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 APRIL 30, 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)

     NEVADA                                             95-3538903
     (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 June 12,
2000 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .  15,815,421

Number  of  shares  of  Series  1-A  Convertible Preferred Stock, par value $.01
          outstanding  as  of  June  12,  2000 . . . . . . . . . . . . 2,802,000

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


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

                                                                            Page
                                                                            ----
                         PART I - FINANCIAL INFORMATION

Item  1.   FINANCIAL  STATEMENTS . . . . . . . . . . . . . . . . . . . . . . . 1
Item  2.   MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
              CONDITION  AND  RESULTS  OF  OPERATIONS . . . . . . . . . . . .  7

                           PART II - OTHER INFORMATION

Item  1.   LEGAL  PROCEEDINGS . . . . . . . . . . . . . . . . . . . . . . . . 20
Item  2.   CHANGES  IN  SECURITIES . . . . . . . . . . . . . . . . . . . . .  20
Item  3.   DEFAULTS  UPON  SENIOR  SECURITIES . . . . . . . . . . . . . . . . 21
Item  4.   SUBMISSION  OF  MATTERS  TO  A  VOTE  OF  SECURITY HOLDERS . . . . 21
Item  5.   OTHER  INFORMATION . . . . . . . . . . . . . . . . . . . . . . . . 21
Item  13.  EXHIBITS,  REPORTS  ON  FORM  8-K . . . . . . . . . . . . . . . .  22
SIGNATURES . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .  22


<PAGE>
PART  I  -  FINANCIAL  INFORMATION

<TABLE>
<CAPTION>
                                       VSOURCE, INC.
                                CONSOLIDATED BALANCE SHEET

                                          ASSETS


                                                        April 30, 2000  January 31, 2000
                                                         (unaudited)
                                                        --------------  ----------------
<S>                                                     <C>             <C>
Current assets:
  Cash in bank                                          $   3,868,134   $     5,124,399
  Restricted cash                                              84,965            82,768
                                                        --------------  ----------------
  Total Cash                                                3,953,099         5,207,167

  Employee receivables                                        155,847           109,847
  Prepaid expenses                                            149,280                --
                                                        --------------  ----------------
Total current assets                                        4,258,226         5,317,014

Property and equipment
  Fixed assets                                                411,058           240,208
  Less:  accumulated depreciation                             (35,516)          (17,708)
                                                        --------------  ----------------
  Property and equipment, net                                 375,542           222,500

Other assets                                                    1,197               881
                                                        --------------  ----------------
                                                        $   4,634,965   $     5,540,395
                                                        ==============  ================

                      LIABILITIES AND SHAREHOLDERS' EQUITY (DEFICIT)
Current liabilities:
  Accounts payable                                      $     839,195   $       247,472
  Accrued expenses                                            163,984           100,937
  Convertible notes payable                                   150,000           150,000
  Liabilities related to private placement of
    preferred stock                                                --         6,002,500
                                                        --------------  ----------------
  Total Current Liabilities                                 1,153,179         6,500,909

Shareholders' Equity (Deficit)
  Preferred stock ($0.01 par value, 5,000,000 shares
        authorized:  2,802,000 issued and outstanding)         28,020                --
  Common stock ($0.01 par value, 50,000,000 shares
        authorized: 15,815,421 issued and outstanding)        158,154           158,071
  Additional paid-in capital                               44,804,735        10,645,934
  Deferred compensation                                   (18,848,570)       (1,780,817)
  Accumulated equity (deficit)                            (22,481,755)       (9,804,904)
    Less:  Notes receivable from the sale of stock           (178,798)         (178,798)
                                                        --------------  ----------------
  Total Shareholders' Equity (Deficit)                      3,481,786          (960,514)
                                                        --------------  ----------------
                                                        $   4,634,965   $     5,540,395
                                                        ==============  ================
</TABLE>

         The accompanying notes are an integral part of this statement.


