SECURITIES AND EXCHANGE COMMISSION
                             Washington, D.C. 20549
                   ------------------------------------------
                                   Form 10-KSB


(Mark one)

[X]  Annual report under section 13 or 15(d) of the  Securities  Exchange Act of
     1934.

     For the fiscal year ended December 31, 2000
                               -----------------

                                       OR

[ ]  Transition report  under  section  13 or 15(d) of the  Securities  Exchange
     Act of 1934

     For the  transition  Period from ______________ to ______________


                        Commission file number: 0-28475
                                                -------


                                  Merilus, Inc.
                  -------------------------------------------
                 (Name of small business issuer in its charter)



             Nevada                                             87-0635270
   ------------------------------                          -------------------
  (State or other jurisdiction of                           (I.R.S. Employer
   incorporation or organization)                          Identification No.)


            #307, 46165 Yale Road
     Chilliwack, British Columbia, Canada                           V2R 3C7
    -------------------------------------                          ---------
     (Address of principal executive offices)                      (Zip Code)

                   Issuer's telephone number: (604) 792-0100



             Securities registered under Section 12(b) of the Act:
                                (Title of Class)

                                      None
              -----------------------------------------------------


                      Name of exchange on which registered

                                      None
              -----------------------------------------------------



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

                         Common Stock, $0.001 par value
          -------------------------------------------------------------
                                (Title of class)

Check  whether the Issuer (1) filed all reports  required to be filed by Section
13 or 15(d) of the  Securities  Exchange  Act  during the past 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
              -----              -----

Check if there is no disclosure of delinquent  filers in response to Item 405 of
Regulation  S-B is not  contained  in  this  form,  and no  disclosure  will  be
contained,  to the  best of  registrant's  knowledge,  in  definitive  proxy  or
information statements incorporated by reference in Part III of this Form 10-KSB
or any amendment to this Form 10-KSB.

Registrant's revenues for its most recent fiscal year was $21,278.

The  aggregate  market value of the voting stock held by  non-affiliates  of the
registrant on March 27, 2001, computed by reference to the closing price of that
date,  was  approximately  $  6,452,385  assuming  solely for  purposes of this
calculation  that  all  directors  and  executive  officers  of the  issuer  are
"affiliates."  This  determination  of  affiliate  status is not  necessarily  a
conclusive determination for other purposes.

On March 27, 2001, the registrant had 9,100,000  shares of Common Stock,  $0.001
par value per share, issued and outstanding.


              Transitional Small Business Disclosure Format: Yes[ ]  No [X]



<PAGE>
<TABLE>
<CAPTION>


                                  MERILUS, INC.

                                    Index to
                          Annual Report on Form 10-KSB
                      For the Year Ended December 31, 2000

Part I                                                                                                 Page
<S>      <C>                                                                                          <C>
Item 1   Description of Business........................................................................ 3
Item 2   Description of Property.........................................................................7
Item 3   Legal Proceedings...............................................................................7
Item 4   Submission of Matters to a Vote of Security Holders.............................................7

Part II
Item 5   Market for Common Equity and Related Stockholder Matters........................................8
Item 6   Management's Discussion and Analysis of Financial Condition and Results of Operations...........9
Item 7   Financial Statements...........................................................................13
Item 8   Changes In and Disagreements With Accountants on Accounting and Financial Disclosure...........13

Part III
Item 9   Directors, Executive Officers, Promoters and Control Persons; Compliance With
         Section 16(a) of the Exchange Act..............................................................14
Item 10  Executive Compensation.........................................................................17
Item 11  Security Ownership of Certain Beneficial Owners and Management.................................23
Item 12  Certain Relationships and Related Transactions.................................................25
Item 13  Exhibits and Reports on Form 8-K...............................................................26

Signatures..............................................................................................27

Financial Statements....................................................................................F-1


</TABLE>


                                       2
<PAGE>


                                     Part I

ITEM 1.  DESCRIPTION OF BUSINESS
--------------------------------

Certain  statements  contained in this Report,  including,  without  limitation,
statements containing the words, "believes," "anticipates," "expects," and other
words of similar  import,  constitute  "forward-looking  statements"  within the
meaning of Section 27A of the  Securities  Act of 1933, as amended,  and Section
21E of the  Securities  Exchange Act of 1934, as amended.  Such  forward-looking
statements  involve  known and unknown  risks,  uncertainties  and other factors
which may cause the actual results, performance or achievements of Merilus, Inc.
to be materially different from any future results, performance, or achievements
expressed   or  implied  by  such   forward-looking   statements.   Given  these
uncertainties,  readers  are  cautioned  not to  place  undue  reliance  on such
forward-looking statements. Merilus, Inc. disclaims any obligation to update any
such  factors  or to  announce  publicly  the  results  of any  revision  of the
forward-looking  statements  contained or  incorporated  by reference  herein to
reflect future events or developments.


History of Merilus
------------------

On November 4, 1997 Messrs. Dana Epp and Kevin Traas formed NetMaster Networking
Solutions,  Inc., a private British  Columbia,  Canada,  company.  The company's
purpose  was to  address  the many  issues  and  risks  involved  in  connecting
organizations and/or enterprise networks to the Internet. Traditional connection
methods were generally known to require high startup costs, require high monthly
recurring costs and incorporated very limited network  security.  The marketable
version of the resulting products,  including Gateway Guardian,  combined unique
custom-built  solutions  and a  graphical  administration  "shell"  to  minimize
complexity and add further features and benefits.

NetMaster  Networking  Solutions,  Inc.,  changed its corporate  name to Merilus
Technologies Inc.  ("Merilus  Technologies") on September 8, 2000 in conjunction
with  its  resolve  to focus on  network  security.  Since  that  time,  Merilus
Technologies  has  continued to develop its line of secure  networking  products
including Gateway Guardian(TM) and FireCard(TM).

On November  29, 2000  Merilus  Technologies  agreed to merge with Golden  Soil,
Inc., a Nevada  Corporation  incorporated  on May 7, 1985 and publicly traded on
the OTC Bulletin Board under the symbol "GDSI".  In connection  with the merger,
which closed on December 29, 2000,  Golden Soil issued  3,787,500  shares of its
common stock in exchange for all of the issued and outstanding shares of Merilus
Technologies  ("Exchangeable  Shares").  The  acquisition was accounted for as a
recapitalization of Merilus Technologies,  effectively  representing an issue of
shares by Merilus  Technologies for the net assets of Golden Soil. Following the
closing,  Golden Soil, Inc.  changed its name to Merilus,  Inc.  ("Merilus") and
changed its trading symbol to "MERH". In connection with the merger transaction,
Merilus raised  $2,000,000 from the sale of 2,000,000  shares of common stock to
investors.  Further  information about the merger transaction and the rights and
preferences associated with the Exchangeable Shares may be found in the Schedule
14C dated November 30, 2000 and filed with the SEC on December 12, 2000, and the
report on Form 8-K dated  January 18, 2001 and filed with the SEC on January 19,
2001, incorporated herein by reference.

Business of Merilus
-------------------

Data transmitted  over the Internet is subject to unauthorized  interception and
computer  networks  expose  organization's  sensitive  information  and  mission
critical  applications to  unauthorized  access from both outside and inside the
organization.  These risks create a critical need for  organizations  to protect
their information and information systems from unauthorized access and use.

Driven by concern over  cyber-crime  and  vandalism,  the  worldwide  market for
network  security  products and services is large and growing  rapidly.  Despite
this  growth and the range of  available  security  products,  the  majority  of
computer networks remain  unprotected.  Merilus believes that more organizations
would  purchase  network  security  products  if these  products  were easier to
implement, use and maintain.

Merilus  is  a  development   stage  software   company  focused  on  delivering
intelligent   products  that  simplify  the  process  of  digital  security  for
organizations  connecting to networks.  We have  developed  products that are:

     o    Extremely  effective,  when used as part of a  comprehensive  security
          process;
     o    Easy to implement, use and maintain;
     o    More robust yet less expensive than products  offered by  competitors;
          and
     o    Interoperable with popular security products offered by other vendors.

                                       3
<PAGE>

We are  preparing to  distribute  these  products to end-user  customers  via:

     o    Established distributors of network security products;
     o    Value added resellers (VARs);
     o    Manufacturers of network servers (OEMs); and
     o    Business and security consultants.


Merilus currently offers two product families:

          o FireCard(TM),  a hardware-based  product  providing  "plug-and-play"
            ------------
     firewall  protection and virtual private networking,  integrating  directly
     into any server supporting a PCI bus (e.g., IBM, DELL,  COMPAQ,  HP, Apple,
     Sun).

          o Gateway  Guardian(TM),  a software  product that is the heart of the
            ---------------------
     Merilus  FireCard(TM),  providing  firewall  protection and virtual private
     networking  for  Windows  95/98/NT,  Mac OS,  Linux,  Solaris  and SCO UNIX
     platforms.


  Merilus has developed  and is bringing to market a family of network  security
products  that  are:

     o    Extremely effective;
     o    Less expensive;
     o    Feature-rich;
     o    Easy to use;
     o    Interoperable with popular security products offered by other vendors;
          and
     o    Designed for a global market- North America, Europe and Asia.

FireCard(TM)
------------

FireCard(TM)  is a separate  computer on a circuit  board with its own operating
system (OS),  independent of the main computer's OS. Because  FireCard(TM) takes
power  from the bus,  it does not  affect  the  underlying  operating  system or
network and, its "box within a box" design keeps the network secure, even if the
server were to fail.

Utilizing  re-programmable flash memory,  FireCard(TM) accepts software upgrades
to add new functionality  and protect against future security  threats,  without
costly hardware changes.

An IPSec compliant device,  FireCard(TM) acts as a virtual private network (VPN)
bridge,  securing VPN tunnels  across the Internet.  In short,  FireCard(TM)  is
flexible enough to secure digital  communications between individuals and entire
networks over any Internet or network connection.

FireCard(TM)features include:

     o    Broadband  Internet  security that protects against external  security
          threats;
     o    Merilus  SPURS TM  (Security  Policy  User Rule  Sets)  that  protects
          against internal security threats and abuse;
     o    Active  real-time  prioritization,  allocation  and control of network
          bandwidth  (i.e.,  ensure that Napster  usage doesn't  interfere  with
          mission-critical tasks);
     o    Active   alerting  of  attempts  of  intrusion,   denial  of  service,
          authentication failures and hardware failures;
     o    Advanced internal DHCP server; and
     o    Secure remote firewall  configuration,  management and upgrading using
          RSA (R) technology.

                                       4
<PAGE>

We offer FireCard(TM) in two separate configurations:

          o FireCard Plus(TM)- an "industrial strength," central office solution
     with VPN server and a full range of features.

          o FireCard(TM)- a small office, home office solution offering superior
     protection  and a full  range of  security  features  at a very  affordable
     price.

Gateway Guardian
----------------
Gateway Guardian is the software heart and brains of the FireCard (TM).  Merilus
makes Gateway Guardian as a packaged  software product for creating firewall and
virtual private networking appliances utilizing a Java-based configuration tool.
Its Java Runtime Environment is platform independent, supporting:

     o    Windows 95/98/00/NT,
     o    Mac OS,
     o    Linux,
     o    Solaris; and
     o    SCO UNIX.

Intelligent  configuration  wizards  make  Gateway  Guardian  extremely  easy to
maintain and manage. The wizard guides users through a series of straightforward
questions  regarding hardware  components,  network connections and helps create
security policies using Merilus SPURS(TM).

Merilus offers Gateway Guardian software in four separate configurations;

     o    Personal edition;
     o    Professional edition;
     o    VPN; and
     o    Enterprise edition.

Merilus  continues to focus on research and  development  to make its  solutions
easier to use through new features based on end-user feedback.

Once the products  have been  provided,  Merilus has the  opportunity  to create
secondary streams of revenue.  Through Merilus' OEM partners and through its own
sales force,  Merilus can provide  multiple  forms of advanced  services.  These
advanced services include:

     o    EXTENDED FIREWALL  MANAGEMENT.  The Gateway Guardian Suite of firewall
          management tools, offer clients more control over their local network,
          including  control of use,  bandwidth and even  services  while taking
          advantage of the existing system already in place;

     o    POLICY BASED INTERNET  MANAGEMENT.  Enables users to set priorities on
          internet use. Often critical  applications  suffer because  someone is
          using the internet for  non-critical  tasks,  such as downloading  the
          latest  copy  of  their  favorite  MP3  or  video  game.  The  systems
          administrator can easily guarantee  priority to critical areas such as
          video  conferencing  or web  servers  in the  event  that  there  is a
          conflict. Most companies are unaware that this technology exists; and

     o    VIRTUAL PRIVATE NETWORKS. The customer can bore a "tunnel" through the
          Internet between two points.  Using this  technology,  two offices (or
          more) can  communicate  with each  other  using data  transfer,  video
          conferencing,  or voice in ABSOLUTE  privacy.  The special  encryption
          algorithms  make certain that no one can 'hack' in.  Merilus  products
          can  integrate a solution  with  standards  based IPSEC VPN devices on
          remote ends.

                                       5
<PAGE>

Competition
-----------

The market for Internet security products is world-wide and highly  competitive,
and Merilus  expects  competition  to  intensify  in the  future.  There are few
substantial  barriers  to  entry,  and  additional   competition  from  existing
competitors  and new market  entrants  will  occur in the  future.  Current  and
potential  competitors in Merilus' markets  include,  but are not limited to the
following,  all of whom sell  world-wide or have a presence in most of the major
markets for such products:

     o    enterprise  firewall software vendors such as Check Point Software and
          Axent Technologies;
     o    network  equipment   manufacturers  such  as  Cisco  Systems,   Lucent
          Technologies, Nortel Networks, 3COM and Nokia;
     o    computer or network component manufacturers such as Intel Corporation;
     o    operating  system  software  vendors  such as  Microsoft  Corporation,
          Novell and Sun Microsystems;
     o    security appliance suppliers such as WatchGuard Technologies, Inc. and
          SonicWall, Inc.; and
     o    low cost Internet router  suppliers which may include limited Internet
          security functionality.



In the market for Internet security solutions,  Merilus competes on the basis of
technological  expertise  and  functionality,  breadth  of service  and  product
features, ease of installation and management, updatability,  scalability, brand
recognition,  price and  customer  support.  Many of its  current  or  potential
competitors have longer operating  histories,  greater name recognition,  larger
customer bases and significantly  greater  financial,  technical,  marketing and
other resources than Merilus does.  Nothing  prevents or hinders these actual or
potential  competitors  from entering  Merilus'  target  markets at any time. In
addition,  Merilus'  competitors may bundle products competitive to Merilus with
other  products  that may be sold to Merilus'  current or  potential  customers.
These  customers  may accept  these  bundled  products  rather  than  separately
purchasing the products. If these companies were to use their greater financial,
technical and marketing resources in Merilus' target markets, it could adversely
affect Merilus' business.

Government Regulation
---------------------

Export  restrictions  on  encryption   technology  above  64  bits  are  tightly
controlled  through the provisions of the Wassenaar  Arrangement.  The Wassenaar
Arrangement is a 33 country  agreement  including  Canada and the United States,
signed  December  3, 1998.  The  Wassenaar  Arrangement  controls  the export of
encryption  technology to any destination  outside of continental North America.
This  arrangement  requires  exporters  of  encryption  technology  to  make  an
application  prior to exportation.  Applications  for export under the agreement
are  evaluated on a case by case basis and  considerable  evaluation  is done by
both countries involved in the export review. The application process slows down
the selling cycle and flow of trade of Merilus' products by requiring compliance
with the terms of the Wassenaar Arrangement.

Research and Development
------------------------

In the past year Merilus has  continued to develop and refine  Gateway  Guardian
and Firecard.  Merilus  developed its products using a modular design concept to
provide the foundation for future product  development  that includes  expanding
the feature sets and capacity of all products and extending the current  product
designs into non-traditional and emerging  applications such as managed security
providers, automotive applications and satellite and military applications.

Proprietary Rights
------------------

Merilus relies on a combination of trademark, copyright and trade secret laws to
protect its proprietary rights. On September 8, 2000, Merilus Technologies, Inc.
applied to trademark  the names  "Merilus"  and  "FireCard"  in Canada.  Similar
applications  have been filed in the United States.  Neither of these trademarks
are believed to be  significant  in the  protection of Merilus'  technology.  In
addition,  Merilus owns the Internet domain name of "Merilus".  Merilus believes
its  products,  trademarks  and other  property  rights do not  infringe  on the
proprietary rights of third parties.


