UNITED STATES
                       SECURITIES AND EXCHANGE COMMISSION

                             WASHINGTON, D.C. 20549

                            ------------------------

                                   FORM 10-KSB

      /X/ ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES
                              EXCHANGE ACT OF 1934

                  For the fiscal year ended SEPTEMBER 30, 1999

                                       OR

    / / TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES
                              EXCHANGE ACT OF 1934
        For the transition period from ______________ to ______________

                        Commission file number 333-59133

                             V3 SEMICONDUCTOR, INC.
             (Exact name of Registrant as specified in its charter)

<TABLE>
<CAPTION>
<S>                                                                                      <C>
                             Nevada                                                      87-0429263
                (State or Other Jurisdiction of                                       (I.R.S. Employer
                 Incorporation or Organization)                                      Identification No.)
</TABLE>



                               250 Consumers Road
                                   Suite 901
                         North York, ON Canada M2J 4V6
              (Address of Principal Executive Offices) (Zip Code)


                                 (416) 497 8884
                 Issuer's Telephone Number, Including Area Code)

         Securities Registered under Section 12(b) of the exchange Act:


                              Name of Each Exchange
                     Title of Each Class on Which Registered
                                      None

         Securities registered under Section 12(g) of the Exchange Act:

                     Common Stock, $.001 par value per share
                                (Title of Class)

                                (Title of Class)


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

     Indicate by check mark if no disclosure of  delinquent  filers  pursuant to
Item 405 of Regulation S-B is not contained in this form, and no disclosure will
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-KSB
or any amendment to this Form 10-KSB. ______

     The issuer's revenues for its most recent fiscal year. $7,043,353.

     The aggregate  market value of the voting and non-voting  common stock held
by non-affiliates of the registrant  computed by reference to the price at which
the common stock was sold as of September 30, 1999 was: $66,770,094.

     The  number  of  shares  outstanding  of  the  registrant's   Common  Stock
outstanding as of September 30, 1999 was 5,743,664.

DOCUMENTS INCORPORATED BY REFERENCE:

     Reference  is  made  in  Part  III  of  this  Report  to  the  Registrant's
Prospectus,  dated  October  21,  1998,  filed  pursuant  to Rule  424(b) of the
Securities Act of 1933.

     Reference is made in Part III of this Report to the Registrant's  Form SB-2
Registration Statement (File No. 333-59133), as filed on July 15, 1998, which is
hereby incorporated by reference.

     Reference is made in Part III of this Report to  Amendment  Number 1 to the
Registrant's Form SB-2 Registration Statement (File No. 333-59133),  as filed on
September 22, 1998, which is hereby incorporated by reference.

     Reference is made in Part III of this Report to  Amendment  Number 2 to the
Registrant's Form SB-2 Registration Statement (File No. 333-59133),  as filed on
October 8, 1998, which is hereby incorporated by reference.

     Reference is made in Part III of this Report to  Amendment  Number 3 to the
Registrant's Form SB-2 Registration Statement (File No. 333-59133),  as filed on
October 19, 1998, which is hereby incorporated by reference.

     Reference  is made in Part III of this  Report to the  Registrant's  Annual
Report on Form 10-KSB for the fiscal year ended  September 30, 1998, as filed on
December 23, 1998, which is hereby incorporated by reference.


     Transitional Small Business Disclosure Format: Yes ______; No X


<PAGE>
                                     PART I

ITEM 1.           DESCRIPTION OF BUSINESS

History

     V3 Semiconductor,  Inc. (the "Company") was incorporated  under the laws of
the State of Nevada on December 23, 1985 under the name Ariel,  Inc. The Company
was dormant and did not engage in any business  activities until April 1994 when
the Company merged with V3 Corporation and changed its name from Ariel,  Inc. to
V3 Incorporated.  V3 Corporation,  was  incorporated  under the Ontario Business
Corporations  on October 22,  1985.  During the period from  October 22, 1985 to
April 1994, V3 Corporation engaged in the business of designing, engineering and
marketing semiconductors and integrated circuits. On April 18, 1994, the Company
and V3 Corporation entered into a plan of reorganization agreement through which
the two  companies  merged into V3  Incorporated  and in 1996,  V3  Incorporated
changed its name to V3 Semiconductor, Inc.

Overview

     The overall mission of the Company is to originate,  design and market high
performance  peripheral  and core  silicon  products  for the  Embedded  Systems
market.  The Company believes that the Embedded Systems market has the potential
for significant growth as Embedded System  applications  evolve in functionality
from  relatively  simple  industrial   controllers  to  use  in  highly  complex
networking and telecommunications applications.

     The  Company's  products are  designed to function in tandem with  specific
microprocessors   manufactured  by  third  parties  such  as  Intel  Corporation
("Intel"),  Motorola Corporation  ("Motorola"),  International Business Machines
("IBM"),  Hitachi  Semiconductor of America  ("Hitachi"),  Quantum Effect Design
("QED"),  Texas Instruments  ("T.I."),  Integrated Device Technology ("IDT") and
Advanced Micro Devices ("AMD"). Microprocessors,  which include microcontrollers
or central processing units ("CPUs"),  are the central  controllers of virtually
all computer systems. In addition,  they are also used in a relatively invisible
but very large segment of the computer  industry as "Embedded  Controllers" in a
variety of products and  applications.  The  Company's  products work with these
CPUs by  directing  and  controlling  the flow of data  between the CPUs and the
various  peripherals  that  the  CPUs  control.  Applications  include  servers,
communication  routers,  data  switches,   mass  storage  controllers,   modems,
facsimiles (fax) and imaging equipment,  telecommunication  switching equipment,
networking   controllers,   instrumentation,   industrial   tools  and  consumer
appliances.

     The  Company's  products are  co-peripherals  to all major RISC  processors
including, but not limited to, Intel's i960 family of processors,  IBM's PowerPC
series, Hitachi SH Series, MIPS (QED) Processors, AMD's 29K, as well as embedded
x86 processors which are used for lower cost applications.  In addition,  with a
minimum of programming,  the Company's controllers (System,  Memory and PCI) can
be used with any and all embedded processors,  such as: Motorola (PowerPC,  68K,
Coldfire,  PowerQUICC families),  MIPS(TM)Processors  (MIPS, IDT, NEC, Toshiba).
The  Company's  products are  designed to be  compatible  with  existing and new
standards and technologies such as PCI with I2O.

     The Company has identified  target  markets for its business,  designed and
developed  products  that  satisfy the  requirements  of key  customers in those
markets,  and established a number of important  strategic alliances with Intel,
IBM,  Motorola,  Hitachi and QED. The Company is presently  listed on Hitachi's,
Intel's,  Motorola's,  QED's  and  T.I.'s  websites.  The  Company's  sales  and
marketing  channels are designed in order to provide total market coverage.  The
Company has now reached the stage in the  development  of its business  plan and
has the right  management team in place, to  aggressively  pursue  marketing and
sales  strategies to maximize  market share in its target  markets and reinforce
its competitive advantages in the Embedded Systems market.


<PAGE>
Product Lines

     The  Company  produces   processor  specific   semiconductors,   integrated
circuits,  for the Embedded  Systems  market.  These products are used by system
designers who are utilizing  high-speed RISC and 'Super Scalar'  microprocessors
within their embedded systems design. These processors demand efficient coupling
to memory  and  peripheral  input/output  (I/O)  devices  in order to attain any
degree of efficiency.  The system  designer faces three  alternative  choices in
achieving this coupling:  (1) use PLDs or FPGAs (Field  Programmable Gate Array)
which must be customized to the application,  (2) designing an ASIC to implement
the application, or (3) using a V3 Semiconductor standard product which requires
no design work and whose functionality has been fully tested.

     The  Company's  principal  product lines fall into four  categories:  Burst
(DRAM) Memory Controllers (BMC, PDC, and SDC Families), Small System Controllers
(SSC Family),  PCI Bridge  Controllers (PBC, EPC, USC, HPC, PSC), and PCI to PCI
Bridges (PPB  Family).  Today's  market  demands also require  support for these
silicon  devices  in  the  form  of  evaluation  and  reference  design  boards,
application notes, documentation and software that will enable engineers ease of
interfacing to other devices in their design.

Burst (DRAM/PCI DRAM/SynchronousDRAM) Memory Controllers (BMC, PDC, and SDC)

     Semiconductor  memory is typically  available  in two major  types,  Static
Random Access Memory  ("SRAM") and Dynamic Random Access Memory  ("DRAM").  SRAM
devices are somewhat  faster than DRAMs,  however,  they are  considerably  more
expensive,  particularly in systems where a significant  amount of random access
memory is required. DRAM Controllers are integrated circuits that are physically
installed  between the  microprocessor  and an array of DRAM devices and execute
the appropriate control strategy to make DRAM devices behave like SRAM devices.

     The  Company's  Burst  Memory  Controllers  ("BMCs")  are DRAM  Controllers
interfaces the host processor to the low cost commodity  DRAMs  manufactured  by
merchant  semiconductor  manufacturers.  Systems employing these controllers can
replicate the  performance of an SRAM based system at a fraction of the cost, at
lower power levels,  at higher speeds and with no design or production  overhead
to either the DRAM  manufacturer  or the system  designer.  In order to increase
flexibility  to system  designers and to expand their  marketability,  most BMCs
have  features that are software  programmable,  enabling  these  features to be
easily modified for performance or convenience.

     The  Company  has a  Canadian  patent  on a DRAM  Controller  design  which
minimizes the power required and heat  generated  during the access stage with a
proprietary  design  feature that may only be  functionally  replicated by other
technologies at materially higher prices.

     The  high-performance PCI target interface with integrated SDRAM Controller
("PDC's") and the Synchronous DRAM Controller  ("SDC's") are the newest products
from V3's newly formed Memory Controller Product Group. These devices complement
the existing BMC family of memory  controllers,  by providing an upgrade path to
today's most popular  Synchronous DRAM. These devices enable system designers to
shorten  their design cycle by offering them an off the shelf  product,  that in
turn will provide the advantage of faster time-to-market.  The PDC interfaces to
the industrial  standard PCI bus and the CompactPCI  bus. At the same time, they
provide access to SDRAM and other peripheral  components such as FLASH and SRAM.
The PDC is a Hot Swap  Ready  device  (Hot Swap  Ready - ability  to insert  and
extract a system  board  without  shutting  down the system) and is available in
industrial   temperature   range.  The  SDC  is  also  available  in  industrial
temperature range. This device is the successor to the BMC, which interfaces the
host processor to SDRAM to provide higher  performance,  lower system cost and a
faster design cycle.
<PAGE>
         Small System Controllers ("SSC")

     System  Controllers are integrated  circuits that expand the functional use
of DRAM  controllers by adding control  features that would normally be provided
by external devices.  The Company's system controllers (SSC family of integrated
circuits) are designed to operate with specific  microprocessors such as Intel's
i960 Sx/Jx,  and IBM's  PPC401  PowerPC  processors  and are  typically  used in
high-performance network equipment and RAID (Storage) Controllers. The Company's
SSC product family,  allows system  designers to replace many lower  integration
support components with a single integrated component.

     The Company's SSC System Controller family includes a high performance DRAM
controller,  DMA controllers,  interrupt  management,  serial ports, I/O control
logic,  timers and I/O  ports.  The SSC can be  combined  with Intel i960 or IBM
PowerPC  processors to build  powerful,  low-component  add-in  cards,  robotics
controllers and networking systems.

         PCI Bridge Controllers (PBC,EPC,USC,HPC and PSC)

     Peripheral  Component  Interconnect  (PCI) is a new system  "bus"  standard
developed by more than 100 industry leading  companies,  including  Intel,  IBM,
AMD, H.P. and Apple to define a single  standard  method of  connecting  CPUs to
peripheral   devices  such  as  disk  controllers,   graphics   controllers  and
communication  devices.  Most computers today use the PCI bus interface that has
replaced the Industry Standard Architecture (ISA) bus interface.

     The Company was the first  company to go to  production  with  devices that
supported  the  intelligent  input/output  (I2O)  standard.  This  new  standard
provides a software  solution  (along with PCI, a standard bus interface)  which
optimizes CPU and system performance by handling the overhead of I/O interrupts.

     The Company has now launched its Second  Generation of I2O PCI Controllers,
the EPC (Enhanced PCI Controller).  The EPC has additional functionality such as
DMA Chaining, which supports Multi-Processor capabilities. These features are in
demand by mainly networking companies such as: 3 Comm, Cabletron, Cisco, Hewlett
Packard, Lucent Technologies, Nortel Networks, Newbridge and others.

     The   Company's   USC   (Universal   System   Controller)   family   is   a
high-performance,  highly  integrated  PCI  bridge  solution  for  MIPS  and  SH
processors.  The USC product family consists of an SDRAM controller with support
for Enhanced SDRAM, FIFO storage,  DMA Chaining,  3.3v operation - all necessary
features that are in demand in the industry today.  This  controller  family was
designed to address the two largest embedded processor market segments, MIPS and
SH. The Company expects substantial revenues to be generated from the USC in the
year 2000 and beyond. Market acceptance has already been overwhelming.

     The Company's latest and most advanced controller the  High-Performance PCI
Controller  ("HPC") extends the existing line of PCI Bridge Controllers into the
arena of 64-bit  datapaths.  The  Company's HPC PCI Bridge family is designed to
serve as the system  control  logic for  high-end  embedded  applications  whose
computational  and bandwidth  performance  levels are unattainable with existing
32-bit solutions. The HPC can provide simultaneous  connectivity to multiple PCI
buses, high performance  MIPS(TM)  processors,  and commodity  Synchronous DRAMs
(SDRAMs) without the use of any external components. In addition, the HPC family
includes a high-performance DMA controller,  interrupt management, serial ports,
I/O control logic, timers, and I/O ports, all of which allow system designers to
build  very  powerful,   low-component   systems   tailored  to  their  embedded
applications.
<PAGE>
PCI to PCI Bridges (PPB)

The Company's PPB family  (PCI-to-PCI  Bridge) is the newest product designed to
address the issues of bandwidth  restrictive  applications.  The PPB is a highly
integrated, high-performance peripheral device that performs PCI-to-PCI bridging
functions.  It provides  electrical  isolation  of devices on each PCI bus while
maintaining  concurrent  operation  on both  buses.  This  64-bit Hot Swap Ready
device is pin-to-pin  compatible  with Intel's popular 21154  PCI-to-PCI  bridge
family  (provides  second  source  and  supply   continuity  for  Intel's  21154
PCI-to-PCI  bridges).  The  features  of  this  product  best  address  advanced
networking and  telecommunications  products,  mass storage  controllers (RAID),
high performance servers, and Intelligent I/O subsystems.

