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

                                   FORM 10-KSB
                                   (MARK ONE)

[X]  ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
     ACT OF 1934 FOR THE FISCAL YEAR ENDED DECEMBER 31, 2002.

                                       OR

[ ]  TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
     EXCHANGE ACT OF 1934 FOR THE TRANSITION PERIOD FROM__________ TO _________.

                        COMMISSION FILE NUMBER 000-29927

                                IMPROVENET, INC.
             (Exact name of registrant as specified in its charter)

           DELAWARE                                            77-0452868
(State or other jurisdiction of                             (I.R.S. Employer
incorporation or organization)                            Identification Number)

                        8930 E. RAINTREE DRIVE, SUITE 300
                            SCOTTSDALE, ARIZONA 85260
                    (Address of principal executive offices)

                                 (480) 346-0000
              (Registrant's telephone number, including area code)

         Securities registered under Section 12(g) of the Exchange Act:

                     Common Stock, $.001 par value 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-B 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-KSB or any
amendment to this Form 10-KSB. [ ]

     State issuer's revenues for its most recent fiscal year. $777,000.

     The aggregate market value of the voting stock held by non-affiliates of
the registrant, based on the closing sale price of the common stock on March 31,
2003 was approximately $501,411.00. Shares of common stock held by each current
executive officer and director and by each person who is known by the registrant
to own 5% or more of the outstanding common stock have been excluded from this
computation in that such persons may be deemed to be affiliates of the Company.
This determination of affiliate status is not a conclusive determination for
other purposes.

     The number of shares outstanding of the registrant's common stock, $.001
par value, was 39,110,428 as of March 31, 2003.

                       DOCUMENTS INCORPORATED BY REFERENCE

                                      NONE.
<PAGE>
                                IMPROVENET, INC.
                                   FORM 10-KSB
                      FOR THE YEAR ENDED DECEMBER 31, 2002

                                      INDEX

                                                                            PAGE
                                                                            ----
PART I
Item 1.     Description of Business                                           2
Item 2.     Description of Property                                          24
Item 3.     Legal Proceedings                                                24
Item 4.     Submission of Matters to a Vote of Security Holders              24

PART II
Item 5.     Market for Common Equity and Related Stockholder Matters         24
Item 6.     Management's Discussion and Analysis or Plan of Operation        25
Item 7.     Financial Statements                                             31
Item 8.     Changes in and Disagreements with Accountants on Accounting
            and Financial Disclosure                                         31

PART III
Item 9.     Directors, Executive Officers, Promoters and Control Persons;
            Compliance With Section 16(a) of the Exchange Act                32
Item 10.    Executive Compensation                                           35
Item 11.    Security Ownership of Certain Beneficial Owners and
            Management and Related Stockholder Matters                       36
Item 12.    Certain Relationships and Related Transactions                   37

PART IV
Item 13.    Exhibits and Reports on Form 8-K                                 37
Item 14.    Controls and Procedures                                          37

SIGNATURES                                                                   38

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RECENT DEVELOPMENTS

     Effective December 23, 2002 (the "Effective Time"), Etech Acquisition, Inc.
("Merger Sub"), a newly formed Arizona corporation and wholly-owned subsidiary
of ImproveNet, Inc., a Delaware corporation ("ImproveNet" or "the Company"),
merged (the "Merger") with and into eTechLogix, Inc., an Arizona corporation
("eTechLogix") pursuant to an Agreement and Plan of Merger dated July 30, 2002
(the "Merger Agreement"). The description contained in this Item 1 of the
transactions consummated pursuant to the terms and conditions of the Merger
Agreement is qualified in its entirety by reference to the full text of the
Merger Agreement, and the amendments thereto, which are incorporated herein by
reference. The Merger Agreement is filed as Exhibit 10.39 to the Report on Form
8-K filed by the Company on August 6, 2002 and which provides additional
information regarding the Merger Agreement. Amendment No. 1 to the Merger
Agreement and Amendment No. 2 to the Merger Agreement which are filed herewith
as Exhibits 2.4 and 2.5.

     At the Effective Time, each outstanding share of the common stock, no par
value per share, of eTechLogix ("Etech Common Stock") was converted into the
right to receive and became exchangeable for 5,555.555556 shares of common stock
of ImproveNet, par value $0.001 per share ("IMPV Common Stock"). A total of
35,417,750 shares of IMPV Common Stock were issued in the Merger to eleven (11)
different shareholders of Etech Common Stock. Of the holders of Etech Common
Stock, Jeffrey I. Rassas, Homayoon J. Farsi and Naser Ahmad, the directors of
Etech, (the "Etech Directors") collectively received 30,310,740 shares of IMPV
Common Stock in the Merger and have acquired control of ImproveNet. At the
Effective Time, the Etech Directors collectively held 57.06% of the outstanding
shares of IMPV Common Stock. There are no agreements between the Etech Directors
regarding their holdings of IMPV Common Stock.

     ETechLogix is now a wholly-owned subsidiary of ImproveNet. However, as a
result of the change in control of ImproveNet, eTechLogix is the "acquiring"
entity and ImproveNet is the "acquired" entity for accounting and financial
reporting purposes.

     In addition, each outstanding warrant which was exercisable to purchase
shares of Etech Common Stock was converted into a warrant to purchase a number
of shares of IMPV Common Stock equal to the number of shares of Etech Common
Stock that could have been purchased by exercising such warrant multiplied by
5,555.555556, at a price per share of IMPV Common Stock equal to the per share
exercise price of such warrant divided by 5,555.555556. Warrants to purchase
1,500,000 shares of IMPV Common Stock were issued in the Merger. Also, each
unexpired outstanding option to purchase Etech Common Stock was converted, on
the same vesting schedule, into an option to purchase a number of shares of IMPV
Common Stock equal to the number of shares of Etech Common Stock that could have
been purchased under such option multiplied by 5,555.555556, at a price per
share of IMPV Common Stock equal to the per share exercise price of $0.05 per
share. Options to acquire 788,889 shares of IMPV Common Stock were issued in the
Merger of which 222,222 had vested as of December 23, 2002.

     The Merger was intended to qualify as a tax deferred reorganization under
Section 368(a) of the Internal Revenue Code of 1986, as amended, and to be
accounted for on a purchase basis. Neither ImproveNet nor any of its affiliates,
directors, or officers or any affiliate of any of ImproveNet's directors or
officers had any material relationship with the holders of securities of
eTechLogix at or before the Effective Time. eTechLogix is a leading developer
and marketer of enterprise commerce management software applications for the
supply side of the building materials industry.

SPECIAL NOTE REGARDING FINANCIAL RESULTS RELATIVE TO THE BUSINESS OF THE ISSUER

     As a result of the Merger which occurred late in 2002, eTechLogix is deemed
to be the "acquiring" entity and ImproveNet the "acquired" entity for accounting
and financial reporting purposes, and the financial reporting in this report on
Form 10-KSB primarily and almost exclusively reflects only the activity of
eTechLogix during the designated periods. With regard to the discussion in ITEM
1 DESCRIPTION OF BUSINESS set forth below, financial information regarding the
service provider matching services and marketing services, which comprises the
primary activity of ImproveNet, is not reflected in the financial results set
forth in ITEM 7 FINANCIAL STATEMENTS. The financial results primarily reflect
activities of eTechLogix and comprise sales of the business management software
and of the offerings to the manufacturers and distributors in the building
materials industry. Despite this fact, the activities of ImproveNet are a major
focus for us following the Merger, and through the first quarter of 2003, the
service provider matching services of ImproveNet are the primary revenue
generating component of the combined businesses of ImproveNet and eTechLogix.

SPECIAL NOTE ON FORWARD-LOOKING STATEMENTS

     In addition to historical information, this Annual Report on Form 10-KSB
contains forward-looking statements based on our current expectations about our
company and our industry. You can identify these forward-looking statements when
you see us using words such as "expect," "anticipate," "estimate," "project" and
other similar expressions. These forward-looking statements are subject to
certain risks and uncertainties that could cause actual results to differ
materially from those reflected in these forward-looking statements. Factors
that might cause such a difference include, but are not limited to, those

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discussed in the section entitled "Management's Discussion and Analysis of
Financial Condition and Results of Operations, Risk Factors that May Affect Our
Results of Operations and Financial Condition" and elsewhere in this report. We
undertake no obligation to publicly update any forward-looking statements for
any reason, even if new information becomes available or other events occur in
the future.

                                     PART I

ITEM 1. DESCRIPTION OF BUSINESS

COMPANY OVERVIEW AND BUSINESS DEVELOPMENT

     We started business in January 1996 as a regional contractor matching
service. Originally ImproveNet was a California corporation but reincorporated
in Delaware in 1998. We spent most of 1996 and 1997 building our service
provider database, developing our services and technology, recruiting personnel
and raising capital. We launched our Web site and homeowner/service provider
matching service on a national scale in August 1997. In December 1998, we began
selling Web site advertising and direct marketing services to suppliers of home
improvement products as a way to send targeted messages about their products,
including product promotions, to homeowners at the time of purchase, as well as
to our network of service providers. In March 1999, we began to hire a new
senior management team. In April 1999, we introduced Powered by ImproveNet, a
service that allows third parties to offer the ImproveNet matching services and
content on their Web sites. We completed the acquisition of two regional
contractor referral companies, Contractor Referral Service, LLC and The J.L.
Price Corporation, in September and November 1999, respectively. These entities
were integrated into our operations during the course of calendar year 2000.

     On March 15, 2000, we completed our initial public offering. We sold
2,760,000 shares of our common stock in the offering at $16.00 per share and
received approximately $44,160,000 in gross proceeds. Shares of our common stock
were listed for trading on the Nasdaq National Market System. From January
through June 2000, we spent substantial amounts primarily on marketing and
marketing related activities, as well as the development and expansion of our
service and operations infrastructure.

     On June 10, 2002 we entered into a letter of intent with eTechLogix which
outlined the substantive terms of an agreement and plan of merger involving the
companies. The resulting Merger Agreement was entered into on July 30, 2002. On
December 23, 2002, eTechLogix became our wholly-owned subsidiary by way of a
merger of Merger Sub with and into eTechLogix pursuant to terms of the Merger
Agreement. With regard to ImproveNet, it was anticipated that as a result of the
Merger our stockholders would be offered a share buyback at a price to be
finalized on or before the closing that would represent a premium over what they
would receive upon a liquidation and dissolution of the company.

     The board of directors of ImproveNet based its decision to enter into the
letter of intent, in part, upon a liquidation analysis which it prepared which
projected the anticipated proceeds to the stockholders were the company to
dissolve and liquidate. The liquidation analysis necessarily made assumptions
concerning numerous important factors relevant to the amount of proceeds which
would be available, such as the revenues which would be generated by ImproveNet
during the dissolution process, the extent to which it could resolve long term
liabilities on a reasonable basis and the costs associated with the process of
dissolution and liquidation. While the board recognized that its liquidation
analysis involved many uncertainties, the board nevertheless concluded that the
analysis provided a basis for its anticipation that the proposed transaction
with eTechLogix would likely provide a premium to the stockholders over the
proceeds of a possible dissolution and liquidation.

     The board of directors of ImproveNet also based its decision upon its
belief that that it was unlikely that ImproveNet could be sold as an entity to a
party other than eTechLogix on a basis more favorable to the stockholders of
ImproveNet than the transaction with eTechLogix. During the second quarter of
2002, the chairman of ImproveNet contacted five substantial companies in the
building materials industry with which he had previous business relationships in
order to discuss the possibility of their acquiring ImproveNet as a company or
purchasing some or all of its assets. None of the five companies indicated any
interest in pursuing a transaction with ImproveNet which would have provided
value to the stockholders of ImproveNet comparable to the value they were to be
entitled to receive in the proposed transaction with eTechLogix.

     The primary reason for eTechLogix entering into the Merger Agreement was to
extend its business to include consumers and contractors in the building
materials industry. The company has, to date, directed its business to
manufacturers and distributors in that industry. Early in 2002, the board of
directors of eTechLogix concluded that eTechLogix would benefit if it could
include consumers and contractors in its target market as well as manufacturers
and distributors. With the approval and support of the board, the chief
executive officer of eTechLogix began a search for companies which eTechLogix
could acquire to provide it with a means of reaching consumers and contractors.
In February 2002, the chief executive officer identified ImproveNet as a
potential candidate and made contact with the chairman of ImproveNet, who was
then its chief executive officer. A letter of intent was executed between the
parties on June 10, 2002, and the Merger Agreement was executed the following
month.

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     eTechLogix advised us that the board of directors of eTechLogix approved
the Merger Agreement and the Merger for a variety of reasons, including the
following:

     *    The combination of eTechLogix with ImproveNet will create a combined
          company with access to strategic relationships not currently available
          to eTechLogix with companies in the building materials industry which
          could become key business partners.

     *    eTechLogix has developed intellectual property which it has marketed
          under the brand name Smart Fusion(SM) to manufacturers and
          distributors in the building materials industry. The combination with
          ImproveNet will enable the combined company to market this
          intellectual property to consumers and contractors as well as
          distributors and manufacturers.

     *    eTechLogix has developed intellectual property, marketed under the
          brand name of eBusiness, that has been designed to meet the specific
          needs of distributors and contractors. The board of eTechLogix
          believes that the combination of eTechLogix and ImproveNet will enable
          the combined company to generate additional revenue by marketing the
          software to new potential customers to whom the combined company will
          have access as a result of the operations of ImproveNet.

     *    eTechLogix was a privately held company. The board of eTechLogix
          believed that the combined company, by continuing to file reports with
          the SEC and remaining a public company, will be better positioned to
          raise additional capital under current market conditions than is
          eTechLogix as a private company.

     *    Since the combined company will be a public reporting company,
          eTechLogix believes that the combined company may be able to utilize
          its stock to make strategic acquisitions, something which is more
          difficult for eTechLogix to do as a privately held company.

BUSINESS OF ISSUER

     ImproveNet, Inc. is a nationally recognized provider of home improvement
services. There are two major categories of home improvement services: service
provider matching services and marketing services. In addition, through our
wholly-owned subsidiary eTechLogix, we are a developer of and marketer of
Enterprise Commerce Management ("ECM") software sold under the product
servicemark of Smart Fusion(SM) for the Building Materials Industry ("BMI"),
which is segmented into many vertical markets.

SERVICE PROVIDER MATCHING SERVICES

     Our service provider matching service is the process by which homeowners
are matched to our network of pre-screened ImproveNet contractors. This was the
core business model upon which the Company was founded and has been the primary
source of revenue for the Company. Since its inception, the Company has invested
quite heavily in establishing a pool of national remodeling contractors. The
Company considers this to be the core of its business and we anticipate the
major portion of the Company's resources and efforts in the foreseeable future
will be devoted to further this service.

MARKETING SERVICES

     We provide advertising and marketing services on behalf of home improvement
suppliers and marketing programs for building materials manufacturers,
distributors, contractors and trade professionals, as well as other companies
who wish to communicate to our consumer and service provider audiences. We also
provide content and on-line tools on behalf of companies to assist them in
serving their own on-line customers.

DEVELOPER AND MARKETER OF BUSINESS MANAGEMENT SOFTWARE

     With regard to our business management software offerings, we have
initially focused our business strategy on the window and door manufacturers and
distributors ("WND") niche of the BMI, which accounts for over $25 billion in
industry wide annual sales. It encompasses a finite universe of prospective
customers with a distinct multi-tiered distribution channel and supply chain
procurement processes that can be significantly enhanced with web based
Enterprise Commerce Solutions ("ECM"). We provide a comprehensive, integrated
software platform that enables manufacturers to quickly create a "Pure Internet"
true eCommerce solution specifically with regard to their product order
configuration packages and electronic catalogs. We anticipate becoming a leading
Enterprise Commerce Software provider in that space, delivering solutions that
integrate seamlessly with legacy IT systems. Our solutions enable customers to
increase profitability through improved sales processes and reduce costs by
minimizing operating inefficiencies.

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<PAGE>
INDUSTRY BACKGROUND

THE HOME IMPROVEMENT INDUSTRY

     According to the United States Census Bureau, there were an estimated 122
million housing units in the United States of America as of the second quarter
of 2001. Approximately 107 million housing units were occupied: 73 million by
owners and 34 million by renters. Expenditures for improvements and repairs of
residential properties in the second quarter 2001, the most recently reported
period from the US Census, were at a seasonally adjusted annual rate of $165.8
billion, representing $119 billion on larger discretionary projects and $46.8
billion for maintenance and repair projects. According to the "Improving
America's Housing" study from the Joint Center for Housing Studies at Harvard
University, the residential remodeling industry accounts for about 2% of gross
domestic product.

     The participants in the home improvement market includes homeowners,
service providers, manufacturers, distributors, and suppliers of home
improvement products. These participants face distinct challenges in meeting
their objectives.

     HOMEOWNERS

     The appearance and general working condition of their home is highly
important to homeowners. Maintaining and improving the home involves an ongoing
financial and emotional investment to design, budget, hire service providers,
and successfully complete repair and remodeling projects. Traditionally,
homeowners must rely upon books, magazines, local newspaper articles and
advertisements, Yellow Pages and word-of-mouth recommendations to accomplish
these tasks. None of these resources provides immediate, objective, reliable and
personalized information. As a result, homeowners are often poorly informed and
uncertain about how best to identify and locate reputable, experienced and
competitively priced service providers for their projects.

     SERVICE PROVIDERS

     Based upon a compilation of industry sources, we believe there are up to
800,000 service providers including contractors, architects, designers, and
handymen in the United States. These service providers have few channels to
communicate effectively with homeowners or with one another. There is no
industry-wide certification based on work quality or a code of conduct and
ethics for contractors as there is for architects and designers. As a result,
reputable contractors are often unable to differentiate themselves based on
reliability, adequate capitalization and areas of specialization. Service
providers currently rely on word-of-mouth recommendations, the Yellow Pages and
other traditional mass media advertising that require them to pay upfront fixed
costs. Therefore, service providers must allocate significant time, money and
energy to qualifying and verifying the leads they receive. Typically, small
independent contractors experience difficulty in predicting lead flow, managing
staffing and working capital requirements and systematically building a stable
business.

     MANUFACTURERS, DISTRIBUTORS, AND SUPPLIERS OF HOME IMPROVEMENT PRODUCTS

     There are many well-known brand names supplying a wide array of home
improvement products on a national basis. There are also a large number of
regional firms with limited means to distribute and market their products
effectively to homeowners. Currently, the majority of supplier advertising
dollars is spent on co-marketing and co-branding advertising and print and
broadcast advertising. Although suppliers have often used traditional media
effectively to build brand recognition, they have difficulty using traditional
media to target homeowners who are in the process of making time-critical
purchasing decisions regarding home improvement products. These traditional
media lack a centralized database of information that can be searched based on
specified terms, and the ability to conduct two-way communications.

THE INTERNET HOME IMPROVEMENT OPPORTUNITY

     According to a study published by the National Telecommunications and
Information Administration and the Economics and Statistics Administration, 143
million Americans were online in September 2001 and 239 million will be online
by 2005. According to a study done in 2001 by the Pew Internet And American Life
Project, 82 percent of people in households earning more than $75,000 per year
have Internet access.

     We believe that an opportunity exists for an online home improvement
service that provides a central repository of information for the benefit of
homeowners, service providers and suppliers. This service would enable
homeowners to access design and planning tools, find service providers and
obtain other project management services. This service would also enable service
providers to access job leads, differentiate themselves from competitors and
communicate with fellow professionals. Finally, this service would enable
suppliers to market their products to a targeted audience of homeowners and
service providers at the time they are making time-critical purchasing
decisions.

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BUSINESS OBJECTIVES AND STRATEGIES

THE IMPROVENET STRATEGY

     ImproveNet's strategy is to become one of America's premiere building
materials services company. The key elements of our strategy are:

DELIVER A SATISFYING HOME IMPROVEMENT PROJECT EXPERIENCE FOR HOMEOWNERS, SERVICE
PROVIDERS AND SUPPLIERS

     The core of our strategy is to make it easy for homeowners, service
providers, and suppliers to work together effectively throughout the entire home
improvement project experience to deliver a successful result for all of the
participants. Our focus on identifying homeowners that are highly interested in
undertaking and completing a home improvement project and qualified service
providers interested in providing such services, in addition to providing
homeowners quick and easy access to information on service providers and
improved project support allows us to change the current approach and execution
of a home improvement project.

     Access to this marketplace allows service providers in our network to
increase their own business and financial efficiencies and differentiate
themselves from their competitors. Similarly, this access allows suppliers to
market their home improvement products and services within a cost effective
advertising medium. We believe that the execution of our ongoing strategy
requires us to:

     *    Strengthen the pool of high quality information and content on our Web
          sites;

     *    Strengthen the size and capabilities of our network of service
          providers;

     *    Strengthen our relationships with suppliers through enhanced
          co-branded opportunities and highly targeted advertising products; and

     *    Strengthen and improve the business management software solutions and
          marketing programs we offer to manufacturers and distributors in the
          BMI.

     We believe that achieving these goals will improve the level of
professionalism and reliability among service providers as well as the
perception of the home improvement industry in general.

ATTRACTING MORE SCREENED SERVICE PROVIDERS TO OUR NETWORK

     We continue our efforts to develop and implement initiatives that will
result in additional screened service providers participating in our network by:

     *    Upgrading and improving our Web based content to create better quality
          home improvement jobs;

     *    Increasing participation by interested, responsive and screened
          service providers;

     *    Offering tools and incentives to help ImproveNet service providers
          compete more successfully;

     *    Developing tracking systems and procedures to identify wins that are
          not reported to us by either the service provider or the homeowner;
          and

     *    Initiating service provider recruitment programs to increase
          participation in our network by utilizing call center operations
          through existing relationships with companies in India and Bangladesh.

     We have invested heavily in the development of content design tools and
services and have refined our submission process to increase the quality of the
homeowner experience and the quality and number of jobs submitted. We have also
invested in a more highly targeted matching program, increasing the
project-types from 28 broad categories to more than 400 specific home
improvement project types. This action should permit us to more closely match
prospective service providers to each specific home improvement project lead we
receive. Again, we require each homeowner to evaluate, on his own, the
prospective service providers identified before selecting one for his home
improvement project.

COMMERCIAL RELATIONSHIPS WITH SUPPLIERS OF HOME IMPROVEMENT PRODUCTS, SERVICES
AND RELATED HOME SERVICES

     For businesses selling to remodeling contractors, ImproveNet provides
marketing and loyalty solutions to its service provider network. The network has
approximately 30,000 professionals representing, by our estimates, approximately

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$10 billion in annual product and services purchases. The number of service
providers that actually receive leads each month is dependent upon the number of
home improvement project leads submitted to us and the type of work required for
each project submitted. The number of service providers receiving leads from us
in any given month is less than the total number of those service providers
actually enrolled in our network. Through electronic communications tools such
as pager, e-mail, and ImproveNetPRO.com we can deliver a targeted personalized
marketing campaign on behalf of manufacturers, retailers and other service and
product providers to our network. In addition, we can supply co-branded content
and services to enhance their Internet offering.

BUSINESS MANAGEMENT SOLUTIONS AND MARKETING PROGRAMS FOR THE BUILDING MATERIALS
INDUSTRIES

We recognize the tremendous untapped need within the BMI for technology
solutions to solve critical business needs. The Company's strategy for success
is to:

     *    Target the BMI one vertical segment at a time such as, WND, roofing,
          plumbing, lumber, etc., providing a highly targeted solution;

     *    Continually develop and possess an extensive knowledge base of the
          vertical market served that is equal to the customer's and unsurpassed
          by the competition;

     *    Develop and market the best web-based solutions that solve pervasive,
          urgent problems for customers;

     *    Ensure seamless integration to the BMI supply chain from end user to
          manufacturer, enabling companies to leverage their existing IT
          Infrastructure investment;

     *    Define a specific niche market segment utilizing a direct sales model,
          while leveraging vertical partnerships to penetrate enterprise
          customers;

     *    Deliver customer-driven value propositions based on deep domain
          experience and understanding of our target market;

     *    Maintain technological expertise and competitive advantage to deliver
          open solutions that are "Pure Internet"; and

     *    Create options for significant expansion (geographically, vertically
          and with new products).

     *    Leverage existing relationships and favorable cost and expense
          structure with companies in India and Bangladesh for continued
          research and development of business management software, e-commerce
          and e-distribution technology solutions.

PRINCIPAL SERVICES AND PRODUCTS

THE IMPROVENET SOLUTION

     We provide home improvement information and services leveraging our
Internet presence and our network of highly qualified service providers. We
aggregate and organize information and design tools for homeowners, generate job
leads for our network of service providers and provide value chain management
solutions, channel development services, strategic market research services, and
e-commerce software solutions on behalf of home improvement manufacturers,
distributors, and suppliers. We have built and currently maintain a national
network of service providers. We independently screen and monitor to ensure that
our homeowners' qualified job leads are matched with pre-screened service
providers.

     Our solution offers the following benefits:

     FOR HOMEOWNERS:

     *    ONLINE PROJECT PLANNING ASSISTANCE. We believe our online services,
          including our product showcase, our design gallery and our planning
          and estimating tools, provide answers to homeowners' diverse questions
          and needs regarding home improvement and repairs. Our Web site allows
          each homeowner to generate ideas from the product showcase and design
          gallery and access the personal project folder, an archive of previous
          product ideas. In addition, we offer homeowners the ability to search
          for home improvement services and to plan their current projects using
          our interactive planning tools.

     *    ACCESS TO QUALITY SERVICE PROVIDERS. ImproveNet has built a network of
          qualified service providers covering most US markets and home
          improvement trade categories. Our screening process is designed to
          identify high quality service providers in each local market
          nationwide. To pass our screening criteria, service providers must

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          have a clean credit and legal history, appropriate insurance and no
          significant negative references from customers or other service
          providers. By creating a national network of screened service
          providers, we improve the likelihood that homeowners who contact us
          will hire qualified, experienced and reputable service providers.

     *    CONVENIENT AND COST EFFECTIVE SERVICES. We choose the service
          providers by matching their geographical, job type and job size
          preferences, with the homeowner's job specification. We encourage the
          selected service providers to contact the homeowner directly to
          discuss the job in detail within 48 hours. For projects greater than
          $500, our matching process often provides more than one service
          provider, creating a competitive marketplace for their home
          improvement bid.

     *    ONLINE FINANCING. In December 2000, we launched a new "Find a Lender"
          program on our site where remodeling homeowners can apply online for
          home equity loans and lines of credit and receive instant approval
          decisions.

     *    PROJECT COMPLETION BY IMPROVENET. For selected projects and markets,
          ImproveNet, Inc. will act as the general contractor to ensure a
          nationally consistent quality approach to home improvement repairs.
          The Company is currently providing such service in two major markets
          in the United States.

