##### Table of Contents



---

---

UNITED STATES
SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549




---

FORM 10-K








Amendment No. 1





(Mark One)

|    |  |                                                                                     
|--- |  | ------------------------------------------------------------------------------------
|[X] |  | ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the fiscal year ended February 28, 2003

OR

|     |  |                                                                                         
|---- |  | ----------------------------------------------------------------------------------------
|[  ] |  | TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

Commission file number: 0-14356

HEALTHTRAC, INC.

(Exact name of Registrant as specified in its charter)


|                                                                      |  |                                            
|--------------------------------------------------------------------- |  | -------------------------------------------
|Canada
(State or other jurisdiction of
incorporation or organization) |  | 911353658
(IRS Employer
Identification No.)

|                                                                                        |  |                 
|--------------------------------------------------------------------------------------- |  | ----------------
|539 Middlefield Road, Redwood City, California
(Address of principal executive offices) |  | 94063
(Zip Code)

Registrants telephone number, including area code: (650) 839-5500

Securities registered pursuant to Section 12(b) of the Act:
None

Securities registered pursuant to Section 12(g) of the Act:
Common Stock

Indicate by check mark whether the registrant (i) 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 (ii) 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 contained, to
the best of registrants knowledge, in definitive proxy or information
statements incorporated by reference in Part III of this Form 10-K or any
amendment to this Form 10-K. Yes [X] No [  ]

Indicate by check mark whether the registrant is an accelerated filer (as
defined in Rule 12b-2 of the Securities Exchange Act of 1934). Yes [  ] No
[X]

As of May 21, 2003, there were outstanding 223,104,598 shares of Common
Stock of the registrant.

DOCUMENTS INCORPORATED BY REFERENCE

Portions of the Registrants Proxy Statement to be submitted to the
Commission on or before June 28, 2003, are incorporated by reference into Part
III.

The Exhibit Index begins on page F-24.



---

---





---

TABLE OF CONTENTS



|              |                                                                                                         |  |  |  |  |  |  | 
|------------- | ------------------------------------------------------------------------------------------------------- |  |  |  |  |  |  | 
|              | Item 1. Business                                                                                       
|              | Item 2. Properties                                                                                     
|              | Item 3. Legal Proceedings                                                                              
|              | Item 4. Submission of Matters to a Vote of Security Holders                                            
|PART II      
|              | Item 5. Market for Registrants Common Equity and Related Stockholder Matters                          
|              | Item 6. Selected Financial Data                                                                        
|              | Item 7A. Managements Discussion and Analysis of Financial Condition and Results of Operations         
|              | Item 7B. Risk Factors                                                                                  
|              | Item 8. Financial Statements and Supplementary Data                                                    
|              | Item 9. Changes in and Disagreements with Accountants on Accounting and Financial Disclosure           
|PART III     
|              | Item 10. Directors and Executive Officers of the Registrant                                            
|              | Item 11. Executive Compensation                                                                        
|              | Item 12. Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters
|              | Item 13. Certain Relationships and Related Transactions                                                
|              | Item 14. Controls and Procedures                                                                       
|              | Item 15. Exhibits, Financial Statements, Schedules and Reports on Form 8-K                             
|SIGNATURES   
|Exhibit Index
|EXHIBIT 99.1 



---



##### Table of Contents



INTRODUCTORY NOTE

The Annual Report on Form 10-K contains certain forward-looking statements
within the meaning of Section 27A of the Securities Act of 1933 and Section 21E
of the Securities Exchange Act of 1934 and the Company intends that certain
matters discussed in this report are forward-looking statements intended to
qualify for the safe harbor from liability established by the Private
Securities Litigation Reform Act of 1995. These forward-looking statements can
generally be identified by the context of the statement which may include words
such as the Company believes, anticipates, expects, forecasts,
estimates, or other words of similar meaning and context. Similarly,
statements that describe future plans, objectives, outlooks, targets, models or
goals are also deemed forward-looking statements. These forward-looking
statements are subject to certain risks and uncertainties that could cause
actual results to differ materially from those forecasted or anticipated as of
the date of this report. Certain of such risks and uncertainties are described
in close proximity to such statements and elsewhere in this report, including
Item 7, Managements Discussion and Analysis of Financial Condition and
Results of Operations. Stakeholders, potential investors and other readers
are urged to consider these factors in evaluating the forward-looking
statements and are cautioned not to place undue reliance on such
forward-looking statements or construe such statements to be a representation
by the Company that the objectives or plans of the Company will be achieved.
The forward-looking statements included in this report are made only as of the
date of this report, and the Company undertakes no obligation to publicly
update such forward-looking statements to reflect subsequent events or
circumstances.




Item 1.Business

Available Information

The Company maintains an Internet website at www.healthtrac.com which
includes an investor relations page available to all interested
parties, where links to recent filings with the United States Securities and Exchange Commission, along
with any amendments to those reports are available free of charge, as
reasonably practicable following the time they are filed with or furnished to
the SEC.

General

Our company was incorporated under the laws of the Province of British
Columbia on January 29, 1982 under the name Thunder Oil & Gas Ltd.. Our name
was changed to Thunder Explorations Ltd. on May 9, 1983. On April 22, 1985,
we changed our name to CAM-NET Communications Network Inc. and on February 1,
1991, our company was continued under the Canada Business Corporations Act. On
August 1, 1997, we changed our name to Suncom Telecommunications, Inc. and on
May 31, 1999, we changed our name to Virtualsellers.com, Inc.. Following our
Annual General and Special Meeting for the year ended February 28, 2001, on
February 22, 2002, we changed our name to Healthtrac, Inc..




The
Company is currently structured into two business units: Healthcare
Management, and Call Center Operations. Prior to September 23, 2002, the
Company had a third business segment called the Professional Services and
Software Products (PSSP) Group (formerly referred to as the
e-commerce segment). In September 2002, management distributed the
companys information technology resources between its Greenwood, Indiana call
center and Redwood City, California headquarters where the information
technology staff has assumed responsibility for all of Healthtracs information
technology products and services. Prior to February 28, 2002, the
Company had a fourth business segment called Call Direct, a catalog
telecommunication equipment resale business.




The Companys principal offices and subsidiaries are located in North
America. Unless the context otherwise requires, the term Company refers to
Healthtrac, Inc. and its subsidiaries.

Summary of Material Acquisitions During the Previous Five Years

NorthNet Telecommunications Inc. d/b/a NorthStar Telesolutions

On January 1, 1998, we purchased our first call center for $105,000. As
consideration for the acquisition, we issued a convertible note for $105,000
which was convertible into our common shares at the rate of $0.10 per common
share. On January 5, 1999, the convertible note was converted into 1,050,000
of our common shares. The call center is operated through our subsidiary,
NorthNet Telecommunications Inc. doing business as NorthStar Telesolutions.
For details of the operations of our call center, see the section entitled
Call Center Operations below.

1



---



##### Table of Contents



VirtualSellers.com, Inc.

In April, 1999, we purchased certain assets and the business of
VirtualSellers.com, Inc., an Illinois corporation. As consideration for the
acquisition, we paid cash of $170,000, assumed indebtedness of US$28,929,
issued 500,000 of our common shares and issued share purchase warrants to
purchase up to 361,710 of our common shares. Each share purchase warrant
entitled the holder to purchase one common share at a price of $1.50 per common
share for a period of two years. As part of the acquisition, we entered into
employment agreements with two of the founders of this company.

Although
we discontinued the operations of VirtualSellers.com, Inc. in fiscal
2002, we subsequently launched our Professional Services and
Software Products (PSSP) which continued some of the
services of VirtualSellers.com, Inc. The primary purpose of this
Group was to market our TAME V software, provide the information technology
services for our Healthtrac division and provide application development and
Web-enabling solutions. This division was discontinued in fiscal 2003
and these operations are classified as discontinued operations in our
annual financial statements filed under Item 8 of this Annual
Report on Form 10-K.

CallDirect Enterprises Inc.

In May, 1999, we purchased certain assets of CallDirect Enterprises Inc.
As consideration for the acquisition, we issued 1,200,000 of our common shares
and assumed the outstanding indebtedness of approximately CDN$500,000, which we
settled for approximately CDN$109,000.

On February 28, 2002, we announced that our subsidiary, Preferred
Telemanagement Inc., doing business as CallDirect Enterprises, ceased operation
on the last day of our fiscal year, February 28, 2002. As a result, we no
longer operate as a catalogue reseller of telephone-related equipment, as well
as of products such as multimedia, entertainment, travel, security and computer
accessories for offices and homes. These operations are classified as
discontinued operations in our annual financial statements filed under Item 8
of this Annual Report on Form 10-K.

TAME Software and Customer Base

In June, 1999, we purchased the rights to a proprietary e-commerce
shopping cart software system and language interpreter called TAME (Tag
Activated Markup Enhancement) from Seth Russell and Nathan Bawden, doing
business as Clickshop. As consideration for the acquisition, we assumed
liabilities of $20,000 and issued 300,000 of our common shares (150,000 shares
to each of Seth Russell and Nathan Bawden). As part of the acquisition, we
entered into an employment agreement with Nathan Bawden. We also agreed to
issue a further 300,000 of our common shares one year from closing if Nathan
Bawden successfully trained our employees in the use, operation and development
of TAME. These additional 300,000 shares were issued on February 13, 2001
(150,000 shares to each of Seth Russell and Nathan Bawden).

For further details on TAME, see the section entitled TAME (Tag Activated
Markup Enhancement) below.

Sullivan Park LLC

On June 1, 2000, our subsidiary Sullivan Park Inc. acquired all of the
assets of the Internet services development business carried on by Sullivan
Park LLC in exchange for 6,500,000 of our common shares, which were issued to
the owner, Edward Sharpless, on July 18, 2001. As part of the acquisition, our
subsidiary Sullivan Park Inc. entered into an employment agreement with the
former owner and retained several of its employees.

The former owner of Sullivan Park, which was acquired by our company on
June 1, 2000, had filed a claim against our company alleging that the company
was in default of the terms of the purchase agreement. A counter claim was
filed by the company, and on July 18, 2001 we reached a settlement and agreed
to issue 6,500,000 common shares to the former owner of Sullivan Park. We also
agreed to pay the former owner $8,885 to reimburse him for expenses he had
incurred on our behalf.

The
operations of Sullivan Park were rolled into the companys
e-commerce division. On July 19, 2001, we discontinued the operations of Sullivan Park Inc. to
focus our efforts and resources on our new health promotion business.

MedWired Corporation

On April 20, 2001, we purchased certain assets of MedWired Corporation
including the copyright, object code and source code for MedWireds
Practiceportal software, certain registered and unregistered trade or brand
names, domain names and trademarks and MedWireds customer list for a purchase
price of $200,000 which we paid by issuing 241,935 of our common shares at an
issue price of $0.62 per share (the fair market value of our stock at February
27, 2001) and $50,000 in cash. We abandoned these assets in fiscal
2003 to focus on our current programs.

2



---



##### Table of Contents



Healthscape, Inc.

On June 26, 2001, we acquired Healthscape, Inc.s proprietary software
(and related intellectual property) for the sum of $245,000, $5,000 of which
was paid in cash, with the balance paid in 631,579 shares of our common stock
having a fair value of $0.38 per share. The Healthscape Expert System analyzes
each users progress and the user health profile and provides tailored
information to help each user meet their unique health goals. The Healthscape
software, known as the Healthscape Expert System, is expandable to include new
healthcare related applications and scalable to accommodate a growing user
base. We abandoned these assets in fiscal 2003 to focus on our
current programs.

Healthtrac, Inc.

On August 3, 2001, our wholly-owned Nevada subsidiary, Healthtrac
Corporation, acquired Healthtrac, Inc., a California corporation, pursuant to a
Merger Agreement dated July 11, 2001. We acquired the shares of Healthtrac,
Inc. in exchange for 13,529,412 common shares in the capital of our company.
After we acquired all of the shares of Healthtrac, Inc., we merged it into
Healthtrac Corporation as provided for in the Merger Agreement. As a result of
the merger, we assumed a debt owed to a third party of $892,459, which we
settled for $500,000 and paid in shares of our common stock at a price per
share of $0.265. Also as a result of the merger, we obtained a loan for
$110,000 at an interest rate of 1% over the Bank of Americas prime rate from
Queensland Teachers Union Health Fund Limited. The loan is convertible at
Queenslands option into shares of our common stock on the date of maturity of
the loan at a price that is equal to the price per share equal to the ten-day
average closing price for the ten trading day period ending on the repayment
date. Queensland also converted approximately $484,764 of debt owed it by
Healthtrac, Inc. into shares of our common stock at a price of $0.265.
Queensland also agreed to lend Healthtrac Corporation (the surviving
corporation in the merger) money as needed over a period of nine months after
the closing of the merger, for the purpose of purchasing books for resale to
Healthtracs customers. The acquisition of Healthtrac, Inc. closed on August
3, 2001, although there are a number of post-closing obligations to be complied
with, including the issuance of 316,436 of the total of 13,529,412 common
shares that we agreed to issue in the exchange, which will be issued upon the
submission to us by some of the shareholders of Healthtrac, Inc., of certain
paperwork still required of them pursuant to the merger agreement.

For further details on the operations of our health promotion division,
see the section entitled Health Management Operations below.

Healthcare Management Operations




Healthtrac
Corp. provides healthcare management services to health plans,
self-insured employers and government agencies via programs designed to
postpone disease and disability through preventive practices and chronic
disease self-management. Our health risk assessment identifies high-risk
constituents prior to high claims utilization, our tailored interventions
reduce health risks and costs by supporting healthy changes and condition
management, and our reporting capabilities track changes over time and evaluate
each programs impact. Healthtrac measures return on investment, participant
and group changes in health risks, health consumerism, and productivity, and
tracks reductions in healthcare usage.




Healthtracs products and services are designed to enhance the quality of
care while reducing the overall cost of health care. Our programs are intended
to not only lead the way to better health but to do so in a way that can be
continually measured in terms of effectiveness and results.

The fundamental mission of Healthtrac#to improve the health status of the
population#is reflected in all of our programs. Our goals are to reduce health
risks and improve health status, reduce health care costs, and provide sound
data on program impact.

Healthtrac offers a variety of programs ranging from minimal intervention
(Healthtrac Premier) for the entire client population, to intensive
interventions for those at greatest risk (Healthtrac Enhanced). Our products
are available to participants through the mail or via the Internet.

The core components of the Healthtrac programs are:



| |  |  | Health Assessments (i.e. the tool used to measure and monitor the
populations health risks, and to identify those individuals at
greatest risk for poor health status);
| | - |  | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------

3



---



##### Table of Contents





| |  |  | Self-Care (e.g. Take Care of Yourself book versions, health
promotion newsletter, self-care books, online medical encyclopedia,
medical Libraries, health news and content);                                                    
| | - |  | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|
| |  |  | Health Education and Promotion (e.g. health education materials,
personalized letters and reports summarizing health assessment
responses and providing encouragement to take action to improve health,
online Learning Centers)
|
| |  |  | High Risk Identification and Intervention (e.g., targeted risk and
condition-specific health education materials and health education
telephone counseling).                                                                    

Healthtrac Premier reduces the need and demand for health care services by
helping participants increase their personal health self-confidence and their
ability to employ effective self-management practices. This program provides
essential health promotion intervention to participants through universal
health information, education, and support to help participants achieve and
maintain the highest possible level of well-being. Tailored and targeted
feedback reinforces healthy changes based on their self-efficacy and readiness
to make changes, wherever they may be on the health continuum. The results are
reinforcement of gradual progress toward goals, improvements in health status
and reductions in health risks, accompanied by a decrease in unnecessary and
inappropriate use of medical care resources.

The Healthtrac Enhanced program provides an intensive health education
intervention for those who are at greatest risk to utilize high cost services.
Effective interventions targeted to this high cost population can yield
substantial savings. With proactive, early intervention, what might otherwise
become major medical problems, with associated expenses, absenteeism and loss
of productivity, can be minimized or, in some cases, completely avoided. As
evidence of the effectiveness of this approach, the Healthtrac High Risk
program yields ROIs as high as 8:1, as proven through published research.

There are twelve risk modules in the High Risk Program, more being
developed in 2003, each emphasizing a specific lifestyle-related or chronic
condition.

The lifestyle risk modules are:

|                          |  |                                                                                          
|------------------------- |  | -----------------------------------------------------------------------------------------
|       Cigarette smoking |  |        Overweight                                                                       
|       Stress            |  |        Combined lifestyle risks: high stress, sedentary lifestyle, poor        nutrition

The chronic condition modules are:

|                                 |  |                            
|-------------------------------- |  | ---------------------------
|       Arthritis                |  |        Asthma             
|       Back Pain                |  |        Diabetes           
|       Heart Disease            |  |        High Blood Pressure
|       Lung/Respiratory Disease |  |        Stroke             

Our supporting services include:



| |  |  | Client Services (e.g. assists with the day-to-day management of the program)                                                                         
| | - |  | -----------------------------------------------------------------------------------------------------------------------------------------------------
|
| |  |  | Account Management (e.g. consults with the client to determine strategic needs and meet objectives)                                                  
|
| |  |  | Medical Consultation (e.g. James Fries, MD, Medical Director for
Healthtrac provides demand management, research, and other consultation
for clients)
|
| |  |  | Health Education Consultation (e.g. our health educators provide
consultation on health promotion programs and educational materials)                
|
| |  |  | Claims Analysis (e.g. evaluation and comparison of healthcare,
workers compensation, disability claims, and personnel measures with
Healthtrac data).
|
| |  |  | Call Center Counseling (e.g. health decision support-24 hours a
day, seven days a week)                                                              

4



---



##### Table of Contents



All Healthtrac programs employ four essential strategies:



| | 1. |  | Analysis of the participants health status through health
assessment questionnaires                                                                                                           
| | -- |  | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|
| | 2. |  | Development of a personal action plan#tailored to the individuals
needs and readiness to change#that is designed to increase
self-efficacy and reduce health risks                            
|
| | 3. |  | Education in wise and appropriate medical care decision-making                                                                                                                                 
|
| | 4. |  | Ongoing reinforcement of positive health habit changes through
periodic health assessment, serial tracking of changes in health status
and health risks, and targeted health promotion messages

Healthtracs Customers

The majority of Healthtrac clients are self-funded employer groups, health
plans/managed care organizations, hospital systems, and the military.
Healthtrac generally has long-term relationships and long-term contracts with
its clients. Many are in the process of renewing their agreements with
Healthtrac. We target businesses that have an eligible base of 5,000 or more.

Distribution

Healthtracs products and services have traditionally been delivered via
paper/manual delivery, but Healthtrac now has its programs available over the
Internet through its personal health portal, MyHealthtrac.com. Healthtrac
distributes its products and services in the following manner: Healthtrac
contracts with an organization, (e.g. a self-insured employer), to provide a
health promotion program to the employers employees or the health plans
members. Of the total eligible participants, a percentage of the employees or
members become actual Healthtrac program participants. Healthtrac enrolls
these participants into our proprietary system and then generates the initial health risk
assessment for each participant. The participant completes the assessment,
returns it to Healthtrac, and then Healthtrac analyzes the assessment using its
predictive algorithms. Healthtrac then generates a letter and report uniquely
tailored to each individual, addressing that individuals health status and
risks. Based on the findings of the analysis, the individual is either
enrolled in a high risk program or placed in the basic or low risk, program.
The participant then receives ongoing health information, educational materials, and
self management tools (interventions) tailored to the individuals health maintenance or
improvement goals. The participants are then reassessed at periodic intervals.
Healthtrac is exceptional in its market because of this serial tracking of
its participants. This serial tracking reports the individuals successes and
progress toward meeting their health improvement goals over time. Healthtrac
also provides aggregate reports to its clients to measure the programs
success.

Healthtracs products and services were initially developed in 1984 when
Healthtrac was founded. Healthtrac continually evaluates its health assessment
tool to incorporate the most current (accepted and valid) scientific, medical,
demand management, and lifestyle behavior change concepts. This requires
ongoing design/redesign, testing, and monitoring of the questionnaire responses
and the associated algorithms used to calculate risk scores and health status.
We also encourage feedback from our clients medical teams.

Development of our online health risk assessment is complete and we have
already sold this product to our first client. A static version and tour of
the online questionnaire and ancillary products is available for viewing
through our sales group.

Industry Overview

If the health of American citizens were improved, logic indicates we would
spend less time and money treating the many diseases that are clearly
preventable.

