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

                                    FORM 10-K

                  FOR ANNUAL AND TRANSITION REPORTS PURSUANT TO
           SECTIONS 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

X     ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
---   ACT OF 1934 FOR THE FISCAL YEAR ENDED DECEMBER 31, 2000 OR

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


                         COMMISSION FILE NUMBER: 1-15641

                               724 SOLUTIONS INC.
             (Exact name of registrant as specified in its charter)


                                     ONTARIO
                         (State or other jurisdiction of
                         incorporation and organization)

                                  INAPPLICABLE
                      (I.R.S. Employer Identification No.)


                          4101 YONGE STREET, SUITE 702
                            TORONTO, ONTARIO M2P 1N6
          (Address of principal executive offices, including zip code)

                                 (416) 226-2900
              (Registrant's telephone number, including area code)

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

Securities registered pursuant to Section 12(g) of the Act:   Common Shares,
                                                              no par value.
                                (Title of class)

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


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

<PAGE>


     The aggregate market value of the voting stock held by non-affiliates of
the Registrant, based on the closing price of the Registrant's common shares on
February 28, 2001 of $14 3/16, as reported on the Nasdaq National Market, was
approximately $344.5 million. Common shares held by each executive officer and
director and by each person who owns 5% or more of the outstanding common shares
have been excluded from this computation, in that such persons may be deemed to
be affiliates of the Registrant. This determination of affiliate status is not
necessarily a conclusive determination for any other purpose.

     As of February 28, 2001, the Registrant had outstanding 56,578,275 common
shares, no par value.





<PAGE>



                                      INDEX

                               724 SOLUTIONS INC.

                           ANNUAL REPORT ON FORM 10-K

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PART I
Item 1.          Business...................................................................................         2
Item 2.          Properties.................................................................................        37
Item 3.          Legal Proceedings..........................................................................        37
Item 4.          Submission of Matters to a Vote of Security Holders........................................        37

PART II
Item 5.          Market for Registrant's Common Equity and Related Stockholder Matters......................        38
Item 6.          Selected Financial Data....................................................................        44
Item 7.          Management's Discussion and Analysis of Financial Condition and Results of Operations......        46
Item 7A.         Quantitative and Qualitative Disclosures about Market Risk.................................        60
Item 8.          Financial Statements and Supplementary Data................................................        60
Item 9.          Changes in and Disagreements with Accountants on Accounting and Financial Disclosure.......        60

PART III
Item 10.         Directors and Executive Officers of the Registrant.........................................        62
Item 11.         Executive Compensation.....................................................................        62
Item 12.         Security Ownership of Certain Beneficial Owners and Management.............................        62
Item 13.         Certain Relationships and Related Transactions.............................................        62

PART IV
Item 14.         Exhibits, Financial Statement Schedules, and Reports on Form 8-K...........................        63

Index to Consolidated Financial Statements.................................................................        F-1

SIGNATURES

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                                     PART I

ITEM 1.   BUSINESS

                             DESCRIPTION OF BUSINESS

          OVERVIEW

     AN INVESTMENT IN OUR COMMON SHARES INVOLVES SUBSTANTIAL RISKS AND
UNCERTAINTIES. WE ENCOURAGE YOU TO CAREFULLY REVIEW THE INFORMATION SET FORTH IN
THIS ITEM I UNDER THE CAPTIONS "RISK FACTORS" AND "INFORMATION REGARDING
FORWARD-LOOKING STATEMENTS" FOR A DESCRIPTION OF THESE RISKS AND UNCERTAINTIES.

         We provide Internet infrastructure software solutions that enable our
customers to deliver services involving transactions such as online banking,
brokerage and mobile electronic commerce, or m-commerce. Using our 724 Solutions
platform, these services can be delivered across a wide range of
Internet-enabled wireless and consumer electronic devices. Our products
currently enable consumers to securely access these services through network
service providers using digital mobile phones, personal digital assistants,
two-way pagers and personal computers. Our customers are now in the initial
phases of offering m-commerce services based upon our products. With critical
security features built in, our products can be quickly implemented and
integrated with existing systems, and scaled or expanded to accommodate future
growth. Using our 724 Solutions platform and related products, our customers can
provide new levels of service in an easy to use, personalized manner. Our
customers may operate our software solutions within their own facilities, or we
can provide them with our hosting services.

         Our product offering consists of two categories of components: a base
technology layer called the 724 Solutions platform, and a suite of features and
functions for consumers, called the 724 Solutions applications, which include
financial service applications and our LiveClips service, together with our
alerts, m-commerce and content applications, and which can be used together with
the underlying platform infrastructure.

         In recent months, we have entered into new license agreements with
additional financial institutions, and have begun to provide hosting services to
our customers. We have also completed four acquisitions, including:

         -        YRLess Internet Corp., which has developed a carrier-grade
                  short messaging service gateway that we plan to use to enhance
                  our ability to quickly connect our services to carriers. The
                  YRLess gateway includes advanced features that are designed to
                  enhance its operation with different networks, including
                  functions that control the amount of messages that cross a
                  network, advanced security features and anti-spamming
                  features.

         -        Ezlogin.com, Inc., a developer of Internet infrastructure
                  tools for user-directed personalization that are now the basis
                  of our LiveClips product, which we introduced in September
                  2000. LiveClips is a comprehensive aggregation tool designed
                  to enable our customers to provide consumers with a
                  consolidated view of their online accounts and other Web-based
                  items of personal interest across a wide range of
                  Internet-enabled devices.


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         -        Spyonit.com, Inc., which has developed intelligent alerting
                  infrastructure software that monitors the Internet or other
                  data sources for items of interest, such as stock prices,
                  product sales and auction bids, and which notifies a consumer
                  when a particular condition selected by the consumer is met.

         -        TANTAU Software Inc., a global provider of software and
                  services that enable enterprises to conduct high-volume,
                  secure, m-commerce transactions while maintaining direct
                  access to their customers. TANTAU's Wireless Internet Platform
                  creates a link for a variety of wireless and wired devices,
                  including cellular telephones, personal digital assistants,
                  pagers and Web browsers, to interact with enterprise
                  applications and data sources. TANTAU's Wireless Internet
                  Platform allows enterprises to offer access to their Internet
                  e-commerce activities, such as banking, stock trading and
                  shopping, through mobile devices.

         In the third quarter of 2000, we introduced an enhancement to our
product offering. This release focuses on providing our customers with more
flexibility in reaching consumers using devices that are gaining substantial
consumer adoption, such as Wireless Application Protocol (WAP) phones and
two-way pagers. In March 2001, we introduced a new version of our 724 Solutions
platform, which offers, among other new features, speech recognition technology
in 15 languages and a notification system that is designed to select the most
effective delivery channel for a user's device.

         In September 2000, we introduced our LiveClips product, which is based
upon the technology acquired in our purchase of Ezlogin. LiveClips is a
comprehensive aggregation tool designed to enable our customers to provide
consumers with wired or wireless access to a full suite of online accounts and
other items of personal interest. LiveClips enables users to access a variety of
these accounts by using a single user ID and password to sign-in to a secure and
easy-to-access location.

         Since our September 2000 acquisition of Spyonit, we have been offering
advanced notification services that enable our customers to provide consumers
with personalized intelligent alerts. Our alerts technology uses the
carrier-grade short messaging service gateway that we acquired in our
acquisition of YRLess to provide a more reliable way of delivering alerts and
notifications to end users.

         Our headquarters are located in Toronto, Ontario and Austin, Texas, and
we have sales offices and other facilities in other locations in North America,
Europe and the Asia-Pacific Region. As of January 31, 2001, we had 710 employees
worldwide, including the employees of TANTAU.

         INDUSTRY OVERVIEW

         GROWTH OF THE INTERNET

         The Internet has emerged as a global communications medium to deliver
and share information and conduct business electronically. The dramatic growth
in the number of Internet users has led to a proliferation of information and
services on the Internet, including financial services, e-mail, e-commerce, news
and lifestyle content. We believe that consumers are increasingly seeking
personalized and practical Internet applications that they can use in their
daily activities.


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         GROWTH OF DIGITAL WIRELESS COMMUNICATIONS

         Digital wireless communications have grown rapidly due to declining
consumer costs, expanding network coverage, the availability of extended service
features such as voice and text messaging and the proliferation of wireless
devices. These wireless devices include personal digital assistants such as
PalmPilot connected organizers, Handspring Visors, "Pocket PC" organizers;
digitalmobile phones such as the Neopoint 1000, Qualcomm 2700, Ericsson R320,
Nokia 7110 and Motorola Timeport; and two-way pagers, such as those developed by
Research In Motion and Motorola. Recent developments in wireless technology and
deployment of digital data networks have enabled the introduction of wireless
data applications such as financial services, mobile commerce, news and
lifestyle content.

         CONVERGENCE OF WIRELESS COMMUNICATIONS AND THE INTERNET

         The convergence of wireless communications and the Internet has created
new opportunities for the delivery of wireless data services. Cahners In-Stat
Group estimates that the number of wireless Internet subscribers worldwide will
grow from approximately 3.8 million at the end of 1999 to approximately 742
million at the end of 2004. We expect that the convergence of wireless
communications and the Internet will enable the delivery of wireless multimedia
applications, including voice, data, image and video. International wireless
technology groups, such as the Wireless Application Protocol Forum and the
Symbian Alliance, have created global standards for the transmission of wireless
applications, which we believe will help lead to increased penetration of the
market for wireless devices and services.

         GROWTH OF E-COMMERCE

         With the emergence of the Internet as a globally accessible, fully
interactive medium, many individuals and companies that have traditionally
conducted business in person, through the mail or over the telephone now
increasingly conduct business electronically. We expect that consumer use of
e-commerce will accelerate as more individuals gain access to the Internet, as
the cost of Internet access decreases, and as security concerns are alleviated.
In some parts of the world, particularly in a number of European and Asian
countries, e-commerce opportunities have been limited because credit cards,
which are currently the only secure form of online payment, are not widely used.
We expect these consumers to embrace e-commerce once a direct-payment system is
available. International Data Corporation (IDC) estimates that Internet users
worldwide purchased more than $131 billion in goods and services in 1999,
increasing to $2.6 trillion in 2004.

         GROWTH OF SECURE MOBILE TRANSACTIONS

         As the mobile Internet continues to grow and evolve, the focus of user
activity is expanding beyond basic content delivery applications. E-mail and
other forms of messaging that facilitate mobile person-to-person communications
have begun to drive accelerated adoption of wireless data devices and services.
We expect that the next major type of functionality this market will demand is
the ability to conduct secure mobile transactions, with a particular emphasis on
banking, brokerage and m-commerce. According to IDC, m-commerce in the U.S.
would generate $29 million in transactions in 2000 and grow to $20.8 billion in
transactions in 2004. ARC Group estimates that after personal information
management and entertainment, financial services was the most popular category
for wireless data users in 2000. With convenient access, mobile transactions can
be faster, less expensive and easier than


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transactions conducted through a broker, teller, ATM or bricks-and-mortar
storefront. In addition, the location-based capabilities made possible by
wireless networks and device technology facilitate the creation of a
personalized, context-sensitive user experience that is unique to the mobile
environment.

         As in the online context, however, consumer concerns about the security
of their sensitive financial and payment information is a key hurdle to be
overcome for mass adoption of mobile transaction technology to occur.
Traditional financial institutions are well positioned to respond with
strategies that build on their unique trust relationship with consumers and the
strengths of their traditional channels and services to overcome these security
concerns. We believe that the increasing popularity of new Internet-enabled
devices will help generate greater demand for mobile financial services and
provide an opportunity for financial institutions to drive adoption of banking,
brokerage, m-commerce and other secure transaction services to their large and
attractive customer base.

         To execute these strategies, large financial institutions will require
a solution that enables their existing systems, which we believe were generally
not designed to facilitate mobile transactions, to exchange information with
their consumers across a variety of Internet-enabled devices. This exchange
requires a complex bridging architecture that can interface with a variety of
access devices, communication protocols, operating systems, and network and
security technologies. The solution must also be secure in order to protect the
integrity and confidentiality of information, and fault-tolerant and scalable in
order to process an increasing number of transactions. The ideal solution must
also enable rapid deployment and the flexibility to add additional functions and
services.

         BUSINESS STRATEGY

         Our objective is to become the leading provider of Internet
infrastructure software that permits secure transactions using a broad range of
Internet-enabled devices. Our strategy is to:

         EXPAND OUR REACH: Our initial focus has been to provide our products to
large financial institutions worldwide, particularly banks and brokerage firms.
We believe that large financial institutions have both the scale and global
consumer base to maximize the adoption of services based on our products.
Citigroup, Bank of America, Wells Fargo, Hanvit Bank, Bank of Montreal, Wachovia
Corporation, KeyCorp and Claritybank.com are in various stages of implementing
our solution. Through our acquistion of TANTAU, we established customer
relationships with several major financial institutions in Europe. We believe
that the trust relationship these institutions have with consumers, combined
with our secure payment infrastructure, will accelerate consumer adoption of
mobile transactions. Once we have established a significant presence in the
financial services sector, we expect to use many of the components of our
architecture in other markets such as insurance, sales force management and
logistics.

         ACCELERATE WORLDWIDE ADOPTION OF OUR SOLUTION: In an effort to
encourage rapid deployment of our solution by financial institutions and other
customers, we are:

         -        Through our acquisition of TANTAU and our research and
                  development efforts, enhancing the scalability and strength of
                  our 724 Solutions platform;

         -        Establishing relationships worldwide with wireless and other
                  network service providers, device manufacturers and content
                  and technology providers;


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         -        Providing a compelling consumer experience through a
                  consistent, user-friendly interface on a variety of
                  Internet-enabled devices;

         -        Building worldwide hosting services for our customers, which
                  will help allow for quick delivery of services to consumers,
                  as well as a managed contact center service, which will help
                  ensure a rich initial consumer experience; and

         -        Reducing our customers' initial cost of using our solution by
                  charging a variable license fee based on the number of users
                  per month, subject to specific minimum fees.

         EXPAND THE FUNCTIONALITY OF OUR PLATFORM: Our architecture is designed
to be extendable, enabling our customers to continue to offer additional online
services across a variety of protocols, operating systems, networks and devices
to maximize consumer reach. We expect to further expand our reach by supporting
additional devices and broadening our functionality by introducing new
applications, content and services. For example, we are integrating into our
solution public key infrastructure (PKI) technology, which facilitates the
management of the tools necessary to ensure authentication of user identity and
the non-repudiation of transactions. We believe that this security feature is
essential for the widespread adoption of e-commerce and m-commerce transactions.
Additionally, we work with developers of new technologies to, among other
things, gain early access to device, wireless and network advancements.

         PURSUE SELECTIVE ACQUISITIONS TO EXPAND OUR CAPABILITIES: We intend to
continue to pursue acquisitions of companies and technologies that we believe
will allow us to quickly increase the scale and scope of our operations, such as
expanding our research and development team, expanding into new geographical
markets and industry sectors and providing new services.

         724 SOLUTIONS - CUSTOMER BENEFITS

         We believe that our products enable customers to maintain and deepen
consumer relationships and accelerate the adoption of Internet-based financial
services and other transactions. Our products can be rapidly implemented,
integrate easily with existing systems, address security issues, are scalable
and provide a robust platform for future growth. Key benefits of our products
include:

         -        SPEED TO MARKET: Our products, whether installed in a
                  customer's operations center or operated as a service through
                  our hosting group, can be rapidly deployed by a new customer,
                  branded and offered to consumers.

         -        EASE OF INTEGRATION WITH EXISTING SYSTEMS: Our 724 Solutions
                  platform and other products link to a customer's existing
                  systems, enabling customers to preserve their existing
                  investment, and to extend the productivity and functionality
                  of their existing infrastructure to new electronic channels.

         -        SECURITY: The security framework of our product offerings
                  address the stringent security standards of financial
                  institutions, creating an environment of trust for consumers
                  and allowing our customers to offer transactions and other
                  services with reduced fraud-related concerns.


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         -        SCALABILITY AND MANAGEABILITY: Our 724 Solutions platform and
                  other products are designed to add users efficiently and
                  effectively. We believe that our products can support
                  significant growth in users with little increase in
                  infrastructure. We believe that this feature of our product
                  offerings will be further enhanced by the integration of the
                  TANTAU platform into our own 724 Solutions offering, which has
                  a built-in set of tools to easily manage recovery, redundancy
                  and deployment.

         -        ABILITY TO EXPAND FUNCTIONALITY: Our 724 Solutions platform is
                  designed to facilitate the addition of new applications,
                  devices, content and services. It provides a robust basis for
                  the growth of electronic financial services and e-commerce.

         -        MAINTAIN AND DEEPEN CONSUMER RELATIONSHIPS: Our product
                  offerings allow financial institutions and other customers to
                  connect directly with consumers wherever they can obtain wired
                  or wireless Internet access. Our products also allow consumers
                  to set up their own personal preferences and alerts for a
                  personalized, easy-to-use experience. The information
                  contained in the personalization and notification databases
                  provides our customers with a competitive advantage in
                  building consumer loyalty through the delivery of value-added
                  services.

         We believe that our products benefit our customers and the companies
with which we have relationships by enabling the delivery of differentiated
wireless and wireline financial services, and other types of m-commerce
transactions. These services help increase consumer loyalty and drive wireless
airtime usage, consumer electronic device sales, and the purchase of other
products and services.

         OUR PRODUCTS

         Our products enable the delivery of secure and personalized electronic
information, services, transactions and payments using a broad range of
mass-market wired and wireless Internet-enabled devices. This technology is
extendable across a variety of protocols, operating systems and networks,
enabling our customers to deliver personalized transactions, services and
information to consumers over a wide range of communications networks.

         Our product offering consists of two categories of components: a base
technology layer called the 724 Solutions platform, and a suite of features and
functions for consumers, the 724 Solutions applications, which can be used
together with the underlying platform infrastructure.

         724 SOLUTIONS PLATFORM

         The 724 Solutions platform enables connectivity to the back-end systems
of financial institutions, merchants, content providers and other types of
enterprises. The 724 Solutions platform facilitates communications with various
wireless and wireline networks and devices, manages a user's session and network
security, provides system administration tools, and provides a broad set of
application services in support of the 724 Solutions applications. In January
2001, we began to integrate the technologies of TANTAU's Wireless Internet
Platform into the 724 Solutions platform.


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         NETWORK AND DEVICE GATEWAY. The network gateway transforms enterprise
data into formats suitable for use in a wide variety of wired and wireless
networks, including Code Division Multiple Access (CDMA), Global System for
Mobile Communication (GSM), Time Division Multiple Access (TDMA), Cellular
Digital Packet Data (CDPD), Mobitex and Internet Protocol. Almost all digital
mobile systems worldwide use one of these major types of wireless access formats
for voice and data communications. This gateway enables our customers to quickly
deploy their services through multiple network service providers, and allows for
new protocols to be supported without changes to their existing architecture.

         The device gateway supports the presentation of our applications on
multiple devices. It recognizes the type of device a consumer is using and
optimizes the format of the information for the characteristics of that
particular device type. Our software automatically formats information delivered
to a device using style sheets programmed in Extensible Markup Language (XML) or
Extensible Style Language (XSL), which are widely used languages in Internet
communications. This approach enables our customers to deliver services over
many types of access devices, and allows new devices to be supported without
changes to our architecture. The network and device gateway ensures consumers
receive a consistent and user-friendly experience regardless of the device used.

         PERSONALIZATION. Our solution enables consumers to customize their
services through a single set-up procedure. Once completed, a consumer's
preferences are stored in a unique profile on the network rather than on a
specific device. Thereafter, a consumer may use any Internet-enabled device to
access his or her account to retrieve information and conduct transactions
without repeating the set-up procedure. Changes in preferences made by a
consumer on one device will automatically be reflected on all other devices used
by that consumer.

         TARGETED MARKETING SERVICES. Using data generated from personalized
profiles, our customers have the ability to gain a better understanding of their
consumers' needs and interests. Our targeted marketing services can be used to
allow the distribution of information directly to their consumers with
personalized messages or services based on their preferences.

         SESSION MANAGEMENT. Our session management system ensures continuity of
a transaction over the network. For example, if a user is disconnected during a
transaction but is able to reconnect within a prescribed period of time, the
user can complete the transaction without repeating the login process or
previous entries.

         ADMINISTRATION. The administration function allows our products to be
managed within a customer's existing computer infrastructure. Through this
function, platform administrators can start and stop individual servers, add or
remove resources - such as hardware - from the platform without disrupting
service, monitor performance and perform system back-up procedures. These
administration capabilities can be integrated with popular systems management
tools, allowing our products to be monitored as part of a customer's overall
computing environment. We provide a feed into a data warehouse of all
transactions recorded by the system.

         TRANSACTION AND CONTENT GATEWAY. The 724 Solutions platform interfaces
with our customers' existing systems of through the transaction and content
gateway. This connection is typically made using Open Financial Exchange (OFX),
an industry standard specification for the exchange of financial data between
financial institutions and consumers through the Internet, or through an
Extensible Markup


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Language (XML) interface. If a customer does not support OFX or XML, however,
the 724 Solutions platform's link toolkit can facilitate message mapping to
different data sources and/or systems, with minimal impact on our customers' IT
infrastructures.

         SECURITY. Our security framework is based on a strict methodology of
threat evaluation, risk analysis and policy creation, designed to address
authentication, authorization, privacy, integrity and non-repudiation. A
conventional user ID/password mechanism provides user identification and
authentication. Our software incorporates standard cryptography protocols that
ensure the confidentiality of communications between servers, including Secure
Socket Layer (SSL) and Transport Layer Security (TLS), enhanced with Elliptical
Curve Cryptography (ECC) cypher-suites from Certicom Corp., to ensure the
privacy of transactions and communications. These security technologies require
minimal computing power for encrypting and decrypting messages, making them
well-suited for secure communications to wireless handheld devices. We are
currently working to incorporate Public Key Infrastructure (PKI) technology into
our applications to provide additional support for strong user authentication
and non-repudiation. In February 2001, we introduced our PKI gateway product,
the wireless industry's first broadly interoperable PKI management solution
based on open standards. Use of PKI technology, which supports digital
signatures, is expected to grow as a means of creating a secure e-commerce and
m-commerce environment over the Internet or virtual private networks. This
security framework addresses financial institutions' rigorous security
requirements, creating an environment of trust for consumers and allowing
merchants to offer e-commerce and m-commerce services with reduced fraud-related
concerns.

         VOICE RECOGNITION. In March 2001, we introduced voice recognition
technologies that enable authentication through the sound of a user's voice,
with 15 international languages available.

         724 SOLUTIONS APPLICATIONS

         FINANCIAL SERVICES APPLICATIONS. Our financial services applications
enable our customers to offer consumers the ability to execute a variety of
banking and brokerage inquiries and transactions, using a wide range of
Internet-enabled devices. Our banking functionality includes account information
and statements, credit card statements and advances, intra-bank transfers, bill
payment and post-dated payments, commercial cash management, positive pay
exceptions and multi-currency transfers. We also expect to offer bill
presentment during 2001 based upon technology developed through our relationship
with CheckFree Corp. Our brokerage and security functionality includes order
placement and confirmation, balances, positions and open orders, holdings and
transaction records, investment statements, trading data and charting, detailed
stock quotes and watch lists.

         LIVECLIPS. Our LiveClips product, based on the technology obtained
through our Ezlogin acquisition, enables our customers to offer consumers
services with which they can create personalized summaries of information
gathered from different websites. This information can include financial data
gathered from the websites of financial institutions, as well as almost any
other type of Web-based informational content. LiveClips delivers this
customized information by automatically logging-in to different sites using
credentials such as passwords made available by the consumer during the
registration process. Once logged-in to the service, LiveClips is able to,
through a series of software programs, automatically retrieve and display key
pieces of data, such as a consumer's bank account balance, in a personalized
display that can be accessed from a PC or different types of wireless
Internet-enabled devices.


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         We believe that customers may use our LiveClips product to establish
personalized services for consumers that offer enhanced value by aggregating
information from multiple websites and making them available in a single secure
and convenient location. Value-added services such as financial advice may also
be offered based upon analysis of the aggregated data.

         MsMoney.com, a women's financial portal, has licensed LiveClips in
order to offer its customers a consolidated view of their Web-based accounts
through its MyMsMoney online financial management service. Hanvit Bank and
KeyCorp have also announced plans to offer services based on LiveClips. New
Zealand based Parker's Edge, a provider of financial portal solutions, has
entered into a distributor agreement with us in which they will provide
aggregation services related to our LiveClips product to its clients in Asia,
Australia and New Zealand.

         ALERTS TECHNOLOGY. Our alerts technology, which is being enhanced
through the addition of the technology obtained in the Spyonit acquisition,
allows users to be alerted on a wide variety of wired and wireless
Internet-enabled devices when specific events occur. Messages may be delivered
through e-mail, mobile phone text messages, pagers and Internet instant
messaging services. Users may set triggers as to different types of information
or events of interest through a menu of alert options that can be accessed using
a personal computer. The architecture supports a wide variety of alert types
including those that are based upon the information on a website, such as sport
scores, stock prices or merchandise prices, or proprietary data such as
financial information feeds. Our alerts technology provides tools for creating
many different types of alerts and alert options which can be used by our
customers to build a more personalized experience for consumers, particularly
for consumers who prefer to be notified of an event, rather than checking for
information on an ongoing basis.

         Since our acquisition of Spyonit, Hanvit Bank and KeyCorp have
announced plans to offer the service to consumers. Our alerts technology uses
the carrier-grade short messaging service gateway that we acquired in our
acquisition of YRLess to provide a more reliable way of delivering alerts and
notifications to end users.

         M-COMMERCE APPLICATIONS. We are developing technologies that will
enable financial institutions and other customers to offer consumers and
merchants the ability to conveniently and securely engage in mobile commerce.
These applications will complement our LiveClips and alerts products by
providing a secure means to transact in response to the purchasing information
provided by these personalized tools. In addition, we believe that the PKI
technology we are developing will enable us to add strong authentication
capabilities as an enhancement to the current encryption-based security
solution.

         Our initial focus in m-commerce will be on developing shopping
applications, establishing the ability to connect to the key participants in a
commerce transaction, and facilitating secure payments between these parties.
Our shopping applications will provide consumers with different types of tools
for identifying and selecting the desired product or service. For example,
consumers will have the ability to make an immediate purchase in response to an
alert about event tickets going on sale. Our open connectivity initiative will
build on our ability to connect to financial institutions' systems by
establishing interfaces from merchant systems and gateways to the digital wallet
services that enable online payments, such as the wallet gateway we are
currently developing with Brodia. In their position as trusted m-commerce
intermediaries facilitating secure mobile transactions, our customers will be
better able to strengthen relationships with their clients and gain access to
additional revenue streams.


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         CONTENT APPLICATIONS. Our content applications enable our customers to
offer consumers lifestyle content such as news, weather, horoscopes and lottery
results sourced from a variety of content providers. This content complements
our other applications and helps to create a more personalized and compelling
experience for the consumer.

         HOSTING SERVICES

         In order to enable our customers to implement our platform rapidly, we
provide secure hosting services. These services enable our customers to operate
the software upon which our 724 Solutions platform and applications are based,
using equipment maintained and supported by us or by one or more third parties.
Some of our existing and potential customers are also seeking that we host other
third-party applications, in addition to having us remotely manage, administer
and support their services that are based upon our platform and which are
operated in their own data centers.

         We seek to provide these services on a worldwide basis, using
facilities based in Europe, Asia-Pacific and North America. We already have two
facilities established in North America. Our hosting services are designed to be
implemented using a co-location model, which involves our obtaining network
connections to servers that are housed together by a provider in one or more
related facilities. We believe that this model allows us to offer consistent and
standardized service across multiple continents utilizing the services of any
major provider of hosting services.

         We have chosen Exodus Communications, a leader in providing complex
Internet data center facilities and managed services, as the initial provider of
hosting services for our application operations. We may also obtain the services
of additional providers. We have established a North American application
management center that became operational in June 2000. This center is comprised
of experienced professionals who manage our hosting services. From the center,
we remotely manage, monitor and support all hosted operations of our
applications, regardless of their location. Most of the services delivered by
our current customers are hosted through this service.

         Our customers may also elect to host services based upon our solution
in their own facilities or through a third party. Through the experience that we
have acquired in making the services based upon our platform operational, we
also offer these customers consulting services relating to the implementation of
data center operations.

         In the summer of 2000, in connection with the roll-out of our hosting
services, we established our network operations center in Toronto. The center is
designed to monitor and manage our applications that run on the computer systems
which are located at, and managed by, the companies that provide us with hosting
services. Through these arrangements, we believe that we are able to obtain
reliable services such as physical security, power and communications from
providers such as Exodus, while using our own personnel to manage our
proprietary advanced applications which run on these hosted computer systems.

         CUSTOMERS

         Mobile access to the Internet is having a significant effect on the
delivery of financial services to consumers, and enables consumers to effect
transactions in new ways. As a group, we believe that online consumers generally
represent an affluent and important market segment. These consumers are


                                       11
<PAGE>


increasingly using new methods, including wireless technologies, to access the
Internet. The convergence of the Internet and digital wireless technologies
presents new opportunities for financial institutions and other companies that
seek to use the Internet to reach consumers. Using our products to enable secure
mobile transactions, we believe that financial institutions and other companies
can differentiate their services to retain and strengthen their existing
customer relationships and attract new customers.

         In 2000, we derived approximately 79%, 19% and 2% of our net revenues
from customers in the U.S., Canada and other regions, respectively. In 1999, we
derived approximately 93% and 7% of our net revenues from customers in Canada
and the U.S., respectively.

         We currently market our product and services to large financial
institutions such as banks and brokerages. Citigroup, Bank of America, Wells
Fargo, Hanvit Bank, Bank of Montreal, Wachovia Corporation, KeyCorp and
Claritybank.com are in different phases of integrating our products. In
addition, through our acquisition of TANTAU, we have established relationships
with new customers, including Chase Manhattan Bank, Commerzbank, Credit Suisse
Group, MeritaNordbanken, the New Zealand Stock Exchange, Rabobank International
and SE Banken. We also believe that, in the future, a substantial portion of our
customer base will consist of large enterprises in other industries.