FOR IMPROVENET SERVICE PROVIDERS:

     *    QUALITY JOB LEADS. Service providers who receive leads through our
          proprietary matching service benefit from the likelihood that the
          homeowner's interest is real and that the potential project is
          correctly characterized. In addition, service providers give us
          geographic, job type and job size preferences, which enable us to
          match the jobs that meet their preferences and expertise. Service
          providers can change their preferences at any time to reflect their
          changing needs and circumstances. Through our ImproveNetPro.com
          website, we communicate job leads in near real-time to the selected
          service providers.

     *    COMPETITIVE DIFFERENTIATION. We believe service providers can
          differentiate themselves from their competitors by successfully
          completing our proprietary screening process and joining our network.
          Approximately 50% of the service providers that we have screened meet
          our selection standards of professionalism and reliability. Currently,
          we have approximately 30,000 eligible service providers in our network
          who may receive qualified job leads from us.

     *    BUSINESS AND FINANCIAL EFFICIENCIES. Service providers who participate
          in our matching service pay only for job leads that they accept and
          for jobs that they win, allowing them to reduce their upfront
          marketing costs. New job leads from our matching service supplement
          the flow of work that contractors, architects and designers receive
          from their traditional sources, which allows them to plan and operate
          their businesses more efficiently. Furthermore, through our SmartLeads
          program, service providers in our network are able to gain business
          and financial efficiencies that are not likely available to their
          competitors.

FOR MANUFACTURERS, DISTRIBUTORS, AND SUPPLIERS OF HOME IMPROVEMENT PRODUCTS:

     *    TARGETED ADVERTISING TO HOMEOWNERS. ImproveNet.com is designed to
          attract visitors who are focused on remodeling, repairing and
          maintaining their homes. We believe that this audience is a valuable
          target for suppliers of home improvement products and services.
          Banners, buttons and other forms of advertising allow these suppliers
          to target their message more efficiently and cost-effectively to a
          highly responsive and focused audience. Moreover, through our
          SmartLeads program, suppliers are able to reach service providers and
          homeowners engaged in home improvement projects through targeted
          messages.

     *    TARGETING ADVERTISING TO SERVICE PROVIDERS AND SITE ADVERTISING.
          Through our SmartLeads program, we offer our suppliers the opportunity
          to run highly targeted promotions to our network of service providers
          based on detailed attributes including project type, cost, timing and
          location. This focused advertising offers suppliers an effective
          method of selling entire lines and specific products to highly
          interested service providers at the time of purchase.

     *    CO-BRANDED WEB SITES. We offer suppliers the opportunity to place our
          content and services on their own Web sites or link to co-branded Web
          sites, without having to expend development time or resources. These
          co-branded Web sites allow suppliers to offer our content and services
          to their customers. In many of these arrangements, the suppliers'
          share in the revenues from jobs referred through their site or the
          co-branded Web site.

     *    CHANNEL MARKETING SOLUTIONS. We offer a channel marketing solution
          that allows manufacturers and distributors entree to a $1.3B+ annual
          renovation and remodeling market. This channel marketing solution has
          our Smart Fusion(SM) configuration, ecommerce and cataloging software
          on the backend making it easier for contractors to buy building
          materials and products from their favorite manufacturers and
          distributors. This program also allows manufacturers and distributors
          to build and reinforce their brand, provide discount, rebate and other
          types of incentives, and allows them to market and sell directly into
          a market rich with contractors and homeowners who are spending over
          $2M dollars per day on remodeling and renovation

                                       7
<PAGE>
          projects and processing their requests through our site(s). In
          addition, the communications between our customer service center
          representatives and homeowners and service providers who utilize our
          service provider matching services offers a personal touch that can
          help to enhance the effectiveness of the channel marketing solution.

     *    ECOMMERCE SOFTWARE SOLUTIONS. Initially targeted for the window and
          door manufacturers and distributors, our Enterprise Commerce GatewaySM
          ("ECG") provides WND manufacturers with an efficient, easy to deploy
          and manage, sales oriented eCommerce solution. ECG is a fully
          developed product that integrates seamlessly into any enterprise back
          office (ERP, CRM) system, allowing Application-to-Application (A2A)
          capability throughout the entire supply chain. An order placed through
          ECG automatically updates the back-office system without additional
          input, eliminating errors and reducing order-processing time. ECG is
          scalable to meet the needs of any size company, whether the volume is
          10 or 100,000 orders per day, enabling manufacturers to sell
          off-the-shelf, standard products, as well as complex configurable
          products and services. ECG proves the concept of "mass-customization,"
          completely automating the transaction process, with orders placed
          based on individual options and specifications. Customers can access a
          manufacturer's eCommerce site to check availability, evaluate options
          and obtain pricing in real-time, eliminating delays and errors in the
          ordering process. They can define a virtually unlimited number of
          applicable options such as size, model, configurable components and
          services.

     *    EDISTRIBUTION SOFTWARE SOLUTIONS. We recognize that WND distributors
          required an integrated back-office solution to facilitate eCommerce as
          well. Therefore, we developed eDistribution, a comprehensive web-based
          ERP solution designed specifically to meet the needs of wholesale
          distributors. It includes: Order Entry, Purchasing (procurement),
          Inventory Management, Accounts Receivable and Payable, General Ledger,
          Sales Analysis. It also fully integrates to ETechLogix's ECG. Modules
          are highly open and scalable for communications to other eBusiness
          products as well as future growth. All applications are fully written
          in Pure Java and Enhanced Java Beans (EJB) with Oracle or SQL as the
          back end databases and are fully web enabled. Modules are designed
          specifically for BMI and allow multi-location distributors to conduct
          business over a private network or the Internet. Functional security
          has been provided throughout the product for control and eligibility.

     Our key service offerings and capabilities include:

PRODUCTS AND SERVICES

     FOR HOMEOWNERS

IMPROVENET.COM

     Our consumer Web site, www.ImproveNet.com, enables homeowners to browse,
free of charge, pages of ideas and information for use in their home improvement
projects and to use our project tools to help them better understand their home
improvement project. Our design gallery on ImproveNet.com features color images
of the work of leading architects and designers. For most designs, we provide
images, comments from both the designer and our editors and a detailed list of
products used in the design. Our product showcase on ImproveNet.com contains
images of a full range of more than 5,000 distinct home improvement products and
includes brands such as Armstrong, DuPont, General Electric Appliances, Owens
Corning, Price-Pfister, Masco's KraftMaid and Merrillat. Our eight interactive
estimators designed to assist homeowners through the planning and budgeting
stage of the home improvement process allow homeowners to calculate prices for a
project based on parameters such as physical dimensions, styles and the
homeowner's location.

     Homeowners can register as members, which entitle them to access to
additional products and services. As part of the on-site registration process,
we create a customized interface for each registered member, known as the
personal project folder. The personal project folder permanently stores all
information related to that homeowner's project and allows us to present
custom-tailored information to that homeowner. Homeowners can store ideas they
get from our design gallery, product showcase and product estimator, in addition
to their own thoughts, as they plan and design their home improvement project.

     Our Web site gives homeowners access to a community of fellow Web site
visitors and to service providers and industry professionals who can respond to
home improvement questions. Visitors may read discussions currently on our
message boards, and registered members may join in the discussions or post a new
question. This feature gives homeowners who are now in the home improvement
process a friendly environment in which to educate themselves further and to
reduce their anxiety related to home improvement.

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<PAGE>
IMPROVENET'S NETWORK OF SERVICE PROVIDERS

     ImproveNet has built a network of screened service providers covering most
U.S. markets and home improvement trade categories. Approximately 30,000 are
enrolled in our network. The number of service providers that actually receive
leads each month is dependent upon the number of home improvement project leads
submitted to us and the type of work required for each project submitted. The
number of service providers receiving leads from us in any given month is less
than the total number of those service providers actually enrolled in our
network. Service Providers join our network by coming directly to our Web site
and completing an application and consenting to and undergoing our screening
process. In addition, we recruit service providers via direct telemarketing
activities. In order to qualify to participate, a service provider must maintain
a clear credit history and have no legal judgments for at least three years.
They must also provide proof of insurance and valid professional licenses in
those jurisdictions that require such licenses. Finally, they must maintain good
references with the consumers and suppliers from whom we receive feedback. We
offer no warranty or guaranty of the work of any service provider and serve only
to identify contractors that meet our screening criteria. Each homeowner must
make his own decision regarding the hiring of any service provider. .

     We believe that these qualifications make ImproveNet's service providers
more likely to deliver quality professional work to our customers. We also
believe that ImproveNet service providers are more likely to be successful,
making them highly attractive customers for our home improvement supplier
partners.

IMPROVENET'S MATCHING SERVICES

     We offer homeowners through our network an opportunity to submit to us a
home improvement project that we match with local service providers, who want to
bid on the project. Homeowners who are starting home improvement projects begin
the process by clicking on our homepage links to "Find a Contractor" or "Find a
Designer" and are then asked to complete a detailed project request form that
specifies the type of job the homeowner desires.

     Our proprietary matching service uses the homeowner's project description
to select the ImproveNet service providers in the homeowner's geographic area
that do the type of work required by the project description. We deliver job
leads to selected service providers by email or by posting the leads on
ImproveNetPro.com. Currently, we have approximately 30,000 eligible service
providers in our network who have indicated an interest in continuing to receive
qualified job leads from us. The interested service providers who first contact
us get the opportunity to bid on the project. We allow up to four service
providers to be matched depending upon the project size and type.

     Service providers contact the homeowner to discuss the job in detail,
ideally within 48 hours of receipt of our e-mail. Once the homeowner and service
provider have been matched, the service provider is able to bid on the project
at any time after meeting with the homeowner. Following the completion of the
project, we send a quality-assurance survey form to the homeowner to determine
the outcome of the project and the level of homeowner satisfaction.

     We invoice service providers for a win fee based on a pre-determined
percentage of the job's value for every job they win through our matching
service. We ask our service providers not to charge the win fee in the bid quote
to the homeowner. We currently collect our win fees directly from service
providers once the service provider or the homeowner informs us that the
homeowner has hired a service provider through our matching service.

     FOR SERVICE PROVIDERS, CONTRACTORS AND BUILDERS

     A. SERVICES

SERVICE PROVIDER MATCHING SERVICES

     With one of the most robust web-based matching services for professional
builders, general and remodeling contractors available in the market, we have
over 350,000 registered contactors in our national network. Over 30,000 of them
are activated in our Membership Program. The number of service providers that
actually receive leads each month is dependent upon the number of home
improvement project leads submitted to us and the type of work required for each
project submitted. The number of service providers receiving leads from us in
any given month is less than the total number of those service providers
actually enrolled in our network. This elite group of trade professionals
receives over 10,000 renovation and home improvement project leads each month
that have been qualified by our highly skilled, professional staffed customer
service center located in Canada.

     Leads are qualified and opened daily by our highly-skilled customer service
center staff, many of whom are former trade professionals and contractors
themselves. We qualify these leads to ensure they are top quality, and so we
don't waste time of contractors participating in our Membership Program. Better
leads equal more work for participating contractors, and an expected increase in
revenues.

                                       9
<PAGE>
IMPROVENETPRO.COM

     Our commercial Web site, ImproveNetPro.com, provides new or enhanced
services to our service providers. ImproveNetPro.com allows us to communicate in
near real-time with participating service providers who are online.
ImproveNetPro.com provides our contractors, architects and designers with
immediate access to new job postings. Once a service provider enters the
password-protected section of ImproveNetPro.com, he or she is immediately
presented with the status of new jobs available to the service provider that
matches their location, preferences and expertise. ImproveNetPro.com also has
information similar to our consumer design gallery and product showcase to help
our service providers be better informed. Finally, ImproveNetPro.com includes
supplier information and special offers or products and services that are
relevant to their business. We believe that ImproveNetPro.com assists us to
enhance the loyalty of our contractors, architects and designers.

SMARTLEADS AND SMARTPRO

     In the course of helping homeowners manage home improvement projects, we
obtain timely and specific information from them regarding the nature of their
home improvement projects. With SmartLeads, and SmartPRO we offer our suppliers
of home improvement products the opportunity to send direct e-mail messages
about their products to service providers and homeowners who are making
purchasing decisions during the home improvement process. Currently, our service
providers cannot opt out of the SmartLeads program, while homeowners may request
that they not be included in the SmartLeads program. We charge suppliers a fee
for each message sent. We believe this is a targeted and cost-effective means
for suppliers to reach homeowners and service providers near the time of
purchase.

CUSTOMER SERVICE AND OPERATION FUNCTIONS

     Currently all of our customer service and operation functions for
homeowners and service providers regarding the service provider matching
services are performed under the terms of a services agreement with an unrelated
corporation in Nova Scotia, Canada. The functions performed by the Canadian
corporation include (i) receipt and processing of homeowner projects leads, (ii)
verification of homeowner project leads, (iii) distribution of homeowner project
leads to screened service providers, (iv) screening of service provider
applicants for participation in our network, and (v) collection of accounts
receivable from participating service providers. The communications activities
with homeowners and service providers that is performed as part of the customer
service and operations functions provides a personal touch that we believe
enhances the effectiveness of the service provider matching services. The
services agreement is for a two-year period ending December 23, 2004. The
services agreement is subject to termination without cause, by us upon 90 days
written notice, and by the Canadian corporation upon 180 days written notice. A
transition plan for the customer service and operation functions will be
implemented with the cooperation of both parties following any such termination.

     FOR MANUFACTURERS AND DISTRIBUTORS

DISTRIBUTION METHOD - The service offerings and programs for manufacturers and
distributors set forth below are distributed through our in-house direct sales
force.

IMPROVENET MARKET MAKER(SM) - Is a value chain management solution for building
materials manufacturers and distributors. Comprised of hosted and enterprise
web-based business management software, online services, and marketing programs,
Market Maker provides building materials manufacturers and distributors direct
access to a $1.3B+ annual renovation and remodeling market.

Market Maker helps companies to:

     *    Define strategic marketing and product launch activities through our
          state-of-the-art market research services that tap into tens of
          thousands of contractors and hundreds of thousands of consumers who
          spend over $2M dollars per day on remodeling and renovation projects

     *    Define, develop and optimize your channel marketing efforts to deploy
          best practice go-to-market activities and increase revenues

     *    Save money, increase revenues and maximize distribution by
          streamlining critical manufacturing processes like product
          configuration, bill of material generation and order entry, and by
          commerce-enabling your business with seamless integration into your
          back-office system

     *    Increase profitability, reduce inefficiencies, and effectively manage
          your distribution processes by leveraging leading edge web-based back
          office business management and e-commerce technology that provides
          end-to-end accounting, sales analysis, market trending, inventory,
          channel management functionality and more

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<PAGE>
Market Maker contains five modules:

     *    Strategic market research services

     *    Channel development services

     *    Channel management services

     *    E-commerce software for manufacturers

     *    Web-based business management software for distributors

IMPROVENET STRATA(SM) - Strategic market research services

     ImproveNet STRATA(SM) leverages the power of ImproveNet's market research
expertise with REAL TIME CONSUMER, DEALER AND CONTRACTOR MARKET RESEARCH to
determine the best markets for a building materials manufacturer or
distributor's products, the appropriate position in the market for those
products, and to understand the unique requirements of the manufacturer or
distributor's buyer. Our STRATA program allows a manufacturer or distributor to
gain critical insight into the future, help determine product launch schedules,
product life cycles, market acceptance and buyer behavior so that more effective
planning of branding, advertising and marketing activities, and more effective
creation of distribution strategies and programs that maximize channel
performance and increase sales.

IMPROVENET CHANNEL BUILDER(SM) - Manufacturer, distributor, dealer and
contractor development services

     The ImproveNet Channel Builder(SM) program helps companies IDENTIFY,
RECRUIT and DEPLOY the right distribution channel for home improvement, remodel
and renovation products by facilitating the recruitment of the best contractors
and trade professionals to represent those products. With a national network of
over 350,000 licensed and pre-screened general, building and remodeling
contractors and trade professionals, we have one of the most comprehensive
contractor networks with coverage in most major metropolitan areas in the
country. With nearly a decade of expertise in recruiting top-notch contractors
and trade professionals, and tens of millions of dollars invested into this
market, we have some expertise regarding the more productive methods to reach
this audience. In addition, the communications between our customer service
center representatives and homeowners and service providers participating in our
service provider matching services offers a personal touch that can help to
enhance the effectiveness of the ImproveNet Channel Builder(SM) program for our
customers.

IMPROVENET CHANNEL OPTIMIZER(SM) - Channel management services

     ImproveNet Channel Optimizer provides the opportunity to deliver highly
qualified home improvement job leads directly to manufacturer, distributor, and
dealer channel partners for accessing over $1.3B in annual renovation and
remodeling business. This program facilitates sales opportunities for the
specific products and applications that the channel is offering. Channel
Optimizer functions to identify customers who have indicated their readiness to
make purchases for their home improvement projects.

     B. SOFTWARE

     According to Harris Information, a leading market research authority for
the building materials and construction trade industry, "Early adopters of
technology that supports web-based back-office automation and provides
e-commerce front-end access to trade partners and customers, will leapfrog
dominant brands who continue to do business as they always have. "Expensive
software based supply chain solutions, coupled with traditionally extended
implementation times and costs, will be replaced by niche, best of breed
web-based systems. The need for building materials manufacturers to web-enable
critical manufacturing and go-to-market processes, necessitates that the
traditionally fragmented software providers to the industry find better ways of
consolidating their offerings and moving the industry toward the same economies
e-commerce applications afford other industries." Our focus in our software
offerings is to address our customers' needs for web-enabled and web-based
e-commerce systems that better automate their business processes. We have two
primary software offerings that target those needs as follows:

SMART FUSION(SM) - Web-based configuration, order entry and e-commerce software
Smart Fusion(SM) is a web-based software solution that allows manufacturers to
increase revenues and profitability by streamlining order entry, simple and
complex product configuration, and bill of material generation (complete with
product visualizers). Smart Fusion(SM) allows manufacturers the ability to
leverage e-commerce functionality to provide an 'always on' sales and support
infrastructure to their customers. Smart Fusion(SM) integrates seamlessly into
any enterprise back office (ERP, CRM) system, allowing Application-to-
Application (A2A) capability throughout the entire supply chain. An order placed
through Smart Fusion(SM) automatically updates the back-office system without
additional input, eliminating errors and reducing order-processing time.

     Smart Fusion's web-based infrastructure takes the business of our clients
to the next level, a level that exceeds the limitations of any client-server
software system available today. Customers are migrating to the Internet at a
rapid pace. Smart Fusion(SM) ensures customer loyalty for channel participants,
and ongoing support for sales of products offered. Smart Fusion(SM) ensures that
our clients will deliver value to your customers that exceeds their
expectations.

                                       11
<PAGE>
SMART FUSION EDISTRIBUTION(SM) - Web-based business management and e-commerce
software Smart Fusion eDistribution(SM) is a web-based business management and
e-commerce software solution that provides distributors with a fully integrated
sales and order entry, purchase order management, inventory control and
management, accounts receivable, accounts payable and general ledger management,
sales analysis, product configuration, bar code interface, channel management,
marketing program management, and lead management. Smart Fusion
eDistribution(SM) is an entirely web-based solution that improves productivity
and accelerates profitability.

Our Smart Fusion(SM) software has been developed with best of class technologies
including JAVA, Enterprise JAVA Beans, Oracle DB, and WebLogix, and integrates
seamlessly to any back office technology platform using Extensible Markup
Language (XML).

COMPETITION

     Our current competitors with regard to home improvement projects include:

     *    LOCAL, PRIMARILY PHONE-BASED, CONTRACTOR REFERRAL BUSINESSES. These
          are generally small operations that take phone requests from
          homeowners that they attract through Yellow Pages advertising or
          direct marketing initiatives and that refer projects to contractors
          with whom they often have a personal relationship.

     *    ONLINE REFERRAL COMPANIES. Some of our competitors such as
          ServiceMagic.com, and iMandi offer a publicly accessible online
          database and other companies such as BidExpress, and Contractor.com
          have matching services but do not have national coverage.
          Homestore.com, also offers a matching service.

          *    SUPPLIERS OF HOME IMPROVEMENT PRODUCTS. Retailers and
               manufacturers of home improvement products such as The Home
               Depot, Lowe's, Masco, and Sears Roebuck & Co. offer installation
               services.

Additional information on some of the competitors identified above.

--------------------------------------------------------------------------------
SERVICE MAGIC.COM
Headquartered in Golden, Colorado and founded in 1998, ServiceMagic.com provides
an online marketplace connecting homeowners to prescreened contractors and
service professionals. ServiceMagic.com's service is designed to provide
consumers with up to three qualified and interested home service professionals
in their local areas within one business day. All of ServiceMagic.com
contractors are pre-screened for licensing, bankruptcy and insurance.
ServiceMagic.com addresses more than 500 different home service needs in more
than 40 markets nationwide. ServiceMagic.com also offers educational online
tools to homeowners including; expert advice, design ideas, quick tips, over
thousands of articles and a homeowner toolbox containing estimating tools,
example contracts and guides on licensing and insurance.

Strategic Partners include: Certainteed Building Solutions, HomeStore, Maytag,
Quest, Sequel, Mobius and Tango.

Funding: (1) $16M in October 1999 from SOFTBANK, Sequel and Tango, (2) $29M in
May 2000 from CertainTeed, Maytag, QwestDex, SOFTBANK, Sequel and Tango and
(3) $5M in early 2002.
--------------------------------------------------------------------------------
iCASTLE
Headquartered in Walnut Creek, California, iCastle is a division of Next Phase
Media, a referral source for qualified business services, leads and
professionals. iCastle is a one-stop resource providing property owners with a
complete archive of original articles, tips on home improvement topics and
access to qualified contractors for residential and commercial property
improvement projects. All of iCastle.com contractors are prescreened for proper
insurance, licensing and must offer a warranty.

iCastle is in the process of building an internal network of qualified service
professional and leverages ServiceMagic.com to provide service coverage in areas
where they are currently weak.

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<PAGE>
--------------------------------------------------------------------------------
HSSONLINE
Based in Alpharetta, Georgia, HSS provides homeowners and businesses across the
country with one-stop, convenient management and outsourcing of their
maintenance, repair and improvement projects. HSS has a national network of
reliable contractors who are pre-screened, appropriately licensed and insured.
The Company is a member-based organization and charges an annual fee of $48 per
year, to its residential members. Members gain access to HSS's network of
contractors, and receive special seasonal offers and value-added services.
Membership is not required for HSS Commercial Services.

HSS is available in over 130 major metropolitan markets across the U.S. All HSS
trade affiliates (contractors) warrantee their work. HSS also provides its
members with a safety net under the provisions of its Member Protection Plan. In
addition to scheduled maintenance, repairs and improvements, HSS offers members
an urgent response service on a 24/7 basis for emergencies.

Partners include: Sam's Club, AAA Mid Atlantic, True Value, BECU, The National
Business Association, Mortgage Accel, FSBOZoo.com and The National Association
for the Self Employed.
--------------------------------------------------------------------------------
CONTRACTOR.COM
Headquartered in Denver, Colorado, Contractor.com maintains a comprehensive
nationwide directory of service providers allowing homeowners the ability to
search by trade and zip code, on their own, for home improvement service
providers in their area (a customer rates system has been put in place to
provide a quasi "word of mouth environment"). Contractor.com contractors are
prescreened for liability insurance and must provide business references in
order to be listed in the Contractor.com directory. Contractor.com also provides
homeowners with tips on how to find and hire the right contractor for their home
improvement projects.

Contractor.com offers membership programs to contractors which provide access to
free home improvement leads and unlimited use of business solutions including;
sales and marketing tools, information on the construction industry, cost
estimators, and business management and financing tools.

Partners include: HomePlanFinder, Eloan, NetClerk, 4Spec.com, YellowPages.com
and Respond.com.
--------------------------------------------------------------------------------

     In addition, parties with which we have commercial relationships and other
suppliers of home improvement products could choose to develop their own
Internet strategies or competing home improvement services. Many of our existing
and potential competitors have longer operating histories, greater name
recognition, larger homeowner bases and significantly greater financial,
technical and marketing resources than we do. We believe that we and any
competitor seeking to establish web enabled home improvement services confront
significant challenges, including:

     *    The number of visitors to the Web sites, the number of home
          improvement jobs submitted by those visitors, the time spent by those
          visitors at those Web sites and the resultant loyalty created among
          those visitors, the degree to which Web site content and loyalty
          create allegiance to the service provider, and, ultimately, the
          ability to generate repeat customers;

     *    The ability to cost effectively recruit and retain a network of
          quality service providers that have broad trade and geographical
          coverage so that a large number of jobs can be successfully completed;

     *    The ability to generate significant traffic from online homeowners and
          qualify their projects so that they can be efficiently handled by a
          network of service providers;

     *    The ability to develop an effective process for handling a large
          volume of homeowner requests and delivering a high level of customer
          service;

     *    The ability to develop and maintain an excellent performance record on
          repair and remodeling jobs in which we act as the contractor of
          record; and

     *    The ability to develop commercial relationships with suppliers of home
          improvement products and services that provide value to consumers and
          service providers, as well as revenue from advertising.

     Nevertheless, the service provider matching services operate on a localized
basis and it is challenging for one company to dominate in all locations.
Various locations where we experience service provider matching opportunities
are greater in number than others. We believe that because of our web site
presentation and our customer service and operation center, we compare favorably
with others offering service provider matching services.

                                       13
<PAGE>
     Our current competitors with regard to business management software and
marketing programs for the BMI include:

--------------------------------------------------------------------------------
SOFTTECH
SoftTech offers configuration software ("V6 Manufacturer") designed to enable
manufacturers of framed products to configure, price and fabricate their
products. The program can be interfaced with other programs to accommodate
ERP/MRP, distribution and accounting functions. In addition to V6, manufacturers
can distribute a scaled-down version, "V6 Dealer", to their distribution channel
or customers, enabling clients to configure and price products remotely. Orders
can then be sent directly to the manufacturer's V6 program.
--------------------------------------------------------------------------------
EDGENET
EdgeNet is focused on electronic catalog development. m2o is EdgeNet's custom
configuration software for the WND industry. Customers include: The Home Depot,
Anderson Windows, Pella Windows.
--------------------------------------------------------------------------------
BIDMASTER
BidMaster develops electronic catalogs. Their software products incorporate an
electronic catalog with quoting functions. The program prompts the user for all
options available for any selected unit.
--------------------------------------------------------------------------------
SELECTICA, INC. (NASDAQ: SLTC)
Selectica ISS is a comprehensive software application that accelerates the
process of selecting, configuring, pricing, and purchasing complex products with
efficiency and accuracy. Three primary functions include: knowledge capture;
information dissemination; configuration and ordering. Software suggests product
configurations based on business rules, sales objectives, marketing information,
and product constraints and connects with Siebel, SAP and Oracle applications.

