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DELANO TECHNOLOGY CORPORATION - 10K - Annual Report
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                                  UNITED STATES
                       SECURITIES AND EXCHANGE COMMISSION
                             Washington, D.C. 20549
                      ------------------------------------


                                    FORM 10-K

(x)  Annual Report Pursuant to Section 13 or 15(d) of the Securities Exchange
     Act of 1934.

     For the fiscal year ended March 31, 2000; 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 NO. 333-94505

                          DELANO TECHNOLOGY CORPORATION
             (Exact name of Registrant as specified in its charter)

     ONTARIO, CANADA                                        98-0206122
(Province or other Jurisdiction of                      (I.R.S. Employer
   Incorporation or Organization)                      Identification No.)

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

             302 TOWN CENTRE BOULEVARD                         L3R 0E8
             MARKHAM, ONTARIO, CANADA                         (Zip code)
(Address of Registrant's principal executive offices)

Registrant's telephone number, including area code            905-947-2222

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

  Securities registered pursuant to Section 12(g)     COMMON STOCK NO PAR VALUE
                  of the Act:                              (Title of Class)

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

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

Indicate by check mark if disclosure of delinquent filers pursuant to Item 405
of Regulation S-K is not contained herein, and will not be contained, to the
best of the Registrant's knowledge in definitive proxy or information statements
incorporated by reference in Part III of this Form 10-K or any amendment to this
Form 10-K. [X]

The aggregate market value of the voting stock held by non-affiliates of the
Registrant, based upon the closing sale price of the Common Stock on June 16,
2000 as reported on the Nasdaq National Market, was approximately $265.7
million. Shares of Common Stock held by each officer and director and by certain
persons who owned 5% or more of the Registrant's outstanding Common Stock on
that date have been excluded in that such persons may be deemed to be
affiliates. This determination of affiliate status is not necessarily a
conclusive determination for other purposes.

As of Friday, June 16, 2000 Registrant had outstanding 29,974,958 shares of
Common Stock.


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DELANO TECHNOLOGY CORPORATION - 10K - Annual Report
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                          DELANO TECHNOLOGY CORPORATION

                                TABLE OF CONTENTS

                           ANNUAL REPORT ON FORM 10-K
                          FOR YEAR ENDED MARCH 31, 2000


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                                                                                  ----
<S>        <C>                                                                    <C>
                                     PART I
Item 1     Business.............................................................    3
Item 2     Properties...........................................................   11
Item 3     Legal Proceedings....................................................   11
Item 4     Submission Of Matters To A Vote Of Security Holders..................   11

                                     PART II

Item 5     Market For Registrant's Common Equity And Related Stockholder
           Matters..............................................................   11
Item 6     Selected Consolidated Financial Data.................................   15
Item 7     Management's Discussion And Analysis Of Financial Condition
           And Results Of Operations ...........................................   16
Item 7A    Qualitative And Quantitative Market Risk.............................   21
Item 8     Delano Technology Corporation Index To Consolidated
           Financial Statements.................................................   32
Item 9     Changes In And Disagreements With Accountants On Accounting And
           Financial Disclosure.................................................   48

                                     PART III

Item 10    Directors And Executive Officers Of The Registrant...................   49
Item 11    Executive Compensation...............................................   52
Item 12    Security Ownership Of Certain Beneficial Owners And Management.......   55
Item 13    Certain Relationships and Related Transactions.......................   56

                                      PART IV

Item 14    Exhibits And Financial Statement Schedules...........................   58
Signatures .....................................................................   59
</TABLE>





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                SPECIAL NOTE REGARDING FORWARD-LOOKING STATEMENTS

      This Annual Report on Form-10K contains so-called forward-looking
statements including statements about our expectations, beliefs, intentions or
strategies for the future, which we indicate by words or phrases such as
"anticipate," "expect," "intend," "plan," "will," "we believe," and similar
language. We base all forward-looking statements on our current expectations and
these statements are subject to risks and uncertainties and to assumptions we
have made. Important factors that could cause our actual results to differ
materially from those expressed or implied by these forward-looking statements
include those listed under "Risk Factors" or described elsewhere in this Annual
Report on Form 10-K.

                                     PART I

ITEM 1: BUSINESS

OVERVIEW

      We provide communications software that enables companies to rapidly
automate business processes and personalize and manage interactions over the
internet with their existing and prospective customers, partners, suppliers and
employees. These interactions, or e-business applications consist of inbound and
outbound communications through e-mail as well as communications through
companies' web sites. Companies can use applications developed with our software
to initiate, route, track, analyze, respond to and manage inbound and outbound
e-business communications. We are focusing our sales efforts on businesses in
the financial services, technology, telecommunications, transportation, retail
and marketing services industries, as well as other organizations engaged in, or
focused on, business-to-business or business-to-customer commercial
opportunities using the internet. Where desirable, our professional services
group can assist our clients' internal IT personnel to implement our products.

INDUSTRY BACKGROUND

      The internet is growing dramatically as a means of conducting business.
According to International Data Corporation, electronic commerce will increase
from $50.4 billion in 1998 to $1.3 trillion by 2003, as more consumers shop
online and the internet becomes an accepted channel for business-to-consumer and
business-to-business interactions. International Data Corporation estimates that
the number of web users will increase from 142.2 million in 1998 to 502.4
million in 2003. Businesses are using e-mail and the web to interact more
effectively with existing and prospective customers, partners, suppliers and
employees. For example, companies in industries such as financial services,
telecommunications, transportation, retail and marketing services increasingly
rely on e-mail and communications through web sites instead of traditional means
of communication such as telephone calls, letters, facsimiles and face-to-face
meetings. E-mail and the web, which once were used primarily within the
technical community, have become mainstream methods of communication.

      In order to take advantage of the internet to communicate, businesses need
solutions that can manage both inbound and outbound traffic. For example,
Jupiter Communications conducted a survey of 125 companies with content,
consumer brands, travel, retail and financial services web sites and discovered
that 51% of those sites either took longer than five days to reply to e-mail
inquiries or failed to respond at all. Clients need solutions to manage the
growing volume of traffic associated with the increased use of the internet. For
example, Gartner Group estimates that the worldwide customer relationship
management application market will grow from $2.9 billion in 1998 to $20 billion
by 2003, and the Direct Marketing Association estimates that interactive
direct-marketing expenditures will increase from $379.7 million in 1998 to $3.2
billion by 2003.

      To date, organizational and operational constraints have made it difficult
and expensive to automate interactions and business processes between a company
and its customers, partners, suppliers and employees. Companies seeking to
implement e-business communications must either develop their own custom
applications or purchase prepackaged software. Customized applications for
specific business requirements are often expensive and complex. In addition,
since applications typically are developed for internal business processes, they
may not be easily adapted to communicate with customers, partners, suppliers and
employees over the internet. Although prepackaged software can eliminate a
portion of the time and expense required to develop a customized application,
the implementation and subsequent upgrades of a pre-packaged solution may
require business process changes or software customization that strains internal
IT resources. Since prepackaged software often is designed to address a single
operational area, an organization may encounter difficulties using prepackaged
software to address the needs of other operational areas or to communicate with
customers, partners,



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suppliers and employees over the internet. In addition, pre-packaged software
may not leverage an organization's existing IT infrastructure, resulting in
redundancies in software and data.

      Businesses increasingly require a solution that enables them to rapidly
develop and deploy applications that automate, personalize and manage their
interactions over the internet. The solution must leverage businesses' existing
IT infrastructures to provide a broad range of applications across many
operational areas. It must be able to handle large volumes of communications
reliably and cost-effectively to meet businesses' growing dependence on
communications over the internet. Finally, the solution must extend beyond the
walls of the enterprise to reach and connect customers, suppliers and partners.

THE DELANO SOLUTION

      Our solution is based on the Delano(TM) e-Business Interaction Suite(TM),
which enables businesses to rapidly develop and deploy applications that
automate business processes and personalize and manage interactions over the
internet with their customers, partners, suppliers and employees. We believe
that our solution offers the following specific benefits to our clients:

      Enhanced Communications. Our e-business applications enable an
organization to develop and deploy e-business applications across many
operational areas, including finance, marketing, sales, service, operations and
human resources. Our products permit our clients to respond rapidly and
effectively to large volumes of e-mail and web-based communications. For
example, our products allow companies to automatically respond to large numbers
of inbound communications received by e-mail or through websites and route
inquiries to the appropriate departments for action. Our products also enable
organizations to capture and analyze information by communicating with a
client's existing corporate databases and directories. Our clients can use this
information to design better marketing programs, products and services and to
improve business processes to meet the needs of their customers, partners,
suppliers and employees.

      Rapid Deployment. Our products use a "drag and drop" style interface that
allows our clients to define and outline a business process by arranging
application components in a flowchart-style environment. The application
components serve as the building blocks of the e-business application. This
component-based architecture enables our clients to develop a wide range of
e-business applications in a matter of days or weeks. The flexible and open
nature of our component-based architecture enables the Delano e-Business
Interaction Suite to be integrated with our clients' existing systems,
applications and databases, extending the capabilities of our clients' existing
IT infrastructure.

      Scalability. We have designed our products to reliably support multiple
business processes and thousands of simultaneous e-business interactions. Our
component-based architecture supports incremental additions to hardware capacity
to address increased communication volumes.

      Increased Revenue Opportunities and Reduced Operating Costs. We believe
our products can help our clients increase their revenues and reduce their
operating costs. For example, clients can generate revenue through applications
for marketing campaigns and for lead tracking and management. Our service
improvement applications, which include electronic surveys, personalized
newsletters and inbound e-mail support, can lead to increased revenues by
increasing customer loyalty. Using our solution enables clients to process large
volumes of e-business communications automatically, using a reduced number of
support and administrative personnel, which results in lower costs than can be
achieved using traditional methods such as call centers. Clients also can reduce
costs by using our applications for processes such as overdue accounts
receivable notification, automated customer support, inventory management and
self-service.

BUSINESS STRATEGY

      Our objective is to establish our products as the leading e-business
software. The following are the key elements of our strategy for achieving this
objective:

      Extend Technology Leadership. We intend to continue to develop and improve
our products to extend our technological leadership. We believe we are the first
to market a component-based architecture designed to rapidly develop and deploy
e-business applications that can connect most of a business's operational areas
to its customers, partners, suppliers and employees. We intend to continue to
develop new and enhanced products, including products designed to manage higher
volumes of communications and improve integration with our clients' existing IT
infrastructures. In addition, we are continuing to develop e-business
applications such as the Delano Velocity application suites, which are being
designed as prepackaged applications for specific business areas to further
reduce the time required to develop and deploy e-business applications.



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      Increase Penetration of Target Markets. We are focusing our sales efforts
on industries that we believe are early adopters of e-business applications. We
use our in-house industry expertise to supply our products to organizations in
the financial services, technology, telecommunications, transportation, retail
and marketing services industries as well as to other organizations that are
engaged in, or focused on, business-to-business or business-to-consumer
commercial opportunities over the internet. We intend to develop new products
for particular application areas that are relevant to our target industries.

      Increase Presence Worldwide. We plan to extend our commitment to
international sales and support to take advantage of the growing worldwide
demand for e-business applications. We have opened an office in the United
Kingdom, which oversees and processes all orders for our products and services
in Europe and parts of Africa. We intend to increase our international presence
by opening additional offices and intensifying marketing activities in Europe,
and allying ourselves with selected international third-party distribution
companies, consulting organizations and software vendors.

      Increase Distribution Capabilities. We have entered into agreements with
established third-party distribution companies, consulting organizations and
software vendors, including Clarify, Macromedia, Deloitte Consulting and
PricewaterhouseCoopers, to enhance our market presence and extend our sales and
services resources. We intend to enter into additional agreements to further
expand the distribution channels for our products.

      Pursue Strategic Acquisitions. We intend to pursue acquisitions of
complementary technologies and expertise. Acquisitions will be made only if we
believe that they are financially attractive and present opportunities for
expanding growth. For example, we will seek to identify opportunities to acquire
technologies and personnel that will help us to expand the breadth of our
applications and provide us with additional domain expertise.

PRODUCTS

      Our solution is based on the Delano e-Business Interaction Suite, which
automates business processes that utilize e-mail or the web to interact with a
client's customers, partners, suppliers and employees. We also offer other
products that complement the Interaction Suite and focus on specific
technologies or business areas, including products that manage higher volumes of
communications, improve integration with our clients' existing IT infrastructure
and further reduce the time required to develop and deploy e-business
communications applications.

Delano e-Business Interaction Suite

      The Delano e-Business Interaction Suite is an e-business platform that
enables companies to rapidly develop and deploy e-business applications. The
Interaction Suite consists of the following:

      -     The Delano e-Business Interaction Server is an application server
            designed to manage thousands of e-business communications
            applications simultaneously. The Interaction Server is Microsoft
            Windows NT-based and includes an application repository to manage
            the storage and version control of e-business communications
            applications. The Interaction Server also manages and controls the
            quantity of applications or interactions covered by the client's
            license. The Interaction Server communicates directly with e-mail,
            web, database and directory servers. Multiple Interaction Servers
            can operate effectively within a client's enterprise.

      -     The Delano e-Business Application Builder is a graphical application
            builder environment, designed to enable our clients to develop
            e-business applications simply and quickly. The Application Builder
            uses a "drag-and-drop" style interface that allows our clients to
            define and outline a business process by arranging application
            components in a flowchart-style environment. The application
            components serve as the building blocks of the e-business
            application. The Application Builder enables a client to develop
            e-business applications, that, among other things:

            -     interface with existing corporate databases;

            -     connect to corporate directories;

            -     gather information from, and post information to, a web
                  server;

            -     send and receive e-mail using popular e-mail protocols, such
                  as Post Office Protocol 3 or POP3, Internet Message Access
                  Protocol 4 or IMAP4, and Simple Mail Transfer Protocol or
                  SMTP; and


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            -     parse and personalize various document types, including
                  documents in text, HyperText Markup Language or HTML, and
                  eXtensible Markup Language or XML formats.

      -     The Delano e-Business Interaction Server Administrator is a program
            that enables our clients to configure, administer and manage
            e-business applications created with the Application Builder and
            executed on the Interaction Server. The Server Administrator is
            available as a Windows NT application or as a web application to
            enable remote administration.

Delano Component Pack for BackOffice

      Our component packs are being designed as groupings of components to
improve integration of the Interaction Suite with our clients' existing IT
infrastructures. In October 1999, we introduced the Delano Component Pack for
BackOffice, which delivers enhanced integration with, and access to, Microsoft
SQL Servers, Microsoft Exchange Servers, Microsoft Message Queues and Microsoft
Active Directories.

Delano Component Pack for Databases

      The Delano Component Pack for Databases increases the integration
capabilities of the Delano e-Business Interaction Suite by providing native
database support for leading databases including Informix and Oracle. The Delano
Component Pack for Databases extends the breadth of Delano's integration
capabilities with other enterprise applications, enabling database events to
trigger e-business interactions.

Delano Enterprise Connectivity

      Delano Enterprise Connectivity extends the Delano e-Business Interaction
Suite to provide seamless connectivity and integration between applications
deployed on Delano's e-business platform and middleware technology, such as
BEA/Tuxedo and CORBA, as well as mission-critical enterprise applications, such
as SAP and PeopleSoft.

Delano Component Development Kit

      The Delano Component Development Kit enables software developers to create
customized components for use within the Interaction Suite. Our clients can
create customized components that integrate with their legacy or other
specialized IT systems, such as enterprise resource planning or customer
relationship management systems.

Delano Application Templates

      The Delano Application Templates are designed to act as a starting point
for our clients to develop their own e-business communications applications. We
currently offer eleven application templates, including templates that act as
starting points for developing outbound marketing campaigns, customer surveys,
credit management applications and customer support applications.

Delano Campaign Server

      The Campaign Server reliably manages the processing of high volumes of
outbound e-mail initiated from the Interaction Suite. The Campaign Server
significantly enhances the scalability of the Interaction Server by distributing
the outbound communications across a company's multiple e-mail servers to
achieve a higher number of e-mail deliveries in a shorter period of time.

Delano Customer Velocity

      Delano Customer Velocity is the first `Velocity' application suite built
on top of the Delano e-Business Interaction Suite. Customer Velocity is a fully
integrated suite of e-marketing and e-service applications, including marketing
campaigns, surveys, newsletters, e-mail response management, and a web-based
interaction portal that provides a 360-degree view of all customer interactions.
Customer Velocity increases the speed of deployment of customer facing
applications by combining the flexibility, scalability, and extensibility of
Delano's robust e-business platform with the speed-to-market of a complete
e-business application suite.


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SERVICES

      If desired, our professional services group will work with clients to
learn about their specific requirements and implement integrated solutions based
on the Interaction Suite. This process is based on a four-step methodology, with
key client checkpoints at the completion of each step:

      -     Initial needs assessment. Our professional services group works with
            our clients to define their requirements. Once a sale has been
            completed, the professional services group works with the client to
            prioritize applications, identify key data structures that are
            required, and develop a detailed design overview document.

      -     Application building. The group will construct the required
            applications using the Application Builder, develop web forms and
            e-mail messages, and install and configure the Interaction Server in
            the client's environment.

      -     Testing and training. The applications are volume- and user-tested.
            The group also tests the interfaces between our applications and
            existing legacy systems. The group will conduct training and develop
            technical documentation for the specific applications.

      -     Deployment. The applications are published and integrated with
            clients' systems. The group monitors production to ensure that the
            application is functioning properly and that any modifications are
            documented.

      We typically provide professional services on a time-and-materials basis,
acting either alone or with third-party distribution companies, consulting
organizations and software vendors. After our solution has been implemented, our
client services and support organization handles ongoing account management and
monitors client satisfaction.

PRODUCTS UNDER DEVELOPMENT

      We continue to invest in research and development to develop new products
and enhance the functionality of our existing products. For example, we
currently are developing:

      -     additional Component Packs, which are intended to extend the
            capabilities of the Interaction Suite and facilitate integration
            between the Interaction Suite and our clients' IT systems; and

      -     Delano Velocity application suites, which will complement the
            Interaction Suite and will permit our clients to enhance specific
            areas of operation through the use of pre-packaged e-business
            communications applications. In addition, the Velocity application
            suites are intended to enable the rapid deployment of applications
            while still providing our clients with flexibility to update the
            applications as their businesses evolve. Because the application
            suites utilize the Interaction Suite, they can be easily customized
            to fit our clients' business processes and to leverage our clients'
            existing customer databases and infrastructures.

CLIENT SERVICE AND SUPPORT

      Our technical services group provides maintenance and technical support to
our clients, including software upgrades and updates and emergency response. To
date, almost all our clients have entered into maintenance agreements that
entitle them to technical services. Annual maintenance fees are typically equal
to 18% of the product license fee. We provide support to our clients through our
support center located in Toronto.

SALES AND MARKETING

      As of March 31, 2000, we had 131 sales, business development and marketing
professionals, including sales personnel, sales engineers, major account
representatives and marketing managers. We maintain 5 direct sales
representatives in Ontario as well as a total of 33 sales representatives in
California, Georgia, Illinois, Massachusetts, New York and 5 sales
representatives in Europe, who oversee and process all orders for our products
and services in Europe and parts of Africa. Our direct sales force is organized
into regional teams, which include both sales representatives and systems
engineers.

      Our direct sales force is complemented by telemarketing from our
headquarters in Toronto, Ontario, which generates, follows up and qualifies
leads, and by third-party distribution companies, consulting organizations and
software vendors with which we have agreements, such as Clarify, Macromedia,
Deloitte Consulting and PricewaterhouseCoopers. These third-parties further
expand the distribution channels for our products. We intend to increase our
direct sales force, establish


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additional sales offices and enter into additional agreements with established
third-party distribution companies, consulting organizations and software
vendors. We expect a substantial portion of our sales in the foreseeable future
to be derived from our direct sales force.

      We also pursue original equipment manufacturer sales opportunities with
vendors of complementary technology, including developers of enterprise resource
planning systems, customer relationship management systems, and messaging,
internet and e-commerce solutions such as Ironside, Partnerware, Servicesoft and
Touchscape. These vendors may seek to enhance and extend their solutions by
integrating our products into theirs.

      We plan to offer an online hosted application service in the second
quarter of calendar 2000. This service will provide an online offering of our
products to businesses that want to deploy an online customer communication
system while limiting their initial investments in hardware, software and
services. We expect to be able to manage customer information and provide our
clients with real-time access to this information. We believe this service will
enable us to address markets that are complementary to our direct sales and
reseller markets.

      To support our sales efforts, we conduct seminars for prospective clients
and ongoing public relations campaigns, participate in conferences and trade
shows and distribute direct mailings, newsletters and web site communications.
We typically market our products and services independently, but we also
selectively conduct joint marketing activities with third-party distribution
companies, consulting organizations and software vendors.

CLIENTS

      We focus our sales efforts on organizations in five major market sectors:
financial services, technology, telecommunications, retail and transportation.
We have also identified demand in marketing services organizations and companies
focused on business-to-business or business-to-consumer commercial opportunities
over the internet. These industries have been selected because we believe them
to be early adopters of e-business communications applications. Although we
initially are primarily targeting clients in these market sectors, we believe
that increasing use of the internet and the benefits offered by our products
will provide opportunities in other market sectors. The following is a
representative list of our clients by market segment.

      -     Financial Services -- Charles Schwab Canada Co., Talvest Fund
            Management Inc. and Trimark Investment Management Inc.;

      -     Technology -- Clarify, Inc., Macromedia, Inc., Changepoint,
            i-Recognize and VPTN;

      -     Telecommunications -- Ericsson Inc. and BCE Emergis Inc.;

      -     Transportation -- Mark VII, Inc. and Cardinal Logistics;

      -     Retail -- eyeVantage, a subsidiary of TLC Laser Eye Centers Inc.;

      -     Marketing Services -- Mosaic Group Inc., Transparent Languages Inc.,
            Association of National Advertisers and The Computing Group, a
            division of Omnicom;

      -     E-commerce (business-to-consumer) -- Chapters Online Inc.,
            e-centives inc., Harborfreight.com, a web service operated by
            Central Purchasing Inc., Marketrend Communications Inc., Bain &
            Company, We Media Inc., Sessions.edu and Vitamin Research Products;
            and

      -     E-commerce (business-to-business) -- Cowboy Corporation,
            PlasticsNet.com, a web service operated by Commerx Inc. and
            eBreviate, a division of AT Kearney.

