<PAGE>

                                 UNITED STATES
                      SECURITIES AND EXCHANGE COMMISSION
                            Washington, D.C. 20549

                                   FORM 10-Q

[X]  QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
     ACT OF 1934 FOR THE QUARTERLY PERIOD ENDED December 31, 2000

OR

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

                       COMMISSION FILE NUMBER: 001-14001


                          CUMETRIX DATA SYSTEMS CORP.
            (Exact Name of Registrant as Specified in its Charter)

           California                                  95-4574138
 (State or Other Jurisdiction of                   (I.R.S. Employer
 Incorporation or Organization)                    Identification No.)

                 957 Lawson Street, Industry, California 91748

  (Address, Including Zip Code, Of Registrant's Principal Executive Offices)

                                (626) 965-6899

             (Registrant's Telephone Number, Including Area Code)


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

     As of February 14, 2001, the Registrant had 7,392,500 shares of Common
Stock, without par value, issued and outstanding.

                                                                          Page 1
<PAGE>

                          CUMETRIX DATA SYSTEMS CORP.
                                     INDEX

PART I.  FINANCIAL INFORMATION

 ITEM 1. FINANCIAL STATEMENTS

         1.  Condensed Balance Sheets - December 31, 2000 (unaudited) and
             March 31, 2000
         2.  Condensed Statements of Operations - Three Months Ended
             December 31, 2000 (unaudited) and 1999 (unaudited)and Nine
             Months Ended December 31, 2000 (unaudited) and 1999 (unaudited)
         3.  Condensed Statements of Cash Flows - Nine Months Ended
             December 31, 2000 (unaudited) and 1999 (unaudited)
         4.  Notes to Financial Statements (unaudited)

 ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
         RESULTS OF OPERATIONS.


PART II. OTHER INFORMATION

 ITEM 5. OTHER INFORMATION

 ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K

  SIGNATURES

                                                                          Page 2
<PAGE>

PART I. FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS

                          CUMETRIX DATA SYSTEMS CORP.
                            CONDENSED BALANCE SHEETS

<TABLE>
<CAPTION>
                                                                            December 31,     March 31,
                                                                                2000           2000
                                                                            ------------    -----------
<S>                                                                         <C>             <C>
ASSETS                                                                      (unaudited)
CURRENT ASSETS:
 Cash and cash equivalents...............................................   $  1,229,751    $ 3,769,174
 Time deposits...........................................................      1,165,117      1,600,000
 Trade receivables, net of allowance for doubtful accounts of $250,000
  and $150,000...........................................................        991,713        336,854
 Inventories, net of reserve of $100,000 and $150,000....................        381,486        698,226
 Income tax receivable...................................................        541,301        541,301
 Prepaid expenses........................................................         41,466            -
                                                                            ------------    -----------
    Total current assets.................................................      4,350,834      6,945,555
                                                                            ------------    -----------
FIXED ASSETS, net                                                                192,083        516,057

OTHER ASSETS.............................................................        456,169        293,012
                                                                            ============    ===========
    Total Assets.........................................................   $  4,999,086    $ 7,754,624
                                                                            ============    ===========
LIABILITIES AND SHAREHOLDERS' EQUITY

CURRENT LIABILITIES:
   Note payable..........................................................   $  1,142,531    $       -
   Accounts payable......................................................        845,680        152,116
   Accrued expenses and other current liabilities........................        729,632      1,559,215
                                                                            ------------    -----------
    Total current liabilities............................................      2,717,843      1,711,331
                                                                            ------------    -----------

LONG-TERM DEBT, net of current portion...................................         64,267         77,864

SHAREHOLDERS' EQUITY:
 Preferred stock, no par value: Authorized, 2,000,000 shares; issued                 -              -
  and outstanding, none
 Common stock, no par value: Authorized, 20,000,000 shares; issued and
  outstanding, 7,392,500 and 7,392,500 at December 31, 2000 and March
  31, 2000, respectively.................................................     12,248,414     12,188,414
 Retained earnings.......................................................    (10,031,438)    (6,222,985)
                                                                            ------------    -----------
    Total shareholders' equity...........................................      2,216,976      5,965,429
                                                                            ------------    -----------
    Total liabilities and shareholders' equity...........................   $  4,999,086    $ 7,754,624
                                                                            ============    ===========
</TABLE>

The accompanying notes are an integral part of these condensed balance sheets.

                                                                          Page 3
<PAGE>

                          CUMETRIX DATA SYSTEMS CORP.
                      CONDENSED STATEMENTS OF OPERATIONS


<TABLE>
<CAPTION>


                                                         Three Months Ended
                                                             December 31,
                                                         2000           1999
                                                      ----------     ----------
                                                             (unaudited)
<S>                                                 <C>            <C>

NET SALES........................................     $4,502,036     $3,951,045
COST OF PRODUCTS.................................      4,301,419      3,453,308
                                                      ----------     ----------
  Gross profit...................................        200,617        497,737
SELLING, GENERAL AND ADMINISTRATIVE EXPENSES.....        859,347        933,226
                                                      ----------     ----------
    Loss from operations.........................       (658,730)      (435,489)
INTEREST EXPENSE.................................       (196,547)           (51)
INTEREST INCOME..................................         45,483         79,698
GAIN ON SALE OF INVESTMENT.......................        445,000            -
                                                      ----------     ----------
    Loss before benefit for income taxes.........       (364,794)      (355,842)
PROVISION (BENEFIT) FOR INCOME TAXES.............        (46,699)           -
                                                      ----------     ----------
NET LOSS.........................................     $ (318,095)    $ (355,842)
                                                      ==========     ==========

BASIC AND DILUTED LOSS PER SHARE.................     $    (0.04)    $    (0.05)
                                                      ==========     ==========

Weighted average shares used in computation of
 basic and diluted loss per share................      7,392,500      7,392,500
                                                      ==========     ==========
</TABLE>

<TABLE>
<CAPTION>


                                                          Nine Months Ended
                                                             December 31,
                                                         2000           1999
                                                      ----------    -----------
                                                             (unaudited)
<S>                                                  <C>            <C>

NET SALES..........................................  $10,510,558    $15,063,615
COST OF PRODUCTS...................................   10,021,763     14,283,306
                                                     -----------    -----------
  Gross profit.....................................      488,795        780,309
SELLING, GENERAL AND ADMINISTRATIVE EXPENSES.......    2,695,631      2,931,620
IMPAIRMENT LOSS - LOANS RECEIVABLE FROM OFFICERS...      500,000            -
IMPAIRMENT LOSS - LONG-LIVED ASSETS................      207,740            -
                                                     -----------     -----------
    Loss from operations...........................   (2,914,576)    (2,151,311)
INTEREST EXPENSE...................................     (217,255)          (410)
INTEREST INCOME....................................      113,522        246,576
LOSS ON EQUITY INVESTMENT..........................    1,281,843        364,607
GAIN ON SALE OF INVESTMENT.........................      445,000            -
                                                     -----------    -----------
    Loss before benefit for income taxes...........   (3,855,152)    (2,269,752)
PROVISION (BENEFIT) FOR INCOME TAXES...............      (46,699)           -
                                                     -----------    -----------
NET LOSS...........................................  $(3,808,453)   $(2,269,752)
                                                     ===========    ===========

BASIC AND DILUTED LOSS PER SHARE...................  $     (0.52)   $     (0.31)
                                                     ===========    ===========

Weighted average shares used in computation of
 basic and diluted loss per share..................    7,392,500      7,392,500
                                                     ===========    ===========
</TABLE>

  The accompanying notes are an integral part of these condensed statements.