Services account for 45% of sales. The company targets financial services and
manufacturing industries. Clients include: Dell, BMW, Cisco, Fireman's Fund,
Hewlett-Packard. Revenue: FY 2001 = $53.9 million up from $16.1 million in 2000.
--------------------------------------------------------------------------------
CALICO COMMERCE, INC. (NASDAQ: CLIC)
Calico is a provider of interactive selling software for manufacturers. With its
advanced configuration and recommendation technology, Calico enables clients to
better understand and best serve their customers. The company recently filed for
bankruptcy protection and its software assets have been acquired by PeopleSoft.

Calico targets telecommunications, financial services, retail, industrial
manufacturing, electronic finished goods, and medical industries. Customers
include: Telia, Nortel, Best Buy, Staples, and Honeywell. Recent alliance with
Toshiba Information Systems. Revenue: FY 2001 = $29.7 Million down from $35.6
Million FY 2000.
--------------------------------------------------------------------------------
SOFTWARE SOLUTIONS
Software Solutions provides custom and turnkey eCommerce solutions native on the
AS/400 computer system for all industries, including manufacturing and wholesale
or retail distribution applications. AS/400 Platform. Software installed at
hundreds of sites throughout the US. Not a business partner of any of the large
software providers.
--------------------------------------------------------------------------------
NXTREND
NxTrend provides software solutions for supply-chain management designed to
enable the distributor to implement best practices for inventory management,
order processing, sales, customer service, warehouse logistics, and strategic
business analysis. The company targets electrical, building materials,
industrial, PHAC, paper and medical industries. Installed base of over 1000.
Includes Huttig Building Products - the largest distributor of building products
in the nation. Its expanding list of products include: doors, windows, moldings,
lumber, house wrap, decking, fencing, trusses, dry wall, paneling, installation.

In 2000, NxTrend was acquired by BuildNet (an industry vertical exchange), which
provides software to homebuilders and suppliers in the residential construction
industry. BuildNet's objective was to become the B2B eCommerce solution for the
residential construction industry. In August of 2001 BuildNet filed under
Chapter 11 - NxTrend was not included in the filing.
--------------------------------------------------------------------------------

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<PAGE>
WINDOWMAKER
Provides solutions for the window industry supply chain. Solutions include a
comprehensive product suite made up of a number of integrated modules.
Manufacturers pick and choose elements most appropriate to their requirements.
Drag and drop design tools allow creation of custom design on the fly with
engineering rules and limitations automatically checked.

     OUR WEB ENABLED AND BASED BUSINESS MANAGEMENT SOFTWARE OFFERINGS ARE
PROPRIETARY IN NATURE, FOCUSED ON THE BUILDING MATERIALS INDUSTRY, AND WE
BELIEVE COMPARE MORE FAVORABLY TO OUR CUSTOMERS THAN THOSE OF MANY OF OUR
COMPETITORS.

CUSTOMER CONCENTRATION - Almost all of the revenues generated from our
manufacturer and distributor customer base are concentrated among eight primary
customers.

OTHER BENEFICIAL RELATIONSHIPS

POWERED BY IMPROVENET AND FIND A CONTRACTOR

     We provide a customized product superimposing ImproveNet.com content
including our matching services on third-party Web sites so that the content
looks like the third party's own content but is actually Powered by ImproveNet.
This customized product allows our logo and our products and services to be
placed across a broad spectrum of third-party Web sites related to home
improvement, from online versions of traditional media properties to Web sites
related to manufacturing, finance, real estate and local and regional guides. If
a customer of these third parties uses our matching services, we pay the
supplier a portion of any service revenue from that match. We also advertise on
third party Web sites through our Find a Contractor service. We place a "Find a
Contractor" banner or button on third party Web sites that links the user to
ImproveNet.com. We pay these third parties either a flat fee or on a per
referral basis. Since many of the third-party Web sites that use Powered by
ImproveNet and Find a Contractor are related to the home improvement industry,
we believe these programs will deliver more qualified traffic to our Web site.
We also believe that Web sites that are related to the home improvement industry
and that participate in these programs will benefit from the access to our
service provider matching services.

PARTNERSHIPS

     We believe that partnering with the best companies in the Internet and home
improvement space is an important component in ImproveNet's effort to be
America's home improvement destination. Our primary means of creating demand for
ImproveNet services has been through online partnerships. We have entered into
these arrangements, which are generally performance based, one year in length or
cancelable with reasonable notice that obligate us to pay either a fixed monthly
fee, or a variable fee based on won jobs with:

     *    Frequently visited portals, such as Yahoo!, Google, Overture (covering
          America Online, Lycos, InfoSpace, iwon, and others), LookSmart
          (covering MSN, AltaVista, AskJeeves, June and others); and

     *    Web sites related to home improvements, such as Microsoft Home
          Advisor, HomeTime, and Homestore.

     In addition, we have supplemented our online advertising with offline
advertising in Yellow Pages, print media, national radio and through customary
public relations initiatives.

TECHNOLOGY INFRASTRUCTURE

     Our Web sites are designed to provide fast, reliable, high quality access
to our online services. Our hardware and software systems must assimilate and
process large volumes of visitor traffic and store, process and disseminate
large amounts of user data, and process interactive applications.

     We have implemented a broad array of site management, customer interaction
and processing systems using our own proprietary technologies and, where
appropriate, commercially available licensed technologies. Our systems use
Windows NT, Linux, Unix, SQL, BEA WebLogix, and Oracle and are designed for a
high level of automation and performance. We have redundant power supplies,
fail-over machines and fully clustered databases and Web servers to optimize
up-time and user experience. We monitor our network and machines 24 hours a day
for reliability.

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     Our Web sites have been developed internally using a Microsoft platform. In
developing our Web sites we use a variety of tools to support rapid database/Web
application development. Our ability to successfully receive homeowner job
submissions online, provide high-quality homeowner service, and serve a high
volume of advertisements largely depends on the efficient and uninterrupted
operation of our computer and communications hardware systems. Our Web sites and
databases are hosted by AT&T in Phoenix, Arizona. All of our computer,
communications systems and database back-ups are located in our administrative
headquarters in Scottsdale, Arizona. Visitor traffic to our Web sites varies
significantly. Spikes in visitor traffic and user demand can affect expected
performance of our Web sites and could cause outages. Since we have been keeping
logs on our Web sites, we believe that our ImproveNet.com Web site has been
unintentionally interrupted for periods ranging from two minutes to one hour,
except that on one occasion, some users experienced interruptions in part of our
service for a period of 48 hours. We believe that we have had no unintentional
interruptions or outages of our ImproveNetPro.com Web site since its inception
in December 1999. The primary reason for interruptions in service relate to new
content introductions onto our Web sites, such as our visualizer or estimator
tools, which involve a complex code base. Implementation of increased security
measures, such as additional firewalls, has caused interruptions in our
Internet-based services. Having fatal system failures or serious catastrophe to
the systems could result in a significant downtime.

     We seek to maintain and advance our market position by continually
enhancing the performance of our Web sites and expanding the features that we
offer homeowners, service providers and suppliers. We expect that enhancements
to our Web sites and services will continue.

INTELLECTUAL PROPERTY RIGHTS

     Our success is dependent upon our ability to develop and protect our
proprietary technology and intellectual proprietary rights, including our
databases of homeowners, service providers, distributors and manufacturers and
our matching criteria and algorithms. We rely primarily on a combination of
contractual provisions, confidentiality procedures, trade secrets, and copyright
and trademark laws to accomplish these goals. Our databases are trade secrets,
and our matching service is protected by trade secret and copyright laws.

     In addition, we seek to avoid disclosure of our trade secrets by requiring
employees, customers and others with access to our proprietary information to
execute confidentiality agreements. We also seek to protect our software,
documentation and other written materials under trade secret and copyright laws.

     Despite our efforts to protect our proprietary rights, existing laws afford
only limited protection. Attempts may be made to copy or reverse engineer
aspects of our services or to obtain and use information that we regard as
proprietary. Accordingly, there can be no assurance that we will be able to
protect our proprietary rights against unauthorized third-party copying or use.
Use by others of our proprietary rights could materially harm our business.
Furthermore, policing the authorized use of our product is difficult and
expensive litigation may be necessary in the future to enforce our intellectual
property rights.

     In the ordinary course of business, we have received, and may receive in
the future, notices from third parties claiming infringement of their
proprietary rights. Any claims, with or without merit, could be time-consuming,
result in costly litigation, cause delays or require us to enter into royalty or
licensing agreements, any of which could harm our business. Patent litigation in
particular has complex technical issues and inherent uncertainties. In the event
an infringement claim against us were successful and we could not obtain a
license on acceptable terms, license a substitute technology or redesign to
avoid infringement, our business would be harmed.

GOVERNMENT REGULATION

     Our business is subject to rapidly changing laws and regulations. Although
our operations are currently based in Arizona, the United States of America
government and the governments of other states and foreign countries have
attempted to regulate activities on the Internet. The following are some of the
evolving areas of law that are relevant to our business:

     *    PRIVACY LAW. Current and proposed federal, state and foreign privacy
          regulations and other laws restricting the collection, use and
          disclosure of personal information could limit our ability to leverage
          our databases to generate revenues; and

     *    BUILDING REQUIREMENTS. The Company's activities and that of our
          service providers are subject to various federal, state and local
          laws, regulations and ordinances relating to, among other things, the
          licensing of home improvement contractors, OSHA standards, building
          and zoning regulations and environmental laws and regulations relating
          to the disposal of demolition debris and other solid wastes. In
          addition, many jurisdictions require the contractor of record to
          obtain a building permit for each home improvement project.

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<PAGE>
     Because of this rapidly evolving and uncertain regulatory environment, we
cannot predict how these laws and regulations might affect our business. In
addition, these uncertainties make it difficult to ensure compliance with the
laws and regulations governing the Internet. These laws and regulations could
harm us by subjecting us to liability or forcing us to change how we do
business.

EMPLOYEES

     As of December 31, 2002, we employed 14 full-time persons. None of our
employees are represented by a labor union. We have experienced no work
stoppages and believe that our employee relations are good.

FACTORS AFFECTING FUTURE PERFORMANCE, RESULTS OF OPERATION AND FINANCIAL
CONDITION

     This document contains certain forward-looking statements. These statements
relate to future events or our future financial performance. In some cases, you
can identify forward-looking statements by terminology such as "anticipates',
"believes", "continue", "could", "estimates", "expects", "intends", "plans",
"potential", "predicts", "should" or "will" or the negative of these terms or
other comparable terminology which are intended to identify certain of these
forward-looking statements. The cautionary statements made in this document
should be read as being applicable to all related forward-looking statements
wherever they appear in this document. The Company's actual results could differ
materially from those discussed in this document. Factors that could cause or
contribute to such differences include those discussed below, as well as those
discussed elsewhere in this Annual Report on Form 10-KSB.

WE HAVE A RECENT HISTORY OF LOSSES, WE EXPECT FUTURE LOSSES, AND WE MAY NOT
ACHIEVE OR MAINTAIN PROFITABILITY.

     The Company has continued to sustain losses for the past two years and has
negative working capital and negative net worth.

     Our operating losses have limited our ability to obtain vendor credit or
extended payment terms and bank financing on favorable terms; accordingly, we
depend on our cash and cash equivalent balances to fund our operations.

     As a result of the merger with ImproveNet, both revenue and operating
expenses will increase significantly in 2003. Prior to the Merger, the
ImproveNet business operated at a significant loss. The ImproveNet business has
been moved from California to Arizona and has been integrated into the
infrastructure of eTechLogix, leveraging existing technical, marketing and
administrative personnel. We believe during the second half of 2003 ImproveNet
will reach profitability.

However, due to the significant level of current liabilities and the history of
operating losses, there is no assurance that our available cash resources will
be sufficient to meet our anticipated needs for operations and capital
expenditures during the next 12 months. We will strive to make ongoing
realignments, if required, to achieve positive cash flow with our existing cash
resources. We are additionally decreasing our marketing and other operating
expenditures to assist us in maintaining our available cash resources. We may
need to raise additional funds, however, if results of operations for 2003 do
not meet our expectations, or in order to develop new or enhance existing
services, to respond to competitive pressures or to acquire complementary
businesses, services or technologies. If we raise additional funds by selling
equity securities, the percentage ownership of our stockholders will be reduced.
We cannot be sure that additional financing will be available on terms favorable
to us, or at all. If adequate funds were not available on acceptable terms, our
ability to fund expansion, react to competitive pressures, or take advantage of
unanticipated opportunities would be substantially limited. If this occurred,
our business would be significantly harmed. We will continue to evaluate our
needs for funds based on our assessment of access to public or private capital
markets and the timing of our need for funds. Although we have no present
intention to conduct additional public equity offerings, we may seek to raise
these additional funds through private or public debt or equity financings.

OUR SUCCESS IS DEPENDENT UPON OUR ABILITY TO RAISE ADDITIONAL CAPITAL AND THERE
ARE NO ASSURANCES WE WILL FIND ADDITIONAL CAPITAL RESOURCES.

     Our need for additional capital in the near term is critical. The necessity
for additional capital to support continued operations is essential. Since
inception we have funded operations with debt and equity capital. Our ability to
operate profitably under our current business plan is largely contingent upon
success in obtaining additional sources of debt and equity capital. There can be
no assurance that sources of capital will be available on satisfactory terms or
at all. Without additional capital we may not be able to fully implement our
business or operating and development plans. No assurance can be given that any
such financing, if obtained, will be adequate to meet our ultimate capital
needs. If adequate capital cannot be obtained or obtained on satisfactory terms,
our operations could be negatively impacted. In addition, we may seek to raise
additional funds, finance acquisitions or develop commercial relationships by
issuing equity or convertible debt securities, which would reduce the percentage
ownership of existing stockholders. Furthermore, any new securities could have
rights, preferences or privileges senior to those of our common stock.

                                       17
<PAGE>
WE FACE CHALLENGES IN THE INTEGRATION OF THE SEPARATE BUSINESSES OF IMPROVENET
AND ETECHLOGIX FOLLOWING THE MERGER.

     We may not experience the anticipated results from the integration of the
separate businesses of ImproveNet and eTechLogix following the Merger. The
strategies of cross-marketing service offerings, the opportunities of expanded
markets, the development of additional revenue streams, the enhanced ability to
raise capital, and the availability of public currency for making strategic
acquisitions may not prove to be as advantageous as we expect. This could affect
the results of our operations, negatively impact our financial performance and
harm our business.

BECAUSE WE ARE NO LONGER LISTED ON THE NASDAQ NATIONAL MARKET SYSTEM, THE
LIQUIDITY OF OUR COMMON STOCK MAY BE SERIOUSLY LIMITED.

     On June 29, 2001, we received a Nasdaq Qualification Panel Decision
indicating that we have failed to comply with the minimum bid price requirement
for continued listing, and were delisted from the Nasdaq National Market System.
Our stock is currently being traded on the Nasdaq Over-The-Counter Bulletin
Board; however, we believe that our liquidity will be significantly lower than
when it was on the Nasdaq National Market System.

THERE IS A LIMITED MARKET FOR OUR COMMON STOCK.

     Currently only a very limited trading market exists for ImproveNet common
stock. Our common stock trades on the OTC Bulletin Board under the symbol
"IMPV.OB." The Bulletin Board is a limited market and subject to substantial
restrictions and limitations in comparison to the NASDAQ system. Any
broker/dealer that makes a market in our stock or other person that buys or
sells our stock could have a significant influence over its price at any given
time. Effective sometime in 2003 or early 2004, the OTC Bulletin Board will no
longer offer companies a market on which to trade. The new BBX Exchange, which
is intended to replace the OTC Bulletin Board, will have stricter listing
standards. Management intends to apply to be listed on the BBX Exchange as soon
as applications become available but there is no assurance that we will meet the
minimum criteria required. If we fail to meet the BBX Exchange listing
requirements, then we will be forced to trade solely on the pink sheets, a
market with very limited liquidity and minimal listing standards. We cannot
assure our shareholders that a market for our stock will be sustained. There is
no assurance that our shares will have any greater liquidity than shares which
do not trade on a public market.

OUR COMMON STOCK IS SUBJECT TO PENNY STOCK REGULATION.

     Our shares are subject to the provisions of Section 15(g) and Rule 15g-9 of
the Securities Exchange Act of 1934, as amended (the "Exchange Act"), commonly
referred to as the "penny stock" rule. Section 15(g) sets forth certain
requirements for transactions in penny stocks and Rule 15g-9(d)(1) incorporates
the definition of penny stock as that used in Rule 3a51-1 of the Exchange Act.
The Commission generally defines penny stock to be any equity security that has
a market price less than $5.00 per share, subject to certain exceptions. Rule
3a51-1 provides that any equity security is considered to be penny stock unless
that security is: registered and traded on a national securities exchange
meeting specified criteria set by the Commission; authorized for quotation on
The NASDAQ Stock Market; issued by a registered investment company; excluded
from the definition on the basis of price (at least $5.00 per share) or the
registrant's net tangible assets; or exempted from the definition by the
Commission. Since our shares are deemed to be "penny stocks", trading in the
shares will be subject to additional sales practice requirements on
broker-dealers who sell penny stocks to persons other than established customers
and accredited investors.

OUR MARKETS ARE COMPETITIVE AND VOLATILE AND WE MAY SUFFER PRICE REDUCTIONS, BE
UNABLE TO ATTRACT HOMEOWNERS TO OUR WEB SITE, BE UNABLE TO MAINTAIN OUR SERVICE
PROVIDER NETWORK OR ENTER INTO NEW MULTI-YEAR COMMERCIAL CONTRACTS IF WE DO NOT
COMPETE EFFECTIVELY.

     The market for our services is intensely competitive, evolving and subject
to rapid technological change. To remain competitive, we must continue to
enhance and improve the ease of use, responsiveness, functionality and features
of our online and offline services in order to attract homeowners to our Web
site and maintain our service provider network. We expect the intensity of
competition to increase in the future. Increased competition may result in
changes in our pricing model, fewer homeowners visiting our Web site, service
providers leaving our network, less marketing revenue, reduced gross margins and
loss of market share, any one of which could significantly reduce any future
profitability. In addition, technological barriers to entry are relatively low.
As a result, current competitors, including local referral businesses and online
referral companies including ServiceMagic.com, iMandi, Bid Express, and
Contractor.com as well as potential competitors such as The Home Depot, Lowe's
and Sears Roebuck & Company who have launched Web sites similar to ours that
could gain broader market acceptance based on content, products and services.
Because of the localized nature of the service provider matching services, our
Web site presentation, and the personalized approach of our customer service and
operations center, we believe that we distinguish our service provider matching
service from that of our competitors but cannot assure that our customers will
recognize such distinctions or that this will sustain our business.

     The business management software, e-distribution and e-commerce markets are
intensely competitive, and we face increasing competition in every aspect of
this business. E-commerce distribution is a relatively new fragmented industry
and is anticipated to attract significant competition. We may not be able to
compete effectively in such an environment.

                                       18
<PAGE>
     Some of our competitors have more resources and broader and deeper customer
access than we do. In addition, several of these competitors have or can readily
obtain extensive knowledge of the home improvement industry. Our competitors may
be able to respond more quickly than we can to new technologies or changes in
Internet user preferences and devote greater resources than we can to the
development, promotion and sale of their services. We may not be able to
maintain our competitive position against current and future competitors,
especially those with significantly greater resources and brand recognition.

HOMEOWNERS AND SERVICE PROVIDERS MAY BE RELUCTANT TO ACCEPT AN INTERNET-BASED
SERVICE PROVIDER MATCHING SERVICE.

     Currently most homeowners use traditional means including word-of-mouth
referrals, Yellow Pages and local contractor matching services to obtain service
providers for their home improvement projects. In addition, many service
providers do not use the Internet for business purposes and may be reluctant to
become part of a network of service providers on an Internet-based service
provider matching service. If homeowners do not use our matching service or
service providers do not join our network, we will not be able to generate
significant revenues from either services or advertising.

IF WE DO NOT ATTRACT AND RETAIN A NETWORK OF HIGH QUALITY SERVICE PROVIDERS, OUR
BUSINESS COULD BE HARMED.

     We expect to derive the majority of our revenues from our network of
service providers in the form of payments for each homeowner referral that we
provide to them and for each home improvement project that they win. Our
business is highly dependent on homeowners' use of our Web site to find service
providers for their home improvement projects so that service providers will
achieve a satisfactory return on their participation in the ImproveNet program.

     A key element of the growth of our business is the pace at which service
providers adopt the ImproveNet matching process. This adoption includes
responding to homeowner inquiries within 72 hours, providing a competitive, firm
quote to homeowners quickly, and paying the service fees to ImproveNet. We
devote significant effort and resources to screening and supporting
participating service providers and to developing programs that monitor service
providers' job wins and that collect service fees from service providers for
these wins. Our inability to screen and support service providers effectively,
or the failure of our service providers to respond professionally and in a
timely manner to homeowner inquiries, could result in low homeowner satisfaction
and harm our business. In addition, the failure of our service providers to win
home improvement projects, report their wins to us, or pay us service fees could
harm our business.

     We must actively recruit new service providers and retain and motivate our
current service providers to ensure that we continually have adequate coverage.
We believe that service providers in the home improvement industry suffer from a
relatively high failure or turnover rate that makes it difficult for us to
retain service providers. Accordingly, we expect that not all of our service
providers will remain active participants in our network. If we are unable to
achieve low turnover among our network of service providers our business could
be harmed.

THE MARKETS IN WHICH WE COMPETE ARE CYCLICAL WHICH CAN AFFECT OUR FINANCIAL
PERFORMANCE AND RESULTS.

     The demand for our service provider matching services is cyclical and
fluctuates from season to season during the year. Historically during the spring
and summer, the demand of homeowners to proceed with home improvement projects
is stronger than at other times of the year. Numerous factors may account for
this increased demand. As a result, the quantity and quality of the home
improvement project leads we receive at various times of the year fluctuates.
This directly affects the number of home improvement project leads we provide.
Therefore, revenues from lead fees and win fees may be negatively impacted at
times when the demand is less. Our financial performance and results can be
impacted.

     In a similar way, the demand from our manufacturer and distributor customer
base for our business management software, e-commerce and e-distribution
solutions is cyclical. During the late fall and winter when demand for building
materials decreases, manufacturers and distributors in the BMI are more
receptive to the business management software, e-commerce and e-distribution
solutions we offer. We believe this is primarily due to a less demanding
schedule for the manufacturers and distributors affording them time to focus on
our solutions. The result of this fluctuation can negatively impact our
financial performance and results.

IF HOMEOWNERS FAIL TO REPORT, AND SERVICE PROVIDERS FAIL TO REPORT AND TO PAY TO
US WIN FEES, DIRECTLY OR INDIRECTLY, OUR BUSINESS WOULD BE HARMED.

     Our service providers are responsible for paying us a win fee for each job
that they obtain from us. We ask service providers not to pass on the cost of
the win fee to the homeowner. However, we do not currently provide any guarantee
to the homeowner that our service providers have not raised their rates to cover
the win fee nor do we audit or plan to audit our service providers to confirm
that they have not raised their rates. Homeowners may believe that they are
indirectly paying us our win fee through the higher rates of service providers
and, therefore, choose to select service providers through word-of-mouth
referrals, Yellow Pages, local contractor matching services or other means
rather than using our matching service. If homeowners choose not to use our
service, we will lose service revenues and visitors to our Web sites and our
business will be harmed.

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<PAGE>
     We depend on our service providers to report that they have won a job,
report the correct contract amount, and pay us our win fee. We rely on our
relationships with our service providers and the incentive to receive future
leads from us to encourage service providers to report wins and pay win fees.
Currently, we do not have a control or an oversight mechanism in place with
either service providers or homeowners to ensure that they report wins and pay
win fees. If service providers do not report wins, the correct contract amounts,
or pay us win fees, we will lose service revenues and our business will be
harmed.

WE DEPEND ON THIRD-PARTY RELATIONSHIPS TO ATTRACT VISITORS TO OUR WEB SITES.

     We have entered into commercial contracts with suppliers of home
improvement products and services to generate revenues and increase the number
of visitors to our Web sites. Under these contracts, suppliers have placed links
to our Web site from their Web sites to allow their customers to visit our Web
site if the customers are interested in obtaining home improvement information
or searching for a service provider. We believe that increasing the number of
visitors to our Web sites will increase the number of job submissions. We cannot
assure you that these contracts will lead to increased visits to our Web sites
or that increased visits to our Web sites will result in increased job
submissions. If we do not maintain our existing contracts on terms as favorable
as currently in effect or if we are not able to establish new contracts on
commercially reasonable terms, our business could be harmed.

     Companies that we may pursue for a commercial contract may offer services
competitive with suppliers with which we currently have contracts. As a result,
these suppliers may be reluctant to enter into commercial contracts with us.

     We purchase preferential placement on high-traffic Web sites. We believe
these Web sites can help us to increase the number of visitors to
ImproveNet.com. Web site traffic originated from AltaVista, Lycos, Microsoft
HomeAdvisor and Yahoo! There is intense competition for preferential placements
on these Web sites. If we lose our relationships with any one of these Web
sites, job submissions on ImproveNet.com may decrease and we may not be able to
enter into commercially reasonable contracts with replacement high-traffic Web
sites, if at all.

WE DEPEND ON THIRD-PARTY RELATIONSHIPS TO PROVIDE SOFTWARE TOOLS AND
INFRASTRUCTURE.

     We integrate third-party software into our service offerings on our Web
sites. We would be harmed if the providers from which we license software ceased
to deliver and support reliable products, to enhance their current products, or
to respond to emerging industry standards. In addition, third-party software may
not continue to be available to us on commercially reasonable terms or at all.
The loss of, or inability to maintain or obtain, this software could limit the
features available on our Web sites, which could harm our business.

WE DEPEND UPON A THIRD-PARTY RELATIONSHIP FOR THE CUSTOMER SERVICE AND
OPERATIONS OF OUR SERVICE PROVIDER MATCHING SERVICE.

     Our customer service and operations for the service provider matching
service are performed under terms of a services agreement with a Canadian
corporation in Nova Scotia, Canada which provides for termination without cause
upon 180 days notice by the Canadian corporation. There are no assurances that
the services agreement will be fully performed or that in the event of a
termination without cause, that the transition plan will be implemented
smoothly. There is an element of goodwill associated with the customer
relationship aspect of the customer service center which could be lost if the
services agreement was terminated. We could experience a disruption in customer
support, collections of accounts receivable and revenues.

WE ARE DEPENDENT UPON CORPORATE ACCEPTANCE OF OUR SERVICES AND PRODUCTS NARROWLY
TARGETED TO THE MANUFACTURERS AND DISTRIBUTORS IN THE BUILDING MATERIALS
INDUSTRY.

     Acceptance of technology based solutions within the building materials
industry is an unproven strategy and may not materialize despite our marketing
and sales efforts. Our focus on a narrow market for these offerings could harm
our business if the pace of acceptance is slower than we anticipate.

WE ARE DEPENDENT UPON A FEW MAJOR CUSTOMERS FOR REVENUE RECEIVED FROM SALES OF
E-COMMERCE AND E-DISTRIBUTION SOFTWARE.