         CITIGROUP

         In August 1999, Citigroup announced its intention to implement our
solution worldwide under the leadership of its e-Citi division. In December
1999, we entered into a master technology license agreement with Citicorp
Strategic Technology Corporation, a subsidiary of Citigroup, which will enable
us to license our technology to Citigroup's subsidiaries. In January 2001, we
entered into an agreement under the master technology license agreement with
Salomon Smith Barney Inc., Cititrade and the Citibank credit card division that
will enable them to provide mobile delivery of financial services to their North
American customers. In addition, under these agreements, we will provide hosting
services, call center services, and other implementation services to these
affiliates in connection with the technology licensed to them. To date, we have
also entered into an agreement under the master technology license agreement
with a Citigroup affiliate in Singapore relating to several Asian countries, and
with Salomon Smith Barney in Australia. We also expect to enter into one or more
additional agreements with these and other Citigroup affiliates that will enable
us to deliver our solution to their customers.

         BANK OF AMERICA

         In the third quarter of 2000, Bank of America launched its first
wireless banking and brokerage offering in the United States. Based on our 724
Solutions platform and applications, the Bank of America wireless service allows
consumers to conduct a variety of secure, real-time banking transactions and
access financial markets and investment information on a range of mobile phones
and Palm handheld devices and organizers. The initial roll-out of this service
is available to Bank of America Private Bank clients in Dallas and Fort Worth,
Texas, Baltimore, Maryland and Washington, D.C. Bank of America has announced
that it plans to roll out its wireless service to its customers in other U.S.
markets over the next 12 to 18 months.


                                       12
<PAGE>


         WELLS FARGO

         In September 1999, Wells Fargo entered into a licensing agreement to
enable it to begin to deliver online banking services via wireless devices to
its customers during 2000. Wells Fargo introduced these services in a trial to
1,000 consumers in the summer of 2000 and launched these services to its U.S.
online retail and small business banking cutomers in February 2001.

         HANVIT BANK

         In November 2000, we announced a new customer relationship with Hanvit
Bank, a leading financial institution in South Korea. Hanvit has announced that
it plans to use our products to provide wireless banking and investment
services, as well as aggregation and alerts. We believe that Hanvit is the first
Korean financial institution to announce plans to offer aggregation and
personalized alerts services to its customers.

         BANK OF MONTREAL

         In May 1999, our technology enabled Bank of Montreal to become the
first financial institution in North America to launch an integrated wireless
banking and brokerage application in a market trial with approximately 350
users. As of September 30, 2000, there were 6,000 subscribers to the
fully-launched service, which is now available in French and English in major
centers across Canada over four carriers. This service, named Veev, supports the
delivery of banking, brokerage and lifestyle applications through wireless
phones, RIM two-way pagers and PalmPilot connected organizers. In October 2000,
Bank of Montreal began a customer trial of our LiveClips aggregation product.
LiveClips is designed to enable the Veev service to offer customers wireless,
single sign-on access to a consolidated view of financial account information
from multiple websites.

         In March 2000, Harris Bank, a U.S. subsidiary of Bank of Montreal
located in Chicago, Illinois, commenced a trial of the Veev service to its
customers. In July 2000, Harris Bank's wireless banking and investment services
offering, Harris Wireless, was broadly launched to all Harris Bank customers in
the U.S.

         WACHOVIA CORPORATION

         Wachovia has licensed our technology and subscribed to our hosting
services, to extend its real-time, 24-hour electronic banking and financial
services to a broad range of popular wireless and consumer electronic devices.
We have worked with Wachovia to develop and deploy separate retail and
commercial wireless financial services offerings, each specially designed to
meet the needs of Wachovia's retail and corporate customers.
Wachovia has also licensed our technology for retail brokerage services.

         In November 2000, Wachovia launched its wireless commercial financial
services offering, making it one of the first U.S. banks to offer wireless cash
management services. The offering enables Wachovia's treasury clients to
securely and conveniently view, pay, issue or return positive pay exceptions, to
retrieve an intraday position report to view summary information and summary
debits and credits, and to view, approve or cancel payments through wireless
access of Wachovia's Internet-based cash management product, Wachovia Connection
Plus.


                                       13
<PAGE>


         KEYCORP

         In September 2000, we entered into a pilot agreement with KeyCorp which
will enable KeyCorp to introduce interactive wireless banking services to its
Internet banking customers. KeyCorp's wireless banking services, based on our
technology, will allow customers to access real-time account information,
transfer funds between accounts, pay bills and access stock-market information
on a variety of Internet-enabled wireless devices, such as digital mobile
phones, pagers and personal digital assistants.

         In November 2000, we entered into a licensing and consulting services
agreement with KeyCorp relating to our LiveClips and alerts technology.
LiveClips will enable KeyCorp to offer consumers secure, single sign-on access
to all of their Internet-based accounts and content in one consolidated view.

         BBVA BANCOMER

         In July 2000, we announced an agreement with BBVA Bancomer, under which
BBVA Bancomer may use our products to enable mobile wireless banking for its
customers throughout Mexico and Spanish-speaking communities in the U.S. Our 724
Solutions platform and applications would enable BBVA Bancomer customers to use
a wide range of Internet-enabled devices such as mobile phones, personal digital
assistants and pagers to gain access to their real-time financial information,
including account information and statements, transaction details, intra-bank
transfers and bill payments, along with value-added content such as news,
weather and financial market updates. This service can be offered in both
Spanish and English.

         CLARITYBANK.COM

         Claritybank.com is an exclusively online bank established in 2000 to
provide real-time, next-generation financial services to businesses and
consumers. Claritybank.com is one of the first national banks to offer wireless
service to its entire customer base. In February 2000, we entered into an
agreement to license our solution to Claritybank.com. In November 2000,
Claritybank.com launched its first offering of wireless banking services to its
entire customer base. Claritybank.com is the first Internet-only financial
institution to deploy our technology, and one of the first national banks to
deliver wireless services to its customer base across the U.S.

         Since our September 2000 acquisition of Spyonit, we have been offering
advanced notification services that enable our customers to provide consumers
with personalized intelligent alerts. Since this acquisition of Spyonit, Hanvit
Bank and KeyCorp have announced plans to offer the service to consumers. Our
alerts technology uses the carrier-grade short messaging service gateway that we
acquired in our acquisition of YRLess to provide a more reliable way of
delivering alerts and notifications to end users.

         TANTAU CUSTOMERS

         TANTAU launched its Wireless Internet Platform on February 7, 2000,
with initial commercial shipments beginning on February 18, 2000. Prior to our
acquisition of TANTAU in January 2001, several major international financial
institutions became customers of TANTAU, including the following:


                                       14
<PAGE>


         J.P. MORGAN CHASE & CO. In November 2000, The Chase Manhattan Bank,
which has since merged with J.P. Morgan & Co., announced its intent to use
TANTAU's Wireless Internet Platform as a key component of its wireless banking
infrastructure. The planned services will enable commercial and retail customers
to conduct financial transactions over wireless devices. Chase has announced
plans to begin rolling out wireless Internet capabilities in 2001. Features of
the system are expected to include account access, e-mail, Web access and
location-based services such as an ATM finder. LabMorgan, the e-finance unit of
J.P. Morgan Chase, is responsible for deploying the platform.

         CREDIT SUISSE GROUP. Credit Suisse's YOUTRADE service is an online
brokerage service for customers in Switzerland, enabling direct and secure
access to major stock exchanges. In October 2000, Credit Suisse announced its
plans to use TANTAU's technology in connection with YOUTRADE. Using TANTAU's
services, YOUTRADE customers will be able to conduct transactions on the
Frankfurt, New York and Zurich stock exchanges using WAP-enabled devices.

         MERITANORDBANKEN. MeritaNordbanken is a leading international financial
institution based in Scandinavia. More than 1.5 million customers have used its
advanced Internet banking services, which are based upon the TANTAU
infrastructure, since they were first introduced in 1996. In addition, in March
2000, MeritaNordbanken commenced a trial of TANTAU's Wireless Internet Platform
in order to offer wireless banking services to its customers. These services
include conducting balance inquiries, paying bills, transferring money and
conducting stock trades.

         NEW ZEALAND STOCK EXCHANGE. In March 2000, the New Zealand Stock
Exchange launched a demonstration of its wireless securities trading system
developed by TANTAU, Hewlett-Packard and Computershare. This system is based
upon TANTAU's Wireless Internet Platform, and is designed to enable the secure
transfer of data between wireless devices and Computershare's back-end trading
applications and data sources. The service will enable customers to trade and
transfer securities over the exchange directly, without the need for brokerage
services, and is currently subject to a market trial in New Zealand.

         Additional financial services institutions that have licensed TANTAU's
Wireless Internet Platform include Commerzbank, Rabobank International and SE
Banken. In addition, we have licensed the TANTAU platform to Webhelp, a
leading developer of real-time online communications solutions, in order to
enable Webhelp to incorporate the platform into its offerings.

         TECHNOLOGY

         Our open-architecture platform communicates with our customers' systems
primarily using an industry standard called Open Financial Exchange (OFX). Our
services support connectivity with a variety of protocols, including Internet
protocol. Our services run on the Windows NT and the Sun Solaris operating
systems. We believe that our open architecture allows us to rapidly integrate a
wide range of new technologies, in order to enhance the functionality and
reliability of our solution.

         Our architecture complies with Common Object Request Broker
Architecture (CORBA), a standard for application software design used widely in
the software industry. We also use other widely accepted standards in developing
our product, including:

         -        encryption technologies such as Certicom's Elliptical Curve
                  Cryptography (ECC) and Secure Socket Layer (SSL), and RC4, a
                  technology that permits the encryption of large amounts of
                  data;


                                       15
<PAGE>


         -        Hypertext Transfer Protocol (HTTP), the primary data protocol
                  used for Internet communications;

         -        Simple Mail Transport Protocol (SMTP), Short Messaging Service
                  (SMS) and WAP Push, which are standards for sending messages
                  using different types of systems; and

         -        HP OpenView, which enables management of our platform through
                  Hewlett-Packard's enterprise system management environment;

         We are a member of the Wireless Application Protocol Forum, an industry
association that has developed a leading standard for wireless information and
telephony services on digital mobile phones and other digital wireless devices.
Members of this organization include network service providers, device
manufacturers, leading infrastructure providers and software developers.

         Our programs are written in C++ and Java, widely accepted standard
programming languages for developing object-oriented applications. We also make
extensive use of Extensible Markup Language (XML), which was completed by the
World Wide Web Consortium in 1998, and Extensible Style Language (XSL) in our
software applications.

RESEARCH AND DEVELOPMENT

         As of February 16, 2001, after giving effect to our acquisition of
TANTAU, our research and development department consisted of 299 employees.
These units are responsible for assessing new technologies, new release
schedules, product architecture, security, performance engineering, product
requirements, quality assurance and product support.

         In August 1999, we established an advanced technology center as part of
our Research and Development group. Our advanced technology center is primarily
a research center focused on rapidly developing innovative technologies from the
concept stage to the prototype stage. The advanced technology center's main
objectives are to gain early access to emerging technologies, improve our
products and services, expedite deployment to our customers and create mutually
beneficial relationships with customers, network service providers and device
manufacturers.

         In July 1999, we established a performance engineering group. The
objective of this group is to establish benchmarks for our technology, to
recommend and validate reference architectures and to provide feedback to the
architecture and product groups. We invest heavily in performance engineering to
ensure that our products will be scalable for large numbers of users and
transaction volumes.

SALES, MARKETING AND CUSTOMER SUPPORT

         As of February 16, 2001, we employed 79 people in sales in North
America, Europe and Asia-Pacific. In addition, we employed 48 people in our
marketing department. Our sales employees generally receive incentive
compensation based on individual sales volume.

         We offer our customers consulting services to assist in the
installation and deployment of our products, as well as ongoing product support.
Services offered during installation include training,


                                       16
<PAGE>


configuration, and connectivity to existing systems. We believe that our
customer support and consulting services result in improved customer
satisfaction and loyalty, a shorter sales process, faster implementation and an
increase in the sales of our product.

         Our personnel typically work directly with our customers' in-house
personnel to implement our solution. We bring together and coordinate the
technology and resources needed to deliver a single solution to customers who do
not wish to use their in-house resources to implement our products.

         Prior to our January 2001 acquisition of TANTAU, both our company and
TANTAU began to establish relationships with resellers, including several
original equipment manufacturers (OEMs) with which TANTAU has established
relationships. We expect that we will generate a substantial portion of our
revenues in future periods through our relationships with these third parties.
In December 2000, we entered into an agreement with Bank of Montreal that
authorizes the bank to act as a service bureau, including sublicensing and
hosting, in relation to our products. TANTAU has entered into an OEM agreement
with Compaq Computer under which Compaq agreed to resell the Wireless Internet
Platform to its customers in the telecommunications and financial services
markets. TANTAU has also targeted systems integrators, such as Siemens Business
Services, Compaq Computer and HP Consulting, and independent software vendors,
to serve as resellers of the Wireless Internet Platform within the financial
services marketplace.

STRATEGIC RELATIONSHIPS

         We are establishing worldwide relationships with wireless and other
network service providers, content portals, device manufacturers, technology
companies and content providers to facilitate the adoption of our customers' 724
Solutions enabled products and services. We anticipate that some of these
relationships will lead to formal arrangements in which we will incorporate new
technologies into our platform, or in which we will adapt our solution to
support new types of devices. Through strategic relationships, we seek to gain
technological leadership, worldwide access and positioning and an early
awareness of emerging Internet technologies. We believe that our participation
in the development of these technologies at an early stage provides us with a
competitive advantage to bring new products and services to our customers.

         We are working with network service providers, such as AT&T Wireless,
Bell Mobility and Sprint; data center service providers, such as Exodus
Communications and Singapore Telecom; device manufacturers, such as Palm
Computing, Ericsson, Motorola, Neopoint, Nokia, Qualcomm and Research In Motion;
software and technology companies, such as Sonera SmartTrust, Neomar, Edge
Matrix, Baltimore Technologies, Certicom Corp., Sun Microsystems, CheckFree and
Brodia; financial services firms, such as MasterCard; channel/distribution
companies, such as Corillian Corporation, Parker's Edge, CrossMar, Inc. and
Politzer & HANEY; system integrators, such as Deloitte & Touche; strategy
consultants, such as McKinsey & Co.; and content providers, such as Maptuit,
Bridge, Reuters and Sina.com. We believe that our solution benefits each of
these types of companies, as greater demand for digital wireless financial
services helps increase consumer loyalty and drive wireless airtime usage,
consumer electronic device sales and the consumption of other products and
services.

         Additionally, through our acquisition of TANTAU, we believe that we
will gain access to TANTAU's relationships with leading technology and
distribution companies, including computer and


                                       17
<PAGE>


telecommunication equipment manufacturers such as Nokia, Compaq and
Hewlett-Packard, financial service providers, and Internet technology
developers.

COMPETITION

         The market for our products and services is becoming increasingly
competitive. The widespread adoption of open standards may make it easier for
new market entrants and existing competitors to introduce products that compete
against ours. We believe that we will compete primarily on the basis of the
quality, functionality and ease of integration of our products, as well as on
the basis of price. As a provider of a comprehensive Internet solution to
financial institutions, we assess potential competitors based primarily on their
management, functionality and range of services, the security and scalability of
their architecture, their customer base and geographic focus and their
capitalization and other resources.

         Our current and potential competitors include:

         -        FINANCIAL INSTITUTIONS WITH IN-HOUSE SOLUTIONS: Financial
                  institutions that develop their own in-house solution with
                  internal expertise and outsourced service providers and
                  products are a primary source of competition. These include
                  Celestial Securities Limited's wireless trading service in
                  Hong Kong; the wireless trading capability developed by
                  Fidelity using Research In Motion's two-way pagers; the
                  wireless trading service offered by DLJ Direct (a subsidiary
                  of Credit Suisse First Boston) in the U.S.; and the wireless
                  brokerage service provided by the online broker Fimatex in
                  France.

         -        SOFTWARE VENDORS FOCUSED ON FINANCIAL INSTITUTIONS AND OTHER
                  LARGE COMPANIES: Competitors include Aether Systems and
                  w-Technologies. In addition, various companies active in the
                  Internet banking and brokerage businesses with a primary focus
                  on back-end processing, middleware or front-end personal
                  computer platforms for retail Internet banking are potential
                  competitors. These include companies such as S1 Corporation,
                  CosmosBay, Brokat, TIBCO Software and Sanchez Computer
                  Associates.

         -        NETWORK SERVICE PROVIDERS: Sprint and BellSouth in the U.S.
                  and NTT DoCoMo in Japan are leaders in wireless data services.
                  NTT DoCoMo provides consumers with basic wireless banking
                  services from over 50 banks as part of its i-Mode service.
                  Other network service providers with advanced wireless data
                  service initiatives include US West, Bell Atlantic, AT&T
                  Wireless Data Services, Nextel, VodafoneAirtouch and
                  Voicestream in the U.S., Vodafone, British Telecom, Cellnet,
                  Orange and One 2 One in the U.K., Deutsche Telecom in
                  continental Europe, J-Phone, DDI and IDO in Japan, SingTel,
                  MobileOne and StarHub in Singapore, and Telstra, Optus and
                  Vodafone in Australia.

         -        DEVICE MANUFACTURERS: Ericsson, Nokia, Motorola and other
                  large wireless device manufacturers are attempting to sell
                  their technology to financial institutions and other
                  enterprises in our primary markets. These manufacturers may
                  market to these potential customers their own technology and
                  the technology of our competitors in a manner that may reduce
                  our sales.


                                       18
<PAGE>


         -        SOFTWARE VENDORS, SERVICES VENDORS AND PORTALS: Companies that
                  provide browsers for digital mobile phones and the
                  infrastructure to link devices to network service providers
                  and the Internet, such as Openwave and Microsoft, are
                  positioning themselves to provide wireless data services.
                  Companies offering wireless data services such as e-mail,
                  calendar access, aggregation of content, and a mobile
                  e-commerce platform include InfoSpace.com, mobilefinance.com,
                  Wireless Knowledge (a joint venture between Qualcomm and
                  Microsoft), Research In Motion, Go America, EmailPager,
                  Logica, CMG and portals, such as America Online, Yahoo! and
                  Excite@Home. Software companies primarily focused on
                  commercial wireless applications are also potential
                  competitors, including Qualcomm Wireless Business Systems,
                  Broadbeam, Dynamic Mobile Data and Mobimagic Co., a newly
                  formed joint venture between Microsoft and NTT Mobile.

INTELLECTUAL PROPERTY

         We protect our proprietary technology through a combination of
contractual confidentiality provisions, trade secrets, and patent, copyright and
trademark laws. We have applied for registration of several trademarks,
including "724 Solutions," "724 Solutions & Arrows Design," "724 Solutions
Financial Services Platform," "Tellmewhen," "Tellmewhen.com," "Secureofx,"
"Poet," "E-Anywhere," "724 Solutions & Design," "Your Customer is in Motion,"
"PartnerExpress," "Liveclips," "Clip and Paste," "EZLogin," "JumpPage,"
"Login.com," "Surfroom," "Dimecuando" and "Dimecuando.com." To protect our
trademarks throughout the world, we have applied for registration of some or all
of our trademarks in Europe, Canada, the United States, the United Kingdom,
Japan, Australia and Mexico. Besides "724 Solutions," which has been registered
in the U.K., none of these trademarks has yet been issued.

         We have also applied for patents for applications relating to our
mobile commerce technology, our 724 Solutions platform and our LiveClips
product. We have applied for patent protection in Canada, the United States,
Taiwan, Malaysia, the Philippines and through the Patent Cooperation Treaty,
which is an international patent application designating multiple countries. To
date, none of these patents has been issued. To date, TANTAU has received four
patents with respect to the technologies relating to its Wireless Internet
Platform. There are also a number of patent applications pending in respect of
the TANTAU Wireless Internet Platform in the U.S., European Community and Japan.

         There can be no assurance that the confidentiality provisions in our
contracts will be adequate to prevent the infringement or misappropriation of
our copyrights, pending patents, trademarks and other proprietary rights. There
can be no assurance that independent third parties will not develop competing
technologies, or reverse engineer our trade secrets, software or other
technology. Moreover, the laws of some foreign countries may not protect our
proprietary rights to the same extent as do the laws of Canada and the United
States. Therefore, the measures taken by us may not adequately protect our
proprietary rights.

         We rely heavily on technology and other intellectual property licensed
to us by third parties. For example, we have entered into license agreements
with Certicom Corp. and Consensus for use of their encryption technology. In
addition, we use certain third-party software that may not be available to us on
commercially reasonable terms or prices or at all in the future. Moreover, some
of our third-party license agreements are non-exclusive and, therefore, our
competitors may have access to some of the same technology.


                                       19
<PAGE>


         To date, we have not been notified that our product infringes on the
proprietary rights of third parties, but third parties could claim infringement
by us with respect to our existing or future products. Any claim of this kind,
whether or not it has merit, could result in costly litigation, divert
management's attention, cause delays in product installation, or cause us to
enter into royalty or licensing agreements on terms that may not be acceptable
to us.

         On December 28, 2000, Tellme Networks, Inc., a developer of
Internet-related telecommunications services, filed suit in the United States
District Court, Northern District of California, against us claiming that our
use of our "TellMeWhen" mark relating to our notification services in the U.S.
will infringe that company's rights. We believe that we have meritorious
defenses to this claim, and we have filed a counterclaim seeking the
cancellation of their trademark.

EMPLOYEES

         As of January 31, 2001, we had 710 employees, including the employees
of TANTAU.

                                  RISK FACTORS

                      RISK FACTORS RELATED TO OUR BUSINESS

         WE HAVE A HISTORY OF LOSSES AND WE EXPECT LOSSES IN THE FUTURE.

         We have not been profitable since our inception. We incurred losses of
$155,000 for the period between July 28, 1997 (inception) and December 31, 1997,
$2.7 million for the year ended December 31, 1998, $13.8 million for the year
ended December 31, 1999, and $63.3 million for the year ended December 31, 2000.
As of December 31, 2000, we had an accumulated deficit of $79.9 million. We
expect to continue to incur losses in the near future and possibly longer.

         We anticipate that our expenses will increase substantially in the
foreseeable future as we continue to expand our hosting service, increase our
research and development, sales and marketing and general and administrative
expenses, and integrate the operations of TANTAU, Spyonit, Ezlogin and YRLess
into our business. These efforts may prove more expensive than we currently
anticipate. We cannot predict if we will ever achieve profitability and, if we
do, we may not be able to sustain or increase our profitability.

         BECAUSE WE HAVE A LIMITED OPERATING HISTORY, IT MAY BE DIFFICULT FOR
         YOU TO EVALUATE OUR BUSINESS AND ITS FUTURE PROSPECTS.

         The evaluation of our business is difficult because of our limited
operating history. We were founded in July 1997, and services based on our
technology were first launched on a trial basis in May 1999 with our initial
licensee, Bank of Montreal. The four companies that we have acquired also had
short operating histories prior to these acquisitions, and we have operated as a
single company for a very short period of time. Because we are in an early stage
of development, our prospects are difficult to predict and may change rapidly.
We may encounter difficulties as a young company in a new and rapidly evolving
market, including our dependence on a small number of products with only limited
market


                                       20
<PAGE>


acceptance to date and the need to manage expanding operations. Our business
strategy may not be successful, and we may not successfully address these risks.

         OUR RAPID GROWTH MAY STRAIN OUR RESOURCES AND HINDER OUR ABILITY TO
         IMPLEMENT OUR BUSINESS STRATEGY.

         Our historical growth has placed, and any further growth is likely to
continue to place, a significant strain on our resources. The four acquisitions
that we have completed have further magnified this growth. Our ability to
achieve and maintain profitability will depend on our ability to manage our
growth effectively, to implement and expand operational and customer support
systems and to hire qualified personnel worldwide. We may not be able to augment
or improve existing systems and controls or implement new systems and controls
to respond adequately to any future growth. In addition, future growth may
result in increased responsibilities for our management personnel, which may
limit their ability to effectively manage our business.

         IF WE DO NOT SUCCESSFULLY DELIVER OUR HOSTING SERVICES, WE MAY NOT BE
         ABLE TO RETAIN OUR EXISTING CUSTOMERS OR ATTRACT NEW CUSTOMERS.

         Some of our existing customers require, and some potential customers
will require, that we host and manage the server infrastructure and software
platform as part of the implementation of our software. Our customers have
increased their demand for our hosting services since we initially began to
offer them in the second quarter of 2000, and we must ensure that we maintain
the capability to satisfy this demand. In addition, because we expect our
customer base to demand these services in a wide variety of international
locations, we must locate quality providers in countries in which they are in
limited supply. If we cannot effectively deliver these hosting services, we may
lose existing customers and may not attract new customers.

         We are currently working in conjunction with Exodus Communications to
provide our hosting services, and we may work with additional providers in the
future to deliver these services. If any natural disasters, computer breakdowns
or other circumstances occur that affect the computer systems in our network
operations center or the computer systems of Exodus Communications or any other
potential providers that we use to provide these services, our ability to
deliver our hosting services may be substantially impaired. In addition, if
Exodus or any other provider of these services refuses to, or becomes unable to
deliver these services in an effective manner, we will need to obtain services
from a new provider on an expedited basis. If any of these circumstances cause
us to fail to deliver our hosting services, we may lose customers, and our
reputation is likely to suffer.

         WE HAVE A LENGTHY AND COMPLEX SALES CYCLE FOR SEVERAL OF OUR PRODUCTS,
         WHICH COULD CAUSE THE DELAY OR LOSS OF REVENUE AND INCREASE OUR
         EXPENSES.

         Our sales efforts target large financial institutions and other
enterprises worldwide, which requires us to expend significant resources
educating prospective customers about the uses and benefits of our products.
Because the purchase of our products is a significant decision for these
prospective customers, they may take a long time to evaluate them. Our sales
cycle has typically ranged from four to six months, but can be longer due to
significant delays over which we have little or no control. As a result of the
long sales cycle, it may take us a substantial amount of time to generate
revenue from our sales efforts.


                                       21
<PAGE>


         OUR PRODUCTS HAVE ACHIEVED LIMITED MARKET ACCEPTANCE TO DATE, AND IF
         THEY FAIL TO ACHIEVE BROADER MARKET ACCEPTANCE OUR BUSINESS WILL NOT
         GROW.

         Our products are among a number of competing products that are
currently available in a new and rapidly evolving market. Other companies may
introduce other software products that will compete with ours. Customers may not
prefer our products to competing technologies. If customers do not accept our
products as the preferred solution, we may not attract new customers and our
business will not grow.

         OUR FUTURE REVENUE DEPENDS ON CONSUMERS USING THE SERVICES THAT ARE
         BASED ON OUR PRODUCTS, AND IF OUR CUSTOMERS DO NOT SUCCESSFULLY MARKET
         THESE SERVICES, OUR REVENUE WILL NOT GROW.

         We expect that revenue under most of our license agreements will depend
on the number of monthly subscribers to these services. As a result, our revenue
growth will be limited if the number of subscribers does not increase. To
stimulate consumer adoption of these services, our customers must implement our
products quickly. However, our customers may delay implementation because of
factors that are not within our control, including budgetary constraints,
limited resources committed to the implementation process and limited internal
technical support.

         Consumer adoption of these services also requires our customers to
market these services. However, our customers currently have no obligation to
launch a marketing campaign of any kind, may choose not to do so, or may not do
so effectively. Some of our customers have only provided these services on a
test basis to a limited number of consumers. Some of our customers may choose
not to expand their use of these services if they do not perceive a sufficiently
high rate of adoption among their consumers. As a result, we cannot ensure that
a large number of consumers will use these services in the future.

         WE CURRENTLY DEPEND ON THE SALE OF A LIMITED NUMBER OF PRODUCTS TO
         GENERATE MOST OF OUR REVENUE AND IF WE ARE UNABLE TO SELL THESE
         PRODUCTS WE MAY NEVER BECOME PROFITABLE.

         We expect sales of our 724 Solutions platform and applications and the
TANTAU platform to constitute most of our revenue for the foreseeable future. If
customers do not purchase our existing offerings, we do not currently offer any
other products or services that would enable us to become profitable.

         IF WE ARE NOT ABLE TO ESTABLISH RELATIONSHIPS WITH RESELLERS OR
         ADEQUATELY ENCOURAGE RESELLERS TO SELL OUR PRODUCTS, OUR REVENUE MAY
         NOT GROW.

         Historically, we have not made a major portion of our sales through
resellers. However, we anticipate that in future periods a substantial portion
of our sales will be made through resellers, particularly as a result of the new
products that we are selling through our acquisitions of Ezlogin and Spyonit and
the relationships with resellers that we have obtained through our recent
acquisition of TANTAU. If we are not able to establish relationships with
resellers or adequately encourage resellers to sell our products, our revenues
may not grow. We have a limited number of relationships with resellers and only
limited experience working with resellers. These resellers may not market our
products in a manner that will maximize our sales. In addition, we anticipate
that most of our resellers will be


                                       22
<PAGE>


permitted to sell the products and services of our competitors, and may
determine not to continue to serve as resellers of our products.

         WE CURRENTLY RELY ON SALES TO A LIMITED NUMBER OF FINANCIAL
         INSTITUTIONS, AND IF WE FAIL TO RETAIN THESE CUSTOMERS OR TO ADD NEW
         CUSTOMERS OUR REVENUE MAY BE SUBSTANTIALLY REDUCED AND OUR PRODUCTS MAY
         NOT ACHIEVE MARKET ACCEPTANCE.

         We currently derive a significant portion of our revenue from the sale
of our solution to a limited number of financial institutions. Between our
inception and December 31, 2000, sales to our four largest financial institution
customers, Bank of Montreal, Wells Fargo, Bank of America and Citigroup, have
accounted for the majority of our total revenue. Between our inception and
December 31, 2000, sales to our four largest financial institution customers,
Bank of Montreal, Wells Fargo, Bank of America and Citibank, have accounted for
more than 90% of our total revenue, and each of them accounted for more than 10%
of our revenue in the year ended December 31, 2000.

