Filed Pursuant to Rule 424(b)(3)
Registration No. 333-129520

MANARIS CORPORATION
36,298,305 SHARES OF COMMON STOCK

This prospectus relates to the resale by the selling stockholders of 36,298,305
shares of our common stock, including 20,631,175 shares issuable upon the
exercise of warrants. The selling stockholders may sell common stock from time
to time in the principal market on which the stock is traded at the prevailing
market price or in negotiated transactions.

We will pay the expenses of registering these shares. We will not receive any
proceeds from the sale of shares of common stock in this offering. All of the
net proceeds from the sale of our common stock will go to the selling
stockholders. However, we may receive proceeds from the exercise of the
warrants.

Our common stock is traded on the Bulletin Board operated by the National
Association of Securities Dealers, Inc. under the symbol "MANS." On December 15,
2005, the closing price of our common stock was $0.32.

Investing in these securities involves significant risks. Investors should not
buy these securities unless they can afford to lose their entire investment.

The total number of shares sold herewith includes the following shares owned by
or to be issued to the selling stockholders:

* 638,112 shares of common stock underlying our Class A Warrants. One Class A
Warrant and $0.35, subject to adjustment, will entitle a Class A Warrant holder
to acquire one share of common stock. The exercise price of our Class A Warrants
was reduced from $1.00 to $0.35 pursuant to our July 2005 Warrant Offering.

* 1,869,231 shares of common stock underlying our Series A Warrants. One Series
A Warrant and $0.35, subject to adjustment, will entitle a Series A Warrant
holder to acquire one share of common stock. The exercise price of our Series A
Warrants was reduced from $1.10 to $0.35 pursuant to our July 2005 Warrant
Offering.

* 1,596,155 shares of common stock underlying our Series E Warrants. One Series
E Warrant and $0.35, subject to adjustment, will entitle a Series E Warrant
holder to acquire one share of common stock. The exercise price of our Series E
Warrants was reduced from $0.75 to $0.35 pursuant to our July 2005 Warrant
Offering.

* 913,462 shares of common stock underlying our Series F Warrants. One Series F
Warrant and $0.35, subject to adjustment, will entitle a Series F Warrant holder
to acquire one share of common stock. The exercise price of our Series F
Warrants was reduced from $0.70 to $0.35 pursuant to our July 2005 Warrant
Offering.

* 3,797,976 shares of common stock underlying our Series G Warrants, which were
issued pursuant to our July 2005 Warrant Offering. One Series G Warrant and
$0.35, subject to adjustment, will entitle a Series G Warrant holder to acquire
one share of common stock and one Series K warrant. The Series G warrants have a
4.5 year term.

* 890,590 shares of common stock underlying our Series H Warrants, which were
issued pursuant to our July 2005 Warrant Offering. One Series H Warrant and
$0.35, subject to adjustment, will entitle a Warrant holder to acquire one share
of common stock and one Series K warrant. The Series H Warrants have a 4.5 year
term.

* 3,797,976 shares of common stock underlying our Series I Warrants, which were
issued pursuant to our July 2005 Warrant Offering. One Series I Warrant and
$0.50 will entitle a Warrant holder to acquire one share of common stock. The
Series I Warrants have a 4.5 year term.

* 1,781,180 shares of common stock underlying our Series J warrants, which were
issued pursuant to our July 2005 Warrant Offering. One Series J Warrant and
$0.50, subject to adjustment, will entitle a Series J Warrant holder to acquire
one share of common stock. The Series J warrants have a 4.5 year term.

* 4,688,566 shares of common stock underlying our Series K warrants, which are
issuable upon exercise of our Series G or Series H warrants. One Series K
Warrant and $0.70, subject to adjustment, will entitle a Warrant holder to
acquire one share of common stock. The Series K Warrants have a 2 year term.

* 605,676 shares of common stock underlying our Series IB6 Warrants. One Series
IB6 Warrant and $0.35, subject to adjustment, will entitle a Series IB6 Warrant
holder to acquire one share of common stock. The Series IB6 Warrants have a 5
year term.

561,012 Series IB6 warrants were issued to Midtown Partners & Co., LLC, the
placement agent for our July 2005 Warrant Offering, and employees of Midtown
Partners, pursuant to a Placement Agent Agreeement. 11,364 Series IB6 Warrants
were also issued to Starboard Capital Markets and employees of Starboard
pursuant to an agreement with Midtown Partners. In addition, 33,300 Series IB6
warrants were also issued to Midtown Partners for services rendered in
connection with a proposed Bridge financing.

* 52,251 shares of common stock underlying our Series IB7 Warrants. One Series
IB7 Warrant and $0.001, subject to adjustment, will entitle a Series IB7 Warrant
holder to acquire one share of common stock. The Series IB7 Warrants have a 5
year term.

The Series IB7 warrants were issued to Midtown Partners & Co., LLC, the
placement agent for our July 2005 Warrant Offering, and employees of Midtown
Partners, for services rendered in connection with a proposed Bridge financing.

* 11,325,370 shares of common stock issuable upon conversion of Series A Senior
Convertible Promissory Notes, which were issued as part of our February 2005
financing. The Convertible Notes have an outstanding balance of $2,277,145 and
are currently convertible at $0.35 per share. We are registering approximately
175% of the shares underlying the convertible notes to account for potential
adjustments to the conversion price.

* 4,341,760 shares of common stock issuable in satisfaction of debentures issued
on February 14, 2005.

SEE "RISK FACTORS" BEGINNING ON PAGE 8.

The Securities and Exchange Commission and state securities regulators have not
approved or disapproved of these securities or determined if this prospectus is
truthful or complete. Any representation to the contrary is a criminal offense.

The date of this prospectus is January 10, 2006.

Neither the Securities and Exchange Commission nor any state securities
commission has approved or disapproved of these securities or determined if this
prospectus is truthful or complete. Any representation to the contrary is a
criminal offense.

TABLE OF CONTENTS

Page No.

SUMMARY OF OUR OFFERING......................................................6

RISK FACTORS.................................................................8

USE OF PROCEEDS.............................................................12

MARKET FOR OUR COMMON EQUITY................................................13

PLAN OF DISTRIBUTION........................................................13

BUSINESS....................................................................15

MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS...................................................21

MANAGEMENT..................................................................29

EXECUTIVE COMPENSATION......................................................31

SELLING SHAREHOLDERS........................................................34

DESCRIPTION OF SECURITIES...................................................39

CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS..............................

EXPERTS.....................................................................40

LEGAL MATTERS...............................................................40

FINANCIAL STATEMENTS........................................................41

SUMMARY OF OUR OFFERING

This summary highlights selected information about us. It may not contain all of
the information that you find important. You should carefully read this entire
document, including the "Risk Factors" our financial statements and their
related notes and the other documents incorporated by reference.

OUR BUSINESS

Manaris Corporation's primary business is risk mitigation. Manaris offers
corporations and institutions security management solutions and services
enabling them to acquire market intelligence, lower business risks and improve
customer service. Our security solutions and services are geared towards
increasing customer revenues and profits.

Manaris operates the following wholly-owned subsidiaries:

o Avensys Inc, which provides risk management monitoring solutions;

o Chartrand Laframboise Investigation, which provides investigative
services;

o C-Chip Technologies Corporation (North America), which specializes in
high-tech security

CORPORATE HISTORY

Manaris Corporation was incorporated in the State of Nevada on June 26, 2000 as
Keystone Mines Limited and maintains its principal executive offices at 1155
Boulevard Rene-Levesque, Suite 2720, Montreal, Quebec, Canada.

In June 2000, we purchased four mineral claims, situated in the Greenwood Mining
Division in the Province of British Columbia, Canada. At that time, our
principal business plan was to acquire, explore and develop mineral properties
and to ultimately seek earnings by exploiting the mineral claims. In December
2002, we were advised that the mineral properties held were not economically
viable. Our board of directors approved the termination of our exploration
activity.

In March 2003, we changed our company name to C-Chip Technologies Corporation in
order to better reflect our new business activities, and began trading on the
OTC Bulletin Board (OTC-BB) under the symbol "CCHI."

In July 2005, our shareholders approved a name change for the Company to Manaris
Corporation to reflect C-Chip Technologies expanded scope of business. As a
result, the new trading symbol on the OTC Bulletin Board (OTC-BB) became "MANS."

THE OFFERING

Common stock 36,298,305 shares, including 20,631,175 shares issuable
offered by selling upon the exercise of common stock purchase warrants,
stockholders assuming full exercise of the warrants.

This number represents approximately 46.7% of our
current outstanding stock.

Common stock to be Up to 89,688,811 shares
outstanding after the
offering

Use of proceeds We will not receive any proceeds from of the common
stock. However, we will receive the exercise price of
any common stock we issue to the selling stockholders
upon exercise of the warrants. We expect to use the
proceeds received from the exercise of their warrants,
if any, for general working capital purposes.

Over-The-Counter MANS
Bulletin Board Symbol

The above information regarding common stock to be outstanding after the
offering is based on 69,057,636 shares of common stock outstanding as of
December 13, 2005 and assumes the subsequent issuance of common stock to the
selling stockholders and exercise of warrants by our selling stockholders.

RECENT DEVELOPMENTS

RESIGNATION OF OUR CHIEF EXECUTIVE OFFICER

On September 16, 2005, following the resignation of Stephane Solis, John G.
Fraser, the Company's Secretary/Treasurer, was appointed as Chief Executive
Officer for a minimum period of three months. According to the terms of Mr.
Solis's agreement, he will receive 600,000 options exercisable at $0.00001 and
$30,000 CDN upon execution of the Agreement. John G. Fraser will receive a
compensation of $18,000CDN per month and 500,000 options exercisable at market
prices.

CLOSURE OF CSA SUBSIDIARY

On September 22, 2005, the Company decided to cease operations of our Canadian
Security Agency (2004) Inc. ("CSA") subsidiary, which provides security services
to large corporate accounts, including courier and trucking companies. As a
result, CSA has entered into an agreement with Securite Kolossal Inc. pursuant
to which CSA will sell its customer list to Securite Kolossal for $100,000 CDN.
The Company has owned CSA since February 2004.

JULY 2005 WARRANT OFFER

In July 2005, the Company concluded a Special Warrant Offering which raised
gross proceeds of $2,576,117. In connection with the Special Warrant Offer, our
Company issued 7,360,336 common shares to Warrant Holders as well as new
warrants which were issued in the following amounts: (i) 3,797,976 Series G
Warrants, (ii) 3,797,976 Series I Warrants, (iii) 890,590 Series H Warrants and
(iv)1,781,180 Series J Warrants.

AVENSYS ACQUISITION

In March 2005, Manaris acquired all of the issued and outstanding common stock
of Avensys Inc. ("Avensys"), a leader in risk management monitoring solutions
for commercial and industrial buildings, infrastructures and various
environments. The Company issued 10,400,002 restricted shares of common stock in
exchange for 15,746,369 shares of Avensys Inc. which constituted all of the
issued and outstanding common stock of Avensys. Further, Manaris agreed to pay
$312,625 (CDN$385,000) to holders of options of Avensys and then cancelled the
options. The beneficiaries of the options have received $187,592 (CDN$231,000)
as of the date hereof and will receive $124,970 (CDN$154,000) on or before
December 31, 2005. The balance of the purchase price due not later than December
31, 2005 will accrue interest from the date of closing at a rate of twelve
percent (12%) per year calculated daily and payable monthly and any unpaid
interest will carry interest at the same rate.

FEBRUARY 2005 FINANCING

In February 2005, we closed a private placement with eighteen institutional
investors. The Company issued Senior Secured Convertible Notes Series A
("Notes") and Series E and F Warrants for an aggregate principal amount of
$4,675,000. The Company allocated $1,863,870 to the Warrants Series E, $339,456
to the Warrants Series F and recognized an embedded beneficial conversion
feature of $2,470,674 accounted for as additional paid in capital and an
equivalent discount against the Notes.

CHARTRAND LAFRAMBOISE ACQUISITION

In February 2005, we entered into agreements to acquire one hundred percent
(100%) of the outstanding shares of 9151-3929 QUEBEC INC., ("QUEBEC") and
3826961 CANADA INC. ("CANADA") through our wholly owned subsidiary, 6327915
CANADA, INC. QUEBEC and CANADA collectively owned 100% of 3428249 CANADA INC
which owned 100% of CHARTRAND LAFRAMBOISE INC., a company specializing in the
security field and 100% of 9126-7641 QUEBEC INC., a corporation specializing in
credit management and verification. On June 30, 2005, 3428249 Canada Inc. and
6327915 Canada Inc. completed a merger transaction. The merged company continues
to be 6327915 Canada Inc. Following the merger 3826961 Canada Inc. and 9151-3929
Quebec Inc. were each dissolved on June 9, 2005 and September 26, 2005,
respectively. QUEBEC, CANADA, 3428249 CANADA INC., CHARTRAND LAFRAMBOISE INC.,
and 9126-7641 QUEBEC INC. are hereinafter collectively referred to as "CLI." In
consideration for the acquisition of CLI, Manaris paid $2,436,251
(CDN$3,000,000.00) in cash and issued a debenture, convertible into 1,700,000
restricted shares of its common stock at a price of $0.82 per share on behalf of
its wholly own subsidiary, 6327915 CANADA, INC.,

Founded in 1986, CLI has become a leader in the field of investigative services
in Canada. CLI's core services include investigation, surveillance, background
verification, business intelligence, security consulting and labor management
conflict and engages undercover agents for many of its services. CLI is one of
Investigations Canada's major partners. Investigations Canada, a company
offering expertise throughout Canada, is comprised of nine partners, 25
locations and over 200 private investigation and security professionals. CLI is
located in Laval, Quebec.

SUMMARY SELECTED FINANCIAL DATA

The following financial information summarizes the more complete historical
financial information at the end of this prospectus.

As of As of
September 30, September 30,
2005 2004
(Unaudited) (Unaudited)
------------- -------------
Balance Sheet
Total Assets $ 20,999,257 $ 20,115,755
Total Liabilities $ 8,457,402 $ 8,885,896
Stockholders Equity $ 12,541,855 $ 11,229,859

Quarter ended Quarter ended
September 30, September 31,
2005 2004
(Unaudited) (Unaudited)
------------- -------------
Income Statement
Revenue $ 3,725,637 $ 640,030
Total Expenses $ 7,039,799 $ 1,321,550
Net Loss $ (3,314,162) $ (681,520)
Net Cash Used in Operating Activities $ (714,505) $ (541,344)

As of As of
June 30, 2005 June 30, 2004
(Audited) (Audited)
------------- -------------
Balance Sheet
Total Assets $ 20,115,755 $ 3,053,936
Total Liabilities $ 8,867,863 $ 850,283
Stockholders Equity $ 11,229,859 $ 2,203,653

Year ended Year ended
June 30, 2005 June 30, 2004
(Audited) (Audited)
------------- -------------
Income Statement
Revenue $ 7,021,228 $ 1,040,898
Total Expenses $ 13,252,171 $ 5,631,459
Net Loss $ (6,230,943) $ (4,590,561)
Net Cash Used in Operating Activities $ 2,661,708 $ 1,813,789

RISK FACTORS

The risks and uncertainties described below are not the only ones facing our
Company. Additional risks not presently known or that we currently consider
insignificant may also impair our business operations in the future. Our
business, financial condition and plan of operations could be materially
adversely affected by any of the following risks. The trading price of our
common shares could decline due to any of these risks.

1. Our auditors have issued a going concern opinion. This means we may not be
able to achieve our objectives and may have to suspend or cease operations. Our
auditors have issued a going concern opinion as at June 30, 2005. This means
that there is substantial doubt that we can continue as an ongoing business
without additional financing and/or generating profits from our operations.
Further, the going concern opinion could make it more difficult for us to secure
additional financing on terms acceptable to us, if at all, and may materially
and adversely affect the terms of any financing that we may obtain.

2. Because we have historically incurred losses and these losses may increase in
the future, we must begin generating a profit from our operations. If we do not
begin generating a profit we may have to suspend or cease operations. As a
result, you may lose your investment. We have never been profitable. At
September 30, 2005we had negative working capital of $848,707. Included in
current liabilities are amounts due to related parties of $$172,284 that carry
no interest or fixed terms of repayment. Funds on hand together with relatively
low revenues will not sustain operations for the next year. We will need to
raise additional capital to sustain our operations. In order to become
profitable, we will need to generate significant revenues to offset our cost of
revenues, sales and marketing, research and development and general and
administrative expenses. We may not achieve or sustain our revenue or profit
objectives and our losses may continue or increase in the future in which case
you might lose your investment.

3. We have experienced a history of losses and expect to incur future losses
albeit at a reduced level. Therefore, we must continue to raise money from
investors to fund our operations. If we are unable to fund our operations, we
will cease doing business. We have an accumulated deficit of $12,548,352 as of
June 30, 2005. Our losses have resulted principally from costs incurred in
research and development activities related to our efforts to develop our
technologies and from the associated marketing and administrative costs and
stock based compensation. We will need to generate significant revenues in order
to achieve and maintain profitability. We may not be able to generate these
revenues or achieve profitability in the future. Even if we do achieve
profitability, we may not be able to sustain or increase profitability. Product
revenue totaled $3,580,619 and service revenue totaled $3,440,609 for the twelve
month period ended June 30, 2005. Consequently, we have raised money from
investors to fund our operations. If we can't fund our operations through
product sales and investments by third parties, we will have to cease
operations.

4. We may not be able to obtain additional financing when needed or on
acceptable terms. We have never been profitable and we do not expect that funds
on hand together with relatively low revenues will sustain our operations for
the next year. We will need to raise additional capital to sustain our
operations or to pursue our acquisition strategy. We cannot assure you that any
required additional financing will be available or, if it is, whether it will be
on acceptable terms. Our inability to obtain any needed financing, or the terms
on which it may be available, could have a material adverse effect on our
business. As a result, we could have to suspend or cease our operations and you
could loose your entire investment.

5. We have incurred substantial debt which could affect our ability to obtain
additional funds and may increase our vulnerability to economic or business
downturns. On February 23, 2005, we entered into a Purchase Agreement with
eighteen institutional and accredited investors under the terms of which we
agreed to issue Units consisting of (i) an aggregate of $4,675,000 of our
Company's 9.0% Senior Secured Convertible Notes, Series A, which are convertible
into shares of our common stock at a conversion price of $0.65 per share,. Under
the terms of the 9.0% Senior Secured Convertible Note, Series A, the Principal
on the Note shall be paid in 20 equal monthly installments, with each payment
equal to 5% of the principal amount, commencing on June 23, 2005 and continuing
on the same day of each month thereafter to the Holder on the tenth date
immediately preceding the Principal Payment Date. All payments of principal
shall be made at our option in cash or, with 10 business day prior notice, in
our common stock valued at 85% of the average closing bid price of our stock in
the most recent five Trading Days prior to a Valuation Date. As a result, we are
subject to the risks associated with substantial indebtedness, including:

- - we are required to dedicate a portion of our cash flows from operations to pay
debt service costs;

- - it may be more difficult and expensive to obtain additional funds through
financings, if available at all;

- - we are more vulnerable to economic downturns and fluctuations in interest
rates, less able to withstand competitive pressures and less flexible in
reacting to changes in our industry and general economic conditions; and

- - if we defaulted under any of our existing indebtedness or if our creditors
demanded payment of a portion or all of our indebtedness, we may not have
sufficient funds to make such payments.

6. If we default under our financing agreement, we could have to forfeit our
rights to our assets. We have pledged substantially all of our assets, including
the assets of our subsidiaries, as security to holders of our convertible
debentures. A default under the financing agreement concluded with holders of
our convertible debentures, if not waived or cured, would permit the holders of
the convertible debentures to foreclose on the collateral and we could lose all
our rights in the collateral, which would have a materially adverse effect on
our business. As a result, we could have to suspend or cease our operations and
you could loose your entire investment.

7. We may not be able to implement our acquisition strategy. While our
management has some experience in identifying and integrating acquisitions, we
may not be able to identify suitable acquisition candidates, obtain the capital
necessary to pursue our acquisition strategy or complete acquisitions on
satisfactory terms or at all. When companies are acquired, we may not be able to
integrate or manage these businesses to produce returns that justify our
investment. A number of our competitors have also adopted the strategy of
expanding and diversifying through acquisitions. We experience competition in
our effort to execute our acquisition strategy and expect the level of
competition to increase. As a result, we may be unable to continue to make
acquisitions or may be forced to pay more for the companies we are able to
acquire.

8. We may seek to make acquisitions that prove unsuccessful or strain or divert
our resources. We may seek to grow our business through acquisitions of related
businesses. Such acquisitions present risks that could materially adversely
affect our business and financial performance, including:

- - the diversion of our management's attention from our everyday business
activities;

- - the assimilation of the operations and personnel of the acquired business;

- - the contingent and latent risks associated with the past operations of, and
other unanticipated problems arising in, the acquired business; and

- - the need to expand management, administration, and operational systems.

If we make such acquisitions we cannot predict whether:

- - we will be able to successfully integrate the operations of any new businesses
into our business;

- - we will realize any anticipated benefits of completed acquisitions; or

- - there will be substantial unanticipated costs associated with acquisitions.

In addition, future acquisitions by us may result in:

- - potentially dilutive issuances of our equity securities;

- - the incurrence of additional debt; and

- - the recognition of significant charges for depreciation and amortization
related to goodwill and other intangible assets.

Although we have no present plans or intentions, we continuously evaluate
potential acquisitions of related businesses. However, we have not reached any
agreement or arrangement with respect to any particular acquisition and we may
not be able to complete any acquisitions on favorable terms or at all.

9. We may not be able to develop or manage our internal growth. Our growing
existing businesses may strain our management, human resources and information
systems. To manage our growth successfully, we will have to add managers and
employees and update our operating, financial and other systems, procedures and
controls. In addition, issues relating to new acquisitions may divert current
management's attention from existing operations.

10. We are highly dependent on our executive management and other key employees.
We rely heavily on our executive management and key employees to provide
services and for continued business development. We have employment agreements
which contain non-competition and non-solicitation provisions with most of our
executive managers and other key employees. Our business could be materially
adversely affected if a number of our executive managers and other key employees
were to leave us and if we were unable to enforce the non-competition and
non-solicitation agreements or to attract and retain qualified replacements.

On September 16, 2005, the Chief Executive Officer, Stephane Solis, resigned.
John G. Fraser, the Company's Secretary/Treasurer, was appointed as Chief
Executive Officer for a minimum period of three months. We do not expect the
resignation to materially adversely affect the services and business
development.

11. Some of our products and services are in the development stage, and may not
be effective at a level sufficient to support a profitable business venture. If
our products or services are not effective at a level sufficient to support a
profitable venture, we will be unable to create marketable products and
services, and we will have to cease some of our operations. Most of our products
and services are in the development state. Although we have begun to sell some
of our products and services and have current data which indicates the promise
of the concept and market demand, we can offer you no assurance that all of our
products and services will be effective at a level sufficient to support a
profitable business venture. If they are not, we will be unable to create
marketable products, we will not generate sufficient revenues from our key
operations, and we will have to reduce, suspend or cease key operations and you
could lose your entire investment.

12. If we cannot deliver the features and functionality our customers demand, we
will be unable to attract customers that will result in a loss of income and
eventually a termination of our operations. As a result you could lose your
investment. As a security solutions provider, our future success depends largely
upon our ability to determine the features, functionality and services our
customers demand and to design and implement products and services that meet
their needs in a cost efficient manner. We cannot assure that we will be able to
successfully determine customer requirements or that our current or future
products and services will adequately satisfy customer demands. If we cannot
meet our customers' demands, we will not generate revenues from this business
segment and may have to cease or suspend key operations. As a result, you could
lose your investment.

13. Because some of our security solutions depend on a limited number of third
parties to manufacture and supply critical components for our products and
services, if the third party manufacturer should cease operations or refuse to
sell components to us, we may have to suspend or cease these operations. As a
result, you may lose your investment. If our suppliers do not execute their
obligations, or if they stop manufacturing and supplying components critical for
our products and services, we may be not be capable of finding other suppliers
or operating our business. We rely on limited suppliers for a number of key
components and do not have long-term agreements with any of our suppliers. If
our agreements with these suppliers were terminated or expired, if we were
unable to obtain adequate quantities of components critical for our products and
services, if the quality of these components was inadequate, or if the terms for
supply of these components became commercially unreasonable, our search for
additional or alternate suppliers could result in significant delays, added
expense and our inability to maintain or expand key components of our business.
Any of these events could require us to take unforeseen actions or devote
additional resources to provide our products and services and could harm our
ability to compete effectively. As a result, you could lose your investment.

14. Some of our products and services depend on GPS technology owned and
controlled by others, if access to the technology is terminated or withheld from
us, we may have to suspend or cease operations. Our services rely on signals
from GPS satellites built and maintained by the U.S. Department of Defense. GPS
satellites and their ground support systems are subject to electronic and
mechanical failures and sabotage. If one or more satellites malfunction, there
could be a substantial delay before they are repaired or replaced, if at all,
and our services may cease and customer satisfaction would suffer. In addition,
the U.S. government could decide not to continue to operate and maintain GPS
satellites over a long period of time or to charge for the use of satellites. If
the foregoing events occur, we may have to suspend or cease operations.

15. Some of our products and services depend on communication networks owned and
controlled by others, and if access to the technology is terminated or withheld
from us, we may have to suspend or cease operations. As a security solutions
provider, our ability to grow and achieve profitability depends on the ability
of communications carriers to provide sufficient network capacity, reliability
and security to our customers. When we use wireless communications, even where
wireless carriers provide coverage to entire metropolitan areas, there are
occasional lapses in coverage. These effects could make our services less
reliable and less useful, and customer satisfaction could suffer. Our financial
condition could be seriously harmed if our wireless and land-based carriers were
to increase the prices of their services, or to suffer operational or technical
failures.

16. Our business is subject to rapid technological change. Two of our business
units develop security solutions for clients. C-Chip itself integrates wireless
communications, online transactions, software applications, RFID technology, the
Internet and, when location is required, GPS technology, to enable business
users to efficiently access, control, manage and monitor remote assets at low
costs. Our wholly-owned subsidiary, Avensys, uses leading edge fiber optics
sensor technology to offer business and corporations different monitoring
solutions related to the environment, including buildings and infrastructure.
Many of the technologies that we currently use have only recently emerged and
our future success will depend upon the ability of our product development team
to remain current with the rapid changes in the technologies. If we fail to do
this, we could be at a competitive disadvantage. If we cannot foresee and adapt
to technological changes, our business will be materially adversely affected.