                                      - 1 -
<PAGE>
<TABLE>
<CAPTION>
                                          VSOURCE, INC.
                              CONSOLIDATED STATEMENT OF OPERATIONS
                                   FOR THE THREE MONTHS ENDED
                                           (UNAUDITED)


                                                      April 30, 2000  April 30, 1999
                                                      --------------  --------------
<S>                                                   <C>             <C>
Revenue                                               $          --   $       4,060

Expenses
  General and administrative (excluding $2,752,889
    of stock based compensation for the period
    ended April 30, 2000)                                   895,910         337,647

  Research and development (excluding $601,448
    of stock based compensation for the period
    ended April 30, 2000)                                 1,591,307              --
  Stock-based compensation                                3,354,337              --
                                                      --------------  --------------
                                                          5,841,554         337,647

Loss from operations                                     (5,841,554)       (333,587)

Other income/(expense)
  Interest income                                            38,399
  Interest expense                                           (3,699)             --
                                                      --------------  --------------
Loss before income taxes                                 (5,806,854)       (333,587)

Provision for income taxes                                    1,600              --
                                                      --------------  --------------
Net loss                                              $  (5,808,454)  $    (333,587)
                                                      ==============  ==============
Basic loss available to                               $ (12,676,851)  $    (333,587)
  common stockholders (Note 5)                        ==============  ==============

Basic weighted average number of
  common shares outstanding:                             15,815,421      11,838,164
                                                      ==============  ==============
Net loss per share available to common stockholders

  Basic                                               $       (0.80)  $       (0.03)
                                                      ==============  ==============

  Diluted                                             $       (0.80)  $       (0.03)
                                                      ==============  ==============
</TABLE>

         The accompanying notes are an integral part of this statement.


                                      - 2 -
<PAGE>
<TABLE>
<CAPTION>
                                              VSOURCE, INC.
                                   CONSOLIDATED STATEMENT OF CASH FLOWS
                                        FOR THE THREE MONTHS ENDED
                                               (UNAUDITED)


                                                               April 30, 2000  April 30, 1999
                                                               --------------  --------------
<S>                                                            <C>             <C>
Cash flows from operating activities:
  Net loss                                                     $  (5,808,454)  $    (333,587)
  Adjustments to reconcile net loss to net cash
   used in operating activities:
    Depreciation and amortization                                     18,027          13,194
    Compensation expense for stock option grants                   1,106,431              --
    Compensation expense for warrant grants                        2,083,250              --
    Compensation expense for stock issued                            164,656              --
    Issuance of stock and debt for services, expense
      reimbursements and accrued interest                                 --          43,775
  Changes in assets and liabilities:
    (Increase)/decrease in accounts receivable                            --           3,590
    (Increase)/decrease in employee receivables                      (46,000)             --
    (Increase)/decrease in prepaid expenses                         (149,280)         11,250
    (Increase)/decrease in other assets                                 (535)             --
    Increase/(decrease) in accounts payable                          591,723           2,906
    Increase/(decrease) in deferred revenue                               --          (1,384)
    Increase/(decrease) in accrued expenses                           63,047          20,195
                                                               --------------  --------------
  Net cash used in by operating activities                        (1,977,135)       (240,061)

Cash flows from investing activities:
  Purchase of capitalized software                                   (44,718)             --
  Purchase of property and equipment                                (126,132)        (29,640)
  Advances to related parties                                             --         (35,070)
                                                               --------------  --------------
  Net cash used in investing activities                             (170,850)        (64,710)

Cash flows from financing activities:
  Proceeds from issuance of private placement-preferred stock        893,917              --
  Proceeds from borrowings                                                --          29,700
                                                               --------------  --------------
  Net cash provided by financing activities                          893,917       1,029,642
                                                               --------------  --------------
Net (decrease)/increase in cash                                   (1,254,068)        724,871
                                                               --------------  --------------
Cash at beginning of period                                        5,207,167          59,937
                                                               --------------  --------------
Cash at end of period                                          $   3,953,099   $     784,808
                                                               ==============  ==============
Supplemental disclosure of non-cash financing activities
  Reclassification of liability to equity                      $   6,002,500   $          --
  Interest Paid                                                $          --   $          --
  Income Taxes                                                 $       1,600   $       1,600
</TABLE>

         The accompanying notes are an integral part of this statement.


