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

                                   FORM 10-QSB

(Mark  One)

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

                                       OR

[ ]  TRANSITION  REPORT  PURSUANT  TO  SECTION  13  or  15(d)  OF THE SECURITIES
     EXCHANGE ACT OF 1934 FOR THE TRANSITION PERIOD FROM _________ TO __________


                         COMMISSION FILE NO.: 000-30326
                                  VSOURCE, INC.
        (Exact name of small business issuer as specified in its charter)

              DELAWARE                                       77-0557617
     (State or other jurisdiction                         (I.R.S.  Employer
   of incorporation or organization)                     Identification  No.)

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

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

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

Number of shares of Common Stock, par value $.01, outstanding as of December 4,
2000                                                                  16,237,964
Number  of  shares  of  Series  1-A  Convertible Preferred Stock, par value $.01
     outstanding  as  of  December  4,  2000                           2,686,848
Number  of  shares  of  Series  2-A  Convertible Preferred Stock, par value $.01
     outstanding  as  of  December  4,  2000                           1,672,328

Transitional  Small  Business  Disclosure  Format  (Check one):  Yes [ ]  No [X]


<PAGE>
<TABLE>
<CAPTION>
                                   TABLE OF CONTENTS
                                   -----------------


                                                                  Page
                                                                  ----
PART I - FINANCIAL INFORMATION
<S>      <C>                                                      <C>
Item 1.  FINANCIAL STATEMENTS                                        1
Item 2.  MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
         CONDITION AND RESULTS OF OPERATIONS                         9

PART II - OTHER INFORMATION

Item 1.  LEGAL PROCEEDINGS                                          24
Item 2.  CHANGES IN SECURITIES                                      24
Item 3.  DEFAULTS UPON SENIOR SECURITIES                            25
Item 4.  SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS        25
Item 5.  OTHER INFORMATION                                          25
Item 6.  EXHIBITS, REPORTS ON FORM 8-K                              25
SIGNATURES                                                          27
EXHIBIT INDEX                                                       28
</TABLE>


<PAGE>
<TABLE>
<CAPTION>
PART  I  -  FINANCIAL  INFORMATION

                                              VSOURCE, INC.
                                       CONSOLIDATED BALANCE SHEETS

                                                  ASSETS

                                                                    October 31, 2000    January 31, 2000
                                                                      (unaudited)
                                                                   ------------------  ------------------
<S>                                                                <C>                 <C>
Current assets:
  Cash in bank                                                     $       8,154,474   $       5,124,399
  Restricted cash                                                            108,694              82,768
                                                                   ------------------  ------------------
  Total cash                                                               8,263,168           5,207,167

  Accounts receivable                                                        191,500                  --
  Notes receivable - officers and other                                      183,367                  --
  Prepaid expenses                                                           148,383                  --
                                                                   ------------------  ------------------
  Total current assets                                                     8,786,418           5,207,167

Property and equipment
  Fixed assets                                                               819,017             240,208
  Less:  accumulated depreciation                                           (121,564)            (17,708)
                                                                   ------------------  ------------------
  Property and equipment, net                                                697,453             222,500

Notes receivable - officers and other, non-current                            50,755             110,728
                                                                   ------------------  ------------------
                                                                   $       9,534,626   $       5,540,395
                                                                   ==================  ==================
LIABILITIES AND SHAREHOLDERS' EQUITY/(DEFICIT)
Current liabilities:
  Accounts payable                                                 $         366,818   $         247,472
  Accrued liabilities                                                         79,087             100,937
  Convertible notes payable                                                  150,000             150,000
  Liabilities related to private placement of preferred stock                     --           6,002,500
                                                                   ------------------  ------------------
  Total current liabilities                                                  595,905           6,500,909

Shareholders' equity (deficit)
  Preferred stock Series 1-A ($0.01 par value, 2,900,000 shares
        authorized:  2,725,232 issued and outstanding;
         aggregate liquidation value is $6,813,080)                           27,252                  --

  Preferred stock Series 2-A ($0.01 par value, 2,100,000 shares
        authorized:  1,672,328 issued and outstanding;
         aggregate liquidation value is $10,719,622)                          16,723                  --

  Common stock ($0.01 par value, 50,000,000 shares
        authorized: 16,101,523 issued and outstanding)                       161,015             158,071
  Additional paid-in capital                                              63,955,951          10,645,934
  Deferred compensation                                                  (12,953,649)         (1,780,817)
  Accumulated equity (deficit)                                           (41,841,773)         (9,804,904)
    Less:  Notes receivable from the sale of stock                          (426,798)           (178,798)
                                                                   ------------------  ------------------
  Total shareholders' equity (deficit)                                     8,938,721            (960,514)
                                                                   ------------------  ------------------
                                                                   $       9,534,626   $       5,540,395
                                                                   ==================  ==================

                      The accompanying notes are an integral part of these statements.


                                      - 1 -
<PAGE>
                                               VSOURCE, INC.
                                 CONSOLIDATED STATEMENTS OF OPERATIONS
                                                (UNAUDITED)

                                                                         For the three months ended
                                                                    October 31, 2000    October 31, 1999
                                                                   ------------------  ------------------
Revenue                                                            $         151,500   $           2,230

Expenses
  General and administrative (including
1,168,952 of stock based compensation for
the three month period ended October 31, 2000)                             2,017,562             226,745

  Research and development (including
1,210,201 of stock based compensation for
the three month period ended October 31, 2000)                             4,004,459           1,034,021
                                                                   ------------------  ------------------
                                                                           6,022,021           1,260,766
                                                                   ------------------  ------------------

Loss from operations                                                      (5,870,521)         (1,258,536)

Other income/(expense)
  Interest income                                                             36,023                  --
  Other income                                                                    --                  --
  Interest expense                                                            (3,698)                 --
                                                                   ------------------  ------------------
Loss before income taxes                                                  (5,838,196)         (1,258,536)

Provision for income taxes                                                        --                  --
                                                                   ------------------  ------------------
Net loss                                                           $      (5,838,196)  $      (1,258,536)
                                                                   ==================  ==================
Basic loss available to
  common stockholders                                              $     (12,468,976)  $      (1,258,536)
                                                                   ==================  ==================

Basic weighted average number of
  common shares outstanding:                                              15,969,038          14,339,164
                                                                   ==================  ==================
Net loss per share available to common stockholders

  Basic                                                            $           (0.78)  $           (0.09)
                                                                   ==================  ==================

  Diluted                                                          $           (0.78)  $           (0.09)
                                                                   ==================  ==================

                      The accompanying notes are an integral part of these statements.


                                      - 2 -
<PAGE>
                                               VSOURCE, INC.
                                 CONSOLIDATED STATEMENTS OF OPERATIONS
                                                (UNAUDITED)

                                                                          For the nine months ended
                                                                    October 31, 2000    October 31, 1999
                                                                   ------------------  ------------------
Revenue                                                            $         214,000   $          10,215

Expenses
  General and administrative (including
6,617,357 of stock based compensation for
the nine month period ended October 31, 2000)                              9,746,801             803,742

  Research and development (including
3,031,209 of stock based compensation for
the nine month period ended October 31, 2000)                              9,087,797           2,154,073
                                                                   ------------------  ------------------
                                                                          18,834,598           2,957,815
                                                                   ------------------  ------------------
Loss from operations                                                     (18,620,598)         (2,947,600)

Other income/(expense)
  Interest income                                                             91,584                  --
  Other income                                                                 4,019                  --
  Interest expense                                                           (11,096)                 --
                                                                   ------------------  ------------------
Loss before income taxes                                                 (18,536,091)         (2,947,600)

Provision for income taxes                                                     1,600                  --
                                                                   ------------------  ------------------
Net loss                                                           $     (18,537,691)  $      (2,947,600)
                                                                   ==================  ==================
Basic loss available to
  common stockholders                                              $     (32,036,868)  $      (2,947,600)
                                                                   ==================  ==================

Basic weighted average number of
  common shares outstanding:                                              15,869,895          13,296,009
                                                                   ==================  ==================
Net loss per share available to common stockholders

  Basic                                                            $           (2.02)  $           (0.22)
                                                                   ==================  ==================

  Diluted                                                          $           (2.02)  $           (0.22)
                                                                   ==================  ==================

                      The accompanying notes are an integral part of these statements.


                                      - 3 -
<PAGE>
                                               VSOURCE, INC.
                                  CONSOLIDATED STATEMENTS OF CASH FLOWS

                                                (UNAUDITED)

                                                                          For the nine months ended
                                                                    October 31, 2000    October 31, 1999
                                                                   ------------------  ------------------
Cash flows from operating activities:
  Net loss                                                         $     (18,537,691)  $      (2,947,600)
  Adjustments to reconcile net loss to net cash
   used in operating activities:
    Depreciation and amortization                                            104,517             322,090
    Compensation expense for stock option grants                           3,775,099                  --
    Compensation expense for warrant grants                                5,708,810                  --
    Compensation expense for stock issued                                    164,656                  --
    Beneficial conversion feature                                                 --             241,753
    Issuance of stock and debt for services, expense
                reimbursements and accrued interest                               --             647,839
  Changes in assets and liabilities:
    (Increase)/decrease in accounts receivable                              (191,500)              3,590
    (Increase)/decrease in note receivables-officer and other               (183,367)                 --
    (Increase)/decrease in prepaid expenses                                 (148,383)             33,750
    (Increase)/decrease in note receivable
      -officers and other, non-current                                        59,312                 281
    Increase/(decrease) in accounts payable                                  119,345             250,953
    Increase/(decrease) in deferred revenue                                       --              (3,250)
    Increase/(decrease) in accrued expenses                                  (21,850)            (27,034)
                                                                   ------------------  ------------------
  Net cash used in operating activities                                   (9,151,052)         (1,477,628)

Cash flows from investing activities:
  Purchase of property and equipment                                        (463,269)           (151,088)
  Purchase of capitalized software                                          (115,540)                 --
  Advances to related parties                                               (248,000)            (52,833)
                                                                   ------------------  ------------------
  Net cash used in investing activities                                     (826,809)           (203,921)