                                       6
<PAGE>


Employees
---------

As of February 1, 2001,  Merilus had  twenty-eight  full time  employees  and no
part-time  employees.  The  Company  anticipates  that  the  development  of its
business  will  require  the hiring of  additional  employees.  None of Merilus'
current employees are covered by any collective bargaining agreement and Merilus
has never  experienced  a work  stoppage.  The Company  considers  its  employee
relations to be good.



ITEM 2.  DESCRIPTION OF PROPERTY
--------------------------------

The Company's  principal executive offices are located at #307, 46165 Yale Road,
Chilliwack,  British  Columbia,  Canada V2R 3C7. The Company leases 8,075 square
feet at a step rent of  approximately  $4,753 per month.  The monthly  rent will
increase on June 1, 2001 to approximately  $4,960. The lease expires on November
30, 2003 and may be renewed for an additional  term of three years.  The Company
believes  that this  facility will be suitable for the operation of its business
for the foreseeable  future.  The facility is adequately  insured against perils
commonly covered by business insurance policies.

ITEM 3.  LEGAL PROCEEDINGS
--------------------------

The  Company  is  not  presently  a  party  to any  material  pending  legal  or
administrative  proceedings,  and  its  property  is not  subject  to  any  such
proceedings, except as may be incurred in the ordinary course of business.


ITEM 4.  SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
------------------------------------------------------------
On  December  12,  2000,  a  Schedule  14C was  filed  with  the SEC and sent to
stockholders as notice of corporate actions taken by ten stockholders  without a
meeting on November 28, 2000.  The ten persons  collectively  owned in excess of
the required majority of outstanding  voting securities of the Company necessary
for the  adoption of the actions or  3,376,000  shares out of  6,750,000  shares
outstanding (50.01%). The following matters were approved:

o    Amendment  to the  Articles of  Incorporation  of Golden Soil to change the
     name to "Merilus, Inc." and to create a special preferred class of stock;

o    The  Reorganization  Agreement  between Golden Soil,  Merilus  Technologies
     Inc.,  613636  British  Columbia  Inc.  and  the  stockholders  of  Merilus
     Technologies, Inc.;

o    The entering into of employment  agreements  with Dana Epp, Chad Northcott,
     Kevin Traas, Stephen R. Hemenway and Ross Mrazek;

o    A stock option plan; and

o    Electing  nine persons as members of the  Company's  Board of Directors for
     the year 2001,  namely Dana Epp,  Kevin Traas,  Ross Mrazek,  Bruce Davies,
     John Paul  DeJoria,  Gerald C. Allen,  Gene Hoffman,  Jr.,  Aaron Fleck and
     Myron Gushlak.


                                       7
<PAGE>



                                     PART II

ITEM 5.  MARKET FOR COMMON EQUITY AND RELATED STOCKHOLDER MATTERS
-----------------------------------------------------------------

From August 31, 2000 through December 29, 2000,  Merilus common stock was traded
on the OTC Bulletin  Board  (OTC-BB)  under the name Golden  Soil,  Inc, and the
symbol  "GDSI."  From January 2, 2001 through  March 29, 2001,  Merilus'  common
stock has traded on the OTC Bulletin Board (OTC-BB) under the symbol "MERH." The
following table sets forth, for the periods indicated, the range of high and low
closing prices of Merilus' common stock.




    Fiscal 2000                                           High             Low
    -----------                                          -----            -----
    Third Quarter (from August 31, 2000)                 $7.63            $4.97
    Fourth Quarter                                       $6.06            $1.06

    Fiscal 2001                                          High              Low
    -----------                                          -----            -----
    First Quarter (through March 27, 2001)               $4.06            $ .94



On March 27,  2001,  the Merilus  common  stock was held by 23  shareholders  of
record.

Merilus has not paid  dividends in prior years and has no plans to pay dividends
in the near future.  Merilus  intends to reinvest its earnings on the  continued
development and operation of its business. Any payment of dividends would depend
upon Merilus' pattern of growth,  profitability,  financial condition,  and such
other factors as the Board of Directors may deem relevant.

                                       8
<PAGE>

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

The following  selected  financial  data is obtained from the audited  financial
statements of Merilus,  for the three months ended  December 31, 2000, the years
ended  September  30,  2000 and 1999 and for the period  from  November  4, 1997
(inception)  through  December  31, 2000,  which are included  elsewhere in this
document.  The  selected  financial  data  should  be read in  conjunction  with
"Management's  Discussion  and  Analysis of Financial  Condition  and Results of
Operations" and the Financial  Statements and attached  financial notes included
elsewhere in this document.
<TABLE>
<CAPTION>

                                    Three months                                          Inception
                                        ended           Year ended       Year ended   (November 4, 1997)
                                    December 31,       September 30,    September 30,      through
                                        2000               2000             1999       December 31, 2000
                                   ---------------     -------------    -------------  -----------------
<S>                                <C>                  <C>             <C>             <C>
Revenue
   Licensing                          $      524          $  200,776      $   50,448      $  251,759
   Product sales                          20,754              77,038          59,204         167,052
                                      ----------          ----------      ----------      ----------
   Total revenue                          21,278             277,814         109,652         418,811

   Cost of revenue                         8,436              68,829          22,459         104,414
                                      ----------          ----------      ----------      ----------
Gross profit                              12,842             208,985          87,193         314,397


Product development                      180,631             224,070          38,712         480,040

Selling & marketing                      635,005             251,984          20,667         910,727

General & administrative                 449,476             249,286          42,841         757,240

Stock compensation                       659,121                --              --           659,121
                                      ----------          ----------      ----------      ----------


Total operating costs                  1,924,233             725,340         102,220       2,807,128
                                      ----------          ----------      ----------      ----------

Operating loss                         1,911,391             516,355          15,027       2,492,731
                                      ----------          ----------      ----------      ----------

Total Loss                            $1,908,465          $  517,669      $   21,208      $2,498,535
                                      ==========          ==========      ==========      ==========


Balance at end of period

   Cash                               $  672,286          $    4,452                      $  672,286

   Total Assets                        1,848,159             181,530                       1,848,159

   Total Current Liabilities          $  711,666             752,825                      $  711,666
</TABLE>


Management  Discussion  and  Analysis  of  Financial  Condition  and  Results of
Operations

The following  discussion  should be read in conjunction  with the  consolidated
financial  statements included herein.  Certain statements  contained herein may
constitute   forward-looking  statements  within  the  meaning  of  the  Private
Securities  Litigation Reform Act of 1995. Because such statements include risks
and uncertainties,  actual results may differ materially from those expressed or
implied by such  forward-looking  statements.  Factors  that could cause  actual
results to differ materially  include,  but are not limited to, risks associated
with the integration of businesses  following an acquisition,  competitors  with
broader  product lines and greater  resources,  emergence into new markets,  the
Company's  inability to maintain  working  capital  requirements  to fund future
operations  or the Company's  inability to attract and retain  highly  qualified
management, technical and sales personnel.

                                       9
<PAGE>


Overview

Merilus,  Inc. is a  development  stage  enterprise  that  develops  and markets
products  that  simplify  the  process of  digital  security  for  organizations
connecting to networks. We were formed as NetMaster Networking  Solutions,  Inc.
in British  Columbia,  Canada in  November  1997 and changed our name to Merilus
Technologies,  Inc. in September  2000.  On December  29,  2000,  we merged with
Golden Soil,  Inc. a Nevada  corporation  that  acquired all of our  outstanding
common  stock.  For  accounting  purposes,  we  treated  the  acquisition  as  a
re-capitalization of Merilus Technologies,  effectively representing an issue of
shares  by  Merilus  Technologies  Inc.  for  the net  assets  of  Golden  Soil.
Accordingly,   the  comparative   financial   information  is  that  of  Merilus
Technologies Inc., which began operations on November 4, 1997, consolidated with
those of Golden Soil from December 29, 2000.  Following this  re-capitalization,
the combined company changed its name to Merilus, Inc.

Since inception,  we have incurred costs  principally  related to developing our
products,  preparing marketing  materials and organizing our sales channels.  We
have not yet  generated  significant  revenues and have  incurred  negative cash
flows from operations.

In  July  1999,  we  introduced  our  first  product,  Gateway  Guardian(TM),  a
stand-alone software product that is also an integral component of our principal
product,  FireCard(TM).  We publicly announced FireCard(TM) in November 2000 and
plan to make initial shipments in April 2001.  FireCard(TM) is a secure embedded
computer  fitting on a standard  form-factor  PCI card that installs easily into
most networked-based servers and workstations.  It provides firewall protection,
virtual private networking,  bandwidth management and intrusion detection, among
other valuable features.

We have prepared our consolidated  financial statements on a going concern basis
in accordance with generally accepted accounting principles in the United States
of  America.  This going  concern  basis of  presentation  assumes  that we will
continue in operation for the foreseeable future and will be able to realize our
assets and discharge our  liabilities  and  commitments  in the normal course of
business.  As described  below under Liquidity and Capital  Resources,  there is
substantial  uncertainty  about our ability to continue as a going concern.  Our
financial  statements  do not  include  adjustments  that might  result from the
outcome of this uncertainty.

Results of Operations:

Net Revenues
To date,  net  revenues  have  consisted  of  licensing  of  certain  internally
developed  technologies and sales of the Gateway Guardian(TM)  software product.
Licensing revenues increased from $50,448 during the fiscal year ended September
30, 1999 to $200,776  during the fiscal year ended  September 30, 2000, and were
$524 during the three months ended  December 31, 2000.  Although the majority of
our historical revenues are derived from licensing, licensing activities are not
central  to our  future  plans,  and as a result we expect  that such  licensing
revenues will not be significant in future periods.

Revenues from the sale of Gateway Guardian(TM) increased 30 percent from $59,204
during the fiscal year ended  September  30,  1999 to $77,038  during the fiscal
year ended  September 30, 2000.  Gateway  Guardian sales were $20,574 during the
three months ended December 31, 2000. On an annualized  basis,  this  represents
sales of approximately  $82,300,  an increase of 6.8% compared to the comparable
period ended September 30, 2000. Substantially all of the Gateway Guardian sales
were made directly to end-user customers from the Merilus website.

We expect that our future  revenues will  generally be derived from sales of our
FireCard(TM),  Gateway  Guardian(TM)  and  follow-on  products.  We plan to make
initial shipments of the Merilus FireCard(TM) in April 2001 and expect to record
our first revenue from this product  during the quarter ending June 30, 2001. In
order to increase our revenues,  we are currently in  discussions  to enter into
distribution  agreements  with a  variety  of  companies  who  have  established
distribution  into target  markets.  We intend to expand our sales and marketing
organization,   attempt  to  develop   strategic  partner   relationships   with
multi-national  distributors  and OEM customers and expand our  advertising  and
promotional  activities.  There are no assurances  that we will be successful in
these efforts, or that our products will be accepted by potential customers.

Cost of Revenues
The  costs  of  revenues  for  the  periods  presented  consist  of the  cost to
manufacture Gateway Guardian(TM),  including product packaging,  and third-party
product licensing fees. Costs of licensing revenues were not significant.

                                       10
<PAGE>

Since  inception,  we have incurred costs of revenues of $104,414,  representing
approximately  62.5 percent of product  revenues.  Cost of revenues  represented
approximately  38 percent,  89 percent and 40 percent of product revenues during
the fiscal  years  ended  September  30,  1999 and 2000 and three  months  ended
December 31, 2000, respectively. Cost of revenues were higher as a percentage of
product  revenues  during the year ended  September  30, 2000  principally  as a
result of experimentation leading to the development of new products.

We expect that cost of revenues will  increase in future  periods as a result of
increased  sales from the  introduction  of  FireCard(TM)  and new  versions  of
Gateway  Guardian(TM).  At present,  we are unable to quantify such future costs
accurately, either in amount or as percentage of product revenues.

Product Development Expenses
Product  development  expenses  consist of  hardware  and  software  engineering
activities  related  to the design of our  current  and  future  products.  Such
expenses include engineering salaries, supplies, rent and depreciation.

We began our development  efforts in November 1997,  incurring costs of $480,040
through December 31, 2000 related to the development of our Gateway Guardian(TM)
and  FireCard(TM)  products.  Product  development  expenses  were  $38,712  and
$224,070 in the years ended in September 1999 and 2000, respectively. Such costs
were $180,631 in the three months ended December 31, 2000, the annual equivalent
of $722,524,  or a 222 percent  increase  compared with the year ended September
30, 2000,  principally due to preparations for the introduction of new products.
We expect to continue to increase our spending on product development activities
as we prepare to launch our FireCard(TM) product and new versions of our Gateway
Guardian(TM)  product.  We are dependent on additional  financing to continue or
increase the level of our product development  activities.  The level of product
development  that we pursue  will be  substantially  impacted  by the  amount of
additional financing, if any, that we are able to obtain. Assuming that adequate
funding is available,  we currently  intend,  among other things, to continue to
improve our  existing  products  and develop new digital  security  products for
computer  networks.   At  present,   we  are  unable  to  quantify  such  future
expenditures accurately.

Selling and Marketing Expenses
To date,  our selling and  marketing  activities  and  expenses  have  consisted
principally of developing  distribution  channels and promotional  materials for
our Gateway  Guardian(TM)  and  FireCard(TM)  products.  Such  expenses  include
salaries, supplies, travel and tradeshows.

From inception through December 31, 2000, Merilus incurred selling and marketing
costs of $910,727.  Selling and Marketing  expenses were $20,667 and $251,984 in
the years ended in September  1999 and 2000,  respectively.  Such  expenses were
$635,005  in  the  three  months  ended  December  31,  2000.  Of  this  amount,
approximately $425,000 was related to our formal announcement of FireCard(TM) at
the Comdex  tradeshow in November  2000.  Exclusive  of these  Comdex  tradeshow
costs, the Selling and Marketing  expenses in the December quarter represent the
annual  equivalent of $840,000,  or a 32 percent increase compared with the year
ended  in  September  2000,   principally  due  to  the   preparations  for  the
introduction of new products.  We expect to continue to increase our spending on
selling  and  marketing  activities  as we prepare  to launch  our  FireCard(TM)
product and new versions of our Gateway  Guardian(TM)  product. We are dependent
on  additional  financing  to  continue  or  increase  the level of selling  and
marketing  activities.  The level of selling and  marketing  activities  that we
pursue will be substantially impacted by the amount of additional financing,  if
any, that we are able to obtain. Assuming that adequate funding is available, we
currently  intend,  among other  things,  to  establish  worldwide  distribution
agreements  and  strategic  alliances,  to  engage  in  advertising  and  direct
promotion,  and to attend relevant trade shows. We expect that the costs related
to such  activities  will consist  principally of  advertising,  personnel,  and
consulting  expenses.  At  present,  we  are  unable  to  quantify  such  future
expenditures accurately.

General and Administrative Expenses
General and administrative expenses consist of executive management, accounting,
legal, and expenditures for applicable  overhead costs,  including related rent,
insurance, depreciation and certain non-cash stock compensation costs.

Merilus  incurred costs of $757,240 through December 31, 2000 related to general
and administrative activities.  General and Administrative expenses were $42,841
and $249,286 in the years ended in September 1999 and 2000,  respectively.  Such
costs were  $449,476 in the three  months ended  December 31, 2000.  Included in
this amount were  professional  fees and other costs of approximately  $116,000,
related to the merger with Golden Soil, Inc.

                                       11
<PAGE>

Also included in this amount was approximately  $163,396  representing  non-cash
stock  compensation  charges for fully vested stock options  granted in December
2000  to   non-employees   in  exchange   for   services.   Exclusive  of  these
merger-related and stock compensation costs, general and administrative expenses
in the December quarter  represent the annual  equivalent of $680,300,  or a 173
percent  increase  from the year ended in  September  2000,  principally  due to
building of a  management  and  administrative  team.  These stock  compensation
charges were  calculated in accordance  with  Statement of Financial  Accounting
Standard No. 123 (SFAS 123) using the  Black-Scholes  Option Pricing Mode or the
value of the services provided,  which ever was the most reliably  determinable.
We expect that non-cash  stock  compensation  charges will generally be lower in
future periods.

Except for stock compensation and  merger-related  costs, we expect that general
and administrative  expenses will increase in absolute dollars in future periods
as we incur additional costs due to the growth of our business.  At present,  we
are unable to quantify such future expenditures accurately.

Stock-based Compensation Expenses
During December 2000, we issued 510,555 non-qualified stock options to employees
at a strike  price  of one  cent per  share.  Of  these  options,  240,555  were
immediately  vested.  The remaining  270,000 of these stock options vest ratably
over  the  nine-month   period  ending  in  September   2001.  The   stock-based
compensation  expense of $659,121  in the three  months  ended in December  2000
represents  the value of these  240,555  fully-vested  employee  stock  options,
calculated in accordance  with APB No. 25. We will  recognize  additional  stock
compensation  expense  on the  remaining  270,000  stock  options  as they vest,
resulting in a stock  compensation  charge of approximately  $246,600 in each of
the three quarters ending in September 2001.

