seasonal. Management expects that the first quarter will account for 75% of the annual POINTSelite revenue. Page 8 of 29

New Contracted Points Solutions Selling additional Points Solutions is an important source of new revenue. New Points Solutions sold to loyalty program partners grow the base of products being managed and therefore the organic revenue base and, in the case of sales to new loyalty program partners, provide an opportunity to place additional Points Solutions with the same partner. Since June 30, 2003, Points has grown the number of products placed with partners from 26 to 48 as at June 30, 2004. In addition, 22 third party integrations have been implemented with the four POINTSintegrate partners. Points believes that its suite of Points Solutions is applicable to all of its large loyalty program partners and will continue to focus business development resources on both the sale of new products to current partners and on sales to new partners. Management is continuing to focus on expanding the Points Exchange partnership base in 2004 across various loyalty verticals. In particular, Points will continue to focus on new partnerships in the hotel, retail, car rental, online, and financial services categories throughout 2004. Projected revenues for 2004 attributed to the deployment of Points Solutions to new loyalty program partners are considerably riskier than organic growth of existing Points Solutions. Revenue growth is still substantially dependent on generating new contracts for the purchase of Points Solutions products. While management expects continued business development success, there is no certainty that Points will continue with its past success of acquiring new contracts with new or existing partners. OTHER FACTORS CONTRIBUTING TO REVENUE GROWTH In addition to the sources of revenue and growth described above, three other factors contribute to the Corporation's financial performance: interest income, fluctuations in foreign exchange rates and the growth of the loyalty program industry. Interest Revenue The Corporation earned interest revenue of $83,566 for the second quarter of 2004, compared with $114,721 in the second quarter of 2003 and $85,052 in the first quarter of 2004. The decrease in interest revenue year over year and quarter over quarter is largely a function of the shorter duration of the investment portfolio and the subsequently lower average yield of the investments. Management expects the interest revenue to continue to decline in the short term as cash reserves are reduced as a consequence of the MilePoint Acquisition and growth of its operations. Interest revenue is a function of the Corporation's cash balances and the prevailing interest rates. Canadian cash reserves are invested in a combination of short-term liquid assets and short-term bonds. The bond and money market portfolio has a duration of less than two years. Foreign currency continues to be invested in short-term and money market instruments. Points' cash and short-term investments are valued quarterly at the lower of cost and market value. In the longer term, as Points' business continues to grow, cash reserves and related interest income are also expected to increase, although this growth is not expected to be a material portion of the Corporation's revenue going forward. Interest rates will continue to influence interest earnings. The Corporation's bond portfolio is exposed to financial risk that Page 9 of 29

arises from the credit quality of the underlying bond issuers. The Corporation seeks to mitigate the credit risk by diversifying its bond holdings and only investing in securities with a credit rating of "A" or higher. A summary of the Corporation's investments is as follows: US$ OTHER AS AT JUNE 30, 2004 YIELD % CREDIT RATING C$ TOTAL DENOMINATED DENOMINATED - ------------------- ------- ------------- ----------- ----------- ----------- Cash held at bank(1) 0.81 n/a $14,060,243 $9,607,895 E695,745 Money market securities 1.79(2) R1 - High 2,365,786 n/a n/a Bonds(3) 3.11 A - AAA 2,001,145 n/a n/a ----------- ---------- -------- TOTAL $18,427,174 $9,607,895 E695,745 =========== ========== ======== Notes: (1) C$ Total represents total cash held at bank inclusive of all denominations; US$ and Other Denominated currencies are a subset of the C$ Total and are represented in their local currency amount. (2) Yield as at June 30, 2004. (3) Bond yield is calculated as the simple average of the portfolio's semi-annual yield to maturity. Foreign Exchange Rates The translation of the Corporation's revenues and expenses from U.S. to Canadian dollars is, and will continue to be, sensitive to changes in the U.S./Canadian foreign exchange rates ("FX Rates"). Changes to FX Rates will have greater impact on the Corporation's revenues than on its expenses as approximately 92% of the Corporation's revenues are in U.S. dollars and the remaining 8% are split between Canadian dollars and Euros. Management expects that the percentage of U.S. dollar-based revenue will not decrease significantly in 2004. Approximately 68% of the Corporation's expenses were in Canadian dollars, 27% are U.S. dollar-based and 5% are based in other foreign currencies. The Corporation does not have material foreign exchange risk with its cash expenses as it has sufficient foreign currency reserves to meet its foreign obligations. The average quarterly FX Rate has stabilized relative to the first quarter 2004. The FX rate differential for the quarter was approximately 3%. The impact of this differential was positive, but not material. The translation of the Corporation's revenues will be lower in Canadian dollar terms if the Canadian dollar strengthens relative to the U.S. dollar. Conversely, Points' expenses would decrease, dampening the negative impact to net income. The opposite would be true if the Canadian dollar weakened relative to the U.S. dollar. For the three months ended For the six months ended ---------------------------- ------------------------ JUNE 30 MARCH 31 JUNE 30 JUNE 30 JUNE 30 U.S. - CANADIAN FX RATES 2004 2004 2003 2004 2003 - ------------------------ ------- -------- ------- ------- ------- Period Start 1.311 1.297 1.468 1.297 1.573 Period End 1.345 1.308 1.348 1.345 1.348 Period Average 1.359 1.318 1.399 1.339 1.455 Page 10 of 29

Growth of Loyalty Program Industry The Economist reported on the growing importance of loyalty programs in an article from its May 2, 2002 issue, entitled "Fly me to the moon", noting that on an annual basis, airlines sold "roughly US$10 billion worth of miles to partners, such as credit card firms". In another article (entitled "Frequent-flyer economics," from the same issue), The Economist reported that "frequent flyer miles started as a marketing gimmick, but they have become a lucrative business," that "roughly half of all miles are now earned on the ground, not in the air," and that with "the world-wide stock of unredeemed miles .... close to 8.5 trillion ... the total global stock of frequent flyer miles may now be worth almost US$500 billion". Management understands that members of loyalty programs are much more likely to utilize the Points Exchange and the other products from the suite of Points Solutions when they are close to a level at which they can redeem an award. The redemption level for an award varies by type of award (for example, a business-class flight takes more miles that an economy-class flight) and by program type (the "cost" of a flight typically starts between 15,000 and 25,000 miles whereas a night in a hotel starts at 10,000 points). Therefore, growth in consumer loyalty program account balances will create demand for Points Solutions. Growth in program balances is a function of the growth in the number of programs, the number of participating consumers, time and the number of consumers moving through a loyalty redemption (for example, receiving an award of some type). Several respected periodicals estimate strong growth in the popularity of and participation in loyalty programs. For example, in addition to The Economist, cited above, according to the "frequent flyer facts" section of the website of InsideFlyer magazine (www.webflyer.com), a leading publication for members of frequent traveler programs: "loyalty programs grow at a rate of 11% per annum, with over 120 million members worldwide. While there are about 92 frequent flyer/guest programs in the world, American AAdvantage, the largest frequent flyer program in the world, began with 283,000 members in 1981 and has grown to more than 45 million members". RESULTS OF OPERATIONS - GENERAL AND ADMINISTRATIVE EXPENSES GENERAL AND ADMINISTRATIVE EXPENSES General and administrative expenses grew by 17% relative to the first quarter of 2004 and by 81% over the second quarter of 2003. The increase over the first quarter of 2004 reflects the cost of expanding operations, including new contracted relationships with Private Branded Solutions and Points Exchange partners. Significant changes occurred in the general and administrative expenses relative to the first quarter, including sales commission (-$108,051), employment costs (+$165,384), other operating (-$151,200), marketing and communications (-$250,419) and technology services (-$103,550). Material changes in expenses will be described in each section below. Page 11 of 29

For the three months ended For the six months ended ------------------------------------ ------------------------ JUNE 30 MARCH 31 JUNE 30 JUNE 30 JUNE 30 GENERAL AND ADMINISTRATIVE EXPENSES 2004 2004 2003 2004 2003 - ----------------------------------- ---------- ---------- ---------- ---------- ---------- Employment Costs(1) $1,665,730 $1,831,114 $1,175,325 $3,496,844 $2,276,696 Technology Services(2) 264,856 161,307 254,097 $ 426,163 $ 454,381 Marketing and Communications 452,521 202,102 54,603 $ 654,623 $ 52,708 Sales Commission and Related Expenses 132,754 24,703 101,652 $ 157,457 $ 150,783 Other(3) 582,931 431,731 124,778 $1,014,662 $ 282,609 ---------- ---------- ---------- ---------- ---------- TOTAL $3,098,792 $2,650,957 $1,710,455 $5,749,749 $3,217,177 ========== ========== ========== ========== ========== Notes: (1) Wages and employment costs include salaries, contract labour charges, recruiting, benefits and government charges (CPP and EI). (2) Technology expenses include online hosting and managed services, equipment rental, software licenses and capital lease expenses. (3) Other expenses include foreign exchange losses (or gains), travel expenses, professional fees, insurance, office rent and expenses and regulatory expenses. As the Corporation is still in the process of increasing loyalty program participation in and sales of the Points Solutions, significant resources continue to be required. While management has made controlling costs a priority, costs will continue to increase in 2004. Management expects the general and administrative expenses in the remaining two quarters to be higher than in the second quarter as employment costs and marketing expenses are increased. However, a large percentage of the marketing expenses expected to be incurred will be non-cash as the Corporation is expensing its pre-paid mileage asset account. The Corporation will continue to scale its infrastructure, add new partners to its suite of products, move from trial/test marketing to a more comprehensive marketing and branding program. A significant percentage of the planned expense increases in 2004 are either discretionary or variable (for example new hires and marketing expenditures). Points still expects that a series of significant marketing and branding programs will begin in the latter half of 2004. The actual expense incurred will be a function of the types of marketing media employed and incentives offered, as well as the timing of the programs' launch dates. If actual revenue growth projected from the marketing plan does not meet expectations, the expenditures can either be reduced or reallocated to more successful programs. EMPLOYMENT COSTS As at June 30, 2004, Points had 66 full-time employees. JUNE 30 MARCH 31 JUNE 30 HEADCOUNT BY DEPARTMENT AS AT 2004 2004 2003 - ----------------------------- ------- -------- ------- Technology 36 42 28 Finance and Administration 12 10 6 Business Development 8 8 6 Marketing and Customer Service 10 8 6 --- --- --- TOTAL 66 68 46 === === === Page 12 of 29

Employment costs decreased versus the first quarter of 2004 primarily due to a reduction in recruiting, one-time charges and a slightly reduced headcount. Overall, 2004 employment costs are likely to increase throughout the year as additional technology and marketing staff will be hired to continue the acceleration of the Points.com consumer business. TECHNOLOGY SERVICES Technology services expenses increase in increments based on business growth and product performance. As technology services costs are a function of the number of partners and Points Solutions products, these costs grow as revenue grows. In general, as loyalty program partners and products are added to the infrastructure and transactional volume increases, additional servers, processors, bandwidth, memory, etc., are required to provide a secure and robust production environment. The second quarter of 2004 saw a quarter over quarter increase of $103,550 (64%) as additional services were required for new products associated with the MilePoint Acquisition and the expansion of other Points Solutions. Management expects these costs to be flat for the third and fourth quarter of 2004. Products launched and loyalty program partners acquired are the key drivers of technology services expenses. MARKETING AND COMMUNICATIONS Marketing costs increased by $250,419 (124%) relative to the first quarter of 2004. The increase in the marketing expenditures includes the expenditure of pre-paid mileage purchases issued through various marketing programs, including sweepstakes and mileage promotional campaigns. Additional expenditures were also made in joint marketing, advertising and public relations campaigns with Points Exchange partners. Beginning in the first quarter of 2003, an accounting adjustment related to the expense recognition of promotional points tied to PointsPlus membership purchases was enacted. Prior to the first quarter of 2003, the cost of these points was recorded as an expense in the period they were issued. Beginning January 1, 2003, marketing expenses associated with the sale of PointsPlus memberships are being amortized over the term of the membership, while the other marketing expenditures are recognized in the period of use. The Corporation expects to increase its marketing expenditures in the latter half of 2004, primarily focusing on customer acquisition and retention. The marketing and branding foundation built in 2003 has made it possible to expand audience reach and effectively execute large-scale, multi-channel promotions. Advertising expenditures will continue to be focused on partner media as this approach dovetails with business development strategies and is the most cost-effective means to reach Points' target audience. A smaller portion of the budget will be used for targeted non-partner advertising. It is anticipated that marketing and communication expenses could increase substantially if the programs are successful at customer acquisition and retention. If the programs do not meet management's expectations in driving revenue growth, marketing expenses can be eliminated or reallocated in the short term. Management expects that the results of the carefully planned marketing strategy will accelerate Points Exchange activity. Page 13 of 29