There is ample evidence that poor health habits cost dearly: By way of
example:



| | - |  | preventable illness makes up approximately 70 percent of the burden
of illness and the associated costs. Well-developed national statistics
such as those outlined in Healthy People 2000 (2010) document this
central fact clearly. McGinnis and Foege have carefully reclassified
the causes of death in the United States, using underlying actual causes
rather than the traditional disease-oriented classifications; they found
that preventable causes account for eight of the nine leading categories
and for 980,000 deaths per year. (J. F. Fries, et.al. New England
Journal of Medicine 1993; 329:321-325; and J.M. McGinnis, W. H. Foege,
Journal of American Medical Association 1993; Volume 270, No. 18).
| | - |  | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|
| | - |  | the U.S. Congress Office of Technology Assessment estimated that, in
1985, smokers cost businesses $43 billion in lost earnings. (OTA, US
Congress. Smoking-related Deaths and Financial Costs. Washington, DC:
Health Program, OTA; 1985 OTA staff memorandum).                                                                                                                                                                                                                                                                                                                                                                                                                                                          

5



---



##### Table of Contents





| | - |  | obesity in the US accounts for approximately 5% of all health care
costs (Thompson, D., Edelsberg, J., Kinsey, K. L., Oster, G. Estimated
economic costs of obesity of US business. Am J Health Promotion. 1998;
13:120-127.)                                                                                                                                                                                                                   
| | - |  | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|
| | - |  | current medical research, according to Nutritional Health Magazine
(11/2001), shows that 50% of the American population is overweight.                                                                                                                                                                                                                                                                                                          
|
| | - |  | employees with six heart disease risk factors had future medical
costs 149% higher than those with no risk factors. Those with three
stroke risk factors had costs 52% higher than those without the same
risk factors. (Jee S, ODonnell M, Suh I, Kim I. The relationship
between modifiable health risks and future medical expenditures: the
Korea Medical Insurance Corporation employee study. Am J. Health
Promotion. 2001; 15: 244-255).

Today, there is an expanding demographic looking for new methods of
increasing their well being through health promotion and disease management
products. For individuals following a health promotion program or maintaining
a healthy lifestyle, the results can be very dramatic: the individual is
likely to have more energy, fewer physical problems, greater mental alertness,
greater athletic prowess, feel better, look younger, and be healthier than his
or her peers who did not adopt healthy living practices. For those individuals
following an unhealthy lifestyle, the results can be just as dramatic:
increased illness and disease, frequent absenteeism, prolonged disability, and
early death.

Interest in worksite health promotion has grown steadily since the
mid-1980s when employers became concerned about rapidly rising health care
costs. Employers, managed care providers and third party administrators all
share the following needs:



| |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                             
| | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | - to manage and control participant health benefit costs;
- to decrease demand for unnecessary or avoidable healthcare services;
- to build participant satisfaction and increase productivity;
- to re-connect and focus on the participant as the primary stakeholder
in healthcare;
- to empower, educate, inform, and guide participants to better health;
- to secure best of breed, best in class to affect the health and well
being of participants;
- to improve health status of their participants;
- to reduce and/or stabilize the risks in their participants lives; and
- to achieve a return on investment.

Competition

Generally speaking, Healthtrac competes in the health promotion and
wellness market in which over 20 companies provide health promotion services
with primary emphasis on health risk assessments, lifestyle, and behavioural
modification and condition specific personal care management. Of these, the
Mayo clinic, Wellmed, Staywell, Johnson & Johnson, and WebMD constitute
Healthtracs competitors. This statement is biased towards health assessments
as a core service and the ancillary non-core services that enhance the overall
value proposition as it relates to overall health management. Each of these
companies possesses unique strengths and weaknesses in delivery of health
assessment technologies. We estimate that these five companies combined boast
over 2300 current individual group clients and make up the critical mass of the
marketplace.

Healthtrac has over 18 years of experience providing comprehensive health
assessment, health promotion, and self-care products and services in the United
States and internationally. More than one million individuals have used the
Healthtrac health assessment instrument and over three million health
assessment questionnaires have been completed, making it one of the most highly
used and tested questionnaires in the industry.

Our health assessment and associated health promotion programs have been
studied more extensively than any other such programs. Numerous studies,
published in peer-reviewed medical and scientific literature, have found the
health assessment and its educational programs to be highly effective in
motivating positive change in health habits, resulting in lower risks and
measurable reductions in the use of unnecessary, inappropriate and costly
health care services.

Healthtrac has won numerous awards over the years, and is the only
six-time winner of the C. Everett Koop National Health Award that recognizes
programs that are proven to reduce health risks and health care costs.

Prior to our acquisition of Healthtrac in 2001, it had languished with few
resources directed toward marketing, sales, and technology. We are rebuilding
our sales and marketing efforts, reestablishing our visibility in the
marketplace, and improving our technology platform. During the fiscal year
ended February 28, 2002, Healthtrac

6



---



##### Table of Contents



expanded its marketing and sales efforts in
an effort to increase its visibility in the market. We have increased our
sales force in an effort to fully service our existing clients and to capture
new clients. Healthtrac continues to pursue alliances with strategic sales
partners to expand the market penetration of our products and services.
Healthtrac is also focused on renewing existing client contracts and selling
additional and enhanced products to our existing clients. In addition,
Healthtrac completed the migration to our new software platform, the Windows
NT/TAME platform, thus vastly improving our technology.

Health Insurance Portability and Accountability Act of 1996

The US Congress enacted the Health Insurance Portability and
Accountability Act of 1996 (HIPAA), including Standards for Privacy of
Individually Identifiable Health Information. The law included provisions
designed to save money for health care businesses by encouraging electronic
transactions, but also required new safeguards to protect the security and
confidentiality of that information. Most states already have similar laws,
but HIPAA ensured the closing of gaps in the protection of patients privacy
and confidentiality.

The privacy standards rule applies to our Healthtrac business because
Healthtrac relates to participants in the healthcare industry. We believe that
Healthtrac is a business associate under the HIPAA privacy standards rule.
Therefore, we will provide satisfactory assurances to our clients who must
comply with HIPAA that we will use its participants personal health
information only for the purpose for which we were engaged by the client. In
addition, we have developed our own privacy policy which assures our clients
and our individual users that their information will remain confidential.

Call Center Operations

We operate one call center through our subsidiary, NorthNet
Telecommunications, Inc. doing business as NorthStar TeleSolutions. Our call
center is located at 125 Airport Parkway, Greenwood, Indiana. Our call center
provides back office services such as outbound and inbound customer support,
centralized customer billing, customer sales and support, order entry, order
fulfillment, bill collection, IT help desk support, as well as management
reporting, database management, service scheduling and dispatch, marketing
services and remote service maintenance. Our call center currently has the
capacity for over 80 call center representatives and offers customer service
support 24-hours a day, seven days a week. We provide our services for a flat
monthly rate or on a per-transaction basis depending on the scope of services
required.

In the past, we have provided services to a limited number of cable
television operators and Internet service providers in the United States. Even
though we have recently lost some small clients primarily due to economic
conditions, we have expanded our client base and now service over 60,000 homes
with cable television and/or other broadband services. We target businesses
that have a customer base of up to 20,000 customers, as we have found that
businesses with more than 20,000 customers typically have well established
in-house call centers. We market our call center services through periodic
advertising, direct mail, strategic partnerships and outbound telemarketing, as
well as by appearances at industry trade-shows.

We concentrate our call center services on customer support and
transaction processing, allowing our clients to concentrate on the marketing
and growth of their businesses while still maintaining a high level of customer
care and service. We are cultivating new customers for the call center, which
have also begun to provide cable-related services such as local and long
distance telecommunications and Internet access. By utilizing our service we
are able to bundle and/or market together the services provided by our clients.
We have also had quite a bit of success with our newest service that enables
us to remotely control the services of our clients subscribers. This service
greatly reduces the operating cost to our clients by eliminating truck rolls
while improving customer satisfaction as they are able to receive immediate
service and enhanced service offerings.

We are continuing to expand our scope of service that we provide. In the
past, we provided limited services to cable television operators and Internet
service providers in the United States. We have expanded the scope of our call
center operations and are better positioned to support new and existing clients
that offer the latest services and technologies. We currently handle approximately 45,000 transactions and
16,000 calls per month and have the resources to significantly increase each of
these.

7



---



##### Table of Contents



Discontinued Operations

In
fiscal 2002, the Company discontinued its telecommunications
catalogue resale business which was located in British Columbia,
Canada. The division was closed and the Company did not realize any
proceeds on disposition.




In
fiscal 2003, the Company discontinued its PSSP group (formerly its
e-commerce division) that had been substantially curtailed in fiscal 2002 as a result of cash
flow and profitability concerns. The division was closed and the
Company did not realize any proceeds on disposition in 2002 or 2003.
Previously, the PSSP division operated an internet shopping
cart website whereby customers could purchase products for sale by the
Company, and performed consulting services related to website design,
development projects and hosting services.




Employees

As of February 28, 2003, the Company employs approximately 37 full-time
employees. All employees are located in the United States. The Company
believes that its employee relations are excellent. The employees and the
Company are not parties to any collective bargaining agreements.

Recent Developments

In May 2003, the Company rolled out www.myhealthtrac.com to its first
online client. The new portal allows program participants to complete
their health risks assessments and receive real time feedback. In addition,
participants can read comprehensive health materials and track their progress..




Item 2.Properties

The Companys executive offices and principal facility are located in an
approximately 3,729 square foot building in Redwood City, California. The
Company leases the facility pursuant to a lease expiring October 2006.

The Company leases a facility in Greenwood, Indiana, that is used as a
call center and operations support facility. The lease is for approximately
8,446 square feet. The lease expires in July 2006.




Item 3.Legal Proceedings




On September 25, 2001, Rolling Meadows Associates, I, LLC, by Zaragon
Holdings, Inc., filed a Complaint in Cook County, Illinois Circuit Court
against VirtualSellers.com, Inc. for possession of the premises located at 3075
Tollview Drive, Rolling Meadows Illinois and for rent or damages for
withholding possession of these premises for the period from September 1, 2001
through September 30, 2001 in the amount of $26,315 plus all rents accruing
through the date of trial. A complaint was filed for rent and damages in the
amount of $859,512. The Companys position on this proceeding is that the
building has been sublet and deny that they owe the Plaintiff any money. The
outcome of this complaint is currently uncertain and consequently no
amounts have been accrued as at February 28, 2003. Management is in current
discussions with the plaintiff to settle the dispute.




On July 25, 2001 in the Vancouver Registry of the Supreme Court of British
Columbia, our company commenced a lawsuit against Telemetrix Solutions Inc.
(formerly Telemetrix Resource Group, Inc.) and Tracy Corporation II dba Western
Total Communications asserting a claim against Telemetrix and Tracy in the
amount of CDN$64,658 jointly and severally (plus pre-judgment interest)
pursuant to a letter agreement entered into between the parties on or about
July 14, 1998 with respect to a possible business combination between the
parties which was never completed. A provision in the agreement regarding the
proposed business combination obligated Telemetrix and Tracy to pay our costs
in connection with the proposed business combination. Although no Appearance
or Statement of Defense has been filed on behalf of Telemetrix and Tracy, they
have advised us that they take the position that the British Columbia Court has
no jurisdiction over this matter and further, that any dispute must be dealt
with by way of arbitration to be held in Denver, Colorado.

On October 18, 2001, Steven & Marc Holdings, Inc. filed a lawsuit against
our company in the Supreme Court of the State of New York, Court of New York,
Case No. 604972/01. In this lawsuit, Steven & Marc Holdings, Inc., a public
relations firm, is claiming that we owe them $61,480, plus interest and costs,
for services rendered but not paid for between March and October of 2001. We
have filed an Answer in this lawsuit and we are attempting to settle it at a
reduced amount on a payment plan. The company is currently in discussion with
the Plaintiff to settle the lawsuit.

The Company is also involved in other legal proceedings and claims arising
in the ordinary course of business. The Company does not believe that any
liabilities related to the legal proceedings to which it is a party are likely
to be, individually or in the aggregate, material to the Companys consolidated
financial condition, results of operations or cash flows.

8



---



##### Table of Contents






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

Neither the Board of Directors, nor any security holder, submitted any
matter during the fourth quarter of the fiscal year covered by this Report to a
vote of the security holders through solicitation of proxies or otherwise.




PART II




Item 5.Market for Registrants Common Equity and Related Stockholder Matters

The Common Stock of the Company is traded on the OTC Bulletin Board under
the symbol HTAC. The following table sets forth high and low sales prices
of the shares of Common Stock of the Company for the periods indicated (as
reported by the National Quotation Bureau).

|      |                |  |      |      |     |  |  |      | 
|----- | -------------- |  | ---- | ---- | --- |  |  | ---- | 
|      |                |  | High |      | Low
|      |                |  |      |      |    
|2003: |                |  |      |      |     |  |  |     
|      | First Quarter  |  |      | 0.18 |     |  |  | 0.08 | 
|      | Second Quarter |  |      | 0.09 |     |  |  | 0.04 | 
|      | Third Quarter  |  |      | 0.08 |     |  |  | 0.02 | 
|      | Fourth Quarter |  |      | 0.05 |     |  |  | 0.01 | 
|2002: |                |  |      |      |     |  |  |     
|      | First Quarter  |  |      | 0.69 |     |  |  | 0.28 | 
|      | Second Quarter |  |      | 0.42 |     |  |  | 0.20 | 
|      | Third Quarter  |  |      | 0.20 |     |  |  | 0.07 | 
|      | Fourth Quarter |  |      | 0.29 |     |  |  | 0.08 | 

On May 1, 2002, the shareholders list for our common shares showed 2,251
registered shareholders (42 residents of Canada holding 11,180,336 common
shares; 2,202 residents of the United States holding 189,493,325 common shares;
and 7 residents of other countries holding 5,699,638 common shares), and a
total of 207,373,299 common shares outstanding.

The Company has never paid cash dividends on its Common Stock and the
Board of Directors intends to retain all of its earnings, if any, to finance
the development and expansion of its business. However, there can be no
assurance that the Company can successfully expand its operations or that such
expansion will prove profitable. Future dividend policy will depend upon the
Companys earnings, capital requirements, financial condition and other factors
considered relevant by the Companys Board of Directors.

9



---



##### Table of Contents






Item 6. Selected Financial Data




The following selected historical financial data has been derived from the
audited consolidated financial statements of the Company. This information
should be read in conjunction with the Companys Consolidated Financial
Statements and the Notes thereto as well as Managements Discussion and
Analysis of Financial Condition and Results of Operations, included in Item 7.
In the fourth quarter of 2002, the Company discontinued CallDirect and closed
its facility in British Columbia, Canada. In the third quarter of 2003, the
Company discontinued the PSSP (formerly e-commerce) division and closed its facility in
Chicago, Illinois. CallDirect and the PSSP group results of
operations are included in the income (loss) from discontinued operations (see
Note 5 to Notes to Consolidated Financial Statements). All prior year
information has been adjusted to conform to 2003 presentation.




|                                                    |                                                         |                         |   |                                |         |      |   |                                          |         |      |   |        |         |   |   |        |        |   |   |        |        |  
|--------------------------------------------------- | ------------------------------------------------------- | ----------------------- | - | ------------------------------ | ------- | ---- | - | ---------------------------------------- | ------- | ---- | - | ------ | ------- | - | - | ------ | ------ | - | - | ------ | ------ | -
|                                                    |                                                         |                         |   | Years Ended February 28, 2003,
|                                                    |                                                         |                         |   |                               
|                                                    |                                                         |                         |   | 2003                           |         | 2002 |   | 2001                                     |         | 2000 |   | 1999  
|                                                    |                                                         |                         |   |                                |         |      |   |                                          |         |      |   |       
|                                                    |                                                         |                         |   |                                |         |      |   | (in thousands, except per share amounts) |         |      |   |       
|Selected Consolidated Statement of Operations Data: |                                                         |                         |   |                                |         |      |   |                                          |         |      |   |        |         |   |   |        |        |   |   |       
|                                                    | Net sales                                               |                         | $ | 3,604                          |         |      | $ | 2,780                                    |         |      | $ | 770    |         |   | $ | 333    |        |   | $ | 17     |       
|                                                    | Income (loss) from continuing operations                |                         | $ | (2,165                         | )       |      | $ | (3,642                                   | )       |      | $ | 2,842  |         |   | $ | (3,081 | )      |   | $ | (1,595 | )     
|                                                    | Income
(loss) from discontinued operations              |                         |   | 4                              |         |      |   | (6,275                                   | )       |      |   | (3,869 | )       |   |   | (1,612 | )      |   |   |       |       
|                                                    |                                                         |                         |   |                                |         |      |   |                                          |         |      |   |        |         |   |   |        |        |   |   |       
|                                                    | Net income (loss)                                       |                         | $ | (2,161                         | )       |      | $ | (9,917                                   | )       |      | $ | (6,711 | )       |   | $ | (4,693 | )      |   | $ | (1,595 | )     
|                                                    |                                                         |                         |   |                                |         |      |   |                                          |         |      |   |        |         |   |   |        |        |   |   |       
|                                                    | Basic income (loss) per share:                          |                         |   |                                |         |      |   |                                          |         |      |   |        |         |   |   |        |        |   |   |        |       
|                                                    |                                                         | Continuing operations   |   | $                              | (0.01   | )    |   | $                                        | (0.02   | )    |   | $      | (0.02   | ) |   | $      | (0.03  | ) |   | $      | (0.02  | )
|                                                    |                                                         | Discontinued operations |   |                                | (0.00   | )    |   |                                          | (0.04   |      |   |        | (0.03   | ) |   |        | (0.02  | ) |   |        |       |  
|                                                    |                                                         |                         |   |                                |         |      |   |                                          |         |      |   |        |         |   |   |        |        |   |   |       
|                                                    |                                                         | Net income (loss)       |   | $                              | (0.01   | )    |   | $                                        | (0.06   | )    |   | $      | (0.05   | ) |   | $      | (0.05  | ) |   | $      | (0.02  | )
|                                                    |                                                         |                         |   |                                |         |      |   |                                          |         |      |   |        |         |   |   |        |        |   |   |       
|                                                    | Diluted income (loss) per share:                        |                         |   |                                |         |      |   |                                          |         |      |   |        |         |   |   |        |        |   |   |        |       
|                                                    |                                                         | Continuing operations   |   | $                              | (0.01   | )    |   | $                                        | (0.02   | )    |   | $      | (0.02   | ) |   | $      | (0.03  | ) |   | $      | (0.02  | )
|                                                    |                                                         | Discontinued operations |   |                                | (0.00   | )    |   |                                          | (0.04   | )    |   |        | (0.03   | ) |   |        | (0.02  | ) |   |        |       |  
|                                                    |                                                         |                         |   |                                |         |      |   |                                          |         |      |   |        |         |   |   |        |        |   |   |       
|                                                    |                                                         | Net income (loss)       |   | $                              | (0.01   | )    |   | $                                        | (0.06   | )    |   | $      | (0.05   | ) |   | $      | (0.05  | ) |   | $      | (0.02  | )
|                                                    |                                                         |                         |   |                                |         |      |   |                                          |         |      |   |        |         |   |   |        |        |   |   |       
|                                                    | Shares used in calculating net income (loss) per share: |                         |   |                                |         |      |   |                                          |         |      |   |        |         |   |   |        |        |   |   |        |       
|                                                    |                                                         | Basic                   |   |                                | 214,797 |      |   |                                          | 154,543 |      |   |        | 126,934 |   |   |        | 91,557 |   |   |        | 65,748 |  
|                                                    |                                                         | Diluted                 |   |                                | 214,797 |      |   |                                          | 154,543 |      |   |        | 126,934 |   |   |        | 91,557 |   |   |        | 65,748 |  
|Selected Consolidated Balance Sheet Data:           |                                                         |                         |   |                                |         |      |   |                                          |         |      |   |        |         |   |   |        |        |   |   |       
|                                                    | Total assets                                            |                         | $ | 5,164                          |         |      | $ | 7,209                                    |         |      | $ | 6,268  |         |   | $ | 2,740  |        |   | $ | 218    |       
|                                                    | Long-term debt, net of current portion                  |                         |   | 9                              |         |      |   | 23                                       |         |      |   |       |         |   |   |       |        |   |   |       |       



---

| |  | See Managements Discussion and Analysis and Notes to Consolidated Financial
Statements for information relating to significant items affecting the results
of operations.
| |  | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------

10



---



##### Table of Contents






Item 7A.Managements Discussion and Analysis of Financial Condition and Results of Operations

The following is managements discussion and analysis of certain
significant factors that have affected the profitability of the Companys
business segments from its continuing operations and its consolidated results of operations and
financial condition during the periods included in the accompanying
consolidated financial statements. The following should be read in conjunction
with the consolidated financial statements and related notes.

Critical Accounting Policies and Estimates




The Companys financial statements are based on the selection and
application of significant accounting policies, which require management to
make significant estimates and assumptions. The Company believes that the
following are some of the more critical judgment areas in the application of
its accounting policies that currently affect its consolidated financial
condition and results of operations. However, as many of the
estimates are based on factors that are outside the control of the
Company, no assurance can be provided that our assessments wont
change in the future.




Revenue Recognition

Healthtrac
recognizes revenues from product sales at the time of shipment. On
long-term contracts, Healthtrac recognizes revenue and profit as
services are completed such as the completion of health
questionnaires and submitting of reports to customers. Deferred
revenue results as billing normally occurs during the completion of
the first questionnaire and report. For Other program fees (postage,
printing, books, data file distribution, etc.), revenues are
recognized at the time of billing. Changes in the nature of
Healthtracs sales arrangements with its customers could impact
the timing of its revenue recognition.