         We expect that a relatively small number of customers will continue to
account for a significant portion of our revenue for the foreseeable future. If
any of our customers discontinue their relationship for any reason, do not renew
their agreements or seek to reduce or renegotiate their purchase and payment
obligations, our revenue may be substantially reduced. In addition, there are a
limited number of large financial institutions in our target market and we
believe this number may decline in the future as a result of consolidation in
the financial services industry worldwide. If our sales efforts to these
potential customers are not successful, our products may not achieve market
acceptance and our revenue will not grow.

         In addition, as the market for mobile financial services evolves, our
customers may change their plans as to the services that they will provide using
our products. For example, in December 2000, one of our customers, BBVA
Bancomer, indicated that they sought to reevaluate their planned use of our
technology and that they may not roll out services based upon our products.
Although Bancomer agreed to explore opportunities to work together with us, we
may not derive substantial revenues under our agreement with them or under our
agreement with any other customer that may decide in the future to reevaluate
how it approaches the market for mobile Internet financial services, other than
any applicable minimum contract payment.

         OUR QUARTERLY OPERATING RESULTS MAY FLUCTUATE, WHICH COULD CAUSE OUR
         STOCK PRICE TO FLUCTUATE OR DECLINE.

         Our operating results may fluctuate significantly in the future from
quarter to quarter. If our quarterly revenues and operating results fail to meet
or exceed the expectations of securities analysts and investors, the market
price of our common shares could fall substantially. Our operating results vary
depending on a number of factors, many of which are outside our control,
including:

-         demand for our products and services;
-         the timing of sales of our products and services;
-         the announcement and introduction of competing offerings;
-         changes in our pricing policies or those of our competitors;
-         whether our products and services are sold directly or through
          indirect sales channels;
-         costs related to acquisitions of technology or businesses;


                                       23
<PAGE>


-         customer budget cycles and changes in these cycles; and
-         deferrals of customer orders in anticipation of enhancements to our
          technology or new offerings.

         In addition to these factors, in the future, we expect to recognize
the fixed portion of the license fees under the variable fee contracts that
we will enter into towards the beginning of the license period. As a result,
a delay in recognizing revenue, even from just one account, could have a
significant negative impact on our quarterly operating results. Our results
of operations in any individual quarter should not necessarily be viewed as
an indication of our performance in any future quarters.

         IF THE DIGITAL WIRELESS AND OTHER NETWORK SERVICE PROVIDERS THAT ENABLE
         OUR CUSTOMERS TO DELIVER TO CONSUMERS SERVICES BASED ON OUR PRODUCTS
         FAIL TO SUPPORT OUR SERVICE, OUR REVENUE FROM EXISTING CUSTOMERS WILL
         DECLINE AND WE MAY NOT ATTRACT NEW CUSTOMERS.

         We rely on wireless and other network service providers to introduce
and support our products, and services based on our products, in a timely and
effective manner. We have no control over the pace at which they will do so. If
these providers are slow to support the services that use our solution, our
existing customers may not be able to effectively offer these services and
potential customers may be reluctant to purchase our products. In addition,
wireless and other network service providers face implementation and support
challenges in introducing services delivered to Internet-enabled devices, which
may slow their rate of adoption or implementation of our solution. Moreover, the
continued expansion of digital wireless services, especially in North America,
is critical to our success. The pace of this expansion may not increase for a
variety of reasons, including, for example, if the U.S. government does not
allocate a sufficiently broad portion of the available spectrum to render these
services attractive.

         IF WE DO NOT RESPOND ADEQUATELY TO EVOLVING TECHNOLOGY STANDARDS, SALES
         OF OUR PRODUCTS MAY DECLINE.

         Our future success will depend on our ability to address the
increasingly sophisticated needs of our customers by supporting existing and
emerging technologies, including technologies related to communications and the
Internet generally and the financial services industry in particular. Wireless
Internet access is a rapidly evolving market and is characterized by an
increasing number of market entrants that have introduced or developed, or are
in the process of introducing or developing, products that facilitate the
delivery of Internet-based services through wireless devices. In addition, our
competitors may develop alternative products that gain broader market acceptance
than ours. As a result, the life cycle of our products is difficult to estimate.
We may need to develop and introduce new products and enhancements to our
existing products on a timely basis to keep pace with technological
developments, evolving industry standards, changing customer requirements and
competitive technologies that may render our products obsolete. These research
and development efforts may require us to expend significant capital and other
resources. In addition, as a result of the complexities inherent in our
products, major enhancements or improvements will require long development and
testing periods. If we fail to develop products and services in a timely
fashion, or if we do not enhance our products to meet evolving customer needs
and industry standards, including security technology, we may not remain
competitive or sell our solution.


                                       24
<PAGE>


         ANY DISRUPTION OF THE SERVICES SUPPORTED BY OUR PRODUCTS DUE TO
         ACCIDENTAL OR INTENTIONAL SECURITY BREACHES MAY DAMAGE OUR REPUTATION,
         REDUCE OUR REVENUE, EXPOSE US TO COSTLY LITIGATION AND REQUIRE CAPITAL
         INVESTMENTS IN ALTERNATIVE SECURITY TECHNOLOGY.

         Despite our efforts to maximize the security of the transactions
effected using our platform, we may not be able to stop unauthorized attempts to
gain access to or disrupt transactions between our customers and the consumers
of their services. Specifically, computer viruses, break-ins and other
disruptions could lead to interruptions, delays, loss of data or the inability
to accept and confirm the receipt of information or instructions regarding
transactions. Any of these events could substantially damage our reputation. We
rely on encryption and authentication technology licensed from third parties to
provide key components of the security and authentication necessary to achieve
secure transmission of confidential information. We cannot ensure that this
technology, future advances in this technology or other developments will be
able to prevent security breaches.

         WE MAY NEED TO EXPEND FURTHER CAPITAL AND OTHER RESOURCES TO PROTECT
         AGAINST THE THREAT OF SECURITY BREACHES OR TO ALLEVIATE PROBLEMS CAUSED
         BY THESE BREACHES.

         Because our activities involve the storage and transmission of
proprietary information such as credit card numbers and bank account numbers, if
a third-party were able to steal a user's proprietary information, we could be
subject to claims, litigation or other potential liabilities that could cause
our expenses to increase substantially. In addition to purposeful security
breaches, the inadvertent transmission of computer viruses could expose us to
costly litigation or a significant loss of revenue. Although our customer
agreements contain provisions which limit our liability relating to security,
our customers or their consumers may seek to hold us liable for any losses
suffered as a result of unauthorized access to their communications. Any
litigation of this kind, regardless of its outcome, could be extremely costly
and could significantly divert the attention of our management. We may not have
adequate insurance or resources to cover these losses.

         OUR ACQUISITIONS OF TECHNOLOGIES OR COMPANIES COULD DISRUPT OUR
         BUSINESS AND DILUTE YOUR HOLDINGS IN OUR COMPANY.

         We have completed three acquisitions in 2000, completed our acquisition
of TANTAU in January 2001, and may effect new acquisitions of technologies or
companies in the future. Entering into an acquisition entails many risks, any of
which could materially harm our business, including:

         -        diversion of management's attention from other business
                  concerns;

         -        failure to effectively assimilate the acquired company into
                  our business, including its technology, personnel and
                  customers;

         -        the loss of key customers or employees from either our current
                  business or the acquired business; and

         -        assumption of significant liabilities of the acquired company.

         In addition, holdings of existing shareholders will be diluted if
equity securities are issued in connection with any acquisition. If we incur
debt in order to effect any acquisitions, we will incur debt


                                       25
<PAGE>


service costs, and we expect that we would enter into agreements that will
restrict our operations in some respects and our ability to declare dividends to
the holders of our common shares. If we incur indebtedness, our shareholders
will also rank junior to the holders of the indebtedness in connection with any
liquidation of our company.

         We may not be able to effectively integrate our acquisitions of TANTAU,
Spyonit, Ezlogin and YRLess into our current operations. In particular, as our
largest proposed acquisition to date, our acquisition of TANTAU will pose
several significant challenges to our company. TANTAU has added approximately
175 employees to our organization, and we are integrating several officers of
TANTAU into our senior management team who have not previously worked with our
existing management. The successful integration of our company and TANTAU
requires, among other things, integration of our finance, human resources and
sales and marketing groups, and coordination of our development efforts. The
integration of our operations with TANTAU may be complicated by the fact that,
like ours, TANTAU's business and personnel is spread over several continents.

         ANY FAILURE TO EXPAND AND MANAGE OUR INTERNATIONAL OPERATIONS COULD
         LIMIT OUR POTENTIAL REVENUE GROWTH.

         We plan to substantially expand our activities outside the U.S.  and
Canada. Our plans to expand internationally may be adversely affected by a
number of risks, including:

         -        difficulties in adapting our product and services for foreign
                  markets;

         -        challenges in staffing and managing foreign operations;

         -        difficulties in establishing relationships with local
                  partners;

         -        restrictions on the export of encryption and other
                  technologies;

         -        recessionary environments in foreign economies, particularly
                  in Asian countries and in the financial services sector; and

         -        longer payment cycles and increased difficulties in collecting
                  amounts owed to us.

         FLUCTUATIONS IN THE VALUE OF FOREIGN CURRENCIES COULD RESULT IN
         CURRENCY EXCHANGE LOSSES.

         Our expanding operations outside the U.S. and Canada may be conducted
in currencies other than the U.S. dollar. Fluctuations in the value of foreign
currencies relative to the U.S. dollar, including the value of the Canadian
dollar, could cause currency exchange losses, as our principal offices and staff
in Toronto generate Canadian dollar denominated expenses. We cannot predict the
effect of exchange rate fluctuations upon our future operating results.

         WE WILL NEED TO RECRUIT, TRAIN AND RETAIN KEY MANAGEMENT AND OTHER
         QUALIFIED PERSONNEL TO SUCCESSFULLY GROW OUR BUSINESS.

         Our future success will depend in large part on the ability to recruit
and retain experienced research and development, sales and marketing, customer
service and management personnel. In


                                       26
<PAGE>


particular, our future success depends in part on the continued services of our
current executive officers. If we do not attract and retain such personnel, we
may not be able to grow our business. Competition for qualified personnel is
intense in the industry. In the past, we have experienced difficulty in
recruiting qualified personnel, especially technical and sales personnel. We are
in a new market and there are a limited number of people with the appropriate
combination of skills needed to provide the services that our customers demand
in each of our target markets. We expect competition for qualified personnel to
remain intense, and we may not succeed in attracting or retaining sufficient
personnel. In addition, new employees generally require substantial training,
which requires significant resources and management attention. We must also
offer attractive compensation packages to our personnel, whether that
compensation consists of cash, equity awards, or other forms of compensation.
Even if we invest significant resources to recruit, train and retain qualified
personnel, we may not be successful in our efforts.

         OUR SOFTWARE MAY CONTAIN DEFECTS OR ERRORS THAT COULD DAMAGE OUR
         REPUTATION.

         The software that we develop is complex and must satisfy the stringent
technical requirements of our customers. We must develop our products quickly to
keep pace with the rapidly changing industry in which we operate. Software
products that are as complex as ours are likely to contain undetected errors or
defects, especially when first introduced or when new versions are released. In
addition, our software may not properly operate when integrated with the systems
of some customers or when used to deliver services to a large number of a
customer's subscribers.

         While we continually test our products for errors and work with
customers to identify and correct bugs, errors in our product may be found in
the future. Our software may not be free from errors or defects even after it
has been tested, which could result in the rejection of our products and damage
to our reputation, as well as lost revenue, diverted development resources and
increased support costs.

         WE MAY BE SUBJECT TO PRODUCT LIABILITY CLAIMS THAT COULD RESULT IN
         SIGNIFICANT COSTS TO US.

         We may be subject to claims for damages related to any errors in our
product. A major product liability claim could materially adversely affect our
business because of the costs of defending against these types of lawsuits,
diversion of key employees' time and attention from the business and potential
damage to our reputation. Our license agreements with our customers contain
provisions designed to limit exposure to potential product liability claims.
Limitation of liability provisions contained in our license agreements may not
be effective under the laws of some jurisdictions if local laws treat them as
unenforceable. We could be required to pay substantial amounts of damages in
settlement or upon the determination of any of these types of claims.

         IF WE DO NOT SUCCESSFULLY INTEGRATE PUBLIC KEY INFRASTRUCTURE INTO OUR
         PRODUCTS, WE MAY BE COMPETITIVELY DISADVANTAGED AND OUR BUSINESS MAY
         NOT GROW.

         We expect that the use of public key infrastructure (PKI), an emerging
technology which facilitates user identity authentication and non-repudiation of
transactions, will be used by financial institutions' customers and by
competitors. If we do not succeed in integrating PKI into our products, they may
not be attractive to potential customers because of their security concerns. If
PKI becomes a widely used standard and our products do not use that standard, we
may be at a competitive disadvantage.


                                       27
<PAGE>


Although we are working with Certicom Corporation to design and implement
technologies through which we are integrating PKI into our products, and
introduced our PKI gateway in February 2001, these efforts may not be
successful.

         BECAUSE SEVERAL OF OUR CURRENT CUSTOMERS ARE SHAREHOLDERS IN OUR
         COMPANY, IF ONE OF THESE CUSTOMERS CEASES TO LICENSE OUR TECHNOLOGY AND
         ALSO SELLS ITS SHARES IN OUR COMPANY, OUR CREDIBILITY MAY SUFFER AND
         THE MARKET PRICE OF OUR SHARES MAY DECLINE.

         Several of our current customers, including Bank of Montreal, Bank of
America, Citigroup and Wells Fargo, or their affiliates, are shareholders in our
company. If any of these customers ceases to license our technology, our
credibility in the market may suffer, which may impede our ability to attract
new customers. In addition, if a customer that switches to a competing
technology also sells its shares in us, our credibility may further suffer and
the market price of our shares will likely decline.

         OUR PRODUCTS CONTAIN ENCRYPTION TECHNOLOGY WHOSE EXPORT IS RESTRICTED
         BY LAW, WHICH MAY SLOW OUR GROWTH OR RESULT IN SIGNIFICANT COSTS.

         The U.S. and Canadian governments generally limit the export of
encryption technology, which our products incorporate. A variety of
cryptographic products generally require export approvals from certain U.S.
government agencies in the case of exports from the U.S., and from Canadian
government agencies in the case of exports from Canada, although there are
currently no restrictions on exports of these products from Canada into the U.S.
If any export approval that we receive is revoked or modified, if our software
is unlawfully exported or if the U.S. or the Canadian government adopts new
legislation or regulations restricting export of software and encryption
technology, we may not be able to distribute our products to potential
customers, which will cause a decline in sales. We may need to incur significant
costs and divert resources in order to develop replacement technologies or may
need to adopt inferior substitute technologies to satisfy these export
restrictions. These replacement or substitute technologies may not be the
preferred security technologies of our customers, in which case our business may
not grow. In addition, we may suffer similar consequences if the laws of any
other country limit the ability of third parties to sell encryption technologies
to us.

         IF WE DO NOT HAVE SUFFICIENT CAPITAL TO FUND OUR OPERATIONS, WE MAY BE
         FORCED TO DISCONTINUE PRODUCT DEVELOPMENT, REDUCE OUR SALES AND
         MARKETING EFFORTS OR FOREGO ATTRACTIVE BUSINESS OPPORTUNITIES.

         We may not have sufficient capital to fund our operations and
additional capital may not be available on acceptable terms, if at all. Any of
these outcomes could adversely impact our ability to respond to competitive
pressures or could prevent us from conducting all or a portion of our planned
operations. The speed at which we utilize our available capital is likely to
increase substantially as we integrate our acquisitions into our business,
expand our hosting services and expand our operations internationally. We expect
that the cash we receive through our operations and our cash on hand will be
sufficient to meet our working capital and capital expenditure needs for the
next 12 months. After that, we may need to raise additional funds, and
additional financing may not be available on acceptable terms, if at all. We
also may require additional capital to acquire or invest in complementary
businesses or products or to obtain the right to use complementary technologies.
If we issue additional equity securities to raise funds, the ownership
percentage of existing shareholders will be reduced. If we incur debt, the debt
will rank senior to our common shares, we will incur debt service costs and we
will likely have to


                                       28
<PAGE>


enter into agreements that will restrict our operations in some respects and our
ability to declare dividends to the holders of our common shares.

                      RISK FACTORS RELATED TO OUR INDUSTRY

         OUR BUSINESS WILL NOT GROW IF THE USE OF WIRELESS DATA SERVICES DOES
         NOT CONTINUE TO GROW.

         The markets for wireless data services and related products are still
emerging and continued growth in demand for, and acceptance of, these services
remains uncertain. Our products depend on the acceptance of wireless data
services and Internet-enabled devices in the commercial and financial markets.
Current barriers to market acceptance of these services include cost,
reliability, platform and distribution channel constraints, safety,
functionality and ease of use. We cannot be certain that these barriers will be
overcome. Since the market for our products is new and evolving, it is difficult
to predict the size of this market or its future growth rate, if any. Our future
financial performance will depend in large part upon the continued demand for
online financial services through wireless application devices. We cannot ensure
that a sufficient volume of subscribers will demand financial services or will
seek financial services provided through the Internet on wireless access
devices. If the market for wireless online financial services grows more slowly
than we currently anticipate, our revenue may not grow.

         IF FINANCIAL INSTITUTIONS AND OTHER POTENTIAL CUSTOMERS DO NOT CONSIDER
         THE INTERNET TO BE A VIABLE COMMERCIAL MEDIUM, OUR CUSTOMER BASE MAY
         NOT GROW.

         Our success depends upon the extent to which large enterprises,
particularly financial institutions, accept the Internet as a viable means to
deliver their services. The adoption of the Internet for commerce and
communication, particularly by those financial institutions and other companies
that have historically relied upon traditional means, generally requires them to
understand and accept a new way of conducting business and exchanging
information. Financial institutions and other companies may be reluctant or slow
to adopt a new, Internet-based strategy because of increased pressure on costs
and the complexity and risk involved in developing a solution based on emerging
technologies. Reluctance by financial institutions and other potential customers
to use the Internet to deliver their services may prevent us from growing.

         LACK OF CONSUMER CONFIDENCE IN THE SECURITY OF INTERNET-ENABLED
         TRANSACTIONS COULD LIMIT ADOPTION OF OUR SOLUTION, WHICH COULD PREVENT
         US FROM BECOMING PROFITABLE.

         Consumers will not seek to effect transactions using the Internet and
wireless applications if they are not confident that financial transactions over
the Internet can be undertaken securely and confidentially. Although there is
security technology currently available for Internet-enabled transactions, many
Internet users do not use the Internet for commercial transactions because of
continued security concerns. These concerns may be heightened by well-publicized
security breaches of any Internet-related service, which could deter consumers
from adopting the services provided by our solution. If consumers do not gain
confidence in the security for Internet-enabled transactions that the current
technologies provide, our revenue will not increase.


                                       29
<PAGE>


         WE FACE COMPETITION FROM EXISTING AND NEW COMPETITORS AND FROM NEW
         PRODUCTS WHICH COULD CAUSE US TO LOSE MARKET SHARE AND CAUSE OUR
         REVENUE TO DECLINE.

         The widespread adoption of open industry standards, such as Wireless
Application Protocol (WAP) specifications, may make it easier for new market
entrants and existing competitors to introduce products that compete with ours.
In addition, competitors may develop or market products and services that are
superior or more cost-effective than ours, which could decrease demand for our
products and cause our revenue to decline. Currently, our competitors include:

         -        financial institutions that develop their own in-house
                  solutions;

         -        software vendors focused on financial institutions and other
                  companies in our target markets;

         -        wireless and other network service providers that provide
                  their customers with wireless financial services; and

         -        software and services vendors and portals that provide the
                  infrastructure to link devices to carriers and the Internet
                  and to enable other wireless applications.

         We may also face competition in the future from established companies
that have not previously entered the market for wireless data services and
Internet-related services. Barriers to entry in the software market are
relatively low and it is possible that new competitors or alliances among
competitors may emerge and rapidly acquire significant market share. In
addition, many of our competitors and potential competitors have greater
resources, which may enable them to penetrate the market more quickly.

         CHANGES IN GOVERNMENT REGULATIONS MAY RESULT IN INCREASED EXPENSES,
         TAXES OR LICENSING FEES WHICH COULD DECREASE THE DEMAND FOR OUR PRODUCT
         AND NEGATIVELY IMPACT OUR RESULTS.

         We are not currently subject to direct regulation by any governmental
agency, other than regulations applicable to businesses generally and laws and
regulations directly applicable to access to, or commerce on, the Internet.
However, a number of legislative and regulatory proposals under consideration by
federal, state, provincial, local and foreign governmental organizations may
lead to laws or regulations concerning various aspects of the Internet,
including but not limited to, online content, user privacy, taxation, access
charges and liability for third-party activities. Additionally, it is uncertain
how existing laws governing issues such as property ownership, copyright, trade
secrets, libel and personal privacy will be applied to the Internet. The
adoption of new laws or the broader application of existing laws may expose us
to significant liabilities and additional operational requirements and may
decrease the growth in the use of the Internet, which could, in turn, both
decrease the demand for our products and increase the cost of doing business.


                                       30
<PAGE>


                     RISKS RELATING TO INTELLECTUAL PROPERTY

         WE RELY ON THIRD-PARTY SOFTWARE, TECHNOLOGY AND CONTENT, THE LOSS OF
         WHICH COULD FORCE US TO USE INFERIOR SUBSTITUTE TECHNOLOGY OR TO CEASE
         OFFERING OUR PRODUCTS.

         We must now, and may in the future, license or otherwise obtain access
to the intellectual property of third parties. For example, we have entered into
license agreements with Certicom Corporation and Consensus for use of their
encryption technology. We have also entered into license agreements with
third-party content providers. In addition, we use, and will use in the future,
some third-party software that may not be available in the future on
commercially reasonable terms, or at all. For example, we could lose our ability
to use this software if the rights of our suppliers to license it were
challenged by individuals or companies that asserted ownership of these rights.
The loss of, or inability to maintain or obtain, any required intellectual
property could require us to use substitute technology, which could be more
expensive or of lower quality or performance, or force us to cease offering our
products. Moreover, some of our license agreements from third parties are
non-exclusive and, as a result, our competitors may have access to some of the
technologies used by us.

         IF OUR INTELLECTUAL PROPERTY IS NOT ADEQUATELY PROTECTED, WE MAY LOSE
         OUR COMPETITIVE ADVANTAGE.

         We depend on our ability to develop and maintain the proprietary
aspects of our technology. We seek to protect our software, documentation and
other written materials under trade secret and copyright laws, as well as
confidentiality provisions in contracts with our customers, all of which afford
limited protection. We also seek to protect our proprietary technology under
patent laws. We have applied for patents, although none have been issued to
date, other than the patents that we acquired in connection with our acquisition
of TANTAU. We have also applied for several trademark registrations for many of
our trademarks in the U.S., Canada, the United Kingdom, Japan and Australia. To
date, we have received only one registered trademark in the U.K.

         Despite the measures we have taken to protect our intellectual
property, we cannot ensure that these steps will be adequate, that we will be
able to secure patent or trademark registrations for any of our patent
applications in Canada, the U.S. or other countries, or that third parties will
not breach the confidentiality provisions in our contracts or infringe or
misappropriate our copyrights, pending patents, trademarks and other proprietary
rights. Similarly, we cannot ensure that our employees will comply with the
confidentiality agreements that they have entered into with us, and
misappropriate our technology for the benefit of a third party. If a third party
or any employee breaches the confidentiality provisions in our contracts or
misappropriates or infringes on our intellectual property, we may not have
adequate remedies. In addition, third parties may independently discover or
invent competing technologies or reverse engineer our trade secrets, software or
other technology. Moreover, the laws of some foreign countries may not protect
our proprietary rights to the same extent as do the laws of the U.S. and Canada.
Therefore, the measures we are taking to protect our proprietary rights may not
be adequate.

         THIRD PARTIES MAY CLAIM THAT OUR PRODUCTS INFRINGE ON THEIR
         INTELLECTUAL PROPERTY, WHICH COULD RESULT IN SIGNIFICANT EXPENSES FOR
         LITIGATION OR FOR DEVELOPING OR LICENSING NEW TECHNOLOGY.

         Although we are not currently aware of any material claims asserted by
third parties that we infringed on their intellectual property, in the future,
third parties may assert a claim that our current or


                                       31
<PAGE>


future products infringe on their intellectual property. We cannot predict
whether third parties will assert these types of claims against us or against
the licensors of technology licensed to us, or whether those claims will harm
our business. If we are forced to defend against these types of claims, whether
they are with or without any merit or whether they are resolved in favor of or
against us or our licensors, we may face costly litigation and diversion of
management's attention and resources. As a result of these disputes, we may have
to develop costly non-infringing technology, or enter into licensing agreements.
These agreements, if necessary, may not be available on acceptable terms, or at
all, which could prevent us from selling our products, increase our expenses or
make our products less attractive to customers.

        RISKS RELATING TO THE OWNERSHIP AND TRADING OF OUR COMMON SHARES

         A LIMITED NUMBER OF SHAREHOLDERS OWN A MAJORITY OF OUR COMMON SHARES
         AND MAY ACT, OR PREVENT CERTAIN TYPES OF CORPORATE ACTIONS, TO THE
         DETRIMENT OF OTHER SHAREHOLDERS.

         After giving effect to our acquisition of TANTAU, our seven principal
shareholders, including entities affiliated with members of the management team,
held more than 50% of our outstanding common shares. Accordingly, these
shareholders may, if they act together, exercise significant influence over all
matters requiring shareholder approval, including the election of a majority of
the directors and the determination of significant corporate actions. This
concentration could also have the effect of delaying or preventing a change in
control that could be otherwise beneficial to shareholders. Even if ownership
interest of these shareholders is reduced to less than 50%, they will still be
able to exercise substantial influence in connection with any shareholder vote
in the foreseeable future.

         THE MARKET PRICE OF OUR COMMON SHARES IS VOLATILE, WHICH MAY RESULT IN
         LITIGATION THAT COULD BE COSTLY AND DIVERT OUR RESOURCES.

         Stock markets have recently experienced extreme price and volume
fluctuations, particularly for the shares of technology companies. Since our
initial public offering, the market value of our common shares has fluctuated
significantly. The closing price of our common shares on the Nasdaq National
Market has ranged from $240 during the second quarter of 2000 to $9 1/4 during
the first quarter of 2001. These fluctuations are often unrelated to the
operating performance of particular companies, including ours. The broad market
fluctuations may adversely affect the market price of our common shares. This
may adversely affect our ability to use our common shares as consideration in
acquisition transactions. In addition, when the market price of a company's
stock drops significantly, shareholders often commence securities class action
lawsuits against that company, regardless of the merit of their claims. A
lawsuit against us could cause us to incur substantial costs and could divert
the time and attention of management and other resources, regardless of the
outcome of the lawsuit.

         IF WE DO NOT SUCCESSFULLY INTEGRATE TANTAU, OR IF THE MERGER'S BENEFITS
         DO NOT MEET THE EXPECTATIONS OF FINANCIAL OR INDUSTRY ANALYSTS, THE
         MARKET PRICE OF OUR COMMON SHARES MAY DECLINE.

         The market price of our common shares may decline as a result of our
January 2001 merger with TANTAU if:

         -        the integration of our company and TANTAU is inefficient or
                  unsuccessful;


                                       32
<PAGE>


         -        we do not achieve the perceived benefits of the merger as
                  rapidly as, or to the extent anticipated by us or by financial
                  or industry analysts; or

         -        the effect of the merger on our financial results is not
                  consistent with our expectations or the expectations of
                  financial or industry analysts.

         We can provide no assurances that we will effectively integrate our
operations with those of TANTAU, or whether our combined results of operations
and our combined business efforts will be sufficiently positive to meet the
expectations of the financial community.

         OUR ABILITY TO ISSUE PREFERRED SHARES COULD MAKE IT MORE DIFFICULT FOR
         A THIRD PARTY TO ACQUIRE US, TO THE DETRIMENT OF HOLDERS OF COMMON
         SHARES.

         Our ability to issue preferred shares could make it more difficult for
a third party to acquire us, to the detriment of holders of common shares.
Provisions in our articles of incorporation may make it difficult for a third
party to acquire control of us, even if a change in control would be beneficial
to our shareholders. Our articles authorize our board to issue, at its
discretion, an unlimited number of preferred shares. Without shareholder
approval, but subject to regulatory approval in certain circumstances, the board
has the authority to attach special rights, including voting or dividend rights,
to the preferred shares. Preferred shareholders who possess these rights could
make it more difficult for a third party to acquire us.

         YOUR TAX LIABILITY MAY INCREASE IF WE ARE TREATED AS A PASSIVE FOREIGN
         INVESTMENT COMPANY.

         If at any time we qualify as a passive foreign investment company under
U.S. tax laws, investors may be subject to adverse tax consequences. We could be
a passive foreign investment company if 75% or more of our gross income in any
year is considered passive income for U.S. tax purposes. For this purpose,
passive income generally includes interest, dividends, some types of rents and
royalties, and gains from the sale of assets that produce these types of income.
In addition, we could be classified as a passive foreign investment company if
the average percentage of our assets during any year that produced passive
income, or that were held to produce passive income, is at least 50%. If we are
classified as a passive foreign investment company, and if shareholders sell any
of their common shares or receive some types of distributions from us, they may
have to pay taxes that are higher than if we were not considered a passive
foreign investment company. It is impossible to predict how much shareholders'
taxes would increase, if at all.

         Based on the nature of our revenue and our anticipated corporate
structure, we may be treated as a passive foreign investment company. To
determine whether we are a passive foreign investment company, we will be
required each year to examine our revenue and expenses and the value of our
assets. The tests are complex and require, among other things, that we determine
how much of our income from our license agreements each year will be passive
income. Moreover, the manner in which the tests apply to our business is not
certain.

         Each holder of our common shares is urged to consult his, her or its
own tax advisor to discuss the potential consequences to such investor if at any
time we qualify as a passive foreign investment company.