17. Our business depends on the protection of its intellectual property and
proprietary information. We rely on a combination of trade secret and trademark
laws, confidentiality procedures, contractual provisions and patent and
copyright laws to protect our proprietary rights in our products and technology.
These measures may not be adequate to protect our trade secrets and proprietary
technology. As a result, unauthorized third parties may copy or otherwise obtain
and use our products or technology. To enforce our proprietary rights, we may
have to engage in litigation to defend and enforce our intellectual property
rights, either domestically or in other countries, and we could face substantial
costs and diversion of resources, including management' s attention, regardless
of the outcome of that litigation. Any of our attempts to enforce our
intellectual property rights may not be successful, may result in royalties that
are less than the cost of such enforcement efforts or may result in the loss of
the intellectual property altogether. Further, we may not have adequate funds
available to prosecute actions to protect or defend our proprietary rights, in
which case those using our proprietary rights may continue to do so in the
future. Even if we succeeded in protecting our intellectual property, others may
independently develop similar technologies or products that do not infringe on
our intellectual property.

18. Our trademarks may not give us adequate protection. As a result, third
parties may appropriate our trademarks that may reduce our competitive edge and
cause our revenues to decrease. We have trademarks. There is no assurance,
however, that third parties may not infringe on our trademarks. In order to
protect our trademark rights, we may have to file lawsuits and obtain
injunctions, which will likely be expensive and divert our resources. If we do
that, we will have to spend large sums of money for attorney's fees in order to
obtain the injunctions. Even if we obtain the injunctions, there is no assurance
that those infringing on our trademarks will comply with the injunctions.
Further, we may not have adequate funds available to prosecute actions to
protect or to defend our trademarks, in which case those infringing on our
trademarks could continue to do so in the future.

19. Claims that we infringe third-party proprietary rights could result in
significant expenses or restrictions on our ability to provide our products and
services Third parties may claim that our current or future products or services
infringe their proprietary rights or assert other claims against us. As the
number of entrants into our market increases, the possibility of an intellectual
property or other claim against us grows. Any intellectual property or other
claim, with or without merit, would be time-consuming and expensive to litigate
or settle and could divert management attention from focusing on our core
business. As a result of such a dispute, we may have to pay damages, incur
substantial legal fees, develop costly non-infringing technology, if possible,
or enter into license agreements, which may not be available on terms acceptable
to us, if at all. As a result, our business and operating results could be
materially adversely affected.

20. Changes in government regulations and licensing requirements could have a
material adverse effect on our business. Our businesses are subject to various
federal, state, local and foreign laws and regulations. Two of our subsidiaries
hold security licenses from, and their security services are regulated by, local
government agencies. We also use some data from outside sources, including data
from third party vendors and various government and public records services, in
performing our security services. The use of this data is regulated by certain
laws and regulations. To date, applicable laws and regulations have not
interfered materially with the manner in which we obtain information and conduct
our operations, including our access to data used in our business. However,
changes in these laws and regulations or the adoption of new laws or
regulations, particularly those relating to privacy, could interfere with our
method of operations and access to data and, as a result, could materially
adversely affect our business. Our security products are also subject to
certification by the Federal Communications Commission in the US and by the
Department of Communications in Canada. Further, wireless carriers who supply us
with airtime enabling some of our services are also subject to regulation by the
Federal Communications Commission in the US and the Canadian Radio-Television
and Telecommunications Commission in Canada. If any of our security products
could not obtain certification from either or both the Federal Communications
Commission in the US and the Department of Communications, or if the
communications carriers that we use to provide some of our services to our
customers could not obtain a renewal of their licenses, our business would be
materially adversely affected.

21. Competitive conditions could materially adversely affect our businesses. The
markets in which we do, and intend to do, businesses are highly competitive with
few barriers to entry. Our ability to execute our business strategy depends in
part upon our ability to develop and commercialize efficient and effective
products based on our technologies. We compete against established companies as
well as numerous independently owned small businesses. Many of our competitors
are capable of developing products based on similar technology, have developed
and are capable of continuing to develop products based on other technologies,
which are or may be competitive with our products and technologies. In all
market segments in which we operate, there are many competitors, some of which
are significantly larger, have access to much more important resources or
capital than us, or have better reputations among potential customers in the
delivery of particular services or products. Our competitors may succeed in
developing competing products and technologies that are more effective than our
products and technologies, which may render our existing and new products or
technology uncompetitive, uneconomical or obsolete.

22. We may be exposed to liability claims if products based on our technologies
are marketed and sold. We have liability insurance coverage on our products
which varies from $1,000,000 to $3,000,000, however if a judgment is rendered
against us in excess of the amount of our coverage, we may have to cease
operations. If we are sued for any reason, we will have to rely on our liability
insurance to pay any judgment rendered against us. Although we maintain product
liability insurance of between $1,000,000 and $3,000,000, we cannot provide any
assurance that:

- - our insurance will provide adequate coverage against potential liabilities if
a product or a service that we provide causes harm or fails to perform as
promised;

- - adequate product liability insurance will continue to be available in the
future; or

- - our insurance can be maintained on acceptable terms.

The obligation to pay any product liability claim in excess of whatever
insurance we are able to obtain would increase our expenses and could greatly
reduce our assets or cause us to cease operations. If a judgment is rendered
against us for any amount of money over our coverage of $1,000,000 and, in some
cases, of $3,000,000, we may have to cease operations.

23. Fluctuations in the value of foreign currencies could result in increased
product costs and operating expenses. We have suppliers that are located outside
Canada and the U.S. Our functional currency is Canadian dollars and we report
our results in U.S. dollars. Fluctuations in the value of Canadian and U.S.
dollars are difficult to predict and can cause us to incur currency exchange
costs. Although, we cannot predict the effect of exchange rate fluctuations on
our future operating results any material changes could cause our operating
results to be materially adversely affected.

24. Because a limited number of our stockholders collectively continue to own a
majority of our stock, they may act, or prevent certain types of corporate
actions, to the detriment of other stockholders. Our officers and directors and
certain stockholders beneficially own in the aggregate approximately 11.02% of
our outstanding shares of common stock. As a result, these stockholders may be
able to influence significantly the actions that require stockholder approval,
including:

- - the election of a majority of our directors; and

- - the approval of mergers, sales of assets or other corporate transactions or
matters submitted for stockholder approval.

As a result, our other stockholders may have little or no influence over matters
submitted for stockholder approval. In addition, this influence could preclude
any unsolicited acquisition of us and consequently materially adversely affect
the price of our common stock.

25. Because the market for our common stock is limited, you may not be able to
resell your shares of common stock. There is currently only a limited trading
market for our common stock. Our common stock trades on the Bulletin Board
operated by the National Association of Securities Dealers, Inc. under the
symbol "MANS." Trading volume of OTC Bulletin Board stocks has been historically
lower and more volatile than stocks traded on an exchange. As a result, you may
not be able to resell your securities in open market transactions.

26. Sales of substantial amounts of our common stock could cause our stock price
to fall. As of June 30, 2005, 54,782,802 shares of our common stock were
outstanding, 37,692,544 of which were freely tradable and 17,090,258 of which
were restricted as a result of securities laws. In addition, as of June 30,
2005, 31,073,088 shares of our common stock were issuable upon conversion of our
outstanding debentures and exercise of outstanding options and warrants. Sales
of a substantial number of shares of our common stock could cause the price of
our securities to fall and could impair our ability to raise capital by selling
additional securities. The terms on which we could obtain additional capital
during the life of the options and warrants may be adversely affected, and it
should be expected that the holders of the options and warrants would exercise
or convert them at a time when we would be able to obtain equity capital on
terms more favorable than those provided for by such convertible securities. As
a result, any issuance of additional shares of common stock may cause our
current shareholders to suffer significant dilution which may adversely affect
the market price of our common stock.

27. Because our common stock is subject to penny stock rules, the liquidity of
your investment may be restricted. Our common stock is now and may continue to
be in the future subject to the penny stock rules under the Securities Exchange
Act of 1934, as amended. These rules regulate broker/dealer practices for
transactions in "penny stocks." Penny stocks are generally equity securities
with a price of less than $5.00. The penny stock rules require broker/dealers to
deliver a standardized risk disclosure document that provides information about
penny stocks and the nature and level of risks in the penny stock market. The
broker/dealer must also provide the customer with current bid and offer
quotations for the penny stock, the compensation of the broker/dealer and its
salesperson and monthly account statements showing the market value of each
penny stock held in the customer's account. The bid and offer quotations and the
broker/dealer and salesperson compensation information must be given to the
customer orally or in writing prior to completing the transaction and must be
given to the customer in writing before or with the customer's confirmation. In
addition, the penny stock rules require that prior to a transaction, the broker
and/or dealer must make a special written determination that the penny stock is
a suitable investment for the purchaser and receive the purchaser's written
agreement to the transaction. These additional penny stock disclosure
requirements are burdensome and may reduce the trading activity in the market
for our common stock. As long as the common stock is subject to the penny stock
rules, holders of our common stock may find it more difficult to sell their
securities.

USE OF PROCEEDS

We will not receive any proceeds from the sale of common stock in this offering.
All proceeds from the sale of of our common stock by the selling stockholders
will be received by the selling stockholders.

We may receive proceeds from the exercise of the warrants. If all of the
warrants held by the selling stockholders are exercised, we will receive net
proceeds of approximately $9,481,236. The holders of the warrants are not
obligated to exercise the warrants and we cannot assure that the holders of the
warrants will choose to exercise all or any of the warrants. Our Series IB6 and
Series IB7 warrants contain a cashless exercise provision. If the cashless
exercise provision is exercised, we will not receive any proceeds from the
exercise of the warrants. We intend to use the estimated net proceeds received
upon exercise of the warrants, if any, for working capital and general corporate
purposes.

MARKET FOR OUR COMMON EQUITY

Our common shares are traded on the OTC Bulletin Board operated by the National
Association of Securities Dealers, Inc under the symbol "MANS." Our shares began
trading on July 2, 2001. The following table sets forth the closing high and low
bid prices of the common stock for each quarter within the last three years. The
quotations reflect inter-dealer prices and do not represent retail mark-ups,
markdowns, commissions, and may not reflect actual transactions. Prices before
January 23, 2003 are adjusted for a 20:1 stock split on that date.

Fiscal Quarter High Bid Low Bid
------------------- -------- -------
2006
10-01-05 - 12-31-05* 0.38 0.31
07-01-05 - 09-30-05 0.61 0.29

2005
04-01-05 - 06-30-05 0.79 0.41
01-01-05 - 03-31-05 1.02 0.65
10-01-04 - 12-31-04 0.86 0.65
07-01-04 - 09-30-04 0.90 0.62

2004
04-01-04 - 06-30-04 1.09 0.71
01-01-04 - 03-31-04 0.87 0.63
10-01-03 - 12-31-03 0.94 0.50
07-01-03 - 09-30-03 0.87 0.17

----------

* As of December 14, 2005.

As of December 19, 2005, we had 130 shareholders of record of our common stock.
This does not reflect persons or entities that hold stock through various
brokerage firms or depositories.

The market price of our common shares may to be the object of significant
fluctuations related to a number of events and reasons, such as variations in
our operating results, publication of technological developments or new products
or services by us or our competitors, recommendations of securities analysts on
us or our competitors, the operating and stock performance of other companies
that the market may view as related to our business, and news reports relating
to trends in our activities.

In addition, the stock market in recent years has experienced significant price
and volume fluctuations that have particularly affected the market prices of
many high technology companies that may have often been not related or
inconsistent to the operating performance of those companies. These
fluctuations, as well as general political, economic and market conditions and
other factors, may adversely affect the market price for our common stock.

PLAN OF DISTRIBUTION

The selling shareholders, which as used herein includes donees, pledgees,
transferees or other successors-in-interest selling shares of common stock or
interests in shares of common stock received after the date of this prospectus
from a selling stockholder as a gift, pledge, partnership distribution or other
transfer, may, from time to time, sell, transfer or otherwise dispose of any or
all of their shares of common stock or interests in shares of common stock on
any stock exchange, market or trading facility on which the shares are traded or
in private transactions. These dispositions may be at fixed prices, at
prevailing market prices at the time of sale, at prices related to the
prevailing market price, at varying prices determined at the time of sale, or at
negotiated prices.

The selling shareholders may use any one or more of the following methods when
disposing of shares or interests therein:

- - ordinary brokerage transactions and transactions in which the broker-dealer
solicits purchasers;

- - block trades in which the broker-dealer will attempt to sell the shares as
agent, but may position and resell a portion of the block as principal to
facilitate the transaction;

- - purchases by a broker-dealer as principal and resale by the broker-dealer for
its account;

- - an exchange distribution in accordance with the rules of the applicable
exchange;

- - privately negotiated transactions;

- - short sales effected after the date the registration statement of which this
Prospectus is a part is declared effective by the SEC;

- - through the writing or settlement of options or other hedging transactions,
whether through an options exchange or otherwise;

- - broker-dealers may agree with the selling shareholders to sell a specified
number of such shares at a stipulated price per share;

- - a combination of any such methods of sale; and

- - any other method permitted pursuant to applicable law.

The selling shareholders may, from time to time, pledge or grant a security
interest in some or all of the shares of common stock owned by them and, if they
default in the performance of their secured obligations, the pledgees or secured
parties may offer and sell the shares of common stock, from time to time, under
this prospectus, or under an amendment to this prospectus under Rule 424(b)(3)
or other applicable provision of the Securities Act amending the list of selling
shareholders to include the pledgee, transferee or other successors in interest
as selling shareholders under this prospectus. The selling shareholders also may
transfer the shares of common stock in other circumstances, in which case the
transferees, pledgees or other successors in interest will be the selling
beneficial owners for purposes of this prospectus.

In connection with the sale of our common stock or interests therein, the
selling shareholders may enter into hedging transactions with broker-dealers or
other financial institutions, which may in turn engage in short sales of the
common stock in the course of hedging the positions they assume. The selling
shareholders may also sell shares of our common stock short and deliver these
securities to close out their short positions, or loan or pledge the common
stock to broker-dealers that in turn may sell these securities. The selling
shareholders may also enter into option or other transactions with
broker-dealers or other financial institutions or the creation of one or more
derivative securities which require the delivery to such broker-dealer or other
financial institution of shares offered by this prospectus, which shares such
broker-dealer or other financial institution may resell pursuant to this
prospectus (as supplemented or amended to reflect such transaction).

The aggregate proceeds to the selling shareholders from the sale of the common
stock offered by them will be the purchase price of the common stock less
discounts or commissions, if any. Each of the selling shareholders reserves the
right to accept and, together with their agents from time to time, to reject, in
whole or in part, any proposed purchase of common stock to be made directly or
through agents. We will not receive any of the proceeds from this offering. Upon
any exercise of the warrants by payment of cash, however, we will receive the
exercise price of the warrants.

The selling shareholders also may resell all or a portion of the shares in open
market transactions in reliance upon Rule 144 under the Securities Act of 1933,
provided that they meet the criteria and conform to the requirements of that
rule.

The selling shareholders and any underwriters, broker-dealers or agents that
participate in the sale of the common stock or interests therein may be
"underwriters" within the meaning of Section 2(11) of the Securities Act. Any
discounts, commissions, concessions or profit they earn on any resale of the
shares may be underwriting discounts and commissions under the Securities Act.
Selling shareholders who are "underwriters" within the meaning of Section 2(11)
of the Securities Act will be subject to the prospectus delivery requirements of
the Securities Act.

To the extent required, the shares of our common stock to be sold, the names of
the selling shareholders, the respective purchase prices and public offering
prices, the names of any agents, dealer or underwriter, any applicable
commissions or discounts with respect to a particular offer will be set forth in
an accompanying prospectus supplement or, if appropriate, a post-effective
amendment to the registration statement that includes this prospectus.

In order to comply with the securities laws of some states, if applicable, the
common stock may be sold in these jurisdictions only through registered or
licensed brokers or dealers. In addition, in some states the common stock may
not be sold unless it has been registered or qualified for sale or an exemption
from registration or qualification requirements is available and is complied
with.

We have advised the selling shareholders that the anti-manipulation rules of
Regulation M under the Exchange Act may apply to sales of shares in the market
and to the activities of the selling shareholders and their affiliates. In
addition, we will make copies of this prospectus (as it may be supplemented or
amended from time to time) available to the selling shareholders for the purpose
of satisfying the prospectus delivery requirements of the Securities Act. The
selling shareholders may indemnify any broker-dealer that participates in
transactions involving the sale of the shares against certain liabilities,
including liabilities arising under the Securities Act.

We have agreed to indemnify the selling shareholders against liabilities,
including liabilities under the Securities Act and state securities laws,
relating to the registration of the shares offered by this prospectus.

We have agreed with the selling shareholders to keep the registration statement
of which this prospectus constitutes a part effective until the earlier of (1)
such time as all of the shares covered by this prospectus have been disposed of
pursuant to and in accordance with the registration statement or (2) the date on
which the shares may be sold pursuant to Rule 144(k) of the Securities Act.

Section 15(g) of the Exchange Act

Our shares are covered by section 15(g) of the Securities Exchange Act of 1934,
as amended, and Rules 15g-1 through 15g-6 promulgated there under. They impose
additional sales practice requirements on broker/dealers who sell our securities
to persons other than established customers and accredited investors (generally
institutions with assets in excess of $8,000,000 or individuals with net worth
in excess of $1,000,000 or annual income exceeding $200,000 or $300,000 jointly
with their spouses).

Rule 15g-1 exempts a number of specific transactions from the scope of the penny
stock rules.

Rule 15g-2 declares unlawful broker/dealer transactions in penny stocks unless
the broker/dealer has first provided to the customer a standardized disclosure
document.

Rule 15g-3 provides that it is unlawful for a broker/dealer to engage in a penny
stock transaction unless the broker/dealer first discloses and subsequently
confirms to the customer current quotation prices or similar market information
concerning the penny stock in question.

Rule 15g-4 prohibits broker/dealers from completing penny stock transactions for
a customer unless the broker/dealer first discloses to the customer the amount
of compensation or other remuneration received as a result of the penny stock
transaction.

Rule 15g-5 requires that a broker/dealer executing a penny stock transaction,
other than one exempt under Rule 15g-1, disclose to its customer, at the time of
or prior to the transaction, information about the sales persons compensation.

Rule 15g-6 requires broker/dealers selling penny stocks to provide their
customers with monthly account statements.

Rule 15g-9 requires broker/dealers to approved the transaction for the
customer's account; obtain a written agreement from the customer setting forth
the identity and quantity of the stock being purchased; obtain from the customer
information regarding his investment experience; make a determination that the
investment is suitable for the investor; deliver to the customer a written
statement for the basis for the suitability determination; notify the customer
of his rights and remedies in cases of fraud in penny stock transactions; and,
the NASD's toll free telephone number and the central number of the North
American Administrators Association, for information on the disciplinary history
of broker/dealers and their associated persons.

The application of the penny stock rules may affect your ability to resell your
shares.

BUSINESS

OVERVIEW

Manaris Corporation's primary business is risk mitigation. Manaris offers
corporations and institutions security management solutions and services
enabling them to acquire market intelligence, lower business risks and improve
customer service. The Company's security solutions and services are geared
towards increasing customer revenues and profits.

Manaris operates the following wholly-owned subsidiaries:

o Avensys Inc, which provides risk management monitoring solutions

o Chartrand Laframboise Investigation, which provides investigative services

o C-Chip Technologies Corporation (North America), which specializes in
high-tech security

CORPORATE HISTORY

Manaris Corporation (sometimes referred to as "we," "our," "us," or the
"company"), was incorporated in the State of Nevada on June 26, 2000 as Keystone
Mines Limited and maintains its principal executive offices at 1155 Boulevard
Rene-Levesque, Suite 2720, Montreal, Quebec, Canada.

In June 2000, the Company purchased four mineral claims, situated in the
Greenwood Mining Division in the Province of British Columbia, Canada. At that
time, our principal business plan was to acquire, explore and develop mineral
properties and to ultimately seek earnings by exploiting the mineral claims. In
December 2002, we were advised that the mineral properties held were not
economically viable. Our board of directors approved the termination of our
exploration activity.

In July 2005, Shareholders approved a name change for the Company to Manaris
Corporation to reflect C-Chip Technologies expanded scope of business. As a
result, the new trading symbol on the OTC Bulletin Board (OTC-BB) became "MANS."

RECENT DEVELOPMENTS

RESIGNATION OF OUR CHIEF EXECUTIVE OFFICER

On September 16, 2005, following the resignation of Stephane Solis, John G.
Fraser, the Company's Secretary/Treasurer, was appointed as President and Chief
Executive Officer for a minimum period of three months. According to the terms
of Mr. Solis's agreement, he will receive 600,000 options exercisable at
$0.00001 and $30,000 CDN upon execution of the Agreement. John G. Fraser will
receive a compensation of $18,000CDN per month and 500,000 options exercisable
at market prices.

CLOSURE OF CSA SUBSIDIARY

JULY 2005 WARRANT OFFER

In August 2005, the Company concluded a Special Warrant Offering which raised
gross proceeds of $2,576,168. In connection with the Special Warrant Offer, our
Company issued 7,360,336 common shares to Warrant Holders as well as new
warrants which were issued in the following amounts: (i) 3,797,976 Series G
Warrants, (ii) 3,797,976 Series I Warrants, (iii) 890,590 Series H Warrants and
(iv)1,781,180 Series J Warrants.

Each holder participating in the Special Warrant Offer by exercising any Series
E Warrants at $0.35 per share received new Series G incentive warrants (the
"Series G incentive warrants") and new Series I incentive warrants (the "Series
I Incentive Warrants"), each in an amount equal to 100% of the number of shares
of the Company's common stock issued upon exercise of the Series E Warrants
pursuant to the Special Warrant Offer. Each of the Series G Incentive Warrants
and the Series I Incentive Warrants have a term of four and one-half years,
contain piggyback registration rights, contain full ratchet anti-dilution
protection and have an exercise price equal to $0.35 and $0.50 per share,
respectively.

Each holder participating in the Special Warrant Offer by exercising any Class A
Warrants, Series A Warrants or Series F Warrants received new Series H incentive
warrants (the "Series H Incentive Warrants") and new Series J incentive warrants
(the "Series J Incentive Warrants"), each in an amount equal to twenty-five
percent (25%) and fifty percent (50%), respectively, of the number of shares of
the Company's common stock issued upon exercise of the Class A Warrants, the
Series A Warrants or the Series F Warrants pursuant to the Special Warrant
Offer. Each of the Series H Incentive Warrants and Series J Incentive Warrants
have a term of four and one-half years, contain piggyback registration rights
and have an exercise price equal to $0.35 and $0.50 per share, respectively.

In connection with the Special Warrant Offer, the Company also issued to the
placement agent and its designees warrants to purchase up to 561,012 shares of
common stock at an exercise price of $0.35. The placement agent warrants are
exercisable immediately and will expire on the fifth anniversary of the issue
date.

The Company and the holders consummated the Special Warrant Offer in reliance
upon the exemption from securities registration afforded by the rules and
regulations as promulgated by the United States Securities and Exchange
Commission under Section 4(2) of the Securities Act of 1933, as amended, and
pursuant to Regulation D promulgated thereunder.

AVENSYS ACQUISITION

FEBRUARY 2005 FINANCING

In February 2005, we closed a private placement with eighteen institutional
investors. The Company issued Senior Secured Convertible Notes Series A
("Notes") and Series E and F Warrants for an aggregate principal amount of
$4,675,000. the Company allocated $1,863,870 to the Warrants Series E, $339,456
to the Warrants Series F and recognized an embedded beneficial conversion
feature of $2,470,674 accounted for as additional paid in capital and an
equivalent discount against the Notes.

As of December 19 the Notes have an outstanding balance of of $2,277,145 and are
currently convertible at $0.35 per share.

The obligations of the Company are guaranteed by all of the Subsidiaries of the
Company pursuant to the terms of a Guaranty Agreement.

The Notes and the Guaranty have a secured by perfected first priority security
interests in all the assets of the Company and its Subsidiaries, including,
without limitation, accounts receivable, intellectual property rights and
inventory (the "Collateral") pursuant to the terms of a Pledge and Security
Agreement.

CHARTRAND LAFRAMBOISE ACQUISITION

In February 2005, we entered into agreements to acquire one hundred percent
(100%) of the outstanding shares of 9151-3929 QUEBEC INC., ("QUEBEC") and
3826961 CANADA INC. ("CANADA") through our wholly owned subsidiary, 6327915
CANADA, INC. QUEBEC and CANADA collectively owned 100% of 3428249 CANADA INC
which owned 100% of CHARTRAND LAFRAMBOISE INC., a company specializing in the
security field and 100% of 9126-7641 QUEBEC INC., a corporation specializing in
credit management and verification. On June 30, 2005, 3428249 Canada Inc. and
6327915 Canada Inc. completed a merger transaction. The merged company continues
to be 6327915 Canada Inc. Following the merger 3826961 Canada Inc. and 9151-3929
Quebec Inc. were each dissolved on June 9, 2005 and September 26, 2005,
respectively. QUEBEC, CANADA, 3428249 CANADA INC., CHARTRAND LAFRAMBOISE INC.,
and 9126-7641 QUEBEC INC. are hereinafter collectively referred to as "CLI." In
consideration for the acquisition of CLI, Manaris paid $2,436,251
(CDN$3,000,000.00) in cash and issued a $1,387,302 (CDN $1,700,000) debenture,
convertible into 1,700,000 restricted shares of its common stock at a price of
$0.82 per share on behalf of its wholly own subsidiary, 6327915 CANADA, INC.,

SERVICES AND TECHNOLOGIES

We offer the following services and technologies: Risk Management Solutions;
Security Services; Environmental Monitoring; Web-Based Security Solutions.