                                      - 3 -
<PAGE>
NOTES  TO  CONSOLIDATED  FINANCIAL  STATEMENTS

1.   SUMMARY  OF  SIGNIFICANT  ACCOUNTING  PRINCIPLES

     The  interim  consolidated  financial  statements as of April 30, 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 generally accepted accounting principles.
The  consolidated  balance  sheet  at January 31, 2000 has been derived from the
audited  consolidated  financial  statements at that date. Operating results for
the  three  months  ended  April  30, 2000 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 generally accepted accounting principles 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  generally  accepted  accounting  principles.
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  4  and  5.

2.   NOTES  RECEIVABLE  FROM  THE  SALE  OF  STOCK

     The  Company  has  unsecured notes receivables from several officers, which
totaled  $178,798  as  of  April  30, 2000. The notes are due on demand and bear
interest  at an annual rate of 6%. The notes were granted in connection with the
exercise of 636,100 stock options on May 15, 1999. In addition, the Company also
has  issued  loans  and  other advances to employees that totaled $155,847 as of
April  30,  2000.

3.   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
were  converted  as  of  April  30,  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 three months ended April
30,  2000  was  $3,699.


                                      - 4 -
<PAGE>
4.   SHAREHOLDERS'  EQUITY

     Common  Stock  -  On  April  30,  2000, common stock totaled $158,154. This
reflects  the  issuance  of 8,250 shares of common stock during the three months
ended April 30, 2000, up $83 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 issued and outstanding at a conversion price 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.  There remain 2,100,000 shares of preferred stock, which may be issued
with  rights,  preferences  and  privileges  to  be  designated  by the board of
directors.  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.

     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.

     On April 30, 2000, paid-in-capital totaled $44,804,735, up $34,158,801 from
$10,645,934 at January 31, 2000.  This increase reflects the value, in excess of
par,  of  the new preferred shares issued. This primarily reflects the recording
of  the  issuance  of  stock  of  $6,868,397,  the  recording  of $10,368,184 in
compensation  related  to  stock options granted to employees in accordance with
Accounting  Principles  Board  Opinion  No.  25, "Accounting for Stock Issued to
Employees,"  and  $16,922,220  in compensation for marketing, investor relations
and  referral  services in accordance with the Statement of Financial Accounting
Standards  #123,  "Accounting for Stock-based Compensation." Stockholders equity
is  partially  offset  by  deferred  compensation of $18,848,570 as of April 30,
2000.

     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 as compensation for services rendered.  As of April 30, 2000,
985,985  warrants  and  2,025,250 options had been granted and were outstanding.

     In  February  2000,  the Company entered into a strategic relationship with
U.S.  West,  Inc. of Denver, Colorado, pursuant to which the two firms agreed to
make  VSN  available  to  U.S.  West's  business  customers.  U.S. West provides
telecommunications  and related services, wireless services, high-speed data and
Internet  services  and  directory  services.  U.S.  West  also agreed to make a
minority  equity investment in  Vsource.

     In  exchange  for  services  to  be rendered, Vsource granted to U.S.  West
600,000  warrants  with  a  seven-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  three months ended April 30, 2000, the Company recognized $1,051,500 of
this  charge  as  a  marketing  expense.  The  Company  plans  to  recognize the
remaining  $7,360,500  evenly  on a quarterly basis as a marketing expense until
February  14,  2002.


                                      - 5 -
<PAGE>
5.   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 new
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. Diluted earnings per share reflects the potential
dilution that could occur if securities or other contracts to issue common stock
were  exercised  and  converted into common stock or resulted in the issuance of
common  stock  that  then  shared  in  the  earnings  of  the  entity.

     The  loss available to common shareholders for the three months ended April
30, 2000 is the net loss for the period, adjusted for preferred stock dividends.