Embedded Systems Industry Overview


         The Worldwide Semiconductor Total Available Market is shown below:

Semiconductor Market Growth (US$)
         Year              Revenues         Growth
         -----------------------------------------
         1996              $130B
         1997              $137B                     5%
         1998              $122B                     -11%
         1999              $133B                     9%
         2000              $154B                     16%
         2001              $182B                     18%

     Source: SIA 1998-2000 Forecast

     According to a report  prepared by Frost and  Sullivan,  a market  research
company (the "Frost and Sullivan Report"),  the total embedded market which is a
segment of the Total  Available  Market (4, 8, 16 and  especially  32 and 64 bit
RISC  Processors) is expected to grow to  approximately  $34 billion by the year
2002. The embedded  market is driven by the increasing  performance  demands for
speed  and  functionality,   of  the  server,   mass  storage,   networking  and
communications  technologies.  Global  players,  such  as  IBM,  Intel,  Hewlett
Packard,  Hitachi, and Motorola,  who are also the Company's technology partners
and/or customers,  attest to this unprecedented growth by investing heavily into
product  development in RISC  processors,  new standards,  and new 32 and 64 bit
peripherals.  Their heavy  investments are driven either by the need to develop,
design and market end-user equipment or semiconductor products in support of the
embedded market.

     Moreover,  the  high-end 32 and 64 bit  processor  segment of the  embedded
market is  expected  to exceed $7 billion by the year 2002.  The PCI  market,  a
major subsection of the embedded market that the Company serves,  is expected to
grow to $1.7  billion  during the same time  period.  The Company is targeting a
subset of this market, the peripherals sector, which is expected to grow to over
$1 billion by the year 2002. The Company's goal is to attain  significant market
share  of  this  surging  market  by  2001.  Emerging  standards,  such  as  I2O
(Intelligent  I/O)--which  address and  resolve  the serious and costly  systems
problem  of  data  bottlenecks--create  new  opportunities  in this  market,  by
providing  solutions to data transfer and CPU overhead problems.  In an embedded
system,   these  are  crucial  design  issues  that   seriously   impact  system
performance.  The increasing need to move data faster and more  efficiently will
require solutions supported by the Company's current and future products.

     Initially the Company's  products were developed to support RISC processors
in embedded  applications.  As Embedded Systems  requirements have evolved,  the
Company  has moved to  designing  more  advanced  products in support of the I/O
(input/output)  needs that are driven by such industry leaders as Cisco, Compaq,
Hewlett  Packard,  IBM, Intel,  Lucent  Technologies  and Nortel  Networks.  New
products may include a RISC processor core or "coring" with a partner as part of
a highly  integrated  silicon based system,  as well as other highly  integrated
peripherals targeted for certain segments (telecom and data equipment,  imaging,
set-top boxes and high-end servers) of the market.
<PAGE>
     The newly created  Memory  Products  group,  which  augments the 32 Bit and
Advanced  (64  Bit & PCI to PCI)  product  groups,  is an  added  strength  that
fortifies our position in the market place,  while it differentiates us from our
competitors who lack this essential embedded market expertise.

     The  product  development  roadmap  is now on a "high  velocity"  curve for
fiscal year 2000.  These will include our new generation  high-performance  core
silicon products, supported by board level systems (for reference and evaluation
purposes) and software,  as well as Intellectual  Property (IP). Reusable IP - a
transportable  "virtual component" design or intellectual  property,  that is in
software form rather than hardware, and can be integrated or re-synthesized into
other  (silicon)  products,  is now one of the fastest  growing  segments in the
semiconductor  business today.  The natural target of IP is the rapidly emerging
System-on-Chip  (SoC)  market - a revolution  that has gained  momentum and will
eventually  create an entire new range of consumer  and business  products  that
require an enormous  amount of  integration  for numerous  functions on a single
chip.

     In  manufacturing  and through our foundry  partners,  we have  established
scales and efficiencies that allow us to compete and maintain our margins. As we
migrate to newer methodologies and smaller geometries - that afford us increased
functionality and product  complexity,  that yields higher performance and lower
cost per gate products - we are well  positioned for the  competitive  onslaught
and rapidly increasing market demands.

Semiconductor Industry Market Structure

     There are three major segments in the semiconductor  industry: the standard
integrated circuit ("IC") segment,  the application  specific integrated circuit
("ASIC")  segment and the  "chipset"  segment which is a hybrid of the other two
segments.  Each  of  these  market  segments  can  be  further  subdivided  into
"merchant"  and "captive"  markets.  The merchant  market  consists of producers
involved in sales to unrelated third parties,  while the captive market involves
sales to affiliated  parties.  For example,  while IBM is reportedly the largest
producer of semiconductors in the world, its production is principally  consumed
internally  by  its  "captive"  vertically   integrated  business  groups.  AMD,
Motorola, NSC, SGS-Thompson,  and TI on the other hand, are examples of merchant
semiconductor suppliers.

IC Business Segment

     The IC business segment  generally sells two types of products:  relatively
generic high  volume,  low margin  devices  (such as DRAM memory  devices),  and
proprietary  technologies  (such  as  microprocessors,  peripheral  controllers,
graphics ICs and signal processing ICs). In the "high volume" product lines, key
factors for success are cost controls,  manufacturing efficiency and quality. In
the "proprietary"  product areas, while cost and quality issues remain relevant,
intellectual property and innovative design take precedence.

     For most large  semiconductor  producers  in the  merchant  market,  volume
output  and  economies  of scale are  critical  to  success.  However,  costs of
production  being  relatively  uniform (or at least  potentially  so) for larger
manufacturers,   the  value  of  a  semiconductor   manufacturer's  products  is
determined  by  market  demand  for the  features  embodied  in those  products.
Consumers of merchant market ICs select  semiconductors  for incorporation  into
their products based principally on their  functionality  (roughly determined by
the surface area  consumed per product  unit) and the degree to which  competing
designs can be excluded from the marketplace.

     The volume  requirements of major merchant market suppliers,  their cost of
production  constraints,  and the effect that this has on product  selection for
inclusion   in  the   semiconductors   they   design  and  produce  has  created
opportunities for innovative semiconductor companies,  such as Actel, Atmel, and
Xilinx.  This once  niche  market  now  encompasses  a wide  variety  of rapidly
emerging segments of the embedded market.  These kinds of producers are known in
the  industry as "fabless"  semiconductor  manufacturers.  These  design-centric
companies,   under   subcontracting   arrangements  with  larger   semiconductor
manufacturers,  focus on developing IP (Intellectual Property) and niche designs
and products which can be incorporated  into, or added on to, the semiconductors
manufactured  by principal  merchant  market  semiconductor  suppliers.  Because
fabless  manufacturers  do  not  have  the  high  fixed  costs  associated  with
semiconductor  manufacturing,  profitable  sales  can be  made at  lower  volume
targets and their niche products can be brought to market both independently and
through   arrangements   with  the  principal   merchant  market   semiconductor
manufacturers.


<PAGE>
ASIC Business Segment

     ASICs  are  essentially  customized  ICs  designed  for  specific  customer
applications. The desire among manufacturers who use embedded control systems to
pursue  differentiation in developing their own product designs, and their needs
to increase  performance  and reduce  costs in a number of specific  areas,  has
fueled  the  demand  for  ASICs.  While  this  should  be, in  theory,  a highly
profitable  value  added  undertaking  for larger  semiconductor  manufacturers,
several factors have impeded market growth and  profitability  in this area. The
major  problems of ASICs is that they are  expensive  to design,  do not achieve
full functionality  without substantial  upgrading and have limited market scope
in the semiconductor  merchant market as specific-purpose  products.  ASICs also
are not easily accommodated within the established architecture of most systems.
As a  result,  a number  of  semiconductor  manufacturers  specializing  in ASIC
products  have  encountered  serious  financial  difficulties  and  have  either
discontinued  operations  or have been  acquired by other firms in recent years.
For this  reason,  the  Company  has  focused  upon the  chipset  segment of the
semiconductor industry.

Chipset Business Segment

     Traditionally,  "chipsets"  were  not a part of the  embedded  market.  The
Company's entry into the semiconductor  business was founded on the premise that
32-Bit RISC processors would change the embedded design marketplace.  The 32-Bit
RISC processors are inexpensive and powerful, and allow functions  traditionally
implemented in hardware  through the use of "chipsets" to be moved into software
without sacrifice in performance or cost.  Through the use of 32-Bit processors,
the Company has defined "chipsets" for the embedded marketplace. These "chipset"
devices  are  part  of a new  segment  of  the  IC  business  segment  known  as
Application Specific Standard Products ("ASSPs").

     ASSPs are  designed,  manufactured,  marketed  and sold as merchant  market
commodity  devices or standard products and they are targeted at interfacing key
functions  like  memory  control  and other  peripheral  functions  to  specific
processors.  The Company's  interface devices cost less than equivalent ASICs or
discrete  solutions  that  would  otherwise  be  required,   and  there  are  no
development costs to the end-user.

     The 32-Bit Embedded  Processor market is expected to ship 320 million units
for a total value of $3.4 billion and the 64-Bit  Embedded  Processor  market is
expected  to ship 200  million  units for a total of $2.9  billion by the end of
2000.  The  Company  has had an early  start in this  marketplace  and given its
current and planned product mix,  anticipates  being one of only a few suppliers
of this technology.

Marketing and Sales Strategy & Strategic Partnerships

     The Company has identified  target  markets for its business,  designed and
developed  products  that  satisfy the  requirements  of key  customers in those
markets,  and established a number of important  strategic alliances with Intel,
IBM,  Motorola,  Hitachi and QED. The Company markets it products through direct
sales to its major,  global  corporate  customers;  sales  through the Company's
network of manufacturers' representatives which include major original equipment
manufacturers  worldwide and sales through  distributors.  The Company  believes
that it has reached the stage in the development of its business to aggressively
pursue  marketing and sales  strategies  to maximize  market share in its target
markets and reinforce its competitive advantages in the Embedded Systems market.


<PAGE>
     The  Company   markets  its  products   worldwide   through  a  network  of
manufacturers'  representatives  and  distributors.  The  Company  utilizes  the
technical   support,   customer   service  and   materials   management  of  its
representatives   and  distributors.   The  Company's   customers  include  ATI,
Cabletron,  Cisco, Data General,  Hewlett Packard,  Hitachi, IBM, Kodak, Lucent,
NEC, Nortel, Samsung, and Sony.

     The Company has developed a number of relationships with strategic partners
who  combine  the  Company's  products  with  their  own in  recommended  system
solutions for customers.  These include the i960 division of Intel, the High End
Microprocessor  group of Motorola,  the RISC product  group of IDT, the Embedded
Processor group of IBM, the Embedded Super-H group of Hitachi, MIPs Intellectual
Property House of QED, and the Embedded Processor Division of AMD.

     To date the Company's  marketing  strategy has focused on building end-user
and  strategic  partner  confidence  in its IC  products.  Information  has been
disseminated to strategic  partners and consultations have been held with a view
to presenting the Company's products as part of the strategic  partners' overall
design solution to their customer's specific requirements.  The Company has been
able to access the  resources  of its  strategic  partners  to  identify  target
markets,  determine market sizes,  develop design  proposals and solutions,  and
establish pricing policies.

     This third party  marketing  approach  has enabled the Company to develop a
substantial base of customers.  These alliances have been particularly important
in  developing  relationships  and  product  distribution  channels  to  smaller
customers  who are more risk  averse and less  prepared  to  embrace  technology
solutions offered by smaller suppliers such as the Company. Due to its strategic
relationships with established  merchant market  manufacturers,  the Company has
been able to develop a level of  confidence in smaller  suppliers  that makes it
easier to establish  ongoing  relationships  with them.  Smaller  customers  are
important  to the  Company's  overall  market  development  strategy  since they
purchase  smaller  quantities of its products at higher average  selling prices.
They also provide a more  diverse and stable  revenue base than that which would
apply if the Company held a small number of large accounts.

Manufacturing

     The Company  does not own or operate  silicon  fabrication  facilities  and
therefore is referred to as a "fabless"  semiconductor  company. The Company has
chosen  to be  fabless  as a result  of (i) the  significant  front end costs of
constructing  and  owning  silicon  fabrication  facilities  (estimated  at $500
million  to $1  billion)  and (ii)  the  overabundance  of low cost  fabrication
capacity  available in the market.  The  Company's  semiconductor  manufacturers
include Samsung and Hyundai,  both located in Korea and KLSI,  located in Japan.
The Company is also in discussions with IBM, Hitachi, TSMC, ST Microelectronics,
S-MOS/Seiko Epson and UMC regarding fabrication.

     To assure  its  products  meet  high-quality  standards,  the  Company  has
established a  Manufacturing/Process  Engineering  group and a Quality Assurance
department.  The  continuous  audits by these groups  assure that the  Company's
manufacturing partners and its employees have the discipline to meet the quality
requirements for an ISO 9001 Registered company. The ISO 9001 certification is a
quality management and quality assurance certification standard developed by the
International   Organization   for   Standardization   ("ISO").   The  ISO  9001
Registration is the highest standard in the ISO 9000 series. The ISO 9000 series
was developed to provide an  internationally  accepted  system of rating quality
and for  providing  product  standardization.  V3 is the only company  among its
competitors  that is ISO 9001  Registered,  a definite asset in getting approved
vendor status with large  customers  such as Cisco,  NorTel and Hewlett  Packard
etc.


<PAGE>
Research and Development/Product Development

     The Company has assembled a strong  engineering  team,  comprised of senior
architects and designers from companies such as ATI, Genesis,  LSI Logic, Nortel
and  Scientific  Atlanta.  The  Company's  engineering  group has  designed  and
developed the Company's  product  families,  including the Burst Mode Controller
and the System Controller series,  both of which remain in production today. The
Company plans to expand its product line and enter the 64-Bit PCI Controller and
64-Bit PCI to PCI Bridge market,  based on customer  demands and embedded market
and RISC processor  evolution.  The Company maintains a continuous dialogue with
customers  and  technology  partners  to  ensure  that  the  Company's  products
incorporate  features  that are essential  for the rapidly  evolving  (embedded)
systems  design  requirements.  As a result,  the  Company's  new products  will
incorporate inputs from current customers (Cisco,  Hewlett Packard,  IBM, Kodak,
Lucent  Technologies,  and Nortel  Networks),  and leverage the expertise gained
from joint product development with Hitachi, IBM, IDT, Intel, Motorola, and QED.
For  example,   the  Company   utilized  such  expertise  to  become  the  first
semiconductor  company  to  introduce  and  demonstrate  a  family  of  products
compatible with the newly emerging I2O standard.  Similarly,  the newer MIPS and
SH  products,  were  developed  after close  collaboration  with QED and Hitachi
respectively.

Beta-Site and Key Customer Support Programs

     As part  of its  product  and  market  development  strategy,  the  Company
supplies  unpublished  designs  that  it has  developed  to a  small  number  of
end-users on a trial basis, and works with those end-users to further refine and
develop new products or modifications to existing  products,  that will meet the
requirements of a particular market segment.

     The Company retains ownership and control over any proprietary  information
disclosed   under  a  Beta-site   agreement  and  retains  clear  title  to  any
developments that may result from such joint efforts.

     When the design  specifications are finalized and product functionality has
been demonstrated,  the Company is well positioned to provide the ongoing supply
requirements  of those  end-users or other end users in the same market segment.
This  process of  complementary  development  work with  end-users  enhances the
Company's design reputation,  instills customer confidence and expands potential
markets for the Company's products.