SALES COMMISSIONS AND EXPENSES Sales Commissions and expenses have increased by $108,051 in the second quarter of 2004 over the first quarter. The increase primarily reflects increased payments to sales agents and credit card charges for products that are not reimbursed by partners. In the future, sales commissions will adjust according to partners contracted and growth of existing products. OTHER OPERATING EXPENSES Other operating expenses include office overhead, travel expenses professional fees and foreign exchange gain and/or loss. Other operating expenses increased by $151,200 in the second quarter relative to the first quarter. A significant component of the increase relates to professional fees incurred in completing certain international contracts, the annual general and special meeting in June, regulatory expenses and other corporate disclosure matters. Management expects other operating expenses to remain flat in the third quarter relative to the second quarter. RESULTS OF OPERATIONS - OPERATING EFFICIENCY The Corporation's operating ratio (defined as the ratio of general and administrative expenses to revenues) has improved by 7% over the first quarter of 2004. The Corporation expects the improvement in operating efficiencies to continue through to 2005 as revenues grow and costs stabilize, thereby achieving a ratio less than one. For the three months ended For the six months ended ---------------------------- ------------------------ JUNE 30 MARCH 31 JUNE 30 JUNE 30 JUNE 30 EFFICIENCY MEASURE 2004 2004 2003 2004 2003 - ------------------ ------- -------- ------- ------- ------- Operating Ratio 1.52 1.64 1.17 1.58 1.16 RESULTS OF OPERATIONS - NON-CASH EXPENSES Forward-looking statements contained in this section, "Results of Operations - Non-Cash Expenses", with respect to future expenses of the Corporation, are not guarantees of such future expenses and involve certain risks and uncertainties that are difficult to predict. Any changes in the Corporation's amortizing assets will subsequently change the Corporation's amortizing expenses. AMORTIZATION EXPENSES The Corporation recorded amortization expenses of $573,312 in the second quarter compared to $443,917 for the quarter ended March 31, 2004 and $672,606 for the quarter ending June 30, 2003. The increase was attributed to the charges outlined in the following table: Page 14 of 29

For the three months ended For the six months ended ------------------------------ ------------------------ JUNE 30 MARCH 31 JUNE 30 JUNE 30 JUNE 30 AMORTIZATION EXPENSES 2004 2004 2003 2004 2003 - --------------------- -------- -------- -------- ---------- ---------- Deferred Costs $128,126 $199,346 $100,116 $ 327,472 $ 182,306 Intangible Assets 352,479 188,217 189,050 $ 540,696 $ 378,100 Property, Plant and Equipment 92,707 56,354 383,440 $ 149,061 $ 758,611 TOTAL $573,312 $443,917 $672,606 $1,017,229 $1,319,017 AMORTIZATION OF DEFERRED COSTS For the three months ended For the six months ended ------------------------------ ------------------------ JUNE 30 MARCH 31 JUNE 30 JUNE 30 JUNE 30 DEFERRED COSTS 2004 2004 2003 2004 2003 - -------------- -------- -------- -------- -------- -------- Amortization $128,126 $199,346 $100,116 $327,472 $182,306 Charges incurred in respect of certain financings are deferred and charged to income on a straight-line basis over an applicable time period. Deferred finance charges represent legal, accounting and other related fees incurred to obtain the financings. Points has incurred deferred costs in connection with the following financial transactions: a. In prior quarters, Points reported deferred financing charges in connection with the 11%, $6,000,000 senior secured convertible debenture (the "Debenture") issued to CIBC Capital Partners. The first quarter of 2004 was the final amortization period for the deferred costs associated with the Debenture. b. The Corporation reports deferred financing charges in connection with the Series Two Preferred Share issued pursuant to the IAC Investment, as this financial instrument is also classified as debt. The Series Two Preferred Share has 35 amortization periods remaining. c. In consideration of the value to the Corporation of the Alignment Agreement with American Airlines, the Corporation issued 2,196,635 Common Shares to American Airlines valued at $2,240,568. The Common Shares have been classified as deferred costs and will be amortized over a period of five years. There are 17 amortization periods remaining. AMORTIZATION OF INTANGIBLE ASSETS The excess of the cost over the value attributed to the underlying net assets of the shares of Points.com acquired in 2002 is amortized on a straight-line basis over a period of three years. The increase in the amortization expense of intangible assets in the second quarter is related to the intangible assets (i.e., partner contracts) acquired through the MilePoint Acquisition (see "Commitments Related to MilePoint Acquisition" on page 25 for additional information). Goodwill related to the acquisition will not be amortized unless the assets are deemed to have become impaired, in which case the goodwill will be written off in the appropriate period. Page 15 of 29

For the three months ended For the six months ended ------------------------------ ------------------------ JUNE 30 MARCH 31 JUNE 30 JUNE 30 JUNE 30 INTANGIBLE ASSETS 2004 2004 2003 2004 2003 - ----------------- -------- -------- -------- -------- -------- Amortization $352,479 $188,217 $189,050 $540,696 $378,100 AMORTIZATION OF PROPERTY, PLANT AND EQUIPMENT The increase in the amortization expenses relative to the first quarter of 2004 reflects the completion of the leasehold improvements, office furniture purchases and technology assets acquired during the quarter. Management expects the amortization to increase in the third and fourth quarter as older technology assets are replaced. For the three months ended For the six months ended ----------------------------- ------------------------- JUNE 30 MARCH 31 JUNE 30 JUNE 30 JUNE 30 PROPERTY, PLANT AND EQUIPMENT 2004 2004 2003 2004 2003 - ----------------------------- ------- -------- -------- -------- -------- Amortization $92,707 $56,354 $383,440 $149,061 $758,611 OTHER NON-CASH EXPENSES Interest on Convertible Debenture Accrued interest on any principal amount of the Debenture that is converted into common shares ceases to be payable. In addition, in the event that an exercise of the Warrants (as defined in "Liquidity - IAC Investment" on page 18) results in a change of control of Points, accrued interest on the Debenture will be waived and the principal amount of the Debenture will be repayable within 30 days. See "Commitments Related to the Terms of Certain Financing Arrangements" on page 22. INTEREST ON CONVERTIBLE DEBENTURE 2008 2007 2006 2005 2004 2003 2002 2001 - --------------------------------- ------ ------ ------ ----- ----- ----- ----- ----- Accrued Interest ($000's) 257 1,209 1,089 981 884 854 660 522 Debenture Value ($000's) 12,456 12,199 10,990 9,901 8,920 8,036 7,182 6,522 Interest on the outstanding principal amount of the Debenture accrues at a rate 1of 11% per annum. Interest compounds on an annual basis on the day immediately prior to each anniversary of the original issue date, being March 15, 2001. Thereafter, interest accrues on such compounded interest at the rate of 11% per annum. Page 16 of 29

Interest on the Series Two Preferred Share INTEREST ON SERIES TWO PREFERRED SHARED 2013 2012 2011 2010 2009 2008 2007 2006 2005 2004 2003 - ---------------------- ---- ---- ---- ---- ---- ---- ---- ---- ---- ---- ---- Accrued Interest ($000's) 244 868 868 868 868 868 868 868 868 868 624 Series Two Preferred Share Value ($000,000's) 21.1 20.8 19.9 19.1 18.2 17.3 16.5 15.6 14.7 13.9 13.0 RESULTS OF OPERATIONS - EARNINGS AND SHAREHOLDER EQUITY NET LOSS The Corporation reported a net loss of $2,153,069 for the second quarter of 2004, compared with a net loss of $1,283,337 for the second quarter of 2003 and a net loss of $1,901,594 for the first quarter of 2004. The net loss increased relative to the first quarter of 2004 due to the Corporation's investment in marketing its products and costs related to closing new partners and contracts. SHAREHOLDER EQUITY The deficit in shareholder equity increased from $2,923,084 at March 31, 2004 to $5,048,584 at June 30, 2004. The increase was a result of the net loss for the period of $2,153,069 million. Management continues to expect the growth in this deficit to decrease as Points' business grows. LOSS PER SHARE The Corporation's loss per share is calculated on the basis of the weighted average number of outstanding Common Shares for the period, which amounted to 64,250,018 shares at June 30, 2004, compared with 63,394,531 shares at March 31, 2004 and 55,287,446 at June 30, 2003. The Corporation reported a net loss of $0.03 per share for each of the quarters ending June 30 and March 31, 2004, compared with a net loss of $0.02 per share for the second quarter of 2003. For 2004 and 2003, the number of fully diluted shares outstanding has not been computed as the effect would be anti-dilutive (meaning that the loss per share would decrease on a fully diluted basis) and therefore, in accordance with Canadian generally accepted accounting principles, fully diluted loss per share is not computed. The fully diluted calculation for both 2004 and 2003 would have otherwise included Common Shares underlying outstanding securities, such as options, warrants and preferred shares convertible or exercisable to acquire Common Shares. LIQUIDITY OVERVIEW OF LIQUIDITY Management views liquidity as the Corporation's ability to generate sufficient cash (or cash equivalents) to meet its obligations as they become due. Balance sheet liquidity indicators provide management with a test of the Corporation's current liquidity. Balance Sheet indicators Page 17 of 29

of liquidity include cash, accounts receivable and accounts payable. Earnings (loss) before interest, amortization and other deductions ("EBITDA") are the key indicator of the change in the liquidity of Points' operations over a defined period of time. As the Corporation continues to add contracts to its portfolio of Private Branded Solutions and to the Points Exchange, revenues are expected to grow, resulting in increased liquidity. EARNINGS (LOSS) BEFORE INTEREST, AMORTIZATION AND OTHER DEDUCTIONS Management believes that EBITDA is an important internal measure and financial benchmark for its shareholders because it is a recognizable and understandable measure of the Corporation's cash burn or growth, and is a standard often scrutinized by investors in small to mid-capitalization companies. For example, the Corporation has incurred large non-cash expenses (depreciation and amortization) over the past several fiscal years that distort the financial and strategic gains the Corporation has made. Management continues to expect that Points' revenues will exceed its general and administrative expenses at some point during 2005. For the quarter ending June 30, 2004, the Corporation's EBITDA was ($1.07 million). This compares with EBITDA of ($1.03 million) for the quarter ending March 31, 2004. The increase in the loss relative to the first quarter of 2004 reflects the Corporation's increased expenditure in marketing and other operating expenses. IAC INVESTMENT The following is a general summary of the terms of the IAC Investment. More comprehensive disclosure of the IAC Investment is contained in Points' Material Change Report dated March 21, 2003, which is hereby incorporated by reference. See also "Commitments Related to the Terms of Certain Financing Arrangements" on page 22 below. Under the IAC Investment, Points issued one convertible preferred share (the "Series Two Preferred Share") and Common Share purchase warrants (the "Warrants") for aggregate cash consideration of $12.4 million and $2.7 million, respectively. Based on Points' capitalization as at the date hereof, the Series Two Preferred Share is convertible, for no additional consideration, into 21,855,791 Common Shares. The Warrants are exercisable for three years from their date of issue (April 11, 2003) to acquire up to 55% of the Common Shares of Points (calculated on an adjusted fully diluted basis) less the number of Common Shares issued or issuable on conversion of the Series Two Preferred Share. As at the date hereof and based on Points current capitalization, the Warrants are exercisable to acquire 80,706,911 Common Shares at an effective price per Common Share of $1.02 between April 11, 2004 and April 10, 2005 and $1.13 between April 11, 2005 and April 10, 2006 (resulting in an additional investment by IAC in Points, if exercised in full and depending on the year of exercise, of up to approximately $82.4 million or $91.6 million). Each of the Series Two Preferred Share and the Warrants contain anti-dilution protection provisions. CASH AND CURRENT ASSETS The Corporation had a consolidated cash (and cash equivalents) position of $18,427,174 at June 30, 2004, compared to the $24,243,231 at March 31, 2004, and $24,396,879 at June 30, 2003. Page 18 of 29