We expect to  continue  to use  employee  stock  options to  attract  and retain
critical  talent.  However,  we expect to limit  significantly  the use of stock
options  priced below  market.  As a result,  we expect that stock  compensation
resulting  from such  future  grants  will be lower than in  December  2000.  At
present, we are unable to quantify such additional future charges accurately.

Liquidity  and  Capital  Resources
To date, we have  financed our  operations  principally  through the issuance of
common stock. As of December 31, 2000, we do not have sufficient working capital
to bring  FireCard(TM)  to market or to sustain our operations  through 2001. In
March 2001 we sold  350,000  shares of our common  stock at a price of $1.00 per
share,  100,000  shares to John Paul DeJoria,  a director and 250,000  shares to
Imperium Capital which is controlled by Myron Gushlak, a director. Additionally,
Imperium  Capital has agreed to purchase an additional  100,000  shares at $1.00
per  share.  We are in the  process of  pursuing  additional  equity  financing,
although  there is no assurance  that our efforts will be  successful.  Adequate
funds,  whether through  additional  equity  financing,  debt financing or other
sources,  may not be available when needed or on acceptable terms, or may result
in significant dilution to existing stockholders. If we cannot obtain sufficient
financing,  we would need to reduce our operating  activities  significantly and
might go out of business. The Auditors Report on our December 31, 2000 financial
statements includes an additional explanatory paragragh on conditions that raise
substantial  doubt  about  our  ability  to  continue  as a going  concern.  The
financial  statements  include  managements'  current  plans to respond to those
doubts.

Assuming that we can obtain the necessary  financing,  our future operations are
dependent  upon the  market's  acceptance  of our  products and services and our
ability to secure strategic partnerships. There can be no assurance that we will
be able to secure market acceptance or the necessary strategic partnerships.

Effect of Fluctuations In Foreign Exchange Rates
Our reporting and functional currency is the U.S. Dollar.  Currently, all of our
operations are located in Chilliwack,  British Columbia, Canada. Transactions of
the subsidiary in Canadian  dollars have been translated into U.S. Dollars using
the current rate method,  such that assets and liabilities are translated at the
rates of exchange in effect at the balance  sheet date and revenue and  expenses
are translated at the average rates of exchange  during the  appropriate  fiscal
period. As a result,  the carrying-value of our investments in Canada is subject
to the risk of foreign currency  fluctuations.  Additionally,  revenues received
from our international  operations in other than U.S. Dollars will be subject to
foreign exchange risk.

                                       12
<PAGE>

RECENT ACCOUNTING PRONOUNCEMENTS

In June 1998,  the  Financial  Accounting  Standards  Board issued  Statement of
Financial Standards No. 133, "Accounting for Derivative  Instruments and Hedging
Activities"  (SFAS No. 133).  SFAS No. 133 requires  companies to recognize  all
derivatives  contracts as either assets or  liabilities in the balance sheet and
to measure them at fair value.  If certain  conditions are met, a derivative may
be  specifically  designated as a hedge,  the objective of which is to match the
timing  of  gain  or  loss  recognition  on  the  hedging  derivative  with  the
recognition  of (i) the  changes  in the  fair  value  of the  hedged  asset  or
liability that are  attributable  to the hedged risk or (ii) the earnings effect
of the hedged  forecasted  transaction.  For a derivative  not  designated  as a
hedging  instrument,  the gain or loss is  recognized in income in the period of
change.  SFAS No. 133 is  effective  for all  fiscal  quarters  of fiscal  years
beginning after June 15, 2000.

Historically,  the Company has not entered into derivatives  contracts either to
hedge existing risks or for speculative purposes.  Accordingly, the Company does
not  expect  adoption  of the new  standard  on  January  1, 2001 to affect  its
financial statements.

In December  1999, the SEC staff  released  Staff  Accounting  Bulletin No. 101,
"Revenue  Recognition  in Financial  Statements"  ("SAB 101").  SAB 101 provides
interpretive guidance on the recognition, presentation and disclosure of revenue
in the financial statements. SAB 101 must be applied to the financial statements
no later than the quarter ending July 1, 2001. The Company does not believe that
the adoption of SAB 101 will have a material  affect on the Company's  financial
results.


ITEM 7.  FINANCIAL STATEMENTS
-----------------------------

Financial  statements  and  supplementary  data are set  forth on pages F-1 thru
F-20.


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

On March 5, 2001  Merilus  filed a report on Form  8-K,  which was  subsequently
amended on March 23,  2001,  disclosing  the  dismissal  of Andersen  Andersen &
Strong,  L.C. as Merilus'  independent  public accountants on February 28, 2001,
and appointment of KPMG, LLP of Chilliwack,  British  Columbia,  Canada,  as its
independent  accountants to audit its financial  statements  formerly audited by
Andersen Andersen & Strong, L.C.


                                       13
<PAGE>

                                    PART III

ITEM 9. DIRECTORS, EXECUTIVE OFFICERS, PROMOTERS AND CONTROL PERSONS; COMPLIANCE
--------------------------------------------------------------------------------
WITH SECTION 16(a) OF THE EXCHANGE ACT
--------------------------------------

On  December  29,  2000,  the Board of  Directors  of the Company  accepted  the
resignation  of its director and  executive  officer and appointed new directors
and executive officers.

Xenios  Xenopoulous  resigned as the sole director and executive  officer of the
Company.

The following individuals were appointed directors and executive officers of the
Company on December 29, 2000.

NAME                AGE      POSITION
--------------------------------------------------------------------------------
Dana Epp            27       Director, President and Chief Executive Officer
Kevin Traas         31       Director, Secretary and Chief Information Officer
Ross Mrazek         32       Director and Vice President International Sales
Chad Northcott      48       Chief Operations Officer
Stephen Hemenway    39       Vice President Sales
Bruce Davies        38       Director
John Paul DeJoria   56       Director
Gerald Allen        56       Director
Gene Hoffman, Jr.   25       Director
Aaron Fleck         76       Director
Myron Gushlak       31       Director



Dana Epp - Director, President and Chief Executive Officer
-----------------------------------------------------------
Mr.  Epp is a  co-founder  of  Merilus  Technologies,  Inc.,  and  served as its
President,  Chief Executive Officer,  and a Director.  Mr. Epp has many years of
computer  networking  experience  with  particular  emphasis  on secure  network
connectivity and embedded Java  applications.  Mr. Epp has been an instructor in
the Computer  Information  Systems (CIS) Department at the University College of
the Fraser Valley,  teaching Linux, Java and C++ programming.  He has brought to
market Internet  appliances,  secure firewalling  devices,  wireless routers and
Java  cryptographic  devices which are based on Linux. For the past three years,
he has been  President of the Fraser  Valley  Linux Users Group,  and a steering
committee member of CLUE, the Canadian Linux Users'  Exchange.  Mr. Epp has been
awarded  two  years  running  (1999 and 2000)  the  Community  Spirit  Award for
Business in recognition of his ongoing  initiatives in promoting high technology
industries in his community.

                                       14
<PAGE>

Kevin Traas - Director, Secretary and Chief Information Officer
---------------------------------------------------------------
Mr. Traas is a co-founder of Merilus Technologies,  Inc. and served as its Chief
Information  Officer and a Director.  Mr. Traas is a SCO Unix Advanced Certified
Engineer,  Novell  Certified  Network  Administrator,  and  Microsoft  Certified
Professional.  Mr.  Traas  has more than ten years of  experience  in  managing,
administrating  and  maintaining  computers,  networks and network  servers with
specific focus on Internet services.  Mr. Traas' experience spans all aspects of
the  computer  industry  including  research and design  solutions,  purchasing,
implementing,   and  establishing   computer  and   Internet-related   services,
maintaining  systems,  and support.  While working  closely with Dana Epp as the
Head  System  Administrator  of  ValleyNet  and as a Board  Member of the Fraser
Valley Community  Information  Society, Mr. Traas has gained practical knowledge
in customer service, project team management, administration, Internet security,
and all things  related to maintaining  the efficient  operations of an Internet
and Security  Solutions  Provider.  Mr.  Traas has  considerable  experience  in
implementing and maintaining the most efficient network communication  solutions
no matter what the situation or scale.

Ross Mrazek - Director and Vice President International Sales
-------------------------------------------------------------
Mr.  Mrazek  served  as  Vice  President  of  International   Sales  of  Merilus
Technologies,  Inc..  He was  formerly the CFO of Universal  Scholars  Corp.,  a
Washington DC based provider of online  professional  education and  specialized
content  focused on Asian  markets.  Mr. Mrazek was formerly  Manager,  Emerging
Markets with the Business  Development  Bank of Canada.  Mr. Mrazek  advises and
structures venture investment  opportunities in the high technology and emerging
market sectors.  Mr. Mrazek has worked in the corporate finance field with North
American Trust Company in Toronto and has been a corporate and commercial banker
with  Laurentian  Bank in  Vancouver.  In addition,  Mr.  Mrazek has worked on a
number of projects in the United States,  Europe, Russia and Asia. Mr. Mrazek is
a graduate of the  University  of British  Columbia  and the  American  Graduate
School of International Management (Thunderbird).

Chad Northcott - Chief Operations Officer
-----------------------------------------
Mr. Northcott served as Chief Operations Officer of Merilus Technologies,  Inc..
He is a former  partner  with  Goldfinch,  Nicklom &  Northcott  and brings over
twenty years of practical  business  expertise as a Chartered  Accountant  along
with experience and knowledge in investment and technology.  He is a graduate of
Simon Fraser University and has been in the public  accounting  profession since
1977 having  attained his C.A.  designation in 1980. He has experience with both
national and local Chartered  Accounting  firms and is a member of the Institute
of Chartered Accountants of British Columbia.

Stephen Hemenway - Vice President Sales
---------------------------------------
Prior to his role at Merilus  Technologies,  Inc. as Vice President  Sales,  Mr.
Hemenway was the Manager of Consulting Services at the Business Development Bank
of Canada and brings the Company many years of experience  in sales  management,
event  marketing,  media  planning,  and Internet  development.  His  experience
includes  working with Glentel,  WIC  Communications,  Dowco  Internet,  Roger's
Communications,  Fraser Valley Broadcasters, and The Ministry of Small Business,
Tourism & Culture.  Mr.  Hemenway is a founding  partner of  SearchBC.com  and a
director for the Stolo Development Corporation.

                                       15
<PAGE>

Bruce Davies - Director
-----------------------
Mr. Davies is a corporate attorney and partner at the Chilliwack,  B.C. law firm
of Sliman,  Stander & Company and brings the Company 12 years of  experience  in
advising businesses in all facets of their operations. Mr. Davies attended Simon
Fraser  University  of  Burnaby,  B.C.  from  1980 to  1984 as a joint  business
administration/economics  major and the University of British Columbia from 1984
to 1987 in the faculty of law.  Following  graduation,  Mr. Davies  articled and
practiced law in the business law department of a medium sized  Vancouver,  B.C.
law firm and in 1993 moved to the Fraser  Valley  area of B.C.  Mr.  Davies will
provide the Company with legal  advice on all facets of its  business  including
preservation  of  intellectual  property  rights,  employment  law,  mergers and
acquisitions and corporate finance.

John Paul DeJoria - Director
----------------------------
Mr. DeJoria is the Chairman, Chief Executive Officer and one of the two founders
of John Paul Mitchell Systems a privately owned  professional  hair care company
with retail sales exceeding $600 million  annually.  John Paul Mitchell  Systems
markets more than 90 products in 45 different  countries  through  approximately
110,000 hair salons.  Mr.  DeJoria gives of his time and financial  backing to a
number of philanthropic  causes.  He also has served as a member of the Board of
Directors of the American  Beauty  Association,  and is a current  member of the
Board of Directors  of Solar  Electric  Fund,  the Council of Advisors of Global
Green USA, and is the Honorary Secretary of the State of Louisiana.

Gerald C. Allen - Director
--------------------------
Mr.  Allen  has  been  involved  in the  ownership  and  management  of  various
enterprises  in the oil and gas sector during the last twenty  years.  He is the
founder and  Chairman of JA  Geophysical  Company and NRG  Resources  Ltd. He is
currently  chairman and a major shareholder of Industrial  Services,  Inc. which
owns MQS Inspection,  Inc. and Copperheat, Inc. Copperheat is one of the largest
providers of onsite specialty  heating products and services  providing value to
the oil and gas production and processing  industries.  MQS Inspections has been
the recognized leader in quality services to U.S. industry for over 65 years. It
offers a complete range of Nondestructive  Examination (NDE) services--including
Ultrasonics,  X-ray,  Eddy  Current,  Magnetic  Particle,  Liquid  Penetrant and
Visual--from one-time inspections to comprehensive quality-control programs. Mr.
Allen has served on various civic boards and has served as a member of the Board
of Directors of two banks one State and one National Bank.

Gene Hoffman, Jr. - Director
----------------------------
Mr.  Hoffman,  Jr., is a co-founder of Emusic.com,  Inc.,and has been President,
Chief  Executive  Officer,  and a  Director  with  Emusic  since  January  1998.
Emusic.com,  Inc. is one of the leading  providers of downloadable  music on the
Internet.  From  November  1996 to December  1997,  Mr.  Hoffman was Director of
Business  Development  92 and Director of  Interactive  Marketing of Pretty Good
Privacy.  From  October  1995 to November  1996,  he was  founder,  director and
Executive Vice President of PrivNet, Inc., an Internet privacy software company.
From August 1993 to October 1995, Mr. Hoffman was a student at the University of
North Carolina, Chapel Hill.

Aaron Fleck - Director
----------------------
Mr.  Fleck is a  registered  investment  advisor  and  owner  of  Aaron  Fleck &
Associates  LLC. He is the  organizer and partner of Enter Media Growth Fund, CF
Global Growth Fund, AFA  Management  Partners,  LP, Fleck T.I.M.E.  Fund and the
Fleck T.I.M.E.  Offshore Fund. Mr. Fleck serves on the Advisory  Council for the
Central Asia Caucasus Institute,  the National Committee for the National Jewish
Hospital,  as well as the  Advisory  Board  of the  Pitkin  County  Bank and the
National  Committee at the Kennedy Center of Performing Arts. In the past he has
served on many civic, business and charitable boards.

Myron Gushlak - Director
------------------------
Mr. Gushlak currently serves as Managing Director of Imperium Capital,  a Cayman
Islands  based  private  venture  capital  Company that  provides  financing and
ongoing  management  to  technology  companies,  with a  specific  focus  on the
media/entertainment  and  telephony  industries.   Accomplishments  include  the
initial  funding and public  listing of  Emusic.com,  Inc.,  which is one of the
leading providers of downloadable music on the Internet; the initial funding and
public listing of netValue Holdings,  Inc., a leading public internet incubator,
and the initial  funding  and public  listing of  GlobalNet,  one of the largest
North American based VoIP providers. He also is a co-founder and on the board of
directors of  Laugh.com;  and is on the board of advisors of netValue  Holdings,
Inc. and Sticky Networks, a multilayer search tool company founded by the former
CEO of  Infoseek.  Prior to this,  he was a Broker  at one of  Canada's  largest
Independent brokerage firms.


                                       16
<PAGE>

SECTION 16(a) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE

Directors,  officers and 10% or greater shareholders of the Company are required
by  Section  16(a)  of the  Securities  Exchange  Act of 1934 to  report  to the
Securities  and  Exchange  Commission  their  transactions  in,  and  beneficial
ownership  of, the Company's  common  stock,  including any grants of options to
purchase common stock. Mr. Xenios Xenopoulous was late in filing his Form 3 upon
becoming a director and executive  officer of the Company on July 21, 2000.  Mr.
Myron Gushlak was late in filing his Form 3 upon becoming a beneficial  owner of
more than 10% of the  outstanding  common  stock of the Company on November  17,
2000. To the best of the Company's knowledge, all other directors,  officers and
10% or greater shareholders of the Company timely filed Forms 3 and reported any
subsequent transactions on Forms 4 during the year ended December 31, 2000.


