<PAGE>
                       SECURITIES AND EXCHANGE COMMISSION

                             WASHINGTON, D.C. 20549

                                   FORM 10-QSB


[X]      Quarterly report pursuant to section 13 or 15(d) of the Securities
         Exchange Act of 1934

         FOR THE QUARTER ENDED MARCH 31, 2002

[ ]      Transition report pursuant to section 13 or 15(d) of the Securities
         Exchange Act of 1934

COMMISSION FILE NUMBER 333-89561

                            E-XACT TRANSACTIONS, LTD
             ------------------------------------------------------
             (Exact name of registrant as specified in its charter)

                 DELAWARE                                 98-0212722
         (State of Incorporation)              (IRS Employer Identification No.)

   555 WEST HASTINGS STREET, SUITE 2410            VANCOUVER, B.C., V6B 4N4
 (Address of principal executive offices)           (City, state, zip code)


REGISTRANT'S TELEPHONE NUMBER, INCLUDING AREA CODE: (604) 691-1670

Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Sections 13 or 15(d) of the Securities Exchange Act of 1934
during the preceding 12 months (or for such shorter period that the registrant
was required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days.

                                  Yes  X  No
                                      ---    ---

Transitional Small Business Disclosure format (check one):

                                  Yes     No  X
                                      ---    ---

The number of shares outstanding of the Registrant's $0.001 par value common
stock on April 26, 2002 was 10,502,000.

<PAGE>

                            E-XACT TRANSACTIONS, LTD
                                   FORM 10-QSB
                                TABLE OF CONTENTS


<Table>
<Caption>
     PART I.      FINANCIAL INFORMATION                                                   PAGE
                                                                                          ----
<S>                                                                                       <C>

     Item 1.      Consolidated balance sheets -
                  March 31, 2002 and December 31, 2001                                    2

                  Consolidated statements of operations and deficit -
                  three months ended March 31, 2002 and
                  three months ended March 31, 2001                                       3

                  Consolidated statements of cash flows -
                  Three months ended March 31, 2002 and 2001                              4

                  Notes to consolidated financial statements                              5 - 13

     Item 2.      Management's discussion and analysis of financial condition
                  and results of operations                                               14 -18


    PART II.      OTHER INFORMATION

     Item 1.      Legal Proceedings                                                       19

     Item 2.      Changes in Securities                                                   19

     Item 3.      Defaults Upon Senior Securities                                         19

     Item 4.      Submission of Matters to a Vote of Security Holders                     19

     Item 5.      Other Information                                                       19

     Item 6.      Exhibits and Reports on Form 8-K                                        19

                  Signature                                                               20
</Table>


                                      -1-
<PAGE>

E-XACT TRANSACTIONS LTD.
CONSOLIDATED BALANCE SHEETS
Expressed in Canadian Dollars

<Table>
<Caption>
                                                                             MARCH 31        DECEMBER 31
                                                                               2002              2001
                                                                           ------------      ------------
                                                                            (Unaudited)
<S>                                                                        <C>               <C>
 ASSETS
CURRENT
   Cash                                                                    $     18,946      $     33,402
   Accounts receivable (Note 3)                                                 142,599            99,569
   Prepaid expenses and deposits                                                 14,275            12,520
                                                                           ------------      ------------
                                                                                175,820           145,491

  Capital assets (Note 4)                                                        86,412            94,296

                                                                           ------------      ------------
TOTAL ASSETS                                                               $    262,232      $    239,787
                                                                           ============      ============

 LIABILITIES AND CAPITAL DEFICIENCY

   Accounts payable and accrued liabilities (Note 5)                       $    855,732      $    878,749
   Income taxes payable                                                          16,263             9,846
   Advances payable (Note 6)                                                    205,168           188,335
                                                                           ------------      ------------
TOTAL CURRENT LIABILITIES                                                     1,077,163         1,076,930
                                                                           ------------      ------------
CONTINUING OPERATIONS (Note 1)
COMMITMENTS (Note 10)

 CAPITAL DEFICIENCY
   Common stock, common shares issued and outstanding (Note 7)
   10,502,000 at March 31, 2002 and December 31, 2001                            11,715            11,715
   Share purchase warrants                                                      281,465           281,465
   Additional Paid In Capital                                                 4,833,343         4,833,343
   Accumulated deficit                                                       (5,941,454)       (5,963,666)
                                                                           ------------      ------------
 Capital Deficiency                                                            (814,931)         (837,143)
                                                                           ------------      ------------
TOTAL CAPITAL DEFICIENCY AND LIABILITIES                                        262,232           239,787
                                                                           ============      ============
</Table>

See accompanying notes to consolidated financial statements


                                      -2-
<PAGE>

E-XACT TRANSACTIONS LTD.
CONSOLIDATED STATEMENT OF OPERATIONS AND DEFICIT
Expressed in Canadian Dollars