RISK MANAGEMENT SOLUTIONS

Our risk management solutions are provided by our C-Chip Technologies
Corporation (North America) subsidiary ("C-Chip"). To allow increased security
and to control the usage of remote equipment, C-Chip initially focused on the
development and marketing of risk management solutions using integrated wireless
communications, RFID technology, transaction processing, software applications
and the Internet, and when location is required, Global Positioning System (GPS)
technology to enable users to efficiently access, control, manage and monitor
remote assets. Customers have access to a corporate website in order to remotely
access, control, locate and monitor different types of equipment or services
anywhere throughout North America for increased security. These security
solutions provide significant value to business users by lowering their risks
and associated costs as well as increasing efficiency of their operations.

Because there is a large, readily available market for telematics applications
for automotive products, management has focused initial product development
effort in this industry. C-Chip is now starting to market an offering targeting
the automotive sector with solutions encompassing the credit, asset and security
management industry. Its current technology is based on a platform that can be
adapted to a wide number of products, including office equipment, industrial
machinery and consumer electronics products.

Our competitors in credit management solutions for the automotive sector include
OnTime, PassTime, and PayTeck. These competitors offer different versions of an
"egg timer" whereby a code must be manually entered using a keypad to enable a
physical device connected to the vehicle's starter. The process enables the use
of the vehicle for a certain period of time. Although the device does not rely
on wireless network coverage to function, a code must be given and manually
entered after each payment has been made. These devices work well but involve
significant management time and expense. Our basic product offers a significant
price advantage over these manual devices and, in management's opinion, is a
much more sophisticated solution as it is totally transparent to users.

SECURITY SERVICES

Since 9/11, ensuing world events have further supported our position that the
security industry offers significant opportunity for growth. Our goal is to
attain a leading position within this industry through our subsidiary CLI.

CLI's services include the following:

SECURITY OFFICERS

Security officers provide services primarily to commercial and industrial
centers and office buildings. Their mission consists of delivering quality
protection services combined with courteous customer service. These security
officers all possess the necessary qualifications to work with complex and
multi-purpose high-tech security systems.

INVESTIGATION

CLI's investigation team is made up of highly specialized experts with
long-standing experience in investigation and research. They provide external
and internal investigation services as well as other related services. External
investigations include fraud, insurance, workers' compensation, in-house theft,
productivity problems, inventory protection, and drug trafficking. Internal
investigations are mainly focused on research, pre-employment checks, criminal
files, and due diligences. Other related services include VIP personal
protection services as well as labor conflict management.

The market for our security services is subject to intense competition. Although
a large part of the market is provided by important multinationals, the vast
majority of security- related services are provided by thousands of small
entities, all offering a range of limited services. Our security services are
primarily offered in the province of Quebec in Canada. Our competitors are
mainly with Canadian firms such as Garda World, Kolossal, Sec-Pro and many other
smaller entities and less with larger multinationals.

Competition is based on reputation, relationship with customers, quality of
services and, to some extent, price.

ENVIRONMENTAL MONITORING

Our environmental monitoring services are provided by our Avensys subsidiary. In
order to developing monitoring solutions to different environments as well as
buildings and infrastructure, we acquired Avensys Inc. Avensys has developed a
distinctive expertise in Fiber Bragg Grating (FBG) offering unique advantages
for distributing sensing applications, namely for variables such as temperature,
humidity, pressure, strain, etc. To further broaden its sensing expertise,
Avensys has implemented a research & development program intended to extend its
expertise to organic and chemical compounds. In addition, Avensys is developing
complementary technologies such as innovative optoelectronic interrogation units
to collect data from thousands of fiber sensors in a cost effective manner.

Avensys' fiber-based sensing technology offers multiple variable sensors all of
which are installed on a single fiber strand. Sensors can be interrogated
remotely from different means of communications; are not sensitive to EMI/RFI
and lightning; do not require electricity; can sustain very high temperatures;
and are ideal for hostile or corrosive environments. Furthermore, all of
Avensys' FBG-based sensors are designed for a minimum 25-year lifecycle with
little or no maintenance, considerably reducing the cost of ownership. Avensys'
fiber-based sensing technology is particularly applicable to the environmental,
geotechnical, industrial, aerospace, nuclear and semiconductor vertical markets.

Avensys is considered a key player in the environment monitoring market with a
significant foothold in the structure & geotechnical market segments. It is one
of a few world players in the market for Fiber Bragg Grating (FBG) technology
and believes that its cost structure is one of the lowest in the industry. In
fact, some of Avensys' competitors in distributed fiber based sensing technology
purchase optical components from it. In order to offer complete end to end
security monitoring solutions, Avensys intends to leverage its existing customer
base which includes over 1,000 established accounts. A sample of the customer
base follows:

COMPONENTS AND SENSORS

3m Canada City of Toronto IGA Supermarkets
Abitibi-Consolidated Daishowa Marabeni Inc. Irving Oil
Agri-Food Canada Department of Agriculture INRS-Institut Armand-Frappier
Agropur Department of Fisheries And Oceans Labatt Breweries of Canada
Alcan Aluminum Ltd. Department of National Defense Merck Frost Canada
B.C. Environmental Department of The Environment Metro and Richelieu
Basf Canada Dofasco Inc. Ontario's Ministry of Environment & Energy
Bombardier Inc. GE Canada Inc. Nestle
Bowater Pulp And Paper Gouvernment Du Quebec Nova Scotia Power
Bristol-Myers Squibb Health Canada Domtar
Cascades Carton Plat Hydro Quebec Federal Public Works & Government Services
Bookham

INTEGRATED MONITORING SOLUTIONS

National water level management (Poland) Optical network (US National Defense) Refrigeration controls (IGA)
Flood prevention (China) Ammonia levels monitoring (Versacold) Flood prevention (Guyanna)
Water level measurements (Hydro Quebec) Landslide prevention (Hong Kong) Air quality surveillance (Environnent Quebec)

The reputation of Avensys has been built on years of experience in solving
environmental monitoring problems, from micro scale in-building sensing systems
to the real-time monitoring of temperature, humidity, pressure or chemical
levels and macro-scale wireless landslide and flood warning systems in different
countries. Through integrated solutions and services branded under the name
SenseYourWorldTM, Avensys combines skills, staff and the knowledge to integrate
multiple monitoring technologies to deliver real-time, automated, cost-efficient
data to business users requesting increased market intelligence.

The Company intends to design and market monitoring devices & instrumentations
and to offer complete, turnkey integrated monitoring solutions branded under the
brand name "SenseYourWorldTM". To provide end to end monitoring solutions to its
customers, Avensys intends to have a foothold and be involved in all realms of
turnkey monitoring solutions, including:

1) Monitoring Technologies. The provisioning of physical devices to measure
desired conditions;

2) Data Acquisition Process. An overall physical architecture to bring data to a
central point;

3) Data Applications. A software layer to analyze and process information; and,

4) Data Access & Reporting Process. An access to software tools and reports
needed for a specific application

To enable Avensys to offer end to end monitoring solutions to its customers,
proprietary technologies were designed to work with technologies from other
companies, including partners, competitors, and other third parties. Similarly,
Avensys' services were designed to operate with a variety of communications
protocols. It intends to continue to develop additional proprietary technology
where feasible and to purchase or license technology where cost-effective.

WEB-BASED SECURITY SOLUTIONS

Our Web-Based Security Solutions are provided by our C-Chip subsidiary. On
January 7, 2003, we acquired all assets and intellectual property related to a
new wireless, web-based set of communication tools offering users complete
access, remote control, and monitoring of a variety of equipment from Capex
Investments Limited ("Capex"). The technology we acquired allows selective
enabling, disabling (on/off) of targeted equipment, and other commands at will,
from anywhere to almost anywhere in North America. Essentially, the products and
solutions derived from this technology are targeted to financial institutions
and leasing companies to mitigate risks and enforce schedule of payment of
borrowers and lessees of certain equipment. This technology is herein referred
as the C-Chip technology.

The basic system component of C-Chip's technology entails a chipset embedded in
target devices. This includes a radio frequency receiver and microprocessor,
web-based applications and database management. Other required components
include access to wireless networks and Internet access. The processor is
addressable through a unique electronic serial number that corresponds to the
individual device. The processor accepts an input signal and compares the signal
to a number of criteria to determine if the current operating condition should
be maintained or modified. Additional components to the basic unit include GPS
technology for location/tracking and a host of additional monitoring features.

To process the commands of authorized users and to enable users to manage their
own database of embedded devices from a central point using the Web, C-Chip has
built a proprietary Secure Data Management Center. This eliminates the need for
users to make a substantial investment in acquiring and supporting capital
equipment, such as hardware, software and data networking equipment, in order to
use the Company's services.

C-Chip utilizes proven and effective wireless communications technologies
including one-way messaging services, two-way messaging services and cellular
services.

C-Chip's proprietary technologies are designed to work with those from other
companies, including corporate partners, competitors, and other third parties.
Similarly, C-Chip's services are designed to operate with a variety of wireless
communications protocols. The Company expects to continue development of
additional proprietary technology, and, where cost-effective, purchase or
license technology.

With approximately 4,000 units now in the field which were delivered based on
minimal production volume, and market reception to its offering, C-Chip chose to
reengineer its product for mass production in the first quarter of calendar 2005
to achieve increased efficiencies and to streamline processes. In order to
achieve this as promptly as possible, C-Chip concluded an agreement in April
2005 with iMetrik Inc, a company specializing in the development and marketing
of wireless solutions to improve management of mobile and remote assets. The
process is now essentially completed and the Company expects to begin delivery
of its new units in sizeable quantities, starting October 2005 to provide three
core solutions:

1. Credit Chip II is a small two-way communications device installed in a
rented, leased or financed vehicle's starter and ignition circuitry, or fuel
pump. It allows the credit grantor to disable starting the vehicle in the event
that a customer's account is in default. Addressing and disabling a vehicle is
as simple as logging onto the Company's secure website, entering a username and
password, selecting the customer account, and then clicking on "Disable." In
respect of "Right to cure" laws, an audible warning may also be enabled to
advise the customer of the impending shut-down, giving them a 1, 2 or 3-day
grace period.

2. Credit Chip 100 provides two-way wireless communications allowing remote
visibility of vehicles at all times. It is one of the most cost-effective
vehicle tracking devices on the market today. It provides the user with a
location map, in real-time via the Internet right on their computer screen.
Users can locate a targeted vehicle at any time and each location is stamped
with a time and date.

3. Credit Chip 100 C is C-Chip's most advanced credit management solution. It
combines remote visibility of vehicles and immobilization capabilities. Using
two-way wireless communications and our Internet Web Applications, credit
grantors have the ability to go online, sound a pre-warning, and then disable a
vehicle. If suitable payment arrangement is not made, the vehicle can be located
on a map in real-time, via the Internet right on any computer screen.

In each of market segments where we intend to position our web-based products,
we compete primarily on the basis of functionality, ease of use, quality, price,
service availability, effectiveness and financial strength. All our target
markets for all market segments are highly competitive. As market demand for
wireless communications tools enabling management of remote assets increases,
the quality, functionality and availability of competitors' products and
services is expected to progress. And with new competitors flooding our market,
further price reduction of products and services is expected. In addition, we
expect that the widespread adoption of industry standards may make it easier for
new market entrants or existing competitors to improve their products and
services or offer some or all of the products and services we offer or may offer
in the future, possibly at lower prices than ours. This would harm the
competitive advantages that our products and services currently enjoy.

WARRANTIES

All of the Company's web-based products are offered with a warranty. The
Company's current policy is to offer a warranty a one year warranty on all of
its web-based products. Avensys' warranty policy for manufactured products
varies between 3 months and one year, depending on the product.

INSURANCE

Manaris currently has $1,000,000 of insurance coverage for its web-based
security products and $1,000,000 for general liability and coverage for our
fixed assets. CLI has insurance coverage of $3,000,000 for services and
$1,000,000 for general liability and coverage of its fixed assets. Avensys has
insurance coverage of $3,000,000 for its fiber based products and $1,000,000 for
general liability and coverage of its fixed assets.

GOVERNMENT REGULATION

Manaris's businesses in the security service industry are subject to various
federal, state, local and foreign laws and regulations. CLI and CSA hold
security licenses from, and their security services are regulated by a local
government agency. Both are in good standing. The Company also uses some data
from outside sources, including data from third party vendors and various
government and public records services, in performing its security services. The
use of this data is regulated by certain laws and regulations. To date,
applicable laws and regulations have not interfered materially with the manner
in which the Company obtains information and conducts its operations, including
its access to data used in its business. However, changes in these laws and
regulations or the adoption of new laws or regulations, particularly those
relating to privacy, could interfere with the Company's method of operations and
access to data and, as a result, could materially adversely affect Manaris's
business.

In addition to regulations applicable to businesses in general, the Company's
web-based products are subject to certification by the Federal Communications
Commission in the US and by the Department of Communications in Canada. C-Chip's
first generation of web-based products are all in the process of obtaining such
certification for the US and Canadian markets. Other web-based products are
expected to undergo the certification process once all pre-commercialization
tests are completed. Furthermore, wireless carriers who supply the Company with
airtime enabling our services are also subject to regulation by the Federal
Communications Commission in the US and the Canadian Radio-Television and
Telecommunications Commission in Canada.

Manufactured products are subject to various industry and government
certifications, all of which need to be obtained before commercial launch.

EMPLOYEES

As of December 19, 2005, we have one hundred and seventy-nine (179) employees;
86 (CLI), 85 (Avensys), 3 (C-Chip), 5 (Manaris) employees on the payrolls of
C-Chip, CLI and Avensys and we retained several full-time and part-time
consultants. Our employees are not unionized. We believe relationships with our
employees and consultants are good.

LEGAL PROCEEDINGS

In the course of normal business, the Company may be subject to threat of
litigation, claims and assessments. Management does not believe that unfavorable
decisions in any pending procedures or threat of procedures or any amount it
might be required to pay will not have a material adverse impact on our
financial condition.

On August 13, 2004, a motion was filed by Citicorp Vendor Finance Ltd., under
Quebec law, in the district of Montreal, Province of Quebec, totaling $73,506
USD ($85,348 CAD) for an unpaid contract of credit. The Company intends to
contest the case vigorously and, in the event of an unfavorable outcome, the
amount of any damages is not expected to have a material adverse impact on our
financial condition.

A lawsuit was filed on July 15, 2005, under Quebec law, in the District of
Montreal, Province of Quebec, for a total of $506,000 USD ($620,000 CAD) with
regards to alleged breach of employment contract and wrongful dismissal of
Charles Finkelstein. This lawsuit was settled on September 2, 2005 for an amount
of $81,600 USD ($100,000 CAD) and the transfer of 200,000 shares of the Company,
currently held in escrow. The parties exchanged under this agreement a complete
and final release regarding their business and employment relationship.

Autoland filed a lawsuit on July 15, 2005, under Quebec law, in the District of
Montreal, Province of Quebec, for a total of $81,600 USD ($100,000 CAD) with
regards to alleged expenses incurred by the plaintiff for the purchase of
anti-theft product known as the "Hawk 200". The Company intends to contest the
case vigorously and, in the event of an unfavorable outcome, the amount of any
damages will be charged to the earnings of the quarter and is not expected to
have a material adverse impact on our financial condition

A lawsuit was filed by Richard Larocque on June 30, 2005 under Quebec law, in
the District of Montreal, Province of Quebec pertaining to a claim in the amount
of $88,900 USD ($108,900 CAD) for alleged wrongful and unnecessary use of force
in the exercise of the Company's employee security duties. The Company intends
to contest the case vigorously and, in the event of an unfavorable outcome, the
amount of any damages will be charged to the earnings of the quarter and is not
expected to have a material adverse impact on our financial condition.

Rothsman Bastien, filed a lawsuit under Quebec law, in the district of Laval,
Province of Quebec, totalling $66,351USD ($81,306 CAD) for compensatory damages
and $12,240USD ($15,000 CAD) in punitive and exemplary damages. The claim
alleges that the Company submitted erroneous evidence that was based on racial
profiling which led to the arrest of the plaintiff. The Company intends to
contest the case vigorously and, in the event of an unfavorable outcome, the
amount of any compensatory damages will be covered by the Company's insurance
policy. The punitive and exemplary damages will be charged to the earnings of
the quarter and is not expected to have a material adverse impact on our
financial condition.

DESCRIPTION OF PROPERTY

The Manaris main office is located at 1155, Rene-Levesque West, Suite 2720,
Montreal, Quebec, Canada. The base rent for the current premises is
approximately CDN$8,161 inclusive of taxes per month and is subject to annual
increases equivalent to the increase in the Consumer Price Index ("CPI"). This
lease expires on November 30.

The office of our wholly owned subsidiary, C-Chip, is located at 740 Notre-Dame
West, Suite 1320, Montreal, Quebec, Canada. They currently lease approximately
1,900 square feet for administration and development. The base rent for the
current premises is approximately CND$2,300 inclusive of taxes per month and is
subject to annual increases equivalent to the increase in the Consumer Price
Index ("CPI"). This lease expires in June 2010.

The office of our wholly owned subsidiary, Chartrand Laframboise Inc., is
located at 2 Place Laval, Suite 350, Laval, Quebec, Canada. They currently lease
approximately 6,700 square feet for administration. The base rent for the
current premises is approximately CND$12,100 inclusive of taxes per month and is
subject to annual increases equivalent to the increase in the Consumer Price
Index ("CPI"). This lease expires on January 31, 2007.

The main office of our wholly owned subsidiary, Avensys Inc., is located at 880
Selkirk, Pointe-Claire, Quebec, Canada. They currently lease approximately
20,500 square feet for administration and production. The base rent for the
current premises is approximately CND$13,670 inclusive of taxes per month and is
subject to annual increases equivalent to the increase in the Consumer Price
Index ("CPI"). This lease expires on July 31, 2006.

Avensys has also two sales representative offices in Canada. They currently
lease approximately 3,615 square feet for administration at 1131 Derry Road
East, Mississauga, Ontario Canada. The base rent for the current premises is
approximately CND$2,184 inclusive of taxes per month and is subject to annual
increases equivalent to the increase in the Consumer Price Index ("CPI"). This
lease expires on June 30, 2006. They currently lease approximately 400 square
feet for administration at 301-1493 Johnston Road, White Rock, British Columbia,
Canada. The base rent for the current premises is approximately CND$500
inclusive of taxes per month and is subject to annual increases equivalent to
the increase in the Consumer Price Index ("CPI"). This lease expires on January
31, 2007.

Avensys Inc. also maintains research and development facilities and development
facilities. These facilities are located at 247 Boulevard Thibeau,
Cap-de-la-Madeleine, Quebec, Canada They currently lease approximately 6,500
square feet and the base rent for the current premises is approximately
CND$2,871 inclusive of taxes per month and is subject to annual increases
equivalent to the increase in the Consumer Price Index ("CPI"). This lease
expires on October 30, 2006.

We believe that additional office space will be required, and readily available,
as our business grows.

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

CAUTION ABOUT FORWARD-LOOKING STATEMENTS

This management's discussion and analysis of financial condition and results of
operations of Manaris Corporation should be read in conjunction with the
financial statements and notes thereto of the Company for the year ended June
30, 2005 as included in Form 10-KSB and the three month period ended September
30, 2005 as included in Form 10-QSB. Because of the nature of a relatively new
and growing company the reported results will not necessarily reflect the
future.

This section includes a number of forward-looking statements that reflect our
current views with respect to future events and financial performance.
Forward-looking statements are often identified by words like: believe, expect,
estimate, anticipate, intend, project and similar expressions, or words which,
by their nature, refer to future events. You should not place undue certainty on
these forward-looking statements, which apply only as of the date of this
prospectus. These forward-looking statements are subject to certain risks and
uncertainties that could cause actual results to differ materially from
historical results or our predictions.

OUR BUSINESS

Manaris Corporation's primary business is risk mitigation. Manaris offers
corporations and institutions security management solutions and services
enabling them to acquire market intelligence, lower business risks and improve
customer service. The Company's security solutions and services are geared
towards increasing customer revenues and profits.

Manaris, our holding company, operates the following wholly-owned subsidiaries:

o Avensys Inc, which provides risk management monitoring solutions.

o Chartrand Laframboise Investigation, which provides investigative
services.

o C-Chip Technologies Corporation (North America), which specializes in
high-tech security.

The acquisitions of Avensys Inc, and Chartrand Laframboise Inc. (CLI) in
February 2005 have grown our asset base significantly and expanded our sources
of revenue.

The major potential for revenue growth in the next 12 months for Manaris rests
with C-Chip, the subsidiary conducting the Company's original core business. We
have made a significant investment in reengineering the C-Chip product line as
we strongly believe in the product concept. C-Chip's senior management clearly
understands the need to produce results during FY2006.

The Company has several priorities for its 2006 fiscal year ("FY2006"). Manaris,
the holding company, will reduce costs where possible. We will further leverage
the success of both Avensys and CLI and expect C-Chip to start realizing its
potential. Overall, corporate focus will be on continued growth. In addition, we
will also look to streamline operations and develop efficiencies amongst
complementary activities of our subsidiaries.

On September 16, 2005 Stephane Solis resigned as the Company's Chief Executive
Officer and as a Director of the Company and its subsidiaries, effective
September 30, 2005. In addition, on September 16, 2005, the Company appointed
John G. Fraser as its President and Chief Executive Officer for a minimum period
of three months.

OUR SERVICES

Chartrand Laframboise Inc. ("CLI") offers services that include investigation,
surveillance, undercover agents, background verification, business intelligence,
security consulting and labor management conflict to over 1,000 customers. For
FY2006, CLI is seeking opportunities to broaden its service offering and expand
geographically across Canada.

Avensys is a leader in fibre based sensors and enables businesses and
corporations to monitor different types of environments, including Air, Soil,
Water as well as buildings and infrastructures. We expect that the production of
fiber optics components will continue to be the highest growth area of the
company, with some investments needed to keep our lead position and improve our
manufacturing processes. This fiscal year will also see the transfer of our
first optical sensors from the research and development group to the
manufacturing group. The market for optical sensing solutions should therefore
produce tangible results, although we expect that the real growth for that
sector will start in the next fiscal year.

With regards to environmental and geotechnical solutions, the volume of
distributed monitoring equipment should be stable, but our involvement in
customer solutions is expected to grow. It is our intention to create a team
totally dedicated to integrated solutions in FY2006, with the achievement of a
first large scale integrated customer solution during the year.

We also anticipate that Avensys' advanced limnimeter, launched in the summer of
2005, will prove to be a successful product.

C-Chip specializes in the high-tech sector of the security industry, with
technology that allows credit grantors the ability to efficiently access,
control, manage and monitor remote assets at low costs. For FY2006, C-Chip's
priority is to manufacture and deliver an increasing number of C-Chip products
into the North American marketplace.

RECENT FINANCINGS

In February 2005, we entered into a Purchase Agreement with eighteen
institutional and accredited investors under the terms of which we issued units
consisting of an aggregate of $4,675,000 of our Company's 9.0% Senior Secured
Convertible Notes, Series A, which are convertible into shares of our common
stock at a conversion price of $0.65 per share. Under the terms of the 9.0%
Senior Secured Convertible Notes, Series A, principal on the Notes shall be paid
in 20 equal monthly installments, with each payment equal to 5% of the principal
amount, commencing on June 23, 2005 and continuing on the same day of each month
thereafter to the Holder on the tenth date immediately preceding the Principal
Payment Date. All payments of principal by us shall be made at our option in
cash or, with 10 business day's prior notice, in common stock of our Company
valued at 85% of the average closing bid price of the security in the most
recent five trading days prior to a Valuation Date. The Notes contain full
ratchet anti-dilution protection.

In July 2005 the Company made a Special Warrant Offer (the "Offer") to all Class
A Series A, Series E, and Series F warrant holders. A total of $2,576,168 was
raised under the Private Placement. Under the terms of the Offer, each Holder
participating in the Offer by exercising any Series E Warrants at $0.35 per
share received new Series G Incentive Warrants (the "Series G Incentive
Warrants") and new Series I Incentive Warrants (the "Series I Incentive
Warrants"), each in an amount equal to one hundred percent (100%) of the number
of shares of the Company's common stock issued upon exercise of the Series E
Warrants pursuant to the Offer. A total of 3,797,976 Series E Warrants were
exercised which prompted the issuance of 3,797,976 of Series G Incentive
Warrants and 3,797,976 of Series I Incentive Warrants.

Holders participating in the Offer by exercising any Class A Warrants, Series A
Warrants or Series F Warrants received new Series H Incentive Warrants (the
"Series H Incentive Warrants") and new Series J Incentive warrants (the "Series
J Incentive Warrants"), each in an amount equal to twenty-five percent (25%) and
fifty percent (50%), respectively, of the number of shares of the Company's
common stock issued upon exercise of the Class A Warrants, the Series A Warrants
or the Series F Warrants pursuant to the Offer. A total of 3,562,359 of Class A
Warrants, Series A Warrants and Series F Warrants were exercised which prompted
the issuance of 890,590 Series H Warrants and 1,781,180 of Series J Warrants.

As a result of the Offer, the Company, pursuant to the Warrants in effect,
adjusted the respective Warrants accordingly.

Further, as a result of the Special Warrant Offering, the Company issued shares
of common stock for a consideration per share less than the Conversion Price in
effect, which constitutes a "Trigger Issuance" under the Senior Secured
Convertible Note of February 16, 2005. Consequently, some Investors pursuant to
the Senior Secured Convertible Note exercised their right to convert part of the
Note into Shares of Common Stock. A total of $815,985 of the Senior Secured
Convertible Note was converted. As of September 30, 2005, having made four
principle payments, the balance remaining on the Note Agreement totals
$2,971,647.

CRITICAL ACCOUNTING POLICIES AND ESTIMATES

Management's discussion and analysis of our financial condition and results of
operations are based upon our consolidated financial statements, which have been
prepared in accordance with accounting principles generally accepted in the
United States of America. The preparation of these financial statements requires
that we make estimates and judgments that affect the reported amounts of assets,
liabilities, revenues and expenses and related disclosure of contingent assets
and liabilities. At each balance sheet date, management evaluates its estimates,
including, but not limited to, those related to accounts receivable,
inventories, and deferred revenue. We base our estimates on historical
experience and on various other assumptions that are believed to be reasonable
under the circumstances. Actual results may differ from these estimates under
different assumptions or conditions. The estimates and critical accounting
policies that are most important in fully understanding and evaluating our
financial condition and results of operations are discussed below.