                                       4
<PAGE>

                          CUMETRIX DATA SYSTEMS CORP.
                      CONDENSED STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
                                                        Nine Months Ended
                                                           December 31,
                                                       2000           1999
                                                    -----------    -----------
                                                           (unaudited)
<S>                                                <C>             <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
 Net loss.......................................    $(3,808,453)   $(2,269,752)
  Adjustments to reconcile net income to
   cash and cash equivalents used in
   operating activities:
    Depreciation and amortization...............        116,234        162,000
    Provision for doubtful accounts.............        100,000       (230,000)
    Loss on equity investment in affiliate......      1,281,843        364,607
    Impairment loss - loan receivable officers..        500,000           -
    Impairment loss - long-lived assets.........        207,740           -
    Decrease in inventory reserve...............        (50,000)          -
    Gain on sale of investment..................       (445,000)          -
    Issuance of warrants........................         60,000           -

   Changes in assets and liabilities:
    Trade receivables...........................       (754,859)     1,060,416
    Inventories.................................        366,740      1,759,592
    Loans receivable - officers.................       (500,000)          -
    Investment..................................           -              -
    Prepaid expenses............................        (41,466)        81,109
    Accounts payable............................        693,564     (3,217,168)
    Accrued expenses............................       (829,583)       (39,757)
    Income taxes payable........................           -               800
                                                    -----------    -----------
     Net cash provided (used) by operating
      activities................................     (3,103,240)    (2,328,153)
                                                    -----------    -----------
CASH FLOWS FROM INVESTING ACTIVITIES:
 Purchases of fixed assets......................           -           (31,093)
 Investment in affiliate........................     (1,000,000)          -
 Proceeds from time deposit.....................        434,883           -
                                                    -----------    -----------
     Net cash provided (used) in investing
      activities................................       (565,117)       (31,093)
                                                    -----------    -----------
CASH FLOWS FROM FINANCING ACTIVITIES:
 Payments on long-term debt.....................        (13,597)        (4,810)
 Increase in note payable.......................      1,142,531           -
                                                    -----------    -----------
     Net cash provided (used) in financing
      activities................................      1,128,934         (4,810)
                                                    -----------    -----------
NET DECREASE IN CASH AND CASH EQUIVALENTS            (2,539,423)    (2,364,056)
CASH AND CASH EQUIVALENTS, beginning of period..      3,769,174      6,743,198
                                                    -----------    -----------
CASH AND CASH EQUIVALENTS, end of period........    $ 1,229,751    $ 4,379,142
                                                    ===========    ===========
CASH PAID FOR INTEREST                                    4,740            410
CASH PAID FOR INCOME TAXES                                1,600           -
</TABLE>

  The accompanying notes are an integral part of these condensed statements.

                                       5
<PAGE>

                          CUMETRIX DATA SYSTEMS CORP.
                         NOTES TO FINANCIAL STATEMENTS
                               December 31, 2000
                                  (Unaudited)

NOTE A - BASIS OF PRESENTATION

     The accompanying unaudited condensed financial statements have been
prepared in conformity with generally accepted accounting principles for interim
financial information and with the instructions to Form 10-Q and Article 10 of
Regulation S-X. Accordingly, they do not include all of the information and
footnotes required by generally accepted accounting principles for complete
financial statements. In the opinion of management, all adjustments (which
comprise only normal recurring accruals) necessary for a fair presentation have
been included. Operating results for the period ended December 31, 2000 are not
necessarily indicative of results to be expected for the year ending March 31,
2001. For further information, refer to the financial statements and notes
thereto for the year ended March 31, 2000.

NOTE B - EARNINGS PER SHARE

     Earnings per share calculations are in accordance with SFAS No.
128,"Earnings per Share". Accordingly, "basic" earnings per share is computed by
dividing net income by the weighted average number of common shares outstanding
for the period. "Diluted" earnings per share is computed by dividing net income
by the total of the weighted average number of common shares outstanding and
common equivalent shares outstanding for each period presented. Common
equivalent shares include stock options assuming conversion under the treasury
stock method.

<TABLE>
<CAPTION>
                                        Three Months Ended        Nine Months Ended
                                           December 31,             December 31,
                                       ---------------------   -----------------------
                                          2000        1999        2000         1999
                                       ---------   ---------   ---------   -----------
<S>                                    <C>         <C>         <C>         <C>
Weighted average number of common
 shares outstanding-Basic              7,392,500   7,392,500   7,392,500     7,392,500
Dilutive effect of outstanding
 stock options and warrants                    -           -           -             -
                                       ---------   ---------   ---------   -----------
Weighted average number of common
 shares outstanding-Diluted            7,392,500   7,392,500   7,392,500     7,392,500
                                       =========   =========   =========   ===========
</TABLE>

NOTE C - LINE OF BUSINESS

     Cumetrix Data Systems Corp. (the "Company") was incorporated on April 2,
1996 in the State of California. The Company distributes computer peripherals,
components, and accessories and assembles computer systems. Since April 1999,
the Company's principal business has been the electronic sales and marketing of
computer systems and components through a direct business to business and
business to consumer model. The Company currently sells a majority of its
products to end-users through its Internet marketing partner Egghead.com. The
Company markets its products and services through its Internet marketing
partners such as Egghead.com and Cnet.com and its own Internet website,
suredeals.com.

NOTE D - INVESTMENTS

     Investments at December 31, 2000 consists of common shares and warrants of
Vsource, Inc. and Salescentrix.com.

                                                                          Page 6
<PAGE>

     Online Transaction Technologies, Inc.

     The Company held a 29.5% interest in Online Transaction Technologies, Inc.
("OTT") with an option to acquire an additional 21%. OTT is a development stage
enterprise and developes Internet auction software. The Company accounted for
this investment under the equity method of accounting. The Company's investment
provided substantially all of OTT's working capital.

     In February 2000, the Company purchased an additional 52,174 shares of
OTT's common stock for $300,000.

     The Company's share of OTT losses had completely offset the Company's
investment in OTT as of September 30, 2000.

     In October 2000, the Company purchased an additional 114,286 shares of
OTT's common stock for $100,000. The subscription price is based on a 50%
discount to the price proposed to be paid in a transaction in which Vsource,
Inc. (NASDAQ:VSRC) has offered to acquire OTT for a price of $1.75 per share for
the outstanding common stock.

     If OTT should enter into a definitive acquisition agreement with Vsource
that provides for an acquisition price per share of less than $1.75, then OTT
shall, prior to the closing, issue to the Company a number of additional shares
of Common Stock determined as follows. The Company first shall determine the
price per share that represents a 50% discount to the price per share payable by
the buyer (the Adjusted Price). The Company shall then determine the number of
shares of Common Stock that would have been issued to the Investor had the
Subscription Price equaled the adjusted price. The Company shall then issue to
the Investor a number of shares equal to the difference between the Adjusted
Number and 100,000. If OTT enters into a definitive acquisition agreement with
Vsource that provides for an acquisition price per share greater than $1.75,
then there shall be no adjustment to the number of shares issuable under the
Agreement. Although the actual agreement between OTT and Vsource was for a per
share price of less than $1.75 ($6,668,482 / 4,494,494 shares = $1.48), prior to
the Plan of Merger Agreement between OTT and Vsource on December 14, 2000, the
Company signed a waiver of this agreement between OTT and the Company.

     In December 2000, the Company received at no cost an additional 5,000
shares of OTT's common stock. The 5,000 shares were an incentive for the Company
to loan OTT a short-term loan for $18,000.

     On December 14, 2000, OTT and Vsource finalized a Plan of Merger Agreement,
in which, Vsource formed OTT Acquisition Corp (the "Merger Sub"), a wholly-owned
subsidiary of Vsource, Inc. to merge with and into OTT (the "Merger"). OTT would
be the surviving corporation and become a wholly-owned subsidiary of Vsource,
Inc. and shares of the common stock of Vsource, Inc. would be issued to OTT
shareholders. The merger consolidation dollar value of the Merger Agreement was
$6,668,482 representing issued Vsource, Inc. shares of 1,089,390 at $6.1213 per
share at an exchange ratio of .2423832.

     As of December 14, 2000, the Company had 1,328,581 preferred and common
shares of OTT which converted to 322,026 (1,328,581 x .2423832) Vsource, Inc.
Company Shares.