      In the year ended March 31, 2000, one customer accounted for 15% of our
total revenues. No other customer accounted for more than 10% of our total
revenues in the year ended March 31, 2000. We expect a substantial portion of
our license and service revenues in any given quarter to be generated from a
limited number of clients. However, we do not believe that we will be dependent
on any ongoing commitments from any particular client.

CLIENT CASE STUDIES

      The following case studies provide illustrations of how selected clients
have used our products and services to address

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their requirements. The case studies represent the diversity of the various
applications that can be deployed with our products. We believe other customer
deployments of our products do not differ significantly from those presented in
the case studies below.

      Harborfreight.com. Central Purchasing owns and operates Harbor Freight
Tools, which sells tools through its 70 retail store locations, a mail-order
catalog business, and an e-commerce site, Harborfreight.com. Harborfreight.com
has improved customer service and has generated revenue by using our products
for outbound e-mail marketing campaigns.

      Mark VII. Mark VII provides a complete range of transportation and
logistics capabilities to support supply chain operations around the world.
Using our technology, Mark VII has implemented several e-business communications
applications to automate, personalize and manage customer and supplier
interactions. Initial applications now automate the customer credit approval
process, accounts receivable aging, credit balance and customer statement
retrieval requests, vendor notifications, and destination and dispatch reports.
These applications have allowed Mark VII to reallocate personnel to
revenue-generating areas of its business.

      eyeVantage. Vision Corporation is a subsidiary of TLC Laser Eye Centers,
which operates more than 50 centers across North America and has a network of
more than 10,000 affiliated eye doctors. Vision Corporation co-ordinates with
the various TLC centers to provide centralized buying services for business
supplies such as letterhead, business cards, and other TLC branded materials.
Vision Corporation uses the Interaction Suite to manage and track its central
buying process from initial ordering through fulfillment. Since implementing our
solution, Vision Corporation has improved its order accuracy and delivery rates
by 20% and has reduced labor costs associated with its supply procurement by
more than 20%.

COMPETITION

      The market for our products and services is highly competitive. The market
is evolving rapidly from both a commercial and a technological perspective. We
believe that the principal competitive factors affecting our market include the
breadth of the offered solution, the speed of deployment, distribution breadth,
product quality and reliability, customer and professional services quality, a
significant base of high-profile customers and industry influencers, and
demonstrable value for the customer. Although we believe that our products
compare very favorably with respect to these factors our market is relatively
new and is developing rapidly.

      We currently, and will for the foreseeable future, face competition from
many sources, including systems designed in-house and by third-party development
efforts. E-business applications are frequently developed internally by
organizations for their own use. In addition, a number of companies offer one or
more products in the market for e-business communications software, some of
which compete directly with at least part of our products. For example, our
competitors include companies that provide software that is focused on a few
operational or functional areas, such as Annuncio, Brightware, eGain, Kana and
Responsys.com.

      We intend to position at least part of our solution as complementary to
our competitors' solutions, thereby helping these vendors meet their clients'
needs. For example, we will participate in the customer relationship management
market by acting as the interaction technology for a variety of front office
solutions, such as Clarify, and in the web application server market as a
natural fit for vendors, such as Microsoft Site Server, looking to provide their
customers with enhanced e-mail capabilities. This will, in turn, help us to
preserve our distribution channel opportunities.

RESEARCH AND DEVELOPMENT

      We believe that our future success depends in large part on our ability to
maintain and enhance our technology, to develop a large library of software
products, and to enhance our market positioning through the deployment of
emerging technologies. In fiscal 1999, we invested $797,000 in product
development. For the year ended March 31, 2000, we invested $3.6 million in
product development.

      In order to maintain our focus on developing new products and
enhancements, it is important that we recruit highly skilled, experienced
engineers and software developers. Our senior managers are generally experienced
in enterprise application development. We have designed a process for product
development which defines and addresses the activities required to successfully
bring product concepts and development projects to market, ensures that feedback
from our sales, marketing, and business development efforts is appropriately
integrated into the development cycle, and ensures that products and programs
are available within appropriate timeframes.

      As of March 31, 2000, we had 94 personnel engaged in research and
development activities.


================================================================================
                                                                               9


<PAGE>   10

DELANO TECHNOLOGY CORPORATION - 10K - Annual Report
================================================================================


INTELLECTUAL PROPERTY

      We rely on a combination of copyright, trade secret and trademark laws,
confidentiality procedures, contractual provisions and other similar measures to
protect our proprietary information and technology. We do not currently hold any
patents, registered trademarks or registered copyrights. However, we will assess
appropriate occasions for seeking additional intellectual property protections
for those aspects of our technology that we believe constitute innovations
providing significant competitive advantages. Such future applications may or
may not result in seeking patent protection or the registration of trademarks or
copyrights.

      As part of our confidentiality procedures, we generally require our
employees, clients and potential business partners to enter into confidentiality
and non-disclosure agreements before we will disclose any sensitive aspects of
our products, technology or business plans. In addition, we generally require
employees to agree to surrender to us any proprietary information, inventions or
other intellectual property they generate or come to possess while employed by
us. These efforts afford only limited protection.

      Despite our efforts to protect our proprietary rights, unauthorized
parties may attempt to copy aspects of our products or to obtain and use
information that we regard as proprietary and third parties may attempt to
develop similar technology independently. These precautions may not prevent
misappropriation or infringement of our intellectual property. In addition, laws
of some countries do not protect our proprietary rights to the same extent as do
the United States or Canada. We cannot assure you that protection of our
proprietary rights will be adequate or that our competitors will not
independently develop similar technology.

      There has been a substantial amount of litigation in the software and
internet industries regarding intellectual property rights. It is possible that
in the future third parties may claim that we or our current or potential future
products infringe their intellectual property. We expect that software product
developers and providers of internet-related solutions will increasingly be
subject to infringement claims as the number of products and competitors in our
industry grows and the functionality of products in different industries
increasingly overlaps. Furthermore, former employers of our current and future
employees may assert that our employees have improperly disclosed confidential
or proprietary information to us. Any such claims, with or without merit, could
be time-consuming to defend, divert management's attention and resources, result
in costly litigation, cause product shipment delays or require us to enter into
royalty or licensing agreements which may not be available on terms acceptable
to us or at all. In addition, parties making these claims may be able to obtain
an injunction, which could prevent us from selling our products in the United
States or abroad. A successful infringement claim against us and our failure or
inability to license the infringed rights or develop or license technology with
comparable functionality could have a material adverse effect on our business,
operating results and financial condition.

EMPLOYEES

      As of March 31, 2000, we had 281 full-time employees, including 94 in
research and development, 32 in professional services, 131 in sales, business
development and marketing and 24 in general and administrative. We added 226
employees between April 1, 1999 and March 31, 2000, and we expect to continue
hiring employees at a rapid pace. None of our employees are covered by
collective bargaining agreements and we have never experienced a strike or work
stoppage. We believe our relations with our employees are good.

MARKET DATA

      This Annual Report on Form 10-K contains market data related to the
internet and us. This data has been included in studies published by the market
research firms of Direct Marketing Association, International Data Corporation,
and Jupiter Communications.

      Direct Marketing Association's estimate that interactive direct-market
expenditures for the business market will increase from $1.3 billion in 1998 to
$8.6 billion by 2004 is based on several assumptions, including that:

      -     employment growth rates will continue to increase; and

      -     direct marketing sales will continue to grow.

      Gartner Group's estimate that the worldwide customer relationship
management application market will grow from $2.9 billion in 1998 to $20 billion
by 2003, is based on several assumptions, including that:

================================================================================
                                                                              10


<PAGE>   11



      -     the market encompasses applications designed for marketing
            automation, sales force automation, customer service, and field
            service, as well as internet customer relationship management;

      -     businesses will continue to try and establish closer ties to their
            customers; and

      -     the demand from electronic commerce sites will outstrip that of
            traditional customer calls to call centers.

      Gartner Group's estimates, that electronic commerce will increase from $45
billion in 1998 to $7.3 trillion by 2004 and that the number of web users will
increase from 142.2 million in 1998 to 502.4 million in 2003, are based on
several assumptions, including that:

      -     the number of devices used to access the world wide web will
            continue to increase;

      -     virtually all devices using the internet for e-mail will also use
            the web for other purposes; and

      -     the number of web buyers and the average transaction value per buyer
            will increase.

ITEM 2: PROPERTIES

      Our corporate headquarters are located in Toronto, Ontario, where we lease
approximately 21,000 square feet. The lease for the principal portion of our
space expires on December 31, 2000. In November 1999, we entered into a 10-year
lease for approximately 58,000 square feet for a new corporate headquarters.
This new lease took effect on May 1, 2000. We have entered into an agreement to
sub-lease the former premises through to the end of the lease term. We believe
that our facilities are adequate to meet our requirements for the foreseeable
future. We also lease office space in California, Illinois, New York, Georgia,
New Jersey and Texas. We do not own any real property.

ITEM 3: LEGAL PROCEEDINGS

      We are not currently party to any material legal proceedings, nor are we
aware of any proceedings that are contemplated.

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

      Prior to completion of our IPO on February 9, 2000, the then existing
shareholders of the company approved the following matters: a 3 for 2 split of
the shares of the company; and the implementation of the Employee Stock Purchase
Plan.

ITEM 5: MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDER MATTERS

(A) MARKET INFORMATION AND RECENT SALES OF UNREGISTERED SECURITIES

      Delano's common stock is listed on the Nasdaq Stock Market under the
Symbol "DTEC" and commenced trading on Feb 10, 2000.

      THE FOLLOWING TABLE SETS FORTH THE RANGE OF HIGH AND LOW CLOSING SALES
PRICES FOR EACH PERIOD INDICATED, ADJUSTED FOR THE THREE FOR TWO STOCK SPLIT
EFFECTIVE JANUARY 2000:

<TABLE>
<CAPTION>
    FOR THE YEAR ENDED MARCH 31, 2000                  HIGH            LOW
    ---------------------------------                  ----            ---
<S>                                                   <C>            <C>
            FOURTH QUARTER                            $51.50         $22.44
</TABLE>


      The reported last sale price of Delano's common stock on the Nasdaq Stock
Market on June 16, 2000 was: $12.25. The approximate number of holders of record
of the shares of the Company's common stock was 99 as of June 16, 2000. This
number does not include stockholders whose shares are held in trust by other
entities. The actual number of


================================================================================
                                                                              11

<PAGE>   12

DELANO TECHNOLOGY CORPORATION - 10K - Annual Report
================================================================================

stockholders is greater than this number of holders of record. The Company
estimates that the number of beneficial stockholders of the shares of the
Company's common stock as of June 16, 2000 was approximately 5,700.

      Delano has authorized common stock, with no par value and Preferred Stock.
Delano has not issued any Preferred Stock.

      Delano has not paid any cash dividends on its capital stock. Delano
currently intends to retain its earnings to fund the development and growth of
its business and, therefore, does not anticipate paying any cash dividends in
the foreseeable future.

(B) REPORT OF OFFERING SECURITIES AND USE OF PROCEEDS THEREFROM:

      On February 9, 2000, we consummated our initial public offering of common
stock. The managing underwriters in the offering were FleetBoston Robertson
Stephens Inc. and U.S. Bancorp Piper Jaffray Inc. The shares of common stock
sold in the offering were registered under the Securities Act of 1933, as
amended, on a registration statement on Form F-1 (Reg. No. 333-94505) that was
declared effective by the SEC on February 9, 2000. All 5,750,000 shares of
common stock registered under the registration statement, including shares
covered by an over-allotment option that was exercised, were sold at a price to
the public of $18.00 per share. The aggregate offering amount registered was
$103,500,000. In connection with the offering, Delano paid an aggregate of
$7,245,000 in underwriting discounts to the underwriters. Concurrent with the
offering, Delano entered into an agreement whereby Nortel Networks purchased an
additional 500,000 common shares at the offering price of $18.00 for aggregate
proceeds to Delano of $9,000,000. There were no underwriting fees paid in
connection with the private placement. In addition, the following table sets
forth an approximation of all expenses incurred in connection with the offering,
other than underwriting discounts. All amounts shown are approximations except
for the registration fees of the SEC and the National Association of Securities
Dealers, Inc.

<TABLE>
<S>                                                 <C>
SEC registration fee.............................   $    24,330
NASD filing and other listing fees...............       149,400
Printing expenses................................       171,500
Legal fees and expenses..........................       675,400
Accounting fees and expenses.....................       251,000
Blue Sky fees and expenses.......................         9,700
Miscellaneous....................................       118,670
                                                    -----------
Total............................................   $ 1,400,000
                                                    ===========
</TABLE>

      All of such expenses were direct or indirect payments to others.

      The net offering proceeds to us after deducting the total expenses above
were approximately $103,855,000. From February 9, 2000 to March 31, 2000, we
used such net offering proceeds from our initial public offering of common stock
to invest in short-term, interest bearing, investment grade securities and used
proceeds for working capital and other corporate purposes. This use of proceeds
does not represent a material change in the use of proceeds described in the
Initial Public Offering F-1 Registration Statement.

      We currently estimate that we will use the remaining net proceeds as
follows: 30% for marketing and distribution activities; 5% for various product
development initiatives; 5% for capital expenditures; and 60% for working
capital and other general corporate purposes.

================================================================================
                                                                              12



<PAGE>   13




DELANO TECHNOLOGY CORPORATION - 10K - Annual Report
================================================================================

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

      Our financial statements are reported in United States dollars and have
been prepared in accordance with accounting principles generally accepted in the
United States.

      We express all dollar amounts in this Annual Report on Form 10-K in United
States dollars, except where otherwise indicated. References to "$" are to
United States dollars and references to "Cdn$" are to Canadian dollars. This
Annual Report on Form 10-K contains a translation of some Canadian dollar
amounts into U.S. dollars at specified exchange rates solely for your
convenience. Unless otherwise indicated, these Canadian dollar amounts were
translated into U.S. dollars based on Cdn$1.00 per US$0.6925, which was the
inverse of the noon buying rate in The City of New York for cable transfers in
Canadian dollars as certified for customs purposes by the Federal Reserve Bank
of New York on March 31, 2000. See "Exchange Rate Information."


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

================================================================================
                                                                              13


<PAGE>   14


DELANO TECHNOLOGY CORPORATION - 10K - Annual Report
================================================================================

                            EXCHANGE RATE INFORMATION

      The following table sets forth, for each period indicated, the high and
low exchange rates for Canadian dollars expressed in U.S. dollars, the average
of such exchange rates on the last day of each month during such period, and the
exchange rate at the end of such period, based on the inverse of the noon buying
rate.

<TABLE>
<CAPTION>
                                                          PERIOD FROM MAY 7,
                                                         1998 (INCEPTION TO)           YEAR ENDED
                                                           MARCH 31, 1999            MARCH 31, 2000
                                                           --------------            --------------
<S>                                                          <C>                        <C>
      High......................................             $ 0.6982                   $ 0.6969
      Low.......................................               0.6341                     0.6607
      End.......................................               0.6626                     0.6879
      Average...................................               0.6598                     0.6795
</TABLE>

      On June 1, 2000, the inverse of the noon buying rate was Cdn$1.00 per
$0.6706.


================================================================================
                                                                              14


<PAGE>   15

DELANO TECHNOLOGY CORPORATION - 10K - Annual Report
================================================================================


ITEM 6: SELECTED CONSOLIDATED FINANCIAL DATA

      You should read the selected consolidated financial data set forth below
in conjunction with our consolidated financial statements and the related notes
and "Management's Discussion and Analysis of Financial Condition and Results of
Operations" included elsewhere in this Annual Report on Form 10-K. The selected
consolidated financial data are derived from our consolidated financial
statements that have been audited by KPMG LLP, independent auditors, and are
included elsewhere in this Annual Report on Form 10-K.


<TABLE>
<CAPTION>
                                                                                  PERIOD FROM MAY 7,
                                                                                 1998 (INCEPTION) TO       YEAR ENDED
                                                                                    MARCH 31, 1999        MARCH 31, 2000
                                                                                 ------------------      ----------------
                                                                                  (IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
<S>                                                                                     <C>                    <C>
CONSOLIDATED STATEMENTS OF OPERATIONS
  DATA:
Revenues:
  Products..................................................................                 --                $ 8,799
  Services..................................................................                 --                    690
                                                                                        -------                -------
     Total revenues.........................................................                 --                  9,489
                                                                                        -------                -------
Cost of revenues:
  Products..................................................................                 --                     59
  Services..................................................................                 --                  1,239
                                                                                        -------                -------
     Total cost of revenues.................................................                 --                  1,298
                                                                                        -------                -------
Gross profit................................................................                 --                  8,191
                                                                                        -------                -------
Operating expenses:
  Sales and marketing.......................................................            $   554                 11,732
  Research and development..................................................                797                  3,649
  General and administrative................................................                180                  1,515
  Amortization of deferred stock-based compensation.........................                171                  1,671
                                                                                        -------                -------
  Total operating expenses..................................................              1,702                 18,567
                                                                                        -------                -------
Loss from operations........................................................             (1,702)               (10,376)
Interest income, net........................................................                 13                  1,099
                                                                                        -------                -------
Loss before provision for income taxes......................................             (1,689)                (9,277)
Provision for income taxes..................................................                 --                     --
                                                                                        -------                -------
Loss for the period.........................................................             (1,689)                (9,277)
Less: accretion of dividends on redeemable
  convertible special shares................................................               (101)                  (313)
                                                                                        -------                -------
Loss applicable to common shares............................................            $(1,790)               $(9,590)
                                                                                        =======                =======
Basic and diluted loss per common share.....................................            $ (2.40)               $ (1.50)
                                                                                        =======                =======
Shares used in computing basic and diluted
  loss per common share.....................................................                746                  6,381
                                                                                        =======                =======
Pro forma basic and diluted loss per common share...........................            $ (0.30)               $ (0.46)
                                                                                        =======                =======
Shares used in computing pro forma basic
  and diluted loss per common share.........................................              6,010                 20,473
                                                                                        =======                =======
</TABLE>

<TABLE>
<CAPTION>
                                                                       MARCH 31, 1999         MARCH 31, 2000
                                                                       --------------         --------------
                                                                                   (IN THOUSANDS)
<S>                                                                      <C>                     <C>
CONSOLIDATED BALANCE SHEET DATA:
Cash and cash equivalents...........................................      $   1,989               $  82,370
Short-term investments..............................................             --                  29,154
Working capital.....................................................          1,607                 110,410
Total assets........................................................          2,573                 119,907
Long-term obligations, net of current portion.......................             66                     222
Redeemable convertible special shares...............................          3,481                      --
Shareholders' equity (deficiency)...................................         (1,622)                112,561
</TABLE>

================================================================================
                                                                              15



<PAGE>   16


DELANO TECHNOLOGY CORPORATION - 10K - Annual Report
================================================================================


ITEM  7: MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
         OF OPERATIONS

      The following discussion should be read in conjunction with our
consolidated financial statements and the related notes appearing elsewhere in
this Annual Report on Form 10-K.

OVERVIEW

      From the date of our incorporation on May 7, 1998 until April 1999 we were
a development stage company and had no revenues. Our operating activities during
this period consisted primarily of conducting research and developing our
initial products. In May 1999, we released and sold the first commercially
available version of the Delano e-Business Interaction Suite.

      To date, we have derived substantially all of our revenues from the sale
of software product licenses and from the provision of professional services,
including implementation, training and maintenance services. Our products have
been sold primarily through our direct sales force.

      Our products are offered on a licensed basis. We license our products
based on:

      -     a fee for each client, which depends on the specific and individual
            needs of the client;

      -     an additional fee, which covers installation, configuration,
            training and professional services; and

      -     a variable component, which depends on, among other things, the
            number of servers and the number of optional applications and
            add-ons, servers and component packs purchased.

      We recognize our software license revenues in accordance with the American
Institute of Certified Public Accountants, or ("AICPA"), Statement of Position
("SOP") 97-2, "Software Revenue Recognition," and related amendments and
interpretations contained in the AICPA's SOP 98-9. We generally recognize
revenues allocated to software licenses upon delivery of the software products,
when all of the following conditions have been met:

      -     persuasive evidence of an arrangement exists;

      -     the license fee is fixed or determinable; and

      -     the license fee is collectible.

      Because substantially all of our software license agreements include
related maintenance services, these agreements are multiple-element
arrangements. We allocate the fees in multiple-element arrangements based on the
respective value for each element, with maintenance being allocated as at least
18% of license revenue in all sales. Delivery of the software generally is
deemed to occur upon shipment of the software unless customers are provided the
opportunity to return the products. Revenues are recognized only when all refund
obligations have expired. In situations where we provide online offerings,
delivery of the software occurs upon initiation of the online offerings.
Revenues from maintenance and support services and online offerings are
recognized ratably over the related contractual period.

      Our cost of revenues includes the cost of product documentation, the cost
of compact disks used to deliver our products, personnel-related expenses,
travel costs, equipment costs and overhead costs.

      Our operating expenses are classified into four categories: sales and
marketing, research and development, general and administrative, and
amortization of deferred stock-based compensation.

      -     Sales and marketing expenses consist primarily of compensation and
            related costs for sales and marketing personnel and promotional
            expenditures, including public relations, advertising, trade shows
            and marketing materials.

      -     Research and development expenses consist primarily of compensation
            and related costs for research and development employees and
            contractors and in connection with the enhancement of existing
            products and quality assurance activities.

================================================================================
                                                                              16


<PAGE>   17

DELANO TECHNOLOGY CORPORATION - 10K - Annual Report
================================================================================


      -     General and administrative expenses consist primarily of
            compensation and related costs for administrative personnel, legal,
            accounting and other general corporate expenses.