                                       33
<PAGE>


         FUTURE SALES OF COMMON SHARES BY OUR EXISTING SHAREHOLDERS COULD CAUSE
         OUR SHARE PRICE TO FALL.

         If our shareholders sell substantial amounts of our common shares in
the public market, the market price of the common shares could fall. The
perception among investors that these sales will occur could also produce this
effect. In connection with our merger with TANTAU, we filed a registration
statement on Form F-4 which, subject to limitations under the U.S. securities
laws and the resale restriction agreements entered into by most of the
securityholders of TANTAU, made the common shares that we issued in the offering
available for resale in the U.S. In July 2000, we filed a registration statement
on Form S-8 relating to the issuance and sale of more than 6.5 million of our
common shares that are issuable under our stock option plans, including the
option plan of Ezlogin, which we acquired in June 2000. In February 2001, we
filed an additional registration statement relating to more than 3.5 million
options that we assumed in the acquisition that may be exercised to purchase our
common shares by directors, officers, employees and consultants of TANTAU.

         We have entered into a registration rights agreement with shareholders
that currently own a majority of our common shares. Under this agreement, we are
obligated, under a number of circumstances, including upon the demand of some of
the shareholders that are parties to the agreement, to register a substantial
number of our common shares so that they may be freely sold on the Nasdaq
National Market and The Toronto Stock Exchange. The common shares subject to
this agreement include the common shares held by all of our 5% shareholders, as
well as more than 10 million of the common shares that we issued in connection
with our acquisition of TANTAU. If these rights are exercised, a substantial
number of shares could be sold in the public markets, which is likely to
adversely affect our stock price.


                INFORMATION REGARDING FORWARD-LOOKING STATEMENTS

         Statements in this annual report about our future results, levels of
activity, performance, goals or achievements or other future events constitute
forward-looking statements. These statements involve known and unknown risks,
uncertainties and other factors that may cause actual results or events to
differ materially from those anticipated in our forward-looking statements.
These factors include, among others, those listed under " -- Risk Factors" or
described elsewhere in this annual report. These statements include, but are not
limited to, the statements regarding:

         -        the expected growth in the number of wireless subscribers and
                  demand for wireless services;

         -        the expected growth in the number of wireless Internet
                  subscribers;

         -        our plans to integrate our operations with those of the
                  companies that we have acquired;

         -        our plans to market our combined services to our existing
                  customers;

         -        our plans to increase our customer base;

         -        our plans to form additional strategic relationships;


                                       34
<PAGE>


         -        our plans to work with the companies with which TANTAU has had
                  strategic relationships;

         -        our plans to offer enhanced products and services;

         -        our plans to market our products and services to new industry
                  sectors; and

         -        our plans to improve our future financial performance.

         In some cases, you can identify forward-looking statements by our use
of words such as "may," "will," "should," "could," "expects," "plans,"
"intends," "anticipates," "believes," "estimates," "predicts," "potential" or
"continue" or the negative or other variations of these words, or other
comparable words or phrases.

         In addition, several of the statements set forth under the caption
"Item 7 -- Management's Discussion and Analysis of Financial Condition and
Results of Operations" are of a forward-looking nature. These statements
include, but are not limited to, the statements regarding:

         -        the future revenues that we expect to derive from TANTAU's
                  products and services, our hosting service, revenue sharing
                  arrangements and commissions on m-commerce transactions;

         -        the increased product revenue and consulting revenue that we
                  expect to receive in the future;

         -        the consequences of our shift from a fixed-fee to a variable
                  fee license model;

         -        our expectations that our cost of net revenue as a percentage
                  of revenues will decrease and that our gross margins will
                  increase;

         -        our expectations regarding our future net losses, our future
                  research and development, sales and marketing and general and
                  administrative expenses; and our future capital expenditures;

         -        our expectations regarding our future capital requirements;
                  and

         -        our expectations regarding the impact of recent accounting
                  pronouncements upon our future financial statements.

         Among the factors that could cause our actual results or events to
differ are the risks that are set forth in this document under the caption " --
Risk Factors," in particular:

         -        unanticipated trends and conditions in our industry;

         -        risks associated with our ability to compete in a variety of
                  international markets;

         -        the risk that we will not have sufficient capital to expand
                  our operations;


                                       35
<PAGE>


         -        any unanticipated costs arising from our acquisition of the
                  companies that we have acquired;

         -        any delay, inability or difficulty encountered in increasing
                  our revenues from our existing and future contracts;

         -        any adverse response of our customers, TANTAU's customers or
                  our respective employees to our acquisition of TANTAU;

         -        risks associated with our ability to efficiently integrate
                  acquired businesses;

         -        any inability to effectively develop and manage our combined
                  international operations; and

         -        risks associated with our ability to implement cost savings
                  and combined operational strategies.

         Although we believe that the expectations reflected in our
forward-looking statements are reasonable, we cannot guarantee future results,
levels of activity, performance or achievements or other future events. We are
under no duty to update any of our forward-looking statements after the date of
this report, other than as required by law. You should not place undue reliance
on forward-looking statements.


                                       36
<PAGE>



ITEM  2.   PROPERTIES

         Our principal offices are located in Toronto, Ontario and Austin,
Texas. We also have rented offices in New York, New York; San Francisco,
California; Cupertino, California; Concord, California; Chicago, Illinois;
London, U.K.; Paris, France; Sydney, Australia; Tokyo, Japan; Hong Kong and
Barbados. We believe that we will need to obtain additional facilities as we
expand our international operations, and increase the size of our organization.

         Due to our acquisition of TANTAU, we have recently expanded our offices
to include those used by TANTAU prior to the merger. TANTAU also leases offices
in Reston, Virginia; San Francisco, California; Cupertino, California; Overland
Park, Kansas; West Orange, New Jersey; Charlotte, North Carolina; Sugar Land,
Texas; St. Albans, U.K.; Friedrichsdorf, Germany; Lenzburg, Switzerland; Espoo,
Finland; Sydney, Australia; and Tokyo, Japan.


ITEM  3.   LEGAL PROCEEDINGS.

         We are not presently a party to any material legal proceedings.

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

     Not applicable.


                                       37
<PAGE>



                                     PART II

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

        MARKET PRICES OF 724 SOLUTIONS' COMMON SHARES

         Our common shares are listed on the Nasdaq National Market under the
symbol "SVNX" and on The Toronto Stock Exchange under the symbol "SVN." The
following table sets forth the high and low closing sales prices per share of
our common shares as reported on the Nasdaq National Market and The Toronto
Stock Exchange for each of the quarters during the fiscal year ending December
31, 2000.

<TABLE>
<CAPTION>

                                                   NASDAQ NATIONAL        NASDAQ NATIONAL        TORONTO STOCK        TORONTO STOCK
YEAR ENDED DECEMBER 31, 2000                        MARKET: HIGH           MARKET: LOW           EXCHANGE: HIGH       EXCHANGE: LOW
----------------------------                       ---------------        ---------------        ---------------      --------------
<S>                                                <C>                    <C>                    <C>                  <C>
First Quarter (from January 28, 2000).....                US$240.00              US$59 3/4           Cdn.$345.00          Cdn.$86.00
Second Quarter............................               US$125 3/8               US$30.00           Cdn.$181.50          Cdn.$45.50
Third Quarter.............................                US$55 3/8              US$28 1/4            Cdn.$82.50          Cdn.$42.00
Fourth Quarter............................                US$48 3/4            US$15 13/16            Cdn.$73.00          Cdn.$25.25
</TABLE>


         RECORD HOLDERS

         As of February 28, 2001, there were 289 registered holders of our
common shares, approximately 185 of which had addresses in the U.S. These record
holders owned 36,065,253, or approximately 64%, of our issued and outstanding
common shares.

         DIVIDEND POLICY

         We have never declared or paid any cash dividends on our common shares.
We currently intend to retain any future earnings to fund the development and
growth of our business and we do not anticipate paying any cash dividends in the
foreseeable future. Similarly, TANTAU has never declared a dividend on its
capital stock.

         MATERIAL UNITED STATES FEDERAL AND CANADIAN INCOME TAX CONSEQUENCES

         GENERAL

         The following discussion of material U.S. federal income tax
consequences and Canadian federal income tax consequences of ownership of 724
Solutions' common shares is included for general information purposes only and
does not purport to be a complete description of all potential tax consequences.
The discussion does not address any potential tax effects to non-U.S. Holders
(as defined below) nor do they address all potential tax effects that may be
relevant to U.S. Holders subject to special U.S. federal income or Canadian tax
treatment, including:

         -        persons who own (actually or constructively) 5% or more of
                  either the total voting power or total value of all capital
                  stock of 724 Solutions;


                                       38
<PAGE>


         -        persons subject to the alternative minimum tax;

         -        persons who are or have been residents of Canada or engaged in
                  a trade or business in Canada through a permanent
                  establishment;

         -        persons who hold their shares as part of a hedge, straddle or
                  conversion transaction;

         -        persons whose functional currency is not the U.S.  dollar;

         -        insurance companies;

         -        financial institutions;

         -        dealers in securities;

         -        traders that mark to market;

         -        tax-exempt organizations; and

         -        retirement plans.

         The following discussion does not address the effect of applicable
state, provincial, local or foreign (other than Canadian) tax laws.

         A "U.S. Holder" means a holder of shares of 724 Solutions who is (i) a
citizen or resident of the U.S., (ii) a corporation or other entity taxable as a
corporation created in or organized under the laws of the U.S. or any political
subdivision thereof, (iii) an estate the income of which is subject to U.S.
federal income tax regardless of its source or (iv) in general, a trust if a
U.S. court can exercise primary supervision over the administration of such
trust, and one or more U.S. persons have the authority to control all of the
substantial decisions of such trust. A "non-U.S. Holder" means a holder of
shares who is not a "U.S. Holder."

         MATERIAL U.S.  FEDERAL INCOME TAX CONSEQUENCES

         This summary of material U.S. federal income tax consequences is based
on the Internal Revenue Code, Treasury regulations, administrative rulings and
practice and judicial precedent, each as in effect at the date of this annual
report, all of which are subject to change. Any such change, which may or may
not be retroactive, could alter the tax consequences discussed herein. No
rulings have been or are expected to be sought from the Internal Revenue Service
concerning the tax consequences of holding common shares of 724 Solutions, and
this tax discussion as to the material U.S. federal income tax consequences will
not be binding on the Internal Revenue Service or any court. This discussion
relies on assumptions, including assumptions regarding the absence of changes in
existing facts.

         TAXATION OF DIVIDENDS.  Subject to the discussion below under "Passive
Foreign Investment Company Considerations," for U.S. federal income tax
purposes, the U.S. dollar value of any distribution made out of 724 Solutions'
current or accumulated earnings and profits as determined for


                                       39
<PAGE>


U.S. federal tax income purposes will be included in gross income by a U.S.
Holder and will be treated as foreign source dividend income (except that if
more than 50% of 724 Solutions' stock is owned by U.S. persons, a portion of any
dividends may be treated as U.S. source for purposes of calculating such
Holder's U.S. foreign tax credit). The U.S. dollar value of any distribution
received in Canadian dollars will be based on the spot exchange rate for the
date of receipt.

         If dividends paid by 724 Solutions were to exceed 724 Solutions'
current and accumulated earnings and profits as determined for U.S. federal
income tax purposes, any excess would be treated as a non-taxable return of
capital to the extent of the U.S. Holder's adjusted basis in the common shares
of 724 Solutions, and thereafter as a capital gain.

         A U.S. Holder will be required to include in income the Canadian
withholding tax paid with respect to dividends and may claim a foreign tax
credit or a deduction with respect to such tax, subject to applicable
limitations.

         TAXATION OF GAINS. Upon the sale or disposition of a common share of
724 Solutions, you will recognize gain or loss for U.S. federal income tax
purposes in an amount equal to the difference between the U.S. dollar value of
the amount realized and your adjusted tax basis in the share. Subject to the
discussion below under the heading "Passive Foreign Investment Company
Considerations," such gain or loss will generally be treated as U.S. source
capital gain or loss. If you are an individual, any such capital gain will
generally be subject to U.S. federal income tax at preferential rates if
specified minimum holding periods are met.

         PASSIVE FOREIGN INVESTMENT COMPANY CONSIDERATIONS. 724 Solutions does
not believe it will be a passive foreign investment company (a "PFIC") for the
current taxable year. In the future, the determination of 724 Solutions' PFIC
status will depend on, among other things, a valuation of 724 Solutions' assets,
including goodwill and other intangible assets. No assurance can be given that
724 Solutions will not be attributed PFIC status in future years.

         724 Solutions will be classified as a PFIC in a particular taxable year
if either 75% or more of its gross income for the taxable year is passive
income, or during the taxable year, the average percentage of the value of 724
Solutions' assets that produce or are held for the production of passive income
is at least 50%. The U.S. Internal Revenue Service has indicated that cash
balances, even if held as working capital, are considered to be assets that
produce passive income.

         If 724 Solutions were classified as a PFIC, any gain recognized by a
U.S. Holder upon the sale of common shares of 724 Solutions, or the receipt of
certain distributions, would generally be treated as ordinary income. In this
case, this income would be allocated over the period that the U.S. Holder held
724 Solutions shares and an interest charge would be imposed on the amount of
deferred tax on such income allocated to prior taxable years. If 724 Solutions
were determined to be a PFIC, however, a U.S. Holder could elect to treat his or
her shares as an interest in a qualified electing fund (a "QEF Election"), in
which case the U.S. Holder would be required to include in income annually his
or her proportionate share of 724 Solutions' income and net capital gain in
years in which 724 Solutions was a PFIC, regardless of whether such income or
gain was actually distribued, but any gain subsequently recognized upon the sale
by such U.S. Holder of the shares would generally be taxed as capital gain.
Alternatively, a U.S. Holder could make an election (a "Mark-to-Market
Election"), pursuant to which the U.S. Holder would be required to include as
ordinary income annually the excess of the fair market value of the


                                       40
<PAGE>


724 Solutions shares over the U.S. Holder's basis therein. If a U.S. Holder
makes a Mark-to-Market Election, then any gain recognized upon the sale by such
U.S. Holder of his or her common shares of 724 Solutions generally would be
taxed as ordinary income in the year of sale.

         You should consult with your own tax advisors regarding your
eligibility for, and the manner and advisability of making, the QEF Election or
Mark-to-Market Election if 724 Solutions is treated as a PFIC.

         U.S. BACKUP WITHHOLDING AND INFORMATION REPORTING. A holder of 724
Solutions common shares may, under certain circumstances, be subject to certain
information reporting requirements and backup withholding tax at the rate of 31%
with respect to dividends paid on the 724 Solutions common shares, or the
proceeds of sale of the 724 Solutions common shares, unless such holder (i) is a
corporation or comes within certain other exempt categories, and when required,
demonstrates this fact or (ii) provides a correct taxpayer identification number
("T.I.N."), certifies that such holder is not subject to backup withholding and
otherwise complies with applicable requirements of the backup withholding rules.
A holder of 724 Solutions common shares who does not provide a correct T.I.N.
may be subject to penalties imposed by the U.S. Internal Revenue Service. Any
amount withheld under backup withholding rules generally will be creditable
against the holder's U.S. federal income tax liability and a holder may obtain a
refund of any excess amounts withheld under the backup withholding rules by
filing the appropriate claim for a refund with the IRS.

         THIS TAX DISCUSSION DOES NOT PURPORT TO CONTAIN A COMPLETE ANALYSIS OR
DISCUSSION OF ALL POTENTIAL TAX CONSIDERATIONS RELEVANT TO THE OWNERSHIP OF 724
SOLUTIONS COMMON SHARES. THUS, 724 SOLUTIONS' SHAREHOLDERS ARE URGED TO CONSULT
THEIR OWN TAX ADVISORS AS TO THE SPECIFIC TAX CONSEQUENCES TO THEM OF THE
OWNERSHIP OF 724 SOLUTIONS COMMON SHARES, INCLUDING TAX RETURN REPORTING
REQUIREMENTS, THE APPLICABILITY AND EFFECT OF FEDERAL, STATE, LOCAL, FOREIGN AND
OTHER APPLICABLE TAX LAWS AND THE EFFECT OF ANY PROPOSED CHANGES IN THE TAX
LAWS. STOCKHOLDERS THAT ARE NOT U.S. HOLDERS SHOULD CONSULT THEIR TAX ADVISOR
REGARDING, AMONG OTHER THINGS, THE CONSEQUENCES OF INVESTING IN 724 SOLUTIONS'
COMMON SHARES UNDER THE FOREIGN INVESTMENT IN REAL PROPERTY TAX ACT, INCLUDING
ANY REPORTING REQUIREMENTS THAT MAY APPLY.

         MATERIAL CANADIAN INCOME TAX CONSEQUENCES

         The following discussion is applicable only to U.S. Holders who are
treated as residents of the U.S. under the provisions of the Convention between
Canada and the United States of America with Respect to Taxes on Income and
Capital Gains, who will hold their 724 Solutions common shares as capital
property and who will deal at arm's length with 724 Solutions. The discussion is
intended only as a general guide to the position under Canadian tax law and will
not apply to certain classes of investors, such as "financial institutions" as
defined in Section 142.2 of the Canadian Income Tax Act. If you are in any doubt
as to your tax position, you should consult with your tax advisor.

         CANADIAN TAXATION OF CAPITAL GAINS. A U.S. Holder will not be subject
to Canadian income taxation on the disposal of 724 Solutions common shares,
provided the value of the 724 Solutions shares at the time of disposal is not
derived principally from real property located in Canada. 724 Solutions does not
believe the value of its common shares currently is derived principally from
real property located in Canada and believes that it is unlikely for the
foreseeable future that the value of its common shares will be derived
principally from real property located in Canada.


                                       41
<PAGE>


         CANADIAN TAXATION OF DIVIDENDS. Under the Convention between Canada and
the United States of America with Respect to Taxes on Income and Capital Gains,
dividends paid by 724 Solutions to U.S. Holders will be subject to Canadian
withholding tax at the rate of 15% (except that dividends paid to a corporate
shareholder who owns at least 10% of the voting shares of 724 Solutions will be
subject to Canadian withholding tax at the rate of 5%).

         THE FOREGOING SUMMARY OF MATERIAL U.S. AND CANADIAN TAX CONSEQUENCES IS
BASED ON THE CONVENTION BETWEEN CANADA AND THE UNITED STATES OF AMERICA WITH
RESPECT TO TAXES ON INCOME AND CAPITAL GAINS, U.S. LAW, CANADIAN LAW, AND
REGULATIONS, ADMINISTRATIVE RULINGS AND PRACTICES OF THE U.S. AND CANADA, ALL AS
THEY EXIST AS OF THE DATE OF THIS INFORMATION STATEMENT/PROSPECTUS. THIS SUMMARY
DOES NOT DISCUSS ALL ASPECTS THAT MAY BE RELEVANT TO ANY PARTICULAR INVESTORS IN
LIGHT OF THEIR PARTICULAR CIRCUMSTANCES. INVESTORS ARE URGED TO CONSULT THEIR
OWN TAX ADVISORS WITH RESPECT TO THEIR OWN PARTICULAR CIRCUMSTANCES AND WITH
RESPECT TO THE SPECIFIC TAX CONSEQUENCES OF OWNERSHIP OF 724 SOLUTIONS COMMON
SHARES, INCLUDING THE APPLICABILITY AND EFFECT OF STATE, PROVINCIAL, LOCAL AND
FOREIGN TAX LAWS, ESTATE TAX LAWS AND PROPOSED CHANGES IN APPLICABLE LAWS.

         RECENT SALES OF UNREGISTERED SECURITIES

         Since our inception, we have issued our securities in the following
unregistered offerings:

         1.       At inception, July 28, 1997, we issued 200 common shares for
                  an aggregate subscription price of $1,000.

         2.       Between inception of our corporation and December 31, 1997, we
                  issued 3,999,800 common shares for an aggregate subscription
                  price of $1.4 million.

         3.       Between January 1, 1998 and December 31, 1998, we issued
                  3,428,570 common shares for an aggregate subscription price of
                  $4.56 million.

         4.       Between January 1, 1998 and December 31, 1998, we issued
                  4,000,000 common shares for an aggregate subscription price of
                  approximately $1.3 million upon the exercise of stock options
                  held by our investors.

         5.       In June 1999, we issued 541,790 common shares for an aggregate
                  subscription price of $2.0 million.

         6.       In August 1999, we issued 950,000 common shares for an
                  aggregate subscription price of $3.6 million.

         7.       In August 1999, we issued 6,400,000 common shares for an
                  aggregate subscription price of $24.5 million.

         8.       In October 1999, we issued 5,450,000 common shares for an
                  aggregate subscription price of $20.8 million, 2,658,210
                  common shares for an aggregate subscription price of $10.2
                  million, and 1,973,856 common shares for an aggregate
                  subscription price of $10.0 million.


                                       42
<PAGE>


         9.       In June 2000, in connection with our acquisition of Ezlogin,
                  we issued 1,003,594 common shares to the former shareholders
                  of Ezlogin, and assumed employee stock options to purchase our
                  common shares.

         10.      In September 2000, in connection with our acquisition of
                  Spyonit, we issued 1,041,616 common shares to the former
                  shareholders of Spyonit.

         11.      In the fiscal year ended December 31, 2000, we issued an
                  aggregate of 765,339 common shares upon the exercise of stock
                  options for an aggregate price of $627,000.

         12.      In March 2001, we issued 1,016,986 of our common shares to
                  Webhelp Inc., a developer of online communication
                  solutions, in exchange for rights to Webhelp's Web
                  Application Event Framework technology and shares of
                  Webhelp's preferred stock.

         Each of these issuances occurred in connection with transactions not
subject to the registration requirements of the Securities Act of 1933, as
amended, including pursuant to the provisions of Regulation D and Regulation S
thereunder. Prior to our initial public offering in the first quarter of 2000,
our common shares were issued primarily to our founder, Gregory Wolfond and
entities under his control, our initial financial institution customers and
several financial investors.

         USE OF PROCEEDS FROM INITIAL PUBLIC OFFERING

         In February 2000, we completed our initial public offering, pursuant to
a Registration Statement on Form F-1 (File No. 333-90143), which was declared
effective by the Securities and Exchange Commission on January 27, 2000, on
which date the offering commenced. All of the common shares registered pursuant
to the registration statement were sold by us.

         The managing underwriters of the U.S.  syndicate were Credit Suisse
First Boston Corporation, FleetBoston Robertson Stephens Inc. and Thomas Weisel
Partners LLC. The managing underwriters of the Canadian syndicate were Nesbitt
Burns Inc., RBC Dominion Securities Inc. and Credit Suisse First Boston
Securities Canada Inc.

         6,900,000 of our common shares were registered in the offering. The
aggregate price of these shares was $179.4 million. We incurred expenses of
approximately $2 million in connection with the offering, together with
underwriting commissions of $12.6 million. Our expenses in the offering
consisted of payments to parties other than its directors, officers, their
associates or holders of 10% of our common shares, except that Nesbitt Burns
Inc. is an affiliate of Bank of Montreal, of which Lloyd Darlington, one of our
directors, served as Chief Technology Officer and General Manager. The aggregate
net proceeds of the offering were $166.9 million.

         We have invested a portion of the net proceeds from the offering in
short-term, interest-bearing investment grade securities, and we have deposited
a portion of these proceeds in our accounts with financial institutions. Between
the time of the offering and December 31, 2000, we used a portion of these
proceeds, together with our cash on hand prior to the offering and the cash that
we generated from our operations, for general corporate purposes, including the
development of our hosting service and research and development expenses, as
well as the cash portion of the purchase price for our acquisitions of YRLess
and Spyonit.


                                       43
<PAGE>


ITEM 6.   SELECTED FINANCIAL DATA.

         The selected consolidated statement of operations data for the years
ended December 31, 2000, 1999 and 1998 and the balance sheet data as of December
31, 2000 and 1999 have been derived from our audited financial statements, which
are included elsewhere in this report. The selected statement of operations data
for the period from July 28, 1997 (inception) to December 31, 1997 and the
balance sheet data as of December 31, 1998 and 1997 have been derived from other
audited financial statements not included in this report. These operating
results are not necessarily indicative of results for any future period. You
should not rely on them to predict our future performance. The selected
consolidated financial data should be read in conjunction with the Consolidated
Financial Statements and the Notes thereto and other financial information
beginning on page F-1 in this report, as well as the information set forth under
"Item 7-Management's Discussion and Analysis of Financial Condition and Results
of Operations."

<TABLE>
<CAPTION>


                                                                                                                    JULY 28, 1997
                                                                  YEARS ENDED DECEMBER 31,                         (INCEPTION) TO
                                                                2000               1999             1998         DECEMBER 31, 1997
                                                    -----------------------------------------------------      --------------------
                                                      (In thousands of U.S. dollars, except shares and
                                                                     per share amounts)
<S>                                                       <C>                  <C>               <C>                      <C>
Consolidated Statements of Operations Data:

Revenue:
   Product:                                               $   14,191           $  1,697          $ 1,678                  $       -
   Less stock-based compensation related to
         software development                                   (248)            (1,644)          (1,395)                         -
   Service                                                     7,303              1,169              208                           -
                                                          ----------          ---------          -------                  ---------
Net revenue                                               $   21,246           $  1,222           $  491                  $       -

Operating expenses (1):

   Cost of net revenue                                        13,213              1,858               82                          0
   Research and development                                   32,624              7,255             2194                         44
   Sales and marketing                                        13,015              2,598              405                         39
   General and administrative                                 15,398              3,634              528                         82
   Depreciation                                                3,946                752               88                          -
   Amortization of intangible assets                          18,843                  -                -                          -
                                                          ----------          ---------          -------                  ---------
   Total operating expenses                               $   97,039           $ 16,097          $ 3,297                 $      165
                                                          ----------          ---------          -------                  ---------
Loss from operations                                         (75,793)          (14,875)          (2,806)                       (165)

Interest income                                               11,582             1,044              107                          10

Equity in loss of affiliate                                     (943)                -                -                           -

Dilution gain                                                  1,890                 -                -                           -

</TABLE>


                                       44
<PAGE>
<TABLE>
<CAPTION>

<S>                                                       <C>                  <C>               <C>                      <C>
                                                          ----------          ---------          -------                  ---------
Loss for the year                                         $  (63,264)          $(13,831)        $ (2,699)                $     (155)
                                                          ----------          ---------          -------                  ---------
Basic and diluted loss per share                          $    (1.71)          $  (0.82)        $  (0.47)               $     (0.06)

Weighted-average number of shares used in                     36,963             16,887            5,784                      2,752
computing basic and diluted loss per share (in
thousands)

(1) Included in the operating expenses are
    stock-based compensation expenses in the
    following amounts                                      $   6,415            $   165           $  181                  $       -
                                                          ----------          ---------          -------                  ---------
                                                          ----------          ---------          -------                  ---------
</TABLE>


<TABLE>
<CAPTION>


                                                                           AS OF DECEMBER 31,
                                                          2000                  1999                 1998                1997
                                            ----------------------------------------------------------------------------------
<S>                                                 <C>                    <C>                   <C>                 <C>
Consolidated Balance Sheet Data:

Cash and cash equivalents                           $   73,898             $  65,287             $  2,976            $  1,299
Short-term investments                                  92,726                     -                    -                  --
Working capital                                        149,782                58,805                2,333               1,267
Intangible and other assets                            102,759                 1,100                    -                  --
Total assets                                           287,316                73,242                3,892               1,321
Total shareholders' equity                             262,263                62,168                3,193               1,288
</TABLE>


                                       45
<PAGE>



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

         The following discussion and analysis should be read together with our
audited consolidated financial statements and the accompanying notes appearing
elsewhere in this report. All financial information is presented in U.S. dollars
unless otherwise noted.

         As described in Part I - Business - Information Regarding
Forward-Looking Statements, some of the statements set forth in this section are
forward-looking statements relating to our future results of operations. Our
actual results may vary from the results anticipated by these statements. For a
description of the risks that may cause our future performance to differ
adversely from those described below, please read carefully the information set
forth under Part I - Business - Risk Factors.

         OVERVIEW

         We were established in July 1997 to conceive, design and distribute
Internet infrastructure software solutions that enable financial institutions to
deliver financial information and services using a broad range of
Internet-enabled devices. For the period from July 1997 to May 1999, we were in
a development phase, conducting research and developing our products. In May
1999, we launched our initial product, for use in connection with financial
services, on a trial basis with a limited number of customers of the Bank of
Montreal. During the trial, these customers were able to access banking and
brokerage services and lifestyle content, including news, stock quotes, weather,
lottery results and horoscopes, through Internet-enabled devices, specifically
Palm Pilot connected organizers and mobile phones. This trial was completed in
September 1999. During the period from May 1999 through December 1999, we filled
key management positions in our sales and marketing departments, attracted Bank
of America, Citigroup and Sonera Corporation as investors, entered into license
agreements with Bank of America, Wells Fargo and Citigroup, and continued to
develop our product. Our headcount has grown to 481 employees as of December 31,
2000. After giving effect to our January 2001 acquisition of TANTAU Software
Inc., we had 710 employees as of January 31, 2001.

         RECENT ACQUISITIONS

         YRLESS. In March 2000, we acquired Internet messaging gateway developer
YRLess Internet Corporation of Oakville, Ontario. YRLess developed the YMG-2000,
a scaleable, platform-independent carrier-grade short messaging service gateway
for wireless carriers. Prior to the acquisition, YRLess had licensed its
technology to network operators Bell Mobility and Telus Mobility. We plan to use
this gateway to enhance our ability to quickly connect to carriers. In this
transaction, we paid total cash consideration of approximately $1.3 million,
including acquisition costs of approximately $34,000. In addition, we are
committed to pay approximately $4.4 million over three years, commencing March
2001. Of the $4.4 million commitment, $2.6 million is contingent on the former
shareholders of YRLess remaining as our employees. This amount vests over three
years as services are being performed by these former shareholders. This amount
is required to be paid in our common shares based upon their market value at the
time of issuance, unless we agree otherwise with one or more of the former
shareholders, or under other limited circumstances. We intend to settle this
obligation in shares.

