Landstar Properties Inc.

Incorporated in 1979, Landstar Properties Inc. began operations as an explorer and developer of resource properties. By December 2001 the company had no sustained business activity and had encountered financial and regulatory difficulties. At this time, Landstar went through a corporate restructuring and the current management was appointed to lead the company in a new direction. In September 2002, the decision was made to transform Landstar to its present status as a real estate developer and home builder. Under the new board of directors the company was returned to favourable financial and regulatory standing and is now rapidly expanding with operations in the Greater Vancouver region of British Columbia and Lakeland, Florida.

By October 2002, the company had initial residential building activity, which provided limited revenues of $334,000 during the 12 months ended June 30, 2003. At the end of 2003 the company changed its fiscal calendar to end on December 31st to bring them in line with the real estate industry’s standard for reporting earnings. Consequently, Landstar recorded no revenues for the six months ended December 31, 2003. However, assets of approximately $4.1 million were acquired in the latter half of 2003 when the company commenced new projects.

Landstar’s largest project was undertaken by the company’s wholly-owned U.S. subsidiary, Landstar Lakeland Inc., in mid-2003 when the company entered into an agreement to purchase and develop 223 acres of land in the Morgan Creek Preserve area of Lakeland, Florida. As of April 2005, site preparations were underway on phase one and all 133 saleable lots had been sold or reserved by four Florida-based builders. Phase one consists of 41 usable acres, and was acquired in July 2003 at a cost of $11,000 per net acre. All remaining acreage comprising the Morgan Creek Preserve will also be acquired by Landstar for $11,000 per acre as agreed upon in mid-2003. Management predicts that Morgan Creek will be highly marketable because of the numerous on site amenities including a 60 acre nature preserve and due to the fact that the project provides an affordable alternative to the highly priced housing market in Tampa Bay, Florida. The houses in phase one will range in value from $200,000 to $350,000. In total, the Lakeland project will include three phases and extend over a three year period with 500 single family lots being built. As of March 31, 2005, the company had spent approximately $2.2 million for the initial investment on land, engineering and planning of the project.

In December 2003, Landstar entered into a joint venture with Springer Land Corp. to develop 37 singlefamily lots in Langley, B.C. The company held a 60% interest in the venture, while Springer retained the remaining 40%. The development property was purchased for approximately $4.9 million and the heritage-style homes were 90% sold on a pre-construction basis. The houses ranged from 1,900 to 2,400 square feet and by April 2005 all 37 were sold for an average price of $370,000 per home, resulting in approximately $13.7 million in total revenues. As a result of this project’s success, Landstar expanded its 60/40 joint venture with Springer in April 2005 to acquire a 32 lot subdivision in the Willoughby neighbourhood of Langley, B.C. The site was purchased for approximately $5 million and the company expects to achieve total revenues of approximately $13 million from the venture. The homes will range in size from 1,800 to 2,300 square feet with construction due to commence this year.

In August 2004, the company entered into a 50/50 joint venture with Paradigm Homes to develop seven premium lots in the Eagle Mountain area of Abbotsford, B.C. Eagle Mountain is considered the city’s most expensive residential development area and with five of the homes already sold the project is expected to be completed during the second quarter of fiscal 2005. The property was purchased for a total approximate price of $1.1 million and with the homes being priced in the $450,000 to $560,000 range the company expects that their 50% share of the generated revenues will be at least $1.7 million.

Landstar closed two non-brokered private placements during fiscal 2004, totalling approximately $1.1 million in proceeds. In February 2004, the company sold 1.1 million units for $0.50 per unit. Each unit consisted of one common share and one-half non-transferable share purchase warrant. Each whole warrant is exercisable for 12 months from the date of issue and entitles the holder to purchase one common share at a price of $0.75. The second private placement took place in August 2004 and approximately 1 million units were sold at a price of $0.60 per unit. The terms of this financing were the same as the one completed in February 2004 with the exception of each whole warrant enabling the holder to purchase one common share at a price of $0.80 per share.