Accounts Receivable

The Company is required to estimate the collectibility of its trade
receivables and unbilled costs and fees. A considerable amount of judgment is
required in assessing the ultimate realization of these receivables including
the current credit-worthiness of each customer. Changes in
customers financial situation in the future could materially
impact our assessment of the receivables collectibility.

Inventory

The Company is required to state its inventories at the lower of cost or
market. In assessing the ultimate realization of inventories, the Company is
required to exercise judgment in its assessment of future demand requirements
and compare that with the current or committed inventory levels. The Company
recorded charges for required reserves in the fiscal years 2003 and 2002 due to
changes in strategic direction and market conditions. It is possible that
changes in required inventory reserves may continue to occur in the future due
to market conditions.

Intellectual Property




The
Companys management has estimated the useful life of the
intellectual property that was acquired through the acquisition of
Healthtrac in fiscal 2002 as being five years. We have yet to realize
net income from this acquisition and may not be able to realize
these assets in the normal course of operations over the next five
years. In estimating the fair value of intellectual property, our
Companys management estimates their value at the segment level
based upon factors such as estimated cash flows and market values.
Management has reviewed recent sales transactions in the Healthcare
business and believes that the fair market value of this asset is
higher than the net book value. The fair value of the definite life
intangible will be impacted by general economic conditions, demand for
the segments services and other factors. To the extent that fair
value is reduced in future periods, we may be required to record an
impairment charge against the carrying value of the intellectual
property.




Contingencies

The
Company is involved in legal proceedings as disclosed in note 16
in the consolidated financial statements. The Company has recorded
its best estimate of any costs associated with these legal
proceedings. The accrual for these types of costs is subject to
considerable uncertainty and actual results may differ from the
amounts accrued.

11



---



##### Table of Contents



development costs are written-off when projects
are abandoned or when the estimated cash flows from a product are not expected
to be sufficient to recover the capitalized software development costs.

Outlook and Going Concern

Our ability to continue as a going concern and to realize the carrying
value of our assets is dependent on our ability to obtain additional financing
to fund future operations and on our ability to translate our growth into
profitable operations. The outcome of these matters cannot be predicted with
any certainty at this time. Accordingly, our consolidated financial statements
contain note disclosures describing the circumstances that lead there to be
doubt over our ability to continue as a going concern that states
that the Company has a working capital deficiency of $1,618,647 at
February 28, 2003 and the company has suffered recurring losses
from operations. These conditions raise substantial doubt about its
ability to continue as a going concern. The consolidated financial statements
included in this annual report have been prepared without any adjustments that
would be necessary if we become unable to continue as a going concern and
were therefore required to realize upon our assets and discharge our liabilities in
other than the normal course of operations.

Foreign Exchange

The
company has discontinued its Canadian operations and does not
presently have operations outside the United
States. Therefore, the company is not exposed to foreign currency
risks.

FISCAL YEAR 2003 COMPARED TO FISCAL YEAR 2002

On a consolidated basis, revenues from continuing operations for the year
ended February 28, 2003 (fiscal 2003) were $3,604,433 an increase of
$823,961 or 30% from the revenues of $2,780,472 reported for the year ended
February 28, 2002 (fiscal 2002). The increase in revenues is primarily due to
the addition of our new Healthtrac population health management division in
August 2001, for which revenues were generated for twelve months in
fiscal 2003 compared to seven months in fiscal 2002.

NorthStar
(call center) revenue increased $19,983 to $1,249,802 for fiscal 2003 compared
to $1,229,819 for fiscal 2002. The Call Center generates revenue by providing
transaction processing and backroom services including inbound and outbound
telemarketing, customer and technical support, customer order entry,
centralized billing and collection, order fulfillment, customer dispatch
functions and other related services. Revenue is consistent in fiscal
2003 compared to fiscal 2002 due to an increase in customer
transactions offset by lower per transaction and customer fees.




Consolidated selling, general and administrative expenses from continuing
operations decreased to $3,580,063 from $5,146,813 in fiscal 2002, an decrease
of $1,566,750. Cash wages and benefits represent 51% (30% in fiscal 2002) of these
costs. Cash wages and benefits increased by $270,398 due primarily to the addition
of Healthtrac for the full year. An decrease in accounting and legal expense of $332,436 due to
cost containment initiatives and conclusion of various lawsuits brought by and
against our company, an decrease in consulting fees of $726,137 due to the
issuance of non-cash share compensation paid to Healthtrac consultants of
$450,000 (no similar amounts in 2003) in fiscal 2002 and a reduction in the number of consultants
due to cost containment strategies represent the largest
contributions to the decrease in selling, general and administrative
expenses.







Direct product costs have increased to $663,894 in fiscal 2003 from
$534,753 in fiscal 2002. Direct product costs relate primarily to the books sold by
Healthtrac to support its population health management business. The
increase is due to a full years operations at Healthtrac
compared to seven months in 2002.




Depreciation and amortization increased from $843,856 in fiscal 2002 to
$1,393,988 in fiscal 2003, an increase of $550,132 or 65%. This increase is a
result of the intellectual property acquired in the Healthtrac
acquisition which was amortized for a full year in fiscal 2003. This
asset is being amortized over five years on a straight-line basis.

During
the year, the Company wrote off various assets acquired in prior
years included the Med Wired assets, the Healthscape assets and
certain head office equipment resulting in a write-down of $435,503.
No write-down occurred in fiscal 2002.

During
the year, the Company recorded a gain on forgiveness of debt of
$338,204, primarily the result of an agreement with Queensland
Teachers Union Health (see note 14 of the Consolidated
Financial Statements).

During
the year, the Company discontinued its e-commerce operations
which had been substantively curtailed in the prior year. The
e-commerce operations and the former CallDirect operations form
the companys discontinued operations. The Company recorded net
income from discontinued operations of $3,752 compared to a loss from
discontinued operations of $6,274,633 in fiscal 2002. The Company
realized the income in fiscal 2003 due to a gain on the forgiveness
of debt from these operations of $243,332 offsetting the operating
losses for the year. In the prior year, the Company incurred
substantive losses from operations and the write-down of goodwill and
other tangible assets.

For fiscal 2003, our company recognized a loss of $2,161,235 or $0.01 per
share, compared to a loss of $9,916,809 or $0.06 per share for fiscal 2002.
This loss is a result of the factors discussed above.

12



---



##### Table of Contents



FISCAL YEAR 2002 COMPARED TO FISCAL YEAR 2001

On a consolidated basis, revenues from continuing operations for the year
ended February 28, 2002 (fiscal 2002) were $2,780,472 an increase of
$2,010,319 or 261% from the revenues of $770,153 reported for the year ended
February 28, 2001 (fiscal 2001). The increase in revenues is primarily due to
the addition of our new Healthtrac population health management
division in fiscal 2002, which
produced revenues of $1,550,653.

NorthStar revenue increased $459,666 to $1,229,819 for fiscal 2002
compared to $770,153 for fiscal 2001. The Call Center generates revenue by
providing transaction processing and backroom services including inbound and
outbound telemarketing, customer and technical support, customer order entry,
centralized billing and collection, order fulfillment, customer dispatch
functions and other related services. The increase in revenues from the prior
year is attributable to the signing of additional contracts in the fiscal year
which resulted in an increase in the number of cable service customers.




Consolidated selling, general and administrative expenses from continuing
operations increased to $5,146,813 from $3,569,661 in fiscal 2001, an increase
of $1,577,152. Cash wages and benefits represent 30% (31% in fiscal 2001) of these
costs. Cash wages and benefits increased by $270,398 due primarily to the addition
of Healthtrac. In the prior year, a significant portion of the compensation
was paid through the issuance of shares to our officers and directors
resulting in a decline in the current year from $754,950 to $266,000
in non-cash compensation expense. An
increase in accounting and legal expense of $338,610 due to various lawsuits
brought by and against our company, an increase in consulting fees of $734,385
due to non-cash share compensation paid to Healthtrac consultants of $450,000
(no similar consultants in 2003) increases in travel and promotion of
$92,218 due to the acquisition of
Healthtrac, whose offices are located in Redwood City, California. Corporate
general and administrative expenses decreased to $2,068,132 from $2,714,560.
This decrease is due primarily to the decrease in non-cash compensation paid to
officers and directors of our company. The call centers
selling, general and administrative expenses have increased to
$1,386,035 compared to $908,953 in the prior year. This represents an
increase of 53% whereas revenues from the segment increased 60%. The
Call Centers primary costs continue to be payroll, telephone,
rent, printing, postage and office costs.




Direct product costs have increased to $534,753 in fiscal 2002 from $0 in
fiscal 2001. Direct product costs of $534,753 relate primarily to the
books sold by
the population health management business. The increase is due to a
full years operations at Healthtrac compared to seven months in
2002.

Depreciation
and amortization increased from $36,941 in fiscal 2001 to $843,856 in
fiscal 2002, an increase of $806,915. This increase is a result of
the acquisition of the intellectual property from the Healthtrac
acquisition.

We
recovered $104,980 from a former customer as a result of settlement
of litigation that commenced in prior years. Other income (expense)
changed from an income of $93,238 in fiscal 2001 to $6,284 in fiscal
2002, primarily the result of lower interest income as cash balances
declined during the year.

On
February 28, 2002, we discontinued our CallDirect catalogue
business. During the third quarter of fiscal 2003, we discontinued
our e-commerce business. These discontinued operations recorded a net loss of
$6,274,633 in fiscal 2002 compared to a net loss of $3,869,214 in
fiscal 2001. The CallDirect business earned revenue of $210,443 and
had a loss of $170,639 for fiscal 2002 compared to revenue of
$327,935 and a loss of $272,774 for fiscal 2001. We curtailed our
e-commerce operations in fiscal 2002 due to the decline in the
business of technology and internet companies and the shift in focus
towards the health promotion and disease management business. Our
Sullivan Park operations and transaction processing services were
closed and the remaining services curtailed. As a result, we
wrote-off  the remaining goodwill acquired on the Sullivan Park
acquisition of $1,522,758 and we wrote-down our e-commerce equipment
by $1,330,000 to its estimated net realizable value of approximately
$160,000.

For
fiscal 2002, our company recognized a loss of $9,916,809 or $0.06 per
share, compared to a loss of $6,711,117 or $0.05 per share for fiscal
2001. This loss is a result of the factors discussed above.

13



---



##### Table of Contents



Liquidity and Capital Resources

As at February 28, 2003, the company had a net working capital deficiency
of $1,618,647, capital assets with a book value of $169,994, intellectual
property with a book value of $2,675,362 and obligations under capital leases
of $9,344 resulting in a net equity of $2,675,362.

During fiscal 2003, we used $271,533 in cash to fund operations compared
to $3,059,285 in fiscal 2002. We used $36,060 to fund investing activities
which consisted primarily of capital asset additions. Cash of $210,807 was
obtained during the year from financing activities for a net decrease in cash
of $96,786. Cash at February 28, 2003 was $186,873.

We have historically funded operations through the issuance of common
shares. We expect the need to fund our working capital deficit, future
operations and investments through the issuance of common shares and
from operations. Subsequent
to February 28, 2003, there have not been any sales of common
shares. There can be no assurance that we will be able to generate
proceeds from the sale of common shares during the balance of fiscal
2004.

We estimate our cash requirements for capital asset additions and for
operations for fiscal 2004 to be less than $500,000 in additional
financing in excess of expected cash flow from operations. We will continue to
search for appropriate acquisitions to compliment our existing operations.
Where possible, we will pay for acquisitions through the issuance of our common
shares.




Item 7B. Risk Factors

An investment in our securities involves significant risks, including
those described below. These risks relate to our business model, our ability
to generate revenues and gain operating efficiencies, our history of losses,
significant changes, our ability to hire and retain key personnel, our reliance
on technology providers and internal technology applications, the possible
delisting of our common stock, and legal claims against us.

Our actual results may differ materially from those expressed in any
forward-looking statement as a result of certain factors, including but not
limited to those set forth below and included in other portions of this
document.

Most Of Our Agreements Are Short Term And Our Financial Performance Could Be Damaged By A Significant Number Of Terminations Or Non-Renewals.

The standard customer agreement for customers of the Call Center are
short-term and can be terminated without cause by either party. We expect that
there will be terminations and non-renewals from time to time and that we may
not be able to replace all of these clients. Our ability to generate revenues
and our financial performance could be damaged by a significant number of
terminations or non-renewals of such contracts.

14



---



##### Table of Contents



We Could Be Sued For Medical Malpractice

The information provided by us is intended to be in addition to, and not
in substitution for, medical advice from a users own physician. However,
medical advice may be dispensed both directly by doctors and indirectly through
our Healthtrac products. Damage awards in medical malpractice suits can be
very high, potentially creating a financial burden that we could not withstand
if such a suit were successful and not fully covered by insurance.

Our Common Stock Is Traded On The Over-the-Counter Bulletin Board And As A Result, It May Be More Difficult To Dispose Of Or To Obtain Adequate Quotations As To The Prices Of Our Common Stock.

Our common stock is quoted on the OTC Bulletin Board and is thinly traded.
In the past, our trading price has fluctuated widely, depending on many
factors that may have little to do with our operations or business prospectus.
In addition, the OTC Bulletin Board is not an exchange and, because trading of
the securities on the OTC Bulletin Board is often more sporadic than the
trading of securities listed on an exchange of the Nasdaq Stock Market, Inc.,
you may have difficulty reselling any of the shares you purchase from the
selling stockholders.

We May Not Be Able To Obtain The Additional Financing Necessary To Grow Our Business.

In order to grow our business and finance future acquisitions, we will
require additional financing. We currently have a working capital deficiency
of $1,618,647. As of February 28, 2003, our accumulated deficit was
$119,234,559. Furthermore, we have experienced negative cash flows during each
of the last three years of operations. We have historically depended upon
capital infusion from the issuance of long term debt and equity securities to
provide the cash needed to fund operations. Our ability to continue in
business depends upon our continued ability to obtain significant financing
from external sources. If additional capital is raised through borrowing or
other debt financing, we would incur substantial additional interest expense.
Sales of additional equity securities, through a traditional underwritten
offering, would dilute, on a pro rata basis, the percentage ownership of all
holders of common shares. There can be no assurance that any such financing
would be available upon terms and conditions acceptable to us, if at all. The
inability to obtain additional financing in a sufficient amount when needed and
upon acceptable terms and conditions could have a material adverse effect upon
our company and our revenue growth may be adversely affected. If adequate
funds are not available on acceptable terms when needed, we may be required to
delay, scale-back or eliminate marketing of one or more of our products or
development programs or obtain funds through arrangements with collaborative
partners or others that may require us to relinquish rights to certain of our
technologies, product candidates or potential products that we would not
otherwise relinquish. Inadequate funding also could impair our ability to
compete in the marketplace and could result in our dissolution.

Our Directors Are Authorized To Issue Preferred Stock Which May Adversely Affect The Voting Power Of Our Shareholders

We are authorized to issue 150,000,000 each of Class A and Class B
preference shares, with such designations, rights and preferences as may be
determined from time to time by our board of directors. Accordingly, our board
of directors is empowered, without stockholder approval, to issue such
preference shares with dividend, liquidation, conversion or other rights which
could adversely affect the rights of the our shareholders. The issuance of
preference shares could, among other things, adversely affect the voting power
of our shareholders and, under certain circumstances, make it more difficult
for a third party to gain control of our company, discourage bids for common
shares at a premium or otherwise adversely affect the market price for common
shares.

We Are Dependent on a Small Number of Customers

To date, Healthtrac Corporation has derived a significant portion of its
revenues from a small number of customers. Many of our customers do not have
contracts that extend beyond twelve months. A critical component of the
companys business plan is the acquisition of new customers and the renewal of
current contracts. There can be no assurance that we will be successful in
developing profitable relationships with new customers or that we will retain
existing customers.

Foreign Exchange Rate Risk

The Company operates internationally and has adopted local currencies as
the functional currencies for its foreign subsidiaries because their principal
economic activities are most closely tied to the respective local currencies.
This exposes the Company to market risk from changes in foreign exchange rates
to the extent that transactions are not denominated in the U.S. dollar. In
consolidation, the Company converts the accounts of its foreign subsidiaries
from the functional currency to the U.S. dollar. As a result, the Company faces
the risk that the

15



---



##### Table of Contents



foreign currencies will have declined in value as compared to
the U.S. dollar, resulting in a foreign currency translation loss.




Item 8.Financial Statements and Supplementary Data

The Consolidated Financial Statements and Schedule of the Company are
listed in Item 15(a) and included herein on pages F-1 through F-23.




Item 9.Changes in and Disagreements with Accountants on Accounting and Financial Disclosure

The Company has not had any disagreement with its independent auditors on
any matter of accounting principles or practices or financial statement
disclosure.




PART III




Item 10.Directors and Executive Officers of the Registrant

Reference is made to the information appearing under the caption Election
of Directors in the Companys Proxy Statement to be submitted to the
Commission on or before June 28, 2003.




Item 11.Executive Compensation

Reference is made to the information appearing under the caption
Executive Compensation in the Companys Proxy Statement to be submitted to
the Commission on or before June 28, 2003.




Item 12.Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters

Reference is made to the information appearing under the caption Security
Ownership of Certain Beneficial Owners and Management in the Companys Proxy
Statement to be submitted to the Commission on or before June 28, 2003.

Reference is made to the information appearing under the caption Equity
Compensation Plan Information in the Companys Proxy Statement to be submitted
to the Commission on or before June 28, 2003.




Item 13.Certain Relationships and Related Transactions

Reference is made to the information appearing under the caption Certain
Relationships and Related Transactions in the Companys Proxy Statement to be
submitted to the Commission on or before June 28, 2003.




Item 14.Controls and Procedures

(a)  Evaluation of Disclosure Controls and Procedures

The Chief Executive Officer and Chief Financial Officer of the Company
have concluded, based on their evaluation as of the date within 90 days prior
to the date of the filing of this annual report on Form 10-K, the effectiveness
of the Companys disclosure controls and procedures pursuant to Exchange Act
Rule 13a-14 and 15d-14. Based on that evaluation, the Companys Chief
Executive Officer and Chief Financial Officer concluded that the disclosure
controls and procedures were effective in ensuring that all material
information required to be filed in this annual report have been made known to
them, to allow timely decisions regarding required disclosure.

(b)  Changes in Internal Controls

There have been no significant changes in internal controls, or in other
factors that could significantly affect internal controls subsequent to the
date the Chief Executive Officer and Chief Financial Officer completed their
evaluation.




Item 15.Exhibits, Financial Statements, Schedules and Reports on Form 8-K

(a)  1. Consolidated Financial Statements

Report of Independent Auditors

Consolidated Balance Sheets at February 28, 2003 and 2002

16



---



##### Table of Contents



Consolidated Statements of Operations for the years ended February 28, 2003,
2002 and 2001

Consolidated Statements of Shareholders Equity for the years ended February
28, 2003, 2001 and 2000

Consolidated Statements of Cash Flows for the years ended February 28, 2003,
2002 and 2001

Notes to Consolidated Financial Statements

All other schedules are omitted because they are not applicable or the
required information is shown in the consolidated financial statements or notes
thereto.

3.     Exhibits

|        |  |                                                                                                                                                                                                                                         
|------- |  | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|Exhibit |  |                                                                                                                                                                                                                                         
|Number  |  | Description                                                                                                                                                                                                                             
|        |  |                                                                                                                                                                                                                                         
|99.1    |  | Certification Pursuant to 18 U.S.C. Section 1350, as Adopted
Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 
Edward Sharpless, President, Chief Executive Officer and Tony
DiCostanzo, Vice President, Finance & Operations.

(b)  Reports on Form 8-K

On November 27, 2002, the Registrant filed a lawsuit in the U.S. District
Court for the Northern District of California against Dennis Sinclair
(Sinclair), Raymond Mol (Mol) and Mel Baillie (Baillie) (collectively the
Defendants). The lawsuit is primarily based upon certain sales or
acquisitions of the Registrants stock engaged in or authorized by the
Defendants while they were directors and/or officers of the Registrant in
violation of Section 16(b) of the Securities Exchange Act of 1934, 15 U.S.C.
ss. 78p(b) (Section 16). Section 16 generally restricts certain corporate
insiders from profiting due to the sale or acquisition of corporate
securities within a six month period of the original transaction, by mandating
that all such profits shall inure to, and be recoverable by, the issuer of the
securities. In the lawsuit, the Registrant seeks the recovery of profits which
it believes were received by the Defendants as a result of securities sales or
purchases during the approximate period of November, 1999 through November,
2001, pursuant to Section 16 and applicable common law principles governing the
conduct of corporate fiduciaries. In addition to the disgorgement of profits,
the Registrant also seeks a complete accounting by the Defendants for all
transactions which they conducted involving the Registrants securities or
those of its predecessors while holding corporate office or membership on the
Registrants Board of Directors.

Exhibit 99.1    Certification of Periodic Report, dated December 16,
2002, of the Principal Executive Officer and Principal Financial Officer of the
Registrant pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.