JUNE 30 MARCH 31 JUNE 30 AS AT 2004 2004 2003 - ----- ----------- ----------- ----------- Cash and Cash Equivalents $18,427,174 $24,243,231 $24,396,879 Accounts Receivable 1,339,237 887,100 959,777 Prepaids and Sundry Assets 1,271,451 1,125,666 793,963 ----------- ----------- ----------- TOTAL CURRENT ASSETS $21,037,862 $26,255,997 $26,150,619 =========== =========== =========== Cash and cash equivalents decreased by $5,816,057 from March 31, 2004. The primary reasons for the decrease in cash relative to the first quarter of 2004 was related to the operating loss for the quarter, the scheduled payments for the MilePoint Acquisition and the decrease in deposits from the POINTSelite sales (see revenues Revenue Growth - "Organic Growth of Existing Points Solutions" for additional detail). Cash From Exercise of Certain Warrants and Options Certain "in-the-money" warrants and options are due to expire within 12 months. Assuming that the market price of the Common Shares remains above the exercise price of these securities, management expects the securities to be exercised. If exercised in full, the proceeds from the exercise of these securities will increase cash by approximately $1.59 million assuming the exercise in full of these securities, issued and outstanding Common Shares will increase by over 10.26 million shares. Securities with Near-Term Expiry Dates - Outstanding Amounts as at June 30, 2004 SECURITY TYPE EXPIRY DATE NUMBER EXERCISE PRICE PROCEEDS ------------- ----------- ---------- ------------------ ---------- Warrants 10/21/2004 2,500 $ 0.28 $ 700 Broker Warrants 11/30/2004 88,525 0.25 22,131 Warrants 11/30/2004 2,015,925 0.25 503,981 Points International Ltd. Options 2/14/2005 1,727,000 0.50 863,500 Points International Ltd. Options 3/14/2005 201,400 0.50 100,700 Options in subsidiary with liquidity put 2/17/2005 627,479 Fair Market Value 13,783 Options in subsidiary with liquidity put 3/31/2005 5,597,213 Fair Market Value 87,632 ---------- ---------- TOTAL 10,260,042 $1,592,428 ========== ========== It is probable that investors will sell some amount of the Common Shares acquired through the exercise of these securities to cover the cash cost, any tax expense or simply to realize a gain. Increased selling pressure on the Common Shares may cause short-term downward pressure on the market price of the Common Shares. Accounts Receivable The Corporation expects accounts receivable to grow proportionately with growth in revenues, however there is some variability in this trend. Management deems the risk of bad debts to be minimal based on the structure and nature of the Corporation's cash flows. Page 19 of 29

ABILITY TO FUND FUTURE GROWTH In the second quarter of 2004, the Corporation had cash flows provided by operating activities of ($3,114,130) after changes in non-cash balances related to operations. Management is confident that the Corporation's cash position is adequate to cover expenses and commitments in the short term, even if revenue growth is slower than planned, and expects that the revenue from the Points Solutions will generate sufficient cash to maintain capacity in the short term and grow capacity and resources in the long term. However, the Corporation is currently not generating an operating profit (revenues minus general and administrative expenses) and cannot be assured that revenue growth will be sufficient to meet liabilities as they come due. PROPERTY, PLANT AND EQUIPMENT The Corporation reported an increase in property, plant and equipment in the first quarter due to leasehold improvements, furniture and equipment relating to the new premises. Technology costs under capital lease are depreciated on a straight-line basis over three years. The Corporation's technology costs are currently, and are expected to remain, below industry averages as a result of prudent cost containment initiatives. Additional leasehold improvements at the Corporation's new facility will increase property, plant and equipment and the corresponding amortization in 2004 and beyond. JUNE 30 MARCH 31 JUNE 30 AS AT 2004 2004 2003 - ----- ---------- -------- ---------- Furniture and equipment $ 295,979 $199,489 $ 126,099 Computer equipment 234,339 213,686 101,929 Software 100,756 113,702 108,772 Technology costs 16,973 21,815 721,246 Leasehold improvements 468,109 200,340 69,253 ---------- -------- ---------- TOTAL PLANT, PROPERTY AND EQUIPMENT $1,116,157 $669,032 $1,127,299 ========== ======== ========== GOODWILL The MilePoint Acquisition resulted in $3,675,000 allocated to amortizing intangible assets and $3,975,000 ($3,775,000 from goodwill and $200,000 for other costs and deductions) to goodwill. In accordance with CICA handbook, Section 3062 goodwill will not be expensed unless it is deemed to have become impaired. Management has tested, and concluded, that none of the Corporation's goodwill has become impaired. In the second quarter, $286,385 of charges relating to transition services for the MilePoint Acquisition were incurred and charged to Goodwill. CURRENT LIABILITIES Current liabilities at June 30, 2004 were $16,418,985, compared with $19,670,674 at March 31. The decrease was primarily related to payments for the MilePoint Acquisition and decreased Page 20 of 29

deposits as a result of POINTSelite product sales, although the decrease was partially offset by the increase in sales in other products. Through arrangements with partner loyalty programs such as those for POINTSpurchase and POINTScorporate solutions, Points processes transactions involving the online sale of loyalty currencies and collects the funds on behalf of the loyalty program partner. Gross proceeds received on the sale of loyalty program points, net of the commissions earned, are included in deposits and deferred revenue in the attached consolidated balance sheets until ultimately remitted. The level of deposits is influenced by partner activity and trends in the overall loyalty industry. As activity increases, the Corporation's deposits increase. The Corporation expects deposits to increase as it experiences organic growth with existing partners, establishes new partner relationships and integrates the MilePoint Acquisition. JUNE 30 MARCH 31 JUNE 30 CURRENT LIABILITIES AS AT 2004 2004 2003 - ------------------------- ----------- ----------- ----------- Accounts payable and accrued liabilities $ 931,188 $ 961,807 $ 1,236,658 Deposits 14,668,589 15,949,483 12,322,674 Current portion of obligation under capital lease -- -- 171,412 Current portion of acquisition loan payable 819,208 2,759,384 -- ----------- ----------- ----------- TOTAL CURRENT LIABILITIES $16,418,985 $19,670,674 $13,730,743 =========== =========== =========== The June 30, 2004 accounts payable and accrued liabilities includes 2004 employee bonus accruals to be paid in January 2005, and other accrued charges. The Corporation has sufficient foreign currency reserves to meet its foreign currency obligations and, as such, does not utilize any hedging or other strategies involving interest rate or currency derivatives. WORKING CAPITAL Working capital (defined as current assets minus current liabilities) has declined relative to the first quarter of 2004 to $4,618,877. Management continues to expect working capital to remain positive throughout the remainder of 2004. As revenues increase, the Corporation expects cash and current assets to increase proportionately. If, as expected, the Corporation's revenues exceed its general and administrative expenses during 2005, working capital will begin to grow at that point in time. Pursuant to contractual commitments, the Corporation will take the necessary actions to ensure that its current assets are greater than its current liabilities. Page 21 of 29

LONG-TERM LIABILITIES AND COMMITMENTS PAYMENTS DUE BY PERIOD (AGGREGATE AMOUNT FOR MULTI-PERIODS) ----------------------------------------------------------- FUTURE OBLIGATIONS (000,000'S) TOTAL(1) 2009+ 2008 2007 2006 2005 2004 - ------------------------------ -------- ------ ----- ----- ----- ----- ----- Long-Term Debt(2) (non-cash until repayment) $12.46 -- $6.26 $1.21 $1.09 $0.98 $0.88 Series Two Preferred Share (non-cash until repayment) 21.08 16.12 0.87 0.87 0.87 0.87 0.87 Capital Lease Obligations -- -- -- -- -- -- -- Operating Leases(3) 2.78 0.11 0.11 0.40 0.41 0.50 1.26 Partner Purchase Commitments(4) 4.90 0.02 0.37 1.58 1.22 0.93 0.78 MilePoint Acquisition(5) 4.23 -- -- - 0.40 0.83 3.00 ------ ------ ----- ----- ----- ----- ----- Total Contractual Obligations $45.45 $16.24 $7.61 $4.05 $3.98 $4.12 $6.79 ====== ====== ===== ===== ===== ===== ===== Notes: (1) Represents the aggregate amount for the full duration of the contractual obligations (including years post 2008 and prior to 2004). (2) The Debenture is due on March 15, 2005. However, for the purposes of the above table, the maximum obligation with all four extensions exercised has been included. The holder of the Debenture has the right to extend the term by one year for up to three consecutive years. See "Interest on Convertible Debenture" above for a summary of payments in a fiscal year if the Debenture matures. (3) Includes technology services commitments and hardware and software operating leases. (4) Includes mileage purchase and co-marketing commitments, see "Partner Purchase Commitments" below. (5) Cash commitments related to the MilePoint Acquisition include the purchase price ($3.5 million), anticipated transition costs (up to US$417,000) and anticipated consulting fees (US$120,000). Elements of the foregoing table are explained in more detail in the following sections. Commitments Related to the Terms of Certain Financing Arrangements Background On March 15, 2001, Points issued to CIBC Capital Partners, a division of Canadian Imperial Bank of Commerce ("CIBC Capital Partners"), the 11% $6,000,000 Debenture, which was amended and restated on February 8, 2002 and further amended effective April 11, 2003. The full principal amount of the Debenture was set to mature on March 15, 2004. However, in December 2003, CIBC Capital Partners exercised its right to extend the maturity date until March 15, 2005. CIBC Capital Partners has the option to extend the maturity date from March 15, 2005 for up to three more one-year extensions. Accrued interest on the Debenture as of June 30, 2004 is $2,469,055 and is included with the Debenture in long-term debt as a non-current liability in the consolidated balance sheet. The $6,000,000 principal amount of the Debenture is convertible at the option of CIBC Capital Partners into up to 18,908,070 Common Shares. Accrued interest on any principal amount as converted ceases to be payable. The Debenture will also automatically convert in full into Common Shares immediately preceding certain liquidity events. The Debenture contains certain negative covenants in favour of CIBC Capital Partners. Page 22 of 29

As part of the reorganization of Points completed on February 8, 2002, Points issued to CIBC Capital Partners one preference share (the "Series One Preferred Share"). The holder of the Series One Preferred Share is entitled to a dividend (the "Dividend") in the event that, prior to an automatic conversion of the Debenture, (i) there is a merger or consolidation of Points (or a subsidiary of Points which owns all or substantially all of the assets of Points) with another corporation where, following such event, the shareholders of Points will not hold at least a majority of the voting power of the surviving/acquiring corporation, (ii) any person (other than CIBC Capital Partners) or persons acting jointly or in concert acquire 50% voting control or 50% of the equity of Points (a "Change of Control"), or (iii) there is a sale of all or substantially all of the assets of Points. The Dividend is approximately equal to $4,000,000 plus an amount calculated on the basis of a notional dissolution of the Corporation where the holder of the Series One Preferred Share is entitled to share pro rata (on the basis that the Series One Preferred Share represents that number of Common Shares into which the Debenture is then convertible) with the holders of all other participating shares in distributions from the assets of Points and assuming, for this purpose, that the value of the assets of Points available for distribution on this notional dissolution is the value attributable to the equity of Points implied by the transaction giving rise to the dividend event, as adjusted for the value of non Common Share equity not valued in the transaction giving rise to the Dividend. In no event may the Dividend exceed $24,000,000. Where an event occurs giving rise to the Dividend, CIBC Capital Partners is entitled to accelerate all amounts owing under the Debenture. In connection with the IAC Investment, the Debenture was amended such that (i) the Debenture is repayable (without accrued interest, the repayment of which is waived) by Points within 30 days of a Change of Control of Points resulting from the exercise of the Warrants and (ii) the Debenture is not convertible for so long as the Warrants are outstanding and will not be convertible after the Warrants are exercised if the Debenture is repaid within 30 days of the Change in Control resulting from the exercise of the Warrants. Points and CIBC Capital Partners also acknowledged, in connection with the IAC Investment, that in the event of the exercise of the Warrants resulting in a Change of Control, the application of the terms of the Series One Preferred Share in that situation results in the Dividend equalling the lesser of (i) $24,000,000 and (ii) $4,000,000 plus the number of Common Shares into which the Debenture is then convertible, multiplied by the exercise price paid per Common Share on the exercise of the Warrants. Points has agreed that, within 30 days of the exercise of the Warrants in full, it will pay all amounts owing under the Debenture and the Series One Preferred Share. Except in connection with the exercise of the Warrants by IAC, Points is not entitled to pre-pay the Debenture. Maturity of Debenture Assuming the Warrants have not been exercised and the Debenture matures on March 15, 2005, the Corporation will be required to repay $6 million of principal and $3,108,422 of accrued interest. It is possible that the repayment of $9,108,422 of principal and accrued interest will cause the Corporation to be in a negative working capital position, may materially threaten its solvency and/or may severely restrict the ability to grow its business. There is no certainty that the Corporation would have sufficient cash at such time to make the repayment. Page 23 of 29

