U.S. SECURITIES AND EXCHANGE COMMISSION
                             Washington, D.C. 20549

                                   FORM 10-KSB
(Mark  One)
[X]   ANNUAL  REPORT  PURSUANT  TO  SECTION  13 OR 15(d) OF THE SECURITIES
      EXCHANGE ACT OF 1934 FOR THE FISCAL YEAR ENDED JANUARY 31, 2000.
                                       OR
[ ]   TRANSITION  REPORT PURSUANT TO SECTION 13 or 15(d) OF THE SECURITIES
      EXCHANGE  ACT  OF 1934 FOR THE TRANSITION PERIOD FROM __________ TO
      ____________
                        Commission file number: 000-30326

                                  VSOURCE, INC.
        (Exact name of small business issuer as specified in its charter)

     NEVADA                                         95-3538903
     (State or other jurisdiction                   (I.R.S.  Employer
     of incorporation or organization)              Identification  No.)

    5740 RALSTON STREET, SUITE  110                 93003
     VENTURA, CALIFORNIA                          (Zip  Code)
(Address of principal executive offices)

       Registrant's telephone number, including area code:  (805) 677-6720

SECURITIES REGISTERED PURSUANT TO SECTION 12 (b) OF THE ACT:
                                        NONE

SECURITIES REGISTERED PURSUANT TO SECTION 12 (g) OF THE ACT:
                      COMMON STOCK, PAR VALUE $0.01 PER SHARE

Indicate by check mark whether the registrant (1)  filed all reports required to
be  filed  by  Section 13 or 15(d) of the 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
                          ---

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

State issuer's revenues for the fiscal year ended January 31, 2000        $3,500

Aggregate  market  value of the Registrant's Common Stock (based on the price at
which  such  equity  was  sold  on April 17, 2000) held by non-affiliates of the
Registrant.  --                                                    $244,611,680.

Number of shares of common stock outstanding as of April 17, 2000     15,905,977
Number  of  shares  of  Series 1-A Convertible Preferred Stock outstanding as of
April  17,  2000                                                       2,802,000

                    Documents  Incorporated  By  Reference

The information required by Part III of this report, to the extent not set forth
herein,  is  incorporated herein by reference from the issuer's definitive proxy
statement  relating  to  the  annual meeting of stockholders to be held in 2000,
which  definitive proxy statement will be filed with the Securities and Exchange
Commission within 120 days after the end of the fiscal year to which this Report
relates.  The  Independent Auditors' Report on the  financial  statements  dated
May 15,  1999  except  for  Note 10  to  the financial statements which is as of
September  3, 1999, is  incorporated  herein  by  reference  from  the  issuer's
Registration  statement  of  Form  10SB  previously  filed  with  Securities and
Exchange  Commission  (SEC File. No.  000-26563).


<PAGE>
<TABLE>
<CAPTION>
                                 TABLE  OF  CONTENTS
                                 -------------------
                                                                            Page
                                                                            ----
                                     PART  I

<S>       <C>                                                               <C>
Item 1.   DESCRIPTION OF BUSINESS . . . . . . . . . . . . . . . . . . . . . . .1
Item 2.   DESCRIPTION OF PROPERTY . . . . . . . . . . . . . . . . . . . . . . 20
Item 3.   LEGAL PROCEEDINGS . . . . . . . . . . . . . . . . . . . . . . . . . 20
Item 4.   SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS . . . . . . . . 20

                                     PART II
Item 5.   MARKET FOR COMMON EQUITY AND RELATED SHAREHOLDER MATTERS . . . . . .20
Item 6.   MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
            CONDITION AND RESULTS OF OPERATIONS . . . . . . . . . . . . . . . 24
Item 7.   FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA . . . . . . . . . . . . 28
            REPORT OF INDEPENDENT AUDITORS . . . . . . . . . . . . . . . . . .28
            CONSOLIDATED BALANCE SHEET . . . . . . . . . . . . . . . . . . . .29
            CONSOLIDATED STATEMENTS OF OPERATIONS . . . . . . . . . . . . . . 30
            CONSOLIDATED STATEMENTS OF CASH FLOWS . . . . . . . . . . . . . . 31
            CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY . . . . . . . . . 32
            NOTES TO CONSOLIDATED FINANCIAL STATEMENTS . . . . . . . . . . . .33
Item 8.   CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
          FINANCIAL DISCLOSURE . . . . . . . . . . . . . . . . . . . . . . . .40

                                     PART III
Item 9.   DIRECTORS, EXECUTIVE OFFICERS, PROMOTERS AND CONTROL PERSONS;
            COMPLIANCE WITH SECTION 16(a) OF THE EXCHANGE ACT . . . . . . . . 40
Item 10.   EXECUTIVE COMPENSATION . . . . . . . . . . . . . . . . . . . . . . 40
Item 11.   SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT . . 40
Item 12.   CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS . . . . . . . . . . 40
Item 13.   EXHIBITS, REPORTS ON FORM 8-K, AND FINANCIAL STATEMENT SCHEDULES . 40
             EXHIBITS . . . . . . . . . . . . . . . . . . . . . . . . . . . . 41
             REPORTS ON FORM 8-K . . . . . . . . . . . . . . . . . . . . . . .41
             SIGNATURES . . . . . . . . . . . . . . . . . . . . . . . . . . . 42
</TABLE>


<PAGE>
                                     PART I

Item 1.  DESCRIPTION  OF  BUSINESS

     This  Annual Report on Form 10-KSB and the documents incorporated herein by
reference  contain  forward-looking  statements  based  on current expectations,
estimates and projections about the Company's industry, management's beliefs and
certain  assumptions  made  by management.  All statements, trends, analyses and
other  information  contained  in  this  report relative to trends in net sales,
gross margin, anticipated expense levels and liquidity and capital resources, as
well  as  other  statements  including,  but  not  limited  to,  words  such  as
"anticipate,"  "believe,"  "plan,"  "estimate,"  "expect," "seek," "intend," and
other  similar  expressions,  constitute  forward-looking  statements.  These
forward-looking  statements  are  not  guarantees  of future performance and are
subject  to  certain  risks  and  uncertainties  that  are difficult to predict.
Accordingly,  actual  results  may  differ  materially from those anticipated or
expressed  in such statements.  Potential risks and uncertainties include, among
others,  those  set  forth in this Item 1 as well as under "Item 6. MANAGEMENT'S
DISCUSSION  AND  ANALYSIS  OF  FINANCIAL  CONDITION  AND RESULTS OF OPERATIONS -
LIQUIDITY  AND  CAPITAL  RESOURCES."  PARTICULAR ATTENTION SHOULD BE PAID TO THE
CAUTIONARY  STATEMENTS  INVOLVING  THE  COMPANY'S LIMITED OPERATING HISTORY, THE
UNPREDICTABILITY  OF  ITS  FUTURE  REVENUES,  THE  COMPANY'S  NEED  FOR  AND THE
AVAILABILITY  OF  CAPITAL  RESOURCES, THE EVOLVING NATURE OF ITS BUSINESS MODEL,
THE INTENSELY COMPETITIVE MARKET FOR BUSINES-TO-BUSINESS ELECTRONIC PROCUREMENT,
AND  THE  RISKS  ASSOCIATED  WITH  SYSTEMS DEVELOPMENT, MANAGEMENT OF GROWTH AND
BUSINESS  EXPANSION.  Except  as  required  by  law,  the  Company undertakes no
obligation  to  update any forward-looking statement, whether as a result of new
information,  future  events  or  otherwise.  Readers, however, should carefully
review  the  factors  set  forth  in other reports or documents that the Company
files  from  time  to  time with the Securities and Exchange Commission ("SEC").

OVERVIEW

     Vsource,  Inc.  (the  "Company")  is  positioning  itself  to  be a leading
provider of business-to-business electronic procurement services (eProcurement).
The  Company's  Virtual  Source  Network  (VSN)  allows  buyers and suppliers to
conduct business transactions on the Internet in an efficient and cost-effective
manner.  The  Company creates and markets its eProcurement services via a "pure"
Internet-based  Application  Service  Provider  (ASP)  model  which  enables the
Company's  clients  to access computer software and data that reside on a remote
server  rather  than  the user's own computer or local area network server.  The
clients  may access the Company's software on a rental basis through an Internet
browser  and,  therefore,  are  not  required  to  invest  in the ownership of a
perpetual  right  to  use  the  software, nor do the clients have to procure any
hardware  to operate the software application.  Using the ASP model, the Company
charges  an initial set-up fee to use the software and then charges on a time or
transaction basis for usage of the software depending on the requirements of the
individual  client.

     The  Company's  objective  is to create the leading pure Internet-based ASP
electronic  commerce  network platform for the business-to-business customer and
supplier.  The  Company  intends  to  create the leading virtual marketplace for
business-to-business  goods  and  services,  and  feels  that the ASP technology
provides  customers  an  advantage  not  presently  offered  by  competitive
eProcurement  providers.

INDUSTRY  BACKGROUND

     GROWTH  OF  THE  INTERNET  AND  E-COMMERCE

     The  Internet  has  emerged  as the fastest growing communication medium in
history.  eMarketer,  a leading Internet consulting firm, has estimated that the
number  of  Internet  users  in the United States will reach 66 million in 2000,
with  projected  growth to more than 100 million users by 2002.  The Internet is
dramatically  changing  how  businesses  and  individuals  communicate,  share
information  and  conduct  business,  such  as  business-to-consumer  and
person-to-person  electronic  commerce.  Recently,  the  widespread  adoption of
intranets and the acceptance of the Internet as a business communications medium
have created a foundation for business-to-business electronic commerce that will
enable  organizations  to  streamline complex processes, lower costs and improve
productivity.


                                      -1-
<PAGE>
     INEFFICIENCIES  IN  TRADITIONAL  BUSINESS  PROCUREMENT

     Historically,  most organizations have purchased goods and services through
paper-based  or  semi-automated  processes.  These  processes  are  costly, time
consuming,  complex  and  often  include  the  re-keying of information, lengthy
approval  cycles  and  significant  attention  of  financial  and administrative
personnel.  Furthermore,  corporate  purchasing  has  historically  been  highly
fragmented  and decentralized, thus making it difficult for businesses to manage
employee  purchases,  control  spending  and prevent duplicative or unauthorized
ordering.  The  cost  of  each corporate purchasing transaction generally ranges
from $75 to $175, often exceeding the cost of the items being purchased.  Facing
increasing  competitive  pressures  to  lower  costs  and  improve productivity,
businesses  are  seeking  to  replace these traditional paper-based transactions
with  centralized  eProcurement  solutions  that  provide  cost-effective  and
efficient  networks for the purchase of goods and services.  Beyond the time and
expense  associated  with  manual  processing  costs,  organizations suffer even
greater  costs  when  they  cannot fully exploit procurement economies of scale.
Most  businesses  lack  the  systems  that  enable them to monitor purchases and
compile  data  necessary  to  negotiate  better  volume discounts with preferred
suppliers.  When  preferred  suppliers are not used, the cost of items purchased
tends  to  be  higher.  With  the  increasingly  widespread use of the Internet,
businesses are now in a position to further automate purchasing activities.  The
availability  of  this  technology  creates a significant market opportunity for
Internet-based  business-to-business  electronic  commerce  solutions. With this
foundation,  management  believes  that  Internet-based,  business-  to-business
electronic  commerce is poised for rapid and substantial growth and represents a
significantly  larger  opportunity than business-to-consumer or person-to-person
electronic  commerce. Numerous well-regarded market research organizations, such
as  the  GartnerGroup and Yankee Group, have projected that business-to-business
e-commerce  will grow substantially during the next few years. The GartnerGroup,
for  example,  has projected that business-to-business e-commerce will grow from
$145  billion  worldwide  in  1999  to  $7.4  trillion  worldwide  in  2004.

TRADITIONAL  ELECTRONIC  PROCUREMENT  SOLUTIONS

     Currently  a number of companies provide traditional eProcurement solutions
that  attempt  to  reduce the inefficiencies of corporate purchasing through the
implementation  of  information  technology.  However,  while these solutions do
facilitate  eProcurement  transactions,  the Company believes that each of these
solutions has limitations that will prevent widespread adoption of the platforms
by  business  consumers  and  suppliers.

     -    Businesses have  historically  looked to electronic  data  interchange
          ("EDI") systems to address procurement cycle  inefficiencies.  EDI has
          gained wide  acceptance  in  automating  the sale and  procurement  of
          goods, principally in environments characterized by high dollar-volume
          transactions with a limited number of suppliers. EDI systems involve a
          uniform set of formats for  commercial  documents  used in procurement
          that are exchanged across private networks without human intervention.
          Because the EDI model relies on the uniformity of  documentation,  and
          therefore  transactions,   it  is  not  well  suited  to  address  the
          requirements of a dynamic  procurement  environment  involving a large
          community  of  buyers  and  sellers  of a wide  variety  of goods  and
          services.  Furthermore,  the EDI  model  does  not  provide  real-time
          interaction  between the buyer and seller, thus leaving the buyer with
          supplier information that may not be up to date. Lastly, the EDI model
          involves a high-cost of  installation  and  maintenance in addition to
          significant transaction fees making it an unsuitable solution for most
          businesses.

     -    Many vendors have developed  purchasing software systems to coordinate
          the  purchasing  of  goods  and  services  across  large  enterprises.
          However,  theses systems tend to be  cost-prohibitive  due to up-front
          licensing  fees  that can  exceed $1  million  and  maintenance  fees.
          Furthermore,  these systems tend to be very complex,  thus requiring a
          lengthy and expensive implementation process.

     Neither  of  these  current  solutions provides the full spectrum of online
functions,  such  as  placing simultaneous bid requests with multiple suppliers,
that  is  needed to create an open electronic marketplace for the procurement of
goods  and services.  Furthermore, both solutions are too costly for all but the
largest  businesses.  The  Internet,  on  the  other  hand,  provides  the
cost-effective  medium through which an open and interoperable trading community
can be established and grown.  With the widespread adoption of the Internet as a
business  communication platform, a significant market opportunity exists for an
Internet-based  business-to-business  electronic  commerce  solution.


                                      -2-
<PAGE>
THE  VSOURCE  SOLUTION

     The  VSN  Network  ("VSN")  is  the  Company's  flagship  product. It is an
Internet-based  application  that requires no software on the client side beyond
an  Internet  browser.  VSN allows organizations to establish central control --
and  either  centralized  or  decentralized  implementation - of procurement for
indirect  and  direct  goods and services. These include maintenance, repair and
operations  (MRO), capital equipment, services, travel and entertainment and all
of  the  finished  goods  and  raw  materials  required  by  any  business.  VSN
accommodates  100%  of the procurement process within the supply chain.  Because
customers do not have to install software on their servers and client computers,
the  average cost to test the effectiveness of VSN is less than $25,000.  If the
Company  then  elects to deploy VSN, they can select from five levels ranging in
both  cost  and  complexity.

     With  VSN,  the  inefficiencies  associated  with  paper-based  procurement
processes are significantly reduced.  Information only needs to be entered once,
and a continuous audit trail follows all transactions.  This means that clerical
activities,  such  as  re-keying  information,  are  substantially  reduced  or
eliminated.  Further,  since  VSN  automatically  tracks data, such as volume of
purchases  from  each  supplier,  much  less time is required from financial and
administrative  personnel to monitor results.  Approval cycle times are reduced,
since  the  application  provides  user-specific access controls, such as budget
limits,  item  purchase  authorization  limits,  and  restricted  supplier
availability.  This  enables  organizations  to  reduce or eliminate the complex
approval  processes  that  slow  the  purchase cycle, and it greatly reduces the
likelihood  of  unauthorized  ordering  from  non-approved  suppliers.

     When  VSN  is  employed  throughout an organization, the purchasing process
becomes  much  more  uniform  and  streamlined  than  with  paper-based  or
semi-automated  processes.  Each  user  can  place  orders  directly,  based  on
individual  authorization  limits.  While  procurement  can  be implemented in a
decentralized  manner,  it  can  be controlled centrally, along with the flow of
information.  Organizations  are  able  to better utilize historical and current
purchasing  information  to  negotiate  more  cost  effective  agreements  with
preferred  suppliers  and  achieve  much  greater  economies of scale.  Finally,
organizations  can  focus  resources  on  developing  improved supply strategies
rather  than  conducting  transactional  procurement.

BENEFITS  OF  THE  VSOURCE  SOLUTION

     -    Greater  Access for  Businesses of All Sizes.  VSN provides all of its
          members access to new customer and supplier  relationships through its
          eProcurement  network.  The  system  provides  an  extremely  easy and
          efficient  way  for  members  to  communicate  with a broad  array  of
          companies at a low cost and with little risk. Furthermore, because VSN
          only requires an Internet browser as an interface, it is an innovative
          platform for offering eProcurement  solutions to small-to-medium sized
          businesses that might not otherwise be able to afford such a system.

     -    Speed to  Implement.  Typical  procurement  implementation  cycles can
          range from 6 to 18 months and  require  significant  human  resources.
          Conversely,  depending  on the number of users being  entered into the
          system,  a procurement  client can implement VSN in just 1 week.  More
          complex  organizations  could take up to 2 to 3 months,  not including
          systems  integration  between legacy systems and VSN. However,  VSN is
          fully functional in parallel with the integration  effort, so there is
          no waiting time or opportunity cost to using VSN.

     -    Cost  Flexibility.  The VSN pricing  structure is highly  flexible and
          accommodates how companies want to manage their business. The low cost
          makes it a truly "disposable" solution for companies who prefer not to
          make  large  capital   expenditures  in  technology  that  is  rapidly
          changing.  Components of VSN can be selected  according to a company's
          current  needs,  yet  offer a way for  companies  to stay  with VSN by
          adding capability as their needs grow.  Likewise,  companies that have
          already  invested in other  procurement  processes  can  leverage  the
          Request For Quote (RFQ) and product development capabilities of VSN by
          utilizing it as a front-end system.


                                      -3-
<PAGE>
     -    True Scalability. VSN can accommodate an unlimited number of users and
          can access an unlimited number of suppliers.

     -    Improved  Management and Control.  Every user in VSN can have a unique
          profile along with associated  permissions and workflow  assigned by a
          manager.  Therefore, users can only purchase items that are previously
          approved  for their  profile and fall within a specified  dollar value
          threshold.

     -    Ease of Use and Configuration.  VSN is easily configured by the client
          and has pre-determined  default  configurations that companies can opt
          to use.  The  entire  configuration  process  is menu  and  "checkbox"
          driven.  All forms,  defaults and user  access/workflow  can be edited
          online.

     -    Access to All  Products/Services.  VSN  enables  direct  and  indirect
          purchasing of products and services.  VSN  accommodates  fixed catalog
          content similar to competitors,  as well as additional catalog content
          provided by RFQ responses previously requested by the company.