Cash flows from financing activities:
  Proceeds from issuance of common stock                                   2,144,034           1,749,942
  Proceeds from issuance of preferred stock                               10,889,828                  --
  Proceeds from borrowings                                                        --              29,700
                                                                   ------------------  ------------------
  Net cash provided by financing activities                               13,033,862           1,779,642
                                                                   ------------------  ------------------
Net increase in cash                                                       3,056,001              98,093
                                                                   ------------------  ------------------
Cash at beginning of period                                                5,207,167              59,937
                                                                   ------------------  ------------------
Cash at end of period                                              $       8,263,168   $         158,030
                                                                   ==================  ==================
Supplemental disclosure:
Reclassification  of  liability  to equity                         $       6,002,500   $              --
Interest  Paid                                                     $              --   $              --
Income  Taxes                                                      $           1,600   $           1,600

                      The accompanying notes are an integral part of these statements.
</TABLE>


                                      - 4 -
<PAGE>
                                  VSOURCE, INC.
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                                 OCTOBER 31,2000


1.     SUMMARY  OF  SIGNIFICANT  ACCOUNTING  PRINCIPLES

     The  interim  consolidated financial statements as of October 31, 2000 have
been  prepared  by  Vsource,  Inc.  (the  "Company")  pursuant  to the rules and
regulations  of  the  Securities and Exchange Commission (the "SEC") for interim
financial  reporting.  These  consolidated  statements are unaudited and, in the
opinion  of  management, include all adjustments (consisting of normal recurring
adjustments  and  accruals) necessary to present fairly the consolidated balance
sheets,  consolidated  operating  results,  and  consolidated cash flows for the
period  presented in accordance with accounting principles generally accepted in
the  United  States  of  America ("US GAAP").  The consolidated balance sheet at
January  31,  2000  has  been  derived  from  the audited consolidated financial
statements at that date. Operating results for the interim periods presented are
not  necessarily  indicative  of  the  results that may be expected for the year
ending  January  31, 2001. Certain information and footnote disclosures normally
included  in  financial statements prepared in accordance with US GAAP have been
omitted  in  accordance  with  the  rules  and  regulations  of  the  SEC. These
consolidated financial statements should be read in conjunction with the audited
consolidated  financial  statements,  and  accompanying  notes,  included in the
Company's  Registration  Statement  on  Form  10-SB (formerly Interactive Buyers
Network  International,  Ltd.)  and  Annual Report on Form 10-KSB for the fiscal
year  ended  January  31,  2000  (File  No.  000-030326).

USE  OF  ESTIMATES  IN  PREPARATION  OF  CONSOLIDATED  FINANCIAL  STATEMENTS

     Management  of  the  Company has made a number of estimates and assumptions
relating  to  the  reporting  of  assets,  liabilities,  revenue,  expenses  and
disclosure  of  contingent  assets  and  liabilities  to prepare these financial
statements  in  accordance  with US GAAP. Accordingly, actual results may differ
from  those  estimates.

LOSS  PER  SHARE

     Basic  and  diluted  loss per share of common stock is computed by dividing
the  loss  available  to  common  shareholders by the weighted average number of
common shares outstanding during the period shown.  Common stock equivalents are
not  included in the determination of diluted loss per share, as their inclusion
would  be  antidilutive.  See  notes  to consolidated financial statements as of
January  31,  2000  and  Notes  5  and  6.

REVENUE RECOGNITION

     Revenue is recognized for time and materials-based arrangements as services
are performed and fixed fee arrangements on the percentage-of-completion method.
Under  this  approach,  revenues  and gross profit are recognized as the work is
performed,  based  on  the  ratio  of  costs  incurred to total estimated costs,
commencing  when  progress  reaches  a  point  where experience is sufficient to
estimate  final  results  with  reasonable  accuracy.  Provisions  for estimated
losses  on uncompleted contracts are made in the period in which such losses are
determined.  Customer  deposits  represent  the  amount  of  customer  payments
received in advance Of services being performed.  Transaction revenue, which the
company  has  not  yet  begun  to  receive,  will be accounted for in the period
earned.

STOCK  BASED  COMPENSATION

     The Company accounts for stock based compensation using the intrinsic value
based  method in accordance with Statement of Financial Accounting Standards No.
123,  "Accounting  for  Stock-Based  Compensation,"  ("SFAS  123"), which allows
companies  to  continue to recognize compensation expense pursuant to Accounting
Principles  Board  Opinion  No.  25  ("APB 25"), "Accounting for Stock Issued to
Employees"  but  requires  companies  to  disclose  the  effect  on  earnings of
compensation expense for stock options based on the fair value of the options at
the  grant  date.  Accordingly,  employee compensation cost for stock options is
measured  as  the excess of the fair market value over the exercise price at the
measurement  date.

2.     NOTES  RECEIVABLE  FROM  THE  SALE  OF  STOCK

     The  Company has notes receivable related to the sale of stock from several
officers, which totaled $426,798 as of October 31, 2000. The notes bear interest
at  the  annual rates shown below. The notes were granted in connection with the
purchase  of  stock  or  exercise  of  stock  options  as  follows:


                                      - 5 -
<PAGE>
<TABLE>
<CAPTION>
                                                                                        Balance as of
                  Date granted     Interest rate   Shares related       Date Due       October 31, 2000
               ------------------  --------------  --------------  ------------------  -----------------
<S>            <C>                 <C>             <C>             <C>                 <C>
Unsecured      May 15, 1999          6% per annum         636,100  On demand           $         178,798

Secured        September 19, 2000    8% per annum          39,002  September 15, 2003            248,000
                                                                                         ---------------

                                                                   Total               $         426,798
                                                                                         ---------------
</TABLE>


3.     NOTES  RECEIVABLE  -  OFFICERS  AND  OTHER

     In October 2000, Robert C.  McShirley, the Chief Executive Officer borrowed
$400,000  from  the Company in exchange for a secured ninety-day promissory note
which  bears  interest  at  a  rate  of 8% per annum.  In late October 2000, Mr.
McShirley repaid the Company $250,000 of the original balance, leaving a balance
of  $150,000  plus  interest.  This  note  receivable is included in the current
portion  of  Notes  Receivable  -  officers  and  other.  In addition, the Chief
Operating  Officer  borrowed $50,000 from the Company in exchange for a two-year
promissory  note in such amount, which bears interest at a rate of 8% per annum.
This  note  receivable  is  including  in  long-term  portion  of  notes
receivable-officers  and  other.

      The  Company  has  issued  loans  and other advances to officers and other
employees.  The current Portion is $183,367 and the long-term Portion is $50,755
as  of  October  31,  2000. The notes are due from two to twenty-four months and
bear  interest  at  rates  up  to  8%  per  annum.

4.     CONVERTIBLE  NOTES  PAYABLE

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

     The  Company  allocated  a portion of the convertible notes to the embedded
beneficial  conversion  feature  in  the  convertible notes and credited paid-in
capital.  The portion allocated to the beneficial conversion feature was charged
to  interest  expense  at  the date of issuance.  The amount charged to interest
expense  related  to convertible notes issued during the nine-month period ended
October  31,  2000  was  $11,096.

5.     SHAREHOLDERS'  EQUITY

     Common  Stock - On October 31, 2000, there were 16,101,523 shares of common
stock outstanding.  This reflects the issuance of 294,352 shares of common stock
during  the  nine  months ended October 31, 2000, an increase of $2,944 from the
value  of  common  stock,  $0.01  par  value,  on  January  31,  2000.

     Preferred  Stock  -  Effective February 24, 2000, the Company had 5,000,000
shares  of preferred stock authorized and had designated 2,900,000 shares of the
preferred  stock  "Series  1-A  Convertible  Preferred Stock" of which 2,802,000
shares were initially issued, with a conversion feature of $2.50 per share.  The
Company  allocated  all  of  the net proceeds from the issuance of the preferred
stock  to  an  embedded  beneficial  conversion  feature.  The recorded discount
resulting  from  the allocation was fully amortized through retained earnings at
issuance.  In  the  event of any liquidation or dissolution, either voluntary or
involuntary,  the holders of the Series 1-A Convertible Preferred Stock shall be
entitled  to  receive, prior and in preference to any distribution of any of the
assets  or  surplus funds, to the holders of the Common Stock by reason of their
ownership thereof, a preference amount per share consisting of the sum (A) $2.50
for  each  outstanding  share  of  Series 1-A Preferred Stock, and (B) an amount
equal  to  declared  but  unpaid dividends on such shares, if any. Each share of
Series  1-A  Preferred  Stock shall be convertible at any time after the date of
issuance  of  such shares, into such number of fully paid shares of Common Stock
as  is  determined  by  dividing the Original Issue Price by the then applicable
Conversion Price, in effect on the date the certificate evidencing such share is
surrendered for conversion.   Under certain circumstances, such as stock splits,
these  shares  are subject to stated Conversion Price Adjustments. The remaining
2,100,000  shares  were  designated as "Series 2-A Convertible Preferred Stock",
which  will  be  issued with rights, preferences and privileges as designated by
the  board  of  directors.


                                      - 6 -
<PAGE>
     Each  share  of  Series 1-A Preferred Stock, subject to the surrendering of
the  certificates  of  the  Series  1-A  Preferred Stock, shall be automatically
converted  into  shares  of Common Stock at the then effective Conversion Price,
immediately upon closing of a public offering of the Company's Common Stock with
an  aggregate gross proceeds of at least $10,000,000 and a per share price of at
least  five  dollars,  or  at  the  election of the holders of a majority of the
outstanding  shares  of  Series 1-A Preferred Stock. The holder of each share of
Series 1-A Preferred Stock shall have the right to that number of votes equal to
the  number  of  shares of common stock issued upon conversion of the Series 1-A
Preferred  Stock.  Holders  of  the  Series  1-A Convertible Preferred Stock are
entitled  to  noncumulative dividends, if declared by the Board of directors, of
$0.20  per  share  annually. In the event of a liquidation or dissolution of the
Company,  the  holders  of  the  Series 1-A Convertible Preferred Stock shall be
entitled  to  receive  a  preference  amount for each outstanding share equal to
$2.50  plus declared but unpaid dividends.   (See Note 7 - Subsequent Events for
additional  information.)