<Table>
<Caption>
For the three month period ended March 31                                      2002              2001
-----------------------------------------                                  ------------      ------------
                                                                           (Unaudited)        (Unaudited)
<S>                                                                        <C>               <C>
REVENUE                                                                    $    245,488      $    179,903

COST OF SALES                                                                    28,731            22,278
                                                                           ------------      ------------
GROSS MARGIN                                                                    216,757           157,625
                                                                           ------------      ------------

EXPENSES:
  General and administrative expenses                                           115,998           223,923
  Sales and marketing                                                            29,691            36,093
  Research and development                                                       53,921            98,209
                                                                           ------------      ------------
                                                                                199,610           358,225
                                                                           ------------      ------------
OPERATING INCOME (LOSS)                                                          17,147          (200,600)
                                                                           ------------      ------------
OTHER INCOME (EXPENSES)

  Other Income                                                                    5,065           (59,105)
                                                                           ------------      ------------
NET INCOME (LOSS) BEFORE INCOME TAXES                                            22,212          (259,705)
Income taxes                                                                         --                --
                                                                           ------------      ------------
NET INCOME (LOSS)                                                                22,212          (259,705)
  Deficit, beginning of period                                               (5,963,666)       (5,498,658)
                                                                           ------------      ------------
  Deficit, end of period                                                   $ (5,941,454)     $ (5,758,363)
                                                                           ============      ============

Basic and diluted earnings (loss) per share                                $       0.00      $      (0.03)
                                                                           ------------      ------------

WEIGHTED AVERAGE NUMBER OF SHARES USED TO CALCULATE LOSS PER SHARE
  BASIC                                                                      10,502,000         8,502,000
  DILUTED                                                                    10,647,227         8,502,000
</Table>

See accompanying notes to consolidated financial statements


                                      -3-
<PAGE>

E-XACT TRANSACTIONS LTD.
CONSOLIDATED STATEMENT OF CASH FLOWS
Expressed in Canadian dollars

<Table>
<Caption>
For the three month period ended March 31                                      2002              2001
-----------------------------------------                                  ------------      ------------
                                                                           (unaudited)       (unaudited)
<S>                                                                        <C>               <C>

OPERATING ACTIVITIES
  Net income (loss)                                                        $     22,212      $   (259,705)
  Item not affecting cash:
        Amortization                                                              7,111            15,130
        Loss on disposal of capital assets                                          426                --
                                                                           ------------      ------------
                                                                                 29,749          (244,575)
  Net change in operating assets and liabilities
       (Increase) in accounts receivable                                        (43,030)          (68,658)
       (Increase) in prepaid expenses and deposits                               (1,755)          (18,756)
       Decrease in income taxes recoverable                                       6,417             5,523
       (Decrease) Increase in accounts payable and accrued
       liabilities                                                              (23,017)          108,235
                                                                           ------------      ------------
                                                                                (31,636)         (218,231)
                                                                           ------------      ------------

FINANCING ACTIVITIES
  Advances from stockholders                                                     16,833           250,835
                                                                           ------------      ------------
                                                                                 16,833           250,835
                                                                           ------------      ------------
INVESTING ACTIVITIES
  (Purchase) Disposal of capital assets                                             347                (3)
                                                                           ------------      ------------
                                                                                    347                (3)
                                                                           ------------      ------------

INCREASE (DECREASE) IN CASH                                                $    (14,456)     $     32,601
CASH AND CASH EQUIVALENTS, BEGINNING OF PERIOD                                   33,402            15,709
                                                                           ------------      ------------
CASH AND CASH EQUIVALENTS, END OF PERIOD                                   $     18,946      $     48,310
                                                                           ============      ============
</Table>

See accompanying notes to consolidated financial statements


                                      -4-
<PAGE>

E-XACT TRANSACTIONS LTD.
NOTES TO CONSOLIDATED INTERIM FINANCIAL STATEMENTS
(UNAUDITED)
(EXPRESSED IN CANADIAN DOLLARS)


1.       CONTINUING OPERATIONS

         The Company specializes in online financial transaction processing
         supporting customers' e-commerce activities. The Company was initially
         incorporated on August 13, 1998 under the laws of British Columbia,
         Canada. On July 28, 1999 the Company was continued into the State of
         Delaware.

         The Company was formed through the acquisition of certain software and
         other intangible assets from Sutton Group Financial Services ("Sutton")
         and Data Direct Holdings Ltd. ("DataDirect"). In consideration for the
         acquisition of these assets Sutton and Data Direct, two unrelated
         companies, at the time of the acquisition, each received 2,100,000
         common shares.

         The accompanying financial statements have been prepared on a going
         concern basis, which contemplates the realization of assets and
         satisfaction of liabilities in the normal course of business.

