E Xact Transactions Ltd – ‘10KSB40’ for 12/31/00

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Annual Report — Small Business — [x] Reg. S-B Item 405   —   Form 10-KSB
Filing Table of Contents

Document/Exhibit                   Description                      Pages   Size 

 1: 10KSB40     Form 10-Ksb for the Fiscal Year Ended 12/31/2000      50    240K 
 2: EX-23.1     Consent of Deloitte & Touche LLP                       1      6K 

10KSB40   —   Form 10-Ksb for the Fiscal Year Ended 12/31/2000
Document Table of Contents

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SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549

 FORM 10-KSB

 X      Annual report pursuant to Section 13 or 15(d) of the Securities Exchange
---     Act of 1934                                                             

 For the fiscal year ended December 31, 2000

Or

X      Transition report pursuant to section 13 or 15 (d) of the Securities   
---     Exchange Act of 1934                                                    

 Commission file number: 333-89561

E-xact Transactions Ltd.
 -------------------------
(Exact name of Registrant as specified in its charter)

                                                        [Enlarge/Download Table]
                                                                                     
           Delaware                                              98-0212722          
-------------------------------                          ----------------------------
(State or other jurisdiction of                          I.R.S. Employer I. D. Number
 incorporation or organization)                                                      

2410-555 West Hastings Street, Vancouver, B.C., Canada            V6B 4N6            
-------------------------------------------------------           -------            
(Address of principal executive offices)                            (zip code)       

Registrant's telephone number, including area code:    (604) 691-1670           
                                             -------------

                                                        [Enlarge/Download Table]
                                                                                          
Securities registered pursuant to Section 12(b) of the Act:  None.                        
                                                             -----                        
Securities registered pursuant to Section 12(g) of the Act:  Common Stock, $.001 Par Value
                                                             -----------------------------

       Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of   
1934 during the preceding 12 months (or for such shorter period that the        
registrant was required to file such reports), and (2) has been subject to such 
filing requirements for the past 90 days. Yes  X     No                         
                         ---       ---

     Indicate by check mark if disclosure of delinquent filers pursuant to
Item 405 of Regulation S-K is not contained herein and will not be included     
herein, to the best of Registrant's knowledge, in definitive proxy or           
information statements incorporated by reference in Part III of the Form 10-KSB 
or any amendment to this Form 10-KSB: X .                                       
---   
  State issuer's revenues for its most recent fiscal year:  $241,504
                                                            --------

   Shares of common stock, $.001 par value, outstanding as of April 5,
2001:8,502,000 shares. Aggregate market value of voting stock held by           
non-affiliates of the registrant on April 5, 2001, $625,194.                    

Documents incorporated by reference:  None.                     

                                                                [Download Table]
                                                                               
Transitional Small Business Disclosure Format (check one):  Yes        No   X  
                                                                -----     -----

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E-xact Transactions Ltd.
 FORM 10-KSB
 TABLE OF CONTENTS

                                                        [Enlarge/Download Table]

Part I                                                                                Page
------                                                                                ----

                                                                                          
        Item 1.  Description of Business.................................................3

        Item 2.  Description of Property................................................12

        Item 3.  Legal Proceedings......................................................12

        Item 4.  Submission of Matters to a Vote of Security Holders....................12

Part II                                                                                   
-------                                                                                   

        Item 5.  Market for Common Equity and Related Stockholder Matters...............12

        Item 6.  Management's Discussion and Analysis or Plan of Operation..............14

        Item 7.  Financial Statements...................................................19

        Item 8.  Changes in and Disagreements with Accountants on Accounting............20
                 and Financial Disclosure                                                 

Part III                                                                                  
-------                                                                                   

        Item 9.  Directors and Executive Officers; Compliance with Section 16(a)........20
                 of the Exchange Act                                                      

        Item 10. Executive Compensation.................................................23

        Item 11. Security Ownership of Certain Beneficial Owners and Management.........24

        Item 12. Certain Relationships and Related Transactions.........................26

Part IV                                                                                   
-------                                                                                   

        Item 13. Exhibits and Reports on Form 8-K.......................................29

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E-xact Transactions Ltd.
 FORM 10-KSB
FORWARD-LOOKING STATEMENTS

      Statements made in this Form 10-KSB that are not historical or current
facts are "forward-looking statements" made pursuant to the safe harbor         
provisions of Section 27A of the, Securities Act of 1993 ("The Act") and Section
21E of the Securities Exchange Act of 1934. These statement often can be        
identified by the use of terms such as "may," "will," "expect," "believes,"     
"anticipate," "estimate," or "continue," or the negative thereof. The Company   
intends that such forward-looking statements be subject to the safe harbors for 
such statements. The Company wishes to caution readers not to place undue       
reliance on any such forward-looking statements, which speak only as of the date
made. Any forward-looking statements represent management's best judgment as to 
what may occur in the future. However, forward-looking statements are subject to
risks, uncertainties and important factors beyond the control of the Company    
that could cause actual results and events to differ materially from historical 
results of operations and events and those presently anticipated or projected.  
These factors include adverse economic conditions, entry of new and stronger    
competitors, inadequate capital, unexpected costs, failure to gain product      
approval in United States or foreign countries and failure to capitalize upon   
access to new markets. Additional risks and uncertainties that may affect       
forward-looking statements about the Company's business and prospects include   
the possibility that a competitor will develop a more comprehensive solution,   
delays in market awareness of its products, possible delays in marketing        
strategy, which could have an immediate and material adverse effect by placing  
the Company behind its competitors. The Company disclaims any obligation        
subsequently to revise any forward-looking statements to reflect events or      
circumstances after the date of such statement or to reflect the occurrence of  
anticipated or unanticipated events.                                            

PART I

ITEM 1. DESCRIPTION OF BUSINESS                                                 

CORPORATE HISTORY                                                               

      The Company was incorporated under the laws of the Province of British
Columbia on August 13, 1998. On July 29, 1999 the Company filed a certificate of
domestication and certificate of incorporation with the secretary of state of   
the State of Delaware, thereby "domesticating" or transitioning from a Canadian 
company to one organized under the laws of the State of Delaware.               

     The Company's principal office is located at 2410 - 555 West Hastings
Street, Vancouver, British Columbia, V6H 4N6 Canada. The Company's registered   
agent in the U.S. is located at 1209 Orange Street, Wilmington, Delaware 19801  
USA. The Company has one subsidiary which operates in Canada.                   

 The Company offers an electronic commerce, known as "e-commerce,"
software solution for real-time transaction processing which allows PC based    
cash registers, PCs, point-of-sale terminals, computer systems and proprietary  
product platforms to accept credit card payments and submit those payments to   
various payment processing companies for authorization and settlement/deposit.  
The Company has acquired and developed software and a network system to act as a
third party payment processor to conduct transaction processing with major banks
in North America. The Company is currently approved to conduct transaction      
processing with major banks and credit unions in Canada and has a gateway with  
Vital Processing Services, a U.S.-based credit card processing network, allowing
the Company to process financial transactions with many of the major banks in   
the U.S.                                                                        

       The Company was founded in 1998, by the Sutton Group Financial Services
Ltd. and DataDirect Holdings Inc. On September 1, 1998, each of Sutton Group and
DataDirect transferred to the Company their respective interests in certain     
computer software designed by DataDirect, known as the Transaction Software     

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and Processing System, in exchange for ninety-nine shares of common stock of the
Company each. The software system offered has real time credit card transaction 
processing capabilities for other e-commerce providers.                         

       Version 2.0 provided the ability to move transactional data between the
Company's system and the Royal Bank of Canada, the largest bank in Canada in    
terms of assets and the only financial institution with which it was certified  
to process financial transactions at the time. Throughout the autumn of 1998,   
the Company focused on further testing of its system and enhancing its          
scaleablity. Testing was undertaken with six clients, each focused on a         
different type of application, including an internet based storefront, a        
physical point-of-sale location, a telephone based voice response system and a  
billing system. In January 1999, the Company received certification from Shared 
Network Systems, a firm that processes financial transactions for most other    
banks and credit unions in Canada.                                              

Version 3.0 of the Company's transaction processing component was released in   
January 1999. The software allowed other computers to speak to the Company's    
computers. Following this release, the Company introduced versions for various  
computer operating systems including LINUX, UNIX and JAVA. In June 1999, the    
Company released version 4.0 of its software system and it also established its 
internet web site. Version 4.0 focused on providing transaction processing,     
reporting and support services for e-commerce merchants. The Company has gained 
two hundred and forty five additional clients since the previous year.. In      
November, 1999 the Company recruited a CEO to build a management team in the US 
marketplace. During 2000, US management recruited additional staff to design and
build specific technologies to create additional sales opportunities in the     
North American transaction processing arena. In the fourth quarter of 2000, the 
Company reassessed its postion in the US. It felt that the present US management
team was unable to achieve US market penetration and as a result, the Company   
elected to change management and consolidate its operations in Vancouver, B.C.  
All costs related to this closure were accrued and totaled approximately        
$15,000.                                                                        

Version 5.0 of the Company's transaction processing components and gateway      
software was released in May of 2000 bringing added functionality and           
consistency to all the components the company offers. The Company also completed
its second transaction product called Speedy Merchant. Speedy Merchant is a web 
based service which provides on-line application and real-time credit and risk  
scoring for the merchant account provider (normally a bank) . The merchant      
account provider can use Speedy Merchant to automate its existing credit scoring
process, dramatically reducing the time it takes to to provision a new merchant 
account for the applicant. The Company expects to provide the new service in the
second or third quarter of 2001.                                                

NARRATIVE DESCRIPTION OF BUSINESS                                               

   Due to the recent changes in the capital markets, especially in the
technology sector, the Company has changed the overall operating and management 
structure in order to adapt to the current conditions. In November, 2000 Ted    
Henderson resigned as CEO and President and Peter Fahlman was named as the      
Company's new CEO and President. The Company's new management began the closure 
of the corporate head office in Lakewood, Colorado and consolidated all         
operations in its Vancouver office. Management felt it was a necessary step to  
reduce costs as much as possible to ensure its continued operations, and as of  
April, 2001, the Company had no US operating expenses. The Company continues to 
focus on growth segments and on companies conducting business over the internet.
The Company can process transactions in U.S. and Canadian dollars through credit
card merchant accounts for Visa, MasterCard, American Express, Discover, Diners 
Club, and JCB. The system is secured by sophisticated encryption technology in  
addition to the existing industry standard electronic security such as          
firewalls. In addition to the web-based transaction processing, the Company also
offers transaction processing via other applications for call centres, billing  
systems and other enterprise programs.                                          

     As of today's date, the Company has released its fifth version of the
software to run on various operating systems. The software does not require a   
lengthy installation or integration process; users need only                    

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enable the software within their computer operating environment. Once activated,
merchants are ready to start accepting customer credit cards, provided they have
established a merchant account with a bank for funds settlement.                

 The Company also provides merchants a variety of reports with the
transaction processing system, such as a full suite of accounting tools that    
help customers manage their e-commerce activities such as detailed billing      
statements, transaction search engine, web point of sale terminals and reporting
services.                                                                       

  In order to leverage its marketing efforts, the Company offers its
e-commerce transaction processing solution to partners, which can offer it in   
turn to their clients, as well as to merchants directly. The Company's partners 
may receive a percentage of every transaction fee processed by shared customers 
and may use the Company's comprehensive web tools and services for the benefit  
of such partner's clients or e-merchants.                                       

        A key advantage of the Company's transaction processing software is that
it can be easily integrated with most existing systems and is able to           
communicate with most banks in North America. Additionally, the Company provides
the interface to match a customer's existing operations rather than requiring   
them to meet and design their systems to the Company's pre-defined protocols.   

PRODUCTS AND SERVICES                                                           

       The Company's product/service is a combination of an online service and
a suite of software that act as a real-time payment mechanism for e-commerce,   
either over the internet or via a wide range of other electronic networks.      

How the system works utilizing the internet:                    
         When a customer makes a purchase using a credit card on the web site of
a merchant whose e-commerce system incorporates the Company's 
       transaction component, the payment information is first sent securely
    in encrypted format to a secure computer server. A firewall exists
       between the internet and web servers/transaction servers to safeguard
against any unauthorized intruders.                           

      The encrypted payment information is then sent through another, much
        more extensive firewall to the Company's Gateway Server, from which it
        is sent onward to the banking network to be approved or declined. Once
        approved or declined, the information is returned back securely to the
       web site where only the customer can see the results. The information
         regarding each transaction is also forwarded from the Company's Gateway
         Server to a database to be logged as part of an audit trail. The entire
      process takes place almost instantaneously, typically in two to five
seconds.                                                      

The Company's transaction software and processing system        
        The current processing system, released in May 2000, version 5.0, is a
       combination of custom software applications and processes that run on
     the Windows NT Server 4.0 operating system. The primary function of
  these applications/processes is to perform real-time credit card
       transaction processing through certified links with the Royal Bank of
         Canada and Shared Network Systems in Canada an Vital Processing Service
in the United States.                                         

The Company's system has five components:                       
Gateway Server                                                
Transaction Server                                            
Remote Transaction Component                                  
Audit Database                                                
Secure Web-based Merchant Tools                               

        THE GATEWAY SERVER facilitates real-time credit card processing with any
of the major chartered                                                          

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banks and credit unions in Canada. It currently participates directly with the  
Royal Bank Merchant Host Network, and also communicates electronically with the 
Shared Network Systems network. Through the Company's certified connection with 
Shared Network Systems, the Gateway Server can process transactions to account  
holders from any of the major banks in Canada. The Vital Processing System      
enables the Gateway Server to process transactions with many of the banks in the
United States.                                                                  

    THE TRANSACTION SERVER communicates with the Gateway Server and also
provides communications to the Remote Transaction Component. The Transaction    
Server resides within the Company's network and is accessible on the internet   
via the Remote Transaction Component.                                           

        THE REMOTE TRANSACTION COMPONENT is a custom software component that can
be installed/ integrated in various computer environments to enable credit card 
transaction processing on the Company's network. Merchants can download this    
component from the Company's web site at www.e-xact.com in any of four formats, 
depending upon which operating system the merchant uses.                        

     Once installed on the user's system, the Remote Transaction Component
will connect via the internet to the Company's Transaction Server and           
subsequently the Gateway Server and the financial networks. The Company requires
that merchants have a specific electronic security system known as Secure Socket
Layer protocol operational on their site to provide the security necessary to   
conduct transactions securely via the internet. Encryption is also part of the  
component, ensuring that all transmissions between itself and the Transaction   
Server are safe from other users on the internet. The current version of the    
Remote Transaction Component processes transactions to all the major Canadian   
banks and many of the banks in the United States.                               

     THE AUDIT DATABASE incorporates the added functionality of processing
with the additional Canadian Chartered banks. Every transaction is processed by 
the Gateway and logged to the Audit Database to create an audit trail.          