On December 12, 2002 one of the Registrants directors, Richard Kessler,
resigned from the Board of Directors. Mr. Kessler indicated to the Board that
he resigned for personal reasons.

On December 16, 2002, the Principal Executive Officer and Principal
Financial Officer of the Registrant provided a written statement on the
Registrants Quarterly Report on Form 10-Q for the quarter ended August 31,
2002, as amended, pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.

17



---



##### Table of Contents






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.

| |  |                  |  |                                             
| |  | ---------------- |  | --------------------------------------------
| |  | HEALTHTRAC, INC.
| |  |                  |  |                                             
| |  | By:              |  | /s/ EDWARD W. SHARPLESS

Edward W. Sharpless




Date: September 30, 2003




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




|                                            |  |                                    |  |                   
|------------------------------------------- |  | ---------------------------------- |  | ------------------
|Signature                                   |  | Title                              |  | Date              
|                                            |  |                                    |  |                   
|                                            |  |                                    |  |                   
|/s/ EDWARD W. SHARPLESS
Edward W. Sharpless |  | President, Chief Executive Officer |  | September 30, 2003
|                                            |  |                                    |  |                   
|/s/ TONY Z. DICOSTANZO
Tony Z. DiCostanzo   |  | VP, Finance and Operations         |  | September 30, 2003
|                                            |  |                                    |  |                   
|/s/ BOB MAUL
Bob Maul                       |  | Director                           |  | September 30, 2003
|                                            |  |                                    |  |                   
|/s/ DR. JAMES FRIES
Dr. James Fries         |  | Director                           |  | September 30, 2003
|                                            |  |                                    |  |                   
|/s/ PIERRE PREFONTAINE
Pierre Prefontaine   |  | Director                           |  | September 30, 2003
|                                            |  |                                    |  |                   
|/s/ JUDY HOLLAND
Judy Holland               |  | Director                           |  | September 30, 2003
|                                           
|/s/ DR. ROBERT
BAKER
Dr. Robert Baker       |  | Director                           |  | September 30, 2003




18



---



##### Table of Contents



CERTIFICATION

I, Edward W. Sharpless, certify that:



| | 1. |  | I have reviewed this annual report on Form 10-K of Healthtrac, Inc.;                                                                                                                                                                                                                                                    
| | -- |  | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|
| | 2. |  | Based on my knowledge, this annual report does not contain any
untrue statement of a material fact or omit to state a material fact
necessary to make the statements made, in light of the circumstances
under which such statements were made, not misleading with respect to
the period covered by this annual report;
|
| | 3. |  | Based on my knowledge, the financial statements, and other
financial information included in this annual report, fairly present in
all material respects the financial condition, results of operations
and cash flows of the registrant as of, and for, the periods presented
in this annual report;                   
|
| | 4. |  | The registrants other certifying officers and I are responsible
for establishing and maintaining disclosure controls and procedures (as
defined in Exchange Act Rules 13a-14 and 15d-14) for the registrant and
we have:                                                                                               



| | a) |  | designed such disclosure controls and procedures to
ensure that material information relating to the registrant,
including its consolidated subsidiaries, is made known to us by
others within those entities, particularly during the period in
which this annual report is being prepared;
| | -- |  | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|
| | b) |  | evaluated the effectiveness of the registrants
disclosure controls and procedures as of a date within 90 days
prior to the filing date of this annual report (the Evaluation
Date); and                                                                                                  
|
| | c) |  | presented in this annual report our conclusions about
the effectiveness of the disclosure controls and procedures based
on our evaluation as of the Evaluation Date;                                                                                                                        



| | 5. |  | The registrants other certifying officers and I have disclosed,
based on our most recent evaluation, to the registrants auditors and
the audit committee of registrants board of directors (or persons
performing the equivalent function):
| | -- |  | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| | a) |  | all significant deficiencies in the design or operation
of internal controls which could adversely affect the
registrants ability to record, process, summarize and report
financial data and have identified for the registrants auditors
any material weaknesses in internal controls; and
| | -- |  | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|
| | b) |  | any fraud, whether or not material, that involves
management or other employees who have a significant role in the
registrants internal controls; and                                                                                                                                        

6.     The registrants other certifying officers and I have indicated in this
annual report whether there were significant changes in internal controls or in
other factors that could significantly affect internal controls subsequent to
the date of our most recent evaluation, including any corrective actions with
regard to significant deficiencies and material weaknesses.




Dated: September 30, 2003




| |  |                  |  |                                                            
| |  | ---------------- |  | -----------------------------------------------------------
| |  | HEALTHTRAC, INC.
| |  |                  |  |                                                            
| |  | By:              |  | /s/ Edward W. Sharpless

President,
Chief Executive Officer

19



---



##### Table of Contents



CERTIFICATION

I, Tony Z. DiCostanzo, certify that:



| | 1. |  | I have reviewed this annual report on Form 10-K of Healthtrac, Inc.;                                                                                                                                                                                                                                                    
| | -- |  | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|
| | 2. |  | Based on my knowledge, this annual report does not contain any
untrue statement of a material fact or omit to state a material fact
necessary to make the statements made, in light of the circumstances
under which such statements were made, not misleading with respect to
the period covered by this annual report;
|
| | 3. |  | Based on my knowledge, the financial statements, and other
financial information included in this annual report, fairly present in
all material respects the financial condition, results of operations
and cash flows of the registrant as of, and for, the periods presented
in this annual report;                   
|
| | 4. |  | The registrants other certifying officers and I are responsible
for establishing and maintaining disclosure controls and procedures (as
defined in Exchange Act Rules 13a-14 and 15d-14) for the registrant and
we have:                                                                                               



| | a) |  | designed such disclosure controls and procedures to
ensure that material information relating to the registrant,
including its consolidated subsidiaries, is made known to us by
others within those entities, particularly during the period in
which this annual report is being prepared;
| | -- |  | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|
| | b) |  | evaluated the effectiveness of the registrants
disclosure controls and procedures as of a date within 90 days
prior to the filing date of this annual report (the Evaluation
Date); and                                                                                                  
|
| | c) |  | presented in this annual report our conclusions about
the effectiveness of the disclosure controls and procedures based
on our evaluation as of the Evaluation Date;                                                                                                                        



| | 5. |  | The registrants other certifying officers and I have disclosed,
based on our most recent evaluation, to the registrants auditors and
the audit committee of registrants board of directors (or persons
performing the equivalent function):
| | -- |  | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| | a) |  | all significant deficiencies in the design or operation
of internal controls which could adversely affect the
registrants ability to record, process, summarize and report
financial data and have identified for the registrants auditors
any material weaknesses in internal controls; and
| | -- |  | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|
| | b) |  | any fraud, whether or not material, that involves
management or other employees who have a significant role in the
registrants internal controls; and                                                                                                                                        

6.     The registrants other certifying officers and I have indicated in this
annual report whether there were significant changes in internal controls or in
other factors that could significantly affect internal controls subsequent to
the date of our most recent evaluation, including any corrective actions with
regard to significant deficiencies and material weaknesses.




Dated: September 30, 2003




| |  |                  |  |                                                 
| |  | ---------------- |  | ------------------------------------------------
| |  | HEALTHTRAC, INC.
| |  |                  |  |                                                 
| |  | By:              |  | /s/ Tony Z. DiCostanzo

VP, Finance & Operations

20



---



##### Table of Contents



HEALTHTRAC, INC.
INDEX TO CONSOLIDATED FINANCIAL STATEMENTS
AND FINANCIAL STATEMENT SCHEDULE
For The Year Ended February 28, 2003

|                                                |  |      |     | 
|----------------------------------------------- |  | ---- | --- | 
|                                                |  | Page
|                                                |  |     
|Report of Independent Auditors                  |  |      | F-2 | 
|Consolidated Balance Sheets                     |  |      | F-3 | 
|Consolidated Statements of Operations           |  |      | F-4 | 
|Consolidated Statements of Shareholders Equity |  |      | F-5 | 
|Consolidated Statements of Cash Flows           |  |      | F-6 | 
|Notes to Consolidated Financial Statements      |  |      | F-7 | 

F-1



---



##### Table of Contents



REPORT OF INDEPENDENT AUDITORS

To the Board of Directors and Shareholders
Healthtrac, Inc.

We have audited the accompanying consolidated balance sheets of
Healthtrac, Inc. as at February 28, 2003 and 2002 and the related consolidated
statements of operations, stockholders equity and cash flows for each of the
years in the three-year period ended February 28, 2003. These consolidated
financial statements are the responsibility of the Companys management. Our
responsibility is to express an opinion on these consolidated 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 the audit to obtain reasonable assurance about 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, the consolidated financial statements referred to above
present fairly, in all material respects, the financial position of the Company
as at February 28, 2003 and 2002 and the results of its operations and its cash
flows for each of the years in the three-year period ended February 28, 2003 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 has a working capital deficiency of
$1,618,647 as at February 28, 2003 and the Company has suffered recurring
losses from operations. These conditions raise substantial doubt about its
ability to continue as a going concern. Managements plans in regard to 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/ KPMG LLP

Chartered Accountants

Vancouver, Canada
May 16, 2003

F-2



---



##### Table of Contents



HEALTHTRAC, INC.
CONSOLIDATED BALANCE SHEETS
(Expressed in United States dollars)

February 28, 2003 and 2002

|                                                                                             |                                                                   |                                                            |           |              |             |      |           |                     |             | 
|-------------------------------------------------------------------------------------------- | ----------------------------------------------------------------- | ---------------------------------------------------------- | --------- | ------------ | ----------- | ---- | --------- | ------------------- | ----------- | 
|                                                                                             |                                                                   |                                                            |           | 2003         |             | 2002
|                                                                                             |                                                                   |                                                            |           |              |             |     
|                                                                                             |                                                                   |                                                            |           |              |             |      |           | (Restated - note
5)
|ASSETS                                                                                       |                                                                   |                                                            |           |              |             |      |           |                    
|Current assets:                                                                              |                                                                   |                                                            |           |              |             |      |           |                    
|                                                                                             | Cash and cash equivalents                                         |                                                            | $         | 186,873      |             |      | $         | 248,391             |            
|                                                                                             | Accounts receivable, net of allowance of $4,469
(2002 - $235,847) |                                                            |           | 406,095      |             |      |           | 271,302             |            
|                                                                                             | Employee receivable                                               |                                                            |           |             |             |      |           | 26,417              |            
|                                                                                             | Inventories                                                       |                                                            |           | 121,435      |             |      |           | 48,834              |            
|                                                                                             | Prepaid expenses and deposits (note 6)                            |                                                            |           | 146,263      |             |      |           | 256,953             |            
|                                                                                             | Assets of discontinued operations (note 5)                        |                                                            |           |             |             |      |           | 98,890              |            
|                                                                                             |                                                                   |                                                            |           |              |             |      |           |                     |            
|                                                                                             | Total current assets                                              |                                                            |           | 860,666      |             |      |           | 1,111,501           |            
|Equipment (note 7)                                                                           |                                                                   |                                                            | 169,994   |              |             |      | 914,955   |                    
|Intellectual property, net of $1,915,459 (2002 - $705,695) accumulated amortization
(note 3) |                                                                   |                                                            | 4,133,359 |              |             |      | 5,343,123 |                    
|                                                                                             |                                                                   |                                                            |           |              |             |      |           |                     |            
|Total assets                                                                                 |                                                                   | $                                                          | 5,164,019 |              |             | $    | 7,208,865 |                    
|                                                                                             |                                                                   |                                                            |           |              |             |      |           |                     |            
|LIABILITIES AND STOCKHOLDERS EQUITY                                                         |                                                                   |                                                            |           |              |             |      |           |                    
|Current liabilities                                                                          |                                                                   |                                                            |           |              |             |      |           |                    
|                                                                                             | Accounts payable                                                  |                                                            | $         | 1,216,043    |             |      | $         | 1,398,861           |            
|                                                                                             | Accrued liabilities                                               |                                                            |           | 714,974      |             |      |           | 383,670             |            
|                                                                                             | Deferred revenue (note 2(g)(iv))                                  |                                                            |           | 328,826      |             |      |           | 456,025             |            
|                                                                                             | Notes payable (note 8)                                            |                                                            |           |             |             |      |           | 150,000             |            
|                                                                                             | Current portion of obligations under capital lease (note 9)       |                                                            |           | 19,470       |             |      |           | 43,129              |            
|                                                                                             | Liabilities of discontinued operations (note 5)                   |                                                            |           | 200,000      |             |      |           | 387,671             |            
|                                                                                             |                                                                   |                                                            |           |              |             |      |           |                     |            
|                                                                                             | Total current liabilities                                         |                                                            |           | 2,479,313    |             |      |           | 2,819,356           |            
|Obligations under capital lease (note 9)                                                     |                                                                   |                                                            | 9,344     |              |             |      | 23,176    |                    
|Stockholders equity:                                                                        |                                                                   |                                                            |           |              |             |      |           |                    
|                                                                                             | Common shares, no par value (note 10):                            |                                                            |           |              |             |      |           |                     |            
|                                                                                             |                                                                   | Authorized: 300,000,000 (2001 -
300,000,000) common
shares |           |              |             |      |           |                     |             | 
|                                                                                             |                                                                   | Issued and
outstanding: 223,104,598 (2002 - 199,034,013)   |           |              | 121,809,921 |      |           |                     | 120,685,444 | 
|                                                                                             | Shares to be issued                                               |                                                            |           | 100,000      |             |      |           | 754,213             |            
|                                                                                             | Accumulated deficit                                               |                                                            |           | (119,234,559 | )           |      |           | (117,073,324        | )          
|                                                                                             |                                                                   |                                                            |           |              |             |      |           |                     |            
|                                                                                             | Total stockholders equity                                        |                                                            |           | 2,675,362    |             |      |           | 4,366,333           |            
|                                                                                             |                                                                   |                                                            |           |              |             |      |           |                     |            
|Total liabilities and stockholders equity                                                   |                                                                   | $                                                          | 5,164,019 |              |             | $    | 7,208,865 |                    
|                                                                                             |                                                                   |                                                            |           |              |             |      |           |                     |            
|Future operations (note 1)                                                                   |                                                                   |                                                            |           |              |             |      |           |                    
|Commitment and contingencies (notes 10(b) and 16)                                            |                                                                   |                                                            |           |              |             |      |           |                    

See accompany notes

F-3



---



##### Table of Contents



HEALTHTRAC, INC.
CONSOLIDATED STATEMENTS OF OPERATIONS
(Expressed in United States dollars)

|                                                                 |                         |                                                         |             |              |           |              |             |                     |           |                     |             |       |           | 
|---------------------------------------------------------------- | ----------------------- | ------------------------------------------------------- | ----------- | ------------ | --------- | ------------ | ----------- | ------------------- | --------- | ------------------- | ----------- | ----- | --------- | 
|                                                                 |                         |                                                         |             | Year ended   |           | Year ended   |             | Year ended         
|                                                                 |                         |                                                         |             | February 28, |           | February 28, |             | February 28,       
|                                                                 |                         |                                                         |             | 2003         |           | 2002         |             | 2001               
|                                                                 |                         |                                                         |             |              |           |              |             |                    
|                                                                 |                         |                                                         |             |              |           |              |             | (Restated  note 5) |           | (Restated  note 5)
|Revenue (notes 12 and 13)                                        |                         | $                                                       | 3,604,433   |              |           | $            | 2,780,472   |                     |           | $                   | 770,153     |      
|Costs and expenses:                                              |                         |                                                         |             |              |           |              |             |                     |           |                     |             |      
|                                                                 |                         | Direct costs                                            |             |              | 663,894   |              |             |                     | 534,753   |                     |             |       |          | 
|                                                                 |                         | Selling, general and administrative expenses
(schedule) |             |              | 3,580,063 |              |             |                     | 5,146,813 |                     |             |       | 3,569,661 | 
|                                                                 |                         | Amortization                                            |             |              | 1,393,988 |              |             |                     | 843,856   |                     |             |       | 36,941    | 
|                                                                 |                         | Foreign exchange losses                                 |             |              | 2,441     |              |             |                     | 82,647    |                     |             |       | 38,692    | 
|                                                                 |                         | Loss on sale of equipment                               |             |              |          |              |             |                     | 5,843     |                     |             |       |          | 
|                                                                 |                         | Loss on deposit to acquire assets                       |             |              |          |              |             |                     |          |                     |             |       | 60,000    | 
|                                                                 |                         | Write-down of equipment and other assets                |             |              | 435,503   |              |             |                     |          |                     |             |       |          | 
|                                                                 |                         | Write-down of other assets                              |             |              | 29,669    |              |             |                     |          |                     |             |       |          | 
|                                                                 |                         | Lawsuit settlements (note 16(c))                        |             |              |          |              |             |                     | (184,980  | )                   |             |       |          | 
|                                                                 |                         |                                                         |             |              |           |              |             |                     |           |                     |             |      
|                                                                 |                         |                                                         | 6,105,558   |              |           |              | 6,428,932   |                     |           |                     | 3,705,294   |      
|                                                                 |                         |                                                         |             |              |           |              |             |                     |           |                     |             |      
|Loss before undernoted                                           |                         |                                                         | (2,501,125  | )            |           |              | (3,648,460  | )                   |           |                     | (2,935,141  | )    
|Other income (expense):                                          |                         |                                                         |             |              |           |              |             |                     |           |                     |             |      
|                                                                 |                         | Interest income and miscellaneous                       |             |              | (2,066    | )            |             |                     | 6,284     |                     |             |       | 93,238    | 
|                                                                 |                         | Gain on forgiveness of debt                             |             |              | 338,204   |              |             |                     |          |                     |             |       |          | 
|                                                                 |                         |                                                         |             |              |           |              |             |                     |           |                     |             |      
|                                                                 |                         |                                                         | 336,138     |              |           |              | 6,284       |                     |           |                     | 93,238      |      
|                                                                 |                         |                                                         |             |              |           |              |             |                     |           |                     |             |      
|Loss from continuing operations                                  |                         |                                                         | (2,164,987  | )            |           |              | (3,642,176  | )                   |           |                     | (2,841,903  | )    
|Income (loss) from discontinued operations (note 5)              |                         |                                                         | 3,752       |              |           |              | (6,274,633  | )                   |           |                     | (3,869,214  | )    
|                                                                 |                         |                                                         |             |              |           |              |             |                     |           |                     |             |      
|Loss for the year                                                |                         | $                                                       | (2,161,235  | )            |           | $            | (9,916,809  | )                   |           | $                   | (6,711,117  | )    
|                                                                 |                         |                                                         |             |              |           |              |             |                     |           |                     |             |      
|Loss per common share (note 2(i))  basic and diluted:           |                         |                                                         |             |              |           |              |             |                     |           |                     |             |      
|                                                                 | Continuing operations   |                                                         | $           | (0.01        | )         |              | $           | (0.02               | )         |                     | $           | (0.02 | )        
|                                                                 | Discontinued operations |                                                         |             |             |           |              |             | (0.04               | )         |                     |             | 0.03  | )        
|                                                                 |                         |                                                         |             |              |           |              |             |                     |           |                     |             |      
|Loss for the year                                                |                         | $                                                       | (0.01       | )            |           | $            | (0.06       | )                   |           | $                   | (0.05       | )    
|                                                                 |                         |                                                         |             |              |           |              |             |                     |           |                     |             |      
|Weighted average number of shares outstanding -basic and diluted |                         |                                                         | 214,797,250 |              |           |              | 154,543,871 |                     |           |                     | 126,934,127 |      
|                                                                 |                         |                                                         |             |              |           |              |             |                     |           |                     |             |      