         The Company incurred a net profit of $22,212 for the quarter ended
         March 31, 2002 and at March 31, 2002 had a working capital deficiency
         of $901,343 and capital deficiency of $814,931. The success of the
         Company's future operations is dependent upon maintaining its
         profitability, and upon its ability to raise additional financing.
         Management's plans include obtaining the continued support of
         creditors, raising additional financing and, ultimately, positioning
         the Company for profitable operations.

         These factors among others indicate that the Company may be unable to
         continue as a going concern for a reasonable period of time. The
         financial statements do not include any adjustments that might result
         from the outcome of this uncertainty. The Company's continuation as a
         going concern is dependent upon achieving operating levels adequate to
         support the Company's cost structure and obtaining adequate financial
         resources through a contemplated financing or otherwise. However, there
         can be no assurance that such financings will be successful.

         In the event that cash flow from operations, if any, together with the
         proceeds of any future financings, are insufficient to meet the
         Company's current operating expenses, the Company will be required to
         reevaluate its planned expenditures and allocate its total resources in
         such manner as the Board of Directors and management deems to be in the
         Company's best interest. This may result in the substantial reduction
         of the scope of existing and planned operations.



                                      -5-
<PAGE>

E-XACT TRANSACTIONS LTD.
NOTES TO CONSOLIDATED INTERIM FINANCIAL STATEMENTS
(UNAUDITED)
(EXPRESSED IN CANADIAN DOLLARS)


2.       SIGNIFICANT ACCOUNTING POLICIES

         These financial statements have been prepared in accordance with the
         following significant accounting polices.

         (a)      Basis of consolidation

                  These consolidated financial statements include the assets,
                  liabilities and operating results of the Company and its
                  wholly-owned subsidiary.

         (b)      Use of Estimates

                  The preparation of financial statements in conformity with
                  generally accepted accounting principles requires management
                  to make estimates and assumptions that affect the reported
                  amounts of assets, liabilities, revenues and expenses and
                  disclosure of contingent assets and liabilities at the date of
                  the financial statements and for the periods presented.
                  Estimates are used for, but not limited to, accounting for
                  doubtful accounts, amortization, recoverability of long-lived
                  assets, income taxes, and contingencies. Actual results may
                  differ from those estimates.

         (c)      Foreign Currency Translation

                  On January 1, 2002 the Company changed its functional currency
                  from the US dollar to the Canadian dollar. The majority of the
                  Company's operating transactions are denominated in Canadian
                  dollars. Monetary assets and liabilities denominated in other
                  than the Canadian dollars are translated using the exchange
                  rates prevailing at the balance sheet date. Revenues and
                  expenses are translated using average exchange rates
                  prevailing during the period. Gains and losses on foreign
                  currency transactions are recorded in the consolidated
                  statement of operations. The Company has re-measured its
                  assets, liabilities, revenues and expenses for prior periods
                  using the historical exchange rate in existence at the date of
                  the transaction.

         (d)      Research and Development Costs

                  All research and development costs are expensed when incurred
                  unless they meet generally accepted accounting criteria for
                  deferral and amortization. The Company reassesses whether it
                  has met the relevant criteria for deferral and amortization at
                  each reporting date. To date, no development costs have been
                  deferred.


                                      -6-
<PAGE>

E-XACT TRANSACTIONS LTD.
NOTES TO CONSOLIDATED INTERIM FINANCIAL STATEMENTS
(UNAUDITED)
(EXPRESSED IN CANADIAN DOLLARS)


2.       SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)

         (e)      Capital Assets and Amortization

                  Capital assets are recorded at cost and amortized over the
                  estimated useful lives of the assets on the following basis:

                       Leasehold improvement    5 years on a straight-line basis
                       Computer software        100% declining balance
                       Computer equipment       30% declining balance

                  The Company periodically evaluates the recoverability of its
                  capital assets whenever events or changes in circumstances
                  indicate that the carrying amount of an asset may not be
                  recoverable. An impairment loss would be recognized when
                  estimates of future cash flows expected to result from the use
                  of an asset and its eventual disposition are less than its
                  carrying amount. No impairment in assets had been identified
                  by the Company in the quarters ended March 31, 2002 and 2001.

         (f)      Revenue Recognition

                  The Company's revenue is derived from the following sources:

                  (i)      Online Transactions

                           Revenue from the setup, maintenance, customization
                           and processing of online transactions is recognized
                           when the services are performed, the amount of
                           revenue is fixed or determinable and collectibility
                           is reasonably assured.

                  (ii)     Web Development

                           Revenue from services related to web development are
                           recognized when the services are performed, the
                           amount of revenue is fixed or determinable and
                           collectibility is reasonably assured. Provision for
                           estimated losses on contracts is recorded when
                           identified.


                                      -7-
<PAGE>

E-XACT TRANSACTIONS LTD.
NOTES TO CONSOLIDATED INTERIM FINANCIAL STATEMENTS
(UNAUDITED)
(EXPRESSED IN CANADIAN DOLLARS)


2.       SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)

         (g)      Income Taxes

                  The Company accounts for income taxes under the provisions of
                  SFAS No. 109, Accounting for Income Taxes. This statement
                  provides for a liability approach under which deferred income
                  taxes are provided based upon enacted tax laws and rates
                  applicable to the periods in which the taxes become payable.