       THE SECURE WEB-BASED MERCHANT TOOLS are a group of reporting, auditing,
searching and processing functions available to merchants who have the proper   
access credentials for the Company's system. The system can be accessed through 
any popular web browser and data is delivered almost instantly. Added           
functionality is available through specific tools such as the web based         
point-of-sale terminal where merchants can process credit card transactions     
directly to their merchant account from anywhere on the internet. Through the   
Company's member services on the web site, merchants can track every sale for up
to three years, check statements for totals, deposits made and customer         
spending, among other functions. Security systems limit access to this          
information to the merchant authorized for each account.                        

Dedicated transaction servers                                   
      For merchants that require a transaction server that is only used by
    them, the Company can provide a dedicated server to centralize all
  financially based transactions within a single organization. The
    servers allow for local auditing and reporting of all transactions
     conducted through the specific server. Using the internet (or other
     communications medium), the merchant can interact directly with the
     Company's Gateway Server for a comprehensive electronic transaction
processing solution, including complete maintenance and audit 
capabilities.                                                 

Non-web based transactions                                      
         The Company also works with clients to integrate transaction processing
     services with telephone-based electronic funds transfer and billing
         services that do not utilize the internet. Typically, these systems are
      closed networks that do not require the level of additional firewall
         security as is required for internet transactions which can be accessed
      by anyone in the world. The systems The Company has developed can be
applied to virtually any type of electronic network.          

Financial transaction processing certification                  

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    Certification with transaction processing networks that handle the
       financial transactions that the Company's product/service is designed
    for is an integral and necessary part of the Company being able to
        offer its services. Banking and other financial networks operate under
     stringent regulation which requires that their computer networks be
        highly secured in order to protect privacy and to ensure the integrity
        of the network. Accordingly, any company that wants to offer a service
         that would access an existing banking or financial network must undergo
       a comprehensive process of review and testing prior to being approved
       to access to the network. Before an applicant company is permitted to
         go through this review, the bank or processing system must be satisfied
    that the company is capable of handling mission critical processes
      meeting its requirements, and that its system will operate correctly
and securely.                                                 

STAGE OF DEVELOPMENT AND COSTS                                                  

    The Company's current Transaction Software and Processing System has
been in full operation since June of 1999. The system is fully operational and  
approximately 6,600 transactions were processed per day through the Company's   
systems for the year ended December 31, 2000. Since the software deployment in  
September, 1998, the Company has processed approximately 3.9 million            
transactions.                                                                   

DEVELOPMENT PLANS                                                               

   The Company intends to continue to upgrade and enhance its combined
systems and software focusing on the following key areas.                       

Further development of the fraud protection and risk assessment aspects of the  
system enabling merchants to more securely process online credit cards with the 
aid of automated tools to lower the merchant's risk in accepting credit cards   
online. The Company has expanded its basic fraud engine and developed new fraud 
tools that will enable merchants to qualify transactions that exceed certain    
thresholds that the merchant can set. These thresholds, or rules include:       
     Maximum sales volumes for one day, five day and thirty day periods.
      Card purchasing limits for one day, five day and thirty day periods.
Better Address Verification rules and criteria                

       In addition, the Company is assessing and analyzing the inbound sign-up
process and plans to develop a more streamlined and automated procedure to help 
merchants sign-up and engage its services. Specific design of a fully automated 
online sign-up site allowing first time merchants to download all needed        
components, information, and automatically pay for the Company's services is    
intended to be deployed to dramatically reduce the cost and time of acquiring   
new customers.                                                                  
 The Company will continue its focus on development on all mission
critical aspects of the system. The recent release of version 5.2 has increased 
stability in the entire system which has been delivering an average of 99.9%    
uptime for the last 3 months beginning in December 2000. The release of version 
5.2 software components gives the company functional consistency of all of its  
software objects. This consistency makes the software and the entire system much
easier to support and therefore also reduce overall support costs. Additionally,
the Company plans to upgrade the security of it's network and database          
encryption.                                                                     

        The Company plans to continue to extend the connectivity capabilities of
its system and software in order that transactions can be processed anywhere in 
the world. The Company is in the process of completing its certification with   
First Data Corporation, a large transaction processing network in the U.S.      
Management believes that this would expand the Company's position in the U.S.   
marketplace by providing broader processing capabilities and allow service with 
over 95% coverage of the U.S. banks.                                            

 The Company plans to enhance the merchant account tools including
additional levels of password protection so that access would be restricted to  
individuals granted appropriate authorizations, this would be                   

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managed through a user profile system. In order to do this the Company is in the
process of ugrading its database structure to accommodate the added             
functionality and profile control. In addition, the Company continues to enhance
its reporting capabilities and is researching the development of moving the     
audit data back to the merchant in real time as a value added data transaction. 
The Company will continue its development efforts in moving data transactions   
via emerging XML technology.                                                    

CONCENTRATION OF SALES                                                          

      For the year ended December 31, 2000 approximately 45 % ( 1999 - 62 %)
of the Company's revenues were obtained from two customers ( 1999- one          
customer). Two customers accounted for 58% of accounts receivables at December  
31, 2000(1999, 40% of the Company's total accounts receivables at December 31,  
1999). In 2000 approximately 98% of processing/monthly fee revenues were derived
from Canadian sources and 2% was derived from US sources and in 1999 all revenue
was derived from Canadian sources.                                              

THE MARKET FOR THE PRODUCT                                                      

E-commerce                                                      
The term "E-commerce" encompasses the use of the internet for 
      marketing, advertising, trading, and selling goods and services. The
        ability to use the internet for marketing and advertising results from
      the power to communicate information through the internet to a large
        number of individuals, businesses as well as consumers. The ability to
        use the internet to consummate sales and other commercial transactions
       results from the power to conduct two-way communication from merchant
to buyer and from buyer to merchant through the internet.     

Business and the internet                                       
      In order to conduct business over the internet and accept payment by
         credit card, a merchant needs a merchant account. A merchant account is
        an identification number that identifies a business that is authorized
         to process credit card payments. A merchant account for online sales is
different from a merchant account used in a traditional store.

Transaction processing                                          
        The internet has opened up new possibilities for processing many types
of financial transactions.                                    
         . Continued growth of internet commerce will depend in part on: (1) the
        ability of buyers and sellers to use familiar forms of payment online,
   such as credit and debit cards and checks, in a simple and secure
         manner; and (2) the availability of payment software and services that:

          securely transmit and store payment information with minimal
interruption of a consumer's online experience;   

   are convenient for merchants to install and maintain;

         connect merchants to major payment processors and financial
institutions;                                     

               facilitate familiar types of transactions from the physical world
- (such as bill payment) on the internet; and     

              provide common payment platforms for merchants selling goods and
     services both at physical points-of-sale and electronic
storefronts.                                      

MARKETING PLAN                                                                  

        The Company's management has determined that the most effective means by
which to market its transaction processing product/service is in two primary    
areas. The first is an automated, wider appeal approach to penetrate the        
software developers community by making our software developer's kit available  
free                                                                            

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of charge with extensive documentation that developers can use to easily        
integrate our technology into their specific solution without direct interaction
with the Company. The Company plans on increasing the visibility of its software
by making it available for download directly from the developer's communities'  
websites The second approach is a direct sales effort through a number of       
marketing channels rather than pursuing a mass marketing effort directly to     
merchants. These channels have been identified as the primary sources which     
merchants contact and through which they typically work in order to establish   
their internet e-commerce systems. Firms within these channels become the       
Company's partners.                                                             

    Partners in these market channels provide the Transaction Processing
Component to the merchant--typically, as if it is part of their own             
product/service. For example, a financial institution or internet service       
provider can provide the Transaction Processing Component to companies it works 
with as part of its e-commerce services.                                        

 Where it is necessary, as with financial institutions that become
partners, the Company establishes dedicated network connections in order to     
ensure the integrity of the system and to maximize security. Non-internet based 
applications may also require dedicated network connections.                    

        Application developers integrate the Company's payment capabilities into
their products, seamlessly providing merchants setting up their own e-commerce  
web site with the ability to accept secure payments by credit card over the     
internet.                                                                       

       The Company will provide the partners with a reduced wholesale cost for
its services that partners can re-sell to their clients . Partners are required 
to to administer the service to their customers and the Company will bill the   
partner directly. The Company has two pricing structures, wholesale and retail. 
Wholesale prices apply partners such as internet service providers, web         
developers, application developers and financial institutions. Retail rates     
apply to businesses selling products or services directly to consumers.         

     The Company charges an activation fee for each customer that uses the
Company's services. This fee is charged only once per account. The monthly      
service charge is to maintain the merchant account(s) with the Company's        
servers. Included in this charge is access to the Company's member services that
feature tools such as internet point of sale terminals, transactional searching,
and reporting tools. The Company also charges a transaction fee for each        
transaction that is processed by the Company on behalf of its customers.        

TARGET MARKET CHANNELS                                          

      The Company considers internet service providers, web developers and
application developers as technical market channels since they understand       
software, servers, connectivity and other aspects necessary for integrating the 
Company's Transaction Processing Component. A key aspect of the Company's       
marketing to these technical channels is the fact that its software is easy to  
integrate. The Company provides an interface to communicate with the most common
operating systems such as JAVA, LINUX, UNIX and Windows. This reduces the       
technical barrier and makes it easier for these companies to incorporate the    
Company's transaction processing component with their existing software and     
systems.                                                                        

        A second key aspect of the Company's marketing to these channels is that
its Transaction Processing Component can be virtually transparent to end users  
of products and services provided by the companies in these channels. The       
Company can be identified only by a company logo. Internet service providers    
present a dual market by providing the Company Transaction Processing Component 
as part of e-commerce solutions that they sell to their customers and by using  
the Company's system to handle their own transaction processing (accepting      
payment for their internet access programs and other services).                 

Web developers can provide the Company's Transaction Processing 
Component as an integrated part of e-commerce solutions that they develop and   
manage for clients. For each transaction processed through                      

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those e-commerce solutions, the web developer would be charged a wholesale fee  
for the services.                                                               

      Application developers include both those that are developing software
designed for internet e-commerce and developers of other transaction processing 
applications. An example of another transaction processing application would be 
a computerized point-of-sale terminal, as where a customer visits a business,   
makes a purchase, pays by credit card and the credit card information is entered
into the terminal or a personal computer by a cashier or sales agent. The       
transaction is then sent via the internet through the Company to the bank for   
approval. Although the approval process travels over the internet, the actual   
point of sale may not have been conducted via the internet.                     

Financial Institutions                                          

       The Company has been able to take advantage of having first established
a relationship with the Royal Bank to secure additional other clients and to    
develop relationships with other financial institutions, such as Shared Network 
Services and, more recently, the Bank of Nova Scotia. Typically, these          
relationships can provide many referrals of other direct clients.               

Direct Marketing to Merchants                                   

   Direct marketing does not currently comprise a major portion of the
Company's marketing strategy, however, it is taking place via the Company's web 
site and through word-of-mouth. The Company will continue to maintain its       
website making it possible to download the Company's transaction processing     
component from its web site at www.e-xact.com. . Typically, these downloads are 
from companies with which the Company has had no direct prior contact. .        

     In addition, most of the Company's current client base has made first
contact with the Company by way of word-of-mouth referrals. Among the Company's 
approximately 245 current clients are the BC Children's Hospital, Dell Computer 
Corporation , Sony Music Canada and Intrawest Resorts.                          
       In the third quarter of 2000, the Company completed a service agreement
with Dell Computer Corporation. The Company was to provide real time credit card
transaction processing for customer purchases made through Dell's Canadian call 
centres and web storefront. The Company's software was integrated into Dell's   
order fulfillment and shipping systems. This automation allowed Dell to operate 
more efficiently by removing many manual steps in the fulfillment and shipping  
procedures. The Company also granted Dell Ventures LP warrants to purchase      
549,532 shares of the Company. The term of the warrant is for two years and will
terminate on the fifteenth day that the Company's common shares close trading at
a price equal to 200% of the warrant exercise price of $2.25 per share. The     
warrants were valued at $320,000 and were recorded as an expense in 2000. The   
valuation was based on an option pricing model assuming no dividends are paid,  
full vesting on date of grant, a volatility factor of 43% and a weighted-average
annualized risk-free rate of 6.0%.                                              

OPERATIONS                                                                      

     In December , 2000 the Company closed its operations in Lakewood,
Colorado. Its main office and operations are located in Vancouver, B.C., Canada.

       The processing center for the Company is also located in Vancouver B.C.
This facility houses the Company's computer center for processing all           
truncations over the Internet. Network servers providing connectivity to        
processing systems and the Internet are securely maintained in two, physically  
separated                                                                       

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locations.                                                                      
INTELLECTUAL PROPERTY                                                           

Generally speaking, the Company relies on general trademark and 
copyright law to protect its products. The Company has formally registered its  
primary trademark, E-xact Transaction but has not yet been granted the trademark
protection and has not obtained any patent protection for any of its products.  

COMPETITION                                                                     

    The market for internet commerce software and services is relatively
new, intensely competitive, quickly evolving, and subject to rapid technological
change. Numerous companies are developing e-commerce and online financial       
transaction technologies and systems. Key competitors include:                  

     CyberCash, Inc. of Reston, Virginia - CyberCash offers secure payment
transaction services that encrypt credit card information. Other offerings      
include electronic cash payment software and electronic billing and payment     
software. CyberCash's complete payment solutions, which span the traditional    
retail market to the Internet, provide electronic commerce solutions for        
merchants, as well as hardware and software providers and Internet service      
providers.                                                                      

  Authorize.Net Corporation of Provo, UT - Authorize.Net Corporation
develops, markets, and sells Authorize.Net, a line of products and services that
provide solutions for authorizing, processing, and managing credit card and     
electronic check transactions over the internet. Authorize.Net's transaction    
processing system sends them on to the financial institutions for processing.   

Internet Secure Inc. of Oakville, Ontario - Internet Secure is a
Canadian corporation which provides a secure, on-line, real-time credit card    
processing system for internet merchants. Internet Secure demonstrated a secure,
on-line, real-time credit card processing system that has been approved by two  
of the top six banks in Canada. Currently the company offers Canadian dollar    
merchant status for Visa, MasterCard and AMEX and US dollar merchant status for 
Visa and MasterCard approved and supported by Canadian and American Banks.      