Exercise of Warrants If the Warrants are exercised resulting in a Change of Control prior to the maturity of the Debenture, as at the date hereof and based on the Corporation's current share capitalization, the Corporation would receive between approximately $82.4 million and $91.6 million, depending on the year of exercise. On the exercise of the Warrants resulting in a Change of Control, the Corporation would be required to repay the $6 million principal amount of the Debenture and pay the Dividend, which would then be payable on the Series One Preferred Share (up to a maximum of $24 million). In this situation, management expects that Points would have sufficient cash to make such payments. Redemption Rights of Series Two Preferred Share Holder Unless the Series Two Preferred Share has been converted at the option of the holder, Points will be required to redeem the Series Two Preferred Share upon the earlier of (i) March 31, 2013 and (ii) a person (other than the holder of the Series Two Preferred Share) acquiring shares of Points sufficient to elect a majority of the board of directors of Points (a "Series Two Share Change of Control"). In the event of redemption of the Series Two Preferred Share on a Series Two Share Change of Control, the redemption amount payable will be equal to the greater of (i) 125% of the amount equal to (A) the subscription price of the Series Two Preferred Share plus (B) a return on that subscription price equal to 7% per annum, calculated from the date of issue of the Series Two Preferred Share to the date on which the Series Two Preferred Share is redeemed and (ii) the greater of (A) the value of the Common Shares into which the Series Two Preferred Share then could be converted on the day immediately prior to public announcement of the Series Two Share Change of Control and (B) the product of the Common Shares into which the Series Two Preferred Share then could be converted and the fair market value of the consideration paid per Common Share in the transaction resulting in the Series Two Share Change of Control. Other Change of Control Event Upon the occurrence of an event that is a Change of Control and a Series Two Share Change of Control, and is unrelated to the exercise of the Warrants by IAC, Points may not have sufficient cash to pay the Dividend, the amounts due under the Debenture and/or the redemption amount on the Series Two Preferred Share. As such, it is unlikely that management would consider a transaction that triggered the above payments unless the transaction provided for payment of the outstanding obligations. Partner Purchase Commitments JUNE 30 MARCH 31 JUNE 30 ASSET RELATED TO MILEAGE PURCHASES AS AT 2004 2004 2003 - ---------------------------------------- ---------- ---------- -------- Prepaid Mileage $ 592,707 $ 655,294 $462,766 Sundry assets and other prepaid expenses 678,744 470,372 331,197 ---------- ---------- -------- TOTAL $1,271,451 $1,125,666 $793,963 ========== ========== ======== Page 24 of 29

As part of the contractual requirements of certain commercial agreements, Points has committed to purchase miles and points from partners at predetermined rates. When purchased, the points are recorded as an asset (i.e., prepaid expense) until expensed as marketing expenditures in the period of use. A large portion of the current prepaids and sundry assets of the Corporation include prepaid mileage commitments purchased from the Corporation's partners. While prepaid points may remain the same or lower as an overall percentage of prepaids and sundry assets, management expects the prepaid points account to increase as a result of the mileage purchase commitments from various partners. Commitments Related to Milepoint Acquisition On March 31, 2004 Points completed the MilePoint Acquisition. The purchase price for the assets of MilePoint was $7.5 million and was satisfied through a combination of $3.5 million in cash and four million Common Shares (worth approximately $4 million). An initial $1.9 million was paid in cash on closing, with the balance payable semi-annually over two years. The four million shares were issued into escrow on closing and will be released to MilePoint in four unequal tranches over two years. To date, professional fees of approximately $200,000 and payments for transition services of $286,385 have been incurred in the transaction and have been capitalized as goodwill. A portion of the Acquisition Payable (short term and long term) are interest free and discounted at the appropriate current market rate. The total discount of $50,000 will be charged to interest expense over the life of the Acquisition Payable. Points' business objective in acquiring the assets of MilePoint was to increase its volume of business at minimal additional costs outside of the purchase price and transition costs. Management expects that the acquisition will increase revenues and, including all amortizations, be accretive to net income by the end of 2004. It is expected that the revenue/cash flow from the acquired assets will be sufficient to pay the cash portion of the purchase price over the 24-month period following the acquisition. Management believes that the Corporation's established facilities and existing employees, working in conjunction with MilePoint resources retained during the transition period, will be sufficient to sustain the additional volume of business from the acquired assets. The impact of the acquisition to Points' balance sheet in 2004 will be to increase intangible assets by $3,675,000 and goodwill by $3,975,000. The amortization of the assets is based on the estimated life of the acquired assets (i.e., the partner contracts). The amortization and the balance of the purchased intangible assets are approximately as follows: ANNUAL AMOUNT IN ($000'S) 2004 - ------------------------- ------ Amortization Expense $ 535 Intangible Asset - Closing Balance 3,140 Goodwill 4,261 Page 25 of 29

In addition to the existing revenue streams acquired from MilePoint, offering Points Solutions to the customers acquired from MilePoint represents a potentially valuable stream of revenue. As with any acquisition, the smooth transition into the Corporation's operations poses challenges. Transition risks include difficulties in integrating MilePoint's business into the Corporation's and the possibility of human resources capacity limits to launch additional new partners during the transition. The payment of the purchase price under the terms of the MilePoint Acquisition is as follows: Months from Closing ---------------------------------------------- Payout (000's) 0 4 6 12 18 24 SHARES CASH - -------------- ------ ------ ---- ---- ------ ----- ------ ------ Cash $1,900 $ -- $400 $400 $ 400 $400 $3,500 Shares -- 1,300 -- 700 1,500 500 4,000 Share Value(1) -- 1,300 -- 700 1,500 500 4,000 ------ ------ ---- ---- ------ ---- ----- ------ TOTAL 4,000 $7,500 ===== ====== Note: (1) Based on the simple 20-day weighted average Common Share price of $1.00 per share at signing. In 2004, the Corporation paid $1.9 million on April 1 and is required to pay $400,000 on September 30 in cash in partial satisfaction of the purchase price for MilePoint's business. In addition, MilePoint and the Corporation are party to a Transition Services Agreement ("TSA") whereby MilePoint employees and resources will continue to support the products and partner relationships throughout 2004. Under the TSA, the Corporation has agreed to reimburse MilePoint for expenses incurred in providing transition services, to a maximum of US$417,000 (of which C$286,385 or US$212,137 has been paid to date). Points has also entered into two consulting agreements with MilePoint and the senior business development principals at MilePoint. The two consultants will be focused on supporting existing relationships and selling Points Solutions to existing and new partners. Management of Points expects that the cash cost of the MilePoint Acquisition will largely be recaptured through the new revenue provided by the purchased assets over the 24-month period following March 31, 2004. Commitments Related to Lease Financing Arrangements While the Corporation has completed its capital lease obligations in 2003, several operating leases for hardware and premises remain outstanding. The Corporation's lease on its current premises will expire in February 2005. The Corporation has signed a 45-month sublease agreement and has moved to significantly larger facilities during the second quarter of 2004 to accommodate the increase in employees. In 2004, the Corporation will be paying approximately $226,000 for its former office facilities and $190,000 for its new, current office facilities. Property lease costs are outlined in the table below. Beginning June 1, 2004, the Corporation was able to complete a sublet arrangement for a portion of the former premises. The sublet covers approximately 25% of the cost of the premises, which expires in February 2005. Page 26 of 29

The projected figures do not include leasehold improvement amounts for Points' new facilities. Leasehold improvements for the new facilities are included in 2004 capital expenditures (see "Planned Capital Expenditures" below). The operating leases primarily relate to specific office technology and technology service commitments. ANNUAL AMOUNTS IN ($000'S) 2008 2007 2006 2005 2004 - -------------------------- ---- ---- ---- ---- ------ OPERATING LEASES $ 96 $384 $401 $418 $ 346 Property lease Technology services commitment 11 11 11 85 912 OPERATING LEASES TOTAL 107 396 412 502 1,258 ---- ---- ---- ---- ------ CAPITAL LEASES TOTAL $ -- $ -- $ -- $ -- $ -- ==== ==== ==== ==== ====== CAPITAL RESOURCES PLANNED CAPITAL EXPENDITURES In the second quarter of 2004, the Corporation incurred significant costs in connection with its move to new facilities. Management expects that leasehold improvements and furniture for the new premises will cost approximately between $600,000 and $700,000. For the three months ended For the six months ended ----------------------------- ------------------------ JUNE 30 MARCH 31 JUNE 30 JUNE 30 JUNE 30 CAPITAL EXPENDITURES AS AT 2004 2004 2003 2004 2003 - -------------------------- -------- -------- ------- -------- -------- Leasehold Improvements $305,158 $158,248 $ -- $463,406 $ -- Computer Hardware, Software and Other 234,673 53,416 41,764 288,089 $121,865 -------- -------- ------- -------- -------- TOTAL $539,831 $211,664 $41,764 $751,495 $121,865 ======== ======== ======= ======== ======== The Corporation expects to increase its capital expenditures related to computer hardware and software to approximately $670,000; a 186% increase over 2003. Expected software expenditures include: licenses ($70,000), marketing tools ($135,000), upgrades to internal reporting tools ($215,000) and development tools ($60,000). Management believes that the hardware and software capital expenditures are necessary to keep the development of the Corporation's primary technology assets in line with industry standards. Management will continue to fund 2004 capital expenditures from its working capital. UNPLANNED SECURITIES ISSUANCES Pursuant to the terms of the Debenture, the Investor's Rights Agreement dated April 11, 2003 between IAC, Points and an affiliate of IAC and the terms of the Series Two Preferred Share, IAC and CIBC Capital Partners have significant control over the Corporation's ability to raise capital whether by way of an equity issuance or the incurrence of debt. However, in the event the Corporation requires additional capital, it does not expect that any required consents would Page 27 of 29

be unreasonably withheld. Based on expected revenue and available resources, Points does not expect to require any additional equity financing to facilitate growth of the business or current operations. Outstanding Share Data As at the date hereof, the Corporation has 68,806,275 Common Shares outstanding, one Series One Preferred Share and one Series Two Preferred Share. The Series One Preferred Share is convertible into one Common Share in certain circumstances. Subject to anti-dilution adjustment, based on Points' current capitalization, the Series Two Preferred Share is convertible into 21,855,791 Common Shares. The Corporation has outstanding options exercisable to acquire up to 5,629,238 Common Shares. The options have exercise prices ranging from $0.20 to $1.37 with a weighted average exercise price of $0.68. The expiration dates of the options range from March 22, 2004 to April 21, 2009. The Corporation's subsidiary, Points.com, has outstanding options exercisable to acquire up to 2,708,099 common shares of Points.com. The holders of these options have been granted the right to put the shares acquired on the exercise thereof to the Corporation in return for Common Shares with a fair market value equal to the fair market value so put. The Corporation has used a ratio of 2.5039 Common Shares to one Points.com share for this purpose and has authorized the issuance of up to a maximum of 6,780,806 Common Shares in this regard. The Points.com options have exercise prices ranging from $0.005 to $0.055 with a weighted average exercise price of $0.04. The expiration dates of the options range from February 17, 2005 to September 1, 2005. The Corporation has outstanding warrants exercisable to acquire up to 83,409,528 Common Shares. The warrants have exercise prices ranging from $0.25 to $1.02 with a weighted average exercise price of $1.00. The expiration dates of the options range from October 21, 2004 to April 11, 2006. The Corporation has outstanding an 11% $6,000,000 senior secured convertible Debenture which is convertible into 18,908,070 Common Shares. The Debenture is not convertible for the period that the Warrants are outstanding. At the option of the Debenture holder, the maturity of the Debenture is extendible for up to three additional one-year periods. Assuming the Warrants have not been exercised and the Debenture matures on March 15, 2005, the Corporation will be required to repay $6 million of principal and $3,108,422 of accrued interest. It is possible that the repayment of $9,108,422 million of principal and accrued interest will cause the Corporation to be in a negative working capital position, may materially threaten its solvency and/or may severely restrict the ability to grow its business. There is no certainty that the Corporation would have sufficient cash at such time to make the repayment. Page 28 of 29