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


     Net  loss                                             ($  5,808,454)

     Less  discount  to  preferred  shareholders           (   6,868,397)
                                                           --------------

     Basic  loss  available  to  common  shareholders      ($ 12,676,851)
                                                           ==============

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.


                                      - 6 -
<PAGE>
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

     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


                                      - 7 -
<PAGE>
stage  of  development,  particularly  companies  in  new  and  rapidly evolving
markets.  The  Company  may  not  be  successful  in  addressing  such risks and
difficulties.  For  more  information,  please  refer  to  "FORWARD  LOOKING
STATEMENTS"  and  "FACTORS  THAT  MAY  AFFECT  FUTURE  PERFORMANCE."

RECENT  EVENTS

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

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

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

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

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

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

     The  Company  is  a  paying client of IBM, which has developed the training
program  for  VSN  users.  Clients  of the Company retain the services of IBM in
order  to  train  their  staffs to use the VSN system.  In addition, IBM and the
Company  have  each  agreed informally to make their respective clients aware of
the  other  firm's  services,  where  it  seems  appropriate  for  the client in
question.  MANAGEMENT'S  DISCUSSION  & ANALYSIS OF RESULTS OF OPERATIONS - THREE
MONTHS  ENDED APRIL 30, 2000, COMPARED TO THE THREE MONTHS ENDED APRIL 30, 1999:

REVENUE

     For  the three months ended April 30, 2000, there were no revenues compared
to  $4,060  in  revenues  during  the  three  months ended April 30, 1999.  This
decrease  in  revenues  results  from  the Company's decision, early in the 2000
fiscal  year,  to  discontinue  the  annual subscription program relative to its
previous  software-based version of VSN.  It also reflects the fact that the new
Internet  version  of VSN has not yet begun to generate revenue for the Company.


                                      - 8 -
<PAGE>
GENERAL  AND  ADMINISTRATIVE  EXPENSES

     For  the  three  months  ended  April  30, 2000, general and administrative
expenses  were  $895,910  (excluding $2,752,889 of stock-based compensation), up
$558,263,  or  165%, from $337,647 during the three months ended April 30, 1999.
This  increase  was  caused  primarily  by  increased  expenses  associated with
marketing,  advertising,  public  relations,  and  executive  staff.

RESEARCH  AND  DEVELOPMENT

     For  the  three  months  ended  April  30,  2000,  research and development
expenses  were  $1,591,307  (excluding $601,448 of stock-based compensation), up
from no expenditures for this area during the three months ended April 30, 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.

STOCK  BASED  COMPENSATION

     For  the  three  months  ended  April  30, 2000, recognition of stock based
compensation  was  $3,354,337  up  from no expenditures for this area during the
three  months  ended April 30, 1999. This increase was caused by the issuance of
options, warrants and stock  primarily for employee related compensation, and in
obtaining  services  for  marketing,  investor  relations  and  referral  fees.

NET  LOSS

     For  the three months ended April 30, 2000, the net loss was $5,808,454, an
increase of $5,474,867, or 1641%, from the net loss of $333,587 during the three
months  ended  April  30,  1999.  This  increase  is  a  result of significantly
increased marketing and advertising expenses, as well as significantly increased
research  and  development  expense  and  stock based compensation, as described
above.

WEIGHTED  AVERAGE  COMMON  SHARES  OUTSTANDING  -  BASIC  AND  DILUTED

     For  the  three  months  ended  April  30, 2000, the basic weighted average
common  shares  outstanding  were  15,815,421,  up  3,977,257,  or  33.6%,  from
11,838,164  for  the  three months ended April 30, 1999.  This increase resulted
primarily  from  the issuance of 2,095,787 shares upon conversion of convertible
notes, the issuance of 636,100 shares upon exercise of stock options, as well as
the  issuance  of  shares  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 three months ended April 30,
2000  was $0.80 per share, up $0.77 per share from a net loss of $0.03 per share
for  the  three  months  ended  April  30,  1999.   This  increase  reflects the
$5,808,454  increase  in  the  net  loss  and  the return of equity to preferred
stockholders of $6,868,397, partially offset by the increase of 3,977,257 shares
in  the  basic  weighted  average  outstanding  common  shares.