      -     Amortization of deferred stock-based compensation includes the
            amortization, over the vesting period of a stock option, of the
            difference between the exercise price of options granted to
            employees and the deemed fair market value of the options for
            financial reporting purposes. In addition, deferred stock-based
            compensation includes compensation expense arising on the issuance
            of options and a warrant to employees and a consultant, calculated
            as the difference between the exercise price of the options and
            warrant and the fair market value at the date of issuance. Also
            included in amortization of deferred stock-based compensation is
            compensation expense relating to an option to acquire shares of the
            Company issued in connection with a professional services agreement
            between the Company and a related corporation. The compensation
            expense is calculated as the difference between the exercise price
            of the option and the fair market value at the time the option was
            issued.

      We allocate common costs based on relative headcount or other relevant
measures. These allocated costs include rent and other facility-related costs
for the corporate head office, communication expenses and depreciation expenses
for furniture and equipment.

      In connection with the granting of stock options and the issuance of a
warrant to our employees, we recorded deferred stock-based compensation totaling
$10.7 million through March 31, 2000. This amount represents the total
difference between the exercise prices of stock options and the warrant and the
deemed fair value of the underlying common stock for accounting purposes on the
date these stock options were granted and the warrant issued. This amount is
included as a component of stockholders' equity and is being amortized by
charges to operations over the vesting period of the options, consistent with
the method described in Financial Accounting Standards Board, or ("FASB"),
Interpretation No. 28. We recorded $171,000 of stock-based compensation
amortization expense during the period from May 7, 1998 to March 31, 1999, and
$1.7 million of stock-based compensation amortization expense during the year
ended March 31, 2000. As of March 31, 2000, we had a total of $8.9 million of
deferred stock-based compensation that had not been amortized. The amortization
of the remaining deferred stock-based compensation will result in additional
charges to operations through December 2003 of approximately $950,000 per
quarter. The amortization of deferred stock-based compensation is classified as
a separate component of operation expenses in our consolidated statement of
operations.

      In our development of new products and enhancements of existing products,
the technological feasibility of the software is not established until
substantially all product development is complete. Historically, our software
development costs eligible for capitalization have been insignificant and all
costs related to internal product development have been expensed as incurred.

      We believe that period-to-period comparisons of our historical operating
results are not necessarily meaningful and should not be relied upon as being a
good indication of our future performance. Our prospects must be considered in
light of the risks, expenses and difficulties frequently experienced by
companies in early stages of development, particularly companies in new and
rapidly evolving markets like ours. Although we have experienced significant
revenue growth recently, this trend may not be sustainable. Furthermore, we may
not achieve or maintain profitability in the future.

RESULTS OF OPERATIONS

Year ended March 31, 2000 Compared to Period from May 7, 1998 (Inception) to
March 31, 1999.

      Revenues. For the period from our inception to March 31, 1999, we were a
development stage company and had no revenues. Total revenues for the year ended
March 31, 2000 were $9.5 million. License revenues accounted for $8.8 million,
or 92.7% of total revenues. Services revenues, including maintenance and
services fees, accounted for the remaining $690,000 or 7.3% of total revenues.
Approximately 69.3% of our total revenues were generated in the United States,
25.9% were generated in Canada and 4.8% were generated elsewhere in the year
ended March 31, 2000.

      Cost of revenues. Cost of product revenues was $59,000 for the year ended
March 31, 2000 or 0.6% of total revenues. Cost of services revenues was $1.2
million for the year ended March 31, 2000, or 13.1% of total revenues. We
anticipate that cost of service revenues will increase in absolute dollars as we
continue to hire additional services personnel. We anticipate that the cost of
product revenues will increase proportionately with increases in product
revenues.

      Sales and marketing. Sales and marketing expenses increased from $554,000
for the period ended March 31, 1999 to $11.7 million for the year ended March
31, 2000. This increase was attributable primarily to the addition of 110 sales
and

================================================================================
                                                                              17


<PAGE>   18

DELANO TECHNOLOGY CORPORATION - 10K - Annual Report
================================================================================


marketing personnel and higher marketing costs due to expanded promotional
activities. We anticipate that sales and marketing expenses will increase in
absolute dollars as we continue to hire additional sales and marketing personnel
and expand discretionary marketing programs.

      Research and development. Research and development expenses increased from
$797,000 for the period ended March 31, 1999 to $3.6 million for the year ended
March 31, 2000. This increase was attributable primarily to the addition of 74
product development and related services personnel and to increased consulting
and recruiting costs. The expenses were reduced by investment tax credits of
$285,000 for the year ended March 31, 2000. We anticipate that research and
development expenses will increase in absolute dollars, but will vary as a
percentage of total revenues from period to period as we continue to hire
additional research and development personnel.

      As a Canadian Controlled Private Corporation or ("CCPC"), we qualified for
certain investment tax credits under the Income Tax Act (Canada) on eligible
research and development expenditures. Prior to our initial public offering,
refundable investment tax credits, which result in cash payments to us, have
been recorded at a rate of 35% of eligible current and capital research and
development expenditures. Prior to our initial public offering, we were entitled
to an investment tax credit at these rates for the first Cdn$2.0 million
(approximately $1.4 million) of eligible research and development expenditures
and a further investment tax credit at the rate of 20% of eligible research and
development expenditures in excess of Cdn$2.0 million. Investment tax credits on
current expenditures earned at the 35% rate are fully refundable to CCPCs.
Investment tax credits earned by a CCPC on capital expenditures at the 35% rate
are refundable at a rate of 40% of the amount of the credit. We will earn
investment tax credits at a rate of 20% of eligible current and capital research
and development expenditures made after our initial public offering. While a
portion of investment tax credits earned as a CCPC are refundable, investment
tax credits earned after our initial public offering may only be used to offset
income taxes otherwise payable.

      General and administrative. General and administrative expenses increased
from $180,000 for the period ended March 31, 1999 to $1.5 million for the year
ended March 31, 2000, due primarily to the addition of 18 administrative
personnel, increased consulting costs and to higher facilities- related expenses
necessary to support our growth. We expect that general and administrative
expenses will increase in absolute dollars as we add personnel and incur related
costs to facilitate the growth of our business.

      Amortization of deferred stock-based compensation. We incurred a charge of
$171,000 in the year ended March 31, 1999 and a charge of $1.7 million for the
year ended March 31, 2000 related to the issuance of stock options with exercise
prices less than the deemed fair market value for financial reporting purposes
on the date of grant.

      Interest income, net. Interest income, net for the period ended March 31,
1999 was $13,000. Interest income, net for the year ended March 31, 2000 was
$1.1 million, reflecting the interest earned on the cash and cash equivalents
balance arising from our special warrant offering in June 1999 and our initial
public offering in February 2000.

      Provision for income taxes. A deferred tax asset of $4.8 million existed
as of March 31, 2000. A valuation allowance is recorded against a deferred tax
asset if it is more likely than not that the asset will not be realized. A
valuation allowance taken against substantially all of the deferred tax asset
reflects the lack of profitability in the past, the significant risk that
taxable income would not be generated in the future and the nontransferable
nature of the deferred tax asset under certain conditions.

Period from May 7, 1998 (Inception) to March 31, 1999

      Sales and marketing. Sales and marketing expenses were $554,000 for the
eleven months included in the period from our inception to March 31, 1999. These
expenses consisted primarily of compensation and related costs for sales and
marketing personnel and promotional expenditures, including public relations,
advertising, trade shows and marketing materials.

      Research and development. Research and development expenses were $797,000
for the eleven months ended March 31, 1999. These expenses consisted primarily
of compensation and related costs for research and development employees and
contractors. The expenses were reduced by investment tax credits of $201,000.

      General and administrative. General and administrative expenses were
$180,000 for the eleven months ended March 31, 1999. These expenses consisted
primarily of compensation and related costs for administrative personnel, legal,
accounting and other general corporate expenses.

================================================================================
                                                                              18


<PAGE>   19

DELANO TECHNOLOGY CORPORATION - 10K - Annual Report
================================================================================

      Amortization of deferred stock-based compensation. We incurred a charge of
$171,000 for the eleven months ended March 31, 1999 related to the issuance of
stock options with exercise prices less than the deemed fair market value for
financial reporting purposes on the date of grant.

      Interest income, net. Interest income, net consisted of $13,000 earned on
cash and cash equivalents for the eleven months ended March 31, 1999.

QUARTERLY RESULTS OF OPERATIONS

      The following table sets forth certain unaudited consolidated statements
of operations data for our eight quarters of operation. In our management's
opinion, this unaudited information has been prepared on the same basis as our
annual consolidated financial statements appearing elsewhere in this Annual
Report on Form 10-K and includes all adjustments necessary to fairly present the
unaudited quarterly results. These adjustments consist only of normal recurring
adjustments. This information should be read in conjunction with our
consolidated financial statements and related notes appearing elsewhere in this
Annual Report on Form 10-K. The operating results for any quarter are not
necessarily indicative of results for any future period.


<TABLE>
<CAPTION>
                                                                            QUARTER ENDED
                                       -----------------------------------------------------------------------------------------
                                       JUN. 30,    SEP. 30,    DEC. 31,   MAR. 31,   JUN. 30,    SEP. 30,    DEC. 31,   MAR. 31,
                                         1998        1998       1998       1999       1999        1999         1999       2000
                                       --------    --------    --------   --------   --------    --------    --------   --------
                                                                             (IN THOUSANDS)
<S>                                     <C>         <C>        <C>      <C>          <C>         <C>         <C>        <C>
CONSOLIDATED STATEMENTS OF
OPERATIONS DATA:
Revenues:
   Products.........................       --          --         --         --      $  752      $ 1,561     $ 2,748    $ 3,738
   Services.........................       --          --         --         --          59           54         183        394
                                        -----       -----      -----    -------      ------      -------     -------    -------
     Total revenues.................       --          --         --         --         811        1,615       2,931      4,132
                                        -----       -----      -----    -------      ------      -------     -------    -------
Cost of revenues
   Products.........................       --          --         --         --          --            6          14         39
   Services.........................       --          --         --         --         149          231         321        538
                                        -----       -----      -----    -------      ------      -------     -------    -------
     Total cost of
     revenues.......................       --          --         --         --         149          237         335        577
                                        -----       -----      -----    -------      ------      -------     -------    -------
Gross profit........................       --          --         --         --         662        1,378       2,596      3,555
                                        -----       -----      -----    -------      ------      -------     -------    -------
Operating expenses:
   Sales and marketing..............       --       $  31      $ 113    $   410         818        1,198       3,440      6,276
   Research and
   Development.....................     $  95         179        212        311         389          801       1,054      1,405
   General and
   Administrative...................        4          11         30        135         157          255         355        748
   Amortization of deferred
   stock-based
   compensation.....................       --          --          2        169         107          211         451        902
                                        -----       -----      -----    -------      ------      -------     -------    -------
     Total operating
     expenses.......................       99         221        357      1,025       1,471        2,465       5,300      9,331
                                        -----       -----      -----    -------      ------      -------     -------    -------
Loss from operations................      (99)       (221)      (357)    (1,025)       (809)      (1,087)     (2,704)    (5,776)
Interest income, net................       --          --         --         13          11          165         178        745
                                        -----       -----      -----    -------      ------      -------     -------    -------
Loss before provision for
Income taxes........................      (99)       (221)      (357)    (1,012)       (798)        (922)     (2,526)    (5,031)
Provision for income
Taxes...............................       --          --         --         --          --           --          --         --
                                        -----       -----      -----    -------      ------      -------     -------    -------
Loss for the period.................    $ (99)      $(221)     $(357)   $(1,012)     $ (798)     $  (922)    $(2,526)   $(5,031)
                                        =====       =====      =====    =======      ======      =======     =======    =======
</TABLE>

      Our revenues have increased in our four most recent quarters due to the
initial introduction of our products in May 1999 and our addition of
distribution channels. Each of our expense categories has increased on a
quarterly basis due to the growth of our business and the hiring of new
personnel.

      Our quarterly operating results have varied widely in the past, and we
expect that they will continue to fluctuate in the future as a result of a
number of factors, many of which are outside our control. Our limited operating
history and the undeveloped nature of the market for interaction-based
e-business communications products make predicting future revenues difficult.
Our expense levels are based, in part, on expectations regarding future revenue
increases, and to a large

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DELANO TECHNOLOGY CORPORATION - 10K - Annual Report
================================================================================

extent, such expenses are fixed, particularly in the short term. There can be no
assurance that our expectations regarding future revenues are accurate.
Moreover, we may be unable to adjust spending in a timely manner to compensate
for any unexpected revenue shortfall. Accordingly, any significant shortfall in
revenues in relation to our expectations would likely cause significant
increases in our net losses for that period.

      Due to the foregoing factors, our operating results are difficult to
forecast. We believe that period-to-period comparisons of our operating results
are not meaningful, and you should not rely on them as indicative of our future
performance. You should also evaluate our prospects in light of the risks,
expenses and difficulties commonly encountered by comparable early-stage
companies in new and rapidly emerging markets. We cannot assure you that we will
successfully address the risks and challenges that face us. In addition,
although we have experienced significant revenue growth recently, we cannot
assure you that our revenues will continue to grow or that we will become or
remain profitable in the future.

LIQUIDITY AND CAPITAL RESOURCES

      Since the date of incorporation, we have raised an aggregate of $3.4
million through private placements of special shares. We have raised $14.4
million, net of the agents' commission and offering expenses, through a private
placement of special warrants in June 1999. We have also raised $103.4 million,
net of agents' commissions and offering expenses through our initial public
offering in February 2000.

      Our operating activities used cash of $1.1 million during the eleven
months ended March 31, 1999 and cash of $6.8 million for the year ended March
31, 2000. Our negative operating cash flow resulted principally from the net
losses that we incurred during these periods as we invested in the development
of our products, expanded our sales force and expanded our infrastructure to
support our growth.

      Our financing activities generated $3.4 million in cash during the eleven
months ended March 31, 1999 and $118 million in the year ended March 31, 2000.
Of these financing activities, the issuance of redeemable convertible special
shares generated net proceeds of $3.4 million in the eleven months ended March
31, 1999. In the year ended March 31, 2000 the issuance of special warrants
generated net proceeds of $14.4 million and the issuance of common shares as
part of our initial public offering generated net proceeds of $103.4 million.

      Our investing activities, consisting of the purchase of computer
equipment, software, furniture and equipment to support our growing number of
employees, as well as the purchase of short-term investments used cash of
$251,000 during the period ended March 31, 1999 and cash of $31.0 million during
the year ended March 31, 2000.

      In March 1999, we obtained a lease line of credit from a Canadian
chartered bank to purchase equipment and furniture. Approximately $96,000 was
outstanding on the lease line of credit as of March 31, 1999 and approximately
$431,000 was outstanding as of March 31, 2000. The ceiling on the lease line of
credit is Cdn$1,000,000 (approximately $693,000). The lease line of credit is
not collateralized with cash for the amount of the line that is used for leasing
equipment.

      Our capital requirements depend on a number of factors. We expect to
devote substantial resources to continue our research and development efforts,
expand our sales, support, marketing and product development organizations,
establish additional facilities worldwide and build the infrastructure necessary
to support our growth. Our expenditures have increased substantially since the
date of incorporation, and we anticipate that capital expenditures will continue
to increase in absolute dollars in the foreseeable future.

      At March 31, 2000, we had cash and cash equivalents aggregating $82.4
million. At March 31, 2000, we also had a short-term investment of $29.1
million. We believe that our current cash and cash equivalents are sufficient to
fund our operations for at least the next 12 months. If cash generated from
operations is insufficient to meet our long-term liquidity needs, we may need to
raise additional funds or seek other financing arrangements. Additional funding
may not be available on favorable terms or at all. In addition, although there
are no present understandings, commitments or agreements with respect to any
acquisition of other businesses, products or technologies, we may, from time to
time, evaluate potential acquisitions of other businesses, products and
technologies. In order to consummate potential acquisitions, we may issue
additional securities or need additional equity or debt financing and any such
financing may be dilutive to existing investors.


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DELANO TECHNOLOGY CORPORATION - 10K - Annual Report
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RECENT ACCOUNTING PRONOUNCEMENT

      In June 1998, the FASB issued Statement of Financial Accounting Standards
("SFAS") No. 133, "Accounting for Derivative Instruments and Hedging Activities"
or SFAS No. 133. SFAS No. 133 establishes accounting and reporting standards
requiring that every derivative instrument be recorded on the balance sheet as
either an asset or liability measured at its fair value. SFAS No. 133, as
recently amended, is effective for the fiscal year ending March 31, 2002. We do
not believe that adopting SFAS No. 133 will have a material effect on our
financial position or results of operations.

ITEM 7A: QUALITATIVE AND QUANTITATIVE MARKET RISK

      We develop products in Canada and sell these products in North America and
Europe. Generally, our sales are made in local currency, which to date has been
mostly United States dollars. As a result, our financial results could be
affected by factors such as changes in foreign currency exchange rates or weak
economic conditions in foreign markets. We do not currently use derivative
instruments to hedge our foreign exchange risk. Our interest income is sensitive
to changes in the general level of U.S. interest rates, particularly since the
majority of our investments are in short-term instruments. Due to the nature of
our short-term investments, we have concluded that there is no material market
risk exposure.

RISK FACTORS

      Investing in our common shares will subject you to risks inherent in our
business. You should carefully consider the following factors as well as other
information contained in this Annual Report on Form 10-K before deciding to
invest in our common shares. If any of the risks described below occurs, our
business, results of operations and financial condition could be adversely
affected. In such cases, the price of our common shares could decline, and you
may lose part or all of your investment.

RISKS RELATED TO OUR BUSINESS

OUR LIMITED OPERATING HISTORY MAKES IT DIFFICULT TO EVALUATE OUR BUSINESS AND
FORECAST OUR FUTURE OPERATING RESULTS.

      We were incorporated on May 7, 1998, and we first recorded revenues in the
quarter ended June 30, 1999. We are still in the early stages of our development
and have a limited operating history, making it difficult to evaluate our
business and prospects. As a result of our limited operating history, it is
difficult or impossible for us to predict future operating results. For example,
we cannot forecast operating expenses based on our historical results because
our historical results are limited and we, to some extent, forecast expenses
based on future revenue projections. Moreover, due to our limited operating
history, any evaluation of our business and prospects must be made in light of
the risks and uncertainties often encountered by early-stage companies in
internet-related markets. Many of these risks are discussed in the sub-headings
below, and include our ability to execute our product development activities,
implement our sales and marketing initiatives, both domestically and
internationally, and attract more clients. We may not successfully address any
of these risks.

FACTORS RELATING TO OUR BUSINESS MAKE OUR FUTURE OPERATING RESULTS UNCERTAIN,
AND MAY CAUSE THEM TO FLUCTUATE FROM PERIOD TO PERIOD.

      Our quarterly revenues and operating results are difficult to predict and
may fluctuate significantly from quarter to quarter, particularly because our
products and services are relatively new and our prospects are uncertain. If our
quarterly revenues or operating results fall below the expectations of
investors, the price of our common shares could decline substantially. Factors
that might cause quarterly fluctuations in our operating results include the
risk factors described in the sub-headings below as well as the following:

      -     the timing of new releases of our products;

      -     changes in our pricing policies or those of our competitors,
            including the extent to which we may need to offer discounts to
            match competitors' pricing;

      -     the mix of sales channels through which our products and services
            are sold;

      -     the mix of our domestic and international sales;

      -     costs related to the customization of our products;

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DELANO TECHNOLOGY CORPORATION - 10K - Annual Report
================================================================================


      -     our ability to expand our operations, and the amount and timing of
            expenditures related to this expansion; and

      -     any costs or expenses related to our anticipated move to new
            corporate offices;

      -     our operating results may also be affected by the following factors
            over which we have little or no control:

            -     the evolving and varying demand for interaction-based software
                  products and services for e-businesses, particularly our
                  products and services;

            -     the discretionary nature of our clients' purchasing and
                  budgetary cycles;

            -     the timing of execution of large contracts that materially
                  affect our operating results; and

            -     global economic conditions, as well as those specific to large
                  enterprises with high e-mail volume.

OUR OPERATING EXPENSES ARE RELATIVELY FIXED, WHICH WOULD CAUSE OUR OPERATING
RESULTS TO VARY FROM PERIOD TO PERIOD.

      Most of our expenses, such as employee compensation and rent, are
relatively fixed in the short term. Moreover, our expense levels are based, in
part, on our expectations regarding future revenue levels. As a result, if total
revenues for a particular quarter are below our expectations, we cannot
proportionately reduce operating expenses for that quarter. Therefore, this
revenue shortfall would have a disproportionate effect on our operating results
for that quarter.

WE HAVE A HISTORY OF LOSSES, WE MAY INCUR LOSSES IN THE FUTURE AND OUR LOSSES
MAY INCREASE BECAUSE OF OUR PLAN TO INCREASE OPERATING EXPENSES.

      Since we began operations in May 1998, we have incurred substantial
operating losses in every quarter. As a result of accumulated operating losses,
as of March 31, 2000, we had an accumulated deficit of $11.4 million. For the
year ended March 31, 2000, we had a net loss of $9.3 million, or 97.8% of total
revenues for that period. Our growth in recent periods has been from a limited
base of clients, and we may not be able to sustain our growth rate. We expect to
continue to increase our operating expenses. As a result, we expect to continue
to experience losses and negative cash flow, even if sale of our products and
services continues to grow, and we may not generate sufficient revenues to
achieve profitability in the future.

      In addition, as a result of our rapid growth, we expect that our losses
may increase even more because of additional costs and expenses related to an
increase in:

      -     the number of our employees;

      -     research and development activities; and

      -     sales and marketing activities.

WE ARE DEPENDENT UPON A LIMITED NUMBER OF CLIENTS, AND A LOSS OF ANY OF THESE
CLIENTS OR A REDUCTION, DELAY OR CANCELLATION IN ORDERS FROM THESE CLIENTS COULD
HARM OUR BUSINESS.