     Twenty-five percent (25%) of the 322,026 shares or 80,505 shares of
Vsource, Inc. common stock issued to each shareholder was deposited into an
escrow account for the purpose of providing a means for Vsource, Inc. to recover
losses resulting from or arising out of any inaccuracy in or any breach of any
representation, warranty, covenant or agreement of any Founder or of OTT related
to the Merger Agreement. The shares are to be held in escrow for a period of six
months ending on June 14, 2001, any unused shares at that time would be
distributed to shareholders.

     On December 14, 2000, the Company also received 24,800 warrants,
exerciseable as follows, 12,400 warrants at $17.36 per share and 12,400 warrants
exerciseable at $8.68 per share.

                                                                          Page 7
<PAGE>

     The issued Vsource, Inc. shares and warrants are not freely tradeable
unless Vsource, Inc. registers their "Series 2-A Convertible Preferred Stock".
The Company has the right to be included in any registration of Vsource, Inc's
Series 2-A Convertible Preferred Stock upon proper notice and acceptance.
Vsource is under no obligation to register their Series 2-A Convertible
Preferred Stock within any specified time period.

     On December 31, 2000, the Company recorded an initial gain on sale of
investment of $593,375 on Vsource issued common shares. The gain is calculated
as follows, Vsource, Inc's (NASDAQ:VSRC) closing stock price on December 31,
2000 (December 29, 2000) $1.84375 multiplied by 322,026 shares. Due to the lack
of marketability on Vsource shares held by the Company, the Company recorded a
25% lack of marketability discount totalling $148,375. The net gain on sale of
investment totalled $445,000.


     Salescentrix.com

     On May 22, 2000, the Company initially purchased 125,000 shares of common
stock in Salescentrix.com, Inc., a Canadian based provider of e-business
solutions to small and medium-sized businesses, for $250,000. The Company's
initial investment of $250,000 represents less than a 2% equity interest in
Salescentrix.com.

     Under the terms of the stock purchase agreement between the Company and
Salescentrix.com, the Company has acquired the rights to purchase Common Stock
and Warrants in three separate stages, each stage is contingent on the previous
stage.

     In Stage One, the Company had the right to purchase up to 925,000
additional shares of Common Stock at $2.00 per share at any time until June 30,
2000. In addition, the Company would be issued warrants to purchase 210,000
shares of Common Stock at $2.00 per share at any time until June 1, 2004 (`Stage
One"). Pertaining to the rights to purchase 925,000 additional shares of Common
Stock in Stage One, Salescentrix.com had extended the expiration date from June
30, 2000 to August 10, 2000. On August 10, 2000, the Company purchased 375,000
shares of Salescentrix.com at $2.00 per share, totalling $750,000. The Company
did not exercise it's right to purchase the remaining 550,000 shares of Common
Stock (925,000 - 375,000). In the quarter ended September 30, 2000, this
$750,000 investment was written off due to recurring losses of the investee.

     On August 10, 2000, $750,000 of the $858,000 proceeds from the Bridge Note
(See NOTE E) was used to increase the Company's investment in Salescentrix.com.

   For the quarter ended June 30, 2000, the Company wrote-off its initial
investment of $250,000 in Salescentrix.com due to recurring losses by
Salescentrix.com. In addition, for the quarter ended September 30, 2000, the
Company wrote-off its remaining $750,000 investment, invested on August 10,
2000, due to recurring losses by the investee and the investee's minimum
shareholders equity. As of September 30, 2000, the entire investment had been
written-off.

     For the quarter ended December 31, 2000, the Company made no additional
investments in Salescentrix.com.

NOTE E - BRIDGE NOTES

     On August 9, 2000, the Company signed and executed an "Agreement" to issue,
sell and deliver up to $1,500,000 of the Company's Series 1 Secured Convertible
Bridge Financing Notes (the "Bridge Notes") with attached repricing warrants and
accompanied by certain additional warrants (collectively "the Securities"). The
Company has agreed to grant to the Purchaser of these Notes certain registration
rights with respect to the Company's common stock issuable upon conversion
and/or exercise of the Securities and to secure the Company's obligation under
the Bridge Notes.

     The Company and the Purchasers have determined that it is necessary to
register the Securities for sale under the California "blue sky" law, which
registration could delay the closing of the purchase and sale of the Bridge
Notes.

                                                                          Page 8
<PAGE>

     The Purchasers have agreed to advance to the Company a portion of the
proceeds that it would have received upon the issuance of the Bridge Notes on
agreed upon terms and conditions and in connection therewith have loaned the
Company the sum of $1,125,000, evidenced by a series of 11% demand notes (the
"Demand Notes"). Net proceeds totalled $858,000. The Demand Notes are payable
upon demand unless certain agreed upon conditions have occurred, in which case,
the demand notes are payable on demand after September 23, 2000. The Demand
Notes are secured pursuant to a pledge agreement dated August 9, 2000.

     The difference in the Demand Note of $1,125,000 and net proceeds of
$858,000 represents fees and expenses of $267,000 associated with obtaining the
Bridge Note, primarily $109,982 in fees paid to Sovereign and $110,000 in fees
paid to Benz Consulting Corp.

     No later than five (5) business days after August 9, 2000, the Company
agreed to file for a "permit" from the California Department of Corporations to
represent and warrant to the Purchasers that upon issuance of the permit, the
Securities will be exempt from any California usury law.

     No later than three (3) business days after issuance of the permit, the
Company shall issue to each of the Purchasers, in exchange for the Demand Note
issued to each Purchaser, a Bridge Note equal to the principal amount of the
Demand Note plus accrued interest.

     In connection with the Bridge Financing, on June 15, 2000, the Company
entered into a Consulting Agreement with Sovereign Capital Advisors, LLC
("Sovereign") appointing Sovereign as its non-exclusive agent to issue and sell
the Company's securities. The appointment terminated on August 15, 2000 and was
not subsequently extended. As part of the Consulting Agreement, the Company paid
at closing $109,982 in fees to Sovereign, to be deducted from the $1,125,000
proceeds.

     In addition, on August 9, 2000, Sovereign received 75,000 warrants giving
Sovereign, the right to purchase 75,000 shares of the Company's common stock at
an exercise price equal to 125% of the average closing bid price of the common
shares for the five trading days immediately prior to the closing date, August
9, 2000, exercisable within four years from the closing date. The calculated
exercise price is $1.4844 per share.

     In connection with the Bridge Financing, the Company on August 9, 2000,
entered into a Pledge Agreement with SovCap Equity Partners, Ltd. ("SovCap")
granting SovCap a security interest in (a) 1,800,000 shares of the capital stock
of the Company  (the "pledged stock"), and (b) all proceeds from the pledged
stock. The Company will issue 1,800,000 shares of its Common Stock, registered
in the name of the Company (Cumetrix Data Systems Corp, as collateral for the
Demand Notes, with an aggregate value of at least 200% of the principal amount
of the Bridge Notes. The 1,800,000 shares is calculated as $1,125,000 divided by
the closing price of the Company's stock on the closing date, August 9, 2000
($1.25) multiplied by 200%.

     On September 29, 2000, in exchange for the demand notes, the Company issued
an aggregate of $1,142,531.26 including accrued interest of $17,531.26,
principal amount of Series 1 Bridge Financing Notes to three Purchasers. The
Bridge Notes are convertible into shares of the Company's common stock at an
initial conversion price of $2.00 per share (the "Conversion Shares"). The
conversion price of $2.00 per share was changed from an initial conversion price
of $1.25 per share on August 9, 2000, however, to partly offset this increase in
the conversion price, each Purchaser also received Repricing Warrants and
Purchaser Warrants. Each Purchaser received a Repricing Warrant which
effectively reduces the conversion price of the Bridge Notes (the "Repricing
Warrants"). In addition, for each $100,000 loaned to the Company, the Purchaser
received a Warrant to purchase 10,000 shares of the Company's common stock,
exercisable for a period of four years at an exercise price of $.6668 per share
(the "Purchaser Warrants"). The Warrants may also be exercised on a cashless
basis, assuming the market price of the Company's common stock is in excess of
$.6668.