     In  conjunction  with  expenses relating to the issuance of the "Series 1-A
Convertible Preferred Stock", 235,985 warrants were granted at an exercise price
of  $6.00  per  share  and 150,706 warrants were granted at an exercise price of
$2.50  per  share. During the quarter ended July 31, 2000, 120,000 warrants were
granted  at  an  exercise price of $2.00 per share, as compensation for services
rendered.  Ramin  Kamfar,  who  subsequently  was  elected  as a director of the
Company,  is a partner in a partnership that was awarded 60,000 warrants, of the
120,000 warrants granted, at an exercise price of $2.00 per share. As of October
31,  2000,  1,376,691  warrants  and 1,977,784 options had been granted and were
outstanding.

     In  February  2000,  the Company entered into a strategic relationship with
U.S.  West,  Inc.  (now  known  as  Qwest  Communications)  of Denver, Colorado,
pursuant to which the two firms agreed to make VSN available to Qwest's business
customers.  This relationship was terminated after the end of the third quarter.
(See Note  7 subsequent  events).

     Qwest provides telecommunications and related services,  wireless services,
high-speed  data  and  Internet services and directory services. In exchange for
services  to  be rendered and a nominal amount of cash, Vsource granted to Qwest
600,000  warrants  with  a  three-year  term, at an exercise price of $5.00. The
terms  of  the  distribution and marketing agreement are automatically renewable
each  year unless either party notifies the other of its intent to terminate the
agreement,  in  writing,  sixty  calendar  days  prior  to  February 14th of the
potential  renewal year. When the warrants were granted, the Company's stock was
valued  at $17.50 per share, resulting in a charge to the Company of $8,412,000.
In  the nine months ended October 31, 2000, the Company recognized $3,154,500 of
this charge as a marketing expense. The Company plans to recognize the remaining
$5,257,500  as a marketing expense in the quarter ending January 31, 2001 due to
the  cancellation  of  this  arrangement.

     During  the  period August 28, 2000 to September 18, 2000, the Company sold
1,672,328  shares  of  Series  2-A  Convertible Preferred Stock to 25 accredited
investors and received $10,719,623 less offering costs.  Each share of preferred
stock  is  convertible  into  one  share  of common stock at the election of the
holder.  Each  purchaser  also received a warrant to purchase common stock at an
exercise price of $6.41 per share, with a five-year term.  The aggregate of such
shares of common stock is 145,550.  No underwriters were used and offering costs
were  $531,792  including  transfer  agent  fees,  printing cost, legal fees and
commissions  or  finders  fees.  The  offering  was  a private placement made in
accordance  with  Regulation D. All of the purchasers were accredited investors.
No form of general solicitation or general advertising was used for any offer or
sale.  The  investors  represented  their  intention  to  acquire the shares for
investment  purposes  only,  and not with a view for resale or distribution, and
appropriate  restrictive  legends  were  placed on each stock certificate issued
pursuant  to  this  offering.

     The  Company is obligated to register the shares of Common Stock underlying
the  Series 2-A Preferred and the warrants held by the holders of the Series 2-A
Preferred.  This  registration statement is a result of the Company's obligation
to  the  holders of the Series 2-A Preferred.  If this registration statement is
not  effective  on  or  before  January 16, 2001, the Company must issue to each
holder of Series 2-A Preferred an additional warrant to purchase Common Stock in
an  aggregate amount equal to two percent (2%) of the registrable shares held by
such  holder  for  each  thirty  day  period  this registration statement is not
effective by January 16, 2001.  The additional warrants would have terms of five
(5)  years  and  an  exercise  price  of  $6.41  per  share.

     In connection with the sales of the Series 2-A Convertible Preferred Stock,
the Company issued warrants to purchase an aggregate of 144,881 shares of common
stock  at  exercise  prices  ranging  from $6.41 to $6.69 as additional finder's
fees,  commissions  and  other  services  in  connection  with the offering.  No
underwriters  were used, and no commissions were paid.  The warrants were issued
to  two  consultants  and  as a private placement exempt from registration under
section  4(2)  of  the  Securities  Act.  The  warrant holders represented their
intention  to  acquire the warrants for investment purposes only, and not with a
view  for resale or distribution, and appropriate stop transfer instructions and
restrictive  legends  indicating the transfer restrictions will be place on each
warrant  and each stock certificate when issued.  Each investor had ample access
to  the kind of information from the Company that a registration statement would
include.


                                      - 7 -
<PAGE>
     The  Company  allocated $6,630,780 of the net proceeds from the issuance of
the  Series  2-A  Preferred  Stock  to  Common  Stock as required by an embedded
beneficial conversion feature. The deemed discount resulting from the allocation
was  fully amortized through retained earnings at issuance.  In the event of any
liquidation  or dissolution, either voluntary or involuntary, the holders of the
series  2-A  Convertible Preferred Stock shall be entitled to receive, prior and
in  preference to any distribution of any of the assets or surplus funds, to the
holders  of  the Common Stock by reason of their ownership thereof, a preference
amount  per  share consisting of the sum of (A) $6.41 for each outstanding share
of  Series  2-A  Preferred Stock, and (B) an amount equal to declared but unpaid
dividends on such shares, if any. Each share of Series 2-A Preferred Stock shall
be  convertible at any time after the date of issuance of such shares, into such
number  of  fully  paid  shares of Common Stock as is determined by dividing the
Original  Issue  Price by the then applicable Conversion Price, in effect on the
date the certificate evidencing such share is surrendered for conversion.  Under
certain  circumstances, such as stock splits, these shares are subject to stated
Conversion  Price  Adjustments.

     In  September  2000,  the  Chief  Financial Officer and the Chief Operating
Officer  each purchased shares of the Company's Series 2-A Convertible Preferred
Stock  for  nominal cash and three-year promissory notes that bear interest at a
rate  of  8%  per  annum  and principal amounts of $124,000 each.  The preferred
stock  purchased  was  19,501  for  each  officer.  In  connection  with  these
transactions,  they  also  each  received  a warrant to purchase 1,697 shares of
common  stock  with  an  exercise  price  of  $6.41  and  a  term of five years.

     On  October  31,  2000, paid-in-capital totaled $63,955,951, an increase of
$53,310,017  from  $10,645,934 at January 31, 2000.  This primarily reflects the
recording  of  the  issuance  of preferred stock of $30,347,529, and the related
beneficial  conversion  feature and deemed dividend, the recording of $9,677,123
in compensation related to stock options granted to employees in accordance with
Accounting  Principles  Board  Opinion  No.  25, "Accounting for Stock Issued to
Employees", the recording of the issuance of common stock of $2,154,481, and the
recording  of  $11,130,883 in compensation for marketing, investor relations and
referral services in accordance with Statement of Financial Accounting Standards
No.  123,  "Accounting  for  Stock-based  Compensation."  Stockholders equity is
partially offset by deferred compensation of $12,953,649 as of October 31, 2000.


6.     BASIC  LOSS  AVAILABLE  TO  SHAREHOLDERS

     The  Company  has  adopted  SFAS  No.  128,  "Earnings Per Share," which is
effective for financial statements issued after December 15, 1997.  The standard
eliminates  primary  and  fully  diluted  earnings  per  share  and  requires
presentation of basic and diluted earnings per share together with disclosure of
how  the  per  share  amounts  were  computed.

     Basic  earnings  per  share  excludes  dilution and is computed by dividing
income  available  to  common shareholders by the weighted average common shares
outstanding  for  the  period.

The  loss  available to common shareholders for the three and  nine months ended
October  31,  2000 is the net loss for the period, adjusted for deemed dividends
on preferred  stock.


The  following  table  illustrates  the  calculation  of  basic  and  diluted
earnings/(loss)  per  share:


<TABLE>
<CAPTION>
                                                     Nine months        Three months
                                                  ------------------  ----------------
<S>                                               <C>                 <C>
Net loss                                          $    ( 18,537,691)  $ (   5,838,196)

Less - deemed dividend to preferred shareholders      (  13,499,177)   (    6,630,780)
                                                  ------------------  ----------------
Basic loss available to common shareholders       $    ( 32,036,868)  $  ( 12,468,976)
                                                  ==================  ================
</TABLE>


                                      - 8 -
<PAGE>
Weighted  average  common  shares  outstanding for dilution purposes do not take
into  account  the  exercise  of  options  or warrants because to do so would be
antidilutive.

7.     SUBSEQUENT  EVENTS

     On November 8, 200O, the Company reincorporated in Delaware.  In connection
with  the  Company's  reincorporation,  the Company issued a warrant to purchase
1,500 shares of common stock at an exercise price of $13.00 as consideration for
the  name  change  of  V-Source,  Inc.,  a  Delaware  corporation (a corporation
unrelated  to  Vsource,  Inc.),  to  Arizon,  Inc.,  a Delaware corporation.  No
underwriters were used, and no commissions were paid.  The warrant was issued as
a  private  placement  exempt  from  registration  under  Section  4(2)  of  the
Securities  Act.

     On December 11, 2000 the Company announced that it's strategic relationship
with Qwest had ended, citing that U.S.  West had been acquired by Qwest and that
their  business  strategy  no longer met the objectives of the relationship with
Vsource.  In  conjunction  with  the ending of this relationship, the balance of
the  previously  Deferred  warrant  expense  will be expensed fully in the forth
quarter of  this  fiscal  year  in  the  amount  Of  $5,257,500.

     On  December  14,  2000,  the Company entered into an Agreement and Plan of
Merger  dated  as  of  the  same  date, with OTT Acquisition Corp., a California
corporation,  Online  Transaction  Technologies,  Inc., a California corporation
("OTT"),  Colin  P.  Kruger  and  Michael Shirman (the "Merger Agreement").  The
closing  of  the  transactions  under the Merger Agreement are expected to occur
later in December 2000 (the "Closing").  The proposed merger is to be a tax-free
reorganization  under  Section  368(a)  of  the  Internal  Revenue  Code.

     OTT  is  an  Application  Service  Provider  (ASP)  that develops and hosts
transaction  solutions  for  public  (many  to  many)  and private (one to many)
exchanges.  Among  the  solutions  that  OTT  brings  to  Vsource  is
LiquidMarketplace(TM),  a  complete  suite  of  fully  integrated  transaction
solutions,  including  auctions,  fixed-price  catalogs  and RFQ engines.  These
solutions  are  identified  as  LiquidAuction(TM),  LiquidCatalog(TM)  and
LiquidRFP(TM).  This suite allows public exchange clients to handle both seller-
and  buyer-initiated  transactions  in  their  e-Marketplaces.  OTT's  private
exchange  solution,  LiquidStore(TM),  offers  private  catalog  and  auction
functionality  to LiquidMarketplace(TM) participants or stand-alone clients.  In
addition to offering a complete suite, OTT has developed proprietary modules and
applications  that  reduce  customization  and  deployment  time  and  simplify
integration.