V3 Cubed Corporation ("V Cubed")

     V Cubed was incorporated under the laws of the State of Nevada on September
30, 1994, and is qualified to do business in the State of California. V Cubed is
a wholly owned subsidiary of the Company that was formed for the sole purpose of
providing sales and marketing support for the products of the Company. V Cubed's
principal office is located at 2348 Walsh Avenue, Santa Clara, California 95051.

     In  order  to  maximize  the  exposure  of the  Company's  products  to the
marketplace, it is important that strict attention be paid to product marketing,
customer  support  and  sales  support.  While  the  design,  manufacturing  and
strategic  positioning  of the Company  products are managed from the  corporate
head office in Toronto,  it was felt that the public face of the Company  should
be located in a geographical region (historically and) presently associated with
the business of the Company and one with geographical proximity to the Company's
largest customer base in the world.

     The net effect of establishing a presence in the heart of "Silicon  Valley"
has been to spread the ability to support  customers  across  several time zones
and to  develop an image of the  Company  consistent  with that which  customers
expect.  V Cubed is  chartered  with the  responsibility  of  managing  customer
contact on both a regional and worldwide  basis even though  resources  from the
Toronto office are sometimes required to assist in this regard.


<PAGE>
V3 Semiconductor Corp.

     V3  Semiconductor  Corp. is a corporation  organized  under the laws of the
Province of Ontario, Canada and is a wholly owned subsidiary of the Company. The
Company's  research and development  (R&D)  activities are conducted  through V3
Semiconductor Corp.

Employees

     As of September 30, 1999, the Company  currently  employs  approximately 50
individuals. The company plans to increase the number of employees to 66 persons
over the next year.  Most new employees will be hired to expand the  engineering
and sales and marketing departments.

ITEM 2.           DESCRIPTION OF PROPERTY

     The Company  leases its  headquarters  a 7,500 square foot located in North
York, Ontario. The lease is for a term of 5 years and 6 months, expiring January
31,  2002,  with  an  annual  base  rent  of  Cdn.$7,491  for  the  first  year,
Cdn.$9,363.75 the second year,  Cdn.$11,236.50  the third year,  Cdn.$14,982 the
fourth  year,  and   Cdn.$18,727.50   for  the  remaining  term  of  the  lease.
Additionally,  on August 13, 1998, the Company leased an additional 3,346 square
feet of  office  space for a period of three  years  and five  months,  expiring
January 31, 2002.  The Company leases this  additional  space for an annual base
rent of $15,123.92.  The headquarters houses the Company's President & CEO, Vice
President of Engineering,  General  Manager and Financial  Officer and Corporate
Secretary and the Director of Manufacturing and Quality.

     The Company leases office space located in Santa Clara,  California,  which
is the principal office of its subsidiary,  V3 Cubed. The lease is for a term of
one year, renewable annually, with an annual base rent of $25,200.

ITEM 3.           LEGAL PROCEEDINGS

     Mr.  Patrick  Prentiss,  a former  employee  and  original  founder  of the
Company, filed a claim against V3 Corporation,  a wholly owned subsidiary of the
Company,  in August 1995. The suit,  which has been brought in the Ontario Court
(General Division) (Commercial List), court file number B224/95, seeking damages
of an undetermined  number of Class "A" preferred  shares of V3 Corporation.  In
addition,  Mr. Larry Krauss,  an individual  who was going to act as a finder to
find  investors  for the Company,  filed a claim against the Company in November
1995 alleging breach of contract. The suit has been brought in the Ontario Court
(General   Division)  court  file  number   95-CU-94054  and  seeks  damages  of
$6,000,000.  The Company  believes that it has  meritorious  defenses to both of
these actions and intends to vigorously  contest the actions.  As a result,  the
Company does not believe that these actions will have a material  adverse effect
upon the  financial  conditions  or results of  operations  of the Company.  The
Company is not aware of any other  material  legal  proceedings  now  pending or
threatened against the Company.

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

     None.



<PAGE>
     PART II

ITEM 5.           MARKET FOR COMMON EQUITY AND RELATED STOCKHOLDER MATTERS

Market For Securities

     The high and low bid  price(price  which a market  maker is willing to pay)
and ask price  (price at which a market  maker  will  sell)  quotations  for the
Company's  common  stock,  $.001 par value per share (the  "Common  Stock"),  as
reported to the Company's  management by the OTC Bulletin Board is listed in the
following chart.  These  quotations are between  dealers,  do not include retail
mark-ups,  markdowns or other fees and commissions, and may not represent actual
transactions.

<TABLE>
<CAPTION>

DATE                                              LOW BID             HIGH BID           LOW ASK             HIGH ASK

Fiscal 1997
<S>           <C> <C>                             <C>                  <C>               <C>                 <C>
     December 31, 1996                            $ 0.625              $3.25             $1.75               $4.25
     March 31, 1997                               $ 1.00              $3.00              $2.50               $4.50
     June 30, 1997                                $ 1.25              $4.125             $2.25               $5.00
     September 30, 1997                           $3.50               $4.375             $4.25               $5.25

Fiscal 1998
     December 31, 1997                            $ 2.375             $4.25              $3.25               $5.00
     March 31, 1998                               $3.75               $7.00              $4.00               $7.75
     June 30, 1998                                $ 3.875             $6.125             $4.00               $6.75
     September 30, 1998                           $3.25               $4.125             $3.625              $4.375

Fiscal 1999
     December 31, 1998                            $2.563              $4.813             $3.125              $5.125
     March 31, 1999                               $3.813              $4.031             $3.875              $4.313
     June 30, 1999                                $3.625              $9.688             $3.875              $9.875
     September 30, 1999                           $6.500              $12.750            $6.750              $13.000
</TABLE>


     At September 30, 1999,  there were  approximately  274 holders of record of
the Company's  Common Stock. The Company has not paid dividends on its shares of
Common  Stock  outstanding  during  the  past two  fiscal  years.  There  are no
restrictions  that limit the  ability of the  Company  to pay  dividends  or are
likely to do so in the future.

Recent Sale of Unregistered Securities

     During the fiscal year ended  September  30,  1999,  the Company  issued to
Sichenzia, Ross & Friedman LLP 1,000 shares of its common stock in consideration
for $5,700 in fees for legal services rendered.
<PAGE>
ITEM 6.           MANAGEMENT'S DISCUSSION AND ANALYSIS OR PLAN OF OPERATION

     The  statements  contained  in this  Report  that  are not  historical  are
forward-looking   statements,   including  statements  regarding  the  Company's
expectations,  intentions,  beliefs or strategies regarding the future. Forward-
looking  statements  include  the  Company's   statements  regarding  liquidity,
anticipated  cash needs and  availability  and anticipated  expense levels.  All
forward-looking  statements  included  in this  Report are based on  information
available  to the  Company  on the  date  hereof,  and the  Company  assumes  no
obligation to update any such forward-looking statement. It is important to note
that the Company's  actual  results could differ  materially  from those in such
forward-looking statements.  Additionally, the following discussion and analysis
should be read in  conjunction  with the Financial  Statements and notes thereto
appearing  elsewhere in this Report. The discussion is based upon such financial
statements which have been prepared in accordance with U.S.  Generally  Accepted
Accounting Principles and are presented in United States dollars ($).

General

     The Company  designs  and  markets  high  performance  peripheral  and core
silicon  products for the Embedded  Systems market.  The Company's  products are
co-peripherals  to  microprocessors  manufactured by third parties such as Intel
Corporation,  Motorola  Corporation,  International  Business  Machine,  Hitachi
Semiconductor of America,  Quantum Effect Design, Texas Instruments,  Integrated
Device  Technology and Advanced Micro Devices.  The principal product lines fall
into three  categories:  Burst DRAM  Memory  Controllers  (BMC  family),  System
Controllers (SSC and USC families) and PCI Bridge  Controllers (PBC, EPC and PSC
families).   These   products  are  used  in   applications   such  as  servers,
communication  routers,  data  switches,   mass  storage  controllers,   modems,
facsimiles  and  imaging  equipment,   telecommunications  switching  equipment,
networking   controllers,   instrumentation,   industrial   tools  and  consumer
appliances.

     The Company does not own or operate any silicon fabrication  facilities and
therefore is referred to as a "fabless"  semiconductor  company. The Company has
chosen to be  fabless as a result  of:  (i) the  significant  front end costs of
constructing  and  maintaining  a  silicon  fabrication  facility;  and (ii) the
overabundance  of  low  cost  fabrication  capacity  available.   The  Company's
manufacturing  subcontractors  include  Samsung and Hyundai in Korea and KLSI in
Japan.

     The Company's products are sold to Original Equipment Manufacturers (OEM's)
to be  incorporated  into products such as the ones listed above. A "design win"
is recorded  when an OEM decides to  incorporate  one, or more, of the Company's
products  into one of their end  products.  It could take  anywhere from 3 to 24
months for a design win to proceed to production volumes as the OEM must design,
test market and build the market for its  product.  As a result,  the Company is
highly  dependent on design wins generated in the current fiscal period to yield
revenues in future fiscal periods.

Results of Operations

Overview

     The following table sets forth for the years ended September 30, 1999, 1998
and  1997:  (i)  certain  items  in  the  Company's  Consolidated  Statement  of
Operations expressed as a percentage of revenues; and (ii) the percentage change
in dollar amounts of such items as compared to the indicated prior fiscal year:
<PAGE>
<TABLE>
<CAPTION>
                                                                          Items as a Percentage       Period to Period Percentage
                                                                              Of Net Sales                Increase (Decrease)
                                                                               Years Ended                    Years Ended
                                                                              September 30,                  September 30,
                                                                         1999     1998     1997          1998-99      1997-98

<S>                                                                     <C>      <C>      <C>             <C>          <C>
Sales                                                                   100.0%   100.0%   100.0%          78.6%        95.8%
Gross Profit                                                             70.4     68.8     61.6           82.7        118.8
Other Income                                                              3.2      5.3     13.3            8.7        (22.7)
R&D Expenditures                                                         25.7     14.5     18.9          216.9         50.5
Selling, General & Administrative                                        39.4     49.5     50.6           42.2         91.5
Net Income                                                                3.4      4.4     (6.5)
</TABLE>

     (1) The R&D  expenditures  are expressed before applying R&D tax credits of
$173,591 in 1999, $306,000 in 1998 and $35,032 in 1997.

Fiscal Year Ended September 30, 1999 Compared to Fiscal Year Ended
September 30, 1998.

Sales

     Sales for 1999 increased  $3,003,790 to  $6,825,302,  a 78.6% increase over
sales of $3,821,512 in 1998. The dramatic sales increase was  attributable to an
increase  in the  number of  design  wins that are now  shipping  in  production
volumes,  the introduction of the USC device and various  evaluation boards, and
the  continuos  increase in the number of  manufacturers  sales  representatives
promoting the Company's  products.  Increase in the number of production  design
wins  resulted in an increase of 87.1%,  57.4%,  84.4% and 57.4% in sales of the
BMC, PBC,EPC and SSC  respectively.  The newly released USC family accounted for
3% of  product  sales  in 1999 and  that  percentage  is  expected  to  increase
dramatically  over the next two years.  The  introduction of various  evaluation
boards boosted sales for that product family by 361.3%.

Gross Profit

     Gross profit was  $4,807,796 in 1999, an $2,176,807 or 82.7%  increase over
gross  profit of  $2,630,989  in 1998.  The increase  was  predominantly  due to
increased sales and reduced product costs.  In 1999,  gross profit margin,  as a
percentage of sales, was 70.4%, compared to 68.8% in 1998. The increase in gross
margin  is a  reflection  of the  reduced  product  costs  negotiated  with  the
manufacturing subcontractors.  As the number of volume transaction increase, the
gross margin is expected to decline slightly.

Other Income

     Included in other income are royalty  income,  consulting fees and interest
income  totaling  $218,051 in 1999,an  increase  of $17,402 or 8.7%  compared to
$200,649 in 1998.

     In 1999,  royalty income  decreased by $34,282 or 37.6% to $56,854 compared
to $91,136 in 1998.  This  decrease was a direct  result of reduction in royalty
payments from National  Semiconductor  Corporation  ("NSC"). In 1999 the Company
received $nil in consulting fees for work performed on the behalf of non-related
companies.  In 1998 the Company  received  $36,122 in  consulting  fees for work
performed  on the  behalf of  non-related  companies.  In 1999  interest  income
increased  by $87,806 or 119.60% to $161,197  compared to $73,391,  in 1998.  In
1999 the main source of interest  income was generated  from investing the funds
raised from the private placement in short-term interest bearing notes.



<PAGE>
Research & Development ("R&D") Expenditures

     R&D  expenditures  increased by 216.9% to $1,754,587 in 1999, from $553,641
in 1998, before applying R&D tax credits of $173,591 in fiscal 1999 and $306,000
in fiscal 1998. The increase in R&D  expenditures  was due to an increase in R&D
personnel.  The number of employees  involved in R&D increased by 63.16% in 1999
compared  to 1998  and  resulted  in an  increase  of 105% in R&D  wages in 1999
compared to 1998.  R&D costs were  reduced by  government  funding of $16,615 in
1999,  compared to  government  funding of $157,958  in 1998.  The Company  will
continue  to  increase  the  number of R&D  personnel  to  enable it to  address
emerging trends in technology as well as expedite the release of new products to
market.

Net Income (Loss) for the year

     Net income for 1999 was  $230,480,  compared to $167,193 in 1998.  This was
the result of a 78.6%  increase in sales from 1998 to 1999,  as well as the 1.6%
increase in gross margin during the same time period. In 1999, selling,  general
and  administrative  expense  increased by 42.2% or $798,847 to  $2,690,605,  as
compared to $1,891,758 in 1998, as a result of substantial  increases in non-R&D
wages,   selling  commissions  paid  to  manufacturers  sales   representatives,
promotion and advertising expenses.

Fiscal Year Ended September 30, 1998 Compared to Fiscal Year Ended
September 30, 1997.

Sales

     Sales for 1998 increased  $1,870,059 to  $3,821,512,  a 95.8% increase over
sales of $1,951,453 in 1997. The dramatic sales increase was  attributable to an
increase  in the  number of  design  wins that are now  shipping  in  production
volumes,  the release of an updated SSC device,  the  introduction  of the first
members of the EPC product family and an increase in the number of manufacturers
sales representatives promoting the Company's products.  Increases in the number
of production design wins resulted in an increase of 94% and 69% in sales of the
BMC and PBC product families,  respectively.  The introduction of an updated SSC
device  boosted  sales  of  that  device  by  254%.  Increasing  the  number  of
manufacturing sales  representatives  helped to increase the Company's products'
exposure in the marketplace and resulted in additional design wins.

Gross Profit

     Gross profit was $2,630,989 in 1998, an $1,428,619 or 118.8%  increase over
gross  profit of  $1,202,370  in 1997.  The increase  was  predominantly  due to
increased sales and reduced product costs. In 1998,  gross profit margins,  as a
percentage  of sales,  were 68.8%,  compared to 61.6% in 1997.  The  increase in
gross margin is a reflection of the reduced  product costs  negotiated  with the
manufacturing  subcontractors.  Such a reduction in costs would have resulted in
even greater profit  margins;  however,  the Company's  sales mix has changed to
include an increased volume of transactions at reduced margins. As the number of
volume transactions increase,  gross margin is expected to level off and decline
slightly.