REVENUE RECOGNITION

One of our subsidiaries, C-Chip is still in a development stage and has
generated limited commercial sales of products. The Company developed prototypes
for testing by potential customers, which were billed for a portion of the costs
incurred. Commercial product sales are recorded when shipped as part of a sales
agreement, usually by customer purchase order. Certain product sales contain a
small charge for after sales service for up to one year; such amounts are
deferred and recognized as revenue when earned. Products carry a one-year
replacement warranty and the level of actual warranty expense has not been
material.

Our Company recognizes revenue in accordance with Securities and Exchange
Commission Staff Accounting Bulletin No. 104 (" SAB 104" ), " Revenue
Recognition in Financial Statements." Revenue is recognized only when the price
is fixed or determinable, persuasive evidence of an arrangement exists, the
service is performed, and collectibility is reasonably assured.

Sales of security services commenced on the acquisition of Canadian Security
Agency (2004) Inc. on February 17, 2004. Clients are provided security services
with revenue recognized as services are performed.

CLI recognizes revenue for service contracts as the services are performed using
a proportional performance model. Revenues from investigation contracts are
reported on the percentage of completion method of accounting using measurements
of progress toward completion appropriate for the work performed. Progress is
generally based upon man-hours or costs incurred based upon the appropriate
method for the type of job.

Avensys Inc. recognizes revenues when goods are shipped and the risks and
rewards have transferred to customers. Revenues are recorded net of rebates,
discounts and sales returns. Avensys and its 70% owned subsidiary, specialize in
developing, manufacturing and installing control and monitoring remote security
solutions.

Our Company continually monitors timely payments and assesses any collection
issues. The allowance for doubtful accounts is based on the Company's detailed
assessment of the collectibility of specific customer accounts. Any significant
customer accounts that are not expected to be collected are excluded from
revenues.

PRINCIPLES OF CONSOLIDATION

Our consolidated financial statements include the accounts of the Company and
its wholly owned subsidiaries. Consolidated companies include: a) 100% of
Avensys and its subsidiary, Fizians Inc. of which Avensys owns 70% of its
outstanding shares and the accounts of Avensys Labs Inc., a company in which
Avensys holds variable interests and is the primary beneficiary. b) 100% of
6327915 Canada, Inc., 9151-3929 Quebec Inc., 3826961 Canada Inc., 3428249 Canada
Inc., Chartrand Laframboise Inc. and 9126-7641 Quebec Inc., (collectively the
"CLI Group" ) c) 100% of Canadian Security Agency (2004) Inc.d) 100% of C-Chip
..Operating results for the CLI Group and Avensys are included from the date of
acquisition of February 28, 2005. All inter-company accounts and transactions
have been eliminated.

AMORTIZATION OF EQUIPMENT AND PROPERTY

Our Company's property and equipment are recorded at cost. Our Company provides
for depreciation using the following methods and applying rates estimated to
amortize the cost over the useful life of the assets:

Computer equipment Straight-line and declining balance 30%-33 1/3%
Furniture and fixture Straight-line and declining balance 20%
Leasehold improvements Straight-line 5 to 8 years
Surveillance equipment Declining balance 30%
Communication equipment Declining balance 20%
Laboratory equipment Straight-line and declining balance 20%
Automotive equipment and software Declining balance 30%
Machinery and office equipment Declining balance 20%

INTANGIBLE ASSETS

An acquired intangible asset that represents technology that has reached
technological feasibility is capitalized at cost. Intangible assets with
definite lives are reported at cost, less accumulated amortization. The Company
does not have any identified intangible assets with a finite life. Acquired
in-process research and development is charged to operations in the period of
acquisition. The Company provides for amortization on a straight-line basis over
the following periods:

Customer lists 3-10 years
Licenses, patents and trademarks 4-6 years
Non-compete agreements 4 years

GOODWILL

Goodwill represents the excess of the purchase price of acquired assets over the
fair values of the identifiable assets acquired and liabilities assumed.
Pursuant to SFAS No. 141, the Company does not amortize goodwill, but tests for
impairment of goodwill on an annual basis and at any other time if events occur
or circumstances indicate that the carrying amount of goodwill may not be
recoverable. Circumstances that could trigger an impairment test include but are
not limited to: a significant adverse change in the business climate or legal
factors; an adverse action or assessment by a regulator; unanticipated
competition and loss of key personnel. Goodwill is tested for impairment using
present value techniques of estimated future cash flows; or using valuation
techniques based on multiples of earnings. If the carrying amount of goodwill
exceeds the implied fair value of that goodwill, an impairment loss is charged
to operations.

STOCK-BASED COMPENSATION

Our Company has elected to apply the intrinsic value method of accounting in
accordance with Accounting Principles Board Opinion No. 25, "Accounting for
Stock Issued to Employees" (APB25). Under the intrinsic value method of
accounting, compensation expense is recognized if the exercise price of the
Company's employee stock options is less than the market price of the underlying
common stock on the date of grant. Stock-based compensation for employees is
recognized on the straight-line basis over the vesting period of the individual
options. Stock options granted to non-employees are accounted for under
Statement of Financial Accounting Standards No. 123 "Accounting for Stock-Based
Compensation" (SFAS 123), which establishes a fair value based method of
accounting for stock-based awards, and recognizes compensation expense based on
the fair market value of the stock award or fair market value of the goods and
services received, whichever is more reliably measurable. Under the provisions
of SFAS 123, companies that elect to account for stock-based awards in
accordance with the provisions of APB 25 are required to disclose the pro forma
net income (loss) that would have resulted from the use of the fair value based
method under SFAS 123.

CONTINGENT CONSIDERATION

The measurement, recognition and allocation of contingent consideration are
accounted for using the following principles:

MEASUREMENT AND RECOGNITION

In accordance with SFASNo.141, Business Combinations ("SFAS141"), contingent
consideration is recorded when a contingency is satisfied and additional
consideration is issued or becomes issuable. Our Company records the additional
consideration issued or issuable in connection with the acquisition when a
specified internal performance goal is met. For additional consideration paid in
stock, our Company calculates the amount of additional consideration using the
closing price of its common stock on the date the performance goal is satisfied.

AMOUNT ALLOCATED TO GOODWILL

In accordance with EITF No.95-8, Accounting for Contingent Consideration Paid to
the Shareholders of an Acquired Enterprise in a Purchase Business Combination
("EITF 95-8") and FIN44, the portion of additional consideration issuable to
holders of unrestricted common stock and fully vested options as of the
acquisition date is recorded as additional purchase price, as the consideration
is unrelated to continuing employment with the Company. Such portion is
allocated to goodwill.

AMOUNT ALLOCATED TO STOCK-BASED COMPENSATION EXPENSE

In accordance with EITF 95-8, the intrinsic value associated with additional
consideration related to stock or options that vest between the acquisition date
and the date at which the contingency is satisfied is recorded as an immediate
charge to stock-based compensation expense because the consideration is related
to continuing employment with the Company.

AMOUNT ALLOCATED TO DEFERRED COMPENSATION

Additional consideration related to options and restricted stock that remain
unvested when the contingency is satisfied is recorded as deferred compensation
expense under EITF 95-8 and FIN44, as such consideration will only be earned to
the extent that the holder of such options or restricted stock continues to be
employed by our Company and meets the vesting requirements. The amount recorded
as deferred compensation is based upon the intrinsic value of the restricted
stock and unvested options at the date at which the contingency is satisfied.
Our Company amortizes such deferred compensation over the remaining vesting
period of the underlying restricted stock and unvested options. In the event
that a holder does not fully vest in the restricted stock or unvested options,
the unamortized portion of deferred compensation is eliminated.

INCOME TAX

Our Company utilizes the liability method of accounting for income taxes as set
forth in SFAS No. 109, "Accounting for Income Taxes". Under the liability
method, deferred taxes are determined based on the temporary differences between
the financial statement and tax bases of assets and liabilities using enacted
tax rates. A valuation allowance is recorded when it is more likely than not
that some of the deferred tax assets will not be realized. The Company has
incurred net operating losses of $10,934,000 which expire starting in 2015.
Pursuant to SFAS 109 our Company is required to compute tax asset benefits for
net operating losses carried forward. Potential benefit of net operating losses
have not been recognized in these financial statements because the company
cannot be assured it is more likely than not it will utilize the net operating
losses carried forward in future years.

RECENT ACCOUNTING PRONOUNCEMENTS

In December 2004, FASB issued SFAS No. 153, " Exchanges of Nonmonetary Assets -
An Amendment of APB Opinion No. 29" . The guidance in APB Opinion No. 29, "
Accounting for Nonmonetary Transactions" , is based on the principle that
exchanges of nonmonetary assets should be measured based on the fair value of
the assets exchanged. The guidance in that Opinion, however, included certain
exceptions to that principle. SFAS No. 153 amends Opinion No. 29 to eliminate
the exception for nonmonetary exchanges of similar productive assets and
replaces it with a general exception for exchanges of nonmonetary assets that do
not have commercial substance. A nonmonetary exchange has commercial substance
if the future cash flows of the entity are expected to change significantly as a
result of the exchange. The provisions of SFAS No. 153 are effective for
nonmonetary asset exchanges occurring in fiscal periods beginning after June 15,
2005. Early application is permitted and companies must apply the standard
prospectively. The adoption of this standard is not expected to have a material
effect on our Company's results of operations or financial position.

In December 2004, the Financial Accounting Standards Board (FASB) issued
Statement of Financial Accounting Standard (SFAS) No. 123R, "Share Based
Payment". SFAS 123R is a revision of SFAS No. 123 "Accounting for Stock-Based
Compensation", and supersedes APB Opinion No. 25, "Accounting for Stock Issued
to Employees" and its related implementation guidance. SFAS 123R establishes
standards for the accounting for transactions in which an entity exchanges its
equity instruments for goods or services. It also addresses transactions in
which an entity incurs liabilities in exchange for goods or services that are
based on the fair value of the entity' s equity instruments or that may be
settled by the issuance of those equity instruments. SFAS 123R focuses primarily
on accounting for transactions in which an entity obtains employee services in
share-based payment transactions. SFAS 123R does not change the accounting
guidance for share-based payment transactions with parties other than employees
provided in SFAS 123 as originally issued and Emerging Issues Task Force Issue
No. 96-18, " Accounting for Equity Instruments That Are Issued to Other Than
Employees for Acquiring, or in Conjunction with Selling, Goods or Services" .
SFAS 123R does not address the accounting for employee share ownership plans,
which are subject to AICPA Statement of Position 93-6, " Employers' Accounting
for Employee Stock Ownership Plans" . SFAS 123R requires a public entity to
measure the cost of employee services received in exchange for an award of
equity instruments based on the grant-date fair value of the award (with limited
exceptions). That cost will be recognized over the period during which an
employee is required to provide service in exchange for the award - the
requisite service period (usually the vesting period). SFAS 123R requires that
the compensation cost relating to share-based payment transactions be recognized
in financial statements. That cost will be measured based on the fair value of
the equity or liability instruments issued. The scope of SFAS 123R includes a
wide range of share-based compensation arrangements including share options,
restricted share plans, performance-based awards, share appreciation rights, and
employee share purchase plans. Public entities (other than those filing as small
business issuers) will be required to apply SFAS 123R as of the first interim or
annual reporting period that begins after June 15, 2005. Public entities that
file as small business issuers will be required to apply SFAS 123R in the first
interim or annual reporting period that begins after December 15, 2005. For
nonpublic entities, SFAS 123R must be applied as of the beginning of the first
annual reporting period beginning after December 15, 2005. Our Company is
evaluating the impact of adopting this standard on the Company's results of
operations and financial position.

In March 2005, the SEC staff issued Staff Accounting Bulletin No. 107 ("SAB
107") to give guidance on the implementation of SFAS No. 123R. Our Company will
consider SAB 107 during the implementation of SFAS No. 123R.

RESULTS OF OPERATIONS

The results of the operations include the accounts of the Company and its
wholly-owned subsidiaries.

THREE MONTHS ENDED SEPTEMBER 30, 2005 COMPARED TO THREE MONTHS ENDED SEPTEMBER
30, 2004

The results for the three months period ended September 30, 2005 differs
significantly from the three month period ended September 30, 2004 due to the
acquisitions of our subsidiaries CLI Group and Avensys in February 2005.

Operating results for CSA were included for the three month period ended
September 30, 2005 and 2004. Operating results for CLI Group, Avensys that were
acquired in 2005 and C-Chip, that was created in 2005, were included for the
three month period ended September 30, 2005 compared to none last year.

Our revenues for the three months ended September 30, 2005 were $3,725,637
compared to $640,030 last year. The increase was primarily due to acquisition of
CLI and Avensys during the year. For the same period, our product revenue
accounted for $1,987,895 compared to $152,037 last year. An increase of
$1,835,858 was primarily due to the acquisition of Avensys. Our service revenues
were $1,737,742 for the period ended September 30, 2005 compared to $487,993 in
the prior year. An increase of $1,249,749 was due to the acquisition of CLI
during the year Gross margin for the three months ended September 30, 2005 was
$1,135,906 compared to $183,430 for the same period last year. Our net loss for
the three months ended September 30, 2005 was $3,314,162 compared to $681,520
for the same period last year. The increase in net losses was largely due to
debenture accretion expenses, amortization of deferred financing costs,
amortization of intangible assets, professional fees, increased expenses of our
wholly owned subsidiary CSA and losses from our wholly owned subsidiary C-Chip
(North America).

Operating expenses for the three months ended September 30, 2005 were $2,841,486
compared to $859,797 for the same period last year. Selling, General and
Administration expenses for the three months ended September 30 2005, which
exclude stock based compensation of $424,900, were $1,930,742 compared to
$449,910 in the same period last year, also excluding stock based compensation
of $327,709 last year. Research and development expenses for the three months
ended September 30, 2005 were $226,694 compared to $35,744 for the same period
last year, the increase of $226,108 was due to Avensys. Depreciation and
amortization for the three months ended September 30, 2005 were $223,328
compared to $46,434 last year. An increase of $150,300 was due to the
amortization of intangible assets acquired in February 2005 through our two
acquisitions compared to $0 last year. Impairment of long-lived assets for the
three months ended

September 30, 2005 was $35,822 compared to $0 in the prior year. Other expenses
for the three months ended September 30, 2005 were $1,775,554 compared to $5,153
last year. An amount of $139,464 was due to the amortization of deferred
financing costs and $1,540,287 to the debenture accretion, both related to the
Senior Convertible Note, Series `A' issued in February 2005. Included in the
$1,540,287 is (1) the conversion of $815,985 of the Senior Convertible Note,
Series `A' paid in shares incurred a non-cash expense of $782,037 (2) a portion
of monthly capital payments of the Senior Convertible Note, Series `A' incurred
a non-cash expense of $526,470 (3) a portion of monthly capital payments of
$204,733 paid in cash.

TWELVE MONTHS ENDED JUNE 30, 2005 COMPARED TO TWELVE MONTHS ENDED JUNE 30, 2004

The results of the operations include the accounts of the Company and its
wholly-owned subsidiaries.

Operating results for CSA were included for the twelve months in 2005 compared
to four months in 2004. Operating results for CLI Group and Avensys were
included from the date of acquisition of February 28, 2005. Operating results
for C-Chip were included from April 1, 2005.

Our revenues for the twelve months ended June 30, 2005 were $7,021,228 compared
to $1,040,898 last year. The increase was primarily due to acquisition of CLI
and Avensys during the year. For the same period, our product revenue accounted
for $3,580,619 compared to $210,222 last year. An increase of $3,238,000 was
primarily due to the acquisition of Avensys. Our service revenues were
$3,440,609 for the period ended June 30, 2005 compared to $830,676 in the prior
year. An increase of $1,472,000 was due to the acquisition of CLI during the
year and $1,164,000 was due to the impact of CSA that accounted for twelve
months in 2005 compared to four months in 2004. Gross margin for the twelve
months ended June 30, 2005 was $2,354,728 compared to $379,059 for the same
period last year. Our net loss for the twelve months ended June 30, 2005 was
$6,230,943 compared to $4,590,561 for the same period last year. Net losses were
generated mainly by our wholly owned subsidiary CSA, by our re-engineering of
the c-chip product line and by increased corporate expenses arising out of the
acquisitions and the February financing.

Operating expenses for the twelve months ended June 30, 2005 were $7,724,241
compared to $3,522,643 for the same period last year. Selling, General and
Administration expenses for the twelve months ended June 30 2005, which exclude
stock based compensation of $1,216,542, were $4,538,256 compared to $1,858,376
excluding stock based compensation of $856,384 in the same period last year. The
above reflected increased marketing, consulting and professional expenses in the
period ended June 30, 2005. Research and development expenses for the twelve
months ended June 30, 2005 were $731,865 compared to $351,584 for the same
period last year. Acquired in-process research and development for the twelve
months ended June 30, 2005 was $386,749 compared to none last year. Impairment
of goodwill and other intangible assets for the twelve months ended June 30,
2005 was $180,974 compared to $278,852 in the prior year.

Our results for the twelve months ended June 30, 2005 includes the results of
recently acquired CLI, from February 28, 2005 to June 30, 2005, and the results
of Avensys from February 28, 2005 to June 30, 2005, and C-Chip since April 1,
2005.

FINANCIAL CONDITION, LIQUIDITY AND CAPITAL RESOURCES

We are involved in the risk mitigation business. Through our different business
units, our aim is to provide services and solutions to our customers
encompassing aspects of the security industry, from the collection and
transmission of information, to the treatment and analysis of the data
collected, all to offer the required intervention and protection whether it
pertains to assets, persons or the environment. So far, our operations have been
financed primarily from cash on hand, from the sale of common shares, or of
convertible debentures, exercise of warrants, loans, and with respect to Avensys
and CLI primarily from revenue from the sales of products and services.

As of September 30, 2005 we had a working capital of $848,707, compared to a
working capital deficiency of $1,329,550 at June 30, 2005. Included in these
figures, a cash balance of $1,352,322 compared to $287,147 June 30, 2005,
$2,796,686 in accounts receivable compared to $2,858,275, $1,452,105 in
inventory compared to $1,097,776 June 30, 2005, $2,353,730 in accounts payable
compared to $1,507,959 June 30, 2005, $1,429,439 in accrued liabilities compared
to $2,021,127 at June 30, 2005 and $1,476,693 in loans payable compared to
$1,598,273 at June 30, 2005. The main reason for the significant change in
working capital is due to the proceeds from the July Special Warrant Offer.

Net cash used for our operations was $714,505 compared to $541,344 at September
30, 2004. We mainly financed our operations through the July Special Warrant
Offer for a total net cash proceeds of $2, 127,591 and from a $408,373 loan. We
used $404,712 for Bank credit line payment, $226,733 for principal payment of
Senior Convertible Note Series A, $80,694 for related party payments and capital
addition of $35,781.

As of September 30, 2005, our Company's total assets were $20,999,257 compared
to $20,115,755 at June 30, 2005. The increase in total assets was primarily
attributable to cash of $1,352,322 compared to $287,147 in June 2005,
inventories $1,452,105 compared to $1,097,776 June 2005 offset by a decrease in
intangible assets $3,635,198 compared to $3,852,772 in June 2005.

As of September 30, 2005, the Company had 67,350,818 issued and outstanding
shares compared to 54,782,802 at June 30, 2005. The increase in common shares is
mainly due to the issuance of 7,360,436 common shares from the July Special
Warrant Offer. The

increase is also due to the issuance of 4,462,820 common shares in connection to
payments and conversions pursuant to the Senior Convertible Notes Series A.
Included in this amount, a total of 1,823,206 common shares were issued as
principal payments in the amount of $724,999, 308,230 common shares were issued
as interest payment in the amount of $143,863 and 2,331,384 common shares were
issued following the conversion of $815,985.

Stock options outstanding at September 30, 2005 totaled 5,070,000 compared to
$3,842,500 at June 30, 2005.

In July 2005 the Company made a Special Warrant Offer (the "Offer") to all Class
A Series A, Series E, and Series F warrant holders. The Company received total
proceeds of $2,576,168 from the Offer. Under the terms of the Offer, each Holder
participating in the Offer by exercising any Series E Warrants at $0.35 per
share received new Series G Incentive Warrants (the "Series G Incentive
Warrants") and new Series I Incentive Warrants (the "Series I Incentive
Warrants"), each in an amount equal to one hundred percent (100%) of the number
of shares of the Company's common stock issued upon exercise of the Series E
Warrants pursuant to the Offer. A total of 3,797,976 Series E Warrants were
exercised which prompted the issuance of 3,797,976 of Series G Incentive
Warrants and 3,797,976 of Series I Incentive Warrants.

Holders participating in the Offer by exercising any Class A Warrants, Series A
Warrants or Series F Warrants received new Series H Incentive Warrants (the
"Series H Incentive Warrants") and new Series J incentive warrants (the "Series
J Incentive Warrants"), each in an amount equal to twenty-five percent (25%) and
fifty percent (50%), respectively, of the number of shares of the Company's
common stock issued upon exercise of the Class A Warrants, the Series A Warrants
or the Series F Warrants pursuant to the Offer. A total of 3,562,359 of Class A
Warrants, Series A Warrants and Series F Warrants were exercised which prompted
the issuance of 890,590 Series H Warrants and 1,781,180 of Series J Warrants.

On September 22, 2005, the Company ceased operations of Canadian Security Agency
(2004) Inc. ("CSA") subsidiary, which provides security services to large
corporate accounts, including courier and trucking companies. As a result, CSA
entered into an agreement with Securite Kolossal Inc. pursuant to which CSA sold
its customer list to Securite Kolossal Inc. for CDN $100,000. Of this amount,
CSA received CDN $50,000 and the balance is due in November 2005. On November 2,
2005, CSA filed for bankruptcy protection with the Superior Court of Quebec,
district of Montreal. Pursuant to the Bankruptcy and Insolvency Act, CSA filed a
notice of intention to make a proposal, by which the Company intends to settle
its payables. A notice has been sent to all known creditors of CSA informing
them that it has filed with the court a notice to make proposal.

During the first quarter we issued 400,000 common shares for services, and
257,000 common shares to settle outstanding payables in the amount of $105,501.

Until the Company is able to finance itself through profitable operations it
will continue to rely on cash on hand, exercise of warrants, debentures, loans,
equity issue or sale of assets.

Stock Options and Warrants

a) Stock Options

i) During the three month period ended September 30, 2005, the Company granted
777,000 stock options to consultants pursuant to a non-qualified stock option
plan at an exercise price of $0.00001 per share. Stock options granted to
consultants vest immediately.

ii) The Company granted 600,000 stock options to its former Chief Executive
Officer pursuant to a non-qualified stock option plan at an exercise price of
$0.00001 per share. Stock options granted vest immediately.

iii) The Company granted 500,000 stock options to the Company's current Chief
Executive Officer pursuant to a non-qualified stock option plan at an exercise
price of $0.38 per share, Under the plan, 250,000 stock options vest immediately
and 250,000 stock options vest upon completion of his term as interim Chief
Executive Officer.

iv) A total of 7,500 stock options were cancelled during this period.

v) A total of 257,000 stock options were issued for settlement of debt of
$105,501.

b) Warrants outstanding

Common share purchase warrants issued in July 2005 with the private placement of
the Special Warrant Offer (Refer to Note 15 e) ii)) offering and outstanding at
September 30, 2005 are as follows:

i) 3,797,976 Series G Warrants exercisable at $0.35 each and expiring in
February 2010.

ii) 890,590 Series H Warrants exercisable at $0.35 each and expiring in February
2010.

iii) 3,797,976 Series I Warrants exercisable at $0.50 each and expiring in
February 2010.

iv) 1,781,180 Series J warrants exercisable at $0.50 each and expiring in
February 2010.

v) 605,676 Series IB6 warrants exercisable at $0.35 each and expiring in
February 2010.

vi) 52,251 Series IB7 warrants exercisable at $0.001 each and expiring in
February 2010.

As a result of the Offer in July 2005, the Company, pursuant to the Warrants in
effect, adjusted the respective Warrants accordingly. Common share purchase
warrants issued in February 2005 with the private placement of the Series A
Notes (Refer to Note 15 e) ii)) and outstanding at September 30, 2005 are as
follows:

vii) 1,596,155 Series E warrants exercisable at $0.35 each (June 30, 2005:
$0.75) and expiring in February 2010.

viii) 913,462 Series F warrants exercisable at $0.35 each (June 30, 2005: $0.70)
and expiring in February 2006.

ix) 32,442 Series IB1 warrants exercisable at $0.00001 each and expiring in
February 2010.

x) 215,385 Series IB2 warrants exercisable at a price of $0.62 each (June 30,
2005: $0.65) and expiring in February 2010.

xi) 323,076 Series IB3 warrants exercisable at a price of $0.71 each (June 30,
2005: $0.75) and expiring in February 2010.

xii) 107,693 Series IB4 warrants exercisable at a price of $0.66 each (June 30,
2005: $0.70) and expiring in February 2006.

xiii) 20,000 Series IB5 warrants exercisable at a current price of $0.71 (June
30, 2005: $0.75) each and expiring three (3) months following the effectiveness
of a Registration Statement to be filed with the Securities and Exchange
Commission and expiring in February 2006.

Common share purchase warrants issued with the private placements of common
shares during the year ended June 30, 2004 are as follows:

xiv) 1,046,294 Class A warrants exercisable at $0.35 each, with expiration dates
ranging from October 2005 through February 2006.

xv) 1,869,231 Series A warrants exercisable at $0.35 each and expiring in April
2006.

MANAGEMENT

OFFICERS AND DIRECTORS

The directors and officers, their ages and positions held as of October 1, 2005
are listed below. Each director serves until our next annual meeting of the
stockholders or unless they resign earlier. The Board of Directors elects
officers and their terms of office are at the discretion of the Board of
Directors.

Name Age Position Held
- ------------- --- --------------------------------------------------
Robert Clarke 61 Chairman of the Board of Directors
John Fraser 59 President and Chief Executive Officer and Director
Andre Monette 47 Chief Financial Officer, Secretary and Treasurer
Cherry Lim 40 Director
Jos J. Wintermans 59 Director
Bernard Bougie 56 Director

The following describes the business experience during the past five years of
our directors and executive officers, including for each director, other
directorships held in reporting companies. There are no family relationships
among any of the persons listed.

