ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS.

The following discussion is intended to assist in understanding the financial condition and results of operations of Advanced ID. You should read the following discussion along with our financial statements and related notes included in this Form 10-Q. The following discussion contains forward-looking statements that are subject to risks, uncertainties and assumptions. Our actual results, performance and achievements in 2009 and beyond may differ materially from those expressed in, or implied by, these forward looking statements.

Overview
Advanced ID is a complete solutions provider in the Radio Frequency Identification business with a focus on the tire management industry. Advanced ID is also involved in the tire inspection business. Advanced ID is active in the pet recovery business through its AVID Canada subsidiary in Calgary, Alberta and has developed a UHF RFID reader product line for global supply chain applications. Recently Advanced ID has expanded to other countries in Europe, China and is currently evaluating setting up a minority owned subsidiary in Brazil to address the rapidly growing RFID market in South America.

Results of Operations for the Six Months Ended June 30, 2009 and June 30, 2008.
The net loss of $303,239 for the six months ended June 30, 2009 was lower by $1,209,694 compared to last year due to lower selling and general and administrative expenses during the six months ended June 30, 2009.

Revenues
Revenues of $210,904 during the six months ended June 30, 2009 decreased by $501,117 or 70.38% from last year. This decrease can be attributed to a general slow-down in the economy resulting in lower sales levels. As a result of the slumping sales levels, the Company retained Petidco Sales and Marketing Ltd., to market its companion animal products in North America. Petidco will purchase products from Avid Canada on a cost plus basis and is assuming all costs associated with the Avid Canada operation. We believe that this will help to increase the profitability of the Company. In addition, we can now focus on the larger opportunities in overseas markets with less competition.

Cost of Revenues
Cost of Revenues of $112,244 for the six months ended June 30, 2009 decreased by $290,132 or 72.10% over same period in the previous year. The decrease in Cost of Revenues is attributed to lower sales levels. Gross profit of $98,660 decreased by $210,985 from the corresponding six month period ended June 30, 2008. The gross profit margin increased from 43.49% for the period ended June 30, 2008 to 46.78% for the period ended June 30, 2009. The increase was attributable to the sale of higher margin products during the current period.

Research and Development
Research and development expenses of $32,502 for the six months ended June 30, 2009 decreased by $1,904 or 5.53% from last year's comparable period. During the quarter ended June 30, 2009 the Company invested some funds into further development of applications for its readers.

15 General, administrative and selling expense For the six months ended June 30, 2009, general and administrative and selling expenses of $510,772 were lower by $1,084,605 or 67.98% than last comparable period mainly due to cost cutting measures imposed by the Company.

Interest income (expense)
During the six months ended June 30, 2009 net interest expense was $14,120 as compared to $2,961 during the same period last year. The increase is due to the interest on the outstanding debentures which was partially offset by the interest earned on the Company's promissory note receivable.

Impairment of property and equipment for the six months ended June 30, 2009 was $21,702 versus $Nil for the same period in 2008. In 2009, the Company recorded an impairment on its assets in China.

During the six months ended June 30, 2009, the Company recorded a gain on the sale of Pneu-Logic Corporation Limited of $219,156. The reason is that acquisition payables and accounts payable due to PLL and loans payable due to one of the directors of PLCL were waived.

Results of Operations for the Three Months Ended June 30, 2009 and June 30, 2008.

The net loss of $5,758 for the three months ended June 30, 2009 was lower by $1,048,878 compared to last year, due to higher selling general and administration costs in 2008 and the gain on sale of PLCL in the amount of $219,156 in 2009.

Revenues
Revenues of $64,410 during the three months ended June 30, 2009 decreased by $299,227 or 82.29% from last year. This decrease can be attributed to the lower sales levels in general due to economic conditions.

Cost of Revenues
Cost of Revenues of $38,289 for the three months ended June 30, 2009 decreased by $162,572 or 80.94% over same period in the previous year. The decrease in Cost of Revenues is attributed to slight changes in the product sales mix, lower sales and the re-focus on the Company away from the companion animal business in Canada. Gross profit of $26,121 decreased by $136,655 from the corresponding three month period ending June 30, 2008. The gross profit margin decreased slightly from 44.76% to 40.55%, reflecting the change in product mix.