     The  aggregate  purchase price payable at Closing is to be 1,130,950 shares
of  the  Company's  common  stock.  The number of shares was calculated from the
Merger  Agreement  purchase  price  of  $7,000,000, less $77,115 paid as certain
warrants  and  options,  divided  by  $6.1213 per share ("Acquisition Price", as
calculated from the average closing price of a share of Company common stock for
the  30  calendar  days immediately prior to execution of the Merger Agreement).
Such  aggregate  price  shall  be  subject  to adjustment based on reductions or
increases  in  the net book value of the assets of OTT since September 30, 2000.

     In  connection  with  the Closing, two key employees of OTT will enter into
mutually  agreeable  employment  contracts with the Company providing for, among
other things, salaries of $125,000 and options to purchase 100,000 shares of the
Company's  common  stock which vest over 24 months and have an exercise price of
$6.41  per  share.

     Twenty-five  percent  of  the  equity  securities  comprising the aggregate
purchase  price  will  be  held  for  six  months  in  an  escrow  (the  "Escrow
Securities").  The Escrow Securities and Company shares issued to OTT management
shareholders  will  be  the  sole  recourse  for the Company for indemnification
against  claims  and  losses arising from breaches by OTT of representations and
warranties  or  covenants  made  pursuant  to  the  definitive agreements.  Such
representations and warranties shall terminate over varying periods.  The Escrow
Securities  will  be  valued  for  purposes  of  any such indemnification at the
Acquisition  Price.  OTT shareholders may at their option pay any such indemnity
in  cash  in  lieu  of  Escrow  Securities.

     Closing  of  the  transaction  is  contingent  upon  several  conditions,
including, without limitation, approval of OTT minority shareholders and warrant
holders. This transaction will be recorded on the Purchase method of accounting.

8.   RELATED PARTY TRANSACTION

     In the quarter ended October 31, 2000, a sale was  made to a related party.
Ramin  Kamfar  is a  member of the Board of directors of the Company and is also
the Chief Executive Officer of New World Coffee, one of the customers with which
a sale of $25,000.00

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

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

FORWARD  LOOKING  STATEMENTS


                                      - 9 -
<PAGE>
     This  Quarterly Report on Form 10-QSB and the documents incorporated herein
by  reference  contain forward-looking statements based on current expectations,
estimates and projections about the Company's industry, management's beliefs and
certain  assumptions  made  by management.  All statements, trends, analyses and
other  information  contained  in  this  report relative to trends in net sales,
gross margin, anticipated expense levels and liquidity and capital resources, as
well  as  other  statements  including,  but  not  limited  to,  words  such  as
"anticipate,"  "believe,"  "plan,"  "estimate,"  "expect," "seek," "intend," and
other  similar  expressions,  constitute  forward-looking  statements.  These
forward-looking  statements  are  not  guarantees  of future performance and are
subject  to  certain  risks  and  uncertainties  that  are difficult to predict.
Accordingly,  actual  results  may  differ  materially from those anticipated or
expressed  in such statements.  Potential risks and uncertainties include, among
others,  those  set forth in this Item 2. Particular attention should be paid to
the cautionary statements involving the Company's limited operating history, the
unpredictability  of  its  future  revenues,  the  Company's  need  for  and the
availability  of  capital  resources, the evolving nature of its business model,
the  intensely  competitive  market  for  business-to-business  electronic
procurement,  and  the  risks associated with systems development, management of
growth  and  business  expansion.  Except  as  required  by  law,  the  Company
undertakes  no  obligation to update any forward-looking statement, whether as a
result of new information, future events or otherwise.  Readers, however, should
carefully  review  the  factors set forth in other reports or documents that the
Company  files  from  time  to  time with the Securities and Exchange Commission
("SEC").

OVERVIEW

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

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

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

     The  Internet  version of VSN is now being used on a trial basis by initial
customers.  As  a  result, the limited operating history makes the prediction of
future  operating  results  very difficult.  In particular, the Company believes
that period-to-period comparisons of operating results should not be relied upon
as  predictive  of  future  performance.  Operating results are expected to vary
significantly  from  quarter  to  quarter  and  are  difficult  or impossible to
predict.  The  Company's  operating prospects must be considered in relationship
to  the  risks, expenses and difficulties encountered by any company at an early
stage  of  development,  particularly  companies  in  new  and  rapidly evolving
markets.  The  Company  may  not  be  successful  in  addressing  such risks and
difficulties.  For  more  information,  please  refer  to  "FORWARD  LOOKING
STATEMENTS"  and  "FACTORS  THAT  MAY  AFFECT  FUTURE  PERFORMANCE."

RECENT  EVENTS

      On  October  30,  2000,  the  Common Stock,  $0.01 par value per share, of
Vsource,  Inc., a Nevada corporation began trading on the NASDAQ National Market
system  under  the  ticker  symbol  "VSRC."  The  Company's  Common  Stock  had
previously  been  trading  on  the  OTC  Bulletin  Board under the ticker symbol
"VSRC.OB."

     In  October  2000,  the  Company  and  IBM announced an alliance to provide
eProcurement  services  to  mid-sized  companies.  IBM  agreed  to  establish  a
national  practice  to  support  the  alliance.


                                     - 10 -
<PAGE>
     In October 2000, the Company announced that it had agreed to acquire Online
Transaction  Technologies,  Inc.,  a web auction developer, in a stock for stock
transaction.  The  acquisition  had  not yet been completed at the quarter ended
October 31, 2000.  (See Note 7 - Subsequent Events  of  the financial statements
for  the  quarter  ended  October  31,  2000.)

     In  August 2000, the Company and IBM jointly announced an agreement between
IBM  Global  Services  and  Vsource,  Inc.  for localization services, including
language  translations.  The  Company  is  a  paying  client  of  IBM, which has
developed  the training program for VSN users. Clients of the Company retain the
services  of  IBM  in  order  to  train  their  staffs to use the VSN system. In
addition,  IBM  and  the  Company  have  each  agreed  informally  to make their
respective  clients  aware  of  the  other  firm's  services,  where  it  seems
appropriate  for  the  client  in  question.


MANAGEMENT'S  DISCUSSION  &  ANALYSIS  OF  RESULTS OF OPERATIONS  - THREE MONTHS
ENDED  OCTOBER  31,  2000,  COMPARED TO THE THREE MONTHS ENDED OCTOBER 31, 1999:

REVENUE

     For  the  three  months  ended  October  31,  2000,  revenues were $151,500
compared  to  $2,230 in revenues, up $149,270 or 6,694%, during the three months
ended  October  31,  1999.  This increase in revenues results from the Company's
implementation  of the pilot phase of the revenue generating process for the new
Internet  version  of VSN. The Company has not yet begun to generate transaction
fees,  the  anticipated  primary  source  of  revenue.

GENERAL  AND  ADMINISTRATIVE  EXPENSES

     For  the  three  months  ended October 31, 2000, general and administrative
expenses were  $2,017,562 (including $1,168,952 of stock-based compensation), up
$1,790,817  or  790%,  from  $226,745  during the three months ended October 31,
1999.  This  increase was caused primarily by increased expenses associated with
marketing, advertising, public relations, stock based compensation and executive
staff.

RESEARCH  AND  DEVELOPMENT

     For  the  three  months  ended  October  31, 2000, research and development
expenses  were $4,004,459 (including $1,210,201 of stock-based compensation), up
$2,970,438  or  287%,  from $1,034,021 during the three months ended October 31,
1999.  This  increase  was  caused  primarily by implementation of a development
effort  associated  with  the  Company's  Internet  version  of VSN. These costs
included  the  use  of  independent  contractors,  as  well  as  the addition of
technical  employees in the Company's Seattle office.   The Company does no work
that  would  be  considered  pure  research,  or  basic  research.

NET  LOSS

     For  the  three months ended October 31, 2000, the net loss was $5,838,196,
an  increase  of  $4,579,660 or 364%, from the net loss of $1,258,536 during the
three months ended October 31, 1999.  This increase is a result of significantly
increased  marketing and advertising expenses, stock based compensation, as well
as  significantly  increased  research  and  development  expense.

WEIGHTED  AVERAGE  COMMON  SHARES  OUTSTANDING  -  BASIC  AND  DILUTED

     For  the  three  months  ended October 31, 2000, the basic weighted average
common  shares  outstanding  were  15,969,038,  up  1,629,874  or  11.4%,  from
14,339,164  for the three months ended October 31, 1999.  This increase resulted
primarily  from  the issuance of 1,672,328 shares in return for cash invested in
the  Company,  shares  issued  upon  conversion of convertible notes and accrued
interest,  as  well  as  the exercise of stock options.  Weighted average common
shares  outstanding  for dilution purposes do not take into account the exercise
of  stock  options  or  warrants  because  to  do  so  would  be  anti-dilutive.


                                     - 11 -
<PAGE>
NET  LOSS  PER  COMMON  SHARE  -  BASIC  AND  DILUTED

     The  basic net loss per common share for the three months ended October 31,
2000  was $0.78 per share, up $0.69 per share from a net loss of $0.09 per share
for  the  three  months  ended  October  31,  1999.   This increase reflects the
$4,579,660  increase  in  the  net  loss,  the  return  of  equity  to preferred
stockholders  of  $6,630,780,  created  by  the  deemed  dividend  to  preferred
shareholders,  and  partially  offset by the increase of 1,629,874 shares in the
basic  weighted  average  outstanding  common  shares.

MANAGEMENT'S  DISCUSSION  &  ANALYSIS  OF  RESULTS  OF OPERATIONS  - NINE MONTHS
ENDED  OCTOBER  31,  2000,  COMPARED  TO THE NINE MONTHS ENDED OCTOBER 31, 1999:

REVENUE

     For  the  nine  months  ended  October 31, 2000, revenues were $214,000, up
$203,785  or 1,995% compared to $10,215 in revenues during the nine months ended
October  31,  1999.  This  increase  in  revenues  results  from  the  Company's
implementation  of the pilot phase of the revenue generating process for the new
Internet version of VSN. The Company has not begun to generate transaction fees,
the  anticipated  primary  source  of  revenue.