  Eliance Corporation of Minneapolis, Minnesota - Eliance focuses on
providing its customers with e-commerce solutions including merchant accounts,  
POS software and transaction processing as well as order tracking and           
fulfillment services.                                                           

    E-Commerce Exchange of Irvine, California - E-Commerce Exchange is a
nationwide credit card processing company, specializing in merchant account,    
credit card and electronic check transaction solutions for non-traditional      
merchants within the internet, home-based, phone order/mail order industries.   
E-Commerce Exchange focuses on serving traditionally hard-to-place businesses,  
such as home-based or new merchants, business owners with credit problems, high 
risk businesses, and others which are considered non-conventional by banks and  
other credit card processors.                                                   

RESEARCH AND DEVELOPMENT EXPENDITURES                                           

       The Company conducts research and development through internal research
projects. Costs are                                                             

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incurred from time to time, in specific projects that employ existing           
technologies for which feasibility has previously been established to develop   
applications. Production costs for the development of the software used for     
which technological feasibility has been established but before the product is  
ready for sale, are capitalized when broad applications are identified within   
its existing product lines. The Company incurred $742,767 of expenses relating  
to research and development in 2000 compared to $193,765 in 1999.               

EMPLOYEES                                                                       

    As of December 31, 2000, the Company had 9 full-time employees. That
number includes one technical support, four programmers, two marketing, and two 
senior management personnel.                                                    

ITEM 2. DESCRIPTION OF PROPERTY                                                 

      The Company maintains leased facilities in the locations listed below.

                                                                [Download Table]


       Function                                                  Current  
       --------              Location        Square  Term of     Annual   
                             --------         Feet    Lease    Lease Costs
                                              ----    -----    -----------

                                                                          
Canadian  Office  555 West Hastings Street,                               
                  Suite 2410 Vancouver, B.C. 1,300   10/31/02  Cdn $42,218

    The facility in Vancouver British Columbia, Canada serves as the
Company's processing center with the lease expiring October 31, 2002. The       
Company terminated its lease in Lakewood, CO, in December , 2000. The Company   
has signed a promissory note to pay the landlord $4,000 in full and final       
settlement of the lease in June 2001.                                           

ITEM 3. LEGAL PROCEEDINGS                                                       

       There are no material legal proceedings pending to which the Company is
a party, or to which the property of the Company is subject.                    

ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS                     

None.                                                           

 PART II

ITEM 5. MARKET FOR COMMON EQUITY AND RELATED STOCKHOLDER MATTERS                

    On March 22, 2000 the Company completed an IPO of it common stock in
Canada on the facilities of the Canadian Venture Exchange ("CDNX"). The price to
the public in the initial public offering was $1.00 per share. The stock symbol 
is EXZ.U                                                                        

   The Company was a private company for all of 1999 and thus a public
quote for the Company's stock                                                   

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does not exist for that year                                                    

                                                        [Enlarge/Download Table]

Stock quotes for 2000 and 2001 (US Dollars)                                                   
Date                     Open price          High   Low     Close  Quarterly volume           
                                                                                              
Mar. 31, 2000            $5.00              $5.00  $4.60  $4.70        56,600                 
June 30, 2000             1.90               1.90   1.80   1.83       541,000                 
Sept. 29, 2000            1.30               1.30   1.30   1.30       377,500                 
Dec. 28, 2000             0.25               0.25   0.25   0.25       849,600                 
Mar. 30, 2001             0.15               0.15   0.15   0.15       518,400                 
Apr. 5 ,2001              0.16               0.16   0.15   0.15       120,000 (April 1-5,2001)

        There were 63 shareholders of the Company as at April 5, 2001 holding in
aggregate 8,502,000 shares of which 62 registered shareholders hold in aggregate
5,867,960 shares and 2,634,040 shares are held by CDS & Co. in street form.     

 The Company has never declared a dividend on its common stock and
intends for the foreseeable future, to retain all earnings, if any, for the     
development of its business opportunities. The payment of future dividends will 
be at the discretion of the Company's board of directors and will depend upon,  
among other things, future earnings, capital requirements, financial condition  
and general business conditions.                                                

      The transfer agent for the Company's common stock is Pacific Corporate
Trust Company, 625 Howe Street, Suite 830 Vancouver, BC V6C3B8.                 

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ITEM 6. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS 
OF OPERATION                                                                    

   The following discussion should be read together with the Company's
consolidated financial statements and accompanying notes included elsewhere.    

Exchange Rates

 All dollar amounts herein are stated in U.S. dollars except where
otherwise indicated. The following table reflects the rate of exchange for      
Canadian dollars per U.S. $1.00 in effect at the end of the following periods   
and the average rate of exchange during such periods, based on the Bank of      
Canada average noon spot rate of exchange:                                      

                                                                [Download Table]

---------------------------------------------------------------------------------
                                         YEAR ENDED DECEMBER 31                  
                               1998              1999                2000        
                                                                                 
Rate at end of period:     Cdn. $1.5333      Cdn. $1.4433         Cdn$1.4979     
Average rate for period:   Cdn. $1.4831      Cdn. $1.4858         Cdn$1.4851     
---------------------------------------------------------------------------------

On April 6, 2001, the Bank of Canada noon spot rate of exchange was U.S. $1.00 =
Cdn. $1.5613.                                                                   

INTRODUCTION                                                                    

       The Company was incorporated under the Company Act of British Columbia,
Canada on August 13, 1998. On July 29, 1999 the Company was reincorporated in   
the state of Delaware, USA. The Company earns its revenue by charging its       
customers a setup fee, a monthly membership fee and a transaction fee.          
Transaction fees are based on the number of transactions processed in a month.  
      The Company offers electronic commerce software services for real-time
transaction processing. The software allows PC based cash registers, PCs,       
point-of-sale terminals, computer systems and proprietary product platforms to  
accept credit card payments and to submit those payments to various payment     
processing companies for pre-authorization and settlement/deposit. The Company  
has acquired and developed software and a network system toast as a third party 
payment processor to conduct transaction processing with major banks in North   
American. The Company is currently approved to conduct transaction processing   
with major banks and credit unions in Canada and the US.                        

During the year ended December 31, 2000, the Company released version 5.0 of its
software in Com, Java and Perl platforms. The Company's e-commerce solution is  
functional across major operating environments and it requires minimal          
investment of resources from a new customers to be fully integrated with        
E-xact's services.                                                              

The Company determined that as of April 1, 2000 its functional currency was the 
United States dollar ("US Dollars"). Previously the functional currency of the  
Company was the Canadian dollar. The change in the Company's functional currency
was made as the majority of the Company's operating and financing transactions  
are now denominated in the US dollar. Monetary assets and liabilities           
denominated in other than the US dollar are translated using the exchange rates 
prevailing at the balance sheet date. Revenues and expenses are translated using
average exchange rates prevailing during the period. Gains and losses on foreign
currency transactions are recorded in the consolidated statement of operations. 
The Company has remeasured its assets, liabilities, revenues and expenses for   
prior years using the historical exchange rate in existence at the date of the  
transaction.                                                                    

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 FISCAL YEAR ENDED DECEMBER 31, 2000 COMPARED TO
FISCAL YEAR ENDED DECEMBER 31, 1999 
 (ALL AMOUNTS ARE EXPRESSED IN US DOLLARS)

        REVENUES - The Company's revenue consists of setup fees and transactions
fees. In 2000 total revenues increased $144,713, or 151% from $95,791 in 1999 to
$240,504 in 2000. The revenues were derived primarily from transaction          
processing fees and monthly service fees.                                       
     The Company's customer base grew from 8 in 1999 to 245 in 2000, while
the cumulative number of transactions processed since deployment of the software
in September , 1998 was 3.9 million.                                            

GROSS MARGINS - The Company's gross profit margin in 2000 was   
approximately 52% compared to 69% in 1999. The decrease in profit margin was due
to additional costs incurred in setting up the US market and without a          
commensurate increase in revenue in that market.                                

GENERAL AND ADMINISTRATIVE EXPENSES ( G&A ):                    
G&A expenses increased from approximately $468,000 in 1999 to approximately     
$1,424,000 in 2000. The increase was due primarily to the establishment of a US 
office in Colorado; legal expenses increased from $0 in 1999 to approximately   
$125,000 in 2000. This increase was due to filing and reporting requirements as 
a public issuer and trade mark protection; rent which increased from            
approximately $36,000 in 1999 to approximately $111,000 in 2000; office and     
miscellaneous expenses which increased from approximately $22,500 in 1999 to    
approximately $178,000 in 2000, wages and salaries which increased from         
approximately $62,000 in 1999 to approximately $448,000 in 2000;                
telecommunication expenses which increased from approximately $9,000 in 1999 to 
approximately $91,000 in 2000. These increases all related to the establishment 
of the Colorado office. The Company expects G&A expenses for the year 2001 to be
substantially lower as a result of the closure of the US operations.            

SALES & MARKETING  ( S&M) :                                     
S&M increased from approximately $57,000 in 1999 to approximately $1,101,000 in 
2000. The increase includes a non-cash charge of $320,000 for warrants issued to
a customer in connection with a service agreement simultaneously signed with the
same customer group. The valuation of the warrants were based on Black-Scholes  
option pricing model using a volatility factor of 43% and a weighted-average    
risk free rate of 6.0%. Advertising and promotion increased from approximately  
$8,000 in 1999 to approximately $126,000. The Company embarked on a advertising 
campaign in the US during the year. Travel increased from approximately $13,000 
in 1999 to approximately $199,200 in 2000. Travel expenses were incurred by     
management and sales staff as the Company promoted its products at trade shows  
and made presentations to a number of prospects. Marketing payroll increased    
from approximately $37,000 in 1999 to approximately $411,500 in 2000. Additional
marketing and support staff were employed in 2000. The Company expects S&M      
expenditures to be much lower in 2001 as a result of a substantial reduction in 
staff . The Company will still maintain its visibility in the market place via  
its website and networking contacts.                                            

RESEARCH AND DEVELOPMENT ( R&D) :                               

      R & D expenses consist of compensation expenses and consulting fees to
support the development of the Company's software and services. Production costs
for the development of the software for which the technological feasibility has 
been established but before the product is ready for sale are expensed.         
 R&D expenditures increased from approximately $194,000 in 1999 to
approximately $743,000 in 2000. Consulting fees increased from approximately    
$125,000 in 1999 to approximately $322,000 in 2000, while programming expense   
increased from approximately $58,000 in 1999 to approximately $358,000. The     

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Company originally had a US Gateway certification with Vital Processing.        
Additional development expenses were incurred to further develop the Company's  
software for more robust connectivity. In addition, VISA announced in the second
quarter of 2000 that it would require all processors to add additional          
functionality to accommodate internet based transactions. As a result of these  
additional requirements, the Company incurred more software development         
expenses. The Company is also in the process of working with its second US      
Gateway certification. Additional programming expenses were incurred to upgrade 
all the Company's software primary components (COM, JAVA and PERL) to Version   
5.0.                                                                            

      OTHER INCOME (EXPENSES) -Interest income totaled approximately $19,000
in 2000 compared to $1,411 in 1999. Interest income was received on IPO funds   
invested during the year. In addition, unrealized and realized exchange gain and
losses totaled approximately $38,000.                                           

        INCOME TAXES - Owing to a tax loss incurred during the year, the Company
has a net tax recovery of approximately $59,000 representing the application of 
the current year's loss to prior taxes incurred upon the re-domiciling of the   
Company to Delaware, USA.                                                       

 NET LOSS - The Company incurred a net loss of $2,974,000 in 2000,
compared to a net loss of $771,000 in 1999. The increased losses are the result 
of the Company's expansion in the US.                                           

   In view of the deteriorating market conditions for e-commerce
companies, the Company closed its US operations in December, 2000. The Company  
has consolidated its resources in its Vancouver, B.C. office. Operating expenses
were also significantly reduced in December, 2000.                              

LIQUIDITY AND CAPITAL RESOURCES FOR THE YEAR ENDED DECEMBER 31, 2000

CAPITAL AND DEBT FINANCING                                                      

  In March 2000 the Company completed its initial public offering in
Canada of 2,250,000 shares of the Company's common stock at an offering price of
$1.00 per share on the Canadian Venture Exchange. Additionally, the Agent was   
issued 75,000 shares of the Company's common stock in the Canadian offering     
along with warrants to purchase 225,000 shares of the Company's common stock at 
a price of $1.00 for the first 12 months and at a price of $1.15 for the next 12
months. The estimated net cash proceeds to the Company from the initial public  
offering was approximately $1,800,000 after payment of expenses. During the year
ended December 31, 2000 net cash proceeds of $54,945 were received on the       
exercise of stock options and warrants.                                         

 At December 31,2000 the Company had working capital deficiency of
approximately $747,000 compared to a deficiency of approximately $82,500 at     
December 31, 1999. The decrease in working capital is associated with the       
utilization of working capital to support losses from operations and the        
expansion of the operations.                                                    

CASH FLOW                                                                       

   During the year ended December 31, 2000, the Company used cash from
operations of approximately $2,369,000 compared to approximately $304,000 in    
1999.                                                                           

      Cash provided by financing activities was approximately $2,270,000 for
the year ended December 31, 2000 compared to approximately $669,000 the previous
year. The Company received net proceeds in the amounts of $1,870,000 from the   
sale of equity securities during the year ended December 31, 2000.              

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     Cash used in investing activities, totaled approximately $196,000
during the year ended December 31, 2000 compared to approximately $62,900 in the
prior year. Computer equipment was purchased for new personnel and to expand    
processing capabilities.                                                        

           During the fourth quarter of 2000, the Company took substantial steps
to reduce its operating losses. It closed its US operations, reduced its        
personnel and curtailed its marketing budget. The Company expects continued     
losses in 2001. The Company accrued all costs related to the closure which      
totaled approximately $15,000 in 2000.                                          

CAPITAL RESOURCES                                                               

   Management believes that the working capital deficiency as at
December 31, 2000 and future operating losses will be financed by additional    
equity funding and loans from investors. However, there can be no assurance that
such financings will be successful, or they may be negotiated on terms which are
unfavourable or dilutive to existing stockholders. The Company's continuation as
a going concern is contingent upon achieving operating levels adequate to       
support its cost structure, the continued support of its creditors and obtaining
adequate financial resources through a contemplated financing. The Company has  
no plans to expand its personnel or purchase or lease any major capital         
equipment in 2001. Additional staffing requirements will be supplemented with   
part-time workers or consultants.                                               

        In the event that cash flow from operations, if any, together with
he proceeds of any future financings, are insufficient to meet these expenses,  
the Company will be required to re-evaluate its planned expenditures and        
allocate its total resources in such manner as the board of directors and       
management deems to be in the Company's best interest.                          

RECENT ACCOUNTING PRONOUNCEMENTS                                                

           In June 1998, the FASB issued SFAS No. 133, Accounting for Derivative
Instruments and Hedging Activities, which establishes accounting and reporting  
standards for derivative instruments and hedging activities SFAS 133 is         
effective for all fiscal quarters of all fiscal years beginning after June 15,  
1999. The Financial Accounting Standards Board have subsequently delayed        
implementation of the standard for the financial years beginning after June 15, 
2000. The adoption of this pronouncement will not have a material effect on the 
Company's consolidated financial position or results of operations .            