ITEM 10.  EXECUTIVE COMPENSATION
--------------------------------

                           Summary Compensation Table

The following table sets forth the compensation paid to Named Executive Officers
of the Company.  The Company does not  currently  have a long term  compensation
plan and does not grant any long term compensation to its executive  officers or
employees.  The table does not reflect certain personal  benefits,  which in the
aggregate are less than ten percent of each Named Executive Officer's salary and
bonus. No other compensation was granted for the periods covered.
<TABLE>
<CAPTION>


                                                                               Long Term Compensation
                                                                      -----------------------------------------
                                       Annual Compensation                      Awards              Payouts
                             ---------------------------------------- --------------------------- -------------
       Name                                                 Other      Restricted    Securities
        And                                                Annual        Stock       Underlying       LTIP       All Other
     Principal                                           Compensation   Award(s)      Options/      Payouts    Compensation
     Position         Year    Salary ($)     Bonus ($)       ($)          ($)         SARs (#)         ($)          ($)
-------------------- ------- -------------- ------------ ------------ ------------- ------------- ------------- -------------
<S>                  <C>     <C>                 <C>          <C>          <C>      <C>                <C>           <C>
Epp, Dana*           2000    $104,592.00        -0-          -0-          -0-       145,000           -0-           -0-
(President and CEO)  1999    $ 33,681.00        -0-          -0-          -0-                         -0-           -0-
                     1998    $ 20,740.00        -0-          -0-          -0-                         -0-           -0-
-------------------- ------- -------------- ------------ ------------ ------------- ------------- ------------- -------------
Traas, Kevin*        2000    $ 96,821.00        -0-          -0-          -0-       145,000           -0-           -0-
(Secretary and       1999    $ 16,484.00        -0-          -0-          -0-                         -0-           -0-
CIO)                 1998    $  2,962.00        -0-          -0-          -0-                         -0-           -0-
-------------------- ------- -------------- ------------ ------------ ------------- ------------- ------------- -------------


* These Named  Executive  Officers  began  serving as officers of the Company on
December 29, 2000 pursuant to the  reorganization of the Company,  including the
recapitalization  of Merilus  Technologies,  Inc. The  compensation  information
consists of compensation they received as officers of Merilus Technologies, Inc.
during the past three years.


</TABLE>


                                       17
<PAGE>


Option / SAR Grants in Last Fiscal Year

The following table sets forth certain  information  concerning  grants of stock
options  pursuant to the 2000 Stock Plan to Named Executive  Officers during the
year ended December 31, 2000.
<TABLE>
<CAPTION>


                                                 % of Total
                               Number of          Options /
                              Securities            SARS
                              Underlying         Granted to                           Market Price on
                            Options / SARS      Employees in      Exercise or Base     Date of Grant
          Name                  Granted        Fiscal Year (1)      Price ($/Sh)          ($/Sh)         Expiration Date
-------------------------- ------------------ ------------------ ------------------- ------------------ -------------------
<S>                             <C>                 <C>                <C>                 <C>               <C>
Epp, Dana                       145,000             16.4%              $0.01               $2.94             12/29/03
(President and CEO) (2)
-------------------------- ------------------ ------------------ ------------------- ------------------ -------------------
Traas, Kevin                    145,000             16.4%              $0.01               $2.94             12/29/03
(Secretary and
CIO) (3)
-------------------------- ------------------ ------------------ ------------------- ------------------ -------------------
Mrazek, Ross                    60,000              6.8%               $0.01               $2.94             12/29/03
(Vice President) (4)
-------------------------- ------------------ ------------------ ------------------- ------------------ -------------------
Mrazek, Ross                    50,000              5.7%               $2.94               $2.94             12/29/03
(Vice President) (4)
-------------------------- ------------------ ------------------ ------------------- ------------------ -------------------
Northcott, Chad                 70,000              7.9%               $0.01               $2.94             12/29/03
(Vice President) (5)
-------------------------- ------------------ ------------------ ------------------- ------------------ -------------------
Northcott, Chad                 50,000              5.7%               $2.94               $2.94             12/29/03
(Vice President) (5)
-------------------------- ------------------ ------------------ ------------------- ------------------ -------------------
Hemenway,  Stephen  (Vice       60,000              6.8%               $0.01               $2.94             12/29/03
President) (6)
-------------------------- ------------------ ------------------ ------------------- ------------------ -------------------
Hemenway, Stephen               50,000              5.7%               $2.94               $2.94             12/29/03
(Vice President) (6)
-------------------------- ------------------ ------------------ ------------------- ------------------ -------------------
<FN>

(1) Options to  purchase an  aggregate  of 881,555  shares of Common  Stock were
granted to employees,  including the Named Executive Officers, during the fiscal
year ended December 31, 2000.  Stock options  granted are under the terms of the
2000 Stock Plan.

(2) Mr. Dana Epp received an option to purchase  145,000  shares of common stock
of the Company at $0.01 in four installments as follows:  70,000 on December 29,
2000; 25,000 on March 29, 2001; 25,000 on June 29, 2001; and 25,000 on September
29, 2001.

(3) Mr.  Kevin Traas  received an option to  purchase  145,000  shares of common
stock of the  Company  at $0.01  in four  installments  as  follows:  70,000  on
December 29, 2000; 25,000 on March 29, 2001; 25,000 on June 29, 2001; and 25,000
on September 29, 2001.

(4) Mr. Ross Mrazek received an option to purchase 60,000 shares of common stock
of the Company at $0.01 as follows: 22,500 on December 29, 2000; 12,500 on March
29, 2001;  12,500 on June 29, 2001; and 12,500 on September 29, 2001. Mr. Mrazek
also  received an option to purchase  50,000  shares of common stock at $2.94 in
four equal installments of 12,500 on December 29, 2000, March 29, 2001, June 29,
2001 and September 29, 2001.

(5) Mr. Chad  Northcott  received an option to purchase  70,000 shares of common
stock of the Company at $0.01 as follows: 25,000 on December 29, 2000; 15,000 on
March 29, 2001;  15,000 on June 29, 2001;  and 15,000 on September 29, 2001. Mr.
Northcott  also received an option to purchase  50,000 shares of common stock of
the Company at $2.94 in four equal  installments of 12,500 on December 29, 2000,
March 29, 2001,  June 29, 2001 and September 29,  2001.(6) Mr. Stephen  Hemenway
received an option to purchase  60,000  shares of common stock of the Company at
$0.01 as follows:  22,500 on December 29, 2000; 12,500 on March 29, 2001; 12,500
on June 29, 2001; and 12,500 on September 29, 2001.  Mr.  Hemenway also received
an option to  purchase  50,000  shares  of common  stock at $2.94 in four  equal
installments  of 12,500 on December 29, 2000,  March 29, 2001, June 29, 2001 and
September 29, 2001.
</FN>
</TABLE>

                                       18
<PAGE>


              Aggregated Option / SAR Exercises in Last Fiscal Year
                         and FY-End Option / SAR Values

The following table sets forth certain information concerning exercises of stock
options  pursuant to the 2000 Stock Option Plan by each Named Executive  Officer
during the year ended December 31, 2000 and stock options held at year end.
<TABLE>
<CAPTION>

                                                                           Number of
                                                                          Securities              Value of
                                                                          Underlying             Unexercised
                                                                          Unexercised           In-the-Money
                                                                        Options / SARs         Options / SARs
                                                                         At FY-End (#)          at FY-End ($)

                          Shares Acquired                                Exercisable /          Exercisable /
          Name            On Exercise (#)      Value Realized ($)        Unexercisable         Unexercisable *
---------------------- ---------------------- ---------------------- ---------------------- ----------------------
<S>                      <C>                   <C>                    <C>                    <C>
Epp, Dana                        0                     $0                70,000/75,000        $205,800/$220,500
(President and CEO)
---------------------- ---------------------- ---------------------- ---------------------- ----------------------
Traas, Kevin                     0                     $0                70,000/75,000        $205,800/$220,500
(Secretary and
CIO)
---------------------- ---------------------- ---------------------- ---------------------- ----------------------
Mrazek, Ross                     0                     $0                35,000/75,000        $66,150/$110,250
(Vice President)
---------------------- ---------------------- ---------------------- ---------------------- ----------------------
Northcott, Chad                  0                     $0                37,500/82,500        $73,500/$132,300
(Vice President)
---------------------- ---------------------- ---------------------- ---------------------- ----------------------
Hemenway, Stephen                0                     $0                35,000/75,000        $66,150/$110,250
(Vice President)
---------------------- ---------------------- ---------------------- ---------------------- ----------------------
* On  December  31,  2000,  the  average  of the high and low sale  price of the
Merilus common stock trading on the OTC BB was $2.94.

</TABLE>

COMPENSATION OF DIRECTORS

Directors  are  generally not  compensated  for their service as directors.  The
exception is that Mr. Bruce Davies has been granted  stock  options for services
rendered  to the  Company as a director  and as outside  general  counsel to the
Company. Mr. Davies has received 97,500 stock options with 47,500 exercisable at
$0.01 and 50,000  exercisable at $2.94. The 47,500 options  exercisable at $0.01
were  exercisable at December 29, 2000, with 37,500 of such options provided for
payment of legal services. The 50,000 stock options exercisable at $2.94 vest in
four equal installments of 12,500 on December 29, 2000, March 29, 2001, June 29,
2001 and  September  29, 2001 and will expire in three years.  All directors are
reimbursed  for any  reasonable  expenses  incurred in the course of  fulfilling
their duties as a director of the Company.

EMPLOYMENT CONTRACTS

On December  29,  2000,  the Company  executed  employment  agreements  with the
following executive officers: Dana Epp, Kevin Traas, Ross Mrazek, Chad Northcott
and Stephen R.  Hemenway.  The following  table sets forth the annual salary for
each executive officer of the Company :

                                                                       Annual
                                                                       Salary
Name             Office                                                 2000
---------------- ---------------------------------------------------- ---------

Dana Epp         President, Chief Executive Officer                   $ 200,000
---------------- ---------------------------------------------------- ---------
Kevin Trass      Executive Vice President, Chief Operating Officer    $ 175,000
---------------- ---------------------------------------------------- ---------
Ross Mrazek      Vice President International Sales                   $ 125,000
---------------- ---------------------------------------------------- ---------
Chad Northcott   Chief Operations Officer                             $ 125,000
---------------- ---------------------------------------------------- ---------
Steven Hemenway  Vice President Sales                                 $ 125,000
---------------- ---------------------------------------------------- ---------

                                       19
<PAGE>


Each  employment  agreement  is for a one year term ending  January 2, 2002.  In
addition to financial remuneration, each will also be entitled to the following:
medical health benefits; indemnification from any claim or law suit which may be
asserted against him when acting in their official capacity for Merilus provided
that said  indemnification  is not in  violation  of any federal or state law or
rule or  regulation of the  Securities  and Exchange  Commission  and options to
purchase  shares of Common  Stock of  Merilus.  Each  employment  contract  also
contains   certain   provisions   with  respect  to   disability,   termination,
confidentiality and non-competition.

2000 STOCK PLAN

In November 2000, the Board of Directors and shareholders of the Company adopted
and  approved a stock  option plan (the  "Plan").  The purpose of the Plan is to
enable the Company to offer it's officers, directors,  employees and consultants
and advisors  performance-based  incentives  and other  equity  interests in the
Company,  thereby  attracting,  retaining,  and rewarding  such  personnel.  The
Company  believes that  increased  share  ownership by such persons more closely
aligns  stockholder and employee interests by encouraging a greater focus on the
profitability  of the Company.  There is reserved for issuance under the Plan an
aggregate of 1,400,000  shares of common stock. All of such shares may, but need
not, be issued  pursuant to the exercise of  incentive  stock  options.  Options
granted under the Plan may be either  "incentive  stock  options," as defined in
Section 422 of the Internal  Revenue Code of 1986, as amended (the  "Code"),  or
non-statutory stock options. In addition, awards of or rights to purchase shares
of the Company's  common stock ("Stock Rights") may be granted under the Plan. A
copy of the  Plan may be found in the  Definitive  Information  Statement  dated
November 30, 2000 and filed with the SEC on December 12, 2000.

Administration.
--------------

The Plan will be administered by the Board of Directors or a committee appointed
by the Board of Directors (the "Administrator").  The Administrator,  subject to
the terms and conditions of the plan, has authority to:

     o    select the persons to whom options and Stock Rights are to be granted;
     o    determine  the number of shares of Common  Stock to be covered by each
          option and Stock Right granted;
     o    approve forms of option agreement for use under the Plan;
     o    determine the terms and conditions of any option or Stock Right;
     o    reduce the  exercise  price of any  option or Stock  Right if the fair
          market value of the Common Stock covered by such Option or Stock Right
          has declined  since the date the option or Stock Right was granted;
     o    institute an option exchange program;
     o    interpret the Plan and awards granted under the Plan;
     o    prescribe,  amend and rescind  rules and  regulations  relating to the
          Plan or  sub-plans  established  for the  purpose  of  qualifying  for
          preferred tax treatment under foreign tax laws;
     o    modify or amend each option or Stock Right issued;
     o    allow Optionees to satisfy  withholding tax obligations by electing to
          have the Company  withhold from the shares to be issued on exercise of
          an option or Stock  Right that  number of shares  having a fair market
          value equal to the amount required to be withheld;
     o    authorize  any  person  to  execute  on  behalf  of  the  Company  any
          instrument  required  to effect the grant of an option or Stock  Right
          previously granted by the Administrator; and
     o    make all other  determinations and take all other actions necessary or
          advisable for the administration of the Plan.

All decisions,  interpretations and other actions of the Administrator are final
and binding on all holders of options and Stock Rights.


                                       20
<PAGE>

Eligibility; Limitations of Options.
-----------------------------------

Non-statutory  stock  options and stock rights may be granted  under the Plan to
employees,  directors and consultants of the Company or any parent or subsidiary
of the Company.  Incentive  stock options may be granted only to  employees.  As
discussed above,  Section 162(m) of the Code places limits on the  deductibility
for  federal  income tax  purposes  of  compensation  paid to certain  executive
officers of the Company.  In order to preserve the  Company's  ability to deduct
the  compensation  income  associated with options granted to such persons,  the
Plan  provides  that no  employee  may be  granted,  in any  fiscal  year of the
Company,  options to purchase  more than  1,000,000  shares of Common Stock plus
options to  purchase up to an  additional  1,000,000  shares of Common  Stock in
connection with such employee's initial commencement of service to the Company.

Terms and Conditions of Options.
-------------------------------

Options  granted under the Plan are subject to additional  terms and  conditions
under the individual option agreement. These terms and conditions include:

     Exercise  Price.  The  Administrator  will  determine the exercise price of
     ---------------
options granted at the time of grant.  The exercise of an incentive stock option
may not be less than 100% of the fair  market  value of the Common  Stock on the
date such option is granted;  provided,  however,  the  exercise of an incentive
stock option granted to a 10%  stockholder may not be less than 110% of the fair
market  value of the Common  Stock on the date such option is granted.  The fair
market value of the Common Stock is generally  determined  with reference to the
closing  sale price for the Common  Stock (or the  closing  bid if no sales were
reported)  on the last  market  trading  day  prior to the  date the  option  is
granted. The exercise price of a non-statutory stock option may be determined by
the Administrator,  provided however, the exercise price of a nonstatutory stock
option  intended  to  qualify  as  "performance-based  compensation"  within the
meaning  of  Section  162(m)  of the Code may not be less  than 100% of the fair
market value of the Common Stock on the date of grant.

     Exercise  of Option.  The  Administrator  determines  when  options  become
     -------------------
exercisable,  and  may  in  its  discretion,   accelerate  the  vesting  of  any
outstanding option.

     Form of  Consideration.  The means of payment for shares issued on exercise
     ----------------------
of an option is specified in each option agreement.  The Plan permits payment to
be made by cash,  check,  promissory  note,  other shares of Common Stock of the
Company (with some restrictions),  cashless exercise,  a reduction in the amount
of any  Company  liability  to the  optionee,  any other  form of  consideration
permitted by applicable law, or any combination thereof.

     Term of Option.  The term of an incentive  stock option may be no more than
     --------------
ten years  from the date of  grant;  provided  that in the case of an  incentive
stock option granted to a 10% stockholder, the term of the option may be no more
than five years from the date of grant.  No option  may be  exercised  after the
expiration of its term.

     Termination of Employment.  If an optionee's  employment,  directorship  or
     -------------------------
consulting   relationship  terminates  for  any  reason  (other  than  death  or
disability),  then all options held by the optionee under the Plan expire on the
earlier of (i) the date set forth in his or her notice of grant or stock  option
agreement or (ii) the expiration  date of such option.  To the extent the option
is exercisable at the time of such termination, the optionee may exercise all or
part of his or her option at any time before termination.

     Permanent Disability;  Death. If an optionee's employment,  directorship or
     -----------------------------
consulting relationship terminates as a result of permanent and total disability
(as defined in the Code) or death,  then all options held by such optionee under
the Plan will generally expire on the earlier of (i) twelve months from the date
of  termination  of  optionee's  employment or (ii) the  expiration  date of the
option.   The  optionee  or,  if   applicable,   the  executor  or  other  legal
representative  of  the  optionee's  estate  may  exercise  all or  part  of the
optionee's  option at any time  before  such  expiration  to the extent that the
option was exercisable at the time of termination of employment.