     In addition to the 75,000 warrants received by Sovereign Capital Advisors,
LLC on August 9, 2000, exercisable at $1.4844 per share, Sovereign Capital
Advisors, LLC on September 29, 2000, also received a Warrant to purchase 10,000
shares of the

                                                                          Page 9
<PAGE>

Company's common stock, exercisable for a period of four years at an exercise
price of $1.4375 per share (the "Sovereign Warrant"). Such Warrant may also be
exercised on a cashless basis, assuming the market price of the Company's stock
is in excess of $1.4375.

     The following table identifies each Purchaser and the amount of securities
purchased:

     Purchaser Name                    Note Principal         Purchaser Warrants
     --------------                    --------------         ------------------
     SovCap Equity Partners Ltd         $  507,791.67               50,000
     EIG Capital Investments Ltd.       $  507,791.67               50,000
     Arab Commerce Bank Ltd.            $  126,947.92               12,500
                                        -------------              -------
                                        $1,142,531.26              112,500
                                        =============              =======

     The Bridge Financing Notes are due and payable on demand on or after March
28, 2001 (180 days from September 29, 2000). The Bridge Financing Notes bear
interest at the rate of 8% until proper demand for repayment is made, after
which the Notes accrue interest at the rate of 12% per year. The Bridge Notes
are secured by a pledge of the Company's newly issued common stock having a
value of approximately 200% of the aggregate principal value of all outstanding
Bridge Notes. The Bridge Notes are redeemable for cash or shares of the
Company's common stock, based upon the following redemption premiums:

     Redemption Date                                   Redemption Premium
     ---------------                                   ------------------
     Date of issuance through 45 days thereafter              105%
     46th through 90th day after issuance                     110%
     91st through 135th day after issuance                    115%
     after 135 days from date of issuance                     120%

     At any time prior to the date when a holder demands repayment of a Bridge
Note, the Company may prepay the Bridge Notes, in cash, for an amount equal to
the outstanding principal amount of the Bridge Note, multiplied by the
redemption premium, plus all accrued interest on the Bridge Note through the
date of repayment. At any time after a registration statement covering the
common stock issuable upon conversion of the Bridge Notes is effective under the
Securities Act of 1933, either the holder or the Company may require that the
Bridge Notes be converted into shares of the Company's common stock. The number
of shares of common stock shall equal the outstanding principal amount of the
Bridge Note, multiplied by the redemption premium, plus all accrued interest on
the Bridge Note through the date of repayment, divided by $2.00. The following
chart reflects the number of shares of common stock to be issued to each
purchaser, assuming the conversion occurs on the 180th day after the original
issuance of the Bridge Notes (approximately $1,400,000 calculated as follows
($1,125,000 x 120%) plus $50,000 interest):

     Purchaser                                 Shares
     ---------                                 -------
     Sovcap Equity Partners Ltd                314,831
     EIG Capital Investments Ltd               314,831
     Arab Commerce Bank Ltd.                    78,708
                                               -------
                                               708,370
                                               =======

                                                                         Page 10
<PAGE>

Registration Rights Agreement

   To induce Purchasers to execute and deliver the Purchase Agreement, the
Company has agreed to file a Registration Statement covering the Conversion
Shares, the Purchaser Warrant Shares and the Repricing Warrant Shares under the
Securities Act of 1933. No later than forty five (45) days after the First
Closing Date (September 29, 2000), the Company is to file with the SEC a
Registration Statement on Form S-3, covering the resale of all of the
Registrable Securities ("Mandatory Registration"). The Company shall use its
best efforts to have the Registration Statement declared effective by the SEC
within one hundred fifty (150) days after the First Closing Date, which would be
February 26, 2001 (the "Registration Deadline"). The Company shall permit the
registration statement to become effective within five (5) business days after
receipt (whether orally or in writing) of a "no review" notice from the SEC. The
Registration Rights Agreement calls for damages to be paid to Holders if the
Registration Deadline is not met.

   The Company as of February 14, 2001 has not filed a Registration Statement on
Form S-3 with the SEC, covering the resale of all of the Registrable Securities,
no later than forty five (45) days (November 13, 2000) after the First Closing
Date (September 29, 2000) and is therefore, in default with respect to this
Mandatory Registration. It appears certain that the Company will not be able to
file a Registration Statement with the SEC by February 26, 2001 (the
"Registration Deadline"). However, the Company is continuing the process of
filing the Registration Statement with the SEC.


Repricing Warrants

   Upon the issuance of shares of common stock to a holder of a Bridge Note, the
Holder will receive a repricing warrant which is exercisable at $.001 per share,
for a period of one year from the date of issuance. However, if the holders of
the Bridge Notes choose not to convert the Bridge Notes into shares of the
Company's common stock then the holders of the Bridge Notes would not receive
repricing warrants. By exercising the repricing warrant, the effective
conversion price of the Bridge Note is reduced to the average closing bid price
of the Company's common stock for the twenty trading days commencing on the date
the Bridge Note is actually converted. The following table illustrates the
number of additional shares of the Company's common stock which each holder
would be entitled to receive, if the average closing bid price of the common
stock for the twenty trading days immediately prior to and subsequent to the
conversion date were $.50 per share:

                                                       Repricing
             Purchaser                                 Shares
             ---------------------------------------   ---------

             Sovcap Equity Partners Ltd                  944,491
             EIG Capital Investments Ltd                 944,491
             Arab Commerce Bank Ltd.                     236,122
                                                       ---------
                                                       2,125,104
                                                       =========


   The following formula for determining the number of shares issuable upon
exercise of a repricing warrant or any portion thereof, is as follow:

   # of shares = $2.40 minus the arithmetic mean of the closing bid price
                 of the common stock for each of the 20 trading days commencing
                 on the date the Bridge Note is converted

                 divided by

                 the arithmetic mean of the closing bid price of the common
                 stock for each trading day during the 20 trading days
                 commencing on the date the Bridge Note is converted

                                                                         Page 11
<PAGE>

   Given the recent price of the Company's stock, the Company reserved an
additional 2,200,000 shares of common stock to be issued according to the
repricing warrants. Obviously, the number of shares to be issued under the
repricing warrants is directly linked to the Company's stock price on the
conversion date of the Bridge Notes. As the stock price decreases, the number of
shares to be issued pursuant to the repricing warrants increase. In fact, a
potentially unlimited number of shares could be issued under the repricing
warrants should the Company's stock near a price of $0.00 per share. Given the
current reserve of 4,000,000 shares, (1,800,000 shares, August 9, 2000 and
2,200,000 shares, September 29, 2000), the Company may need to register
additional shares in order to satisfy the Company's obligation under the
repricing warrants if the price of the Company's stock drops significantly below
$.50 per share.


Redemption by Conversion at the Option of the Company

   At any time and from time to time on or prior to the Demand Date and provided
                                     --------------
that on the Redemption Date a registration statement is effective covering the
resale by Holder of all of the Conversion Shares, the Company may at it's
option, redeem the then outstanding principal amount of the Series 1 Bridge Note
at the Demand Date Redemption Price by conversion of the Series 1 Bridge Note
into shares of Common Stock at $2.00 per share (the "Conversion Price"). The
"Demand Date Redemption Price" shall be equal to 120.0% of the then outstanding
principal amount of the Series 1 Bridge Note plus accrued and unpaid interest
through and including the date the payment is disbursed


Cash Redemption at the Option of the Company

   At any time and from time to time on or prior to the Demand Date, the Company
                                     --------------
may, at its option, redeem all or a portion of the Series 1 Bridge Note for cash
according to the Redemption Premium schedule.


Redemption at the Option of the Holder

   At any time and from time to time after the Demand Date, the Holder may, at
                                     -----
its option, make demand to the Company to redeem, all or any part of the then
outstanding principal at a price equal to the Demand Date Redemption Price. Such
demand shall specify Holder's election to accept payment of the redemption price
in cash or by conversion of the Series 1 Bridge Note into shares of Common
Stock.