GENERAL  AND  ADMINISTRATIVE  EXPENSES

     For  the  nine  months  ended  October 31, 2000, general and administrative
expenses  were $9,746,801 (including $6,617,357 of stock-based compensation), up
$8,943,059,  or  1,113%,  from $803,742 during the nine months ended October 31,
1999.  This increase was caused primarily by the increase of expenses associated
with  marketing,  advertising,  public  relations,  stock based compensation and
executive  staff.

RESEARCH  AND  DEVELOPMENT

     For  the  nine  months  ended  October  31,  2000, research and development
expenses  were $9,087,797 (including $3,031,209 of stock-based compensation), up
$6,933,724  or  322%  from  $2,154,073  during the nine months ended October 31,
1999.  This  increase  was  caused  primarily by implementation of a development
effort  associated  with  the  Company's  Internet  version  of VSN. These costs
included  the  use  of  independent  contractors,  as  well  as  the addition of
technical  employees in the Company's Seattle office.   The Company does no work
that  would  be  considered  pure  research,  or  basic  research.

NET  LOSS

     For  the  nine months ended October 31, 2000, the net loss was $18,537,691,
an  increase  of $15,590,091 or 529%, from the net loss of $2,947,600 during the
nine  months ended October 31, 1999.  This increase is a result of significantly
increased  marketing and advertising expenses, stock based compensation, as well
as  significantly  increased  research  and  development  expense.

WEIGHTED  AVERAGE  COMMON  SHARES  OUTSTANDING  -  BASIC  AND  DILUTED

     For  the  nine  months  ended  October 31, 2000, the basic weighted average
common  shares  outstanding  were  15,869,895,  up  2,573,886  or  19.4%,  from
13,296,009  for  the nine months ended October 31, 1999.  This increase resulted
primarily  from  the issuance of 2,118,269 shares of common stock of the Company
upon  conversion  of  convertible  notes  and  accrued interest, the issuance of
217,584  shares  of  common stock upon exercise of stock options, as well as the
issuance  of  236,084  shares of common stock in return for cash invested in the
Company.  Weighted  average  common  shares outstanding for dilution purposes do
not take into account the exercise of stock options or warrants because to do so
would  be  anti-dilutive.

NET  LOSS  PER  COMMON  SHARE  -  BASIC  AND  DILUTED

     The  basic  net loss per common share for the nine months ended October 31,
2000  was $2.02 per share, up $1.80 per share from a net loss of $0.22 per share
for  the  nine  months  ended  October  31,  1999.   This  increase reflects the
$15,590,091  increase  in  the  net  loss,  the  return  of  equity to preferred
stockholders  of  $13,499,177,  created  by  the  deemed  dividend  to preferred
shareholders,  and  partially  offset by the increase of 2,573,886 shares in the
basic  weighted  average  outstanding  common  shares.


                                     - 12 -
<PAGE>
MANAGEMENT'S DISCUSSION & ANALYSIS OF FINANCIAL CONDITION - AT OCTOBER 31, 2000,
COMPARED  TO  JANUARY  31,  2000:

CASH

     On  October 31, 2000, cash totaled $8,263,168, up $3,056,001 or 58.7%, from
$5,207,167  at  January  31,  2000. This increase reflects the proceeds from the
sale  of preferred stock in private transactions that closed September 18, 2000,
in  the net amount of $10,171,108, and is offset by a decrease in the funds used
for  operations  during  the  nine  months  ended  October  31,  2000.

ACCOUNTS  RECEIVABLE

     On  October  31, 2000, accounts receivable were $191,500 and on January 31,
2000,  there  were  no  accounts  receivable.  This reflects that the Company is
approaching the completion of development of its main product, VSN, and has just
begun  generating  revenues  and  receivables  from  the  product.

NOTES  RECEIVABLE  -  OFFICERS  AND  OTHER

     On  October  31,  2000, employee and other receivables totaled $183,367, up
from  no  balance  at January 31, 2000.   This increase results from advances to
officers  and  employees,  net  of  partial  repayments.

PREPAID  EXPENSES

     On  October  31,  2000, prepaid expenses totaled $148,383 as compared to no
balance  at  January 31, 2000.  This increase primarily reflects prepaid fees of
$148,383  that  will  be  expensed  in  the  next  twelve  months.

TOTAL  CURRENT  ASSETS

     On October 31, 2000, total current assets totaled $8,786,418, up $3,579,251
or  68.7%, from  $5,207,167 at January 31, 2000.  This increase reflects the net
of proceeds from the sale of preferred stock in private transactions that closed
September  18,  2000,  in  the  net  amount  of  $10,171,108, and is offset by a
decrease  in  the funds used for operations during the nine months ended October
31,  2000.

FIXED  ASSETS

     On  October  31,  2000,  fixed  assets  totaled  $819,017,  an  increase of
$578,809,  or  241%, from $240,208 at January 31, 2000.   This increase reflects
the addition of equipment and software needed to accommodate the increase in the
development  and  marketing  of  VSN.

ACCUMULATED  DEPRECIATION

     On  October  31,  2000,  accumulated  depreciation  totaled  $121,564,  up
$103,856,  or  586.5%, from $17,808 at January 31, 2000.  This increase reflects
the  addition  of  normal depreciation expense for the nine months ended October
31,  2000.


PROPERTY  AND  EQUIPMENT,  NET

     On  October  31,  2000,  property  and  equipment, net totaled $697,453, up
$474,953,  or 213.5%, from $222,500 at January 31, 2000. This increase primarily
reflects  the  addition  of  equipment  and  software  needed to accommodate the
increase  in  the  development and marketing of VSN, net of depreciation expense
recorded  for  the  period.


                                     - 13 -
<PAGE>
NOTES  RECEIVABLE  -  OFFICERS  AND  OTHER,  NON-CURRENT

     On  October 31, 2000, other assets totaled $50,755, down $59,973, or 54.2%,
from $110,728 at January 31, 2000.    This decrease is due to the recognition of
partial  repayment  on  these notes receivable for the nine months ended October
31,  2000.

TOTAL  ASSETS

     On October 31, 2000, total assets were $9,534,626, up $3,994,231, or 72.1%,
from  $5,540,395  at  January  31,  2000.  This  change  primarily reflects cash
proceeds  from  the  private placement during the period, offset by cash used in
research  and  development  costs,  and  general  and  administrative  expenses
associated  with  the  development  and  marketing  of  VSN.

ACCOUNTS  PAYABLE

     On October 31, 2000, accounts payable were $366,818, up $119,346, or 48.2%,
from  $247,472  at  January  31,  2000.  This  change  is  primarily a result of
increased  amounts  due  independent  contractors involved in development of the
Internet  version  of  VSN,  and also amounts due for marketing, advertising and
legal  expenses.

ACCRUED  LIABILITIES

     On  October  31,  2000,  accrued liabilities were $79,087, down $21,850, or
21.6%,  from  $100,937  at January 31, 2000. This change resulted primarily from
the  decrease  in  accrued  wages  and  related  compensation  expenses.

CONVERTIBLE  NOTES  PAYABLE

     On October 31, 2000, convertible notes payable were $150,000, remaining the
same  as  at January 31, 2000. Interest accrued on this liability is included in
accrued  liabilities.

LIABILITIES  RELATED  TO  THE  PRIVATE  PLACEMENT  OF  PREFERRED  STOCK

     On  October 31, 2000, liabilities related to private placement of preferred
stock  were  zero, as compared to liabilities of $6,002,500 at January 31, 2000.
This  is  due to the reclassification to equity and issuance of 2,802,000 shares
of Series 1-A Preferred Stock in April 2000. As of January 31, 2000, the Company
had  received $6,002,500 in cash associated with the private placement, which it
treated  as  a  liability  until the transaction was completed and the preferred
stock  was  issued.

TOTAL  CURRENT  LIABILITIES

     On  October  31,  2000,  total  current  liabilities totaled $595,905, down
$5,905,004,  or  90.8%,  from  $6,500,909  at  January  31, 2000. This reduction
reflects the reclassification of liabilities related to the private placement of
preferred  stock  in  the  amount  of  $6,002,500  to equity as preferred stock,
partially  offset by the increase in accounts payable of $119,346 and a decrease
in  accrued  liabilities  of  $21,850.

PREFERRED  STOCK,  $0.01  PAR  VALUE

     On  October  31,  2000,  preferred stock for Series 1-A totaled $27,252 and
stock  for  Series  2-A totaled $16,723 versus no preferred stock at January 31,
2000.  This  reflects  the issuance of 2,802,000 new Series 1-A preferred shares
less  76,768  shares converted to common shares during the nine-month period and
the issuance of 1,672,828 shares of new Series 2-A preferred shares.  All of the
shares  were  issued  in  exchange  for  cash  invested  in  the  Company.


                                     - 14 -
<PAGE>
COMMON  STOCK,  $0.01  PAR  VALUE

     On  October  31,  2000, common stock totaled $161,015, up $2,944, or 1.86%,
from  $158,071 at January 31, 2000. This reflects the issuance of 294,352 shares
of  common  stock  ,  $0.01  par value, during the nine months ended October 31,
2000.

ADDITIONAL  PAID-IN-CAPITAL

     On October 31, 2000, paid-in-capital totaled $63,955,951, up $53,310,017 or
500.8%,  from $10,645,934 at January 31, 2000.  This increase reflects the value
(in  excess  of  par)  of  the new preferred shares issued during the period, of
which  4,398,060 preferred shares were issued in return for cash invested in the
Company,  and  294,352  common  shares  were  issued for cash and services. This
primarily  reflects  the  recording  of  additional  paid  in capital for common
stockholders'  of  $13,499,177  related  to the beneficial conversion feature of
preferred stock, compensation of $10,539,257 related to stock options granted to
employees in accordance with the Statement of Financial Accounting Standards No.
123,  accounting  for  stock-based compensation, and $10,966,310 in compensation
for  marketing,  investor  relations  and  referral  services.

DEFERRED  COMPENSATION

     On October 31, 2000, deferred compensation was $12,953,649, up $11,172,832,
or  326%  from  $  1,780,817  at  January  31,  2000. This change was due to the
granting of stock options to employees as employment incentives and bonuses, and
compensation  for  marketing,  investor relations and referral services. This is
amortized  over  a  period  from  one  to  three  years,  in accordance with the
individual  agreement  terms.