Robert Clarke, Chairman of the Board of Directors. Mr. Clarke has been our
Chairman of the Board of Directors since January 2003. He has been Chairman and
Chief Executive Officer of 7bridge Capital, since June 2000, a private venture
capital group based in Hong Kong. Since October 1998, Mr. Clarke has been
Chairman of the Board of Directors of Asia Payment Systems, Inc. (OTCBB: APYM)
During the last five years, Mr. Clarke has served as a Director and as President
and Chief Executive Officer at various times of ePhone Telecom Inc. (OTCBB:
EPHO) as follows: He served as the Chairman of the Board of Directors from April
1999 until July 21, 2000 and again from December 1, 2000 to September 12, 2002.
Mr. Clarke also served as the President and Chief Executive Officer of ePhone
from June 3, 1999 to August 8, 1999, and also from March 9, 20000 until April 1,
2000 and again from December 1, 2000 to July 1, 2001. During two periods he was
CEO but not President. These periods were from August 8, 1999 to March 9, 2000
and from April 1, 2001 to July 2001. He carried out the functions normally
associated with the offices he held and in particular during the periods when he
held the office of CEO he was responsible for the overall direction and
operation of the company. From January 1997 to November 1997, Mr. Clarke was
President, CEO and a Director of WaveRider Communications Inc (OTCBB: WAVC). He
resigned as President in November 1997, but carried on as Director and CEO for
an additional month until December 1997. Mr. Clarke was a Director and Chairman
of TEK Digitel Corp. (OTCBB: TEKI) from June 1998 until September 1999, but had
no executive responsibilities and was paid no compensation. During the period
July 1998 to August 1999 Mr. Clarke was a director of Innofon.Com Inc.
(OTCBB:INNF).

John Fraser, Director, President and Chief Executive Officer. Mr. Fraser has
served as a Director since January 2003, and as our Secretary and Treasurer from
January 2003 until September 16, 2005. On September 16, 2005, Mr. Fraser was
appointed as our President and Chief Executive Officer for a minimum period of
three months, replacing Stephane Solis. He was a partner for twenty years with
KPMG Canada until January 1998. For the last four years of his career with KPMG,
he was Vice Chairman of the firm and responsible for the Canadian management
consulting division. In January 1998, he started providing consulting services
to professional services and high technology start-up firms, which services he
continues to provide to this day, and since January 1999, under the name J G
Fraser & Associates Inc. In February 2004, J G Fraser & Associates became a
partner in Catalyst Consulting, a private Canadian consulting firm providing
management consulting services to law firms and law departments in Canada and
internationally. From July 1999 to August 2002, Mr. Fraser was a director of
ePhone Telecom Inc. (OTCBB: EPHO). Mr. Fraser has been a director of Asia
Payment Systems, Inc. (OTCBB: APYM) since September 2002. From June 2000 to May
2003, Mr. Fraser was a director of Walters Forensic Engineering, a public
engineering firm based in Toronto, Canada. (CDNX: YWL). He is a director of
7bridge Capital, a private venture capital group based in Hong Kong. He is also
a director and immediate past Chairman of Hincks Dellcrest, a non-profit
organization located in Toronto, Canada.

Andre Monette, Chief Financial Officer. Mr. Monette has served as our Chief
Financial Officer since February 2005 and as our Secretary and Treasurer since
September 2005. He began his career in September 1979 with Raymond, Chabot,
Martin, Pare & Associes, as an auditor. In April 1984, he joined the North
American subsidiaries of Lombard Odier & Cie private bankers, Geneva,
Switzerland and as a Senior Manager and he carried out, until September 2002,
various functions within the Group. From 1985 to 2002, he served as Vice
President of Finance and Administration of Lombard Odier Company of Canada, a
holding company offering administrative and information technology services to
affiliated companies. From 1989 to 2002, he also served as President, Chief
Executive Officer and Director of Transatlantic Securities Company, a registered
securities broker/dealer member of The New York Stock Exchange. He was in 2002,
Treasurer of Lombard Odier Trust Company, an investment adviser providing
portfolio management to private clients and securities custody. From 1999 to
2002, he was Treasurer of Lombard Odier Holdings (US) Inc. which had two
wholly-owned subsidiaries, Lombard, Odier, Inc, an investment adviser registered
with the SEC and Lombard, Odier, Securities Inc, a broker-dealer intermediary
registered with the SEC and NASD. From October 2002 to December 2003 he was
self-employed. In January 2004 he joined Caisse de Depot et de Placement du
Quebec, a financial institution, as an operational Risk Manager. Mr. Monette was
unemployed from October 2004 to January 2005. Mr. Monette is a Chartered
Accountant and a Chartered Financial Analyst. He received his Bachelor in
Business Administration from the Ecole des Hautes Etudes Commerciales de
Montreal.

Cherry Lim, Director. Ms. Lim has served as a Director since January 2003. Ms.
Lim has extensive professional experience in manufacturing and
Telecommunications in Asia. She began her career in manufacturing, and before
migrating to Singapore, she worked with a Hong Kong-based conglomerate assisting
the top management in the operation of manufacturing facilities in the region
and in negotiating various technology transfer projects to Mainland China. Since
1990 she has worked in telecoms, first for SingTel in Singapore and then
Deustsche Telekom in Hong Kong; and in 1996 she joined eGlobe, Inc. At eGlobe,
which she left as Director, Business Development in 2000, she was responsible
for spearheading and fostering partnerships with major Telcos and ISPs in the
Asia Pacific region. Ms. Lim is now President of 7bridge Systems (HK) Limited, a
Hong Kong based telecommunications company. Ms. Lim is now CEO of Tsing-tech
Innovations Company Limited, a Hong Kong based company specializing in
technology investment and technology management with a focus in technology
transfer for commercialization. Ms. Lim joined Tsing-Tech from 7bridge Capital
Partners Ltd., which is a privately-held company investing in IT and Telecom
startups.

Jos J. Wintermans, Director. Mr. Wintermans has served as a Director since
November 2005. Mr. Wintermans has held a number of executive positions in the
financial services, retail, manufacturing and distribution sectors. From June
2001 to December 2004, Mr. Wintermans served as the President, Chief Executive
Officer and a Director of Sodisco-Howden Group. From December 1999 to June 2001
served as the President, Chief Executive Officer and a Director for Skyjack.
From June 1996 to May 1997, he was the President, Chief Executive Officer and a
Director of Rogers Cable Ltd. From 1988 to 1995, he served as Chief Executive
Officer for Canadian Tire Acceptance Ltd. In 1996, he was named Senior
Vice-President, Diversified Business for its parent company, Canadian Tire
Corporation (CTC).

Bernard Bougie, Director. Mr. Bougie has served as a Director since December
2005. A Chartered Accountant (Canada) and an expert in financial information and
corporate governance, Mr. Bougie joined Deloitte & Touche in 1975, a leading
accounting and consulting firm, and became a partner in 1982. He retired as a
senior partner from the firm in August 2004. Since that time, he has acted as a
management consultant. In August 2005, Mr. Bougie was appointed as a Director of
the Board and Chairman of the audit committee of the private Canadian company,
Capital Teamsoft Inc. Mr. Bougie is a member of the Institute of Corporate
Directors and a graduate of the Corporate Director's Governance College.

COMPLIANCE WITH SECTION 16(A) OF THE EXCHANGE ACT

Section 16(a) of the Securities Exchange Act of 1934, as amended (the "1934
Act") requires officers and directors of a company with securities registered
pursuant to Section 12 of the 1934 Act, and persons who own more than 10% of the
registered class of such company's equity securities, to file reports of
ownership and changes in ownership with the Securities and Exchange Commission
(the "SEC"). Officers, directors and greater than 10% stockholders are required
by SEC regulation to furnish the subject company with copies of all Section
16(a) forms filed. All reports required to be filed under Section 16 during the
last fiscal year have been filed.

AUDIT COMMITTEE AND CHARTER

We have an audit committee charter. Under the charter, the committee is
comprised of all of our officers and directors. The majority of our directors
are deemed independent. A copy of our audit committee charter is filed as an
exhibit to this report. Our audit committee is responsible for: (1) selection
and oversight of our independent accountant; (2) establishing procedures for the
receipt, retention and treatment of complaints regarding accounting, internal
controls and auditing matters; (3) establishing procedures for the confidential,
anonymous submission by our employees of concerns regarding accounting and
auditing matters; (4) engaging outside advisors; and, (5) funding for the
outside auditory and any outside advisors engagement by the audit committee.

AUDIT COMMITTEE FINANCIAL EXPERT

On December 14, 2005, we appointed Mr. Bernard Bougie as Chairman of our audit
committee and as our audit committee financial expert. Mr. Bougie is independent
of our management.

CODE OF ETHICS

We have adopted a corporate code of ethics. A copy of the code of ethics is
filed as an exhibit to this report. We believe our code of ethics is reasonably
designed to deter wrongdoing and promote honest and ethical conduct; provide
full, fair, accurate, timely and understandable disclosure in public reports;
comply with applicable laws; ensure prompt internal reporting of code
violations; and provide accountability for adherence to the code.

DISCLOSURE COMMITTEE AND CHARTER

We have a disclosure committee charter. The purpose of the committee is to
provide assistance to the Chief management team in fulfilling their
responsibilities regarding the identification and disclosure of material
information about us and the accuracy, completeness and timeliness of our
financial reports. The disclosure committee is currently inactive. We plan to
activate the disclosure committee during fiscal year 2006.

EXECUTIVE COMPENSATION

The following table sets forth information with respect to compensation paid by
us to our officers and directors during the three most recent fiscal years.

Summary Compensation Table

Long Term
Annual Compensation Compensation Awards Payouts
--------------------------- ------------------------ --------------------
(a) (b) (c) (d) (e) (f) (g) (h) (i)
Other
Annual Restricted Securities
Compen- Stock Underlying LTIP All Other
Name and Principal Salary Bonus sation Award(s) Options / Payouts Compens-
Position [1] Year ($) ($) ($) ($) SARs (#) ($) ation ($)
- ---------------------- ---- ------- ------ -------- ----------- ---------- -------- ---------

Stephane Solis 2005 86,709 0 0 500,000 0
President and Chief 2004 67,164 0 6,644 0 0 0 0
Executive Officer 2003 18,775 0 2,086 0 500,000 0 0
(resigned Sept. 2005)

Andre Monette 2005 25,112 0 0 0 150,000 0 0
Treasurer and Chief 2004 0 0 0 0 0 0 0
Financial Officer 2003 0 0 0 0 0 0 0
(since Sept. 2005 and
Feb 2005 respectively)

Robert Clarke 2005 0 0 0 0 150,000 0 0
Chairman of the 2004 0 0 0 0 0 0 0
Board of Directors 2003 0 0 0 0 250,000 0 0

John Fraser 2005 0 0 0 0 75,000 0 0
Secretary & Director 2004 0 0 0 0 0 0 0
(appointed President 2003 0 0 0 0 200,000 0 0
and CEO Sept 2005)

Cherry Lim 2005 0 0 0 0 75,000 0 0
Director 2004 0 0 0 0 0 0 0
2003 0 0 0 0 200,000 0 0

Benjamin Leboe 2005 0 0 0 0 350,000 0 62,096
Treasurer and Chief 2004 0 0 0 0 0 0 38,750
Financial Officer 2003 0 0 0 0 200,000 0 8,340
(resigned Feb 2005)

Claude Pellerin 2005 0 0 0 0 50,000 0 61,589
Vice President 2004 0 0 0 0 0 0 36,950
(resigned Oct 2004) 2003 0 0 0 0 100,000 0 18,955

[1] All compensation received by the officers and directors has been disclosed.

OPTION/SAR GRANTS

There are no stock option, retirement, pension, or profit sharing plans for the
benefit of our officers and directors, other than our 2003 and 2004 Incentive
Stock Option Plans. Under these Plans, the board of directors is vested with
discretionary authority to grant options to persons furnishing services to us.
There were 10,000,000 shares in the plans. 3,958,686 shares have been issued as
a result of the exercise of options, 3,842,500 options are outstanding and
2,198,814 shares remain in the plan.

OPTION GRANTS TO OFFICERS AND DIRECTORS DURING THE LAST FISCAL YEAR

Number of % of Total
Securities Options/SARs
Underlying Granted to Exercise
Options/SARs Employees in of Base Expiration
Name Granted (#) Fiscal Year Price ($/Sh) Date
- --------------- ------------ ------------ ------------ ----------
Stephane Solis 500,000 21% $ 0.68 09/14/2009
Robert Clarke 150,000 6.34% $ 0.68 09/14/2009
Cherry Lim 75,000 3.17% $ 0.68 09/14/2009
John Fraser 75,000 3.17% $ 0.68 09/14/2009
Benjamin Leboe 350,000 14.80% $ 0.68 09/14/2009
Claude Pellerin 50,000 2.11% $ 0.68 09/14/2009
Andre Monette 150,000 6.34% $ 0.81 02/14/2010

Aggregated option/SAR Exercised by Officers and Directors in Last Fiscal Year
and FY-End Option/SAR Values

Number of Securities Value of Unexercised
Underlying Unexercised In-the-Money
Shares Value Options/SARs at FY-End (#) Options/SARs at FY-End ($)
Acquired on Realized --------------------------- ---------------------------
Name Exercised (#) ($) Exercisable Unexercisable Exercisable Unexercisable
- --------------- ------------- --------- ----------- ------------- ----------- -------------

Stephane Solis 0 1,000,000 150,000
Robert Clarke 250,000 $ 154,000 150,000 0
Cherry Lim 200,000 $ 131,000 75,000 0
John Fraser 200,000 $ 18,900 75,000 0
Benjamin Leboe 170,000 $ 49,600 380,000 15,000
Claude Pellerin 100,000 20,235 50,000 0
Andre Monette 0 37,500 0

FUTURE COMPENSATION OF OUR OFFICERS

For the fiscal year ending June 30, 2006, we intend to pay John Fraser, our
president and chief executive officer, a base salary of $173,000 and grant him
500,000 stock purchase options priced at the market on the date of grant.

For the fiscal year ending June 30, 2006, we intend to pay Andre Monette, our
treasurer and chief financial officer, a base salary of approximately $115,000.
We are currently in negotiation with Mr. Andre Monette to determine his bonus
plan. As part of his remuneration, he has been awarded 150,000 options with an
exercise price of $0.81US for the twelve month period ending February 14, 2006.

LONG-TERM INCENTIVE PLAN AWARDS

We do not have any long-term incentive plans that provide compensation intended
to serve as incentive for performance to occur over a period longer than one
fiscal year, whether such performance is measured by reference to our financial
performance, our stock price, or any other measure other than our 2003 and 2004
Incentive/or Nonqualified Stock Option Plans.

COMPENSATION OF DIRECTORS

We do not have any plans to pay our directors any money. We do intend to grant
our directors options for serving on our board of directors. For fiscal year
ending June 30, 2006, we have not determined the compensation that we may grant
our directors.

INDEMNIFICATION

Pursuant to the articles of incorporation and bylaws of the corporation, we may
indemnify an officer or director who is made a party to any proceeding,
including a lawsuit, because of his position, if he acted in good faith and in a
manner he reasonably believed to be in our best interest. In certain cases, we
may advance expenses incurred in defending any such proceeding. To the extent
that the officer or director is successful on the merits in any such proceeding
as to which such person is to be indemnified, we must indemnify him against all
expenses incurred, including attorney's fees. With respect to a derivative
action, indemnity may be made only for expenses actually and reasonably incurred
in defending the proceeding, and if the officer or director is judged liable,
only by a court order. The indemnification is intended to be to the fullest
extent permitted by the laws of the state of Nevada.

Regarding indemnification for liabilities arising under the Securities Act of
1933 which may be permitted to directors or officers pursuant to the foregoing
provisions, we are informed that, in the opinion of the Securities and Exchange
Commission, such indemnification is against public policy, as expressed in the
Act and is, therefore unenforceable.

CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS

As part of interim financing by shareholders, we have purchased management
services from Capex Investments Limited, the vendor in our asset purchase
transaction. Capex is owned and controlled by Robert Clarke, who is a member of
our Board of Directors. Capex and related parties also paid certain operations
expenses directly and advanced funds for working capital. The amounts due are
non-interest bearing, unsecured, and have no fixed terms of repayment. The
amount due to related parties, including Capex, as of June 30, 2005 is $476,646.
Capex Investments Limited is controlled by members of our board of directors.

On February 17, 2004 the Company acquired all the issued and outstanding shares
of Canadian Security Agency (2004) Inc. ("CSA") in exchange for 1,600,000
restricted common shares of the Company. CSA is in the business of providing
guard and security services in Montreal, Canada. Pursuant to the terms of the
acquisition agreement, 600,000 shares were released on closing and 1,000,000
shares were held in escrow as contingent consideration related to revenue
targets and repayment of a note receivable. The note receivable, originally in
the amount of $473,271, is due from the seller on or before February 17, 2005.
The Company has taken a provision against the note for the outstanding balance
of $383,536. The released shares were recorded at their fair value of $468,000.
The Company used the purchase method of accounting for the CSA acquisition as at
February 17, 2004 based on management's best estimate of fair values.

SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT

The following table represents the shares of common stock owned by each officer,
director, and owner of 5% or more of our common stock. The address for each
person is our address at 1155 Rene-Levesque Blvd. West Suite #2720, Montreal,
Quebec, Canada H3B 2K8.

Direct Amount of Percent of
Name of Beneficial Owner Beneficial Owner Position Class [3]
- ------------------------- ---------------- ------------------------------------------------ ----------

Stephane Solis 1,000,000[1] President, Chief Executive Officer and Director 0.00%
until September 16, 2005 [6]

Robert Clarke 150,000[1] Chairman of the Board of Directors 0.00%

John Fraser 245,000[2] President and Chief Executive Officer since 0.00%
September 16, 2005 and a Director [6]

Cherry Lim 75,000[1] Director 0.00%

Andre Monette 150,000[1] Chief Financial Officer, Secretary and Treasurer 0.00%

All officer and Directors
as a Group (5 Persons) 1,620,000[3] 0.00%

Capex Investments Ltd 4,913,306[4] 7.11%
315 St. James Court
St. Denis Street
Port Louis
Republic of Mauritius

Cede & Co. 55,018,089 79.67%
PO Box 222
Bowling Green Station
New York, NY

[1] The foregoing figures include unexercised options. No outstanding shares are
currently owned by this person.
[2] Includes 170,000 shares of common stock and an unexercised option to acquire
75,000 shares.
[3] Includes unexercised option shares
[4] Capex Investments is owned and controlled by Robert Clarke, who is a
Director of Manaris.
[5] On September 16, 2005, Stephane Solis, resigned as President and Chief
Executive Officer. Under the terms of the agreement, Mr. Solis received 600,000
options exercisable at $0.00001 (not included in table above). Following the
resignation of Mr. Solis, John Fraser was appointed CEO and President for a
minimum period of three months. Under the agreement, John Fraser will receive
500,000 options exercisable at current market prices (not included in table
above).

The persons named above are our parents and promoters within the meaning of such
terms under the Securities Act of 1933 by virtue of their direct and indirect
stock holdings.

SELLING SHAREHOLDERS

The tables below sets forth information concerning the resale of the shares of
common stock by the selling stockholders. We will not receive any proceeds from
the resale of the common stock by the selling stockholders. We will receive
proceeds from the exercise of the warrants. Assuming all the shares registered
below are sold by the selling stockholders, none of the selling stockholders
will continue to own any shares of our common stock.

The following table also sets forth the name of each person who is offering the
resale of shares of common stock by this prospectus, the number of shares of
common stock beneficially owned by each person, the number of shares of common
stock that may be sold in this offering and the number of shares of common stock
each person will own after the offering, assuming they sell all of the shares
offered.

This prospectus, as it may be amended or supplemented from time to time, is
deemed to relate to 36,298,305 shares of common stock that may be sold by
certain of our existing shareholders, including:

* 11,325,370 shares of common stock issuable upon conversion of Series A Senior
Convertible Promissory Notes, which were issued as part of our February 2005
financing. As of December 19, 2005, the Convertible Notes have an outstanding
balance of $2,277,145 and are currently convertible at $0.35 per share. We are
registering approximately 175% of the shares underlying the convertible notes to
account for potential adjustments to the conversion price.

* 4,341,760 shares of common stock issuable in satisfaction of debentures issued
on February 14, 2005.

Midtown Partners & Co., LLC, acted as the placement agent for our February 2005
Convertible Note Offering and July 2005 Warrant Offering. Midtown Partners &
Co., LLC is an SEC and NASD registered broker dealer located in Boca Raton,
Florida.

Pursuant to the Placement Agent Agreement we entered into with Midtown in
connection with our July 2005 Warrant Offering, Midtown Partners received a cash
fee in an amount equal to ten percent (10.0%) of the principal amount of the
financing on all warrants with a term to maturity of over one (1) year, and two
percent (2%) on all Warrants with a maturity of less than one (1) year. In
addition, Midtown Partners received warrants to purchase such number of shares
of the common stock of Manaris equal to ten percent & five percent (ten percent
(10.0%) on Warrants that have over one (1) year to maturity and five percent
(5%) on Warrants that have less than one (1) year to maturity) of the aggregate
number of shares of common stock of Manaris issued by the Manaris upon closing
of the Offering.

SHARES BENEFICIALLY OWNED
PRIOR TO THE OFFERING(1)
TOTAL SHARES OF
COMMON STOCK AND
COMMON STOCK ISSUABLE TOTAL SHARES BENEFICIALLY
UPON EXERCISE OF PERCENTAGE OF OWNED AFTER
WARRANTS OR COMMON STOCK, THE OFFERING(2)
CONVERSION OF ASSUMING FULL TOTAL SHARES ---------------------
NAME CONVERTIBLE NOTES(3) CONVERSION(4) REGISTERED NUMBER PERCENT
- ------------------------------------ ---------------------- ------------- ------------ ------ -------

Alpha Capital, AG (5) 2,695,603 3.96% 2,695,603 -0- 0.00%

Design Investments, Ltd. (6) 1,818,383 2.67% 1,818,383 -0- 0.00%

DKR Soundshore Oasis, Holding Fund, 2,773,993 4.07% 2,773,993 -0- 0.00%
Ltd (7)

Double U Master Fund, LP (8) 1,412,087 2.07% 1,412,087 -0- 0.00%

Ellis International (9) 1,552,224 2.28% 1,552,224 -0- 0.00%

Monarch Capital Fund, LTD. (10) 2,446,020 3.59% 2,446,020 -0- 0.00%

Nite Capital, LP (11) 1,998,134 2.93% 1,998,134 -0- 0.00%

Platinum Partners Value Arbitrage 2,691,823 3.95% 2,691,823 -0- 0.00%
Fund, LP (12)

Professional Traders Fund, LLC (13) 713,806 1.05% 713,806 -0- 0.00%

SRG Capital, LLC (14) 1,278,161 1.88% 1,278,161 -0- 0.00%

Vicis Capital Master Fund (15) 1,765,111 2.59% 1,765,111 -0- 0.00%

Basso Holdings, Ltd (16) 100,000 * 100,000 -0- 0.00%

Basso Multi-Strategy Holding Fund Ltd 100,000 * 100,000 -0- 0.00%
(17)

Basso Private Opportunity Holding Fund 100,000 * 100,000 -0- 0.00%
LTD (18)

Capex Investment Limited(19) 382,0079 * 382,079 -0- 0.00%

DT Crystal (20) 727,273 1.07% 727,273 -0- 0.00%

Michael Maloney (21) 18,182 * 18,182 -0- 0.00%

Oleg Kharlanov (22) 410,000 * 410,000 -0- 0.00%
Republic Aggressive Growth (23) 397,203 * 397,203 -0- 0.00%
Silver Oak Investments (24) 397,717 * 397,717 -0- 0.00%

Enable Growth Partners, LP (25) 839,684 1.23% 839,684 -0- 0.00%
Starboard Capital Markets (26) 2,841 * 2,841 -0- 0.00%
Anthony Spatacco (27) 2,841 * 2,841 -0- 0.00%
Michael Hamblett (28) 5,682 * 5,682 -0- 0.00%
Midtown Partners & Co., LLC (29) 323,281 * 323,281 -0- 0.00%
John Rory Rohan (30) 161,641 * 161,641 -0- 0.00%
Richard Henri Kreger (31) 161,641 * 161,641 -0- 0.00%
JGB Capital, LP (32) 888,187 1.30% 888,187 -0- 0.00%
TCMP3 Partners (33) 543,373 * 543,373 -0- 0.00%
Truk International Fund, LP (34) 249,451 * 249,451 -0- 0.00%
Truk Opportunity Fund, LP (35) 1,651,651 2.39% 1,651,651 -0- 0.00%
Whalehaven Capital Fund Limited (36) 993,406 1.46% 993,406 -0- 0.00%
Louis Laframboise (37) 2,170,880 3.19% 2,170,880 -0- 0.00%
Jean Talbot (38) 2,170,880 3.19% 2,170,880 -0- 0.00%
MarketWise Trading Inc. (39) 200,000 * 200,000 -0- 0.00%
Rock Capital Partners LLC (40) 200,000 * 200,000 -0- 0.00%
Mystic Partners LLC (41) 90,909 * 90,909 -0- 0.00%
Gamma Opportunity Capital Partners, LP 769,231 1.13% 769,231 -0- 0.00%
(42)
Longview Fund, LP (43) 615,385 * 615,385 -0- 0.00%
AS Capital Partners LLC (44) 100,000 * 100,000 -0- 0.00%
Gryphon Master Fund, LP (45) 384,615 * 384,615 -0- 0.00%
TOTAL 36,298,305 52.56% 36,298,305 -0- 0.00%

* Less than 1%.