     -    World  Class   Systems   Integration.   The   Company   uses  IBM  and
          PricewaterhouseCoopers  as  the  preferred  providers  of  procurement
          consulting and systems  integration  services for its clients for most
          Enterprise Resource Planning (ERP) and legacy systems integration.

     -    Training and After Sales Support.  The Company has contracted with IBM
          Global Services to provide full training  services for up front system
          planning,  user  training,  ongoing  training  design  and  help  desk
          services.

     -    Platform  Independence.  VSN  is  not  software-based,   thus  systems
          integration  only  consists  of  mapping  the VSN  database  to  share
          information with the client's systems. VSN is compatible with Windows,
          Unix and Apple operating systems.

     -    Project Management. VSN can embed project codes into a user profile so
          that all costs associated with a project can be tracked.

     -    Formation   of   Consortiums/Trading   Communities.   VSN  easily  and
          economically  enables companies to form consortiums among their chosen
          trading communities or across multiple industries.  Companies can host
          consortiums  for their suppliers and customers or can align with other
          companies   who  buy   similar   items.   VSN  offers  the   security,
          affordability and configuration  flexibility of the Company's solution
          that make it a viable  solution for any company  seeking to capitalize
          on the opportunities presented by consortium purchases.

THE  VSOURCE  GROWTH  STRATEGY

     The  Company's  objective  is to create the leading pure Internet-based ASP
electronic  commerce  network platform for the business-to-business customer and
supplier.  Key  strategies  to  achieve  this  objective  include:

     -    Market  and sell  VSN  through  direct  sales to  private  and  public
          organizations  in a variety of industries  on a global  basis.  VSN is
          being  marketed  to this  group as a  cost-effective  new  process  to
          replace  traditional  software-based  procurement  systems.  Large and
          medium  sized  organizations  are seeking  alternatives  to  expensive
          software  systems,  and they  are  looking  for ways to  significantly
          reduce total procurement costs.

     -    Develop joint marketing programs with alliance partners, consisting of
          companies that offer complementary technology, products or services to
          VSN.  Alliance  relationships are also formed with companies that plan
          to  market  VSN  directly  to  their  own  customer  bases  as part of
          comprehensive electronic business application packages.


                                      -4-
<PAGE>
     -    Develop  relationships with marketplace hosts, who will use VSN as the
          engine for a variety of electronic marketplaces.  VSN would act as the
          eProcurement  engine  for  industry-specific   electronic  procurement
          marketplaces,  or VSN may be the  eProcurement  portion  of a  broader
          electronic business marketplace.

PRODUCTS  AND  SERVICES

     VIRTUAL  SOURCE  NETWORK(VSN)

     Currently  all  financial, technical and marketing resources of the Company
are  dedicated  to  VSN.  The  Company  plans to sell VSN through a direct sales
force,  through  independent  resellers,  and  through strategic partnerships in
which VSN will be offered to the partner's base of customers. VSN is designed to
be  sold  initially through a pilot program for on-going transaction fees and an
initial  set-up fee of $25,000. During the pilot program, the client is expected
to  test  the  functionality  of VSN and determine how much customization of the
system,  if  any, is required for a full implementation. The costs to the client
of a full implementation may be significant, particularly if the client requires
sophisticated  integration  with internal ERP or accounting systems. Most of the
costs  will  result  from  the  use  of outside systems consultants (non-Company
employees)  to perform the integration. Management expects that these costs will
vary  significantly  from  client  to  client.

     While  VSN is accessed by the Internet, all customer-specific data, such as
special  catalogs  and purchasing-related data, is kept confidential by means of
encryption  and  other  data  security  features. Clients only know of other VSN
clients  if  they have reason to do business with each other. Clients use VSN to
purchase  items by generating electronic purchase orders directly after shopping
in  online  catalogs.  Clients  may  also  initiate RFQs, Requests for Proposals
(RFPs)  or  Requests for Information (RFIs) which are electronically distributed
to vendors via the Internet. Vendors respond, via the Internet, with appropriate
information,  proposals  or  price  quotations  for the items requested. At that
point, the client may select one of the vendor quotations and send an electronic
purchase  order,  or  the  buyer  may communicate electronically with the vendor
regarding  counter-proposals  or  to  request  additional  information.

     All buying processes are completed by  issuing  electronic purchase orders,
receiving  electronic  invoices  from the suppliers, verifying that the invoiced
goods  or  services  have  been  received,  and  issuing payment authorizations.
Clients  also can have VSN data exported to requisite internal ERP or accounting
systems,  although  this  will  require  the  use  of  customized  interfaces or
third-party  interconnection  products.

     During  1997 and early 1998, the Company offered an earlier version of VSN,
which  was a software application installed on client computers. The company has
discontinued the sale and use of this product. Vsource's Internet version of VSN
has  just  recently  been  made  available  for  use  by clients. The Company is
presently  hiring  a  direct  sales  force  and  creating  relationships  with
independent  resellers  and  strategic  partners.

VIRTUAL  SOURCE  PUBLISHER

     In addition to VSN, the Company also owns Virtual Source Publisher (VSP), a
do-it-yourself  web  site  builder  that  allows  users  to  establish their own
Internet  web  site.  At  this time, VSP is a secondary priority of the Company.
Financial, technical and marketing resources will be dedicated to VSP only after
the  needs  of  VSN are addressed. There can be no assurances, furthermore, that
the Company will decide to implement VSP at some later point because of changing
market  requirements.  As a result, the Company does not anticipate deriving any
revenues  from  VSP  during  its  current  fiscal  year.

TECHNOLOGY

     Companies  handle  their  procurement  processes  on  VSN  using  the
Internet-based  browser  available  on  their  personal  computers.  The  VSN
application  itself  is  hosted  by  the  Company  on servers that reside on the
Internet.  The VSN system has a three-tier database-driven architecture that has
been  built  for  reliability and scalability. As more companies use the system,
the Quality of Service associated with using VSN can be maintained at a constant
level  by  adding  additional  processing resources required by each tier of the
architecture.  By  adding  more  servers  at  multiple processing locations, the
overall  system  has  a  virtually  unlimited  ability  to  scale.


                                      -5-
<PAGE>
     An  important  technological capability is improved control and enhancement
of  the  application.  Because  the  application  resides  on company-controlled
computers,  bug fixes and new features can be added on a continual basis as they
become  available,  rather  than  released  on  a periodic basis as is done with
virtually  all software that resides on customer-controlled computers, requiring
no  maintenance  effort  on  the  part  of  the customers to upgrade the system.

     Because  the  application  is accessed via the Internet, all client data is
stored  centrally at the Company's host site. Such data can be downloaded to the
customer's  internal  processing  systems  as  required, although this typically
requires  a  customized integration with the client's existing internal software
systems.

     All  data  is transmitted securely on the Internet via Secure Socket Layers
(SSL).  Data  transfers  are  performed  using  industry  standard  formats.

     Localization  of  the product is performed with language translation of all
prompts  and  content.  A  software  tool  has  been  developed  allowing direct
modification  of  prompts  and  content  in the system by third-party linguists.

STRATEGIC  RELATIONSHIPS

     In  April  2000,  the  Company  signed  a  letter  of  intent  with  NeTune
Corporation  of  Los  Angeles, California, in which the Company will provide its
electronic purchasing service to companies in the film and television production
industries  that  use  NeTune's  satellite based communications services. NeTune
allows  film and television companies to perform a series of electronic services
directly  from  remote  production  locations  by  using  two-way  satellite
communications.

     In  March  2000,  the  Company  formed  a strategic marketing and technical
alliance  with  Internet  Commerce Corp. (ICC) of New York City, New York, where
ICC  will  connect  its  Internet electronic data interchange (EDI) network with
VSN.  The  interconnection will allow VSN customers to exchange purchase-related
documents  with  companies  that  accept such documents in the EDI standard. ICC
estimates  that more than 400,000 companies worldwide have the ability to accept
purchasing-related  documents  via  the  EDI  standards.

     In  February  2000,  the Company entered into a strategic relationship with
U.S.  West,  Inc. of Denver, Colorado, in which the two firms agreed to make VSN
available  to  U.S.  West's  business customers. U.S. West also agreed to take a
minority  equity stake in Vsource. VSN is the first component of a comprehensive
collection  of  services  that U.S. West said it intends to launch in 2000. U.S.
West  provides  telecommunications  and  related  services,  wireless  services,
high-speed  data  and  Internet  services  and directory services principally to
customers  in  the states of Arizona, Colorado, Idaho, Iowa, Minnesota, Montana,
Nebraska,  New  Mexico, North Dakota, Oregon, South Dakota, Utah, Washington and
Wyoming.

     In  February  2000,  the  Company  entered a strategic alliance with Vitria
Technology  Inc. of Sunnyvale, California, in which Vitria's eBusiness platform,
BusinessWare, can be used by Vsource customers to speed the development of links
between  VSN  and  existing internal processing systems. Vitria is a provider of
eBusiness  infrastructure  software  that  enables  incompatible  information
technology  systems  to  exchange  information  over  corporate networks and the
Internet.

     In January 2000, the Company entered a strategic alliance with ZoomON, Inc.
of  San  Jose,  California,  in which ZoomON's vector graphics visualization and
design  software will be used to develop sophisticated product catalogs based on
product  drawings. Customers can use the ZoomON-based catalogs over the Internet
to  click  on  a  product  drawing and then select specific parts to be ordered.


                                      -6-
<PAGE>
     In  November  1999,  the  Company  entered  into  a strategic alliance with
Corporate  Express,  Inc.  of Bloomfield, Colorado, in which Corporate Express's
extensive  catalog  of  office  and  computer products and services will be made
available  as  part  of  VSN.  Corporate  Express,  a wholly-owned subsidiary of
Buhrmann  NV,  has operations in more than 300 locations worldwide, including 89
distribution  centers.

     The  Company  is  a  paying client of IBM, which has developed the training
program  for VSN users. Clients of the Company may retain the services of IBM in
order  to  train  their  staffs  to use the VSN system. In addition, IBM and the
Company  have  each  agreed informally to make their respective clients aware of
the  other  firm's  services,  where  it  seems  appropriate  for  the client in
question.  Further,  both  firms  will  work together as a team for a particular
client.  IBM  services  include  consulting  to  help  clients  improve  their
procurement practices, and consulting to assist a client with integration of VSN
into  existing  computer systems used by the client. Neither IBM nor the Company
pay  each  other  for services rendered. The clients being served make payments.
Finally,  IBM  provides  the  Company  and  its  VSN  customers with translation
services  through its Polar Bear business unit. Both the Company and the clients
served  pay  for  these  services.

     The  Company  has  an  informal  relationship  with PricewaterhouseCoopers,
pursuant to which each firm has agreed to make its clients and potential clients
aware  of  the  other  firm's  services,  in  those  instances  where  it  seems
appropriate for the client. In certain situations, both firms will work together
as  a  team  for  a  particular  client. PricewaterhouseCoopers services include
consulting  to  help clients improve their procurement practices, and consulting
to  assist  a client with integration of VSN into existing computer systems used
by the client. Neither PricewaterhouseCoopers nor the Company pay each other for
services  rendered.  The  clients  being  served  make  payments.

SALES  AND  MARKETING

     The  Company  sells  its  services  through  two primary channels. First, a
direct  sales  force,  consisting of five sales professionals as of December 31,
1999,  is  organized geographically into four regions. These Sales Professionals
focus  on  selling  VSN  to  large  enterprise  class  organizations,  typically
companies with annual sales of at least $1 billion per year. Sales professionals
receive  a  base  salary  and  earn commissions based on achieving quarterly and
annual  sales  goals. The Company has also developed an indirect channel through
various  alliance  relationships  to  leverage and accelerate market adoption of
VSN.  Alliance  companies provide leverage through joint marketing programs with
Vsource and through direct sales to their customer base, using their own company
sales  force.

     The  alliance  program  identifies  and  proactively  approaches  leading
companies  whose  products/services  are  complementary  to  its  own.  Current
alliance  partners  include  PricewaterhouseCoopers  and  IBM.  Additional
consulting  firms  and systems integrators will be selectively added as alliance
members  as appropriate.  Alliance members share in transaction fees if they are
involved  in the sale of VSN to a client as well as in the ongoing management of
the  client  relationship.  Additionally,  alliance  member  services,  such  as
systems  integration  or  training,  are  charged  directly  to  the  clients as
required.

     The  VSN associate program is designed to identify individuals or companies
who are interested and capable of helping sell VSN services to potential clients
globally.  These  individuals  will  also  share in the transaction fees for any
clients  where  they  have  played  a  role  in  completing  a  sale.

CUSTOMER  SERVICE,  TRAINING  AND  SUPPORT

     The  Company uses IBM and PricewaterhouseCoopers as its preferred providers
of  procurement  consulting and systems integration services for its clients for
most  ERP  and  legacy systems integration.  The Company has also contracted IBM
Global  Services to provide full training services for up front system planning,
user  training, ongoing training design and help desk services. IBM's Polar Bear
business  unit  provides  custom  translation  of  VSN's  system  commands  and
instructions, so that it can be used in other languages as requested by clients.

     All alliance and associate program members are required to attend, complete
and  become  certified  at a VSN boot camp before working with VSN at the client
level.  The  boot  camp is an intensive 2 to 3 day training session developed in
association  with  IBM  Global  Services  and  includes  training  for sales and
technical  certifications.


                                      -7-
<PAGE>
RESEARCH  AND  DEVELOPMENT

     In  fiscal  year  2000,  the  company  spent  $3,458,933  on  research  and
development.  In fiscal year 1999, the Company spent $1,263,720. The increase is
the  result  of  the  Company's  decision  to  change  VSN from a PC-based to an
Internet-based  application.  The  Company  is presently performing research and
development in four major functional areas: application functionality, security,
external  integration  and global Quality of Service. In the area of application
functionality,  the  Company  is  continuing to add new features and improve the
operational  reliability  of the system. In the area of security, the Company is
working  on  improved  methods  of  secure  data transmission, storage and fraud
detection.

     In  the  area of external integration, the Company is continuing to explore
improved  ways  of  connecting the procurement processes performed by VSN with a
client's  back  end  computing  systems,  including  the  use of Electronic Data
Interchange  (EDI),  custom  integration with Enterprise Resource Planning (ERP)
systems,  and the potential use of the RosettaNet transaction standards that are
under  development.  In  the  area  of global Quality of Service, the Company is
exploring  advanced  system  architectures  that  will allow virtually unlimited
processing capability. The Company is also exploring alternative technologies to
land-based communications, such as satellite and cellular wireless communication
technologies.

COMPETITION

     The market for VSN is very competitive and likely to become more so, and is
subject to rapid technological change. Increased competition is likely to result
in  price  reductions,  to  some  extent  caused by VSN pricing which management
believes is below current industry averages (see "FACTORS THAT MAY AFFECT FUTURE
PERFORMANCE  -  COMPETITIVE  "BUSINESS-TO-BUSINESS"  INTERNET  COMMERCE  MARKET;
EFFECT  ON MARKET SHARE AND BUSINESS)."  Although  management  believes that VSN
compares favorably with respect to competitive offerings (several having greater
financial capability  than  VSN), and favorably with respect  to  overall  cost,
VSN does not yet have a large referral base, nor  large  numbers  of  buyers  or
vendors using the network,  and  its  performance  has  yet  to  be  proven with
regard to the new Internet version of  VSN.  As  a  result, it is yet to be seen
whether VSN can compete  successfully.

GOVERNMENT  APPROVALS

     While  there are no governmental approvals required specifically related to
the  licensing  or  use  of  VSN  or  Virtual  Source  Publisher,  and no direct
governmental regulation, that could change.  In those circumstances, competitors
with  larger  administrative  staffs  and  more financial resources will be in a
better  position  to  comply  with  this  regulation  and  obtain  any necessary
approvals.  However,  management  is  not  aware  of  any pending or anticipated
government  regulations  that  will  negatively impact the Company in a material
way.

DEPENDENCE  UPON  SUPPLIERS

     The  Company is not dependent on suppliers of raw materials, although it is
dependent  on the Internet, including the ability to communicate with its remote
servers.  The  Company's  clients  are  also  dependent on the Internet for this
communication, without which clients would be unable to use any of the Internet-
based  services  provided by the Company. Should the Company and its clients not
be  able to access the Internet for an extended period of time, it could have an
adverse  material  effect  on  the  Company's  operations.

TRADEMARKS

     Vsource  has  been  awarded  the  trademark  VIRTUAL  SOURCE.  It  also has
applications  pending  for the trademark VSOURCE and the service mark DELIVERING
ON  THE  PROMISE  OF  THE  INTERNET.

     Vsource  does  not  have  patents  or patent applications pending.  Vsource
technology  is  protected  by the security of the Company-maintained Web site in
which  Vsource  software code resides, by confidentiality agreements it has with
its development personnel, and by the separation of development responsibilities
and  access  authorities.


                                      -8-
<PAGE>
EMPLOYEES

     As  of  April  15,  2000, the Company employed 42 full-time employees and 3
part-time employees, consisting of 8 executives, 6 general and administrative, 5
marketing  and  sales,  and  26  research,  development, operations and customer
relationship  management personnel. The Company believes that its future success
will  depend  in  part  on  its  ability to attract, hire and maintain qualified
personnel.  There  can  be  no assurance that the Company will be able to do so.
Competition  for  such personnel in the online industry is intense.  None of the
Company's  employees are represented by a labor union, and the Company has never
experienced  a  work  stoppage.  The  Company believes its relationship with its
employees  to  be  good.

     The  following  table  sets  forth  the  names,  ages, and positions of the
directors  and  officers  of  the  Company  as  of  April  10,  2000.

NAME                  AGE   POSITION
Robert C. McShirley    45   President, Chief Executive Officer and Chairman of
                            the Board
Scott T. Behan         38   Director,  Member  of  the  Audit  Committee
Samuel E. Bradt        61   Director,  Member  of  the  Audit  Committee
Ramin Kamfar           36   Director,  Member  of  the  Audit  Committee
Robert N. Schwartz     60   Director
P. Scott Turner        33   Chief  Operating  Officer
Sandford T. Waddell    59   Chief Financial Officer, Treasurer, and Secretary
Jeri D. Sessler        46   Executive  Vice  President,  Client  Operations
Dennis W. McQuilliams  58   Vice  President,  Chief  Technology  Officer
Richard S. McShirley   43   Vice  President,  Business  Development
Daniel J. Jinguji      46   Vice  President,  Product  Development
Ronald J. Sanderson    53   Vice  President,  Marketing

     ROBERT  C.  MCSHIRLEY.    Mr.  McShirley  has served as President and Chief
Executive  Officer  of  the  Company since May 1997, as a director since January
1998,  and  as  Chairman  since  June  1999.  From  1995  to May 1997, he was an
independent consultant specializing in the field of manufacturing, with his most
recent  assignment  being  with  AML  Communications,  Inc.,  a  manufacturer of
wireless  amplifiers.  Prior to that, he was the founder of Virtual Source, Inc.
(formerly  Buyer/Seller  Interactive  Software,  Inc., which was acquired by the
Company  in  1995).  Robert  C. McShirley and Richard S. McShirley are brothers.