ACCUMULATED  DEFICIT

     On October 31, 2000, the accumulated deficit was $41,841,773 up $32,036,869
or  326% from $9,804,904 at January 31, 2000.    This change resulted from a net
loss  of  $18,537,691  during  the  nine  months  ended October 31, 2000 and the
recognition  of  a  deemed  dividend  to  preferred stockholders of $13,499,177.

NOTES  RECEIVABLE  FROM  THE  SALE  OF  STOCK

     On  October  31,  2000,  notes  receivable  from  the sale of stock totaled
$426,798,  up $248,000 from $178,798 at January 31, 2000. This amount is used to
offset  the  balance  in  stockholders' equity.  These notes are receivable from
officers  who  exercised stock options during the current period, and in a prior
period.   The  Company's  stock  option  program  provides  several  alternative
methods of paying for shares acquired through exercise of stock options, and one
of those alternatives is to provide a demand note payable to the Company, in the
amount  of  the  purchase.

TOTAL  STOCKHOLDERS'  EQUITY/(DEFICIT)

     On  October  31,  2000,  total  stockholders'  equity  was  $8,938,721,  up
$9,899,235,  or  1,031%,  from  a  deficit of $960,514 at January 31, 2000. This
change  resulted primarily from increases in preferred stock and paid-in-capital
of  $53,356,936  offset  by an increase in deferred compensation of $11,172,832,
the  recognition  of a deemed dividend to preferred stockholders of $13,499,177,
the  increase  in notes receivable relating to the sale of stock of $248,000 and
the  net  loss  of  $18,537,691  during  the nine months ended October 31, 2000.

LIQUIDITY  AND  CAPITAL  RESOURCES

     The  Company  had  $214,000 of revenue during the nine months ended October
31,  2000,  in  addition  to  small  amounts  of  interest  income,  and certain
non-recurring  items.  While  the  Company  expects  to  generate revenue in the
future,  it  is  currently  entirely dependent on investor funds. At October 31,
2000,  the  Company had cash balances totaling $8,263,168, primarily as a result
of  its private placement of preferred stock during the first and third quarters
of 2000 offset by current operating activity. The Company is currently expending
approximately $900,000 per month of cash and cash equivalents.  With anticipated
revenue  from  current  clients  only  and  at  the current rate of expenditure,
management  expects  those  funds  to  last  through  July  2001.


                                     - 15 -
<PAGE>
     The  Company's  principal sources of cash and cash equivalents were derived
from private sales of the Company's equity and debt securities.  The main source
of  funds  for  the Company from the date of inception through October 31, 2000,
other  than the sale of equity and debt securities, has been from implementation
fees.  $214,000  was  derived  from  such  sales  made  in the nine months ended
October  31,  2000.  The Company has not yet begun to generate transaction fees,
the  anticipated  primary  source  of  revenue.

     The  Company  anticipates client revenues to continue increasing during the
twelve-month  period  from  November  1, 2000 to October 31, 2001.  In September
2000,  the  Company completed a private equity offering and received $10,719,623
less  offering  costs  of $531,792.  There can be no assurances that the Company
will continue generating additional revenue from clients.  If client revenues or
future private equity offerings do not materialize, the Company has a contingent
plan  of  cash  conservation  that  will allow it to operate through October 31,
2001.

     The Consolidated Statements of Cash Flows for the nine months ended October
31,  2000,  and  nine  months  ended  October 31, 1999 show that net losses were
$18,537,691  and  $2,947,600, respectively, with the issuance of preferred stock
for  cash of $10,889,828, partially offsetting the cash requirement.  A non-cash
entry was made for the period ended October 31, 2000 to recognize the conversion
of liabilities related to the private placement of preferred stock in the amount
of  $6,002,500 to equity as preferred stock.  In addition, a non-cash accounting
entry  of  $20,808,006  was made to increase additional paid-in capital, with an
offsetting  entry  of  $9,648,566  for  compensation expense, and $11,159,440 to
deferred  compensation.  This  did  not  offset any cash requirement directly or
indirectly,  and  there  was  no  such  cash  or  other  consideration  paid  as
compensation  in  the  period.

RESEARCH  AND  DEVELOPMENT  FOR  THE  FISCAL  YEAR  ENDING  JANUARY  31,  2001

     During  the  fiscal  year  ending  January  31,  2001,  it is expected that
approximately  $12,000,000, including stock based compensation, will be spent on
product  development.  The  Company  does  not expect to expend any resources in
basic  research.  Additional  work  is being done to enhance the present system.
Developments  will  make  the system more flexible, and allow additional options
for the user to modify portions of the system to better meet the unique needs of
each  particular  user's business.  Other enhancements will add new capabilities
to  the  system  in the future.  No assurance can be given that the Company will
have  the  resources  necessary  to  conduct  this  product  development.

FACTORS  THAT  MAY  AFFECT  FUTURE  PERFORMANCE:

RISKS  RELATED  TO  THE  COMPANY'S  BUSINESS

     NEED FOR ADDITIONAL CAPITAL: The Company has recorded substantial operating
losses  and, as of October 31, 2000, has an accumulated deficit of approximately
$41.8  million.  The  Company  anticipates  sustaining  its  current  rate  of
development  and  operating  expenditures through the fiscal year ending January
31,  2002.  The  Company  currently  has  less  than  10 clients under contract.
During  the  recent  quarter,  six  of  these clients together generated a small
amount  of  revenue  from  the initial phases of contract implementation.  It is
expected  that  current  and  newly  added  clients  will  produce significantly
increased revenues during the fourth quarter, primarily from implementation fees

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


                                     - 16 -
<PAGE>
     RISKS OF EARLY STAGE COMPANY; NEW, RAPIDLY CHANGING MARKET: NEED TO ATTRACT
LARGE  CORPORATIONS:  The market for Internet applications and services is at an
early  stage,  and  changing  rapidly.  Internet procurement is a relatively new
market. Its rate of growth and change is unpredictable, as is the nature of this
change.  The Company will encounter the risks and difficulties often encountered
by  early-stage  companies  in  new  and rapidly evolving markets. The Company's
initial  success  will  depend  upon  attracting  several large, technologically
advanced  corporations  to use VSN, and their favorable results from this usage.
Subsequent  success  will  depend  on the Company's ability to communicate these
early successes to the marketplace, thus attracting significant numbers of other
businesses  and buying organizations. No assurance can be given that the Company
will  be  successful  in the marketplace, or if successful, that it will attract
significant  numbers  of  clients.  There  can  be no assurance that an adequate
demand  for,  and  usage  of,  the  Company's  products  will  develop.

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

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

     FAILURE  TO MAINTAIN LISTING ON MAJOR STOCK MARKET:  Although the Company's
common  stock  began trading on the Nasdaq National Market System on October 30,
2000,  there  is  no  assurance  that  the  Company will continually achieve the
requirements  for  continued  listing on the Nasdaq National Market System.  The
Company's common stock is currently trading below $5.00 per share.  If the stock
continues  to  trade  below  $5.00  per share, the Company may be the subject of
de-listing  or  transfer  to  the  Nasdaq  Small-Cap.  While  the listing of the
Company's  stock  does  not have a direct effect on the Company's operations, it
has  an  effect on the perception of the Company amongst potential investors and
can  have  an effect on the ability of the Company to raise additional funds. It
can  also  impact  the  dilution  associated  with  any  financing.

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

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

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


                                     - 17 -
<PAGE>
     DEPENDENCE  ON  SALES  AND MARKETING RELATIONSHIPS FOR GROWTH: Our business
model  includes  generating  sales  through our alliance and affiliate programs.
Consequently, the Company will depend, in part, on sales and marketing strategic
relationships  for growth.  The Company has established and plans to continue to
establish  sales  and marketing strategic relationships with large organizations
as  part  of  our  growth  strategy.  Such  relationships  may not contribute to
increased  use  of  the Company's services, help the Company add new clients, or
increase  the  Company's revenue.  The Company may not be able to enter into new
relationships or renew existing relationships on favorable terms, if at all.  In
addition,  the  Company  may  not  be  able  to  recover  costs and the expenses
associated  with the formation of these programs.  In December 2000, the Company
announced  that  it's  strategic  relationship with Qwest had ended, citing that
U.S.  West had been acquired by Qwest and that their business strategy no longer
met  the  objectives  of  the  relationship  with  Vsource.  Accordingly, if the
Company  is  unable  to establish and maintain effective and long-term alliances
with  other organizations, the Company may have difficulty achieving significant
market  penetration.

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

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

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

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


                                     - 18 -
<PAGE>
     -  demand  for  and  market  acceptance  of  VSN

     -  inconsistent  growth,  if  any,  of  the  Company's  client  base

     -  loss  of  key  customers  or  strategic  partners

     -  timing  of  the  recognition  of  revenue  for  large  contracts

     -  variations  in  the  dollar  volume of transactions effected through VSN

     -  intense  and  increased  competition

     -  introductions  of  new  services  or enhancements, or changes in pricing
        policies,  by  the  Company  and  it's  competitors

     -  the  Company's  ability  to  control  costs

     -  reliable  continuity  of  VSN  availability

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

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

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

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


                                     - 19 -
<PAGE>
     VENDORS ARE ESSENTIAL TO SUCCESS OF VIRTUAL SOURCE NETWORK; NEGATIVE IMPACT
OF  VENDORS' FAILURE TO JOIN THE NETWORK: In order to operate, VSN requires that
vendors (suppliers) be able to access the network and that client buyers be able
to communicate their requirements electronically to vendors.  Currently, vendors
can  access  VSN  even  if  they have not joined the network, but it is far more
efficient if a vendor does join the network and sets up a catalog online.  It is
necessary, furthermore, that a client's key vendors join the network in order to
achieve  the  full  benefits  of  the  system, such as buying from an electronic
catalog.  The  Company,  furthermore,  expects  that  vendors will join VSN upon
invitation from their respective buyers.  Network membership is now free for any
vendor.  Client  buyers  operating  on  VSN  make  direct  requests of their key
vendors  that  they  join.  When  a  large corporation requests that its vendors
adapt to a new purchasing process, and that change is free, the Company believes
that  there  is  a  strong  incentive  for  those vendors to make that change to
protect  their  customer  relationships.