Other Income

     Included in other income are royalty  income,  consulting fees and interest
income  totaling  $200,649 in 1998,a  decrease  of $59,063 or 22.7%  compared to
$259,712 in 1997.

     In 1998,  royalty income decreased by $166,336 or 64.6% to $91,136 compared
to $257,472 in 1997. This decrease was a direct result of a reduction in royalty
payments from National  Semiconductor  Corporation  ("NSC"). In 1998 the Company
received  $36,122  in  consulting  fees  for work  performed  on the  behalf  of
non-related  companies.  The Company did not receive consulting fees in 1997. In
1998  interest  income  increased by $71,151 or 3,176.4% to $73,391  compared to
$2,240 in 1997. In 1998 the main source of interest  income was  generated  from
investing  the funds raised from the private  placement in  short-term  interest
bearing notes.


<PAGE>
Research & Development ("R&D") Expenditures

     R&D  expenditures  increased by 50.5% to $553,641 in 1998, from $367,959 in
1997,  before applying R&D tax credits of $306,000 in fiscal 1998 and $35,032 in
fiscal  1997.  The  increase in R&D  expenditures  was due to an increase in R&D
personnel.  The number of  employees  involved in R&D  increased by 240% in 1998
compared  to 1997  and  resulted  in an  increase  of 145% in R&D  wages in 1998
compared to 1997.  R&D costs were reduced by  government  funding of $157,958 in
1998, compared to government funding of $124,989 in 1997.

Net Income (Loss) for the year

     Net income for 1998 was  $167,193,  compared  to a net loss of  $124,596 in
1997. The Company's return to  profitability  was  predominately  due to a 95.8%
increase  in sales  from  1997 to 1998,  as well as the 7.2%  increase  in sales
margin during the same time period. In 1998, selling, general and administrative
expense  increased by 73.2% or $892,085 to  $2,110,804  in 1998,  as compared to
$1,218,719  in 1997,  as a result of  substantial  increases  in non-R&D  wages,
selling commissions paid to manufacturers sales  representatives,  promotion and
advertising expenses, and professional fees.

Liquidity and Capital Resources

     In 1999,  the  Company  generated  a  negative  cash  flow  from  operating
activities  of  $392,181.  The  principal  source of cash was from net income of
$230,480  and an increase  in  inventories  of  $114,617.  Net income  increased
principally  because  of  increases  in  sales  and  gross  profit.  Inventories
decreased  as the Company  outsourced  its  logistic  functions to a third party
experts  for most of our product  lines.  The  principal  use of cash was for an
increase in accounts  receivable  and prepaid  expenses of $693,336 and $124,214
respectively.  Both accounts  receivable and prepaid expense increased as result
in the increase in the volume of business. Cash used by investing activities was
$572,342 as a result of the purchase of major  computer  equipment  and software
for research and development. Financing activities provided net cash flow in the
amount  of  $619,519.  This  amount  is  represented  from the  proceeds  in the
exercising  of stock  options  by the  optionee.  Net  cash  outflow  after  all
activities was $345,004.

     In 1998,  the  Company  generated  a  positive  cash  flow  from  operating
activities  of  $97,092.  The  principal  source of cash was from net  income of
$167,193 and an increase in accounts  payable of $244,211.  Net income increased
principally  because of increases in sales and gross profit.  Payable  increased
because of the increased  volume of business.  The principal use of cash was for
an increase in  inventory of $73,038 and in increase in accounts  receivable  of
$522,227.  Both inventory and accounts  receivable  increased as a result in the
increase  in the  volume of  business.  Cash used by  investing  activities  was
$170,842 as a result of the purchase of computer  equipment and software used to
run the business and develop products.  Financing  activities  provided net cash
flow in the  amount of  $4,311,371.  The  principal  source of cash was from the
issuance of 1,372,658  shares of Common  Stock.  The  principal use of cash flow
generated  from  financing  is  repayment  of bank loan payable in the amount of
$55,313. Net cash flow generated after all activities was $4,237,621.

     On March 16, 1998,  the Company,  through its  placement  agent,  The Mason
Cabot  ("Mason  Cabot")  Division  of W.J.  Nolan & Co.,  undertook  the private
placement  of  Common  Stock  at a  price  of  $3.50  per  share.  The  offering
contemplated  a minimum gross amount of $1,000,000  and a maximum of $5,500,000.
On May 6, 1998,  the initial  closing was  conducted  in which the Company  sold
687,926 shares for aggregate gross proceeds of $2,407,741. On June 15, 1998, the
second and final closing was conducted in which the Company sold 684,732  shares
for aggregate gross proceeds of $2,396,562. In the two closings the Company sold
a total of 1,372,658 shares of Common Stock for $4,804,303. Mason Cabot received
a 7% selling  commission and a 1.5%  non-accountable  expense  allowance for its
services as placement agents.  The Company received net proceeds of this sale of
approximately $4,374,000.


<PAGE>
     In  September  1997,  the  Company  entered  into a line of credit with the
Canadian Imperial Bank of Commerce ("CIBC") for a maximum of $140,000.  No funds
have ever been drawn on this facility. This facility bears interest at the prime
rate, as established by the Royal Bank of Canada, plus two percent.  The Company
is currently negotiating with the bank to increase this line of credit.

     Management  believes that its present cash  holdings,  cash flow  generated
from  operations  and the  funds  available  under  the line of  credit  will be
sufficient to meet the Company's capital, operating and research and development
requirements for the next 12-18 months.

Foreign Exchange

     All sales are received in US dollars and all goods purchased for resale are
purchased in US dollars. Although the Company is a US company, expenses incurred
by V3  Semiconductor  Corp, a wholly owed  subsidiary of the Company  located in
Toronto, Canada, are incurred in Canadian dollars.  Operational expense incurred
by V3 Semiconductor  Corp.  accounted for 79% of the Company's total operational
expenses in 1999.  Upward  variations  in the value of the Canadian  dollar,  as
compared to the value of the US dollar,  could  adversely  effect the  Company's
results.

Investigation of Significant Distributor

     Future  Electronics  Inc.  ("Future  Electronics"),  one of  the  Company's
significant distributors has advised the Company that the U.S. Federal bureau of
Investigation  has  commenced  an  investigation  relating  to certain  industry
practices  known as "ship from stock and debit."  Ship from stock and debit is a
practice where  distributors  purchase  parts from suppliers at inflated  prices
and, subsequently, receives credits or rebates when a sale is made to a customer
at a price that is below the list price for such parts.

     Future Electronics has advised the Company that it does not believe that it
has  committed  any  wrongdoing  and that  such  investigation  will not  effect
business  transactions  with the Company.  While the Company does not  presently
believe that the F.B.I.'s  investigation  of Future  Electronics will materially
effect  its  business,  there  can  be  no  assurance  of  the  outcome  of  the
investigation  or its effect on the  Company.  In the event  Future  Electronics
ceases  operations,   the  Company's  business  could  be  materially  adversely
affected.

Year 2000

     Many currently  installed  computer systems and software products are coded
to accept only two digit entries in the date code field.  These date code fields
will need to accept  four digits to  distinguish  21st  century  dates from 20th
century dates.  Therefore,  any such computer systems and software products that
recognize  a date code field of "00" as the year 1900  rather than the year 2000
could result in errors or system failures. As a result, many companies' software
and computer systems may need to be upgraded or replaced in order to resolve the
potential  impact of this  misinterpretation  and the resulting errors or system
failures and to make such systems,  equipment and software Year 2000  compliant.
In addition,  the Company  relies upon  products and  information  from critical
suppliers,  large customers and other outside  parties,  in the normal course of
business,  whose software programs are also subject to the same problem.  Should
miscalculations  or other operational  errors occur as a result of the Year 2000
issue,  the  Company or the parties on which it depends may be unable to produce
reliable information or process routine transactions.  Furthermore, in the worse
case, the Company or the parties on which it depends may, for an extended period
of time, be incapable of conducting critical business activities,  which include
but are not limited to, manufacturing and shipping products, invoicing customers
and paying vendors.

     The Company has  assessed the impact that the Year 2000 Problem may have on
its operations and has identified the following  three key areas of its business
that may be affected:


<PAGE>
Products

     The Company has  evaluated  each of its products and believes  that each is
substantially Year 2000 compliant.  However, the Company believes that it is not
possible to  determine  whether all of its  customers'  products  into which the
Company's  products are  incorporated  will be Year 2000  compliant  because the
Company has little or no control over the design,  production and testing of its
customers' products.

Business Systems

     Based on the Company's  assessment,  it has determined that the core of its
business software applications, including those critical to the Company's normal
operation  are Year 2000  compliant.  The Company is currently in the process of
implementing an ERP system from JD Edwards to address its inventory, sales order
management  and  financial  reporting   requirements.   Management  expects  the
completion of the implementation process in early March in the year 2000.

Third-Party Suppliers

     The Company relies,  directly and indirectly,  on external systems utilized
by its suppliers for the  management  and control of  fabrication,  assembly and
testing  of  substantially  all of  the  Company's  products.  The  Company  has
contacted all of its major suppliers and other critical  business partners in an
effort to identify and mitigate Year 2000 matters originating from third parties
which may adversely  affect the Company.  Contingency  plans, if required,  have
been  developed for  transactions  with suppliers that appear to be lagging with
their Year 2000 readiness programs.

ITEM 7.           FINANCIAL STATEMENTS

     All  financial  information  required  by  this  Item  is  attached  hereto
beginning on Page F-1.

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

         None.



<PAGE>
ITEM 9. DIRECTORS, EXECUTIVE OFFICERS, PROMOTERS AND CONTROL PERSONS;
        COMPLIANCE WITH SECTION 16(A) OF THE EXCHANGE ACT

Directors and Executive Officers

     The directors and executive officers of the Company are as follows:

<TABLE>
<CAPTION>

Name                                                      Age         Position

<S>                                                        <C>        <C>
John Zambakkides                                           49         President, Chief Executive Officer and Director

Carl Mitchell                                              39         General Manager, Secretary  and Treasurer

Michael Alford                                             39         Vice President of Engineering

Bernard N. Slade                                           75         Director

Jim Wilkinson                                              51         Director

John A. Fazackerley                                        64         Director

Robert Skinner                                             49         Director

</TABLE>

     Set  forth  below  is a brief  background  of the  executive  officers  and
directors of the Company, based on information supplied by them.

     John Zambakkides. Mr. John Zambakkides joined the Board of Directors of the
Company in May,  1995 and on April 13, 1996,  he was  appointed as President and
Chief  Executive  Officer of the Company.  Mr.  Zambakkides  has an  Electronics
Diploma from Niagara  College and an Electronics  Bachelor of  Engineering  from
Ryerson Polytechnical Institute.  From 1992 to 1996, Mr. Zambakkides worked with
InTELaTECH,  Inc. From 1972 to 1992, Mr.  Zambakkides served as Regional Manager
for Fairchild  Semiconductor  during which time he helped to establish Fairchild
in the Canadian  market.  After National  Semiconductor  Corp.  ("NSC") acquired
Fairchild,  Mr.  Zambakkides was made General  Manager for NSC. Mr.  Zambakkides
served on the Board of Directors of the Canadian  subsidiaries of both Fairchild
and NSC for a total of 13 years where he contributed  his expertise in the areas
of sales, engineering and corporate development.  In addition, his expertise was
supplemented by numerous courses in management, finance as well as Total Quality
Management  ("TQM"),  whereby  he was  also  an  accredited  instructor  for the
Canadian organization.

     Carl Mitchell.  Mr. Mitchell has served as the Company's  General Manager &
Corporate  Secretary  since  June  1994  and  is  responsible  for  the  General
Administration  and  Management of the business  operations of the Company.  Mr.
Mitchell joined V3  Semiconductor  Corp. in 1987 and was responsible for writing
and  documenting  the user interface for the Pc/La Personal Logic  Analyzer,  as
well as setting up and  maintaining the  distribution  channels for that product
family.  In  1989  Mr.  Mitchell  was  appointed  Company   Controller  and  was
responsible  for the  accounting  functions  as well as the  preparation  of the
financial statements.  Mr. Mitchell is currently responsible for the operations,
administration and financial & corporate reporting of the V3 group of companies.
Mr. Mitchell  graduated from the University of Toronto in 1984 with a Specialist
Degree in Computer  Science.  Prior to joining the  Company,  Mr.  Mitchell  was
Software Group Manager at Syntronics Inc.


<PAGE>
     Michael Alford.  Michael Alford,  B.E.Sc.  (Electrical)  graduated from the
University of Western  Ontario in 1983 with a degree in Electrical  Engineering.
Since that time Mr.  Alford has  developed  a wide  range of  experience  in all
phases  of  electronic  design,  with a  particular  emphasis  on the  design of
semiconductors.  Mr. Alford was one of the first design engineers employed by V3
and has recently  returned as hardware design manager.  Prior to his return,  he
was the  design  group  leader for  multi-media  products  at ATI.  While at ATI
Technologies,  he led a team that designed part of an Intel i750  derivative for
acceleration  of digital  video.  He was also a project  manager for ATI's first
video re-sizing and reformatting chip. He has experience in ASIC and custom VLSI
chip designs  (CMOS  technology),  and he holds  several  patents in the area of
multi-media  architectures.  Mr. Alford graduated from the University of Western
Ontario in 1983 with a degree in Electrical Engineering.

     Bernard N. Slade. Mr. Slade was elected to the Company's board of directors
in April,  1996.  Mr.  Slade also  serves on the board of  directors  of YieldUp
International,  a firm he founded in 1993. From 1993 to 1984, Mr. Slade acted as
a consultant for Arthur D. Little, Inc. and Gemini Consulting. Prior to becoming
a consultant, Mr. Slade spent 28 years working for IBM, from 1956 to 1984, where
he held a number of senior positions including management of product development
and  manufacturing  for  the  components  division  and  Corporate  Director  of
Manufacturing  Technology.  From 1948 to 1956 Mr.  Slade  worked in research and
development for RCA. Mr. Slade is the author of "Compressing Product Development
Cycle" and "Winning the Productivity Race."

     James  Wilkinson.  Mr.  Wilkinson  was  elected to the  Company's  board of
directors in April,  1996 and is also  currently  working as a consultant in the
industry.  From 1994 to 1997, Mr. Wilkinson served as the Vice-President,  Chief
Operating Officer and Secretary to Tee-Comm  Electronics,  Inc. and has 30 years
of experience in corporate  finance.  From 1987 to 1994, Mr. Wilkinson served as
Vice President and Treasurer of Northern Telecom Ltd., and from 1984 to 1987 Mr.
Wilkinson was the Assistant  Treasurer of Corporate Finance for Northern Telecom
Ltd. Prior thereto,  he held senior  financial  positions with Shell Canada Ltd.
and Canadian National Railway Co.