See accompanying notes

F-4



---



##### Table of Contents



HEALTHTRAC, INC.
CONSOLIDATED STATEMENTS OF SHAREHOLDERS EQUITY
(Expressed in United States dollars)

|                                            |                                                                                        |  |               |            |       |  |             |           |           |  |             |            |   |  |              |            |   |  |           |            |  
|------------------------------------------- | -------------------------------------------------------------------------------------- |  | ------------- | ---------- | ----- |  | ----------- | --------- | --------- |  | ----------- | ---------- | - |  | ------------ | ---------- | - |  | --------- | ---------- | -
|                                            |                                                                                        |  | Common Shares |            |       |  |             |           |           |  |             |            |   |  |             
|                                            |                                                                                        |  |               |            |       |  |             |           |           |  |             |            |   |  |             
|                                            |                                                                                        |  |               |            |       |  | Assigned    |           | Shares to |  | Accumulated |            |   |  |             
|                                            |                                                                                        |  | Number        |            | Value |  | be issued   |           | deficit   |  | Total      
|                                            |                                                                                        |  |               |            |       |  |             |           |           |  |            
|Balance, February 29, 2000                  |                                                                                        |  | 123,001,504   |            |       |  | 102,492,038 |           |           |  |            |            |   |  | (100,445,398 | )          |   |  | 2,046,640 |           
|Shares issued during the year:              |                                                                                        |  |               |            |       |  |             |           |           |  |             |            |   |  |              |            |   |  |           |           
|                                            | Exercise of CCAA warrants (note 10(b))                                                 |  |               | 1,170,060  |       |  |             |          |           |  |             |           |   |  |              |           |   |  |           |           |  
|                                            | For cash pursuant to private placements                                                |  |               | 1,730,375  |       |  |             | 4,310,800 |           |  |             |           |   |  |              |           |   |  |           | 4,310,800  |  
|                                            | For employees and directors compensation                                             |  |               | 1,295,000  |       |  |             | 754,950   |           |  |             |           |   |  |              |           |   |  |           | 754,950    |  
|                                            | For settlement of debt                                                                 |  |               | 49,629     |       |  |             | 19,344    |           |  |             |           |   |  |              |           |   |  |           | 19,344     |  
|                                            | For consulting services                                                                |  |               | 88,181     |       |  |             | 6,000     |           |  |             |           |   |  |              |           |   |  |           | 45,000     |  
|                                            | Issue on acquisition of TAME                                                           |  |               | 300,000    |       |  |             | 39,000    |           |  |             |            |   |  |              |            |   |  |           |            |  
|                                            | Issued on acquisition of Sullivan Park                                                 |  |               | 200,000    |       |  |             | 375,000   |           |  |             |           |   |  |              |           |   |  |           | 375,000    |  
|                                            | Shares to be issued on acquisition
of Sullivan Park                                    |  |               |           |       |  |             |          |           |  |             | 2,700,000  |   |  |              |           |   |  |           | 2,700,000  |  
|                                            | Shares to be issued for cash received
pursuant to private placements                   |  |               |           |       |  |             |          |           |  |             | 2,005,000  |   |  |              |           |   |  |           | 2,005,000  |  
|                                            | Share issue costs                                                                      |  |               |           |       |  |             | (475,650  | )         |  |             |           |   |  |              |           |   |  |           | (475,650   | )
|                                            | Loss for the year                                                                      |  |               |           |       |  |             |          |           |  |             |           |   |  |              | (6,711,117 | ) |  |           | (6,711,117 | )
|                                            |                                                                                        |  |               |            |       |  |             |           |           |  |             |            |   |  |              |            |   |  |           |           
|Balance, February 28, 2001                  |                                                                                        |  | 127,834,749   |            |       |  | 107,521,482 |           |           |  | 4,705,000   |            |   |  | (107,156,515 | )          |   |  | 5,069,967 |           
|Shares issued during the year:              |                                                                                        |  |               |            |       |  |             |           |           |  |             |            |   |  |              |            |   |  |           |           
|                                            | Exercise of CCAA warrants (note 10(b))                                                 |  |               | 732,433    |       |  |             |          |           |  |             |           |   |  |              |           |   |  |           |           |  
|                                            | Issued for acquisition of Sullivan Park                                                |  |               | 6,500,000  |       |  |             | 2,210,000 |           |  |             | (2,700,000 | ) |  |              |           |   |  |           | (490,000   | )
|                                            | Shares issued and to be issued for
acquisition of Healthtrac (note 4)                  |  |               | 13,212,976 |       |  |             | 4,492,412 |           |  |             | 107,588    |   |  |              |           |   |  |           | 4,600,000  |  
|                                            | Issued on acquisition of Med Wire
assets (note 5)                                      |  |               | 241,935    |       |  |             | 150,000   |           |  |             |           |   |  |              |           |   |  |           | 150,000    |  
|                                            | Issued on acquisition of specific
assets of Healthscape (note 5)                       |  |               | 631,579    |       |  |             | 240,000   |           |  |             |           |   |  |              |           |   |  |           | 240,000    |  
|                                            | Shares issued for cash received
pursuant to private placements                         |  |               | 42,985,717 |       |  |             | 4,744,125 |           |  |             | (2,005,000 | ) |  |              |           |   |  |           | 2,739,125  |  
|                                            | Shares to be issued for settlement of debt                                             |  |               |           |       |  |             |          |           |  |             | 6,000      |   |  |              |           |   |  |           | 6,000      |  
|                                            | Shares issued for settlement of debt (note 4)                                          |  |               | 3,716,090  |       |  |             | 971,767   |           |  |             |           |   |  |              |           |   |  |           | 971,767    |  
|                                            | Shares issued for services                                                             |  |               | 1,425,777  |       |  |             | 123,658   |           |  |             |           |   |  |              |           |   |  |           | 123,658    |  
|                                            | Shares issued for employees and
directors compensation                               |  |               | 1,018,181  |       |  |             | 566,000   |           |  |             |           |   |  |              |           |   |  |           | 566,000    |  
|                                            | Shares issued for severance pay                                                        |  |               | 1,000,000  |       |  |             | 100,000   |           |  |             |           |   |  |              |           |   |  |           | 100,000    |  
|                                            | Shares returned to treasury and cancelled                                              |  |               | (265,424   | )     |  |             |          |           |  |             |           |   |  |              |           |   |  |           |           |  
|                                            | Shares to be issued for cash received
pursuant to private placements                   |  |               |           |       |  |             |          |           |  |             | 640,625    |   |  |              |           |   |  |           | 640,625    |  
|                                            | Share issue costs                                                                      |  |               |           |       |  |             | (24,000   | )         |  |             |           |   |  |              |           |   |  |           | (24,000    | )
|                                            | Subscription receivable                                                                |  |               |           |       |  |             | (410,000  | )         |  |             |           |   |  |              |           |   |  |           | (410,000   | )
|                                            | Loss for the year                                                                      |  |               |           |       |  |             |          |           |  |             |           |   |  |              | (9,916,809 | ) |  |           | (9,916,809 | )
|                                            |                                                                                        |  |               |            |       |  |             |           |           |  |             |            |   |  |              |            |   |  |           |           
|Balance, February 28, 2002, brought forward |                                                                                        |  | 199,034,013   |            |       |  | 120,685,444 |           |           |  | 754,213     |            |   |  | (117,073,324 | )          |   |  | 4,366,333 |           
|Shares issued during the year:              |                                                                                        |  |               |            |       |  |             |           |           |  |             |            |   |  |              |            |   |  |           |           
|                                            | For cash pursuant to private placements                                                |  |               | 20,040,238 |       |  |             | 859,124   |           |  |             | (561,625   | ) |  |              |           |   |  |           | 297,499    |  
|                                            | Shares to be issued for cash received pursuant to private
placements                   |  |               |           |       |  |             |          |           |  |             | 15,000     |   |  |              |           |   |  |           | 15,000     |  
|                                            | Shares issued for employee compensation ($50,000 cash
received from private placement) |  |               | 1,000,000  |       |  |             | 130,000   |           |  |             |           |   |  |              |           |   |  |           | 130,000    |  
|                                            | Subscription receivable                                                                |  |               |           |       |  |             | (77,500   | )         |  |             |           |   |  |              |           |   |  |           | (77,500    | )
|                                            | Shares issued for services                                                             |  |               | 1,450,000  |       |  |             | 45,500    |           |  |             |           |   |  |              |           |   |  |           | 45,500     |  
|                                            | Shares issued and to be issued for
acquisition of Healthtrac (note 3)                  |  |               | 431,293    |       |  |             | 107,588   |           |  |             | (107,588   | ) |  |              |           |   |  |           |           |  
|                                            | Shares to be issued for settlement of debt                                             |  |               | 1,149,054  |       |  |             | 59,765    |           |  |             |           |   |  |              |           |   |  |           | 59,765     |  
|                                            | Loss for the year                                                                      |  |               |            |       |  |             |           |           |  |             |            |   |  |              | (2,161,235 | ) |  |           | (2,161,235 | )
|                                            |                                                                                        |  |               |            |       |  |             |           |           |  |             |            |   |  |              |            |   |  |           |           
|Balance, February 28, 2003                  |                                                                                        |  | 223,104,598   |            |       |  | 121,809,921 |           |           |  | 100,000     |            |   |  | (119,234,559 | )          |   |  | 2,675,362 |           
|                                            |                                                                                        |  |               |            |       |  |             |           |           |  |             |            |   |  |              |            |   |  |           |           

See accompanying notes

F-5



---



##### Table of Contents



HEALTHTRAC, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Expressed in United States dollars)

|                                                       |                                                |                                   |         |              |           |              |          |                     |           |                     |         |            |           |  
|------------------------------------------------------ | ---------------------------------------------- | --------------------------------- | ------- | ------------ | --------- | ------------ | -------- | ------------------- | --------- | ------------------- | ------- | ---------- | --------- | -
|                                                       |                                                |                                   |         | Year ended   |           | Year ended   |          | Year ended         
|                                                       |                                                |                                   |         | February 28, |           | February 28, |          | February 28,       
|                                                       |                                                |                                   |         | 2003         |           | 2002         |          | 2001               
|                                                       |                                                |                                   |         |              |           |              |          |                    
|                                                       |                                                |                                   |         |              |           |              |          | (Restated - note 5) |           | (Restated - note 5)
|Cash flows from operating activities:                  |                                                |                                   |         |              |           |              |          |                     |           |                     |         |           
|                                                       | Loss for the year                              |                                   | $       | (2,161,235   | )         |              | $        | (9,916,809          | )         |                     | $       | (6,711,117 | )        
|                                                       | Adjustments for:                               |                                   |         |              |           |              |          |                     |           |                     |         |            |          
|                                                       |                                                | Loss
from discontinued operations |         |              | (3,752    | )            |          |                     | 6,274,633 |                     |         |            | 3,869,214 |  
|                                                       |                                                | Non-cash compensation             |         |              | 80,000    |              |          |                     | 566,000   |                     |         |            | 754,950   |  
|                                                       |                                                | Non-cash severance payment        |         |              |          |              |          |                     | 100,000   |                     |         |            |          |  
|                                                       |                                                | Non-cash services and purchases   |         |              | 45,500    |              |          |                     | 129,658   |                     |         |            | 64,344    |  
|                                                       |                                                | Amortization                      |         |              | 1,393,988 |              |          |                     | 843,856   |                     |         |            | 36,941    |  
|                                                       |                                                | Write-down of equipment           |         |              | 435,503   |              |          |                     |          |                     |         |            |          |  
|                                                       |                                                | Write-down of other assets        |         |              | 29,669    |              |          |                     |          |                     |         |            |          |  
|                                                       |                                                | Loss on sale of equipment         |         |              |          |              |          |                     | 5,843     |                     |         |            |          |  
|                                                       |                                                | Gain on forgiveness of debt       |         |              | (338,204  | )            |          |                     |          |                     |         |            |          |  
|                                                       | Changes in non-cash operating working capital: |                                   |         |              |           |              |          |                     |           |                     |         |            |          
|                                                       |                                                | Accounts receivable               |         |              | (134,793  | )            |          |                     | 106,816   |                     |         |            | (57,353   | )
|                                                       |                                                | Employee receivable               |         |              | (3,252    | )            |          |                     | 7,192     |                     |         |            | (33,609   | )
|                                                       |                                                | Loan receivable                   |         |              |          |              |          |                     | 75,000    |                     |         |            | (75,000   | )
|                                                       |                                                | Prepaid expenses and advances     |         |              | 110,689   |              |          |                     | (9,533    | )                   |         |            | 28,108    |  
|                                                       |                                                | Inventories                       |         |              | (72,601   | )            |          |                     | 50,656    |                     |         |            | (270      | )
|                                                       |                                                | Deferred revenue                  |         |              | (127,199  | )            |          |                     | 45,787    |                     |         |            |          |  
|                                                       |                                                | Accounts payable                  |         |              | 101,853   |              |          |                     | 179,284   |                     |         |            | 277,374   |  
|                                                       |                                                | Accrued liabilities               |         |              | 331,304   |              |          |                     | 320,605   |                     |         |            | 20,523    |  
|                                                       |                                                |                                   |         |              |           |              |          |                     |           |                     |         |            |          
|                                                       | Cash flow used in continuing operations        |                                   |         | (312,530     | )         |              |          | (1,221,012          | )         |                     |         | (1,825,895 | )        
|                                                       | Cash used in discontinued operations           |                                   |         | 40,997       |           |              |          | (1,838,270          | )         |                     |         | (2,803,701 | )        
|                                                       |                                                |                                   |         |              |           |              |          |                     |           |                     |         |            |          
|                                                       | Cash flow used in operations                   |                                   |         | (271,533     | )         |              |          | (3,059,284          | )         |                     |         | (4,629,596 | )        
|Investments:                                           |                                                |                                   |         |              |           |              |          |                     |           |                     |         |           
|                                                       | Acquisition of equipment                       |                                   |         | (36,060      | )         |              |          | (122,709            | )         |                     |         | (1,061,615 | )        
|                                                       | Acquisition costs (note 3)                     |                                   |         |             |           |              |          | (136,585            | )         |                     |         |           |          
|                                                       | Cash acquired on acquisition                   |                                   |         |             |           |              |          | 57,091              |           |                     |         | 3,248      |          
|                                                       |                                                |                                   |         |              |           |              |          |                     |           |                     |         |            |          
|                                                       | Cash flow used in investments                  |                                   |         | (36,060      | )         |              |          | (202,203            | )         |                     |         | (1,058,367 | )        
|Financing:                                             |                                                |                                   |         |              |           |              |          |                     |           |                     |         |           
|                                                       | Note payable                                   |                                   |         | (36,702      | )         |              |          | 100,000             |           |                     |         |           |          
|                                                       | Repayment of capital lease obligation          |                                   |         | (37,491      | )         |              |          | (69,757             | )         |                     |         | (30,878    | )        
|                                                       | Issuance of common shares for cash             |                                   |         | 270,000      |           |              |          | 2,329,125           |           |                     |         | 4,310,800  |          
|                                                       | Shares to be issued                            |                                   |         | 15,000       |           |              |          | 640,625             |           |                     |         | 2,005,000  |          
|                                                       | Share issue costs                              |                                   |         |             |           |              |          | (24,000             | )         |                     |         | (475,650   | )        
|                                                       |                                                |                                   |         |              |           |              |          |                     |           |                     |         |            |          
|                                                       | Cash flow provided by financing                |                                   |         | 210,807      |           |              |          | 2,975,993           |           |                     |         | 5,809,272  |          
|                                                       |                                                |                                   |         |              |           |              |          |                     |           |                     |         |            |          
|Increase (decrease) in cash and cash equivalents       |                                                |                                   | (96,786 | )            |           |              | (285,495 | )                   |           |                     | 121,309 |           
|Increase (decrease) in cash of discontinued operations |                                                |                                   | 41,104  |              |           |              | 39,476   |                     |           |                     | (74,743 | )         
|Cash and cash equivalents, beginning of year           |                                                |                                   | 248,391 |              |           |              | 494,410  |                     |           |                     | 447,844 |           
|                                                       |                                                |                                   |         |              |           |              |          |                     |           |                     |         |            |          
|Cash and cash equivalents, end of year from            |                                                |                                   |         |              |           |              |          |                     |           |                     |         |           
|continuing operations                                  |                                                | $                                 | 186,873 |              |           | $            | 248,391  |                     |           | $                   | 494,410 |           
|                                                       |                                                |                                   |         |              |           |              |          |                     |           |                     |         |            |          

Non-cash transactions and supplemental disclosures (note 15).
See accompanying notes

F-6



---



##### Table of Contents



HEALTHTRAC, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
February 28, 2003



|1. |  | Future operations:                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                         
|-- |  | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|  
|   |  | These financial statements have been prepared on the going concern
basis, which assumes the realization of assets and the settlement of
liabilities in the normal course of business. The application of the
going concern concept is dependent on the Companys ability to
generate future profitable operations and receive continued financial
support from its shareholders and from external financing. The
Company incurred a loss from operations of $2,161,235 for the year
ended February 28, 2003 (2002  $9,916,809) and has an accumulated
deficit of $119,234,559 at February 28, 2003 (2002  $117,073,324).
For the year ended February 28, 2003, the Company used $312,530 in
cash to fund continuing operations, provided $40,997 in cash from
discontinued operations, used $36,060 in cash to fund investing
activities and generated $210,807 in cash from financial activities
for a net cash outflow of $96,786. As at February 28, 2003, the
Company has a working capital deficiency of $1,618,647.
|  
|   |  | Management projects that the Company will require additional cash and
working capital to fund planned operations and capital asset additions
for fiscal 2004 which management estimates will total approximately
$500,000. Although management is of the opinion that sufficient cash
will be obtained from operations and external financing to meet the
Companys liabilities and commitments as they become due in fiscal
2004, if external financings become required, there can be no
assurance that funds will be available when required on an economic
basis to the Company. The ability of the Company to continue as a
going concern and realize the carrying value of its assets is
dependent on the Companys ability to increase its revenues by
increasing its customer base and reducing its operating costs so that
the Company achieves profitable operations.                                                                                                                                            
|  
|   |  | These financial statements do not reflect any adjustments that would
be necessary should the Company be unable to continue as a going
concern and therefore be required to realize its assets and discharge
its liabilities in other than the normal course of operations.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                 
|  
|  
|   |  | To May 16, 2003, subsequent to February 28, 2003 the Company has raised
nil in external financing through the issuance of private placements.
If the Company is unable to obtain sufficient funds for operations, it
will be required to reduce operations or liquidate assets.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                            
|  
|  
|2. |  | Significant accounting policies:                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                           



| | (a) |  | Basis of presentation:                                                                                                                                                                                                                                                                                
| | --- |  | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|
| |     |  | These consolidated financial statements have
been prepared in accordance with accounting
principles generally accepted in the United
States of America. Except as disclosed in note
17, these principles do not differ materially
from measurement accounting principles generally
accepted in Canada.

F-7



---



##### Table of Contents





|2. |  | Significant accounting policies (continued):
|-- |  | --------------------------------------------



| | (a) |  | Basis of presentation (continued):                                                                                                                                                                                                                                                                                                                                                                                           
| | --- |  | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|
| |     |  | These consolidated financial statements include the accounts of the Company and its
subsidiaries, all of which are wholly owned. All subsidiaries were acquired from unrelated
parties and have been accounted for using the purchase method. Their results of operations
have been included from the respective effective dates of acquisition. All significant
intercompany balances and transactions have been eliminated.

|                                             |  |                                      
|-------------------------------------------- |  | -------------------------------------
|Canadian subsidiaries                        |  | United States subsidiaries           
|                                             |  |                                      
|Canadian-American Communications Inc.        |  | Northnet Telecommunications Inc.     
|Canadian Northstar Transmission Systems Ltd. |  | eCommerce Solutions inc.             
|Preferred Telemangement Inc. (PTI)          |  | Sullivan Park, Inc. (Sullivan Park)
|Cam-Net Cellular Inc.                        |  | Healthtrac Corporation               



| | (b) |  | Cash and cash equivalents:                                                                                                                                                                                                                                                                                                                       
| | --- |  | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|
| |     |  | Cash and cash equivalents includes overnight repurchase agreements and certificates of
deposit having a term to maturity of three months or less when acquired. For presentation
purposes, the Company considers all highly liquid debt instruments with original terms to
maturity of three months or less when acquired to be cash equivalents.
|
| | (c) |  | Inventories:                                                                                                                                                                                                                                                                                                                                     
|
| |     |  | Inventories consist of various publications and written materials for the Healthcare
segment. Inventories are stated at the lower of average cost and net realizable value.                                                                                                                                                                      
|
| | (d) |  | Equipment:                                                                                                                                                                                                                                                                                                                                       
|
| |     |  | Equipment is recorded at cost. Amortization is recorded using the straight-line method over
the following estimated useful lives:                                                                                                                                                                                                                

|                  |  |             |  | 
|----------------- |  | ----------- |  | 
|Asset             |  | Term       
|                  |  |            
|Office equipment  |  | 5 - 7 years
|Computer hardware |  | 3 - 5 years
|Computer software |  | 3 - 5 years



| |  |  | Leasehold improvements are depreciated on a straight-line basis over the shorter of the
lease term or their estimated useful lives.
| |  |  | -----------------------------------------------------------------------------------------------------------------------------------

F-8



---



##### Table of Contents





|2. |  | Significant accounting policies (continued):
|-- |  | --------------------------------------------



| | (e) |  | Intellectual property:                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                           
| | --- |  | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|
|
| |     |  | Intellectual property representing
the algorithms and data used in the health questionnaires and are
being amortized on a straight-line basis over five years.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                   
|
|
| | (f) |  | Impairment of long-lived assets and long-lived assets to be disposed of:                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                         
|
| |     |  | The Company accounts for long-lived assets, which includes equipment, intellectual property and
goodwill, in accordance with the provisions of SFAS No. 144, Accounting for the Impairment or
Disposal of Long-Lived Assets.This Statement requires that long-lived assets and certain
identifiable intangibles and goodwill related to such assets, be reviewed for impairment whenever
events or changes in circumstances indicate that the carrying amount of an asset may not be
recoverable. Recoverability of assets to be held and used is measured by a comparison of the
carrying amount of an asset to future undiscounted net cash flows expected to be generated by the
asset. If such assets are considered to be impaired, the impairment to be recognized is measured
as the amount by which the carrying amount of the assets exceeds the fair value of the assets.
Assets to be disposed of are reported at the lower of the carrying amount or fair value less costs
to sell.
|
| |     |  | During 2002, the Company reviewed the carrying value of goodwill acquired on acquisition of
Sullivan Park. The review was initiated as a result of the settlement of the Sullivan Park lawsuit
and the subsequent shut down of those operations. As a result of the shut down, the Company
determined that the estimated discounted cash flows were nil and the goodwill was written off
completely. The impairment charge is included in discontinued operations (note 5).                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                      
|
| | (g) |  | Revenue recognition:                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                             



| | (i)  |  | Call Center division:                                                                                                                                                                                                                                                                                                                
| | ---- |  | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|
| |      |  | The Call Center provides transaction processing,
centralized billing, customer and technical support,
order entry, order fulfillment, bill collection, help
desk services and dispatch functions. Revenue is
recognized based on monthly per customer transactions for
standard services in accordance with contractual
arrangements.
|
| | (ii) |  | PSSP (formerly E-Commerce) division (included in discontinued operations):                                                                                                                                                                                                                                                           
|
| |      |  | Commissions earned from the sale of third party products
ordered from the Companys internet site, whereby the
Company does not take title to the products in advance of
sale, are recognized, on a net basis when the product has
been delivered, the fee is fixed and determinable and
collection is probable.                     
|
| |      |  | Revenues earned from the sale of products ordered from
the Companys internet site, whereby the Company takes
title to the product in advance of sale and stocks the
product in inventories, are recognized when the product
has been delivered, the fee is fixed and determinable and
collection is probable.                       

