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UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549



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Form 10-K



ANNUAL REPORT PURSUANT TO SECTION 13 OR
15(D) OF THE SECURITIES

EXCHANGE ACT OF 1934

For the fiscal year ended: January 31, 2003

Commission File Number: 000-23384



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eBT International, Inc.

(Exact name of registrant as specified in its charter)



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|Delaware                                                       |  | 04-3216243                          
|-------------------------------------------------------------- |  | ------------------------------------
|(State or other jurisdiction of incorporation or organization) |  | (I.R.S. Employer Identification No.)



P.O.
Box 1029 Scituate, MA 02047

(Address of principal executive offices)

(781) 319-0460

(Registrants telephone number, including area code)



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Securities Registered Pursuant to Section 12(b) of the Act:
None



Securities Registered Pursuant to
Section 12(g) of the Act:

Common Stock, par value $.01 per share

(Title of class)



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



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



Indicate by check
mark whether the registrant is an accelerated filer (as defined in Exchange Act Rule 12b-2).  Yes: ̈No:  x



As of July 31, 2002, the aggregate market value of common stock held by non-affiliates of the registrant was $4,974,000.



Number of shares of common stock, par value $.01 per share, outstanding at April 15, 2003: 14,680,459.



Documents Incorporated by ReferenceNONE



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Form 10-K



This report contains forward-looking
statements. For this purpose, any statements contained herein that are not statements of historical fact may be deemed to be forward-looking statements. Without limiting the foregoing, the words believes, anticipates,
plans, expects, and similar expressions are intended to identify forward-looking statements. There are a number of factors of which we are aware that may cause our estimate of the minimum net proceeds available for
distribution to shareholders to vary materially from those forecasted or projected in any such forward-looking statement. Please see Risk Factors for a discussion of certain, but not necessarily all, of the factors that we believe could
cause our estimate of the minimum net proceeds available for distribution to shareholders to be materially less than those forecasted or projected in any forward-looking statement.



Part I



Item 1.Business



eBT International, Inc. (eBT, or Company) formerly developed and marketed
enterprise-wide Web content management software solutions and associate services. The Company was incorporated under the laws of the State of Delaware in 1993.



The Board of Directors unanimously adopted a Plan of Complete Liquidation and Dissolution (Plan), subject to stockholder
approval on May 22, 2001. The Board concluded that the Plan was in the best interests of eBT and its stockholders after considering a number of factors. Among the factors the Board considered were as follows:



| |  |  | unsatisfactory revenue performance, particularly the results from the fiscal quarter ended April 30, 2001 when we did not generate any revenue from the license of
software products;
| | - |  | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | the competitive nature of the content management industry and our position within that industry;
| | - |  | ------------------------------------------------------------------------------------------------



| |  |  | prevailing economic conditions both generally and within the content management sector;
| | - |  | ---------------------------------------------------------------------------------------



| |  |  | our inability to identify a buyer or strategic alliance partner acceptable to us;
| | - |  | ---------------------------------------------------------------------------------



| |  |  | the significant risks associated with restructuring our business, including the conclusion that positive operating cash flow or operating income could not be
achieved in a period of time satisfactory to the Board and that a significant amount of cash would be spent to fund our operations prior to the achievement, if any, of potentially acceptable financial results;
| | - |  | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | the Boards belief that distribution of our assets in liquidation could produce more value to our stockholders than if the stockholders held shares of common
stock; and
| | - |  | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | Morgan Stanleys opinion dated May 22, 2001, that based upon and subject to the considerations set forth in its opinion, the consideration to be received by the
holders of our common stock pursuant to the Plan was fair to them from a financial point of view.
| | - |  | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



The Plan was approved by the holders of a majority of the Companys outstanding shares on November 8, 2001. The key features of the
Plan are (1) the conclusion of all business activities, other than those related to the execution of the Plan; (2) the sale or disposal of all of the Companys non-cash assets; (3) the establishment of reasonable reserves to be sufficient to
satisfy the liabilities, expenses and obligations of eBT not otherwise paid, provided for or discharged; (4) the periodic payment of per share liquidating distributions to stockholders; and (5) the authorization of the filing of a Certificate of
Dissolution with the State of Delaware.



In
connection with the adoption of the Plan and the anticipated liquidation, the Company adopted the liquidation basis of accounting effective August 1, 2001, whereby assets are valued at their estimated net



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realizable cash values and liabilities are stated at their estimated settlement amounts. Uncertainties as to the precise net value of
eBTs assets (other than cash), and the ultimate amount of its liabilities make it impracticable to predict the aggregate net value that may ultimately be distributable to stockholders. Claims, liabilities and future expenses for operations
(including salaries, payroll and local taxes, professional fees and miscellaneous office expenses), although currently declining in the aggregate, will continue to be incurred with execution of the Plan. These costs will reduce the amount of net
assets available for ultimate distribution to stockholders. Although we do not believe that a precise estimate of those expenses can currently be made, we believe that available cash and amounts received for the collection of receivables will be
adequate to provide for eBTs obligations, liabilities, operating costs and claims (including contingent liabilities), and to make cash distributions to stockholders. If available cash and amounts received from the collection of receivables are
not adequate to provide for eBTs obligations, liabilities, operating costs and claims, estimated future distributions of cash to eBTs stockholders will be reduced.



The Company filed its Certificate of Dissolution on November 8, 2001 with the State of Delaware. Pursuant to
Delaware law, the Company will continue in existence until at least November 8, 2004. During this period, the Company will continue to convert its estimated remaining net assets to cash for future distribution to its stockholders. It is not
permitted to continue the business of the Corporation as a going concern.



In connection with the approval of the Plan, the Board determined that if the Companys shareholders of record were reduced to less than 300 the Company would seek relief from the reporting requirements to the
Securities Exchange Act of 1934 (the Exchange Act). The termination of the Companys reporting obligations under the Exchange Act is expected to result in a reduction in the Companys previously estimated costs to be incurred
during the remaining liquidation period.



On
January 23, 2003, the Board reviewed options available for reducing the number of shareholders of record to less than 300 so as to permit the Company to deregister under the Exchange Act, and determined that a reverse stock split was the most
feasible given the Companys current situation and financial resources. On February 3, 2003, the Company filed a preliminary proxy statement (amended March 17, 2003) with the Securities and Exchange Commission (the Commission)
seeking shareholder approval for a reverse stock split. If approved by the shareholders, the Company intends to terminate its status as a reporting company under the Exchange Act and thereby eliminate the expenses associated with being a reporting
company. Based on its past experience, the Company believes that total savings of $100,000 to $120,000 in previously estimated liquidation costs may be realized by becoming a private entity. The proposed reverse split will be in the ratio of one
share new common stock for every fifty shares of the 14,680,459 shares of common stock currently outstanding. The Company currently expects to mail its definitive proxy statement to shareholders by May 9, 2003 and hold a special meeting of
stockholders to approve the reverse stock split by June 10, 2003.



eBT has made two cash liquidating distributions under the Plan. A distribution of $44,055,000 was made on December 13, 2001 ($3.00 per share based on 14,685,001 shares of common stock outstanding) and a distribution of
$4,406,000 ($0.30 per share based on 14,685,001 shares of common stock outstanding) was made on October 30, 2002. We currently estimate that stockholders may receive periodic additional liquidation proceeds totaling $0.102 per share, not
including the $100,000 to $120,000 in estimated cost savings, which are contingent on shareholder approval of the reverse stock split referred to above, or any benefit that might be realized if some or all of the estimated litigation settlement
costs and general contingency reserve are not required to pay claims (see Notes 1 and 11 of Notes to Consolidated Financial Statements). The actual nature, amount and timing of future distributions will be determined by the Board in its
sole discretion, and will depend primarily upon eBTs ability to execute the Plan. However, it is unlikely that any further liquidation distributions will be made to stockholders until final resolution of the Companys obligations, if any,
for indemnification claims. See Item 3, Legal Proceedings.



The Companys liquidation should be concluded on or around November 8, 2004 with a final liquidating distribution either directly to the stockholders or to one or more liquidating trusts. Complete details regarding the
Plan to liquidate and dissolve the Company can be found in the Companys October 3, 2001 Proxy Statement filed with the Commission, and mailed to Stockholders on October 4, 2001.



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Red Bridge Interactive,
Inc.



Effective July 1, 2001, the Company
entered into an agreement with Red Bridge Interactive, Inc. (Interactive) whereby Interactive assumed our maintenance and support obligations relating to DynaBase, engenda and enterpid. In connection with that agreement, we assigned
Interactive our existing rights in the DynaBase and engenda products and provided Interactive with a limited, non-exclusive license of our rights to entrepid. Interactive was founded in June 2001 and is owned and managed by former employees of eBT.
Interactive is based in Providence, RI.



The
terms of our agreement required the Company to provide Interactive with $650,000 in cash over the period July 1, 2001 to March 1, 2002. The payments were made monthly, generally declining in amount over this period, which corresponded to the
customer maintenance and support contracts that we transferred to Interactive. In the event of a default by Interactive, which specifically included performance of the obligations assumed by Interactive under the Companys former maintenance
and support business, we were entitled to draw upon an irrevocable letter of credit provided by Interactive. This letter of credit had an initial principal amount of $350,000 and declined over the period July 31, 2001 to March 31, 2002, at which
time it was terminated.



Our agreement with
Interactive also provides for the payment of royalties to eBT in the event Interactive earns gross revenue from the maintenance and support business or from licensing of DynaBase, engenda and entrepid. The royalty periods relative to the active
products (DynaBase and engenda) expire at various times through June 30, 2003. The Companys Consolidated Statements of Net Assets in Liquidation as of January 31, 2003 and 2002 include receivables from Interactive for royalties earned in the
amount of $44,000 and $99,000, respectively. Although we expect that the Company will continue to receive royalties pursuant to its agreement with Interactive, we have not included any amounts in the Consolidated Statements of Net Assets in
Liquidation other than the amounts referred to above. Accordingly, we will continue to account for Interactive royalty income when amounts due to the Company, if any, have been verified.



There was no gain or loss incurred in connection with the Interactive transaction and no royalty income was
earned prior to the adoption of liquidation basis accounting.



Risk Factors



The
Companys plan is to continue to conclude the business activities of the Company and distribute its net assets to stockholders. The timing of and completion of these objectives are subject to a number of risks and uncertainties, including those
set forth below.



The Company no longer satisfies
the requirements for continued listing of its common stock on the Nasdaq National Market (Nasdaq). The Companys common stock was delisted from Nasdaq on May 24, 2002. Commencing on that date, the Companys common stock began
trading on the OTC Bulletin Board. This change may adversely affect a stockholders ability to obtain price quotations and to buy or sell the Companys common shares.



The methods used by the Board and management in estimating the value of eBTs net assets do not result
in an exact determination of value nor are they intended to indicate definitely the amount of cash a stockholder will receive in liquidation. Additionally, the amount of royalty income ultimately paid by Interactive to the Company may exceed the
amount currently reflected in the Consolidated Statements of Net Assets in Liquidation. The Company has established reserves for known and unknown liabilities, and the adequacy of those reserves will be reviewed prior to making further cash
distributions to stockholders. We cannot assure you that the amount you will receive during the remaining period of liquidation will equal or exceed the price or prices at which the common stock has recently traded or may trade in the future.



You could be liable to return some or all of the
amount you receive from eBT if the amount of our reserves do not cover all of our liabilities and expenses. According to Delaware General Corporation law, eBT will



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continue to exist for three years from November 8, 2001 or for a longer period if required by the Delaware Court of Chancery, for the purpose
of prosecuting and defending suits against eBT and enabling us to dispose of our property, to discharge liabilities and to distribute to our stockholders any remaining assets.



Under Delaware law, if eBT fails to create adequate reserves for payment of our expenses and liabilities,
including contingent obligations, you could be held liable for payment to eBTs creditors of your proportional share of amounts owed to creditors in excess of available reserves. In that regard, your liability would be limited to the amounts
previously received by you from eBT (and from any liquidating trust). Accordingly, you could be required to return all distributions previously made to you. Moreover, you could incur a net tax cost if you paid taxes on the amounts received from eBT
and then have to repay such amounts back to eBTs creditors.



We cannot assure you that the reserves established by eBT will be adequate to cover all of our expenses and liabilities, including contingent liabilities. However, we believe that the reserves are adequate and that a return
of amounts previously distributed will not be required.



If the number of the Companys shareholders of record drops below 300, the Company intends to deregister under the Securities Exchange Act of 1934, and will no longer be subject to its rules, including those relating to
reporting and proxy solicitation. See Business above for a status of the Companys plans to deregister.



Employees



As of April 22, 2003, the Company had two employees.



Item 2.Properties



As of November 30, 2001, the Company terminated the lease of
its former corporate headquarters in Providence, Rhode Island. A cash payment was made to landlord in an amount that approximated the reserve established for this settlement. The reserve was included in the determination of the Estimated Net
Proceeds Available for Distribution to Shareholders as shown on page 20 of the October 3, 2001 Proxy Statement. The original terms of the terminated former corporate headquarters lease obligated the Company through January 2007.



The Company remains the primary obligor under its lease for
Boston office space; however, the space has been subleased for the entire lease term, at rates in excess of the minimum lease payment. The Company terminated the leases on all of its satellite offices in fiscal 2002.



Item 3.Legal Proceedings



In late January 1999 the Company discovered
that it would be necessary to restate its financial results for the first three quarters of calendar year 1998. The Company immediately and voluntarily provided this information to the Commission. On June 2, 1999, the Company was informed that the
Commission had issued a Formal Order of Private Investigation in connection with matters relating to the previously announced restatement of the Companys 1998 financial results.



The staff of the Boston office of the Commission informed the Company on July 10, 2002 that the
Commissions investigation as to eBT had been terminated and no enforcement or other actions against eBT had been recommended. In a Complaint filed on June 21, 2002 (amended on November 19, 2002) in the United States District Court, District of
Massachusetts (Federal District Court) the Commission in an enforcement action alleged that two former officers of eBT violated various sections of the Securities Act of 1933, as amended, (the Securities Act), and the
Exchange Act, and Rules thereunder. In the Complaint the Commission requests that the Federal District Court issue a Final Judgment of Permanent Injunction and Order of Permanent Relief against the two former officers. The Complaint also alleged
that one other former officer was liable as a



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Control Person for uncharged violations under sections of the Exchange Act and Rules thereunder. This individual, without
admitting or denying any of the allegations set forth in the Complaint, consented to the entry of a Final Judgment in this matter which was entered by the Federal District Court on June 24, 2002. The Company is obligated under its By-laws to
indemnify these former officers for expenses reasonably incurred in connection with the Commissions investigation, including the defense costs for actions that may be pursued by the Commission and resultant fines and penalties. However, the
Companys By-laws provide that an officer is not entitled to such indemnification if it is adjudicated or determined by the Board of Directors that such officer did not act in good faith and in a manner he or she reasonably believed to be in,
or not opposed to, the best interests of the Company. The former officer who consented to the entry of a Final Judgment has made a claim for indemnification of legal fees of approximately $200,000. The Board of Directors unanimously determined on
August 7, 2002 that such former officer was not entitled to indemnification. Such former officer has indicated that he may initiate action to contest the Boards determination. The Company has been advised by one of the two former officers who
have not settled with the Commission that he intends to defend the Commissions proposed action in Federal District Court. As of July 2002, the legal fees for such defense were estimated by the former officers defense counsel to be
no less than $400,000 over the next year. The Company believes the Commissions allegations will be challenged by the other former officer in Federal District Court. Until such time as the disposition of the Commissions
allegations with regard to the two former officers has been finalized, the Company will maintain its Litigation Settlement Reserve, which at January 31, 2003 was $976,000.



In December 2002, the office for the United States Attorney, District of Massachusetts, requested documents
from eBT relating to the investigation it conducted in connection with the restatement of its financial results for 1998. On February 12, 2003, eBT entered into an agreement with the United States Attorneys office pursuant to which eBT will
provide the requested documents subject to use immunity for the Company. We are unable to comment on what action the United States Attorneys office may take with respect to any individuals, and we are unable to predict what additional
requests, if any, eBT will receive in the future for By-law indemnification.



We may also be subject to various legal proceedings and claims that may arise during liquidation. We currently believe that any such proceedings and claims will not have a material adverse impact on
the Companys estimate of net assets in liquidation.



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



None.