Selected Financial Results and Highlights THREE MONTHS ENDED SIX MONTHS ENDED ------------------------------------------ --------------------------- INCOME STATEMENT JUN 30, 2004 MAR 31, 2004 JUN 30, 2003 JUN 30, 2004 JUN 30, 2003 - ---------------- ------------ ------------ ------------ ------------ ------------ Revenue $ 2,032,136 $ 1,617,565 $ 1,457,568 $ 3,649,700 $ 2,761,761 General and administrative expenses 3,098,792 $ 2,650,957 1,710,455 5,749,749 3,217,177 Loss before interest, amortization and other (1,066,656) (1,033,392) (252,888) (2,100,048) (455,416) and other deductions Net income (loss) (2,153,069) $(1,901,594) (1,283,337) (4,054,663) (2,301,825) Net income (loss) per share - basic ($0.03) ($0.03) ($0.02) ($0.06) ($0.04) - fully diluted n/a n/a n/a n/a n/a BALANCE SHEET AS AT JUN 30, 2004 MAR 31, 2004 DEC 31,2003 JUN 30, 2003 - ------------------- ------------ ------------ ------------ ------------ Cash and cash equivalents $ 18,427,174 $24,243,231 $ 20,274,836 $ 24,396,879 Total assets(1) $ 34,063,056 38,997,588 27,481,286 30,507,645 Long-term liabilities 22,692,655 22,249,996 21,060,850 20,102,978 CASH DIVIDENDS DECLARED PER SHARE -- -- -- -- SHAREHOLDERS EQUITY - warrants 2,759,390 2,766,610 2,785,737 2,805,308 - capital stock 21,983,696 21,948,908 17,728,461 15,371,255 - retained earnings (29,791,670) (27,638,601) (25,737,007) (21,502,640) ------------ ------------ ------------ ------------ TOTAL $ (5,048,584) $ (2,923,084) $ (5,222,809) $ (3,326,076) ============ ============ ============ ============ Note: (1) Financial results from minority holdings are not consolidated into the Corporation's consolidated financial statements, as the Corporation does not exercise control in these entities. POINTS INTERNATIONAL LTD. SUMMARY OF QUARTERLY RESULTS (UNAUDITED) QUARTER ENDED REVENUE NET LOSS LOSS PER SHARE(1) - ------------- ---------- ----------- ----------------- June 30, 2004 $2,032,136 ($2,153,069) ($0.03) March 31, 2004 $1,617,565 ($1,901,594) ($0.03) December 31, 2003 $1,449,378 ($2,605,974) ($0.04) September 30, 2003 $1,647,566 ($1,628,391) ($0.03) June 30, 2003 $1,457,568 ($1,283,337) ($0.02) March 31, 2003 $1,304,192 ($1,018,489) ($0.02) December 31, 2002 $ 911,940 ($1,762,000) ($0.03) September 30, 2002 $ 729,467 ($1,725,072) ($0.03) Note: (1) The fully diluted loss per share has not been computed, as the effect would be anti-dilutive. Page 29 of 29

FORM 52-109FT2 - CERTIFICATION OF INTERIM FILINGS DURING TRANSITION PERIOD I, T. Robert MacLean, Chief Executive Officer of Points International Ltd., certify that: 1. I have reviewed the interim filings (as this term is defined in Multilateral Instrument 52-109 Certification of Disclosure in Issuers' Annual and Interim Filings) of Points International Ltd., (the issuer) for the interim period ending June 30, 2004; 2. Based on my knowledge, the interim filings do not contain any untrue statement of a material fact or omit to state a material fact required to be stated or that is necessary to make a statement not misleading in light of the circumstances under which it was made, with respect to the period covered by the interim filings; and 3. Based on my knowledge, the interim financial statements together with the other financial information included in the interim filings fairly present in all material respects the financial condition, results of operations and cash flows of the issuer, as of the date and for the periods presented in the interim filings. DATED this 9 day of August, 2004. [original signature] ---------------------------------------- T. Robert MacLean Chief Executive Officer

FORM 52-109FT2 - CERTIFICATION OF INTERIM FILINGS DURING TRANSITION PERIOD I, Stephen Yuzpe, Chief Financial Officer of Points International Ltd., certify that: 1. I have reviewed the interim filings (as this term is defined in Multilateral Instrument 52-109 Certification of Disclosure in Issuers' Annual and Interim Filings) of Points International Ltd., (the issuer) for the interim period ending June 30, 2004; 2. Based on my knowledge, the interim filings do not contain any untrue statement of a material fact or omit to state a material fact required to be stated or that is necessary to make a statement not misleading in light of the circumstances under which it was made, with respect to the period covered by the interim filings; and 3. Based on my knowledge, the interim financial statements together with the other financial information included in the interim filings fairly present in all material respects the financial condition, results of operations and cash flows of the issuer, as of the date and for the periods presented in the interim filings. DATED this 9 day of August, 2004. [original signature] ---------------------------------------- Stephen Yuzpe Chief Financial Officer

Exhibit 99.9 POINTS INTERNATIONAL LTD. UNAUDITED INTERIM CONSOLIDATED FINANCIAL STATEMENTS MARCH 31, 2004 Page 1 of 9

POINTS INTERNATIONAL LTD. UNAUDITED INTERIM CONSOLIDATED BALANCE SHEETS March 31, December 31, AS AT 2004 2003 - ----- ----------- ------------ ASSETS CURRENT Cash and cash equivalents $24,243,231 $20,274,836 Accounts receivable 887,100 1,004,370 Prepaids and sundry assets 1,125,666 825,221 ----------- ----------- 26,255,997 22,104,427 LONG-TERM INVESTMENTS 161,629 161,629 PROPERTY, PLANT AND EQUIPMENT 669,032 513,723 INTANGIBLE ASSETS (Note 7) 8,799,479 1,320,692 FUTURE INCOME TAXES RECOVERABLE 590,000 590,000 DEFERRED COSTS 2,521,451 2,790,816 ----------- ----------- $38,997,588 $27,481,286 =========== =========== Page 2 of 9

POINTS INTERNATIONAL LTD. UNAUDITED INTERIM CONSOLIDATED BALANCE SHEETS March 31, December 31, AS AT 2004 2003 - ----- ------------ ------------ LIABILITIES CURRENT Accounts payable and accrued liabilities $ 961,807 $ 1,187,598 Deposits 15,949,483 10,455,646 Current portion of acquisition loan payable 2,759,384 -- ------------ ------------ 19,670,674 11,643,245 ACQUISITION LOAN PAYABLE (Note 8) 765,123 -- CONVERTIBLE DEBENTURE 8,243,396 8,036,372 CONVERTIBLE PREFERRED SHARES 13,241,478 13,024,478 ------------ ------------ 41,920,671 32,704,095 ============ ============ SHAREHOLDERS' EQUITY CAPITAL STOCK 21,948,908 17,728,461 WARRANTS 2,766,610 2,785,737 DEFICIT (27,638,601) (25,737,007) (2,923,083) (5,222,809) ------------ ------------ $ 38,997,588 $ 27,481,286 ============ ============ Page 3 of 9

POINTS INTERNATIONAL LTD. UNAUDITED INTERIM CONSOLIDATED STATEMENTS OF OPERATIONS AND DEFICIT March 31, March 31, FOR THE THREE MONTHS ENDED 2004 2003 - -------------------------- ------------ ------------ REVENUES Points operations $ 1,532,513 $ 1,283,521 Interest revenue 85,052 20,671 ------------ ------------ 1,617,565 1,304,192 GENERAL AND ADMINISTRATION 2,650,957 1,506,721 ------------ ------------ LOSS- Before interest, amortization and other deductions (1,033,392) (202,529) ------------ ------------ Interest on convertible debenture 207,024 165,000 Interest on Series Two Preferred Share 217,000 -- Interest and bank charges 261 4,549 Amortization of property, plant and equipment, intangible assets and deferred costs 443,917 646,411 ------------ ------------ 868,202 815,960 ------------ ------------ NET LOSS (1,901,594) (1,018,489) DEFICIT - Beginning of period (25,737,007) (19,200,816) DEFICIT - End of period $(27,638,601) $(20,219,305) ============ ============ LOSS PER SHARE (Note 2) $ (0.03) $ (0.02) ============ ============ Page 4 of 9

POINTS INTERNATIONAL LTD. UNAUDITED INTERIM CONSOLIDATED STATEMENTS OF CASH FLOWS March 31, March 31, FOR THE THREE MONTHS ENDED 2004 2003 - -------------------------- ----------- ----------- CASH FLOWS FROM OPERATING ACTIVITIES Net loss $(1,901,594) $(1,018,489) Items not affecting cash Amortization of property, plant and equipment 56,354 375,171 Amortization of deferred costs 199,346 82,190 Amortization of intangible assets 188,217 189,050 Cancellation of warrants issued for services (1,167) -- Interest on Series Two Preferred Shares 217,000 -- Interest accrued on convertible debenture 207,024 165,000 ----------- ----------- (1,034,820) (207,077) Changes in non-cash balances related to operations (Note 6 a) 5,159,380 3,412,690 ----------- ----------- CASH FLOWS PROVIDED BY OPERATING ACTIVITIES 4,124,560 3,205,613 ----------- ----------- CASH FLOWS FROM INVESTING ACTIVITIES Purchase of property, plant and equipment, net of proceeds (211,664) (79,947) Purchase of intangible assets (17,004) (35,374) Costs related to the acquisition of MilePoint, Inc. (Note 7) (200,000) -- ----------- ----------- CASH FLOWS USED IN INVESTING ACTIVITIES (428,668) (115,321) ----------- ----------- CASH FLOWS FROM FINANCING ACTIVITIES Deferred financing costs 70,018 -- Repayment of obligations under capital leases -- (114,912) Issuance of capital stock, net of share issue costs 202,485 153,655 ----------- ----------- CASH FLOWS PROVIDED BY FINANCING ACTIVITIES 272,503 38,743 ----------- ----------- INCREASE IN CASH 3,968,395 3,129,035 CASH AND CASH EQUIVALENTS - Beginning of period 20,274,836 7,341,700 ----------- ----------- CASH AND CASH EQUIVALENTS - End of period $24,243,231 $10,470,735 =========== =========== Page 5 of 9

POINTS INTERNATIONAL LTD. NOTES TO UNAUDITED INTERIM CONSOLIDATED FINANCIAL STATEMENTS MARCH 31, 2004 1. Accounting policies The company's interim financial statements have been prepared using accounting policies consistent with those used for the preparation of its annual financial statements. These interim financial statements should be read in conjunction with the company's 2003 audited consolidated financial statements. These financial statements contain all adjustments which management believes necessary for fair presentation of the financial position, results of operations and cash flows. a) Basis of presentation The consolidated financial statements include the accounts of the Company and from their respective dates of acquisition of control or formation of its wholly owned subsidiaries. All inter-company transactions and amounts have been eliminated on consolidation. b) Goodwill Goodwill represents the excess of the purchase price of acquired companies over the estimated fair value of the tangible and intangible net assets acquired. Goodwill is not amortized. The company currently compares the carrying amount of the goodwill to the fair value, at least annually, and recognizes in net income any impairment in value. c) Intangible assets Intangible assets represent the fair value of contracts acquired by the company on MilePoint, Inc, acquisition. The carrying value of these contracts will be amortized on a straight-line basis over the life of the contracts. 2. Loss per share a) Basic loss per share Loss per share is calculated on the basis of the weighted average number of common shares outstanding for the three months ended March 31 that amounted to 63,394,531 shares (March 31, 2003 - 54,606,209). b) Fully-diluted loss per share The fully-diluted loss per share has not been computed, as the effect would be anti-dilutive. Page 6 of 9