         EZLOGIN. In June 2000, we completed our acquisition of Ezlogin, a
leading provider of Internet software infrastructure tools for user directed
personalization. Using the technologies that we acquired in


                                       46
<PAGE>


this transaction, we introduced LiveClips, a comprehensive aggregation tool
designed to enable our customers to provide consumers with a consolidated view
of their online accounts and other items of personal interest. LiveClips also
enables consumers to select other Internet content for display on their
personalized Web pages. In this transaction, we issued 1,003,594 of our common
shares at the closing. In addition, we assumed the options that were outstanding
under Ezlogin's stock option plan, and, at the closing, these options were
converted into options to purchase 91,796 of our common shares.

         SPYONIT. In September 2000, we completed our acquisition of
Chicago-based Spyonit. Spyonit's intelligent alerting infrastructure software
monitors the Internet for items of interest such as stock prices, product sales
or auction bids. When appropriate content is detected, the Spyonit system
delivers smart notifications to the user through a variety of Internet-access
devices. Spyonit allows us to broaden the range of alert services that the 724
Solutions platform supports, complements our LiveClips aggregation tool, and
adds an attractive standalone offering to our product portfolio. In this
transaction, the purchase price of approximately $40.0 million was satisfied by
the issuance of 1,041,616 of our common shares and $2.0 million in cash. As part
of the terms of the purchase, up to 137,062 of the total common shares issued
are subject to repurchase at a nominal value if the vendors do not remain our
employees through September 2003.

         TANTAU SOFTWARE. In January 2001, we completed our acquisition of
Austin-based TANTAU Software. TANTAU develops and designs software and related
services that enable enterprises to conduct high-volume, secure, m-commerce
transactions. We believe that TANTAU's infrastructure will complement our 724
Solutions applications. By integrating TANTAU's platform with our 724 Solutions
platform and applications, we believe that we will be able to offer enhanced
services to our existing and future customers that require a strong
enterprise-wide solution. As consideration for the acquisition, we issued an
aggregate of 17,091,679 of our common shares and assumed options originally
issued by TANTAU, which, as of the closing date, became exercisable to purchase
an additional 3,539,245 of our common shares. The calculated acquisition price
is estimated to be approximately $407.7 million, including acquisition costs of
$9.4 million. In addition, we will be recognizing approximately $53.3 million in
deferred stock-based compensation relating to the assumption of TANTAU's stock
option plan. The acquisition will be accounted for by the purchase method.

         For additional information regarding our accounting for these
acquisitions, please see Notes 3 and 14 to our consolidated financial
statements.

         SOURCES OF REVENUE

         Our primary sources of revenue are revenues generated under our license
agreements and services revenue with respect to our 724 Solutions platform.
Historically, our services revenue has consisted primarily of implementation,
customer service and maintenance fees. In the future, we expect our services
revenue to also include amounts derived from revenue sharing arrangements and
commissions on m-commerce transactions.

         We have recently commenced providing hosting services to our customers;
revenues from these services are included in our services revenue. We expect to
increase our hosting revenue once customers have commenced signing up
subscribers to use services based on our products and the services have begun to
operate from our data center. As our hosting services expand, we believe that
the portion of our revenues derived from hosting and maintenance services will
increase in future periods.


                                       47
<PAGE>


         LICENSE FEES

         Our two initial license agreements were with Bank of Montreal and Bank
of America, and used a fixed fee license model. Under this model, a customer
pays us a fixed annual license fee in whole or part upon execution of the
license agreement, and/or periodically thereafter during the term of the
agreement. The use of this model helped provide the initial cash flow that was
necessary to fund our development and start-up costs. Our initial fixed fee
license contracts contained provisions that required us to deliver to our
customers all of the technology that we made generally available to our
customers during the term of the agreement. As such, these fees have been
recognized using the subscription accounting method commencing with the delivery
of the first product in the contract.

         After raising additional capital in August 1999 through the issuance of
common shares, we had the financial resources to forego this fixed fee license
model in favor of a variable fee license model. Our agreements with several of
our customers, including Citigroup, Wells Fargo, Wachovia and Claritybank.com,
utilize this model. The variable fee license model is based on a per user fee.
We expect that the transition of our revenue model from fixed fee to variable
fee will have two significant consequences: first, we will no longer receive the
primary portion of our license fees as initial payments under our customer
agreements; and second, we expect our revenue stream will vary with the number
of our customers' end users. We expect that these variable fees will be subject
to a minimum quarterly payment, and expect to provide incentive discounts to our
customers based on the number of their customers using our platform. To date, we
have not received revenues from the user fees in excess of any minimum payments.
However, over time, we expect these fees to become a significant portion of our
revenue once our customers roll out services based upon our platform to a
substantial number of consumers.

         Under the variable fee license model, we recognize revenue when we have
executed an agreement with a customer, when delivery and acceptance have
occurred, and when the collection of the related receivable is deemed probable.
Revenue from the minimum payments is recognized on a monthly basis. Revenue
associated with user fees in excess of any minimum payments will be recognized
on a quarterly basis when the amount is determined.

         We expect that in our future contracts that use the variable fee
license model, the customer will pay us a license fee consisting of an up front
payment upon execution of the contract and an ongoing variable fee based on the
number of users. The monthly user fees may be subject to minimum quarterly
payments. We will allocate revenue to the software based on vendor specific
objective evidence of fair value. The portion of revenue that will be allocated
to the software will be recognized as revenue when delivery and acceptance have
occurred and when the collection of any related receivable is deemed probable.
As a result, we anticipate that the initial payments under these contracts will
tend to be recognized by revenue either in the quarter in which the contract is
executed or shortly thereafter. Revenue from the minimum payments will be
recognized on a monthly basis. Revenue associated with user fees in excess of
any minimum payments will be recognized on a quarterly basis when the amount is
determined.

         In fiscal 2000, we entered into a number of reseller agreements. While
each arrangement can be different, the reseller generally pays either a
non-refundable licensing fee for our software and/or a royalty fee based on the
related number of users. We recognize revenue associated with a non-refundable
license fee upon the execution of the contract when delivery and acceptance have
occurred, no significant


                                       48
<PAGE>


performance requirements are remaining, and when the collection of the related
receivable is deemed probable. Additional license fees based on the number of
users, are recognized monthly.

         IMPLEMENTATION AND CUSTOMER SERVICE FEES

         Revenue from implementation and customer services includes fees for
implementation of our product offerings, consulting and training services. We
currently rely, and expect to continue to rely, upon a combination of our own
resources and third-party consulting organizations to deliver these services to
our customers. Customers are charged a fee based on time and expenses. Revenue
from implementation and customer service fees is recognized as the services are
performed.

         MAINTENANCE FEES

         We receive revenue from maintaining and servicing our products for
customers. The maintenance fee is typically equal to a specified percentage of
the customer's license fee. If associated with the fixed fee license model, the
maintenance revenues received will be deferred and recognized on a straight-line
basis over the contract period. When associated with the variable fee license
model, any minimum payments will be recognized on a monthly basis. Maintenance
revenue in excess of any minimum payments will be recognized on a quarterly
basis when the amount is determined.

         HOSTING FEES

         Some of our existing customers require us, and we expect that many of
our potential customers would require us, to host and manage the server
infrastructure and software platform as part of the implementation of our
products. In fiscal 2000, we commenced providing this service to our customers.
We typically charge a customer a one-time setup fee plus a per monthly flat fee
or a monthly fee based on the number of users. The set-up fees are recognized
ratably over the term of the hosting arrangement.

         REVENUE DERIVED FROM TANTAU SOFTWARE

         We expect to derive additional license and professional services
revenue from our purchase of TANTAU in January 2001. TANTAU's software license
revenue is generated principally from the licensing of its products, including
the Wireless Internet Platform, directly to enterprises and indirectly through
value-added resellers and original equipment manufacturers. Now that we have
acquired TANTAU, we anticipate that some customers will seek to purchase the
TANTAU platform as a stand-alone product, while other customers will purchase
the integrated 724 Solutions/TANTAU product offerings.

         TANTAU uses a per seat model, in which the licensee pays a one-time
license fee for a fixed number of installed copies in exchange for a license
with a perpetual term. The licensed software is sold in increments as the user
expands its use, and we recognize revenue under these contracts when the
software is shipped.

         TANTAU licenses its products to end users primarily under perpetual
licenses. TANTAU's standard perpetual license agreement includes post-contract
customer support for a specified period of time. Thereafter, post-contract
customer support can be renewed annually for an additional fee. TANTAU uses the
post-contract customer support renewal rate as evidence of the fair value of
this service. Since post-contract customer support is the only undelivered
element in these arrangements,


                                       49
<PAGE>


revenue is recognized using the residual method. The fair value of post-contract
customer support is recognized over the term of the support obligation and the
remaining portion of the arrangement fee is recognized after the execution of a
license agreement and the delivery of the product to the customer, provided that
there are no uncertainties surrounding the product acceptance, fees are fixed
and determinable, collectibility is probable, and TANTAU has no remaining
obligations other than the delivery of the support.

         TANTAU enters into arrangements with original equipment manufacturers
(OEMs) and resellers. Under these arrangements, TANTAU grants the OEM or
reseller rights to sell products which incorporate TANTAU's products for a
specified period of time. TANTAU's primary obligation to the OEM or reseller is
to deliver a product master and any bug fixes under warranty provisions in order
to maintain the product master in accordance with published specifications. In
some arrangements, TANTAU receives prepaid, non-refundable minimum license fees
from the OEM or reseller. Because TANTAU's primary obligations to an OEM or
reseller are fulfilled upon delivery of the product master, TANTAU recognizes
the prepaid, non-refundable minimum license fees as revenue as the fees become
due and payable or upon delivery of the product master, whichever is later.

         TANTAU's professional services revenue consists primarily of fees for
training, consulting, software maintenance and support. TANTAU currently relies,
and expects to continue to rely, on a combination of its internal professional
services organization and third-party consulting firms to provide training and
consulting services to its customers. Fees for these services are charged on a
time-and-materials basis and are recognized as the services are performed.
Maintenance fees are derived under annual maintenance agreements with customers,
which enable customers to receive service and support from TANTAU as well as
product updates. Maintenance fees typically are set as a specified percentage of
the customer's license fee and paid in advance for the maintenance period.
Revenues under maintenance agreements are deferred and recognized on a
straight-line basis over the contract period.

         RESULTS OF OPERATIONS

         Our consolidated financial statements are prepared in accordance with
Canadian generally accepted accounting principles. These principles conform in
all material respects with U.S. generally accepted accounting principles, except
as disclosed in note 14 to our consolidated financial statements. We completed
our acquisition of TANTAU in January 2001. As a result, the results described
here for our prior fiscal years do not include the results of operations of
TANTAU and its subsidiaries.

         YEAR ENDED DECEMBER 31, 2000 COMPARED TO YEAR ENDED DECEMBER 31, 1999

         Our revenue, before the offset of stock-based compensation, increased
to $21.5 million for the year ended December 31, 2000 from $2.9 million in
December 31, 1999.

         PRODUCT REVENUE

         Our product revenue, before the offset of stock-based compensation,
increased to $14.2 million in 2000 compared to $1.7 million in 1999.
Substantially all of the increase resulted from the delivery of our 724
Solutions platform in accordance with the terms in our customer contracts
entered into in 1999. We expect that our product revenue will increase as we
sell our products to new customers and our current customers, including the
customers that we added in 2000, begin to deliver services based upon


                                       50
<PAGE>


our products to end users. The mix of our product revenue will change as we
benefit from the sales of TANTAU's software.

         SERVICE REVENUE

         Our service revenue increased to $7.3 million from $1.2 million for the
twelve months ended December 31, 2000 and 1999, respectively. Most of the
increase resulted from our customers seeking additional services to help them
deploy our 724 Solutions platform and applications and other products. In
addition, we received revenue for consulting work related to the implementation
and customization of our LiveClips product, which we have made available as a
result of our June 2000 acquisition of Ezlogin.

         As product revenue grows, we expect that services revenue from
consulting will increase as our customers seek additional services to help them
deploy our applications. We also anticipate that services revenue will increase
as more of our customers subscribe for our hosting service.

         STOCK-BASED COMPENSATION RELATED TO SOFTWARE DEVELOPMENT REVENUE

         Under our subscription agreement with Bank of Montreal (BMO) dated
April 30, 1998, we granted an option to BMO to subscribe for 2,428,570 common
shares for Cdn. $1.0 million. This option was only exercisable in the event that
BMO extended its technology license agreement for a second year and paid the
second year's license fee. In October 1998, following BMO's extension of the
license agreement, BMO exercised the option. On the date of exercise, the fair
value of the 2,428,570 common shares was determined to be Cdn. $6.1 million,
resulting in a stock-based compensation charge related to software development
revenue of Cdn. $5.1 million, or U.S. $3.3 million. This stock-based
compensation was attributed to our software development revenue over the term of
the agreement in proportion to the revenue recognized in the first and second
years. Stock-based compensation related to software development revenue
decreased to $248,000 for the twelve months ended December 31, 2000 from $1.6
million for the twelve months ended December 31, 1999. The decrease resulted
from the fact that the second year of this agreement ended in the first quarter
of fiscal 2000. This deferred stock-based compensation charge has now been fully
expensed.

         OPERATING EXPENSES

         COST OF NET REVENUE

         Cost of net revenue consists primarily of personnel costs associated
with customer support, training, implementation, consulting and hosting
services, as well as amounts paid to third-party consulting firms for those
services and an allocation of expenses for our facilities and administration. It
also includes software licensing expenses paid for integration of third-party
software into our products.

         Cost of net revenue was $13.2 million for the year ended December 31,
2000 compared to $1.9 million for the year ended December 31, 1999. Most of the
increase was due to salary and consulting costs as we significantly increased
our implementation and customer services personnel and third-party consulting
firms to support our customers' deployment of our 724 Solutions platform, and as
we incurred startup and implementation costs required to establish our hosting
infrastructure. Included in cost of net revenues is also a non-cash charge of
$653,000 and $19,000 for stock-based compensation for 2000 and 1999,
respectively.


                                       51
<PAGE>


         While we expect cost of net revenue to increase in the near future as
we expand our customer services and hosting service personnel and establish
hosting centers worldwide, we expect that our cost of net revenue as a
percentage of revenues will decrease and our gross margin will increase. We are
seeking to utilize the personnel and infrastructure that we have built in 1999
and 2000, and the experience we have gained in enabling customers to deploy our
products, to reduce the per customer costs that we incur in driving the adoption
and implementation of our platform. In addition, we believe that the acquisition
of TANTAU will help us increase our gross margins, as TANTAU mainly sells
licenses which generally have relatively high margins.

         RESEARCH AND DEVELOPMENT

         Research and development expenses include the compensation of software
development teams working on the continuing enhancement of our products as well
as our quality assurance and testing activities. These expenses also include
independent contractors and consultants, software licensing expenses, and
allocated operating expenses.

         Research and development expenses increased to $32.6 million for the
year ended December 31, 2000 compared to $7.3 million for the same period in
1999. The increase from the prior year was attributed to the expansion of the
functionality of our platform and costs associated with integrating Ezlogin and
Spyonit and other acquired technology, as well as the continued development of
our LiveClips and alerts products and the inclusion of a non-cash, stock-based
compensation charge of $3.7 million in the twelve months ended December 31,
2000. We anticipate that our research and development expenses will increase in
the future as we continue to expand the functionality of our platform and
enhance the technologies that we purchased in connection with our acquisitions
of YRLess, Ezlogin, Spyonit and TANTAU. We expect that our research and
development expenses will decrease as a percentage of revenue in fiscal 2001 as
we begin to leverage the technology that was previously developed and as we
further benefit from our previous acquisitions.

         SALES AND MARKETING

         Sales and marketing expenses include compensation of sales and
marketing personnel, public relations and advertising, trade shows, marketing
materials and allocated operating expenses.

         Sales and marketing expenses were $13.0 million in 2000 compared to
$2.6 million in 1999. These costs increased primarily because in fiscal 2000 we
hired additional sales personnel to manage our relationships with our major
customers and to expand our business both in North America and worldwide. In
addition, in 2000, we opened sales offices in Tokyo and Sydney to establish our
presence in the Asia Pacific region and incurred fees associated with marketing
programs designed to build brand awareness. We anticipate that our sales and
marketing expenses will increase as we continue to attract customers worldwide,
expand our reach to other market segments and increase our efforts to sell our
expanding suite of products. However, as a result of our acquisition of TANTAU,
which has built a sales and marketing infrastructure in Europe, a portion of the
amounts that we would have otherwise expended to build our presence in Europe
may be allocated to other geographic markets or to other corporate purposes.


                                       52
<PAGE>


         GENERAL AND ADMINISTRATIVE

         General and administrative expenses include salaries and benefits for
corporate personnel and other general and administrative expenses such as
professional fees, facilities, travel and professional consulting costs. Our
corporate staff includes several of our executive officers and our business
development, financial planning and control, legal, human resources and
corporate administration staff.

         Our general and administrative expenses increased to $15.4 million in
2000 from $3.6 million in 1999. The increase in general and administrative
expenses reflected our continued investment in increased staffing and related
expenses for the enhancement of the international infrastructure necessary to
support our growing business. The remainder of the increase was due to a
non-cash charge for stock-based compensation of $1.5 million and integration and
professional fees related to our acquisitions and corporate development
activities. We expect that our general and administrative expenses will increase
marginally due to the growth of our company and the acquisition of TANTAU.
However, as percentage of revenue, we expect these expenses to decrease as we
utilize the infrastructure that we built in 2000.

         DEPRECIATION AND AMORTIZATION

         Depreciation expense increased to $3.9 million in 2000 compared to
$752,000 in 1999. The increase reflects the capital spending in computer
hardware, office furniture and leasehold improvements at our Canadian facilities
to support the increase in the number of personnel. Additional software
development tools used for research and development and computer hardware
purchased for our hosting facilities accounted for the remainder of the
increase.

         Amortization expense increased to $18.8 million in 2000 from nil in
1999. The increase was due to the goodwill and acquired intangibles relating to
the Ezlogin acquisition completed in June 2000 and the Spyonit acquisition
completed in September 2000. We are amortizing goodwill related to the Ezlogin
and Spyonit acquisitions over 24 months and 60 months, respectively. We have
hired an independent third party appraiser to assist in the determination of the
value of the goodwill and the other intangibles that we acquired in connection
with our acquisition of TANTAU. Upon completion of this appraisal, we will
determine the amount of the amortization charges that we will need to record as
a result of this acquisition, and the period of time over which we will do so.

         STOCK BASED COMPENSATION RELATED TO STOCK OPTIONS

         Stock-based compensation has been allocated to the operating expense
line items based on the nature of the services provided by the grantee.
Stock-based compensation was $6.4 million for the twelve months ended December
31, 2000 compared to $165,000 for the twelve months ended December 31, 1999.
Stock-based compensation mainly represents the difference between the exercise
prices of options granted to acquire our common shares and the deemed fair
market value, for financial reporting purposes, of our common shares on their
respective grant dates. This stock-based compensation is being amortized on a
straight-line basis over the vesting periods of these options, which is
generally three years. The increases are largely attributed to the amortization
of deferred stock-based compensation related to options that were granted
between October 1, 1999 and March 31, 2000. Stock-based compensation also
includes accrued stock consideration related to the YRLess acquisition. See
"Recent Acquisitions" and Note 3(a) of our consolidated financial statements.


                                       53
<PAGE>


         A large percentage of our outstanding options have exercise prices that
are significantly higher than the current prices at which our common shares
trade on the Nasdaq National Market and The Toronto Stock Exchange. Although we
have not yet determined how we will address this issue, members of our
management team are currently considering a variety of strategies. These
strategies include issuing additional options, lowering the exercise prices of
our outstanding options, issuing additional options to personnel who agree to
rescind all or a portion of their options, and/or paying additional cash
compensation to our personnel. We may undertake a combination of these
strategies, or develop new plans for compensating our personnel. Some of these
strategies could require us to record very large cash or non-cash compensation
expenses. However, because we have not yet determined the strategy or strategies
that we will pursue, we cannot estimate at this time the precise impact that
these actions will have on our financial condition and results of operations.


         INTEREST INCOME

         Interest income increased to $11.6 million for the year ended December
31, 2000 from $1.0 million for the twelve months ended December 31, 1999.
Interest was derived from cash and cash equivalent balances and short-term
investments, representing primarily the unused portion of the proceeds from our
issuances of common shares, including, in particular, the proceeds from our
initial public offering in the first quarter of 2000.

         EQUITY IN LOSSES OF AFFILIATE

         Our relative ownership in Maptuit decreased from 33.4% in March 2000 to
24.9% in December 2000. This decrease is due to the additional financing that
Maptuit arranged with other investors. Our investment in Maptuit is accounted
for using the equity method. In fiscal 2000, we recognized a net gain of
$947,000, including a dilution gain of $1.9 million, as a result of Maptuit's
additional financing, offset by our share of Maptuit's fiscal 2000 losses of
$943,000.

         NET LOSS

         We recorded a net loss of $63.3 million for the year ended December 31,
2000 compared to a net loss of $13.8 million for the year ended December 31,
1999. Our loss increased as we invested heavily in building our infrastructure.
In particular, our research and development expenses and our sales and marketing
expenses increased to meet required product delivery schedules and to gain
market share. In 2001, we expect our net loss to continue to increase as we
expand our hosting services and continue to invest in developing our products.
Net loss will also increase due to the non-cash charges relating to amortization
of intangibles arising from our acquisition of Ezlogin and Spyonit, which we
purchased in 2000, and TANTAU, which we purchased in 2001.

         YEAR ENDED DECEMBER 31, 1999 COMPARED TO YEAR ENDED DECEMBER 31, 1998

         REVENUE

         Our revenue, before the offset of stock-based compensation, increased
to $2.9 million for the year ended December 31, 1999 from $1.9 million for the
year ended December 31, 1998.


                                       54
<PAGE>


         PRODUCT REVENUE

         Our software development revenue, before the offset of stock-based
compensation, remained approximately the same at $1.7 million for the years
ended December 31, 1999 and 1998. All software development revenue realized in
1999 and 1998 related to our contract with Bank of Montreal.

         SERVICE REVENUE

           Our service revenue increased to $1.2 million for the year ended
December 31, 1999 from $208,000 for the year ended December 31, 1998. This
increase resulted from our entry into additional contracts for consulting and
software design services for implementations at Bank of Montreal, Bank of
America and Wells Fargo.

         STOCK-BASED COMPENSATION RELATED TO SOFTWARE DEVELOPMENT REVENUE

         Stock-based compensation related to software development revenue
increased to $1.6 million for the year ended December 31, 1999 from $1.4 million
for the year ended December 31, 1998, as we recognized a greater portion of the
revenue associated with Bank of Montreal's license agreement in 1999 than in
1998.

         OPERATING EXPENSES

         COST OF NET REVENUE

         Our cost of net revenue increased to $1.9 million for the year ended
December 31, 1999 from $82,000 for the year ended December 31, 1998. This
increase was primarily related to the addition of implementation and customer
service personnel to support additional customers in 1999. The increase in cost
of services revenue also reflects amounts paid to third party consultants and
software providers.

         RESEARCH AND DEVELOPMENT

         Research and development expenses increased to $7.3 million for the
year ended December 31, 1999 from $2.2 million for the year ended December 31,
1998. This increase largely reflects the addition of personnel to our research
and development department, primarily to support the second release of our
software.

         SALES AND MARKETING

         Sales and marketing expenses increased to $2.6 million for the year
ended December 31, 1999 from $405,000 for the year ended December 31, 1998. This
increase is primarily attributable to the hiring of additional sales and
marketing personnel, together with increased travel and related expenses. This
increase reflects the opening of sales offices in San Francisco and London in
1999.

         GENERAL AND ADMINISTRATIVE

         Our general and administrative expenses increased to $3.6 million for
the year ended December 31, 1999 from $528,000 for the year ended December 31,
1998, which reflects the increase in our corporate staff.

                                       55

<PAGE>

         DEPRECIATION AND AMORTIZATION

         Total depreciation and amortization expense (excluding amortization of
deferred stock-based compensation) increased to $752,000 for the year ended
December 31, 1999 from $88,000 for the year ended December 31, 1998, reflecting
the capital spending in computer workstations and software development tools
used for research and development purposes.


         AMORTIZATION OF DEFERRED EMPLOYEE STOCK-BASED COMPENSATION

         In 1999, we accrued a $5.8 million deferred stock compensation charge
related to employee stock options granted prior to our initial public offering.
Amortization of employee stock-based compensation was $165,000 for the year
ended December 31, 1999 compared to $181,000 for the year ended December 31,
1998, and has been included in the operating expense line items in which it
relates. In 1998, we recognized $414,000 for deferred stock based compensation
related to options that were granted to purchase 1,227,000 common shares under
our stock option plans at a weighted average exercise price of $0.34 per share.

         INTEREST INCOME

         Interest income, which increased to $1.0 million for the year ended
December 31, 1999 from $107,000 for the year ended December 31, 1998, was
derived from cash and cash equivalent balances, representing primarily the
unused portion of the proceeds from our issuances of common shares.

         NET LOSS

         We recorded a net loss of $13.8 million for the year ended December 31,
1999 compared to $2.7 million for the year ended December 31, 1998. The loss per
share, calculated using the weighted average number of shares outstanding, was
$0.82 for the year ended December 31, 1999 compared to a loss per share of $0.47
for the year ended December 31, 1998. Our losses increased as we invested
heavily in building our infrastructure. Research and development, along with
sales and marketing activities, increased to meet the required delivery
schedules for our products and to establish customer relationships.

         QUARTERLY RESULTS OF OPERATIONS

         The following tables set forth certain unaudited consolidated
statements of operations data for each of the twelve most recent quarters ended
December 31, 2000. The information has been derived from our unaudited
consolidated financial statements that, in management's opinion, have been
prepared on a basis consistent with the audited consolidated financial
statements contained elsewhere in this annual report and include all
adjustments, consisting only of normal recurring adjustments, necessary for a
fair presentation of information presented. These operating results are not
necessarily indicative of results for any future period. You should not rely on
them to predict our future performance.

                                       56

<PAGE>



<TABLE>
<CAPTION>
                                                                                 QUARTER ENDED
                                                                                 -------------
        2000                                                                                                  TOTAL YEAR
        ----                                                                                                  ----------
                                                            MAR. 31       JUN. 30      SEPT. 30      DEC 31       2000
                                                            -------       -------      --------      ------       ----
                                                         (In thousands of U.S. dollars, except for shares and per share
                                                                                    amounts)
<S>                                                          <C>          <C>           <C>          <C>         <C>
        Revenue:
           Product.....................................       $2,762        $2,591        $3,482      $5,356     $14,191
           Services....................................          597         1,377         2,632       2,697       7,303
           Less: Stock-based compensation related to
              software development revenue.............         (248)            -             -           -       (248)
                                                              ------      --------      --------    --------     -------

        Net revenue....................................        3,111         3,968         6,114       8,053      21,246
                                                               -----         -----         -----       -----      ------

        Operating expenses:
           Cost of net revenue.........................        2,039         2,675         3,902       4,597      13,213
           Research and development....................        4,864         7,186         8,805      11,769      32,624
           Sales and marketing.........................        2,559         3,475         3,792       3,189      13,015
           General and administrative..................        2,424         5,925         4,409       2,640      15,398
           Depreciation................................          317           684         1,313       1,632       3,946
           Amortization of intangibles.................            -         1,350         7,917       9,576      18,843
                                                           ---------         -----         -----       -----      ------

        Total operating expenses.......................       12,203        21,295        30,138      33,403      97,039
        Loss from operations...........................       (9,092)      (17,327)      (24,024)    (25,350)    (75,793)
        Interest income................................        2,237         2,772         3,631       2,942      11,582
        Equity in losses of affiliate..................          (66)         (213)          965         261         947
                                                           ---------     ---------     ---------    --------   ---------

        Net loss.......................................      $(6,921)     $(14,768)     $(19,428)    (22,147)    (63,264)
                                                            --------     ---------     ---------    --------    --------

        Basic and diluted net loss per share...........       $(0.20)       $(0.40)       $(0.51)     $(0.57)     $(1.71)
        Shares used in computing basic and diluted net
           loss per share (in thousands)...............       34,037        36,717        37,961      39,092      36,963
                                                              ======        ======        ======      ======      ======
</TABLE>


<TABLE>
<CAPTION>
                                                                               QUARTER ENDED
 1999                                                          MAR. 31       JUN. 30       SEPT. 30      DEC. 31     TOTAL YEAR
 ----                                                          -------      -------       --------      -------     -----------
                                                                                                                         1999
                                                                                                                         ----
                                                                   (In thousands of U.S. dollars, except for shares and
                                                                                    per share amounts)
<S>                                                               <C>           <C>           <C>          <C>          <C>
Revenue:
Product...............................................             $548          $383          $383         $383        $1,697
Services................................................             34             -           754          381         1,169
Less: Stock-based compensation related to software                 (531)         (371)         (371)        (371)       (1,644)
development revenue...................................            -----         -----         -----        -----       -------


Net revenue...........................................               51            12           766          393         1,222
                                                                     --            --           ---          ---         -----

Operating expenses:
Cost of net revenue...................................                -            20           811        1,076         1,907
Research and development..............................            1,185         1,421         2,051        2,968         7,625
Sales and marketing...................................              210           307           634        1,560         2,711
General and administrative............................              315           606         1,160        1,773         3,854
                                                                  -----         -----         -----        -----         -----
</TABLE>

                                       57

<PAGE>

<TABLE>
<CAPTION>
                                                                   (In thousands of U.S. dollars, except for shares and
                                                                                    per share amounts)
<S>                                                             <C>           <C>           <C>          <C>          <C>
 Total operating expenses.............................            1,710         2,354         4,656        7,377        16,097
                                                                  -----         -----         -----        -----        ------
Loss from operations..................................           (1,659)       (2,342)       (3,890)      (6,984)      (14,875)
Interest income.........................................             61            28           252          703         1,044
                                                                -------       -------       -------      -------      --------

Net loss..............................................          $(1,598)      $(2,314)      $(3,638)     $(6,281)     $(13,831)
                                                               --------      --------      --------     --------     ---------

Basic and diluted net loss per share..................           $(0.14)       $(0.20)       $(0.22)      $(0.23)       $(0.82)
Shares used in computing basic and diluted net loss per          11,429        11,609        16,870       27,557        16,887
share (in thousands)..................................           ======        ======        ======       ======        ======
</TABLE>


<TABLE>
<CAPTION>
                                                                                  QUARTER ENDED
                                                                                  -------------
1998                                                     MAR.  31, 1998      JUN. 30,       SEPT. 30,     DEC. 31,   TOTAL YEAR 1998
----                                                     -------------      ---------      ----------    ---------   ---------------
                                                                                1998          1998          1998
                                                                                ----          ----          ----
                                                          (In thousands of U.S. dollars, except for shares and per share amounts)
<S>                                                              <C>           <C>             <C>          <C>           <C>
Revenue:
   Software development.........                                 $    -           $419           $630         $629        $1,678
   Services.....................                                     208             -              -            -           208
   Less: Stock-based compensation                                      -           (91)          (694)        (610)       (1,395)
      related to software                                          -----          ----          -----        -----       -------
      development revenue.......