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

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

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

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

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

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


                                     - 20 -
<PAGE>
     SYSTEM FAILURES, SERVICE DELAYS AND INTERRUPTIONS: The Company's ability to
provide  acceptable  levels of customer service largely depends on the efficient
and  uninterrupted  operation  of  the  Company's  computer  and  communications
hardware and procurement network systems.  Any interruptions could severely harm
the  Company's  business  and  result  in  a  loss  of customers.  The Company's
computer and communications systems are located in the state of Washington.  The
Company does not maintain a redundant site, although is currently planning to do
so.  The  Company's  systems  and  operations  are  vulnerable  to  damage  or
interruption  from  a  variety of sources including human error, sabotage, fire,
flood,  earthquake,  power  loss, telecommunications failure and similar events.
The  Company  cannot give assurances that it will not experience system failures
in the future.  The occurrence of any system failure or similar event could harm
the  Company's  business  dramatically.

     INCOMPLETE  DISASTER  RECOVERY  PLAN:  The Company has developed a disaster
recovery  plan  that  is  still  in the implementation process.  The Company has
transferred  its  Web site operations to a facility in Seattle, Washington.  The
Bothell,  Washington facility will initially serve as backup.  A second phase of
the  plan  will include a dedicated backup facility in another state.  Until the
second  phase  is completed there are risks of localized Internet failure, which
could  affect  both  Seattle and Bothell.  The Company is also in the process of
implementing  redundancy  and  other  improvements  in  its  internal  network
operations.  Until  these  improvements  are  completed,  there will be risks of
periodic  network  disruptions.

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

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

     SUCCESS  DEPENDS  ON  KEY  PERSONNEL;  NO  "KEY MAN" LIFE INSURANCE: Future
performance  depends  on the continued service of key personnel, and the ability
to attract, train, and retain additional technical, marketing, customer support,
and  management  personnel.  The  loss  of  one  or  more  key  employees  could
negatively impact the Company, and there is no "key man" life insurance in force
at  this  time.  However,  the  Company  does  plan  to  obtain  this insurance.
Competition  for  qualified  personnel is intense, and there can be no assurance
that  the  Company will retain key employees, or attract and retain other needed
personnel.

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

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

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


                                     - 21 -
<PAGE>
     INABILITY  TO  ACCURATELY  PREDICT  USAGE  RATES AND DIFFICULTY IN ADAPTING
SYSTEMS  IN  A  TIMELY  MANNER: Traffic in the Company's procurement network may
increase  to  the  point  where  the Company must expand and upgrade some of its
transaction  processing  systems  and procurement network hardware and software.
While  the  Company's systems are scalable and can be expanded, that flexibility
is  limited.  The  Company  may  not  be  able to accurately predict the rate of
increase in the usage of its procurement network.  This may affect the Company's
timing  and  ability  to  expand and upgrade its systems and procurement network
hardware  and  software  capabilities  to  accommodate  increased  use  of  its
procurement  network.  If  the  Company  does  not  upgrade  its  systems  and
procurement  network  hardware and software in a timely fashion, the Company may
experience  downgraded  service,  interruptions  or delays that could damage its
business  reputation,  relationship  with clients and its operating results.  It
might  also be forced to delay bringing additional customers onto the VSN system
until  such  upgrades  are  completed

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

     -  increased impact of recessions in economies outside of the United States

     -  difficulties  staffing  and  managing  foreign  operations

     -  political  instability

     -  the  burdens of compliance with a wide variety of foreign laws and legal
        regimes

     -  unexpected  changes  in  regulatory  requirements

     -  tariffs,  export  controls  and  other  barriers  to  trade

     -  potentially  adverse  tax  consequences

     -  fluctuations  in  currency  exchange  rates

     -  longer payment cycles and difficultiesin collecting accounts receivables

     -  seasonal  fluctuations  in  business  activity

RISKS  RELATED  TO  THE  INTERNET  AND  E-COMMERCE

     YEAR  2000  RISK: Management believes that its internally developed systems
and  technology  are  Year 2000 compliant and has so far had no indications that
its  products are not Y2K compliant. Nevertheless, because the Company relies on
information technology supplied by third parties, it is still possible that year
2000  problems may yet surface that could adversely affect the Company, although
none  have  surfaced  to  date.  Further, the Internet itself could face serious
disruptions  arising  from  Year  2000  problems, although none have surfaced to
date.  Many  potential  VSN  clients, furthermore, may have implemented policies
that  prohibit  or  strongly  discourage  making  changes  or additions to their
internal computer systems until after the impact of Year 2000 has been assessed.
While  the  Year 2000 issue has generally been considered resolved, there can be
no  assurances  that  the  issue  will  not impact the rate at which VSN will be
implemented  inside  client  organizations.

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

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


                                     - 22 -
<PAGE>
     SUBSTANTIAL  COSTS  OF ANY INTELLECTUAL PROPERTY INFRINGEMENT CLAIMS: There
has  been  a  substantial  amount of litigation in the software industry and the
Internet  industry  regarding intellectual property rights.  It is possible that
in  the  future,  third  parties  may  claim  that  the Company's technology may
infringe  their  intellectual  property.  Management  is  not  aware  of  any
infringement  or  claim  of  infringement  by  a  third  party.  It is expected,
however,  that  software product developers and providers of electronic commerce
solutions  will  increasingly be subject to infringement claims as the number of
products  and  competitors  grows and the functionality of products in different
industry  segments  overlaps.  Any  claims,  with  or  without  merit,  could be
time-consuming  and  result  in  costly  litigation.

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

     POTENTIAL BREACHES OF THE COMPANY'S SECURITY SYSTEMS: A significant barrier
to  electronic  commerce  and  communications  is  the  secure  transmission  of
confidential  information  over  public  networks.  Advances  in  computer
capabilities,  new  discoveries  in the field of cryptography or other events or
developments  could  result in compromises or breaches of the Company's security
systems  or  those  of  other  web  sites  to  protect  the  Company's exclusive
information.  If  any  well-publicized compromises of security were to occur, it
could  have the effect of substantially reducing the use of the web for commerce
and  communications.  Anyone  who  circumvents  the  Company's security measures
could  misappropriate  its  exclusive  information  or  cause  interruptions  in
services or operations.  The Internet is a public network, and data is sent over
this  network  from  many  sources.  In  the  past,  computer  viruses, software
programs  that  disable  or  impair  computers,  have  been distributed and have
rapidly  spread  over  the  Internet.  Computer  viruses  could theoretically be
introduced into the Company's systems, or those of our clients or vendors, which
could  disrupt  VSN or another ASP-based product offered by the Company, or make
it  inaccessible to clients or vendors.  Although language in its user agreement
places  responsibility  with users to protect VSN from such threats, the Company
may  be  required  to  expend significant capital and other resources to protect
against  the  threat  of  security  breaches  or to alleviate problems caused by
breaches.  To  the  extent that the Company's activities may involve the storage
and transmission of exclusive information, such as credit card numbers, security
breaches  could  expose the Company to a risk of loss or litigation and possible
liability.  Despite  provisions  to  the  contrary  in  its user agreements, the
Company's  security measures may be inadequate to prevent security breaches, and
the  Company's  business  could be seriously impacted if they are not prevented.

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


                                     - 23 -
<PAGE>
     One  or  more  states, furthermore, may seek to impose sales tax collection
obligations  on  out-of-state  companies  like  the  Company  that  engage in or
facilitate  electronic commerce throughout numerous states.  These proposals, if
adopted,  could substantially impair the growth of electronic commerce and could
adversely  affect  the  Company's  opportunity  to derive financial benefit from
these  activities.


                           PART II - OTHER INFORMATION

Item  1.     LEGAL  PROCEEDINGS

     On  October 23, 2000, the Company filed a suit in the Superior Court of the
State  of  California  for  the  County  of  Los  Angeles  for  fraudulent
misrepresentation,  fraudulent  concealment,  rescission  and  mutual  mistake,
seeking  to  rescind a contract the Company purportedly entered into with Vitria
Technology, Inc. ("Vitria") in February of this year.  Vitria has filed a motion
to  transfer  venue  to  Santa  Clara  County.  Although  Vitria  has not as yet
responded  to  the substance of the Company's complaint, it  is anticipated that
Vitria will deny the substantive allegations in the complaint and seek the award
of  monetary  damages  against  the Company for breach of contract.  The Company
intends  to  pursue  its  claims  against  Vitria aggressively.  However, if the
Company is unsuccessful in this litigation, damages could be awarded against the
Company  in  excess  of  $700,000  plus  Vitria's  legal  fees  and  costs.

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

Item  2.     CHANGES  IN  SECURITIES  AND  USE  OF  PROCEEDS

     During  the  period  August 1, 2000 to September 18, 2000, the Company sold
1,672,328  shares  of  Series  2-A  Convertible Preferred Stock to 25 accredited
investors  for  $10,719,623  less  offering  costs  of  $531,792.  Each share of
preferred  stock  is initially convertible into one share of common stock at the
election  of  the  holder,  upon  an underwritten public offering with aggregate
proceeds  to  the  Company  of  at  least  $10 million or upon the election of a
majority  of  the  outstanding  shares of preferred stock.  No underwriters were
used.  Offering  costs  included transfer agent fees, printing costs, legal fees
and  commissions or finders' fees.  The offering was a private placement made in
accordance  with Regulation D.  All of the purchasers were accredited investors.
No form of general solicitation or general advertising was used for any offer or
sale.  The  investors  represented  their  intention  to  acquire the shares for
investment  purposes  only,  and  not with a view to resale or distribution, and
appropriate  restrictive  legends  were  placed on each stock certificate issued
pursuant  to  this  offering.

In  connection with the sales of the Series 2-A Convertible Preferred Stock, the
Company  has  issued  warrants to purchase an aggregate 144,881 shares of common
stock at exercise prices ranging from $6.41 to $6.69 as additional finder's fees
and  commissions  and  for  other  services in connection with the offering.  No
underwriters were used, and no commissions were paid.  The warrants were issued,
or  will  be issued, to seven consultants and as a private placement exempt from
registration  under  Section  4(2)  of  the Securities Act.  The warrant holders
represented  their  intention  to  acquire  the warrants for investment purposes
only,  and  not  with  a  view  to  resale or distribution, and appropriate stop
transfer  instructions  and  restrictive  legends  indicating  the  transfer
restrictions  will  be  placed  on  each warrant and each stock certificate when
issued.  Each  investor  had  ample  access  to the kind of information from the
Company  that  a  registration  statement  would  include.