                  Deferred tax assets, if any, are recognized only to the extent
                  that, in the opinion of management, it is more likely than not
                  that the income tax assets will be realized.

         (h)      Basic and Diluted Loss Per Share

                  Basic loss per share is computed by dividing net loss
                  available to common stockholders by the weighted-average
                  number of common shares outstanding for the period along with
                  the contingently issuable common shares from the issuance of
                  special warrants which have been treated as outstanding as all
                  necessary conditions have been satisfied.

         (i)      Comprehensive Income

                  SFAS No. 130, Reporting Comprehensive Income, establishes
                  standards for the reporting and display of comprehensive
                  income and its components (revenue, expenses, gains and
                  losses) in a full set of general-purpose financial statements.
                  The Company has no comprehensive income items, other than the
                  net loss, in any of the periods presented.

         (j)      Recent Accounting Pronouncements

                  In July 2001,the Financial Accounting Standards Board ("FASB")
                  issued SFAS No. 141, Business Combinations and SFAS No. 142,
                  Goodwill and Other Intangible Assets. SFAS No. 141 addresses
                  the initial recognition and measurement of intangible assets
                  acquired in a business combination and SFAS No. 142 addresses
                  the subsequent recognition and measurement of intangible
                  assets acquired outside of a business combination whether
                  acquired individually or with a group of other assets. These
                  standards require all business combinations to be accounted
                  for using the purchase method of accounting. Goodwill is no
                  longer amortized but instead is subject to impairment tests at
                  least annually.

                  The Company is required to adopt SFAS No. 141 and No. 142 on a
                  prospective basis as of July 1, 2002; however, certain
                  provisions of these new standards may also apply to any
                  acquisitions concluded subsequent to June 30, 2001. The
                  adoption of SFAS No. 141 did not to have a material effect on
                  the Company's financial position or results of operations.


                                      -8-
<PAGE>

E-XACT TRANSACTIONS LTD.
NOTES TO CONSOLIDATED INTERIM FINANCIAL STATEMENTS
(UNAUDITED)
(EXPRESSED IN CANADIAN DOLLARS)


2.       SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)

         (j)      Recent Accounting Pronouncements (continued)

                  The FASB issued SFAS No. 144, Accounting for the Impairment or
                  Disposal of Long-Lived Assets, in August 2001. SFAS No. 144,
                  which addresses financial accounting and reporting for the
                  impairment of long-lived assets and for long-lived assets to
                  be disposed of, supersedes SFAS No. 121 and is effective for
                  fiscal years beginning after December 15, 2001. Therefore, the
                  Company will be required to adopt SFAS No. 144 as of January
                  1, 2002. The adoption of SFAS No. 144 has not had a material
                  impact on the Company's financial position or results of
                  operations.

         (k)      Stock options

                  Stock options are denominated in US dollars and are therefore
                  subject to variable accounting. For the quarter ended
                  March 31, 2002 no compensation expense was recognized as the
                  exercise price of the options was less than market price.

3.       ACCOUNTS RECEIVABLE

         Accounts receivable are recorded net of a $18,732 allowance for
         doubtful accounts at March 31, 2002 (December 31, 2001 - $19,999).

4.       CAPITAL ASSETS

<Table>
<Caption>
                                                                                               December 31
                                                            March 31, 2002                         2001
                                            ----------------------------------------------     ------------
                                                             Accumulated        Net Book         Net Book
                                                Cost         Amortization        Value            Value
                                            ------------     ------------     ------------     ------------
<S>                                         <C>              <C>              <C>              <C>

         Leasehold improvements .......     $      7,333     $      2,566     $      4,767     $      5,143
         Computer software ............          130,828          130,336              492              775
         Computer equipment ...........          175,944           94,791           81,153           88,378
                                            ------------     ------------     ------------     ------------
                                            $    314,105     $    227,693     $     86,412     $     94,296
                                            ============     ============     ============     ============
</Table>



                                      -9-
<PAGE>

E-XACT TRANSACTIONS LTD.
NOTES TO CONSOLIDATED INTERIM FINANCIAL STATEMENTS
(UNAUDITED)
(EXPRESSED IN CANADIAN DOLLARS)


5.       ACCOUNTS PAYABLE AND ACCRUED LIABILITIES

         The principal components of accounts payable and accrued liabilities
         were as follows:

<Table>
<Caption>
                                              March 31, 2002  December 31, 2001
                                              --------------  -----------------
<S>                                            <C>              <C>

         Trade payables ..................     $    823,484     $    845,221
         Other accrued liabilities .......           32,248           33,528
                                               ------------     ------------
                                               $    855,732     $    878,749
                                               ============     ============
</Table>

6.       ADVANCES PAYABLE

         The advances payable from certain stockholders of the Company bear
         interest at prime plus one percent and have no fixed terms of
         repayment. Advances are secured by certain assets of the Company.