     John A. Fazackerley.  Mr. Fazackerley was elected to the board of directors
in September, 1997. Mr. John Fazackerley , founded Digital Processing Systems in
1987 and is currently  serving as its Chairman of the Board.  From 1975 to 1987,
Scientific Atlanta employed Mr. Fazackerley.  When he joined Scientific Atlanta,
he  served as head of  Broadband  sales for  their  newly  established  Canadian
facility.  In 1977 he was  promoted to General  Manager and in 1987 he purchased
Scientific  Atlanta's  studio  (equipment)  products,  under its  Digital  Video
Systems division,  and formed Digital  Processing  Systems.  Mr. Fazackerley has
served as a director on the Board of the Canadian Cable  Television  Association
for seven years and he presently  serves as an international  representative  on
the Management Committee of the International broadcasting Convention in London,
England.  He was born in  Cheshire,  England  were he  received  his  Radio  and
Television Engineering diploma from Sanford University.

     Robert Skinner.  Mr. Skinner was elected to the board of directors in March
1998.  From  1992  to  1999,  Mr.  Skinner  has  managed  his  own  investments,
specializing in emerging companies in the technology market.  From 1980 to 1992,
Mr.  Skinner  was an  executive  director of Bain  Capital  Markets  Ltd.,  Bain
Securities  Ltd.,  and Bain and Co. Ltd.,  the group holding  company.  He first
joined  Bain and Co. in 1980  working  in its Fixed  Income  Division,  and soon
thereafter became a partner in the firm in December 1981. During his career with
Bain and Co. he was also involved in risk management,  mortgage  securitization,
and commodities  markets with emphasis on both coal and industrial  metals.  Mr.
Skinner's  experience  in the  securities  industry  commenced in 1977,  when he
joined  Capel  Court  Corporation  Ltd.,  a merchant  bank,  where he engaged in
securities trading and structuring transactions.

     Directors  serve until the next  annual  meeting of  stockholders  or until
their successors are elected and qualified.  Officers serve at the discretion of
the Board of Directors. Directors are reimbursed for travel expenses and, during
fiscal  1999,  each of Mssrs.  Slade,  Wilkinson,  Fazackerley  and Skinner were
granted options to purchase  10,000 shares of Common Stock as  compensation  for
their services as directors of the Company.
<PAGE>
Section 16(a) Beneficial Ownership Reporting Compliance

     Based  solely  upon a review of Forms 3, 4 and 5, and  amendments  thereto,
furnished to the Company  during  fiscal year 1999,  the Company is not aware of
any  director,  officer  or  beneficial  owner of more than ten  percent  of the
Company's Common Stock that, during fiscal year 1999, failed to file on a timely
basis reports required by Section 16(a) of the Securities Exchange Act of 1934.


ITEM 10.          EXECUTIVE COMPENSATION

     The following table sets forth certain summary  information with respect to
the  compensation  paid  to the  Company's  Chief  Executive  Officer,  and  the
Company's  Vice-President  of Sales and Marketing,  for services rendered in all
capacities to the Company for the fiscal period ended September 30, 1999.  Other
than as listed below,  the Company had no executive  officers whose total annual
salary and bonus exceeded $100,000 for that fiscal year:
<TABLE>
<CAPTION>

                                                                                                                   Long Term
Name and                                                    Other             Annual            All Other         Compensation
Principal Position              Year       Salary ($)    Compensation          Bonus          Compensation      Awards/Securities
                                                                                                               Underlying Options(#)
John Zambakkides,
President and Chief
Executive Officer...
                                <S>            <C>              <C>            <C>               <C>                   <C>
                                1999           $134,008         ---            $41,223           $11,473 (1)           400,000

                                1998            $97,743         ---            $55,200           $13,117 (2)             ---

                                1997             $72560         ---              ---              $5,966 (2)             ---
</TABLE>

----------------

     (1)  Represents  $7,986 in car allowance  and $3,487 in insurance  benefits
paid to Mr. Zambakkides pursuant to his employment agreement with the Company.

     (2) Represents car allowance  commissions paid to Mr. Zambakkides  pursuant
to his employment agreement with the Company.

     The following table shows the option grants to the named executive officers
during fiscal year ended September 30, 1999:

                        Option Grants in Last Fiscal Year
                               (Individual Grants)
<TABLE>
<CAPTION>


                                                                 Percent of Total
                                        Number of Common         Options Granted
                                        Stock Underlying         to Employees in     Exercise Price
Name                                    Options Granted          Fiscal Year         ($/Share)    Expiration Date
John Zambakkides, President
<S>                                         <C>                     <C>                <C>         <C>
and Chief Executive Officer.....            400,000                 66.24%             $3.40       Feb. 28, 2009

</TABLE>
<PAGE>
     The following  table shows the value at September  30, 1999 of  unexercised
options held by the named executive officers:
<TABLE>
<CAPTION>

                 Aggregated Option Exercises in Last Fiscal Year
                        And Fiscal Year-end Option Values


                                                                   Number of Securities
                                                                   Underlying Unexercised           Value of Unexercised
                                      Shares                            Options at                 In-the-Money Options at
                                     Acquired          Value       Fiscal Year-end (#)               Fiscal Year-end ($)
                                        On            Realized     Exercisable/Unexercisable       Exercisable/Unexercisable
Name                               Exercise (#)         ($)
John Zambakkides, President
and Chief Executive Officer.....
<S>                                   <C>             <C>             <C>                          <C>
                                      54,700          453,899         225,300 / 280,000(1)(2)      $1,731,766 / $2,182,320(1)(2)
</TABLE>

----------------

     (1) Represents  presently  exercisable options to purchase 85,300 shares of
common stock at $3.75 per share and 140,000 shares of common stock at $3.40, and
unexercisable  options to purchase  20,000  shares of common  stock at $3.75 per
share and 260,000 shares of common stock at $3.40 per share.

     (2) Assumes a fair market  value of $11.22 per share of common  stock which
is the closing price for the Company's common stock on September 30, 1999.

Employment Arrangements

     From January 1, 1999 to December 31, 1999, John Zambakkides,  the Company's
President and Chief  Executive  Officer,  was employed  pursuant to an agreement
providing for annual  compensation  of Cdn.  $200,000.  On January 1, 1998,  Mr.
Zambakkides   entered  into  a  new  agreement  with  the  Company  whereby  Mr.
Zambakkides  will be employed as the  Company's  President  and Chief  Executive
Officer  for a term of five  years  and,  thereafter,  the  agreement  shall  be
renewable  annually.  The agreement  provides for a base salary of Cdn. $200,000
effective January 1, 1999. The employment agreement provides for a car allowance
of Cdn. $1,000 per month. In addition,  Mr. Zambakkides is entitled to receive a
bonus  and  options  based  upon  achieving  certain  goals  and  objectives  as
determined by the Board of Directors.

Employee Stock Option Plan

     The Company has adopted two stock option  plans,  the 1996  Employee  Stock
Option Plan and the 1999 Employee  Stock Option Plan.  The plans were adopted by
the Company for the  purpose of  attracting  and  retaining  the best  available
personnel for positions with the Company, and to provide additional incentive to
such  employees and others to exert their maximum  efforts toward the success of
the Company.  The Company  believes that these aims will be effectuated  through
the granting of certain stock options.

         1996 Employee Stock Option Plan

     In February 1996, the Company adopted,  by action of the board of directors
and  stockholders,  the 1996 Employee Stock Option Plan (the " 1996 Plan").  The
1996 Plan which was  amended in  February  1997,  provides  for the  issuance of
incentive stock options to qualified  employees.  The 1996 Plan does not have an
expiration date. Set forth below is a summary of the 1996 Plan, but this summary
is  qualified  in its entirety by reference to the full text of the 1996 Plan, a
copy of which is filed as an exhibit to the Company's Registration Statement.

     The  1996  Plan is  authorized  to  grant  options  or  other  equity-based
incentives  for  400,000  shares of the Common  Stock.  If shares  subject to an
option  under the 1996 Plan  cease to be subject  to such  option,  or if shares
awarded under the 1996 Plan are  forfeited,  or otherwise  terminated  without a
payment  being made to the  participant  in the form of stock,  such shares will
again be available for future distribution under the 1996 Plan.


<PAGE>
     Awards under the 1996 Plan may be made to key employees, including officers
of and consultants to the Company,  its subsidiaries  and affiliates,  including
any director. The 1996 Plan imposes no limit on the number of officers and other
key employees to whom awards may be made;  however,  no person shall be entitled
to receive  awards  which would  entitle such person to acquire more than 10% of
the number of shares of Common Stock available under the 1996 Plan.

     The 1996  Plan is to be  administered  by a  committee  of no less than two
disinterested  directors  to be  appointed  by the board (the  "Committee").  No
member or alternate member of the Committee shall be eligible to receive options
or stock  under the 1996 Plan  (except as to the  automatic  grant of options to
directors)  or  under  any plan of the  Company  or any of its  affiliates.  The
Committee has broad  discretion in determining the persons to whom stock options
or other  awards  are to be  granted,  the terms and  conditions  of the  award,
including the type of award,  the exercise  price and term and the  restrictions
and forfeiture conditions.  If no Committee is appointed, the board of directors
shall perform the functions of the Committee.

     The  Committee  will have the  authority  to grant the  following  types of
awards under the 1996 Plan:  incentive or non-qualified stock options.  The 1996
Plan is  designed  to  provide  the  Committee  with broad  discretion  to grant
incentive stock-based rights.

         1999 Employee Stock Option Plan

     In March 1999, the Company adopted, by action of the board of directors and
stockholders,  the 1999 Employee Stock Option Plan (the " 1999 Plan").  The 1999
Plan provides for the issuance of incentive stock options  ("ISOs") to qualified
employees  and  options  which are not  intended to qualify as  incentive  stock
options ("Non-ISOs").  The 1999 Plan expires 10 years from the date of adoption.
Set forth below is a summary of the 1999 Plan,  but this summary is qualified in
its entirety by reference to the full text of the 1999 Plan.

     The  1999  Plan is  authorized  to  grant  options  or  other  equity-based
incentives  for  700,000  shares of the Common  Stock.  If shares  subject to an
option  under the 1999 Plan  cease to be subject  to such  option,  or if shares
awarded under the 1999 Plan are  forfeited,  or otherwise  terminated  without a
payment  being made to the  participant  in the form of stock,  such shares will
again be available for future distribution under the 1999 Plan.

     Awards under the 1999 Plan may be made to key employees, including officers
of and consultants to the Company,  its subsidiaries  and affiliates,  including
any  director,  provided,  however,  that the issuance of options under the 1999
plan is subject to certain restrictions which include:

     o An ISO may be  granted  to an  individual  who owns  more  that ten (10%)
percent of the total  combined  voting power or value of all classes of stock of
the  Company  or a  subsidiary  corporation  only if,  at the  time  such ISO is
granted,  the purchase price of the Common Stock subject to the ISO is an amount
which equals or exceeds one hundred ten percent  (110%) of the fair market value
of such Common  Stock,  and such ISO by its terms is not  exercisable  more than
five (5) years after it is granted

     o A director  or an officer of the  Company  who is not also an employee of
the Company and consultants to the Company shall be eligible to receive Non-ISOs
but shall not be eligible to receive ISOs

     o To the extent that the grant of an option  results in the aggregate  fair
market value  (determined  at the time of grant) of the Common  Shares (or other
capital stock of the Company or any  subsidiary)  with respect to which ISOs are
exercisable  for the first time by an optionee  during any calendar  year (under
all plans of the Company and subsidiary  corporation) to exceed  $100,000,  such
options shall be treated as a Non-ISOs


<PAGE>
     o The purchase price of the Common Shares subject to each Non-ISO shall not
be less than 85% of the fair market value of such Common Shares at the time such
Option is granted

     The 1999 Plan  imposes  no limit on the  number of  officers  and other key
employees to whom awards may be made.

     The 1999  Plan is to be  administered  by a  committee  of no less than two
disinterested  directors  to be  appointed  by the board (the  "Committee").  No
member or alternate member of the Committee shall be eligible to receive options
or stock  under the 1996 Plan  (except as to the  automatic  grant of options to
directors)  or  under  any plan of the  Company  or any of its  affiliates.  The
Committee has broad  discretion in determining the persons to whom stock options
or other  awards  are to be  granted,  the terms and  conditions  of the  award,
including the type of award,  the exercise  price and term and the  restrictions
and forfeiture conditions.  If no Committee is appointed, the board of directors
shall perform the functions of the Committee.

     The  Committee  will have the  authority  to grant the  following  types of
awards under the 1996 Plan:  incentive or non-qualified stock options.  The 1996
Plan is  designed  to  provide  the  Committee  with broad  discretion  to grant
incentive stock-based rights.

     As of September  30, 1999,  the Board  granted stock options to purchase an
aggregate of 1,032,483  shares of Common Stock at exercise  prices between $1.75
and $9.16. Of such options,  224,768 were  exercised,  55,166 were cancelled and
912,449 remain  outstanding.  The option  exercise prices were determined by the
Board to be the fair  market  value per share on the date of grant.  The options
which have been granted expire between July 7, 1999 and February 22, 2006.

Employee Stock Purchase Plan

     On February 12, 1996,  the Board of  Directors  approved an employee  stock
purchase  plan.  The plan reserves  20,000  shares of Common  Stock,  out of the
shares of Common  Stock  reserved  under the Stock  Option  Plan,  for  eligible
employees  and  permits  employees  to purchase  Common  Stock  through  payroll
deductions  at a purchase  price of 90% of the fair  market  value of the Common
Stock on the purchase  date.  As of September 30, 1999 no options were issued or
outstanding from his plan.
<PAGE>
ITEM 11. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT

     The  following  table  sets  forth,  as  of  September  30,  1999,  certain
information  concerning  beneficial  ownership  of shares of Common  Stock  with
respect  to (i)  each  person  known  to the  Company  to own 5% or  more of the
outstanding shares of Common Stock, (ii) each director of the Company, (iii) the
executive  officers of the Company,  and (iv) all  directors and officers of the
Company as a group:
<TABLE>
<CAPTION>


                                           Number of Shares        Approximate
                                            Beneficially          Percentage of
                                               Owned              Common Stock**
Name*


<S>             <C>                            <C>                     <C>
John Zambakkides(1)                            505,300                 8.1%

Carl Mitchell(2)                               652,339                10.2%

Michael Alford(3)                              477,248                 7.5%

Bernard N. Slade(4)                            156,500                 2.7%

Jim Wilkinson(5)                                20,000                 0.4%

John A. Fazackerley(6)                          25,833                 0.5%

Robert Skinner(7)                              228,711                 3.8%

Bellingham Industries Inc.                     599,857                 9.5%

All Officers and Directors as
a Group (7 persons)                          2,065,931                33.4%
</TABLE>

------------------

     * Except as noted above, the address for the above identified  officers and
directors of the Company is c/o V3  Semiconductor,  Inc.,  250  Consumers  Road,
Suite 901, North York, Ontario, Canada M2J 4V6.

     **  Percentages  are based upon the  assumption  that the  shareholder  has
exercised  all of the  currently  exercisable  options  he or she owns which are
currently   exercisable  or  exercisable  within  60  days  and  that  no  other
shareholder has exercised any options he or she owns.

     (1) Includes  505,300  shares of Common Stock issuable upon exercise of the
stock  options  granted  John  Zambakkides,  of which  225,300  are  immediately
exercisable.