     Our reliance on a few major customers for revenue currently generated by
eTechLogix leaves our business vulnerable to the ability of those customers to
pay us timely. Although our efforts are focused on increasing our customer base,
there can be no assurances that we will be successful. Almost all of the revenue
generated by eTechLogix is received from eight primary customers.

WE CANNOT GUARANTEE THAT WE WILL BE ABLE TO MANAGE FUTURE GROWTH.

     Any future growth we may experience will present many challenges and place
additional pressure on our already limited resources and infrastructure. No
assurances can be given that we will be able to execute our business plans and
strategies and effectively manage future growth. Our future growth may place a
significant strain on our managerial, operational, financial and other
resources. Our success will depend upon our ability to manage growth
effectively, which will require that we continue to implement and improve our
operational, administrative, financial and accounting systems and controls and
continue to expand, train and manage our employees. Our systems, procedures and
controls may not be adequate to support operations and we may not be able to

                                       20
<PAGE>
achieve the rapid execution necessary to successfully penetrate the building
materials industry. Our inability to manage internal or acquisition based growth
effectively would cause a significant strain on our resources and our resulting
financial performance would be materially adversely affected.

WE HAVE EXPERIENCED DIFFICULTY IN ACCURATELY FORECASTING OUR SALES, WHICH
RESULTS IN OUR SALES REVENUES TO VARY FROM OUR ESTIMATES.

     As a result of our limited operating history, it is difficult to accurately
forecast our net sales and we have limited meaningful historical financial data
upon which to base operating expenses. We base our current and future expense
levels on our operating plans and estimates of future net sales, and our
expenses are to a large extent fixed. Sales and operating results are difficult
to forecast because they generally depend on the volume and timing of the orders
we receive. As a result, we may be unable to adjust our spending in a timely
manner to compensate for any unexpected revenue shortfall. This inability could
cause our net losses in a given quarter to be greater than expected.

OUR OPERATING RESULTS ARE SUBJECT TO SIGNIFICANT FLUCTUATIONS AND MAY RESULT IN
CONTINUED LOSSES.

     As a result of our limited operating history, rapid growth and change in
business focus, and because of the emerging nature of the market in which we
compete, our historical financial data is of limited value in planning future
operating expenses. Our expense levels will be based in part on expectations
concerning future revenues. Our revenue is derived primarily from service and
product sales, which are difficult to forecast accurately. Revenues from our
service provider matching services are subject to credits made to the service
providers from time to time, and the amount of credits made during any
particular period are difficult to forecast. We establish a refund reserve at
the time of revenue recognition based on our historical experience. We may be
unable to adjust spending in a timely manner to compensate for any unexpected
shortfall in revenues. A significant shortfall in demand for our products could
have an immediate and material adverse effect on our business, results of
operations and financial condition. Our business development and marketing
expenses will increase significantly as we expand our operations. To the extent
that such expenses precede or are not rapidly followed by increased revenue, our
business, results of operations and financial condition may be materially
adversely affected.

OUR INABILITY TO COLLECT ACCOUNTS RECEIVABLE ON A TIMELY BASIS COULD CAUSE OUR
CASH FLOW TO BE IMPAIRED AND REDUCE OUR PROFITABILITY.

     While we have gained significant expertise in dealing with Internet
distribution and collection issues and have instituted credit review and
approval procedures, no assurances can be given that future unexpected problems
and collection risks will not develop from these and other customers which could
reduce our profitability or increase our losses.

IF WE FAIL TO RETAIN QUALIFIED PERSONNEL, OUR ABILITY TO CONTINUE TO OPERATE
COULD BE HARMED.

     We depend on the continued service of our key technical, operational and
administrative personnel. In particular, the loss of the services of any of the
remaining personnel, individually or as a group, could cause us to incur
increased operating expenses and divert other personnel time in searching for
their replacements. We do not have employment agreements with any employee, and
we do not maintain any key person life insurance policies for any of our
employees. The loss of any of our remaining personnel could harm our business.

THREE OF OUR EMPLOYEE BOARD MEMBERS HOLD A CONTROLLING INTEREST IN US, WHICH
LIMITS THE ABILITY OF OTHER SHAREHOLDERS TO INFLUENCE CORPORATE DECISIONS.

     Three of the current members of our Board of Directors who also serve in
senior management positions, collectively hold a controlling interest in our
outstanding common stock and can effectively control the election of our Board
of Directors. As a practical matter, these three members of our Board will
continue to control ImproveNet into the foreseeable future.

IF WE FAIL TO ADEQUATELY PROTECT OUR PROPRIETARY RIGHTS, WE COULD LOSE THESE
RIGHTS AND OUR BUSINESS COULD BE HARMED.

     We depend upon our ability to develop and protect our intellectual property
rights, including our databases of homeowners and service providers and our
internally-developed matching criteria and algorithms, to distinguish our
services from our competitors' services. We rely on a combination of copyright,
trademark and trade secret laws, as well as confidentiality agreements and
licensing arrangements, to establish and protect our proprietary rights. We have
no issued patents. Our databases are protected by trade secret laws and our
matching service is protected primarily by trade secret and copyright laws.
Existing laws afford only limited protection of intellectual property rights.
Attempts could be made to copy or reverse engineer aspects of our processes or
services or to obtain and use information that we regard as proprietary.
Accordingly, we may not be able to protect our intellectual property rights
against unauthorized third-party copying or use. Furthermore, policing the
unauthorized use of our intellectual property is difficult, and expensive
litigation may be necessary in the future to enforce our intellectual property
rights. The use by others of our proprietary rights could harm our business.

                                       21
<PAGE>
OUR SERVICES COULD INFRINGE THE INTELLECTUAL PROPERTY RIGHTS OF OTHERS CAUSING
COSTLY LITIGATION AND THE LOSS OF SIGNIFICANT RIGHTS.

     Third parties could claim that we have infringed their intellectual
property rights by claiming that our matching service infringes their patents,
trade secrets or copyrights. In the ordinary course of business, we have
received, and may receive in the future, notices from third parties claiming
infringement of their proprietary rights. In addition, providers of goods and
services over the Internet are increasingly subject to claims that they infringe
patents that cover basic elements of electronic commerce. The resolution of any
claims could be time-consuming, result in costly litigation, delay or prevent us
from offering our services or require us to enter into royalty or licensing
agreements, any of which could harm our business. In the event an infringement
claim against us is successful and we cannot obtain a license on acceptable
terms, license a substitute technology or redesign our services, our business
would be harmed. Furthermore, former employers or our current and future
employees may assert that our employees have improperly disclosed to us or are
using confidential or proprietary information in our business.

IF WE EXPERIENCE SYSTEM FAILURES, OUR REPUTATION WOULD BE HARMED AND USERS MIGHT
SEEK ALTERNATIVE SERVICE PROVIDERS, CAUSING US TO LOSE REVENUES.

     We depend on the efficient and uninterrupted operation of our computer and
communications hardware and software systems. Substantially all of our computer
hardware for operating our Web sites is currently located at AT&T in Phoenix,
Arizona with backups located at our facility in Scottsdale, Arizona. These
systems and operations are vulnerable to damage or interruption from
earthquakes, floods, fires, power loss, telecommunication failures and similar
events. They are also subject to break-ins, sabotage, intentional acts of
vandalism and similar misconduct. We do not have fully redundant systems, a
formal disaster recovery plan or alternative providers of hosting services, and
we do not carry business interruption insurance to compensate us for losses that
could occur. Despite any precautions we may take, the occurrence of a natural
disaster or other unanticipated problems either at AT&T or at our facility could
result in interruptions in our services. Any damage to or failure of our systems
could result in interruptions in our service. In addition to placing an
increased burden on our engineering staff, any system failure could create user
questions and complaints that must be responded to by our customer support
personnel. The system failures of various third-party Internet service
providers, online service providers and other Web site operators could result in
interruptions in our service to those users who require the services of these
third-party providers and operators to access our Web sites. These interruptions
could reduce our revenues and profits, and our future revenues and profits will
be harmed if our users believe that our system is unreliable. Since we have been
keeping logs of our Web sites, our ImproveNet.com Web site has been
unintentionally interrupted for periods ranging from two minutes to one hour,
the latter prior to February 2000.

WE MAY HAVE CAPACITY RESTRAINTS THAT COULD LIMIT THE GROWTH OF OR REDUCE OUR
REVENUES.

     The satisfactory performance, reliability and availability of our Web
sites, processing systems and network infrastructure are critical to our
reputation and our ability to attract and retain large numbers of users. If the
volume of traffic, including at peak times, on our Web sites increases, we may
need to expand and upgrade our technology, transaction processing systems and
network infrastructure. We may not be able to accurately project the rate or
timing of these increases, if any, in the use of our services or to expand or
upgrade our systems and infrastructure in a timely manner to accommodate these
increases.

     We use internally developed systems for operating our services and
processing our transactions, including billing and collections processing. We
must continually improve these systems in order to accommodate the use of our
Web sites. If we add new features and functionality to our services, we could be
required to develop or license additional technologies. Our inability to add
additional software and hardware or upgrade our technology, transaction
processing systems or network infrastructure could cause unanticipated system
disruptions, slower response times, degradation in levels of customer support,
impaired quality of the users' experience, delays in accounts receivable
collection or losses of recorded financial information. Our failure to provide
new features or functionality also could result in these consequences. The
required hardware may not be readily available or affordable and we may be
unable to effectively upgrade and/or expand our systems in a timely manner or to
integrate smoothly any newly developed or purchased technologies with our
existing systems. These difficulties could harm or limit our ability to expand
our business.

WE COULD BE HELD LIABLE FOR PRODUCTS AND SERVICES.

     We could be subject to claims relating to products and services that we
perform on behalf of homeowners or referrals to selected contractors through our
Web site. Homeowners may bring claims against us or our service providers, who
may have among other things, provided them with poor workmanship or caused
bodily injury or damage to property. Our existing insurance coverage may not
cover all potential claims, may not adequately cover all costs incurred in
defense of potential claims, may not indemnify us for all liability that may be
imposed or may not be renewable in future periods or renewable on terms and
conditions satisfactory to us. In addition, claims, with or without merit, would
result in diversion of our financial resources and management resources.

                                       22
<PAGE>
WE DEPEND ON THE USE OF THE INTERNET. IF THE USE OF THE INTERNET DOES NOT GROW,
OUR REVENUES MAY NOT GROW AND COULD DECLINE AND OUR BUSINESS COULD BE HARMED.

     We depend on increased acceptance and use of the Internet. In particular,
our matching service depends upon service providers being willing to use the
Internet to find jobs through our service. We believe that service providers
generally have not traditionally used computers or the Internet to operate their
businesses. Demand and market acceptance for recently introduced products and
services over the Internet are subject to a high level of uncertainty. As a
result, acceptance and use of the Internet may not develop or a sufficiently
broad base of users may not adopt or continue to use the Internet as a medium of
commerce.

THE INTERNET IS CHARACTERIZED BY RAPIDLY CHANGING TECHNOLOGIES, FREQUENT NEW
PRODUCT AND SERVICE INTRODUCTIONS AND EVOLVING INDUSTRY STANDARDS.

     To succeed, we will need to adapt effectively to rapidly changing
technologies and continually improve the performance features and reliability of
our services. We could incur substantial costs in modifying our products,
services or infrastructure to adapt to these changes, and we may also lose
customers and revenues if our services fail to adapt to the rapid changes
characteristic of the Internet.

     Conversely, if the Internet experiences increased growth in number of
users, frequency of use and bandwidth requirements, the Internet infrastructure
may be unable to support the demands placed on it. The success of our business
will rely on the Internet providing a convenient means of interaction and
commerce. Our business depends on the ability of users to access information
without significant delays or aggravation.

FUTURE GOVERNMENT REGULATIONS AND LEGAL UNCERTAINTIES PERTAINING TO THE INTERNET
COULD DECREASE THE DEMAND FOR OUR SERVICES OR INCREASE THE COST OF DOING
BUSINESS.

     There is, and will likely continue to be, an increasing number of laws and
regulations pertaining to the Internet. These laws and regulations may relate to
liability for information retrieved from or transmitted over the Internet,
online content, user privacy, taxes or the quality of services. Any new law or
regulation pertaining to the Internet, or the adverse application or
interpretation of existing laws, could decrease the demand for our services or
increase our cost of doing business.

     We are not certain how our business may be affected by the application of
existing laws governing issues such as property ownership, copyrights,
encryption and other intellectual property issues, taxation, libel, obscenity
and export or import matters. The vast majority of these laws were adopted prior
to the advent of the Internet. As a result, they do not contemplate or address
the unique issues created by the Internet and related technologies. Changes in
laws intended to address these issues could create uncertainty for or adversely
affect companies doing business on the Internet. This could reduce demand for
our services or increase the cost of doing business.

GENERAL ECONOMIC CONDITIONS MAY CHANGE DRAMATICALLY FROM YEAR TO YEAR.

     General economic conditions, which affect consumer confidence and home
improvement and home-building spending, including interest rates, the overall
level of economic activity, the availability of consumer credit and mortgage
financing and unemployment rates may change dramatically and impact our ability
to operate.

LEGISLATIVE AND REGULATORY INITIATIVES REGARDING THE COLLECTION AND USE OF OUR
USERS' PERSONAL INFORMATION MAY RESULT IN LIABILITY AND EXPENSES.

     Current computing and Internet technology allows us to collect personal
information about our users. In the past, the Federal Trade Commission has
investigated companies that have sold personal information to third parties
without permission or in violation of a stated privacy policy. Currently, we
collect personal information only with the users' consent and under our privacy
policy. If we begin collecting or selling personal information without
permission or in violation of our privacy policy, we could face potential
liability for compiling and providing information to third parties.

THE IMPOSITION OF ADDITIONAL STATE AND LOCAL TAXES ON INTERNET-BASED
TRANSACTIONS WOULD INCREASE OUR COST OF DOING BUSINESS AND HARM OUR ABILITY TO
BECOME PROFITABLE.

     We file state tax returns as required by law based on principles applicable
to traditional businesses. However, one or more states could seek to impose
additional income tax obligations or sales and use tax collection obligations on
out-of-state companies such as ours that engage in or facilitate Internet-based
commerce. A number of proposals have been made at state and local levels that
could impose taxes on the sale of products and services through the Internet or
the income derived from those sales. These proposals, if adopted, could
substantially impair the growth of Internet-based commerce and harm our ability
to become profitable.

     United States of America federal law limits the ability of the states to
impose taxes on Internet-based transactions. Until October 21, 2001, state and
local taxes on Internet-based commerce that are discriminatory against Internet
access are prohibited, unless the taxes were generally imposed and actually
enforced before October 1, 1998. It is possible that this tax moratorium will
not be renewed by October 21, 2001 or at all. Failure to renew this legislation
would allow various states to impose taxes on Internet-based commerce. The
imposition of state and local taxes could harm our ability to become profitable.

                                       23
<PAGE>
ITEM 2. PROPERTIES

     Our principal administrative offices and part of our business and systems
operations are located in Scottsdale, Arizona in approximately 3,529 square feet
of office space under a lease agreement with payments of $6,322.79 per month on
a month-to-month tenancy with a ninety (90) day notice of termination.

     We believe that our facilities are adequate for our current operations and
that additional office space, if required, can be readily obtained. See Note 6
of the Notes to the Consolidated Financial Statements for information regarding
the Company's lease obligations.

     At this time, the registrant has no policy in terms of investment in real
estate nor does it have any investment in real estate. The registrant has no
immediate plans to invest in real estate mortgages.

ITEM 3. LEGAL PROCEEDINGS

     From time to time, we may be involved in routine litigation relating to
claims arising out of or incidental to our operations. As of the date of this
filing, we are engaged in various legal proceedings which we believe will be
resolved without material adverse consequences to our business.

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

     No matters were submitted to a vote of security holders during the fourth
quarter of our fiscal year ended December 31, 2002.

                                     PART II

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

     Our Common Stock began trading on the Nasdaq National Market System under
the symbol "IMPV" on March 16, 2000 and subsequently, on the Over The Counter
Bulletin Board on June 29, 2001. The following table sets forth the high and low
sales prices of the Company's Common Stock for the periods indicated as reported
on the Nasdaq National Market System and Over-The-Counter Bulletin Board:

                                               HIGH SALE    LOW SALE
                                                 PRICE       PRICE
                                                 -----       -----
          Year Ended December 31, 2001
          First Quarter                          $1.19       $0.31
          Second Quarter                         $0.49       $0.28
          Third Quarter                          $0.45       $0.11
          Fourth Quarter                         $0.22       $0.05
          Year Ended December 31, 2002
          First Quarter                          $0.11       $0.06
          Second Quarter                         $0.23       $0.03
          Third Quarter                          $0.13       $0.04
          Fourth Quarter                         $0.16       $0.08

     As of December 31, 2002, we had approximately 2,000 stockholders of record.

                                       24
<PAGE>
     We have never paid any cash dividends on our stock, and we anticipate that
we will retain any future earnings, if any, for use in the operation and
expansion of our business and do not anticipate paying any cash dividends in the
foreseeable future.

<TABLE>
<CAPTION>
                                          NUMBER OF SECURITIES                             NUMBER OF SECURITIES
                                           TO BE ISSUED UPON        WEIGHTED-AVERAGE       REMAINING AVAILABLE
                                              EXERCISE OF           EXERCISE PRICE OF      FOR FUTURE ISSUANCE
                                          OUTSTANDING OPTIONS,     OUTSTANDING OPTIONS,        UNDER EQUITY
                                          WARRANTS AND RIGHTS      WARRANTS AND RIGHTS      COMPENSATION PLANS
                                          -------------------      -------------------      ------------------
<S>                                            <C>                         <C>                   <C>
     Equity compensation plans approved
     by security holders                       1,092,991                   $1.08                 4,158,044
</TABLE>

ITEM 6. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS

     The following discussion and analysis should be read with our consolidated
financial statements and notes included elsewhere in this Annual Report on Form
10-KSB. The discussion in this Annual Report on Form 10-KSB contains
forward-looking statements that involve risks and uncertainties, such as
statements of our plans, objectives, expectations and intentions. The cautionary
statements made in this Annual Report on Form 10-KSB should be read as applying
to all related forward-looking statements wherever they appear in this Annual
Report on Form 10-KSB. Our actual results could differ materially from those
discussed here. Factors that could cause or contribute to these differences
include those discussed in "Factors Affecting Future Performance, Results of
Operations and Financial Condition" in Part I--Item 1. Description of Business
as well as those discussed elsewhere.

OVERVIEW

BASIS OF PRESENTATION

     On December 23, 2002, eTech merged into Etech Acquisition, Inc., (the
"Merger") an Arizona corporation and wholly owned subsidiary of ImproveNet.
Through this merger, the former shareholders of eTech acquired a controlling
interest in ImproveNet and accordingly, the Merger is accounted for as a reverse
merger, with eTech being the accounting acquirer of ImproveNet. The Company has
treated the merger as being effective December 31, 2002 as ImproveNet had de
minimus operations from December 23, 2002 to December 31, 2002. As such, the
financial statements present the historic financial position, operations and
cash flows of eTech for all periods presented with the December 31, 2002 balance
sheet adjusted to consolidate and reflect the fair values assigned to the
acquisition balance sheet of ImproveNet. Refer to Note 8, Merger with eTech, for
additional information and disclosures related to the Merger.

     The Company's financial statements are presented on a going concern basis,
which contemplates the realization of assets and the satisfaction of liabilities
in the normal course of business. The Company has continued to sustain losses
for the past two years and has negative working capital and negative net worth.

     The financial statements do not include any adjustments to reflect the
possible future effects of the recoverability and classification of assets or
the amounts and classifications of liabilities that may result from the
uncertainty of the Company's ability to continue as a going concern.

ACQUISITION

     On December 23, 2002, eTech merged with eTech Acquisition, Inc., an Arizona
corporation and wholly-owned subsidiary of ImproveNet, that was created during
2002 to merge eTech and ImproveNet. This Merger occurred pursuant to an
Agreement and Plan of Merger (the "Merger Agreement") dated July 30, 2002. Under
the terms of the Merger Agreement, eTech paid $500,000 to ImproveNet and
incurred $19,000 in costs directly related to the merger. At the time of the
Merger, each outstanding share of eTech Common Stock, no par value per share,
was converted into the right to receive and became exchangeable for 5,555.555556
shares of ImproveNet Common Stock, par value $.001 per share. A total of
35,417,750 shares of ImproveNet common stock were issued in the Merger to eleven
(11) different shareholders of eTech. Through the merger, the former directors
of eTech collectively received 30,310,740 shares of ImproveNet Common Stock and
as a result, acquired control of the Company.

                                       25
<PAGE>
     Un-expired outstanding options to purchase eTech Common Stock were
converted, on the same vesting schedule, into an option to purchase a number of
shares of ImproveNet Common Stock equal to the number of shares of eTech Common
Stock that could have been purchased under such option multiplied by
5,555.555556, at a price per share of ImproveNet Common Stock equal to the per
share exercise price of $.05 per share. Options to acquire 788,889 shares of
ImproveNet Common Stock were issued in the Merger as a result of these
outstanding options, of which, 222,222 had vested as of the date of the Merger.

     Warrants to purchase 1,500,000 shares of ImproveNet were issued as a result
of the Merger. These warrants were issued in conjunction with subordinated
convertible notes payable, as discussed below.

TENDER OFFER

     Under the terms of the Merger Agreement, the Company agreed to present a
cash tender offer ("Tender Offer") to pre-merger shareholders of ImproveNet. The
price per share was based in part on ImproveNet's available cash balance at the
closing of the merger. The Tender Offer was available from the time of the
merger through January 2, 2003.

     Prior to the closing of the merger, ImproveNet deposited approximately
$2,557,000 with its stock transfer agent for payments to be made under the
Tender Offer. In conjunction with the Tender Offer, the Company disbursed a
total of approximately $1,962,000 to various pre-merger ImproveNet shareholders
in January 2003 resulting in the acquisition of 13,913,975 treasury shares in
January 2003. Funds remaining with the stock transfer agent in excess of
disbursements of approximately $595,000 are classified as receivable from stock
transfer agent on the accompanying balance sheets.

CONVERSION OF SUBORDINATED CONVERTIBLE NOTES PAYABLE

     During July 2002, eTech issued an aggregate of $150,000 of subordinated
convertible notes payable to two accredited investors. The notes are secured by
substantially all of the Company's assets and are subordinated to the eTech's
9.00% note payable to a bank (Refer to Note 5, Notes Payable). In conjunction
with the issuance of these subordinated convertible notes payable, eTech also
issued one-year warrants to purchase an aggregate of 1,500,000 shares of
ImproveNet at a purchase price of $0.15 per share. The subscription of the
warrants is expressly conditioned upon the closing of the Merger. The Company
expensed approximately $81,000 in connection with these warrants to recognize
the fair value of the warrants.

     During August 2002, eTech issued an aggregate of $100,000 of subordinated
convertible notes payable to accredited investors and officers of eTech (refer
to Note 7, Related Party Transactions). The notes are secured by substantially
all of eTech's assets and are subordinated to the $150,000 of aggregate
subordinated notes payable discussed above and to the 9.00% note payable to bank
(Refer to Note 5, Notes Payable).

     All of the subordinated convertible notes payable described above bear
interest at a rate of 10.00% per annum and are due two years after the date of
issue, provided they are not converted prior to this date. The notes are
convertible into Common Shares of eTech in whole, or in part, at the option of
the lender at any time during the term of the note at a rate of one share for
every $555.5555556 of debt converted. The notes will automatically be converted
if there is a transfer of more than 50% of the voting control of the Company, in
one transaction or a series of transactions with ImproveNet directly or by
merger or consolidation in which the existing shareholders of eTech do not
directly retain more than 50% of the voting control of eTech, or a sale of all
or substantially all assets of eTech to ImproveNet or one of ImproveNet's
subsidiaries. The shares of eTech that will be received by the note holders if
automatic conversion occurs will be converted to shares of ImproveNet using the
same conversion rate as all other eTech shares converted in a merger
transaction.

     The proceeds of the subordinated notes payable of $250,000 were to be used
for a portion of a $500,000 deposit with ImproveNet. This deposit was made prior
to the Merger and in accordance with the Merger Agreement.

ACCOUNTING FOR THE MERGER

     The Company accounted for this merger in accordance with SFAS No. 141,
"Business Combinations." As discussed above, the former shareholders of eTech
acquired a controlling interest in the Company, accordingly, the transaction has
been accounted for as a reverse merger and the total consideration given by
eTech of $519,000 has been allocated to the fair values of the pre-merger assets
and liabilities of ImproveNet. At the time of the acquisition, the fair value of
the net assets of ImproveNet was $361,351 in excess of the consideration given
by eTech after all applicable reductions of amounts that otherwise would have
been assigned to the acquired assets were considered. This excess is reported in
the statement of operations as an extraordinary gain.

     ImproveNet, Inc. ("ImproveNet" or the "Company") was incorporated in
California in January 1996, was reincorporated in Deleware in September 1998 and
is headquartered in Scottsdale, Arizona. The Company is a source for home
improvement information services for homeowners, service providers and suppliers
nationwide.

                                       26
<PAGE>
     eTechLogix, Inc. ("eTech"), a wholly-owned subsidiary of ImproveNet,
licenses, installs and maintains its proprietary e-commerce software products to
companies primarily operating in the building material industry. eTech was
formerly known as First Systech International, Inc. and was originally
incorporated in March 1989 in the State of Texas. In July of 1994, eTech
relocated to the State of Arizona and incorporated itself under the laws of the
State of Arizona.

     The following discussion should be read in conjunction with the
consolidated financial statements provided under Part II, Item 7 of this Form
10-KSB. Certain statements contained herein may constitute forward-looking
statements within the meaning of the Private Securities Litigation Reform Act of
1995. These statements involve a number of risks, uncertainties and other
factors that could cause actual results to differ materially, as discussed more
fully herein.

     The forward-looking information set forth in this Form 10-KSB is as of
April 15, 2003, and ImproveNet, Inc. undertakes no duty to update this
information. Should events occur subsequent to April 15, 2003 that make it
necessary to update the forward-looking information contained in this Form
10-KSB, the updated forward-looking information will be filed with the SEC in a
Quarterly Report on Form 10-QSB or as an earnings release included as an exhibit
to a Form 8-K, each of which will be available at the SEC's website at
www.sec.gov. More information about potential factors that could affect our
business and financial results is included in the section entitled "Factors
Affecting Future Performance, Results of Operations and Financial Condition" in
Part I--Item 1. Description of Business.

CRITICAL ACCOUNTING POLICIES AND ESTIMATES

     ImproveNet, Inc.'s discussion and analysis of its financial condition and
results of operations are based upon ImproveNet, Inc. consolidated financial
statements, which have been prepared in accordance with accounting principles
generally accepted in the United States. The preparation of these financial
statements requires ImproveNet to make estimates and judgments that affect the
reported amounts of assets, liabilities, revenues and expenses, and related
disclosure of contingent assets and liabilities. On an on-going basis,
ImproveNet evaluates its estimates, including those related to customer
programs, bad debts, income taxes, contingencies and litigation. ImproveNet
bases its estimates on historical experience and on various other assumptions
that are believed to be reasonable under the circumstances, the results of which
form the basis for making judgments about the carrying values of assets and
liabilities that are not readily apparent from other sources. Actual results may
differ from these estimates under different assumptions or conditions.