7.       STOCKHOLDERS' EQUITY

         (a)      Authorized Stock

                  The Company was initially incorporated on August 13, 1998
                  under the laws of British Columbia, Canada with 50,000,000
                  authorized common stock with no par value. On July 28, 1999
                  the Company was reincorporated in the State of Delaware.

                  The Company has authorized 50,000,000 common stock with a par
                  value of $0.001 per share. As a result of the re-incorporation
                  and change to par value shares, $60,317 was reclassified
                  during 1998 from common stock to additional paid in capital.

         (b)      On September 2, 1999 the Company's common stock were split,
                  twenty-one thousand-for-one. All per share amounts of prior
                  periods have been adjusted to reflect the split.


                                      -10-
<PAGE>

E-XACT TRANSACTIONS LTD.
NOTES TO CONSOLIDATED INTERIM FINANCIAL STATEMENTS
(UNAUDITED)
(EXPRESSED IN CANADIAN DOLLARS)


7.       STOCKHOLDERS' EQUITY (CONTINUED)

         (c)      Stock Options

                  The following table summarizes information about stock options
                  outstanding at March 31, 2002:

<Table>
<Caption>
                    Date granted     Expiry date   Number of options   Exercise price
                    ------------     -----------   -----------------   --------------
                                                                        (US dollars)
<S>                 <C>              <C>           <C>                 <C>
                     12-Jan-00        11-Jan-05           357,000      $       1.00
                     21-Mar-00        20-Mar-05            13,000              1.00
                     17-May-00        16-May-05            78,500              3.35
                     24-Apr-01        23-Apr-06           625,000              0.25
                                                     ------------
                                                        1,073,500
                                                     ------------
</Table>

          (d)     Warrants

                   The following warrants were outstanding as at March 31, 2002

<Table>
<Caption>
                    Date granted     Expiry date   Number of options   Exercise price
                    ------------     -----------   -----------------   --------------
<S>                 <C>              <C>           <C>                 <C>
                     28-Jul-99        28-Jul-04        1,007,136       US$     1.32
                     02-Aug-00        02-Aug-02          549,532               2.25
                     26-Apr-01        26-Apr-03        2,000,000               0.23
                                                    ------------
                                                       3,556,668
                                                    ------------
</Table>

8.       FINANCIAL INSTRUMENTS

         (a)      Fair Value

                  The carrying values of cash, accounts receivable, deposits,
                  accounts payable and accrued liabilities, income taxes payable
                  and advances payable, as reflected in the balance sheet,
                  approximate their respective fair values as at March 31, 2002
                  and 2001 because of the demand or short-term maturity of these
                  instruments.


                                      -11-
<PAGE>

E-XACT TRANSACTIONS LTD.
NOTES TO CONSOLIDATED INTERIM FINANCIAL STATEMENTS
(UNAUDITED)
(EXPRESSED IN CANADIAN DOLLARS)


         (b)      Credit Risk and Economic Dependence

                  Financial instruments which potentially subject the Company to
                  credit risk consist of bank deposits and accounts receivable.
                  Cash is deposited with high credit quality financial
                  institutions. Accounts receivable consist of amounts
                  receivable from trade and other receivables. The Company does
                  not require collateral or other security to support accounts
                  receivable. The Company estimates its allowance for doubtful
                  accounts based on analysis of specific accounts and its
                  operating history.

                  The Company is subject to credit risk as it earns revenue from
                  a limited number of customers. During the quarter ended March
                  31, 2002 - $91,435 (quarter ended March 31, 2001 - $25,382) of
                  revenue was derived from two customers. As at March 31, 2002
                  accounts receivable included $70,102 (March 31, 2001 -
                  $14,125) due from two customers.

9.       RELATED PARTY TRANSACTIONS

         Related party transactions not otherwise disclosed in these financial
         statements include:

         (a)      As at March 31, 2002 accounts payable and accrued liabilities
                  included $115,055 (December 31, 2001 - $83,028) due to two
                  corporate stockholders for operating costs paid on its behalf;

         (b)      During the quarter ended March 31, 2002, the Company incurred
                  interest of $2,341 (2001 - $12,660) on advances from certain
                  stockholders of the Company; and,

         (c)      As at March 31, 2002, $205,169 (December 31, 2001 - $232,493)
                  was due to stockholders and directors of the Company;

10.      COMMITMENTS

         Future minimum operating lease payment for premises and equipment
         leases for the years ended March 31, are due as follows:

<Table>
<S>                                                      <C>
         2002 ......................................     $    32,067
         2003 ......................................           7,356
         2004 ......................................           1,000
                                                         -----------
                                                         $    40,423
                                                         ===========
</Table>



                                      -12-
<PAGE>

E-XACT TRANSACTIONS LTD.
NOTES TO CONSOLIDATED INTERIM FINANCIAL STATEMENTS
(UNAUDITED)
(EXPRESSED IN CANADIAN DOLLARS)


11.      SEGMENTED INFORMATION

         The Company operates in one segment - electronic commerce services.