Net revenue.....................                                     208           328            (64)          19           491
                                                                     ---           ---           ----           --           ---

Operating expenses:
   Cost of net revenue..........                                      61             -              -            -            61
   Research and development.....                                     124           397            687        1,198         2,406
   Sales and marketing..........                                      27            86            109          213           435
   General and administrative...                                      41            74             53          227           395
                                                                      --            --             --          ---           ---

Total operating expenses........                                     253           557            849        1,638         3,297
                                                                     ---           ---            ---        -----         -----

Loss from operations............                                     (45)         (229)          (913)      (1,619)       (2,806)
Interest income.................                                      18            20             31           38           107
                                                                   -----         -----         ------       ------        ------

Net loss........................                                    $(27)        $(209)         $(882)     $(1,581)      $(2,699)
                                                                   -----        ------         ------     --------       -------

Basic and diluted net loss per                                    $(0.01)       $(0.04)        $(0.18)      $(0.17)       $(0.47)
   share........................                                 -------       -------        -------      -------       -------

Shares used in computing basic                                     4,000         4,667          5,000        9,286         5,784
   and diluted net loss per share                                  =====         =====          =====        =====         =====
   (in thousands)...............
</TABLE>


                                       58

<PAGE>

         LIQUIDITY AND CAPITAL RESOURCES

         Since inception, we have financed our operations through issuances of
common shares, together with revenue from operations. In February 2000, we
completed our initial public offering of an aggregate of 6,900,000 of our common
shares, raising net proceeds of approximately $165.7 million.

         Net cash used in operating activities was $26.8 million for the year
ended December 31, 2000 compared to $5.5 million for the year ended December 31,
1999. Net cash used in operating activities for 2000 mainly consisted of our net
loss of $63.3 million and our net gain in equity of affiliate of $947,000 offset
by depreciation and amortization of $22.8 million, stock-based compensation of
$6.7 million and net changes in working capital of $6.2 million. Net changes in
working capital includes an accrued liability for non recurring costs of $9.0
million relating to the acquisition of TANTAU Software.

         Cash provided from financing activities was $165.6 million for the
twelve months ended December 31, 2000, compared to $70.1 million for the year
ended December 31,1999. Cash flow from financing activities in 2000 reflects the
net proceeds of our initial public offering and funds received from the exercise
of stock options, as reduced by share issuance costs relating to our
acquisitions of Ezlogin and Spyonit.

         Cash used in investing activities, before the purchase of short-term
investments, was $39.7 million for the year ended December 31, 2000 compared to
$2.3 million for the year ended December 31, 1999. At December 31, 2000,
short-term investments mainly consisted of government debt and commercial paper
with term to maturity of no greater than one year. Cash used in investing
activities in 2000, excluding the purchase of short-term investments, reflects
our investments in Corillian, Neomar and Maptuit, our acquisitions of YRless,
Ezlogin and Spyonit, acquisition costs related to TANTAU Software, as well as
purchases of capital and other assets. Capital expenditures for the year were
$11.8 million. We anticipate capital expenditures to continue to increase as we
continue to implement our data centers worldwide to support our hosting
activities. In addition, as at December 31, 2000, we had commitments to make
minimum lease payments of approximately $4.6 million in 2001.

         As a result of our purchase of TANTAU, we acquired approximately $30.0
million in cash and cash equivalents and short term investments. In addition, as
of December 31, 2000, TANTAU had approximately $8.5 million in commitments
relating to facilities and equipment leases, which we are obligated to make as a
result of our acquisition.

         We expect that the revenue from our operations, interest income and the
funds provided by our initial public offering will be sufficient to cover our
cash requirements, including our planned capital expenditures, for at least the
next 12 months. We may require additional financing if we expand our operations
at a faster rate than currently expected, or if we seek to effect one or more
significant acquisitions.

         RECENT ACCOUNTING POLICIES AND REGULATIONS IN CANADA AND THE
         UNITED STATES

         In June 1998, the Financial Accounting Standards Board issued Statement
of Financial Accounting Standards No. 133, ACCOUNTING FOR DERIVATIVE INSTRUMENTS
AND HEDGING ACTIVITIES (SFAS No. 133). SFAS No. 133 establishes accounting and
reporting standards requiring that every derivative instrument be recorded on
the balance sheet as either an asset or liability measured at its fair value.
SFAS

                                       59

<PAGE>

No. 133, as recently amended, is effective for fiscal years beginning after
June 15, 2000. To date, we have not entered into derivative instruments. We
believe that the adoption of SFAS No. 133 will not have a material effect on
our financial position or results of operations.

ITEM 7A.   QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISKS

IMPACT OF INTEREST RATE EXPOSURE

         As of December 31, 2000, we had approximately $167 million in cash,
cash equivalents and short-term investments, of which over $93 million was
short-term investments. A significant portion of the cash earns interest at
variable rates. In addition, although our short-term investments are fixed-rate
instruments, the average term is short. Accordingly, our interest income is
effectively sensitive to changes in the level of prevailing interest rates. This
is partially mitigated by the fact that we generally hold our short-term
investments until their maturity date.

IMPACT OF FOREIGN EXCHANGE RATE EXPOSURE

         Our functional currency is the U.S. dollar, however a significant
portion of our expenses are incurred in Canadian dollars. With the purchase of
TANTAU, we expect that an increased portion of our expenses will be incurred in
Euros and other European currencies. Changes in the value of these currencies
relative to the U.S. dollar may result in currency translation gains and losses,
which could affect our operating results. In the year ended December 31, 2000,
we realized foreign currency losses of approximately $938,000. In the future, we
may seek to minimize this risk by hedging our known exposures, such as salaries,
rent and certain other recurring payments. We plan to account for any
arrangements of this kind under Canadian and U.S. GAAP in a manner consistent
with Financial Accounting Standards 133. See Note 14(a) to our consolidated
financial statements.

ITEM 8.   FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA.

         The consolidated financial statements and supplementary data of the
Company and the report of independent auditors thereon set forth beginning on
page F-1 are incorporated herein by reference.

         Quarterly financial information set forth herein under "Item
7-Management's Discussion and Analysis of Financial Condition and Results of
Operations" is incorporated herein by reference.

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

         KPMG LLP has audited our consolidated balance sheets as at December 31,
2000 and 1999 and the consolidated statements of operations, shareholders'
equity and cash flows for the years ended December 31, 2000, 1999 and 1998, as
stated in their report appearing herein. KPMG LLP replaced Arthur Andersen LLP
in March 1999, several months prior to the time that we began to prepare the
registration statement relating to our initial public offering. The decision to
change accountants was approved by the Company's board of directors. Under the
applicable rules of the U.S. Securities and Exchange Commission and the Canadian
Securities Administrators, we have not made any public filings containing any
report of Arthur Andersen LLP as to our financial statements.

                                       60

<PAGE>

         Arthur Andersen LLP's report as to our October 31, 1998 financial
statements, which was the only report issued by that firm, did not contain any
adverse opinion or a disclaimer of opinion, nor was it qualified or modified as
to uncertainty, audit scope, or accounting principles. There were no
disagreements between us and Arthur Andersen LLP on any matter of accounting
principles or practices, financial statement disclosure, or auditing scope or
procedure which would have caused that firm to make reference to the subject
matter of such a disagreement in connection with its reports.










                                       61
<PAGE>


                                    PART III

ITEM 10.    DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT.

         The information required by this Item is contained in the Company's
Management Information Circular and Proxy Statement, which was filed with the
Securities and Exchange Commission on March 21, 2001, and which is incorporated
by reference herein.

ITEM 11.    EXECUTIVE COMPENSATION.

         The information required by this Item is contained in the Company's
Management Information Circular and Proxy Statement, which was filed with the
Securities and Exchange Commission on March 21, 2001, and which is incorporated
by reference herein.

ITEM 12.    SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT.

         The information required by this Item is contained in the Company's
Management Information Circular and Proxy Statement, which was filed with the
Securities and Exchange Commission on March 21, 2001, and which is incorporated
by reference herein.


ITEM 13.    CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS.

         The information required by this Item is contained in the Company's
Management Information Circular and Proxy Statement, which was filed with the
Securities and Exchange Commission on March 21, 2001, and which is incorporated
by reference herein.













                                       62

<PAGE>


                                     PART IV

ITEM 14.   EXHIBITS, FINANCIAL STATEMENT SCHEDULES, AND REPORTS ON FORM 8-K.

     The following documents are filed as part of this Report:

     1  Financial Statements.

           Incorporated by reference from the financial statements and notes
thereto that are set forth beginning on page F-1 of this report.

     2.  Financial Statement Schedules.

           None.

     3.  Exhibits.

<TABLE>
<CAPTION>
EXHIBIT
NUMBER                NAME OF DOCUMENT
------                ----------------
<S>                   <C>
3.1(1)                Articles of the Registrant.
3.2(1)                By-laws of Registrant.
10.1(1)(2)            Technology License Agreement, dated as of April 30, 1998, between the Registrant and Bank of Montreal.
10.2(1)               Mutual Indemnity Agreement, dated April 30, 1998, between the Registrant and Bank of Montreal.
10.3(1)               Letter Agreement, dated November 27, 1998, between Bank of Montreal and the Registrant.
10.4(1)               Letter Agreement, dated November 27, 1998, between Bank of Montreal and the Registrant.
10.5(1)               Letter Agreement, dated July 26, 1999, between Bank of Montreal and the Registrant.
10.6(1)               Form of Registration Rights Agreement
10.7(1)(2)            Master Technology License Agreement, dated December 29, 1999, between Citicorp Strategic Technology
                      Corporation and the Registrant.
10.8(1)               Support Agreement, dated December 29, 1999, among Citicorp Strategic Technology Corporation, 724 Solutions
                      International SRL and the Registrant.
10.9(2)(3)            Licensed Affiliate Agreement between the Registrant and Citibank, N.A.
10.10(3)              First Amended and Restated Agreement and Plan of Merger and Reorganization among the Registrant, Sapphire
                      Merger Sub, Inc., Ezlogin.com.  and Alexandre Balkanski, as Shareholders' Agent, dated as of May 9, 2000.
10.11(3)              Amendment to First Amended and Restated Agreement and Plan of Merger and Reorganization, among the
                      Registrant, Sapphire Merger Sub, Inc., Ezlogin.com, Inc.  and Alexandre Balkanski, as Shareholders' Agent,
                      dated as of June 9, 2000.
10.12(4)              Agreement and Plan of Merger and Reorganization among 724 Solutions Inc., the Registrant, Serpent Merger Sub,
                      Inc., Spyonit.com, Inc.  and certain stockholders of Spyonit.com, Inc., dated as of September 12, 2000.
10.13(4)              Agreement and Plan of Merger, dated as of November 29, 2000, by and among the Registrant, Saturn Merger
                      Sub, Inc.  and TANTAU Software, Inc.
10.14(4)              Form of Resale Restriction Agreement relating to former securityholders of TANTAU Software, Inc.
</TABLE>

                                       63

<PAGE>

<TABLE>
<CAPTION>
EXHIBIT
NUMBER                NAME OF DOCUMENT
------                ----------------
<S>                   <C>
10.15(4)              Form of Indemnification and Escrow Agreement relating to former securityholders of TANTAU Software, Inc.
10.16.1               Registrant's Canadian Stock Option Plan.
10.16.2               Registrant's U.S.  Stock Option Plan.
10.16.3               Registrant's 2000 Stock Option Plan.
10.16.4               Registrant's TANTAU Software, Inc.  Stock Option Plan.
10.17.1               Employment Agreement of Gregory Wolfond.
10.17.2               Employment Agreement of John Sims.
10.17.3               Employment Agreement of Christopher Erickson.
10.17.4               Employment Agreement of Karen Basian.
10.17.5               Employment Agreement of Andre Boysen.
10.17.6               Employment Agreement of Christopher Jarman.
16.1                  Letter Regarding Change in Certifying Accountant.
21.1                  List of Subsidiaries
23.1                  Consent of KPMG LLP, Toronto.
</TABLE>
         ------------------

         (1)      Incorporated by reference to the Registrant's Registration
                  Statement on Form F-1, File No. 333-90143.

         (2)      Confidential treatment has been requested with respect to
                  certain portions of the Exhibit pursuant to Rule 406 under the
                  Securities Act of 1933, as amended. Omitted portions have been
                  filed separately with the Securities and Exchange Commission.

         (3)      Incorporated by reference to the Registrant's Annual Report on
                  Form 20-F, Filed on June 29, 2000.

         (4)      Incorporated by reference to the Registrant's Registration
                  Statement on Form F-4, File No. 333-52698.


                                       64


<PAGE>


AUDITORS' REPORT TO THE SHAREHOLDERS


We have audited the consolidated balance sheets of 724 Solutions Inc. as at
December 31, 2000 and 1999 and the consolidated statements of operations,
shareholders' equity and cash flows for each of the years in the three-year
period ended December 31, 2000. These financial statements are the
responsibility of the Company's management. Our responsibility is to express an
opinion on these financial statements based on our audits.

With respect to the consolidated financial statements for the year ended
December 31, 2000, we conducted our audit in accordance with Canadian generally
accepted auditing standards and United States generally accepted auditing
standards. With respect to the consolidated financial statements for each of the
years in the two-year period ended December 31, 1999, we conducted our audits in
accordance with Canadian generally accepted auditing standards. Those standards
require that we plan and perform an audit to obtain reasonable assurance 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.

In our opinion, these consolidated financial statements present fairly, in all
material respects, the financial position of the Company as at December 31, 2000
and 1999 and the results of its operations and its cash flows for each of the
years in the three-year period ended December 31, 2000 in accordance with
Canadian generally accepted accounting principles.

Canadian generally accepted accounting principles vary in certain significant
respects from accounting principles generally accepted in the United States.
Application of accounting principles generally accepted in the United States
would have affected reported results for each of the years in the three-year
period ended December 31, 2000 to the extent summarized in note 14 to the
consolidated financial statements.


/s/ KPMG LLP


Chartered Accountants


Toronto, Canada

January 16, 2001, except
as to note 16 which is
as of January 23, 2001

                                      F-1


<PAGE>

724 SOLUTIONS INC.
Consolidated Balance Sheets
(In thousands of U.S. dollars)

December 31, 2000 and 1999

<TABLE>
<CAPTION>
-------------------------------------------------------------------------------------------------------------------
                                                                                     2000                 1999
-------------------------------------------------------------------------------------------------------------------
<S>                                                                          <C>                   <C>
Assets

Current assets:
     Cash and cash equivalents (note 4)                                      $     73,898          $    65,287
     Short-term investments (note 4)                                               92,726                    -
     Accounts receivable, net of allowance for
       doubtful accounts of $56 (1999 - nil)                                        4,376                3,121
     Prepaid expenses and other receivables                                         2,260                1,368
-------------------------------------------------------------------------------------------------------------------
     Total current assets                                                         173,260               69,776

Fixed assets (note 5)                                                              11,297                2,366

Investments (note 6)                                                               12,196                    -

Intangible and other assets (note 7)                                               90,563                1,100

-------------------------------------------------------------------------------------------------------------------
Total assets                                                                 $    287,316          $    73,242
-------------------------------------------------------------------------------------------------------------------

Liabilities and Shareholders' Equity

Current liabilities:
     Accounts payable                                                        $      2,203          $     1,982
     Accrued liabilities                                                           18,198                2,967
     Deferred revenue, net of deferred
       stock-based compensation of nil (1999 - $248)                                1,887                6,022
     Deferred consideration (note 3(a))                                             1,190                    -
-------------------------------------------------------------------------------------------------------------------
     Total current liabilities                                                     23,478               10,971

Leasehold inducements                                                                 375                  103

Deferred consideration, net of current portion (note 3(a))                          1,200                    -

Shareholders' equity (note 8): Unlimited common shares authorized:
         39,112,975 common shares issued and
           outstanding (1999 - 29,402,426)                                        357,158               84,762
     Deferred stock-based compensation                                            (14,946)              (5,909)
     Accumulated deficit                                                          (79,949)             (16,685)
-------------------------------------------------------------------------------------------------------------------
     Total shareholders' equity                                                   262,263               62,168

-------------------------------------------------------------------------------------------------------------------
Total liabilities and shareholders' equity                                   $    287,316          $    73,242
-------------------------------------------------------------------------------------------------------------------
</TABLE>

See accompanying notes to consolidated financial statements.


                                      F-2


<PAGE>

724 SOLUTIONS INC.
Consolidated Statements of Operations
(In thousands of U.S. dollars, except number of shares and per share amounts)

Years ended December 31, 2000, 1999 and 1998
<TABLE>
<CAPTION>
-------------------------------------------------------------------------------------------------------------------
                                                                 2000                1999                 1998
-------------------------------------------------------------------------------------------------------------------
<S>                                                     <C>                  <C>                   <C>
Revenue:
     Product:
         Related parties (note 12)                      $      11,363        $      1,697          $     1,678
         Other                                                  2,828                   -                    -
     Less stock-based compensation
       related to software development
       (notes 8 and 12)                                          (248)             (1,644)              (1,395)
     Services:
         Related parties (note 12)                              4,733                 963                  208
         Other                                                  2,570                 206                    -
-------------------------------------------------------------------------------------------------------------------
     Net revenue                                               21,246               1,222                  491

Operating expenses:
     Cost of net revenue, including
       stock-based compensation expense
       of $653 (1999 - $19; 1998 - $21)                        13,213               1,858                   82
     Research and development, including
       stock-based compensation expense
       of $3,748 (1999 - $97; 1998 - $107)                     32,624               7,255                2,194
     Sales and marketing, including
       stock-based compensation expense
       of $484 (1999 - $24; 1998 - $27)                        13,015               2,598                  405
     General and administrative, including
       stock-based compensation expense
       of $1,530 (1999 - $25; 1998 - $26)                      15,398               3,634                  528
     Depreciation                                               3,946                 752                   88
     Amortization of intangible assets                         18,843                   -                    -
-------------------------------------------------------------------------------------------------------------------
     Total operating expenses                                  97,039              16,097                3,297
-------------------------------------------------------------------------------------------------------------------

Loss from operations                                          (75,793)            (14,875)              (2,806)

Interest income                                                11,582               1,044                  107

Equity in loss of affiliate                                      (943)                  -                    -

Dilution gain (note 6(a))                                       1,890                   -                    -

-------------------------------------------------------------------------------------------------------------------
Loss for the year                                       $     (63,264)       $    (13,831)         $    (2,699)
-------------------------------------------------------------------------------------------------------------------

Basic and diluted loss per share (note 13)              $      (1.71)        $      (0.82)         $     (0.47)

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

Weighted average number of shares used
   in computing basic and diluted loss per
   share (in thousands)                                        36,963              16,887                5,784

-------------------------------------------------------------------------------------------------------------------
</TABLE>

See accompanying notes to consolidated financial statements.

                                      F-3


<PAGE>

724 SOLUTIONS INC.
Consolidated Statements of Shareholders' Equity
(In thousands of U.S. dollars, except number of shares and per share amounts)

Years ended December 31, 2000, 1999 and 1998
<TABLE>
<CAPTION>
-------------------------------------------------------------------------------------------------------------------
                                                                           Deferred
                                                             Deferred   stock-based
                                                          stock-based  compensation
                                                         compensation    related to
                                                              related      software                        Total
                                       Common shares         to stock   development   Accumulated  shareholders'
                                   Number        Amount       options       revenue       deficit         equity
-------------------------------------------------------------------------------------------------------------------
<S>                             <C>          <C>         <C>           <C>            <C>          <C>

Balance, December 31, 1997      4,000,000    $    1,443    $        -     $       -    $     (155)    $    1,288

Loss for the year                       -             -             -             -        (2,699)        (2,699)

Deferred stock-based
   compensation                         -           414          (414)       (3,287)            -         (3,287)

Amortization of deferred
   stock-based compensation             -             -           181             -             -            181

Allocation of deferred
   stock-based compensation
   to software development
   revenue and deferred
   revenue                              -             -             -         1,815             -          1,815

Issuance on exercise
   of options                   4,000,000         1,296             -             -             -          1,296

Issuance of common shares       3,428,570         4,599             -             -             -          4,599
-------------------------------------------------------------------------------------------------------------------

Balance, December 31, 1998     11,428,570         7,752          (233)      (1,472)        (2,854)         3,193

Loss for the year                       -             -             -             -       (13,831)       (13,831)

Deferred stock-based
   compensation                         -         5,841        (5,841)            -             -              -

Amortization of deferred
   stock-based compensation             -             -           165             -             -            165

Allocation of deferred
   stock-based compensation
   to software development
   revenue and deferred revenue         -             -             -         1,472             -          1,472

Issuance of common shares      17,973,856        71,169             -             -             -         71,169
-------------------------------------------------------------------------------------------------------------------

Balance, December 31, 1999     29,402,426        84,762        (5,909)            -       (16,685)        62,168

Loss for the year                       -             -             -             -       (63,264)       (63,264)

Deferred stock-based
   compensation                         -        14,364       (14,364)            -             -              -

Common share purchase
   options                              -         4,786             -             -             -          4,786

Amortization of deferred
   stock-based compensation             -             -         5,327             -             -          5,327

Issuance on exercise of options   765,339           627             -             -             -            627

Issuance of common shares       8,945,210       252,619             -             -             -        252,619

-------------------------------------------------------------------------------------------------------------------
Balance, December 31, 2000     39,112,975    $  357,158    $  (14,946)    $       -    $  (79,949)    $  262,263
-------------------------------------------------------------------------------------------------------------------
</TABLE>

See accompanying notes to consolidated financial statements.

                                      F-4


<PAGE>

724 SOLUTIONS INC.
Consolidated Statements of Cash Flows
(In thousands of U.S. dollars)

Years ended December 31, 2000, 1999 and 1998
<TABLE>
<CAPTION>
-------------------------------------------------------------------------------------------------------------------
                                                                 2000                1999                 1998
-------------------------------------------------------------------------------------------------------------------
<S>                                                    <C>                   <C>                   <C>

Cash flows from (used in) operating activities:
     Loss for the year                                 $      (63,264)       $    (13,831)         $    (2,699)
     Depreciation and amortization                             22,789                 752                   88
     Stock-based compensation                                   6,663               1,809                1,576
     Other non-cash expenses                                    1,722                   -                    -
     Equity in loss of affiliate                                  943                   -                    -
     Dilution gain                                             (1,890)                  -                    -
     Foreign exchange loss                                         34                   -                    -
     Change in operating assets and liabilities:
         Accounts receivable                                   (1,255)             (3,086)                 (34)
         Prepaid expenses and other
           receivables                                           (632)             (1,347)                 (21)
         Accrued interest on short-term
           investments                                         (2,290)                  -                    -
         Accounts payable                                         221               1,746                  213
         Accrued liabilities                                   14,638               2,504                  453
         Deferred revenue                                      (4,486)              5,953                  420
-------------------------------------------------------------------------------------------------------------------
     Net cash flows used in operating activities              (26,807)             (5,500)                  (4)

Cash flows from (used in) financing activities:
     Issuance of common shares for cash                       165,555              71,169                2,608
     Deferred charges                                               -              (1,100)                   -
-------------------------------------------------------------------------------------------------------------------
     Net cash flows from financing activities                 165,555              70,069                2,608

Cash flows from (used in) investing activities:
     Purchase of capital assets                               (11,814)             (2,258)                (927)
     Purchase of short-term investments                       (90,436)                  -                    -
     Purchase of intangible and other assets                   (2,230)                  -                    -
     Investment in Neomar Inc.                                 (3,500)                  -                    -
     Investment in Corillian Corporation                       (7,000)                  -                    -
     Investment in Maptuit.com Inc.                              (750)                  -                    -
     Acquisition of Yrless Internet Corporation                (1,272)                  -                    -
     Acquisition of Ezlogin.com, Inc.                          (1,651)                  -                    -
     Acquisition of Spyonit.com, Inc.                          (2,065)                  -                    -
     Acquisition costs of Tantau Software, Inc.                (9,385)                  -                    -
-------------------------------------------------------------------------------------------------------------------
     Net cash flows used in investing activities             (130,103)             (2,258)                (927)

Foreign exchange loss on cash held in a
   foreign currency                                               (34)                  -                    -
-------------------------------------------------------------------------------------------------------------------

Net increase in cash and cash equivalents                       8,611              62,311                1,677

Cash and cash equivalents, beginning of year                   65,287               2,976                1,299

-------------------------------------------------------------------------------------------------------------------
Cash and cash equivalents, end of year                 $       73,898        $     65,287          $     2,976
-------------------------------------------------------------------------------------------------------------------
</TABLE>

Supplemental disclosure of cash flow information (note 15)


See accompanying notes to consolidated financial statements.

                                      F-5


<PAGE>


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

724 SOLUTIONS INC.
Notes to Consolidated Financial Statements
(Tabular amounts in thousands of U.S. dollars, except per share amounts)

Years ended December 31, 2000, 1999 and 1998

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


1.     ORGANIZATION OF THE COMPANY:


       The Company was established in July 1997 to provide Internet
       infrastructure solutions to financial institutions, enabling them to
       offer personalized and secure mobile banking, investment and commerce
       services across a wide range of internet-enabled wireless and consumer
       electronic devices. The Company also offers end-to-end customer support
       through its global application hosting and contact centre services.


2.     SIGNIFICANT ACCOUNTING POLICIES:


       These consolidated financial statements are stated in U.S. dollars,
       except as otherwise noted. They have been prepared in accordance with
       Canadian generally accepted accounting principles which, except as
       disclosed in note 14, conform, in all material respects, with generally
       accepted accounting principles in the United States.


       (a) Consolidation:


           These consolidated financial statements include the accounts of the
           Company and its wholly owned subsidiaries. The results of operations
           for acquisitions are included in these consolidated financial
           statements from the date of acquisition. Intercompany transactions
           and balances are eliminated on consolidation.


       (b) Financial instruments:


           Financial instruments consist of cash and cash equivalents,
           short-term investments, accounts receivable, accounts payable and
           accrued liabilities. The Company determines the fair values of its
           financial instruments based on quoted market values or discounted
           cash flow analyses. Unless otherwise indicated, the fair values of
           financial assets and financial liabilities approximate their recorded
           amounts.

                                      F-6


<PAGE>

724 SOLUTIONS INC.
Notes to Consolidated Financial Statements (continued)
(Tabular amounts in thousands of U.S. dollars, except per share amounts)

Years ended December 31, 2000, 1999 and 1998

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

2.     SIGNIFICANT ACCOUNTING POLICIES (CONTINUED):


           Financial instruments that potentially expose the Company to
           concentrations of credit risk consist primarily of cash and cash
           equivalents, short-term investments and accounts receivable. Cash and
           cash equivalents consist primarily of deposits with major commercial
           banks and high-grade commercial paper, the maturities of which are
           three months or less from the date of purchase. Short-term
           investments consist of high-grade fixed income securities with
           maturities of more than three months but less than one year. The
           Company performs periodic credit evaluations of the financial
           condition of its customers. Allowances are maintained for potential
           credit losses consistent with the credit risk of specific customers.


       (c) Revenue recognition:


           The Company's revenue is primarily derived from (i) the licensing of
           its products, (ii) application hosting services and (iii) the
           provision of related services, including installation, integration,
           training and maintenance and support. Product revenues are recognized
           when a contract with a customer has been executed, delivery and
           acceptance have occurred, the Company has no significant remaining
           performance requirements and collection of the related receivables is
           deemed probable by management. Application hosting services revenue
           is recognized monthly as earned either on a fixed fee or variable
           rate basis. Services revenues are recognized as the services are
           performed. Maintenance and support revenues paid in advance are
           non-refundable and are recognized rateably over the term of the
           agreement, which is typically 12 months. Product and services
           revenues that have been prepaid but do not yet qualify for
           recognition as revenues under the Company's revenue recognition
           policy are reflected as deferred revenue on the Company's balance
           sheet.


       (d) Research and development expenses:


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

                                      F-7

<PAGE>


724 SOLUTIONS INC.
Notes to Consolidated Financial Statements (continued)
(Tabular amounts in thousands of U.S. dollars, except per share amounts)

Years ended December 31, 2000, 1999 and 1998

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

2.     SIGNIFICANT ACCOUNTING POLICIES (CONTINUED):


       (e) Investment tax credits:


           The Company is entitled to Canadian federal and provincial investment
           tax credits, which are earned as a percentage of eligible research
           and development expenditures incurred in each taxation year.


           Investment tax credits are accounted for as a reduction of the
           related expenditure for items of a current nature and a reduction of
           the related asset cost for items of a long-term nature, provided that
           the Company has reasonable assurance that the tax credits will be
           realized.


       (f) Stock-based compensation:


           The Company uses the intrinsic value method to account for
           stock-based compensation. As such, deferred stock-based compensation
           is recorded if, on the date of grant of the stock option or the
           subscription right, the current market value of an underlying common
           share exceeds the exercise price per share. Deferred stock-based
           compensation is recognized as an expense over the vesting period of
           the option or where the stock-based compensation is issued to a
           customer in connection with the sale of products or services, as a
           reduction of revenue over the term of the related revenue contract.