      To date, a significant portion of the total revenues has been derived from
sales to a small number of clients. In the year ended March 31, 2000, one
customer accounted for 15% of our total revenues and no other customer accounted
for more than 10% of revenues. We expect that we will continue to be dependent
upon a limited number of clients for a significant portion of our revenue in
future periods. There can be no assurance that our existing clients or any
future clients will continue to use our products. A reduction, delay or
cancellation in orders from our clients, including reductions or delays due to
market, economic or competitive conditions, could have a materially adverse
effect on our business, operating results and financial condition.

DIFFICULTIES IN IMPLEMENTING OUR PRODUCTS COULD HARM OUR BUSINESS.

      Our success depends upon the ability of our staff and our clients to
implement our products. This implementation typically involves working with
sophisticated software, computing and communications systems. If we experience
implementation difficulties or do not meet project milestones in a timely
manner, we could be obligated to devote more

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DELANO TECHNOLOGY CORPORATION - 10K - Annual Report
================================================================================

customer support, engineering and other resources to a particular project than
anticipated. Some clients may also require us to develop customized features or
capabilities. If new or existing clients require more time to deploy our
products than is originally anticipated, or require significant amounts of our
professional services support or customized features, our revenue recognition
could be further delayed and our costs could increase, causing increased
variability in our operating results.

OUR PRODUCTS AND SERVICES MAY NOT BE ACCEPTED BY THE MARKETPLACE.

      Of our total revenues of $9.5 million for the year ended March 31, 2000,
$8.8 million were derived from licenses of our products and $690,000 was from
related services. We are not certain that our target clients will widely adopt
and deploy our products and services. Our future financial performance will
depend on the successful development, introduction and client acceptance of new
and enhanced versions of our products. In the future, we may not be successful
in marketing our products and services or any new or enhanced products.

WE EXPECT TO DEPEND ON SALES OF OUR DELANO E-BUSINESS INTERACTION SUITE AND
VELOCITY SUITE APPLICATIONS FOR A SUBSTANTIAL MAJORITY OF OUR REVENUES FOR THE
FORESEEABLE FUTURE.

      In the year ended March 31, 2000, we derived most of our revenues from
licenses of our Delano e-Business Interaction Suite. Although we have added new
product offerings and expect to add new product offerings, we expect to continue
to derive a substantial majority of our revenues from sales of the Delano
e-Business Interaction Suite for the foreseeable future. Implementation of our
strategy depends on the Delano e-Business Interaction Suite being able to solve
the communication needs of businesses engaging in commercial transactions over
the internet or having an internet presence. If current or future clients are
not satisfied with the Delano e-Business Interaction Suite, our business and
operating results could be seriously harmed.

WE MUST CONTINUE TO DEVELOP ENHANCEMENTS TO OUR PRODUCTS AND NEW APPLICATIONS
AND FEATURES THAT RESPOND TO THE EVOLVING NEEDS OF OUR CLIENTS, RAPID
TECHNOLOGICAL CHANGE AND ADVANCES INTRODUCED BY OUR COMPETITORS.

      Future versions of hardware and software platforms embodying new
technologies and the emergence of new industry standards could render our
products obsolete. The market for e-business communications software is
characterized by:

      -     rapid technological change;

      -     frequent new product introductions;

      -     changes in customer requirements; and

      -     evolving industry standards.

      Our products are designed to work on, or interoperate with, a variety of
operating systems used by our clients. However, our software may not operate
correctly on evolving versions of operating systems, or the hardware upon which,
or with which, they are intended to run or interoperate, programming languages,
databases and other systems that our clients use. For example, because the
server component of the current versions of our products run only on the Windows
NT operating system from Microsoft, we must develop products and services that
are compatible with UNIX and other operating systems to meet the demands of our
clients. If we cannot successfully develop these products in response to client
demands or improve our existing products to keep pace with technological
changes, our business could suffer.

      We must continually improve the performance, features and reliability of
our products, particularly in response to competitive offerings. Our success
depends, in part, on our ability to enhance our existing software and to develop
new services, functionality and technologies that address the increasingly
sophisticated and varied needs of our prospective clients. If we do not properly
identify the feature preferences of prospective clients, or if we fail to
deliver features that meet the requirements of these clients on a timely basis,
our ability to market our products successfully and to increase our revenues
will be impaired.

DELAYS IN INTRODUCING NEW AND ENHANCED PRODUCTS COULD HARM OUR BUSINESS.

      The development of proprietary technologies and necessary service
enhancements entail significant technical and business risks and requires
substantial expenditures and lead time. If we experience product delays in the
future we may face:

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DELANO TECHNOLOGY CORPORATION - 10K - Annual Report
================================================================================

      -     customer dissatisfaction;

      -     cancellation of orders and license agreements;

      -     negative publicity;

      -     loss of revenues;

      -     slower market acceptance; and

      -     legal action by clients against us.

      In the future, our efforts to remedy product delays may not be successful
and we may lose clients as a result. Delays in bringing to market new products
or product enhancements could be exploited by our competitors. If we were to
lose market share as a result of lapses in our product development, our business
would suffer.

INTENSE COMPETITION COULD REDUCE OUR MARKET SHARE AND HARM OUR FINANCIAL
PERFORMANCE.

      The market for our products and services is intensely competitive,
evolving and subject to rapid technological change. We expect the intensity of
competition to increase in the future. Increased competition may result in price
reductions, reduced gross margins and loss of market share. The market for
e-business communications software is new and intensely competitive. There are
no substantial barriers to entry in this emerging market segment, and we expect
established or new entities to enter this market segment in the near future.

      We currently face competition for our products principally from systems
designed by in-house and third-party development efforts. In addition, some of
our competitors who currently offer licensed software products are now beginning
to offer online offerings, which involve providing software on a rental basis
hosted on the hardware of an application service provider, or ASP. We currently
do not offer online offerings in any material way.

      Our competitors include companies providing software that is focused on a
few operational or functional areas, such as eGain Communications and Kana
Communications. We also compete with companies that provide customer management
and communications solutions, such as Siebel Systems and Vantive. Furthermore,
established enterprise software companies, including Hewlett-Packard, IBM and
Microsoft, may leverage their existing relationships and capabilities to offer
e-business communications software that competes with our products. We believe
competition will increase as our current competitors increase the sophistication
of their offerings and as new participants enter the market. We may also face
competition from web application servers, messaging server platform solutions,
e-mail application vendors and e-mail service bureaus.

      Many of our competitors have longer operating histories, significantly
greater financial, technical, marketing and other resources, significantly
greater name recognition and a larger installed base of customers than we do. In
addition, many of our competitors have well-established relationships with our
current and potential clients and have extensive knowledge of our industry. We
may lose potential clients to competitors for various reasons, including the
ability or willingness of our competitors to offer lower prices and other
incentives that we cannot match. Accordingly, it is possible that new
competitors or alliances among competitors may emerge and rapidly acquire
significant market share. We also expect that competition may increase as a
result of industry consolidations. We may not be able to compete successfully
against current and future competitors, and competitive pressures may seriously
harm our business.

THE DELANO E-BUSINESS INTERACTION SUITE ENABLES THIRD PARTIES TO DEVELOP
APPLICATIONS THAT COMPETE WITH OUR APPLICATIONS.

      Third parties have the ability to develop their own applications on top of
the Delano e-Business Interaction Suite. The applications of these third parties
could compete with products developed by us or services which we offer now or
will offer in the future. If our target clients do not widely adopt and purchase
our products, or if third parties compete with applications developed by us, our
business would suffer.

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<PAGE>   25

DELANO TECHNOLOGY CORPORATION - 10K - Annual Report
================================================================================


FAILURE TO ATTRACT AND RETAIN ADDITIONAL QUALIFIED PERSONNEL COULD ADVERSELY
AFFECT OUR EXPANSION PLANS.

      We intend to continue to increase the number of our sales and marketing,
engineering, professional services and product management personnel
significantly over the next 12 months. Competition for these individuals is
intense in our industry, particularly in the Toronto area where we are
headquartered, and there are a limited number of experienced people available
with the necessary technical skills. Our ability to increase revenues in the
future depends considerably upon our success in recruiting, training and
retaining additional direct sales personnel and the success of the direct sales
force. Our business will be harmed if we fail to hire or retain qualified sales
personnel, or if newly hired salespeople fail to develop the necessary sales
skills or develop these skills more slowly than we anticipate. We also are
substantially dependent upon our ability to develop new products and enhance
existing products, and we may not be able to hire and retain highly qualified
research and development personnel. Similarly, our failure to attract and retain
the highly trained personnel that are integral to our professional services
group, which is responsible for the implementation and customization of, and
technical support for, our products and services, may limit the rate at which we
can develop and install new products or product enhancements, which would harm
our business.

THE LOSS OF ANY OF OUR EXECUTIVE OFFICERS COULD ADVERSELY AFFECT OUR BUSINESS.

      Our future success depends to a significant degree on the skills,
experience and efforts of our executive officers. In particular, we depend upon
the continued services of John Foresi, our President and Chief Executive
Officer, and Bahman Koohestani, our Executive Vice-President, Products and Chief
Technology Officer and a founder of Delano. Although we have purchased
Cdn$500,000 (approximately $346,000) life insurance benefiting Delano on these
two individuals, the loss of the services of either of these individuals could
significantly harm our business and operations.

      We have not entered into employment agreements with our executive officers
which would require them to work solely for us on a long-term basis. If any of
our executive officers left or was seriously injured and unable to work and we
were unable to find a qualified replacement, our business could be harmed.

FAILURE TO INTEGRATE OUR EXECUTIVE TEAM MAY INTERFERE WITH OPERATIONS.

      Our executive team has largely been hired in the past year. To integrate
into our company, these individuals must spend a significant amount of time
developing interpersonal relationships and learning our business model and
management system, in addition to performing their regular duties. Accordingly,
the integration of new personnel has resulted, and may continue to result, in
some disruption of our ongoing operations.

WE HAVE EXPERIENCED RAPID GROWTH WHICH HAS PLACED A STRAIN ON OUR RESOURCES, AND
ANY FAILURE TO MANAGE OUR GROWTH EFFECTIVELY MAY CAUSE OUR BUSINESS TO SUFFER.

      Our ability to offer our products and services successfully in a rapidly
evolving market requires an effective planning and management process. We have
limited experience in managing rapid growth. We are experiencing a period of
growth that is placing a significant strain on our managerial, financial and
personnel resources. On March 31, 2000, we had a total of 281 full-time
employees compared to 55 on March 31, 1999. We expect to continue to hire new
employees at a rapid pace. Our business will suffer if this growth continues and
we fail to manage this growth. Any additional growth will further strain our
management, financial, personnel and other resources. To manage any future
growth effectively, we must improve our financial and accounting systems,
controls, reporting systems and procedures, integrate new personnel and manage
expanded operations. Any failure to do so could negatively affect the quality of
our products, our ability to respond to our clients and retain key personnel,
and our business in general.

OUR FUTURE REVENUE GROWTH COULD BE IMPAIRED IF WE ARE UNABLE TO DEVELOP
ADDITIONAL DISTRIBUTION CHANNELS FOR OUR PRODUCTS.

      We believe that our success in penetrating our target markets depends in
part on our ability to enter into agreements with established third-party
distribution companies, consulting organizations and software vendors relating
to the distribution of our products. We have recently entered into non-exclusive
distribution agreements with various parties, including Clarify,
Hewlett-Packard, Macromedia, Deloitte Consulting and PricewaterhouseCoopers.
Since these agreements are non-exclusive and normally terminable without penalty
on short notice, some third parties may choose to discontinue working with us or
may decide to work with our competitors. We derive revenues from these
agreements through the sale of licenses. For the year ended March 31, 2000, we
derived 15% of our total revenues from a single sale through one of these
agreements. We may not be able to derive significant revenues in the future from
these agreements.

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================================================================================

WE MAY SEEK TO GROW BY MAKING ACQUISITIONS, BUT WE HAVE NEVER ACQUIRED ANOTHER
BUSINESS AND WE MAY NOT BE ABLE TO SUCCESSFULLY COMPLETE ANY ACQUISITIONS WE
UNDERTAKE OR INTEGRATE ANY ACQUIRED BUSINESS WITH OUR OWN.

      We intend to consider investments in complementary companies, products or
technologies. If we undertake an acquisition or investment, we may not realize
the anticipated benefits. If we buy a company, we may not be able to
successfully assimilate the acquired personnel, operations, technology and
products into our business. In particular, we will need to assimilate and retain
key technical, professional services, sales and marketing personnel. In
addition, acquired products or technology will have to be integrated into our
products and technology, and it is uncertain whether we may accomplish this.
These difficulties could disrupt our ongoing business, distract our management
and employees or increase our expenses. In connection with a merger, or
acquisition for shares, the issuance of these securities may be dilutive to our
existing shareholders or affect profitability. Furthermore, we may have to issue
equity or incur debt to pay for future acquisitions or investments, the issuance
of which could be dilutive to us or our existing shareholders or affect our
profitability. In addition, our profitability may suffer because of
acquisition-related costs or amortization costs for acquired goodwill and other
acquired intangible assets.

WE MAY NEED TO RAISE ADDITIONAL CAPITAL TO GROW OUR BUSINESS, WHICH WE MAY NOT
BE ABLE TO DO.

      Our future liquidity and capital requirements are difficult to predict
because they depend on numerous factors, including the success of our existing
and new service offerings as well as competing technological and market
developments. As a result, we may not be able to generate sufficient cash from
our operations to meet additional working capital requirements, support
additional capital expenditures or take advantage of acquisition opportunities.
Accordingly, we may need to raise additional capital in the future. Our ability
to obtain additional financing will be subject to a number of factors, including
market conditions and our operating performance. These factors may make the
timing, amount, terms and conditions of additional financing unattractive for
us. If we raise additional funds by selling equity securities, the relative
equity ownership of our existing investors could be diluted or the new investors
could obtain terms more favorable than previous investors. If we raise
additional funds through debt financing, we could incur significant borrowing
costs. If we are unable to raise additional funds when needed, our ability to
operate and grow our business could be impeded.

TECHNICAL PROBLEMS WITH INTERNAL OR OUTSOURCED COMPUTER AND COMMUNICATIONS
SYSTEMS COULD RESULT IN REDUCED REVENUES AND HARM TO OUR REPUTATION.

      The success of our online support services depends on the efficient and
uninterrupted operation of our own and outsourced computer and communications
hardware and software systems. These systems and operations are vulnerable to
damage or interruption from human error, natural disasters, telecommunications
failures, break-ins, sabotage, computer viruses and similar adverse events. Our
operations depend on our ability to protect our systems against damage or
interruption. We cannot guarantee that our internet access will be
uninterrupted, error-free or secure. We have no formal disaster recovery plan in
the event of damage or interruption, and our insurance policies may not
adequately compensate us for losses that we may incur. Any system failure that
causes an interruption in our service or a decrease in responsiveness could harm
our relationships with our clients and result in reduced revenues.

FAILURE TO SELL ONLINE SERVICES MAY IMPAIR OUR FUTURE REVENUE GROWTH.

    We currently focus primarily on software sales rather than online offerings.
Our competitors may move to a heavier emphasis on online offerings, and our
failure to focus on it at an early stage may make it difficult to compete if
online offerings become a dominant means of generating revenues within the
industry. In addition, although our sales force sells both our software products
and online offerings, the skills necessary to market and sell online offerings
are different than those relating to our software products. As a result, our
sales and marketing groups may not be able to maintain or increase the level of
sales of our online offerings.

A DECLINE IN OUR LICENSE REVENUES COULD CAUSE A DECLINE IN OUR SERVICE REVENUES.

      Our products are designed to enable customers to rapidly develop and
deploy e-business communication applications. Where desirable, our professional
services group can assist our clients internal IT personnel to implement our
products. Because the revenues associated with these services are largely
correlated with the licensing of our products, a decline in license revenues
could also cause a decline in our service revenues.

================================================================================
                                                                              26


<PAGE>   27

DELANO TECHNOLOGY CORPORATION - 10K - Annual Report
================================================================================

CONFLICTS BETWEEN OUR PRODUCTS AND OTHER VENDORS' PRODUCTS COULD HARM OUR
BUSINESS AND REPUTATION.

      Our clients generally use our products together with products from other
companies. As a result, when problems occur in the network, it may be difficult
to identify the source of the problem. Even when these problems are not caused
by our products, they may cause us to incur significant warranty and repair
costs, divert the attention of our engineering personnel from our product
development efforts and cause significant customer relations problems.

OUR SUCCESS DEPENDS ON OUR ABILITY TO PROTECT OUR PROPRIETARY RIGHTS.

      We rely on contractual restrictions, such as confidentiality agreements
and licenses, to establish and protect our proprietary rights. None of our
trademarks is registered, nor do we have any trademark applications pending. We
currently have no patent applications pending relating to our software. Despite
any precautions that we take to protect our intellectual property:

      -     laws and contractual restrictions may be insufficient to prevent
            misappropriation of our technology or deter others from developing
            similar technologies;

      -     current laws that prohibit software copying provide only limited
            protection from software "pirates", and effective trademark,
            copyright and trade secret protection may be unavailable or limited
            in foreign countries;

      -     other companies may claim common law trademark rights based upon
            state, provincial or foreign laws that precede any registrations we
            may receive for our trademarks; and

      -     policing unauthorized use of our products and trademarks is
            difficult, expensive and time-consuming, and we may be unable to
            determine the extent of this unauthorized use.

      It is possible that our intellectual property rights could be successfully
challenged by one or more third parties, which could result in our inability to
exploit, or our loss of the right to prevent others from exploiting, certain
intellectual property. We are aware that certain of our competitors have filed
patent applications.

      Also, the laws of other countries in which we market our products may
offer little or no effective protection of our technology. Reverse engineering,
unauthorized copying or other misappropriation of our technology could enable
third parties to benefit from our technology without paying us for it, which
would significantly harm our business.

WE RELY ON SOFTWARE LICENSED TO US BY THIRD PARTIES FOR FEATURES WE INCLUDE IN
OUR PRODUCTS.

      We use and in the future will use certain software technologies and other
information that we license or otherwise acquire from third parties, usually on
a non-exclusive basis, including software that is integrated with our internally
developed software and used in our products to perform what may be important
functions. If we are not able to continue to use the third-party software and
technologies, or if they fail to adequately update and support their products,
we could suffer delays or reductions in shipments of our products until
alternative software and technologies could be identified, which could adversely
affect our business and financial condition.

CLAIMS BY OTHER COMPANIES THAT OUR PRODUCTS INFRINGE THEIR PROPRIETARY RIGHTS
COULD ADVERSELY AFFECT OUR ABILITY TO SELL OUR PRODUCTS AND INCREASE OUR COSTS.

      Substantial litigation over intellectual property rights exists in our
industry. We expect that software in our industry may be increasingly subject to
third-party infringement claims as the number of competitors grow and the
functionality of products in different industry segments overlap. Third parties
may currently have, or may eventually be issued patents that our products or
technology infringe.

      Any of these third parties might make a claim of infringement against us.
Many of our software license agreements require us to indemnify our clients and
suppliers from any claim or finding of intellectual property infringement. Any
litigation, brought by us or others, could result in the expenditure of
significant financial resources and the diversion of management's time and
efforts. In addition, litigation in which we are accused of infringement might
cause negative publicity, have an impact on prospective clients, cause product
shipment delays, require us to develop non-infringing technology or require us
to enter into royalty or license agreements, which might not be available on
acceptable terms, or at all. If a successful claim of infringement were made
against us and we could not develop non-infringing technology or license the
infringed or similar technology on a timely and cost-effective basis, our
business could be significantly harmed.


================================================================================
                                                                              27


<PAGE>   28

DELANO TECHNOLOGY CORPORATION - 10K - Annual Report
================================================================================

OUR INSURANCE MAY NOT BE SUFFICIENT TO COVER ALL POTENTIAL PRODUCT LIABILITY AND
WARRANTY CLAIMS.

      Our products are integrated into our clients' networks. The sale and
support of our products results in the risk of product liability or warranty
claims based on damage to these networks. In addition, the failure of our
products to perform to client expectations could give rise to warranty claims.
Although we carry general liability insurance, our insurance would likely not
cover potential claims of this type or may not be adequate to protect us from
all liability that may be imposed.

OUR PRODUCTS COULD CONTAIN UNDETECTED DEFECTS OR ERRORS.

      We face the possibility of higher costs as a result of the complexity of
our products and the potential for undetected errors. Due to the
mission-critical nature of our products and services, undetected errors are of
particular concern. We have only a limited number of clients that test new
features and the functionality of our software before we make these features and
functionalities generally available. If our software contains undetected errors
or we fail to meet our clients' expectations in a timely manner, we could
experience:

      -     loss of, or delay in revenues expected from the new product and an
            immediate and significant loss of market share;

      -     loss of existing clients that upgrade to the new product and of new
            clients;

      -     failure to achieve market acceptance;

      -     diversion of development resources;

      -     injury to our reputation;

      -     increased service and warranty costs;

      -     legal actions by clients against us; and

      -     increased insurance costs.

      A product liability claim could harm our business by increasing our costs,
damaging our reputation and distracting our management.

OUR INTERNATIONAL EXPANSION EFFORTS MAY NOT BE SUCCESSFUL.

      Our operations outside the United States and Canada are located in the
United Kingdom and, to date, have been limited. We plan to expand our existing
international operations and establish additional facilities in other parts of
the world, including continental Europe and Asia. However, we have not yet
determined which cities or countries will be the locations for our international
expansion. The expansion of our existing international operations and entry into
additional international markets are key parts of our growth strategy and will
require significant management attention and financial resources. In addition,
to expand our international sales operations, we will need to, among other
things:

      -     expand our international sales channel management and support
            organizations;

      -     develop relationships with international service providers and
            additional distributors and systems integrators; and

      -     customize our products for local markets.

      Our investments in facilities in other countries may not produce desired
levels of revenues. Even if we are able to expand our international operations
successfully, we may not be able to maintain or increase international market
demand for our products.