Right of First Refusal

   For a period of 1 (one) year after the closing Date of the last Additional
Closing, the Purchasers shall have a right of first refusal to purchase any
Private Securities that the Company proposes to issue and sell after the date of
the Agreement, with each Purchaser being entitled to purchase its pro rata
share. If the Company proposes to issue any Private Securities, it shall give
each Purchaser written notice of its intention, describing the Private
Securities in detail and the price and the terms and conditions upon which the
Company proposes to issue the same.


Bridge Note Proceeds

   The proceeds from the Bridge Note are intended to provide additional funding
for existing investments. On August 10, 2000, $750,000 of the $858,000 net
proceeds from the Bridge Note was used to provide additional working capital for
Salescentrix.com, an existing investment. For the quarter ended September 30,
2000, the entire $750,000 investment in Salescentrix.com was written-off due to
recurring losses and the investee's minimum amount of shareholders equity.

                                                                         Page 12
<PAGE>

Cash versus Stock Conversion

   On or about March 28, 2001 if the price of the Company's stock has not
increased to a price high enough to induce the Holders of the Bridge Notes to
convert the Bridge Notes to Company stock, the Company would need to pay to the
Holders cash of approximately $1,400,000. If the price of the Company's stock
was to remain at current levels ($.335 per share at February 8, 2001) or
decrease, the Company would be forced to pay the Holders of the Bridge Notes
cash of approximately $1,400,000 since it would be prohibitive to issue the
amount of Company shares necessary to satisfy conversion of the Bridge Notes.
The $1,400,000 potential cash payment has not been reserved by the Company.


Additional Interest and Penalties after March 28, 2001

   Additional interest and penalties of approximately $70,000 per month would
accrue after March 28, 2001 if a Registration Statement on Form S-3 covering the
resale of all of the Registrable Securities was not filed or effective with the
SEC, in addition to the $1,400,000.


NOTE F - CONSULTING AGREEMENT

   On April 5, 2000, the Company entered into a consulting agreement with its
Chairman, John Botdorf, which provides that the Company will pay Mr. Botdorf
$150,000 annually, payable in 12 monthly installments plus expenses, and will
issue stock options to purchase 450,000 shares, vesting over a three-year
period, in equal quarterly installments. The stock options expire in seven years
and are exercisable as follows: 225,000 at $3.25 per share and 225,000 at $6.75
per share. The consulting agreement is "at will," and if the agreement is
terminated by the Company without cause, the vesting provisions will accelerate.

   On October 4, 2000, the Board of Directors cancelled Mr. Botdorf's stock
options to purchase 450,000 shares, vesting over a three-year period and
replaced the 450,000 stock options with 500,000 stock options, of which 200,000
options vested immediately and 300,000 options over a two year period, vesting
monthly. The 200,000 options has an exercise price of $1.00 per share and of the
300,000 options, 240,000 options are exercisable at $2.00 a share with the
remaining 60,000 options exercisable at $3.00 a share.

   The Company's consulting agreement with Mr. Botdorf was terminated on January
19, 2001. Therefore, the total of 500,000 stock options issued to Mr. Botdorf
are fully vested as of January 19, 2001.

   On January 26, 2001, Mr. Botdorf resigned as Chairman of the Board.


NOTE G - TMA CONSULTING AGREEMENT

  In January 2000, the Company entered into a consulting agreement with TMA, a
company based in California to provide Internet/website and e-commerce
consulting services, which include a Cyberspace Network Marketing program. The
agreement was originally for two months at $25,000 per month plus expenses of
$1,000 per month. The contract was amended on March 5, 2000 to extend the term
of the agreement for an indefinite period of time. For the fiscal year ended
March 31, 2000, the Company paid TMA $42,700. From April 1, 2000 to December 31,
2000, the Company paid TMA an additional $239,400, to total $282,100.

NOTE H - 2000 LOAN PLAN

  On August 18, 2000, the Board of Directors approved and adopted the "Cumetrix
Data Systems Corp. 2000 Loan Plan"(2000 Loan Plan). The purpose of the 2000 Loan
Plan is to attract, retain and motivate employees and other key personnel who
provide valuable services to Cumetrix Data Systems Corp. by providing them with
the opportunity to obtain loan financing on affordable terms.

   The Board of Directors selected Max Toghraie as the plan's sole
administrator. Max Toghraie as the "Plan Administrator" shall have the
authority, in his

                                                                         Page 13
<PAGE>

discretion, to determine all matters relating to loans grantedunder the Plan,
including selection of the individuals to be granted loans, the principal amount
of such loans, and any and all other terms, conditions, restrictions, and
limitations of a loan. Furthermore, the Plan Administrator shall have the
authority and discretion to interpret the Plan, to establish, amend, and rescind
any rules and regulations relating to the Plan, to determine the terms and
provisions of any loan made pursuant to the Plan, and to make all other
determinations that may be necessary or advisable for the administration of the
Plan. All decisions made by the Plan Administrator prior to the Plan's execution
and related orders and resolutions shall be final, conclusive, and binding on
all persons.

   The Plan sets a maximum loan amount to Max Toghraie of $275,000. The Plan was
effective for a one week period beginning August 22, 2000 and terminating on
August 31, 2000. After the plan is terminated on August 31, 2000, no future
loans may be granted.

   Repayment of the loan is collateralized by the individual's current and
future stock or stock option holdings in the Company. The Plan states that under
no circumstances is any participant in the plan personally liable for repayment
of his loan beyond the pledge of his current and future stocks or stock option
holdings in the Company. Repayment of the participant's loan includes principal,
accrued interest, or other charges or fees incurred by the plan in administering
the plan.

   The Company's sole remedy, for repayment of a participant's loan, is limited
to the exercise of its rights as sole beneficiary of the Company's stock or
stock option proceeds, whether or not the stocks or stock options are of any
value. The Company's security in said collateral remains the company's sole and
only recourse for repayment of the individual's loan.

   The aggregate dollar amount of all loans outstanding under the Plan at any
time shall not exceed Five Hundred Thousand Dollars ($500,000.00). The principal
balance outstanding shall bear interest, until fully paid, at 5% per annum.
Repayment is to be made in twenty (20) equal quarterly installments of principal
and interest due and payable on the last day of March, June, September and
December of each year beginning December 31, 2001.

   On August 22, 2000 the following loan amounts in excess of $60,000.00 were
wired to the following individuals as per the Board approved loan documents:


             Max Toghraie, CEO and Board of Director            $275,000.00
             Jeff Toghraie, VP and Board of Director            $182,500.00
                                                                -----------
                                                                $457,500.00
                                                                ===========


   For the quarter ended September 30, 2000, the Company wrote-off the total
amount of $500,000 Loans to Officers due to the small number of Officers vested
stock options and the lack of any value in the Officers stock options used as
collateral.

   On October 4, 2000, the Board of Directors cancelled certain management stock
options and issued and repriced new stock options. Stock options cancelled
ranged from an exercise price of $1.1875 to $6.75 per share (see NOTE J) and
were replaced with stock options priced at $1.00 to $3.00 per share. As of
December 31, 2000 the stock options were not-in-the-money and therefore of no
value as the Company's stock price was $.095 per share.


NOTE I - IMPAIRMENT LOSS - LOANS TO OFFICERS

   On August 22, 2000 the Company wired cash of $500,000 to Company Officers
related to the Company's "2000 Loan Plan". For the quarter ended September 30,
2000, the Company wrote-off the $500,000 Loans to Officers and recorded an
Impairment Loss of $500,000 due to the lack of value of the underlying Officers
stock options used as collateral for the loans (See NOTE H and NOTE J).

                                                                         Page 14
<PAGE>

NOTE J - REPRICED MANAGEMENT STOCK OPTIONS

   On October 4, 2000, the Board of Directors, citing it would be in the best
interest of the Company, approved a repricing and issuance of additional stock
options for certain outstanding management stock options and warrants for Max
Toghraie, CEO and a Director, Jeff Toghraie, VP of Sales & Marketing and a
Director, John Botdorf, Chairman of the Board and Herbert Tom, CFO.