F-9



---



##### Table of Contents





|2. |  | Significant accounting policies (continued):
|-- |  | --------------------------------------------



| | (g) |  | Revenue recognition (continued):
| | --- |  | --------------------------------



| | (ii)  |  | PSSP (formerly E-Commerce) division (continued):                                                                                                                                                                                                      
| | ----- |  | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|
| |       |  | Revenues from consulting services related to website design and
development projects are recognized upon completion of those
projects. Revenues from website hosting services are recognized
monthly as billed.                                       
|
| |       |  | The divisions sale arrangements do not include post sales customer
support, discounts, warranties or other ongoing arrangements.                                                                                                                     
|
| | (iii) |  | Call Direct Catalogue division (included in discontinued operations):                                                                                                                                                                                 
|
| |       |  | The Catalogue division acquires products from suppliers for resale,
advertises the products in its catalogues and sells the product
based on telephone orders. Revenue is earned when product is
delivered to the customer and collection is probable.
|
| | (iv)  |  | Healthcare division:                                                                                                                                                                                                                                  
|
| |       |  | Service fees for the evaluation of health assessment questionnaires
and the development and monitoring of health education plans are
initially deferred and recognized as services are provided and the
revenues earned.                              
|
| |       |  | Sales of publications and written materials are recognized upon
shipment, at which time title is transferred to the customer.                                                                                                                         
|
| |       |  | Royalty revenue from licensing of the Companys software is
recognized in accordance with the provisions of SOP 97-2 Software
Revenue Recognition, as amended.                                                                                      



| | (h) |  | Income taxes:                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                   
| | --- |  | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|
| |     |  | Income taxes are accounted for under the asset and liability method. Deferred tax assets
and liabilities are recognized for the future tax consequences attributable to differences
between the financial statement carrying amounts of existing assets and liabilities and
their respective tax bases and operating loss and tax credit carry forwards. Deferred tax
assets and liabilities are measured using enacted tax rates expected to apply to taxable
income in the years in which those temporary differences are expected to be recovered or
settled. The effect on deferred tax assets and liabilities of a change in tax rates is
recognized in income in the period that includes the enactment date. When the realization
of deferred tax assets is not considered to be more likely than not, a valuation allowance
is provided.

F-10



---



##### Table of Contents





|2. |  | Significant accounting policies (continued):
|-- |  | --------------------------------------------



| | (i) |  | Loss per share:                                                                                                                                                                                                                                                                                                               
| | --- |  | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|
| |     |  | Loss per share has been calculated using the weighted average number of shares outstanding during the
year.                                                                                                                                                                                                                   
|
| |     |  | Diluted loss per share for the year is the same as basic loss per share due to the loss for all periods
presented. The following securities could potentially dilute basic EPS in the future but were not
included in the computation of diluted EPS because to do so would have been anti-dilutive for the
periods presented:

|                     |  |      |           |      |  |      |           |  |  |  |           | 
|-------------------- |  | ---- | --------- | ---- |  | ---- | --------- |  |  |  | --------- | 
|                     |  | 2003 |           | 2002 |  | 2001
|                     |  |      |           |      |  |     
|Warrants             |  |      | 6,135,000 |      |  |      | 6,135,000 |  |  |  |          | 
|Options (note 10(e)) |  |      | 260,000   |      |  |      | 6,776,000 |  |  |  | 6,952,500 | 



| | (j) |  | Foreign exchange:                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                             
| | --- |  | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|
| |     |  | The functional currency of all of the Companys operations is the United States dollar
except for its Canadian subsidiaries for which it is the Canadian dollar. Subsidiary
amounts originally measured in other than the Companys functional currency, are
translated to the functional currency by using the current rate method under which
assets and liabilities are translated at the exchange rate at the balance sheet date
and revenues, expenses, gains and losses are translated at the exchange rate at the
dates on which those transactions occurred except that weighted average exchange rate
is used to translate normal recurring transactions. Translation adjustments are
reported and accumulated in a separate component of equity, if material. No
translation adjustments have been incurred for the years presented.
|
| |     |  | Balance sheet items denominated in other than the functional currency are translated
into the functional currency dollars at exchange rates prevailing at the balance sheet
date for monetary items and at exchange rates in effect at the transaction date for
non-monetary items. Statement of operations items are translated at actual or average
rates prevailing during the year. Gains and losses on translation of balance sheet
items are included in operations as incurred.                                                                                                                                                                                                                                                                                                                                                        
|
| | (k) |  | Use of estimates:                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                             
|
| |     |  | Management of the Company has made a number of estimates and assumptions relating to
the reporting of assets, liabilities, revenues and expenses and the disclosure of
contingent assets and liabilities in preparing these financial statements in conformity
with accounting principles generally accepted in the United States. Actual results
could differ from those estimates. In these consolidated financial statements,
significant areas requiring the use of management estimates relate to the determination
of collectibility of accounts receivable, the recoverability of equipment and
intellectual property and rates for depreciation and amortization.                                                                                                                                                                     

F-11



---



##### Table of Contents





|2. |  | Significant accounting policies (continued):
|-- |  | --------------------------------------------



| | (l) |  | Financial instruments:                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                      
| | --- |  | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|
| |     |  | The fair values of cash and cash
equivalents, amounts receivable,
accounts payable, accrued
liabilities and obligations under
capital lease approximate their
carrying values due to the
short-term to maturity of these
items.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                             
|
| |     |  | The Companys credit risk is
limited to the amounts disclosed
on the balance sheet. The
Company has significant
concentrations of credit risk as
certain customers or classes of
customers aggregate greater than
10% of the Companys outstanding
accounts receivable (note 13).                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                           
|
| |     |  | The Company operates in Canada
and the United States which gives
rise to a risk that its earnings
and cash flows may be negatively
impacted by fluctuations in
interest and foreign exchange
rates. The Company has not
entered into derivative or other
financial instruments to hedge
these risks.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                        
|
| | (m) |  | Stock-based compensation plans:                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                             
|
| |     |  | The Company applies the intrinsic
value-based method of accounting
prescribed by Accounting
Principles Board (APB) Opinion
No. 25, Accounting for Stock
Issued to Employees,and related
interpretations to account for
its employee stock options plans.
Under this method, compensation
expense is recorded on the
measurement date, which is
generally the date of grant, only
if the current market price of
the underlying stock exceeds the
exercise price. SFAS No. 123,
Accounting for Stock-Based
Compensation,established
accounting and disclosure
requirements using a fair
value-based method of accounting
for stock-based employee
compensation plans. As allowed
by SFAS No. 123, the Company has
elected to continue to apply the
intrinsic value-based method of
accounting described above, and
has adopted the disclosure
requirements of SFAS No. 123 for
employee stock option grants.
Option grants to non-employees
will be recognized at their fair
value as the services are
provided and the options earned.
|
| |     |  | The Company accounts for
stock-based compensation
associated with the repricing of
employee stock options in
accordance with the provisions of
FASB Interpretation No. 44,
Accounting for Certain
Transactions involving Stock
Compensation (FIN 44). For
accounting purposes, the
repricing of existing stock
options requires variable
accounting for the new options
granted from the date of
modification. Variable
accounting requires that the
intrinsic value, being the excess
of the current market price at
the end of each reporting period
in excess of the exercise price
of the repriced options, be
expensed as non-cash stock-based
compensation expense, until such
time as the repriced options are
exercised, expire or are
otherwise forfeited. Any
increase in the intrinsic value
of the repriced options will
decrease reported earnings, and
any subsequent decreases in value
will increase reported earnings.                                                                                                 

F-12



---



##### Table of Contents





|2. |  | Significant accounting policies (continued):
|-- |  | --------------------------------------------



| | (m) |  | Stock-based compensation plans (continued):                                                                                                                                                                                                                                                                                                                                                                                         
| | --- |  | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|
| |     |  | The closing price of the Companys common stock on February 28, 2003 was $0.03
per share and therefore the Company recognized employee non-cash compensation
expense charges of nil for the year ended February 28, 2003 related to repriced
stock options. There is a potential for such a variable non-cash charges in
each reporting period until all of the Companys repriced stock options are
exercised, forfeited or expire.
|
| |     |  | Had the Company determined compensation cost based on the fair value at the
grant date for its stock options under SFAS No. 123, the Companys net loss
would have been increased to the pro forma amounts indicated below:                                                                                                                                                                                                         

|                         |  |      |           |      |  |      |            |  |  |   |            | 
|------------------------ |  | ---- | --------- | ---- |  | ---- | ---------- |  |  | - | ---------- | 
|                         |  | 2003 |           | 2002 |  | 2001
|                         |  |      |           |      |  |     
|Compensation expense     |  | $    | 69,008    |      |  | $    | 746,000    |  |  | $ | 8,629,883  | 
|Pro forma loss           |  |      | 2,230,243 |      |  |      | 10,662,809 |  |  |   | 15,341,000 | 
|Pro forma loss per share |  | $    | 0.01      |      |  | $    | 0.07       |  |  | $ | 0.12       | 



| |  |  | The weighted average fair value of employee options granted during the year was
$0.08 (2002  $0.28; 2001  $1.25) estimated using the Black-Scholes
option-pricing model with the following weighted average assumptions:
| |  |  | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|                        |  |      |           |      |  |      |           |   |  |  |           |  
|----------------------- |  | ---- | --------- | ---- |  | ---- | --------- | - |  |  | --------- | -
|                        |  | 2003 |           | 2002 |  | 2001
|                        |  |      |           |      |  |     
|Risk free interest rate |  |      | 4.07      | %    |  |      | 4.75      | % |  |  | 6.00      | %
|Annual dividends        |  |      |          |      |  |      |          |   |  |  |          |  
|Expected lives          |  |      | 1.2 years |      |  |      | 5.0 years |   |  |  | 5.0 years |  
|Volatility              |  |      | 119       | %    |  |      | 121       | % |  |  | 131       | %



| | (n) |  | Recently adopted accounting standards:                                                                                      
| | --- |  | ----------------------------------------------------------------------------------------------------------------------------
|
| |     |  | During 2002, the Financial Accounting Standards Board has issued the following
new pronouncements that impacted the Company:



| |  |  | In August 2001, the Financial Accounting Standards Board (FASB) issued FAS
No. 143, Accounting or Asset Retirement Obligations (SFAS No. 143), which
requires entities to record the fair value of a liability for an asset or an
asset retirement obligation in the period in which it is incurred and a
corresponding increase in the carrying amount of the related long-lived asset.
SFAS No. 143 was effective for the Companys current fiscal year.
| | - |  | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

F-13



---



##### Table of Contents





|2. |  | Significant accounting policies (continued):
|-- |  | --------------------------------------------



| | (n) |  | Recently adopted accounting standards (continued):
| | --- |  | --------------------------------------------------



| |  |  | In July 2002, FASB released SFAS No. 146,
Accounting for costs associated with Exit or
Disposal Activities, (SFAS No. 146), which
addresses the financing accounting and reporting
for costs associated with exit or disposal
activities. SFAS No. 146 relates to the
recognition of a liability for a cost associated
with an exit or disposal activity and requires
that a liability be recognized for these costs
only when the liability is incurred., that is,
when it meets the definition of a liability under
FASB conceptual framework. SFAS No. 146 also
established fair value as the objective for
initial measurement of liabilities related to
exit or disposal activities. As a result, SPAS
146 significantly reduces an entitys ability to
recognize a liability for future expenses related
to restructuring. SFAS 146 was effective for
exit and disposal activities initiated after
December 31, 2002.
| | - |  | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|
| |  |  | In December 2002, FASB released SFAS No. 148,
Accounting for Stock-based Compensation
-Transition and Disclosure. This statement
amends FASB Statement No. 123. Accounting for
Stock-based Compensation, to provide alternative
methods of transition for a voluntary change to
the fair value base method of accounting for
stock-based compensation. In addition, this
Statement amends the disclosure requirements of
Statement 123 to require prominent disclosures in
both annual and interim financial statements
about the method of accounting for stock-based
compensation and the effect of the method used on
reported results.                                                                                                                                                                                                                                                                                  



| |  |  | The adoption of SFAS No. 143 or SFAS No. 146 on
January 1, 2003 did not have a material impact on
the Companys reported financial results. The
disclosure requirements in SFAS No. 148 have been
adopted in these consolidated financial
statements.
| |  |  | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



|3. |  | Acquisition of the business of Healthtrac, Inc.:                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                           
|-- |  | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|  
|   |  | On August 3, 2001, the Company acquired all of the shares of Healthtrac, Inc.
(Healthtrac) which operated an analytical health assessment program. The
Company issued 13,212,976 common shares on closing and issued 431,293 common
shares subsequently for a total fair value of $4,600,000 in share
consideration. This acquisition has been accounted for as a purchase of the
business of Healthtrac under the purchase method with effect from August 3,
2001. As part of the acquisition, the Company issued 3,716,090 common shares
with a fair value of $971,767 to creditors of the acquired company to settle
debt obligations.

F-14



---



##### Table of Contents





|3. |  | Acquisition of the business of Healthtrac, Inc. (continued):                                                        
|-- |  | --------------------------------------------------------------------------------------------------------------------
|  
|   |  | Details of the fair value assigned to the assets acquired and liabilities assumed in the acquisition are as
follows:

|                     |                       |   |           |           | 
|-------------------- | --------------------- | - | --------- | --------- | 
|Assets acquired:     |                       |   |           |          
|                     | Current assets        |   | $         | 520,962   | 
|                     | Equipment             |   |           | 83,387    | 
|                     | Intellectual property |   |           | 6,048,818 | 
|                     |                       |   |           |           | 
|                     |                       |   | 6,653,167 |          
|Liabilities assumed: |                       |   |           |          
|                     | Current liabilities   |   |           | 1,866,582 | 
|                     | Long-term debt        |   |           | 50,000    | 
|                     |                       |   |           |           | 
|                     |                       |   | 1,916,582 |          
|                     |                       |   |           |           | 
|Net assets acquired  |                       | $ | 4,736,585 |          
|                     |                       |   |           |           | 
|Consideration paid:  |                       |   |           |          
|                     | Shares                |   | $         | 4,600,000 | 
|                     | Acquisition costs     |   |           | 136,585   | 
|                     |                       |   |           |           | 
|                     |                       | $ | 4,736,585 |          
|                     |                       |   |           |           | 



|4. |  | Other acquisitions:
|-- |  | -------------------



| | (a) |  | Medwired Corporation:                                                                                                                                                                                                                                                                                                                                                                                    
| | --- |  | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|
| |     |  | On April 20, 2001, the Company closed its acquisition of proprietary web portal development and
content management software from Medwired Corporation for $50,000 in cash and 241,935 common
shares of the Company with a fair value of $150,000. The total proceeds were allocated to
equipment. In fiscal 2003, management made a decision to abandon the business and wrote-down
the equipment to nil.
|
| | (b) |  | Healthscape, Inc.:                                                                                                                                                                                                                                                                                                                                                                                       
|
| |     |  | Pursuant to an agreement dated May 30, 2001, the Company acquired proprietary software from
Healthscape, Inc. on June 26, 2001 for $5,000 in cash and 631,579 common shares of the Company
with a fair value of $240,000. The total proceeds were allocated to equipment. In fiscal
2003, management made a decision to abandon the business and wrote-down the equipment to nil.                        



|5. |  | Discontinued operations:                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                   
|-- |  | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|  
|   |  | On February 28, 2002, the Company closed its catalogue sales division. During the third quarter of fiscal
2003, the Company discontinued its PSSP (formerly e-commerce) segment which had been substantially curtailed in fiscal 2002.
As a result, the catalogue and PSSP divisions represent discontinued operations to the Company. In
accordance with generally accepted accounting principles in the United States, prior year and current year
figures have been reclassified in the consolidated financial statements to separately reflect the assets,
liabilities, revenues and expenses under discontinued operations accounting.

F-15



---



##### Table of Contents



5.      Discontinued operations (continued):



| |  | Summarized financial information for the discontinued operations is as follows:
| |  | -------------------------------------------------------------------------------

|                                           |  |   |         |      |  |      |         |  |  | 
|------------------------------------------ |  | - | ------- | ---- |  | ---- | ------- |  |  | 
|                                           |  |   |         | 2003 |  | 2002
|                                           |  |   |         |      |  |     
|Assets                                     |  |   |         |      |  |      |         | 
|Cash                                       |  | $ |        |      |  | $    | 35,267  | 
|Accounts and employee receivables          |  |   |        |      |  |      | 34,557  | 
|Inventory                                  |  |   |        |      |  |      | 544     | 
|Prepaid expenses                           |  |   |        |      |  |      | 28,522  | 
|Equipment, net of accumulated amortization |  |   |        |      |  |      | 160,714 | 
|                                           |  |   |         |      |  |      |         | 
|Assets of discontinued operations          |  | $ |        |      |  | $    | 259,604 | 
|                                           |  |   |         |      |  |      |         | 
|Liabilities                                |  |   |         |      |  |      |         | 
|Accounts payable                           |  | $ |        |      |  | $    | 287,604 | 
|Accrued liabilities                        |  |   | 200,000 |      |  |      | 100,067 | 
|                                           |  |   |         |      |  |      |         | 
|Liabilities of discontinued operations     |  | $ | 200,000 |      |  | $    | 387,671 | 
|                                           |  |   |         |      |  |      |         | 



| |  | The Company expects to settle the remaining liabilities from discontinued operations in 2004.
The Company is negotiating the settlements with the intention of settling at less than the recorded amount of $200,000.
However, there can be no certainty that this will be achieved.
| |  | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|                                               |                                  |   |          |         |      |   |            |           |  |   |            |           |  
|---------------------------------------------- | -------------------------------- | - | -------- | ------- | ---- | - | ---------- | --------- |  | - | ---------- | --------- | -
|                                               |                                  |   | 2003     |         | 2002 |   | 2001      
|                                               |                                  |   |          |         |      |   |           
|Revenue                                        |                                  | $ | 50,304   |         |      | $ | 930,360    |           |  | $ | 1,810,299  |          
|Expenses:                                      |                                  |   |          |         |      |   |            |           |  |   |            |          
|                                               | Direct costs                     |   |          | 21,540  |      |   |            | 437,939   |  |   |            | 478,497   |  
|                                               | Selling and administrative costs |   |          | 54,624  |      |   |            | 2,891,272 |  |   |            | 3,873,534 |  
|                                               | Amortization                     |   |          | 26,780  |      |   |            | 890,846   |  |   |            | 1,361,206 |  
|                                               | Write-down of equipment          |   |          | 134,513 |      |   |            | 1,379,883 |  |   |            |          |  
|                                               | Write-down of other assets       |   |          | 52,427  |      |   |            |          |  |   |            |          |  
|                                               | Impairment of goodwill           |   |          |        |      |   |            | 1,522,758 |  |   |            |          |  
|                                               | Other                            |   |          |        |      |   |            | 82,295    |  |   |            | (33,724   | )
|Gain on forgiveness of debt                    |                                  |   | (243,332 | )       |      |   |           |           |  |   |           |          
|                                               |                                  |   |          |         |      |   |            |           |  |   |            |          
|Net income (loss) from discontinued operations |                                  | $ | 3,752    |         |      | $ | (6,274,633 | )         |  | $ | (3,869,214 | )        
|                                               |                                  |   |          |         |      |   |            |           |  |   |            |          

6.     Prepaid expenses and deposits:

|                 |  |      |         |      |  |   |         | 
|---------------- |  | ---- | ------- | ---- |  | - | ------- | 
|                 |  | 2002 |         | 2001
|                 |  |      |         |     
|Prepaid expenses |  | $    | 5,144   |      |  | $ | 104,584 | 
|Deposits         |  |      | 141,119 |      |  |   | 152,369 | 
|                 |  |      |         |      |  |   |         | 
|                 |  | $    | 146,263 |      |  | $ | 256,953 | 
|                 |  |      |         |      |  |   |         | 