Item 4A.Executive Officer of the Registrant



Stephen O. Jaeger, who is 58 years old and Chairman of the
Board since March, 1999, agreed to serve as the Companys Chief Executive Officer and President, effective June 1, 2001. Mr. Jaeger added the posts of Treasurer and Secretary in December 2001. Mr. Jaeger served as Chief Executive Officer of the
Company from the end of March 1999 to April 11, 2000, and has been a director of the Company since its inception in November 1993. In mid-March 1999, after serving as an independent consultant, Mr. Jaeger joined privately-held PharmaCom Group, Inc.
in February 1999 as a principal, director and officer. From December 1997 to October 1998, Mr. Jaeger was Executive Vice President and Chief Financial Officer and a director at Clinical Communications Group, Inc. from March 1995 until September
1997, Mr. Jaeger served as Vice President and Chief Financial Officer and Treasurer of The Perkin-Elmer Corporation. Mr. Jaeger was Chief Financial Officer of Houghton Mifflin from 1988 until March 1995.



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Part II



Item 5.Market for Registrants Common Equity and Related Stockholder
Matters



The common stock of eBT
is currently traded on the OTC Bulletin Board under the symbol EBTI. The following table sets forth the high and low sale prices per share of eBTs common stock for the fiscal periods listed below as reported on the Nasdaq National Market prior
to May 24, 2002 and on the OTC Bulletin Board after that date. Such information reflects interdealer prices, without retail markup, markdown, or commission, and may not represent actual transactions. The Company was notified on February 14, 2002
that it was subject to delisting since its stock price, which generally tracks its estimated liquidation value, did not meet the Nasdaq National Markets minimum market value requirements. The Company was delisted from the Nasdaq National
Market on May 24, 2002.



|              |  | Fiscal 2003 |      | Fiscal 2002
|------------- |  | ----------- | ---- | -----------
|Quarter Ended |  | High        |      | Low        
|April 30      |  | $           | 0.27 |            
|July 31       |  | $           | 0.44 |            
|October 31    |  | $           | 0.38 |            
|January 31    |  | $           | 0.10 |            



As of
April 15, 2003, eBTs common stock was held by 363 holders of record. eBT has paid no dividends on its common stock since inception. eBT has made two cash liquidation distributions under the Plan. On December 13, 2001 the Company made a
distribution in the amount of $44,055,000 ($3.00 per share based on 14,685,001 shares of common stock outstanding) and a distribution of $4,406,000 ($0.30 per share based on 14,685,001 shares of common stock outstanding) was made on October 30,
2002. Whether or not the stockholders approve the proposed reverse stock split (See Item. 1 Business), it is unlikely that any further liquidation distributions will be made to stockholders until final resolution of the
Companys obligations, if any, for indemnification claims (See Item 3. Legal Proceedings). The liquidation should be concluded on or around November 8, 2004 either directly to the stockholders or to one or more liquidating
trusts.



Item 6.Selected
Financial Data



The following
selected financial data of the Company as of and for the periods indicated below are derived from the financial statements of the Company. The information presented below should be read in conjunction with Managements Discussion and
Analysis of Financial Condition and Results of Operations included as Item 7, the financial statements and related footnotes included as Item 8 in this Form 10-K and the footnotes accompanying the tables. Effective August 1, 2001, the Company
adopted liquidation basis accounting and as a result the selected financial data for fiscal year 2002 only reflects operating activity for the six month period through July 31, 2001.



Statement of Changes in Net Assets Data

(Liquidation Basis of Accounting)



|                                                 |  | Year Ended January 31, 2003 |        |   | Six Months Ended January 31, 2002 |  
|------------------------------------------------ |  | --------------------------- | ------ | - | --------------------------------- | -
|                                                 |  | (in thousands of dollars)   |       
|Net assets in liquidation at beginning of period |  | $                           | 4,700  |   |                                   | $
|Cash received from sale of fixed assets          |  |                             |       |   |                                   |  
|Purchase of common stock                         |  |                             |       |   |                                   |  
|Adjust assets and liabilities to fair value      |  |                             | 1,207  |   |                                   |  
|Cash distribution to shareholders                |  |                             | (4,406 | ) |                                   |  
|Net assets in liquidation at end of period       |  | $                           | 1,501  |   |                                   | $



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| | Statement of Operations Data
| | ----------------------------

(Going Concern Basis)



|                                                    |  | Six Months Ended July 31, 2001          |         |   | Years Ended January 31, |         |         | One Month Ended January 31, 1999 |  |   | Year Ended December 31, 1998(1) |  
|--------------------------------------------------- |  | --------------------------------------- | ------- | - | ----------------------- | ------- | ------- | -------------------------------- |  | - | ------------------------------- | -
|                                                    |  |                                         | 2001(1) |   |                         | 2000(1) |         |                                  | 
|                                                    |  | (In thousands except per share amounts) |        
|Total revenues                                      |  | $                                       | 1,526   |   |                         | $       | 21,696  |                                  |  | $ | 64,680                          |  
|Gross profit (loss)                                 |  |                                         | (169    | ) |                         |         | 12,060  |                                  |  |   | 42,470                          |  
|Restructuring expenses (recovery) (4)               |  |                                         | (135    | ) |                         |         | 1,954   |                                  |  |   | 11,068                          |  
|Special charges (4)                                 |  |                                         | 11,395  |   |                         |         | 200     |                                  |  |   | 28,103                          |  
|Purchased in-process research and development       |  |                                         |        |   |                         |         |        |                                  |  |   |                                |  
|Total operating expenses (3)                        |  |                                         | 18,993  |   |                         |         | 37,933  |                                  |  |   | 115,584                         |  
|Operating loss                                      |  |                                         | (19,162 | ) |                         |         | (25,873 | )                                |  |   | (73,114                         | )
|Recovery/(write-down) of investment (5)             |  |                                         |        |   |                         |         | 657     |                                  |  |   | (2,655                          | )
|Gains on sales of assets, net (2)                   |  |                                         | 230     |   |                         |         | 38,170  |                                  |  |   | 12,212                          |  
|Income (loss) before provision for income taxes     |  |                                         | (17,029 | ) |                         |         | 16,815  |                                  |  |   | (61,836                         | )
|Provision (benefit) for income taxes                |  |                                         |        |   |                         |         | 300     |                                  |  |   | 474                             |  
|Net income (loss)                                   |  |                                         | (17,029 | ) |                         |         | 16,515  |                                  |  |   | (62,310                         | )
|Earnings (loss) per common share                    |  |                                         | (1.14   | ) |                         |         | 1.00    |                                  |  |   | (3.98                           | )
|Earnings (loss) per common share, assuming dilution |  |                                         | (1.14   | ) |                         |         | 0.98    |                                  |  |   | (3.98                           | )



Consolidated Balance Sheet Data

Consolidated Net Assets in Liquidation (January 31, 2003 and 2002)
and

Going Concern Basis Data (January 31 2001, 2000 and December 31, 1998)



|                          |  | At January 31,           
|------------------------- |  | -------------------------
|                          |  | 2003                     
|                          |  | (In thousands of dollars)
|Current assets            |  | $                        
|Total assets              |  |                          
|Long-term debt            |  |                          
|Stockholders equity      |  |                          
|Net assets in liquidation |  |                          

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|(1) |  | eBTs 1998 results include the operations of ViewPort Development AB, MediaBank, Sherpa Systems Corporation, and Venture Labs, Inc. since their acquisitions
dates of March 12, 1998, August 28, 1998, December 4, 1998 and December 22, 1998, respectively. eBTs fiscal 2000 results include the operations of its PDM Division through January 2000 and the fiscal 2001 results include the operations of the
Information Exchange Division (IED) through July 2000 and the MediaBank product line through June 2000 (see Note 3 of Notes to Consolidated Financial Statements).
|--- |  | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|(2) |  | eBTs 1998 results include a gain of $13,289,000 on the sale of eBTs linguistic software net assets to Lernout & Hauspie Speech Products N.V. on April
23, 1998. eBTs fiscal 2000 results include a gain of $14,549,000 on the sale of its DynaText/DynaWeb stand-alone technical publishing products and its ViewPort browser technology, a loss of $2,337,000 on the sale of the balance of its PDM
Division (see Note 3 of Notes to Consolidated Financial Statements). eBTs fiscal 2001 results include a gain of $39,914,000 on the sale of IED to Stellent, Inc. on July 10, 2000, a $3,735,000 loss on the sale of its MediaBank
product line in June 2000, a gain on the sale of its PDM Division and DynaText/DynaWeb stand-alone technical publishing products and its ViewPort browser technology of $1,991,000 (see Note 3 of Notes to Consolidated Financial
Statements).
|--- |  | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|(3) |  | eBTs 1998 results include a charge of $4,000,000 relating to an international distributor relationship. eBTs fiscal 2000 results include a credit of
$3,093,000 relating to a release from the 1998 agreement with the international distributor.
|--- |  | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



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|(4) |  | eBTs recorded restructuring expenses of $1,954,000 and $11,068,000 in fiscal 2001 and 2000, and special charges of $11,395,000, $200,000 and $28,103,000 in the
first six months of fiscal 2002, fiscal 2001 and 2000, respectively. See Notes 4 and 5 of Notes to Consolidated Financial Statements for a summary of the fiscal 2002 and 2001 restructuring expenses and special charges and the
Consolidated Financial Statements included in the Companys Form 10-K for the year ended January 31, 2002 for a summary of the restructuring charges and special charges in incurred fiscal 2000.
|--- |  | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|(5) |  | See Note 3 of Notes to Consolidated Financial Statements, Investment in Information Please LLC.
|--- |  | -------------------------------------------------------------------------------------------------



Item
7.Managements Discussion and Analysis of Financial Condition, Status of Liquidation and Results of Operations



Overview



The Companys Board of Directors unanimously adopted a Plan of Complete Liquidation and Dissolution (the Plan) on May 22,
2001. The Plan was approved by the holders of a majority of the Companys shares on November 8, 2001. The key features of the Plan are (1) the conclusion of all business activities, other than those related to the execution of the Plan; (2) the
sale or disposal of all of the Companys non-cash assets; (3) the establishment of reserves to be sufficient to satisfy the liabilities, expenses and obligations of eBT not otherwise paid, provided for or discharged; (4) the periodic payment of
per share liquidating distributions to stockholders; and (5) the authorization of the filing of a Certificate of Dissolution with the State of Delaware.



In connection with the adoption of the Plan and the anticipated liquidation, the Company adopted the liquidation basis of accounting
effective August 1, 2001, whereby assets are valued at their estimated net realizable cash values and liabilities are stated at their estimated settlement amounts. Uncertainties as to the precise net value of eBTs assets (other than cash), and
the ultimate amount of its liabilities make it impracticable to predict the aggregate net value that may ultimately be distributable to stockholders. Claims, liabilities and future operating costs (including salaries, payroll and local taxes,
professional fees and miscellaneous office expenses), although currently declining in the aggregate, will continue to be incurred with execution of the Plan. Although we do not believe that a precise estimate of the Companys net assets can
currently be made, we believe that available cash and cash equivalent investments and amounts received for the collection of receivables will be adequate to provide for eBTs obligations, liabilities, operating costs and claims (including
contingent liabilities), and to make future cash distributions to stockholders.



In connection with the Board of Directors May 22, 2001 decision to implement the Plan, the Company immediately began the orderly wind down of its operations, including laying off most of its employees,
seeking purchasers for the sale of its intellectual property and other tangible and intangible assets and providing for its outstanding and potential liabilities. These actions resulted in a special charge of $10,477,000 in the second fiscal quarter
of 2002 (see Note 5 of Notes to Consolidated Financial Statements). The charge consisted of $4,573,000 in severance and related costs including $473,000 of non-cash stock compensation charges related to the accelerated vesting of
restricted stock and stock options for the majority of its employees and executives, $2,904,000 related to the write-down of intangible assets, capitalized software costs and fixed assets to their estimated fair values, $2,050,000 related to a
settlement agreement with Microlytics including legal fees (see Note 11 of Notes to Consolidated Financial Statements), $495,000 related to the write down of unrecoverable prepaid expenses and other current assets and $455,000 related to
professional and other fees incurred that were related to the orderly wind down of the Companys operations.



Under Delaware law, the Company will remain in existence as a non-operating entity until at least November 8, 2004 and is required to
maintain a certain level of liquid assets and reserves to cover any remaining liabilities and pay operating costs during the dissolution period. During the dissolution period, the Company will continue to convert its remaining assets to cash and
settle its liabilities as expeditiously as possible.



On February 3, 2003, the Company filed a preliminary proxy statement with the Commission (amended March 17, 2003) seeking shareholder approval for a reverse stock split. If approved by the shareholders, the



9



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Company intends to terminate its status as a reporting company under the Exchange Act and thereby eliminate the expenses associated with
being a reporting company. Based on its past experience, the Company believes that total savings of $100,000 to $120,000 in previously estimated liquidation costs may be realized by becoming a private entity. The proposed reverse split will be in
the ratio of one share of new common stock for every fifty shares of the 14,680,459 shares of eBT common stock currently outstanding. The Company currently expects to mail its definitive proxy statement to shareholders by May 9, 2003, incorporating
by reference this Annual Report on Form 10-K for the fiscal year ended January 31, 2003. The special meeting of shareholders to vote on the reverse stock split is expected to be held no later than June 10, 2003.



Critical Accounting Policies and Significant Estimates



Estimated Litigation Settlement Costs Reserve



Litigation settlement costs in the amount
of $976,000 at January 31, 2003 and 2002 primarily represent estimated future legal fees, and amounts that may be payable under the Companys By-laws to indemnify certain former officers for expenses reasonably incurred in connection with the
Commissions investigation of the restatement of the Companys results for the first three calendar quarters of 1998. However, the Companys By-laws provide that an officer is not entitled to such indemnification if it is adjudicated
or determined that such officer did not act in good faith and in a manner he reasonably believed to be in, or not opposed to, the best interests of the Company. Further, in this instance, the Company may not be required to make any further payments
to the individuals and any remaining unpaid reserve amounts will result in an increase in the total net proceeds estimated as available for distribution to shareholders. See Note 11 of Notes to Consolidated Financial Statements for a
summary of the Commissions investigation and involvement of the United States Attorney.



General Contingency Reserve



In view of the duration of the liquidation period to November 8, 2004, and provision in Delaware law that the Company maintain reserves sufficient to allow for the payment of all its liabilities and
obligations, including all contingent, conditional and unmatured claims, the Company established a general contingency reserve upon the adoption of liquidation basis accounting on August 1, 2001. The amount of reserve initially established was
$900,000, at January 31, 2002 was $235,000 and at January 31, 2003 is $100,000. The Company has no known material claims against this reserve and will periodically assess whether maintenance of a lower or higher general contingency reserve is
required. The reductions in this reserve have been accounted for as adjustments to assets and liabilities to fair value in the liquidation basis financial statements. In the event there are no claims against this reserve then the amount of
liquidation proceeds that may be paid to stockholders will be increased.



Estimated Costs to be Incurred During Liquidation Period



At January 31, 2003, the Company estimates that there are $594,000 of costs remaining, including compensation for liquidation personnel and Board fees ($242,000), professional fees ($342,000) and
miscellaneous other costs ($10,000). At January 31, 2002, remaining costs were $989,000, including compensation for liquidation personnel and board fees ($400,000), professional fees ($549,000) and miscellaneous other costs ($40,000).



If the reverse stock split is approved by the Companys
shareholders, and relief from the reporting requirements under the Exchange Act is achieved, based on its past experience, the Company believes that total savings of $100,000 to $120,000 in previously estimated liquidation costs may be realized.



Liquidity and Capital Resources



The Companys primary objectives are to liquidate its
assets in the shortest time period possible while realizing the maximum values for such assets. The actual nature, amount and timing of future liquidating distributions will be determined by the Board in its sole discretion, and will depend upon a
variety of factors



10



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including, but not limited to, eBTs ability to convert certain remaining assets into cash, the ultimate settlement amounts of the
Companys liabilities and obligations, actual costs in carrying out the Plan, the timing of the liquidation and dissolution and shareholder approval of the reverse stock split referred to above. Although the liquidation is currently expected to
be concluded on or around the third anniversary of the filing on November 8, 2001 of the Certificate of Dissolution in Delaware, the period of time to liquidate the assets and distribute the proceeds is subject to uncertainties and contingencies,
many of which are beyond the Companys control (see Item 1, Risk Factors).