   In December, 1999, the Securities and Exchange Commission ("SEC")
issued Staff Accounting Bulletin ("SAB") No. 101, Revenue Recognition in        
Financial Statements. SAB No. 101 summarizes certain of the SEC's views in      
applying generally accepted accounting principles to revenue recognition in     
financial statements. In October 2000, the SEC issued further guidance with     
respect to adoption of specific issues addressed by SAB No. 101. The adoption of
SAB No. 101 did not have a material effect on the Company's consolidated        
financial position or results of operations.                                    

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RECENT ACCOUNTING PRONOUNCEMENTS (CONTINUED)                                    

                In March 2000, the FASB issued Interpretation No. 44 ("FIN No.
44"), Accounting for Certain Transactions Involving Stock Compensation - an     
interpretation of APB 25. FIN No. 44 clarifies (i) the definition of employee   
for purposes of applying APB Opinion No. 5, (ii) the criteria for determining   
whether a plan qualifies as a noncompensatory plan, (iii) the accounting        
consequences of various modifications to the terms of a previously fixed stock  
option or award, and (iv) the accounting for an exchange of stock compensation  
awards in a business combination. FIN No. 44 is effective July 1, 2000 but      
certain conclusions in this interpretation cover specific events that occur     
after either December 15, 1998, or January 12, 2000. The adoption of certain of 
the conclusions of FIN No. 44 covering events occurring during the period after 
December 15, 1998 or January 12, 2000 did not have a material effect on the     
Company's financial position and results of operations. The adoption of the     
remaining conclusions did not have a material effect on the financial position  
or results of operations.                                                       

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ITEM 7. FINANCIAL STATEMENTS                                                    

                                                                [Download Table]
                                                                             
Independent Auditors' Report                                              F-1

Consolidated Balance Sheets - December 31, 2000 and December 31, 1999     F-2

Consolidated Statements of Operations - For the years ended December 31,     
2000 and 1999 and period from inception August 13, 1998 to December 31,   F-3

Consolidated Statements of (Capital Deficiency) Stockholders' Equity -       
For the years ended December 31, 2000 and 1999 and period                    
 from inception August 13, 1998 to December 31, 1998                      F-4

Consolidated Statements of Cash Flows - For the years ended December 31,     
2000 and 1999 and period from inception August 13, 1998 to December 31,      
1998                                                                      F-5

Notes to Consolidated Financial Statements                                F-6

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INDEPENDENT AUDITORS' REPORT

To the Directors and Stockholders of                                            
E-xact Transactions Ltd.                                                        

We have audited the consolidated balance sheets of E-xact Transactions Ltd. as  
at December 31, 2000 and 1999 and the consolidated statements of operations,    
capital deficiency and cash flows for each of the years in the two year period  
ended December 31, 2000 and period from inception, August 13, 1998, to December 
31, 1998. These financial statements are the responsibility of the Company's    
management. Our responsibility is to express an opinion on these financial      
statements based on our audits.                                                 

We conducted our audits in accordance with auditing standards generally accepted
in the United States of America. Those standards require that we plan and       
perform an audit to obtain reasonable assurance whether the financial statements
are free of material misstatement. An audit includes examining, on a test basis,
evidence supporting the amounts and disclosures in the financial statements. An 
audit also includes assessing the accounting principles used and significant    
estimates made by management, as well as evaluating the overall financial       
statement presentation. We believe that our audits provide a reasonable basis   
for our opinion.                                                                

In our opinion, these consolidated financial statements present fairly, in all  
material respects, the financial position of the Company as at December 31, 2000
and 1999 and the results of its operations and its cash flows for each of the   
years in the two year period ended December 31, 2000 and the period from        
inception, August 13, 1998, to December 31, 1998 in accordance with accounting  
principles generally accepted in the United States of America.                  

The accompanying financial statements have been prepared assuming that the      
Company will continue as a going concern. As discussed in Note 1 to the         
financial statements, the Company's recurring losses from operations raise      
substantial doubt about its ability to continue as a going concern. Management's
plans concerning these matters are also described in Note 1. The financial      
statements do not include any adjustments that might result from the outcome of 
this uncertainty.                                                               

/s/ Deloitte & Touche LLP                                                       

Chartered Accountants                                                           
Vancouver, British Columbia                                                     
March 16, 2001                                                                  

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E-XACT TRANSACTIONS LTD.
 CONSOLIDATED BALANCE SHEETS
(EXPRESSED IN UNITED STATES DOLLARS)

                                                        [Enlarge/Download Table]

                                                                 December 31,      December 31, 
                                                                         2000              1999 
                                                             ----------------- -----------------
                                                                                                
ASSETS                                                                                          

Current                                                                                         
   Cash ..................................................    $       10,476   $      304,668   
   Accounts receivable (Note 3) ..........................            72,671           81,837   
   Prepaid expenses and deposits .........................             5,356            4,334   
                                                             ----------------- -----------------
Total current assets .......................................          88,503          390,839   
Deferred share issue costs .................................             -            177,299   
Capital assets (Note 4) ....................................         103,601           45,099   
                                                             ----------------- -----------------
Total assets ...............................................  $      192,104   $      613,237   
                                                             ================= =================

LIABILITIES                                                                                     

Current                                                                                         
   Accounts payable and accrued liabilities (Note 5) .....    $      541,163   $      370,758   
   Income taxes payable ..................................            71,909          102,557   
   Advances payable (Note 6) .............................           222,558              -     
                                                             ----------------- -----------------
Total current liabilities ..................................         835,630          473,315   
                                                             ----------------- -----------------

Continuing operations (Note 1)                                                                  
Commitments (Note 10)                                                                           

(CAPITAL DEFICIENCY) STOCKHOLDERS' EQUITY                                                       

Common stock, common shares issued and outstanding (Note 7)                                     
   8,502,000 at December 31, 2000 and                                                           
   5,897,000 at December 31, 1999 ........................             8,502            5,897   
Additional paid-in capital .................................       3,128,382          940,863   
Accumulated deficit ........................................      (3,780,410)        (806,838)  
                                                             ----------------- -----------------
Total (capital defiency) stockholders' equity ..............        (643,526)         139,922   
                                                             ----------------- -----------------
Total (capital deficiency) stockholders' equity and                                             
liabilities ................................................  $      192,104   $      613,237   
                                                             ================= =================

See Accompanying Notes to the Consolidated Financial Statements.

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E-XACT TRANSACTIONS LTD.
 CONSOLIDATED STATEMENTS OF OPERATIONS
(EXPRESSED IN UNITED STATES DOLLARS)

                                                        [Enlarge/Download Table]

                                                                          From inception 
                                                                              August 13, 
                                                 Year ended    Year ended        1998 to 
                                               December 31,  December 31,   December 31, 
                                                       2000          1999           1998 
                                              -------------- ------------ ---------------

                                                                                         
Revenues                                                                                 
  Online transactions ......................    $   240,504   $   88,721    $   15,317   
  Web development ..........................            -          7,070        14,311   
                                              -------------- ------------ ---------------
Total revenues .............................        240,504       95,791        29,628   
                                              -------------- ------------ ---------------

Cost of sales                                                                            
  Cost of online transactions ..............        115,532       26,262         5,393   
  Cost of web development ..................            -          3,183         6,919   
                                              -------------- ------------ ---------------
Total cost of sales ........................        115,532       29,445        12,312   
                                              -------------- ------------ ---------------

Expenses                                                                                 
  General and administrative expenses ......      1,423,701      467,780        27,038   
  Sales and marketing (including $320,000 of                                             
  non-cash warrant charges;                                                              
  1999 - $Nil;  1998 - $Nil) ...............      1,100,941       57,180        12,196   
  Research and development .................        742,767      193,765        14,017   
                                              -------------- ------------ ---------------
Total expenses .............................      3,267,409      718,725        53,251   
                                              -------------- ------------ ---------------
Operating loss .............................     (3,142,437)    (652,379)      (35,935)  
Other income (expense) .....................        110,140      (15,967)          -     
                                              -------------- ------------ ---------------
Loss before income tax .....................     (3,032,297)    (668,346)      (35,935)  
Income taxes (Note 11) .....................         58,725     (102,557)          -     
                                              -------------- ------------ ---------------
Net loss ...................................    $(2,973,572)  $ (770,903)   $  (35,935)  
                                              ============== ============ ===============

Basic and diluted loss per share ...........    $     (0.37)  $    (0.17)   $    (0.01)  
                                              ============== ============ ===============

Weighted average number of common shares                                                 
  used to calculate loss per share .........      7,932,356    4,553,542     3,820,832   
                                              ============== ============ ===============

See Accompanying Notes to the Consolidated Financial Statements.

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E-XACT TRANSACTIONS LTD.
 CONSOLIDATED STATEMENTS OF (CAPITAL DEFICIENCY)
STOCKHOLDERS' EQUITY
(EXPRESSED IN UNITED STATES DOLLARS)

                                                        [Enlarge/Download Table]

                                                                                                                  Total     
                                                                                                                (Capital    
                                                           Common Stock         Additional                     Deficiency)  
                                                   --------------------------    Paid-in       Accumulated    Stockholders' 
                                                      Shares        Amount       Capital         Deficit         Equity     
                                                   ----------- -------------- ------------- ---------------- -------------- 

                                                                                                                            
Issuance of common stock for cash .................    42,000   $         1   $       -      $       -          $         1 
Issuance of common stock for acquired                                                                                       
  software and intangibles ........................ 4,158,000        42,129           -              -               42,129 
Net loss ..........................................       -             -             -          (35,935)           (35,935)
                                                   ----------- -------------- ------------- ---------------- -------------- 
Balance at December 31, 1998 ...................... 4,200,000        42,130           -          (35,935)             6,195 
Reclassification on reincorporation (Note 7) ......       -         (37,930)       37,930            -                  -   
Warrants issued for consulting fees (Note 7 (d)) ..       -             -          58,320            -               58,320 
Issuance of common stock on private                                                                                         
  placement, net of offering costs                                                                                          
  of $20,698 and warrants issued                                                                                            
  for financing services of $142,123                                                                                        
  (Note 7 (d)) .................................... 1,697,000         1,697       844,613            -              846,310 
Net loss ..........................................       -             -             -         (770,903)          (770,903)
                                                   ----------- -------------- ------------- ---------------- -------------- 
Balance at December 31, 1999 ...................... 5,897,000         5,897       940,863       (806,838)           139,922 
Issuance of stock pursuant to exercise of                                                                                   
  warrants, January 2000 ..........................   225,000           225        74,334            -               74,559 
Issuance of stock pursuant to IPO, net of                                                                                   
  cash offering of $509,435, stock issued                                                                                   
  to the Underwriter of $75,000, and                                                                                        
  warrants issued for financing services                                                                                    
  of $138,744 ..................................... 2,325,000         2,325     1,738,240            -            1,740,565 
Exercise of stock options .........................    25,000            25        24,975            -               25,000 
Warrants issued for compensation (Note 7 (d)) .....       -             -         320,000            -              320,000 
Exercise of warrants ..............................    30,000            30        29,970            -               30,000 
Net loss ..........................................       -             -             -       (2,973,572)        (2,973,572)
                                                   ----------- -------------- ------------- ---------------- -------------- 
Balance at December 31, 2000 ...................... 8,502,000   $     8,502   $ 3,128,382    $(3,780,410)       $  (643,526)
                                                   =========== ============== ============= ================ ============== 

See Accompanying Notes to the Consolidated Financial Statements.

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E-XACT TRANSACTIONS LTD.
 CONSOLIDATED STATEMENTS OF CASH FLOWS
(EXPRESSED IN UNITED STATES DOLLARS)

                                                        [Enlarge/Download Table]

                                                                                     From inception
                                                                                         August 13,
                                                           Year ended    Year ended         1998 to
                                                         December 31,  December 31,    December 31,
                                                                 2000          1999            1998
                                                         ------------------------------------------

                                                                                                   
Operating activities:                                                                              
Net loss ..............................................  $(2,973,572)    $(770,903)     $(35,935)  
Item not affecting cash                                                                            
  Amortization of capital assets, acquired                                                         
    software and other intangible assets ..............       58,328        36,014        27,721   
  Loss on disposal of fixed assets ....................       78,671           -             -     
  Warrants issued to customer .........................      320,000           -             -     
  Warrants issued for financing fees ..................          -          58,320           -     
Net change in operating assets and liabilities                                                     
Accounts receivable ...................................        9,166       (69,058)      (12,747)  
Prepaid expenses and deposits .........................       (1,022)          -          (4,326)  
Accounts payable and accrued liabilities ..............      170,405       345,887        22,529   
Income taxes payable ..................................      (30,648)      102,557           -     
Advances from stockholders ............................          -          (7,318)        7,299   
                                                         ------------------------------------------

                                                          (2,368,672)     (304,501)        4,541   
                                                         ------------------------------------------

Financing activities:                                                                              
Proceeds on issuance of capital stock, net of                                                      
  offering costs ......................................    1,870,124       846,310             1   
Deferred share issue costs ............................      177,299      (177,299)          -     
Advances from shareholders ............................      222,558           -             -     
                                                         ------------------------------------------

                                                           2,269,981       669,011             1   
                                                         ------------------------------------------

Investing activities:                                                                              
Purchase of capital assets ............................     (198,075)      (62,948)       (1,436)  
Proceeds on disposal of fixed assets ..................        2,575           -             -     
                                                         ------------------------------------------

                                                            (195,500)      (62,948)       (1,436)  
                                                         ------------------------------------------
Net cash inflow .......................................     (294,191)      301,562         3,106   
Cash, beginning of period .............................      304,668         3,106           -     
                                                         ------------------------------------------
Cash, end of period ...................................  $    10,477     $ 304,668      $  3,106   
                                                         ==========================================

Supplemental non-cash investing and financing cash flow                                            
disclosures:                                                                                       

Common shares issued for acquired software                                                         
  and intangibles .....................................  $       -       $     -        $ 44,407   
                                                         ==========================================
Warrants issued for financing services ................  $   138,744     $ 142,123      $    -     
                                                         ==========================================
Warrants issued to customer ...........................  $   320,000     $     -        $    -     
                                                         ==========================================
Common stock issued to underwriters ...................  $    75,000     $     -        $    -     
                                                         ==========================================

See Accompanying Notes to the Consolidated Financial Statements.

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E-XACT TRANSACTIONS LTD.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
(EXPRESSED IN UNITED STATES DOLLARS)

1.      CONTINUING OPERATIONS                                                   

  The Company specializes in online financial transaction processing
      supporting customers' e-commerce activities. The Company was initially
   incorporated on August 13, 1998 under the laws of British Columbia,
       Canada. On July 28, 1999 the Company was reincorporated in the State of
Delaware.                                                       

      The Company was formed through the acquisition of certain software and
       other intangible assets from Sutton Group Financial Services ("Sutton")
      and Data Direct Holdings Ltd. ("DataDirect"). In consideration for the
 acquisition of these assets Sutton and Data Direct, two unrelated
  companies, at the time of the acquisition, each received 2,100,000
common shares.                                                  

   The accompanying financial statements have been prepared on a going
concern basis, which contemplates the realization of assets and 
satisfaction of liabilities in the normal course of business.   