(1) The number and percentage of shares beneficially owned is determined in
accordance with Rule 13d-3 of the Securities Exchange Act of 1934, and the
information is not necessarily indicative of beneficial ownership for any other
purpose. Under such rule, beneficial ownership includes any shares as to which
the selling stockholders has sole or shared voting power or investment power and
also any shares, which the selling stockholders has the right to acquire within
60 days.
(2) Assumes that all securities registered will be sold and that all shares of
common stock underlying the warrants and convertible notes will be issued.
(3) The current conversion price for the convertible notes is $0.35 per share.
We are registering 150% of the shares underlying the convertible notes to
account for potential adjustments to the conversion price.
(4) Based on 69,057,636 shares of common stock outstanding as of December 13,
2005.
(5) Represents (i) 461,538 shares underlying Series G warrants (ii) 113,462
underlying Series H warrants (iii) 461,538 shares underlying Series I warrants
(iv) 226,924 shares underlying Series J warrants (v) 575,000 shares underlying
Series K warrants (vi) 857,143 shares underlying Series A Convertible Notes.
Alpha Capital AG is a private investment fund that is owned by all its investors
and managed by Mr. Konrad Ackerman and Rainer Posch, may be deemed the control
person of the securities.

(6) Represents (i) 288,362 shares underlying Series G warrants (ii) 24,039
shares underlying Series H warrants (iii) 288,362 shares underlying Series I
warrants (iv) 48,077 shares underlying Series J warrants (v) 312,401 shares
underlying Series K warrants (vi) 857,143 shares underlying Series A Convertible
Notes. Mr. Haim Rolnitsky has sole dispositive voteing power and control of the
securities.
(7) Represents (i) 192,308 shares underlying Series F warrants (ii) 576,923
shares underlying Series G warrants (iii) 576,923 shares underlying Series I
warrants (iv) 576,923 shares underlying Series K warrants (v) 850,843 shares
underlying Series A Convertible Notes. DKR SoundShore Oasis Holding Fund Ltd.
(the "Fund") is a master fund in a master-feeder structure. The Fund's
investment manager is DKR Oasis Management Company LP (the "Investment
Manager"). Pursuant to an investment management agreement among the Fund, the
feeder funds and the Investment Manager, the Investment Manager has the
authority to do any and all acts on behalf of the Fund, including voting any
shares held by the Fund. Mr. Seth Fischer is the managing partner of Oasis
Management Holdings LLC, one of the general partners of the Investment Manager.
Mr. Fischer has ultimate responsibility for trading with respect to the Fund.
Mr. Fischer disclaims beneficial ownership of the shares.
(8) Represents (i) 230,769 shares underlying Series G warrants (ii) 19,231
shares underlying Series H warrants (iii) 230,769 shares underlying Series I
warrants (iv) 38,462 shares underlying Series J warrants (v) 250,000 shares
underlying Series K warrants (vi) 642,857 shares underlying Series A Convertible
Notes.
(9) Represents (i) 67,308 shares underlying Series E warrants (ii) 105,769
shares underlying Series F warrants (iii) 250,000 shares underlying Series G
warrants (iv) 250,000 shares underlying Series I warrants (v) 250,000 shares
underlying Series K warrants (vi) 629,147 shares underlying Series A Convertible
Notes. Mr. Wilhelm Ungar may be deemed the control person of the securities.
(10) Represents (i) 153,846 shares underlying Series G warrants (ii) 461,538
shares underlying Series G warrants (iii) 461,538 shares underlying Series I
warrants (iv) 461,538 shares underlying Series K warrants (v) 907,560 shares
underlying Series A Convertible Notes. Mr. Jonno Elliott, may be deemed the
control person of the securities.
(11) Represents (i) 403,846 shares underlying Series G warrants (ii) 33,654
shares underlying Series H warrants (iii) 403,846 shares underlying Series I
warrants (iv) 67,308 shares underlying Series J warrants (v) 437,500 shares
underlying Series K warrants (vi) 651,981 shares underlying Series A Convertible
Notes. Mr. Keith Goodman, a Manager of the General Partner of Nite Capital, LP
has voting control of the security investments
(12) Represents (i) 461,538 shares underlying Series G warrants (ii)
38,462 shares underlying Series H warrants (iii) 461,538 shares underlying
Series I warrants (iv) 76,923 shares underlying Series J warrants (v) 500,000
shares underlying Series K warrants (vi) 1,153,363 shares underlying Series A
Convertible Notes. Mr. Mark Nordlicht, may be deemed the control person of the
securities.
(13) Represents (i) 144,231 shares underlying Series G warrants (ii) 12,019
shares underlying Series H warrants (iii) 144,231 shares underlying Series I
warrants (iv) 24,039 shares underlying Series J warrants (v) 156,250 shares
underlying Series K warrants (vi) 233,036 shares underlying Series A Convertible
Notes. Mr. Howard Berger and Mr. Marck Swickle have control over the investment
decisions.
(14) Represents (i) 230,769 shares underlying Series G warrants (ii) 53,322
shares underlying Series H warrants (iii) 230,769 shares underlying Series I
warrants (iv) 106,644 shares underlying Series J warrants (v) 284,091 shares
underlying Series K warrants (vi) 372,567 shares underlying Series A Convertible
Notes. Edwin Mecabe and Tai May Lee, are authorized agents for SRG Capital, LLC,
have joint dispositive, voting and investment control of the securities held by
SRG Capital, LLC. Edwin Mecabe and Tai May Lee disclaim beneficial ownership of
these securities. SRG Capital, LLC is an affiliate of a broker dealer.
(15) Represents (i) 288,462 shares underlying Series G warrants (ii) 24,039
shares underlying Series H warrants (iii) 288,462 shares underlying Series I
warrants (iv) 48,077 shares underlying Series J warrants (v) 312,501 shares
underlying Series K warrants (vi) 803,571 shares underlying Series A Convertible
Notes Mr. John Succo, Sky Lucas, Shad Stastney may be deemed the control person
of the securities.
(16) Represents (i) 25,000 shares underlying Series H warrants (ii) 50,000
shares underlying Series J warrants (iii) 25,000 shares underlying Series K
warrants. Basso Capital Management, LP ("Basso") is the Investment Manager to
Basso Holdings Ltd. Howard I. Fischer is a managing member of Basso GP,LLC, the
General Partner of Basso, and as such has investment power and voting control
over these securities. Mr. Fischer disclaims beneficial ownership of these
securities.
(17) Represents (i) 25,000 shares underlying Series H warrants (ii) 50,000
shares underlying Series J warrants (iii) 25,000 shares underlying Series K
warrants. Basso. Capital Management, LP ("Basso") is the Investment Manager to
Basso Multi-Strategy Holding Fund Ltd. Howard I. Fischer is a managing member of
Basso GP, LLC, the General Partner of Basso, and as such has investment power
and voting control over these securities. Mr. Fischer disclaims beneficial
ownership of these securities.
(18) Represents (i) 25,000 shares underlying Series H warrants (ii) 50,000
shares underlying Series J warrants (iii) 25,000 shares underlying Series K
warrants. Basso. Capital Management, LP ("Basso") is the Investment Manager to
Basso Private Opportunity Holding Ltd. Howard I. Fischer is a managing member of
Basso GP, LLC, the General Partner of Basso, and as such has investment power
and voting control over these securities. Mr. Fischer disclaims beneficial
ownership of these securities.
(19) Represents (i) 95,520 shares underlying Series H warrants (ii) 191,040
shares underlying Series J warrants (iii) 95,520 shares underlying Series K
warrants. Capex Investments Limited is owned and controlled by Robert Clarke,
who is a director of Manaris.
(20) Represents (i) 181,818 shares underlying Series H warrants (ii) 363,637
shares underlying Series J warrants (iii) 181,818 shares underlying Series K
warrants. Michael Roberts may be deemed control person of the securities. (21)
Represents (i) 4,546 shares underlying Series H warrants (ii) 9,091 shares
underlying Series J warrants (iii) 4,546 shares underlying Series K warrants.
Michael J. Maloney has control of the security investments in Manaris
Corporation. (22) Represents (i) 102,500 shares underlying Series H warrants
(ii) 205,000 shares underlying Series J warrants (iii) 102,500 shares underlying
Series K warrants.
(23) Represents (i) 147,203 shares underlying Class A warrants (ii) 62,500
shares underlying Series H warrants (iii) 125,000 shares underlying Series J
warrants (iv) 62,500 shares underlying Series K warrants. Mr. Wilhelm Ungar, may
be deemed the control person of the securities.
(24) Represents (i) 144,231 shares underlying Series E (ii) 12,019 shares
underlying Series H warrants (iii) 24,039 shares underlying Series J warrants
(iv) 12,019 shares underlying Series K warrants (v) 200,409 shares underlying
Series A Convertible Notes. Mr. Murray Todd, may be deemed the control person of
the securities.

(25) Represents (i) 230,769 shares underlying Series E Warrants (ii) 76,923
shares underlying Series F warrants (iii) 38,462 shares underlying Series H
warrants (iv) 76,923 shares underlying Series J warrants (v) 38,462 shares
underlying Series K warrants (vi) 378,146 shares underlying Series A Convertible
Notes. Enable Growth Partners L.P. is affiliated with Enable Capital LLC, a
registered broker-dealer. Mitch Levine is the Managing Member of Enable Capital
LLC and is also a principal in Enable Growth Partners L.P's general partner.
Enable Growth Partners LP is purchasing shares of MANS for the sole benefit of
the fund's limited partners, and with no pre-existing, current or future intent
to distribute shares of MANS through Enable Capital LLC. Enable acquired the
securities in the ordinary course of business and, at the time of acquisition,
had no agreements, understandings or arrangements with any other persons,
directly or indirectly, to dispose of the securities. Lastly, Enable Capital LLC
is foreclosed from the same anyway, insofar as it maintains no customer or
client accounts.
(26) Represents (i) 2,841 shares underlying Series IB6 warrants. Starboard
Capital Markets is a registered broker dealer. Starboard Capital Markets and
affiliated individuals received Series IB6 warrants for services rendered in
connection with our July 2005 Warrant Offering. Mr. James Dotzman, may be deemed
the control person of the securities.
(27) Represents (i) 2,841 shares underlying Series IB6 warrants. Anthony
Spatacco, who is affiliated with Starboard Capital Markets, received the
warrants for services for services rendered in connection with our July 2005
Warrant Offering.
(28) Represents (i) 5,682 shares underlying Series IB6 warrants. Michael
Hamblett, who is affiliated with Starboard Capital Markets, received the
warrants for services for services rendered in connection with our July 2005
Warrant Offering.
(29) Represents (i) 297,156 shares underlying Series IB6 warrants (ii) 26,125
shares underlying Series IB7 warrants. Midtown Partners & Co., LLC is an SEC and
NASD registered broker dealer located in Boca Raton, Florida. Midtown acted as
the placement agent for our February Convertible Note and Warrant offering.
(30) Represents (i) 148,578 shares underlying Series IB6 warrants (ii) 13,063
shares underlying Series IB7 warrants. John Rory Rohan is affiliated with
Midtown Partners & Co., LLC, which acted as the placement agent for our July
2005 Warrant Offering.
(31) Represents (i) 148,578 shares underlying Series IB6 warrants (ii) 13,063
shares underlying Series IB7 warrants. Richard Henri Kreger is affiliated with
Midtown Partners & Co., LLC, which acted as the placement agent for our July
2005 Warrant Offering.
(32) Represents (i) 288,462 shares underlying Series E warrants (ii) 96,154
shares underlying Series F warrants (iii) 503,571 shares underlying Series A
Convertible Notes. Mr. Brett Cohen may be deemed the control person of the
securities.
(33) Represents (i) 173,077 shares underlying Series E warrants (ii) 57,692
shares underlying Series F warrants (iii) 312,604 shares underlying Series A
Convertible Notes. Mr. Steve Slawson and Mr. Walter Schenker may be deemed the
control persons of the securities.
(34) Represents (i) 27,692 shares underlying Series E warrants (ii) 9,231 shares
underlying Series F warrants (iii) 77,143 shares underlying Series A Convertible
Notes. Michael E. Fein and Stephen E. Saltzstein, as principals of Atoll Asset
Management, LLC, the Managing Member of Truk International Fund, LP, exercise
investment and voting control over the securities owned by Truk International
Fund, LP. Both Mr. Fein and Mr. Saltzstein disclaim beneficial ownership of the
securities owned by Truk International Fund, LP.
(35) Represents (i) 433,847 shares underlying Series E warrants (ii) 144,616
shares underlying Series F warrants (iii)1,208,573 shares underlying Series A
Convertible Notes. Michael E. Fein and Stephen E. Saltzstein, as principals of
Atoll Asset Management, LLC, the Managing Member of Truk Opportunity Fund, LLC,
exercise investment and voting control over the securities owned by Truk
Opportunity Fund, LLC. Both Mr. Fein and Mr. Saltzstein disclaim beneficial
ownership of the securities owned by Truk Opportunity Fund, LLC.
(36) Represents (i) 230,769 shares underlying Series E warrants (ii) 76,923
shares underlying Series F warrants (iii) 685,714 shares underlying Series A
Convertible Arthur Jones, Jennifer Kelly and Evan Schemenauer may be deemed
control persons of the securities.
(37) Represents 2,170,880 shares issuable in satisfaction of a debenture issued
on February 14, 2005.
(38) Represents 2,170,880 shares issuable in satisfaction of a debenture issued
on February 14, 2005.
(39) Represents 200,000 shares underlying Class A warrants. Rachel Gershan may
be deemed control person of the securities.
(40) Represents 200,000 shares underlying Class A warrants. (41) Represents
90,909 shares underlying Class A warrants. (42) Represents 769,231 shares
underlying Series A warrants. (43) Represents 615,385 shares underlying Series A
warrants. (44) Represents 100,000 shares underlying Series A warrants. (45)
Represents 384,615 shares underlying Series A warrants.

DESCRIPTION OF SECURITIES

COMMON STOCK

Our authorized capital stock consists of 500,000,000 shares of common stock,
$0.00001 par value per share. The holders of our common stock:

* have equal ratable rights to dividends from funds legally available if and
when declared by our board of directors;

* are entitled to share ratably in all of our assets available for distribution
to holders of common stock upon liquidation, dissolution or winding up of our
affairs;

* do not have preemptive, subscription or conversion rights and there are no
redemption or sinking fund provisions or rights; and

* are entitled to one non-cumulative vote per share on all matters on which
stockholders may vote.

All shares of common stock now outstanding are fully paid for and non-assessable
and all shares of common stock that are the subject of this offering, when
issued, will be fully paid for and non-assessable. We refer you to our Articles
of Incorporation, Bylaws and the applicable statutes of the state of Nevada for
a more complete description of the rights and liabilities of holders of our
securities.

NON-CUMULATIVE VOTING

Holders of shares of our common stock do not have cumulative voting rights,
which means that the holders of more than 50% of the outstanding shares, voting
for the election of directors, can elect all of the directors to be elected, if
they so choose, and, in that event, the holders of the remaining shares will not
be able to elect any of our directors.

CASH DIVIDENDS

As of the date of this prospectus, we have not paid any cash dividends to
stockholders. The declaration of any future cash dividend will be at the
discretion of our board of directors and will depend upon our earnings, if any,
our capital requirements and financial position, our general economic
conditions, and other pertinent conditions. It is our present intention not to
pay any cash dividends in the foreseeable future, but rather to reinvest
earnings, if any, in our business operations.

ANTI-TAKEOVER PROVISIONS

There are no Nevada anti-takeover provisions that may have the affect of
delaying or preventing a change in control.

REPORTS

After we complete this offering, we will not be required to furnish you with an
annual report. Further, we will not voluntarily send you an annual report. We
will be required to file reports with the SEC under section 15(d) of the
Securities Act. The reports will be filed electronically. The reports we will be
required to file are Forms 10-KSB, 10-QSB, and 8-K. You may read copies of any
materials we file with the SEC at the SEC's Public Reference Room at 450 Fifth
Street, N.W., Washington, D.C. 20549. You may obtain information on the
operation of the Public Reference Room by calling the SEC at 1-800-SEC-0330. The
SEC also maintains an Internet site that will contain copies of the reports we
file electronically. The address for the Internet site is www.sec.gov.

STOCK TRANSFER AGENT

Our stock transfer agent for our securities is Pacific Stock Transfer Company,
500 East Warm Springs Road, Las Vegas, Nevada 89119 and its telephone number is
(702) 361-3033.

EXPERTS

Our financial statements for the period ending June 30, 2005, included in this
prospectus have been audited by Manning Elliott, Chartered Accountants, 11th
Floor, 1050 West Pender Street; Vancouver, British Columbia, Canada V6E 3S7, as
set forth in their report included in this prospectus.

LEGAL MATTERS

Darrin Ocasio, Attorney at Law, 1065 Avenue of the Americas, 21st flr., New
York, New York 10018, telephone 212-930-9700 has acted as our legal counsel.

FINANCIAL STATEMENTS

Our fiscal year end is June 30. We will provide audited financial statements to
our stockholders on an annual basis.

Manaris Corporation
(Formerly A Development Stage Company)
Consolidated Financial Statements
September 30, 2005

Index

Consolidated Balance Sheets................................................F-2

Consolidated Statements of Operations......................................F-3

Consolidated Statements of Cash Flows......................................F-4

Notes to the Consolidated Financial Statements.............................F-6

Manaris Corporation
(Formerly A Development Stage Company)
Consolidated Balance Sheets
(expressed in U.S. dollars)
(Unaudited)

September 30, June 30,
2005 2005
$ $
(unaudited) (audited)
ASSETS
Current Assets

Cash 1,352,322 287,147
Accounts receivable, net of allowance for doubtful accounts of $146,633 and $141,093
respectively 2,796,686 2,858,275
Other receivables (Note 6) 817,190 899,248
Inventories (Note 6) 1,452,105 1,097,776
Prepaid expenses 147,137 143,717
Restricted marketable securities 86,125 81,606
----------- -----------
Total Current Assets 6,651,565 5,367,769

Property and Equipment (Note 7) 734,458 731,075
Intangible Assets (Note 5) 3,635,198 3,852,772
Goodwill (Notes 3 and 5) 9,684,228 9,727,454
Deferred Financing Costs 293,808 436,685
----------- -----------
Total Assets 20,999,257 20,115,755
=========== ===========

LIABILITIES AND STOCKHOLDERS' EQUITY
Current Liabilities

Accounts payable 2,353,730 1,507,959
Accrued liabilities (Note 6) 1,429,439 2,021,127
Loans payable (Note 9) 1,476,693 1,598,273
Current portion of long-term debt 198,140 199,878
Current portion of convertible debentures 172,572 893,436
Due to related parties (Note 8) 172,284 476,646
----------- -----------
Total Current Liabilities 5,802,858 6,697,319

Long-term Debt, less current portion (Note 10) 489,843 483,240
Convertible Debentures (Note 11) 2,145,963 1,687,304
----------- -----------
Total Liabilities 8,438,664 8,867,863
----------- -----------
Non-controlling Interest 18,738 18,033
----------- -----------
Commitments and Contingencies (Notes 1 and 15)

Stockholders' Equity

Common Stock, 500,000,000 (June 30, 2005: 100,000,000) shares authorized with a par value
of $0.00001; 67,350,818 and 54,782,802 issued and outstanding, respectively 673 548
Additional Paid-in Capital 28,780,200 24,142,078
Accumulated Other Comprehensive Loss (376,504) (364,415)
Deficit (15,862,514) (12,548,352)
----------- -----------
Total Stockholders' Equity 12,541,855 11,229,859
----------- -----------
Total Liabilities and Stockholders' Equity 20,999,257 20,115,755
=========== ===========

(The Accompanying Notes are an Integral Part of the
Consolidated Financial Statements)

F-2

MANARIS CORPORATION
(Formerly A Development Stage Company)
CONSOLIDATED STATEMENTS OF OPERATIONS
(expressed in U.S. dollars)
(Unaudited)

For the Three Months Ended
September 30,
2005 2004
$ $
Revenue

Product 1,987,895 152,037
Service 1,737,742 487,993
---------- -----------
Total Revenue 3,725,637 640,030
---------- -----------
Cost of Revenue
Product 1,268,844 79,863
Service 1,320,887 376,737
---------- -----------
Total Cost of Revenue 2,589,731 456,600
---------- -----------
Gross Margin 1,135,906 183,430
---------- -----------
Operating Expenses

Depreciation and amortization 223,328 46,434
Selling, general and administrative 1,930,742 449,910
Impairment of long-lived assets
35,822 --
Research and development 226,694 35,744
Stock based compensation(1) 424,900 327,709
---------- -----------
Total Operating Expenses 2,841,486 859,797
---------- -----------
Loss from Operations (1,705,580) (676,367)

Other Expenses

Interest expense 235,267 5,153
Debenture accretion 1,540,287 --
---------- -----------
Net Loss Before Income Tax Benefit (3,481,134) (681,520)

Income Tax Benefit 167,256 --
========== ===========

Net Loss Before Non-controlling interest (3,313,878) (681,520)
Non-controlling interest 284 --
========== ===========
Net loss (3,314,162) (681,520)
========== ===========
Comprehensive Loss (Note 14) (3,326,251) (821,371)
========== ===========
Net Loss Per Share - Basic and Diluted (0.06) (0.02)
========== ===========
Weighted Average Shares Outstanding 53,545,000 39,758,000
========== ===========

(1) Stock based compensation is excluded from the following:

Selling, general and administration 424,900 327,709
========== ===========

(The Accompanying Notes are an Integral Part of the
Consolidated Financial Statements)

F-3

MANARIS CORPORATION
(Formerly A Development Stage Company)
CONSOLIDATED STATEMENTS OF CASH FLOWS
(expressed in U.S. dollars)
(Unaudited)

For the Three Months Ended
September 30,
2005 2004
$ $
Operating Activities

Net loss (3,314,162) (681,520)

Adjustments to reconcile net loss to cash used in operating activities
Contingent consideration paid in shares -- 148,000
Stock based compensation 424,900 179,709
Expenses settled with issuance of common shares 5,400 --
Depreciation and amortization 223,328 46,434
Loss on settlement of accounts payable 31,359 --
Non-controlling interest 705 --
Accretion of debenture 1,540,287 --
Deferred financing costs related to senior convertible debenture 142,877 --

Changes in operating assets and liabilities
(Increase) decrease in accounts receivable 61,589 (188,860)
(Increase) in inventory (354,329) (71,099)
Decrease in other receivable 125,284 --
Decrease (increase) in prepaid and other assets 23,224 (3,165)
(Decrease) in short term debt (47,059) --
(Decrease) in long term debt - current portion (32,545) --
Increase in long term debt 146,498 --
(Decrease) Increase in due to related parties (22,944) --
Increase in accounts payable and accrued liabilities 331,083 29,157
--------- ----------
Net Cash Used In Operating Activities (714,505) (541,344)
--------- ----------
Investing Activities
Purchase of property and equipment (35,781) (10,330)
Payment received on note receivable -- 44,895
--------- ----------
Net Cash Provided by (Used) in Investing Activities (35,781) 34,565
--------- ----------
Financing Activities
Borrowing (Repayments) on bank credit line (404,712) 89,536
Payment of senior convertible debt (226,733) --
Repayment of related party advances (80,694) (9,814)
Proceeds from loans 408,373 --
Proceeds from exercise of stock options and warrants 2,127,591 16,001
--------- ----------
Net Cash Provided By Financing Activities 1,823,825 95,723
--------- ----------
Effect of Exchange Rate Changes on Cash (8,364) (115,586)
--------- ----------
Increase (Decrease) in Cash 1,065,175 (526,642)

Cash - Beginning of period 287,147 1,561,020
--------- ----------
Cash - End of period 1,352,322 1,034,378
========= ==========

(The Accompanying Notes are an Integral Part of the
Consolidated Financial Statements)

F-4

MANARIS CORPORATION
(Formerly A Development Stage Company)
CONSOLIDATED STATEMENTS OF CASH FLOWS (CONTINUED)
(expressed in U.S. dollars)
(Unaudited)

For the Three Months Ended
September 30,
2005 2004
$ $
Non-Cash Financing and Investing Activities

Issuance of common shares for services 54,000 --
Issuance of common shares for interest payment 143,863 --
Issuance of common shares for repayment of senior
convertible note, series A 724,999 --
Issuance of common shares for conversion of senior
convertible note, series A 815,985 --
Issuance of stock options for debt settlement -- 64,608
Issuance of common shares to settle outstanding
payables 105,501 --
Issuance of common share warrants to settle related
party and short term payables 181,649 --
------- -------
Supplemental Disclosures

Interest paid 50,570 5,153
Income taxes paid -- --
------- -------

(The Accompanying Notes are an Integral Part of the
Consolidated Financial Statements)

F-5

MANARIS CORPORATION
(Formerly A Development Stage Company)
Notes to Consolidated Financial Statements September 30, 2005
(Expressed in U.S. Dollars)
(Unaudited)

1. Nature of Operations and Continuance of Business

Manaris Corporation (the "Company") was incorporated in the State of Nevada on
June 26, 2000 as Keystone Mines Limited.

On January 7, 2003 the Company acquired assets and intellectual property. It
then changed its business focus to the development of security technology and
changed its name to C-Chip Technologies Corporation. In July 2005, the Company
changed it's name to Manaris Corporation.

On February 17, 2004, the Company acquired Canadian Security Agency (2004) Inc.,
("CSA") a company providing guard and security services. (Refer to Note 3(c)).

The Company was previously a development stage company as defined by Statement
of Financial Accounting Standard No. 7, "Development Stage Companies". The
Company has achieved significant revenue from acquired companies as described
below. The companies acquired during the year ended June 30, 2005 have
significant operations which involve security services and products. The Company
is no longer considered a development stage company.

On February 28, 2005, the Company acquired, through its wholly owned subsidiary
corporation, 6327915 Canada, Inc., 100% of the outstanding shares of 9151-3929
Quebec Inc., ("Quebec") and 3826961 Canada Inc. ("Canada"). Quebec and Canada
collectively own 100% of 3428249 Canada Inc. 3428249 Canada Inc. owns 100% of
Chartrand Laframboise Inc., a company specializing in the security field, and
100% of 9126-7641 Quebec Inc., a company specializing in the credit management
and verification. On June 30, 2005, 3428249 Canada Inc. and 6327915 Canada Inc.
completed a merger transaction. The merged company continues to be 6327915
Canada Inc. Following the merger 3826961 Canada Inc. and 9151-3929 Quebec Inc.
were each dissolved on June 9, 2005 and September 26, 2005, respectively.
Collectively, Quebec, Canada, 3428249 Canada Inc., Chartrand Laframboise Inc.,
and 9126-7641 Quebec Inc. are hereinafter collectively referred to as "CLI".
(Refer to Note 3(a)).