     SCOTT  T. BEHAN.  Mr. Behan has served on the Company's board since January
1998.  For  the  past  five  years, Mr. Behan has been employed as the Executive
Vice  President  of  AML  Communications,  Inc.,  a  manufacturer  of  wireless
amplifiers.  He  has been a director of AML since February 1999. Mr. Behan has a
B.S.  in  Electrical  Engineering  from  Worcester  Polytechnic  Institute.

     SAMUEL  E.  BRADT. Mr.  Bradt has served on the Company's board since 1996.
From December  1996, through March 6, 2000, he served as Chief Financial Officer
and Secretary of the  Company.  He  is  currently  a  director  of  six  private
companies  and  one  other  public  company,  Lunar  Corporation  of  Madison,
Wisconsin.   Mr. Bradt  has a B.S. from Stanford University, and  an M.B.A. from
the  University  of  Chicago  Graduate  School  of  Business.

     RAMIN  KAMFAR.  Mr.  Kamfar  has  served on the Company's board since April
2000.  Mr.  Kamfar is a Managing Partner at New World Venture Partners, Inc., an
investment  banking  boutique  focusing on technology and new economy companies.
Since 1993, Mr. Kamfar has also served in various capacities at New World Coffee
-  Manhattan  Bagel,  Inc., a company he founded. Most recently he has served as
Chairman and Chief Executive Officer. From 1988 to 1993 Mr. Kamfar worked in the
investment  banking department of Lehman Brothers, Inc., most recently as a Vice
President  in  private  placements.   Mr.  Kamfar has a B.S. in Finance from the
University  of  Maryland and an M.B.A. in Finance from The Wharton School at the
University  of  Pennsylvania.


                                      -9-
<PAGE>
     ROBERT  N.  SCHWARTZ.  Mr. Schwartz has served on the Company's board since
January 1998.  From 1981 to the present, Mr. Schwartz has been a Senior Research
Scientist  at  HRL  Laboratories  LLC,  Malibu,  California.  From  1979  to the
present, Mr. Schwartz has been a visiting professor at U.C.L.A. He has a B.A. in
Mathematics,  Chemistry  and  Physics,  and an M.S. in Chemical Physics from the
University of Connecticut, and a PhD. in Chemical Physics from the University of
Colorado.

     P.  SCOTT  TURNER.  Mr.  Turner has served as the Company's Chief Operating
Officer since March 2000.  Mr. Turner was a member of Company board from January
1998  to  March 2000.  From July 1997 to  March 31, 2000,  Mr.  Turner  was Vice
President of Operations for Holbrook Design LLC, a company  engaged  in  product
realization.  From January 1990 to June  1997, Mr. Turner  served  as  the  Vice
president of Operations of SCICON Technologies Corp., a company engaged in rapid
prototyping and product development automation. He is presently  a  director  of
SCICON  Technologies  Corp. Mr.  Turner  has  a B.S.  in  Computer  Science  and
Engineering  from  the  Milwaukee School of Engineering.

     SANDFORD  T.  WADDELL.   Mr.  Waddell  has  served  as  the Company's Chief
Financial  Officer  and  Secretary since March 2000.  From October 1999 to March
2000  ,  Mr.  Waddell as the Chief Financial Officer for Snyder Diamond, Inc., a
privately  owned  retail  company.  From March 1998 to October 1999, Mr. Waddell
served as Chief Financial Officer for Rampage Clothing Company, a privately held
clothing manufacturer which was in bankruptcy, and which he helped to restore to
profitability  and  effected  a successful reorganization.  From October 1966 to
March  1988,  Mr.  Waddell served initially as Chief Financial Officer and later
also  as  Interim  Chief  Executive Officer at Reddi Brake Supply Corporation, a
wholesale  auto  parts  distributor,  where  he directed a reorganization of the
company's operating subsidiary.  From February 1992 to October 1996, Mr. Waddell
served  as  Interim  Chief  Financial  Officer  or  Financial  Consultant  for
approximately  twelve  privately  held  companies.  Mr.  Waddell holds a B.S. in
Engineering from Michigan Technological University and an M.B.A. from University
of  Minnesota.

     DENNIS  W.  MCQUILLIAMS.  Mr. McQuilliams has served as the Company's Chief
Technology  Officer  since  June  1999.  Since October 1997, Mr. McQuilliams was
served  as  president  of  Wpg.Net, Inc.  Wpg.Net was acquired by the Company in
June  1998.  Prior  to  October  1997,  Mr.  McQuilliams  was self-employed as a
consultant  in  software  design  and  construction and project management.  Mr.
McQuilliams  has  a  background in finance, and over fifteen years experience in
design, development and implementation of business application software for mini
and microcomputers.  He has developed multi-user programs for municipal entities
and  the  vision health industry, as well as accounting systems, payroll systems
and  other  custom  applications.

     JERI  D.  SESSLER.  Ms. Sessler has been Executive  Vice President,  Client
Operations with the Company since  March  2000.  From August 1999 to March 2000,
Ms.  Sessler served as the Chief Operating Officer of the Company.  From 1996 to
1999,  Ms. Sessler was principal consultant with PricewaterhouseCoopers in their
Center of Excellence, Full Value Procurement Practice, Western Region, where her
responsibilities  included  leading edge procurement practices and technologies,
working  with  Fortune  1000  companies.  Prior to 1996, she spent fifteen years
with  A.T.  Kearney,  Inc.  where she was Director, Practice Development, Supply
Chain  Integration  Practice.  Ms.  Sessler  has  a  M.B.A. from the Lake Forest
Graduate  School  of  Management, and a B.A. from  Northern Illinois University.

     RICHARD  S.  MCSHIRLEY.  Richard  McShirley  has served the Company as Vice
President  of  Business  Development  since  1995.  Mr.  McShirley has more than
fifteen  years  experience  developing  and  implementing  marketing  and  sales
programs.  Prior to working for the Company, he worked with the creators of King
World Productions, and the creators of the television series "Wild America".  He
led  the  development  of  a merchandising and licensing program related to that
television  series. He has a B.A. in International Relations from the University
of  Southern  California.  Robert  C.  McShirley  and  Richard  S. McShirley are
brothers.

     DANIEL  J.  JINGUJI.  Since  April  1999,  Mr.  Jinguji  has  served as the
Company's  Vice  President of Product Development.  From 1993 to March 1999, Mr.
Jinguji  was a Software Design Engineer at Microsoft.  Mr. Jinguji spent fifteen
years  with  Microsoft Corporation, where he co-authored "Learn Microsoft Visual
J++ 6.0" to help explain the Microsoft version of the Java programming language.
He  attended  the University of Washington in Seattle where he received his B.A.
in  Mathematics,  B.S.  in  Biology  and  M.S.  in  Computer  Science.


                                      -10-
<PAGE>
     RONALD J. SANDERSON.  Since September 1999, Mr. Sanderson has served as the
Company's  Vice  President  of Marketing.  From June 1998 to September 1999, Mr.
Sanderson  was principal consultant with Netsource Management, Inc., focusing on
strategic  sourcing,  supply chain and marketing.  From March 1986 to June 1998,
Mr.  Sanderson  was  a  consultant  with  A.T.  Kearney,  Inc.  He has a B.S. in
Mechanical  Engineering  from  Northwestern  University  and  an  M.B.A.  from
Northwestern  University.

FACTORS  THAT  MAY  AFFECT  FUTURE  PERFORMANCE

     SPECIAL  NOTE  REGARDING  FORWARD-LOOKING  STATEMENTS

     Some  of  the  statements  in  this  document  constitute  forward-looking
statements. These statements involve known and unknown risks, uncertainties, and
other  factors that may cause actual results, levels of activity, performance or
achievements  to  be  materially  different  from  any future results, levels of
activity,  performance  or  achievements  expressed  or  implied  by  these
forward-looking  statements.  Although management believes that the expectations
reflected  in  the  forward-looking  statements  are  reasonable,  there  is  no
guarantee  that  future results, levels of activity, performance or achievements
will  be  attained.  Moreover,  neither  management nor any other person assumes
responsibility  for  the  accuracy  and  completeness  of  these  statements.

     The  Company's  business, financial condition and results of operations may
be  impacted  by  a number of factors including, without limitation, the factors
discussed  below.

RISKS  RELATED  TO  THE  COMPANY'S  BUSINESS

     NEED FOR ADDITIONAL CAPITAL: The Company has recorded substantial operating
losses  and, as of January 31, 2000, has an accumulated deficit of $9.8 million.
As  discussed  in  Item  6.  MANAGEMENT'S  DISCUSSION  AND ANALYSIS OF FINANCIAL
CONDITION  AND  RESULTS OF OPERATIONS -- LIQUIDITY AND RESOURCES, if the Company
is  to  sustain  its  current rate of development and operating expenditures, it
must  generate  additional capital in the second quarter or third quarter of the
fiscal year ending January 31, 2001, from client revenues, private equity sales,
or  both.  The  Company  is  currently implementing contracts with five clients.
These clients, and others that are near the implementation stage,  are  expected
to produce revenues in the  second quarter of  this  year.  In  March  2000, the
Company  retained  a  full  time  Chief Financial  Officer  and  engaged a major
investment bank to  help  the Company  raise additional equity.  The  investment
bank  is  currently  working  on  the  private  placement  of  equity  capital
sufficient to fund the  Company's  operations until such time as a public equity
offering  is  practicable.

     ANTI-TAKEOVER  PROVISIONS:  Provisions  in  Nevada  law  and  the Company's
Articles  of  Incorporation and Bylaws could delay or prevent a third party from
acquiring the Company, even if doing so would be beneficial to the stockholders.
In  addition,  such  provisions  may affect the price that some investors may be
willing to pay for the Company's stock.  Such provisions include the issuance of
preferred  stock  by  the board of directors without prior stockholder approval,
commonly referred to as "blank check" preferred stock, with rights senior to the
Company's  common  stock.  The  Company  has 5,000,000 shares of preferred stock
authorized.  The  Company has designated 2,900,000 shares of the preferred stock
"Series  1-A  Convertible  Preferred Stock" of which 2,802,000 shares are issued
and outstanding.  There remains 2,100,000 shares of preferred stock which may be
issued  with rights, preferences and privileges to be designated by the board of
directors.  While  such  shares  of  preferred  stock  may  not  have  rights or
preferences  senior  to  the Series 1-A Convertible Preferred Stock, they may be
senior  to  the  common  stock  of  the  Company.

     In  addition,  the Company is seeking stockholder approval to reincorporate
in  the  State of Delaware.  In connection with the reincorporation, the Company
is  seeking  an  increase in the number of shares of common stock authorized for
issuance,  which  could  be  used  to prevent or discourage a change of control.

     LIMITED  OPERATING  HISTORY:  VSN,  the Company's primary service offering,
began  operations  in  October  1996 when the earlier version of VSN, a software
application  for  personal  computers  rather  than an Internet application, was
successfully installed and used at a private company in southern California. The
Company  has  had  a  limited  operating  history  since  then,  although it did
successfully install the earlier VSN version (personal computer application) for
several  clients, and was paid the annual subscription rate then in effect. This
limited  history  makes  an  evaluation  of  the Company's future prospects very
difficult.  The  new Internet version of VSN is now available for evaluation and
use  by  customers,  but  does  not yet have any fully operational customers. As
such,  because  of  the  limited  operational  history  of  VSN, there can be no
assurances  that  the product will meet the needs of potential customers or that
the  product  will  operate  correctly.


                                      -11-
<PAGE>
     RISKS OF EARLY STAGE COMPANY; NEW, RAPIDLY CHANGING MARKET; NEED TO ATTRACT
LARGE  CORPORATIONS:  The market for Internet applications and services is at an
early  stage,  and  changing  rapidly.  Internet procurement is a relatively new
market. Its rate of growth and change is unpredictable, as is the nature of this
change.  The Company will encounter the risks and difficulties often encountered
by  early-stage  companies  in  new  and rapidly evolving markets. The Company's
initial  success  will  depend  upon  attracting  several large, technologically
advanced  corporations  to use VSN, and their favorable results from this usage.
Subsequent  success  will  depend  on the Company's ability to communicate these
early successes to the marketplace, thus attracting significant numbers of other
businesses  and buying organizations. No assurance can be given that the Company
will  be  successful  in the marketplace, or if successful, that it will attract
significant  numbers  of  clients.  There  can  be no assurance that an adequate
demand  for,  and  usage  of,  the  Company's  products  will  develop.

     COMPLEX IMPLEMENTATION AND INTEGRATION OF VIRTUAL SOURCE NETWORK MAY IMPEDE
MARKET  PENETRATION:  The  installation  of  VSN,  including  integration with a
client's  systems  currently  in  use,  can  be  a  complex,  time consuming and
expensive  process.  While the Company is designing a simplified version for use
by smaller organizations with limited enhancement capabilities and, as a result,
a  low cost associated with its implementation, the Company anticipates that its
initial  customers  will  be mid-sized or larger organizations that will require
that VSN undergo substantial customization to meet their needs. These firms will
also  likely require that VSN be integrated with existing internal ERP and other
operational  systems.  The  Company's management estimates that the installation
and  integration process may take anywhere from one month to six weeks or longer
in  some  cases,  depending  on  the  size  of the client, the complexity of its
operations,  the  configurations  of  its  current  computer  systems, and other
systems  projects  that  compete  for  the time and attention of the Information
Technology  departments  of  the  clients.  Management  also  expects  that most
integration  projects  in  larger  companies will involve various integrators as
outside  systems consultants to the client. The Company's ability to continually
enhance  the features of VSN, in response to client's widely differing needs, is
yet  to  be  proven.  The  Company's ability to develop a simplified version for
smaller  businesses  that  is  inexpensive  to  implement is also unproven. As a
result,  VSN  may not achieve significant market penetration in the near future,
or  ever.

     LARGE  OPERATING  LOSSES  EXPECTED TO CONTINUE: The Company has accumulated
net  losses  of  $9.8  million  through  January  31, 2000. Since inception, the
Company  has  not  had  material revenues, and has recognized no revenues at all
from  the Internet version of VSN. The Company expects to derive the majority of
its  revenues from VSN fees over the next five years. In addition, provided that
revenues  develop  more  or  less  as  expected,  the Company expects to spend a
substantial portion of revenues during the next two or three years on marketing,
sales,  technology  development,  training  and  administration. There can be no
assurance  that  the  Company  will  be  able  to  fund  these  expenses.

     FAILURE  TO  ACHIEVE  LISTING  ON  MAJOR  STOCK  MARKET: In March 2000, the
Company  applied  for  listing  on the Nasdaq National Market System. Management
believes that it meets the stated requirements for listing on Nasdaq. Presently,
the  Company's  stock  is  traded  on the over-the-counter bulletin board system
under  the  stock symbol, VSRC (see Item 5. MARKET FOR COMMON EQUITY AND RELATED
SHAREHOLDER  MATTERS).  While the listing of the Company's stock does not have a
direct effect on the Company's operations, it has an effect on the perception of
the Company amongst potential investors and can have an effect on the ability of
the  Company  to  raise  additional  funds.  It  can  also  impact  the dilution
associated  with  any  financing.  There can be no assurances that the Company's
application  will be accepted by Nasdaq or that the Company will have its shares
listed  on  a  major  exchange.

     Until  the  Company's  securities  are  listed  on  a  major  exchange, the
securities  of  the  Company are subject to a Securities and Exchange Commission
rule  that  imposes  special sales practice requirements upon broker-dealers who
sell  such  securities to persons other than established customers or accredited
investors. For purposes of the rule, the phrase "accredited investors" means, in
general  terms, institutions with assets in excess of $5,000,000, or individuals


                                      -12-
<PAGE>
having  a  net  worth  in  excess  of $1,000,000 or having an annual income that
exceeds  $200,000  (or  that,  when  combined  with  a  spouse's income, exceeds
$300,000).  For  transactions covered by the rule, the broker-dealer must make a
special  suitability determination for the purchaser and receive the purchaser's
written  agreement  to the transaction prior to the sale. Consequently, the rule
may  affect  the ability of broker-dealers to sell the securities of the Company
and  also  may affect the ability of any shareholder to sell their securities in
any  market  that  might  develop  for  the  common  stock.

     EFFECT  OF  INCREASED  OPERATING EXPENSES ON OPERATIONS AND PRICE OF COMMON
STOCK:  The Company plans to increase operating expenses to expand its sales and
marketing  operations,  establish  new  strategic relationships, fund additional
systems  development,  and  increase  its  business  and  technical staff. These
planned  expenses will increase operating losses during reporting periods before
significant  revenues  develop.  These  increased  losses  could have a negative
effect  on  the  price  of  the  Company's  common  stock.

     DEPENDENCE  ON  VIRTUAL  SOURCE  NETWORK  ANTICIPATED REVENUES: The Company
expects  that when revenues do develop, substantially all of those revenues will
come  from  VSN  clients.  Although  VSN  fees are believed by management of the
Company  to be below those currently charged for leading competitive systems and
services,  future  reductions  in competitive prices could negatively impact the
demand  for, or usage of, VSN. These changes may impede VSN's ability to achieve
broad  market acceptance, thus negatively impacting the Company's opportunity to
eventually  become  profitable.  There can be no assurance that broad and timely
acceptance  of  VSN,  which is critical to the Company's future success, will be
achieved.  Failure  to  achieve  anticipated  revenues  would  have  adverse
consequences  for  the  Company.

     DEPENDENCE  ON  ONE  PRODUCT:  At  the  present  time  all of the Company's
resources  are  being  devoted  to  the  development  and marketing of VSN.  The
Company expects to depend on VSN for substantially all of the Company's revenues
for the foreseeable future.  Accordingly, if VSN is not accepted by customers or
potential  customers,  or  does not generate the demand or revenues necessary to
the  Company,  the  Company  may  face  serious  or  irreparable  harm.

     DEPENDENCE  ON SALES AND MARKETING RELATIONSHIPS FOR GROWTH.:  Our business
model  includes  generating  sales  through our alliance and affiliate programs.
Consequently, the Company will depend, in part, on sales and marketing strategic
relationships  for  growth. The Company has established and plans to continue to
establish  sales  and marketing strategic relationships with large organizations
as  part  of  our  growth  strategy.  Such  relationships  may not contribute to
increased  use  of  the Company's services, help the Company add new clients, or
increase  the  Company's  revenue. The Company may not be able to enter into new
relationships  or renew existing relationships on favorable terms, if at all. In
addition,  the  Company  may  not  be  able  to  recover  costs and the expenses
associated  with  the  formation  of  these  programs.