     (2) Includes 50,000 shares of Common Stock owned by Mr. Mitchell's wife and
30,000 shares of Common Stock  issuable  upon exercise of stock options  granted
under the Company's ESOP.

     (3) Includes  110,000 shares of Common Stock owned by Mr. Alford's wife and
64,000 shares of Common Stock  issuable  upon exercise of stock options  granted
under the Company's ESOP. Of such options, 40,000 are immediately exercisable.

     (4) Includes  20,000 shares of Common Stock issuable upon exercise of stock
options  granted under the  Company's  ESOP plan,  all of which are  immediately
exercisable. Includes 15,000 shares owned by Mr. Slade's wife includes and 6,000
shares owned by Mr. Slade's son.

     (5) Includes  20,000 shares of Common Stock issuable upon exercise of stock
options  granted under the  Company's  ESOP plan,  all of which are  immediately
exercisable.
<PAGE>
     (6) Includes  25,833 shares of Common Stock issuable upon exercise of stock
options  granted under the  Company's  ESOP plan,  all of which are  immediately
exercisable.

     (7) Includes 200,002 shares of Common Stock owned by Cedar Capital Limited.
Robert Skinner is the sole shareholder of Cedar Capital Limited. Includes 20,000
shares of Common Stock issuable upon exercise of stock options granted under the
Company's ESOP plan, all of which are immediately exercisable.

ITEM 12. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS

     None.

ITEM 13. EXHIBITS, LIST AND REPORTS ON FORM 8-K

     The Company  has not filed any reports on Form 8-K during the last  quarter
of the period covered by this report.

Exhibits

     The following Exhibits are filed as part of this Report:
<TABLE>
<CAPTION>

       Exhibit
       Number              Description

         <S>      <C>
         3.1      Certificate of Incorporation, as amended to date (1)
         3.2      By-Laws (1)
         4.1      Form of Common Stock Certificate (2)
         4.2      1996 Stock Option Plan (1)
         10.1     Lease of premises located at 250 Consumers Road, North York, Ontario, Canada (2)
                  Employment Agreement between the Company and John Zambakkides, executed on February 23, 1996 (3)
         10.2     Lease of additional space at the Company's headquarters located at 250 Consumers Road, North York, Ontario,
                  Canada, executed on August 13, 1998 (5)
         10.3     Letter agreement, dated August 19, 1998, between the Company and Commerce Communities renewing the lease on the
                  Company's office space in Santa Clara, California(5)
         23.1     Consent of KPMG LLP, the Company's Independent Auditors
         23.2     Consent of KPMG LLP, the Company's Independent Auditors, regarding Form SB-2 Registration Statement (4)
         23.3     Consent of Sichenzia, Ross & Friedman LLP regarding Form SB-2 Registration Statement (4)
         27.1     Financial Data Schedule
</TABLE>

--------------

     (1) Reference is made to the Registrant's Form SB-2 Registration  Statement
(File No. 333-59133), as filed on July 15, 1998, which is hereby incorporated by
reference.

     (2) Reference is made to Amendment Number 1 to the  Registrant's  Form SB-2
Registration  Statement  (File No.  333-59133),  as filed on September 22, 1998,
which is hereby incorporated by reference.

     (3) Reference is made to Amendment Number 2 to the  Registrant's  Form SB-2
Registration Statement (File No. 333-59133),  as filed on October 8, 1998, which
is hereby incorporated by reference.


<PAGE>
     (4) Reference is made to Amendment Number 3 to the  Registrant's  Form SB-2
Registration Statement (File No. 333-59133), as filed on October 19, 1998, which
is hereby incorporated by reference.

     (5) Reference is made to the Registrant's  Annual Report on Form 10-KSB for
the fiscal year ended  September 30, 1998, as filed on December 23, 1998,  which
is hereby incorporated by reference.
<PAGE>
                        Consolidated Financial Statements
                        (Stated in United States dollars)

                             V3 SEMICONDUCTOR, INC.

                     Years ended September 30, 1999 and 1998



<PAGE>
                          INDEX TO FINANCIAL STATEMENTS
<TABLE>
<CAPTION>



V3 Semiconductor, Inc.:

<S>                                                                                                         <C>
       Report of Independent Auditors.....................................................................F-3

       Balance Sheet......................................................................................F-4

       Statement of Operations............................................................................F-5

       Statement of Stockholders Equity...................................................................F-6

       Statement of Cash Flows............................................................................F-7

       Notes to Financial Statements......................................................................F-8 - F-25

</TABLE>

                                       F-2


<PAGE>
                          INDEPENDENT AUDITORS' REPORT


To the Shareholders of V3 Semiconductor, Inc.


     We  have  audited  the  accompanying  consolidated  balance  sheets  of  V3
Semiconductor,  Inc.  as  at  September  30,  1999  and  1998  and  the  related
consolidated  statements  of  operations,  changes in  shareholders'  equity and
comprehensive  income  (loss)  and  cash  flows  for  each of the  years  in the
three-year  period ended September 30, 1999. These financial  statements are the
responsibility of the Company's management.  Our responsibility is to express an
opinion on these financial statements based on our audits.

     We conducted our audits in accordance with United States generally accepted
auditing standards. Those standards require that we plan and perform an 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 September  30, 1999 and 1998,  and the results of its  operations  and its
cash flows for each of the years in the  three-year  period ended  September 30,
1999, in accordance with generally accepted accounting  principles in the United
States.


/s/ KPMG LLP

Chartered Accountants

Toronto, Canada

November 30, 1999



                                       F-3


<PAGE>
V3 SEMICONDUCTOR, INC.
Consolidated Balance Sheets
(Stated in United States dollars)

September 30, 1999 and 1998
<TABLE>
<CAPTION>

                                                                           1999           1998
Assets

Current assets:
<S>                                                                           <C>            <C>
     Cash and cash equivalents ............................................   $ 4,474,174    $ 4,821,556
     Accounts receivable, net of allowance for doubtful
       accounts of $16,352; $15,533 at September 30, 1998 .................     1,447,455        754,119
     Inventories (note 2) .................................................        53,873        168,490
     Prepaid expenses .....................................................       163,908         39,694
                                                                                ---------      ---------
                                                                                6,139,410      5,783,859

Capital assets (note 3) ...................................................     1,099,606        420,794
                                                                                ---------      ---------
                                                                              $ 7,239,016    $ 6,204,653
                                                                                =========      =========




Liabilities and Shareholders' Equity

Current liabilities:
     Accounts payable .....................................................   $   801,685    $   576,055
     Accrued liabilities ..................................................       145,532         64,777
     Capital taxes payable ................................................        12,806          4,940
     Deferred revenue .....................................................          --          105,394
                                                                                ---------      ---------
                                                                                  960,023        751,166



Shareholders' equity:
     Capital stock:
         Preferred shares:
              Authorized 10,000,000; no shares issued
                and outstanding (note 5) ..................................          --             --
         Special shares:
              Authorized 3,400,000; Nil shares issued and outstanding at
                September 30, 1999; 46,368 shares issued and outstanding at
                September 30,1998 (note 5) ................................          --              124
         Common shares:
              Authorized 50,000,000; 5,743,664 shares issued and
                outstanding at September 30, 1999; 5,471,628
                issued and outstanding at September 30, 1998 (note 5) .....         5,743          5,472
         Additional paid-in capital .......................................     6,675,572      6,050,500
                                                                                ---------      ---------
                                                                                6,681,315      6,056,096


     Cumulative translation adjustment ....................................       (14,465)        15,728
     Deficit ..............................................................      (387,857)      (618,337)
                                                                                ---------      ---------
                                                                                6,278,993      5,453,487


Commitments (note 10)
Contingent liabilities (note 11)
                                                                                ---------      ---------
                                                                              $ 7,239,016    $ 6,204,653
                                                                                =========      =========

</TABLE>

          See accompanying notes to consolidated financial statements.


On behalf of the Board:

____________________________ Director      ____________________________ Director


                                       F-4


<PAGE>
V3 SEMICONDUCTOR, INC.
Consolidated Statements of Operations
(Stated in United States dollars)

Years ended September 30, 1999, 1998 and 1997
<TABLE>
<CAPTION>

                                                                1999               1998                 1997


<S>                                                     <C>                <C>                  <C>
Sales                                                   $     6,825,302    $    3,821,512       $    1,951,453
Cost of goods sold                                            2,017,506         1,190,523              749,083
                                                              ---------         ---------            ---------
                                                              4,807,796         2,630,989            1,202,370



Other income (note 6)                                           218,051           200,649              259,712

Expenses:
     Selling, general and administrative                      2,690,605         1,891,758              987,616
     Research and development (note 7)                        1,580,996           247,641              332,927
     Depreciation and amortization                              110,245           122,757              143,151
     Rent and utilities                                         127,628            90,183               77,252
     Bank charges and interest                                    8,142             6,106               10,700
                                                              ---------         ---------            ---------
                                                              4,517,616         2,358,445            1,551,646
                                                              ---------         ---------            ---------

Income (loss) before income taxes                               508,231           473,193             (89,564)

Income taxes:
     Current                                                    277,751           306,000               35,032
     Deferred                                                         -                 -                    -
                                                              ---------         ---------            ---------
                                                                277,751           306,000               35,032


                                                              ---------         ---------            ---------
Net income (loss)                                       $       230,480    $      167,193       $    (124,596)
                                                              =========         =========            =========

Net income (loss) per share (note 12):
     Basic                                              $         0.04     $         0.04       $     (0.03)
     Diluted                                                      0.04               0.03             (0.03)
                                                              ---------         ---------            ---------
</TABLE>
          See accompanying notes to consolidated financial statements.


                                       F-5


<PAGE>
<TABLE>
<CAPTION>
V3 SEMICONDUCTOR, INC.
Consolidated Statements of Changes in Shareholders' Equity and Comprehensive Income (Loss)
(Stated in United States dollars)
                                                                        Additional
                                                                        Paid-in
                                                                        capital       Total share  Retained    Accumulated
                                                                        special       capital and  earnings    other
                                                                        shares        additional   (accumu-    comprehensive
                                  Special shares      Common shares     and common    paid-in      lated       income
                                Shares   Par value  Shares    Par value shares        capital      deficit)    (loss)

<S>                <C> <C>      <C>      <C>        <C>        <C>       <C>          <C>          <C>          <C>
Balance, September 30, 1996     709,810  $   455    3,425,428  $  3,425  $1,649,182   $1,653,062   $ (660,934)  $  (12,733)

Changes during the year:
 Conversion of special shares
   to common shares             (12,500)      (6)      12,500        13         (7)           -             -            -
 Loss for the year                    -        -            -         -          -            -      (124,596)           -
 Translation adjustment               -        -            -         -          -            -                      3,202
 Net loss and other
   comprehensive income               -        -            -         -          -            -             -         -
                               --------      ---    ---------     -----  ---------     ---------    ----------      ------
Balance, September 30, 1997     697,310      449    3,437,928     3,438  1,649,175     1,653,062     (785,530)      (9,531)

Changes during the year:
 Conversion of special shares
   to common shares            (650,942)    (325)     650,942       651       (326)           -             -            -
 Issuance of common shares            -        -    1,382,758     1,383  4,401,651     4,403,034            -            -
 Net income                           -        -            -         -          -            -       167,193            -
 Translation adjustment               -        -            -         -          -            -             -       25,259
 Net income and other
   comprehensive income               -        -            -         -          -            -             -         -
                               --------      ---    ---------     -----  ---------     ---------    ----------      ------
Balance, September 30, 1998      46,368      124    5,471,628     5,472  6,050,500     6,056,096     (618,337)      15,728

Changes during the year:
 Conversion of special shares
   to common shares             (46,368)    (124)      46,368        46         78            -             -            -
 Issuance of common shares            -        -      225,668       225    624,994       625,219            -            -
 Net income                           -        -            -         -          -            -       230,480            -
 Translation adjustment               -        -            -         -          -            -             -      (30,193)
 Net income and other
   comprehensive loss                 -        -            -         -          -            -             -         -
                               --------      ---    ---------     -----  ---------     ---------    ----------      ------
Balance, September 30, 1999           -    $   -    5,743,664    $5,743 $6,675,572   $ 6,681,315    $(387,857)  $  (14,465)
                               ========      ===    =========     =====  =========     ==========   ===========     ======
</TABLE>

   See accompanying notes to consolidated financial statements.


                                       F-6


<PAGE>
                                   Total               Comprehensive
                                   shareholders'       income
                                   equity (deficit)    (loss)

<TABLE>
<CAPTION>
<S>                <C> <C>         <C>                 <C>
Balance, September 30, 1996        $  979,395          $-

Changes during the year:
 Conversion of special shares
   to common shares                          -          -
 Loss for the year                   (124,596)          -
 Translation adjustment                 3,202           -
 Net loss and other
   comprehensive income                      -          (121,394)
                                   -----------         ----------
Balance, September 30, 1997           858,001

Changes during the year:
 Conversion of special shares
   to common shares                          -
 Issuance of common shares          4,403,034
 Net income                           167,193
 Translation adjustment                25,259
 Net income and other
   comprehensive income                      -            192,452
                                   -----------         ----------
Balance, September 30, 1998         5,453,487

Changes during the year:
 Conversion of special shares
   to common shares                          -
 Issuance of common shares            625,219
 Net income                           230,480
 Translation adjustment               (30,193)
 Net income and other
   comprehensive loss                        -            200,287
                                   -----------         ----------
Balance, September 30, 1999       $ 6,278,993
                                   ===========         ==========
</TABLE>

   See accompanying notes to consolidated financial statements.


                                       F-6

<PAGE>
V3 SEMICONDUCTOR, INC.
Consolidated Statements of Cash Flows
(Stated in United States dollars)

Years ended September 30, 1999, 1998 and 1997
<TABLE>
<CAPTION>

                                                                 1999             1998                1997
Operating activities:
<S>                                                     <C>                <C>                   <C>
     Net income (loss)                                  $      230,480     $      167,193        $   (124,596)
     Add items not involving cash:
         Depreciation and amortization                          234,745           122,757              143,151
         Deferred revenue                                      (105,394)           98,695                6,699
         Non-cash administrative services                         5,700            28,000                    -
     Changes in working capital balances:
         Accounts receivable                                   (693,336)         (522,227)             158,319
         Capital taxes payable                                    7,866             2,406                2,167
         Inventories                                            114,617           (73,038)              53,097
         Prepaid expenses                                      (124,214)           (8,522)            (11,446)
         Accounts payable                                      (143,400)          244,211              136,281
         Accrued liabilities                                     80,755            37,617               10,518
                                                               ---------         ---------            ---------
     Total cash provided by (used by)
       operating activities                                    (392,181)           97,092              374,190



Investing activities:
     Additions to capital assets                               (572,342)         (170,842)            (62,553)
                                                               ---------         ---------            ---------
     Total cash used by investing activities                   (572,342)         (170,842)            (62,553)



Financing activities:
     Repayment of bank term loan                                      -           (55,313)            (61,970)
     Repayment of obligation under capital lease                      -            (8,350)             (7,443)
     Net proceeds from issuance of common shares                619,519         4,375,034                   -
                                                               ---------         ---------            ---------
     Total cash provided by (used by)
       financing activities                                     619,519         4,311,371             (69,413)
                                                               ---------         ---------            ---------
Increase (decrease) in cash and
   cash equivalents                                            (345,004)        4,237,621              242,224

Effect of currency translation adjustments on cash               (2,378)           25,259                3,202

Cash and cash equivalents, beginning of year                  4,821,556           558,676              313,250
                                                               ---------         ---------            ---------
Cash and cash equivalents, end of year                   $    4,474,174       $ 4,821,556             $558,676
                                                               =========         =========            =========
Supplemental disclosure of cash flow information:
     Cash paid for:
         Interest                                      $          4,078    $        2,869        $       8,337
     Cash received for:
         Interest                                               155,376            66,074                2,240
     Non-cash financing and investing activities:
         Acquisition of capital assets included
           in accounts payable                                  369,030                 -                    -
         Issue of common shares for legal services                5,700            28,000                    -
</TABLE>
          See accompanying notes to consolidated financial statements.