     ImproveNet believes the following critical accounting policies affect its
more significant judgments and estimates used in the preparation of its
consolidated financial statements.

SOFTWARE DEVELOPMENT AND SALES FOR THE BUILDING MATERIALS INDUSTRY SEGMENT

     The Company recognizes revenue in accordance with SOP 97-2, "Software
Revenue Recognition." This SOP provides guidance on revenue recognition of
software transactions. The Company recognizes revenue principally from the
development and licensing of its software and from consulting and maintenance
services rendered in connection with such development and licensing activities.
Maintenance contract revenue is recognized on a straight-line basis over the
life of the respective contract. The Company also derives revenue from the sale
of third party hardware and software which is recognized based on the terms of
each contract. Consulting revenue is recognized when the services are rendered.
No revenue is recognized prior to obtaining a binding commitment from the
customer.

     Revenue from fixed price software development contracts, which require
significant modification to meet the customer's specifications, is recognized on
the percentage-of-completion method using the units-of-work-performed method to
measure progress towards completion. Revisions in cost estimates and recognition
of losses on these contracts are reflected in the accounting period in which the
facts become known. Revenue from software package license agreements without
significant vendor obligations is recognized upon delivery of the software.
Contract terms may provide for billing schedules that differ from revenue
recognition and give rise to costs and estimated earnings in excess of billings
on uncompleted software contracts, and billings in excess of costs and estimated
earnings on uncompleted software contracts.

     Deferred revenue represents revenue billed and collected but not yet
earned.

     The cost of maintenance and research and development related revenues,
which consist principally of staff payroll and applicable overhead, are expensed
as incurred.

                                       27
<PAGE>
HOME IMPROVEMENT SERVICES SEGMENT

     Revenues in the home improvement services segment are derived from two
sources: Service revenues and marketing revenues.

SERVICE REVENUES:

     Service revenues include lead fees and win fees from ImproveNet's
contractor matching service and enrollment fees from new contractors joining the
ImproveNet network. Lead fees are recognized at the time a homeowner and
contractor are matched by the Company and the service provider becomes obligated
to pay such fee. Win fees are recognized at the time the service provider or the
homeowner notifies the Company that a job has been sold and the service provider
becomes obligated to pay such fee. Enrollment fees from service providers are
recognized as revenue ratably over the expected period they participate in our
contractor matching service, which is initially estimated to be between one and
two years. Payments of enrollment fees received in advance of providing services
are deferred until the period the services are provided. The Company establishes
a refund reserve at the time of revenue recognition based on the Company's
historical experience.

MARKETING REVENUES:

     Marketing revenues include the sale of banner, SmartLeads and other Web
site advertisements. Currently marketing revenues are comprised of cash
advertising.

     CASH ADVERTISING

     Cash advertising revenues generally are derived from short-term advertising
contracts in which the Company typically guarantees that a minimum number of
impressions will be delivered to its Web site visitors over a specified period
of time for a fixed fee. Cash marketing revenues from banner, button and other
Web site advertisements are recognized at the lesser of the amount recorded
ratably over the period in which the advertising is delivered or the percentage
of guaranteed impressions delivered. SmartLeads revenues are also paid for in
cash and are recognized when the SmartLeads have been delivered to the customer.
Cash marketing is recognized when the Company has delivered the advertising,
evidence of an agreement is in place and fees are fixed, determinable and
collectible.

     The Company follows the allowance method of recognizing uncollectible
accounts receivable. The allowance method recognizes bad debt expense as a
percentage of accounts receivable based on a review of the individual accounts
outstanding and the Company's prior history of uncollectible accounts
receivable. If the financial condition of ImproveNet's customers were to
deteriorate, resulting in an impairment of their ability to make payments,
additional allowances may be required.

     Deferred income taxes are provided for on an asset and liability method,
whereby deferred tax assets are recognized for deductible temporary differences
and operating loss carryforwards and deferred tax liabilities are recognized for
taxable temporary differences. Temporary differences are the differences between
the reported amounts of assets and liabilities and their tax basis.

     Deferred tax assets are reduced by a valuation allowance, when in the
opinion of management, it is more likely than not that some portion or all of
the deferred tax assets will not be realized. Deferred tax assets and
liabilities are adjusted for the effects of changes in tax laws and rates on the
date of enactment.

     BUSINESS SEGMENTS

     The Company follows SFAS No. 131, "Disclosure about Segments of an
Enterprise and Related Information." SFAS No. 131 requires publicly held
companies to report financial and other information about key revenue segments
of an entity for which this information is available and is utilized by the
chief operating decision maker. The Company operates in two segments: Software
development and sales for the building materials industry and home improvement
information services. The Company's consolidated statements of operations and
cash flows do not reflect operations for the home improvement services segment
as this segment was acquired effective December 31, 2002 through a merger
between ImproveNet and eTech.

RESULTS OF OPERATIONS

YEARS ENDED DECEMBER 31, 2002 AND 2001

REVENUES

     Our revenues increased from $479,000 to $777,000 in the years ended
December 31, 2001 and 2002. The increases from 2001 to 2002 were achieved by
increased sales of the company's Smart Fusion(SM) software product and
associated installation and integration services. It is anticipated that in 2003
revenues will increase significantly due to the merger with ImproveNet. The
addition of the service provider matching service will result in lead fees and
win fees from service providers in 2003.

                                       28
<PAGE>
OPERATING EXPENSES

COST OF REVENUES

     The cost of maintenance and research and development related revenues
consist principally of staff payroll and applicable overhead. Cost of revenues
in 2002 includes $68,000 of third party software that was resold.

     Our cost of revenues increased from $204,000 to $240,000 in the years ended
December 31, 2001 and 2002 due primarily to the cost of third party software.

SELLING, GENERAL AND ADMINISTRATIVE EXPENSES

     Selling, general and administrative expense decreased slightly from
$882,000 to $855,000 in the years ended December 31, 2001 and 2002. The decrease
in selling, general and administrative expenses in 2001 was primarily
attributable to lower office rent expense partially offset by increased hiring
in anticipation of the merger.

     It is anticipated marketing costs will increase significantly in 2003 as
the company will purchase leads for the service provider matching service and
will hire marketing personnel. Additionally the company has added administrative
personnel related to increased accounting and reporting requirements resulting
from the merger.

RESEARCH AND DEVELOPMENT EXPENSES

     Our research and development costs include the payroll and related costs of
our technology staff as well as offshore contract developers.

     Our research and development expenses increased from $50,000 to $87,000 in
the years ended December 31, 2001 and 2002

     The increase in research and development expenses in 2002 was primarily
attributable to increased payroll and related costs. We expect product
development costs to remain at these levels or increase slightly for the
foreseeable future.

OTHER REVENUES AND EXPENSES

     Interest expense and financing costs increased from $39,000 to $205,000 in
the years ended December 31, 2000 and 2001. The increase in interest expense was
primarily due costs associated with raising $500,000 in anticipation of the
merger and to interest related to the accrued furniture lease buyout.

     The $51,000 loss on disposal of fixed assets related primarily to the
write-off of leasehold improvements in an office move.

LIQUIDITY AND CAPITAL RESOURCES

     Cash and cash equivalents totaled $447,000 at December 31, 2002, an
increase of $415,000 from $32,000 at December 31, 2001. Most of the increase
came from the $500,000 proceeds from eTech Common Stock and convertible notes
payable.

     Net cash used in operating activities was $375,000 in 2001 as compared to
net cash provided by operating activities of $77,000 in 2002. Net cash used in
2001 operating activities resulted primarily from our net loss. Net cash
provided by operating activities in 2002 primarily represented increases in
accrued liabilities, the proceeds from the prior year's income taxes receivable
partially offset by the net loss for the period.

     Net cash used in investing activities was $1,000 in 2001 and $102,000 in
2002. The purchase of pre-merger net assets of ImproveNet by eTech accounts for
$519,000 of the cash used in investing activities in 2002 offset by cash
acquired in the merger of $418,000.

     Net cash provided by financing activities was $20,000 in 2001 and $440,000
in 2002. Net cash provided by financing activities in 2001 was primarily due to
the net proceeds from the line of credit partially offset by debt payments on
capital lease obligations and notes payable. Net cash provided by financing
activities in 2002 was primarily due to proceeds from the convertible notes
payable and the sale of eTech common stock partially offset by debt payments on
capital lease obligations, notes payable and the line of credit.

     The Company has continued to sustain losses for the past two years and has
negative working capital and negative net worth.

                                       29
<PAGE>
     During 2002 the Company has procured contracts for software sales of its
products and has various contracts pending. The Company anticipates increased
sales volume of their primary software products throughout 2003 and thereafter.
The Company also anticipates increased revenues from the home improvement
information services segment as a result of the synergies it expects to realize
through the Merger of ImproveNet and eTech. The Company also intends to raise
additional capital either through a public or private offering of securities.

     The additional funds from continued software sales and capital financing
will be used to finance continued operations and increase the Company's sales
and marketing functions.

     Our operating losses have limited our ability to obtain vendor credit or
extended payment terms and bank financing on favorable terms; accordingly, we
depend on our cash and cash equivalent balances to fund our operations.

     As a result of the merger with ImproveNet, both revenue and operating
expenses will increase significantly in 2003. Prior to the merger, the
ImproveNet business operated at a significant loss. The ImproveNet business has
been moved from California to Arizona and has been integrated into the
infrastructure of eTechLogix, leveraging existing technical, marketing and
administrative personnel. We believe during the second half of 2003 ImproveNet
will reach profitability.

     However, due to the significant level of current liabilities and the
history of operating losses, there is no assurance that our available cash
resources will be sufficient to meet our anticipated needs for operations and
capital expenditures during the next 12 months. We will strive to make ongoing
realignments, if required, to achieve positive cash flow with our existing cash
resources. We are additionally decreasing our marketing and other operating
expenditures to assist us in maintaining our available cash resources. We may
need to raise additional funds, however, if results of operations for 2003 do
not meet our expectations, or in order to develop new or enhance existing
services, to respond to competitive pressures or to acquire complementary
businesses, services or technologies. If we raise additional funds by selling
equity securities, the percentage ownership of our stockholders will be reduced.
We cannot be sure that additional financing will be available on terms favorable
to us, or at all. If adequate funds were not available on acceptable terms, our
ability to fund expansion, react to competitive pressures, or take advantage of
unanticipated opportunities would be substantially limited. If this occurred,
our business would be significantly harmed. We will continue to evaluate our
needs for funds based on our assessment of access to public or private capital
markets and the timing of our need for funds. Although we have no present
intention to conduct additional public equity offerings, we may seek to raise
these additional funds through private or public debt or equity financings.

     As a result of the above factors, among others, our auditors have modified
their opinion to our financial statements indicating there is substantial doubt
about our ability to continue as a going concern.

RECENT ACCOUNTING DEVELOPMENTS

     In April 2002, the Financial Accounting Standards Board ("FASB") issued
SFAS No. 145, "Rescission of FASB Statements Nos. 4, 44, and 64, Amendment of
FASB Statement No. 13, and Technical Corrections." SFAS No. 145 updates,
clarifies and simplifies existing accounting pronouncements, by rescinding SFAS
No. 4, which required all gains and losses from extinguishment of debt to be
aggregated and, if material, classified as an extraordinary item, net of any
related income tax effect. As a result, the criteria in APB No. 30 will now be
used to classify those gains and losses. Additionally, SFAS No. 145 amends SFAS
No. 13 to require that certain lease modifications that have economic effects
similar to sale-leaseback transactions be accounted for in the same manner as
sale-leaseback transactions. Finally, SFAS No. 145 also makes technical
corrections to existing pronouncements. While those corrections are not
substantive in nature, in some instances, they may change accounting practice.
The Company adopted the provisions of SFAS No. 145 that amended SFAS No. 13, as
required, on May 15, 2002 for transactions occurring after such date with no
material impact on its financial statements. The Company's management currently
does not expect that the adoption of the remaining provisions of SFAS No. 145,
as required, on January 1, 2003 will have a material impact on its financial
statements.

     In June 2002, the FASB issued SFAS No. 146, "Accounting for Costs
Associated with Exit or Disposal Activities." SFAS No. 146 was issued to address
the financial accounting and reporting for costs associated with exit or
disposal activities, unless specifically excluded. SFAS No. 146 requires that a
liability for a cost associated with a covered exit or disposal activity be
recognized and measured initially at its fair value in the period in which the
liability is incurred, except for a liability for one-time termination benefits
that is incurred over time. If employees are not required to render service
until they are terminated in order to receive the one-time termination benefits
or if employees will not be retained to render service beyond the minimum
retention period (as dictated by existing law, statute or contract, or in the
absence thereof, 60 days), a liability for the termination benefits shall be
recognized and measured at its fair value at the communication date. If
employees are required to render service until they are terminated in order to
receive the one-time termination benefits and will be retained to render service
beyond the minimum retention period, a liability for the termination benefits
shall be measured initially at the communication date based on the fair value of
the liability as of the termination date. The liability shall be recognized
ratably over the future service period. SFAS No. 146 also dictates that a
liability for costs to terminate an operating lease or other contract before the
end of its term shall be recognized and measured at its fair value when the
entity terminates the contract in accordance with the contract terms. A
liability for costs that will continue to be incurred under a contract for its
remaining term without economic benefit to the entity is to be recognized and
measured at its fair value when the entity ceases using the right conveyed by

                                       30
<PAGE>
the contract. SFAS No. 146 further dictates that a liability for other covered
costs associated with an exit or disposal activity be recognized and measured at
its fair value in the period in which the liability is incurred. The Company's
management currently does not expect that the adoption of SFAS No. 146, as
required, on January 1, 2003 will have a material impact on its financial
statements.

     In October 2002, the FASB issued SFAS No. 147, "Acquisitions of Certain
Financial Institutions." SFAS No. 147 requires that acquisitions of financial
institutions be accounted in accordance with SFAS Nos. 141 and 142. The Company
adopted SFAS No. 147 in October 2002, with no impact on its consolidated
financial statements.

     In December 2002, the FASB issued SFAS No. 148, "Accounting for Stock Based
Compensation - Transition and Disclosure - an amendment of FASB Statement No.
123." SFAS No. 148 amends SFAS No. 123 to provide methods of transition for a
voluntary change to the fair value based method of accounting for stock-based
employee compensation, as well as requiring prominent disclosure about the
method and effect of accounting for stock-based compensation. The Company
adopted the provisions of SFAS No. 145 as of December 31, 2002 with no material
effect on its consolidated financial statements

     In November 2002, the FASB issued Interpretation No. 45, "Guarantor's
Accounting and Disclosure Requirements for Guarantees, Including Indirect
Guarantees of Indebtedness of Others," which clarifies the disclosure,
recognition, and measurement requirements related to certain guarantees. The
provisions related to recognizing a liability at the inception of the guarantee
for the fair value of the guarantor's obligations does not apply to product
warranties or to guarantees accounted for as derivative instruments. The
disclosure requirements are effective for financial statements issued after
December 15, 2002 and the recognition and measurement provisions apply on a
prospective basis to guarantees issued or modified after December 31, 2002. The
Company adopted the provisions of Interpretation No. 45 in December 2002, with
no impact on its consolidated financial statements.

     In November 2002, the Emerging Issues Task Force ("EITF") reached a
consensus on Issue No. 00-21, "Accounting for Revenue Arrangements with Multiple
Deliverables." This issue addresses how revenue arrangements with multiple
deliverables should be divided into separate units of accounting and how the
arrangement consideration should be allocated to the identified separate
accounting units. Issue No. 00-21 is effective for fiscal periods beginning
after June 15, 2003. The Company does not expect the adoption of EITF 00-21 to
have a material impact on its financial position or results of operations.

ITEM 7. FINANCIAL STATEMENTS

     Reference is made to the consolidated financial statements, the report
thereon and the notes thereto, and the supplementary data commencing at page F-1
of this Annual Report of Form 10-KSB, which financial statements, report, notes
and data are incorporated herein by reference.

ITEM 8. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE

     On January 13, 2003, PricewaterhouseCoopers LLP resigned as independent
accountants of ImproveNet, Inc. The reports of PricewaterhouseCoopers LLP on the
financial statements for the past two fiscal years contained no adverse opinion
or disclaimer of opinion and were not qualified or modified as to uncertainty,
audit scope or accounting principle. However, the audit report for the financial
statements for the year ended December 31, 2001 contained an explanatory
paragraph in respect of substantial doubt about the Company's ability to
continue as a going concern. The resignation of PricewaterhouseCoopers LLP was
accepted by the board of directors. In connection with its audits for the two
most recent fiscal years and through January 13, 2003, there have been no
disagreements with PricewaterhouseCoopers LLP on any matter of accounting
principles or practices, financial statement disclosure, or auditing scope or
procedure, which disagreements if not resolved to the satisfaction of
PricewaterhouseCoopers LLP would have caused them to make reference thereto in
their report on the financial statements for such years. During the two most
recent fiscal years and through January 13, 2003, there have been no reportable
events (as defined in Regulation S-K Item 304(a)(1)(iv)).

     With the resignation of PricewaterhouseCoopers LLP as its principal
independent accountant, we engaged Semple & Cooper, LLP ("Semple") as the
Company's principal independent accountant. The Company's Board of Directors
approved the appointment of Semple as the Company's principal independent
accountants and auditors on January 15, 2003. During the two most recent fiscal
years and subsequent interim periods, the Company has not consulted with Semple
regarding (i) either the application of accounting principles to a specified
transaction, either completed or proposed, or the type of audit opinion that
might be rendered on the Company's financial statements, or (ii) any matter that
was either the subject of disagreement on any matter of accounting principles or
practices, financial statement disclosure or auditing scope or procedures or a
reportable event (as defined in Item 304 (a) (1) (v) of Regulation S-K). Semple
has served as the principal independent accountant during the two most recent
fiscal years for eTechLogix, Inc. which is a wholly-owned subsidiary of
ImproveNet as a result of the merger transaction on December 23, 2002 and
described on Form 8-K filed by the Company on January 7, 2003.

                                       31
<PAGE>
                                    PART III

ITEM 9. DIRECTORS, EXECUTIVE OFFICERS, PROMOTERS AND CONTROL PERSONS; COMPLIANCE
WITH SECTION 16(a) OF THE EXCHANGE ACT.

     Information concerning the directors and executive officers of ImproveNet
is set forth below:

     NAME                    AGE                 POSITION
     ----                    ---                 --------

     Jeffrey I. Rassas       40    Chief Executive Officer

     Homayoon J. Farsi       49    Co-Chairman, President

     Naser Ahmad             49    Co-Chairman, Chief Technology Officer

     Ronald B. Cooper        48    Director

     Jay Stead               39    Director

     Kenneth S. Cragun       42    Chief Financial Officer

     Jeffrey Perry           44    General Counsel & EVP, Mergers & Acquisitions

The following is a brief summary of the directors and executive officers
including their business experience for at least the past five years.

NASER AHMAD

     Mr. Ahmad, 49, is the co-chairman, chief technology officer and a
co-founder of eTechLogix. He became chief technology officer, a director, and
co-chairman of ImproveNet on January 7, 2003. He has been active for over 25
years in the development of computer solutions for distribution and
manufacturing companies. Throughout his career, Mr. Ahmad has held technical
leadership positions with both entrepreneurial ventures as well as Fortune 100
companies including Caterpillar International, Inc., Sante Fe International and
Taylor Management Systems.

     In 1989, Mr. Ahmad and Mr. Farsi co-founded SysTech International, Inc., a
Texas corporation, which was the predecessor-in-interest to eTechLogix. In 1994,
SysTech International, Inc. was merged into an Arizona corporation named First
SysTech International, Inc. which changed its name to eTechLogix, Inc. in 2000.
Mr. Ahmad served as executive vice president and chief technology officer of
SysTech International, Inc. from 1989 to 1994 and has held the same positions
with eTechLogix since 1994.

     At Sante Fe International, Mr. Ahmad was a member of the task force for
evaluating and determining the next generation of application systems for the
organization. At Caterpillar, he was the software development manager and the
chief architect of the Company's enterprise resource planning (ERP) distribution
system.

     Mr. Ahmad has been instrumental in the development of technology products
throughout his career. He co-founded the National Institute of Technology in
Karachi, Pakistan, is a member of the Advisory council of the Darul Islam
University, Dhaka, Bangladesh and serves as a director of several privately held
U.S. and foreign corporations. Mr. Ahmad is a graduate of the University of
Karachi with a BA in Accounting and a postgraduate degree in Computer Science.

HOMAYOON J. FARSI

     Mr. Farsi, 49, is the co-chairman, president and a co-founder of
eTechLogix. He became president, a director, and co-chairman of ImproveNet on
January 7, 2003. He has over 20 years experience as an entrepreneur in the
computer software industry. Mr. Farsi is knowledgeable concerning manufacturing,
distribution business processes and information systems and has been
instrumental in the development and launch of numerous software products
throughout his career. Mr. Farsi has held senior technical and operations
management positions with software and hardware companies including Taylor
Management Systems and Unisys, Inc.

                                       32
<PAGE>
     In 1989, Mr. Farsi and Mr. Ahmad co-founded SysTech International, Inc., a
Texas corporation, which was the predecessor-in-interest to eTechLogix. In 1994,
SysTech International, Inc. was merged into an Arizona corporation named First
SysTech International, Inc. which changed its name to eTechLogix in 2000. Mr.
Farsi served as president of SysTech International, Inc. from 1989 to 1994 and
has served as president of eTechLogix since 1994. Mr. Farsi has an MS Degree in
Computer Systems from the University of Salford, Manchester, England.

JEFFREY I. RASSAS

     Mr. Rassas, 40, has served as chief executive officer of eTechLogix since
October, 2001. He became chief executive officer, a director, and co-chairman of
ImproveNet on January 7, 2003. Mr. Rassas also helped launch and fund two
private Arizona companies, the TOLIS Group, Inc., a data back-up and recovery
software company supporting both the Linux and Unix operating systems, and
Channel Pros, Inc., a technology marketing and sales organization which services
clients across the country. He remains a shareholder of both companies.

     Mr. Rassas founded EBIZ Enterprises, Inc., a Linux solution provider and
computer cluster developer, in 1995. The common stock of EBIZ Enterprises is
traded on the NASD Over-The-Counter Bulletin Board. Mr. Rassas served as chief
executive officer of EBIZ Enterprises from 1995 to October, 2000 and as its
chairman of the board from 1995 until May 21, 2002. EBIZ Enterprises filed a
voluntary petition to reorganize under Chapter 11 of the Bankruptcy Code on
September 7, 2001. Its Plan of Reorganization was confirmed on April 11, 2002,
and became effective on May 21, 2002.

     Between 1989 and 1994, Mr. Rassas founded and operated The Wilsaac Group,
Inc. dba DLC Consulting, an office services outsourcing firm for large
corporations. The Wilsaac Group, Inc. was acquired by a division of Air Canada
in 1994. Mr. Rassas co-founded ITS Travel Group, Inc., in 1985 and was involved
in its management until it was sold in 1989. By the time of its sale, it had
become the third largest travel organization in Arizona. From 1982 to 1985, Mr.
Rassas held the position of Magnetics Design Engineer at CTM Magnetics.

RONALD B. COOPER

     Mr. Cooper, 47, has served as a director since September 1999 and as
chairman of the board of directors from August 2000 until January 7, 2003. He
served as chief executive officer and president of ImproveNet, Inc. from March
1999 until he stepped down from those positions on June 7, 2002. From July 1996
to March 1999, Mr. Cooper was president of Price Pfister, Black and Decker's
plumbing products division. From August 1992 to July 1996, Mr. Cooper was
president of three other Black and Decker divisions: Power Tool Accessories, PRC
Realty Systems and PRC Commercial Systems Group.

JAY STEAD

     Mr. Stead, 39, based in Auckland, New Zealand, became a director on January
7, 2003. He is currently the managing director of Mokka Enterprises, LLP, a
technology-oriented private investment firm focused on emerging companies, which
he joined in 2001. From 1999 to 2000 Mr. Stead was the President & CEO of
Sagebrush Corporation, an educational software company, and from 1994 to 1998
was a senior executive at Reynolds and Reynolds. In addition, Mr. Stead has held
key management positions with Allen-Bradley and McKinsey & Company. His career
includes general management, marketing and business development roles across
software, services, consulting, hardware and manufacturing sectors.

     Mr. Stead holds a Bachelor of Science in Industrial Management from Purdue
University and received a Masters in Management from Northwestern's Kellogg
School of Management in 1989. Mr. Stead also serves on the board of directors
for MD Online and GolfLogix.

KENNETH S. CRAGUN

     Mr. Cragun, 42, served as chief financial officer of eTechLogix beginning
in December 2002 and of ImproveNet, Inc. beginning in January 2003. He brings
over 16 years of finance experience in the technology industry to the Company.
He served as Corporate Controller for NetCharge, Inc., an electronic invoicing
and payments company from 2000 to 2002. He was at C-Cube Microsystems Inc., a
semiconductor and systems company, from 1994 to 2000 and his most recent
position was Corporate Controller. He was part of the team that successfully led
C-Cube through an IPO and managed rapid growth from $24 million in annual
revenues to $400 million in annual revenues in a six-year period. He has held
key finance and accounting positions with Deloitte & Touche and 3Com
Corporation. Mr. Cragun is a CPA and a member of the Arizona Society of
Certified Public Accountants. He has a BS in accounting from the University of
Southern Colorado.

                                       33
<PAGE>
JEFFREY PERRY

     Mr. Perry, 44, has served as general counsel of eTechLogix since May 2002
and served as chief financial officer until December 2002. In January 2003, he
began his duties as executive vice-president mergers & acquisitions and general
counsel with ImproveNet. From October 2000 to April 2003 he has also served as
general counsel of EBIZ Enterprises, Inc., a Linux solution provider and
computer cluster developer. Shares of the common stock of EBIZ Enterprises are
traded on the NASD Over-The-Counter Bulletin Board. Mr. Perry began private law
practice in 1988 and served as an investment manager and financial advisor with
Prudential Securities from 1997 to 2000. Mr. Perry previously founded and held
the position of president and principal financial officer for several private
companies involved in the development of proprietary consumer sports products
and sports themed gifts with distribution through a network of national catalog
companies.

     Mr. Perry holds business, political science, and law degrees from Southern
Methodist University. He holds law licenses in Arizona and Texas.

     None of the executive officers or directors of ImproveNet or eTechLogix
has, during the last five years, been convicted in a criminal proceeding
(excluding traffic violations or similar misdemeanors) or has been a party to a
civil proceeding which resulted in a judgment, decree or final order enjoining
further violations of, or prohibiting activities subject to, federal or state
securities laws or finding any violation of such laws. All of the executive
officers and directors of ImproveNet and eTechLogix are citizens of the United
States.