MANAGEMENT'S  DISCUSSION  & ANALYSIS OF FINANCIAL CONDITION - AT APRIL 30, 2000,
COMPARED  TO  JANUARY  31,  2000:

CASH

     On  April 30, 2000, cash totaled $3,953,099 down $1,254,068, or 24.1%, from
$5,207,167 at January 31, 2000.   This decrease reflects proceeds of the sale of
preferred  stock in private transactions during the three months ended April 30,
2000,  less  the  funds  used  for  operations  during  that  period.

ACCOUNTS  RECEIVABLE


                                      - 9 -
<PAGE>
     On  April  30, 2000 and January 31, 2000 there were no accounts receivable.
This  reflects  that  the  Company is finishing development of its main product,
VSN,  and  has  not  yet generated any revenues or receivables from the product.

EMPLOYEE  RECEIVABLES

     On  April  30,  2000, employee receivables totaled $155,847, up $46,000, or
41.9%  from  $109,847 at January 31, 2000.   This increase results from personal
advances  to  employees.

PREPAID  EXPENSES

     On  April  30,  2000,  prepaid  expenses totaled $149,280 as compared to no
balance  at  January 31, 2000.  This increase primarily reflects prepaid fees of
$149,280  that  will  be  expensed  in  the  current  year.

TOTAL  CURRENT  ASSETS

     On  April  30,  2000,  total  current  assets  totaled  $4,258,226,  down
$1,058,788,  or  19.9%,  from  $5,317,014  at  January  31, 2000.  This decrease
primarily  reflects  the  use  of  cash  to  fund operations during the quarter.

FIXED  ASSETS

     On  April 30, 2000, fixed assets totaled $411,058, an increase of $170,850,
or  71.1%, from $240,208 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.

ACCUMULATED  DEPRECIATION

     On April 30, 2000, accumulated depreciation totaled $35,516, up $17,808, or
100.6%,  from  $17,808 at January 31, 2000.  This increase reflects the addition
of  normal  depreciation  expense  for  the  three  months ended April 30, 2000.

PROPERTY  AND  EQUIPMENT,  NET

     On  April  30,  2000,  property  and  equipment,  net  totaled $375,542, up
$153,042,  or  68.8%, 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.

OTHER  ASSETS

     On April 30, 2000, other assets totaled $1,197, up $316, or 35.9% from $881
at  January 31, 2000.    This increase reflects an additional rental deposit for
additional space, net against normal amortization of organizational expenses for
the  three  months  ended  April  30,  2000.

TOTAL  ASSETS

     On  April  30, 2000, total assets were $4,634,965, down $905,430, or 16.3%,
from $5,540,395 at January 31, 2000. This change primarily reflects cash used in
research  and  development  costs,  and  general  and  administrative  expenses
associated  with  the  development  and  marketing  of  VSN.

ACCOUNTS  PAYABLE

     On  April 30, 2000, accounts payable were $839,195, up $591,723, or 239.1%,
from  $247,472 at January 31, 2000. This change is a result of increased amounts
due  independent  contractors involved in development of the Internet version of
VSN,  as  well  as  amounts  due  for marketing, advertising and legal expenses.

ACCRUED  LIABILITIES

     On April 30, 2000, accrued liabilities were $163,984, up $63,047, or 62.5%,
from $100,937 at January 31, 2000. This increase resulted primarily from accrued
wages  and  related  compensation  expenses.

CONVERTIBLE  NOTES  PAYABLE


                                     - 10 -
<PAGE>
     On  April  30,  2000, convertible notes payable was $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  April  30,  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  April  30,  2000,  total  current  liabilities totaled $1,153,179, down
$5,347,730,  or  82.3%,  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 $591,723 and accrued
liabilities  of  $63,047.

COMMON  STOCK,  $0.01  PAR  VALUE

     On  April  30,  2000,  common  stock  totaled  $158,154.  This reflects the
issuance of 8,250 shares of common stock during the three months ended April 30,
2000,  up  $83  from  the value of common stock, $0.01 par value, on January 31,
2000.