     THIRD  PARTY IMPLEMENTATION/INTEGRATION OF VIRTUAL SOURCE NETWORK; NEGATIVE
IMPACT  UPON  REVENUE  GOALS IF THIRD PARTIES UNAVAILABLE OR DO NOT PERFORM: The
Company  expects  to  rely,  to  a large degree, on a number of third parties to
propose  and  explain  VSN to prospective clients, to sell pilot projects to the
clients, and to integrate VSN with clients' existing systems, and to train users
when VSN is rolled out for general usage. The Company itself is planning to work
with  clients  and  third-parties to implement the pilot projects. The Company's
ability to support its strategic partners, in pursuit of large numbers of buyers
and  suppliers,  is  yet to be proven. If the Company is unable to establish and
maintain  effective,  long-term relationships with these third parties, if these
third  parties  are unable to meet the needs and expectations of VSN clients, or
if the Company cannot properly implement pilot projects, the Company will likely
have  difficulty  achieving  its  revenue  goals.

     UNSUCCESSFUL  ACQUISITIONS  COULD  HARM OUR OPERATING RESULTS, BUSINESS AND
GROWTH.:  The  Company  may  acquire  businesses, products and technologies that
complement  or  augment  the  Company's  existing  businesses,  services  and
technologies.  The  inability  to  integrate  any  newly  acquired  entities  or
technologies  effectively  could  harm the Company's operating results, business
and  growth.  Integrating  any  newly acquired businesses or technologies may be
expensive and time consuming.  To finance any acquisitions, the Company may need
to  raise  additional funds through public or private financings.  Any equity or
debt  financings, if available at all, may be on terms that are not favorable to
the Company and, in the case of equity financings, may result in dilution to the
Company's  stockholders.  The  Company  may  not be able to operate any acquired
businesses  profitably  or  otherwise  implement the Company's business strategy
successfully.


                                      -13-
<PAGE>
     LONG SALES CYCLE FOR LARGE CORPORATE ACCOUNTS COULD CAUSE DELAYS IN REVENUE
GROWTH:  The  Company's  sales cycles for large corporate accounts may take many
months to complete and may vary from contract to contract.  Further, the Company
expects  that  a large number of then Company's clients may be introduced to VSN
through  such large accounts.  Lengthy sales cycles for large corporate accounts
could  cause delays in revenue growth, and result in significant fluctuations in
the  Company's  quarterly  operating results.  The length of the sales cycle may
vary  depending on a number of factors over which the Company may have little or
no  control,  including  the  internal  decision-making process of the potential
customer and the level of competition that the Company encounters in its selling
activities.  Additionally,  since the market for business-to-business e-commerce
is  relatively  new,  the  Company  believes  that  it will have to educate many
potential  customers  about  the  use and benefits of the Company's products and
services,  which can in turn prolong the sales process. The Company has provided
access  to  VSN  on  a  trial basis for customer evaluation, which can again may
prolong  the  sales  process.  Sales  made  through  third  parties, such as the
Company's  alliance  partners,  can  further  extend  sales  cycles

     QUARTERLY  RESULTS MAY BE SUBJECT TO SIGNIFICANT FLUCTUATIONS; EXPECTATIONS
OF  INVESTORS  AND  ANALYSTS  MAY  NOT  BE  MET:  The  Company  expects that its
quarterly  operating  results  will fluctuate significantly due to many factors,
many  of  which  are  outside the control of the Company.  Such factors include:

     . demand  for  and  market  acceptance  of  VSN
     . inconsistent  growth,  if  any,  of  the  Company's  client  base
     . loss  of  key  customers  or  strategic  partners
     . timing  of  the  recognition  of  revenue  for  large  contracts
     . variations  in  the  dollar  volume  of transactions effected through VSN
     . intense  and  increased  competition
     . introductions  of  new  services  or  enhancements, or changes in pricing
             policies, by  us  and  our  competitors
     . the  Company's  ability  to  control  costs
     . reliable  continuity  of  VSN  availability.

      The  Company  believes  that  quarterly  revenues,  expenses and operating
results  are  likely  to vary significantly in the future, that period-to-period
comparisons of results of operations are not necessarily meaningful and that, as
a  result,  such  comparisons should not be relied upon as indications of future
performance.  Due  to  these  and other factors, it is likely that the Company's
operating  results  will  be  below market analysts' expectations in some future
quarters,  which would cause the market price of the Company's stock to decline.

     COMPETITIVE  "BUSINESS-TO-BUSINESS"  INTERNET  COMMERCE  MARKET;  EFFECT ON
MARKET  SHARE AND BUSINESS: The market for VSN is very competitive, evolving and
subject  to  rapid  technological  change. Intensity of competition is likely to
increase  in the future. Increased competition from new competitors is likely to
result  in  loss  of  market  share, which could negatively impact the Company's
business. Competitors vary in size, and in the scope and breadth of the products
and  services  offered.  VSN  will  encounter  competition  from  Ariba, Clarus,
Commerce  One,  Concur  Technologies,  Extricity,  GE  Information  Services, i2
Technologies,  Intelisys,  Netscape  Communications,  PurchasePro,  and TRADE'ex
Electronic  Commerce  Systems.  VSN  may also encounter competition from several
major enterprise software developers, such as Oracle, PeopleSoft and SAP who are
not  presently  considered  to  be  direct  competitors,  but who have announced
intentions  to  enter into the market. In addition, because there are relatively
low  barriers  to  entry  in  this  market,  additional  competition  from other
established  and  emerging  companies  may  develop.


                                      -14-
<PAGE>
     Many  current  and  potential  competitors have longer operating histories,
significantly  greater  financial, technical, marketing and other resources than
the Company, significantly greater name recognition, and a larger installed base
of  customers.  In  addition,  many  of  the  competitors  have well-established
relationships  with  the  Company's  clients  and  potential  clients,  and have
extensive  knowledge  of  the  industry.  Current and potential competitors have
established  or may establish cooperative relationships among themselves or with
third  parties  to  increase  the  ability of their products to address customer
needs.  Accordingly,  it  is  possible  that new competitors, or alliances among
competitors,  may  emerge  and rapidly acquire significant market share. Actions
taken  by  the  Company  competitors,  including  price  cuts,  new  product
introductions  and enhancements could have material adverse consequences for the
Company. There can be no assurance that the Company will be able to compete with
price  cuts,  or  develop, introduce and market enhancements to its service on a
timely  basis  to  compete  successfully  in  this  market.

     VIRTUAL  SOURCE NETWORK REVENUES EXPECTED FROM A LIMITED NUMBER OF CLIENTS,
MEANING  INCREASED  POTENTIAL  IMPACT OF CUSTOMER LOSS: The Company expects that
VSN  revenues,  if  any,  during  the current fiscal year will come from a small
number  of  clients, perhaps as few as 20 or less. The loss of any few customers
or a change in a client's budget could have a substantial negative impact on the
business  of  the  Company.

     VENDORS ARE ESSENTIAL TO SUCCESS OF VIRTUAL SOURCE NETWORK; NEGATIVE IMPACT
OF  VENDORS' FAILURE TO JOIN THE NETWORK: In order to operate, VSN requires that
vendors (suppliers) be able to access the network and that client buyers be able
to  communicate their requirements electronically to vendors. Currently, vendors
can  access  VSN  even  if  they have not joined the network, but it is far more
efficient  if a vendor does join the network and sets up a catalog online. It is
necessary, furthermore, that a client's key vendors join the network in order to
achieve  the  full  benefits  of  the  system, such as buying from an electronic
catalog.  The  Company,  furthermore,  expects  that  vendors will join VSN upon
invitation  from their respective buyers. Network membership is now free for any
vendor. Client buyers operating on VSN make direct requests of their key vendors
that  they  join.  When a large corporation requests that its vendors adapt to a
new purchasing process, and that change is free, the Company believes that there
is  a  strong  incentive  for those vendors to make that change to protect their
customer  relationships.

     To  date there has been no significant vendor resistance to joining the new
Internet  version  of  VSN.  During  1996  and  1997, however, the Company found
significant  vendor resistance to joining the PC version of VSN. Vendors, at the
time,  viewed  VSN  as  increasing  competitive price pressure. They also saw an
increased  possibility  of losing customers to lower cost vendors not previously
competing  for  the  business. Vendors also resisted annual subscription fees of
$980.  Finally,  the  non-Internet  version  was  more  difficult for vendors to
operate.

     Since 1997 the Company believes that important changes have occurred in the
procurement  environment.  Electronic  commerce,  and  the  resultant  increased
competition,  have  become  more accepted by vendors. It is management's opinion
that  most  vendors believe that they will eventually be required to do business
electronically, if they have not already started. The Company also believes that
the  Internet version of VSN is easier for vendors to use. As a final incentive,
the  Company  no  longer  charges  subscription  fees  to vendors. Despite these
changes, there can be no assurance that vendors will not resist participating in
VSN.  Should significant new vendor resistance develop, that could slow adoption
of  VSN  by  clients,  and  negatively impact potential revenues of the Company.

     ABILITY  TO  ENHANCE  FEATURES AND FUNCTIONALITY OF PRODUCTS; CHANGE IN THE
MARKET:  The  success of the Company will depend on its ability to tailor VSN to
meet  the  requirements  of  its  clients,  not  only  as  such requirements are
presently  known  and understood by the Company and its client base, but also as
such  requirements  evolve.  Such  requirements  may  be  driven  by competitive
products or the changing preferences of the Company's client base.  An inability
to  offer  enhanced  products  or  features  which  anticipate  or  meet  such
requirements  in a timely and efficient manner may result in a loss of sales and
revenues  and  the  obsolescence  of  the Company's products.    There can be no
assurance that the Company can make the changes and enhancements to its products
necessary  to  meet  and  satisfy  the  demands  of  its  clients.


                                      -15-
<PAGE>
     In  addition, the rapid technological changes and rapidly changing industry
standards  which have characterized the Internet and companies doing business on
the  Internet  may  have the effect of rendering the Company, its business model
and  products  obsolete.  Making  the  adjustments,  changes  and  adaptations
necessary in this market may also require significant expenditures in equipment,
infrastructure  and  product  development.  There  can  be no assurance that the
Company  will  be  able  to  adapt  to  such  rapid  changes.

     FAILURE  TO  MAINTAIN  ACCURATE  DATABASES:  The  Company  must  update and
maintain  extensive  databases of the products, services and procurement network
transactions for its clients.  The Company's computer systems and databases must
allow  for  expansion  as  a client's business grows without losing performance.
Database  capacity  constraints  may  result  in  data  maintenance and accuracy
problems  which could cause a disruption in service and the Company's ability to
provide  accurate  information  to  its clients.  These problems may result in a
loss  of  clients  which  could  severely  harm  the  Company's  business.

     DEFECTS  IN  SOFTWARE:  VSN  is  complex software.  Software often contains
defects,  particularly  when first introduced or when new versions are released.
The  Company's  testing procedures may not discover software defects that affect
new  or  current  services  or enhancements until after they are deployed.  Such
defects  could  cause  service  interruptions,  which could damage the Company's
reputation or increase its service costs, cause it to lose revenue, delay market
acceptance or divert development resources, any of which could severely harm the
Company's  business.

     SYSTEM FAILURES, SERVICE DELAYS AND INTERRUPTIONS: The Company's ability to
provide  acceptable  levels of customer service largely depends on the efficient
and  uninterrupted  operation  of  the  Company's  computer  and  communications
hardware and procurement network systems.  Any interruptions could severely harm
the  Company's  business  and  result  in  a  loss  of customers.  The Company's
computer and communications systems are located in the state of Washington.  The
Company does not maintain a redundant site, although is currently planning to do
so.  The  Company's  systems  and  operations  are  vulnerable  to  damage  or
interruption  from  a  variety of sources including human error, sabotage, fire,
flood,  earthquake,  power  loss, telecommunications failure and similar events.
The  Company  cannot give assurances that it will not experience system failures
in  the future. The occurrence of any system failure or similar event could harm
the  Company's  business  dramatically.

     NO  DISASTER  RECOVERY PLAN:  The Company does not have a disaster recovery
plan and does not  yet have redundant systems at an alternate site to permit the
company  to  continue  to  provide  services  on  the  event of a failure in its
computer  and communications systems.  Accordingly, any such failure would cause
severe  harm  to  the  Company's  business.

     SUBSTANTIAL  COSTS  OF  ANY  PRODUCT LIABILITY CLAIMS; NO PRODUCT LIABILITY
INSURANCE:  Errors,  defects or other performance problems with VSN could result
in  financial  or  other  damages  to  our clients. Management believes that the
contractual  limits  of liability, indemnification provisions and disclaimers of
warranties should minimize the exposure of the Company in the event of a product
liability  claim.  A  product  liability claim, however, even if not successful,
would  likely be time consuming and costly and could seriously harm the Company.
The  Company  presently  does not maintain product liability insurance. Although
the  terms  and  conditions  in  VSN  user agreements contain disclaimers of any
warranties  designed to limit exposure to these claims, existing or future laws,
or  unfavorable  judicial decisions, could weaken or negate these provisions and
have  materially  adverse  consequences  for  the  Company.

     LEGAL  LIABILITY FOR COMMUNICATION ON PROCUREMENT NETWORK:  The Company may
be  subject  to legal claims relating to the content in its procurement network,
or  the  downloading  and  distribution  of  such content.  Claims could involve
matters  such  as  fraud,  defamation,  invasion  of  privacy  and  copyright
infringement.  Providers of Internet products and services have been sued in the
past,  sometimes  successfully,  based  on the content of material.  Even if the
Company  was  ultimately  successful  in  its  defense of these claims, any such
litigation  is  costly  and these claims could harm the Company's reputation and
business.

     SUCCESS  DEPENDS  ON  KEY  PERSONNEL;  NO  "KEY MAN" LIFE INSURANCE: Future
performance  depends  on the continued service of key personnel, and the ability
to attract, train, and retain additional technical, marketing, customer support,
and management personnel. The loss of one or more key employees could negatively


                                      -16-
<PAGE>
impact  the  Company,  and there is no "key man" life insurance in force at this
time.  However,  the Company does plan to obtain this insurance. Competition for
qualified  personnel  is intense, and there can be no assurance that the Company
will  retain  key  employees,  or  attract  and  retain  other needed personnel.

     PROTECTION  OF  INTELLECTUAL PROPERTY; LACK OF PATENTS; POTENTIAL PIRATING:
The Company's success depends to a large extent on its exclusive technology, and
relies  on  a combination of contractual provisions, confidentiality procedures,
trade  secrets, copyrights and trademark protections. The Company has no patents
at  this  point,  and  the Company's technologies may not be patentable. Despite
efforts  to  protect  its  exclusive rights, unauthorized parties may attempt to
copy aspects of that technology, or to obtain and use our exclusive information.
Policing  unauthorized  use  of  this technology is difficult. While the Company
does  not suspect that any of the Company's software has been subject to piracy,
there  can  be  no  assurances  that  such  piracy  will  not  occur.  Further,
competitors  may  independently  develop  similar  technology, or  duplicate the
Company's services without  violating  intellectual  property  rights.

     At  present,  the Company's technologies are owned outright by the Company.
However,  the  Company  may  in  the  future have to license or otherwise obtain
access  to intellectual property of third parties in order to remain competitive
in  the  marketplace.

     STRAIN ON LIMITED RESOURCES DUE TO NEED TO MANAGE GROWTH AND EXPANSION: The
Company  anticipates  a  period  of significant expansion and growth, which most
likely  will  place  significant strain upon management, employees, systems, and
resources.  Because  the  market  is  developing  rapidly,  furthermore,  it  is
difficult  to  project  the  rate  of growth, if any. Failure to properly manage
growth  and expansion, if and when it occurs, will jeopardize the ability of the
Company  sustain  its  third  party  and customer relationships. There can be no
assurances  that  the Company will properly be able to manage growth, especially
if  such  growth  is  more  rapid  than  anticipated.

     INACCURATE  PREDICTIONS  OF  USAGE  RATES:  Traffic  in  the  Company's
procurement  network may increase to the point where the Company must expand and
upgrade  some  of  its  transaction  processing  systems and procurement network
hardware  and  software.  While  the  Company's  systems are scalable and can be
expanded, the Company may not be able to accurately predict the rate of increase
in  the  usage of its procurement network.  This may affect the Company's timing
and  ability  to expand and upgrade its systems and procurement network hardware
and  software  capabilities  to  accommodate  increased  use  of its procurement
network.  If  the  Company  does not upgrade its systems and procurement network
hardware  and  software  appropriately,  the  Company  may experience downgraded
service,  interruptions  or  delays  which could damage its business reputation,
relationship  with  clients  and  its  operating  results.

     RISKS  OF  INTERNATIONAL OPERATION:  The Company is exploring international
markets and considering the expansion of its operations and marketing efforts to
include  international markets.  If the Company should elect to expand into such
markets,  it  would  be  confronted  with  risks  including:

          -  increased  impact  of recessions in economies outside of the United
             States
          -  difficulties  staffing  and  managing  foreign  operations
          -  political  instability
          -  the  burdens  of compliance with a wide variety of foreign laws and
             legal  regimes
          -  unexpected  changes  in  regulatory  requirements
          -  tariffs,  export  controls  and  other  barriers  to  trade
          -  potentially  adverse  tax  consequences
          -  fluctuations  in  currency  exchange  rates
          -  longer payment  cycles  and  difficulties  in  collecting  accounts
             receivables
          -  seasonal  fluctuations  in  business  activity.


                                      -17-
<PAGE>
     RISKS  RELATED  TO  THE  INTERNET  AND  ECOMMERCE

     YEAR  2000 RISK: Although management believes that its internally developed
systems  and  technology  are  Year  2000  compliant, certain other technologies
nevertheless  could  be substantially impaired, or cease to operate, due to Year
2000  problems  (See Item 2. MANAGEMENT'S DISCUSSION AND ANALYSIS AND RESULTS OF
OPERATIONS-IMPACT OF Y2K). The Company relies on information technology supplied
by  third  parties  as  well,  and  strategic  partners may also be dependent on
information  technologies  not Year 2000 compliant, and on their own third-party
vendor  systems  that  may  be at risk. These Year 2000 problems could adversely
affect  the Company. Further, the Internet itself could face serious disruptions
arising  from  Year  2000  problems,  although  none have surfaced to date. Many
potential  VSN clients, furthermore, may have implemented policies that prohibit
or  strongly  discourage  making changes or additions to their internal computer
systems until after the impact of Year 2000 has been assessed. Further, in 1999,
some  technology  budgets  of  prospective  customers  were  diverted from other
projects  to deal with Year 2000 issues. While the Year 2000 issue has generally
been  considered  resolved,  there  can be no assurances that the issue will not
impact  the  rate  at which VSN will be implemented inside client organizations.