         The Company attributes revenue among geographical areas based on the
         location of the customers. During the quarter ended March 31, 2002, 93%
         of revenues were derived in Canada (quarter ended March 31, 2001 -
         100%). Long-lived assets include capital assets and are located in
         Canada.

         The Company's customer sales concentration is discussed in Note 8 (b).

12.      SUBSEQUENT EVENT

         Subsequent to March 31, 2002 the Company received a statement of
         assessment from Canada Customs and Revenue Agency ("CCRA") denying the
         Company's filing position with regards to its continuation to the U.S.
         CCRA has assessed a liability of $335,000. The Company intends to
         strongly defend its position. No provision for this amount has been
         recorded as the outcome is uncertain.



                                      -13-
<PAGE>

E-XACT TRANSACTIONS LTD.
FORM 10-QSB
QUARTER ENDED MARCH 31, 2002


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

         Forward-looking Statements

         The following Management Discussion and Analysis of Financial Condition
and Results of Operations should be read in conjunction with the accompanying
condensed financial statements and notes included in this report. Statements
made in this Form 10-QSB that are not historical or current facts are
"forward-looking statements" made pursuant to the safe harbor provisions of
Section 27A of the Securities Act of 1933 and Section 21E of the Securities
Exchange Act of 1934. These statements often can be identified by the use of
terms such as "may," "will," "expect," "believes," "anticipate," "estimate," or
"continue," or the negative thereof. The Company intends that such
forward-looking statements be subject to the safe harbors for such statements.
The Company wishes to caution readers not to place undue reliance on any such
forward-looking statements, which speak only as of the date made. Any
forward-looking statements represent management's best judgment as to risks,
uncertainties and important factors beyond the control of the Company that could
cause actual results and events to differ materially from historical results of
operations and events from those presently anticipated or projected. These
factors include adverse economic conditions, entry of new and stronger
competitors, inadequate capital, unexpected costs, failure to gain product
approval in the United States or foreign countries and failure to capitalize
upon access to new markets. Additional risks and uncertainties that may affect
forward-looking statements about the Company's business and prospects include
the possibility that a competitor will develop a more comprehensive solution,
delays in market awareness of its products, possible delays in execution of
sales and marketing strategy, which could have an immediate and material adverse
effect. The Company disclaims any obligation subsequently to revise any
forward-looking statements to reflect events or circumstances after the date of
such statements or to reflect the occurrence of anticipated or unanticipated
events.

         Overview

         The Company was incorporated under the laws of the Province of British
Columbia on August 13, 1998. On July 29, 1999 the Company filed a certificate of
domestication and certificate of incorporation with the Secretary of State of
the State of Delaware, thereby "domesticating" or transitioning from a Canadian
company to one organized under the laws of the State of Delaware.

         The consolidated financial statements of the Company are prepared in
accordance with accounting policies generally accepted in the United States of
America which for this Company complies in all material respects with Canadian
generally accepted accounting principles.

         The Company provides real-time financial transaction processing
services using web-centric technology. Its electronic commerce (e-commerce)
software services allow PC based cash registers, PCs, point-of-sale terminals,
computer systems and proprietary product platforms to accept credit card
payments and submit those payments to various payment processing companies for
pre-authorization, authorization and settlement/deposit. The Company is approved
to act as a third party payment processor to conduct transaction processing with
major banks in North America.

         The Company's success will depend largely upon its ability to compete
successfully, develop new products and services and market them successfully in
a market that is becoming increasingly competitive.



                                      -14-
<PAGE>

E-XACT TRANSACTIONS LTD.
FORM 10-QSB
QUARTER ENDED MARCH 31, 2002


The Company determined that as of January 1, 2002 its functional currency was
the Canadian dollar. Previously the functional currency of the Company was the
US dollar. The change in the Company's functional currency was made as the
majority of the Company's operating transactions are now denominated in the
Canadian dollar. Monetary assets and liabilities denominated in other than
Canadian dollars were translated using the exchange rates prevailing at the
balance sheet date. Revenues and expenses were translated using average exchange
rates prevailing during the period. Gains and losses on foreign currency
transactions were recorded in the consolidated statement of operations and
deficit. The Company remeasured its assets, liabilities, revenues and expenses
for prior periods using historical exchange rates in existence at the date of
the transaction.


Results of Operations
Interim Financial Results
(All amounts are expressed in Canadian dollars)

         The Company earns its revenues by charging its customers setup fees,
monthly account maintenance fees and transaction fees for usage of its services.
Transaction fees are based on the number of transactions processed in a month.