3. Segmented information Reportable segments: The company has only one operating segment whose operating results are regularly reviewed by the company's chief operating decision maker and for which complete and discrete financial information is available. The company's business is carried on in the industry of loyalty program asset management. The attached consolidated balance sheets as at March 31, 2004 and December 31, 2003 present the financial position of this segment. The continuing operations reflected on the attached consolidated statements of operations are those of this operating segment. Enterprise-wide disclosures: $1,475,886 (March 31, 2003 - $1,319,997) of the company's revenues were generated in the U.S. for the three month period, with the remaining revenues generated in Canada, Europe and Asia. A significant majority of the company's assets are located in Canada. 4. Economic dependence For the three-month period ended March 31, 2004, approximately 65% of the company's revenues are from its two largest customers (65% at March 31, 2003). In addition, as at March 31, 2004, 80% of the company's deposits are due to these customers (58% as at December 31, 2003). 5. Stock-based compensation Effective January 1, 2002 the company adopted CICA 3870 ("Stock-based Compensation and Other Stock-based Payments"). As permitted by CICA 3870 the company has applied this change prospectively for new awards granted on or after January 1, 2002. The company has chosen to recognize no compensation when stock options are granted to employees and directors under stock option plans with no cash settlement features. In periods prior to January 1, 2002 the company recognized no compensation when stock or stock options were issued to employees. Supplementary pro forma information regarding net income is required by CICA 3870 as if the company had accounted for its employee stock options granted after December 31, 2001 under the fair value method. During the quarter ended March 31, 2004, no options were issued to employees. For purposes of pro forma disclosures, the estimated fair value of the options is amortized to expense over the options' vesting periods. The company's pro forma net income under Canadian GAAP would be reduced by approximately $56,100 for the three months ended March 31, 2004. Basic loss-per-share figures would not have changed. Page 7 of 9

6. Statement of Cash Flows a) Changes in non-cash balances related to operations are as follows: MARCH 31, MARCH 31, FOR THE THREE MONTHS ENDED 2004 2003 - -------------------------- ---------- ---------- Decrease (Increase) in accounts receivable $ 117,270 $ (234,143) Increase in prepaid and sundry assets (300,445) (172,762) Decrease in accounts payable and accrued liabilities (225,791) (139,018) Increase in deposits 5,493,837 3,958,613 Increase in liability related to MilePoint, Inc. acquisition 74,509 -- ---------- ---------- $5,159,380 $3,412,690 ========== ========== b) Supplemental information Interest and taxes Interest of $261 was paid during the three month period ended March 31, 2004 (three months ended March 31, 2003 - $4,549). Interest revenue of $85,052 was earned during the three month period ended March 31, 2004 (three months ended March 31, 2003 - $20,671). No income taxes have been paid. Non-cash transactions Non-cash transactions for the quarter ended March 31, 2004 are as follows: (i) 185,999 shares of Points.com Inc. were acquired in exchange for 465,724 shares of the Corporation. (ii) 4,000,000 shares (valued at $4,000,000) of the Corporation were issued as part consideration in the acquisition of MilePoint, Inc. (see Note 6). (iii) $9,937 of revenue earned for hosting services provided was paid in loyalty currency. The currency was valued at the purchase price of the miles. The expense will be recognized as the currency is used. (iv) The Corporation received $41,415 of loyalty currency from a partner as reimbursement of a portion of the partner's direct expenses for the services provided by the Corporation. (v) Interest of $207,024 was accrued on the convertible debenture. (vi) Interest of $217,000 was accrued on the Series Two Preferred. Page 8 of 9

c) Cash and cash equivalents consist of: MARCH 31, DECEMBER 31, 2004 2003 ----------- ------------ Cash $16,656,147 $ 9,046,701 Short-term investments 5,680,274 9,627,468 Cash held by credit card processor 1,906,810 1,600,667 ----------- ----------- $24,243,231 $20,274,836 =========== =========== 7. MilePoint Inc. Acquisition On March 31, 2004 Points acquired substantially all of the assets of MilePoint, Inc., a loyalty program technology provider and operator. The purchase price of $7.5 million was satisfied through a combination of $3.5 million in cash payable, without interest, over two years and four million common shares. The cost of the acquisition and the fair values assigned are as follows: Intangibles $ 225,000 Contracts with Partners 3,450,000 Goodwill 3,975,000 ---------- $7,650,000 ========== Consideration: Cost of Transaction $ 200,000 Capital Stock Issued 4,000,000 Acquisition Loan Payable 3,450,000 ---------- $7,650,000 ========== The acquired contracts with partners will be amortized over the life of the contracts. The goodwill and other intangibles will not be amortized; these will be reviewed annually and any permanent impairment will be recorded and charged to income in the year that the impairment has occurred. The loan payable, which has a face value of $3,500,000, is discounted to its fair value as it is non interest bearing and due over two years. 8. MilePoint Inc. Acquisition Payments Payments under the terms of the acquisition loan payable are as follows: Acquisition Loan Payable $3,450,000 Less: Current Portion 2,684,877 ---------- Long-Term Portion $ 765,123 ========== Page 9 of 9

POINTS INTERNATIONAL LTD. INTERIM MANAGEMENT'S DISCUSSION AND ANALYSIS The following interim management's discussion and analysis ("MD&A") of the performance, financial condition and future prospects of Points International Ltd. (which is also referred to herein as "Points" or the "Corporation") should be read in conjunction with the Corporation's consolidated financial statements (including the notes thereon) for the quarter ended March 31, 2004 and with the Corporation's 2003 audited consolidated financial statements. Further information, including Points' Annual Information Form ("AIF") for the year ended December 31, 2003, may be accessed at www.sedar.com. All financial data herein has been prepared in accordance with Canadian generally accepted accounting principles ("GAAP") and all dollar amounts herein are in Canadian dollars unless otherwise specified. This MD&A is dated as of April 30, 2004. FORWARD-LOOKING STATEMENTS Some of the statements contained or incorporated by reference in this MD&A, including those relating to Points' strategies and other statements that are predictive in nature, that depend upon or refer to future events or conditions, or that include words such as "expects," "anticipates," "intends," "plans," "believes," "estimates" or similar expressions, are forward-looking statements within the meaning of Canadian securities laws. Forward-looking statements include, without limitation, the information concerning possible or assumed future results of operations of Points as set forth herein. These statements are not historical facts but instead represent only Points' expectations, estimates and projections regarding future events. The forward-looking statements contained or incorporated by reference in this MD&A are not guarantees of future performance and involve certain risks and uncertainties that are difficult to predict. The future results and shareholder value of Points may differ materially from those expressed in the forward-looking statements contained or incorporated by reference in this MD&A due to, among other factors, the risks and uncertainties discussed herein, the matters set forth under "Risk and Uncertainties" contained in Points' AIF filed with Canadian securities regulators and the factors detailed in Points' other filings with Canadian securities regulators, including the factors detailed in Points' annual and interim financial statements and the notes thereto. Points does not undertake any obligation to update or release any revisions to these forward-looking statements to reflect events or circumstances after the date of this MD&A or to reflect the occurrence of unanticipated events, except as required by law. Page 1 of 30

OVERVIEW OF POINTS' BUSINESS CORE BUSINESS - POINTS SOLUTIONS Points has developed a proprietary technology platform that allows it to offer a portfolio of solutions, referred to as the Points Solutions, to the loyalty program industry. The Points platform was designed to create value for consumers and loyalty programs alike. The Points Solutions are comprised of the Points Exchange and a suite of Private Branded Solutions available to loyalty program operators. The Points Exchange In April 2001, Points launched its cornerstone product, the proprietary Points Exchange. The Points Exchange is an online service allowing consumers who are members of participating loyalty programs to exchange their loyalty program points and/or miles between the participating loyalty programs. The Points Exchange also serves as a central resource to help individuals track their account balances with a number of their major loyalty programs. Management believes that the Points Exchange is currently the only independent loyalty points exchange of its kind. As at March 31, 2004, the Points Exchange had attracted 36 loyalty program participants (38 as at the date hereof), including the loyalty programs of leading airlines, hotels, online businesses, retail businesses and gift certificate programs. Private Branded Solutions In addition to the Points Exchange, Points offers a portfolio of Private Branded Solutions to loyalty programs. This suite of technologies includes: POINTSpurchase and POINTSgift - facilitates the online sale and gift of miles, points and other loyalty program currencies. POINTScorporate - facilitates the sale of loyalty program currencies to corporate customers. POINTStransfer - facilitates the amalgamation or transfer of loyalty program currencies among multiple accounts. POINTSintegrate - functions as a common platform to process transactions between third-party loyalty programs, to simplify and automate a complex and resource-intensive process, with a single integration. POINTSelite - facilitates the online sale of tier status to members of loyalty programs. POINTScustom - custom applications developed for select large loyalty program partners. Page 2 of 30

SIGNIFICANT BUSINESS DEVELOPMENTS IN THE FIRST QUARTER OF 2004 STRATEGIC RELATIONSHIP WITH EBAY In 2003, Points developed a significant relationship with online leader eBay Inc. ("eBay"). Under this relationship, eBay's Anything Points ("EAP") program became an anchor Points Exchange partner, and Points implemented a number of Points Solutions to power core elements of the EAP program, including POINTSintegrate. In addition, in August 2003, eBay selected Points to develop and operate a POINTScustom product, the "Offer Manager", for their EAP program. The Offer Manager allows eBay sellers to issue EAPs to buyers who purchase their goods and services on eBay. In March 2004, Points and eBay agreed to continue eBay's participation on the Points Exchange through at least December 2005 and eBay made Points the exclusive exchange vehicle for all airline, hotel, car rental and major online loyalty programs participating with eBay's EAP program. TORONTO STOCK EXCHANGE LISTING On February 24, 2004, Points' Common Shares were listed for trading on the Toronto Stock Exchange under the symbol "PTS". The Corporation's Common Shares ceased to trade on the TSX Venture Exchange at the close of trading on February 23, 2004. MILEPOINT ACQUISITION On March 31, 2004, Points acquired substantially all of the assets of MilePoint, Inc. ("MilePoint"), a leading loyalty program technology and service provider (the "MilePoint Acquisition"). The MilePoint Acquisition has allowed Points to add to its partner base relationships with Northwest Airlines, Delta Air Lines and Starwood Hotels, among others, and increase the potential of both the Points Exchange and the Corporation's broad portfolio of Private Branded Solutions. In connection with the MilePoint Acquisition, Points has retained for one year, as consultants, MilePoint's founders and loyalty industry veterans, Mark Lacek and Peter Brennan. In 2003, MilePoint had unaudited earned revenue of $2.2 million and was slightly profitable. Points expects to realize significant operating synergies by integrating MilePoint's products into Points' operations. Management expects that most of the synergies will be achieved by the end of 2004. For further information on the MilePoint Acquisition, see "Results of Operations" below. Page 3 of 30