OUR BUSINESS MAY SUFFER IF WE FAIL TO ADAPT APPROPRIATELY TO THE CHALLENGES
ASSOCIATED WITH OPERATING INTERNATIONALLY.

      Expanding our operations outside the United States and Canada subjects us
to numerous inherent potential risks associated with international operations.
These risks include greater difficulty in accounts receivable collection, the
burden of complying with multiple and conflicting regulatory requirements,
foreign exchange controls, longer payment cycles,

================================================================================
                                                                              28


<PAGE>   29


DELANO TECHNOLOGY CORPORATION - 10K - Annual Report
================================================================================

import and export restrictions and tariffs, potentially adverse tax
consequences, and political and economic instability, any of which could impair
our sales and results of operations. In addition, our ability to expand our
business in certain countries will require modification of our products,
particularly domestic language support.

      Our international operations will increase our exposure to international
laws and regulations. If we cannot comply with foreign laws and regulations,
which are often complex and subject to variation and unexpected changes, we
could incur unexpected costs and potential litigation. For example, the
governments of foreign countries might attempt to regulate our products and
services or levy sales or other taxes relating to our activities. In addition,
foreign countries may impose tariffs, duties, price controls or other
restrictions on foreign currencies or trade barriers, any of which could make it
more difficult to conduct our business. The European Union, in which we have a
sales office, recently enacted its own privacy regulations that may result in
limits on the collection and use of certain user information, which, if applied
to the sale of our products and services, could negatively impact our results of
operations.

FLUCTUATIONS IN EXCHANGE RATES MAY AFFECT OUR OPERATING RESULTS.

      A substantial portion of our revenues are now, and are expected to
continue to be, realized in currencies other than Canadian dollars. Our
operating expenses are primarily paid in Canadian dollars. Fluctuations in the
exchange rate between the Canadian dollar and these other currencies may have a
material effect on our results of operations. In particular, we may be adversely
affected by a significant strengthening of the Canadian dollar against the U.S.
dollar. We do not currently engage in currency hedging activities. We have not
yet, but may in the future, experience significant foreign exchange rate losses,
especially to the extent that we do not engage in hedging.

IF WE ARE OR BECOME A PASSIVE FOREIGN INVESTMENT COMPANY WE MAY NOT BE ABLE TO
SATISFY RECORD-KEEPING REQUIREMENTS, WHICH COULD HAVE ADVERSE U.S. TAX
CONSEQUENCES TO YOU.

      The rules governing passive foreign investment companies can have
significant effects on U.S. investors. We could be classified as a passive
foreign investment company if, for any taxable year, either:

      -     75% or more of our gross income is passive income, which includes
            interest, dividends and some types of rents and royalties; or

      -     the average percentage, by fair market value, or, in some cases, by
            adjusted tax basis, of our assets that produce or are held for the
            production of passive income is 50% or more.

      Distributions which constitute "excess distributions," as defined in
Section 1291 of the Internal Revenue Code, from a passive foreign investment
company and dispositions of shares of a passive foreign investment company are
subject to the highest rate of tax on ordinary income in effect and to an
interest charge based on the value of the tax deferred during the period during
which the shares are owned. However, these rules generally will not apply if the
U.S. investor elects to treat the passive foreign investment company as a
qualified electing fund under Section 1295 of the Internal Revenue Code.

      If we are or become a passive foreign investment company we may not be
able to satisfy record-keeping requirements that would permit you to make a
qualified electing fund election.

RISKS RELATED TO OUR INDUSTRY

OUR FUTURE REVENUES AND PROFITS DEPEND ON THE CONTINUED GROWTH IN USE AND
EFFICIENT OPERATION OF THE INTERNET AND E-MAIL.

      We sell our products and services primarily to organizations that receive
large volumes of e-mail and communications over the web. Consequently, our
future revenues and profits, if any, substantially depend upon the continued
acceptance and use of the web and e-mail, which are evolving as communications
media. Rapid growth in the use of e-mail is a recent phenomenon and may not
continue. As a result, a broad base of enterprises that use e-mail as a primary
means of communication may not develop or be maintained. Moreover, companies
that have already invested significant resources in other methods of
communications with customers, such as call centers, may be reluctant to adopt a
new strategy that may limit or compete with their existing investments. If
businesses do not continue to accept the web and e-mail as communications media,
our business would suffer.

================================================================================
                                                                              29


<PAGE>   30

DELANO TECHNOLOGY CORPORATION - 10K - Annual Report
================================================================================


GOVERNMENT REGULATION AND LEGAL UNCERTAINTIES RELATING TO THE INTERNET COULD
DISCOURAGE COMMUNICATION BY E-MAIL OR OTHER INTERNET-BASED COMMUNICATIONS
FACILITATED BY OUR PRODUCTS.

      Due to the increasing popularity and use of the internet, it is possible
that Canadian and U.S. federal, Canadian provincial, U.S. state, and other
foreign regulators could adopt laws and regulations that impose additional
burdens on those companies that conduct business online. These laws and
regulations could discourage communication by e-mail or other internet-based
communications facilitated by our products, which could reduce demand for our
products and services.

      The growth and development of the market for online services may prompt
calls for more stringent consumer protection laws or laws that may inhibit the
use of internet-based communications or the information contained in these
communications. The adoption of any additional laws or regulations may slow the
growth of the internet. A decline in the growth of the internet, particularly as
it relates to online communication, could decrease demand for our products and
services and increase our cost of doing business, or otherwise harm our
business.

YEAR 2000 COMPLICATIONS MAY DISRUPT OUR OPERATIONS AND HARM OUR BUSINESS.

      Many currently installed computer systems and software products are coded
to accept or recognize only two digit entries in the date code field. These
systems and software products will need to accept four digit entries to
distinguish 21st century dates from 20th century dates.

      We continue to monitor our software, the software we license for our
internal use, the systems that operate in conjunction with our software and our
internal and external systems for Year 2000 failures. We still may discover Year
2000 compliance problems in our systems that will require substantial revision.
In addition, third-party software, hardware or services incorporated into our
products and services may need to be revised or replaced, all of which could be
time-consuming and expensive and result in the following, any of which could
have a material adverse effect on our business including:

      -     delay or loss of revenue;

      -     cancellation of client contracts;

      -     diversion of development resources;

      -     damage to our reputation;

      -     increased service and warranty costs; and

      -     litigation costs.

BECAUSE WE ARE A CANADIAN COMPANY, IT MAY BE DIFFICULT FOR YOU TO ENFORCE
AGAINST US LIABILITIES BASED SOLELY UPON THE FEDERAL SECURITIES LAWS OF THE
UNITED STATES.

      We have been incorporated under the laws of the Province of Ontario, and
our executive offices are located in Ontario. Many of our directors, controlling
persons and officers, and representatives of the experts named in this Annual
Report on Form 10-K, are residents of Canada and a substantial portion of their
assets and a majority of our assets are located outside the United States.
Consequently, it may be difficult for you to enforce against us or any of our
directors, controlling persons, officers or experts who are not resident in the
United States, liabilities based solely upon the federal securities laws of the
United States.

OUR BOARD OF DIRECTORS MAY ISSUE, WITHOUT SHAREHOLDER APPROVAL, PREFERENCE
SHARES THAT HAVE RIGHTS AND PREFERENCES SUPERIOR TO THOSE OF COMMON SHARES AND
THAT MAY DELAY OR PREVENT A CHANGE OF CONTROL.

      Our articles of incorporation allow the issuance an unlimited number of
preference shares in one or more series. After the offering, there will be no
preference shares outstanding. However, our board of directors may set the
rights and preferences of any class of preference shares in its sole discretion
without the approval of the holders of common shares. The rights and preferences
of these preference shares may be superior to those of the common shares.
Accordingly, the issuance of preference shares may adversely affect the rights
of holders of common shares. The issuance of preference shares also could have
the effect of delaying or preventing a change of control of our company.


================================================================================
                                                                              30


<PAGE>   31

DELANO TECHNOLOGY CORPORATION - 10K - Annual Report
================================================================================

WE DO NOT INTEND TO PAY ANY DIVIDENDS ON OUR COMMON SHARES.

We have not paid any cash dividends on our shares and we currently do not have
any plans to pay dividends on our shares. In addition, our lease line of credit
specifically prohibits the payment of dividends on our shares.


================================================================================
                                                                              31



<PAGE>   32


DELANO TECHNOLOGY CORPORATION - 10K - Annual Report
================================================================================


ITEM  8: DELANO TECHNOLOGY CORPORATION INDEX TO CONSOLIDATED FINANCIAL
         STATEMENTS AND FINANCIAL STATEMENT SCHEDULE


<TABLE>
<CAPTION>
                                                                                    PAGE
                                                                                    ----
<S>                                                                                  <C>
Independent Auditor's Report......................................................   33
Consolidated Balance Sheets.......................................................   34
Consolidated Statements of Operations.............................................   35
Consolidated Statements of Shareholders' Equity (Deficiency)......................   36
Consolidated Statements of Cash Flows.............................................   37
Notes to Consolidated Financial Statements........................................   38
Schedule II - Valuation and Qualifying Accounts ..................................   47
</TABLE>

================================================================================
                                                                              32



<PAGE>   33

DELANO TECHNOLOGY CORPORATION - 10K - Annual Report
================================================================================

INDEPENDENT AUDITORS' REPORT


To the Board of Directors and Shareholders of Delano Technology Corporation.

We have audited the consolidated financial statements of Delano Technology
Corporation as listed in the accompanying index. In connection with our audits
of the consolidated financial statements, we also have audited the financial
statement schedule as listed in the accompanying index. These consolidated
financial statements and financial statement schedule are the responsibility of
the Company's management. Our responsibility is to express an opinion on these
consolidated financial statements and financial statement schedule based on our
audit.

We conducted our audits in accordance with generally accepted auditing standards
in the United States. Those standards require that we plan and perform the audit
to obtain reasonable assurance about whether the financial statements are free
of material mis-statement. 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 Delano Technology
Corporation as of March 31, 1999 and March 31, 2000, and the results of its
operations and its cash flows for the period from May 7, 1998 (date of
inception) to March 31, 1999 and the year ended March 31, 2000, in conformity
with generally accepted accounting principles in the United States. Also in our
opinion, the related financial statement schedule, when considered in relation
to the basic consolidated financial statements taken as a whole, present fairly,
in all material respects, the information set forth therein.

On April 14, 2000, we reported separately to the shareholders of Delano
Technology Corporation on the consolidated financial statements for the same
period, prepared in accordance with Canadian generally accepted accounting
principles.

Chartered Accountants

/s/ KPMG LLP
Toronto, Canada
April 14, 2000


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                                                                              33


<PAGE>   34

DELANO TECHNOLOGY CORPORATION - 10K - Annual Report
================================================================================



                          DELANO TECHNOLOGY CORPORATION

                           CONSOLIDATED BALANCE SHEETS
                  (DOLLAR AMOUNTS IN THOUSANDS OF U.S. DOLLARS)



<TABLE>
<CAPTION>
                                                                                             MARCH 31,      MARCH 31,
                                                                                               1999           2000
                                                                                             ---------     ----------
<S>                                                                                          <C>           <C>
ASSETS
Current assets:
   Cash and cash equivalents.......................................................          $   1,989     $   82,370
   Short-term investments..........................................................                 --         29,154
   Accounts receivable trade, net of allowance for doubtful accounts of nil at March
   31, 1999, and $200 at March 31, 2000............................................                 --          3,910
   Investment tax credits receivable...............................................                201            292
   Prepaid expenses and other......................................................                 65          1,808
                                                                                             ---------     ----------
     Total current assets..........................................................              2,255        117,534
Property and equipment.............................................................                318          2,373
                                                                                             ---------     ----------
Total assets.......................................................................          $   2,573     $  119,907
                                                                                             =========     ==========
LIABILITIES AND SHAREHOLDERS' EQUITY (DEFICIENCY)
Current liabilities:
   Accounts payable and accrued liabilities........................................          $     518     $    5,954
   Deferred revenue................................................................                100            961
   Current portion of obligations under capital leases.............................                 30            209
                                                                                             ---------     ----------
     Total current liabilities.....................................................                648          7,124
Long-term liabilities:
   Obligations under capital leases................................................                 66            222
                                                                                             ---------     ----------
Total liabilities..................................................................                714          7,346
Class A redeemable convertible special shares:
   Authorized: Unlimited
   Issued and outstanding:
     4,000,000 shares at March 31, 1999 and nil at March 31, 2000
     redemption amount-- $1,000 plus 8% cumulative dividends.......................              1,047             --
Class B redeemable convertible special shares:
   Authorized: Unlimited
   Issued and outstanding:
     3,789,476 shares at March 31, 1999 and nil at March 31, 2000
     redemption amount-- $2,400 plus 8% cumulative dividends.......................              2,434             --
Shareholders' equity (deficiency):
   Capital stock:
     Preference shares:
       Authorized: Unlimited
       Issued and outstanding:
       Nil at March 31, 1999 and 2000
     Common shares:
       Authorized: Unlimited
       Issued and outstanding:
       6,000,000 shares at March 31, 1999 and 29,929,833
       shares at March 31, 2000....................................................                433        133,006
   Warrant.........................................................................                126            126
   Deferred stock-based compensation...............................................               (386)        (8,851)
   Accumulated other comprehensive losses..........................................                 (5)          (340)
   Deficit.........................................................................             (1,790)       (11,380)
                                                                                             ---------     ----------
     Total shareholders' equity (deficiency).......................................             (1,622)       112,561
                                                                                             ---------     ----------
Total liabilities and shareholders' equity (deficiency)............................          $   2,573     $  119,907
                                                                                             =========     ==========
</TABLE>

          See accompanying notes to consolidated financial statements.

================================================================================
                                                                              34


<PAGE>   35


DELANO TECHNOLOGY CORPORATION - 10K - Annual Report
================================================================================

                          DELANO TECHNOLOGY CORPORATION

                      CONSOLIDATED STATEMENTS OF OPERATIONS
     (DOLLAR AMOUNTS IN THOUSANDS OF U.S. DOLLARS, EXCEPT PER SHARE AMOUNTS)

<TABLE>
<CAPTION>
                                                                                          PERIOD FROM
                                                                                          MAY 7, 1998        YEAR
                                                                                        (INCEPTION) TO       ENDED
                                                                                           MARCH 31,        MARCH 31,
                                                                                             1999            2000
                                                                                          ---------        ---------
<S>                                                                                      <C>              <C>
Revenues:
   Products.......................................................................               --        $   8,799
   Services.......................................................................               --              690
                                                                                          ---------        ---------
     Total revenues...............................................................               --            9,489
                                                                                          ---------        ---------
Cost of revenues:
   Products.......................................................................               --               59
   Services.......................................................................               --            1,239
                                                                                          ---------        ---------
     Total cost of revenues.......................................................               --            1,298
                                                                                          ---------        ---------
Gross profit......................................................................               --            8,191
                                                                                          ---------        ---------
Operating expenses:
   Sales and marketing............................................................        $     554           11,732
   Research and development.......................................................              797            3,649
   General and administrative.....................................................              180            1,515
   Amortization of deferred stock-based compensation..............................              171            1,671
                                                                                          ---------        ---------
     Total operating expenses.....................................................            1,702           18,567
                                                                                          ---------        ---------
Loss from operations..............................................................           (1,702)         (10,376)
Interest income, net..............................................................               13            1,099
                                                                                          ---------        ---------
Loss before provision for income taxes............................................           (1,689)          (9,277)
Provision for income taxes........................................................               --               --
                                                                                          ---------        ---------
Loss for the period...............................................................           (1,689)          (9,277)
   Less: accretion of dividends on redeemable convertible
   special shares.................................................................             (101)            (313)
                                                                                          ---------        ---------
   Loss applicable to common shares...............................................        $  (1,790)       $  (9,590)
                                                                                          =========        =========
Basic and diluted loss per common share...........................................        $   (2.40)       $   (1.50)
                                                                                          =========        =========
Shares used in computing basic and diluted loss per
common share (in thousands).......................................................              746            6,381
                                                                                          =========        =========
</TABLE>

          See accompanying notes to consolidated financial statements.


================================================================================
                                                                              35


<PAGE>   36

DELANO TECHNOLOGY CORPORATION - 10K - Annual Report
================================================================================


                          DELANO TECHNOLOGY CORPORATION

          CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY (DEFICIENCY)
                  (DOLLAR AMOUNTS IN THOUSANDS OF U.S. DOLLARS)


<TABLE>
<CAPTION>
                                       COMMON SHARES
                                  -----------------------                               ACCUMULATED                  TOTAL
                                                                           DEFERRED        OTHER                  SHAREHOLDERS'
                                                                         STOCK-BASED   COMPREHENSIVE                 EQUITY
                                    NUMBER        AMOUNT      WARRANT   COMPENSATION       LOSSES       DEFICIT   (DEFICIENCY)
                                  ----------    ---------    --------   ------------   -------------    -------   ------------
<S>                               <C>           <C>          <C>        <C>            <C>              <C>       <C>
Balances, May 7, 1998.........            --           --          --           --           --             --            --
Issuance of common shares.....     6,000,000    $       2          --           --           --             --     $       2
Deferred stock-based
compensation..................            --          431    $    126    $    (557)          --             --            --
Amortization of deferred
stock-based compensation......            --           --          --          171           --             --           171
Accretion of dividends on
redeemable convertible special
shares........................            --           --          --           --           --      $    (101)         (101)
Other comprehensive losses....            --           --          --           --      $    (5)            --            (5)
Loss for the period...........            --           --          --           --           --         (1,689)       (1,689)
                                  ----------    ---------    --------    ---------      -------      ---------     ---------
Balances, March 31, 1999......     6,000,000          433         126         (386)          (5)        (1,790)       (1,622)
Issuance of common shares.....     6,250,000      103,855          --           --           --             --       103,855
Issuance of common shares on
conversion of Class A special
shares........................     6,000,000        1,158          --           --           --             --         1,158
Issuance of common shares on
conversion of Class B special
shares........................     5,684,198        2,693          --           --           --             --         2,693
Issuance of common shares on
conversion of special
warrants .....................     6,490,385       14,703          --           --           --             --        14,703
Deferred stock-based
compensation..................            --       10,136          --      (10,136)          --             --            --
Repurchase of common
shares........................      (750,000)          --          --           --           --             --            --
Amortization of deferred
stock-based compensation......            --           --          --        1,671           --             --         1,671
Accretion of dividends on
redeemable convertible special
shares........................            --           --          --           --           --           (313)         (313)
Exercise of stock options.....       255,250           28          --           --           --             --            28
Other comprehensive losses....            --           --          --           --         (335)            --          (335)
Loss for the period...........            --           --          --           --           --         (9,277)       (9,277)
                                  ----------    ---------    --------    ---------      -------      ---------     ---------
Balances, March 31, 2000...       29,929,833    $ 133,006    $    126    $  (8,851)     $  (340)     $ (11,380)    $ 112,561
                                  ==========    =========    ========    =========      =======      =========     =========
</TABLE>


          See accompanying notes to consolidated financial statements.


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                                                                              36



<PAGE>   37

DELANO TECHNOLOGY CORPORATION - 10K - Annual Report
================================================================================



                          DELANO TECHNOLOGY CORPORATION

                      CONSOLIDATED STATEMENTS OF CASH FLOWS
                  (DOLLAR AMOUNTS IN THOUSANDS OF U.S. DOLLARS)


<TABLE>
<CAPTION>
                                                                                         PERIOD FROM
                                                                                          MAY 7, 1998         YEAR
                                                                                        (INCEPTION) TO        ENDED
                                                                                           MARCH 31,         MARCH 31,
                                                                                              1999             2000
                                                                                           --------          --------
<S>                                                                                        <C>               <C>
Cash provided by (used in):
Operating activities:
   Loss for the period............................................................         $ (1,689)         $ (9,277)
   Depreciation and amortization which does not
   involve cash...................................................................               33               299
   Amortization of deferred stock-based compensation..............................              171             1,671
   Changes in non-cash operating working capital:
     Accounts receivable trade....................................................               --            (3,852)
     Investment tax credits receivable............................................             (200)              (82)
     Prepaid expenses and other...................................................              (65)           (1,715)
     Accounts payable and accrued liabilities.....................................              516             5,335
     Deferred revenue.............................................................               99               844
                                                                                           --------          --------
   Net cash used in operating activities..........................................           (1,135)           (6,777)
Financing activities:
   Issuance of redeemable convertible special shares..............................            3,375                --
   Issuance of common shares......................................................                2           103,398
   Issuance of special warrants...................................................               --            14,436
   Proceeds from bank loan........................................................               --               156
   Repayment of bank loan.........................................................               --              (156)
   Repayment of obligations under capital leases..................................               (2)             (126)
                                                                                           --------          --------
   Net cash provided by financing activities......................................            3,375           117,708
Investing activities:
   Additions to property and equipment............................................             (251)           (1,859)
   Purchase of short-term investments.............................................               --           (29,154)
                                                                                           --------          --------
   Cash used in investing activities..............................................             (251)          (31,013)
Effect of currency translation of cash balances...................................               --               463
                                                                                           --------          --------
Increase in cash and cash equivalents.............................................            1,989            80,381
Cash and cash equivalents, beginning of period....................................               --             1,989
                                                                                           --------          --------
Cash and cash equivalents, end of period..........................................         $  1,989          $ 82,370
                                                                                           ========          ========
</TABLE>

          See accompanying notes to consolidated financial statements.

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                                                                              37


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DELANO TECHNOLOGY CORPORATION - 10K - Annual Report
================================================================================


                          DELANO TECHNOLOGY CORPORATION
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

1.    ORGANIZATION OF THE COMPANY

      Delano Technology Corporation (the "Company") was incorporated on May 7,
1998 and commenced commercial operations during the quarter ended June 30, 1999.
The Company develops and markets communications software that enables companies
to use e-mail and the internet for business interactions.

2.    SIGNIFICANT ACCOUNTING POLICIES

      These financial statements are stated in U.S. dollars, except where
otherwise noted. They have been prepared in accordance with accounting
principles generally accepted in the United States.