On February 28, 2005 the Company acquired Avensys Inc. ("Avensys"), a company
incorporated under Part IA of the Companies Act (Quebec) in Canada. Avensys is a
leader in risk management monitoring solutions for commercial and industrial
buildings, infrastructures and various environments. (Refer to Note 3(b)).

On September 22, 2005, the Company ceased operations of CSA and entered into an
agreement with Securite Kolossal Inc. to sell its customer list for CDN
$100,000. As at September 30, 2005, the Company has received CDN $50,000 with
the remaining balance to be received in November 2005. The outstanding portion
has been recorded as other receivable as at September 30, 2005.

The Company's assets and operations at September 30, 2005 are located largely in
Quebec and in Ontario, Canada. In April, 2005, the Company transferred the
production, marketing and sales of its C-Chip product technology to its
wholly-owned subsidiary, C-Chip Technologies Corporation ("North America").

The Company's shares trade on the NASD OTC Bulletin Board under the symbol MANS.

The Company has experienced significant operating losses since inception and has
a working capital of $848,707. These factors raise substantial doubt regarding
the Company's ability to continue as a going concern. These consolidated
financial statements do not include any adjustments to the recoverability and
classification of recorded assets amounts and classification of liabilities that
might be necessary should the Company be unable to continue as a going concern.
The Company has funded itself through issuance of shares or by loans from
shareholders and/or directors. During the next twelve months the Company plans
to fund its operations through cash on hand, the sale of security services, the
sale of products and sale of assets. If profitable operations are not achieved,
additional financing will be required to pursue the Company's business plan.

F-6

MANARIS CORPORATION
(Formerly A Development Stage Company)
Notes to Consolidated Financial Statements September 30, 2005
(Expressed in U.S. Dollars)
(Unaudited)

2. Summary of Significant Accounting Policies

FISCAL YEAR

The Company's fiscal year-end is June 30.

BASIS OF ACCOUNTING

These consolidated financial statements are prepared in conformity with
accounting principles generally accepted in the United States and are presented
in US dollars.

PRINCIPLES OF CONSOLIDATION

These consolidated financial statements include the accounts of the Company and
its subsidiaries. Consolidated companies include: a) 100% of Avensys and its
subsidiary, Fizians Inc. of which Avensys owns 70% of its outstanding shares and
the accounts of Avensys Labs Inc., a company in which Avensys holds variable
interests and is the primary beneficiary; b) 100% of 6327915 Canada, Inc.,
9151-3929 Quebec Inc., 3826961 Canada Inc., 3428249 Canada Inc., Chartrand
Laframboise Inc. and 9126-7641 Quebec Inc., (collectively the "CLI Group"); c)
100% of CSA; and d) 100% of North America. Operating results for the CLI Group
and Avensys are included from the date of acquisition of February 28, 2005. All
inter-company accounts and transactions have been eliminated.

CASH AND CASH EQUIVALENTS

The Company considers all highly liquid instruments with maturity of three
months or less at the time of issuance to be cash equivalents.

ADVERTISING

The Company charges to operations the cost of advertising as incurred which was
$31,420 and $10,811 for the three months ended September 30, 2005 and 2004,
respectively.

LONG-LIVED ASSETS

In accordance with SFAS No. 144, "Accounting for the Impairment or Disposal of
Long-Lived Assets", the Company tests long-lived assets or asset groups for
recoverability when events or changes in circumstances indicate that their
carrying amount may not be recoverable. Circumstances which could trigger a
review include, but are not limited to: significant decreases in the market
price of the asset; significant adverse changes in the business climate or legal
factors; accumulation of costs significantly in excess of the amount originally
expected for the acquisition or construction of the asset; current period cash
flow or operating losses combined with a history of losses or a forecast of
continuing losses associated with the use of the asset; and current expectation
that the asset will more likely than not be sold or disposed significantly
before the end of its estimated useful life.

Recoverability is assessed based on the carrying amount of the asset and its
fair value which is generally determined based on the sum of the undiscounted
cash flows expected to result from the use and the eventual disposal of the
asset, as well as specific appraisal in certain instances. An impairment loss is
recognized when the carrying amount is not recoverable and exceeds fair value.

FOREIGN CURRENCY TRANSACTIONS/BALANCES

The Company's functional currency is the Canadian dollar. Occasional
transactions occur in U.S. dollars, and management has adopted SFAS No. 52,
"Foreign Currency Translation". Financial statements denominated in foreign
currencies are translated into US dollars at rates of exchange in effect at the
balance sheet date. Average rates for the year are used to translate revenues
and expenses. Resulting translation gains and losses are accumulated in a
separate component of stockholders' equity as accumulated other comprehensive
income or loss. Currency transaction gains and losses are included in the
Company's results of operations.

F-7

MANARIS CORPORATION
(Formerly A Development Stage Company)
Notes to Consolidated Financial Statements September 30, 2005
(Expressed in U.S. Dollars)
(Unaudited)

2. Summary of Significant Accounting Policies (continued)

USE OF ESTIMATES

The preparation of financial statements in conformity with U.S. generally
accepted accounting principles requires management to make estimates and
assumptions that affect the reported amounts of assets and liabilities and
disclosure of contingent assets and liabilities at the date of the financial
statements and the reported amounts of revenues and expenses during the
reporting period. Actual results could differ from those estimates.

Recent Accounting Pronouncements
In June 2005, the Emerging Issues Task Force ("EITF") issued No. 05-6,
"Determining the Amortization Period for Leasehold Improvements " ("EITF05-6").
The pronouncement requires that leasehold improvements acquired in a business
combination or purchase subsequent to the inception of the lease should be
amortized over the lesser of the useful life of the asset or the lease term that
includes reasonably assured lease renewals as determined on the date of the
acquisition of the leasehold improvement. This pronouncement should be applied
prospectively and the Company will adopt it during the first quarter of fiscal
2006. The Company does not have unamortized leasehold improvements from
acquisitions or business combinations and therefore, does not believe this
pronouncement will have an impact in its financial results.

In May 2005, the Financial Accounting Standards Board (FASB) issued SFAS No.
154, "Accounting Changes and Error Corrections - A Replacement of APB Opinion
No. 20 and SFAS No. 3". SFAS 154 changes the requirements for the accounting for
and reporting of a change in accounting principle and applies to all voluntary
changes in accounting principle. It also applies to changes required by an
accounting pronouncement in the unusual instance that the pronouncement does not
include specific transition provisions. SFAS 154 requires retrospective
application to prior periods' financial statements of changes in accounting
principle, unless it is impracticable to determine either the period-specific
effects or the cumulative effect of the change. The provisions of SFAS No. 154
are effective for accounting changes and correction of errors made in fiscal
years beginning after December 15, 2005. The adoption of this standard is not
expected to have a material effect on the Company's results of operations or
financial position.

In December 2004, FASB issued SFAS No. 153, "Exchanges of Nonmonetary Assets -
An Amendment of APB Opinion No. 29". The guidance in APB Opinion No. 29,
"Accounting for Nonmonetary Transactions", is based on the principle that
exchanges of nonmonetary assets should be measured based on the fair value of
the assets exchanged. The guidance in that Opinion, however, included certain
exceptions to that principle. SFAS No. 153 amends Opinion No. 29 to eliminate
the exception for nonmonetary exchanges of similar productive assets and
replaces it with a general exception for exchanges of nonmonetary assets that do
not have commercial substance. A nonmonetary exchange has commercial substance
if the future cash flows of the entity are expected to change significantly as a
result of the exchange. The provisions of SFAS No. 153 are effective for
nonmonetary asset exchanges occurring in fiscal periods beginning after June 15,
2005. Early application is permitted and companies must apply the standard
prospectively. The adoption of this standard is not expected to have a material
effect on the Company's results of operations or financial position.

It also addresses transactions in which an entity incurs liabilities in exchange
for goods or services that are based on the fair value of the entity's equity
instruments or that may be settled by the issuance of those equity instruments.
SFAS 123R focuses primarily on accounting for transactions in which an entity
obtains employee services in share-based payment transactions.

F-8

MANARIS CORPORATION
(Formerly A Development Stage Company)
Notes to Consolidated Financial Statements September 30, 2005
(Expressed in U.S. Dollars)
(Unaudited)

2. Summary of Significant Accounting Policies (continued)

SFAS 123R does not change the accounting guidance for share-based payment
transactions with parties other than employees provided in SFAS 123 as
originally issued and Emerging Issues Task Force Issue No. 96-18, "Accounting
for Equity Instruments That Are Issued to Other Than Employees for Acquiring, or
in Conjunction with Selling, Goods or Services". SFAS 123R does not address the
accounting for employee share ownership plans, which are subject to AICPA
Statement of Position 93-6, "Employers' Accounting for Employee Stock Ownership
Plans". SFAS 123R requires a public entity to measure the cost of employee
services received in exchange for an award of equity instruments based on the
grant-date fair value of the award (with limited exceptions). That cost will be
recognized over the period during which an employee is required to provide
service in exchange for the award - the requisite service period (usually the
vesting period). SFAS 123R requires that the compensation cost relating to
share-based payment transactions be recognized in financial statements. That
cost will be measured based on the fair value of the equity or liability
instruments issued. The scope of SFAS 123R includes a wide range of share-based
compensation arrangements including share options, restricted share plans,
performance-based awards, share appreciation rights, and employee share purchase
plans. Public entities (other than those filing as small business issuers) will
be required to apply SFAS 123R as of the first interim or annual reporting
period that begins after June 15, 2005. Public entities that file as small
business issuers will be required to apply SFAS 123R in the first interim or
annual reporting period that begins after December 15, 2005. For nonpublic
entities, SFAS 123R must be applied as of the beginning of the first annual
reporting period beginning after December 15, 2005. The adoption of this
standard is not expected to have a material effect on the Company's results of
operations or financial position.

In March 2005, the SEC staff issued Staff Accounting Bulletin No. 107 ("SAB
107") to give guidance on the implementation of SFAS No. 123R. The Company will
consider SAB 107 during the implementation of SFAS No. 123R.

FINANCIAL INSTRUMENTS AND CONCENTRATIONS

Financial instruments include cash, accounts receivable, other receivables,
accounts payable, accrued liabilities, short and long-term debt, convertible
debenture and related party payables. The fair values approximate their carrying
values due to the immediate or short-term maturity of these financial
instruments.

The Company sells the majority of its products and services in Canada. The
Company performs periodic credit evaluations of its ongoing customers and
generally does not require collateral. Reserves are maintained for potential
credit losses, which have not been historically significant. The Company invests
its excess cash in deposits with major financial institutions.

NET LOSS PER SHARE

The Company computes net loss per share in accordance with SFAS No. 128,
"Earning per Share" (SFAS 128). SFAS 128 requires presentation of both basic and
diluted net loss per share (EPS) on the face of the income statement. Basic net
loss per share is computed by dividing the net loss for the year by the weighted
average number of shares of common stock outstanding during the year. Diluted
net loss per share is computed by dividing the net loss for the period by the
weighted average number of shares of common stock and potential common stock
outstanding during the period, if dilutive.

F-9

MANARIS CORPORATION
(Formerly A Development Stage Company)
Notes to Consolidated Financial Statements September 30, 2005
(Expressed in U.S. Dollars)
(Unaudited)

2. Summary of Significant Accounting Policies (continued)

STOCK-BASED COMPENSATION

The Company has elected to apply the intrinsic value method of accounting in
accordance with Accounting Principles Board Opinion No. 25, "Accounting for
Stock Issued to Employees" (APB 25). Under the intrinsic value method of
accounting, compensation expense is recognized if the exercise price of the
Company's employee stock options is less than the market price of the underlying
common stock on the date of grant. Stock-based compensation for employees is
recognized on the straight-line basis over the vesting period of the individual
options. Stock options granted to non-employees are accounted for under
Statement of Financial Accounting Standards No. 123 "Accounting for Stock-Based
Compensation" (SFAS 123), which establishes a fair value based method of
accounting for stock-based awards, and recognizes compensation expense based on
the fair value of the stock award or fair value of the goods and services
received, whichever is more reliably measurable. Under the provisions of SFAS
123, companies that elect to account for stock-based awards in accordance with
the provisions of APB 25 are required to disclose the pro forma net income
(loss) that would have resulted from the use of the fair value based method
under SFAS 123.

The Company also complies with the provisions of FASB Emerging Issues Task Force
("EITF") Issue No. 96-18, Accounting for Equity Instruments That Are Issued to
Other Than Employees for Acquiring, or in Conjunction with Selling, Goods or
Services ("EITF 96-18") with respect to stock option grants to non-employees who
are consultants to the Company. EITF 96-18 requires variable plan accounting
with respect to such non-employee stock options, whereby compensation associated
with such options is measured on the date such options vest, and incorporates
the then-current fair market value of the Company's common stock into the option
valuation model.

On June 15, 2004 the Company filed a Form S-8 Registration Statement with the US
Securities and Exchange Commission to register 5,000,000 shares of common stock
pursuant to the Company's 2004 Nonqualified Stock Option Plan ("the Plan'). The
determination of those eligible to receive options under this plan, and the
amount, type, price and timing of each stock option and the terms and conditions
shall rest at the sole discretion of the Company's Compensation Committee,
subject to the provisions of this Plan. A total of 329,314 options under the
Plan remain available for issuance.

During the three month period ended September 30, 2005, the Company granted
1,877,000 stock options, pursuant to a non-qualified stock option plan at
exercise prices ranging from $0.00001 to $0.38 per share. Stock options granted
to non-employees totalled 777,000 of which 642,000 have vested. Stock options
granted to the former Chief Executive Officer totalled 600,000 at an exercise
price of $.00001. Stock options granted to the Company's current Chief Executive
Officer totalled 500,000 at an exercise price of $0.38 with 250,000 stock
options vesting immediately and 250,000 stock options vesting upon completion of
his term as interim Chief Executive Officer. Had the Company determined
compensation cost based on the fair value at the date of grant for its employee
stock options, the net loss would have increased by $177,613 for the three month
period ended September 30, 2005.

During the three month period ended September 30, 2005, the Company recognized
stock based compensation for non-employees in the amount of $424,900.

The fair value of the options granted during the period was measured at the date
of grant using the Black-Scholes option pricing model with the following
weighted-average assumptions:

Three months ended
September 30,
2005 2004

Risk - free interest rate 2.97 % 1.84 %
Expected volatility 100 % 121.75 %
Expected life of stock options (in years) .83 1.16
Assumed dividends None None

F-10

Manaris Corporation
(Formerly A Development Stage Company)

Notes to Consolidated Financial Statements September 30, 2005
(Expressed in U.S. Dollars)
(Unaudited)

2. Summary of Significant Accounting Policies (continued)

The following table illustrates the effect on net loss per share as if the fair
value method had been applied to all grants of stock options:

Three months ended
September 30,
2005 2004
$ $

Net loss - as reported (3,314,162) (681,520)
Add: Stock-based compensation expense included in net
loss - as reported 424,900 179,709
Deduct: Stock-based compensation expense determined under
fair value method (602,513) (614,491)
---------- ----------
Net loss - pro forma (3,491,775) (1,116,302)
========== ==========
Net loss per share (basic and diluted) - as reported (0.06) (0.02)
========== ==========
Net loss per share (basic and diluted) - pro forma (0.07) (0.03)
========== ==========

REVENUE RECOGNITION

The Company's C-Chip technology has generated limited commercial sales of
products. The Company developed prototypes for testing by potential customers,
which were billed for a portion of the costs incurred. Commercial product sales
are recorded when shipped as part of a sales agreement, usually by customer
purchase order. Certain product sales contain a small charge for after sales
service for up to one year; such amounts are deferred and recognized as revenue
when earned. Products carry a one-year replacement warranty and the level of
actual warranty expense has not been material.

The Company recognizes revenue in accordance with Securities and Exchange
Commission Staff Accounting Bulletin No. 104 ("SAB 104"), "Revenue Recognition
in Financial Statements." Revenue is recognized only when the price is fixed or
determinable, persuasive evidence of an arrangement exists, the service is
performed, and collectibility is reasonably assured.

Sales of security services commenced on the acquisition of CSA on February 17,
2004. Clients are provided security services with revenue recognized as services
are performed.

The CLI Group recognizes revenue for service contracts as the services are
performed using a proportional performance model. Revenues from investigation
contracts are reported on the percentage of completion method of accounting
using measurements of progress toward completion appropriate for the work
performed. Progress is generally based upon man-hours or costs incurred based
upon the appropriate method for the type of job.

Avensys recognizes revenues when goods are shipped and the risks and rewards
have transferred to customers. Revenues are recorded net of rebates, discounts
and sales returns. Avensys and Fizians Inc. specialize in developing,
manufacturing and installing control and monitoring remote security solutions.

ALLOWANCE FOR UNCOLLECTIBLE ACCOUNTS

The Company continually monitors timely payments and assesses any collection
issues. The allowance for doubtful accounts is based on the Company's detailed
assessment of the collectibility of specific customer accounts. Any significant
customer accounts that are not expected to be collected are excluded from
revenues.

F-11

MANARIS CORPORATION
(Formerly A Development Stage Company)
Notes to Consolidated Financial Statements September 30, 2005
(Expressed in U.S. Dollars)
(Unaudited)

2. Summary of Significant Accounting Policies (continued)

PROPERTY AND EQUIPMENT

Property and equipment are recorded at cost. Amortization is based on the
following annual rates or period:

INVENTORY

Inventory consists of finished products available for sale to customers and
components. Inventory is valued at the lower of cost and net realizable value.
Cost is determined on a weighted average cost basis.

INTANGIBLE ASSETS

An acquired intangible asset of a technological product or service that has
reached technological feasibility is capitalized at cost. Intangible assets with
definite lives are reported at cost, less accumulated amortization. The Company
does not have any identified intangible assets with an indefinite life. Acquired
in-process research and development is charged to operations in the period of
acquisition. The Company provides for amortization on a straight-line basis over
the following periods:

Customer lists 3-10 years
Licenses, patents and trademarks 4-6 years
Non-compete agreements 4 years

ACQUIRED GOODWILL

Goodwill represents the excess of the purchase price of acquired assets over the
fair values of the identifiable assets acquired and liabilities assumed.
Pursuant to SFAS No. 141, the Company does not amortize goodwill, but tests for
impairment of goodwill on an annual basis and at any other time if events occur
or circumstances indicate that the carrying amount of goodwill may not be
recoverable. Circumstances that could trigger an impairment test include but are
not limited to: a significant adverse change in the business climate or legal
factors; an adverse action or assessment by a regulator; unanticipated
competition; and loss of key personnel. Goodwill is tested for impairment using
present value techniques of estimated future cash flows or using valuation
techniques based on multiples of earnings. If the carrying amount of goodwill
exceeds the implied fair value of that goodwill, an impairment loss is charged
to operations.

DEFERRED FINANCING COSTS

Costs relating to long-term debt are deferred and amortized over the term of the
related debt facilities.

RESEARCH AND DEVELOPMENT EXPENSES AND TAX CREDITS

Research and development expenses are expensed as they incurred. Research and
development tax credits are accounted for as a reduction of the income tax
provision during the year in which the costs are incurred, provided that the
Company is reasonably certain that the credits will be received. The investment
tax credits must be examined and approved by the tax authorities and it is
possible that the amounts granted will differ from the amounts recorded.

F-12

MANARIS CORPORATION
(Formerly A Development Stage Company)
Notes to Consolidated Financial Statements September 30, 2005
(Expressed in U.S. Dollars)
(Unaudited)

2. Summary of Significant Accounting Policies (continued)

CONTINGENT CONSIDERATION

In connection with the Company's acquisition of CSA, if certain future internal
performance goals are later satisfied, the aggregate consideration for the
acquisition will be increased. Such additional consideration, if earned, will be
paid in the form of additional shares of the Company's common stock currently
held in escrow. Any additional consideration paid will be allocated between
goodwill, stock-based compensation expense and deferred compensation. The
measurement, recognition and allocation of contingent consideration are
accounted for using the following principles:

Measurement and Recognition
In accordance with SFAS No. 141, Business Combinations ("SFAS 141"), contingent
consideration is recorded when a contingency is satisfied and additional
consideration is issued or becomes issuable. The Company records the additional
consideration issued or issuable in connection with the acquisition when a
specified internal performance goal is met. For additional consideration paid in
stock, the Company calculates the amount of additional consideration using the
closing price of its common stock on the date the performance goal is satisfied.

Amount Allocated to Goodwill
In accordance with EITF No. 95-8, Accounting for Contingent Consideration Paid
to the Shareholders of an Acquired Enterprise in a Purchase Business Combination
("EITF 95-8") and FIN 44, the portion of additional consideration issuable to
holders of unrestricted common stock and fully vested options as of the
acquisition date is recorded as additional purchase price, as the consideration
is unrelated to continuing employment with the Company. Such portion is
allocated to goodwill.

Amount Allocated to Stock-Based Compensation Expense In accordance with EITF
95-8, the intrinsic value associated with additional consideration related to
stock or options that vest between the acquisition date and the date at which
the contingency is satisfied is recorded as an immediate charge to stock-based
compensation expense because the consideration is related to continuing
employment with the Company.

Amount Allocated to Deferred Compensation Additional consideration related to
options and restricted stock that remain unvested when the contingency is
satisfied is recorded as deferred compensation expense under EITF 95-8 and FIN
44, as such consideration will only be earned to the extent that the holder of
such options or restricted stock continues to be employed by the Company and
meets the vesting requirements. The amount recorded as deferred compensation is
based upon the intrinsic value of the restricted stock and unvested options at
the date at which the contingency is satisfied. The Company amortizes such
deferred compensation over the remaining vesting period of the underlying
restricted stock and unvested options. In the event that a holder does not fully
vest in the restricted stock or unvested options, the unamortized portion of
deferred compensation is eliminated.

INCOME TAX

Potential benefits of income tax losses are not recognized in the accounts until
realization is more likely than not. The Company has adopted SFAS No. 109 as of
its inception and has incurred net operating losses. Pursuant to SFAS 109, the
Company is required to compute tax asset benefits for net operating losses
carried forward. Potential benefit of net operating losses have not been
recognized in these financial statements because the Company cannot be assured
it is more likely than not it will utilize the net operating losses carried
forward in future years.

SHIPPING AND HANDLING COSTS

The Company's shipping and handling costs are included in cost of sales.

F-13

MANARIS CORPORATION
(Formerly A Development Stage Company)
Notes to Consolidated Financial Statements September 30, 2005
(Expressed in U.S. Dollars)
(Unaudited)

2. Summary of Significant Accounting Policies (continued)

RESTRICTED MARKETABLE SECURITIES

The Company defines marketable securities as income yielding securities that can
be readily converted into cash. An irrevocable letter of credit for $86,125 (CDN
$100,000) was issued to an individual who personally guaranteed a loan of
Avensys Labs Inc. ("ALI"), a subsidiary of Avensys and the Company. A term
deposit which matures in June 2006 and with an interest rate of 1.3% per annum
is designated as a guarantee for this amount.

LITIGATION AND SETTLEMENT COSTS

From time to time, the Company is involved in disputes, litigation and other
legal actions in the normal course of operations. In accordance with SFAS 5, the
Company records a charge to operations equal to at least the minimum estimated
liability for a loss contingency when both of the following conditions are met:
(i) information available prior to issuance of the financial statements
indicates that it is probable that an asset had been impaired or a liability had
been incurred at the date of the financial statements and (ii) the range of loss
can be reasonably estimated.

WARRANTY EXPENSE

The Company's products typically carry a one year warranty. The Company
establishes reserves for estimated product warranty costs at the time revenue is
recognized based upon its historical warranty experience, and additionally for
any known product warranty issues. The Company has not incurred any significant
warranty expense during the three month periods ended September 30, 2005 and
2004.

RECLASSIFICATIONS

Certain reclassifications have been made to the prior year's financial
statements to conform to the current period's presentation.

3. Business Combinations

On February 28, 2005, the Company acquired two businesses. These acquisitions
have been accounted for using the purchase method and the consolidated financial
statements include the results of operations for these businesses from the date
of acquisition. In accordance with SFAS No.
141 `'Business Combinations", the Company allocated the purchase price to the
tangible and intangible assets acquired and liabilities assumed, including
in-process research and development, based on their estimated fair values. The
excess purchase price over those fair values is recorded as goodwill. The fair
values assigned to tangible and intangible assets acquired and liabilities
assumed are based on an independent valuation analysis using estimates and
assumptions provided by management, and other information compiled by
management, including valuations that utilize established valuation techniques
appropriate for the security industry. In accordance with SFAS No. 142,
"Goodwill and Other Intangible Assets", goodwill and purchased intangibles with
indefinite lives are not amortized but will be reviewed at least annually for
impairment. Purchased intangibles with finite lives will be amortized on a
straight-line basis over their respective estimated useful lives.

a) CLI Group

In February 2005, the Company acquired the CLI Group through its wholly-owned
subsidiary corporation, 6327915 Canada, Inc. The Company owns all of the
outstanding shares of 9151-3929 Quebec Inc. ("Quebec") and 3826961 Canada Inc.
("Canada"). Quebec and Canada collectively own 100% of 3428249 Canada Inc.
3428249 Canada Inc. owns 100% of Chartrand Laframboise Inc. a company
specializing in the security field and 100% of 9126-7641 Quebec Inc., a company
specializing in the credit management and verification. Quebec, Canada, 3428249
Canada Inc., Chartrand Laframboise Inc., and 9126-7641 Quebec Inc. The CLI Group
was purchased for total consideration of $3,859,611, including acquisition costs
of $42,817 which were accounted for as a purchase price adjustment to goodwill.

The Company paid $2,436,251 (CDN $3,000,000) in cash and issued a $1,380,543
(CDN $1,700,000) Secured Convertible Debenture with interest of 9% payable
quarterly and maturing in five years. At the option of the holders, but not
before the sixth month following the closing date, the debenture is convertible
into 1,700,000 shares of the Company's common stock at price of $0.82 per share.
The debenture is secured by the universality of all of the moveable property of
the wholly-owned subsidiary, 3428249 Canada Inc. As at September 30, 2005, no
amounts have been converted to the Company's common stock.