F-16



---



##### Table of Contents



7.      Equipment:

|                       |  |      |         |                |  |              |         |          |  |   |         | 
|---------------------- |  | ---- | ------- | -------------- |  | ------------ | ------- | -------- |  | - | ------- | 
|                       |  |      |         |                |  | Accumulated  |         |          |  |  
|                       |  |      |         |                |  | amortization |         | Net book
|2003                   |  | Cost |         | and write-down |  | value       
|                       |  |      |         |                |  |             
|Office equipment       |  | $    | 274,104 |                |  | $            | 135,912 |          |  | $ | 138,192 | 
|Computer hardware      |  |      | 87,590  |                |  |              | 74,227  |          |  |   | 13,363  | 
|Leasehold improvements |  |      | 24,980  |                |  |              | 6,541   |          |  |   | 18,439  | 
|                       |  |      |         |                |  |              |         |          |  |   |         | 
|                       |  | $    | 386,674 |                |  | $            | 216,680 |          |  | $ | 169,994 | 
|                       |  |      |         |                |  |              |         |          |  |   |         | 

|                         |                        |      |           |              |  |       |             |           |          |   |         |         | 
|------------------------ | ---------------------- | ---- | --------- | ------------ |  | ----- | ----------- | --------- | -------- | - | ------- | ------- | 
|                         |                        |      |           |              |  |       | Accumulated |           | Net book
|2002                     |                        | Cost |           | amortization |  | value
|                         |                        |      |           |              |  |      
|Continuing operations:   |                        |      |           |              |  |       |             |           |          |   |         |        
|                         | Office equipment       |      | $         | 293,629      |  |       | $           | 83,246    |          |   | $       | 210,383 | 
|                         | Computer hardware      |      |           | 164,867      |  |       |             | 104,423   |          |   |         | 60,444  | 
|                         | Computer software      |      |           | 543,247      |  |       |             | 84,272    |          |   |         | 458,975 | 
|                         | Leasehold improvements |      |           | 329,301      |  |       |             | 304,862   |          |   |         | 24,439  | 
|                         |                        |      |           |              |  |       |             |           |          |   |         |         | 
|                         |                        | $    | 1,331,044 |              |  | $     | 576,803     |           |          | $ | 754,241 |        
|                         |                        |      |           |              |  |       |             |           |          |   |         |         | 
|Discontinued operations: |                        |      |           |              |  |       |             |           |          |   |         |        
|                         | Office equipment       |      | $         | 770,104      |  |       | $           | 677,589   |          |   | $       | 92,515  | 
|                         | Computer hardware      |      |           | 1,504,770    |  |       |             | 1,468,975 |          |   |         | 35,795  | 
|                         | Computer software      |      |           | 102,344      |  |       |             | 69,940    |          |   |         | 32,404  | 
|                         |                        |      |           |              |  |       |             |           |          |   |         |         | 
|                         |                        | $    | 2,377,218 |              |  | $     | 2,216,504   |           |          | $ | 160,714 |        
|                         |                        |      |           |              |  |       |             |           |          |   |         |         | 

8.      Notes payable:

|                                                                                                                                                   |  |      |   |      |  |   |         | 
|-------------------------------------------------------------------------------------------------------------------------------------------------- |  | ---- | - | ---- |  | - | ------- | 
|                                                                                                                                                   |  | 2003 |   | 2002
|                                                                                                                                                   |  |      |   |     
|Note payable to a shareholder with interest at 1%
over Bank of Americas prime rate due on February 3,
2003 (note 14)                              |  | $    |  |      |  | $ | 50,000  | 
|Note payable with interest at 8% due January 31,
2002. The note is secured by a pledge of an
aggregate of 300,000 common shares held by a
director |  |      |  |      |  |   | 100,000 | 
|                                                                                                                                                   |  |      |   |      |  |   |         | 
|                                                                                                                                                   |  | $    |  |      |  | $ | 150,000 | 
|                                                                                                                                                   |  |      |   |      |  |   |         | 



| |  | The $100,000 note payable was not
paid on January 31, 2002 and the lender exercised their right under the default
provision to receive the 300,000 common shares of the director on March 5, 2002. The creditor sold the shares for
$34,360 of cash. The remaining payments have been reclassified to accounts payable.
| |  | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

F-17



---



##### Table of Contents



9.      Obligations under capital lease:

|                                                    |  |      |        |      |  |   |        | 
|--------------------------------------------------- |  | ---- | ------ | ---- |  | - | ------ | 
|                                                    |  | 2003 |        | 2002
|                                                    |  |      |        |     
|Year ending February 28 (2004 - 29):                |  |      |        |      |  |   |        | 
|2003                                                |  | $    |       |      |  | $ | 47,961 | 
|2004                                                |  |      | 19,470 |      |  |   | 14,060 | 
|2005                                                |  |      | 11,040 |      |  |   | 10,224 | 
|2006                                                |  |      | 920    |      |  |   | 1,704  | 
|                                                    |  |      |        |      |  |   |        | 
|Total minimum lease payments                        |  |      | 31,430 |      |  |   | 73,949 | 
|Amount representing interest from 10% to 13%        |  |      | 2,616  |      |  |   | 7,644  | 
|                                                    |  |      |        |      |  |   |        | 
|Present value of net minimum capital lease payments |  |      | 28,814 |      |  |   | 66,305 | 
|Current portion of obligation under capital lease   |  |      | 19,470 |      |  |   | 43,129 | 
|                                                    |  |      |        |      |  |   |        | 
|                                                    |  | $    | 9,344  |      |  | $ | 23,176 | 
|                                                    |  |      |        |      |  |   |        | 



| |  | Interest of $4,695 (2002  $8,550) relating to capital lease obligations has been included in interest expense.
| |  | ---------------------------------------------------------------------------------------------------------------

10.     Share capital:



|(a) |  | Authorized:
|--- |  | -----------



| |  |  | 300,000,000 common stock without par value
150,000,000 class A preference stock without par value
150,000,000 class B preference stock without par value
| |  |  | --------------------------------------------------------------------------------------------------------------------------------------------------------



|(b) |  | Commitments to issue common shares:                                                                                                                                                                                                                                                                                                   
|--- |  | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|   
|    |  | During fiscal 1998, the Company committed to issue 13,000,000 shares to former
creditors under a reorganization plan. As at February 28, 2003, 10,581,455
(2002  10,581,455; 2001  9,849,022) shares have been issued to creditors
leaving an outstanding commitment to issue 2,418,545 (2002  2,418,545; 2001 -
3,150,978) shares.
|   
|(c) |  | Reduction of common share stated capital:                                                                                                                                                                                                                                                                                             
|   
|    |  | On August 22, 1996, the shareholders of the Company passed a special resolution
to reduce the stated capital of the Companys common shares by $86,729,000 (CDN
$117,535,000). For accounting purposes, the recorded amounts for common shares
and deficit have not been adjusted.                                                    
|   
|(d) |  | Warrants:                                                                                                                                                                                                                                                                                                                             
|   
|    |  | On June 4, 2001, the Company issued 65,000 share purchase warrants which expire
June 4, 2004. Each warrant entitles the holder to purchase one common share for
$0.56. As at February 28, 2003, 65,000 of these warrants were unexercised.                                                                                            
|   
|    |  | On July 16, 2001, the Company issued 20,000 share purchase warrants which expire
July 16, 2003. Each warrant entitles the holder to purchase one common share
for $0.40. As at February 28, 2003, 20,000 of these warrants were unexercised.                                                                                          

F-18



---



##### Table of Contents



10.     Share capital (continued):



|(d) |  | Warrants (continued):                                                                                                                                                                                                                                                                                                                                                                                                                                                                               
|--- |  | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|   
|    |  | On August 3, 2001, the Company issued 50,000 share purchase warrants to a former employee in place of 45,000 options previously granted to that employee. The
warrants expire on August 3, 2003. Each warrant entitles the holder to purchase one common share for $0.24. As at February 28, 2003, 50,000 of these
warrants were unexercised.                                                                                                                                                       
|   
|    |  | On January 2, 2002, the Company issued 6,000,000 share purchase warrants to the former President as part of his severance package. The warrants expire on
January 2, 2007. Each warrant entitles the holder to purchase one common share for $0.10, the market price of the Companys common shares at the time of the
issuance of the share purchase warrants. As at February 28,
2003, 6,000,000 of these warrants were unexercised. The Company has
cancelled these share purchase warrants.     
|   
|(e) |  | Stock options:                                                                                                                                                                                                                                                                                                                                                                                                                                                                                      
|   
|    |  | The Company has a stock option plan, which allows the Company, at the discretion of the Board of Directors, to issue options to employees, directors and
consultants to purchase common shares of the Company. Stock purchase options are granted having exercise prices based on the market price at the date of
grant. The stock options expire at various dates ranging from July 28, 2010 to November 5, 2011. The stock options vest in accordance with each individual
stock option agreement.
|   
|    |  | The following summarizes changes in stock options for the last three reporting years:                                                                                                                                                                                                                                                                                                                                                                                                               

|                                                       |  |        |             |       |  |          |       |       |  |        |            |          |  |   |      |  |  |          |           |   |  |   |      | 
|------------------------------------------------------ |  | ------ | ----------- | ----- |  | -------- | ----- | ----- |  | ------ | ---------- | -------- |  | - | ---- |  |  | -------- | --------- | - |  | - | ---- | 
|                                                       |  | 2003   |             | 2002  |  | 2001    
|                                                       |  |        |             |       |  |         
|                                                       |  |        |             |       |  | Weighted |       |       |  |        |            | Weighted |  |   |      |  |  | Weighted
|                                                       |  |        |             |       |  | average  |       |       |  |        |            | average  |  |   |      |  |  | average 
|                                                       |  |        |             |       |  | exercise |       |       |  |        |            | exercise |  |   |      |  |  | exercise
|                                                       |  | Shares |             | price |  | Shares   |       | price |  | Shares |            | price   
|                                                       |  |        |             |       |  |          |       |       |  |        |            |         
|Outstanding, beginning
of year, as previously
reported |  |        | 6,776,000   |       |  | $        | 0.14  |       |  |        | 6,952,500  |          |  | $ | 0.56 |  |  |          | 100,000   |   |  | $ | 1.28 | 
|Outstanding, beginning
of year, as repriced            |  |        |            |       |  |          |      |       |  |        | 6,952,500  |          |  |   | 0.15 |  |  |          |          |   |  |   |     | 
|Granted                                                |  |        | 6,000,000   |       |  |          | 0.10  |       |  |        | 2,696,000  |          |  |   | 0.13 |  |  |          | 6,952,500 |   |  |   | 0.56 | 
|Forfeited                                              |  |        | (12,516,000 | )     |  |          | (0.12 | )     |  |        | (2,872,500 | )        |  |   | 0.48 |  |  |          | (100,000  | ) |  |   | 1.28 | 
|                                                       |  |        |             |       |  |          |       |       |  |        |            |          |  |   |      |  |  |          |           |   |  |   |      | 
|Outstanding, end of year                               |  |        | 260,000     |       |  | $        | 0.15  |       |  |        | 6,776,000  |          |  | $ | 0.14 |  |  |          | 6,952,500 |   |  | $ | 0.56 | 
|                                                       |  |        |             |       |  |          |       |       |  |        |            |          |  |   |      |  |  |          |           |   |  |   |      | 

F-19



---



##### Table of Contents



10.    Share capital (continued):



|(e) |  | Stock options (continued):

The Company has the following stock purchase options outstanding and vested
at February 28, 2003:
|--- |  | -----------------------------------------------------------------------------------------------------------------------------

|          |  |        |         |       |  |        |      |  |  |                  |  | 
|--------- |  | ------ | ------- | ----- |  | ------ | ---- |  |  | ---------------- |  | 
|          |  | Number |         | Price |  | Expiry
|          |  |        |         |       |  |       
|Employees |  |        | 60,000  |       |  | $      | 0.15 |  |  | July 28, 2010   
|Director  |  |        | 200,000 |       |  |        | 0.15 |  |  | November 5, 2011
|          |  |        |         |       |  |        |      |  |  |                  |  | 
|Total     |  |        | 260,000 |       |  | $      | 0.15 |  |  |                  |  | 
|          |  |        |         |       |  |        |      |  |  |                  |  | 



|    |  | On June 10, 2002, the President and Chief Executive Officer resigned from the Company and
consequently, forfeited 3,000,000 unvested options at $0.10.                                                                                                                                        
|--- |  | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|   
|    |  | During the year, the expiry date was extended for 350,000 options held by former
employees. No additional compensation was required to be recognized as a result of this
modification.                                                                                                        
|   
|    |  | On April 1, 2002, 2,000,000 stock options were granted to a consultant of the Company
which vest in accordance with certain performance criteria and expired on April 1, 2003.
No compensation was required to be recorded to February 28, 2003, for this award.                              
|   
|    |  | The Company cancelled a majority of the outstanding options in the fourth quarter as the
option holders no longer were employed by the Company or no longer directors or
consultants of the Company.                                                                                          
|   
|(f) |  | Issuance of shares for non-monetary consideration:                                                                                                                                                                                                                                            
|   
|    |  | Shares issued for employee and director compensation, to third parties for services
rendered, for settlement of debt and for the acquisition of assets or businesses are
recorded based upon the market trading value of the shares at the date of the related
agreements to issue the shares.

F-20



---



##### Table of Contents



11.    Income taxes:



| |  | Loss before income taxes consists of the following:
| |  | ---------------------------------------------------

|              |  |      |            |      |  |      |            |   |  |   |            |  
|------------- |  | ---- | ---------- | ---- |  | ---- | ---------- | - |  | - | ---------- | -
|              |  | 2003 |            | 2002 |  | 2001
|              |  |      |            |      |  |     
|Canada        |  | $    | (1,362,650 | )    |  | $    | (2,954,858 | ) |  | $ | (2,943,317 | )
|United States |  |      | (798,585   | )    |  |      | (6,961,951 | ) |  |   | (3,767,800 | )
|              |  |      |            |      |  |      |            |   |  |   |            |  
|              |  | $    | (2,161,235 | )    |  | $    | (9,916,809 | ) |  | $ | (6,711,117 | )
|              |  |      |            |      |  |      |            |   |  |   |            |  



| |  | Income tax recovery attributable to loss from operations differs from the amounts computed by
applying the combined federal and provincial income tax rate of approximately 39.6% (2002  44.6%)
to loss before taxes as a result of the following:
| |  | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|                                                      |  |      |          |      |  |      |            |   |  |   |            |  
|----------------------------------------------------- |  | ---- | -------- | ---- |  | ---- | ---------- | - |  | - | ---------- | -
|                                                      |  | 2003 |          | 2002 |  | 2001
|                                                      |  |      |          |      |  |     
|At statutory rates                                    |  | $    | (856,000 | )    |  | $    | (4,422,897 | ) |  | $ | (2,653,000 | )
|U.S. tax rate difference                              |  |      | 6,000    |      |  |      | 300,000    |   |  |   |           |  
|Losses and other temporary differences not
recognized |  |      | 800,000  |      |  |      | 4,072,897  |   |  |   | 2,348,000  |  
|Non-deductible items and other                        |  |      | 50,000   |      |  |      | 50,000     |   |  |   | 305,000    |  
|                                                      |  |      |          |      |  |      |            |   |  |   |            |  
|                                                      |  | $    |         |      |  | $    |           |   |  | $ |           |  
|                                                      |  |      |          |      |  |      |            |   |  |   |            |  



| |  | The tax effects of temporary differences that give rise to significant portions
of the future tax assets and liabilities are as follows:
| |  | ----------------------------------------------------------------------------------------------------------------------------------------

|                        |               |                                    |             |      |           |      |             |   |           | 
|----------------------- | ------------- | ---------------------------------- | ----------- | ---- | --------- | ---- | ----------- | - | --------- | 
|                        |               |                                    |             | 2003 |           | 2002
|                        |               |                                    |             |      |           |     
|Deferred tax assets:    |               |                                    |             |      |           |      |             |  
|                        | Canada:       |                                    |             |      |           |      |             |   |          
|                        |               | Net operating losses carry forward |             | $    | 5,585,000 |      |             | $ | 7,758,282 | 
|                        |               | Other                              |             |      |          |      |             |   |          | 
|                        |               |                                    |             |      |           |      |             |   |           | 
|                        |               |                                    | 5,585,000   |      |           |      | 7,758,282   |  
|                        | United States |                                    |             |      |           |      |             |   |          
|                        |               | Net operating losses carry forward |             |      | 4,747,000 |      |             |   | 4,437,095 | 
|                        |               |                                    |             |      |           |      |             |   |           | 
|                        |               |                                    | 10,332,000  |      |           |      | 12,195,377  |  
|Valuation allowance     |               |                                    | (10,332,000 | )    |           |      | (12,195,377 | )
|                        |               |                                    |             |      |           |      |             |   |           | 
|Net deferred tax assets |               | $                                  |            |      |           | $    |            |  
|                        |               |                                    |             |      |           |      |             |   |           | 



| |  | The Company had losses carried forward for Canadian income
tax purposes of $4,528,732 expire unused during the year.
| |  | --------------------------------------------------------------------------------------------------------------------

F-21



---



##### Table of Contents



11.     Income taxes (continued):



| |  | As at February 28, 2002, the Company has accumulated losses for tax purposes of approximately $28,091,534 which may be carried forward to reduce
taxable income in future years. These losses may be claimed no later than:
| |  | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|     |  |        |            |               |  |   |            | 
|---- |  | ------ | ---------- | ------------- |  | - | ---------- | 
|     |  | Canada |            | United States
|     |  |        |            |              
|2004 |  | $      | 1,734,000  |               |  | $ |           | 
|2005 |  |        | 2,350,000  |               |  |   |           | 
|2006 |  |        | 3,075,000  |               |  |   |           | 
|2007 |  |        |           |               |  |   |           | 
|2008 |  |        | 2,803,000  |               |  |   |           | 
|2009 |  |        | 2,905,000  |               |  |   |           | 
|2010 |  |        | 1,237,000  |               |  |   |           | 
|2020 |  |        |           |               |  |   | 1,460,000  | 
|2021 |  |        |           |               |  |   | 3,014,000  | 
|2022 |  |        |           |               |  |   | 6,962,000  | 
|2023 |  |        |           |               |  |   | 799,000    | 
|     |  |        |            |               |  |   |            | 
|     |  | $      | 14,104,000 |               |  | $ | 12,235,000 | 
|     |  |        |            |               |  |   |            | 

12.    Segmented information:



|
|
|
|
|
|

|                                           |  |            |           |             |  |       |           |   |  |   |           | 
|------------------------------------------ |  | ---------- | --------- | ----------- |  | ----- | --------- | - |  | - | --------- | 
|                                           |  | Healthcare |           | Call
Center |  |       |           |  
|2003                                       |  | segment    |           | segment     |  | Total
|                                           |  |            |           |             |  |      
|Gross revenue                              |  | $          | 2,354,631 |             |  | $     | 1,249,802 |   |  | $ | 3,604,433 | 
|                                           |  |            |           |             |  |       |           |   |  |   |           | 
|Segment loss (income)                      |  | $          | 852,094   |             |  | $     | (53,509   | ) |  | $ | 798,585   | 
|Corporate                                  |  |            |          |             |  |       |          |   |  |   | 1,366,402 | 
|                                           |  |            |           |             |  |       |           |   |  |   |           | 
|Loss from continuing operations            |  | $          | 852,094   |             |  | $     | (53,509   | ) |  | $ | 2,164,987 | 
|                                           |  |            |           |             |  |       |           |   |  |   |           | 
|Segment assets                             |  | $          | 4,755,717 |             |  | $     | 353,030   |   |  | $ | 5,108,747 | 
|Corporate assets                           |  |            |          |             |  |       |          |   |  |   | 55,272    | 
|Assets of discontinued operations (note 7) |  |            |          |             |  |       |          |   |  |   |          | 
|                                           |  |            |           |             |  |       |           |   |  |   |           | 
|Total assets                               |  | $          | 4,755,717 |             |  | $     | 353,030   |   |  | $ | 5,164,019 | 
|                                           |  |            |           |             |  |       |           |   |  |   |           | 