       (g) Fixed assets:


           Fixed assets are stated at cost, net of accumulated depreciation and
           amortization, and are amortized over their estimated useful lives
           except for leasehold improvements, which are amortized over the
           lesser of their useful lives or the term of the related lease.
           Expenditures for maintenance and repairs are charged to the statement
           of operations as incurred. Depreciation and amortization are computed
           using the straight-line method as follows:
<TABLE>
--------------------------------------------------------------------------------
           <S>                                                           <C>
           Computer equipment                                            3 years
           Computer software                                             1 year
           Office furniture and equipment                                5 years
           Leasehold improvements                                        5 years

--------------------------------------------------------------------------------
</TABLE>

                                      F-8


<PAGE>

724 SOLUTIONS INC.
Notes to Consolidated Financial Statements (continued)
(Tabular amounts in thousands of U.S. dollars, except per share amounts)

Years ended December 31, 2000, 1999 and 1998

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

2.     SIGNIFICANT ACCOUNTING POLICIES (CONTINUED):


           The Company regularly reviews the carrying values of its fixed assets
           by comparing the carrying amount of the asset to the expected future
           undiscounted cash flows to be generated by the asset. If the carrying
           value exceeds the amount recoverable, a write-down equal to the
           excess is charged to the statement of operations. To December 31,
           2000, no write-down of fixed assets has been recorded.


       (h) Investments:


           Investments in affiliates are recorded on the equity method when the
           Company's ownership interest in the affiliate is greater than 20% but
           not more than 50% and where the Company can exercise significant
           influence over the affiliate.


           Long-term investments in affiliates in which the Company's ownership
           interest is less than 20% and where the Company cannot exercise
           significant influence over the affiliate are accounted for by the
           cost method. Under this method of accounting, the investment is
           recorded at cost and only written down in value if a decline in value
           is other than temporary.


       (i) Intangible and other assets:


           Intangible and other assets are recorded at cost, and are amortized
           on a straight-line basis at the following rates:

<TABLE>
--------------------------------------------------------------------------------
           <S>                                                  <C>
           Workforce                                            Over 2 - 5 years
           Acquired technology                                  Over 1 - 5 years
           Goodwill                                             Over 2 - 5 years

--------------------------------------------------------------------------------
</TABLE>


           Goodwill represents the excess of the purchase price over the fair
           value of net identifiable assets acquired in a business combination.
           On an ongoing basis, management reviews the valuation and
           amortization of goodwill, taking into consideration any events and
           circumstances which might impair the fair value of the related asset.
           Intangible and other assets are written down to fair value when
           decreases in value are considered to be other than temporary, based
           upon expected cash flows of the acquired business.

                                      F-9


<PAGE>

724 SOLUTIONS INC.
Notes to Consolidated Financial Statements (continued)
(Tabular amounts in thousands of U.S. dollars, except per share amounts)

Years ended December 31, 2000, 1999 and 1998

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

2.     SIGNIFICANT ACCOUNTING POLICIES (CONTINUED):


       (j) Deferred acquisition costs:


           The Company commences the deferral of business acquisition costs when
           the proposed transaction has been specifically identified and the
           completion of the transaction is considered to be more likely than
           not. The Company defers only those costs that are direct and
           incremental costs incurred in connection with the proposed
           transaction. The Company records deferred acquisition costs as
           non-current assets. The Company expenses costs related to abandoned
           proposed acquisitions in the period in which the Company determines
           that the transaction is not likely to be completed.


       (k) Currency translation:


           Effective July 31, 1999, the U.S. dollar became the functional
           currency of the Company. This change resulted from the increased
           significance of U.S. dollar-denominated revenue and expenditures in
           relation to the Company's Canadian dollar-denominated transactions.
           In addition, the Company's recent issuances of common shares have
           been primarily denominated in U.S. dollars. Exchange gains and losses
           resulting from transactions denominated in currencies other than
           U.S. dollars are included in the results of operations for the year.


           Prior to July 31, 1999, the functional currency of the Company was
           the Canadian dollar. Accordingly, monetary assets and liabilities of
           the Company that were denominated in foreign currencies were
           translated into Canadian dollars at the exchange rate prevailing at
           the balance sheet date. Transactions included in operations were
           translated at the average rate for the period. Exchange gains and
           losses resulting from the translation of these amounts were reflected
           in the statement of operations in the period in which they occurred.
           In these consolidated financial statements, the Canadian dollar
           amounts have been translated into U.S. dollars based on exchange
           rates reflecting those in effect at the dates of the underlying
           transactions.


           The aggregate foreign currency gain (loss) included in determining
           net income for the three years ended December 31, 2000 are as
           follows: 2000 - $(938,000); 1999 - $105,000; 1998 - $52,000.

                                      F-10

<PAGE>

724 SOLUTIONS INC.
Notes to Consolidated Financial Statements (continued)
(Tabular amounts in thousands of U.S. dollars, except per share amounts)

Years ended December 31, 2000, 1999 and 1998

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


2.     SIGNIFICANT ACCOUNTING POLICIES (CONTINUED):


       (l) Income taxes:


           The Company provides for income taxes under the liability method.
           Under the liability method, deferred tax assets and liabilities are
           recognized for the future tax consequences attributable to
           differences between the financial statement carrying value of
           existing assets and liabilities and their respective tax basis and
           operating loss and tax credit carryforwards. Deferred tax assets and
           liabilities are measured using enacted tax rates expected to apply to
           taxable income in the years in which those temporary differences are
           expected to be recovered or settled. The effect on deferred tax
           assets and liabilities of a change in tax rates is recognized in
           income in the period that includes the enactment date.


       (m) Use of estimates:


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


3.     ACQUISITIONS:


       (a) YRLess Internet Corporation:


           On March 17, 2000, the Company acquired all the outstanding common
           shares of YRLess Internet Corporation ("YRLess"), an Internet message
           gateway developer, for total cash consideration of approximately
           $1,272,000, including acquisition costs of approximately $34,000. The
           transaction has been accounted for by the purchase method, with the
           results of operations included in these financial statements from the
           date of acquisition. The cash consideration paid has been allocated
           to the net identifiable assets acquired based on their fair values,
           and the excess of the purchase price over the fair value of the net
           assets acquired has been recorded as goodwill and is being amortized
           over 36 months. Amortization expense of $378,000 has been recorded in
           the year ended December 31, 2000.

                                      F-11


<PAGE>

724 SOLUTIONS INC.
Notes to Consolidated Financial Statements (continued)
(Tabular amounts in thousands of U.S. dollars, except per share amounts)

Years ended December 31, 2000, 1999 and 1998

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


3.     ACQUISITIONS (CONTINUED):


           In addition, the Company is committed to pay approximately $4,401,000
           in common shares, or cash if the Company agrees to a cash payment,
           over the next three years. The Company intends to settle this
           liability in shares. As the purchase agreement contains certain terms
           that may require the Company to settle the payments in cash, and
           these terms are out of the control of the Company, the commitment is
           being recorded as a liability under the heading deferred
           consideration. Of the additional $4,401,000 in consideration,
           $2,640,000 is contingent on certain former shareholders of Yrless
           remaining employees of the Company. As such, this amount is being
           recorded as stock-based compensation on a monthly basis as the
           services are being performed. The deferred consideration represents
           $1,761,000 in unconditional additional consideration and $629,000 in
           accrued contingent consideration. To December 31, 2000, $1,108,000
           related to the $4,401,000 commitment has been recorded as an expense.


       (b) Ezlogin.com, Inc.:


           On June 16, 2000, the Company acquired all of the outstanding shares
           of Ezlogin.com, Inc. ("Ezlogin"), a privately held company
           incorporated in California in the business of providing Internet
           infrastructure tools for user-driven personalization. The transaction
           has been accounted for by the purchase method, with the results of
           operations included in these financial statements from the date of
           acquisition. The purchase price of approximately $55.8 million,
           before acquisition costs, was satisfied by the issuance of 1,003,594
           common shares of the Company and the assumption of the existing
           Ezlogin option plan which, if all options outstanding under the plan
           are exercised, would result in the issuance of an additional 91,796
           common shares of the Company. In addition, the Company incurred $3.0
           million in costs related to the acquisition. The excess of the
           purchase price over the fair value of the net identifiable assets of
           Ezlogin at the date of acquisition of $56.9 million has been
           allocated to goodwill and other intangible assets and is being
           amortized over 24 months. Amortization expense of the resulting
           goodwill and acquired intangible assets of $16.0 million has been
           recorded in the year ended December 31, 2000.

                                      F-12


<PAGE>

724 SOLUTIONS INC.
Notes to Consolidated Financial Statements (continued)
(Tabular amounts in thousands of U.S. dollars, except per share amounts)

Years ended December 31, 2000, 1999 and 1998

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


3.     ACQUISITIONS (CONTINUED):


       (c) Spyonit.com, Inc.:


           On September 12, 2000, the Company acquired all of the outstanding
           shares of Spyonit.com, Inc. ("Spyonit"), a privately held company
           incorporated in Delaware which develops software to monitor the
           Internet and other content sources for items of interest to
           end-users. The transaction has been accounted for by the purchase
           method, with the results of operations included in these financial
           statements from the date of acquisition. The purchase price of
           approximately $40.0 million was satisfied by the issuance of
           1,041,616 common shares of the Company and $2.0 million in cash. As
           part of the terms of purchase, up to 137,062 common shares of the
           total common shares issued are subject to repurchase at a minimum
           value if the vendors do not remain employees of the Company through
           September 2003. The Company has recorded deferred stock-based
           compensation in the amount of $6.0 million related to the 137,062
           common shares and is amortizing this amount as compensation expense
           on a straight-line basis over three years. In addition, the Company
           incurred $200,000 in costs related to the acquisition. The excess of
           the purchase price over the fair value of the net tangible assets of
           Spyonit at the date of acquisition of $39.9 million has been
           allocated to goodwill and acquired intangible assets and is being
           amortized over 60 months. Amortization expense of the resulting
           goodwill and acquired intangible assets of $2.4 million has been
           recorded in the year ended December 31, 2000.

                                      F-13


<PAGE>

724 SOLUTIONS INC.
Notes to Consolidated Financial Statements (continued)
(Tabular amounts in thousands of U.S. dollars, except per share amounts)

Years ended December 31, 2000, 1999 and 1998

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


3.     ACQUISITIONS (CONTINUED):


       The transactions are summarized as follows:
<TABLE>
<CAPTION>

-------------------------------------------------------------------------------------------------------------------
                                                               YRLess             Ezlogin              Spyonit
-------------------------------------------------------------------------------------------------------------------
<S>                                                        <C>                <C>                  <C>

       Net identifiable assets acquired at fair values:
           Cash                                            $        -         $     1,517          $        66
           Fixed assets                                            17                 529                   87
           Other assets                                            43                 272                   38
           Current liabilities                                   (177)               (486)                (109)
           Acquired technology                                      -               2,290                7,290
           Workforce                                                -                 560                  280
           Non-competition agreements                               -                   -                  260
-------------------------------------------------------------------------------------------------------------------
           Fair value of identifiable assets                     (117)              4,682                7,912

       Goodwill                                                 1,389              54,103               32,063

-------------------------------------------------------------------------------------------------------------------
                                                           $    1,272         $    58,785          $    39,975
-------------------------------------------------------------------------------------------------------------------

       Purchase price:
           Cash                                            $    1,238         $         -          $     2,000
           Common shares                                            -              51,186               37,775
           Fair value of options                                    -               4,599                    -
           Acquisition expenses                                    34               3,000                  200

-------------------------------------------------------------------------------------------------------------------
                                                           $    1,272         $    58,785          $    39,975
-------------------------------------------------------------------------------------------------------------------
</TABLE>


       The table below reflects unaudited pro forma consolidated results of the
       Company, YRLess, Ezlogin and Spyonit as if the acquisitions had taken
       place on January 1, 2000 and January 1, 1999, respectively.

<TABLE>
<CAPTION>
-------------------------------------------------------------------------------------------------------------------
                                                                                     2000                 1999
-------------------------------------------------------------------------------------------------------------------
<S>                                                                           <C>                  <C>
       Revenue                                                                $    21,267          $     1,536
       Loss for the year                                                          (86,465)             (43,738)
       Loss for the year per common share                                           (2.27)               (2.44)

-------------------------------------------------------------------------------------------------------------------
</TABLE>


4. CASH AND CASH EQUIVALENTS AND SHORT-TERM INVESTMENTS:


       Cash consists of deposits with major financial institutions. Cash
       equivalents consist of short-term deposits and high-grade commercial
       paper with an original term to maturity of three months or less at the
       date of purchase.

                                      F-14


<PAGE>

724 SOLUTIONS INC.
Notes to Consolidated Financial Statements (continued)
(Tabular amounts in thousands of U.S. dollars, except per share amounts)

Years ended December 31, 2000, 1999 and 1998

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


4.     CASH AND CASH EQUIVALENTS AND SHORT-TERM INVESTMENTS (CONTINUED):


       All short-term debt securities are classified as held-to-maturity because
       the Company has the positive intent and ability to hold the securities to
       maturity. Held-to-maturity securities are stated at amortized cost,
       adjusted for amortization of premiums and accretion discounts to
       maturity. The Company owns no short-term investments that are considered
       to be trading securities nor available-for-sale securities.


       The components of cash and cash equivalents and short-term investments
are summarized as follows:

<TABLE>
<CAPTION>
-------------------------------------------------------------------------------------------------------------------
                                                                                     2000                 1999
-------------------------------------------------------------------------------------------------------------------
       <S>                                                                    <C>                  <C>

       Cash and cash equivalents:
           Cash                                                               $     1,297          $     3,264
           Cash equivalents:
                Term deposits                                                           -               52,000
                Bankers' acceptance                                                     -                6,000
                Government T-Bills                                                 32,086                4,023
                Corporate bonds                                                    33,374                    -
                Corporate commercial paper                                          7,141                    -

-------------------------------------------------------------------------------------------------------------------
                                                                              $    73,898          $    65,287
-------------------------------------------------------------------------------------------------------------------

       Short-term investments:
           Held-to-maturity:
                Corporate commercial paper                                    $    90,546          $         -
                Government term deposits                                            2,180                    -

-------------------------------------------------------------------------------------------------------------------
                                                                              $    92,726          $         -
-------------------------------------------------------------------------------------------------------------------
</TABLE>

5.     FIXED ASSETS:

<TABLE>
<CAPTION>
-------------------------------------------------------------------------------------------------------------------
                                                                                     2000                 1999
-------------------------------------------------------------------------------------------------------------------
<S>                                                                           <C>                  <C>
       Computer equipment                                                     $     7,770          $     1,499
       Computer software                                                            2,602                  500
       Office furniture and equipment                                               2,142                  453
       Leasehold improvements                                                       3,150                  754
-------------------------------------------------------------------------------------------------------------------
                                                                                   15,664                3,206

       Less accumulated depreciation and amortization                               4,367                  840

-------------------------------------------------------------------------------------------------------------------
                                                                              $    11,297          $     2,366
-------------------------------------------------------------------------------------------------------------------
</TABLE>
                                      F-15


<PAGE>

724 SOLUTIONS INC.
Notes to Consolidated Financial Statements (continued)
(Tabular amounts in thousands of U.S. dollars, except per share amounts)

Years ended December 31, 2000, 1999 and 1998

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


6.     INVESTMENTS:

<TABLE>
<CAPTION>
-------------------------------------------------------------------------------------------------------------------
                                                                                     2000                 1999
-------------------------------------------------------------------------------------------------------------------
<S>                                                                           <C>                        <C>

       Investments, at cost:
           Corillian Corporation                                              $     7,000                $   -
           Neomar Inc.                                                              3,500                    -
       Investments, at equity:
           Maptuit.com Inc.                                                         1,696                    -

-------------------------------------------------------------------------------------------------------------------
                                                                              $    12,196                $   -
-------------------------------------------------------------------------------------------------------------------
</TABLE>


       (a) On March 8, 2000, the Company purchased a one-third interest in
           Maptuit.com Inc. ("Maptuit") for cash consideration of $750,000.
           Maptuit is a privately held Canadian company in the business of
           developing directional mapping software and providing online
           directional services, mapping services and spatial relational search
           services to its customers.


           The investment in Maptuit has been accounted for using the equity
           method. Under the equity method, the original cost of the investment
           is adjusted for the Company's share of post-acquisition income or
           losses, less dividends. The excess of the cost of the shares of
           Maptuit over the Company's proportionate interest in the net book
           value of Maptuit's net assets on the date of acquisition amounted to
           approximately $677,000. This excess is being amortized on a
           straight-line basis over three years.


           On September 27, 2000 and December 6, 2000, Maptuit completed two
           separate private placements through the issuance of convertible
           preferred shares for aggregate proceeds of $8.0 million. The Company
           recorded a dilution gain of $1,890,000, which reduced its investment
           from a 33.3% interest to a 24.88% interest.


       (b) In April 2000, the Company acquired 875,000 common shares (then
           representing approximately a 2.9% interest) for $7.0 million in cash
           in Corillian Corporation ("Corillian"), a provider of eFinance
           solutions for the Internet. The market value of the Corillian shares,
           based on the publicly quoted price, on December 31, 2000, is $10.5
           million. In addition, the Company announced its intention to work
           with Corillian to provide financial services providers with a
           seamless wired and wireless Internet banking services solution based
           on the 724 Solutions Financial Services Platform in combination with
           Corillian's eFinance Voyager platform. Corillian is a U.S. publicly
           traded company on the NASDAQ exchange trading under the symbol CORI.
           The investment is accounted for using the cost method of accounting.

                                      F-16

<PAGE>

724 SOLUTIONS INC.
Notes to Consolidated Financial Statements (continued)
(Tabular amounts in thousands of U.S. dollars, except per share amounts)

Years ended December 31, 2000, 1999 and 1998

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


6.     INVESTMENTS (CONTINUED):


       (c) In June 2000, the Company acquired a 9.5% interest (December 31, 2000
           - 5.98%) in Neomar Inc. ("Neomar") for $3.5 million in cash. Neomar
           is a privately held company in the business of providing Wireless
           Application Protocol ("WAP")-based services for personal digital
           assistants. In addition, the Company has entered into a license
           agreement with Neomar to license the WAP solution and incorporate it
           into the Company's Financial Services Platform. The investment is
           accounted for using the cost method of accounting.


7. INTANGIBLE AND OTHER ASSETS:

<TABLE>
<CAPTION>
-------------------------------------------------------------------------------------------------------------------
                                                                                     2000                 1999
-------------------------------------------------------------------------------------------------------------------
<S>                                                                          <C>                    <C>
       Goodwill                                                              $     87,387           $        -
       Deferred acquisition costs                                                   9,385                    -
       Acquired technology and other assets                                        12,634                1,100
-------------------------------------------------------------------------------------------------------------------
                                                                                  109,406                1,100

       Less accumulated amortization                                               18,843                    -

-------------------------------------------------------------------------------------------------------------------
                                                                             $     90,563           $    1,100
-------------------------------------------------------------------------------------------------------------------
</TABLE>


8.     SHAREHOLDERS' EQUITY:


       (a) Common share issuances:


           1997:


           In September 1997, the Company issued 3,999,800 common shares and
           granted an option to acquire an additional 4,000,000 common shares to
           the founder of the Company for gross proceeds of Cdn. $1,999,900. The
           option was exercisable at the holder's option at a price of $0.50 per
           common share. The option was exercised in October 1998.

                                      F-17

<PAGE>

724 SOLUTIONS INC.
Notes to Consolidated Financial Statements (continued)
(Tabular amounts in thousands of U.S. dollars, except per share amounts)

Years ended December 31, 2000, 1999 and 1998

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


8.     SHAREHOLDERS' EQUITY (CONTINUED):


           1998:


           In April 1998, the Company issued to Bank of Montreal ("BMO")
           1,000,000 common shares for gross proceeds of Cdn. $1,000,000 and
           granted BMO an option to subscribe for 2,428,570 additional common
           shares for Cdn. $1,000,000, exercisable upon BMO's extension of its
           technology licensing agreement with the Company for a second year,
           and payment of the second year's technology licensing fee. In October
           1998, following BMO's extension of the technology license agreement,
           BMO exercised the option to subscribe for 2,428,570 common shares for
           Cdn. $1,000,000. On the date of exercise, the fair value of the
           2,428,570 common shares was determined to be Cdn. $6,071,425,
           resulting in a deferred stock-based compensation charge of Cdn.
           $5,071,425 (U.S. $3,286,943).


           1999:


           In June 1999, the Company issued 541,790 common shares to Bank of
           America ("BA") at a price of $3.69 per share for gross proceeds of
           $2,000,000 and BA committed to subscribe for 541,790 additional
           common shares for $2,000,000. BA subscribed for the 541,790
           additional common shares in October 1999 for gross proceeds of
           $2,000,000.


           In August 1999, the Company issued to Citicorp Strategic Technology
           Corporation 950,000 common shares at a price of $3.83 per share for
           gross proceeds of $3,633,750. Citicorp Strategic Technology
           Corporation also contracted at this time to subscribe for 5,450,000
           additional common shares at a price of $3.83 per share upon the
           satisfaction of certain conditions, including the receipt of
           applicable regulatory approvals. The option was exercised in October
           1999 for gross proceeds of $20,846,250.


           In August 1999, the Company granted BA an option to subscribe for
           2,116,420 common shares at a price of $3.90 per share. The option was
           exercised in October 1999 for cash proceeds of $8,243,446.


           In August 1999, the Company issued 6,400,000 common shares to Sonera
           Corporation for a price of $3.83 per share for gross proceeds of
           $24,480,000.

                                      F-18

<PAGE>

724 SOLUTIONS INC.
Notes to Consolidated Financial Statements (continued)
(Tabular amounts in thousands of U.S. dollars, except per share amounts)

Years ended December 31, 2000, 1999 and 1998

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


8.     SHAREHOLDERS' EQUITY (CONTINUED):


           In October 1999, the Company completed three private placements for a
           total issuance of 1,973,856 common shares at prices of $3.83 and
           $7.50 per share and a warrant in respect of 666,668 common shares
           exercisable at a price of $7.50 per share for total proceeds of
           $10,000,000. This warrant expired unexercised on January 14, 2000.


           On December 30, 1999, all of the outstanding and reserved common
           shares were split on a basis of two-for-one. The Company's share
           capital and earnings (loss) per share have been restated on a
           retroactive basis to give effect to this share split.


           2000:


           In February 2000, the Company issued 6,900,000 common shares through
           an initial public offering at $26.00 per common share on the NASDAQ
           National Market and The Toronto Stock Exchange for net proceeds of
           approximately $164,200,000.


           During 2000, in connection with the acquisitions of Ezlogin and
           Spyonit, the Company issued an aggregate of 2,045,210 common shares
           with an ascribed aggregate value of $89,000,000 (note 3).


       (b) Stock option plans:


           The Company currently has a Canadian stock option plan, a U.S. stock
           option plan and a new 2000 stock option plan (the "Plans"), each of
           which is intended to attract, retain and motivate employees,
           officers, directors and consultants. The stock option committee, in
           conjunction with the compensation committee, determines, among other
           things, the eligibility of individuals to participate in the Plans
           and the term, vesting periods and the exercise price of options
           granted under the Plans. The Company has reserved an aggregate of
           3,200,000 common shares for issuance under the Canadian and U.S.
           plans, and an additional 2,000,000 common shares under the new 2000
           plan. In April 2000, the Board of Directors approved an increase in
           the maximum number of shares issuable under the 2000 Plan to
           3,800,000 common shares, which was ratified by the Company's
           shareholders at the meeting of shareholders held May 31, 2000.

                                      F-19


<PAGE>

724 SOLUTIONS INC.
Notes to Consolidated Financial Statements (continued)
(Tabular amounts in thousands of U.S. dollars, except per share amounts)

Years ended December 31, 2000, 1999 and 1998

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


8.     SHAREHOLDERS' EQUITY (CONTINUED):


           The Canadian stock option plan was adopted in September 1997. All
           options granted under the plan have a maximum term of 10 years and
           have an exercise price per share of no less than the fair market
           value of the common shares on the date of the option grant as
           determined by the Board of Directors or duly authorized committee as
           at the time of the grant. If an optionee's employment is terminated
           without cause, the vested portion of any grant will remain
           exercisable until its expiration date subject to compliance with
           certain non-competition and non-solicitation obligations. In the
           event of termination for cause, the vested portion of any grant will
           remain exercisable for a period of 30 days after the date of
           termination. Unvested options will expire on termination, except for
           such portion thereof which would have vested within six months or
           within the required statutory notice period following a termination
           without cause, whichever is earlier, or within one year if
           termination is due to death or disability. If a change of control of
           the Company occurs, all options become immediately vested and
           exercisable.


           The U.S. stock option plan was adopted in October 1999. The plan
           provides for the grant of both incentive stock options and
           non-qualified stock options. Incentive stock options granted under
           the plan have a maximum term of 10 years, or five years in the case
           of incentive stock options granted to an employee who owns common
           shares having more than 10% of the voting power of the Company. The
           exercise price of incentive stock options is the fair market value of
           common shares on the date of the grant, or 110% of the fair market
           value in the case of an incentive stock option granted to an employee
           who owns common shares having more than 10% of the voting power of
           the Company. Non-qualified stock options granted under the plan have
           a maximum term of 10 years and an exercise price of no less than 85%
           of the fair market value of the common shares on the date of the
           grant, or 110% of the fair market value for those employees who own
           common shares representing more than 10% of the voting power.
           Restricted shares granted under the plan have a maximum term of 10
           years and an exercise price of no less than 85% of the fair market
           value of the common shares on the date of the grant, or 100% of the
           fair market value in the case of restricted shares granted to an
           employee who owns common shares having more than 10% of the voting
           power.


           Under the Plans, the Company has the right to repurchase options from
           optionees after termination of employment on certain terms.

                                      F-20

<PAGE>

724 SOLUTIONS INC.
Notes to Consolidated Financial Statements (continued)
(Tabular amounts in thousands of U.S. dollars, except per share amounts)

Years ended December 31, 2000, 1999 and 1998

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


8.     SHAREHOLDERS' EQUITY (CONTINUED):


           The new 2000 stock option plan was adopted in December 1999 and
           replaced, on a prospective basis, the Canadian and U.S. stock option
           plans. The stock options granted under the Canadian and U.S. stock
           option plans prior to the date of completion of the IPO, continued to
           be effective and governed by the terms of the plans under which they
           were granted. The options granted under the 2000 plan have a maximum
           term of 10 years and an exercise price no less than the fair market
           value of the common shares on the date of the grant as determined by
           the Board of Directors or duly authorized committee at the date of
           the grant. Options held by any person under the new plan, together
           with any other options granted to that person may not at any time
           exceed 5% of the aggregate number of common shares outstanding. If a
           change of control of the Company occurs, all options granted under
           this plan will become immediately vested and exercisable.


           On June 16, 2000, the Company assumed the Ezlogin stock option plan
           in connection with its acquisition of Ezlogin. In aggregate, the
           Company assumed options to issue common shares of the Company
           totalling 91,796 to the Ezlogin option holders. The Company does not
           plan to issue any additional options under the Ezlogin stock option
           plan in the future. Instead, any of the former directors, officers,
           employees and consultants of Ezlogin will be issued options under the
           Company's 2000 stock option plan.


           The Ezlogin plan provided for the grant of both incentive stock
           options and non-qualified stock options. Incentive stock options
           granted under the plan have a maximum term of 10 years, or five years
           in the case of incentive stock options granted to an employee who
           owned common shares having more than 10% of the voting power of
           Ezlogin. In the event of termination and to the extent unexercised
           and exercisable, the option will remain exercisable for a period of
           three months after the date of termination. If termination is due to
           death or disability, the right to exercise the option will expire
           within one year.

                                      F-21

<PAGE>

724 SOLUTIONS INC.
Notes to Consolidated Financial Statements (continued)
(Tabular amounts in thousands of U.S. dollars, except per share amounts)

Years ended December 31, 2000, 1999 and 1998

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


8.     SHAREHOLDERS' EQUITY (CONTINUED):


           A summary of the status of the  Company's  options under the Plans
           as at  December 31,  2000 and 1999 is as follows:


           2000:

<TABLE>
<CAPTION>
-------------------------------------------------------------------------------------------------------------------
                                                                                  Weighted
                                                                                   average
                                                                                 remaining           Number of
                                                              Number of        contractual             options
           Exercise price ranges                                options       life (years)         exercisable
-------------------------------------------------------------------------------------------------------------------
           <S>                                                <C>             <C>                  <C>

           $  0.34 - 20.00                                    2,180,354                8.0           1,250,251
           $  29.82 - 36.78                                     449,055                9.8               1,002
           $  40.53 - 58.38                                   1,020,366                9.5                 566
           $  64.03 - 76.45                                      38,597                9.3                 672
           $  83.07 - 90.89                                     158,200                9.3              12,000
           $  105.95 - 155.98                                    68,900                9.2                   -
           $  163.87 - 207.82                                    58,050                9.2                   -

-------------------------------------------------------------------------------------------------------------------
                                                              3,973,522                8.7           1,264,491
-------------------------------------------------------------------------------------------------------------------
</TABLE>

           The following table summarizes the continuity of options issued under
           the Plans:

<TABLE>
<CAPTION>
-------------------------------------------------------------------------------------------------------------------
                                            2000                       1999                      1998
-------------------------------------------------------------------------------------------------------------------
                                                Weighted                   Weighted                   Weighted
                                                 average                    average                    average
                                   Number of    exercise      Number of    exercise     Number of     exercise
                                     options       price        options       price       options        price
-------------------------------------------------------------------------------------------------------------------
           <S>                     <C>          <C>           <C>          <C>          <C>           <C>

           Outstanding,
              beginning of year    2,876,930    $   2.81      1,865,000   $    0.49       400,000      $  0.35
           Granted                 2,238,836       50.84      1,071,196        8.44     1,465,000         0.54
           Exercised                (765,339)       0.81              -           -             -            -
           Cancelled                (376,905)      40.76        (59,266)       3.42             -            -

-------------------------------------------------------------------------------------------------------------------
           Outstanding, end
              of year              3,973,522       26.65      2,876,930         2.81    1,865,000         0.49
-------------------------------------------------------------------------------------------------------------------

           Options exercisable,
              end of year          1,264,491    $   3.15      1,237,926   $    0.72       625,166      $  0.34

-------------------------------------------------------------------------------------------------------------------
</TABLE>


           The Company recorded deferred stock-based compensation relating to
           options issued under the Company's Plans amounting to $14,364,000 for
           the year ended December 31, 2000 (1999 - $5,841,000; 1998 -
           $414,000). Amortization of deferred stock-based compensation amounted
           to $5,327,196 for the year ended December 31, 2000 (1999 - $165,000;
           1998 - $181,000).