     Non-transferability  of Options.  Options  granted under the Plan generally
     --------------------------------
are not transferable other than by will or the laws of descent and distribution,
and may be exercised during the optionee's lifetime only by the optionee.

     Value  Limitation.  If the  aggregate  fair  market  value of all shares of
     ------------------
Common  Stock  subject  to  an  optionee's  incentive  stock  option  which  are
exercisable  for the first time during any calendar year exceeds  $100,000,  the
excess portion of such option will be treated as a non-statutory stock option.

                                       21
<PAGE>

     Other  Provisions.  The stock  option  agreement  may contain  other terms,
     -----------------
provisions and conditions not inconsistent with the Plan as may be determined by
the Administrator.


Stock Rights.
------------

A Stock Right may award the recipient Common Stock or may give the recipient the
right to purchase Common Stock. Shares received or purchased pursuant to a Stock
Right are subject to a restricted  stock  agreement  between the Company and the
recipient.  Unless the Administrator  determines otherwise, the restricted stock
agreement  will  give the  Company a  reacquisition  option  exercisable  on the
voluntary or involuntary termination of the recipient's employment or consulting
relationship  with the Company for any reason  (including death and disability).
The  acquisition  price for any shares  reacquired  by the  Company  will be the
original price paid by the recipient, if any. The reacquisition option lapses at
a rate  determined by the  Administrator.  A Stock Right and the stock  acquired
(while restricted) is generally  nontransferable  other than by will or the laws
of descent and distribution.

Adjustments of Options on Changes in Capitalization.
---------------------------------------------------

In the event that the stock of the Company changes by reason of any stock split,
reverse stock split,  stock  dividend,  combination,  reclassification  or other
similar  changes in the capital  structure of the Company  effected  without the
receipt of consideration, appropriate adjustments will be made in the number and
class of shares of stock subject to the Plan,  the number and class of shares of
stock subject to any option or Stock Right  outstanding  under the Plan, and the
exercise price of any such award.  In the event of a liquidation or dissolution,
any  unexercised   options  will  terminate.   The  Administrator  may,  in  its
discretion,  provide that each optionee will fully vest in and have the right to
exercise the optionee's  option or Stock Right as to all of the optioned  stock,
and  will  release  all  restrictions  on  any  restricted  stock  prior  to the
consummation of the liquidation or dissolution.  In the event of a merger,  sale
or  reorganization  of the Company  into another  corporation  that results in a
change of control of the Company,  options that would have become  vested within
18 months after the closing date of the merger  transaction  will accelerate and
become fully vested on the closing of the transaction.  In the event of a change
of control  transaction,  any other outstanding options that are not accelerated
would be  assumed by the  successor  company or an  equivalent  option  would be
substituted by the successor company. If any of these options are not assumed or
substituted, they would terminate.

Amendment and Termination of the Plan.
-------------------------------------

The Administrator may amend,  alter,  suspend or terminate the Plan, or any part
of the  Plan,  at any time and for any  reason.  No such  action by the Board or
stockholders  may alter or impair any option or Stock Right  previously  granted
under the Plan  without the written  consent of the  optionee/recipient.  Unless
terminated  earlier,  the Plan will  terminate  ten  years  from the date of its
approval by the stockholders or the Board, whichever is earlier.

Federal Income Tax Consequences of Options.
------------------------------------------

         Incentive Stock Options.  An optionee who is granted an incentive stock
option does not  generally  recognize  taxable  income at the time the option is
granted or on its  exercise,  although  the exercise may subject the optionee to
the alternative  minimum tax. On a disposition of the shares more than two years
after grant of the option and one year after exercise of the option, any gain or
loss is treated as long-term  capital gain or loss. If these holding periods are
not  satisfied,   the  optionee  recognizes  ordinary  income  at  the  time  of
disposition equal to the difference between the exercise price and the lower of:

     o    the  fair  market  value  of the  shares  at the  date  of the  option
          exercise; or
     o    the sale price of the shares.

Any gain or loss  recognized  on such a premature  disposition  of the shares in
excess of the amount  treated as  ordinary  income is  treated as  long-term  or
short-term  capital gain or loss,  depending on the holding period.  A different
rule for measuring ordinary income on such a premature  disposition may apply if
the optionee is an officer,  director,  or 10%  stockholder of the Company.  the
Company is  entitled to a deduction  in the same amount as the  ordinary  income
recognized by the optionee.

                                       22
<PAGE>

     Non-statutory  Stock  Options.  An optionee  does not recognize any taxable
     ------------------------------
income  at the  time he or she is  granted  a  non-statutory  stock  option.  On
exercise,  the optionee recognizes taxable income generally by the excess of the
then fair market value of the shares over the exercise price. Any taxable income
recognized in connection  with an option  exercise by an employee of the Company
is subject to tax  withholding  by the  Company.  the  Company is  entitled to a
deduction in the same amount as the ordinary income  recognized by the optionee.
On a disposition of such shares by the optionee, any difference between the sale
price and the optionee's exercise price, to the extent not recognized as taxable
income as provided above, is treated as long-term or short-term  capital gain or
loss, depending on the holding period.

     Stock  Rights.  Restricted  stock is generally  acquired  pursuant to Stock
     -------------
Rights.  At  the  time  of  acquisition,   restricted  stock  is  subject  to  a
"substantial  risk of forfeiture"  within the meaning of Section 83 of the Code.
As a result,  the recipient will not generally  recognize ordinary income at the
time of acquisition.  Instead,  the recipient will recognize  ordinary income on
the  dates  when  the  stock  ceases  to be  subject  to a  substantial  risk of
forfeiture.  The stock will generally cease to be subject to a substantial  risk
of forfeiture  when it is no longer subject to the Company's  right to reacquire
the stock on the recipient's termination of employment with the Company. At such
times,  the recipient will recognize  ordinary income measured as the difference
between the  purchase  price (if any) and the fair market  value of the stock on
the date the stock is no longer subject to a substantial risk of forfeiture. The
purchaser may  accelerate to the date of acquisition  his or her  recognition of
ordinary  income,  if any, and the beginning of any capital gain holding period,
by timely  filing an  election  pursuant to Section  83(b) of the Code.  In such
event,  the ordinary  income  recognized,  if any, is measured as the difference
between the purchase price and the fair market value of the stock on the date of
purchase  and the  capital  gain  holding  period  commences  on such date.  The
ordinary income  recognized by a purchaser who is an employee will be subject to
tax  withholding by the Company.  Different  rules may apply if the purchaser is
also an officer, director, or 10% stockholder of the Company.

The  foregoing  is only a summary of the effect of federal  income  taxation  on
optionees and the Company with respect to the grant and exercise of options, and
on  recipients  of Stock  Rights,  under the  Plan.  It does not  purport  to be
complete,  and  does  not  discuss  the  tax  consequences  of  the  employee's,
director's or consultant's death or the provisions of the income tax laws of any
municipality,  state or  foreign  country  in which the  employee,  director  or
consultant may reside.


ITEM 11.  SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
------------------------------------------------------------------------

The following table sets forth as of March 27, 2001 certain information known to
the Company  regarding the beneficial  ownership of the Company's  common stock,
and as adjusted to reflect the share  ownership for: (i) each executive  officer
or director of the Company who beneficially  owns shares;  (ii) each shareholder
known to the Company to beneficially own five percent or more of the outstanding
shares of its common stock; and (iii) all executive  officers and directors as a
group. A person is deemed to be the beneficial  owner of securities  that can be
acquired by such person within 60 days from March 27, 2001, upon the exercise of
warrants,  options or other  securities  convertible  into  common  stock.  Each
beneficial  owner's  percentage  ownership is  determined  by assuming  that all
options,  warrants or other  securities  convertible  into common stock that are
held by such person, and which are exercisable within 60 days of March 27, 2001,
have been  exercised.  The Company  believes that the  beneficial  owners of the
common stock listed below, based on information  furnished by such owners,  have
sole  investment  and voting  power  with  respect  to such  shares,  subject to
community  property laws where applicable.  The individuals  listed in the table
are  accessible at the following  address:  #307,  46165 Yale Road,  Chilliwack,
British Columbia V2R 3C7, Canada.

                                       23
<PAGE>

As of March 27,  2001,  there  were  9,100,000  shares of Merilus  common  stock
outstanding.

                                                                   Percentage of
                                                                    Outstanding
Name and Position                                 Number of Shares    Shares
-----------------                                 ----------------    ------
Dana Epp - President, Chief Executive Officer          920,000         9.2%
  and  Director (1)
------------------------------------------------ ------------------ ------------
Kevin Traas - Secretary, Chief Information             920,000         9.2%
  Officer and  Director (2)
------------------------------------------------ ------------------ ------------
Ross  Mrazek -  Director and Vice President             97,500         1.1%
  International Sales and Director (3)
------------------------------------------------ ------------------ ------------
Chad Northcott - Chief Operations Officer (4)          140,000         1.5%

------------------------------------------------ ------------------ ------------
Stephen Hemenway - Vice President Sales (5)             97,500         1.1%

------------------------------------------------ ------------------ ------------
Bruce Davies - Director (6)                            110,000         1.2%

------------------------------------------------ ------------------ ------------
John Paul DeJoria - Director                           100,000         1.1%

------------------------------------------------ ------------------ ------------
Gerald Allen - Director                                   0             0%

------------------------------------------------ ------------------ ------------
Gene Hoffman, Jr. - Director                              0             0%

------------------------------------------------ ------------------ ------------
Aaron Fleck - Director                                    0             0%

------------------------------------------------ ------------------ ------------
Myron Gushlak - Director                             2,611,500       28.7%

------------------------------------------------ ------------------ ------------
All directors and officers as a group                4,996,500       43.9%
  (11 Persons) (1)-(6)
------------------------------------------------ ------------------ ------------

(1) Mr. Epp has the right to convert  Exchangeable Shares into 825,000 shares of
common stock of the Company.  Currently and within the next 60 days, Mr. Epp has
the  right to  acquire  95,000  shares of common  stock of the  Company  through
exercise of stock options.

(2) Mr. Traas has the right to convert  Exchangeable  Shares into 825,000 shares
of common stock of the Company. Currently and within the next 60 days, Mr. Traas
also has the right to  acquire  95,000  shares of  common  stock of the  Company
through exercise of stock options.

(3) Mr. Mrazek has the right to convert  Exchangeable  Shares into 37,500 shares
of common  stock of the  Company.  Currently  and within  the next 60 days,  Mr.
Mrazek  also has the right to  acquire  60,000  shares  of  common  stock of the
Company through exercise of stock options.

(4) Mr.  Northcott  has the right to convert  Exchangeable  Shares  into  75,000
shares of common  stock of the Company.  Currently  and within the next 60 days,
Mr. Northcott also has the right to acquire 65,000 shares of common stock of the
Company through exercise of stock options.

(5) Mr. Hemenway has the right to convert Exchangeable Shares into 37,500 shares
of common  stock of the  Company.  Currently  and within  the next 60 days,  Mr.
Hemenway  also has the right to  acquire  60,000  shares of common  stock of the
Company through exercise of stock options.

(6) Mr. Davies has the right to convert  Exchangeable  Shares into 37,500 shares
of common  stock of the  Company.  Currently  and within  the next 60 days,  Mr.
Davies  also has the right to  acquire  72,500  shares  of  common  stock of the
Company through exercise of stock options.


                                       24
<PAGE>

VOTING AND EXCHANGE TRUST AGREEMENT

Establishment. On December 29, 2000, Merilus, Inc.,  Merilus Technologies,  Inc.
-------------
and Interwest  Transfer Company,  Inc. (the "Trustee") entered into a Voting and
Exchange Trust Agreement.  Interwest  Transfer Company,  Inc. is located at 1981
East Murray Holladay Road, Suite 100, Salt Lake City,  Utah,  84117. The holders
of the Exchangeable Shares may be reached at the offices of the Company or #307,
46165 Yale Road,  Chilliwack,  British  Columbia  V2R 3C7,  Canada.  The Company
issued  one share of  preferred  stock of the  Company  to the  Trustee  for the
benefit of the holders of Exchangeable Shares.

Preferred Stock. During the term of the Voting and Exchange Trust Agreement, the
---------------
Company  will not issue  any  shares of the same  class as the  preferred  share
issued to the Trustee.

Voting Rights. The one share of preferred stock has the number of votes that may
-------------
be cast at a meeting  of  stockholders  of the  Company  equal to the  number of
outstanding  Exchangeable  Shares  held by  registered  holders.  Each holder of
Exchangeable Shares on the record date for any meeting that holders of shares of
common  stock of the Company are  entitled to vote are  entitled to instruct the
Trustee to  exercise  one of the votes  attached  to the one share of  preferred
stock of the Company for each Exchangeable Share held by such holder. All rights
of a holder of  Exchangeable  Shares to exercise votes attached to the one share
of  preferred  stock of the Company  will cease on the exchange by the holder of
the Exchangeable Shares for shares of common stock of the Company.

Compensation of Trustee. The Company and Merilus Technologies,  Inc. jointly and
severally  agreed  to pay the  Trustee  reasonable  compensation  for all of the
services rendered by it under the agreement and to reimburse the Trustee for all
reasonable expenses and disbursements.

Termination.  The Trust will terminate at the earliest to occur of the following
-----------
events:
          1.   no Exchangeable Shares remain outstanding;

          2.   each of Merilus  Technologies,  Inc.  and the  Company  elects in
               writing to terminate the Trust and such terminationis approved by
               the holders of the Exchangeable Shares; and

          3.   twenty-one  years  after  the death of the last  survivor  of the
               descendents  of His Majesty King George VI of the United  Kingdom
               of Great Britain and Northern  Ireland  living on the date of the
               creation of the Trust.


CHANGE IN CONTROL

The  Company  is not aware of any  arrangement  that  would  upset  the  control
mechanisms  currently in place.  Although it is  conceivable  that a third party
could  attempt a hostile  takeover of the Company,  the Company has not received
notice of any such effort.

ITEM 12.  CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
--------------------------------------------------------

There have been no transactions required to be reported hereunder. In the future
Merilus will present all proposed transactions between Merilus and its officers,
directors or 5%  shareholders,  and  affiliates,  to its board of directors  for
their consideration and approval.  Any such transaction will require approval by
a  majority  of the  directors  and such  transactions  will be on terms no less
favorable than those available to disinterested third parties.



                                       25
<PAGE>

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

EXHIBITS


Exhibit
Number  Description
------- --------------
 2.1*   Agreement and Plan of Reorganization by and among Merilus Technologies,
        Inc., 613636 British Columbia, Inc., Golden Soil, Inc. and the
        stockholders of Merilus Technologies, Inc. as named in the agreement
        dated October 19, 2000 and executed December 29, 2000

 3.1*   Amended Articles of Incorporation of  Merilus Technologies Inc.dated
        December 29, 2000

 3.2*   Certificate of Amendment of Articles of Incorporation of Merilus, Inc.
        dated  December 29, 2000

 4.1*   Specimen Stock Certificate for Shares of Common Stock of the Company

10.1*   Registration Rights Agreement between the Company and the holders of
        Exchangeable Shares dated December 29, 2000
10.2*   Support Agreement between the Company and Merilus Technologies, Inc.
        dated December 29,  2000
10.3*   Voting and Exchange Trust Agreement by and among the Company, Merilus
        Technologies, Inc. and Interwest Transfer Company, Inc. dated December
        29, 2000

10.4*   Escrow Agreement by and among the Company, Merilus Technologies, Inc.,
        the holders of Exchangeable Shares and Interwest Transfer Company, Inc.
        dated December 29, 2000

10.5*   2000 Stock Plan

10.6    Lease Agreement dated October 20, 2000

10.7    Employment agreement with Dana Epp dated December 29, 2000

10.8    Employment agreement with Kevin Traas dated December 29, 2000

10.9    Employment agreement with Chad Northcott dated December 29, 2000

10.10   Employment agreement with Ross Mrazek dated December 29, 2000

10.11   Employment agreement with Stephen R. Hemenway dated December 29, 2000

21.1    Subsidiaries of Merilus, Inc.


* Filed  on  December  12,  2000,  as an  Exhibit  to the  Company's  Definitive
Information  Statement  dated  November  30,  2000 and  incorporated  herein  by
reference.

REPORTS ON FORM 8-K

No reports  on Form 8-K were  filed by the  Company  during  the  quarter  ended
December 31, 2000.

                                       26

<PAGE>

SIGNATURES

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

            MERILUS, INC.

            By:     /s/  Dana Epp
                -------------------------------
                   Dana Epp
                   President

            Date:   March 30, 2001


In  accordance  with the Exchange  Act, this report has been signed below by the
following  persons on behalf of the  registrant and in the capacities and on the
dates indicated.