     VOLATILITY  IN  STOCK  PRICE:  The  stock  market  and especially the stock
prices  of  Internet related companies have been very volatile.  This volatility
may  not  be  related  to the operating performance of the companies.  The broad
market  volatility and industry volatility may reduce the price of the Company's
stock without regard to the Company's operating performance.  The  market  price
of the  company's stock could significantly decrease  at  anytime  due  to  this
volatility.  The  uncertainty  that  results  from  such  volatility  can itself
depress  the  market  price  of  the  company's  stock.

     SUBSTANTIAL  COSTS  OF  ANY  SECURITIES  LITIGATION  COULD  DIVERT  LIMITED
RESOURCES  OF  THE  COMPANY: In the past, securities class action litigation has
often  been  brought  against  a  company following periods of volatility in the
market  price  of  its  securities. The Company could become a target of similar
securities litigation based upon the volatility of its stock in the marketplace.
Litigation  of  this  type  could  result  in  substantial  costs  and  divert
management's  attention  and  resources.

     SUBSTANTIAL  COSTS  OF ANY INTELLECTUAL PROPERTY INFRINGEMENT CLAIMS: There
has  been  a  substantial  amount of litigation in the software industry and the
Internet industry regarding intellectual property rights. It is possible that in
the  future,  third parties may claim that the Company's technology may infringe
their  intellectual  property.  Management  is  not aware of any infringement or
claim  of  infringement by a third party. It is expected, however, that software
product  developers  and  providers  of  electronic  commerce  solutions  will
increasingly  be  subject  to  infringement claims as the number of products and
competitors  grows  and  the  functionality  of  products  in different industry
segments  overlaps.  Any  claims, with or without merit, could be time-consuming
and  result  in  costly  litigation.

     DEPENDENCE  UPON,  AND  RISKS  RELATED TO, THE INTERNET: The use of VSN and
other  ASP-based  products  (see  Item 1.  DESCRIPTION  OF  BUSINESS - OVERVIEW)
depends on  the increased acceptance and use  of  the  Internet  as  a medium of
commerce and communication. While management believes that acceptance and use of
the Internet will  continue  to increase at  very  rapid  rates, there can be no
assurances that such  increase  will continue  to  develop,  or  that use of the
Internet  as  a means of  conducting  business  will  continue  or increase.  If
growth in the use of the Internet  does  not  continue,  clients  may  not adopt
or use these  new  Internet technologies  at  the  rates  or  for  the  purposes
management  has  assumed.  This could,  in  turn,  adversely  impact the Company
and the results of its business operations.  Further,  even  if  acceptance  and
use of the Internet does increase rapidly,  but  the  technology  underlying the
Internet  and  other  necessary technology  and related infrastructure does  not
effectively  support  that growth, the  Company's  future  would  be  negatively
impacted.

     POTENTIAL BREACHES OF THE COMPANY'S SECURITY SYSTEMS: A significant barrier
to  electronic  commerce  and  communications  is  the  secure  transmission  of
confidential  information  over  public  networks.  Advances  in  computer
capabilities,  new  discoveries  in the field of cryptography or other events or
developments  could  result in compromises or breaches of the Company's security
systems  or  those  of  other  web  sites  to  protect  the  Company's exclusive
information.  If  any  well-publicized compromises of security were to occur, it
could  have the effect of substantially reducing the use of the web for commerce
and communications. Anyone who circumvents the Company's security measures could


                                      -18-
<PAGE>
misappropriate  its  exclusive information or cause interruptions in services or
operations. The Internet is a public network, and data is sent over this network
from many sources. In the past, computer viruses, software programs that disable
or  impair  computers,  have  been  distributed and have rapidly spread over the
Internet.  Computer viruses could theoretically be introduced into the Company's
systems,  or those of our clients or vendors, which could disrupt VSN or another
ASP-based  product offered by the Company, or make it inaccessible to clients or
vendors.  Although  language  in  its  user agreement places responsibility with
users  to  protect  VSN from such threats, the Company may be required to expend
significant  capital  and  other  resources  to  protect  against  the threat of
security  breaches  or  to  alleviate problems caused by breaches. To the extent
that  the  Company's  activities  may  involve  the  storage and transmission of
exclusive  information,  such  as  credit  card numbers, security breaches could
expose  the  Company  to  a  risk  of loss or litigation and possible liability.
Despite  provisions  to  the  contrary  in  its  user  agreements, the Company's
security  measures  may  be  inadequate  to  prevent  security breaches, and the
Company's  business  could  be  seriously  impacted  if  they are not prevented.

     GOVERNMENT  REGULATION:  As  Internet  commerce continues to grow, the risk
that  federal,  state or foreign agencies will adopt regulations covering issues
such  as  user  privacy,  pricing, content and quality of products and services,
increases.  It  is  possible that legislation could expose companies involved in
electronic  commerce  to  liability,  which could limit the growth of electronic
commerce  generally.  Legislation  could dampen the growth in Internet usage and
decrease  its  acceptance as a communications and commercial medium. If enacted,
these  laws,  rules  or  regulations  could  limit  the market for the Company's
services.

     One  or  more  states, furthermore, may seek to impose sales tax collection
obligations  on  out-of-state  companies  like  the  Company  that  engage in or
facilitate  electronic  commerce throughout numerous states. These proposals, if
adopted,  could substantially impair the growth of electronic commerce and could
adversely  affect  the  Company's  opportunity  to derive financial benefit from
these  activities.

HISTORY

     The  Company  was  incorporated in the state of Nevada on October 22, 1980,
and  ultimately  adopted  the  name  Vsource,  Inc.  on  December  16,  1999.

     On  June  1,  1998,  the  Company  acquired all of the outstanding stock of
Wpg.Net,  Inc. for 500,000 shares of common stock plus stock options for 500,000
shares.  The  options  vest  ratably,  on  a  monthly  basis,  over  the 3 years
subsequent  to  the purchase.  If Wpg.Net, Inc. division revenues reach $500,000
before  the  3-year  vesting  period  has  expired,  the  500,000  options  vest
immediately.  The  former  shareholders  of  Wpg.Net,  Inc.  (Wpg.Net,  Inc.
Shareholders)  are  entitled  to a commission of 50% of revenue generated by the
Wpg.Net,  Inc.  division.  However, no Wpg.net, Inc. revenues have been recorded
since  it  was  acquired  and  no revenue producing activities are contemplated.
Wpg.net,  Inc.  shareholders are entitled to 25% of revenues produced by Virtual
Source,  Inc.  relating  to  sales  of  the  currently  inactive  Virtual Source
Publisher. In the event that Vsource is sold, the Wgp.Net, Inc. shareholders are
entitled  to a one-time payment of $3,000,000, the options vest immediately, and
all commission obligations cease at that time.  The Company guaranteed a minimum
stock  price of $7.00 per share for the stock held by Wpg.Net, Inc. shareholders
upon  the  sale of the Company.  The acquisition was accounted for as a purchase
and  was  included with the combined operations for the dates subsequent to June
1,  1998. As a result of the acquisition, goodwill was recorded in the amount of
$1,186,555.  During the year ended January 31, 2000, the Company determined that
the present value of future cash flows related to the acquisition of Wpg.Net was
not  material. Consequently, the remaining unamortized goodwill has been written
off  as  of  January  31,  2000.

     Subsequent  to  the  year  ended  January  31,  2000,  the  Company  raised
approximately $7 million through the sale of approximately 2.8 million shares of
the  Company'  s Series 1-A Convertible Preferred Stock.  The Company's Board of
Directors  has authorized the reincorporation of the Company under Delaware law.
The  resulting  Delaware  corporation  will  have  100 million authorized common
shares.


                                      -19-
<PAGE>
Item  2.     DESCRIPTION  OF  PROPERTY

     The  Company,  through  its  subsidiary  Virtual  Source,  Inc.,  leases
approximately  5,500  square  feet  of  standard  office  space at its principal
location  in Ventura, California.  The lease expires on March 21, 2002.  Rent is
$8,307  per  month.

     The  Company  rents  approximately  6,700 square feet of standard office in
Bothell,  Washington.  The  lease  expires on October 21, 2002, under a 36-month
lease.  Rent  is  $11,117  per  month.

     The  Company's  main  servers  are  housed in a Seattle facility especially
designed  for  mission-critical computers.  The cost is $3,200 per month, and is
available on a month-to-month basis.  This facility maintains back-up electrical
power,  fire  protection,  and  other  security  features.  Data  communications
connections  available  within  this  facility  provide  direct  access  to  the
Internet,  without  the  need  to  connect  through T-1, T-2, or T-3 high volume
telephone  lines.  Alternative  sites  in  Seattle  are available, and redundant
servers  at  other  Internet  access  sites  are  under  development.

Item  3.     LEGAL  PROCEEDINGS

     There  are  currently  no legal proceedings involving the Company, and none
threatened. However, because of the rapidly changing environment surrounding the
Internet, and the rapid pace with which new businesses enter or attempt to enter
Internet  related  businesses,  it  is  possible that disagreements will develop
regarding  business  names,  relationships,  markets,  technologies,  and  other
subjects.  Any  future  disagreement  could  lead  to  legal  action.

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

     During  the fourth quarter of the year ended January 31, 2000, shareholders
approved  a  change  of  the  Company's  name to Vsource, Inc. Of the 13,589,752
issued  and  outstanding shares of common stock of the Company entitled to vote,
7,896,344  shares  were  voted  in  favor  of  an  amendment  to the Articles of
Incorporation  and  no  shares  were  voted  against  the  amendment.
PART  II

Item  5.     MARKET  FOR  COMMON  EQUITY  AND  RELATED  SHAREHOLDER  MATTERS

MARKET  INFORMATION

     Beginning  January  4, 2000, the Company's common stock began trading under
the  symbol  "VSRC" in the over-the-counter securities market.  Prior to January
4,  2000,  the  Company's  common  stock  traded  under the symbol "IBNL" in the
over-the-counter  securities  market.  The  over-the-counter  quotations reflect
interdealer bid prices, without retail mark-up, mark-down or commission, and may
not  represent  actual  transactions.  The  over-the-counter  market  does  not
constitute  active  trading and trading in the Company's common stock is limited
and  sporadic.  The following table sets forth the range of high bid and low bid
quotations  and  the  closing  price for the fiscal quarters within the last two
years.  The  source  for  this  information  is  the  Nasdaq OTC Bulletin Board.


                                      -20-
<PAGE>
<TABLE>
<CAPTION>
Common  Stock
-------------

<S>                                     <C>     <C>    <C>
For Fiscal Year Ended January 31, 1999  High    Low    Close
--------------------------------------  ------  -----  ------

Quarter ended April 30, 1998            $ 3.25  $0.40  $ 1.78
Quarter ended July 31, 1998             $ 2.94  $1.06  $ 1.31
Quarter ended October 31, 1998          $ 1.31  $0.63  $ 0.78
Quarter ended January 31, 1999          $ 3.00  $0.69  $ 2.00

For Fiscal Year Ended January 31, 2000  High    Low    Close
--------------------------------------  ------  -----  ------

Quarter ended April 30, 1999            $ 2.38  $1.38  $ 1.41
Quarter ended July 31, 1999             $ 2.13  $1.38  $ 2.13
Quarter ended October 31, 1999          $ 2.88  $1.53  $ 1.88
Quarter ended January 31, 2000          $19.88  $1.88  $15.19
</TABLE>


SHAREHOLDERS

     As  of  April  17,  2000,  there  were  1,054 stockholders of record of the
Company's  common  stock.  Of  the  15,905,977 million outstanding shares of the
Company's  common stock at April 17, 2000, 9,578,907 shares were held in "street
name"  by  Cede,  Inc.  on  behalf  of  shareholders.

     As  of  April  17,  2000, there were 46 holders of the Company's Series 1-A
convertible  preferred  stock.

DIVIDENDS

     The  Company has never declared or paid cash dividends on its common stock.
The  Company  currently  intends to retain all future earnings to finance future
growth  and,  therefore,  does  not  anticipate paying any cash dividends in the
foreseeable  future.

RECENT  SALE  OF  UNREGISTERED  SECURITIES

     The  following are all securities sold by the Company or issued as warrants
within  the fiscal year ending January 31, 2000 which were not registered  under
the  Securities  Act:
     During  January  and February of 1997, the Company sold 2,918,653 shares of
restricted  common  stock  and  received  proceeds  of $583,731 before expenses.
Since  no  underwriters  were  used  and no commissions were paid, expenses were
limited  to  legal  fees  approximating  $10,000.  This  offering  was a private
placement  made  in  accordance  with  Regulation D, and in the opinion of legal
counsel  for the Company, was exempt from registration under the Securities Act.
There  were  less  than 25 offerees.  The recipients of these shares, except one
who was a senior sales executive of the Company, were accredited investors.  The
investors,  approximately  ten  in  total,  were  primarily  existing  Company
investors,  or  friends,  relatives  and  business  associates  of  the  Company
officers,  directors  or  investors.  The chief executive officer and the former
chief  financial  officer were included as investors.  The investors represented
their intention to acquire the shares for investment purposes only, and not with
a  view  to  resale  or  distribution,  and appropriate restrictive legends were
placed  on  each  stock  certificate  issued  pursuant  to  this offering.  Each
investor  had  ample  access  to the kind of information from the Company that a
registration  statement  would  include.

     From  August through November of 1997, the Company sold 1,487,763 shares of
unrestricted  common  stock,  and  received  $346,721 before offering costs.  As
before, no underwriters were used, and no commissions paid.  Offering costs were
limited  to  approximately  $4,000  for legal fees.  This offering was a private
placement  and  in the opinion of legal counsel for the Company, was exempt from
registration  under the Securities Act and made in accordance with Regulation D.
Further,  the Company was eligible under Securities and Exchange Commission Rule
504,  which  allowed  the  shares  sold  in  this private placement to be issued
without  restrictive legend.  The recipients of these shares, primarily existing
Company  investors, or friends, relatives and business associates of the Company
officers,  directors  and  investors, represented their intention to acquire the
shares  for  investment  purposes  only,  and  not  with  a  view  to  resale or
distribution.

                                      -21-
<PAGE>
     In  June  1998,  the  Company issued 500,000 shares of its common stock and
granted  an  option to purchase an additional 500,000 shares in exchange for all
of  the  shares  of  Wpg.Net,  Inc.,  a  Washington corporation.  The shares and
options  were  issued to DX3, Inc., a Washington corporation wholly owned by the
three  Wpg.Net  shareholders.  The  options  have an exercise price of $0.59 per
share  and  vest  ratably  each  month  over  a  three  year  period  subject to
acceleration  upon  the  achievement  of certain revenue goals.  No underwriters
were used, and no commissions were paid.  The issuances were a private placement
and  exempt  from  registration  under Section 4(2) of the Securities Act.   The
transactions  did  not involve a public offering.  There were three shareholders
of Wpg.Net who were also the sole shareholders of DX3, each of whom was familiar
with  the  Company.  DX3  represented  its  intention  to acquire the shares and
option  for  investment  purposes  only,  and  not  with  a  view  to  resale or
distribution, and appropriate stop transfer instructions and restrictive legends
indicating  the  transfer  restrictions  were  placed  on each stock certificate
issued  and will be placed on each stock certificate issued upon exercise of the
options.  Each  individual  had ample access to the kind of information from the
Company  that  a  registration  statement  would  include.
     During  March  and  April  of  1999,  the  Company  sold  737,493 shares of
unrestricted  common  stock for  $999,942.  No underwriters  were  used,  and no
commissions were paid. This offering was a private placement and, in the opinion
of  counsel,  was  exempt  from  registration  under  Rule  504  of  Commission
Regulation D.  No form of general solicitation or general advertising  was  used
for any offer or sale.  The  recipients  of  these  shares,  primarily  existing
Company investors, or friends, relatives and  business associates of the Company
officers, directors  and  investors,  represented their intention to acquire the
shares for  investment  purposes  only,  and  not  with  a  view  to  resale  or
distribution.

     On  May  15,  1999,  the  Company  issued an aggregate of 636,100 shares of
common  stock upon the exercise of options held three of the Company's executive
officers.  The  exercise  prices  ranged  from $0.18 to $0.625.  No underwriters
were  used, and no commissions were paid.  The issuances were exempt pursuant to
Rule  701  promulgated  by  the  Securities  and  Exchange  Commission under the
Securities  Act.  The  option  grants  were  made  under  written  compensatory
contracts.  Appropriate  stop  transfer  instructions  and  restrictive  legends
indicating  the transfer restrictions were placed on each stock certificate when
issued.

     During  the period May 1999 to October 1999, the Company granted options to
purchase  1,039,500  shares  of  its  common  stock  to  officers, employees and
consultants.  The  exercise prices ranged from $0.75 to $1.10.  The options vest
over  periods of 27 to 36 months from date of grant.  No underwriters were used,
and  no  commissions  were paid.  The issuances were exempt pursuant to Rule 701
promulgated  by the Securities and Exchange Commission under the Securities Act.
The  consultants  were  natural  persons  and  the option grants were made under
written  compensatory  contracts.  Appropriate  stop  transfer  instructions and
restrictive  legends indicating the transfer restrictions will be placed on each
stock  certificate  when  issued.

     During  the  period  July  1,  1999  to December 31, 1999, the Company sold
757,720  shares  of  restricted  common  stock, for $1,140,000.  No underwriters
were  used, and no commissions were paid.  The sales were  a  private  placement
and, in the opinion of counsel, exempt from registration under  Section 4(2)  of
the  Securities  Act.   The  transactions  did  not  involve  a public offering.
There  were  eleven offerees and nine purchasers, each of whom was an accredited
investor,  and  familiar  with  the  Company  and  four of  whom  were  existing
shareholders.  The investors represented their intention  to  acquire the shares
for  investment  purposes  only,  and not with a view to resale or distribution,
and appropriate stop transfer instructions  and  restrictive  legends indicating
the transfer restrictions will be placed on each stock certificate when  issued.
Each  individual  had  ample access to the kind of information from the  Company
that  a  registration  statement  would  include.