As of January 31, 2003, the Companys total assets were $3,532,000, of which $2,999,000 is comprised of cash, cash equivalents and marketable securities. On October 30, 2002, the Company paid the
sum of $4,406,000, equivalent to $0.30 per common share to stockholders of record on October 24, 2002. On December 13, 2001, the Company paid the sum of $44,055,000, equivalent to $3.00 per common share to stockholders of record as of December 7,
2001. The Company currently estimates that stockholders may receive periodic additional liquidation proceeds of $0.102 per common share. This amount does not include any benefit that might be realized if some or all of the estimated litigation
settlement costs and general contingency reserves are not required to pay claims (see Note 1 of Notes to Consolidated Financial Statements), or the $100,000 to $120,000 in liquidation cost savings expected to be realized if the
shareholders approve the reverse split and the Company terminates its status as a reporting company under the Exchange Act. Whether or not the stockholders approve the reverse stock split, it is unlikely that any further liquidation distributions
will be made to stockholders until final resolution of the Companys obligations, if any, for indemnification claims (see Note 11 of Notes to Consolidated Financial Statements).



At January 31, 2003, the Company estimates that $594,000 of
operating costs may be incurred during the remaining liquidation period through November 8, 2004. If the reverse stock split is approved by the shareholders, these costs may decline by $100,000 to $120,000. The estimated liabilities of the Company
at January 31, 2003 total $1,437,000, including $976,000 for potential litigation settlement costs (see Note 1 of Notes to Consolidated Financial Statements) equivalent to approximately $0.066 per share and $100,000 in general
contingency reserve (see Note 1 of Notes to Consolidated Financial Statements), equivalent to approximately $0.007 per share.



The net decrease in net assets in liquidation to $1,501,000 at January 31, 2003 from $4,700,000 at January 31, 2002, or $3,199,000,
reflects the October 30, 2002 cash distribution to shareholders totaling $4,406,000 (a reduction in net assets) and the adjustment of assets and liabilities to fair value in the amount of $1,207,000 (an increase in net assets). The adjustment of net
assets and liabilities to fair value in fiscal year 2003 and the fourth fiscal quarter of 2003 was comprised of the following:



|                                          |  | Year Ended       |           |   | Quarter Ended |  
|----------------------------------------- |  | ---------------- | --------- | - | ------------- | -
|                                          |  | January 31, 2003 |          
|Reduction in accrued income taxes         |  | $                | 644,000   |   |               | $
|Reduction in contingency reserve          |  |                  | 135,000   |   |               |  
|Increase estimated future interest income |  |                  | 150,000   |   |               |  
|Interactive royalty income                |  |                  | 78,000    |   |               |  
|Insurance and other recoveries            |  |                  | 107,000   |   |               |  
|Net receivables increase                  |  |                  | 78,000    |   |               |  
|Net change in miscellaneous accruals      |  |                  | 126,000   |   |               |  
|Increase in liquidation costs             |  |                  | (30,000   | ) |               |  
|Reverse stock split transaction costs     |  |                  | (84,000   | ) |               |  
|Miscellaneous other, net                  |  |                  | 3,000     |   |               |  
|                                          |  |                  |           |   |               |  
|Total adjustment                          |  | $                | 1,207,000 |   |               | $



11



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Liquidation Basis of
Accounting



The consolidated financial
statements for fiscal 2001 and for the six months ended July 31, 2001 were prepared on the going concern basis of accounting, which contemplates realization of assets and satisfaction of liabilities in the normal course of business. As a result of
the adoption of the Plan and the imminent nature of the liquidation, the Company adopted the liquidation basis of accounting effective August 1, 2001. This basis of accounting is considered appropriate when, among other things, liquidation of a
company is probable and the net realizable value of assets are reasonably determinable. Under this basis of accounting, assets are valued at their estimated net realizable values and liabilities are stated at their estimated settlement amounts. The
conversion from the going concern to liquidation basis of accounting has required management to make significant estimates and judgements. In order to record assets at estimated net realizable value and liabilities at estimated settlement amounts
under liquidation basis accounting, the Company recorded the following adjustments to record its assets and liabilities to fair value as of August 1, 2001, the date of adoption of liquidation basis accounting:



|                                                         |  | (In thousands of dollars) |       
|-------------------------------------------------------- |  | ------------------------- | ------
|Adjust assets and liabilities to fair value:             |  |                           |       
|Lease settlement costs, net of subrental income          |  | $                         | (2,732
|Litigation settlement costs                              |  |                           | (800  
|Accrued income taxes                                     |  |                           | 2,083 
|All other, net                                           |  |                           | 164   
|                                                         |  |                           |       
|Total adjustment of assets and liabilities to fair value |  |                           | (1,285
|Accrued estimated net costs during liquidation:          |  |                           |       
|Costs to be incurred during liquidation period           |  | $                         | (2,078
|Future interest income                                   |  |                           | 916   
|                                                         |  |                           |       
|Total estimated net costs during liquidation             |  |                           | (1,162
|                                                         |  |                           |       
|Total                                                    |  | $                         | (2,447
|                                                         |  |                           |       



The
amount and timing of future liquidating distributions will depend upon a variety of factors including, but not limited to, the actual proceeds from the realization of the Companys assets, the ultimate settlement amounts of the Companys
liabilities and obligations, actual costs incurred in connection with carrying out the Plan, including salaries, administrative and operating costs during the liquidation period, the timing of the liquidation and dissolution and shareholder approval
of the reverse stock split referred to above. Whether or not the stockholders approve the reverse stock split, it is unlikely that any further liquidation distributions will be made to stockholders until final resolution of the of the Companys
obligations, if any, for indemnification claims. See Note 11 for a summary of the current status of indemnification claims.



A summary of significant estimates and judgments utilized in preparation of the January 31, 2003 and 2002 consolidated financial
statements on a liquidation basis follows:



Receivables and
Other Assets



Receivables and other assets
are summarized as follows:



|                                   |  | As of January 31,        
|---------------------------------- |  | -------------------------
|                                   |  | 2003                     
|                                   |  | (In thousands of dollars)
|Sublease income                    |  | $                        
|Accrued and future interest income |  |                          
|State income tax refund            |  |                          
|Red Bridge royalties               |  |                          
|Other receivables                  |  |                          
|                                   |  |                          
|Total                              |  | $                        



12



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Accounts Payable and
Accrued Expenses



Accounts payable and
accrued expenses are summarized as follows:



|                                      |  | As of January 31,        
|------------------------------------- |  | -------------------------
|                                      |  | 2003                     
|                                      |  | (In thousands of dollars)
|Accounts payable and accruals         |  | $                        
|Accrued income taxes                  |  |                          
|Estimated litigation settlement costs |  |                          
|General contingency                   |  |                          
|                                      |  |                          
|Total                                 |  | $                        



Results of Operations



Six Months Ended July 31, 2001 (the last
period in which the Company had operations).



Total Company revenues of $1,526,000 for the six months ended July 31, 2001 compared with revenues of $6,865,000 (excluding business disposed) in the comparable preceding period. Given this performance, which included revenues of
only $429,000 in the fiscal quarter ended July 31, 2001, and the other factors specified in the October 3, 2001 Proxy Statement, the Board of Directors adopted the Plan.



Operating expenses in the six months ended July 31, 2001 totaled $18,993,000, of which $11,395,000 were
special charges. The special charge of $10,477,000, taken in connection with the commencement of the orderly wind down of the Companys operations, is discussed above in Overview. The remaining special charge of $918,000 was for the
write-down of computer equipment, purchased software and office equipment to their estimated fair values as of April 30, 2001. This write-down was due in part to the poor operating results reported for the first fiscal quarter of 2002 and revised
future operating performance. These assets, along with other assets and liabilities, were further revalued with the adoption of liquidation basis accounting on August 1, 2001.



All other operating costs in the six months ended July 31, 2001 were directly related to the Companys
then business activities.



Item
7A.Quantitative and Qualitative Disclosures About Market Risk



The Company is exposed to the impact of interest rate fluctuations. Our cash equivalents and available for sale investments are exposed to
financial market risk due to fluctuations in interest rates, which may affect the future cash value of the assets available for distribution to shareholders. We manage the exposure to financial market risk by performing periodic evaluations of our
investment portfolio and investing in investment grade corporate securities, United States agency bonds, and asset backed securities all of which have maturities before November 8, 2004. In addition, we do not use investments for trading or other
speculative purposes. We have performed a sensitivity analysis assuming a certain hypothetical adverse fluctuation in interest rates. The analysis indicated that any change in interest income would not have a material adverse effect on our
Consolidated Statement of Net Assets in Liquidation as of January 31, 2003. However, actual interest income earned over the remaining liquidation period may differ materially from our analysis.



Item 8.Financial Statements and
Supplementary Data



The
Companys consolidated financial statements and supplementary data are included under Item 15 of this Annual Report and incorporated herein by reference.



Item 9.Changes in and Disagreements with Accountants on Accounting and Financial Disclosure



None.



13



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Part III



Item 10.Directors and
Executive Officers of the Registrant



The Company has a classified Board of Directors currently consisting of two Class I directors, one Class II director and one Class III director. The Class I and Class II directors were elected to serve until the annual meetings of
stockholders to be held in 2003 and 2004, respectively, or until their respective successors are duly elected and qualified. No annual meeting was held in 2002, and the Class III director continues to serve until her successor is duly elected and
qualified. At each annual meeting of stockholders, directors are elected for a full term of three years to succeed those whose terms are expiring.



For each member of the Board of Directors, there follows information given by each concerning his or her principal occupation and business
experience for the past five years, the names of other publicly-held companies of which he or she serves as a director, his or her age and his or her length of service as a director of the Company.



|Class I Directors (Terms Expiring at the 2003 Annual
Meeting) |  | Age |  | Principal Occupation                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                 
|------------------------------------------------------------- |  | --- |  | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|Samuel H. Fuller                                              |  | 56  |  | Dr. Fuller has been a director of the Company since May 1996. Dr. Fuller is currently Vice President, Research and
Development, Analog Devices, Inc. Prior to joining Analog Devices, Inc. in February 1998, Dr. Fuller served as Vice President, Corporate Technology Strategy and Chief Scientist for Digital Equipment Corporation from January 1996 until January 1998.
Dr. Fuller held various other positions with Digital Equipment Corporation since 1978, and served as its Vice President of Research from 1983 to January 1996. Dr. Fuller is also a director of Zaiq Technologies, Inc. and Corporation for National
Research Initiatives.                                                                                                               
|                                                             
|Edward Terino                                                 |  | 49  |  | Mr. Terino has been a director of the Company since September 1999. Mr. Terino has been the Senior Vice President and
Chief Financial Officer at Art Technology Group, Inc.(ATG) since October 2001. Prior to joining ATG, Mr. Terino served as Senior Vice President and Chief Financial Officer for Applix, Inc. from April 1999 through September 2001. Prior to joining
Applix, Inc. Mr. Terino was Chief Financial Officer, Treasurer and Secretary for Celerity Solutions, Inc. from November 1996 through March 1999. From July 1995 through November 1996, Mr. Terino served as Vice President Finance Planning and
Operations for the Educational Publishing Division of Houghton Mifflin Company. Mr. Terino is also a director of Celerity Solutions, Inc.



14



---

|Class II Director (Term Expiring at the 2004 Annual
Meeting)                                                             |  | Age |  | Principal Occupation                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                
|------------------------------------------------------------------------------------------------------------------------ |  | --- |  | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|Stephen O. Jaeger                                                                                                        |  | 58  |  | Mr. Jaeger served as Chief Executive Officer of the Company from the end of March 1999 to April 11, 2000 and from June
1, 2001 to the present, and has been a director of the Company since its inception in November 1993. Since June 1, 2001, Mr. Jaeger has also served as the Companys President and has served as its Treasurer since December 2001. In mid-March
1999, Mr. Jaeger was elected Chairman of the Board of Directors and continues to serve in that capacity. After serving as an independent consultant, Mr. Jaeger joined privately-held PharmaCom Group, Inc. in February 1999 as a principal, director and
officer. From December 1997 to October 1998, Mr. Jaeger was Executive Vice President and Chief Financial Officer and a director at Clinical Communications Group, Inc. From March 1995 until September 1997, Mr. Jaeger served as Vice President and
Chief Financial Officer and Treasurer of The Perkin-Elmer Corporation. Mr. Jaeger was Chief Financial Officer of Houghton Mifflin from 1988 until March 1995.
|Class III Director (Term Expired at the 2002 Annual Meetingcontinues to serve until successor is elected and qualified) |  | Age |  | Principal Occupation                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                
|Joanna T. Lau                                                                                                            |  | 44  |  | Ms. Lau has been a director of the Company since March 1994. Ms. Lau has been President and Chairman of the Board of
Lau Technologies, Inc., which provides manufacturing services for electronic systems and produces digitized imaging identification systems, since March 1990. Ms. Lau held various management positions with Digital Equipment Corporation and General
Electric Company from 1981 until 1990.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                  



Other
than Mr. Jaeger, there are no other executive officers of the Company.



Directors Compensation



Each director who is not an employee of the Company receives $2,500 per quarter for Board and committee meetings held during the quarter, up to a maximum of $10,000 per year (subject to adjustment by the Board in the event that the
number of meetings in the year is extraordinary). In February 2003, director compensation was reduced to $1,250 per quarter, up to a maximum of $5,000 per year. This change will be effective June 1, 2003.



Item 11.Executive Compensation



Summary Compensation Table



The following table sets forth information
with respect to the compensation, for the last three fiscal years, of the Chief Executive Officer of the Company during the fiscal year ended January 31, 2003.



|                                                                       |  |                     |  | Long Term Compensation Awards
|---------------------------------------------------------------------- |  | ------------------- |  | -----------------------------
|                                                                       |  | Annual Compensation |  | Restricted Stock Awards($)   
|Name and Principal Position in Fiscal 2002                             |  | Fiscal Year         |  | Salary($)                    
|Stephen O. Jaeger, Chief Executive Officer, President and Treasurer(1) |  | 2003 2002 2001      |  | 90,000 120,000 140,000       

---

|(1) |  | Mr. Jaeger resigned as Chief Executive Officer as of April 11, 2000 and was reinstated on June 1, 2001.
|--- |  | -------------------------------------------------------------------------------------------------------



There were no stock options granted during the fiscal year
ended January 31, 2003.



15



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Aggregated Option Exercises
and Year-End Option Table



As of January 31,
2003 all options held by the Chief Executive Officer were either exercised or forfeited prior to January 31, 2003.



Employment Agreements



Stephen O. Jaeger, the Companys Chief Executive Officer at the time. Mr. Jaegers employment agreement was amended effective
April 13, 2000 to provide that, notwithstanding his resignation as Chief Executive Officer effective April 2000, Mr. Jaegers annual base salary would continue to be $260,000 until such time as the Company divested itself of its Information
Exchange Division or the Board determined otherwise. If the Information Exchange Division were divested, the amended agreement provided that Mr. Jaegers annual base salary would be reduced to $120,000. In addition, pursuant to the amended
agreement, the third installment of Mr. Jaegers 1999 option grant (an option to purchase 33,334 shares) was amended so that it vested upon the earlier to occur of March 31, 2002, or the date Mr. Jaeger was terminated by the Company as Chairman
of the Board; provided his termination is not for cause and the date of termination was between April 1, 2001 and March 30, 2002.



The Company also entered into an agreement with Mr. Jaeger, effective February 15, 2000, pursuant to which Mr. Jaeger was to be paid a
one-time transaction bonus of $150,000 upon consummation of a transaction in which a Change of Control of the Company (as defined in the agreement) occurs, provided that Mr. Jaeger was employed as either the Chairman or Chief Executive Officer at
the time of the execution of a definitive agreement which will result in a Change of Control of the Company. The agreement was subsequently amended effective April 13, 2000 to provide for payment of the transaction bonus to Mr. Jaeger upon the
earliest of a Change of Control of the Company or the sale by the Company of its Information Exchange Division. On July 10, 2000, the Company completed the sale of the Information Exchange Division and Mr. Jaeger was paid the bonus on August 25,
2000 and his salary was reduced to $120,000 effective July 31, 2000.