SECTION 16(a) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE

     The Officers, Directors and those beneficially owning more than 10% of
small business registrant's class of equity securities registered under Section
12 of the Exchange Act, shall file reports of ownership and any change in
ownership with the Securities and Exchange Commission. Copies of these reports
are to be filed with the registrant.

     Based upon a review of the reports furnished for the most recently
completed fiscal year, we conclude that all such reports were timely filed.

                                       34
<PAGE>
ITEM 10. EXECUTIVE COMPENSATION

     The following table sets forth the annual compensation paid by the Company
to certain of the Company's executive officers whose annual compensation,
including salary and bonus, exceeded $100,000 ("the Named Executive Officers").
Note that the executive officers' employment concluded prior to year-end 2002.
The following table shows for the fiscal years ended December 31, 2000, 2001 and
2002 all compensation paid by ImproveNet, Inc. to Cooper, Crosby, Gaspar, and
Roof in all capacities:

                           Summary Compensation Table

<TABLE>
<CAPTION>
                                                                                                LONG-TERM COMPENSATION
                                                                                         ------------------------------------
                                                         ANNUAL COMPENSATION                            AWARDS
                                                --------------------------------------   ------------------------------------
                                                                          OTHER ANNUAL    RESTRICTED    SECURITIES UNDERLYING
NAME AND PRINCIPAL POSITION           YEAR      SALARY        BONUS       COMPENSATION   STOCK AWARDS      OPTIONS/SARS (#)
---------------------------           ----      ------        -----       ------------   ------------      ----------------
<S>                                   <C>      <C>          <C>            <C>            <C>                   <C>
Ronald B. Cooper                      2002     $162,328     $ 60,000       $177,707(6)    $
President and                         2001     $315,539     $ 80,000(2)    $143,002(4)    $    --               200,000
Chief Executive Officer               2000     $296,154     $150,000(1)    $      0       $    --                60,000

William Crosby                        2002     $ 83,336     $ 12,800       $106,667(7)    $    --
Senior Vice President, Editorial,     2001     $159,370     $ 54,280(2)    $      0       $    --                50,000
Partnership Services                  2000     $125,569     $ 41,448(1)    $104,564(5)    $ 6,901(3)

Donald Gaspar                         2002     $102,196     $ 16,330       $136,080(8)    $    --
Chief Technology Officer              2001     $203,934     $ 91,563(2)    $     --       $23,408(3)
                                      2000     $191,908     $ 61,104(1)    $     --       $15,313(3)             3,000

Richard A. Roof                       2002       29,026       13,608         85,050(9)
Senior Vice President,                2001     $169,944     $ 76,302(2)                    23,552(3)
Project Services                      2000     $159,923     $ 75,920(1)     104,564(5)     12,305(3)             5,000
</TABLE>

----------
1.   Represent amounts paid in 2000 for services rendered in 1999.
2.   Represent amounts paid in 2001 for services rendered in 2000.
3.   Represents the dollar value of shares awarded, calculated by multiplying
     the market value on the date of grant ($0.4375) by the number of shares
     awarded in fiscal years 2000 and 2001. In October 2000, the Board adopted
     the Company's Restricted Share Grant Program pursuant to which the Named
     Executive Officers were given the opportunity to exchange each unexercised
     option for an equal number of shares of restricted common stock.
4.   Amount represents forgiveness by the Company of interest accrued pursuant
     to a loan to the Executive Officer.
5.   Amounts represent forgiveness by the Company of loans to the Named
     Executive Officer.
6.   Represents $160,000 severance and $17,707 pursuant to the change of control
     agreement. Mr. Cooper's employment as Chief Executive Officer concluded in
     June 2002. Note subsequent to the merger, Mr. Cooper retains a seat on the
     company's board of directors.
7.   Represents $80,000 severance and $26,667 pursuant to the change of control
     agreement. Mr. Crosby's employment concluded in June 2002.
8.   Represents $102,060 severance and $34,020 pursuant to the change of control
     agreement. Mr. Gaspar's employment concluded in June 2002.
9.   Represents amount received for severance. Mr. Roof's employment concluded
     in February 2002.

                        Option Grants in Last Fiscal Year

     The Company granted no options to executive officers to purchase its shares
of common stock during the 2002 fiscal year.

AGGREGATED OPTION/SAR EXERCISES IN LAST FISCAL YEAR AND FY-END OPTION/SAR VALUES

<TABLE>
<CAPTION>
                                                    NUMBER OF SECURITIES         VALUE OF UNEXERCISED
                     SHARES                        UNDERLYING UNEXERCISED             IN-THE-MONEY
                   ACQUIRED ON      VALUE        OPTIONS/SARS AT FY-END (#)     OPTION/SARS AT FY-END ($)
NAME               EXERCISE (#)   REALIZED ($)   EXERCISABLE/UNEXERCISABLE    EXERCISABLE/UNEXERCISABLE (1)
----               ------------   ------------   -------------------------    -----------------------------
<S>                    <C>            <C>              <C>                               <C>
Ronald B. Cooper        0              0               206,033/31,069                     0/0
</TABLE>

                                       35
<PAGE>
COMPENSATION OF DIRECTORS

     Directors currently receive no cash compensation from the Company for their
services as members of the board or for attendance at committee meetings.
Members of the board are reimbursed for some expenses in connection with
attendance at board and committee meetings. Under the Company's 1999 Equity
Incentive Plan, each non-employee director is entitled to receive options to
purchase 20,000 shares of common stock upon commencement of service as a
director, which vest monthly over three years and 5,000 shares annually
thereafter, which will vest monthly over twelve months.

ITEM 11. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT

     The following table and footnotes set forth certain information regarding
the ownership of the common stock of ImproveNet as of March 31, 2003 by: (i) all
those known by ImproveNet to be beneficial owners of more than five percent of
its common stock; (ii) each director of ImproveNet; and (iii) all executive
officers and directors of ImproveNet as a group. Unless indicated below, the
address for each listed stockholder is c/o ImproveNet, Inc., 8930 E Raintree
Drive, Suite 300 Scottsdale, AZ 85260.

<TABLE>
<CAPTION>
                                                           NUMBER OF
                                                           SHARES OF
                                                          COMMON STOCK         PERCENT
                                                          BENEFICIALLY      BENEFICIALLY
     NAME AND ADDRESS OF BENEFICIAL OWNERS(1)                OWNED            OWNED(1)
     ----------------------------------------                -----            --------
<S>                                                        <C>                  <C>
     Jeffrey I Rassas                                      10,103,580           25.8%
     Homayoon J. Farsi                                     10,103,580           25.8%
     Naser Ahmad                                           10,103,580           25.8%
     Jay Stead(2)                                           1,252,780            3.2%
     Jeffrey R. Perry(3)                                      361,112              *
     Ronald B. Cooper(4)                                      226,132              *
     All executive officers and directors as a group       32,150,764           82.2%
</TABLE>

----------
* Less than one percent.

1.   This table is based upon information supplied by officers, directors and
     principal stockholders and Forms 3, 4 and 5 as filed with the Securities
     and Exchange Commission (the "SEC"). Unless otherwise indicated in the
     footnotes to this table and subject to community property laws where
     applicable, ImproveNet believes that each of the stockholders named in this
     table has sole voting and investment power with respect to the shares
     indicated as beneficially owned. Applicable percentages are based on
     39,110,428 shares outstanding on March 31, 2003, adjusted as required by
     rules promulgated by the SEC. Such SEC rules require that shares of common
     stock subject to options or warrants that are currently exercisable or
     exercisable within 60 days of March 31, 2003 are deemed to be outstanding
     and to be beneficially owned by the person or entity holding the options or
     warrants but are not treated as outstanding for the purpose of computing
     the percentage ownership of any other person.

2.   Includes 1,250,000 shares owned indirectly through Oxley Ventures, LLLP,
     and the right to directly acquire within 60 days, 2780 shares upon the
     exercise of non-employee director options. Mr. Stead's family trust is a
     general partner of Mokka Enterprises Partnership, the general partner of
     Oxley Ventures, LLLP.

3.   Includes 55,556 shares issuable at a per share exercise price of $0.05
     pursuant to options that vest within 60 days.

4.   Includes 3690 shares issuable at a per share exercise price of $0.25
     pursuant to options that vest within 60 days and 2500 shares issuable at a
     per share exercise price of $6.25 pursuant to options that vest within 60
     days.

                                       36
<PAGE>
ITEM 12. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS

NONE.

ITEM 13. EXHIBITS AND REPORTS ON FORM 8-K

     (a) The exhibits to this report are listed in the Exhibit Index at the end
of this report.

     (b) During the last quarter of the year ended December 31, 2002, we filed
reports on Form 8-K as follows:

     October 15, 2002 for report dated October 10, 2002 regarding an amendment
to the Merger Agreement extending until December 31, 2002 the date by which the
closing date is to occur.

     December 4, 2002 for report dated December 3, 2002 announcing a tender
offer to commence December 4, 2002.

     December 19, 2002 for report dated December 13, 2002 correcting the
publication of the date of the completion of the tender offer to be January 2,
2003.

ITEM 14. CONTROLS AND PROCEDURES.

     Within the 90 days prior to the filing date of this report, the Company
carried out an evaluation of the effectiveness of the design and operation of
the Company's disclosure controls and procedures pursuant to Exchange Act Rule
13a-14. This evaluation was carried out under the supervision and with the
participation of the Company's management, including the Company's Chief
Executive Officer along with the Company's Chief Financial Officer and Chief
Accounting Officer. Based upon that evaluation, the Company's Chief Executive
Officer along with the Company's Chief Financial Officer concluded that the
Company's disclosure controls and procedures are effective in timely alerting
them to material information relating to the Company required to be included in
the Company's periodic SEC filings. There were no significant changes in the
Company's internal controls or in other factors that could significantly affect
internal controls subsequent to the date the Company carried out its evaluation,
and there were no corrective actions with regard to significant deficiencies and
material weaknesses.

     Disclosure controls and procedures are controls and other procedures that
are designed to ensure that information required to be disclosed in Company
reports filed or submitted under the Exchange Act is recorded, processed,
summarized and reported within the time periods specified in the Securities and
Exchange Commission's rules and forms. Disclosure controls and procedures
include controls and procedures designed to ensure that information required to
be disclosed in Company reports filed under the Exchange Act is accumulated and
communicated to management, including the Company's Chief Executive Officer and
Chief Financial Officer as appropriate, to allow timely decisions regarding
required disclosure.

                                       37
<PAGE>
                                   SIGNATURES

     Pursuant to the requirements of the Securities and Exchange Act of 1934,
the Registrant has duly caused this report to be signed, April 11, 2002 on its
behalf by the undersigned duly authorized.

                                        IMPROVENET, INC.
                                        (Registrant)

                                        By: /s/ JEFFREY I. RASSAS
                                            ------------------------------------
                                            Jeffrey I. Rassas
                                            CO-CHAIRMAN & CEO

                                POWER OF ATTORNEY

     Know All Persons By These Presents, that each person whose signature
appears below constitutes and appoints Jeffrey I. Rassas his true and lawful
attorney-in-fact and agent, with full power of substitution and resubstitution,
for him and in his name, place and stead, in any and all capacities, to sign any
and all amendments to this Annual Report on Form 10-KSB, and to file the same,
with all exhibits thereto, and other documents in connection therewith, with the
Commission, granting unto said attorneys-in-fact and agents, and each of them,
full power and authority to do and perform each and every act and thing
requisite and necessary to be done in connection therewith, as fully to all
intents and purposes as he might or could do in person, hereby ratifying and
confirming our signatures as they may be signed by ours said attorney-in-fact
and any and all amendments to this Annual Report on Form 10-KSB.

     Pursuant to the requirements of the Securities Exchange Act of 1934, this
Annual Report on Form 10-KSB has been signed by the following persons in the
capacities and on the dates indicated.

                                        By: /s/ JEFFREY I. RASSAS
                                            ------------------------------------
                                            Jeffrey I. Rassas
                                            CO-CHAIRMAN & CEO

                                        By: /s/ HOMAYOON J. FARSI
                                            ------------------------------------
                                            Homayoon J. Farsi
                                            CO-CHAIRMAN & PRESIDENT

                                        By: /s/ NASER AHMAD
                                            ------------------------------------
                                            Naser Ahmad
                                            CO-CHAIRMAN & CTO

                                        By: /s/ JAY STEAD
                                            ------------------------------------
                                            Jay Stead
                                            DIRECTOR

                                        By: /s/ RONALD COOPER
                                            ------------------------------------
                                            Ronald Cooper
                                            DIRECTOR

Date: April 15, 2003

                                       38
<PAGE>
                                 CERTIFICATIONS

I, Jeffrey I. Rassas, certify that:

     1.   I have reviewed this annual report on Form 10-KSB of ImproveNet, 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 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 15, 2003                        /s/ JEFFREY I. RASSAS
                                            ------------------------------------
                                            Jeffrey I. Rassas
                                            CO-CHAIRMAN & CEO

                                       39
<PAGE>
I, Kenneth S. Cragun, certify that:

     1.   I have reviewed this annual report on Form 10-KSB of ImproveNet, 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 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 15, 2003                        /s/ KENNETH S. CRAGUN
                                            ------------------------------------
                                            Kenneth S. Cragun
                                            CHIEF FINANCIAL OFFICER

                                       40
<PAGE>
EXHIBITS

EXHIBIT
NUMBER                         DESCRIPTION OF DOCUMENT
------                         -----------------------

2.1     Stock Purchase Agreement by and between the Registrant and The J.L.
        Price Corporation. (1)
2.2     Asset Purchase Agreement by and between the Registrant and Contractor
        Referral Service, LLC. (1)
2.3     Agreement and Plan of Merger by and between the Registrant, eTechLogix,
        Inc. and Etech Acquisition, Inc. dated July 30, 2002, as amended (2)
2.4     Amendment No. 1 to Agreement and Plan of Merger dated October 1, 2002
        (filed herewith)
2.5     Amendment No. 2 to Agreement and Plan of Merger dated November 12, 2002
        (filed herewith)
3.1     Fourth Amended and Restated Certificate of Incorporation of the
        Registrant. (1)
3.2     Amended and Restated Bylaws of the Registrant. (1)
4.1     Specimen Stock Certificate. (1)
10.1    Amended and Restated 1996 Stock Option Plan. (1)
10.2    Form of 1999 Equity Incentive Plan. (1)
10.3    Form of 1999 Employee Stock Purchase Plan. (1)
10.4    Commercial Office Lease by and between Florcor I Limited Partnership and
        the Registrant. (1)
10.5    Commercial Office Lease by and between Chestnut Bay LLC and the
        Registrant. (1)
10.6    Employment agreement by and between the Registrant and Ronald Cooper.
        (1)
10.7    Series A Preferred Stock and Warrant Purchase Agreement by and between
        the Registrant and certain investors of the Registrant dated June 30,
        1997. (1)
10.8    Series B Preferred Stock and Warrant Purchase Agreement by and between
        the Registrant and certain investors of the Registrant dated March 17,
        1998. (1)
10.9    Series C Preferred Stock Agreement by and between the Registrant and
        certain investors of the Registrant dated March 29, 1999. (1)
10.10   Series D Preferred Stock Purchase Agreement by and between the
        Registrant and certain investors of the Registrant dated September 10,
        1999. (1)
10.11   First Series E Preferred Stock Purchase Agreement by and between the
        Registrant and certain investors of the Registrant dated November 23,
        1999. (1)
10.12   Second Series E Preferred Stock Purchase Agreement by and between the
        Registrant and certain investors of the Registrant dated November 23,
        1999. (1)
10.12   Form of Warrant Purchase Agreement by and between the Registrant and
        certain investors of the Registrant dated December 7, 1999. (1)
10.14   Fourth Amended and Restated Voting Agreement by and between the
        Registrant and certain investors of the Registrant dated November 23,
        1999. (1)
10.15   Form of Indemnity Agreement by and between the Registrant and each of
        its directors and executive officers. (1)
10.16   Internet-based Service Agreement between the Registrant and Owens
        Corning dated October 1, 1999. (1)
10.17   Collaboration Agreement between the Registrant and E.I. du Pont de
        Nemours and Company dated December 3, 1999. (1)
10.18   Internet Development, Marketing and Distribution Agreement between the
        Registrant and General Electric Appliances dated September 10, 1999. (1)
10.19   Relationship Agreement between the Registrant and Microsoft HomeAdvisor
        dated December 7, 1999. (1)
10.20   Agreement between the Registrant and CompleteHome Operations, Inc. dated
        December 13, 1999. (1)
10.21   Form of 1996 Stock Option Plan Grant Notice. (1)
10.22   Form of 1999 Equity Incentive Plan Stock Option Agreement. (1)
10.23   Form of Warrant to Purchase an aggregate of 420,000 shares of common
        stock. (1)
10.24   Form of Warrant to Purchase an aggregate of 10,000 shares of common
        stock. (1)
10.25   Form of Warrant to Purchase an aggregate of 842,596 shares of common
        stock. (1)
10.26   Form of Warrant to Purchase an aggregate of 96,400 shares of Series A
        preferred stock. (1)
10.27   Form of Warrant to Purchase an aggregate of 47,009 shares of Series B
        preferred stock. (1)
10.28   Form of Warrant to purchase 47,167 shares of Series C preferred stock.
        (1)
10.29   Form of Warrant to purchase an aggregate of 326,000 shares of Series D
        preferred stock. (1)

                                       41
<PAGE>
10.30   Fourth Amended and Restated Investor Rights Agreement by and between the
        Registrant and certain investors of the Registrant dated November 23,
        1999. (1)
10.33   Commercial Office Lease by and between Bennett Center, LLC and the
        Registrant. (3)
10.34   Improvenet, Inc. Stock Repurchase Agreement dated July 12, 2001. (4)
10.35*  Services Agreement dated December 16, 2002 regarding contractor matching
        operation (filed herewith)
16.1    Concurrence of PricewaterhouseCoopers LLP, former independent
        accountants, regarding resignation. (5)
23.1    Consent of PricewaterhouseCoopers LLP, Independent Accountants. (3)
24.1    Power of Attorney. (see page 58) (3)
99.1    Tender Offer Statement and Offer to Purchase All Shares of Common Stock,
        as amended. (6)

----------
(1)  Incorporated by reference to the Registrant's Registration Statement on
     Form S-1 (No. 333-92873), as amended.

(2)  Incorporated by reference to the Registrant's Form 8-K filed on August 6,
     2002.

(3)  Incorporated by reference to the Registrant's Form 10-K for the fiscal year
     ended December 31, 2000.

(4)  Incorporated by reference to the Registrant's Form 10-K for the fiscal year
     ended December 31, 2001.

(5)  Incorporated by reference to the Registrant's Form 8-K filed on January 21,
     2003.

(6)  Incorporated by reference to the Registrant's Schedule TO with exhibits and
     amendments thereto and eTechLogix's Schedule TO with exhibits and
     amendments thereto.

* Confidential treatment requested

                                       42
<PAGE>
The following consolidated financial statements are filed as part of this
report:

                                                                            PAGE
                                                                            ----
Independent Accountants Report                                               F-1

Consolidated Financial Statements:

Consolidated Balance Sheets as of December 31, 2002 and 2001                 F-2

Consolidated Statements of Operations for the years ended
December 31, 2002 and 2001                                                   F-4

Consolidated Statements of Stockholders' Equity (Deficit) and Mandatorily
Redeemable Convertible Preferred Stock for the years ended
December 31, 2002 and 2001                                                   F-5

Consolidated Statements of Cash Flows for the years ended December 31, 2002
and 2001                                                                     F-6

Notes to Consolidated Financial Statements                                   F-8

                                       43
<PAGE>
                                IMPROVENET, INC.

                        CONSOLIDATED FINANCIAL STATEMENTS
<PAGE>
                         INDEPENDENT ACCOUNTANTS' REPORT

To the Stockholders and Board of Directors of
ImproveNet, Inc.

We have audited the accompanying consolidated balance sheets of ImproveNet, Inc.
as of December 31, 2002 and 2001,  and the related  consolidated  statements  of
operations,  stockholders'  equity (deficit),  and cash flows for the years then
ended.  These  consolidated  financial  statements are the responsibility of the
Company's  management.  Our  responsibility  is to  express  an opinion on these
consolidated financial statements based on our audits.

We conducted our audits in accordance with auditing standards generally accepted
in the  United  States of  America.  Those  standards  require  that we plan and
perform the audits to obtain reasonable assurance about whether the consolidated
financial  statements  are free of  material  misstatement.  An  audit  includes
examining,  on a test basis,  evidence supporting the amounts and disclosures in
the  consolidated  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 our
audits provide a reasonable basis for our opinion.

In our opinion, the consolidated  financial statements referred to above present
fairly, in all material respects, the financial position of ImproveNet,  Inc. as
of December 31, 2002 and 2001, and the results of its  consolidated  operations,
stockholders' equity (deficit),  and its cash flows for the years then ended, in
conformity with accounting principles generally accepted in the United States of
America.

The accompanying  consolidated  financial statements have been prepared assuming
that the Company will continue as a going concern. As discussed in Note 1 to the
financial  statements,  the Company  incurred net losses and had an  accumulated
deficit and negative  working  capital as of December  31, 2002 and 2001.  These
factors raise  substantial  doubt about the  Company's  ability to continue as a
going concern.  Management's plans in regard to these matters are also described
in Note 1. The accompanying consolidated financial statements do not include any
adjustments to the amounts and  classifications  of assets or  liabilities  that
might result should the Company be unable to continue as a going concern.

/s/ Semple & Cooper, LLP

Certified Public Accountants

Phoenix, Arizona
March 26, 2003

                                       F-1
<PAGE>
                                IMPROVENET, INC.
                           CONSOLIDATED BALANCE SHEETS
                           DECEMBER 31, 2002 AND 2001

                                     ASSETS

                                                            2002         2001
                                                         ----------   ----------
Current Assets:
    Cash and cash equivalents                            $  446,833   $   31,630
    Accounts receivable, net                                329,657        2,575
    Receivable from stock transfer agent                    594,715           --
    Other receivables                                         1,000           --
    Prepaid expenses                                         55,054           --
    Income tax refund receivable                                 --      134,180
    Costs and estimated earnings in excess of billings
        on uncompleted software contracts                     4,100           --
                                                         ----------   ----------

        Total Current Assets                              1,431,359      168,385

Property and equipment, net                                 157,994      384,055
                                                         ----------   ----------

        Total Assets                                     $1,589,353   $  552,440
                                                         ==========   ==========

                   The Accompanying Notes are an Integral Part
                    of the Consolidated Financial Statements

                                      F-2
<PAGE>
                                IMPROVENET, INC.
                     CONSOLIDATED BALANCE SHEETS (CONTINUED)
                           DECEMBER 31, 2002 AND 2001

                      LIABILITIES AND STOCKHOLDERS' DEFICIT

<TABLE>
<CAPTION>
                                                                           2002           2001
                                                                       -----------    -----------
<S>                                                                    <C>            <C>
Current Liabilities:
    Notes payable - current portion                                    $    12,592    $    27,504
    Obligations under capital leases - current portion                      15,843         69,303
    Line of credit                                                          77,755         71,813
    Related party note payable                                                  --         12,000
    Accounts payable                                                       221,096         13,166
    Accrued compensation                                                   194,082        134,000
    Accrued customer claims                                                137,080        130,446
    Accrued furniture lease buyout                                         216,376             --
    Accrued merger and tender offer redemption liabilities               2,378,029             --
    Deferred revenue                                                        35,958         42,000
    Billings in excess of costs and estimated earnings
      on uncompleted software contracts                                     89,250             --
    Other liabilities and accrued expenses                                  23,453         17,672
                                                                       -----------    -----------

        Total Current Liabilities                                        3,401,514        517,904

Long-Term Liabilities:
    Notes payable - long-term portion                                          605         85,663
    Obligations under capital leases - long-term portion                    26,275        167,991
                                                                       -----------    -----------

        Total Liabilities                                                3,428,394        771,558
                                                                       -----------    -----------

Commitments and Contingencies:                                                  --             --

Stockholders' Deficit:

    Common stock, $.001 par value, 100,000,000 shares
      authorized, 53,124,290 and 10,000 shares
      issued and 53,124,290 and 3,600 (20,000,000 post
      merger) shares outstanding at December 31, 2002
      and 2001, respectively                                                53,124         10,000
    Additional paid-in capital                                             482,570             --
    Accumulated deficit                                                   (412,794)      (119,118)
                                                                       -----------    -----------

                                                                           122,900       (109,118)
    Less:  Treasury stock, at cost                                              --       (110,000)
           Treasury stock subscribed, at cost,
             underlying 13,913,975 shares                               (1,961,941)            --
                                                                       -----------    -----------

        Total Stockholders' Deficit                                     (1,839,041)      (219,118)
                                                                       -----------    -----------

        Total Liabilities and Stockholders' Equity                     $ 1,589,353    $   552,440
                                                                       ===========    ===========
</TABLE>

                   The Accompanying Notes are an Integral Part
                    of the Consolidated Financial Statements

                                      F-3
<PAGE>
                                IMPROVENET, INC.
                      CONSOLIDATED STATEMENTS OF OPERATIONS
                 FOR THE YEARS ENDED DECEMBER 31, 2002 AND 2001

<TABLE>
<CAPTION>
                                                                           2002            2001
                                                                       ------------    ------------
<S>                                                                    <C>             <C>
Revenues                                                               $    777,257    $    478,660
Cost of Revenues                                                            240,394         203,911
                                                                       ------------    ------------

Gross Profit                                                                536,863         274,749

Selling, General and Administrative Expenses                                855,282         881,881
Research and Development Expenses                                            86,801          50,000
                                                                       ------------    ------------

Loss from Operations                                                       (405,220)       (657,132)

Other Revenues (Expenses):
    Interest income                                                             220           4,436
    Interest expense and financing costs                                   (204,773)        (38,784)
    Loss on disposal of fixed assets                                        (51,294)             --
    Miscellaneous revenues                                                    6,034           3,570
                                                                       ------------    ------------

Loss from Operations before Income Taxes and Extraordinary Gain            (655,033)       (687,910)

Benefit for Income Taxes                                                         --         134,180
                                                                       ------------    ------------

Loss before Extraordinary Gain                                             (655,033)       (553,730)

Extraordinary Gain on Merger with eTech                                     361,357              --
                                                                       ------------    ------------

Net Loss                                                               $   (293,676)   $   (553,730)
                                                                       ============    ============

Net Earnings (loss) per common share, basic and diluted:
    Loss before extraordinary gain on Merger with eTech                $      (0.02)   $      (0.03)
    Extraordinary gain on Merger with eTech                            $       0.01    $         --
                                                                       ------------    ------------

        Net loss per common share                                      $      (0.01)   $      (0.03)
                                                                       ============    ============