      These consolidated financial statements include the accounts of the
Company and its wholly owned subsidiaries. All material intercompany
transactions and balances have been eliminated.

a.    Use of Estimates

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

b.    Cash and Cash Equivalents

      All highly liquid investments, with an original maturity of three months
or less at the date of acquisition, are classified as cash equivalents.

c.    Short-term investments

      The Company's short-term investments include highly liquid instruments
with an original maturity of 90 days or more and are carried at cost, which
approximates their fair value.

d.    Property and Equipment

      Property and equipment are stated at cost, net of accumulated depreciation
and amortization, and are amortized over their estimated useful lives.
Expenditures for maintenance and repairs have been charged to the statement of
operations as incurred. Depreciation and amortization are computed using the
straight-line method as follows:

<TABLE>
<S>                                                                         <C>
      Furniture and office equipment...............................         33%
      Computer hardware............................................         33%
      Computer software............................................         50%
</TABLE>

      The Company regularly reviews the carrying values of its property and
equipment by comparing the carrying amount of the asset to the expected future
cash flows to be generated by the asset. If the carrying value exceeds the
amount recoverable a writedown is charged to the statement of operations.

e.    Revenue Recognition

      The Company recognizes revenue in accordance with the provisions of the
American Institute of Certified Public Accountants' ("AICPA") Statement of
Position ("SOP") No. 97-2, "Software Revenue Recognition" ("SOP No. 97-2") and
related provisions as amended by SOP 98-9. The Company's revenues are derived
from product elements, comprised primarily of license fees and service elements,
which include postcontract customer support ("PCS"), installation, training,
consulting and other services. Fees for services are generally billed separately
from licenses of the Company's products. In cases where the Company sells a
multi-element arrangement, the fees are allocated to the elements based on
Company-specific objective evidence of each element's fair value.


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                                                                              38


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DELANO TECHNOLOGY CORPORATION - 10K - Annual Report
================================================================================


      Revenue from product elements, consisting primarily of license fees, is
recognized pursuant to a contract or purchase order, when each element is
delivered to the customer and collection of the related receivable is deemed
probable by management. Reserves for product returns and sales allowances are
estimated and provided for at the time of sale. Such reserves are based upon
management's evaluation of historical experience and current industry trends.

      Revenue from service elements includes PCS which is recognized ratably
over the term of the agreement, which is typically twelve months. Revenues from
installation, training, consulting and other services are recognized when the
services are performed. Losses on professional services contracts, if any, are
recognized at the time such losses are identified.

      Product and service elements that have been prepaid but do not yet qualify
for recognition as revenue under the Company's revenue recognition policy are
reflected as deferred revenue on the Company's balance sheet.

f.    Currency Translation

      Monetary assets and liabilities of the Company and of its wholly owned
subsidiaries, which are integrated foreign operations, that are denominated in
foreign currencies are translated into Canadian dollars (which is considered to
be the measurement currency) at the exchange rate prevailing at the balance
sheet date. Non-monetary assets and liabilities are translated at the historical
exchange rate. Transactions included in operations are translated at the average
rate for the period. Exchange gains and losses resulting from the translation of
these foreign denominated amounts are reflected in the consolidated statement of
operations in the period in which they occur. As the Company's reporting
currency is the U.S. dollar, the Company translates consolidated assets and
liabilities denominated in Canadian dollars into U.S. dollars at the exchange
rate prevailing at the balance sheet date, and the consolidated results of
operations at the average rate for the period. Cumulative translation
adjustments are included as a separate component of shareholders' equity
(deficiency).

g.    Research and Development Expenses

      Costs related to research, design and development of products are charged
to research and development expense as incurred. Software development costs are
capitalized beginning when a product's technological feasibility has been
established and ending when a product is available for general release to
customers. To date, completing a working model of the Company's products and
general release have substantially coincided. As a result, the Company has not
capitalized any software development costs since such costs have not been
significant.

h.    Investment Tax Credits

      The Company is entitled to Canadian federal and provincial investment tax
credits which are earned as a percentage of eligible current and capital
research and development expenditures incurred in each taxation year. Certain
investment tax credits are fully refundable to the Company. All other investment
tax credits are available to be applied against future income tax liabilities,
subject to a 10-year carry forward period. Investment tax credits are accounted
for as a reduction of the related expenditure for items of a current nature and
a reduction of the related asset cost for items of a long-term nature, provided
that the Company has reasonable assurance that the tax credits will be realized.

i.    Income Taxes

      Under the asset and liability method of Statement of Accounting Standards
No. 109, "Accounting for Income Taxes" ("SFAS 109"), deferred tax assets and
liabilities are recognized for the future tax consequences attributable to
differences between the financial statement carrying amounts of existing assets
and liabilities and their respective tax bases and operating loss and tax credit
carry forwards. Deferred tax assets and liabilities are measured using enacted
tax rates expected to apply to taxable income in the years in which those
temporary differences are expected to be recovered or settled. Under SFAS 109,
the effect on deferred tax assets and liabilities of a change in tax rates is
recognized in the consolidated statement of operations in the period that
includes the enactment date.

j.    Stock-based Compensation

      The Company has elected to follow Accounting Principles Board Opinion No.
25 ("APB 25"), "Accounting for Stock Issued to Employees" and related
interpretations, in accounting for its employee stock options because the
alternative fair value accounting provided for under Financial Accounting
Standards Board, Statement No. 123 ("SFAS 123") "Accounting for Stock-Based
Compensation", requires use of option valuation models that were not developed
for use in valuing employee stock options. Under APB 25, deferred stock-based
compensation is recorded at the option grant date in an


================================================================================
                                                                              39


<PAGE>   40

DELANO TECHNOLOGY CORPORATION - 10K - Annual Report
================================================================================

amount equal to the difference between the fair market value of a common share
and the exercise price of the option. Deferred stock-based compensation for
options which are contingently issuable based upon the achievement of
performance criteria is recorded based upon the current fair market value of the
shares at the end of each period. Deferred stock-based compensation resulting
from employee option grants is amortized over the vesting period of the
individual options, generally three or four years, in accordance with Financial
Accounting Standards Board Interpretation No. 28.

k.    Loss Per Common Share

      Loss per common share has been calculated on the basis of earnings
applicable to common shares divided by the weighted average number of common
shares outstanding during each period. The calculation of weighted average
number of shares outstanding during each period excludes common shares held in
escrow. Diluted loss per common share has been calculated assuming that the
common shares held in escrow pursuant to escrow arrangements with certain
employee/shareholders prior to the date of the completion of the Company's IPO,
redeemable convertible special shares, special warrants, warrant and stock
options outstanding at the end of the period had been issued, converted or
exercised at the later of the beginning of the period or their date of issuance,
where such conversion or exercise would not be anti-dilutive. Pro forma basic
and diluted loss per common share has been calculated to give effect to the
conversion, at the later of the beginning of the period or their date of
issuance, of all outstanding redeemable convertible special shares and the
exercise of all outstanding special warrants.

l.    Concentration of Credit Risk

      Financial instruments that potentially subject the Company to
concentrations of credit risk consist primarily of cash equivalents, short-term
investments and accounts receivable trade. Cash equivalents and short-term
investments consist of deposits with, or guaranteed by, major commercial banks.
With respect to accounts receivable trade, the Company performs periodic credit
evaluations of the financial condition of its customers and typically does not
require collateral from them. Management assesses the need for allowances for
potential credit losses by considering the credit risk of specific customers,
historical trends and other information.

m.    Fair Values of Financial Assets and Financial Liabilities

      The carrying values of cash and cash equivalents, accounts receivable
trade, accounts payable and accrued liabilities approximate their fair values
due to the relatively short periods to maturity of the instruments. In addition,
the carrying values of obligations under capital leases and redeemable
convertible special shares approximate their fair values. The following methods
and assumptions were used to estimate the fair value of the following financial
instruments:

      (i)   Redeemable convertible special shares -- at the present value of
            contractual future payments of dividends and capital, discounted at
            the current market rates of interest available to the Company for
            the same or similar instrument.

      (ii)  Obligations under capital leases -- at the present value of the
            contractual future payments of principal and interest, discounted at
            the current market rates of interest available to the Company for
            the same or similar debt instrument.

n.    Comprehensive Income

      In June 1997, the Financial Accounting Standards Board ("FASB") issued
SFAS No. 130, "Reporting Comprehensive Income," which establishes standards for
reporting and presentation of comprehensive income. This standard defines
comprehensive income as the changes in equity of an enterprise except those
resulting from shareholder transactions. Comprehensive loss for the period from
May 7, 1998 (inception) to March 31, 1999 and the year ended March 31, 2000, was
not materially different from net loss for the periods.

o.    Recent Accounting Pronouncement

      In June 1998, the FASB issued Statement of Financial Accounting Standards
No. 133 ("SFAS No. 133"), "Accounting for Derivative Instruments and Hedging
Activities". SFAS No. 133 establishes accounting and reporting standards
requiring that every derivative instrument be recorded in the balance sheet as
either an asset or liability measured at its fair value. SFAS No. 133, as
recently amended, is effective for the fiscal year ending March 31, 2002.
Management believes the adoption of SFAS No. 133 will not have a material effect
on the Company's financial position or results of operations.

================================================================================
                                                                              40


<PAGE>   41

DELANO TECHNOLOGY CORPORATION - 10K - Annual Report
================================================================================


3.    PROPERTY AND EQUIPMENT

      Property and equipment consists of the following (in thousands):

<TABLE>
<CAPTION>
                                                                              MARCH 31,      MARCH 31,
                                                                                1999           2000
                                                                               ------        -------
<S>                                                                            <C>           <C>
    Furniture and office equipment.....................................        $   33        $   407
    Computer hardware..................................................            96          1,426
    Computer software..................................................            15            321
    Assets under capital leases:
       Furniture and office equipment..................................             6            157
       Computer hardware...............................................           198            353
       Computer software...............................................             3             47
                                                                               ------        -------
                                                                                  351          2,711
    Less accumulated depreciation and amortization.....................            33            338
                                                                               ------        -------
                                                                               $  318        $ 2,373
                                                                               ======        =======
</TABLE>

4.    ACCOUNTS PAYABLE AND ACCRUED LIABILITIES

      Accounts payable and accrued liabilities are as follows (in thousands):

<TABLE>
<CAPTION>
                                                                            MARCH 31,       MARCH 31,
                                                                               1999           2000
                                                                              ------        -------
<S>                                                                           <C>            <C>
    Accounts payable..................................................        $  304         $ 2,408
    Accrued compensation..............................................            --           1,474
    Accrued financing.................................................            --             466
    Other accrued liabilities.........................................           214           1,606
                                                                              ------         -------
                                                                              $  518         $ 5,954
                                                                              ======         =======
</TABLE>

5.    BANK LOAN

      The bank loan bears interest at bank prime plus 2.5% per annum and was
repaid in December 1999 upon the Company's receipt of its investment tax
credits.

      The Company also has a lease line of credit available to a maximum of
$679,000 (Cdn$1,000,000). Refer to note 6 for details as to the amounts utilized
under this line of credit as at March 31, 2000.

6.    OBLIGATIONS UNDER CAPITAL LEASES

      The following is an analysis by year of the future minimum lease payments
for capital leases (in thousands):

<TABLE>
<CAPTION>
                                                                                            MARCH 31,
                                                                                              2000
                                                                                              -----
<S>                                                                                          <C>
    March 31, 2001..................................................................          $ 209
    March 31, 2002..................................................................            205
    March 31, 2003..................................................................             59
                                                                                              -----
                                                                                                473
    Less amount representing interest (at rates ranging from
    7.7% to 8.5%)...................................................................             42
                                                                                              -----
    Balance of obligation...........................................................            431
    Less current portion............................................................            209
                                                                                              -----
                                                                                              $ 222
                                                                                              =====
</TABLE>


7.    REDEEMABLE CONVERTIBLE SPECIAL SHARES AND SPECIAL WARRANTS

Redeemable Convertible Special Shares

      The Company is authorized to issue an unlimited number of Class A, Class B
and Class C special shares. In July 1998, the Company issued 4,000,000 Class A
special shares for proceeds of $992,129. During January 1999, the Company issued
3,789,476 Class B special shares for proceeds of $2,382,528. To date, no Class C
special shares have been issued.

================================================================================
                                                                              41



<PAGE>   42

DELANO TECHNOLOGY CORPORATION - 10K - Annual Report
================================================================================


      The Class A and Class B shares automatically converted to common shares
when the Company completed its initial public offering on a three-for-two basis.

Special Warrants

      On June 24, 1999, the Company closed a private placement of 4,326,924
special warrants at a price of $3.55 per special warrant for proceeds of
$14,486,978, net of issue costs of $873,602.

      The special warrants were converted into common shares at a ratio of 3
common shares for each 2 special warrants.

      In connection with the Company's IPO, all of the then outstanding shares
of the Company's redeemable convertible special shares and special warrants were
converted into common shares based on their respective conversion ratios. The
pro forma basic and diluted loss per common share after giving effect to the
conversion, at the later of the beginning of the period or their date of
issuance, of the redeemable convertible special shares and the special warrants
is as follows (in thousands, except per share amounts):

<TABLE>
<CAPTION>
                                                                                   PERIOD FROM
                                                                                   MAY 7, 1998        YEAR
                                                                                  (INCEPTION) TO      ENDED
                                                                                    MARCH 31,        MARCH 31,
                                                                                       1999            2000
                                                                                     -------         --------
<S>                                                                                  <C>             <C>
  Pro forma basic and diluted loss per common share..........................        $ (0.30)        $  (0.47)
                                                                                     =======         ========
  Numerator for pro forma basic and diluted loss per common share:
       Loss for the period...................................................        $(1,689)        $ (9,277)
                                                                                     =======         ========
  Denominator for pro forma basic and diluted loss per common share:
     Weighted average number of common shares................................            746            6,381
     Add:
       Weighted average number of common shares on conversion of redeemable
       convertible special shares and special warrants.......................          5,264           14,092
                                                                                     -------         --------
                                                                                       6,010           20,473
                                                                                     =======         ========
</TABLE>

8.    SHAREHOLDERS' EQUITY (DEFICIENCY)

      The Company's share capital and loss per common share information has been
restated to reflect a 3-for-2 split of the Company's common shares, which was
approved by the Company's shareholders on January 11, 2000.

Stock Option Plan

      The Company's stock option plan (the "Plan") was established for the
benefit of the employees, officers, directors and certain consultants of the
Company. The maximum number of common shares which may be set aside for issuance
under the Plan is 5,500,000 shares, provided that the Board of Directors of the
Company has the right, from time to time, to increase such number subject to the
approval of the shareholders of the Company when required by law or regulatory
authority. Generally, options issued subsequent to March 4, 1999 under the Plan
vest over a four-year period. Options issued prior to March 5, 1999 vest
annually over a three-year period.

      Details of stock option transactions are as follows:

<TABLE>
<CAPTION>
                                                                                             WEIGHTED
                                                          SHARES                              AVERAGE
                                                      AVAILABLE FOR        NUMBER          EXERCISE PRICE
                                                          GRANT          OF SHARES            PER SHARE
                                                       ----------        ---------           ----------
<S>                                                    <C>               <C>                 <C>
Balances, May 7, 1998
    Shares authorized.............................      3,000,000               --                   --
    Options granted...............................     (1,779,000)       1,779,000           $     0.13
                                                       ----------        ---------
Balances, March 31, 1999..........................      1,221,000        1,779,000           $     0.13
      Additional shares authorized................      2,500,000               --                   --
      Options granted.............................     (2,692,725)       2,692,725           $     3.85
      Options exercised...........................             --         (255,250)          $     0.11
      Options cancelled...........................        202,875         (202,875)          $     1.08
                                                       ----------        ---------
Balances, March 31, 2000..........................      1,231,150        4,013,600           $     2.51
                === =====                               =========        =========
Options exercisable at March 31, 2000.............                         356,877           $     0.11
                                                                         =========
</TABLE>


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                                                                              42



<PAGE>   43

DELANO TECHNOLOGY CORPORATION - 10K - Annual Report
================================================================================


      The stock options expire at various dates between May 2003 and March 2005.


<TABLE>
<CAPTION>
                                                                                          PERIOD FROM
                                                                                          MAY 7, 1998          YEAR
                                                                                          (INCEPTION)          ENDED
                                                                                          TO MARCH 31,       MARCH 31,
                                                                                             1999              2000
                                                                                             ----              ----
<S>                                                                                        <C>               <C>
Weighted average fair value of options granted during the period with exercise prices
equal to fair value at date of grant..............................................         $  0.02                --
Weighted average fair value of options granted during the period with exercise prices
less than fair value at date of grant.............................................         $  0.29           $  5.83
Weighted average fair value of options granted during the period with exercise prices
greater than fair value at date of grant..........................................              --                --
</TABLE>


      As of March 31, 2000, the range of exercise prices and weighted average
remaining contractual life of outstanding options were as follows:


<TABLE>
<CAPTION>
                                                    OPTIONS OUTSTANDING
                                                                                                 OPTIONS EXERCISABLE
                                                     WEIGHTED AVERAGE
                                                         REMAINING      WEIGHTED AVERAGE                 WEIGHTED AVERAGE
                                         NUMBER      CONTRACTUAL LIFE    EXERCISE PRICE       NUMBER      EXERCISE PRICE
RANGE OF EXERCISE PRICES               OUTSTANDING        (YEARS)           PER SHARE       EXERCISABLE      PER SHARE
------------------------               -----------        -------           ---------       -----------      ---------
<C>                                    <C>                 <C>                <C>            <C>              <C>
$0.11..........................        1,578,500           3.57               $ 0.11         353,500          $0.11
 0.44..........................          945,375           4.32                 0.44           3,377          $0.44
 2.35-3.08.....................          316,500           4.58                 2.77              --            n/a
 3.47-4.52.....................          220,125           4.70                 4.33              --            n/a
 5.23-6.67.....................          506,350           4.76                 6.09              --            n/a
 6.97-18.00....................          446,750           4.84                10.26              --            n/a
</TABLE>

      The Company recorded deferred stock-based compensation amounting to
$557,000 for the period from May 7, 1998 (inception) to March 31, 1999 and $10.1
million for the year ended March 31, 2000. Amortization of deferred stock-based
compensation amounted to $171,000 for the period from May 7, 1998 (inception) to
March 31, 1999 and $1.7 million for the year ended March 31, 2000.

      Compensation amounting to $39,660 arising on the issuance of 32,000 stock
options to consultants has been recorded. The compensation was determined based
on the fair value at the grant date of the stock options consistent with the
method under SFAS 123 "Accounting for Stock-based Compensation". To determine
the fair value of each option, the following assumptions were used: dividend
yield of 0.0%, 100% volatility, a weighted average risk free interest rate of
5.5% and a weighted average expected life of options of 3.5 years.

      The amortization of deferred stock-based compensation relates to the
following cost of service revenues and operating expense categories (in
thousands):

<TABLE>
<CAPTION>
                                                                     PERIOD FROM
                                                                     MAY 7, 1998            YEAR
                                                                    (INCEPTION) TO          ENDED
                                                                       MARCH 31,           MARCH 31,
                                                                         1999                2000
                                                                    --------------         --------
<S>                                                                    <C>                 <C>
Cost of service revenues......................................         $    18             $   206
Sales and marketing...........................................              11               1,186
Research and development .....................................               1                 118
General and administrative....................................             141                 161
                                                                       -------             -------
                                                                       $   171             $ 1,671
                                                                       =======             =======
</TABLE>

      Had compensation expense for the Company's stock option plans been
determined based on the fair value at the grant dates for the awards under the
plan consistent with the method under SFAS 123 "Accounting for Stock-Based
Compensation", the Company's loss and loss per common share would have been
reported as the pro forma amounts indicated in the table below. To determine the
fair value of each option on the grant date the following assumptions were used:
dividend yield of 0.0%, zero volatility (180% volatility assumed for period
after IPO), a weighted average risk free interest rate of 5.5% and a weighted
average expected life of options of 3.5 years. Pro forma information for the
period

================================================================================
                                                                              43


<PAGE>   44

DELANO TECHNOLOGY CORPORATION - 10K - Annual Report
================================================================================


indicated is as follows (in thousands, except per share amounts):

<TABLE>
<CAPTION>
                                                                      PERIOD FROM
                                                                       MAY 7, 1998            YEAR
                                                                     (INCEPTION) TO           ENDED
                                                                        MARCH 31,           MARCH 31,
                                                                           1999                2000
                                                                      -------------         ---------
<S>                                                                     <C>                 <C>
  Loss -- as reported.................................................  $ (1,689)           $ (9,277)
  Loss -- pro forma...................................................    (1,678)             (9,807)
  Loss per common share -- as reported................................     (2.40)              (1.50)
  Loss per common share -- pro forma..................................     (2.25)              (1.54)
  Weighted average grant date fair value of options granted
  during the period...................................................      0.24                5.39
</TABLE>

Warrant

      During January 1999, the Company issued a warrant for no consideration to
an executive of the Company to purchase 394,737 common shares at a price of
$0.44 per share. The warrant expires when the executive ceases to be employed by
the Company or January 5, 2002 whichever is earlier.

Repurchase of Common Shares

      During August 1999, the Company acquired 750,000 common shares of the
Company from a former executive of the Company for nominal cash consideration.

Escrow Shares

      At March 31, 2000, 1,603,125 common shares of the Company are held in
escrow pursuant to escrow arrangements entered into with certain
employee/shareholders. Under the terms of the arrangements 365,625 common shares
will be released from escrow on the last day of each successive calendar quarter
subsequent to March 31, 2000.

Employee Stock Purchase Plan

      The Company has established an employee stock purchase plan under which
employees may authorize payroll deductions of up to 15% of their compensation
(as defined in the plan) to purchase common shares at a price equal to 85% of
the lower of the fair market values as of the beginning or the end of the
offering period. As at March 31, 2000 no common shares had been issued and there
were 1,000,000 common shares available for issuance under this plan.