   Max Toghraie's 426,046 stock options with exercise prices as follows: 126,046
at $2.70 per share, 150,000 stock options at $1.1875 per share and 150,000 stock
options at $1.125 per share were cancelled and replaced with 500,000 stock
options with an exercise price of $1.00 per share. Jeff Toghraie's 150,000 stock
options exercisable at $1.1875 per share were cancelled and replaced with
400,000 stock options exercisable at $1.00 per share. John Botdorf's 450,000
stock options exercisable as follows: 225,000 at $3.25 per share and 225,000 at
$6.75 per share were cancelled and replaced with 500,000 stock options
exercisable as follows: 200,000 at $1.00 per share, 240,000 at $2.00 per share
and 60,000 at $3.00 per share. Herbert Tom's 35,000 stock options exercisable at
$1.1875 per share were cancelled and replaced with 175,000 stock options
exercisable at $1.00 per share.

   The number of options, exercise price and vesting are as follows:

    Individual        # of options   Exercise Price       Vesting
    -------------     ------------   --------------   ----------------

    Max Toghraie          500,000      $1.00/share     2 years, monthly
    Jeff Toghraie         400,000      $1.00/share     2 years, monthly
    John Botdorf          200,000      $1.00/share     Immediate
    John Botdorf          240,000      $2.00/share     2 years, monthly
    John Botdorf           60,000      $3.00/share     2 years, monthly
    Herbert Tom           175,000      $1.00/share     2 years, monthly


   At December 31, 2000 the following individuals had vested stock options as
follows: Max Toghraie, 62,500, Jeff Toghraie, 50,000, John Botdorf, 237,500 and
Herbert Tom, 21,875.

   On October 4, 2000 the vesting period for all stock options were 3 years
determined quarterly. On October 20, 2000 the Board of Directors changed the
vesting period to 2 years, determined monthly, except for 200,000 stock options
for John Botdorf which would vest immediately.

   On December 31, 2000 the stock closed at $.095 per share. As of December 31,
2000, none of the options were in-the-money and none of the options were
exercised.


NOTE K - AFFILIATE ACQUISITION AND MERGER

    On December 14, 2000, OTT and Vsource finalized a Plan of Merger Agreement,
in which, Vsource formed OTT Acquisition Corp (the "Merger Sub"), a wholly-owned
subsidiary of Vsource, Inc. to merge with and into OTT (the "Merger"). OTT would
be the surviving corporation and become a wholly-owned subsidiary of Vsource,
Inc. and shares of the common stock of Vsource, Inc. would be issued to OTT
shareholders. The merger consolidation dollar value of the Merger Agreement was
$6,668,482 representing issued Vsource, Inc. shares of 1,089,390 at $6.1213 per
share at an exchange ratio of .2423832.

   As of December 14, 2000, the Company had 1,328,581 preferred and common
shares of OTT which converted to 322,026 (1,328,581 x .2423832) Vsource, Inc.
Company Shares.

   Twenty-five percent (25%) of the 322,026 shares or 80,505 shares of Vsource,
Inc. common stock issued to each shareholder was deposited into an escrow
account for the purpose of providing a fund for the satisfaction of the
obligations of Vsource, Inc.  shareholders from any suffered or incurred losses
as defined by the Merger Agreement. The shares are to be held in escrow for a
period of six months

                                                                         Page 15
<PAGE>

ending on June 14, 2001, any unused shares at that time would be distributed to
shareholders.

   On December 14, 2000, the Company also received 24,800 warrants, exerciseable
as follows, 12,400 warrants at $17.36 per share and 12,400 warrants exerciseable
at $8.68 per share.

   The issued Vsource, Inc. shares and warrants are not freely tradeable unless
Vsource, Inc. registers their "Series 2-A Convertible Preferred Stock". The
Company has the right to be included in any registration of Vsource, Inc's
Series 2-A Convertible Preferred Stock upon proper notice and acceptance.
Vsource is under no obligation to register their Series 2-A Convertible
Preferred Stock within any specified time period.

   On December 31, 2000, the Company recorded an initial gain on sale of
investment of $593,375 on Vsource issued common shares. The gain is calculated
as follows, Vsource, Inc's (NASDAQ:VSRC) closing stock price on December 31,
2000 (December 29, 2000) $1.84375 multiplied by 322,026 shares. Due to the lack
of marketability on Vsource shares held by the Company, the Company recorded a
25% lack of marketability discount totalling $148,375. The net gain on sale of
investment  totalled $445,000.


NOTE L - AMENDED AND RESTATED 2000 STOCK PLAN

   On October 4, 2000 the Board of Directors approved an increase in the number
of aggregate number of shares of Common Stock that may be issued under the
Amended and Restated 2000 Stock Plan from 1,000,000 shares to 10,000,000 (Ten
Million) shares.


NOTE M - SHAREHOLDERS EQUITY

   For the quarter ended September 30, 2000 the Company recorded an investment
expense of $60,000 and a corresponding increase in additional paid-in-capital of
$60,000 related to the 75,000 warrants issued to Sovereign on August 9, 2000 in
connection with the Bridge Note.


NOTE N - IMAGINGDESIGN AND ASTRAL PORT SYSTEMS

   The Company entered into an Agreement with two consulting firms that are
related to each other and both based in Los Angeles. On November 15, 2000 the
Company entered into an Agreement with  ImagingDesign to provide corporate web
site design and development for the Company's web site at www.cumetrix.com for
                                                          ----------------
an estimated fee between $40,000 to $50,000. As of February 13, 2001, $103,100
was paid to ImagingDesign. The Company also entered into an Agreement with
Astral Port Systems dated December 19, 2000 to prepare a comprehensive study for
the design of an international web portal for an estimated fee between $70,000
to $90,000. As of February 13, 2001, $87,000 was paid to Astral Port Systems. As
of February 13, 2001, a total of $190,100 were paid to both firms.


NOTE O - INTERNATIONAL MARKETING AGREEMENT

   The Company entered into an International Marketing Agreement dated January
15, 2001 with Ameritech S.A., a Mexico corporation, (consultant) to serve as an
International Marketing and Consulting firm and advisor to the Company. The
consultant will work on opening new and lucrative channels in the international
markets exclusively for Cumetrix Products and Services. The term is for a period
of 12 months. There is no stated fee in the Agreement. The fee is based upon the
scale and scope of the marketing operation. In January 2001, $58,790 was wired
to Ameritech S.A.

                                                                         Page 16
<PAGE>

PART I. FINANCIAL INFORMATION
-----------------------------

ITEM 2.   MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
          RESULTS OF OPERATIONS.


Overview
--------

     The Company was founded in April 1996, and until December of 1996 operated
entirely as a distributor and value added reseller of computer equipment and
related hardware components and software (The "Computer Products business"). In
December 1996, the Company began offering end-users custom computer
configuration and assembly systems (the "Computer System Assembly" business),
through resellers, third-party E-commerce sites and its own system configuration
E-commerce web site, suredeals.com and sureauctions.com. As a result, the
majority of sales was derived from sales of computer systems, with a smaller
percentage of sales from computer products or components.

     Currently the Company derives approximately 85% of its sales from computer
components and approximately 15% of sales from Computer Systems Assembly. The
Company reduced its emphasis on Computer Systems due partly to low margins and
the high rate of computer system returns, thereby further eroding margins on
sales of Computer Systems Assembly. The Company's current emphasis on selling
computer products and components may further decrease already low margins.

     The Company is experimenting with sales of products unrelated to Computer
Systems Assembly or Computer Components in an effort to increase margins and
total sales.


Risk Factors
------------

"Going-Concern" Issue

     The Company may not be able to continue as a going concern for the next
twelve months. The Financial Statements do not contain any adjustments that
might be necessary in such a case. The uncertainty stems from anticipated
continuing operating losses, the possibility of a $1,400,000 repayment to the
Bridge Note Holders, the difficulty of raising equity capital and any future
financing. The Company's continuation as a going concern is dependent upon its
ability to generate sufficient cash flow to meet its obligations on a timely
basis, to comply with the terms of its Bridge Note Financing, to obtain
additional financing and ultimately to attain profitability. Therefore, the
"going-concern" issue can have severe adverse consequences on the Company.