Weighted average common shares: basic and diluted                        28,909,573      20,000,000
                                                                       ============    ============
</TABLE>

                   The Accompanying Notes are an Integral Part
                    of the Consolidated Financial Statements

                                      F-4
<PAGE>
            CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY (DEFICIT)
                 FOR THE YEARS ENDED DECEMBER 31, 2002 AND 2001

<TABLE>
<CAPTION>
                                                                                                                           TOTAL
                                            COMMON STOCK         TREASURY STOCK    ADDITIONAL  TREASURY     RETAINED   STOCKHOLDERS'
                                        --------------------   ------------------   PAID-IN     STOCK       EARNINGS      EQUITY
                                          SHARES     AMOUNT    SHARES    AMOUNT     CAPITAL   SUBSCRIBED    (DEFICIT)    (DEFICIT)
                                        ----------  --------   ------   ---------   --------  -----------   ---------   -----------
<S>                                     <C>         <C>        <C>      <C>         <C>       <C>           <C>         <C>
Balance at December 31, 2000                 3,600  $ 10,000    6,400   $(110,000)  $     --  $        --   $ 434,612   $   334,612

Net loss                                        --        --       --          --         --           --    (553,730)     (553,730)
                                        ----------  --------   ------   ---------   --------  -----------   ---------   -----------

Balance at December 31, 2001                 3,600    10,000    6,400    (110,000)        --           --    (119,118)     (219,118)

Conversion of a related party note
  payable for stock                          1,800    12,000       --          --         --           --          --        12,000

Effect of Merger with eTech             53,118,890    31,124   (6,400)    110,000    482,570           --          --       623,694

Tender offer of common shares                   --        --       --          --         --   (1,961,941)         --    (1,961,941)

Net loss                                        --        --       --          --         --           --    (293,676)     (293,676)
                                        ----------  --------   ------   ---------   --------  -----------   ---------   -----------

Balance at December 31, 2002            53,124,290  $ 53,124       --   $      --   $482,570  $(1,961,941)  $(412,794)  $(1,839,041)
                                        ==========  ========   ======   =========   ========  ===========   =========   ===========
</TABLE>

                   The Accompanying Notes are an Integral Part
                    of the Consolidated Financial Statements

                                      F-5
<PAGE>
                                IMPROVENET, INC.
                      CONSOLIDATED STATEMENTS OF CASH FLOWS
                 FOR THE YEARS ENDED DECEMBER 31, 2002 AND 2001

<TABLE>
<CAPTION>
                                                                        2002        2001
                                                                     ---------   ---------
<S>                                                                  <C>         <C>
Cash flows from operating activities:
Net Loss                                                             $(293,676)  $(553,730)
   Adjustments to reconcile net loss to net cash
     provided by operations:
        Depreciation and amortization                                   95,695     132,310
        Loss on disposal of property and equipment                      51,294          --
        Consulting fees paid through the issuance of stock              25,000          --
        Extraordinary gain                                            (361,357)
        Financing costs paid through the issuance of warrants           81,318          --
        Interest expense recognized through the conversion of
           convertible notes payable                                    17,376          --
   Changes in assets and liabilities:
        Accounts receivable, net                                       (33,158)      1,630
        Other receivables                                               (1,000)    309,248
        Prepaid expenses                                                43,910          --
        Income tax refund receivable                                   134,180    (134,180)
        Costs and estimated earnings in excess of billings on
           uncompleted software contracts                               (4,100)         --
        Other current assets                                                --       2,382
        Due to bank                                                         --     (10,750)
        Accounts payable                                                98,488    (204,815)
        Accrued compensation                                            60,082     134,000
        Accrued customer claims                                          6,634          --
        Accrued furniture lease buyout                                  67,563          --
        Deferred revenue                                                (6,042)    (58,000)
        Billings in excess of costs and estimated earnings on
           uncompleted software contracts                               89,250          --
        Income taxes payable                                                --     (11,367)
        Other liabilities and accrued expenses                           5,781      18,195
                                                                     ---------   ---------
      Net cash provided by (used in) operating activities               77,238    (375,077)
                                                                     ---------   ---------

Cash flows from investing activities:
   Purchase of property and equipment                                   (1,372)     (1,450)
   Purchase of the pre-merger net assets of ImproveNet by
     eTech through the Merger with eTech                              (519,000)         --
   Cash and cash equivalents acquired in the Merger with eTech         418,284          --
                                                                     ---------   ---------
      Net cash used in investing activities                           (102,088)     (1,450)
                                                                     ---------   ---------
</TABLE>

                   The Accompanying Notes are an Integral Part
                    of the Consolidated Financial Statements

                                      F-6
<PAGE>
                                IMPROVENET, INC.
                CONSOLIDATED STATEMENTS OF CASH FLOWS (CONTINUED)
                 FOR THE YEARS ENDED DECEMBER 31, 2002 AND 2001

<TABLE>
<CAPTION>
                                                                       2002          2001
                                                                    ----------    ----------
<S>                                                                 <C>           <C>
Cash flows from financing activities:
  Proceeds from convertible notes payable                              250,000            --
  Proceeds from eTech Common Stock sale                                250,000            --
  Repayment of notes payable                                           (19,526)      (35,169)
  Payments on capital lease obligations                                (46,363)      (28,830)
  Line of credit, net                                                    5,942        71,813
  Proceeds from related party note payable                                  --        12,000
                                                                    ----------    ----------
     Net cash provided by financing activities                         440,053        19,814
                                                                    ----------    ----------

Net increase (decrease) in cash and cash equivalents                   415,203      (356,713)
Cash and cash equivalents at beginning of year                          31,630       388,343
                                                                    ----------    ----------

Cash and cash equivalents at end of year                            $  446,833    $   31,630
                                                                    ==========    ==========

Supplemental Disclosure of Cash Flow Information:

  Cash paid during the year for:
    Interest                                                        $   81,080    $   38,784
                                                                    ==========    ==========

    Income taxes                                                    $       --    $   11,367
                                                                    ==========    ==========
  Non-Cash Activity:
    Conversion of a related party note payable into Common Stock    $   12,000    $       --
                                                                    ==========    ==========

    Assumption of notes payable on automobiles by related parties   $   80,444    $       --
                                                                    ==========    ==========

    Conversion of convertible notes payable into Common Stock       $  250,000    $       --
                                                                    ==========    ==========

    Transfer of capital lease obligations to current assets         $  148,813    $       --
                                                                    ==========    ==========

    Extraordinary gain recognized on the Merger with eTech          $  361,357    $       --
                                                                    ==========    ==========
</TABLE>

                   The Accompanying Notes are an Integral Part
                    of the Consolidated Financial Statements

                                      F-7
<PAGE>
                                IMPROVENET, INC.
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

NATURE OF BUSINESS

ImproveNet,  Inc. ("ImproveNet" or the "Company") was incorporated in California
in January  1996 and was  reincorporated  in Delaware  in  September  1998.  The
Company is  headquartered  in Scottsdale,  Arizona.  The Company is a source for
home  improvement  information  services for homeowners,  service  providers and
suppliers nationwide.

eTechLogix,  Inc. ("eTech"), a wholly-owned subsidiary of ImproveNet,  licenses,
installs and maintains its proprietary e-commerce software products to companies
primarily operating in the building material industry.  eTech was formerly known
as First Systech  International,  Inc. and was originally  incorporated in March
1989 in the State of Texas.  In July of 1994,  eTech  relocated  to the State of
Arizona and incorporated itself under the laws of the State of Arizona.

BASIS OF PRESENTATION AND MERGER WITH ETECH

On December 23, 2002, eTech merged into Etech Acquisition,  Inc., (the "Merger")
an Arizona  corporation and wholly owned subsidiary of ImproveNet.  Through this
merger,  the former  shareholders  of eTech  acquired a controlling  interest in
ImproveNet  and  accordingly,  the Merger is accounted for as a reverse  merger,
with  eTech  being the  accounting  acquirer  of  ImproveNet.  Accordingly,  the
financial  statements  present the historic financial  position,  operations and
cash flows of eTech for all periods presented with the December 31, 2002 balance
sheet  adjusted to  consolidate  and  reflect  the fair  values  assigned to the
acquisition  balance sheet of ImproveNet.  ImproveNet had de minimus  operations
from December 23, 2002 to December 31, 2002. Refer to Note 8, Merger with eTech,
for additional information and disclosures related to the Merger.

GOING CONCERN

The Company's financial statements are presented on a going concern basis, which
contemplates  the  realization of assets and the  satisfaction of liabilities in
the normal course of business.  The Company has continued to sustain  losses for
the past two years and has negative working capital and negative net worth.

During  2002 the  Company  has  procured  contracts  for  sales of its  software
products and has various contracts pending.  The Company  anticipates  increased
sales volume of their primary software products  throughout 2003 and thereafter.
The  Company  also  anticipates  increased  revenues  from the home  improvement
information  services segment as a result of the synergies it expects to realize
through the Merger of  ImproveNet  and eTech.  The Company also intends to raise
additional capital either through a public or private offering of securities.

The additional funds from continued software sales and capital financing will be
used to finance  continued  operations  and  increase  the  Company's  sales and
marketing functions.

The financial  statements do not include any adjustments to reflect the possible
future effects of the recoverability and classification of assets or the amounts
and  classifications  of liabilities that may result from the uncertainty of the
Company's ability to continue as a going concern.

PRINCIPLES OF CONSOLIDATION

As discussed above, the consolidated  financial  statements include the accounts
of eTech for all periods presented and ImproveNet from the effective date of the
Merger. All material intercompany accounts and transactions have been eliminated
in the consolidated financial statements.

PERVASIVENESS OF ESTIMATES

The preparation of financial statements in conformity with accounting principles
generally  accepted in the United States of America requires  management to make
estimates  and  assumptions  that  affect  the  reported  amounts  of assets and

                                      F-8
<PAGE>
liabilities  and disclosure of contingent  assets and liabilities at the date of
the  financial  statements  and the  reported  amounts of revenues  and expenses
during the reporting period. Actual results could differ from those estimates.

CASH AND CASH EQUIVALENTS

The Company  considers all highly liquid  instruments  purchased with an initial
maturity of three (3) months or less to be cash and cash equivalents.

CONCENTRATIONS OF RISK

The Company maintains its cash balances in a financial institution. Deposits not
to exceed $100,000 are insured by the Federal Deposit Insurance Corporation.  At
December 31, 2002, the Company had uninsured cash of approximately  $388,000. At
December 31, 2001, there were no uninsured cash balances.

The Company  extends credit to customers,  which results in accounts  receivable
arising  from its normal  business  activities.  The  Company  does not  require
collateral or other security to support financial  instruments subject to credit
risk.  The Company  routinely  assesses the financial  strength of its customers
and, based upon factors surrounding the credit risk of those customers, believes
that its accounts  receivable  credit risk  exposure is limited.  The  Company's
customers  are not  concentrated  in any  specific  geographic  region,  but are
concentrated in the building material and home improvement service industries.

ACCOUNTS RECEIVABLE

The Company follows the allowance method of recognizing  uncollectible  accounts
receivable.  The allowance method recognizes bad debt expense as a percentage of
accounts receivable based on a review of the individual accounts outstanding and
the Company's prior history of uncollectible accounts receivable. As of December
31, 2002, the Company has  established an allowance for  uncollectible  accounts
receivable of  approximately  $37,000.  As of December 31, 2001, the Company has
not established an allowance for uncollectible accounts receivable, as it is the
Company's  opinion that all amounts reflected as receivable at this date will be
collected.  The Company does not record interest  income on delinquent  accounts
receivable balances until it is received.

PROPERTY AND EQUIPMENT

Property  and  equipment  is  stated  at  cost  less  accumulated  depreciation.
Depreciation of property and equipment is computed by the  straight-line  method
at rates adequate to allocate the cost of applicable  assets over their expected
useful lives.  Maintenance and repairs that neither  materially add to the value
of the property and  equipment nor  appreciably  prolong its life are charged to
expense as incurred.  Betterments  or renewals are  capitalized  when  incurred.
Amortization  of  leasehold  improvements  is computed  using the shorter of the
lease term or the expected useful life of the assets.

Estimated useful lives are as follows:

     Equipment                                                 5 Years
     Furniture and fixtures                                  5-7 Years
     Automobiles                                               5 Years
     Leasehold improvements                                    5 Years

The Company is the lessee of equipment and furniture and fixtures  under various
capital lease agreements  expiring through July, 2005.  Assets under the capital
lease  agreements  are recorded at the lower of the present value of the minimum
lease payments or the fair value of the assets. The assets are being depreciated
over their estimated productive lives.

CAPITALIZED SOFTWARE DEVELOPMENT COSTS

The Company capitalizes  software development costs in accordance with Statement
of Financial  Accounting Standards ("SFAS") No. 86, "Accounting for the Costs of
Computer Software to be Sold, Leased, or Otherwise Marketed."  Capitalization of
computer   software   development   costs  begins  upon  the   establishment  of
technological   feasibility  for  the  Company's   computer  software  products.

                                      F-9
<PAGE>
Technological  feasibility is generally  based upon the  achievement of a detail
program  design free of  high-risk  development  issues.  The  establishment  of
technological  feasibility  and the  ongoing  assessment  of  recoverability  of
capitalized computer software development costs requires  considerable  judgment
by  management  with respect to certain  external  factors,  including,  but not
limited  to,  technological  feasibility,  anticipated  future  gross  revenues,
estimated  economic  life and  changes  in  software  and  hardware  technology.
Amortization of capitalized  computer software  development costs commences when
the  related  products  become  available  for  general  release  to  customers.
Amortization is provided on a product-by-product basis and is the greater of the
amount  computed  using (a) the ratio that current gross  revenues for a product
bear to the total of current and  anticipated  future  gross  revenues  for that
product or (b) the straight-line  method over the remaining  estimated  economic
life of the product.

During  the years  ended  2002 and 2001,  the  Company  did not  capitalize  any
software  development costs, as amounts related to internal software development
that could be capitalized under this statement were immaterial.

Research and development costs are charged to expense as incurred.  Research and
development costs incurred in relation to third-party  contracts are included in
cost of revenue.

REVENUE RECOGNITION

SOFTWARE DEVELOPMENT AND SALES FOR THE BUILDING MATERIALS INDUSTRY SEGMENT

The Company  recognizes  revenue in accordance with SOP 97-2,  "Software Revenue
Recognition."  This SOP  provides  guidance on revenue  recognition  of software
transactions.  The Company recognizes  revenue  principally from the development
and  licensing of its  software and from  consulting  and  maintenance  services
rendered  in  connection  with  such   development  and  licensing   activities.
Maintenance  contract  revenue is recognized on a  straight-line  basis over the
life of the respective contract.  The Company also derives revenue from the sale
of third party hardware and software  which is recognized  based on the terms of
each contract.  Consulting revenue is recognized when the services are rendered.
No  revenue is  recognized  prior to  obtaining  a binding  commitment  from the
customer.

Revenue  from  fixed  price  software  development   contracts,   which  require
significant modification to meet the customer's specifications, is recognized on
the percentage-of-completion  method using the units-of-work-performed method to
measure progress towards completion. Revisions in cost estimates and recognition
of losses on these contracts are reflected in the accounting period in which the
facts become known.  Revenue from software  package license  agreements  without
significant  vendor  obligations  is  recognized  upon delivery of the software.
Contract  terms may  provide  for billing  schedules  that  differ from  revenue
recognition and give rise to costs and estimated  earnings in excess of billings
on uncompleted software contracts, and billings in excess of costs and estimated
earnings on uncompleted software contracts.

Deferred revenue represents revenue billed and collected but not yet earned.

The cost of maintenance and research and  development  related  revenues,  which
consist  principally of staff payroll and applicable  overhead,  are expensed as
incurred.

HOME IMPROVEMENT SERVICES SEGMENT

Revenues in the home improvement  services segment are derived from two sources:
Service revenues and marketing revenues.

SERVICE REVENUES:
Service  revenues  include lead fees and win fees from  ImproveNet's  contractor
matching  service,  enrollment fees from new contractors  joining the ImproveNet
network,  and project  revenues from those jobs in which  ImproveNet acts as the
contractor  of record.  Lead fees are  recognized  at the time a  homeowner  and
contractor are matched by the Company and the service provider becomes obligated
to pay such fee. Win fees are recognized at the time the service provider or the
homeowner notifies the Company that a job has been sold and the service provider
becomes  obligated to pay such fee.  Enrollment fees from service  providers are
recognized as revenue ratably over the expected  period they  participate in our
contractor matching service,  which is initially estimated to be between one and
two years. Payments of enrollment fees received in advance of providing services
are deferred until the period the services are provided.  This deferred  revenue

                                      F-10
<PAGE>
is included in current  liabilities.  Project  revenues  are  recognized  on the
completed contract method. The Company  establishes a refund reserve at the time
of revenue recognition based on the Company's historical experience.

MARKETING REVENUES:
Marketing  revenues  include the sale of banner,  SmartLeads  and other Web site
advertisements.  Revenues  are  generally  derived from  short-term  advertising
contracts in which the Company  typically  guarantees  that a minimum  number of
impressions  will be delivered to its Web site visitors over a specified  period
of time for a fixed fee. Cash marketing  revenues from banner,  button and other
Web site  advertisements  are  recognized  at the lesser of the amount  recorded
ratably over the period in which the  advertising is delivered or the percentage
of guaranteed  impressions  delivered.  SmartLeads revenues are also paid for in
cash and are recognized when the SmartLeads have been delivered to the customer.
Cash  marketing is recognized  when the Company has  delivered the  advertising,
evidence  of an  agreement  is in place  and fees are  fixed,  determinable  and
collectible.

ADVERTISING COSTS

The  Company  recognizes  advertising  expenses  in  accordance  with SOP  93-7,
"Reporting on  Advertising  Costs." As such,  the Company  expenses  advertising
costs as they are incurred.  Advertising expense totaled  approximately  $11,000
and $18,000 for the years ended December 31, 2002 and 2001, respectively.

BUSINESS SEGMENTS

The Company  follows SFAS No. 131,  "Disclosure  about Segments of an Enterprise
and Related  Information."  SFAS No. 131  requires  publicly  held  companies to
report financial and other  information  about key revenue segments of an entity
for which this  information is available and is utilized by the chief  operating
decision maker. The Company operates in two segments:  Software  development and
sales for the  building  materials  industry  and home  improvement  information
services.  As is  discussed  in the  "Basis  of  Presentation"  portion  of this
footnote, the Company's consolidated  statements of operations and cash flows do
not currently  reflect  operations for the home improvement  services segment as
this segment was acquired  effective  December 31, 2002 through a merger between
ImproveNet  and  eTech.  Refer  to Note 8,  Merger  with  eTech  for  additional
information and disclosures related to the Merger.

INCOME TAXES

Deferred income taxes are provided for on an asset and liability method, whereby
deferred tax assets are  recognized  for deductible  temporary  differences  and
operating loss  carryforwards  and deferred tax  liabilities  are recognized for
taxable temporary differences. Temporary differences are the differences between
the reported amounts of assets and liabilities and their tax basis.

Deferred tax assets are reduced by a valuation allowance, when in the opinion of
management,  it is more likely than not that some portion or all of the deferred
tax  assets  will not be  realized.  Deferred  tax assets  and  liabilities  are
adjusted  for the  effects  of  changes  in tax  laws  and  rates on the date of
enactment.

COMPREHENSIVE LOSS

The Company follows SFAS No. 130, "Reporting Comprehensive Income". SFAS No. 130
establishes  standards for reporting and display of comprehensive income and its
components in a full set of general-purpose  financial statements.  There was no
difference  between the  Company's net loss and its  comprehensive  loss for any
periods presented in the accompanying consolidated financial statements.

STOCK-BASED COMPENSATION PLANS

The Company has adopted the disclosure requirements of SFAS No. 123, "Accounting
for  Stock-Based  Compensation"  and SFAS No. 148,  "Accounting  for Stock-Based
Compensation  - Transition  and  Disclosure - an amendment of FASB Statement No.
123." The Company continues to recognize  compensation costs using the intrinsic
value based method described in Accounting Principles Board Opinion ("APB") No.
25, "Accounting for Stock Issued to Employees."

                                      F-11
<PAGE>
For 2002 and 2001,  there were no differences  between net loss and net loss per
share as reported in these consolidated  financial statements and on a pro forma
basis,  as if the fair value  based  method  described  in SFAS No. 123 had been
adopted.

NET EARNINGS (LOSS) PER COMMON SHARE

Basic  net loss per  common  share is  calculated  by  dividing  net loss by the
average number of outstanding common shares during the period.  Diluted net loss
per common share is calculated by adjusting  the average  number of  outstanding
common shares assuming conversion of all potentially  dilutive stock options and
warrants  under the  treasury  stock  method.  For all fiscal  years  presented,
potentially  dilutive  securities,  including  stock options and warrants,  were
excluded form the  calculation  of diluted net loss per common  share,  as their
effect would have been anti-dilutive.

For  purposes of  reporting  shares  outstanding  and  weighted  average  shares
outstanding,  the financial  statements  reflect the  conversion of eTech common
shares  as if the  Merger  (recapitalization)  were  effective  for all  periods
presented.

FAIR VALUE OF FINANCIAL INSTRUMENTS

The carrying values of the Company's financial  instruments  included in current
assets and current liabilities approximated their respective fair values at each
balance  sheet  date  due to the  immediate  or  short-term  maturity  of  these
financial  instruments.  The fair value of  long-term  notes  payable  and lease
obligations  is based on current  rates at which the Company  could borrow funds
with similar remaining maturities.

RECLASSIFICATIONS

Certain items have been reclassified to be consistent with current presentation.
The  reclassifications  have no  effect  on  previously  disclosed  net  loss or
stockholders' equity (deficit).

RECENTLY ISSUED ACCOUNTING STANDARDS

In April 2002, the Financial Accounting Standards Board ("FASB") issued SFAS No.
145,  "Rescission  of FASB  Statements  Nos.  4, 44, and 64,  Amendment  of FASB
Statement No. 13, and Technical  Corrections."  SFAS No. 145 updates,  clarifies
and simplifies  existing  accounting  pronouncements,  by rescinding SFAS No. 4,
which required all gains and losses from extinguishment of debt to be aggregated
and, if material, classified as an extraordinary item, net of any related income
tax effect. As a result, the criteria in APB No. 30 will now be used to classify
those gains and losses. Additionally, SFAS No. 145 amends SFAS No. 13 to require
that  certain  lease   modifications  that  have  economic  effects  similar  to
sale-leaseback   transactions   be   accounted   for  in  the  same   manner  as
sale-leaseback  transactions.   Finally,  SFAS  No.  145  also  makes  technical
corrections  to  existing  pronouncements.   While  those  corrections  are  not
substantive in nature, in some instances,  they may change accounting  practice.
The Company  adopted the provisions of SFAS No. 145 that amended SFAS No. 13, as
required,  on May 15, 2002 for  transactions  occurring  after such date with no
material impact on its financial statements.  The Company's management currently
does not expect that the adoption of the  remaining  provisions of SFAS No. 145,
as required,  on January 1, 2003 will have a material impact on its consolidated
financial statements.

In June 2002,  the FASB issued SFAS No. 146,  "Accounting  for Costs  Associated
with Exit or  Disposal  Activities."  SFAS No.  146 was  issued to  address  the
financial  accounting and reporting for costs  associated  with exit or disposal
activities, unless specifically excluded. SFAS No. 146 requires that a liability
for a cost associated with a covered exit or disposal activity be recognized and
measured  initially  at its fair value in the period in which the  liability  is
incurred,  except for a liability  for  one-time  termination  benefits  that is
incurred over time.  If employees are not required to render  service until they
are  terminated  in order to receive  the  one-time  termination  benefits or if
employees will not be retained to render  service  beyond the minimum  retention
period (as  dictated by existing  law,  statute or  contract,  or in the absence
thereof, 60 days), a liability for the termination  benefits shall be recognized
and  measured at its fair value at the  communication  date.  If  employees  are
required to render  service  until they are  terminated  in order to receive the
one-time  termination benefits and will be retained to render service beyond the
minimum  retention  period,  a liability for the  termination  benefits shall be
measured  initially  at the  communication  date  based on the fair value of the
liability as of the termination date. The liability shall be recognized  ratably
over the future service period.  SFAS No. 146 also dictates that a liability for
costs to terminate an operating  lease or other  contract  before the end of its
term  shall be  recognized  and  measured  at its  fair  value  when the  entity

                                      F-12
<PAGE>
terminates the contract in accordance  with the contract  terms. A liability for
costs that will continue to be incurred  under a contract for its remaining term
without  economic  benefit to the entity is to be recognized and measured at its
fair value when the entity ceases using the right conveyed by the contract. SFAS
No. 146 further  dictates that a liability  for other  covered costs  associated
with an exit or disposal  activity be recognized  and measured at its fair value
in the period in which the  liability  is  incurred.  The  Company's  management
currently  does not expect that the  adoption of SFAS No. 146, as  required,  on
January  1, 2003  will have a  material  impact  on its  consolidated  financial
statements.

In  October  2002,  the FASB  issued  SFAS No.  147,  "Acquisitions  of  Certain
Financial  Institutions."  SFAS No. 147 requires that  acquisitions of financial
institutions  be accounted in accordance with SFAS Nos. 141 and 142. The Company
adopted  SFAS No.  147 in  October  2002,  with no  impact  on its  consolidated
financial statements.

In December  2002,  the FASB issued  SFAS No. 148,  "Accounting  for Stock Based
Compensation  - Transition  and  Disclosure - an amendment of FASB Statement No.
123." SFAS No. 148 amends SFAS No. 123 to provide  methods of  transition  for a
voluntary  change to the fair value based method of accounting  for  stock-based
employee  compensation,  as well as  requiring  prominent  disclosure  about the
method  and effect of  accounting  for  stock-based  compensation.  The  Company
adopted the  provisions of SFAS No. 148 as of December 31, 2002 with no material
effect on its consolidated financial statements

In November 2002, the FASB issued Interpretation No. 45, "Guarantor's Accounting
and Disclosure  Requirements for Guarantees,  Including  Indirect  Guarantees of
Indebtedness  of Others,"  which  clarifies  the  disclosure,  recognition,  and
measurement  requirements related to certain guarantees.  The provisions related
to  recognizing a liability at the inception of the guarantee for the fair value
of the  guarantor's  obligations  does not  apply to  product  warranties  or to
guarantees accounted for as derivative instruments.  The disclosure requirements
are effective for financial  statements  issued after  December 15, 2002 and the
recognition  and  measurement   provisions  apply  on  a  prospective  basis  to
guarantees  issued or modified after December 31, 2002. The Company  adopted the
provisions  of  Interpretation  No. 45 in December  2002,  with no impact on its
consolidated financial statements.