The Company incurred a net loss of $2,973,572 for the year ended
December 31, 2000 and at December 31, 2000 had a working capital
      deficiency of $747,127 and capital deficiency of $643,526. The success
of the Company's future operations is dependent upon attaining  
profitable operations, and upon its ability to raise additional 
        financing. Management's plans include obtaining the continued support of
        creditors, raising additional financing and, ultimately, positioning the
Company for profitable operations.                              

     These factors among others indicate that the Company may be unable to
continue as a going concern for a reasonable period of time. The
     financial statements do not include any adjustments that might result
     from the outcome of this uncertainty. The Company's continuation as a
      going concern is dependent upon achieving operating levels adequate to
     support the Company's cost structure and obtaining adequate financial
       resources through a contemplated financing or otherwise. However, there
can be no assurance that such financings will be successful.    

2.      SIGNIFICANT ACCOUNTING POLICIES                                         

    These financial statements have been prepared in accordance with the
following significant accounting polices.                       

(a)    Basis of consolidation                                   

         These consolidated financial statements include the assets,
      liabilities and operating results of the Company and its
wholly-owned subsidiary.                          

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E-XACT TRANSACTIONS LTD.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
(EXPRESSED IN UNITED STATES DOLLARS)

2.      SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)                             

(b)    Use of Estimates                                         

        The preparation of financial statements in conformity with
             generally accepted accounting principles requires management to
             make estimates and assumptions that affect the reported amounts
             of assets, liabilities, revenues and expenses and disclosure of
            contingent assets and liabilities at the date of the financial
               statements and for the periods presented. Estimates are used for,
   but not limited to, accounting for doubtful accounts,
              amortization, recoverability of long-lived assets, income taxes,
     and contingencies. Actual results may differ from those
estimates.                                        

(c)    Foreign Currency Translation                             

            The Company determined that as of April 1, 2000 its functional
              currency was the United States dollar ("US Dollars"). Previously
             the functional currency of the Company was the Canadian dollar.
             The change in the Company's functional currency was made due to
             the expansion of US operations during the year. The majority of
        the Company's operating and financing transactions are now
           denominated in the US dollar. Monetary assets and liabilities
              denominated in other than the US dollar are translated using the
               exchange rates prevailing at the balance sheet date. Revenues and
             expenses are translated using average exchange rates prevailing
     during the period. Gains and losses on foreign currency
        transactions are recorded in the consolidated statement of
             operations. The Company has remeasured its assets, liabilities,
        revenues and expenses for prior years using the historical
        exchange rate in existence at the date of the transaction.

(d)    Research and Development Costs                           

           All research and development costs are expensed when incurred
         unless they meet generally accepted accounting criteria for
              deferral and amortization. The Company reassesses whether it has
             met the relevant criteria for deferral and amortization at each
               reporting date. To date, no development costs have been deferred.

(e)    Deferred Share Issue Costs                               

               Share issue costs incurred prior to the issuance of share capital
           are deferred and netted against the proceeds when the related
shares are issued.                                

(f)    Capital Assets and Amortization                          

        Capital assets are recorded at cost and amortized over the
          estimated useful lives of the assets on the following basis:

                   Leasehold improvement        5 years on a straight-line basis
         Computer software            100% declining balance
        Computer equipment           30% declining balance

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E-XACT TRANSACTIONS LTD.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
(EXPRESSED IN UNITED STATES DOLLARS)

2.      SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)                             

(f)    Capital Assets and Amortization (continued)              

          The Company periodically evaluates the recoverability of its
        capital assets whenever events or changes in circumstances
      indicate that the carrying amount of an asset may not be
      recoverable. An impairment loss would be recognized when
               estimates of future cash flows expected to result from the use of
              an asset and its eventual disposition are less than its carrying
        amount. No impairment in assets had been identified by the
               Company in the years ended December 31, 2000 and 1999 and initial
           period from inception, August 13, 1998, to December 31, 1999.

(g)    Revenue Recognition                                      

          The Company's revenue is derived from the following sources:

(i)    Online Transactions                        

                  Revenue from the setup, maintenance, and processing of
                   online transactions is recognized when the services are
                     performed, the amount of revenue is fixed or determinable
     and collectibility is reasonably assured.

(ii)   Web Development                            

                Revenue from services related to web development are
                     recognized when the services are performed, the amount of
                  revenue is fixed or determinable and collectibility is
                 reasonably assured. Provision for estimated losses on
  contracts is recorded when identified.

(h)    Stock-Based Compensation Plans                           

         As permitted under SFAS No. 123, Accounting for Stock-Based
      Compensation, the Company has accounted for employee and
              directors stock options in accordance with Accounting Principles
          Board ("APB") Opinion No. 25, Accounting for Stock Issued to
           Employees, and has made the pro forma disclosures required by
SFAS No. 123 in Note 7 (c).                       

             SFAS No. 123, Accounting for Stock-Based Compensation, requires
            the use of the fair value based method of accounting for stock
              options. Under this method, compensation cost is measured at the
        grant date as the fair value of the options granted and is
          recognized over the vesting period. Where the Company issues
       options to individuals other than employees and directors
              deferred share-based compensation is recorded. These amounts are
            amortized as charges to operations, over the vesting period of
the individual stock options.                     

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E-XACT TRANSACTIONS LTD.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
(EXPRESSED IN UNITED STATES DOLLARS)

2.      SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)                             

(i)    Income Taxes                                             

           The Company accounts for income taxes under the provisions of
       SFAS No. 109, Accounting for Income Taxes. This statement
           provides for a liability approach under which deferred income
      taxes are provided based upon enacted tax laws and rates
          applicable to the periods in which the taxes become payable.

            Deferred tax assets, if any, are recognized only to the extent
            that, in the opinion of management, it is more likely than not
that the income tax assets will be realized.      

(j)    Basic and Diluted Loss Per Share                         

             Basic loss per share is computed by dividing net loss available
             to common stockholders by the weighted average number of common
shares outstanding for the period.                

(k)    Comprehensive Income                                     

       SFAS No. 130, Reporting Comprehensive Income, establishes
             standards for the reporting and display of comprehensive income
           and its components (revenue, expenses, gains and losses) in a
               full set of general-purpose financial statements. The Company has
               no comprehensive income items, other than the net loss, in any of
the periods presented.                            

(l)    Business Segments                                        

            SFAS No. 131, Disclosures about Segments of an Enterprises and
       Related Information, establishes standards for reporting,
      information about operating segments in annual financial
             statements. It also establishes standards for disclosures about
          products and services, geographic areas and major customers.
          Information related to SFAS No. 131 is contained in Note 12.

(m)    Recent Accounting Pronouncements                         

        In June 1998, the FASB issued SFAS No. 133, Accounting for
              Derivative Instruments and Hedging Activities, which establishes
               accounting and reporting standards for derivative instruments and
              hedging activities SFAS 133 is effective for all fiscal quarters
              of all fiscal years beginning after June 15, 1999. The Financial
  Accounting Standards Board have subsequently delayed
              implementation of the standard for the financial years beginning
              after June 15, 2000. The adoption of this pronouncement will not
            have a material effect on the Company's consolidated financial
position or results of operations.                

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E-XACT TRANSACTIONS LTD.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
(EXPRESSED IN UNITED STATES DOLLARS)

2.      SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)                             

(m)    Recent Accounting Pronouncements (continued)             

               In December, 1999, the Securities and Exchange Commission ("SEC")
       issued Staff Accounting Bulletin ("SAB") No. 101, Revenue
         Recognition in Financial Statements. SAB No. 101 summarizes
       certain of the SEC's views in applying generally accepted
       accounting principles to revenue recognition in financial
               statements. In October 2000, the SEC issued further guidance with
              respect to adoption of specific issues addressed by SAB No. 101.
               The adoption of SAB No. 101 did not have a material effect on the
     Company's consolidated financial position or results of
operations.                                       

            In March 2000, the FASB issued Interpretation No. 44 ("FIN No.
       44"), Accounting for Certain Transactions Involving Stock
              Compensation - an interpretation of APB 25. FIN No. 44 clarifies
         (i) the definition of employee for purposes of applying APB
             Opinion No. 5, (ii) the criteria for determining whether a plan
       qualifies as a noncompensatory plan, (iii) the accounting
     consequences of various modifications to the terms of a
             previously fixed stock option or award, and (iv) the accounting
        for an exchange of stock compensation awards in a business
           combination. FIN No. 44 is effective July 1, 2000 but certain
           conclusions in this interpretation cover specific events that
            occur after either December 15, 1998, or January 12, 2000. The
           adoption of certain of the conclusions of FIN No. 44 covering
           events occurring during the period after December 15, 1998 or
              January 12, 2000 did not have a material effect on the Company's
               financial position and results of operations. The adoption of the
         remaining conclusions did not have a material effect on the
financial position or results of operations.      

3.      ACCOUNTS RECEIVABLE                                                     

        Accounts receivable are recorded net of a $65,581 allowance for doubtful
accounts at December 31, 2000 (1999 - $3,400).                  

4.      CAPITAL ASSETS                                                          

                                                                [Download Table]

                                                 December 31,                      
                           --------------------------------------------------------
                                              2000                        1999     
                           --------------------------------------------------------
                                           Accumulated     Net Book     Net Book   
                                Cost      Amortization       Value        Value    
                           --------------------------------------------------------

                                                                                   
Leasehold improvements ... $    4,940     $      494    $    4,446     $       -   
Computer software ........     87,251         72,907        14,344        12,892   
Computer equipment .......    119,165         34,354        84,811        32,207   
                           --------------------------------------------------------
                           $  211,356     $  107,755    $  103,601     $  45,099   
                           ========================================================

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E-XACT TRANSACTIONS LTD.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
(EXPRESSED IN UNITED STATES DOLLARS)

5.      ACCOUNTS PAYABLE AND ACCRUED LIABILITIES                                

    The principal components of accounts payable and accrued liabilities
were as follows:                                                                

                                                                [Download Table]

                                                            December 31,          
                                                   -------------------------------
                                                          2000            1999    
                                                   -------------------------------

                                                                                  
Trade payables ...................................    $  498,149      $   205,096 
Financing costs payable ..........................            -           131,879 
Other accrued liabilities ........................        43,014           33,783 
                                                   -------------------------------
                                                      $  541,163      $   370,758 
                                                   ===============================

6.      ADVANCES PAYABLE                                                        

  The advances payable from certain stockholders of the Company bear
interest at prime plus one per cent and have no fixed terms of  
        repayment. Subsequent to the year ended December 31, 2000, such advances
were secured by certain assets of the Company.                  

7.      STOCKHOLDERS' EQUITY                                                    

(a)    Authorized Stock                                         

             The Company was initially incorporated on August 13, 1998 under
             the laws of British Columbia, Canada with 50,000,000 authorized
              common stock with no par value. On July 28, 1999 the Company was
reincorporated in the State of Delaware.          

           The Company has authorized 50,000,000 common stock with a par
               value of $0.001 per share. As a result of the reincorporation and
              change to par value shares, $37,930 was reclassified during 1998
from common stock to additional paid in capital.  

  (b)    On September 2, 1999 the Company's common stock were split,
         twenty-one thousand-for-one. All per share amounts of prior
periods have been adjusted to reflect the split.  

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E-XACT TRANSACTIONS LTD.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
(EXPRESSED IN UNITED STATES DOLLARS)

7.      STOCKHOLDERS' EQUITY (CONTINUED)                                        

(c)    Stock-Based Compensation Plans                           

           During 1999, the Company established a Share Option Plan (the
            "option plan") which provides for options to be granted by the
              Company to its directors, officers, employees and consultants of
              the Company and affiliated companies. The Company has reserved a
              maximum of 1,695,400 common shares for issuance under the option
             plan. No options were granted prior to the establishment of the
              plan. At the date options are granted, the exercise price for an
               option shall not be less than the then market price of the common
           shares of the Company. Options granted are subject to certain
vesting requirements.                             

              A summary of the status of the Company's stock option plan as of
              December 31, 2000 and 1999 and changes during the periods ending
on those dates is presented below:                

                                                                [Download Table]

                                          2000                      1999          
                                -------------------------- -----------------------
                                               Weighted-               Weighted-  
                                                Average                 Average   
                                    Common     Exercise      Common    Exercise   
Options                             Shares       Price       Shares      Price    
---------------------------------------------------------- -----------------------

                                                                                  
Outstanding at beginning                                                          
   of period ..............         650,000    $   1.00         -     $   -       
     Granted ............           900,500        1.34     650,000      1.00     
     Exercised ..........           (25,000)       1.00         -         -       
     Cancelled ..........          (980,000)       1.10         -         -       
                                -------------------------- -----------------------
Outstanding at end of period        545,500    $   1.42     650,000   $  1.00     
                                ========================== =======================

Exercisable at end of period        200,000    $   1.39       4,167   $  1.00     
                                ========================== =======================

            The following table summarizes information about stock options
outstanding at December 31, 2000:                 

                                                        [Enlarge/Download Table]

                                     Options Outstanding                                    
--------------------------------------------------------------------------------------------
                                  Number                                        Number      
             Range of          Outstanding         Weighted-Average          Exercisable    
             Exercise        at December 31,           Remaining           at December 31,  
              Price               2000             Contractual Life             2000        
--------------------------------------------------------------------------------------------

                                                                                            
          $1.00 to $3.35            545,500             4 years              200,000        

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E-XACT TRANSACTIONS LTD.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
(EXPRESSED IN UNITED STATES DOLLARS)

7.      STOCKHOLDERS' EQUITY (CONTINUED)                                        

(c)    Stock-Based Compensation Plans (Continued)               

           Under APB No. 25, because the exercise price of the Company's
           employee stock options generally equals the fair value of the
               underlying stock on the date of grant, no compensation expense is
recognized.                                       

             Statement of Financial Accounting Standards No. 123, Accounting
            for Stock-Based Compensation, issued in October 1995, requires
            the use of the fair value based method of accounting for stock
              options. Under this method, compensation cost is measured at the
        grant date as the fair value of the options granted and is
           recognized over the exercise period. During the periods ended
          December 31, 2000 and 1999, the Company issued no options to
              individuals other than employees and directors. SFAS 123, allows
         the Company to continue to measure the compensation cost of
           employee related stock options in accordance with APB 25. The
            Company has therefore adopted the disclosure-only provision of
SFAS 123.                                         

              Had compensation cost for the Company's share options granted to
  employees and directors been determined based on the
             Black-Scholes value at the grant dates for awards as prescribed
              by SFAS No. 123, pro forma net loss and net loss per share would
have been as follows:                             