9.    INCOME TAXES

      The provision for income taxes differs from the amount computed by
applying the combined federal and provincial income tax rate of 43.6% (1999:
44.6%) to the loss before provision for income taxes as a result of the
following (in thousands):

<TABLE>
<CAPTION>
                                                                                 PERIOD FROM
                                                                                 MAY 7, 1998        YEAR
                                                                               (INCEPTION) TO       ENDED
                                                                                   MARCH 31,       MARCH 31,
                                                                                     1999            2000
                                                                                --------------     ---------
<S>                                                                                <C>             <C>
Loss for the period ..........................................................     $ 1,689         $ 9,277
                                                                                   =======         =======
Computed expected tax recovery ...............................................     $   753         $ 4,045
                                                                                   -------         -------
Increase (reduction) in income tax recovery resulting from:
   Permanent differences ...................................................           (79)           (154)
   Change in beginning of the year balance of the valuation allowance
   allocated to income tax expense .........................................          (718)         (3,905)
   Reduction in tax rate for foreign subsidiary ............................            --             (48)
   Additional loss carry forward due to Ontario
   superallowance ..........................................................            44              62
                                                                                   -------         -------
                                                                                   $    --         $    --
                                                                                   =======         =======
</TABLE>


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================================================================================


      The tax effects of temporary differences that give rise to significant
portions of the future tax assets and future tax liabilities at March 31, 1999
and March 31, 2000 are presented below (in thousands):

<TABLE>
<CAPTION>
                                                                                MARCH 31,       MARCH 31,
                                                                                   1999            2000
                                                                                 ------          -------
<S>                                                                              <C>             <C>
Future tax assets:
   Non-capital loss carried forward.........................................     $  650          $ 4,125
   Research and development expenses deferred for income tax
   purposes.................................................................        166              246
   Share issue costs........................................................         --              483
                                                                                 ------          -------
   Total gross future tax assets............................................        816            4,854
   Less valuation allowance.................................................        718            4,623
                                                                                 ------          -------
   Net future tax assets....................................................         98              231
Future tax liabilities:
   Depreciation and amortization............................................        (30)            (139)
   Investment tax credits receivable........................................        (68)             (92)
                                                                                 ------          -------
   Total gross future tax liabilities.......................................        (98)            (231)
                                                                                 ------          -------
   Net future tax assets (liabilities)......................................     $   --          $    --
                                                                                 ======          =======

</TABLE>

      In assessing the realizability of deferred tax assets, management
considers whether it is more likely than not that some portion or all of the
deferred tax assets will not be realized. The ultimate realization of deferred
tax assets is dependent upon the generation of future taxable income during the
periods in which those temporary differences become deductible. Management
considers projected future taxable income, uncertainties related to the industry
in which the Company operates, and tax planning strategies in making this
assessment. Based upon the level of historical taxable income and projections
for future taxable income over the periods which the deferred tax assets are
deductible, management believes it is more likely than not the Company will
realize the benefits of these deductible differences, net of the existing
valuation allowances.

      As at March 31, 2000 the Company had $5.2 million of losses and deductions
available to reduce future years' taxable income in Canada, of which $4.9
million expire in 2006 and the remainder has no expiry date.

10.   RELATED PARTY TRANSACTIONS

      On June 1, 1999, the Company entered into a professional services
agreement with a company related to a director of the Company in connection with
the management of the Company's European subsidiary. Under the terms of the
agreement, the Company is required to pay certain annual fees, a portion of
which is calculated based on net revenues, as defined, of the European
subsidiary, with the option of converting all or part of this portion into
common shares of the Company subject to certain terms. As at March 31, 2000, the
Company has accrued fees aggregating $179,000 in respect of this agreement and
the related company is eligible to exercise an option to acquire 18,250 shares
at $3.55 per share. In addition, the Company has recorded stock-based
compensation amounting to $193,000 in connection with this option during the
year ended March 31, 2000.

      The Company has accrued consulting fees payable to a shareholder of the
Company amounting to nil for the periods ended March 31, 1999 and $60,900 for
the year ended March 31, 2000.

11.   SEGMENTED INFORMATION

      The Company reviewed its operations and determined that it operates in a
single reportable operating segment, being the development and marketing of
interaction-based e-business communications applications. All long-lived assets
relating to the Company's operations are located in Canada. Revenue per
geographic location, which is attributable to geographic location based on the
location of the external customer, is as follows (in thousands):

<TABLE>
<CAPTION>
                                                                      PERIOD FROM
                                                                      MAY 7, 1998       YEAR
                                                                    (INCEPTION) TO      ENDED
                                                                       MARCH 31,      MARCH 31,
                                                                         1999            2000
                                                                        ------         -------
<S>                                                                     <C>            <C>
Revenue by geographic locations:
   United States .............................................          $   --         $ 6,579
   Canada.....................................................              --           2,457
   Europe.....................................................              --             453
                                                                        ------         -------
                                                                        $   --         $ 9,489
                                                                        ======         =======
</TABLE>


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DELANO TECHNOLOGY CORPORATION - 10K - Annual Report
================================================================================

      For the year ended March 31, 2000, one customer accounted for 15% of total
revenues. As at March 31, 2000, the Company had a receivable from four
significant customers amounting to 15%, 12%, 11% and 11% of total accounts
receivable trade, respectively.

12.   SUPPLEMENTARY CASH DISCLOSURES:

      Supplementary cash disclosures are as follows (in thousands):

<TABLE>
<CAPTION>
                                                                     PERIOD FROM
                                                                     MAY 7, 1998       YEAR
                                                                    (INCEPTION) TO     ENDED
                                                                       MARCH 31,     MARCH 31,
                                                                         1999          2000
                                                                    -------------    ---------
<S>                                                                    <C>            <C>
Supplemental disclosure of cash flow information:
   Cash paid for interest.......................................       $     1        $     37
                                                                       =======        ========
Supplemental disclosure of non-cash investing and  financing
activities:
   Capital lease obligations incurred for purchase of capital
    Assets......................................................       $    99        $    443
                                                                       =======        ========
   Deferred compensation on the grant of options to purchase
   common shares with an exercise price below fair value........       $   557        $ 10,136
                                                                       =======        ========
</TABLE>

13.   LEASE COMMITMENTS

      The Company is required to make minimum payments under the terms of
operating leases for premises, property and equipment expiring on various dates
to December 31, 2010. Future minimum lease payments by fiscal year are as
follows (in thousands):

<TABLE>
<S>                                                 <C>
      2001.....................................      $ 1,176
      2002.....................................        1,083
      2003.....................................        1,080
      2004.....................................        1,077
      2005 and thereafter......................          629
                                                     -------
                                                     $ 5,045
                                                     =======
</TABLE>

      Rent expense was $62,000 and $339,000 for the period from May 7, 1998
(inception) to March 31, 1999, and for the year ended March 31, 2000,
respectively.


================================================================================
                                                                              46




<PAGE>   47

DELANO TECHNOLOGY CORPORATION - 10K - Annual Report
================================================================================



                 SCHEDULE II - VALUATION AND QUALIFYING ACCOUNTS

                          DELANO TECHNOLOGY CORPORATION


<TABLE>
<CAPTION>
                                                           BALANCE AT                                     BALANCE AT
                                                          BEGINNING OF   CHARGED TO                         END OF
                                                             PERIOD      OPERATIONS     DEDUCTIONS         PERIOD
                                                             ------      ----------     ----------         ------
                                                                                 (IN THOUSANDS)
    Allowance for doubtful accounts:
<S>                                                           <C>         <C>               <C>           <C>
         Year ended March 31, 2000................             --         $    200           --           $    200
         Period from May 7, 1998 (inception)
         to March 31, 1999........................             --               --           --                 --
</TABLE>




================================================================================
                                                                              47



<PAGE>   48

DELANO TECHNOLOGY CORPORATION - 10K - Annual Report
================================================================================




ITEM  9: CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
         FINANCIAL DISCLOSURE.

      Not Applicable.


================================================================================
                                                                              48


<PAGE>   49

DELANO TECHNOLOGY CORPORATION - 10K - Annual Report
================================================================================



                                    PART III


ITEM 10: DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT


MANAGEMENT

EXECUTIVE OFFICERS AND DIRECTORS

      The following table sets forth the name, age and positions with Delano for
each of our directors and officers as of March 31, 2000.

<TABLE>
<CAPTION>
       NAME                                         AGE                       POSITION
       ----                                         ---                       --------
<S>                                                 <C>      <C>
Dennis Bennie(1)(2)...............................  47       Chairman
John Foresi.......................................  39       Director, President and Chief Executive Officer
Bahman Koohestani.................................  38       Director, Executive Vice-President, Products
                                                             and Chief Technology Officer
Thomas Hearne.....................................  35       Chief Financial Officer
Robert Lalonde....................................  36       Vice-President, Marketing
Barry Yates.......................................  34       Senior Vice-President, Worldwide Sales
Bruce Cameron.....................................  47       Vice-President, North American Sales
Andrew Dennis.....................................  32       Vice-President, Business Development
David Lewis.......................................  37       General Counsel and Secretary
Albert Amato(1)(2)................................  41       Director
J. (Ian) Giffen(1)................................  42       Director
Donald Woodley(2).................................  54       Director
Tony Zingale......................................  44       Director
</TABLE>

----------
[FN]
(1)   Member of the audit committee

(2)   Member of the compensation committee
</FN>

      Dennis Bennie has been our Chairman since our inception in May 1998.
Currently, Mr. Bennie is the Chief Executive Officer and President of XDL
Capital Corp., a private venture capital firm that he established in January
1997 to focus on investing in and working with emerging Internet companies and
related technologies. Mr. Bennie is a director of MGI Software Corp., a company
that produces digital imaging software. In 1988, Mr. Bennie co-founded Delrina
Corporation, a designer of fax, data and voice communications software, where he
was the Chairman and Chief Executive Officer until the November 1995 sale of
Delrina to Symantec Corporation. He remained employed with Symantec as Executive
Vice President and was a director until mid-1996. Mr. Bennie has an accounting
degree from the University of Witwatersrand.

      John Foresi has been our President and Chief Executive Officer and has
served as one of our directors since January 1999. From May 1998 to December
1998, he was the President, Transportation of i2 Technologies, a global supply
chain software company. In May 1998, i2 Technologies acquired InterTrans
Logistics Solutions, of which Mr. Foresi was President and Chief Executive
Officer from August 1994 to April 1998. Mr. Foresi has an MBA from the Harvard
Business School and a BBA from Wilfrid Laurier University.

      Bahman Koohestani founded Delano in May 1998, has served as one of our
directors since our inception and was our President and Chief Executive Officer
from our inception until January 1999. Mr. Koohestani has been our Executive
Vice-President, Products and Chief Technology Officer since January 1999. Prior
to founding Delano, Mr. Koohestani was Director of Products, Messaging for
Netscape Communications from October 1996 to May 1998. From February 1991 to
September 1996, Mr. Koohestani served as Chief Architect of Electronic Forms and
Products e-Commerce at Delrina. Mr. Koohestani has a Bachelor of Science
(Honors) degree from York University.

================================================================================
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DELANO TECHNOLOGY CORPORATION - 10K - Annual Report
================================================================================

      Thomas Hearne has served as our Chief Financial Officer since November
1999. From October 1997 to November 1999, Mr. Hearne was Chief Financial Officer
of Open Text Corporation, a provider of intranet, extranet and e-community
platform solutions. From September 1996 to October 1997, Mr. Hearne served as
Vice President, Finance and Administration of Algorithmics Incorporated, a
developer of risk management software. From April 1996 to September 1996, Mr.
Hearne was the Controller of Algorithmics. From September 1992 to April 1996,
Mr. Hearne was European Controller and Manager, Financial Reporting at Alias
Research Inc., a developer of 3D graphics software, which was sold to Silicon
Graphics, Inc. in June 1995. Mr. Hearne is a chartered accountant and has an MBA
from York University and a Bachelor of Economics degree from Trent University.

      Robert Lalonde has served as our Vice-President, Marketing since January
1999. From July 1993 to January 1999, Mr. Lalonde was the Vice-President,
Marketing of the Business Intelligence Division at Hummingbird Communications,
Ltd., a provider of network connectivity, business intelligence, document and
knowledge management software. Mr. Lalonde has a Bachelor of Science from
Laurentian University.

      Barry Yates has served as our Senior Vice-President, Worldwide Sales since
March 2000. Between September 1998 and January 2000, Mr. Yates served as our
Vice President, North American Sales. Between September 1998 and January 2000,
Mr. Yates served as our Vice-President, Professional Services. Prior to joining
us, Mr. Yates was Manager at Bain & Company from December 1995 to September
1998. From April 1992 to November 1995, Mr. Yates was Principal at KPMG
Management Consulting Company. Mr. Yates has a Bachelor of Commerce (Honors)
degree from Queen's University.

      Bruce Cameron has been our Vice President, North American Sales since
January 2000. From December 1997 to January 2000, Mr. Cameron was Vice President
and General Manager for the Consumer Products Division of QAD Inc., a worldwide
provider of ERP solutions. From August 1996 to December 1997, Mr. Cameron was
the General Manager of BACG, a worldwide provider of enterprise solutions for
retail stores. From August 1992 to August 1997 Mr. Cameron was General Manager
and later Senior Vice President of JBA International, a worldwide provider of
ERP solutions. Mr. Cameron has a Bachelor of Science Degree in Mechanical
Engineering from Rochester Institute of Technology.

      Andrew Dennis has served as our Vice-President, Business Development since
June 1999. From January 1997 to June 1999, Mr. Dennis was a Vice President at
Gartner Group, an independent provider of advisory and market research services
to information technology vendors and users. From June 1996 to January 1997,
Mr. Dennis was an independent consultant who provided strategic business
planning, sales and marketing, and information technology consulting advice.
From January 1995 to June 1996, Mr. Dennis was the Vice President at Hill Arts &
Entertainment Systems, a client-server application software vendor. From
November 1993 to January 1995 Mr. Dennis served as Director of Sales of Data
Lease International. Mr. Dennis has a BBA in Marketing from the Detroit College
of Business.

      David Lewis has served as our Vice President, Legal, General Counsel and
Secretary since January 2000. From February 1999 to January 2000, Mr. Lewis was
the Vice President, Legal at Open Text. From November 1994 to February 1999, Mr.
Lewis was the General Counsel at Alias Wavefront (formerly Alias Research) prior
to its acquisition by Silicon Graphics in June 1995. Between June 1994 and
November 1994, Mr. Lewis was an independent consultant and prior to June 1994,
Mr. Lewis was General Counsel at SoftKey Software Products Inc., a consumer
software publisher. Mr. Lewis has a Bachelor of Law degree from Osgoode Hall Law
School.

      Albert Amato has served as one of our directors since May 1998. Since
November 1995, Mr. Amato has been a technology consultant and advisor to
software companies and technology investment funds. Mr. Amato was a co-founder
and was Chief Technical Officer of Delrina from 1989 to November 1995. After
Delrina was sold to Symantec, he served as a Vice President with Symantec from
November 1995 to May 1996. Mr. Amato has a Bachelor of Applied Science and
Engineering (Honors) degree from the University of Toronto.

      J. (Ian) Giffen has served as one of our directors since June 1998. Since
September 1996, Mr. Giffen has been a consultant and advisor to software
companies and technology investment funds. From February 1996 to September 1996,
Mr. Giffen was Chief Financial Officer of Algorithmics. From January 1992 until
February 1996, Mr. Giffen served as Chief Financial Officer of Alias Research,
which was sold to Silicon Graphics in June 1995. Mr. Giffen is a director of and
advisor to Macromedia Inc., a developer of software for web publishing,
multimedia and graphics and a director of MGI Software and a Director of Digital
Processing Systems Inc. Mr. Giffen is also a consultant to XDL Capital. Mr.
Giffen has a Bachelor of Arts in Business Administration from the University of
Strathclyde.

      Donald Woodley has served as one of our directors since November 1999.
From February 1997 to October 1999, Mr. Woodley was President of Oracle
Corporation Canada Inc. From September 1987 to January 1997, he was President of


================================================================================
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<PAGE>   51

DELANO TECHNOLOGY CORPORATION - 10K - Annual Report
================================================================================


Compaq Canada Inc. Mr. Woodley serves on the board of directors of Telus
Corporation Inc., a telecommunications company, and ThinWEB Technologies Inc.
Mr. Woodley has a Bachelor of Communications from the University of Saskatchewan
and an MBA from the University of Western Ontario.

Tony Zingale has served as one of our directors since March, 2000. Mr. Zingale
is the President of Clarify eBusiness Applications, a Nortel Networks Company.
Prior to Clarify being acquired by Nortel Networks, Mr. Zingale was the
President and CEO of Clarify from March 1998 to March 2000. Prior to March 1998,
Mr. Zingale was the Senior Vice President of Worldwide Marketing at Cadence
Design Systems. Mr. Zingale serves on the board of directors of Interwoven, Inc.
Mr. Zingale has Bachelor's degrees in electrical and computer engineering and
business administration from the University of Cincinnati.

      There are no family relationships among any of our directors and executive
officers.

BOARD OF DIRECTORS AND COMMITTEES

      Our board of directors is comprised of seven persons. In accordance with
the provisions of the Business Corporations Act (Ontario), our directors are
authorized from time to time to increase the size of the board of directors, and
to fix the number of directors, up to a maximum of ten persons, without the
prior consent of our shareholders. Each director is elected at the annual
meeting of shareholders to serve until the next annual meeting or until a
successor is elected or appointed. The board of directors has established an
audit committee and a compensation committee.

      Our audit committee's mandate is to assist the board of directors in
fulfilling its functions relating to corporate accounting and reporting
practices as well as financial and accounting controls, to provide effective
oversight of the financial reporting process, and to review financial statements
as well as proposals for the issue of securities. Messrs. Bennie, Amato and
Giffen are members of the audit committee.

Our compensation committee reviews and approves the compensation and benefits
for our executive officers, administers our stock option plan and performs other
duties as may from time to time be determined by our board of directors. Messrs.
Bennie, Amato and Woodley are members of the compensation committee.

================================================================================
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DELANO TECHNOLOGY CORPORATION - 10K - Annual Report
================================================================================



ITEM 11: EXECUTIVE COMPENSATION

      The following table sets forth the actual compensation paid or awarded to
our named executive officers for the year ended March 31, 2000, by the
individual who served as Delano's Chief Executive Officer and each of the four
other most highly compensated executive officers whose salary and bonus for the
2000 fiscal year exceeded $100,000, for services rendered in all capacities to
Delano and its subsidiaries for the fiscal year ended March 31, 2000 and the
period from May 8, 1999 to March 31, 1999. The listed individuals are referred
to hereafter as the "Named Executive Officers." No other executive officers who
otherwise would have been includable in this table on the basis of salary and
bonus earned during 2000 have been excluded because they terminated employment
or changed their executive status during the year.

<TABLE>
<CAPTION>
                                                                                                              Long-term
                                                                                                            Compensation
                                                                                                               Awards
                                                                                      Annual
                                                                                    Compensation              Securities
                                                                Year                                          Underlying
          Name and Principal Position                          Ended     Salary ($)   Bonus ($)   Other       Options (#)
                                                                                                   ($)

<S>                                                            <C>        <C>         <C>         <C>          <C>
John Foresi(1)...............................................   2000      104,167     277,778     5,000               --
President and Chief Executive Officer                           1999       81,250          --     1,188        1,144,737

Bahman Koohestani(2).........................................   2000      130,208     138,889     5,000               --
Executive Vice President, Products and Chief Technology         1999       82,488          --     3,563               --
Officer

Barry Yates(3)...............................................   2000      104,167     104,167     5,000               --
Senior Vice President, Worldwide Sales                          1999       58,827          --     2,916          225,000

Robert Lalonde(4)............................................   2000      104,167      40,886     5,000               --
Vice President, Marketing                                       1999       20,833          --        --          135,000

Andrew Dennis(5).............................................   2000      111,438      17,469     6,000          150,000
Vice President, Business
Development
</TABLE>

----------
[FN]

1.    Mr. Foresi joined Delano as President and Chief Executive Officer in
      January 1999. His annualized salary and bonus for 2000 was Cdn$150,000 and
      Cdn$400,000, respectively. Mr. Foresi also received a car allowance of
      Cdn$7,200 which is included as other compensation. As of March 31, 2000,
      Mr. Foresi held 500,000 unvested shares of Delano at $0.11 per share and
      has a warrant to purchase an additional 394,737 common shares at $0.44 per
      share. The warrant expires when he ceases to be employed by us or on
      January 5, 2002, whichever occurs earlier.

2.    Mr. Koohestani, who preceded Mr. Foresi as our chief executive officer
      during 1999, received an annualized salary and bonus for 2000 of
      Cdn$187,500 and Cdn$200,000, respectively. Mr. Koohestani also received a
      car allowance of Cdn$7,200 which is included as other compensation. In
      accordance with the terms of a subscription agreement between Delano and
      Mr. Koohestani, in fiscal 2000 a total of 5,250,000 common shares were
      released from escrow to a corporation owned by Mr. Koohestani. Under the
      terms of the subscription agreement, Mr. Koohestani would not have been
      entitled to receive these shares if he had resigned or had been dismissed
      for cause.

3.    Mr. Yates joined Delano in September 1998. As of March 31, 2000, Mr. Yates
      held 150,000 unvested shares of Delano at $0.11 per share.

4.    Mr. Lalonde joined Delano in January 1999. As of March 31, 2000, Mr.
      Lalonde held 90,000 unvested shares of Delano at $0.11 per share.

5.    Mr. Dennis joined Delano in June 1999. As of March 31, 2000, Mr. Dennis
      held 150,000 unvested shares of Delano at $0.44 per share.

</FN>


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DELANO TECHNOLOGY CORPORATION - 10K - Annual Report
================================================================================


STOCK OPTIONS

      The following table sets forth (1) the number of common shares underlying
the options granted to each of the named executive officers during the fiscal
year ended March 31, 2000, (2) the percentage that these options represent in
comparison to the total number of options granted to our employees during the
same period, (3) the exercise price of such options and (4) their expiration
date.