            By:     /s/ Dana Epp                        Date: March  30, 2001
                -------------------------------               ---------------
                   Dana Epp
                   President, Chief Executive Officer
                   and a Director


            By:     /s/ Kevin Traas                     Date: March  30, 2001
                -------------------------------               ---------------
                   Kevin Traas
                   Executive Vice President, Secretary,
                   Chief Operating Officer and a Director


            By:     /s/ Ross Mrazek                     Date: March  30, 2001
                -------------------------------               ---------------
                   Ross Mrazek
                   Vice President International Sales
                   and a Director


            By:     /s/ Chad Northcott                  Date: March  30, 2001
                -------------------------------               ---------------
                   Chad Northcott
                   Chief Operations Officer


            By:     /s/ Stephen R. Hemenway             Date: March 30, 2001
                -------------------------------               --------------
                   Stephen R. Hemenway
                   Vice President Sales


            By:     /s/ Bruce Davies                    Date: March 30, 2001
                -------------------------------               --------------
                   Bruce Davies
                   Director


            By:                                         Date:
                -------------------------------               --------------
                   John Paul DeJoria
                   Director


            By:     /s/ Gerald C. Allen                 Date: March 30, 2001
                -------------------------------               --------------
                   Gerald C. Allen
                   Director


            By:                                         Date:
                -------------------------------               --------------
                   Gene Hoffman, Jr.
                   Director


            By:                                         Date:
                -------------------------------               --------------
                   Aaron Fleck
                   Director


            By:     /s/ Myron Gushlak                   Date: March 30, 2001
                -------------------------------               --------------
                   Myron Gushlak
                   Director



                                       27

<PAGE>
<TABLE>
<CAPTION>



                          INDEX TO FINANCIAL STATEMENTS

                                  Merilus, Inc.

<S>                                                                             <C>
Independent Auditor's Report, dated February 20, 2001...............................F-1

Balance Sheets as at December 31, 2000 and September 30, 2000 (audited).............F-2

Statement of Operations for  the three months ended December 31, 2000 and
the years ended September 30, 2000 and 1999 (audited) and for the period
from November 4, 1997 (inception) to December 31, 2000..............................F-3

Statement of Cash Flows for the three months ended December 31, 2000 and
the years ended September 30, 2000 and 1999 (audited) and for the period
from November 4, 1997 (inception) to December 31, 2000..............................F-4

Statement of Stockholders' Equity and Comprehensive Loss as at December 31, 2000
and September 30, 2000 and 1999 (audited) and for the period
from November 4, 1997 (inception) to December 31, 2000..............................F-5

Notes to Financial Statements (audited).............................................F-6
</TABLE>



<PAGE>













                      Consolidated Financial Statements of
                      MERILUS, INC.
                      (formerly Golden Soil, Inc.)

                      (A Development Stage Enterprise)
                      (Expressed in US Dollars)

                      Three months ended December 31, 2000 and
                      Year ended September 30, 2000



<PAGE>


KPMG
KPMG LLP
Chartered Accountants
Mary Street                                             Telephone (604) 793-4700
Chilliwack, British Columbia V2P 4H7                    Telefax   (604) 793-4747
Canada                                                  www.kmpg.ca




INDEPENDENT AUDITORS' REPORT


To the Shareholders of
Merilus, Inc. (formerly Golden Soil, Inc.)


We have  audited the  consolidated  balance  sheets of Merilus,  Inc.  (formerly
Golden Soil,  Inc.) and its  subsidiaries  as at December 31, 2000 and September
30, 2000 and the related  consolidated  statements of operations,  stockholders'
equity and comprehensive loss and cash flows for the three months ended December
31, 2000,  the year ended  September 30, 2000,  and the  cumulative  period from
November 4, 1997 (inception) to December 31, 2000. These consolidated  financial
statements   are  the   responsibility   of  the   Company's   management.   Our
responsibility  is to express an opinion on these financial  statements based on
our audits.

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

In our opinion,  these consolidated  financial statements present fairly, in all
material respects,  the financial  position of Merilus,  Inc. as at December 31,
2000 and September 30, 2000 and the results of its operations and its cash flows
for the three months ended December 31, 2000, the year ended September 30, 2000,
and the cumulative period from November 4, 1997 (inception) to December 31, 2000
in conformity with accounting principles generally accepted in the United States
of America.

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

/s/ KPMG LLP

Chartered Accountants

Chilliwack, British Columbia
February 20, 2001

                                      F-1
<PAGE>
<TABLE>
<CAPTION>

MERILUS, INC.
(formerly Golden Soil, Inc.)
(A Development Stage Enterprise)

Consolidated Balance Sheets
Expressed in US Dollars



---------------------------------------------------------------- ----------------- -----------------
                                                                     December 31,     September 30,
                                                                             2000              2000
---------------------------------------------------------------- ----------------- -----------------
<S>                                                                     <C>                <C>
Assets
Current assets:
        Cash                                                      $       672,286   $         4,452
        Accounts receivable                                                47,528            15,018
        Inventories                                                        95,639                 -
        Prepaid expenses                                                  185,491           117,990
        Deferred stock compensation                                       739,800                 -
        -------------------------------------------------------- ----------------- -----------------
                                                                        1,740,744           137,460

Fixed assets (Note 3)                                                     107,415            44,070

---------------------------------------------------------------- ----------------- -----------------
                                                                  $     1,848,159   $       181,530
---------------------------------------------------------------- ----------------- -----------------

Liabilities and Stockholders' Equity
Current liabilities:
        Accounts payable and accrued liabilities                  $       368,611   $       263,651
        Notes payable (Note 4)                                            333,170           479,315
        Due to shareholders                                                 9,885             9,859
        -------------------------------------------------------- ----------------- -----------------
                                                                          711,666           752,825

Stockholders' equity (Note 9)
        Authorized:
           100,000,000  Voting common stock, par value of
                        $0.001 per share
                     1  Special voting preferred share, par
                        value of $1 per share (voting rights -
                        see Note 9(a))
        Issued:
            12,537,500  Common stock at December 31, 2000
                        (3,750,000 - September 30, 2000)                   12,538             6,433
                     1  Special voting preferred share (nil -
                        September 30, 2000)                                     1                 -
Additional paid in capital                                              3,629,713                 -
Deficit accumulated during the development stage                      (2,498,535)         (590,070)
Accumulated other comprehensive income (loss):
        Cumulative exchange adjustment                                    (7,224)            12,342
------- -------------------------------------------------------- ----------------- -----------------

                                                                        1,136,493         (571,295)
Commitments (Note 7)

---------------------------------------------------------------- ----------------- -----------------
                                                                  $     1,848,159   $       181,530
---------------------------------------------------------------- ----------------- -----------------

See accompanying notes to consolidated financial statements.

</TABLE>
                                      F-2
<PAGE>
<TABLE>
<CAPTION>


MERILUS, INC.
(formerly Golden Soil, Inc.)
(A Development Stage Enterprise)

Consolidated Statements of Operations
Expressed in US Dollars

----------------------------------------- ------------------ ------------------ ----------------- ------------------
                                                                                                         Period from
                                                Three months                                              November 4,
                                                       ended         Year ended       Year ended     1997 (inception)
                                                December 31,      September 30,    September 30,      to December 31,
                                                        2000               2000             1999                 2000
----------------------------------------- ------------------ ------------------ ----------------- ------------------
<S>                                       <C>                 <C>                <C>                <C>

Revenues:
        Licensing                          $            524   $        200,776   $        50,448   $        251,759
        Product sales                                20,754             77,038            59,204            167,052
        --------------------------------- ------------------ ------------------ ----------------- ------------------
                                                     21,278            277,814           109,652            418,811
        Costs of goods sold                           8,436             68,829            22,459            104,414
        --------------------------------- ------------------ ------------------ ----------------- ------------------
                                                     12,842            208,985            87,193            314,397

Operating expenses:
        Product development                         180,631            224,070            38,712            480,040
        Selling and marketing                       635,005            251,984            20,667            910,727
        General and administrative                  449,476            249,286            42,841            757,240
        Stock-based compensation                    659,121                  -                 -            659,121
        --------------------------------- ------------------ ------------------ ----------------- ------------------
        Total operating expenses                  1,924,233            725,340           102,220          2,807,128

----------------------------------------- ------------------ ------------------ ----------------- ------------------
Operating loss                                  (1,911,391)          (516,355)          (15,027)        (2,492,731)

Interest and other income                             4,344                569                 -              4,996

Interest expense                                    (1,418)            (1,883)           (6,181)           (10,800)

----------------------------------------- ------------------ ------------------ ----------------- ------------------
Net loss                                   $    (1,908,465)   $      (517,669)   $      (21,208)   $    (2,498,535)
----------------------------------------- ------------------ ------------------ ----------------- ------------------

Net loss per common share, basic and
diluted                                    $         (0.47)   $         (0.14)   $        (0.00)            $(0.29)
----------------------------------------- ------------------ ------------------ ----------------- ------------------

Weighted average common shares
outstanding, basic and diluted                    4,052,520          3,750,000        11,391,267          8,762,271
----------------------------------------- ------------------ ------------------ ----------------- ------------------

See accompanying notes to consolidated financial statements.

</TABLE>
                                      F-3
<PAGE>

<TABLE>
<CAPTION>



MERILUS, INC.
(formerly Golden Soil, Inc.)
(A Development Stage Enterprise)
Consolidated Statement of Stockholders' Equity and Comprehensive Loss
Expressed in US Dollars

--------------------------------------- ----------------------- ------------ ------------- -------------- ------------ -------------
                                                                                  Special    Accumulated
                                              Common Stock       Additional        Voting          Other                       Total
                                        -----------------------     Paid in     Preferred  Comprehensive   Accumulated Stockholders'
                                           Shares      Amount       Capital        Share   Income (Loss)       Deficit        Equity
--------------------------------------- ------------ ---------- ------------ ------------- -------------- ------------ -------------
<S>                                      <C>            <C>      <C>          <C>          <C>            <C>           <C>
Balance, November 4, 1997 (Merilus

Technologies Inc. common stock)          11,718,750   $    142   $        -   $         -   $          -   $        -   $        142

Comprehensive income:
        Translation adjustment                    -          -            -             -          2,515            -          2,515
        Loss for the period                       -          -            -             -              -     (51,193)       (51,193)
        ------------------------------- ------------ ---------- ------------ ------------- -------------- ------------ -------------
                                                                                                                            (48,678)

------- ------------------------------- ------------ ---------- ------------ ------------- -------------- ------------ -------------
Balance, September 30 1998               11,718,750        142            -             -          2,515     (51,193)       (48,536)
--------------------------------------- ------------ ---------- ------------ ------------- -------------- ------------ -------------

Common stock cancelled, September 15,
1999                                    (8,671,875)      (105)            -             -              -            -          (105)

Common stock issued for cash,
September 15, 1999                          527,344          6            -             -              -            -              6

Common stock issued for notes
receivable, September 15, 1999              175,781      6,390            -             -              -            -          6,390

Less note receivable                              -    (6,390)            -             -              -            -        (6,390)

Comprehensive income:
        Translation adjustment                    -          -            -             -        (2,548)            -        (2,548)
        Loss for the period                       -          -            -             -              -     (21,208)       (21,208)
        ------------------------------- ------------ ---------- ------------ ------------- -------------- ------------ -------------
                                                                                                                            (23,756)

--------------------------------------- ------------ ---------- ------------ ------------- -------------- ------------ -------------
Balance, September 30, 1999               3,750,000         43            -             -           (33)     (72,401)       (72,391)
--------------------------------------- ------------ ---------- ------------ ------------- -------------- ------------ -------------

Receipt of proceeds on note
receivable, November 16, 1999                     -      5,381            -             -              -            -          5,381

Receipt of proceeds on note
receivable, January 13, 2000                      -      1,009            -             -              -            -          1,009

Comprehensive income:
        Translation adjustment                    -          -            -             -         12,375            -         12,375
        Loss for the period                       -          -            -             -              -    (517,669)      (517,669)
        ------------------------------- ------------ ---------- ------------ ------------- -------------- ------------ -------------
                                                                                                                           (505,294)

--------------------------------------- ------------ ---------- ------------ ------------- -------------- ------------ -------------
Balance, September 30, 2000               3,750,000      6,433            -             -         12,342    (590,070)      (571,295)
--------------------------------------- ------------ ---------- ------------ ------------- -------------- ------------ -------------


</TABLE>
                                      F-4
<PAGE>
<TABLE>
<CAPTION>

MERILUS, INC.
(formerly Golden Soil, Inc.)
(A Development Stage Enterprise)
Consolidated Statement of Stockholders' Equity and Comprehensive Loss (Continued)
Expressed in US Dollars

--------------------------------------- ----------------------- ------------ ------------- -------------- ------------ -------------
                                                                                  Special    Accumulated
                                              Common Stock       Additional        Voting          Other                       Total
                                        -----------------------     Paid in     Preferred  Comprehensive   Accumulated Stockholders'
                                           Shares      Amount       Capital        Share   Income (Loss)       Deficit        Equity
--------------------------------------- ------------ ---------- ------------ ------------- -------------- ------------ -------------


<S>                                      <C>          <C>        <C>            <C>         <C>           <C>          <C>
Balance forward, September 30, 2000       3,750,000      6,433             -             -        12,342     (590,070)     (571,295)

Common stock issued for cash, October
20, 2000                                     37,500          1             -             -             -             -             1

Shares deemed to be issued on
re-capitalization transaction (Note
2(a))                                     6,750,000      4,104       (4,104)             1             -             -             1

Stock  options  issued  December 29,
2000 at $0.01 to non-employees for
legal services rendered at an
estimated fair value of $98,316
(Note 6)                                          -          -        98,316             -             -             -        98,316

Stock options issued December 29,
2000 at $0.01 to non-employees for
services rendered at an estimated
fair value of $46,580 (Note 9(b))                 -          -        46,580             -             -             -        46,580

Stock options issued December 29,
2000 at $0.01 to employees as
stock-based compensation at their
intrinsic value of $1,398,921
(Note 9(b))                                       -          -     1,398,921             -             -             -     1,398,921

Stock options  issued and vested
at December 29, 2000 at $2.94 to
non-employees as stock-based
compensation at an estimated fair
value of $18,500 (Note 9(b))                      -          -        18,500             -             -             -        18,500

Issued common stock for cash,
December 29, 2000 at $1.00 per share,
net of issuance costs of $nil             2,000,000      2,000     1,998,000             -             -             -     2,000,000

Commitment to issue common stock to
non-employees for services rendered
at an estimated fair value of $73,500
(Note 9(c))                                       -          -        73,500             -             -             -        73,500

Comprehensive income:
        Translation adjustment                    -          -             -             -      (19,566)             -      (19,566)
        Loss for the period                       -          -             -             -             -    (1,908,465)  (1,908,465)
--------------------------------------- ------------ ---------- ------------ ------------- -------------- ------------ -------------
                                                                                                                         (1,928,031)

--------------------------------------- ------------ ---------- ------------ ------------- -------------- ------------ -------------
Balance, December 31, 2000               12,537,500   $ 12,538  $  3,629,713   $         1       (7,224)  $ (2,498,535)  $ 1,136,493
--------------------------------------- ------------ ---------- ------------ ------------- -------------- ------------ -------------

See accompanying notes to consolidated financial statements.