Following the resignation of the Companys prior President and Chief Executive Officer on May 30, 2001, Mr. Jaeger agreed to serve once again as the Companys Chief Executive Officer and President. Effective June
1, 2001, the Company entered into a new Employment Agreement (the 2001 Agreement) with Mr. Jaeger. The 2001 Agreement replaced his April 1, 1999 employment agreement. The 2001 Agreement provided for the following compensation:



| |  |  | A continuation of his annual base salary of $120,000 through the earlier of March 1, 2002 or at such time as a third party is appointed by the Board of Directors to
complete the liquidation and distribution of the Companys net assets pursuant to the Plan. If a third party is not appointed by March 1, 2002, and he continues to serve as Chief Executive Officer and President then the Board may reduce his
base salary to an amount commensurate with the requirement to complete the Plan.
| | - |  | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | A bonus not to exceed $100,000 if the anticipated distribution to stockholders pursuant to the Plan is determined by the Board of Directors to be at least $3.10 per
share of common stock.
| | - |  | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | His April 11, 2001 option to acquire 10,000 shares of common stock at $1.60 per share was deemed fully vested as of the date the Companys stockholders approved
the Plan.
| | - |  | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | His employment as Chief Executive Officer and President may be terminated other than for cause by the Company at any time upon 60 days notice. In such event,
he is entitled to receive a continuation of insurance benefits for a period of 24 months plus the bonus, if any, referred to above.
| | - |  | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



On March 18, 2002, Mr. Jaeger and the Company agreed to reduce his base salary base to $90,000 per year effective as of March 1, 2002, and
to provide Mr. Jaeger with the opportunity to earn a bonus in fiscal 2003 of up to $30,000, if the estimate of the payout to shareholders is in excess of $.28 per share at January 31, 2003 (adjusted for any cash payouts made in the fiscal year). In
February 2003, Mr. Jaeger and the Company agreed to reduce his base salary to $30,000 per year effective as of May 2003.



16



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Item
12.Security Ownership of Certain Beneficial Owners and Management



Five Percent Beneficial Owners



The following table sets forth information relating to the beneficial ownership of Common Stock by each person known by the Company to own
beneficially more than 5% of the Companys Common Stock as of April 22, 2003:



|Name and Address of Beneficial Owner                      |  | Amount and Nature of Beneficial Ownership(1) |  | Percent of Common Stock(2) |  
|--------------------------------------------------------- |  | -------------------------------------------- |  | -------------------------- | -
|Dimensional Fund Advisors Inc.(3)                         |  | 763,400                                      |  | 5.20                       | %
|1299 Ocean Avenue, 11th Floor                             |  |                                              |  |                            |  
|Santa Monica, CA 90401                                    |  |                                              |  |                            |  
|Farhad Fred Ebrahimi(4)                                   |  | 768,900                                      |  | 5.24                       | %
|8821 Experimental Farm Road                               |  |                                              |  |                            |  
|Cheyenne, WY 82009-8814                                   |  |                                              |  |                            |  
|Ironwood Capital Management, LLC(5)                       |  | 1,093,450                                    |  | 7.45                       | %
|21 Custom House Street                                    |  |                                              |  |                            |  
|Boston, MA 02109                                          |  |                                              |  |                            |  
|Performance Capital Group, LLC 14 Wall Street, 27th Floor |  | 2,370,137                                    |  | 16.14                      | %
|New York, NY 10005                                        |  |                                              |  |                            |  
|Millen Co., L.P.                                          |  | 1,612,682                                    |  | 10.99                      | %
|666 Fifth Avenue                                          |  |                                              |  |                            |  
|New York, NY 10103                                        |  |                                              |  |                            |  

---

|(1) |  | Unless otherwise noted, the nature of beneficial ownership is sole voting and investment power. The information herein is based on the most recently filed reports of
beneficial ownership on Schedules 13D and 13G filed with the SEC pursuant to the Securities Exchange Act of 1934.
|--- |  | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|(2) |  | Percentage based upon 14,680,459 shares of the Common Stock of the Company outstanding as of January 31, 2003.
|--- |  | --------------------------------------------------------------------------------------------------------------

|(3) |  | Dimensional Fund Advisors Inc. (Dimensional), an investment advisor registered under Section 203 of the Investment Advisors Act of 1940, furnishes
investment advice to four investment companies registered under the Investment Company Act of 1940, and serves as investment manager to certain other commingled group trusts and separate accounts. These investment companies, trusts and accounts are
the Funds. In its role as investment adviser or manager, Dimensional possesses voting and/or investment power over the securities of the Company that are owned by the Funds. All securities reported in this table are owned by the Funds.
Dimensional disclaims beneficial ownership of such securities.
|--- |  | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|(4) |  | The members of the Ebrahimi family share power to vote the 768,900 shares. The members of the Ebrahimi family have dispositive power over the total number of shares
as follows: Farhad Fred Ebrahimi has shared dispositive power with Farhad Alexander Ebrahimi over 100,000 shares, shared dispositive power with Mary Wilkie Ebrahimi over 544,900 shares, and shared dispositive power with Farah Alexandra Ebrahimi over
124,000. Mary Wilkie Ebrahimi has shared dispositive power with Farhad Fred Ebrahimi over 544,900 shares. Farad Alexander Ebrahimi has shared dispositive power with Farad Fred Ebrahimi over 100,000 shares. Farah Alexandra Ebrahimi has shared
dispositive power with Farhad Fred Ebrahimi over 124,000.
|--- |  | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|(5) |  | Ironwood Capital Management, LLC (Ironwood) shares beneficial ownership over the shares with Warren J. Isabelle (Isabelle), Richard L.
Droster (Droster) and Donald Collins (Collins). Ironwood, Isabelle, Droster and Collins share voting power over 554,550 shares and dispositive power over 1,093,450 shares.
|--- |  | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



17



---



Managements Stock
Ownership



The following table sets forth
information relating to the beneficial ownership of Common Stock, by (i) each director of the Company, (ii) the executive officer, and (iii) the directors and executive officer of the Company as a group.



|Name of Beneficial Owner                                       |  | Beneficial Ownership(1) |  | Percent of Common Stock(2)
|-------------------------------------------------------------- |  | ----------------------- |  | --------------------------
|Samuel H. Fuller                                               |  | 7,500                   |  | *                         
|Stephen O. Jaeger                                              |  | 19,333                  |  | *                         
|Joanna T. Lau                                                  |  | 9,500                   |  | *                         
|Edward Terino                                                  |  | 18,700                  |  | *                         
|All directors and the executive officer as a group (4 persons) |  | 55,033                  |  | *                         

---

|(*) |  | Less than 1%.
|--- |  | -------------

|(1) |  | Percentage based upon 14,680,459 shares of the Common Stock of the Company outstanding as of January 31, 2003.
|--- |  | --------------------------------------------------------------------------------------------------------------



Equity Compensation Plan Information



|Plan Category                                              |  | Number of securities to be issued upon exercise of outstanding
options, warrants and rights (a) |  | Weighted-average exercise price of outstanding options, warrants and rights
(b) |  | Number of securities remaining available for future issuance under equity
compensation plans (excluding securities reflected in columns (a) and (c))
|---------------------------------------------------------- |  | ----------------------------------------------------------------------------------------------- |  | ------------------------------------------------------------------------------- |  | ----------------------------------------------------------------------------------------------------------------------------------------------------
|Equity compensation plans approved by security holders     |  |                                                                                                |  |                                                                                |  | 5,889,527                                                                                                                                           
|Equity compensation plans not approved by security holders |  |                                                                                                |  |                                                                                |  |                                                                                                                                                    
|Total                                                      |  |                                                                                                |  |                                                                                |  | 5,889,527                                                                                                                                           



Item
13.Certain Relationships and Related Transactions



None.



Item 14.Controls and Procedures



Within the 90-day period prior to the filing date of this report, the Company carried out an evaluation of
the effectiveness of the design and operation of its disclosure controls and procedures as such term is defined in Rule 13a-14(c) under the Securities Exchange Act of 1934. The evaluation of the Companys disclosure controls and procedures was
made under the supervision and with the participation of the Companys management, including its principal executive officer and principal financial officer. Based upon that review, the Company believes that its disclosure controls and
procedures are adequately designed to ensure that the information that the Company is required to disclose in this report has been accumulated and communicated to the Companys management, including its principal executive officer and principal
financial officer, as appropriate to allow timely decisions regarding such required disclosure.



There have not been any significant changes in the Companys internal controls and procedures or in other factors that could significantly affect such internal controls since the date of the most
recent evaluation by these senior officers and no corrective actions with regard to any significant deficiencies or material weaknesses have been taken.



18



---

Signatures



Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the registrant
has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.



|                        |  | EBT INTERNATIONAL,
INC.                                                        
|----------------------- |  | -------------------------------------------------------------------------------
|                        |  | Registrant                                                                     
|                       
|Date:    April 24, 2003 |  | /S/    STEPHEN O.
JAEGERStephen O. Jaeger President and Chief Executive Officer



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



|                                         
|-----------------------------------------
|/S/    SAMUEL H.
FULLERSamuel H. Fuller  
|                                         
|/S/    STEPHEN O.
JAEGERStephen O. Jaeger
|                                         
|/S/    JOANNA T.
LAUJoanna T. Lau        
|                                         
|/S/    EDWARD
TERINOEdward Terino        



19



---



CERTIFICATION



I, Stephen
O. Jaeger, certify that:



1. I have reviewed
this annual report on Form 10-K of eBT International, Inc.;



2. Based on my knowledge, this annual report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements
were made, not misleading with respect to the period covered by this annual report;



3. Based on my knowledge, the financial statements, and other financial information included in this annual report, fairly present in all material respects the financial condition, results of
operations and cash flows of the registrant as of, and for, the periods presented in this annual report;



4. The registrants other certifying officers and I are responsible for establishing and maintaining disclosure controls and
procedures (as defined in Exchange Act Rules 13a-14 and 15d-14) for the registrant and have:



a) designed such disclosure controls and procedures to ensure that material information relating to the registrant,
including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this annual report is being prepared;



b) evaluated the effectiveness of the registrants disclosure controls and procedures as
of a date within 90 days prior to the filing date of this annual report (the Evaluation Date); and



c) presented in this annual report our conclusions about the effectiveness of the disclosure controls and procedures based
on our evaluation as of the Evaluation Date;



5.
The registrants other certifying officers and I have disclosed, based on our most recent evaluation, to the registrants auditors and the audit committee of registrants board of directors (or persons performing the equivalent
functions):



a) all significant
deficiencies in the design or operation of internal controls which could adversely affect the registrants ability to record, process, summarize and report financial data and have identified for the registrants auditors any material
weaknesses in internal controls; and



b) any fraud, whether or not material, that involves management or other employees who have a significant role in the registrants internal controls; and



6. The registrants other certifying officers and I have indicated in this annual report whether or not
there were significant changes in internal controls or in other factors that could significantly affect internal controls subsequent to the date of our most recent evaluation, including any corrective actions with regard to significant deficiencies
and material weaknesses.



Date:    April 24,
2003



By:

/s/    STEPHEN O. JAEGERStephen O. Jaeger Chairman, President and Chief Executive Officer (Principal executive officer and principal financial
officer)




20



---

Part IV



Item 15.Exhibits, Financial Statement Schedules, and Reports on Form 10-K



| | (a)    1.  Consolidated |  | financial statements
| | ----------------------- |  | --------------------



The Consolidated Financial Statements listed in the accompanying Index to Consolidated Financial Statements and Financial Statement
Schedule is filed as part of this Annual Report.



2.  Consolidated financial statement Schedule



The Consolidated Financial Statement Schedule listed in the accompanying Index to Consolidated Financial Statements and Financial Statement Schedule is filed as part of this Annual Report.



3.  Exhibits



The following exhibits are filed as part of this Annual
Report.



99.1 Certificate pursuant to Section
906 of the Sarbanes-Oxley Act of 2002.



| | (b)    Reports |  | on Form 8-K filed in the fourth quarter of fiscal 2003.
| | -------------- |  | -------------------------------------------------------



None.



21



---



Item
15(a).Index to Consolidated Financial Statements and Financial Statement Schedule



|                                                                                                                                                        |  | Page 
|------------------------------------------------------------------------------------------------------------------------------------------------------- |  | -----
|Report of Independent Auditors                                                                                                                          |  | 23   
|                                                                                                                                                       
|Consolidated Statements of Net Assets in Liquidation at January 31, 2003 and
2002                                                                       |  | 24   
|                                                                                                                                                       
|Consolidated Statements of Changes in Net Assets in Liquidation for the year ended
January 31, 2003 and six months ended January 31, 2002               |  | 25   
|                                                                                                                                                       
|Consolidated Statements of Operations for the six months ended July 31, 2001 and year
endedJanuary 31, 2001 (Going Concern Basis)                       |  | 26   
|                                                                                                                                                       
|Consolidated Statements of Cash Flows for the six months ended July 31, 2001 and year
endedJanuary 31, 2001 (Going Concern Basis)                       |  | 27   
|                                                                                                                                                       
|Consolidated Statements of Changes in Stockholders Equity for the six months ended
July 31, 2001 and year ended January 31, 2001 (Going Concern Basis) |  | 28   
|                                                                                                                                                       
|Notes to Consolidated Financial Statements                                                                                                              |  | 29-46
|                                                                                                                                                       
|Schedule for the six months ended July 31, 2001 and year ended January 31, 2001 (Going
Concern Basis):                                                  |  |      
|Schedule II Valuation and Qualifying Accounts                                                                                                           |  | 47   



All
other schedules have been omitted since the required information is not present or the amounts are not present in amounts sufficient to require submission of the schedule, or because the information required is included in the consolidated financial
statements or notes thereto.





22



---



The Board of Directors and
Stockholders

eBT International, Inc.



We have audited the accompanying consolidated statements of net assets in liquidation of eBT International, Inc. as of January 31, 2003
and 2002 and the related consolidated statements of changes in net assets in liquidation for the year ended January 31, 2003 and the six months ended January 31, 2002. In addition, we have audited the consolidated statements of operations,
stockholders equity and cash flows for the six months ended July 31, 2001 and the year ended January 31, 2001. Our audits also included the financial statement schedule listed in the Index at Item 15(a). These financial statements and schedule
are the responsibility of the Companys management. Our responsibility is to express an opinion on these financial statements and schedule based on our audits.



We conducted our audits in accordance with auditing standards generally accepted in the United States. Those
standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and
disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits
provide a reasonable basis for our opinion.



As
described in Note 1 to the consolidated financial statements, the stockholders of eBT International, Inc. approved a plan of complete liquidation and dissolution of the Company, and the Company commenced liquidation shortly thereafter. As a result,
the Company has changed its basis of accounting for periods subsequent to July 31, 2001 from the going-concern basis to a liquidation basis.



In our opinion, the consolidated financial statements referred to above present fairly, in all material respects, the consolidated net
assets in liquidation of eBT International, Inc. as of January 31, 2003 and 2002 and the consolidated changes in net assets in liquidation for the year ended January 31, 2003 and the six months ended January 31, 2002, and the consolidated results of
its operations and its cash flows for the six months ended July 31, 2001 and the year ended January 31, 2001, in conformity with accounting principles generally accepted in the United States applied on the bases described in the preceding
paragraph. Also, in our opinion, the related financial statement schedule, when considered in relation to the basic financial statements taken as a whole, presents fairly in all material respects the information set forth therein.



/s/ Ernst & Young LLP

Boston, Massachusetts

April 17, 2003





23



---

eBT INTERNATIONAL, INC.



CONSOLIDATED STATEMENTS OF NET ASSETS IN LIQUIDATION

JANUARY 31, 2003 and 2002

|                                                         |  | 2003           |       | 2002
|-------------------------------------------------------- |  | -------------- | ----- | ----
|                                                         |  | (In thousands)
|Assets                                                   |  |                |       |     
|Cash and cash equivalents                                |  | $              | 256   |     
|Marketable securities                                    |  |                | 2,743 |     
|Receivables and other assets                             |  |                | 533   |     
|                                                         |  |                |       |     
|Total assets                                             |  | $              | 3,532 |     
|                                                         |  |                |       |     
|Liabilities                                              |  |                |       |     
|Accounts payable and accrued expenses                    |  | $              | 1,437 |     
|Estimated costs to be incurred during liquidation period |  |                | 594   |     
|                                                         |  |                |       |     
|Total liabilities                                        |  |                | 2,031 |     
|                                                         |  |                |       |     
|Net assets in liquidation                                |  | $              | 1,501 |     
|                                                         |  |                |       |     









See accompanying Notes to Consolidated Financial Statements



24



---



eBT
INTERNATIONAL, INC.