     As  of July 31, 1999, the Company converted all $971,553 of its outstanding
convertible debt


                                      -22-
<PAGE>
into an aggregate of 2,210,201
shares  of  the  company's  common  stock.  No  underwriters  were  used, and no
commissions  were  paid.  The  issuance  of  the Company's common stock upon the
conversion  of the notes was a private placement to 22 investors and exempt from
registration  under  Section  4(2)  of  the  Securities Act.  No Form of general
solicitation  or  general  advertising  was  used  for  any  offer or sale.  The
investors  represented  their  Intention  to  acquire  the shares for investment
purposes only, and not  with  a  view to resale or distribution, and appropriate
stop transfer  instructions  and  restrictive  legends  indicating  the transfer
restrictions will be placed on each stock certificate when issued. Each investor
had ample access to the kind of information from the Company that a registration
statement would include.

     In  November  1999,  the  Company  issued  an  aggregate of $150,000 of 10%
convertible  demand  notes  due  on demand after December 2000 to two accredited
investors.  The  notes,  principal and interest, are convertible into restricted
shares  of  the  Company's  common  stock at a rate of $2.50 per share.  None of
these  notes have been converted.  No underwriters were used, and no commissions
were  paid.  The  issuance of the Company's notes was a private placement exempt
from  registration  under  Section  4(2)  of  the  Securities  Act.  No Form  of
general  solicitation  or  general  advertising  was used for any offer or sale.
Prior to conversion, the investors must represent their intention to acquire the
conversion shares for investment purposes only, and not with a view to resale or
distribution, and appropriate stop transfer instructions and restrictive legends
indicating  the  transfer  restrictions will be placed on each stock certificate
when issued.  Each investor had ample access to the kind of information from the
Company  that  a  registration  statement  would  include.

     During  the  period  November  1999 to February 2000, the Company issued or
committed  to  issuing  warrants  to  purchase an aggregate of 870,000 shares of
common  stock  to  one consultant and four corporations at exercise prices which
range from $2.00 to $25.00 in exchange for financial consulting and distribution
and  marketing  services.  No  underwriters  were  used, and no commissions were
paid.  The  warrants were issued or will be issued as a private placement exempt
from registration  under Section 4(2) of the Securities Act.  No Form of general
solicitation or general advertising was used for any offer or sale.  The warrant
holders represented  their  intention  to  acquire  the warrants for  investment
purposes only, and not with a  view  to  resale or distribution, and appropriate
stop transfer instructions  and  restrictive  legends  indicating  the  transfer
restrictions  will  be  placed  on  each warrant and each stock certificate when
issued.  Each  warrant  holder  had ample access to the kind of information from
the  Company  that  a  registration  statement  would  include.

     During  the  period December 1, 1999 to February 24, 2000, the Company sold
2,802,000  shares  of  Series  1-A  Convertible Preferred Stock to 46 accredited
investors for $7,005,000. Each share of preferred stock is initially convertible
into  one  share  of common  stock.  Offering costs were approximately  $151,269
including transfer agent fees, printing costs, legal  fees  and  commissions  or
finders'  fees.  The  offering  was a private placement made in accordance  with
Regulation D.  All of the purchasers  were  accredited  investors.  No  form  of
general solicitation or general advertising  was  used  for  any  offer or sale.
The investors represented their intention to acquire  the  shares for investment
purposes only, and not with a view to resale or  distribution,  and  appropriate
restrictive legends were placed on each stock  certificate  issued  pursuant  to
this  offering.

     In connection with the sales of the Series 1-A Convertible Preferred Stock,
the  Company  issued  or  will  issue  warrants to purchase an aggregate 386,691
shares  of  common  stock  as additional finder's  fees  and commissions and for
other services in connection with  the  offering.  The warrants were issued,  or
will  be  issued, to five consultants and as a  private  placement  exempt  from
registration under Section 4(2) of  the  Securities  Act.  No  Form  of  general
solicitation or general advertising was used for any offer or sale.  The warrant
holders  represented  their  intention  to acquire the warrants  for  investment
purposes only, and not with a view to resale or  distribution,  and  appropriate
stop  transfer  instructions and restrictive  legends  indicating  the  transfer
restrictions will be placed on each warrant  and  each  stock  certificate  when
issued.  Each investor had ample access to the  kind  of  information  from  the
Company  that  a  registration  statement  would  include.

     On  January  17, 2000, the Company granted options to purchase an aggregate
of  78,750  shares  of  common stock to 6 key employees exercisable at $1.66 per
share.  No  underwriters  were  used,  and no commissions were paid.  The grants
were  intended  to  be private placements exempt from registration under Section
4(2)  of  the  Securities  Act.  The  option  grants  were  made  under  written
compensatory  contracts.  Appropriate stop transfer instructions and restrictive
legends  indicating  the  transfer  restrictions  will  be  placed on each stock
certificate  when  issued.

See "Notes to Consolidated Financial Statements."

                                      -23-
<PAGE>
     On  February 23, 2000, the Company granted options to purchase an aggregate
of  125,000  shares of common stock to an executive officer exercisable at $2.50
per share.  No underwriters were used, and no commissions were paid.  The grants
were  a  private  placement  exempt  from registration under Section 4(2) of the
Securities  Act.  The  option  grants  were  made  under  written  compensatory
contracts.  Appropriate  stop  transfer  instructions  and  restrictive  legends
indicating  the  transfer  restrictions will be placed on each stock certificate
when  issued.

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

     The  following discussion and analysis of the Company's financial condition
and  results  of  operations  should  be  read in conjunction with the Company's
financial  statements  and the related notes thereto appearing elsewhere herein.

FORWARD  LOOKING  STATEMENTS

     The  statements  contained  in this Management's Discussion and Analysis of
Financial  Condition  and  Results  of  Operations  include  "forward  looking"
information  within the meaning of Section 27A of the Securities Act of 1933, as
amended, and Section 21E of the Securities and Exchange Act of 1934, as amended,
and are subject to the safe harbor created by those sections.  The actual future
results  of  the  Company  could  differ  materially from those projected in the
forward-looking  information.  For  a  discussion  of certain factors that could
cause  actual  results  to  differ  materially  from  those  projected  by  the
forward-looking  information, please refer to "Item 1. DESCRIPTION OF BUSINESS -
FACTORS  THAT  MAY  AFFECT  FUTURE  PERFORMANCE."

OVERVIEW

     The Company creates and markets "pure" Internet-based applications using an
Application  Service  Provider  (ASP)  model.  An ASP model is best described as
providing  the  ability  on  a rental basis for clients to access by an Internet
browser,  such  as Internet Explorer or Netscape Communicator, computer software
and  data that reside on a remote server on the Internet, rather than the user's
computer  or  a  server on the user's local area network. The Company intends to
generate  fees  by  charging  a  small  set-up  fee to use its software and then
charging  based  upon  time  or  transactions,  depending  upon  the  situation.
Currently,  the  Company  offers  one application, Virtual Source Network (VSN),
which  may  be  used by corporate clients to purchase goods and services via the
Internet.

     Currently  all  financial, technical and marketing resources of the Company
are  dedicated  to  VSN.  The  Company  plans to sell VSN through a direct sales
force,  through  independent  resellers,  and  through strategic partnerships in
which VSN will be offered to the partner's base of customers. VSN is designed to
be  sold  initially through a pilot program for on-going transaction fees and an
initial  set-up fee of $25,000. During the pilot program, the client is expected
to  test  the  functionality  of VSN and determine how much customization of the
system,  if  any,  is  required  for  a  full  implementation.


     During  1997 and early 1998, the Company offered an earlier version of VSN,
which  was a software application installed on client computers. The Company has
discontinued the sale and use of this product. The Company's Internet version of
VSN  has  just  recently  been made available for use by clients. The Company is
presently  hiring  a  direct  sales  force  and  creating  relationships  with
independent  resellers  and  strategic  partners.

     The  Internet  version of VSN is now being used on a trial basis by initial
customers.  As  a  result, the limited operating history makes the prediction of
future  operating  results  very  difficult. In particular, the Company believes
that period-to-period comparisons of operating results should not be relied upon
as  predictive  of  future  performance.  Operating results are expected to vary
significantly  from  quarter  to  quarter  and  are  difficult  or impossible to
predict. The Company's operating prospects must be considered in relationship to
the  risks,  expenses  and  difficulties  encountered by any company at an early


                                      -24-
<PAGE>
stage  of  development,  particularly  companies  in  new  and  rapidly evolving
markets.  The  Company  may  not  be  successful  in  addressing  such risks and
difficulties.  For  more  information,  please  refer to "Item 1. DESCRIPTION OF
BUSINESS  -  FACTORS  THAT  MAY  AFFECT  FUTURE  PERFORMANCE."

RECENT  EVENTS

     In  April  2000,  the  Company  signed  a  letter  of  intent  with  NeTune
Corporation  of  Los  Angeles,  California,  pursuant  to which the Company will
provide  its  electronic  purchasing  service  to  companies  in  the  film  and
television  production  industries  that  use  NeTune's  satellite  based
communications  services. NeTune allows film and television companies to perform
a  series  of  electronic  services directly from remote production locations by
using  two-way  satellite  communications.

     In  March  2000,  the  Company  formed  a strategic marketing and technical
alliance  with  Internet  Commerce Corp. (ICC) of New York City, New York, where
ICC  will  connect  its  Internet electronic data interchange (EDI) network with
VSN.  The  interconnection will allow VSN customers to exchange purchase-related
documents  with  companies  that  accept such documents in the EDI standard. ICC
estimates  that more than 400,000 companies worldwide have the ability to accept
purchasing-related  documents  via  the  EDI  standards.

     In  February  2000,  the Company entered into a strategic relationship with
U.S.  West,  Inc. of Denver, Colorado, pursuant to which the two firms agreed to
make  VSN  available to U.S. West's business customers. U.S. West also agreed to
take  a  minority  equity  stake  in  Vsource.  VSN  is the first component of a
comprehensive collection of services that U.S. West said it intends to launch in
2000.  U.S.  West  provides  telecommunications  and  related services, wireless
services,  high-speed  data  and  Internet  services  and  directory  services
principally  to  customers  in  the  states  of  Arizona, Colorado, Idaho, Iowa,
Minnesota,  Montana,  Nebraska,  New Mexico, North Dakota, Oregon, South Dakota,
Utah,  Washington  and  Wyoming.

     In  February  2000,  the  Company  entered a strategic alliance with Vitria
Technology  Inc.  of Sunnyvale, California, pursuant to which Vitria's eBusiness
platform,  BusinessWare,  will  be  used  by  Vsource  customers  to  speed  the
development  of  links  between  VSN  and  existing internal processing systems.
Vitria  is  a  provider  of  eBusiness  infrastructure  software  that  enables
incompatible  information  technology  systems  to  exchange  information  over
corporate  networks  and  the  Internet.

     In January 2000, the Company entered a strategic alliance with ZoomON, Inc.
of  San  Jose,  California,  pursuant  to  which  ZoomON's  vector  graphics
visualization  and design software will be used to develop sophisticated product
catalogs  based on product drawings. Customers can use the ZoomON-based catalogs
over  the  Internet to click on a product drawing and then select specific parts
to  be  ordered.

     In  November  1999,  the  Company  entered  into  a strategic alliance with
Corporate Express of Bloomfield, Colorado, pursuant to which Corporate Express's
extensive  catalog  of  office  and  computer products and services will be made
available  as  part  of  VSN.  Corporate  Express,  a wholly-owned subsidiary of
Buhrmann  NV,  has operations in more than 300 locations worldwide, including 89
distribution  centers.

     The  Company  is  a  paying client of IBM, which has developed the training
program  for  VSN  users.  Clients  of the Company retain the services of IBM in
order  to  train  their  staffs  to use the VSN system. In addition, IBM and the
Company  have  each  agreed informally to make their respective clients aware of
the  other  firm's  services,  where  it  seems  appropriate  for  the client in
question.

RESULT  OF  OPERATIONS  -  FISCAL  YEAR  2000  VERSUS  FISCAL  YEAR  1999

     REVENUES:  Revenues for the year ended January 31, 2000 decreased to $3,500
from  revenues  of  $60,527  for  the year ended January 31, 1999, a decrease of
$57,027,  or  94%.  Revenues  decreased primarily because the Company ceased its
sales  of subscriptions to the software version of VSN in the year ended January
3,  1999,  and because the new Internet version of VSN did not generate revenues
in  the  year  ended  January  31,  2000.


                                      -25-
<PAGE>
     GENERAL  AND  ADMINISTRATIVE  EXPENSES: General and administrative expenses
increased  to  $1,167,328  for the year ended January 31, 2000 from $298,468 for
the  year ended January 31, 1999, an increase of $868,860, or 291%. The increase
was  due  primarily  to  expenses  associated  with  an  increase  in personnel,
including  payroll,  rent  and  travel.

     RESEARCH  AND  DEVELOPMENT: Research and development expenses of $3,458,933
for  the  year  ended  January  31, 2000 grew from $1,263,720 for the year ended
January  31,  1999,  an increase of $2,195,213, or 174%. The increase was due to
increased  costs  associated  with  the  development  of  the Company's Internet
version  of  its  VSN electronic purchasing system. Such increased costs include
additional  personnel  and  personnel-related  expenses  as  well  as  increased
licensing  fees  for  development-related  tools  and  systems.

     TOTAL EXPENSES: Total expenses of $4,626,261 for the year ended January 31,
2000  increased from $1,562,368 for the year ended January 31, 1999, an increase
of  $3,063,893, or 196%. The increase in total expenses was due primarily to the
increases  in  both  research  and  development  and  general and administrative
expenses.

     LOSS  FROM OPERATIONS: The Company had a loss from operations of $4,622,761
for  the  year  ended  January 31, 2000 versus a loss of $1,501,841 for the year
ended  January  31, 1999, an increase of $3,120,920, or 207%. The loss increased
because  of  increased  costs associated with developing the Internet version of
VSN  versus  a  decline  in  revenues associated with discontinuing the software
version  of  VSN.

     INTEREST  EXPENSE: Interest expenses of $388,571 for the year ended January
31,  2000 grew from $351,499 for the year ended January 31, 1999, an increase of
$37,072,  or  11%.  The increase was due primarily to the difference between the
conversion  rates  of  Convertible  Demand  Notes issued by the Company, and the
market  prices  of the Company's unrestricted common stock on or about the dates
such Notes were issued.   Since the Notes are convertible into restricted common
stock,  however, investors require discounted conversion rates which reflect the
illiquid  nature  of  restricted  stock,  and  Generally  Accepted  Accounting
Principles  require  that  interest  expense  be  charged  for  any  such  price
difference.

     LOSS  ON  IMPAIRMENT  OF  INTANGIBLE ASSETS: The Company incurred a loss of
$527,356  for the year ended January 31, 2000 versus no impairment losses in the
year  ended  January  31,  1999.  The  Company  determined  that  its  June 1998
investment  in  Wpg Net, Inc., and its technology, did not continue to carry the
value  originally anticipated.  As a result, the goodwill remaining on the books
as  of  January  31,  2000  was  eliminated  and  charged  to  expense.

     OTHER  INCOME:  Other Income of $15,394 for the year ended January 31, 2000
declined  from  $91,110  for  the  year  ended  January  31, 1999, a decrease of
$75,716,  or 83%. Other income in 1999 was derived primarily from the settlement
of  a  lawsuit against the Company's landlord in which the Company received free
rent.

     NET  LOSS:  The  net loss of $5,523,294 for the year ended January 31, 2000
increased  from  $1,762,230  for the year ended January 31, 1999, an increase of
$3,761,064,  or  213%,  almost  entirely  as  a  result  of  increased loss from
operations,  and  loss  on  impairment,  as  noted  above.

     BASIC  WEIGHTED  AVERAGE  NUMBER OF COMMON SHARES OUTSTANDING: The weighted
average  number of shares of 13,931,634 for the year ended January 31, 2000 grew
from  10,529,147  for  the year ended January 31, 1999, an increase of 3,402,487
shares,  or  32%.  The  increase  resulted  from  issuing  2,210,201 shares upon
conversion  of  Convertible  Demand  Notes,  1,500,213 shares in return for cash
invested  in  the company during the year, 636,100 shares upon exercise of stock
options,  and  64,165  shares  in  return  for services provided to the Company.

     NET  LOSS  PER COMMON SHARE: The net loss per common share of $0.40 for the
year  ended  January  31,  2000  grew  from  $0.17 per share for fiscal 1999, an
increase  of $0.23, or 135%, as a result of the increased net loss for the year,
partially  offset  by the increase in outstanding Common Shares, as noted above.


                                      -26-
<PAGE>
CHANGES  IN  CONSOLIDATED  STATEMENT  OF  CASH  FLOWS

     CASH FLOWS FROM OPERATING ACTIVITIES: The Company had a decrease in cash of
$2,863,183 from operating activities in the year ended January 31, 2000 versus a
decrease  in cash of $811,229 in the year ended January 31, 1999, an increase of
$2,051,954, or 252%, in the use of cash. The increased use of cash resulted from
a  net  loss of $5,523,294 offset by non-cash items affecting income and changes
in  operating  assets  and liabilities of $2,660,111. The net loss was primarily
due  to  increases  in  general  and administrative and research and development
expenses  associated  with  the development of the Company's Internet version of
its  VSN  eProcurement  software,  while  the  Company  generated  no offsetting
revenues.

     CASH  FLOWS FROM INVESTING ACTIVITIES: For the year ended January 31, 2000,
cash  flows  from investing activities decreased $282,028 because of advances to
employees  of  $41,820 and purchase of equipment of $240,208. For the year ended
January  31,  1999,  cash  flows  from investing activities decreased $9,400 for
advances  to  employees.

     CASH  FLOWS FROM FINANCING ACTIVITIES: For the year ended January 31, 2000,
cash  flows  from  financing  activities  increased by $8,292,441, consisting of
$6,002,500  from  a  private  placement,  $2,139,941 from the issuance of common
stock, and  $150,000  from borrowings.  See Item 5. MARKET FOR COMMON EQUITY AND
RELATED  SHAREHOLDER  MATTERS  -  RECENT  SALE  OF  UNREGISTERED  SECURITIES.

     For  the  year ended January 31, 1999, cash flows from financing activities
increased $825,160 from borrowings. This debt has all been converted into equity
See  Item  5.  MARKET FOR COMMON EQUITY AND RELATED SHAREHOLDER MATTERS - RECENT
SALE  OF  UNREGISTERED  SECURITIES.

LIQUIDITY  AND  CAPITAL  RESOURCES

     The  Company's  principal sources of cash and cash equivalents were derived
from private sales of the Company's equity and debt securities.  The sole source
of  funds  for  the Company from the date of inception through January 31, 2000,
other  than  the  sale of equity and debt securities, has been from sales of the
earlier software products.  No cash was derived from such sales made in the year
ended  January  31,  2000.

     The  Company  completed  the year ended January 31, 2000 with cash and cash
equivalents totaling approximately $5.2 million.  As of March 31, 2000 the total
of  cash  and  cash  equivalents  was  approximately  $4.0  million.