In November 2002, the Emerging Issues Task Force ("EITF") reached a consensus on
Issue  No.   00-21,   "Accounting   for  Revenue   Arrangements   with  Multiple
Deliverables."  This issue  addresses  how revenue  arrangements  with  multiple
deliverables  should be divided into separate  units of  accounting  and how the
arrangement  consideration  should  be  allocated  to  the  identified  separate
accounting  units.  Issue No. 00-21 is effective  for fiscal  periods  beginning
after June 15,  2003.  The Company does not expect the adoption of EITF 00-21 to
have a material impact on its financial position or results of operations.

NOTE 2 - SOFTWARE CONTRACTS IN PROGRESS

At December 31,  2002,  billings in excess of costs and  estimated  earnings and
costs and  estimated  earnings  in excess of billings  on  uncompleted  software
contracts consist of the following:

                                      F-13
<PAGE>
Costs incurred on uncompleted software contracts                      $  53,746
Profit earned to date                                                   138,204
                                                                      ---------
                                                                        191,950
Less:  billings to date                                                (277,100)
                                                                      ---------

                                                                      $ (85,150)
                                                                      =========

Included  in the  accompanying  balance  sheet  at  December  31,  2002  are the
following captions:

Costs and estimated earnings in excess of billings on
     uncompleted software contracts                                    $  4,100

Billings in excess of costs and estimated earnings on
     uncompleted software contracts                                     (89,250)
                                                                       --------

                                                                       $(85,150)
                                                                       ========

At December 31, 2001,  the Company did not have any  contracts in progress  that
resulted  in costs and  estimated  earnings in excess of billings or billings in
excess of costs and estimated earnings on uncompleted software contracts.

NOTE 3 - PROPERTY AND EQUIPMENT

As of  December  31,  2002 and  2001,  property  and  equipment  consist  of the
following:

                                                        2002             2001
                                                     ---------        ---------

Equipment                                            $ 185,892        $ 184,520
Furniture and fixtures                                 231,985          231,986
Automobiles                                                 --          169,987
Leasehold improvements                                      --           98,077
                                                     ---------        ---------
                                                       417,877          684,570
Less:  accumulated depreciation                       (259,883)        (300,515)
                                                     ---------        ---------

                                                     $ 157,994        $ 384,055
                                                     =========        =========

NOTE 4 - LINE OF CREDIT

The Company has an unsecured  $95,000 line of credit  agreement with a bank. The
agreement  calls for  interest at the bank's  prime rate plus  2.75%,  (7.00% at
December 31, 2002) and is due on demand. The Company had outstanding balances on
the line of credit of approximately  $78,000 and $72,000 as of December 31, 2002
and 2001, respectively.

NOTE 5 - NOTES PAYABLE

As of December 31, 2002 and 2001, notes payable consist of the following:

                                      F-14
<PAGE>
<TABLE>
<CAPTION>
                                                                                2002         2001
                                                                             ---------    ---------
<S>                                                                          <C>          <C>
9.00% note payable to a bank, monthly payments of $1,100 including
principal and interest, secured by equipment, due May 2004                   $  13,197    $  26,649

8.50% note payable to a bank, monthly payments of $2,000 including
principal and interest, secured by automobiles, due May 2006                        --       86,518
                                                                             ---------    ---------
                                                                                13,197      113,167
Less: current maturities                                                       (12,592)     (27,504)
                                                                             ---------    ---------

                                                                             $     605    $  85,663
                                                                             =========    =========
</TABLE>

The long-term portion of notes payable as of December 31, 2002 of $605 is due in
2003.

NOTE 6 - COMMITMENTS

CAPITAL LEASES

The Company leases  furniture and equipment  through 2005 under capital  leases.
The following is an analysis of leased property under these capital leases:

                                                   December 31,
                                                2002         2001
                                              --------    ---------
     Capitalized cost                         $ 72,259    $ 271,599
     Less: accumulated depreciation            (39,792)     (99,069)
                                              --------    ---------

     Net carrying value                       $ 32,467    $ 172,530
                                              ========    =========

Depreciation  expense  on  furniture  and  equipment  under  capital  leases was
approximately  $15,000 and $54,000  for the years  ended  December  31, 2002 and
2001, respectively.

The following is a schedule of future  minimum lease  payments under the capital
leases described above, together with the present value of the net minimum lease
payments:

          Year
          Ended
       December 31,
       ------------
           2003                                             $ 20,416
           2004                                               20,416
           2005                                                8,506
                                                            ---------

     Total minimum lease payments                             49,338
     Less: imputed interest                                   (7,220)
                                                            ---------

     Present value of net minimum lease payments              42,118
     Less: current portion                                   (15,843)
                                                            ---------

     Long-term portion                                      $ 26,275
                                                            =========

The interest rates under the capital lease obligations range from  approximately
13% to 14% per annum,  and are imputed  based on the lessor's  implicit  rate of
return at the inception of the lease.

                                      F-15
<PAGE>
During 2001, the Company  ceased making  payments under the terms of a furniture
lease  agreement.  This lease is being  accounted  for as a capital  lease as of
December 31, 2001. During 2002, the Company decided to allow the leasing company
to obtain a judgment in the amount of $216,376.  Accordingly,  during 2002,  the
Company has  reclassified the total principal due under the furniture lease from
obligations  under  capital  leases to  accrued  furniture  lease  buyout on the
accompanying balance sheets. The Company has adjusted the accrual for the amount
due the leasing company based on the amount of the judgment.

OPERATING LEASES

On May 1, 2000,  the Company  entered into a lease  agreement  for its operating
facility in Scottsdale,  Arizona.  The lease is with Apple  Investments,  LLC, a
Company  wholly owned by two of the Company's  officers.  Rent expense under the
lease was  approximately  $10,000 and $102,000 for the years ended  December 31,
2002 and 2001, respectively.

On January 31, 2002, the Company  terminated  the related party lease  agreement
and entered into a new operating  lease  agreement with an unrelated third party
that calls for monthly payments of $4,060 expiring in March,  2003. Rent expense
under this  agreement  for the year ended  December  31, 2002 was  approximately
$45,000.  Future  minimum lease  payments under the lease through March 2003 are
approximately $12,000.

In connection  with the  termination of the related party lease  agreement,  the
Company  expensed the net carrying value of certain  leasehold  improvements  of
approximately $66,000.

NOTE 7 - RELATED PARTY TRANSACTIONS

RELATED PARTY NOTE PAYABLE

During 2001,  the Company  borrowed a total of $12,000 from a  shareholder  of a
related corporation under the same common control as that of the Company. During
the year ended  December 31, 2002,  this amount was converted to 1,800 shares of
Common  Stock of eTech,  which was  converted  to  10,000,000  Common  Shares of
ImproveNet at the time of the Merger.

As  described  in Note 8, Merger with eTech,  during  2002,  eTech  entered into
subordinated  convertible notes payable. An aggregate of $30,000 of the $100,000
subordinated  convertible  notes  payable  issued  during  August  2002  were to
officers of eTech.

RELATED PARTY FACILITY LEASE

From May 1, 2001 to January 31, 2002,  the Company  leased  office space for its
corporate  headquarters  under an  operating  lease  from Apple  Investments,  a
company  wholly  owned  by two of the  Company's  officers  (Refer  to  Note  6,
Commitments).

ROYALTY FEE REVENUES

Included in revenues are royalty fees that were  recognized  by the Company from
Smart  Fusion,  Inc.  ("Smart  Fusion")  a  company  wholly  owned by two of the
Company's officers. The Company recognized royalty fees from Smart Fusion in the
amounts of  approximately  $285,000 and $26,000 for the years ended December 31,
2002 and 2001,  respectively.  The fees are based on a percentage  of sales that
Smart Fusion generated as a result of sales of the Company's software products.

RESEARCH AND DEVELOPMENT

The Company  subcontracts a portion of its research and development to companies
wholly  owned by two of the  officers  of the  Company.  During the years  ended
December 31, 2002 and 2001, the Company  incurred  expenses from these companies
totaling approximately $38,000 and $50,000,  respectively,  which is included in
research and development expenses in the accompanying financial statements.

                                      F-16
<PAGE>
ACCRUED OFFICER SALARIES PAYABLE

For cash  management  purposes,  some of the Company's  officers have elected to
defer their regular salary  payments.  Total amounts  deferred by these officers
are  approximately  $190,000  and  $134,000  at  December  31,  2002  and  2001,
respectively  and are  included  in  accrued  compensation  in the  accompanying
balance sheets.

NOTE 8 - MERGER WITH ETECH

OVERVIEW

On December 23,  2002,  eTech merged with eTech  Acquisition,  Inc.,  an Arizona
corporation and wholly-owned  subsidiary of ImproveNet,  that was created during
2002 to  merge  eTech  and  ImproveNet.  This  Merger  occurred  pursuant  to an
Agreement  and Plan of Merger (the "Merger  Agreement")  dated July 30, 2002. As
consideration  for this merger,  eTech paid $500,000 to ImproveNet  and incurred
$19,000 in costs directly related to the merger. At the time of the Merger, each
outstanding  share of eTech Common Stock, no par value per share,  was converted
into the right to receive and became  exchangeable  for  5,555.555556  shares of
ImproveNet Common Stock, par value $.001 per share. A total of 35,417,750 shares
of  ImproveNet  common stock were issued in the Merger to eleven (11)  different
shareholders  of eTech.  Through  the  merger,  the  former  directors  of eTech
collectively  received  30,310,740  shares of  ImproveNet  Common Stock and as a
result, acquired control of the Company.

Un-expired outstanding options to purchase eTech Common Stock were converted, on
the same  vesting  schedule,  into  options  to  purchase  a number of shares of
ImproveNet Common Stock equal to the number of shares of eTech Common Stock that
could have been purchased  under such option  multiplied by  5,555.555556,  at a
price per share of ImproveNet Common Stock equal to the per share exercise price
of $0.05 per share. Options to acquire 788,889 shares of ImproveNet Common Stock
were issued in the Merger as a result of these  outstanding  options,  of which,
222,222 had vested as of the date of the Merger and carried an exercise price of
$0.05 per share.

Warrants to purchase  1,500,000  shares of ImproveNet were issued as a result of
the  Merger.  These  warrants  were  issued  in  conjunction  with  subordinated
convertible notes payable, as discussed below.

TENDER OFFER

Under the terms of the Merger  Agreement,  the Company  agreed to present a cash
tender offer ("Tender  Offer") to pre-merger  shareholders  of  ImproveNet.  The
price per share is based in part on  ImproveNet's  available cash balance at the
closing of the  merger.  The  Tender  Offer was  available  from the time of the
merger through January 2, 2003.

Prior  to  the  closing  of  the  merger,   ImproveNet  deposited  approximately
$2,557,000  with its stock  transfer  agent for  payments  to be made  under the
Tender Offer.  In  conjunction  with the Tender Offer,  the Company  disbursed a
total of approximately  $1,962,000 to various pre-merger ImproveNet shareholders
in January 2003 resulting in the  acquisition of 13,913,975  treasury  shares in
January  2003.  Funds  remaining  with the  stock  transfer  agent in  excess of
disbursements of approximately  $595,000 are classified as receivable from stock
transfer agent on the accompanying balance sheets.

CONVERSION OF SUBORDINATED CONVERTIBLE NOTES PAYABLE

During  July  2002,  eTech  issued an  aggregate  of  $150,000  of  subordinated
convertible notes payable to two accredited investors.  The notes are secured by
substantially  all of the Company's  assets and are  subordinated to the eTech's
9.00% note payable to a bank (Refer to Note 5, Notes  Payable).  In  conjunction
with the issuance of these  subordinated  convertible notes payable,  eTech also
issued  one-year  warrants to  purchase  an  aggregate  of  1,500,000  shares of
ImproveNet  at a purchase  price of $0.15 per  share.  The  subscription  of the
warrants is expressly  conditioned  upon the closing of the Merger.  The Company
expensed  approximately  $81,000 in connection  with these warrants to recognize
the fair value of the warrants.

During  August  2002,  eTech  issued an  aggregate  of $100,000 of  subordinated
convertible  notes payable to accredited  investors and officers of eTech (refer
to Note 7, Related Party  Transactions).  The notes are secured by substantially
all of  eTech's  assets  and  are  subordinated  to the  $150,000  of  aggregate
subordinated notes payable discussed above and to the 9.00% note payable to bank
(Refer to Note 5, Notes Payable).

                                      F-17
<PAGE>
All of the subordinated  convertible notes payable described above bear interest
at a rate of 10.00%  per  annum  and are due two years  after the date of issue,
provided they are not converted  prior to this date.  The notes are  convertible
into Common Shares of eTech in whole, or in part, at the option of the lender at
any  time  during  the  term  of the  note  at a rate  of one  share  for  every
$555.5555556 of debt  converted.  The notes will  automatically  be converted if
there is a transfer of more than 50% of the voting  control of the  Company,  in
one  transaction  or a series of  transactions  with  ImproveNet  directly or by
merger or  consolidation  in which  the  existing  shareholders  of eTech do not
directly  retain more than 50% of the voting control of eTech,  or a sale of all
or  substantially  all  assets  of eTech to  ImproveNet  or one of  ImproveNet's
subsidiaries.  The shares of eTech that will be received by the note  holders if
automatic  conversion occurs will be converted to shares of ImproveNet using the
same  conversion  rate  as  all  other  eTech  shares   converted  in  a  merger
transaction.

The proceeds of the subordinated notes payable of $250,000 were to be used for a
portion of a $500,000  deposit with  ImproveNet.  This deposit was made prior to
the Merger and in accordance with the Merger Agreement.

ACCOUNTING FOR THE MERGER

The Company accounted for this merger in accordance with SFAS No. 141, "Business
Combinations."  As discussed above, the former  shareholders of eTech acquired a
controlling  interest in the  Company,  accordingly,  the  transaction  has been
accounted for as a reverse merger and the total  consideration given by eTech of
$519,000  has been  allocated  to the fair values of the  pre-merger  assets and
liabilities of ImproveNet. At the time of the acquisition, the fair value of the
net assets of ImproveNet  was $361,357 in excess of the  consideration  given by
eTech after all applicable  reductions of amounts that otherwise would have been
assigned to the acquired assets were considered.  This excess is reported in the
statement of operations as an extraordinary gain.

A summary of the amounts assigned to the assets and liabilities of ImproveNet at
the time of the merger is as follows:

<TABLE>
<S>                                                               <C>           <C>
Consideration provided                                                              519,000

Assets
      Cash and cash equivalents                                   $   418,284
      Accounts receivable                                             293,924
      Receivable from stock transfer agent                            594,715
      Prepaid expenses and other current assets                        98,964
                                                                  -----------
                  Allocation to assets                                           (1,405,887)

Liabilities
      Accounts payable                                                109,442
      Accrued merger and tender offer redemption liabilities        2,378,029
                                                                  -----------
                  Allocation to liabilities                                       2,487,471

Allocation to treasury stock subscribed                                          (1,961,941)
                                                                                -----------

Extraordinary gain recognized                                                      (361,357)
                                                                                ===========
</TABLE>

NOTE 9 - STOCKHOLDERS' EQUITY

MERGER WITH ETECH

Refer to Note 8, Merger with eTech,  for information  related to the Merger with
eTech.

SALE OF ETECH COMMON STOCK

During  October  2002,  eTech  issued an aggregate of 450 shares of eTech Common
Stock to accredited investors resulting in proceeds of $250,000.  In conjunction
with this sale,  eTech  distributed 45 shares of its common stock to consultants

                                      F-18
<PAGE>
who  assisted  in the Common  Stock sale and  recognized  financing  expenses of
$25,000 related to the services performed. At the time of the Merger in December
2002, all 495 shares described above were converted into shares of ImproveNet at
a rate of 5,555.555556 per share of eTech Common Stock.

The  proceeds of the eTech stock sale of $250,000  were to be used for a portion
of a $500,000 deposit with ImproveNet. This deposit was made prior to the Merger
and in accordance with the Merger Agreement.

COMMON STOCK OPTIONS

Prior to the Merger on May 1, 2002,  eTech issued 142 common stock options to an
employee. The options vesting schedule is as follows: 10 options on June 1, 2002
and 5  options  on July 1,  2002  and each  succeeding  month  thereafter  until
September 1, 2004 when all options shall be vested. The options expire on May 1,
2012 and have an exercise price of $277.78 per share. At the time of the Merger,
these  options  were  converted  to  options  to  purchase a number of shares of
ImproveNet Common Stock equal to the number of shares of eTech Common Stock that
could have been purchased under such options  multiplied by  5,555.555556,  at a
price per share of ImproveNet Common Stock equal to the per share exercise price
of $.05 per share.

Subsequent to the Merger,  the Company  retained  ImproveNet's  already existing
stock option plans. These plans consist of the following:

1996 STOCK OPTION PLAN

Under the Company's  1996 Stock Option Plan,  as amended,  the Company may issue
incentive  stock  options  or  non-statutory  stock  options to  purchase  up to
2,700,000  shares of common  stock.  Incentive  stock  options may be granted to
employees  at exercise  prices not lower than fair  market  value at the date of
grant, as determined by the Board of Directors.  Non-statutory stock options may
be granted to employees, directors and consultants, at exercise prices not lower
than 85% of fair market value at the date of grant,  as  determined by the Board
of Directors. The Board also has the authority to set the term of the options up
to a maximum of ten  years.  Options  granted  generally  vest over four  years.
Unexercised options expire three months after termination of employment with the
Company.

1999 EQUITY INCENTIVE PLAN

The Company's  Board of Directors  adopted the 1999 Equity  Incentive  Plan (the
"Incentive  Plan") on December 3, 1999 under  which  1,300,000  shares have been
reserved for issuance.  The number of shares  reserved  under the Incentive Plan
will automatically increase on January 1 of each year by the lesser of 5% of the
total number of shares  outstanding or 1,300,000 shares.  The Board of Directors
implemented a program of automatic option grants to each  non-employee  director
such that each  non-employee  director will receive  options to purchase  20,000
shares of common stock upon  commencement  of service as a director,  which will
vest monthly over three years and 5,000 shares annually  thereafter,  which will
vest monthly over twelve months.

EMPLOYEE STOCK PURCHASE PLAN

The Company's  Board of Directors  adopted the Employee Stock Purchase Plan (the
"Purchase  Plan") on  December  3, 1999 under  which  300,000  shares  have been
reserved for issuance. The Purchase Plan was effected upon the effective date of
the Company's  initial public  offering  ("IPO").  The number of shares reserved
under the Purchase Plan will automatically increase on January 1 of each year by
the lesser of an amount equal to 1% of the total  number of shares  outstanding,
or 300,000  shares.  Under the Purchase  Plan,  eligible  employees may purchase
common stock valued at the lesser of $25,000 or 15% of their  compensation.  The
purchase price per share will be 85% of the common stock fair value at the lower
of certain plan defined dates. The Purchase Plan was suspended on June 29, 2001.

A summary of stock option activity is as follows:

                                      F-19
<PAGE>
                                                                   Weighted
                                                   Number of       Average
                                                    Shares      Exercise Price
                                                    ------      --------------
Balances, January 1, 2002 and 2001                        --       $    --

Options granted by eTech                                 142        277.78
Effect of eTech Merger
     - conversion of eTech options
          - reversal of eTech options                   (142)      (277.78)
          - conversion of eTech options              788,889          0.05
     - recognition of ImproveNet options
            existing prior to the merger             304,102          2.29

                                                  ----------
Balances, December 31, 2002                        1,092,991       $  0.67
                                                  ==========

As of December 31, 2002,  there were 4,158,044  shares available for grant under
the various stock option and incentive plans described above.

The  following  table  summarizes  information  with  respect  to stock  options
outstanding at December 31, 2002:

                       Options Outstanding             Options Exercisable
               -------------------------------------  ----------------------
                               Weighted
                               Average      Weighted                Weighted
                              Remaining     Average                 Average
Exercise          Number     Contractual    Exercise    Number      Exercise
 Price         Outstanding   Life (Years)    Price    Outstanding    Price
 -----         -----------   ------------    -----    -----------    -----
$ 0.04             25,000         9.5       $ 0.04       12,500      $ 0.04
$ 0.05            788,889         9.4       $ 0.05      222,222      $ 0.05
$ 0.25            177,102         6.3       $ 0.25      166,033      $ 0.25
$ 0.34             20,000         8.4       $ 0.34        7,917      $ 0.34
$ 6.25             60,000         7.3       $ 6.25       40,000      $ 6.25
$12.00             20,000         7.1       $12.00       14,583      $12.00
$15.00              2,000         7.2       $15.00        1,417      $15.00
               ----------                             ---------

                1,092,991                   $ 1.08      464,672      $ 1.08
               ==========                             =========

FAIR VALUE DISCLOSURES

The fair value of each option  granted by the  Company  during 2002 and 2001 has
been  estimated  on the date of grant  using the minimum  value  method with the
following assumptions:

                                                         2002          2001
                                                       --------      --------
Weighted average fair values                           $   0.10      $   0.45

Assumptions:
              Risk - free interest rate                    4.30%   4.99% - 6.91%
              Expected lives                            4 years       4 years
              Dividend yield                                 --            --
              Volatility                                 138.00%       151.00%

                                      F-20
<PAGE>

COMMON STOCK WARRANTS

A summary of common stock warrant activity is as follows:

                                                                    Weighted
                                                     Number of      Average
                                                      Shares     Exercise Price
                                                    ----------   --------------
Balances, January 1, 2002 and 2001                          --       $  --

Effect of eTech Merger
     - grant of eTech warrants contingent on the
            occurrence of the merger                 1,500,000        0.15
     - recognition of ImproveNet warrants
            existing prior to the Merger             1,267,596        8.98
                                                    ----------

Balances, December 31, 2002                          2,767,596       $4.19
                                                    ==========

The following table summarizes warrants outstanding at December 31, 2002:

         Number of     Exercise           Term           Expiration
           Shares       Price            (Years)           Date
         ----------     ------           -------     -----------------
             5,000      $ 1.00            10.00         June 16, 2007
           245,000      $ 0.01             5.00      November 23, 2004
           100,000      $ 0.01             5.00      December 6, 2004
           583,333      $13.50             5.00      December 6, 2004
            75,000      $ 0.01             5.00      December 12, 2004
           259,263      $13.50             5.00      December 12, 2004
         1,500,000      $ 0.15             1.00      December 23, 2003
        ----------

         2,767,596
        ==========

NOTE 10 - INCOME TAXES

The Company  accounts  for income taxes using an asset and  liability  approach.
Deferred income taxes arise from timing differences  resulting from revenues and
costs reported for financial and tax reporting purposes in different periods. In
addition, a valuation allowance is recognized if it is more likely than not that
some or all of the deferred income tax assets will not be realized.  A valuation
allowance  is used to offset the related net  deferred  income tax assets due to
uncertainties of realizing the benefits of certain net operating losses.

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

                                      F-21
<PAGE>
                                                             December 31,
                                                         2002           2001
                                                       ---------      ---------

Deferred Income Tax Assets (Liabilities):
   Allowance for doubtful accounts                     $  16,000      $      --
   Excess of book over tax depreciation                  (27,000)        19,600
   Accrued officer's compensation                             --         56,300
   Federal net operating loss carryforwards              790,000             --
   State net operating loss carryforwards                 68,000         40,000
                                                       ---------      ---------
Total deferred income tax asset                          847,000        115,900
Valuation allowance                                     (847,000)      (115,900)
                                                       ---------      ---------

Net deferred income tax asset                          $      --      $      --
                                                       =========      =========

At  December  31,  2002 and 2001,  the  Company  had state  net  operating  loss
carryforwards of approximately $843,000 and $497,000,  respectively which expire
through 2007. At December 31, 2002, the Company had a federal net operating loss
of approximately $2,322,000, which expire at various times through 2022.

Due to the Merger with eTech,  ImproveNet's  pre-merger net operating losses are
limited in use subsequent to the merger. The amount of net operating losses that
can be used on an annual  basis for the next twenty  years is based on the value
of  ImproveNet  at the time of the merger and the  adjusted  applicable  federal
long-term rate.

NOTE 11 - RETIREMENT PLAN

Effective  April  16,  1997,  the  Company  adopted  a 401(k)  retirement  plan.
Employees  are  eligible  to  participate  in the plan  after four (4) months of
service.  Salary  deferral may range from 1% to 15%. The Company matches 100% of
the  amounts  deferred  by  employees,   up  to  6%  of  an  employee's   annual
compensation.  The Company matched contributions  totaling  approximately $0 and
$1,000 for the years ended December 31, 2002 and 2001, respectively.

Subsequent to the Merger with eTech, the Company retained  ImproveNet's  already
existing   401(k)  plan.  The  terms  of   ImproveNet's   retirement   plan  are
substantially  the same as that of the eTech plan described  above.  The Company
has not made any contributions to either of the plans described above subsequent
to the Merger.

NOTE 12 - CONTINGENCIES

As of December 31, 2002 and 2001, the Company had various pending claims arising
from former customer  disputes.  The Company intends to vigorously  defend these
claims and expects to prevail in all cases.  In conjunction  with the defense of
these claims, the Company has accrued approximately  $137,000 and $130,000 as of
December 31, 2002 and 2001,  respectively,  which  represents the Company's best
estimate of future costs associated with defending the claims.

NOTE 13 - SERVICE AGREEMENT

The Company  entered into an agreement  with a third party  service  provider to
operate  and manage the  contractor  matching  operation  of  Improvenet's  home
improvement services segment. The agreement commenced on the date of the Merger,
has a term of two years,  is  cancelable  by the  Company  with 90 days  written
notice and cancelable by the service provider with 180 days written notice.

The  agreement  calls  for the  Company  to  remit,  on a weekly  basis,  25% of
collected revenues related to the contractor  matching function that the service
provider  manages and operates.  On a monthly basis,  the Company is required to
reconcile  total  revenues  related to the  service  agreement.  The  Company is
required to pay the service  provider an additional 2.5% of monthly  revenues in
excess of  $400,000  but less than  $500,000  and an  additional  5% of revenues
greater than $500,000.

NOTE 14 - CONCENTRATIONS

During  2002,  the  Company had four  customers  that  accounted  for 69% of the
Company's  revenues  (Customer A - 25%,  Customer B - 19%,  Customer C - 14% and
Customer D - 11%).  During 2001, the Company had one customer  (Customer A) that
accounted for 71% of the Company's revenues.

NOTE 15 - SUBSEQUENT EVENTS

In January 2003, the Company's  transfer agent disbursed funds to the pre-merger
shareholders  of ImproveNet  who elected to  participate  in the Tender Offer. A
total  of  approximately   $1,962,000  was  distributed  to  these  shareholders
resulting in the repurchase of 13,913,975 shares of treasury stock.

In January 2003,  warrants to purchase 100,000 shares of Common Stock at a price
of $0.01 per share and options to  purchase  5,000  shares of Common  Stock at a
price of $0.04 per share were tendered in conjunction with the Tender Offer.

In January 2003,  the Company  issued  660,000  options to employees at a strike
price equal to the market price on the date of the grant.

Subsequent to year-end, the Company's office lease expired. The company extended
the lease on a month-to-month basis.