                                       F-7
<PAGE>
1.     Significant accounting policies:


       (a)        Basis of presentation:


               V3 Semiconductor,  Inc. (the "Company") is incorporated under the
          laws of the State of Nevada. The consolidated  financial statements of
          the Company include the accounts of its wholly owned subsidiaries,  V3
          Semiconductor Corp., a Canadian company incorporated under the Ontario
          Business Corporations Act and V Cubed Corporation,  a California-based
          company,  registered in the State of Nevada. All intercompany balances
          and  transactions  have  been  eliminated.   The  Company's  principal
          business  activities  are the design  and  development  of  integrated
          circuits for the embedded computer market.


       (b)        Sales recognition:


               Sales  are  recognized  when  the  products  are  shipped  to the
          customer,  and are net of an allowance  for returns.  Sales to a major
          distributor  are  subject to an  agreement  allowing  for the right of
          return. The Company provides a reserve for estimated future returns.


       (c)        Inventories:


               Raw  materials,  which  are used in the  production  of  computer
          boards,  are  valued  at the  lower  of cost  and  replacement  value.
          Finished  goods,  which  consist of  embedded  chips are valued at the
          lower of cost (cost has been determined on the average cost basis) and
          net realizable value.


       (d)        Capital assets:


               The Company  records  capital  assets at cost, net of accumulated
          depreciation  and  amortization,  and  investment  tax credits.  These
          assets are depreciated and amortized over their estimated useful lives
          as follows:
<TABLE>
<CAPTION>

           Asset                                              Basis                                       Rate

<S>                                                           <C>                                     <C>
           Furniture and equipment                            Declining balance                            20%
           Computer equipment                                 Declining balance                            30%
           Computer software                                  Declining balance                            30%
           Patent                                             Straight line                           17 years
           Leasehold improvements                             Straight line                            5 years

</TABLE>

                                       F-8
<PAGE>
1.     Significant accounting policies (continued):


       (e)        Share issue costs:


               Share issue costs are charged against share capital.


       (f)        Revenue recognition:


               Revenues  from the sale of chipsets and chips are  recognized  at
          the time of shipment.


       (g)        Research and development costs:


               Research  and  development  costs are  charged to  operations  as
          incurred less investment tax credits related to these costs.


       (h)        Foreign currency translation:


               The  Company's  Canadian  subsidiary  measures  and  reports  its
          results  in  Canadian  dollars.  The  amounts  relating  to assets and
          liabilities  have been  translated  into United States  dollars at the
          exchange rate in effect at the balance sheet date and amounts relating
          to the profit and loss accounts have been translated  using the year's
          average exchange rate.  Differences arising from currency  translation
          are presented as a component of shareholders' equity.


       (i)        Income taxes:


               The Company  records  income taxes using the asset and  liability
          method  as  required  by  the  Financial  Accounting  Standards  Board
          Statement of Financial  Accounting  Standards No. 109,  Accounting for
          Income Taxes.  Under this method,  deferred tax assets and liabilities
          are determined based on differences  between  financial  reporting and
          tax bases of assets and liabilities and are measured using the enacted
          tax  rates  and  laws  that  are  expected  to be in  effect  when the
          differences  are  expected  to  reverse.   Valuation   allowances  are
          established  when  necessary  to  reduce  deferred  tax  assets to the
          amounts  that are more likely than not to be  realized.  The effect on
          deferred  tax  assets  and  liabilities  of a change  in tax  rates is
          recognized in the period that such tax rates changes are enacted.



<PAGE>
1.     Significant accounting policies (continued):


       (j)        Use of estimates:


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


       (k)        Cash and cash equivalents:


               The Company  considers  all highly liquid  investments  purchased
          with a maturity  of 90 days or less to be cash  equivalents.  Cash and
          cash equivalent balances consist of cash balances and term deposits.


       (l)        Other comprehensive income:


               During  the  year,   the  Company   adopted  FAS  130  "Reporting
          Comprehensive  Income," which  establishes the standards for reporting
          and displaying  comprehensive income and its components in a financial
          statement  that  is  displayed  with  the  same  prominence  as  other
          financial   statements.   The  changes  in  the  components  of  other
          comprehensive  income (loss) which consist of the currency translation
          adjustment is as follows:
<TABLE>
<CAPTION>

                                                                                                   Accumulated
                                                                                                       other
                                                                                                 comprehensive
                                                                                                  income (loss)

<S>                  <C> <C>                                                                     <C>
           September 30, 1996                                                                    $     (12,733)
           1997 change                                                                                   3,202
                                                                                                       --------
           September 30, 1997                                                                           (9,531)
           1998 change                                                                                  25,259
                                                                                                       --------
           September 30, 1998                                                                           15,728
           1999 change                                                                                 (30,193)
                                                                                                       --------
           September 30, 1999                                                                    $     (14,465)
</TABLE>


     The  currency  translation  adjustment  is not adjusted for income taxes as
they relate to a long-term investment in a non-U.S. subsidiary.
<PAGE>
2.     Inventories:
<TABLE>
<CAPTION>


       Inventories are comprised of the following:
                                                                                     1999                1998

<S>                                                                         <C>                   <C>
       Raw materials                                                        $      32,424         $      6,423
       Finished goods                                                              21,449              162,067
                                                                                   ------              -------
                                                                            $      53,873         $    168,490

</TABLE>

3. Capital assets:
<TABLE>
<CAPTION>

                                                                               Accumulated
                                                                              depreciation
                                                                                       and            Net book
       September 30, 1999                                          Cost       amortization               value



<S>                                                      <C>                 <C>                 <C>
       Furniture and equipment                           $      201,648      $      83,262       $     118,386
       Computer equipment                                     1,015,740            330,717             685,023
       Computer software                                        615,888            339,085             276,803
       Patent                                                    11,171              2,233               8,938
       Leasehold improvements                                     5,247              1,049               4,198
       Computer equipment under
         capital lease                                           21,060             14,802               6,258
                                                              ---------            -------           ---------
                                                        $     1,870,754      $     771,148      $    1,099,606



                                                                               Accumulated
                                                                              depreciation
                                                                                       and            Net book
       September 30, 1998                                          Cost       amortization               value



       Furniture and equipment                           $      131,972     $       54,165      $       77,807
       Computer equipment                                       311,661            155,045             156,616
       Computer software                                        415,283            244,431             170,852
       Patent                                                     8,461              1,510               6,951
       Computer equipment under
         capital lease                                           20,183             11,615               8,568
                                                              ---------            -------           ---------
                                                          $     887,560      $     466,766       $     420,794

</TABLE>
<PAGE>
4. Banking facilities:

               The  Company  has a $140,000  line of credit,  payable on demand,
          which bears  interest at the Canadian bank prime rate plus 2% of which
          none was drawn at September 30, 1999.  Advances under the facility are
          secured by a general security agreement covering substantially all the
          assets of the Company.

5. Capital stock:

               The  authorized   capital  stock  of  the  Company  consists  of:
          50,000,000  common  shares with a par value of $.001 each,  10,000,000
          preferred  shares,  which may be issued in different  series and whose
          rights and privileges  are to be determined at the time of issue,  and
          3,400,000 special shares with a par value of $0.0005 each. The special
          shares are voting,  are not entitled to any  dividends  and can not be
          transferred without the consent of the Board of Directors.

               The  holders  of the  special  shares  are able to  exchange  one
          special share  together with one preferred  share of V3  Semiconductor
          Corp. for one common share of the Company.


       (a) The Company undertook a private  placement  offering (the "Offering")
           of common shares at $3.50 per common share. The offering contemplated
           a minimum of $1,000,000  and a maximum of  $5,500,000.  In connection
           with the Offering between the Company and The Mason Cabot Division of
           W. J. Nolan & Co.,  (the  "Placement  Agent"),  the  Placement  Agent
           offered the minimum  offering on a "best efforts,  all or none" basis
           and any  additional  shares  up to the  maximum  offering  on a "best
           efforts"  basis.  The Company agreed to pay the Placement Agent a fee
           of 7% of each common share sold, plus an expense allowance of 1.5% of
           the aggregate  purchase  price of the common shares sold. The Company
           also  granted to the  Placement  Agent,  warrants to purchase  96,505
           common shares.  Each warrant has a 3-year exercise period  commencing
           on the date of the Final  Closing (June 22, 1998) at $3.50 per common
           share.  The Company received net proceeds in the amount of $2,188,000
           representing  the issuance of 687,926  common  shares in May 1998 and
           $2,186,000 representing the issuance of 684,732 common shares in June
           1998.  Share  issue  costs  relating  to the May 1998  and June  1998
           private placement offerings were $219,316 and $210,155, respectively.


       (b) During the year, the Company issued 1,000 common shares in the amount
           of $5,700 as consideration for legal services.
<PAGE>
5.     Capital stock (continued):


        (c) During  fiscal  1996,  the board of  directors  approved  an
          employee share  purchase plan. The plan reserves  20,000 common shares
          for purchase by eligible  employees and permits  employees to purchase
          common stock through payroll  deductions at a purchase price of 90% of
          the fair market value of the common  shares on the purchase  date.  No
          shares have yet been issued under this plan.


       (d)        Stock option plan:


               During fiscal 1996,  the board of directors  approved an employee
          stock option plan.  Pursuant to the plan,  250,000  common  shares are
          reserved for issue to eligible  employees.  During  fiscal  1997,  the
          board of directors  approved an amendment to the employee stock option
          plan to increase the shares  reserved  for issue from  250,000  common
          shares to 400,000.  In addition,  the board of directors  approved the
          issuance of 10,000 options to each director as compensation.


               During 1999,  the board of directors  approved the 1999  employee
          stock option plan.  Pursuant to this plan,  700,000  common shares are
          reserved for issue to eligible employees.


               Under  the 1996  stock  option  plan,  a total of  568,983  share
          options were  granted and  approved by the board of  directors  during
          1996 to 1998 which expire between July 1999 and February 2006. Of this
          total,  90,833  options  were  granted to the  members of the board of
          directors and 160,000  options were granted to an officer and director
          of the Company. The options granted to the officer and director of the
          Company are in addition to the  options  reserved  under the  employee
          stock option plan.  The exercise  prices of these  options  range from
          $1.75 to $6.25 per share.


               Under  the 1999  stock  option  plan,  a total of  623,400  share
          options were granted and approved by the board of directors during the
          year which expire  between  February and September  2009. The exercise
          prices of these options range from $3.40 to $9.16 per share.



<PAGE>
5.     Capital stock (continued):


               The Company  measures  compensation  cost for stock option awards
          issued  to  employees  using  the  intrinsic  value  based  method  of
          accounting prescribed by the United States Accounting Principles Board
          Opinion  No.  25,  "Accounting  for Stock  Issued to  Employees".  Had
          compensation cost for these plans been determined under the provisions
          of the United States Financial Accounting Standards Board Statement of
          Financial  Accounting  Standards No. 123,  "Accounting for Stock-Based
          Compensation"  which utilizes a fair value based method, the Company's
          net  income  (loss)  and  earnings  (loss)  per share  would have been
          changed to the following pro forma amounts:
<TABLE>
<CAPTION>

                                                1999                         1998                         1997
                                    As           Pro            As            Pro            As            Pro
                              reported         forma      reported          forma      reported          forma


<S>                        <C>           <C>           <C>            <C>           <C>           <C>
           Net income
              (loss)       $   230,480   $  (280,002)  $  (167,193)   $  (191,992)  $  (124,596)  $   (319,321)

           Net income
           (loss) per share:
                Basic             0.04      (0.05)            0.04      (0.04)          (0.03)        (0.08)
                Diluted           0.04      (0.05)            0.03      (0.04)          (0.03)        (0.08)
</TABLE>

               For purposes of the pro forma disclosures, the fair value of each
          option grant is estimated on the date of grant using the Black-Scholes
          option pricing model with following weighted average  assumptions used
          for options as at  September  30, 1999,  1998 and 1997,  respectively:
          risk-free  interest rates of 5.0%,  5.0% and 5.0%;  expected  dividend
          yields of 0%, 0% and 0%; expected  volatility of 90%, 90% and 90%; and
          expected lives of 3 years, 5 years and 5 years.



<PAGE>
5.     Capital stock (continued):


               Certain  additional   disclosures  with  respect  to  stock-based
          compensation are as follows:


               Stock option information:
<TABLE>
<CAPTION>

                                                1999                         1998                         1997
                                            Weighted                     Weighted                     Weighted
                                             average                      average                      average
                                            exercise                     exercise                     exercise
                                Number         price        Number          price        Number          price
<S>                            <C>          <C>            <C>           <C>            <C>          <C>
           Balance,
              beginning
              of year          548,483      $   3.39       384,083       $  2.87        283,750      $    2.95

           Options
              granted          643,900          3.96       164,500          4.59        100,333           2.67

           Options
              exercised       (224,768)         2.76          (100)             -             -              -

           Options
              cancelled        (55,166)         3.35             -              -             -              -
                              ---------         ----       -------          -----      --------          -----
           Balance,
              end of year      912,449      $   3.95       548,483       $  3.39        384,083      $    2.87
                              =========         ====       =======          =====      ========          =====
           Exercisable, at
              end of year      227,813                     395,096                      322,798
                              =========         ====       =======          =====      ========          =====

</TABLE>

               Stock options outstanding and exercisable as at September 30 1999
          are as follows:
<TABLE>
<CAPTION>

                         Options outstanding                                      Options exercisable
                                                                       Weighted
                                                                       average
                                                                       remaining
                                                                       contractual
           Exercise price                      Number                  life                             Number

<S>        <C>       <C>                       <C>                     <C>   <C>                        <C>
           $  1.75 - 2.00                      38,000                  1.0 - 3.0 years                  85,682
              2.02 - 2.75                      16,000                  3.1 - 4.0 years                  76,831
              3.00 - 3.88                     537,283                  4.1 - 5.0 years                       -
              4.00 - 6.25                     276,866                  5.0 - 8.0 years                  65,300
              6.78 - 9.16                      44,300
                                              -------                                                  -------
                                              912,449                                                  227,813

</TABLE>
<PAGE>
6.     Revenue:

       Included in revenue are the following amounts:
<TABLE>
<CAPTION>

                                                                   1999               1998                1997

<S>                                                        <C>                <C>                 <C>
       Royalty income                                      $     56,854       $     91,136        $    257,472
       Consulting fees                                                -             36,122                   -
       Interest                                                 161,197             73,391               2,240
                                                                -------            -------             -------
                                                           $    218,051       $    200,649        $    259,712

</TABLE>

               The  Company's   Canadian   subsidiary  entered  into  a  royalty
          agreement  with one of its suppliers  whereby the supplier was granted
          the  right  to sell  the  Company's  product.  The  royalty  agreement
          provided for a 50% royalty  payment on the first 100,000 units shipped
          to  customers  and a 7.5%  royalty  payment  on any  additional  units
          shipped to customers up to a maximum royalty payment of  approximately
          $1.7 million. As at September 30, 1999,  approximately $1.6 million of
          royalty  payments have been received.  Royalty revenues are recognized
          in accordance with the terms of the agreement.