F-14

MANARIS CORPORATION
(Formerly A Development Stage Company)
Notes to Consolidated Financial Statements September 30, 2005
(Expressed in U.S. Dollars)
(Unaudited)

3. Business Combinations (continued)

a) CLI (continued)

CLI's principal services include investigation, surveillance, undercover agents,
background verification, business intelligence, security consulting and labor
management conflict.

The purchase price was allocated to the following assets and liabilities:

Current assets 578,224
Property and equipment 192,340
Non-compete agreement 574,133
Customer lists 380,811
Current liabilities (341,280)
Bank indebtedness (43,809)
Long-term debt - current portion (74,829)
Long-term debt (5,411)
Other liabilities (19,757)
Excess purchase consideration (goodwill) 2,576,372
----------------------------------------------------
3,816,794
====================================================

The purchase price allocation was preliminary and subject to change if the
Company obtains additional information concerning the fair values of certain
tangible assets and liabilities of CLI. During the three months ended March 31,
2005, the Company adjusted the net tangible assets acquired and increased
goodwill by approximately $235,000 due to purchase price adjustments.

NET TANGIBLE ASSETS

The acquisition cost has been allocated to the assets and liabilities according
to their estimated fair value at the acquisition date.

AMORTIZABLE INTANGIBLE ASSETS

The customer lists consist of information about customers such as their name,
contact information, order history and demographic information. The income
approach using a discounted cash flow approach was used to estimate the fair
value of the customer list, or more specifically, the multi-period excess
earnings method. This method is predicated on the theory that the value of an
asset or investment is the present value of future cash flows discounted at a
rate commensurate with the time value of money and the underlying risks of the
subject investment. The Company is amortizing the fair value of the customer
list on a straight-line basis over the remaining estimated useful life of ten
years.

The non-compete agreements represent an agreement by the seller to refrain from
competing with the Company. The agreement normally restricts the seller from
competing in the same line of business for a certain period of time. The
comparative business valuation method was used to estimate the fair value. This
approach assumes that in the absence of such agreement, the sellers would be
free to compete and take business away, thus reducing sales and profitability.
The Company is amortizing the fair value of the non-compete agreements on a
straight-line basis over the remaining estimated life of four years.

F-15

MANARIS CORPORATION
(Formerly A Development Stage Company)
Notes to Consolidated Financial Statements September 30, 2005
(Expressed in U.S. Dollars)
(Unaudited)

3. Business Combinations (continued)

b) Avensys Inc.

On February 28, 2005, the Company completed its acquisition of Avensys. The
acquisition resulted in the issuance of 10,400,002 restricted shares of the
Company's common shares having a fair value of $0.75 per share and a total value
of $7,800,000 (before discounting as discussed below) in exchange for 15,746,369
shares of Avensys which constituted all of the issued and outstanding common
stock of Avensys. The Company also purchased and cancelled all of the
outstanding Avensys stock options for a total of $312,652 (CDN $385,000). The
beneficiaries of the options received $187,592 (CDN $231,000) on acquisition and
will receive the balance of $124,970 (CDN $154,000) on or before December 31,
2005. The Company issued 427,432 restricted shares of common stock as a finder's
fee to an unrelated party. The Company incurred direct costs associated with the
acquisition of $45,000 (CDN $55,413). The total value of the cancelled stock
options, finders fee and direct costs were accounted for as purchase price
adjustments to goodwill. The 10,400,002 restricted shares are to be released
from escrow over the eighteen months after acquisition. As a result, the value
of restricted stock paid was discounted in the amount of $166,414.

Avensys offers leading edge fiber optics sensor technology to monitor a variety
of environments, including air, water, soil as well as buildings and
infrastructures. Avensys specializes in providing solutions to monitor different
types of environments, solving environmental monitoring problems, from micro
scale in-building sensing systems to macro scale wireless landslide and flood
warning systems in different countries, covering air, water and soil as well as
the security of materials and infrastructures, employing a wide range of
technologies including Optical Fiber Sensing Technology.

The purchase price was allocated to the following assets and liabilities:

Current assets 3,499,635
Property and equipment 523,898
Customer list 701,621
Other assets 101,511
Current liabilities (2,358,108)
License agreements 2,085,357
In-process research and development 386,749
Bank Indebtedness (1,202,483)
Long-term debt - current portion (122,829)
Long-term debt (1,453,966)
Other liabilities (16,678)
Excess purchase consideration (goodwill) 5,488,879
-----------------------------------------------------
7,633,586
=====================================================

The purchase price allocation is preliminary and subject to change if the
Company obtains additional information concerning the fair values of certain
tangible assets and liabilities of Avensys.

NET TANGIBLE ASSETS

The acquisition cost has been allocated to the assets and liabilities according
to their estimated fair value at the acquisition date.

F-16

MANARIS CORPORATION
(Formerly A Development Stage Company)
Notes to Consolidated Financial Statements September 30, 2005
(Expressed in U.S. Dollars)
(Unaudited)

3. Business Combinations (continued)

b) Avensys Inc. (continued)

AMORTIZABLE INTANGIBLE ASSETS

Customer list represents information about customers such as their name, contact
information, order history and demographic information. The income approach
using a discounted cash flow method was used to estimate the fair value of the
customer list, or more specifically, the multi-period excess earnings method.
This method is predicated on the theory that the value of an asset or investment
is the present value of future cash flows discounted at a rate commensurate with
the time value of money and the underlying risks of the subject investment. The
Company is amortizing the fair value of the customer list on a straight-line
basis over the remaining estimated useful life of ten years.

License agreements represent a combination of processes, patents, and trade
secrets that were used for existing and in-process technology. These intangible
assets were valued using the income approach method. This method estimates fair
value based on the earnings and cash flow capacity of an asset. The Company is
amortizing the fair value of the license agreements on a straight-line basis
over the remaining estimated useful life of six years.

ACQUIRED IN-PROCESS RESEARCH AND DEVELOPMENT

Of the total purchase price, $386,749 has been allocated to in-process research
and development ("IPR&D") and was charged to operations. Projects that qualify
as IPR&D represent those that have not yet reached technological feasibility and
which have no alternative future use. Technological feasibility is defined as
being equivalent to a beta-phase working prototype in which there is no
remaining risk relating to the development. At the time of acquisition, Avensys
had multiple IPR&D efforts under way for certain current and future product
lines. These efforts included physical sensors, interrogation units, chemical
sensors and limnimeters. In applying the discounted cash flow method, the value
of the acquired technology was estimated by discounting to present value the
free cash flows expected to be generated by the products with which the
technology is associated, over the remaining economic life of the technology. To
distinguish between the cash flows attributable to the underlying technology and
the cash flows attributable to other assets available for generating product
revenues, adjustments were made to provide for a fair return to property and
equipment, working capital, and other assets that provide value to the product
lines.

4. Variable Interest Entity

The Financial Accounting Standards Board ("FASB") finalized FASB Interpretation
No. 46R, "Consolidation of Variable Interest Entities--An Interpretation of
ARB51" ("FIN46R") in December 2003. FIN46R expands the scope of ARB51 and can
require consolidation of "variable interest entities" ("VIEs"). Once an entity
is determined to be a VIE, the party with the controlling financial interest,
the primary beneficiary, is required to consolidate it. During the year ended
June 30, 2005, Avensys transferred its research activities to ALI. Avensys owns
49% of ALI and the two entities have entered an Agreement (the "Agreement")
where ALI will perform research and development activities for Avensys. The
Agreement is for a period of five years with a two-year renewal period and calls
for ALI to provide Avensys with a commercialization license for products
developed in return for a royalty of 5% of sales generated. Avensys sold
intellectual property related to R&D projects to ALI in return for 500,000
preferred shares redeemable for $408,030 (CDN $500,000). ALI provides R&D for
Avensys only, however it may enter into agreements with third parties in the
future. ALI has no other financing other than amounts received from Avensys.

As a result of the above, ALI has been included in the consolidated financial
statements commencing in the year ended of June 30, 2005 since Avensys holds a
controlling financial interest and is the primary beneficiary. The impact to the
consolidated balance sheet as of September 30, 2005 include the approximate
additions to current assets of $256,000, net property and equipment of $85,000,
and current liabilities of $103,000. The impact to the consolidated statement of
operations for the three month period ended September 30, 2005 was an increase
in research and development expenses of $211,000.

F-17

MANARIS CORPORATION
(Formerly A Development Stage Company)
Notes to Consolidated Financial Statements September 30, 2005
(Expressed in U.S. Dollars)
(Unaudited)

5. Goodwill and Purchased Intangible Assets

The following table presents details of the Company's purchased intangible
assets with definite lives:

September 30, June 30,
2005 2005
Weighted Net Book Net Book
Average Accumulated Value Value
Life in Cost Amortization $ $
Years $ $ (unaudited) (audited)

Licenses, patents and trademarks 5.6 2,197,241 286,294 1,910,947 2,002,687
Technology 1.7 574,285 358,900 215,385 251,275
Non-compete agreements 3.7 574,133 84,000 490,133 526,133
Customers lists 9.5 1,109,077 90,344 1,018,733 1,072,677
--- --------- --------- --------- ---------
Total intangible assets 6.0 4,454,736 819,538 3,635,198 3,852,772
=== ========= ========= ========= =========

Amortization expense of purchased intangible assets charged to operations was
$190,930 and $373,180 for the three months ended September 30, 2005 and 2004
respectively.

The estimated future amortization expense of purchased intangible assets with
definite lives for the next five years is as follows:

2006 $ 572,791
2007 723,285
2008 601,199
2009 551,333
2010 457,200
Thereafter 729,390
------------------------------------
$3,635,198
====================================

6. Balance Sheet Details

September 30, June 30,
2005 2005
(unaudited) (audited)
$ $
Other Receivables
Grants receivable 81,271 59,110
Investment tax credits receivable 413,350 596,417
Sales tax receivable 164,604 111,545
Other 157,965 132,176
--------- ---------
817,190 899,248
Inventory
Raw materials 382,583 261,445
Work in process 202,132 102,966
Finished goods 867,390 733,365
--------- ---------

1,452,105 1,097,776
--------- ---------
Accrued Liabilities
Payroll and benefits 528,827 693,040
Sales taxes payable 426,374 323,934
Income taxes payable 80,839 98,007
Accrual for litigation costs -- 160,392
Royalties payable -- 236,144
Other 393,399 509,610
========= =========
1,429,439 2,021,127

F-18

Manaris Corporation
(Formerly A Development Stage Company)
Notes to Consolidated Financial Statements September 30, 2005
(Expressed in U.S. Dollars)
(Unaudited)

7. Property and Equipment

September 30, June 30,
2005 2005
Accumulated Net Book Net Book
Cost Amortization Value Value
$ $ $ $
(unaudited) (audited)

Automotive equipment 35,683 19,583 16,100 17,309
Computers 609,774 485,242 124,532 132,948
Communication equipment 56,513 36,098 20,415 18,248
Furniture and fixtures 417,787 340,004 77,783 77,224
Laboratory equipment 420,153 183,027 237,126 237,922
Leasehold improvements 79,590 54,081 25,509 26,569
Machinery and office equipment 310,588 164,217 146,371 136,265
Software 85,896 47,811 38,085 35,845
Surveillance equipment 134,704 108,462 26,242 26,507
- -------------------------------------------------------------------------------------------------------------
2,150,688 1,438,525 712,163 708,837
Office equipment under capital leases 40,031 17,736 22,295 22,238
- -------------------------------------------------------------------------------------------------------------
Total property and equipment 2,190,719 1,456,261 734,458 731,075
=============================================================================================================
Depreciation during the period 32,398 88,639
=============================================================================================================

8. Related Party Transactions/Balances

An amount of $132,585 (June 30, 2005: $125,628) is due to the beneficiaries of
Avensys stock options. The Company purchased and cancelled all outstanding stock
options upon acquisition. The amount is due on December 31, 2005 and bears
interest of 12% calculated daily and payable monthly. The total amount due to
officers and/or shareholders of the Company at September 30, 2005 is $39,699
(June 30, 2005: $351,018). The amounts due are non-interest bearing, unsecured,
and have no fixed terms of repayment.

9. Loans Payable

a) CSA held a Corporate Credit Line facility in the amount of CDN $400,000,
fluctuating with cash flow and collection of accounts receivable. Interest was
charged at Canadian bank prime rate plus 2% per annum. The facility was secured
by a movable hypothec over accounts receivable and inventory of CSA and an
unlimited personal guarantee by the former sole owner of CSA, supported by
collateral second mortgage on his personal residence and subrogation of the
shareholder loan and salary bonus. Upon the departure of the former sole owner
of CSA in April 2005 and the withdrawing of his guarantees with the Bank, the
Bank proceeded with a demand of repayment of his line of credit with CSA. The
position of the Bank was repurchased in July 2005 by the Company and the Company
is now subrogated in all the Bank's rights . The Bank's proceedings were
therefore terminated.

b) CLI has a credit agreement for an authorized amount of $430,626 (CDN
$500,000), renewable annually. Any utilized portion bears interest at the
Canadian bank prime rate plus 1.125%, and is secured by a general assignment of
CLI's accounts receivable and adherence to certain financial ratios. As at
September 30, 2005, there was an outstanding amount of $16,549 (CDN $19,215) and
CLI is in compliance with all financial ratios.

c) Avensys has designated the accounts receivable and inventories to guarantee
the line of credit. The line of credit, for an authorized amount of $1,171,303
(CDN $1,360,000), bears interest at the Canadian bank prime rate plus 1.5% and
is currently in renegotiation.

d) An irrevocable letter of credit for $86,125 (CDN $100,000) has also been
issued to an individual who has personally guaranteed a loan of the Company. A
term deposit is lodged as a guarantee for this letter of credit.

F-19

MANARIS CORPORATION
(Formerly A Development Stage Company)
Notes to Consolidated Financial Statements September 30, 2005
(Expressed in U.S. Dollars)
(Unaudited)

9. Loans Payable (continued)

e) The Company's wholly-owned subsidiary, C-Chip Technologies Corporation (North
America) has an unsecured credit facility for an amount of $1,000,000 (principal
and interest) to finance service fees and inventory that bears interest at 15%
per annum. All receipts from sales revenues will be placed into a designated
bank account and be used to reimburse any amount owed pursuant to the credit
facility. Amounts not paid within twelve months of the execution of the credit
facility will become payable in full. As at September 30, 2005 there was an
outstanding amount of $728,500 (June 30, 2005: $320,127).

10. Long-Term Debt

September 30, June 30,
2005 2005
(unaudited) (audited)
$ $

Mortgage loan secured by the universality of Avensys' tangible and intangible
movables, (CDN $406,000), interest is prime rate plus 2.75%, payable in monthly
instalments of CDN $7,000 plus interest,
maturing in May 2010 337,611 331,320

Note payable, interest is prime rate, payable in six monthly payments,
maturing in October 2005 47,197 44,720

Note payable on demand (CDN $16,382) without interest 14,109 13,369

Note payable (CDN $12,778) without interest maturing in May 2006 11,005 10,428

Note payable (CDN $60,000) without interest, payable in monthly instalments
of $5,440 (CDN $6,667), maturing in March 2006 34,450 48,964

Note payable (CDN $5,000) without interest maturing in 2006 4,306 4,080

Note payable (CDN $15,202) without interest, payable in monthly instalments
of $691, maturing in April 2007 11,307 12,406

Redeemable preferred shares, 241 Class D shares issued by CLI. Non voting, non
participating and redeemable at the holder's option with a 1% monthly
dividend on the redemption price 207,562 196,670

Obligations under capital leases, maturing at various dates until 2009, payable
in instalments totalling $7,188 (CDN $8,808) in 2006 and 2007,
$ 5,406
(CDN $6,624) in 2008 and $1,379 (CDN $5,406) in 2009 20,436 21,161
- ------------------------------------------------------------------------------------------------------
687,983 683,118
Instalments due within one year 198,140 199,878
- ------------------------------------------------------------------------------------------------------
Long-term debt 489,843 483,240
======================================================================================================

Principal payments on long-term debt for the next five years are:

September 30,
2005
$
2006 198,140
2007 289,761
2008 78,050
2009 73,801
2010 48,231
- --------------------------------------------------------------------------
Total 687,983
==========================================================================

F-20

MANARIS CORPORATION
(Formerly A Development Stage Company)
Notes to Consolidated Financial Statements September 30, 2005
(Expressed in U.S. Dollars)
(Unaudited)

11. Convertible Debentures

September 30, June 30,
2005 2005
(unaudited) (audited)
$ $

Senior secured convertible debentures at 7%, payments of $233,750 for 20 months
beginning June 16, 2005, interest payable each June and December,
maturing January 31, 2007, principal amount of $4,675,000 (Note 11 (a)) 172,572 557,284

Secured convertible debentures at 9%, maturing February 2010, principal
amount of $1,387,302 (CDN $1,700,000) (Note 11 (b)) 1,464,128 1,387,302

Unsecured convertible debentures at 15%, maturing September 2007, principal
amount of $397,829 (CDN $487,500) (Note 11 (c)) 362,001 336,152

Unsecured convertible debentures at 12% maturing September 2007, principal
amount of $326,424 (CDN $400,000) (Note 11 (d)) 319,834 300,002
- ---------------------------------------------------------------------------------------------------------------
2,318,535 2,580,740
Instalments due within one year 172,572 893,436
- ---------------------------------------------------------------------------------------------------------------
Long-term debt 2,145,963 1,687,304
===============================================================================================================

Principal payments on the convertible debentures for the next five years are:

September 30,
2005
$

2006 172,572
2007 --
2008 681,835
2009 --
2010 1,464,128
- -------------------------------------------------------------------------------
Total 2,318,535
===============================================================================

a) Senior Secured Convertible Debentures

On February 16, 2005, the Company issued Senior Secured Convertible Notes Series
A ("Series A Notes") and Series E and F Warrants (See Note 13(b)) for an
aggregate principal amount of $4,675,000.

In accordance with EITF 98-5 "Accounting for Convertible Securities with
Beneficial Conversion Features or Contingently Adjustable Conversion Ratios" and
with EITF 00-27 "Application of Issue No. 98-5 to Certain Convertible
Instruments", the Company allocated $1,863,870 to the Warrants Series E,
$339,456 to the Warrants Series F and recognized an embedded beneficial
conversion feature of $2,470,674 accounted for as additional paid in capital and
an equivalent discount against the Series A Notes. The carrying amount of the
Series A Notes will be increased monthly by periodic accretion under the
interest method. The Company remains obligated for the entire contractual
balance of the Notes of $4,675,000.

These Notes bear interest at 9% per annum from February 16, 2005 until the first
principal payment date on June 16, 2005 and 7% per annum after this date.
Principal payments on the Series A Notes shall be paid in twenty (20) equal
monthly instalments of $233,750. Interest on these Notes shall be payable on the
last day of June and December of each year commencing on June 30, 2005.

All payments of interest shall be made, at the option of the Company, (a) in
cash; (b) by the issuance of additional Series A Notes in the principal amount
equal to the interest payment due; or (c) in shares of common stock of the
Company valued at 90% of the average price of such security in the most recent
five trading days ("Market Price").

All payments of principal shall be made, at the option of the Company, (a) in
cash with a premium equal to 10% of the cash amount paid; or (b) in shares of
common stock of the Company valued at 85% of the Market Price.

F-21

MANARIS CORPORATION
(Formerly A Development Stage Company)
Notes to Consolidated Financial Statements September 30, 2005
(Expressed in U.S. Dollars)
(Unaudited)

11. Convertible Debentures (continued)

a) Senior Secured Convertible Debentures

All payments made by the issuance of shares will be acceptable only if the
issuance of the shares of the Company has first been registered with the
Securities and Exchange Commission.

The holders of these Series A Notes have the right, at their option at any time,
to convert some or all of the notes, including the principal amount and the
amount of any accrued but unpaid interest into a number of common shares of the
Company valued initially at $0.65 per share, subject to certain adjustments as
described in the purchase agreement.

In connection with the placement of the Series A Notes, the Company issued
Warrant Series: IB1, IB2, IB3, IB4, and IB5 granting the right to acquire up to
881,538 shares of the Company's common stock at prices ranging from $0.01 to
$0.75 per share (see Note 13(b)) and expiring from three months following the
date of their Registration until February 16, 2010.

The Company valued the warrants at $486,586 and recognized this amount to
additional paid in capital of Warrants Series IB1, IB2, IB3, IB4, and IB5 and as
deferred financing costs for the Series A Notes and issue expenses for the
Warrants Series E and F.

To secure payment of the principal amount of the Series A Notes and the interest
thereon, the Company hypothecated, in favour of the note holders, the
universality of all of the immovable and movable assets, corporeal and
incorporeal, present and future of the Company.

The purchase agreement of the Series A Notes contain certain covenants (a)
related to the conduct of the business of the Company and its subsidiaries; (b)
related to creation or assumption of lien other than liens created pursuant to
the Security Documents and Permitted Liens, as defined in the purchase
agreement; and (c) for so long as at least $2,500,000 principal amount of these
Notes remain outstanding, the Company shall not, without the consent of holders
representing at least 50% of the then outstanding principal amount, create,
incur, guarantee, issue, assume or in any manner become liable in respect of any
indebtedness, other than permitted indebtedness or issue other securities that
rank senior to the Series A Notes provided however that the Company may have
outstanding bank debt.

b) Secured Convertible Debentures

On February 14, 2005, the Company issued debentures of an aggregate principal
amount of $1,380,543 related to the acquisition of the CLI Group.

These debentures bear interest at 9% per annum from February 14, 2005. Principal
on these Notes shall be paid on February 14, 2010. Interest on these debentures
shall be payable on the first day beginning of quarter, commencing on May 1,
2005.

The holders of these Debentures have the right, at their option at any time, to
convert in part or all of the Debentures into a total number of 1,700,000 common
stock of the Company valued initially at $0.82 per share. As at September 30,
2005, no amounts have been converted to the Company's common stock.

To secure payment of the principal amount of the debentures and the interest
thereon, the Company hypothecated, in favour of the debenture holders, the
universality of all of the movable assets, corporeal and incorporeal, present
and future of its wholly-owned subsidiary 3828249 Canada Inc.

The purchase agreement of these debentures contain certain covenants related to
the conduct of the business of the Company and its subsidiaries.

c) Unsecured Convertible Debentures

With the acquisition of Avensys, the Company assumed 15% unsecured convertible
debentures having a nominal value of $918,068 (CDN $1,125,000) and maturing on
September 1, 2007. When the debentures were originally issued, Avensys recorded
an equity component of $378,445 (CDN $463,747) and a liability component of
$539,623 (CDN $661,253), for a total of $918,068 (CDN $1,125,000). In April
2005, the Company issued 680,000 shares in settlement of $520,238 (CDN $637,500)
of the debentures outstanding. The remainder of the debentures, $397,829 (CDN
$487,500) was replaced by a new 15% unsecured debenture. The new debenture is
convertible into shares of the Company using the following formula: principal
and interest divided by a 17.5% discount on the 10 day weighted average price of
the Company's shares. At year-end the discount related to the conversion feature
is $61,677.

F-22

MANARIS CORPORATION
(Formerly A Development Stage Company)
Notes to Consolidated Financial Statements September 30, 2005
(Expressed in U.S. Dollars)
(Unaudited)

11. Convertible Debentures (continued)

d) Unsecured Convertible Debentures

With the acquisition of Avensys, the Company also assumed 12% unsecured
convertible debentures having a nominal value of $652,848 (CDN $800,000) and
maturing on September 1, 2007. When the debentures were originally issued,
Avensys recorded an equity component of $305,857 (CDN $374,797) and a liability
component of $346,991 (CDN $425,203), for a total of $652,848 (CDN $800,000). In
April 2005, the Company issued 426,667 shares in settlement of $326,424 (CDN
$400,000), of the debentures outstanding. The remainder of the debentures,
$326,424 (CDN $400,000) was modified to be convertible into 330,251 shares of
the Company. At year-end the discount related to the conversion feature is
$26,422.

e) In order to take account for the Company's default on its principal and
interest payment that was due on June 23, 2005, the Company offered its
investors the option to receive payment of the principal payment in freely
tradable shares. The shares issued in lieu of cash were valued at 85% of the
market price (5 day volume weighted average price). In addition, since a notice
was sent under 10 business days indicating the Company's intent to pay in
shares, the Company increased the amount of the principal to be reimbursed by
ten percent.

f) In July 2005 the Company issued shares of common stock for a consideration
per share less than the conversion price in effect, which constitutes a "Trigger
Issuance" under the Senior Secured Convertible Note of February 16, 2005.
Consequently, some investors pursuant to the Senior Secured Convertible Note
exercised their right to convert part of the Note into common shares. A total of
$815,985 of the Senior Secured Convertible Note was converted into the Company's
common shares. The balance remaining on the Note Agreement totals $2,971,647.

12. Common Stock

a) During the three months ended September 30, 2005, the Company issued 385,000
common shares for total proceeds of $3.85 from the exercise of stock options.

b) During the three months ended September 30, 2005, the Company issued
4,462,820 common shares in connection to the Series A Notes. Of that amount,
308,230 common shares were issued for the interest payment in the amount of
$143,863, 1,823,206 common shares were issued for the amortization payments in
the amount of $724,999, and 2,331,384 common shares were issued following the
conversion of $815,985 of the Series A Notes.

c) During the three months ended September 30, 2005, the Company issued
7,360,436 common shares for total proceeds of $2,576,117 from the exercise of
warrants, before offering costs of $266,882.

d) In September 2005, the Company issued 87,760 common shares at an exercise
price of $0.00001 for total proceeds of $0.88 following the exercise of 87,760
Series IB1 warrants.

e) During the three months ended September 30, 2005, 257,000 stock options were
exercised after issuance to settle outstanding payables in the amount of
$105,501.

f) The Company issued 15,000 common shares valued at $5,400 for services.

13. Stock Options and Warrants

a) Stock Options

F-23

MANARIS CORPORATION
(Formerly A Development Stage Company)
Notes to Consolidated Financial Statements September 30, 2005
(Expressed in U.S. Dollars)
(Unaudited)

13. Stock Options and Warrants (continued)