Revenues

The revenues are derived primarily from transaction processing fees and monthly
service fees. During the three month period ended March 31, 2002, revenues
increased by 36% over the comparable period in 2001. The increase was due
primarily to an increase in the number of customers as well as an increase in
the number of transactions processed per customer. As at March 31, 2002 the
Company had 289 customers compared to 200 customers as at March 31, 2001. The
total value of transactions processed by the Company for the quarter ended March
31, 2002 amounted to approximately $321 million compared to $292 million in the
comparable quarter in 2001.

Gross profit percentage for the three months ended March 31, 2002 marginally
increased from 87.6% in 2001 to 88.3% in 2002. The Company was able to contain
its cost of sales despite an increase in revenue.

Expenses

Total expenses during the three months ended March 31, 2002 amounted to $199,610
compared to $358,225 for the three months ended March 31, 2001. The decrease of
44% in operating expenses was due primarily to the closure of the US office. The
remaining staff in the US office were terminated in the first quarter of 2001.

General and Administrative (G&A): During the three months ended March 31, 2002,
G&A expenses amounted to $115,998 compared to $223,923 in the comparable period
in 2001. The decrease of approximately 48% in G&A expenses over the comparable
period was due to the closure of the US office as well as some onetime expenses.
For the quarter ended March 31, 2001, the Company incurred additional accounting
expenses as it had to relocate and restore its accounting records, and accounts
receivable was re-evaluated with the resultant write off of non-performing
receivables. Accounting expenses decreased from $29,340 in 2001 to $10,441 in
2002, bad debts decreased from $50,225 to



                                      -15-
<PAGE>

E-XACT TRANSACTIONS LTD.
FORM 10-QSB
QUARTER ENDED MARCH 31, 2002


$3,246 in 2002. Telephone expenses decreased from $11,635 in 2001 to $1,859 in
2002, rent decreased from $18,478 in 2001 to $11,281 in 2002. Amortization of
equipment decreased from $15,574 in 2001 to $7,638 in 2002. Wages and salaries
decreased from $74,027 in 2001 to $49,286 in 2002.

Sales and Marketing: Sales and Marketing expenses for the quarter ended March
31, 2002 amounted to $29,691 compared to $36,093 incurred in the three months
ended March 31, 2001. The majority of the sales and marketing expense consisted
of payroll of employees involved in marketing.

Research and development (R&D): Research and development expenses consist
primarily of compensation expenses and consulting fees to support the
development of the Company's software, services and technologies. Research and
development expenditures were $53,921 for the three months ended March 31, 2002
compared to $98,209 in the comparable period in 2001. The decreased in R&D
expenses in the current period over the comparable period was due to a reduction
of US staff in 2001.The Company has adequate resources to meet its software
development goals. The Company has contingency plans to hire contract developers
should the need arise.

Net Profit:

The Company incurred a net profit (before income taxes) of $22,212 for the three
months ended March 31, 2002 compared to a loss of $(259,705) for the three
months ended March 31, 2001. Management believes that it has the right mix of
customers that would enable it to maintain its profitability in the future.

Recent Accounting Pronouncements

In July 2001,the Financial Accounting Standards Board ("FASB") issued SFAS No.
141, Business Combinations and SFAS No. 142, Goodwill and Other Intangible
Assets. SFAS No. 141 addresses the initial recognition and measurement of
intangible assets acquired in a business combination and SFAS No. 142 addresses
the subsequent recognition and measurement of intangible assets acquired outside
of a business combination whether acquired individually or with a group of other
assets. These standards require all business combinations to be accounted for
using the purchase method of accounting. Goodwill is no longer amortized but
instead is subject to impairment tests at least annually.

The Company is required to adopt SFAS No. 141 and No. 142 on a prospective basis
as of July 1, 2002; however, certain provisions of these new standards may also
apply to any acquisitions concluded subsequent to June 30, 2001. The adoption of
SFAS No. 141 did not to have a material effect on the Company's financial
position or results of operations.

The FASB issued SFAS No. 144, Accounting for the Impairment or Disposal of
Long-Lived Assets, in August 2001. SFAS No. 144, which addresses financial
accounting and reporting for the impairment of long-lived assets and for
long-lived assets to be disposed of, supersedes SFAS No. 121 and is effective
for fiscal years beginning after December 15, 2001. Therefore, the Company will
be required to adopt SFAS No. 144 as of January 1, 2002. The adoption of SFAS
No. 144 has not had a material impact on the Company's financial position or
results of operations.