                                                                [Download Table]

                                                 Year Ended      Year Ended 
                                               December 31,    December 31, 
                                                       2000            1999 
                                              --------------  --------------

                                                                            
Net loss                                                                    
   As reported ............................   $ (2,973,572)     $ (770,903) 
   SFAS No. 123 pro forma adjustment ......       (429,209)         (9,271) 
                                              --------------  --------------
Pro forma net loss .......................... $ (3,402,781)     $ (780,174) 
                                              ==============  ==============

Loss per share, as reported ................. $      (0.37)     $    (0.17) 
SFAS No. 123 pro forma adjustment ...........        (0.05)              -  
                                              --------------  --------------
Pro forma loss per share .................... $      (0.42)     $    (0.17) 
                                              ==============  ==============

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E-XACT TRANSACTIONS LTD.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
(EXPRESSED IN UNITED STATES DOLLARS)

7.      STOCKHOLDERS' EQUITY (CONTINUED)                                        

(c)    Stock-Based Compensation Plans (continued)               

              The weighted average Black-Scholes option pricing model value of
            options granted under the share option plan during the periods
              ended December 31, 2000 and 1999 were $1.04 and $0.17 per share,
             respectively. The fair value for these options was estimated at
    the date of grant using the following weighted average
assumptions:                                      

                                                                [Download Table]

                                                   Year Ended     Year Ended 
                                                 December 31,   December 31, 
                                                         2000           1999 
                                               ---------------  -------------
                                                                             
Assumption                                                                   
Volatility factor of expected market price                                   
   of the Company's shares .................           109.0%           5.3% 
Dividend yield ...............................           0.0%           0.0% 
Weighted average expected life of stock                                      
options ......................................        5 years        3 years 
Risk free interest rate ......................          5.32%          6.55% 

(d)    Warrants                                                 

          On August 2, 2000, under an arrangement with a customer, the
        Company granted warrants to purchase 549,532 shares of the
               Company. The term of the warrant was two years and will terminate
              earlier if not exercised on the fifteenth day that the Company's
         common shares close trading at a price equal to 200% of the
               warrant exercise price of $2.25 per share. The Company recorded a
              non-cash charge of $320,000. This amount was determined using an
              option pricing model assuming no dividends, full vesting on date
             of grant, a volatility of 43% and a weighted-average annualized
risk-free rate of 6.0%.                           

             On July 28, 1999, and amended January 18, 2000 and February 15,
             2000, the Company entered into an agreement with Bolder Venture
               Partners ("BVP") to have BVP complete a financing plan which will
         include an initial private placement (b), an Initial Public
         Offering ("IPO") (c), and a Follow-On Placement. In partial
         consideration of BVP's services, the Company will issue BVP
               warrants to purchase 1,232,136 shares exercisable for a five year
             term from July 28, 1999. 225,000 of the Warrants were exercised
              at $0.25 per share on January 18, 2000. As these Warrants became
               exercisable on August 28, 1999, the Company has recorded the fair
              value of these warrants of $58,320 as a corporate finance fee in
             the year ended December 31, 1999. The remaining Warrants became
exercisable or will be exercisable as follows:    

              (i)     557,136 of the Warrants became exercisable as of October
     14, 1999 at a price of $1.00 per share;

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E-XACT TRANSACTIONS LTD.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
(EXPRESSED IN UNITED STATES DOLLARS)

7.      STOCKHOLDERS' EQUITY (CONTINUED)                                        

(d)    Warrants (continued)                                     

              (ii)    225,000 of the Warrants were exercisable upon completion
                  of the IPO as of March 22, 2000 at a price per share
               equal to the IPO price (estimated to be $1.00 per
share); and                       

             (iii)   225,000 of the Warrants will be exercisable immediately
                    upon completion of the Follow-On Placement of not less
                than $3,000,000, at a price equal to the Follow-On
private placement price.          

               The exercise price of all warrants increase by 15% in each of the
      second, third, fourth and fifth years of the term of the
Warrants.                                         

      The 225,000 Warrants exercised January 18, 2000 were not
       contingent on obtaining financing and therefore have been
           accounted for as a compensatory finance fee equal to the fair
           market value of the shares on August 28, 1999 less the option
             price which amounted to $58,320. The remaining tranches will be
             accounted for in a similar manner except any difference between
              the fair value and the option price will be offset against share
            capital as receiving the warrants is contingent on raising the
              applicable capital. On October 14, 1999, 557,136 Warrants became
              exercisable on completion of a private placement. These warrants
             had a fair value of $142,123 and were recorded as an additional
              cost of raising the applicable capital. Under the agreement, BVP
        agreed to serve as corporate and financial advisors to the
               Company for a period of twelve months, commencing July 1, 1999 at
a rate of $10,000 per month.                      

             On March 22, 2000 the second tranche of 225,000 warrants vested
upon completion of the initial public offering.   

(e)    Initial Public Offering                                  

               On March 22, 2000, the Company successfully completed its initial
            public offering in Canada of 2,250,000 shares of the Company's
         common stock at an offering price of $1.00 per share on the
Canadian Venture Exchange ("CDNX").               

           In connection with the Company's Initial Public Offering (the
              "IPO"), the Company granted to Canaccord Capital Corporation and
             Haywood Securities Inc. (the "Agents"), an aggregate of 225,000
            share purchase warrants (the "Agents' Warrants") entitling the
              Agents up to 225,000 shares of the Company's common stock at any
              time up to the close of business on the first anniversary of the
          Company's listing on the CDNX at a price of $1.00 per share.
          30,000 of these Agents' Warrants were exercised in September
    2000, leaving an aggregate of 195,000 Agents' warrants
outstanding.                                      

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E-XACT TRANSACTIONS LTD.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
(EXPRESSED IN UNITED STATES DOLLARS)

7.      STOCKHOLDERS' EQUITY (CONTINUED)                                        

(e)    Initial Public Offering (continued)                      

            The Company incurred cash costs of $509,435 in connection with
            the initial public offering. In addition, the Company recorded
            non-cash share issue costs of $138,744 and $75,000 relating to
          the issuance of Warrants and common stock as a result of the
          offering. The Company received net proceeds from the initial
public offering of $1,740,565.                    

8.      FINANCIAL INSTRUMENTS                                                   

(a)    Fair Value                                               

         The carrying values of cash, accounts receivable, deposits,
               accounts payable and accrued liabilities income taxes payable and
              advances payable, as reflected in the balance sheet, approximate
           their respective fair values as at December 31, 2000 and 1999
   because of the demand or short-term maturity of these
instruments.                                      

(b)    Credit Risk and Economic Dependence                      

            Financial instruments which potentially subject the Company to
           credit risk consist of bank deposits and accounts receivable.
  Cash is deposited with high credit quality financial
             institutions. Accounts receivable consist of amounts receivable
            from trade and other receivables. The Company does not require
              collateral or other security to support accounts receivable. The
            Company estimates its allowance for doubtful accounts based on
      analysis of specific accounts and its operating history.

              The Company is subject to credit risk as it earns revenue from a
             limited number of customers. During the year ended December 31,
             2000 - $75,973 (year ended December 31, 1999 - $58,418; initial
           period from inception, August 13, 1998 to December 31, 1998 -
           $15,236) of revenue was derived from a single customer. As at
            December 31, 2000 accounts receivable included $45,398 (1999 -
$33,128) due from a single customer.              

(c)    Foreign Exchange Risk                                    

          During the year ended December 31, 2000, the majority of the
         Company's operations were conducted in the United States of
America.                                          

          The Company also undertakes certain transactions in Canadian
           dollars and as such is subject to risk due to fluctuations in
             exchange rates. The Company does not use derivative instruments
to reduce exposure to foreign exchange risk.      

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E-XACT TRANSACTIONS LTD.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
(EXPRESSED IN UNITED STATES DOLLARS)

9.      RELATED PARTY TRANSACTIONS                                              

     Related party transactions not otherwise disclosed in these financial
statements include:                                             

(a)    During the year ended December 31, 2000 the Company paid 
         consulting fees of $118,196 (year ended December 31, 1999 -
         $181,784; initial period from inception, August 31, 1998 to
      December 31, 1998 - $Nil) to a corporate stockholder for
research, development and computer services;      

       (b)    As at December 31, 2000 accounts payable and accrued liabilities
             include $58,649 (1999 - $62,846) due to a corporate stockholder
for operating costs paid on its behalf; and       

    (c)    During the year ended December 31, 2000, the Company incurred
              interest of $1,973 (year ended December 31, 1999 - $Nil; initial
           period from inception, August 31, 1998 to December 31, 1998 -
          $Nil) on advances from a certain stockholder of the Company.

10.     COMMITMENTS                                                             

        Future minimum operating lease payment for premises and equipment leases
for the years ended December 31, are due as follows:            

                                                        [Enlarge/Download Table]
                                                                                      
2001 ................................................................  $      29,618  
2002 ................................................................         25,407  
2003 ................................................................          3,507  
2004 ................................................................            877  
                                                                      ----------------
                                                                       $      59,409  
                                                                      ================

11.     INCOME TAXES                                                            

    Income tax expense for the periods ended December 31, 2000, 1999 and
1998 was as follows:                                            

                                                        [Enlarge/Download Table]

                                                                      From inception 
                                                                          August 13, 
                                      Year Ended        Year Ended           1998 to 
                                    December 31,      December 31,      December 31, 
                                            2000              1999              1998 
                                 ----------------  ----------------  ----------------

                                                                                     
Current ........................   $    (58,725)     $     102,557     $           - 
Deferred (recovery) ............              -                  -                 - 
                                 ----------------  ----------------  ----------------
                                   $    (58,725)     $     102,557     $           - 
                                 ================  ================  ================

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E-XACT TRANSACTIONS LTD.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
(EXPRESSED IN UNITED STATES DOLLARS)

11.     INCOME TAXES (CONTINUED)                                                

     The reported income tax provision differs from the amount computed by
        applying the statutory rate to the loss before income taxes. The reasons
for this difference and the related tax effects are as follows: 

                                                        [Enlarge/Download Table]

                                                                          From inception 
                                                                              August 13, 
                                               Year Ended     Year Ended         1998 to 
                                             December 31,   December 31,    December 31, 
                                                     2000           1999            1998 
                                          ----------------  -------------  --------------

                                                                                         
Statutory tax rate ......................             35%            35%             45% 
Expected income tax (recovery) ..........  $  (1,061,304)   $  (232,866)      $ (16,171) 
Foreign tax rate differences and other ..         57,975        (48,185)            -    
Losses producing no current tax benefit          782,030        148,054          16,171  
Non-deductible expenses .................        162,574            -               -    
Benefit of prior year losses                                                             
(recognized) ............................            -          (16,172)            -    
Foreign taxes on redomocile of Company ..            -          251,726             -    
                                          ----------------  -------------  --------------
                                           $   (58,725)     $   102,557       $     -    
                                          ================  =============  ==============

On July 28, 1999, the Company was reincorporated in the State of
    Delaware. This event resulted in a deemed tax year end and a taxable
      gain for Canadian tax purposes, based on the excess of the fair market
       value of the Company's assets over their related tax cost. Accordingly,
    a provision for the Canadian taxes on the estimated taxable gain has
been recorded, which has been partially eliminated by the use of
available current tax losses in Canada.                         

      Deferred income taxes result principally from temporary differences in
      the recognition of certain revenue and expense items for financial and
      income tax reporting purposes. Significant components of the company's
        deferred tax assets and liabilities as of December 31, 2000 and 1999 are
as follows:                                                     

                                                        [Enlarge/Download Table]

                                                               December 31,          
                                                       ------------------------------
                                                                 2000           1999 
                                                       ---------------  -------------

                                                                                     
Deferred income tax assets ...........................                               
Book tax base difference in assets ...................  $    170,936    $    69,436  
Net operating tax loss carry forwards ................       930,084        148,054  
Valuation allowance for deferred income tax asset ....    (1,101,020)      (217,490) 
                                                       ---------------  -------------
Net deferred income tax assets .......................            -              -   
                                                       ---------------  -------------
Deferred income tax liabilities ......................  $         -     $        -   
                                                       ===============  =============

     Due to the uncertainty surrounding realization of the deferred income
       tax assets, the Company has 100% valuation allowance against its future
income tax assets.                                              

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E-XACT TRANSACTIONS LTD.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
(EXPRESSED IN UNITED STATES DOLLARS)

11.     INCOME TAXES (CONTINUED)                                                

   As of December 31, 2000, the Company has U.S. and Canadian tax loss
       carry forwards of approximately $2.4 million, which expire between 2007
    and 2019, available to reduce future years' income for tax purposes.

12.     SEGMENTED INFORMATION                                                   

   The Company operates in one segment - electronic commerce services.

    The Company attributes revenue among geographical areas based on the
       location of the customers. During the year ended December 31, 2000, 98%
  of revenues were derived in Canada (year ended December 31, 1999 -
  100%). Long-lived assets include capital assets and are located in
Canada.                                                         

      The Company's customer sales concentration is discussed in Note 8 (b).

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ITEM 8. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND         
FINANCIAL DISCLOSURES                                                           

Not applicable.                                                 

PART III

ITEM 9. DIRECTORS AND EXECUTIVE OFFICERS; COMPLIANCE WITH SECTION 16(a) OF THE  
EXCHANGE ACT                                                                    

     The directors and executive officers of the Company are listed below.
Directors are elected to hold office until the next annual meeting of           
shareholders and until their respective successors have been elected and        
qualified. Executive officers are elected by the Board of Directors and hold    
office until their successors are elected and qualified. The Board of Directors 
have established a compensation(a) and an audit (b) committee and the following 
are members of the respective committees.                                       

                                                                [Download Table]


Name                        Age      Positions                                 
----                        ---      ---------                                 
                                                                               
Ted Henderson                39      President , Chief Executive Officer and   
                                     Director (resigned November 10, 2000)     

Peter Fahlman                36      President and Chief Executive Officer     
                                     (appointed November 11, 2000) and Director

Lance Tracey(a)(b)           54      Director                                  

Dieter Heidrich(a)           61      Director                                  
Cliff Mah                    35      Director ( resigned  May 17, 2000)        
Paul MacNeill(b)             46      Director                                  
John Rose                                                                      
Edmund Shung                 55      Director ( appointed May 17, 2000)        

                             46      Chief Financial Officer                   

BIOGRAPHICAL INFORMATION                                                        

    Peter Fahlman - Mr. Fahlman, has been President of the Company since
November 11, 2000 and director since September, 1998. Mr. Fahlman was previously
the Vice President of Business Development from September , 1998 to November 11,
2000. Mr Fahlman was a partner in Data Direct Consulting Services, an internet  
software development company, since November, 1997; prior to that he was        
President of Prophase Development Corp., an online print services company, from 
May 1996 to December 1997; prior to that he was a consultant to Cybernet        
Technologies, from September 1995 to April 1996; prior to that he was a partner 
in Hyper Sound Recording, a high-tech music retail operation located in Vernon, 
British Columbia from May 1989 to January 1996.                                 