</TABLE>
                                      F-5
<PAGE>
<TABLE>
<CAPTION>


MERILUS, INC.
(formerly Golden Soil, Inc.)
(A Development Stage Enterprise)
Consolidated Statements of Cash flows
Expressed in US Dollars

------------------------------------------------------ ----------------- ----------------- ----------------- ------------------
                                                                                                                   Period from
                                                                                                                   November 4,
                                                           Three months                                                   1997
                                                                  ended        Year ended        Year ended     (inception) to
                                                           December 31,     September 30,     September 30,       December 31,
                                                                   2000              2000              1999               2000
------------------------------------------------------ ----------------- ----------------- ----------------- ------------------
<S>                                                    <C>                <C>               <C>               <C>
Cash provided by (used in):

Operating:
         Net loss                                       $   (1,908,465)    $    (517,699)    $     (21,208)    $   (2,498,535)
         Items not involving cash:
             Amortization                                         6,477            13,961             1,082             22,406
             Stock-based compensation                           659,121                 -                 -            659,121
             Common stock or options issued for
             non-wage services                                  138,580                 -                 -            138,580
         Net changes in non-cash working capital
             balances  relating to operations:
            Accounts receivable                                (32,510)           (6,687)          (11,386)           (47,528)
            Inventories                                        (95,639)                 -                 -           (95,639)
            Prepaid expenses                                   (67,501)         (114,297)                 -          (185,491)
            Accounts payable and accrued liabilities            137,593           236,848            24,664            413,559
         --------------------------------------------- ----------------- ----------------- ----------------- ------------------
                                                            (1,162,344)         (387,874)           (6,848)        (1,593,527)

Financing:
         Cash acquired on recapitalization                       50,000                 -                 -             50,000
         Decrease in operating line of credit                         -          (10,131)           (8,909)                  -
         Advances from (to) shareholders                              -          (27,980)            16,207              9,885
         Increase in notes payable                                    -           479,315                 -            479,315
         Repayment of notes payable                           (150,000)                 -                 -          (150,000)
         Share subscription proceeds                                  -             6,390                 -              6,390
         Cancellation of common stock                                 -                 -             (105)              (105)
         Proceeds on issuance of common stock                 2,000,000                 -                 6          2,000,149
         --------------------------------------------- ----------------- ----------------- ----------------- ------------------
                                                              1,900,000           447,594             7,199          2,395,634

Investing:
         Purchase of fixed assets                              (69,822)          (55,268)             (351)          (129,821)

------------------------------------------------------ ----------------- ----------------- ----------------- ------------------
Increase in cash position                                       667,834             4,452                 -            672,286

Cash position, beginning of period                                4,452                 -                 -                  -

------------------------------------------------------ ----------------- ----------------- ----------------- ------------------
Cash position, end of period                                  $ 672,286    $        4,452    $            -    $       672,286
------------------------------------------------------ ----------------- ----------------- ----------------- ------------------

Supplementary cash flow information:
        Interest paid                                    $          953    $          532    $            -    $         8,441
        Income taxes paid                                             -                 -                 -                  -
        Non-cash transactions:
              Accounts payable settled with stock
               options                                           98,316                 -                 -             98,316
              Value assigned to stock options granted         1,537,501                 -                 -          1,537,501
----------------------------------------------------- ----------------- ----------------- ----------------- ------------------

See accompanying notes to consolidated financial statements.

</TABLE>

                                      F-6
<PAGE>


MERILUS, INC.
(formerly Golden Soil, Inc.)
(A Development Stage Enterprise)

Notes to Consolidated Financial Statements
Expressed in US Dollars

Three months ended December 31, 2000
Year ended September 30, 2000
--------------------------------------------------------------------------------


1.  General and future operations:

     Merilus,  Inc.  (the  "Company")  is a development  stage  enterprise  that
     develops   products  to  simplify  the  process  of  digital  security  for
     organizations  connecting  to  networks.  The Company was formed in British
     Columbia,  Canada in November 1997 as NetMaster Networking Solutions,  Inc.
     and changed its name to Merilus Technologies, Inc. ("Merilus Technologies")
     in September 2000. On December 29, 2000, Golden Soil, Inc. ("Golden Soil"),
     a Nevada  corporation,  acquired all of the outstanding Common Stock of the
     Company (see Note 2(a)).  For accounting  purposes,  this  acquisition  was
     treated as a recapitalization of the Company as if Merilus Technologies had
     issued  common  shares to acquire the net  monetary  assets of Golden Soil.
     Golden  Soil  was  originally  organized  in May  1995  under  the  name of
     Architronics  and  changed  its name to Golden Soil in June 1999 and had no
     revenues  or  operations  prior to the merger  with  Merilus  Technologies.
     Following  the  recapitalization,  Golden Soil changed its name to Merilus,
     Inc.

     As to date,  Merilus has received limited revenues from its operations,  it
     is considered to be a development stage enterprise for financial  reporting
     purposes.

     These  consolidated  financial  statements  have been  prepared  on a going
     concern basis in accordance with generally accepted  accounting  principles
     in the United States of America.  The going  concern basis of  presentation
     generally  assumes the Company  will  continue  in  operation  for the next
     twelve  months and will be able to realize  its  assets and  discharge  its
     liabilities  and  commitments  in the normal  course of  business.  Certain
     conditions,  discussed below,  currently exist that raise substantial doubt
     upon the  validity of this  assumption.  The  financial  statements  do not
     include  any  adjustments  that  might  result  from  the  outcome  of this
     uncertainty.

     The Company's future operations are dependent upon the market's  acceptance
     of its products and services and the Company's  ability to secure strategic
     partnerships.  There can be no  assurance  that the Company will be able to
     secure  market  acceptance  or strategic  partnerships.  As of December 31,
     2000,  the  Company is  considered  to be in the  development  stage as the
     Company has not  generated  any  significant  revenues and is continuing to
     develop  its  business,  and  has  experienced  negative  cash  flows  from
     operations. Operations have primarily been financed through the issuance of
     common stock.


                                      F-7
<PAGE>

MERILUS, INC.
(formerly Golden Soil, Inc.)
(A Development Stage Enterprise)

Notes to Consolidated Financial Statements, Continued
Expressed in US Dollars

Three months ended December 31, 2000
Year ended September 30, 2000
--------------------------------------------------------------------------------


1.  General and future operations (continued):

     The Company does not have sufficient  working capital to sustain operations
     until the end of the year  ended  December  31,  2001.  Additional  debt or
     equity  financing  will be required and may not be available on  reasonable
     terms.  If  sufficient  financing  cannot be  obtained,  the Company may be
     required to reduce operating activities.

     Management's  intention is to generate sufficient  financing through one or
     more  private  placements  of the  Company's  common  stock  with the first
     private placement expected to close prior to March 31, 2001.



2.  Significant accounting policies:

     (a)  Basis of presentation:

         On December 29, 2000,  3,787,500  common  shares were issued for all of
         the issued and outstanding  shares of Merilus  Technologies,  a company
         incorporated  in the Province of British  Columbia on November 4, 1997.
         The  acquisition  was  accounted for as a  recapitalization  of Merilus
         Technologies  effectively  representing  an issue of shares by  Merilus
         Technologies for the net assets of Golden Soil.

         Application of recapitalization accounting results in the following:

          (i)  The consolidated  financial  statements are issued under the name
               of  the  Company,  but  are  considered  a  continuation  of  the
               operations of Merilus Technologies.  Accordingly, the comparative
               financial  information  is based on Merilus  Technologies  fiscal
               years ended  September  30, 2000 and 1999 and for the period from
               inception of Merilus Technologies  (November 4, 1997) to December
               31, 2000,  consolidated  with those of Golden Soil from  December
               29, 2000. The assets and liabilities of Merilus  Technologies are
               recorded at their  historical  costs without  adjustment  for the
               recapitalization transaction.

          (ii) The  stockholders'  equity  is  presented  as a  continuation  of
               Merilus  Technologies.  Common stock of Merilus  Technologies has
               been  presented  with the effective  stock split that occurred on
               the recapitalization applied retroactively.


                                      F-8
<PAGE>

MERILUS, INC.
(formerly Golden Soil, Inc.)
(A Development Stage Enterprise)

Notes to Consolidated Financial Statements, Continued
Expressed in US Dollars

Three months ended December 31, 2000
Year ended September 30, 2000
--------------------------------------------------------------------------------


2.  Significant accounting policies (continued):

     (a)  Basis of presentation (continued):

          (iii)The net monetary assets received on the  recapitalization  are as
               follows:

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

               Cash                                               $50,000

               Net working capital deficiency                    (50,000)

               ------------------------------------------ ----------------
                                                           $           -
               ------------------------------------------ ----------------

     Acquisition related costs of $64,380 were incurred on this recapitalization
     and have been recorded in general and administrative expenses.

     The  following  is a continuity  of the legal share  capital of Golden Soil
     through the date of recapitalization:

         --------------------------------------------------- ----------------
                                                                      Number
                                                                   of shares
         --------------------------------------------------- ----------------

         Balance, November 4, 1997                                 4,750,000
         --------------------------------------------------- ----------------
         Balance, December 31, 1998                                4,750,000

         Issued for cash on July 2, 1999                             500,000

         Issued for cash on December 9, 1999                       1,500,000

         --------------------------------------------------- ----------------
         Balance, December 31, 1999 and December 29, 2000,         6,750,000
            and deemed to be issued on recapitalization
         --------------------------------------------------- ----------------

     The number of shares  have been  adjusted  retroactively  to reflect  stock
     splits on June 28, 1999 (200 for 1) and on August 10, 2000 (10 for 1).


                                      F-9
<PAGE>


MERILUS, INC.
(formerly Golden Soil, Inc.)
(A Development Stage Enterprise)

Notes to Consolidated Financial Statements, Continued
Expressed in US Dollars

Three months ended December 31, 2000
Year ended September 30, 2000
--------------------------------------------------------------------------------


2.  Significant accounting policies (continued):

     (b)  Basis of consolidation:

         These  consolidated  financial  statements  have  been  prepared  using
         generally  accepted  accounting  principles  in the  United  States  of
         America.  The financial  statements include the accounts of the Company
         and its directly  and  indirectly  owned  subsidiaries  613636  British
         Columbia  Corporation  and Merilus  Technologies  Inc. All  significant
         inter-company  balances and  transactions  have been  eliminated in the
         consolidated financial statements.

         613636 British Columbia Corporation is inactive and has no operations.

     (c)  Use of estimates:

         The preparation of consolidated financial statements in accordance with
         United  States  generally  accepted   accounting   principles  requires
         management  to make  estimates  and  assumptions  that affect  recorded
         amounts of assets and  liabilities  and the  disclosure  of  contingent
         assets  and  liabilities  at the  date  of the  consolidated  financial
         statements and reported revenues and expenses for the reporting period.
         Actual results may significantly differ from those estimates.

     (d)  Foreign currency translation:

         The Company's  reporting and functional  currency is the US dollar. The
         operations of the  Company's  subsidiaries  are located in  Chilliwack,
         British Columbia,  Canada and their functional currency is the Canadian
         dollar.  The operations  have been translated into US dollars using the
         current rate method whereby the assets and  liabilities  are translated
         at the  rates of  exchange  in  effect at the  balance  sheet  date and
         revenue and expenses are  translated  at the average  rates of exchange
         during the year.

         Adjustments  from  the  translation  of  the   subsidiaries   financial
         information  are  included  in  comprehensive  income  (loss)  and as a
         separate component of stockholders' equity.

     (e)  Inventories:

         Inventories,   consisting  of  raw  materials  for  production  of  the
         Company's  initial  test  products,  are  recorded at the lower of cost
         determined on a first-in,  first-out  basis,  or net realizable  value.
         Costs include shipping and handling costs and excise taxes.


                                      F-10
<PAGE>


MERILUS, INC.
(formerly Golden Soil, Inc.)
(A Development Stage Enterprise)

Notes to Consolidated Financial Statements, Continued
Expressed in US Dollars

Three months ended December 31, 2000
Year ended September 30, 2000
--------------------------------------------------------------------------------


2.  Significant accounting policies (continued):

     (f)  Fixed assets:

         Fixed  assets are  recorded at cost.  Amortization  of fixed assets has
         been  provided for in the accounts on a declining  balance basis at the
         following annual rates,  calculated on the unamortized  balances at the
         end of the year:

                  Computer equipment                              30%
                  Office equipment                                20%

     (g)  Income taxes:

         The  Company  uses the asset and  liability  method of  accounting  for
         income taxes.  Under this method,  current taxes are recognized for the
         estimated income taxes payable for the current period.

         Deferred  income taxes are provided  based on the estimated  future tax
         effects of timing  differences  between  financial  statement  carrying
         amounts of assets and  liabilities  and their  respective  tax basis as
         well as the benefit of losses available to be carried forward to future
         years for tax purposes.

         Deferred  tax assets and  liabilities  are measured  using  enacted tax
         rates  that are  expected  to apply to  taxable  income in the years in
         which those timing differences are expected to be recovered or settled.
         The effect on deferred  tax assets and  liabilities  of a change in tax
         rates is  recognized  in  operations  in the period that  includes  the
         substantive  enactment  date.  A valuation  allowance  is recorded  for
         deferred  tax assets  when it is more  likely than not that such future
         tax assets will not be realized.

     (h)  Net loss per share:

         Basic net loss per share is computed using the weighted  average number
         of common shares and nominal  exercise  price stock options  issued and
         outstanding during the period. Diluted loss per share is computed using
         the weighted  average number of common and potentially  dilutive common
         stock outstanding  during the period. As the Company has a net loss for
         all  periods  presented  basic and  diluted  net loss per share are the
         same.  Net  loss per  share  is  calculated  on the  basis  of  Merilus
         Technologies effective weighted average number of diluted shares of the
         Company retroactively calculated on an assumed post-conversion basis.


                                      F-11
<PAGE>


MERILUS, INC.
(formerly Golden Soil, Inc.)
(A Development Stage Enterprise)

Notes to Consolidated Financial Statements, Continued
Expressed in US Dollars

Three months ended December 31, 2000
Year ended September 30, 2000
--------------------------------------------------------------------------------


2.  Significant accounting policies (continued):

     (i)  Stock-based compensation:

         The  Company  accounts  for  its  employee   stock-based   compensation
         arrangement  in accordance  with  provisions  of Accounting  Principles
         Board ("APB") Opinion No. 25, Accounting for Stock Issued to Employees,
         and related interpretations.  As such, compensation expense under fixed
         plans is recorded on the date of grant only if the market  value of the
         underlying  stock at the date of grant exceeded the exercise price. The
         Company recognizes compensation expense for stock options, common stock
         and other  equity  instruments  issued to  non-employees  for  services
         received   based  upon  the  fair  value  of  the  services  or  equity
         instruments  issued,  whichever  is  more  reliably  determined.  Stock
         options  granted to  non-employees  are  recognized at their fair value
         calculated  by an option  pricing  model and  recognized as the related
         services are performed and vesting occurs.

         SFAS  No.  123,  Accounting  for  Stock  Based  Compensation,  requires
         entities that  continue to apply the  provisions of the APB Opinion No.
         25 for transactions  with employees to provide pro forma net income and
         pro forma  earnings per share  disclosures  for  employee  stock option
         grants made in 1995 and future years as if the fair-value-based  method
         defined in SFAS No. 123 had been applied to these transactions.

         Pro forma loss and pro forma loss per share are disclosed in Note 9(b).


3.  Fixed Assets:

     ---------------------------------------- ----------------- ---------------
                                                  December 31,     September 30,
                                                          2000            2000
     ---------------------------------------- ----------------- ---------------

     Cost:
            Office equipment                    $       85,890    $     36,654
            Computer equipment                          43,765          23,025
            --------------------------------- ----------------- ---------------
                                                       129,655          59,679

     Accumulated amortization:
            Office equipment                            11,388           7,447
            Computer equipment                          10,852           8,162
            --------------------------------- ----------------- ---------------
                                                        22,240          15,609

     ---------------------------------------- ----------------- ---------------
     Net book value                             $      107,415    $     44,070
     ---------------------------------------- ----------------- ---------------



                                      F-12
<PAGE>


MERILUS, INC.
(formerly Golden Soil, Inc.)
(A Development Stage Enterprise)

Notes to Consolidated Financial Statements, Continued
Expressed in US Dollars

Three months ended December 31, 2000
Year ended September 30, 2000
--------------------------------------------------------------------------------


4.  Notes payable:

     The notes payable are due to the following:
     <TABLE>
     <CAPTION>

     ---------------------------------------------------------- ----------------- ----------------
                                                                    December 31,      September 30,
                                                                            2000             2000
     ---------------------------------------------------------- ----------------- ----------------
     <S>                                                        <C>               <C>

     Clyde Resources Ltd., due without interest, repayable         $     166,585    $     164,657
      upon the Company securing a private placement offering
      (see below)

     Bank Sal Oppenheim Jr. & CIE (Schweiz) AG, due without              166,585          164,658
      interest, repayable upon the Company securing a private
      placement offering (see below)

     Golden Soil, Inc.; secured by $150,000 term note with
      interest of 8% per annum after October 31, 2000                          -          150,000

     ---------------------------------------------------------- ----------------- ----------------
                                                                   $     333,170    $     479,315
     ---------------------------------------------------------- ----------------- ----------------
     </TABLE>

     The  term  note  due  to  Golden  Soil,  Inc.  was  extinguished  upon  the
     recapitalization of Merilus Technologies.

     The  company  intends to repay the notes upon  securing  private  placement
     proceeds of a  sufficient  amount to meet both  operating  and  refinancing
     requirements.