PREFERRED  STOCK,  $0.01  PAR  VALUE

     On  April  30,  2000,  preferred  stock totaled $28,020 versus no preferred
stock  at  January  31,  2000.  This  reflects  the  issuance  of  2,802,000 new
preferred shares during the period.  All of the shares were issued in return for
cash  invested  in  the  Company.

ADDITIONAL  PAID-IN-CAPITAL

     On  April  30, 2000, paid-in-capital totaled $44,804,735, up $34,158,801 or
321%,  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  2,802,000  shares were issued in return for cash invested in the Company.
This  primarily  reflects the recording of additional paid in capital for common
stockholders'  of  $6,868,397,  compensation  of  $10,368,184  related  to stock
options  granted  to  employees  in  accordance  with the Statement of Financial
Accounting  Standards  #123,  accounting  for  stock-based  compensation,  and
$16,922,220  in  compensation  for  marketing,  investor  relations and referral
services.

DEFERRED  COMPENSATION

     On  April  30, 2000, deferred compensation was $18,848,570, up $17,067,753,
or  958%  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.

ACCUMULATED  DEFICIT

     On  April  30, 2000, the accumulated deficit was $22,481,755 up $12,676,851
or  129% from $9,804,904 at January 31, 2000.    This change resulted from a net
loss  of  $5,808,454  during  the  three  months  ended  April  30, 2000 and the
recognition  of  a  stock  dividend  to  preferred  stockholders  of $6,868,397.

NOTES  RECEIVABLE  FROM  THE  SALE  OF  STOCK

     On  April  30,  2000,  notes  receivable  from  the  sale  of stock totaled
$178,798.  This  amount  is  used to offset the balance in stockholders' equity.
These  notes  are  receivable from officers who exercised stock options during 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.


                                     - 11 -
<PAGE>
TOTAL  STOCKHOLDERS'  EQUITY/(DEFICIT)

     On  April  30,  2000,  total  stockholders'  equity  was  $3,481,786,  up
$4,442,300,  or  462.5%,  from  a  deficit of $960,514 at January 31, 2000. This
change  resulted primarily from increases in preferred stock and paid-in-capital
of  $34,158,801  offset  by an increase in deferred compensation of $16,016,254,
the recognition of a stock dividend to preferred stockholders of $6,868,397, and
the  net  loss  of  $5,808,454  during  the  three  months ended April 30, 2000.

LIQUIDITY  AND  CAPITAL  RESOURCES

     The  Company  has  no  revenue  at  this  time, other than 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  April  30,  2000, the Company had cash balances totaling $3,953,099,
primarily  as  a  result  of its private placement of preferred stock during the
first quarter of 2000. The Company is currently expending approximately $800,000
per  month  of  cash  and  cash  equivalents.  At  this rate, without additional
capital or revenues, management expects those funds to last through August 2000.

     The  Company's  principal sources of cash and cash equivalents were derived
from private sales of the Company's equity and debt securities.  The sole source
of  funds  for  the  Company  from the date of inception through April 30, 2000,
other  than  the  sale of equity and debt securities, has been from sales of the
earlier  software  products.  No  cash  was  derived from such sales made in the
three  months  ended  April  30,  2000.

     The Company anticipates client revenues to begin during the period from May
1,  2000  to  July  31,  2000.  Also, the Company has initiated a private equity
offering  through  its  investment bank that is anticipated to fund, fully or in
part,  during  the  period  from  May 1, 2000 to July 31, 2000.  There can be no
assurances  that the Company will raise funds as anticipated or that the Company
will  begin generating revenues from clients.  If client revenues or the private
equity  offering  do  not  materialize on schedule, the Company has a contingent
plan  of  cash  conservation that will allow it to operate through the remaining
quarters  of  the  current  year.