                                      -16-
<PAGE>

E-XACT TRANSACTIONS LTD.
FORM 10-QSB
QUARTER ENDED MARCH 31, 2002


Critical Accounting Policies and Estimates

The significant accounting policies are outlined within note 2 to the financial
statements. Some of those accounting policies require the Company to make
estimates and assumptions that affect the amounts reported by the Company. The
following items require the most significant judgment or estimation:

         Revenue Recognition:

         New customers are required to complete a Merchant Registration Form and
         a Transactions Processing Agreement. The term of the Agreement is
         normally for a year with an automatic renewal at the anniversary date.
         The Company receives it revenue from three sources: new account
         activations, monthly service/membership fees and online transactions
         fees. New account activations fees are recognized as revenue when
         customers' production accounts are activated while monthly services
         fees are recognized when customers are invoiced. Online transaction
         fees are recognized when services have been performed.

         Accounts Receivable:

         The Company performs monthly reviews of its accounts receivable.
         Customers who are in arrear are normally given the opportunity to pay
         off arrear balances prior to suspension of processing services.
         Provision for doubtful accounts are normally based on customers who are
         120 days in arrear. However, a review is also based on a case by case
         basis depending on the customer's circumstances. A significant change
         in the financial position of the Company's customers could have a
         material adverse impact on the collectability of the accounts
         receivable.

         Use of estimates:

         The preparation of financial statements in conformity with generally
         accepted accounting principles requires management to make estimates
         and assumptions that affect the reported amounts of assets and
         liabilities at the date of the financial statements and the reported
         amounts of revenues and expenses during the reporting period. Examples
         include provisions for bad debts, and the contingencies described in
         Legal Proceedings in item 1 following. Actual results could differ from
         those estimates.

         Liquidity & Capital Resources

         Cash flow:

         The Company's net cash flow used for operating activities during the
         three months ended March 31, 2002 was a negative $31,636 compared to a
         negative $ 218,231 for the three months ended March 31, 2001. The
         Company's cash position is expected to improve as it expects to
         activate new accounts as a result of its relationship with Scotiabank.

         No investment was made in capital equipment during the three months
         ended March 31, 2002. Management will continue to review its operations
         and adjust its operations based on market conditions.

         Capital resources. The Company had a capital deficiency of $814,931 as
         at March 31, 2002 compared to a deficiency of $1,226,290 as at March
         30, 2001 and a deficiency of $837,143 as at December 31, 2001. In the
         event that cash flow from operations, together with the proceeds of any
         future financings, are insufficient to meet these expenses, the Company
         will be required to re-evaluate its



                                      -17-
<PAGE>

E-XACT TRANSACTIONS LTD.
FORM 10-QSB
QUARTER ENDED MARCH 31, 2002


         planned expenditures and allocate its total resources in such manner as
         the board of directors and management deems to be in the best interest
         of the Company and its stockholders.

         The success of the company is dependant upon the continuing support of
         its creditors, its ability to continue to raise financing to fund
         operations and ultimately upon its ability to achieve profitable
         operations.

         Subsequent events

         Subsequent to March 31, 2002 the Company received a statement of
         assessment from Canada Customs and Revenue Agency ("CCRA") denying the
         Company's filing position with regards to its continuation to the U.S.
         CCRA has assessed a liability of $335,000. The Company intends to
         strongly defend its position. No provision for this amount has been
         recorded as the outcome is uncertain.




                                      -18-
<PAGE>

E-XACT TRANSACTIONS LTD.
FORM 10-QSB
QUARTER ENDED MARCH 31, 2002


Part II. Other Information

Item 1. Legal Proceedings

1. On October 2, 2001 Robert Roker, a former employee (the "Plaintiff") filed a
complaint in the Supreme Court of British Columbia, Vancouver County, against
the Company in connection with an employment contract dated November 26, 1999.
The Plaintiff alleges that he was terminated without cause on September 11, 2001
and seeks severance pay of CAD$45,000 plus two weeks vacation and out of pocket
expenses of CAD$2,431.

         On October 23, 2001 the Company filed a Statement of Defense denying
the allegation that any moneys are due to the Plaintiff.

         The Company believes that the Plaintiff's complaint is without merit
and intends to vigorously defend these proceedings. The Company believes that
the Plaintiff was terminated with reasonable cause and has sufficient evidence
to support its case.

Item 2. Changes in Securities

         No changes in securities.

Item 3. Defaults Upon Senior Securities

         Not applicable

Item 4. Submission of Matters to a Vote of Security Holders

         Not applicable

Item 5. Other Information

         Not applicable

Item 6. Exhibits and Reports on Form 8-K

         (a)      Exhibits

                  None

         (b)      Reports on Form 8-K.

                  No Form 8-K reports were file in the quarter ended March 31,
                  2002




                                      -19-
<PAGE>

E-XACT TRANSACTIONS LTD.
FORM 10-QSB
QUARTER ENDED MARCH 31, 2002


                                   SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1933 the Company
has duly caused this report to be signed on its behalf by the undersigned
thereunto duly authorized.



E-XACT TRANSACTIONS LTD
(Registrant)

Dated: May 22, 2002                             By: /s/ Peter Fahlman
                                                    ----------------------------
                                                    Peter Fahlman
                                                    President and CEO



                                      -20-