                          OPTION GRANTS IN FISCAL 2000

<TABLE>
<CAPTION>

                                                                                                    Potential
                                                                                                    Realizable
                                                                                                 Value at Assumed
                                                                                                  Annual Rates of
                                                                                                    Stock Price
                        Number of Shares   Percent of Total        Exercise                       Appreciation for
                           Underlying      Options Granted to                                        Option Term
                        Options Granted       Employees in      Price Per Share    Expiration
      Name                    (#)              Fiscal Year        ($/Security)        Date        5% ($)      10%($)
<S>                         <C>                  <C>                <C>           <C>             <C>        <C>
   John Foresi                 --                  --                  --              --           --          --
Bahman Koohestani              --                  --                  --              --           --          --
   Barry Yates                 --                  --                  --              --           --          --
   Rob Lalonde                 --                  --                  --              --           --          --
  Andrew Dennis             150,000               5.6%               $0.44        June 2, 2004    387,718    506,536
</TABLE>





                         OPTION EXERCISES IN FISCAL 2000


<TABLE>
<CAPTION>
                                                        # of Securities
                                                      Underlying Unexercised          Value of Unexercised In-
                         Number of                       Options at Fiscal               the-Money Options
                           Shares                             Year End                   at Fiscal Year End
                        Acquired on      Value      ----------------------------   ------------------------------
       Name               Exercise     Realized     Exercisable    Unexercisable   Exercisable      Unexercisable
       ----               --------     --------     -----------    -------------   -----------      -------------
<S>                       <C>         <C>             <C>            <C>            <C>             <C>
   John Foresi            250,000     $2,607,500          --          500,000               --       $11,165,000
Bahman Koohestani            --           --              --               --               --                --
   Barry Yates               --           --          75,000          150,000       $1,674,750        $3,349,500
   Rob Lalonde               --           --          45,000           90,000       $1,004,850        $2,009,700
  Andrew Dennis              --           --              --          150,000               --        $3,300,000
</TABLE>


COMPENSATION OF DIRECTORS

      The By-laws of the Company provide that, subject to Section 136 of the
Business Corporations Act (Ontario) (the "OBCA"), the Company shall indemnify a
director or officer of the Company, a former director or officer of the Company
or a person who acts or acted at the Company's request as a director or officer
of a body corporate of which the Company is or was a shareholder or creditor,
and his or her heirs and legal representatives, against all costs, charges and
expenses reasonably incurred by him or her in respect of certain actions or
proceedings to which he or she is made a party by reason of his or her office,
if he or she meets certain specified standards of conduct, and the Company shall
also indemnify any such person in such other circumstances as the OBCA or the
law permits or requires. The Company maintains directors' and officers'
liability insurance for its directors and officers. With respect to directors
and officers as a group, the Company paid a premium of $450,846 for directors'
and officers' liability insurance, which included coverage required in
connection with the Company's initial public offering. The total amount of
insurance purchased for directors and officers as a group was $15,000,000. All
matters insured are subject to a $500,000 securities-related retainer, which
applies to costs of defense and which is waived where claims against all
insureds are dismissed or the insureds are found not liable. We do not


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DELANO TECHNOLOGY CORPORATION - 10K - Annual Report
================================================================================


otherwise compensate our directors, but they are reimbursed for out-of-pocket
expenses incurred in connection with meetings of the Board of Directors or its
committees. Directors are eligible to participate in the Company's Stock Option
Plan. To date, options to purchase an aggregate of 680,000 Common Shares have
been granted to members of the Board of Directors as detailed below:

<TABLE>
<CAPTION>
                            Number of Shares
                               Underlying              Exercise
                            Options Granted        Price Per Share        Expiration
      Name                        (#)                ($/Security)            Date
<S>                             <C>                    <C>               <C>
  John Foresi                   500,000                $ 0.11            Jan. 04, 2004
  Albert Amato                   75,000                $ 0.11            Aug. 26, 2003
J. (Ian) Giffen                  30,000                $ 0.11            Aug. 26, 2003
J. (Ian) Giffen                  15,000                $ 3.08            Oct. 18, 2004
 Donald Woodley                  30,000                $ 4.51            Nov. 26, 2004
  Tony Zingale                   30,000                $18.00            Feb. 09, 2005
</TABLE>



EMPLOYMENT AGREEMENTS

      The following is a brief description of the employment agreements entered
into between the Company or its subsidiaries and each of the Named Executive
Officers.

      We have entered into an agreement with Mr. Foresi pursuant to which he was
hired as our President and Chief Executive Officer effective January 4, 1999.
Pursuant to this agreement, Mr. Foresi receives a salary of C$150,000
(approximately $104,000) per annum, exclusive of bonuses, benefits and other
compensation. Mr. Foresi was also granted options to purchase 750,000 Common
Shares at a price of $0.11 per share, which options expire on January 4, 2004,
and a warrant to purchase an additional 394,737 Common Shares at a price of
$0.44 per share, which warrant expires when Mr. Foresi ceases to be employed by
us or January 5, 2002, whichever is earlier. On January 11, 2000, Mr. Foresi
exercised options to purchase 250,000 Common Shares at a price of $0.11 per
share. Mr. Foresi also receives a yearly car allowance and compensation for all
expenses incurred from time to time in connection with the carrying out of his
duties. If Mr. Foresi is dismissed without cause he will be entitled to receive
either six months' notice or payment of six months' severance. Options that have
not vested and warrants that have not been exercised prior to notice of
termination (other than for cause) or during the six-month notice or severance
period thereafter will be null and void. The agreement further provides that in
the event of a change of control of Delano resulting in the termination of Mr.
Foresi's employment without cause, all of Mr. Foresi's options will vest within
three months of the change of control.

      We have also entered into an agreement with Mr. Koohestani pursuant to
which he was hired as our Executive Vice President, Products and Chief
Technology Officer effective January 4, 1999. Pursuant to this agreement, Mr.
Koohestani receives a salary of C$150,000 (approximately $104,000) per annum,
exclusive of bonuses, benefits and other compensation. Mr. Koohestani also
receives a yearly car allowance and compensation for all expenses incurred from
time to time in connection with the carrying out of his duties.

      The Company has also entered into separate Employee Confidentiality and
Non-Solicitation Agreements with each of the Named Executive Officers. Under
these agreements, each of them has agreed to keep in confidence all proprietary
information of the Company obtained during his employment with the Company for a
period of three years following the termination of his employment with the
Company.

STOCK OPTION PLAN

      We established our Stock Option Plan to provide incentives to our
directors, officers, employees and consultants through participation in our
growth and success. Options to purchase common shares may be granted from time
to time by our board of directors at an exercise price determined by them. The
maximum number of common shares that currently may be issued under the plan is
7,500,000 common shares. Options granted under the plan must be exercised no
later than five years after the date of the grant, except where our board of
directors specifically states otherwise, in which case the expiry date can be no
later than 10 years after the date of grant. The option price per common share
shall be determined by the board of directors at the time an option is granted.
The board of directors may accelerate the vesting of any or all outstanding
options of any or all optionees upon the occurrence of a change of control.


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DELANO TECHNOLOGY CORPORATION - 10K - Annual Report
================================================================================

      As at March 31, 2000, options to purchase a total of 4,013,600 common
shares are outstanding under the plan, as follows:

<TABLE>
<CAPTION>
                                               Common      Exercise
                                            Shares Under     Price
       Holders of Options                      Options        ($)                    Expiry Date
       ------------------                      -------    -------------              -----------
<S>                                          <C>          <C>                   <C>
Executive Officers (ten in total)              225,000             0.11         September 1, 2003
                                               500,000             0.11         January 4, 2004
                                               135,000             0.11         January 20, 2004
                                                43,125             0.44         May 3, 2004
                                               150,000             0.44         June 2, 2004
                                               127,500             0.44         July 26, 2004
                                               157,500             3.08         October 18, 2004
                                                75,000             4.00         December 15, 2004
                                                60,000             5.23         December 1, 2004
                                               105,000             6.67         January 13, 2005

Directors who are not Executive
Officers (four in total)                       105,000             0.11         August 26, 2003
                                                15,000             3.08         October 18, 2004
                                                30,000             4.51         November 26, 2004
                                                30,000            18.00         February 9, 2005

Employees                                      583,500             0.11         May 1, 2003 to May 10, 2004
                                               561,750             0.44         March 17, 2004 to November 1, 2004
                                             1,017,225    2.39 to 10.00         October 1, 2004 to March 31,2005

Others (four in total)                          93,000     0.11 to 0.44         August 26, 2003 to November 1, 2004
</TABLE>

         As at March 31, 2000, 255,250 common shares had been issued to five
employees pursuant to the exercise of options granted under the plan.


ITEM 12: SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT

SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT

      The following table sets forth certain information regarding beneficial
ownership of the Company's Common Shares as of June 16, 2000 of (i) each
shareholder known by the Company to be the beneficial owner of more than 5% of
the outstanding Common Shares, (ii) each director of the Company, (iii) each
Named Executive Officer (as defined under "Executive Compensation and Other
Transactions", below) of the Company and (iv) all directors and officers as a
group. Beneficial ownership also includes any shares as to which a person or
entity has the right to acquire beneficial ownership of within 60 days after
June 16, 2000 Except as otherwise indicated, the Company believes that the
beneficial owners of the Common Shares listed below, based on the information
furnished by such owners, have sole investment and voting power with respect to
such shares, subject to community of property laws where applicable. The address
of our executive officers and directors is in care of Delano Technology
Corporation, 302 Town Centre Blvd., Markham, Ontario L3R 0E8, Canada.


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                                                                              55


<PAGE>   56
DELANO TECHNOLOGY CORPORATION - 10K - Annual Report
================================================================================

<TABLE>
<CAPTION>
                                                       NUMBER OF SHARES            PERCENT OF TOTAL
NAME OF BENEFICIAL OWNER                              BENEFICIALLY OWNED          BENEFICIALLY OWNED
------------------------                              ------------------          ------------------
<S>                                                       <C>                           <C>
Bahman Koohestani (1).......................               3,900,000                     13.0%
Strategic Investment Holdings Inc...........               1,991,203                      6.6%
Dennis Bennie (2)...........................               1,024,087                      3.4%
John Foresi (3).............................               1,434,211                      4.8%
Albert Amato (4)............................                 326,927                      1.1%
J. (Ian) Giffen (5).........................                  55,750                         *
Donald Woodley..............................                   2,000                         *
Tony Zingale................................                       0                         *

All executive officers and directors
as a group (14  Persons) (6)................               6,890,725                     23.0%
</TABLE>

----------
[FN]
*     Less than 1%

(1)   Represents shares held of record by 1329347 Ontario Inc., in its capacity
      as general partner of GHI Limited Partnership. Mr. Koohestani is the sole
      shareholder of 1329347 Ontario Inc.. A total of 1,350,000 of theses shares
      are subject to escrow with the Company.

(2)   Represents shares held by 3060357 Canada Inc. and XDL Ventures Corp., both
      of which companies are controlled by Mr. Bennie.

(3)   Includes 789,474 shares held of record by Tofino Venture Capital Inc, of
      which Mr. Foresi is the voting trustee. The shares also include a warrant
      to purchase 394,737 shares at a price of $0.44 per share.

(4)   Includes 276,927 shares owned and options for 25,000 shares which are
      vested.

(5)   Includes 45,000 shares owned and options for 10,000 shares which are
      vested.

(6)   Includes 6,290,988 shares owned and options/warrants for 599,737 shares
      which are vested.
</FN>

ITEM 13: CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS

RELATIONSHIP WITH PROTEGE

      Dennis Bennie, our Chairman, is a trustee of the Bennie Children's' Trust,
which owns 11.25% of Protege Software Limited, a company with which we have
entered into a services agreement dated as of June 1, 1999. Pursuant to this
agreement, Protege Software Limited has agreed to provide administrative
assistance and office space to facilitate the opening of our European offices in
return for a management fee of (pound)125,000 (approximately $200,000) per year,
as well as (pound)6,000 (approximately $9,600) per month in respect of its costs
and a bonus of up to 15% Of sales generated by our European offices. Within the
first 12 months of the 18 month term of the agreement, the bonus may be
converted into common shares at a price of $3.55 per share. In the final six
months of the agreement, one-half of the bonus may be converted into common
shares based on the average trading price for the 10 days preceding the
conversion date.

ESCROW ARRANGEMENTS

      Pursuant to subscription agreements dated July 17, 1998, an aggregate of
4,500,000 common shares purchased by Bahman Koohestani, Sean Maurik, John Mah
and Robert Gayle were deposited with us in escrow.

      The escrow arrangements were entered into with Bahman Koohestani, Sean
Maurik, John Mah and Robert Gayle in order to provide restrictions on the free
disposition by these individuals of the shares held by them and limiting the
ability of these shareholders to immediately divest themselves of all equity
participation in Delano, resulting in a reduced personal economic interest in
our future economic success. Upon completion of this offering, the passage of
time is the only restriction on the release of the escrowed shares. In the event
of termination without cause of an individual's employment resulting from a
change of control of Delano, all of the individual's common shares will be
released from escrow.

      In accordance with the terms of the subscription agreement between Delano
and Mr. Koohestani, one-twelfth of the 4,050,000 common shares acquired by him
were released from escrow on July 17, 1998 and an additional one-twelfth of the
common shares are to be released on the last day of each successive calendar
quarter. On June 24, 1999, all the securities of Delano owned by Mr. Koohestani
were transferred to 1329347 Ontario Inc. in its capacity as the general partner
of GHI Limited Partnership. As of March 31, 2000, 2,700,000 of the 4,050,000
common shares of Mr. Koohestani which were originally subject to escrow had been
released from escrow and 1,350,000 of the common shares held by 1329347 Ontario
Inc. remained in escrow.

================================================================================
                                                                              56



<PAGE>   57

DELANO TECHNOLOGY CORPORATION - 10K - Annual Report
================================================================================

      In accordance with the terms of the subscription agreements between Delano
and each of Mr. Maurik, Mr. Mah and Mr. Gayle, 37,500 of their respective
150,000 common shares were released from escrow on June 30, 1999 and an
additional 9,375 of their respective common shares are to be released on the
last day of each successive calendar quarter. As of March 31, 2000, 65,625
common shares had been released to each of Mr. Maurik, Mr. Mah and Mr. Gayle and
84,375 of their respective common shares remained in escrow.

SPECIAL WARRANT FINANCING

      On June 24, 1999, we raised $14.4 million, net of the agents' commission
and offering expenses, through a private placement of special warrants. Each
special warrant entitles the holder to acquire at any time, without additional
payment, one Class C special share or, if our issued and outstanding shares have
been converted to common shares, one common share, subject to adjustment. In
connection with this offering, all of the special warrants will be exercised to
acquire common shares on the basis of 1.5 common shares for each special
warrant. See "Description of Capital Stock -- Special Warrants." Pursuant to the
special warrant offering, Mr. Amato purchased 42,000 special warrants, XDL
Delano Holdings Inc., one of our principal shareholders, purchased 124,308
special warrants, and the June H. Yates Trust under the Estate of Pearl B.
Walker, a trust affiliated with Mr. Yates, one of our officers, purchased 29,000
special warrants.


================================================================================
                                                                              57


<PAGE>   58

DELANO TECHNOLOGY CORPORATION - 10K - Annual Report
================================================================================

                                     PART IV

ITEM 14.  EXHIBITS AND FINANCIAL STATEMENT SCHEDULES

A.    EXHIBITS

      The following exhibits are attached hereto:

<TABLE>
<CAPTION>
EXHIBIT
NUMBER                     TITLE
------                     -----
<S>      <C>
  3.1*   Articles of Incorporation of the Registrant
  3.2*   By-laws of the Registrant
  3.3    Articles of Amalgamation of the Registrant
  3.4    Revised By-laws of the Registrant
  4.1+   Specimen Common Share certificate
 10.1*   Registration Rights Agreement, dated as of January 27, 1999, between the
         Registrant and certain shareholders of the Registrant
 10.2*   Agency Agreement, dated as of June 24, 1999, between the Registrant and
         the Agents named therein
 10.3*   Professional Services Agreement, dated June 1, 1999, between the
         Registrant and Protege Software Limited
 10.4*   Form of Subscription Agreement, dated July 17, 1998 between the
         Registrant and each of Robert Gayle, Bahman Koohestani, John Mah and
         Sean Maurik
 10.5*   Form of Subscription Agreement, dated July 17, 1998, between the
         Registrant and Bahman Koohestani
 10.6*   Credit Facility, dated July 5, 1998 between the Registrant and Royal
         Bank of Canada
 10.7*   Sub-lease Agreement, dated December 16, 1998 between the Registrant and
         MGI Software Corp.
 10.8*   Lease Agreement, dated November 17, 1999 between the Registrant and 302
         Town Centre Limited.
 10.9*   Stock Option Plan
10.10*   Employment Agreement, dated November 23, 1998, between John Foresi and
         the Registrant
10.11*   Employment Agreement, dated February 26, 1998, between Bahman Koohestani
         and the Registrant
10.12*   Employment Agreement and Form of Confidentiality Agreement between the
         Registrant and its executive officers
10.13*   Employee Stock Purchase Plan
10.14*   Amalgamation Agreement, dated November 30, 1999, between the Registrant
         and XDL Delano Holdings Inc.
10.15*   Amendment No. 1 to the Amalgamation Agreement, dated February 7, 2000,
         between the Registrant and XDL Delano Holdings Inc.
10.16*   Subscription Agreement, dated February 7, 2000, between the Registrant
         and Nortel Networks Corporation
10.17    Amendment to Lease Agreement between Registrant and 302 Town Centre
         Limited
 21.1    Subsidiaries of Registrant
 24.1*   Powers of Attorney
</TABLE>

----------
[FN]
*       Incorporated by reference to the exhibits contained in the Company's
        Registration Statement on Form F-1 (File No. 333-94505).

+       Incorporated by reference from the Company's Registration Statement on
        Form 8-A dated January 27, 2000.
</FN>


B.      FINANCIAL STATEMENT SCHEDULES

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

================================================================================
                                                                              58


<PAGE>   59

DELANO TECHNOLOGY CORPORATION - 10K - Annual Report
================================================================================



                                   SIGNATURES

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

DELANO TECHNOLOGY CORPORATION
                                      By:   /s/ JOHN FORESI
                                         -----------------------------------
                                         John Foresi
                                         President and Chief Executive Officer

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


         SIGNATURE                                     TITLE
         ---------                                     -----

        /s/ JOHN FORESI                      President and Chief
-------------------------------------------  Executive Officer, Director
John Foresi                                  (Principal Executive Officer)

        /s/ THOMAS HEARNE                    Chief Financial Officer
-------------------------------------------  (Principal Financial Officer
Thomas Hearne                                And Principal Accounting Officer)

        /s/ DENNIS BENNIE                    Chairman of the Board of Directors
-------------------------------------------
Dennis Bennie

        /s/ ALBERT AMATO                     Director
-------------------------------------------
Albert Amato

        /s/ IAN GIFFEN                       Director
-------------------------------------------
Ian Giffen

        /s/ BAHMAN KOOHESTANI                Director
-------------------------------------------
Bahman Koohestani

        /s/ DONALD WOODLEY                   Director
-------------------------------------------
Donald Woodley

        /s/ TONY ZINGALE                     Director
-------------------------------------------
Tony Zingale



================================================================================
                                                                              59

<PAGE>   60

                                 EXHIBIT INDEX

<TABLE>
<CAPTION>
EXHIBIT
NUMBER                     TITLE
------                     -----
<S>      <C>
  3.1*   Articles of Incorporation of the Registrant
  3.2*   By-laws of the Registrant
  3.3    Articles of Amalgamation of the Registrant
  3.4    Revised By-laws of the Registrant
  4.1+   Specimen Common Share certificate
 10.1*   Registration Rights Agreement, dated as of January 27, 1999, between the
         Registrant and certain shareholders of the Registrant
 10.2*   Agency Agreement, dated as of June 24, 1999, between the Registrant and
         the Agents named therein
 10.3*   Professional Services Agreement, dated June 1, 1999, between the
         Registrant and Protege Software Limited
 10.4*   Form of Subscription Agreement, dated July 17, 1998 between the
         Registrant and each of Robert Gayle, Bahman Koohestani, John Mah and
         Sean Maurik
 10.5*   Form of Subscription Agreement, dated July 17, 1998, between the
         Registrant and Bahman Koohestani
 10.6*   Credit Facility, dated July 5, 1998 between the Registrant and Royal
         Bank of Canada
 10.7*   Sub-lease Agreement, dated December 16, 1998 between the Registrant and
         MGI Software Corp.
 10.8*   Lease Agreement, dated November 17, 1999 between the Registrant and 302
         Town Centre Limited.
 10.9*   Stock Option Plan
10.10*   Employment Agreement, dated November 23, 1998, between John Foresi and
         the Registrant
10.11*   Employment Agreement, dated February 26, 1998, between Bahman Koohestani
         and the Registrant
10.12*   Employment Agreement and Form of Confidentiality Agreement between the
         Registrant and its executive officers
10.13*   Employee Stock Purchase Plan
10.14*   Amalgamation Agreement, dated November 30, 1999, between the Registrant
         and XDL Delano Holdings Inc.
10.15*   Amendment No. 1 to the Amalgamation Agreement, dated February 7, 2000,
         between the Registrant and XDL Delano Holdings Inc.
10.16*   Subscription Agreement, dated February 7, 2000, between the Registrant
         and Nortel Networks Corporation
10.17    Amendment to Lease Agreement between Registrant and 302 Town Centre
         Limited
 21.1    Subsidiaries of Registrant
 24.1*   Powers of Attorney
</TABLE>

----------
[FN]
*       Incorporated by reference to the exhibits contained in the Company's
        Registration Statement on Form F-1 (File No. 333-94505).

+       Incorporated by reference from the Company's Registration Statement on
        Form 8-A dated January 27, 2000.

</FN>