REVENUE RECOGNITION POLICIES The revenue recognition policies for the suite of Points Solutions are as follows: POINTS EXCHANGE - Revenues from transaction processing are recognized as the services are provided under the terms of related contracts. - Membership dues received in advance for services are recognized over the term of service. Membership dues are $19.95 annually for a PointsPlus membership. - One-time trading fees ($5.95 per trade) are recognized at the time of the trade (for non-PointsPlus members). - Exchange commissions are a percentage of the exchanged value. PRIVATE BRANDED SOLUTIONS - Revenues from the sale of loyalty program points are recorded net of costs. - Hosting and management fees are recognized in the period of service. - Non-refundable partner sign-up fees with no fixed term, and for which the Corporation is under no further obligations, are recognized as revenue when received. - Technology design, development and maintenance revenues are recorded on a "percentage-of-completion" basis. KEY BUSINESS DRIVERS Revenue growth has historically been, and will continue to be, generated by growth of membership in and use of the suite of Points Solutions (i.e., the Points Exchange and Private Branded Solutions). Growth in the number of individual members using the Points Exchange is driven by three factors that contribute to increased site traffic and the ease with which a consumer can join the Points Exchange to conduct exchange transactions. These factors are website usability and enhancements, marketing (awareness and brand) and partner activity. For additional information, see "Points Exchange Growth" on page 6 hereof. Growth in Private Branded Solutions will occur from organic growth of existing partner relationships, supplemented with new business relationships established throughout the year. For additional information, see "Private Branded Solutions Growth" on page 7 hereof. While the Corporation has no control over the growth of the loyalty program industry, management considers it an important factor in the Corporation's growth prospects. For additional information, see "Growth of Loyalty Program Industry" on page 11 hereof. Page 4 of 30

RESULTS OF OPERATIONS - REVENUES OVERVIEW Revenue for the three months ended March 31, 2004 was $1,617,565 representing a year over year increase of 24% and an increase of 12% over the prior quarter (December 31, 2003). The provision of Points Solutions accounted for approximately 95% of the revenues in the first quarter. Revenue allocation remained similar to the 2003 annual distribution. Revenues MARCH 31 DECEMBER 31 --------------------------------- ------------------- REVENUES FOR THE QUARTER ENDING 2004 2003 CHANGE 2003 CHANGE - ------------------------------- ---------- ----------- ------ ---------- ------ Points Operations $1,532,513 $1,283,521 19% $1,336,597 15% Interest and other revenue 85,052 20,671 311% 112,781 -25% ---------- ---------- --- ---------- --- TOTAL REVENUE $1,617,565 $1,304,192 24% $1,449,378 12% ========== ========== === ========== === A substantial portion of Points' revenue is generated through the provision of Private Branded Solutions for loyalty programs by way of fees for technology services and transaction fees or commissions paid to Points by the operators of the loyalty programs. Points earns revenue from the Points Exchange in two principal ways. First, Points charges a commission on all exchanges, based on a value of the loyalty currency tendered for exchange by the loyalty program member. Through the exchange model, the participating loyalty program sets a value on the currency tendered for "sale". Based on this valuation, a percentage is remitted to Points and the remaining balance is used to purchase the currency of another participating loyalty program. Second, loyalty program members pay Points either a fee for each exchange transaction on the Points Exchange or an annual fee for a membership that includes unlimited exchange transactions. For the three-month period ended March 31, 2004, two key customers represented approximately 65% of the Corporation's gross revenues (for the three-month period ended March 31, 2003, two key customers represented 65% of the Corporation's gross revenues). In addition, two key customers, measured by revenue, represented approximately 80% (March 31, 2003 - 79%) of the Corporation's deposits. As additional partner relationships are established, management expects the economic dependence on key customers to proceed on a downward trend. One of the two key customers is not the same partner as disclosed in the 2003 Management's Discussion and Analysis. Management recognizes that the Corporation must achieve profitability through revenue growth and cost management. As stated in prior disclosure, management continues to expect that Points' revenues will exceed its general and administrative expenses by 2005. Page 5 of 30

REVENUE GROWTH Revenue growth has historically been, and will continue to be, generated by growth of membership in and use of the suite of Points Solutions products. Growth in product usage will occur from the organic growth of existing relationships, supplemented with new business relationships established throughout the year. Management expects the existing contracts to continue to generate growing revenues and, based on on-going business development efforts, is optimistic about new revenue sources in 2004. Growth in Use of the Points Solutions The suite of Points Solutions experiences revenue growth based on the number of loyalty program partners and consumer members who participate in the various programs. Partner Summary - Total Number of Partners(1) MARCH 31 DECEMBER 31 ---------------------- -------------- NUMBER OF PARTNERS AS AT 2004 2003 CHANGE 2003 CHANGE - ------------------------ ----- ----- ------ ----- ------ Points Exchange 36 26 38% 35 3% Private Branded Solutions(2) 16 7 129% 12 33% Cumulative Miles Transacted (000,000's) 3,810 1,322 188% 3,027 26% Notes: (1) Partners may be included in both the Private Branded Solutions and the Points Exchange. (2) Includes 4 additional partnerships acquired in the Acquisition of MilePoint as at March 31, 2004. Points Exchange Growth Growth in the number of consumer members using the Points Exchange is driven by three factors that contribute to both increased site traffic and the ease with which a consumer can join the Points Exchange and then conduct exchange transactions: website usability and enhancements; marketing (awareness and brand) and partner activity. In the first quarter of 2004, enhancements were made to the website that simplify processes and will allow us to grow while incurring fewer costs. In 2004, Points will continue to release further enhancements and expand its marketing promotions and programs. To support growth in the Points Exchange, the Corporation hired a Chief Marketing Officer in the second quarter of 2004 to lead the marketing group. Growth in activity on the Points Exchange is also heavily impacted by partner activity. The number of loyalty program participants, their industry mix and the average number of points/miles required to acquire one point/mile of another loyalty currency (the "Trade Ratio") are important elements in the growth of the Points Exchange. Points Exchange Metrics MARCH 31 DECEMBER 31 ------------------------------ ------------------ METRICS FOR THE QUARTER ENDING 2004 2003 CHANGE 2003 CHANGE - ------------------------------ --------- --------- ------ --------- ------ Total Loyalty Programs - cumulative 36 26 38% 35 3% Trade Ratio(1) 1.68 to 1 1.83 to 1 -8% 1.75 to 1 -4% Notes: (1) Average rates are based on all miles and points exchanged and excludes gift certificates. The results are based on actual trades made during the fiscal year. Page 6 of 30

The number of loyalty programs participating on the Points Exchange has increased by 38% since the first quarter of 2003 and 3% since the December 31, 2003. Points continues to focus its business development efforts on adding the optimal partners by size and industry to the Points Exchange. Management continuously works with new and existing program participants in an effort to improve the Trade Ratio. Through these efforts, the Trade Ratio has improved by 8% since March 2003. In addition, total trades grew by 270% compared to the first quarter of 2003. Management expects to continue to see successes in this area in 2004. Private Branded Solutions Growth The Private Branded Solutions have been designed with each partner's look and branding. As a result, Points has little impact on driving traffic and transactions through its partners' sites. However, Points has seen continuous growth in the products since each launch. Management expects this trend to continue for new and existing Private Branded Solutions. Private Branded Solutions Metrics MARCH 31 DECEMBER 31 -------------------- ------------- METRICS AS AT 2004 2003 CHANGE 2003 CHANGE - ------------- ---- ---- ------ ---- ------ Total Unique Partners(2) 16 7 129% 12 33% Total Private Branded Solutions(3) 43 21 105% 30 43% Notes: (1) Average rates are based on all miles and points exchanged and exclude gift certificates. The results are based on actual trades made during the fiscal year. (2) Includes 4 additional partnerships acquired in the Acquisition of MilePoint as at March 31, 2004. (3) Includes 12 additional products acquired in the Acquisition of MilePoint as at March 31, 2004. Private Branded Solutions (1)(2) MARCH 31 DECEMBER 31 -------------------- ------------- NUMBER OF PRODUCTS AS AT 2004 2003 CHANGE 2003 CHANGE - ------------------------ ---- ---- ------ ---- ------ POINTSpurchase 13 7 86% 9 44% POINTSgift 13 7 86% 8 63% POINTStransfer 3 2 50% 2 50% POINTScorporate 5 2 150% 4 25% POINTSelite 2 2 0% 2 0% POINTScustom 3 -- n/a 2 50% POINTSintegrate partners(3)(4) 4 1 300% 3 33% Total Private Branded Solutions 43 21 105% 30 43% Notes: (1) Includes products sold to new and existing customers. (2) Includes 12 additional products acquired in the Acquisition of MilePoint as at March 31, 2004. (3) Each POINTSintegrate partner will have third parties integrated into its technology platform. (4) There are 21 existing partner integration add-ons among the four POINTSintegrate partners. Page 7 of 30

SOURCES OF REVENUE GROWTH Approximately 95% of the Corporation's revenue is generated through its Points Solutions, which have two primary sources for growth: organic growth through increased use of existing contracted Points Solutions; and the development of new contracted Points Solutions. In the first quarter of 2004, management was focused on completing the MilePoint Acquisition and aligning resources to plan for a smooth transition post acquisition. The Corporation will begin to book revenues from the acquired partners beginning April 1, 2004. Percentage of Revenues by Source MARCH 31 DECEMBER 31 -------------------- ------------- FOR THE QUARTER ENDING 2004 2003 CHANGE 2003 CHANGE - ---------------------- ---- ---- ------ ---- ------ Organic Growth of existing Points Solutions 97.0% 79.4% 18% 80.6% 16% New contracted Points Solutions with new and existing partners 3.0% 20.6% -18% 19.4% -16% ---- ---- --- ---- --- TOTAL 100% 100% 0% 100% 0% ==== ==== === ==== === Organic Growth of Existing Points Solutions The large majority of existing products that Points operates, including those on behalf of partner loyalty programs, continue to grow through increased consumer awareness, consumer adoption and loyalty program growth. As Points earns transaction fees or commissions on the majority of these products and as the products continue to grow, Points expects to continue to derive a large portion of its revenues in this manner. Organic growth of existing Points Solutions accounted for 97% of revenues in the first quarter of 2004. Revenue from organic growth grew by 52% from $1.036 million in the first quarter of 2003 to $1.569 million in the first quarter of 2004, and by 34% from the fourth quarter of 2003. Management expects this trend to continue as the base of existing products continues to grow. Effective April 1, 2004, organic growth will include products from partnerships acquired in the MilePoint Acquisition. The MilePoint Acquisition resulted in 12 additional Private Branded Solutions products, five additional POINTSintegrate third party integrations and four new partnerships. New Contracted Points Solutions Selling new Points Solutions is an important source of new revenue. New Points Solutions sold to loyalty program partners grow the base of products being managed and therefore the organic revenue base and, in the case of sales to new loyalty program partners, provide an opportunity to place additional Points Solutions with the same partner. Since March 31, 2003, Points has more than doubled the number of products placed with partners from 21 to 43 as at March 31, 2004. In addition, 20 third party integrations have been implemented with the four POINTSintegrate partners and ten new loyalty programs have been added to the Points Exchange since March 31, 2003. Page 8 of 30

Points believes that its suite of Points Solutions is applicable to all of its large loyalty program partners and will continue to focus business development resources on both the sale of new products to current partners and on sales to new partners. Management is continuing to focus on expanding the Points Exchange partnership base in 2004 across various loyalty verticals. In particular, Points will continue to focus on new partnerships in the hotel, retail, car rental, online, and financial services categories throughout 2004. Projected revenues for 2004 attributed to the deployment of Points Solutions to new loyalty program partners are considerably riskier than organic growth of existing Points Solutions. Revenue growth is still substantially dependent on generating new contracts for the purchase of Points Solutions products. While management expects continued business development success, there is no certainty that Points will continue with its past success of acquiring new contracts with new or existing partners. OTHER FACTORS CONTRIBUTING TO REVENUE GROWTH In addition to the sources of revenue and growth described above, three other factors contribute to the Corporation's financial performance: interest income, fluctuations in foreign exchange rates and the growth of the loyalty program industry. Interest Revenue The Corporation earned interest revenue of $85,052 for the first quarter of 2004, compared with $20,671 in the first quarter of 2003 and $112,781 in the fourth quarter of 2003. The major factor resulting in higher interest revenue over 2003 is the growth in the Corporation's cash reserves. The decrease in interest revenue versus the fourth quarter of 2003 is largely a function of the shorter duration of the investment portfolio and the subsequently lower average yield of the investments. Management expects the interest revenue to continue to decline in the short term as cash reserves are reduced related to the MilePoint Acquisition. Interest revenue is a function of the Corporation's cash balances and the prevailing interest rates. Canadian cash reserves are invested in a combination of short-term liquid assets and short-term bonds. The bond and money market portfolio has a duration of less than two years and a yield of approximately 4%. Foreign currency continues to be invested in short-term and money market instruments. Points' cash and short-term investments are valued quarterly at the lower of cost and market value. As Points' business continues to grow, cash reserves and related interest income are also expected to increase, although this growth is not expected to be a material portion of the Corporation's revenue going forward. Interest rates will continue to influence interest earnings. The Corporation's bond portfolio is exposed to financial risk that arises from the credit quality of the underlying bond issuers. The Corporation seeks to mitigate the credit risk by diversifying its bond holdings and only investing in securities with a credit rating of "A" or higher. Page 9 of 30