                                      F-22

<PAGE>

724 SOLUTIONS INC.
Notes to Consolidated Financial Statements (continued)
(Tabular amounts in thousands of U.S. dollars, except per share amounts)

Years ended December 31, 2000, 1999 and 1998

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


9.     INCOME TAXES:


       The provision for income taxes differs from the amount computed by
       applying the statutory income tax rate to net income (loss) before income
       taxes. The sources and tax effects of the differences are as follows:

<TABLE>
<CAPTION>
-------------------------------------------------------------------------------------------------------------------
                                                                 2000                1999                 1998
-------------------------------------------------------------------------------------------------------------------
       <S>                                              <C>                  <C>                   <C>

       Basic rate applied to loss before
         provision for income taxes                     $     (27,156)       $     (6,168)         $    (1,201)
       Adjustments resulting from:
           Scientific research expenses not
              deducted for tax                                  1,320               2,285                  333
           Foreign losses affected at lower rates               6,935                 991                    -
           Stock-based compensation not
              deductible for tax                                2,815                 789                  701
           Amortization of intangibles                          7,962                   -                    -
           Share issue costs                                   (1,208)                  -                    -
           Other                                                1,563                 218                  167
                                                               (7,769)             (1,885)                   -
-------------------------------------------------------------------------------------------------------------------

       Unrecognized benefit of net operating
         losses carried forward                                 7,769               1,885                    -

-------------------------------------------------------------------------------------------------------------------
       Income taxes                                     $           -        $          -          $         -
-------------------------------------------------------------------------------------------------------------------


       Significant components of the Company's future tax assets are as follows:

-------------------------------------------------------------------------------------------------------------------
                                                                                     2000                 1999
-------------------------------------------------------------------------------------------------------------------

       Research and development expenses deferred
         for income tax purposes                                             $      4,387          $     3,067
       Net operating losses carried forward                                        11,427                1,909
       Share issue costs                                                            5,383                    -
       Capital assets                                                               1,326                    -
-------------------------------------------------------------------------------------------------------------------

       Future tax asset                                                            22,523                4,976

       Less:
           Future tax liability related to capital assets                               -                  420
           Future tax liability related to acquired technology                      3,781                    -
           Valuation allowance                                                     18,742                4,556

-------------------------------------------------------------------------------------------------------------------
                                                                             $          -          $         -
-------------------------------------------------------------------------------------------------------------------
</TABLE>

                                      F-23


<PAGE>

724 SOLUTIONS INC.
Notes to Consolidated Financial Statements (continued)
(Tabular amounts in thousands of U.S. dollars, except per share amounts)

Years ended December 31, 2000, 1999 and 1998

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


9.     INCOME TAXES (CONTINUED):


       In assessing the realizability of future tax assets, management considers
       whether it is more likely than not that some portion or all of the future
       tax assets will not be realized. The ultimate realization of future tax
       assets is dependent upon the generation of future taxable income during
       the periods in which those temporary differences become deductible.
       Management considers projected future taxable income, uncertainties
       related to the industry in which the Company operates, and tax planning
       strategies in making this assessment. In order to fully realize the
       future tax assets, the Company will need to generate future taxable
       income of approximately $71 million prior to the expiration of the net
       operating losses carried forward in the years 2003 to 2019. Due to the
       uncertainties related to the industry in which the Company operates, the
       tax benefit of the above carried forward amounts have been completely
       offset by a valuation allowance.


10.    LEASE COMMITMENTS:


       Future minimum lease payments under non-cancellable operating leases for
       premises and equipment at December 31, 2000 are as follows:

<TABLE>
-------------------------------------------------------------------------------
       <S>                                                           <C>
       2001                                                          $     4,558
       2002                                                                3,885
       2003                                                                3,479
       2004                                                                3,100
       2005 and thereafter                                                 1,544

--------------------------------------------------------------------------------
                                                                     $    16,566
--------------------------------------------------------------------------------
</TABLE>


       Rent expense for the year ended December 31, 2000 was $3,733,000 (1999 -
       $590,000; 1998 - $107,000). The Company is also responsible for certain
       common area costs at its various leased premises.

                                      F-24

<PAGE>

724 SOLUTIONS INC.
Notes to Consolidated Financial Statements (continued)
(Tabular amounts in thousands of U.S. dollars, except per share amounts)

Years ended December 31, 2000, 1999 and 1998

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


11.    SEGMENTED INFORMATION:


       The Company operates in a single reportable operating segment, that is,
       the design and delivery of an Internet infrastructure platform that
       enables financial institutions and other customers to deliver financial
       information and services to a range of internet-enabled devices. The
       single reportable operating segment derives its revenue from the sale of
       software and related services. Information about the Company's
       geographical net revenues and assets is set forth below:

<TABLE>
<CAPTION>
-------------------------------------------------------------------------------------------------------------------
                                                                       2000              1999             1998
-------------------------------------------------------------------------------------------------------------------
       <S>                                                      <C>                <C>              <C>

       Net revenue by geographic locations:
           Other North America                                  $    16,871        $    1,135       $        -
           Canada                                                     4,038                87              491
           International                                                337                 -                -

-------------------------------------------------------------------------------------------------------------------
                                                                $    21,246        $    1,222       $      491
-------------------------------------------------------------------------------------------------------------------
</TABLE>

<TABLE>
<CAPTION>
-------------------------------------------------------------------------------------------------------------------
                                                            2000                              1999
-------------------------------------------------------------------------------------------------------------------
                                                                 Intangible                         Intangible
                                                     Fixed        and other             Fixed        and other
                                                    assets           assets            assets           assets
-------------------------------------------------------------------------------------------------------------------
       <S>                                     <C>              <C>                <C>              <C>

       United States                           $     1,383      $    87,913        $       41       $    1,100
       Canada                                        9,537            2,650             2,325                -
       International                                   376                -                 -                -

-------------------------------------------------------------------------------------------------------------------
                                               $    11,296      $    90,563        $    2,366       $    1,100
-------------------------------------------------------------------------------------------------------------------
</TABLE>


       For the year ended December 31, 2000, four customers accounted for 43%,
       18%, 15% and 14% of revenue, respectively. For the year ended December
       31, 1999, three customers accounted for 100% of revenue. For the year
       ended December 31, 1998, one customer accounted for 100% of revenue.


       At December 31, 2000, three customers accounted for 41%, 25% and 16% of
       the accounts receivable balance. At December 31, 1999, three customers
       accounted for 100% of the accounts receivable balance.

                                      F-25

<PAGE>

724 SOLUTIONS INC.
Notes to Consolidated Financial Statements (continued)
(Tabular amounts in thousands of U.S. dollars, except per share amounts)

Years ended December 31, 2000, 1999 and 1998

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


12.    RELATED PARTY TRANSACTIONS:


       (a) On April 30, 1998, the Company entered into a share subscription
           agreement and a technology license agreement with Bank of Montreal
           ("BMO"). Pursuant to the share subscription agreement, on April 30,
           1998, BMO subscribed for 1,000,000 of the Company's common shares for
           Cdn. $1,000,000 and received an option to subscribe for 2,428,570
           additional common shares for Cdn. $1,000,000, exercisable in the
           event that BMO extended its technology license agreement for a second
           year and paid the second year's technology licensing fee. In October
           1998, upon exercising its right to extend the technology license
           agreement, BMO exercised the option and subscribed for 2,428,570
           shares for Cdn. $1,000,000. On the date of exercise, the fair value
           of the 2,428,570 common shares was determined to be Cdn. $6,071,425,
           resulting in a stock-based compensation charge related to software
           development revenue of Cdn. $5,071,425 (U.S. $3,286,943). The
           stock-based compensation is being attributed to the software
           development revenue over the term of the technology license agreement
           in proportion to the revenue recognized in the first and second years
           under the agreement. The excess of the stock-based compensation over
           the accumulated allocation to software development revenue has been
           netted against the related deferred revenue, with the balance being
           recorded as deferred stock-based compensation in shareholders'
           equity. As of December 31, 2000, the deferred stock-based
           compensation has been fully expensed. As at December 31, 2000 and
           1999, BMO owned approximately 8.8% and 11.7%, respectively, of the
           Company's outstanding common shares.


           The BMO technology license agreement had an initial term of 10 months
           commencing on April 30, 1998. BMO has extended the term of the
           technology license for two additional years such that the current
           renewal period ends on March 1, 2001. BMO has notified the Company
           that it intends to renew the agreement for an additional year. The
           technology license agreement provides for fixed annual license fees
           of Cdn. $3,000,000 in exchange for a worldwide perpetual license for
           all technology existing at the commencement of the license period and
           all technology developed during each term of the agreement. The
           annual license fees in the first two technology licensing terms of
           the agreement were subject to refund to the extent that the Company
           failed to meet certain spending commitments. As at December 31, 1999,
           all spending commitments had been satisfied. Initially BMO had a
           right to be the exclusive Canadian financial institution to which the
           Company would license its technology. In November 1998, BMO agreed to
           waive this right in exchange for the right to a payment, if any,
           equal to a percentage of licence fees paid by other Canadian
           financial institutions to license the Company's technology up to a
           maximum payment of Cdn. $700,000. To December 31, 2000, no amounts
           have been subject to payment under this provision. The Company has
           recognized the annual license fees of the technology license on a
           straight-line basis over the term of the license.

                                      F-26

<PAGE>

724 SOLUTIONS INC.
Notes to Consolidated Financial Statements (continued)
(Tabular amounts in thousands of U.S. dollars, except per share amounts)

Years ended December 31, 2000, 1999 and 1998

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


12.    RELATED PARTY TRANSACTIONS (CONTINUED):


           On December 29, 2000, the Company entered into an agreement with BMO
           that amended certain terms of the April 30, 1998 technology license
           agreement. The amended grants BMO the right to act as a service
           bureau, including sublicensing and hosting, in relation to the
           Company's financial service platform, comprising the banking and
           brokerage modules as well as the LiveClips aggregation and Spyonit
           alerts products. BMO is restricted to providing these services to
           financial institutions carrying on business anywhere in North America
           and having a total asset value of less than $20 billion. In return,
           BMO has agreed to pay a monthly royalty fee based on the number of
           end users. The Company has recognized royalty revenue in the amount
           of $1,300,000 related to a non-refundable royalty prepayment. In
           addition, BMO shall pay the Company for maintenance fees based on a
           fixed percentage of royalties related to activated end users.


       (b) On June 1, 1999, the Company entered into a subscription agreement
           with Bank of America, NA ("BA") and a technology licensing agreement
           with an affiliate of BA. Pursuant to the subscription agreement, BA
           subscribed for 541,790 common shares of the Company for $2,000,000.
           The subscription agreement also stipulated that BA would
           unconditionally subscribe for an additional 541,790 common shares on
           February 1, 2000 for $2,000,000. BA subscribed for the 541,790
           additional common shares in October 1999 as a result of the Company
           attracting additional equity investors at that time. On August 2,
           1999, an Option and Subscription Amending Agreement was entered into
           which granted BA the option to acquire a further 2,116,420 common
           shares for an aggregate subscription price of $8,243,456. BA
           exercised this option in October 1999.


           The technology license agreement provides for a fixed license fee to
           be paid to the Company over a 20-month period commencing on June 1,
           1999, in exchange for the delivery of specific products over the term
           of the agreement and for a license of all technology developed during
           the license period. The license fee has been recognized over the term
           of the contract commencing upon the delivery of the first product. As
           at December 31, 2000, the Company has delivered all the software
           products specified in the agreement. BA has an option to extend this
           agreement for consecutive one-year terms at the end of the 20-month
           term. The Company has also contracted with BA to provide consulting
           fees at commercial rates. As at December 31, 2000 and 1999, BA owned
           approximately 8.2% and 10.9%, respectively, of the Company's
           outstanding common shares.

                                      F-27

<PAGE>

724 SOLUTIONS INC.
Notes to Consolidated Financial Statements (continued)
(Tabular amounts in thousands of U.S. dollars, except per share amounts)

Years ended December 31, 2000, 1999 and 1998

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


12.    RELATED PARTY TRANSACTIONS (CONTINUED):


       (c) On December 29, 1999, the Company entered into a master technology
           license agreement with Citicorp Strategic Technology Corporation
           ("Citibank"). The initial term of the master agreement is five years.
           The agreement enables Citigroup and its affiliates to license the
           technology by entering into separate agreements which will
           incorporate the terms of the master agreement. During 2000, the
           Company has entered into an agreement under the master technology
           license agreement with a Citigroup affiliate in Asia. As at December
           31, 2000 and December 31, 1999, Citibank owned approximately 7.7% and
           21.8%, respectively, of the Company's outstanding common shares.


           Under the terms of the master agreement, Citibank is required to pay
           to the Company a specified minimum amount during each year that the
           master agreement is in effect, whether or not Citigroup or any
           Citigroup affiliates actually enter into agreements under the master
           agreement to license the technology. The required payments may
           increase each year of the agreement, up to specified maximum levels,
           based on specified targets relating to the number of worldwide
           Citigroup customers that use services based upon the Company's
           financial services platform, the number of Citigroup affiliates that
           license the technology and the amount of revenue generated under this
           agreement. The specified minimum amount received in respect of the
           first year of the contract has been recognized as revenue in the year
           ended December 31, 2000 and is being recognized rateably over the
           first year of the contract.


           The Company agreed to purchase from Citicorp Strategic Technology
           Corporation a range of consulting services that are described in the
           master agreement. These services will include consulting services
           relating to the promotion of the technology for adoption by
           Citigroup's affiliates. The Company will pay for these services a fee
           that will be calculated based upon the number of Citigroup affiliates
           that enter into agreements to license the technology during the first
           year of the master agreement, which ended at the end of December 31,
           2000. In the year ended December 31, 2000, the Company paid
           approximately $400,000 for these services.


           These technology license agreements are extendible annually at the
           option of the licensees. In addition, the Company has agreed to
           provide related support and maintenance services to the licensees at
           commercial rates.

                                      F-28

<PAGE>

724 SOLUTIONS INC.
Notes to Consolidated Financial Statements (continued)
(Tabular amounts in thousands of U.S. dollars, except per share amounts)

Years ended December 31, 2000, 1999 and 1998

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


12.    RELATED PARTY TRANSACTIONS (CONTINUED):


           The following table sets out the balances and transactions with the
           licensees relating to these agreements:

<TABLE>
<CAPTION>
-------------------------------------------------------------------------------------------------------------------
                                                                    2000                 1999             1998
-------------------------------------------------------------------------------------------------------------------
           <S>                                               <C>                   <C>                 <C>

           Related party balances:
                Accounts receivable, net of allowance
                  for doubtful accounts                      $     2,904           $    2,051          $    34
                Deferred revenue, net of deferred
                  stock-based compensation of nil
                  (1999 - $248)                                    1,400                4,125                -

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

           Related party transactions:
                Net revenue:
                    Product                                  $    11,115           $       53          $   283
                    Services                                       4,733                  963              208

-------------------------------------------------------------------------------------------------------------------
</TABLE>


       (d) In August 1999, the Company entered into a two-year consulting
           agreement with a director of the Company providing for a monthly
           consulting fee of $34,000, together with options, granted under the
           option plan, to purchase 48,000 common shares of the Company at an
           exercise price of $3.75 per share. This consulting agreement was
           cancelled, with the last payment being made in August 2000.


13. EARNINGS (LOSS) PER SHARE:


       Due to the net loss for all periods presented, all potential common
       shares outstanding are considered anti-dilutive and are excluded from the
       calculation of diluted loss per share. Common shares issuable on the
       exercise of common shares that could potentially dilute basic loss per
       share in the future that were not included in the computation of diluted
       loss per share, because to do so would have been anti-dilutive for the
       year ended December 31, 2000 and 1999, amounted to 2,999,473 and
       2,117,951, respectively.

                                      F-29

<PAGE>

724 SOLUTIONS INC.
Notes to Consolidated Financial Statements (continued)
(Tabular amounts in thousands of U.S. dollars, except per share amounts)

Years ended December 31, 2000, 1999 and 1998

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


14. CANADIAN AND U.S. ACCOUNTING POLICY DIFFERENCES:


       The financial statements of the Company have been prepared in accordance
       with generally accepted accounting principles ("GAAP") as applied in
       Canada, which conform in all material respects with generally accepted
       accounting principles in the United States, except as noted below.


       Comprehensive income:


       In June 1997, the Financial Accounting Standards Board issued
       SFAS No. 130, "Reporting Comprehensive Income" (SFAS No. 130), which
       establishes standards for reporting and presentation of comprehensive
       income. This standard defines comprehensive income as the changes in
       equity of an enterprise, except those resulting from stockholder
       transactions.


       As described in note 6(b), the Company has an investment in a publicly
       traded entity which the Company has classified as an available-for-sale
       security. Under U.S. GAAP, the Company would record the investment at
       fair value and record the unrealized gain as a separate component of
       stockholders' equity. This would result in investments and stockholders'
       equity on the balance sheet being increased by $3.5 million and a
       separate caption in stockholders' equity entitled "accumulated other
       comprehensive income" with a balance of $3.5 million. Comprehensive loss
       for the year ended December 31, 2000 would be $59.8 million. For all
       other periods presented, comprehensive loss would be the same as the loss
       for the period presented.


       Supplemental disclosures required under U.S. GAAP include the following:


       (a) Recent Accounting Pronouncements:


           In June 1998,  the  Financial  Accounting  Standards  Board issued
           Statement  of  Financial  Accounting Standards No. 133,  "Accounting
           for  Derivative  Instruments  and Hedging  Activities"
           (SFAS No. 133). SFAS No. 133 establishes  accounting and reporting
           standards requiring that every derivative  instrument  be recorded
           on the balance  sheet as either an asset or liability  measured at
           its fair value.  SFAS No. 133, as recently  amended,  is effective
           for fiscal years  beginning  after June 15, 2000. To date, the
           Company has not entered into derivative  instruments.  Management
           believes the adoption of SFAS No. 133 will not have a material effect
           on the Company's financial position or results of operations.

                                      F-30

<PAGE>

724 SOLUTIONS INC.
Notes to Consolidated Financial Statements (continued)
(Tabular amounts in thousands of U.S. dollars, except per share amounts)

Years ended December 31, 2000, 1999 and 1998

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


14.    CANADIAN AND U.S. ACCOUNTING POLICY DIFFERENCES (CONTINUED):


       (b) SFAS 123 Pro Forma Information:


           The Company has elected to apply the disclosure-only provisions of
           SFAS No. 123, Accounting for Stock-Based Compensation, for the
           disclosure of compensation costs related to employee stock options
           valued at fair value. For companies electing not to adopt the fair
           value measurement for stock-based compensation, the pronouncement
           requires the disclosure of pro forma net income and net income (loss)
           per share information as if the Company had accounted for its stock
           options issued from inception on July 28, 1997 under the fair value
           method. A summary of the required pro forma disclosure of the impact
           on the statement of operations is presented in the table below:

<TABLE>
<CAPTION>
-------------------------------------------------------------------------------------------------------------------
                                                                 2000                1999                 1998
-------------------------------------------------------------------------------------------------------------------
<S>                                                     <C>                  <C>                   <C>

           Loss for the year - U.S. GAAP                $     (63,264)       $    (13,831)         $    (2,699)
           Compensation expense related
              to the fair value of stock options              (17,064)               (362)                 (23)

-------------------------------------------------------------------------------------------------------------------
           Pro forma loss for the year                  $     (80,328)       $    (14,193)         $    (2,722)
-------------------------------------------------------------------------------------------------------------------

           Pro forma loss for the year per share        $      (2.17)        $      (0.84)         $     (0.47)
-------------------------------------------------------------------------------------------------------------------
</TABLE>


           The fair value of each option granted prior to the Company becoming a
           publicly traded company has been estimated at the date of grant using
           the minimum value method and by applying the following assumptions:
           weighted average risk-free interest rate of 4.9% for the year ended
           December 31, 2000 (1999 - 4.9%; 1998 - 5.1%), dividend yield of 0%
           and an expected life of the options of five years.


           The fair value of each option granted between the date the Company
           became a publicly traded company and December 31, 2000 has been
           estimated at the date of grant using the Black-Scholes option pricing
           model with the following assumptions used: dividend yield of zero,
           expected volatility of 145%, risk-free rate of return of 6.41% and an
           expected life of the option of five years.


           The Company has assumed no forfeiture rate, as adjustments for actual
           forfeitures are made in the year they occur. The weighted average
           grant date fair value of options issued in the year ended December
           31, 2000 was $78.28 (1999 - $3.26; 1998 - $0.13).

                                      F-31

<PAGE>

724 SOLUTIONS INC.
Notes to Consolidated Financial Statements (continued)
(Tabular amounts in thousands of U.S. dollars, except per share amounts)

Years ended December 31, 2000, 1999 and 1998

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


14.    CANADIAN AND U.S. ACCOUNTING POLICY DIFFERENCES (CONTINUED):


       (c) Other disclosures:


           U.S. GAAP requires the disclosure of accrued liabilities that exceed
           5% of current liabilities.


           Included in accrued liabilities at December 31, 2000, are accrued
           compensation expenses of $3.3 million, accrued acquisition costs of
           $9.0 million and consulting fees of $2.1 million. At December 31,
           1999, there were no individual amounts that accounted for more than
           5% of current liabilities.


15. SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION:


       The following presents the supplemental disclosure of cash flow
       information for the year ended December 31, 2000. Non-cash activities in
       the other periods presented in these financial statements are not
       significant.

<TABLE>
-------------------------------------------------------------------------------------------------------------------
       <S>                                                                                         <C>

       Supplemental disclosure of non-cash financing and investing activities:
           Liabilities assumed in business acquisitions                                            $       772
           Fair value of assets assumed on business
              acquisitions less cash acquired                                                           11,666

-------------------------------------------------------------------------------------------------------------------
</TABLE>

                                      F-32


<PAGE>

724 SOLUTIONS INC.
Notes to Consolidated Financial Statements (continued)
(Tabular amounts in thousands of U.S. dollars, except per share amounts)

Years ended December 31, 2000, 1999 and 1998

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


16.    SUBSEQUENT EVENTS:


       On November 29, 2000, the Company entered into an agreement to acquire
       all of the issued and outstanding shares of Tantau Software, Inc. in
       exchange for the issuance of common shares of the Company. The
       acquisition closed on January 16, 2001. Under the terms of the agreement,
       the Company acquired all of the outstanding common shares and common
       share purchase options in exchange for the issuance of 17,091,679 common
       shares and 2,039,245 replacement common share purchase options.


       Of the 17,091,679 common shares issued, 14,248,346 common shares are
       fully vested shares with the balance of 2,843,333 subject to future
       vesting. The value of the fully vested shares has been recorded as a
       component of the purchase consideration. The value of the unvested shares
       has been allocated between purchase consideration and deferred
       stock-based compensation. The Company has determined the amount
       attributable to deferred stock-based compensation as the proportionate
       share of the intrinsic value of the unvested shares pertaining to the
       service period subsequent to the date of acquisition. The amount
       attributable to purchase consideration represents the fair value of the
       unvested shares as at the purchase date less the amount recorded as
       deferred stock-based compensation related to these unvested shares.


       The value of the 2,039,245 replacement options issued on acquisition has
       been allocated between purchase consideration and deferred stock-based
       compensation. The Company has determined the amount attributable to
       deferred stock-based compensation as the proportionate share of the
       intrinsic value of the stock option pertaining to the service period
       subsequent to the date of acquisition. The amount attributable to
       purchase consideration represents the fair value of the stock option as
       at the purchase date less the amount recorded as deferred stock-based
       compensation related to the stock options.


       The purchase price has been determined to be approximately $407,734,000
       including acquisition costs of approximately $9,385,000. The deferred
       stock-based compensation related to the unvested shares and replacement
       stock options has been determined to be approximately $53 million.

                                      F-33

<PAGE>

724 SOLUTIONS INC.
Notes to Consolidated Financial Statements (continued)
(Tabular amounts in thousands of U.S. dollars, except per share amounts)

Years ended December 31, 2000, 1999 and 1998

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


16.    SUBSEQUENT EVENTS (CONTINUED):


       The acquisition will be accounted for by the purchase method with the
       fair value of the consideration paid being allocated to the fair value of
       the identifiable assets and liabilities assumed on the closing date. A
       preliminary acquisition equation based on the estimated fair values of
       the identifiable assets and liabilities as at December 31, 2000 has been
       set out below. There are no significant accounting differences between
       Canadian and U.S. GAAP in the accounting for the acquisition. The Company
       has not yet finalized its assessment of the allocation between intangible
       assets and goodwill.

<TABLE>
<CAPTION>
-------------------------------------------------------------------------------------------------------------------
                                                                                                    Fair value
-------------------------------------------------------------------------------------------------------------------
       <S>                                                                                          <C>

       Net assets acquired:
           Cash and cash equivalents                                                              $     33,270
           Accounts receivable                                                                           5,498
           Prepaid expenses and other receivables                                                          398
           Investment in Accrue Software Inc.                                                              830
           Capital assets                                                                                1,835
           Intangible and other assets                                                                     205
           Accounts payable                                                                             (1,700)
           Accrued liabilities                                                                          (2,878)
           Deferred revenue                                                                               (665)
           Notes payable                                                                                (5,000)
-------------------------------------------------------------------------------------------------------------------
                                                                                                        31,793

       Allocation of the net purchase price:
           Goodwill and other intangibles                                                              322,661
           Deferred stock-based compensation                                                            53,280
-------------------------------------------------------------------------------------------------------------------
                                                                                                       375,941

-------------------------------------------------------------------------------------------------------------------
                                                                                                  $    407,734
-------------------------------------------------------------------------------------------------------------------

       Consideration paid:
           Share and stock option consideration                                                   $    398,349
           Costs of acquisition                                                                          9,385
-------------------------------------------------------------------------------------------------------------------
                                                                                                  $    407,734
-------------------------------------------------------------------------------------------------------------------
</TABLE>

                                      F-34


<PAGE>

724 SOLUTIONS INC.
Notes to Consolidated Financial Statements (continued)
(Tabular amounts in thousands of U.S. dollars, except per share amounts)

Years ended December 31, 2000, 1999 and 1998

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


16.    SUBSEQUENT EVENTS (CONTINUED):


       The table below reflects unaudited pro forma consolidated results of the
       Company and Tantau as if the acquisition had taken place on January 1,
       2000. The pro form results assume that the allocation of the excess
       purchase price over the net asets of Tantau before the identification of
       identifiable intangible assets has been allocated to goodwill and is
       being amortized on a straight line basis over five years.

<TABLE>
<CAPTION>
--------------------------------------------------------------------------------
                                                                     Year ended
                                                                   December 31,
                                                                           2000
--------------------------------------------------------------------------------
                                                                     (Unaudited)
       <S>                                                        <C>
       Revenue                                                    $      31,477
       Pro forma loss for the period                                   (223,390)
       Pro forma loss for the period per common share                     (4.43)

--------------------------------------------------------------------------------
</TABLE>

                                      F-35

<PAGE>


                                   SIGNATURES

                  Pursuant to the requirements of Section 13 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, in the city of
Toronto, Ontario on March 29, 2001.

                                 724 SOLUTIONS INC.


                                 By:/s/ Gregory Wolfond
                                    ---------------------
                                    Gregory Wolfond
                                    Chairman of the Board



<PAGE>


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

<TABLE>
<CAPTION>
            SIGNATURE                                   TITLES                             DATE
            ---------                                   ------                             ----
<S>                                  <C>                                                <C>

        /s/ Gregory Wolfond          Chairman (principal executive officer)             March 29, 2001
        -----------------
        Gregory Wolfond


       /s/ John Sims                 Chief Executive Officer (principal                 March 29, 2001
       ------------------            executive officer)
         John Sims

       /s/ Karen Basian              Chief Financial Officer (principal                 March 29, 2001
       ------------------            financial and accounting officer)
         Karen Basian

      /s/ Lloyd F. Darlington                      Director                             March 29, 2001
       ------------------
         Lloyd F. Darlington


      /s/ James D. Dixon                           Director                             March 29, 2001
       ------------------
        James D. Dixon


      /s/ Antti Vasara                             Director                              March 29, 2001
       ------------------
          Antti Vasara


     /s/ Heather Reisman                           Director                               March 29, 2001
       ------------------
       Heather Reisman


     /s/ Barry J. Reiter                           Director                               March 29, 2001
       ------------------
        Barry J. Reiter


     /s/ Holger Kluge                              Director                               March 29, 2001
       -----------------
         Holger Kluge


    /s/ J. Robert S. Prichard                       Director                              March 29, 2001
       -----------------
     J. Robert S. Prichard


    /s/ Frederick T. White                          Director                              March 29, 2001
        -----------------
       Frederick T. White


    /s/ Joseph Aragona                              Director                              March 29, 2001
        -----------------
         Joseph Aragona


     /s/ Charles Goldman                            Director                              March 29, 2001
        ----------------
        Charles Goldman
</TABLE>


                            AUTHORIZED REPRESENTATIVE

                  Pursuant to the requirements of Section 13 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, in the city of
Toronto, Ontario on March 29, 2001.

                                          724 SOLUTIONS CORP


                                          By: /s/ Karen Basian
                                             ---------------------------
                                               Karen Basian
                                               Chief Financial Officer