      Lance Tracey - Secretary and a director of the Company since September
1, 1998; President of Code                                                      

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Marketing Ltd. since January 1990; President and Director of Sutton Group Realty
Services Inc. from January 1986 to present.                                     

    Dieter Heidrich - Managing Director of Opus Capital, LLP, a Boulder,
Colorado venture capital company, since October 1993 and a Director of the      
Company since September 1, 1998. Prior to that he was a general partner with    
Weiss, Peck, and Greer Venture Partners from October 1986 to October 1993       

Paul C. MacNeill - Partner with Campney & Murphy, Barristers and
Solicitors, of Vancouver B.C., since 1981 and a Director of the Company since   
September 1, 1999.                                                              

John T. Rose - Mr. Rose is currently an active investor in nine 
internet, software and communications companies. He also serves on the board of 
FatPipeU, a nation wide broadband skills training company based in Irvine,      
California.Mr. Rose was formerly the Senior Vice-President and General Manager  
for Compaq Computer Corporation's enterprise business with the responsibility   
for twelve operating divisions and approximately $14 billion in revenue . Prior 
to that appointment, he was the Group General Manager for Compaq's Desktop and  
Consumer Businesses. Mr Rose led the acquisitions of both Tandem Computers and  
Digital Equipment Corporation. Mr. Rose has been a director of the Company since
May 17, 2000.                                                                   

     Edmund Shung - Chief Financial Officer of the Company since November,
1998. Mr. Shung is currently a part-time independent contractor to the Company. 
Mr. Shung devotes 25% of his time to the Company and has served the Company in  
this capacity since November 1998. In June, 2000 Mr. Shung was appointed CFO and
Secretary of Sourcesmith Industries Ltd. Mr. Shung has also been the Controller 
of Sutton Group Financial Services Ltd., a technology based real estate         
franchise company, from December 1995 to present. Prior to that he was President
of Totemcolor Film Labs Ltd., a photo processing facility, from October, 1991 to
November, 1995.                                                                 

Ted Henderson - Mr. Henderson was the Company's President, Chief
Executive Officer and a director from October 4, 1999 to November 10, 2000.     
Prior to that he was Vice President of Business Development from February 1999  
to September 1999; General Manager from October 1997 to February 1998, and a    
director of Corporate Development from October, 1996 to October, 1997 at        
Centrobe (an EDS company), a provider of end-to-end electronic business         
solutions. Prior to that he was Director of Business Operations at Echostar     
Communications Corporation from April, 1995 to September, 1996, a publicly held 
digital broadcast satellite communications manufacturing, distribution, and     
service provider. Prior to that he was Senior Vice President and Chief Financial
Officer at Key Investments, Inc.(a Key Corp company), from September, 1992 to   
March, 1995, a financial services company.                                      

        Cliff Mah - Mr. Mah was a director of the Company from September 1, 1999
to May 17, 2000. Partner with Bolder Venture Partners, LLC, a venture capital   
company, since June 1999. Prior to joining Bolder Venture Partners, he was an   
investment banker at Canaccord from November 1998 to May 1999 and at C.M. Oliver
and Company from October 1996 to November 1998. Prior to that he became, through
two leverage buy-outs, the President and controlling shareholder of Canadian    
Neon Ltd., a Vancouver based manufacturing company, in 1992 and Northwest Signs 
Ltd., a Seattle, Washington based manufacturing company, in 1993. Mr. Mah       
resigned as director of the Company on May 17, 2000.                            

Other Associations                                                              

        During the past five years, the principals of the Company have served as
principals of the following reporting issuers during the periods and in the     
capacities noted below:                                                         

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                                                        [Enlarge/Download Table]

                                                             SYMBOL/                                               
PRINCIPAL          REPORTING ISSUER                          EXCHANGE    CAPACITY                 PERIOD           

                 -------------------------------------------           -----------------------  -------------------
                                                                                                                   
Lance Tracey       Sutton Group Financial Services Ltd.      SUG/TSE     Director                 01/87 - present  
                   ID Internet Direct Ltd.                   LKC/CDNX    Director and Officer     01/93 - 11/99    
                   dba Telecom Corp.                         Dba/CDNX    Director                 07/92 - 01/96    
                   Sourcesmith Industries Ltd.               SSM/CDNX    Director                 06/00 - present  

Paul C. MacNeill   America Mineral Fields Inc.                           Director                 03/98 - present  
                   Anaconda Uranium Corp.                    ANU/CDNX    Director                 12/97 - present  
                   Axion Communications Inc.                 AXN/CDNX    Director                 08/96 - present  
                   Consolidated Firstfund Capital Corp.      FFP/CDNX    Secretary                09/92 - 06/95    
                   Diagem International Resource Corp.       DGM/CDNX    Director                 12/97 - present  
                   Jordex Resources Inc.                                 Secretary                04/98 04/2000    
                   Minefinders Corporation Inc.                          Director                 05/95 - present  
                   Minefinders Corporation Inc.                          Secretary                07/95 - present  
                   Prospex Mining Inc.                                   Director                 10/93 - 06/99    
                   Unique Broadband Systems Inc.                         Director                 07/97 - 01/01    
                   Unique Broadband Systems Inc.                         Secretary                07/97 - 08/97    
                   Vision Gate Ventures Limited              VGV/CDNX    Director                 12/99-  present  

Edmund Shung       Sutton Group Financial Services Ltd.      SUG/TSE     Secretary                10/98 - present  
                   Sutton Group Financial Services Ltd.      SUG/TSE     CFO                      10/00 - present  
                   Sourcesmith Industries Ltd.               SSM/CDNX    Secretary/CFO            06/00 - present  

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ITEM 10.       EXECUTIVE COMPENSATION                                           

      The following table sets forth information regarding compensation paid
during the past three fiscal years to the Company's Chief Executive Officer:    

SUMMARY COMPENSATION TABLE

                                                        [Enlarge/Download Table]

                                                                                                 Long Term       
                             Annual Compensation                      Awards                Compensation Payouts 
                    ---------------------------------  ----------------------------------  ----------------------

      (a)             (b)       (c)            (d)       (e)       (f)          (g)         (h)        (i)       
                                                                             Securities                          
                                                        Other   Restricted   Underyling     LTIP     All Other   
Name and Principal   Year                               Annual     Stock     Option/SAR's  Payouts  Compensation 
Position             ----    Salary ($)     Bonus ($)  Comp ($) Awards ($)      ($)        -------  ------------ 
--------                     ----------     ---------  -------- ----------   ------------                        

                                                                                                                 
Ted Henderson(1)     2000    US  $96,249     $17,700      $0        $0          $0         $0         $0         
  President and                                                                                                  
  CEO                1999        $27,699       $0         $0        $0          $0         $0         $0         
                     1998        $0            $0         $0        $0          $0         $0         $0         

Peter Fahlman(2)     2000    Cdn.$94,720       $0         $0        $0          $0         $0         $0         
  Interim                                                                                                        
  President and      1999        $7,500        $0         $0        $0          $0         $0         $0         
     CEO             1998        $0            $0         $0        $0          $0         $0         $0         

Edmund Shung                                                                                                     
    CFO              2000        $0            $0         $0        $0          $0         $0         $0         
                     1999        $0            $0         $0        $0          $0         $0         $0         

-------                                                                         
(1)     Mr. Henderson joined the Company on October 4, 1999 and resigned as     
President and CEO on November 10, 2000. On November 15, 2000 Mr.
    Henderson was paid $4,583.33 and on February 15, 2001 he was paid an
additional amount of $4,583.33.                                 
(2)     Mr. Fahlman has served as the acting Chief Executive Officer while the  
     Company conducted a search for permanent chief executive officer. Mr.
        Fahlman served in this capacity from August 13, 1998 to October 4, 1999,
   at which time he was replaced by Mr. Henderson. Mr. Fahlman did not
receive any compensation for his service as CEO. Mr. Fahlman was
appointed President and CEO on November 11, 2000.               

 OPTION/SAR GRANTS IN LAST FISCAL YEAR

      Prior to the adoption of the Stock Option Plan described below, no stock
options were ever granted to or exercised by executive officers of the Company. 

     On October 14, 1999, the Board of Directors adopted a stock option plan
(the "Plan"), which provides for incentive stock options and non-statutory      
options to be granted to officers, employees, directors and consultants to the  
Company. The exercise price of each stock option granted shall not be less than 
the average closing price of the common stock of the Company listed on the CDNX 
for the ten trading days preceding the date the stock options are granted. The  
options granted pursuant to the Plan shall vest according to the terms set forth
in each particular grant. A period of at least two years of continuous service  
by the optionee to the Company is required before the stock option shall be 100%
vested. The term of the options cannot exceed five years. Options to purchase up
to 1,695,400 shares of the Company's common stock may be granted under the Plan.
During 2000, 900,500 options were granted to employees. As of April 5, 2001,    
520,500 stock options remained unexercised (subject to the vesting rules). The  
balance of the options which were previously granted were cancelled after 30    
days upon termination of employment of the grantee.                             

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     In the fiscal year ending December 31, 2000, stock options were granted
as follows:                                                                     

                                                        [Enlarge/Download Table]

                         NUMBER OF        % OF TOTAL                                           
                          SHARES        OPTIONS GRANTED                                        
                        UNDERLYING      TO EMPLOYEES IN       EXERCISE          EXPIRATION     
       NAME           OPTIONS GRANTED     FISCAL YEAR           PRICE              DATE        
-------------------- ------------------ ----------------- ------------------ ------------------

                                                                                               
John Rose               75,000(1)             8.3%           US$3.35/share        5/16/05      

(1)     1/3 vest immediately, another 1/3 vests on May 17, 2001 and the balance 
vests on May 17, 2002.                                          

AGGREGATED OPTION/SAR EXERCISES FY-END OPTION/SAR VALUES

                                                        [Enlarge/Download Table]

       (a)                (b)            (c)                     (d)                               (e)              

                                                                                           Value of Unexercised     
                        Shares                     Number of Securities Underlying         In-the Money Options/    
                 Acquired on Exercise   Value    Unexercised Options/SARs at FY-End(#)      SARs at FY-End (#)      
                 --------------------  Realized       Exercisable/Unexercisable         Exercisable/Unexercisable(1)
                                       --------       -------------------------         ----------------------------

                                                                                                                    
Peter Fahlman                                                                                                       
President & CEO                                                                                                     
Unexercisable                                                                                      $0               
Exercisable               -0-            -0-                   41,666(1)                           $0               

-------                                                                         
The year-end value represents the difference between the option exercise prices 
US $1.00 and the current market value of US $0.15 resulting in no value being   
assigned to the options. The market price as at December 29, 2000 was US$0.25   

Compensation of Directors. The directors of the Company are not     
  currently compensated for serving as directors, each director has been
    granted an option to purchase 75,000 shares of Common Stock at $1.00 per
   share. 25,000 shares vested on January 12, 2000 and 25,000 will on each
 anniversary date through 2002. Outside director's travel expenses are
reimbursed by the Company. Mr. Henderson and Mr. Fahlman receive    
compensation as officers.                                           

ITEM 11. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT         

   The following table sets forth, as of April 5, 2001 the number of
shares of the Company's Common Stock beneficially owned by (a) owners of more   
than five percent of the Company's outstanding Common Stock who are known to the
Company and (b) the Directors of the Company, individually, and the Executive   
Officers and Directors of the Company as a group, and (c) the percentage of     
ownership of the outstanding Common Stock represented by such shares. The       
security holders listed below are deemed to be the beneficial owners of shares  
of Common Stock underlying options and warrants which are exercisable within 60 
days from the above date.                                                       

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                                                                [Download Table]


                                            AMOUNT AND NATURE               
                                              OF BENEFICIAL      PERCENT OF 
      NAME AND ADDRESS OF BENEFICIAL OWNER      OWNERSHIP          CLASS    

                                                                            
Peter Fahlman, President and CEO and a              785,833(1)         7.61%
Director855 55A Street                                                      
Delta, B.C., V4M 3M3                                                        

Paul MacNeill, Director                               50,000(2)         .48%
  1111 West Georgia Street, Suite 2100                                      
 Vancouver, BC V6J 5B3                                                      

Lance Tracey, Director                              639,713(3)         6.19%
555 West Hastings Street, Suite 1610                                        
 Vancouver, BC V6H 4N6                                                      

Dieter Heidrich, Director                           525,640(4)         5.09%
230 Green Rock Drive                                                        
Boulder, CO 80302                                                           

Robert Roker                                        720,833(5)         6.98%
555 West Hastings Street, Suite 1610                                        
 Vancouver, BC V6H 4N6                                                      

Brian Archer                                        370,833(6)         3.59%
555 West Hastings Street, Suite 1610                                        
 Vancouver, BC V6H 4N6                                                      

Scott Shaw                                          552,563(7)         5.35%
555 West Hastings St, Suite 1628                                            
 Vancouver, BC V6B 4N6                                                      

Daryl Yurek                                         536,122(8)         5.19%
1327 Spruce Street, Suite 300                                               
Boulder, CO 80302                                                           

Acacia Management Services                          700,000(9)         6.77%
Kuttellgasse 4 CH-8001                                                      
Zurich, Switzerland                                                         

John Rose, Director                                 225,000(10)        2.18%
13826 Vintage Centre Drive                                                  
Houston, TX, 77069                                                          

Edmund Shung, CFO                                    12,000(11)         .12%
555 West Hastings Street, Suite 1628                                        
Vancouver, B.C., V6B 4N6                                                    

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                                                                [Download Table]
                                                                      
All Directors and Executive Officers as a group  2,234,019(12)  21.62%

------------------------                                                        
(1)  Includes 45,833 options exercisable presently or within 60 days. 40,000 of 
    these shares are held in the name of Michelle Fahlman, Mr. Fahlman's wife.
    The remaining shares are beneficially owned through a 40% ownership by Mr.
 Fahlman of DataDirect Holdings, Inc. which owns 1,750,000 shares of the
Company.                                                              
(2)  Includes 50,000 options exercisable presently or within 60 days .          
(3)  Includes 50,000 options exercisable presently or within 60 days, 20,000    
     shares held in the name of Mr. Tracey's wife and 210,613 shares represented
by a 12.035% ownership interest of Sutton Group Financial Services    
     controlled by his wife. The remaining shares are beneficially owned through
   Mr. Tracey's ownership of 20.52% of Sutton group Financial Services Ltd.,
which owns 1,750,000 shares of the Company.                           
(4)  Includes 50,000 options exercisable presently or within 60 days, 45,450 of 
    the shares are held jointly by Mr. Heidrich and his wife. 80,000 share are
held by Heidrich Family LLP . 160,000 shares are owned by Opus Capital
 Fund, LLC of which Mr. Heidrich is a general partner and manager of the
   fund giving beneficial ownership to Mr. Heidrich. 190,190 shares are held
by Opus Capital LLC.                                                  
(5)  Includes 20,833 options exercisable presently or within 60 days. The       
remaining shares are beneficially owned through a 40% ownership by Mr.
Roker of DataDirect Holdings, Inc. which owns 1,750,000 shares of the 
Company.                                                              
(6)  Includes 20,833 options exercisable presently or within 60 days. The       
remaining shares are beneficially owned through a 20% ownership by Mr.
Archer of DataDirect Holdings, Inc. which owns 1,750,000 shares of the
Company.                                                              
(7)  Mr. Shaw owns 19.54% of Sutton Group Financial Services, Ltd. which owns   
1,750,000 of the Company's common stock giving Mr. Shaw beneficial    
ownership to these shares and 210,613 shares represented by a 12.035% 
 ownership interest of Sutton Group Financial Services controlled by his
wife.                                                                 
(8)  Includes 66,840 shares and 469,282 warrants held both by Bolder Venture    
Partners, LLC of which Mr. Yurek is a 60% partner.                    
(9)  These shares were transferred by Sutton Group Financial Services Ltd. and  
DataDirect Holdings Inc. in January 2000.                             
(10) Includes 25,000 options exercisable presently or within 60 days.           
(11) Includes 5,000 options exercisable presently or within 60 days.            
(12) Includes 225,833 options exercisable presently or within 60 days.          