Research and Development
Research and development expenses of $30,552 for the three months ended June 30, 2009 increased by $9,076 or 42.26% from last year's comparable period.

General, administrative and selling expense For the three months ended June 30, 2009, general and administrative and selling expenses of $195,092 were lower by $808,922 as compared to general and administrative and selling expenses of $1,004,014 for the three months ended June 30, 2008. The difference was mainly due to the cost cutting measures undertaken by the Company.

16 Other income (expense)
During the three months ended June 30, 2009, interest expense was $10,977 as compared to $2,088 during the same period last year mainly due to the interest on the La Jolla Cove debentures.

Liquidity and Capital Resources
As at June 30, 2009, we had cash and cash equivalents of $11,170.

During the six months ended June 30, 2009, net cash used in operating activities of $151,462 was lower by $481,373 or 76.07% as compared to the quarter ended June 30, 2008. The decrease in cash used by operating activities during 2009 resulted primarily from an overall decrease in general and administrative expenses as a result of cost cutting measures.

During the six months ended June 30, 2009, net cash used in investing activities was $4,746 compared to cash used in investing activities of $13,989 for the six months ended June 30, 2008. The decrease of $9,243 was mainly due to the Company's financial position which restricted its investing ability.

During the six months ended June 30, 2009, net cash provided by financing activities was $20,000 as compared to $701,458 for the six months ended June 30, 2008. The lower cash generated is a result of lower proceeds from sales of stock.

Our internal and external sources of liquidity have included cash generated from the exercise of options and warrants, proceeds raised from subscription agreements and private placements, and advances from related parties. We are currently not aware of any trends that are reasonably likely to have a material impact on our liquidity. We are attempting to increase the sales to raise much needed cash for the remainder of the year, which will be supplemented by our efforts to raise cash through the issuance of equities securities. It is our intent to secure a market share in the livestock and inanimate identification industry which we feel will require additional capital over the long term to undertake sales and marketing initiatives, further our research and development, and to manage timing differences in cash flows from the time product is manufactured to the time it is sold and cash is collected from the sale. Our capital strategy is to increase our cash balance through financing transactions, including the issuance of debt and/or equity securities.

OFF-BALANCE SHEET ARRANGEMENTS

We have no off-balance sheet arrangements.

CAUTIONARY STATEMENT REGARDING FORWARD LOOKING INFORMATION

Certain information set forth in this report contains "forward-looking statements" within the meaning of federal securities laws. Forward looking statements include statements concerning our plans, objectives, goals, strategies, future events, future revenues or performance, capital expenditures, and financing needs and other information that is not historical information. When used in this report, the words "estimates," "expects," "anticipates," "forecasts," "plans," "intends," "believes" and variations of such words or similar expressions are intended to identify forward-looking statements. Additional forward-

17 looking statements may be made by us from time to time. All such subsequent forward-looking statements, whether written or oral and whether made by us or on our behalf, are also expressly qualified by these cautionary statements.

Our forward-looking statements are based upon our current expectations and various assumptions. Our expectations, beliefs and projections are expressed in good faith and are believed by us to have a reasonable basis, including without limitation, our examination of historical operating trends, data contained in our records and other data available from third parties, but there can be no assurance that our expectations, beliefs and projections will result or be achieved or accomplished. Our forward-looking statements apply only as of the date made. We undertake no obligation to publicly update or revise forward- looking statements which may be made to reflect events or circumstances after the date made or to reflect the occurrence of unanticipated events.

There are a number of risks and uncertainties that could cause actual results to differ materially from those set forth in, contemplated by or underlying the forward-looking statements contained in this report. Those risks and uncertainties include, but are not limited to, our history of operating losses, lack of liquidity in our common stock, our dependence on key personnel, the expression by our auditors of uncertainty as to our ability to continue as a going concern, and the fact that we face substantial competition. Those risks and certain other uncertainties are discussed in more detail in our 2008 Annual Report on Form 10-K and our subsequent filings with the SEC. There may also be other factors, including those discussed elsewhere in this report that may cause our actual results to differ from the forward- looking statements. Any forward-looking statements made by us or on our behalf should be considered in light of these factors.