CONSOLIDATED
STATEMENTS OF CHANGES IN NET ASSETS IN LIQUIDATION

YEAR ENDED JANUARY 31, 2003 and

SIX MONTHS ENDED JANUARY 31, 2002

|                                                               |  | Year Ended January 31, 2003 |        |   | Six Months Ended January 31, 2002 |  
|-------------------------------------------------------------- |  | --------------------------- | ------ | - | --------------------------------- | -
|                                                               |  | (In thousands)              |       
|Net assets in liquidation at beginning of period               |  | $                           | 4,700  |   |                                   | $
|Cash received, receivables and other assets                    |  |                             | (783   | ) |                                   |  
|Cash disbursed, accounts payable and accrued expenses          |  |                             | 306    |   |                                   |  
|Cash disbursed, liquidation period costs                       |  |                             | 425    |   |                                   |  
|Net change in cash, cash equivalents and marketable securities |  |                             | 52     |   |                                   |  
|Adjust assets and liabilities to fair value                    |  |                             | 1,207  |   |                                   |  
|Cash received from sale of assets                              |  |                             |       |   |                                   |  
|Cash distribution to shareholders                              |  |                             | (4,406 | ) |                                   |  
|Purchases of common stock                                      |  |                             |       |   |                                   |  
|                                                               |  |                             |        |   |                                   |  
|Net assets in liquidation at end of period                     |  | $                           | 1,501  |   |                                   | $
|                                                               |  |                             |        |   |                                   |  









See accompanying Notes to Consolidated Financial Statements





25



---



eBT
INTERNATIONAL, INC.



CONSOLIDATED
STATEMENTS OF OPERATIONS (GOING CONCERN BASIS)

FOR THE SIX MONTHS ENDED JULY 31, 2001,

AND YEAR ENDED JANUARY 31, 2001

(In thousands, except per share amounts)



|                                                    |  | Six Months Ended July 31, 2001 |         |   | Year Ended January 31, 2001 |  
|--------------------------------------------------- |  | ------------------------------ | ------- | - | --------------------------- | -
|Revenues:                                           |  |                                |         |   |                             |  
|Product licenses                                    |  | $                              | 219     |   |                             | $
|Service                                             |  |                                | 1,307   |   |                             |  
|                                                    |  |                                |         |   |                             |  
|Total revenues                                      |  |                                | 1,526   |   |                             |  
|Cost of revenues:                                   |  |                                |         |   |                             |  
|Cost of product licenses                            |  |                                | 467     |   |                             |  
|Cost of service                                     |  |                                | 1,228   |   |                             |  
|                                                    |  |                                |         |   |                             |  
|Total cost of revenues                              |  |                                | 1,695   |   |                             |  
|                                                    |  |                                |         |   |                             |  
|Gross profit (loss)                                 |  |                                | (169    | ) |                             |  
|Operating expenses:                                 |  |                                |         |   |                             |  
|Sales and marketing                                 |  |                                | 3,814   |   |                             |  
|Product development                                 |  |                                | 1,630   |   |                             |  
|Amortization of intangible assets                   |  |                                |        |   |                             |  
|General and administrative                          |  |                                | 2,289   |   |                             |  
|Restructuring expenses, (benefit)                   |  |                                | (135    | ) |                             |  
|Special charges                                     |  |                                | 11,395  |   |                             |  
|                                                    |  |                                |         |   |                             |  
|Total operating expenses                            |  |                                | 18,993  |   |                             |  
|                                                    |  |                                |         |   |                             |  
|Operating loss                                      |  |                                | (19,162 | ) |                             |  
|Non-operating income (expense):                     |  |                                |         |   |                             |  
|Net investment and other income                     |  |                                | 1,903   |   |                             |  
|Recovery of investment                              |  |                                |        |   |                             |  
|Gain on sale of assets, net                         |  |                                | 230     |   |                             |  
|                                                    |  |                                |         |   |                             |  
|Income (loss) before provision for income taxes     |  |                                | (17,029 | ) |                             |  
|                                                    |  |                                |         |   |                             |  
|Provision for income taxes                          |  |                                |        |   |                             |  
|                                                    |  |                                |         |   |                             |  
|Net income (loss)                                   |  | $                              | (17,029 | ) |                             | $
|                                                    |  |                                |         |   |                             |  
|Earnings (loss) per common share                    |  | ($                             | 1.14    | ) |                             | $
|                                                    |  |                                |         |   |                             |  
|Earnings (loss) per common share, assuming dilution |  | ($                             | 1.14    | ) |                             | $
|                                                    |  |                                |         |   |                             |  



See
accompanying Notes to Consolidated Financial Statements.



26



---



eBT
INTERNATIONAL, INC.



CONSOLIDATED
STATEMENTS OF CASH FLOWS (GOING CONCERN BASIS)

SIX MONTHS ENDED JULY 31, 2001,

AND YEAR ENDED JANUARY 31, 2001

(In thousands of dollars)



|                                                                                     |  | Six Months Ended July 31, 2001 |         |   | Year Ended January 31, 2001 |  
|------------------------------------------------------------------------------------ |  | ------------------------------ | ------- | - | --------------------------- | -
|Cash flows used in operating activities:                                             |  |                                |         |   |                             |  
|Net income (loss)                                                                    |  | $                              | (17,029 | ) |                             | $
|Adjustments to reconcile net income (loss) to net cash used in operating
activities: |  |                                |         |   |                             |  
|Depreciation                                                                         |  |                                | 330     |   |                             |  
|Amortization                                                                         |  |                                | 440     |   |                             |  
|Provisions for doubtful accounts                                                     |  |                                |        |   |                             |  
|Non-cash stock compensation expense                                                  |  |                                | 102     |   |                             |  
|Non-cash special charges expenses                                                    |  |                                | 4,790   |   |                             |  
|Recovery of investment                                                               |  |                                |        |   |                             |  
|Gain on sale of assets, net                                                          |  |                                |        |   |                             |  
|                                                                                     |  |                                |         |   |                             |  
|                                                                                     |  |                                | (11,367 | ) |                             |  
|Changes in operating assets and liabilities:                                         |  |                                |         |   |                             |  
|Accounts receivable                                                                  |  |                                | 3,082   |   |                             |  
|Accounts payable and accrued liabilities                                             |  |                                | 447     |   |                             |  
|Other assets and liabilities                                                         |  |                                | (2,248  | ) |                             |  
|                                                                                     |  |                                |         |   |                             |  
|Net cash used in operating activities                                                |  |                                | (10,086 | ) |                             |  
|Cash flows provided by investing activities:                                         |  |                                |         |   |                             |  
|Property and equipment expenditures                                                  |  |                                | (80     | ) |                             |  
|Capitalized product development costs                                                |  |                                |        |   |                             |  
|Purchases from sales of marketable securities                                        |  |                                | (5,638  | ) |                             |  
|Proceeds from the sale of assets, net                                                |  |                                | 5,942   |   |                             |  
|                                                                                     |  |                                |         |   |                             |  
|Net cash provided by investing activities                                            |  |                                | 224     |   |                             |  
|Cash flows used in financing activities:                                             |  |                                |         |   |                             |  
|Net proceeds from issuance of common stock                                           |  |                                | 248     |   |                             |  
|Purchases of treasury stock                                                          |  |                                | (1,283  | ) |                             |  
|Payments under capital lease obligations                                             |  |                                |        |   |                             |  
|                                                                                     |  |                                |         |   |                             |  
|Net cash used in financing activities                                                |  |                                | (1,035  | ) |                             |  
|                                                                                    
|Net increase (decrease) in cash and cash equivalents                                 |  |                                | (10,897 | ) |                             |  
|Cash and cash equivalents at beginning of period                                     |  |                                | 56,709  |   |                             |  
|                                                                                     |  |                                |         |   |                             |  
|Cash and cash equivalents at end of period                                           |  | $                              | 45,812  |   |                             | $
|                                                                                     |  |                                |         |   |                             |  



See
accompanying Notes to Consolidated Financial Statements.





27



---

eBT INTERNATIONAL, INC.



CONSOLIDATED STATEMENTS OF STOCKHOLDERS EQUITY

GOING CONCERN BASIS

(In thousands except share amounts)

|                                                            |  | Common stock |   | Capital in excess of par value |        |     | Accumulated deficit |   |         | Unamortized value of restricted shares |        |    | Notes receivable from stock purchase agreements |   |  | Treasury stock |      |   |  |   
|----------------------------------------------------------- |  | ------------ | - | ------------------------------ | ------ | --- | ------------------- | - | ------- | -------------------------------------- | ------ | -- | ----------------------------------------------- | - |  | -------------- | ---- | - |  | --
|                                                            |  | Shares       |   |                                | Amount |     |                     |   |         |                                        | Shares |    | Amount                                          |   |  | Total          |     
|Balance at January 31, 2000                                 |  | 16,588,773   |   |                                | $      | 165 |                     | $ | 156,098 |                                        |        | ($ | 100,633                                         | ) |  | $              |     |   |  | ($
|Issuance of shares pursuant to Employee Stock Purchase Plan |  | 188,210      |   |                                |        | 2   |                     |   | 499     |                                        |        |    |                                                 |   |  |                |      |   |  |   
|Issuance of restricted shares                               |  | 177,300      |   |                                |        | 2   |                     |   | 763     |                                        |        |    |                                                 |   |  |                | (765 | ) |  |   
|Stock options exercised                                     |  | 34,850       |   |                                |        |    |                     |   | 206     |                                        |        |    |                                                 |   |  |                |      |   |  |   
|Cancellation of restricted shares                           |  | (51,100      | ) |                                |        |    |                     |   | (215    | )                                      |        |    |                                                 |   |  |                | 215  |   |  |   
|Purchases of treasury stock                                 |  |              |   |                                |        |     |                     |   |         |                                        |        |    |                                                 |   |  |                |      |   |  |   
|Other issuances and repurchases                             |  |              |   |                                |        |     |                     |   | 361     |                                        |        |    |                                                 |   |  |                | (55  | ) |  |   
|Amortization of restricted shares                           |  |              |   |                                |        |     |                     |   |         |                                        |        |    |                                                 |   |  |                | 172  |   |  |   
|Net income*                                                 |  |              |   |                                |        |     |                     |   |         |                                        |        |    | 16,515                                          |   |  |                |      |   |  |   
|                                                            |  |              |   |                                |        |     |                     |   |         |                                        |        |    |                                                 |   |  |                |      |   |  |   
|Balance at January 31, 2001                                 |  | 16,938,033   |   |                                | $      | 169 |                     | $ | 157,712 |                                        |        | ($ | 84,118                                          | ) |  | ($             | 433  | ) |  | ($
|Issuance of shares pursuant to Employee Stock Purchase Plan |  | 28,105       |   |                                |        |     |                     |   | 61      |                                        |        |    |                                                 |   |  |                |      |   |  |   
|Stock options exercised                                     |  | 102,000      |   |                                |        | 1   |                     |   | 186     |                                        |        |    |                                                 |   |  |                |      |   |  |   
|Purchases of treasury stock                                 |  |              |   |                                |        |     |                     |   |         |                                        |        |    |                                                 |   |  |                |      |   |  |   
|Other issuances and repurchases                             |  |              |   |                                |        |     |                     |   | (26     | )                                      |        |    |                                                 |   |  |                | 55   |   |  |   
|Acceleration of restricted shares                           |  |              |   |                                |        |     |                     |   | 144     |                                        |        |    |                                                 |   |  |                | 276  |   |  |   
|Amortization of restricted shares                           |  |              |   |                                |        |     |                     |   |         |                                        |        |    |                                                 |   |  |                | 102  |   |  |   
|Net loss*                                                   |  |              |   |                                |        |     |                     |   |         |                                        |        |    | (17,029                                         | ) |  |                |      |   |  |   
|                                                            |  |              |   |                                |        |     |                     |   |         |                                        |        |    |                                                 |   |  |                |      |   |  |   
|Balance at July 31, 2001                                    |  | 17,068,138   |   |                                | $      | 170 |                     | $ | 158,077 |                                        |        | ($ | 101,147                                         | ) |  | $              |     |   |  | ($
|                                                            |  |              |   |                                |        |     |                     |   |         |                                        |        |    |                                                 |   |  |                |      |   |  |   

* Net income (loss) equals comprehensive income (loss) for each period presented.



See accompanying Notes to Consolidated Financial Statements.





28



---



eBT
INTERNATIONAL, INC.



NOTES TO CONSOLIDATED
FINANCIAL STATEMENTS



Note
1.    Background and Summary of Significant Accounting Policies



Nature of Business



On May 22, 2001 the Board of Directors of the Company approved a plan to liquidate and dissolve the Company (the Plan). The Plan was approved by a majority of the Companys
stockholders on November 8, 2001.



The approval
of the Plan was preceded by a series of divestitures, restructuring activities and special charges (see Notes 3, 4 and 5) which left the Company with a single active business unit in the middle of the fiscal year 2001. The principal focus of that
unit was the development and marketing of enterprise-wide Web content management software solutions and associated services. Following a detailed review of the results of operations of that business for the first fiscal quarter of 2002, and future
prospects, the Board concluded that adoption of the Plan was in the best interests of eBT and its stockholders. The key features of the Plan are (i) the conclusion of all business activities, other than those related to the execution of the Plan;
(2) the sale or disposal of all of the Companys non-cash assets; (3) the establishment of reasonable reserves to be sufficient to satisfy the liabilities, expenses and obligations of eBT not otherwise paid, provided for or discharged; (4) the
periodic payment of per share liquidating distributions to stockholders; and (5) the authorization of the filing of a Certificate of Dissolution with the State of Delaware. In addition, the Board determined that if the Companys shareholders of
record were reduced to less than 300 the Company would seek relief from the reporting requirements of the Securities Exchange Act of 1934 (the Exchange Act). The termination of the Companys reporting obligations under the Exchange
Act will result in a reduction in the Companys previously estimated costs to be incurred during the remaining liquidation period.



On January 28, 2003, the Board of Directors reviewed options available to reduce the number of shareholders of record to below 300, so as
to enable the Company to deregister under the Exchange Act, and determined that a reverse stock split was the most feasible option given the Companys current situation and financial resources. On February 3, 2003, the Company filed a
preliminary proxy statement with the Securities and Exchange Commission (amended on March 17, 2003) seeking shareholder approval for a reverse stock split. If approved by shareholders, the Company intends to terminate its status as a reporting
company under the Exchange Act and thereby eliminate the expenses associated with being a reporting company. The proposed reverse split will be in the ratio of one share of new common stock for every fifty shares of the 14,680,459 shares of eBT
common stock, $ 0.01 par value, currently issued and outstanding. The Company currently expects to mail its definitive proxy statement to shareholders by May 9, 2003 and hold the meeting of stockholders by June 10, 2003.



eBT has made two cash liquidating distributions under the
Plan. A distribution of $44,055,000 was made on December 13, 2001 (or $3.00 per share based on 14,685,001 shares of Common Stock outstanding) and a distribution of $4,406,000 was made on October 30, 2002 (or $.30 per share based on 14,685,001 shares
of Common Stock outstanding).



Liquidation
Basis of Accounting



The consolidated
financial statements for fiscal 2001 and for the six months ended July 31, 2001 were prepared on the going concern basis of accounting, which contemplates realization of assets and satisfaction of liabilities in the normal course of business. As a
result of the adoption of the Plan and the imminent nature of the liquidation, the Company adopted the liquidation basis of accounting effective August 1, 2001. This basis of accounting is considered appropriate when, among other things, liquidation
of a company is probable and the net realizable value of assets are reasonably determinable. Under this basis of accounting, assets are valued at their



29



---

eBT INTERNATIONAL, INC.



NOTES TO CONSOLIDATED FINANCIAL STATEMENTS(Continued)



estimated net realizable values and liabilities are stated at their estimated settlement amounts. The conversion from the going concern to
liquidation basis of accounting required management to make significant estimates and judgments. In order to record assets at estimated net realizable value and liabilities at estimated settlement amounts under liquidation basis accounting, the
Company recorded the following adjustments to record its assets and liabilities to fair value as of August 1, 2001, the date of adoption of liquidation basis accounting:



|                                                         |  | (In thousands) |       
|-------------------------------------------------------- |  | -------------- | ------
|Adjust assets and liabilities to fair value:             |  |                |       
|Lease settlement costs, net of subrental income          |  | $              | (2,732
|Litigation settlement costs                              |  |                | (800  
|Accrued income taxes                                     |  |                | 2,083 
|All other, net                                           |  |                | 164   
|                                                         |  |                |       
|Total adjustment of assets and liabilities to fair value |  |                | (1,285
|                                                        
|Accrued estimated net costs during liquidation:          |  |                |       
|Costs to be incurred during liquidation period           |  | $              | (2,078
|Future interest income                                   |  |                | 916   
|                                                         |  |                |       
|Total estimated net costs during liquidation             |  |                | (1,162
|                                                         |  |                |       
|Total                                                    |  | $              | (2,447
|                                                         |  |                |       



In the
fiscal year ended January 31, 2003, the Company adjusted assets and liabilities to fair value in the net amount of $1,207,000 (an increase in net assets in liquidation). The principal components of this adjustment were: $644,000 to reduce accrued
income taxes (See Note 6); $135,000 to reduce the general contingency reserve (See Note 1); $78,000 for Interactive royalty income (See Note 3); $150,000 for future interest income; $185,000 for cash received and an increase in future receivables;
$126,000 for a net reduction in miscellaneous accrued liabilities; ($84,000) for the costs of the proposed reverse stock split; and ($27,000) in other net costs.