ITEM 12. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS                         

 The Company has entered into transactions with its officers and
directors, and with principal shareholders listed in Item 11 or affiliated      
entities as described below.                                                    

EMPLOYMENT CONTRACTS AND TERMINATION OF EMPLOYMENT AND CHANGE-IN-CONTROL        
ARRANGEMENTS.                                                                   

   On November 10, 2000 Mr. Henderson resigned as President, CEO and
Director of the Company.                                                        

      Peter Fahlman -On November 26, 1999 the Company and Mr. Fahlman, the
current President and CEO and a director of the Company and formerly the Vice   
President of Business Development , entered into an employment agreement        
commencing on November 26, 1999. Under the terms of the                         

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agreement, the Company will pay to Mr. Fahlman the sum of Cdn. $7,500 per month.
Effective November 16, 2001 Mr. Fahlman's salary was increased to CAD $ 9,860   
per month. Mr. Fahlman continues to hold incentive stock options to acquire     
50,000 shares of the Company's common stock at a price of US $1.00 per share for
a period of five years. The options vest over a thirty-six month period as      
follows: 1/36 of the options will vest in upon signing of the agreement and 1/36
of the options will vest each month thereafter. The options vest immediately if 
Mr. Fahlman is terminated for good reason or is terminated without cause. In his
capacity as a director of the Company, Mr. Fahlman was subsequently granted     
stock options to acquire an additional 25,000 common shares at $1.00 per share  
which stock options vested immediately.                                         

Other Employment Agreements                                                     

   The Company has entered into employment agreements with two other
employees with a range of salary levels and benefits. The employment agreements 
have no fixed term. The two employees are paid CAD$7,500 per month. The         
employees under these agreements have received each incentive stock options to  
purchase 50,000 shares of the Company's common stock at exercise prices of US   
$1.00 per share. Certain of the employment agreements also contain twelve month 
non-competition and confidentiality provisions, and provide for the immediate   
vesting of all stock options and six months severance pay in the event the      
agreement is terminated by the employee as a result of a failure by the Company 
to pay an amount due to the employee under the agreement, or if the agreement is
terminated by the Company without cause.                                        

The Company and executives of the Company have entered into   
confidentiality agreements that include non-confidential and non-disclosure     
provisions with respect to confidential information obtained by the executives  
in the course of their employment with the Company.                             

RELATED PARTIES                                                                 

Consulting Agreement                                                            

 The Company is party to a consulting agreement (the "Consulting
Agreement") with Bolder Venture Partners L.L.C. ("Bolder") made July 28, 1999   
and amended on February 15, 2000. Bolder Venture Partners is a limited liability
company incorporated under the laws of the State of Colorado and is owned 10% by
Cliff Mah, a director of the Company and is owned 60% by Daryl Yurek.           

       Under the terms of the Consulting Agreement, Bolder agrees to provide
consulting services to the officers of the Company relating to matters of       
corporate development, strategic planning, raising of capital and other         
financial matters, and to assist with certain private placements and public     
offerings of the Company's securities, including this offering. In consideration
of these services, the Company agreed to pay Bolder Venture Partners a monthly  
retainer of US $10,000, and purchase warrants to acquire up to 1,232,136 shares 
of the Company's common stock for a period of five years from July 28, 1999. The
remaining warrants will be exercisable as follows:                              

      -       225,000 of the warrants at US $0.25 per share on July 28, 1999
were exercised;                                 
      -       557,136 at US $1.00 per share as amended on February 15, 2000;
       -       225,000 at US $1.00 per share upon completion of this offering;
and                                             

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       -       225,000 at a price per share equal to the price per share under
             a future private placement of not less than US $3,000,000, if
such a private placement is made.               

   The exercise price of all of the Warrants referred to herein will
increase by 15% in each of the second, third, fourth and fifth year of the term 
of the share purchase warrants until exercised. The term of the Consulting      
Agreement ends on June 30, 2000.                                                

DataDirect Consulting Services Inc.                                             
During the year, the Company paid computer consulting fees of $118,196 (1999 -  
$181,784) to DataDirect Consulting Services Inc., a wholly owned subsidiary of  
DataDirect Holdings Inc. DataDirect Holdings Inc. is owned 40% by Mr. Fahlman   
and 40% by Robert Roker and 20% by Mr. Brian Archer.                            

Sutton Group Financial Services Ltd.                                            
  The Company has had accounts payables and accrued liabilities of
$58,649 (1999-$62,846) due to Sutton Group Financial Services Ltd. for operating
costs paid by Sutton on behalf of the Company. Sutton Group is 20.52%           
beneficially owned by Lance Tracy and 19.54% beneficially owned by Scott Shaw.  

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 PART IV

ITEM 13. EXHIBITS AND REPORTS ON FORM 8-K                                       

      (a) EXHIBITS. The following Exhibits are filed herewith or have been
previously filed with the Securities and Exchange Commission and are            
incorporated by reference herein:                                               

                                                        [Enlarge/Download Table]

EXHIBIT NUMBER   DESCRIPTION OF EXHIBIT                                                     
---------------  -------------------------------------------------------------------------- 
                                                                                            
3.1              Certificate of Domestication of E-xact Transactions Ltd.*                  
3.2              Certificate of Incorporation of E-xact Transactions Ltd.*                  
3.3              Bylaws*                                                                    
10.1             Amended Sponsorship Agreement dated January, 2000 between E-xact           
                 Transactions Ltd., Inc. and Canaccord Capital Corporation*                 
10.2             Lease dated April 22, 1999 between Harbour Centre Complex Limited as       
                 attorney-in-fact for Lord Realty Holdings Limited and Privest Properties   
                 Ltd. (Landlord) and E-xact Transactions Ltd.*                              
10.3             Stock Option Plan*                                                         
10.4             Letter Agreement dated September 16, 1999 between E-xact Transactions Ltd. 
                 And Ted Henderson.*                                                        
10.5             Letter Agreement dated July 28, 1999 between E-xact Transactions Ltd. And  
                 Bolder Venture Partners, LLC.*                                             
10.6             Management Agreement dated April 15, 1999 between DataDirect Holdings, Inc.
                 and Peter Fahlman, and Robert Roker, and E-xact Transactions Ltd.*         
10.7             Form of Employment Agreement executed between E-xact Transactions Ltd. and 
                 each of Peter Fahlman, Robert Roker and Brian Archer**                     
10.8             Confidentiality Agreement dated December 10, 1999 between E-xact           
                 Transactions Ltd. and Ted Henderson**                                      
10.9             Amended Letter Agreement dated January 18, 2000 between E-xact Transactions
                 Ltd. and Bolder Venture Partners, LLC.***                                  
10.1             Agency Agreement Amendment dated January 19, 2000 between E-xact           
                 Transactions Ltd. and Canaccord Capital Corporation.***                    
10.11            Sublease Agreement dated December 14, 1999 between E-xact Transactions Ltd.
                 and Kinder Morgan, Inc.***                                                 
23.1             Consent of Deloitte & Touche LLP, Independent Auditors.                    

--------------------                                                            
        *       Filed with Registration Statement on Form SB-2 filed October 22,
1999.                                           
    **      Filed with Registration Statement on Amendment No. 1 to Form
SB-2 filed December 22, 1999.                   
      ***     Filed with Registration Statement Amendment No. 2 to Form SB-2
filed February 8, 2000.                         
      ****    Filed with Registration Statement Amendment No. 3 to Form SB-2
filed February 11,2000.                         

        b) Reports on Form 8-K. During the last quarter of the period covered by
   this report, the Company filed reports on Form 8-K as listed below.
        Form 8-K filed on December 6, 2000 : RE: News release on
     appointment of Peter Fahlman as President and CEO and
  resignation of Ted Henderson as President and CEO.

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SIGNATURES

     Pursuant to the requirements of Section 13 or 15(d) of the Securities
Exchange Act of 1934, the Registrant has duly caused this report to be signed on
its behalf by the undersigned, thereunto duly authorized.                       

                                         E-xact Transaction Ltd.

Date: April 16, 2001                             By:  /s/ Peter Fahlman         
--------------------                                --------------------------- 
                                     Peter Fahlman
                                         President and CEO

    Pursuant to the requirements of the Securities Exchange Act of 1934,
this report has been signed by the following persons on behalf of the registrant
and in the capacities and on the dates indicated.                               

                                                        [Enlarge/Download Table]

        Signatures                              Title                         Date    
        ----------                              -----                         ----    

                                                                                      
 /s/ Peter Fahlman                             President and            April 16, 2001
---------------------------------              Director                               
Peter Fahlman                                                                         

 /s/ Edmund Shung                              Chief Financial Officer  April 16, 2001
---------------------------------                                                     
Edmund Shung                                                                          

 /s/ Lance Tracey                              Director                 April 16, 2001
---------------------------------                                                     
Lance Tracey                                                                          

 /s/ Dieter Heidrich                           Director                 April 16, 2001
---------------------------------                                                     
Dieter Heidrich                                                                       

 /s/  John Rose                                Director                 April 16, 2001
-----------------------------------------------                                       
John Rose                                                                             

 /s/ Paul MacNeill                             Director                 April 16, 2001
---------------------------------                                                     
Paul MacNeill                                                                         

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EXHIBIT INDEX 

                                                        [Enlarge/Download Table]

EXHIBIT NUMBER   DESCRIPTION OF EXHIBIT                                                     
---------------  -------------------------------------------------------------------------- 
                                                                                            
3.1              Certificate of Domestication of E-xact Transactions Ltd.*                  
3.2              Certificate of Incorporation of E-xact Transactions Ltd.*                  
3.3              Bylaws*                                                                    
10.1             Amended Sponsorship Agreement dated January, 2000 between E-xact           
                 Transactions Ltd., Inc. and Canaccord Capital Corporation*                 
10.2             Lease dated April 22, 1999 between Harbour Centre Complex Limited as       
                 attorney-in-fact for Lord Realty Holdings Limited and Privest Properties   
                 Ltd. (Landlord) and E-xact Transactions Ltd.*                              
10.3             Stock Option Plan*                                                         
10.4             Letter Agreement dated September 16, 1999 between E-xact Transactions Ltd. 
                 And Ted Henderson.*                                                        
10.5             Letter Agreement dated July 28, 1999 between E-xact Transactions Ltd. And  
                 Bolder Venture Partners, LLC.*                                             
10.6             Management Agreement dated April 15, 1999 between DataDirect Holdings, Inc.
                 and Peter Fahlman, and Robert Roker, and E-xact Transactions Ltd.*         
10.7             Form of Employment Agreement executed between E-xact Transactions Ltd. and 
                 each of Peter Fahlman, Robert Roker and Brian Archer**                     
10.8             Confidentiality Agreement dated December 10, 1999 between E-xact           
                 Transactions Ltd. and Ted Henderson**                                      
10.9             Amended Letter Agreement dated January 18, 2000 between E-xact Transactions
                 Ltd. and Bolder Venture Partners, LLC.***                                  
10.1             Agency Agreement Amendment dated January 19, 2000 between E-xact           
                 Transactions Ltd. and Canaccord Capital Corporation.***                    
10.11            Sublease Agreement dated December 14, 1999 between E-xact Transactions Ltd.
                 and Kinder Morgan, Inc.***                                                 
23.1             Consent of Deloitte & Touche LLP, Independent Auditors.                    

--------------------                                                            
        *       Filed with Registration Statement on Form SB-2 filed October 22,
1999.                                           
    **      Filed with Registration Statement on Amendment No. 1 to Form
SB-2 filed December 22, 1999.                   
      ***     Filed with Registration Statement Amendment No. 2 to Form SB-2
filed February 8, 2000.                         
      ****    Filed with Registration Statement Amendment No. 3 to Form SB-2
filed February 11,2000.                         

Dates Referenced Herein   and   Documents Incorporated by Reference

				Referenced-On Page
This ‘10KSB40’ Filing		Date		First		Last			Other Filings
		10/31/02		12
		5/17/02		43
		11/16/01		46
		5/17/01		43
Filed on:		4/17/01
		4/16/01		49
		4/6/01		14
		4/5/01		1		43
		3/16/01		20
		2/15/01		42
For Period End:		12/31/00		1		43			NT 10-K
		12/29/00		43
		12/6/00		48					8-K
		11/15/00		42
		11/11/00		39		42
		11/10/00		39		45
		8/2/00		33
		7/1/00		18		29
		6/30/00		47					10QSB,  NT 10-Q
		6/15/00		17		28
		5/17/00		39		40
		4/1/00		14		26
		3/31/00		13					10QSB,  NT 10-K,  NT 10-Q
		3/22/00		12		34
		2/15/00		33		46
		2/8/00		48		50			SB-2/A
		1/19/00		48		50
		1/18/00		33		50
		1/12/00		18		43
		12/31/99		8		38			10KSB40,  NT 10-K
		12/22/99		48		50
		12/14/99		48		50
		12/10/99		48		50
		11/26/99		45
		10/22/99		48		50			SB-2
		10/14/99		33		42
		10/4/99		40		42
		9/16/99		48		50
		9/2/99		30
		9/1/99		40
		8/28/99		33		34
		7/29/99		3		14
		7/28/99		25		50
		7/1/99		34
		6/15/99		17		28
		4/22/99		48		50
		4/15/99		48		50
		12/31/98		19		36
		12/15/98		18		29
		9/1/98		3		40
		8/31/98		36
		8/13/98		3		42
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