     The  Company  is  currently  expending  approximately $800,000 per month of
cash  and cash equivalents.  At this rate, without addition capital or revenues,
the  Company  cannot continue operations much beyond the early part of the third
quarter  beginning  August  1,  2000.

     The Company anticipates material client revenues to begin during the second
quarter.  Also,  the Company has initiated a private equity offering through its
investment bank that is anticipated to fund, fully or in part, during the second
quarter.

     If  revenues or the private equity offering do not materialize on schedule,
the  Company  has  a  contingent plan of cash conservation that will allow it to
operate  through  the  remaining  quarters  of  the  current  year.


                                      -27-
<PAGE>
Item  7.   FINANCIAL  STATEMENTS  AND  SUPPLEMENTARY  DATA

                          INDEPENDENT AUDITORS' REPORT
                          ----------------------------



Board  of  Directors
VSource,  Inc.

We  have audited the accompanying consolidated balance sheet of VSource, Inc. (a
Nevada  corporation)  as  of  January  31,  2000  and  the  related consolidated
statements  of  operations,  shareholders'  deficit  and cash flows for the year
ended  January  31,  2000.  The  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  audit.

We conducted our audit in accordance with generally accepted auditing standards.
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  audit  provides  a  reasonable  basis  for  our opinion.

In  our opinion, the consolidated financial statements referred to above present
fairly,  in all material respects, the financial position of VSource, Inc. as of
January  31,  2000 and the results of its operations, and its cash flows for the
year  then  ended  in  conformity with generally accepted accounting principles.


/s/  Grant Thornton LLP
Los  Angeles,  California
April  7,  2000


                                      -28-
<PAGE>
                                  VSOURCE, INC.
                           CONSOLIDATED BALANCE SHEET
                                January 31, 2000
<TABLE>
<CAPTION>
                                         ASSETS

<S>                                               <C>
CURRENT ASSETS
  Cash                                             $5,124,399
  Restricted cash                                      82,768
                                                  ------------
    Total current assets                            5,207,167

PROPERTY AND EQUIPMENT
  Equipment and fixtures                              240,208
  Less - accumulated depreciation                     (17,708)
                                                  ------------
                                                      222,500

EMPLOYEE AND OTHER RECEIVABLES                        110,728
                                                  ------------
                                                   $5,540,395
                                                  ============

                           LIABILITIES AND SHAREHOLDERS' DEFICIT

CURRENT LIABILITIES
  Accounts payable                                   $247,472
  Accrued expenses                                    100,937
  Amounts related to in-process
      private placement of preferred stock          6,002,500
  Convertible notes payable                           150,000
                                                  ------------
                                                    6,500,909

SHAREHOLDERS' DEFICIT
  Preferred stock ($0.01 par value, 5,000,000
    shares authorized; no shares issued)                   --
  Common stock ($0.01 par value, 50,000,000
    shares authorized; 15,807,130 issued
    and outstanding)                                  158,071
  Additional paid-in capital                       10,645,934
  Deferred Compensation                            (1,780,817)
  Accumulated deficit                              (9,804,904)
                                                  ------------
                                                     (781,716)
  Less: Notes receivable from the sale of stock      (178,798)
                                                  ------------
                                                     (960,514)
                                                  ------------
                                                   $5,540,395
                                                  ============
</TABLE>

     The accompanying notes are an integral part of this statement.


                                      -29-
<PAGE>
<TABLE>
<CAPTION>
                                  VSOURCE, INC.
                      CONSOLIDATED STATEMENTS OF OPERATIONS
                         For the Years Ended January 31,


                                                 2000             1999
                                               -------------  ------------
<S>                                            <C>            <C>
Revenue                                              $3,500       $60,527

General and administrative expenses               1,167,328       298,648
Research and development                          3,458,933     1,263,720
                                               -------------  ------------
  Total expenses                                  4,626,261     1,562,368
                                               -------------  ------------
Loss from operations                             (4,626,761)   (1,501,841)

Other income (expense):
  Interest expense                                 (388,571)     (351,499)
  Loss on impairment of intangible asset           (527,356)            -
  Other income                                       15,394        91,110
                                               -------------  ------------
Net loss                                        $(5,523,294)  $(1,762,230)
                                               =============  ============
Basic weighted average number of
common shares outstanding                        13,931,634    10,529,147
                                               =============  ============
Net loss per common share                            $(0.40)  $     (0.17)
                                               =============  ============
</TABLE>

         The accompanying notes are an integral part of this statement.


                                      -30-
<PAGE>
<TABLE>
<CAPTION>
                                  VSOURCE, INC.
                      CONSOLIDATED STATEMENTS OF CASH FLOWS
                         For the Year Ended January 31,

                                                                        2000          1999
                                                                 ------------  ------------
<S>                                                              <C>           <C>
Increase (decrease) in cash
Cash flows from operating activities:
  Net loss                                                       $(5,523,294)  $(1,762,230)
  Adjustments to reconcile net loss to
    net cash used by operating activities:
  Depreciation and amortization                                      436,671       285,340
  Interest expense related to
    the beneficial conversion feature                                349,710       290,657
  Interest expense converted to equity                                36,568            --
  Impairment of intangible asset                                     527,356            --
  Compensation expense from stock option grants                      424,266       155,112
  Services paid with equity                                          548,513       192,235
  Settlement of rent litigation                                       37,500       (37,500)
    Changes in assets and liabilities:
      Accounts receivable                                              3,590        (3,590)
      Prepaid expenses                                                    --        27,562
      Other assets                                                        --           877
      Accounts payable                                               198,250        16,735
      Deferred revenue                                                (3,250)      (25,469)
      Accrued liabilities                                            100,937        49,042
                                                                 ------------  ------------
Net cash used in operating activities                             (2,863,183)     (811,229)

Cash flows from investing activities:
  Advances to employees                                              (41,820)       (9,400)
  Purchase of equipment                                             (240,208)           --
                                                                 ------------  ------------
      Net cash used in investing activities                         (282,028)       (9,400)

Cash flows from financing activities:
  Proceeds from issuance of common stock                           2,139,941            --
  Proceeds from private placement                                  6,002,500            --
  Proceeds from borrowings                                           150,000       825,160
                                                                 ------------  ------------
      Net cash provided by financing activities                    8,292,441       825,160
                                                                 ------------  ------------
Net increase in cash                                               5,147,230         4,531
                                                                 ------------  ------------
Cash at beginning of period                                           59,937        55,406
                                                                 ------------  ------------
Cash at end of period                                             $5,207,167       $59,937
                                                                 ============  ============

Supplemental disclosure of non-cash financing activities:
  Issuance of warrants in exchange for services                     $435,000            --
  Conversion of debt to equity                                      $971,553      $319,007
                                                                 ============  ============
</TABLE>

         The accompanying notes are an integral part of this statement.


                                      -31-
<PAGE>
<TABLE>
<CAPTION>
                                                    VSOURCE, INC.
                              CONSOLIDATED STATEMENTS OF STOCKHOLDER'S EQUITY (DEFICIT)


                                      Common Stock         Additional       Deferred      Notes     Accumulated   Stockholder's
                                    Shares    Amount     Paid-in-Capital  Compensation  Receivable  Deficit       Equity/(Deficit)
                                 -----------  ---------  ---------------  ------------  ----------  ------------  ----------------
<S>                              <C>          <C>        <C>              <C>           <C>         <C>           <C>
Balance at January 31, 1998      10,804,295   $108,043       $2,310,724           $ -        $ -    $(2,519,380)        $(100,613)
Common stock surrendered         (1,000,000)   (10,000)          10,000                                                        --
Issuance of common stock-
Acquisition of WPG.net              500,000      5,000        1,181,555                                                 1,186,555
Issuance of common stock upon
     conversion of demand notes     778,656      7,786          311,221                                                   319,007
Beneficial conversion feature                                   290,657                                                   290,657
Granting of common stock
      options for services                                       45,725                                                    45,725
Issuance of common stock
      for services                  318,500      3,185          146,510                                                   149,695
Net loss                                                                                             (1,762,230)       (1,762,230)
                                 -----------  ---------  ---------------  ------------  ----------  ------------  ----------------
Balance at January 31, 1999      11,401,451    114,014        4,296,392                              (4,281,610)          128,796
Issuance of common stock,
     net of issuance costs        1,495,213     14,952        2,124,990                                                 2,139,942
Issuance of common stock
      upon conversion of
      demand notes                2,210,201     22,102          949,451                                                   971,553
Issuance of common
     stock for services              64,165        642          112,735                                                   113,377
Granting of common stock
     options for services                                     2,123,382   (1,780,817)                                     343,015
Issuance of warrants -
 related party                                                  435,136                                                   435,136
Beneficial conversion feature                                   349,710                                                   349,710
Modification in terms
 of stock options                                                81,251                                                    81,251
Exercise of stock options           636,100      6,361          172,437                 (178,798)                              --
Net loss                                                                                             (5,523,294)       (5,523,294)
                                 -----------  ---------  ---------------  ------------  ----------  ------------  ----------------
Balance at January 31, 2000      15,807,130   $158,071      $10,645,934   $(1,780,817)  $(178,798)  $(9,804,904)        $(960,514)
                                 ===========  =========  ===============  ============  ==========  ============  ================
</TABLE>

         The accompanying Notes are an integral part of this statement.


                                      -32-
<PAGE>
                                  VSOURCE, INC.
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                                January 31, 2000


NOTES  TO  CONSOLIDATED  FINANCIAL  STATEMENTS

1.   NATURE  OF  BUSINESS  AND  SUMMARY  OF  SIGNIFICANT ACCOUNTING PRINCIPLES

ORGANIZATION  AND  BUSINESS

VSource,  Inc.  (VSource  or  the  "Company") creates and markets Internet-based
applications  for businesses. An Internet-based application is best described as
computer  software  and  data  that  reside  on a remote server, rather than the
user's  computer,  where  that software and data are accessed over the Internet.
The  Company  intends  to  generate  fees  by  licensing  its  Internet-based
applications  for  use  by businesses.  Currently, the Company offers VSN as its
primary application.  VSN may be used by corporate clients to purchase goods and
services  via  the  Internet.  The Company has also developed and has previously
offered  Virtual  Source  Publisher, a do-it-yourself Internet web site builder.
Virtual  Source Publisher is currently inactive but is being retained for future
use  as  a  supporting  application.

VSource  was  incorporated  in  Nevada  on  October  22,  1980  as  Cinema-Star
Corporation and, in September 1989, was renamed Dyna-Seal Corporation.  Prior to
February  1,  1995, the Company's name was changed several times, and its former
line  of  business  (manufacturing,  packaging  and  distribution  of  coatings,
sealants  and adhesive for use in aircraft and marine industries) was completely
discontinued.  In  July 1995, the Company changed its name to Interactive Buyers
Network  International,  Ltd.,  and  acquired  all  of the outstanding shares of
Buyer/Seller  Interactive  Software,  Inc.,  a Nevada corporation whose name was
subsequently changed to Virtual Source, Inc., ("VSI").   The Company changed its
name  to  VSource,  Inc.  in  December  1999.

On  June  1, 1998, the Company acquired all of the outstanding stock of Wpg.Net,
Inc.  ("Wpg.Net").  See  Note  3.

PRINCIPLES  OF  CONSOLIDATION

The  consolidated financial statements include the accounts of VSource, Inc. and
its wholly owned subsidiaries Virtual Source, Inc. and Wpg.Net, Inc. Significant
intercompany  accounts  have  been  eliminated.

REVENUE  RECOGNITION

The  Company  accounts  for revenue in accordance with the American Institute of
Certified  Public  Accountants  (the AICPA) Statement of Position (SOP) No. 97-2
"Software  Revenue  Recognition,"  which provides guidance on applying generally
accepted  accounting  principles  for software revenue recognition transactions.

When  the  Internet  version  of  the Company's software is fully functional and
available  for sale, the Company plans on charging initial license fees and user
fees.

The initial license fees are charged in return for granting the client access to
the  network  and  the Interactive Buyer's servers where the system resides. The
Company  has  not  yet  received  revenue related to the Internet version of the
software. The revenue related to the initial license fees will be amortized over
the  service  life  of  a  customer relationship, currently estimated to be five
years.

In addition to the initial fees, the Company plans on charging a transaction fee
for  each  transaction  consummated  by  the  licensee  on  the  network.

RESEARCH  AND  DEVELOPMENT

Research  and  development  expenditures  are charged to operations as incurred.

SOFTWARE  DEVELOPMENT  COST

Software  development costs have been accounted for in accordance with Statement
of  Financial  Accounting  Standard  (SFAS)  No. 86, Accounting for the Costs of
Computer Software to be Sold, Leased or Otherwise Marketed. Under that standard,


                                      -33-
<PAGE>
                                  VSOURCE, INC.
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                                January 31, 2000


capitalization  of  software  development costs begins upon the establishment of
technological  feasibility,  subject  to  net  realizable  value considerations.
Capitalized  software  costs  are  amortized  over the greater of: 1) the amount
computed  using  the ratio that current gross revenues for a product bear to the
total  current and anticipated future gross revenues for that product; or 2) the
straight-line  method over the remaining estimated useful life of the product in
which  the  life  is  generally estimated to be three years. The Company has not
incurred  any  significant  capitalization costs after technological feasibility
was  achieved  and thus does not have any capitalized software development costs
for  the  years  ended  January  31,  1999  and  2000.

PROPERTY  AND  EQUIPMENT

Property  and equipment are stated at cost. The assets are depreciated using the
straight-line  method  over their estimated useful lives of five years. Carrying
values  are  reviewed  periodically for impairment whenever events or changes in
circumstances  indicate  that  the  carrying  amount  of  assets  may  not  be
recoverable.

The  policy  of  the  Company  is  to capitalize significant improvements and to
expense  repairs  and  maintenance.

Depreciation  expense  for the years ended January 31, 1999 and 2000 was $21,661
and  $40,275,  respectively.

IMPAIRMENT  OF  LONG  LIVED  ASSETS

The  Company evaluates its long lived assets by measuring the carrying amount of
the  assets against the estimated undiscounted future cash flows associated with
them.  If  such  evaluations indicate that the future undiscounted cash flows of
certain  long  lived  assets are not sufficient to recover the carrying value of
such  assets,  the  assets  are  adjusted  to  their  fair  values.

INTANGIBLE  ASSETS

Intangible  assets,  principally  goodwill,  are  amortized on the straight-line
method  over  a period of 3 years. The carrying amounts of intangible assets are
assessed  for  impairment  when  operating  profit  from  the  related  business
indicates  the  carrying  amounts of the assets may not be recoverable. Carrying
values  are  reviewed  periodically for impairment whenever events or changes in
circumstances indicate that the carrying amounts of intangible assets may not be
recoverable.  The  Company  recorded  an impairment of goodwill in the amount of
$527,356  for the year ended January 31, 2000.  Amortization for the years ended
January  31,  1999  and  2000  was  $263,757  and  $396,396,  respectively.

STOCK  BASED  COMPENSATION

The  Company  has  adopted  the  disclosure provisions of Statement of Financial
Accounting Standard (SFAS) No. 123, Accounting for Stock-Based Compensation. The
Company  has  chosen  under  the  provisions  of  SFAS 123 to continue using the
intrinsic-value  method  of  accounting for employee stock-based compensation in
accordance with Accounting Principles Board (APB) Opinion No. 25, Accounting for
Stock  Issued  to  Employees.

LOSS  PER  SHARE

Loss  per share of common stock is computed using the weighted average number of
common  shares outstanding during the period shown. Common stock equivalents are
not  included  in  the  determination  of  the weighted average number of shares
outstanding,  as  they  would  be  antidilutive.

ADVERTISING  COST

The  Company  charges  advertising  costs  to  expense  as incurred. Advertising
expense  for  the years ended January 31, 1999 and 2000 was $1,073 and $245,680,
respectively.


                                      -34-
<PAGE>
                                  VSOURCE, INC.
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                                January 31, 2000


STATEMENT  OF  CASH  FLOWS

For  the purpose of the statement of cash flows, cash includes amounts "on-hand"
and  amounts  deposited  with  financial  institutions.

Supplemental  disclosure  of  cash  flow  information  is  as  follows:

Cash  paid  during  the  periods:

                       For  the  Years  Ended  January  31,
                       ------------------------------------
                            2000                 1999
                       ------------------------------------
Interest               $       -              $     -
                       ==============  ====================
Income  taxes          $   1,600             $  1,600
                       ==============  ====================

Supplemental  schedule  of  non-cash  investing  and  financing  transactions:

Issuance  of  common  stock  in  connection  with  the  following  transactions:

                                      For  the  Years  Ended  January  31,
                                      ------------------------------------
                                            2000             1999
                                        ----------------------------------

Conversion  of  notes  payable                $996,553         $   319,007
Purchase  of  Wpg.Net                    $          -           $1,186,555
                                        ===============     ==============

For  the year ended January 31, 2000, options for 636,100 shares of common stock
were  exercised  for  notes  receivable  in  the  amount  of  $178,798.

USE  OF  ESTIMATES

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

2.     REALIZATION  OF  ASSETS

The  accompanying  financial  statements  have  been prepared in conformity with
generally  accepted accounting principles, which contemplate continuation of the
company  as  a  going  concern.  However,  the company has sustained substantial
losses  from  operations in recent years, and such losses have continued through
the year ended January 31, 2000.  In addition, the company has used, rather than
provided,  cash  in  its  operations.

In view of the matters described in the preceding paragraph, recoverability of a
major  portion  of  the recorded asset amounts shown in the accompanying balance
sheet  is  dependent  upon continued operations of the company, which in turn is
dependent  upon  the  company's  ability to meet its financing requirements on a
continuing  basis,  to  maintain present financing, and to succeed in its future
operations.  The financial statements do not include any adjustments relating to
the  recoverability  and classification of recorded asset amounts or amounts and
classification  of  liabilities  that  might  be necessary should the company be
unable  to  continue  in  existence.


                                      -35-
<PAGE>
                                  VSOURCE, INC.
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                                January 31, 2000


Management  has  taken the following steps to revise its operating and financial
requirements,  which  it believes are sufficient to provide the company with the
ability  to  continue its operations:  it has retained experienced operating and
financial management, it has concluded contracts with clients which will provide
revenues  in  future  periods,  and its has retained an investment bank to raise
additional  capital.