Results of Operations
---------------------

     Sales for the nine months ended December 31, 2000 were $10,510,558 as
compared with sales of $15,063,615 for the same period in the prior year. Sales
for the three months ended December 31, 2000 were $4,502,036 as compared with
sales of $3,951,045 for the three months ended December 31, 1999. Sales for the
nine months ended December 31, 2000 declined $4,553,057 or 30% and sales for the
three months ended December 31, 2000 increased $550,991 or 14% over the same
periods in the prior year. While the Company has substantially reduced it's
dependence on computer hard-drive sales, the Company has increased its focus on
sales of Computer Components and Products relative to Computer Systems Assembly.
Currently approximately 85% of total sales are derived from Computer Components
and Products and 15% from Computer Systems Assembly.

                                                                         Page 17
<PAGE>

     Gross profit for the nine months ended December 31, 2000 was $488,795 or 5%
of sales, as compared with gross profit of $780,309 or 5% of sales for the nine
months ended December 31, 1999. Gross profit for the three months ended December
31, 2000 was $200,617 or 4% of sales, as compared with gross profit of $497,737
or 13% of sales for the three months ended December 31, 1999. The decrease in
gross profit for the three months ended December 31, 2000 from 13% to 4%
compared with the three months ended December 31, 1999 is due primarily from the
Company's current emphasis on selling lower margin Computer Components and
Products relative to higher margin Computer Systems Assembly.

     Selling, general and administrative expenses for the nine months ended
December 31, 2000 were $2,695,631 as compared with $2,931,620 for the nine
months ended December 31, 1999. Selling, general and administrative expenses for
the three months ended December 31, 2000 were $859,347 as compared with $933,226
for the three months ended December 31, 1999.

     Salaries and wages for the nine months ended December 31, 2000 as compared
to the nine months ended December 31, 1999 declined $233,000 from $1,382,000 to
$1,149,000 due to an overall decrease in assembly, plant employees, management
and administrative personnel.

A brief summary of the principle components of selling, general and
administrative expenses for the periods is presented below.
<TABLE>
<CAPTION>

                                              Three Months Ended              Nine Months Ended
                                                 December 31,                    December 31,

                                               2000         1999              2000             1999
                                            ---------     --------         ----------       ----------
<S>                                         <C>           <C>              <C>              <C>
Salaries and wages                          $ 391,000     $562,000         $1,149,000       $1,382,000
 Allocation to cost of sales                 (220,000)           0           (600,000)               0
                                            ---------     --------         ----------       ----------
Salaries and wages                            171,000      562,000            549,000        1,382,000
Investment expenses                           160,000            0            521,000                0
Outside services                               44,000       76,000            346,000          277,000
Bad debt                                      200,000            0            200,000                0
Credit and collection                         241,000       87,000            523,000          214,000
 Allocation to cost of sales                 (241,000)           0           (349,000)               0
                                            ---------     --------         ----------       ----------
Credit and collection                               0       87,000            174,000          214,000
Legal                                          33,000        7,000            156,000          218,000
Accounting and audit                           30,000       18,000            139,000          256,000
Internet/Web Support                          134,000            0            139,000                0
Rent                                           25,000       25,000             65,000           80,000
Depreciation and amortization                  21,000       54,000            116,000          162,000
 Allocation to cost of sales                  (13,000)           0           (108,000)               0
                                            ---------     --------         ----------       ----------
Depreciation and amortization                   8,000       54,000              8,000          162,000
Other (under 5%)                               54,347      104,226            398,631          342,620
                                            ---------     --------         ----------       ----------
                                            $ 859,347     $933,226         $2,695,631       $2,931,620
                                            =========     ========         ==========       ==========
</TABLE>

     The increase in investment expenses for the three months ended December 31,
2000 of $160,000 primarily consist of fees paid to Benz Consulting Corp. of
$130,000 and $37,500 paid to John Botdorf. The increase in investment expenses
for the nine months ended December 31, 2000 primarily consist of fees paid to
Benz Consulting Corp of $230,000, investment expenses paid of $192,000 related
to the Company's $1,125,000 Bridge Notes and consulting fees of $112,500 paid to
John Botdorf.

     The increase in outside services for the nine months ended December 31,
2000 are principally attributable to outside consulting service fees of $239,400
paid to TMA, a California based company that provides Internet/website and e-
commerce consulting services.

     The increase in credit and collection expenses for the three months and
nine months ended December 31, 2000 is due to an increase in service fees
charged by websites Egghead.com and CNet.com.

     The increase in legal, accounting and audit fees for the nine months ended
December 31, 1999 are the result of legal, auditing, investigative and
management consulting fees incurred during the periods in connection with a
special investigation of allegations of improprieties and record-keeping
irregularities initiated by the Board of Directors.

                                                                         Page 18
<PAGE>

     The increase in internet/web support expenses of $134,000 for the three
months ended December 31, 2000 is due primarily to consulting fees paid to two
consulting firms related to each other, ImagingDesign for $65,800 and Astral
Port Systems for $56,000.  The Company entered into an Agreement with
ImagingDesign of Los Angeles dated November 15, 2000 to provide corporate web
site design and development for the Company's web site at www.cumetrix.com for
                                                          ----------------
an estimated fee between $40,000 to $50,000. As of February 8, 2001, $103,100
was paid to ImagingDesign. The Company also entered into an Agreement with
Astral Port Systems of Los Angeles dated December 19, 2000 to prepare a
comprehensive study for the design of an international web portal for an
estimated fee between $70,000 to $90,000. As of February 8, 2001, $87,000 was
paid to Astral Port Systems. As of February 8, 2001, $190,100 were paid to both
firms.

     For the three months ended June 30, 2000, the Company recorded a non-cash
impairment loss of $207,740 related to a write-down of the value of the
Company's fixed assets. These assets were written down to their fair values
based on the salvage value of the assets. The recognition of this impairment was
in accordance with the provisions of Statement of Financial Accounting Standards
No. 121 - Accounting for the Impairment of Long-Lived Assets and for Long-Lived
Assets to Be Disposed Of.

     For the three months ended September 30, 2000, the Company recorded a non-
cash impairment loss of $500,000 related to a write-down of the value of the
Company's Loans Receivables from Officers. This asset was written off based on
the lack of value of the Officers stock options used as collateral for the
loans.

     Interest expense, primarily related to the Company's $1,125,000 Bridge
Notes was $217,255 for the nine months ended December 31, 2000, and $196,547 for
the three months ended December 31, 2000. Interest expense for the nine months
and three months ended December 31, 1999, was $410 and $51, respectively.

     Interest income, primarily from the investment of the proceeds of the
Company's public offering of the Company's stock was $113,522 for the nine
months ended December 31, 2000, and $45,483 for the three months ended December
31, 2000. Interest income for the nine months and three months ended December
31, 1999, was $246,576 and $79,698, respectively.

     For the nine months ended December 31, 2000, the Company reported a net
loss of $3,808,453, as compared to a net loss of $2,269,752 for the nine months
ended December 31, 1999. The Company reported a net loss of $318,095 for the
three months ended December 31, 2000 as compared to a net loss of $355,842 for
the three months ended December 31, 1999. Net losses for the nine months ended
December 31, 2000 increased $1,538,701 or 68% and net losses for the three
months ended December 31, 2000 decreased by $37,747 or 11% over the same periods
in the prior year.

     The net loss of $3,808,453 for the nine months ended December 31, 2000 are
principally the result of decreased Company sales resulting in lower margins,
impairment losses from fixed assets, write-offs of loans made to Company
officers, expenses related to the Company's investments, losses from the write-
off of the company's investments and fees paid to various outside consultants.

     The Company anticipates continuing losses from operations and currently
cannot determine when the Company will be profitable from operations.

     Shareholders equity at December 31, 2000 was $2,216,976 compared to
shareholders equity of $7,542,612 on December 31, 1999 a decrease of $5,325,636
or 71%.