A summary of the Corporation's investments is as follows: Corporation's Investments - Summary CREDIT US$ OTHER AS AT MARCH 31, 2003 YIELD % RATING C$ TOTAL DENOMINATED DENOMINATED - -------------------- ------- --------- ----------- ----------- ----------- Cash held at bank(1) 0.78 n/a $18,562,957 $11,157,504 E1,101,680 Money market securities 2.47(2) R1 - High 17,143 n/a n/a Bonds(3) 4.74 A - AAA 5,663,131 n/a n/a ----------- ----------- ---------- TOTAL $24,243,231 $11,157,504 E1,101,680 =========== =========== ========== Notes: (1) C$ Total represents total cash held at bank inclusive of all denominations; US$ and Other Denominated currencies are a subset of the C$ Total and are represented in their local currency amount. (2) Yield as at March 31, 2004. (3) Bond yield is calculated as the simple average of the portfolio's semi-annual yield to maturity. Foreign Exchange Rates The translation of the Corporation's revenues and expenses from U.S. to Canadian dollars is, and will continue to be, sensitive to changes in the U.S./Canadian foreign exchange rates ("FX Rates"). Changes to FX Rates will have greater impact on the Corporation's revenues than on its expenses as approximately 91% of the Corporation's revenues are in U.S. dollars and the remaining 8% are split between Canadian dollars and Euros. Management expects that the percentage of U.S. dollar-based revenue will not decrease significantly in 2004. Approximately 61% of the Corporation's expenses are in Canadian dollars, 37% are U.S. dollar-based and 2% are based in other foreign currencies. The Corporation does not have material foreign exchange risk with its cash expenses as it has sufficient foreign currency reserves to meet its foreign obligations. The average quarterly FX Rate has decreased by 13% versus the first quarter of 2003. As approximately 91% of the Corporation's revenues are in U.S. dollars, this has a significant impact on revenues and earnings; the year over year negative variance in revenue due to the strengthened Canadian dollar is approximately $216,000. This negative variance coupled with the year over year positive variance in expenses of $70,000 due to the strengthening FX Rate, results in an overall negative variance of $146,000 to Points' first quarter 2004 loss before interest, taxes, depreciation and amortization versus the same period in 2003. The Corporation's revenue growth will slow (in Canadian dollar terms) if the Canadian dollar continues its trend of strengthening relative to the U.S. dollar. Similarly, it is expected that Points' expenses should also decrease, dampening the negative impact to net income. MARCH 31 DECEMBER 31 ---------------------- -------------- U.S. - CANADIAN FX RATES 2004 2003 CHANGE 2003 CHANGE - ------------------------ ----- ----- ------ ----- ------ Quarter Start 1.297 1.573 -18% 1.350 n/a Quarter End 1.308 1.472 -11% 1.295 1% Quarter Average 1.318 1.511 -13% 1.317 0% Page 10 of 30

Growth of Loyalty Program Industry The Economist reported on the growing importance of loyalty programs in an article from its May 2, 2002 issue, entitled "Fly me to the moon", noting that on an annual basis, airlines sold "roughly US$10 billion worth of miles to partners, such as credit card firms". In another article (entitled "Frequent-flyer economics," from the same issue), The Economist reported that "frequent flyer miles started as a marketing gimmick, but they have become a lucrative business," that "roughly half of all miles are now earned on the ground, not in the air," and that with "the world-wide stock of unredeemed miles .. . . close to 8.5 trillion . . . the total global stock of frequent flyer miles may now be worth almost US$500 billion". Management understands that members of loyalty programs are much more likely to utilize the Points Exchange and the other products from the suite of Points Solutions when they are close to a level at which they can redeem an award. The redemption level for an award varies by type of award (for example, a business-class flight takes more miles that an economy-class flight) and by program type (the "cost" of a flight typically starts between 15,000 and 25,000 miles whereas a night in a hotel starts at 10,000 points). Therefore, growth in consumer loyalty program account balances will create demand for Points Solutions. Growth in program balances is a function of the growth in the number of programs, the number of participating consumers, time and the number of consumers moving through a loyalty redemption (for example, receiving an award of some type). Several respected periodicals estimate strong growth in the popularity of and participation in loyalty programs. For example, in addition to The Economist, cited above, according to the "frequent flyer facts" section of the website of InsideFlyer magazine (www.webflyer.com), a leading publication for members of frequent traveler programs: "loyalty programs grow at a rate of 11% per annum, with over 120 million members worldwide. While there are about 92 frequent flyer/guest programs in the world, American AAdvantage, the largest frequent flyer program in the world, began with 283,000 members in 1981 and has grown to more than 45 million members". Page 11 of 30

RESULTS OF OPERATIONS - GENERAL AND ADMINISTRATIVE EXPENSES GENERAL AND ADMINISTRATIVE EXPENSES General and administrative expenses grew by 76% over the first quarter of 2003 and were flat relative to the fourth quarter of 2003. The increase over the first quarter of 2003 reflects the cost of expanding operations, including the launch of a number of Private Branded Solutions to new and existing customers. The Corporation had approximately $225,000 of additional expenses relating to employment and other costs that are one-time or occur only in the first quarter. The Corporation continues to support its technology, its technological expertise and its industry expertise, in order to have the appropriate infrastructure and personnel required to deal with large, established companies. The Corporation's investment in the above areas was critical in completing its commercial agreements with its strategic partners (for example, American Airlines, eBay and IAC). General and Administrative Expenses MARCH 31 DECEMBER 31 GENERAL AND ADMINISTRATIVE EXPENSES -------------------------------- ------------------- FOR THE QUARTER ENDING 2004 2003 CHANGE 2003 CHANGE - ----------------------------------- ---------- ---------- ------ ---------- ------ Employment Costs(1) $1,831,114 $1,101,371 66% $1,511,390 21% Technology Services(2) 161,307 200,284 -19% 86,688 86% Marketing and Communications 202,102 (1,895) n/a 284,171 -29% Other(3) 456,434 206,961 121% 769,068 -41% ---------- ---------- --- ---------- --- TOTAL $2,650,957 $1,506,721 76% $2,651,317 0% ========== ========== === ========== === Notes: (1) Wages and employment costs include salaries, contract labour charges, recruiting, benefits and government charges (CPP and EI). (2) Technology expenses include online hosting and managed services, equipment rental, software licenses and capital lease interest expenses. (3) Other expenses include foreign exchange losses (or gains), sales commissions and related expenses, travel expenses, professional fees, insurance, office rent and expenses and regulatory expenses. As the Corporation is still in the process of increasing loyalty program participation in and sales of the Points Solutions, significant resources continue to be required. While management has made controlling costs a priority, costs will increase in 2004 relative to 2003. However, management does not expect the general and administrative expenses in the remaining three quarters to be significantly higher than in the first quarter. The Corporation will continue to scale its infrastructure, add new partners to its suite of products, move from trial/test marketing to a more comprehensive marketing and branding program and begin the transition associated with assimilating the business of MilePoint. A significant percentage of the planned expense increases in 2004 are either discretionary or variable. Points still expects that a series of significant marketing and branding programs will begin in the latter half of 2004. The actual expense incurred will be a function of the types of marketing media employed and incentives offered, as well as the timing of the programs' launch dates. If actual revenue growth projected from the marketing plan does not meet expectations, the expenditures can either be reduced or reallocated to more successful programs. Page 12 of 30

EMPLOYMENT COSTS As at March 31, 2004, Points had 68 full-time employees. Headcount by Department MARCH 31 DECEMBER 31 ------------------------------------- ----------------- AT THE QUARTER ENDING 2004 % OF TOTAL 2003 % OF TOTAL 2003 % OF TOTAL - --------------------- ---- ---------- ---- ---------- ---- ---------- Technology Group 45 66% 18 56% 41 64% Finance 10 15% 5 16% 10 16% Business Development 8 12% 7 22% 8 13% Marketing 5 7% 2 6% 5 8% --- ---- --- --- --- --- TOTAL 68 100% 32 100% 64 100% === ==== === === === === Employment costs increased by 66% versus the first quarter of 2003 primarily due to growth in the technology, finance and marketing groups. Additional technology personnel has been required to meet the demand of growing from 21 Private Branded Solutions and 26 Points Exchange partners at March 31, 2003 to 43 Private Branded Solutions and 36 Points Exchange partners one year later. Employment costs increased by 21% from the fourth quarter of 2003 (11% excluding one-time employment related costs in 2004) primarily due to new hires in the first quarter of 2004. Overall, 2004 employment costs are likely to increase moderately relative to 2003. This increase is expected to result from new hiring, annualizing the employment costs of employees hired part way through 2003 and annual salary increases. While the Corporation will continue to hire in 2004, it expects to hire fewer personnel than in previous years. TECHNOLOGY SERVICES Technology services expenses increase in increments based on business growth and product performance. As technology services costs are a function of the number of partners and Points Solutions products, these costs grow proportionately to revenue growth. In general, as loyalty program partners and products are added to the infrastructure and transactional volume increases, additional servers, processors, bandwidth, memory, etc., are required to provide a secure and robust production environment. The first quarter of 2004 saw a year over year decrease of 19%, as the Corporation was able to renegotiate one of its technology services contracts. The significant increase over the fourth quarter of 2003 (86%) is due to a one-time credit received in the fourth quarter. Management expects these costs to continue to increase in 2004 driven by products launched, loyalty program partners acquired and the speed with which Points completes the transition of the MilePoint business. MARKETING AND COMMUNICATIONS Marketing costs decreased by 29% in the first quarter of 2004 relative to the fourth quarter of 2003 primarily due to a decline in promotional activities. Fourth quarter marketing expenditures are typically higher due to promotional efforts tied to the Christmas holiday. The first quarter of 2003 includes an accounting adjustment related to the expense recognition of promotional miles tied to PointsPlus membership purchases. Prior to the first quarter of 2003, the cost of these miles was recorded as an expense in the period they were issued. Beginning January 1, 2003, marketing expenses associated with the sale of PointsPlus memberships are being amortized over the term of the membership, while the other marketing expenditures are recognized in the period of use. Page 13 of 30

The Corporation expects to significantly increase its marketing expenditures in the latter half of 2004, primarily focusing on customer acquisition and retention. The marketing and branding foundation built in 2003 has made it possible to expand audience reach and effectively execute large-scale, multi-channel promotions. Advertising expenditures will continue to be focused on partner media as this approach dovetails with business development strategies and is the most cost-effective means to reach Points' target audience. A smaller portion of the budget will be used for targeted non-partner advertising. It is anticipated that marketing and communication expenses could increase substantially if the programs are successful at customer acquisition and retention. If the programs do not meet management's expectations in driving revenue growth, marketing expenses can be eliminated or reallocated in the short term. Management expects that the results of the carefully planned marketing strategy will accelerate Points Exchange activity. RESULTS OF OPERATIONS - OPERATING EFFICIENCY The Corporation's operating ratio (defined as the ratio of general and administrative expenses to revenues) has improved by 10% over the fourth quarter of 2003. Although higher than the operating ratio in the first quarter of 2003, the first quarter of 2004's operating ratio was consistent with the ratio experienced for the 2003 annual results. The Corporation expects the improvement in operating efficiencies to continue through to 2005 as revenues grow and costs stabilize, thereby achieving a ratio less than one. Operating Efficiency MARCH 31 DECEMBER 31 -------------------- ------------- EFFICIENCY MEASURE 2004 2003 CHANGE 2003 CHANGE - ------------------ ---- ---- ------ ---- ------ Operating Ratio 1.64 1.16 42% 1.83 -10% RESULTS OF OPERATIONS - NON-CASH EXPENSES Forward-looking statements contained in this section, "Resul