     Upon  the  Company's  reincorporation in Delaware on November 8, 2000, each
share  of  each  class  of the Company's predecessor's stock was exchanged for a
substantially  similar  share of the Company's stock.  The Company increased the
number  of  shares  of common stock authorized for issuance to 100,000,000.  The
issuance of additional shares of common stock could have the effect of delaying,
deferring  or preventing a change in control of the Company, even if such change
in  control  would  be  beneficial  to  the  Company's  stockholders.


                                     - 24 -
<PAGE>
Item  3.     DEFAULTS  UPON  SENIOR  SECURITIES

     None.

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

     None.

Item  5.     OTHER  INFORMATION

     On  December  14,  2000,  the Company entered into an Agreement and Plan of
Merger  dated  as  of  the  same  date, with OTT Acquisition Corp., a California
corporation,  Online  Transaction  Technologies,  Inc., a California corporation
("OTT"),  Colin  P.  Kruger  and  Michael Shirman (the "Merger Agreement").  The
closing  of  the  transactions  under the Merger Agreement are expected to occur
later in December 2000 (the "Closing").  The proposed merger is to be a tax-free
reorganization  under  Section  368(a)  of  the  Internal  Revenue  Code.

     OTT  is  an  Application  Service  Provider  (ASP)  that develops and hosts
transaction  solutions  for  public  (many  to  many)  and private (one to many)
exchanges.  Among  the  solutions  that  OTT  brings  to  Vsource  is
LiquidMarketplace(TM),  a  complete  suite  of  fully  integrated  transaction
solutions,  including  auctions,  fixed-price  catalogs  and RFQ engines.  These
solutions  are  identified  as  LiquidAuction(TM),  LiquidCatalog(TM)  and
LiquidRFP(TM).  This suite allows public exchange clients to handle both seller-
and  buyer-initiated  transactions  in  their  e-Marketplaces.  OTT's  private
exchange  solution,  LiquidStore(TM),  offers  private  catalog  and  auction
functionality  to LiquidMarketplace(TM) participants or stand-alone clients.  In
addition to offering a complete suite, OTT has developed proprietary modules and
applications  that  reduce  customization  and  deployment  time  and  simplify
integration.

     The  aggregate  purchase price payable at Closing is to be 1,130,950 shares
of  the  Company's  common  stock.  The number of shares was calculated from the
Merger  Agreement  purchase  price  of  $7,000,000, less $77,115 paid as certain
warrants  and  options,  divided  by  $6.1213 per share ("Acquisition Price", as
calculated from the average closing price of a share of Company common stock for
the  30  calendar  days immediately prior to execution of the Merger Agreement).
Such  aggregate  price  shall  be  subject  to adjustment based on reductions or
increases  in  the net book value of the assets of OTT since September 30, 2000.

     In  connection  with  the Closing, two key employees of OTT will enter into
mutually  agreeable  employment  contracts with the Company providing for, among
other things, salaries of $125,000 and options to purchase 100,000 shares of the
Company's  common  stock which vest over 24 months and have an exercise price of
$6.41  per  share.

     Twenty-five  percent  of  the  equity  securities  comprising the aggregate
purchase  price  will  be  held  for  six  months  in  an  escrow  (the  "Escrow
Securities").  The Escrow Securities and Company shares issued to OTT management
shareholders  will  be  the  sole  recourse  for the Company for indemnification
against  claims  and  losses arising from breaches by OTT of representations and
warranties  or  covenants  made  pursuant  to  the  definitive agreements.  Such
representations and warranties shall terminate over varying periods.  The Escrow
Securities  will  be  valued  for  purposes  of  any such indemnification at the
Acquisition  Price.  OTT shareholders may at their option pay any such indemnity
in  cash  in  lieu  of  Escrow  Securities.

     Closing  of  the  transaction  is  contingent  upon  several  conditions,
including, without limitation, approval of OTT minority shareholders and warrant
holders.



Item  6.  EXHIBIT  AND  REPORTS  ON  FORM  8-K


     (a)       EXHIBITS:

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


                                     - 25 -
<PAGE>
     4.4(*)    Form of Series 2 Convertible Demand  Note  incorporated herein by
               reference to Exhibit 3.3 to Registrant's  Registration  Statement
               on  Form  10-SB  filed  on  September  21,  1999  (SEC  File  No.
               000-26563)

     4.5(*)    Form  of  Common Stock Purchase  Warrant  incorporated  herein by
               reference to Registrant's  Form 8-K filed September 26, 2000 (SEC
               File No. 000-30326)

     10.1(*)   Distribution and Marketing Agreement between  Vsource,  Inc.  and
               U.S.  West  Interprise  America,  Inc.  dated  February  15, 2000
               incorporated  herein by reference to Exhibit 10.1 to Registrant's
               Form 10-KSB filed May 11, 2000 (SEC File No. 000-30326)

     10.2(*)   Ventura  Professional  Center  First  Amendment  to Lease between
               Virtual Source, Inc. and Security National Properties, LLC, dated
               October 27, 1998 incorporated herein by reference to Exhibit 10.2
               to  Registrants  Form  10-KSB  filed  May 11,  2000 (SEC File No.
               000-30326)

     10.3(*)   Lease - Razore  Land  Company,  Landlord  and Interactive  Buyers
               Network   International,   Tenant,   dated   October   11,   1999
               incorporated  herein by reference to Exhibit 10.3 to  Registrants
               Form 10-KSB filed May 11, 2000 (SEC File No. 000-30326)

     10.4      Promissory Note by Robert C. McShirley dated October 11, 2000

     10.5      Pledge and  Security  Agreement  with Robert C.  McShirley  dated
               October 11, 2000

     10.6      Promissory Note by P. Scott Turner dated October 13, 2000

     10.7      Promissory Note by Sandford T. Waddell dated September 18, 2000

     10.8      Pledge and Security  Agreement  with  Sandford T.  Waddell  dated
               September 18, 2000

     10.9      Promissory Note by P. Scott Turner dated September 18, 2000

     10.10     Pledge  and  Security   Agreement  with  P.  Scott  Turner  dated
               September 18, 2000

     10.11     Agreement and Plan of Merger dated as of December 14, 2000, among
               the  Company,   OTT   Acquisition   Corp.,   Online   Transaction
               Technologies, Inc. and it's Shareholders

     27.1     (**) Financial Data Schedule

     99.1     (*) Vsource,  Inc. 2000 Stock Option Plan  incorporated  herein by
               reference to Exhibit 99.1 to  Registrant's  Form  10-QSB/A  filed
               September 25, 2000 (SEC File No. 000-30326)

______________

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




          (b)  REPORTS ON FORM 8-K

               1.   Report  on Form  8-K  dated  September  18,  2000  filed  on
                    September 26, 2000.

               2.   Report on Form 8-K dated  October  6, 2000  filed on October
                    23, 2000.

               3.   Report on Form 8-K dated  October 30, 2000 filed on November
                    14, 2000.


                                     - 26 -
<PAGE>
                                   SIGNATURES

     In accordance with the requirements of the Securities Exchange Act of 1934,
the  registrant  has  caused  this  report  to  be  signed  on its behalf by the
undersigned,  thereunto  duly  authorized.


VSOURCE,  INC.


By:  /s/  Robert  C.  McShirley
  -----------------------------

     Robert  C.  McShirley
     President  and  Chief  Executive  Officer
    (Principal  Executive  Officer)

Date:  December  15,  2000


By:  /s/  Sandford  T.  Waddell
  -----------------------------

     Sandford  T.  Waddell
     Chief  Financial  Officer  and  Secretary
     (Principal  Accounting  Officer)

Date:  December  15,  2000


                                     - 27 -
<PAGE>
                                  EXHIBIT INDEX

EXHIBIT     SEQUENTIALLY
NUMBER                    DESCRIPTION                    NUMBERED  PAGE

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

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

     4.5(*)    Form  of  Common Stock Purchase  Warrant  incorporated  herein by
               reference to Registrant's  Form 8-K filed September 26, 2000 (SEC
               File No. 000-30326)

     10.1(*)   Distribution and Marketing Agreement between  Vsource,  Inc.  and
               U.S.  West  Interprise  America,  Inc.  dated  February  15, 2000
               incorporated  herein by reference to Exhibit 10.1 to Registrant's
               Form 10-KSB filed May 11, 2000 (SEC File No. 000-30326)

     10.2(*)   Ventura  Professional  Center  First  Amendment  to Lease between
               Virtual Source, Inc. and Security National Properties, LLC, dated
               October 27, 1998 incorporated herein by reference to Exhibit 10.2
               to  Registrants  Form  10-KSB  filed  May 11,  2000 (SEC File No.
               000-30326)

     10.3(*)   Lease - Razore  Land  Company,  Landlord  and Interactive  Buyers
               Network   International,   Tenant,   dated   October   11,   1999
               incorporated  herein by reference to Exhibit 10.3 to  Registrants
               Form 10-KSB filed May 11, 2000 (SEC File No. 000-30326)

     10.4      Promissory Note by Robert C. McShirley dated October 11, 2000

     10.5      Pledge and  Security  Agreement  with Robert C.  McShirley  dated
               October 11, 2000

     10.6      Promissory Note by P. Scott Turner dated October 13, 2000

     10.7      Promissory Note by Sandford T. Waddell dated September 18, 2000

     10.8      Pledge and Security  Agreement  with  Sandford T.  Waddell  dated
               September 18, 2000

     10.9      Promissory Note by P. Scott Turner dated September 18, 2000

     10.10     Pledge  and  Security   Agreement  with  P.  Scott  Turner  dated
               September 18, 2000

     10.11     Agreement and Plan of Merger dated as of December 14, 2000, among
               the  Company,   OTT   Acquisition   Corp.,   Online   Transaction
               Technologies, Inc. and it's Shareholders

     27.1     (**) Financial Data Schedule

     99.1     (*) Vsource,  Inc. 2000 Stock Option Plan  incorporated  herein by
               reference to Exhibit 99.1 to  Registrant's  Form  10-QSB/A  filed
               September 25, 2000 (SEC File No. 000-30326)


___________________
(1)  This exhibit is being filed electronically in the electronic format
     specified  by  EDGAR./foot2


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