     The  Consolidated Statements of Cash Flows for the three months ended April
30,  2000,  and  three  months  ended  April  30, 1999 show that net losses were
$5,808,454  and $333,587, respectively, with the issuance of preferred stock for
cash  of  $893,917, partially offsetting the cash requirement.  A non-cash entry
was  made  for  the  period  ended April 30, 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  $20,422,090 was made to additional paid-in capital with an offsetting
entry  of  $3,354,337  for  compensation  expense,  and  $17,067,753 to deferred
compensation  is  shown as an increase in paid-in-capital.   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 $6,000,000 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 April 30, 2000, has an accumulated deficit of $22.5 million.
As  discussed  in  Item  2.  MANAGEMENT'S  DISCUSSION  AND ANALYSIS OF FINANCIAL
CONDITION  AND  RESULTS OF OPERATIONS -- LIQUIDITY AND RESOURCES, if the Company
is  to  sustain  its  current rate of development and operating expenditures, it
must  generate  additional capital in the second quarter or third quarter of the
fiscal year ending January 31, 2001, from client revenues, private equity sales,
or  both.  The  Company  is  currently implementing contracts with five clients.


                                     - 12 -
<PAGE>
These  clients,  and others that are near the implementation stage, are expected
to  produce  revenues  in  the  second quarter of this year.  In March 2000, the
Company  retained  a  full  time  Chief  Financial  Officer  and engaged a major
investment  bank  to  help  the Company raise additional equity.  The investment
bank  is currently working on the private placement of equity capital sufficient
to  fund the Company's operations until such time as a public equity offering is
practicable.

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

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

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

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

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


                                     - 13 -
<PAGE>
     LARGE  OPERATING  LOSSES  EXPECTED TO CONTINUE: The Company has accumulated
net losses of $22.5 million through April 30, 2000. Since inception, the Company
has  not  had  material revenues, and has recognized no revenues at all from the
Internet  version  of  VSN.  The  Company  expects to derive the majority of its
revenues  from  VSN  fees  over  the next five years. In addition, provided that
revenues  develop  more  or  less  as  expected,  the Company expects to spend a
substantial portion of revenues during the next two or three years on marketing,
sales,  technology  development,  training  and  administration. There can be no
assurance  that  the  Company  will  be  able  to  fund  these  expenses.

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

     Until  the  Company's  securities  are  listed  on  a  major  exchange, the
securities  of  the  Company are subject to a Securities and Exchange Commission
rule  that  imposes  special sales practice requirements upon broker-dealers who
sell  such  securities to persons other than established customers or accredited
investors.  For  purposes  of the rule, the phrase "accredited investors" means,
in  general  terms,  institutions  with  assets  in  excess  of  $5,000,000,  or
individuals  having  a  net  worth  in  excess of $1,000,000 or having an annual
income  that  exceeds  $200,000  (or that, when combined with a spouse's income,
exceeds $300,000).  For transactions covered by the rule, the broker-dealer must
make  a  special  suitability  determination  for  the purchaser and receive the
purchaser's  written  agreement  to  the  transaction  prior  to  the  sale.
Consequently,  the  rule  may  affect  the ability of broker-dealers to sell the
securities  of the Company and also may affect the ability of any shareholder to
sell  their  securities  in  any market that might develop for the common stock.

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

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

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

     DEPENDENCE  ON  SALES AND MARKETING RELATIONSHIPS FOR GROWTH:  Our business
model  includes  generating  sales  through our alliance and affiliate programs.
Consequently, the Company will depend, in part, on sales and marketing strategic
relationships  for growth.  The Company has established and plans to continue to
establish  sales  and marketing strategic relationships with large organizations


                                     - 14 -
<PAGE>
as  part  of  our  growth  strategy.  Such  relationships  may not contribute to
increased  use  of  the Company's services, help the Company add new clients, or
increase  the  Company's revenue.  The Company may not be able to enter into new
relationships or renew existing relationships on favorable terms, if at all.  In
addition,  the  Company  may  not  be  able  to  recover  costs and the expenses
associated  with  the  formation  of  these  programs.