The amount and timing of future liquidating distributions will depend upon a variety of factors including,
but not limited to, the actual proceeds from the realization of the Companys assets, the ultimate settlement amounts of the Companys liabilities and obligations, actual costs incurred in connection with carrying out the Plan, including
salaries, administrative and operating costs during the liquidation period, the timing of the liquidation and dissolution and shareholder approval of the proposed reverse stock split referred to above. Whether or not the stockholders approve the
reverse stock split, it is unlikely that any further liquidation distributions will be made to stockholders until final resolution of the of the Companys obligations, if any, for indemnification claims. See Note 11 for a summary of the current
status of indemnification claims.



A summary of
significant estimates and judgments utilized in preparation of the January 31, 2003 and 2002 consolidated financial statements on a liquidation basis follows:



Receivables and Other Assets



Receivables and other assets are summarized as follows:



|                                   |  | As of January 31,
|---------------------------------- |  | -----------------
|                                   |  | 2003             
|                                   |  | (In thousands)   
|Sublease income                    |  | $                
|Accrued and future interest income |  |                  
|State income tax refund            |  |                  
|Red Bridge royalties               |  |                  
|Other receivables                  |  |                  
|                                   |  |                  
|Total                              |  | $                



30



---

eBT INTERNATIONAL, INC.



NOTES TO CONSOLIDATED FINANCIAL STATEMENTS(Continued)





Accounts Payable and Accrued Expenses



Accounts payable and accrued expenses are summarized as follows:



|                                     
|-------------------------------------
|                                     
|                                     
|                                     
|Accounts payable and accruals        
|Accrued income taxes                 
|Estimated litigation settlement costs
|General contingency                  
|                                     
|Total                                



Estimated Litigation Settlement Costs Reserve



Litigation settlement costs in the amount of $976,000 at January 31, 2003 and 2002 primarily represent estimated future legal fees, and amounts that may be payable under the Companys By-laws to indemnify certain former
officers for expenses reasonably incurred in connection with the Securities and Exchange Commissions (the Commission) investigation of the restatement of the Companys results for the first three calendar quarters of 1998.
However, the Companys By-laws provide that an officer is not entitled to such indemnification if it is adjudicated or determined that such officer did not act in good faith and in a manner he reasonably believed to be in, or not opposed to,
the best interests of the Company. Further, in this instance, the Company may not be required to make any further payments to the individuals and any remaining unpaid reserve amounts will result in an increase in the total net proceeds estimated as
available for distribution to shareholders. See Note 11 for a summary of the Commissions investigation and involvement of the United States Attorney.



General Contingency Reserve



In view of the duration of the liquidation period to November 8, 2004, and provision in Delaware law that the Company maintain reserves
sufficient to allow for the payment of all its liabilities and obligations, including all contingent, conditional and unmatured claims, the Company established a general contingency reserve upon the adoption of liquidation basis accounting on August
1, 2001. The amount of reserve initially established was $900,000, at January 31, 2002 was $235,000 and at January 31, 2003 is $100,000. The Company has no known material claims against this reserve and will periodically assess whether maintenance
of a lower or higher general contingency reserve is required. The reductions in this reserve have been accounted for as adjustments to assets and liabilities to fair value in the liquidation basis financial statements. In the event there are no
claims against this reserve then the amount of liquidation proceeds that may be paid to stockholders will be increased.



Estimated Costs to be Incurred During Liquidation Period



At January 31, 2003, the Company estimates that there are $594,000 of costs remaining, including compensation
for liquidation personnel and Board fees ($242,000), professional fees ($342,000) and miscellaneous other costs ($10,000). At January 31, 2002, remaining costs were $989,000, including compensation for liquidation personnel and board fees
($400,000), professional fees ($549,000) and miscellaneous other costs ($40,000).



31



---

eBT INTERNATIONAL, INC.



NOTES TO CONSOLIDATED FINANCIAL STATEMENTS(Continued)





Accounting Policies



Basis of Presentation



The accompanying consolidated financial statements include the accounts of the Company and its wholly owned subsidiaries. All significant intercompany accounts and transactions have been eliminated.



Reclassification



Certain amounts in the prior period financial statements have
been reclassified to conform to the current year presentation.



Cash and Cash Equivalents



The Company considers highly liquid investments with maturities of three months or less at the time of purchase to be cash equivalents.



Use of Estimates



The preparation of financial statements in conformity with generally accepted accounting principles requires management to make certain
estimates and assumptions that affect the net realizability of assets and estimated costs to be incurred during the liquidation period and disclosure of contingent assets and liabilities at the date of the financial statements. Actual results could
differ from those estimates.



Additional Cash
Flow Statement Information



|                                                   |  | Six Months Ended July 31, 2001 |   | Year Ended January 31, 2001 |   |      
|-------------------------------------------------- |  | ------------------------------ | - | --------------------------- | - | -----
|                                                   |  | (in thousands)                 |   |                            
|Supplemental disclosures of cash flow information: |  |                                |   |                             |   |      
|Cash paid for income taxes                         |  | $                              |  |                             | $ | 24   
|Non-cash investing and financing information:      |  |                                |   |                             |   |      
|Receivables from asset sales                       |  |                                |  |                             |   | 5,973



Investments



The Company
accounts for its investments in securities, including certain cash equivalents and marketable securities, in accordance with Statement of Financial Accounting Standards No. 115, Accounting for Certain Investments in Debt and Equity
Securities.



Foreign Currency
Translation



The financial statements of
foreign subsidiaries have been translated into U.S. dollars in accordance with Statement of Financial Accounting Standards No. 52, Foreign Currency Translation. All balance sheet accounts have been translated using the exchange rate in
effect at the balance sheet date. Income statement amounts were translated using average exchange rates in effect during the period presented. The gains and losses resulting from the changes in exchange rates from period to period were insignificant
for all periods presented. Additionally, the effect on the statements of operations for transaction gains and losses was insignificant for all periods presented.



32



---

eBT INTERNATIONAL, INC.



NOTES TO CONSOLIDATED FINANCIAL STATEMENTS(Continued)





Fair
Value of Financial Instruments



The
Companys cash equivalents, marketable securities and accounts receivables are carried at cost, which approximates fair value.



Revenue Recognition



The Company derived its revenues from licenses of its software products and from services the Company provided to its customers. Revenue
from software licensing and services fees was recognized in the periods through July 31, 2001 in accordance with Statement of Position (SOP) 97-2, Software Revenue Recognition, and SOP 98-9, Software Revenue
Recognition with Respect to Certain Transactions.



Typically, the Companys software licenses did not include significant post-delivery obligations to be fulfilled by the Company and payments were due within a twelve-month period from date of delivery. Consequently, license fee
revenue was generally recognized when the product was shipped. Royalty revenues were generally recognized in the quarter in which the amounts due to the Company had been determined. Revenue from training, consulting and implementation services was
recognized as the services were performed. Revenue for license renewals was recognized when all the criteria under SOP 97-2 were met.



Product Development Costs



Software and other costs incurred in connection with product development were charged to expense until such time as specific product
technological feasibility had been established. Thereafter, product development costs specific to the product were capitalized.



Amortization of capitalized product development costs began when the related product was available for general release to customers. These
costs were amortized using the shorter of the estimated future product revenue streams or the straight-line method over periods not exceeding three years.



Acquired developed software was capitalized as part of the allocation of the purchase price on the basis of the estimated fair market
value. Acquired developed software was amortized on a straight-line basis over estimated useful lives ranging from two to ten years.



Amortization of $292,000 and $2,397,000 for the six months ended July 31, 2001 and the year ended January 31, 2001, respectively, was
included as a component of cost of revenues.



Licensed Technology and Advances



Licensed technology and royalty advances, which pertain to payments by the Company for the license of technology used in the Companys products, were stated at cost less royalty amounts expensed based on revenues recognized over
the lives of the related agreement. Costs of purchased licenses were amortized using the greater of (a) the straight-line method over their estimated economic lives, generally one to five years, or (b) current period revenue to anticipated total
revenues during the license period.



Property
and Equipment



Property and equipment were
stated at cost. Subsequent to the adoption of the liquidation basis of accounting on August 1, 2001, the Company sold or otherwise disposed of its property and equipment. Depreciation was provided on leasehold improvements using the straight-line
method over the economic life of the asset or the lease term, whichever was shorter.



33



---

eBT INTERNATIONAL, INC.



NOTES TO CONSOLIDATED FINANCIAL STATEMENTS(Continued)





Intangible Assets



Intangible assets, including excess costs over net assets acquired, were amortized on a straight-line method over their estimated economic lives for periods ranging from one to ten years.



Impairment of Long-Lived Assets



In accordance with the provisions of Statement of Financial
Accounting Standards No. 121, Accounting for the Impairment of Long-Lived Assets and for Long-Lived Assets to be Disposed of, if facts and circumstances suggest that an impairment may have occurred, the unamortized balances of these
assets are reviewed for recoverability. In the six months ended July 31, 2001 and in connection with the adoption of liquidation basis accounting, the Companys intangible assets and fixed assets were determined to be impaired, and the carrying
amounts were reduced, as appropriate (see Note 5).



Concentration of Credit Risk



The Company performed ongoing credit evaluations of its customers and maintained reserves for potential credit losses.



The Company licensed its products primarily to customers in North America. Revenues from foreign customers accounted for 22% and 28% of
total net revenue for the six months ended July 31, 2001 and the year ended January 31, 2001.



Stock-Based Compensation



The Company elected to account for its stock-based compensation plans following Accounting Principles Board Opinion No. 25, Accounting for Stock Issued to Employees (APB 25) and related
interpretations rather than the alternative fair value accounting provided under Statement of Financial Accounting Standards No. 123, Accounting for Stock-Based Compensation (SFAS 123). Accordingly, the Company did not generally
recognize compensation expense for its stock option plans and its stock purchase plan. If compensation expense had been recorded consistent with SFAS No. 123 based on the fair value of stock awards at the date of grant, the Companys net income
would have been adjusted to the pro forma amounts presented below (thousands, except for per share data):



|                                                                                                                                            |  | Fiscal Year Ended 2001
|------------------------------------------------------------------------------------------------------------------------------------------- |  | ----------------------
|Net income as reported                                                                                                                      |  | $                     
|Add: stock-based employee compensation expense included in reported net income, net of
related tax effects                                  |  |                       
|Deduct: Total stock based employee compensation expense determined under fair value
based methods of all awards, net of related tax effects |  |                       
|                                                                                                                                            |  |                       
|Pro forma net income                                                                                                                        |  | $                     
|Earnings per share:                                                                                                                         |  |                       
|Earnings per share, assuming dilutionas reported                                                                                           |  | $                     
|Earnings per share, assuming dilutionpro forma                                                                                             |  | $                     



Recent Accounting Pronouncements



In November 2002, the FASB issued Interpretation No. 45 (FIN 45), Guarantors Accounting and Disclosure Requirements for Guarantees, Including Indirect Guarantees of Indebtedness of Others. FIN 45
requires that a guarantor recognize, at the inception of a guarantee, a liability for the fair value of the obligation



34



---

eBT INTERNATIONAL, INC.



NOTES TO CONSOLIDATED FINANCIAL STATEMENTS(Continued)



undertaken in issuing the guarantee. FIN 45 also requires additional disclosure by a guarantor in its interim and annual financial statements
about its obligations under certain guarantees. The initial recognition and measurement provisions of FIN 45 are applicable for guarantees issued or modified after December 31, 2002. The disclosure requirements of FIN 45 are effective for financial
statements of interim or annual periods ending after December 15, 2002. The Company believes that the adoption of FIN 45 will not have a material impact on its liquidation basis of accounting or financial position.



Note 2.    Available for Sale Investments



The Companys available-for-sale
investments are carried at cost, which approximates fair value, and are included in cash equivalents and marketable securities. Following are the components of the available-for-sale investments:



|                   |  | As of January 31,        
|------------------ |  | -------------------------
|                   |  | 2003                     
|                   |  | (In thousands of dollars)
|Corporate issues   |  | $                        
|Money market funds |  |                          
|                   |  |                          
|Total              |  | $                        
|                   |  |                          



Interest
on securities classified as available-for-sale of $1,379,000 and $3,261,000 is included in net investment and other income in the six months ended July 31, 2001 and year ended January 31, 2001, respectively. The gross realized gains and losses on
those sales were not significant to the Companys financial results.



The Companys available-for-sale securities have the following maturities:



|                        |  | As of January 31, 2003
|----------------------- |  | ----------------------
|                        | 
|                        |  | (In thousands)        
|Due in one year or less |  | $                     



Note
3.    Divestitures



eBT Products



Effective
July 1, 2001, the Company entered into an agreement with Red Bridge Interactive, Inc. (Interactive) whereby Interactive assumed our maintenance and support obligations relating to DynaBase, engenda and enterpid. In connection with that
agreement, we assigned Interactive our existing rights in the DynaBase and engenda products and provided Interactive with a limited, non-exclusive license of our rights to entrepid. Interactive was founded in June 2001 and is owned and managed by
former employees of eBT. Interactive is based in Providence, RI.



The terms of our agreement required the Company to provide Interactive with $650,000 in cash over the period July 1, 2001 to March 1, 2002. The payments were made monthly, generally declining in amount over this period, which
corresponded to the customer maintenance and support contracts that we transferred to Interactive. In the event of a default by Interactive, which specifically includes performance of the obligations assumed by Interactive under the Companys
former maintenance and support business, we were entitled to draw upon an irrevocable letter of credit provided by Interactive. This letter of credit had an initial principal amount of $350,000 and declined over the period July 31, 2001 to March 31,
2002, at which time it was terminated.



35



---

eBT INTERNATIONAL, INC.



NOTES TO CONSOLIDATED FINANCIAL STATEMENTS(Continued)





Our
agreement with Interactive also provided for the payment of royalties to eBT in the event Interactive earns gross revenue from the maintenance and support business or from licensing of DynaBase, engenda and entrepid. The royalty periods relative to
the active products (DynaBase and engenda) expire at various times through June 30, 2003. The Companys Consolidated Statements of Net Assets in Liquidation as of January 31, 2003 and 2002 include receivables from Interactive for royalties
earned in the amount of $44,000 and $99,000, respectively. Although we expect that the Company will continue to receive royalties pursuant to its agreement with Interactive, we have not included any amounts in the Consolidated Statements of Net
Assets in Liquidation other than the amounts referred to above. Accordingly, we will continue to account for Interactive royalty income when amounts due to the Company, if any, have been verified.



There was no gain or loss incurred in connection with the
Interactive transaction and no royalty income was earned prior to the adoption of liquidation basis accounting.



Sale of PDM Division



On January 5, 2000, we sold the remaining interest in our PDM Division to Structural Dynamics Research Corporation (SDRC) for
$6,000,000 in cash plus assumption of liabilities. The proceeds received from the sale totaled $5,000,000 in cash at the time of the closing, and $1,000,000 was placed in a supplemental closing fund to be paid no later than 90 days after the first
anniversary of the closing date. The selling price was subject to adjustment based on the net worth of the business at closing. After direct transaction costs, the loss on the sale of PDM was $2,337,000 for the year ended January 31, 2000. The net
worth of the business on the closing balance sheet, as agreed to by SDRC and the Company in July 2000, net of certain other adjustments negotiated between the Company and SDRC, resulted in an additional receipt from SDRC of approximately $2,696,000,
in final settlement of the net worth balances. This amount was received in July 2000. In connection with this settlement, during the second quarter of fiscal 2001, we adjusted the carrying amounts of certain assets and liabilities, and recorded an
additional loss of approximately $637,000, which is included in the Non-operating income section in the accompanying Consolidated Statements of Operations.