7. Research and development:


       (a)        Government assistance:


               Research  and   development   is   undertaken   by  the  Canadian
          subsidiary.  The Company  received  government  assistance  covering a
          portion  of  the  salaries   incurred  on   qualifying   research  and
          development  projects.  Government  assistance  has been  accrued  and
          netted against the research and development expense as follows:


1999   $ 16,615
1998    157,958
1997    124,989

<PAGE>
7.     Research and development (continued):


       (b)        Investment tax credits ("ITCs"):


               The  Company's  Canadian  subsidiary  incurs  current and capital
          expenditures   which  are   eligible  as   scientific   research   and
          experimental  development  ("SR&ED")  expenditures.  The Company earns
          ITCs at a rate of 20% on SR&ED  expenditures each year. These ITCs are
          available for application  against the Canadian  subsidiary's  federal
          income  taxes  payable.  Unclaimed  ITCs can be carried  forward for a
          period of 10 years.  The Company has  unclaimed  ITCs in the amount of
          $590,500 which expire on September 2009.


               ITCs claimed each year have been netted  against the research and
          development expense as follows:




1999   $173,591
1998    306,000
1997     35,000

               In the  current  year,  $110,823  of ITCs was netted  against the
          capital assets acquired for research and development purposes.


       (c)        Research and development expenditures:


               The Company's Canadian subsidiary incurs SR&ED expenditures which
          can be deducted  against  taxable  income.  The Company has undeducted
          SR&ED  expenditures  of  approximately   $2,976,723  available  to  be
          deducted  against  future  years'  taxable  income  and can be carried
          forward indefinitely.



<PAGE>
8. Income taxes:

               The tax  effects  of  temporary  differences  that  give  rise to
          significant  portions  of the  deferred  tax assets and  deferred  tax
          liabilities at September 30, 1999, are presented below:
<TABLE>
<CAPTION>

                                                                 Canada      United States               Total
       Deferred tax assets:
<S>                                                        <C>             <C>                    <C>
           Net operating loss carryforwards                $      -        $       87,600         $     87,600
           Unclaimed research and
              development expenditures                          896,600                 -              896,600
           Unclaimed investment tax credits                     590,500                 -              590,500
                                                              ---------           -------           ----------
           Total gross deferred tax assets                    1,487,100            87,600            1,574,700

           Less valuation allowance                          (1,096,900)          (87,600)          (1,184,500)
                                                              ---------           -------           ----------
           Net deferred tax assets                              390,200                 -              390,200

       Deferred tax liabilities:
           Investment tax credits                               390,200                 -              390,200
                                                              ---------           -------           ----------
           Total gross deferred tax liabilities                 390,200                 -              390,200



       Net deferred tax liability                       $             -      $          -       $            -
                                                              =========           =======           ==========




               The  tax  effect  of  temporary  differences  that  give  rise to
          significant  portions  of the  deferred  tax assets and  deferred  tax
          liabilities at September 30, 1998, are presented below:

                                                                Canada      United States               Total





       Deferred tax assets:
           Net operating loss carryforwards                  $      -        $    130,400      $       130,400
           Unclaimed research and
              development expenditures                          828,700                 -              828,700
           Unclaimed investment tax credits                     215,200                 -              215,200
                                                              ---------           -------           ----------
           Total gross deferred tax assets                    1,043,900           130,400            1,174,300

           Less valuation allowance                            (681,400)         (130,400)            (811,800)
                                                              ---------           -------           ----------

           Net deferred tax assets                              362,500                 -              362,500

       Deferred tax liabilities:
           Investment tax credits                               232,500                 -              232,500
           Fixed assets                                         130,000                 -              130,000
                                                              ---------           -------           ----------
           Total gross deferred tax liabilities                 362,500                 -              362,500
                                                              ---------           -------           ----------
       Net deferred tax liability                       $             -      $          -       $            -
                                                              =========           =======           ==========

</TABLE>
<PAGE>
8.     Income taxes (continued):

               At September 30, 1999, the Company's United States subsidiary had
          operating loss carryforwards for tax purposes which expire as follows:

2010   $ 56,000
2011     76,000
2013     87,000

       $219,000

               The effective tax rate on income is different  from the statutory
          income tax rate as follows:
<TABLE>
<CAPTION>

                                                                   1999            1998               1997

<S>                                                                <C>             <C>                <C>
       Statutory tax rate                                          44.6%           44.6%              44.6%

       Effect of ITC claims                                       (15.2)          (28.8)              17.4
       Other                                                       (1.0)            0.7               (3.0)
       SR & ED expenditures not tax effected                       34.7            96.3              (89.6)
       Losses utilized not tax effected                            (8.4)          (48.1)              (8.5)

                                                                   54.7%           64.7%             (39.1)%


</TABLE>
9. Related party transactions:

               A shareholder  provided  consulting and  management  services for
          fees  which are  included  in  research  and  development  expense  as
          follows:

1999   $  --
1998    28,246
1997    67,757


               These transactions are in the normal course of operations and are
          measured at the exchange amount,  which is the amount of consideration
          established and agreed to by the related parties.
<PAGE>
10.    Commitments:

               (a) The Company  leases office  premises under  operating  leases
          which expire in 2002.

               The minimum lease payments due under these leases are as follows:

Year ending September 30:

2000           $21,641
2001            23,768
2002             7,923

               $53,332


               (b) The Company has entered into a five year employment agreement
          with the  Company's  President  and  Chief  Executive  Officer,  which
          commenced  February  1996. The  employment  agreement  provides for an
          annual base salary of approximately $136,000 (Cdn. $200,000).


11. Contingent liabilities:


               (a) A lawsuit was instituted against the Company's  subsidiary by
          a former  employee for entitlement of additional  preferred  shares of
          the Company in 1995.  The Company has  contested  the legal action and
          management  believes that it has a valid  defense in this matter.  The
          Company  cannot  estimate  the  reasonable  possible  loss  from  this
          contingency  as neither the number of  additional  shares nor a dollar
          amount was specified on the claim.


               (b)  During  fiscal  1996,  a  breach  of  contract  lawsuit  was
          instituted   against  the  Company's   subsidiary  in  the  amount  of
          $6,000,000.  The Company filed a Statement of Defense in December 1995
          and  offered to settle the  lawsuit  for  $30,000.  Management,  after
          consulting  legal  counsel,  is of the opinion  that the Company has a
          strong defense to the claim.  The Company has estimated that the range
          of loss is between  $30,000 and  $6,000,000  and has accrued  $30,000,
          representing  the settlement  offer amount as its best estimate within
          the range.



<PAGE>
12. Net income (loss) per share:

               Net  income  (loss)  per  share  has been  calculated  using  the
          weighted  average  number of common  and  special  shares  outstanding
          during the periods.  Special shares have been included in the weighted
          average  number  of  shares  outstanding  as the  special  shares  are
          exchangeable into common shares of the Company (note 5).


               The  weighted   average  number  of  common  and  special  shares
          outstanding  which was used to  calculate  the net  income  (loss) per
          share was:

1999   5,563,788
1998   4,742,496
1997   4,135,238

               Application   of  the   provisions   of  Statement  of  Financial
          Accounting  Standards  No. 128 results in disclosure of two income per
          share  measures,  basic  and  assuming  dilution,  on the  face of the
          consolidated statement of income.



<PAGE>
12. Net income (loss) per share (continued):

               The reported net income  represents  the net income  available to
          common  and  special  shareholders  for  purposes  of  computing  both
          measures. The following reconciles shares outstanding at the beginning
          of the year to average shares  outstanding used to compute both income
          per share measures:
<TABLE>
<CAPTION>

                                                                   1999               1998                1997
       Common and special shares outstanding,
<S>                                                           <C>                <C>                 <C>
         beginning of year                                    5,517,996          4,135,238           4,135,238

       Weighted average shares issued                            45,792            607,258                   -

       Weighted average shares cancelled                              -                  -                   -
                                                              ---------          ---------           ---------
       Average shares outstanding - basic                     5,563,788          4,742,496           4,135,238

       Effect of dilutive securities:
         Dilutive shares contingently
           issuable upon the exercise
           of stock options and warrants                        850,382            487,284             325,719

       Shares assumed to have been
          purchased for treasury with assumed
          proceeds from the exercise of stock
          options and warrants                                 (695,907)          (384,782)            (90,603)
                                                              ---------          ---------           ---------
       Average shares outstanding -
         assuming dilution                                    5,718,263          4,844,998           4,370,354
                                                              =========          =========           =========
</TABLE>

<PAGE>
13. Segment information:

               The Company's operations involve a single operating segment - the
          design  and  development  of  integrated  circuits  for  the  embedded
          computer market. Substantially,  all the operations of the Company are
          conducted  by, and assets held by the Canadian  subsidiary.  Financial
          information, summarized by geographic area, is as follows:
<TABLE>
<CAPTION>

                                                                   1999               1998                1997

       Sales

<S>                                                     <C>               <C>                   <C>
       Canada                                           $     6,825,302   $     3,821,512       $    1,951,453
       United States                                            866,000           508,940              318,000
       Corporate - United States                                      -                 -                    -
       Eliminations                                            (866,000)         (508,940)            (318,000)
                                                              ----------        ----------           ----------
       Total sales                                      $     6,825,302   $     3,821,512       $    1,951,453
                                                              ==========        ==========           ==========
       Income (loss) before income taxes

       Canada                                           $       443,910   $       565,027       $      (37,158)
       United States                                            127,965            (9,703)             (15,109)
       Corporate expenses - United States                       (62,592)          (87,664)             (43,904)
       Eliminations                                              (1,052)            5,533                6,607
                                                              ----------        ----------           ----------
       Total income (loss) before income taxes          $       508,231   $       473,193       $      (89,564)
                                                              ==========        ==========           ==========
       Assets

       Canada                                           $     3,169,575   $     1,721,251       $    1,059,756
       United States                                             89,762            38,342               30,750
       Corporate - United States                              3,979,679         4,445,060              199,395
                                                              ----------        ----------           ----------
       Total assets                                     $     7,239,016   $     6,204,653       $    1,289,901
                                                              ==========        ==========           ==========
</TABLE>

               The corporate assets consist mainly of cash and cash equivalents.
          The United States operations provide marketing services exclusively to
          the Canadian subsidiary.
<PAGE>
13.    Segment information (continued):


               The  Company  has  several  customers  whose  sales  represent  a
          significant portion of the Company's total sales. Sales to each of the
          four  major  customers  for the year  ended  September  30,  1999 were
          $3,777,000,  $640,000, $525,000 and $416,000,  respectively.  Sales to
          each of the four major customers for the year ended September 30, 1998
          were $1,572,000,  $397,000, $360,000 and $317,000, respectively. Sales
          to each of the two major  customers  for the year ended  September 30,
          1997 were $644,000 and $585,000,  respectively. Sales to all customers
          are conducted in United States dollars.


               Export  sales  by  the  Company's  Canadian  subsidiary  were  as
          follows:
<TABLE>
<CAPTION>

                                                                   1999               1998                1997

<S>                                                     <C>                 <C>                 <C>
       United States                                    $     1,903,036     $    1,630,091      $      526,892
       Middle East                                              527,702            397,382             585,436
       Other                                                    516,603            209,029             175,631
                                                              ---------          ---------           ---------
                                                        $     2,947,341     $    2,236,502      $    1,287,959
</TABLE>

               The Company's largest customer is being  investigated by the U.S.
          Federal Bureau of Investigation relating to certain industry practices
          known as "ship from stock and  debit."  Ship from stock and debit is a
          practice where distributors  purchase parts from suppliers at inflated
          prices and,  subsequently,  receive  credits or rebates when a sale is
          made to a  customer  at a price  that is below the list price for such
          parts.

               The  customer  has advised  the Company  that it does not believe
          that it has committed any wrong doing and that such investigation will
          not affect business  transactions with the Company.  In the event that
          the  customer  ceases  operations,  the  Company's  business  could be
          materially adversely affected.

14. Financial instruments:

               The reported  values of financial  instruments  which  consist of
          cash and cash equivalents,  accounts receivable,  accounts payable and
          accrued   liabilities   approximate  their  fair  values  due  to  the
          short-term nature of these instruments.

<PAGE>
15. Concentration of credit risk:

               Financial  instruments  which  potentially  expose the Company to
          concentrations   of  credit  risk  consist   principally  of  accounts
          receivable.

               The Company's exposure to credit risk is impacted by the economic
          conditions  of the  embedded  systems  market  which could  affect the
          customers'  ability to satisfy their  obligations  to the Company.  In
          order to reduce  risks,  the  Company has credit  procedures  in place
          whereby  trade  receivables  are  insured  and  the  insuring  company
          performs  analysis  to control  the  granting  of credit to  high-risk
          customers.

16. New accounting standards not yet adopted:

               FAS 133,  "Accounting  for  Derivative  Instruments  and  Hedging
          Activities",   establishes  accounting  and  reporting  standards  for
          derivative  instruments  and  for  hedging  activities.   It  requires
          derivative  instruments  to be recognized in the balance sheet at fair
          value.  Changes  in the  fair  value  of  derivative  instruments  are
          recognized  in  earnings  in the  period of  change,  unless  they are
          designated as hedging  instruments.  FAS 133 is required to be adopted
          in the year ending September 30, 2001.

               The American Institute of Certified Public Accountants has issued
          Statements of Position entitled  "Accounting for the Costs of Computer
          Software  Developed or Obtained for Internal Use" and  "Reporting  the
          Costs of Start-Up  Activities"  which the Company is required to adopt
          in the year ending September 30, 2000.

               Management  does not  believe  that  the  adoption  of these  new
          accounting  standards will materially affect its historical results of
          operations or shareholders' equity.

<PAGE>
                                   Signatures

     In accordance  with Section 13 or 15(d) of the Exchange Act, the registrant
caused this report to be signed on its behalf by the undersigned, thereunto duly
authorized on this 27th day of December, 1999.


                                                          V3 SEMICONDUCTOR, INC.

                                                               /s/ Carl Mitchell
                                                 Carl Mitchell, General Manager,
                                              Secretary, Treasurer and Principal
                                                               Financial Officer