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

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

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

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

     .  demand  for  and  market  acceptance  of  VSN

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

     .  loss  of  key  customers  or  strategic  partners

     .  timing  of  the  recognition  of  revenue  for  large  contracts

     .  variations  in  the  dollar  volume of transactions effected through VSN

     .  intense  and  increased  competition

     .  introductions  of  new  services  or enhancements, or changes in pricing
        policies, by  us  and  our  competitors


                                     - 15 -
<PAGE>
     .  the  Company's  ability  to  control  costs

     .  reliable  continuity  of  VSN  availability.

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

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

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

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

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

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


                                     - 16 -
<PAGE>
     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.

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

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


                                     - 17 -
<PAGE>
     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.

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


                                     - 18 -
<PAGE>
     RISKS  OF  INTERNATIONAL  OPERATION: The Company is exploring international
markets and considering the expansion of its operations and marketing efforts to
include  international markets.  If the Company should elect to expand into such
markets,  it  would  be  confronted  with  risks  including:

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

          -  difficulties  staffing  and  managing  foreign  operations

          -  political  instability

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

          -  unexpected  changes  in  regulatory  requirements

          -  tariffs,  export  controls  and  other  barriers  to  trade

          -  potentially  adverse  tax  consequences

          -  fluctuations  in  currency  exchange  rates

          -  longer  payment  cycles  and  difficulties  in  collecting accounts
             receivables

          -  seasonal  fluctuations  in  business  activity.

RISKS  RELATED  TO  THE  INTERNET  AND  ECOMMERCE

     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.

     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


                                     - 19 -
<PAGE>
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.

     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

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

Item  2.     CHANGES  IN  SECURITIES

     During  the  period December 1, 1999 to February 24, 2000, the Company sold
2,802,000  shares  of  Series  1-A  Convertible Preferred Stock to 46 accredited
investors  for $7,005,000 less offering costs.  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


                                     - 20 -
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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 1-A Convertible Preferred Stock,
the  Company  issued  or  will  issue  warrants to purchase an aggregate 386,691
shares  of  common  stock  at  exercise  prices  ranging  from $2.00 to $6.00 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 five 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.

Item  3.     DEFAULTS  UPON  SENIOR  SECURITIES

     There were no defaults upon senior securities during the three months ended
April  30,  2000.

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

     During  the  three  months  ended  April  30,  2000,  there were no matters
submitted  to  a  vote  of  security  holders.

Item  5.     OTHER  INFORMATION

RECENT  SALE  OF  UNREGISTERED  SECURITIES

     During  the  period  November  1999 to February 2000, the Company issued or
committed  to  issuing  warrants  to  purchase an aggregate of 985,985 shares of
common  at  exercise  prices  which  range  from $2.00 to $25.00 in exchange for
financial  consulting  and distribution and marketing services.  No underwriters
were  used,  and  no commissions were paid.  The warrants were issued or will be
issued as a private placement exempt from registration under Section 4(2) of the
Securities  Act.  The warrant holders represented their intention to acquire the
warrants  for  investment  purposes  only,  and  not  with  a  view to resale or
distribution, and appropriate stop transfer instructions and restrictive legends
indicating  the  transfer  restrictions  will be placed on each warrant and each
stock certificate when issued.  Each warrant holder had ample access to the kind
of  information  from  the  Company that a registration statement would include.

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

     On April 3, 2000, the Company  granted  options to purchase an aggregate of
100,000  shares of common stock to an executive officer exercisable at $3.00 per
share.  No  underwriters  were  used,  and no commissions were paid.  The grants
were  a  private  placement  exempt  from registration under Section 4(2) of the
Securities  Act.  The  option  grants  were  made  under  written  compensatory
contracts.  Appropriate  stop  transfer  instructions  and  restrictive  legends
indicating  the  transfer  restrictions will be placed on each stock certificate
when  issued.


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Item  13.     EXHIBITS  AND  REPORTS  ON  FORM  8-K

EXHIBITS

     There  are  no  exhibits  in  this  report.

REPORTS  ON  FORM  8-K

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

                                   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:  June  14,  2000


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

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

Date:  June  14,  2000


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