Liquidity and Sources of Capital
--------------------------------

     For the nine months ended December 31, 2000, net cash used by operating
activities was $3,103,240, as compared to net cash used by operating activities
of $2,328,153 for the same period in the prior year. The net use of cash for the
nine months ended December 31, 2000 was principally the result of net operating
losses, loans made to officers and payments of accrued expenses. The net use of
cash for the

                                                                         Page 19
<PAGE>

nine months ended December 31, 1999 was principally the result of net operating
losses and payments on accounts payable.

     An investment of $1,000,000 in Salescentrix.com constitute the principle
use of cash from investing activities for the nine months ended December 31,
2000. Capital expenditures of S31,093 constitute the principle use of cash for
the nine months ended December 31, 1999. Capital expenditures for the nine
months ended December 31, 2000 were $0. Cash of $434,883 from a time deposit
constituted the only source of cash provided by investing activities for the
nine months ended December 31, 2000.

     Cash flows provided by financing activities for the nine months ended
December 31, 2000 of $1,128,934 are principally associated with the issuance of
a $1,125,000 demand note payable (see NOTE E in Notes to Financial Statements).
Principal repayment of long-term debt of $13,597 and $4,810 for the nine months
ended December 31, 2000 and 1999, respectively, constitute the balance of funds
used in financing activities.

     As of December 31, 2000 the Company had $2,394,868 in cash, cash
equivalents and investment deposits and working capital of $1,632,991 with a
ratio of current assets to current liabilities of approximately 1.6 : 1. This
compares with cash, cash equivalents and investment deposits of $5,369,174 and
working capital of 5,234,224 with a ratio of current assets to current
liabilities of 4.1 : 1 as of March 31, 2000. For the nine months ended December
31, 2000, cash decreased $2,974,306 and working capital decreased $3,601,233
from March 31, 2000.


Current Funds
-------------

     The Company believes that current funds may not be sufficient to meet its
anticipated cash needs for working capital and capital expenditures for the next
twelve months if certain events occur. For example, anticipated continued losses
from operations, the cash payment of $1,400,000 to the Holders of the Company's
Bridge Notes plus additional interest and penalties, the difficulty of raising
equity capital, the inability of the Company to secure favorable vendor terms
which have resulted in numerous inventory purchases by COD only and the
difficulty of obtaining financing on favorable terms.


Inflation
---------

     The Company does not believe that inflation has had a material effect on
its results of operations. There can be no assurance, however, that the
Company's business will not be affected by inflation in the future.


Management Restructuring
------------------------

     During the first quarter of fiscal year 2000, allegations of certain
improprieties and record-keeping irregularities in fiscal year 1999 were brought
to the attention of the Board of Directors. Under the direction of the Audit
Committee of the Board of Directors a special investigation was initiated. As a
result of this investigation, the Company's former President and its Secretary-
Treasurer were terminated from employment and disciplinary actions were taken
with certain other non-management employees.

     The Company failed to file timely its Annual 10-K Report for the fiscal
year ended March 31, 1999 and its Quarterly 10-Q Report for the first quarter
ended June 30, 1999, consequently, the company's stock was delisted from the
Boston Stock Exchange and from NASDAQ on August 27, 1999, respectively. The
Company employed an independent management consultant as Chief Executive Officer
in early September, 1999 principally to oversee the filing of the delinquent SEC
reports.

     The special investigation was completed to the satisfaction of the
Company's

                                                                         Page 20
<PAGE>

Board of Directors and its outside auditors. On October 15, 1999, the Company's
fiscal year 1999 Annual Report and first Quarterly Report for fiscal year 2000
were filed with the SEC.

     On October 22, 1999 the Company ended its contract with the independent
consultant, and Mr. Max Toghraie was appointed as the Company's Chief Executive
Officer.

     In late October 1999, a restructuring plan to reduce the company's
operating overhead and improve operating efficiencies was adopted, which
resulted in the elimination of approximately 25% of the Company's workforce,
including certain management positions.

     In October and November, 1999, Directors Mr. James Ung (formerly
President), Mr. Philip Alford and Mr. David Tobey, resigned from the Board of
Directors.

     In 1999, Mr. Herbert Tom was appointed as the Company's new Chief Financial
Officer. Mr. Tom's background includes extensive experience in operations as
well as finance and accounting. Mr. Tom is a certified public accountant and
holds a Master's degree in business administration.


Leased Facility
---------------

     The Company's corporate headquarters is located in a leased facility in the
City of Industry, California comprised of approximately 21,900 square feet of
office and warehouse space. The current lease expires January 31, 2001, however,
the Company and the Lessor agreed to extend the current lease for one additional
year from January 31, 2001 to January 31, 2002. The monthly base rent will
increase from $11,607 to $14,235.


Egghead Fees
------------

     Effective August 10, 2000, the fees charged to the Company by the internet
site Egghead.com, the Company's major source of sales, will increase for all
sales generated through the Egghead.com website to 10% from the current fees
charged of 5% and 10%. This increase in Egghead fees will have a material effect
on the Company's margins.


Egghead Sales
-------------

     At least 60% of the Company's sales are derived from its internet marketing
partner's internet site Egghead.com. Any adverse occurrence to Egghead.com's
operations would have a serious and far reaching consequence on the Company's
ability to continue its operations.


Board of Directors
------------------

     With the resignation of Mr. John Botdorf on January 19, 2001, the Board of
Directors currently consist of three individuals, Max Toghraie, CEO, Jeff
Toghraie, VP Sales & Marketing (who also runs day-to-day operations) and Nancy
Hundt (shareholder).


Related Party
-------------

     In 1997, the Company employed Sam Toghraie, brother of Max Toghraie, CEO
and Jeff Toghraie, VP Sales & Marketing as a Department Head for the Return
Merchandise Department on an at-will basis for an annual salary of $60,000
including the use of

                                                                         Page 21
<PAGE>

a company car. Effective November 6, 2000, Sam Toghraie resigned as an employee
of the Company and entered into a Consulting Agreement with the Company as an
independent outside Sales and Marketing Consultant for an annual fee of $72,000,
payable on a semi-monthly basis of $3,000, including use of a company car plus
out-of-pocket expenses. The Agreement is for a 2-year period.


Year 2000 Update
----------------

     The Company has completed a comprehensive review of its computer systems to
identify the systems that could be affected by ongoing Year 2000 problems.
Upgrades to systems judged critical to business operations have been
successfully installed.  To date, no significant costs have been incurred in the
Company's systems related to the Year 2000. While the Company has taken steps to
communicate with outside suppliers, it cannot guarantee that the suppliers have
all taken the necessary steps to prevent any service interruption that may
affect the Company.


Forward-Looking Statements
--------------------------

     Certain statements in this Form 10-Q contain "forward-looking statements"
(as defined in Section 27A of the Securities Act of 1933, as amended) that
involve risks and uncertainties that may cause actual results to differ
materially from those predicted in the forward-looking statements. Forward-
looking statements can be identified by their use of such verbs as expects,
anticipates, believes or similar verbs. If any of the Company's assumptions on
which the statements are based prove incorrect or should unanticipated
circumstances arise, the Company's actual results could materially differ from
those anticipated by such forward-looking statements. The differences could be
caused by a number of factors or combination of factors including but not
limited to, the risks detailed in the Company's Securities and Exchange
Commission filings, including the Company's Form 10-K for the fiscal year ended
March 31, 2000.

PART II.  OTHER INFORMATION
---------------------------

ITEM 5.   OTHER INFORMATION

None


ITEM 6.   EXHIBITS AND REPORTS ON FORM 8-K


     none.


                                   SIGNATURE


Pursuant to the requirements of the Securities Exchange Act of 1934, as amended,
the registrant has duly caused this report to be signed on its behalf by the
undersigned thereto duly authorized.


Date: February 14, 2001                     CUMETRIX DATA SYSTEMS CORP.

                                            /s/ Herbert H. Tom
                                            Herbert H. Tom
                                            Chief Financial Officer

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