F-22



---



##### Table of Contents





|12. |  | Segmented information (continued):
|--- |  | ----------------------------------
|   
|    |  | Operating segments (continued):   

|                     |                         |         |            |           |             |       |        |        |  |   |           |           | 
|-------------------- | ----------------------- | ------- | ---------- | --------- | ----------- | ----- | ------ | ------ |  | - | --------- | --------- | 
|                     |                         |         | Healthcare |           | Call
Center |       |        |        | 
|2003                 |                         | segment |            | segment   |             | Total
|                     |                         |         |            |           |             |      
|Equipment additions: |                         |         |            |           |             |       |        |        |  |   |           |          
|                     | Equipment               |         | $          | 29,293    |             |       | $      | 5,075  |  |   | $         | 34,368    | 
|                     | Corporate               |         |            |          |             |       |        |       |  |   |           | 1,115     | 
|                     | Discontinued operations |         |            |          |             |       |        |       |  |   |           | 577       | 
|                     |                         |         |            |           |             |       |        |        |  |   |           |          
|                     |                         | $       | 29,293     |           |             | $     | 5,075  |        |  | $ | 36,060    |          
|                     |                         |         |            |           |             |       |        |        |  |   |           |          
|Amortization expense |                         |         |            |           |             |       |        |        |  |   |           |          
|                     | Equipment               |         | $          | 75,416    |             |       | $      | 40,582 |  |   | $         | 115,998   | 
|                     | Intellectual property   |         |            | 1,209,764 |             |       |        |       |  |   |           | 1,209,764 | 
|                     | Corporate assets        |         |            |          |             |       |        |       |  |   |           | 68,226    | 
|                     |                         |         |            |           |             |       |        |        |  |   |           |          
|                     |                         | $       | 1,285,180  |           |             | $     | 40,582 |        |  | $ | 1,393,988 |          
|                     |                         |         |            |           |             |       |        |        |  |   |           |          

|                                           |                         |         |            |         |             |       |           |        |  |   |           |         | 
|------------------------------------------ | ----------------------- | ------- | ---------- | ------- | ----------- | ----- | --------- | ------ |  | - | --------- | ------- | 
|                                           |                         |         | Healthcare |         | Call
Center |       |           |        | 
|2002                                       |                         | segment |            | segment |             | Total
|                                           |                         |         |            |         |             |      
|Gross revenue                              |                         | $       | 1,550,653  |         |             | $     | 1,229,819 |        |  | $ | 2,780,472 |        
|                                           |                         |         |            |         |             |       |           |        |  |   |           |        
|Segment loss                               |                         | $       | 936,759    |         |             | $     | 205,218   |        |  | $ | 1,141,977 |        
|Corporate                                  |                         |         |           |         |             |       |          |        |  |   | 2,500,199 |        
|                                           |                         |         |            |         |             |       |           |        |  |   |           |        
|Loss from continuing
operations            |                         | $       | 936,759    |         |             | $     | 205,218   |        |  | $ | 3,642,176 |        
|                                           |                         |         |            |         |             |       |           |        |  |   |           |        
|Segment assets                             |                         | $       | 5,710,725  |         |             | $     | 272,891   |        |  | $ | 5,983,616 |        
|Corporate assets                           |                         |         |           |         |             |       |          |        |  |   | 965,645   |        
|Assets of discontinued
operations (note 5) |                         |         |           |         |             |       |          |        |  |   | 259,604   |        
|                                           |                         |         |            |         |             |       |           |        |  |   |           |        
|Total assets                               |                         | $       | 5,710,725  |         |             | $     | 272,891   |        |  | $ | 7,208,865 |        
|                                           |                         |         |            |         |             |       |           |        |  |   |           |        
|Equipment additions:                       |                         |         |            |         |             |       |           |        |  |   |           |        
|                                           | Equipment               |         | $          | 31,870  |             |       | $         | 49,737 |  |   | $         | 81,607  | 
|                                           | Corporate               |         |            |        |             |       |           |       |  |   |           | 10,641  | 
|                                           | Discontinued operations |         |            |        |             |       |           |       |  |   |           | 30,461  | 
|                                           |                         |         |            |         |             |       |           |        |  |   |           |        
|                                           |                         | $       | 31,870     |         |             | $     | 49,737    |        |  | $ | 122,709   |        
|                                           |                         |         |            |         |             |       |           |        |  |   |           |        
|Amortization expense                       |                         |         |            |         |             |       |           |        |  |   |           |        
|                                           | Equipment               |         | $          | 10,318  |             |       | $         | 43,159 |  |   | $         | 53,477  | 
|                                           | Intellectual property   |         |            | 705,695 |             |       |           |       |  |   |           | 705,695 | 
|                                           | Corporate assets        |         |            |        |             |       |           |       |  |   |           | 84,684  | 
|                                           |                         |         |            |         |             |       |           |        |  |   |           |        
|                                           |                         | $       | 716,013    |         |             | $     | 43,159    |        |  | $ | 843,856   |        
|                                           |                         |         |            |         |             |       |           |        |  |   |           |        

F-23



---



##### Table of Contents





|12. |  | Segmented information (continued):
|--- |  | ----------------------------------
|   
|    |  | Operating segments (continued):   




|                                  |                         |         |            |         |             |       |         |         |  |   |           |         | 
|--------------------------------- | ----------------------- | ------- | ---------- | ------- | ----------- | ----- | ------- | ------- |  | - | --------- | ------- | 
|                                  |                         |         | Healthcare |         | Call
Center |       |         |         | 
|2001                              |                         | segment |            | segment |             | Total
|                                  |                         |         |            |         |             |      
|Gross revenue                     |                         | $       |           |         |             | $     | 770,153 |         |  | $ | 770,153   |        
|                                  |                         |         |            |         |             |       |         |         |  |   |           |        
|Segment loss                      |                         | $       |           |         |             | $     | 169,729 |         |  | $ | 169,729   |        
|Corporate                         |                         |         |           |         |             |       |        |         |  |   | 2,672,174 |        
|                                  |                         |         |            |         |             |       |         |         |  |   |           |        
|Loss from continuing
operations   |                         | $       |           |         |             | $     | 169,729 |         |  | $ | 2,841,903 |        
|                                  |                         |         |            |         |             |       |         |         |  |   |           |        
|Segment assets                    |                         | $       |           |         |             | $     | 314,273 |         |  | $ | 314,273   |        
|Corporate assets                  |                         |         |           |         |             |       |        |         |  |   | 3,140,689 |        
|Assets of discontinued
operations |                         |         |           |         |             |       |        |         |  |   | 2,813,271 |        
|                                  |                         |         |            |         |             |       |         |         |  |   |           |        
|Total assets                      |                         | $       |           |         |             | $     | 314,273 |         |  | $ | 6,268,233 |        
|                                  |                         |         |            |         |             |       |         |         |  |   |           |        
|Equipment additions:              |                         |         |            |         |             |       |         |         |  |   |           |        
|                                  | Equipment               |         | $          |        |             |       | $       | 134,175 |  |   | $         | 134,175 | 
|                                  | Corporate               |         |            |        |             |       |         |        |  |   |           | 4,833   | 
|                                  | Discontinued operations |         |            |        |             |       |         |        |  |   |           | 922,607 | 
|                                  |                         |         |            |         |             |       |         |         |  |   |           |        
|                                  |                         | $       |           |         |             | $     | 134,175 |         |  | $ | 1,061,615 |        
|                                  |                         |         |            |         |             |       |         |         |  |   |           |        
|Amortization expense:             |                         |         |            |         |             |       |         |         |  |   |           |        
|                                  | Equipment               |         | $          |        |             |       | $       | 31,162  |  |   | $         | 31,162  | 
|                                  | Corporate assets        |         |            |        |             |       |         |        |  |   |           | 5,779   | 
|                                  |                         |         |            |         |             |       |         |         |  |   |           |        
|                                  |                         | $       |           |         |             | $     | 31,162  |         |  | $ | 36,941    |        
|                                  |                         |         |            |         |             |       |         |         |  |   |           |        




Revenue:

|                    |                                     |   |           |           |      |   |           |           |  |   |         |   | 
|------------------- | ----------------------------------- | - | --------- | --------- | ---- | - | --------- | --------- |  | - | ------- | - | 
|                    |                                     |   | 2003      |           | 2002 |   | 2001     
|                    |                                     |   |           |           |      |   |          
|Call
Center service |                                     | $ | 1,249,802 |           |      | $ | 1,229,819 |           |  | $ | 770,153 |  
|Healthcare:         |                                     |   |           |           |      |   |           |           |  |   |         |  
|                    | Book sales                          |   |           | 576,640   |      |   |           | 398,509   |  |   |         |  | 
|                    | Program revenues                    |   |           | 1,687,991 |      |   |           | 1,152,144 |  |   |         |  | 
|                    | Sale
of license agreement (note 14) |   |           | 90,000    |      |   |           |          |  |   |         |  | 
|                    |                                     |   |           |           |      |   |           |           |  |   |         |  
|                    |                                     | $ | 3,604,433 |           |      | $ | 2,780,472 |           |  | $ | 770,153 |  
|                    |                                     |   |           |           |      |   |           |           |  |   |         |  

F-24



---



##### Table of Contents





|13. |  | Major customers:                                                                                                                     
|--- |  | -------------------------------------------------------------------------------------------------------------------------------------
|   
|    |  | Four major customers accounted for
62% (2002  56%) of total sales for
the healthcare segment for the period ended February 28, 2003.
|   
|14. |  | Related party transactions:                                                                                                          



| | (a) |  | Payments totalling nil were
made to the President and
Concept 10 Inc., a company
controlled by the President,
during the year ended
February 28, 2003 (2002 -
$7,000; 2001  $475,650) for
services rendered in
connection with a private
placement of common shares.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                  
| | --- |  | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|
| | (b) |  | The Company had a licensing
agreement with Queensland
Teachers Union Health Fund
Limited (QTUH) for a term
of 20 years expiring April
30, 2019 to grant QTUH a
license to use the Healthtrac
Program in exchange for a
monthly royalty calculated as
$1 per questionnaire prepared
in each calendar year. QTUH
was also required to pay
annual maintenance fees of
$16,000 to the Company. The
maintenance fees had not been
accrued for the year ended
February 28, 2002. In
addition, QTUHs royalty
payments to the Company were
suspended for the next five
years expiring December 31,
2006.                                                                                                                                                                                                                                                                                                                                                                                                                    
|
| |     |  | On the date of acquisition of
Healthtrac, August 3, 2001,
an amended license agreement
was signed between QTUH and
the Company. On that date,
QTUH also signed a loan
agreement in which QTUH
agreed to provide a loan
facility to the Company for a
maximum of $110,000 at an
interest rate of 1% over Bank
of Americas prime rate. At
February 28, 2002, $50,000
had been advanced to the
Company under the
arrangements (note 8) and a
further $60,000 was advanced
in fiscal 2003. QTUH had the
right to convert the amount
borrowed under the agreement
into shares of the Company
which is exercisable on the
repayment date, being January
29, 2003. The number of
shares to be issued would
have been the amount of the
loan on the date of election
divided by the ten day
average price per share for
the Companys common shares
for the period ending on the
date of conversion. In
addition to the loan, the
Company also owed QTUH
$161,000 in accounts payable
for prior book purchases
funded by QTUH.
|
| |     |  | On February 14, 2003, the
Company and QTUH signed an
amended license agreement
that cancelled all the
previous arrangements. Under
the agreement, QTUH agreed to
forgive the $110,000 loan
amount and $161,000 in
accounts payable in return
for Healthtrac forgiving any
amounts owed by QTUH to
Healthtrac for maintenance
fees, royalty payments and
any other fees. In addition,
QTUH and the Company agreed
to grant QTUH a license to
use the Healthtrac Program in
various countries around the
world for a term of 18 years
expiring April 30, 2001 for a
fee of $90,000. The Company
has no ongoing requirements
under this agreement and any
additional services provided
by the Company to QTUH are to
be negotiated based on
current market prices. As a
result, the Company
recognized the $90,000 in
revenue in fiscal 2003.                                                                                                                                                                             

F-25



---



##### Table of Contents





|15. |  | Non-cash transactions and supplemental disclosures:          
|--- |  | -------------------------------------------------------------
|   
|    |  | The Company had the following material non-cash transactions:

|                        |                                                     |  |      |         |      |  |      |           |  |  |   |         | 
|----------------------- | --------------------------------------------------- |  | ---- | ------- | ---- |  | ---- | --------- |  |  | - | ------- | 
|                        |                                                     |  | 2003 |         | 2002 |  | 2001
|                        |                                                     |  |      |         |      |  |     
|Non-cash transactions:  |                                                     |  |      |         |      |  |      |           |  |  |   |        
|                        | Acquisition of equipment under capital lease        |  | $    |        |      |  | $    |          |  |  | $ | 107,099 | 
|Issuance of shares for: |                                                     |  |      |         |      |  |      |           |  |  |   |        
|                        | Employee and director compensation                  |  |      | 80,000  |      |  |      | 566,000   |  |  |   | 754,950 | 
|                        | Acquisition of Sullivan Park, LLC                   |  |      |        |      |  |      |          |  |  |   | 375,000 | 
|                        | Acquisition of fixed assets                         |  |      |        |      |  |      |          |  |  |   | 39,000  | 
|                        | Settlement of debt                                  |  |      | 59,765  |      |  |      | 1,039,345 |  |  |   | 19,344  | 
|                        | Services received                                   |  |      | 45,500  |      |  |      | 123,658   |  |  |   | 6,000   | 
|                        | Acquisition of MedWire assets (note 4(a))           |  |      |        |      |  |      | 150,000   |  |  |   |        | 
|                        | Acquisition of Healthtrac, Inc. (note 3)            |  |      | 107,588 |      |  |      | 4,600,000 |  |  |   |        | 
|                        | Acquisition of Healthscape, Inc. assets (note 4(b)) |  |      |        |      |  |      | 240,000   |  |  |   |        | 
|                        | Severance payment                                   |  |      |        |      |  |      | 100,000   |  |  |   |        | 
|                        |                                                     |  |      |         |      |  |      |           |  |  |   |        



|    |  | Interest of $30,000 (2002  $8,550; 2001  $8,913) was paid in the year. No income taxes were paid in the years presented.
|--- |  | --------------------------------------------------------------------------------------------------------------------------
|   
|16. |  | Commitments and contingencies:                                                                                            



| | (a) |  | Operating leases:                                                                                          
| | --- |  | -----------------------------------------------------------------------------------------------------------
|
| |     |  | The Company is committed to annual office and equipment rental payments for the next four years as
follows:

|     |  |   |         | 
|---- |  | - | ------- | 
|2004 |  | $ | 239,300 | 
|2005 |  |   | 220,911 | 
|2006 |  |   | 224,308 | 
|2007 |  |   | 118,195 | 
|     |  |   |         | 
|     |  | $ | 802,714 | 
|     |  |   |         | 



| | (c) |  | Legal proceedings:
| | --- |  | ------------------

| |  |     |  |                                                                                                                                                                                                                                                                                                                                                                                     
| |  | --- |  | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |  | (i) |  | Rolling Meadows Premises:                                                                                                                                                                                                                                                                                                                                                           
| |  |     |  |                                                                                                                                                                                                                                                                                                                                                                                     
| |  |     |  | The Company moved its e-commerce operations from Rolling Meadows, Illinois to the
Greenwood, Indiana offices during 2002. A complaint was filed for rent and damages
in the amount of $859,512. The Companys position on this proceeding is that the
building has been sublet and deny that they owe the Plaintiff any money. The
outcome of this complaint is currently uncertain.

F-26



---



##### Table of Contents





|16. |  | Commitments and contingencies (continued):
|--- |  | ------------------------------------------



| | (c) |  | Legal proceedings (continued):
| | --- |  | ------------------------------

| |  |       |  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                             
| |  | ----- |  | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |  | (ii)  |  | Vancouver Telephone Company Limited:                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                        
| |  |       |  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                             
| |  |       |  | On July 17, 2001 the Company
reached a settlement for a lawsuit
against one of its former
customers. The settlement grants
the Company CDN$275,000 to be
received in various payments over
eight months, with final payment on
February 1, 2002. The Company
recognized the funds upon receipt.                                                                                                                                                                                                                                                             
| |  |       |  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                             
| |  | (iii) |  | Other Litigation:                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                           
| |  |       |  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                             
| |  |       |  | The Company is involved in other
legal proceedings and claims
arising in the ordinary course of
business including claims for
outstanding payments for goods and
services received and taxation
claims. The Company does not
believe than any liabilities
related to the proceedings to which
its is a party are likely to be,
individually or in the aggregate,
material to the Companys
consolidated financial condition,
operations or cash flows. The
Company has accrued for any amounts
it considers likely in the
consolidated financial statements.



|17. |  | Reconciliation of United States to Canadian generally accepted accounting principles (GAAP):                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                              
|--- |  | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|   
|    |  | These financial statements are prepared in accordance with U.S. GAAP, the measurement principles of which do not differ
materially from Canadian GAAP with respect to the accounting policies and disclosures in these financial statements, except
as described in the following paragraph:                                                                                                                                                                                                                                                                                                                                                                                
|   
|    |  | Under U.S. GAAP, a reduction in an accumulated deficit with a corresponding reduction in common share stated capital is only
permitted in limited circumstances. Under Canadian GAAP, a reduction in an accumulated deficit with a corresponding
reduction in common share stated capital is permitted if approved by the shareholders of the Company. On August 22, 1996,
the shareholders of the Company passed a special resolution to reduce the stated capital of the Companys common shares by
$86,729,000 (CDN  $117,535,000). As a result, under Canadian GAAP, common stock and accumulated deficit would each be
reduced by $86,729,000 for all years presented.
|   
|18. |  | Comparative figures:                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                        
|   
|    |  | Certain prior year figures have been reclassified to conform to the current years financial statement classification.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                      

F-27



---



##### Table of Contents



HEALTHTRAC, INC.
Consolidated Schedule of Selling, General and Administrative Expenses
(Expressed in United States dollars)

|                                   |                  |   |                   |           |                   |   |                     |           |                     |   |           |           | 
|---------------------------------- | ---------------- | - | ----------------- | --------- | ----------------- | - | ------------------- | --------- | ------------------- | - | --------- | --------- | 
|                                   |                  |   | Year ended        |           | Year ended        |   | Year ended         
|                                   |                  |   | February 28, 2003 |           | February 28, 2002 |   | February 29, 2001  
|                                   |                  |   |                   |           |                   |   |                    
|                                   |                  |   |                   |           |                   |   | (Restated  note 5) |           | (Restated  note 5)
|Wages and benefits:                |                  |   |                   |           |                   |   |                     |           |                     |   |           |          
|                                   | Cash and accrued |   | $                 | 1,834,603 |                   |   | $                   | 1,564,205 |                     |   | $         | 1,118,355 | 
|                                   | Non-cash         |   |                   | 80,000    |                   |   |                     | 266,000   |                     |   |           | 754,950   | 
|Bad debts (recovery)               |                  |   | (5,708            | )         |                   |   | 136,894             |           |                     |   | 19,344    |          
|Rent, utilities and property taxes |                  |   | 352,954           |           |                   |   | 282,117             |           |                     |   | 162,481   |          
|Consulting fees                    |                  |   | 185,692           |           |                   |   | 911,829             |           |                     |   | 177,444   |          
|Accounting and legal               |                  |   | 199,330           |           |                   |   | 531,766             |           |                     |   | 193,156   |          
|Office and sundry                  |                  |   | 140,683           |           |                   |   | 330,390             |           |                     |   | 219,710   |          
|Marketing and advertising          |                  |   | 43,321            |           |                   |   | 278,902             |           |                     |   | 414,143   |          
|Travel and promotion               |                  |   | 109,143           |           |                   |   | 229,482             |           |                     |   | 137,264   |          
|Insurance                          |                  |   | 229,214           |           |                   |   | 177,339             |           |                     |   | 100,872   |          
|Telephone                          |                  |   | 159,540           |           |                   |   | 148,304             |           |                     |   | 105,027   |          
|Printing                           |                  |   | 102,945           |           |                   |   | 134,338             |           |                     |   | 62,314    |          
|Equipment rental                   |                  |   | 58,117            |           |                   |   | 60,986              |           |                     |   | 3,457     |          
|Bank charges and interest          |                  |   | 60,021            |           |                   |   | 35,169              |           |                     |   | 24,272    |          
|Automobile                         |                  |   | 8,092             |           |                   |   | 20,907              |           |                     |   | 18,860    |          
|Recruiting                         |                  |   | 751               |           |                   |   | 323                 |           |                     |   | 7,430     |          
|Licences, taxes and dues           |                  |   | 12,184            |           |                   |   | 16,930              |           |                     |   | 70        |          
|Billing system fees                |                  |   | 7,894             |           |                   |   | 17,794              |           |                     |   | 44,878    |          
|Subscriptions and dues             |                  |   | 1,287             |           |                   |   | 3,138               |           |                     |   | 5,634     |          
|                                   |                  |   |                   |           |                   |   |                     |           |                     |   |           |           | 
|                                   |                  | $ | 3,580,063         |           |                   | $ | 5,146,813           |           |                     | $ | 3,569,661 |          
|                                   |                  |   |                   |           |                   |   |                     |           |                     |   |           |           | 

F-28



---



##### Table of Contents






Exhibit Index

|        |  |                                                                                                                                                                                                                                                                           
|------- |  | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|Exhibit |  |                                                                                                                                                                                                                                                                           
|Number  |  | Description                                                                                                                                                                                                                                                               
|        |  |                                                                                                                                                                                                                                                                           
|99.1    |  | Certification Pursuant to 18 U.S.C. Section 1350, as Adopted
Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002  Walter
W. Straub, President, Chief Executive Officer and Chairman of the
Board and Patrick E. Fevery, Vice President and Chief Financial
Officer.

F-29