During the fourth quarter of fiscal 2001, the Company and SDRC reached a settlement agreement under which SDRC remitted an additional net
purchase price adjustment amount of $1,971,000, according to the terms of the original agreement, as modified in the final settlement agreement dated January 24, 2001. This additional net payment was comprised of additional proceeds based on
qualifying maintenance and license revenue, as defined in the original agreement, reduced by certain agreed upon amounts relative to remaining contingent liabilities. The Company had estimated and accrued the amounts it believed may become due. The
net results of the monies received and adjustments recorded in connection with the settlement agreement was a $1,526,000 gain in fiscal 2001 and this amount is included in the Non-operating income section of the Companys Consolidated
Statements of Operations.



Investment in
Information Please LLC



In fiscal 2000, the
Company determined that the value of its equity investment in Information Please LLC, an organization engaged in the development and marketing of the Information Please Almanac product line, was impaired. This assessment was based on the
Companys review of Information Please LLCs operating results and business plan and the Companys anticipated future cash flows from its investment. Accordingly, the investment was written down to its net realizable value, resulting
in a charge of $2,655,000 in fiscal 2000. In the third quarter of fiscal 2001, the Company received a $657,000 distribution due to the partial liquidation of our former investment in Information Please LLC and in February 2003 we received a $33,000
distribution. This amount is included in receivables at January 31, 2003.



36



---

eBT INTERNATIONAL, INC.



NOTES TO CONSOLIDATED FINANCIAL STATEMENTS(Continued)





Sale of
MediaBank



In June 2000, we sold our
MediaBank product line, which was formerly a component of the eBusiness Technologies (eBT) division, for contingent future consideration of up to $2,000,000. As the consideration is contingent, no proceeds were recorded on the sale, and
a loss on the disposition of the net assets of the MediaBank business in the amount of $3,735,000 was charged against income in connection with the transaction in fiscal year 2001. The majority of the charge, approximately $3,548,000, was a non-cash
charge related to licensed technology that was sold, while approximately $386,000 related to severance and professional fees incurred as a result of the transaction. These amounts were partially offset by the liabilities assumed by the buyer. This
loss is included in the Non-operating income section of the Companys Consolidated Statements of Operations. Through January 31, 2003, no consideration had been received.



Sale of Information Exchange Division



On July 10, 2000, the Company sold its Information Exchange Division (IED) to IntraNet Solutions,
Inc. (now Stellent, Inc., Stellent) for a stated sale price of $55,000,000, less amounts for retained rights under license and subject to adjustment based on the net working capital of the IED business on the closing date. The
transaction was in the form of a merger of two wholly owned subsidiaries of Stellent with the Companys subsidiaries, Inso Chicago Corporation and Inso Kansas City Corporation, which generally comprised the IED business. The Company received
$48,000,000 of the proceeds in cash at the time of the closing. An additional $5,500,000 was placed in an escrow account, and subject to indemnification obligations under the agreement. This amount was paid on the first anniversary of the closing
date. The net gain initially recorded in the second quarter of fiscal 2001 from the transaction was $39,312,000. Under terms of the agreement, the purchase price was to be adjusted for the net working capital, delivered to Stellent, as agreed to by
both parties. As a result of these adjustments and the estimated resolution of certain obligations, the net gain recorded in fiscal 2001 was $39,914,000. An additional gain of $230,000 was recorded in the quarter ended July 31, 2001 to reflect
adjustments to certain obligations incurred by the Company as a result of this disposition.



Note 4.    Restructuring Expenses



On January 31, 2001, the Company adopted a plan of restructuring aimed at reducing current operating cost. In connection with this plan,
19 non-management employees, primarily development and administrative positions, and one executive level employee were terminated. As a result of this plan, we recorded a charge of $539,000 for severance costs in the fourth quarter of fiscal 2001.
Total payments against this plan in fiscal 2002 were $505,000. The remaining balance of $34,000 was credited against restructuring expenses in the second quarter of fiscal 2002.



On April 11, 2000, the Company adopted a restructuring plan under which the Company would focus its energies
on its eBusiness Technologies (eBT) Web Content Management and Workflow product line, and pursue divestiture of certain assets, including the Information Exchange Division. The plan included the consolidation of the Companys
Boston, Massachusetts headquarters into the Providence, Rhode Island offices of our eBT division. In connection with this reorganization, approximately 18 administrative employees and four executive officers were terminated or resigned in
April, May and June 2000. As a result of this plan, we recorded a charge of $1,930,000 for severance costs in the first quarter of fiscal 2001. The charge was reduced by net proceeds received on the disposal of certain fixed assets located at the
Boston headquarters in connection with the move of $95,000, resulting in a net charge of $1,835,000 in the first quarter of fiscal 2001. During fiscal 2002, the Company adjusted the severance cost charge, decreasing it by $101,000, due to a change
in estimated obligations.



In addition, in fiscal
2001 the Company reduced by $420,000 restructuring charges that were taken in fiscal 2000. This reduction reflected changes to initial estimates of certain restructuring obligations.



37



---

eBT INTERNATIONAL, INC.



NOTES TO CONSOLIDATED FINANCIAL STATEMENTS(Continued)





Note
5.    Special Charges



As a direct result of the Companys unsatisfactory first quarter operating results for fiscal 2001 and revised forecasted operating performance, management evaluated for impairment certain long-lived assets. Based upon estimated
future undiscounted cash flows management determined that certain of its property and equipment were not recoverable over their remaining estimated useful lives. As a result, these assets, consisting of computer equipment, purchased software and
office equipment were written down to their estimated fair value, as of April 30, 2001. This write-down resulted in an impairment charge of $918,000, reflected in special charges in the Consolidated Statements of Operations.



On May 22, 2001, the Board of Directors approved a plan to
liquidate and dissolve the Company subject to the approval of the holders of a majority of its shares (which was received on November 8, 2001). In connection with the Board of Directors plan to liquidate, the Company immediately began the orderly
wind down of its operations, including laying off most of its employees, seeking purchasers for the sale of its intellectual property and other tangible and intangible assets and providing for its outstanding and potential liabilities. As a result
of this action the Company recorded a special charge in the second fiscal quarter of 2002 of $10,477,000. The charge consists of $4,573,000 in severance and related costs including $473,000 of non-cash stock compensation charges related to the
accelerated vesting of restricted stock and stock options for the majority of its employees and executives, $2,904,000 related to the write-down of intangible assets, capitalized software costs and fixed assets to their estimated fair values,
$2,050,000 related to the settlement agreement with Microlytics (see Note 11), including legal fees, $495,000 related to the write down of unrecoverable prepaid expenses and other current assets and $455,000 related to professional and other fees
incurred related to the orderly wind down of the Companys operations. The activity impacting the accrual related to this aforementioned charge as of July 31, 2001 is summarized in the following table:



|                                                                            |  | Charge                    |        | Payments Made |   | Accrual Balance July 31, 2001
|--------------------------------------------------------------------------- |  | ------------------------- | ------ | ------------- | - | -----------------------------
|                                                                            |  | (In thousands of dollars)
|Cash charges:                                                               |  |                           |        |               |   |                              
|Settlement of Microlytics, including legal fees                             |  | $                         | 2,050  |               | $ |                             
|Professional and other fees                                                 |  |                           | 455    |               |   | 351                          
|Severance and related                                                       |  |                           | 4,100  |               |   | 2,388                        
|                                                                            |  |                           |        |               |   |                              
|Subtotal                                                                    |  | $                         | 6,605  |               | $ | 2,739                        
|                                                                            |  |                           |        |               |   |                              
|                                                                           
|Non-cash charges:                                                           |  |                           |        |               |   |                              
|Accelerated vesting of restricted stock and stock options                   |  | $                         | 473    |               |   |                             
|Write-downs of capitalized development costs, intangibles, and fixed
assets |  |                           | 2,904  |               |   |                             
|Write-down of unrecoverable prepaid expenses                                |  |                           | 495    |               |   |                             
|                                                                            |  |                           |        |               |   |                              
|Total                                                                       |  | $                         | 10,477 |               | $ | 2,739                        
|                                                                            |  |                           |        |               |   |                              



The July
31, 2001 accrual balance of $3,866,000 was fully paid as of January 31, 2002.



38



---

eBT INTERNATIONAL, INC.



NOTES TO CONSOLIDATED FINANCIAL STATEMENTS(Continued)





Note
6.    Income Taxes



Pre-tax income (loss) from continuing operations is taxed in the following jurisdictions:



|         |  | Six Months Ended July 31, 2001 |         |   | Year Ended January 31, 2001
|-------- |  | ------------------------------ | ------- | - | ---------------------------
|         |  |                               
|         |  | (in thousands)                
|Domestic |  | $                              | (16,378 | ) |                            
|Foreign  |  |                                | (651    | ) |                            
|         |  |                                |         |   |                            
|Total    |  | $                              | (17,029 | ) |                            
|         |  |                                |         |   |                            



The
provision for income taxes comprised the following:



|                |  | Six Months Ended July 31, 2001 |   | Year Ended January 31, 2001
|--------------- |  | ------------------------------ | - | ---------------------------
|                |  |                               
|                |  | (in thousands)                
|Current:        |  |                                |   |                            
|Federal         |  | $                              |  |                            
|Foreign         |  |                                |  |                            
|State           |  |                                |  |                            
|                |  |                                |   |                            
|Total current   |  |                                |  |                            
|                |  |                                |   |                            
|Deferred:       |  |                                |   |                            
|Federal         |  |                                |  |                            
|State           |  |                                |  |                            
|                |  |                                |   |                            
|Total deferred  |  |                                |  |                            
|                |  |                                |   |                            
|Total provision |  |                                |  |                            
|                |  |                                |   |                            



In
fiscal 2003, and in the six month liquidation period ended January 31, 2002, the Company recorded adjustments to the net assets in liquidation, a reduction of accrued income taxes in the amount of $644,000 and $2,083,000, respectively. These
reductions reflected the Boards judgment that a portion of the amounts recorded for potential tax contingencies related to prior years were no longer required.



The Company has available net operating loss carry forwards and other tax credits totaling approximately
$130,000,000, which expires in the fiscal years 2011 to 2022. Capital loss carry forwards of approximately $7,300,000 are also available to the Company. These loss carry forwards expire in fiscal 2005.



The Companys net deferred tax asset at January 31, 2003
and 2002 approximated $50,000,000, representing principally net operating loss and capital loss carryforwards. This amount has been fully reserved in the liquidation basis financial statements. The Company does not expect to realize any material
future benefit from this fully reserved asset.



Note
7.    Common and Preferred Stock



At January 31, 2003, there were 14,680,459 and 0 shares, respectively, of common and preferred stock issued.



The Company purchased 248,300 shares of common stock pursuant to the share buyback program announced on November 19, 2001. The total cost
of the shares repurchased was $784,000, or $3.16 per share.



39



---

eBT INTERNATIONAL, INC.



NOTES TO CONSOLIDATED FINANCIAL STATEMENTS(Continued)



Since the repurchase of these shares occurred prior to the December 13, 2001 shareholder liquidation payment, the net cost of the shares
repurchased, after adjustment for the $3.00 per share liquidation payment, was $38,800, or $.16 per share. The Company purchased 4,542 shares of common stock during the fourth quarter of fiscal 2003. The total cost of this repurchase was $409, or
$0.09 per share. The remaining authorization is 4,747,158 common shares.



On July 11, 1997, the Board of Directors adopted a Shareholders Rights Plan and declared a dividend distribution of one preferred stock purchase right (a Right) for each outstanding share of the
Companys Common Stock to stockholders of record at the close of business on July 24, 1997 (the Record Date). Each Right entitles the registered holder to purchase from the Company a unit consisting of one one-thousandth of a share
(a Unit) of Series A Junior Participating Preferred Stock, $0.01 par value per share (the Preferred Stock), at a purchase price of $145 in cash per Unit (the Purchase Price), subject to adjustment. The description
and terms of the Rights are set forth in a Rights Agreement dated as of July 11, 1997, as amended in Amendment Number 1 to the Rights Agreement, dated October 27, 1999 (the Rights Agreement), between the Company and State Street Bank
& Trust Company, as Rights Agent.



The Rights
will become exercisable after a person or group has acquired or obtained the right to acquire beneficial ownership of 20% or more of the outstanding common stock, or following the commencement of a tender or exchange offer that would result in a
person or group owning 30% or more of the shares of common stock. Generally, if any person becomes the beneficial owner of 20% or more of the shares of Common Stock of the Company, except pursuant to a tender or exchange offer for all shares at a
fair price as determined by the outside Board members, each Right not owned by the 20% or more stockholder will enable its holder to purchase that number of shares of the Companys Common Stock, in lieu of preferred stock, which equals the
exercise price of the Right divided by one- half of the current market price of such Common Stock at the date of the occurrence of the event. In addition, if the Company is involved in a merger or other business combination transaction with another
person or group in which it is not the surviving corporation or in connection with which its Common Stock is changed or converted, or it sells or transfers 50% or more of it assets or earning power to another person, each Right that has not
previously been exercised will entitle its holder to purchase that number of shares of Common Stock of such other person which equals the exercise price of the Right divided by one-half of the current market price of such Common Stock at the date of
the occurrence of the event. In general, the Company may redeem the Rights in whole, but not in part, at a price of $0.01 per Right, payable in cash, in shares of common stock, or in any other form of consideration or any combination of the
foregoing deemed appropriate by the Board of Directors, at any time prior to the earlier of (1) the tenth day after a public announcement that a person or group has acquired, or obtained the right to acquire, 20% or more of the outstanding common
stock, or (2) the tenth day following the commencement of a tender offer or exchange offer that would result in a person or group owning 30% or more of the outstanding common stock. The Rights will expire in July 2007. At January 31, 2003,
14,680,459 Rights were outstanding.



Note
8.    Earnings (Loss) Per Common Share



Earnings (loss) per common share had been calculated based on the weighted average number of common shares outstanding during the period. Earnings (loss) per common share, assuming dilution, had been calculated using the weighted
average number of common shares outstanding during the period, plus the dilutive effect of potential common shares which consisted of stock options, stock purchase warrants, unissued shares subscribed under the employee stock purchase plan and
unvested shares of restricted stock.



40



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eBT INTERNATIONAL, INC.



NOTES TO CONSOLIDATED FINANCIAL STATEMENTS(Continued)





The
following table sets forth the computations of earnings (loss) per share.



|                                                     |  | Six Months Ended July 31, 2001        |         |   | Year Ended January 31, 2001
|---------------------------------------------------- |  | ------------------------------------- | ------- | - | ---------------------------
|                                                     |  |                                      
|                                                     |  | (in thousands, except per share data)
|Earnings (loss) per common share:                    |  |                                       |         |   |                            
|Net income (loss)                                    |  | $                                     | (17,029 | ) |                            
|Weighted average shares outstanding                  |  |                                       | 14,919  |   |                            
|Income (loss) per common share                       |  | $                                     | (1.14   | ) |                            
|Earnings (loss) per common share, assuming dilution: |  |                                       |         |   |                            
|Net income (loss)                                    |  | $                                     | (17,029 | ) |                            
|Weighted average shares outstanding                  |  |                                       | 14,919  |   |                            
|Dilutive effect of potential common shares           |  |                                       |        |   |                            
|                                                     |  |                                       |         |   |                            
|Total diluted weighted average shares                |  |                                       | 14,919  |   |                            
|Income (loss) per common share                       |  | $                                     | (1.14   | ) |                            



Securities that were excluded from earnings (loss) per share, assuming dilution, because they would have been anti-dilutive are listed below:



|                          |  | Six Months Ended July 31, 2001 |  | Year Ended January 31, 2001
|------------------------- |  | ------------------------------ |  | ---------------------------
|                          |  |                               
|Stock options outstanding |  | 1,576,246                      |  | 2,716,836                  
|Warrants outstanding      |  | 965,356                        |  | 926,682                    



Note
9.    Stock Compensation Plans



Stock Incentive Plans



The Company reserved 3,000,000 shares for issuance under the 1993 Stock Incentive Plan (1993 Plan) and 5,000,000 shares for issuance under the 1996 Stock Incentive Plan, as amended (1996 Plan). The 1993 Plan
and the 1996 Plan (the Plans) provided for the issuance of incentive stock options, non-qualified stock options, unrestricted stock, restricted stock, and performance share awards. Under the Plans, both incentive options and
non-qualified options were granted to employees and consultants. The option exercise price was not less than 100% of the fair market value of the shares on the date of grant in the case of incentive options and was not less than 85% of the fair
market value of the shares on the date of grant in the case of non-qualified options. The Plans also provided for the grant of performance share awards to employees, entitling the recipient to receive shares of common stock based upon achievement of
individual or Company performance goals. The term of each option and the vesting periods for options and stock awards were fixed by the Compensation Committee of the Companys Board of Directors. The term for incentive stock option grants did
not exceed 10 years from the date of grant.