3.     ACQUISITION  OF  WPG.NET,  INC.

On  June  1, 1998, the Company acquired all of the outstanding stock of Wpg.Net,
Inc. for an aggregate purchase price of $1,186,555. VSource, Inc. issued 500,000
shares  of  common  stock  with a fair value of $625,000 ($1.25 per share), plus
stock options for 500,000 shares with a fair value of $561,555. The options vest
ratably,  on  a  monthly  basis, over the 3 years subsequent to the purchase. If
Wpg.Net,  Inc. division revenues reach $500,000 before the 3-year vesting period
has  expired,  the  500,000 options vest immediately. The former shareholders of
Wpg.Net,  Inc.  (Wpg.Net, Inc. shareholders) are entitled to a commission of 50%
of  revenue  generated by the Wpg.Net, Inc. division. Wpg.Net, Inc. shareholders
are entitled to 25% of the revenues produced by Virtual Source, Inc. relating to
the sales of Virtual Source Publisher.  As of January 31, 2000, no revenues have
been generated related to Wpg.Net, Inc. or the Virtual Source Publisher.  In the
event  that  VSource  is  sold, the Wpg.Net, Inc. shareholders are entitled to a
one-time payment of $3,000,000, the options vest immediately, and all commission
obligations cease to accrue at that time. The Company guaranteed a minimum stock
price  of  $7.00 per share for stock held by Wpg.Net, Inc. shareholders upon the
sale  of  the  Company.

The  acquisition  was  accounted  for  as  a  purchase and was included with the
combined operations for the dates subsequent to June 1, 1998. As a result of the
acquisition,  goodwill  was recorded in the amount of $1,186,555. In conjunction
with  the  acquisition of Wpg.Net, three of Wpg.Net's executives signed one-year
employment  agreements  with  the  Company. The contracts guaranteed the Wpg.Net
executives  salaries  ranging  from $49,500 to $77,250 per year. These contracts
have  expired; however, these executives remain active employees of the Company.

During  the year ended January 31, 2000, the Company determined that the present
value  of  future  cash  flows  related  to  the  acquisition of Wpg.Net was not
material.  Consequently, the remaining unamortized goodwill has been written off
as  of  January  31,  2000.

4.     NOTES  RECEIVABLE  -  RELATED  PARTIES

The  Company has unsecured notes receivables from several officers which totaled
$178,798  as  of January 31, 2000. The notes are due on demand and bear interest
at  an annual rate of 6%. The notes were granted in connection with the exercise
of  636,100  stock  options  on  May  15,  1999.

5.     CONVERTIBLE  NOTES  PAYABLE


In  July  1999, the company converted all of its outstanding convertible debt to
equity.  To  induce  debt  holders to convert prior to the 90-day notice period,
the Company offered a financial inducement.  The total amount of the inducement,
charged  to interest expense, was $19,860.  The total amount of shares issued in
connection  with  the conversion of debt for the year ended January 31, 2000 was
2,210,201  shares.

In  November  1999,  the  Company  issued  $150,000 of 10% convertible notes due
December  31,  2000 to certain investors.  The notes are convertible into shares
of  restricted  common stock at a per share price of $2.50.  None of these notes
were  converted  as  of  January  31,  2000.

The  Company  allocated  a  portion  of  the  convertible  notes to the embedded
beneficial  conversion  feature  in  the  convertible notes and credited paid-in
capital.  The portion allocated to the beneficial conversion feature was charged


                                      -36-
<PAGE>
                                  VSOURCE, INC.
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                                January 31, 2000


to  interest  expense  at  the date of issuance.  The amount charged to interest
expense  related  to  convertible notes issued during the year ended January 31,
2000  was  $112,500.

6.     STOCK  OPTIONS  AND  WARRANTS

The  Company  has granted various non-qualified stock options to key executives,
management  and  other employees at exercise prices equal to or below the market
price at the date of grant. In general, options become exercisable from 8 months
to  3  years  from  the  grant  date.

On  June  10,  1998,  the Board of Directors granted options to shareholders' of
Wpg.Net,  Inc.  to  purchase  500,000  shares of the Company's restricted common
stock  at  an exercise price of $0.59 per share. The options vest monthly over a
three-year  period  and  have  a  term  ending  in  June  2008.

The  following  table summarizes information about stock option transactions for
the  years  ended  January  31,  1999  and  2000:


                                                  Weighted
                                    Shares    Average Exercise
                                                    Price
                                  ----------  -----------------
Outstanding at January 30, 1998     506,100               $0.19
Granted                             630,000                0.73
Exercised                                 -                   -
Cancelled                                 -                   -
                                  ----------
Outstanding at January 31, 1999:  1,136,100                0.49
Granted                           1,273,250                0.93
Exercised                          (636,100)               0.28
Cancelled                          (130,000)               1.25
                                  ----------

Outstanding at January 31, 2000   1,643,250                0.85
                                  ----------

Exercisable at January 31, 2000     676,856                0.72
                                  ----------


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

<TABLE>
<CAPTION>
                                         Weighted
                                         Average                              Exercisable
                                         Remaining    Weighted                Weighted
               Range    of  Number   of  Years of     Average   Number Of     Average
               Exercise     Options      Contractual  Exercise  Options       Exercise
               Prices       Outstanding  Life         Price     Exercisable   Price
             ----------------------------------------------------------------------------
<S>          <C>           <C>          <C>          <C>        <C>          <C>
January 31,  $0.59 - 1.66    1,643,250         8.76      $0.85      676,856         $0.72
2000
</TABLE>


The  Company  has  elected  to  continue  using  the  intrinsic-value  method of
accounting  for  stock-based  awards granted to employees in accordance with APB
25.  For  the  year  ended  January  31, 2000, the Company recorded compensation
expense  in  the  amount  of  $424,266.

The following table reflects pro forma net income and earnings per share had the
Company  elected  to  adopt  the  fair  value approach of SFAS 123 for the years
ended:


                                      -37-
<PAGE>
                                  VSOURCE, INC.
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                                January 31, 2000


                                  January  31,
                                 ----------------------------------
                                  2000               1999
                                 -------------     ----------------
Net  loss  as  reported          $(5,523,294)          $(1,762,230)
Pro  forma                       $(6,921,005)          $(1,802,545)
Loss  per  share  as reported         $(0.40)               $(0.17)
Pro  forma                            $(0.50)               $(0.17)

The  estimated  fair  value  of  each  option  granted  is  calculated using the
Black-Scholes  option-pricing  model  with  a weighted average risk free rate of
6.5%,  volatility  of  219.4%  and  expected  life  of  1  to  5  years.

In  connection  with  a financing transaction, the Company issued warrants to an
outside  consultant to purchase 120,000 shares of the Company's common stock for
a  purchase  price  of $2.00 per share. The warrants expire on November 7, 2000.

7.     INCOME  TAXES

Income  taxes are provided pursuant to SFAS No. 109 Accounting for Income Taxes.
The  statement requires the use of an asset and liability approach for financial
reporting  for  income taxes. If it is more likely than not that some portion or
all  of  a  deferred  tax  asset  will not be realized, a valuation allowance is
recognized.  Accordingly,  as  the realization and use of the net operating loss
carryforward is not probable at January 31, 1999 or 2000, the tax benefit of the
loss  carryforward  has been offset by a valuation allowance of the same amount.

The  composition  of  deferred  tax  assets  is  as  follows:

                                  January  31,
                                 ----------------------------------
                                  2000               1999
                                 -------------     ----------------
Total  deferred  tax  assets       $2,424,637           $902,000
Total  valuation  allowance        (2,434,637)          (902,000)

Total  deferred  tax  assets       $      -             $     -

The  tax  effects  of  temporary differences and carryforwards that give rise to
deferred  assets  are  as  follows:

                                  January  31,
                                 ----------------------------------
                                  2000               1999
                                 -------------     ----------------
Deferred  tax  assets:
Net operating loss carryforwards  $  9,149,575        $  3,452,000
Stock  option  conversion              164,217                 -

As  of January 31, 2000, the Company had approximately $9,149,575 of federal and
state  loss  carryforwards  available  to  reduce  future  federal and state tax
liability  through the year 2020 for federal loss carryforwards and 2005 for the
state  loss  carryforwards.


                                      -38-
<PAGE>
                                  VSOURCE, INC.
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                                January 31, 2000


8.     FAIR  VALUE  OF  FINANCIAL  INSTRUMENTS

The  Company  has  used  market  information for similar instruments and applied
judgment  to  estimate fair values of financial instruments. At January 31, 1999
and  2000,  the  fair values of cash, accounts receivable, employee receivables,
notes  payable  and accounts payable approximated carrying values because of the
short-term  nature  of  these  instruments.

9.     COMMITMENTS  AND  CONTINGENCIES

LEASES
The  Company  leases its main office facilities under a noncancellable operating
lease  agreement  expiring  March 31, 2002. The future minimum rent expense that
will  be  incurred  under  operating  leases  are  as  follows:


        2001          $184,000
        2002           206,000
        2003            97,000
                      --------
                      $487,000
                      ========

Rent  expense  for  the  years  ended  January 31, 1999 and 2000 was $35,063 and
$114,221,  respectively.

10.     SUBSEQUENT  EVENTS

In  February  2000,  the company completed a private placement of non-cumulative
convertible  preferred  stock  in  the  amount  of  $7,005,000.  The convertible
preferred  stock accrues dividends at a rate of $0.20 per share per annum and is
convertible  into  shares  of  common  stock  at any time at the election of the
holder.  The  preferred  stock is automatically convertible upon an underwritten
public  offering  of  shares  of the Company with aggregate proceeds of at least
$10,000,000, or by a vote of the majority of the outstanding Series1-A preferred
stock.  The  amount  as  of  January  31,  2000  in  the  in-progress  offering,
$6,002,500,  was  included  in  current  liabilities in the accompanying balance
sheet until the closing of the offering in February 2000 when stock certificates
were  issued  to  subscribers.

In  February  2000,  the  Company  entered  into a strategic relationship with a
vendor  in  which  the two companies agreed to make the Company's Virtual Source
Network  available  to  the vendor's business customers. In connection with this
agreement,  the Company issued warrants to the vendor to purchase 600,000 shares
of  the  Company's common stock at a base exercise price of $5.00 per share. The
exercise  price  is subject to various adjustments, as defined in the agreement.
The  warrants  may  be  exercised  in  whole  or  in part through February 2007.


                                      -39-
<PAGE>
Item  8.     CHANGES  IN  AND  DISAGREEMENTS  WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL  DISCLOSURE.

     Effective  February  8,  2000,  Vsource,  Inc.,  a  Nevada  corporation
("Registrant"  or  the  "Company"),  agreed  to retain Grant Thornton LLP as the
principal  accountant to audit the Company's financial statements.  Concurrently
with  the  agreement  to  engage  Grant  Thornton  LLP,  the  Company's  former
accountants,  Lucas,  Horsfall,  Murphy & Pindroh, LLP resigned as the Company's
independent accountants.  The Company's Board of Directors approved the decision
to  change  accountants.

     Lucas, Horsfall, Murphy & Pindroh, LLP's report, dated May 15, 1999 (except
for  Note  10  to the financial statements which is as of September 3, 1999), on
the  consolidated financial statements as of and for the years ended January 31,
1999 and 1998 contained an additional paragraph adding emphasis to the matter of
the  Company's  ability  to  continue  as  a  going  concern.

     During  the  Company's  two  most  recent  fiscal  years and any subsequent
interim  period,  there  were  no  disagreements  between the Company and Lucas,
Horsfall,  Murphy  &  Pindroh,  LLP  on  any  matter of accounting principles or
practices,  financial  statement  disclosure,  or  auditing scope or procedures,
which  disagreements,  if  not  resolved to the satisfaction of Lucas, Horsfall,
Murphy  &  Pindroh, LLP, would have caused it to make a reference to the subject
matter  of  the  disagreements  in  connection  with  its  reports.

                                    PART  III

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

     Incorporated by reference to the Registrant's definitive proxy statement to
be  filed  not  later  than  120  days  after  the  end  of  the  fiscal  year.

Item  10.     EXECUTIVE  COMPENSATION

     Incorporated by reference to the Registrant's definitive proxy statement to
be  filed  not  later  than  120  days  after  the  end  of  the  fiscal  year.

Item  11.     SECURITY  OWNERSHIP  OF  CERTAIN  BENEFICIAL OWNERS AND MANAGEMENT

     Incorporated by reference to the Registrant's definitive proxy statement to
be  filed  not  later  than  120  days  after  the  end  of  the  fiscal  year.

Item  12.     CERTAIN  RELATIONSHIPS  AND  RELATED  TRANSACTIONS

     Incorporated by reference to the Registrant's definitive proxy statement to
be  filed  not  later  than  120  days  after  the  end  of  the  fiscal  year.

Item  13.     EXHIBITS  AND  REPORTS  ON  FORM  8-K

EXHIBITS

     The  Company  will  furnish a copy of any exhibit listed below upon written
request  of  any shareholder receiving these materials.  The Company will charge
the  requesting  shareholder  a fee covering the reasonable expenses incurred by
the  Company  in  furnishing  any  such  exhibit.


                                      -40-
<PAGE>
Exhibit No.    Description
----------     -----------

3.1(*)         Articles  of  Incorporation.  Incorporated  herein  by reference
               from  Exhibit 2.1 to Registrant's Registration Statement on Form
               10-SB filed on September 21,  1999  (SEC  File  No.  000-26563).

3.2            Certificate of Designation of  Series  1-A Convertible Preferred
               Stock.

3.3(*)         Bylaws  of  Vsource, Inc.  Incorporated herein by reference from
               Exhibit  2.2  to  Registrant's  Registration  Statement  on Form
               10-SB filed on September 21, 1999 (SEC File No. No.  000-26563).

3.4            Certificate  of Amendment to Bylaws of Vsource, Inc. dated April
               26, 2000.

3.5            Certificate of Amendment of Bylaws of Vsource, Inc. dated May 2,
               2000.

4.1(*)         Form of  Stock Certificate for Vsource, Inc.  Incorporated herein
               by  reference  from  Exhibit  3.1  to  Registrant's  Registration
               Statement on Form 10-SB filed on September  21,  1999  (SEC  File
               No.  000-26563).

4.2(*)         Form of Series  3  Convertible  Demand  Note  for  Vsource,  Inc.
               Incorporated herein by reference from Exhibit 3.2 to Registrant's
               Registration Statement on Form  10-SB filed on September 21, 1999
               (SEC File No. 000-26563).

4.3(*)         Form of Series  2  Convertible  Demand  Note  for  Vsource,  Inc.
               Incorporated herein by reference from Exhibit 3.3 to Registrant's
               Registration Statement on Form  10-SB filed on September 21, 1999
               (SEC File No. 000-26563).

10.1           Distribution  and  Marketing Agreement  between Vsource, Inc. and
               U.S. West  Interprise  America, Inc.  dated  February  15,  2000.

10.2           Ventura  Professional  Center  First  Amendment to  Lease between
               Virtual  Source,  Inc.  and  Security  National  Properties, LLC,
               dated October 27, 1998.

10.3           Lease - Razore  Land  Company,  Landlord  and Interactive  Buyers
               Network  International,  Tenant,  dated  October  11,  1999.

21.1           Subsidiaries.

23.1           Consent  of  Independent  Auditors

27.1**         Financial  Data  Schedule.

*   Previously  filed  with  the  Securities  and  Exchange  Commission.
**  Filed  electronically  via  EDGAR.


REPORTS  ON  FORM  8-K

          Report  on  Form  8-K  - Change in Registrant's Certifying Accountant,
          filed  on  February  14,  2000.


                                      -41-
<PAGE>
SIGNATURES

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

                                           Vsource,  Inc.


Date:   May 10, 2000                       /s/  Robert  C.  McShirley
                                           --------------------------
                                           Robert  C.  McShirley,
                                           President and Chief Executive Officer

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

SIGNATURE                 TITLE                                   DATE
                          Chief  Executive  Officer
                          President
/s/  Robert C. McShirley  Director                                May  10,  2000
------------------------
Robert  C.  McShirley     (Principal  Executive  Officer)


                          Chief  Financial  Officer
/s/  Sandford T. Waddell  Secretary                               May  10,  2000
------------------------
Sandford  T.  Waddell     (Principal  Accounting  Officer)



/s/  Samual E. Bradt      Director                                May  10,  2000
------------------------
Samual  E.  Bradt



/s/  Scott  T.  Behan     Director                                May  10,  2000
------------------------
Scott  T.  Behan



/s/  Robert  N. Schwartz  Director                                May  10,  2000
------------------------
Robert  N.  Schwartz



/s/  Ramin  Kamfar        Director                                May  10,  2000
------------------------
Ramin  Kamfar


                                      -42-
<PAGE>
EXHIBIT  INDEX

The  Exhibit  Index shows the page numbers of all exhibits filed as part of this
10-KSB.

<TABLE>
<CAPTION>
Exhibit
-------
<S>      <C>

3.1(*)   Articles of Incorporation incorporated herein by reference from Exhibit 2.1 to registrant's
         Registration Statement on Form 10-SB Filed on September 21, 1999 (SEE File No. 000-26563).
3.2      Certificate of Designation of Series 1-A Convertible Preferred Stock
3.3(*)   Bylaws  of  Vsource, Inc.  Incorporated herein by reference from
         Exhibit  2.2  to  Registrant's  Registration  Statement  on Form
         10-SB filed on September 21, 1999 (SEC File No. No.  000-26563).
3.4      Certificate of Amendment to Bylaws of Vsource, Inc. dated April 26, 2000
3.5      Certificate of Amendment of Bylaws of Vsource, Inc. dated May 2, 2000
4.1(*)   Form of  Stock Certificate for Vsource, Inc.  Incorporated herein
         by  reference  from  Exhibit  3.1  to  Registrant's  Registration
         Statement on Form 10-SB filed on September  21,  1999  (SEC  File
         No.  000-26563).
4.2(*)   Form of Series  3  Convertible  Demand  Note  for  Vsource,  Inc.
         Incorporated herein by reference from Exhibit 3.2 to Registrant's
         Registration Statement on Form  10-SB filed on September 21, 1999
         (SEC File No. 000-26563).
4.3(*)   Form of Series  2  Convertible  Demand  Note  for  Vsource,  Inc.
         Incorporated herein by reference from Exhibit 3.3 to Registrant's
         Registration Statement on Form  10-SB filed on September 21, 1999
         (SEC File No. 000-26563).
10.1     Distribution and Marketing Agreement between Vsource, Inc. and U.S. West
         Interprise America, Inc. dated February 15, 2000
10.2     Ventura Professional Center First Amendment to Lease between Virtual Source, Inc. and Security
         National Properties, LLC, dated October 27, 1998
10.3     Lease - Razore Land Company, Landlord and Interactive Buyers Network International,
         Tenant, dated October 11, 1999
21.1     Subsidiaries.
23.1     Consent of Independent Auditors
27.1**   Financial Date Schedule

*        Previously filed with Securities and Exchange Commission.
**       Filed electronically via EDGAR
</TABLE>


                                      -43-
<PAGE>