5.  Income taxes:

     The Company has income tax loss  carryforwards of approximately  $1,583,500
     which are available to reduce  future  taxable  income.  The benefit of the
     losses has not been recognized in the financial statements. The losses will
     expire as follows:

     -------------- -------------------- ----------------- ---------------
                                 Canada                US           Total
     -------------- -------------------- ----------------- ---------------

      2005                $      48,600        $        -   $      48,600
      2006                       19,700                 -          19,700
      2007                      413,900                 -         413,900
      2008                    1,024,800                 -       1,024,800
      2013                            -            18,000          18,000
      2019                            -            27,500          27,500
      2020                            -            31,000          31,000
     -------------- -------------------- ----------------- ---------------


                                      F-13
<PAGE>

MERILUS, INC.
(formerly Golden Soil, Inc.)
(A Development Stage Enterprise)

Notes to Consolidated Financial Statements, Continued
Expressed in US Dollars

Three months ended December 31, 2000
Year ended September 30, 2000
--------------------------------------------------------------------------------


5.  Income taxes (continued):

     In addition,  the Company has applied for research and development  credits
     for the periods ended  September 30, 1998 and 1999  totaling  $38,000.  The
     credits relate to research and development expenditures of $66,000 included
     in expenses of the Company.  As these  applications have not been processed
     and are subject to audit by Canada Customs and Revenue Agency,  the benefit
     of these credits has not been recognized in the financial  statements.  The
     benefit, it any, will be recognized in the year received.

     Significant  components  of the  Company's  deferred  tax  assets are shown
     below.  A valuation  allowance  has been  recognized to full offset the net
     future tax assets as realization of such net assets cannot be considered to
     be more likely than not.

     --------------------------------------------- ------------- ---------------
                                                    December 31   September 30,
                                                           2000            2000
     --------------------------------------------- ------------- ---------------

      Deferred tax assets:
             Operating loss carryforwards           $   701,000   $     215,000
             Capital assets                               3,800           3,000
             Restructuring costs                         46,000          28,000
     --------------------------------------------- ------------- ---------------
                                                        750,800         246,000
     Valuation allowance for deferred tax assets      (750,800)       (246,000)

     --------------------------------------------- ------------- ---------------
      Net deferred tax assets                       $        -    $          -
     --------------------------------------------- ------------- ---------------


6.  Related party transactions:

     During the three  months  ended  December  31,  2000 the  Company  incurred
     $31,919  (year  ended  September  30,  2000 -  $66,397)  in fees for  legal
     services  related to the  recapitalization  transaction and for other legal
     matters,  from a law  office of which a  shareholder  in the  Company  is a
     partner.

     The total legal services incurred since inception were $98,316,  which were
     settled in full by issuance of 37,500  options on December  29, 2000 by the
     Company.  Each option entitles the holder to acquire a share in the Company
     at $0.01 each. These options were exercised subsequent to the year-end.

     The accounts payable include $13,187  (September 30, 2000 - $13,733) due to
     three shareholders of the Company,  as well as an accrual of nil (September
     30, 2000 - $66,397) due to the law office.

     In all cases, the related party  transactions were recorded at the exchange
     amount, which is the consideration established and agreed to by the related
     parties.


                                      F-14
<PAGE>

MERILUS, INC.
(formerly Golden Soil, Inc.)
(A Development Stage Enterprise)

Notes to Consolidated Financial Statements, Continued
Expressed in US Dollars

Three months ended December 31, 2000
Year ended September 30, 2000
--------------------------------------------------------------------------------


7.  Commitments:

     The Company has committed to rental of premises,  equipment and  automotive
     equipment until 2006. Minimum annual lease payments are as follows:

     --------------- ------------- --------------- -------------- -------------
                                                      Automotive
                         Premises       Equipment      Equipment         Total
     --------------- ------------- --------------- -------------- -------------

     2001             $    58,923     $    17,726    $     7,999    $   84,648
     2002                  60,395          20,668          5,313        86,376
     2003                  55,362          17,588            736        73,686
     2004                       -           5,703              -         5,703
     2005                       -           3,922              -         3,922
     2006                       -           1,634              -         1,634

     --------------- ------------- --------------- -------------- -------------
                      $   174,680     $    67,241    $    14,048    $  255,969
     --------------- ------------- --------------- -------------- -------------


8.  Financial instruments:

     The Company's financial  instruments consist of cash, accounts  receivable,
     accounts payable and accrued  liabilities,  due to shareholders,  and notes
     payable.  It is the opinion of the management  that the maximum credit risk
     equals their carrying values.

     Fair value:

     The carrying  values of cash,  accounts  receivable,  due to  shareholders,
     accounts payable and accrued liabilities and notes payable approximate fair
     value due to the short-term maturities of these instruments.

     Foreign exchange risk:

     The  Company's  Canadian  subsidiary,  Merilus  Technologies,  operates  in
     Canadian  dollars.  As a result,  the amounts  included in the consolidated
     financial  statements  relating to the  subsidiary  will fluctuate with the
     Canadian  foreign  exchange rate. The Company has not entered into currency
     futures or other  derivative  instruments to mitigate the foreign  currency
     risk.




                                      F-15
<PAGE>

MERILUS, INC.
(formerly Golden Soil, Inc.)
(A Development Stage Enterprise)

Notes to Consolidated Financial Statements, Continued
Expressed in US Dollars

Three months ended December 31, 2000
Year ended September 30, 2000
--------------------------------------------------------------------------------


9.  Share capital:

     (a)  Issued:

         During the three months ended December 31, 2000, the Company issued one
         preferred  share  to a  voting  trust  as part of the  recapitalization
         transaction.

         The special voting  preferred share is entitled to an aggregate  number
         of  votes  equal  to the  number  of  exchangeable  shares  of  Merilus
         Technologies Inc.  ("Exchangeable  Shares"),  the Company's subsidiary,
         not held by the Company or its  subsidiaries.  At December 31, 2000 the
         special voting  preferred  share was entitled to 3,787,500  votes which
         equal  the   exchangeable   shares   outstanding   at  that  date.  The
         exchangeable  shares may, at the option of the holder, be exchanged for
         already issued common stock of the Company.

         The  exchangeable  shares  were  issued  to allow the  former  Canadian
         shareholders  of Merilus  Technologies  to obtain  voting and effective
         ownership  rights in the Company on a tax deferred  basis.  Upon all of
         the exchangeable  shares being exchanged,  the special voting preferred
         shares will be cancelled.

     (b)  Options:

         The  following  table sets forth  information  concerning  the  options
         granted to the Company's officers, directors,  employees and others and
         the exercise price as of December 31, 2000:
         <TABLE>
         <CAPTION>

         ----------------------------------------- ------------------ ----------- ----------
                                                                       Number of   Exercise
                                                                         options
                                                         Expiry date     granted      price
         ----------------------------------------- ------------------ ----------- ----------
         <S>                                        <C>                <C>        <C>

          Options issued:
          (a)     to employees and directors
                     under Incentive Stock
                 i)  Option Plan

                      December 29, 2000            December 29, 2003     371,000      $2.94

                     under non-qualified Stock
                 ii) Option Plan

                      December 29, 2000            December 29, 2003     510,555      $0.01

          (b)    to non-employees under
                 non-qualified Stock Option Plan

                  December 29,2000                 December 29, 2003      50,000      $2.94

                  December 29,2000                 December 29, 2003      54,500      $0.01

         ----------------------------------------- ------------------ ----------- ----------
                                                                         986,055
         ----------------------------------------- ------------------ ----------- ----------
         </TABLE>


                                      F-16
<PAGE>

MERILUS, INC.
(formerly Golden Soil, Inc.)
(A Development Stage Enterprise)

Notes to Consolidated Financial Statements, Continued
Expressed in US Dollars

Three months ended December 31, 2000
Year ended September 30, 2000
--------------------------------------------------------------------------------


9.  Share capital (continued):

     (b)  Options (continued):

         The vesting dates for the above options is as follows:

         ------------------------------------ ----------------- ----------------
                                                   Exercisable      Exercisable
                                                      at $0.01         at $2.94
         ------------------------------------ ----------------- ----------------

         December 29, 2000                             295,055          105,250
         March 29, 2001                                 90,000          105,250
         June 29, 2001                                  90,000          105,250
         September 29, 2001                             90,000          105,250

         ------------------------------------ ----------------- ----------------
                                                       565,055          421,000
         ------------------------------------ ----------------- ----------------


         The  compensatory  value of the options granted during the three months
         ended  December 31, 2000 (no options were granted in prior  months) are
         as follows:

         ----------------------------------------------------- ----------------
         Options issued at $0.01
                  - to employees                                 $   1,398,921
                  - for legal services                                  98,316
                  - for other services                                  46,580

         Options issued at $2.74
                  - to non-employees                                    74,000
                  - to employees                                       544,080

         ----------------------------------------------------- ----------------
                                                                 $   2,161,897
         ----------------------------------------------------- ----------------


         Options  issued for legal  services (see Note 6) and for other services
         have been  recorded  as a general  and  administrative  expense  in the
         period ending December 31, 2000 as the services have been performed and
         the options earned.

         Options issued to employees that are fully vested have been recorded as
         compensation  expense  totaling  $659,121 in the period ending December
         31, 2000.  Options not yet vested totaling  $739,800 have been recorded
         as  deferred  compensation  and are  being  expensed  over the  vesting
         period.

         Options  issued to  non-employees  at $2.74 that are fully  vested have
         been recorded as a general and administrative  expense totaling $18,500
         in the period ending December 31, 2000.  Options to  non-employees  not
         yet vested totaling $55,500 are being expensed over the vesting period.

                                      F-17

<PAGE>

MERILUS, INC.
(formerly Golden Soil, Inc.)
(A Development Stage Enterprise)

Notes to Consolidated Financial Statements, Continued
Expressed in US Dollars

Three months ended December 31, 2000
Year ended September 30, 2000
--------------------------------------------------------------------------------


9.  Share capital (continued):

     (b)  Options (continued):

         The  compensation  expense  for the above  options is  included  in the
         consolidated statement of operations.

         For the  purposes of  disclosure  under SFAS No. 123, the fair value of
         the option grant to employees, in aggregate is estimated on the date of
         grant using the  Black-Scholes  Option Pricing Model with the following
         assumptions:

         ------------------------------------------------------ ----------------
                                                                   Three months
                                                                          ended
                                                                   December 31,
                                                                           2000
         ------------------------------------------------------ ----------------

          Expected volatility                                               80%
          Risk-free interest                                               6.0%
          Expected life                                                 3 years
          Expected dividend yield                                            0%
         ------------------------------------------------------ ----------------

         Pro forma loss and loss per share  after  consideration  of fair market
         value of the employee share options granted is as follows:
         <TABLE>
         <CAPTION>

         --------------------------- --------------- --------------- --------------- ------------------
                                                                         Year ended        Period from
                                       Three months                                        November 4,
                                              ended      Year ended                   1997 (inception)
                                       December 31,   September 30,   September 30,    to December 31,
                                               2000            2000            1999               2000
         --------------------------- --------------- --------------- --------------- ------------------
         <S>                         <C>             <C>             <C>             <C>

         Net loss as reported         $ (1,908,465)     $ (517,669)    $   (21,208)   $    (2,498,535)

         Pro forma compensation
         for stock options                (137,270)               -               -          (137,270)

         --------------------------- --------------- --------------- --------------- ------------------
         Pro forma loss               $ (2,045,735)     $ (517,669)    $   (21,208)   $    (2,635,805)
         --------------------------- --------------- --------------- --------------- ------------------

         Pro forma loss per share,
         basic and diluted            $      (0.50)     $    (0.14)    $       0.00   $         (0.30)
         --------------------------- --------------- --------------- --------------- ------------------
</TABLE>


     (c)  Other share commitments:

         The Company is  committed to issue 25,000  shares as  compensation  for
         services  rendered  during  the   recapitalization   transaction.   The
         compensation  expense  has been  recorded  as the  services  have  been
         performed and the shares earned.


                                      F-18
<PAGE>

MERILUS, INC.
(formerly Golden Soil, Inc.)
(A Development Stage Enterprise)

Notes to Consolidated Financial Statements, Continued
Expressed in US Dollars

Three months ended December 31, 2000
Year ended September 30, 2000
--------------------------------------------------------------------------------


10.  Stock compensation plans:

     (a)  Incentive stock option plan:

         The incentive  stock option plan  authorizes the issuance of options to
         purchase  shares  of  the  Company's   common  stock.   Only  officers,
         directors, and employees of the Company may be granted options pursuant
         to the Incentive Stock Option Plan.

         The total fair market value of the shares of common  stock  (determined
         at the time of the grant of the option) for which any  employee  may be
         granted  options which are first  exercisable  in any calendar year may
         not exceed $100,000.

         Options may not be exercised  until vested.  Options  generally vest as
         follows unless changed by the plan administrator:

          -    25% of options granted on date of granting; and

          -    25% on each of the three,  six, and nine month  anniversaries  of
               the date of granting.

         Options  granted to an employee then owning more than 10% of the common
         stock of the Company may not be  exercisable  after five years from the
         date of grant. All other options may not be exercisable after ten years
         from the date of grant.

         The  purchase  price per share of common  stock,  purchasable  under an
         option, is determined by the plan administrator but cannot be less than
         the fair market  value (no less than 110% of fair  market  value if the
         employee owns more than 10% of voting stock) of the common stock on the
         date of the grant of the option.

     (b)  Non-qualified stock option plan:

         The non-qualified  stock option plan authorizes the issuance of options
         to  purchase  shares of the  Company's  common  stock to the  Company's
         employees,  directors,  officers,  consultants  or  advisors  and  such
         services.  The option exercise price and expiration date are determined
         by the Company's Board of Directors.

     All  options  outstanding  and issued  during the period are listed in Note
     9(b).


                                      F-19
<PAGE>

MERILUS, INC.
(formerly Golden Soil, Inc.)
(A Development Stage Enterprise)

Notes to Consolidated Financial Statements, Continued
Expressed in US Dollars

Three months ended December 31, 2000
Year ended September 30, 2000
--------------------------------------------------------------------------------


11.  Segmented information:

     Management  has  determined  that the  Company  operates  in one  operating
     segment  which  involves  computer   networking  and  firewall   solutions.
     Substantially  all of the  Company's  operations,  assets and employees are
     located in Canada;  however,  the  Company's  revenues  are from  customers
     located in Canada, Southeast Asia, and the United States, as follows:
     <TABLE>
     <CAPTION>

     ---------------- -------------- --------------- ------------- ----------------
                                                                        Period from
                       Three months                                     November 4,
                              ended      Year ended    Year ended  1997 (inception)
                       December 31,   September 30,  September 30,  to December 31,
                               2000            2000          1999             2000
     ---------------- -------------- --------------- ------------- ----------------
     <S>              <C>             <C>            <C>           <C>

     Canada            $     12,083    $    271,745   $   109,652   $      408,544
     Southeast Asia           6,268               -             -            6,268
     United States            2,927           6,069             -            8,996

     ---------------- -------------- --------------- ------------- ----------------
                       $     21,278    $    277,814   $   109,652   $      423,808
     ---------------- -------------- --------------- ------------- ----------------
     </TABLE>

                                      F-20
<PAGE>




                                  EXHIBIT INDEX


Exhibit
Number  Description
------- --------------
 2.1*   Agreement and Plan of Reorganization by and among Merilus Technologies,
        Inc., 613636 British Columbia, Inc., Golden Soil, Inc. and the
        stockholders of Merilus Technologies, Inc. as named in the agreement
        dated October 19, 2000 and executed December 29, 2000

 3.1*   Amended Articles of Incorporation of  Merilus Technologies Inc.dated
        December 29, 2000

 3.2*   Certificate of Amendment of Articles of Incorporation of Merilus, Inc.
        dated  December 29, 2000

 4.1*   Specimen Stock Certificate for Shares of Common Stock of the Company

10.1*   Registration Rights Agreement between the Company and the holders of
        Exchangeable Shares dated December 29, 2000
10.2*   Support Agreement between the Company and Merilus Technologies, Inc.
        dated December 29,  2000
10.3*   Voting and Exchange Trust Agreement by and among the Company, Merilus
        Technologies, Inc. and Interwest Transfer Company, Inc. dated December
        29, 2000

10.4*   Escrow Agreement by and among the Company, Merilus Technologies, Inc.,
        the holders of Exchangeable Shares and Interwest Transfer Company, Inc.
        dated December 29, 2000

10.5*   2000 Stock Plan

10.6    Lease Agreement dated October 20, 2000

10.7    Employment agreement with Dana Epp dated December 29, 2000

10.8    Employment agreement with Kevin Traas dated December 29, 2000

10.9    Employment agreement with Chad Northcott dated December 29, 2000

10.10   Employment agreement with Ross Mrazek dated December 29, 2000

10.11   Employment agreement with Stephen R. Hemenway dated December 29, 2000

21.1    Subsidiaries of Merilus, Inc.


* Filed  on  December  12,  2000,  as an  Exhibit  to the  Company's  Definitive
Information  Statement  dated  November  30,  2000 and  incorporated  herein  by
reference.