The
Companys 1996 Non-employee Director Plan, as amended (Director Plan) provided for the automatic grant of non-qualified stock options and unrestricted stock to members of the Board of Directors who are not employees of the Company.
The Director Plan was terminated in connection with the Plan to liquidate and dissolve the Company. As of January 31, 2003 and 2002 there are no options outstanding under this plan.



Note Receivable from Stock Purchase Agreement



As of January 31, 2001, the Company held a note receivable
for a total of $200,000, before certain tax benefits had been deducted, from one of its former corporate officers, which the Company provided to effect the



41



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eBT INTERNATIONAL, INC.



NOTES TO CONSOLIDATED FINANCIAL STATEMENTS(Continued)



purchase of shares of the Companys common stock, pursuant to the former 1996 Stock Incentive Plan. In connection with the
officers separation from the Company, the term of this note was extended through December 31, 2002, or 30 days from the date at which the Companys common stock averages $10.25 per share over a period of 30 consecutive days, whichever
came first. This loan, which was shown as a reduction to stockholders equity on the going concern balance sheet was adjusted to its fair market value upon adoption of liquidation basis accounting and subsequently settled with the former
officer at fair market value.



The following
table summarizes the stock option activity under the 1993 Plan, the 1996 Plan, and the Director Plan:



|                           |  | Available for Grant |   |  | Options Outstanding |   |  | Weighted Average Price
|-------------------------- |  | ------------------- | - |  | ------------------- | - |  | ----------------------
|At January 31, 2000        |  | 1,416,946           |   |  | 4,831,581           |   |  | $                     
|2001                       |  |                     |   |  |                     |   |  |                       
|Granted                    |  | (954,200            | ) |  | 954,200             |   |  |                       
|Exercised                  |  |                    |   |  | (34,850             | ) |  |                       
|Forfeited                  |  | 2,410,129           |   |  | (2,410,120          | ) |  |                       
|Restricted stock grant     |  | (177,300            | ) |  |                    |   |  |                       
|Restricted stock forfeited |  | 51,100              |   |  |                    |   |  |                       
|                           |  |                     |   |  |                     |   |  |                       
|At January 31, 2001        |  | 2,746,675           |   |  | 3,340,802           |   |  |                       
|2002                       |  |                     |   |  |                     |   |  |                       
|Granted                    |  | (218,450            | ) |  | 218,450             |   |  |                       
|Exercised                  |  |                    |   |  | (197,950            | ) |  |                       
|Forfeited                  |  | 2,618,071           |   |  | (2,618,071          | ) |  |                       
|                           |  |                     |   |  |                     |   |  |                       
|At January 31, 2002        |  | 5,146,296           |   |  | 743,231             |   |  |                       
|2003                       |  |                     |   |  |                     |   |  |                       
|Forfeited                  |  | 743,231             |   |  | (743,231            | ) |  |                       
|                           |  |                     |   |  |                     |   |  |                       
|At January 31, 2003        |  | 5,889,527           |   |  | 0                   |   |  | $                     
|                           |  |                     |   |  |                     |   |  |                       



The
market value of the restricted shares awarded was recorded as unearned compensation and is shown as a separate component of stockholders equity. Unearned compensation was being amortized to expense over the vesting periods that ranged from one
to five years. Amortization totaled $102,000 for the six months ended July 31, 2001 and $172,000 for the year ending January 31, 2001.



Stock Purchase Plan



Under the Companys 1993 Stock Purchase Plan, employees had the opportunity to purchase the Companys common stock. The price at
which the employee could purchase the common stock was 85% of the last reported sale price of the Companys common stock on the Nasdaq National Market on the date the offering period commenced or concluded, whichever was lower. A total of
1,100,000 shares of common stock were reserved under this plan. Employees purchased 28,105 shares under the plan for the six months ending July 31, 2001 and 188,210 shares under the plan in fiscal 2001, respectively, generating proceeds to the
Company of $61,000 in the period ending July 31, 2001 and $501,000 in fiscal 2001. The stock purchase plan was terminated on June 1, 2001.



Fair Value



Pro forma information regarding net income and net income per share has been determined as if the Company had accounted for its employee
stock plans based on the fair value method provided under SFAS 123.



42



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eBT INTERNATIONAL, INC.



NOTES TO CONSOLIDATED FINANCIAL STATEMENTS(Continued)



The fair value of the options was estimated at the date of grant using a Black-Scholes option pricing model with the following weighted
average assumptions for awards granted in fiscal 2001.



|Risk-free interest rate |  | 5.96%    
|----------------------- |  | ---------
|Expected life           |  | 3.0 years
|Expected volatility     |  | 116%     
|Expected dividends      |  | 0.0%     



The
Black-Scholes option valuation model was developed for use in estimating the fair value of traded options, which have no vesting restriction and are fully transferable. In addition, option valuation models require the input of highly subjective
assumptions including the expected stock price volatility. Because the Companys employee stock options had characteristics significantly different from those of traded options, and because changes in the subjective input assumptions can
materially affect the fair value estimate, in managements opinion, the existing models did not necessarily provide a reliable single measure of the fair value of its employee stock options.



The total value of the awards granted during the year ended
January 31, 2001 was computed as approximately $12,314,000, which would have been amortized over the vesting period of the options. The weighted average fair value of awards granted in fiscal 2001 was estimated to be $5.76. See Note 1 for disclosure
of proforma net income and income per share.



Note
10.    Benefit Plan



The
Company maintained a 401(k) retirement savings plan (401(k) Plan) that covered substantially all of the Companys domestic employees. Eligible employees were permitted to make pre-tax contributions, up to 15% of their compensation
subject to an annual limit. Under the 401(k) Plan, the Company was permitted to make contributions either in cash or common stock of the Company at the discretion of the Companys Board of Directors. The Company had authorized 100,000 shares
for issuance under the 401(k) Plan. During the six months ended July 31, 2001 and the year ended January 31, 2001, the Companys total matching cash contributions amounted to approximately $150,000 and $556,000, respectively. In connection with
the Plan the Board discontinued the Companys matching contributions for its active employees on Sept 30, 2001. The 401(k) Plan was terminated in Fiscal 2003.



Note 11.    Commitments and Contingencies



Leases



The Company previously held various lease agreements for
office space that expired between 2002 and 2007. During fiscal 2000, in connection with the May 2000 restructuring (see Note 4), the Company reduced the size and location of the Boston office space then under lease, terminating the existing leases
and providing for a new lease for a smaller space, effective May 1, 2000. The Company remains the primary obligor under this lease. This smaller space has been subleased for the entire lease term, at rates in excess of the minimum lease payments.
The Company received $121,000 and $203,000 in net rental income during the six-month period ended July 31, 2001 and fiscal 2001, respectively, for the Boston sublease. The Company expects to receive and pay the following total amounts in the periods
after January 31, 2003, with respect to this property:



|      |  | Amounts to be paid |         | Amounts to be received |   | Net receivable
|----- |  | ------------------ | ------- | ---------------------- | - | --------------
|Total |  | $                  | 578,000 |                        | $ | 765,000       



Rent
expense was $321,000 and $1,086,000 for the six months ended July 31, 2001 and the year ended January 31, 2001, respectively.



43



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eBT INTERNATIONAL, INC.



NOTES TO CONSOLIDATED FINANCIAL STATEMENTS(Continued)





Litigation and Indemnification



In late January 1999 the Company discovered that it would be necessary to restate its financial results for the first three quarters of calendar year 1998. The Company immediately and voluntarily provided this information to the
Commission. On June 2, 1999, the Company was informed that the Commission had issued a Formal Order of Private Investigation in connection with matters relating to the previously announced restatement of the Companys 1998 financial results.



The staff of the Boston office of the Commission
informed the Company on July 10, 2002 that the Commissions investigation as to eBT had been terminated and no enforcement or other actions against eBT had been recommended. In a Complaint filed on June 21, 2002 (amended on November 19, 2002)
in the United States District Court, District of Massachusetts (Federal District Court) the Commission in an enforcement action alleged that two former officers of eBT violated various sections of the Securities Act of 1933, as amended,
(the Securities Act), and the Exchange Act, and Rules thereunder. In the Complaint the Commission requests that the Federal District Court issue a Final Judgment of Permanent Injunction and Order of Permanent Relief against the two
former officers. The Complaint also alleged that one other former officer was liable as a Control Person for uncharged violations under sections of the Exchange Act and Rules thereunder. This individual, without admitting or denying any
of the allegations set forth in the Complaint, consented to the entry of a Final Judgment in this matter which was entered by the Federal District Court on June 24, 2002. The Company is obligated under its By-laws to indemnify these former officers
for expenses reasonably incurred in connection with the Commissions investigation, including the defense costs for actions that may be pursued by the Commission and resultant fines and penalties. However, the Companys By-laws provide
that an officer is not entitled to such indemnification if it is adjudicated or determined by the Board of Directors that such officer did not act in good faith and in a manner he or she reasonably believed to be in, or not opposed to, the best
interests of the Company. The former officer who consented to the entry of a Final Judgment has made a claim for indemnification of legal fees of approximately $200,000. The Board of Directors unanimously determined on August 7, 2002 that such
former officer was not entitled to indemnification. Such former officer has indicated that he may initiate action to contest the Boards determination. The Company has been advised by one of the two former officers who have not settled with the
Commission that he intends to defend the Commissions proposed action in Federal District Court. The Company believes the Commissions allegations will be challenged by the other former officer in Federal District Court. Until such time as
the disposition of the Commissions allegations with regard to the two former officers has been finalized, the Company will maintain its Litigation Settlement Reserve, which at January 31, 2003 was $976,000.



In December 2002, the office for the United States Attorney,
District of Massachusetts, requested documents from eBT relating to the investigation it conducted in connection with the restatement of its financial results for 1998. On February 12, 2003, eBT entered into an agreement with the United States
Attorneys office pursuant to which eBT will provide the requested documents subject to use immunity for the Company. We are unable to comment on what action the United States Attorneys office may take with respect to any individuals, and
we are unable to predict what additional requests, if any, eBT will receive in the future for By-law indemnification.



On June 9, 1999, the bankruptcy estates of Microlytics, Inc. and Microlytics Technology Co., Inc. (together Microlytics) filed
a complaint against the Company in the United States Bankruptcy Court for the Western District of New York. The complaint sought turnover of purported property of the estates and damages for alleged breaches of a license from Microlytics relating to
certain computer software databases and other information. The complaint sought damages of at least $11,750,000. On August 29, 2001, the Company agreed to settle the June 9, 1999 complaint filed by Microlytics. The terms of the settlement, which
were approved by the United States Bankruptcy Court for the Western District of New York on September 21, 2001, included the payment of 2,000,000 to Microlytics, which was accrued at July 31, 2001. The $2,000,000 payment was made in September 2001.



44



---

eBT INTERNATIONAL, INC.



NOTES TO CONSOLIDATED FINANCIAL STATEMENTS(Continued)





We may
also be subject to various legal proceedings and claims that may arise during liquidation. We currently believe that any such proceedings and claims will not have a material adverse impact on the Companys estimate of net assets in liquidation.



Note
12.Operations by Industry Segment and Geographic Area



During the year ended January 31, 2001, the Company managed two operating segments, eBT and IED. The IED segment was sold to Stellent on
July 10, 2000 (see Note 3). The operating results of the MediaBank product line, which was sold in June 2000 (see Note 3), are included in the eBT segment results through the date of sale.



As a result of the dispositions, the Company had only one operating segment at January 31, 2001. We have not
restated the historical segment information to conform to the presentation of the eBT results as a single line of business, which now includes all corporate operating expenses, but rather have disclosed the corporate office expenses as a reconciling
item to the consolidated financial statement amounts.



Each segments profit and loss for the year ended January 31, 2001 reflects all income and losses, except for the items shown in the reconciliation information below. The accounting policies of the reportable segments are the
same as those described in the summary of significant accounting policies.



Segment Disclosure



|                                      |  | Year Ended January 31, 2001 |        
|------------------------------------- |  | --------------------------- | -------
|                                      |  | eBT                         |        
|                                      |  | (in thousands)              |        
|Revenues from external customers      |  | $                           | 13,311 
|Depreciation and amortization expense |  |                             | 3,192  
|Segment profit (loss)                 |  |                             | (20,217
|Segment assets                        |  |                             | 80,002 



Enterprise-Wide Disclosures



Geographic Information



|                   |  | Six Months Ended July 31, 2001 |       | Fiscal 2001
|------------------ |  | ------------------------------ | ----- | -----------
|                   |  | (in thousands)                
|Revenue:           |  |                                |       |            
|United States      |  | $                              | 1,189 |            
|Foreign countries  |  |                                | 337   |            
|                   |  |                                |       |            
|Consolidated Total |  | $                              | 1,526 |            
|                   |  |                                |       |            



Revenues
are attributed to countries based on the location of the customer.



As of January 31, 2001, the Companys long-lived assets were primarily located in the Companys United States operations. The long-lived assets located in foreign countries were less than 5% of consolidated assets.





45



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eBT INTERNATIONAL, INC.



NOTES TO CONSOLIDATED FINANCIAL STATEMENTS(Continued)



Reconciliation Information



Profit or loss



|                                                             |  | Fiscal 2001    |        
|------------------------------------------------------------ |  | -------------- | -------
|                                                             |  | (in thousands) |        
|Total external profit or loss for reportable segments        |  | $              | (20,190
|Restructuring expenses                                       |  |                | (1,954 
|Special charges                                              |  |                | (200   
|Net investment and other income                              |  |                | 3,861  
|Recovery (write-down) of Information Please LLC              |  |                | 657    
|Gain on sale of assets, net                                  |  |                | 38,170 
|Unallocated corporate and other expenses                     |  |                | (3,529 
|                                                             |  |                |        
|Consolidated income (loss) before provision for income taxes |  | $              | 16,815 
|                                                             |  |                |        





Unaudited Quarterly Financial Data

(Going Concern Basis)



|                                        |  | Quarter Ended
|--------------------------------------- |  | -------------
|                                        |  | April 30,    
|Six Months Ended July 31, 2001 (3)      |  |              
|Revenues                                |  | $            
|Gross profit (loss)                     |  |              
|Restructuring and special charges (1,2) |  |              
|Gain on sale of assets, net             |  |              
|Net loss                                |  |              
|Loss per share                          |  |              
|Loss per share, assuming dilution       |  |              



The
above table presents our unaudited quarterly results of operations up to and including the quarter ended July 31, 2001. The unaudited results of operations have been prepared on substantially the same basis as the audited statements of operations
contained in this Form 10-K and include all adjustments, consisting of normal recurring accruals, that we consider necessary to present this information fairly when read in conjunction with our financial statements and accompanying notes appearing
elsewhere in this Form 10-K. The operating results in any quarter are not necessarily indicative of the results that may be expected for subsequent periods. As a result we believe that period-to-period comparisons of our results of operations will
not be meaningful.



| | (1) |  | As a result of the Companys first quarter operating results and revised forecasted operating performance management determined that certain of its property and
equipment would not be recoverable over their remaining estimated useful lives. These assets were written down resulting in an impairment charge of $918,000. This charge was offset by a decrease in severance of $101,000 due to a change in estimated
obligations. (See Notes 4 and 5 of Notes to Consolidated Financial Statements).
| | --- |  | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | (2) |  | On May 22, 2001, the Board of Directors adopted a plan of complete liquidation and dissolution of the Company. The special charge of $10,477,000 related to that
action. (See Notes 1 and 5 of Notes to Consolidated Financial Statements).
| | --- |  | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | (3) |  | The Company adopted the liquidation basis of accounting on August 1, 2001 and no longer operates as a going concern. (See Note 1 of Notes to Consolidated
Financial Statements).
| | --- |  | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------





46



---

|eBT INTERNATIONAL, INC.  SCHEDULE II. VALUATION AND QUALIFYING
ACCOUNTS  Six Months ended July 31, 2001
and Year ended January 31, 2001
|---------------------------------------------------------------------------------------------------------------------------------------
|                                                                                                                                       
|Fiscal 2002 (Six Months)                                                                                                               
|Allowance for doubtful accounts                                                                                                        
|Allowance for returns and refunds                                                                                                      
|                                                                                                                                       
|Total                                                                                                                                  
|                                                                                                                                       
|Fiscal 2001 (Year)                                                                                                                     
|Allowance for doubtful accounts                                                                                                        
|Allowance for returns and refunds                                                                                                      
|                                                                                                                                       
|Total                                                                                                                                  
|                                                                                                                                       



47